1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________________ TO __________________
COMMISSION FILE NUMBER 1-10177
APPLICA INCORPORATED
-------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
FLORIDA 59-1028301
--------------------------------- ----------------------
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification Number)
5980 MIAMI LAKES DRIVE, MIAMI LAKES, FLORIDA 33014
-------------------------------------------- -----
(Address Of Principal Executive Offices) (Zip Code)
(305) 362-2611
-------------------------------------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
FORMER NAME, IF CHANGED SINCE LAST REPORT:
Not Applicable
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirement for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
NUMBER OF SHARES
CLASS OUTSTANDING ON AUGUST 1, 2001
----- -----------------------------
Common Stock, $.10 par value................ 23,191,974
2
APPLICA INCORPORATED
INDEX
PAGE
----
PART I. FINANCIAL INFORMATION.....................................................................................3
Item 1. Financial Statements............................................................................3
Consolidated Balance Sheets as of June 30, 2001 and December 31, 2000.........................3
Consolidated Statements of Operations for the Three Months Ended June 30, 2001 and 2000.......4
Consolidated Statements of Operations for the Six Months Ended June 30, 2001 and 2000.........5
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2001 and 2000.........6
Notes to Consolidated Financial Statements....................................................7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..........14
Item 3. Quantitative and Qualitative Disclosures About Market Risk.....................................19
PART II. OTHER INFORMATION.......................................................................................20
Item 1. Legal Proceedings..............................................................................20
Item 4. Submission of Matters to a Vote of Security Holders............................................20
Item 6. Exhibits and Reports on Form 8-K...............................................................20
2
3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
APPLICA INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2001 DECEMBER 31, 2000
--------------- -----------------
(UNAUDITED)
(IN THOUSANDS)
ASSETS
CURRENT ASSETS
Cash and cash equivalents ............................................ $ 10,367 $ 16,857
Accounts and other receivables, less allowances of $7,931 in 2001 and
$8,049 in 2000 ..................................................... 156,891 186,198
Receivables from affiliates .......................................... 3,405 3,281
Inventories .......................................................... 133,649 160,820
Prepaid expenses and other ........................................... 20,061 17,277
Refundable income taxes .............................................. 1,314 1,207
Future income tax benefits ........................................... 19,284 14,655
--------- ---------
Total current assets ........................................... 344,971 400,295
INVESTMENT IN JOINT VENTURE ............................................. 1,395 1,525
PROPERTY, PLANT AND EQUIPMENT - at cost, less accumulated depreciation of
$92,253 in 2001 and $82,770 in 2000 .................................. 83,352 78,200
FUTURE INCOME TAX BENEFITS, NON-CURRENT ................................. 5,912 3,705
NOTE RECEIVABLE ......................................................... 500 --
OTHER ASSETS ............................................................ 214,495 224,210
--------- ---------
TOTAL ASSETS ....................................................... $ 650,625 $ 707,935
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes and acceptances payable ........................................ $ 2,255 $ 13,494
Current maturities of long-term debt ................................. 19,569 18,842
Accounts payable ..................................................... 46,997 43,361
Accrued expenses ..................................................... 38,128 47,103
Deferred income ...................................................... 478 514
--------- ---------
Total current liabilities ....................................... 107,427 123,314
LONG-TERM DEBT .......................................................... 226,316 260,147
OTHER LONG-TERM LIABILITIES ............................................. 2,495 --
SHAREHOLDERS' EQUITY:
Common stock - authorized: 75,000 shares of $.10 par value; issued and
outstanding: 23,203 in 2001 and 23,080 in 2000 ..................... 2,320 2,308
Paid-in capital ...................................................... 153,065 152,591
Retained earnings .................................................... 164,584 173,466
Notes receivable - officers .......................................... (1,496) (1,496)
Accumulated other comprehensive (loss) ............................... (4,086) (2,395)
--------- ---------
Total shareholders' equity ....................................... 314,387 324,474
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ......................... $ 650,625 $ 707,935
========= =========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
3
4
APPLICA INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED JUNE 30,
--------------------------------------------------------------
2001 2000
------------------------- -------------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Sales and other revenues .......... $ 161,664 100.0% $ 171,411 100.0%
Cost of goods sold ................ 113,997 70.5 119,231 69.6
--------- ----- --------- -----
Gross profit ............. 47,667 29.5 52,180 30.4
Selling, general and administrative
expenses ....................... 45,992 28.5 45,268 26.4
--------- ----- --------- -----
Operating profit ......... 1,675 1.0 6,912 4.0
Other (income) expense:
Interest expense ............... 5,688 3.5 7,785 4.5
Interest and other income ...... (508) (0.3) (535) (0.3)
--------- ----- --------- -----
5,180 3.2 7,250 4.2
--------- ----- --------- -----
Loss before income taxes . (3,505) (2.2) (338) (0.2)
Income tax benefit ................ 906 0.6 93 0.1
--------- ----- --------- -----
Net loss ................. $ (2,599) (1.6)% $ (245) (0.1)%
========= ===== ========= =====
Per share data:
Loss per common share - basic .. $ (0.11) $ (.01)
========= =========
Loss per common share - diluted $ (0.11) $ (.01)
========= =========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
4
5
APPLICA INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
SIX MONTHS ENDED JUNE 30,
--------------------------------------------------------------
2001 2000
------------------------- -------------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Sales and other revenues .......... $ 313,485 100.0% $ 318,102 100.0%
Cost of goods sold ................ 225,394 71.9 221,508 69.6
--------- ----- --------- -----
Gross profit ............. 88,091 28.1 96,594 30.4
Selling, general and administrative
expenses ....................... 88,685 28.3 87,865 27.6
--------- ----- --------- -----
Operating (loss) profit .. (594) (0.2) 8,729 2.8
Other (income) expense:
Interest expense ............... 12,371 3.9 14,064 4.4
Interest and other income ...... (970) (0.3) (965) (0.3)
--------- ----- --------- -----
11,401 3.6 13,099 4.1
--------- ----- --------- -----
Loss before income taxes . (11,995) (3.8) (4,370) (1.3)
Income tax benefit ................ 3,113 1.0 1,097 0.3
