10-Q

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, 2003
OR
o	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 Incorporation or Organization)	(I.R.S. Employer 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   o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).    Yes   x    No   o

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 April 30, 2003
Common Stock, $0.10 par value	23,500,555

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
	Item 1. Financial Statements
		CONSOLIDATED BALANCE SHEETS
		CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
		CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
		Notes to Consolidated Financial Statements
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 3. Quantitative and Qualitative Disclosures About Market Risk
	Item 4. Controls and Procedures.
PART II. OTHER INFORMATION
	Item 1. Legal Proceedings
	Item 6. Exhibits and Reports on Form 8-K.
SIGNATURES
CERTIFICATION
CERTIFICATION
EX-3.1 Amended and Restated Bylaws
EX-99.1 Certification of Chief Executive Officer
EX-99.2 Certification of Chief Financial Officer

APPLICA INCORPORATED

INDEX

			Page
PART I. FINANCIAL INFORMATION				3
	Item 1. Financial Statements			3
		Consolidated Balance Sheets as of March 31, 2003 and December 31, 2002		3
		Consolidated Statements of Earnings for the Three Months Ended March 31, 2003 and 2002		4
		Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2003 and 2002		5
		Notes to Consolidated Financial Statements		6
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			14
	Item 3. Quantitative and Qualitative Disclosures About Market Risk			20
	Item 4. Controls and Procedures			21
PART II. OTHER INFORMATION				22
	Item 1. Legal Proceedings			22
	Item 6. Exhibits and Reports on Form 8-K			22

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Applica Incorporated and Subsidiaries

CONSOLIDATED BALANCE SHEETS

				March 31, 2003			December 31,
				(Unaudited)			2002
				(In thousands)
		Assets
Current Assets:
	Cash and cash equivalents			$	6,146		$	7,683
	Accounts and other receivables, less allowances of $16,243 in 2003 and $15,830 in 2002				103,023			146,567
	Receivables from affiliates				1,993			2,060
	Inventories				117,308			111,453
	Prepaid expenses and other				10,552			11,862
	Refundable income taxes				7,154			1,663
	Future income tax benefits				14,654			18,654
			Total current assets		260,830			299,942
Investment in Joint Venture					38,749			1,249
Property, Plant and Equipment - at cost, less accumulated depreciation of $115,169 in 2003 and $109,949 in 2002					78,571			76,963
Future Income Tax Benefits, Non-Current					42,024			54,378
Goodwill					62,812			62,812
Other Intangibles					18,621			20,860
Other Assets					4,748			5,461
		Total Assets		$	506,355		$	521,665
		Liabilities and Shareholders’ Equity
Current Liabilities:
	Accounts payable			$	34,070		$	31,446
	Accrued expenses				52,624			74,686
	Current maturities of long-term debt				144			144
	Current taxes payable				2,820			518
	Deferred rent				354			372
			Total current liabilities		90,012			107,166
Other Long-Term Liabilities					1,649			1,533
Long-Term Debt, Less Current Maturities					176,209			193,838
Shareholders’ Equity:
	Common stock – authorized:75,000 shares of $.10 par value; issued and outstanding: 23,501 shares in 2003 and 23,497 shares in 2002				2,350			2,350
	Paid-in capital				155,417			155,395
	Retained earnings				90,872			71,251
	Notes receivable – officer				(1,496	)		(1,496	)
	Accumulated other comprehensive earnings (loss)				(8,658	)		(8,372	)
		Total shareholders’ equity			238,485			219,128
		Total liabilities and shareholders’ equity		$	506,355		$	521,665

The accompanying notes are an integral part of these financial statements.

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Applica Incorporated and Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

				Three Months Ended March 31,
				2003					2002
				(In thousands, except per share data)
Net sales				$	121,239		100.0	%	$	143,058		100.0	%
Cost of goods sold					83,110		68.6			101,668		71.1
			Gross profit		38,129		31.4			41,390		28.9
Selling, general and administrative expenses:
		Operating expenses			39,444		32.5			42,318		29.6
		Repositioning charge			—		—			362		0.2
			Operating earnings (loss)		(1,315	)	(1.1	)		(1,290	)	(0.9	)
Other expense (income):
		Interest expense			3,887		3.2			3,815		2.7
		Interest and other income			(404	)	(0.3	)		(340	)	(0.2	)
					3,483		2.9			3,475		2.5
		Earnings (loss) before equity in net earnings (loss) of joint venture and income taxes			(4,798	)	(4.0	)		(4,765	)	(3.4	)
		Equity in net earnings (loss) of joint venture			37,500		30.9			(96	)	(0.0	)
		Earnings (loss) before income taxes			32,702		26.9			(4,861	)	(3.4	)
		Income tax expense (benefit)			13,081		10.7			(1,680	)	(1.2	)
		Earnings (loss) before cumulative effect of change in accounting principle			19,621		16.2			(3,181	)	(2.2	)
		Cumulative effect of change in accounting principle, net of tax benefit of $0 and $42,447 in 2003 and 2002			—		—			(78,829	)	(55.1	)
			Net earnings (loss)	$	19,621		16.2	%	$	(82,010	)	(57.3	)%
Earnings (loss) per common share — basic:
		Earnings (loss) before cumulative effect of change in accounting principle		$	0.84				$	(0.14	)
	Cumulative effect of change in accounting principle				—					(3.37	)
		Earnings (loss) per common share — basic		$	0.84				$	(3.51	)
Earnings (loss) per common share — diluted:
		Earnings (loss) before cumulative effect of change in accounting principle		$	0.83				$	(0.14	)
	Cumulative effect of change in accounting principle				—					(3.37	)
		Earnings (loss) per common share — diluted		$	0.83				$	(3.51	)

The accompanying notes are an integral part of these financial statements.

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Applica Incorporated and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

					Three Months Ended
					March 31,
					2003			2002
					(In thousands)
Cash flows from operating activities:
	Net earnings (loss)				$	19,621		$	(82,010	)
	Reconciliation to net cash provided by (used in) operating activities:
		Depreciation of property, plant and equipment				4,689			4,831
		Provision for doubtful accounts				898			590
		Amortization of intangible assets				2,426			2,287
		Cumulative effect of change in accounting principle, net of tax				—			78,829
		Deferred income taxes				16,354			(3,906	)
		Other non-cash changes in equity items				10			26
		Equity in net (earnings) loss of joint venture				(37,500	)		96
		Changes in assets and liabilities:
			Accounts and other receivables			42,646			36,311
			Inventories			(6,538	)		(4,459	)
			Prepaid expenses and other			1,310			(4,446	)
			Other assets			240			(1,909	)
			Accounts payable and accrued expenses			(19,438	)		(10,030	)
			Current income taxes			(3,189	)		(2,658	)
			Other liabilities			98			3,484
				Net cash provided by (used in) operating activities		21,627			17,036
Cash flows from investing activities:
	Additions to property, plant and equipment					(6,297	)		(3,413	)
	Distributions from (investments in) joint ventures – net					—			(80	)
	Receivables from affiliates					77			(197	)
				Net cash (used in) provided by investing activities		(6,220	)		(3,690	)
Cash flows from financing activities:
	Notes payable					—			3,997
	Net (payments) borrowings under lines of credit					(17,629	)		(24,483	)
	Exercise of stock options and issuance of common stock under employee stock purchase plan					12			175
	Interest receivable from officer					(10	)		(16	)
				Net cash (used in) provided by financing activities		(17,627	)		(20,327	)
Effect of exchange rate changes on cash						683			1,912
Decrease in cash and cash equivalents						(1,537	)		(5,069	)
Cash and cash equivalents at beginning of period						7,683			15,743
Cash and cash equivalents at end of period					$	6,146		$	10,674
Supplemental Disclosures of Cash Flow Information:
Cash paid during the three-month period ended March 31:
	Interest				$	6,797		$	7,291
	Income taxes				$	—		$	4,884

The accompanying notes are an integral part of these financial statements.

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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 March 31, 2003 are not necessarily indicative of the results that may be expected for the remaining quarters or the year ending December 31, 2003 due to seasonal fluctuations in Applica’s business, changes in economic conditions and other factors. For further information, please refer to the Consolidated Financial Statements and Notes thereto contained in Applica’s Annual Report on Form 10-K for the year ended December 31, 2002.

Reclassifications

     Certain prior period amounts have been reclassified for comparability.

Receivables from Affiliates

     Receivables from affiliates include the current portion of receivables due from certain senior 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 senior officers are unsecured.

Foreign Currency Reporting — Argentina

     Effective January 1, 2003, the functional currency of the Argentinean operation was changed from the U.S. dollar to the Argentinean peso. For 2002, the functional currency of our Argentinean operation was the U.S. dollar and, accordingly, Applica recognized a translation loss of approximately $1.7 million during 2002. However, recently the peso has stabilized and further translation gains or losses are recognized as part of other accumulated comprehensive earnings, a component of shareholders’ equity.

Inventories

     Inventories are stated at the lower of cost or market; cost is determined by the first-in, first-out method. Inventories are comprised of the following:

	March 31,		December 31,
	2003		2002
	(In thousands)
Raw materials	$	3,904	$	4,103
Work in process		1,816		1,513
Finished goods		111,588		105,837
	$	117,308	$	111,453

     Stock Based Compensation

     At March 31, 2003, the Company had four active stock based compensation plans. The Company accounts for stock-based compensation using the intrinsic value method. Accordingly, compensation cost for stock options

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issued is measured as the excess, if any, of the fair value of the Company’s common stock at the date of grant over the exercise price of the options. The Company’s net earnings (loss) and earnings (loss) per share would have been changed to the pro forma amounts indicated below had compensation cost for the stock option plans and non-qualified options issued to employees been determined based on the fair value of the options at the grant dates consistent with the method of SFAS 123.

		March 31,		March 31,
		2003		2002
		(In thousands, except per share data)
Net earnings (loss):
	As reported	$	19,621	$	(82,010	)
	Pro forma	$	19,471	$	(83,438	)
Basic earnings (loss) per share:
	As reported	$	0.84	$	(3.51	)
	Pro forma	$	0.83	$	(3.53	)
Diluted earnings (loss) per share:
	As reported	$	0.83	$	(3.51	)
	Pro forma	$	0.82	$	(3.53	)

     The above pro forma disclosures may not be representative of the effects on reported net earnings (loss) for future years as options vest over several years and the Company may continue to grant options to employees.

     In accordance with the requirements of SFAS 123, the fair value of each option grant was estimated on the date of grant using a binomial option-pricing model with the following weighted-average assumptions used for grants in 2003 and 2002, respectively: no dividend yield; expected volatility ranging from 93.3% to 96.5%; risk-free interest rates of 5.3%; and expected holding periods of four years.

     Recent Accounting Pronouncements

     In December 2002, the FASB issued Statement No. 148, “Accounting for Stock-Based Compensation-Transition and Disclosure” (“SFAS 148”). SFAS 148 amends FASB Statement No. 123, “Accounting for Stock-Based Compensation”, to provide alternative methods of transition for an entity that voluntarily changes to the fair value based method of accounting for stock-based employee compensation. Additionally, SFAS 148 requires prominent disclosures about the effects on reported net income of an entity’s accounting policy decisions with respect to stock-based employee compensation. SFAS 148 also amends APB Opinion No. 28, “Interim Financial Reporting,” to require disclosures about such effects in interim financial information. Applica currently accounts for its stock-based compensation awards to employees and directors under the accounting prescribed by Accounting Principles Board Opinion No. 25 and provides the disclosures required by SFAS No. 123. Applica currently intends to continue to account for its stock-based compensation awards to employees and directors under the accounting prescribed by Accounting Principles Board Opinion No. 25. Applica adopted the additional disclosure provisions of SFAS 148 during the first quarter of 2003.

     In December 2002, the FASB issued Interpretation 45 (FIN 45), Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. For a guarantee subject to FASB Interpretation 45, a guarantor is required to:

• measure and recognize the fair value of the guarantee at inception (for many guarantees, fair value will be determined using a present value method); and

• provide new disclosures regarding the nature of any guarantees, the maximum potential amount of future guarantee payments, the current carrying amount of the guarantee liability, and the nature of any recourse

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provisions or assets held as collateral that could be liquidated and allow the guarantor to recover all or a portion of its payments in the event guarantee payments are required.

     The disclosure requirement of this Interpretation is effective for financial statements for fiscal years ending after December 15, 2002 and did not have a material effect on Applica financial statements. The initial recognition and measurement provision are effective prospectively for guarantees issued or modified on or after January 1, 2003, which should not have a material effect on Applica’s financial statements.

2. SHAREHOLDERS’ EQUITY

Earnings Per Share

     Basic shares for the three-month periods ended March 31, 2003 and 2002 were 23,500,555 and 23,342,893, respectively. Included in diluted shares for the three-month period ended March 31, 2003 are common stock equivalents relating to options of 165,312. All common stock equivalents have been excluded from the diluted per share calculations in the three-month period ended March 31, 2002 because their inclusion would have been anti-dilutive.

3. COMMITMENTS AND CONTINGENCIES

     Toaster Recall. In February 2002, Applica Consumer Products, Inc., in cooperation with the Consumer Products Safety Commission, voluntarily recalled approximately 2.1 million Black & Decker® T1200 and T1400 toasters. Applica’s Canadian operating subsidiary, Applica Canada Corporation, also recalled approximately 180,000 of these toasters in Canada. Management charged 2001 operations with an estimated reserve of $13.4 million for these recalls and does not believe the ultimate liability will be materially different.

     Four lawsuits have been filed in connection with property damage or bodily injury relating to the recalled toasters (one of which has been settled) and several other claims have been made. We believe that the amount of ultimate liability of these claims, if any, is not likely to have a material effect on our business, financial condition, results of operations or liquidity. However, as the outcome of litigation is difficult to predict, significant changes in the estimated exposures could occur.

     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 our business, 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.

4. REPOSITIONING AND OTHER CHARGES

     Applica took a charge of $13.4 million in the fourth quarter of 2001 relating to the estimated expenses of the toaster recall discussed in Note 3 above. As of March 31, 2003, $8.8 million had been charged against the accrual. For the three months ended March 31, 2003, the activity in the accrued repositioning and other charges was as follows:

	Amount Accrued at				Amount Accrued at
Activity	Dec. 31, 2002		Charges		March 31, 2003
			(In thousands)
Recall	$	4,763	$	159	$	4,604
Back-office consolidation		5,956		756		5,200
Shareholder litigation settlement		450		450		0
	$	11,169	$	1,365	$	9,804

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     For the three months ended March 31, 2002, the activity in the accrued repositioning and other charges was as follows:

	Amount Accrued at				Amount Accrued at
Activity	Dec. 31, 2001		Amount Paid		March 31, 2002
			(In thousands)
Recall	$	13,418	$	3,952	$	9,466
Back-office consolidation		5,179		100		5,079
Shareholder litigation settlement		1,000		550		450
	$	19,597	$	4,602	$	14,995

5. INVESTMENT IN JOINT VENTURE

     At December 31, 2002, Applica’s investment in Anasazi Partners L.P. totaled $1.2 million with no loans outstanding. Anasazi’s investments include certain privately traded securities whose values have been estimated by the general partner in the absence of readily ascertainable market values. Fair value of these securities may differ significantly from the values that would have been used had a ready market for the securities existed. Any change from the estimated values could have a significant impact on the Company’s operations.

     In the fourth quarter of 2002, Anasazi engaged an investment banker to pursue strategic exit strategies for one if its investments. As part of this process, a valuation of the investment was performed. Based on this valuation, Anasazi increased the fair value of the investment by approximately $75.0 million, resulting in equity in net earnings of unconsolidated joint venture of $37.5 million in the first quarter statement of operations.

