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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
XX QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 2004
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
JARDEN CORPORATION
DELAWARE 0-21052 35-1828377
State of Incorporation Commission File Number IRS Identification Number
555 THEODORE FREMD AVENUE
RYE, NEW YORK 10580
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (914) 967-9400
--------------------------------------------------------------------
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
requirements for the past 90 days. Yes X No
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes X No
------ -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at October 29, 2004
----- -------------------------------
Common Stock, 28,182,534 shares
par value $.01 per share
JARDEN CORPORATION
QUARTERLY REPORT ON FORM 10-Q
FOR THE THREE AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 2004
INDEX
Page
Number
--------
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements (Unaudited):
Condensed Consolidated Statements of Income for the three and
nine month periods ended September 30, 2004 and
2003......................................................... 3
Condensed Consolidated Statements of Comprehensive Income for
the three and nine month periods ended September 30, 2004 and
2003......................................................... 4
Condensed Consolidated Balance Sheets at September 30, 2004
and December 31, 2003........................................ 5
Condensed Consolidated Statements of Cash Flows for the nine
month periods ended September 30, 2004 and 2003.............. 6
Notes to Condensed Consolidated Financial Statements......... 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................... 16
Item 3. Quantitative and Qualitative Disclosures About Market Risk... 24
Item 4. Controls and Procedures...................................... 24
PART II. OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K............................. 25
Signature
Certifications
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
JARDEN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTH PERIOD ENDED NINE MONTH PERIOD ENDED
------------------------------- -------------------------------
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2004 2003 2004 2003
--------------- --------------- --------------- ---------------
Net sales....................................... $ 244,580 $ 167,962 $ 601,939 $ 396,177
Costs and expenses:
Cost of sales............................... 159,507 104,799 404,326 251,151
Selling, general and administrative expenses... 41,669 33,087 104,391 83,405
--------------- --------------- --------------- ---------------
Operating earnings.............................. 43,404 30,076 93,222 61,621
Interest expense, net........................... 7,560 5,083 19,255 13,302
--------------- --------------- --------------- ---------------
Income before taxes............................. 35,844 24,993 73,967 48,319
Provision for income taxes...................... 13,565 9,747 28,128 18,891
--------------- --------------- --------------- ---------------
Net income...................................... $ 22,279 $ 15,246 $ 45,839 $ 29,428
=============== =============== =============== ===============
Basic earnings per share........................ $ 0.82 $ 0.71 $ 1.69 $ 1.38
Diluted earnings per share...................... $ 0.79 $ 0.69 $ 1.62 $ 1.33
Weighted average shares outstanding:
Basic....................................... 27,227 21,379 27,148 21,369
Diluted..................................... 28,269 22,107 28,251 22,119
See accompanying notes to condensed consolidated
financial statements.
3
JARDEN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME
(UNAUDITED)
(IN THOUSANDS)
THREE MONTH PERIOD ENDED NINE MONTH PERIOD ENDED
-------------------------------- -------------------------------
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2004 2003 2004 2003
---------------- --------------- --------------- ---------------
Net income........................... $ 22,279 $ 15,246 $ 45,839 $ 29,428
Foreign currency translation......... 1,817 159 992 3,487
Minimum pension liability............ 1,106 - 1,106 -
Unrealized (loss)/gain on interest rate
swap............................ (8) 28 57 (110)
---------------- --------------- --------------- ---------------
Comprehensive income................. $ 25,194 $ 15,433 $ 47,994 $ 32,805
================ =============== =============== ===============
See accompanying notes to condensed consolidated
financial statements.
4
JARDEN CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
SEPTEMBER 30, DECEMBER 31,
2004 2003
---------------- -----------------
(Unaudited) (Note 1)
ASSETS
Current assets:
Cash and cash equivalents................................... $ 18,506 $ 125,400
Accounts receivable, net.................................... 134,665 92,777
Inventories, net............................................ 156,242 105,573
Other current assets........................................ 28,664 23,369
---------------- -----------------
Total current assets.................................... 338,077 347,119
---------------- -----------------
Non-current assets:
Property, plant and equipment, at cost...................... 219,667 188,823
Accumulated depreciation.................................... (121,049) (109,704)
---------------- -----------------
98,618 79,119
Goodwill.................................................... 441,482 236,413
Other intangible assets, net................................ 133,422 79,413
Other assets................................................ 20,242 17,610
---------------- -----------------
Total assets.................................................... $ 1,031,841 $ 759,674
================ =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt and current portion of long-term debt....... $ 16,321 $ 17,512
Accounts payable............................................ 39,795 34,211
Deferred consideration for acquisitions..................... 43,049 -
Other current liabilities................................... 75,106 53,357
---------------- ----------------
Total current liabilities............................... 174,271 105,080
---------------- ----------------
Non-current liabilities:
Long-term debt.............................................. 476,552 369,870
Other non-current liabilities............................... 78,750 34,819
---------------- ----------------
Total non-current liabilities........................... 555,302 404,689
---------------- ----------------
Commitments and contingencies................................... - -
Stockholders' equity:
Common stock ($.01 par value, 28,720 and 28,720 shares issued
and 27,448 and 27,007 shares outstanding at September
30, 2004 and December 31, 2003, respectively)........... 287 287
Additional paid-in capital.................................. 166,125 165,056
Retained earnings........................................... 146,650 100,811
Other stockholders' equity.................................. (10,794) (16,249)
---------------- ----------------
Total stockholders' equity.................................. 302,268 249,905
---------------- ----------------
Total liabilities and stockholders' equity...................... $ 1,031,841 $ 759,674
================ =================
See accompanying notes to condensed consolidated
financial statements.
5
JARDEN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
NINE MONTH PERIOD ENDED
-------------------------------
SEPTEMBER 30, SEPTEMBER 30,
2004 2003
-------------- ---------------
Net cash provided by operations................................... $ 28,037 $ 47,528
Financing activities:
Proceeds from revolving credit borrowings..................... 18,200 78,000
Payments on revolving credit borrowings....................... (18,200) (78,000)
Proceeds from issuance of long-term debt...................... 116,000 160,000
Payments on long-term debt.................................... (9,177) (5,296)
Proceeds from bond issuance................................... - 31,950
Payments on seller notes...................................... (5,400) (10,000)
Proceeds from issuance of common stock, net of underwriting fees
and related expenses....................................... 2,487 113,933
Debt issue and amendment costs................................ (2,213) (5,772)
Other......................................................... - 2,231
-------------- ---------------
Net cash provided by financing activities................. 101,697 287,046
-------------- ---------------
Investing activities:
Additions to property, plant and equipment.................... (7,265) (9,460)
Acquisition of businesses, net of cash acquired............... (228,876) (253,278)
Other......................................................... (487) -
-------------- ---------------
Net cash (used in) investing activities................... (236,628) (262,738)
-------------- ---------------
Net (decrease) increase in cash and cash equivalents.............. (106,894) 71,836
Cash and cash equivalents at beginning of period.................. 125,400 56,779
-------------- ---------------
Cash and cash equivalents at end of period........................ $ 18,506 $ 128,615
============== ===============
See accompanying notes to condensed consolidated
financial statements.
6
JARDEN CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
of Jarden Corporation (the "Company") have been prepared in accordance
with generally accepted accounting principles in the United States for
interim financial information and with the instructions to Form 10-Q
and Article 10 of Regulation S-X. Accordingly, they do not include all
of the information and footnotes required by generally accepted
accounting principles in the United States for complete financial
statements. In the opinion of management, all adjustments considered
necessary for a fair presentation (consisting of normal recurring
adjustments) have been included. Results of operations for the periods
shown are not necessarily indicative of results for the year,
particularly in view of the varying seasonality of certain of our
product line sales and the acquisitions the Company has completed
during 2004 (see Note 4).
The balance sheet at December 31, 2003 has been derived from the
audited financial statements at that date but does not include all of
the information and footnotes required by generally accepted accounting
principles in the United States for complete financial statements.
For further information, refer to the consolidated financial statements
and footnotes thereto included in the Company's Annual Report on Form
10-K for the year ended December 31, 2003.
Certain reclassifications have been made in the Company's financial
statements of prior years to conform to the current year presentation.
These reclassifications have no impact on previously reported net
income.
2. STOCK OPTIONS
As allowed for by Statement of Financial Accounting Standard No. 148,
Accounting for Stock-Based Compensation - Transition and Disclosure,
the Company accounts for the issuance of stock options using the
intrinsic value method in accordance with Accounting Principles Board
("APB") No. 25, Accounting for Stock Issued to Employees, and related
interpretations. Generally for the Company's stock option plans, no
compensation cost is recognized in the Condensed Consolidated
Statements of Income because the exercise price of the Company's stock
options equals the market price of the underlying stock on the date of
grant.
