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 SEPTEMBER 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 of (I.R.S. Employer
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 NOVEMBER 1, 2001
----- -------------------------------
Common Stock, $.10 par value.................. 23,235,974
APPLICA INCORPORATED
INDEX
Page
----
PART I. FINANCIAL INFORMATION.....................................................................................3
Item 1. Financial Statements............................................................................3
Consolidated Balance Sheets as of September 30, 2001 and December 31, 2000....................3
Consolidated Statements of Operations for the Three Months Ended September 30, 2001 and
2000.......................................................................................4
Consolidated Statements of Operations for the Nine Months Ended September 30, 2001 and 2000...5
Consolidated Statements of Cash Flows for the Nine Months Ended September 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..........13
Item 3. Quantitative and Qualitative Disclosures About Market Risk.....................................18
PART II. OTHER INFORMATION.......................................................................................19
Item 1. Legal Proceedings..............................................................................19
Item 6. Exhibits and Reports on Form 8-K...............................................................19
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
APPLICA INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
2001 2000
------------- ------------
(Unaudited)
(In Thousands)
ASSETS
CURRENT ASSETS
Cash and cash equivalents ............................................ $ 8,499 $ 16,857
Accounts and other receivables, less allowances of $9,050 in 2001 and
$8,049 in 2000 ..................................................... 193,594 186,198
Receivables from affiliates .......................................... 3,600 3,281
Inventories .......................................................... 141,973 160,820
Prepaid expenses and other ........................................... 21,215 17,277
Refundable income taxes .............................................. 4,836 1,207
Future income tax benefits ........................................... 19,284 14,655
--------- ---------
Total current assets ........................................... 393,001 400,295
INVESTMENT IN JOINT VENTURE ............................................. 1,395 1,525
PROPERTY, PLANT AND EQUIPMENT - at cost, less accumulated depreciation of
$96,526 in 2001 and $82,770 in 2000 .................................. 83,027 78,200
FUTURE INCOME TAX BENEFITS, NON-CURRENT ................................. 5,896 3,705
OTHER ASSETS ............................................................ 210,590 224,210
--------- ---------
TOTAL ASSETS ....................................................... $ 693,909 $ 707,935
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes and acceptances payable ........................................ $ -- $ 13,494
Current maturities of long-term debt ................................. 21,048 18,842
Accounts payable ..................................................... 54,972 43,361
Accrued expenses ..................................................... 45,777 47,103
Deferred income, current portion ..................................... 461 514
--------- ---------
Total current liabilities ....................................... 122,258 123,314
LONG-TERM DEBT .......................................................... 247,617 260,147
FUTURE INCOME TAX LIABILITIES ........................................... 2,483 --
OTHER LONG-TERM LIABILITIES ............................................. 75 --
SHAREHOLDERS' EQUITY:
Common stock - authorized: 75,000 shares of $.10 par value; issued and
outstanding: 23,236 shares in 2001 and 23,080 shares in 2000 ....... 2,324 2,308
Paid-in capital ...................................................... 153,432 152,591
Retained earnings .................................................... 173,121 173,466
Notes receivable - officers .......................................... (1,496) (1,496)
Accumulated other comprehensive earnings (loss) ...................... (5,905) (2,395)
--------- ---------
Total shareholders' equity ....................................... 321,476 324,474
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ......................... $ 693,909 $ 707,935
========= =========
The accompanying notes are an integral part of these statements.
