UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 10-K
[ X ] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended DECEMBER 31, 1996
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
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Commission file Number 1-11962
COLEMAN WORLDWIDE CORPORATION
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(Exact name of registrant as specified in its charter)
DELAWARE 13-3704484
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1767 DENVER WEST BLVD., GOLDEN, COLORADO 80401
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(Address of principal executive offices) (Zip Code)
1526 COLE BLVD., GOLDEN, COLORADO 80401
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(Former address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 303-202-2400
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
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LIQUID YIELD OPTION-TM- NOTES DUE 2013 NEW YORK STOCK EXCHANGE
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. X Yes No
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Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [ X ]
The number of shares outstanding of the registrant's par value $1.00
common stock was 1,000 shares as of March 17, 1997 all of which were held by
an indirect wholly-owned subsidiary of Mafco Holdings Inc.
INCORPORATED BY REFERENCE
Portions of the definitive proxy statement of The Coleman Company, Inc.
for its Annual Meeting of Shareholders to be held on May 13, 1997, which is
to be filed within 120 days of the end of the fiscal year, are incorporated
by reference into Part III of this Annual Report on Form 10-K.
Exhibit Index at pages 22 through 30
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
1996 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
PART I
PAGE
----
Item 1. Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Item 2. Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . 10
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . 11
PART II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters . . . . . . . . . . . . . . . . . . 11
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . 12
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . . 13
Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . 19
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure. . . . . . . . . . . . . . . . . . . . 19
PART III
Item 10. Directors and Executive Officers of the Registrant. . . . . . . . 19
Item 11. Executive Compensation. . . . . . . . . . . . . . . . . . . . . . 21
Item 12. Security Ownership of Certain Beneficial Owners and Management. . 21
Item 13. Certain Relationships and Related Transactions. . . . . . . . . . 21
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . 22
Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
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PART I
ITEM 1. BUSINESS
OVERVIEW
Coleman Worldwide Corporation ("Coleman Worldwide") was formed in March
1993 in connection with the offering of Liquid Yield Option TM Notes due 2013
(the "LYONs" TM). Coleman Worldwide also holds 44,067,520 shares of the
common stock of The Coleman Company, Inc. ("Coleman " or the "Company" )
which represents approximately 83% of the outstanding Coleman common stock as
of March 15, 1997. Coleman is a leading manufacturer and marketer of
consumer products for the outdoor recreation and hardware markets on a global
basis. The Company's products have been sold domestically and
internationally under the Coleman brand name since the 1920s. The Company
believes its strong market position is attributable primarily to its
well-recognized trademarks, particularly the Coleman brand name, broad
product line, product quality and innovation, and marketing, distribution and
manufacturing expertise.
BACKGROUND
Coleman was formed in December 1991 to succeed to the assets and
liabilities of the outdoor products business of New Coleman Holdings Inc.
("Holdings"), an indirect wholly-owned subsidiary of Mafco Holdings Inc.
("Mafco"). Holdings (then named The Coleman Company, Inc.) was acquired (the
"Acquisition") in 1989 by MacAndrews & Forbes Holdings Inc. ("MacAndrews
Holdings", and, together with Mafco, "MacAndrews & Forbes"), a corporation
wholly owned through Mafco by Ronald O. Perelman. Coleman is a subsidiary of
Coleman Worldwide, which is an indirect wholly-owned subsidiary of Holdings.
In March 1992, the Company completed an initial public offering of its common
stock (the "IPO"), and Coleman Worldwide's ownership interest in the Company
is approximately 83%.
The Company has made several acquisitions in recent years designed to
expand its product lines in the outdoor recreation market. In 1996, the
Company acquired the French company Application des Gaz ("ADG" or "Camping
Gaz"), which is a leader in the European camping equipment market. In 1995,
the Company acquired Sierra Corporation of Fort Smith, Inc. ("Sierra"), a
manufacturer of portable outdoor and recreational folding furniture and
accessories. In 1994, the Company acquired substantially all of the assets
of Eastpak, Inc. and all of the capital stock of M.G. Industries, Inc.
(together, "Eastpak"), a leading designer, manufacturer and distributor of
branded daypacks, sports bags and related products. In 1993, the Company
acquired substantially all of the assets associated with the butane business
of the Taymar Group ("Taymar") in the United Kingdom and substantially all of
the assets of S.V.B. Caravan Camping S.p.a. and Cadia S.r.l. (together,
"S.V.B.") in Italy. Taymar manufactures and distributes lightweight butane
camping lanterns and stoves, as well as butane gas torches and other
accessories. S.V.B. manufactures and distributes a wide range of products
for the camping and hardware markets under the S.V.B. brand name.
The Company also restructured certain operations in the outdoor
recreation market. In 1994, the Company restructured its German
manufacturing operations (the "German Restructuring"), including selling its
plastic cooler business located in Inheiden, Germany and Loucka, Czech
Republic. In 1996, the Company closed the Brazilian manufacturing operations
it had acquired from Metal Yanes, Ltda. in 1994.
3
The Company has also expanded its presence in the hardware market through
its acquisition in 1996 of the assets of Seatt Corporation ("Seatt"), a
leading designer, manufacturer and distributor of smoke alarms, thermostats
and carbon monoxide detectors, its acquisition in 1995 of substantially all
of the assets of Active Technologies, Inc. ("ATI"), a manufacturer of
technologically advanced lightweight generators and battery charging
equipment, and its acquisition in 1994 of substantially all of the assets of
Sanborn Manufacturing Company ("Sanborn"), a manufacturer of a broad line of
portable and stationary air compressors.
PRODUCTS
The Company participates in two primary markets, outdoor recreation and
hardware.
OUTDOOR RECREATION
The Company's principal products include a comprehensive line of lanterns
and stoves for outdoor recreational use, fuel-related products such as
disposable fuel cartridges, a broad range of coolers and jugs, sleeping bags,
backpacks, tents, outdoor folding furniture, portable electric lights, spas,
camping accessories and other products for recreational use. These products
are distributed predominantly through mass merchandisers, sporting goods
chains and outdoor specialty stores.
LANTERNS AND STOVES. Coleman believes it is the leading manufacturer of
lanterns and stoves for outdoor recreational use in the world. Coleman's
liquid fuel appliances include single and dual fuel-powered lanterns and
stoves. Coleman also manufactures a broad range of propane- and butane-fueled
lanterns and stoves, which allow the user to regulate the intensity of light
or heat. These products are manufactured at the Company's facilities located
in the United States and Europe and are marketed under the Coleman, Camping
Gaz and Peak 1 brand names.
FUEL. The Company is a leading supplier to the worldwide camping and
outdoor recreation market of propane and butane cartridges and camping fuel.
In addition to manufacturing and filling disposable propane cartridges and
refillable LPG cylinders, Coleman sells camping fuel that is refined and
canned to its specifications by various suppliers, fills butane gas
cartridges and purchases butane-filled gas cartridges from third-party
vendors for sale to customers throughout the world. These products are
marketed under the Coleman, Camping Gaz and Peak 1 brand names.
COOLERS AND JUGS. The Company manufactures and sells a wide variety of
insulated coolers and jugs and reusable ice substitutes. The Company's
cooler line includes personal coolers for camping, picnics or lunch box use;
large coolers; beverage coolers for use at work sites and recreational and
social events; and soft-sided coolers. Coleman's cooler products are
manufactured predominantly at the Company's facilities located in the United
States and are marketed under the Coleman brand name worldwide and under the
Camping Gaz brand name in Europe. In addition, the Company also manufactures
coolers and jugs for third parties to be given away as promotions or sold
with the customer's own products as a premium.
RECREATIONAL SOFT GOODS. The Company designs, manufactures or sources,
and markets textile products, including tents, sleeping bags, backpacks,
daysacks, sports bags, duffle bags and rucksacks. These products are
manufactured at the Company's facilities located in the United States and
Puerto Rico or sourced from third-party vendors who manufacture them to the
Company's specifications. The Company's tents and sleeping bags are marketed
under the Coleman and Peak 1 brand names, while its daysacks, sport bags and
related products are marketed under the Coleman, Eastpak and newly licensed
Timberland brand names. In addition to mass merchandisers, sporting goods
chains and outdoor specialty stores, the Company distributes daysacks, sports
bags and duffle bags through college bookstores and luggage shops.
OUTDOOR FURNITURE. The Company manufactures and markets aluminum- and
steel-framed, portable, outdoor, folding furniture under the Coleman and
Sierra Trails brand names. These products are manufactured predominantly at
the Company's facilities located in the United States.
ELECTRIC LIGHTS. The Company designs and markets electric lighting
products that are manufactured by others and sold under the Coleman,
Powermate, Job-Pro and Camping Gaz brand names. These products include
portable electric lights such as hand held spotlights, flashlights and
fluorescent lanterns and a line of rechargeable lanterns and flashlights.
4
SPAS. The Company manufactures and markets a wide range of spas, which
are made primarily from acrylic, for residential applications. These
products are manufactured at the Company's facility located in the United
States and are distributed through a nationwide dealer network.
CAMPING ACCESSORIES. The Company designs, sources and markets a variety
of small accessories for camping and outdoor use, such as cookware and
utensils. These products are manufactured by third-party vendors to Coleman's
specifications and are marketed under the Coleman brand name.
HARDWARE
The Company's principal products include portable generators, portable
and stationary air compressors, pressure washers, and safety and security
products such as smoke alarms, carbon monoxide detectors and thermostats.
GENERATORS. The Company is a leading manufacturer and distributor of
portable generators in the United States and worldwide. These products are
manufactured by the Company, using engines manufactured by Tecumseh, Briggs &
Stratton, Vanguard, Honda and Kawasaki, at its facilities located in the
United States, are marketed under the Coleman Powermate brand name and are
distributed predominantly through mass merchandisers and home center chains.
With its acquisition of ATI, the Company now produces advanced, light-weight
generators.
AIR COMPRESSORS. The Company's air compressors are manufactured at its
facilities located in the United States, are marketed under the Coleman
Powermate brand name and are distributed predominantly through mass
merchandisers and home center chains.
PRESSURE WASHERS. The Company offers a line of pressure washers
manufactured at its facilities located in the United States and distributed
predominantly through mass merchandisers and home center chains under the
Coleman Powermate brand name.
SAFETY AND SECURITY PRODUCTS. The Company manufactures a range of safety
and security products for residential use, primarily smoke alarms, carbon
monoxide detectors and thermostats. The Company manufactures these products
at its facilities located in Mexico and markets them under the Firex, Code 1
and Coleman Sheltra brand names. These products are distributed
predominantly through electrical wholesalers, mass merchandisers, and home
center chains in North America and selected foreign countries, primarily
Australia and the United Kingdom.
BUSINESS STRATEGY
The Company's business strategy is to build upon its reputation as a
leading manufacturer and marketer of high quality brand name consumer
products for the outdoor recreation and hardware markets. The specific
operating strategies include:
FOCUS ON QUALITY AND SERVICE
Since the business of the Company was founded in the early 1900's,
Coleman has built a reputation for its quality products and superior customer
service. The Company is committed to continuing, and building upon, this
reputation.
INTRODUCING NEW PRODUCTS
The Company plans to continue introducing new products. Management
intends to focus on leveraging the Company's existing technologies, processes
and expertise to maximize the speed and efficiency of new product development
and introductions.
5
DEVELOPING EXISTING BRANDS
The Company believes it has some of the more prominent brand names in the
outdoor recreation and hardware markets and plans to strengthen these brands
through superior product design, advertising, and promotion.
EXPANDING INTERNATIONAL MARKETS
Coleman is currently a market leader in several product categories in
Europe and Japan. The Company plans to utilize its well-established
infrastructures in Europe and Japan to expand in other core product
categories and to invest appropriately to develop and build businesses in new
geographic markets.
DEVELOPING HUMAN RESOURCES
The Company plans to continue developing, training, and motivating its
personnel at all levels to achieve excellence, including developing and
building its team of experienced managers.
OPERATING EFFICIENCY
The Company plans to continue seeking ways to further improve the quality
and efficiency of its business processes in order to ensure quality and
realize cost savings, including, among other things, exiting low margin
product lines and businesses and consolidating manufacturing, distribution
and administrative facilities.
SALES AND MARKETING
The following table sets forth the net revenues by class of products for the
years ended December 31, 1996, 1995 and 1994.
1996 1995 1994
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(In millions)
Outdoor Recreation . . . . . . . . $ 859.6 $ 688.9 $ 563.7
Hardware . . . . . . . . . . . . . 360.6 244.7 187.9
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Total . . . . . . . . . . . . $ 1,220.2 $ 933.6 $ 751.6
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In the United States and Canada, the Company's outdoor recreation
products are sold by the Company's own sales force and, to a lesser extent,
by sales representatives that serve specialty markets and related
distribution channels. Spa products, however, are sold by independent sales
representatives to a nationwide dealer network and, to a lesser extent, by
regional sales managers employed by the Company. The Company's hardware
products are sold by Company and independent sales representatives.
The Company promotes its products through national and local advertising
campaigns, frequently coordinating with retailers' promotions to maximize the
benefits of its advertising efforts.
Coleman's major customers include Canadian Tire, Home Depot, Kmart,
Price/Costco, Target, and Wal-Mart. Wal-Mart and its affiliates accounted
for approximately 15% of the Company's 1996 consolidated net revenues.
Although the loss of Wal-Mart as a customer could have an adverse effect on
the Company, the Company believes its relationship with Wal-Mart is
satisfactory and the Company has no reason to believe Wal-Mart will not
continue as a customer.
6
International sales represented 32%, 24% and 23% of net revenues for the
years ended December 31, 1996, 1995 and 1994, respectively. For 1996,
approximately 79% of the Company's international sales were in Japan and
Europe, with the balance in Latin America, Asia-Pacific, Africa and the
Middle East. The Company has sales administration offices and warehouse and
distribution facilities in Australia, Austria, Belgium, Brazil, the Czech
Republic, France, Germany, Hungary, Italy, Japan, The Netherlands, Portugal,
Spain, Switzerland, the United Arab Emirates and the United Kingdom. Each
office is responsible for sales and distribution of the Company's products in
the territories assigned to that office. The Company's direct export
operations market its products directly to international customers in certain
other markets through Company sales managers, independent distributors, and
commissioned sales representatives. In total, the Company sells its products
in more than 100 countries.
SEASONALITY
The Company's sales generally are highest in the second quarter of the
year and lowest in the fourth quarter. As a result of this seasonality, the
Company has generally incurred a loss in the fourth quarter. The Company's
sales may be affected by weather conditions, especially during the second and
third quarters of the year.
COMPETITION
The markets in which the Company operates are highly competitive, based
primarily on product quality, product innovation, price and customer service
and support. The Company's competitors vary according to product lines. The
Company believes that no other company produces and markets the breadth of
camping and outdoor recreation products marketed by the Company. Lanterns
and stoves compete with, among others, products offered by Century Primus (a
unit of Century Tool & Manufacturing Inc.), American Camper (a unit of
Brunswick Corporation) and Dayton Hudson Corporation. The Company's
insulated cooler and jug products compete with products offered by Rubbermaid
Incorporated, Igloo Products Corp. (a unit of Brunswick Corporation) and The
Thermos Company (a unit of Nippon Sanso KK). The Company's sleeping bags
compete with, among others, American Recreation and Slumberjack (units of
Kellwood Company), Academy Broadway Corp. and MZH Inc. (a unit of Brunswick
Corporation), as well as certain private label manufacturers. In the tent
market, the Company competes with, among others, Sears, Wenzel (a unit of
Kellwood Company), Eureka (a unit of Johnson Worldwide Associates, Inc.) and
Mountain Safety Research (a unit of Thaw Corporation), as well as certain
private label manufacturers. The Company's backpack products compete with,
among others, American Camper (a unit of Brunswick Corporation), JanSport (a
unit of VF Corporation), Nike, Outdoor Products and Kelty (a unit of Kellwood
Company), as well as certain private label manufacturers. The Company's
competition in the electric light business includes, among others, Eveready
(a unit of Ralston Purina Company) and Rayovac Corporation. The Company's
spas compete with, among others, Watkins Manufacturing Corporation (d.b.a.
Hot Springs, a unit of Masco Corporation) and Clark Manufacturing Company,
Inc. (d.b.a. Sundance Spas). The Company's camping accessories compete
primarily with Coughlan's. The Company's primary competitors in the
7
generator business are Generac Corporation, Honda Motor Co., Ltd., Kawasaki
and Yamaha. Primary competitors in the air compressor business include
DeVilbiss and Campbell Hausfield. Alfred Karcher, Inc. and Sears are the
Company's primary competitors in pressure washers. The Company's safety and
security products compete primarily with First Alert, American Sensor and
Nighthawk (a unit of Williams Holding PLC). In addition, the Company
competes with various other entities in international markets.
PATENTS, TRADEMARKS, AND LICENSES
The Company's operations are not significantly dependent upon any single
or related group of patents. While the Company does not believe any single
trademark is material to its business other than the "Coleman" word mark and
the "Coleman in parallelogram with lantern symbol" logo mark, it believes its
trademarks taken as a whole are material to its business. Accordingly, the
Company has taken, and will continue to take, actions to protect its
interests in all such trademarks.
The Company licenses the Coleman name and logo under two types of
licensing arrangements: general merchandise licenses and licenses to
purchasers of businesses divested by Holdings. The Company's general
merchandise licensing activities involve licensing the Coleman name and logo,
for a royalty fee, to certain companies that manufacture and sell products
that complement the Company's product lines. In connection with the
divestitures of certain businesses after the Acquisition, Holdings entered
into trademark license agreements with the purchasers of these businesses.
The Company and Holdings receive no direct financial remuneration from the
use of the Coleman name by the purchasers of the divested businesses. The
Company's licensing activities are not material to the results of operations
of the Company.
RESEARCH AND DEVELOPMENT
The Company's research and development efforts are linked to the process
of marketing its products. New products and improvements to existing
products are developed based upon the perceived needs and demands of
consumers. The Company's research and development is performed primarily by
an in-house team of marketing managers, engineers, draftsmen and product
testers using tools such as computer-assisted design and a variety of
consumer research techniques.
INDUSTRY SEGMENTS, FOREIGN AND DOMESTIC OPERATIONS
The Company operates in a single business segment. Certain information
concerning geographic segments of the Company is set forth in Note 16 of the
Notes to Consolidated Financial Statements contained elsewhere in this Form
10-K Annual Report.
EMPLOYEES
As of December 31, 1996 the Company employed approximately 4,200 persons
full time in the United States and 2,800 persons internationally. None of
the Company's United States employees are represented by unions. The
Company's Canadian warehouse employees are represented by a union. All of
the approximately 350 production employees at the Company's operations in
France and Italy and the approximately 1,100 production employees at the
Company's operations in Mexico are represented by unions. The Company
believes that its relations with its employees are satisfactory and that its
employees, many of whom have long experience with the Company, represent a
valuable resource.
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ITEM 2. PROPERTIES
The Company's principal properties as of December 31, 1996 are as follows:
Building
Square
Location Principal Use Footage
-------- ------------- --------
St Genis Laval, Manufacture of lanterns and stoves, filling 2,070,000
France of gas cylinders, and assembly of barbeques;
office and warehouse
Wichita, KS Manufacture of lanterns and stoves and 1,162,000
insulated coolers and jugs; research and
development and design operations;
office and warehouse
New Braunfels, TX Manufacture of insulated coolers and other 338,000
plastic products
Lake City, SC Manufacture of sleeping bags 168,000
Springfield, MN Manufacture of air compressors 166,000
Cedar City, UT Manufacture of sleeping bags 160,000
Kearney, NE Manufacture/assembly of portable generators 155,000
and pressure washers; office and warehouse
Pacola, OK Manufacture of outdoor folding furniture 123,000
Maize, KS Manufacture of propane cylinders and 116,000
machined parts
Chihuahua, Mexico Manufacture of smoke alarms and carbon 110,000
monoxide detectors
Hastings, NE Manufacture of pressure washers and generators 103,000
New Ulm, MN Manufacture of air compressors 90,000
Morovis and Orocovis, Manufacture of daypacks, sports bags, and 80,000
Puerto Rico related products
Chandler, AZ Manufacture of acrylic spas; office and 78,000
warehouse
Centenaro di Lonato, Manufacture of butane lanterns, stoves 77,000
Italy and heaters; office and warehouse
Stockport, England Manufacture of butane cylinders, torches, 60,000
lanterns and stoves; office and warehouse
The Wichita, Kansas; New Braunfels, Texas; Lake City, South Carolina; Cedar
City, Utah; Pacola, OK; Chandler, Arizona; New Ulm and Springfield, Minnesota;
Centenaro di Lonato, Italy; and Stockport, England
9
facilities are owned by the Company. The owned facilities at Kearney,
Nebraska reside on land leased under three leases that expire in 2007 with
options to extend for three additional ten-year periods. The Maize, Kansas
facility is leased by the Company under leases that terminate in 2005. The
Company has an option to purchase this facility at the end of the lease
period. The Hastings, Nebraska facility is leased by the Company for a term
that expires in 1999 with options to extend the lease for three additional
one-year periods and an option to purchase the facility during the lease term
including renewal periods. The Puerto Rico facilities in Morovis and Orocovis
are leased for terms that expire in 1999 and 2007, respectively. The
warehouse portion of St. Genis Laval, France is leased for terms that expire
in 1998, the remaining facility is owned. 48,000 square feet of the
Chihuahua, Mexico property are leased for terms that expire in 1998, and the
remaining facility is owned.
