Page 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended JUNE 30, 1997
-------------
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission File Number: 1-988
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THE COLEMAN COMPANY, INC.
-------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 13-3639257
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2111 E. 37TH STREET NORTH, WICHITA, KANSAS 67219
------------------------------------------ -----
(Address of principal executive offices) (Zip Code)
1767 DENVER WEST BLVD., GOLDEN, COLORADO 80401
----------------------------------------- -----
(Former address of principal executive offices) (Zip Code)
316-832-2700
------------
(Registrant's telephone number, including area code)
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
requirement for the past 90 days. /X/ Yes No
----- -----
The number of shares outstanding of the registrant's par value $.01 common stock
was 53,368,726 shares as of August 4, 1997 of which 44,067,520 shares were held
by an indirect wholly-owned subsidiary of Mafco Holdings Inc.
Exhibit Index on Page 13.
Page 2
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION Page
----
Item 1. Condensed Consolidated Financial Statements:
Condensed Consolidated Statements of Earnings
Three months ended June 30, 1997 and 1996 and
Six months ended June 30, 1997 and 1996 3
Condensed Consolidated Balance Sheets
June 30, 1997 and December 31, 1996 4
Condensed Consolidated Statements of Cash Flows
Six months ended June 30, 1997 and 1996 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
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THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share data)
(Unaudited)
Three Months Six Months
Ended June 30, Ended June 30,
----------------------- -----------------------
1997 1996 1997 1996
--------- --------- --------- ---------
Net revenues $ 383,514 $ 452,654 $ 678,978 $ 726,214
Cost of sales 281,601 315,116 496,023 507,710
--------- --------- --------- ---------
Gross profit 101,913 137,538 182,955 218,504
Selling, general and administrative expenses 70,111 78,916 135,984 125,653
Interest expense, net 11,027 10,732 21,739 18,813
Amortization of goodwill and deferred charges 2,762 2,897 5,627 5,144
Other expense, net 526 627 797 657
--------- --------- --------- ---------
Earnings before income taxes,
minority interest and extraordinary item 17,487 44,366 18,808 68,237
Income tax expense 6,637 14,369 7,147 23,201
Minority interest in earnings of Camping Gaz 731 1,951 843 1,951
--------- --------- --------- ---------
Earnings before extraordinary item 10,119 28,046 10,818 43,085
Extraordinary loss on early extinguishment
of debt, net of income tax benefit -- (647) -- (647)
--------- --------- --------- ---------
Net earnings $ 10,119 $ 27,399 $ 10,818 $ 42,438
--------- --------- --------- ---------
Earnings per share:
Earnings before extraordinary item $ 0.19 $ 0.53 $ 0.20 $ 0.81
Extraordinary item -- (0.01) -- (0.01)
--------- --------- --------- ---------
Net earnings $ 0.19 $ 0.52 $ 0.20 $ 0.80
--------- --------- --------- ---------
Weighted average common shares outstanding 53,338 53,190 53,285 53,178
--------- --------- --------- ---------
See Notes to Condensed Consolidated Financial Statements
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THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
June 30, December 31,
1997 1996
---------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 17,047 $ 17,299
Accounts and notes receivable, less allowance of $9,262
in 1997 and $11,512 in 1996 312,238 231,603
Inventories 252,880 287,502
Deferred tax assets 40,040 40,466
Prepaid assets and other 15,734 14,767
---------- -----------
Total current assets 637,939 591,637
Property, plant and equipment, net 180,161 199,182
Intangible assets related to businesses acquired, net 326,683 341,715
Deferred tax assets and other 31,275 27,552
---------- -----------
$1,176,058 $1,160,086
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts and notes payable $ 202,559 $ 132,841
Other current liabilities 126,789 113,653
---------- -----------
Total current liabilities 329,348 246,494
Long-term debt 522,819 582,866
Other liabilities 62,299 76,173
Minority interest 1,904 1,608
Contingencies
Stockholders' equity:
Common stock 534 532
Additional paid-in capital 170,739 166,690
Retained earnings 93,650 82,832
Currency translation adjustment (4,614) 3,176
Minimum pension liability adjustment (621) (285)
---------- -----------
Total stockholders' equity 259,688 252,945
---------- -----------
$1,176,058 $1,160,086
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See Notes to Condensed Consolidated Financial Statements
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THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months