Had compensation cost for the Company's stock option plans been
determined based on the fair value at the grant dates for awards under
those plans, the Company's net income and earnings per share would have
been reduced to the pro forma amounts indicated (in thousands of
dollars, except per share data):
THREE MONTH PERIOD ENDED NINE MONTH PERIOD ENDED
--------------------------------- ------------------------------
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2004 2003 2004 2003
----------------- --------------- -------------- ---------------
Net income, as reported............................ $ 22,279 $ 15,246 $ 45,839 $ 29,428
Deduct: Total stock-based employee compensation
expense determined under fair value based method
for all awards, net of related tax effects....... (688) (546) (1,950) (1,440)
----------------- --------------- -------------- ---------------
Pro forma net income............................... $ 21,591 $ 14,700 $ 43,889 $ 27,988
================= =============== ============== ===============
Basic earnings per share:
As reported...................................... $ 0.82 $ 0.71 $ 1.69 $ 1.38
Pro forma........................................ $ 0.79 $ 0.69 $ 1.62 $ 1.31
Diluted earnings per share:
As reported...................................... $ 0.79 $ 0.69 $ 1.62 $ 1.33
Pro forma........................................ $ 0.76 $ 0.66 $ 1.55 $ 1.27
7
The Company granted approximately 329,000 stock options, including
grants in the aggregate of approximately 119,500 stock options to
certain executive officers and directors of the Company, in the nine
month period ended September 30, 2004. The stock options that were
granted have a four year vesting period with the exception of 37,500
stock options granted to directors of the Company, which have a one
year vesting period. The fair value of each option granted is estimated
on the date of grant using the Black-Scholes option-pricing model with
the following weighted-average assumptions used for grants in 2004: no
dividend yield, expected volatility of approximately 32 percent,
risk-free interest rate of 2.8 percent and expected life of 7.3 years.
3. INVENTORIES
Inventories at September 30, 2004 and December 31, 2003 were comprised
of the following (in thousands):
SEPTEMBER 30, DECEMBER 31,
2004 2003
------------- ------------
Raw materials and supplies.............................. $ 20,680 $ 15,254
Work in process......................................... 10,925 6,653
Finished goods.......................................... 124,637 83,666
--------- ---------
Total inventories................................... $ 156,242 $ 105,573
========= =========
4. ACQUISITIONS
On September 19, 2004, the Company signed a definitive agreement to
acquire all of the common stock of American Household, Inc. ("AHI") a
privately held company, for approximately $745.6 million in cash for
the equity and the assumption or repayment of indebtedness ("AHI
Acquisition"). AHI is the parent of The Coleman Company, Inc. and
Sunbeam Products, Inc., leading producers of global consumer products
through the BRK(R), Campingaz(R), Coleman(R), First Alert(R), Health o
meter(R), Mr. Coffee(R), Oster(R) and Sunbeam(R) brands.
The AHI Acquisition is expected to close during the first quarter of
2005, subject to Hart-Scott-Rodino approval and other customary closing
conditions (see Notes 6 and 8 for details on the proposed funding of
the AHI Acquisition). No assurances can be given that the AHI
Acquisition will be consummated or, if such acquisition is consummated,
as to the final terms of such acquisition under its amended and
restated senior credit facility ("Amended Credit Agreement").
On June 28, 2004, the Company acquired approximately 75.4% of the
issued and outstanding stock of Bicycle Holding, Inc., including its
wholly owned subsidiary United States Playing Card Company ("USPC" and
"USPC Acquisition"), and acquired the remaining 24.6% pursuant to a
put/call agreement ("Put/Call Agreement") on October 4, 2004 (see
discussion below). USPC is the world's largest manufacturer and
distributor of playing cards and a leader in marketing children's card
games, collectible tins, puzzles and card accessories for the North
American retail market as well as supplying premium playing cards to
casinos worldwide. USPC's portfolio of owned brands includes
Aviator(R), Bee(R), Bicycle(R) and Hoyle(R). In addition, USPC has an
extensive list of licensed brands, including Disney(R),
Harley-Davidson(R), NASCAR(R) and World Poker Tour(TM). USPC's
international holdings include Naipes Heraclio Fournier, S.A.
("Fournier"), a leading playing card manufacturer in Europe. The
purchase price was approximately $237.8 million, including transaction
expenses and deferred consideration amounts.
As of September 30, 2004, the Company had accrued in connection with
the USPC Acquisition approximately $49.1 million of deferred
consideration, of which $41.6 million is included as a current
liability on the Company's Condensed Consolidated Balance Sheet. The
current liability amount is comprised of (i) the current portion
(approximately $7.5 million) of an approximately $15.1 million holdback
of consideration deferred for purposes of guaranteeing potential
indemnification liabilities of the sellers and (ii) deferred
consideration of approximately $34.1 million, of which $29.1 million
was paid on October 4, 2004 (see discussion below) and the remainder
was added to the holdback amount at such date. The holdback amount is
secured by a stand-by letter of credit under the Company's senior
credit facility. The cash portion of the purchase price funded on June
28, 2004 was financed using a combination of cash on hand, new debt
financing (see Note 6) and borrowings under the Company's existing
8
revolving credit facility. The goodwill and other intangibles amounts
recorded in connection with the USPC Acquisition are discussed in
detail in Note 5. Based on management's intention to exercise the call
feature in the Put/Call Agreement resulting in 100% ownership of USPC
within the current year, the Company did not account for the 24.6%
minority interest in USPC. Therefore, the Company's Condensed
Consolidated Financial Statements reflected 100% of the assets and
liabilities of USPC as of September 30, 2004 and 100% of the results of
USPC for the period from June 28, 2004 through September 30, 2004. In
connection with the USPC Acquisition, the Company has preliminarily
allocated approximately $165.3 million to goodwill and approximately
$50.9 million to other intangibles. The Company also accrued
approximately $3.1 million for a restructuring that is occurring at
Fournier. In addition, the USPC Acquisition includes an earn-out
provision with a potential payment in cash of up to $2 million and an
additional potential payment of up to $8 million (for a potential total
of up to $10 million) in either cash or Company common stock, at the
Company's sole discretion, payable in 2007, provided that certain
earnings performance targets are met. If paid, the Company expects to
capitalize the cost of the earn-out. USPC is included in the branded
consumables segment from June 28, 2004 (see Note 10).
On October 4, 2004, the Company exercised its call option under the
Put/Call Agreement and acquired the remaining 24.6% of USPC for
approximately $29.1 million in cash. Such amount was paid for using a
combination of cash on hand and revolving borrowings under the Amended
Credit Agreement.
On September 2, 2003, the Company acquired all of the issued and
outstanding stock of Lehigh Consumer Products Corporation and its
subsidiary ("Lehigh" and the "Lehigh Acquisition"). Lehigh is the
largest supplier of rope, cord and twine for the U.S. consumer
marketplace and a leader in innovative storage and organization
products and workshop accessories for the home and garage as well as in
the security screen door and ornamental metal fencing market. The
purchase price of this transaction was approximately $157.6 million,
including transaction expenses. In connection with the Lehigh
Acquisition, the Company allocated approximately $109.2 million to
goodwill and approximately $3.4 million to trademarks (see Note 5).
Lehigh is included in the branded consumables segment from September 2,
2003 (see Note 10).
On February 7, 2003, the Company completed its acquisition of the
business of Diamond Brands International, Inc. and its subsidiaries
("Diamond Brands" and the "Diamond Acquisition"), a manufacturer and
distributor of niche household products, including clothespins, kitchen
matches, plastic cutlery and toothpicks under the Diamond(R) and
Forster(R) trademarks. The purchase price of this transaction was
approximately $91.5 million, including transaction expenses. The
acquired plastic manufacturing operation is included in the plastic
consumables segment from February 1, 2003 and the acquired wood
manufacturing operation and branded product distribution business is
included in the branded consumables segment from February 1, 2003 (see
Note 10).
The USPC Acquisition, the Lehigh Acquisition and the Diamond
Acquisition were all entered into as part of the Company's strategy of
acquiring branded consumer products businesses with leading market
positions in niche markets for products used in and around the home.
The following unaudited pro forma financial information includes the
actual reported results of the Company, as well as giving pro forma
effect to the USPC Acquisition, the Lehigh Acquisition and the Diamond
Acquisition with the related financings as if they had been consummated
as of the beginning of the earliest period presented and as if the
Company had acquired 100% of USPC. The pro forma information does not
give effect to the proposed AHI Acquisition. The pro forma net income
for the nine month period ended September 30, 2003 includes $1.5
million of reorganization expenses incurred by Diamond Brands prior to
February 7, 2003 (in thousands, except per share data):
THREE MONTH PERIOD ENDED NINE MONTH PERIOD ENDED
--------------- ---- --------------- ----------------- ---- ------------------
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2004 2003 2004 2003
ACTUAL PRO FORMA PRO FORMA PRO FORMA
--------------- --------------- ----------------- ------------------
Net sales....................... $ 244,580 $ 222,726 $ 665,118 $ 587,359
Net income...................... 22,279 20,013 51,680 45,031
Diluted earnings per share...... 0.79 0.74 1.83 1.67
9
During the first quarter of 2004, the Company also completed a tuck-in
acquisition of Loew-Cornell, Inc. ("Loew-Cornell"), a leading marketer
and distributor of paintbrushes and other arts and crafts products. The
acquired business is included in the branded consumables segment from
March 18, 2004. Additionally, the Company completed two other tuck-in
acquisitions in 2003, one in the branded consumables segment and the
other in the consumer solutions segment. These acquisitions did not
have a material effect on the Company's results of operations for
either the three or the nine month periods ended September 30, 2004 or
September 30, 2003 and are not included in the pro forma financial
information presented herein.
