UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended DECEMBER 31, 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
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)
Registrant's telephone number, including area code: 316-832-2700
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- ---------------------
COMMON STOCK, $.01 PAR VALUE NEW YORK STOCK EXCHANGE
SAME CLASS THE PACIFIC STOCK EXCHANGE
(unlisted trading privileges)
SAME CLASS MIDWEST STOCK EXCHANGE
(unlisted trading privileges)
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. X Yes No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the voting stock of the registrant held by
non-affiliates, based upon the closing sale price of the common stock on March
3, 1998, was approximately $307,672,838.
As of March 3, 1998, there were 53,610,950 shares of the registrant's
common stock outstanding, of which 44,067,520 shares were held by an indirect
wholly-owned subsidiary of Mafco Holdings Inc.
Exhibit Index at pages 39 through 45.
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
1997 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
PART I Page
----
Item 1. Business................................................... 3
Item 2. Properties................................................. 9
Item 3. Legal Proceedings.......................................... 10
Item 4. Submission of Matters to a Vote of Security Holders........ 11
PART II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters............................... 12
Item 6. Selected Financial Data.................................... 13
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 14
Item 8. Financial Statements and Supplementary Data................ 21
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................. 21
PART III
Item 10. Directors and Executive Officers of the Registrant......... 21
Item 11. Executive Compensation..................................... 25
Item 12. Security Ownership of Certain Beneficial Owners and
Management................................................ 36
Item 13. Certain Relationships and Related Transactions............. 37
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K.................................................. 39
Signatures................................................. 46
2
PART I
ITEM 1. BUSINESS
OVERVIEW
The Coleman Company, Inc. ("Coleman" or the "Company") is a leading
manufacturer and marketer of consumer products for outdoor recreation and home
hardware use on a global basis. The Company's products have been sold
domestically and internationally under the Coleman brand name since the 1920s.
The Company believes its strong market position is attributable primarily to its
well-recognized trademarks, particularly the Coleman brand name, broad product
line, product quality and innovation, and marketing, distribution and
manufacturing expertise.
The Company has two primary classes of products, outdoor recreation and
hardware. The Company's principal outdoor recreation products include a
comprehensive line of lanterns and stoves, fuel-related products such as
disposable fuel cartridges, a broad range of coolers and jugs, sleeping bags,
backpacks, daypacks, adventure travel gear, tents, outdoor folding furniture,
portable electric lights, spas, camping accessories and other products. The
Company's principal hardware products include portable generators, portable and
stationary air compressors, and safety and security products such as smoke
alarms, carbon monoxide detectors and thermostats. The Company has entered into
a Stock Purchase Agreement dated as of February 18, 1998 (the "CSS Sale
Agreement") with Ranco Incorporated of Delaware ("Ranco") and Siebe plc, the
parent of Ranco, for the sale of Coleman Safety & Security Products, Inc.
("CSS"), which manufactures such safety and security products. The Company's
products, which are mostly used for outdoor recreation, home improvement
projects, and emergency preparedness, are distributed predominantly through mass
merchandisers, home centers and other retail outlets.
BACKGROUND
Coleman is a subsidiary of Coleman Worldwide Corporation ("Coleman
Worldwide"). Coleman Worldwide is an indirect wholly-owned subsidiary of CLN
Holdings Inc. ("CLN Holdings"), an indirect wholly-owned subsidiary of New
Coleman Holdings Inc. ("Holdings"), an indirect wholly-owned subsidiary of
MacAndrews & Forbes Holdings Inc. ("MacAndrews Holdings"), a corporation wholly
owned through Mafco Holdings Inc. ("Mafco" and, together with MacAndrews
Holdings, "MacAndrews & Forbes") by Ronald O. Perelman. Coleman Worldwide owns
44,067,520 shares of the common stock of Coleman which represented approximately
82% of the outstanding Coleman common stock as of December 31, 1997.
