Small appliance maker Applica Incorporated today announced that third-quarter sales for 2002 were U.S. $194.9 million, a decrease of 4.1 percent over the third quarter of 2001. For the first 9 months of 2002, net sales declined 2.1 percent to $505.9 million as compared to $516.7 million in 2001. The company said continued weakness in Latin American and Canada, combined with softening U.S. sales were the major contributors to the declines in the quarter and 9 months. The declines were partially offset by an increase in sales of pest control products.
Applica reported net earnings for the 2002 third quarter of $5.2 million, or $0.22 per share, compared with earnings of $8.5 million, or $0.35 per share for the same period last year. Excluding (1) the previously announced costs and expenses of $5.4 million related to the consolidation of its Shelton, Connecticut office, as well as certain back-office and supply chain functions in Latin America and Canada, and (2) a $557,000 one-time gain on the settlement of outstanding litigation matters with Salton, Inc., the pro forma earnings for the quarter were $8.1 million, or $0.34 per share.
For the first 9 months of 2002, Applica reported a net loss of $78.9 million, or $3.37 per share, compared with a loss of $345,000, or $0.02 per share, in the first 9 months of 2001. Excluding (1) the effect of the cumulative change in accounting principle in accordance with Statement of Financial Accounting Standards (SFAS) No. 142, (2) the previously announced costs and expenses of $10.6 million related to the consolidation of operations and (3) the one-time gain related to the Salton settlement, Applica had a profit of $6.0 million, or $0.26 per share for the first 9 months. The improved year-to-date pro forma results were primarily due to improved operating margins and a decrease in interest expense.
David M. Friedson, Applica's chairman of the Board and CEO, commented, "Although I am encouraged with the improvements in our operating margins, I am disappointed with the softer sales we experienced across most divisions during the quarter. Despite the difficult economic environment, we remain committed to our focus on balance sheet management."
Applica's gross profit margins were 33.2 percent in the third quarter and 31.5 percent in the first 9 months of 2002, as compared to 30.5 percent and 29.1 percent in the quarter and the first 9 months of 2001. The gross profit margins increased as Applica returned to normal production levels at its manufacturing facilities during 2002 and experienced an improved product mix.
EBITDA decreased 5.4 percent to $24.6 million as compared to $26.0 million recorded in the 2001 third quarter. For the first 9 months of the year, EBITDA decreased 2.5 percent to $43.4 million, as compared to $44.5 million for the first 9 months of 2001. At September 30, 2002, total debt as a percentage of total capitalization was 53.6 percent, with total debt of $244.7 million and stockholders' equity of $212.2 million. The Company's book value per share was $9.04 at Sept. 30, 2002. Capital expenditures for the first 9 months of 2002 totaled $12.3 million, as compared to $19.4 million in the first 9 months of 2001.
Harry D. Schulman, Applica's president and COO, commented, "For the fourth quarter, we anticipate that reduced contract manufacturing orders and continued weakness in Latin America will negatively affect sales. Sales will also be impacted by congestion resulting from the West Coast port lockout, as well as increased credit risk of certain of our customers. We anticipate sales for the fourth quarter will be similar to last year."
The company will hold a conference call today at 11:00 a.m., Eastern Standard Time, to discuss its third-quarter and year-to-date results.
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