Lenox to Cut Back Pensions, Products, Properties
By Staff -- Gifts and Dec, 10/31/2006 1:00:00 PM
Eden Prairie, MN — Lenox Group Inc. announced today that it will freeze employees' pensions. In place of the frozen Lenox non-union, defined-benefit pension plan, the company will increase its matching 401(k) contribution rate for those employees to a maximum of 4 percent of salary, effective January 2007. The company will also stop offering post-retirement health-care benefits for Lenox non-union employees retiring after Dec. 31, 2006.
Lenox expects to save approximately $11 million with the changes. Funding for the company's defined-benefit pension plans is expected to be $9 million in 2007 and $2 million in 2008, down from $12 million this year. The company also expects to reduce its post-retirement health-care expenses by $1.3 million annually.
As part of its plan to reduce costs and increase cash flow, Lenox Group chairwoman and CEO Susan Engel said the company intends to, "reduce our SKUs by approximately 40 percent over the next two years, and simplify our supply-chain structure." Lenox intends to reduce Department 56 SKUs by 30 percent in 2007. "Two of our biggest challenges this year have been the inaccuracy of our SKU-level forecasting, which has contributed to excess inventory, and the delay in receipt of product from overseas manufacturers," Engel also said.
In addition to reducing the total number of SKUs, Lenox hired two new executives to focus on forecasting, international sourcing and product development, and began to consolidate and upgrade its wholesale order management systems, a project which is expected to be completed by the middle of 2007.
Lenox plans to use its freed cash to pay down company debt, which at the end of the third quarter was approximately $212 million, including $83.4 million of long-term debt. The company plans to use $7 million from the sale of its factory in Pomona, NJ, to pay down debt once the transaction is completed, which Lenox expects by December 30.
The company is also working on the sale and leaseback of its distribution facility in Hagerstown, MD, and is assessing the sale of its office in Eden Prairie. Proceeds from these sales, which Lenox estimates at $30–$35 million, would also be used to pay down debt.
Lenox's third quarter net sales rose to $154 million, up from $99.5 million in the prior year. The company attributed the increase to two additional months of contribution from the Lenox acquisition, which closed in September 2005, and the acquisition of Willitts Designs in March, which helped offset the decline in Department 56 brand wholesale sales. Sales of Department 56 brand products were down 8 percent in the quarter.
Net income from continuing operations for the quarter was $5.4 million, or 39 cents per share, compared with $11.5 million, or 84 cents per share, in the third quarter of 2005. Lenox business customarily takes losses in July and August, which weren't included in last year's numbers because of the timing of the acquisition.
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