Salton, Inc. (NYSE: SFP) announced today fiscal results for its
first quarter ended October 1, 2005. The Company reported net sales
of $148.4 million for its fiscal 2006 first quarter compared to net
sales of $204.7 million for the fiscal 2005 first quarter. Salton
reported net income of $29.7 million, or $2.43 per share or $1.83
per diluted share, versus a loss of $(3.2) million, or ($0.28) per
share for the same period in fiscal 2005. Net sales decreased
domestically by $47.0 million as a result of restructuring and the
uncertainty it created among one of our large suppliers and a few
customers. This uncertainty impacted product availability and
demand for the first quarter. The Company has now concluded a major
portion of its restructuring efforts. Foreign sales declined by
$9.2 million. The foreign sales were impacted by weak consumer
demand and some product shortages in the United Kingdom. As a
result of the sale of Amalgamated Appliance Holdings Limited (AMAP)
on September 29, 2005, the results of AMAP have been included in
discontinued operations for the first quarter of fiscal 2006 and
2005. The Company's gross margin was 27.0% for the first quarter of
fiscal 2006, compared to 32.6% for the year earlier period. Gross
margins decreased as a result of an inventory shortage of higher
margin products and increased closeouts in the domestic market. In
addition, Salton's business and its margins continue to be affected
by the high cost of steel, corrugated and oil-based raw materials.
Despite these challenges, operating expenses, including
distribution costs, declined $8.8 million in the first quarter of
fiscal 2006 compared to fiscal 2005. This was primarily a result of
$7.8 million in domestic cost improvements. Net income increased by
$32.9 million primarily as a result of a $27.8 million gain from
the sale of the Company's 52.6% ownership interest in AMAP and a
pre-tax gain of $21.7 million from the early retirement of debt
associated with the Company's Exchange Offer. The Company had a
loss from operations of $(11.0) million compared to operating
income of $6.2 million in the year-earlier period. The Company had
approximately $301.8 million in indebtedness, net of cash and
restructuring interest on senior secured notes of $28.5 million at
the end of the fiscal 2006 first quarter, compared to $429.3
million as of July 2, 2005. As a result of lower than expected
sales, the Company was not in compliance with its financial
covenants as of the end of the first quarter of fiscal 2006 and
does not expect to be in compliance as of November 5, 2005. Salton
sought and received The Sixth Amendment and waiver from its senior
lenders, who also agreed to provide additional availability of $5.0
million for seasonal build-up of inventory. "During the last 18
months, Salton has taken significant steps to make the Company less
leveraged and more competitive. Our goal remains to return the
Company to profitability," said William Rue, President and Chief
Operating Officer. "Recently, we completed the sale of AMAP and our
Tabletop Division which improved our balance sheet and will allow
us to focus on sales initiatives and our business. Through our cost
reduction programs, we have reduced our annual domestic expenses by
more than $55.0 million. We will continue to seek ways to make our
business more cost effective and profitable, while looking for new
ways to grow." Business Outlook: "As we had indicated previously,
our sales for the first quarter were weak due to the impact of our
restructuring efforts, delays in customer orders, product shortages
and the effects of the hurricanes," said Leonhard Dreimann, Chief
Executive Officer. "However, we are encouraged by recent reactions
from customers and suppliers. Incoming orders indicate customers
are excited about our new products such as the George Foreman(R)
"G5" Next Grilleration, the latest in a line of removable plate
grills developed by the Company and George Foreman. We expect a
much stronger second quarter" The conference call will take place
at 9 a.m. EST on November 10, 2005. Leonhard Dreimann, Chief
Executive Officer, William Rue, President and Chief Operating
Officer and David Mulder, Executive Vice President, Chief
Administrative Officer and Senior Financial Officer will host the
call. Interested participants should call (800) 968-9265 when
calling from the United States or (706) 679-3061 when calling
internationally. Please reference Conference I.D. Number 2140676.
