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2005 Annual Report
Innovations That Improve Life

Table of contents

  • Page 1
    2005 Annual Report Innovations That Improve Life

  • Page 2
    02 Chairman's Letter 04 Branded Consumables 06 Consumer Solutions 08 Outdoor Solutions 10 Other 11 Selected Financial Data 14 Management's Discussion & Analysis 33 Financial Statements Winner of Jarden's 2005 Annual Report Cover Design Concept: Scott Hager, Jarden Home Brands.

  • Page 3
    .... CORPORATE PROFILE Jarden Corporation is a global provider of market leading branded consumer products used in and around the home, marketed under well-known brand names through three primary business segments: branded consumables, consumer solutions and outdoor solutions. Our branded consumables...

  • Page 4
    ... 2005, we completed the American Household acquisition, which has proven to be a highly successful addition to Jarden. In July 2005, we added The Holmes Group, a predominantly niche player in the kitchen appliance and home environment markets, to complement our Jarden Consumer Solutions segment...

  • Page 5
    ... E. Franklin - Chairman and Chief Executive Officer CORPORATE TEAM ADDS VALUE The corporate Human Resources department of Jarden was at the forefront of the integrations completed in 2005. The new team's most important goal for 2005 was to complete a company-wide employee "total rewards" survey...

  • Page 6
    ..., branded consumer products used in and around the home Branded consumables continued its new product development efforts with the release of its Simply Art line, plastic freezer jars and soduko playing card deck, among others. We manufacture or source, market and distribute a broad line of branded...

  • Page 7
    ...ability to work closely with customers to create new and innovative product lines. ERP Implementation In early 2005, Jarden Home Brands and US Playing Card Company began a joint development initiative to share a unified enterprise resource planning software platform, utilizing the SAP system already...

  • Page 8
    ..., bedding, home vacuum packaging machines, heating pads, slow cookers, air cleaning products, fans and heaters, personal and animal grooming products, as well as related "consumable" items for certain of these products. We sell kitchen products under the Crock-Pot®, FoodSaver®, Mr. Coffee®, Oster...

  • Page 9
    ... of new coffee products featuring stylish colors and innovative materials. In addition, the team developed a revolutionary new hot tea maker, effectively creating an entirely new product category upon which to build. The result was a winning combination- beverage sales outpaced industry growth and...

  • Page 10
    ... of airbeds, coolers, grills, lanterns, sleeping bags, tents and other related outdoor activity products. We manufacture or source, market and distribute products worldwide under, and license rights to, the Campingaz® and Coleman® brand names, among others. Our product line services the camping...

  • Page 11
    ... met. The Company's hurricane response went far beyond making sure operations were running. Teams of volunteers helped to hand-load products to deliver to Red Cross shelters and employees assisted in delivering food, water and blankets to the evacuees. Carrier Scorecard System During 2005, one of...

  • Page 12
    ... in order to successfully meet our customer's goal. We are proud to have completed this successful bronze-plated coin initiative and believe that we can capitalize on the success and our investment to develop new products using a bronze plated coin solution. Revenue was $ 233 million in 2005...

  • Page 13
    ... reported net income. For the Years Ended December 31, 2005 2004 2003 2002 2001 (a)(b)(g) (b)(c) (b)(d) (b)(e) (f)(g) (in millions, except per share data) STATEMENTS OF INCOME DATA: Net sales ...Operating earnings (loss) ...Interest expense, net ...Loss on early extinguishment of debt ...Income tax...

  • Page 14
    ...18 2005; USPC from June 28, 2004; Lehigh from September 2, 2003; Diamond Brands from February 1, 2003; and Tilia from April 1, 2002; which are the respective dates of acquisition. (c) 2004 includes a non-cash restricted stock charge of $32.5 million. As a result, the Company's operating earnings and...

  • Page 15
    ...and creditworthiness of companies with comparable market capitalization to the Company, many of which present EBITDA when reporting their results. Furthermore, EBITDA is one of the factors used to determine the total amount of bonuses available to be awarded to executive officers and other employees...

