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JARDEN CORPORATION
2006 ANNUAL REPORT
Welcome Home

Table of contents

  • Page 1
    JARDEN CORPORATION 2006 ANNUAL REPORT Welcome Home

  • Page 2
    ...85 billion Outdoor Solutions 23% Consumer Solutions 48% 21% 8% Process Solutions Branded Consumables Consolidated 2006 Segment Earnings $442 million Outdoor Solutions 17% Consumer Solutions 52% 24% Branded Consumables 7% Process Solutions Winner of Jarden's 2006 Annual Report Cover Design Concept...

  • Page 3
    ...) as we planned to expand our product range outside the home. TABLE OF CONTENTS 02 Chairman's Letter 06 Jarden Today 10 Branded Consumables 14 Consumer Solutions 18 Outdoor Solutions 22 Process Solutions 25 Selected Financial Data 27 Management's Discussion & Analysis 40 Financial Statements 1

  • Page 4
    ... to highlight some of the innovative products that contributed to making 2006 another record year. A core of Jarden's success has been in developing, marketing and selling niche branded consumer products used in and around the home. The diversification of our product portfolio today is significant...

  • Page 5
    "Our service level to customers continued at the highest levels in 2006. Being able to get the right product to the right place at the right time is as critical to our success as our creative marketing programs. Since January 2005, we have identified synergies between our businesses that have ...

  • Page 6
    ... our consumer brands significantly in 2006. While we do not invest directly in promoting the Jarden name, we are heavily vested in ensuring it resonates with our retail partners as standing for quality products and brands, outstanding operational execution and creativity in introducing new products...

  • Page 7
    We also embarked on a number of new longer term broader initiatives during the year. Our Operation: Careers for Veterans program, whereby we formalized our policy of actively looking to hire qualified veterans into open positions within the company, was introduced and 5% of our domestic workforce ...

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  • Page 9
    JARDEN today We are a world-class consumer products company with a diverse product line and global footprint. Jarden has strong brand equity and leading market positions. Many of our products enjoy recurring revenue steams, which is a testimony to our company's continued success. Aviator® Ball® ...

  • Page 10
    ... international sourcing and manufacturing creates a competitive advantage in the marketplace • Constantly evaluating sourcing strategies by product line • Optimizing sourcing locations • Sourcing products from over 18 countries short sheet, left side OUR GLOBAL MANUFACTURING PLATFORM CANADA...

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  • Page 13
    ...the home 2006 Net Sales of $812 million and Segment Earnings of $118 million We design, manufacture or source and distribute a broad array of products used every day by consumers in over 100 countries. Our broad line of products are comprised of trusted and well recognized brands that in some cases...

  • Page 14
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  • Page 15
    BRANDED CONSUMABLES Highest margin business for Jarden with further margin expansion opportunities We MANUFACTURE or SOURCE, MARKET and DISTRIBUTE a broad line of branded consumer products, many of which are fundamental household staples, such as the products displayed below. 13

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    14

  • Page 17
    ..., bedding, home vacuum packaging machines, heating pads, slow cookers, air cleaning products, fans and personal and animal grooming products, as well as related "consumable" items for certain of these products. We sell kitchen products under the CrockPot®, FoodSaver®, Mr. Coffee®, Oster...

  • Page 18
    16

  • Page 19
    CONSUMER SOLUTIONS Strong portfolio of brands with leading positions in core categories We MANUFACTURE or SOURCE, MARKET, DISTRIBUTE and LICENSE rights to an array of innovative consumer products that are designed to improve consumers' lives, such as the products displayed below. 17

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    18

  • Page 21
    ... experiences 2006 Net Sales of $901 million and Segment Earnings of $84 million Outdoor solutions is a leading global designer, manufacturer and marketer of airbeds, coolers, grills, lanterns, sleeping bags, stoves, tents and other related outdoor activity products. We manufacture or source, market...

  • Page 22
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  • Page 23
    OUTDOOR SOLUTIONS Strong international platform with leadership in Europe, Canada and Japan. Outdoor Solutions is a leading GLOBAL DESIGNER, MANUFACTURER and MARKETER of airbeds, coolers, grills, lanterns, sleeping bags, stoves, tents and other related outdoor recreation activity products, such as ...

  • Page 24
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  • Page 25
    ...zinc solutions, offering our customers forward-thinking, efficient, and innovative solutions to product and project challenges 2006 Net Sales of $309 million and Segment Earnings of $34 million We manufacture, market and distribute a wide variety of plastic products including closures, contact lens...

