Sunbeam 2001 Annual Report Download - page 18

of assets and liabilities using enacted tax rates.
The Company established a valuation allow-
ance against a portion of the net tax benefit
associated with all carryforwards and tempo-
rary differences at December 31, 2001, as it is
more likely than not that these will not be fully
utilized in the available carryforward period.
Fair Value and Credit Risk of
Financial Instruments
The carrying values of cash and cash
equivalents, accounts receivable, notes pay-
able, accounts payable and accrued liabilities
approximate their fair market value due to the
short-term maturities of these instruments. The
fair market value of long-term debt was esti-
mated using rates currently available to the
Company for debt with similar terms and ma-
turities.
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 re-
ceived under the swap agreements. The fair
market value of the swap agreements was esti-
mated based on the current market value of
similar instruments.
Financial instruments that potentially sub-
ject the Company to credit risk consist prima-
rily of trade receivables and interest-bearing
investments. Trade receivable credit risk is lim-
ited due to the diversity of the Company’s
customers and the Company’s ongoing credit
review procedures. Collateral for trade receiv-
ables is generally not required. The Company
places its interest-bearing cash equivalents with
major financial institutions and limits the
amount of credit exposure to any one financial
institution.
Stock Options
The Company accounts for the issuance of
stock options under the provisions of Account-
ing Principles Board Opinion No. 25, ‘‘Account-
ing for Stock Issued to Employees.’’ Generally for
the Company’s stock option plans, no compen-
sation cost is recognized in the consolidated
statement of operations because the exercise
price of the Company’s stock options equals
the market price of the underlying stock on the
date of grant. Under the Company’s 2001 Stock
Option Plan, however, the Company did recog-
nize a one-time charge of compensation cost
because of stockholder approval of the plan
subsequent to the grant date (see Note 10).
2. Acquisitions and Divestitures
Effective November 26, 2001, the Com-
pany sold the assets of its Triangle, TriEnda and
Synergy World plastic thermoforming opera-
tions to Wilbert, Inc. for $21.0 million in cash,
a $1.85 million noninterest-bearing one-year
note as well as the assumption of certain iden-
tified liabilities. The Company recorded a pre-
tax loss of $121.1 million in 2001 related to the
sale. The amount of goodwill included in the
loss on the sale was $82.0 million. The proceeds
from the sale were used to pay down the Com-
pany’s term debt.
As a result of the sale, the Company also
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.
$15.0 million of the proceeds related to this
recovery of income taxes was also used to pay
down the Company’s term debt. The tax net
operating loss not utilized during the allowable
carryback period will be available to offset tax-
able income in future periods. (See Note 19.)
The combined net sales of the thermo-
formed business sold included in the Compa-
ny’s historical results were $63.8 million in
2001 (through the date of sale), $100.3 million
in 2000 and $70.7 million in 1999. Operating
earnings (losses) associated with this business
were $(12.0) million in 2001, $(8.4) million in
2000 and $2.8 million in 1999.
Effective November 1, 2001, the Company
sold its majority interest in Microlin, LLC for
$1,000 in cash plus contingent consideration
based upon future performance through De-
cember 31, 2012 and the cancellation of future
funding requirements. The Company recorded
a pre-tax loss of $1.4 million in 2001 related to
the sale.
On June 1, 2000, the Company acquired
the net assets of Synergy World, a St. Louis,
Missouri-based designer and marketer of por-
table restrooms sold to equipment rental com-
panies, waste services companies and diversi-
fied sanitation firms, for $6.9 million in cash
plus acquisition costs. The transaction was ac-
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