Applica Incorporated (NYSE:APN) today announced that first-quarter
sales for 2006 were $104.0 million compared to sales of $112.5
million in the same period in 2005. Sales of Black & Decker(R)
branded products were $84.8 million in the first quarter of 2006,
an increase of 2.4% compared to first quarter of 2005. The decline
in consolidated sales was primarily due to a decrease in sales of
Littermaid(TM) branded products of $3.9 million, resulting from
supply shortages related to the transition to the next generation
of automatic litter boxes, and a decline in sales of professional
personal care products of $5.8 million due to inventory management
by key customers. Applica's gross profit in the first quarter of
2006 was $24.6 million, an increase of 31.5% compared to $18.7
million for the first quarter of 2005. Gross profit margin was
23.7% in the three-month period ended March 31, 2006 as compared to
16.7% for the same period in 2005. Gross profit for the first
quarter of 2006 included the following: -- $3.7 million related to
a probable product recall; and -- the sale of products produced in
Mexico that included $1.8 million of capitalized losses related to
the closure of Applica's Mexican manufacturing facility. Gross
profit margins in the first quarter of 2006 were also negatively
impacted by the decrease in sales of Littermaid branded products
and professional personal care products, which generally carry
higher margins. Gross profit in the first quarter of 2005 included
the following: -- inventory write-downs of $9.4 million related to
lower-than-anticipated consumer demand of certain products,
primarily related to our ultrasonic stain removal appliance; --
higher product warranty returns and related expenses of $3.3
million; and -- losses of $3.0 million in the Mexico manufacturing
operations related to restructuring and downsizing activities.
Operating expenses in the first quarter of 2006 were $34.2 million,
or 32.9% of sales, and included $1.1 million in consulting fees
related to the engagement of Alvarez & Marsal, LLP and $500,000
in administrative expenses related to the closure of the Mexican
manufacturing facility. Operating expenses for the first quarter of
2005 were $39.2 million, or 34.9% of sales. Applica reported a net
loss for the first quarter of 2006 of $13.0 million, or $0.54 per
diluted share, compared to a net loss of $23.0 million, or $0.95
per diluted share, for the 2005 first quarter. During the first
quarter of 2006, Applica generated cash from operating activities
of $31.7 million. Short-term debt declined from $69.5 million at
December 31, 2005 to $38.0 million at March 31, 2006, a reduction
of $31.5 million during the first quarter of 2006. Currently,
Applica has approximately $114.0 million in total debt outstanding
and approximately $39.6 million of availability under its senior
credit facility. Applica must maintain a minimum average monthly
availability of $13 million and a minimum daily availability of $10
million. "Over the past year, we have made tremendous progress in
our restructuring efforts at Applica. In the second half of 2005,
we closed our manufacturing facility in Mexico and expanded our
sourcing from third parties in China in order to lower our product
costs. We amended our credit facility to improve our availability
and lower our borrowing costs on the facility, and we took actions
to reduce our operating expenses. The ERP system we installed in
2005 is enabling us to more efficiently manage our supply chain. We
are well-positioned to achieve our goals over the balance of the
year," stated Harry D. Schulman, Chief Executive Officer and
President. David Coles, interim Chief Operating Officer, stated:
"The assistance that Alvarez & Marsal has provided to
management in the area of sales and operations planning is
beginning to pay dividends. Applica's visibility to demand side and
supply side opportunities and hurdles is much improved and sales
volumes appear to be on plan and may even have some upside." "As
announced earlier in 2006, Applica is currently exploring strategic
alternatives, which could involve the sale or merger of the
Company. Applica is well-positioned at this stage to improve its
business, but I continue to believe the industry will benefit from
further consolidation in order to address scale, product innovation
and channel strategies. As a result, we are actively exploring
alternatives to increase shareholder value," concluded Mr.
Schulman. Applica will hold a conference call today at 11:00 a.m.,
Eastern Daylight Time, to discuss its first-quarter 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 Thursday, May 11, 2006, 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.
Additional information regarding the Company is available at
http://www.applicainc.com. Certain matters discussed in this news
release are forward-looking statements. Such statements are
indicated by words or phrases such as "anticipates," "projects,"
"management believes," "Applica believes," "intends," "expects,"
and similar words or phrases. The forward-looking statements are
subject to certain risks, uncertainties or assumptions and may be
affected by certain other factors, including the follow factors: --
We purchase a large number of products from one supplier.