On February 27, 1998, CLN Holdings and Coleman (Parent) Holdings Inc., the
parent company of CLN Holdings, entered into an Agreement and Plan of Merger
(the "CLN Holdings Merger Agreement") with Sunbeam Corporation ("Sunbeam") and a
wholly-owned subsidiary of Sunbeam ("Laser Merger Sub"). The CLN Holdings
Merger Agreement provides that, among other things, Laser Merger Sub will be
merged (the "CLN Holdings Merger") with CLN Holdings. Pursuant to the CLN
Holdings Merger Agreement, the shares of CLN Holdings' common stock issued and
outstanding immediately prior to the effective time of the CLN Holdings Merger
will be converted into the right to receive in the aggregate 14,099,749 shares
of Sunbeam's common stock and $159,957,756 in cash, without interest. In
addition, the outstanding $732.0 million principal amount at maturity of Senior
Secured Discount Exchange Notes due 2001 (the "Escrow Notes") of CLN Holdings
will remain an obligation of CLN Holdings following the CLN Holdings Merger.
Coincident with the execution of the CLN Holdings Merger Agreement, the
Company, Sunbeam and a wholly-owned subsidiary of Sunbeam ("Merger Sub"),
entered into an Agreement and Plan of Merger (the "Coleman Merger Agreement" and
with the CLN Holdings Merger Agreement, collectively the "Merger Agreements"),
providing that, among other things, Merger Sub will be merged (the "Coleman
Merger") with the Company. Pursuant to the Coleman Merger Agreement, each share
of the Company's common stock issued and
3
outstanding immediately prior to the effective time of the Coleman Merger
(other than shares held by Coleman Worldwide and dissenting shares, if any)
will be converted into the right to receive (a) 0.5677 of a share of Sunbeam
common stock, with cash paid in lieu of fractional shares, and (b) $6.44 in
cash, without interest.
Consummation of the CLN Holdings Merger is subject to the expiration of the
applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and the satisfaction of certain other customary
conditions. It is currently anticipated that the CLN Holdings Merger will be
completed later this month or early next month. Consummation of the Company
Merger is subject to the completion of the CLN Holdings Merger at the filing of
certain definitive documents required in connection therewith with the
Securities and Exchange Commission. It is anticipated that the Company Merger
will be consummated later this Spring.
Following consummation of the CLN Holdings Merger, CLN Holdings will be a
direct wholly-owned subsidiary of Sunbeam. Following consummation of the Coleman
Merger, the Company will be an indirect wholly-owned subsidiary of Sunbeam.
The Company has made several acquisitions in recent years designed to
expand its product lines. In 1996, the Company ac quired the French company
Application des Gaz ("Camping Gaz") which is a leader in the European camping
equipment market and also acquired the assets of Seatt Corporation ("Seatt"), a
leading designer, manufacturer and distributor of smoke alarms, thermostats and
carbon monoxide detectors. In 1995, the Company acquired Sierra Corporation of
Fort Smith, Inc. ("Sierra"), a manufacturer of portable outdoor and recreational
folding furniture and accessories and substantially all of the assets of Active
Technologies, Inc. ("ATI"), a manufacturer of technologically advanced
lightweight generators and battery charging equipment. In 1994, the Company
acquired substantially all of the assets of Eastpak, Inc. and all of the capital
stock of M.G. Industries, Inc. (together, "Eastpak"), a leading designer,
manufacturer and distributor of branded daypacks, sports bags and related
products; and substantially all of the assets of Sanborn Manufacturing Company
("Sanborn"), a manufacturer of a broad line of portable and stationary air
compressors.
The Company also restructured certain operations. In 1994, the Company
completed the restructuring of its German manufacturing operations (the "German
Restructuring"), including selling its plastic cooler business located in
Inheiden, Germany and Loucka, Czech Republic. In 1996, the Company closed the
Brazilian manufacturing operations it had acquired from Metal Yanes, Ltda. in
1994. In 1997, the Company undertook further restructuring including (i) exiting
various low margin products, including pressure washers, (ii) closing and
relocating certain administrative and sales offices, and (iii) closing several
manufacturing facilities.
On February 18, 1998, the Company entered into the CSS Sale Agreement. The
sale price is approximately $105.0 million and is subject to adjustment. The
closing under the CSS Sale Agreement is expected to occur by the end of March
1998. In addition, the Company will license to Ranco the right to use the
"Coleman" name on retail smoke alarms and carbon monoxide detectors, and certain
other products.