  • Page 26
    PROCESS SOLUTIONS A dynamic portfolio of world class brands We MANUFACTURE, MARKET and DISTRIBUTE a wide variety of plastic products including closures, contact lens packaging, plastic cutlery, refrigerator door liners and medical disposables, such as the products displayed below. 24

  • Page 27
    ...Corporation 2006 Annual Report The following tables set forth the Company's selected financial data as of and for the years ended December 31, 2006, 2005, 2004, 2003 and 2002. The selected financial data set forth below has been derived from our audited consolidated financial statements and related...

  • Page 28
    ... Financial Data Jarden Corporation 2006 Annual Report For 2006, the Company's operating earnings and earnings before interest, taxes and depreciation and amortization ("EBITDA") (see item (h) below) of $300.6 million and $367.0 million, respectively, were reduced by the following amounts: purchase...

  • Page 29
    ... o meter®, Oster® and Sunbeam® brand names. Our portable air cleaning products are sold under the Bionaire® and Harmony® brand names, and our fans and heaters are sold under the Holmes® and Patton® brand names. In the Outdoor solutions segment, the Company manufactures or sources, markets and...

  • Page 30
    ... Jarden Corporation 2006 Annual Report 2005 Activity On July 18, 2005, the Company completed its acquisition of Holmes, a privately held company, for approximately $420 million in cash and 6.15 million shares of its common stock. Holmes is a leading manufacturer and distributor of home environment...

  • Page 31
    ... and Analysis Jarden Corporation 2006 Annual Report RESULTS OF OPERATIONS-COMPARING 2006 TO 2005 Net Sales Years ended December 31, (in millions) Branded consumables Consumer solutions Outdoor solutions Process solutions Corporate / Unallocated Intercompany eliminations(1) 2006 2005 $ 812...

  • Page 32
    ..., partially offset by the sale of four million shares in November 2006. RESULTS OF OPERATIONS-COMPARING 2005 TO 2004 Net Sales Years ended December 31, (in millions) Branded consumables Consumer solutions Outdoor solutions Process solutions Corporate / Unallocated Intercompany eliminations(1) 2005...

  • Page 33
    ... to support working capital requirements, planned capital expenditures, completion of current and future reorganization and acquisition-related integration programs, and servicing debt obligations. Net cash provided by operating activities was $236 million for the year-ended December 31, 2006...

  • Page 34
    ... all of the Company's Outdoor solutions and Consumer solutions accounts receivable are sold to a special purpose entity, Jarden Receivables, LLC ("JRLLC"), which is a wholly-owned consolidated subsidiary of the Company. JRLLC funds these purchases with borrowings under a loan agreement, secured by...

  • Page 35
    ... use in operating activities. At December 31, 2006, the aggregate amount available under these lines of credit totaled approximately $29.3 million. The Company was in compliance with all its debt covenants as of December 31, 2006. The Company maintains cash balances which at times may be significant...

  • Page 36
    ... as a long-term liability in the Consolidated Balance Sheet, with a corresponding offset to long-term debt. The Company uses forward foreign currency contracts to mitigate the foreign currency exchange rate exposure on the cash flows related to forecasted inventory purchases. The derivatives used to...

  • Page 37
    Management's Discussion and Analysis Jarden Corporation 2006 Annual Report SIGNIFICANT ACCOUNTING POLICIES AND CRITICAL ESTIMATES The Company's financial statements are prepared in accordance with accounting principles generally accepted in the United States of America, which require us to make ...

  • Page 38
    ... product recall actions and higher than anticipated rates of warranty returns or other returns of goods. Each year the Company sets its product liability insurance program, which is an occurrence-based program based on current and historical claims experience and the availability and cost of related...

  • Page 39
    ...of the Company's stock options on the date of grant. 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 SFAS 123. The fair value of the market-based restricted stock awards was...

  • Page 40
    ... Jarden Corporation 2006 Annual Report ucts, earnings per share, estimated sales, segment earnings, cash flows from operations, future revenues and margin requirement and expansion, the success of new product introductions, growth or savings in costs and expenses and the impact of acquisitions...

  • Page 41
    ... 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 intraday high and low sales prices of the Company's common stock as reported on the New York Stock Exchange for the...

