APN Apeiron Capital Investment Corp

Applica Incorporated Reports 2004 Third-Quarter and Year-to-Date Financial Results MIRAMAR, Fla., Nov. 4 /PRNewswire-FirstCall/ -- Applica Incorporated (NYSE:APN) today announced that third-quarter sales for 2004 were $187.8 million, an increase of 8.2% from the same period in 2003. For the first nine months of 2004, sales were $479.2 million, an increase of 11.0% over the first nine months of 2003. The increases in sales in the third quarter and nine-month period resulted primarily from sales of new products and increased sales of core Black & Decker(R) branded products, offset by a decline in contract manufacturing sales. Applica reported a net loss for the 2004 third quarter of $9.9 million, or $0.41 per share, compared with earnings of $4.9 million, or $0.20 per diluted share, for the 2003 third quarter. The third quarter of 2004 included expenses of $9.2 million related to termination benefits and a loss of $0.8 million on the sale of Applica's Chinese manufacturing operations. The third-quarter 2003 earnings included $16.2 million of equity in the net earnings of a joint venture in which Applica owned a 50% interest. For the first nine months of 2004, Applica reported a net loss of $138.2 million, or $5.78 per share, as compared to net income of $21.7 million, or $0.91 per diluted share, for the same period last year. As previously announced, Applica incurred a non-cash tax expense in the second quarter of 2004 of approximately $24.0 million related to the U.S. taxes on previously undistributed foreign earnings. Additionally, as previously announced, in the second quarter of 2004, the Company recognized a non-cash adjustment to goodwill of $62.8 million (or $46.4 million after tax) as the result of its annual test of its existing goodwill for impairment in accordance with Statement of Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible Assets." Finally, Applica increased its allowance related to deferred tax assets by $51.4 million, resulting in a non-cash tax expense in the second quarter. The 2003 year-to-date earnings included $55.2 million ($33.1 million after tax) of equity in the net earnings of a joint venture. Applica's gross profit margin increased to 29.8% in the three-month period ended September 30, 2004 as compared to 29.1% for the same period in 2003. The increase in the gross profit margin was primarily attributed to sales of new products with higher margins and the movement of production of core products from our manufacturing facility in Mexico to third parties in China. For the first nine months of the year, the gross profit margin increased to 29.6% as compared to 29.1% for the same period in 2003. Harry D. Schulman, President and Chief Executive Officer stated, "We have gone through significant changes over the last few months, including the sale of our Chinese manufacturing operations, the renewal of the Black & Decker(R) license, the move of our executive offices and other matters. Additionally, this past week, we sold our Jerdon division. We believe that these are profound changes that will have a lasting positive effect on the company, and we intend to continue to transform Applica to create long-term shareholder value." Applica will hold a conference call today at 11:00 a.m., Eastern Standard Time, to discuss its third-quarter and year-to-date 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 Thursday, November 11, 2004, at midnight. Applica Incorporated and its subsidiaries are marketers and distributors of a broad range of branded and private-label small electric consumer goods. 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) 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 manufacturing facilities 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 all 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, 2003. 