BUSINESS STRATEGY
The Company's business strategy is to build upon its reputation as a
leading manufacturer and marketer of high quality brand name consumer products
for the outdoor recreation and hardware markets. The specific operating
strategies include:
FOCUS ON QUALITY AND SERVICE. Since the business of the Company
was founded in the early 1900's, Coleman has built a reputation for its
quality products and superior customer service. The Company is
committed to continuing, and building upon, this reputation.
INTRODUCING NEW PRODUCTS. The Company plans to continue
introducing new products. Management intends to focus on leveraging the
Company's existing technologies, processes and expertise to maximize the
speed and efficiency of new product development and introductions.
4
DEVELOPING EXISTING BRANDS. The Company believes it has some of
the more prominent brand names for outdoor recreation and home hardware
use and plans to strengthen these brands through superior product
design, advertising, and promotion.
EXPANDING INTERNATIONAL MARKETS. Coleman is currently a market
leader in several product categories in various markets around the
world, including the United States, Europe and Japan. The Company plans
to utilize its well-established infrastructures in these markets to
expand its core product categories and to invest appropriately to
develop and build businesses in new geographic markets.
DEVELOPING HUMAN RESOURCES. The Company plans to continue
developing, training, and motivating its personnel at all levels to
achieve excellence, including developing and building its team of
experienced managers.
OPERATING EFFICIENCY. The Company plans to continue seeking ways
to further improve the quality and efficiency of its business processes
in order to ensure quality, realize cost savings, and improve customer
service.
Following the consummation of the CLN Holdings Merger, such business
strategy may change.
PRODUCTS
OUTDOOR RECREATION
The Company's principal products include a comprehensive line of lanterns
and stoves for outdoor recreational use, fuel-related products such as
disposable fuel cartridges, a broad range of coolers and jugs, sleeping bags,
backpacks, tents, outdoor folding furniture, portable electric lights, spas,
camping accessories and other products. These products are used predominantly
in outdoor recreation, but many products have applications in emergency
preparedness and some are also used in home improvement projects and are
distributed predominantly through mass merchandisers, home centers and other
retail outlets.
LANTERNS AND STOVES. Coleman believes it is the leading manufacturer of
lanterns and stoves for outdoor recreational use in the world. Coleman's liquid
fuel appliances include single and dual fuel-powered lanterns and stoves.
Coleman also manufactures a broad range of propane- and butane-fueled lanterns
and stoves, which allow the user to regulate the intensity of light or heat.
These products are manufactured at the Company's facilities located in the
United States and Europe and are marketed under the Coleman, Campingaz and Peak
1 brand names.
FUEL. The Company is a leading supplier to the worldwide camping and
outdoor recreation market of propane and butane cartridges and camping fuel.
In addition to manufacturing and filling disposable propane cartridges and
refillable liquid propane gas cylinders, Coleman sells camping fuel that is
refined and canned to its specifications by various suppliers, fills butane gas
cartridges and purchases butane-filled gas cartridges from third-party vendors
for sale to customers throughout the world. These products are marketed under
the Coleman, Campingaz and Peak 1 brand names.
COOLERS AND JUGS. The Company manufactures and sells a wide variety of
insulated coolers and jugs and reusable ice substitutes. The Company's cooler
line includes personal coolers for camping, picnics or lunch box use; large
coolers; beverage coolers for use at work sites and recreational and social
events; and soft-sided coolers. Coleman's cooler products are manufactured
predominantly at the Company's facilities located in the United States and are
marketed under the Coleman brand name worldwide and under the Campingaz brand
name in Europe.
RECREATIONAL SOFT GOODS. The Company designs, manufactures or sources, and
markets textile products, including tents, sleeping bags, backpacks, daysacks,
sports bags, duffle bags and rucksacks. These products are
5
manufactured at the Company's facilities located in the United States
and Puerto Rico or sourced from third-party vendors who manufacture them
to the Company's specifications. The Company's tents and sleeping bags
are marketed under the Coleman and Peak 1 brand names, while its
daysacks, sport bags and related products are marketed under the
Coleman, Eastpak and the licensed Timberland brand names.
OUTDOOR FURNITURE. The Company manufactures and markets aluminum- and
steel-framed, portable, outdoor, folding furniture under the Coleman and Sierra
Trails brand names. These products are manufactured predominantly at the
Company's facilities located in the United States.
