Salton (NYSE:SFP)
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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.
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*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
============= =============
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-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