  • Page 42
    ... criteria, management concluded that the Company maintained effective internal control over financial reporting as of December 31, 2006. On August 31, 2006, the Company completed the acquisition of the firelog and firestarter business of Conros Corporation, Conros International Ltd and Java Logg...

  • Page 43
    ... standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Jarden Corporation and subsidiaries as of December 31, 2006 and 2005, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the years in the...

  • Page 44
    ...The Board of Directors and Stockholders of Jarden Corporation We have audited the accompanying consolidated balance sheets of Jarden Corporation and subsidiaries (the "Company") as of December 31, 2006 and 2005, and the related consolidated statements of income, stockholders' equity, and cash flows...

  • Page 45
    Consolidated Statements of Income Jarden Corporation 2006 Annual Report Years Ended December 31, (in millions, except per share data) Net sales Cost of sales Selling, general and administrative expenses (including non-cash compensation of $23, $62.4 and $32.2 for the years ended December 31, 2006, ...

  • Page 46
    ... Jarden Corporation 2006 Annual Report As of December 31, (in millions, except per share data) Assets Current assets: Cash and cash equivalents Accounts receivable, net of allowances of $47.3 in 2006, $41.2 in 2005 Inventories Deferred taxes on income Prepaid expenses and other current assets Total...

  • Page 47
    ... Other, net Net cash provided by financing activities Cash flows from investing activities Additions to property, plant and equipment Acquisition of businesses, net of cash acquired Other Net cash used in investing activities Effect of exchange rate changes on cash and cash equivalents Net increase...

  • Page 48
    ...Derivative transactions Minimum pension liability Comprehensive income Restricted stock awards, stock options exercised and stock plan purchases Shares reissued from treasury Non cash compensation charges Tax benefit related to stock option exercises Repayment of executive officers loans and accrued...

  • Page 49
    ... Statements of Shareholders' Equity (continued) Jarden Corporation 2006 Annual Report (in millions) Common Stock Shares Amount 68.8 Treasury Stock Shares Amount Additional Preferred Stock Paid-In Shares Amount Capital Accumulated Other Retained Comprehensive Earnings Income (Loss) Total...

  • Page 50
    ... Financial Statements Jarden Corporation 2006 Annual Report 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...

  • Page 51
    ... net sales in 2006, 2005 and 2004, 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 52
    Notes to Consolidated Financial Statements Jarden Corporation 2006 Annual Report The Company provides for depreciation primarily using the straight-line method in amounts that allocate the cost of property, plant and equipment over the following ranges of useful lives: Buildings and improvements ...

  • Page 53
    ... Financial Statements Jarden Corporation 2006 Annual Report Product Warranty Costs The Company recognizes warranty costs based on an estimate of amounts required to meet future warranty obligations arising as part of the sale of its products. The Company accrues an estimated liability at the time...

  • Page 54
    ... Series B and C preferred Stock Income available to common stockholders Add: Total stock-based employee compensation expense included in 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...

  • Page 55
    Notes to Consolidated Financial Statements Jarden Corporation 2006 Annual Report 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, assumed ...

  • Page 56
    Notes to Consolidated Financial Statements Jarden Corporation 2006 Annual Report includes simplified methods to establish the beginning balance of the additional paid-in capital pool ("APIC pool") related to the tax effects of employee stock-based compensation, and to determine the subsequent ...

  • Page 57
    ... Financial Statements Jarden Corporation 2006 Annual Report 3. ACQUISITIONS 2006 Activity During 2006, the Company completed four tuck-in acquisitions, three in the Branded consumables segment and one in the Consumer solutions segment. 2005 Activity On July 18, 2005, the Company completed...

  • Page 58
    ... 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) Current assets Property, plant and equipment Other non-current assets Total assets acquired Current...

  • Page 59
    ... Outdoor solutions $ 376.5 91.1 .- $ 467.6 Acquisitions $ 61.4 496.7 237.0 $795.1 Net Book Value at December 31, 2006 $ 437.9 588.3 237.0 $1,263.2 $ The purchase accounting adjustments to goodwill in 2006 and 2005 are primarily related to the fair valuation of the balance sheets of Holmes...

  • Page 60
    ... to Consolidated Financial Statements Jarden Corporation 2006 Annual Report Intangibles at December 31, 2006 and 2005 were as follows: Gross Carrying Amount At January 1, (in millions) Intangibles Patents Non-compete agreements Manufacturing process and expertise Brand names Customer relationships...

