SFP Salton

Salton, Inc. (NYSE: SFP) announced today fiscal results for its first quarter ended September 30, 2006. The Company reported net sales of $138.3 million in the first quarter of fiscal 2007 and a loss of $10.0 million, or $(0.70) per share, versus net sales of $148.4 million in the first quarter of fiscal 2006 and net income of $29.7 million, or $1.83 per diluted share. The net income reported in fiscal 2006 included a pretax gain of $21.7 million resulting from the early settlement of debt associated with the Company�s private debt exchange offer and a $27.8 million gain associated with the sale of its 52.6% ownership interest in the South African subsidiary, AMAP. The decrease in sales in the first quarter of fiscal 2007 was primarily due to the sale of the tabletop business, other planned product discontinuation, and some inventory shortages that resulted from the Company�s liquidity constraints at the beginning of the quarter. The liquidity constraints that impacted the fiscal 2007 first quarter results were resolved during the quarter as a result of the company receiving an amendment from the lenders under its senior secured credit facility. Foreign sales increased by $6.5 million, of which $2.5 million was a result of favorable foreign exchange rate fluctuations. Gross profit for the first quarter of fiscal 2007 increased from $29.5 million (19.9%) in 2006 to $34.4 million (24.9%) in 2007. This increase is primarily a result of a more favorable product mix including fewer closeouts and a higher percentage of core products in 2007. Additional improvements of $0.9 million resulted from a domestic decline in distribution expenses primarily as a result of the Company�s U.S. cost reduction programs. In addition to improved mix, as a percent of sales, gross margins on the core business lines showed an increase in spite of material cost increases on plastics, copper, steel and corrugated materials. Selling, general and administrative expenses decreased to $33.5 million for first quarter of fiscal 2007 compared to $40.4 million for first quarter of fiscal 2006. U.S. operations reduced selling, general and administrative expenses by $5.4 million, while foreign operations reduced selling, general and administrative expenses by $1.5 million primarily in the European market as costs were realigned globally with current sales volumes. The Company reported operating income of $0.1 million in the first quarter of fiscal 2007, compared to an operating loss of $11.0 million in the first quarter of fiscal 2006. The average amount of all debt outstanding was $341.6 million for the first quarter of 2007 compared to $434.9 million for the first quarter of 2006. Net interest expense was $9.3 million for the first quarter of fiscal 2007 compared to $11.0 million for the first quarter of fiscal 2006. �We are pleased that through tight cost controls we were able to increase our gross margins, helping to overcome some of the challenges Salton faced due to liquidity constraints during the first quarter,� said Salton CEO Leon Dreimann. �The operating results, particularly in the U.S., reflect the reduction of more than $100 million in cumulative operating expenses we have achieved over the past two years. We believe we can continue to eliminate additional costs, making Salton more competitive despite high commodity prices.� Business Outlook: �As Salton enters the Holiday Season, the Company has improved its competitive position through our aggressive cost reduction program and new production innovation,� said Mr. Dreimann. "Competitive pressures in the small appliance market are bringing change to the industry, and Salton has positioned itself through an improved balance sheet and lower cost structure to remain an industry leader. We are excited by the early response from retailers to many of our products for the Holiday Season. We also look forward to the launch of our new hydrogen grill in mid 2007, which will combine the best of the George Foreman Grill with innovative technology." The Company will hold a conference call today at 9 a.m. ET today to discuss these results. Mr. Dreimann, Chief Executive 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 2029735. There