Ended June 30,
--------------------------
1997 1996
----------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 10,818 $ 42,438
----------- ----------
Adjustments to reconcile net earnings to net cash flows
from operating activities:
Depreciation and amortization 19,393 17,112
Non-cash restructuring and other charges 9,897 --
Extraordinary loss on early extinguishment of debt -- 1,078
Minority interest in earnings of Camping Gaz 843 1,951
Change in assets and liabilities:
Increase in receivables (83,057) (141,964)
Decrease (increase) in inventories 27,526 (14,318)
Increase in accounts payable 19,992 24,298
Other, net 3,272 23,055
----------- ----------
(2,134) (88,788)
----------- ----------
Net cash provided (used) by operating activities 8,684 (46,350)
----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (12,660) (18,803)
Purchases of businesses, net of cash acquired -- (158,228)
Proceeds from sale of fixed assets 2,815 433
----------- ----------
Net cash used by investing activities (9,845) (176,598)
----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net payments of revolving credit agreement borrowings (49,959) (31,996)
Net change in short-term borrowings 51,594 24,068
Proceeds from issuance of long-term debt -- 235,000
Repayment of long-term debt (2,376) (5,917)
Debt issuance and refinancing costs (766) (1,765)
Purchases of Company common stock -- (2,329)
Proceeds from stock options exercised 1,443 1,655
----------- ----------
Net cash (used) provided by financing activities (64) 218,716
----------- ----------
Effect of exchange rate changes on cash 973 3,531
----------- ----------
Net decrease in cash and cash equivalents (252) (701)
Cash and cash equivalents at beginning of the period 17,299 12,065
----------- ----------
Cash and cash equivalents at end of the period $ 17,047 $ 11,364
----------- ----------
See Notes to Condensed Consolidated Financial Statements
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1. BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying unaudited condensed consolidated financial statements
of The Coleman Company, Inc. ("Coleman" or the "Company") include the
accounts of the Company and its subsidiaries after elimination of all
material intercompany accounts and transactions, and have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10
of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the six months ended
June 30, 1997 are not necessarily indicative of the results that may be
expected in future periods. The balance sheet at December 31, 1996 has been
derived from the audited financial statements for that date but does not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's annual report on Form 10-K for the year
ended December 31, 1996.
2. INVENTORIES
The components of inventories consist of the following:
June 30, December 31,
1997 1996
--------- ------------
Raw material and supplies $ 67,937 $ 82,399
Work-in-process 11,569 12,878
Finished goods 173,374 192,225
-------- --------
$252,880 $287,502
-------- --------
3. RESTRUCTURING AND OTHER CHARGES
During the six months ended June 30, 1997, the Company recorded
restructuring and other charges totaling $22,551 and related tax benefits of
$8,569. The second quarter pre-tax restructuring charge of $18,623 related
primarily to (i) exiting various low margin products, including pressure
washers, (ii) closing and relocating certain administrative and sales
offices, and (iii) closing several manufacturing facilities. These
restructuring initiatives are expected to be substantially completed within
one year. Pre-tax restructuring and other costs totaling $3,928 were
recorded, primarily selling, general and administrative ("SG&A") expenses, in
the first quarter of 1997 and related primarily to executive severance costs.
The costs associated with the second quarter restructuring charge included
pre-tax charges of $12,919 related to exiting certain products and facilities of
which $10,261 was reflected in cost of sales and $2,658 in SG&A expenses.
Included in this restructuring charge was $8,632 of pre-tax charges related
primarily to the write down of inventory and fixed assets to estimated net
realizable value, and $4,287 of liabilities for other exit costs, including
carrying costs of idle facilities and relocation costs, of which $1,134 was paid
as of June 30, 1997.
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The costs associated with the second quarter restructuring charge also
included $5,704 of termination costs for 389 factory and administrative
employees of which $1,141 was reflected in cost of sales and $4,563 in SG&A
expenses. As of June 30, 1997, $1,763 of these termination benefits were paid
to the 234 employees who were terminated as of that date.