5. INTANGIBLES
As of September 30, 2004 and December 31, 2003, the Company had
recorded the following amounts for intangible assets (millions of
dollars):
BRANDED CONSUMER
CONSUMABLES SOLUTIONS TOTAL
----------------- ----------------- --------------
September 30, 2004
- ------------------
Intangible assets not subject to amortization:
Goodwill........................................................ $ 368.6 $ 72.9 $ 441.5
Trademarks...................................................... 72.1 56.1 128.2
----------------- ----------------- --------------
Intangible assets not subject to amortization................ 440.7 129.0 569.7
----------------- ----------------- --------------
Intangible assets subject to amortization:
Manufacturing processes and expertise........................... - 6.5 6.5
Non-compete agreements......................................... 1.1 - 1.1
Accumulated amortization....................................... (0.3) (2.1) (2.4)
----------------- ----------------- --------------
Net amount of intangible assets subject to amortization...... 0.8 4.4 5.2
----------------- ----------------- --------------
Total goodwill and other intangible assets.................... $ 441.5 $ 133.4 $ 574.9
================= ================= ==============
BRANDED CONSUMER
CONSUMABLES SOLUTIONS TOTAL
----------------- ----------------- --------------
December 31, 2003
Intangible assets not subject to amortization:
Goodwill........................................................ $ 167.3 $ 69.1 $ 236.4
Trademarks...................................................... 18.9 55.9 74.8
----------------- ----------------- --------------
Intangible assets not subject to amortization................ 186.2 125.0 311.2
----------------- ----------------- --------------
Intangible assets subject to amortization:
Manufacturing processes and expertise........................... - 6.0 6.0
Accumulated amortization....................................... - (1.4) (1.4)
----------------- ----------------- --------------
Net amount of intangible assets subject to amortization...... - 4.6 4.6
----------------- ----------------- --------------
Total goodwill and other intangible assets.................... $ 186.2 $ 129.6 $ 315.8
================= ================= ==============
Certain working capital balances recorded in connection with the USPC
Acquisition are preliminary and when finalized within one year of the
date of acquisition may result in changes to the intangible balances
shown above. The Company intends to obtain a third party valuation for
the fixed assets acquired in connection with the USPC Acquisition.
10
In the branded consumables segment, the only intangible assets which
have a definitive life and are currently subject to amortization are
two non-compete agreements in the aggregate amount of approximately
$1.1 million, which were assumed by the Company in connection with the
USPC Acquisition and which will be fully amortized by February 2005 and
March 2006, respectively. Amortization for the non-compete agreements
in the aggregate amount of approximately $0.3 million was recorded in
the third quarter of 2004 and is included in Selling, General and
Administrative expenses in the Condensed Consolidated Statements of
Income.
In the consumer solutions segment, the only intangible assets which
have a definitive life and are currently subject to amortization are
the manufacturing processes and expertise, which are being amortized
over a period of 7-8 years. Amortization for the manufacturing
processes and expertise in the aggregate amount of approximately $0.7
million was recorded in the first nine months of 2004 and is included
in Selling, General and Administrative expenses in the Condensed
Consolidated Statements of Income.
A portion of the consumer solutions segment's goodwill is recorded on a
Canadian subsidiary's books. Due to the effect of foreign currency
translations, the amount of goodwill recorded increased by
approximately $0.4 million in the first nine months of 2004.
Approximately $219.3 million of the goodwill and other intangible
assets recorded by the Company is not deductible for income tax
purposes.
6. DEBT AND DERIVATIVE FINANCIAL INSTRUMENTS
If consummated, it is intended that the AHI Acquisition will partly be
funded through debt borrowings (see Note 8 for a discussion of the
remainder of the funding). As such, certain banks have committed to
provide the Company a $1.05 billion senior secured facility, consisting
of a term loan facility in the aggregate principal amount of $850
million and a revolving credit facility with an aggregate commitment of
approximately $200 million. Such facility would replace the Amended
Credit Agreement.
On June 28, 2004, in connection with its USPC Acquisition, the Company
completed an add-on to its Term B loan facility ("Term B Add-on") under
its Amended Credit Agreement. The gross proceeds from the Term B Add-on
offering were $116 million and were used to partially fund the USPC
Acquisition. The spread on the Term B Add-on is 2.25% over London
Interbank Offered Rate ("LIBOR"). Additionally, under this offering the
spread on the Company's existing Term B loan facility was reduced from
2.75% over LIBOR to 2.25% over LIBOR. The Company's Amended Credit
Agreement matures on April 24, 2008.
In connection with its USPC Acquisition, the Company assumed
approximately $2.3 million of debt relating to a Spanish subsidiary. As
of September 30, 2004, $2.2 million of such debt was outstanding. This
debt relates to bank notes that are payable in equal quarterly,
semi-annual or annual installments through April 2007 with rates of
interest at Euro Interbank Offered Rate plus 1.00%.
In April 2004, the Company repaid the remaining seller debt financing
incurred in connection with a 2002 acquisition, which included both
principal and accrued interest thereon, in the amount of approximately
$5.4 million.
As of September 30, 2004, the Company had $306.6 million outstanding
under its term loan facilities and no amounts outstanding under its
revolving credit facility. As of September 30, 2004, net availability
under the revolving credit agreement was approximately $48.2 million,
after deducting $21.8 million of issued letters of credit. As discussed
in Note 4 above, the letters of credit outstanding include an amount of
approximately $15.1 million securing the USPC holdback amount. The
Company is required to pay commitment fees on the unused balance of the
revolving credit facility.
As of September 30, 2004, the fair market value of the Company's
interest rate swaps, which are accounted for as fair value hedges, was
negative in an amount of approximately $1.0 million and is included as
a liability in the Condensed Consolidated Balance Sheet, with a
corresponding offset to long-term debt.
11
7. CONTINGENCIES
The Company is involved in various legal disputes in the ordinary
course of business. In addition, the Environmental Protection Agency
has designated the Company as a potentially responsible party, along
with numerous other companies, for the clean up of several hazardous
waste sites. Based on currently available information, the Company does
not believe that the disposition of any of the legal or environmental
disputes the Company is currently involved in will have a material
adverse effect upon the financial condition, results of operations,
cash flows or competitive position of the Company. It is possible, that
as additional information becomes available, the impact on the Company
of an adverse determination could have a different effect.
8. EQUITY
In connection with the proposed AHI Acquisition, the Company entered
into a purchase agreement ("Equity Purchase Agreement") pursuant to
which the Company has agreed to sell $350 million of equity consisting
of the following:
(i) 714,286 shares of the Company's common stock, at a price of
$30 per share;
(ii) 128,571 shares of a new class of the Company's preferred
stock, Series B Convertible Participating Preferred Stock
("Series B Preferred Stock"), par value $.01 per share, at a
price of $1,000 per share; and
(iii) 200,000 shares of a new class of the Company's preferred
stock, Series C Mandatory Convertible Participating
Preferred Stock ("Series C Preferred Stock"), par value $.01
per share, at a price of $1,000 per share.
On October 8, 2004, such cash and securities were deposited into an
escrow account pending the completion of the AHI Acquisition, at which
time the securities would be issued and the cash would be used to fund
a portion of the cash purchase price for AHI.
According to the Equity Purchase Agreement and a related Assignment
and Joinder Agreement, approximately $300 million of the equity
securities will be issued to Warburg Pincus Private Equity VIII, LP or
its affiliates and approximately $50 million will be issued to
Catterton Partners V, LP and its affiliates, both private equity
investors (collectively "Private Equity Investors").
Pursuant to the terms of the Equity Purchase Agreement, it is the
Company's intention to seek shareholder approval of the mandatory
conversion of the Series C Preferred Stock into a combination of
Series B Preferred Stock and common stock of the Company. Subsequent
to shareholder approval and mandatory conversion, the Company expects
to have $300 million of Series B Preferred Stock and $50 million of
common stock outstanding, without taking into effect any other
conversion or the accrual of dividends.
In August 2004, the Company's board of directors ("Board") approved
the granting of an aggregate of 140,000 restricted shares of the
Company's common stock to three executive officers of the Company. The
restrictions on these shares were to lapse ratably over a three year
period commencing January 1, 2005 and would lapse immediately in the
event of a change in control.
During October 2004, the Board amended the terms of all of the 140,000
restricted shares of common stock issued in August 2004 to lapse
immediately. Also in October 2004, the Board accelerated the granting
of an aggregate amount of 735,000 restricted shares of common stock
under the Company's 2003 Stock Incentive Plan to two executive
officers of the Company that would otherwise have been granted to
these executive officers in 2005-2007 pursuant to such executives'
employment agreements. The Board approved that the restrictions on
these shares lapsed immediately upon issuance. As such, the Company
intends to record a non-cash compensation expense for all these
restricted stock issuances and restriction lapses of approximately $32
million in the fourth quarter of 2004.
