UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) March 28, 2002
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ALLTRISTA CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 0-21052 35-1828377
(State or other (Commission File Number) (IRS Employer
Jurisdiction of Identification Number)
Incorporation)
555 THEODORE FREMD AVENUE, SUITE B302, RYE, NEW YORK 10580
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(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, including area code: (914) 967 9426
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(Former name or former address, if changed since last report)
Item 5. Other Events.
On March 27, 2002, the Registrant signed a definitive agreement to purchase
substantially all of the assets and assume substantially all of the liabilities
of Tilia International, Inc. ("Tilia") upon the satisfaction of certain closing
conditions (the "Acquisition"). A copy of the press release announcing the
signing of the agreement is attached as Exhibit 99.1 to this Form 8-K and is
incorporated by reference herein.
Item 9. Regulation FD Disclosure
The Registrant is conducting a $150 million senior subordinated note
offering to finance a portion of the purchase price in connection with the
Acquisition. The offering will be a private placement under Rule 144A and
Regulation S under the Securities Act of 1933 and will be made only to qualified
institutional buyers or outside the United States. Included in the preliminary
offering memorandum for the private placement are the Registrant's Unaudited Pro
Forma Condensed Consolidated Financial Statements, which are attached as Exhibit
99.2 to this Form 8-K and are incorporated by reference herein. The Unaudited
Pro Forma Condensed Consolidated Financial Statements have not been previously
disclosed. In addition, included in the preliminary offering memorandum for the
private placement is the following information, which has not been previously
publicly disclosed.
TILIA'S RESULTS OF OPERATIONS
COMPARISON OF 2001 WITH 2000
Net sales for the year ended December 31, 2001 were $183.8 million, an
increase of approximately $51.7 million, or 39.2%, compared to net sales of
$132.1 million in the year ended December 31, 2000. This increase was primarily
attributable to growth in retail revenue, which increased by $51.2 million to
$138.1 million, while direct-to-consumer revenue was essentially flat at $45.7
million. The increase in retail revenue is primarily attributable to increases
at national accounts, including Costco, Sam's Club, Sears, Target and Wal-Mart.
Gross profit in fiscal 2001 was $94.2 million, or 51.2% of net sales,
compared to $72.2 million, or 54.7% of net sales, in fiscal 2000. The decline in
gross margin was due in part to a change in sales channel mix with more sales
being derived from sales to retailers compared to direct-to-consumer sales, as
well as price adjustments effected in 2000 and 2001.
Operating expenses were 33.8% of net sales, or $62.2 million in fiscal
2001, compared to 36.3% of net sales, or $48.0 million in fiscal 2000.
Expenditures for infomercial media advertising and associated costs during
fiscal 2001 were $24.0 million, compared to $20.9 million in fiscal 2000.
COMPARISON OF 2000 WITH 1999
Net sales for fiscal 2000 were $132.1 million, an increase of approximately
$52.1 million, or 65.1%, compared to net sales of $80.0 million in the year
ended December 31, 1999. This increase was primarily attributable to growth in
retail revenue, which increased by $47.1 million to $86.9 million. The increase
at retail is attributable to sales to new customers as well as increased sales
to existing customers.
Gross profit in 2000 was $72.2 million, an increase of $24.9 million, or
52.5%, from $47.3 million in 1999. Gross margin in 2000 was 54.7%, compared to
59.2% in fiscal 1999. The decline in the gross profit margin was due in part to
a change in sales channel mix. The retail sales channel, which offers wholesale
pricing to retailers, was responsible for 65.7% of net sales in 2000, up from
49.8% of net sales in 1999. Direct-to-consumer sales, which are at list price to
consumers, and therefore at higher margins, had a corresponding decline in
percentage sales mix.