6. GOODWILL AND INTANGIBLE ASSETS

     Applica applied the provisions of SFAS 142 beginning on January 1, 2002 and performed a transitional fair valued based impairment test. Based on the initial impairment test, Applica recognized a non-cash adjustment of $121.3 million ($78.8 million, net of tax) in the first quarter of 2002 to reduce the carrying value of goodwill to its implied fair value, which was estimated using a combination of market-multiples, comparable transactions and discounted cash flow methodologies. Under SFAS 142, the impairment adjustment was reflected as a cumulative effect of change in accounting principle in the first quarter of 2002.

     Components of other intangible assets not subject to amortization include $4.1 million allocated to trademarks acquired in the Weitech acquisition. The components of Applica’s intangible assets subject to amortization are as follows:

			March 31, 2003					December 31, 2002
			Gross Carrying		Accumulated			Gross Carrying		Accumulated
	Average Life		Amount		Amortization			Amount		Amortization
	(Years)				(In thousands)
Licenses		6.5	$	49,200	$	(34,602	)	$	49,200	$	(32,786	)
Contract-Based		3.3		20,193		(16,170	)		20,193		(15,747	)
			$	69,393	$	(50,772	)	$	69,393	$	(48,533	)

Amortization expense for intangible assets during the first three months of 2003 was $2.2 million.

     The following table provides information regarding estimated amortization expense for each of the following years ended December 31:

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	(In thousands)
2003	$	8,912
2004	$	8,744
2005	$	1,442
2006	$	776
2007	$	469
2008	$	161

7. 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.

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		Three Months Ended March 31, 2003
		Parent			Guarantors			Non-Guarantors			Eliminations			Consolidated
								(In thousands)
Statement of Operations:
Net sales		$	—		$	94,002		$	76,775		$	(49,538	)	$	121,239
Cost of goods sold			—			64,728			67,920			(49,538	)		83,110
	Gross profit		—			29,274			8,855			—			38,129
Operating (income) expenses			10			31,693			7,741			—			39,444
	Operating earnings (loss)		(10	)		(2,419	)		1,114			—			(1,315	)
Other (income) expense, net			(26	)		3,840			(331	)		—			3,483
	Earnings (loss) before equity in net earnings (loss) of joint venture and subsidiaries, and income taxes		16			(6,259	)		1,445			—			(4,798	)
Equity in net earnings (loss) of joint venture			55,395			—			—			(17,895	)		37,500
Equity in net earnings (loss) of subsidiaries			(17,895	)		—			—			17,895			—
Income tax expense (benefit)			—			19,441			(6,360	)		—			13,081
	Net earnings (loss)	$	37,516		$	(25,700	)	$	7,805		$	—		$	19,621
Balance Sheet:
Cash and cash equivalents		$	—		$	578		$	5,568		$	—		$	6,146
Accounts and other receivables, net			—			74,039			28,984			—			103,023
Receivables from affiliates			(151,263	)		104,485			48,771			—			1,993
Inventories			—			80,653			36,655			—			117,308
Future income tax benefits			—			14,906			(252	)		—			14,654
Other current assets			—			2,941			14,765			—			17,706
	Total current assets		(151,263	)		277,602			134,491			—			260,830
Investment in joint venture			38,749			—			—			—			38,749
Investment in subsidiaries			699,921			113,482			70,430			(883,833	)		—
Property, plant and equipment, net			—			17,349			61,222			—			78,571
Long-term future income tax benefits			—			36,983			5,041			—			42,024
Other assets			2,499			114,305			20,341			(50,964	)		86,181
	Total assets	$	589,906		$	559,721		$	291,525		$	(934,797	)	$	506,355
Accounts payable and accrued expenses		$	—		$	36,689		$	50,005		$	—		$	86,694
Current maturities of long-term debt			144			—			—			—			144
Deferred rent			—			354			—			—			354
Current taxes payable			—			629			2,191			—			2,820
	Total current liabilities		144			37,672			52,196			—			90,012
Long-term debt			176,209			44,351			17,143			(61,494	)		176,209
Future income tax liabilities			—			(909	)		909			—			—
Other long-term liabilities			1,686			(37	)		—			—			1,649
	Total liabilities		178,039			81,077			70,248			(61,494	)		267,870
Shareholders’ equity			411,867			478,644			221,277			(873,303	)		238,485
Total liabilities and shareholders’ equity		$	589,906		$	559,721		$	291,525		$	(934,797	)	$	506,355
Cash Flow Information:
Net cash provided by (used in) operating activities		$	36,805		$	(71,263	)	$	26,972		$	29,113		$	21,627
Net cash provided by (used in) investing activities			(19,917	)		(7,201	)		(16,612	)		37,510			(6,220	)
Net cash provided by (used in) financing activities			(17,571	)		75,433			(8,866	)		(66,623	)		(17,627	)
Effect of exchange rate changes on cash			683			—			—			—			683
Cash at beginning			—			3,609			4,074			—			7,683
Cash at end			—			578			5,568			—			6,146

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		Three Months Ended March 31, 2002
		Parent			Guarantors			Non-Guarantors			Eliminations			Consolidated
								(In thousands)
Statement of Operations:
Net sales		$	—		$	109,372		$	109,633		$	(75,947	)	$	143,058
Cost of goods sold			—			72,346			105,269			(75,947	)		101,668
	Gross profit		—			37,026			4,364			—			41,390
Operating (income) expenses			(207	)		34,033			8,492			—			42,318
Repositioning charge			—			362			—			—			362
	Operating earnings (loss)		207			2,631			(4,128	)		—			(1,290	)
Other (income) expense, net			(21	)		3,914			(118	)		(300	)		3,475
	Earnings (loss) before equity in net earnings (loss) of joint venture and subsidiaries, and income taxes and cumulative effect of change in accounting principle		228			(1,283	)		(4,010	)		300			(4,765	)
Equity in net earnings (loss) of joint venture			(96	)		—			—			—			(96	)
Equity in net earnings (loss) of subsidiaries			(82,442	)		—			—			82,442			—
Income tax expense (benefit)			—			(4,123	)		2,443			—			(1,680	)
Earnings (loss) before cumulative effect of change in accounting principle			(82,310	)		2,840			(6,453	)		82,742			(3,181	)
Cumulative effect of change in accounting principle			—			(78,829	)		—			—			(78,829	)
	Net earnings (loss)	$	(82,310	)	$	(75,989	)	$	(6,453	)	$	82,742		$	(82,010	)
Balance Sheet:
Cash and cash equivalents		$	—		$	2,023		$	8,651		$	—		$	10,674
Accounts and other receivables, net			—			99,800			44,687			—			144,487
Receivables from affiliates			(120,395	)		72,306			51,833			—			3,744
Inventories			—			66,396			41,598			—			107,994
Future income tax benefits			—			27,557			—			—			27,557
Other current assets			—			3,707			14,482			—			18,189
	Total current assets		(120,395	)		271,789			161,251			—			312,645
Investments in joint venture			1,396			—			—			—			1,396
Investment in subsidiaries			716,391			113,553			70,476			(900,420	)		—
Property, plant and equipment, net			—			16,739			64,180			—			80,919
Long-term future income tax benefits			—			49,852			648			—			50,500
Other assets			2,281			90,460			31,379			(45,392	)		78,728
	Total assets	$	599,673		$	542,393		$	327,934		$	(945,812	)	$	524,188
Notes and acceptances payable		$	—		$	—		$	3,997		$	—		$	3,997
Accounts payable and accrued expenses			20			29,812			66,980			—			96,812
Deferred rent			—			425			—			—			425
Current taxes payable			—			930			4,504			—			5,434
	Total current liabilities		20			31,167			75,481			—			106,668
Long-term debt			201,243			17,590			29,698			(47,288	)		201,243
Future income tax liabilities			—			(2,070	)		2,070			—			—
Other long-term liabilities			3,502			—			—			—			3,502
	Total liabilities		204,765			46,687			107,249			(47,288	)		311,413
Shareholders’ equity			394,908			495,706			220,685			(898,524	)		212,775
Total liabilities and shareholders’ equity		$	599,673		$	542,393		$	327,934		$	(945,812	)	$	524,188
Cash Flow Information:
Net cash provided by (used in) operating activities		$	(1,686	)	$	(34,804	)	$	22,031		$	31,495		$	17,036
Net cash provided by (used in) investing activities			19,977			546			(24,118	)		(95	)		(3,690	)

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	Three Months Ended March 31, 2002
	Parent			Guarantors		Non-Guarantors			Eliminations			Consolidated
						(In thousands)
Net cash provided by (used in) financing activities		(20,203	)		35,525		(4,249	)		(31,400	)		(20,327	)
Effect of exchange rate changes on cash		1,912			—		—			—			1,912
Cash at beginning		—			756		14,987			—			15,743
Cash at end		—			2,023		8,651			—			10,674

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

     As used in this Quarterly Report on Form 10-Q, “we,” “our,” “us,” the “Company” and “Applica” refer to Applica Incorporated and its subsidiaries, unless the context otherwise requires.

     The following discussion and analysis and the related financial data present a review of the consolidated operating results and financial condition of Applica for the three-month period ended March 31, 2003 and 2002. 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, 2002.

Forward Looking Statement Disclosure

     This Quarterly Report on 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 “anticipates,” “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, including the specific factors set forth below.

     You should carefully consider the following risk factors, together with the other information contained in our annual report on Form 10-K for the year ended December 31, 2002, in evaluating us and our business before purchasing our securities:

• If Our Investment In Joint Venture Is Not Realized, It Could Have A Material Adverse Effect On Our Results Of Operations.

• Uncertainties Regarding The Impact Of Terrorist Activities, The Current War On Terrorism And The War With Iraq Could Have A Material Adverse Effect On Our Business.

• An Outbreak Of Severe Acute Respiratory Syndrome (SARS) Among Our Employees Located In China And Hong Kong Could Have A Material Adverse Effect On Our Business.

• The Failure Of Our Growth Strategy Could Have A Material Adverse Effect On Our Business.

• If We Are Unable To Renew The Black & Decker® Trademark License Agreement, Our Business Could Be Adversely Affected.

• We Depend On Purchases By Several Large Customers And Any Significant Decline In These Purchases Or Pressure From These Customers To Reduce Prices Could Have A Negative Effect On Our Business.

• The Bankruptcy Or Financial Difficulty Of Any Major Customer Or Fluctuations In The Financial Condition Of The Retail Industry Could Adversely Affect Our Business.

• Our Business Is Very Sensitive To The Strength Of The U.S. Retail Market And Weakness In This Market Could Adversely Affect Our Business.

• Our Business Can Be Adversely Affected By Fluctuations In Cost And Availability Of Raw Materials (Particularly The Cost Of Petroleum) And Components.

• Our Business Involves The Potential For Product Recalls And Product Liability Claims Against Us.

• We Operate A Significant Portion Of Our Business Outside Of The United States Which Subjects Us To Additional Risks.

• Our Business Could Be Adversely Affected By Changes In Trade Relations With China.

• Our Business Could Be Adversely Affected By Currency Fluctuations In Our International Operations.

• Our Business Could Be Adversely Affected By Retailer Inventory Management Or The Failure of Our Logistical Systems.

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• Our Future Success Requires Us To Develop New And Innovative Products On A Consistent Basis In Order To Increase Revenues And We May Not Be Able To Do So.

• We Rely Heavily On Our Manufacturing Facilities To Manufacture And Assemble Our Products. An Extended Interruption In The Operation Of Any Facility Could Have An Adverse Impact On Our Operating Results.

• We Are Subject To Several Production-Related Risks Which Could Jeopardize Our Ability To Realize Anticipated Sales And Profits.

• The Infringement Or Loss Of Our Proprietary Rights Could Have An Adverse Effect On Our Business.

• Our Operating Results Can Be Affected By Seasonality.

• We Compete With Other Large Companies That Produce Similar Products.

• Our Debt Agreements Contain Covenants That Restrict Our Ability To Take Certain Actions.

• Our Business Can Be Adversely Affected By Newly Acquired Businesses Or Product Lines.

• Government Regulations Could Adversely Impact Our Operations.

     Should one or more of these risks, uncertainties or other factors materialize, or should underlying assumptions prove incorrect, actual results, performance, or achievements of Applica may vary materially from any future results, performance or achievements expressed or implied by 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. You 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 Quarterly Report on Form 10-Q.

General

     Applica Incorporated is a Florida corporation that was incorporated in 1963. Applica is a manufacturer, marketer and distributor of a broad range of branded and private-label small electric consumer goods. In 1998, we acquired the Black & Decker Household Products Group and became a leading supplier of brand name small household appliances in North and Latin America. We also manufacture and distribute professional personal care products, home environment products, pet care products, including the LitterMaid® self-cleaning cat litter box, and pest control products. We manufacture and market products under licensed brand names, such as Black & Decker®, our own brand names, such as Windmere® and Applica®, 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.

     We operate manufacturing facilities in China and Mexico. In 2002, approximately 76% of the products sold by Applica were manufactured in such facilities. In addition, we manufacture products for other consumer product companies, which we refer to as contract manufacturing.

     Applica’s manufacturing operations are conducted by two wholly owned subsidiaries: Applica Durable Manufacturing Limited in China and Applica Manufacturing, S. de R.L. de C.V. in Mexico. The distribution, sales, and marketing operations are primarily handled through our U.S. operating subsidiary, Applica Consumer Products, Inc. Applica also has separate entities providing distribution, sales and marketing operations in Canada, Puerto Rico, Mexico, Chile, Argentina, Venezuela and Colombia.

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Results of Operations

     The operating results of Applica expressed as a percentage of sales are set forth below:

			Three Months Ended March 31,
			2003			2002
Net sales				100.0	%		100.0	%
Cost of goods sold				68.6			71.1
	Gross profit			31.4			28.9
Selling, general and administrative expenses:
	Operating expenses			32.5			29.6
	Repositioning charge			—			0.2
		Operating earnings (loss)		(1.1	)		(0.9	)
Other expense (income)				2.9			2.5
Equity in net earnings (loss) of joint venture				30.9			(0.0	)
Earnings (loss) before income taxes and cumulative effect of change in accounting principle				26.9			(3.4	)
Income taxes expense (benefit)				10.7			(1.2	)
Earnings (loss) before cumulative effect of change in accounting principal				16.2			(2.2	)
Cumulative effect of change in accounting principle, net of tax benefit				—			(55.1	)
		Net earnings (loss)		16.2	%		(57.3	)%

Three Months Ended March 31, 2003 Compared To Three Months Ended March 31, 2002

     Net Sales. Sales for Applica decreased by $21.9 million to $121.2 million, a decrease of 15.3% over the first quarter of 2002. The decrease was largely the result of lower sales to key retailers, planned lower contract manufacturing sales and the loss of PHD, Inc., a significant customer, to bankruptcy in January 2003. For the quarter, sales of Black & Decker branded products decreased by $20.8 million worldwide, contract manufacturing decreased by $5.2 million and sales of Littermaid decreased by $2.1 million. These decreases were partially offset by increases in sales of pest control products of $5.0 million and Windmere and other branded products of $1.2 million. No pest control products were sold in the first quarter of 2002.

     Management anticipates that reduced contract manufacturing orders and persistent weakness in North and Latin America will continue to negatively affect sales in 2003.

     Gross Profit Margin. Applica’s gross profit margin increased to 31.4% in the first quarter of 2003 as compared to 28.9% for the same period in 2002. The gross profit margin increase is attributed to an improved product mix.

     For the second quarter, management anticipates that margins will be lower than the first quarter of 2003, as a result of higher petroleum prices and lower production levels related to anticipated lower first half sales.

     Selling, General and Administrative Expenses.

