Sunbeam 2013 Annual Report Download - page 23

Jarden Corporation Annual Report 2013 19
as an increase in sales in certain home environment categories was partially offset by a decline in sales in certain small appliance
categories. Unfavorable foreign currency translation accounted for a decrease of approximately 3% in net sales.
Net sales in the Branded Consumables segment increased $514 million, or 29.3%. Excluding the impact of acquisitions (approximately
25%), net sales on a currency-neutral basis increased approximately 4%, primarily due to increased sales in the baby care, home
care and leisure and entertainment businesses, largely related to increased sales in certain product categories, including the food
preservation category, primarily due to favorable weather conditions and increased point of sale; certain products in the safety and
security category in part due to increased demand at certain mass market retailers; and the relog category, primarily due to more
favorable weather conditions in 2013 versus the prior year.
Net sales in the Process Solutions segment increased 7% on a period-over-period basis, primarily due to increased sales within each of
its business units.
Cost of Sales
Cost of sales for 2013 increased $470 million, or 9.8%, to $5.2 billion versus the prior year. The increase was primarily due to the
impact of acquisitions (approximately $240 million), increased sales (approximately $210 million) and the inclusion of a $89.8 million
charge recorded in 2013, related to a purchase accounting adjustment, primarily due to the YCC Acquisition, for the elimination of
manufacturer’s prot in inventory, partially offset by foreign currency translation (approximately $80 million). Cost of sales as a
percentage of net sales for 2013 and 2012 was 71.3% and 71.3%, respectively (70.0% for 2013 excluding the charge for the elimination of
manufacturer’s prot in inventory).
Selling, General And Administrative Costs
SG&A for 2013 increased $199 million, or 15.1%, to $1.5 billion versus the prior year. The change is primarily due to the impact of
acquisitions (approximately $128 million), an increase in stock-based compensation (approximately $29 million) and an increase in
marketing and product development costs (approximately $20 million) related to the Company’s investment in brand equity. The
Venezuela devaluation-related charges (approximately $29 million) were mostly offset by a net gain on the sale of certain assets
(approximately $21 million). Favorable foreign currency translation (approximately $25 million) was essentially offset by other items.
Operating Earnings
Operating earnings for 2013 in the Outdoor Solutions segment decreased $54.6million, or 21.8%, versus the prior year, primarily
due to an increase in SG&A (approximately $34 million) and a decrease in gross prot (approximately $21 million), primarily due to
slightly lower gross margins, net of the gross margin impact of higher sales. Operating earnings for 2013 in the Consumer Solutions
segment increased $37.7 million, or 16.2%, versus the same prior year period, primarily due to a gross prot increase (approximately
$41 million), primarily due to the gross margin impact of higher sales and improved gross margins and a decrease in reorganization
costs (approximately $11 million), partially offset by an increase in SG&A ($14 million). Operating earnings for 2013 in the Branded
Consumables segment increased $44.5 million, or 21.2%, versus the same prior year period, primarily due to the YCC Acquisition; and
an increase in gross prot (approximately $39 million), in part due to the gross margin impact of higher sales; partially offset by the
purchase accounting adjustment for the elimination of manufacturer’s prot in inventory (approximately $82 million), primarily due to
the YCC Acquisition; an increase in reorganization costs (approximately $7 million) and an increase in SG&A (approximately $16 million)
excluding the impact of the YCC Acquisition. Operating earnings in the Process Solutions segment for 2013 increased $6.8 million, or
20.2%, versus the same prior year period, primarily due to an increase in gross prot, due to higher sales and improved gross margins.
Reorganization Costs and Impairment Charges
Reorganization costs for 2013 decreased $5.1 million to $22.0 million versus the prior year, primarily related to reorganization plans
initiated in the Outdoor Solutions, Consumer Solutions and Branded Consumables segments to rationalize certain international
operating processes, primarily through headcount reductions. Reorganization costs of $11.7 million, $3.3 million and $7.0 million were
recorded in the Outdoor Solutions, Consumer Solutions and Branded Consumables segments, respectively.
Interest Expense
Net interest for 2013 increased $10.1 million to $195 million versus the prior year, primarily due to higher average debt levels, partially
offset by a decrease in the weighted average interest rate for 2013 to 4.4% from 5.2% in 2012.
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Income Taxes
The Company’s reported tax rate for the 2013 and 2012 was 42.1% and 37.7%, respectively. The difference from the statutory tax rate
to the reported tax rate for 2013 results principally due to the currency devaluation in Venezuela and from the translation of U.S. dollar
denominated net assets in Venezuela and the tax effects of non-deductible compensation expense. The increase from the statutory tax
rate to the reported tax rate for 2012 results principally from U.S. tax expense related to the taxation of foreign income and tax expense
related to foreign tax audit adjustments.
Management’s Discussion and Analysis
Jarden Corporation Annual Report 2013