In July 2004, the Board approved a grant of 10,000 restricted shares
of common stock to Mr. Jonathan Franklin, a consultant to the Company,
who is the brother of Mr. Martin E. Franklin, the Company's Chairman
and Chief
12
Executive Officer. The restrictions on 5,000 of these shares lapsed
immediately and the Company recorded a non-cash compensation charge
based on the fair market value of the Company's common stock on the
date of grant. The restrictions on the remaining 5,000 of these shares
lapse ratably over a four year period. Non-cash compensation expense
will be recognized on these shares based on the market value of the
Company's common stock at the time of the lapsing. All of the shares
which still have a restriction remaining will have the restrictions
lapse immediately upon the event of a change in control.
In addition, during the first nine months of 2004, the Company issued
26,750 restricted shares of common stock to certain employees under
the Company's 2003 Stock Incentive Plan. The restrictions on these
shares will lapse ratably over five years of employment with the
Company.
The Company issued all the restricted shares discussed above out of
its treasury account.
9. EARNINGS PER SHARE CALCULATION
Basic earnings per share are computed by dividing net income by the
weighted average number of common shares outstanding for the period.
Diluted earnings per share are calculated based on the weighted
average number of outstanding common shares plus the dilutive effect
of stock options as if they were exercised and restricted common
stock. A computation of earnings per share is as follows (in
thousands, except per share data):
THREE MONTH PERIOD ENDED NINE MONTH PERIOD ENDED
---------------------------------- ------------------------------
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2004 2003 2004 2003
----------------- ---------------- ------------- ----------------
Net income......................................... $ 22,279 $ 15,246 $ 45,839 $ 29,428
----------------- ---------------- ------------- ----------------
Weighted average shares outstanding................ 27,227 21,379 27,148 21,369
Additional shares assuming conversion of
stock options and restricted stock............. 1,042 728 1,103 750
----------------- ---------------- ------------- ----------------
Weighted average shares outstanding
assuming conversion............................ 28,269 22,107 28,251 22,119
----------------- ---------------- ------------- ----------------
Basic earnings per share........................... $ 0.82 $ 0.71 $ 1.69 $ 1.38
Diluted earnings per share......................... $ 0.79 $ 0.69 $ 1.62 $ 1.33
10. SEGMENT INFORMATION
The Company reports four business segments: branded consumables,
consumer solutions, plastic consumables and other.
In the branded consumables segment, the Company markets, distributes
and in certain cases manufactures a broad line of branded products
that includes arts and crafts paintbrushes, children's card games,
clothespins, collectible tins, food preparation kits, home canning
jars, jar closures, kitchen matches, other craft items, plastic
cutlery, playing cards and card accessories, puzzles, rope, cord and
twine, storage and workshop accessories, toothpicks and other
accessories marketed under the Aviator(R), Ball(R), Bee(R),
Bernardin(R), Bicycle(R), Crawford(R), Diamond(R), Forster(R),
Hoyle(R), Kerr(R), Lehigh(R), Leslie-Locke(R) and Loew-Cornell(R)
brand names. As discussed in Note 4, the Diamond Brands wood
manufacturing operation and branded product distribution business, the
Lehigh home improvement business, the Loew-Cornell arts and crafts
business and the USPC playing cards business have been included in the
branded consumables segment effective February 1, 2003, September 2,
2003, March 18, 2004 and June 28, 2004, respectively.
In the consumer solutions segment, the Company sources, markets and
distributes an array of innovative kitchen products under the market
leading FoodSaver(R) brand name, as well as the VillaWare(R) brand
name. The plastic consumables segment manufactures, markets and
distributes a wide variety of consumer and medical plastic products,
including products sold to retailers by the Company's branded
consumables segment (plastic cutlery) and
13
consumer solutions segment (containers). As discussed in Note 4, the
Diamond Brands plastic manufacturing operation is included in the
plastic consumables segment effective February 1, 2003. The other
segment is primarily a producer of zinc strip.
Net sales, operating earnings, depreciation and amortization, and
assets employed in operations by segment are summarized as follows (in
thousands of dollars):
THREE MONTH PERIOD ENDED NINE MONTH PERIOD ENDED
----------------------------------- ----------------------------------
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2004 2003 2004 2003
----------------- ---------------- --------------- ----------------
Net sales:
Branded consumables (1)........................ $ 152,317 $ 81,593 $ 349,935 $ 181,974
Consumer solutions............................. 58,152 55,364 139,506 130,913
Plastic consumables (2)........................ 31,429 30,136 99,611 80,368
Other.......................................... 15,483 11,841 54,198 29,713
Intercompany (3).............................. (12,801) (10,972) (41,311) (26,791)
----------------- ---------------- --------------- ----------------
Total net sales............................ $ 244,580 $ 167,962 $ 601,939 $ 396,177
================= ================ =============== ================
Operating earnings:
Branded consumables (1)........................ $ 30,619 $ 16,263 $ 59,374 $ 29,390
Consumer solutions ............................ 9,510 11,219 19,319 22,683
Plastic consumables (2)........................ 1,334 1,590 7,298 6,674
Other.......................................... 1,991 1,199 7,545 4,115
Intercompany (3).............................. (50) (195) (314) (1,241)
----------------- ---------------- --------------- ----------------
Total operating earnings................... 43,404 30,076 93,222 61,621
Interest expense, net.......................... 7,560 5,083 19,255 13,302
----------------- ---------------- --------------- ----------------
Income before taxes............................ $ 35,844 $ 24,993 $ 73,967 $ 48,319
================= ================ =============== ================
Depreciation and amortization:
Branded consumables (1)........................ $ 2,737 $ 1,228 $ 5,170 $ 3,096
Consumer solutions ............................ 849 626 2,525 1,669
Plastic consumables (2)........................ 1,842 1,848 5,544 5,044
Other.......................................... 456 534 1,413 1,609
Corporate (4).................................. 36 25 104 73
----------------- ------------------ --------------- ---------------
Total depreciation and amortization ....... $ 5,920 $ 4,261 $ 14,756 $ 11,491
================= ================== =============== ===============
AS OF
-------------------------------------
SEPTEMBER 30, DECEMBER 31,
2004 2003
----------------- ----------------
Assets employed in operations:
Branded consumables (1)........................ $ 676,565 $ 310,451
Consumer solutions ............................ 231,883 216,289
Plastic consumables (2)........................ 57,171 62,623
Other.......................................... 12,539 13,867
----------------- ----------------
Total assets employed in operations........ 978,158 603,230
Corporate (4).................................. 53,683 156,444
----------------- ----------------
Total assets............................... $1,031,841 $ 759,674
================= ================
14
(1) The USPC business, Loew-Cornell business, Lehigh business and the Diamond
Brands wood manufacturing operation and branded product distribution business
are included in the branded consumables segment effective June 28, 2004, March
18, 2004, September 2, 2003 and February 1, 2003, respectively.
(2) The Diamond Brands plastic manufacturing operation is included in the
plastic consumables segment effective February 1, 2003.
(3) Intersegment sales are recorded at cost plus an agreed upon intercompany
profit on intersegment sales.
(4) Corporate assets primarily include cash and cash equivalents, amounts
relating to benefit plans, deferred tax assets and corporate facilities and
equipment.
Within the branded consumables segment are four product lines: kitchen products,
home improvement products, playing card products and other specialty products.
Kitchen products include food preparation kits, home canning and accessories,
kitchen matches, plastic cutlery, straws and toothpicks. Home improvement
products include rope, cord and twine, storage and organizational products for
the home and garage and security door and fencing products. Playing card
products include children's card games, collectible tins and playing cards
products. Other specialty products include arts and crafts paintbrushes, book
and advertising matches, institutional plastic cutlery and sticks, laundry care
products, lighters and fire starters, other craft items, other commercial
products and puzzles.
Net sales of these products for the three and nine month periods ended September
30, 2004 and 2003, respectively, were as follows (in millions):
THREE MONTH PERIOD ENDED NINE MONTH PERIOD ENDED
--------------------------------- -------------------------------
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2004 2003 2004 2003
----------------- --------------- --------------- ---------------
Kitchen products.................................. $ 62.5 $ 65.4 $ 170.2 $ 154.9
Home improvement products......................... 37.6 10.7 106.4 10.7
Playing cards products............................ 34.8 - 36.2 -
Other specialty products.......................... 17.4 5.5 37.1 16.4
----------------- --------------- -------------------------------
Total branded consumables net sales............... $ 152.3 $ 81.6 $ 349.9 $ 182.0
================= =============== ===============================
15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following "Overview" section is a brief summary of the significant issues
addressed in Management's Discussion and Analysis of Financial Condition and
Results of Operations ("MD&A"). Investors should read the relevant sections of
this MD&A for a complete discussion of the issues summarized below.
