<PAGE> 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 MARCH 31, 2000
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)
WINDMERE-DURABLE HOLDINGS, INC.
FORMER NAME, IF CHANGED SINCE LAST REPORT
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 report(s), 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 OUTSTANDING
CLASS ON MAY 8, 2000
----- -----------------------------
Common Stock, $.10 Par Value 22,951,106
<PAGE> 2
APPLICA INCORPORATED
INDEX
<TABLE>
<CAPTION>
<S> <C> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. Consolidated Statements of Operations for the
Three Months Ended March 31, 2000 and 1999......................................... 3
Consolidated Balance Sheets as of
March 31, 2000, and December 31, 1999.............................................. 4-5
Consolidated Statements of Cash Flows
for the Three Months Ended March 31, 2000 and 1999................................. 6
Notes to Consolidated Financial Statements......................................... 7-13
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations...................................... 14-20
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk......................... 20
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings ................................................................. 21
ITEM 6. Exhibits and Reports on Form 8-K................................................... 21
SIGNATURES........................................................................................... 22
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
APPLICA INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE INFORMATION)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
------------------------------------------------------------
2000 1999
------------------------- ------------------------------
<S> <C> <C> <C> <C>
Sales and Other Revenues .................................... $ 146,691 100.0% $ 118,853 100.0%
Cost of Goods Sold .......................................... 102,277 69.7 81,895 68.9
--------- --------- --------- ---------
Gross Profit ........................................... 44,414 30.3 36,958 31.1
Selling, General and
Administrative Expenses ................................ 42,597 29.1 39,128 32.9
--------- --------- --------- ---------
Operating Profit ....................................... 1,817 1.2 (2,170) (1.8)
Other (Income) Expense
Interest Expense ....................................... 6,280 4.3 6,205 5.2
Interest and Other Income .............................. (430) (.3) (289) (.2)
--------- --------- --------- ---------
5,850 4.0 5,916 5.0
--------- --------- --------- ---------
Loss before Equity
in Net Loss of Joint
Ventures and Income Taxes .............................. (4,033) (2.8) (8,086) (6.8)
Equity in Net Loss
of Joint Ventures ...................................... -- -- (519) (.4)
--------- --------- --------- ---------
Loss Before
Income Taxes ........................................... (4,033) (2.8) (8,605) (7.2)
Provision (Benefit) for
Income Taxes ........................................... (1,005) (.7) (2,076) (1.7)
--------- --------- --------- ---------
Net Loss .................................................... $ (3,028) (2.1)% $ (6,529) (5.5)%
========= ========= ========= =========
Earnings Per Share - basic .................................. $ (.13) $ (.30)
========= =========
Earnings Per Share - diluted ................................ $ (.13) (.30)
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE> 4
APPLICA INCORPORATED
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, 2000 DECEMBER 31, 1999
-------------- -----------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash & Cash Equivalents ............................................... $ 9,604 $ 13,768
Accounts and Other Receivables,
less allowances of $8,751 and
$8,761, respectively ............................................. 161,931 172,500
Receivables from Affiliates (Note 1) .................................. 3,440 3,533
Other Receivables ..................................................... -- 12,962
Inventories
Raw Materials .................................................... 8,780 9,045
Work-in-process .................................................. 21,239 18,547
Finished Goods ................................................... 150,636 136,114
-------- --------
Total Inventories ............................................ 180,655 163,706
Prepaid Expenses ...................................................... 16,135 12,703
Refundable Income Taxes ............................................... 1,122 1,122
Future Income Tax Benefits ............................................ 8,490 8,490
-------- --------
Total Current Assets ............................................. 381,377 388,784
INVESTMENT IN JOINT VENTURE
(NOTE 2) ......................................................... 2,342 2,608
PROPERTY, PLANT & EQUIPMENT -
AT COST, less accumulated
depreciation of $71,913 and
$69,597, respectively ............................................ 81,184 75,983
Long-term future income tax benefits .................................. 2,049 2,049
OTHER ASSETS .......................................................... 238,624 243,249
-------- --------
TOTAL ASSETS ........................................................ $ 705,576 $712,673
======== ========
</TABLE>
(Continued)
4
<PAGE> 5
APPLICA INCORPORATED
CONSOLIDATED BALANCE SHEETS (UNAUDITED) (CONTINUED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, 2000 DECEMBER 31, 1999
-------------- -----------------
<S> <C> <C>
LIABILITIES
CURRENT LIABILITIES
Notes and acceptances payable ................... $ 1,716 $ 898
Current Maturities of Long-Term Debt ............ 15,342 13,587
Accounts Payable and Accrued Expenses ........... 78,668 95,103
Income taxes payable ............................ 1,015 4,723
Deferred Income, current portion ................ 585 585
Other current liabilities ....................... -- 10,573
--------- ---------
Total Current Liabilities ......... 97,326 125,469
LONG-TERM DEBT .................................. 266,338 243,571
DEFERRED INCOME, less current portion ........... 227 236
SHAREHOLDERS' EQUITY (Note 2)
Special Preferred Stock -
Authorized 40,000 shares of
$.01 par value; none issued ............ -- --
Common Stock - authorized
40,000 shares of $.10 par
value; shares outstanding:
22,920 and 22,641,
respectively ............................... 2,292 2,264
Paid-in Capital ................................. 150,996 149,548
Retained Earnings ............................... 191,654 194,682
Accumulated Other Comprehensive Loss ............ (1,761) (1,601)
Note receivable - officer ....................... (1,496) (1,496)
--------- ---------
Total Shareholders' Equity ...................... 341,685 343,397
--------- ---------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 705,576 $ 712,673
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE> 6
APPLICA INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
2000 1999
