Applica Incorporated Reports 2004 Fourth-Quarter and Year-End
Financial Results MIRAMAR, Fla., March 14 /PRNewswire-FirstCall/ --
Applica Incorporated (NYSE:APN) today announced that fourth-quarter
sales for 2004 were $247.5 million, an increase of 18.4% from the
same period in 2003. For the full year ended December 31, 2004,
sales were $726.7 million, an increase of 13.4% over 2003. The
increases in sales in the fourth quarter and full year periods
resulted primarily from sales of new and core products under the
Black & Decker(R) brand, partially offset by a decline in
contract manufacturing sales. Applica reported net income for the
fourth quarter of 2004 of $5.3 million, or $0.22 per diluted share,
compared with a net loss of $6.5 million, or $0.27 per diluted
share, for the 2003 fourth quarter. The 2004 fourth quarter
included: - Restructuring charges of $8.3 million related to the
continued downsizing of Applica's Mexican manufacturing operations;
- A gain of $3.4 million related to the sale of the Jerdon hotel
and hospitality business; and - A gain of $1.3 million on the sale
of the executive offices in Miami Lakes, Florida. The fourth
quarter of 2003 included: - A non-cash impairment charge of $7.2
million related to an intangible asset acquired as part of the
acquisition of the Black & Decker household products group; -
Expenses of $7.0 million related to the restructuring of the
Mexican and Chinese manufacturing facilities; - Restructuring and
other charges of $4.7 million related to accrued rental expenses at
the Shelton, Connecticut facility, which has been closed; -
Expenses of $2.0 million related to the early extinguishment of
debt; and - A reversal of $4.1 million in product recall related
expenses previously recorded in cost of goods sold. For the year,
Applica reported a net loss of $133.0 million, or $5.55 per diluted
share, as compared to net income of $15.2 million, or $0.63 per
diluted share, for the same period last year. The year ended
December 31, 2004 included the following: - A non-cash impairment
charge of $62.8 million to goodwill; - Income tax expense of $57.8
million primarily related to an increase in valuation allowances
against net deferred tax assets; - Restructuring charges of $9.2
million primarily relating to the continued downsizing of Applica's
Mexican manufacturing operations; - Expenses of $9.2 million
related to termination benefits for certain senior officers and the
termination of a consulting agreement; - A net gain of $3.9 million
relating to the sale of the Jerdon hotel and hospitality business,
the sale of the Miami Lakes, Florida executive offices and the sale
of Applica's Hong Kong based manufacturing operations. The 2003
full year included: - $55.6 million of equity in the net earnings
of a joint venture in which Applica owned a 50% interest; - A
non-cash impairment charge of $7.2 million related to an intangible
asset acquired as part of the acquisition of the Black & Decker
household products group; - Expenses of $7.0 million related to the
restructuring of the Mexican and Chinese manufacturing facilities;
- Restructuring and other charges of $4.7 million related to
accrued rental expenses at the Shelton, Connecticut facility, which
has been closed; - A reversal of $4.1 million in product recall
related expenses previously recorded in cost of goods sold; and -
Expenses in an aggregate amount of $3.9 million related to the
early extinguishment of debt. Applica's gross profit margin
decreased to 27.9% in the three-month period ended December 31,
2004 as compared to 28.6% for the same period in 2003. Gross
margins in the fourth quarter of 2004 were negatively impacted by:
- Restructuring costs relating to the continued downsizing of the
Mexican manufacturing operations; and - Lower-than-expected sales
and higher-than-expected costs for the Tide(R) Buzz(R) Ultrasonic
Stain Remover. For the full year, the gross profit margin increased
slightly to 29.0% as compared to 28.9% for the same period in 2003.
Increases in the gross margin from (a) better overall product mix
and (b) the movement of production of core products from our
manufacturing facility in Mexico to third parties in China were
offset by restructuring costs relating to the continued downsizing
of the Mexican manufacturing operations. Harry D. Schulman,
President and Chief Executive Officer stated, "We are pleased by
our strong performance in the fourth quarter. We remain financially
stable despite a difficult year. Management will continue to focus
aggressively on improving profitability and the balance sheet. We
will increase customer and product contribution margins, maximize
supply chain efficiencies and deliver quality products. We expect
that our efforts will position us to be profitable in 2005."
