The maker of the ubiquitous George Foreman Grill continues to get raked over the coals as sales and profits fall. Not only was Salton's (NYSE:SFP) quarterly profit entirely due to various one-time gains, but its sales have also shriveled so much that it's fallen out of compliance with its debt covenants.
First-quarter revenues dropped 27% to $148.4 million, and both domestic and foreign sales fell as well. Gross profits were cut nearly in half, coming in at $29.5 million in contrast to last year's $53.8 million. Salton is undergoing a restructuring, which the company said caused some uncertainty with several customers and one of its suppliers. As a result, there were some product shortages, and demand was weak. Coupled with the higher cost of steel, oil, raw materials, and a handful of hurricanes, Salton's bottom line got burned.
Simply comparing net income year over year would make sales seem sizzling. The company reported profits of $29.7 million, or $1.83 per share, compared to a $3.2 million loss last year, a loss of $0.28 a share. But Salton was able to notch the gain only through a few one-time events: the sale of Amalgamated Appliance, for $27.8 million, and the early retirement of debt, which added a pre-tax gain of $21.7 million. And the company's operating losses totaled $11 million, compared with a $6.2 million profit last year.
Faltering sales knocked the appliance maker out of compliance with its financial covenants. It had to get a waiver from its senior lenders and an additional $5 million in financing to build its inventory back up for the season. Salton expects a stronger second quarter; it's preparing to launch yet another iteration of the George Foreman Grill called the "G5" Next Grilleration. Oh boy.
Though the company also is home to such brand names as Juiceman, White-Westinghouse, Melitta, Stiffel, Farberware, and Toastmaster (I've apparently got a few Salton products in my house), it seems the focus on just one product is hurting the company's ability to turn around. The original George Foreman Grill was a great marketing success, but I found its fixed grill plates a major drawback. Washing the darn thing was a pain, and it now sits on a shelf in favor of my NACCO Industries (NYSE:NC) Hamilton Beach grill with removable, interchangeable plates. Salton responded by adding that feature to its own line of grills, and it'll be found on the new G5 as well. Sure, the Foreman has been its most profitable, highest-margin product, but how many grills does a household really need?
Competitors National Presto (NYSE:NPK), Applica (NYSE:APN), and Global-Tech (NYSE:GAI) have all endured tough times lately, particularly as costs for raw materials have continued to rise. Some have fallen to penny-stock territory, and National Presto remains under a cloud of controversy with the SEC.
Salton's goose is not yet fully cooked, but it's no time to start grillin' or chillin' with this stock.
What happens when lawyers don't like a company's quarterly results? Find out in "Lawyers Add Salton Wounds."
Fool contributor Rich Duprey does not own any of the stocks mentioned in this article. The Motley Fool has a disclosure policy.