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss ..................................................................... $ (3,028) $ (6,529)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation of property, plant and equipment ................................ 4,508 4,400
Amortization of intangible assets ............................................ 4,952 4,330
Amortization of deferred income .............................................. (9) --
Net change in allowance for losses on accounts receivable .................... 10 1,107
Changes in assets and liabilities
Decrease in accounts and other receivables ............................... 10,559 37,626
Decrease (increase) in inventories ....................................... (16,949) 10,192
Increase in prepaid expenses ............................................. (3,432) (906)
Increase in other assets ................................................. (327) (1,845)
Decrease in other receivables ............................................ 12,962 --
Decrease in accounts payable and accrued expenses ........................ (16,435) (25,420)
Decrease in current and deferred income taxes ............................ (3,708) (8,587)
Decrease in other liabilities ............................................ (10,573) --
Decrease in deferred income .............................................. -- (1,181)
Decrease in other accounts ............................................... (160) (52)
-------- --------
Net cash provided by (used in)
operating activities .............................................. (21,630) 13,135
Cash flows from investing activities:
Additions to property, plant and equipment - net ............................. (9,709) (4,745)
Equity in net earnings (loss) of joint ventures .............................. 266 526
Decrease in receivable accounts
and notes from affiliates ................................................ 93 1,318
-------- --------
Net cash used in investing activities ............................... (9,350) (2,901)
Cash flows from financing activities:
Net borrowings under lines of credit ......................................... $ 818 $ --
Long-term debt - net ......................................................... 24,522 (16,878)
Exercise of stock options and warrants ....................................... 1,476 23
-------- --------
Net cash provided by (used in) financing activities ...................... 26,816 (16,855)
Decrease in cash
and cash equivalents .............................................. (4,164) (6,621)
Cash and cash equivalents at beginning of year .................................... 13,768 20,415
-------- --------
Cash and cash equivalents at end of quarter ....................................... $ 9,604 $ 13,794
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for:
Interest ..................................................................... $ 9,698 $ 9,615
Income taxes ................................................................. $ 1,204 $ 2,505
</TABLE>
The accompanying notes are an integral part of these statements.
6
<PAGE> 7
APPLICA INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF ACCOUNTING POLICIES
INTERIM REPORTING
In the opinion of the Company, the accompanying unaudited consolidated
financial statements contain all normal recurring adjustments necessary
to present fairly the Company's financial position as of March 31, 2000
and the results of its operations and changes in financial position for
the interim periods. Results for interim periods should not be
considered indicative of results for a full year. Reference should be
made to the financial statements contained in the registrant's Annual
Report on Form 10-K for the year ended December 31, 1999.
RECLASSIFICATIONS
Certain prior period amounts have been reclassified for comparability.
RECEIVABLES FROM AFFILIATES
Receivables from Affiliates include accounts receivable which arise in
the ordinary course of business and are settled as trade obligations,
as well as the current portion of notes receivable due from certain of
the Company's joint venture partners (affiliates) and a Company
officer. Notes receivable are due upon demand and bear interest at
prevailing market interest rates.
DERIVATIVE FINANCIAL INSTRUMENTS
The Company 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 currency instruments used
are generally consistent with the timing of the committed or
anticipated transactions being hedged. Outstanding at March 31, 2000 is
$11,000,000, in contracts and/or options to purchase foreign currency,
forward. There is no significant unrealized gain or loss on these
contracts. All contracts have terms of six months or less.
The Company uses interest rate swaps of one to five years in duration
to reduce the impact of changes in interest rates on its floating rate
debt. The notional amounts of the swap 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.
In February 2000, the Company exited contracts with a notional value of
$60,000,000 and received a payment of $248,300 which was recorded as an
adjustment to interest expense.
As of March 31, 2000, the Company had purchased a swap on $80,000,000
notional principal amount with a market value of approximately
($1,840,000). The market value represents the amount the Company would
have to pay to exit the contract at March 31, 2000. The Company does
not intend to exit the contract at this time.
2. SHAREHOLDERS' EQUITY
EARNINGS PER SHARE
Basic shares for the three month periods ended March 31, 2000 and 1999
were 22,719,389 and 22,090,966, respectively. All common stock
equivalents have been excluded from the per share calculations as the
Company incurred net losses in both periods and their inclusion would
have been anti-dilutive.
7
<PAGE> 8
3. COMMITMENTS AND CONTINGENCIES
The Company 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, HARRY D. SCHULMAN AND NATIONSBANC MONTGOMERY
SECURITIES LLC, 98-2273-CIV-LENARD which was filed in the United States
District Court, Southern District of Florida on October 8, 1998.
This matter is a class action complaint, which is the consolidation of
eight separate class action complaints with substantially similar
allegations. On June 30, 1999, a consolidated amended class action
complaint was filed. The consolidated amended class action complaint
was purportedly filed on behalf of those security holders of the
Company who purchased such securities during a certain period in the
second and third quarters of 1998, alleging violations of the federal
securities laws (including Rule 10b-5 promulgated pursuant to the
Securities Exchange Act of 1934, as amended) in connection with the
acquisition by the Company of certain product categories of the
Household Products Group of the Black & Decker Corporation. Among other
things, the plaintiffs allege that the Company and certain of its
directors and officers, along with NationsBanc Montgomery Securities
LLC, provided false information in connection with a public offering of
debt and equity securities. The plaintiffs seek, among other relief, to
be declared a class, to be awarded compensatory damages, rescission
rights, unspecified damages and attorneys' fees and costs. The
defendants have moved to dismiss the consolidated class action
complaint. The motion is pending consideration by the Court.
