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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004
( ) 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
------------------------------------------------------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------
COMMON STOCK, $.01 PAR VALUE NEW YORK STOCK EXCHANGE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
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 IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM
405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS
FORM 10-K: [ ]
INDICATE BY CHECK MARK WHETHER THE REGISTRANT IS AN ACCELERATED FILER (AS
DEFINED IN RULE 12B-2 OF THE EXCHANGE ACT). YES [X] NO [ ]
AS OF JUNE 30, 2004, THE AGGREGATE MARKET VALUE OF VOTING COMMON STOCK
HELD BY NON-AFFILIATES OF THE REGISTRANT WAS $791.8 MILLION BASED UPON THE
CLOSING MARKET PRICE ON SUCH DATE AS REPORTED ON THE NEW YORK STOCK EXCHANGE.
ALL (I) EXECUTIVE OFFICERS AND DIRECTORS OF THE REGISTRANT AND (II) ALL
PERSONS FILING A SCHEDULE 13D WITH THE SECURITIES AND EXCHANGE COMMISSION IN
RESPECT TO REGISTRANT'S COMMON STOCK WHO HOLD 10% OR MORE OF THE REGISTRANT'S
OUTSTANDING COMMON STOCK, HAVE BEEN DEEMED, SOLELY FOR THE PURPOSE OF THE
FOREGOING CALCULATION, TO BE "AFFILIATES" OF THE REGISTRANT.
THERE WERE 29,092,334 SHARES OUTSTANDING OF THE REGISTRANT'S COMMON STOCK,
PAR VALUE $.01 PER SHARE, AS OF FEBRUARY 18, 2005.
DOCUMENTS INCORPORATED BY REFERENCE
CERTAIN INFORMATION REQUIRED FOR PART III OF THIS REPORT WILL BE SET FORTH
IN AND, INCORPORATED HEREIN BY REFERENCE TO THE COMPANY'S DEFINITIVE PROXY
STATEMENT FOR THE 2005 ANNUAL MEETING OF STOCKHOLDERS, WHICH IS ANTICIPATED TO
BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO REGULATION 14A
NOT LATER THAN 120 DAYS FOLLOWING THE END OF THE COMPANY'S FISCAL YEAR ENDED
DECEMBER 31, 2004.
JARDEN CORPORATION
INDEX TO FORM 10-K
PART I PAGE
Item 1. Business........................................................................................ 3
Item 2. Properties...................................................................................... 20
Item 3. Legal Proceedings............................................................................... 20
Item 4. Submission of Matters to a Vote of Security Holders............................................. 20
Executive Officers of the Company............................................................... 21
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities....................................................................... 22
Item 6. Selected Financial Data......................................................................... 23
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations........... 25
Item 7A. Quantitative and Qualitative Disclosures About Market Risk...................................... 44
Item 8. Financial Statements and Supplementary Data..................................................... 45
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure............ 78
Item 9A. Controls and Procedures......................................................................... 79
Item 9B. Other Information............................................................................... 80
PART III
Item 10. Directors and Executive Officers of the Registrant ........................................... 81
Item 11. Executive Compensation ..................................................................... 81
Item 12. Security Ownership of Certain Beneficial Owners and Management.................................. 81
Item 13. Certain Relationships and Related Transactions.................................................. 81
Item 14. Principal Accountant Fees and Services.......................................................... 81
PART IV
Item 15. Exhibits and Financial Statement Schedule....................................................... 82
Signatures.................................................................................................... 93
Financial Statement Schedule.................................................................................. 94
Exhibit Index................................................................................................. 95
2
PART I
ITEM 1. BUSINESS
Jarden Corporation was reincorporated in the State of Delaware in December
2001, having been originally incorporated in the State of Indiana in 1991. We
are a global provider of a diversified array of branded consumer products
marketed under well-known brand names including Ball(R), Bee(R), Bicycle(R),
Campingaz(R), Coleman(R), Crawford(R), Diamond(R), First Alert(R), FoodSaver(R),
Forster(R), Health o meter(R), Hoyle(R), Kerr(R), Lehigh(R), Leslie-Locke(R),
Loew-Cornell(R), Mr. Coffee(R), Oster(R), Sunbeam(R) and VillaWare(R). Our
growth strategy of acquiring businesses with highly recognized brands,
innovative products and multi-channel distribution has resulted in significant
growth in revenue and earnings.
We have achieved leading market positions in a number of categories by
selling branded products through a variety of distribution channels, including
club, department store, drug, grocery, mass merchant, sporting goods and
specialty retailers as well as direct to consumers. By leveraging our strong
brand portfolio, category management expertise and superior customer service, we
have established and continue to maintain long-term relationships with leading
retailers within these channels. For example, we have serviced Wal-Mart and Home
Depot since their openings in 1962 and 1978, respectively, and are currently
category manager at these and other retailers in certain categories. Moreover,
several of our leading brands, such as Ball(R) jars, Coleman(R) lanterns,
Diamond(R) kitchen matches and Bicycle(R) playing cards have been in continuous
use for over 100 years. We continue to strive to expand our existing customer
relationships and attract new customers by introducing new product line
extensions and entering new product categories.
On January 24, 2005, we acquired American Household, Inc., a leading
designer, manufacturer and marketer of branded household and outdoor leisure
consumer products in both domestic and international markets through its two
principal businesses, The Coleman Company, Inc. and Sunbeam Products, Inc.
Coleman sells principally outdoor leisure and camping products, and Sunbeam
Products sells principally household kitchen appliances, personal care and
wellness products for home use and home safety equipment. American Household's
principal brands, which include Sunbeam(R), Oster(R), Campingaz(R), Coleman(R),
First Alert(R), Health o meter(R) and Mr. Coffee(R), have high levels of brand
name recognition among consumers. For a more detailed description of the
acquisition of American Household, please see "--Recent Developments" and
"--History of American Household" below.
We operate three primary business segments: branded consumables, consumer
solutions and outdoor solutions. Our branded consumables products include many
household staples under well known brand names such as Ball(R), Bicycle(R),
Diamond(R), Forster(R), Lehigh(R), Leslie-Locke(R) and Loew-Cornell(R), all of
which were included as part of the branded consumables segment prior to our
acquisition of American Household. With the acquisition of American Household we
have added the First Alert(R), Health o meter(R), Mr. Coffee(R), Oster(R) and
Sunbeam(R) branded products to our consumer solutions segment and established a
strong market position in the camping equipment and outdoor living industry,
under the Campingaz(R) and Coleman(R) brand names within our newly-formed
"outdoor solutions" business segment. We also operate several other businesses
that manufacture, market and distribute a wide variety of plastic products,
including jar closures, contact lens packaging, plastic cutlery, refrigerator
door liners, surgical devices and syringes, as well as zinc strip and fabricated
zinc products. Many of our plastic products are consumable in nature or
represent components of consumer products. Due to the size of these businesses,
they will be grouped in and their results and assets will be included in the
"other" category of our segment information in our SEC filings for periods after
the American Household acquisition.
Branded Consumables. We manufacture or source, market and distribute a broad
line of branded consumer products, many of which are affordable, consumable and
fundamental household staples including arts and crafts paint brushes,
children's card games, clothespins, collectible tins, craft items, food
preparation kits, home canning jars, jar closures, kitchen matches, other craft
items, plastic cutlery, playing cards and accessories, rope, cord and twine,
storage and workshop accessories, toothpicks and other accessories. This segment
markets its products
3
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, among others.
Consumer Solutions. We manufacture or source, market and distribute an array of
innovative consumer products that are designed to enhance consumers lives by
enhancing sleep, health, personal care, cooking and other daily necessities with
market-leading products such as coffee makers, bedding, home vacuum packaging
machines, smoke and carbon monoxide alarms, heating pads, and personal and
animal grooming products, as well as related consumable products. We sell
kitchen products under the well known FoodSaver(R), Mr. Coffee(R), Oster(R),
Sunbeam(R) and VillaWare(R) brand names. Home safety products are sold under the
First Alert(R) and BRK(R) brand names, while personal care and grooming products
are sold under the Health o meter(R), Sunbeam(R) and Oster(R) brand names.
Outdoor Solutions. We manufacture or source, market and distribute consumer
leisure products worldwide under the Campingaz(R) and Coleman(R) brand names for
use outside the home or away from the home, such as products for camping,
backpacking, tailgating, backyard grilling and other outdoor activities.
Other. In addition to the three primary business segments described above, our
other business segment consists primarily of our plastic consumables business,
which manufactures, markets and distributes a wide variety of consumer and
medical plastic products for customers and our other primary business segments,
and our zinc strip business, which is the largest producer of zinc strip and
fabricated products in North America, including low denomination coinage. The
plastic products include closures, contact lens packaging, plastic cutlery,
refrigerator door liners, surgical devices and syringes. Many of our plastic
products are consumable in nature or represent components of consumer products.
COMPETITIVE STRENGTHS
We believe that the following competitive strengths serve as a foundation
for our growth strategy:
Market Leadership Positions. In North America, we are a leader in several
targeted consumer categories including camping gear, cordage, home canning, home
vacuum packaging, matches and toothpicks, playing cards, retail plastic cutlery,
selected small kitchen appliances, warming blankets and a number of other
branded consumer products. We believe that the specialized nature of our niche
categories, and our leading market shares therein, provide us with competitive
advantages in terms of demand from major retailers and enhanced brand awareness.
We believe our market leadership positions contribute to our ability to attract
new customers and enter new distribution channels.
We believe our Ball(R) brand is synonymous with home canning. We are either
the named category manager, sole supplier or one of a very limited number of
vendors to the dominant retailers in the rope, cord and twine product lines. In
the playing card industry, our branded consumables segment is the leading
provider of playing cards under the Bee(R), Bicycle(R) and Hoyle(R) brands. We
created the home vacuum packaging category at most of our retailers and continue
to lead the category by providing innovation and marketing tools to promote the
FoodSaver(R) brand and home vacuum packaging to consumers. As a leading provider
of small kitchen appliances, we work directly with retailers, often as the
category "captain", to identify and support consumer's needs. Our Mr. Coffee(R),
Sunbeam(R) and Oster(R) brands hold leading positions in a number of small
electric categories including automatic drip coffee makers, blenders and hand
mixers. Our Coleman(R) and Campingaz(R) brands are widely recognized
domestically, in Europe and in the Pacific Rim, and we are a leader in a number
of camping and outdoor equipment product categories, including airbeds, lanterns
and stoves.
Strong Brand Name Recognition. We have built a portfolio of leading consumer
brands, which assists us in gaining retail shelf space and introducing new
products. The Ball(R) brand has been in continuous use for over 100 years and is
well recognized within the home food preservation market while the Bicycle(R)
playing card brand has been in continuous production since 1885. In the United
States, we believe Kerr(R) is also a widely-recognized home canning brand while
Bernardin(R) is the leading home canning brand in Canada. We believe Diamond(R)
and
4
Forster(R) are the leading brands in plastic cutlery, kitchen matches and
toothpicks for use in and around the home. We also believe our FoodSaver(R)
brand is a household name in home vacuum packaging systems. In addition, Bee(R),
Bicycle(R) and Hoyle(R) are leading brands with strong brand awareness and with
a significant share in the playing card category. The Coleman(R), Sunbeam(R) and
Mr. Coffee(R) brands are highly recognized brands in their respective market
segments. Overall, we believe our strong brand recognition and consumer
awareness, coupled with the long-standing quality of our products, results in
significant customer loyalty.
Comprehensive Product Offering. We provide retailers with a comprehensive
portfolio of consumer products across multiple categories, which adds diversity
to our revenues and cash flows. Within these categories, we service the needs of
a wide range of consumers and satisfy their different tastes, preferences and
budgets. Through our branded consumables segment, we offer a range of branded
products to serve the value, mid-tier and premium price points. Additionally,
branded consumables offers kitchen matches, retail plastic cutlery and
toothpicks of various counts, sizes and durability as well as leading card
products in each pricing category and a broad portfolio of card and gaming
accessories. Branded consumables also offers a diversified portfolio of consumer
products to the home improvement industry, including cordage (e.g. ropes and
twines), home storage and organization hardware, workshop accessories and
security screen doors and fencing. We believe our consumer solutions segment,
through our existing FoodSaver(R) and VillaWare(R) brands, along with the
recently purchased Mr. Coffee(R), Oster(R) and Sunbeam(R) brands, is well
positioned in the kitchen appliances category to take advantage of a "good,
better, best" strategy in order to target consumers with various levels of price
sensitivity and product sophistication. Within this segment we also offer to the
home safety market a complete product offering to both consumers and
professional installers under the First Alert(R) and BRK(R) brands,
respectively. In addition, with products ranging from lanterns to coolers to
outdoor fireplaces, Coleman(R) and Campingaz(R) are leading global camping and
outdoor lifestyle brands with comprehensive product offerings in numerous
categories. We believe our ability to serve retailers with a broad array of
branded products and introduce new products will continue to allow us to further
penetrate existing customers.
Long-Term Customer Relationships. We have established and continue to maintain
strong relationships with our retail customers based, in part, on our portfolio
of leading brands, superior customer service and product innovation. We are the
named category manager for various products including home canning, camping,
coffeemakers and seasonal bedding at key retailers, including Wal-Mart, Home
Depot and Lowe's. We are the leading supplier for other products for which there
is no named category manager such as cord and twine, home safety products,
playing cards, and scales. In addition, we have maintained relationships for
more than 10 years with virtually all of our key customers. We provide
marketing, technical and service support to our retail customers by assisting
with category management, in-store merchandising and customized packaging. We
also offer end users a broad array of services including product warranties,
toll-free customer service numbers and web sites featuring extensive customer
service information.
Recurring Revenue Stream. We derive recurring and, we believe, annually stable
sales from many of our leading products due to their affordability and position
as fundamental staples within many households. Our jar closures, kitchen
matches, plastic cutlery, rope, cord and twine and toothpicks are consumable in
nature and exemplify these traits. Moreover, we believe that as the installed
base of FoodSaver(R) appliances increases, our patented disposable storage bags
and related accessories used with the FoodSaver(R) appliances will constitute an
increasing percentage of total FoodSaver(R) revenues. In each of the last six
years the sales of consumable bags and accessories as a percentage of total net
sales of FoodSaver's(R) products has increased. We believe the acquisition of
American Household provides additional sources of recurring revenue, such as
replacement blades for our grooming and sheering business, replacement propane
and fuel tanks for our camping business and coffee filters for our Mr. Coffee(R)
coffee machine products.
Expertise in Successfully Identifying and Executing Complementary Acquisitions.
We believe we have expertise in identifying and acquiring businesses or brands
that complement our existing product portfolio. We are opportunistic in
identifying acquisition candidates that can provide category leading product
offerings to be sold through our existing distribution channels or introducing
new distribution channels for our existing products. This expertise has
previously resulted in several important strategic acquisitions of complementary
businesses, including
5
Tilia, Diamond Brands, Lehigh, United States Playing Card Company and American
Household, which have helped build our portfolio of consumer products and
strengthened our distribution channels. We believe that our acquisition
expertise uniquely positions us to take advantage of future opportunities to
acquire complementary businesses or brands.
We believe the January 2005 acquisition of American Household provides
benefits to us similar to our previous complimentary acquisitions, but on a much
larger scale. As a result of the acquisition, we have become a leader in a
variety of branded, consumer product segments in which we did not previously
participate (e.g. a broad range of small kitchen appliances, warming blankets,
grooming and shearing products and camping equipment) while also increasing our
international presence through the Sunbeam(R) and Coleman(R) channels of
distribution.
Low Cost Manufacturing. We focus on executing manufacturing programs involving
large volumes with superior efficiencies, low cost and high quality. We organize
the production runs of our branded consumables product lines to minimize the
number of manufacturing functions and the frequency of material handling. We
also utilize, where practical, a flexible process which uses cellular
manufacturing to allow a continuous flow of parts with minimal set up time. Our
efficient and automated plastic cutlery manufacturing operations enable us to
produce, count and package plastic cutlery ready for retail distribution with
minimal labor costs. In our Cincinnati, Ohio facility, which we acquired through
our acquisition of United States Playing Card Company, we use a manufacturing
process which results in a superior card stock and quality "snap," "slip" and
"shuffle" that we believe distinguishes our products from the competition.
We also utilize an efficient outsourced manufacturing network of suppliers
for certain of our branded consumables and consumer solutions products. Many of
these relationships are long-term, affording us increased flexibility and
stability in our operations. Our FoodSaver(R) appliances, bags and accessories
are sourced through several facilities throughout Asia and the United States.
This diverse network allows us to maintain multiple sources of quality products
while keeping price points competitive.
In 2003, and continuing in 2004, American Household implemented a series of
cost-saving initiatives that rationalized certain operating facilities for
products in the consumer solutions and outdoor solutions segments, as well as
increased outsourcing of certain small kitchen appliances and camping products.
Proprietary and Patented Technology. We believe that we have proprietary
expertise in the design, development and manufacture of certain of our products
supported by patented technology, affording us a competitive advantage and
enabling us to maintain our market leading positions. We own patents on our
FoodSaver(R) home vacuum packaging systems and on the bags used for vacuum
sealing. We believe this patent protection and our well-developed manufacturing
relationships have enabled us to become a market leader within the home vacuum
packaging category. For our home canning products, we have developed a
proprietary two-piece closure system incorporating a plastisol sealant that
differentiates our jar lids from those of competitors. For our playing card
manufacturing process, we have a proprietary method that is employed to
manufacture card stock and coating, which gives our products the unique "snap,"
"slip" and "shuffle" users demand for playing cards.
Proven and Incentivized Management Team. Our management team has a proven track
record of successful management with positive operating and shareholder results.
Our management team is led by Martin E. Franklin, our Chairman and Chief
Executive Officer, and Ian G.H. Ashken, our Vice Chairman and Chief Financial
Officer, both of whom joined Jarden in 2001 and who collectively beneficially
own approximately 9% of our common stock. In addition, each of our operating
businesses is managed by professionals with an average of over 20 years of
experience. Moreover, in 2003, we hired James E. Lillie to the newly created
positions of President and Chief Operating Officer to oversee day-to-day
operations and operational synergies of new acquisitions. Mr. Lillie's recent
background includes three years as the Executive Vice President of Operations
for Moore Corporation Limited.
6
GROWTH STRATEGY
Our objective is to increase profitability, cash flow and revenue while
growing our position as a leading manufacturer, marketer and distributor of
branded consumer products used in and around the home and home away from home.
Our strategy for achieving these objectives includes the following key elements:
Further Penetrate Existing Distribution Channels. We will seek to further
penetrate existing distribution channels to drive organic growth by capitalizing
on our strong existing customer relationships and attracting new customers. We
intend to further penetrate existing customers by continuing to:
o provide quality products;
o efficiently and consistently fulfill logistical requirements and
volume demands;
o provide comprehensive product support from design to after-market
customer service;
o cross-sell our brands across various business segments to our
extensive combined customer bases; and
o leverage Coleman's and Sunbeam's strong established European, Latin
American and Pacific Rim distribution channels.
As a result of our cross-selling initiatives, for example, FoodSaver(R)
products are now being sold through the grocery and hardware channels.
Similarly, certain food preparation kits have been sold directly to consumers
using consumer solutions' expertise. Furthermore, we believe there is an
opportunity to sell Lehigh(R) rope and garage storage products under the
Coleman(R) and Campingaz(R) brands or Diamond(R) products under or co-branded
with the First Alert(R) and Coleman(R) brands. We intend to attract new
customers through our portfolio of leading brands, innovative products and
superior customer service.
Introduce New Products. To drive organic growth from our existing businesses, we
intend to continue to leverage our strong brand names, customer relationships
and proven capacity for innovation to develop new products and product
extensions in each of our major product categories. For example, we recently
introduced our Loew-Cornell(R) soft comfort art brushes, handheld WineSaver(TM),
World Poker Tour(TM) poker sets and Diamond(R) Signature Series plastic cutlery.
We are developing several new product lines within the playing cards
business that bundle cards, rules and poker chips into a wide assortment of
travel cases and gift boxes. This product line also includes the World Poker
Tour(TM) brand. As part of this development, we have become the sole licensed
vendor for World Poker Tour(TM) cards and poker chips. We believe the addition
of American Household's brands to our portfolio results in a variety of
co-branding and cross-selling opportunities with the potential to introduce
numerous new products in a variety of categories.
Further Expand Internationally. Historically, we have operated primarily in
North America while establishing a limited presence internationally. In 2004,
actual sales outside of North America represented less than 6% of sales. The
integration of American Household provides an immediate distribution opportunity
in Europe, the Pacific Rim and Latin America. We intend to expand our
international sales primarily by leveraging these distribution channel
opportunities for certain of our existing products and by pursuing strategic
cross selling or co-branding in our foreign businesses with established
complementary distribution channels. We believe American Household's strong
international distribution network will assist us in placing FoodSaver(R) and
other of our products into foreign channels and increase the rate at which our
products assimilate themselves into homes in the European, the Pacific Rim and
Latin American markets.
We expect that our acquisition of American Household, which derived more
than 25% of its sales internationally, will provide us with a strong foothold to
drive increased international sales of our other products.
7
Pursue Strategic Acquisitions. We anticipate that the fragmented nature of the
consumer products market will continue to provide opportunities for growth
through strategic acquisitions of complementary businesses. Our acquisition
strategy will continue to focus on businesses or brands with product offerings
that provide expansion into related categories and can be marketed through our
existing distribution channels or provide us with new distribution channels for
our existing products, thereby increasing marketing and distribution
efficiencies. Furthermore, we seek acquisition candidates that demonstrate a
combination of attractive margins, strong cash flow characteristics, category
leading positions and products that generate recurring revenue. We anticipate
that future acquisitions will be financed through a combination of cash on hand,
operating cash flow, availability under our existing credit facilities and new
capital market offerings.
BRANDED CONSUMABLES
On February 7, 2003, we acquired substantially all of the assets of
Diamond Brands International, Inc. and its subsidiaries, which we refer to
collectively as Diamond Brands, a leading provider of plastic cutlery,
clothespins, kitchen matches and toothpicks. On September 2, 2003, we acquired
all of the issued and outstanding stock of Lehigh Consumer Products Corporation
and its subsidiary, which we refer to collectively as Lehigh, 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 products in the security screen door and ornamental
metal fencing market.
On June 28, 2004, we completed our acquisition of United States Playing
Card Company, a leading 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 and the largest supplier of
premium playing cards to casinos worldwide. Its brands include Aviator(R),
Bee(R), Bicycle(R), and Hoyle(R). With the United States Playing Card Company
acquisition, we also acquired Naipes Heraclio Fournier, S.A., a leading playing
card manufacturer in Europe.
We manufacture, market and distribute a broad line of branded products
that includes cordage, home canning, matches and toothpicks, playing cards, and
retail plastic cutlery marketed under the well-known Ball(R), Bee(R),
Bernardin(R), Bicycle(R), Diamond(R), Forster(R), Hoyle(R), Kerr(R), Lehigh(R)
and Leslie-Locke(R) brand names, among others. We distribute our branded
consumable products through grocery, mass merchant, hardware and specialty
retail customers and deliver these products to thousands of "ship to" locations.
We sell a variety of branded consumable products detailed below:
Selected Owned and Licensed Brands Selected Products
- ---------------------------------- -----------------
Ball(R), Bernardin(R) and Kerr(R) Home canning jars in various
sizes, consumable decorative and
functional lids, food preparation
kits and home canning accessories
Aviator(R), Bee(R), Bicycle(R) and Hoyle(R) Playing cards, card accessories
and collectible tins
Diamond(R) and Forster(R) Kitchen matches, plastic cutlery,
toothpicks, clothespins, wood
craft items, fire starters, book
matches and straws
Lehigh(R) and Crawford(R) Ropes in synthetic and natural
fiber, clotheslines and related
hardware, twines and rubber tie
downs
Loew-Cornell(R), Forster(R) and Woodsies(R) Arts and crafts paintbrushes and
other craft items
Storehorse(R), Crawford(R) and
Leslie-Locke(R) Metal and plastic sawhorses,
multi-purpose
8
workbenches, garage storage and
organization products, security
screen doors and ornamental metal
fencing and related products
Customers
We have long-standing relationships with a diverse group of retail,
wholesale and institutional customers in North America. We sell through a wide
variety of retail formats, including grocery stores, mass merchants, department
stores, value retailers, home improvement stores and craft stores. Our principal
branded consumable customers include Home Depot, Kroger / Fred Meyer, Lowe's,
SuperValue and Wal-Mart, among others.
9
Sales and Marketing
For our branded consumables sales efforts we utilize internal sales,
marketing and customer service staff, supported by a network of outside sales
representatives. Regional sales managers are organized by geographic area and,
in some cases, customers, and are responsible for customer relations management,
pricing and distribution strategies, and sales generation. Our customer-specific
organized sales staff includes individuals focused on key customers such as Home
Depot, Lowe's and Wal-Mart and also key customer groups such as casinos. Our
marketing and sales departments work closely together to develop pricing and
distribution strategies and to design packaging and develop product line
extensions and new products. In the home improvement market, our sales and
marketing staff is supplemented by independent sales representative
organizations, which provide in-store merchandising services and assist the
store personnel with stocking, promotional programs and shelf set maintenance.
We have employed a two-tier marketing strategy for our line of home
canning and plastic cutlery products. The Ball(R), Kerr(R), Diamond(R) and
Forster(R) brand names are marketed as premium and specialty products. For the
more price-conscious consumer, we have positioned Golden Harvest(R) and Lady
Dianne(R) as our value-priced brands, which have allowed us to minimize the
cannibalization of our family of products by lower-priced, discount store
brands. Also, for our plastic cutlery products we manufacture certain private
label products.
Distribution and Fulfillment
We distribute our branded consumable products through a number of in-house
distribution centers and third party warehouses throughout North America.
Whenever possible, we utilize highly automated packaging equipment, allowing us
to maintain our efficient and effective logistics and freight management
processes. We also work with outsourced providers for the delivery of our
products in order to ensure that as many shipments as possible are processed as
full truckloads, saving significant freight costs.
Manufacturing
We manufacture the metal closures for our home canning jars at our Muncie,
Indiana facility. Lithographed tin plated steel sheet is cut and formed to
produce the lids and bands. Liquid plastisol, which we formulate, is applied to
lids, forming an airtight seal, which is necessary for safe and effective home
canning. Finished products are packaged for integration with glass jars or sold
in multi-packs as replacement lids.
We manufacture kitchen matches, toothpicks and craft items at our Cloquet,
Minnesota location. The plant purchases local wood that we convert into veneer,
from which we saw, stamp and mold the various wood shapes. The shapes are dried
and polished to prepare them for packing. The kitchen match products are put
through a secondary manufacturing process to apply the match head and prepare it
for packing and shipping to our customers.
We manufacture products for the home improvement industry utilizing U.S.,
Mexican and Asian-based manufacturing. North American manufacturing is utilized
for shorter runs and special orders. We operate facilities in Macungie,
Pennsylvania; Compton, California; and Merida, Mexico. Our Asian sourcing is
comprised of several long-standing sourcing relationships. We have long-standing
strategic alliances with several Asian contract manufacturers that have proven
to be reliable sources.
We manufacture playing card decks at our facilities in Cincinnati, Ohio
and Vitoria, Spain. All North American production is manufactured in Cincinnati
and in most cases shipped direct to the customer. We do maintain inventory at
a third party distribution warehouse in Las Vegas to insure that casino demand
is met. The Spain manufacturing plant services most of our European and Middle
Eastern customers.
10
Raw Materials and Sourcing of Product
Most of our glass canning jars and wood pulp for playing cards are
supplied under multi-year supply agreements with primary vendors which assist us
in achieving attractive pricing taking into consideration our volumes. Such
glass and wood pulp materials are currently also available from other sources at
competitive prices. The tin plate, nylon, metal, paper and resin used in the
manufacture of our branded consumables are supplied by multiple vendors and are
currently available from a variety of sources at competitive prices. Our wood is
also supplied by multiple vendors and is readily available to our wood
manufacturing plants from local suppliers. Our plastic cutlery is sourced from
our other segment.
Historically, the raw materials and components that are necessary for the
manufacture of our products have been available in the quantities that we
require. We believe the acquisition of American Household provides an
opportunity to integrate and leverage our combined purchasing of shared
commodities, resulting in cost savings for our businesses.
Intellectual Property
We believe that none of our active trademarks or patents is essential to
the successful operation of our business as a whole. However, one or more
trademarks may be material in relation to individual products or product lines
such as our rights to use the Ball(R), Bee(R), Bernardin(R), Bicycle(R),
Crawford(R), Diamond(R), Forster(R), Hoyle(R), Kerr(R), Lehigh(R),
Leslie-Locke(R) and Storehorse(R) brand names in connection with the sale of our
branded consumables.
Pursuant to the terms of the 1993 distribution agreement with Ball
Corporation ("Ball"), we were granted a perpetual, royalty-free license to use
the Ball(R) brand name for our branded consumables. In the event of a change of
control of Jarden which has not received the approval of a majority of our board
of directors or causes us to be controlled or majority owned by a competitor of
Ball, Ball has the option to terminate our license to use the Ball(R) brand
name. Pursuant to the terms of an agreement with Kerr Group, Inc. ("Kerr"), we
have a perpetual, royalty-free and exclusive, worldwide license to use the
Kerr(R) brand name for our branded consumables. However, in the event of a
change of control of Jarden which has not received the approval of a majority of
our board of directors, Kerr has the option to terminate our license to use the
Kerr(R) brand name.
We also have exclusive licensing agreements for brands such as Disney(R),
Harley-Davidson(R), Mattel(R), World Poker Tour(TM) and NASCAR(R) to manufacture
and distribute playing cards under those brand names.
Competition
Although we are a leading provider of home canning products, kitchen
matches, retail plastic cutlery, toothpicks, playing cards, rope, cord and
twines in the United States, we have direct competitors in most of our niche
markets. In addition to direct competitors, in the market for home canning we
compete with companies who specialize in other food preservation mediums such as
freezing and dehydration. The market for plastic cutlery is extremely price
sensitive and our competitors include Far East and domestic suppliers. Our
competition in the market for rope, cord and twine includes Wellington, Peerless
and Bevis. In the market for playing cards our competition includes Angel,
Cardinal Carta Mundi, Gemaco, Patch Products, Paul-Son, and a number of other
manufacturers located in China. Because of the significant investment in our
North American manufacturing facilities, established Asian sourcing capabilities
and efficient distribution platform, we believe we have become a low-cost
supplier of rope, cord, and twines, and playing cards and accessories to our
retail customer base, which we believe gives us a competitive advantage.
Seasonality
Sales of our home canning products generally reflect the pattern of the
growing season, and retail sales of our plastic cutlery are concentrated in the
summer months and holiday periods. Sales of our home improvement products are
concentrated in the spring and summer months. Sales of all these products may be
negatively impacted by unfavorable weather conditions and other market trends.
Periods of drought, for example, may adversely affect the supply and price of
fruit, vegetables, and other foods available for home canning. Sales of playing
cards and arts and crafts are not, generally, very seasonally concentrated.
11
CONSUMER SOLUTIONS
On April 24, 2002, we acquired the business of Tilia International, Inc.
and its subsidiaries, which we refer to collectively as Tilia.
On January 24, 2005, we acquired American Household, Inc., which we refer
to as American Household, a leading global designer, manufacturer and marketer
of branded durable household consumer products in both domestic and
international markets. One of its subsidiaries, Sunbeam Products, Inc., which we
refer to as Sunbeam, is now included in our consumer solutions segment. Sunbeam
manufactures, markets, and distributes a diverse line of household products,
including kitchen appliances, personal care and wellness products for home use,
and home safety equipment, primarily to consumers through department stores,
specialty retailers, and mass merchants. Sunbeam maintains a strong portfolio of
globally recognized brands including BRK(R), First Alert(R), Health o meter(R),
Mr. Coffee(R), Oster(R) and Sunbeam(R).
We manufacture or source, market and distribute a diverse array of
innovative kitchen and other household products primarily to consumers through
department stores, specialty retailers, and mass merchants. Our strong portfolio
of well known brands includes the BRK(R), First Alert(R), FoodSaver(R), Health o
meter(R), Mr. Coffee(R), Oster(R), Sunbeam(R) and VillaWare(R) brand names. We
believe that the FoodSaver(R) vacuum packaging system is superior to more
conventional means of food packaging, including freezer and storage bags and
plastic containers, in preventing dehydration, rancidity, mold, freezer burn and
hardening of food. The original FoodSaver(R) product was successfully launched
through infomercials and has since expanded its distribution channels to be
based primarily on retail customers. In addition to machines, we market and
distribute an expanding line of proprietary bags and bag rolls for use with
FoodSaver(R) machines which represent a recurring revenue source, along with
accessories including canisters, jar sealers and wine stoppers. Under the
VillaWare(R) brand name, we provide high-end kitchen products, such as panini
grills, smoothie makers and waffle makers, primarily to the specialty gourmet
market. Through our BRK(R), First Alert(R), Health o meter(R), Mr. Coffee(R),
Oster(R) and Sunbeam(R) brand names our principal products include clippers and
trimmers for professional use in the beauty and barber and animal segments;
electric blankets and throws; home safety products principally consisting of
consumer fire and carbon monoxide detectors, as well as fire extinguishers;
household kitchen appliances, such as blenders, coffee makers, irons, mixers,
toasters, and toaster ovens; personal care and wellness products consisting of
health products for home use; products for the hospitality industry; and scales
for consumer use. We believe we hold one of the leading positions in most of our
principal markets.
We believe that with the acquisition of American Household's diverse
product offerings, our consumer solutions sales are well diversified with
respect to both geography and distribution channel. We sell a variety of branded
household products detailed below:
Principal Owned Brands Principal Products
- ---------------------- ------------------
First Alert(R) and BRK(R) Home safety products
FoodSaver(R) Home vacuum packaging
Health at Home(R) and Health o meter(R) Personal care and health monitoring
products
Mr. Coffee(R) Coffee Makers
Sunbeam(R) and Oster(R) Small appliances and personal care
products
VillaWare(R) Specialty kitchen products
12
Customers
We sell our small kitchen appliances, including home vacuum packaging
machines, and our home safety products and personal care and wellness products
through a diverse group of leading wholesale and retail customers in North
America and distributors around the world. Our vacuum sealing products have
penetrated traditional retail channels including mass merchants and specialty
retailers in the United States and select international locations and are also
sold through direct-to-consumer channels, primarily infomercials. Small kitchen
appliances are sold worldwide, including in Latin America and Europe, through
retail channels including mass merchants, specialty retailers and department
stores. Home safety products are sold through mass retailers such as Wal-Mart,
professional retailers such as home centers, direct-to-customer such as
homebuilders and to wholesalers. Our leading retail customers in the consumer
solutions segment include Costco, Kohl's, Sam's, Target and Wal-Mart, among
others.
Sales and Marketing
Our vacuum packaging sales efforts are led by our internal sales force,
which manages house accounts and oversees independent manufacturer
representatives. We also sell directly to the consumer through television
infomercials, the Internet and other direct-to-consumer promotions. In addition
to generating direct sales, the infomercials serve as an advertising tool
creating awareness and demand at retail stores for the product line. Our
marketing and sales departments work closely together to develop customized
product line and pricing strategies to meet our customers' specialized needs.
