UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) February 7, 2003
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Jarden Corporation
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(Exact name of registrant as specified in its charter)
Delaware 0-21052 35-1828377
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(State or other jurisdiction of (Commission File Number) (IRS Employer Identification No.)
incorporation)
555 Theodore Fremd Avenue, Rye, New York 10580
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (914) 967-9400
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(Former name or former address, if changed since last report.)
We hereby amend the Current Report on Form 8-K filed on February 14,
2003 by replacing Item 7 in its entirety as follows:
Item 7. Financial Statements and Exhibits
---------------------------------
(a) Financial Statements of Business Acquired.
Audited consolidated balance sheet of Diamond Brands as of December
31, 2002 and related consolidated statements of operations, stockholders'
deficit and cash flows for the years ended December 31, 2002. See "Index to
Financial Statements."
(b) Pro Forma Financial Information.
Unaudited pro forma condensed consolidated balance sheet as of December
31, 2002 and related condensed consolidated statement of operations for the
year ended December 31, 2002 of Jarden Corporation which gives effect to the
acquisitions of Tilia International, Inc. and its subsidiaries and Diamond
Brands as if they had occurred on January 1, 2002. See "Index to Financial
Statements."
(c) Exhibits. The following Exhibits are filed herewith as part of
this report:
Exhibit Description
- ------- -----------
10.1 Asset Purchase Agreement, dated as of November 27, 2002, by and
among Jarden Corporation ("Jarden"), Diamond Brands, Incorporated,
Diamond Brands Operating Corp., Forster, Inc. and Diamond Brands
Kansas, Inc. (1)
10.2 Credit Agreement, dated as of April 24, 2002, among Jarden, Bank
of America, N.A., as Administrative Agent, Swing Line Lender, and
L/C Issuer, Canadian Imperial Bank of Commerce, as Syndication
Agent, National City Bank of Indiana, as Documentation Agent, and
the other Lenders party thereto, including The Bank of New York,
Fleet National Bank, Harris Trust and Savings Bank, U.S. Bank
National Association, Allfirst Bank, Transamerica Business Capital
Corporation, and Union Federal Bank of Indianapolis (filed as
Exhibit 10.1 to Jarden's Current Report on Form 8-K filed with the
Commission on May 9, 2002, and incorporated herein by reference).
(1)
10.3 Guaranty Agreement, dated as of April 24, 2002, by Alltrista
Newco Corporation, Alltrista Plastics Corporation, Alltrista
Unimark, Inc., Alltrista Zinc Products, L.P., Caspers Tin Plate
Company, Hearthmark, Inc., Lafayette Steel & Aluminum
Corporation, LumenX Corporation, Penn Video, Inc., Quoin
Corporation, Tilia, Inc., Tilia Direct, Inc., Tilia
International, Inc., TriEnda Corporation, and Unimark Plastics,
Inc. to Bank of America, NA., as Administrative Agent (filed as
Exhibit 10.2 to Jarden's Current Report on Form 8-K filed with
the Commission on May 9, 2002, and incorporated herein by
reference). (1)
10.4 Security Agreement, dated as of April 24, 2002, among Jarden,
Alltrista Newco Corporation, Alltrista Plastics Corporation,
Alltrista Unimark, Inc., Alltrista Zinc Products, L.P., Caspers
Tin Plate Company, Hearthmark, Inc., Lafayette Steel & Aluminum
Corporation, LumenX Corporation, Penn Video, Inc., Quoin
Corporation, Tilia, Inc., Tilia Direct, Inc., Tilia
International, Inc., TriEnda Corporation, and Unimark Plastics,
Inc. and Bank of America, N.A., as Administrative Agent (filed as
Exhibit 10.3 to Jarden's Current Report on Form 8-K filed with
the Commission on May 9, 2002, and incorporated herein by
reference). (1)
Exhibit Description
- ------- -----------
10.5 Intellectual Property Security Agreement, dated as of April 24,
2002, among Jarden, Alltrista Newco Corporation, Alltrista
Plastics Corporation, Alltrista Unimark, Inc., Alltrista Zinc
Products, L.P., Caspers Tin Plate Company, Hearthmark, Inc.,
Lafayette Steel & Aluminum Corporation, LumenX Corporation, Penn
Video, Inc., Quoin Corporation, Tilia, Inc., Tilia Direct, Inc.,
Tilia International, Inc., TriEnda Corporation, and Unimark
Plastics, Inc. and Bank of America, N.A., as Administrative Agent
(filed as Exhibit 10.4 to Jarden's Current Report on Form 8-K
filed with the Commission on May 9, 2002, and incorporated herein
by reference). (1)
10.6 Securities Pledge Agreement, dated as of April 24, 2002, among
Jarden, Quoin Corporation, Alltrista Newco Corporation, Caspers
Tin Plate Company, and Bank of America, NA., as Administrative
Agent (filed as Exhibit 10.5 to Jarden's Current Report on Form
8-K filed with the Commission on May 9, 2002, and incorporated
herein by reference). (1)
10.7 Consent, Waiver and Amendment No. 1 to Credit Agreement, dated as
of September 18, 2002, among Jarden Corporation, Alltrista Newco
Corporation, Alltrista Plastics Corporation, Alltrista Zinc
Products, L.P., Hearthmark, Inc., Quoin Corporation, Tilia, Inc.,
Tilia Direct, Inc., Tilia International, Inc., TriEnda
Corporation, and Unimark Plastics, Inc. Bank of America, N.A., as
Administrative Agent and Lender, and the other lenders party
thereto. (1)
10.8 Amendment No. 2 to Credit Agreement and Amendment No. 1 to
Security Agreement, dated as of September 27, 2002, among Jarden
Corporation, Alltrista Newco Corporation, Alltrista Plastics
Corporation, Alltrista Zinc Products, L.P., Hearthmark, Inc.,
Quoin Corporation, Tilia, Inc., Tilia Direct, Inc., Tilia
International, Inc., TriEnda Corporation, and Unimark Plastics,
Inc., Bank of America, N.A., as Administrative Agent and Lender,
and the other lenders party thereto. (1)
10.9 Amendment No. 3 to Credit Agreement and Waiver, dated as of
January 31, 2003, among Jarden Corporation, Alltrista Newco
Corporation, Alltrista Plastics Corporation, Alltrista Zinc
Products, L.P., Hearthmark, Inc., Quoin Corporation, Tilia, Inc.,
Tilia Direct, Inc., Tilia International, Inc., TriEnda
Corporation, and Unimark Plastics, Inc., Bank of America, N.A., as
Administrative Agent and Lender, and the other lenders party
thereto. (1)
23.1 Consent of Ernst & Young LLP. (2)
99.1 Section entitled "Technical Modification to Joint Plan of
Reorganization" from the Findings of Fact, Conclusions of Law and
Order Confirming Joint Plan of Reorganization of Diamond Brands
Operating Corp. and its Debtor Affiliates Proposed by the Debtors
and Jarden Corporation by the Honorable Randall J. Newsome on
January 29, 2003, in connection with case No. 01-1825 (RJN), a
Chapter 11 case captioned "In re: Diamond Brands Operating Corp.,
et al., Debtors" filed in the United States Bankruptcy Court for
the District of Delaware. (1)
99.2 Press Release of Jarden Corporation, dated February 7, 2003. (1)
(1) Incorporated by reference to the Form 8-K filed by Jarden Corporation on
February 14, 2003.