During 1996, the Company recorded restructuring charges primarily to (i)
integrate the Camping Gaz and Coleman operations, and (ii) exit certain
products. Activities associated with the implementation of those plans are
substantially completed or are in process at June 30, 1997. Remaining
liabilities of approximately $8,500 at June 30, 1997, relate primarily to
anticipated returns of discontinued products and to closing certain factory,
warehouse and office facilities.
4. RELATED PARTY TRANSACTION
As of March 31, 1997, the Company purchased an inactive subsidiary from an
affiliate for $1,000. The Company expects to realize certain foreign tax
benefits from this transaction in future years. The Company has accounted for
this transaction in a manner similar to a pooling-of-interests due to the Mafco
Holdings Inc. common control over each of the parties involved in the
transaction. The $2,608 excess value of estimated realizable tax benefits
acquired over the purchase price has been accounted for as a capital
contribution.
5. RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings per Share" ("FAS 128"),
which specifies the computation, presentation, and disclosure requirements for
earnings per share with the objective to simplify the computation of earnings
per share. FAS 128 is effective for financial statements for periods ending
after December 15, 1997 and earlier application is not permitted. After the
effective date, all prior period earnings per share data shall be restated to
conform with the provisions of FAS 128. The adoption of FAS 128 is not expected
to have a material impact on the Company's earnings per share data.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
As part of its strategy to improve profitability, the Company has developed
a restructuring program including plans to (i) close its executive offices in
Golden, Colorado, with most of its administrative functions relocating to its
Wichita, Kansas facility, (ii) reduce its work force by approximately
10% or 700 employees, (iii) close or relocate several of its factories, (iv)
close its Geneva, Switzerland international headquarters, (v) rationalize its
product lines, including a significant reduction in SKUs, and (vi) exit its
pressure washer business. In addition, the Company continues to evaluate the
various components of its business operations and may, as a result of those
ongoing evaluations, decide to sell certain businesses or assets if suitable
opportunities arise. Several of the initiatives involved in the Company's
restructuring plan, including closing and relocating certain administrative and
manufacturing facilities, were substantially completed as of June 30, 1997. The
remaining initiatives are expected to be substantially completed within one
year.
THREE MONTHS ENDED JUNE 30, 1997 COMPARED WITH THE THREE MONTHS ENDED
JUNE 30, 1996
Net revenues of $383.5 million in 1997 were $69.1 million or 15.3% less
than in 1996 with outdoor recreation products decreasing $48.6 million or 13.7%
and hardware products decreasing $20.5 million or 21.2%. The outdoor recreation
products revenues decrease primarily reflects reduced sales in Japan due to weak
market conditions and a program to reduce wholesaler inventories and the
inclusion of Camping Gaz revenues from the date of acquisition in 1996. The
hardware products revenues decrease is primarily due to a decline in pressure
washer sales as a result of the Company's decision to exit the pressure washer
business. Geographically, United States and Canadian revenues decreased 0.3%
while international revenues decreased 38.6% reflecting the decline in outdoor
recreation products revenues outside the United States as described above.
Gross margins of 29.5%, excluding the impact of restructuring and other
charges which are more fully described below, decreased as a percent of sales
by 0.9 percentage points from 30.4% in 1996. The decrease is primarily the
result of the effect of lower sales of high margin products in Japan.
Closing several of the Company's factories as part of the Company's
restructuring initiatives is intended to reduce manufacturing costs in future
periods.
SG&A expenses, excluding the impact of restructuring and other charges
which are more fully described below, were $62.9 million or 16.4% of sales in
1997 compared to $78.9 million or 17.4% of sales in 1996. The decrease in SG&A
expenses reflects reduced promotional and advertising spending, cost reductions
from the integration of the Camping Gaz business and timing of the acquisition
in 1996, and the restructuring initiatives implemented in 1997.
During the second quarter of 1997, the Company recorded restructuring
charges totaling $18.6 million of which $11.4 million was reflected in cost of
sales and $7.2 million in SG&A expenses. These charges relate to the Company's
restructuring initiatives designed to improve profitability. Tax benefits of
$7.1 million associated with these charges are reflected in income tax expense.
