Salton Reports Q3 Results, Restructures U.S. Operations
May 11, 2004
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Small appliance maker Salton, Inc. announced results for the third fiscal quarter ended March 27, 2004. The company reported net sales of U.S. $191.4 million for the quarter versus $166.4 million for the same period in fiscal 2003.
The increase in net sales was due primarily to continued expansion of the company's international operations, which offset a $22.8 million decline in U.S. market sales. The international expansion resulted from the company's inclusion of Amalgamated Appliances Holdings Limited (AMAP).
Salton reported a loss of $58.0 million, or $5.14 per share, versus a loss of $12.1 million, or $1.08 per share for the third quarter of fiscal 2003. The 2004 third quarter loss included a non-cash asset impairment of $34.3 million, which is $29.9 million after tax, or $2.65 per share.
Gross profit for the third fiscal quarter of 2004 was $38.6 million or 20.2 percent of net sales, compared to $37.3 million or 22.5 percent of net sales in the third quarter of fiscal 2003. The third quarter was impacted by lower margin sales of AMAP, increased distribution expenses, and additional expenses for returns and allowances.
For the 9 months ended March 27, 2004, Salton reported net sales of $827.0 million versus $705.7 million for the same period in fiscal 2003. Salton reported a loss of $44.9 million, or $4.01 per share, versus net income of $16.8 million, or $1.51 per share ($1.11 per diluted share) for the first 9 months of fiscal 2003.
Salton also announced that it is implementing a U.S. restructuring plan in the domestic market, in order to align domestic operating costs with current sales levels. Salton plans to reduce annual domestic operating expenses by a minimum of $40 million through a reduction in advertising and coop expenses and through consolidation of U.S. operations. In connection with these initiatives, Salton expects to record significant charges in the fourth quarter.
"While we are pursuing these cost reduction initiatives immediately, we have positioned the Company for growth through new product initiatives," said Leonhard Dreimann, CEO of Salton. "We just completed the best Housewares Show we ever had. Retailer enthusiasm was high for our introduction of 40 new products and product groups, which compares to our launch of 6 last year. We have seen signs of stabilization in our domestic business, and our international operations continue to grow rapidly through strong results from South Africa, Europe, Australia, and Brazil. We remain confident that a combination of new products and a lower cost structure will return Salton to profitability."
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