ITEM 3. LEGAL PROCEEDINGS
ENVIRONMENTAL MATTERS
GILBERT AND MOSLEY SITE. As a result of investigations undertaken in 1986,
the Kansas Department of Health and Environment ("KDHE") discovered that
groundwater in the downtown Wichita area (the "Gilbert and Mosley Site") was
contaminated with volatile organic chemicals ("VOCs"). Coleman occupied a
facility within the boundaries of the Gilbert and Mosley Site. Subsequent
investigations in the area, including investigations in November 1988 by
Coleman, indicated that the groundwater beneath the Coleman property is
contaminated with VOCs. Coleman is in the process of remediating the
contamination on its property.
The City of Wichita has entered into a voluntary agreement with KDHE in
which the City agreed to investigate and then remediate contamination in the
Gilbert and Mosley Site. Coleman has entered into an agreement with KDHE in
which Coleman agreed to perform a similar study for the Coleman property and to
implement remedial activities at its property. In addition, Coleman entered
into an agreement with the City of Wichita in which Coleman agreed to fund its
proportionate share of the City's study and remediation of the Gilbert and
Mosley site.
All previously filed lawsuits alleging that properties in the downtown
Wichita area were diminished in value as a result of discharges of volatile
organic chemicals from Coleman's downtown Wichita facility have been settled and
dismissed.
MAIZE SITE. Coleman has undertaken a soil and groundwater investigation at
its facility in Maize, Kansas (the "Maize Site"). Results indicate that limited
VOC contamination is present in the groundwater under and to the southeast of
the facility. The data has been reported to the KDHE, and Coleman has entered
into an agreement with KDHE to implement appropriate remedial actions. The
remediation system has been installed, and Coleman is in the process of
remediating the contaminated groundwater.
NORTHEAST SITE. In 1990 Coleman undertook a soil and groundwater
investigation of its facility in northeast Wichita (the "Northeast Site").
Results indicated the presence of VOCs in the groundwater and soils. Although
some of the contamination may be a result of Coleman's operations at the
facility, the data also indicated that contamination was migrating onto the
Coleman property from up gradient sources. Coleman reported the initial results
of its study to KDHE. Coleman has also provided copies of all data to the
United States Environmental Protection Agency (the "EPA"), at its request. The
EPA has not initiated any actions against the Company with respect to the
Northeast Site. An agreement has been entered into with KDHE to undertake
additional investigatory activities, and an interim remediation system has been
installed. Additions to the interim remediation system are planned for
installation during 1997.
LAKE CITY SITE. In 1992 Coleman undertook a soil and groundwater
investigation of its facility in Lake City, South Carolina (the "Lake City
Site"). Results indicated limited VOC and fuel oil contamination in the soil
and groundwater. In both instances the contamination appears to relate to the
activities of a previous occupant of the Lake City Site. The results of the
investigation have been reported to the appropriate South Carolina environmental
agency. Coleman has demanded that the prior owner and occupant undertake
appropriate action.
10
At the state's request, Coleman has undertaken additional investigations.
Coleman has also commenced legal proceedings against the prior owner.
The Company has adopted an environmental policy designed to ensure that the
Company operates in full compliance with applicable environmental regulations
and, where appropriate, the Company's own internal standards. Coleman has also
undertaken an environmental compliance audit program. The Company makes
expenditures that it believes are necessary to comply with environmental
management practices. Environmental expenditures that relate to current
operations are expensed or capitalized as appropriate and were not significant
in 1996 and are not expected to be significant in the foreseeable future.
Coleman has established reserves for environmental matters, including the
investigations, remedial activities and litigation described above.
OTHER
The Company and Holdings are involved in various claims and legal actions
arising in the ordinary course of business, including environmental matters and
product liability lawsuits that are incidental to its business. Coleman
Worldwide believes the ultimate disposition of these matters is not expected to
have a material adverse effect on Coleman Worldwide's consolidated financial
condition or results of operations. Coleman Worldwide and the Company have
entered into a cross-indemnification agreement with Holdings pursuant to which
Coleman will indemnify Holdings against all liabilities related to businesses
transferred to the Company, and Holdings will indemnify the Company against all
liabilities of Holdings other than liabilities related to the businesses
transferred to the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of 1996.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
All of the equity securities of Coleman Worldwide are owned indirectly by
Mafco Holdings Inc., a corporation wholly owned by Ronald O. Perelman, and there
is no public market therefor.
Coleman Worldwide did not sell any unregistered securities during 1996.
11
ITEM 6. SELECTED FINANCIAL DATA
Coleman Worldwide is a holding company formed in March 1993 and holds
44,067,520 shares of Coleman Common Stock which represents approximately 83%
of the outstanding Coleman Common Stock as of March 15, 1997. Coleman was
formed in December 1991 to succeed to the assets and liabilities of the
outdoor products business of Holdings. Due to Coleman Worldwide's
approximately 83% ownership of Coleman, the Consolidated Financial Statements
of Coleman Worldwide include the accounts of Coleman and its subsidiaries
after elimination of all material intercompany accounts and transactions.
Minority interest primarily represents the minority shareholders'
proportionate share of the results of operations and equity of Coleman. The
selected financial data for the years presented in the table below have been
derived from the Consolidated Financial Statements. The selected financial
data should be read in conjunction with the Consolidated Financial Statements
and the notes thereto included elsewhere in this Form 10-K Annual Report.
(IN THOUSANDS)
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1996 1995 1994 1993 1992
---------- -------- -------- -------- --------
STATEMENTS OF OPERATIONS DATA:
Net revenues . . . . . . . . . . . . . . . . . . $1,220,216 $933,574 $751,580 $575,415 $505,815
Cost of sales (a). . . . . . . . . . . . . . . . 928,497 649,427 535,710 400,052 350,141
---------- -------- -------- -------- --------
Gross profit . . . . . . . . . . . . . . . . . . 291,719 284,147 215,870 175,363 155,674
Selling, general and
administrative expenses (a). . . . . . . . . . 291,862 174,870 128,561 102,197 92,711
Asset impairment charge (b). . . . . . . . . . . -- 12,289 -- -- --
Restructuring expense (c). . . . . . . . . . . . -- -- 18,456 -- --
Interest expense, net. . . . . . . . . . . . . . 50,767 35,930 24,031 15,733 14,465
Amortization of goodwill and
deferred charges . . . . . . . . . . . . . . . 11,056 8,309 6,667 5,752 6,002
Gain on IPO (d). . . . . . . . . . . . . . . . . -- -- -- -- (54,515)
Other (income) expense, net. . . . . . . . . . . (1,604) 283 1,138 766 1,343
---------- -------- -------- -------- --------
(Loss) earnings before income taxes,
minority interest and extraordinary item . . . (60,362) 52,466 37,017 50,915 95,668
Income tax (benefit) expense (a) . . . . . . . . (14,753) 19,861 10,437 21,225 40,713
Minority interest. . . . . . . . . . . . . . . . (5,390) 6,696 5,734 6,401 4,428
---------- -------- -------- -------- --------
(Loss) earnings before extraordinary item. . . . (40,219) 25,909 20,846 23,289 50,527
Extraordinary loss on early extinguishment
of debt, net of income taxes . . . . . . . . . (1,244) (787) (677) -- --
---------- -------- -------- -------- --------
Net (loss) earnings. . . . . . . . . . . . . . . $ (41,463) $ 25,122 $ 20,169 $ 23,289 $ 50,527
---------- -------- -------- -------- --------
---------- -------- -------- -------- --------
DECEMBER 31,
----------------------------------------------------------
1996 1995 1994 1993 1992
---------- -------- -------- -------- --------
BALANCE SHEET DATA:
Total assets . . . . . . . . . . . . . . . . . . $1,206,449 $906,389 $755,026 $552,660 $443,781
Long-term debt
(including current portions) . . . . . . . . . 758,207 520,691 446,216 313,242 237,098
Minority interest. . . . . . . . . . . . . . . . 45,088 49,266 42,233 39,952 36,372
Total stockholder's equity . . . . . . . . . . . 62,668 101,673 76,782 55,220 54,778
- ------------------------
(a) During 1996, the Company recorded restructuring and certain other charges
totaling $52,516, net of tax. Cost of sales includes a pre-tax charge of
$44,005, selling, general and administrative expenses include a pre-tax
charge of $30,195, and the provision for income tax benefit includes
$21,684 of net tax benefits resulting from these charges.
(b) Asset impairment charge reflects primarily the non-recurring charge taken
in connection with the adoption of FAS 121.
(c) Restructuring expense reflects primarily the non-recurring charge taken in
connection with the German Restructuring which includes severance costs,
commitments to third parties and write-downs of leasehold improvements and
other assets to estimated realizable values.
(d) Gain on IPO represents the gain to Coleman Worldwide on the sale of
approximately 18% of the Coleman Common Stock in the IPO.
12
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Coleman Worldwide is a holding company with no business operations or
source of income of its own. Accordingly, except as otherwise indicated, the
following discussion relates to the results of operations of the Company.
The following discussion should be read in conjunction with the Consolidated
Financial Statements of Coleman Worldwide and the notes thereto included
elsewhere in this Form 10-K Annual Report.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996 COMPARED WITH THE YEAR ENDED DECEMBER 31, 1995
Net revenues in 1996 and 1995 were $1,220.2 million and $933.6 million,
respectively, an increase of $286.6 million, or 30.7% with outdoor recreation
products increasing by $170.7 million or 24.8% and hardware products
increasing $115.9 million or 47.4%. Geographically, United States and Canada
revenues increased 15.6%, while international revenues increased 79.5%.
Outdoor recreation products revenues increased $170.7 million or 24.8%.
Excluding the impact of the Camping Gaz and Sierra acquisitions, the effect
of a weaker yen in 1996 as compared to 1995 and the one-time 1995
thermo-electric cooler premium promotion, comparable outdoor recreation
product revenues increased approximately 6.4%. Significant revenue gains
were experienced in the backpack, tent and sleeping bag businesses, primarily
in international markets. In addition, the Company successfully introduced a
new line of camping accessories and expanded its heater and light businesses.
These gains were substantially offset by poor weather conditions during the
camping season in North America and the economic downturn experienced in
Japan, both of which adversely affected the demand for the Company's camping
products. Hardware products revenues increased 47.4% or $115.9 million.
Excluding the impact of the Seatt acquisition, comparable hardware products
revenues increased approximately 13.8%, driven by strong generator and
pressure washer sales.
Gross margins, excluding the impact of restructuring and other charges
totaling $44.0 million which are more fully discussed below, decreased as a
percent of sales by 2.9 percentage points from 30.4% in 1995 to 27.5% in
1996. This decrease is primarily the result of lower margins associated with
the Company's backpack business and the unfavorable effects of product mix
including significantly higher sales of pressure washers at lower gross
margin percentages and lower sales of camping products which tend to have
higher gross margin percentages than the Company's average.
Selling, General and Administrative ("SG&A") expenses, excluding $30.2
million of restructuring and other charges as discussed more fully below,
were $261.5 million in 1996 compared to $174.7 million in 1995, an increase
of 49.7%. The increase in SG&A expenses primarily reflects SG&A expenses
associated with the Camping Gaz and Seatt business acquisitions and to a
lesser extent increased advertising and marketing expenses.
During 1996, the Company recorded restructuring and certain other charges
totaling $52.5 million net of tax. The restructuring charges total $45.1
million, net of tax, and consist of charges to a) integrate the Camping Gaz
and Coleman operations into a single global recreation products business, b)
exit the low-end electric pressure washer business, c) exit a portion of the
Company's battery powered light business and settle certain litigation with
respect to this business, and d) increase the valuation reserve for certain
foreign deferred income tax assets. Other charges of $7.4 million, net of
tax, relate to certain asset write-offs and other tax matters. These other
charges were incurred in the Company's normal course of business, although
the amounts involved are higher than similar charges that the Company has
recorded in prior periods. Cost of sales includes a pre-tax charge of $44.0
million, SG&A expenses includes a pre-tax charge of $30.2 million, and the
provision for income tax expense includes $21.7 million of tax benefits
resulting from these charges, net of the effect of an increase in the
valuation reserve related to certain foreign deferred tax assets and other
foreign tax charges.
13
The Company's interest expense was $38.7 million in 1996 compared with
$24.5 million in 1995, an increase of $14.2 million. This increase was
primarily the result of higher borrowings to fund business acquisitions and
support the increased working capital. On an unconsolidated basis, Coleman
Worldwide had an additional $12.1 million of interest expense in 1996
compared with $11.4 million in 1995, an increase of $0.7 million, or 5.8%.
This increase is a result of the effects of compounding interest related to
the LYONs.
The Company recorded an income tax benefit in 1996 of $10.9 million,
which includes the net tax benefits of $21.7 million associated with
restructuring and other charges discussed above. Excluding the net tax
benefit from restructuring and other charges, the provision for income taxes
would have been $10.8 million or 45.0% of pre-tax earnings, excluding
restructuring and other charges, as compared to a provision for income tax
expense of $24.5 million or 37.9% of pre-tax earnings in 1995. The increase
is primarily due to losses of certain foreign subsidiaries for which the
Company has not recognized a tax benefit and the impact of non-deductible
goodwill amortization. On an unconsolidated basis, Coleman Worldwide
recorded an income tax benefit of $3.9 million in 1996 and $4.6 million in
1995 or approximately 38% of Coleman Worldwide's unconsolidated pre-tax loss
in each period.
The Company obtained control of approximately 70% of Camping Gaz in
March 1996 and obtained control of the remaining 30% in July 1996.
Accordingly, the minority interest in Camping Gaz for 1996 primarily
represents the minority shareholders' approximate 30% proportionate share of
the results of operations of Camping Gaz for the period March through June of
1996. Minority interest in Camping Gaz also includes the interests of
minority shareholders in certain subsidiary operations of Camping Gaz.
Minority interest in the loss of Coleman represents the minority
shareholders' proportionate share of the results of operations of Coleman,
which is reflected on Coleman Worldwide's consolidated financial statements
because of Coleman Worldwide's approximate 83% ownership of Coleman's common
stock.
During the second quarter of 1996, in connection with the renegotiation
of its then existing credit agreement, the Company recorded an extraordinary
loss of $1.1 million ($0.6 million after taxes) which represents a write-off
of the related unamortized financing costs associated with its then existing
credit agreement. During the third quarter of 1995, the Company completed a
$200.0 million private placement debt issue. In connection with the private
placement, the Company renegotiated its previous credit agreement and
recorded an extraordinary loss of $1.3 million ($0.8 million after taxes)
which represents a write-off of the related unamortized financing costs
associated with its previous credit agreement.
YEAR ENDED DECEMBER 31, 1995 COMPARED WITH THE YEAR ENDED DECEMBER 31, 1994
Net revenues in 1995 and 1994 were $933.6 million and $751.6 million,
respectively, an increase of $182.0 million, or 24.2% with outdoor recreation
products increasing by $125.2 million or 22.2% and hardware products
increasing $56.8 million or 30.2%. Geographically, United States and Canada
revenues increased 24.0%, while international revenues increased 25.1%.
Outdoor recreation products revenues increased $125.2 million or 22.2%.
The sales increase includes the effects of a full twelve months of the
Eastpak business, a business acquired in November 1994. The sales increase
also reflects strong performance in the sleeping bag, tent, and the core
camping businesses, particularly in Japan. Sales of coolers and jugs
increased overall in part due to a thermo-electric cooler premium promotion
that began in early 1995. In addition, price increases in selected areas
also helped to compensate for the loss of revenues attributable to the German
operations which were sold in the third quarter of 1994. Hardware products
revenues increased 30.2% or $56.8 million. The sales increase includes the
effects of a full twelve months of the compressor business, a business
acquired in April of 1994. Pressure washer unit sales continued to increase
although per unit sales prices declined somewhat in the latter half of 1995
in response to a more competitive market. In addition, generator sales were
up primarily as a result of storm activity in the latter half of 1995.
14
Gross margins increased as a percent of sales by 1.7 percentage points
from in 28.7% in 1994 to 30.4% in 1995. The margin improvement is due to the
favorable effects of the mix of products sold including higher margin new
products. Gross margins were negatively impacted in 1995 due to
manufacturing inefficiencies, integration costs and pricing issues at the
Company's Brazilian operations. Cost of sales in 1995 also includes a $6.3
million benefit resulting from the effects of marking to market the Company's
forward exchange contracts pursuant to the guidance of the Emerging Issues
Task Force (the "EITF") in its consensus opinion of EITF 95-2 "Determination
of What Constitutes a Firm Commitment for Foreign Currency Transactions Not
Involving a Third Party", which was adopted in the fourth quarter of 1995.
Prior to the adoption of EITF 95-2, the Company routinely used forward
exchange contracts to hedge certain intercompany commitments and deferred
recognition of forward exchange contract gains and losses until the component
of the related hedge transaction was completed and recognized in income.
Cost of sales in 1994 also includes a $2.2 million charge resulting from an
increase in the Company's reserves for estimated costs of environmental
remediation efforts.
SG&A expenses were $174.7 million in 1995, compared to $128.5 million in
1994, an increase of 36.0%. The increase in SG&A expenses is primarily
related to the Company's selling and marketing organization, SG&A expenses
associated with the businesses acquired in 1994, and expenses associated with
the relocation of Corporate, certain International and Hardware offices.
Reduced annual expenses associated with certain insurance programs helped
reduce the overall increase in SG&A.
During the fourth quarter of 1995, the Company adopted Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of" ("FAS 121"). In
connection with the adoption of FAS 121 the Company recognized an asset
impairment charge of $12.3 million ($9.9 million after tax) related to its
Brazilian operations. The Brazilian operations had not performed to the
Company's expectations since acquisition of this business in April of 1994,
and, in the fourth quarter of 1995, the Company initiated actions to reduce
the operating losses in Brazil. These actions included replacing management,
increasing prices, dramatically downsizing the manufacturing operations and
reducing SG&A and other overhead. Because of these actions, the Company
performed an impairment review pursuant to the guidelines set forth in FAS
121 and concluded that a recognition of an asset impairment charge was
appropriate.
During September 1994, the Company restructured its German manufacturing
operations in a move to strengthen its European business and eliminate
unprofitable operations. The German restructuring resulted in a one-time
charge of approximately $18.0 million before tax and included severance costs
of $1.5 million, commitments to third parties of approximately $5.5 million,
and write-downs of leasehold improvements and other assets to estimated
realizable values aggregating $11.0 million. In connection with the
restructuring, the Company recognized tax benefits of approximately $10.9
million relating to the write-off of the Company's investment in its German
operations. The Company also announced a plan to change from manufacturing
to sourcing for certain textile product lines and to exit the market for
personal flotation devices. This plan resulted in a $0.5 million pretax
charge.
The Company's interest expense was $24.5 million in 1995 and $13.4
million in 1994, an increase of $11.1 million. This increase was primarily
the result of higher borrowings in 1995 necessary to support the Company's
acquisitions and increased working capital needs related to the growth of the
Company and, to a lesser extent, higher interest rates in 1995. On an
unconsolidated basis, Coleman Worldwide had an additional $11.4 million of
interest expense in 1995 compared with $10.6 million in 1994, an increase of
$0.8 million, or 6.9%. This increase is a result of the effects of
compounding interest related to the LYONs.
Minority interest represents the minority stockholders' proportionate
share of the results of operations of the Company, which is reflected on
Coleman Worldwide's Consolidated Financial Statements because of the sale of
approximately 18% of the Coleman Common Stock in the IPO in 1992. Minority
interest increased in 1995 due to an increase in the Company's income in 1995.
The Company's effective income tax rate was 37.9% in 1995 compared with
30.6% in 1994. The increase in the effective tax rate in 1995 as compared to
1994 is primarily due to higher taxes on foreign earnings in the
15
1995 period as compared to the 1994 period which was favorably impacted by
the tax benefits arising from permanent basis differences associated with the
restructuring of the German operations. The effective income tax rate in
1995 also reflects the favorable impact of tax benefits associated with the
Company's manufacturing operations in Puerto Rico, which were acquired in
late 1994. Coleman Worldwide's consolidated effective income tax rate was
37.9% in 1995 compared with 28.2% in 1994. The increase in Coleman
Worldwide's consolidated effective income tax rate reflects the
proportionately greater impact of the items discussed above when compared to
Coleman Worldwide's consolidated earnings before income taxes, minority
interest and extraordinary item, partially offset by the proportionately
higher impact of nondeductible goodwill amortization when compared with 1994.
During the third quarter of 1995, the Company completed a $200.0 million
private placement debt issue. In connection with the private placement, the
Company renegotiated its previous credit agreement and recorded an
extraordinary loss of $1.3 million ($0.8 million after taxes), which
represents a write-off of the related unamortized financing costs associated
with its previous credit agreement. During the second quarter of 1994, in
connection with the renegotiation of its then existing credit agreement, the
Company recorded an extraordinary loss of $1.1 million ($0.7 million after
taxes) which represents a write-off of the related unamortized financing
costs associated with its then existing credit agreement.
LIQUIDITY AND CAPITAL RESOURCES
Coleman Worldwide's operating activities used $5.3 million of cash during
the year ended December 31, 1996 and provided $9.4 million and $46.8 million
for the years ended December 31, 1995 and 1994, respectively. At December
31, 1996, receivables were approximately equal to 1995 year-end levels,
excluding the amount acquired in connection with the Camping Gaz and Seatt
acquisitions and the effect of the restructuring and other charges described
above. Inventories, excluding the amount acquired in connection with the
Camping Gaz and Seatt acquisitions and the effect of the restructuring and
other charges described above, increased by $42.4 million during the 1996
period primarily because of lower than expected sales as described above.