ELECTRIC LIGHTS. The Company designs and markets electric lighting
products that are manufactured by others and sold under the Coleman, Powermate,
Job-Pro and Campingaz brand names. These products include portable electric
lights such as hand held spotlights, flashlights and fluorescent lanterns and a
line of rechargeable lanterns and flashlights.
SPAS. The Company manufactures and markets a wide range of spas, which are
made primarily from acrylic, for residential applications. These products are
manufactured at the Company's facility located in the United States and are
distributed through a nationwide dealer network.
CAMPING ACCESSORIES. The Company designs, sources and markets a variety of
small accessories for camping and outdoor use, such as cookware and utensils.
These products are manufactured by third-party vendors to Coleman's
specifications and are marketed under the Coleman brand name.
HARDWARE
The Company's principal products include portable generators, portable and
stationary air compressors. In addition, through CSS, the Company manufactures
and markets safety and security products such as smoke alarms, carbon monoxide
detectors and thermostats. On February 18, 1998, the Company entered into the
CSS Sale Agreement and the closing under such agreement is expected to occur by
the end of March 1998.
GENERATORS. The Company is a leading manufacturer and distributor of
portable generators in the United States and worldwide. Generators are used
for home improvement projects, emergency preparedness and outdoor recreation.
These products are manufactured by the Company, using engines manufactured by
Tecumseh, Briggs & Stratton, Vanguard, Honda and Kawasaki, at its facilities
located in the United States, are marketed under the Coleman Powermate brand
name and are distributed predominantly through mass merchandisers and home
center chains. The Company also produces advanced, light-weight generators
incorporating proprietary technology.
AIR COMPRESSORS. The Company's air compressors are manufactured at its
facilities located in the United States, are marketed under the Coleman
Powermate brand name and are distributed predominantly through mass
merchandisers and home center chains.
SAFETY AND SECURITY PRODUCTS. The Company manufactures a range of safety
and security products for residential use, primarily smoke alarms, carbon
monoxide detectors and thermostats. The Company manufactures these products at
its facilities located in Mexico and markets them under the Firex, Code 1 and
Coleman Sheltra brand names. These products are distributed predominantly
through electrical wholesalers, mass merchandisers, and home center chains in
North America and selected foreign countries, primarily Australia and the United
Kingdom.
6
SALES AND MARKETING
The following table sets forth the net revenues by class of products for
the years ended December 31, 1997, 1996 and 1995.
1997 1996 1995
-------- -------- ------
(In millions)
Outdoor Recreation $ 859.7 $ 859.6 $688.9
Hardware 294.6 360.6 244.7
-------- -------- ------
Total $1,154.3 $1,220.2 $933.6
-------- -------- ------
-------- -------- ------
In the United States and Canada, the Company's outdoor recreation products
are sold by the Company's own sales force and, to a lesser extent, by sales
representatives that serve specialty markets and related distribution channels.
Spa products, however, are sold by independent sales representatives to a
nationwide dealer network and, to a lesser extent, by regional sales managers
employed by the Company. The Company's hardware products are sold by Company
and independent sales representatives that serve specialty markets and related
distribution channels.
The Company promotes its products through national and local advertising
campaigns, frequently coordinating with retailers' promotions to maximize the
benefits of its advertising efforts.
Coleman's major customers include Canadian Tire, Home Depot, Kmart,
Price/Costco, Target, and Wal-Mart. Wal-Mart and its affiliates accounted for
approximately 13% of the Company's 1997 consolidated net revenues. Although the
loss of Wal-Mart as a customer could have an adverse effect on the Company, the
Company believes its relationship with Wal-Mart is satisfactory and the Company
has no reason to believe Wal-Mart will not continue as a customer.
International sales represented 31%, 32% and 24% of net revenues for the
years ended December 31, 1997, 1996 and 1995, respectively. For 1997,
approximately 80% of the Company's international sales were in Japan and Europe,
with the balance in Latin America, Asia-Pacific, Africa and the Middle East.
The Company has sales administration offices and warehouse and distribution
facilities in Australia, Austria, Belgium, Brazil, the Czech Republic, France,
Germany, Hungary, Italy, Japan, The Netherlands, Portugal, Spain, Switzerland,
the United Arab Emirates and the United Kingdom. Each office is responsible for
sales and distribution of the Company's products in the territories assigned to
that office. The Company's direct export operations market its products
directly to international customers in certain other markets through Company
sales managers, independent distributors, and commissioned sales
representatives. In total, the Company sells its products in more than 100
countries.