OVERVIEW
We are a leading provider of niche consumer products used in and around the
home, under well-known brand names including Aviator(R), Ball(R), Bee(R),
Bernardin(R), Bicycle(R), Crawford(R), Diamond(R), FoodSaver(R), Forster(R),
Hoyle(R), Kerr(R), Lehigh(R), Leslie-Locke(R), Loew-Cornell(R) and VillaWare(R).
In North America, we are the market leader in several consumer categories,
including home canning, home vacuum packaging, kitchen matches, plastic cutlery,
playing cards, rope, cord and twine and toothpicks. We also manufacture zinc
strip and a wide array of plastic products for third party consumer product and
medical companies, as well as our own businesses.
Results of Operations
o Our net sales for the third quarter ended September 30, 2004 increased to
$244.6 million or 45.6% over the same period in 2003. Our net sales for the
nine months ended September 30, 2004 increased to $601.9 million or 51.9%
over the same period in 2003;
o Our operating income for the third quarter ended September 30, 2004
increased to $43.4 million or 44.3% over the same period in 2003. Our
operating income for the nine months ended September 30, 2004 increased to
$93.2 million or 51.3% over the same period in 2003;
o Our net income for the third quarter ended September 30, 2004 increased to
$22.3 million or 46.1% over the same period in 2003. Our net income for the
nine months ended September 30, 2004 increased to $45.8 million or 55.8%
over the same period in 2003; and
o The increases to our net sales, operating income and net income are
principally the result of the acquisitions we completed in 2004 and 2003,
which are described in detail in "Acquisition Activities" below. In
addition, on an overall basis we had significant organic growth in three of
our four business segments in the first nine months of 2004 compared to the
same period in 2003.
Liquidity and Capital Resources
o We ended the third quarter of 2004 with a higher net debt-to-total market
capitalization ratio, than as of December 31, 2003 due to the additional
debt incurred to partially fund the acquisition of Bicycle Holding, Inc.
and its wholly owned subsidiary United States Playing Card Company ("USPC"
and "USPC Acquisition"), partially offset by a significant increase in our
market capitalization;
o Our liquidity, as measured by cash and cash equivalents on hand and
availability under our debt facility, was lower at September 30, 2004 than
at December 31, 2003, due to the use of cash on hand during the first half
of 2004 to fund the USPC Acquisition and the acquisition of Loew-Cornell,
Inc. ("Loew-Cornell" and "Loew-Cornell Acquisition");
o Our cash flows from operations in the first nine months of 2004 was $28.0
million compared to $47.5 million in the first nine months of 2003. The
decrease is principally due to higher inventory amounts as a result of
early buys of certain commodity items in order to take advantage of pricing
trends in raw materials, increasing commodity costs which increases the
dollar value of the same quantity of inventory, the addition of a large
number of new product stock keeping units ("SKUs") and continuing sales
growth requiring greater levels of inventory. Accounts receivable were also
higher, primarily due to strong sales during the quarter;
o As of September 30, 2004, we had $18.5 million of cash on hand and $48.2
million of availability under the revolving credit facility of our amended
and restated senior credit facility ("Amended Credit Agreement"). On
October 4, 2004, we exercised our call option and acquired the remaining
24.6% of USPC for approximately $29.1 million in cash. Such amount was paid
for using a combination of cash on hand and revolving borrowings under our
Amended Credit Agreement; and
o On September 19, 2004, we signed a definitive agreement to acquire all of
the common stock of American Household, Inc. ("AHI") a privately held
company, for approximately $745.6 million in cash for the equity and the
assumption or repayment of indebtedness ("AHI Acquisition"). The AHI
Acquisition is expected to close
16
during the first quarter of 2005. We intend to use additional capital
raised through financing activities to fund the AHI Acquisition if
consummated (see "Financial Condition and Capital Resources" and "Recent
Developments").
We intend for the discussion of our financial condition and results of
operations (including our acquisition activities) that follows to provide
information that will assist in understanding our financial statements, the
changes in certain key items in those financial statements from year to year,
and the primary factors that accounted for those changes, as well as how certain
accounting principles, policies and estimates affect our financial statements.
ACQUISITION ACTIVITIES
We have grown through strategic acquisitions of complementary businesses and by
expanding sales of our existing product lines. Our strategy to achieve future
growth is to sustain profitable internal growth, acquire new businesses or
brands that complement our existing product portfolio and expand our
international business.
On June 28, 2004, we acquired approximately 75.4% of the issued and outstanding
stock of United States Playing Card Company and its subsidiaries ("USPC" and
"USPC Acquisition"), and acquired the remaining 24.6% pursuant to a put/call
agreement ("Put/Call Agreement") on October 4, 2004 (see discussion below). USPC
is the world's largest manufacturer and distributor of playing cards and a
leader in marketing children's card games, collectible tins, puzzles and card
accessories for the North American retail market as well as supplying premium
playing cards to casinos worldwide. USPC's portfolio of owned brands includes
Aviator(R), Bee(R), Bicycle(R) and Hoyle(R). In addition, USPC has an extensive
list of licensed brands, including Disney(R), Harley-Davidson(R), NASCAR(R) and
World Poker Tour(TM). USPC's international holdings include Naipes Heraclio
Fournier, S.A. ("Fournier"), a leading playing card manufacturer in Europe. The
purchase price was approximately $237.8 million, including transaction expenses
and deferred consideration amounts.
As of September 30, 2004, we had accrued in connection with the USPC Acquisition
approximately $49.1 million of deferred consideration, of which $41.6 million is
included as a current liability on the Condensed Consolidated Balance Sheet
included herein. The current liability amount is comprised of (i) the current
portion (approximately $7.5 million) of an approximately $15.1 million holdback
of consideration deferred for purposes of guaranteeing potential indemnification
liabilities of the sellers and (ii) deferred consideration of approximately
$34.1 million, of which $29.1 million was paid on October 4, 2004 (see
discussion below) and the remainder was added to the holdback amount at such
date. The holdback amount is secured by a stand-by letter of credit under our
senior credit facility. The cash portion of the purchase price funded on June
28, 2004 was financed using a combination of cash on hand, new debt financing
(see discussion in "Financial Condition, Liquidity and Capital Resources" below)
and borrowings under our existing revolving credit facility. Based on
management's intention to exercise the call feature in the Put/Call Agreement
resulting in 100% ownership of USPC within the current year, we did not account
for the 24.6% minority interest in USPC. Therefore, our Company's Condensed
Consolidated Financial Statements reflected 100% of the assets and liabilities
of USPC as of September 30, 2004 and 100% of the results of USPC for the period
from June 28, 2004 through September 30, 2004. We also accrued an amount of
approximately $3.1 million for a restructuring that is occurring at Fournier. In
addition, the USPC Acquisition includes an earn-out provision with a potential
payment in cash of up to $2 million and an additional potential payment of up to
$8 million (for a potential total of up to $10 million) in either cash or our
common stock, at our sole discretion, payable in 2007, provided that certain
earnings performance targets are met. If paid, we expect to capitalize the cost
of the earn-out. The USPC business is included in our branded consumables
segment.
On October 4, 2004, we exercised our call option under the Put/Call Agreement
and acquired the remaining 24.6% of USPC for approximately $29.1 million in
cash. Such amount was paid for using a combination of cash on hand and
borrowings under our revolving credit facility under our Amended Credit
Agreement.
On September 2, 2003, we acquired all of the issued and outstanding stock of
Lehigh Consumer Products Corporation and its subsidiary ("Lehigh" and the
"Lehigh Acquisition"). Lehigh is the largest supplier of rope, cord and twine in
the U.S. consumer marketplace and a leader in innovative storage and
organization products and workshop accessories for the home and garage as well
as in the security screen door and ornamental metal fencing
17
market. The purchase price of the transaction was approximately $157.6 million,
including transaction expenses. Lehigh is included in the branded consumables
segment from September 2, 2003.
On February 7, 2003, we completed our acquisition of the business of Diamond
Brands International, Inc. and its subsidiaries ("Diamond Brands" and the
"Diamond Acquisition"), a manufacturer and distributor of niche household
products, including clothespins, kitchen matches, plastic cutlery and toothpicks
under the Diamond(R) and Forster(R) trademarks. The purchase price of this
transaction was approximately $91.5 million, including transaction expenses. The
acquired plastic manufacturing operation is included in the plastic consumables
segment from February 1, 2003. The acquired wood manufacturing operation and
branded product distribution business is included in the branded consumables
segment from February 1, 2003.
The USPC Acquisition, the Lehigh Acquisition and the Diamond Acquisition were
all entered into as part of our strategy of acquiring branded consumer products
businesses with leading market positions in niche markets for products used in
and around the home.
For the three and nine month periods ended September 30, 2004 and September 30,
2003, pro forma financial information reflecting the USPC Acquisition, the
Lehigh Acquisition and the Diamond Acquisition has been included in Note 4 to
our Condensed Consolidated Financial Statements.
