Sunbeam 2003 Annual Report Download

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2003 Annual Report
2003 Annual Report

Table of contents

  • Page 1
    2003 Annual Annual Report Report 2003

  • Page 2
    ...'S LETTER BRANDED CONSUMABLES CONSUMER SOLUTIONS PLASTIC CONSUMABLES OTHER S E L E C T E D F I N A N C I A L D ATA MANAGEMENT'S DISCUSSION F I N A N C I A L S TAT E M E N T S AND 4 8 10 13 31 A N A LY S I S Winner of Jarden's 2003 Annual Report Cover Design Contest: Kim Huffman, Branded...

  • Page 3
    ... is the market leader in several targeted consumer categories, including home canning, home vacuum packaging, kitchen matches, plastic cutlery, rope, cord and twine and toothpicks. Many of our products are affordable, consumable and fundamental household staples. Corporate Strategy Our objective...

  • Page 4
    ...the year, both operationally and financially. We reported record financial performance in 2003 with revenues surpassing the $500 million mark and cash flow from operations exceeding $70 million. At the same time, shareholder value continued to expand as evidenced by a 72% increase in our share price...

  • Page 5
    ... brands has enormous development potential. The morale within your company is high; we have a clear strategy, a successful operating business and a motivated and enthusiastic management team. As we enter the new year, our main focus is executing our business strategy. Your management team intends to...

  • Page 6
    ...products used in and around the home, including home canning jars, jar closures, kitchen matches, ergonomically designed lighters, plastic cutlery, a variety of rope, cord and twine, garage and workshop storage hooks and racks, security doors, ornamental fencing, wooden craft products and a complete...

  • Page 7
    ... with existing customers. The acquisition of the Lehigh business expanded our already diverse branded consumables product line into the growing Do-It-Yourself market by adding rope, cord and twine, garage storage organizers and other home improvement products. Diamond® brand kitchen matches and...

  • Page 8
    ...to sell direct to consumers, superior marketing and retail merchandising and consistent product innovation has resulted in solid relationships with our mass merchant, warehouse club and specialty retail customer base. Key customers include Bed Bath and Beyond, Costco, Kohl's, QVC, Sam's, Target, Wal...

  • Page 9
    ... growth. FoodSaver® sales increased 12% from 2002 and we launched over 20 new products, more than ever before. The acquisition of the VillaWare® business added a high-end brand with distribution into the gourmet and specialty food retail markets. We created the home vacuum packaging category at...

  • Page 10
    ... presence in Europe by adding a UK plant to our holdings, allowing us to better service our global customers. Initiated in January, our Innovative Solutions engineering and product development group offers our customers superior product development, engineering and design capabilities in addition to...

  • Page 11
    ...of industrial zinc products marketed globally for use in the plumbing, automotive, electrical component and architectural markets, and the Lifejacket® Cathodic Protection System. 2003 Highlights ... The Lifejacket Cathodic Protection System continues to gain market share both in North America and...

  • Page 12
    ... 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...

  • Page 13
    Jarden Corporation Selected Financial Data (continued) 2003 (a) (b) 2002 (c) (d) As of December 31, 2001 2000 (e) (f) 1999 (g) (dollars in thousands) Balance Sheet Data: Cash and cash equivalents ...$125,400 $ 56,779 $ 6,376 $ 3,303 $ 17,394 Working capital ...242,039 101,557 8,035 22,975 54,611...

  • Page 14
    ...) Reconciliations of non-GAAP Measures 2003 For the year ended December 31, 2002 2001 2000 (dollars in thousands, except per share data) 1999 Net income (loss) ...$31,778 $36,309 $(85,429) $ 4,922 $29,192 Add back: non-cash restricted stock charge, net of related tax benefit of $8,559 ...13,274...

  • Page 15
    ..., home canning, home vacuum packaging, kitchen matches, rope, cord and twine and toothpicks. We also manufacture zinc strip and a wide array of plastic products for third party consumer product and medical companies as well as our own businesses. Results of Operations • • Our net sales increased...

  • Page 16
    ...Lehigh Acquisition"). Lehigh is the largest supplier of rope, cord, and twine in the U.S. consumer marketplace and a leader in innovative storage and organization products and workshop accessories for the home and garage as well as in the security screen door and ornamental metal fencing market. The...

  • Page 17
    ... funding requirements. We recorded a pretax loss of $1.4 million in 2001 related to the sale. Non-GAAP Measures Net income and diluted earnings per share, excluding a non-cash restricted stock charge and a net release of our tax valuation allowance, are non-GAAP financial measures and they are...

  • Page 18
    ...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 quarter of 2003...

  • Page 19
    ... of these non-GAAP financial measures to the most directly comparable GAAP financial measures is as follows: Year ended December 31, 2003 2002 (in thousands, except per share amounts) Net income ...Add back: non-cash restricted stock charge, net of related tax benefit of $8,559 ...Less: net...