Our marketing department is implementing a strategy designed to drive sustained
growth over the next few years. Advertising and brand-building programs will
extend beyond infomercials. We believe that new product innovation will
increasingly capitalize on consumer segmentation opportunities in vacuum
packaging and in other food preservation categories. We believe that our retail
position will be reinforced by channel marketing initiatives that optimize
category volume and profitability for retailers. We intend to expand direct
marketing activities to reinforce the brand loyalty and usage rates for bags and
accessories.
Small kitchen appliances, home safety and personal care and wellness
products have an internal sales force and marketing department that focus their
efforts in those markets that require high levels of precision, quality and
engineering expertise. The team dedicates resources across the organization to
focus on developing brands. The sales force is allocated by geographic region:
United States, Canada, Latin America and Europe with sub-groups to sell
different product lines. We operate in an integrated model with the business and
operational teams to ensure consistency and fulfillment of marketing strategy
and establish direction for the growth priorities of the brands. Advertising and
brand building promotions include public relations impressions, print
advertisements, movie co-promotions, consumer contests, demonstrations and
educational events at trade shows and strategic partnerships with public safety
campaigns.
In addition to brand development, we have an extensive licensing strategy
to extend the reach of the brands across categories, geographies and strategic
product extensions. We believe that utilizing licensing generates high value
consumer impressions that are aligned with the strategic objectives of the
brands and enhances emotional relevance of the product. Sunbeam(R) is among the
leading licensed housewares brands in the industry.
Distribution and Fulfillment
We utilize a combination of third party and owned warehouses in the United
States, Canada, Latin America and Europe to distribute our consumer solutions
products.
Manufacturing
Our research and development department designs and engineers home vacuum
packaging in the United States, sets strict engineering specifications for the
third-party manufacturers and ensures our proprietary manufacturing expertise
despite outsourced production. We maintain control over all critical production
molds. In
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order to ensure the quality and consistency of our products manufactured by
third party manufacturers in Asia, we employ a team of inspectors who examine
the products we purchase on site at the factories. Products are currently
sourced through multiple key suppliers in China, Taiwan, Korea and the United
States.
Small kitchen appliances, home safety and personal care and wellness
products are developed, designed and tested at sites around the world. The
products are manufactured in owned and leased facilities in the United States,
Mexico and Venezuela and through third-party sourcing. In order to ensure the
quality and consistency of our products manufactured by third party
manufacturers in Asia, we have sourcing facilities including product
development, project management and quality support in Hong Kong and the
mainland of China. We are in the process of rationalizing our facilities
worldwide.
Intellectual Property
The principal trademarks in our consumer solutions segment consist of
BRK(R), First Alert(R), FoodSaver(R), Health o meter(R), Mr. Coffee(R),
Oster(R), and Sunbeam(R). Our other brands used include Health at Home(R),
Mixmaster(R), Osterizer(R), Hydrosurge(R), and Blanket with a Brain(R). We
believe our principal trademarks have high levels of brand name recognition
among retailers and consumers. In addition, we believe our brands have an
established reputation for quality, reliability and value. We monitor and
protect our brands against infringement, and we actively pursue the licensing of
our trademarks to third parties for products that complement our product lines
or businesses. We also hold numerous design and utility patents covering a wide
variety of products, the loss of any one of which would likely not have a
material adverse effect on our business taken as a whole.
On April 1, 2004, our subsidiaries, Tilia, Inc. and Tilia International,
Inc., entered into a license and settlement agreement with Applica Incorporated
and Applica Consumer Products, Inc. (collectively "Applica"), to resolve patent
infringement litigation that we initiated and which was pending in federal court
in Miami and before the International Trade Commission in Washington, D.C. As
part of the license and settlement agreement, Applica agreed to pay us royalties
for using our vacuum sealing technology. In addition, Applica agreed to not
contest the validity of our previously disputed patents and to settle any future
disputes over product infringement by arbitration. Both parties have agreed to
keep specific terms of the license and settlement agreement, including the terms
of the license, confidential. By virtue of the license and settlement agreement,
the parties have mutually agreed to settle all of their various claims in the
relevant proceedings, including claims for antitrust violations against us. We
continue to pursue related patent infringement claims against ZeroPack Co. Ltd.
In December 2004, Tilia won at arbitration a patent infringement claim against
Applica involving two new vacuum sealing machines that they had been planning to
introduce.
Competition
The markets in which we operate are generally highly competitive, based
primarily on product quality, product innovation, price and customer service and
support, although the degree and nature of such competition vary by location and
product line.
Our FoodSaver(R) appliances and bags compete with marketers of
"conventional" food storage solutions, such as non-vacuum plastic bags and
containers. In addition, our competitors include other manufacturers of home
sealing appliances that heat- or vacuum-seal bags. As household penetration of
home vacuum packaging systems has increased, more competitors have entered the
market. As such, the market has become more price and feature sensitive. There
are also several companies that manufacture industrial and commercial vacuum
packaging products, but we do not believe that these manufacturers have
attempted to enter the household marketplace in any meaningful way.
In the general, more mature small household appliance category outside of
home vacuum packaging, our key competitors in the United States and Canada
include Applica Incorporated (maker of Black & Decker(R) branded products),
Cuisinart(R), Kitchen Aid(R), NACCO (maker of Hamilton Beach(R) and
Proctor-Silex(R) branded products) and Salton(R). In heated bedding products,
our primary competitor is Biddeford. In scales, vaporizers and
14
humidifiers, the key competitors include Holmes, Homedics(R)/Metro-Taylor,
Honeywell/Kaz and private label brands. Our key competitors for clippers,
trimmers and accessories for professional users include Andis(R) and Wahl. The
primary competitor to our hospitality business is Proctor-Silex(R). Our key
competitors in the home safety business include Kidde (maker of Kidde(R),
Nighthawk(R), and Fryenetics(R) branded products), Maple Chase (maker of
FireX(R) branded products) and USI Industries.
Seasonality
Sales of our consumer solutions products generally are strongest in the
fourth quarter preceding the holiday season and may be negatively impacted by
unfavorable retail conditions and other market trends.
OUTDOOR SOLUTIONS
As part of our acquisition of American Household, we acquired The Coleman
Company, Inc., which we refer to as Coleman, a leading, worldwide manufacturer
and marketer of outdoor recreation products, offering an array of products that
includes camping equipment such as tents, lanterns, foldable furniture, sleeping
bags, camping stoves; propane fuel; air mattresses; coolers; gas and charcoal
grills; insect control devices; and backyard furniture primarily under the
Coleman(R) and Campingaz(R) brand names. Coleman is part of our outdoor
solutions segment.
We manufacture, market, and distribute a complete line of camping and
outdoor activity products. We are a leading provider of airbeds, coolers,
grills, lanterns, sleeping bags, tents and other related products. Camping and
outdoor activity products are distributed globally under the Coleman(R) brand,
primarily in the United States, Canada and the Pacific Rim, and under the
Campingaz(R) brand internationally, primarily in Europe, through mass merchants,
sporting goods/specialty camping stores, and other retail locations.
Customers
We distribute our products globally through mass merchandisers; specialty
retail, including sporting goods and specialty camping stores; club stores;
wholesalers and our owned network of Coleman Outlet Stores. The "store-in-store"
concept at sporting goods specialty retailers has resulted in increased sales to
the channel. We have strong relationships with a number of our key customers
including serving as category captain for Wal-Mart. Other large customers
include Kmart, Lowe's, Sports Authority and Target.
Sales and Marketing
Our internal sales force and marketing department focus our efforts in
those markets that require high levels of precision, quality and engineering
expertise. The sales force is allocated by geographic region: United States,
Canada, the Pacific Rim and Europe, with sub-groups to sell different product
lines.
We focus on positioning Coleman as an outdoor lifestyle brand by creating
products to service the outdoor enthusiasts' broad spectrum of needs. We are
involved in a new packaging design to create a unique look for products. In
addition, we are investing in brand research and market research. We also
utilize promotions including Camp Wal-Mart and public relations campaigns.
In addition to brand development, we have an extensive licensing strategy
to enhance brand exposure and brand equity through appropriate product
extensions, while generating incremental revenue and goodwill. We believe we
have an objective and targeted image of high quality and excellent value.
Coleman has over 17 years of experience as a licensor and approximately 40
licensees of the Coleman(R) brand.
Distribution and Fulfillment
We have sales administration offices, warehouse and distribution facilities
in the United States, Europe, the Middle East, Japan and Australia. We also use
third party warehouses and logistical services. We sell our products directly to
international customers in certain other markets through our sales force,
independent
15
distributors and commissioned sales representatives.
Manufacturing
We manufacture our products at three facilities in the United States, two
facilities in Europe and through third-party sourcing, primarily in Asia. We are
in the process of closing a production facility in Lyon, France and
transitioning product manufacturing to third-party sources in Asia. In order to
ensure the quality and consistency of our products manufactured by third party
manufacturers in Asia, we have an Asian sourcing facility including product
development, project management and quality support in Hong Kong and China.
Raw Materials and Sourcing of Product
Our primary raw materials include aluminum, copper, corrugated cardboard
for packaging, electrical components, plastic resin, propane gas, steel and
various textiles and fabrics. The raw materials used in the manufacture of our
products are generally available from numerous suppliers in quantities
sufficient to meet normal requirements. Resin is a key raw material component in
outdoor solution products. We purchase resin from regular commercial sources of
supply and, in most cases, multiple sources. The supply and demand for resins is
subject to cyclical and other market factors. The segment's other key raw
material is propane gas which we purchase from regular commercial sources of
supply and, in most cases, multiple sources.
We also purchase a substantial number of finished products from various
suppliers, but are not dependent upon a single supplier for a material amount of
sourced product.
Intellectual Property
The principal trademarks consist of Coleman(R) and Campingaz(R). Other
trademarks in this segment include Coleman Exponent(R) and Roadtrip(TM). We
believe our principal trademarks in the outdoor solutions segment have high
levels of brand name recognition among retailers and consumers throughout North
America, Latin America, Europe and Asia. In addition, we believe our brands have
an established reputation for quality, reliability and value. We monitor and
protect our brands against infringement, and we actively pursue the licensing of
our trademarks to third parties for products that complement our product lines
or businesses. We hold numerous design and utility patents covering a wide
variety of products, the loss of any of which would likely not have a material
adverse effect on our business as a whole.
Competition
The markets in which our outdoor solutions business operates are generally
highly competitive, based primarily on product quality, product innovation,
price and customer service and support, although the degree and nature of such
competition vary by location and product line. Our largest competitors include
Igloo Corporation, Intex Corporation, VF Corporation (maker of North Face(R),
Jansport(R) and Eastpack(R) branded products), Johnson Outdoors (maker of
Eureka(R), Silva(R), Old Town(R) and other brands), Kellwood Company (maker of
American Recreation Products(R), Eddie Bauer(R) camping products, Kelty(R),
Wenzel(R), Sierra(R), Slumberjack(R) and other brands) and North Pole(R). In
addition to branded products, we regularly compete against the private label
brands of retailers. In order to protect our business and margins, we are
undergoing extensive corporate restructuring, transitions in sourcing and new
product development designed to allow us to compete effectively and maintain our
strong position in the market.
Seasonality
Sales of our outdoor solutions products are generally seasonal, with the
strongest sales in the first and second quarters of the calendar year. Sales of
these products may be negatively impacted by unfavorable weather conditions and
other market trends.
16
OTHER
In addition to the three primary business segments described above, we
manufacture, market and distribute a wide variety of plastic products including
closures, contact lens packaging, plastic cutlery, refrigerator door liners,
surgical devices and syringes. Many of these products are consumable in nature
or represent components of consumer products. We also are the largest North
American producer of niche products fabricated from solid zinc strip and are the
sole source supplier of copper plated zinc penny blanks to both the United
States Mint and the Royal Canadian Mint as well as a supplier of low
denomination coinage to other international markets. In addition, we manufacture
a line of industrial zinc products marketed globally for use in the plumbing,
automotive, electrical component and architectural markets, and the
Lifejacket(R) Cathodic Protection System.
We sell our plastic products primarily to major companies in the
healthcare and consumer products industries. Our leading customers include CIBA
Vision, Johnson & Johnson and Whirlpool. We also supply plastic products and
parts to both our branded consumables (plastic cutlery and closures) and
consumer solutions (plastic containers) segments. We sell our zinc products to
the United States Mint, the Royal Canadian Mint and other international markets,
and in the plumbing, automotive, electrical component and architectural markets.
GOVERNMENT CONTRACTS
We enter into contracts with the United States Government, which contain
termination provisions customary for government contracts. The United States
Government retains the right to terminate such contracts at its convenience.
However, if the contract is terminated, we are entitled to be reimbursed for
allowable costs and profits to the date of termination relating to authorized
work performed to such date. The United States Government contracts are also
subject to reduction or modification in the event of changes in government
requirements or budgetary constraints. Since entering into a contract with us in
1981, the United States Government has not terminated the penny blank supply
arrangement.
ENVIRONMENTAL MATTERS
Our operations are subject to Federal, state and local environmental and
health and safety laws and regulations, including those that impose workplace
standards and regulate the discharge of pollutants into the environment and
establish standards for the handling, generation, emission, release, discharge,
treatment, storage and disposal of materials and substances including solid and
hazardous wastes. We believe that we are in material compliance with such laws
and regulations. Further, the cost of maintaining compliance has not, and we
believe, in the future, will not, have a material adverse effect on our
business, results of operations and financial condition. Due to the nature of
our operations and the frequently changing nature of environmental compliance
standards and technology, we cannot predict with any certainty that future
material capital or operating expenditures will not be required in order to
comply with applicable environmental laws and regulations.
In addition to operational standards, environmental laws also impose
obligations on various entities to clean up contaminated properties or to pay
for the cost of such remediation, often upon parties that did not actually cause
the contamination. We have attempted to limit our exposure to such liabilities
through contractual indemnities and other mechanisms. We do not believe that any
of our existing remediation obligations, including at third-party sites where we
have been named a potentially responsible party, will have a material adverse
effect upon our business, results of operations or financial condition.
EMPLOYEES
We employ approximately 9,200 people in the United States, Latin America,
the Pacific Rim, Canada and Europe. Approximately 380 union workers are covered
by four collective bargaining agreements at four of our U.S. facilities. These
agreements expire at our jar closure facility (Muncie, Indiana) in October 2006,
at our kitchen match and toothpick manufacturing facility (Cloquet, Minnesota)
in February 2008, at our metals facility (Greeneville, Tennessee) in October
2007 and at our fire extinguisher plant (Aurora, Illinois) in May 2007.
17
Additionally, approximately 165 employees at our Legutiano, Spain manufacturing
facility, 90 employees at our Lyon, France facility, 75 employees at our
Barquisemeto, Venezuela facility and 500 employees at our Acuna, Mexico facility
are unionized.
We have not experienced a work stoppage during the past five years except
for brief stoppages in 2004 in Lyon, France in connection with our
restructurings at that location. Management believes that its relationships with
our employees and collective bargaining unions are satisfactory.
BACKLOG
As of December 31, 2004, the branded consumables and consumer solutions
segments had a backlog of orders of $7.0 million and $2.1 million, respectively.
In our remaining segments, we typically sell under supply contracts for minimum
(generally exceeded) or indeterminate quantities and, accordingly, we do not
track backlog information. There can be no assurance that orders comprising the
backlog will be realized as revenue.
RESEARCH AND DEVELOPMENT
Research and development costs are expensed as incurred in connection with
our internal programs for the development of products and processes and have not
been material in recent years.
RECENT DEVELOPMENTS
On January 24, 2005, we acquired American Household, Inc., a leading global
consumer products company that designs, manufactures and markets a diverse
portfolio of consumer products. Through its subsidiaries, American Household
produces a diverse array of products including blenders, camping stoves,
coffeemakers, coolers, irons, lanterns, scales, sleeping bags, smoke alarms,
tents and toasters under well-known brand names such as BRK(R), Campingaz(R),
Coleman(R), First Alert(R), Health o meter(R), Mr. Coffee(R), Oster(R) and
Sunbeam(R). Pursuant to the terms of a Securities Purchase Agreement, dated
September 19, 2004, we acquired American Household for $745.6 million in cash
for the equity and the repayment of approximately $100 million of debt after
deducting seller expenses.
For additional information about the history of American Household, see
"--History of American Household" below.
HISTORY OF AMERICAN HOUSEHOLD
American Household was organized in 1989 as Sunbeam-Oster Company, Inc. In
September 1990, Sunbeam-Oster and certain of its subsidiaries acquired the
assets and assumed certain liabilities, through reorganization, of Allegheny
International, Inc. Sunbeam-Oster completed a public offering of its common
stock in August 1992 and changed its name from Sunbeam-Oster Company, Inc. to
Sunbeam Corporation in May 1995. In December 2002, Sunbeam Corporation changed
its name to American Household, Inc.
On February 6, 2001, American Household (then known as Sunbeam Corporation)
and substantially all of its domestic subsidiaries filed for relief under
Chapter 11 of the United States Bankruptcy Code. The bankruptcy filing was the
result of high levels of leverage used to finance a series of acquisitions,
significant litigation exposure from litigation arising out of the events and
practices under the tenure of prior management, a general reduction in retailer
purchases as retailers sought to reduce their inventories due to the slowing
economy, and reduced sales of certain outdoor products which had unusually high
sales during 1999 due to Year 2000 concerns. On December 18, 2002, Sunbeam
Corporation and its subsidiaries consummated their plans of reorganization and
emerged from Chapter 11 proceedings.
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WEB SITE ACCESS DISCLOSURE
Our internet web site address is http://www.jarden.com. We make available
free of charge through our web site our annual report on Form 10-K, quarterly
reports on Form 10-Q, current reports on Form 8-K and all amendments to those
reports filed pursuant to Section 13(a) or 15(d) of the Securities Exchange Act
of 1934, as amended, and the proxy statement for our annual meeting of
stockholders, as soon as reasonably practicable after such material is
electronically filed with or furnished to the Securities and Exchange
Commission. In addition, information concerning purchases and sales of our
equity securities by our executive officers and directors is posted on our web
site, by the end of the business day after filing.
Our web site also includes the following corporate governance materials, at
the tab "Governance": our Business Conduct and Ethics Policy; our Board
Governance and Conduct Policy; our Management and Board of Directors; our
Committee Composition; our Insider Transactions; and the charters of our Board
committees. These corporate governance materials are also available in print
upon request by any stockholder to our Investor Relations department at our
corporate headquarters.
Information on our web site does not constitute part of this filing on Form
10-K.
In addition to the information included in this Item 1, see Item 7
(Management's Discussion and Analysis of Financial Condition and Results of
Operations) and Item 8, Note 1 (Significant Accounting Policies) and Note 5
(Business Segment Information) for financial and other information concerning
our business segments and geographic areas.
Our executive corporate headquarters is located at 555 Theodore Fremd
Avenue, Rye, NY 10580, and our telephone number is (914) 967-9400.
19
ITEM 2. PROPERTIES
The Company's properties are well maintained, considered adequate and being
utilized for their intended purposes. Information regarding the approximate size
of principal manufacturing, warehousing and office facilities is provided below:
Approximate
Location Type of Use Business Segment Square Foot Owned/Leased
- -------- ----------- ---------------- ----------- ------------
Cincinnati, Ohio Manufacturing/Warehousing/Offices Branded Consumables 1,080,000 Owned/Leased
Muncie, Indiana Manufacturing/Warehousing/Offices Branded Consumables 331,000 Owned/Leased
Cloquet, Minnesota Manufacturing Branded Consumables 290,000 Owned
Kansas City, Missouri Warehousing Branded Consumables 286,000 Leased
Macungie, Pennsylvania Manufacturing/Warehousing/Offices Branded Consumables 270,000 Leased
Compton, California Manufacturing/Warehousing Branded Consumables 222,000 Leased
Wilton, Maine Warehousing Branded Consumables 155,000 Owned
Merida, Mexico Manufacturing/Warehousing/Offices Branded Consumables 127,000 Owned/Leased
Vitoria, Spain Manufacturing/Warehousing/Offices Branded Consumables 71,000 Owned
Teaneck, New Jersey Warehousing/Offices Branded Consumables 50,000 Leased
Neosho, Missouri Warehousing Consumer Solutions 1,818,000 Owned
Waynesboro, Mississippi Manufacturing Consumer Solutions 894,000 Leased
Barquisimeto, Venezuela Manufacturing Consumer Solutions 195,000 Owned
McMinnville, Tennessee Manufacturing Consumer Solutions 169,000 Leased
Juarez, Mexico Manufacturing Consumer Solutions 150,000 Leased
Mississauga, Ontario Warehousing Consumer Solutions 137,000 Leased
Cleveland, Ohio Warehousing Consumer Solutions 127,000 Leased
Acuna, Mexico Manufacturing Consumer Solutions 110,000 Owned
Aurora, Illinois Manufacturing/Offices Consumer Solutions 104,000 Leased
Boca Raton, Florida Offices Consumer Solutions 101,000 Leased
San Francisco, California Offices Consumer Solutions 49,000 Leased
Wichita, Kansas Manufacturing/Warehousing/Offices Outdoor Solutions 1,366,000 Owned
New Braunfels, Texas Manufacturing Outdoor Solutions 345,000 Owned
St. Genis Laval, France Manufacturing/Warehousing/Offices Outdoor Solutions 282,000 Owned/Leased
Corbas, France Warehousing Outdoor Solutions 165,000 Leased
Maize, Kansas Manufacturing Outdoor Solutions 116,000 Owned
Centenaro di Lonato, Italy Manufacturing/Warehousing/Offices Outdoor Solutions 77,000 Owned
Greeneville, Tennessee Manufacturing/Warehousing/Offices Other 347,000 Owned
Fort Smith, Arkansas Manufacturing/Warehousing Other 179,000 Owned/Leased
Tupper Lake, New York Manufacturing/Warehousing Other 130,000 Owned
East Wilton, Maine Manufacturing/Warehousing Other 79,000 Owned
Reedsville, Pennsylvania Manufacturing/Warehousing Other 65,000 Owned
Springfield, Missouri Manufacturing/Warehousing Other 63,000 Owned/Leased
Greenville, South Carolina Manufacturing/Warehousing/Offices Other 49,000 Owned
Rye, New York Executive offices ----- 7,000 Leased
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in various legal disputes and other legal
proceedings that arise from time to time 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.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
fourth quarter of the fiscal year covered by this report.
20
EXECUTIVE OFFICERS OF THE COMPANY
Pursuant to General Instruction G(3), the information regarding our
executive officers called for by Item 401(b) of Regulation S-K is hereby
included in Part I of this Annual Report on Form 10-K.
The executive officers of the Company are as follows:
Martin E. Franklin, age 40, is Chairman and Chief Executive Officer of the
Company. Mr. Franklin was appointed to the Board of Directors on June 25, 2001
and became Chairman and Chief Executive Officer effective September 24, 2001.
Mr. Franklin is also a principal and executive officer of a number of private
investment entities. Mr. Franklin was the Chairman of the Board of Directors of
Bolle, Inc. from February 1997 until February 2000. Mr. Franklin has previously
held positions as Chairman and Chief Executive Officer of Lumen Technologies,
Inc. from May 1996 to December 1998, and Benson Eyecare Corporation from October
1992 to May 1996. Since January 2002, Mr. Franklin has served as the
non-executive Chairman of the Board and a director of Find/SVP, Inc., a Nasdaq
OTC Bulletin Board company. Mr. Franklin also serves as a director of Apollo
Investment Corporation.
Ian G.H. Ashken, age 44, is Vice Chairman, Chief Financial Officer and
Secretary of the Company. Mr. Ashken was appointed to the Board of Directors on
June 25, 2001 and became Vice Chairman, Chief Financial Officer and Secretary
effective September 24, 2001. Mr. Ashken is also a principal and executive
officer of a number of private investment entities. Mr. Ashken was the Vice
Chairman of the Board of Directors of Bolle, Inc. from December 1998 until
February 2000. From February 1997 until his appointment as Vice Chairman, Mr.
Ashken was the Chief Financial Officer and a director of Bolle. Mr. Ashken
previously held positions as Chief Financial Officer and a director of Lumen
Technologies, Inc. from May 1996 to December 1998 and Benson Eyecare Corporation
from October 1992 to May 1996.
James E. Lillie, age 43, is President and Chief Operating Officer of the
Company. Mr. Lillie joined the Company in August 2003 as Chief Operating Officer
and assumed the additional title and responsibilities of President, effective
January 2004. From 2000 to 2003, Mr. Lillie served as Executive Vice President
of Operations at Moore Corporation, Limited, a diversified commercial printing
and business communications company. From 1999 to 2000, Mr. Lillie served as
Executive Vice President of Operations at Walter Industries, Inc., a Kohlberg,
Kravis, Roberts & Company (KKR) portfolio company. From 1990 to 1999, Mr. Lillie
held a succession of managerial human resources, manufacturing, finance and
operations positions at World Color, Inc., another KKR portfolio company.
Desiree DeStefano, age 37, is Executive Vice President of Finance and
Treasurer of the Company. From 2003 to January 2005, Ms. DeStefano served as
Senior Vice President of the Company. Ms. DeStefano joined the Company as Chief
Transition Officer and Vice President in 2001. From 2000 to 2001, Ms. DeStefano
served as Chief Financial Officer of Sports Capital Partners, a private equity
investment fund. Ms. DeStefano served as Vice President of Bolle, Inc. from 1998
to 2000. From 1996 to 1998, Ms. DeStefano was Vice President of Lumen
Technologies, Inc. and prior to that, Ms. DeStefano held similar positions at
Benson Eyecare Corporation and was an audit senior at Price Waterhouse LLP.
J. David Tolbert, age 44, is Senior Vice President, Human Resources and
Corporate Risk of the Company. From October 1998 to January 2005, Mr. Tolbert
served as Vice President, Human Resources and Administration of the Company.
From April 1997 to October 1998, Mr. Tolbert served as Vice President, Human
Resources and Corporate Risk of the Company. From October 1993 to April 1997,
Mr. Tolbert served as Director of Human Resources of the Company. Since joining
Ball Corporation in 1987, Mr. Tolbert served in various human resource and
operating positions of Ball's and the Company's former Plastic Packaging
division.
Our executive officers serve at the discretion of our Board of Directors.
21
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASE OF EQUITY SECURITIES
MARKET FOR REGISTRANT'S COMMON EQUITY
Jarden Corporation's ("Jarden") common stock is traded on the New York
Stock Exchange under the symbol "JAH." As of February 18, 2005, there were
approximately 3,249 holders of record of the Company's common stock. On February
18, 2005, the last recorded sales price of the Company's common stock was
$44.59. Jarden currently does not and does not intend to pay cash dividends on
its common stock in the foreseeable future, and is restricted from doing so
under the terms of its credit facility and the indenture governing its senior
subordinated notes (see "Management's Discussion and Analysis of Financial
Condition and Results of Operations"). Cash generated from operations will be
used for general corporate purposes, including acquisitions and supporting
organic growth.
The table below sets forth the high and low sales prices of the Company's
common stock as reported on the New York Stock Exchange for the periods
indicated:
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
--------------- -------------- ------------- --------------
2004
- ----
High........... $ 36.97 $ 39.97 $ 39.15 $ 44.21
Low............ $ 27.52 $ 31.75 $ 29.90 $ 33.02
--------------- -------------- ------------- --------------
2003
- ----
High........... $ 18.83 $ 21.79 $ 26.84 $ 28.79
Low............ $ 14.57 $ 16.97 $ 17.67 $ 23.38
--------------- -------------- ------------- --------------
EQUITY COMPENSATION PLAN INFORMATION
Information regarding Jarden's equity compensation plans, including both
stockholder approved plans and plans not approved by stockholders, is set forth
in the section entitled "Executive Compensation-- Equity Compensation Plan
Information" in Jarden's Proxy Statement, to be filed within 120 days after the
Company's fiscal year end of December 31, 2004 (the "Proxy Statement"), which
information is incorporated herein by reference.
22
ITEM 6. SELECTED FINANCIAL DATA
The following tables set forth our selected financial data as of and for
the years ended December 31, 2004, 2003, 2002, 2001 and 2000. The selected
financial data set forth below has been derived from our audited consolidated
financial statements and related notes thereto where applicable for the
respective fiscal years. The selected financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" as well as our consolidated financial statements and
notes thereto. These historical results are not necessarily indicative of the
results to be expected in the future. The results of Tilia, Diamond Brands,
Lehigh and USPC are included from April 1, 2002, February 1, 2003, September 2,
2003, and June 28, 2004, respectively. 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.
FOR THE YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------------
2004 2003 2002 2001 2000
(a)(b) (c)(d) (e)(f) (g) (h)
------------ ------------ ------------ ------------- -------------
(dollars in thousands, except per share data)
STATEMENT OF OPERATIONS DATA:
Net sales....................... $838,609 $587,657 $367,104 $ 304,276 $356,123
Costs and expenses:
Cost of sales.............. 563,210 374,614 223,663 237,357 280,671
Selling, general and
administrative expenses... 146,901 119,760 78,332 47,829 49,686
Restricted stock charges... 32,415 21,833 - - -
Goodwill amortization...... - - - 5,153 6,404
Special charges and
reorganization expenses (i). - - - 4,978 380
Loss on divestiture of assets
and product lines......... - - - 122,887 -
------------ ------------ ------------ ------------- -------------
Operating earnings (loss)....... 96,083 71,450 65,109 (113,928) 18,982
Interest expense, net........... 27,608 19,184 12,611 11,791 11,917
Income tax provision (benefit).. 26,041 20,488 16,189 (40,443) 2,402
Minority interest in gain (loss) of
consolidated subsidiary...... - - - 153 (259)
------------ ------------ ------------ ------------- -------------
Net income (loss)............... $ 42,434 $ 31,778 $ 36,309 $ (85,429) $ 4,922
============ ============ ============ ============= =============
Basic earnings (loss) per share. $ 1.55 $ 1.40 $ 1.74 $ (4.47) $ 0.26
Diluted earnings (loss) per share $ 1.49 $ 1.35 $ 1.68 $ (4.47) $ 0.26
AS OF AND FOR THE YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------------
2004 2003 2002 2001 2000
(a)(b) (c)(d) (e)(f) (g) (h)
------------ ------------ ------------ ------------- -------------
(dollars in thousands)
OTHER FINANCIAL DATA:
EBITDA (j)........................ $ 115,258 $ 86,495 $ 75,110 $ (95,284) $ 40,552
Cash flows from operations (k).... 70,415 73,821 71,013 39,857 19,144
Depreciation and amortization..... 19,175 15,045 10,001 18,797 21,311
Capital expenditures.............. 10,761 12,822 9,277 9,707 13,637
BALANCE SHEET DATA:
Cash and cash equivalents......... $ 20,665 $ 125,400 $ 56,779 $ 6,376 $ 3,303
Working capital (m)............... 181,371 242,039 101,557 8,035 22,975
Total assets...................... 1,042,381 759,674 366,765 162,234 310,429
Total debt........................ 487,451 387,382 216,955 84,875 137,060
Total stockholders' equity........ 333,951 249,905 76,764 35,129 118,221
(a) 2004 includes a non-cash restricted stock charge of $32.4 million. As a
result, the Company's operating earnings and earnings before interest, taxes,
depreciation and amortization ("EBITDA") (see item (j) below) of $96.1 million
and $115.3 million, respectively, were each reduced by such amount. Also, the
Company's net income of $42.4 million included a reduction of $20.0 million
reflecting the amount of the non-cash restricted stock charge, net of related
tax benefit. Given that the Company's diluted weighted average shares for the
year were 28.5 million, the non-cash restricted stock charge, net of related tax
benefits also reduced the Company's diluted earnings per share by $0.71.
(b) The results of USPC are included from June 28, 2004.
23
(c) 2003 includes a non-cash restricted stock charge of $21.8 million. As a
result, the Company's operating earnings and earnings before interest, taxes,
depreciation and amortization ("EBITDA") (see item (j) below) of $71.5 million
and $86.5 million, respectively, were each reduced by such amount. Also, the
Company's net income of $31.8 million included a reduction of $13.3 million
reflecting the amount of the non-cash restricted stock charge, net of related
tax benefit. Given that the Company's diluted weighted average shares for the
year were 23.5 million, the non-cash restricted stock charge, net of related tax
benefits also reduced the Company's diluted earnings per share by $0.56.
(d) The results of Diamond Brands and Lehigh are included from February 1, 2003
and September 2, 2003, respectively.
(e) The results of Tilia are included from April 1, 2002.
(f) 2002 includes a net release of a $4.4 million tax valuation allowance. As a
result, the Company's net income of $36.3 million included the benefit of this
release. Given that the Company's diluted weighted average shares for the year
were 21.6 million, the net release of the tax valuation allowance, improved the
Company's diluted earnings per share by $0.20.
(g) 2001 includes a $121.1 million pretax loss on the sale of thermoforming
assets, a $2.3 million pretax charge associated with corporate restructuring, a
$1.4 million pretax loss on the sale of the Company's interest in Microlin, LLC,
$2.6 million of pretax separation costs related to the management
reorganization, $1.4 million of pretax costs to evaluate strategic options, $1.4
million of pretax costs to exit facilities, a $2.4 million pretax charge for
stock option compensation, $4.1 million of pretax income associated with the
discharge of deferred compensation obligations and a $1.0 million pretax gain
related to an insurance recovery.
(h) 2000 includes $1.6 million of pretax income associated with the reduction in
long-term performance-based compensation, $1.4 million in pretax litigation
charges, net of recoveries and $0.6 million of pretax costs to evaluate
strategic options.
(i) Special charges and reorganization expenses, net were comprised of costs to
evaluate strategic options, discharge of deferred compensation obligations,
separation costs for former officers, stock option compensation, corporate
restructuring costs, costs to exit facilities, reduction of long-term
performance based compensation, litigation charges and items related to our
divested thermoforming operations.
(j) For the years ended December 31, 2004 and 2003, EBITDA includes non-cash
restricted stock charges of $32.4 million and $21.8 million, respectively. For
the year ended December 31, 2001, EBITDA includes a $122.9 million loss on
divestiture of assets and product lines. EBITDA, a non-GAAP financial measure,
is presented in this Form 10-K because the Company's credit facility and senior
subordinated notes contain financial and other covenants which are based on or
refer to the Company's EBITDA. In this regard, GAAP refers to generally accepted
accounting principles in the United States. Additionally, EBITDA is a basis upon
which our management assesses financial performance and we believe it is
frequently used by securities analysts, investors and other interested parties
in measuring the operating performance and creditworthiness of companies with
comparable market capitalization to the Company, many of which present EBITDA
when reporting their results. Furthermore, EBITDA is one of the factors used to
determine the total amount of bonuses available to be awarded to executive
officers and other employees. EBITDA is widely used by the Company to evaluate
potential acquisition candidates. While EBITDA is frequently used as a measure
of operations and the ability to meet debt service requirements, it is not
necessarily comparable to other similarly titled captions of other companies due
to potential inconsistencies in the method of calculation. Because of these
limitations, EBITDA should not be considered a primary measure of the Company's
performance and should be reviewed in conjunction with, and not as substitute
for, financial measurements prepared in accordance with GAAP that are presented
in this Form 10-K. A reconciliation of the calculation of EBITDA, is presented
below.
(k) For the year ended December 31, 2002, cash flows from operations included
$38.6 million of income tax refunds resulting primarily from the 2001 loss on
divestiture of assets.