There will be a playback available until midnight, December 10,
2005. To listen to the playback, please call (800) 642-1687 when
calling within the United States or (706) 645-9291 when calling
internationally. Please use pass code 2140676 for the replay. This
call is also being webcast and can be accessed at Salton's web site
at www.saltoninc.com until December 10, 2005. The conference call
can be found under the subheadings, "Stock Quotes" and then "Audio
Archives." About Salton, Inc. Salton, Inc. is a leading designer,
marketer and distributor of branded, high quality small appliances,
electronics, home decor and personal care products. Its product mix
includes a broad range of small kitchen and home appliances,
electronics for the home, time products, lighting products, picture
frames and personal care and wellness products. The Company sells
its products under a portfolio of well recognized brand names such
as Salton(R), George Foreman(R), Westinghouse(TM), Toastmaster(R),
Mellitta(R), Russell Hobbs(R), Farberware(R), Ingraham(R) and
Stiffel(R). It believes its strong market position results from its
well-known brand names, high quality and innovative products,
strong relationships with its customer base and its focused
outsourcing strategy. Certain matters discussed in this press
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: Salton's ability to repay the outstanding
10-3/4% Subordinated Notes due December 15, 2005; Salton's ability
to realize the benefits it expects from its U.S. restructuring
plan; Salton's substantial indebtedness and restrictive covenants
in Salton's debt instruments; Salton's ability to access the
capital markets on attractive terms or at all; Salton's
relationship and contractual arrangements with key customers,
suppliers and licensors; pending legal proceedings; cancellation or
reduction of orders; the timely development, introduction and
customer acceptance of Salton's products; dependence on foreign
suppliers and supply and manufacturing constraints; competitive
products and pricing; economic conditions and the retail
environment; international business activities; the risks related
to intellectual property rights; the risks relating to regulatory
matters and other risks and uncertainties detailed from time to
time in Salton's Securities and Exchange Commission Filings. -0- *T
SALTON, INC. CONSOLIDATED BALANCE SHEETS (Dollars in Thousands)
UNAUDITED ASSETS 10/1/05 7/2/05 ------ CURRENT ASSETS:
--------------- Cash $10,310 $14,857 Compensating balances on
deposit 38,779 34,355 Restricted cash 81,664 - Accounts Receivable,
less allowance: 146,213 140,179 2006 - $7,581; 2005 - $10,130
Inventories 188,319 195,065 Asset held for sale - 998 Prepaid
expenses and other current assets 15,424 16,048 Deferred income
taxes 6,402 5,524 Current assets of discontinued operations -
101,927 --------- --------- Total current assets 487,111 508,953
Net Property, Plant and Equipment 47,287 50,227 Tradenames 179,941
180,041 Non-current deferred tax asset 27,239 49,275 Other assets
11,522 11,555 Non-current assets of discontinued operations - 7,737
--------- --------- TOTAL ASSETS $753,100 $807,788 =========
========= LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------ CURRENT LIABILITIES:
-------------------- Revolving line of credit and other current
debt, including an adjustment of $9,713 and $0 for accrued interest
on the senior secured notes, respectively $87,485 $70,730 Senior
subordinated notes-current 45,990 45,990 Accounts payable 113,075
86,254 Accrued expenses 36,638 48,391 Income Taxes Payable 4,378
4,375 Current liabilities of discontinued operations - 47,331
--------- --------- Total current liabilities 287,566 303,071
Non-current deferred income taxes 3,040 3,334 Term loan and other
notes payable 100,050 100,050 Senior subordinated notes due 2005 -
79,010 Senior subordinated notes due 2008, including an adjustment
of $2,578 and $7,082 to the carrying value related to interest rate
swap agreements, respectively 62,206 156,387 Second lien notes,
including an adjustment of $18,756 and $0 to the carrying value for
accrued interest, respectively 121,933 - Series C preferred stock
8,087 - Other long term liabilities 20,134 20,283 Non-current
liabilities of discontinued operations - 1,462 --------- ---------
TOTAL LIABILITIES 603,016 663,597 Minority interest in discontinued
operations - 24,263 Convertible Preferred Stock, $.01 par value:
authorized, 2,000,000 shares, 40,000 shares issued 40,000 40,000
STOCKHOLDERS' EQUITY: --------------------- Common stock, $.01 par
value; authorized 40,000,000 shares; issued and outstanding
2006-13,520,761 shares, 2005-11,376,292 shares 170 148 Treasury
stock - at cost (65,793) (65,793) Additional paid-in capital 62,356
55,441 Accumulated other comprehensive income 5,068 11,513 Retained
Earnings 108,283 78,619 --------- --------- Total stockholders'
equity 110,084 79,928 --------- --------- TOTAL LIABILITIES AND
STOCKHOLDER EQUITY $753,100 $807,788 ========= ========= *T -0- *T
SALTON, INC CONSOLIDATED INCOME STATEMENTS (Dollars in Thousands)
UNAUDITED 13 Weeks Ended Oct 1, 2005 Oct 2, 2004 -----------
----------- Net Sales $148,416 $204,684 Cost of Sales 108,371
137,986 Total Distribution Expense 10,548 12,935 -----------
----------- Gross Profit 29,497 53,763 Total Selling, General &
Administrative 40,418 46,854 Restructuring Costs 117 672
----------- ----------- Operating (Loss) Income (11,038) 6,237
Interest Expense 11,049 12,879 Gain-Early settlement of debt
(21,655) 0 ----------- ----------- (Loss) Income from Continuing
Operations Before Income Taxes (432) (6,642) Income Taxes (545)
(2,197) ----------- ----------- Net (Loss) Income from Continuing
Operations 113 (4,445) Income (Loss) from Discontinued Operations,
net of Tax 1,735 1,258 Gain on Sale of Discontinued Operations, net
of Tax 27,816 - ----------- ----------- Net Income (Loss) $29,664
$(3,187) =========== =========== Weighted avg common shares
outstanding 12,215,911 11,370,946 Weighted avg common & common
equiv share 16,249,880 11,370,946 Net income(loss) per common
share: Basic Income(loss) from continuing operations $0.01 $(0.39)
Income from discontinued operations, net of tax 0.14 0.11 Gain on
sale of discontinued operations 2.28 - ----------- ----------- Net
income(loss) per common share: Basic $2.43 $(0.28) ===========
=========== Net income(loss) per common share: Diluted Income(loss)
from continuing operations $0.01 $(0.39) Income from discontinued
operations, net of tax $0.11 $0.11 Gain on sale of discontinued
operations $1.71 $- ----------- ----------- Net income(loss) per
common share: Diluted $1.83 $(0.28) =========== =========== *T
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