  • Page 16
    ...&A should be read in conjunction with Selected Financial Data and the consolidated financial statements appearing elsewhere in this Annual Report. Overview We are a leading provider of market branded consumer products used in and around the home marketed under well-known brand names including Ball...

  • Page 17
    ... the legacy Sunbeam Products business was integrated within our existing consumer solutions segment and the Coleman business formed a new segment named outdoor solutions. Financing for the AHI Acquisition is discussed in "Financial Condition, Liquidity and Capital Resources" below. 2004 Activity On...

  • Page 18
    ...52.2) $838.6 Kitchen products ...Home improvement products ...Playing cards products (1) ...Other specialty products ...Total branded consumables (1) ...Consumer solutions (2) ...Outdoor solutions (3) ...Other ...Intercompany eliminations (4) ...Total net sales ... (1) The USPC business is included...

  • Page 19
    ...The outdoor solutions segment was created upon the purchase of the Coleman business with the AHI Acquisition, effective January 24, 2005. (4) Intersegment sales are recorded at cost plus an agreed upon intercompany profit on intersegment sales. We reported net sales of $3.2 billion in the year ended...

  • Page 20
    ...related benefit costs as well as charges relating to the transitioning of operations between facilities and offices, plant closures and write-offs of the carrying value of certain equipment and software applications. We reported operating earnings of $186 million for the year ended December 31, 2005...

  • Page 21
    ... $587.7 Kitchen products(1) ...Home improvement products(2) ...Playing cards products(3) ...Other specialty products(1)(2)(3) ...Total branded consumables(1)(2)(3) ...Consumer solutions(4) ...Other(5) ...Intercompany eliminations(6) ...Total net sales ...(1) The Diamond Brands wood manufacturing...

  • Page 22
    ...new business development projects, partially offset by the sales effects discussed above. Operating earnings of our other segment increased by $3.5 million due primarily to the sales effects discussed above. During the fourth quarters of 2004 and 2003, we recorded non-cash compensation costs related...

  • Page 23
    ... Capital Resources 2005 Activity During the year ended December 31, 2005, the following changes were made to our capital resources: ‰ we issued term debt (the "Term Loan") under a new senior credit facility of which $1.3 billion remains outstanding as of December 31, 2005; the proceeds were used...

  • Page 24
    ...and losses related to the effective portion of the interest rate swaps are reported as a component of other comprehensive income and are reclassified into earnings in the same period that the hedged transaction affects earnings. As of December 31, 2005, the fair market value of the Replacement Swaps...

  • Page 25
    ... Sheets. On March 1, 2006, pursuant to the new stock repurchase program, the Company repurchased 2.0 million shares of the Company's common stock for $50.0 million through a privately negotiated sale. 2004 Activity During 2004, the following changes were made to our capital resources we completed...

  • Page 26
    ... stock to three of our executive officers. The restrictions on these shares were to lapse ratably over a three year period commencing January 1, 2005 and would lapse immediately in the event of a change in control. Following the signing of the AHI Acquisition during October 2004, our Board amended...

  • Page 27
    ... fall within our capital expenditure benchmarks for periods prior to 2005. Cash used in investing activities was $1.3 billion for the year ended December 31, 2005, which represented an increase of $1.0 billion over the prior year, and primarily relates to the AHI Acquisition and THG Acquisition. 25

  • Page 28
    ... time to time to take advantage of favorable conditions in the capital markets or in connection with our corporate development activities. Our ability to access both debt and equity capital markets and to obtain attractive rates of return on our invested capital is dependent on the capital market...

  • Page 29
    ... 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 allowance for product returns The Company recognizes revenues at the time of product...

  • Page 30
    ... As a consumer goods manufacturer and distributor, we face the risk of product liability and related damages for substantial money damages, product recall actions and higher than anticipated rates of warranty returns or other returns of goods. Each year we set our product liability insurance program...