During the first quarter of 2004, we completed a tuck-in acquisition of
Loew-Cornell, a leading marketer and distributor of paintbrushes and other arts
and crafts products. The acquired business is included in the branded
consumables segment from March 18, 2004. Additionally, we completed two other
tuck-in acquisitions in 2003, one in the branded consumables segment and the
other in the consumer solutions segment. These acquisitions did not have a
material effect on our results of operations for either the three or the nine
month periods ended September 30, 2004 and September 30, 2003 and are not
included in the pro forma financial information presented in Note 4 to our
Condensed Consolidated Financial Statements.
RESULTS OF OPERATIONS - COMPARISON OF THIRD QUARTER 2004 TO THIRD QUARTER 2003
We reported net sales of $244.6 million for the third quarter of 2004, a 45.6%
increase from net sales of $168.0 million in the third quarter of 2003.
In the third quarter of 2004, our branded consumables segment reported net sales
of $152.3 million compared to $81.6 million in the third quarter of 2003. This
increase of 86.7% was principally a result of acquisitions. Excluding the effect
of acquisitions, net sales of our branded consumables segment were higher in the
third quarter of 2004 compared to the same period in 2003, principally due to
stronger September 2004 versus September 2003 sales of our home improvement
products, caused by replenishment orders of our cordage products due to the
effect of hurricane's in certain parts of the United States and the rollout of
our new fence and security doors program. In the third quarter of 2004, our
consumer solutions segment recorded net sales of $58.2 million compared to $55.4
million in the third quarter of 2003. This increase of 5.0% was principally the
result of the tuck-in acquisition of VillaWare Manufacturing Company
("VillaWare") in the fourth quarter of 2003, partially offset by lower revenues
from FoodSaver(R) products primarily due to a market shift to lower priced
FoodSaver(R) machines.
In the third quarter of 2004, our plastic consumables segment reported net sales
of $31.4 million compared to $30.1 million in the third quarter of 2003. The
principal reason for this increase of 4.3% was an increase in sales of plastic
cutlery to our branded consumables segment and increased sales to an existing
OEM customer, partially offset by the third quarter of 2003 reflecting sales to
two OEM customers for which there was no equivalent sales in 2004. In the third
quarter of 2004, our other segment reported net sales of $15.5 million compared
to $11.8 million in the third quarter of 2003. The principal reasons for this
increase of 30.8% were increased volume sales of low denomination coinage and
industrial zinc, and the effect of increases in the price of zinc which were
passed through to customers.
We reported operating earnings of $43.4 million in the third quarter of 2004
compared to operating earnings of $30.1 million in the third quarter of 2003.
The principal reason for this increase of $13.3 million, or 44.3%, was an
increase in the operating earnings of the branded consumables segment of $14.4
million, primarily due to the effect of 2003 and 2004 acquisitions now included
in this segment. Exclusive of the effect of acquisitions, operating
18
earnings of the branded consumables segment were lower than the comparative
period in the prior year primarily due to sales mix and higher distribution
costs more than offsetting the sales effects discussed above. The operating
earnings of the consumer solutions segment decreased by $1.7 million principally
due to the sales effects discussed above, partially offset by lower legal and
compensation costs. The operating earnings of the plastic consumables segment
decreased by $0.3 million principally due to the effect of continuing higher
plastic resin prices which could not be passed through with respect to plastic
cutlery sales, partially offset by manufacturing efficiencies. The operating
earnings of the other segment increased by $0.8 million due to the sales effects
discussed above and positive manufacturing variances resulting from the
increased sales volume.
Gross margin percentages on a consolidated basis decreased to 34.8% in the third
quarter of 2004 from 37.6% in the third quarter of 2003. The principal reasons
for this decrease are the change in mix between 2003 and 2004 resulting from the
acquisitions completed within the last thirteen months which have relatively
lower gross margins and a shift to lower priced FoodSaver(R) machines in our
consumer solutions segment.
Selling, general and administrative expenses increased to $41.7 million in the
third quarter of 2004 from $33.1 million in the third quarter of 2003, or, as a
percentage of net sales, decreased to 17.0% in the third quarter of 2004 from
19.7% in the third quarter of 2003. The increase in dollar terms was principally
the result of the acquisitions completed during 2003 and 2004, partially offset
by lower legal and compensation costs in the consumer solutions segment. The
decrease in percentage terms was principally due to the inclusion of the
acquisitions completed in the last thirteen months which have relatively lower
selling, general and administrative expenses as a percentage of net sales.
Net interest expense increased to $7.6 million for the third quarter of 2004
compared to $5.1 million in the same period last year. This increase was due to
higher levels of outstanding debt in the third quarter of 2004 compared to the
same period in 2003, resulting from the additional debt financing required to
fund the acquisitions completed in the last thirteen months.
Our effective tax rate for the third quarter of 2004 was 37.8% compared to an
effective tax rate of 39.0% in the third quarter of 2003.
RESULTS OF OPERATIONS-COMPARISON OF YEAR TO DATE 2004 TO YEAR TO DATE 2003
We reported net sales of $601.9 million in the first nine months of 2004, a
51.9% increase from net sales of $396.2 million in the first nine months of
2003.
In the first nine months of 2004, our branded consumables segment reported net
sales of $349.9 million compared to $182.0 million in the first nine months of
2003. This increase of 92.3% was principally a result of acquisitions. Excluding
the effect of acquisitions, net sales of our branded consumables segment were
significantly higher in the first nine months of 2004 compared to the same
period in 2003, principally due to higher home canning sales volumes and
favorable home canning sales mix, as well as stronger September 2004 home
improvement sales compared to September 2003. In the first nine months of 2004,
our consumer solutions segment reported net sales of $139.5 million compared to
$130.9 million in net sales for the first nine months of 2003. This increase of
6.6% was principally the result of the acquisition of VillaWare in the fourth
quarter of 2003. Excluding the effect of this acquisition, net sales of our
consumer solutions segment were lower in the first nine months of 2004 compared
to the same period in 2003 due to a market shift to lower priced FoodSaver(R)
machines, partially offset by sales volume increases for FoodSaver(R) machines
and increased bag unit sales.
In the first nine months of 2004, our plastic consumables segment reported net
sales of $99.6 million compared to $80.4 million in the first nine months of
2003. The principal reasons for this increase of 23.9% was both an increase in
sales of plastic cutlery to our branded consumables segment, as well as a full
nine month period effect of these sales due to the addition of the plastic
manufacturing business acquired in the Diamond Acquisition in February 2003.
Additionally, net sales of our plastics consumables segment were significantly
higher in the first nine months of 2004 compared to the same period in 2003
principally due to increased sales to certain existing OEM customers and new
international sales. In the first nine months of 2004, our other segment
reported net sales of $54.2 million compared to $29.7 million in the first nine
months of 2003. The principal reasons for this increase of 82.4% were a
19
full nine months period effect on net sales resulting from contractual changes
with two major customers whereby this segment took on the responsibility of
purchasing the raw material inventory for the customers, increased volume sales
of low denomination coinage and industrial zinc and the effect of increases in
the price of zinc which were passed through to customers.
We reported operating earnings of $93.2 million in the first nine months of 2004
compared to operating earnings of $61.6 million in the first nine months of
2003. The principal reason for this increase of $31.6 million, or 51.3%, was an
increase in the operating earnings of the branded consumables segment of $30.0
million, primarily due to the effect of 2003 and 2004 acquisitions now included
in this segment. Due to the integration of certain of our acquisitions it is no
longer possible to compare the operating earnings in this segment exclusive of
acquisitions for the first nine months of the year. The operating earnings of
the consumer solutions segment decreased by $3.4 million principally due to
higher legal costs as well as the sales effects discussed above. The operating
earnings of the plastic consumables segment increased by $0.6 million due to the
sales effects discussed above, partially offset by higher plastic resin prices
which could not be passed through with respect to plastic cutlery sales and
higher validation costs incurred for new business development projects. The
operating earnings of the other segment increased by $3.4 million due to the
sales effects discussed above and positive manufacturing variances resulting
from the increased sales volume.
Gross margin percentages on a consolidated basis decreased to 32.8% in the first
nine months of 2004 from 36.6% in the first nine months of 2003. The principal
reasons for this decrease are the impact of the acquisitions completed in the
last thirteen months which have relatively lower gross margins, higher
distribution costs in our branded consumables segment, a shift to lower priced
FoodSaver(R) machines in our consumer solutions segment and the effect of the
contractual changes for two major customers in our other segment as discussed
above.
Selling, general and administrative expenses increased to $104.4 million in the
first nine months of 2004 from $83.4 million in the first nine months of 2003,
or, as a percentage of net sales, decreased to 17.3% in the first nine months of
2004 from 21.1% in the first nine months of 2003. The increase in dollar terms
was principally the result of the acquisitions completed during 2003 and 2004,
higher legal costs in our consumer solutions segment, and higher validation
costs incurred for new business development projects in our plastic consumables
segment, partially offset by lower media spending in the consumer solutions
segment. The decrease in percentage terms was principally due to the inclusion
of the Lehigh business which has relatively lower selling, general and
administrative expenses as a percentage of net sales. In addition, we had
significant growth in our branded consumables, plastic consumables and other
segment's net sales and all of these segments have lower selling, general and
administrative expenses as a percentage of net sales than our consumer solutions
segment.
