Sunbeam 2003 Annual Report Download - page 28

Company (“USPC”), a privately held leading producer and distributor of premium playing cards,
including the Bee®, Bicycle®, Aviator®and Hoyle®brands, for approximately $232 million. The
transaction is expected to close by the third quarter of 2004, subject to Hart-Scott-Rodino approval,
gaming industry related regulatory approvals, BHI shareholder execution and approval and other
conditions. USPC is the largest manufacturer and distributor of playing cards, children’s card games,
collectible tins, puzzles and card accessories for the North American retail market and through its
subsidiaries, including USPC, BHI is the largest supplier of premium playing cards to casinos worldwide.
It is anticipated that we will purchase not less than 75% of the capital stock of BHI at closing and that
the remainder of the capital stock will be purchased according to the terms of a put/call agreement
within one year of closing. In addition to the purchase price, the agreement includes an earn-out
provision with a total potential payment in cash or our common stock of up to $10 million based on
achieving future growth targets. If paid, we expect to capitalize the cost of the earn-out. No assurances
can be given that the acquisition of BHI will be consummated or, if such acquisition is consummated, as
to the final terms of such acquisition. The foregoing summary description of the purchase agreement,
the put/call agreement and the transactions contemplated thereby are not intended to be complete and
are qualified in their entirety by the complete texts of the purchase agreement and the put/call
agreement.
Critical Accounting Policies
Our financial statements are prepared in accordance with accounting principles generally accepted
in the United States, which require us to make judgments, estimates and assumptions that affect the
amounts reported in the financial statements and accompanying notes. The following list of critical
accounting policies is not intended to be a comprehensive list of all our accounting policies. Our
significant accounting policies are more fully described in Note 1 to the Consolidated Financial
Statements. The following represents a summary of our critical accounting policies, defined as those
policies that we believe are the most important to the portrayal of our financial condition and results of
operations, and/or require management’s significant judgments and estimates:
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, or exchange. Our revenue is recognized as the net amount to be
received after deducting estimated amounts for product returns, discounts, and allowances. We estimate
future product returns based upon historical return rates and our judgment. If these estimates do not
properly reflect future returns, they could be revised.
Allowance for accounts receivable
We maintain an allowance for doubtful accounts for estimated losses that may result from the
inability of our customers to make required payments. That estimate is based on historical collection
experience, current economic and market conditions, and a review of the current status of each
customer’s trade accounts receivable. If the financial condition of our customers were to deteriorate or
our judgment regarding their financial condition was to change negatively, additional allowances may be
required resulting in a charge to income in the period such determination was made. Conversely, if the
financial condition of our customers were to improve or our judgment regarding their financial
condition was to change positively, a reduction in the allowances may be required resulting in an
increase in income in the period such determination was made.
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Jarden Corporation
Management’s Discusson and Analysis (continued)