  • Page 61
    Notes to Consolidated Financial Statements Jarden Corporation 2006 Annual Report 7. OTHER CURRENT LIABILITIES Other current liabilities is comprised of the following at December 31, 2006 and 2005: (in millions) Cooperative advertising, customer rebates and allowances Warranty and product liability...

  • Page 62
    Notes to Consolidated Financial Statements Jarden Corporation 2006 Annual Report On February 13, 2007, the Company completed its registered public offering for $550 million aggregate principal amount of 7 1/2% Senior Subordinated Notes due 2017. On February 14, 2007, the Company completed an add-on...

  • Page 63
    ...Consolidated Financial Statements Jarden Corporation 2006 Annual Report Securitization Facility On August 28, 2006, the Company completed a $250 million receivables purchase agreement, which is subject to annual renewal, bears interest at a margin over the commercial paper rate and is accounted for...

  • Page 64
    Notes to Consolidated Financial Statements Jarden Corporation 2006 Annual Report Debt Covenant Compliance The Company is in compliance as of December 31, 2006 and 2005 with all covenants contained in its Facility, the Foreign Senior Debt and the Indenture. Each of the Facility, the Foreign Senior ...

  • Page 65
    ...swap instrument is designed to achieve hedge accounting treatment under Financial Accounting Standards Board Statement No. 133 ("SFAS 133") as a fair value hedge of the underlying term loan. The fair market value of this cross-currency interest rate swap is included as a long-term asset or liability...

  • Page 66
    ... Statements Jarden Corporation 2006 Annual Report Cash Flow Hedges At December 31, 2006, the Company had $725 million of notional amount outstanding in swap agreements that exchange variable interest rates (LIBOR) for fixed interest rates over the terms of the agreements. The Company has designated...

  • Page 67
    Notes to Consolidated Financial Statements Jarden Corporation 2006 Annual Report The fixed operating lease commitments detailed above assume that the Company continues the leases through their initial lease terms. Rent expense, including equipment rentals, was $53.2 million, $41.3 million and $13.7...

  • Page 68
    ... 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 69
    ...to Consolidated Financial Statements Jarden Corporation 2006 Annual Report In February 2006, a derivative complaint was filed against certain Company officers and the Board of Directors of the Company in the United States District Court for the Southern District of New York. The Company is named as...

  • Page 70
    ... domestic tax purposes acquired through acquisition, of which $849 million are not reflected on the financial statements. Of this amount, $947 million are subject to a limitation on their use as required by Sec. 382 of the Internal Revenue Code; $920 million of these losses are subject to an annual...

  • Page 71
    Notes to Consolidated Financial Statements Jarden Corporation 2006 Annual Report The Company's federal income tax returns for its fiscal year ended December 31, 2003 and 2004 are under examination by the Internal Revenue Service ("IRS"). In addition, one of the Company's acquired subsidiaries is ...

  • Page 72
    Notes to Consolidated Financial Statements Jarden Corporation 2006 Annual Report Significant option groups outstanding at December 31, 2006 and related weighted average price and life information follows: Options Outstanding Number Outstanding Weighted Average Exercise Price Weighted Average ...

  • Page 73
    ... Statements of Income, the restrictions over the second tranche still 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 74
    Notes to Consolidated Financial Statements Jarden Corporation 2006 Annual Report Company, and the restrictions on the remaining 64,995 2004 Shares lapse upon the latter of either the Company's stock price achieving a volume weighted average of $42.67 per share for ten consecutive business days or ...

  • Page 75
    ... Financial Statements Jarden Corporation 2006 Annual Report 14. EARNINGS PER SHARE CALCULATION A computation of earnings per share is as follows: Years Ended December 31, (in millions, except per share data) Net income, as reported Paid-in-kind dividends on Series B and C preferred stock...

  • Page 76
    ...to Consolidated Financial Statements Jarden Corporation 2006 Annual Report Components of Net Periodic The components of net periodic pension and postretirement benefit expense for the years ended December 31, 2006, 2005 and 2004 are as follows: Pension Benefits 2006 2005 (in millions) Service cost...

  • Page 77
    Notes to Consolidated Financial Statements Jarden Corporation 2006 Annual Report The amount of accumulated other comprehensive income expected to be recognized in net periodic benefit cost for the year ending December 31, 2007 is as follows: Domestic Prior service cost (benefit) Net actuarial loss ...