     Operating Expenses. Operating expenses for Applica decreased $2.9 million for the first quarter of 2003 to $39.4 million as compared to the first quarter of 2002. Such expenses increased as a percentage of sales to 32.5% from 29.6% in the 2002 period as the result of lower sales volume. In the first quarter of 2003, expenses decreased by $1.0 million resulting from the 2002 consolidation of certain facilities in North and Latin America and freight expenses decreased by $1.0 million. Additionally, foreign exchange losses for the quarter totaled $578,000 as compared to $1.6 million in the first quarter of 2002.

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     Repositioning and Other Charges. In the first quarter of 2002, Applica incurred expenses of $362,000 relating to its decision to consolidate its Shelton, Connecticut office with the headquarters located in Miami Lakes, Florida, as well as certain back-office and supply chain functions in Canada and Latin America. Such consolidation was completed in the third quarter of 2002.

     Interest Expense. Interest expense remained flat at $3.9 million for the three months ended March 31, 2003. In the first quarter of 2003, lower debt levels were offset by reduced income from interest rate management contracts. Management anticipates that interest expense will remain flat as this trend continues into the second quarter of 2003.

     Equity in Net Earnings (Loss) of Joint Venture. The equity in net earnings (loss) of joint venture increased from a $96,000 loss in 2002 to a gain of $37.5 million in the first quarter of 2003. The equity in net earnings resulted primarily from an unrealized gain in the fair value of an investment held by such joint venture. The gain was precipitated by a potential sale of the investment. Applica expects a sale and the related cash distribution to occur before the end of the third quarter of 2003. The remaining investments of Anasazi Partners include certain privately traded securities whose values have been estimated by the general partner in the absence of readily ascertainable market values. Fair value of these securities may differ significantly from the values that would have been used had a ready market for the securities existed.

     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. In the first quarter of 2003, Applica used an effective rate of 40%, as compared to 35% for the first quarter of 2002. The change in the tax rate from 2002 reflects additional permanent differences. Applica expects its future effective tax rate to approximate 40%.

     The earnings of subsidiaries in Canada, Mexico and Latin America (other than Chile) are generally taxed at rates comparable to or higher than 35%, the United States statutory rate. In addition, commencing in January 2002, the earnings of Applica’s Hong Kong subsidiary were also taxed at the United States statutory rate of 35% due to Applica’s intent not to permanently reinvest the earnings outside of the United States. Applica does not make tax provisions for the undistributed earnings of its foreign subsidiaries that it expects will be permanently reinvested in its operations outside of the United States.

     Cumulative Effect of Change in Accounting Principle. In June 2001, the Financial Accounting Standards Board approved the issuance of SFAS 142, “Goodwill and Other Intangible Assets”, which established new accounting and reporting requirements for goodwill and other intangible assets. The new standard requires that all intangible assets acquired that are obtained through contractual or legal right, or are capable of being separately sold, transferred, licensed, rented or exchanged must be recognized as an asset apart from goodwill. Goodwill and intangibles with indefinite lives are no longer amortized, but are subject to an annual assessment for impairment by applying a fair value based test.

     Applica applied the provisions of SFAS 142 beginning in January 2002 and performed a transitional fair valued based impairment test. Based on its initial impairment tests, Applica recognized an adjustment of $121.3 million ($78.8 million, or $3.37 per share, net of tax) in the first quarter of 2002 to reduce the carrying value of goodwill to its implied fair value. Under SFAS 142, the impairment adjustment was reflected as a cumulative effect of change in accounting principle in the first quarter of 2002.

     Earnings Per Share. Basic shares for the three-month periods ended March 31, 2003 and 2002 were 23,500,555 and 23,342,893, respectively. Included in diluted shares of 23,665,867 are common stock equivalents relating to options of 165,312 for the three-month period ended March 31, 2003. All common stock equivalents have been excluded from the diluted per share calculations in the three-month period ended March 31, 2002 because their inclusion would have been anti-dilutive.

Liquidity and Capital Resources

     At March 31, 2003, Applica’s working capital was $170.8 million, as compared to $206.0 million at March 31, 2002. Applica’s current ratio was 2.9 to 1 at both March 31, 2003 and 2002. Applica’s quick ratio was 1.2 to 1 at March 31, 2003 and 1.5 to 1 at March 31, 2002. The decrease in the current and quick ratios primarily reflected the use of the cash from the decrease in accounts receivable to repay long-term debt.

     Cash balances decreased by $1.5 million to $6.1 million for the three months ended March 31, 2003.

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     The net cash provided by operating activities totaled $21.6 million in 2003 and $17.0 million in 2002. Both periods reflected decreases in accounts receivable, which was partially offset by accrued expenses.

     Cash used in investing activities totaled approximately $6.2 million for the period, as compared to $3.7 million for 2002, and reflected the purchase of equipment at Applica’s manufacturing facilities and tooling for new products in both years.

     Cash used in financing activities totaled approximately $17.6 million in 2003 and $20.3 million in 2002 reflecting the continued reduction of debt levels.

     For the three months ended March 31, 2003 and 2002, the effect of exchange rate changes on cash were $683,000 and $1.9 million.

     Applica’s primary sources of liquidity are its cash flow from operations and borrowings under its credit facility. As of April 30, 2003, Applica was borrowing approximately $45.4 million under its senior secured revolving credit facility and had approximately $55.3 million available for future cash borrowings. Advances under the facility are primarily based upon percentages of eligible accounts receivable and inventories. The credit facility includes a $10.0 million sublimit for the issuance of letters of credit, with approximately $0.5 million outstanding under the limit as of April 30, 2003. All amounts outstanding under the credit facility are payable on December 28, 2005.

     At Applica’s option, interest accrues on the loans made under the credit facility at either:

• LIBOR (adjusted for any reserves), plus a specified margin which is determined by Applica’s leverage ratio and is currently set at 2.00% (3.32% at April 30, 2003); or

• the Base Rate (which is Bank of America’s prime rate), plus a specified margin, which is determined based upon Applica’s leverage ratio and is currently set at 0.00% (4.25% at April 30, 2003).

Swing loans up to $15.0 million bear interest at the Base Rate plus a specified margin, which is determined based on Applica’s leverage ratio and is currently set at 0.00% (4.25% at April 30, 2003).

     In July 1998, Applica issued $130.0 million in Senior Subordinated Notes. The notes bear interest at a rate of 10%, payable semiannually, and mature on July 31, 2008. The notes are general unsecured obligations of Applica Incorporated and rank subordinate in right of payment to all senior debt of Applica and rank pari passu in right of payment to all future subordinated indebtedness of Applica. The notes may be redeemed at the option of Applica, in whole or in part, on or after July 31, 2003 at various redemption prices. See Note G of the Consolidated Financial Statements included in Schedule I to this Annual Report on Form 10-K for more detailed information regarding Applica’s borrowings.

     On September 28, 2002, Applica entered into credit approved receivables purchasing agreements with CIT Group/Commercial Services, Inc. (“CIT”). The agreements allow Applica to transfer to CIT, without recourse, approved receivables of specified customers under certain circumstances, including the bankruptcy of covered customers. Applica remains the servicer of the approved receivables and pays fees based upon a percentage of the gross face amount of each approved receivable. These arrangements are strictly for the purpose of insuring selected receivables. On January 17, 2003, the agreement covering receivables from a significant customer was converted into a full notification agreement under which CIT has agreed to purchase all approved receivables of such customer.

     In April 2002, Applica Consumer Products, Inc. entered into a five-year $6.0 million mortgage loan on Applica’s executive offices located in Miami Lakes, Florida. The loan bears interest at an annual rate of 7.25%, with monthly principal and interest payments based on a 20-year amortization. A final balloon payment is due at the end of the term. The loan is secured by a mortgage on the property and the building located thereon.

     Certain of Applica’s foreign subsidiaries have approximately $18.4 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. As of March 31, 2003, there were no amounts outstanding under the working capital lines and $200,000 outstanding under the letter of credit lines. As of April 30, 2003, there was $1.4 million outstanding under the working capital lines and $0.2 million under the letter of credit lines.

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     Applica’s aggregate capital expenditures for the three months ended March 31, 2003 were $6.3 million, as compared to $3.4 million for same three month period in 2001. Applica anticipates that the total capital expenditures for 2003 will be approximately $23.0 million, which includes new information technology infrastructure, the cost of equipment at our manufacturing facilities and tooling for new products. Applica plans to fund such capital expenditures from cash flow from operations and, if necessary, borrowings under its credit facility.

     At March 31, 2003, debt as a percent of total capitalization was 42.5%, as compared to 49.1% at March 31, 2002.

     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 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 its control. Based upon the current level of operations and anticipated cost savings and revenue growth, we believe that cash flow from operations and available cash, together with available borrowings under its credit facility and other facilities, will be adequate to meet our 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 credit facility 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.”

Use of Estimates and Critical Accounting Policies

     The preparation of Applica’s financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and revenues and expenses during the period. Future events and their effects cannot be determined with absolute certainty; therefore, the determination of estimates requires the exercise of judgment. Actual results inevitably will differ from those estimates, and such differences may be material to our financial statements. Management continually evaluates its estimates and assumptions, which are based on historical experience and other factors that are believed to be reasonable under the circumstances. These estimates and Applica’s actual results are subject to the risk factors listed above.

     Management believes that the following may involve a higher degree of judgment or complexity:

     Collectibility of Accounts Receivable. Applica’s allowance for doubtful accounts is based on management’s estimates of the creditworthiness of its customers, current economic conditions and historical information, and, in the opinion of management, is believed to be an amount sufficient to respond to normal business conditions. Management sets specific reserves for customers in bankruptcy and other reserves for the remaining customers based upon historical collection experience. Should business conditions deteriorate or any major customer default on its obligations to Applica, this allowance may need to be significantly increased, which would have a negative impact upon Applica’s operations.

     Reserves on Inventories. Applica establishes a reserve based on historical experience and specific reserves when it is apparent that the expected realizable value of an inventory item falls below its original cost. A charge to operations results when the estimated net realizable value of inventory items declines below cost. Management regularly reviews Applica’s investment in inventories for declines in value.

     Income Taxes. Significant management judgment is required in developing Applica’s provision for income taxes, including the determination of foreign tax liabilities, deferred tax assets and liabilities and any valuation allowances that might be required against the deferred tax assets. At March 31, 2003, Applica had deferred tax assets in excess of deferred tax liabilities of $66.9 million. Applica determined that it was more likely than not that $56.7 million of such assets will be realized, resulting in a valuation allowance of $10.2 million in the first quarter of 2003. Applica evaluates quarterly its ability to realize its deferred tax assets and adjusts the amount of its valuation allowance, if necessary. Applica operates within multiple taxing jurisdictions and is subject to audit in those jurisdictions. Because of the complex issues involved, any claims can require an extended period to resolve. In management’s opinion, adequate provisions for income taxes have been made.

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     Goodwill. On an annual basis, management assesses the composition of Applica’s assets and liabilities, as well as the events that have occurred and the circumstances that have changed since the most recent fair value determination. If events occur or circumstances change that would more likely than not reduce the fair value of goodwill below its carrying amount, goodwill will be tested for impairment. Applica will recognize an impairment loss if the carrying value of the asset exceeds the fair value determination. During the first quarter of 2002, Applica recorded a write-down of its goodwill of $121.3 million ($78.8 million, net of tax).

     Long-Lived Assets. Applica reviews long-lived assets and certain identifiable intangibles held and used for possible impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In evaluating the fair value and future benefits of its intangible assets, management performs an analysis of the anticipated undiscounted future net cash flows of the individual assets over the remaining amortization period. Applica recognizes an impairment loss if the carrying value of the asset exceeds the expected future cash flows.

     Reserves for Product Liability Claims and Litigation. Applica is subject to various legal proceedings, product liability claims and other claims in the ordinary course of its business. Management estimates the amount of ultimate liability, if any, with respect to such matters in excess of applicable insurance coverage based on historical claims experience and current claim amounts, as well as other available facts and circumstances. As the outcome of litigation is difficult to predict and significant estimates are made with regard to future events, significant changes from estimated amounts could occur.

     Product Recall Liability. Applica is subject to potential product recalls. We estimate the amount of ultimate liability based on discussions with the Consumer Product Safety Commission and historical claims experience. For example, in February 2002, we voluntarily recalled our Black & Decker® branded T1200 and T1400 toasters. We charged the 2001 operations with an estimated reserve of $13.4 million for this recall. Applica has charged $8.8 million against this reserve through March 31, 2003. While we believe that the reserve is adequate, there can be no assurance that significant future adjustments will not be required.

     Other Estimates. Applica makes a number of other estimates in the ordinary course of business relating to sales returns and allowances, warranty reserves, and reserves for promotional incentives. Historically, past changes to these estimates have not had a material impact on our financial condition. However, circumstances could change which may alter future expectations.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk Management

     Applica is exposed to the impact of interest rate changes. Applica’s objective is to manage the impact of interest rate changes on earnings and cash flows and on the market value of its borrowings. Applica maintains fixed rate debt as a percentage of its net debt between a minimum and maximum percentage, which is set by policy.

     It is Applica’s policy to enter into interest rate risk management transactions only to the extent considered necessary to meet its objectives as set forth above. Applica does not enter into interest rate risk management transactions for speculative purposes.

     Outstanding as of March 31, 2003 were interest rate management contracts on approximately $60.0 million notional principal amount with a fair value of approximately $300,642. The market value represents the amount Applica would receive upon exiting the contracts at March 31, 2003 and was determined based on quotes obtained from Applica’s financial institutions. The market value related to interest rate risk management contracts is included as other long-term liabilities as of March 31, 2003. Applica does not intend to exit these contracts at this time.

     Significant interest rate risk management instruments held by Applica as of March 31, 2003 included pay-floating swaps. Pay-floating swaps effectively convert medium term obligations to LIBOR-rate indexed variable-rate instruments. All swaps have maturity dates that mirror the maturity date of the underlying hedged transaction. For the period ending March 31, 2003, Applica did not discontinue any hedges due to the probability that the original underlying forecasted transaction would not occur.

     The impact of interest rate risk management activities on income during the quarter ending March 31, 2003 was not material.

20

Foreign Exchange Risk Management

     Applica transacts business globally and is subject to risks associated with changing foreign exchange rates. Applica’s objective is to reduce earnings and cash flow volatility associated with foreign exchange rate changes to allow management to focus attention on core business issues and challenges. By policy, Applica maintains hedge coverage between minimum and maximum percentages of its forecasted foreign exchange exposures for periods not to exceed 18 months. The gains and losses on these contracts offset changes in the value of the related exposures.

     It is Applica’s policy to enter into foreign currency transactions only to the extent considered necessary to meet its objectives as set forth above. Applica does not enter into foreign currency transactions for speculative purposes.

     Outstanding as of March 31, 2003 were $28.9 million notional of contracts to purchase and/or sell foreign currency forward with a negative fair market value of approximately $2.1 million. The market value represents the amount Applica would pay upon exiting the contracts at March 31, 2003 and was determined based on quotes obtained from Applica’s financial institutions. This amount is included in prepaid expenses and other assets as of March 31, 2003. Applica does not intend to exit these contracts at this time.

     Applica enters into various contracts that change in value as foreign exchange rates change to protect the value of its existing foreign currency assets and liabilities, commitments and forecasted foreign currency revenues. Applica uses option strategies and forward contracts that provide for the sale of foreign currencies to hedge forecasted revenues and expenses. Applica also uses forward contracts to hedge foreign currency assets and liabilities. While these hedging instruments are subject to fluctuations in value, such fluctuations are offset by changes in the value of the underlying exposures being hedged. The principal currencies hedged are the Mexican peso, Chinese renminbi, Hong Kong dollar and Canadian dollar.

Additional Information

     For additional information, see Item 7A. “Quantitative and Qualitative Disclosures About Market Risk” in Applica’s Annual Report on Form 10-K for the year ended December 31, 2002.

Item 4. Controls and Procedures.