(2) Filed herewith.
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 hereunto duly authorized.
Dated: March 6, 2003
JARDEN CORPORATION
By: /s/ Desiree DeStefano
------------------------
Name: Desiree DeStefano
Title: Senior Vice President
INDEX TO FINANCIAL STATEMENTS
Audited Consolidated Financial Statements
Report of Independent Auditors............................................ F-1
Consolidated Balance Sheet as of December 31, 2002........................ F-2
Consolidated Statement of Operations
for the Year Ended December 31, 2002...................................... F-3
Consolidated Statement of Stockholders' Deficit
for the Year Ended December 31, 2002...................................... F-4
Consolidated Statement of Cash Flows
for the Year Ended December 31, 2002...................................... F-5
Notes to Consolidated Financial Statements................................ F-6
Unaudited Pro Forma Condensed Consolidated Financial Statements
Unaudited Pro Forma Balance Sheet as of December 31, 2002................. F-24
Unaudited Pro Forma Statement of Operations
for the Year Ended December 31, 2002...................................... F-25
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.. F-26
Report of Independent Auditors
Diamond Brands Incorporated
We have audited the accompanying consolidated balance sheet of Diamond Brands
Incorporated and Subsidiaries (Debtor-in-Possession) as of December 31, 2002,
and the related consolidated statement of operations, stockholders' deficit, and
cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. 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 audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Diamond Brands Incorporated and
Subsidiaries (Debtor-in-Possession) as of December 31, 2002, and the result of
their operations and their cash flows for the year then ended, in conformity
with accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP
Minneapolis, Minnesota
February 7, 2003
F-1
Diamond Brands Incorporated and Subsidiaries
(Debtor-in-Possession)
Consolidated Balance Sheet
(In Thousands, Except Share and Per Share Amounts)
December 31, 2002
ASSETS
Current assets:
Cash and cash equivalents $ 18,910
Restricted cash 150
Accounts receivable, net of allowance of $964 12,087
Inventories 11,892
Prepaid expenses and other current assets 2,017
-------------------
Total current assets 45,056
Property, plant, and equipment:
Land 559
Buildings and improvements 7,148
Machinery and equipment 35,584
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43,291
Less accumulated depreciation (26,080)
-------------------
Property, plant, and equipment, net 17,211
Goodwill 22,941
Deferred financing costs and other assets, net 1,142
-------------------
Total assets $ 86,350
===================
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Debt (Note 6) $ 84,050
Accounts payable 3,768
Accrued interest 839
Other accrued liabilities 8,816
-------------------
Total current liabilities 97,473
Postretirement benefit obligations 1,865
Liabilities subject to compromise (Note 2) 148,310
-------------------
Total liabilities 247,648
Commitments and contingencies (Note 10)
Redeemable preferred stock, $0.01 par value:
Authorized shares - 1,000,000
Issued and outstanding shares - 47,000, net of subscription receivable of $867 51,111
Stockholders' deficit:
Common stock, $0.01 par value:
Authorized shares - 50,000,000
Issued and outstanding shares - 1,481,258 15
Additional paid-in capital 11,946
Accumulated deficit (222,513)
Accumulated other comprehensive loss (Notes 4 and 8) (1,857)
-------------------
Total stockholders' deficit (212,409)
-------------------
Total liabilities and stockholders' deficit $ 86,350
===================
See accompanying notes.
F-2
Diamond Brands Incorporated and Subsidiaries
(Debtor-in-Possession)
Consolidated Statement of Operations
(In Thousands)
Year Ended December 31, 2002
Net sales $101,604
Cost and expenses:
Cost of sales 72,163
Selling, general, and administrative expenses 10,033
-------------------
Income before interest expense, reorganization costs, and provision
for income taxes 19,408
Interest expense (contractual interest expense of $25,272 in 2002) 9,182
-------------------
Income before reorganization costs and provision for income taxes 10,226
Reorganization costs (Note 2) 4,565
-------------------
Income before provision for income taxes 5,661
Provision for income taxes -
-------------------
Net income applicable to common stock $ 5,661
===================
See accompanying notes.
F-3
Diamond Brands Incorporated and Subsidiaries
(Debtor-in-Possession)
Consolidated Statement of Stockholders' Deficit
(In Thousands, Except Share Amounts)
COMMON STOCK
-------------------------- ADDITIONAL ACCUMULATED OTHER
NUMBER PAR PAID-IN ACCUMULATED COMPREHENSIVE
OF SHARES VALUE CAPITAL DEFICIT LOSS TOTAL
----------------------------------------------------------------------------------------
Balance, January 1, 2002 1,481,258 $15 $11,946 $(228,174) $(2,455) $(218,668)
Net income - - - 5,661 - 5,661
Change in market value of
derivative instruments - - - - 1,009 1,009
Excess of minimum pension
liability over unrecognized
prior service costs - - - - (411) (411)
--------------
Total comprehensive income 6,259
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Balance, December 31, 2002 1,481,258 $15 $11,946 $(222,513) $(1,857) $(212,409)
========================================================================================
See accompanying notes.
F-4
Diamond Brands Incorporated and Subsidiaries
(Debtor-in-Possession)
Consolidated Statement of Cash Flows
(In Thousands)
Year Ended December 31, 2002
OPERATING ACTIVITIES
Net income $ 5,661
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 2,754
Reorganization costs 4,565
Changes in operating assets and liabilities:
Accounts receivable (1,336)
Inventories 1,308
Prepaid expenses and other current assets (719)
Accounts payable 1,800
Accrued liabilities 675
Other liabilities 402
-------------------
Net cash provided by operating activities before reorganization costs 15,110
Net cash paid for reorganization costs (4,565)
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Net cash provided by operating activities 10,545
INVESTING ACTIVITIES
Purchases of property, plant, and equipment (1,812)
-------------------
Net cash used in investing activities (1,812)
FINANCING ACTIVITIES
Borrowings under revolving line of credit (post petition) 1,900
Increase in restricted cash (150)
-------------------
Net cash provided by financing activities 1,750
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Net increase in cash and cash equivalents 10,483
Cash and cash equivalents, beginning of year 8,427
-------------------
Cash and cash equivalents, end of year $18,910
===================
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the year:
Interest $ 8,678
===================
See accompanying notes.