By Order dated March 9, 1999, in addition to consolidating the
above-referenced cases, the Court provisionally certified the class of
plaintiffs who purchased Windmere stock between May 12, 1998 and
September 22, 1998, and provisionally certified Sherleigh Associates
LLC and Sherleigh Associates, Inc. Profit Sharing Plan as lead
plaintiff. By Order dated June 3, 1999, the Court, among other things,
appointed lead counsel and directed the filing of a joint scheduling
order. On June 23, 1999, the parties submitted a Joint Scheduling
Report and a proposed scheduling order, which is still under
consideration by the Court.
The Company is currently advancing the legal expenses of the directors
and officers who were named as defendants. Such defendants have agreed
to repay the Company for all or any portion of such advances to which
they are ultimately found not to be entitled pursuant to applicable
law. Based on the information currently available to the Company,
management does not believe that the indemnification of the officers
and directors named as defendants in the above-listed matters will have
a material adverse effect on the financial condition, results of
operations or liquidity of the Company. However, the actual effects of
such indemnification on the Company cannot be finally determined until
the amount of such indemnification, if any, is fixed.
The Company is subject to other legal proceedings and claims which
arise in the ordinary course of its business. In the opinion of
management, the amount of ultimate liability, if any, in excess of
applicable insurance coverage, is not likely to have a material effect
on the financial position of the Company. However, as the outcome of
litigation or other claims is difficult to predict, significant changes
in the estimated exposures could occur.
4. BUSINESS SEGMENT INFORMATION
Effective January 1, 2000, the Company reorganized into three new
business units: Consumer Products North America, Consumer Products
International and Manufacturing. The information for 1999 has been
restated in order to conform to the new presentation.
The Consumer Products North America segment distributes kitchen
electric, personal care and home environment products under licensed
brand names such as Black & Decker, as well as the Windmere 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 &
8
<PAGE> 9
Decker and Windmere brand names. Products are marketed throughout all
countries in Latin America except for Brazil.
The Manufacturing segment includes the Company's operations located in
Bao An County, Guangdong Province of the Peoples' Republic of China
(PRC) and in Queretaro, Mexico. The majority of the Company's products
are manufactured in these two facilities.
Summarized financial information concerning the Company's reportable
segments is shown in the following table. Corporate related items,
results of insignificant operations and, as it relates to segment
profit (loss), income and expense not allocated to reportable segments
are included in the reconciliations to consolidated results.
Segment information for the three month periods ended March 31, are as
follows: (In Thousands)
<TABLE>
<CAPTION>
CONSUMER PRODUCTS CONSUMER
NORTH PRODUCTS
AMERICA INTERNATIONAL MANUFACTURING TOTAL
------- ------------- ------------- -----
<S> <C> <C> <C> <C>
2000:
Net Sales...................... $ 108,534 $ 20,414 $ 93,613 $ 222,561
Intersegment net sales......... 1,625 -- 80,374 81,999
Operating earnings (loss) ..... (10,125) 510 9,968 353
1999:
Net Sales...................... 89,604 14,901 48,374 152,879
Intersegment net sales......... -- -- 36,891 36,891
Operating earnings (loss) ..... (11,194) 602 5,770 (4,822)
Reconciliation to consolidated amounts:
2000 1999
---- ----
REVENUES:
Total revenues for reportable segments............................ $ 222,561 $ 152,879
Other revenues.................................................... 6,129 2,865
Eliminations of intersegment revenues............................. (81,999) (36,891)
------------- --------------
Total consolidated revenues.................................. $ 146,691 $ 118,853
============= ==============
Operating earnings:
Total earnings for reportable segments....................... $ 353 $ (4,822)
Other earnings .............................................. 1,894 2,941
Interest expense............................................. (6,280) (6,205)
Equity in net earnings (loss) of joint ventures.............. -- (519)
------------- --------------
Consolidated earnings before income taxes.................... $ (4,033) $ (8,605)
============= ==============
</TABLE>
9
<PAGE> 10
5. CONDENSED CONSOLIDATING FINANCIAL INFORMATION
The following condensed consolidating financial information presents
the results of operations, financial position and cash flows of the
Company (on a stand alone basis), the guarantor subsidiaries of the
Company's Senior Subordinated Notes ("Notes") (on a combined basis),
the non-guarantor subsidiaries (on a combined basis) and the
eliminations necessary to arrive at the consolidated results of the
Company. The results of operations and cash flows presented below
assume as if the guarantor subsidiaries were in place for all periods
presented. The Company and 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 the Company and have fully and
unconditionally guaranteed the Notes on a joint and several basis. The
guarantors include the following: Windmere Corporation, Windmere
Holdings Corporation, Windmere Holdings Corporation II, Fortune
Products, Inc., Bay Books & Tapes, Inc., HP Delaware, Inc., HP
Americas, Inc., HPG LLC, HP Intellectual Corp. and WD Delaware, Inc.
The Notes contain certain covenants which, among other things, will
restrict the ability of the Subsidiary Guarantors to make distributions
to the Company. The Company has not presented separate financial
statements and other disclosures concerning the guarantors and
non-guarantor subsidiaries because it has determined they would not be
material to investors.