Coleman Worldwide's net cash used for investing activities was $204.3
million, $68.3 million, and $157.1 million for the years ended December 31,
1996, 1995 and 1994, respectively, and was composed primarily of the
Company's capital expenditures, purchases of businesses, and also advances to
Mafco under the Coleman Worldwide tax sharing agreement and the terms of the
LYONs trust indenture (the "Indenture") of $4.1 million, $6.7 million and
$27.1 million for the years ended December 31, 1996, 1995 and 1994,
respectively. The Company's capital expenditures were $41.3 million in the
year ended December 31, 1996, and the Company used $161.9 million of cash for
business acquisitions during the year ended December 31, 1996. For 1997, the
Company expects capital expenditures to be within the range of $30.0 to $40.0
million.
Coleman Worldwide's net cash provided by financing activities was $210.6
million, $64.3 million, and $114.6 million for the years ended December 31,
1996, 1995 and 1994, respectively, and consisted primarily of increases in
long-term borrowings and in 1994 from revolving credit agreement borrowings.
The Company paid $2.3 million to acquire 100,000 shares of its common stock
in the open market during 1996.
The Company's working capital requirements are currently funded by cash
flow from operations and domestic and foreign bank lines of credit. In April
1996, the Company amended its credit agreement to: a) provide a term loan of
French Franc 385.1 million ($75.0 million at the then current exchange
rates), b) provide an unsecured revolving credit facility in an amount of
$275.0 million, c) allow for the Camping Gaz acquisition and d) extend the
maturity of the credit agreement (as amended, the "Company Credit
Agreement"). Due to the restructuring and other charges as discussed
previously and lower than expected operating results, the Company further
amended the Company Credit Agreement in October 1996 and again in March 1997.
Availability under the Company Credit Agreement is reduced by any
commercial paper borrowings outstanding. The Company Credit Agreement is
available to the Company until April 30, 2001. At December 31, 1996, $128.1
million would have been available for borrowings under the Company Credit
Agreement. The
16
outstanding loans under the Company Credit Agreement bear interest at either
of the following rates, as selected by the Company from time to time: (i)
the higher of the agent's base lending rate or the federal funds rate plus
.50% or (ii) the London Inter-Bank Offered Rate ("LIBOR") plus a margin
ranging from .25% to 2.125% based on the Company's financial performance. If
there is a default, the interest rate otherwise in effect will be increased
by 2% per annum. The Company Credit Agreement also bears an overall facility
fee ranging from .15% to .375% based on the Company's financial performance.
The Company Credit Agreement contains various restrictive covenants
including, without limitation, requirements for the maintenance of specified
financial ratios, levels of consolidated net worth and profits, and certain
other provisions limiting the incurrence of additional debt, purchase or
redemption of the Company's common stock, issuance of preferred stock of the
Company, and also prohibits the Company from paying any dividends until on or
after January 1, 1999 and limits the amount of dividends the Company may pay
thereafter. The Company Credit Agreement also provides for a specific
requirement relating to the Company's financial leverage at December 31, 1997
which, if not achieved, will result in the Company Credit Agreement becoming
secured by the Company's assets. In addition, substantially all of the
shares of the Company's common stock owned by Coleman Worldwide are pledged
to secure indebtedness of Coleman Worldwide and of its parent, Coleman
Holdings Inc. The indentures governing this indebtedness contain various
covenants including a covenant placing certain limitations on the Company's
indebtedness.
The Company's ability to meet its current cash operating requirements,
including projected capital expenditures, tax sharing payments and other
obligations is dependent upon a combination of cash flows from operations and
borrowings under the Company Credit Agreement. The Company's ability to
borrow under the terms of the Company Credit Agreement is subject to the
Company's continuing requirement to meet the various restrictive covenants,
including without limitation, those described above. If the Company fails to
meet the various restrictive covenants of the Company Credit Agreement, the
Company will need to renegotiate its current Company Credit Agreement, and/or
enter into alternative financing arrangements. There is no assurance that
the terms and conditions of such agreements would be as favorable as those
now contained in the Company Credit Agreement.
Coleman financed the acquisition of the shares of Camping Gaz with the
net proceeds from (i) a private placement issuance and sale of $85.0 million
aggregate principal amount of 7.10% Senior Notes, Series A, due 2006 (the
"Notes due 2006") and (ii) a private placement issuance and sale of $75.0
million aggregate principal amount of 7.25% Senior Notes, Series B, due 2008
(the "Notes due 2008"). The Notes due 2006 bear interest at the rate of
7.10% per annum payable semiannually, and the principal amount is payable in
annual installments of $12.1 million commencing June 13, 2000 with a final
payment due on June 13, 2006. If there is a default, the interest rate will
be the greater of (i) 9.10 % or (ii) 2% above the prime interest rate. The
Notes due 2008 bear interest at the rate of 7.25% per annum payable
semiannually, and the principal amount is payable in annual installments of
$15.0 million commencing June 13, 2004 with a final payment due on June 13,
2008. If there is a default, the interest rate will be the greater of (i)
9.25 % or (ii) 2% above the prime interest rate. The Notes due 2006 and the
Notes due 2008 are unsecured and are subject to various restrictive
covenants, including without limitation, requirements for the maintenance of
specified financial ratios and levels of consolidated net worth and certain
other provisions limiting the incurrence of additional debt and sale and
leaseback transactions under the terms of the Note Purchase Agreement. The
Notes due 2006 and the Notes due 2008 and the Company's 7.26% Senior Notes
due 2007 shall become secured if the Company Credit Agreement becomes secured
as discussed above.
The Company's international operations are located primarily in Japan,
Europe, and Canada, which are not considered to be highly inflationary
environments. The Company uses a variety of derivative financial instruments
to manage its foreign currency and interest rate exposures. The Company does
not speculate on interest rates or foreign currency rates. Instead, it uses
derivatives when implementing its risk management strategies to reduce the
possible effects of these exposures.
17
With respect to foreign currency exposures, the Company principally uses
forward and option contracts to reduce risks arising from firm commitments,
anticipated intercompany sales transactions and intercompany receivable and
payable balances. The Company generally uses interest rate swaps and interest
rate caps to fix certain of its variable rate debt. The Company manages credit
risk related to these derivative contracts through credit approvals, exposure
limits and other monitoring procedures.
Coleman Worldwide is a holding company with no business operations or
source of income of its own, and its ability to meet its obligations with
respect to the LYONs and any other obligations is contingent upon distributions
from the Company, including payments under the Company tax sharing agreement,
capital contributions or loans from its direct and indirect parent companies,
other borrowings and proceeds from the disposition of the common stock of
Coleman owned by Coleman Worldwide. As the holder of approximately 83% of the
capital stock of the Company, Coleman Worldwide has the ability to cause the
Company to make distributions up to the maximum amount permitted by law, subject
to limitations in the debt instruments of the Company. However, Coleman
Worldwide currently expects that, for the foreseeable future, the net earnings
and cash flow of the Company will be retained and used in the business of the
Company and that Coleman Worldwide will not receive any distributions from the
Company other than payments under the Company's tax sharing agreement.
Furthermore, the terms of the Company Credit Agreement prohibits the Company
from paying any dividends until on or after January 1, 1999 and limits the
amount of dividends the Company may pay thereafter. The receipt by Coleman
Worldwide of tax sharing payments from the Company will cease upon Coleman
Worldwide's ownership interest in Coleman falling below 80%, and the Indenture
does not require Coleman Worldwide to own more than a majority of the Coleman
Common Stock. Pursuant to the LYONs indenture agreement, at any time that the
LYONs are outstanding, the amounts that Coleman Worldwide would be required to
pay to Mafco under the Worldwide Tax Sharing Agreement, together with any
remaining funds paid to Coleman Worldwide by the Company under the tax sharing
agreement between Coleman Worldwide and the Company, may not be paid as tax
sharing payments, but Coleman Worldwide may advance such funds to Mafco as long
as the aggregate amount of such advances at any time does not exceed the issue
price plus accrued OID of the LYONs. Such advances are evidenced by noninterest
bearing unsecured demand promissory notes from Mafco in the amount of $54.7
million at December 31, 1996.
Coleman Worldwide currently anticipates that in order to pay the principal
amount at maturity of the LYONs, to redeem the LYONs or to repurchase the LYONs
for cash, including upon a Purchase Date (as defined) or upon the occurrence of
any Additional Purchase Right Event (as defined), Coleman Worldwide will be
required to adopt one or more alternatives, such as seeking capital
contributions or loans from its direct and indirect parent companies,
refinancing its indebtedness or disposing of the common stock of Coleman owned
by Coleman Worldwide (which disposition could result in tax sharing payments
ceasing to be available to Coleman Worldwide). None of the affiliates of
Coleman Worldwide will be required to make any capital contributions or other
payments to Coleman Worldwide with respect to Coleman Worldwide's obligations on
the LYONs, nor has any affiliate of Coleman Worldwide or any other person
guaranteed the obligations of Coleman Worldwide with respect to the LYONs.
There can be no assurance that any of the foregoing actions could be effected on
satisfactory terms, that they would be sufficient to enable Coleman Worldwide to
make any payments in respect of the LYONs when required or that any of such
actions would be permitted by the terms of the Indenture or, with respect to
sales of Coleman Common Stock, the debt instruments of the Company then in
effect.
The Indenture governing the LYONs provides the holders of LYONs with the
option to require Coleman Worldwide to purchase the LYONs after the
occurrence of certain events ("Additional Purchase Right Events").
Additional Purchase Right Events occur, among other things, upon the
Company's Consolidated Debt Ratio (as defined) exceeding 0.75 to 1.0 or the
Consolidated Net Worth (as defined) of Coleman Worldwide as of the end of any
fiscal quarter being less than a specified amount which is $60.0 million at
March 31, 1997 and increases to $70.0 million at June 30, 1997.
FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for certain forward-looking statements. The forward-looking statements
contained in this Form 10-K are subject to certain risks and uncertainties.
Actual results could differ materially from current expectations. Among the
factors that could affect Coleman Worldwide's actual results and could cause
results to differ from those contained in the forward-looking statements are the
success of the Company's restructuring programs, negative external factors like
adverse weather in North America or other regions and possible consumer spending
decline in Japan, and the possibility the Company may be required to renegotiate
its credit agreements. Other factors could also cause actual results to vary
materially from the future results covered in such forward-looking statements.
18
INFLATION
In general, manufacturing costs are affected by inflation and the effects
of inflation may be experienced by the Company in future periods. Management
believes, however, that such effect has not been material to the Company during
the past three years.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See the consolidated financial statements and supplementary data listed in
the accompanying List of Financial Statements and Schedules on Page F-1 herein.
Information required by other schedules called for under Regulation S-X is
either not applicable or is included in the consolidated financial statements or
notes thereto.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information concerning the directors
and executive officers of Coleman Worldwide:
DIRECTORS
NAME AGE
---- ---
Ronald O. Perelman. . . . . . . . . . . . . . . . . . . . . 54
Donald G. Drapkin . . . . . . . . . . . . . . . . . . . . . 49
Jerry W. Levin. . . . . . . . . . . . . . . . . . . . . . . 52
Bruce Slovin. . . . . . . . . . . . . . . . . . . . . . . . 61
EXECUTIVE OFFICERS
NAME AGE POSITION
---- --- --------
Ronald O. Perelman . . . . . . 54 Chairman of the Board
Bruce Slovin . . . . . . . . . 61 President
Irwin Engelman . . . . . . . . 62 Executive Vice President, Chief
Financial Officer and Treasurer
Barry F. Schwartz. . . . . . . 47 Executive Vice President & General
Counsel
RONALD O. PERELMAN has been a Director and Chairman of the Board of
Coleman Worldwide and of Coleman Holdings since their formations in March 1993
and July 1993, respectively, and a Director of the Company since 1989. Mr.
Perelman has been Chairman of the Board and Chief Executive Officer of
MacAndrews Holdings and various of its affiliates for more than the past five
years. Mr. Perelman also is Chairman of the Board of Andrews Group Incorporated
("Andrews Group"), Consolidated Cigar Holdings Inc. ("Cigar Holdings"), Mafco
Consolidated Group Inc. ("Mafco Consolidated"), Meridian Sports Incorporated
("Meridian"), and Power Control Technologies, Inc. ("PCT"), and is Chairman of
the Executive Committee of the Board of Revlon, Inc. ("Revlon"), Revlon Consumer
Products Corporation ("Products Corporation"), and Marvel Entertainment Group,
Inc. ("Marvel"). Mr. Perelman is also a Director of the following corporations
19
which file reports pursuant to the Securities Exchange Act of 1934, as amended
(the "Exchange Act"): Andrews Group, Cigar Holdings, Consolidated Cigar
Corporation ("Consolidated Cigar"), California Federal Bank, A Federal Savings
Bank ("Cal Fed"), First Nationwide (Parent) Holdings Inc., First Nationwide
Holdings Inc., Mafco Consolidated, Marvel, Marvel Holdings Inc. ("Marvel
Holdings"), Marvel (Parent) Holdings Inc. ("Marvel Parent"), Marvel III Holdings
Inc. ("Marvel III"), Meridian, PCT, Pneumo Abex Corporation ("Pneumo Abex"),
Products Corporation, Revlon, Revlon Worldwide Corporation ("Revlon Worldwide"),
and Toy Biz, Inc. ("Toy Biz"). On December 27, 1996, Marvel Holdings, Marvel
Parent, Marvel III, and Marvel and several of its subsidiaries filed voluntary
petitions for reorganization under Chapter 11 of the United States Bankruptcy
Code.
DONALD G. DRAPKIN has been a Director of Coleman Worldwide and Coleman
Holdings since their respective formations and of the Company since 1989. He
has been Vice Chairman and a Director of MacAndrews & Forbes and various of its
affiliates since 1987. Mr. Drapkin also is a Director of the following
corporations which file reports pursuant to the Exchange Act: Alogos
Pharmaceutical Corporation, Andrews Group, Cigar Holdings, Consolidated Cigar,
Marvel, Marvel Holdings, Marvel Parent, Marvel III, Products Corporation,
Revlon, Revlon Worldwide, Toy Biz, VIMRx Pharmaceuticals Inc. Mr. Drapkin was a
partner in the law firm of Skadden, Arps, Slate, Meagher & Flom for more than
five years prior to March 1987. On December 27, 1996, Marvel Holdings, Marvel
Parent, Marvel III, and Marvel and several of its subsidiaries filed voluntary
petitions for reorganization under Chapter 11 of the United States Bankruptcy
Code.
JERRY W. LEVIN has been a director of Coleman Worldwide and Coleman
Holdings since March 14, 1994. He has been a director of the Company since 1989
and served as Chairman of the Board of the Company until October 1990. Mr. Levin
has been Chairman of the Board of the Company and Acting Chief Executive Officer
of the Company since February 1997. Mr. Levin has been Chairman of the Board of
Revlon and of Products Corporation since November 1995 and a Director of Revlon
and Products Corporation since their respective formations in 1992 to November
1995. Mr. Levin has been Executive Vice President of MacAndrews Holdings since
March 1989. For 15 years prior to joining MacAndrews Holdings, he held various
senior executive positions with The Pillsbury Company ("Pillsbury"). Mr. Levin
is also a Director of the following corporations which file reports pursuant to
the Exchange Act: Ecolab, Inc., First Bank System, Inc., Meridian, and Revlon
Worldwide.
BRUCE SLOVIN has been a director of Coleman Worldwide and Coleman Holdings
since their respective formations and of the Company since February 1993 and
President of Coleman Holdings and Coleman Worldwide since August 1, 1995. He
has been President of MacAndrews Holdings and various of its affiliates for more
than the past five years. Mr. Slovin is also a Director of the following
corporations which file reports pursuant to the Exchange Act: Andrews Group,
Cantel Industries, Inc., Continental Health Affiliates, Inc., Infu-Tech, Inc.,
Meridian, and PCT.
IRWIN ENGELMAN has been Executive Vice President, Chief Financial Officer
and Treasurer of Coleman Worldwide and Coleman Holdings since February 1997 and
has been the Executive Vice President and Chief Financial Officer of MacAndrews
& Forbes and certain of its affiliates since February 1992. Mr. Engelman was
Executive Vice President and Chief Financial Officer of GAF Corporation, a
specialty chemical and building materials company, from 1990 to February 1992.
Mr. Engelman was President and Chief Operating Officer of Citytrust Bancorp Inc.
from 1988 to 1990; Executive Vice President of the Blackstone Group LP from 1987
to 1988; and Executive Vice President of General Foods Corporation for more than
five years prior to 1987. On December 27, 1996, Marvel Holdings, Marvel Parent,
and Marvel III, of which Mr. Engelman is an executive officer, and several
subsidiaries filed voluntary petitions for reorganization under Chapter 11 of
the United States Bankruptcy Code.
BARRY F. SCHWARTZ has been Executive Vice President & General Counsel of
Coleman Worldwide and Coleman Holdings since September 1994. He has been
Executive Vice President of MacAndrews & Forbes and certain of its affiliates
since 1993. Mr. Schwartz was Senior Vice President of MacAndrews & Forbes from
1989 to 1993. On December 27, 1996, Marvel Holdings, Marvel Parent, and Marvel
III, of which Mr. Schwartz
20
is an executive officer, and several subsidiaries filed voluntary petitions
for reorganization under Chapter 11 of the United States Bankruptcy Code.
All directors serve terms of one year and until the election of their
respective successors. Executive officers serve at the pleasure of the Board of
Directors.
Information required in this Item 10 as it relates to Coleman Worldwide's
principal operating subsidiary, The Coleman Company, Inc., is incorporated by
reference from Coleman's definitive proxy statement for its 1997 annual meeting
of shareholders, which is to be filed pursuant to Regulation 14A no later than
120 days following the end of the fiscal year reported upon.
ITEM 11. EXECUTIVE COMPENSATION
The executive officers of Coleman Worldwide do not receive any compensation
from Coleman Worldwide for serving in such capacities. Information required by
this Item 11 as it relates to Coleman Worldwide's principal operating,
subsidiary, The Coleman Company, Inc., is incorporated by reference from
Coleman's definitive proxy statement for its 1997 annual meeting of
shareholders, which is to be filed pursuant to Regulation 14A no later than 120
days following the end of the fiscal year reported upon.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Coleman Worldwide has 1,000 shares of common stock, par value $1.00 per
share, issued and outstanding. Ronald O. Perelman, 35 East 62nd Street, New
York, New York 10021, through MacAndrews & Forbes, beneficially owns 100% of the
outstanding shares of common stock of Coleman Worldwide. No other director,
executive officer or person beneficially owns any shares of common stock of
Coleman Worldwide. The shares of common stock of Coleman and shares of common
stock of intermediate holding companies are or may from time to time be pledged
to secure obligations of MacAndrews & Forbes or its affiliates.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Ronald O. Perelman, through MacAndrews & Forbes, beneficially owns 100% of
the common stock of Coleman Worldwide. Due to its stock ownership, MacAndrews &
Forbes controls Coleman Worldwide and is able to elect the entire board of
directors.
TAX SHARING AGREEMENTS. Coleman Worldwide and the Company are, for federal
income tax purposes, included in the affiliated group of which Mafco is the
common parent, and the federal taxable income and loss of Coleman Worldwide and
the Company will be included in the consolidated federal income tax return filed
by Mafco. Coleman Worldwide and the Company also may be included in certain
state and local tax returns of Mafco or its subsidiaries. In connection with
the offering of the LYONs, Coleman Worldwide and Mafco entered into a tax
sharing agreement (the "Worldwide Tax Sharing Agreement" and together with the
Holdings Tax Sharing Agreement, the "Tax Sharing Agreements"), pursuant to which
Coleman Worldwide is required to pay to Mafco amounts equal to the taxes that
Coleman Worldwide would otherwise have to pay if it were to file separate
consolidated federal, state or local income tax returns including only itself
and its domestic subsidiaries (including any amounts determined to be due as a
result of a redetermination of the tax liability of the Mafco consolidated group
ensuing from an audit or otherwise). At any time that the LYONs are
outstanding, the amounts that Coleman Worldwide would be required to pay to
Mafco under the Worldwide Tax Sharing Agreement, together with any remaining
funds paid to Coleman Worldwide by the Company under the Company Tax Sharing
Agreement, will instead be advanced by Coleman Worldwide to Mafco as long as the
aggregate amount of such advances at any time does not exceed the Issue Price
plus accrued Original Issue Discount on the LYONs. Such advances will be
evidenced by noninterest bearing unsecured demand promissory notes from Mafco.