F-5
Diamond Brands Incorporated and Subsidiaries
(Debtor-in-Possession)
Notes to Consolidated Financial Statements
December 31, 2002
1. BASIS OF PRESENTATION AND BUSINESS DESCRIPTION
The accompanying consolidated financial statements include the accounts of
Diamond Brands Incorporated (Holdings) and its wholly owned subsidiary, Diamond
Brands Operating Corp. (Operating Corp.), and Operating Corp.'s wholly owned
subsidiary, Forster Inc. (Forster), and Diamond Brands Kansas, Inc. (DBK) after
elimination of all material intercompany balances and transactions. Holdings,
Operating Corp., and its wholly owned subsidiary are referred to collectively as
"the Company."
The Company is a manufacturer and marketer of a broad range of consumer
products, including wooden matches and firestarters; plastic cutlery and straws;
and toothpicks, clothespins, and wooden crafts. The Company's products are
marketed primarily in the United States and Canada under the nationally
recognized Diamond(R) and Forster(R) brand names. During 2002, one customer
accounted for 24% of gross sales. As of December 31, 2002, this customer
represented approximately 50% of trade accounts receivable.
2. PETITION FOR RELIEF UNDER CHAPTER 11
On March 31, 2001, the Company was unable to make a bank term loan payment of
$1,250,000 that was due. As a result, the Company was out of compliance with the
financial covenants contained in the credit agreement as discussed in Note 6 and
the Company's revolving line of credit was no longer available. Without the
ability to borrow on the line of credit, the Company was unable to pay
$5,062,500 of interest due on April 15, 2001, relating to the senior
subordinated notes. On May 22, 2001 (the Filing Date), the Company filed
voluntary petitions for reorganization (the Filing) under Chapter 11 of the
United States Bankruptcy Code in the United States Bankruptcy Court for the
District of Delaware (the Bankruptcy Court). The bankruptcy case numbers are
01-01825, 01-01826, 01-01827, and 01-01828. The consolidated financial
statements of the Company have been presented in accordance with the American
Institute of Certified Public Accountants Statement of Position 90-7, Financial
Reporting by Entities in Reorganization Under the Bankruptcy Code, and have been
prepared in accordance with accounting principles generally accepted in the
United States applicable to a going concern, which principles, except as
otherwise disclosed, assume that assets will be realized and liabilities will be
discharged in the normal course of business.
F-6
Diamond Brands Incorporated and Subsidiaries
(Debtor-in-Possession)
Notes to Consolidated Financial Statements (continued)
2. PETITION FOR RELIEF UNDER CHAPTER 11 (CONTINUED)
Under the Filing, certain claims against the Company in existence prior to the
Filing Date were stayed while the Company continues to operate as a
debtor-in-possession. These claims are reflected in the accompanying
consolidated balance sheet as "liabilities subject to compromise." Additional
claims (liabilities subject to compromise) may arise subsequent to the Filing
Date resulting from the rejection of executory contracts, including leases, and
from the determination by the Bankruptcy Court of allowed claims for
contingencies and other disputed amounts. Claims secured by the Company's assets
also are stayed, although the holders of such claims have the right to petition
the Bankruptcy Court for relief from the stay. Secured claims are secured
primarily by liens on the Company's assets.
The principal categories and the balances of liabilities that have been
reclassified in the accompanying consolidated balance sheet as liabilities
subject to compromise are set forth below. These amounts may be subject to
future adjustments depending upon Bankruptcy Court actions, further developments
with respect to disputed claims, whether or not such claims are secured, and the
value of any security interests securing such claims or other events.
Liabilities subject to compromise as of December 31, 2002 consisted of the
following (in thousands):
Senior subordinated notes due 2008 $100,000
Senior subordinated debentures due 2009 39,000
Convertible debt due 2009 10,786
Discount (8,210)
-----------------
Debt subject to compromise 141,576
Prepetition trade and other miscellaneous claims 651
Accrued interest 6,083
-----------------
$148,310
=================
The Company received approval from the Bankruptcy Court to pay or otherwise
honor certain of its prepetition obligations, including employee wages. The
Company has determined that there is insufficient collateral to cover the
interest portion of scheduled payments on its prepetition debt obligations;
therefore, the Company has discontinued accruing interest as of the Filing Date.
The Company has discontinued preferred stock dividends and accretion as of the
Filing Date.
F-7
Diamond Brands Incorporated and Subsidiaries
(Debtor-in-Possession)
Notes to Consolidated Financial Statements (continued)
2. PETITION FOR RELIEF UNDER CHAPTER 11 (CONTINUED)
Concurrent with the Filing, the Company negotiated a new credit facility
referred to as the Debtor-in-Possession Credit Agreement (the DIP Agreement)
with its existing bank group, with Wells Fargo Bank, National Association as the
agent bank. The DIP Agreement was approved by the Bankruptcy Court. The DIP
Agreement provides for an $8,200,000 revolving credit line and also converted
the prepetition secured bank debt (revolving line of credit and the term loan
facilities) into debt under the DIP Agreement. On April 30, 2002, the DIP
Agreement matured by its terms and all obligations under the DIP Agreement
became immediately due and payable. The Company was able to obtain forbearance
agreements that have been effectively extended through the effective date of the
Plan of Reorganization. As of December 31, 2002, the Company has not borrowed
additional amounts from the Agreement. The Company has paid all of the Agreement
interest and fees as due monthly.
The Debtors' Disclosure Statement with Respect to Joint Plan of Reorganization
of Diamond Brands Operating Corp. and Its Debtor Affiliates Proposed by the
Debtors and Jarden Corporation (the Plan) was approved by the Bankruptcy Court
on December 13, 2002. On December 17, 2002, the debtors and their Plan
co-proponent, Jarden Corporation, filed the Plan. Modifications to the Plan were
filed on January 24, 2003 and January 29, 2003. The Plan, as modified, was
confirmed by order of the Bankruptcy Court on January 29, 2003. The effective
date of the Plan was February 7, 2003.
The Plan included the sale of substantially all of the assets of the Company
(the Sale). The proceeds of the Sale were allocated, in accordance with the Plan
and the Confirmation Order, to pay allowed Debtor in Possession Facility Claims,
allowed administrative claims, allowed priority tax claims, administrative tax
claims arising as a result of the Sale, and, to the extent that funds are
available after the payment of the claims mentioned above, to pay pro rata
distributions to holders of allowed general unsecured claims.
The sale of substantially all of the assets of the Company for cash and,
potentially, a distribution of Jarden Corporation common stock totaling
approximately $92,000,000 was closed on February 7, 2003. Cash proceeds will be
used to pay debt outstanding under the DIP Agreement, and allowed administrative
claims, with any remaining consideration available to holders of allowed general
unsecured claims.
