Sunbeam 2004 Annual Report Download - page 31

Management’s Discussion and Analysis of Financial Condition and Results of Operations
(cont’d)
Recent Developments
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 is the parent of The Coleman Company, Inc. (“Coleman”) and Sunbeam Products,
Inc. (“SPI”), leading producers of global consumer products through brands such as BRK®,
Campingaz®, Coleman®, First Alert®, Health o meter®, Mr. Coffee®, Oster®and Sunbeam®. Product
lines added include appliances, personal care and wellness, home safety equipment and outdoor leisure
and camping products. Had AHI been a part of us from January 1, 2004, our unaudited pro forma
consolidated net sales (including the pro forma effect of the USPC Acquisition) for 2004 would have
been $2.7 billion. The SPI business will be integrated within our existing consumer solutions segment in
2005 and the Coleman business will form a new segment of our Company called “outdoor solutions.”
In connection with the AHI Acquisition, we issued $350 million of equity securities pursuant to a
purchase agreement (“Equity Purchase Agreement”). The securities issued were as follows:
(i) 714,286 shares of our common stock for approximately $21.4 million, at a price of $30 per
share;
(ii) 128,571 shares or approximately $128.6 million of a new class of our preferred stock, Series B
Convertible Participating Preferred Stock (“Series B Preferred Stock”), par value $.01 per
share, at a price of $1,000 per share; and
(iii) 200,000 shares or approximately $200 million of a new class of our preferred stock, Series C
Mandatory Convertible Participating Preferred Stock (“Series C Preferred Stock”), par value
$.01 per share, at a price of $1,000 per share.
In accordance with the Equity Purchase Agreement and a related Assignment and Joinder
Agreement, approximately $300 million of our equity securities were issued to Warburg Pincus Private
Equity VIII, LP and its affiliates and approximately $50 million was issued to Catterton Partners V, LP
and its affiliates, both private equity investors (collectively “Private Equity Investors”). The cash raised in
connection with the Equity Purchase Agreement was used to fund a portion of the cash purchase price
of AHI.
The terms of the Equity Purchase Agreement require shareholder approval of the mandatory
conversion of the Series C Preferred Stock into a combination of Series B Preferred Stock and our
common stock. Subsequent to shareholder approval and mandatory conversion, our total new equity
issued to the Private Equity Investors, will consist of $300 million of Series B Preferred Stock and
1,666,667 shares of our common stock valued at $50 million, without taking into effect any other
conversion, market value increases or the accrual of dividends.
Additionally, the AHI Acquisition was also funded through a new $1.05 billion senior credit facility,
consisting of a term loan facility in the aggregate principal amount of $850 million and a revolving credit
facility with an aggregate commitment of $200 million. This facility replaces our Second Amended
Credit Agreement.
On January 24, 2005, we entered into two interest rate swaps, effective on January 26, 2005, that
converted an aggregate of $125 million of floating rate interest payments (excluding our 2% applicable
margin) under its term loan facility for a fixed obligation. Both interest rate swaps carry a fixed interest
rate of 4.025% per annum for a term of five years. The swaps have interest payment dates that are the
same as the term loan facility. The swaps are considered to be cash flow hedges and are also considered
to be effective hedges against changes in future interest payments of our floating-rate debt obligation for
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