Interest expense was $11.0 million in 1997 compared with $10.7 million in
1996, an
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increase of $0.3 million. This increase was primarily the result of higher
interest rates.
Minority interest in the second quarter of 1997 reflects the minority
interests held by other shareholders in certain subsidiary operations acquired
with the Camping Gaz business. On March 1, 1996, the Company acquired control
of approximately 70% of Camping Gaz and in July 1996 obtained control of the
remaining 30% of Camping Gaz and, accordingly, in the second quarter of 1996,
minority interest reflected the approximately 30% share of Camping Gaz held by
other shareholders and also the minority interests in certain subsidiary
operations acquired with the Camping Gaz business.
The Company recorded a provision for income tax expense of $6.6 million or
38.0% of pre-tax earnings in 1997 compared to a provision for income tax expense
of $14.4 million or 32.4% of pre-tax earnings in 1996.
The increase in the effective tax rate in 1997 as compared to 1996 is primarily
due to reduced tax benefits associated with certain of the Company's offshore
operations.
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 net of tax) which represented a write-off
of the related unamortized financing costs associated with its then existing
credit agreement.
SIX MONTHS ENDED JUNE 30, 1997 COMPARED WITH THE SIX MONTHS ENDED JUNE 30, 1996
Net revenues of $679.0 million in 1997 were $47.2 million or 6.5% less than
in 1996 with outdoor recreation products decreasing $19.4 million or 3.6% and
hardware products decreasing $27.8 million or 15.3%. The outdoor recreation
products revenues decrease is largely attributable to lower sales in Japan due
to weak market conditions and a program to reduce wholesaler inventories. The
hardware products revenues decrease is primarily due to a decline in pressure
washer sales as a result of the Company's decision to exit the pressure washer
business. Geographically, United States and Canadian revenues decreased 3.3%
while international revenues decreased 13.1% primarily related to lower sales in
Japan. Results in the 1996 period include the Camping Gaz operations from the
date of acquisition.
Gross margins of 28.6%, excluding the impact of restructuring and other
charges which are more fully described below, decreased as a percent of sales by
1.5 percentage points from 30.1% in 1996. The decrease is primarily the result
of the effect of lower sales of high margin products in Japan. The closing of
several of the Company's factories as part of the Company's restructuring
initiatives is intended to reduce manufacturing costs in future periods.
SG&A expenses, excluding the impact of restructuring and other charges
which are more fully described below, were $124.4 million in 1997 compared to
$125.7 million in 1996, a decrease of 1.0%. The inclusion of a full six
months of Camping Gaz SG&A costs in the 1997 period increased SG&A expenses,
however these increases were more than offset by reduced costs in the
Company's various promotional programs and benefits resulting from the
integration of Camping Gaz operations and the restructuring initiatives.
During the 1997 period, the Company recorded restructuring charges
totaling $22.6 million of which $11.0 million was reflected in cost of sales
and $11.6 million in SG&A expenses. These charges relate to the Company's
restructuring initiatives designed to improve profitability. Tax benefits of
$8.6 million associated with these charges are reflected in income tax
expense.
Interest expense was $21.7 million in 1997 compared with $18.8 million in
1996, an increase of $2.9 million. This increase was primarily the result of
higher interest rates and increased borrowings related to the Camping Gaz
acquisition.
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Minority interest in the 1997 period reflects the minority interests held
by other shareholders in certain subsidiary operations acquired with the Camping
Gaz business. On March 1, 1996, the Company acquired control of approximately
70% of Camping Gaz and in July 1996 obtained control of the remaining 30% of
Camping Gaz and, accordingly, in the 1996 period, minority interest reflected
the approximately 30% share of Camping Gaz held by other shareholders and also
the minority interests in certain subsidiary operations acquired with the
Camping Gaz business.
The Company recorded a provision for income tax expense of $7.1 million or
38.0% of pre-tax earnings in 1997 compared to a provision for income tax expense
of $23.2 million or 34.0% of pre-tax earnings in 1996. The increase in the
effective tax rate in 1997 as compared to 1996 is primarily due to reduced tax
benefits associated with certain of the Company's offshore operations.
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 net of tax) which represented a write-off
of the related unamortized financing costs associated with its then existing
credit agreement.