Net interest expense increased to $19.3 million for the first nine months of
2004 compared to $13.3 million in the same period last year. This increase was
primarily due to higher levels of outstanding debt in the first nine months of
2004 compared to the same period in 2003, resulting from the additional debt
financing required to fund the acquisitions completed in the last thirteen
months.
Our effective tax rate for the first nine months of 2004 was 38.0% compared to
an effective tax rate of 39.1% in the first nine months of 2003.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
On June 28, 2004, in connection with our USPC Acquisition, we completed an
add-on to our Term B loan facility ("Term B Add-on") under our Amended Credit
Agreement. The gross proceeds from the Term B Add-on offering were $116 million
and were used to partially fund the USPC Acquisition. The spread on the Term B
Add-on is 2.25% over London Interbank Offered Rate ("LIBOR"). Additionally,
under this offering the spread on our existing Term B loan facility was reduced
from 2.75% over LIBOR to 2.25% over LIBOR. Our Amended Credit Agreement matures
on April 24, 2008.
In connection with the USPC Acquisition, we assumed approximately $2.3 million
of debt relating to a Spanish subsidiary. As of September 30, 2004, $2.2 million
of such debt was outstanding. This debt relates to bank notes
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that are payable in equal quarterly, semi-annual or annual installments through
April 2007 with rates of interest at Euro Interbank Offered Rate plus 1.00%.
In April 2004, we repaid the remaining seller debt financing incurred in
connection with a 2002 acquisition, which included both principal and accrued
interest thereon, in the amount of approximately $5.4 million.
In August 2004, our board of directors ("Board") approved the granting of an
aggregate of 140,000 restricted shares of our Company's common stock to three
executive officers of our Company. The restrictions on these shares were to
lapse ratably over a three year period commencing January 1, 2005 and would
lapse immediately in the event of a change in control.
During October 2004, our Board amended the terms of all of the 140,000
restricted shares of common stock issued in August 2004 to lapse immediately.
Also in October 2004, our Board accelerated the granting of an aggregate amount
of 735,000 restricted shares of common stock under our 2003 Stock Incentive Plan
to two executive officers of our Company that would otherwise have been granted
to these executive officers in 2005-2007 pursuant to such executives' employment
agreements. The Board approved that the restrictions on these shares lapsed
immediately upon issuance. As such, we intend to record a non-cash compensation
expense for all these restricted stock issuances and restriction lapses of
approximately $32 million in the fourth quarter of 2004.
In July 2004, our Board approved a grant of 10,000 restricted shares of common
stock to Mr. Jonathan Franklin, a consultant to our Company, who is the brother
of Mr. Martin E. Franklin, our Company's Chairman and Chief Executive Officer.
The restrictions on 5,000 of these shares lapsed immediately and we recorded a
non-cash compensation charge based on the fair market value of our Company's
common stock on the date of grant. The restrictions on the remaining 5,000 of
these shares lapse ratably over a four year period. Non-cash compensation
expense will be recognized on these shares based on the market value of our
Company's common stock at the time of the lapsing. All of the shares which still
have a restriction remaining will have the restrictions lapse immediately upon
the event of a change in control.
In addition, during the first nine months of 2004, we issued 26,750 restricted
shares of common stock to certain employees under our 2003 Stock Incentive Plan.
The restrictions on these shares will lapse ratably over five years of
employment with us.
We issued all of the restricted shares discussed above out of our treasury
account.
As of September 30, 2004, we had $306.6 million outstanding under our term loan
facilities and no amounts outstanding under our revolving credit facility. As of
September 30, 2004, net availability under our revolving credit agreement was
approximately $48.2 million, after deducting $21.8 million of issued letters of
credit. The letters of credit outstanding include an amount of approximately
$15.1 million securing the USPC holdback amount (see "Acquisition Activities").
We are required to pay commitment fees on the unused balance of the revolving
credit facility.
As of September 30, 2004, the fair market value of our interest rate swaps,
which are accounted for as fair value hedges, was negative in an amount of
approximately $1.0 million and is included as a liability in the Condensed
Consolidated Balance Sheet, with a corresponding offset to long-term debt.
Net current assets decreased to approximately $164 million at September 30, 2004
from approximately $242 million at December 31, 2003, due primarily to the use
of cash on hand to finance the USPC Acquisition and the Loew-Cornell Acquisition
and the establishment of deferred consideration balances in connection with the
USPC Acquisition (see "Acquisition Activities" above), partially offset by
higher inventory and accounts receivable amounts (see below) and the working
capital balances of USPC and Loew-Cornell.
Our cash flow from operations was $28.0 million in the first nine months of
2004, compared to a cash flow from operations of $47.5 million in the first nine
months of 2003. This decrease in cash flow from operations is primarily due to
higher inventory amounts as a result of early buys of certain commodity items in
order to take advantage of pricing trends in raw materials, increasing commodity
costs which increases the dollar value of the same quantity of
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inventory, the addition of a large number of new product SKUs and continuing
sales growth requiring greater levels of inventory. Accounts receivable amounts
were also higher due to strong sales during the quarter.
Capital expenditures were approximately $7.3 million in the first nine months of
2004 compared to $9.5 million for the first nine months of 2003 and are largely
related to maintaining facilities, tooling projects and improving manufacturing
efficiencies. As of September 30, 2004, we had capital expenditure commitments
in the aggregate for all our segments of approximately $3.0 million.
We believe that our cash and cash equivalents on hand, cash generated from our
operations and our availability under our senior credit facility is adequate to
satisfy our working capital and capital expenditure requirements for the
foreseeable future. However, we intend to fund a part of the AHI Acquisition
through debt borrowing as discussed below (see "Recent Developments") and we may
raise additional capital from time to time to take advantage of favorable
conditions in the capital markets or in connection with our corporate
development activities.
RELATED PARTY TRANSACTION
On July 27, 2004, the agreement between one of our Company's wholly owned
subsidiaries and NewRoads, Inc. ("NewRoads"), a third party provider of pick,
pack and ship services, order fulfillment, warehousing and other services to the
retail industry was terminated. Pursuant to this agreement, NewRoads had agreed
to provide such services to our Company's consumer solutions segment. Mr.
Franklin's brother-in-law was the executive chairman of the board of NewRoads at
the time of the agreement being consummated. Mr. Franklin has an indirect
ownership interest of less than 1/2% in NewRoads. Our consumer solutions segment
now uses a different third party provider for these services.
RECENT DEVELOPMENTS
On September 19, 2004, we signed a definitive agreement to acquire all of the
common stock of AHI for approximately $745.6 million in cash for the equity and
the assumption or repayment of indebtedness ("AHI Acquisition"). AHI is the
parent of The Coleman Company, Inc. and Sunbeam Products, Inc., leading
producers of global consumer products through the BRK(R), Campingaz(R),
Coleman(R), First Alert(R), Health o meter(R), Mr. Coffee(R), Oster(R) and
Sunbeam(R) brands.
The AHI Acquisition is expected to close during the first quarter of 2005,
subject to Hart-Scott-Rodino approval and other customary closing conditions. No
assurances can be given that the AHI Acquisition will be consummated or, if such
acquisition is consummated, as to the final terms of such acquisition.
In connection with the proposed AHI Acquisition, we entered into a purchase
agreement ("Equity Purchase Agreement") pursuant to which we have agreed to sell
$350 million of equity consisting of the following:
(iv) 714,286 shares of our common stock, at a price of $30 per share;
(v) 128,571 shares of a new class of our preferred stock, Series B
Convertible Participating Preferred Stock ("Series B Preferred
Stock"), par value $.01 per share, at a price of $1,000 per
share; and
(vi) 200,000 shares of a new class of our preferred stock, Series C
Mandatory Convertible Participating Preferred Stock ("Series C
Preferred Stock") , par value $.01 per share, at a price of
$1,000 per share.
On October 8, 2004, such cash and securities were deposited into an escrow
account pending the completion of the AHI Acquisition, at which time the
securities would be issued and the cash would be used to fund a portion of the
cash purchase price of AHI.
According to the Equity Purchase Agreement and a related Assignment and Joinder
Agreement, approximately $300 million of our equity securities will be issued to
Warburg Pincus Private Equity VIII, LP or its affiliates and approximately $50
million will be issued to Catterton Partners V, LP and its affiliates, both
private equity investors (collectively "Private Equity Investors").
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Pursuant to the terms of the Equity Purchase Agreement, it is our intention to
seek shareholder approval of the mandatory conversion of the Series C Preferred
Stock into a combination of Series B Preferred Stock and common stock of our
Company. Subsequent to shareholder approval and mandatory conversion, we expect
to have $300 million of Series B Preferred Stock and $50 million of common stock
outstanding, without taking into effect any other conversion or the accrual of
dividends.