  • Page 78
    Notes to Consolidated Financial Statements Jarden Corporation 2006 Annual Report Pension Benefits 2006 2005 Postretirement Benefits 2006 2005 Domestic Foreign Assumptions Weighted average assumption used to calculate benefit obligation: Discount rate Rate of compensation increase Healthcare cost ...

  • Page 79
    ... Financial Statements Jarden Corporation 2006 Annual Report The allocation percentage of plan assets follows: 2006 2005 58.5% 25.1 16.4 100.0% Asset allocation: Equity securities and funds Debt securities and funds Other Total 55.7% 22.5 21.8 100.0% Domestic Contributions In 2007, the Company...

  • Page 80
    Notes to Consolidated Financial Statements Jarden Corporation 2006 Annual Report 16. REORGANIZATION AND ACQUISITION-RELATED INTEGRATION COSTS For the years ended December 31, 2006 and 2005, the Company recorded the following reorganization and acquisition- related integration costs: (in millions) ...

  • Page 81
    ... Financial Statements Jarden Corporation 2006 Annual Report European Reorganization During 2006, the Company made a strategic plan to rationalize its European manufacturing and administrative platform in order to facilitate a long-term cost savings initiative. During 2006, the Company recorded...

  • Page 82
    Notes to Consolidated Financial Statements Jarden Corporation 2006 Annual Report The following table sets forth the details and the activity related to reorganization and acquisition-related integration costs as of and for the years ended December 31, 2006 and 2005: Accrual Balance at December 31, ...

  • Page 83
    ..., bedding, home vacuum packaging machines, heating pads, slow cookers, air cleaning products, fans and heaters and personal and animal grooming products, as well as related consumable products. The Company sells kitchen products under the well-known Crock-Pot®, FoodSaver®, Mr. Coffee®, Oster...

  • Page 84
    ... Consolidated Financial Statements Jarden Corporation 2006 Annual Report Branded Consumables Consumer Solutions Outdoor Solutions Total Process Intercompany Operating Solutions Eliminations Segments Corporate/ Unallocated Consolidated Year ended December 31, 2005 (Reclassified) Net sales $685...

  • Page 85
    ... to Consolidated Financial Statements Jarden Corporation 2006 Annual Report Geographic Area Information The Company's operations are principally within the United States. The Company's international operations are mainly based in Europe, Canada, Latin America and Japan. (in millions) 2006 Domestic...

  • Page 86
    Notes to Consolidated Financial Statements Jarden Corporation 2006 Annual Report Condensed Consolidating Statements of Income Year Ended December 31, 2006 Guarantor Non-Guarantor Subsidiaries Subsidiaries Eliminations $2,918.4 2,656.8 261.6 112.6 63.7 (in millions) Net sales Costs and expenses ...

  • Page 87
    ...by (used in) financing activities Investing activities: Additions to property, plant and equipment Acquisition of business, net of cash acquired Other Net cash provided by (used in) investing activities Effect of exchange rate changes on cash Net increase (decrease) in cash and cash equivalents Cash...

  • Page 88
    Notes to Consolidated Financial Statements Jarden Corporation 2006 Annual Report Parent Net cash (used in) provided by operating activities Financing activities: Proceeds from revolving credit borrowings Payments on revolving credit borrowings Proceeds (payments) from (to) intercompany transactions...

  • Page 89
    ... date (February 9, 2007) of the Tender Offer and in conjunction with the Financing Transactions, the Company recorded a loss on early extinguishment of debt in its Consolidated Statements of Income consisting of: (a) the tender premium of approximately $9.5 million; (b) the write-off of related...

  • Page 90
    ... Molen JARDEN SENIOR MANAGEMENT & OFFICERS Martin E. Franklin Chairman and Chief Executive Officer* Ian G.H. Ashken Vice Chairman & Chief Financial Officer* James E. Lillie President,Chief Operating Officer & President, Branded Consumables* Desiree DeStefano Executive Vice President of Finance...

  • Page 91
    ...Consumer Solutions Bionaire® , Crock-Pot® , FoodSaver® , ® Holmes , Health o meter® , Mr. Coffee® , Oster® , Rival® , ® Seal-a-Meal , VillaWare® Sunbeam® Boca Raton, FL 561-912-4100 Outdoor Solutions Coleman®,Campingaz® Wichita, KS 316-832-2653 Process Solutions Jarden Plastic Solutions...

  • Page 92
    JARDEN CORPORATION AR 06