Production-related risks, interruption of product shipments or
demand for shorter credit terms from this supplier could jeopardize
our ability to realize anticipated sales and profits. -- We are
dependent on key personnel and the loss of these key personnel
could have a material adverse effect on our success. -- The New
York Stock Exchange has notified us that we are not in compliance
with its continued listing criteria. If we are delisted by the
NYSE, the price and liquidity of our common stock will be
negatively affected. -- We depend on third party suppliers for the
manufacturing of all of our products which subjects us to
additional risks. -- Our business involves the potential for
product recalls and product liability claims against us. -- We have
announced our intent to seek strategic alternatives, but no
transaction may occur. Also, if one is undertaken, we cannot be
certain of its potential terms or timing. -- The failure of our
business strategy could have a material adverse effect on our
business. -- Our business could be adversely affected by
fluctuation of the Chinese currency. -- We depend on purchases from
several large customers and any significant decline in these
purchases or pressure from these customers to reduce prices could
have a negative effect on our business. -- Increases in costs of
products will reduce our profitability. Other risks and
uncertainties are detailed in Applica's Securities and Exchange
Commission filings, including the Annual Report on Form 10-K for
the year ended December 31, 2005. Should one or more of these
risks, uncertainties or other factors materialize, or should
underlying assumptions prove incorrect, actual results,
performance, or achievements of Applica may vary materially from
any future results, performance or achievements expressed or
implied by the forward-looking statements. 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. -0- *T Applica Incorporated and Subsidiaries
CONSOLIDATED BALANCE SHEETS (In thousands, except par value data)
Assets March 31, 2006 December 31, (Unaudited) 2005 -----------
------------ Current Assets: Cash and cash equivalents $ 6,445 $
4,464 Accounts and other receivables, less allowances of $7,791 in
2006 and $8,773 in 2005 94,785 140,479 Inventories 83,488 101,638
Prepaid expenses and other 13,213 11,137 Refundable income taxes
3,821 3,661 Future income tax benefits 1,246 1,249 ---------
--------- Total current assets 202,998 262,628 Property, Plant and
Equipment - at cost, less accumulated depreciation of $48,197 in
2006 and $46,755 in 2005 18,460 19,715 Future Income Tax Benefits,
Non-Current 9,066 9,185 Intangibles, Net 1,570 1,765 Other Assets
3,446 3,989 --------- --------- Total Assets $235,540 $297,282
========= ========= Liabilities and Shareholders' Equity Current
Liabilities: Accounts payable $ 28,374 $ 33,682 Accrued expenses
38,701 50,034 Short-term debt 38,031 69,524 Current taxes payable
3,131 3,747 Deferred rent 897 919 --------- --------- Total current
liabilities 109,134 157,906 Other Long-Term Liabilities 429 475
Long-Term Debt 75,750 75,750 Shareholders' Equity: Common stock -
authorized: 75,000 shares of $0.10 par value; issued and
outstanding: 24,279 shares in 2006 and 24,179 in 2005 2,428 2,418
Paid-in capital 159,539 159,226 Accumulated deficit (108,708)
(95,749) Accumulated other comprehensive loss (3,032) (2,744)
--------- --------- Total shareholders' equity 50,227 63,151
--------- --------- Total Liabilities and Shareholders' Equity
$235,540 $297,282 ========= ========= *T -0- *T Applica
Incorporated and Subsidiaries CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited) Three Months Ended March 31,
--------------------------------------- 2006 2005
------------------- ----------------- (In thousands, except per
share data) Net sales $104,009 100.0% $112,450 100.0% Cost of goods
sold 79,384 76.3 93,722 83.3 ----------- ------- --------- -------
Gross profit 24,625 23.7 18,728 16.7 Operating expenses 34,180 32.9
39,243 34.9 ----------- ------- --------- ------- Operating loss
(9,555) (9.2) (20,515) (18.2) Other expense (income): Interest
expense 2,778 2.7 2,441 2.2 Interest and other income (36) (0.1)
(275) (0.2) ----------- ------- --------- ------- 2,742 2.6 2,166
1.9 ----------- ------- --------- ------- Loss before income taxes
(12,297) (11.8) (22,681) (20.2) Income tax provision 662 0.6 274
0.2 ----------- ------- --------- ------- Net loss $(12,959)
(12.5)% $(22,955) (20.4)% =========== ======= ========= =======
Loss per common share: Loss per common share - basic and diluted
$(0.54) $(0.95) =========== ========= *T
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