(m) Working capital is defined as current assets (including cash and cash
equivalents) less current liabilities.
Reconciliation of non-GAAP Measure
FOR THE YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------------
2004 2003 2002 2001 2000
------------ ------------ ------------ ------------- -------------
(dollars in thousands)
Net income........................ $ 42,434 $ 31,778 $ 36,309 $ (85,429) $ 4,922
Income tax provision (benefit).... 26,041 20,488 16,189 (40,443) 2,402
Interest expense, net............. 27,608 19,184 12,611 11,791 11,917
Depreciation and amortization..... 19,175 15,045 10,001 18,797 21,311
------------ ------------ ------------ ------------- -------------
EBITDA............................ $115,258 $ 86,495 $ 75,110 $ (95,284) $ 40,552
============ ============ ============ ============= =============
24
ITEM 7. 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. The
entire MD&A should be read in conjunction with Item 6. Selected Financial Data
and Item 8. Financial Statements and Supplementary Data appearing elsewhere in
this Form 10-K.
OVERVIEW
We are a leading provider of market leading branded consumer products used
in and around the home marketed under well-known brand names including Ball(R),
Bee(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). As a
result of our acquisition of American Household, Inc. ("AHI") on January 24,
2005 ("AHI Acquisition") we also provide global consumer products through the
Campingaz(R), Coleman(R), First Alert(R), Health o meter(R), Mr. Coffee(R),
Oster(R) and Sunbeam(R) brands (see "Recent Developments"). See Item 1. Business
and Note 5. Business Segment Information in Item 8. Financial Statements and
Supplementary Data, both included herein, for a discussion of each of our
segment's products.
Results of Operations
o Our net sales increased by $251.0 million in 2004 or, in percentage
terms, by 42.7% over 2003;
o Our operating income increased from $71.5 million in 2003 to $96.1
million in 2004 or, in percentage terms, by 34.5% over the prior year.
Such increase was after non-cash restricted stock charges in 2004 and
2003 of $32.4 million and $21.8 million, respectively, which had the
effect of reducing our operating income reported under generally
accepted accounting principles in the United States ("GAAP") in both
years;
o Our net income increased from $31.8 million in 2003 to $42.4 million
in 2004 or, in percentage terms, by 33.5% over the prior year. Such
increase was after non-cash restricted stock charges, net of related
tax benefits, in 2004 and 2003 of $20.0 million and $13.3 million,
respectively, which had the effect of reducing our net income reported
under GAAP in both years;
o Our diluted earnings per share increased from $1.35 in 2003 to $1.49
in 2004 or, in percentage terms, by 10.4% over the prior year. Given
our diluted weighted average shares outstanding in 2004 and 2003 of
28.5 million and 23.5 million, respectively, the effect of the
non-cash restricted stock charges discussed above was to reduce our
diluted earnings per share amounts reported under GAAP by $0.71 and
$0.56 in 2004 and 2003, respectively; and
o The increases to our net sales, operating income, net income and
diluted earnings per share discussed above, are principally the result
of acquisitions we completed in 2004 and 2003, which are described in
"Acquisition Activities" below. In addition, on an overall basis we
had organic growth of approximately 5% in 2004.
Liquidity and Capital Resources
o In taking advantage of cash on hand to partially fund the acquisitions
of Bicycle Holding, Inc. and its wholly-owned subsidiary United States
Playing Card Company (collectively "USPC" and "USPC Acquisition") and
to fund the acquisition of Loew-Cornell, Inc. ("Loew-Cornell" and
"Loew-Cornell Acquisition"), our liquidity, as measured by cash and
cash equivalents on hand and availability under our debt facility was
lower at December 31, 2004 than at December 31, 2003;
o We ended 2004 with a lower net debt-to-total capitalization ratio than
as of December 31, 2003 due to a significant increase in our market
capitalization, which was only partially offset by the additional debt
incurred to partially fund the USPC Acquisition;
25
o We increased total stockholders equity to approximately $334.0 million
at December 31, 2004 from approximately $249.9 million at December 31,
2003, primarily due to net income and restricted common stock
issuances;
o Cash flow generated from operations was approximately $70.4 million in
2004 compared to $73.8 million in December 31, 2003. The decrease of
$3.4 million was principally due to an increase in working capital,
partially offset by an increase of $17.4 million in cash operating
income;
o As of December 31, 2004, we had $20.7 million of cash and cash
equivalents on hand and nothing drawn down under our revolving credit
facility; and
o On January 24, 2005 we completed our acquisition of AHI, a privately
held company, for approximately $745.6 million in cash for the equity
and the repayment of approximately $100 million of indebtedness ("AHI
Acquisition"). The AHI Acquisition was funded through a combination of
new debt and equity financing (see "Financial Condition, Liquidity and
Capital Resources" and "Recent Developments").
We intend the discussion of our financial condition and results of
operations, including our acquisition and disposition 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 expanding sales of our existing brands. Our strategy to achieve future
growth is through internal growth as well as to consider future acquisitions of
businesses or brands that complement our existing product portfolio (see "Recent
Developments" below).
2004 Activity
On June 28, 2004 we acquired approximately 75.4% of the issued and
outstanding stock of USPC and subsequently acquired the remaining 24.6% pursuant
to a put/call agreement ("Put/Call Agreement") on October 4, 2004. USPC is a
manufacturer and distributor of playing cards and related games and accessories.
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), Mattel(R), NASCAR(R) and World Poker Tour(TM).
USPC's international holdings include Naipes Heraclio Fournier, S.A., a leading
playing card manufacturer in Europe. The aggregate purchase price was
approximately $237.9 million, including transaction expenses and deferred
consideration amounts. 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. The cash portion of the
October 4, 2004 exercise of the Put/Call Agreement was funded by a combination
of cash on hand and borrowings under our existing revolving credit facility.
As of December 31, 2004, in connection with the USPC Acquisition, we had
accrued approximately $20 million of deferred consideration for purposes of
guaranteeing potential indemnification liabilities of the sellers, of which $10
million is included as part of Deferred Consideration for Acquisitions on our
Consolidated Balance Sheet. The remaining $10 million is included in Other
Non-current Liabilities on our Consolidated Balance Sheet. The holdback amount
is secured by a stand-by letter of credit under our senior credit facility.
We also accrued approximately $3.0 million for a planned and ongoing
restructuring related to USPC. 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. USPC is included in our branded
consumables segment from June 28, 2004.
26
During the first quarter of 2004, we completed the tuck-in acquisition of
Loew-Cornell. Loew-Cornell is a leading marketer and distributor of paintbrushes
and other arts and crafts products. The Loew-Cornell Acquisition includes an
earn-out provision with a payment in cash or our common stock, at our sole
discretion, based on earnings performance targets. As of December 31, 2004, the
outcome of the contingent earn-out is not determinable beyond a reasonable
doubt. Therefore, only the prepayment of the contingent consideration ($0.5
million to be paid in equal installments during 2005 and 2006) has been recorded
as part of Deferred Consideration for Acquisitions on our Consolidated Balance
Sheet. Loew-Cornell is included in the branded consumables segment from March
18, 2004.
2003 Activity
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 a leading 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 market. The purchase
price of the transaction was approximately $157.5 million, including transaction
expenses. In addition, the Lehigh Acquisition includes a contingent
consideration provision with a potential payment in cash or our common stock, at
our sole discretion, of up to $25 million payable in 2006, provided that certain
earnings performance targets are met. Since this consideration is not payable
beyond a reasonable doubt, no amount has been accrued in our Consolidated
Balance Sheet as of December 31, 2004. 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 plastic cutlery, clothespins, kitchen matches 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.
We also completed two tuck-in acquisitions in 2003. In the fourth quarter
of 2003, we completed our acquisition of the VillaWare Manufacturing Company
("VillaWare"). VillaWare's results are included in the consumer solutions
segment from October 3, 2003. In the second quarter of 2003, we completed our
acquisition of O.W.D., Incorporated and Tupper Lake Plastics, Incorporated
(collectively "OWD"). The branded product distribution operation acquired in the
acquisition of OWD is included in the branded consumables segment from April 1,
2003. The plastic manufacturing operation acquired in the acquisition of OWD is
included in the plastic consumables segment from April 1, 2003.
2002 Activity
On April 24, 2002, we completed our acquisition of the business of Tilia
International, Inc. and its subsidiaries ("Tilia" and the "Tilia Acquisition").
We acquired the business of Tilia for approximately $145 million in cash and $15
million in seller debt financing. In addition, the Tilia Acquisition includes an
earn-out provision with a potential payment in cash or our common stock, at our
sole discretion, of up to $25 million payable in 2005, provided that certain
earnings performance targets are met. At December 31, 2004, we estimated that
the earn-out payment, payable in the second quarter of 2005, could be
approximately $17.3 million and we have accrued this amount in Deferred
Consideration for Acquisitions on our Consolidated Balance Sheet. We have
capitalized this earn-out accrual into goodwill. Tilia is included in the
consumer solutions segment from April 1, 2002.
Pro forma financial information for 2004 and 2003, relating to the USPC
Acquisition, the Lehigh Acquisition and the Diamond Acquisition has been
included in Item 8. Financial Statements and Supplementary Data.
The results of Loew-Cornell, VillaWare and OWD did not have a material
effect on our results for the years ended December 31, 2004 and 2003 and are not
included in the pro forma financial information presented in Item 8. Financial
Statements and Supplementary Data.
27
RESULTS OF OPERATIONS - COMPARING 2004 TO 2003
We reported net sales of $838.6 million in 2004, a 42.7% increase from net
sales of $587.7 million in 2003.
In 2004, our branded consumables segment reported net sales of $473.1
million compared to $257.9 million in 2003. This increase of 83.5% was
principally a result of acquisitions. Excluding the effects of acquisitions, net
sales of our branded consumables segment were $7.4 million or 2.9% higher than
2003, principally due to higher home canning sales and home improvement sales.
Our consumer solutions segment reported net sales of $222.2 million compared to
$216.1 million in net sales in 2003. This increase of 2.8% was principally the
result of the tuck-in acquisition of VillaWare in the fourth quarter of 2003.
Net sales of our FoodSaver(R) branded machines were lower in 2004 compared to
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 2004, our plastic consumables segment reported net sales of $128.1
million compared to $109.1 million in 2003. The principal reason for this
increase of 17.5% was both an increase in sales of plastic cutlery to our
branded consumables segment, as well as a full year effect of these sales due to
the addition of the plastic manufacturing business acquired in the Diamond
Acquisition in February 2003. Excluding intercompany sales, net sales for the
plastic consumables segment were higher due to increased sales to certain
existing OEM customers and new international sales. In 2004, our other segment
reported net sales of $67.5 million compared to $42.8 million in 2003. The
principal reasons for this increase of 57.7% were a full year's effect on net
sales resulting from the effects of purchasing rather than tolling zinc on
behalf of certain customers, increases in the price of zinc which were passed
through to customers and strength in industrial zinc and low denomination
coinage sales.
We reported operating earnings of $96.1 million in 2004 compared to
operating earnings of $71.5 million in 2003. This increase of $24.6 million
included non-cash restricted stock charges of approximately $32.4 million and
$21.8 million in 2004 and 2003, respectively. Excluding these non-cash
restricted stock charges, our operating earnings would have been 37.8% higher
than 2003. The principal reason for this increase was the effect of our 2003 and
2004 acquisitions. Due to the integration of certain of our acquisitions it is
no longer possible to compare the operating earnings, exclusive of acquisitions,
in the branded consumables segment with the prior year. The operating earnings
of our consumer solutions segment decreased by $5.5 million principally due to
the sales effects discussed above. The operating earnings of our plastic
consumables segment decreased by $2.9 million due to higher plastic resin prices
which were not passed through to our branded consumables segment with respect to
plastic cutlery products and higher validation costs incurred for new business
development projects, partially offset by the sales effects discussed above.
Operating earnings of our other segment increased by $3.5 million due primarily
to the sales effects discussed above.
Gross margin percentages on a consolidated basis decreased to 32.8% in
2004 from 36.3% in 2003. The principal reasons for this decrease are the impact
of the acquisitions completed in the last sixteen 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 tolling changes in our other segment
as discussed above.
Selling, general and administrative expenses decreased as a percentage of
net sales from 20.4% in 2003 to 17.5% in 2004. The decrease in percentage terms
was principally due to the inclusion of the acquisitions completed during 2003
and 2004 which have relatively lower selling, general and administrative
expenses as a percentage of net sales and to spending not increasing at the same
rate as organic growth. The increase in dollar terms, from $119.8 million in
2003 to $146.9 million in 2004, was principally the result of the acquisitions
completed during 2003 and 2004, higher sales and marketing expenses in our
branded consumables segment and higher validation costs incurred for new
business development projects and higher employee compensation costs in our
plastic consumables segment, partially offset by lower media spending, lower
legal costs and lower employee compensation costs in the consumer solutions
segment.
28
During the fourth quarters of 2004 and 2003, we recorded non-cash
restricted stock charges of approximately $32.4 million and $21.8 million,
respectively, relating to the lapsing of restrictions over restricted stock
issuances to certain executive officers.
Net interest expense increased to $27.6 million in 2004 compared to $19.2
million in 2003. This increase was primarily due to higher levels of outstanding
debt in 2004 compared to 2003, resulting from the additional debt financing
required to fund the acquisitions completed in the last sixteen months.
Our effective tax rate in 2004 was 38.0% compared to an effective tax rate
of 39.2% in 2003.
Our diluted earnings per share increased from $1.35 in 2003 to $1.49 in
2004 or, in percentage terms, by 10.4% over the prior year. Given our diluted
weighted average shares outstanding in 2004 and 2003 of 28.5 million and 23.5
million, respectively, the effect of the non-cash restricted stock charges
discussed above was to reduce our diluted earnings per share amounts reported
under GAAP by $0.71 and $0.56 in 2004 and 2003, respectively.
RESULTS OF OPERATIONS - COMPARING 2003 TO 2002
We reported net sales of $587.7 million in 2003, a 60.1% increase from net
sales of $367.1 million in 2002.
In 2003, our branded consumables segment reported net sales of $257.9
million compared to $111.2 million in 2002. This increase of 131.8% was
principally the result of the Diamond Acquisition, effective February 1, 2003,
and the Lehigh Acquisition, effective September 2, 2003. In addition, the
acquisition of OWD in the second quarter of 2003 contributed to this increase.
Excluding the effect of acquisitions, net sales for our branded consumables
segment in 2003 were comparable to 2002.
Our consumer solutions segment reported net sales of $216.1 million in
2003 compared to $145.3 million in net sales in 2002. This increase of 48.7% was
principally the result of this segment being acquired in April 2002 and,
therefore, net sales for 2003 reflect sales for the full year but net sales for
2002 reflect sales for only nine months of the year. Additionally, the
acquisition of VillaWare in the fourth quarter of 2003 contributed to this
increase. Furthermore, the year-on-year increase is a result of organic U.S.
retail and international sales growth of over 10% for this segment in the last
three quarters of 2003 compared to the same period in 2002.
In 2003, our plastic consumables segment reported net sales of $109.1
million compared to $70.6 million in 2002. The principal reason for this
increase of 54.5% was intercompany sales generated by the addition of the
plastic manufacturing business acquired in the Diamond Acquisition. In addition,
the intercompany sales resulting from the acquisition of OWD in the second
quarter of 2003 also contributed to this increase. Excluding intercompany sales,
net sales for the plastic consumables segment increased slightly in 2003 due to
higher sales volumes with a number of customers, partially offset by the loss of
sales to one large customer and a contractual sales price reduction with another
large customer.
In 2003, our other segment reported net sales of $42.8 million compared to
$41.0 million in 2002. The principal reason for this increase of 4.3% was an
increase in sales to a major customer as a result of a contractual change
whereby this segment took on the responsibility of purchasing the raw material
inventory for the customer.
We reported operating earnings of $71.5 million in 2003 compared to
operating earnings of $65.1 million in 2002. This increase of $6.4 million, or
9.7%, occurred despite the 2003 operating earnings being negatively impacted, as
a result of a non-cash restricted stock charge of approximately $21.8 million.
Excluding this non-cash restricted stock charge, our operating earnings would
have been 43.3% higher than 2002. The principal reason for this increase was
that the branded consumables segment's operating earnings increased by $18.5
million from 2002 to 2003, due to the addition of the acquired Diamond Brands
and Lehigh product lines, as well as an increase in organic operating earnings
due to a favorable home canning sales mix resulting from increased sales of
premium products. Also, the operating earnings of the consumer solutions segment
increased by $10.9 million, principally due to (i) the acquisition of this
business in April 2002; (ii) the acquisition of VillaWare in the fourth
29
quarter of 2003 and (iii) increased organic net sales of over 10% in the final
three quarters of 2003 relative to the comparable prior year periods, partially
offset by increased litigation costs arising from an action that we took against
certain competitors who we believe had infringed on our intellectual property.
Operating earnings in 2003 for our plastic consumables segment were
approximately $0.5 million higher than the same period in the prior year due to
the earnings effect from the intercompany sales, partially offset by lower gross
margins resulting from the changes in net sales discussed above. Operating
earnings in 2003 for our other segment were $0.8 million lower compared to the
same period in the prior year due to a greater amount of net sales having lower
gross margins principally due to the contractual change with one major customer
as discussed above.
Gross margin percentages on a consolidated basis decreased to 36.3% in
2003 from 39.1% in 2002. The primary reason for these lower gross margins is the
addition of the relatively lower gross margin Diamond Brands and Lehigh product
lines. This effect is partially offset by the benefit of including the higher
gross margins of the acquired consumer solutions business for the full year in
2003 but only nine months of the year in 2002.
Selling, general and administrative expenses increased to $119.8 million
in 2003 from $78.3 million in 2002, or, as a percentage of net sales, decreased
to 20.4% in 2003 from 21.3% in 2002. The increase in dollar terms was
principally the result of the acquisitions completed during 2003 and 2002. Also,
the selling, general and administrative expenses increased, in part, due to
higher marketing expenditures and legal costs. The decrease in percentage terms
was principally due to the addition of the Diamond Brands and Lehigh product
lines, which have relatively lower selling, general and administrative expenses
as a percentage of net sales compared to those of our consumer solutions
segment.
During the fourth quarter of 2003, we recorded a non-cash restricted
stock charge of approximately $21.8 million relating to the lapsing of
restrictions over restricted stock issuances to certain officers.
Net interest expense increased to $19.2 million in 2003 compared to $12.6
million in 2002. This increase resulted from higher levels of outstanding debt
in 2003 compared to the same period in 2002, principally due to (i) the
principal on the $150 million of our 9 3/4% senior subordinated notes ("Notes")
issued in connection with the Tilia Acquisition being outstanding for the entire
twelve months of 2003 as compared to only nine months of 2002, (ii) the
additional respective financings in 2003 in connection with the Diamond
Acquisition and the Lehigh Acquisition, and (iii) the issuance of an additional
$30 million principal amount of Notes in 2003. Our weighted average interest
rate in 2003 of 6.2% was lower than our weighted average interest rate of 7.0%
in 2002.
Our effective tax rate in 2003 was 39.2% compared to an effective tax rate
of 30.8% in 2002. At December 31, 2001, we had federal net operating losses that
were recorded as a deferred tax asset with a valuation allowance of $5.4
million. Due to the impact of the Job Creation Act and the tax refunds that we
received as a result, a net $4.4 million of this valuation allowance was
released in 2002 resulting in an income tax provision of $16.2 million.
Excluding the release of this valuation allowance our effective tax rate would
also have been approximately 39.2% in 2002.
Our net income in 2003 of $31.8 million included a reduction of $13.3
million reflecting the amount of the restricted stock charge discussed above,
net of related tax benefit. Given that our diluted weighted average shares in
2003 were 23.5 million, the non-cash restricted stock charge, net of related tax
benefits also had the effect of reducing our diluted earnings per share by $0.56
to $1.35. Our net income in 2002 of $36.3 million included the benefit of the
valuation allowance release discussed above. Given that our diluted weighted
average shares in 2002 were 21.6 million, the net release of the tax valuation
allowance had the effect of improving our diluted earnings per share by $0.20 to
$1.68.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
2004 Activity
During 2004, the following changes were made to our capital resources:
30
o we completed a $116 million add-on to our Term B loan facility ("Term
B Add-on") under a Second Amended Credit Agreement, to partially fund
the USPC Acquisition;
o we repaid $5.4 million of seller debt financing;
o we issued an aggregate of 955,080 restricted shares of common stock
under our 2003 Stock Incentive Plan, of which, in conjunction with the
AHI transaction, the restrictions on 735,000 of these shares were
lapsed at the time of issuance and we accelerated the granting of a
further 140,000 of these shares; and
o in anticipation of the additional floating rate debt financing
required to complete the AHI Acquisition, we entered into two interest
rate swaps that converted an aggregate of $300 million of existing
floating rate interest payments under our term loan facility for a
fixed obligation.
Specifically, in December 2004, in anticipation of the additional floating
rate debt financing required to complete the AHI Acquisition, we entered into
two interest rate swaps, effective in January 2005, that converted an aggregate
of $300 million of floating rate interest payments under our term loan facility
for a fixed obligation. The first interest rate swap, for $150 million of
notional value, carries a fixed interest rate of 3.625% per annum for a term of
three years. The second interest rate swap, also for $150 million of notional
value, carries a fixed interest rate of 4.0675% per annum for a term of five
years. The swaps have interest payment dates that are the same as our term loan
facilities. The swaps are considered to be cash flow hedges and are also
considered to be effective hedges against changes in future interest payments of
our floating-rate debt obligations for both tax and accounting purposes. Gains
and losses related to the effective portion of the interest rate swap will be
reported as a component of other comprehensive income and will be reclassified
into earnings in the same period that the hedged transaction affects earnings.
As of December 31, 2004, the fair value of these interest rate swaps, which was
unfavorable in the amount of approximately $0.5 million, was included as an
unrealized loss in Accumulated Other Comprehensive Income on our Consolidated
Balance Sheet.
On June 28, 2004, in connection with the USPC Acquisition, we completed
our $116 million Term B Add-on under the Second Amended Credit Agreement. The
proceeds from the Term B Add-on were used to partially fund the USPC
Acquisition. The spread on the Term B Add-on was 2.25% over London Interbank
Offered Rate ("LIBOR"). Additionally, under this Second Amended Credit
Agreement, the spread on our existing Term B loan facility was reduced from
2.75% over LIBOR to 2.25% over LIBOR.
The Second Amended Credit Agreement did not significantly change the
restrictions on the conduct of our business or the financial covenants required
in our previous senior credit facility ("Amended Credit Agreement") (see "2003
Activity" below). The Second Amended Credit Agreement, which matures on April
24, 2008, also did not change the pricing and principal terms of our $70 million
revolving credit facility.
As of December 31, 2004, we had $302.9 million outstanding under our term
loan facilities and no outstanding amounts under the revolving credit facility
of our Second Amended Credit Agreement. As of December 31, 2004, net
availability under the revolving credit facility was approximately $44.2
million, after deducting $25.8 million of issued letters of credit. The letters
of credit outstanding include an amount of approximately $20 million securing a
holdback on the USPC Acquisition (see "Acquisition Activities" above). We are
required to pay commitment fees on the unused balance of the revolving credit
facility.
As of December 31, 2004, we also had other debt outstanding in the amount
of approximately $1.5 million, which principally consists of bank notes that are
payable in equal quarterly installments through April 2007 with rates of
interest at Euro Interbank Offered Rate plus 1.00%.
In August 2004, our board of directors ("Board") approved the granting of
an aggregate of 140,000 restricted shares of our common stock to three of our
executive officers. 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.
Following the signing of the AHI transaction, 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 conjunction
31
with the AHI transaction, 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 of our executive officers that would otherwise have
been granted to these executive officers in 2005-2007 pursuant to such
executives' respective employment agreements. The Board approved that the
restrictions on these shares lapse upon issuance. We record non-cash
compensation expense for our issued and outstanding restricted stock either when
the restrictions lapse or ratably over time, when the passage of time is the
only restriction. As such, we recorded a non-cash compensation expense for all
these restricted stock issuances and restriction lapses of approximately $32.4
million in the fourth quarter of 2004.
In July 2004, our Board approved a grant of 10,000 restricted shares of
our common stock to Mr. Jonathan Franklin, who was a consultant to us and who is
a brother of Mr. Martin E. Franklin, our 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 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 is being
recognized on these shares based on the market value of our 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 April 2004, we repaid the remaining seller debt financing incurred in
connection with the Tilia Acquisition, which included both principal and accrued
interest thereon, in the amount of approximately $5.4 million.
During 2004, we incurred costs in connection with the issuance of the
Second Amended Credit Agreement of approximately $2.3 million.
In addition, during 2004, we issued 70,080 restricted shares of our common
stock to certain other officers and employees under our 2003 Stock Incentive
Plan. The restrictions on 26,750 of these shares will lapse ratably over five
years of employment with us. The restrictions on the remaining 43,330 of these
shares will lapse upon the latter of either our stock price achieving a volume
weighted average of $64 per share for ten consecutive business days or November
1, 2008.
We issued all of the restricted shares discussed above out of our treasury
account.
2003 Activity
On September 30, 2003, we completed a public offering ("Offering") of
approximately 4.8 million shares of our common stock at $24.67 per share.
Proceeds from the Offering, net of underwriting fees and related expenses,
totaled approximately $112.3 million. The net proceeds of the Offering were used
for a combination of general corporate purposes, acquisitions and debt
repayment.
During 2003, we amended and restated our existing senior credit facility
("Amended Credit Agreement"). The Amended Credit Agreement provided for up to
$280 million of senior secured loans, consisting of a $70 million revolving
credit facility, a $60 million term loan facility, and a new $150 million
five-year term loan facility. The new term loan facility bore interest at a rate
equal to (i) the Eurodollar Rate (as determined by the Administrative Agent)
pursuant to an agreed formula or (ii) a Base Rate equal to the higher of (a) the
Bank of America prime rate and (b) the federal funds rate plus 0.50%, plus, in
each case, an applicable margin of 2.75% per annum for Eurodollar loans and
1.75% per annum for Base Rate loans. The pricing and principal of the revolving
credit facility and the previously existing term loan did not change. The
revolving credit facility continued to have a $15 million letters of credit
sublimit and a $10 million swing line loans sublimit. On September 2, 2003, we
drew down the full amount of the new $150 million term loan facility, which
funds were used principally to pay the majority of the cash consideration for
the Lehigh Acquisition. Our Amended Credit Agreement was scheduled to mature on
April 24, 2008.
32
The Amended Credit Agreement contained certain restrictions on the conduct
of our business, including, among other things restrictions, generally, on:
o incurring debt;
o disposing of certain assets;
o making investments;
o exceeding certain agreed upon capital expenditures;
o creating or suffering liens;
o completing certain mergers;
o consolidations and sales of assets and, with permitted exceptions,
acquisitions;
o declaring dividends;
o redeeming or prepaying other debt; and
o certain transactions with affiliates.
The Amended Credit Agreement also included financial covenants that
required us to maintain certain leverage and fixed charge ratios and a minimum
net worth.
On May 8, 2003, we issued an additional $30 million of Notes (bringing to
a total $180 million of Notes issued and outstanding, including the 2002
issuance discussed below). The net proceeds of the offering were used to reduce
the outstanding revolver balances under our senior credit facility. The Notes
were issued at a price of 106.5% of face value and we received approximately
$32.0 million in gross proceeds from the issuance. As a result of an exchange
offer completed on December 2, 2003, all of the Notes are governed by an
indenture, dated as of April 24, 2002, as supplemented ("April 2002 Indenture").
Significant terms of the Notes and the April 2002 Indenture are discussed under
"2002 Activity".
On May 6, 2003, we entered into a $30 million interest rate swap ("New
Swap") to receive a fixed rate of interest and pay a variable rate of interest
based upon LIBOR. The New Swap is a swap against our Notes.
During the fourth quarter of 2003, we recorded a non-cash restricted stock
charge of approximately $21.8 million related to the lapsing of restrictions
over all the restricted stock issuances to three of our executive officers,
discussed immediately below and in "2002 Activity" also below. We received a tax
deduction for this non-cash restricted stock charge.
During 2003, we issued an aggregate amount of 562,500 shares of restricted
stock to three of our executive officers. We issued these shares under our 2003
Stock Incentive Plan and out of our treasury stock account. During 2003, all of
these restricted stock issuances either provided or were amended to provide that
the restrictions lapse upon the earlier of (i) a change in control; or (ii) the
earlier of our common stock achieving a closing price of $28 (up from $23.33) or
us achieving annualized revenues of $800 million. However, if such restrictions
were to lapse during a period when these officers were subject to additional
contractual limitations on the sale of securities, the restrictions on such
shares would continue until the expiration or waiver of such additional
contractual limitations. As discussed above, during the fourth quarter of 2003,
all such restrictions lapsed which resulted in a restricted stock charge.
During 2003, we also issued 7,200 shares of our restricted stock to
certain other officers and employees. The restrictions on these shares will
lapse ratably over five years of employment with us.
In January 2002, two executive officers exercised 900,000 and 450,000
non-qualified stock options, respectively, which had been granted under our 2001
Stock Option Plan. These shares were issued out of our treasury stock account.
The exercises were accomplished via loans from us under our Executive Loan
Program. The principal amounts of the loans were $3.3 million and $1.6 million,
respectively, and bore interest at 4.125% per annum. The loans were due on
January 23, 2007 and were classified within the Stockholders' Equity section of
our Consolidated Balance Sheet. The loans could be repaid in cash, shares of our
common stock, or a combination thereof. In February 2003, one of the executive
officers surrendered to us shares of our common stock to repay
33
$0.3 million of his loan. On April 29, 2003, both of the executive officers each
surrendered to us shares of our common stock to repay in full all remaining
principal amounts and accrued interest owed under their respective loans. We
will not make any additional loans under the Executive Loan Program.
Effective April 2, 2003, we entered into an interest rate swap that
converted $37 million of floating rate interest payments under our term loan
facility for a fixed obligation that carries an interest rate, including
applicable margin, of 4.25% per annum. The swap had interest payment dates that
were the same as the term loan facility and it matured on September 30, 2004.
In March 2003, we unwound a $75 million interest rate swap to receive a
fixed rate of interest and pay a variable rate of interest based upon LIBOR and
contemporaneously entered into a new $75 million interest rate swap ("Second
Replacement Swap"). Like the swap that it replaced, the Second Replacement Swap
is a swap against our Notes. The Second Replacement Swap has a maturity date
that is the same as the Notes. Interest is payable semi-annually in arrears on
May 1 and November 1. As of December 31, 2004, we have accrued interest
(including the applicable spread) on the swap at an effective rate of 7.84%.
In return for unwinding the swap, we received $3.2 million of cash
proceeds. Of this amount, approximately $1 million of such proceeds related to
accrued interest that was owed to us at such time. The remaining $2.2 million of
proceeds is being amortized over the remaining life of the Notes as a credit to
interest expense and the unamortized balances are included in our Consolidated
Balance Sheet as an increase to the value of the long-term debt. We are exposed
to credit loss in the event of non-performance by the other party to the Second
Replacement Swap, a large financial institution, however, we do not anticipate
non-performance by the other party. The fair market value of our interest rate
swaps as of December 31, 2004 was unfavorable in an amount of approximately $2.0
million and is included as a non-current liability in our Consolidated Balance
Sheet, with a corresponding offset to long-term debt.
During 2003, we repaid seller debt financing, incurred in connection with
the Tilia Acquisition, in the principal amount of $10 million.
In January 2003, we filed a shelf registration statement, which was
declared effective by the Securities and Exchange Commission on January 31,
2003. This shelf registration statement was intended to facilitate our access to
growth capital for future acquisitions and allowed us to sell over time up to
$150 million of common stock, preferred stock, warrants, debt securities, or any
combination of these securities in one or more separate offerings in amounts, at
prices and on terms to be determined at the time of the sale. The equity
offering completed in September 2003 and the $30 million of Notes issued in May
2003, were covered by our shelf registration statement and, in the aggregate,
constituted the issuance of approximately $150 million in registered securities.
Accordingly, no further issuances will be made under this registration
statement.
During 2003, we incurred costs in connection with the issuance of the
Notes and the Amended Credit Agreement of approximately $5.9 million.
2002 Activity
In April 2002, in connection with the Tilia Acquisition we made an
offering of $150 million of Notes to qualified institutional buyers in a private
placement pursuant to Rule 144A under the Securities Act of 1933, as amended.
The Notes were issued at a discount such that we received approximately $147.7
million in net proceeds. The Notes are scheduled to mature on May 1, 2012,
however, on or after May 1, 2007, we can redeem all or part of the Notes at any
time at a redemption price ranging from 100% to 104.875% of the principal
amount, plus accrued and unpaid interest and liquidated damages, if any. Prior
to May 1, 2005, we may redeem up to 35% of the aggregate principal amount of the
Notes with the net cash proceeds from certain public equity offerings at a
redemption price of 109.75% of the principal amount, plus accrued and unpaid
interest and liquidated damages, if any. Interest on the Notes accrues at the
rate of 9.75% per annum and is payable semi-annually in arrears on May 1 and
November 1, with the first payment having occurred on November 1, 2002. The
April 2002 Indenture governing the Notes also contains certain restrictions on
the conduct of our business.
34
Prior to the Amended Credit Agreement, we entered into a credit agreement
in connection with the Tilia Acquisition ("Old Credit Agreement"). The Old
Credit Agreement was scheduled to mature on April 24, 2007. The revolving credit
facility and the term loan facility bore interest at a rate equal to (i) the
Eurodollar Rate pursuant to an agreed formula or (ii) a Base Rate equal to the
higher of (a) the Bank of America prime rate and (b) the federal funds rate plus
..50%, plus, in each case, an applicable margin ranging from 2.00% to 2.75% for
Eurodollar Rate loans and from .75% to 1.5% for Base Rate loans. The Old Credit
Agreement contained restrictions on the conduct of our business similar to the
Amended Credit Agreement. The Old Credit Agreement was replaced by the Amended
Credit Agreement.
Until it was replaced by the Old Credit Agreement on April 24, 2002, our
senior credit facility, as amended provided for a revolving credit facility of
$40 million and a term loan which amortized periodically as required by the
terms of the agreement. Interest on borrowings under the term loan and the
revolving credit facilities were based upon fixed increments over adjusted LIBOR
or the agent bank's alternate borrowing rate as defined in the agreement. The
agreement also required the payment of commitment fees on the unused balance.
During the first quarter of 2002, approximately $38 million of tax refunds we
received were used to repay a portion of the outstanding amounts under this
credit agreement.
In conjunction with the Notes, on April 24, 2002, we entered into a $75
million interest rate swap ("Initial Swap") to receive a fixed rate of interest
and pay a variable rate of interest based upon LIBOR. The Initial Swap had a
maturity date that was the same as the Notes. Interest was payable semi-annually
in arrears on May 1 and November 1, commencing on November 1, 2002. The initial
effective rate of interest that we established on this swap was 6.05%.