--------- ----- --------- -----
Net loss ................. $ (8,882) (2.8)% $ (3,273) (1.0)%
========= ===== ========= =====
Per share data:
Loss per common share - basic .. $ (0.38) $ (0.14)
========= =========
Loss per common share - diluted $ (0.38) $ (0.14)
========= =========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
5
6
APPLICA INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED
JUNE 30,
---------------------------
2001 2000
-------- --------
(IN THOUSANDS)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ...................................................... $ (8,882) $ (3,273)
Adjustments to reconcile net loss to net cash provided by (used
in) operating activities:
Depreciation of property, plant and equipment .............. 9,753 9,219
Amortization of intangible assets .......................... 9,341 9,644
Net change in allowance for losses on accounts receivable .. (118) 55
Consulting expense on non-employee stock options ........... 25 --
Amortization of deferred income ............................ (36) (37)
Changes in assets and liabilities:
Accounts and other receivables .......................... 29,425 2,351
Inventories ............................................. 26,671 (36,445)
Prepaid expenses and other .............................. (2,784) 703
Other assets ............................................ 1,178 (641)
Accounts payable and accrued expenses ................... (5,339) (12,308)
Current and deferred income taxes ....................... (6,943) (7,834)
Other liabilities ....................................... -- (10,573)
Other receivables ....................................... -- 12,962
Other accounts .......................................... -- (677)
-------- --------
Net cash provided by (used in) operating activities ... $ 52,291 $(36,854)
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment .................... (14,905) (17,610)
Distributions from joint venture .............................. 130 306
Receivables from affiliates ................................... (124) 172
-------- --------
Net cash used in investing activities ................. (14,899) (17,132)
CASH FLOWS FROM FINANCING ACTIVITIES:
Notes and acceptances ......................................... (11,239) (446)
Long-term debt - net .......................................... (33,104) 47,013
Exercises of stock options .................................... 461 2,164
-------- --------
Net cash (used in) provided by financing activities ... (43,882) 48,731
DECREASE IN CASH AND CASH EQUIVALENTS ............................ (6,490) (5,255)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ................. 16,857 13,768
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ....................... $ 10,367 8,513
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
CASH PAID DURING THE SIX-MONTH PERIOD ENDED JUNE 30, 2001:
Interest ...................................................... $ 11,434 $ 12,608
Income taxes .................................................. $ 3,254 $ 5,189
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
6
7
APPLICA INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF ACCOUNTING POLICIES
INTERIM REPORTING
The accompanying unaudited consolidated financial statements include
the accounts of Applica Incorporated and its subsidiaries ("Applica"). All
significant intercompany transactions and balances have been eliminated. The
unaudited consolidated financial statements have been prepared in conformity
with Rule 10-01 of Regulation S-X of the Securities and Exchange Commission and
therefore do not include information or footnotes necessary for a complete
presentation of financial position, results of operations and cash flows in
conformity with accounting principles generally accepted in the United States of
America. However, all adjustments (consisting of normal recurring accruals),
which, in the opinion of management, are necessary for a fair presentation of
the financial statements, have been included. Operating results for the period
ended June 30, 2001 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2001. For further information, refer
to the Consolidated Financial Statements and Notes thereto included in Applica's
Annual Report on Form 10-K for the year ended December 31, 2000.
RECLASSIFICATIONS
Certain prior period amounts have been reclassified for comparability.
RECEIVABLES FROM AFFILIATES
Receivables from affiliates include the current portion of receivables
due from Applica's joint venture partner and certain executive officers of
Applica. These receivables are due upon demand or upon termination of the
applicable employment contract and bear interest at prevailing market interest
rates. Receivables due from Applica's executive officers are unsecured.
DERIVATIVE FINANCIAL INSTRUMENTS
Applica uses forward exchange contracts to reduce fluctuations in
foreign currency cash flows related to third party raw material and other
operating purchases. The terms of the foreign currency instruments used are
generally consistent with the timing of the committed or anticipated
transactions being hedged. Applica does not use derivative financial instruments
for trading or speculative purposes. Outstanding at June 30, 2001 were $48.8
million notional value of contracts to purchase and/or sell foreign currency
forward with a fair market value of approximately $0.1 million. The market value
represents the amount Applica would receive upon exiting the contracts at June
30, 2001 and was determined based on quotes obtained from Applica's financial
institutions. This amount is included in prepaid expenses and other as of June
30, 2001 and the related credit is included in accumulated other comprehensive
loss as of June 30, 2001. All contracts have terms of twelve months or less.
Applica uses interest rate derivatives to reduce the impact of changes
in interest rates on its floating rate debt and to maintain its desired
fixed/floating rate ratio. The notional amounts of the agreements are used to
measure interest to be paid or received and do not represent the amount of
exposure to credit loss. The differential paid or received on the agreements is
recognized as an adjustment of interest expense. Applica does not use derivative
financial instruments for trading or speculative purposes. Outstanding as of
June 30, 2001 were derivatives on $220.0 million notional principal amount with
a negative fair market value of approximately $2.5 million. The market value
represents the amount Applica would have to pay to exit the contracts at June
30, 2001 and was determined based on quotes obtained from Applica's financial
institutions. This amount is included in other long-term liabilities as of June
30, 2001 and the related debit is included in accumulated other comprehensive
loss as of June 30, 2001. Applica does not intend to exit these contracts at
this time. All contracts have terms between one and seven years, which reflect
the tenor of the underlying obligation.
At June 30, 2001, Applica had no significant commodity future
contracts.
7
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APPLICA INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
2. SHAREHOLDERS' EQUITY
EARNINGS PER SHARE
Basic shares for the three-month period ended June 30, 2001 and 2000
were 23,093,291 and 22,991,460, respectively. Basic shares for the six-month
period ended June 30, 2001 and 2000 were 23,085,231 and 22,857,889,
respectively. All common stock equivalents have been excluded from the diluted
per share calculations as their inclusion would have been anti-dilutive.