  • Page 20
    ...principally due to the acquisition of the home vacuum packaging business, which accounted for an additional $46.3 million of selling, general and administrative expenses, and because of company-wide increased performance-based compensation expenses related to our strong financial performance in 2002...

  • Page 21
    ... described above. Financial Condition, Liquidity and Capital Resources 2003 Activity During 2003, the following changes were made to our capital resources: • we completed a public offering of approximately 4.8 million shares of our common stock at $24.67 per share (stock-split adjusted), the...

  • Page 22
    ... 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 matures on...

  • Page 23
    ... Chief Financial Officer) and James E. Lillie (our President and Chief Operating Officer), discussed immediately below and in "2002 and 2001 Activity" also below. We will receive a tax deduction for this non-cash restricted stock charge. During 2003, we issued 375,000, 135,000 and 52,500 shares of...

  • Page 24
    ... 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...

  • Page 25
    ... Corporation Management's Discusson and Analysis (continued) 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...

  • Page 26
    ...: • • the working capital of our acquired businesses; and increased cash on hand amounts caused by the equity offering, our favorable operating results and the new financing relationships discussed above, being only partially offset by amounts used to fund our 2003 acquisitions. Cash Flows from...

  • Page 27
    ... with the Lehigh Acquisition, we may be obligated to pay an earn-out in cash or our common stock of up to $25 million in 2006, provided that certain earnings performance targets are met; and In connection with a contract we have entered into to acquire additional intellectual property, we may be...

  • Page 28
    ...: 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...

  • Page 29
    ..., 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 April 2002, the Financial Accounting Standards Board ("FASB...

  • Page 30
    ... affected by the financial health of the U.S. retail industry; We may be adversely affected by the trend towards retail trade consolidation; Sales of some of our products are seasonal and weather related; Competition in our industries may hinder our ability to execute our business strategy, sustain...

  • Page 31
    ... or disruption to Jarden, our suppliers or our customers which could significantly impact our revenue, costs and expenses and financial condition; We may be adversely affected by problems that may arise between certain of our vendors, customers, and transportation services that we rely on and their...

  • Page 32
    ... 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...

  • Page 33
    ...balance sheets of Jarden Corporation and subsidiaries (the "Company") as of December 31, 2003 and 2002, and the related consolidated statements of operations, comprehensive income, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2003. These financial...

  • Page 34
    Jarden Corporation Consolidated Statements of Operations (in thousands, except per share amounts) 2003 Year ended December 31, 2002 2001 Net sales ...Costs and expenses: Cost of sales ...Selling, general and administrative expenses ...Restricted stock charge ...Goodwill amortization ...Special ...

  • Page 35
    ...Income taxes receivable ...Inventories, net ...Deferred taxes on income ...Prepaid expenses and other current assets ...Total current assets ...Non-current assets: Property, plant and equipment, at cost Land ...Buildings ...Machinery and equipment ... Jarden Corporation Consolidated Balance Sheets...

  • Page 36
    ... of common stock, net of underwriting fees and related expenses ...Other ...Net cash provided by (used in) financing activities ...Cash flows from investing activities Additions to property, plant and equipment ...Insurance proceeds from property casualty ...Acquisitions of businesses, net of...

  • Page 37
    ... income ...Stock options exercised and stock plan purchases ...Shares issued for non-cash compensation ...Shares reissued from treasury ...Shares tendered for stock options and taxes ...Cumulative translation adjustment ...Tax benefit related to stock option exercises ...Loans to executive officers...

  • Page 38
    Jarden Corporation Consolidated Statements of Comprehensive Income (in thousands) 2003 Year ended December 31, 2002 2001 Net income (loss) ...Foreign currency translation: Translation adjustment during period ...Translation adjustment recorded to net income (loss) due to liquidation of investment ...

  • Page 39
    ... reported and disclosed in the financial statements and related notes. Actual results could differ 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...

  • Page 40
    ... or market. Property, Plant and Equipment Property, plant and equipment are recorded at cost. 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...

  • Page 41
    ...the 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...

  • Page 42
    ... fiscal 2003. The adoption of SFAS No. 145 did not have a material impact on the Company's consolidated financial statements. In July 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities. SFAS No. 146 provides guidance on the timing of the recognition...

  • Page 43
    ...Lehigh Acquisition"). Lehigh is the largest supplier of rope, cord and twine for the U.S. consumer marketplace and a leader in innovative storage and organization products and workshop accessories for the home and garage as well as in the security screen door and ornamental metal fencing market. The...

  • Page 44
    ... 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...

  • Page 45
    ... financial information presented does not exclude the $21.8 million non-cash restricted stock charge and related tax benefit recorded in 2003 or the net $4.4 million income tax valuation allowance released in 2002: Year Ended December 31, 2003 2002 (in thousands, except per share data) Net sales...