10
<PAGE> 11
THREE MONTHS ENDED MARCH 31, 2000
(IN THOUSANDS)
<TABLE>
<CAPTION>
APPLICA NON
INCORPORATED GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
------------ ---------- ----------------------- ------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
Net Sales ..................................... -- 112,683 116,007 (81,999) 146,691
Cost of goods sold ............................ -- 86,701 97,575 (81,999) 102,277
-------- -------- -------- -------- --------
Gross Profit .................................. -- 25,982 18,432 -- 44,414
Operating Expenses ............................ (1,272) 36,509 7,270 90 42,597
-------- -------- -------- -------- --------
Operating Profit (loss) ....................... 1,272 (10,527) 11,162 (90) 1,817
Other (income) expense, net ................... 6,348 (470) (28) -- 5,850
-------- -------- -------- -------- --------
Earnings (loss) before income taxes and
equity in earnings (loss) of joint
ventures ................................. (5,076) (10,057) 11,190 (90) (4,033)
Provision (benefit) for income taxes .......... -- 43 2,107 (3,155) (1,005)
Equity in net earnings (loss)
of joint ventures ........................ -- -- -- -- --
-------- -------- -------- -------- --------
Net earnings (loss) ........................... (5,076) (10,100) 9,083 3,065 (3,028)
======== ======== ======== ======== ========
BALANCE SHEET
Cash .......................................... 7 (3,460) 13,057 -- 9,604
Accounts and other receivables ................ -- 110,790 51,141 -- 161,931
Receivables from affiliates ................... (673) (39,941) 44,052 2 3,440
Inventories ................................... -- 118,227 64,278 (1,850) 180,655
Other current assets .......................... -- 17,936 13,313 (5,502) 25,747
-------- -------- -------- -------- --------
Total current assets ..................... (666) 203,552 185,841 (7,350) 381,377
Investments in joint ventures ................. 426,067 113,052 70,543 (607,320) 2,342
Property, plant and equipment, net ............ -- 16,311 64,873 -- 81,184
Other assets .................................. -- 399,148 11,177 (169,652) 240,673
-------- -------- -------- -------- --------
Total assets ............................. 425,401 732,063 332,434 (784,322) 705,576
======== ======== ======== ======== ========
LIABILITIES:
Notes payable ................................. -- -- 1,716 -- 1,716
Accounts payable and accrued expenses ......... -- 22,173 56,495 -- 78,668
Current maturities of long term debt .......... 15,342 -- -- -- 15,342
Deferred income, current portion .............. -- 585 -- -- 585
Income taxes payable .......................... -- 1,034 6,293 (6,312) 1,015
-------- -------- -------- -------- --------
Total current liabilities ................ 15,342 23,792 64,504 (6,312) 97,326
Long term debt ................................ 266,338 163,572 9,350 (172,922) 266,338
Deferred income, less current portion ......... -- 227 -- -- 227
Deferred income taxes ......................... -- 16,253 2,847 (19,100) --
-------- -------- -------- -------- --------
Total liabilities ........................ 281,680 203,844 76,701 (198,334) 363,891
Shareholders' equity ..................... 143,721 528,219 255,733 (585,988) 341,685
-------- -------- -------- -------- --------
Total liabilities and shareholders' equity 425,401 732,063 332,434 (784,322) 705,576
======== ======== ======== ======== ========
Cash Flow Information
Net cash provided by (used in) operating
activities ............................... (5,077) (927,718) 20,785 890,540 (21,470)
Net cash provided by (used in) investing
activities ............................... (20,918) 983,020 (17,231) (954,221) (9,350)
Net cash provided by (used in) financing
activities ............................... 25,998 (62,701) (162) 63,681 26,816
Effect of exchange rate ....................... -- -- (160) -- (160)
Cash at beginning ............................. 4 3,939 9,825 -- 13,768
Cash at end ................................... 7 (3,460) 13,057 -- 9,604
</TABLE>
11
<PAGE> 12
THREE MONTHS ENDED MARCH 31, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
APPLICA NON
INCORPORATED GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
------------ ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
Net Sales ..................................... -- 91,517 50,854 (23,518) 118,853
Cost of goods sold ............................ -- 65,563 40,163 (23,831) 81,895
-------- -------- -------- -------- --------
Gross Profit .................................. -- 25,954 10,691 313 36,958
Operating Expenses ............................ (176) 33,114 6,100 90 39,128
-------- -------- -------- -------- --------
Operating Profit (loss) ....................... 176 (7,160) 4,591 223 (2,170)
Other (income) expense, net ................... 5,986 248 (318) -- 5,916
-------- -------- -------- -------- --------
Earnings (loss) before income taxes and
equity in earnings (loss) of joint
ventures ................................. (5,810) (7,408) 4,909 223 (8,086)
Provision (benefit) for income taxes .......... -- 1,692 60 (3,828) (2,076)
Equity in net earnings (loss)
of joint ventures ........................ 393 (912) -- -- (519)
-------- -------- -------- -------- --------
Net earnings (loss) ........................... (5,417) (10,012) 4,849 4,051 (6,529)
======== ======== ======== ======== ========
BALANCE SHEET
Cash .......................................... 10 (1,100) 14,884 -- 13,794
Accounts and other receivables ................ -- 75,919 47,005 4,180 127,104
Receivables from affiliates ................... 1,744 4,207 1,357 (3,038) 4,270
Inventories ................................... -- 89,570 63,754 1,949 155,273
Other current assets .......................... -- 25,914 4,596 17,830 48,340
-------- -------- -------- -------- --------
Total current assets ..................... 1,754 194,510 131,596 20,921 348,781
Investments in joint ventures ................. 426,306 22,252 70,500 (503,876) 15,182
Property, plant and equipment, net ............ -- 12,587 63,835 -- 76,422
Other assets .................................. -- 601,226 20,280 (371,886) 249,620
-------- -------- -------- -------- --------
Total assets ............................. 428,060 830,575 286,211 (854,841) 690,005
======== ======== ======== ======== ========
LIABILITIES:
Accounts payable and accrued expenses ......... 3 74,393 36,872 (17,077) 94,191
Current maturities of long term debt .......... 7,842 -- -- -- 7,842
Deferred income, current portion .............. -- 637 -- -- 637
Income taxes payable .......................... -- 394 900 (1,294) --
-------- -------- -------- -------- --------
Total current liabilities ................ 7,845 75,424 37,772 (18,371) 102,670
Long term debt ................................ 256,280 370,918 -- (370,918) 256,280
