Sunbeam 2003 Annual Report Download - page 25

Jarden 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 prime rate and (b) the federal funds rate plus .50%, plus, in each case, an
applicable margin ranging from 2.00% to 2.75% for Eurodollar Rate loans and from .75% to 1.5% for
Base Rate loans. The Old Credit Agreement contained restrictions on the conduct of our business
similar to the Amended Credit Agreement. The Old Credit Agreement was replaced by the Amended
Credit Agreement.
Until it was replaced by the Old Credit Agreement on April 24, 2002, our senior credit facility, as
amended provided for a revolving credit facility of $40 million and a term loan which amortized
periodically as required by the terms of the agreement. Interest on borrowings under the term loan and
the revolving credit facilities were based upon fixed increments over adjusted LIBOR or the agent bank’s
alternate borrowing rate as defined in the agreement. The agreement also required the payment of
commitment fees on the unused balance. During the first quarter of 2002, approximately $38 million of
tax refunds we received were used to repay a portion of the outstanding amounts under this credit
agreement.
In conjunction with the Notes, on April 24, 2002, we entered into a $75 million interest rate swap
(“Initial Swap”) to receive a fixed rate of interest and pay a variable rate of interest based upon LIBOR.
The Initial Swap had a maturity date that was the same as the Notes. Interest was payable semi-annually
in arrears on May 1 and November 1, commencing on November 1, 2002. The initial effective rate of
interest that we established on this swap was 6.05%.
Effective September 12, 2002, we entered into an agreement, whereby we unwound the Initial Swap
and contemporaneously entered into a new $75 million interest rate swap (“First Replacement Swap”).
The First Replacement Swap had the same terms as the Initial Swap, except that we were required to pay
a variable rate of interest based upon 6 month LIBOR in arrears. The spread on this contract was 470
basis points. Based upon this contract, we paid an effective interest rate of 6.32% on November 1, 2002.
In return for unwinding the Initial Swap, we received $5.4 million in cash proceeds, of which $1 million
related to accrued interest that was owed to us. The remaining $4.4 million of proceeds is being
amortized over the remaining life of the Notes as a credit to interest expense and is included in our
consolidated balance sheet as an increase to the value of the long-term debt. Such amortization amount
offsets the increased effective rate of interest that we pay on the Second Replacement Swap. The First
Replacement Swap was superceded by the Second Replacement Swap, as discussed above.
All of our swaps have been and, where applicable, are considered to be effective hedges against
changes in the fair value of our fixed-rate debt obligation for both tax and accounting purposes.
During 2002, we issued 150,000 and 60,000 shares of restricted stock to Messrs. Franklin and
Ashken, respectively, under our 1998 Long-Term Equity Incentive Plan, as amended and restated, and
out of our treasury stock account. During 2003, the restricted stock issuances were amended to provide
that the restrictions would lapse upon the same terms as the 2003 restricted stock issuances discussed in
“2003 Activity” above. Also, as discussed in “2003 Activity” above, during the fourth quarter of 2003 all
such restrictions lapsed and we recorded a restricted stock charge.
During 2002 and 2001, we also issued 5,250 and 1,500, respectively, of shares of restricted stock to
certain other employees. The restrictions on these shares will lapse ratably over five years of employment
with us.
During 2002, we incurred costs in connection with the issuance of the Notes and the Old Credit
Agreement of approximately $7.4 million.
page 23