3. COMMITMENTS AND CONTINGENCIES
Applica is a defendant in certain litigation. See Part II, "Item 1.
Legal Proceedings."
4. BUSINESS SEGMENT INFORMATION
The Consumer Products North America segment distributes kitchen
electric, professional personal care, pet and home environment products under
licensed brand names such as Black & Decker(R), as well as the Windmere(R),
Littermaid(R) and private label brand names. The sales are handled primarily
through in house sales representatives to mass merchandisers, specialty
retailers and appliance distributors in the United States and Canada.
The Consumer Products International segment distributes kitchen
electric, personal care and home environment products under the Black &
Decker(R) and Windmere(R) brand names. Products are marketed throughout Latin
America except for Brazil.
The Manufacturing segment includes Applica's manufacturing operations
located in China and Mexico. The majority of Applica's products are manufactured
in these two facilities. Applica also manufactures products on an "original
equipment manufacturing" (OEM) basis for other consumer products companies. The
Manufacturing segment also includes these OEM sales.
Summarized financial information concerning Applica's reportable
segments is shown in the following table. Corporate related items, results of
insignificant operations and income and expense not allocated to reportable
segments are included in the reconciliations to consolidated results.
Segment information for the three-month periods ended June 30, 2001 and
2000 was as follows:
CONSUMER CONSUMER
PRODUCTS PRODUCTS
NORTH AMERICA INTERNATIONAL MANUFACTURING TOTAL
------------- ------------- ------------- -----
(IN THOUSANDS)
2001:
Net sales............................... $116,496 $29,124 $89,389 $235,009
Intersegment net sales.................. 357 -- 79,514 79,871
Operating earnings (loss)............... (7,380) 1,748 7,662 2,030
2000:
Net sales............................... 121,226 25,287 102,851 249,364
Intersegment net sales.................. 2,585 -- 84,915 87,500
Operating earnings (loss)............... (2,568) (1,200) 12,734 8,966
8
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APPLICA INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Reconciliation to consolidated amounts was as follows:
2001 2000
-------- --------
(IN THOUSANDS)
REVENUES:
Total revenues for reportable segments................. $235,009 $249,364
Other revenues......................................... 6,526 9,547
Eliminations of intersegment revenues.................. (79,871) (87,500)
-------- --------
Total consolidated revenues....................... 161,664 $171,411
======== ========
Operating earnings:
Total earnings for reportable segments............ 2,030 $8,966
Other income (loss)............................... 153 (1,519)
Interest expense.................................. (5,688) (7,785)
-------- --------
Consolidated loss before income tax benefit....... $(3,505) $(338)
======== ========
Segment information for the six-month periods ended June 30, 2001 and
2000 was as follows:
CONSUMER CONSUMER
PRODUCTS PRODUCTS
NORTH AMERICA INTERNATIONAL MANUFACTURING TOTAL
------------- ------------- ------------- -----
(IN THOUSANDS)
2001:
Net sales............................... $234,373 $49,047 $157,603 $441,023
Intersegment net sales.................. 724 -- 138,209 138,933
Operating earnings (loss)............... (13,402) 813 14,375 1,786
2000:
Net sales............................... 229,760 45,701 196,464 471,925
Intersegment net sales.................. 4,235 -- 165,289 169,524
Operating earnings (loss)............... $(11,800) $(690) $23,827 $11,337
Reconciliation to consolidated amounts was as follows:
2001 2000
-------- --------
(IN THOUSANDS)
REVENUES:
Total revenues for reportable segments................. $441,023 $471,925
Other revenues......................................... 11,395 15,701
Eliminations of intersegment revenues.................. (138,933) (169,524)
-------- --------
Total consolidated revenues....................... 313,485 $318,102
======== ========
Operating earnings:
Total earnings for reportable segments............ $1,786 $11,337
Other (loss)...................................... (1,410) (1,643)
Interest expense.................................. (12,371) (14,064)
-------- --------
Consolidated loss before income tax benefit....... $(11,995) $(4,370)
======== ========
9
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APPLICA INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
5. CONDENSED CONSOLIDATING FINANCIAL INFORMATION
Applica Incorporated's domestic subsidiaries are guarantors of its 10%
Senior Subordinated Notes due 2008. The following condensed consolidating
financial information presents the results of operations, financial position and
cash flows of Applica Incorporated (on a stand alone basis), the guarantor
subsidiaries (on a combined basis), the non-guarantor subsidiaries (on a
combined basis) and the eliminations necessary to arrive at the consolidated
results of Applica. The results of operations and cash flows presented below
assume that the guarantor subsidiaries were in place for all periods presented.
Applica Incorporated and the Subsidiary Guarantors have accounted for
investments in their respective subsidiaries on an unconsolidated basis using
the equity method of accounting. The Subsidiary Guarantors are wholly-owned
subsidiaries of Applica and have fully and unconditionally guaranteed the Notes
on a joint and several basis. The Notes contain certain covenants that, among
other things, restrict the ability of the Subsidiary Guarantors to make
distributions to Applica Incorporated.