  • Page 31
    ... from time to time in the ordinary course of business. In addition, the Environmental Protection Agency has designated our Company as a potentially responsible party, along with numerous other companies, for the clean up of several hazardous waste sites. Based on currently available information, we...

  • Page 32
    ... and in reports to our shareholders. Such forward-looking statements include the Company's repurchase of shares of common stock from time to time under the Company's stock repurchase program, the outlook for Jarden's markets and the demand for its products, earnings per share, future cash flows from...

  • Page 33
    ... significant derivative financial or commodity instruments, nor does it invest in any foreign financial instruments. The Company does not use derivative instruments for speculative purposes. NYSE Corporate Governance Disclosure Jarden Corporation filed as exhibits to its 2005 Annual Report on Form...

  • Page 34
    ...Results of Operations"). Cash generated from operations will be used for general corporate purposes, including acquisitions and supporting organic growth. The table below sets forth the high and low sales prices of the Company's common stock as reported on the New York Stock Exchange for the periods...

  • Page 35
    ... Company maintained effective internal control over financial reporting as of December 31, 2005. On January 24, 2005, the Company completed the acquisition of American Household, Inc. and, on July 18, 2005 completed the acquisition of The Holmes Group, Inc., ("Holmes") both privately held companies...

  • Page 36
    ... Public Accounting Firm The Board of Directors and Stockholders of Jarden Corporation We have audited management's assessment, included in the accompanying Management's Report on Internal Control Over Financial Reporting, that Jarden Corporation and subsidiaries (the "Company") maintained effective...

  • Page 37
    ... standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Jarden Corporation and subsidiaries as of December 31, 2005 and 2004, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the years in the...

  • Page 38
    ... October 1, 2005, the Company adopted SFAS No. 123, Share-Based Payment (revised 2004). We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Jarden Corporation's internal control over financial reporting as of...

  • Page 39
    Jarden Corporation Consolidated Statements of Income (in thousands, except share and per share data) Years Ended December 31, 2005 2004 2003 Net sales ...Cost of sales ...Selling, general and administrative expenses (including non-cash compensation of $62,368, $32,455 and $21,899 for the years ended...

  • Page 40
    Jarden Corporation Consolidated Balance Sheets (in thousands, except per share amounts) As of December 31, 2005 2004 Assets Current assets: Cash and cash equivalents ...Accounts receivable, net of allowances of $41,200 in 2005, $14,149 in 2004 . . Income taxes receivable ...Inventories ...Deferred ...

  • Page 41
    ...772 98,066 284,796 Cash flows from investing activities: Additions to property, plant and equipment ...(58,492) (10,761) (12,822) Acquisition of businesses, net of cash acquired ...(1,289,614) (258,008) (277,259) Other ...6,971 (4,447) 85 Net cash used in investing activities ...(1,341,135) (273,216...

  • Page 42
    ... awards, stock options exercised and stock plan purchases ...Shares reissued from treasury ...Restricted stock awards canceled and shares tendered for stock options and taxes ...Non cash compensation charges ...Tax benefit related to stock option exercises ...Repayment of executive officers loans...

  • Page 43
    ... treasury ...(596) - Restricted stock awards cancelled and shares tendered for stock options and taxes ...- - Non cash compensation charges ...- - Tax benefit related to stock option exercises ...- - Shares repurchased ...- - Shares issued for acquisitions ...7,221 72 Shares issued for dividends on...

  • Page 44
    ... Consolidated Financial Statements December 31, 2005 1. Business and Significant Accounting Policies Business Jarden Corporation and its subsidiaries (hereinafter referred to as the "Company" or "Jarden") is a leading provider of market branded consumer products used in and around the home marketed...

  • Page 45
    ... net sales in 2005, 2004 and 2003, respectively, were to a single customer who purchased product from three of the Company's business segments including branded consumables, consumer solutions and outdoor solutions. Cash and Cash Equivalents The Company considers highly liquid investments purchased...

