Applica Incorporated announced that first-quarter sales for 2006 were U.S. $104.0 million compared to sales of $112.5 million in the same period in 2005. Sales of Black & Decker(R) branded products were $84.8 million in the first quarter of 2006, an increase of 2.4 percent compared to first quarter of 2005. The decline in consolidated sales was primarily due to a decrease in sales of professional personal care products of $5.8 million due to inventory management by key customers.
Applica's gross profit in the first quarter of 2006 was $24.6 million, an increase of 31.5 percent compared to $18.7 million for the first quarter of 2005. Gross profit margin was 23.7 percent in the 3-month period ended March 31, 2006 as compared to 16.7 percent for the same period in 2005. Gross profit for the first quarter of 2006 included the following: $3.7 million related to a probable product recall; and the sale of products produced in Mexico that included $1.8 million of capitalized losses related to the closure of Applica's Mexican manufacturing facility.
Gross profit margins in the first quarter of 2006 were also negatively impacted by the decrease in sales of professional personal care products, which generally carry higher margins.
Gross profit in the first quarter of 2005 included the following: inventory write-downs of $9.4 million related to lower-than-anticipated consumer demand of certain products, primarily related to our ultrasonic stain removal appliance; higher product warranty returns and related expenses of $3.3 million; and losses of $3.0 million in the Mexico manufacturing operations related to restructuring and downsizing activities.
Operating expenses in the first quarter of 2006 were $34.2 million, or 32.9 percent of sales, and included $1.1 million in consulting fees related to the engagement of Alvarez & Marsal, LLP and $500,000 in administrative expenses related to the closure of the Mexican manufacturing facility. Operating expenses for the first quarter of 2005 were $39.2 million, or 34.9 percent of sales.
Applica reported a net loss for the first quarter of 2006 of $13.0 million, or $0.54 per diluted share, compared to a net loss of $23.0 million, or $0.95 per diluted share, for the 2005 first quarter.
During the first quarter of 2006, Applica generated cash from operating activities of $31.7 million. Short-term debt declined from $69.5 million at December 31, 2005 to $38.0 million at March 31, 2006, a reduction of $31.5 million during the first quarter of 2006. Currently, Applica has approximately $114.0 million in total debt outstanding and approximately $39.6 million of availability under its senior credit facility. Applica must maintain a minimum average monthly availability of $13 million and a minimum daily availability of $10 million.
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