In addition, the Company, Coleman Worldwide and Mafco entered into the Company
Tax Sharing Agreement pursuant to which the Company is required to pay to
Coleman Worldwide amounts equal to the taxes that the Company would otherwise
have to pay if it were to file separate consolidated federal, state or local
21
income tax returns including only itself and its domestic subsidiaries
(including any amounts determined to be due as a result of a redetermination of
the tax liability of the Mafco consolidated group ensuing from an audit or
otherwise). Under federal tax law, Coleman Worldwide and the Company will be
subject to several liability with respect to the consolidated federal income tax
liabilities of the affiliated group of which Mafco is the common parent for any
taxable period during which Coleman Worldwide or the Company or a subsidiary of
any of them is a member of such group. Mafco has agreed, however, to indemnify
Coleman Worldwide and the Company for any such federal income tax liability (and
certain state and local tax liabilities) of Mafco or any of its subsidiaries
that Coleman Worldwide or the Company or any of their subsidiaries are actually
required to pay. Because the tax sharing payments to be made under the
respective Tax Sharing Agreements will be determined by the amount of taxes that
the Company or Coleman Worldwide, as the case may be, would otherwise have to
pay if it were to file federal, state or local income tax returns, including
only itself and, in the case of Coleman Worldwide and the Company, its domestic
subsidiaries, the Tax Sharing Agreements will not increase the taxes payable by
the Company or Coleman Worldwide. Mafco may benefit, however, to the extent
that Mafco can offset the taxable income generated by Coleman Worldwide and the
Company against losses and tax credits generated by Mafco and its other
subsidiaries.
OTHER RELATIONSHIPS WITH COLEMAN. Information required by this Item 13 as
it relates to Coleman Worldwide's principal operating subsidiary, The Coleman
Company, Inc., is incorporated by reference from Coleman's definitive proxy
statement for its 1997 annual meeting of shareholders, which is to be filed
pursuant to Regulation 14A no later than 120 days following the end of the
fiscal year reported upon.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1) and (2) Financial Statements and Schedule.
See List of Financial Statements and Schedules which appears on
page F-1 herein.
(3) Exhibits
Exhibit No. Description
- ---------- -----------
3.1 Certificate of Incorporation of Coleman Worldwide Corporation, filed
with the Secretary of State of Delaware on March 12, 1993
(incorporated by reference to Exhibit 3.1 to the Coleman Worldwide
Corporation 1993 Annual Report on Form 10-K (the "1993 Worldwide
10-K")).
3.2 Bylaws of Coleman Worldwide Corporation, as adopted March 12, 1993
(incorporated by reference to Exhibit 3.2 to the 1993 Worldwide
10-K).
22
4.1 Amended and Restated Credit Agreement dated as of August 3, 1995
among the Company, the Lenders party thereto, the Issuing Bank, the
Agent, and the Co-Agents (the "Company Credit Agreement")
(incorporated by reference to Exhibit 4.2 to The Coleman Company
Inc. Form 10-Q for the period ended June 30, 1995 ( the "Company's
June 30, 1995 Form 10-Q")).
4.2 Amendment No. 1 dated as of April 30, 1996 to the Company Credit
Agreement (incorporated by reference to Exhibit 4.1 to The Coleman
Company, Inc. Form 10-Q for the period ended March 31, 1996 (the
"Company's March 31, 1996 Form 10-Q")).
4.3 Amendment No. 2 dated as of April 30, 1996 to the Company Credit
Agreement (incorporated by reference to Exhibit 4.2 to the
Company's March 31, 1996 Form 10-Q).
4.4 Amendment No. 3 dated as of May 29, 1996 to the Company Credit
Agreement (incorporated by reference to Exhibit 4.1 to The Coleman
Company, Inc. Form 10-Q for the period ended September 30, 1996 (the
"Company's September 30, 1996 Form 10-Q").
4.5 Amendment No. 4 dated as of October 25, 1996 to the Company Credit
Agreement (incorporated by reference to Exhibit 4.2 to the Company's
September 30, 1996 Form 10-Q).
4.6 Amendment No. 5 dated as of March 7, 1997 to the Company Credit
Agreement (Incorporated by reference to Exhibit 4.6 to The Coleman
Company, Inc. 1996 Annual Report on Form 10-K (the "1996 Coleman
10-K")).
4.7 Purchase Agreement dated as of August 3, 1995 among the Company and
Purchasers party thereto (the "Notes Agreement") (incorporated by
reference to Exhibit 4.3 to the Company's June 30, 1995 Form 10-Q).
4.8 Note Purchase Agreement dated as of May 1, 1996 among the Company
and Purchasers party thereto (incorporated by reference to Exhibit
4.1 to the Company's Current Report on Form 8-K dated June 28,
1996).
4.9 Specimen copy of definitive certificate of Common Stock of The
Coleman Company, Inc., par value $.01 per share (incorporated by
reference to Exhibit 4.4 to The Coleman Company, Inc. 1992 Annual
Report on Form 10-K (the "1992 Coleman 10-K")).
4.10 Indenture dated as of May 27, 1993 between Coleman Worldwide and
Continental Bank National Association, as Trustee (incorporated by
reference to Exhibit 4.10 to the Coleman Holdings Inc. S-1, filed on
August 6, 1993 (the "Holdings S-1")).
4.11 Escrow and Pledge Agreement dated as of May 27, 1993 among Coleman
Worldwide and the Trustee, as Escrow Agent (incorporated by
reference to Exhibit 4.2 to the Holdings S-1).
4.12 Worldwide Non-Recourse Guaranty dated as of May 27, 1993
(incorporated by reference to Exhibit 4.6 to the Holdings S-1).
23
4.13 Worldwide Pledge Agreement dated as of May 27, 1993 between Coleman
Worldwide and the Agent (incorporated by reference to Exhibit 4.7 to
the Holdings S-1).
10.1 Cross-Indemnification Agreement dated as of February 26, 1992 among
New Coleman Holdings Inc., Coleman Finance Holdings Inc., the
Company and certain subsidiaries of New Coleman Holdings Inc. and
the Company (the "Cross Indemnification Agreement") (incorporated by
reference to Exhibit 10.1 to the 1992 Coleman 10-K).
10.2 Amendment No. 1 dated as of December 30, 1992 to the
Cross-Indemnification Agreement (incorporated by reference to
Exhibit 10.2 to the 1992 Coleman 10-K).
10.3 Reimbursement Agreement dated as of February 26, 1992 between the
Company and MacAndrews Holdings (incorporated by reference to
Exhibit 10.4 to the 1992 Coleman 10-K).
10.4 Subordination Agreement dated as of March 4, 1992 among New Coleman
Holdings Inc., Coleman Powermate, Inc., Coleman Spas, Inc., the
Company, the Lenders party to the Company Credit Agreement and
Credit Suisse, as agent (the "Subordination Agreement")
(incorporated by reference to Exhibit 10.17 to the 1992 Coleman
10-K).
10.5 Amendment No. 1 dated as of December 30, 1992, to the Subordination
Agreement (incorporated by reference to Exhibit 10.18 to the 1992
Coleman 10-K).
10.6 Tax Allocation Agreement dated as of August 24, 1990 among
MacAndrews Holdings, New Coleman Holdings Inc. and subsidiaries of
New Coleman Holdings Inc. (incorporated by reference to Exhibit
10.29 to the 1992 Coleman 10-K).
10.7 Amendment No. 1 dated as of February 26, 1992 to the Tax Allocation
Agreement (incorporated by reference to Exhibit 10.30 to the 1992
Coleman 10-K).
10.8 Amendment No. 2 dated as of December 30, 1992 to the Tax Allocation
Agreement (incorporated by reference to Exhibit 10.31 to the 1992
Coleman 10-K).
10.9 Amendment No. 3 dated as of May 27, 1993 to the Tax Allocation
Agreement (incorporated by reference to Exhibit 10.45 to the
Coleman Holdings Inc. S-1, filed on August 6, 1993 (the "Holdings
S-1")).
10.10 Tax Sharing Agreement II dated as of February 26, 1992, among Mafco,
Coleman Finance Holdings Inc., the Company and certain subsidiaries
of the Company (incorporated by reference to Exhibit 10.25 to the
1992 Coleman 10-K).
10.11 Amendment No. 1 dated as of December 30, 1992 to the Tax Sharing
Agreement II (incorporated by reference to Exhibit 10.26 to the 1992
Coleman 10-K).
10.12 Supplemental Tax Sharing Agreement dated as of February 26, 1992,
between the Company and MacAndrews Holdings (incorporated by
reference to Exhibit 10.32 to the 1992 Coleman 10-K).
10.13 Tax Sharing Agreement III dated as of February 26, 1992 among Mafco,
New Coleman Holdings Inc., Coleman Finance Holdings Inc. and
subsidiaries of Coleman Finance Holdings Inc. (incorporated by
reference to Exhibit 10.27 to the 1992 Coleman 10-K).
24
10.14 Amendment No. 1 dated as of December 30, 1992 to the Tax Sharing
Agreement III (incorporated by reference to Exhibit 10.28 to the
1992 Coleman 10-K).
10.15 Tax Sharing Agreement V dated as of May 27, 1993 among Mafco,
Coleman Worldwide, the Company and certain subsidiaries of the
Company (incorporated by reference to Exhibit 10.38 to the Holdings
S-1).
10.16 Tax Sharing Agreement VI dated as of May 27, 1993 between Mafco and
Coleman Worldwide (incorporated by reference to Exhibit 10.39 to the
Holdings S-1).
10.17 Tax Sharing Termination Agreement dated as of May 27, 1993 among
Mafco, New Coleman Holdings Inc., Coleman Finance Holdings Inc., the
Company and subsidiaries of the Company and Coleman Finance Holdings
Inc. (incorporated by reference to Exhibit 10.40 to the Holdings
S-1).
10.18 Registration Rights Agreement dated as of March 4, 1992 among the
Company, Coleman Finance Holdings Inc. and Credit Suisse, as agent
(incorporated by reference to Exhibit 10.33 to the 1992 Coleman
10-K).
10.19 Worldwide Registration Rights Agreement dated as of May 27, 1993
among Coleman Worldwide, the Company, the Lenders Party thereto and
the Agent (incorporated by reference to Exhibit 10.47 to the
Holdings S-1).
10.20 Asset Purchase Agreement dated as of October 10, 1994, by and among
E. Acquisition Corporation, the Company, Eastpak, Inc. and Mark
Goldman (incorporated by reference to Exhibit 10.1 to the Company's
Current Report on Form 8-K dated November 2, 1994 (the "Coleman
8-K")).
10.21 Stock Purchase Agreement dated as of October 10, 1994, by and among
M. Acquisition Corporation, the Company and Mark Goldman
(incorporated by reference to Exhibit 10.2 to the Coleman 8-K).
10.22 Contingent Payment Agreement dated as of October 10, 1994, by and
among E. Acquisition Corporation, M. Acquisition Corporation, the
Company and Mark Goldman (incorporated by reference to Exhibit 10.3
to the Coleman 8-K).
10.23 Agreement for Purchase and Sale of Assets of Seatt Corporation dated
October 26, 1995 by and among James McCrink, Seatt Corporation,
Seller, and The Coleman Company, Inc., Purchaser (incorporated by
reference to Exhibit 10.1 to the Company's Current Report on Form
8-K dated January 26, 1996).
10.24 Share Purchase Agreement dated as of February 27, 1996 by and among
Butagaz S.N.C. and Bafiges S.A. (incorporated by reference to
Exhibit 10.26 to The Coleman Company, Inc. 1995 Annual Report on
Form 10-K (the "1995 Coleman 10-K")).
10.25 Amendment to the Share Purchase Agreement dated as of February 27,
1996 by and among Bafiges S.A. and Butagaz S.N.C. (incorporated by
reference to Exhibit 10.27 to the 1995 Coleman 10-K).
10.26 Shareholders Agreement dated as of February 27, 1996 by and among
Butagaz S.N.C., The Coleman Company, Inc. and Bafiges S.A.
(incorporated by reference to Exhibit 10.28 to the 1995 Coleman
10-K).
25
10.27 Agreement dated as of February 27, 1996 by and between Shell
International Petroleum Company Limited, Butagaz S.N.C. on the first
part, and Bafiges S.A. and The Coleman Company, Inc. on the second
part (incorporated by reference to Exhibit 10.29 to the 1995 Coleman
10-K).
10.28* Non-Competition, Confidentiality and Release Agreement between the
Company and Robert L. Ring, dated as of February 11, 1994
(incorporated by reference to Exhibit 10.46 to the 1993 Coleman
10-K).
10.29* Employment Agreement dated as of January 1, 1996 between the Company
and George Mileusnic (incorporated by reference to Exhibit 10.44 to
the 1995 Coleman 10-K).
10.30* First Amendment dated August 1, 1996 to Employment Agreement
effective as of January 1, 1996, by and between The Coleman Company,
Inc. and George Mileusnic (incorporated by reference to Exhibit 10.5
to the Company's September 30, 1996 Form 10-Q).
10.31* Employment Agreement dated as of January 1, 1996 between the Company
and Larry E. Sanford (incorporated by reference to Exhibit 10.46 to
the 1995 Coleman 10-K).
10.32* First Amendment dated August 1, 1996 to Employment Agreement
effective as of January 1, 1996, by and between The Coleman Company,
Inc. and Larry E. Sanford (incorporated by reference to Exhibit 10.7
to the Company's September 30, 1996 Form 10-Q).
10.33* Employment Agreement dated as of January 1, 1996 between the Company
and Michael N. Hammes (incorporated by reference to Exhibit 10.47 to
the 1995 Coleman 10-K.
10.34* Corrected and Restated Employment Agreement dated as of January 1,
1996 between the Company and Michael N. Hammes (incorporated by
reference to Exhibit 10.2 to the Company's March 31, 1996 Form 10-Q).
10.35* First Amendment dated July 1, 1996 to Employment Agreement effective
January 1, 1996 between the Company and Michael N. Hammes
(incorporated by reference to Exhibit 10.4 to the Company's June 30,
1996 Form 10-Q).
10.36* Second Amendment dated August 1, 1996 to Employment Agreement
effective as of January 1, 1996, by and between The Coleman Company,
Inc. and Michael N. Hammes (incorporated by reference to Exhibit
10.3 to the Company's September 30, 1996 Form 10-Q).
10.37* Letter Agreement between the Company and Lawrence M. Jones dated as
of January 14, 1994 (incorporated by reference to Exhibit 10.57 to
the 1993 Coleman 10-K).
10.38* Employment Agreement dated as of January 20, 1995 between the
Company and Frederick J. Fritz (incorporated by reference to Exhibit
10.41 to the 1994 Coleman 10-K).
26
10.39* Employment Agreement dated as of January 1, 1996 between the Company
and Gerald E. Brown (incorporated by reference to Exhibit 10.48 to
the 1995 Coleman 10-K).
10.40* First Amendment dated August 1, 1996 to Employment Agreement
effective as of January 1, 1996, by and between The Coleman Company,
Inc. and Gerry E. Brown (incorporated by reference to Exhibit 10.8
to the Company's September 30, 1996 Form 10-Q).
10.41* Employment Agreement dated as of January 1, 1996 between the Company
and Patrick McEvoy (incorporated by reference to Exhibit 10.1 to the
Company's March 31, 1996 Form 10-Q).
10.42* First Amendment dated August 1, 1996 to Employment Agreement
effective as of January 1, 1996, by and between The Coleman Company,
Inc. and Patrick McEvoy (incorporated by reference to Exhibit 10.6
to the Company's September 30, 1996 Form 10-Q).
10.43* Employment Agreement dated as of January 1, 1996 between the Company
and David Stearns (incorporated by reference to Exhibit 10.50 to the
1995 Coleman 10-K).
10.44* First Amendment dated August 1, 1996 to Employment Agreement
effective as of January 1, 1996, by and between The Coleman Company,
Inc. and David Stearns (incorporated by reference to Exhibit 10.4 to
the Company's September 30, 1996 Form 10-Q).
10.45* Employment Agreement dated as of May 1, 1996 between the Company
and Frederik van den Bergh (incorporated by reference to Exhibit
10.1 to the Company's June 30, 1996 Form 10-Q).
10.46* First Amendment dated August 1, 1996 to Employment Agreement
effective as of May 1, 1996, by and between The Coleman Company,
Inc. and Frederik van den Bergh (incorporated by reference to
Exhibit 10.2 to the Company's September 30, 1996 Form 10-Q).
10.47* Second Amendment dated August 1, 1996 to Employment Agreement
effective as of May 1, 1996, by and between The Coleman Company,
Inc. and Frederik van den Bergh (incorporated by reference to
Exhibit 10.47 to the 1996 Coleman 10-K).
10.48* Employment Agreement dated as of August 1, 1996 between the Company
and Steven F. Kaplan (incorporated by reference to Exhibit 10.2 to
the Company's June 30, 1996 Form 10-Q).
10.49* Addendum dated August 3, 1996 and effective August 1, 1996 to
Employment Agreement dated as of August 1, 1996 between the Company
and Steven F. Kaplan (incorporated by reference to Exhibit 10.3 to
the Company's June 30, 1996 Form 10-Q).
10.50* First Amendment dated August 1, 1996 to Employment Agreement
effective as of August 1, 1996, by and between The Coleman Company,
Inc. and Steven F. Kaplan (incorporated by reference to Exhibit 10.1
to the Company's September 30, 1996 Form 10-Q).
27
10.51* The Coleman Company, Inc. Performance Incentive Plan for 1996
(incorporated by reference to Exhibit 10.53 to the 1995 Coleman 10-K).
10.52* The Coleman Company, Inc. Executive Annual Incentive Plan for 1995
(incorporated by reference to Exhibit 10.49 to the 1994 Coleman 10-K).
10.53* The Coleman Company, Inc. 1996 Stock Option Plan, as amended
(incorporated by reference to Exhibit 10.53 to the 1996 Coleman 10-K).
10.54* The Coleman Retirement Salaried Incentive Savings Plan (incorporated
by reference to Exhibit 10.3 to the Company's March 31, 1996 Form
10Q).
10.55* The Coleman Retirement Incentive Savings Plan (the "Savings Plan")
(incorporated by reference to Exhibit 10.54 to the 1995 Coleman 10-K).
10.56* First Amendment dated as of October 11, 1994 to the Savings Plan
(incorporated by reference to Exhibit 10.55 to the 1995 Coleman 10-K).
10.57* Second Amendment dated as of January 1, 1995 to the Savings Plan
(incorporated by reference to Exhibit 10.56 to the 1995 Coleman 10-K).
10.58* Third Amendment dated as of December 14, 1995 to the Savings Plan
(incorporated by reference to Exhibit 10.57 to the 1995 Coleman 10-K).
10.59* Fourth Amendment dated as of December 14, 1995 to the Savings Plan
(incorporated by reference to Exhibit 10.58 to the 1995 Coleman 10-K).
10.60* Fifth Amendment dated as of January 1, 1996 to the Savings Plan
(incorporated by reference to Exhibit 10.59 to the 1995 Coleman 10-K).
10.61* Amendment dated as of December 14, 1995 to the Savings Plan
(incorporated by reference to Exhibit 10.60 to the 1995 Coleman 10-K).
10.62* Amendment dated as of December 14, 1995 to the Savings Plan
(incorporated by reference to Exhibit 10.61 to the 1995 Coleman 10-K).
10.63* Amendment dated as of January 1, 1996 to the Savings Plan
(incorporated by reference to Exhibit 10.62 to the 1995 Coleman 10-K).
10.64* New Coleman Holdings Inc. Excess Benefit Plan dated as of January 1,
1995 (incorporated by reference to Exhibit 10.1 to the Company's
June 30, 1995 Form 10-Q).
10.65* The New Coleman Company, Inc. Retirement Plan for Salaried Employees
(the "Retirement Plan") (incorporated by reference to Exhibit 10.63
to the 1995 Coleman 10-K).
10.66* Amendment dated as of October 17, 1994 to the Retirement Plan
(incorporated by reference to Exhibit 10.64 to the 1995 Coleman 10-K).
10.67* Amendment dated as of December 14, 1995 to the Retirement Plan
(incorporated by reference to Exhibit 10.65 to the 1995 Coleman 10-K).
28
10.68* Amendment dated as of December 14, 1995 to the Retirement Plan
(incorporated by reference to Exhibit 10.66 to the 1995 Coleman 10-K).
10.69* Amendment dated as of October 12, 1995 to the Retirement Plan
(incorporated by reference to Exhibit 10.67 to the 1995 Coleman 10-K).
10.70* Amendment dated as of January 1, 1996 to the Retirement Plan
(incorporated by reference to Exhibit 10.68 to the 1995 Coleman 10-K).
10.71* Amendment dated as of December 31, 1995 to the Retirement Plan
(incorporated by reference to Exhibit 10.69 to the 1995 Coleman 10-K).
10.72* The Coleman Company, Inc. Special Executive Retirement Plan for the
benefit of Robert L. Ring, dated as of April 11, 1994 (incorporated
by reference to Exhibit 10.2 to the Company's March 31, 1994 Form
10-Q).
10.73* The Coleman Company, Inc. Consolidated Supplemental Retirement Plan,
dated as of January 1, 1996 (incorporated by reference to Exhibit
10.73 to the 1995 Coleman 10-K).
10.74* First Amendment dated July 1, 1996 to the Consolidated Supplemental
Retirement Plan adopted January 1, 1996 (incorporated by reference
to Exhibit 10.5 to the Company's June 30, 1996 Form 10-Q).
10.75* The Coleman Company, Inc. Executive Employees Deferred Compensation
Plan, as amended by the First Amendment thereto (incorporated by
reference to Exhibit 10.11 to the Coleman S-1).
10.76* The Coleman Company, Inc. 1992 Stock Option Plan (incorporated by
reference to Exhibit 10.13 to Amendment No. 2 to the Coleman S-1).
10.77* The Coleman Company, Inc. 1993 Stock Option Plan (incorporated by
reference to Exhibit 10.18 to The Coleman Company, Inc. Quarterly
Report on Form 10-Q for the quarter ended September 30, 1993, filed
on November 15, 1993).
10.78* The Coleman Company, Inc. 1996 Stock Option Plan (incorporated by
reference to Exhibit 10.78 to the 1995 Coleman 10-K).