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 September 30, 2004 December 31, (Unaudited) 2003 (In thousands) Current Assets: Cash and cash equivalents $5,107 $12,735 Accounts and other receivables, less allowances of $11,652 in 2004 and $12,543 in 2003 136,177 131,021 Notes receivable - current and former officers 1,554 1,615 Inventories 173,849 106,326 Prepaid expenses and other 18,980 21,828 Refundable income taxes 2,686 4,823 Future income tax benefits 2,442 11,616 Total current assets 340,795 289,964 Investment in Joint Venture -- 5,389 Property, Plant and Equipment - at cost, less accumulated depreciation of $76,680 in 2004 and $100,445 in 2003 43,252 62,154 Future Income Tax Benefits, Non-Current 8,304 49,695 Goodwill -- 62,812 Other Intangibles, Net 4,998 6,146 Other Assets 2,005 2,676 Total Assets $399,354 $478,836 Liabilities and Shareholders' Equity Current Liabilities: Accounts payable $49,925 $39,273 Accrued expenses 60,703 61,362 Current maturities of long-term debt 8,955 5,919 Current taxes payable 2,462 2,172 Deferred rent 665 301 Total current liabilities 122,710 109,027 Other Long-Term Liabilities 1,313 1,327 Long-Term Debt, Less Current Maturities 173,022 130,869 Shareholders' Equity: Common stock - authorized: 75,000 shares of $0.10 par value; issued and outstanding: 24,069 shares in 2004 and 23,687 shares in 2003 2,407 2,369 Paid-in capital 158,865 156,604 (Accumulated deficit) retained earnings (51,766) 86,474 Note receivable - former officer (1,496) (1,496) Accumulated other comprehensive earnings (loss) (5,701) (6,338) Total shareholders' equity 102,309 237,613 Total Liabilities and Shareholders' Equity $399,354 $478,836 Applica Incorporated and Subsidiaries CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended September 30, 2004 2003 (In thousands, except per share data) Net sales $187,750 100.0% $173,512 100.0% Cost of goods sold 131,850 70.2 123,004 70.9 Gross profit 55,900 29.8 50,508 29.1 Selling, general and administrative expenses: Operating expenses 52,846 28.1 53,358 30.8 Termination benefits 9,153 4.9 -- -- Loss on sale of subsidiary 784 0.4 -- -- Operating loss (6,883) (3.7) (2,850) (1.7) Other expense (income): Interest expense 2,360 1.3 3,597 2.1 Interest and other income (80) -- (245) (0.1) Loss on early extinguishment of debt -- -- 1,906 1.1 2,280 1.2 5,258 3.0 Loss before equity in net earnings of joint venture and income taxes (9,163) (4.9) (8,108) (4.7) Equity in net earnings of joint venture -- -- 16,199 9.3 Loss before income taxes (9,163) (4.9) 8,091 4.7 Income tax provision 780 0.4 3,236 1.9 Net (loss) earnings $(9,943) (5.3)% $4,855 2.8% Earnings (loss) per common share: (Loss) earnings per common share - basic $(0.41) $0.21 (Loss) earnings per common share - diluted $(0.41) $0.20 Applica Incorporated and Subsidiaries CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Nine Months Ended September 30, 2004 2003 (In thousands, except per share data) Net sales $479,236 100.0% $431,598 100.0% Cost of goods sold 337,377 70.4 305,962 70.9 Gross profit 141,859 29.6 125,636 29.1 Selling, general and administrative expenses: Operating expenses 146,729 30.6 132,240 30.6 Termination benefits 9,153 1.9 -- -- Loss on sale of subsidiary 784 0.2 -- -- Repositioning charge (563) (0.1) -- -- Impairment of goodwill 62,812 13.1 -- -- Operating loss (77,056) (16.1) (6,604) (1.5) Other expense (income): Interest expense 6,718 1.4 11,431 2.6 Interest and other income (1,069) (0.2) (893) (0.2) Loss on early extinguishment of debt 187 -- 1,906 0.4 5,836 1.2 12,444 2.9 Loss before equity in net earnings of joint venture and income taxes (82,892) (17.3) (19,048) (4.4) Equity in net earnings of joint venture -- -- 55,199 12.8 (Loss) earnings before income taxes (82,892) (17.3) 36,151 8.4 Income tax provision 55,348 11.5 14,460 3.4 Net (loss) earnings $(138,240) (28.8)% $21,691 5.0% Earnings (loss) per common share: (Loss) earnings per common share - basic $(5.78) $0.92 (Loss) earnings per common share - diluted $(5.78) $0.91 DATASOURCE: Applica Incorporated CONTACT: Investor Relations Department of Applica Incorporated, +1-954-883-1000, or Web site: http://www.applicainc.com/

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