Operating expenses in 2000 were $48.0 million, up $19.1 million, or 66.1%,
from $28.9 million in 1999. As a percentage of net sales, operating expenses
were 36.3% in 2000 compared to 36.1% in 1999. Expenditures for infomercial media
advertising and associated costs during 2000 were $20.9 million, compared to
$14.1 million in 1999. The increase was primarily due to increased infomercial
media advertising costs and product development costs.
PRO FORMA COMBINED FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Upon consummation of the Acquisition and the related financing
transactions, the Registrant's primary sources of liquidity will be cash flow
from operations and borrowings under our new senior credit facility. Under the
new senior credit facility, on
a pro forma basis as of December 31, 2001, $50.0 million of term borrowings and
no revolving credit borrowings would have been outstanding and revolver and
swing short-term availability therefore would have been approximately $50.0
million. As of March 3, 2002, the Registrant's borrowings under its existing
credit facility were $10.2 million lower than at December 31, 2001 due to
receipt of $15.7 million of the Tax Refunds, offset in part by additional
working capital borrowings. Due to seasonality, the Registrant expects increases
in working capital through the end of the second quarter of 2002 and to start to
repay short term debt in the third quarter of 2002.
Borrowings under the Registrant's new senior credit facility will bear
interest at a rate equal to LIBOR plus an applicable margin or an alternate base
rate equal to the higher of (a) the Bank of America prime rate and (b) the
federal funds rate plus .50%, plus, in each case, an applicable margin.
Applicable margins will be determined based on the Registrant's total leverage
ratio.
The new senior credit facility will contain customary affirmative and
negative covenants, including, but not limited to, limitations on liens and
negative pledges, limitations on mergers, consolidations and sales of assets,
limitations on incurrence of debt (including the notes being offered hereby),
limitations on dividends, stock redemptions and the redemption and/or prepayment
of other debt, limitations on investments and acquisitions, limitations on
capital expenditures, limitations on payment of earnouts in cash in connection
with the Acquisition, limitations on leases, limitations on burdensome
agreements, limitation on transactions with affiliates, and limitations on asset
ownership by foreign subsidiaries exceeding more than 10% of our consolidated
total assets. In addition, the new senior credit facility will contain financial
covenants, including obligations to maintain a minimum net worth, a maximum
total leverage ratio, a maximum senior leverage ratio, and a minimum fixed
charge coverage ratio.
In connection with the Acquisition, the Company will issue subordinated
seller notes in the aggregate principal amount of $15.0 million, of which $10.0
million in principal amount will mature in 2003 and will not bear interest and
$5.0 million in principal amount will mature in 2005 and will bear interest at a
rate equal to the effective interest rate on the Company's new senior credit
facility, compounding annually and payable at maturity.
On a pro forma basis, the Company's capital expenditures were $8.7 million
in 2001 and are largely related to maintaining facilities and improving
manufacturing efficiencies.
The Registrant believes that existing funds, cash generated from operations
and our new senior credit facility will be adequate to satisfy our working
capital and capital expenditure requirements for the foreseeable future.
RECENT DEVELOPMENTS
The Registrant expects that the pro forma net sales and operating income of
its consumer products segment for the three months ending March 31, 2002 will be
lower than in the corresponding quarter for the previous year, as a result of
the planned movement in sales of FoodSaver (Registered Trademark) machines from
infomercial sales to retail sales which are typically more concentrated in the
fourth quarter of the year. This reduction due to a shift in business mix was
partially offset by continuing strong out-of-season demand for home canning
products and manufacturing cost savings from the reorganization of the
Registrant's Canadian operations in the second half of 2001.
TILIA'S BUSINESS
Tilia provides patented vacuum packaging systems for household use marketed
under the FoodSaver (Registered Trademark) brand. Our seven models of compact,
patented counter-top FoodSaver (Registered Trademark) appliances incorporate a
vacuum pump and bag sealer to keep foods fresh and are sold at prices ranging
from approximately $100 to almost $300. Tilia markets its FoodSaver (Registered
Trademark) appliances in tandem with its patented FoodSaver (Registered
Trademark) bags and rolls and complementary accessories, including canisters,
containers, lids, jar sealers and bottle stoppers.