F-8
Diamond Brands Incorporated and Subsidiaries
(Debtor-in-Possession)
Notes to Consolidated Financial Statements (continued)
2. PETITION FOR RELIEF UNDER CHAPTER 11 (CONTINUED)
REORGANIZATION COSTS
Reorganization costs under Chapter 11 are items of expense or income that are
incurred or realized by the Company because it is in reorganization. These
include, but are not limited to, professional fees and similar types of
expenditures incurred directly relating to the Chapter 11 proceeds.
Reorganization costs from the Filing Date through December 31, 2002 consisted of
the following (in thousands):
Professional fees $ 9,159
Interest income (234)
Retention bonuses (Note 8) 426
Deferred financing costs 3,999
-------------------
$13,350
===================
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Significant estimates include allowance for doubtful accounts and
inventory obsolescence reserves. Ultimate results could differ from those
estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist primarily of highly liquid investments with a
maturity of three months or less at acquisition and are stated at cost, which
approximates fair value. The Company has restricted cash of $150,000 in an
account with US Bank.
F-9
Diamond Brands Incorporated and Subsidiaries
(Debtor-in-Possession)
Notes to Consolidated Financial Statements (continued)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts reported in the consolidated balance sheet at December 31,
2002 for accounts receivable and accounts payable approximate fair value due to
the short-term maturity of these financial instruments. As the interest rates on
the revolving line of credit and term loan facilities are reset monthly based on
current market rates, the carrying value of these financial instruments
approximates fair value. Given the Company's bankruptcy status and the Plan of
Reorganization, the prepetition senior subordinated notes and debentures and the
convertible debt as of December 31, 2002 are presumed to have no fair value. The
fair value of interest rate swap agreements is described in Note 4.
INVENTORIES
Inventories are stated at the lower of first-in, first-out or market and include
materials, labor, and overhead.
Inventories consisted of the following as of December 31, 2002 (in thousands):
Raw materials $ 2,941
Work-in-process 320
Finished goods 8,631
-------------------
$11,892
===================
PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment are stated at cost. Depreciation for financial
reporting purposes is provided using the straight-line method over estimated
useful lives of 5 to 29 years for buildings and improvements and 3 to 10 years
for machinery and equipment. Maintenance and repairs are charged to expense as
incurred. Depreciation expense was approximately $2,322,000 for the year ended
December 31, 2002.
GOODWILL
Goodwill represents the excess of the purchase price of the fair value of the
net assets acquired.
F-10
Diamond Brands Incorporated and Subsidiaries
(Debtor-in-Possession)
Notes to Consolidated Financial Statements (continued)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Effective January 1, 2002, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 142, Goodwill and Other Intangible Assets. Under SFAS No.
142, goodwill is no longer amortized but must be tested for impairment annually,
or more often if an event occurs or circumstances change that would more likely
than not reduce the fair value of a reporting unit below its carrying amount.
The Company performed an impairment test of goodwill under SFAS No. 142 using
the fair value of assets and liabilities implicit in the Plan of Reorganization
and determined that goodwill was not impaired.
REVENUE RECOGNITION
Revenue for products sold is recognized at the time of shipment.
COMPREHENSIVE INCOME
Comprehensive income reflects the change in equity of a business enterprise
during the period from transactions and other events and circumstances from
nonowner resources. For the Company, comprehensive income represents net income
adjusted for the changes in the fair value of the derivative instrument and the
minimum pension liability. The Company has chosen to disclose comprehensive
income in the consolidated statement of stockholders' deficit.
4. ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
The Company accounts for derivative instruments and hedging activities under
SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. SFAS
No. 133 establishes accounting and reporting standards requiring that every
derivative instrument, including certain derivative instruments embedded in
other contracts, be recorded in the balance sheet as either an asset or
liability measured at its fair value. SFAS No. 133 requires that changes in the
derivative's fair value be recognized currently in earnings unless specific
hedge criteria are met.
The Company had entered into an interest rate swap agreement with a financial
institution that limits its exposure to interest rate volatility of its variable
rate debt by effectively converting a portion of variable rate debt to fixed
rate debt. As of December 31, 2002, the notional principal amount of this
agreement totaled $40,000,000, with a fixed LIBOR rate of 5.98%. Notional
amounts are not reflective of the Company's
F-11
Diamond Brands Incorporated and Subsidiaries
(Debtor-in-Possession)
Notes to Consolidated Financial Statements (continued)
4. ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (CONTINUED)
obligations under this agreement because the Company is only obligated to pay
the net amount of interest rate differential between the fixed and variable
LIBOR rates in the contracts. The fair value of the outstanding contract, which
represents the estimated amount that the bank would receive or pay to terminate
the swap agreements at the reporting date taking into account current interest
rates and the current creditworthiness of the swap counterparties, was a net
payable position of approximately $921,000 at December 31, 2002. The offset of
this payable is recorded in other comprehensive loss. The financial institution
has asserted that this obligation is fully secured by the Company's assets.
5. RECAPITALIZATION
Holdings entered into a recapitalization agreement in 1998 (the Recapitalization
Agreement) with its existing stockholders (the Stockholders), Seaver Kent-TPG
Partners, L.P. and Seaver Kent I Parallel, L.P. (collectively, the Sponsors),
that provided for the recapitalization of Holdings. Pursuant to the
Recapitalization Agreement, the Sponsors and other investors purchased from
Holdings, for an aggregate purchase price of $47,000,000, shares of pay-in-kind
preferred stock of Holdings (Holdings Preferred Stock), together with warrants
(the Warrants) to purchase shares of common stock of Holdings (Holdings Common
Stock). The shares of Holdings Common Stock issuable upon the full exercise of
the Warrants would represent 77.5% of the outstanding shares of Holdings Common
Stock after giving effect to such issuance. In addition, Holdings purchased (the
Equity Repurchase) for $211,421,000, subject to certain working capital
adjustments, from the Stockholders all outstanding shares of Holdings' capital
stock other than shares (the Retained Shares) of Holdings Common Stock having an
implied value (based solely on the per share price to be paid in the Equity
Repurchase) of $15,000,000 (the Implied Value), which will continue to be held
by certain of the Stockholders. The Retained Shares represent 22.5% of the
outstanding shares of Holdings Common Stock after giving effect to the full
exercise of the Warrants. Holdings, the Sponsors, and the holders of the
Retained Shares also entered into a stockholders' agreement pursuant to which,
among other things, the Sponsors have the ability to direct the voting of
outstanding shares of Holdings Common Stock in proportion to their ownership of
such shares as if the Warrants were exercised in full. Accordingly, the Sponsors
have voting control of Holdings.
F-12
Diamond Brands Incorporated and Subsidiaries
(Debtor-in-Possession)
Notes to Consolidated Financial Statements (continued)
5. RECAPITALIZATION (CONTINUED)
In connection with the Recapitalization, Holdings organized Operating Corp., and
immediately prior to the consummation of the Recapitalization, Holdings
transferred substantially all of its assets and liabilities to Operating Corp.
Holdings' future operations are limited to owning the stock of Operating Corp.