  • Page 46
    ... that extend the useful lives of assets are capitalized. The Company reviews property, plant and equipment for impairment whenever events or circumstances indicate that carrying amounts may not be recoverable through future undiscounted cash flows. If the Company concludes that impairment...

  • Page 47
    ... Stock Split On June 9, 2005, the Company's Board of Directors declared a 3-for-2 stock split in the form of a stock dividend of one additional share of common stock for every two shares of common stock, payable on July 11, 2005 to shareholders of record as of the close of business on June 20, 2005...

  • Page 48
    ... employee benefits, stock-based compensation, employment taxes, management information systems, marketing, advertising, office rent, insurance, legal, finance, audit and travel. Advertising Costs Advertising costs consist primarily of ad demo, cooperative advertising, media placement and promotions...

  • Page 49
    ...of the Company's customers and the Company's ongoing credit review procedures. Collateral for trade receivables is generally not required. The Company places its interest-bearing cash equivalents with major financial institutions. Share-Based Compensation Cost Effective October 1, 2005, the Company...

  • Page 50
    ...net income and pro forma earnings per share prior to October 1, 2005 were calculated using pro forma guidance under SFAS 123. The fair value of stock options was determined using the Black-Scholes option-pricing model which was previously used for disclosing the Company's pro forma information under...

  • Page 51
    Jarden Corporation Notes to Consolidated Financial Statements (cont'd) December 31, 2005 Pension and Postretirement Plans The Company records annual amounts relating to its pension and postretirement plans based on calculations which include various actuarial assumptions, including discount rates, ...

  • Page 52
    ... of The Holmes Group, Inc. ("Holmes" and the "THG Acquisition") for approximately $420 million in cash and 6.15 million shares of the Company's common stock. Holmes is a leading manufacturer and distributor of select home environment and small kitchen electrics under well-recognized consumer brands...

  • Page 53
    ...'s strategy of acquiring branded consumer products businesses with leading market positions in markets for products used in and around the home and home away from home. During 2005, the Company completed three tuck-in acquisitions within the branded consumables division. 2004 Activity On June 28...

  • Page 54
    ... in cash or the Company's common stock, at the Company's sole discretion, based on earnings performance targets. Pro forma financial information The aggregate of the tuck-in acquisitions did not have a material effect on the Company's results of operations for the years ended December 31, 2005 or...

  • Page 55
    Jarden Corporation Notes to Consolidated Financial Statements (cont'd) December 31, 2005 The following table summarizes the estimated fair values of the assets acquired and the liabilities assumed at the respective effective dates of acquisition for the year ended December 31, 2005 (in millions): ...

  • Page 56
    ... $0.5 million and $0.5 million was recorded in the years ended December 31, 2005 and 2004, respectively. These amounts are included in SG&A expenses in the Consolidated Statements of Income. In the consumer solutions segment, intangible assets which have finite lives and are currently subject to...

  • Page 57
    Jarden Corporation Notes to Consolidated Financial Statements (cont'd) December 31, 2005 The following table summarizes the changes to the carrying amounts of intangible asset not subject to amortization during the years ended December 31, 2005 and 2004 (in millions): Branded Consumables Intangible ...

  • Page 58
    ... replacement of the Second Amended Credit Agreement, the Company recorded a loss on early extinguishment of debt in its Consolidated Statements of Income in connection with the write-off of approximately $6.0 million of unamortized deferred debt issuance costs during the year ended December 31, 2005...

  • Page 59
    Jarden Corporation Notes to Consolidated Financial Statements (cont'd) December 31, 2005 On April 11, 2005, the Company completed a $100 million add-on to the Term Loan as part of the first amendment to the Senior Credit Facility. These proceeds were used for general corporate purposes and strategic...

  • Page 60
    ...Senior Debt are guaranteed by the Company and certain of its foreign subsidiaries which are directly or indirectly 100% owned by the Company. 2004 Activity On June 28, 2004, in connection with its USPC Acquisition, the Company completed a $116 million add-on to its Term B loan facility ("Term B Add...

