Sunbeam 2004 Annual Report Download - page 52

Jarden Corporation
Notes to Consolidated Financial Statements (cont’d)
December 31, 2004
on plan participants. As permitted by FSP 106-1, the Company made a one-time election to defer
accounting for the effect of the Medicare Prescription Drug Act and, as a result, the amounts included
in the Company’s Consolidated Financial Statements do not reflect the effects of the Medicare
Prescription Drug Act.
In May 2004, the FASB issued FSP No. 106-2 (FSP 106-2, which superseded FASP 106-1). FSP 106-2
provides authoritative guidance on the accounting for the federal subsidy and specifies the disclosure
requirements for employers who have adopted FSP 106-2. Detailed regulations necessary to implement
the Medicare Prescription Drug Act have not been issued, including those that would specify the
manner in which actuarial equivalency must be determined, the evidence required to demonstrate
actuarial equivalency, and the documentation requirements necessary to be entitled to the subsidy. FSP
106-2 is effective for the Company’s first quarter of 2005. The Company does not currently believe that
the adoption of FSP 106-2 will have a material impact on the Company’s consolidated financial
statements. Final authoritative guidance could require the Company to change this assessment.
3. Acquisitions
2004 Activity
On June 28, 2004, the Company acquired approximately 75.4% of the issued and outstanding stock
of Bicycle Holding, Inc., including its wholly owned subsidiary United States Playing Card Company
(collectively “USPC” and “USPC Acquisition”), 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
Note 8) and borrowings under the Company’s 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
revolving borrowings under the Company’s senior credit facility (see Note 8).
As of December 31, 2004, in connection with the USPC Acquisition, the Company accrued
approximately $20 million of deferred consideration for purposes of guaranteeing potential
indemnification liabilities of the sellers, of which $10 million is included as Deferred Consideration for
Acquisitions on the Consolidated Balance Sheet. The remaining $10 million is included in Other Non-
current Liabilities on the Consolidated Balance Sheet. The holdback amount is secured by a stand-by
letter of credit under the Company’s senior credit facility (see Note 8).
The Company also accrued approximately $3.0 million for a planned and ongoing restructuring
related to USPC. In addition, the USPC Acquisition includes an earn-out provision with a potential
payment in cash of up to $2 million and an additional potential payment of up to $8 million (for a
potential total of up to $10 million) in either cash or Company common stock, at the Company’s sole
discretion, payable in 2007, provided that certain earnings performance targets are met. If paid, the
Company expects to capitalize the cost of the earn-out. USPC is included in the branded consumables
segment from June 28, 2004.
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