LIQUIDITY AND CAPITAL RESOURCES
The Company's operating activities provided $8.7 million of cash during the
six months ended June 30, 1997 and used $46.4 million of cash in the same period
a year ago. Net cash provided by operating activities during the 1997 period
reflects an increase in receivables and a decrease in inventories as a result of
the seasonality of the Company's sales and was also favorably impacted by
improved management of receivables and inventories. The Company's net cash used
for investing activities was $9.8 million and $176.6 million for the six months
ended June 30, 1997 and 1996, respectively. The Company used $158.2 million of
cash in the 1996 period for the Camping Gaz and Seatt business acquisitions.
The Company's capital expenditures were $12.7 million in the six months ended
June 30, 1997.
As part of its strategy to improve profitability, the Company has
announced several restructuring initiatives. The Company has recognized
year-to-date pre-tax charges of $22.6 million associated with these actions
and expects to record additional pre-tax charges of approximately $7.0
million during the remaining periods of 1997. These restructuring
initiatives are expected to generate cost savings in the future from
reductions in personnel, production facilities and administrative overhead.
There can be no assurance as to the Company's success in implementing its
planned initiatives or the results therefrom, the amount of future charges,
or against any adverse impact of the Company's restructuring initiatives.
The Company's working capital requirements are currently funded by cash
flow from operations and domestic and foreign bank lines of credit. The
Company's Amended and Restated Credit Agreement, dated as of August 3, 1995, as
amended (the "Company Credit Agreement"), consists of a $275.0 million unsecured
revolving credit facility (the "Revolving Credit Facility") and a term loan
facility of approximately 385.0 million French Francs (approximately $66.1
million at June 30, 1997 exchange rates). Availability under the Revolving
Credit Agreement is reduced by any commercial paper borrowings outstanding. The
Company Credit Agreement is available to the Company until April 30, 2001. At
June 30, 1997, $173.5 million was available for borrowings under the Company
Credit Agreement.
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
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("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. For purposes of determining the Company's
compliance with certain of such covenants, the Company Credit Agreement
excludes, among other things, up to $30.0 million of pre-tax charges in
connection with the Company's restructuring initiatives. In addition to the
Company Credit Agreement, the Company has private placement notes outstanding
totaling $360.0 million (the "Private Placement Notes") which, among other
provisions, provide for the Private Placement Notes to become secured if the
Company Credit Agreement becomes secured.
The Company believes that cash flow from operations and borrowings under
the Company Credit Agreement will be sufficient for the Company to meet its
current cash operating requirements, including projected capital expenditures,
tax sharing payments and other obligations. 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 covenants, including without
limitation, those described above, and the various covenants in the Private
Placement Notes. If the Company fails to meet the various restrictive covenants
of the Company Credit Agreement, the Company will need to seek a waiver of such
provisions, renegotiate its current Company Credit Agreement, and/or enter into
alternative financing arrangements. There is no assurance that the Company
would be able to obtain such waiver or that terms and conditions of such
renegotiated or alternative agreements, if any, would be as favorable as those
now contained in the Company Credit Agreement.
All of the shares of the Company's common stock owned by Coleman
Worldwide Corporation ("Coleman Worldwide") are pledged to secure
indebtedness of Coleman Worldwide and Coleman Escrow Corp. ("Coleman
Escrow"). On May 20, 1997, Coleman Escrow issued approximately $732.0 million
in principal amount at maturity of Senior Secured Discount Notes due 2001
(the "Escrow Notes"). A portion of the net proceeds from the issuance of the
Escrow Notes was contributed to Coleman Holdings Inc. ("Coleman Holdings")
and used by it to redeem, on July 15, 1997, its Senior Secured Discount Notes
due 1998 (the "Holdings Notes"). A portion of the net proceeds from the
issuance of the Escrow Notes was contributed to Coleman Worldwide and used by
it to accept for exchange on June 20, 1997, $545.1 million aggregate
principal amount at maturity of Liquid Yield Option Notes-TM- due 2013 (the
"LYONs"-TM-). Coleman Worldwide plans to redeem the remaining $16.5 million
aggregate principal amount at maturity of LYONs on May 27, 1998 with the
remaining proceeds from the issuance of the Escrow Notes. Following the
redemption of the Holdings Notes, Coleman Holdings was merged into Coleman
Escrow and the name of Coleman Escrow was changed to "Coleman Holdings Inc."
