Sunbeam 2005 Annual Report Download - page 16

Download and view the complete annual report

Please find page 16 of the 2005 Sunbeam annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 92

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92

Management’s Discussion and Analysis of Financial Condition and
Results of Operations
The following “Overview” section is a brief summary of the significant items addressed in Management’s
Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”). Investors should read the
relevant sections of this MD&A for a complete discussion of the items summarized below. The entire MD&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®, Bee®, Bicycle®, Crawford®, Diamond®,
FoodSaver®, Forster®, Hoyle®, Kerr®, Lehigh®, Leslie-Locke®, Loew-Cornell®and VillaWare®. As a result
of our acquisition of American Household, Inc. (“AHI” and “AHI Acquisition”) on January 24, 2005 and
The Holmes Group, Inc. (“Holmes” and “THG Acquisition”) on July 18, 2005, we also provide global
consumer products through the Campingaz®, Coleman®, First Alert®, Health o meter®, Mr. Coffee®,
Oster®and Sunbeam®Bionaire®, Crock-Pot®, Harmony®, Holmes®, Patton®, Rival®, Seal-a-Meal®and
White Mountain™ brands (see “Recent Developments”). See Item 1. Business and Note 14, Segment
Information in Item 8. Financial Statements and Supplementary Data, both included herein, for a
discussion of each of our segment’s products.
Results of Operations
‰Our net sales for the year ended December 31, 2005 increased to $3.2 billion or approximately
280% over the same period in 2004;
‰Our operating earnings for 2005 increased to $186 million from $96.0 million, or 93.5% over the
same period in 2004. This year to date increase was achieved after expensing the following items
related to the AHI Acquisition and the THG Acquisition in the year ended December 31, 2005,
respectively:
‰Manufacturer’s profit in acquired inventory of $22.4 million;
‰Write-offs of $2.5 million in inventory related to reorganization and acquisition-related
integration initiatives; and
‰Reorganization and acquisition-related integration costs of $29.1 million.
These items mentioned above, along with non-cash compensation costs of $62.4 million, had the effect
of reducing our 2005 operating earnings reported under generally accepted accounting principles in the
United States of America (“GAAP”).
‰Our increase in net sales was primarily the result of the acquisitions we completed during 2005 and
2004, which are described in detail in “Acquisition Activities” below. On a pro forma basis our net
sales grew organically by approximately 3% in 2005 compared to 2004; and
‰Our net income for the year ended December 31, 2005, after the adjustments above tax effected at
our effective rate of 36.5%, was $60.7 million, a 43.2% increase over the same period in 2004.
Acquisitions
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.
14