Sunbeam 2002 Annual Report Download - page 14

Jarden Corporation
Management’s Discussion and Analysis
We are a leading provider of niche, branded consumer products used in the home, under leading brand
names including Ball威, Bernardin威, Diamond威, FoodSaver威, Forster威and Kerr威. In North America, we are the
market leader in several targeted categories, including home canning, branded retail plastic cutlery, kitchen
matches, toothpicks and home vacuum packaging.
We have grown by actively acquiring new brands and expanding our existing brands. Our strategy to
achieve future growth is to acquire new brands, sustain profitable internal growth and expand our international
business.
On April 24, 2002, we completed our acquisition of the business of Tilia International, Inc. and its
subsidiaries (collectively ‘‘Tilia’’), pursuant to an asset purchase agreement (the ‘‘Acquisition’’). Based in San
Francisco, California, Tilia was a developer, manufacturer and marketer of a patented vacuum packaging
system for home use, primarily for food storage, under the FoodSaver威brand. The Acquisition was entered into
as part of our plan to pursue growth in branded consumer products. We acquired the business of Tilia for
approximately $145 million in cash and $15 million in seller debt financing. In addition, the Acquisition
includes an earn-out provision with a potential payment in cash or our common stock of up to $25 million
payable in 2005, provided that certain earnings performance targets are met. In conjunction with the
Acquisition, we incurred expenses in the amount of approximately $4.5 million. Due to the Company having
effective control of the business of Tilia as of April 1, 2002, the results of Tilia have been included in the
Company’s results from such date.
Effective November 26, 2001, we sold the assets of our Triangle, TriEnda and Synergy World plastic
thermoforming operations (‘‘TPD Assets’’) to Wilbert, Inc. for $21.0 million in cash, a non-interest bearing
one-year note (‘‘Wilbert Note’’) as well as the assumption of certain identified liabilities. The carrying amount
on the Wilbert Note of $1.6 million was repaid on November 25, 2002. In connection with this sale, we recorded
a pre-tax loss of approximately $121.1 million in 2001. The proceeds from the sale were used to pay down the
Company’s term debt under its old credit agreement.
Effective November 1, 2001, we sold our majority interest in Microlin, LLC (‘‘Microlin’’), a developer of
proprietary battery and fluid delivery technology, for $1,000 in cash plus contingent consideration based upon
future performance through December 31, 2012 and the cancellation of future funding requirements. We
recorded a pretax loss of $1.4 million in 2001 related to the sale.
Pro forma financial information relating to the Acquisition and the sales of TPD Assets and Microlin has
been included in the notes to our consolidated financial statements.
On September 24, 2001, our board of directors appointed Martin E. Franklin as our Chairman and Chief
Executive Officer and Ian G.H. Ashken as our Vice Chairman, Chief Financial Officer and Secretary. Following
this appointment we undertook a new business and management strategy to concentrate on niche, branded
consumer products, which led to the sale of the TPD Assets and the Acquisition. During 2002, we revised our
business segment information to report four business segments: branded consumables, home vacuum
packaging, plastic consumables and other. Prior periods have been reclassified to conform to the current
segment definitions.
Results of Operations – Comparing 2002 to 2001
We reported net sales of $368.2 million in 2002, an increase of 20.7% from net sales of $305.0 million in
2001. From April 1, 2002 onwards, our home vacuum packaging segment, which consists of the newly acquired
Tilia business, generated net sales of $145.3 million. Our branded consumables segment reported net sales of
$112.3 million in 2002 compared to $120.6 million in 2001. Net sales were $8.3 million or 6.9% lower than
2001, principally due to severe drought weather conditions during summer 2002 in the South, Southeast and
West Central regions of the United States. Our plastic consumables segment reported net sales of $70.6 million
in 2002 compared to $139.9 million in 2001. The principal cause of the $69.3 million decrease was the
divestiture of the TPD Assets and Microlin, which accounted for $63.3 million of such change (after adjusting
for $1.2 million of intercompany sales to these businesses). The remaining $6.0 million is principally due to
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