3
APPLICA INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended September 30,
---------------------------------------------------------
2001 2000
----------------------- ------------------------
(In thousands, except per share data)
Sales and other revenues ..................... $203,201 100.0% $199,397 100.0%
Cost of goods sold.......................... 141,145 69.5 132,649 66.5
-------- ----- -------- -----
Gross profit....................... 62,056 30.5 66,748 33.5
Selling, general and administrative
expenses................................. 45,699 22.4 48,071 24.1
-------- ----- -------- -----
Operating profit................... 16,357 8.1 18,677 9.4
Other expense (income):
Interest expense......................... 5,429 2.7 8,160 4.1
Interest and other income................ (608) (0.3) (708) (0.4)
-------- ----- -------- -----
4,821 2.4 7,452 3.7
-------- ----- -------- -----
Earnings before equity in net loss of
joint venture and income taxes......... 11,536 5.7 11,225 5.7
Equity in net loss of joint venture...... -- -- (128) (0.1)
-------- ----- -------- -----
Earnings before income taxes ...... 11,536 5.7 11,097 5.6
Income tax expense.......................... 2,999 1.5 2,798 1.4
-------- ----- -------- -----
Net earnings....................... $8,537 4.2% $ 8,299 4.2%
======== ===== ======== =====
Per share data:
Earnings per common share - basic........ $ 0.37 $ 0.36
======== ========
Earnings per common share - diluted...... $ 0.35 $ 0.35
======== ========
The accompanying notes are an integral part of these statements.
4
APPLICA INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Nine Months Ended September 30,
---------------------------------------------------------
2001 2000
---------------------- ------------------------
(In thousands, except per share data)
Sales and other revenues ..................... $516,685 100.0% $517,499 100.0%
Cost of goods sold.......................... 366,539 70.9 354,156 68.4
-------- ----- -------- -----
Gross profit....................... 150,146 29.1 163,343 31.6
Selling, general and administrative
expenses................................. 134,384 26.0 135,936 26.3
-------- ----- -------- -----
Operating profit................... 15,762 3.1 27,407 5.3
Other expense (income):
Interest expense......................... 17,801 3.5 22,225 4.3
Interest and other income................ (1,579) (0.3) (1,673) (0.3)
-------- ----- -------- -----
16,222 3.2 20,552 4.0
-------- ----- -------- -----
Earnings (loss) before equity in net (460) (0.1) 6,855 1.3
loss of joint venture and income taxes.
Equity in net loss of joint venture...... -- -- (128) --
-------- ----- -------- -----
Earnings (loss) before income
taxes ........................... (460) (0.1) 6,727 1.3
Income tax expense (benefit) ............... (115) -- 1,701 0.3
-------- ----- -------- -----
Net earnings (loss)................ $ (345) (0.1)% $ 5,026 1.0%
======== ===== ======== =====
Per share data:
Earnings (loss) per common share - basic. $ (0.02) $ 0.22
======== ========
Earnings (loss) per common share -
diluted................................ $ (0.02) $ 0.21
======== ========
The accompanying notes are an integral part of these statements.
5
APPLICA INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months Ended
September 30,
---------------------------
2001 2000
-------- --------
(In Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) ........................................ $ (345) $ 5,026
Reconciliation to net cash provided by (used in) operating
activities:
Depreciation of property, plant and equipment ........... 14,575 14,234
Amortization of intangible assets ....................... 14,142 14,465
Net change in allowance for losses on accounts receivable 1,001 565
Equity in net earnings of joint venture ................. -- 434
Consulting expense on non-employee stock options ........ 25 --
Net change in deferred income ........................... (53) (529)
Changes in assets and liabilities:
Accounts and other receivables ....................... (8,397) (22,489)
Inventories .......................................... 18,847 (61,107)
Prepaid expenses and other ........................... (3,938) 3,692
Other assets ......................................... (3,957) (2,320)
Accounts payable and accrued expenses ................ 10,285 (1,043)
Current and deferred income taxes .................... (7,966) (9,521)
Other liabilities .................................... -- (10,573)
Other receivables .................................... -- 12,962
Other accounts ....................................... -- (521)
-------- --------
Net cash provided by (used in) operating activities $ 34,219 $(56,725)
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment ................. (19,402) (19,441)
Distributions from joint venture ........................... 130 --
Receivables from affiliates ................................ (319) 696
-------- --------
Net cash used in investing activities .............. (19,591) (18,745)
CASH FLOWS FROM FINANCING ACTIVITIES:
Notes and acceptances ...................................... (13,494) (898)
Long-term debt - net ....................................... (10,324) 70,220
Proceeds from employee stock benefit plans ................. 832 2,164
-------- --------
Net cash (used in) provided by financing activities (22,986) 71,486
DECREASE IN CASH AND CASH EQUIVALENTS ......................... (8,358) (3,984)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD .............. 16,857 13,768
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD .................... $ 8,499 9,784
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
CASH PAID DURING THE NINE-MONTH PERIODS ENDED SEPTEMBER 30:
Interest ................................................... $ 19,566 $ 23,332
Income taxes ............................................... $ 7,026 $ 8,758
The accompanying notes are an integral part of these statements.