  • Page 61
    Jarden Corporation Notes to Consolidated Financial Statements (cont'd) December 31, 2005 The Second Amended Credit Agreement did not significantly change the restrictions on the conduct of the Company's business or the financial covenants required in the previous senior credit facility ("Amended ...

  • Page 62
    ..., 2005, in connection with Sunbeam Corporation (Canada) Limited ("Sunbeam Canada") legal reorganization and IRC §965 dividend, Sunbeam Canada obtained a senior secured term loan facility ("Canadian Term Loan") of $43 million U.S. dollars. Sunbeam Canada chose to limit the foreign currency exchange...

  • Page 63
    ...the Company's Consolidated Balance Sheets as an increase to the value of the long-term debt. The New Swap and Second Replacement Swap 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...

  • Page 64
    ... tax and accounting purposes. Gains and losses related to the effective portion of the interest rate swap are reported as a component of other comprehensive income and are reclassified into earnings in the same period that the hedged transaction affects earnings. As of December 31, 2005, the fair...

  • Page 65
    ... from time to time in the ordinary course of business. In addition, the Environmental Protection Agency has designated the Company as a potentially responsible party, along with numerous other companies, for the clean up of several hazardous waste sites. Based on currently available information, the...

  • Page 66
    ... adverse effect upon the Company's consolidated financial position, results of operations or cash flows. Litigation The Company and/or its subsidiaries are involved in various lawsuits arising from time to time that the Company considers ordinary routine litigation incidental to its business...

  • Page 67
    ... rates of warranty returns or other returns of goods. The Company and/or its subsidiaries are therefore party to various personal injury and property damage lawsuits relating to their products and incidental to its business. Annually, the Company sets its product liability insurance program which is...

  • Page 68
    ... Financial Statements (cont'd) December 31, 2005 these complaints. No class has been certified in the actions. The complaints seek compensatory damages plus interest and attorneys' fees. In February of 2006, a derivative complaint was filed against certain Company officers and the Board of Directors...

  • Page 69
    ...Financial Statements (cont'd) December 31, 2005 Foreign pre-tax income was $77.1 million, $5.1 million, and $3.2 million for the years ended December 31, 2005, 2004, and 2003, respectively. Deferred tax (liabilities) assets are comprised of the following: (millions of dollars) Property and equipment...

  • Page 70
    ... 31, 2005. In December of 2005, the Company distributed cash from its foreign subsidiaries and will report an extraordinary dividend of approximately $114 million and a related tax liability of approximately $6.7 million in its calendar year 2005 tax returns. The total effect on income tax expense...

  • Page 71
    ... The Company does not use cash to settle any of its share based awards and when available issues shares from its treasury stock instead of issuing new shares. The total intrinsic value of options exercised during the years ended December 31, 2005, 2004 and 2003, based upon the average market price...

  • Page 72
    ... Statements of Income, the restrictions over the second tranche have not yet lapsed and these shares vest on the date on which certain Jarden common stock price targets are achieved in accordance with the terms of the related agreements. In August 2004, the Company's board of directors ("Board...

  • Page 73
    ... been granted to these executive officers in 2005-2007 pursuant to such executives' employment agreements. The Board approved that the restrictions on these shares lapsed upon issuance. The Company records non-cash compensation expense for its issued and outstanding restricted stock either when the...

  • Page 74
    ... Investors were negotiated during the two months leading up to the Execution Date when the average market price of the Company's common stock was, in fact, less than the conversion price. On June 9, 2005, following requisite stockholder approval, all outstanding shares of Series C Preferred Stock...

  • Page 75
    ... minimum of withholding taxes relating to lapsing of certain shares of the Executive Award. 10. Earnings Per Share Calculation A computation of earnings per share is as follows (in millions, except per share data): Years Ended December 31, 2005 2004 2003 Net income, as reported ...Paid-in-kind...