The LYONs and the Escrow Notes, to which the Company is not a
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party, provide that it is a put right or an event of default, respectively,
under these debt instruments if, among other things, the amount of debt
incurred by the Company exceeds certain limitations.
The Company periodically 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.
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.
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. The Company's annual results are generally dependent on its
results during the second quarter.
Page 13
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-Q are subject to certain risks and uncertainties.
Actual results could differ materially from current expectations. Among the
factors which could affect the Company's actual results and could cause results
to differ from those contained in the forward-looking statements contained
herein are (i) difficulties or delays in the reduction of wholesaler inventories
in Japan, (ii) unanticipated costs or delays in eliminating low or unprofitable
products or businesses or closing facilities or consummating the Company's
other restructuring activities, (iii) unanticipated costs or delays in
developing new products, (iv) the possibility the Company fails to meet the
various restrictive covenants of the Company Credit Agreement, (v) a decrease in
the public's interest in camping and related activities, and (vi) adverse
weather, market or economic conditions which negatively affect demand for the
Company's products.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The 1997 annual meeting of shareholders was held on May 13, 1997.
Directors elected at the meeting were Ronald O. Perelman, Donald G. Drapkin,
Lawrence M. Jones, Robert J. Lanigan, Jerry W. Levin, Robert S. Miller, John A.
Moran, Bruce Slovin, and William H. Spoor, constituting the entire board of
directors. All of the directors were elected without opposition. There were no
broker nonvotes. Other matters voted on were proposals to (i) ratify the
appointment of Ernst & Young LLP as the independent certified public accountants
for the Company for 1997, (ii) ratify and adopt The Coleman Company, Inc.
Executive Annual Incentive Plan, and (iii) consider a proposal to amend The
Coleman Company, Inc. 1993 Stock Option Plan.
The tabulation of votes for each matter is as follows:
1. ELECTION OF DIRECTORS
Nominees
for Against or
Directors For Withheld Abstained
--------- --- -------- ---------
Ronald O. Perelman 51,286,138 60,864 --
Donald G. Drapkin 51,288,398 58,604 --
Lawrence M. Jones 51,286,418 60,584 --
Robert J. Lanigan 51,288,698 58,304 --
Jerry W. Levin 51,288,598 58,404 --
Robert S. Miller 51,288,098 58,904 --
John A. Moran 51,288,698 58,304 --
Bruce Slovin 51,288,698 58,304 --
William H. Spoor 51,288,098 58,904 --
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Subsequent to being elected by the shareholders, Robert J. Lanigan and
Robert S. Miller resigned as directors. Ann D. Jordan and James D.
Robinson III were appointed by the remaining directors to fill these
vacancies.
2. RATIFICATION OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
51,320,591 13,626 12,785
3. RATIFICATION AND ADOPTION OF THE EXECUTIVE ANNUAL INCENTIVE PLAN
49,165,945 185,345 37,616
4. PROPOSAL TO AMEND THE 1993 STOCK OPTION PLAN
51,115,400 190,610 40,992
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit Index Description
------------- -----------
3.1+ By-Laws of The Coleman Company, Inc., as amended.
10.1*+ The Coleman Company, Inc. 1993 Stock Option
Plan, as amended.
10.2* The Coleman Company, Inc. Executive Annual
Incentive Plan, incorporated by reference to
Exhibit A, pp. 30 to 34, of the Company's 1997
Proxy Statement.
10.3*+ The Coleman Company, Inc. 1992 Stock Option
Plan, as amended.
10.4*+ The Coleman Company, Inc. 1996 Stock Option
Plan, as amended.
10.5*+ Letter agreement dated as of June 30, 1997
between the Company and Frederick van den Bergh.
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
June 30, 1997.
Page 15
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.
THE COLEMAN COMPANY, INC.
(Registrant)
Date: August 13, 1997 By: /s/ Steven F. Kaplan
-------------------- -------------------------------
Steven F. Kaplan
Executive Vice President and
Chief Financial Officer