Effective September 12, 2002, we entered into an agreement, whereby we
unwound the Initial Swap and contemporaneously entered into a new $75 million
interest rate swap ("First Replacement Swap"). The First Replacement Swap had
the same terms as the Initial Swap, except that we were required to pay a
variable rate of interest based upon 6 month LIBOR in arrears. The spread on
this contract was 470 basis points. Based upon this contract, we paid an
effective interest rate of 6.32% on November 1, 2002. In return for unwinding
the Initial Swap, we received $5.4 million in cash proceeds, of which $1 million
related to accrued interest that was owed to us. The remaining $4.4 million of
proceeds is being amortized over the remaining life of the Notes as a credit to
interest expense and is included in our Consolidated Balance Sheet as an
increase to the value of the long-term debt. Such amortization amount offsets
the increased effective rate of interest that we pay on the Second Replacement
Swap. The First Replacement Swap was superseded by the Second Replacement Swap,
as discussed above.
All of our swaps have been and, where applicable, are considered to be
effective hedges against changes in the fair value of our fixed-rate debt
obligation for both tax and accounting purposes.
During 2002, we issued an aggregate of 210,000 shares of restricted stock
to two of our executive officers under our 1998 Long-Term Equity Incentive Plan,
as amended and restated, and out of our treasury stock account. During 2003, the
restricted stock issuances were amended to provide that the restrictions would
lapse upon the same terms as the 2003 restricted stock issuances discussed in
"2003 Activity" above. Also, as discussed in "2003 Activity" above, during the
fourth quarter of 2003 all such restrictions lapsed and we recorded a restricted
stock charge.
During 2002, shares of our common stock in the aggregate amount of 45,009
were issued to certain of our other officers under our 1998 Performance Share
Plan. In connection with these stock issuances, we recorded a non-cash
compensation expense charge of approximately $0.6 million.
During 2002, we also issued 5,250 of shares of our restricted stock to
certain of our other officers and employees. The restrictions on these shares
will lapse ratably over five years of employment with us.
35
During 2002, we incurred costs in connection with the issuance of the
Notes and the Old Credit Agreement of approximately $7.4 million.
Working Capital
Working capital (defined as current assets less current liabilities)
decreased to approximately $181.4 million at December 31, 2004, from
approximately $242.0 million at December 31, 2003, due primarily to:
o the use of cash on hand to finance our 2004 acquisitions; and
o the increase in our Deferred Consideration for Acquisitions balance on
our Consolidated Balance Sheet principally due to the contractual
terms of our USPC Acquisition (see "Acquisition Activities - 2004
Activity" above) and the recording of a contingent earn-out for our
Tilia Acquisition (see "Acquisition Activities - 2002 Activity"
above); partially offset by
o the addition of the working capital of our 2004 acquired businesses;
and
o higher inventory balances (see "Cash Flows from Operations" below).
Cash Flows from Operations
Cash flow generated from operations was approximately $70.4 million for
the year ended December 31, 2004 compared to $73.8 million for the year ended
December 31, 2003. This decrease of approximately $3.4 million was principally
due to an increase in working capital, partially offset by an increase of $17.4
million in net income, excluding the non-cash restricted stock charges. The
increase in working capital 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 SKUs and continuing sales growth requiring greater levels of
inventory.
Our statement of cash flows is prepared using the indirect method. Under
this method, net income is reconciled to cash flows from operating activities by
adjusting net income for those items that impact net income but do not result in
actual cash receipts or payments during the period. These reconciling items
include depreciation and amortization, changes in deferred tax items, non-cash
compensation, non-cash interest expense, charges in reserves against accounts
receivable and inventory and changes in the balance sheet for working capital
from the beginning to the end of the period.
Capital Expenditures
Capital expenditures were $10.8 million in 2004 compared to $12.8 million
for 2003 and are largely related to maintaining facilities, information systems,
tooling projects and improving manufacturing efficiencies. As of December 31,
2004, we had capital expenditure commitments in the aggregate for all our
segments of approximately $4.3 million.
Cash and Financing Availability
After taking into account the AHI Acquisition and its related financing in
January 2005 (see "Recent Developments" below), 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 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.
36
CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS
The following table includes aggregate information about our contractual
obligations as of December 31, 2004 and the periods in which payments are due.
Certain of these amounts are not required to be included in our consolidated
balance sheet:
- ------------------------------------------
CONTRACTUAL OBLIGATIONS PAYMENTS DUE BY PERIOD (MILLIONS OF DOLLARS)
- ------------------------------------------ -----------------------------------------------------
LESS THAN AFTER 5
TOTAL 1 YEAR 1-3 YEARS 3-5 YEARS YEARS
----- ------ --------- --------- -----
Long-term debt, including scheduled
interest payments (1).............. $ 631.3 $ 45.1 $211.0 $ 159.1 $ 216.1
Operating leases..................... 19.9 6.7 7.4 2.2 3.6
Unconditional purchase obligations... 4.3 4.3 - - -
Other non-current obligations........ 0.2 0.1 0.1 - -
------------ ------------ ------------- ------------ -------------
Total................................ $ 655.7 $ 56.2 $ 218.5 $ 161.3 $219.7
============ ============ ============= ============ =============
(1) The debt amounts are based on the principal payments that will be due
upon their maturity as well as scheduled interest payments. Interest
payments on our variable debt have been calculated based on their
scheduled payment dates and using the weighted average interest rate on
our variable debt as of December 31, 2004. Interest payments on our
fixed rate debt are calculated based on their scheduled payment dates.
The debt amounts exclude approximately $3.2 million of non-debt
balances arising from the interest rate swap transactions described in
Item 8. Note 15. Financial Statements and Supplementary Data.
Commercial commitments are items that we could be obligated to pay in the
future and are not included in the above table:
o As of December 31, 2004, we had $25.8 million in standby and
commercial letters of credit of which $20.0 million expire in 2006,
with the remainder expiring in 2005;
o In connection with a 2003 acquisition, we may be obligated to make
future payments of up to approximately $1.5 million in 2005;
o In connection with the Tilia Acquisition, we are obligated to pay an
earn-out in cash or our common stock, at our discretion, of up to $25
million in 2005, provided that certain earnings performance targets
are met. At December 31, 2004, we estimated that the earn-out payment,
payable in the second quarter of 2005, could be approximately $17.3
million and we have accrued this amount in Deferred Consideration for
Acquisitions on our Consolidated Balance Sheet;
o In connection with the Lehigh Acquisition, we may be obligated to pay
contingent consideration in cash or our common stock, at our
discretion, of up to $25 million in 2006, provided that certain
earnings performance targets are met;
o In connection with the USPC Acquisition, we may be obligated to pay 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 in 2007, at our discretion, provided that certain earnings
performance targets are met;
o In connection with the Loew-Cornell Acquisition, we may be obligated
to pay an earn-out provision with a potential payment in cash or our
common stock, at our discretion, beginning with advance payments in
2005 and 2006. As of December 31, 2004, an amount of $0.5 million in
relation to this earn-out was accrued in Deferred Consideration for
Acquisitions on our Consolidated Balance Sheet. The balance on the
earn-out is to be paid during 2007 through 2009 based on a defined
formula as applied to Loew-Cornell's earnings; and
o In connection with a contract we have entered into to acquire
additional intellectual property, we may be obligated to pay up to
$7.0 million between 2005 and 2010, providing certain contractual
obligations, including the issuance of patents amongst other things,
are satisfied.
Other than as discussed specifically above, these amounts are not required
to be included in our Consolidated Balance Sheet.
37
OFF-BALANCE-SHEET ARRANGEMENTS
As of December 31, 2004, we did not have any significant off-balance-sheet
arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.
RECENT DEVELOPMENTS
On January 24, 2005, we completed our acquisition of AHI, a privately held
company, for approximately $745.6 million in cash for the equity and the
repayment of approximately $100 million of indebtedness. AHI is the parent of
The Coleman Company, Inc. ("Coleman") and Sunbeam Products, Inc. ("SPI"),
leading producers of global consumer products through brands such as BRK(R),
Campingaz(R), Coleman(R), First Alert(R), Health o meter(R), Mr. Coffee(R),
Oster(R) and Sunbeam(R). Product lines added include appliances, personal care
and wellness, home safety equipment and outdoor leisure and camping products.
Had AHI been a part of us from January 1, 2004, our unaudited pro forma
consolidated net sales (including the pro forma effect of the USPC Acquisition)
for 2004 would have been $2.7 billion. The SPI business will be integrated
within our existing consumer solutions segment in 2005 and the Coleman business
will form a new segment of our Company called "outdoor solutions".
In connection with the AHI Acquisition, we issued $350 million of equity
securities pursuant to a purchase agreement ("Equity Purchase Agreement"). The
securities issued were as follows:
(i) 714,286 shares of our common stock for approximately $21.4 million, at
a price of $30 per share;
(ii) 128,571 shares or approximately $128.6 million 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
(iii) 200,000 shares or approximately $200 million 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.
In accordance with the Equity Purchase Agreement and a related Assignment
and Joinder Agreement, approximately $300 million of our equity securities were
issued to Warburg Pincus Private Equity VIII, LP and its affiliates and
approximately $50 million was issued to Catterton Partners V, LP and its
affiliates, both private equity investors (collectively "Private Equity
Investors"). The cash raised in connection with the Equity Purchase Agreement
was used to fund a portion of the cash purchase price of AHI.
The terms of the Equity Purchase Agreement require shareholder approval of
the mandatory conversion of the Series C Preferred Stock into a combination of
Series B Preferred Stock and our common stock. Subsequent to shareholder
approval and mandatory conversion, our total new equity issued to the Private
Equity Investors, will consist of $300 million of Series B Preferred Stock and
1,666,667 shares of our common stock valued at $50 million, without taking into
effect any other conversion, market value increases or the accrual of dividends.
Additionally, the AHI Acquisition was also funded through a new $1.05
billion senior credit 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 $200 million. This facility replaces our Second
Amended Credit Agreement.
On January 24, 2005, we entered into two interest rate swaps, effective on
January 26, 2005, that converted an aggregate of $125 million of floating rate
interest payments (excluding our 2% applicable margin) under its term loan
facility for a fixed obligation. Both interest rate swaps carry a fixed interest
rate of 4.025% per annum for a term of five years. The swaps have interest
payment dates that are the same as the term loan facility. The swaps are
considered to be cash flow hedges and are also considered to be effective hedges
against changes in future interest payments of our floating-rate debt obligation
for both tax and accounting purposes. Gains and losses related to the effective
portion of the interest rate swap will be reported as a component of other
comprehensive income and will be reclassified into earnings in the same period
that the hedged transaction affects earnings.
38
CRITICAL ACCOUNTING POLICIES
Our financial statements are prepared in accordance with accounting
principles generally accepted in the United States, which require us to make
judgments, estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. The following list of critical
accounting policies is not intended to be a comprehensive list of all our
accounting policies. Our significant accounting policies are more fully
described in Note 1. Significant Accounting Policies to Item 8. Financial
Statements and Supplementary Data. The following represents a summary of our
critical accounting policies, defined as those policies that we believe are the
most important to the portrayal of our financial condition and results of
operations, and/or require management's significant judgments and estimates:
Revenue recognition and allowances for product returns
We recognize revenue when title transfers. In most cases, title transfers
at the time product is shipped to customers. We allow customers to return
defective or damaged products as well as certain other products for credit,
replacement, or exchange. Our revenue is recognized as the net amount to be
received after deducting estimated amounts for product returns, discounts, and
allowances. We estimate future product returns based upon historical return
rates and our judgment. If these estimates do not properly reflect future
returns, they could be revised.
Allowance for accounts receivable
We maintain an allowance for doubtful accounts for estimated losses that
may result from the inability of our customers to make required payments. That
estimate is based on historical collection experience, current economic and
market conditions, and a review of the current status of each customer's trade
accounts receivable. If the financial condition of our customers were to
deteriorate or our judgment regarding their financial condition was to change
negatively, additional allowances may be required resulting in a charge to
income in the period such determination was made. Conversely, if the financial
condition of our customers were to improve or our judgment regarding their
financial condition was to change positively, a reduction in the allowances may
be required resulting in an increase in income in the period such determination
was made.
Allowance for inventory obsolescence
We write down our inventory for estimated obsolescence or unmarketable
inventory equal to the difference between the cost of the inventory and the
estimated market value based upon assumptions about future demand and market
conditions. If actual market conditions are less favorable than those projected
by us, additional inventory write-downs may be required resulting in a charge to
income in the period such determination was made. Conversely, if actual market
conditions are more favorable than those projected by us, a reduction in the
write down may be required resulting in an increase in income in the period such
determination was made.
Deferred tax assets
We record a valuation allowance to reduce our deferred tax assets to the
amount that we believe is more likely than not to be realized. While we have
considered future taxable income and ongoing prudent and feasible tax planning
strategies in assessing the need for the valuation allowance, in the event we
were to determine that we would not be able to realize all or part of our net
deferred tax assets in the future, an adjustment to the deferred tax assets
would be charged to income in the period such determination was made. Likewise,
should we determine that we would be able to realize our deferred tax assets in
the future in excess of our net recorded amount, an adjustment to the deferred
tax assets would increase income in the period such determination was made.
Intangible assets
We have significant intangible assets on our balance sheet that include
goodwill, trademarks and other intangibles fair valued in conjunction with
acquisitions. The valuation and classification of these assets and the
assignment of amortizable lives involves significant judgments and the use of
estimates. The testing of these intangibles under established guidelines for
impairment also requires significant use of judgment and assumptions (such as
cash flows, terminal values and discount rates). Our assets are tested and
reviewed for impairment on an
39
ongoing basis under the established accounting guidelines. Changes in business
conditions could potentially require adjustments to these asset valuations.
CONTINGENCIES
We are involved in various legal disputes and other legal proceedings that
arise from time to time 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
expenditures 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.
NEW ACCOUNTING PRONOUNCEMENTS
In December 2004, the Financial Accounting Standards Board ("FASB") issued
FASB Statement No. 123 (revised 2004) ("Statement 123 (R)"), Share-Based
Payment, which is a revision of FASB Statement No. 123 ("Statement 123"),
Accounting for Stock-Based Compensation. Statement 123 (R) supersedes APB
Opinion No. 25, Accounting for Stock Issued to Employees, and amends FASB
Statement No. 95, Statement of Cash Flows. Generally, the approach in Statement
123 (R) is similar to the approach described in Statement 123. However,
Statement 123 (R) requires all shared-based payments to employees, including
grants of employee stock options, to be recognized in the income statement based
on their fair values. Pro forma disclosure is no longer an alternative.
Statement 123 (R) must be adopted no later than July 1, 2005. Early
adoption will be permitted in periods in which financial statements have not yet
been issued. We expect to adopt Statement 123 (R) on July 1, 2005.
Statement 123 (R) permits public companies to adopt its requirements using
one of two methods:
1. A "modified prospective" method in which compensation cost is
recognized beginning with the effective date (a) based on the
requirements of Statements 123 (R) for all share-based payments
granted after the effective date and (b) based on the requirements of
Statement 123 for all awards granted to employees prior to the
effective date of Statement 123 (R) that remain unvested on the
effective date; or
2. A "modified retrospective" method which includes the requirements of
the modified prospective method described above, but also permits
entities to restate based on the amounts previously recognized under
Statement 123 for purposes of pro forma disclosures either (a) all
prior periods presented or (b) prior interim periods of the year of
adoption.
We plan to adopt Statement 123 (R) using the modified-prospective method.
As permitted by Statement 123, we currently account for share-based
payments to employees using intrinsic value method in Accounting Principles
Board Opinion No. 25, Accounting for Stock Issued to Employees, and related
interpretations. As such, we generally recognize no compensation cost for
employee stock options. Accordingly, the adoption of Statement 123 (R)'s fair
value method will have a significant impact on our result of operations,
although it will have no impact on our overall financial position. The impact of
the adoption of Statement 123 (R) cannot be predicted at this time because it
will depend on levels of share-based payments granted in the future. However,
had we adopted Statement 123 (R) in prior periods, the impact of that standard
would have approximated the impact of Statement 123 as described in the
disclosure of pro forma net income and earnings per share in Note 1. Significant
Accounting Policies of Item 8. Financial Statements and Supplementary Data
included herein. Statement 123 (R) also requires the benefits of tax deductions
in excess of recognized compensation cost to be reported as a financing cash
flow, rather than as an operating cash flow as required under current
literature. This requirement will reduce net operating cash flows and increase
net financing cash flows in periods after adoption. While we cannot estimate
what those amounts will be in the future (because they depend on, among other
things, when employees exercise stock options), the amount of operating cash
flows recognized in
40
prior periods for such excess tax deductions were approximately $2.0 million,
$1.3 million, and $2.3 million in 2004, 2003 and 2002, respectively.
In November 2004, the FASB issued Statement of Financial Accounting
Standards No. 151, Inventory Costs, an amendment of ARB No. 43, Chapter 4 ("SFAS
151"). SFAS 151 requires the exclusion of certain costs from inventories and the
allocation of fixed production overheads to inventories to be based on normal
capacity of the production facilities. The provisions of SFAS 151 are effective
for costs incurred during fiscal years beginning after June 15, 2005. Earlier
adoption is permitted for inventory costs incurred during fiscal years beginning
after the issuance date of SFAS 151. We do not expect the adoption of SFAS 151
to have a material effect on our consolidated financial statements.
Effective December 8, 2003, the Medicare Prescription Drug, Improvement and
Modernization Act of 2003 (Medicare Prescription Drug Act) was signed into law.
This act provides for a prescription drug benefit under Medicare (Part D) as
well as a federal subsidy to sponsors of retiree health care benefits plans that
provide a benefit that is at least actuarially equivalent to Medicare Part D.
Our defined benefit postretirement health care plans provide prescription drug
benefits.
In January 2004, the FASB issued FASB Staff Position ("FSP") No. 106-1,
Accounting and Disclosure Requirements Related to the Medicare Prescription
Drug, Improvement and Modernization Act of 2003 ("FSP 106-1"). FSP 106-1 permits
a sponsor of a postretirement healthcare plan that provides a prescription
benefit to elect a one-time deferral of the recognition of the effects of the
Medicare Prescription Drug Act in accounting for its plan under Statement No.
106 and in providing disclosures related to the plan required by SFAS 132. The
FASB allowed the one-time deferral due to the accounting issues raised by the
Medicare Prescription Drug Act--in particular, the accounting for federal
subsidy that is not explicitly addressed in Statement No. 106--and due to the
fact the uncertainties exist as to the direct effects on the Medicare
Prescription Drug Act and its ancillary effects on plan participants. As
permitted by FSP 106-1, we made a one-time election to defer accounting for the
effect of the Medicare Prescription Drug Act and, as a result, the amounts
included in our Consolidated Financial Statements do not reflect the effects of
the Medicare Prescription Drug Act.
In May 2004, the FASB issued FSP No. 106-2 ("FSP 106-2"), which superseded
FASP 106-1. FSP 106-2 provides authoritative guidance on the accounting for the
federal subsidy and specifies the disclosure requirements for employers who have
adopted FSP 106-2. Detailed regulations necessary to implement the Medicare
Prescription Drug Act have not been issued, including those that would specify
the manner in which actuarial equivalency must be determined, the evidence
required to demonstrate actuarial equivalency, and the documentation
requirements necessary to be entitled to the subsidy. FSP 106-2 is effective for
our first quarter of 2005. We do not currently believe that the adoption of FSP
106-2 will have a material impact on our Consolidated Financial Statements.
Final authoritative guidance could require us to change this assessment.
FORWARD-LOOKING STATEMENTS
From time to time, we may make or publish forward-looking statements
relating to such matters as anticipated financial performance, business
prospects, 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. In order to comply with the terms of the safe harbor,
we note that a variety of factors could cause our actual results and experience
to differ materially from the anticipated results or other expectations
expressed in forward-looking statements.
While it is impossible to identify all such factors, the risks and
uncertainties that may affect our business, financial condition and results of
operations include the following:
41
o Our sales are highly dependent on purchases from several large
customers and any significant decline in these purchases or pressure
from these customers to reduce prices could have a negative effect on
our future financial performance;
o We may be adversely affected by the trend towards retail trade
consolidation and private-labeling;
o Sales of some of our products are seasonal and weather related;
o Our operations are dependent upon third-party suppliers and service
providers whose failure to perform adequately could disrupt our
business operations;
o We depend on suppliers in Asia;
o We are subject to several production-related risks which could
jeopardize our ability to realize anticipated sales and profits;
o We depend on a single manufacturing facility for certain products;
o Competition in our industries may hinder our ability to execute our
business strategy, achieve profitability, or maintain relationships
with existing customers;
o If we fail to develop new or expand existing customer relationships,
our ability to grow our business will be impaired;
o We cannot be certain that our product innovations and marketing
successes will continue;
o We may experience difficulty in integrating acquired businesses, which
may interrupt our business operations;
o Our operations are subject to a number of federal, state and local
environmental regulations;
o We may be adversely affected by remediation obligations mandated by
applicable environmental laws;
o Our resources may be insufficient to manage the demands imposed by our
growth;
o We depend upon key personnel;
o We enter into contracts with the United States government and other
governments;
o Our operating results can be adversely affected by changes in the cost
or availability of raw materials;
o Our business could be adversely affected because of risks which are
particular to international operations;
o Our business could be adversely affected by currency fluctuations in
our international operations;
o Our performance can fluctuate with the financial condition of the
retail industry;
o Our business involves the potential for product recalls and product
liability claims against us;
o Our failure to successfully protect our intellectual property rights
could have a material adverse effect on our business;
o Our business could be adversely affected by complications resulting
from our implementation of a new operating software system or other
new computer technologies we install;
42
o We may not be able to implement successfully our restructuring
projects;
o Certain of our employees are represented by labor unions;
o Our significant indebtedness could adversely affect our financial
health;
o We will require a significant amount of cash to service our
indebtedness. Our ability to generate cash depends on many factors
beyond our control;
o The indenture related to our 9 3/4% senior subordinated notes due 2012
and our senior credit facility contain various covenants which limit
our management's discretion in the operation of our business; and
o Compliance with changing regulation of corporate governance and public
disclosure may result in additional expenses.
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially from
those described in the forward-looking statements. We undertake no obligation to
publicly update forward-looking statements, whether as a result of new
information, future events or otherwise.
43
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES 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 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. 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 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 $3.3 million,
$2.0 million and $0.8 million for 2004, 2003 and 2002, respectively. 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.
The Company does not invest or trade in any significant derivative
financial or commodity instruments, nor does it invest in any foreign financial
instruments.
44
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of Jarden Corporation
We have audited management's assessment, included in the accompanying
Management's Report on Internal Control Over Financial Reporting in Item 9A.
Controls and Procedures, that Jarden Corporation and subsidiaries (the
"Company") maintained effective internal control over financial reporting as of
December 31, 2004, based on criteria established in Internal Control--Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (the COSO criteria). The Company's management is responsible for
maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting.
Our responsibility is to express an opinion on management's assessment and an
opinion on the effectiveness of the company's internal control over financial
reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over
financial reporting, evaluating management's assessment, testing and evaluating
the design and operating effectiveness of internal control, and performing such
other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.
A company's internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company's internal control over
financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
As indicated in the accompanying Management's Report on Internal Control Over
Financial Reporting in Item 9A, management's assessment of and conclusion on the
effectiveness of internal control over financial reporting did not include the
internal controls of Bicycle Holding, Inc., including its wholly owned
subsidiary United States Playing Card Company (collectively "USPC"), which is
included in the 2004 consolidated financial statements of the Company and
constituted 7.5% of total assets, excluding $225.3 million of goodwill and other
intangible asset amounts recorded in connection with the acquisition of USPC, as
of December 31, 2004 and 10.5% of revenues for the year then ended. Our audit of
internal control over financial reporting of the Company also did not include an
evaluation of the internal control over financial reporting of USPC.
In our opinion, management's assessment that Jarden Corporation and subsidiaries
maintained effective internal control over financial reporting as of December
31, 2004, is fairly stated, in all material respects, based on the COSO
criteria. Also, in our opinion, Jarden Corporation and subsidiaries maintained,
in all material respects, effective internal control over financial reporting as
of December 31, 2004, based on the COSO criteria.
45
We have also audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the consolidated balance sheets of
Jarden Corporation and subsidiaries as of December 31, 2004 and 2003, and the
related consolidated statements of income, comprehensive income, stockholders'
equity, and cash flows for each of the three years in the period ended December
31, 2004 and our report dated March 1, 2005 expressed an unqualified opinion
thereon.
/s/ ERNST & YOUNG LLP
New York, New York
March 1, 2005
46
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of Jarden Corporation
We have audited the accompanying consolidated balance sheets of Jarden
Corporation and subsidiaries (the "Company") as of December 31, 2004 and 2003,
and the related consolidated statements of income, comprehensive income,
stockholders' equity, and cash flows for each of the three years in the period
ended December 31, 2004. Our report also included the financial statement
schedule listed in the Index at Item 15(a). These financial statements and
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and schedule based on our
audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Jarden Corporation
and subsidiaries at December 31, 2004 and 2003, and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended December 31, 2004, in conformity with U.S. generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
We also have audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the effectiveness of Jarden
Corporation's internal control over financial reporting as of December 31, 2004,
based on criteria established in Internal Control-Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway Commission and our
report dated March 1, 2005 expressed an unqualified opinion thereon.
/s/ ERNST & YOUNG LLP
New York, New York
March 1, 2005
47
JARDEN CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEAR ENDED DECEMBER 31,
------------------------------------
2004 2003 2002
-------- -------- --------
Net sales ..................................... $838,609 $587,657 $367,104
Costs and expenses:
Cost of sales .............................. 563,210 374,614 223,663
Selling, general and administrative expenses 146,901 119,760 78,332
Restricted stock charges ................... 32,415 21,833 --
-------- -------- --------
Operating earnings ............................ 96,083 71,450 65,109
Interest expense, net ......................... 27,608 19,184 12,611
-------- -------- --------
Income before taxes ........................... 68,475 52,266 52,498
Income tax provision .......................... 26,041 20,488 16,189
-------- -------- --------
Net income .................................... $ 42,434 $ 31,778 $ 36,309
======== ======== ========
Basic earnings per share ...................... $ 1.55 $ 1.40 $ 1.74
Diluted earnings per share .................... $ 1.49 $ 1.35 $ 1.68
Weighted average shares outstanding:
Basic ..................................... 27,353 22,663 20,910
Diluted ................................... 28,455 23,531 21,588
The accompanying notes are an integral part of the consolidated
financial statements.
48
JARDEN CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
DECEMBER 31,
-----------------------
2004 2003
---------- ---------
ASSETS
Current assets:
Cash and cash equivalents................................................ $ 20,665 $ 125,400
Accounts receivable, net of allowances of $14,149 and $11,880,
respectively .......................................................... 127,468 92,777
Income taxes receivable.................................................. 1,135 913
Inventories, net......................................................... 154,180 105,573
Deferred taxes on income................................................. 19,801 14,071
Prepaid expenses and other current assets................................ 11,813 8,385
---------- ---------
Total current assets................................................ 335,062 347,119
---------- ---------
Non-current assets:
Property, plant and equipment, at cost
Land..................................................................... 3,395 2,070
Buildings................................................................ 33,793 31,642
Machinery and equipment.................................................. 172,685 155,111
---------- ---------
209,873 188,823
Accumulated depreciation................................................. (124,444) (109,704)
---------- ---------
85,429 79,119
---------- ---------
Goodwill...................................................................... 467,594 236,413
Other intangible assets, net.................................................. 134,789 79,413
Other assets.................................................................. 19,507 17,610
---------- ---------
Total assets.................................................................. $1,042,381 $ 759,674
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt and current portion of long-term debt.................... $ 16,951 $ 17,512
Accounts payable......................................................... 48,910 34,211
Accrued salaries, wages and employee benefits............................ 15,682 15,879
Deferred consideration for acquisitions.................................. 28,995 2,833
Other current liabilities................................................ 43,153 34,645
---------- ---------
Total current liabilities........................................... 153,691 105,080
---------- ---------
Non-current liabilities:
Long-term debt........................................................... 470,500 369,870
Deferred taxes on income................................................. 41,041 17,127
Other non-current liabilities............................................ 43,198 17,692
---------- ---------
Total non-current liabilities....................................... 554,739 404,689
---------- ---------
Commitments and contingencies - -
Stockholders' equity:
Common stock ($.01 par value, 50,000 shares authorized, 28,720 and 28,720
shares issued and 28,292 and 27,007 shares outstanding at December 31,
2004 and 2003, respectively)............................................ 287 287
Additional paid-in capital............................................... 193,004 165,056
Retained earnings........................................................ 143,245 100,811
Accumulated other comprehensive income................................... 4,068 308
Less: treasury stock (428 and 1,713 shares, at cost, at December 31, 2004
and 2003, respectively)................................................. (6,653) (16,557)
---------- ---------
Total stockholders' equity........................................... 333,951 249,905
---------- ---------
Total liabilities and stockholders' equity.................................... $1,042,381 $ 759,674
========== =========
The accompanying notes are an integral part of the consolidated
financial statements.
49
JARDEN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
YEAR ENDED DECEMBER 31,
-----------------------------------------
2004 2003 2002
--------- --------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ............................................................... $ 42,434 $ 31,778 $ 36,309
Reconciliation of net income to net cash provided by operating activities:
Depreciation ......................................................... 17,698 14,188 9,412
Amortization ......................................................... 1,477 857 589
Deferred income taxes ................................................ 7,241 6,674 8,039
Deferred employee benefits ........................................... 1,395 988 383
Non-cash compensation ................................................ 32,455 21,899 587
Non-cash interest expense ............................................ 1,487 996 1,607
Other, net ........................................................... 714 577 2,923
Changes in working capital components, net of effects from acquisitions:
Accounts receivable .................................................. (9,939) (16,944) (12,076)
Income tax refunds ................................................... 1,134 379 38,578
Inventories .......................................................... (26,343) 4,994 (15,118)
Accounts payable ..................................................... 7,514 6,439 10
Accrued salaries, wages and employee benefits ........................ (6,282) (710) 1,689
Other current assets and liabilities ................................. (570) 1,706 (1,919)
--------- --------- ---------
Net cash provided by operating activities ........................ 70,415 73,821 71,013
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from revolving credit borrowings ............................... 72,250 78,000 25,200
Payments on revolving credit borrowings ................................. (72,254) (78,000) (34,600)
Proceeds from bond issuance ............................................. - 31,950 147,654
Payments on long-term debt .............................................. (13,684) (7,941) (77,975)
Payment on seller note .................................................. (5,400) (10,000) -
Debt issue and amendment costs .......................................... (2,252) (5,913) (7,467)
Proceeds from issuance of senior debt ................................... 116,000 160,000 50,000
Proceeds from recouponing of interest rate swap ......................... - 2,231 4,400
Proceeds from issuance of common stock, net of underwriting fees and
related expenses ..................................................... - 112,258 -
Other ................................................................... 3,406 2,211 4,335
--------- --------- ---------
Net cash provided by financing activities ............................ 98,066 284,796 111,547
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment .............................. (10,761) (12,822) (9,277)
Acquisitions of businesses, net of cash acquired of $4,287 and $6,685 in
2004 and 2003, respectively ........................................... (258,008) (277,259) (121,065)
Deal related costs incurred prior to the consummation of transaction .... (3,976) (23) (1,462)
Purchase of intangible assets ........................................... (523) - (2,000)
Proceeds from divestitures of assets and product lines .................. - - 1,600
Other, net .............................................................. 49 108 47
--------- --------- ---------
Net cash used in investing activities ................................. (273,216) (289,996) (132,157)
--------- --------- ---------
NET (DECREASE) INCREASE IN CASH .............................................. (104,735) 68,621 50,403
Cash and cash equivalents, beginning of year ................................. 125,400 56,779 6,376
--------- --------- ---------
CASH AND CASH EQUIVALENTS, END OF YEAR ....................................... $ 20,665 $ 125,400 $ 56,779
========= ========= =========
The accompanying notes are an integral part of the consolidated
financial statements.
50
JARDEN CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS)
Accumulated Other
Comprehensive (Loss) Income
---------------------------
Common Stock Treasury Stock Additional Cumulative Interest Minimum
--------------- -------------- Paid-in Retained Loans Translation Rate Pension
Shares Amount Shares Amount Capital Earnings Receivable Adjustment Swaps Liability
------ ------ ------ ------ ------- -------- ---------- ---------- ----- ---------
Balance, December 31, 2001 .. 23,890 $239 (4,695) $(37,586) $ 41,614 $ 32,724 $ - $ (941) $ (524) $ (397)
Net income .................. - - - - - 36,309 - - - -
Stock options exercised and
stock Plan purchases ........ 2,324 - - - 9,261 - - - - -
Shares issued for non-cash
compensation ........... 45 - - - 587 - - - - -
Shares reissued from treasury (2,369) - 2,369 19,742 (19,742) - - - - -
Shares tendered for stock
options and taxes ........... - - (6) (88) - - - - - -
Cumulative translation
adjustment ............. - - - - - - - 191 - -
Tax benefit related to stock
option exercises ...... - - - - 2,276 - - - - -
Loans to executive officers
and accrued interest
thereon ................ - - - - - - (5,109) - - -
Interest rate swap maturity . - - - - - - - - 524 -
Minimum pension liability ... - - - - - - - - - (2,316)
------ ---- ---- -------- --------- -------- ----- ------- ------- -------
Balance, December 31, 2002 .. 23,890 239 (2,332) (17,932) 33,996 69,033 (5,109) (750) - (2,713)
Net income .................. - - - - - 31,778 - - - -
Proceeds from issuance of
common stock ........... 4,830 48 - - 112,210 - - - - -
Restricted stock awards,
stock options exercised
and stock plan purchases 623 - - - 2,270 - - - - -
Shares issued for non-cash
compensation
Shares reissued from treasury (884) - 884 6,610 (6,610) - - - - -
Restricted stock awards
canceled and shares
tendered for stock
options and taxes ...... - - (4) (60) - - - - - -
Non cash compensation charges - - - - 21,899 - - - - -
Cumulative translation
adjustment ............. - - - - - - - 4,009 - -
Tax benefit related to stock
option exercises ....... - - - - 1,291 - - - - -
Repayment of executive
officers loans and
accrued interest ....... 261 - (261) (5,175) - - 5,109 - - -
Interest rate swap unrealized
loss ................... - - - - - - - - (57) -
Minimum pension liability ... - - - - - - - - - (181)
------ ---- ---- -------- --------- -------- ----- ------- ------- -------
Balance, December 31, 2003 .. 28,720 287 (1,713) (16,557) 165,056 100,811 - 3,259 (57) (2,894)
Net income .................. - - - - - 42,434 - - - -
Restricted stock awards,
stock options exercised
and stock plan purchases 1,293 - - - 3,506 - - - - -
Shares reissued from treasury (1,293) - 1,293 10,005 (10,005) - - - - -
Restricted stock awards
canceled and shares
tendered for stock
options and taxes ...... - - (8) (101) - - - - - -
Non cash compensation charges - - - - 32,455 - - - - -
Cumulative translation
adjustment ............. - - - - - - - 3,480 - -
Tax benefit related to stock
option exercises ....... - - - - 1,992 - - - - -
Interest rate swap unrealized
loss ................... - - - - - - - - (472) -
Minimum pension liability ... - - - - - - - - - 752
------ ---- ---- -------- --------- -------- ----- ------- ------- -------
Balance, December 31, 2004 .. 28,720 $287 (428) $ (6,653) $ 193,004 $143,245 $ - $ 6,739 $ (529) $(2,142)
====== ==== ==== ======== ========= ======== ===== ======= ======= =======
The accompanying notes are an integral part of the consolidated
financial statements.