6
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 September 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 September 30, 2001 were
$67.7 million notional value of contracts to purchase and/or sell foreign
currency forward with a fair market value of approximately $400,000. The market
value represents the amount Applica would receive upon exiting the contracts at
September 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 September 30, 2001. All contracts expire on or before September 30, 2002.
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 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 September 30,
2001 were derivatives on $200.0 million notional principal amount with a
negative fair market value of approximately $100,000. The market value
represents the amount Applica would have to pay to exit the contracts at
September 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 September 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.
One of Applica's interest rate derivatives qualifies as a fair value
hedge. Accordingly, Applica increased the value of its debt by approximately
$1.9 million at September 30, 2001, as required by SFAS 133.
At September 30, 2001, Applica had no significant commodity future
contracts.
7
APPLICA INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
2. SHAREHOLDERS' EQUITY
EARNINGS PER SHARE
Basic shares for the three-month period ended September 30, 2001 and
2000 were 23,218,715 and 23,035,355, respectively. Basic shares for the
nine-month period ended September 30, 2001 and 2000 were 23,168,672 and
22,917,044, respectively. Included in diluted shares are common stock
equivalents relating to options of 917,048 and 539,762 for the three month
periods ended September 30, 2001 and 2000, respectively and 971,795 for the nine
month period ended September 30, 2000. All common stock equivalents have been
excluded from the diluted per share calculations in the nine-month period ended
September 30, 2001 as their inclusion would have been anti-dilutive.
Stock options to purchase 1,685,926 shares of Applica's common stock at
exercise prices ranging from $9.85 to $31.6875 were excluded from the diluted
per share computation for the three month period ended September 30, 2001 as the
exercise prices were greater than the average market price of Applica's common
stock during such period.
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.
8
APPLICA INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Segment information for the three-month periods ended September 30,
2001 and 2000 was as follows:
Consumer Consumer
Products Products
North America International Manufacturing Total
------------- ------------- ------------- --------
(In thousands)
2001:
Net sales............................... $144,798 $26,497 $116,529 $287,824
Intersegment net sales.................. -- -- 92,157 92,157
Operating earnings ..................... 1,950 1,436 12,787 16,173
2000:
Net sales............................... $149,005 $24,852 $111,511 $285,368
Intersegment net sales.................. 1,620 -- 95,695 97,315
Operating earnings ..................... 5,947 286 12,450 18,683
Reconciliation to consolidated amounts was as follows:
2001 2000
-------- --------
(In thousands)
REVENUES:
Total revenues for reportable segments................. $287,824 $285,368
Other revenues......................................... 7,534 11,344
Eliminations of intersegment revenues.................. (92,157) (97,315)
-------- --------
Total consolidated revenues....................... $203,201 $199,397
======== ========
OPERATING EARNINGS:
Total earnings for reportable segments............ $16,173 $18,683
Other income (loss)............................... 792 574
Interest expense.................................. (5,429) (8,160)
-------- --------
Earnings before income taxes............... $ 11,536 $ 11,097
======== ========
Segment information for the nine-month periods ended September 30, 2001
and 2000 was as follows:
Consumer Consumer
Products Products
North America International Manufacturing Total
------------- ------------- ------------- --------
(In thousands)
2001:
Net sales............................... $379,170 $75,545 $274,131 $728,846
Intersegment net sales.................. -- -- 231,090 231,090
Operating earnings (loss)............... (9,760) 2,249 26,711 19,200
