Applica Incorporated announced that third-quarter sales for 2003 were U.S. $173.5 million, a decrease of 11.0 percent from the same period in 2002. For the first 9 months of 2003, net sales declined 14.7 percent to $431.6 million. The decrease was largely the result of planned lower contract manufacturing sales and softer U.S. sales.
The small appliance maker reported earnings for the 2003 third quarter of $4.9 million, or $0.20 per diluted share, compared with earnings of $5.2 million, or $0.22 per diluted share, for the 2002 third quarter. The third-quarter 2003 earnings included $16.2 million ($9.7 million, net of tax) of equity in the net earnings of a joint venture in which Applica owns a 50 percent interest and expenses of $1.9 million ($1.1 million, net of tax) related to the early extinguishing of $30.0 million of debt.
For the first 9 months of 2003, the company reported net income of $21.7 million, or $0.87 per diluted share, as compared to a loss of $78.9 million, or $3.37 per share, for the same period last year. The 2003 earnings included $55.2 million ($33.1 million, net of tax) of equity in the net earnings of a joint venture and expenses of $1.9 million ($1.1 million, net of tax) related to the early extinguishing of debt. In the first 9 months of 2002, Applica recognized an adjustment of $121.3 million ($78.8 million, or $3.37 per share, net of tax) to reduce the carrying value of goodwill pursuant to the provisions of SFAS 142.
Applica's gross profit margin decreased to 29.5 percent in the three-month period ended September 30, 2003 as compared to 33.2 percent for the same period in 2002. For the 9-month period ended September 30, 2003, the gross profit margin decreased to 29.8 percent as compared to 31.5 percent for the same period in 2002. The gross profit margin decrease is primarily attributed to a poor product mix and unabsorbed overhead related to lower production levels at our manufacturing facilities.
At Sept. 30, 2003, total debt as a percentage of total capitalization was 39.0 percent, with total debt of $156.1 million and shareholders' equity of $244.5 million. The company's book value per share was $10.34 at September 30, 2003. Capital expenditures for the first 9 months ended September 30, 2003 and 2002 were $9.5 million and $12.3 million, respectively.
Harry D. Schulman, Applica's President and CEO, commented, "We are disappointed with our performance for the third quarter and the year, and we are taking specific cost reductions actions to address the fixed costs in our operating model. Finally, we are very excited about being able to announce our relationship with The Procter & Gamble Company. This begins an exciting new chapter in Applica's history combining our strength in application of technology with a premier partner and leader in consumer packaged goods. We expect a national launch of the first two products under this alliance to occur in the second quarter of 2004."
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