     Evaluation of Disclosure Controls and Procedures. Applica’s chief executive officer and chief financial officer, after evaluating the effectiveness of the Company’s “disclosure controls and procedures” (as defined in Sections 13a-14(c) of the Securities Exchange Act of 1934) as of a date (the “Evaluation Date”) not more than 90 days before the filing date of this quarterly report, have concluded that as of the Evaluation Date, the Company’s disclosure controls and procedures were effective and designed to ensure that material information relating to the Company and its consolidated subsidiaries is accumulated and would be made known to them by others within those entities as appropriate to allow timely decisions regarding required disclosures.

     Changes in Internal Controls. Subsequent to the Evaluation Date, there were no significant changes in our internal controls or in other factors that could significantly affect these controls, including any corrective actions with regard to significant deficiencies and material weaknesses.

     Applica’s senior management, in conjunction with its Board of Directors, continuously reviews overall company policies and improves documentation of important financial reporting and internal control matters. Accordingly, certain changes to Applica’s internal controls were made during the first quarter of 2003, none of which were significant. Applica is committed to continuously improving the state of its internal controls, corporate governance and financial reporting.

21

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

     Toaster Recall. In February 2002, Applica Consumer Products, Inc., in cooperation with the Consumer Products Safety Commission, voluntarily recalled approximately 2.1 million Black & Decker® T1200 and T1400 toasters. Applica’s Canadian operating subsidiary, Applica Canada Corporation, also recalled approximately 180,000 of these toasters in Canada. Management charged 2001 operations with an estimated reserve of $13.4 million for these recalls and does not believe the ultimate liability will be materially different.

     Four lawsuits have been filed in connection with property damage or bodily injury relating to the recalled toasters (one of which has been settled) and several other claims have been made. We believe that the amount of ultimate liability of these claims, if any, is not likely to have a material effect on our business, financial condition, results of operations or liquidity. However, as the outcome of litigation is difficult to predict, significant changes in the estimated exposures could occur.

     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 our business, 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:
3.1	Second Amended and Restated Bylaws dated February 25, 2003
99.1	Certification of Principal Executive Officer Pursuant to 18 U.S.C. 1350
99.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. 1350
(b)	Reports on Form 8-K:
	Form 8-K dated May 1, 2003 reporting under “Item 9. Regulation FD Disclosure” and “Item 12. Results of Operations and Financial Condition” that Applica issued a press release describing its results of operations for the first quarter ended March 31, 2003 and attaching such press release.

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)
April 30, 2003	By:	/s/ Harry D. Schulman
		Harry D. Schulman President, Chief Executive Officer and Secretary
April 30, 2003	By:	/s/ Terry L. Polistina
		Terry L. Polistina Senior Vice President and Chief Financial Officer (Chief Financial and Accounting Officer)

23

CERTIFICATION

I, Harry D. Schulman, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of Applica Incorporated;

2.     Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.     Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.     The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.     The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6.     The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: April 30, 2003

/s/ Harry D. Schulman

Name: Harry D. Schulman
Title: President, Chief Executive Officer and Secretary

24

CERTIFICATION

I, Terry Polistina, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of Applica Incorporated;

2.     Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.     Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.     The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.     The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6.     The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: April 30, 2003

/s/ Terry Polistina

Name: Terry Polistina
Title: Chief Financial Officer and Senior Vice President

25 EX-3.1 3 g82522exv3w1.txt EX-3.1 AMENDED AND RESTATED BYLAWS EXHIBIT 3.1 AMENDED AND RESTATED BYLAWS OF APPLICA INCORPORATED (A FLORIDA CORPORATION) FEBRUARY 25, 2003 INDEX

PAGE NUMBER ARTICLE ONE - OFFICES.............................................................................................1 Section 1. Registered Office.........................................................................1 Section 2. Other Offices.............................................................................1 ARTICLE TWO - MEETINGS OF SHAREHOLDERS............................................................................1 Section 1. Place.....................................................................................1 Section 2. Time of Annual Meeting....................................................................1 Section 3. Call of Special Meetings..................................................................1 Section 4. Conduct of Meetings.......................................................................1 Section 5. Notice and Waiver of Notice...............................................................2 Section 6. Notice Requirements for Director Nominations and Shareholder Proposals....................2 Section 7. Business of Special Meeting...............................................................4 Section 8. Quorum....................................................................................4 Section 9. Voting Per Share..........................................................................4 Section 10. Voting of Shares..........................................................................4 Section 11. Proxies...................................................................................5 Section 12. Shareholder List..........................................................................5 Section 13. Action Without Meeting....................................................................6 Section 14. Fixing Record Date........................................................................6 Section 15. Inspectors and Judges.....................................................................6 ARTICLE THREE - DIRECTORS.........................................................................................7 Section 1. Number, Election and Term.................................................................7 Section 2. Removal...................................................................................7 Section 3. Vacancies.................................................................................7 Section 4. Powers....................................................................................7 Section 5. Place of Meetings.........................................................................7 Section 6. Annual Meeting............................................................................8 Section 7. Regular Meetings..........................................................................8 Section 8. Special Meetings and Notice...............................................................8 Section 9. Quorum; Required Vote; Presumption of Assent..............................................8 Section 10. Action Without Meeting....................................................................8 Section 11. Conference Telephone or Similar Communications Equipment Meetings.........................9 Section 12. Committees................................................................................9 Section 13. Compensation of Directors.................................................................9 Section 14. Chairman of the Board.....................................................................9