Applica will hold a conference call today at 11:00 a.m., Eastern
Standard Time, to discuss its fourth-quarter and year-end results
and to give guidance on future results and trends in operations.
Live audio of the conference call will be simultaneously broadcast
over the Internet and will be available to members of the news
media, investors and the general public. The conference call is
expected to last approximately one hour. Broadcast of the event can
be accessed on the Company's website, http://www.applicainc.com/ by
clicking on the Investor Relations page. You may also access the
call via CCBN at http://www.streetevents.com/ . The event will be
archived and available for replay through Monday, March 21, 2005,
at midnight. Applica Incorporated and its subsidiaries are
marketers and distributors of a broad range of branded and
private-label small household appliances. Applica markets and
distributes kitchen products, home products, pest control products,
pet care products and personal care products. Applica markets
products under licensed brand names, such as Black & Decker(R),
its own brand names, such as Windmere(R), LitterMaid(R), Belson(R)
and Applica(R), and other private-label brand names. Applica's
customers include mass merchandisers, specialty retailers and
appliance distributors primarily in North America, Latin America
and the Caribbean. The Company operates a manufacturing facility in
Mexico. Additional information regarding the Company is available
at http://www.applicainc.com/ . Certain matters discussed in this
news release are forward-looking statements that are subject to
certain risks and uncertainties that could cause actual results to
differ materially from those set forth in the forward- looking
statements. These factors include uncertainties regarding our
transition from manufacturers to a company that purchases most of
its products from third party sources; complications resulting from
our implementation of the new ERP system; success or failure of our
growth strategy; increases in cost and availability of raw
materials and components; our dependence on purchases from large
customers; the strength of the U.S. retail market; currency
fluctuations in our international operations; the potential for
product recalls and product liability claims against us; the
bankruptcy or loss of a major retail customer, distributor or
supplier; the risks of our international operations; changes in
trade relations with China; our dependence on the timely
development, introduction and customer acceptance of products;
competitive products and pricing; dependence on foreign suppliers
and supply and manufacturing constraints; cancellation or reduction
of orders; and other risks and uncertainties detailed from time to
time in the Company's Securities and Exchange Commission filings,
including the Annual Report on Form 10-K for the year ended
December 31, 2004. Readers are cautioned not to place undue
reliance on forward-looking statements. Applica undertakes no
obligation to publicly revise any forward-looking statements to
reflect events or circumstances that arise after the date hereof.
Applica Incorporated and Subsidiaries CONSOLIDATED BALANCE SHEETS
Assets As of December 31, 2004 2003 (In thousands, except par value
data) Current Assets: Cash and cash equivalents $10,463 $12,735
Accounts and other receivables, less allowance of $11,711 in 2004
and $12,543 in 2003 160,436 131,021 Note receivable - officers and
former officer 2,569 1,615 Inventories 131,503 106,326 Prepaid
expenses and other 12,309 13,593 Refundable income taxes 2,032
4,823 Future income tax benefits 33 11,616 Total current assets
319,345 281,729 Investment in Joint Venture -- 5,389 Property,
Plant and Equipment - at cost, less accumulated depreciation of
$73,171 in 2004 and $103,894 in 2003 38,327 70,389 Future Income