Deferred income, less current portion ......... -- 17,943 -- (16,479) 1,464
Deferred income taxes ......................... -- 16,253 2,984 (7,106) 12,131
-------- -------- -------- -------- --------
Total liabilities ........................ 264,125 480,538 40,756 (412,874) 372,545
Shareholders' equity ..................... 163,935 350,037 245,455 (441,967) 317,460
-------- -------- -------- -------- --------
Total liabilities and shareholders' equity 428,060 830,575 286,211 (854,841) 690,005
======== ======== ======== ======== ========
Cash Flow Information
Net cash provided by (used in) operating
activities ............................... (5,414) 116,007 (43,382) (53,498) 13,713
Net cash provided by (used in) investing
activities ............................... 10,279 (20,548) 5,305 1,537 (3,427)
Net cash provided by (used in) financing
activities ............................... (4,855) (99,642) 35,681 51,961 (16,855)
Effect of exchange rate ....................... -- -- (52) -- (52)
Cash at beginning ............................. -- 3,083 17,332 -- 20,415
Cash at end ................................... 10 (1,100) 14,884 -- 13,794
</TABLE>
12
<PAGE> 13
6. SUBSEQUENT EVENTS
On May 9, 2000, the shareholders of the Company voted to change the
name of the Company to Applica Incorporated. The name change was effective on
May 10, 2000. In addition, the shareholders voted to approve the Second Amended
and Restated Articles of Incorporation of the Company, which increases the
authorized number of shares of Common Stock from 40,000,000 to 75,000,000 and
eliminates the Company's Special Preferred Stock. The Special Preferred Stock
and the applicable Special Preferred Rights Plan (the "Rights Plan") were
adopted by the Company's shareholders at the 1986 Annual Meeting of
Shareholders. The Rights Plan was intended to preserve for the Company and its
shareholders the benefits of any recovery in the Company's lawsuit with North
American Philips Corporation, U.S. Philips Corporation and N.V. Philips by
preventing those benefits from being obtained by Philips or any other party that
might attempt to appropriate the value of any ultimate recovery from the lawsuit
by acquiring shares of the Company's common stock at a price not fully
reflective of such recovery. During 1992, the Company received $57 million from
Philips in settlement of the lawsuit. Pursuant to the Rights Plan, the right to
purchase shares of Special Preferred Stock expired on the last day of the end of
the seven-year period following the entry of non-appealable court order
favorable to the Company, which was in May 1992.
13
<PAGE> 14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
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," "the Company 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.
Should one or more of these risks, uncertainties or other factors materialize,
or should underlying assumptions prove incorrect, actual results, performance,
or achievements of the Company 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 the Company or persons acting on its behalf are expressly
qualified in their entirety by the cautionary statements in this paragraph. The
Company 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.
The Company, through its subsidiaries, is a leading diversified manufacturer and
distributor of a broad range of branded and private label small household
appliances, including electric housewares (kitchen and garment care), personal
care, and other products. The Company manufactures and markets products under
licensed brand names, such as Black & Decker(R) and White-Westinghouse(R), under
the Windmere(R) and other Company-owned brand names and under private-label
brand names. The Company's customers for such products include mass
merchandisers, specialty retailers and appliance distributors primarily in North
America, Latin America and the Caribbean. In addition, the Company manufactures
products on an OEM basis for other major consumer products companies. The
Company also manufactures and markets the LitterMaid(R) self-cleaning cat litter
box.
RESULTS OF OPERATIONS
The operating results of the Company expressed as a percentage of sales and
other revenues are set forth below:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
2000 1999
---- ----
<S> <C> <C>
Net Sales ......................................................... 100.0% 100.0%
Cost of goods sold..................................................... 69.7 68.9
----------- -----------
Gross Profit ......................................................... 30.3 31.1
Selling, general and administrative expenses........................... 29.1 32.9
Other (income) expense - net........................................... 4.0 5.0
Equity in net earnings (loss) of joint ventures........................ -- (.4)
----------- -----------
Earnings (loss) before income taxes.................................... (2.8) (7.2)
Provision (benefit) for income taxes................................... (.7) (1.7)
----------- -----------
Net earnings (loss).................................................... (2.1)% (5.5)%
=========== ===========
</TABLE>
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED MARCH 31, 1999
SALES AND OTHER REVENUES
Sales and other revenues ("Revenues") for the Company increased by $27.8 million
to $146.7 million, an increase of 23.4% over Revenues for the first quarter of
1999. Sales to Walmart accounted for 20% and 18% of total sales for the 2000 and
1999 periods, respectively.
The change is primarily the result of a $19.4 million increase in sales of Black
& Decker and Windmere branded kitchen products. An increase of $3.8 million in
sales of White-Westinghouse electronics as well as a $1.7 million increase in
Durable OEM sales also contributed to the overall increase.
14
<PAGE> 15
GROSS PROFIT MARGIN
Gross profit increased by $7.5 million yet decreased slightly as a percentage of
sales to 30.3% of revenues in 2000 from 31.1% in the 1999 period. The decrease
is attributed to a change in the Company's overall product mix, as well as
pricing changes that did not become effective until the third quarter of 1999.
Included in 2000 results were increases in lower margin Windmere branded kitchen
product, White-Westinghouse electronic and OEM sales.
Changes in product mix and pricing were substantiallly offset by productivity
gains at the Company's manufacturing facilities.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for the Company increased by $3.5
million in the first quarter of 2000 yet decreased as a percentage of sales, to
29.1% from 32.9% in the 1999 period. The dollar increase consists of
approximately $1.4 million in volume related selling and promotional expenses,
$600,000 in amortization expense related to the June 1999 Newtech asset purchase
and $1.5 million in warehousing and distribution expenses.