SEASONALITY
The Company's sales generally are highest in the second quarter of the year
and lowest in the fourth quarter. As a result of this seasonality, the Company
has generally incurred a loss in the fourth quarter. The Company's sales may be
affected by weather conditions.
COMPETITION
The markets in which the Company operates are generally highly competitive,
based primarily on product quality, product innovation, price and customer
service and support. The Company's competitors vary according to product line.
The Company believes that no other company produces and markets the breadth of
camping and outdoor recreation products marketed by the Company. Lanterns and
stoves compete with, among others, products offered by Century Primus (a unit
of Century Tool & Manufacturing Inc.), American Camper (a unit
7
of Brunswick Corporation) and Dayton Hudson Corporation. The Company's
insulated cooler and jug products compete with products offered by Rubbermaid
Incorporated, Igloo Products Corp. (a unit of Brunswick Corporation) and The
Thermos Company (a unit of Nippon Sanso KK). The Company's sleeping bags
compete with, among others, American Recreation and Slumberjack (units of
Kellwood Company), Academy Broadway Corp. and MZH Inc. (a unit of Brunswick
Corporation), as well as certain private label manufacturers. In the tent
market, the Company competes with, among others, Sears, Wenzel (a unit of
Kellwood Company), Eureka (a unit of Johnson Worldwide Associates, Inc.) and
Mountain Safety Research (a unit of Thaw Corporation), as well as certain
private label manufacturers. The Company's backpack products compete with,
among others, American Camper (a unit of Brunswick Corporation), JanSport (a
unit of VF Corporation), Nike, Outdoor Products and Kelty (a unit of Kellwood
Company), as well as certain private label manufacturers. The Company's
competition in the electric light business includes, among others, Eveready (a
unit of Ralston Purina Company) and Rayovac Corporation. The Company's spas
compete with, among others, Watkins Manufacturing Corporation (d.b.a. Hot
Springs, a unit of Masco Corporation) and Clark Manufacturing Company, Inc.
(d.b.a. Sundance Spas). The Company's camping accessories compete primarily
with Coughlan's. The Company's primary competitors in the generator business
are Generac Corporation, Honda Motor Co., Ltd., Kawasaki and Yamaha. Primary
competitors in the air compressor business include DeVilbiss and Campbell
Hausfield. The Company's safety and security products compete primarily with
First Alert, American Sensor and Nighthawk (a unit of Williams Holding PLC).
In addition, the Company competes with various other entities in international
markets.
PATENTS, TRADEMARKS, AND LICENSES
The Company's operations are not significantly dependent upon any single or
related group of patents. While the Company does not believe any single
trademark is material to its business other than the "Coleman" word mark and the
"Coleman in parallelogram with lantern symbol" logo mark and the "Eastpak"
trademark, it believes its trademarks taken as a whole are material to its
business. Accordingly, the Company has taken actions to protect its interests in
all such trademarks.
The Company licenses the Coleman name and logo under two types of licensing
arrangements: general merchandise licenses and licenses to purchasers of
businesses divested by the Company and Holdings. The Company's general
merchandise licensing activities involve licensing the Coleman name and logo,
for a royalty fee, to certain companies that manufacture and sell products that
complement the Company's product lines.
RESEARCH AND DEVELOPMENT
The Company's research and development efforts are linked to the process of
marketing its products. New products and improvements to existing products are
developed based upon the perceived needs and demands of consumers. The
Company's research and development is performed primarily by an in-house team of
marketing managers, engineers, draftsmen and product testers using tools such as
computer-assisted design and a variety of consumer research techniques.
Research and development expenditures are expensed as incurred. The amounts
charged against operations for the years ended December 31, 1997, 1996 and 1995
were $11.9 million, $11.1 million and $6.5 million, respectively.
INDUSTRY SEGMENTS, FOREIGN AND DOMESTIC OPERATIONS
The Company operates in a single business segment. Certain information
concerning geographic segments of the Company is set forth in Note 18 of the
Notes to Consolidated Financial Statements contained elsewhere in this Form 10-K
Annual Report.