Additionally, it is intended that the AHI Acquisition will also be funded
through debt borrowings. As such, certain banks have committed to provide us a
$1.05 billion senior secured facility, consisting of a term loan facility in the
aggregate principal amount of $850 million and a revolving credit facility with
an aggregate commitment of approximately $200 million. Such facility would
replace our Amended Credit Agreement.
CONTINGENCIES
We are involved in various legal disputes in the ordinary course of business. In
addition, the Environmental Protection Agency has designated our Company as a
potentially responsible party, along with numerous other companies, for the
clean up of several hazardous waste sites. Based on currently available
information, we do not believe that the disposition of any of the legal or
environmental disputes our Company is currently involved in will require
material capital or operating expenses or will otherwise have a material adverse
effect upon the financial condition, results of operations, cash flows or
competitive position of our Company. It is possible, that as additional
information becomes available, the impact on our Company of an adverse
determination could have a different effect.
FORWARD-LOOKING INFORMATION
Our disclosure and analysis in this report contains forward looking information
about our Company's financial results and estimates and business prospects. From
time to time, we may make or publish forward-looking statements relating to such
matters as anticipated financial performance, business prospects, the expected
closing of the AHI Acquisition and the effect of such transaction on the
Company, technological developments, new products and similar matters. Such
statements are necessarily estimates reflecting management's best judgment based
on current information. The Private Securities Litigation Reform Act of 1995
provides a safe harbor for forward-looking statements. Such statements are
usually identified by the use of words or phrases such as "believes",
"anticipates", "expects", "estimates", "planned", "outlook", and "goal". Because
forward-looking statements involve risks and uncertainties, our actual results
could differ materially. We cannot guarantee that any forward-looking statement
will be realized, although we believe we have been prudent in our plans and
assumptions.
Achievement of future results is subject to risks, uncertainties and inaccurate
assumptions. Should known or unknown risks or uncertainties materialize, or
should underlying assumptions prove inaccurate, actual results could vary
materially from past results and those anticipated, estimated or projected.
Investors should bear this in mind as they consider forward-looking statements.
We undertake no obligation to publicly update forward-looking statements,
whether as a result of new information, future events or otherwise. You are
advised, however, to consult any further disclosures we make on related subjects
in our Forms 10-Q, 8-K and 10-K reports to the Securities and Exchange
Commission. Please see our Company's Annual Report on Form 10-K for 2003 for a
list of factors which could cause our Company's actual results to differ
materially from those projected in our Company's forward-looking statements and
certain risks and uncertainties that may affect the operations, performance and
results of our business. You should understand that it is not possible to
predict or identify all such factors. Consequently, you should not consider any
such list to be a complete set of all potential risks or uncertainties.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
In general, business enterprises can be exposed to market risks including
fluctuations in commodity prices, foreign currency values, and interest rates
that can affect the cost of operating, investing, and financing. The Company's
exposures to these risks are relatively low. The Company's plastic consumables
business purchases resin from regular commercial sources of supply and, in most
cases, multiple sources. The supply and demand for plastic resins is subject to
cyclical and other market factors. With many of our external customers, we have
the ability to pass through price increases with an increase in our selling
price and certain of our external customers purchase the resin used in products
we manufacture for them. This pass-through pricing is not applicable to plastic
cutlery, which we supply to our branded consumables segment. Plastic cutlery is
principally made of polystyrene and for each $0.01 change in the price of
polystyrene the material cost in our plastics consumables segment will change by
approximately $0.5 million per annum. Therefore, the operating results of the
Company's plastic consumables segment may fluctuate with changes in the price of
plastic resins. The Company's zinc business has sales arrangements with a
majority of its customers such that sales are priced either based upon supply
contracts that provide for fluctuations in the price of zinc to be passed on to
the customer or are conducted on a tolling basis whereby customers supply zinc
to the Company for processing. Such zinc sales arrangements as well as the zinc
business utilizing forward buy contracts reduce the exposure of this business to
changes in the price of zinc.
The Company, from time to time, invests in short-term financial instruments with
original maturities usually less than fifty days.
The Company is exposed to short-term interest rate variations with respect to
Eurodollar or Base Rate on certain of its term and revolving debt obligations
and six month LIBOR in arrears on certain of its interest rate swaps. The
spreads on the interest rate swaps range from 523 to 528 basis points.
Settlements on the interest rate swaps are made on May 1 and November 1. The
Company is exposed to credit loss in the event of non-performance by the other
party to its current existing swaps, a large financial institution. However, the
Company does not anticipate non-performance by the other party.
Changes in Eurodollar or LIBOR interest rates would affect the earnings of the
Company either positively or negatively depending on the direction of the
change. Assuming that Eurodollar and LIBOR rates each increased 100 basis points
over period end rates on the outstanding term debt and interest rate swaps, the
Company's interest expense would have increased by approximately $2.2 million
for the nine month period ended September 30, 2004 and approximately $1.2
million for the nine month period ended September 30, 2003. The amount was
determined by considering the impact of the hypothetical interest rates on the
Company's borrowing cost, short-term investment rates, interest rate swaps and
estimated cash flow. Actual changes in rates may differ from the assumptions
used in computing this exposure.
Other than the short-term forward buys of zinc discussed above in "Financial
Condition, Liquidity and Capital Resources", the Company does not invest or
trade in any derivative financial or commodity instruments, nor does it invest
in any foreign financial instruments.
ITEM 4. CONTROLS AND PROCEDURES
An evaluation was performed under the supervision and with the participation of
the Company's management, including the Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures as of the end of the period covered
by this report. Based on that evaluation, the Company's management, including
the Chief Executive Officer and Chief Financial Officer, concluded that the
Company's disclosure controls and procedures were effective.
There have been no significant changes in the Company's internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of their evaluation.
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. EXHIBITS
Exhibit Description
------- -----------
10.1 Securities Purchase Agreement, dated as of September 19,
2004, by and among American Household, Inc., Jarden
Corporation, Morgan Stanley Senior Funding, Inc., Wachovia
Bank National Association, Banc of America Strategic
Solutions, Inc., Jerry W. Levin, 1st Trust & Co. FBO, Jerry
W. Levin, Rollover, 1st Trust & Co. FBO, Jerry W. Levin, IRA
SEP and Abby L. Levin Trust (filed as Exhibit 10.1 to the
Company's Form 8-K filed with the Commission on September 23,
2004, and incorporated herein by reference).
10.2 Purchase Agreement, dated as September 19, 2004, between
Jarden Corporation and Warburg Pincus Private Equity VIII,
L.P. (filed as Exhibit 10.2 to the Company's Form 8-K filed
with the Commission on September 23, 2004, and incorporated
herein by reference).
* 31.1 Certification of Chief Executive Officer Pursuant to
Rule 13a-14(a) as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
* 31.2 Certification of Chief Financial Officer Pursuant to
Rule 13a-14(a) as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
* 32.1 Certifications Pursuant to 18 U.S.C. Section 1350 as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
* Filed herewith.
B. REPORTS ON FORM 8-K
We filed a Form 8-K on July 13, 2004 with respect to items 2, 5 and 7 relating
to (i) the acquisition of The United States Playing Card Company and (ii) the
refinancing of our existing senior indebtedness by closing on an amendment and
restatement to our existing credit agreement.
We filed a Form 8-K on July 26, 2004, with respect to Items 7 and 12, relating
to a press release, dated July 26, 2004, announcing our earnings for the three
month period ended June 30, 2004.
We filed a Form 8-K/A on August 6, 2004, amending our current report on Form 8-K
filed July 13, 2004 to include Item 7(a) Financial Statement of the Acquired
Business and Item 7 (b) Pro Forma Financial Information.
We filed a Form 8-K/A-2 on August 13, 2004, amending our current report on Form
8-K filed July 13, 2004 (as amended on August 6, 2004) to include Exhibit 23.1,
the consent of Deloitte and Touche LLP.
We filed a Form 8-K on September 23, 2004 with respect to Items 1.10, 2.03,
3.02, 3.03 and 9.01, relating to (i) the execution of a Securities Purchase
Agreement ("Securities Purchase Agreement") to acquire all of the capital stock
of American Household, Inc. upon the terms and subject to the conditions
contained in the Securities Purchase Agreement ("AHI Acquisition"); (ii)
entering into a Purchase Agreement with Warburg Pincus Private Equity VIII, L.P.
("Warburg Pincus"), pursuant to which the Company agreed to sell, and Warburg
Pincus agreed to purchase, for a total purchase price of $350,000,000: shares of
Series B Convertible Participating Preferred Stock, shares of Series C Mandatory
Convertible Participating Preferred Stock, and shares of Jarden's common stock;
and (iii) the Company receiving a Commitment Letter, from Citicorp USA, Inc. and
Canadian Imperial Bank of Commerce to provide senior secured credit facilities
to finance the AHI Acquisition, certain related costs and for other corporate
purposes.
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SIGNATURE
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.
JARDEN CORPORATION
Date: November 8, 2004 By: /s/ Ian G.H. Ashken
-------------------
Ian G.H. Ashken
Vice Chairman,
Chief Financial Officer and Secretary
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