10
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APPLICA INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
SIX MONTHS ENDED JUNE 30, 2001
------------------------------------------------------------------------
APPLICA
INCORPORATED GUARANTORS NON-GUARANTORS ELIMINATIONS CONSOLIDATED
------------ ---------- --------------- ------------ ------------
(IN THOUSANDS)
STATEMENT OF OPERATIONS:
Sales and other revenues ............... -- 236,613 215,805 (138,933) 313,485
Cost of goods sold ..................... -- 175,737 188,590 (138,933) 225,394
------- ------- ------ -------- -----
Gross profit ........................ -- 60,876 27,215 -- 88,091
Operating expenses ..................... (696) 73,713 15,244 424 88,685
------- ------- ------ -------- -----
Operating profit (loss) ............. 696 (12,837) 11,971 (424) (594)
Other (income) expense, net ............ 11,152 (40) 289 -- 11,401
------- ------- ------ -------- -----
Earnings (loss) before income taxes . (10,456) (12,797) 11,682 (424) (11,995)
Income taxes (benefit) ................. -- (9,574) 6,461 -- (3,113)
------- ------- ------ -------- -----
Net earnings (loss) ................. (10,456) (3,223) 5,221 (424) (8,882)
======= ======= ====== ======== =====
BALANCE SHEET:
Cash ................................... 6 962 9,399 -- 10,367
Accounts and other receivables ......... -- 107,505 49,386 -- 156,891
Receivables from affiliates ............ (72,058) 7,770 67,693 -- 3,405
Inventories ............................ -- 83,606 50,043 -- 133,649
Other current assets ................... -- 7,762 17,901 14,996 40,659
------- ------- ------ -------- -----
Total current assets ................ (72,052) 207,605 194,422 14,996 344,971
Investment in joint venture ............ 425,121 113,124 70,492 (607,342) 1,395
Property, plant and equipment, net ..... -- 19,182 64,170 -- 83,352
Other assets ........................... 2,175 245,030 19,047 (45,345) 220,907
------- ------- ------ -------- -----
Total assets ........................ 355,244 584,941 348,131 (637,691) 650,625
======= ======= ====== ======== =====
Notes and acceptances payable .......... -- -- 2,255 -- 2,255
Accounts payable and accrued expenses .. 3 24,580 60,542 -- 85,125
Current maturities of long-term debt ... 19,569 -- -- -- 19,569
Deferred income ........................ -- 478 -- -- 478
Income taxes payable ................... -- 4,899 2,567 (7,466) --
------- ------- ------ -------- -----
Total current liabilities ........... 19,572 29,957 65,364 (7,466) 107,427
Long-term debt ......................... 221,812 7,975 24,093 (27,564) 226,316
Deferred income, less current portion .. -- -- -- -- --
Deferred income taxes .................. -- 25,749 2,445 (28,194) --
Other long-term liabilities ............ -- 2,495 -- -- 2,495
------- ------- ------ -------- -----
Total liabilities ................... 241,384 66,176 91,902 (63,224) 336,238
Shareholders' equity ................... 113,860 518,765 256,229 (574,467) 314,387
------- ------- ------ -------- -----
Total liabilities and shareholders'
equity .............................. 355,244 584,941 348,131 (637,691) 650,625
======= ======= ====== ======== =====
CASH FLOW INFORMATION:
Net cash provided by (used in) operating
activities .......................... (12,629) 14,187 37,951 12,782 52,291
Net cash provided by (used in) investing
activities .......................... 41,581 (11,382) (41,559) (3,539) (14,899)
Net cash provided by (used in) financing
activities .......................... (28,954) (6,189) 504 (9,243) (43,882)
Cash at beginning ...................... 8 4,346 12,503 -- 16,857
Cash at end ............................ 6 962 9,399 -- 10,367
11
12
APPLICA INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
SIX MONTHS ENDED JUNE 30, 2000
------------------------------------------------------------------------
APPLICA
INCORPORATED GUARANTORS NON-GUARANTORS ELIMINATIONS CONSOLIDATED
------------ ---------- --------------- ------------ ------------
(IN THOUSANDS)
STATEMENT OF OPERATIONS:
Sales and other revenues ............... -- 238,906 248,720 (169,524) 318,102
Cost of goods sold ..................... -- 176,250 214,782 (169,524) 221,508
------- ------- ------ -------- -----
Gross profit ........................ -- 62,656 33,938 -- 96,594
Operating expenses ..................... 421 71,346 15,918 180 87,865
------- ------- ------ -------- -----
Operating profit (loss) ............. (421) (8,690) 18,020 (180) 8,729
Other (income) expense, net ............ 12,760 335 4 -- 13,099
------- ------- ------ -------- -----
Earnings (loss) before income taxes . (13,181) (9,025) 18,016 (180) (4,370)
Income taxes (benefit) ................. -- (3,897) 2,800 -- (1,097)
------- ------- ------ -------- -----
Net earnings (loss) ................. (13,181) (5,128) 15,216 (180) (3,273)
======= ======= ====== ======== =====
BALANCE SHEET:
Cash ................................... 6 (4,415) 12,922 -- 8,513
Accounts and other receivables ......... -- 113,823 56,271 -- 170,094
Receivables from affiliates ............ 11,790 (56,741) 48,157 -- 3,206
Inventories ............................ -- 138,821 61,330 -- 200,151
Other current assets ................... -- 2,384 12,059 11,542 25,985
------- ------- ------ -------- -----
Total current assets ................ 11,796 193,872 190,739 11,542 407,949
Investments in joint venture ........... 426,028 113,121 70,536 (607,383) 2,302
Property, plant and equipment, net ..... -- 17,589 66,785 -- 84,374
Other assets ........................... -- 591,253 11,164 (366,122) 236,295
------- ------- ------ -------- -----
Total assets ........................ 437,824 915,835 339,224 (961,963) 730,920
======= ======= ====== ======== =====
Notes and acceptances payable .......... -- -- 452 -- 452
Accounts payable and accrued expenses .. 2 28,528 54,265 -- 82,795
Current maturities of long-term debt ... 17,842 -- -- -- 17,842
Deferred income, current portion ....... -- 585 -- -- 585
Income taxes payable ................... -- (1,816) 4,627 (1,549) 1,262
------- ------- ------ -------- -----
Total current liabilities ........... 17,844 27,297 59,344 (1,549) 102,936
Long-term debt ......................... 283,832 353,636 11,847 (362,986) 286,329
Deferred income, less current portion .. -- 199 -- -- 199
Deferred income taxes .................. -- 5,514 2,843 (8,357) --
------- ------- ------ -------- -----
Total liabilities ................... 301,676 386,646 74,034 (372,892) 389,464
Shareholders' equity ................... 136,148 529,189 265,190 (589,071) 341,456
------- ------- ------ -------- -----
Total liabilities and shareholders'
equity .............................. 437,824 915,835 339,224 (961,963) 730,920
======= ======= ====== ======== =====
CASH FLOW INFORMATION:
Net cash provided by (used in) operating
activities .......................... (13,180) (177,313) 23,227 130,412 (36,854)
Net cash provided by (used in) investing
activities .......................... (33,342) 45,598 (25,789) (3,599) (17,132)
Net cash provided by (used in) financing
activities .......................... 46,524 123,361 5,659 (126,813) 48,731
Cash at beginning ...................... 4 3,939 9,825 -- 13,768
Cash at end ............................ 6 (4,415) 12,922 -- 8,513
12
13
APPLICA INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
6. SUBSEQUENT EVENTS
As part of its acquisition of the Black & Decker Household Products
Group in June 1998, Applica licensed the Black & Decker(R) brand in North
America, Central America, South America (excluding Brazil) and the Caribbean for
specific household appliances. The license was on a royalty-free basis for core
product categories through June 2003. In July 2001, Applica and The Black &
Decker Corporation entered into an extension of the trademark license agreement
through December 31, 2006. Under the agreement as extended, Applica will pay
certain fees and guaranteed minimum royalty payments to The Black & Decker
Corporation of $1.2 million in 2001, $2.0 million in 2002, $5.0 million in 2003
and $12.5 million in each year thereafter through 2006. Renewals of the license
agreement, if mutually agreed upon, are for five-year periods. If Black & Decker
does not agree to renew the license agreement, Applica has 18 months to
transition out of the product line. No minimum royalty payments will be due
during such transition period.