2000:
Net sales............................... $378,764 $70,553 $307,975 $757,292
Intersegment net sales.................. 5,855 -- 260,985 266,840
Operating earnings (loss)............... (4,780) (405) 32,335 27,150
9
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................. $728,846 $757,292
Other revenues......................................... 18,929 27,047
Eliminations of intersegment revenues.................. (231,090) (266,840)
-------- --------
Total consolidated revenues....................... $516,685 $517,499
======== ========
OPERATING EARNINGS:
Total earnings for reportable segments............ $19,200 $27,150
Other income (loss)............................... (1,859) 1,802
Interest expense.................................. (17,801) (22,225)
-------- --------
Earnings (loss) before income taxes...... $ (460) $ 6,727
======== ========
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
APPLICA INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Nine Months Ended September 30, 2001
--------------------------------------------------------------------------------
Applica
Incorporated Guarantors Non-Guarantors Eliminations Consolidated
------------ ---------- -------------- ------------ ------------
(In thousands)
STATEMENT OF OPERATIONS:
Sales and other revenues ............... -- 378,754 369,021 (231,090) 516,685
Cost of goods sold ..................... -- 271,549 326,080 (231,090) 366,539
------- ------- ------- -------- -------
Gross profit ........................ -- 107,205 42,941 -- 150,146
Operating expenses ..................... (1,142) 112,398 22,614 514 134,384
------- ------- ------- -------- -------
Operating profit (loss) ............. 1,142 (5,193) 20,327 (514) 15,762
Other (income) expense, net ............ 16,222 -- -- -- 16,222
------- ------- ------- -------- -------
Earnings (loss) before income taxes . (15,080) (5,193) 20,327 (514) (460)
Income taxes (benefit) ................. (12,488) -- 12,373 -- (115)
------- ------- ------- -------- -------
Net earnings (loss) ................. (2,592) (5,193) 7,954 (514) (345)
======= ======= ======= ======== =======
BALANCE SHEET:
Cash ................................... -- 1,322 7,177 -- 8,499
Accounts and other receivables ......... -- 128,142 65,452 -- 193,594
Receivables from affiliates ............ (51,742) (8,081) 63,423 -- 3,600
Inventories ............................ -- 89,474 52,499 -- 141,973
Other current assets ................... -- 7,958 19,048 18,329 45,335
------- ------- ------- -------- -------
Total current assets ................ (51,742) 218,815 207,599 18,329 393,001
Investment in joint venture ............ 425,119 113,123 70,492 (607,339) 1,395
Property, plant and equipment, net ..... -- 18,109 64,918 -- 83,027
Other assets ........................... 2,207 240,721 23,065 (49,507) 216,486
------- ------- ------- -------- -------
Total assets ........................ 375,584 590,768 366,074 (638,517) 693,909
======= ======= ======= ======== =======
Accounts payable and accrued expenses .. 3 27,218 73,528 -- 100,749
Current maturities of long-term debt ... 21,048 -- -- -- 21,048
Deferred income ........................ -- 461 -- -- 461
Income taxes payable ................... -- 2,445 4,603 (7,048) --
------- ------- ------- -------- -------
Total current liabilities ........... 21,051 30,124 78,131 (7,048) 122,258
Long-term debt ......................... 244,422 6,477 23,425 (26,707) 247,617
Future income tax liabilities .......... -- 28,230 2,448 (28,195) 2,483
Other long-term liabilities ............ -- 75 -- -- 75
------- ------- ------- -------- -------
Total liabilities ................... 265,473 64,906 104,004 (61,950) 372,433
Shareholders' equity ................... 110,111 525,862 262,070 (576,567) 321,476
------- ------- ------- -------- -------
Total liabilities and shareholders'
equity .............................. 375,584 590,768 366,074 (638,517) 693,909
======= ======= ======= ======== =======
CASH FLOW INFORMATION:
Net cash provided by (used in) operating
activities .......................... (4,797) (10,422) 32,142 17,296 34,219
Net cash provided by (used in) investing
activities .......................... 21,267 4,580 (40,412) (5,026) (19,591)
Net cash provided by (used in) financing
activities .......................... (16,478) 2,818 2,944 (12,270) (22,986)