will be a playback available until midnight December 14, 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 2029735 for the replay. This call is also being webcast and can be accessed at Salton's web site at www.saltoninc.com until December 14, 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 repay or refinance its indebtedness as it matures and satisfy the redemption obligations under its preferred stock agreements; 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 (in thousands, except share and per share data) (unaudited) � 13 Weeks Ended � Sept 30, 2006 Oct 1, 2005 � Net Sales $ 138,307� $ 148,416� Cost of Sales 94,178� 108,371� Total Distribution Expense � 9,687� � 10,548� Gross Profit 34,442� 29,497� Total Selling, General & Administrative 33,546� 40,418� Restructuring Costs � 845� � 117� Operating Income (Loss) 51� (11,038) Interest Expense 9,277� 11,049� Gain-Early Settlement of Debt � 0� � (21,655) Loss from Continuing Operations Before Income Taxes (9,226) (432) Income Tax Expense (Benefit) � 798� � (545) Net Loss (Income) from Continuing Operations (10,024) 113� Income from Discontinued Operations, net of Tax 0� 1,735� Gain on Sale of Discontinued Operations, net of Tax � 0� � 27,816� Net (Loss) Income $ (10,024) $ 29,664� � Weighted avg common shares outstanding 14,384,961� 15,745,323� Weighted avg common & common equiv share 14,384,961� 16,249,880� � Net (Loss) Income per common share: Basic (Loss) income from continuing operations $ (0.70) $ 0.01� Income from discontinued operations, net of tax -� 0.11� Gain on sale of discontinued operations � -� � 1.76� Net (Loss) Income per common share: Basic $ (0.70) $ 1.88� � Net (Loss) Income per common share: Diluted (Loss) income from continuing operations $ (0.70) $ 0.01� Income from discontinued operations, net of tax $ -� $ 0.11� Gain on sale of discontinued operations $ -� $ 1.71� Net (Loss) Income per common share: Diluted $ (0.70) $ 1.83� SALTON, INC. CONSOLIDATED BALANCE SHEET (in thousands, except share data) � � ASSETS 9/30/06� 7/1/06� CURRENT ASSETS: Cash $ 13,495� $ 18,103� Compensating balances on deposit 39,696� 39,516� Accounts receivable, less allowance: 132,236� 117,094� 2007 - $10,604; 2006 - $9,440 Inventories 146,133� 143,997� Prepaid expenses and other current assets 16,454� 14,809� Prepaid income taxes 3,237� 1,332� Deferred income taxes � 5,438� � 5,433� Total current assets 356,689� 340,284� � Net Property, Plant and Equipment 38,572� 40,460� � Tradenames 160,138� 159,675� Non-current deferred tax asset 3,355� 3,269� Other assets � 10,540� � 9,844� TOTAL ASSETS $ 569,294� $ 553,532� � LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Revolving line of credit and other current debt, including accrued interest of $10,971 and $10,971, respectively $ 58,882� $ 32,518� Accounts payable 90,664� 91,308� Accrued expenses 29,423� 28,081� Accrued interest 7,250� 5,028� Income Taxes Payable � 1,677� � 702� Total current liabilities 187,896� 157,637� � Non-current deferred income taxes 16,022� 16,271� Senior subordinated notes due 2008, including an adjustment of $1,580 and $1,829 to the carrying value related to interest rate swap agreements, respectively � 61,306� 61,531� Second lien notes, including accrued interest of $7,619 and $13,136, respectively 110,891� 116,407� Series C preferred stock, $.01 par value; authorized 150,000 shares; 135,217 shares issued 9,198� 8,922� Term loan and other notes payable 117,729� 117,908� Other long term liabilities � 15,635� � 15,668� TOTAL LIABILITIES 518,677� 494,344� Redeemable 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 2007-14,384,390 shares, 2006-14,386,390 shares � 178� 178� Treasury stock, 7,885,845 shares, at cost (65,793) (65,793) Additional paid-in capital 64,818� 63,854� Accumulated other comprehensive income 10,786� 10,297� Retained Earnings � 628� � 10,652� Total stockholders' equity � 10,617� � 19,188� TOTAL LIABILITIES AND STOCKHOLDER EQUITY $ 569,294� $ 553,532� Salton, Inc. (NYSE: SFP) announced today fiscal results for its first quarter ended September 30, 2006. The Company reported net sales of $138.3 million in the first quarter of fiscal 2007 and a loss of $10.0 million, or $(0.70) per share, versus