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Jarden Corporation Annual Report 2013 21
Cost of Sales
Cost of sales for 2012 decreased $50.2 million, or 1.0%, to $4.8 billion versus the prior year. The decrease is primarily due to foreign
currency translation (approximately $70 million), partially offset by approximately $30 million related to the net impact on cost of sales
of higher sales, partially offset by improved margins, which is driven by manufacturing improvement projects, stable commodity prices,
new products and product mix.
SG&A
SG&A for 2012 increased $61.3 million, or 4.9%, to $1.3 billion versus the prior year. The increase is primarily due to an increase in
marketing and product development costs (approximately $18 million) related to the Company’s investment in brand equity, an
increase in stock-based compensation (approximately $43 million) and approximately $13 million in acquisition-related and other costs,
partially offset by favorable foreign currency translation (approximately $27 million).
Operating Earnings
Operating earnings for 2012 in the Outdoor Solutions segment decreased $25.7 million, or 9.3%, versus the prior year, primarily due
to a gross prot decrease (approximately $25 million), primarily due to the gross margin impact of lower sales. Operating earnings
for 2012 in the Consumer Solutions segment decreased $4.4 million, or 1.9%, versus the prior year, primarily due to an increase in
SG&A (approximately $21 million) and an increase in reorganization costs (approximately $12 million), partially offset by a gross prot
increase (approximately $28 million), primarily due to expanded margins and the gross margin impact of higher sales. Operating
earnings for 2012 in the Branded Consumables segment increased $104 million, or 98%, versus the prior year, primarily due to a gross
prot increase (approximately $45 million), primarily due to improved margins, a decrease in the charges recorded related to the
impairment of goodwill, intangibles and other assets (approximately $52 million) and a decrease in reorganization costs (approximately
$6 million). Operating earnings for 2012 in the Process Solutions segment increased $11.7 million, or 53.4%, versus the prior year,
primarily due to an increase in gross prot, primarily due to improved margins and the gross margin impact of higher sales.
Reorganization Costs and Impairment Charges
Reorganization costs for 2012 increased $3.7 million to $27.1 million versus the prior year, primarily related to reorganization plans
initiated in the Outdoor Solutions and Consumer Solutions segments. Reorganization costs of $12.6 million were recorded in the
Outdoor Solutions segment related to a plan to reorganize certain manufacturing facilities in the Far East within the winter sport
business. Reorganization costs of $14.1 million were recorded in the Consumer Solutions segment related to a plan to rationalize the
operating processes of certain international operations.
Interest Expense
Net interest expense for 2012 increased $5.6 million to $185 million versus the prior year, primarily due to higher average debt levels,
partially offset by a decrease in the weighted average interest rate for 2012 to 5.2% from 5.4% in 2011.
Income Taxes
The Company’s reported tax rate for 2012 and 2011 was 37.7% and 38.0%, respectively. The increase from the statutory tax rate to the
reported tax rate for 2012 results principally from U.S. tax expense related to the taxation of foreign income and tax expense related to
foreign tax audit adjustments. The increase from the statutory tax rate to the reported tax rate for 2011 results principally from the U.S.
tax expense ($12.3 million) related to U.S. goodwill impairment.
Net Income
Net income for 2012 increased $39.2 million to $244 million versus the prior year. For 2012 and 2011, earnings per diluted share were
$2.06 and $1.54, respectively. The increase in net income was primarily due to a gross prot increase (approximately $70 million),
primarily due to increased margins and higher sales; and the charges recorded in 2011 for the impairment of goodwill, intangibles and
other assets ($52.5 million) and the loss on early extinguishment of debt ($12.8 million), partially offset by the aforementioned increase
in SG&A. On a period-over-period basis, the diluted weighted average shares outstanding decreased approximately 11%, primarily due
to the Company’s Stock Repurchase Program (see “Capital Resources”).
Financial Condition, Liquidity and Capital Resources
LIQUIDITY
At December31, 2013 and 2012, the Company had cash and cash equivalents of $1.1 billion and $1.0 billion, respectively. The Company
believes that its cash and cash equivalents, cash generated from operations and the availability under the Facility, the securitization
facility and the credit facilities of certain foreign subsidiaries as of December31, 2013 provide sufcient liquidity to support working
capital requirements, planned capital expenditures, debt obligations, completion of current and future reorganization and acquisition-
related integration programs and pension plan contribution requirements for the foreseeable future, as well as fund the potential
repurchase of shares of the Company’s common stock under the Company’s Stock Repurchase Program.
Management’s Discussion and Analysis
Jarden Corporation Annual Report 2013