SFP Salton

Salton, Inc. (NYSE: SFP) announced today fiscal results for its fourth quarter and year ended July 1, 2006. The Company reported net sales of $129.5 million and a loss of $50.8 million or ($3.57) per share for its fiscal 2006 fourth quarter compared to net sales of $151.2 million and a loss of $28.8 million or ($2.53) per share for the fiscal 2005 fourth quarter. Net sales decreased domestically by $29.7 million. This decrease includes $5.4 million of reductions, as a result of the sale or discontinuance of certain product lines. The remaining $24.3 million decrease resulted primarily from volume and mix shifts as a result of price increases, other planned product line changes and close outs of discontinued product lines. Despite continued weak consumer demand in the United Kingdom, foreign sales increased by $8.0 million. The loss in the 2006 fourth quarter included a pretax charge of $21.9 million for non-cash intangible asset impairments associated with certain trade names and a $3.4 million non-cash valuation allowance against certain foreign deferred tax assets. The loss in the 2005 fiscal fourth quarter included a pretax charge of $3.0 million for non-cash intangible asset impairments. Salton�s sales were $636.0 million for the year ended July 1, 2006 compared to $781.7 million in fiscal 2005, a reduction of $145.7 million. Domestic sales declined by $124.2 million due to the impact of the sale of the tabletop product lines in September 2005, inventory shortages, vendor and customer uncertainty, post-holiday overstocks at retailers and planned product discontinuation. Foreign sales, particularly in the United Kingdom, were impacted by a continuing weak retail market, resulting in a decline of $16.1 million in 2006. In addition, Salton incurred $5.5 million in unfavorable foreign currency fluctuation. Gross profit declined from $187.5 million (24%) in fiscal 2005 to $144.4 million (22.7%) in fiscal 2006, primarily a result of global raw material cost increases and additional costs associated with inventory reduction programs. These added costs were partially offset by a $10.6 million decline in distribution expenses. Selling, general and administrative expenses decreased to $172.1 million in 2006 compared to $207.8 million for 2005 in connection with previously announced cost reduction initiatives. It is expected that further restructuring activities will continue in fiscal 2007, resulting in additional distribution and SG&A expense reductions. Net interest expense was $37.0 million for fiscal 2006 compared to $51.7 million for fiscal 2005 as a result of lower levels of indebtedness and the debt exchange completed in August, 2005. The Company had approximately $293 million in indebtedness, net of approximately $44 million of cash, swap valuation and accrued interest on senior secured notes at the end of the fiscal 2006 year-end, compared to $429.3 million as of July 2, 2005, net of approximately $21.9 million of cash and swap valuation. �During fiscal 2006, we made significant progress in reducing costs, improving inventory levels and strengthening our balance sheet,� said William Rue, President and Chief Operating Officer. �As a result of our continuing focus on cost controls, we have eliminated more than $90 million in annual operating expenses since 2004. We continue to look for other areas to lower costs, improve inventory turns and working capital utilization. While raw material costs remain high, we believe that our initiatives will make Salton more competitive in the future.� Business Outlook: �We believe as a result of our cost reduction programs, improved balance sheet and new product introductions that Salton is in a much improved position entering the Holiday Season,� said Salton CEO Leon Dreimann. �While the small appliance market remains fiercely competitive, including ongoing pressure from high raw material prices, several of our new products have created tremendous excitement among our customers. Salton has been recognized for its innovation for many years, and our new hydrogen grill will enable us to offer a truly unique product combining the best of the George Foreman Grill with this exciting technology which will be launched in mid 2007. We feel that through increased revenue, driven by product innovation, along with tight cost containment that Salton will return to profitability.� The Company will hold a conference call today at 10 a.m. to discuss these results. Leonhard Dreimann, Chief Executive Officer, William Rue, President and Chief Operating Officer and William Lutz, Chief 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 8985281. There will be a playback available until midnight November 13, 2006. 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 8985281 for the replay. This call is also being webcast and can be accessed at Salton's web site at www.saltoninc.com until November 13, 2006. 