net sales of $148.4 million in the first quarter of fiscal 2006 and net income of $29.7 million, or $1.83 per diluted share. The net income reported in fiscal 2006 included a pretax gain of $21.7 million resulting from the early settlement of debt associated with the Company's private debt exchange offer and a $27.8 million gain associated with the sale of its 52.6% ownership interest in the South African subsidiary, AMAP. The decrease in sales in the first quarter of fiscal 2007 was primarily due to the sale of the tabletop business, other planned product discontinuation, and some inventory shortages that resulted from the Company's liquidity constraints at the beginning of the quarter. The liquidity constraints that impacted the fiscal 2007 first quarter results were resolved during the quarter as a result of the company receiving an amendment from the lenders under its senior secured credit facility. Foreign sales increased by $6.5 million, of which $2.5 million was a result of favorable foreign exchange rate fluctuations. Gross profit for the first quarter of fiscal 2007 increased from $29.5 million (19.9%) in 2006 to $34.4 million (24.9%) in 2007. This increase is primarily a result of a more favorable product mix including fewer closeouts and a higher percentage of core products in 2007. Additional improvements of $0.9 million resulted from a domestic decline in distribution expenses primarily as a result of the Company's U.S. cost reduction programs. In addition to improved mix, as a percent of sales, gross margins on the core business lines showed an increase in spite of material cost increases on plastics, copper, steel and corrugated materials. Selling, general and administrative expenses decreased to $33.5 million for first quarter of fiscal 2007 compared to $40.4 million for first quarter of fiscal 2006. U.S. operations reduced selling, general and administrative expenses by $5.4 million, while foreign operations reduced selling, general and administrative expenses by $1.5 million primarily in the European market as costs were realigned globally with current sales volumes. The Company reported operating income of $0.1 million in the first quarter of fiscal 2007, compared to an operating loss of $11.0 million in the first quarter of fiscal 2006. The average amount of all debt outstanding was $341.6 million for the first quarter of 2007 compared to $434.9 million for the first quarter of 2006. Net interest expense was $9.3 million for the first quarter of fiscal 2007 compared to $11.0 million for the first quarter of fiscal 2006. "We are pleased that through tight cost controls we were able to increase our gross margins, helping to overcome some of the challenges Salton faced due to liquidity constraints during the first quarter," said Salton CEO Leon Dreimann. "The operating results, particularly in the U.S., reflect the reduction of more than $100 million in cumulative operating expenses we have achieved over the past two years. We believe we can continue to eliminate additional costs, making Salton more competitive despite high commodity prices." Business Outlook: "As Salton enters the Holiday Season, the Company has improved its competitive position through our aggressive cost reduction program and new production innovation," said Mr. Dreimann. "Competitive pressures in the small appliance market are bringing change to the industry, and Salton has positioned itself through an improved balance sheet and lower cost structure to remain an industry leader. We are excited by the early response from retailers to many of our products for the Holiday Season. We also look forward to the launch of our new hydrogen grill in mid 2007, which will combine the best of the George Foreman Grill with innovative technology." The Company will hold a conference call today at 9 a.m. ET today to discuss these results. Mr. Dreimann, Chief Executive 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 2029735. There will be a playback available until midnight December 14, 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 2029735 for the replay. This call is also being webcast and can be accessed at Salton's web site at www.saltoninc.com until December 14, 