EMPLOYEES
As of December 31, 1997 the Company employed approximately 3,700 persons
full time in the United States and 2,300 persons internationally. None of the
Company's United States employees are represented by unions. The Company's
Canadian warehouse employees are represented by a union. All of the
approximately
8
525 production employees at the Company's operations in France and Italy
and the approximately 900 production employees at CSS's operations in
Mexico are represented by unions. The Company believes that its
relations with its employees are satisfactory.
ITEM 2. PROPERTIES
The Company's principal properties as of December 31, 1997 are as follows:
Building
Square
Location Principal Use Footage
-------- ------------- --------
St Genis Laval, France Manufacture of lanterns and stoves, filling of gas 2,070,000
cylinders, and assembly of barbeques; office and
warehouse
Wichita, KS Manufacture of lanterns and stoves and insulated 1,197,000
coolers and jugs; research and development and design
operations; office and warehouse
New Braunfels, TX Manufacture of insulated coolers and other plastic 338,000
products
Lake City, SC Manufacture of sleeping bags 168,000
Springfield, MN Manufacture of air compressors 166,000
Cedar City, UT Manufacture of sleeping bags 160,000
Kearney, NE Manufacture/assembly of portable generators and pressure 155,000
washers; office and warehouse
Pocola, OK Manufacture of outdoor folding furniture 123,000
Maize, KS Manufacture of propane cylinders and machined parts 116,000
Chihuahua, Mexico * Manufacture of smoke alarms and carbon monoxide detectors 110,000
Morovis and Orocovis, Manufacture of daypacks, sports bags, and related 110,000
Puerto Rico products; office and warehouse
Chandler, AZ Manufacture of acrylic spas; office and warehouse 78,000
Centenaro di Lonato, Italy Manufacture of butane lanterns, stoves and heaters; 77,000
office and warehouse
* To be disposed of as part of the CSS Sale Agreement.
The Wichita, Kansas; New Braunfels, Texas; Lake City, South Carolina;
Cedar City, Utah; Pocola, Oklahoma; Chandler, Arizona; Springfield,
Minnesota; and Centenaro di Lonato, Italy facilities are owned by the
Company. The owned facilities at Kearney, Nebraska reside on land leased
under three leases that expire in 2007 with options to extend for three
additional ten-year periods. The Maize, Kansas facility is leased by the
Company under leases that terminate in 2005. The Company has an option to
purchase this facility at the end of the lease period. The Puerto Rico
facilities in Morovis and Orocovis are leased for terms that expire in 1999
and 2007, respectively. The warehouse portion of St. Genis Laval, France is
leased for terms that expire in 1998, the remaining facility is owned; and
48,000 square feet of the Chihuahua, Mexico property are leased for terms
that expire in 2004, the remaining facility is owned. Company management
considers the Company's facilities to be well maintained, adequate, suitable
and satisfactory for the Company's operations, and believes that the
Company's facilities provide sufficient capacity for its production
requirements.
9
PRODUCT LIABILITY AND INSURANCE
The Company is party to various product liability lawsuits relating to
its products and incidental to its business. The Company believes that many
of the personal injury and damage claims brought against it arise from the
misuse or misapplication of the Company's products. In such cases, the
Company vigorously defends against such actions. Since the beginning of
1986, in only one policy period did the Company have a product liability
award that exceeded the individual per occurrence self-insured retention
amount and product liability awards that exceeded the aggregate self-insured
retention amount. There can be no assurance, however, that the Company's
future product liability experience will be consistent with its past
experience. The Company believes that the ultimate conclusion of the various
pending product liability claims and lawsuits of the Company will not have a
material adverse effect on the financial position or results of operations of
the Company.
The Company participates in product liability insurance programs
maintained by Holdings and reimburses Holdings for its allocable share of the
cost of such coverage. Such liability insurance is written on a "claims
made" basis. A "claims made" policy generally insures the Company for any
claims made while such insurance coverage is in effect regardless of when the
incident or event occurred. There can be no assurance that the Company's
insurance carrier would not discontinue the Company's policy after the
occurrence of, but prior to a claims with respect to, an incident or event
giving rise to a claim. The Company believes that, in such event, it would
be able to obtain insurance coverage that would cover the particular incident
or event and replace the Company's existing policy, although there can be no
assurance that the Company could obtain such coverage or that it would be on
terms comparable to its existing coverage.