10.79* Employment Agreement dated as of November 1, 1994 between E.
Acquisition Corporation and Mark Goldman (incorporated by reference
to Exhibit 10.79 to the 1996 Coleman 10-K).
.
10.80* Employment Agreement dated as of November 1, 1994 between M.
Acquisition Corporation and Mark Goldman (incorporated by reference
to Exhibit 10.80 to the 1996 Coleman 10-K).
10.81* Letter Agreement dated as of February 28, 1997 between the Company
and Michael N. Hammes (incorporated by reference to Exhibit 10.81 to
the 1996 Coleman 10-K).
10.82 Worldwide Registration Rights Agreement dated as of May 27, 1993
among Coleman Worldwide, the Company, the Lenders Party thereto and
the Agent (incorporated by reference to Exhibit 10.47 to the
Holdings S-1).
29
10.83 Indemnity Agreement dated as of May 27, 1993 among Coleman
Worldwide, New Coleman Holdings Inc. and certain subsidiaries of New
Coleman Holdings Inc. (incorporated by reference to Exhibit 10.3 to
the Holdings S-1).
10.84 Reimbursement Agreement dated as of May 27, 1993 between Coleman
Worldwide and MacAndrews Holdings (incorporated by reference to
Exhibit 10.8 to the Holdings S-1).
21.1+ Subsidiaries of the Company.
24.1+ Powers of Attorney executed by Ronald O. Perelman, Donald G.
Drapkin, and Jerry W. Levin.
27 + Financial Data Schedule
- -------------------
* Management Contracts and Compensatory Plans
+Filed herewith
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended
December 31, 1996.
(d) For separate financial statements and schedules of The Coleman
Company, Inc., whose common stock is pledged as collateral, see Item 8
of The Coleman Company, Inc. Annual Report on Form 10-K for the year
ended December 31, 1996 incorporated herein by reference.
30
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
COLEMAN WORLDWIDE CORPORATION
(Registrant)
Date: March 27, 1997 By: Bruce Slovin /s/
-------------------------- ----------------------------------
Bruce Slovin
President and Director
Date: March 27, 1997 By: Irwin Engelman /s/
-------------------------- ----------------------------------
Irwin Engelman
Executive Vice President and
Chief Financial Officer
Date: March 27, 1997 By: Laurence Winoker /s/
-------------------------- ----------------------------------
Laurence Winoker
Chief Accounting Officer
Pursuant to the requirements of the Securities and Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: March 27, 1997 By: Ronald O. Perelman *
-------------------------- ----------------------------------
Ronald O. Perelman
Chairman of the Board and Director
Date: March 27, 1997 By: Donald G. Drapkin *
-------------------------- ----------------------------------
Donald G. Drapkin
Director
Date: March 27, 1997 By: Jerry W. Levin*
-------------------------- ----------------------------------
Jerry W. Levin
Director
* Executed on behalf of the named director pursuant to a power of attorney.
Date: March 27, 1997 By: Larry E. Sanford /s/
-------------------------- ----------------------------------
Larry E. Sanford
Attorney-in-fact
31
ANNUAL REPORT ON FORM 10-K
ITEM 8, ITEM 14(a)(1) AND (2) AND (d)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
YEAR ENDED DECEMBER 31, 1996
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
The following consolidated financial statements of Coleman Worldwide
Corporation and Subsidiaries are included in Item 8:
PAGE
----
Consolidated Balance Sheets as of December 31, 1996 and 1995 . . . . . F-3
Consolidated Statements of Operations
for the years ended December 31, 1996, 1995 and 1994 . . . . . . . . F-4
Consolidated Statements of Stockholder's Equity
for the years ended December 31, 1996, 1995 and 1994 . . . . . . . . F-5
Consolidated Statements of Cash Flows
for the years ended December 31, 1996, 1995 and 1994 . . . . . . . . F-6
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . F-7
The following consolidated financial statement schedules of Coleman
Worldwide Corporation and Subsidiaries are included in Item 14(d):
Schedule I - Condensed Financial Information of Registrant . . . . . . F-30
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable and, therefore,
have been omitted.
F-1
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholder
Coleman Worldwide Corporation
We have audited the accompanying consolidated balance sheets of Coleman
Worldwide Corporation and subsidiaries as of December 31, 1996 and 1995, and
the related consolidated statements of operations, Stockholder's equity, and
cash flows for each of the three years in the period ended December 31, 1996.
Our audits also included the financial statement schedule listed in the Index
at Item 14(a). These financial statements and schedule are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of The Coleman Company, Inc. and subsidiaries at December 31, 1996 and 1995,
and the consolidated results of their operations and their cash flows for
each of the three years in the period ended December 31, 1996, in conformity
with generally accepted accounting principles. Also, in our opinion, the
related financial statement schedule, when considered in relation to the
basic financial statements taken as a whole, present fairly in all material
respects, the information set forth therein.
/s/ ERNST & YOUNG LLP
Denver, Colorado
March 10, 1997
F-2
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
December 31,
-----------------------
1996 1995
---------- --------
ASSETS
Current assets:
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . $ 17,299 $ 12,065
Accounts receivable, less allowance of $11,512 in 1996
and $3,115 in 1995 . . . . . . . . . . . . . . . . . . . . . . 182,418 148,765
Notes receivable . . . . . . . . . . . . . . . . . . . . . . . . 27,524 16,544
Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . 287,502 216,236
Deferred tax assets. . . . . . . . . . . . . . . . . . . . . . . 40,466 20,481
Prepaid assets and other . . . . . . . . . . . . . . . . . . . . 14,885 22,420
---------- --------
Total current assets. . . . . . . . . . . . . . . . . . . . 570,094 436,511
Property, plant and equipment, net . . . . . . . . . . . . . . . . 199,182 162,691
Intangible assets related to businesses acquired, net. . . . . . . 349,761 225,247
Note receivable - affiliate. . . . . . . . . . . . . . . . . . . . 54,739 50,685
Deferred tax assets and other. . . . . . . . . . . . . . . . . . . 32,673 31,255
---------- --------
$1,206,449 $906,389
---------- --------
---------- --------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current portion of long-term debt. . . . . . . . . . . . . . . . $ 747 $ 1,051
Short-term borrowings. . . . . . . . . . . . . . . . . . . . . . 33,935 19,302
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . 98,906 71,377
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . 112,944 58,162
---------- --------
Total current liabilities . . . . . . . . . . . . . . . . . 246,532 149,892
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . 757,460 519,640
Income taxes payable - affiliate . . . . . . . . . . . . . . . . . 18,528 37,846
Other liabilities. . . . . . . . . . . . . . . . . . . . . . . . . 76,173 48,072
Minority interest. . . . . . . . . . . . . . . . . . . . . . . . . 45,088 49,266
Commitments and contingencies. . . . . . . . . . . . . . . . . . .
Stockholder's equity:
Common stock, par value $1.00 per share;
1,000 shares issued and outstanding. . . . . . . . . . . . . . 1 1
Additional paid-in capital . . . . . . . . . . . . . . . . . . . 23,687 23,496
Retained earnings. . . . . . . . . . . . . . . . . . . . . . . . 36,360 77,823
Currency translation adjustment. . . . . . . . . . . . . . . . . 2,856 353
Minimum pension liability adjustment . . . . . . . . . . . . . . (236) --
---------- --------
Total stockholder's equity. . . . . . . . . . . . . . . . . 62,668 101,673
---------- --------
$1,206,449 $906,389
---------- --------
---------- --------
See Notes to Consolidated Financial Statements
F-3
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
Year Ended December 31,
-----------------------------------------
1996 1995 1994
----------- ---------- ----------
Net revenues . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,220,216 $ 933,574 $ 751,580
Cost of sales. . . . . . . . . . . . . . . . . . . . . . . . . 928,497 649,427 535,710
----------- ---------- ----------
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . 291,719 284,147 215,870
Selling, general and administrative expenses . . . . . . . . . 291,862 174,870 128,561
Asset impairment charge. . . . . . . . . . . . . . . . . . . . -- 12,289 --
Restructuring expense. . . . . . . . . . . . . . . . . . . . . -- -- 18,456
Interest expense, net. . . . . . . . . . . . . . . . . . . . . 50,767 35,930 24,031
Amortization of goodwill and deferred charges. . . . . . . . . 11,056 8,309 6,667
Other (income) expense, net. . . . . . . . . . . . . . . . . . (1,604) 283 1,138
----------- ---------- ----------
(Loss) earnings before income taxes, minority
interest and extraordinary item. . . . . . . . . . . . . . . (60,362) 52,466 37,017
Income tax (benefit) expense . . . . . . . . . . . . . . . . . (14,753) 19,861 10,437
Minority interest in earnings of Camping Gaz . . . . . . . . . 1,872 -- --
Minority interest in (loss) earnings of Coleman. . . . . . . . (7,262) 6,696 5,734
----------- ---------- ----------
(Loss) earnings before extraordinary item. . . . . . . . . . . (40,219) 25,909 20,846
Extraordinary loss on early extinguishment of debt,
net of income tax benefit of $846 in 1996, $503 in 1995,
and $435 in 1994 . . . . . . . . . . . . . . . . . . . . . . (1,244) (787) (677)
----------- ---------- ----------
Net (loss) earnings. . . . . . . . . . . . . . . . . . . . . . $ (41,463) $ 25,122 $ 20,169
----------- ---------- ----------
----------- ---------- ----------
See Notes to Consolidated Financial Statements
F-4
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
Common Stock
--------------------- Additional Currency Minimum
Number Paid-In Retained Translation Pension
of Shares Amount Capital Earnings Adjustment Liability
--------- ------ ---------- -------- ----------- ---------
Balance at December 31, 1993 . . . . . 1,000 $ 1 $ 22,902 $ 32,532 $ (215) $ --
Net earnings . . . . . . . . . . . . -- -- -- 20,169 -- --
Currency translation adjustment. . . -- -- -- -- 1,185
Contributions. . . . . . . . . . . . -- -- 208 -- -- --
--------- -------- --------- --------- --------- --------
Balance at December 31, 1994 . . . . . 1,000 1 23,110 52,701 970 --
Net earnings . . . . . . . . . . . . -- -- -- 25,122 -- --
Currency translation adjustment. . . -- -- -- -- (617)
Contributions. . . . . . . . . . . . -- -- 386 -- --
--------- -------- --------- --------- --------- --------
Balance at December 31, 1995 . . . . . 1,000 1 23,496 77,823 353 --
Net loss . . . . . . . . . . . . . . -- -- -- (41,463) -- --
Currency translation adjustment. . . -- -- -- -- 2,503 --
Minimum pension liability
adjustment, net of tax . . . . . . -- -- -- -- -- (236)
Contributions. . . . . . . . . . . . -- -- 191 -- -- --
--------- -------- --------- --------- --------- --------
Balance at December 31, 1996 . . . . . 1,000 $ 1 $ 23,687 $ 36,360 $ 2,856 $ (236)
--------- -------- --------- --------- --------- --------
--------- -------- --------- --------- --------- --------
See Notes to Consolidated Financial Statements
F-5
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
Year Ended December 31,
-------------------------------
1996 1995 1994
--------- -------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) earnings . . . . . . . . . . . . . . . . . . . $ (41,463) $ 25,122 $ 20,169
--------- -------- --------
Adjustments to reconcile net (loss) earnings to net
cash flows from operating activities:
Depreciation and amortization . . . . . . . . . . . . . 36,941 27,087 23,213
Non-cash tax sharing agreement provision. . . . . . . . 4,637 15,722 3,668
Minority interest in (loss) earnings of Coleman . . . . (7,262) 6,696 5,734
Minority interest in earnings of Camping Gaz. . . . . . 1,872 -- --
Interest accretion. . . . . . . . . . . . . . . . . . . 12,051 11,388 10,657
Non-cash gain on LYONs conversion . . . . . . . . . . . (2,755) -- --
Non-cash restructuring and other charges. . . . . . . . 48,269 12,289 10,950
Extraordinary loss on early extinguishment of debt. . . 2,090 1,290 1,112
Change in assets and liabilities:
Decrease (increase) in receivables. . . . . . . . . . 976 (37,833) (22,122)
Increase in inventories . . . . . . . . . . . . . . . (42,402) (49,396) (10,852)
(Decrease) increase in accounts payable . . . . . . . (12,308) 13,825 (1,403)
Other, net. . . . . . . . . . . . . . . . . . . . . . (5,982) (16,747) 5,659
--------- -------- --------
36,127 (15,679) 26,616
--------- -------- --------
Net cash (used) provided by operating activities. . . . . (5,336) 9,443 46,785
--------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures. . . . . . . . . . . . . . . . . . . (41,334) (29,053) (34,915)
Purchases of businesses, net of cash acquired . . . . . . (161,875) (33,385) (99,587)
Increase in note receivable - affiliate . . . . . . . . . (4,054) (6,742) (27,052)
Proceeds from sale of fixed assets. . . . . . . . . . . . 2,924 928 4,471
--------- -------- --------
Net cash used by investing activities . . . . . . . . . . (204,339) (68,252) (157,083)
--------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in short-term borrowings . . . . . . . . . . . (11,043) 3,106 6,867
Net (payments of) proceeds from revolving credit
agreement borrowings . . . . . . . . . . . . . . . . . . (2,779) (61,289) 129,274
Proceeds from issuance of long-term debt. . . . . . . . . 235,000 200,000 --
Repayment of long-term debt . . . . . . . . . . . . . . . (6,778) (74,782) (10,796)
Debt issuance and refinancing costs . . . . . . . . . . . (3,902) (3,569) (1,955)
Purchases of Company common stock . . . . . . . . . . . . (2,329) (4,086) (9,571)
Proceeds from stock options exercised
including tax benefits . . . . . . . . . . . . . . . . . 2,192 4,520 584
Contributions from parent . . . . . . . . . . . . . . . . 191 386 208
--------- -------- --------
Net cash provided by financing activities . . . . . . . . 210,552 64,286 114,611
--------- -------- --------
Effect of exchange rate changes on cash . . . . . . . . . 4,357 (1,731) (1,587)
--------- -------- --------
Net increase in cash and cash equivalents . . . . . . . . 5,234 3,746 2,726
Cash and cash equivalents at beginning of the year. . . . 12,065 8,319 5,593
--------- -------- --------
Cash and cash equivalents at end of the year. . . . . . . $ 17,299 $ 12,065 $ 8,319
--------- -------- --------
--------- -------- --------
See Notes to Consolidated Financial Statements
F-6
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA)
1. SIGNIFICANT ACCOUNTING POLICIES
BACKGROUND:
Coleman Worldwide Corporation ("Coleman Worldwide") was formed in March
1993 in connection with the offering of Liquid Yield Option-TM- Notes due 2013
(the "LYONs"-TM-). Coleman Worldwide also holds 44,067,520 shares of the
common stock of The Coleman Company, Inc. ("Coleman " or the "Company")
which represents approximately 83% of the outstanding Coleman common stock as
of December 31, 1996. Coleman was formed in December 1991 to succeed to the
assets and liabilities of the outdoor products business of New Coleman
Holdings Inc. ("Holdings") an indirect wholly-owned subsidiary of Mafco
Holdings Inc. ("Mafco"). Holdings (then named The Coleman Company, Inc.) was
acquired in 1989 by MacAndrews & Forbes Holdings Inc. ("MacAndrews Holdings",
and, together with Mafco, "MacAndrews & Forbes"), a corporation wholly owned
through Mafco by Ronald O. Perelman. Coleman is a subsidiary of Coleman
Worldwide Corporation ("Coleman Worldwide"), which is an indirect
wholly-owned subsidiary of Holdings. In March 1992, the Company completed an
initial public offering of its common stock.
PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements include the accounts of Coleman
Worldwide and its subsidiaries after elimination of all material intercompany
accounts and transactions.
CASH EQUIVALENTS:
Cash equivalents (primarily investments in money market funds and
commercial paper which are purchased with original maturities of three months
or less) are carried at cost, which approximates fair value.
INVENTORIES:
Inventories are valued at the lower of cost or market. Cost is
principally determined by the first-in, first-out ("FIFO") method.
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment is recorded at cost and depreciated on a
straight-line basis over the estimated useful lives of such assets as
follows: land improvements, 5 to 25 years; buildings and building
improvements, 7 to 45 years; and machinery and equipment, 3 to 15 years.
Leasehold improvements are amortized over their estimated useful lives or the
terms of the leases, whichever is shorter. Repairs and maintenance are
charged to operations as incurred, and significant expenditures for additions
and improvements are capitalized.
INTANGIBLE ASSETS:
Intangible assets represent goodwill which is being amortized on a
straight-line basis over periods not in excess of 40 years. Accumulated
amortization aggregated $39,520 and $29,664 at December 31, 1996 and 1995,
respectively. The carrying amount of goodwill is reviewed if facts and
circumstances suggest it may be impaired. If this review indicates goodwill
will not be recoverable over the remaining amortization period, as determined
based on the estimated undiscounted cash flows of the entity acquired, the
carrying amount of the goodwill is reduced to estimated fair value based on
market value or discounted cash flows, as appropriate.
F-7
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
DEFERRED CHARGES:
Expenses associated with borrowings, such as for underwriting, legal fees
and printing costs, are amortized over the term of the related debt.
REVENUE RECOGNITION:
The Company recognizes net revenues upon shipment of merchandise. Net
revenues comprise gross revenues less customer returns and allowances.
ADVERTISING AND PROMOTION EXPENSE:
Production costs of future media advertising are deferred until the
advertising occurs. All other advertising and promotion costs are expensed when
incurred. The amounts charged against operations for the years ended December
31, 1996, 1995 and 1994 were $58,823, $37,544 and $30,831, respectively.
RESEARCH AND DEVELOPMENT:
Research and development expenditures are expensed as incurred. The
amounts charged against operations for the years ended December 31, 1996, 1995
and 1994 were $11,082, $6,548, and $5,230, respectively.
SELF INSURANCE:
Coleman Worldwide participates in insurance programs maintained by
Holdings. Coleman Worldwide estimates its liability for the self-insured
portions of the risks covered by such programs and accrues appropriate
reserves. (See Note 11.)
FOREIGN CURRENCY TRANSLATION:
The Company's international operations, other than its Brazilian and
Mexican operations, are conducted in economic environments which the Company
does not consider to be highly inflationary. Assets and liabilities of
international operations generally are translated into U.S. dollars at the
rates of exchange in effect at the balance sheet date, and income and expense
items generally are translated at the average exchange rates prevailing
during the period presented. Gains and losses resulting from the translation
of these financial statements are recorded as a component of stockholder's
equity. Gains and losses resulting from foreign currency transactions and
translation of the financial statements of the Company's Brazilian and
Mexican operations are included in the results of operations and have not
been significant for the years ended December 31, 1996, 1995 and 1994.
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK:
The Company periodically enters into a variety of foreign currency
exchange agreements in the management of foreign currency exposure related
primarily to firm commitments, intercompany foreign sales transactions
expected to occur within the next twelve months and intercompany accounts
receivables and payables.
F-8
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
At December 31, 1996, the Company did not have any outstanding foreign
currency exchange agreements related to firm commitments. At December 31,
1995, the Company had a forward exchange contract to buy $15,000 of Italian
lira maturing on May 31, 1996 and had an unrecognized gain of $93. The gains
and losses from this contract are accounted for under the deferral method and
are recognized and included in income in the same period as a component of
the related hedged transactions. In the event it is no longer probable the
transactions will be consummated, the gains and losses are recognized
immediately in income under the fair value method. At December 31, 1995, the
Company had outstanding option contracts for the purchase or sale of Italian
lira totaling $10,500, which contracts expired during 1996.
During the fourth quarter of 1995, the Company elected to adopt the
provisions of the Emerging Issues Task Force Issue No. 95-2, "Determination
of What Constitutes a Firm Commitment for Foreign Currency Transactions Not
Involving a Third Party" ("EITF 95-2") which narrowed the scope of
intercompany foreign currency commitments eligible to be hedged for financial
reporting purposes. Under EITF 95-2, the Company reflects the carrying value
of its forward currency contract positions relating to intercompany foreign
sales transactions on a mark-to-market basis and accounts for the resulting
unrecognized gains or losses in income as a component of cost of sales. As a
result of this change, the Company increased net income by $3,796 in the
fourth quarter of 1995. Prior to the adoption of EITF 95-2, the gains and
losses associated with these contracts were accounted for under the deferral
method. At December 31,1996, the Company had forward exchange contracts to
sell $8,500 in Canadian dollars maturing on February 28, 1997, for which the
Company has recognized a net gain of $40 as a component of cost of sales. At
December 31,1995, the Company had forward exchange contracts to sell $22,969
in foreign currencies, which contracts matured at various dates in 1996 and
for which the Company has recognized a net gain of $7,599 as a component of
cost of sales.
The Company also enters into option contracts to hedge intercompany
foreign sales transactions. Gains and losses on these contracts are deferred
and recognized as an adjustment to cost of sales upon the sale of the
related inventory. At December 31, 1996 and 1995, the Company had
outstanding option contracts for the sale of Japanese yen at fixed exchange
rates totaling $20,038 and $24,926 for specified periods of time which expire
during 1997 and 1996, respectively. Net unrealized gains deferred at
December 31, 1996 and 1995 were $653 and $125, respectively.