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, 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�, George Foreman�, Westinghouse (TM), Toastmaster�, Melitta�, Russell Hobbs�, Farberware�, Ingraham� and Stiffel�. 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 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. SALTON, INC. CONSOLIDATED INCOME STATEMENTS (Dollars in Thousands) � Quarters Ended Years Ended July 1, 2006 July 2, 2005 July 1, 2006 July 2, 2005 � Net Sales $ 129,499� $ 151,195� $ 635,960� $ 781,736� Cost of Sales 94,407� 114,781� 447,530� 539,583� Total Distribution Expense � 10,490� � 11,839� � 44,079� � 54,679� Gross Profit 24,602� 24,575� 144,351� 187,474� Total Selling, General & Administrative 41,266� 44,837� 172,074� 207,810� Intangible Impairment Loss 21,763� 2,968� 21,968� 3,211� Restructuring Costs � 630� � (62) � 867� � 1,015� Operating Loss (39,057) (23,168) (50,558) (24,562) Interest Expense 8,372� 13,097� 36,968� 51,703� Gain-Early Settlement of Debt � 0� � 0� � (21,721) � 0� Loss from Continuing Operations Before Income Taxes (47,429) (36,265) (65,805) (76,265) Income Tax Expense (Benefit) � 7,841� � (10,512) � 36,229� � (22,340) Net Loss from Continuing Operations (55,270) (25,753) (102,034) (53,925) (Loss) Income from Discontinued Operations, net of Tax 0� (3,074) 1,735� 2,138� Gain on Sale of Discontinued Operations, net of Tax � 4,516� � -� � 32,332� � -� Net Loss $ (50,754) $ (28,827) $ (67,967) $ (51,787) � Weighted avg common shares outstanding 14,218,181� 11,376,295� 13,393,373� 11,373,919� Weighted avg common & common equiv share 14,218,181� 11,376,295� 13,393,373� 11,373,919� � Net Loss per common share: Basic Loss from continuing operations $ (3.89) $ (2.26) $ (7.62) $ (4.74) Income from discontinued operations, net of tax -� (0.27) 0.13� 0.19� Gain on sale of discontinued operations � 0.32� � -� � 2.41� � -� Net Loss per common share: Basic $ (3.57) $ (2.53) $ (5.08) $ (4.55) � Net Loss per common share: Diluted Loss from continuing operations $ (3.89) $ (2.26) $ (7.62) $ (4.74) Income from discontinued operations, net of tax $ -� $ (0.27) $ 0.13� $ 0.19� Gain on sale of discontinued operations $ 0.32� $ -� $ 2.41� $ -� Net Loss per common share: Diluted $ (3.57) $ (2.53) $ (5.08) $ (4.55) SALTON, INC. CONSOLIDATED BALANCE SHEET (Dollars in Thousands) � � ASSETS 7/1/06� 7/2/05� CURRENT ASSETS: Cash $18,103� $14,857� Compensating balances on deposit 39,516� 34,355� Accounts receivable, less allowance: 117,094� 140,179� 2006 - $9,440; 2005 - $7,695 Inventories 143,997� 195,065� Assets held for sale -� 998� Prepaid expenses and other current assets 14,809� 16,048� Prepaid income taxes 1,332� -� Deferred income taxes 5,433� 5,524� Current assets of discontinued operations -� 101,927� Total current assets 340,284� 508,953� � Net Property, Plant and Equipment 40,460� 50,227� � Tradenames 159,675� 180,041� Non-current deferred tax asset 3,269� 54,730� Other assets 9,844� 11,555� Non-current assets of discontinued operations -� 7,737� TOTAL ASSETS $553,532� $813,243� � LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Revolving line of credit and other current debt, including an adjustment of $10,971 and $0 for accrued interest on the senior secured notes, respectively � $32,518� $70,730� Senior subordinated notes due 2005 - Current -� 45,990� Accounts payable 91,308� 86,254� Accrued expenses 28,081� 34,802� Accrued interest 5,028� 13,589� Income Taxes Payable 702� 4,375� Current liabilities of discontinued operations -� 47,331� Total current liabilities 157,637� 303,071� � Non-current deferred income taxes 16,271� 3,334� Senior subordinated notes due 2005 -� 79,010� Senior subordinated notes due 2008, including an adjustment of $1,829 and $7,082 to the carrying value related to interest rate swap agreements, respectively � 61,531� 156,387� Senior secured notes, including an adjustment of $13,136 and $0 to the carrying value for accrued interest, respectively 116,407� -� Series C preferred stock, $.01 par value; authorized 150,000 shares; 135,217 shares issued 8,922� -� Term loan and other notes payable 117,908� 100,050� Other long term liabilities 15,668� 20,283� Non-current liabilities of discontinued operations -� 6,917� TOTAL LIABILITIES 494,344� 669,052� 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 2006-14,386,390 shares, 2005-11,376,292 shares � 178� 148� Treasury stock - 7,885,845 shares at cost (65,793) (65,793) Additional paid-in capital 63,854� 55,441� Accumulated other comprehensive income 10,297� 11,513� Retained Earnings 10,652� 78,619� Total stockholders' equity 19,188� 79,928� TOTAL LIABILITIES AND STOCKHOLDER EQUITY $553,532� $813,243� Salton, Inc. (NYSE: SFP) announced today fiscal results for its fourth quarter and year ended July 1, 2006. The Company reported net sales of $129.5 million and a loss of $50.8 million or ($3.57) per share for its fiscal 2006 fourth quarter compared to net sales of $151.2 million and a loss