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 repay or refinance its indebtedness as it matures and satisfy the redemption obligations under its preferred stock agreements; 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 (in thousands, except share and per share data) (unaudited) 13 Weeks Ended Sept 30, 2006 Oct 1, 2005 ------------- ------------- Net Sales $ 138,307 $ 148,416 Cost of Sales 94,178 108,371 Total Distribution Expense 9,687 10,548 ------------- ------------- Gross Profit 34,442 29,497 Total Selling, General & Administrative 33,546 40,418 Restructuring Costs 845 117 ------------- ------------- Operating Income (Loss) 51 (11,038) Interest Expense 9,277 11,049 Gain-Early Settlement of Debt 0 (21,655) ------------- ------------- Loss from Continuing Operations Before Income Taxes (9,226) (432) Income Tax Expense (Benefit) 798 (545) ------------- ------------- Net Loss (Income) from Continuing Operations (10,024) 113 Income from Discontinued Operations, net of Tax 0 1,735 Gain on Sale of Discontinued Operations, net of Tax 0 27,816 ------------- ------------- Net (Loss) Income $ (10,024) $ 29,664 ============= ============= Weighted avg common shares outstanding 14,384,961 15,745,323 Weighted avg common & common equiv share 14,384,961 16,249,880 Net (Loss) Income per common share: Basic (Loss) income from continuing operations $ (0.70) $ 0.01 Income from discontinued operations, net of tax - 0.11 Gain on sale of discontinued operations - 1.76 ------------- ------------- Net (Loss) Income per common share: Basic $ (0.70) $ 1.88 ============= ============= Net (Loss) Income per common share: Diluted (Loss) income from continuing operations $ (0.70) $ 0.01 Income from discontinued operations, net of tax $ - $ 0.11 Gain on sale of discontinued operations $ - $ 1.71 ------------- ------------- Net (Loss) Income per common share: Diluted $ (0.70) $ 1.83 ============= ============= *T -0- *T SALTON, INC. CONSOLIDATED BALANCE SHEET (in thousands, except share data) ASSETS 9/30/06 7/1/06 -------------------------------------------------- CURRENT ASSETS: -------------------------------------------------- Cash $ 13,495 $ 18,103 Compensating balances on deposit 39,696 39,516 Accounts receivable, less allowance: 132,236 117,094 2007 - $10,604; 2006 - $9,440 Inventories 146,133 143,997 Prepaid expenses and other current assets 16,454 14,809 Prepaid income taxes 3,237 1,332 Deferred income taxes 5,438 5,433 --------- --------- Total current assets 356,689 340,284 Net Property, Plant and Equipment 38,572 40,460 Tradenames 160,138 159,675 Non-current deferred tax asset 3,355 3,269 Other assets 10,540 9,844 --------- --------- TOTAL ASSETS $569,294 $553,532 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY -------------------------------------------------- CURRENT LIABILITIES: -------------------------------------------------- Revolving line of credit and other current debt, including accrued interest of $10,971 and $10,971, respectively $ 58,882 $ 32,518 Accounts payable 90,664 91,308 Accrued expenses 29,423 28,081 Accrued interest 7,250 5,028 Income Taxes Payable 1,677 702 --------- --------- Total current liabilities 187,896 157,637 Non-current deferred income taxes 16,022 16,271 Senior subordinated notes due 2008, including an adjustment of $1,580 and $1,829 to the carrying value related to interest rate swap agreements, respectively 61,306 61,531 Second lien notes, including accrued interest of $7,619 and $13,136, respectively 110,891 116,407 Series C preferred stock, $.01 par value; authorized 150,000 shares; 135,217 shares issued 9,198 8,922 Term loan and other notes payable 117,729 117,908 Other long term liabilities 15,635 15,668 --------- --------- TOTAL LIABILITIES 518,677 494,344 Redeemable 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 2007-14,384,390 shares, 2006-14,386,390 shares 178 178 Treasury stock, 7,885,845 shares, at cost (65,793) (65,793) Additional paid-in capital 64,818 63,854 Accumulated other comprehensive income 10,786 10,297 Retained Earnings 628 10,652 --------- --------- Total stockholders' equity 10,617 19,188 --------- --------- TOTAL LIABILITIES AND STOCKHOLDER EQUITY $569,294 $553,532 ========= ========= *T