CUSTOMERS
Tilia's customers are comprised of national and regional retail chains as
well as individual consumers who purchase Tilia's products through
direct-to-consumer channels. Its principal retail customers include warehouse
clubs, such as Costco and Sam's Club, mass merchants, such as Wal-Mart and
Target, department stores, such as Sears and Kohl's, and specialty retailers,
such as Lowe's Companies, Inc. In addition, Tilia recently began selling to
sporting goods and outdoor stores. Tilia's direct-to-consumer sales have
primarily been made through infomercials and catalogs.
Tilia contracts with an outside telemarketing company to answer calls on
Tilia's toll-free customer care hotline, providing information on food storage,
responding to general customer inquiries, and taking orders for additional bags
and accessories.
SALES AND MARKETING
Tilia has an in-house retail sales force that establishes and maintains
relationships with mass merchants, warehouse clubs, department stores, specialty
stores, sporting goods stores, and other retail chains. Tilia also utilizes
manufacturer representative organizations targeting the sporting goods and
outdoor segment to help develop and build this distribution channel.
Tilia implements its marketing strategy to build brand awareness and drive
sales through programs built around in-store demonstrations, infomercials,
point-of-purchase displays and traditional public relations and print
advertising campaigns. Tilia also has a website through which consumers are able
to place orders, and Tilia markets its products in a variety of catalogs,
including specialty cooking magazines such as Chef's Catalog. Tilia's products
are also sold through prominent retail websites such as Amazon.com and
Cooking.com.
DISTRIBUTION AND FULFILLMENT
FoodSaver (Registered Trademark) appliances, bags and accessories are
received separately from various manufacturing partners and are packaged by
Tilia for retail and individual customers at company-operated and third-party
facilities in California.
MANUFACTURING
Tilia has established an efficient, cost-effective, outsourced
manufacturing network of suppliers. Appliances are currently sourced through
three facilities in China; bags and rolls are currently sourced through
suppliers in Korea and the United States; and accessories are sourced from
Taiwan, China and the United States. Tilia's own research and development
department designs and engineers products in the United States and sets strict
engineering specifications for the third-party manufacturers. Tilia maintains
ownership over all necessary production molds and believes it has excellent
relationships with each of its suppliers.
INTELLECTUAL PROPERTY
Tilia holds patents throughout most primary worldwide markets on both the
design of the FoodSaver (Registered Trademark) appliance itself as well as on
many of its components. Our patent on the FoodSaver (Registered Trademark)
vacuum seal appliance expires in 2009, and our patent on FoodSaver (Registered
Trademark) bags expires in 2005. The key elements of the bag are a unique waffle
pattern that facilitates air removal, an oxygen barrier layer that prevents air
from entering the bag and a heat resistant outer layer to allow easy sealing
without burn-through. In addition, Tilia has registered the VacLoc, SaverMate,
VacuTop and VacuSave names with the U.S. Patent and Trademark Office and in
several countries throughout the world.
COMPETITION
Tilia competes with marketers of "conventional" food storage solutions,
such as plastic bags and containers. In addition, our competitors include
manufacturers of sealing appliances that heat-seal bags, but, we believe, do not
create a vacuum seal comparable to ours. There are also several companies that
manufacture industrial and commercial vacuum packaging products, but these
manufacturers have not attempted to enter the household marketplace. We believe
that the strength of our proprietary technology coupled with our strong brand
name and competitive pricing strategy will prevent others from producing a
similar product at comparable price points.
SIGNATURE
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 hereunto duly authorized.
ALLTRISTA CORPORATION
By: /s/ Ian G.H. Ashken
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Ian G.H. Ashken
Vice President, Secretary and Treasurer
Dated: March 28, 2002
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
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99.1 Press Release of the Company, dated March 28, 2002
99.2 Unaudited Pro Forma Condensed Consolidated Financial
Statements