Upon request, Black & Decker may elect to extend the license to use the
Black & Decker(R) brand to certain additional products. Such additional products
are subject to royalty payments. In 2000, Black & Decker agreed to extend the
license to seven new product categories, including heaters, fans, deep fryers
and humidifiers.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
As used in this Quarterly Report on Form 10-Q, "we," "our," "us," the
"Company" and "Applica" refer to Applica Incorporated and its subsidiaries,
unless the context otherwise requires.
The following discussion and analysis and the related financial data
present a review of the consolidated operating results and financial condition
of Applica for the three-month and six-month periods ended June 30, 2000 and
2001. This discussion and analysis should be read in conjunction with the
Consolidated Financial Statements and Notes thereto contained in Applica's
Annual Report on Form 10-K for the year ended December 31, 2000.
FORWARD LOOKING STATEMENT DISCLOSURE
This document contains forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act. Such
statements are indicated by words or phrases such as "anticipate," "projects,"
"management believes," "Applica believes," "intends," "expects," and similar
words or phrases. Such forward-looking statements are subject to certain risks,
uncertainties or assumptions and may be affected by certain other factors. These
factors include, but are not limited to:
o If we are unable to renew the Black & Decker(R) Trademark License
Agreement beyond December 2006, our business could be adversely
affected.
o The infringement or loss of our proprietary rights could have an
adverse effect on our business.
o We depend on purchases from several large customers and any
significant decline in these purchases or pressure from these
customers to reduce prices could have a negative effect on our
business.
o Our business is very sensitive to the strength of the U.S. retail
market and weakness in this market could adversely effect our
business.
o Our performance can fluctuate with the financial condition of the
retail industry.
o Our business can be adversely effected by fluctuations in cost and
availability of raw materials and components.
o Our business involves the potential for product recalls and product
liability claims against us.
o We could be adversely affected by changing conditions in foreign
countries.
o Our business could be adversely affected by changes in trade
relations with China.
o Our business could be adversely affected by currency fluctuations in
our international operations.
o Our future success requires us to develop new and innovative
products on a consistent basis in order to increase revenues and we
may not be able to do so.
o We rely heavily on our manufacturing facilities to manufacture and
assemble our products. An extended interruption in the operation of
any facility could have an adverse impact on our operating results.
o We are subject to several production-related risks that could
jeopardize our ability to realize anticipated sales and profits.
o Our operating results can be affected by seasonality.
o We compete with other large companies that produce similar products.
o Our advertising, marketing and promotional programs may not be as
successful as we expect them to be.
o Our debt agreements contain covenants that restrict our ability to
take certain actions.
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o A class action lawsuit has been brought against us in connection
with our acquisition of the Black & Decker Household Products Group;
we cannot predict the outcome of this lawsuit.
o Government regulations could adversely impact our operations.
Should one or more of these risks, uncertainties or other factors
materialize, or should underlying assumptions prove incorrect, actual results,
performance, or achievements of Applica may vary materially from any future
results, performance or achievements expressed or implied by such
forward-looking statements. All subsequent written and oral forward-looking
statements attributable to Applica or persons acting on its behalf are expressly
qualified in their entirety by the cautionary statements in this paragraph.
Applica disclaims any obligation to publicly announce the results of any
revisions to any of the forward-looking statements contained herein to reflect
future events or developments.
GENERAL
Applica is a manufacturer, marketer and distributor of a broad range of
branded and private-label small electric consumer goods. In 1998, Applica
acquired the Black & Decker Household Products Group and became a leading
supplier of brand name small household appliances in the United States. We also
manufacture and distribute professional personal care products, home environment
products and pet care products, including the LitterMaid(R) self-cleaning cat
litter box. We manufacture and market products under licensed brand names, such
as Black & Decker(R), our own brand names, such as Windmere(R), and other
private-label brand names. Our customers include mass merchandisers, specialty
retailers and appliance distributors primarily in North America, Latin America
and the Caribbean. Applica operates manufacturing facilities in China and
Mexico. In addition, Applica manufactures products on an "original equipment
manufacturing" (OEM) basis for other consumer products companies.
As part of our acquisition of the Black & Decker Household Products
Group in June 1998, we licensed the Black & Decker(R) brand in North America,
Central America, South America (excluding Brazil) and the Caribbean for specific
household appliances. The license was on a royalty-free basis for core product
categories through June 2003. In July 2001, Applica and The Black & Decker
Corporation entered into an extension of the trademark license agreement through
December 31, 2006. Under the agreement as extended, Applica will pay certain
fees and guaranteed minimum royalty payments to The Black & Decker Corporation
of $1.2 million in 2001, $2.0 million in 2002, $5.0 million in 2003 and $12.5
million in each year thereafter through 2006. Renewals of the license agreement,
if mutually agreed upon, are for five-year periods. If Black & Decker does not
agree to renew the license agreement, Applica has 18 months to transition out of
the product line. No minimum royalty payments will be due during such transition
period.