51
JARDEN CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(THOUSANDS OF DOLLARS)
YEAR ENDED DECEMBER 31,
--------------------------------------
2004 2003 2002
------- -------- --------
Net income...................................................... $ 42,434 $ 31,778 $ 36,309
Foreign currency translation.................................... 3,480 4,009 191
Interest rate swap unrealized (loss) gain:
Change during period....................................... (472) (57) -
Maturity of interest rate swap............................. - - 524
Minimum pension liability....................................... 752 (181) (2,316)
------- -------- --------
Comprehensive income............................................ $46,194 $ 35,549 $ 34,708
======= ======== ========
The accompanying notes are an integral part of the consolidated
financial statements.
52
JARDEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2004
1. SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The Company is a leading provider of market leading branded consumer
products used in and around the home marketed under well-known brand names
including Ball(R), Bee(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. As a result of the acquisition of American Household, Inc. ("AHI") on
January 24, 2005 ("AHI Acquisition") (see Note 19) the Company also sells global
consumer products through such brands as Campingaz(R), Coleman(R), First
Alert(R), Health o meter(R), Mr. Coffee(R), Oster(R) and Sunbeam(R) brands. See
Business Segment Information (Note 5) for a discussion of the Company's
products.
These consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States. The
consolidated financial statements include the accounts of Jarden Corporation and
its subsidiaries ("Company"). All significant intercompany transactions and
balances have been eliminated upon consolidation.
On a stand alone basis, without the consolidation of its subsidiaries, the
Company has no independent assets or operations. The guarantees by its
subsidiaries of the 9 3/4% senior subordinated notes ("Notes"), which are
discussed in Note 8, are full and unconditional and joint and several. The
subsidiaries that are not guarantors of the Notes are minor. There are no
significant restrictions on the Company's or the guarantors' ability to obtain
funds from their respective subsidiaries by dividend or loan.
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.
Use of Estimates
The preparation of the consolidated financial statements in accordance with
generally accepted principles in the United States requires estimates and
assumptions that affect amounts reported and disclosed in the financial
statements and accompanying notes. Actual results could differ materially from
those estimates.
Revenue Recognition
The Company recognizes revenue when title transfers. In most cases, title
transfers at the time product is shipped to customers. The Company allows
customers to return defective or damaged products as well as certain other
products for credit, replacement, or exchange. Revenue is recognized as the net
amount to be received after deducting estimated amounts for product returns,
discounts, and allowances. The Company estimates future product returns based
upon historical return rates and its judgment.
Distribution Costs
Distribution costs, including the costs of shipping and handling are
included in Cost of Sales in the Consolidated Statements of Income.
Prepaid Media and Advertising Costs
Direct advertising costs (primarily media expenses) related to infomercial
sales are recorded as prepaid assets when paid in advance. The expense is
recognized when the infomercial is aired. All production expenses related to the
infomercials are expensed upon the first showing of the infomercial. The
Company's other advertising costs, consisting primarily of ad demo and
cooperative advertising, media placement and promotions are expensed as
incurred. The Company incurred advertising costs in the approximate amounts of
$24.0 million, $25.9 million and $17.8 million for the years 2004, 2003 and
2002, respectively. Amounts of $0.4 million and $0.5 million were included in
the Company's Prepaid Expenses and Other Current Assets in the Consolidated
Balance Sheet as of December 31, 2004 and 2003, respectively.
53
Cash and Cash Equivalents
Cash equivalents include financial investments with a maturity of three
months or less when purchased.
Accounts Receivable
The Company provides credit, in the normal course of business, to its
customers. The Company maintains an allowance for doubtful customer accounts for
estimated losses that may result from the inability of the Company's customers
to make required payments. That estimate is based on a variety of factors,
including historical collection experience, current economic and market
conditions, and a review of the current status of each customer's trade accounts
receivable. The Company charges actual losses when incurred to this allowance.
Inventories
Inventories are stated at the lower of cost, determined on the first-in,
first-out method, or market.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost less accumulated
depreciation. Maintenance and repair costs are charged to expense as incurred,
and expenditures that extend the useful lives of the assets are capitalized. The
Company reviews property, plant and equipment for impairment whenever events or
circumstances indicate that carrying amounts may not be recoverable through
future undiscounted cash flows, excluding interest cost.
Depreciation
Depreciation is calculated on the straight-line basis in amounts sufficient
to amortize the cost of the assets over their estimated useful lives (buildings
- - 30 to 50 years; machinery and equipment - 3 to 20 years).
Intangible Assets
Intangible assets consist principally of goodwill and intangible assets
recorded in connection with brand names and manufacturing processes expertise.
Goodwill represents the excess of the purchase prices of acquired businesses
over the estimated fair values of the net assets acquired. The Company's
goodwill and intangible assets that are deemed to have indefinite lives are no
longer amortized under current accounting guidance but are subject to annual
impairment tests. Other intangible assets are amortized over their useful lives
and are evaluated for impairment whenever events or circumstances indicate that
carrying amounts may not be recoverable through future undiscounted cash flows,
excluding interest costs. If facts or circumstances suggest that the Company's
intangible assets are impaired, the Company assesses the fair value of the
intangible assets and reduces them to an amount that results in book value
approximating fair value.
Taxes on Income
Deferred taxes are provided for differences between the financial statement
and tax basis of assets and liabilities using enacted tax rates. The Company
established a valuation allowance against a portion of the net tax benefit
associated with all carryforwards and temporary differences in a prior year, as
it was more likely than not that these would not be fully utilized in the
available carryforward period. A portion of this valuation allowance remained as
of December 31, 2004 and 2003 (see Note 9).
Fair Value and Credit Risk of Financial Instruments
The carrying values of cash and cash equivalents, accounts receivable,
notes payable, accounts payable and accrued liabilities approximate their fair
market values due to the short-term maturities of these instruments. The fair
market value of the Company's senior subordinated notes was determined based on
quoted market prices (see Note 8). The fair market value of the Company's other
long-term debt was estimated using rates currently available to the Company for
debt with similar terms and maturities (see Note 8).
The Company enters into interest rate swaps to manage interest rate
exposures. The Company designates the interest rate swaps as hedges of
underlying debt. Interest expense is adjusted to include the payment made or
received under the swap agreements. The fair market value of the swap agreements
was estimated based on the current market value of similar instruments (see Note
15).
Financial instruments that potentially subject the Company to credit risk
consist primarily of trade receivables and interest-bearing investments. Trade
receivable credit risk is limited due to the diversity of the
54
Company's customers and the Company's ongoing credit review procedures.
Collateral for trade receivables is generally not required. The Company places
its interest-bearing cash equivalents with major financial institutions.
Stock Options
In December 2002, the Financial Accounting Standards Board ("FASB") issued
Statements of Financial Accounting Standards ("SFAS") No. 148, Accounting for
Stock-Based Compensation - Transition and Disclosure. SFAS No. 148 amends SFAS
No. 123, Accounting for Stock-Based Compensation, to provide alternative methods
of transition for a voluntary change to the fair value based methods of
accounting for stock-based employee compensation. In addition, SFAS No. 148
amends the disclosure requirements of SFAS No. 123 to require more prominent
disclosures in both annual and interim financial statements about the method of
accounting for stock-based employee compensation and the effect of the method
used on reported results. As allowed for by both SFAS No. 148 and SFAS No. 123,
the Company accounts for the issuance of stock options using the intrinsic value
method in accordance with Accounting Principles Board ("APB") Opinion No. 25,
Accounting for Stock Issued to Employees, and related interpretations ("APB
25"). Generally for the Company's stock option plans, no compensation cost is
recognized in the 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 (see Note 2).
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 adjusted to the pro
forma amounts indicated:
YEAR ENDED DECEMBER 31,
---------------------------------------------
(thousands of dollars, except per share amounts) 2004 2003 2002
-------------- ------------- --------------
Net income, as reported......................................... $ 42,434 $ 31,778 $ 36,309
Deduct: Total stock-based employee compensation expense
determined under fair value based method for all awards, net
of related tax effects.................................. 2,795 2,042 1,037
-------------- ------------- --------------
Pro forma net income............................................. $ 39,639 $ 29,736 $ 35,272
============== ============= ==============
Basic earnings per share:
As reported........................................... $ 1.55 $ 1.40 $ 1.74
Pro forma............................................. 1.45 1.31 1.69
Diluted earnings per share:
As reported........................................... $ 1.49 $ 1.35 $ 1.68
Pro forma............................................. 1.39 1.26 1.63
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, 2003 and 2002, respectively: no dividend
yield for all years, expected volatility of 32, 37 and 44 percent, risk-free
interest rates of 2.8, 1.6 and 2.0 percent and expected lives of 7.6, 7.6 and
7.5 years. The average fair value of each option granted in 2004, 2003 and 2002
was $14.36, $9.11 and $6.19, respectively.
2. ADOPTION OF NEW ACCOUNTING PRONOUNCEMENTS
In December 2004, the Financial Accounting Standards Board ("FASB") issued
FASB Statement No. 123 (revised 2004) ("Statement 123 (R)"), Share-Based
Payment, which is a revision of FASB Statement No. 123, Accounting for
Stock-Based Compensation. Statement 123 (R) supersedes APB Opinion No. 25,
Accounting for Stock Issued to Employees, and amends FASB Statement No. 95,
Statement of Cash Flows. Generally, the approach in Statement 123 (R) is similar
to the approach described in Statement 123. However, Statement 123 (R) requires
all shared-based payments to employees, including grants of employee stock
options, to be recognized in the income statement based on their fair values.
Pro forma disclosure is no longer an alternative.
55
Statement 123 (R) must be adopted no later than July 1, 2005. Early
adoption will be permitted in periods in which financial statements have not yet
been issued. The Company expects to adopt Statement 123 (R) on July 1, 2005.
Statement 123 (R) permits public companies to adopt its requirements using
one of two methods:
1. A "modified prospective" method in which compensation cost is
recognized beginning with the effective date (a) based on the
requirements of Statements 123 (R) for all share-based payments
granted after the effective date and (b) based on the requirements of
Statement 123 for all awards granted to employees prior to the
effective date of Statement 123 (R) that remain unvested on the
effective date; or
2. A "modified retrospective" method which includes the requirements of
the modified prospective method described above, but also permits
entities to restate based on the amounts previously recognized under
Statement 123 for purposes of pro forma disclosures either (a) all
prior periods presented or (b) prior interim periods of the year of
adoption.
The Company plans to adopt Statement 123 (R) using the modified-prospective
method.
As permitted by Statement 123, the Company currently accounts for
share-based payments to employees using APB 25's intrinsic value method and, as
such, generally recognizes no compensation cost for employee stock options.
Accordingly, the adoption of Statement 123 (R)'s fair value method will have a
significant impact on our result of operations, although it will have no impact
on our overall financial position. The impact of the adoption of Statement 123
(R) cannot be predicted at this time because it will depend on levels of
share-based payments granted in the future. However, had we adopted Statement
123 (R) in prior periods, the impact of that standard would have approximated
the impact of Statement 123 as described in the disclosure of pro forma net
income and earnings per share in Note 1 above to the Company's consolidated
financial statements. Statement 123 (R) also requires the benefits of tax
deductions in excess of recognized compensation cost to be reported as a
financing cash flow, rather than as an operating cash flow as required under
current literature. This requirement will reduce net operating cash flows and
increase net financing cash flows in periods after adoption. While the Company
cannot estimate what those amounts will be in the future (because they depend
on, among other things, when employees exercise stock options), the amount of
operating cash flows recognized in prior periods for such excess tax deductions
were approximately $2.0 million, $1.3 million, and $2.3 million in 2004, 2003
and 2002, respectively.
In November 2004, the FASB issued Statement of Financial Accounting
Standards No. 151, Inventory Costs, an amendment of ARB No. 43, Chapter 4 ("SFAS
151"). SFAS 151 requires the exclusion of certain costs from inventories and the
allocation of fixed production overheads to inventories to be based on normal
capacity of the production facilities. The provisions of SFAS 151 are effective
for costs incurred during fiscal years beginning after June 15, 2005. Earlier
adoption is permitted for inventory costs incurred during fiscal years beginning
after the issuance date of SFAS 151. The Company is currently evaluating the
effect that the adoption of SFAS 151 will have on its consolidated financial
statements but does not expect SFAS 151 to have a material effect.
Effective December 8, 2003, the Medicare Prescription Drug, Improvement and
Modernization Act of 2003 (Medicare Prescription Drug Act) was signed into law.
This act provides for a prescription drug benefit under Medicare (Part D) as
well as a federal subsidy to sponsors of retiree health care benefits plans that
provide a benefit that is at least actuarially equivalent to Medicare Part D.
The Company's defined benefit postretirement health care plans provide
prescription drug benefits (see Note 10).
In January 2004, The FASB issued FASB Staff Position ("FSP") No. 106-1,
Accounting and Disclosure Requirements Related to the Medicare Prescription
Drug, Improvement and Modernization Act of 2003 ("FSP 106-1"). FSP 106-1 permits
a sponsor of a postretirement healthcare plan that provides a prescription
benefit to elect a one-time deferral of the recognition of the effects of the
Medicare Prescription Drug Act in accounting for its plan under SFAS No. 106 and
in providing disclosures related to the plan required by Statement No. 132. The
FASB allowed the one-time deferral due to the accounting issues raised by the
Medicare Prescription Drug Act--in particular, the accounting for federal
subsidy that is not explicitly addressed in Statement No. 106--and due to the
fact the uncertainties exist as to the direct effects on the Medicare
Prescription Drug Act and its ancillary effects on plan participants. As
permitted by FSP 106-1, the Company made a one-time election to defer
56
accounting for the effect of the Medicare Prescription Drug Act and, as a
result, the amounts included in the Company's Consolidated Financial Statements
do not reflect the effects of the Medicare Prescription Drug Act.
In May 2004, the FASB issued FSP No. 106-2 (FSP 106-2, which superseded
FASP 106-1. FSP 106-2 provides authoritative guidance on the accounting for the
federal subsidy and specifies the disclosure requirements for employers who have
adopted FSP 106-2. Detailed regulations necessary to implement the Medicare
Prescription Drug Act have not been issued, including those that would specify
the manner in which actuarial equivalency must be determined, the evidence
required to demonstrate actuarial equivalency, and the documentation
requirements necessary to be entitled to the subsidy. FSP 106-2 is effective for
the Company's first quarter of 2005. The Company does not currently believe that
the adoption of FSP 106-2 will have a material impact on the Company's
consolidated financial statements. Final authoritative guidance could require
the Company to change this assessment.
3. ACQUISITIONS
2004 Activity
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 (collectively "USPC" and "USPC
Acquisition"), and subsequently acquired the remaining 24.6% pursuant to a
put/call agreement ("Put/Call Agreement") on October 4, 2004. USPC is a
manufacturer and distributor of playing cards and related games and accessories.
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-Davison(R), Mattel(R), NASCAR(R) and World Poker Tour(TM).
USPC's international holdings include Naipes Heraclio Fournier, S.A., a leading
playing card manufacturer in Europe. The aggregate purchase price was
approximately $237.9 million, including transaction expenses and deferred
consideration amounts. 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 8) and borrowings under the Company's existing revolving credit facility.
The cash portion of the October 4, 2004 exercise of the Put/Call Agreement was
funded by a combination of cash on hand and revolving borrowings under the
Company's senior credit facility (see Note 8).
As of December 31, 2004, in connection with the USPC Acquisition, the
Company accrued approximately $20 million of deferred consideration for purposes
of guaranteeing potential indemnification liabilities of the sellers, of which
$10 million is included as Deferred Consideration for Acquisitions on the
Consolidated Balance Sheet. The remaining $10 million is included in Other
Non-current Liabilities on the Consolidated Balance Sheet. The holdback amount
is secured by a stand-by letter of credit under the Company's senior credit
facility (see Note 8).
The Company also accrued approximately $3.0 million for a planned and
ongoing restructuring related to USPC. 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.
During the first quarter of 2004, the Company completed the tuck-in
acquisition of Loew-Cornell, Inc. ("Loew-Cornell" and "Loew-Cornell
Acquisition"). Loew-Cornell is a leading marketer and distributor of
paintbrushes and other arts and crafts products. The Loew-Cornell Acquisition
includes an earn-out provision with a payment in cash or our common stock, at
the Company's sole discretion, based on earnings performance targets. As of
December 31, 2004, the outcome of the contingent earn-out is not determinable
beyond a reasonable doubt. Therefore, only the prepayment of the contingent
consideration ($0.5 million to be paid in equal installments during 2005 and
2006) has been recorded as part of the Deferred Considerations for Acquisitions
amount in the Consolidated Balance Sheet. Loew-Cornell is included in the
branded consumables segment from March 18, 2004.
57
2003 Activity
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 a leading 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 $157.5 million,
including transaction expenses. Additionally, the Lehigh Acquisition includes a
contingent consideration provision with a potential payment in cash or the
Company's common stock, at the Company's sole discretion, of up to $25 million
payable in 2006, provided that certain earnings performance targets are met.
Since this consideration is not payable beyond a reasonable doubt, no amount has
been accrued in the Consolidated Balance Sheet as of December 31, 2004. Lehigh
is included in the branded consumables segment from September 2, 2003 (see Note
5).
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 5).
The Company also completed two tuck-in acquisitions in 2003. In the fourth
quarter of 2003, the Company completed its acquisition of the VillaWare
Manufacturing Company ("VillaWare"). VillaWare's results are included in the
consumer solutions segment from October 3, 2003. In the second quarter of 2003,
the Company completed its acquisition of O.W.D., Incorporated and Tupper Lake
Plastics, Incorporated (collectively "OWD"). The branded product distribution
operation acquired in the acquisition of OWD is included in the branded
consumables segment from April 1, 2003. The plastic manufacturing operation
acquired in the acquisition of OWD is included in the plastic consumables
segment from April 1, 2003 (see Note 5).
2002 Activity
On April 24, 2002, the Company completed its acquisition of the business of
Tilia International, Inc. and its subsidiaries ("Tilia" and the "Tilia
Acquisition"). Pursuant to the Tilia Acquisition, the Company acquired Tilia for
approximately $145 million in cash and $15 million in seller debt financing
(repaid in 2004 and 2003, see Note 8). In addition, the Tilia Acquisition
includes an earn-out provision with a potential payment in cash or Company
common stock, at the Company's sole discretion, provided that certain earnings
performance targets are met. At December 31, 2004, the Company estimated that
the earn-out payment, payable in the second quarter of 2005, could be
approximately $17.3 million and has accrued this amount in Deferred
Consideration for Acquisitions in the Consolidated Balance Sheet. The Company
has capitalized this earn-out accrual. The goodwill balance relating to the
Tilia Acquisition includes the effect of foreign currency translations since the
date of acquisition (see Note 7). Tilia is included in the consumer solutions
segment from April 1, 2002 (see Note 5).
Acquisition Disclosures
The following table summarizes the estimated fair values of the assets
acquired and the liabilities assumed at the respective effective dates of
acquisition:
Tilia Diamond Brands Lehigh USPC
(April 1, (Feb. 1, (Sept. 2, (June 28,
(millions of dollars) 2002) 2003) 2003) 2004)
----------------- --------------- ---------------- ----------------
Current assets..................... $ 65.1 $ 24.7 $ 47.0 $ 48.2
Property, plant and equipment...... 2.4 20.2 9.3 15.4
Trademark.......................... 50.9 13.8 3.4 50.0
Other intangibles.................. 5.5 - - 1.1
Other non-current assets........... - - - 5.6
--------------- --------------- ---------------- ----------------
Total assets acquired.......... 123.9 58.7 59.7 120.3
--------------- --------------- ---------------- ----------------
Current liabilities................ (19.3) (9.4) (11.4) (25.0)
Long-term liabilities.............. (0.7) (0.9) - (31.8)
--------------- --------------- ---------------- ----------------
Total liabilities assumed..... (20.0) (10.3) (11.4) (56.8)
--------------- --------------- ---------------- ----------------
Net assets acquired.... 103.9 48.4 48.3 63.5
--------------- --------------- ---------------- ----------------
Purchase price..................... 163.3 91.5 157.5 237.9
--------------- --------------- ---------------- ----------------
Goodwill recorded................ $ 59.4 $ 43.1 $ 109.2 $ 174.4
=============== =============== ================ ================
58
Certain balances recorded in connection with the USPC Acquisition are
preliminary and when finalized within one year of the respective date of
acquisition may result in changes to the intangible balances shown above.
The 2004, 2003 and 2002 acquisitions discussed above 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.
In connection with the Loew-Cornell Acquisition, the Company recorded
approximately $30.2 million to goodwill and $4.6 million to trademarks. In
connection with the two 2003 tuck-in acquisitions discussed above, the Company
recorded an aggregate of approximately $14.0 million to goodwill and $5.0
million to trademarks.
The aggregate of these three tuck-in acquisitions did not have a material
effect on the Company's results of operations for the years ended December 31,
2004 or 2003 and are therefore not included in the pro forma financial
information presented herein (see Note 4).
The goodwill and other intangibles amounts recorded in connection with the
Company's acquisitions are discussed in detail in Note 7.
4. PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial information includes the actual
reported results of the Company, as well as giving effect to the USPC
Acquisition, the Lehigh Acquisition and the Diamond Acquisition (as described in
Note 3 above) with the related financings as if they had been consummated as of
the beginning of the earliest period presented. The unaudited pro forma
information does not give effect to the AHI Acquisition completed in January
2005 (see Note 19). The pro forma information for the year ended December 31,
2003 includes $1.5 million of reorganization expenses incurred by Diamond Brands
prior to February 7, 2003 and includes a non-cash restricted stock charge of
approximately $21.8 million and related tax benefit. The pro forma information
for the year ended December 31, 2004 includes a non-cash restricted stock charge
of approximately $32.4 million and related tax benefit:
YEAR ENDED DECEMBER 31,
--------------------------------
(thousands of dollars, except per share data) 2004 2003
-------------- ----------------
Net sales........................................ $901,788 $809,086
Operating income................................. 109,474 113,307
Net income....................................... 48,749 50,479
Diluted earnings per share....................... 1.71 1.86
5. BUSINESS 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, 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, among others. As discussed in
Note 3, the Diamond Brands wood manufacturing operation and branded product
59
distribution business, the Lehigh home improvement business and the USPC playing
cards and related accessories business have been included in the branded
consumables segment effective February 1, 2003, September 2, 2003 and June 28,
2004, respectively.
In the consumer solutions segment, which was created upon the acquisition
of Tilia in April 2002, 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
consumer solutions segment (containers).
60
Net sales, operating earnings, capital expenditures, depreciation and
amortization, and assets employed in operations by segment are summarized as
follows:
YEAR ENDED DECEMBER 31,
-----------------------------------------
(thousands of dollars) 2004 2003 2002
--------- --------- ---------
Net sales:
Branded consumables (1) .................. $ 473,073 $ 257,869 $ 111,240
Consumer solutions (2) ................... 222,185 216,123 145,316
Plastic consumables (3) .................. 128,115 109,056 70,578
Other .................................... 67,486 42,802 41,034
Intercompany (4) ......................... (52,250) (38,193) (1,064)
--------- --------- ---------
Total net sales .................. $ 838,609 $ 587,657 $ 367,104
========= ========= =========
Operating earnings:
Branded consumables (1) .................. $ 75,685 $ 36,521 $ 17,984
Consumer solutions (2) ................... 37,021 42,550 31,672
Plastic consumables (3) .................. 6,689 9,551 9,088
Other .................................... 9,017 5,531 6,366
Intercompany ............................. 86 (870) (1)
Unallocated corporate expenses (5) ....... (32,415) (21,833) -
--------- --------- ---------
Total operating income ........... 96,083 71,450 65,109
Interest expense, net ....................... 27,608 19,184 12,611
--------- --------- ---------
Income before taxes ......................... $ 68,475 $ 52,266 $ 52,498
========= ========= =========
Capital expenditures:
Branded consumables (1) .................. $ 4,103 $ 4,074 $ 3,547
Consumer solutions (2) ................... 2,048 4,598 1,008
Plastic consumables (3) .................. 3,759 2,484 3,392
Other .................................... 707 924 585
Corporate (6) ............................ 144 742 745
--------- --------- ---------
Total capital expenditures ........ $ 10,761 $ 12,822 $ 9,277
========= ========= =========
Depreciation and amortization:
Branded consumables (1) .................. $ 6,343 $ 3,673 $ 1,878
Consumer solutions (2) ................... 3,437 2,278 1,382
Plastic consumables (3) .................. 7,391 6,859 4,435
Other .................................... 1,861 2,133 2,222
Corporate (6) ............................ 143 102 84
--------- --------- ---------
Total depreciation and amortization $ 19,175 $ 15,045 $ 10,001
========= ========= =========
AS OF DECEMBER 31,
-------------------------------------
2004 2003
-------------------- ---------------
Assets employed in operations:
Branded consumables (1)...................... $ 671,510 $ 310,451
Consumer solutions (2)....................... 241,217 216,289
Plastic consumables (3)...................... 56,402 62,623
Other........................................ 13,159 13,867
Corporate (6)................................ 60,093 156,444
-------------------- ---------------
Total assets.......................... $ 1,042,381 $ 759,674
==================== ===============
61
(1) The USPC business, the 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, September 2, 2003
and February 1, 2003, respectively.
(2) The consumer solutions segment was created upon the purchase of Tilia,
effective April 1, 2002.
(3) The Diamond Brands plastic manufacturing operation is included in the
plastic consumables segment effective February 1, 2003.
(4) Intersegment sales are recorded at cost plus an agreed upon intercompany
profit on intersegment sales.
(5) Unallocated corporate expenses are comprised of non-cash restricted stock
charges of $32.4 million and $21.8 million in 2004 and 2003, respectively.
(6) 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 card
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 and other commercial
products and puzzles.
Net sales of these products in 2004, 2003 and 2002 were as follows:
YEAR ENDED DECEMBER 31,
---------------------------------------------------
(in millions) 2004 2003 2002
------------------ ---------------- --------------
Kitchen products....................................... $205.8 $ 194.4 $ 109.1
Home improvement products.............................. 138.1 41.0 -
Playing cards products................................. 80.5 - -
Other specialty products............................... 48.7 22.5 2.1
------------------ ---------------- --------------
Total branded consumables net sales.................. $473.1 $257.9 $111.2
================== ================ ==============
One of the Company's customers (a customer to both the branded consumables
and consumer solutions segments) accounted for 16.5%, 19.7% and 18.7% of its
2004, 2003 and 2002 net revenues, respectively. No other customer accounted for
more than 10% of the Company's net revenues in any of the years presented.
The Company's sales are principally within the United States. Our
international operations are mainly based in Canada, Spain, Mexico and the U.K.
Export sales are also made to countries in Europe, Latin America, the Caribbean
and the Pacific Rim. Net sales of the Company's products outside of North
America were $43.8 million, $15.0 million and $7.3 million or on a percentage
basis, 5.2%, 2.6% and 2.0%, in 2004, 2003 and 2002, respectively. Long-lived
assets located outside of North America are not material.
6. INVENTORIES
Inventories were comprised of the following:
AS OF DECEMBER 31,
-------------------------------
(thousands of dollars) 2004 2003
--------------- ---------------
Raw materials and supplies.............................................. $ 20,580 $ 15,254
Work in process......................................................... 10,874 6,653
Finished goods.......................................................... 122,726 83,666
--------------- ---------------
Total inventories............................................. $ 154,180 $ 105,573
=============== ===============
62
7. INTANGIBLES
As of December 31, 2004 and 2003, the Company recorded the following
amounts for intangible assets by segment (the Company allocates intangible
assets based on which segment the subsidiary that gave rise to the intangible
asset is included in):
BRANDED CONSUMER
(in millions) CONSUMABLES SOLUTIONS TOTAL
----------------- ----------------- ----------------
2004
- ----
Intangible assets not subject to amortization:
Goodwill............................................... $ 376.6 $ 91.1 $ 467.7
Trademarks............................................. 73.9 56.1 130.0
Intangible assets not subject to amortization......... 450.5 147.2 597.7
Intangible assets subject to amortization:
Non-compete agreement.................................... 1.1 - 1.1
Manufacturing processes and expertise.................... - 6.5 6.5
Accumulated amortization................................ (0.5) (2.4) (2.9)
----------------- ----------------- ----------------
Net amount of intangible assets subject to
amortization............................................. 0.6 4.1 4.7
----------------- ----------------- ----------------
Total goodwill and other intangible assets............ $ 451.1 $ 151.3 $ 602.4
================= ================= ================
BRANDED CONSUMER
CONSUMABLES SOLUTIONS TOTAL
----------------- ----------------- ----------------
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:
Non-compete agreement.................................... - - -
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 asset............. $ 186.2 $ 129.6 $ 315.8
================= ================ ================
The only intangible assets which have finite lives and are currently
subject to amortization are certain manufacturing processes and expertise within
the consumer solutions segment, which are being amortized over a period of seven
to eight years and two non-compete agreements within the branded consumables
segment, which are being amortized over the life of their respective agreements.
Amortization expense for the intangible assets which have finite lives in the
aggregate amounts of $1.5 million, $0.8 million and $0.6 million was recorded in
2004, 2003 and 2002, respectively, and is included in Selling, General and
Administrative expenses in the Consolidated Statements of Income.
63
The following table summarizes the changes to the carrying amounts of
intangible asset not subject to amortization during the years ended December 31,
2004 and 2003:
BRANDED CONSUMER
(in millions) CONSUMABLES SOLUTIONS TOTAL
----------------- ----------------- ----------------
Intangible assets not subject to amortization:
Balance at December 31, 2002.............................. $ 15.5 $ 113.2 $ 128.7
Acquired goodwill (see Note 3)......................... 151.7 6.4 158.1
Acquired trademark (see Note 3)........................ 19.0 3.0 22.0
Foreign currency translation adjustment................ - 3.1 3.1
Purchase accounting adjustments to goodwill............ - (0.7) (0.7)
------------------ --------------- --------------
Balance at December 31, 2003.............................. 186.2 125.0 311.2
Acquired goodwill (see Note 3)......................... 204.6 - 204.6
Acquired trademark (see Note 3)........................ 54.9 0.2 55.1
Contingent consideration............................... - 17.3 17.3
Foreign currency translation adjustment................ - 1.3 1.3
Purchase accounting adjustments to goodwill............ 4.8 3.4 8.2
------------------ --------------- --------------
Balance at December 31, 2004.............................. $ 450.5 $ 147.2 $ 597.7
================= ================ ================
The purchase accounting adjustments to goodwill in 2004 primarily relate to
the finalization of preliminary working capital balances related to recent
acquisitions. As described in Note 3 during 2004, the Company recorded to the
goodwill balance in connection with the Tilia Acquisition, an estimated earn-out
amount of $17.3 million.
The estimated amortization expense for each of the five succeeding fiscal
years is as follows: $1.4 million in 2005; $1.0 million in 2006; $0.9 million in
2007; $0.9 million in 2008; and $0.3 million in 2009.
Approximately $226.9 million of the goodwill and other intangible assets
recorded by the Company are not deductible for income tax purposes.
In accordance with SFAS No. 142, the Company performs annual impairment
testing on its intangible assets. The Company performs this testing as of
October 1 each year. During the years ended December 31, 2004, 2003 and 2002,
the Company did not record goodwill amortization and did not experience any
impairment losses.
8. DEBT AND INTEREST
Debt was comprised of the following:
AS OF DECEMBER 31,
--------------------------------
(thousands of dollars) 2004 2003
---------------- ---------------
9 3/4% Senior Subordinated Notes........................................ $ 179,871 $179,853
Term A.................................................................. 39,341 49,934
Term B.................................................................. 148,125 149,625
Term B Add-on .......................................................... 115,420 -
Other................................................................... 1,524 5,420
Non-debt balances arising from interest rate swap activity.............. 3,170 2,550
---------------- ---------------
487,451 387,382
Less current portion.................................................... (16,951) (17,512)
---------------- ---------------
Total long-term debt.......................................... $ 470,500 $369,870
================ ===============
2004 Activity
On June 28, 2004, in connection with its USPC Acquisition, the Company
completed a $116 million add-on to its Term B loan facility ("Term B Add- on")
under its Second Amended Credit Agreement. The proceeds from the Term B Add-on
offering were used to partially fund the USPC Acquisition. The spread on the
Term B Add-on
64
is 2.25% over London Interbank Offered Rate ("LIBOR"). Additionally, under this
Second Amended Credit Agreement, the spread on the Company's existing Term B
loan facility was reduced from 2.75% over LIBOR to 2.25% over LIBOR.
The Second Amended Credit Agreement did not significantly change the
restrictions on the conduct of the Company's business or the financial covenants
required in the previous senior credit facility ("Amended Credit Agreement")
(see "2003 Activity" below). The Second Amended Credit Agreement, which matures
on April 24, 2008, also did not change the pricing and principal terms of the
$70 million revolving credit facility.
As of December 31, 2004, other debt primarily consisted of $1.5 million of
bank notes that are payable in equal quarterly 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.
2003 Activity
In connection with the Lehigh Acquisition (see Note 3), the Company's
Amended Credit Agreement, amended and restated in 2003, provided for up to $280
million of senior secured loans, consisting of a $70 million revolving credit
facility, a $60 million term loan facility ("Term A") and a second term loan
facility for $150 million ("Term B"). The second term loan facility bears
interest at a rate equal to (i) the Eurodollar Rate (as determined by the
Administrative Agent) pursuant to an agreed formula or (ii) a Base Rate equal to
the higher of (a) the Bank of America prime rate and (b) the federal funds rate
plus 0.50%, plus, in each case, an applicable margin of 2.75% per annum for
Eurodollar loans and 1.75% per annum for Base Rate loans. The pricing and
principal of the revolving credit facility and the previously existing term loan
did not change. On September 2, 2003, the Company drew down the full amount of
Term B, which funds were used principally to pay the majority of the cash
consideration for the Lehigh Acquisition. Our Amended Credit Agreement was
scheduled to mature on April 24, 2008.
The Amended Credit Agreement contained certain restrictions on the conduct
of the Company's business, including, among other things restrictions,
generally, on: incurring debt; disposing of certain assets; making investments;
exceeding certain agreed upon capital expenditures; creating or suffering liens;
completing certain mergers; consolidations and sales of assets and with
permitted exceptions; acquisitions; declaring dividends; redeeming or prepaying
other debt; and certain transactions with affiliates. The Amended Credit
Agreement also included financial covenants that required the Company to
maintain certain leverage and fixed charge ratios and a minimum net worth.
On May 8, 2003, the Company issued an additional $30 million of Notes
(bringing to a total $180 million of Notes issued and outstanding, including the
2002 issuance discussed below). The net proceeds of the offering were used to
reduce the outstanding revolver balances under the Company's senior credit
facility. The Notes were issued at a price of 106.5% of face value and the
Company received approximately $32.0 million in gross proceeds from the
issuance. As a result of an exchange offer completed on December 2, 2003, all of
the Notes are governed by an indenture, dated as of April 24, 2002, as
supplemented ("April 2002 Indenture"). Significant terms of the Notes and the
indenture are discussed under "2002 Activity".
During 2003, a seller note in the principal amount of $10 million was
repaid. For accounting purposes, the Company imputed an interest rate of 5% on
the $10 million non-interest bearing note.