ARTICLE FOUR - OFFICERS..........................................................................................10 Section 1. Positions................................................................................10 Section 2. Election of Specified Officers by Board..................................................10 Section 3. Election or Appointment of Other Officers................................................10 Section 4. Salaries.................................................................................10 Section 5. Term; Resignation........................................................................10 Section 6. Chief Executive Officer..................................................................10 Section 7. President................................................................................11 Section 8. Senior Vice Presidents and Vice Presidents...............................................11 Section 9. Secretary................................................................................11 Section 10. Chief Financial Officer..................................................................11 ARTICLE FIVE - CERTIFICATES FOR SHARES...........................................................................11 Section 1. Issue of Certificates....................................................................11 Section 2. Legends for Preferences and Restrictions on Transfer.....................................12 Section 3. Facsimile Signatures.....................................................................12 Section 4. Lost Certificates........................................................................12 Section 5. Transfer of Shares.......................................................................13 Section 6. Registered Shareholders..................................................................13 Section 7. Redemption of Control Shares.............................................................13 ARTICLE SIX - MISCELLANEOUS PROVISIONS...........................................................................13 Section 1. Dividends................................................................................13 Section 2. Reserves.................................................................................13 Section 3. Checks...................................................................................13 Section 4. Fiscal Year..............................................................................13 Section 5. Seal.....................................................................................14 ARTICLE SEVEN - AMENDMENTS OF BYLAWS.............................................................................14 ARTICLE EIGHT - INDEMNIFICATION..................................................................................14 APPLICA INCORPORATED SECOND AMENDED AND RESTATED BYLAWS ARTICLE ONE OFFICES Section 1. Registered Office. The registered office of APPLICA INCORPORATED, a Florida corporation (the "Corporation"), shall be located in the State of Florida, unless otherwise designated by the Board of Directors of the Corporation (the "Board of Directors"). Section 2. Other Offices. The Corporation may also have offices at such other places, either within or outside the State of Florida, as the Board of Directors may from time to time determine or as the business of the Corporation may require. ARTICLE TWO MEETINGS OF SHAREHOLDERS Section 1. Place. All annual meetings of shareholders shall be held at such place, within or outside the State of Florida, as may be designated by the Board of Directors and stated in the notice of the meeting or in a duly executed waiver of notice thereof. Special meetings of shareholders may be held at such place, within or outside the State of Florida, and at such time as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof. Section 2. Time of Annual Meeting. Annual meetings of shareholders shall be held on such date and at such time fixed, from time to time, by the Board of Directors, provided that there shall be an annual meeting held every year at which the shareholders shall elect members of the Board of Directors and transact such other business as may properly be brought before the meeting. Section 3. Call of Special Meetings. Special meetings of the shareholders shall be held if called upon the written request of the Chairman of the Board, the Chief Executive Officer, the President or a majority of the Board of Directors acting without a meeting, or if the holders of not less than ten percent (10%) of all the shares entitled to vote at the meeting sign, date, and deliver to the Secretary one or more written demands for the meeting describing the purpose or purposes for which it is to be held. The Board of Directors shall fix the record date for and the place, date and hour of, the meeting, and the Secretary shall give notice of such meeting and the place, day and hour and the purpose or purposes thereof to the shareholders entitled thereto. The Board of Directors of the Corporation may delay calling a shareholder-initiated special meeting of shareholders to elect directors or to vote upon a pending merger proposal for such period of time as is reasonably necessary. Section 4. Conduct of Meetings. The Chairman of the Board (or in his absence, the President or such other designee of the Chairman of the Board) shall preside at the annual and special meetings of shareholders and shall be given full discretion in establishing the rules and procedures to be followed in conducting the meetings, except as otherwise provided by law or in these Bylaws. Section 5. Notice and Waiver of Notice. Except as otherwise provided by law, written or printed notice stating the place, day and hour of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than ten nor more than 60 days before the day of the meeting, either personally or by first-class mail, by or at the direction of the President, the Secretary, or the officer or person calling the meeting, to each shareholder of record entitled to vote at such meeting. If the notice is mailed at least 30 days before the date of the meeting, it may be done by a class of United States mail other than first-class. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail addressed to the shareholder at his or her address as it appears on the stock transfer books of the Corporation, with postage thereon prepaid. If a meeting is adjourned to another time and/or place, and if an announcement of the adjourned time and/or place is made at the meeting, it shall not be necessary to give notice of the adjourned meeting unless the Board of Directors, after adjournment, fixes a new record date for the adjourned meeting. Whenever any notice is required to be given to any shareholder, a waiver thereof in writing signed by the person or persons entitled to such notice, whether signed before, during or after the time of the meeting stated therein, and delivered to the Corporation for inclusion in the minutes or filing with the corporate records, shall be equivalent to the giving of such notice. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the shareholders need be specified in any written waiver of notice. Attendance of a person at a meeting shall constitute a waiver of (a) lack of or defective notice of such meeting, unless the person objects at the beginning to the holding of the meeting or the transacting of any business at the meeting, or (b) lack of defective notice of a particular matter at a meeting that is not within the purpose or purposes described in the meeting notice, unless the person objects to considering such matter when it is presented. Section 6. Notice Requirements for Director Nominations and Shareholder Proposals. (a) Only persons who are nominated in accordance with the procedures set forth in these Bylaws shall be eligible to serve as directors. Nominations of persons for election to the Board of Directors of the Corporation may be made at a meeting of shareholders (i) by or at the direction of the Board of Directors or (ii) by any shareholder of the Corporation who is a shareholder of record at the time of giving of notice provided for in this Bylaw, who shall be entitled to vote for the election of directors at the meeting and who complies with the notice procedures set forth in this Bylaw. (b) Nominations by shareholders shall be made pursuant to timely notice in writing to the Secretary of the Corporation. To be timely, a shareholder's notice shall be delivered to or mailed and received at the principal executive offices of the Corporation (a) in the case of an annual meeting, not less than 90 days nor more than 120 days prior to the first anniversary of the date of the notice of preceding year's annual meeting; provided, however, that in the event that the date of the annual meeting is changed by more than 30 days from such anniversary date, -2- notice by the shareholder to be timely must be so received not later than the close of business on the tenth day following the earlier of the day on which notice of the date of the meeting was mailed or public disclosure was made, and (b) in the case of a special meeting at which directors are to be elected, not later than the close of business on the tenth day following the earlier of the day on which notice of the date of the meeting was mailed or public disclosure was made. (c) Such shareholder's notice shall set forth (i) as to each person whom the shareholder proposes to nominate for election or reelection as a director all information relating to such person that is required to be disclosed in solicitations of proxies for elections of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (including such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected); (ii) as to the shareholder giving the notice (A) the name and address, as they appear on the Corporation's books, of such shareholder and (B) the class and number of shares of the Corporation which are beneficially owned by such shareholder and also which are owned by such shareholder and also which are owned of record by such shareholder; and (iii) as to the beneficial owner, if any, on whose behalf the nomination is made, (A) the name and address of such person and (B) the class and number of shares of the Corporation which are beneficially owned by such person. At the request of the Board of Directors, any person nominated by the Board of Directors for election as a director shall furnish to the Secretary of the Corporation that information required to be set forth in a shareholder's notice of nomination which pertains to the nominee. (d) At an annual meeting of the shareholders, only such business shall be conducted as shall have been brought before the meeting (i) pursuant to the Corporation's notice of meeting, (ii) by or at the direction of the Board of Directors or (iii) by any shareholder of the Corporation who is a shareholder of record at the time of giving of the notice provided for in this Bylaw, who shall be entitled to vote at such meeting and who complies with the notice procedures set forth in this Bylaw. (e) For business to be properly brought before an annual meeting by a shareholder pursuant to clause (iii) of paragraph (d) of this Bylaw the shareholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a shareholder's notice must be delivered to or mailed and received at the principal executive offices of the Corporation not less than 90 days nor more than 120 days prior to the first anniversary of the date of the notice of the preceding year's annual meeting; provided, however, that in the event that the date of the meeting is changed by more than 30 days from such anniversary date, to be timely, notice by the shareholder must be received no later than the close of business on the tenth day following the earlier of the day on which notice of the date of the meeting was mailed or public disclosure was made. A shareholder's notice to the Secretary shall set forth as to each matter the shareholder proposes to bring before the meeting (i) a brief description of the business desired to be brought before the meeting and the reasons for conducting such business at the meeting, (ii) the name and address, as they appear on the Corporation's books, of the shareholder proposing such business, and the name and address of the beneficial owner, if any, on whose behalf the proposal is made, (iii) the class and number of shares of the Corporation which are owned beneficially and of record by such shareholder of record and by the beneficial owner, if -3- any, on whose behalf the proposal is made and (iv) any material interest of such shareholder of record and the beneficial owner, if any, on whose behalf the proposal is made in such business. (f) Notwithstanding anything in these Bylaws to the contrary, no business shall be conducted at an annual meeting except in accordance with the procedures set forth in this Bylaw. Additionally, no person shall be eligible to serve as a director of the Corporation unless nominated in accordance with the procedures set forth in this Bylaw. The Chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that (1) the business was not properly brought before the meeting and in accordance with the procedures prescribed by this Bylaw or (2) a nomination was not made in accordance with the procedures prescribed by these Bylaws. If the Chairman should so determine, he or she shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted or the defective nomination shall be disregarded. Notwithstanding the foregoing provisions of this Bylaw, a shareholder shall also comply with all applicable requirements of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder with respect to the matters set forth in this Bylaw. Section 7. Business of Special Meeting. Business transacted at any special meeting shall be confined to the purposes stated in the notice thereof. Section 8. Quorum. Shares entitled to vote as a separate voting group may take action on a matter at a meeting only if a quorum of those shares exists with respect to that matter. Except as otherwise provided in the Articles of Incorporation or Bylaws, a majority of the shares entitled to vote on the matter by each voting group, represented in person or by proxy, shall constitute a quorum at any meeting of shareholders, but in no event shall a quorum consist of less than one-third of the shares of each voting group entitled to vote. If less than a majority of outstanding shares entitled to vote are represented at a meeting, a majority of the shares so represented may adjourn the meeting from time to time without further notice. After a quorum has been established at any shareholders' meeting, the subsequent withdrawal of shareholders, so as to reduce the number of shares entitled to vote at the meeting below the number required for a quorum, shall not affect the validity of any action taken at the meeting or any adjournment thereof. Once a share is represented for any purpose at a meeting, it is deemed present for quorum purposes for the remainder of the meeting and for any adjournment of that meeting unless a new record date is or must be set for that adjourned meeting. Section 9. Voting Per Share. Except as otherwise provided in the Articles of Incorporation or by law, each shareholder is entitled to one vote for each outstanding share held by him or her on each matter voted at a shareholders' meeting. Section 10. Voting of Shares. A shareholder may vote at any meeting of shareholders of the Corporation, either in person or by proxy. Shares standing in the name of a corporation, domestic or foreign, may be voted by the officer, agent or proxy designated by the bylaws of such corporate shareholder or, in the absence of any applicable bylaw, by such person or persons as the board of directors of the corporate shareholder may designate. In the absence of any such designation, or, in case of conflicting designation by the corporate shareholder, the chairman of the board, the president, any vice president, the secretary and the treasurer of the corporate -4- shareholder, in that order, shall be presumed to be fully authorized to vote such shares. Shares held by an administrator, executor, guardian, personal representative, or conservator may be voted by such person, either in person or by proxy, without a transfer of such shares into his or her name. Shares standing in the name of a trustee may be voted by such trustee, either in person or by proxy, but no trustee shall be entitled to vote shares held by him or her without a transfer of such shares into his or her name or the name of his or her nominee. Shares held by or under the control of a receiver, a trustee in bankruptcy proceedings, or an assignee for the benefit of creditors may be voted by such person without the transfer thereof into his or her name. If shares stand of record in the names of two or more persons, whether fiduciaries, members of a partnership, joint tenants, tenants in common, tenants by the entirety or otherwise, or if two or more persons have the same fiduciary relationship respecting the same shares, unless the Secretary of the Corporation is given notice to the contrary and is furnished with a copy of the instrument or order appointing them or creating the relationship wherein it is so provided, then acts with respect to voting shall have the following effect: (a) if only one votes, in person or by proxy, such person's act binds all; (b) if more than one vote, in person or by proxy, the act of the majority so voting binds all; (c) if more than one vote, in person or by proxy, but the vote is evenly split on any particular matter, each faction is entitled to vote the share or shares in question proportionally; or (d) if the instrument or order so filed shows that any such tenancy is held in unequal interest, a majority or a vote evenly split for purposes hereof shall be a majority or a vote evenly split in interest. The principles of this paragraph shall apply, insofar as possible, to execution of proxies, waivers, consents, or objections and for the purpose of ascertaining the presence of a quorum. Section 11. Proxies. Any shareholder of the Corporation, other person entitled to vote on behalf of a shareholder pursuant to law, or attorney-in-fact for such persons may vote the shareholder's shares in person or by proxy. Any shareholder of the Corporation may appoint a proxy to vote or otherwise act for such shareholder by signing an appointment form, either personally or by his or her attorney-in-fact. An executed facsimile appearing to have been transmitted by such person, or a photographic, photostatic, or equivalent reproduction of an appointment form, shall be deemed a sufficient appointment form. An appointment of a proxy is effective when received by the Secretary of the Corporation or such other officer or agent which is authorized to tabulate votes, and shall be valid for up to 11 months, unless a longer period is expressly provided in the appointment form. The death or incapacity of the shareholder appointing a proxy does not affect the right of the Corporation to accept the proxy's authority unless notice of the death or incapacity is received by the secretary or other officer or agent authorized to tabulate votes before the proxy exercises his or her authority under the appointment. An appointment of a proxy is revocable by the shareholder unless the appointment is coupled with an interest. Section 12. Shareholder List. After fixing a record date for a meeting of shareholders, the Corporation shall prepare an alphabetical list of the names of all its shareholders who are entitled to notice of the meeting, arranged by voting group with the address of, and the number and class and series, if any, of shares held by each. The shareholders' list must be available for inspection by any shareholder for a period of ten days prior to the meeting or such shorter time as exists between the record date and the meeting and continuing through the meeting at the Corporation's principal office, at a place identified in the meeting notice in the city where the -5- meeting will be held, or at the office of the Corporation's transfer agent or registrar. Any shareholder of the Corporation or his or her agent or attorney is entitled on written demand to inspect the shareholders' list (subject to the requirements of law), during regular business hours and at such shareholder's expense, during the period it is available for inspection. The Corporation shall make the shareholders' list available at the meeting of shareholders, and any shareholder or his or her agent or attorney is entitled to inspect the list at any time during the meeting or any adjournment. Section 13. Action Without Meeting. Any action required or permitted to be taken by the shareholders of the Corporation must be taken at a duly called annual or special meeting of shareholders of the Corporation. No shareholder action may be taken by a consent in writing. Section 14. Fixing Record Date. For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other proper purposes, the Board of Directors may fix in advance a date as the record date for any such determination of shareholders, such date in any case to be not more than 60 days, and, in case of a meeting of shareholders, not less than ten days, prior to the date on which the particular action requiring such determination of shareholders is to be taken. If no record date is fixed for the determination of shareholders entitled to notice of or to vote at a meeting of shareholders, or shareholders entitled to receive payment of a dividend, the date on which the notice of the meeting is mailed or the date on which the resolutions of the Board of Directors declaring such dividend is adopted, as the case may be, shall be the record date for such determination of shareholders. When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this Section 14, such determination shall apply to any adjournment thereof, except where the Board of Directors fixes a new record date for the adjourned meeting or as required by law. Section 15. Inspectors and Judges. The Board of Directors in advance of any meeting may, but need not, appoint one or more inspectors of election or judges of the vote, as the case may be, to act at the meeting or any adjournment(s) thereof. If any inspector or inspectors, or judge or judges, are not appointed, the person presiding at the meeting may, but need not, appoint one or more inspectors or judges. In case any person who may be appointed as an inspector or judge fails to appear or act, the vacancy may be filled by the Board of Directors in advance of the meeting, or at the meeting by the person presiding thereat. The inspectors or judges, if any, shall determine the number of shares of stock outstanding and the voting power of each, the shares of stock represented at the meeting, the existence of a quorum, the validity and effect of proxies, and shall receive votes, ballots and consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate votes, ballots and consents, determine the result, and do such acts as are proper to conduct the election or vote with fairness to all shareholders. On request of the person presiding at the meeting, the inspector or inspectors or judge or judges, if any, shall make a report in writing of any challenge, question or matter determined by them, and execute a certificate of any fact found by them. -6- ARTICLE THREE DIRECTORS Section 1. Number, Election and Term. The business of the Corporation shall be managed by a Board of Directors who need not be shareholders of the Corporation. The number of Directors shall not be less than seven nor more than 15, as determined from time to time by resolution of the majority of the Board of Directors. The Board of Directors shall be divided into three classes, designated Class I, Class II and Class III, as nearly equal in number as possible. The terms of office of directors of one class shall expire at each annual meeting of shareholders, and in all cases as to each director until his successor shall be elected and shall qualify, or until his earlier resignation, removal from office, death or incapacity. If the number of directors is changed, any increase or decrease in directors shall be apportioned among the classes so as to maintain all classes as equal in number as possible, and any additional director elected to any class shall hold office for a term which shall coincide with the terms of the other directors in such class. No decrease in the number of directors shall shorten the term of any incumbent director. At each annual meeting, the number of directors equal to the number of directors of the class whose term expires at the time of such meeting (or, if different, the number of directors properly nominated and qualified for election) shall be elected to hold office until the third succeeding annual meeting of shareholders after their election. At each annual meeting of shareholders, the nominees receiving the highest number of votes will be elected. Section 2. Removal. Any director or the entire Board of Directors may be removed; however, such removal must be for cause and must be approved as set forth in this Section. Except as may otherwise be provided by law, cause for removal shall be construed to exist only if (a) the director whose removal is proposed has been convicted of a felony by a court of competent jurisdiction, or (b) such director has been adjudicated by a court of competent jurisdiction to be liable for negligence or misconduct in the performance of his duty to the Corporation in a matter of substantial importance to the Corporation and such adjudication is no longer subject to direct appeal. Removal for cause, as defined in (a) and (b) above must be approved by a least a majority vote of the shares of the Corporation then entitled to vote at an election for that director or by at least a majority of the total number of directors. Any action for the removal of a director must be brought within one year of such conviction or adjudication. Section 3. Vacancies. Any vacancies in the Board of Directors resulting from death, resignation, retirement, removal from office, the creation of a new directorship by an increase in the authorized number of directors, or otherwise shall be filled by a majority vote of the directors than in office, though less than a quorum of the entire Board of Directors. Directors so chosen to fill any vacancy shall hold office for a term expiring at the next Annual Meeting of Shareholders at which directors are elected. Section 4. Powers. Except as provided in the Articles of Incorporation and Bylaws, all corporate powers shall be exercised by or under the authority of, and the business and affairs of the Corporation shall be managed under the direction of, its Board of Directors. Section 5. Place of Meetings. Meetings of the Board of Directors, regular or special, may be held either within or outside the State of Florida. -7- Section 6. Annual Meeting. The first meeting of each newly elected Board of Directors shall be held, without call or notice, immediately following each annual meeting of shareholders. Section 7. Regular Meetings. Regular meetings of the Board of Directors may also be held without notice at such time and at such place as shall from time to time be determined by the Board of Directors. Section 8. Special Meetings and Notice. Special meetings of the Board of Directors may be called by the Chairman of the Board or by the President and shall be called by the Secretary on the written request of any three directors. Written notice of special meetings of the Board of Directors shall be given to each director at least 48 hours before the meeting. Except as required by statute, neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice or waiver of notice of such meeting. Notices to directors shall be in writing and delivered personally or mailed to the directors at their addresses appearing on the books of the Corporation. Notice by mail shall be deemed to be given at the time when the same shall be received. Notice to directors may also be given by facsimile or e-mail or any other generally acceptable form of electronic communication. Notice of a meeting of the Board of Directors need not be given to any director who signs a written waiver of notice before, during or after the meeting. Attendance of a director at a meeting shall constitute a waiver of notice of such meeting and a waiver of any and all objections to the place of the meeting, the time of the meeting and the manner in which it has been called or convened, except when a director states, at the beginning of the meeting or promptly upon arrival at the meeting, any objection to the transaction of business because the meeting is not lawfully called or convened. Section 9. Quorum; Required Vote; Presumption of Assent. A majority of the number of directors fixed by, or in the manner provided in, these Bylaws shall constitute a quorum for the transaction of business; provided, however, that whenever, for any reason, a vacancy occurs in the Board of Directors, a quorum shall consist of a majority of the remaining directors until the vacancy has been filled. The act of a majority of the directors present at a meeting at which a quorum is present when the vote is taken shall be the act of the Board of Directors. A director of the Corporation who is present at a meeting of the Board of Directors or a committee of the Board of Directors when corporate action is taken shall be presumed to have assented to the action taken, unless such director objects at the beginning of the meeting or promptly upon his or her arrival, to holding the meeting or transacting specific business at the meeting, or he or she votes against or abstains from the action taken. Section 10. Action Without Meeting. Any action required or permitted to be taken at a meeting of the Board of Directors or a committee thereof may be taken without a meeting if a consent in writing, setting forth the action taken, is signed by all of the members of the Board of Directors or the committee, as the case may be, and such consent shall have the same force and effect as a unanimous vote at a meeting. Action taken under this section is effective when the last director signs the consent, unless the consent specifies a different effective date. A consent signed under this Section 10 shall have the effect of a meeting vote and may be described as such in any document. -8- Section 11. Conference Telephone or Similar Communications Equipment Meetings. Members of the Board of Directors may participate in a meeting of the Board by means of conference telephone, video conferencing or similar communications equipment by means of which all persons participating in the meeting can hear each other at the same time. Participation in such a meeting shall constitute presence in person at the meeting, except where a person participates in the meeting for the express purpose of objecting to the transaction of any business on the ground the meeting is not lawfully called or convened. Section 12. Committees. The Board of Directors, by resolution adopted by a majority of the full Board of Directors, may designate from among its members an executive committee and one or more other committees, each of which, to the extent provided in such resolution, shall have and may exercise all of the authority of the Board of Directors in the business and affairs of the Corporation, except where the action of the full Board of Directors is required by statute. Each committee must have two or more members who serve at the pleasure of the Board of Directors. The Board of Directors, by resolution adopted in accordance with this Article Three, may designate one or more directors as alternate members of any committee, who may act in the place and stead of any absent member or members at any meeting of such committee. Vacancies in the membership of a committee shall be filled by the Board of Directors at a regular or special meeting of the Board of Directors. The committees shall keep regular minutes of its proceedings and report the same to the Board of Directors when required. The designation of any such committee and the delegation thereto of authority shall not operate to relieve the Board of Directors, or any member thereof, of any responsibility imposed upon it or such director by law. Section 13. Compensation of Directors. The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as director. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings. Section 14. Chairman of the Board. The Board of Directors may, in its discretion, choose a chairman of the board who shall preside at meetings of the shareholders and of the directors. The Chairman of the Board shall lead the Board of Directors in fulfilling its responsibilities. Additionally, the Chairman of the Board shall be an officer of the Company, subject to control of the Board, and will have supervisory responsibility over the strategic corporate vision, material acquisitions, venture-type investments and philanthropic matters. The Chairman of the Board shall have such other powers and shall perform such other duties as shall be designated by the Board of Directors. The Chairman of the Board shall be a member of the Board of Directors but no other officer of the Corporation need be a director. The Chairman of the Board shall serve until his or her successor is chosen and qualified, but the Chairman may be removed at any time by the affirmative vote of a majority of the Board of Directors. -9- ARTICLE FOUR OFFICERS Section 1. Positions. The officers of the Corporation shall consist of a Chief Executive Officer, a President and a Chief Financial Officer, and, if elected by the Board of Directors by resolution, a Chairman of the Board, a Treasurer, a Secretary and one or more Senior Vice Presidents or Vice Presidents. Any two or more offices may be held by the same person. Section 2. Election of Specified Officers by Board. The Board of Directors at its first meeting after each annual meeting of shareholders shall elect a Chief Executive Officer, a President and a Chief Financial Officer, and may elect a Chairman of the Board, a Secretary, a Treasurer or one or more Senior Vice Presidents or Vice Presidents. Section 3. Election or Appointment of Other Officers. Such other officers and assistant officers and agents as may be deemed necessary may be elected or appointed by the Board of Directors, or, unless otherwise specified herein, appointed by the Chief Executive Officer or President of the Corporation. The Board of Directors shall be advised of appointments by the Chief Executive Officer or President at or before the next scheduled Board of Directors meeting. Section 4. Salaries. The salaries of the Chairman of the Board, the Chief Executive Officer and the President shall be fixed from time to time by the Board of Directors pursuant to its discretion. The salaries of all other elected or appointed officers of the Corporation shall be fixed from time to time by the Chief Executive Officer or President of the Corporation or pursuant to his or her direction. Section 5. Term; Resignation. The officers of the Corporation shall hold office until their successors are chosen and qualified. Any officer or agent elected or appointed by the Board of Directors or the Chief Executive Officer or President of the Corporation may be removed, with or without cause, by the Board of Directors. Any officers or agents appointed by the Chief Executive Officer or President of the Corporation pursuant to Section 3 of this Article Four may also be removed from such officer positions by the Chief Executive Officer or President, with or without cause. Any vacancy occurring in any office of the Corporation by death, resignation, removal or otherwise shall be filled by the Board of Directors, or, in the case of an officer appointed by the Chief Executive Officer or President of the Corporation, by the Chief Executive Officer, the President or the Board of Directors. Any officer of the Corporation may resign from his or her respective office or position by delivering notice to the Corporation. Such resignation is effective when delivered unless the notice specifies a later effective date. If a resignation is made effective at a later date and the Corporation accepts the future effective date, the Board of Directors may fill the pending vacancy before the effective date if the Board provides that the successor does not take office until the effective date. Section 6. Chief Executive Officer . The Chief Executive Officer shall exercise general and active management of the business of the Corporation and shall see that all orders -10- and resolutions of the Board of Directors are carried into effect. In the absence of the Chairman of the Board or in the event the Board of Directors shall not have designated a chairman of the board, the Chief Executive Officer shall preside at meetings of the shareholders and the Board of Directors. Section 7. President. In the absence of the Chief Executive Officer, the President shall perform the duties and exercise the powers of the Chief Executive Officer. The President shall perform such other duties and have such other powers as the Board of Directors shall prescribe or as the Chief Executive Officer may from time to time delegate. Section 8. Senior Vice Presidents and Vice Presidents. The Senior Vice Presidents and Vice Presidents in the order of their seniority, unless otherwise determined by the Board of Directors, in the absence or disability of the Chief Executive Officer and the President, or any Senior Vice President as applicable, shall perform the duties and exercise the powers of the President. They shall perform such other duties and have such other powers as the Board of Directors shall prescribe or as the Chief Executive Officer or President may from time to time delegate. Section 9. Secretary. The Secretary shall attend all meetings of the Board of Directors and all meetings of the shareholders and record all the proceedings of the meetings of the shareholders and of the Board of Directors in a book to be kept for that purpose and shall perform like duties for the standing committees when required. The Secretary shall give, or cause to be given, notice of all meetings of the shareholders and special meetings of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors, Chief Executive Officer or President, under whose supervision he or she shall be. The Secretary shall keep in safe custody the seal of the Corporation and, when authorized by the Board of Directors, affix the same to any instrument requiring it. Section 10. Chief Financial Officer. The Chief Financial Officer shall have the custody of corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. The Chief Financial Officer shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the President and the Board of Directors at its regular meetings or when the Board of Directors so requires an account of all his or her transactions as treasurer and of the financial condition of the Corporation unless otherwise specified by the Board of Directors, the Chief Financial Officer shall be the Corporation's Treasurer. ARTICLE FIVE CERTIFICATES FOR SHARES Section 1. Issue of Certificates. The Corporation shall deliver certificates representing all shares to which shareholders are entitled; and such certificates shall be signed by the Chairman of the Board, Chief Executive Officer, President or a Senior Vice President, and by -11- the Secretary or an Assistant Secretary of the Corporation, and may be sealed with the seal of the Corporation or a facsimile thereof. Section 2. Legends for Preferences and Restrictions on Transfer. The designations, relative rights, preferences and limitations applicable to each class of shares and the variations in rights, preferences and limitations determined for each series within a class (and the authority of the Board of Directors to determine variations for future series) shall be summarized on the front or back of each certificate. Alternatively, each certificate may state conspicuously on its front or back that the Corporation will furnish the shareholder a full statement of this information on request and without charge. At the option of the Board of Directors or an officer of the Corporation, any certificate representing shares that are restricted as to the sale, disposition, or transfer of such shares shall also indicate that such shares are restricted as to transfer and there shall be set forth or fairly summarized upon the certificate, or the certificate shall indicate that the Corporation will furnish to any shareholder upon request and without charge, a full statement of such restrictions. If the Corporation issues any shares that are not registered under the Securities Act of 1933, as amended, and registered or qualified under the applicable state securities laws, the transfer of any such shares shall be restricted substantially in accordance with the following legend: "THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR UNDER ANY APPLICABLE STATE LAW. THEY MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR PLEDGED WITHOUT (1) REGISTRATION UNDER THE SECURITIES ACT OF 1933 AND ANY APPLICABLE STATE LAW, OR (2) AT HOLDER'S EXPENSE, AN OPINION (SATISFACTORY TO THE CORPORATION) OF COUNSEL (SATISFACTORY TO THE CORPORATION) THAT REGISTRATION IS NOT REQUIRED." Section 3. Facsimile Signatures. The signatures of the Chairman of the Board, the Chief Executive Officer, the President or a Senior Vice President and the Secretary or Assistant Secretary upon a certificate may be facsimiles, if the certificate is manually signed by a transfer agent, or registered by a registrar, other than the Corporation itself or an employee of the Corporation. In case any officer who has signed or whose facsimile signature has been placed upon such certificate shall have ceased to be such officer before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer at the date of the issuance. Section 4. Lost Certificates. The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost or destroyed. When authorizing such issue of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and/or to give the Corporation a bond in such sum as it may direct as indemnity against any claim -12- that may be made against the Corporation with respect to the certificate alleged to have been lost or destroyed. Section 5. Transfer of Shares. Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. Section 6. Registered Shareholders. The Corporation shall be entitled to recognize the exclusive rights of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of the State of Florida. Section 7. Redemption of Control Shares. Section 607.0902 of the Florida Business Corporation Act shall apply to control share acquisitions (as that term is defined in such section) of shares of the Corporation. As provided by the Florida Business Corporation Act, if a person acquiring control shares of the Corporation does not file an acquiring person statement with the Corporation, the Corporation may redeem the control shares at fair market value at any time during the period ending 60 days after the last acquisition of such control shares. If a person acquiring control shares of the Corporation files an acquiring person statement with the Corporation, the control shares may be redeemed by the Corporation only if such shares are not accorded full voting rights by the shareholders as provided by law. ARTICLE SIX MISCELLANEOUS PROVISIONS Section 1. Dividends. The Board of Directors may from time to time declare, and the Corporation may pay, dividends on its outstanding shares in cash, property, or its own shares pursuant to law and subject to the provisions of the Articles of Incorporation. Section 2. Reserves. The Board of Directors may by resolution create a reserve or reserves out of earned surplus for any proper purpose or purposes, and may abolish any such reserve in the same manner. Section 3. Checks. All checks or demands for money and notes of the Corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors or the Chief Executive Officer or President may from time to time designate. Section 4. Fiscal Year. The fiscal year of the Corporation shall end on December 31 of each year and may be changed from time to time by resolution of the Board of Directors. -13- Section 5. Seal. The corporate seal shall have inscribed thereon the name and state of incorporation of the Corporation. The seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced. ARTICLE SEVEN AMENDMENTS OF BYLAWS Unless otherwise provided by law, these Bylaws may be altered, amended or repealed or new Bylaws may be adopted by action of the Board of Directors. ARTICLE EIGHT INDEMNIFICATION The Corporation shall indemnify and hold harmless any director, officer, employee, or agent of the Corporation and its subsidiaries against all liability and expense to the fullest extent permitted by law currently in effect or hereinafter enacted. -14- EX-99.1 4 g82522exv99w1.htm EX-99.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER

Exhibit 99.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350

     In connection with the Quarterly Report on Form 10-Q of Applica Incorporated for the quarter ended March 31, 2003 as filed with the Securities and Exchange Commission (the “Report”), I, Harry D. Schulman, President, Chief Executive Officer and Secretary of Applica Incorporated, hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Applica Incorporated.

Dated: April 30, 2003	By:	/s/ Harry D. Schulman
		Harry D. Schulman President, Chief Executive Officer and Secretary

EX-99.2 5 g82522exv99w2.htm EX-99.2 CERTIFICATION OF CHIEF FINANCIAL OFFICER

Exhibit 99.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350

     In connection with the Quarterly Report on Form 10-Q of Applica Incorporated for the quarter ended March 31, 2003 as filed with the Securities and Exchange Commission (the “Report”), I, Terry Polistina, Senior Vice President and Chief Financial Officer of Applica Incorporated, hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(3)	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(4)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Applica Incorporated.

Dated: April 30, 2003	By:	/s/ Terry L. Polistina
		Terry L. Polistina Senior Vice President and Chief Financial Officer

-----END PRIVACY-ENHANCED MESSAGE-----

EX-3.1

                                                                    EXHIBIT 3.1


                              AMENDED AND RESTATED

                                     BYLAWS

                                       OF
                              APPLICA INCORPORATED
                            (A FLORIDA CORPORATION)
                               FEBRUARY 25, 2003



                                     INDEX



                                                                                                                PAGE
                                                                                                               NUMBER

                                                                                                            
ARTICLE ONE - OFFICES.............................................................................................1
         Section 1.     Registered Office.........................................................................1
         Section 2.     Other Offices.............................................................................1

ARTICLE TWO - MEETINGS OF SHAREHOLDERS............................................................................1
         Section 1.     Place.....................................................................................1
         Section 2.     Time of Annual Meeting....................................................................1
         Section 3.     Call of Special Meetings..................................................................1
         Section 4.     Conduct of Meetings.......................................................................1
         Section 5.     Notice and Waiver of Notice...............................................................2
         Section 6.     Notice Requirements for Director Nominations and Shareholder Proposals....................2
         Section 7.     Business of Special Meeting...............................................................4
         Section 8.     Quorum....................................................................................4
         Section 9.     Voting Per Share..........................................................................4
         Section 10.    Voting of Shares..........................................................................4
         Section 11.    Proxies...................................................................................5
         Section 12.    Shareholder List..........................................................................5
         Section 13.    Action Without Meeting....................................................................6
         Section 14.    Fixing Record Date........................................................................6
         Section 15.    Inspectors and Judges.....................................................................6

ARTICLE THREE - DIRECTORS.........................................................................................7
         Section 1.     Number, Election and Term.................................................................7
         Section 2.     Removal...................................................................................7
         Section 3.     Vacancies.................................................................................7
         Section 4.     Powers....................................................................................7
         Section 5.     Place of Meetings.........................................................................7
         Section 6.     Annual Meeting............................................................................8
         Section 7.     Regular Meetings..........................................................................8
         Section 8.     Special Meetings and Notice...............................................................8
         Section 9.     Quorum; Required Vote; Presumption of Assent..............................................8
         Section 10.    Action Without Meeting....................................................................8
         Section 11.    Conference Telephone or Similar Communications Equipment Meetings.........................9
         Section 12.    Committees................................................................................9
         Section 13.    Compensation of Directors.................................................................9
         Section 14.    Chairman of the Board.....................................................................9




                                                                                                              
ARTICLE FOUR - OFFICERS..........................................................................................10
         Section 1.     Positions................................................................................10
         Section 2.     Election of Specified Officers by Board..................................................10
         Section 3.     Election or Appointment of Other Officers................................................10
         Section 4.     Salaries.................................................................................10
         Section 5.     Term; Resignation........................................................................10
         Section 6.     Chief Executive Officer..................................................................10
         Section 7.     President................................................................................11
         Section 8.     Senior Vice Presidents and Vice Presidents...............................................11
         Section 9.     Secretary................................................................................11
         Section 10.    Chief Financial Officer..................................................................11

ARTICLE FIVE - CERTIFICATES FOR SHARES...........................................................................11
         Section 1.     Issue of Certificates....................................................................11
         Section 2.     Legends for Preferences and Restrictions on Transfer.....................................12
         Section 3.     Facsimile Signatures.....................................................................12
         Section 4.     Lost Certificates........................................................................12
         Section 5.     Transfer of Shares.......................................................................13
         Section 6.     Registered Shareholders..................................................................13
         Section 7.     Redemption of Control Shares.............................................................13

ARTICLE SIX - MISCELLANEOUS PROVISIONS...........................................................................13
         Section 1.     Dividends................................................................................13
         Section 2.     Reserves.................................................................................13
         Section 3.     Checks...................................................................................13
         Section 4.     Fiscal Year..............................................................................13
         Section 5.     Seal.....................................................................................14

ARTICLE SEVEN - AMENDMENTS OF BYLAWS.............................................................................14

ARTICLE EIGHT - INDEMNIFICATION..................................................................................14





                              APPLICA INCORPORATED

                       SECOND AMENDED AND RESTATED BYLAWS


                                  ARTICLE ONE

                                    OFFICES

         Section 1.        Registered Office. The registered office of APPLICA
INCORPORATED, a Florida corporation (the "Corporation"), shall be located in
the State of Florida, unless otherwise designated by the Board of Directors of
the Corporation (the "Board of Directors").

         Section 2.        Other Offices. The Corporation may also have offices
at such other places, either within or outside the State of Florida, as the
Board of Directors may from time to time determine or as the business of the
Corporation may require.

                                  ARTICLE TWO

                            MEETINGS OF SHAREHOLDERS

         Section 1.        Place. All annual meetings of shareholders shall be
held at such place, within or outside the State of Florida, as may be
designated by the Board of Directors and stated in the notice of the meeting or
in a duly executed waiver of notice thereof. Special meetings of shareholders
may be held at such place, within or outside the State of Florida, and at such
time as shall be stated in the notice of the meeting or in a duly executed
waiver of notice thereof.

         Section 2.        Time of Annual Meeting. Annual meetings of
shareholders shall be held on such date and at such time fixed, from time to
time, by the Board of Directors, provided that there shall be an annual meeting
held every year at which the shareholders shall elect members of the Board of
Directors and transact such other business as may properly be brought before
the meeting.

         Section 3.        Call of Special Meetings. Special meetings of the
shareholders shall be held if called upon the written request of the Chairman
of the Board, the Chief Executive Officer, the President or a majority of the
Board of Directors acting without a meeting, or if the holders of not less than
ten percent (10%) of all the shares entitled to vote at the meeting sign, date,
and deliver to the Secretary one or more written demands for the meeting
describing the purpose or purposes for which it is to be held. The Board of
Directors shall fix the record date for and the place, date and hour of, the
meeting, and the Secretary shall give notice of such meeting and the place, day
and hour and the purpose or purposes thereof to the shareholders entitled
thereto. The Board of Directors of the Corporation may delay calling a
shareholder-initiated special meeting of shareholders to elect directors or to
vote upon a pending merger proposal for such period of time as is reasonably
necessary.

         Section 4.        Conduct of Meetings. The Chairman of the Board (or
in his absence, the President or such other designee of the Chairman of the
Board) shall preside at the annual and



special meetings of shareholders and shall be given full discretion in
establishing the rules and procedures to be followed in conducting the
meetings, except as otherwise provided by law or in these Bylaws.

         Section 5.        Notice and Waiver of Notice. Except as otherwise
provided by law, written or printed notice stating the place, day and hour of
the meeting and, in the case of a special meeting, the purpose or purposes for
which the meeting is called, shall be delivered not less than ten nor more than
60 days before the day of the meeting, either personally or by first-class
mail, by or at the direction of the President, the Secretary, or the officer or
person calling the meeting, to each shareholder of record entitled to vote at
such meeting. If the notice is mailed at least 30 days before the date of the
meeting, it may be done by a class of United States mail other than
first-class. If mailed, such notice shall be deemed to be delivered when
deposited in the United States mail addressed to the shareholder at his or her
address as it appears on the stock transfer books of the Corporation, with
postage thereon prepaid. If a meeting is adjourned to another time and/or
place, and if an announcement of the adjourned time and/or place is made at the
meeting, it shall not be necessary to give notice of the adjourned meeting
unless the Board of Directors, after adjournment, fixes a new record date for
the adjourned meeting. Whenever any notice is required to be given to any
shareholder, a waiver thereof in writing signed by the person or persons
entitled to such notice, whether signed before, during or after the time of the
meeting stated therein, and delivered to the Corporation for inclusion in the
minutes or filing with the corporate records, shall be equivalent to the giving
of such notice. Neither the business to be transacted at, nor the purpose of,
any regular or special meeting of the shareholders need be specified in any
written waiver of notice. Attendance of a person at a meeting shall constitute
a waiver of (a) lack of or defective notice of such meeting, unless the person
objects at the beginning to the holding of the meeting or the transacting of
any business at the meeting, or (b) lack of defective notice of a particular
matter at a meeting that is not within the purpose or purposes described in the
meeting notice, unless the person objects to considering such matter when it is
presented.

         Section 6.        Notice Requirements for Director Nominations and
Shareholder Proposals.

