Sunbeam 2004 Annual Report Download - page 17

Management’s Discussion and Analysis of Financial Condition and Results of Operations
(cont’d)
‰We increased total stockholder’s equity to approximately $334.0 million at December 31, 2004
from approximately $249.9 million at December 31, 2003, primarily due to net income and
restricted common stock issuances;
‰Cash flow generated from operations was approximately $70.4 million in 2004 compared to
$73.8 million in December 31, 2003. The decrease of $3.4 million was principally due to an
increase in working capital, partially offset by an increase of $17.4 million in cash operating
income;
‰As of December 31, 2004, we had $20.7 million of cash and cash equivalents on hand and
nothing drawn down under our revolving credit facility; and
‰On January 24, 2005 we completed our acquisition of AHI, a privately held company, for
approximately $745.6 million in cash for the equity and the repayment of approximately $100
million of indebtedness (“AHI Acquisition”). The AHI Acquisition was funded through a
combination of new debt and equity financing (see “Financial Condition, Liquidity and Capital
Resources” and “Recent Developments”).
We intend the discussion of our financial condition and results of operations, including our
acquisition and disposition activities, that follows to provide information that will assist in understanding
our financial statements, the changes in certain key items in those financial statements from year to year,
and the primary factors that accounted for those changes, as well as how certain accounting principles,
policies and estimates affect our financial statements.
Acquisition Activities
We have grown through strategic acquisitions of complementary businesses and expanding sales of
our existing brands. Our strategy to achieve future growth is through internal growth as well as to
consider future acquisitions of businesses or brands that complement our existing product portfolio (see
“Recent Developments” below).
2004 Activity
On June 28, 2004 we acquired approximately 75.4% of the issued and outstanding stock of USPC
and subsequently acquired the remaining 24.6% pursuant to a put/call agreement (“Put/Call
Agreement”) on October 4, 2004. USPC is a manufacturer and distributor of playing cards and related
games and accessories. USPC’s portfolio of owned brands includes Aviator®, Bee®, Bicycle®and Hoyle®.
In addition, USPC has an extensive list of licensed brands, including Disney®, Harley-Davidson®,
Mattel®, NASCAR®and World Poker Tour™. USPC’s international holdings include Naipes Heraclio
Fournier, S.A., a leading playing card manufacturer in Europe. The aggregate purchase price was
approximately $237.9 million, including transaction expenses and deferred consideration amounts. The
cash portion of the purchase price funded on June 28, 2004 was financed using a combination of cash
on hand, new debt financing (see discussion in “Financial Condition, Liquidity and Capital Resources”
below) and borrowings under our existing revolving credit facility. The cash portion of the October 4,
2004 exercise of the Put/Call Agreement was funded by a combination of cash on hand and borrowings
under our existing revolving credit facility.
As of December 31, 2004, in connection with the USPC Acquisition, we had accrued approximately
$20 million of deferred consideration for purposes of guaranteeing potential indemnification liabilities
of the sellers, of which $10 million is included as part of Deferred Consideration for Acquisitions on our
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