Sunbeam 2003 Annual Report Download - page 20

sales and a contractual sales price reduction to a significant customer. In our other segment, net sales
decreased to $41.0 million in 2002 from $45.5 million in 2001, primarily due to a reduction in sales to
the United States Mint in connection with its inventory reduction program for all coinage.
We reported operating income of $65.1 million for 2002. These results compare to an operating
loss of $113.9 million for 2001, which included special charges and reorganization expenses of $5.0
million and a loss on divestitures of assets and product lines of $122.9 million. All of our segments
generated increases in operating income in 2002 from 2001, with the exception of the other segment,
which had a small decrease but still maintained a constant operating income percentage of net sales in
2002. From April 1, 2002 until December 31, 2002, our consumer solutions segment, which consists of
the acquired Tilia business, generated operating income of $31.7 million. Operating income for our
branded consumables and plastic consumables segments increased by $4.7 million and $14.4 million,
respectively, in 2002 compared to 2001. The other factors that contributed to these favorable operating
income results are discussed in the following two paragraphs.
Gross margin percentages on a consolidated basis increased to 41.0% in 2002 from 23.5% in 2001,
reflecting the higher gross margins of the acquired home vacuum packaging business in 2002, the lower
gross margins of the disposed TPD Assets and Microlin businesses which were disposed in 2001, a $1.5
million charge for slow moving inventory in the branded consumables segment in 2001 and cost
efficiency increases in our plastic consumables segment. These increases were partially offset by lower
gross margins in the branded consumables segment caused by the lower sales volume.
Selling, general and administrative expenses increased to $85.4 million in 2002 from $52.6 million
in 2001, or, as a percentage of net sales increased to 23.3% in 2002 from 17.3% in 2001. This increase
was 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. Partially offsetting this were decreases in selling, general and administrative expenses in our
branded consumables, plastic consumables and other segments. Expenses within the branded
consumables segment decreased due to lower selling expenses associated with the decrease in net sales
discussed above. Expenses within our plastic consumables segment decreased primarily due to the
divestiture of TPD Assets and Microlin, which accounted for $11.7 million of this decline, and lower
expenses in the remaining business of the segment.
We incurred net special charges and reorganization expenses of $5.0 million in 2001, consisting of
$0.8 million in costs to exit facilities, $2.4 million in stock option compensation, $2.3 million in
corporate restructuring costs, $2.6 million in separation costs for former executive officers and $1.4
million of costs to evaluate strategic options, partially offset by $4.1 million in pre-tax income related to
the discharge of certain deferred compensation obligations and $0.4 million of income for items related
to the divested TPD Assets.
As a result of the adoption of SFAS No. 142, we did not record goodwill amortization in 2002.
Goodwill amortization of approximately $5.2 million had been recorded in 2001.
Net interest expense in 2002 was $12.6 million compared to $11.8 million for 2001, primarily due to
the additional indebtedness assumed pursuant to the Tilia Acquisition, partially offset by the write-off in
2001 of $1.5 million of previously deferred debt issuance costs in November 2001 in conjunction with
the amendment to our credit facility effected in connection with the TPD Assets sale. During 2002, we
had a lower weighted average interest rate than the prior year, which was more than offset by higher
average borrowings outstanding.
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Jarden Corporation
Management’s Discusson and Analysis (continued)