With respect to intercompany accounts receivable and payables, at
December 31, 1996, the Company had forward exchange contracts to sell $26,623
and to buy $3,898 in foreign currencies, which contracts matured at various
dates in 1997, and had deferred a net gain of $185. At December 31, 1995,
the Company had forward exchange contracts to sell $31,152 and to buy $1,712
in foreign currencies, which contracts matured at various dates in 1996 and
had deferred a net gain of $56. The gains and losses from these contracts
are accounted for under the deferral method and are recognized and included
in income in the same period as a component of the related hedged
transactions.
The Company periodically enters into interest rate swap and cap
agreements as a hedge against interest rate exposure of variable rate debt.
At December 31, 1996, $25,000 of the Company's outstanding long-term debt was
subject to an interest rate swap agreement and $25,000 of the Company's
outstanding long-term debt was subject to an interest rate cap. Under the
interest rate swap agreement, the Company pays the counterparty interest at a
fixed rate of 6.115%, and the counterparty pays the Company interest at a
variable rate equal to the three month LIBOR for a seven year period
commencing January 2, 1996. The agreement is with a major financial
institution which is expected to fully perform under the terms of the
agreement, thereby mitigating the credit risk from the transaction. The
differences to be paid or received on interest rate swap agreements
designated as hedges are included in interest expense as payments are made or
received. The interest rate cap
F-9
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
agreement entitles the Company to receive from a major financial institution
the amount, if any, by which the Company's interest payments on $25,000 of
its variable rate debt exceed 7.35%. The $509 premium paid for this interest
rate cap agreement is included in other assets and is amortized to interest
expense over the three-year term of the cap, which commenced January 3, 1995.
Payments received as a result of the cap are accrued as a reduction of
interest expense on the variable rate debt. In the event the interest rate
swap or cap agreements are terminated early and the related debt remains
outstanding, the amounts paid or received upon the early termination, along
with any unamortized premium, will continue to be amortized over the terms of
the original interest rate swap and cap agreements.
CREDIT RISK:
Financial instruments which potentially subject Coleman Worldwide to
concentrations of credit risk consist primarily of trade receivables and
derivative financial instruments. Credit risk on trade receivables is
minimized as a result of the large and diversified nature of the Company's
worldwide customer base. Although the Company has one significant customer
(See Note 14), there have been no credit losses related to this customer.
With respect to its derivative contracts, the Company is also subject to
credit risk of non performance by counterparties and its maximum potential
loss may exceed the amount recognized in the financial statements. The
Company controls its exposure to credit risk through credit approvals, credit
limits and monitoring procedures. Collateral is generally not required for
the Company's financial instruments.
FAIR VALUE OF FINANCIAL INSTRUMENTS:
The following methods and assumptions were used by Coleman Worldwide in
estimating its fair value disclosures for financial instruments:
CASH AND CASH EQUIVALENTS: The carrying amount reported in the
balance sheet for cash and cash equivalents approximates its fair
value.
LONG- AND SHORT-TERM DEBT: The carrying amounts of Coleman
Worldwide's borrowings under its foreign bank lines of credit,
revolving credit agreement and other variable rate debt
approximate their fair value. The fair value of the Company's
senior notes issues (see Note 9) are estimated using discounted
cash flow analysis based on the Company's estimated current
borrowing rate for similar types of borrowing arrangements. The
fair value of the publicly traded LYONs debt is based on quoted
market prices.
FOREIGN CURRENCY EXCHANGE AGREEMENTS: The fair values of Coleman
Worldwide's foreign currency agreements are estimated based on
quoted market prices of comparable agreements, adjusted through
interpolation where necessary for maturity differences.
INTEREST RATE SWAP AND CAP AGREEMENTS: The fair values of
interest rate swap and cap agreements are the amounts at which
they could be terminated, based on estimates obtained from
dealers.
F-10
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The carrying amounts and fair values of Coleman Worldwide's financial
instruments at December 31, 1996 and 1995 are as follows:
December 31, 1996 December 31, 1995
------------------------- --------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
of Asset/ of Asset/ of Asset/ of Asset/
(Liability) (Liability) (Liability) (Liability)
----------- ----------- ----------- -----------
Cash and cash equivalents. . . . . . . . . . . . . $ 17,299 $ 17,299 $ 12,065 $ 12,065
Short-term debt. . . . . . . . . . . . . . . . . . (33,935) (33,935) (19,302) (19,302)
Long-term debt excluding capital leases. . . . . . (757,613) (738,964) (519,914) (541,732)
Foreign currency exchange agreements . . . . . . . 940 1,629 8,026 8,287
Interest rate swap agreements. . . . . . . . . . . -- 296 -- (635)
Interest rate cap agreement. . . . . . . . . . . . 170 1 340 18
USE OF ESTIMATES:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
RECLASSIFICATIONS:
Certain amounts in the prior years' financial statements have been
reclassified to conform to the current year presentation.
ACCOUNTING FOR STOCK-BASED COMPENSATION:
The Company accounts for its stock compensation arrangements under the
provisions of Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" ("APB 25") and related pronouncements. Under the
provisions of APB 25, no compensation expense is recognized when stock options
are granted with exercise prices equal to or greater than market value on the
date of grant.
IMPAIRMENT OF LONG-LIVED ASSETS:
In March 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of" ("FAS 121"),
which requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted
cash flows estimated to be generated by those assets are less than the
assets' carrying amount. FAS 121 also addresses the accounting for
long-lived assets expected to be disposed of. The Company adopted FAS 121 in
the fourth quarter of 1995. The effect of the adoption of FAS 121 is
described in Note 3.
2. ACQUISITIONS
During April 1994, the Company purchased substantially all the assets of
Sanborn Manufacturing Company ("Sanborn") in Eden Prairie, Minnesota, a
manufacturer of a broad line of portable and stationary air
F-11
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
compressors for consumer and commercial markets distributed primarily through
warehouse clubs, home centers and mass merchants in North America, and
substantially all the assets and business of Metal Yanes, Ltda. ("Yanes") in
Sao Paulo, Brazil, a manufacturer of camping products, including propane and
butane fueled lanterns, camp stoves, tents, lantern mantles and fuel. The
Sanborn and Yanes acquisitions, which were accounted for under the purchase
method of accounting, were completed for the following consideration: (a)
approximately $41,066 in cash financed through borrowings under the Company
Credit Agreement (as defined in Note 9), (b) assumption of liabilities in the
amount of $22,193, and (c) a note payable of $2,999. During 1995, in
connection with the Sanborn acquisition, the Company entered into a
settlement agreement with the predecessor owners which resolved certain
disputes between the parties as well as fulfilled certain obligations owed
and anticipated to be owed by the Company to the predecessor owners. These
anticipated obligations related to a requirement to make additional payments
of up to $4,000 based upon the achievement of certain annual sales levels
during the five year period ending December 31, 1998 by Coleman Powermate
Compressors, Inc. ("Compressors"), the Company's subsidiary that acquired the
Sanborn assets (the "Sales Agreement"). As a result of the settlement,
goodwill was increased by $3,282. For 1994, approximately $671 was earned
under the terms of the Sales Agreement based on the 1994 sales levels of
Compressors, and this amount was recorded as additional goodwill in 1994.
The results of operations of these businesses have been included in the
consolidated financial statements from the dates of acquisitions.
On November 2, 1994, the Company purchased substantially all the assets
of Eastpak, Inc. and all of the capital stock of M.G. Industries, Inc.
(collectively, "Eastpak"), a leading designer, manufacturer and distributor
of branded daypacks, sports bags and related products. The Eastpak
acquisition, which was accounted for under the purchase method, was completed
for approximately $57,850 in cash financed through borrowings under the
Company Credit Agreement, and assumption of certain liabilities in the amount
of $4,130. The Company also entered into an agreement with the predecessor
owner of Eastpak to make additional payments based upon the achievement of
certain annual sales levels of Eastpak products and other products
substantially similar to the Eastpak products during the years ended December
31, 1995, 1996, and 1997. For 1995 and 1996, a total of approximately
$11,000 was recorded under the terms of this agreement. An additional amount
of up to $12,000 may be earned during the year ended December 31, 1997.
These amounts are recorded as additional goodwill. The results of operations
of Eastpak have been included in the consolidated financial statements from
the date of acquisition.
In connection with the final purchase price allocations of the Sanborn and
Eastpak acquisitions, the Company recorded goodwill of approximately $53,000.
The Company is amortizing these amounts over 40 years. The goodwill of
approximately $7,700 associated with the Yanes acquisition was included in the
1995 asset impairment charge of $12,289 related to the Company's operations in
Brazil, which is further discussed in Note 3.
During 1995, the Company purchased all of the outstanding shares of
capital stock of Sierra Corporation of Fort Smith, Inc. ("Sierra"), a
manufacturer of portable outdoor and recreational folding furniture and
accessories, and substantially all of the assets of Active Technologies, Inc.
("ATI"), a manufacturer of technologically advanced lightweight generators
and battery charging equipment. The aggregate purchase price for these
acquisitions was $19,516 including fees and expenses. These acquisitions
were accounted for using the purchase method of accounting. The purchase
price and expenses associated with these acquisitions exceeded the fair value
of net assets acquired by $11,186 and the excess has been assigned to
goodwill and is being amortized over 20 to 30 years on the straight-line
basis. In connection with the ATI purchase, the Company may also be required
to record an additional amount of up to $18,750 based on the Company's sales
of ATI related products and royalties received by the Company for licensing
arrangements related to ATI patents. For 1995 and
F-12
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
1996, the amounts earned under the terms of this agreement were immaterial.
Amounts earned under the terms of the agreement are recorded as additional
goodwill. The results of operations of these companies on a pro forma basis
as if their acquisitions had occurred at the beginning of 1995 and 1994,
respectively, individually and in the aggregate were not significant to
Coleman Worldwide.
On January 2, 1996, the Company purchased substantially all the assets and
assumed certain liabilities of Seatt Corporation ("Seatt"), a leading designer,
manufacturer and distributor of safety and security related electronic products
for residential and commercial applications. The Seatt acquisition, which was
accounted for under the purchase method, was completed for approximately $65,300
including fees and expenses. The results of operations of Seatt have been
included in the consolidated financial statements from the date of acquisition.
In connection with the purchase price allocation of the Seatt acquisition, the
Company recorded goodwill of approximately $38,800. The Company is amortizing
this amount over 40 years on the straight-line method.
On February 28, 1996, the Company and Butagaz S.N.C. ("Butagaz"), a
subsidiary of Socit de Petroles Shell S.A., jointly announced they had entered
into an agreement (the "Share Purchase Agreement") in connection with the sale
to Coleman of approximately 70% of the outstanding shares of Application des
Gaz, S.A. ("ADG" or "Camping Gaz"). Camping Gaz is a leading manufacturer and
distributor of camping appliances in Europe. On June 24, 1996, Coleman
commenced a public tender offer for the purchase of all the publicly traded
outstanding shares of ADG, or approximately 30% of the outstanding shares. The
tender offer period expired in July 1996 with approximately 94% of the
outstanding publicly traded shares of ADG tendered for purchase. The Company
completed the necessary steps to acquire the remaining publicly held stock
during the third quarter of 1996. The cost of acquiring all the shares of ADG
was approximately $100,000 including fees and expenses.
The acquisition of Camping Gaz is being accounted for under the purchase
method. In connection with the allocation of purchase price to the fair
values of assets acquired and liabilities assumed, the Company recorded
goodwill of approximately $84,200, which is being amortized over 40 years on
the straight-line method. The Company also recognized liabilities in the
amount of $21,898 representing severance and other termination benefits for
production and administrative employees of Camping Gaz who will be
terminated. The Company paid termination costs of approximately $4,385
during 1996 and anticipates all remaining termination costs will be paid
during 1997.
The Company has included the results of operations of Camping Gaz in the
consolidated financial statements from March 1, 1996, the date on which the
Company obtained control of Camping Gaz, and has recognized minority interest
related to the publicly traded shares for the period March 1, 1996 through June
30, 1996.
The following summarized, unaudited pro forma results of operations of
Coleman Worldwide for the years ended December 31, 1996 and 1995 assume the
acquisition of Seatt and the acquisition of all the outstanding shares of
Camping Gaz occurred as of the beginning of the respective periods. The pro
forma results include certain adjustments, primarily reflecting increased
amortization and interest expense and a lower income tax provision, and are not
necessarily indicative of what the results of operations would have been had the
Seatt and Camping Gaz acquisitions occurred at the beginning of the respective
periods. Moreover, the pro forma information is not intended to be indicative
of future results of operations.
F-13
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
Year Ended
December 31,
-------------------------
1996 1995
---------- ----------
Net revenues . . . . . . . . . . . . . . . . $1,246,370 $1,193,295
(Loss) earnings before extraordinary item. . (40,353) 25,151
Net (loss) earnings. . . . . . . . . . . . . (41,597) 24,364
3. RESTRUCTURING, ASSET IMPAIRMENT AND OTHER CHARGES
During 1996, the Company recorded restructuring and certain other charges
totaling $52,516, net of tax. The restructuring charges total $45,086, net of
tax, and consist of charges to a) integrate the Camping Gaz and Coleman
operations into a single global recreation products business, b) exit the low
end electric pressure washer business, c) exit a portion of the Company's
battery powered light business and settle certain litigation with respect to
this business, and d) increase the valuation reserve for certain foreign
deferred income tax assets. Other charges of $7,430, net of tax, relate to
certain asset write-offs and other tax matters. These other charges were
incurred in the Company's normal course of business, although the amounts
involved are higher than similar charges the Company has recorded in prior
periods. Cost of sales includes a pre-tax charge of $44,005, selling, general
and administrative expenses includes a pre-tax charge of $30,195, and the
provision for income tax expense includes $21,684 of tax benefits resulting from
these charges, net of the effect of an increase in the valuation reserve related
to certain foreign deferred tax assets and other foreign tax charges.
During 1995, in connection with the adoption of FAS 121, the Company
recognized an asset impairment charge of $12,289 related to its Brazilian
operations. The Brazilian operations had not performed to the Company's
expectations since acquisition of this business in April of 1994, and in the
fourth quarter of 1995, the Company initiated actions to reduce the operating
losses in Brazil. These actions included replacing management, increasing
prices, downsizing the manufacturing operations and reducing SG&A and other
expenses. Because of these actions, the Company performed an impairment review
pursuant to the guidelines set forth in FAS 121 and concluded recognition of an
asset impairment charge was appropriate. The basis of the fair values used in
the computation of the charge were appraisals for property and equipment and
estimated discounted cash flows for goodwill. The charge has been included in
the statement of operations under the caption "Asset Impairment Charge".
During September 1994, the Company restructured its German manufacturing
operations. The German Restructuring included the sale of the low margin
plastic cooler business located in Inheiden, Germany and Loucka, Czech
Republic, including inventory, to a management group. The German
Restructuring resulted in a one-time charge of approximately $17,956 before
tax and included severance costs of $1,541, commitments to third parties of
approximately $5,465 and write-downs of leasehold improvements and other
assets to estimated realizable values aggregating $10,950. As a result of
the restructuring, the German work force was reduced by about 150 employees
from a pre-restructuring level of approximately 250 employees. The
restructuring was substantially completed in 1994. In connection with the
restructuring, the Company recognized tax benefits of approximately $10,900
relating to the write-off of the Company's investment in its German
operations. The Company also announced a plan to change from manufacturing
to sourcing for certain textile product lines and to exit the market for
personal flotation devices. This plan resulted in a $500 pre-tax charge.
F-14
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
4. INVENTORIES
Inventories consisted of the following:
December 31,
-----------------------
1996 1995
-------- --------
Raw material and supplies . . . . . . . $ 82,399 $ 57,653
Work-in-process . . . . . . . . . . . . 12,878 5,389
Finished goods. . . . . . . . . . . . . 192,225 153,194
-------- --------
$287,502 $216,236
-------- --------
-------- --------
Generally, inventory costs are determined by the FIFO method; however,
approximately 13% and 10% of total inventories at December 31, 1996 and 1995,
respectively, are determined using the last-in, first-out ("LIFO") method. If
such inventories were stated using the FIFO method, such amounts would
approximate the LIFO carrying values.
5. PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, net consisted of the following:
December 31,
-----------------------
1996 1995
-------- --------
Land and land improvements. . . . . . . $ 8,772 $ 6,318
Buildings and building improvements . . 78,760 67,989
Machinery and equipment . . . . . . . . 194,714 142,941
Construction-in-progress. . . . . . . . 15,519 13,105
-------- --------
297,765 230,353
Accumulated depreciation. . . . . . . . (98,583) (67,662)
-------- --------
$199,182 $162,691
-------- --------
-------- --------
Depreciation expense was $25,770, $19,142, and $16,793 for the years ended
December 31, 1996, 1995 and 1994, respectively.
6. ACCRUED EXPENSES
Accrued expenses consisted of the following:
December 31,
-----------------------
1996 1995
-------- --------
Compensation and related benefits. . . . . . $ 29,331 $ 14,201
Other. . . . . . . . . . . . . . . . . . . . 83,613 43,961
-------- --------
$112,944 $ 58,162
-------- --------
-------- --------
F-15
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
7. OTHER LIABILITIES
Other liabilities consisted of the following:
December 31,
-------------------
1996 1995
------- -------
Pensions and other postretirement benefits . $52,229 $40,240
Other. . . . . . . . . . . . . . . . . . . . 23,944 7,832
------- -------
$76,173 $48,072
------- -------
------- -------
8. SHORT-TERM BORROWINGS
The Company maintained foreign bank lines of credit aggregating $119,101,
and $64,375, of which $33,935 and $19,302 were outstanding at December 31, 1996
and 1995, respectively. The weighted average interest rate on amounts borrowed
was approximately 2.4% and 7.1% at December 31, 1996 and 1995, respectively.
Outstanding letters of credit aggregated approximately $32,897 and $40,036
at December 31, 1996 and 1995, respectively.
9. LONG-TERM DEBT
Long-term debt consisted of the following:
December 31,
--------------------
1996 1995
-------- --------
7.26% Senior Notes due 2007 (a). . . . . . . . $200,000 $200,000
7.10% Senior Notes due 2006 (b). . . . . . . . 85,000 --
7.25% Senior Notes due 2008 (c). . . . . . . . 75,000 --
Revolving credit facility (d). . . . . . . . . 146,350 150,150
Term loan (d). . . . . . . . . . . . . . . . . 73,478 --
Liquid Yield Option-TM- Notes due 2013 (e) . . 174,594 165,434
Other. . . . . . . . . . . . . . . . . . . . . 3,785 5,107
-------- --------
758,207 520,691
-------- --------
Less current portion. . . . . . . . . . . 747 1,051
-------- --------
$757,460 $519,640
-------- --------
-------- --------
(a) On August 8, 1995, the Company completed a private placement
issuance and sale of $200,000 aggregate principal amount of 7.26%
Senior Notes due 2007 (the "2007 Notes"). Interest on the 2007
Notes is payable semiannually, and the principal is payable in
annual installments of $40,000 each commencing August 8, 2003,
with a final installment payment of $40,000 due on August 8,
2007. If there is a default, the interest rate will be the
greater of (i) 9.26% or (ii) 2.0% above the prime interest rate.
F-16
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
The 2007 Notes are unsecured and are subject to various
restrictive covenants including, without limitation, requirements
for the maintenance of specified financial ratios and levels of
consolidated net worth and certain other provisions limiting the
incurrence of additional debt and sale and leaseback transactions
under the terms of the note purchase agreement. The 2007 Notes
shall become secured if the Company Credit Agreement becomes
secured as discussed in (d) below.
(b) On June 13, 1996, the Company completed a private placement
issuance and sale of $85,000 aggregate principal amount of 7.10%
Senior Notes due 2006 (the "2006 Notes"). Interest on the 2006
Notes is payable semiannually, and the principal is payable in
annual installments of $12,143 each commencing June 13, 2000,
with a final installment payment of $12,143 due on June 13, 2006.
If there is a default, the interest rate will be the greater of
(i) 9.10% or (ii) 2.0% above the prime interest rate.
The 2006 Notes are unsecured and are subject to various
restrictive covenants including, without limitation, requirements
for the maintenance of specified financial ratios and levels of
consolidated net worth and certain other provisions limiting the
incurrence of additional debt and sale and leaseback transactions
under the terms of the note purchase agreement. The 2006 Notes
shall become secured if the Company Credit Agreement becomes
secured as discussed in (d) below.
(c) On June 13, 1996, the Company completed a private placement
issuance and sale of $75,000 aggregate principal amount of 7.25%
Senior Notes due 2008 (the "2008 Notes"). Interest on the 2008
Notes is payable semiannually, and the principal is payable in
annual installments of $15,000 each commencing June 13, 2004,
with a final installment payment of $15,000 due on June 13, 2008.
If there is a default, the interest rate will be the greater of
(i) 9.25% or (ii) 2.0% above the prime interest rate.
The 2008 Notes are unsecured and are subject to various
restrictive covenants including, without limitation, requirements
for the maintenance of specified financial ratios and levels of
consolidated net worth and certain other provisions limiting the
incurrence of additional debt and sale and leaseback transactions
under the terms of the note purchase agreement. The 2008 Notes
shall become secured if the Company Credit Agreement becomes
secured as discussed in (d) below.
(d) In April 1996, the Company amended its credit agreement to: a)
provide a term loan of French Franc 385,125 ($73,478 at current
exchange rates), b) provide an unsecured revolving credit
facility in an amount of $275,000, c) allow for the Camping Gaz
acquisition and d) extend the maturity of the credit agreement
(as amended, the "Company Credit Agreement"). In connection with
the Company recording the restructuring and other charges as
discussed in Note 3 and lower than expected operating results,
the Company further amended the Company Credit Agreement in
October 1996 and again in March 1997.