         (a)      Only persons who are nominated in accordance with the
procedures set forth in these Bylaws shall be eligible to serve as directors.
Nominations of persons for election to the Board of Directors of the
Corporation may be made at a meeting of shareholders (i) by or at the direction
of the Board of Directors or (ii) by any shareholder of the Corporation who is
a shareholder of record at the time of giving of notice provided for in this
Bylaw, who shall be entitled to vote for the election of directors at the
meeting and who complies with the notice procedures set forth in this Bylaw.

         (b)      Nominations by shareholders shall be made pursuant to timely
notice in writing to the Secretary of the Corporation. To be timely, a
shareholder's notice shall be delivered to or mailed and received at the
principal executive offices of the Corporation (a) in the case of an annual
meeting, not less than 90 days nor more than 120 days prior to the first
anniversary of the date of the notice of preceding year's annual meeting;
provided, however, that in the event that the date of the annual meeting is
changed by more than 30 days from such anniversary date,


                                      -2-

notice by the shareholder to be timely must be so received not later than the
close of business on the tenth day following the earlier of the day on which
notice of the date of the meeting was mailed or public disclosure was made, and
(b) in the case of a special meeting at which directors are to be elected, not
later than the close of business on the tenth day following the earlier of the
day on which notice of the date of the meeting was mailed or public disclosure
was made.

         (c)      Such shareholder's notice shall set forth (i) as to each
person whom the shareholder proposes to nominate for election or reelection as
a director all information relating to such person that is required to be
disclosed in solicitations of proxies for elections of directors, or is
otherwise required, in each case pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended (including such person's written
consent to being named in the proxy statement as a nominee and to serving as a
director if elected); (ii) as to the shareholder giving the notice (A) the name
and address, as they appear on the Corporation's books, of such shareholder and
(B) the class and number of shares of the Corporation which are beneficially
owned by such shareholder and also which are owned by such shareholder and also
which are owned of record by such shareholder; and (iii) as to the beneficial
owner, if any, on whose behalf the nomination is made, (A) the name and address
of such person and (B) the class and number of shares of the Corporation which
are beneficially owned by such person. At the request of the Board of
Directors, any person nominated by the Board of Directors for election as a
director shall furnish to the Secretary of the Corporation that information
required to be set forth in a shareholder's notice of nomination which pertains
to the nominee.

         (d)      At an annual meeting of the shareholders, only such business
shall be conducted as shall have been brought before the meeting (i) pursuant
to the Corporation's notice of meeting, (ii) by or at the direction of the
Board of Directors or (iii) by any shareholder of the Corporation who is a
shareholder of record at the time of giving of the notice provided for in this
Bylaw, who shall be entitled to vote at such meeting and who complies with the
notice procedures set forth in this Bylaw.

         (e)      For business to be properly brought before an annual meeting
by a shareholder pursuant to clause (iii) of paragraph (d) of this Bylaw the
shareholder must have given timely notice thereof in writing to the Secretary
of the Corporation. To be timely, a shareholder's notice must be delivered to
or mailed and received at the principal executive offices of the Corporation
not less than 90 days nor more than 120 days prior to the first anniversary of
the date of the notice of the preceding year's annual meeting; provided,
however, that in the event that the date of the meeting is changed by more than
30 days from such anniversary date, to be timely, notice by the shareholder
must be received no later than the close of business on the tenth day following
the earlier of the day on which notice of the date of the meeting was mailed or
public disclosure was made. A shareholder's notice to the Secretary shall set
forth as to each matter the shareholder proposes to bring before the meeting
(i) a brief description of the business desired to be brought before the
meeting and the reasons for conducting such business at the meeting, (ii) the
name and address, as they appear on the Corporation's books, of the shareholder
proposing such business, and the name and address of the beneficial owner, if
any, on whose behalf the proposal is made, (iii) the class and number of shares
of the Corporation which are owned beneficially and of record by such
shareholder of record and by the beneficial owner, if


                                      -3-

any, on whose behalf the proposal is made and (iv) any material interest of such
shareholder of record and the beneficial owner, if any, on whose behalf the
proposal is made in such business.

         (f)      Notwithstanding anything in these Bylaws to the contrary, no
business shall be conducted at an annual meeting except in accordance with the
procedures set forth in this Bylaw. Additionally, no person shall be eligible
to serve as a director of the Corporation unless nominated in accordance with
the procedures set forth in this Bylaw. The Chairman of the meeting shall, if
the facts warrant, determine and declare to the meeting that (1) the business
was not properly brought before the meeting and in accordance with the
procedures prescribed by this Bylaw or (2) a nomination was not made in
accordance with the procedures prescribed by these Bylaws. If the Chairman
should so determine, he or she shall so declare to the meeting and any such
business not properly brought before the meeting shall not be transacted or the
defective nomination shall be disregarded. Notwithstanding the foregoing
provisions of this Bylaw, a shareholder shall also comply with all applicable
requirements of the Securities Exchange Act of 1934, as amended, and the rules
and regulations thereunder with respect to the matters set forth in this Bylaw.

         Section 7.        Business of Special Meeting. Business transacted at
any special meeting shall be confined to the purposes stated in the notice
thereof.

         Section 8.        Quorum. Shares entitled to vote as a separate voting
group may take action on a matter at a meeting only if a quorum of those shares
exists with respect to that matter. Except as otherwise provided in the
Articles of Incorporation or Bylaws, a majority of the shares entitled to vote
on the matter by each voting group, represented in person or by proxy, shall
constitute a quorum at any meeting of shareholders, but in no event shall a
quorum consist of less than one-third of the shares of each voting group
entitled to vote. If less than a majority of outstanding shares entitled to
vote are represented at a meeting, a majority of the shares so represented may
adjourn the meeting from time to time without further notice. After a quorum
has been established at any shareholders' meeting, the subsequent withdrawal of
shareholders, so as to reduce the number of shares entitled to vote at the
meeting below the number required for a quorum, shall not affect the validity
of any action taken at the meeting or any adjournment thereof. Once a share is
represented for any purpose at a meeting, it is deemed present for quorum
purposes for the remainder of the meeting and for any adjournment of that
meeting unless a new record date is or must be set for that adjourned meeting.

         Section 9.        Voting Per Share. Except as otherwise provided in
the Articles of Incorporation or by law, each shareholder is entitled to one
vote for each outstanding share held by him or her on each matter voted at a
shareholders' meeting.

         Section 10.       Voting of Shares. A shareholder may vote at any
meeting of shareholders of the Corporation, either in person or by proxy.
Shares standing in the name of a corporation, domestic or foreign, may be voted
by the officer, agent or proxy designated by the bylaws of such corporate
shareholder or, in the absence of any applicable bylaw, by such person or
persons as the board of directors of the corporate shareholder may designate.
In the absence of any such designation, or, in case of conflicting designation
by the corporate shareholder, the chairman of the board, the president, any
vice president, the secretary and the treasurer of the corporate


                                      -4-

shareholder, in that order, shall be presumed to be fully authorized to vote
such shares. Shares held by an administrator, executor, guardian, personal
representative, or conservator may be voted by such person, either in person or
by proxy, without a transfer of such shares into his or her name. Shares
standing in the name of a trustee may be voted by such trustee, either in
person or by proxy, but no trustee shall be entitled to vote shares held by him
or her without a transfer of such shares into his or her name or the name of
his or her nominee. Shares held by or under the control of a receiver, a
trustee in bankruptcy proceedings, or an assignee for the benefit of creditors
may be voted by such person without the transfer thereof into his or her name.
If shares stand of record in the names of two or more persons, whether
fiduciaries, members of a partnership, joint tenants, tenants in common,
tenants by the entirety or otherwise, or if two or more persons have the same
fiduciary relationship respecting the same shares, unless the Secretary of the
Corporation is given notice to the contrary and is furnished with a copy of the
instrument or order appointing them or creating the relationship wherein it is
so provided, then acts with respect to voting shall have the following effect:
(a) if only one votes, in person or by proxy, such person's act binds all; (b)
if more than one vote, in person or by proxy, the act of the majority so voting
binds all; (c) if more than one vote, in person or by proxy, but the vote is
evenly split on any particular matter, each faction is entitled to vote the
share or shares in question proportionally; or (d) if the instrument or order
so filed shows that any such tenancy is held in unequal interest, a majority or
a vote evenly split for purposes hereof shall be a majority or a vote evenly
split in interest. The principles of this paragraph shall apply, insofar as
possible, to execution of proxies, waivers, consents, or objections and for the
purpose of ascertaining the presence of a quorum.

         Section 11.       Proxies. Any shareholder of the Corporation, other
person entitled to vote on behalf of a shareholder pursuant to law, or
attorney-in-fact for such persons may vote the shareholder's shares in person
or by proxy. Any shareholder of the Corporation may appoint a proxy to vote or
otherwise act for such shareholder by signing an appointment form, either
personally or by his or her attorney-in-fact. An executed facsimile appearing
to have been transmitted by such person, or a photographic, photostatic, or
equivalent reproduction of an appointment form, shall be deemed a sufficient
appointment form. An appointment of a proxy is effective when received by the
Secretary of the Corporation or such other officer or agent which is authorized
to tabulate votes, and shall be valid for up to 11 months, unless a longer
period is expressly provided in the appointment form. The death or incapacity
of the shareholder appointing a proxy does not affect the right of the
Corporation to accept the proxy's authority unless notice of the death or
incapacity is received by the secretary or other officer or agent authorized to
tabulate votes before the proxy exercises his or her authority under the
appointment. An appointment of a proxy is revocable by the shareholder unless
the appointment is coupled with an interest.

         Section 12.       Shareholder List. After fixing a record date for a
meeting of shareholders, the Corporation shall prepare an alphabetical list of
the names of all its shareholders who are entitled to notice of the meeting,
arranged by voting group with the address of, and the number and class and
series, if any, of shares held by each. The shareholders' list must be
available for inspection by any shareholder for a period of ten days prior to
the meeting or such shorter time as exists between the record date and the
meeting and continuing through the meeting at the Corporation's principal
office, at a place identified in the meeting notice in the city where the


                                      -5-

meeting will be held, or at the office of the Corporation's transfer agent or
registrar. Any shareholder of the Corporation or his or her agent or attorney
is entitled on written demand to inspect the shareholders' list (subject to the
requirements of law), during regular business hours and at such shareholder's
expense, during the period it is available for inspection. The Corporation
shall make the shareholders' list available at the meeting of shareholders, and
any shareholder or his or her agent or attorney is entitled to inspect the list
at any time during the meeting or any adjournment.

         Section 13.       Action Without Meeting. Any action required or
permitted to be taken by the shareholders of the Corporation must be taken at a
duly called annual or special meeting of shareholders of the Corporation. No
shareholder action may be taken by a consent in writing.

         Section 14.       Fixing Record Date. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or entitled to receive payment of any dividend, or in
order to make a determination of shareholders for any other proper purposes,
the Board of Directors may fix in advance a date as the record date for any
such determination of shareholders, such date in any case to be not more than
60 days, and, in case of a meeting of shareholders, not less than ten days,
prior to the date on which the particular action requiring such determination
of shareholders is to be taken. If no record date is fixed for the
determination of shareholders entitled to notice of or to vote at a meeting of
shareholders, or shareholders entitled to receive payment of a dividend, the
date on which the notice of the meeting is mailed or the date on which the
resolutions of the Board of Directors declaring such dividend is adopted, as
the case may be, shall be the record date for such determination of
shareholders. When a determination of shareholders entitled to vote at any
meeting of shareholders has been made as provided in this Section 14, such
determination shall apply to any adjournment thereof, except where the Board of
Directors fixes a new record date for the adjourned meeting or as required by
law.

         Section 15.       Inspectors and Judges. The Board of Directors in
advance of any meeting may, but need not, appoint one or more inspectors of
election or judges of the vote, as the case may be, to act at the meeting or
any adjournment(s) thereof. If any inspector or inspectors, or judge or judges,
are not appointed, the person presiding at the meeting may, but need not,
appoint one or more inspectors or judges. In case any person who may be
appointed as an inspector or judge fails to appear or act, the vacancy may be
filled by the Board of Directors in advance of the meeting, or at the meeting
by the person presiding thereat. The inspectors or judges, if any, shall
determine the number of shares of stock outstanding and the voting power of
each, the shares of stock represented at the meeting, the existence of a
quorum, the validity and effect of proxies, and shall receive votes, ballots
and consents, hear and determine all challenges and questions arising in
connection with the right to vote, count and tabulate votes, ballots and
consents, determine the result, and do such acts as are proper to conduct the
election or vote with fairness to all shareholders. On request of the person
presiding at the meeting, the inspector or inspectors or judge or judges, if
any, shall make a report in writing of any challenge, question or matter
determined by them, and execute a certificate of any fact found by them.


                                      -6-

                                 ARTICLE THREE

                                   DIRECTORS

         Section 1.        Number, Election and Term. The business of the
Corporation shall be managed by a Board of Directors who need not be
shareholders of the Corporation. The number of Directors shall not be less than
seven nor more than 15, as determined from time to time by resolution of the
majority of the Board of Directors. The Board of Directors shall be divided
into three classes, designated Class I, Class II and Class III, as nearly equal
in number as possible. The terms of office of directors of one class shall
expire at each annual meeting of shareholders, and in all cases as to each
director until his successor shall be elected and shall qualify, or until his
earlier resignation, removal from office, death or incapacity. If the number of
directors is changed, any increase or decrease in directors shall be
apportioned among the classes so as to maintain all classes as equal in number
as possible, and any additional director elected to any class shall hold office
for a term which shall coincide with the terms of the other directors in such
class. No decrease in the number of directors shall shorten the term of any
incumbent director. At each annual meeting, the number of directors equal to
the number of directors of the class whose term expires at the time of such
meeting (or, if different, the number of directors properly nominated and
qualified for election) shall be elected to hold office until the third
succeeding annual meeting of shareholders after their election. At each annual
meeting of shareholders, the nominees receiving the highest number of votes
will be elected.

         Section 2.        Removal. Any director or the entire Board of
Directors may be removed; however, such removal must be for cause and must be
approved as set forth in this Section. Except as may otherwise be provided by
law, cause for removal shall be construed to exist only if (a) the director
whose removal is proposed has been convicted of a felony by a court of
competent jurisdiction, or (b) such director has been adjudicated by a court of
competent jurisdiction to be liable for negligence or misconduct in the
performance of his duty to the Corporation in a matter of substantial
importance to the Corporation and such adjudication is no longer subject to
direct appeal. Removal for cause, as defined in (a) and (b) above must be
approved by a least a majority vote of the shares of the Corporation then
entitled to vote at an election for that director or by at least a majority of
the total number of directors. Any action for the removal of a director must be
brought within one year of such conviction or adjudication.

         Section 3.        Vacancies. Any vacancies in the Board of Directors
resulting from death, resignation, retirement, removal from office, the
creation of a new directorship by an increase in the authorized number of
directors, or otherwise shall be filled by a majority vote of the directors
than in office, though less than a quorum of the entire Board of Directors.
Directors so chosen to fill any vacancy shall hold office for a term expiring
at the next Annual Meeting of Shareholders at which directors are elected.

         Section 4.        Powers. Except as provided in the Articles of
Incorporation and Bylaws, all corporate powers shall be exercised by or under
the authority of, and the business and affairs of the Corporation shall be
managed under the direction of, its Board of Directors.

         Section 5.        Place of Meetings. Meetings of the Board of
Directors, regular or special, may be held either within or outside the State
of Florida.


                                      -7-

         Section 6.        Annual Meeting. The first meeting of each newly
elected Board of Directors shall be held, without call or notice, immediately
following each annual meeting of shareholders.

         Section 7.        Regular Meetings. Regular meetings of the Board of
Directors may also be held without notice at such time and at such place as
shall from time to time be determined by the Board of Directors.