Operating Corp. repaid substantially all of the Company's funded debt
obligations existing immediately before the consummation of the Recapitalization
in the amount of $51,834,000 (the Debt Retirement).
Funding requirements of the Recapitalization were $296,470,000 (including the
Implied Value of the Retained Shares) and were satisfied through the Retained
Shares and the following: (i) the purchase by the Sponsors and other investors
of Holdings Preferred Stock and the Warrants for $47,000,000 ($45,783,000 in
cash and $1,217,000 in officer notes receivables); (ii) $45,105,000 of gross
proceeds from the offering of 12.875% senior discount debentures (the
Debentures); (iii) $80,000,000 of borrowings under senior secured term loan
facilities (the Term Loan Facilities) provided by a syndicate of lenders
(collectively, the Banks); (iv) $10,582,000 of borrowings under a senior secured
revolving credit facility (the Revolving Credit Facility, together with the Term
Loan Facilities, and the Bank Facilities) with availability of up to $25,000,000
provided by the Banks; and (v) $100,000,000 of gross proceeds from the sale by
Operating Corp. of 10.125% senior subordinated notes (the Notes).
The Equity Repurchase, the Debentures, the Debt Retirement, the issuance and
sale by Holdings of Holdings Preferred Stock and the Warrants, the borrowing by
Operating Corp. of funds under the Bank Facilities and the issuance and sale by
Operating Corp. of the Notes are collectively referred to herein as the
Recapitalization. The Recapitalization was accounted for as a Recapitalization
transaction for accounting purposes.
F-13
Diamond Brands Incorporated and Subsidiaries
(Debtor-in-Possession)
Notes to Consolidated Financial Statements (continued)
6. DEBT
Debt consisted of the following as of December 31, 2002 (in thousands):
Revolving line of credit, interest at prime (4.25% as of
December 31, 2002) plus 4.5% $ 11,800
Term loan facility, interest at prime (4.25% as of
December 31, 2002) plus 4.5% 48,625
Term loan facility, interest at prime (4.25% as of
December 31, 2002) plus 5.0% 23,625
Senior subordinated notes, interest at 10.125%, due 2008 100,000
Senior discount debentures, interest at 12.875%, due 2009 39,000
Convertible debt, interest at 12.875%, due 2009 10,786
Less discount (8,210)
-------------------
Total debt 225,626
Less debt subject to compromise 141,576
-------------------
$ 84,050
===================
Concurrent with the Filing, the Company negotiated a new credit facility
referred to as the DIP Agreement with its existing bank group, with Wells Fargo
Bank, National Association as the agent bank. The Agreement was approved by the
Bankruptcy Court. The DIP Agreement provides for an $8,200,000 revolving credit
line and also converted the prepetition previous revolving line of credit and
the term loan facilities into the DIP Agreement. On April 30, 2002, the DIP
Agreement matured by its terms and all obligations under the DIP Agreement
became immediately due and payable. The Company was able to obtain forbearance
agreements that have been effectively extended through the effective date of the
Plan of Reorganization. As of December 31, 2002, the Company has not borrowed
additional amounts from the Agreement. The Company has paid all of the Agreement
interest and fees as due monthly.
In April 1998, the Company completed offerings of $100,000,000 of 10.125%
unsecured Notes and $84,000,000 of 12.875% unsecured Debentures with an original
issue discount of $38,895,000. The net proceeds to the Company for the offering,
after discounts, commissions, and other offering costs, were $138,400,000 and
were used to repay all outstanding indebtedness and to repurchase common stock
of the Company.
F-14
Diamond Brands Incorporated and Subsidiaries
(Debtor-in-Possession)
Notes to Consolidated Financial Statements (continued)
6. DEBT (CONTINUED)
On April 26, 2000, certain stockholders made a $9,425,000, 12.875% bridge loan
to the Company. The proceeds were used to retire $45,000,000 face value
($31,072,051 accreted value) senior discount debentures on April 27, 2000. This
resulted in an extraordinary gain of $12,398,000, net of income taxes of
$8,265,000. Effective June 2, 2000, the bridge loan, plus accrued interest, was
exchanged for $9,549,000 of 12.875% unsecured convertible debt. Interest
compounds semiannually on each April 15 and October 15. All accrued interest is
due and payable on April 15, 2003 and payable semiannually on each October 15
and April 15 thereafter.
Revolving line of credit (revolver) data is as follows for the year ended
December 31 (in thousands):
2002
------------------
Revolver borrowings at year-end $11,800
Average daily revolver borrowings 11,149
Highest total revolver borrowings 11,800
Weighted average interest rates:
Based on average daily borrowings 8.31%
Deferred financing costs related to the prepetition debt subject to compromise
of $3,636,000 were expensed effective with the debt becoming an allowed claim in
2001. Retained earnings as of December 31, 2001 have been restated to reflect
this change.
For the year ended December 31, 2002, interest expense as recorded related to
Holdings was $-0- and to Operating Corp. was $9,182,000. For the year ended
December 31, 2002, contractual interest expense related to Holdings was
$4,415,000 and to Operating Corp. was $20,857,000.
7. INCOME TAXES
The Company had no income tax provision for the year ended December 31, 2002
because of the existing net operating loss carryforwards.
F-15
Diamond Brands Incorporated and Subsidiaries
(Debtor-in-Possession)
Notes to Consolidated Financial Statements (continued)
7. INCOME TAXES (CONTINUED)
A reconciliation from the federal statutory tax rate to the effective tax rate
is as follows:
2002
-------------------
Federal statutory tax rate 35 %
State income taxes, net of federal effect 5
Valuation allowance (40)
-------------------
Effective income tax rate - %
===================
Components of deferred income taxes are as follows as of December 31 (in
thousands):
2002
-------------------
Current deferred tax assets (liabilities):
Accrued interest $ (6,510)
Debt accretion (3,699)
Other 2,304
-------------------
Current deferred tax liability (7,905)
Long-term deferred tax assets (liabilities):
Net operating loss carryforward 16,296
Depreciation (1,645)
Other 1,205
-------------------
Long-term deferred tax asset 15,856
Net deferred tax asset 7,951
Valuation allowance (7,951)
-------------------
Total net deferred tax asset $ -
===================
As of December 31, 2002, the Company has net operating loss carryforwards of
approximately $40,739,000 that expire through 2022. Future uses of these federal
tax benefits are dependent upon the profitability of the Company. The future use
of federal tax benefits are subject to limitation under Internal Revenue Code
Section 382 due to a change in control as defined by Internal Revenue Code
Section 382. The amount and availability of the net operating loss carryforwards
are subject to challenge by the Internal
F-16
Diamond Brands Incorporated and Subsidiaries
(Debtor-in-Possession)
Notes to Consolidated Financial Statements (continued)
7. INCOME TAXES (CONTINUED)
Revenue Service, including the deductibility of certain interest expense related
to prepetition debt and other issues related to the bankruptcy reorganization.