Cash at beginning ...................... 8 4,346 12,503 -- 16,857
Cash at end ............................ -- 1,322 7,177 -- 8,499
11
APPLICA INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Nine Months Ended September 30, 2000
--------------------------------------------------------------------------------
Applica
Incorporated Guarantors Non-Guarantors Eliminations Consolidated
------------ ---------- -------------- ------------ ------------
(In thousands)
STATEMENT OF OPERATIONS:
Sales and other revenues ............... -- 388,646 395,693 (266,840) 517,499
Cost of goods sold ..................... -- 283,296 337,700 (266,840) 354,156
------- ------- ------- -------- -------
Gross profit ........................ -- 105,350 57,993 -- 163,343
Operating expenses ..................... (557) 111,543 24,680 270 135,936
------- ------- ------- -------- -------
Operating profit (loss) ............. 557 (6,193) 33,313 (270) 27,407
Other (income) expense, net ............ 20,026 615 (89) -- 20,552
------- ------- ------- -------- -------
Earnings (loss) before income taxes . (19,469) (6,808) 33,402 (270) 6,855
Income taxes (benefit) ................. -- 159 7,036 (5,494) 1,701
Equity in net loss of joint venture .... 128 -- -- -- 128
------- ------- ------- -------- -------
Net earnings (loss) ................. (19,597) (6,967) 26,366 5,224 5,026
======= ======= ======= ======== =======
BALANCE SHEET:
Cash ................................... 10 (2,107) 11,881 -- 9,784
Accounts and other receivables ......... -- 134,648 59,776 -- 194,424
Receivables from affiliates ............ 21,286 (83,046) 64,597 -- 2,837
Inventories ............................ -- 146,803 78,010 -- 224,813
Other current assets ................... -- 893 11,719 11,536 24,148
------- ------- ------- -------- -------
Total current assets ................ 21,296 197,191 225,983 11,536 456,006
Investments in joint venture ........... 425,900 113,122 70,503 (607,351) 2,174
Property, plant and equipment, net ..... -- 17,800 63,390 -- 81,190
Other assets ........................... -- 219,571 11,137 2,446 233,154
------- ------- ------- -------- -------
Total assets ........................ 447,196 547,684 371,013 (593,369) 772,524
======= ======= ======= ======== =======
Accounts payable and accrued expenses .. 3 27,957 66,100 -- 94,060
Current maturities of long-term debt ... 18,342 -- -- -- 18,342
Deferred income, current portion ....... -- 292 -- -- 292
Income taxes payable ................... -- 991 2,724 (2,987) 728
------- ------- ------- -------- -------
Total current liabilities ........... 18,345 29,240 68,824 (2,987) 113,422
Long-term debt ......................... 299,154 (18,476) 18,799 9,559 309,036
Deferred income taxes .................. -- 5,514 2,843 (8,357) --
------- ------- ------- -------- -------
Total liabilities ................... 317,499 16,278 90,466 (1,785) 422,458
Shareholders' equity ................... 129,697 531,406 280,547 (591,584) 350,066
------- ------- ------- -------- -------
Total liabilities and shareholders'
equity .............................. 447,196 547,684 371,013 (593,369) 772,524
======= ======= ======= ======== =======
CASH FLOW INFORMATION:
Net cash provided by (used in) operating
activities .......................... (19,595) 168,297 26,254 (231,681) (56,725)
Net cash provided by (used in) investing
activities .......................... (42,710) 70,783 (41,016) (5,802) (18,745)
Net cash provided by (used in) financing
activities .......................... 62,311 (245,126) 16,818 237,483 71,486
Cash at beginning ...................... 4 3,939 9,825 -- 13,768
Cash at end ............................ 10 (2,107) 11,881 -- 9,784
12
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 nine-month periods ended September 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 Form 10-Q 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 Uncertainties regarding the impact of the recent terrorist
activities and the public's confidence in general.
o Our inability to renew the Black & Decker(R) Trademark License
Agreement beyond December 2006.
o The infringement or loss of our proprietary rights.
o Any significant decline in purchases by our larger customers
or pressure from these customers to reduce prices.
o The bankruptcy or loss of any major retail customer or
supplier.