Tax Benefits, Non-Current 11,212 49,695 Goodwill -- 62,812 Other
Intangibles, net 4,493 6,146 Other Assets 2,560 2,676 Total Assets
$375,937 $478,836 Liabilities and Shareholders' Equity Current
Liabilities: Accounts payable $41,827 $39,273 Accrued expenses
62,046 61,362 Short-term debt 89,455 62,703 Current portion of
long-term debt 3,000 151 Current taxes payable 5,947 2,172 Deferred
rent 680 301 Total current liabilities 202,955 165,962 Other
Long-Term Liabilities 1,004 1,327 Long-Term Debt 61,008 73,934
Shareholders' Equity: Common stock - authorized: 75,000 shares of
$0.10 par value; issued and outstanding: 24,137 in 2004 and 23,687
in 2003 2,414 2,369 Paid-in capital 159,131 156,604 (Accumulated
deficit) retained earnings (46,480) 86,474 Note receivable - former
officer (502) (1,496) Accumulated other comprehensive loss (3,593)
(6,338) Total shareholders' equity 110,970 237,613 Total
liabilities and shareholders' equity $375,937 $478,836 Applica
Incorporated and Subsidiaries CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited) Three Months Ended December 31, 2004 2003 (In
thousands, except per-share data) Net sales $247,497 100.0%
$209,041 100.0% Cost of sales: Cost of goods sold 170,175 68.8
146,488 70.1 Restructuring charges 8,336 3.4 6,993 3.3 Product
recall -- -- (4,125) (2.0) Gross profit 68,986 27.9 59,685 28.6
Selling, general and administrative expenses: Operating expenses
61,402 24.8 54,361 26.0 Gain on the sale of division and property
(4,705) (1.9) Restructuring and other charges -- -- 4,681 2.2
Impairment of intangible asset -- -- 7,152 3.4 Operating profit
(loss) 12,289 5.0 (6,509) (3.1) Other (income) expense: Interest
expense 3,078 1.2 2,533 1.2 Interest and other (income) expense
(178) (0.1) 76 0.0 Loss on early extinguishment of debt -- -- 2,034
1.0 2,900 1.2 4,643 2.2 Earnings (loss) before equity in net
earnings of joint venture and income taxes 9,389 3.8 (11,152) (5.3)
Equity in net earnings of joint venture -- -- 371 0.2 Earnings
(loss) before income taxes 9,389 3.8 (10,781) (5.2) Income tax
provision (benefit) 4,103 1.7 (4,313) (2.1) Net earnings (loss)
$5,286 2.1% $(6,468) (3.1)% Per-share data: Earnings (loss) per
common share - basic $0.22 $(0.27) Earnings (loss) per common share
- diluted $0.22 $(0.27) Applica Incorporated and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS For the Years Ended December
31, 2004 2003 (In thousands, except per-share data) Net sales
$726,733 100.0% $640,639 100.0% Cost of sales: Cost of goods sold
506,652 69.7 452,450 70.6 Restructuring charges 9,236 1.3 6,993 1.1
Product recall -- -- (4,125) (0.6) Gross profit 210,845 29.0
185,321 28.9 Selling, general and administrative expenses:
Operating expenses 208,131 28.6 186,601 29.1 Termination benefits
9,153 1.3 -- -- Gain on the sale of subsidiary, division and
property - net (3,921) (0.5) -- -- Restructuring and other
(credits) charges (563) (0.1) 4,681 0.7 Impairment of goodwill
62,812 8.6 -- -- Impairment of intangible asset -- -- 7,152 1.1
Operating loss (64,767) (8.9) (13,113) (2.0) Other (income)
expense: Interest expense 9,796 1.3 13,964 2.2 Interest and other
income (1,247) (0.2) (817) (0.1) Loss on early extinguishment of
debt 187 0.0 3,940 0.6 8,736 1.2 17,087 2.7 Loss before equity in
net earnings of joint venture and income taxes (73,503) (10.1)
(30,200) (4.7) Equity in net earnings of joint venture -- -- 55,570
8.7 (Loss) earnings before income taxes (73,503) (10.1) 25,370 4.0
Income tax provision 59,451 8.2 10,147 1.6 Net (loss) earnings
$(132,954) (18.3) $15,223 2.4% Per-share data: (Loss) earnings per
common share - basic $(5.55) $0.65 (Loss) earnings per common share
- diluted $(5.55) $0.63 DATASOURCE: Applica Incorporated CONTACT:
Investor Relations Department, +1-954-883-1000, or Web site:
http://www.applicainc.com/
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