2002 Activity
In April 2002, in connection with the Tilia Acquisition, the Company made
an offering of $150 million of Notes to qualified institutional buyers in a
private placement pursuant to Rule 144A under the Securities Act of 1933.
The Notes were issued at a discount such that the Company received
approximately $147.7 million in net proceeds. The Notes are scheduled to mature
on May 1, 2012; however, on or after May 1, 2007, the Company can redeem all or
part of the Notes at any time at a redemption price ranging from 100% to
104.875% of the
65
principal amount, plus accrued and unpaid interest and liquidated damages, if
any. Prior to May 1, 2005, the Company can redeem up to 35% of the aggregate
principal amount of the Notes with the net cash proceeds from certain public
equity offerings at a redemption price of 109.75% of the principal amount, plus
accrued and unpaid interest and liquidated damages, if any. Interest on the
Notes accrues at the rate of 9.75% per annum and is payable semi-annually in
arrears on May 1 and November 1, with the first payment occurring on November 1,
2002. The April 2002 Indenture governing the Notes also contains certain
restrictions on the conduct of the Company's business.
Prior to the Amended Credit Agreement, the Company's former credit
agreement ("Old Credit Agreement") was due to mature on April 24, 2007. The
revolving credit facility and the term loan facility bore interest at a rate
equal to (i) the Eurodollar Rate pursuant to an agreed formula or (ii) a Base
Rate equal to the higher of (a) the Bank of America prime rate and (b) the
federal funds rate plus .50%, plus, in each case, an applicable margin ranging
from 2.00% to 2.75% for Eurodollar Rate loans and from .75% to 1.50% for Base
Rate loans. The Old Credit Agreement contained restrictions on the conduct of
the Company's business similar to the restrictions under the Amended Credit
Agreement. The Old Credit Agreement was replaced by the Amended Credit
Agreement.
Until it was replaced by the Old Credit Agreement on April 24, 2002, our
senior credit facility, as amended, provided for a revolving credit facility of
$40 million and a term loan which amortized periodically as required by the
terms of the agreement. Interest on borrowings under the term loan and the
revolving credit facilities were based upon fixed increments over adjusted LIBOR
or the agent bank's alternate borrowing rate as defined in the agreement. The
agreement also required the payment of commitment fees on the unused balance.
During the first quarter of 2002, approximately $38 million of tax refunds the
Company received were used to repay a portion of the outstanding amounts under
this credit facility.
Debt disclosures
As of December 31, 2004, the Notes traded at a premium, resulting in an
estimated fair value, based upon quoted market prices, of approximately $198.5
million compared to the book value of $179.9 million.
As of December 31, 2004, the Company had $302.9 million outstanding under
its term loan facilities and no amounts outstanding under the revolving credit
facility of the Second Amended Credit Agreement. As of December 31, 2004, net
availability under the revolving credit agreement was approximately $44.2
million, after deducting $25.8 million of issued letters of credit. As discussed
in Note 3 above, the letters of credit outstanding include an amount of
approximately $20.0 million securing the USPC holdback amount. The Company is
required to pay commitment fees on the unused balance of the revolving credit
facility. At December 31, 2004, the annual commitment fee on unused balances was
0.50%.
As of December 31, 2003, the Company had $199.6 million outstanding under
the term loan facilities and no outstanding amounts under the revolving credit
facility of the Amended Credit Agreement. Net availability under the revolving
credit agreement was approximately $64.9 million as of December 31, 2003, after
deducting $5.1 million of issued letters of credit.
The Company's long-term debt maturities, net of unamortized debt
discounts/premiums, for the five years following December 31, 2004 and
thereafter are as follows (in thousands):
Year ending December 31, Amount
----------------------------------------------------------
2005 $ 16,935
2006 19,773
2007 138,441
2008 129,200
2009 (16)
Thereafter 183,118
-----------------
$ 487,451
=================
As of December 31, 2004 and 2003, the Company's long-term debt included
approximately $3.2 million and $2.6 million, respectively, of non-debt balances
arising from the interest rate swap transactions related to the
66
Company's outstanding notes as described in Note 15. The 2004 non-debt balance
is included in the "thereafter" balance above.
Because the interest rates applicable to the senior debt under the Second
Amended Credit Agreement and the Amended Credit Agreement are based on floating
rates identified by reference to market rates, the fair market value of the
senior debt as of December 31, 2004 and 2003 approximated its carrying value.
During 2004 and 2003, the Company incurred costs in connection with the
issuance of the Notes, Second Amended Credit Agreement, Amended Credit Agreement
and Old Credit Agreement of approximately $2.3 million and $5.9 million,
respectively. Such amounts are included in Other Assets on the Consolidated
Balance Sheet and are being amortized over the respective terms of the debt.
Interest paid on the Company's borrowings during the years ended December
31, 2004, 2003 and 2002 was $26.1 million, $17.2 million and $10.5 million,
respectively.
9. TAXES ON INCOME
The components of the provision for income taxes attributable to continuing
operations were as follows:
YEAR ENDED DECEMBER 31,
---------------------------------------------
(thousands of dollars) 2004 2003 2002
-------------- -------------- ---------------
Current income tax expense:...................................
U.S. federal.................................................. $ 14,391 $ 9,842 $ 13,513
Foreign....................................................... 1,904 676 692
State and local............................................... 2,120 2,466 2,813
-------------- -------------- ---------------
Total ............................................... 18,415 12,984 17,018
-------------- -------------- ---------------
Deferred income tax expense (benefit):
U.S. federal.................................................. 6,536 6,485 (340)
State, local and other........................................ 121 602 (489)
Foreign.................................................... 969 417 -
-------------- -------------- ---------------
Total................................................. 7,626 7,504 (829)
-------------- -------------- ---------------
Total income tax provision ..................................... $ 26,041 $ 20,488 $ 16,189
============== ============== ===============
Foreign pre-tax income was $5.1 million, $3.2 million, and $1.8 million in
2004, 2003, and 2002, respectively.
Deferred tax (liabilities) assets are comprised of the following:
AS OF DECEMBER 31,
-------------------------------
(thousands of dollars) 2004 2003
--------------- ---------------
Property, equipment and intangibles.......................................... $ (38,083) $ (14,682)
Other........................................................................ ( 2,693) (2,445)
--------------- ---------------
Gross deferred tax liabilities............................................ (40,776) (17,127)
--------------- ---------------
Net operating loss........................................................... 3,426 2,726
Accounts receivable allowances............................................... 3,340 1,342
Inventory valuation.......................................................... 4,621 3,097
Compensation and benefits.................................................... 5,036 3,961
Other........................................................................ 4,113 3,945
--------------- ---------------
Gross deferred tax assets................................................. 20,536 15,071
--------------- ---------------
Valuation allowance.......................................................... (1,000) (1,000)
--------------- ---------------
Net deferred tax liability................................................... $ (21,240) $ (3,056)
=============== ===============
67
As of December 31, 2004, approximately $3.4 million of state and Canadian
net operating loss carryforwards remain before the valuation allowance, of which
$2.9 million and $0.5 million relate to net operating losses in the United
States and Canada, respectively. Their use is limited to future taxable income
of the Company. The carryforwards expire in the United States in 2021 and in
Canada in 2008. The Company maintained a valuation allowance against a portion
of the net tax benefit associated with all carryforwards and temporary
differences at December 31, 2004, as it is more likely than not that these will
not be fully utilized in the available carryforward period.
As a result of the losses arising from the sale of certain assets in 2001,
the Company recovered in January 2002 approximately $15.7 million of federal
income taxes paid in 1999 and 2000 by utilizing the carryback of a tax net
operating loss generated in 2001. On March 9, 2002, The Job Creation and Workers
Assistance Act of 2002 was enacted which provided, in part, for the carryback of
2001 net operating losses for five years instead of the previous two year
period. As a result, the Company filed for an additional refund of $22.8
million, of which $22.2 million was received in March 2002 and the remainder was
received in April 2002.
The difference between the federal statutory income tax rate and the
Company's effective income tax rate as a percentage of income from continuing
operations is reconciled as follows:
YEAR ENDED DECEMBER 31,
--------------------------------------------
2004 2003 2002
-------------- ------------- ------------
Federal statutory tax rate..................................... 35.0% 35.0% 35.0%
Increase (decrease) in rates resulting from:
State and local taxes, net................................. 3.0 3.8 3.3
Foreign.................................................... 0.3 (0.1) -
Valuation allowance........................................ - - (8.4)
Other...................................................... (0.3) 0.5 0.9
-------------- ------------- ------------
Effective income tax rate...................................... 38.0% 39.2% 30.8%
============== ============= ============
The American Jobs Creation Act of 2004 ("Act") introduced a special
one-time dividends received deduction on the repatriation of certain foreign
earnings to a United States taxpayer ("Repatriation Provision"), provided
certain criteria are met. The Act provides an 85% dividends received deduction
of certain foreign earnings that are repatriated (as defined in the Act) in
either the enterprise's last tax year that began before October 22, 2004 ("the
Enactment Date") or the first tax year that begins during the one-year period
beginning on the Enactment Date. The Company has not completed its evaluation of
the effects of the Repatriation Provision, although it does expect such
evaluation to be completed by the third quarter of 2005. Since the Company has
not completed its evaluation of the effects of such Repatriation Provision, the
potential range of income tax effects of such Repatriation Provision cannot be
reasonably estimated prior to the issuance of the Company's Consolidated
Financial Statements. As a result, the Company has not provided United States
income taxes on undistributed foreign earnings of approximately $13.5 million at
December 31, 2004.
Total income tax payments made by the Company during the years ended
December 31, 2004, 2003 and 2002 were $17.0 million, $11.2 million and $9.3
million, respectively.
10. RETIREMENT AND OTHER EMPLOYEE BENEFIT PLANS
The Company has certain defined contribution retirement plans that qualify
under section 401(k) of the Internal Revenue Code. The Company's contributions
to these retirement plans were $3.1 million, $2.3 million and $1.6 million in
the years ended December 31, 2004, 2003 and 2002, respectively.
The Company also maintains a defined benefit pension plan for certain of
its hourly employees and provides certain postretirement medical and life
insurance benefits for a portion of its employees. In 2004, in connection with
the USPC Acquisition, the Company acquired both the plan assets and the benefit
obligation on a defined benefit plan that covers all eligible non-union
employees of USPC as well as the benefit obligation of a post retirement medical
and life insurance plan for USPC. Additionally, in 2003, in connection with the
Diamond
68
Acquisition, the Company acquired both the plan assets and the remaining benefit
obligation on two additional deferred benefit pension plans which are both
frozen.
The funding policy for the Company's defined benefit pension plans is based
on actuarial calculations and the applicable requirements of federal law.
Benefits under the Company's pension plans are primarily related to years of
service. The Company uses September 30 as the measurement date for all of its
defined pension plans and postretirement plans.
69
The components of net periodic pension and postretirement benefit expense
for the years ended December 31, 2004, 2003 and 2002 are as follows:
PENSION BENEFITS POSTRETIREMENT BENEFITS
--------------------------------------- ---------------------------------------
(thousands of dollars) 2004 2003 2002 2004 2003 2002
-------------- ----------- ---------- ------------- ------------ ----------
Components of net periodic benefit cost:
Service cost........................... $ 697 $ 304 $ 334 $ 168 $ 75 $ 72
Interest cost ......................... 2,158 1,419 973 339 194 119
Expected return on plan assets......... (2,175) (1,143) (975) - - -
Net amortization....................... 314 250 114 2 2 (7)
-------------- ----------- ---------- ------------- ------------ ----------
Net periodic benefit cost.............. $ 994 $ 830 $ 446 $ 509 $ 271 $ 184
============== =========== ========== ============= ============ ==========
The following table is a reconciliation of the projected benefit obligation
and the fair value of the deferred benefit pension plan assets and the status of
the Company's unfunded postretirement benefit obligation as of December 31:
PENSION BENEFITS POSTRETIREMENT BENEFITS
----------------------------- ------------------------------
(thousands of dollars) 2004 2003 2004 2003
-------------- -------------- -------------- ---------------
Change in benefit obligation:
Benefit obligation at beginning of year...... $ 21,872 $ 14,168 $ 3,300 $ 1,766
Service cost................................. 697 304 168 75
Interest cost................................ 2,158 1,419 339 194
Amendments................................... - 442 35 -
Actuarial loss (gain)........................ 754 1,317 (64) 1,461
Acquisition.................................. 29,049 5,177 4,783 -
Benefits paid................................ (2,199) (955) (324) (196)
-------------- -------------- -------------- ---------------
Benefit obligation at end of year............ 52,331 21,872 8,237 3,300
-------------- -------------- -------------- ---------------
Change in plan assets:
Fair value of plan assets at beginning of year 15,283 9,704 - -
Company contributions........................ 559 307 99 -
Participant contributions.................... - - 35 -
Actual return on plan assets................. 2,874 1,959 - -
Acquisition.................................. 19,782 4,268 - -
Benefits paid................................ (2,199) (955) (134) -
-------------- -------------- -------------- ---------------
Fair value of plan assets at end of year..... 36,299 15,283 - -
-------------- -------------- -------------- ---------------
Reconciliation of funded status:
Funded status................................ (16,032) (6,589) (8,237) (3,300)
Unrecognized prior service cost.............. 944 1,096 25 27
Unrecognized net loss (gain)................. 3,282 3,390 (447) (240)
-------------- -------------- -------------- ---------------
Net amount recognized........................ $ (11,806) $ (2,103) $ (8,659) $ (3,513)
============== ============== ============== ===============
70
Amounts recognized in the Company's Consolidated Balance Sheet consist of:
PENSION BENEFITS POSTRETIREMENT BENEFITS
------------------------------- ------------------------------
(thousands of dollars) 2004 2003 2004 2003
---------------- -------------- -------------- ---------------
Accrued benefit cost............................ $ (16,283) $ (6,043) $ (8,659) $ (3,513)
Intangible assets............................... 944 1,096 - -
Accumulated other comprehensive income.......... 3,533 2,894 - -
---------------- -------------- -------------- ---------------
Net amount recognized........................... $ (11,806) $ (2,103) $(8,659) $ (3,513)
================ ============== ============== ===============
The accumulated benefit obligation for the Company's defined benefit
pension plans was approximately $49.8 million and $21.2 million as of December
31, 2004 and 2003, respectively.
PENSION BENEFITS POSTRETIREMENT BENEFITS
------------------------------- ------------------------------
2004 2003 2004 2003
---------------- -------------- -------------- ---------------
Weighted-average assumptions as of December 31:
Discount rate..................................... 6.00% 6.50% 6.00% 6.50%
Expected return on plan assets.................... 8.53% 9.00% - -
The rate of compensation increase assumption is 3.25% to 4.25% for the USPC
pension plan and is not applicable to the Company's other pension plans. The
healthcare cost trend on covered charges for the USPC postretirement plan is 12%
in 2004 decreasing to an ultimate rate of 5.5%. For the Company's other
postretirement plan the healthcare cost trend is 11% for participants aged 64
and under and 8% for participants aged 65 and over, decreasing to an ultimate
rate of 6% for all participants.
The return on plan assets reflects the weighted-average of the long-term
rates of return for the broad categories of investments held in the Company's
defined benefit pension plans. The expected long-term rate of return is adjusted
when there are fundamental changes in expected returns on the Company's defined
benefit pension plan's investments.
The Company's investment strategy for its defined benefit pension plans is
to maximize the long-term rate of return on plans assets within an acceptable
level of risk in order to minimize the cost of providing pension benefits. The
Company's target asset range for 2005 as a percentage of market value is as
follows: equities - 50%-70% (and within equities: foreign stocks - 0%-20% and
small capitalized common stocks - 0%-40%); bonds - 30%-50% and cash and money
funds - 0%-10%. This target range was the same in 2004. As of the Company's 2004
and 2003 measurement dates, the percentage of fair value of total assets by
asset category was as follows:
2004 2003
------------- ------------
Asset category:
Equity securities and funds.................. 61.1% 58.4%
Debt securities and funds.................... 38.1 38.7
Other........................................ 0.8 2.9
------------- ------------
Total........................................ 100.0% 100.0%
============= ============
The Company's pension contributions for 2005 are estimated to be
approximately $2.1 million, reflecting quarterly contributions to certain plans
as required by the IRS Code Section 412 and certain voluntary contributions. The
Company's postretirement contributions for 2005 are estimated to be
approximately $0.2 million.
Information about the expected benefit payments for the Company's pension
and postretirement plans follows (in thousands):
71
POST
PENSION RETIREMENT
PLANS PLANS
YEAR ENDING DECEMBER 31, ---------------- --------------
2005 $ 2,656 $ 395
2006 2,752 419
2007 2,868 450
2008 3,013 471
2009 3,097 488
2010-2014 18,105 1,750
A one percentage point increase or one percentage point decrease in
healthcare costs would increase or decrease the benefit obligation under the
Company's postretirement plans by approximately $0.6 million or $0.5 million,
respectively. The effect of either a one percentage point increase or a one
percentage point decrease in health care costs would affect the aggregate annual
service and interest costs under the Company's postretirement plans by less than
$0.1 million.
11. EQUITY AND STOCK PLANS
On September 30, 2003, the Company completed a public offering ("Offering")
of approximately 4.8 million shares of its common stock at $24.67 per share. The
proceeds from the Offering, net of underwriting fees and related expenses,
totaled approximately $112.3 million. The net proceeds of the Offering were used
for a combination of general corporate purposes, acquisitions and debt
repayment.
The Company maintains the 2003 Stock Incentive Plan, which allows for
grants of stock options, restricted stock and stock bonuses. As of December 31,
2004, there were approximately 0.5 million shares available for grant under this
long-term equity incentive plan.
During 2002 and prior years, the Company granted stock options to key
employees and non-employee directors under the 2001 Stock Option Plan, the 1998
Long-Term Equity Incentive Plan, the 1993 Stock Option Plan and the 1993 and
1996 Stock Option Plans for Non-employee Directors. There are no remaining
shares available for grant under any of these plans.
A summary of the Company's stock option activity for the years ended
December 31, 2004, 2003 and 2002 is as follows:
WEIGHTED AVG.
SHARES OPTION PRICE PRICE RANGE
----------------- -------------------- --------------------
Outstanding as of December 31, 2001............... 2,768,917 $ 4.38 $ 3.65-$9.31
New options granted............................... 1,761,750 12.51 6.25-18.10
Exercised......................................... (2,057,624) 4.25 3.65-11.51
Canceled.......................................... (52,050) 10.11 3.65-11.51
----------------- -------------------- --------------------
Outstanding as of December 31, 2002............... 2,420,993 10.37 3.65-18.10
New options granted............................... 535,500 21.00 15.97-25.82
Exercised......................................... (280,143) 6.01 3.65-17.43
Canceled.......................................... (53,886) 12.38 4.33-19.20
----------------- -------------------- --------------------
Outstanding as of December 31, 2003............... 2,622,464 12.97 3.65-25.82
New options granted............................... 469,250 35.05 28.33-42.85
Exercised......................................... (302,297) 8.11 3.65-19.71
Canceled.......................................... (55,186) 13.54 4.33-25.82
----------------- -------------------- --------------------
Outstanding as of December 31, 2004............... 2,734,231 $ 17.28 $ 3.65-$42.85
================= ==================== ====================
Exercisable as of December 31, 2002............... 493,310 $ 5.03 $ 3.65-$9.31
Exercisable as of December 31, 2003............... 743,912 9.60 3.65-18.10
Exercisable as of December 31, 2004............... 1,020,873 12.11 3.65-25.82
72
Significant option groups outstanding at December 31, 2004 and related
weighted average price and life information follows:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------- -------------------
NUMBER WEIGHTED AVERAGE WEIGHTED AVERAGE NUMBER WEIGHTED AVERAGE
EXERCISE PRICE OUTSTANDING EXERCISE PRICE REMAINING LIFE (YEARS) EXERCISABLE EXERCISE PRICE
- ------------------- -------------- ------------------- ------------------------ ------------------ --------------------
$ 3.65 -$12.40.. 431,234 $ 6.94 6.57 254,612 $ 6.15
12.90........... 1,312,500 12.90 7.50 618,754 12.90
15.97 - 19.71... 362,497 18.85 8.47 132,819 18.47
21.45 - 32.10... 236,250 27.01 9.00 14,688 24.90
32.85 - 42.85... 391,750 36.01 9.68 - -
-------------- -----------------
2,734,231 1,020,873
============== =================
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.
Following the signing of the AHI transaction (see Note 19), 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 conjunction
with the AHI transaction, during October 2004, our 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 upon issuance. The Company records
non-cash compensation expense for its issued and outstanding restricted stock
either when the restrictions lapse or ratably over time, when the passage of
time is the only restriction. As such, the Company recorded a non-cash
compensation expense for all these restricted stock issuances and restriction
lapses of approximately $32.4 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, who was a consultant to the Company and
who is a brother of Mr. Martin E. Franklin, the Company's Chairman and Chief
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 its 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 is being 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.
During the fourth quarter of 2003, the Company recorded a non-cash
restricted stock charge of approximately $21.8 million related to the lapsing of
restrictions over all the restricted stock issuances to three of the Company's
executive officers, discussed immediately below.
During 2003, the Company issued an aggregate amount of 562,500 shares of
restricted stock to three of its executive officers, under its 2003 Stock
Incentive Plan. During 2003, all of these restricted stock issuances either
provided or were amended to provide that the restrictions lapsed upon the
earlier of (i) a change in control; or (ii) the earlier of our common stock
achieving a closing price of $28 (up from $23.33) or the Company achieving
annualized revenues of $800 million. However, if such restrictions were to lapse
during a period when these officers were subject to additional contractual
limitations on the sale of securities, the restrictions on such shares would
continue until the expiration or waiver of such additional contractual
limitations. As discussed above, during the fourth quarter of 2003, all such
restrictions lapsed which resulted in a restricted stock charge.
During 2002, the Company issued an aggregate of 210,000 shares of
restricted stock to two of its executive officers, under its 1998 Long-Term
Equity Incentive Plan, as amended and restated. During 2003, the restricted
stock issuances were amended to provide that the restrictions would lapse upon
the same terms as the 2003 restricted stock issuances discussed above. Also, as
discussed above, during the fourth quarter of 2003 all such restrictions lapsed
and the Company recorded a restricted stock charge.
73
During 2004, 2003 and 2002, the Company also issued 70,080 ("2004 Shares"),
7,200 and 5,250 shares, respectively, of restricted stock to certain other
officers and employees. The restrictions on 26,750 of the 2004 Shares and the
restrictions on all of the shares issued in 2003 and 2002 lapse ratably over
five years of employment with the Company. The restrictions on 43,330 of the
2004 Shares will lapse upon the latter of either the Company's stock price
achieving a volume weighted average of $64 per share for ten consecutive
business days or November 1, 2008.
The Company issued all of the restricted shares discussed above out of its
treasury account.
During 2002, common stock in the aggregate amount of 45,009 shares, were
issued to certain other officers of the Company under its 1998 Performance Share
Plan. In connection with these stock issuances, the Company recorded a non-cash
compensation expense charge of approximately $0.6 million.
In February 2003, the Company adopted the 2003 Employee Stock Purchase Plan
whereby stock of the Company can be acquired at a 15% discount and no
compensation charge is recorded by the Company. Prior to this, the Company
maintained another employee stock purchase plan whereby the Company matched 20%
of each participating employee's monthly payroll deduction, up to $500. The
Company thereby contributed $0.1 million to the plan in 2002. As of December 31,
2004, there were approximately 0.4 million shares available for grant under the
2003 Employee Stock Purchase Plan.
12. LEASE COMMITMENTS
The Company has commitments under operating leases, certain of which extend
through 2013. These commitments total $6.7 million in 2005, $4.8 million in
2006, $2.5 million in 2007, $1.2 million in 2008, $1.0 million in 2009 and $3.7
million thereafter. Total lease expense was $7.4 million, $7.4 million and $5.1
million in 2004, 2003 and 2002, respectively.
13. CONTINGENCIES
The Company is involved in various legal disputes and other legal
proceedings that arise from time to time 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.
14. EXECUTIVE LOAN PROGRAM
On January 24, 2002, two executive officers of the Company exercised
900,000 and 450,000 non-qualified stock options, respectively, which had been
granted under the Company's 2001 Stock Option Plan. The Company issued these
shares out of its treasury stock account. The exercises were accomplished via
loans from the Company under its Executive Loan Program. The principal amounts
of the loans were $3.3 million and $1.6 million, respectively, and bore interest
at 4.125% per annum. The loans were due on January 23, 2007 and were classified
within the stockholders' equity section. The loans could be repaid in cash,
shares of the Company's common stock, or a combination thereof. In February
2003, one of the executive officers surrendered to the Company shares of the
Company's stock to repay $0.3 million of his loan. On April 29, 2003, the two
executive officers each surrendered to the Company shares of the Company's
common stock to repay in full all remaining principal amounts and accrued
interest owed under their respective loans. The Company will not make any
additional loans under the Executive Loan Program.
74
15. DERIVATIVE FINANCIAL INSTRUMENTS
The Company actively manages its fixed and floating rate debt mix using
interest rate swaps. The Company will enter into fixed and floating rate swaps
to alter its exposure to the impact of changing interest rates on its
consolidated results of operations and future cash outflows for interest.
Floating rate swaps are used to convert the fixed rates of long-term debt into
short-term variable rates to take advantage of current market conditions. Fixed
rate swaps are used to reduce the Company's risk of the possibility of increased
interest costs. Interest rate swap contracts are therefore used by the Company
to separate interest rate risk management from the debt funding decision.
At December 31, 2004, the interest rate on approximately 15% of the
Company's debt obligation, excluding the $3.2 million of non-debt balances
discussed in Note 8, was fixed by either the nature of the obligation or through
interest rate swap contracts. In anticipation of the AHI Acquisition debt
financing (see Note 19), the Company entered into two fixed rate swap contracts
in December 2004 (see "Cash Flow Hedges" below), effective January 4, 2005,
resulting in a fixed interest ratio percentage of approximately 77%, based on
the debt balance at December 31, 2004.
Fair Value Hedges
On May 6, 2003, the Company entered into a $30 million interest rate swap
("New Swap") to receive a fixed rate of interest and pay a variable rate of
interest based upon 6 month LIBOR in arrears, plus a spread of 523 basis points.
The New Swap is a swap against the Notes.
In March 2003, the Company unwound a $75 million interest rate swap ("First
Replacement Swap") to receive a fixed rate of interest and pay a variable rate
of interest and contemporaneously entered into a new $75 million interest rate
swap ("Second Replacement Swap"). Like the swap that it replaced, the Second
Replacement Swap is a swap against the Notes. The variable rate of interest is
based on six-month LIBOR in arrears, plus a spread of 528 basis points. In
return for unwinding the swap, the Company received $3.2 million of cash
proceeds. Of this amount, approximately $1 million of proceeds related to
accrued interest that was owed to the Company at such time. The remaining $2.2
million of proceeds is being amortized over the remaining life of the Notes as a
credit to interest expense and the unamortized balances are included in the
Company's Consolidated Balance Sheet as an increase to the value of the
long-term debt.
Effective September 12, 2002, the Company entered into an agreement,
whereby it unwound a $75 million interest rate swap ("Initial Swap") and
contemporaneously entered into the First Replacement Swap. The First Replacement
Swap had the same terms as the Initial Swap, except that the Company was
required to pay a variable rate of interest based upon 6 month LIBOR in arrears.
The spread on this contract was 470 basis points. In return for unwinding the
Initial Swap, the Company received $5.4 million in cash proceeds, of which $1
million related to accrued interest that was owed to it. The remaining $4.4
million of proceeds is being amortized over the remaining life of the Notes as a
credit to interest expense and is included in the Company's Consolidated Balance
Sheet as an increase to the value of the long-term debt. Such amortization
amount offsets the increased effective rate of interest that the Company pays on
the Second Replacement Swap.
In conjunction with the Notes, on April 24, 2002, we entered into the
Initial Swap, to receive a fixed rate of interest and pay a variable rate of
interest based upon LIBOR. The Initial Swap had a maturity date that was the
same as the Notes. Interest was payable semi-annually in arrears on May 1 and
November 1, commencing on November 1, 2002. The initial effective rate of
interest that we established on this swap was 6.05%.
The New Swap and Second Replacement Swap have been and, where applicable,
are considered to be effective hedges against changes in the fair value of our
fixed-rate debt obligation for both tax and accounting purposes. Accordingly,
the interest rate swap contracts are reflected at fair value in the Company's
Consolidated Balance Sheet and the related portion of fixed-rate debt being
hedged is reflected at an amount equal to the sum of its carrying value plus an
adjustment representing the change in fair value of the debt obligations
attributable to the interest rate risk being hedged. The fair market value of
these interest rate swaps as of December 31, 2004 was unfavorable in an amount
of approximately $2.0 million and is included as a long-term liability in the
Consolidated Balance Sheet, with a corresponding offset to long-term debt. In
addition, changes during any accounting period in the fair value of the interest
rate swaps, as well as offsetting changes in the adjusted carrying
75
value of the related portion of fixed-rate debt being hedged, will be recognized
as adjustments to interest expense in the Company's Consolidated Statements of
Income. The net effect of this accounting on the Company's operating results is
that interest expense on the portion of fixed-rate debt being hedged is
generally recorded based on variable interest rates. The Company is exposed to
credit loss, in the event of non-performance by the other party to its current
existing swap, a large financial institution. However, the Company does not
anticipate non-performance by the other party.
Cash Flow Hedges
In December 2004, the Company entered into two interest rate swaps,
effective in January 2005, that converted an aggregate of $300 million of
floating rate interest payments (excluding the Company's 2% applicable margin)
under its term loan facility for a fixed obligation. The first interest rate
swap, for $150 million of notional value, carries a fixed interest rate of
3.625% per annum for a term of three years. The second interest rate swap, also
for $150 million of notional value, carries a fixed interest rate of 4.0675% per
annum for a term of five years. The swaps have interest payment dates that are
the same as the term loan facilities. The swaps are considered to be cash flow
hedges and are also considered to be effective hedges against changes in future
interest payments of the Company's floating-rate debt obligations for both tax
and accounting purposes. Gains and losses related to the effective portion of
the interest rate swap will be reported as a component of other comprehensive
income and will be reclassified into earnings in the same period that the hedged
transaction affects earnings. As of December 31, 2004, the fair value of these
interest rate swaps, which was unfavorable in an amount of approximately $0.5
million, is included as an unrealized loss in Accumulated Other Comprehensive
Income on the Company's Consolidated Balance Sheet.
On September 30, 2004, the Company's previous interest rate swap matured.
That swap was effective on April 2, 2003 and converted the floating rate
interest payments of $37 million of term loan debt for a fixed obligation that
carried an interest rate, including applicable margin, of 4.25% per annum. The
swap had interest payment dates that were the same as the term loan facility.
The swap was considered to be a cash flow hedge and was also considered to be an
effective hedge against changes in the interest payments of the Company's
floating-rate debt obligation for both tax and accounting purposes. Gains and
losses related to the effective portion of the interest rate swap were reported
as a component of other comprehensive income and were reclassified into earnings
in the same period that the hedged transaction affects earnings.
The Company's derivative activities do not create additional risk because
gains and losses on derivative contracts offset gains and losses on the assets,
liabilities and transactions being hedged. As derivative contracts are
initiated, the Company designates the instruments individually as either a fair
value hedge or a cash flow hedge. Management reviews the correlation and
effectiveness of its derivatives on a periodic basis.
16. RELATED PARTY TRANSACTIONS
On July 27, 2004, the agreement between one of the 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 the 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. The Company's consumer
solutions segment now uses a different third party provider for these services.
76
17. EARNINGS PER SHARE
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:
YEARS ENDED DECEMBER 31,
-------------------------------------------
(thousands, except per share amounts) 2004 2003 2002
--------------- -------------- -----------
Net income.............................................................. $ 42,434 $ 31,778 $ 36,309
=============== ============== ===========
Weighted average shares outstanding..................................... 27,353 22,663 20,910
Additional shares assuming conversion of stock options and
restricted stock................................................... 1,102 868 678
--------------- -------------- -----------
Weighted average shares outstanding assuming conversion................. 28,455 23,531 21,588
=============== ============== ===========
Basic earnings per share................................................ $ 1.55 $ 1.40 $ 1.74
Diluted earnings per share.............................................. $ 1.49 $ 1.35 $ 1.68
18. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
Summarized quarterly results of operations for 2004 and 2003 were as
follows (see Note 3 for a discussion of the Company's acquisitions that occurred
during this period):
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL
(thousands of dollars, except per share amounts) ------------- -------------- --------------- ------------- -------------
2004
- ----
Net sales................................... $158,324 $199,035 $244,580 $236,670 $838,609
Gross profit................................ 48,382 64,158 85,073 77,786 275,399
Net income (loss) (1)....................... 7,512 16,047 22,279 (3,404) 42,434
Basic earnings (loss) per share (2)......... 0.28 0.59 0.82 (0.12) 1.55
Diluted earnings (loss) per share (2)....... 0.27 0.57 0.79 (0.12) 1.49
2003
- ----
Net sales (3)............................... $ 97,445 $ 130,770 $167,962 $ 191,480 $587,657
Gross profit (3)............................ 35,809 46,055 63,163 68,016 213,043
Net income (4).............................. 4,231 9,951 15,246 2,350 31,778
Basic earnings per share (2)................ 0.20 0.47 0.71 0.09 1.40
Diluted earnings per share (2).............. 0.19 0.45 0.69 0.09 1.35
(1) Fourth quarter of 2004, includes a non-cash restricted stock charge of $32.4
million and related tax benefit.
(2) Earnings per share calculations for each
quarter are based on the weighted average number of shares outstanding for each
period, and the sum of the quarterly amounts may not necessarily equal the
annual earnings per share amounts.
(3) Certain reclassifications have been made in the Company's previously
reported net sales and gross profit amounts in 2003 to conform to the
presentation in 2004. These reclassifications have no impact on previously
reported net income.
(4) Fourth quarter of 2003, includes a non-cash restricted stock charge of $21.8
million and related tax benefit.
77
19. SUBSEQUENT EVENTS (UNAUDITED)
On January 24, 2005, the Company completed its acquisition of AHI, a
privately held company, for approximately $745.6 million in cash for the equity
and the repayment of approximately $100 million of indebtedness. AHI is the
parent of The Coleman Company, Inc. ("Coleman") and Sunbeam Products, Inc.
("SPI"), leading producers of global consumer products through brands such as
BRK(R), Campingaz(R), Coleman(R), First Alert(R), Health o meter(R), Mr.
Coffee(R), Oster(R) and Sunbeam(R). Product lines added include appliances,
personal care and wellness, home safety equipment and outdoor leisure and
camping products. Had AHI been a part of the Company from January 1, 2004, the
unaudited pro forma consolidated net sales of the Company (including the pro
forma effect of the USPC Acquisition) (see Note 4) would have been $2.7 billion.
The SPI business will be integrated within the Company's existing consumer
solutions segment in 2005 and the Coleman business will form a new segment of
the Company called "outdoor solutions".
In connection with the AHI Acquisition, the Company issued $350 million of
equity securities pursuant to a purchase agreement ("Equity Purchase
Agreement"). The securities issued were as follows:
(iv) 714,286 shares of the Company's common stock for approximately
$21.4 million at a price of $30 per share;
(v) 128,571 shares or approximately $128.6 million 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
(vi) 200,000 shares or approximately $200 million 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.