o Weakness in the U.S. retail market and changes in product mix.
o The financial condition of the retail industry.
o Fluctuations in cost and availability of raw materials and
components.
o Product recalls and product liability claims against us or
other regulatory actions.
o Changing conditions in foreign countries.
o Changes in trade relations with China.
o Currency fluctuations in our international operations.
o Our ability to develop new and innovative products and
customer acceptance of such products.
o An extended interruption in the operation of our manufacturing
facilities.
o Production-related risks that could jeopardize our ability to
realize anticipated sales and profits.
o Seasonality of our operating results.
o Competition 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.
o The outcome of the class action lawsuit brought against us in
connection with our acquisition of the Black & Decker
Household Products Group.
o Government regulations.
13
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 the forward-looking
statements. All subsequent written and oral forward-looking statements
attributable to Applica or persons acting on our behalf are expressly qualified
in their entirety by the cautionary statements in this paragraph. Readers are
cautioned not to place undue reliance on forward-looking statements. Applica
undertakes no obligation to publicly revise any forward-looking statements to
reflect events or circumstances that arise after the filing of this Form 10-Q.
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.
Due to the continuation of the economic slowdown, which was further
compounded by the events of September 11th, Applica again lowered production at
its Chinese and Mexican manufacturing facilities in the fourth quarter. The
slowdown of production will result in unabsorbed overhead costs and an expected
decrease in gross profit margins for the fourth quarter of 2001. Additionally,
because management expects that the current weak retail environment will
adversely effect consumer spending during the holiday season, we are considering
other cost cutting measures which could result in charges of up to $15 million
after-tax in the fourth quarter of 2001 and annual cost savings of $4 to $5
million. It is anticipated that approximately one-half of the charges would be
non-cash.
14
RESULTS OF OPERATIONS
The operating results of Applica expressed as a percentage of sales and
other revenues are set forth below:
Nine Months Ended September 30,
-------------------------------
2001 2000
----- -----
Sales and other revenues........................................... 100.0% 100.0%
Cost of goods sold................................................. 70.9 68.4
----- -----
Gross profit.................................................... 29.1 31.6
Selling, general and administrative expenses....................... 26.0 26.3
Other expense - net................................................ 3.2 4.0
----- -----
(Loss) earnings before income taxes............................. (0.1) 1.3
Income taxes (benefit)............................................. -- 0.3
----- -----
Net (loss) earnings............................................. (0.1)% 1.0%
===== =====
THREE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 2000
SALES AND OTHER REVENUES. Sales and other revenues for Applica
increased by $3.8 million to $203.2 million, an increase of 1.9% over the third
quarter of 2000. The change was primarily the result of an increase of $8.0
million in OEM sales, a $1.9 million increase in Littermaid sales, a $1.8
million increase in Black & Decker branded product sales and a $1.7 million
increase in Windmere branded and other product sales. These increases were
partially offset by a decrease of $8.0 million in sales of product categories
that were exited in the fourth quarter of 2000 and a decrease of $1.7 million in
sales of electronic products. Additionally, during October, shipments to one
major retailer were significantly curtailed, which could adversely impact fourth
quarter sales.
North America sales decreased by $4.2 million, or 2.8%, to $144.8
million in the third quarter of 2001. The change is primarily attributable to a
$8.0 million decrease in sales of product categories that were exited in the
fourth quarter of 2000 and a $1.1 million decrease in sales of Windmere branded
and other branded products. This decrease was partially offset by a $3.0 million
increase in sales of Black & Decker branded products and a $1.9 million increase
in sales of Littermaid products.
Sales for the international segment increased by $1.6 million, or 6.6%,
to $26.5 million, from the 2000 period. The change primarily resulted from a
$2.8 million increase in Windmere branded and other product sales, offset by a
decrease of $1.2 million in sales of Black & Decker products.
Sales at Applica's manufacturing subsidiaries increased by $5.0
million, or 4.5%, to $116.5 million from the third quarter of 2000. The increase
in manufacturing sales was primarily the result of an increase in OEM sales of
$8.0 million, or 50.7%, to $23.8 million. The increase in OEM sales was the
result of sales to new customers.