The Company was notified on January 16, 2003 that the government is planning to
review these items upon filing of the Company's 2003 income tax return. A
valuation allowance is provided when it is more likely than not that a portion
or all of the deferred tax assets will not be realized. The Company established
a full valuation allowance as of December 31, 2002 for its net deferred tax
assets due to the uncertainty related to their ultimate realization. The Company
arrived at such a decision considering several factors, including, but not
limited to, historical cumulative losses incurred by the Company and anticipated
continued losses and uncertainty of resolution of income tax issues raised by
the Justice Department as part of the bankruptcy filing.
8. EMPLOYEE BENEFITS
PENSION AND POSTRETIREMENT BENEFITS
The Company has two defined benefit pension plans to cover certain employees
that were suspended as of October 1, 1994. Participants continue to vest in
nonvested benefits existing at October 1, 1994. The Company will continue to pay
accrued benefits and has no intention of terminating the plans. In addition, the
Company provides certain postretirement health and life insurance benefits for
all Operating Corp. bargaining unit employees who retire with ten or more years
of service. The Company also provides certain postretirement life insurance
benefits to eligible Forster employees who retire and have attained age 55 with
20 or more years of service. For postretirement benefits the Company has elected
to recognize actuarial gains and losses during the year of the change.
F-17
Diamond Brands Incorporated and Subsidiaries
(Debtor-in-Possession)
Notes to Consolidated Financial Statements (continued)
8. EMPLOYEE BENEFITS (CONTINUED)
The change in projected benefit obligation and plan assets consisted of the
following for the year ended December 31, 2002 (in thousands):
POSTRETIREMENT
PENSION BENEFITS BENEFITS
----------------------------------------
Changes in benefit obligation:
Projected benefit obligation, beginning of year $5,688 $1,475
Service cost - 44
Interest cost 395 128
Actuarial loss (gain) (355) 296
Benefits paid (551) (78)
----------------------------------------
Projected benefit obligation, end of year $5,177 $1,865
========================================
Changes in plan assets:
Fair value of plan assets, beginning of year $5,321 $ -
Actual return on plan assets (459) -
Employer contributions 5 78
Other expenses (48) -
Benefits paid (551) (78)
----------------------------------------
Fair value of plan assets, end of year $4,268 $ -
========================================
The funded status of the Company's plans were as follows as of December 31, 2002
(in thousands):
POSTRETIREMENT
PENSION BENEFITS BENEFITS
----------------------------------------
Funded status $ (909) $(1,865)
Unrecognized actuarial loss 1,038 -
Unrecognized prior service cost (51) -
----------------------------------------
Prepaid benefit cost $ 78 $(1,865)
========================================
F-18
Diamond Brands Incorporated and Subsidiaries
(Debtor-in-Possession)
Notes to Consolidated Financial Statements (continued)
8. EMPLOYEE BENEFITS (CONTINUED)
The following weighted average assumptions were used to account for the plans
for the year ended December 31, 2002:
PENSION POSTRETIREMENT
BENEFITS BENEFITS
----------------------------------------
Discount rate 6.75%-7.30% 6.5%-7.0%
Expected return on plan assets 7.00%-7.30% N/A
Rate of compensation increase N/A 4.5
The components of net benefit expense (income) are as follows for the year ended
December 31, 2002 (in thousands):
PENSION POSTRETIREMENT
BENEFITS BENEFITS
----------------------------------------
Service cost $ - $ 44
Interest cost 395 127
Expected return on plan assets (368) -
Amortization of prior service cost 29 -
Recognized actuarial gain 55 305
----------------------------------------
Net benefit expense $111 $476
========================================
The Company recorded a minimum pension liability of $987,000, of which $52,000
was recorded as an intangible asset and $935,000 as other comprehensive loss in
stockholders' deficit.
Retained earnings as of December 31, 2001, have been restated to reflect the
recording of a minimum pension liability of $366,000 at that date.
F-19
Diamond Brands Incorporated and Subsidiaries
(Debtor-in-Possession)
Notes to Consolidated Financial Statements (continued)
8. EMPLOYEE BENEFITS (CONTINUED)
DEFINED CONTRIBUTION PLANS
The Company has a 401(k) savings and profit-sharing plan for certain nonunion
employees. The plan is a qualified defined contribution plan in accordance with
Section 401(k) of the Internal Revenue Code. The Company's policy is to match
50% of employee contributions up to a maximum of 3% of compensation.
Additionally, the Company makes discretionary profit-sharing contributions that
are determined by the Board of Directors. The Company also has a defined
contribution retirement plan for certain union employees. The Company makes
contributions to the plan based on hours worked. The Company also matches 50% of
the first 4% of the union employees' 401(k) deferral. Total expense related to
the plans was $762,000.
KEY EMPLOYEE RETENTION PROGRAM
During 2001, the Company established the Key Employee Retention Program (KERP)
to ensure that the key employees remain with the Company to help facilitate its
restructuring of the Company. The first three payments were paid in 2001 upon
the approval by the Bankruptcy Court. The final payment for performance and
retention, of approximately $1,016,000, was paid upon either the confirmation or
effective date of the Plan.
9. REDEEMABLE CUMULATIVE PREFERRED STOCK AND WARRANTS
Pursuant to the Recapitalization, the Company issued the Holdings Preferred
Stock and the Warrants (see Note 5). The Warrants are exercisable at $0.01 per
share of common stock and expire in April 2008. The Holdings Preferred Stock
ranks senior to all classes of common stock of the Company and is entitled to
receive cash dividends equal to 12% of the liquidation preference per annum of
$1,000 per share ($47,000,000 as of December 31, 2002), plus all unpaid
dividends until the mandatory redemption date of October 15, 2009. The Company
has the option at any time to redeem the Holdings Preferred Stock at a price
equal to the liquidation preference, plus all unpaid dividends. No dividends
have been declared as of December 31, 2002.
F-20
Diamond Brands Incorporated and Subsidiaries
(Debtor-in-Possession)
Notes to Consolidated Financial Statements (continued)
9. REDEEMABLE CUMULATIVE PREFERRED STOCK AND WARRANTS (CONTINUED)
The net proceeds from the issuance of the Holdings Preferred Stock and the
Warrants were allocated based on the relative fair values of the securities
issued. The value assigned to the Warrants of $12,320,000, less issuance costs
of $326,000, has been reflected as a discount to the Holdings Preferred Stock,
which was accreted to its mandatory redemption value using the effective
interest method (15% effective yield) up to the Filing Date. The Warrant
Agreement allows the warrant holder to require the Warrants to be purchased by
the Company at fair value if certain conditions set forth in the Warrant
Agreement exist.
During 1998, 417,382 shares of Holdings Common Stock were issued in connection
with the exercise of the Warrants and 10,582 Warrants were repurchased by
Holdings. During 1999, 52,436 Warrants were repurchased by Holdings. During
2000, 10,582 Warrants were repurchased by Holdings. No Warrants were repurchased
by Holdings during 2001 or 2002. As of December 31, 2002, 3,205,528 Warrants
remained outstanding.