Upon request, Black & Decker may elect to extend the license to use the
Black & Decker(R) brand to certain additional products. Such additional products
are subject to royalty payments. In 2000, Black & Decker agreed to extend the
license to seven new product categories, including heaters, fans, deep fryers
and humidifiers.
In the fourth quarter of 2000, we entered into a joint product
development relationship with a consumer products company to develop,
manufacture, market and distribute new household products. We have entered into
development agreements for two products pursuant to such alliance and currently
expect them to be launched in the U.S. in 2003.
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RESULTS OF OPERATIONS
The operating results of Applica expressed as a percentage of sales and
other revenues are set forth below:
SIX MONTHS ENDED JUNE 30,
--------------------------
2001 2000
---- ----
Sales and other revenues.................................. 100.0% 100.0%
Cost of goods sold........................................ 71.9 69.6
----- -----
Gross profit........................................... 28.1 30.4
Selling, general and administrative expenses.............. 28.3 27.6
Other (income) expense - net.............................. 3.6 4.1
----- -----
Loss before income taxes............................... (3.8) (1.3)
Income taxes benefit...................................... 1.0 0.3
----- -----
Net loss............................................... (2.8)% (1.0)%
===== =====
THREE MONTHS ENDED JUNE 30, 2001 COMPARED TO THREE MONTHS ENDED JUNE 30, 2000
SALES AND OTHER REVENUES. Sales and other revenues for Applica
decreased by $9.7 million to $161.7 million, a decrease of 5.7% over the second
quarter of 2000. The change was primarily the result of a decrease of $12.0
million in sales of product categories that were exited in the fourth quarter of
2000 repositioning and a decrease of $8.1 million in OEM sales. The decrease was
partially offset by a $5.8 million increase in Black & Decker branded product
sales, a $3.3 million increase in Littermaid sales and a $3.0 million increase
in Windmere branded and other product sales in Latin America.
North America sales decreased by $4.7 million, or 3.9%, to $116.5
million in the second quarter of 2001. The change is primarily attributable to a
$12.0 million decrease in sales of product categories that were exited in the
fourth quarter of 2000 and was partially offset by a $5.0 million increase in
sales of Black & Decker branded products and a $3.3 million increase in sales of
Littermaid products.
Sales for the international segment increased by $3.8 million to $29.1
million, or 15.2%, from the 2000 period. The change primarily resulted from a
$3.0 million increase in Windmere branded and other product sales.
Sales at Applica's manufacturing subsidiaries decreased by $13.5
million, or 13.1%, to $89.4 million from the second quarter of 2000. The
decrease in manufacturing sales was primarily the result of the production slow
down at the Mexico and China factories and the decrease in OEM sales of $8.1
million, or 45.0%, to $9.9 million. The decrease in OEM sales was primarily the
result of the loss of one customer. However, management believes that sales to
new customers will eliminate such loss in the second half of the year.
GROSS PROFIT MARGIN. Applica's gross profit margin was 29.5% in the
second quarter as compared to 30.4% in 2000. The decrease in the gross profit
margin was primarily the result of lower production at Applica's manufacturing
facilities, as Applica continued to reduce its inventory levels. The slowdown of
production in the China and Mexico factories during the second quarter resulted
in unabsorbed overhead costs.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and
administrative expenses for Applica increased by $0.7 million in the second
quarter of 2001. Such expenses increased as a percentage of sales to 28.5% from
26.4% in the 2000 period. In the second quarter 2001, promotion expenses
increased $1.0 million and distribution and freight costs increased by $1.0
million. The increase in distribution and freight costs primarily related to the
liquidation of products exited in the 2000 repositioning and also reflected
higher year-over-year rates and fuel surcharges from freight carriers. The
increase was partially offset by a decrease of approximately $1.3 million in
selling and other expenses.
See "New Accounting Pronouncement" below for information regarding a
change in the accounting for goodwill.
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INTEREST EXPENSE. Interest expense decreased by $2.1 million, or 26.9%,
to $5.7 million for the three months ended June 30, 2001, as compared to $7.8
million for the 2000 period. Such decrease was the result of lower interest
rates and the reduction of debt by $56.5 million to $248.1 million as compared
to $304.6 million as of June 30, 2000.
TAXES. Applica's tax expense is based on an estimated annual
aggregation of the taxes on earnings of each of its foreign and domestic
operations. The earnings of subsidiaries in Canada, Mexico and Latin America
(other than Chile) are generally taxed at rates comparable to or higher than
34%, the United States statutory rate. Income tax rates in Hong Kong and Chile
range between 8% and 16%. Applica does not make tax provisions for the
undistributed earnings of its foreign subsidiaries that it expects will be
permanently invested out of the United States.
In the second quarter of 2001, Applica used an effective tax rate of
26%, as compared to 25% for the second quarter of 2000.
EARNINGS PER SHARE. All common stock equivalents have been excluded
from the diluted per share calculations in the second quarter of 2001 and 2000
as Applica incurred a net loss in both periods and such inclusion would have
been anti-dilutive.
SIX MONTHS ENDED JUNE 30, 2001 COMPARED TO SIX MONTHS ENDED JUNE 30, 2000
SALES AND OTHER REVENUES. Sales and other revenues for Applica
decreased by $4.6 million to $313.5 million, a decrease of 1.5% over the 2000
period. The change was primarily the result of a decrease of $27.1 million in
sales of product categories that were exited in the fourth quarter 2000
repositioning and a decrease of $11.8 million in OEM sales. The decrease was
partially offset by a $20.9 million increase in sales of Black & Decker branded
products, a $10.3 million increase in Windmere branded and other product sales,
and a $3.1 million increase in sales of Littermaid pet products.
North America sales increased by $4.6 million, or 2.0%, to $234.4
million in the first six months of 2001. The change resulted from a $23.6
million increase in sales of Black & Decker branded products, a $5.0 million
increase in Windmere branded and other product sales, and a $3.1 million
increase in sales of Littermaid pet products. The increase was partially offset
by a decrease of $27.1 million in sales of product categories that were exited
in the fourth quarter of 2000.
