Harry D. Schulman, Applica's president and CEO, commented, "Although I am disappointed with our sales for the quarter, I am pleased with our continued emphasis on asset management, as we decreased our debt level in the first quarter to $176 million from $194 million at Dec. 31, 2002."
Applica reported net earnings for the 2003 first quarter of $19.6 million, or $0.83 per diluted share, compared with a loss of $82.0 million, or $3.51 per diluted share, for the 2002 first quarter. The first-quarter 2003 earnings included $37.5 million of equity in the net earnings of a joint venture in which Applica owns a 50-percent interest. Applica said the equity in net earnings resulted primarily from an unrealized gain in the fair value of an investment held by the joint venture. The gain was precipitated by a potential sale of the investment. Applica expects a sale and the related cash distribution to occur before the end of the third quarter of 2003.
Applica's gross profit margin was 31.4 percent in the first quarter as compared to 28.9 percent in the first quarter of 2002. The increase is attributable to an improved product mix.
Mr. Schulman continued: "We are encouraged by the improving product mix. However, the most recent survey from the Association of Home Appliance Manufacturers showed sales for our industry declined 9 percent in the first quarter. As the result of anticipated softer sales in the second quarter of 2003, we have slowed our production. Additionally, we anticipate a negative impact on gross margins in the second quarter from higher petroleum prices. Still, we expect that product margins will continue to improve in the long term as our new product development initiatives for 2004 continue as planned."