  • Page 46
    ... Corporation Notes to Consolidated Financial Statements (continued) Net sales, operating earnings (loss), capital expenditures, depreciation and amortization, and assets employed in operations by segment are summarized as follows: 2003 Year Ended December 31, 2002 (in thousands) 2001 Net sales...

  • Page 47
    ... relating to benefit plans, deferred tax assets and corporate facilities and equipment. (7) Intersegment sales are recorded at cost plus an agreed upon intercompany profit on intersegment sales. Within the branded consumables segment are three product lines: kitchen products, home improvement...

  • Page 48
    Jarden Corporation Notes to Consolidated Financial Statements (continued) require the individuals to secure a life insurance policy having the death benefit equivalent to the amount of the loan payable to the Company. All accrued interest and principal on the loans are payable upon the death of the ...

  • Page 49
    Jarden Corporation Notes to Consolidated Financial Statements (continued) As of December 31, 2003 and 2002, the Company had recorded the following amounts for intangible assets: Branded Consumables Consumer Solutions (in millions) Total 8. Intangibles 2003 Intangible assets not subject to ...

  • Page 50
    ...follows: 2003 Year Ended December 31, 2002 2001 (in thousands, except per share amounts) Reported net income (loss) ...Add back: goodwill amortization (net of tax expense of $0, $0 and $2,020, respectively) ...Adjusted net income (loss) ...Basic earnings (loss) per share: Reported net income (loss...

  • Page 51
    ... sub-limit and a $10 million swing line loans sub-limit. On September 2, 2003, the Company drew down the full cash 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. The Company's Amended...

  • Page 52
    ... As of December 31, 2003, the Notes traded at a premium, resulting in an estimated fair value, based upon quoted market prices, of approximately $198.5 million. As of December 31, 2003, the Company had $199.6 million outstanding under the term loan facilities and no outstanding amounts under...

  • Page 53
    ... 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, 2003, 2002 and 2001 was $17.2 million, $10.5 million and $9.5 million, respectively. 10. Taxes on Income The components of the provision (benefit...

  • Page 54
    ... and the applicable requirements of federal law. Benefits under the Company's pension plans are primarily related to years of service. The Company also provides certain postretirement medical and life insurance benefits for a portion of its employees. We use September 30 as the measurement date for...

  • Page 55
    Jarden Corporation Notes to Consolidated Financial Statements (continued) The components of net periodic pension and postretirement benefit expense for the years ended December 31, 2003, 2002 and 2001 are as follows: 2003 Pension Benefits 2002 2001 Postretirement Benefits 2003 2002 2001 (in ...

  • Page 56
    ... in order to minimize the cost of providing pension benefits. The Company's target asset range for 2004 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...

  • Page 57
    ... a life insurance policy having the death benefit equivalent to the amount of the loan payable to the Company. All accrued interest and principal on the loans are payable upon the death of the participant and their spouse. The Company recognized $4.1 million of pre-tax income during 2001 related to...

  • Page 58
    Jarden Corporation Notes to Consolidated Financial Statements (continued) On September 30, 2003, the Company completed a public offering ("Offering") of approximately 4.8 million of its common stock at $24.67 per share. Proceeds from the Offering, net of underwriting fees and related expenses, ...

  • Page 59
    ... Notes to Consolidated Financial Statements (continued) A summary of the Company's stock option activity for the years ended December 31, 2003, 2002 and 2001 is as follows: Shares Weighted Avg. Option Price Price Range Outstanding as of December 31, 2000 ...New options granted ...Exercised...

  • Page 60
    Jarden Corporation Notes to Consolidated Financial Statements (continued) earlier of the Company's 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 Messrs. ...

  • Page 61
    ... owed under their respective loans. The Company will not make any additional loans under the Executive Loan Program. 16. 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...

  • Page 62
    ... payment dates that are the same as the term loan facility and it matures on September 30, 2004. The swap is considered to be a cash flow hedge and is also considered to be an effective hedge against changes in the fair value of the Company's floating-rate debt obligation for both tax and accounting...

  • Page 63
    ... Notes to Consolidated Financial Statements (continued) On May 7, 2001, the Company entered into a letter of intent (the "Letter") with Marlin Partners II, LP ("Marlin"), Catterton Partners, L.P. and Alpha Private Equity Group (collectively, the "Other Investors") for the acquisition by Marlin and...

  • Page 64
    ... 2003, includes a non-cash restricted stock charge of $21.8 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...

  • Page 65
    ....com Securities Listing Jarden's common stock is listed on the New York Stock Exchange. Symbol: JAH Other Alltrista Zinc Products Company 2500 Old Stage Road Greeneville, TN 37745 423-639-8111 www.allzinc.com Investor Relations Financial Dynamics Business Communications New York, New York 212-850...

  • Page 66