The Company Credit Agreement is available to the Company until
April 30, 2001. The outstanding loans under the Company Credit
Agreement bear interest at either of the following rates, as
selected by the Company from time to time: (i) the higher of the
agent's base lending rate or the federal funds rate plus .50% or
(ii) the London Inter-Bank Offered Rate ("LIBOR") plus
F-17
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
a margin ranging from .25% to 2.125% based on the Company's
financial performance. If there is a default, the interest rate
otherwise in effect will be increased by 2% per annum. The
Company Credit Agreement also bears an overall facility fee
ranging from .15% to .375% based on the Company's financial
performance.
The Company Credit Agreement contains various restrictive
covenants including, without limitation, requirements for the
maintenance of specified financial ratios, levels of consolidated
net worth and profits, and certain other provisions limiting the
incurrence of additional debt, purchase or redemption of the
Company's common stock, issuance of preferred stock of the
Company, and also prohibits the Company from paying any dividends
until on or after January 1, 1999 and limits the amount of
dividends the Company may pay thereafter. The Company Credit
Agreement also provides for a specific requirement relating to
the Company's financial leverage at December 31, 1997 which, if
not achieved, will result in the Company Credit Agreement
becoming secured by the Company's assets. In addition,
substantially all of the shares of the Company's common stock
owned by Coleman Worldwide are pledged to secure indebtedness of
Coleman Worldwide and of its parent, Coleman Holdings Inc. The
indentures governing this indebtedness contain various covenants
including a covenant placing certain limitations on the
Company's indebtedness.
(e) On May 27, 1993, Coleman Worldwide issued and sold $500,000
principal amount at maturity of LYONs in an underwritten public
offering. On June 7, 1993, an additional $75,000 principal
amount at maturity of LYONs was sold upon exercise of the
underwriter's overallotment option.
The LYONs mature on May 27, 2013 and are secured by 16,394,810
shares of common stock of Coleman. There are no periodic
payments of interest on the LYONs. The aggregate principal
amount of the LYONs represents a yield to maturity of 7.25% per
annum (computed on a semi-annual bond equivalent basis)
calculated from May 27, 1993.
Each LYON has a principal amount at maturity of $1 and is
exchangeable, at the option of the holder, at any time on or
prior to maturity (unless previously redeemed or otherwise
purchased) for shares of common stock of Coleman securing the
LYONs at an exchange rate of 15.706 shares of common stock of
Coleman per LYON, subject to Coleman Worldwide's right to pay
cash equal to the then market value (as defined) of such shares
in lieu, in whole or in part, of delivering such shares. The
exchange rate will not be adjusted for original issue discount
("OID") but will be subject to adjustment upon the occurrence of
certain events affecting the common stock of Coleman.
The LYONs are redeemable by Coleman Worldwide on or after May 27,
1998, at the option of Coleman Worldwide, in whole or in part, at
redemption prices equal to the issue price plus accrued OID
through but excluding the date of redemption, payable solely in
cash. Coleman Worldwide will purchase any LYON, at the option of
the holder, on May 27, 1998, May 27, 2003 and May 27, 2008 (each,
a "Purchase Date") for a purchase price per LYON equal to the
issue price plus accrued OID through but excluding each such
Purchase Date, representing a yield per annum to the holder on
each such date of 7.25% computed on a semi-annual bond equivalent
basis. Coleman Worldwide may, at its option, elect to pay the
purchase price on any Purchase Date either in cash or shares of
common stock of Coleman or any combination thereof.
F-18
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
The Indenture governing the LYONs provides the holders of LYONs with
the option to require Coleman Worldwide to purchase the LYONs after
the occurrence of certain events ("Additional Purchase Right Events").
Additional Purchase Right Events occur, among other things, upon the
Company's Consolidated Debt Ratio (as defined) exceeding 0.75 to 1.0
or the Consolidated Net Worth (as defined) of Coleman Worldwide as of
the end of any fiscal quarter being less than a specified amount which
is $60,000 at March 31, 1997 and increases to $70,000 at June 30, 1997.
The aggregate scheduled amounts of long-term debt maturities in the years
1997 through 2001 are $747, $500, $2,357, $12,207, and $232,005, respectively.
10. INCOME TAXES
Coleman Worldwide is included in the consolidated federal income tax return
of Mafco Holdings Inc. ("Mafco") and certain state tax returns of Mafco or its
affiliates. Coleman Worldwide and Mafco are parties to a tax sharing agreement
(the "Tax Sharing Agreement"), pursuant to which Coleman Worldwide is required
to pay to Mafco amounts equal to the taxes that Coleman Worldwide would
otherwise have to pay if it were to file separate consolidated federal, state or
local income tax returns including only itself and its domestic subsidiaries.
Pursuant to the LYONs indenture agreement, at any time that the LYONs are
outstanding, the amounts that Coleman Worldwide would be required to pay to
Mafco under the Tax Sharing Agreement, together with any remaining funds paid to
Coleman Worldwide by the Company under the tax sharing agreement between Coleman
Worldwide and the Company, may not be paid as tax sharing payments, but Coleman
Worldwide may advance such funds to Mafco as long as the aggregate amount of
such advances at any time does not exceed the issue price plus accrued OID of
the LYONs. Such advances are evidenced by noninterest bearing unsecured demand
promissory notes from Mafco in the amount of $54,739 at December 31, 1996. As a
result of the restriction on the payment of the tax sharing amounts, income
taxes provided pursuant to the Tax Sharing Agreement are reflected as a non-cash
charge. For all periods presented, federal and state income taxes are provided
as if Coleman Worldwide filed its own income tax returns. The accompanying
consolidated balance sheet includes approximately $18,528 and $37,846 of federal
and state income taxes payable to Mafco pursuant to the Tax Sharing Agreement at
December 31, 1996 and 1995, respectively.
For financial reporting purposes, (loss) earnings before income taxes,
minority interest and extraordinary item include the following components:
Year Ended December 31,
------------------------------
1996 1995 1994
-------- -------- --------
Earnings (loss) earnings before income taxes,
minority interest and extraordinary item:
Domestic . . . . . . . . . . . . . . . . . . . . . $(39,593) $ 66,900 $ 59,392
Foreign. . . . . . . . . . . . . . . . . . . . . . (20,769) (14,434) (22,375)
-------- -------- --------
$(60,362) $ 52,466 $ 37,017
-------- -------- --------
-------- -------- --------
F-19
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
Significant components of the provision for income tax (benefit) expense were
as follow:
Year Ended December 31,
------------------------------
1996 1995 1994
-------- ------- -------
Current:
Federal . . . . . . . . . . . . . . . . $ (3,932) $14,520 $ 3,147
State . . . . . . . . . . . . . . . . . (937) 3,102 899
Foreign . . . . . . . . . . . . . . . . 3,454 3,853 2,248
-------- ------- -------
Total current . . . . . . . . . . . . (1,415) 21,475 6,294
-------- ------- -------
Deferred:
Federal . . . . . . . . . . . . . . . . (10,686) (3,104) 6,069
State . . . . . . . . . . . . . . . . . (2,178) (725) 1,114
Foreign . . . . . . . . . . . . . . . . (474) 2,215 (3,040)
-------- ------- -------
Total deferred. . . . . . . . . . . . (13,338) (1,614) 4,143
-------- ------- -------
$(14,753) $19,861 $10,437
-------- ------- -------
-------- ------- -------
The effective tax rate on (loss) earnings before income taxes, minority
interest and extraordinary item varies from the current statutory federal
income tax rate as follows:
Year Ended December 31,
--------------------------
1996 1995 1994
----- ---- -----
(Benefit) provision at statutory rate. . . . . . . . . . . . (35.0)% 35.0% 35.0%
State taxes, net . . . . . . . . . . . . . . . . . . . . . . (4.5) 2.2 3.5
Recognition of permanent basis differences related
to loss on restructuring of foreign investment . . . . . . -- -- (13.4)
Nondeductible amortization . . . . . . . . . . . . . . . . . 4.3 3.8 4.4
Foreign operations . . . . . . . . . . . . . . . . . . . . . 3.6 (0.2) (3.4)
Valuation allowance. . . . . . . . . . . . . . . . . . . . . 5.8 -- --
Puerto Rico operations . . . . . . . . . . . . . . . . . . . 0.3 (3.1) --
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . 1.1 0.2 2.1
----- ---- -----
Effective tax rate (benefit) provision . . . . . . . . . . . (24.4)% 37.9% 28.2%
----- ---- -----
----- ---- -----
F-20
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.
Significant components of Coleman Worldwide's deferred tax liabilities and
assets are as follows:
December 31,
------------------
1996 1995
------- -------
Deferred tax assets:
Postretirement benefits other than pensions . . . . . . $12,370 $11,986
Reserves for self-insurance and warranty costs. . . . . 6,678 4,777
Pension liabilities . . . . . . . . . . . . . . . . . . 8,828 4,942
Inventory . . . . . . . . . . . . . . . . . . . . . . . 8,245 5,579
Net operating loss carryforwards. . . . . . . . . . . . 14,875 3,103
Impaired assets . . . . . . . . . . . . . . . . . . . . -- 10,068
Other, net. . . . . . . . . . . . . . . . . . . . . . . 24,026 5,555
------- -------
Total deferred tax assets . . . . . . . . . . . . . . 75,022 46,010
Valuation allowance . . . . . . . . . . . . . . . . . . . (7,501) --
------- -------
Net deferred tax assets . . . . . . . . . . . . . . 67,521 46,010
------- -------
Deferred tax liabilities:
Depreciation. . . . . . . . . . . . . . . . . . . . . . 18,248 17,611
Other, net. . . . . . . . . . . . . . . . . . . . . . . 7,675 5,125
------- -------
Total deferred tax liabilities. . . . . . . . . . . . 25,923 22,736
------- -------
Net deferred tax assets . . . . . . . . . . . . . . $41,598 $23,274
------- -------
------- -------
During 1996, Coleman Worldwide increased the valuation allowance related
to certain foreign deferred tax assets due to uncertainties over realization.
At December 31, 1996, Coleman Worldwide had net operating loss carryforwards
("NOL's") of approximately $42,677 for certain foreign income tax purposes.
These NOL's expire beginning in 1999.
Coleman Worldwide has not provided for taxes on undistributed foreign
earnings of approximately $16,904 at December 31, 1996 as Coleman Worldwide
intends to permanently reinvest these earnings in the future growth of the
business. Determination of the amount of unrecognized deferred U.S. income
tax liability is not practicable because of the complexities associated with
its hypothetical calculation.
11. RELATED PARTY TRANSACTIONS
In 1996, the Company entered into an agreement with an affiliate in which
the Company realized approximately $1,800 of net tax benefits associated with
certain foreign tax net operating loss carry forwards that had not previously
been recognized.
The Company provided management services to certain affiliates pursuant
to a management agreement through June 30, 1995. The consolidated financial
statements reflect the management fees as a reduction in selling, general and
administration expenses. For the years ended December 31, 1995 and 1994,
management fees earned by the Company were $2,400 and $4,800, respectively.
F-21
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
MacAndrews & Forbes provides Coleman Worldwide, at Coleman Worldwide's
request, with certain allocated services, pursuant to a services agreement.
These allocated services are purchased by MacAndrews & Forbes from third party
providers on behalf of Coleman Worldwide. Such services include professional
services, such as legal and accounting, insurance coverage and other services.
Coleman Worldwide reimburses MacAndrews & Forbes for that portion of amounts due
to third party providers as is allocable to the services purchased for and
provided to Coleman Worldwide and reimburses MacAndrews & Forbes for their other
out-of-pocket expenses incurred in connection with providing such services.
Coleman Worldwide participates in certain of Holdings' insurance programs,
including health and life insurance, workers compensation, and liability
insurance. Coleman Worldwide's expense represents its expected costs for
self-insured retentions and premiums for excess coverage insurance. The expense
was $13,923, $9,874, and $10,586 for the years ended December 31, 1996, 1995 and
1994, respectively.
The Company purchases and sells products from and to certain affiliates.
These amounts are not, in the aggregate, material.
12. EMPLOYEE BENEFIT PLANS
PENSION PLANS:
Holdings maintains pension and other retirement plans in various forms
covering employees of the Company who meet eligibility requirements. The U.S.
salaried retirement plan is a non-contributory defined benefit plan and provides
benefits based on a formula of each participant's final average pay and years of
service. The U.S. hourly pension plan is a non-contributory defined benefit
plan and contains a flat benefit formula. The salaried and hourly plans provide
reduced benefits for early retirement and the salaried plan takes into account
offsets for Social Security benefits. The Company's policy is to contribute
annually the minimum amount required pursuant to the Employee Retirement Income
Security Act, as amended.
Holdings also has an unfunded excess benefit plan covering certain of the
Company's U.S. employees whose benefits under the plans described above are
limited by provisions of the Internal Revenue Code. The following table
reconciles the funded status of the pension plans with the amount recognized in
Coleman Worldwide's consolidated balance sheets as of the dates indicated:
December 31,
-------------------------
1996 1995
--------- ---------
Actuarial present value of benefit obligation:
Accumulated benefit obligation, including vested
benefits of $18,686 and $15,282. . . . . . . . . . . $ (21,933) $ (17,588)
--------- ---------
--------- ---------
Projected benefit obligation for service
rendered to date. . . . . . . . . . . . . . . . . . . . $ (37,092) $ (32,284)
Plan assets at fair value. . . . . . . . . . . . . . . . . . 16,197 9,696
--------- ---------
Projected benefit obligation in excess of plan assets. . . . (20,895) (22,588)
Unrecognized prior service cost. . . . . . . . . . . . . . . 50 57
Unrecognized net loss. . . . . . . . . . . . . . . . . . . . 7,999 8,869
--------- ---------
Accrued pension cost . . . . . . . . . . . . . . . . . . . . (12,846) (13,662)
Amount reflected as an intangible asset. . . . . . . . . . . (288) --
Amount reflected as minimum pension liability adjustment . . (470) --
--------- ---------
Amount reflected as pension liability. . . . . . . . . . . . $ (13,604) $ (13,662)
--------- ---------
--------- ---------
F-22
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
The weighted-average discount rate used in determining the actuarial
present value of the projected benefit obligation was 7.5% and 7.25% as of
December 31, 1996 and 1995, respectively. The rate of increase in future
compensation levels reflected in such determination was 5% as of December 31,
1996 and 1995. The expected long-term rate of return on assets was 9% as of
December 31, 1996, 1995 and 1994. Plan assets consist primarily of common
stock, mutual funds and fixed income securities stated at fair market value, and
cash equivalents stated at cost, which approximates fair market value.
Unrecognized items are being recognized over the estimated remaining service
lives of active employees.
Net pension expense includes the following components:
Year Ended December 31,
------------------------------
1996 1995 1994
-------- -------- --------
Service cost-benefits attributed to
service during the year . . . . . . . $ 3,098 $ 2,125 $ 2,051
Interest cost on projected
benefit obligation. . . . . . . . . . 2,442 2,004 1,554
Actual return on plan assets . . . . . . . (1,490) (1,347) 391
Net amortization and deferrals . . . . . . 844 834 (750)
-------- -------- --------
Net pension expense. . . . . . . . . . . . $ 4,894 $ 3,616 $ 3,246
-------- -------- --------
-------- -------- --------
SAVINGS PLAN:
In January 1990, Holdings initiated an employee savings plan under Section
401(k) of the Internal Revenue Code. This plan covers substantially all of the
Company's full-time U.S. employees and allows employees to contribute up to 10%
of their salary to the plan. The Company matches, at a 33 1/3% rate, employee
contributions of up to 6% of their salary. Amounts charged to expense for
matching contributions were $1,314, $1,165, and $927 for the years ended
December 31,1996, 1995 and 1994, respectively.
RETIREE HEALTH CARE AND LIFE INSURANCE:
The Company, through Holdings, provides certain unfunded health and life
insurance benefits for certain retired employees. Approximately 53 percent of
the Company's U.S. employees may become eligible for these benefits if they
reach retirement age while working for the Company.
The following table reconciles the funded status of the Company's allocable
portion of Holdings' postretirement benefit plans with the amount recognized in
Coleman Worldwide's consolidated balance sheets as of the dates indicated:
December 31,
-------------------------
1996 1995
---------- ---------
Accumulated postretirement benefit obligation:
Retirees. . . . . . . . . . . . . . . . . . . . . . . . $ (6,682) $ (6,660)
Fully eligible active plan participants . . . . . . . . (3,015) (2,991)
Other active plan participants. . . . . . . . . . . . . (10,664) (10,904)
--------- --------
Total accumulated postretirement benefit obligation. . . . . (20,361) (20,555)
Unrecognized transition benefit. . . . . . . . . . . . . . . (3,973) (4,239)
Unrecognized prior service cost. . . . . . . . . . . . . . . (492) (580)
Unrecognized net (gain) loss . . . . . . . . . . . . . . . . (976) 936
--------- --------
Net postretirement benefit liability . . . . . . . . . . . . $ (25,802) $ (24,438)
--------- --------
--------- --------
F-23
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
Net periodic postretirement benefit expense includes the following
components:
Year Ended December 31,
--------------------------------
1996 1995 1994
--------- -------- --------
Service cost-benefits attributed to service
during the year . . . . . . . . . . . . . . . . . $ 1,044 $ 756 $ 901
Interest cost on accumulated postretirement
benefit obligation. . . . . . . . . . . . . . . . 1,454 1,352 1,268
Amortization of transition benefit
and other net gains . . . . . . . . . . . . . . . (354) (455) (354)
--------- -------- --------
Net periodic postretirement benefit expense. . . . . . $ 2,144 $ 1,653 $ 1,815
--------- -------- --------
--------- -------- --------
The discount rate used in determining the accumulated postretirement
benefit obligation ("APBO") was 7.5% and 7.25% as of December 31, 1996 and 1995,
respectively. The assumed health care cost trend rate used in measuring the
APBO at December 31, 1996 was 8% starting in 1997, then gradually decreasing to
5% by the year 2003 and remaining at that level thereafter. The health care
cost trend rate assumption has a significant effect on the amount of the
obligation and periodic benefit expense reported. An increase in the assumed
health care cost trend rates by 1% in each year would increase the APBO as of
December 31, 1996 by approximately 18% and the service and interest cost
components of net periodic postretirement benefit expense by approximately 23%.
STOCK OPTION PLAN:
The Company adopted The Coleman Company, Inc. 1992 Stock Option Plan (the
"1992 Stock Option Plan") prior to the effective date of the IPO. During 1993,
the shareholders approved the 1993 Stock Option Plan (the "1993 Stock Option
Plan") and during 1996, the shareholders approved The Coleman Company, Inc.
1996 Stock Option Plan (the "1996 Stock Option Plan"). Under the terms of the
1992 Stock Option Plan, the 1993 Stock Option Plan and the 1996 Stock Option
Plan (collectively the "Stock Option Plans"), incentive stock options ("ISOs"),
non-qualified stock options ("NQSOs") and stock appreciation rights ("SARs") may
be granted to key employees of the Company and any of its affiliates from time
to time. Stock options have been granted under the Stock Option Plans with
vesting terms and maximum terms of approximately five years and ten years,
respectively. The aggregate number of shares of common stock as to which
options and rights may be granted under the Stock Option Plans may not exceed
4,700,000.
F-24
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
The following table summarizes the stock option transactions under the
Stock Option Plans:
1996 1995 1994
-------------------------- ---------------------------- --------------------------
Weighted- Weighted- Weighted-
Average Average Average
Options Exercise Price Options Exercise Price Options Exercise Price
--------- -------------- -------- --------------- --------- --------------
Outstanding - January 1, 2,572,930 $ 15.25 2,310,888 $ 14.03 1,256,540 $ 12.61
Granted:
at market price 294,000 19.73 637,000 17.89 1,272,450 15.13
above market price 381,000 15.00 - - - -
Exercised (154,890) 12.17 (325,748) 12.09 (53,362) 10.12
Forfeited (75,410) 14.19 (49,210) 13.14 (164,740) 12.98
---------- ---------- ---------
Outstanding - December 31, 3,017,630 15.84 2,572,930 15.25 2,310,888 14.03
---------- ---------- ---------
---------- ---------- ---------
Exercisable - December 31, 513,440 13.25 413,526 12.84 488,488 12.15
---------- ---------- ---------
---------- ---------- ---------
Weighted-average fair value
of options granted during
the year:
at market price $ 6.62 $ 7.13
---------- --------
---------- --------
above market price $ 3.21 -
---------- --------
---------- --------
The following table summarizes information concerning currently outstanding
and exercisable options at December 31, 1996:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- -------------------------------------------------------------------- ------------------------------
Range Weighted-Average
of Exercise Number Remaining Weighted-Average Number Weighted-Average
Prices Outstanding Contractual Life Exercise Price Exercisable Exercise Price
- ----------- ----------- ----------------- ---------------- ----------- ----------------
$ 9.75-$14.32 770,630 1.59 years $ 13.05 393,440 $ 12.71
$14.33-$15.13 606,000 7.32 14.98 120,000 15.06
$15.14-$16.30 755,000 7.92 16.06 - -
$16.31-$23.13 886,000 8.86 18.65 - -
--------- -------
$ 9.75-$23.13 3,017,630 6.46 513,440
--------- -------
--------- -------
As described in Note 1, the Company follows APB 25 in accounting for its
stock compensation arrangements. Pro forma financial information regarding
net income is required by FASB Statement No. 123, "Accounting for Stock-Based
Compensation" ("FAS 123"), and has been determined as if the Company had
accounted for its employee stock options under the fair value method of FAS
123. The fair value of ISOs and NQSOs granted during 1996 and 1995 were
estimated at the date of grant using the Black-Scholes option pricing model
with the following weighted-average assumptions: risk-free interest rates of
6.11% and 5.91% for 1996 and 1995, respectively, dividend yield of 0.0%,
volatility of the expected market price of the Company's common stock of
20.2% and 30.8% for 1996 and 1995, respectively, and a weighted-average
expected life of the option of 5.5 years.