EQUITY IN NET EARNINGS OF JOINT VENTURES
In June 1999, the Company wrote down its remaining investment in Newtech and,
therefore, discontinued recording its interest in the joint ventures operations.
TAXES
The Company's tax expense is based on the earnings of each of its foreign and
domestic operations and it includes such additional U.S. taxes as are applicable
to any repatriation of foreign earnings. Foreign earnings, other than in Canada,
Mexico and certain other countries in Latin America, are generally taxed at
rates lower than in the United States.
EARNINGS PER SHARE
Basic shares for the three month periods ended March 31, 2000 and 1999 were
22,719,389 and 22,090,966, respectively. All common stock equivalents have been
excluded from the per share calculations as the Company incurred net losses in
both periods and their inclusion would have been anti-dilutive.
CONSUMER PRODUCTS NORTH AMERICA ("NORTH AMERICA")
North America sales increased by $18.9 million to $108.5 million in the first
quarter of 2000. A $16.7 million increase in Black & Decker and Windmere branded
kitchen electrics and home environment products contributed significantly to the
growth in segment sales.
Gross profit margin for the segment decreased to 22.0% in the 2000 period as
compared to 25.0% in 1999. The decrease is the result of increased sales of
lower margin items comprising the period's product mix.
Selling, general and administrative expenses decreased by $347,000 in the 2000
period to $34.0 million, and decreased as a percentage of sales to 31.3% from
37.5% in 1999.
15
<PAGE> 16
CONSUMER PRODUCTS INTERNATIONAL ("INTERNATIONAL")
Sales for the International segment increased by $5.5 million to $20.4 million
or 37.0% from the 1999 period. The increase may be attributed to growth in sales
of existing products as well as the introduction of new products, under both the
Black & Decker and Windmere brand names.
The gross profit margin for the International segment increased to 34.9% in 2000
from 33.7% of sales in 1999.
Selling, general and administrative expenses for the International segment
increased by approximately $2.2 million in the 2000 first quarter to $6.6
million. Volume related sales and promotional expenses as well as various other
country-specific operating costs comprised most of the increase. Selling,
general and administrative expenses represented 32.4% and 29.7% of segment sales
in the 2000 and 1999 periods, respectively.
MANUFACTURING
Sales at the Company's Manufacturing subsidiaries increased by $45.2 million to
$93.6 million in the 2000 period as compared to 1999, primarily as a result of
increased Company-wide sales. Included in total sales are OEM sales totaling
$13.2 million, a $1.7 million or 14.8% increase over the 1999 period.
Operating earnings for the Manufacturing segment increased by $4.2 million to
$10.0 million in the 2000 period. Operating results benefited from the increased
volume.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2000, the Company's working capital was $284.1 million, as compared
to $246.1 million at March 31, 1999. At March 31, 2000 and 1999, the Company's
current ratio was 3.9 to 1 and 3.4 to 1, respectively, and its quick ratio was
2.0 to 1 and 1.7 to 1, respectively. The change in ratios is primarily the
result of the use of the Company's increased cash flow and long-term credit
facilities to meet short-term working capital requirements.
Cash balances decreased by $4.2 million for the three month period ended March
31, 2000. The net cash used in operating activities reflects cash used to begin
building inventories, which are higher than last period, for future periods and
to meet other working capital needs.
Cash used in investing activities totaled approximately $9.4 million for the
period and consists of capital expenditures at the Company's manufacturing
facilities.
Funds provided by financing activities totaled approximately $26.8 million in
the period reflecting increased borrowings used to meet working capital
requirements.
No provision for U.S. taxes has been made on undistributed earnings of the
Company's foreign subsidiaries and joint ventures because management plans to
reinvest such earnings in their respective operations or in other foreign
operations. Repatriating those earnings or using them in some other manner which
would give rise to a U.S. tax liability would reduce after tax earnings and
available working capital.
Certain of the Company's foreign subsidiaries have approximately $33.0 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 Company
guarantee. Outstanding borrowings by the Company's Hong Kong subsidiaries are
primarily in U.S. dollars.
The Company's primary sources of liquidity are its cash flow from operations and
borrowings under the Senior Secured Credit Facilities. The Company is currently
borrowing $125.3 million under the term loan portion of its Senior Secured
Credit Facilities. The Senior Secured Revolving Credit Facility as amended,
provides for borrowings by the Company of up to $160.0 million. As of May 10,
2000, the Company is borrowing $44.3 million under the Senior Secured Revolving
Credit Facility and has approximately $84.1 million available for future
16
<PAGE> 17
borrowings, under all its credit facilities. Advances under the Senior Secured
Revolving Credit Facility are based upon percentages of outstanding eligible
accounts receivable and inventories.
The Company's aggregate capital expenditures for the three months ended March
31, 2000 were $9.7 million. The Company anticipates that the total capital
expenditures for 2000 will be approximately $25.0 million, which includes the
cost of new tooling. The Company plans to fund those capital expenditures from
cash flow from operations and, if necessary, borrowings under the Senior Secured
Revolving Credit Facility.
At March 31, 2000, debt as a percent of total capitalization was 45.3 percent.
The Company'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 research and 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 the Company's 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 Credit and other facilities, will be adequate to
meet the Company's future liquidity needs for at least the next several years.
The Company may, however, need to refinance all or a portion of the principal of
the indebtedness on or prior to maturity. There can be no assurance that the
Company'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 the Company to service its indebtedness,
including the Senior Subordinated Notes, or to fund its other liquidity needs.
In addition, there can be no assurance that the Company will be able to effect
any such refinancing on commercially reasonable terms or at all.