  • Page 76
    ..., 2005 (in millions): 2005 Service cost ...Interest cost ...Expected return on plan assets ...Net periodic cost ...$ 0.6 0.6 (0.3) $ 0.9 The Company had no net periodic pension cost for foreign plans for the years ended December 31, 2004 and 2003 since the AHI Acquisition closed in January 2005. 74

  • Page 77
    ... plans in amounts consistent with applicable laws and regulations. The Company expects to contribute $0.7 million to its foreign pension plans for the year ending December 31, 2006. The following table is a reconciliation of the projected benefit obligation and the fair value of the domestic and...

  • Page 78
    ... risk in order to minimize the cost of providing pension benefits. The Company's target asset allocation for 2006 as a percentage of market value is as follows: equities - 55%-65%; bonds - 25%-40% and cash and money funds - 0%-20%. This target range was the same in 2005. As of the Company's 2005 and...

  • Page 79
    ... information systems platforms and outsourcing the manufacturing of certain kitchen products. Reorganization costs relating to this strategic plan are currently estimated at approximately $4.2 million, excluding any capital expenditures. During the year ended December 31, 2005, the Company recorded...

  • Page 80
    ... back-office functions. In order to take advantage of a shared infrastructure and facilitate combined strategic management of this business segment, the Company executed certain reorganization plans and acquisition related initiatives. During the year ended December 31, 2005, the Company recorded...

  • Page 81
    ... segment. In the branded consumables segment, the Company markets, distributes and in certain cases manufactures a broad line of branded products that includes arts and crafts, paintbrushes, children's card games, clothespins, collectible tins, food preparation kits, home canning jars, jar closures...

  • Page 82
    ... kitchen and other household products that includes bedding, blenders, coffee makers, heating pads, home vacuum packaging machines, smoke and carbon monoxide alarms, personal and animal grooming products, and warming blankets, as well as related consumable products. The segment's leading brands...

  • Page 83
    ... (a) The United States Playing Card Company business is included in the branded consumables segment effective June 28, 2004, the date of its acquisition. (b) The Jarden Consumer Solutions business, acquired with the acquisition of American Household, Inc. (the "AHI Acquisition"), is included in the...

  • Page 84
    ... Acquisition (see Note 3), cash and cash equivalents, amounts relating to benefit plans, deferred tax assets and corporate facilities and equipment. Within the branded consumables segment are four product lines: kitchen products, home improvement products, playing cards products and other specialty...

  • Page 85
    ... consolidating financial statements of the Company ("Parent"), the Guarantor Subsidiaries and the Non-Guarantor Subsidiaries on a consolidated basis as of and for the year ended December 31, 2005. Condensed Consolidating Statements of Income (in millions) Year Ended December 31, 2005 Guarantor Non...

  • Page 86
    ...19.1 Net cash provided by (used in) financing activities ...1,626.8 Investing activities: Additions to property, plant and equipment ...(0.9) Acquisition of business, net of cash acquired ...(1,311.1) Other ...- Net cash (used in) provided by investing activities ...(1,312.0) Effect of exchange rate...

  • Page 87
    ...32.5 million and related tax benefit. Fourth quarter of 2005 includes a non-cash charge of $32.0 million and related tax benefit attributable to stock options and restricted stock. (3) Earnings per share calculations for each quarter are based on the weighted average number of shares outstanding for...

  • Page 88
    ...reported net income, net of related tax effects ...Deduct: Total stock-based employee compensation expense determined under the fair value based method for all awards, net of tax related effects ...Pro forma (loss allocable) net income available to common stockholders ...Pro forma earnings per share...

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  • Page 91
    ...Jarden's common stock is listed on the New York Stock Exchange. Symbol: JAH Investor Relations Coleman®, Campingaz® Wichita, KS 316-832-2653 Other Jarden Corporation 555 Theodore Fremd Avenue Rye, NY 10580 914-967-9400 www.jarden.com Financial Dynamics Business Communications New York, New York...

  • Page 92
    2005