FAS 123 requires the use of option valuation models, one of which is the
Black-Scholes model, that were not developed for use valuing ISOs or NQSOs.
Further, these option valuation models require the input of highly
F-25
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
subjective assumptions, including the expected stock price volatility.
In management's opinion, based on the above, the existing models do not
necessarily provide a reliable single measure of the fair value of its
ISOs or NQSOs.
The following summarized, unaudited pro forma results of operations
assume the estimated fair value of the ISOs and NQSOs granted in 1996 and
1995 is amortized to expense over the ISOs' and NQSOs' vesting period. FAS
123 does not require disclosure of the effect of any grants of stock based
compensation prior to 1995 and, therefore, the pro forma effect on net
earnings of FAS 123 is not representative of the pro forma effect on net
earnings in future years.
Year Ended December 31,
-----------------------
1996 1995
-------- -------
Pro forma net (loss) earnings. . . . . $(42,180) $24,897
13. COMMITMENTS AND CONTINGENCIES
LEASES:
The Company leases manufacturing, administrative and sales facilities and
various types of equipment under operating lease agreements expiring through
2007. Rental expense was $14,164, $11,526, and $9,520 for the years ended
December 31, 1996, 1995 and 1994, respectively. Minimum rental commitments
under all noncancellable operating leases with remaining lease terms in
excess of one year from December 31, 1996, aggregated $43,573; such
commitments for each of the five years subsequent to December 31, 1996 are
$12,379, $11,135, $6,189, $4,296, and $2,619, respectively, and $6,955
thereafter.
The Company leases its Hastings, Nebraska facility and the corporate
office building in Denver, Colorado under agreements which give the Company
the right, subject to certain qualifications, to renew, terminate, or
purchase the properties. Upon termination, the Company has guaranteed the
lessor certain residual values.
ENVIRONMENTAL MATTERS:
The Company is subject to various environmental regulations and has
adopted an environmental policy designed to ensure the Company operates in
full compliance with applicable environmental regulations and, where
appropriate, the Company's own internal standards. Coleman has also
undertaken an environmental compliance audit program. The Company makes
expenditures it believes are necessary to comply with environmental
management practices. Environmental expenditures that relate to current
operations are expensed or capitalized as appropriate, were not significant
in 1996, and are not expected to be significant in the foreseeable future.
Coleman has established reserves for various environmental matters to cover
the estimated costs of the investigations, remedial activities and
litigation.
NON-RECOURSE GUARANTY:
On July 22, 1993, Coleman Worldwide's parent, Coleman Holdings Inc.,
("Coleman Holdings") issued and sold $281,281 principal amount at maturity of
Senior Secured Discount Notes due 1998 (the "Old Notes") in a private
placement offering. Subsequent to the private placement offering, a
registration statement on Form
F-26
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
S-1 was filed to exchange the Old Notes for Series B Senior Secured Discount
Notes (the "Notes"). The net proceeds of approximately $162,299 were
distributed to Coleman Holdings' parent.
The Notes will mature on May 27, 1998 and are secured by all the shares
of Coleman Worldwide. In connection with Coleman Holdings' Notes issuance,
Coleman Worldwide has provided a non-recourse guaranty, which is secured by
its pledge of 26,000,000 shares of Coleman Common Stock. There will be no
periodic payment of interest on the Notes. The aggregate principal amount of
the Notes represents a yield to maturity of 10.875% per annum (computed on a
semi-annual bond equivalent basis) calculated from July 22, 1993.
OTHER:
The Company and Holdings are involved in various claims and legal actions
arising in the ordinary course of business. The Company believes the
ultimate disposition of these matters is not expected to have a material
adverse effect on Coleman Worldwide's consolidated financial condition or
results of operations. Coleman Worldwide and the Company have entered into a
cross-indemnification agreement with Holdings pursuant to which Coleman will
indemnify Holdings against all liabilities related to businesses transferred
to the Company, and Holdings will indemnify the Company against all
liabilities of Holdings other than liabilities related to the businesses
transferred to the Company.
The Company is also party to a license agreement which requires payments
of minimum guaranteed royalties aggregating to $8,225 at December 31, 1996;
such commitments for each of the four years remaining under the agreement
subsequent to December 31, 1996 are $933, $1,768, $2,454, and $3,070,
respectively.
14. SIGNIFICANT CUSTOMERS
The Company's U.S. and Canadian operations have one significant customer
which accounted for approximately 15%, 19%, and 21% of net revenues in the
years ended December 31, 1996, 1995 and 1994, respectively.
15. CASH FLOW REPORTING
Coleman Worldwide uses the indirect method to report cash flows from
operating activities. Interest paid was $37,608, $23,976, and $11,933 and
income taxes paid were $2,857, $4,606, and $359 for the years ended December
31, 1996, 1995 and 1994, respectively. Certain non-cash transactions
relating to acquisitions and the issuance of long-term debt have been
reported in Notes 2 and 9.
16. GEOGRAPHIC SEGMENTS
Coleman Worldwide designs, manufactures and markets a wide variety of
multiuse products and accessories, which are primarily marketed through
independent retail markets, for the outdoor recreation and hardware
consumers. Coleman Worldwide is a leading manufacturer and marketer of brand
name consumer products for the camping and related outdoor recreation markets
in the United States, Canada, Europe, and Japan.
Operating profit, as indicated below, represents net revenues less
operating expenses and amortization of goodwill. Generally, sales between
geographic areas are made at cost plus a share of operating profit.
Identifiable assets are those used by each geographic segment. Corporate
assets are principally cash, certain property and equipment, income tax
refunds receivable - affiliate, and deferred charges. The geographic segment
F-27
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
presentation has been restated for the years ended December 31, 1995 and 1994
to reflect the European segment which became a significant segment for the
year ended December 31, 1996, primarily due to the impact of the Camping Gaz
operations.
Information related to Coleman Worldwide's geographic segments is as
follows:
YEAR ENDED DECEMBER 31,
--------------------------------------
1996 1995 1994
---------- ---------- --------
Net revenues:
Domestic - U.S. . . . . . . . $ 916,260 $ 716,018 $566,098
- Export . . . . . . 91,125 90,434 93,917
Europe . . . . . . . . . . . 168,780 52,233 52,461
Other foreign . . . . . . . . 219,350 169,836 121,545
Eliminations. . . . . . . . . (175,299) (94,947) (82,441)
---------- ---------- --------
$1,220,216 $ 933,574 $751,580
---------- ---------- --------
---------- ---------- --------
Operating profit:
Domestic (a). . . . . . . . . $ 19,915 $ 120,915 $ 94,773
Europe (b). . . . . . . . . . (17,505) (3,241) (23,203)
Other foreign (c) . . . . . . 4,027 (10,540) 2,222
---------- ---------- --------
6,437 107,134 73,792
Corporate expenses . . . . . . . . (16,032) (18,738) (12,744)
Interest expense . . . . . . . . . (50,767) (35,930) (24,031)
---------- ---------- --------
(Loss) earnings before income
taxes, minority interest
and extraordinary item . . . . . $ (60,362) $ 52,466 $ 37,017
---------- ---------- --------
---------- ---------- --------
Identifiable assets:
Domestic. . . . . . . . . . . $ 782,373 $ 696,681 $559,599
Europe. . . . . . . . . . . . 247,412 70,478 72,908
Other foreign . . . . . . . . 83,033 59,107 54,573
Corporate . . . . . . . . . . 93,631 80,123 67,946
---------- ---------- --------
$1,206,449 $ 906,389 $755,026
---------- ---------- --------
---------- ---------- --------
- ----------------------
(a) Includes $49,257 of restructuring and other charges in 1996.
(b) Includes $20,002 of restructuring and other charges in 1996 and
$17,956 related to the German Restructuring in 1994.
(c) Includes $4,941 of restructuring and other charges in 1996 and $12,289
of asset impairment charges in 1995.
F-28
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONCLUDED)
(IN THOUSANDS, EXCEPT SHARE DATA)
17. QUARTERLY FINANCIAL SUMMARIES (UNAUDITED)
Summarized quarterly financial data for 1996 and 1995 are as follow:
Quarter Ended
--------------------------------------------------------------------
March 31, June 30, September 30,(a) December 31,(b)(c)
-------- -------- --------------- ------------------
1996
- ----
Net revenues . . . . . . . . . . . . $273,560 $452,654 $269,607 $224,395
Gross profit . . . . . . . . . . . . 80,966 137,538 39,894 33,321
Earnings (loss) before
extraordinary item . . . . . . . . . 12,236 21,437 (42,047) (31,845)
Net earnings (loss). . . . . . . . . . 11,654 20,780 (42,052) (31,845)
1995
- ----
Net revenues . . . . . . . . . . . . $224,024 $311,281 $211,817 $186,452
Gross profit . . . . . . . . . . . . 68,496 99,575 65,932 50,144
Earnings (loss) before
extraordinary item . . . . . . . . . 9,285 21,085 5,831 (10,292)
Net earnings (loss). . . . . . . . . . 9,285 21,085 5,044 (10,292)
- ---------------------
(a) For the third quarter of 1996, the gross profit amount includes $33,567 of
restructuring and other charges. The loss before extraordinary item and
net loss amounts include an after tax charge of $44,495 related to
restructuring and other charges.
(b) For the fourth quarter of 1996, the gross profit amount includes $10,438 of
restructuring and other charges. The loss before extraordinary item and
net loss amounts include an after tax charge of $8,021 related to
restructuring and other charges.
(c) For the fourth quarter of 1995, the gross profit amount includes $7,599 of
income as a result of adopting the provisions of EITF 95-2. The loss
before extraordinary item and net loss amounts include an after tax asset
impairment charge of $9,856 as a result of adopting FAS 121 and an after
tax credit of $3,796 as a result of adopting the provisions of EITF 95-2.
F-29
SCHEDULE 1
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
COLEMAN WORLDWIDE CORPORATION
CONDENSED BALANCE SHEETS
(IN THOUSANDS)
December 31,
--------------------
1996 1995
-------- --------
ASSETS
Investment in The Coleman Company, Inc.. . . . . $209,465 $243,076
Note receivable - affiliate. . . . . . . . . . . 54,739 50,685
Other assets . . . . . . . . . . . . . . . . . . 13,285 13,617
-------- --------
$277,489 $307,378
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDER'S EQUITY
Accrued expenses . . . . . . . . . . . . . . . . $ 38 $ 25
Income taxes payable - subsidiary. . . . . . . . 21,661 2,400
Income taxes payable - affiliate - long term . . 18,528 37,846
Long-term debt . . . . . . . . . . . . . . . . . 174,594 165,434
Stockholder's equity
Common stock . . . . . . . . . . . . . . . . . 1 1
Additional paid-in-capital . . . . . . . . . . 23,687 23,496
Retained earnings. . . . . . . . . . . . . . . 36,360 77,823
Minimum pension liability adjustment . . . . . (236) --
Currency translation adjustment. . . . . . . . 2,856 353
-------- --------
Total stockholder's equity . . . . . . . . . 62,668 101,673
-------- --------
$277,489 $307,378
-------- --------
-------- --------
F-30
SCHEDULE I
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
CONDENSED FINANCIAL INFORMATION OF REGISTRANT (CONTINUED)
COLEMAN WORLDWIDE CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
Year Ended December 31,
----------------------------------
1996 1995 1994
-------- -------- --------
Administrative expenses. . . . . . . . . . . . . . . . . . $ 193 $ 182 $ 95
Interest expense, net. . . . . . . . . . . . . . . . . . . 12,040 11,385 10,657
Amortization of deferred charges . . . . . . . . . . . . . 583 564 458
Other income, net. . . . . . . . . . . . . . . . . . . . . (2,755) (51) --
--------- -------- --------
Loss before income taxes, equity in net earnings of
subsidiaries and extraordinary item . . . . . . . . . . . (10,061) (12,080) (11,210)
Income tax benefit . . . . . . . . . . . . . . . . . . . . (3,826) (4,618) (4,310)
--------- -------- --------
Loss before equity in net earnings of subsidiary
and extraordinary item. . . . . . . . . . . . . . . . . . (6,235) (7,462) (6,900)
Equity in net (loss) earnings of subsidiaries. . . . . . . (34,631) 32,584 27,069
--------- -------- --------
(Loss) earnings before extraordinary item. . . . . . . . . (40,866) 25,122 20,169
Extraordinary loss on early extinguishment of debt,
net of income tax benefit of $415 . . . . . . . . . . . . (597) -- --
--------- -------- --------
Net (loss) earnings. . . . . . . . . . . . . . . . . . . . $ (41,463) $ 25,122 $ 20,169
--------- -------- --------
--------- -------- --------
F-31
SCHEDULE I
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
CONDENSED FINANCIAL INFORMATION OF REGISTRANT (CONTINUED)
COLEMAN WORLDWIDE CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
Year Ended December 31,
-----------------------------
1996 1995 1994
-------- -------- ---------
Net cash provided by operating activities. . . . . . . . . $ 3,993 $ 7,254 $ 26,844
-------- -------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in note receivable - affiliate. . . . . . . . . . (4,054) (6,742) (27,052)
-------- -------- ---------
Net cash used by investing activities. . . . . . . . . . . (4,054) (6,742) (27,052)
-------- -------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt. . . . . . . . . . . . . . . . (130) (898) --
Contributions from parent. . . . . . . . . . . . . . . . . 191 386 208
-------- -------- ---------
Net cash (used) provided by financing activities . . . . . 61 (512) 208
-------- -------- ---------
Increase in cash . . . . . . . . . . . . . . . . . . . . . $ -- $ -- $ --
-------- -------- ---------
-------- -------- ---------
F-32
SCHEDULE I
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
CONDENSED FINANCIAL INFORMATION OF REGISTRANT (CONTINUED)
COLEMAN WORLDWIDE CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA)
1. BACKGROUND AND BASIS OF FINANCIAL STATEMENT PRESENTATION
Coleman Worldwide Corporation ("Coleman Worldwide") was formed in March
1993 in connection with the offering of Liquid Yield Option-TM- Notes due 2013
(the "LYONs" -TM-). Coleman Worldwide holds 44,067,520 shares of the common
stock of The Coleman Company, Inc. (the "Company" or "Coleman") which
represents approximately 83% of the outstanding Coleman common stock as of
December 31, 1996.
In the Coleman Worldwide parent company-only financial statements, Coleman
Worldwide's investment in Coleman is stated at cost plus equity in undistributed
earnings of Coleman since date of acquisition. Coleman Worldwide's share of net
income of its unconsolidated subsidiary is included in consolidated income using
the equity method. The Coleman Worldwide parent company-only financial
statements should be read in conjunction with Coleman Worldwide's consolidated
financial statements.
2. LONG-TERM DEBT
On May 27, 1993, Coleman Worldwide issued and sold $500,000 principal
amount at maturity of LYONs in an underwritten public offering. On June 7,
1993, an additional $75,000 principal amount at maturity of LYONs was sold upon
exercise of the underwriter's overallotment option. The net proceeds of
approximately $133,100 were used to repay the Allocated Indebtedness and the
balance of the net proceeds was used to pay a dividend to MacAndrews & Forbes.
The LYONs mature on May 27, 2013 and are secured by 16,394,810 shares of
common stock of Coleman. There are no periodic payments of interest on the
LYONs. The aggregate principal amount of the LYONs represents a yield to
maturity of 7.25% per annum (computed on a semi-annual bond equivalent basis)
calculated from May 27, 1993.
Each LYON has a principal amount at maturity of $1 and is exchangeable, at
the option of the holder, at any time on or prior to maturity (unless previously
redeemed or otherwise purchased) for shares of common stock of Coleman securing
the LYONs at an exchange rate of 15.706 shares of common stock of Coleman per
LYON, subject to the Coleman Worldwide's right to pay cash equal to the then
market value (as defined) of such shares in lieu, in whole or in part, of
delivering such shares. The exchange rate will not be adjusted for original
issue discount ("OID") but will be subject to adjustment upon the occurrence of
certain events affecting the Coleman Common Stock. As of December 31, 1996,
LYONs with a principal amount at maturity of $13,447 have been exchanged at the
request of the LYONs holder.
The LYONs are redeemable by Coleman Worldwide on or after May 27, 1998, at
the option of Coleman Worldwide, in whole or in part, at redemption prices equal
to the issue price plus accrued OID through but excluding the date of
redemption, payable solely in cash. Coleman Worldwide will purchase any LYON,
at the option of the holder, on May 27, 1998, May 27, 2003 and May 27, 2008
(each, a "Purchase Date") for a purchase price per LYON equal to the issue price
plus accrued OID through but excluding each such Purchase Date,
F-33
SCHEDULE I
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
CONDENSED FINANCIAL INFORMATION OF REGISTRANT (CONTINUED)
COLEMAN WORLDWIDE CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
(IN THOUSANDS)
representing a yield per annum to the holder on each such date of 7.25% computed
on a semi-annual bond equivalent basis. Coleman Worldwide may, at its option,
elect to pay the purchase price on any Purchase Date either in cash or shares of
common stock of Coleman or any combination thereof.
The Indenture governing the LYONs provides the holders of LYONs with the
option to require Coleman Worldwide to purchase the LYONs after the
occurrence of certain events ("Additional Purchase Right Events").
Additional Purchase Right Events occur, among other things, upon the
Company's Consolidated Debt Ratio (as defined) exceeding 0.75 to 1.0 or the
Consolidated Net Worth (as defined) of Coleman Worldwide as of the end of any
fiscal quarter being less than a specified amount which is $60,000 at March
31, 1997 and increases to $70,000 at June 30, 1997.
3. COMMITMENTS AND CONTINGENCIES
On July 22, 1993, Coleman Worldwide's parent, Coleman Holdings Inc.,
("Coleman Holdings") issued and sold $281,281 principal amount at maturity of
Senior Secured Discount Notes due 1998 (the "Old Notes") in a private placement
offering. Subsequent to the private placement offering, a registration
statement on Form S-1 was filed to exchange the Old Notes for Series B Senior
Secured Discount Notes (the "Notes").
The Notes will mature on May 27, 1998 and are secured by all the shares of
Coleman Worldwide. In connection with Coleman Holdings' Notes issuance, Coleman
Worldwide has provided a non-recourse guaranty, which is secured by its pledge
of 26,000,000 shares of Coleman Common Stock. There will be no periodic payment
of interest on the Notes. The aggregate principal amount of the Notes
represents a yield to maturity of 10.875% per annum (computed on a semi-annual
bond equivalent basis) calculated from July 22, 1993.
4. INCOME TAXES RECEIVABLE -, INCOME TAXES PAYABLE -, AND NOTE RECEIVABLE
-AFFILIATE
Coleman and Coleman Worldwide are included in the consolidated federal and
certain consolidated state income tax returns of Mafco Holdings Inc. ("Mafco")
and/or its affiliates. Coleman and Coleman Worldwide have entered into a tax
sharing agreement (the "Company Tax Sharing Agreement") pursuant to which
Coleman is required to pay to Coleman Worldwide amounts equal to the taxes that
Coleman would otherwise have to pay if it were to file separate consolidated
federal, state or local income tax returns including only itself and its
domestic subsidiaries. The accompanying condensed balance sheet includes
approximately $21,666 and $2,400 of federal and state income taxes payable to
Coleman pursuant to the Company Tax Sharing Agreement at December 31, 1996 and
1995, respectively. Coleman Worldwide and Mafco are parties to a tax sharing
agreement (the "Worldwide Tax Sharing Agreement"), pursuant to which Coleman
Worldwide is required to pay to Mafco amounts equal to the taxes that Coleman
Worldwide would otherwise have to pay if it were to file separate consolidated
federal, state or local income tax returns including only itself and its
domestic subsidiaries. Pursuant to the LYONs indenture agreement, at any time
that the LYONs are outstanding, the amounts that Coleman Worldwide would be
required to pay to Mafco under the Worldwide Tax Sharing Agreement, together
with any remaining funds paid to Coleman Worldwide by the Company under the
Company Tax Sharing Agreement may not be paid as tax sharing payments, but
Coleman Worldwide may advance such funds to Mafco as long as the aggregate
amount of such advances at any time does not exceed the issue price plus accrued
OID of the LYONs. Such advances are evidenced by noninterest bearing unsecured
demand promissory notes from Mafco in the amount of $54,739 and $50,685 at
December 31, 1996 and 1995, respectively.
F-34
SCHEDULE I
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
CONDENSED FINANCIAL INFORMATION OF REGISTRANT (CONCLUDED)
COLEMAN WORLDWIDE CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
(IN THOUSANDS)
As a result of the restriction on the payment of the tax sharing amounts, the
accompanying condensed balance sheet includes approximately $18,528 and $37,846
of federal and state income taxes payable to Mafco pursuant to the Worldwide Tax
Sharing Agreement at December 31, 1996 and 1995, respectively.
F-35