Salton Announces Q4, Year-End Results
Oct 16, 2006
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Salton, Inc. announced fiscal results for its fourth quarter and year ended July 1, 2006. The company reported net sales of U.S. $129.5 million and a loss of $50.8 million or $3.57 per share for its fiscal 2006 fourth quarter compared to net sales of $151.2 million and a loss of $28.8 million or $2.53 per share for the fiscal 2005 fourth quarter. Net sales decreased domestically by $29.7 million. This decrease includes $5.4 million of reductions, as a result of the sale or discontinuance of certain product lines. The remaining $24.3 million decrease resulted primarily from volume and mix shifts as a result of price increases, other planned product line changes and close outs of discontinued product lines. Despite continued weak consumer demand in the United Kingdom, foreign sales increased by $8.0 million. The loss in the 2006 fourth quarter included a pretax charge of $21.9 million for non-cash intangible asset impairments associated with certain trade names and a $3.4 million non-cash valuation allowance against certain foreign deferred tax assets. The loss in the 2005 fiscal fourth quarter included a pretax charge of $3.0 million for non-cash intangible asset impairments.

Salton’s sales were $636.0 million for the year ended July 1, 2006 compared to $781.7 million in fiscal 2005, a reduction of $145.7 million. Domestic sales declined by $124.2 million due to the impact of the sale of the tabletop product lines in September 2005, inventory shortages, vendor and customer uncertainty, post-holiday overstocks at retailers and planned product discontinuation. Foreign sales, particularly in the United Kingdom, were impacted by a continuing weak retail market, resulting in a decline of $16.1 million in 2006. In addition, Salton incurred $5.5 million in unfavorable foreign currency fluctuation.

Gross profit declined from $187.5 million (24 percent) in fiscal 2005 to $144.4 million (22.7 percent) in fiscal 2006, primarily a result of global raw material cost increases and additional costs associated with inventory reduction programs. These added costs were partially offset by a $10.6 million decline in distribution expenses.

Selling, general and administrative expenses decreased to $172.1 million in 2006 compared to $207.8 million for 2005 in connection with previously announced cost reduction initiatives. It is expected that further restructuring activities will continue in fiscal 2007, resulting in additional distribution and SG&A expense reductions. Net interest expense was $37.0 million for fiscal 2006 compared to $51.7 million for fiscal 2005 as a result of lower levels of indebtedness and the debt exchange completed in August 2005.

The company had approximately $293 million in indebtedness, net of approximately $44 million of cash, swap valuation and accrued interest on senior secured notes at the end of the fiscal 2006 year-end, compared to $429.3 million as of July 2, 2005, net of approximately $21.9 million of cash and swap valuation.

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