of $28.8 million or ($2.53) per share for the fiscal 2005 fourth quarter. Net sales decreased domestically by $29.7 million. This decrease includes $5.4 million of reductions, as a result of the sale or discontinuance of certain product lines. The remaining $24.3 million decrease resulted primarily from volume and mix shifts as a result of price increases, other planned product line changes and close outs of discontinued product lines. Despite continued weak consumer demand in the United Kingdom, foreign sales increased by $8.0 million. The loss in the 2006 fourth quarter included a pretax charge of $21.9 million for non-cash intangible asset impairments associated with certain trade names and a $3.4 million non-cash valuation allowance against certain foreign deferred tax assets. The loss in the 2005 fiscal fourth quarter included a pretax charge of $3.0 million for non-cash intangible asset impairments. Salton's sales were $636.0 million for the year ended July 1, 2006 compared to $781.7 million in fiscal 2005, a reduction of $145.7 million. Domestic sales declined by $124.2 million due to the impact of the sale of the tabletop product lines in September 2005, inventory shortages, vendor and customer uncertainty, post-holiday overstocks at retailers and planned product discontinuation. Foreign sales, particularly in the United Kingdom, were impacted by a continuing weak retail market, resulting in a decline of $16.1 million in 2006. In addition, Salton incurred $5.5 million in unfavorable foreign currency fluctuation. Gross profit declined from $187.5 million (24%) in fiscal 2005 to $144.4 million (22.7%) in fiscal 2006, primarily a result of global raw material cost increases and additional costs associated with inventory reduction programs. These added costs were partially offset by a $10.6 million decline in distribution expenses. Selling, general and administrative expenses decreased to $172.1 million in 2006 compared to $207.8 million for 2005 in connection with previously announced cost reduction initiatives. It is expected that further restructuring activities will continue in fiscal 2007, resulting in additional distribution and SG&A expense reductions. Net interest expense was $37.0 million for fiscal 2006 compared to $51.7 million for fiscal 2005 as a result of lower levels of indebtedness and the debt exchange completed in August, 2005. The Company had approximately $293 million in indebtedness, net of approximately $44 million of cash, swap valuation and accrued interest on senior secured notes at the end of the fiscal 2006 year-end, compared to $429.3 million as of July 2, 2005, net of approximately $21.9 million of cash and swap valuation. "During fiscal 2006, we made significant progress in reducing costs, improving inventory levels and strengthening our balance sheet," said William Rue, President and Chief Operating Officer. "As a result of our continuing focus on cost controls, we have eliminated more than $90 million in annual operating expenses since 2004. We continue to look for other areas to lower costs, improve inventory turns and working capital utilization. While raw material costs remain high, we believe that our initiatives will make Salton more competitive in the future." Business Outlook: "We believe as a result of our cost reduction programs, improved balance sheet and new product introductions that Salton is in a much improved position entering the Holiday Season," said Salton CEO Leon Dreimann. "While the small appliance market remains fiercely competitive, including ongoing pressure from high raw material prices, several of our new products have created tremendous excitement among our customers. Salton has been recognized for its innovation for many years, and our new hydrogen grill will enable us to offer a truly unique product combining the best of the George Foreman Grill with this exciting technology which will be launched in mid 2007. We feel that through increased revenue, driven by product innovation, along with tight cost containment that Salton will return to profitability." The Company will hold a conference call today at 10 a.m. to discuss these results. Leonhard Dreimann, Chief Executive Officer, William Rue, President and Chief Operating Officer and William Lutz, Chief 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 8985281. There will be a playback available until midnight November 13, 2006. 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 8985281 for the replay. This call is also being webcast and can be accessed at Salton's web site at www.saltoninc.com until November 13, 2006. 