10. COMMITMENTS AND CONTINGENCIES
MANAGEMENT AND TRANSACTION ADVISORY AGREEMENTS
In connection with the Recapitalization, the Company entered into a ten-year
agreement (the Management Advisory Agreement) with Seaver Kent & Company, LLC
(Seaver Kent), pursuant to which Seaver Kent is entitled to receive from the
Company an annual fee for management advisory services equal to the greater of
$200,000 or 0.05% of the budgeted consolidated net sales of the Company. In
addition, the Company agreed to indemnify Seaver Kent, its affiliates and
shareholders, and their respective directors, officers, agents, employees, and
affiliates, from and against all claims, actions, proceedings, demands,
liabilities, damages, judgments, assessments, losses, and costs, including fees
and expenses, arising out of or in connection with the services rendered by
Seaver Kent thereunder. The Management Advisory Agreement makes available the
resources of Seaver Kent concerning a variety of financial and operational
matters. The services to be provided by Seaver Kent cannot otherwise be obtained
by the Company without the addition of personnel or the engagement of outside
professional advisors. The Company and Seaver Kent verbally agreed to end this
agreement during 2002 due to the bankruptcy. Total expense related to the
agreement was $70,000 for the year ended December 31, 2002.
F-21
Diamond Brands Incorporated and Subsidiaries
(Debtor-in-Possession)
Notes to Consolidated Financial Statements (continued)
10. COMMITMENTS AND CONTINGENCIES (CONTINUED)
LITIGATION
The Company is subject to asserted and unasserted claims encountered in the
normal course of business. In the opinion of management and its legal counsel,
disposition of these matters will not have a material effect on the Company's
financial condition or results of operations.
OPERATING LEASES
The Company leases office space and equipment with various expiration dates
through 2005. Total rent expense was approximately $944,000 in 2002. Future
minimum payments for all operating leases with initial or remaining terms of one
year or more subsequent to December 31, 2002 are as follows (in thousands):
2003 $ 852
2004 132
2005 51
2006 6
2007 4
-------------------
$1,045
===================
F-22
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma financial information as of and for the year
ended December 31, 2002 has been derived from our audited consolidated financial
statements as of such date and for such period and gives pro forma effect to
(collectively, the "Transactions"):
o the April 2002 acquisition (the "Tilia Acquisition") of
substantially all of the assets of Tilia International, Inc. and
its subsidiaries including the related refinancing of our senior
credit facility and the offering of 9 3/4% senior subordinated
notes;
o the February 2003 acquisition of substantially all of the assets
of Diamond Brands International, Inc. and its subsidiaries (the
"Diamond Acquisition") including the related financing.
The unaudited pro forma financial information is not necessarily indicative of
our results of operations or financial position had the events reflected herein
actually been consummated at the assumed dates, nor is it necessarily indicative
of our results of operations or financial position for any future period. The
unaudited pro forma financial information should be read in conjunction with the
Jarden consolidated financial statements with the related notes incorporated by
reference herein and the Diamond consolidated financial statements with the
related notes included herein.
The pro forma adjustments related to the purchase price allocation and financing
of the Diamond Acquisition are preliminary and are subject to revision as
additional information becomes available. Revisions to the preliminary purchase
price allocation and financing of the Diamond Acquisition may have a significant
impact on the unaudited pro forma information.
F-23
JARDEN CORPORATION
UNAUDITED PRO FORMA BALANCE SHEET
DECEMBER 31, 2002
(In thousands)
DIAMOND
ACQUISITION
JARDEN DIAMOND PRO FORMA PRO FORMA
AS REPORTED AS REPORTED ADJUSTMENTS COMBINED
----------------- --------------- ----------------- --------------
ASSETS
Current assets
Cash and cash equivalents $ 56,779 $ 19,060 (73,500)(a) $ 2,339
Accounts receivable, net 40,470 12,087 52,557
Inventories, net 59,463 11,892 71,355
Deferred taxes on income 10,312 - 10,312
Other current assets 5,706 2,017 (1,001)(b) 6,722
----------------- --------------- ----------------- --------------
Total current assets 172,730 45,056 (74,501) 143,285
----------------- --------------- ----------------- --------------
Property, plant and equipment, net 45,237 17,211 10,000 (c) 72,448
Intangibles, net 134,060 22,941 (22,941)(d) 183,755
49,695 (e)
Other assets 14,738 1,142 (1,012)(f) 14,868
----------------- --------------- ----------------- --------------
Total assets $ 366,765 $ 86,350 $ (38,759) $ 414,356
================= =============== ================= ==============
LIABILITIES AND EQUITY
Current liabilities
Short-term and current portion of long-term debt $ 16,117 $ 84,050 (84,050)(g) $ 33,841
17,724 (h)
Accounts payable 18,466 3,768 (500)(i) 21,734
Other current liabilities 36,590 9,655 (921)(j) 45,324
----------------- --------------- ----------------- --------------
Total current liabilities 71,173 97,473 (67,747) 100,899
----------------- --------------- ----------------- --------------
Noncurrent liabilities
Long-term debt 200,838 10,000 (k) 210,838
Deferred taxes on income 6,377 6,377
Liabilities subject to compromise 148,310 (148,310)(l) -
Other noncurrent liabilities 11,613 1,865 13,478
----------------- --------------- ----------------- -------------
Total noncurrent liabilities 218,828 150,175 (138,310) 230,693
Redeemable preferred stock
Equity 51,111 (51,111)(m) -
76,764 (212,409) 212,409 (n) 82,764
6,000 (o)
----------------- --------------- ----------------- --------------
Total liabilities and equity $ 366,765 $ 86,350 $ (38,759) $ 414,356
================= =============== ================= ==============
F-24
JARDEN CORPORATION
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2002 UNAUDITED TILIA TILIA
(In thousands except per share amounts) 3 MONTHS ENDED ACQUISITION
JARDEN 03/31/2002 PRO FORMA DIAMOND
AS REPORTED (1) AS REPORTED (2) ADJUSTMENTS (3) AS REPORTED
----------------- ---------------- ---------------- -----------
Net sales $ 368,199 $ 38,525 $ 101,604
Costs and expenses
Cost of sales 216,629 19,343 72,163
Selling, general and administrative expenses 86,461 13,468 172 (p) 10,033
Reorganization costs (4) 4,565
----------------- ---------------- ---------------- -----------
Income before interest and taxes 65,109 5,714 (172) 14,843
Interest expense, net 12,611 (52) (1,232)(q) 9,182
4,344 (r)
225 (s)
----------------- ---------------- ---------------- -----------
Income (loss) before taxes 52,498 5,766 (3,509) 5,661
Income tax provision (benefit) 16,189 1,801 (916)(t)
----------------- ---------------- ---------------- -----------
Net income (loss) $ 36,309 $ 3,965 $ (2,593) $ 5,661
================= ================ ================ ===========
Basic earnings (loss) per share $ 2.60
Diluted earnings (loss) per share $ 2.52
Weighted average shares outstanding:
Basic 13,940
Diluted 14,392
DIAMOND
ACQUISITION
PRO FORMA PRO FORMA
ADJUSTMENTS COMBINED
------------- -------------
Net sales $ 508,328
Costs and expenses
Cost of sales 1,429 (u) 309,564
Selling, general and administrative expenses 110,134
Reorganization costs (4) 4,565
------------- -------------
Income before interest and taxes (1,429) 84,065
Interest expense, net (9,182)(v) 17,895
1,525(w)
474(x)
------------- -------------
Income (loss) before taxes 5,754 66,170
Income tax provision (benefit) 4,475(t) 21,549
------------- -------------
Net income (loss) $ 1,279 $ 44,621
============= =============
Basic earnings (loss) per share $ 3.15
Diluted earnings (loss) per share $ 3.05
Weighted average shares outstanding:
Basic 222(y) 14,162
Diluted 222(y) 14,614
(1) Amounts in the Jarden column represent Jarden's actual results for the year
ended December 31, 2002, which include Tilia from April 1, 2002 and
include the net release of a $4.4 million tax valuation allowance. Without
the release, Jarden's 2002 effective tax rate would have been 39.2%.