Under Holdings' product liability insurance coverages, the Company
retains liability in the amount of $2 million per occurrence and $4 million
in the aggregate for the policy year. The Company believes that this type and
level of coverage is adequate. For a discussion of the Company's policy on
accrual of reserves for the self-insured portions of the risks covered by the
insurance programs maintained by Holdings, see Notes 1 and 12 of the
Consolidated Financial Statements of the Company.
As a result of and effective with the consummation of the CLN Holdings
Merger, the Company will no longer participate in insurance programs
sponsored by Holdings (except for claims made prior to the consummation of
the CLN Holdings Merger), and will either obtain replacement insurance on its
own and/or obtain replacement insurance under policies maintained by Sunbeam.
ITEM 3. LEGAL PROCEEDINGS
ENVIRONMENTAL MATTERS
GILBERT AND MOSLEY SITE. As a result of investigations undertaken in
1986, the Kansas Department of Health and Environment ("KDHE") discovered
that groundwater in the downtown Wichita area (the "Gilbert and Mosley Site")
was contaminated with volatile organic chemicals ("VOCs"). Coleman occupied
a facility within the boundaries of the Gilbert and Mosley Site. Subsequent
investigations in the area, including investigations in November 1988 by
Coleman, indicated that the groundwater beneath the Coleman property is
contaminated with VOCs. Coleman is in the process of remediating the
contamination on its property.
The City of Wichita has entered into a voluntary agreement with KDHE in
which the City agreed to investigate and then remediate contamination in the
Gilbert and Mosley Site. Coleman has entered into an agreement with KDHE in
which Coleman agreed to perform a similar study for the Coleman property and
to implement remedial activities at its property. In addition, Coleman
entered into an agreement with the City of Wichita in which Coleman agreed to
fund its proportionate share of the City's study and remediation of the
Gilbert and Mosley site.
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All previously filed lawsuits alleging that properties in the downtown
Wichita area were diminished in value as a result of discharges of volatile
organic chemicals from Coleman's downtown Wichita facility have been settled
and dismissed.
MAIZE SITE. Coleman has undertaken a soil and groundwater investigation
at its facility in Maize, Kansas (the "Maize Site"). Results indicate that
limited VOC contamination is present in the groundwater under and to the
southeast of the facility. The data has been reported to the KDHE, and
Coleman has entered into an agreement with KDHE to implement appropriate
remedial actions. The remediation system has been installed, and Coleman is
in the process of remediating the contaminated groundwater.
NORTHEAST SITE. In 1990 Coleman undertook a soil and groundwater
investigation of its facility in northeast Wichita (the "Northeast Site").
Results indicated the presence of VOCs in the groundwater and soils.
Although some of the contamination may be a result of Coleman's operations at
the facility, the data also indicated that contamination was migrating onto
the Coleman property from up gradient sources. Coleman reported the initial
results of its study to KDHE. Coleman has also provided copies of all data
to the United States Environmental Protection Agency (the "EPA"), at its
request. The EPA has not initiated any actions against the Company with
respect to the Northeast Site. An agreement has been entered into with KDHE
to undertake additional investigatory activities, and an interim remediation
system has been installed.
LAKE CITY SITE. In 1992, Coleman undertook a soil and groundwater
investigation of its facility in Lake City, South Carolina (the "Lake City
Site"). Results indicated limited VOC and fuel oil contamination in the soil
and groundwater. In both instances, the contamination appeared to relate to
the activities of a previous occupant of the Lake City Site. The results of
the investigation were reported to the appropriate South Carolina
environmental agency and Coleman took legal action against the prior owner.
In early 1998, the lawsuit was settled and the prior owner agreed to take
over further site investigations and remediation actions and to reimburse
Coleman for a significant part of Coleman's past costs related to site
investigation.
The Company has not been named as a potentially responsible party
("PRP") by the EPA nor does it have joint and several liability with any
other PRP for remediation at any of the above sites.
The Company has adopted an environmental policy designed to ensure that
the Company operates in full compliance with applicable environmental
regulations and, where appropriate, the Company's own internal standards.
Coleman has also undertaken an environmental compliance audit program. The
Company makes expenditures that it believes are necessary to comply with
environmental management practices. Environmental expenditures that relate
to current operations are expensed or capitalized as appropriate and were not
significant in 1997 and are not expected to be significant in the foreseeable
future. Coleman has established reserves, which it believes are adequate,
for environmental matters, including the investigations, remedial activities
and litigation described above.