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, 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), Melitta(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 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 INCOME STATEMENTS (Dollars in Thousands) Quarters Ended Years Ended July 1, 2006 July 2, 2005 July 1, 2006 July 2, 2005 ------------ ------------ ------------ ------------ Net Sales $ 129,499 $ 151,195 $ 635,960 $ 781,736 Cost of Sales 94,407 114,781 447,530 539,583 Total Distribution Expense 10,490 11,839 44,079 54,679 ------------ ------------ ------------ ------------ Gross Profit 24,602 24,575 144,351 187,474 Total Selling, General & Administrative 41,266 44,837 172,074 207,810 Intangible Impairment Loss 21,763 2,968 21,968 3,211 Restructuring Costs 630 (62) 867 1,015 ------------ ------------ ------------ ------------ Operating Loss (39,057) (23,168) (50,558) (24,562) Interest Expense 8,372 13,097 36,968 51,703 Gain-Early Settlement of Debt 0 0 (21,721) 0 ------------ ------------ ------------ ------------ Loss from Continuing Operations Before Income Taxes (47,429) (36,265) (65,805) (76,265) Income Tax Expense (Benefit) 7,841 (10,512) 36,229 (22,340) ------------ ------------ ------------ ------------ Net Loss from Continuing Operations (55,270) (25,753) (102,034) (53,925) (Loss) Income from Discontinued Operations, net of Tax 0 (3,074) 1,735 2,138 Gain on Sale of Discontinued Operations, net of Tax 4,516 - 32,332 - ------------ ------------ ------------ ------------ Net Loss $ (50,754) $ (28,827) $ (67,967) $ (51,787) ============ ============ ============ ============ Weighted avg common shares outstanding 14,218,181 11,376,295 13,393,373 11,373,919 Weighted avg common & common equiv share 14,218,181 11,376,295 13,393,373 11,373,919 Net Loss per common share: Basic Loss from continuing operations $ (3.89) $ (2.26) $ (7.62) $ (4.74) Income from discontinued operations, net of tax - (0.27) 0.13 0.19 Gain on sale of discontinued operations 0.32 - 2.41 - ------------ ------------ ------------ ------------ Net Loss per common share: Basic $ (3.57) $ (2.53) $ (5.08) $ (4.55) ============ ============ ============ ============ Net Loss per common share: Diluted Loss from continuing operations $ (3.89) $ (2.26) $ (7.62) $ (4.74) Income from discontinued operations, net of tax $ - $ (0.27) $ 0.13 $ 0.19 Gain on sale of discontinued operations $ 0.32 $ - $ 2.41 $ - ------------ ------------ ------------ ------------ Net Loss per common share: Diluted $ (3.57) $ (2.53) $ (5.08) $ (4.55) ============ ============ ============ ============ *T -0- *T SALTON, INC. CONSOLIDATED BALANCE SHEET (Dollars in Thousands) ASSETS 7/1/06 7/2/05 -------------------------------------------------- CURRENT ASSETS: -------------------------------------------------- Cash $18,103 $14,857 Compensating balances on deposit 39,516 34,355 Accounts receivable, less allowance: 117,094 140,179 2006 - $9,440; 2005 - $7,695 Inventories 143,997 195,065 Assets held for sale - 998 Prepaid expenses and other current assets 14,809 16,048 Prepaid income taxes 1,332 - Deferred income taxes 5,433 5,524 Current assets of discontinued operations - 101,927 --------- --------- Total current assets 340,284 508,953 Net Property, Plant and Equipment 40,460 50,227 Tradenames 159,675 180,041 Non-current deferred tax asset 3,269 54,730 Other assets 9,844 11,555 Non-current assets of discontinued operations - 7,737 --------- --------- TOTAL ASSETS $553,532 $813,243 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY -------------------------------------------------- CURRENT LIABILITIES: -------------------------------------------------- Revolving line of credit and other current debt, including an adjustment of $10,971 and $0 for accrued interest on the senior secured notes, respectively $32,518 $70,730 Senior subordinated notes due 2005 - Current - 45,990 Accounts payable 91,308 86,254 Accrued expenses 28,081 34,802 Accrued interest 5,028 13,589 Income Taxes Payable 702 4,375 Current liabilities of discontinued operations - 47,331 --------- --------- Total current liabilities 157,637 303,071 Non-current deferred income taxes 16,271 3,334 Senior subordinated notes due 2005 - 79,010 Senior subordinated notes due 2008, including an adjustment of $1,829 and $7,082 to the carrying value related to interest rate swap agreements, respectively 61,531 156,387 Senior secured notes, including an adjustment of $13,136 and $0 to the carrying value for accrued interest, respectively 116,407 - Series C preferred stock, $.01 par value; authorized 150,000 shares; 135,217 shares issued 8,922 - Term loan and other notes payable 117,908 100,050 Other long term liabilities 15,668 20,283 Non-current liabilities of discontinued operations - 6,917 --------- --------- TOTAL LIABILITIES 494,344 669,052 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- 14,386,390 shares, 2005-11,376,292 shares 178 148 Treasury stock - 7,885,845 shares at cost (65,793) (65,793) Additional paid-in capital 63,854 55,441 Accumulated other comprehensive income 10,297 11,513 Retained Earnings 10,652 78,619 --------- --------- Total stockholders' equity 19,188 79,928 --------- --------- TOTAL LIABILITIES AND STOCKHOLDER EQUITY $553,532 $813,243 ========= ========= *T