Sunbeam 2011 Annual Report Download - page 21

19
Management’s Discussion and Analysis
Jarden Corporation Annual Report 2011
Net Sales
Net sales for 2011 increased $657 million, or 10.9%, to $6.7 billion versus the same period in the prior year. Acquisitions provided net
sales growth of approximately 6%. Excluding acquisitions, sales increased approximately 5%, primarily due to increased sell-through
in certain product categories, expanded product offerings and favorable foreign currency translation, partially offset by weakness in
certain product categories. On a currency-neutral basis net sales increased approximately 3%.
Net sales in the Outdoor Solutions segment increased $253 million, or 10.1%. Increased sales in the apparel, camping and outdoor,
team sports and winter sports businesses provided an increase of approximately 8% in net sales, largely related to expanded air
bed product offerings, increased point of sale and earthquake-related sales. Favorable foreign currency translation accounted for an
increase of approximately 2% in net sales.
Net sales in the Consumer Solutions segment increased $10.7 million, or 0.6%. Increased demand internationally, primarily in Latin
America, which contributed to an increase in net sales of approximately 3%, primarily due to gains in distribution, was mostly offset
by declines domestically, primarily related to weakness in certain appliance and personal care and wellness categories.
Net sales in the Branded Consumables segment increased $389 million, or 28.9%. Acquisitions provided net sales growth of
approximately 24%. Increased sales on a currency neutral basis provided an increase in net sales of approximately 2%, in part due
to increased sales in certain product categories in the safety and security businesses, partially offset by softness in firelog and
playing card sales, as well as softness in food preservation sales, which were negatively affected by unfavorable weather conditions.
Favorable foreign currency translation accounted for an increase of approximately 2% in net sales.
Net sales in the Process Solutions segment increased 2.5% on a year-over-year basis primarily due to an increase in coinage sales.
Cost of Sales
Cost of sales for 2011 increased $438 million, or 10.0%, to $4.8 billion versus the same prior year period. The increase is primarily
due to the impact of acquisitions (approximately $280 million), foreign currency translation (approximately $67 million) and increased
sales (approximately $110 million), partially offset by a $20.5 million period-over-period decrease in the charge recorded for the
purchase accounting adjustment for the elimination of manufacturer’s profit in inventory. Cost of sales as a percentage of net sales
for 2011 and 2010 was 72.2% and 72.8%, respectively (72.1 % and 72.3% for 2011 and 2010, respectively, excluding the charge for
the elimination of manufacturer’s profit in inventory). Cost of sales as a percentage of net sales for 2010 was negatively affected as a
result of the currency devaluation in Venezuela (see “Venezuela Operations”).
SG&A
SG&A for 2011 increased $47.4 million, or 3.9%, to $1.3 billion versus the same prior year period. The change is primarily due to an
increase in marketing and product development costs ($13.3 million) primarily related to the Company’s investment in brand equity,
foreign currency translation (approximately $23 million) and an increase of $11.3 million related to the period-over-period change
in the net gain/loss recognized on derivatives not designated as effective hedges. The period-over-period impact of acquisitions
was mostly offset by the $70.6 million of charges recorded in 2010, related to the Company’s Venezuela operations (see “Venezuela
Operations”). Additionally during 2011, the Company recorded a gain on the sale of certain domestic assets that was mostly offset
by acquisition-related and other charges.
Operating Earnings
Operating earnings for 2011 in the Outdoor Solutions segment increased $47.8 million, or 20.9%, versus the same prior year period
primarily due to a gross profit increase (approximately $91 million) due to higher sales and increased margins, partially offset by a
$30.0 million increase in SG&A and a $13.5 million increase in reorganization costs. Operating earnings for 2011 in the Consumer
Solutions segment increased $3.3 million, or 1.4%, versus the same prior year period primarily due to a gross profit increase
(approximately $22 million) primarily due to increased margins, partially offset by an increase in SG&A ($16.9 million). Operating
earnings for 2011 in the Branded Consumables segment decreased $3.6 million, or 3.3%, versus the same prior year period primarily
due to the period-over-period increase in the charges recorded related to the impairment of goodwill and intangible assets ($25.1
million), an impairment charge recorded for the write off of an equity basis investment ($9.1 million) and a $6.4 million increase in
reorganization costs, partially offset by the impact of acquisitions and a gross profit increase of approximately $15 million due to
higher sales. Operating earnings in the Process Solutions segment for 2011 decreased $3.1 million, or 12.4%, versus the same prior
year period primarily due to a gross profit decrease (approximately $5 million) primarily due to the negative gross margin impact of
higher commodity costs and a $1.4 million increase in reorganization costs partially offset by a decrease in SG&A ($3.8 million).
Reorganization Costs and Impairment Charges
For 2011, reorganization costs were $23.4 million, primarily related to reorganization plans initiated in the Outdoor Solutions and
Branded Consumables segments. Reorganization costs of $13.5 million were recorded in the Outdoor Solutions segment related
to a plan to consolidate certain international manufacturing processes and a plan to rationalize the overall cost structure of this
segment through headcount reductions. Reorganization costs of $6.4 million were recorded in the Branded Consumables segment
related to a plan to consolidate certain manufacturing processes though headcount reduction and facility consolidation and a plan
to rationalize the overall cost structure of this segment through headcount reductions. For 2010, the Company did not incur any
reorganization costs as the reorganization plans from prior periods have been completed.