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Applica Reports Lower Sales, Revenue
Jul 29, 2005
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Electric housewares maker Applica Incorporated announced that second-quarter sales for 2005 were U.S. $116.5 million, a decrease of 24.7 percent from sales of $154.7 million in the same period in 2004. For the first half of 2005, sales were $228.9 million, a decrease of 19.2 percent over the first half of 2004.

"As we previously announced, we initiated a product and customer profitability review that resulted in an expected decrease in sales in the second quarter and the first half of 2005," Harry D. Schulman, president and CEO, said. "Lower sales of the first generation Home Cafe(TM) single cup coffee makers contributed to this reduction in both periods. Inventory management by certain customers also affected sales in the second quarter."

Applica's gross profit margin decreased to 19.7 percent in the 3-month period ended June 30, 2005 as compared to 28.6 percent for the same period in 2004. The gross margin for the first half decreased to 18.2 percent as compared to 27.4 percent for the same period in 2004.

The company said gross margins were negatively impacted by inventory write-downs related to an adjustment to the net realizable value of the Tide(TM) Buzz(TM) ultrasonic stain removal appliance and the first generation of the Home Cafe(TM) coffee maker, higher product warranty returns and related expenses primarily related to manufacturing transition issues in Mexico and China, and losses in the Mexico manufacturing operations related to the company's transition from manufacturing to sourcing.

Applica reported a net loss for the second quarter of 2005 of $18.5 million, or $0.77 per diluted share, compared to a net loss of $123.8 million, or $5.16 per diluted share, for the 2004 second quarter. For the 6 months ended June 30, 2005, Applica reported a net loss of $41.5 million, or $1.72 per diluted share, compared to a net loss of $128.3 million, or $5.38 per diluted share, for the first half of 2004.

In addition, Applica announced that it had made the decision to close its Mexican manufacturing facility in the fourth quarter of 2005.

"The strategies initiated in 2004 to position the company to achieve improved financial results should be completed by the end of this year," Mr. Schulman said. "The last step in this transition will occur in the fourth quarter of 2005 when we close our Mexican manufacturing facility. We believe that this is the final step in our transformation process and that the profound changes we have undertaken during 2004 and 2005 will have a lasting positive effect on the Company while creating long-term shareholder value. We anticipate being profitable in the fourth quarter of this year, even with the expected closing costs in Mexico."

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