(2) Amounts in the Tilia column represent Tilia's actual results for the three
months ended March 31, 2002, which are not included in Jarden's reported
results.
(3) Amounts in the Tilia Acquisition Pro Forma Adjustments column represent
adjustments related to the Tilia acquisition for the three months ended
March 31, 2002, the period for which Tilia was not included in Jarden's
reported results.
(4) On May 22, 2001, Diamond filed voluntary petitions for reorganization under
Chapter 11 of the United States Bankruptcy Code. Accordingly, its expenses
related to the bankruptcy are included in "Reorganization Costs."
F-25
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
Balance sheet adjustments:
(a) Adjustment to reflect the use of cash on hand to fund a portion of the
purchase price and expenses of the Diamond Acquisition. Amount is
calculated as follows:
Sources of cash:
Deposit paid into escrow by Jarden in November 2001 plus interest (see note (b))
$ 1,001
Proceeds from Jarden's senior credit facility (see notes (h) and (k)) 27,724
-----------------------
Total sources of cash $ 28,725
-----------------------
Uses of cash:
Cash paid to the Debtors including Jarden's portion of administrative claims
($850) and cure amounts ($12), net of real estate tax credit received ($33) 13,779
Repayment of Diamond's senior facility plus fees and interest of approximately
$85 (see note (g)) 84,135
Termination of Diamond's interest rate swap agreement ($925) plus related legal
fees of approximately $186 1,111
Payment of acquisition related expenses 3,200
-----------------------
Total uses of cash $ 102,225
-----------------------
-----------------------
NET USE OF CASH ON HAND TO FUND TRANSACTIONS $ 73,500
-----------------------
(b) Adjustment to reflect the use of Jarden's escrowed deposit plus interest to
fund a portion of the purchase price of Diamond.
(c) Adjustment to reflect the estimated fair value of Diamond's manufacturing
related machinery and equipment.
(d) Adjustment to reflect the write off of Diamond's existing goodwill.
(e) Adjustment to reflect the estimated fair value of intangible assets
(trademarks and goodwill) to be recorded with the Diamond Acquisition.
(f) Adjustment to reflect the elimination of deferred financing costs related to
debt which Jarden did not assume in the Diamond Acquisition.
(g) Adjustment to reflect the repayment of the principal amount of Diamond's DIP
facility. See note (a)
(h) Adjustment to reflect the borrowings on Jarden's revolving credit facility
to fund a portion of the cash purchase price. See note (a).
(i) Adjustment to reflect the elimination of bankruptcy related administrative
claims included in accounts payable for which Jarden is not assuming the
liability.
(j) Adjustment to reflect the elimination of the recorded liability for the
interest rate swap agreement, which was terminated in conjunction with the
Diamond Acquisition.
(k) Adjustment to reflect the issuance of additional term debt on Jarden's
senior credit facility to fund a portion of the cash purchase price of the
Diamond Acquisition. See note (a).
(l) Adjustment to reflect the elimination of Diamond's liabilities subject to
compromise, none of which Jarden is assuming in the Diamond Acquisition.
F-26
(m) Adjustment to reflect the elimination of Diamond's redeemable preferred
stock for which Jarden did not assume the liability.
(n) Adjustment to reflect the elimination of the existing stockholders' deficit
of Diamond.
(o) Adjustment to reflect the issuance of stock to satisfy the Additional
Consideration portion of the purchase price for the Diamond Acquisition.
Statements of operations adjustments:
(p) Adjustment to reflect the amortization of estimated identifiable intangible
assets recorded with the Tilia Acquisition.
(q) Adjustment to reflect the elimination of Jarden's historical interest
expense, prior to the Tilia Acquisition.
(r) Adjustment to reflect pro forma interest expense relating to:
(i.) the new senior credit facility issued in conjunction with the Tilia
Acquisition at 5%, based upon Jarden's effective borrowing rate on
its senior credit facilities for first quarter 2002;
(ii.) the interest bearing subordinated seller note issued in conjunction
with the Tilia Acquisition at 5% based upon Jarden's effective
borrowing rate on its senior credit facilities for first quarter
2002; and
(iii.) the 9 3/4% Senior Subordinated Notes due 2012 issued in conjunction
with the Tilia Acquisition.
The annualized effect of a 1/8% change in interest rates would be $81 per
year.
(s) Adjustment to reflect amortization of debt issue costs for both the new
senior credit facility and the Senior Subordinated Notes due 2012 issued in
conjunction with the Tilia Acquisition.
(t) Adjustment to reflect an effective tax rate of 39.2% on the pre tax results
of the acquired business and related adjustments based on Jarden's 2002
effective tax rate.
(u) Adjustment to reflect depreciation expense on the estimated step up in
valuation of manufacturing related machinery and equipment amortized over an
estimated useful life of 7 years. See note (c).
(v) Adjustment to reflect the elimination of Diamond's historical interest
expense.
(w) Adjustment to reflect interest expense on the drawdown of the Company's
revolving credit facility and issuance of term debt in order to fund a
portion of the cash purchase price of Diamond Acquisition at 5.5% based upon
Jarden's effective borrowing rate for 2002 on its senior credit facility.
The effect of a 1/8% change in interest rates would be $35 per year.
(x) Adjustment to reflect the elimination of Jarden's interest income related to
cash on hand used to fund a portion of the cash purchase price.
(y) Adjustment to reflect the issuance of shares to satisfy the Additional
Consideration for the Diamond Acquisition.
F-27