         Section 8.        Special Meetings and Notice. Special meetings of the
Board of Directors may be called by the Chairman of the Board or by the
President and shall be called by the Secretary on the written request of any
three directors. Written notice of special meetings of the Board of Directors
shall be given to each director at least 48 hours before the meeting. Except as
required by statute, neither the business to be transacted at, nor the purpose
of, any regular or special meeting of the Board of Directors need be specified
in the notice or waiver of notice of such meeting. Notices to directors shall
be in writing and delivered personally or mailed to the directors at their
addresses appearing on the books of the Corporation. Notice by mail shall be
deemed to be given at the time when the same shall be received. Notice to
directors may also be given by facsimile or e-mail or any other generally
acceptable form of electronic communication. Notice of a meeting of the Board
of Directors need not be given to any director who signs a written waiver of
notice before, during or after the meeting. Attendance of a director at a
meeting shall constitute a waiver of notice of such meeting and a waiver of any
and all objections to the place of the meeting, the time of the meeting and the
manner in which it has been called or convened, except when a director states,
at the beginning of the meeting or promptly upon arrival at the meeting, any
objection to the transaction of business because the meeting is not lawfully
called or convened.

         Section 9.        Quorum; Required Vote; Presumption of Assent. A
majority of the number of directors fixed by, or in the manner provided in,
these Bylaws shall constitute a quorum for the transaction of business;
provided, however, that whenever, for any reason, a vacancy occurs in the Board
of Directors, a quorum shall consist of a majority of the remaining directors
until the vacancy has been filled. The act of a majority of the directors
present at a meeting at which a quorum is present when the vote is taken shall
be the act of the Board of Directors. A director of the Corporation who is
present at a meeting of the Board of Directors or a committee of the Board of
Directors when corporate action is taken shall be presumed to have assented to
the action taken, unless such director objects at the beginning of the meeting
or promptly upon his or her arrival, to holding the meeting or transacting
specific business at the meeting, or he or she votes against or abstains from
the action taken.

         Section 10.       Action Without Meeting. Any action required or
permitted to be taken at a meeting of the Board of Directors or a committee
thereof may be taken without a meeting if a consent in writing, setting forth
the action taken, is signed by all of the members of the Board of Directors or
the committee, as the case may be, and such consent shall have the same force
and effect as a unanimous vote at a meeting. Action taken under this section is
effective when the last director signs the consent, unless the consent
specifies a different effective date. A consent signed under this Section 10
shall have the effect of a meeting vote and may be described as such in any
document.


                                      -8-

         Section 11.       Conference Telephone or Similar Communications
Equipment Meetings. Members of the Board of Directors may participate in a
meeting of the Board by means of conference telephone, video conferencing or
similar communications equipment by means of which all persons participating in
the meeting can hear each other at the same time. Participation in such a
meeting shall constitute presence in person at the meeting, except where a
person participates in the meeting for the express purpose of objecting to the
transaction of any business on the ground the meeting is not lawfully called or
convened.

         Section 12.       Committees. The Board of Directors, by resolution
adopted by a majority of the full Board of Directors, may designate from among
its members an executive committee and one or more other committees, each of
which, to the extent provided in such resolution, shall have and may exercise
all of the authority of the Board of Directors in the business and affairs of
the Corporation, except where the action of the full Board of Directors is
required by statute. Each committee must have two or more members who serve at
the pleasure of the Board of Directors. The Board of Directors, by resolution
adopted in accordance with this Article Three, may designate one or more
directors as alternate members of any committee, who may act in the place and
stead of any absent member or members at any meeting of such committee.
Vacancies in the membership of a committee shall be filled by the Board of
Directors at a regular or special meeting of the Board of Directors. The
committees shall keep regular minutes of its proceedings and report the same to
the Board of Directors when required. The designation of any such committee and
the delegation thereto of authority shall not operate to relieve the Board of
Directors, or any member thereof, of any responsibility imposed upon it or such
director by law.

         Section 13.       Compensation of Directors. The directors may be paid
their expenses, if any, of attendance at each meeting of the Board of Directors
and may be paid a fixed sum for attendance at each meeting of the Board of
Directors or a stated salary as director. No such payment shall preclude any
director from serving the Corporation in any other capacity and receiving
compensation therefor. Members of special or standing committees may be allowed
like compensation for attending committee meetings.

         Section 14.       Chairman of the Board. The Board of Directors may,
in its discretion, choose a chairman of the board who shall preside at meetings
of the shareholders and of the directors. The Chairman of the Board shall lead
the Board of Directors in fulfilling its responsibilities. Additionally, the
Chairman of the Board shall be an officer of the Company, subject to control of
the Board, and will have supervisory responsibility over the strategic
corporate vision, material acquisitions, venture-type investments and
philanthropic matters. The Chairman of the Board shall have such other powers
and shall perform such other duties as shall be designated by the Board of
Directors. The Chairman of the Board shall be a member of the Board of
Directors but no other officer of the Corporation need be a director. The
Chairman of the Board shall serve until his or her successor is chosen and
qualified, but the Chairman may be removed at any time by the affirmative vote
of a majority of the Board of Directors.


                                      -9-

                                  ARTICLE FOUR

                                    OFFICERS

         Section 1.        Positions. The officers of the Corporation shall
consist of a Chief Executive Officer, a President and a Chief Financial
Officer, and, if elected by the Board of Directors by resolution, a Chairman of
the Board, a Treasurer, a Secretary and one or more Senior Vice Presidents or
Vice Presidents. Any two or more offices may be held by the same person.

         Section 2.        Election of Specified Officers by Board. The Board
of Directors at its first meeting after each annual meeting of shareholders
shall elect a Chief Executive Officer, a President and a Chief Financial
Officer, and may elect a Chairman of the Board, a Secretary, a Treasurer or one
or more Senior Vice Presidents or Vice Presidents.

         Section 3.        Election or Appointment of Other Officers. Such
other officers and assistant officers and agents as may be deemed necessary may
be elected or appointed by the Board of Directors, or, unless otherwise
specified herein, appointed by the Chief Executive Officer or President of the
Corporation. The Board of Directors shall be advised of appointments by the
Chief Executive Officer or President at or before the next scheduled Board of
Directors meeting.

         Section 4.        Salaries. The salaries of the Chairman of the Board,
the Chief Executive Officer and the President shall be fixed from time to time
by the Board of Directors pursuant to its discretion. The salaries of all other
elected or appointed officers of the Corporation shall be fixed from time to
time by the Chief Executive Officer or President of the Corporation or pursuant
to his or her direction.

         Section 5.        Term; Resignation. The officers of the Corporation
shall hold office until their successors are chosen and qualified. Any officer
or agent elected or appointed by the Board of Directors or the Chief Executive
Officer or President of the Corporation may be removed, with or without cause,
by the Board of Directors. Any officers or agents appointed by the Chief
Executive Officer or President of the Corporation pursuant to Section 3 of this
Article Four may also be removed from such officer positions by the Chief
Executive Officer or President, with or without cause. Any vacancy occurring in
any office of the Corporation by death, resignation, removal or otherwise shall
be filled by the Board of Directors, or, in the case of an officer appointed by
the Chief Executive Officer or President of the Corporation, by the Chief
Executive Officer, the President or the Board of Directors. Any officer of the
Corporation may resign from his or her respective office or position by
delivering notice to the Corporation. Such resignation is effective when
delivered unless the notice specifies a later effective date. If a resignation
is made effective at a later date and the Corporation accepts the future
effective date, the Board of Directors may fill the pending vacancy before the
effective date if the Board provides that the successor does not take office
until the effective date.

         Section 6.        Chief Executive Officer . The Chief Executive
Officer shall exercise general and active management of the business of the
Corporation and shall see that all orders


                                     -10-

and resolutions of the Board of Directors are carried into effect. In the
absence of the Chairman of the Board or in the event the Board of Directors
shall not have designated a chairman of the board, the Chief Executive Officer
shall preside at meetings of the shareholders and the Board of Directors.

         Section 7.        President. In the absence of the Chief Executive
Officer, the President shall perform the duties and exercise the powers of the
Chief Executive Officer. The President shall perform such other duties and have
such other powers as the Board of Directors shall prescribe or as the Chief
Executive Officer may from time to time delegate.

         Section 8.        Senior Vice Presidents and Vice Presidents. The
Senior Vice Presidents and Vice Presidents in the order of their seniority,
unless otherwise determined by the Board of Directors, in the absence or
disability of the Chief Executive Officer and the President, or any Senior Vice
President as applicable, shall perform the duties and exercise the powers of
the President. They shall perform such other duties and have such other powers
as the Board of Directors shall prescribe or as the Chief Executive Officer or
President may from time to time delegate.

         Section 9.        Secretary. The Secretary shall attend all meetings
of the Board of Directors and all meetings of the shareholders and record all
the proceedings of the meetings of the shareholders and of the Board of
Directors in a book to be kept for that purpose and shall perform like duties
for the standing committees when required. The Secretary shall give, or cause
to be given, notice of all meetings of the shareholders and special meetings of
the Board of Directors, and shall perform such other duties as may be
prescribed by the Board of Directors, Chief Executive Officer or President,
under whose supervision he or she shall be. The Secretary shall keep in safe
custody the seal of the Corporation and, when authorized by the Board of
Directors, affix the same to any instrument requiring it.

         Section 10.       Chief Financial Officer. The Chief Financial
Officer shall have the custody of corporate funds and securities and shall keep
full and accurate accounts of receipts and disbursements in books belonging to
the Corporation and shall deposit all moneys and other valuable effects in the
name and to the credit of the Corporation in such depositories as may be
designated by the Board of Directors. The Chief Financial Officer shall
disburse the funds of the Corporation as may be ordered by the Board of
Directors, taking proper vouchers for such disbursements, and shall render to
the President and the Board of Directors at its regular meetings or when the
Board of Directors so requires an account of all his or her transactions as
treasurer and of the financial condition of the Corporation unless otherwise
specified by the Board of Directors, the Chief Financial Officer shall be the
Corporation's Treasurer.

                                  ARTICLE FIVE

                            CERTIFICATES FOR SHARES

         Section 1.        Issue of Certificates. The Corporation shall deliver
certificates representing all shares to which shareholders are entitled; and
such certificates shall be signed by the Chairman of the Board, Chief Executive
Officer, President or a Senior Vice President, and by


                                     -11-

the Secretary or an Assistant Secretary of the Corporation, and may be sealed
with the seal of the Corporation or a facsimile thereof.

         Section 2.        Legends for Preferences and Restrictions on
Transfer. The designations, relative rights, preferences and limitations
applicable to each class of shares and the variations in rights, preferences
and limitations determined for each series within a class (and the authority of
the Board of Directors to determine variations for future series) shall be
summarized on the front or back of each certificate. Alternatively, each
certificate may state conspicuously on its front or back that the Corporation
will furnish the shareholder a full statement of this information on request
and without charge. At the option of the Board of Directors or an officer of
the Corporation, any certificate representing shares that are restricted as to
the sale, disposition, or transfer of such shares shall also indicate that such
shares are restricted as to transfer and there shall be set forth or fairly
summarized upon the certificate, or the certificate shall indicate that the
Corporation will furnish to any shareholder upon request and without charge, a
full statement of such restrictions. If the Corporation issues any shares that
are not registered under the Securities Act of 1933, as amended, and registered
or qualified under the applicable state securities laws, the transfer of any
such shares shall be restricted substantially in accordance with the following
legend:

         "THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
         1933 OR UNDER ANY APPLICABLE STATE LAW. THEY MAY NOT BE OFFERED FOR
         SALE, SOLD, TRANSFERRED OR PLEDGED WITHOUT (1) REGISTRATION UNDER THE
         SECURITIES ACT OF 1933 AND ANY APPLICABLE STATE LAW, OR (2) AT
         HOLDER'S EXPENSE, AN OPINION (SATISFACTORY TO THE CORPORATION) OF
         COUNSEL (SATISFACTORY TO THE CORPORATION) THAT REGISTRATION IS NOT
         REQUIRED."

         Section 3.        Facsimile Signatures. The signatures of the Chairman
of the Board, the Chief Executive Officer, the President or a Senior Vice
President and the Secretary or Assistant Secretary upon a certificate may be
facsimiles, if the certificate is manually signed by a transfer agent, or
registered by a registrar, other than the Corporation itself or an employee of
the Corporation. In case any officer who has signed or whose facsimile
signature has been placed upon such certificate shall have ceased to be such
officer before such certificate is issued, it may be issued by the Corporation
with the same effect as if he were such officer at the date of the issuance.

         Section 4.        Lost Certificates. The Board of Directors may direct
a new certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost or destroyed. When authorizing such issue
of a new certificate or certificates, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost or destroyed certificate or certificates, or his legal
representative, to advertise the same in such manner as it shall require and/or
to give the Corporation a bond in such sum as it may direct as indemnity
against any claim


                                     -12-

that may be made against the Corporation with respect to the certificate
alleged to have been lost or destroyed.

         Section 5.        Transfer of Shares. Upon surrender to the
Corporation or the transfer agent of the Corporation of a certificate for
shares duly endorsed or accompanied by proper evidence of succession,
assignment or authority to transfer, it shall be the duty of the Corporation to
issue a new certificate to the person entitled thereto, cancel the old
certificate and record the transaction upon its books.

         Section 6.        Registered Shareholders. The Corporation shall be
entitled to recognize the exclusive rights of a person registered on its books
as the owner of shares to receive dividends, and to vote as such owner, and
shall not be bound to recognize any equitable or other claim to or interest in
such share or shares on the part of any other person, whether or not it shall
have express or other notice thereof, except as otherwise provided by the laws
of the State of Florida.

         Section 7.        Redemption of Control Shares. Section 607.0902 of
the Florida Business Corporation Act shall apply to control share acquisitions
(as that term is defined in such section) of shares of the Corporation. As
provided by the Florida Business Corporation Act, if a person acquiring control
shares of the Corporation does not file an acquiring person statement with the
Corporation, the Corporation may redeem the control shares at fair market value
at any time during the period ending 60 days after the last acquisition of such
control shares. If a person acquiring control shares of the Corporation files
an acquiring person statement with the Corporation, the control shares may be
redeemed by the Corporation only if such shares are not accorded full voting
rights by the shareholders as provided by law.

                                  ARTICLE SIX

                            MISCELLANEOUS PROVISIONS

         Section 1.        Dividends. The Board of Directors may from time to
time declare, and the Corporation may pay, dividends on its outstanding shares
in cash, property, or its own shares pursuant to law and subject to the
provisions of the Articles of Incorporation.

         Section 2.        Reserves. The Board of Directors may by resolution
create a reserve or reserves out of earned surplus for any proper purpose or
purposes, and may abolish any such reserve in the same manner.

         Section 3.        Checks. All checks or demands for money and notes of
the Corporation shall be signed by such officer or officers or such other
person or persons as the Board of Directors or the Chief Executive Officer or
President may from time to time designate.

         Section 4.        Fiscal Year. The fiscal year of the Corporation
shall end on December 31 of each year and may be changed from time to time by
resolution of the Board of Directors.


                                     -13-

         Section 5.        Seal. The corporate seal shall have inscribed
thereon the name and state of incorporation of the Corporation. The seal may be
used by causing it or a facsimile thereof to be impressed or affixed or in any
other manner reproduced.

                                 ARTICLE SEVEN

                              AMENDMENTS OF BYLAWS

         Unless otherwise provided by law, these Bylaws may be altered, amended
or repealed or new Bylaws may be adopted by action of the Board of Directors.

                                 ARTICLE EIGHT

                                INDEMNIFICATION

         The Corporation shall indemnify and hold harmless any director,
officer, employee, or agent of the Corporation and its subsidiaries against all
liability and expense to the fullest extent permitted by law currently in
effect or hereinafter enacted.


                                     -14-

EX-99.1

EX-99.1 Certification of Chief Executive Officer

EX-99.2

EX-99.2 Certification of Chief Financial Officer