GROSS PROFIT MARGIN. Applica's gross profit margin was 30.5% in the
third quarter of 2001 as compared to 33.5% for the same period in 2000. The
decrease in the gross profit margin was primarily the result of an increase in
OEM sales, which are generally at lower margins, and a significantly less
favorable product mix. Generally, consumers purchased fewer higher-priced,
higher-margin products and more lower-priced, lower-margin products in the third
quarter. Due to the continuation of the economic slowdown, which was further
compounded by the events of September 11th, Applica again lowered production at
its Chinese and Mexican manufacturing facilities in the fourth quarter. The
slowdown of production will result in unabsorbed overhead costs and an expected
decrease in gross profit margins for the fourth quarter of 2001.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and
administrative expenses for Applica decreased by $2.4 million in the third
quarter of 2001, or 4.9%, to $45.7 million. Such expenses decreased as a
percentage of sales to 22.4% from 24.1% in the 2000 period. In the third quarter
2001, distribution and freight costs decreased by $3.2 million as the result of
lower inventories, better space management and lower North American sales due to
exited businesses.
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 $2.7 million, or 33.5%,
to $5.4 million for the three months ended September 30, 2001, as compared to
$8.2 million for the 2000 period. Such decrease was the result of the reduction
of debt by $58.7 million to $268.7 million, as compared to $327.4 million as of
September 30, 2000, and lower interest rates.
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 third quarter of 2001, Applica used an effective tax rate of
26%, as compared to 25% for the third quarter of 2000.
EARNINGS PER SHARE. Basic shares for the three month periods ended
September 30, 2001 and 2000 were 23,218,715 and 23,035,355, respectively.
Included in diluted shares are common stock equivalents relating to options of
971,048 and 539,762 for the three month periods ended September 30, 2001 and
2000, respectively.
NINE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 2000
SALES AND OTHER REVENUES. Sales and other revenues for Applica
decreased slightly to $516.7 million from $517.5 million in the 2000 period. The
change was primarily the result of a decrease of $35.1 million in sales of
product categories that were exited in the fourth quarter of 2000, a decrease of
$3.4 million in OEM sales and a decrease of $2.8 million in sales of electronic
products. The decrease was primarily offset by a $22.6 million increase in sales
of Black & Decker branded products, a $12.8 million increase in Windmere branded
and other product sales, and a $5.0 million increase in sales of Littermaid pet
products.
North America sales increased slightly to $379.2 million in the first
nine months of 2001 from $378.8 million. The change was primarily the result of
a $26.6 million increase in sales of Black & Decker branded products, a $5.0
million increase in sales of Littermaid pet products and a $3.9 million increase
in Windmere and other product sales. The increase was primarily offset by a
decrease of $35.1 million in sales of product categories that were exited in the
fourth quarter of 2000.
Sales for the international segment increased by $5.0 million, or 7.1%,
to $75.5 million from the 2000 period. The change resulted from a $8.9 million
increase in Windmere branded and other products partially offset by a $3.9
million decrease in sales of Black & Decker branded products.
Sales at Applica's manufacturing subsidiaries decreased by $33.8
million, or 11.0%, to $274.1 million from the first nine 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 $3.4
million, or 7.2%, in the 2001 period to $43.6 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 result in an increase in OEM sales for
the year.
GROSS PROFIT MARGIN. Applica's gross profit margin was 29.1% in the
first nine months of 2001 as compared to 31.6% 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. Additionally,
as a result of the slow economic environment, consumers purchased fewer
higher-priced, higher-margin products and more lower-priced, lower-margin
products during the nine-month period. Due to the economic slowdown, which was
further compounded by the events of September 11th, Applica again lowered
production at its Chinese and Mexican manufacturing facilities in the fourth
quarter. The slowdown of production will result in unabsorbed overhead costs and
an expected decrease in gross profit margins for the year ended December 31,
2001.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and
administrative expenses for Applica decreased by $1.6 million, or 1.1%, in the
first nine months of 2001 to $134.4 million. Such expenses decreased as a
percentage of sales to 26.0% in 2001 from 26.3% in the 2000 period. In the first
nine months of 2001, selling and other expenses decreased by $2.5 million as the
result of the consolidation of our external and internal sales forces.