CURRENCY MATTERS
While the Company transacts business predominantly in U.S. dollars and most of
its revenues are collected in U.S. dollars, a portion of the Company's costs,
such as payroll, rent and indirect operations costs, are denominated in other
currencies, such as Chinese renminbi, Hong Kong dollars and Mexican pesos.
Changes in the relation of these and other currencies to the U.S. dollar will
affect the Company's cost of goods sold and operating margins and could result
in exchange losses. The impact of future exchange rate fluctuations on the
Company's results of operations cannot be accurately predicted.
The Company uses forward exchange contracts to reduce fluctuations in foreign
currency cash flows related to third party raw material and other operating
purchases as well as trade receivables. The purpose of the Company's foreign
currency management activity is to reduce the risk that eventual cash flows from
foreign currency denominated transactions may be adversely affected by changes
in exchange rates.
Durable uses the Hong Kong dollar as its functional currency. The Hong Kong
dollar has historically been "pegged" to a fixed exchange rate vis-a-vis the
U.S. dollar. If the Hong Kong dollar were to be significantly devalued against
the U.S. dollar and the exchange rate allowed to fluctuate, the Company could
experience significant changes in its currency translation account which would
impact the Company's future comprehensive income. The Company has acquired the
Queretaro property and related assets from The Black & Decker Corporation.
Because the operations of such facilities are primarily peso-denominated and the
revenues derived from products manufactured at such facilities are primarily
dollar-denominated, the Company is now subject to fluctuations in the value of
the peso. The December 1994 devaluation of the peso had a number of effects on
the Mexican economy that adversely affected the financial condition of
businesses in Mexico. The devaluation caused the peso value of dollar
denominated indebtedness associated with businesses in Mexico to increase
significantly, and also greatly increased the rate of inflation, resulting in a
sharp rise in nominal interest rates on peso-denominated financing. There can be
no assurance that the peso to dollar foreign exchange rate will not be volatile
in the future and that financial markets will not have a material adverse effect
on the Company's business, financial condition and results of operations.
17
<PAGE> 18
The Company uses interest rate swaps of one to four years in duration to reduce
the impact of changes in interest rates on its floating rate debt. 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.
In February 2000, the Company exited contracts with a notional value of
$60,000,000 and received a payment of $248,300 which was recorded as an
adjustment to interest expense.
As of March 31, 2000, the Company had purchased interest rate swaps on $80
million notional principal amount with a market value of approximately
($1,840,000). The market value represents the amount the Company would have to
pay to exit the contracts at March 31, 2000. The Company does not intend to exit
such contracts at this time.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued Statement of Financial Accounting Standards (FAS)
No. 133, "Accounting for Derivative Instruments and Hedging Activities." FAS No.
133 establishes standards for accounting and reporting for derivative
instruments, and conforms the requirements for treatment of different types of
hedging activities. This statement is effective for all fiscal years beginning
after June 15, 2000. The Company has not completed its evaluations of FAS No.
133.
SEASONALITY
The Company's business is highly seasonal, with operating results varying from
quarter to quarter. The Company has historically experienced higher revenues in
the third and fourth quarters of each fiscal year primarily due to increased
demand by customers for products in the late summer for "back-to-school" sales
and in the fall for holiday sales. As a result of the HPG acquisition, the
fourth quarter has now become the Company's largest quarter. The Company's major
sales occur during August through November. Sales are generally made on 45 to 90
day terms. Heaviest collections on its open accounts receivable are received
from November through March, at which time the Company is in its most liquid
state.
YEAR 2000 ISSUES
The Company uses a significant number of computer software programs and
operating systems across its entire organization, including applications used in
financial business systems, manufacturing and administrative functions. A
complete evaluation was performed to identify whether any of the Company's
software applications contain source code that is unable to interpret the year
2000 and beyond. The appropriate modifications were made and, to date, the
Company has not experienced any immediate adverse impact on its operations from
the transition to the Year 2000. The Company also received communications from
its major suppliers and trading partners, some of who have filed reports with
the Securities and Exchange Commission, and believes that they are also Year
2000 compliant. The cost of implementing required system changes was not
material to the Company's consolidated financial statements. No assurance can be
given, however, that all of the Company's systems, the systems of acquired
businesses and those of significant customers and suppliers will not experience
Year 2000 compliance difficulties which are not yet apparent or in a manner that
may arise in the future. Difficulties that arise may result in unfavorable
business consequences including disruption in product shipments, delays in
receipt of materials, delay in customer receipts and payments to suppliers.
LEGAL PROCEEDINGS
The Company 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, HARRY
D. SCHULMAN AND NATIONSBANC MONTGOMERY SECURITIES LLC, 98-2273-CIV-LENARD which
was filed in the United States District Court, Southern District of Florida on
October 8, 1998.
18
<PAGE> 19
This matter is a class action complaint, which is the consolidation of eight
separate class action complaints with substantially similar allegations. On June
30, 1999, a consolidated amended class action complaint was filed. The
consolidated amended class action complaint was purportedly filed on behalf of
those security holders of the Company who purchased such securities during a
certain period in the second and third quarters of 1998, alleging violations of
the federal securities laws (including Rule 10b-5 promulgated pursuant to the
Securities Exchange Act of 1934, as amended) in connection with the acquisition
by the Company of certain product categories of the Household Products Group of
the Black & Decker Corporation. Among other things, the plaintiffs allege that
the Company and certain of its directors and officers, along with NationsBanc
Montgomery Securities LLC, provided false information in connection with a
public offering of debt and equity securities. The plaintiffs seek, among other
relief, to be declared a class, to be awarded compensatory damages, rescission
rights, unspecified damages and attorneys' fees and costs. The defendants have
moved to dismiss the consolidated class action complaint. The motion is pending
consideration by the Court.