Sales for the international segment increased by $3.3 million to $49.0
million, or 7.3%, from the 2000 period. The change resulted from a $6.0 million
increase in Windmere branded and other products partially offset by a $2.7
million decrease in sales of Black & Decker branded products.
Sales at Applica's manufacturing subsidiaries decreased by $38.9
million, or 19.8%, to $157.6 million from the first six months of 2000. The
decrease in manufacturing sales was primarily the result of the production slow
down at the Mexico and China factories and decreases in OEM sales of $11.8
million, or 37.8%, in the 2001 period to $19.4 million. The decrease in OEM
sales was primarily the result of the loss of one customer. However, management
believes that sales to new customers will eliminate such loss in the second half
of the year.
GROSS PROFIT MARGIN. Applica's gross profit margin was 28.1% in the
first six months of 2001 as compared to 30.4% in 2000. The decrease in the gross
profit margin was primarily the result of lower production at Applica's
manufacturing facilities, as Applica continued to reduce its inventory levels,
along with higher raw material costs in the first quarter of 2001. The slowdown
of production in the China and Mexico factories during the first half of 2001
resulted in unabsorbed overhead costs.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and
administrative expenses for Applica increased by $0.8 million in the first six
months of 2001 to $88.7 million. Such expenses increased as a percentage of
sales to 28.3% from 27.6% in the 2000 period. In the first half of 2001,
distribution and freight costs increased by $3.3 million. Such costs primarily
related to the liquidation of products exited in the 2000 repositioning and also
reflected higher year-over-year rates and fuel surcharges from freight carriers.
In addition, promotion expenses increased by $1.0 million during the period.
This was partially offset by a decrease of approximately $3.5 million in selling
and other expenses.
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See "New Accounting Pronouncement" below for information regarding a
change in the accounting for goodwill.
INTEREST EXPENSE. Interest expense decreased by $1.7 million, or 12.1%,
to $12.4 million for the six months ended June 30, 2001, as compared to $14.1
million for the 2000 period. Such decrease was the result of lower interest
rates and the reduction of debt by $56.5 million to $248.1 million as compared
to $304.6 million as of June 30, 2000.
TAXES. Applica's tax expense is based on an estimated annual
aggregation of the taxes on earnings of each of its foreign and domestic
operations. The earnings of subsidiaries in Canada, Mexico and Latin America
(other than Chile) are generally taxed at rates comparable to or higher than
34%, the United States statutory rate. Income tax rates in Hong Kong and Chile
range between 8% and 16%. Applica does not make tax provisions for the
undistributed earnings of its foreign subsidiaries that it expects will be
permanently invested out of the United States.
In the first six months of 2001, Applica used an effective tax rate of
26%, as compared to 25% for the first half of 2000.
EARNINGS PER SHARE. All common stock equivalents have been excluded
from the diluted per share calculations in the first half of 2001 and 2000 as
Applica incurred a net loss in both periods and such inclusion would have been
anti-dilutive.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2001, Applica's working capital was $237.5 million, as
compared to $305.0 million at June 30, 2000. At June 30, 2001 and 2000,
Applica's current ratio was 3.2 to 1 and 4.0 to 1, respectively, and its quick
ratio was 1.8 to 1 and 1.9 to 1, respectively. The change in ratios is primarily
the result of the inventory reduction program.
Cash balances decreased by $6.5 million to $10.4 million for the six
months ended June 30, 2001.
The net cash provided by operating activities, which totaled $52.3
million for the period, reflected primarily reductions in inventories and
accounts receivable.
Cash used in investing activities totaled approximately $14.9 million
for the six-month period, as compared to $17.1 million for the 2000 period, and
consisted primarily of capital expenditures at Applica's manufacturing
facilities.
Cash used in financing activities totaled approximately $43.9 million
in the period, as compared to cash provided by financing activities of $48.7
million in the 2000 period, and primarily reflected the change in debt levels in
2001 and 2000 as Applica reduced its debt by approximately $43.0 million during
the six month period in June 2001.
Certain of Applica's foreign subsidiaries have approximately $55.1
million in trade finance lines of credit, payable on demand, which are secured
by the subsidiaries' tangible and intangible property, and in some cases, a
guarantee by the parent company, Applica Incorporated. Outstanding borrowings by
Applica's Hong Kong subsidiaries are primarily in U.S. dollars.
Applica's primary sources of liquidity are its cash flow from
operations and borrowings under its Senior Secured Credit Facilities. The Senior
Secured Credit Facilities, as amended, consist of a Senior Secured Revolving
Credit Facility, a Tranche A Term Loan and a Tranche B Term Loan. The Senior
Secured Revolving Credit Facility as amended, provides for borrowings by Applica
of up to $160 million. As of August 10, 2001, Applica was borrowing
approximately $104 million under the term loan portion of its Senior Secured
Credit Facilities. As of August 10, 2001, Applica was borrowing approximately
$16 million under the Senior Secured Revolving Credit Facility and had
approximately $94 million available for future cash borrowings as determined by
the borrowing base under the Senior Secured Credit Facilities. Advances under
the Senior Secured Revolving Credit Facility are based upon percentages of
outstanding eligible accounts receivable and inventories.
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At June 30, 2001, the interest rate applicable to the loans made under
the revolving credit facility and the Tranche A Term Loan (other than Swing Line
Loans) was 5.59% as compared to 8.52% at June 30, 2000. The interest rate
applicable to the Tranche B Term Loan was 6.59% as compared to 9.52% for the
2000 period. Swing Line Loans bore interest at 7.50% at June 30, 2001 as
compared to 10.25% at June 30, 2000.
At June 30, 2001, debt as a percent of total capitalization was 44.1%,
as compared to 47.0% at June 30, 2000.
Applica's aggregate capital expenditures for the six months ended June
30, 2001 were $14.9 million as compared to $17.6 million for the 2000 period.