In accordance with the Equity Purchase Agreement and a related Assignment
and Joinder Agreement, approximately $300 million of the Company's equity
securities were issued to Warburg Pincus Private Equity VIII, LP and its
affiliates and approximately $50 million were issued to Catterton Partners V, LP
and its affiliates, both private equity investors (collectively "Private Equity
Investors"). The cash raised in connection with the Equity Purchase Agreement
was used to fund a portion of the cash purchase price of AHI.
The terms of the Equity Purchase Agreement require 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 total new equity of the
Company issued to the Private Equity Investors will consist of $300 million of
Series B Preferred Stock and 1,666,667 shares of common stock valued at $50
million, without taking into effect any other conversion, market value increases
or the accrual of dividends.
Additionally, the AHI Acquisition was also funded through a new $1.05
billion senior credit 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 $200 million. This facility replaces the Company's
Second Amended Credit Agreement (see Note 8 for details of the debt balances at
December 31, 2004).
On January 24, 2005, the Company entered into two interest rate swaps,
effective on January 26, 2005, that converted an aggregate of $125 million of
floating rate interest payments (excluding our 2% applicable margin) under its
term loan facility for a fixed obligation. Both interest rate swaps carry a
fixed interest rate of 4.025% per annum for a term of five years. The swaps have
interest payment dates that are the same as the term loan facility. The swaps
are considered to be cash flow hedges and are also considered to be effective
hedges against changes in future interest payments of the Company's
floating-rate debt obligation for both tax and accounting purposes. Gains and
losses related to the effective portion of the interest rate swap will be
reported as a component of other comprehensive income and will be reclassified
into earnings in the same period that the hedged transaction affects earnings.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
78
ITEM 9A. CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
The Company's management carried out an evaluation, under the supervision
and with the participation of the Company's Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures (as such term is defined in Rules
13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the "Exchange
Act") as of December 31, 2004, pursuant to Exchange Act Rule 13a-15. Based upon
that evaluation, the Company's Chief Executive Officer and Chief Financial
Officer concluded that the Company's disclosure controls and procedures were
effective as of December 31, 2004.
MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management of the Company is responsible for establishing and maintaining
adequate internal control over financial reporting as defined in Rules 13a-15(f)
and 15d-15(f) under the Exchange Act. The Company's internal control over
financial reporting is designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with accounting principles generally
accepted in the United States of America ("GAAP"). The Company's internal
control over financial reporting includes those policies and procedures that:
o pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of
the Company;
o provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with GAAP,
and that receipts and expenditures of the Company are being made only in
accordance with authorizations of management and directors of the Company; and
o provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use or disposition of the Company's assets that
could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.
As required by Section 404 of the Sarbanes-Oxley Act of 2002, management
assessed the effectiveness of the Company's internal control over financial
reporting as of December 31, 2004. In making this assessment, management used
the criteria set forth by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO) in Internal Control-Integrated Framework.
Based on our assessment and those criteria, management concluded that the
Company maintained effective internal control over financial reporting as of
December 31, 2004.
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 (collectively "USPC"), and
acquired the remaining 24.6% pursuant to a put/call agreement on October 4,
2004. The Company has excluded from its assessment of and conclusion on the
effectiveness of internal control over financial reporting, USPC's internal
controls over financial reporting. For the year ended December 31, 2004, USPC
accounted for 10.5% of the Company's total net sales. As of December 31, 2004,
USPC accounted for 7.5% of the Company's total assets, excluding $225.3 million
of goodwill and other intangible asset amounts that were recorded in connection
with the acquisition of USPC.
Our management's assessment of the effectiveness of our internal control
over financial reporting as of December 31, 2004 has been audited by Ernst &
Young LLP, an independent registered public accounting firm, as stated in their
report which is included elsewhere herein.
79
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
During the quarter that ended on the Evaluation Date, there was no change
in internal controls over financial reporting (as defined in Rules 13a-15(f) and
15d-15(f) under the Exchange Act) that materially affected, or is reasonably
likely to materially affect, the Company's internal control over financial
reporting.
ITEM 9B. OTHER INFORMATION
Not Applicable.
80
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding executive officers is included in Part I of this Form
10-K as permitted by General Instruction G(3).
Jarden Corporation has adopted a "Business Conduct and Ethics Policy"
("Code") for all its employees, including its principal executive officer,
principal financial officer and principal accounting officer. The Code is
available on our Internet web site at http://www.jarden.com, at the tab
"Governance".
Other information required by Item 10, including information regarding
directors, membership and function of the audit committee, including the
financial expertise of its members, and Section 16(a) compliance, appearing
under the captions "Election of Directors", "Information Regarding Board of
Directors" and "Other Matters" of the Company's Proxy Statement for the 2005
Annual Meeting of Stockholders is incorporated herein by reference. The Company
will file its Proxy Statement with the Commission not later than 120 days after
December 31, 2004.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 appearing under the caption "Executive
Compensation" of the Company's Proxy Statement for the 2005 Annual Meeting of
Stockholders is incorporated herein by reference. The Company will file its
Proxy Statement with the Commission not later than 120 days after December 31,
2004.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 12 appearing under the captions
"Executive Compensation" and "Security Ownership of Certain Beneficial Owners
and Management" of the Company's Proxy Statement for the 2005 Annual Meeting of
Stockholders is incorporated herein by reference. The Company will file its
Proxy Statement with the Commission not later than 120 days after December 31,
2004.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 13 appearing under the caption "Certain
Relationships and Related Transactions" of the Company's Proxy Statement for the
2005 Annual Meeting of Stockholders is incorporated herein by reference. The
Company will file its Proxy Statement with the Commission not later than 120
days after December 31, 2004.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by Item 14 appearing under the caption
"Ratification of the Appointment of Independent Registered Public Accounting
Firm - Fees Paid to Ernst & Young LLP" of the Company's Proxy Statement for the
2005 Annual Meeting of Stockholders is incorporated by reference. The Company
will file its Proxy Statement with the Commission not later than 120 days after
December 31, 2004.
81
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
The following documents are filed as part of this report:
(1) Financial Statements:
Location
In Form 10-K
--------------------
Reports of independent registered public accounting firm Item 8
Consolidated statements of income - Years ended December 31, 2004, 2003
and 2002 Item 8
Consolidated balance sheets - December 31, 2004 and 2003 Item 8
Consolidated statements of cash flows - Years ended December 31, 2004,
2003 and 2002 Item 8
Consolidated statements of changes in stockholders' equity - Years ended
December 31, 2004, 2003 and 2002 Item 8
Consolidated statements of comprehensive income - Years ended December
31, 2004, 2003 and 2002 Item 8
Notes to consolidated financial statements Item 8
(2) Financial Statement Schedule:
See Schedule II of this Form 10-K.
(3) Exhibits:
Copies of exhibits incorporated by reference can be obtained from the
Commission and are located in Commission File No. 0-12052.
Exhibit
Number Description of Exhibit
- -------- -----------------------------------------------------------------
2.1 Agreement and Plan of Merger between the Company and Alltrista
Reincorporation MergerSub, Inc. (filed as Exhibit A to the
Company's Definitive Proxy Statement, filed with the Commission
on November 26, 2001, and incorporated herein by reference).
2.2 Asset Purchase Agreement, dated as of March 27, 2002, among
Alltrista, Tilia International, Inc., Tilia, Inc., Tilia Canada,
Inc., and Andrew Schilling (filed as Exhibit 10.6 to the
Company's Current Report on Form 8-K, filed with the Commission
on May 9, 2002, and incorporated herein by reference).
2.3 Amendment No. 1 to the Asset Purchase Agreement, dated as of
April 24, 2002, among Alltrista, Tilia International, Inc.,
Tilia, Inc., Tilia Canada, Inc., and Andrew Schilling (filed as
Exhibit 10.7 to the Company's Current Report on Form 8-K, filed
with the Commission on May 9, 2002, and incorporated herein by
reference).
82
2.4 Asset Purchase Agreement, dated as of November 27, 2002, by and
among the Company, Diamond Brands, Incorporated, Diamond Brands
Operating Corp., Forster, Inc. and Diamond Brands Kansas, Inc.
(filed as Exhibit 10.1 to the Company's Current Report on Form
8-K, filed with the Commission on February 14, 2003, and
incorporated herein by reference).
2.5 Section entitled "Technical Modification to Joint Plan of
Reorganization" from the Findings of Fact, Conclusions of Law and
Order Confirming Joint Plan of Reorganization of Diamond Brands
Operating Corp. and its Debtor Affiliates Proposed by the Debtors
and the Company by the Honorable Randall J. Newsome on January
29, 2003, in connection with case No. 01-1825 (RJN), a Chapter 11
case captioned "In re: Diamond Brands Operating Corp., et al.,
Debtors" filed in the United States Bankruptcy Court for the
District of Delaware (filed as Exhibit 99.1 to the Company's
Current Report on Form 8-K, filed with the Commission on February
14, 2003, and incorporated herein by reference).
2.6 Stock Purchase Agreement dated as of August 15, 2003, by and
among the Company, American Manufacturing Company, Inc., and
Lehigh Consumer Products Corporation (filed as Exhibit 10.1 to
the Company's Current Report on Form 8-K, filed with the
Commission on September 5, 2003, and incorporated herein by
reference).
2.7 Securities Purchase Agreement, dated as of February 24, 2004, by
and among Bicycle Holding, Inc., the Sellers identified therein,
Dudley S. Taft, as the Seller Representative, and the Company
(filed as Exhibit 2.7 Company's Annual Report on Form 10-K, filed
with the Commission on March 12, 2004, and incorporated herein by
reference).
2.8 Put and Call Agreement, dated as of February 24, 2004, by and
among the shareholders of Bicycle Holding, Inc. that are
signatories thereto and the Company (filed as Exhibit 2.8
Company's Annual Report on Form 10-K, filed with the Commission
on March 12, 2004, and incorporated herein by reference).
2.9 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 Current Report on Form 8-K, filed with the
Commission on September 23, 2004, and incorporated herein by
reference).
2.10 Purchase Agreement, dated as of September 19, 2004, between
Jarden Corporation and Warburg Pincus Private Equity VIII, L.P.
(filed as Exhibit 10.2 to the Company's Current Report on Form
8-K, filed with the Commission on September 23, 2004, and
incorporated herein by reference).
3.1 Restated Certificate of Incorporation of the Company (filed as
Exhibit 3.1 to the Company's Annual Report on Form 10-K, filed
with the Commission on March 27, 2002, and incorporated herein by
reference).
3.2 Certificate of Amendment of Restated Certificate of Incorporation
of the Company (filed as Exhibit 3.2 to the Company's Current
Report on Form 8-K, filed with the Commission on June 4, 2002,
and incorporated herein by reference).
83
3.3 Certificate of Designations, Preferences and Rights of Series B
Convertible Participating Preferred Stock of Jarden Corporation
and the Certificate of Correction thereto (filed as Exhibit 3.1
to the Company's Current Report on Form 8-K, filed with the
Commission on January 27, 2005, and incorporated herein by
reference).
3.4 Certificate of Designations, Preferences and Rights of Series C
Mandatory Convertible Participating Preferred Stock of Jarden
Corporation and the Certificate of Correction thereto (filed as
Exhibit 3.2 to the Company's Current Report on Form 8-K, filed
with the Commission on January 27, 2005, and incorporated herein
by reference).
3.5 Bylaws of the Company (filed as Exhibit C to the Company's
Definitive Proxy Statement, filed with the Commission on November
26, 2001, and incorporated herein by reference).
4.1 Indenture, dated as of April 24, 2002 (the "April 2002
Indenture"), among the Company, Alltrista Newco Corporation,
Alltrista Plastics Corporation, Alltrista Unimark, Inc.,
Alltrista Zinc Products, L.P., Caspers Tin Plate Company,
Hearthmark, Inc., Lafayette Steel & Aluminum Corporation, LumenX
Corporation, Penn Video, Inc., Quoin Corporation, Tilia, Inc.,
Tilia Direct, Inc., Tilia International, Inc., TriEnda
Corporation, Unimark Plastics, Inc., and The Bank of New York, as
trustee, and form of Old Note attached as Exhibit A thereto
(filed as Exhibit 4.1 to the Company's Current Report on Form
8-K, filed with the Commission on May 9, 2002, and incorporated
herein by reference).
4.2 First Supplemental Indenture to the April 2002 Indenture, dated
as of May 7, 2003, among the Company, the guarantors named
therein and The Bank of New York, as trustee, and form of note
attached as Exhibit A thereto, (filed as Exhibit 4.1 to the
Company's Current Report on Form 8-K, filed with the Commission
on September 26, 2003, and incorporated herein by reference).
4.3 Second Supplemental Indenture to the April 2002 Indenture, dated
as of May 28, 2003, among the Company, the guarantors named
therein and The Bank of New York, as trustee (filed as Exhibit
4.2 to the Company's Current Report on Form 8-K, filed with the
Commission on September 26, 2003, and incorporated herein by
reference).
4.4 Third Supplemental Indenture to the April 2002 Indenture, dated
as of September 25, 2003, among the Company, the guarantors named
therein and The Bank of New York, as trustee (filed as Exhibit
4.3 to the Company's Current Report on Form 8-K, filed with the
Commission on September 26, 2003, and incorporated herein by
reference).
4.5 Fourth Supplemental Indenture to the April 2002 Indenture, dated
as of April 16, 2004, among the Company, the guarantors named
therein and The Bank of New York, as trustee (filed as Exhibit
4.1 to the Company's Quarterly Report on Form 10-Q for the period
ended June 30, 2004 filed with the Commission on August 9, 2004,
and incorporated herein by reference).
4.6 Fifth Supplemental Indenture to the April 2002 Indenture, dated
as of July 23, 2004, among the Company, the guarantors named
therein and The Bank of New York, as trustee (filed as Exhibit
4.2 to the Company's Quarterly Report on Form 10-Q for the period
ended June 30, 2004 filed with the Commission on August 9, 2004,
and incorporated herein by reference).
84
*4.7 Sixth Supplemental Indenture to the April 2002 Indenture, dated
as of February 24, 2005, among the Company, the guarantors named
therein and The Bank of New York, as trustee.
4.8 Registration Rights Agreement, dated as of September 2, 2003,
among the Company, American Manufacturing Company, Inc., and the
Holders named therein (filed as Exhibit 10.2 to the Company's
Current Report on Form 8-K, filed with the Commission on
September 5, 2003, and incorporated herein by reference).
4.9 Form of Subsidiary Guarantee in connection with the exchange of
notes under the April 2002 Indenture (filed as Exhibit 4.12 to
the Company's Form S-4 Registration Statement filed the
Commission on October 1, 2003, and incorporated herein by
reference).
+10.1 Form of Change of Control Agreement (filed as Exhibit 10.6 to the
Company's Annual Report on Form 10-K, filed with the Commission
on March 29, 1999, and incorporated herein by reference).
+10.2 Form of Amendment to Change of Control Agreement, effective June
21, 2001 (filed as Exhibit 10.16 to the Company's Report on Form
10-Q, filed with the Commission on August 10, 2001, and
incorporated herein by reference).
+10.3 List of the Company's officer's party to Exhibit 10.1 and Exhibit
10.2 (filed as Exhibit 10.7 to the Company's Annual Report on
Form 10-K/A, filed with the Commission on October 17, 2002, and
incorporated herein by reference).
10.4 Form of Distribution Agreement between Ball Corporation and the
Company (filed as Exhibit 10.7 to the Company's Registration
Statement on Form 10, filed with the Commission on March 17,
1993, and incorporated herein by reference).
10.5 Form of Tax Sharing and Indemnification Agreement between Ball
Corporation and the Company (filed as Exhibit 10.10 to the
Company's Registration Statement on Form 10, filed with the
Commission on March 17, 1993, and incorporated herein by
reference).
+10.6 Form of Indemnification Agreement (filed as Exhibit 10.13 to the
Company's Registration Statement on Form 10, filed with the
Commission on March 17, 1993, and incorporated herein by
reference).
+10.7 List of Directors and Executive Officers party to Exhibit 10.6
(filed as Exhibit 10.10 to the Company's Annual Report on Form
10-K, filed with the Commission on March 31, 1996, and
incorporated herein by reference).
+10.8 Alltrista Corporation 1998 Long Term Equity Incentive Plan, as
amended and restated (filed as Exhibit 10.13 to the Company's
Quarterly Report on Form 10-Q/A for the period ended June 30,
2002, filed with the Commission on October 17, 2002, and
incorporated herein by reference).
+10.9 Alltrista Corporation 2001 Stock Option Plan (filed as Exhibit
10.6 to the Company's Quarterly Report on Form 10-Q, filed with
the Commission on November 14, 2001, and incorporated herein by
reference).
+10.10 Amendment No. 1 to the Alltrista Corporation 2001 Stock Option
Plan (filed as Exhibit 10.15 to the Company's Quarterly Report on
Form 10-Q/A for the period ended June 30, 2002, filed with the
Commission on October 17, 2002, and incorporated herein by
reference).
85
+10.11 Second Amended and Restated Employment Agreement, dated as of
January 24, 2005, between the Company and Martin E. Franklin
(filed as Exhibit 10.4 to the Company's Current Report on Form
8-K, filed with the Commission on January 27, 2005, and
incorporated herein by reference).
+10.12 Second Amended and Restated Employment Agreement, dated as of
January 24, 2005, between the Company and Ian G.H. Ashken (filed
as Exhibit 10.5 to the Company's Current Report on Form 8-K,
filed with the Commission on January 27, 2005, and incorporated
herein by reference).
+10.13 Employment Agreement between the Company and J. David Tolbert,
effective January 1, 2002 (filed as Exhibit 10.36 to the
Company's Annual Report on Form 10-K/A, filed with the Commission
on October 17, 2002, and incorporated herein by reference).
+10.14 Amended and Restated Employment Agreement between the Company and
James E. Lillie, effective January 24, 2005 (filed as Exhibit
10.6 to the Company's Current Report on Form 8-K, filed with the
Commission on January 27, 2005, and incorporated herein by
reference).
+10.15 Employment Agreement, dated as of May 3, 2003, between the
Company and Desiree DeStefano (filed as Exhibit 10.4 to the
Company's Quarterly Report on Form 10-Q for the period ended
March 31, 2004 filed with the Commission on May 7, 2004, and
incorporated herein by reference).
+10.16 Restricted Stock Award Agreement, dated January 2, 2002, between
the Company and Martin E. Franklin (filed as Exhibit 10.18 to the
Company's Quarterly Report on Form 10-Q/A for the period ended
June 30, 2002, filed with the Commission on October 17, 2002 and
incorporated herein by reference).
+10.17 Amendment No. 1, dated as of February 7, 2002, to Restricted
Stock Award Agreement, dated January 2, 2002, between the Company
and Martin E. Franklin (filed as Exhibit 10.19 to the Company's
Quarterly Report on Form 10-Q/A for the period ended June 30,
2002, filed with the Commission on October 17, 2002, and
incorporated herein by reference).
+10.18 Amendment No. 2, dated as of April 15, 2002, to Restricted Stock
Award Agreement, dated January 2, 2002, between the Company and
Martin E. Franklin (filed as Exhibit 10.20 to the Company's
Quarterly Report on Form 10-Q/A for the period ended June 30,
2002, filed with the Commission on October 17, 2002, and
incorporated herein by reference).
+10.19 Amendment No. 3, dated as of July 15, 2002, to Restricted Stock
Award Agreement dated January 2, 2002 between the Company and
Martin E. Franklin (filed as Exhibit 10.21 to the Company's
Quarterly Report on Form 10-Q/A for the period ended June 30,
2002, filed with the Commission on October 17, 2002, and
incorporated herein by reference).
+10.20 Amendment No. 4, dated as of September 4, 2003, to Restricted
Stock Award Agreement dated January 2, 2002 between the Company
and Martin E. Franklin (filed as Exhibit 10.7 to the Company's
Current Report on Form 8-K, filed with the Commission on
September 26, 2003, and incorporated herein by reference).
+10.21 Amendment No. 5, dated as of October 2, 2003, to Restricted Stock
Award Agreement dated January 2, 2002 between the Company and
Martin E. Franklin (filed as Exhibit 10.4 to the Company's
Current Report on Form 8-K, filed with the Commission on October
27, 2003, and incorporated herein by reference).
86
+10.22 Amendment No. 6, dated as of October 31, 2003, to the Restricted
Stock Award Agreement, dated January 2, 2002, between the Company
and Martin E. Franklin (filed as Exhibit 10.13 to the Company's
Quarterly Report on Form 10-Q for the period ended September 30,
2003, filed with the Commission on November 14, 2003, and
incorporated herein by reference).
+10.23 Restricted Stock Award Agreement, dated as of May 8, 2003,
between the Company and Martin E. Franklin (filed as Exhibit 10.1
to the Company's Current Report on Form 8-K, filed with the
Commission on September 26, 2003, and incorporated herein by
reference).
+10.24 Amendment No. 1, dated as of September 4, 2003, to the Restricted
Stock Award Agreement, dated as of May 8, 2003, between the
Company and Martin E. Franklin. (filed as Exhibit 10.2 to the
Company's Current Report on Form 8-K, filed with the Commission
on September 26, 2003, and incorporated herein by reference).
+10.25 Amendment No. 2, dated as of October 2, 2003, to the Restricted
Stock Award Agreement, dated as of May 8, 2003, between the
Company and Martin E. Franklin (filed as Exhibit 10.5 to the
Company's Current Report on Form 8-K, filed with the Commission
on October 27, 2003, and incorporated herein by reference).
+10.26 Amendment No. 3, dated as of October 31, 2003, to the Restricted
Stock Award Agreement, dated as of May 8, 2003, between the
Company and Martin E. Franklin (filed as Exhibit 10.15 to the
Company's Quarterly Report on Form 10-Q for the period ended
September 30, 2003, filed with the Commission on November 14,
2003, and incorporated herein by reference).
+10.27 Restricted Stock Award Agreement, dated January 2, 2002, between
the Company and Ian G.H. Ashken (filed as Exhibit 10.22 to the
Company's Quarterly Report on Form 10-Q/A for the period ended
June 30, 2002, filed with the Commission on October 17, 2002, and
incorporated herein by reference).
+10.28 Amendment No. 1, dated as of February 7, 2003, to Restricted
Stock Award Agreement, dated January 2, 2002, between the Company
and Ian G.H. Ashken (filed as Exhibit 10.23 to the Company's
Quarterly Report on Form 10-Q/A for the period ended June 30,
2002, filed with the Commission on October 17, 2002, and
incorporated herein by reference).
+10.29 Amendment No. 2, dated as of April 15, 2002, to Restricted Stock
Award Agreement, dated January 2, 2002, between the Company and
Ian G.H. Ashken (filed as Exhibit 10.24 to the Company's
Quarterly Report on Form 10-Q/A for the period ended June 30,
2002, filed with the Commission on October 17, 2002, and
incorporated herein by reference).
+10.30 Amendment No. 3, dated as of July 25, 2002, to Restricted Stock
Award Agreement dated January 2, 2002 between the Company and Ian
G.H. Ashken (filed as Exhibit 10.25 to the Company's Quarterly
Report on Form 10-Q/A for the period ended June 30, 2002, filed
with the Commission on October 17, 2002, and incorporated herein
by reference).
+10.31 Amendment No. 4, dated as of September 4, 2003, to Restricted
Stock Award Agreement dated January 2, 2002 between the Company
and Ian G.H. Ashken (filed as Exhibit 10.8 to the Company's
Current Report on Form 8-K, filed with the Commission on
September 26, 2003, and incorporated herein by reference).
87
+10.32 Amendment No. 5, dated as of October 2, 2003, to Restricted Stock
Award Agreement dated January 2, 2002 between the Company and Ian
G.H. Ashken (filed as Exhibit 10.4 to the Company's Current
Report on Form 8-K, filed with the Commission on October 27,
2003, and incorporated herein by reference).
+10.33 Amendment No. 6, dated as of October 31, 2003, to the Restricted
Stock Award Agreement, dated January 2, 2002, between the Company
and Ian G.H. Ashken (filed as Exhibit 10.14 to the Company's
Quarterly Report on Form 10-Q for the period ended September 30,
2003, filed with the Commission on November 14, 2003, and
incorporated herein by reference).
+10.34 Restricted Stock Award Agreement, dated as of May 8, 2003,
between the Company and Ian G.H. Ashken (filed as Exhibit 10.3 to
the Company's Current Report on Form 8-K, filed with the
Commission on September 26, 2003, and incorporated herein by
reference).
+10.35 Amendment No. 1, dated as of September 4, 2003, to the Restricted
Stock Award Agreement, dated as of May 8, 2003, between the
Company and Ian G.H. Ashken (filed as Exhibit 10.4 to the
Company's Current Report on Form 8-K, filed with the Commission
on September 26, 2003, and incorporated herein by reference).
+10.36 Amendment No. 2, dated as of October 2, 2003, to the Restricted
Stock Award Agreement, dated as of May 8, 2003, between the
Company and Ian G.H. Ashken (filed as Exhibit 10.6 to the
Company's Current Report on Form 8-K, filed with the Commission
on October 27, 2003, and incorporated herein by reference).
+10.37 Amendment No. 3, dated as of October 31, 2003, to the Restricted
Stock Award Agreement, dated as of May 8, 2003, between the
Company and Ian G.H. Ashken (filed as Exhibit 10.16 to the
Company's Quarterly Report on Form 10-Q for the period ended
September 30, 2003, filed with the Commission on November 14,
2003, and incorporated herein by reference).
+10.38 Restricted Stock Award Agreement, dated as of August 4, 2003,
between the Company and James E. Lillie (filed as Exhibit 10.5 to
the Company's Current Report on Form 8-K, filed with the
Commission on September 26, 2003, and incorporated herein by
reference).
+10.39 Amendment No. 1, dated as of September 4, 2003, to the Restricted
Stock Award Agreement, dated as of August 4, 2003, between the
Company and James E. Lillie (filed as Exhibit 10.6 to the
Company's Current Report on Form 8-K, filed with the Commission
on September 26, 2003, and incorporated herein by reference).
+10.40 Amendment No. 2, dated as of October 2, 2003, to the Restricted
Stock Award Agreement, dated as of August 4, 2003, between the
Company and James E. Lillie (filed as Exhibit 10.7 to the
Company's Current Report on Form 8-K, filed with the Commission
on October 27, 2003, and incorporated herein by reference).
+10.41 Amendment No. 3, dated as of October 31, 2003, to the Restricted
Stock Award Agreement, dated as of August 4, 2003, between the
Company and James E. Lillie (filed as Exhibit 10.17 to the
Company's Quarterly Report on Form 10-Q for the period ended
September 30, 2003, filed with the Commission on November 14,
2003, and incorporated herein by reference).
+10.42 Promissory Note, dated January 24, 2002, by Martin E. Franklin in
favor of the Company (filed as Exhibit 10.37 to the Company's
Annual Report on Form 10-K/A, filed with the Commission on
October 17, 2002, and incorporated herein by reference).
88
+10.43 Promissory Note, dated January 24, 2002, by Ian G.H. Ashken in
favor of the Company (filed as Exhibit 10.38 to the Company's
Annual Report on Form 10-K/A, filed with the Commission on
October 17, 2002, and incorporated herein by reference).
+10.44 Alltrista Corporation 2002 Executive Loan Program (filed as
Exhibit 10.39 to the Company's Annual Report on Form 10-K/A,
filed with the Commission on October 17, 2002, and incorporated
herein by reference).
+10.45 Jarden Corporation 2003 Stock Incentive Plan (incorporated by
reference from Annex B to the Company's 2003 Definitive Proxy
Statement with respect to the Company's 2003 Annual Meeting of
Stockholders, as filed with the Commission on March 28, 2003).
+10.46 Jarden Corporation 2003 Stock Employee Stock Purchase Plan
(incorporated by reference from Annex C to the Company's 2003
Definitive Proxy Statement with respect to the Company's 2003
Annual Meeting of Stockholders, as filed with the Commission on
March 28, 2003).
10.47 Credit Agreement, dated as of January 24, 2005, among Jarden
Corporation, as the borrower, Canadian Imperial Bank of Commerce,
as administrative agent, Citicorp USA, Inc., as syndication
agent, and Bank of America, N.A., National City Bank of Indiana
and SunTrust Bank, as co-documentation agents, and Citigroup
Global Markets Inc. and CIBC World Markets Corp., as joint-lead
arrangers and joint book-running managers, and the lenders and
letters of credit issuers parties thereto. (filed as Exhibit 10.1
to the Company's Current Report on Form 8-K, filed with the
Commission on January 27, 2005, and incorporated herein by
reference).
10.48 Pledge and Security Agreement, dated as of January 24, 2005, by
and among Jarden Corporation and the several subsidiary grantors
signatories thereto (filed as Exhibit 10.2 to the Company's
Current Report on Form 8-K, filed with the Commission on January
27, 2005, and incorporated herein by reference).
10.49 Guaranty, dated as of January 24, 2005, of the several subsidiary
guarantors signatories thereto (filed as Exhibit 10.3 to the
Company's Current Report on Form 8-K, filed with the Commission
on January 27, 2005, and incorporated herein by reference).
10.50 Second Amended and Restated Credit Agreement, dated as of June
11, 2004, among the Company, the lenders party thereto, Canadian
Imperial Bank of Commerce., as Administrative Agent, Citigroup
North America, Inc., as Syndication Agent, and National City Bank
of Indiana and Bank of America, N.A., as Co-Documentation Agents
(filed as Exhibit 10.1 to the Company's Current Report on Form
8-K, filed with the Commission on July 13, 2004, and incorporated
herein by reference).
10.51 Amended and Restated Credit Agreement, dated as of September 2,
2003, among the Company Corporation, Bank of America, N.A., as
Administrative Agent, Swing Line Lender, and L/C Issuer, Canadian
Imperial Bank of Commerce, as Syndication Agent, National City
Bank of Indiana and Fleet National Bank, as Co-Documentation
Agents. (filed as Exhibit 10.3 to the Company's Current Report on
Form 8-K, filed with the Commission on September 5, 2003, and
incorporated herein by reference).
89
10.52 Amendment No. 1, dated as of September 25, 2003, to the Amended
and Restated Credit Agreement by and among the Company, Bank of
America, N.A., as Administrative Agent, the Lenders signatory
thereto and each of the Subsidiary Guarantors (filed as Exhibit
10.9 to the Company's Current Report on Form 8-K, filed with the
Commission on September 26, 2003, and incorporated herein by
reference).
10.53 Amendment No. 2, dated as December 3, 2003, to the Amended and
Restated Credit Agreement by and among the Company, Bank of
America, N.A., as Administrative Agent, the Lenders signatory
thereto and each of the Subsidiary Guarantors (filed as Exhibit
10.48 to the Company's Annual Report on Form 10-K, filed with the
Commission on March 12, 2004 and incorporated herein by
reference).
10.54 Amendment No. 3, dated as March 31, 2004, to the Amended and
Restated Credit Agreement by and among the Company, Bank of
America, N.A., as Administrative Agent, the Lenders signatory
thereto and each of the Subsidiary Guarantors (filed as
Exhibit10.3 to the Company's Quarterly Report on Form 10-Q for
the period ended March 31, 2004, filed with the Commission on May
7, 2004, and incorporated herein by reference).
10.55 Consent, Waiver and Amendment No. 1 to Credit Agreement, dated as
of September 18, 2002, among the Company, the Guarantors, Bank of
America, N.A., as Administrative Agent and Lender, and the other
lenders party thereto (filed as Exhibit 10.7 to the Company's
Current Report on Form 8-K, filed with the Commission on February
14, 2003, and incorporated herein by reference).
10.56 Amendment No. 2 to Credit Agreement and Amendment No. 1 to
Security Agreement, dated as of September 27, 2002, among the
Company, the Guarantors, Bank of America, N.A., as Administrative
Agent and Lender, and the other lenders party thereto (filed as
Exhibit 10.8 to the Company's Current Report on Form 8-K, filed
with the Commission on February 14, 2003, and incorporated herein
by reference).
10.57 Amendment No. 3 to Credit Agreement and Waiver, dated as of
January 31, 2003, among the Company, the Guarantors, Bank of
America, N.A., as Administrative Agent and Lender, and the other
lenders party thereto (filed as Exhibit 10.9 to the Company's
Current Report on Form 8-K, filed with the Commission on February
14, 2003, and incorporated herein by reference).
10.58 Amendment No. 3 to Security Agreement, dated as of June 11, 2004,
among Jarden Corporation and certain of its subsidiaries party
thereto and Canadian Imperial Bank of Commerce, as Administrative
Agent (filed as Exhibit 10.2 to the Company's Current Report on
Form 8-K, filed with the Commission on July 13, 2004, and
incorporated herein by reference).
10.59 Guaranty Agreement, dated as of April 24, 2002, by Alltrista
Newco Corporation, Alltrista Plastics Corporation, Alltrista
Unimark, Inc., Alltrista Zinc Products, L.P., Caspers Tin Plate
Company, Hearthmark, Inc., Lafayette Steel & Aluminum
Corporation, LumenX Corporation, Penn Video, Inc., Quoin
Corporation, Tilia, Inc., Tilia Direct, Inc., Tilia
International, Inc., TriEnda Corporation, and Unimark Plastics,
Inc. to Bank of America, NA., as administrative agent (filed as
Exhibit 10.2 to the Company's Current Report on Form 8-K, filed
with the Commission on May 9, 2002, and incorporated herein by
reference).
90
10.60 Security Agreement, dated as of April 24, 2002, among the
Company, Alltrista Newco Corporation, Alltrista Plastics
Corporation, Alltrista Unimark, Inc., Alltrista Zinc Products,
L.P., Caspers Tin Plate Company, Hearthmark, Inc., Lafayette
Steel & Aluminum Corporation, LumenX Corporation, Penn Video,
Inc., Quoin Corporation, Tilia, Inc., Tilia Direct, Inc., Tilia
International, Inc., TriEnda Corporation, Unimark Plastics, Inc.,
and Bank of America, N.A., as administrative agent (filed as
Exhibit 10.3 to the Company's Current Report on Form 8-K, filed
with the Commission on May 9, 2002, and incorporated herein by
reference).
10.61 Intellectual Property Security Agreement, dated as of April 24,
2002, among the Company, Alltrista Newco Corporation, Alltrista
Plastics Corporation, Alltrista Unimark, Inc., Alltrista Zinc
Products, L.P., Caspers Tin Plate Company, Hearthmark, Inc.,
Lafayette Steel & Aluminum Corporation, LumenX Corporation, Penn
Video, Inc., Quoin Corporation, Tilia, Inc., Tilia Direct, Inc.,
Tilia International, Inc., TriEnda Corporation, Unimark Plastics,
Inc., and Bank of America, N.A., as administrative agent (filed
as Exhibit 10.4 to the Company's Current Report on Form 8-K,
filed with the Commission on May 9, 2002, and incorporated herein
by reference).
10.62 Securities Pledge Agreement, dated as of April 24, 2002, among
the Company, Quoin Corporation, Alltrista Newco Corporation,
Caspers Tin Plate Company, and Bank of America, NA., as
administrative agent (filed as Exhibit 10.5 to the Company's
Current Report on Form 8-K, filed with the Commission on May 9,
2002, and incorporated herein by reference).