By Order dated March 9, 1999, in addition to consolidating the above-referenced
cases, the Court provisionally certified the class of plaintiffs who purchased
Windmere stock between May 12, 1998 and September 22, 1998, and provisionally
certified Sherleigh Associates LLC and Sherleigh Associates, Inc. Profit Sharing
Plan as lead plaintiff. By Order dated June 3, 1999, the Court, among other
things, appointed lead counsel and directed the filing of a joint scheduling
order. On June 23, 1999, the parties submitted a Joint Scheduling Report and a
proposed scheduling order, which is still under consideration by the Court.
The Company is currently advancing the legal expenses of the directors and
officers who were named as defendants. Such defendants have agreed to repay the
Company for all or any portion of such advances to which they are ultimately
found not to be entitled pursuant to applicable law. Based on the information
currently available to the Company, management does not believe that the
indemnification of the officers and directors named as defendants in the
above-listed matters will have a material adverse effect on the financial
condition, results of operations or liquidity of the Company. However, the
actual effects of such indemnification on the Company cannot be finally
determined until the amount of such indemnification, if any, is fixed.
The Company is subject to other legal proceedings and claims which arise in the
ordinary course of its business. In the opinion of management, the amount of
ultimate liability, if any, in excess of applicable insurance coverage, is not
likely to have a material effect on the financial position of the Company.
However, as the outcome of litigation or other claims is difficult to predict,
significant changes in the estimated exposures could occur.
MANUFACTURING OPERATIONS
The Company's products are manufactured primarily at the Company's facilities in
the PRC and Mexico. The Company has ceased manufacturing at the Asheboro
facility as of March 31, 1999 and completely exited the facility as of June 30,
1999. Prior to the HPG acquisition, the majority of the Company's products were
manufactured by Durable, its wholly-owned Hong Kong subsidiary operating in Bao
An County, Guangdong Province of the People's Republic of China, which is
approximately 60 miles northwest of Central, Hong Kong. The Company has a
significant amount of its assets in the People's Republic, primarily consisting
of inventory, equipment and molds. The supply and cost of products, as well as
finished products, can be adversely affected, among other reasons, by changes in
foreign currency exchange rates, increased import duties, imposition of tariffs,
imposition of import quotas, interruptions in sea or air transportation and
political or economic changes. From time to time, the Company explores
opportunities to diversify its sourcing and/or production of certain products to
other low-cost locations or with other third parties or joint venture partners
in order to reduce its dependence on production in the People's Republic and/or
reduce Durable's dependence on the Company's existing distribution base.
However, at the present time, the Company intends to continue its production in
the People's Republic and Mexico.
The Mexican government exercises significant influence over many aspects of the
Mexican economy. Accordingly, the actions of the Mexican government concerning
the economy could have a significant effect on private sector entities in
general and the Company in particular. In addition, during the 1980s and 1990s,
19
<PAGE> 20
Mexico experienced periods of slow or negative growth, high inflation,
significant devaluations of the peso and limited availability of foreign
exchange. As a result of the Company's reliance upon manufacturing facilities in
Mexico, economic conditions in Mexico could adversely affect the Company's
business, financial condition and results of operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's major market risk exposure is to changing interest rates, debt
obligations issued at a fixed rate and fluctuations in the currency exchange
rates. The Company'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 accrue interest at variable rates; however, the
company has purchased interest rate protection for such loans in the form of
interest rate swaps. Based on the current amount of variable rate, as well as
underlying swaps, the exposure to interest rate risk is not material. Fixed-rate
debt obligations issued by the Company are not callable until July 31, 2003.
The Company is subject to foreign currency exchange rate risk relating to
receipts from customers and payments to suppliers in foreign currencies. As a
general policy, the Company hedges foreign currency commitments of future
payments and receipts by purchasing foreign currency-forward and option
contracts. As of March 31, 2000, the notional value of such derivatives was
approximately $11,000,000 million, with no significant unrealized gain or loss.
The majority of the Company's receipts and expenditures are contracted in U.S.
dollars, and the Company does not consider the market risk exposure relating to
currency exchange to be material at this time.
20
<PAGE> 21
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See "Legal Proceedings" in Part I, Item 2 of this report.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
None
(b) Reports on Form 8-K:
None
21
<PAGE> 22
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)
May 15, 2000 By: /s/ HARRY D. SCHULMAN
--------------------------------
Harry D. Schulman
CHIEF OPERATING OFFICER AND CHIEF
FINANCIAL OFFICER
(Duly authorized to sign on
behalf of the Registrant)
May 15, 2000 By: /s/ TERRY L. POLISTINA
--------------------------------
Terry L. Polistina
SENIOR VICE PRESIDENT - FINANCE
(Duly authorized to sign on
behalf of the Registrant)
22
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<S> <C>
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<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 9,604
<SECURITIES> 0
<RECEIVABLES> 170,682
<ALLOWANCES> 8,751
<INVENTORY> 180,655
<CURRENT-ASSETS> 381,377
<PP&E> 153,097
<DEPRECIATION> 71,913
<TOTAL-ASSETS> 705,576
<CURRENT-LIABILITIES> 97,326
<BONDS> 130,000
0
0
<COMMON> 2,292
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<TOTAL-LIABILITY-AND-EQUITY> 705,576
<SALES> 146,691
<TOTAL-REVENUES> 146,691
<CGS> 102,277
<TOTAL-COSTS> 42,597
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 415
<INTEREST-EXPENSE> 6,280
<INCOME-PRETAX> (4,033)
<INCOME-TAX> (1,005)
<INCOME-CONTINUING> (3,028)
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<NET-INCOME> (3,028)
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