Such expenditures related to capital expenditures at Applica's manufacturing
facilities. Applica anticipates that the total capital expenditures for 2001
will be approximately $20.0 million to $25.0 million. Applica plans to fund such
capital expenditures from cash flow from operations and, if necessary,
borrowings under the Senior Secured Revolving Credit Facility.
Applica's ability to make scheduled payments of principal of, or to pay
the interest on, or to refinance, its indebtedness, or to fund planned capital
expenditures, product development expenses and marketing expenses will depend on
its future performance, which, to a certain extent, is subject to general
economic, financial, competitive, legislative, regulatory, and international and
United States domestic political factors and other factors that are beyond its
control. Based upon the current level of operations and anticipated cost savings
and revenue growth, management believes that cash flow from operations and
available cash, together with available borrowings under the Senior Secured
Credit Facilities and other facilities, will be adequate to meet Applica's
future liquidity needs for at least the next several years. There can be no
assurance that Applica's business will generate sufficient cash flow from
operations, that anticipated revenue growth and operating improvements will be
realized or that future borrowings will be available under the Senior Secured
Credit Facilities in an amount sufficient to enable Applica to service its
indebtedness, including the outstanding 10% notes, or to fund its other
liquidity needs. In addition, there can be no assurance that Applica will be
able to effect any needed refinancing on commercially reasonable terms or at
all.
Applica is also involved in certain ongoing litigation. See Part II.
"Item 1 - Legal Proceedings."
NEW ACCOUNTING PRONOUNCEMENT
In June 2001, the Financial Accounting Standards Board approved the
issuance of SFAS No. 141, "Business Combinations" and SFAS 142, "Goodwill and
Other Intangible Assets". The new standards require that all business
combinations initiated after June 30, 2001 must be accounted for under the
purchase method. In addition, all intangible assets acquired that are obtained
through contractual or legal right, or are capable of being separately sold,
transferred, licensed, rented or exchanged shall be recognized as an asset apart
from goodwill. Goodwill and intangibles with indefinite lives will no longer be
subject to amortization, but will be subject to an annual assessment for
impairment by applying a fair value based test. Applica will continue to
amortize goodwill existing at June 30, 2001 under its current method until
January 1, 2002. Thereafter, annual goodwill amortization of $5.0 million will
be discontinued, and amortization of a newly recognized intangible, if any, will
commence on January 1, 2002. By June 30, 2002, Applica will perform a
transitional fair value based impairment test and if the fair value is less than
the recorded value at January 1, 2002, Applica will record an impairment loss in
the first half of 2002 as a cumulative effect of a change in accounting
principle.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Applica's major market risk exposure is to changing interest rates,
debt obligations issued at a fixed rate and fluctuations in the currency
exchange rates. Applica's policy is to manage interest rate risk through the use
of a combination of fixed and floating rate instruments, with respect to both
its liquid assets and its debt instruments. The Senior Credit Facilities
currently bear interest at LIBOR plus an applicable margin and thus are affected
by changes in interest rates.
For additional information, see Footnote 1, "Derivative Financial
Instruments," of the Notes to Consolidated Financial Statements included
elsewhere in this Form 10-Q Report.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
SHAREHOLDER LITIGATION AND RELATED MATTERS. Applica is a defendant in
SHERLEIGH ASSOCIATES LLC AND SHERLEIGH ASSOCIATES INC. PROFIT SHARING PLAN, ON
THEIR OWN BEHALF AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED V.
WINDMERE-DURABLE HOLDINGS, INC., DAVID M. FRIEDSON AND NATIONSBANC MONTGOMERY
SECURITIES LLC, 98-2273-CIV-LENARD which was filed in the United States District
Court, Southern District of Florida in October 1998. Discovery procedures have
been initiated and are ongoing.
In connection with the Household Products Group acquisition, Applica
also received two derivative demands from certain shareholders alleging breach
of fiduciary duties by certain of our officers and directors. An independent
committee of the Board of Directors is currently conducting an investigation as
to whether such derivative actions are in the best interest of Applica.
SALTON LITIGATION. Applica is also a defendant in SALTON, INC. V
WINDMERE-DURABLE HOLDINGS, INC. AND WINDMERE CORPORATION, which was filed in the
United States District Court, Northern District of Illinois in January 2001.
Discovery procedures have been initiated and are ongoing.
OTHER MATTERS. Applica is subject to other legal proceedings, product
liability claims and other claims that arise in the ordinary course of our
business. In the opinion of management, the amount of ultimate liability with
respect to such matters, if any, in excess of applicable insurance coverage, is
not likely to have a material effect on the financial condition, results of
operations or liquidity of Applica. However, as the outcome of litigation or
other claims is difficult to predict, significant changes in the estimated
exposures could occur.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
At Applica's Annual Meeting of Shareholders held on May 8, 2001, the
shareholders voted to elect Leonard Glazer, Lai Kin, Raymond So, Paul K. Sugrue
and Arnold Thaler as Class II Directors. Continuing members of the Board of
Directors of Applica include: Barbara Freidson Garrett, J. Maurice Hopkins,
Thomas J. Kane, Felix S. Sabates, David M. Friedson, Harry D. Schulman, Jerald
I. Rosen, Susan J. Ganz, Desmond Lai, and Frederick E. Fair.
The number of votes cast for or against with respect to each of the
nominees were as follows:
NOMINEE FOR AGAINST
------- --- -------
Leonard Glazer 20,135,351 1,390,067
Lai Kin 19,695,133 1,830,285
Raymond So 19,698,033 1,827,385
Paul K. Sugrue 20,139,156 1,386,262
Arnold Thaler 20,139,142 1,386,276
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
None.
(b) Reports on Form 8-K:
None.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
APPLICA INCORPORATED
(Registrant)
August 9, 2001 By: /s/ HARRY D. SCHULMAN
--------------------------------------
Harry D. Schulman
President, Chief Operating Officer
and Secretary
August 9, 2001 By: /s/ TERRY L. POLISTINA
-------------------------------------
Terry L. Polistina
Senior Vice President and Chief
Financial Officer
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