10.63 Consolidated Amendment to Guaranty and Security Instruments,
dated as of September 2, 2003, among the Company, the Guarantors,
and Bank of America, N.A., as Administrative Agent (filed as
Exhibit 10.4 to the Company's Current Report on Form 8-K, filed
with the Commission on September 5, 2003, and incorporated herein
by reference).
10.64 Unsecured Subordinated Note, dated as of April 24, 2002, by
Alltrista in favor of Tilia International, Inc. in the principal
amount of $5,000,000 (filed as Exhibit 10.8 to the Company's
Current Report on Form 8-K, filed with the Commission on May 9,
2002, and incorporated herein by reference).
10.65 Unsecured Subordinated Note, dated as of April 24, 2002, by
Alltrista in favor of Tilia International, Inc. in the principal
amount of $10,000,000 (filed as Exhibit 10.9 to the Company's
Current Report on Form 8-K, filed with the Commission on May 9,
2002, and incorporated herein by reference).
10.66 Escrow Agreement, dated as of April 24, 2002, among Alltrista,
Tilia International, Inc., Tilia, Inc., Tilia Canada, Inc.,
Andrew Schilling, and J. P. Morgan Trust Company, National
Association, as escrow agent (filed as Exhibit 10.10 to the
Company's Current Report on Form 8-K, filed with the Commission
on May 9, 2002, and incorporated herein by reference).
10.67 Long Term Escrow Agreement, dated as of April 24, 2002, among
Alltrista, Tilia International, Inc., Andrew Schilling, and J. P.
Morgan Trust Company, National Association, as escrow agent
(filed as Exhibit 10.11 to the Company's Current Report on Form
8-K, filed with the Commission on May 9, 2002, and incorporated
herein by reference).
10.68 Form of the new 9 3/4% Senior Subordinated Notes Due 2012 (the
"New Note") (filed as Exhibit 10.40 to Company's Annual Report on
Form 10-K, filed with the Commission on February 28, 2003 and
incorporated herein by reference).
91
*21.1 Subsidiaries of the Company.
*23.1 Consent of Independent Registered Public Accounting Firm.
*31.1 Certification of Chief Executive Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
*31.2 Certification of Chief Financial Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
*32.1 Certification pursuant to 18 U.S.C. Section 1350 as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
- -------------------------
* Filed herewith
+ This Exhibit represents a management contract or compensatory plan.
92
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
(Registrant)
By: /s/ Martin E. Franklin
------------------------------------
Martin E. Franklin
Chairman and Chief Executive Officer
March 2, 2005
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the registrant and in the
capacities and on the dates indicated below.
Chairman and Chief Executive Officer
/s/ Martin E. Franklin (Principal Executive Officer)
------------------------------------- March 2, 2005
Martin E. Franklin
Vice Chairman, Chief Financial
Officer and Company Secretary
(Principal Financial Officer and
/s/ Ian G.H. Ashken Principal Accounting Officer)
------------------------------------- March 2, 2005
Ian G.H. Ashken
/s/ Rene-Pierre Azria Director
------------------------------------- March 2, 2005
Rene-Pierre Azria
/s/ Douglas W. Huemme Director
------------------------------------- March 2, 2005
Douglas W. Huemme
/s/ Richard L. Molen Director
------------------------------------- March 2, 2005
Richard L. Molen
/s/ Irwin D. Simon Director
------------------------------------- March 2, 2005
Irwin D. Simon
/s/ Robert L. Wood Director
------------------------------------- March 2, 2005
Robert L. Wood
/s/ Charles Kaye Director
------------------------------------- March 2, 2005
Charles Kaye
93
SCHEDULE II
JARDEN CORPORATION
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(THOUSANDS OF DOLLARS)
Balance at Charges to
beginning of costs and Deductions Balance at end
period expense from reserves Other (1) of period
-------------- -------------- -------------- -------------- ----------------
Reserves against
accounts receivable:
2004................... $ (11,880) $ (44,126) $ 43,738 $ (1,881) $ (14,149)
2003................... (6,095) (38,246) 37,194 (4,733) (11,880)
2002................... (778) (15,176) 12,957 (3,098) (6,095)
Valuation allowance
against deferred taxes:
2004................... (1,000) - - - (1,000)
2003................... (1,000) - - - (1,000)
2002................... (5,395) (1,000) 5,395 - (1,000)
(1) Principally consisting of acquisitions and divestitures.
94
JARDEN CORPORATION
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2004
EXHIBIT INDEX
Copies of exhibits incorporated by reference can be obtained from the
Commission and are located in Commission File No. 0-12052.
Exhibit
Number Description of Exhibit
- ----------- -----------------------------------------------------------------
2.1 Agreement and Plan of Merger between the Company and Alltrista
Reincorporation MergerSub, Inc. (filed as Exhibit A to the
Company's Definitive Proxy Statement, filed with the Commission
on November 26, 2001, and incorporated herein by reference).
2.2 Asset Purchase Agreement, dated as of March 27, 2002, among
Alltrista, Tilia International, Inc., Tilia, Inc., Tilia Canada,
Inc., and Andrew Schilling (filed as Exhibit 10.6 to the
Company's Current Report on Form 8-K, filed with the Commission
on May 9, 2002, and incorporated herein by reference).
2.3 Amendment No. 1 to the Asset Purchase Agreement, dated as of
April 24, 2002, among Alltrista, Tilia International, Inc.,
Tilia, Inc., Tilia Canada, Inc., and Andrew Schilling (filed as
Exhibit 10.7 to the Company's Current Report on Form 8-K, filed
with the Commission on May 9, 2002, and incorporated herein by
reference).
2.4 Asset Purchase Agreement, dated as of November 27, 2002, by and
among the Company, Diamond Brands, Incorporated, Diamond Brands
Operating Corp., Forster, Inc. and Diamond Brands Kansas, Inc.
(filed as Exhibit 10.1 to the Company's Current Report on Form
8-K, filed with the Commission on February 14, 2003, and
incorporated herein by reference).
2.5 Section entitled "Technical Modification to Joint Plan of
Reorganization" from the Findings of Fact, Conclusions of Law and
Order Confirming Joint Plan of Reorganization of Diamond Brands
Operating Corp. and its Debtor Affiliates Proposed by the Debtors
and the Company by the Honorable Randall J. Newsome on January
29, 2003, in connection with case No. 01-1825 (RJN), a Chapter 11
case captioned "In re: Diamond Brands Operating Corp., et al.,
Debtors" filed in the United States Bankruptcy Court for the
District of Delaware (filed as Exhibit 99.1 to the Company's
Current Report on Form 8-K, filed with the Commission on February
14, 2003, and incorporated herein by reference).
2.6 Stock Purchase Agreement dated as of August 15, 2003, by and
among the Company, American Manufacturing Company, Inc., and
Lehigh Consumer Products Corporation (filed as Exhibit 10.1 to
the Company's Current Report on Form 8-K, filed with the
Commission on September 5, 2003, and incorporated herein by
reference).
2.7 Securities Purchase Agreement, dated as of February 24, 2004, by
and among Bicycle Holding, Inc., the Sellers identified therein,
Dudley S. Taft, as the Seller Representative, and the Company
(filed as Exhibit 2.7 Company's Annual Report on Form 10-K, filed
with the Commission on March 12, 2004, and incorporated herein by
reference).
95
2.8 Put and Call Agreement, dated as of February 24, 2004, by and
among the shareholders of Bicycle Holding, Inc. that are
signatories thereto and the Company (filed as Exhibit 2.8
Company's Annual Report on Form 10-K, filed with the Commission
on March 12, 2004, and incorporated herein by reference).
2.9 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 Current Report on Form 8-K, filed with the
Commission on September 23, 2004, and incorporated herein by
reference).
2.10 Purchase Agreement, dated as of September 19, 2004, between
Jarden Corporation and Warburg Pincus Private Equity VIII, L.P.
(filed as Exhibit 10.2 to the Company's Current Report on Form
8-K, filed with the Commission on September 23, 2004, and
incorporated herein by reference).
3.1 Restated Certificate of Incorporation of the Company (filed as
Exhibit 3.1 to the Company's Annual Report on Form 10-K, filed
with the Commission on March 27, 2002, and incorporated herein by
reference).
3.2 Certificate of Amendment of Restated Certificate of Incorporation
of the Company (filed as Exhibit 3.2 to the Company's Current
Report on Form 8-K, filed with the Commission on June 4, 2002,
and incorporated herein by reference).
3.3 Certificate of Designations, Preferences and Rights of Series B
Convertible Participating Preferred Stock of Jarden Corporation
and the Certificate of Correction thereto (filed as Exhibit 3.1
to the Company's Current Report on Form 8-K, filed with the
Commission on January 27, 2005, and incorporated herein by
reference).
3.4 Certificate of Designations, Preferences and Rights of Series C
Mandatory Convertible Participating Preferred Stock of Jarden
Corporation and the Certificate of Correction thereto (filed as
Exhibit 3.2 to the Company's Current Report on Form 8-K, filed
with the Commission on January 27, 2005, and incorporated herein
by reference).
3.5 Bylaws of the Company (filed as Exhibit C to the Company's
Definitive Proxy Statement, filed with the Commission on November
26, 2001, and incorporated herein by reference).
4.1 Indenture, dated as of April 24, 2002 (the "April 2002
Indenture"), among the Company, Alltrista Newco Corporation,
Alltrista Plastics Corporation, Alltrista Unimark, Inc.,
Alltrista Zinc Products, L.P., Caspers Tin Plate Company,
Hearthmark, Inc., Lafayette Steel & Aluminum Corporation, LumenX
Corporation, Penn Video, Inc., Quoin Corporation, Tilia, Inc.,
Tilia Direct, Inc., Tilia International, Inc., TriEnda
Corporation, Unimark Plastics, Inc., and The Bank of New York, as
trustee, and form of Old Note attached as Exhibit A thereto
(filed as Exhibit 4.1 to the Company's Current Report on Form
8-K, filed with the Commission on May 9, 2002, and incorporated
herein by reference).
4.2 First Supplemental Indenture to the April 2002 Indenture, dated
as of May 7, 2003, among the Company, the guarantors named
therein and The Bank of New York, as trustee, and form of note
attached as Exhibit A thereto, (filed as Exhibit 4.1 to the
Company's Current Report on Form 8-K, filed with the Commission
on September 26, 2003, and incorporated herein by reference).
96
4.3 Second Supplemental Indenture to the April 2002 Indenture, dated
as of May 28, 2003, among the Company, the guarantors named
therein and The Bank of New York, as trustee (filed as Exhibit
4.2 to the Company's Current Report on Form 8-K, filed with the
Commission on September 26, 2003, and incorporated herein by
reference).
4.4 Third Supplemental Indenture to the April 2002 Indenture, dated
as of September 25, 2003, among the Company, the guarantors named
therein and The Bank of New York, as trustee (filed as Exhibit
4.3 to the Company's Current Report on Form 8-K, filed with the
Commission on September 26, 2003, and incorporated herein by
reference).
4.5 Fourth Supplemental Indenture to the April 2002 Indenture, dated
as of April 16, 2004, among the Company, the guarantors named
therein and The Bank of New York, as trustee (filed as Exhibit
4.1 to the Company's Quarterly Report on Form 10-Q for the period
ended June 30, 2004 filed with the Commission on August 9, 2004,
and incorporated herein by reference).
4.6 Fifth Supplemental Indenture to the April 2002 Indenture, dated
as of July 23, 2004, among the Company, the guarantors named
therein and The Bank of New York, as trustee (filed as Exhibit
4.2 to the Company's Quarterly Report on Form 10-Q for the period
ended June 30, 2004 filed with the Commission on August 9, 2004,
and incorporated herein by reference).
*4.7 Sixth Supplemental Indenture to the April 2002 Indenture, dated
as of February 24, 2005, among the Company, the guarantors named
therein and The Bank of New York, as trustee.
4.8 Registration Rights Agreement, dated as of September 2, 2003,
among the Company, American Manufacturing Company, Inc., and the
Holders named therein (filed as Exhibit 10.2 to the Company's
Current Report on Form 8-K, filed with the Commission on
September 5, 2003, and incorporated herein by reference).
4.9 Form of Subsidiary Guarantee in connection with the exchange of
notes under the April 2002 Indenture (filed as Exhibit 4.12 to
the Company's Form S-4 Registration Statement filed the
Commission on October 1, 2003, and incorporated herein by
reference).
+10.1 Form of Change of Control Agreement (filed as Exhibit 10.6 to the
Company's Annual Report on Form 10-K, filed with the Commission
on March 29, 1999, and incorporated herein by reference).
+10.2 Form of Amendment to Change of Control Agreement, effective June
21, 2001 (filed as Exhibit 10.16 to the Company's Report on Form
10-Q, filed with the Commission on August 10, 2001, and
incorporated herein by reference).
+10.3 List of the Company's officer's party to Exhibit 10.1 and Exhibit
10.2 (filed as Exhibit 10.7 to the Company's Annual Report on
Form 10-K/A, filed with the Commission on October 17, 2002, and
incorporated herein by reference).
10.4 Form of Distribution Agreement between Ball Corporation and the
Company (filed as Exhibit 10.7 to the Company's Registration
Statement on Form 10, filed with the Commission on March 17,
1993, and incorporated herein by reference).
97
10.5 Form of Tax Sharing and Indemnification Agreement between Ball
Corporation and the Company (filed as Exhibit 10.10 to the
Company's Registration Statement on Form 10, filed with the
Commission on March 17, 1993, and incorporated herein by
reference).
+10.6 Form of Indemnification Agreement (filed as Exhibit 10.13 to the
Company's Registration Statement on Form 10, filed with the
Commission on March 17, 1993, and incorporated herein by
reference).
+10.7 List of Directors and Executive Officers party to Exhibit 10.6
(filed as Exhibit 10.10 to the Company's Annual Report on Form
10-K, filed with the Commission on March 31, 1996, and
incorporated herein by reference).
+10.8 Alltrista Corporation 1998 Long Term Equity Incentive Plan, as
amended and restated (filed as Exhibit 10.13 to the Company's
Quarterly Report on Form 10-Q/A for the period ended June 30,
2002, filed with the Commission on October 17, 2002, and
incorporated herein by reference).
+10.9 Alltrista Corporation 2001 Stock Option Plan (filed as Exhibit
10.6 to the Company's Quarterly Report on Form 10-Q, filed with
the Commission on November 14, 2001, and incorporated herein by
reference).
+10.10 Amendment No. 1 to the Alltrista Corporation 2001 Stock Option
Plan (filed as Exhibit 10.15 to the Company's Quarterly Report on
Form 10-Q/A for the period ended June 30, 2002, filed with the
Commission on October 17, 2002, and incorporated herein by
reference).
+10.11 Second Amended and Restated Employment Agreement, dated as of
January 24, 2005, between the Company and Martin E. Franklin
(filed as Exhibit 10.4 to the Company's Current Report on Form
8-K, filed with the Commission on January 27, 2005, and
incorporated herein by reference).
+10.12 Second Amended and Restated Employment Agreement, dated as of
January 24, 2005, between the Company and Ian G.H. Ashken (filed
as Exhibit 10.5 to the Company's Current Report on Form 8-K,
filed with the Commission on January 27, 2005, and incorporated
herein by reference).
+10.13 Employment Agreement between the Company and J. David Tolbert,
effective January 1, 2002 (filed as Exhibit 10.36 to the
Company's Annual Report on Form 10-K/A, filed with the Commission
on October 17, 2002, and incorporated herein by reference).
+10.14 Amended and Restated Employment Agreement between the Company and
James E. Lillie, effective January 24, 2005 (filed as Exhibit
10.6 to the Company's Current Report on Form 8-K, filed with the
Commission on January 27, 2005, and incorporated herein by
reference).
+10.15 Employment Agreement, dated as of May 3, 2003, between the
Company and Desiree DeStefano (filed as Exhibit 10.4 to the
Company's Quarterly Report on Form 10-Q for the period ended
March 31, 2004 filed with the Commission on May 7, 2004, and
incorporated herein by reference).
+10.16 Restricted Stock Award Agreement, dated January 2, 2002, between
the Company and Martin E. Franklin (filed as Exhibit 10.18 to the
Company's Quarterly Report on Form 10-Q/A for the period ended
June 30, 2002, filed with the Commission on October 17, 2002 and
incorporated herein by reference).
98
+10.17 Amendment No. 1, dated as of February 7, 2002, to Restricted
Stock Award Agreement, dated January 2, 2002, between the Company
and Martin E. Franklin (filed as Exhibit 10.19 to the Company's
Quarterly Report on Form 10-Q/A for the period ended June 30,
2002, filed with the Commission on October 17, 2002, and
incorporated herein by reference).
+10.18 Amendment No. 2, dated as of April 15, 2002, to Restricted Stock
Award Agreement, dated January 2, 2002, between the Company and
Martin E. Franklin (filed as Exhibit 10.20 to the Company's
Quarterly Report on Form 10-Q/A for the period ended June 30,
2002, filed with the Commission on October 17, 2002, and
incorporated herein by reference).
+10.19 Amendment No. 3, dated as of July 15, 2002, to Restricted Stock
Award Agreement dated January 2, 2002 between the Company and
Martin E. Franklin (filed as Exhibit 10.21 to the Company's
Quarterly Report on Form 10-Q/A for the period ended June 30,
2002, filed with the Commission on October 17, 2002, and
incorporated herein by reference).
+10.20 Amendment No. 4, dated as of September 4, 2003, to Restricted
Stock Award Agreement dated January 2, 2002 between the Company
and Martin E. Franklin (filed as Exhibit 10.7 to the Company's
Current Report on Form 8-K, filed with the Commission on
September 26, 2003, and incorporated herein by reference).
+10.21 Amendment No. 5, dated as of October 2, 2003, to Restricted Stock
Award Agreement dated January 2, 2002 between the Company and
Martin E. Franklin (filed as Exhibit 10.4 to the Company's
Current Report on Form 8-K, filed with the Commission on October
27, 2003, and incorporated herein by reference).
+10.22 Amendment No. 6, dated as of October 31, 2003, to the Restricted
Stock Award Agreement, dated January 2, 2002, between the Company
and Martin E. Franklin (filed as Exhibit 10.13 to the Company's
Quarterly Report on Form 10-Q for the period ended September 30,
2003, filed with the Commission on November 14, 2003, and
incorporated herein by reference).
+10.23 Restricted Stock Award Agreement, dated as of May 8, 2003,
between the Company and Martin E. Franklin (filed as Exhibit 10.1
to the Company's Current Report on Form 8-K, filed with the
Commission on September 26, 2003, and incorporated herein by
reference).
+10.24 Amendment No. 1, dated as of September 4, 2003, to the Restricted
Stock Award Agreement, dated as of May 8, 2003, between the
Company and Martin E. Franklin. (filed as Exhibit 10.2 to the
Company's Current Report on Form 8-K, filed with the Commission
on September 26, 2003, and incorporated herein by reference).
+10.25 Amendment No. 2, dated as of October 2, 2003, to the Restricted
Stock Award Agreement, dated as of May 8, 2003, between the
Company and Martin E. Franklin (filed as Exhibit 10.5 to the
Company's Current Report on Form 8-K, filed with the Commission
on October 27, 2003, and incorporated herein by reference).
+10.26 Amendment No. 3, dated as of October 31, 2003, to the Restricted
Stock Award Agreement, dated as of May 8, 2003, between the
Company and Martin E. Franklin (filed as Exhibit 10.15 to the
Company's Quarterly Report on Form 10-Q for the period ended
September 30, 2003, filed with the Commission on November 14,
2003, and incorporated herein by reference).
99
+10.27 Restricted Stock Award Agreement, dated January 2, 2002, between
the Company and Ian G.H. Ashken (filed as Exhibit 10.22 to the
Company's Quarterly Report on Form 10-Q/A for the period ended
June 30, 2002, filed with the Commission on October 17, 2002, and
incorporated herein by reference).
+10.28 Amendment No. 1, dated as of February 7, 2003, to Restricted
Stock Award Agreement, dated January 2, 2002, between the Company
and Ian G.H. Ashken (filed as Exhibit 10.23 to the Company's
Quarterly Report on Form 10-Q/A for the period ended June 30,
2002, filed with the Commission on October 17, 2002, and
incorporated herein by reference).
+10.29 Amendment No. 2, dated as of April 15, 2002, to Restricted Stock
Award Agreement, dated January 2, 2002, between the Company and
Ian G.H. Ashken (filed as Exhibit 10.24 to the Company's
Quarterly Report on Form 10-Q/A for the period ended June 30,
2002, filed with the Commission on October 17, 2002, and
incorporated herein by reference).
+10.30 Amendment No. 3, dated as of July 25, 2002, to Restricted Stock
Award Agreement dated January 2, 2002 between the Company and Ian
G.H. Ashken (filed as Exhibit 10.25 to the Company's Quarterly
Report on Form 10-Q/A for the period ended June 30, 2002, filed
with the Commission on October 17, 2002, and incorporated herein
by reference).
+10.31 Amendment No. 4, dated as of September 4, 2003, to Restricted
Stock Award Agreement dated January 2, 2002 between the Company
and Ian G.H. Ashken (filed as Exhibit 10.8 to the Company's
Current Report on Form 8-K, filed with the Commission on
September 26, 2003, and incorporated herein by reference).
+10.32 Amendment No. 5, dated as of October 2, 2003, to Restricted Stock
Award Agreement dated January 2, 2002 between the Company and Ian
G.H. Ashken (filed as Exhibit 10.4 to the Company's Current
Report on Form 8-K, filed with the Commission on October 27,
2003, and incorporated herein by reference).
+10.33 Amendment No. 6, dated as of October 31, 2003, to the Restricted
Stock Award Agreement, dated January 2, 2002, between the Company
and Ian G.H. Ashken (filed as Exhibit 10.14 to the Company's
Quarterly Report on Form 10-Q for the period ended September 30,
2003, filed with the Commission on November 14, 2003, and
incorporated herein by reference).
+10.34 Restricted Stock Award Agreement, dated as of May 8, 2003,
between the Company and Ian G.H. Ashken (filed as Exhibit 10.3 to
the Company's Current Report on Form 8-K, filed with the
Commission on September 26, 2003, and incorporated herein by
reference).
+10.35 Amendment No. 1, dated as of September 4, 2003, to the Restricted
Stock Award Agreement, dated as of May 8, 2003, between the
Company and Ian G.H. Ashken (filed as Exhibit 10.4 to the
Company's Current Report on Form 8-K, filed with the Commission
on September 26, 2003, and incorporated herein by reference).
+10.36 Amendment No. 2, dated as of October 2, 2003, to the Restricted
Stock Award Agreement, dated as of May 8, 2003, between the
Company and Ian G.H. Ashken (filed as Exhibit 10.6 to the
Company's Current Report on Form 8-K, filed with the Commission
on October 27, 2003, and incorporated herein by reference).
100
+10.37 Amendment No. 3, dated as of October 31, 2003, to the Restricted
Stock Award Agreement, dated as of May 8, 2003, between the
Company and Ian G.H. Ashken (filed as Exhibit 10.16 to the
Company's Quarterly Report on Form 10-Q for the period ended
September 30, 2003, filed with the Commission on November 14,
2003, and incorporated herein by reference).
+10.38 Restricted Stock Award Agreement, dated as of August 4, 2003,
between the Company and James E. Lillie (filed as Exhibit 10.5 to
the Company's Current Report on Form 8-K, filed with the
Commission on September 26, 2003, and incorporated herein by
reference).
+10.39 Amendment No. 1, dated as of September 4, 2003, to the Restricted
Stock Award Agreement, dated as of August 4, 2003, between the
Company and James E. Lillie (filed as Exhibit 10.6 to the
Company's Current Report on Form 8-K, filed with the Commission
on September 26, 2003, and incorporated herein by reference).
+10.40 Amendment No. 2, dated as of October 2, 2003, to the Restricted
Stock Award Agreement, dated as of August 4, 2003, between the
Company and James E. Lillie (filed as Exhibit 10.7 to the
Company's Current Report on Form 8-K, filed with the Commission
on October 27, 2003, and incorporated herein by reference).
+10.41 Amendment No. 3, dated as of October 31, 2003, to the Restricted
Stock Award Agreement, dated as of August 4, 2003, between the
Company and James E. Lillie (filed as Exhibit 10.17 to the
Company's Quarterly Report on Form 10-Q for the period ended
September 30, 2003, filed with the Commission on November 14,
2003, and incorporated herein by reference).
+10.42 Promissory Note, dated January 24, 2002, by Martin E. Franklin in
favor of the Company (filed as Exhibit 10.37 to the Company's
Annual Report on Form 10-K/A, filed with the Commission on
October 17, 2002, and incorporated herein by reference).
+10.43 Promissory Note, dated January 24, 2002, by Ian G.H. Ashken in
favor of the Company (filed as Exhibit 10.38 to the Company's
Annual Report on Form 10-K/A, filed with the Commission on
October 17, 2002, and incorporated herein by reference).
+10.44 Alltrista Corporation 2002 Executive Loan Program (filed as
Exhibit 10.39 to the Company's Annual Report on Form 10-K/A,
filed with the Commission on October 17, 2002, and incorporated
herein by reference).
+10.45 Jarden Corporation 2003 Stock Incentive Plan (incorporated by
reference from Annex B to the Company's 2003 Definitive Proxy
Statement with respect to the Company's 2003 Annual Meeting of
Stockholders, as filed with the Commission on March 28, 2003).
+10.46 Jarden Corporation 2003 Stock Employee Stock Purchase Plan
(incorporated by reference from Annex C to the Company's 2003
Definitive Proxy Statement with respect to the Company's 2003
Annual Meeting of Stockholders, as filed with the Commission on
March 28, 2003).
101
10.47 Credit Agreement, dated as of January 24, 2005, among Jarden
Corporation, as the borrower, Canadian Imperial Bank of Commerce,
as administrative agent, Citicorp USA, Inc., as syndication
agent, and Bank of America, N.A., National City Bank of Indiana
and SunTrust Bank, as co-documentation agents, and Citigroup
Global Markets Inc. and CIBC World Markets Corp., as joint-lead
arrangers and joint book-running managers, and the lenders and
letters of credit issuers parties thereto. (filed as Exhibit 10.1
to the Company's Current Report on Form 8-K, filed with the
Commission on January 27, 2005, and incorporated herein by
reference).
10.48 Pledge and Security Agreement, dated as of January 24, 2005, by
and among Jarden Corporation and the several subsidiary grantors
signatories thereto (filed as Exhibit 10.2 to the Company's
Current Report on Form 8-K, filed with the Commission on January
27, 2005, and incorporated herein by reference).
10.49 Guaranty, dated as of January 24, 2005, of the several subsidiary
guarantors signatories thereto (filed as Exhibit 10.3 to the
Company's Current Report on Form 8-K, filed with the Commission
on January 27, 2005, and incorporated herein by reference).
10.50 Second Amended and Restated Credit Agreement, dated as of June
11, 2004, among the Company, the lenders party thereto, Canadian
Imperial Bank of Commerce., as Administrative Agent, Citigroup
North America, Inc., as Syndication Agent, and National City Bank
of Indiana and Bank of America, N.A., as Co-Documentation Agents
(filed as Exhibit 10.1 to the Company's Current Report on Form
8-K, filed with the Commission on July 13, 2004, and incorporated
herein by reference).
10.51 Amended and Restated Credit Agreement, dated as of September 2,
2003, among the Company Corporation, Bank of America, N.A., as
Administrative Agent, Swing Line Lender, and L/C Issuer, Canadian
Imperial Bank of Commerce, as Syndication Agent, National City
Bank of Indiana and Fleet National Bank, as Co-Documentation
Agents. (filed as Exhibit 10.3 to the Company's Current Report on
Form 8-K, filed with the Commission on September 5, 2003, and
incorporated herein by reference).
10.52 Amendment No. 1, dated as of September 25, 2003, to the Amended
and Restated Credit Agreement by and among the Company, Bank of
America, N.A., as Administrative Agent, the Lenders signatory
thereto and each of the Subsidiary Guarantors (filed as Exhibit
10.9 to the Company's Current Report on Form 8-K, filed with the
Commission on September 26, 2003, and incorporated herein by
reference).
10.53 Amendment No. 2, dated as December 3, 2003, to the Amended and
Restated Credit Agreement by and among the Company, Bank of
America, N.A., as Administrative Agent, the Lenders signatory
thereto and each of the Subsidiary Guarantors (filed as Exhibit
10.48 to the Company's Annual Report on Form 10-K, filed with the
Commission on March 12, 2004 and incorporated herein by
reference).
10.54 Amendment No. 3, dated as March 31, 2004, to the Amended and
Restated Credit Agreement by and among the Company, Bank of
America, N.A., as Administrative Agent, the Lenders signatory
thereto and each of the Subsidiary Guarantors (filed as
Exhibit10.3 to the Company's Quarterly Report on Form 10-Q for
the period ended March 31, 2004, filed with the Commission on May
7, 2004, and incorporated herein by reference).
102
10.55 Consent, Waiver and Amendment No. 1 to Credit Agreement, dated as
of September 18, 2002, among the Company, the Guarantors, Bank of
America, N.A., as Administrative Agent and Lender, and the other
lenders party thereto (filed as Exhibit 10.7 to the Company's
Current Report on Form 8-K, filed with the Commission on February
14, 2003, and incorporated herein by reference).
10.56 Amendment No. 2 to Credit Agreement and Amendment No. 1 to
Security Agreement, dated as of September 27, 2002, among the
Company, the Guarantors, Bank of America, N.A., as Administrative
Agent and Lender, and the other lenders party thereto (filed as
Exhibit 10.8 to the Company's Current Report on Form 8-K, filed
with the Commission on February 14, 2003, and incorporated herein
by reference).
10.57 Amendment No. 3 to Credit Agreement and Waiver, dated as of
January 31, 2003, among the Company, the Guarantors, Bank of
America, N.A., as Administrative Agent and Lender, and the other
lenders party thereto (filed as Exhibit 10.9 to the Company's
Current Report on Form 8-K, filed with the Commission on February
14, 2003, and incorporated herein by reference).
10.58 Amendment No. 3 to Security Agreement, dated as of June 11, 2004,
among Jarden Corporation and certain of its subsidiaries party
thereto and Canadian Imperial Bank of Commerce, as Administrative
Agent (filed as Exhibit 10.2 to the Company's Current Report on
Form 8-K, filed with the Commission on July 13, 2004, and
incorporated herein by reference).
10.59 Guaranty Agreement, dated as of April 24, 2002, by Alltrista
Newco Corporation, Alltrista Plastics Corporation, Alltrista
Unimark, Inc., Alltrista Zinc Products, L.P., Caspers Tin Plate
Company, Hearthmark, Inc., Lafayette Steel & Aluminum
Corporation, LumenX Corporation, Penn Video, Inc., Quoin
Corporation, Tilia, Inc., Tilia Direct, Inc., Tilia
International, Inc., TriEnda Corporation, and Unimark Plastics,
Inc. to Bank of America, NA., as administrative agent (filed as
Exhibit 10.2 to the Company's Current Report on Form 8-K, filed
with the Commission on May 9, 2002, and incorporated herein by
reference).
10.60 Security Agreement, dated as of April 24, 2002, among the
Company, Alltrista Newco Corporation, Alltrista Plastics
Corporation, Alltrista Unimark, Inc., Alltrista Zinc Products,
L.P., Caspers Tin Plate Company, Hearthmark, Inc., Lafayette
Steel & Aluminum Corporation, LumenX Corporation, Penn Video,
Inc., Quoin Corporation, Tilia, Inc., Tilia Direct, Inc., Tilia
International, Inc., TriEnda Corporation, Unimark Plastics, Inc.,
and Bank of America, N.A., as administrative agent (filed as
Exhibit 10.3 to the Company's Current Report on Form 8-K, filed
with the Commission on May 9, 2002, and incorporated herein by
reference).
10.61 Intellectual Property Security Agreement, dated as of April 24,
2002, among the Company, Alltrista Newco Corporation, Alltrista
Plastics Corporation, Alltrista Unimark, Inc., Alltrista Zinc
Products, L.P., Caspers Tin Plate Company, Hearthmark, Inc.,
Lafayette Steel & Aluminum Corporation, LumenX Corporation, Penn
Video, Inc., Quoin Corporation, Tilia, Inc., Tilia Direct, Inc.,
Tilia International, Inc., TriEnda Corporation, Unimark Plastics,
Inc., and Bank of America, N.A., as administrative agent (filed
as Exhibit 10.4 to the Company's Current Report on Form 8-K,
filed with the Commission on May 9, 2002, and incorporated herein
by reference).
103
10.62 Securities Pledge Agreement, dated as of April 24, 2002, among
the Company, Quoin Corporation, Alltrista Newco Corporation,
Caspers Tin Plate Company, and Bank of America, NA., as
administrative agent (filed as Exhibit 10.5 to the Company's
Current Report on Form 8-K, filed with the Commission on May 9,
2002, and incorporated herein by reference).
10.63 Consolidated Amendment to Guaranty and Security Instruments,
dated as of September 2, 2003, among the Company, the Guarantors,
and Bank of America, N.A., as Administrative Agent (filed as
Exhibit 10.4 to the Company's Current Report on Form 8-K, filed
with the Commission on September 5, 2003, and incorporated herein
by reference).
10.64 Unsecured Subordinated Note, dated as of April 24, 2002, by
Alltrista in favor of Tilia International, Inc. in the principal
amount of $5,000,000 (filed as Exhibit 10.8 to the Company's
Current Report on Form 8-K, filed with the Commission on May 9,
2002, and incorporated herein by reference).
10.65 Unsecured Subordinated Note, dated as of April 24, 2002, by
Alltrista in favor of Tilia International, Inc. in the principal
amount of $10,000,000 (filed as Exhibit 10.9 to the Company's
Current Report on Form 8-K, filed with the Commission on May 9,
2002, and incorporated herein by reference).
10.66 Escrow Agreement, dated as of April 24, 2002, among Alltrista,
Tilia International, Inc., Tilia, Inc., Tilia Canada, Inc.,
Andrew Schilling, and J. P. Morgan Trust Company, National
Association, as escrow agent (filed as Exhibit 10.10 to the
Company's Current Report on Form 8-K, filed with the Commission
on May 9, 2002, and incorporated herein by reference).
10.67 Long Term Escrow Agreement, dated as of April 24, 2002, among
Alltrista, Tilia International, Inc., Andrew Schilling, and J. P.
Morgan Trust Company, National Association, as escrow agent
(filed as Exhibit 10.11 to the Company's Current Report on Form
8-K, filed with the Commission on May 9, 2002, and incorporated
herein by reference).
10.68 Form of the new 9 3/4% Senior Subordinated Notes Due 2012 (the
"New Note") (filed as Exhibit 10.40 to Company's Annual Report on
Form 10-K, filed with the Commission on February 28, 2003 and
incorporated herein by reference).
*21.1 Subsidiaries of the Company.
*23.1 Consent of Independent Registered Public Accounting Firm.
*31.1 Certification of Chief Executive Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
*31.2 Certification of Chief Financial Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
*32.1 Certification pursuant to 18 U.S.C. Section 1350 as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
- ----------------------
* Filed herewith
+ This Exhibit represents a management contract or a compensatory plan.
104