Sunbeam 2008 Annual Report Download - page 18

Management’s Discussion and Analysis
Jarden Corporation Annual Report 2008
Acquisitions
2007 Activity
The Company did not complete any acquisitions in 2008. On April 6, 2007, the Company acquired Pure Fishing, Inc. (“Pure Fishing”),
aleading global provider of fishing tackle marketed under well-known fishing brands including Abu-Garcia® ,Berkley® ,Gulp!® ,Mitchell® ,
Stren®and Trilene® .The consideration consisted of $300 million in cash, a $100 million five year subordinated note with a 2% coupon and a
warrant exercisable into approximately 2.2 million shares of Jarden common stock with an initial exercise price of $45.32 per share (subject to
adjustment as provided therein). In addition to the upfront purchase price, a contingent purchase price payment of up to $50 million based
on the future financial performance of the acquired business may be paid and during 2008, $25 million of this amount was paid. The Pure
Fishing acquisition is consistent with the Company’s strategy of purchasing leading, niche consumer-oriented brands with attractive cash
flows and strong management. The Company’s results of operations for 2007 include the results of Pure Fishing from April 6, 2007.
On August 8, 2007, the Company acquired all the outstanding shares of K2 Inc. (the “Acquisition”), a leading provider of branded
consumer products in the global sports equipment market in exchange for consideration of $10.85 in cash per share of K2 Inc. (“K2”)
common stock and 0.1118 of a share of Jarden common stock for each share of K2 common stock issued and outstanding. The total
value of the transaction, including debt assumed, was approximately $1.2 billion. The aggregate consideration to the K2 shareholders
was approximately $701 million and was comprised of a cash payment of approximately $517 million and the issuance of approximately
5.3 million common shares of the Company with a fair value of approximately $184 million. The cash and Jarden common stock issued in
the transaction had a combined value of $14.72 per K2 share, which was calculated using the average of the closing stock price of a share
of Jarden common stock on the New York Stock Exchange (“NYSE”) during the five-day trading period ending two trading days after the
date that the number of shares of Jarden common stock to be received by K2 stockholders was finalized, which was August 6, 2007. The
total purchase price of $779 million, which is net of cash acquired, also includes: the purchase of K2 share-based awards for $22.7 million,
the Company’s investment in K2 prior to the acquisition of $31.1 million, debt make-whole premiums of $15.4 million and other fees and
consideration totaling $22.1 million. Inconnection with the Acquisition the Company repaid certain of K2’s debt, including accrued interest
and the aforementioned make-whole premiums for approximately $341 million. The Acquisition was recorded by allocating the cost of
the assets acquired, including intangible assets and liabilities assumed based on their estimated fair values at the date of Acquisition. The
excess of the cost of the Acquisition over the net of amounts assigned to the fair value of the assets acquired and the liabilities assumed is
recorded as goodwill and is based on the Company’s independent valuation. The Company’s results of operations for 2007 include the
results of K2 from August 8, 2007 (the “Acquisition Date”).
2006 Activity
During 2006, the Company completed four tuck-in acquisitions, three in the Branded Consumables segment and one in the
Consumer Solutions segment.
The differences in the results from operations for 2008 versus 2007 and 2007 versus 2006 are primarily due to the K2 and Pure
Fishing acquisitions.
Consolidated Results of Operations
Years Ended December 31,
(In millions) 2008 2007 2006
Net sales $5,383.3 $ 4,660.1 $ 3,846.3
Cost of sales 3,880.5 3,517.4 2,904.0
Selling,general and administrative expenses 1,013.7 861.1 604.9
Reorganization and acquisition-related integration costs, net 59.8 49.6 36.8
Impairment of goodwill and intangibles 283.2 — —
Operating earnings 146.1 232.0 300.6
Interest expense, net 178.7 149.7 112.6
Loss on early extinguishment of debt — 15.7 —
Income (loss) beforetaxes (32.6) 66.6 188.0
Income tax provision 26.3 38.5 82.0
Net income (loss) $(58.9) $ 28.1 $ 106.0
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