16
This was partially offset by an increase in promotional expenses of $0.8
million. Freight and distribution expenses remained relatively flat during the
period.
See "New Accounting Pronouncement" below for information regarding a
change in the accounting for goodwill.
INTEREST EXPENSE. Interest expense decreased by $4.4 million, or 19.9%,
to $17.8 million for the nine months ended September 30, 2001, as compared to
$22.2 million for the 2000 period. Such decrease was the result of the reduction
of debt by $58.7 million to $268.7 million, as compared to $327.4 million as of
September 30, 2000, and lower interest rates.
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 nine months of 2001, Applica used an effective tax rate of
26%, as compared to 25% for the first nine months of 2000.
EARNINGS PER SHARE. Basic shares for the nine month periods ended
September 30, 2001 and 2000 were 23,168,672 and 22,917,044, respectively.
Included in diluted shares are common stock equivalents relating to options of
971,795 for the nine-month period ended September 30, 2000. All common stock
equivalents have been excluded from the diluted per share calculations in the
first nine months of 2001 as Applica incurred a net loss in such period and
inclusion would have been anti-dilutive.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2001, Applica's working capital was $270.7 million, as
compared to $342.6 million at September 30, 2000. At September 30, 2001 and
2000, Applica's current ratio was 3.2 to 1 and 4.0 to 1, respectively, and its
quick ratio was 1.9 to 1 and 2.0 to 1, respectively. The change in the current
ratio is primarily the result of the inventory reduction program.
Cash balances decreased by $8.4 million to $8.5 million for the nine
months ended September 30, 2001.
The net cash provided by operating activities, which totaled $34.2
million for the period, reflects a significant reduction in inventories.
Cash used in investing activities remained relatively flat at
approximately $19.6 million for the nine-month periods in 2001 and 2000 and
consisted primarily of capital expenditures at Applica's manufacturing
facilities.
Cash used in financing activities totaled approximately $23.0 million
in the period, as compared to $71.5 million of cash provided by financing
activities in the 2000 period, and primarily reflected the change in debt levels
in 2001 and 2000 as Applica reduced its debt by approximately $58.7 million
year-over-year.
Certain of Applica's foreign subsidiaries have approximately $40.8
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 in both U.S. and Hong Kong 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 November 1, 2001, Applica was borrowing
approximately $99.5 million under the term loan portion of its Senior Secured
Credit Facilities. As of November 1, 2001, Applica was borrowing approximately
$28.3 million under the Senior Secured Revolving Credit Facility and had
approximately $122.7 million available for future cash borrowings as determined
by the borrowing
17
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.
At September 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 4.38% as compared to 8.3675% at September 30, 2000. The
interest rate applicable to the Tranche B Term Loan was 5.38% as compared to
9.3675% for the 2000 period. Swing Line Loans bore interest at 6.75% at
September 30, 2001 as compared to 10.25% at September 30, 2000.
At September 30, 2001, debt as a percent of total capitalization was
45.5%, as compared to 48.3% at September 30, 2000.
Applica's aggregate capital expenditures for the nine months ended
September 30, 2001 were $19.4 million as compared to $19.4 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 $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 September 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 September 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. Applica has not yet made an evaluation to comply with this standard.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Applica's major market risk exposure is to changing interest rates on
debt obligations 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.
18
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 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
10.1 Amendment No. 7 to Amended and Restated Credit Agreement by and
among Applica Incorporated, each of its subsidiaries party thereto,
each of the lenders party thereto and Bank of America, N.A., as
agent for the lenders, dated August 24, 2001.
(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)
November 6, 2001 By: /s/ Harry D. Schulman
-------------------------------------
Harry D. Schulman
President, Chief Operating Officer
and Secretary
November 6, 2001 By: /s/ Terry L. Polistina
-------------------------------------
Terry L. Polistina
Senior Vice President and
Chief Financial Officer
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