Applica Sells Chinese Manufacturing Operations
Jul 29, 2004
| Print this page
Small appliance maker Applica Incorporated announced that it has sold its Chinese manufacturing operations through a sale of all of the outstanding shares of Applica Durable Manufacturing Limited to an affiliate of Elec-Tech International Co., Ltd., a leading Chinese manufacturer of kitchen appliances. Applica said it does not expect to realize a material gain or loss from the sale. As part of the transaction, Applica has entered into a long-term supply arrangement with Elec-Tech.
"We are very excited to announce this expansion of our relationship with Elec-Tech," Harry D. Schulman, Applica's President and CEO, said in a statement. "We consider Elec-Tech to be a leading manufacturer in China and expect that our supply partnership with them will result in new products and improved cost for Applica and its customers."
As a result of the decision to exit its Chinese manufacturing operations, Applica has changed its position with regard to permanently investing certain previously undistributed foreign earnings outside of the U.S. The company estimates that there will be an additional tax charge in the second quarter of approximately U.S. $24.0 million ($1.00 per share), which reflects the U.S. taxes on those earnings. Management believes that the cash impact of these taxes in 2004 will be less than $2.0 million as the result of the use of NOLs and foreign tax credits.
Applica also announced that it has made a preliminary assessment of its existing goodwill for impairment in accordance with Statement of Financial Accounting Standards (SFAS) No. 142 "Goodwill and Other Intangible Assets." Management's current estimate of the impairment is $62.8 million ($46.4 million after tax). The non-cash expense will be reported as an impairment of goodwill and will reduce reported earnings by $1.93 per share for the second quarter.
In view of these corporate events, the company is re-evaluating its tax strategies and its ability to realize deferred tax assets of approximately $64.0 million as of March 31, 2004.
Back to Breaking News