OTHER
GENERAL. The Company is involved in various claims and legal actions
arising in the ordinary course of business, including environmental matters
and product liability lawsuits that are incidental to its business. The
Company believes the ultimate disposition of these matters is not expected to
have a material adverse effect on the Company's consolidated financial
condition or results of operations. The Company has entered into a
cross-indemnification agreement with Holdings pursuant to which it will
indemnify Holdings against all liabilities related to businesses transferred
to the Company by Holdings, and Holdings will indemnify the Company against
all liabilities of Holdings other than liabilities related to the businesses
transferred to the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
fourth quarter of 1997.
11
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's common stock is listed and traded on the New York Stock
Exchange under the symbol "CLN" and has unlisted trading privileges on the
Midwest Stock Exchange and the Pacific Stock Exchange. The following table
sets forth the high and low sales prices as reported on the NYSE Composite
Tape for the Company's common stock for each quarter in 1997 and 1996.
High Low
---- ---
1997
----
First Quarter $16 1/8 $11 1/2
Second Quarter 19 1/8 12 7/8
Third Quarter 18 15 3/16
Fourth Quarter 16 13/16 12 3/8
1996
----
First Quarter $26 $16 5/16
Second Quarter 23 1/4 19 13/16
Third Quarter 21 8/0 13 3/4
Fourth Quarter 15 1/4 11 3/4
As of the close of business on March 3, 1998, there were approximately
700 holders of record of the Company's common stock.
The Company has not declared a cash dividend on its common stock and
does not anticipate that any dividends will be declared on its common stock
in the foreseeable future. The declaration and payment of dividends are
subject to the discretion of the Board of Directors of the Company and
subject to certain limitations under Delaware law, and are also limited by
the terms of the Company's Credit Agreement which, among other things,
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 did not sell any unregistered securities during 1997.
12
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data for the years presented in the table below
have been derived from the Consolidated Financial Statements. The selected
financial data should be read in conjunction with the Consolidated Financial
Statements and the notes thereto included elsewhere in this Form 10-K Annual
Report.
(IN THOUSANDS, EXCEPT PER SHARE DATA)
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- -------- -------- --------
STATEMENTS OF OPERATIONS DATA:
Net revenues $1,154,294 $1,220,216 $933,574 $751,580 $575,415
Cost of sales (a) 840,331 928,497 649,427 535,710 400,052
---------- ---------- -------- -------- --------
Gross profit 313,963 291,719 284,147 215,870 175,363
Selling, general and
administrative expenses (a) 266,283 291,669 174,688 128,466 102,038
Asset impairment charge (b) -- -- 12,289 -- --
Restructuring expense (c) -- -- -- 18,456 --
Interest expense, net 40,852 38,727 24,545 13,374 7,706
Amortization of goodwill and
deferred charges 11,338 10,473 7,745 6,209 5,330
Other expense, net 1,867 1,151 334 1,138 746
---------- ---------- -------- -------- --------
(Loss) earnings before income taxes,
minority interest and
extraordinary item (6,377) (50,301) 64,546 48,227 59,543
Income tax (benefit) expense (a) (5,227) (10,927) 24,479 14,747 24,569
Minority interest 1,386 1,872 -- -- --
---------- ---------- -------- -------- --------
(Loss) earnings before
extraordinary item (2,536) (41,246) 40,067 33,480 34,974
Extraordinary loss on early
extinguishment of debt, net of
income taxes -- (647) (787) (677) --
---------- ---------- -------- -------- --------
Net (loss) earnings $ (2,536) $ (41,893) $ 39,280 $ 32,803 $ 34,974
---------- ---------- -------- -------- --------
---------- ---------- -------- -------- --------
Basic (loss) earnings
per common share $ (0.05) $ (0.79) $ 0.74 $ 0.61 $ 0.65
---------- ---------- -------- -------- --------
---------- ---------- -------- -------- --------
Weighted average common
shares outstanding 53,344 53,197 53,226 53,436 53,909
---------- ---------- -------- -------- --------
---------- ---------- -------- -------- --------
DECEMBER 31,
--------------------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- -------- -------- --------
BALANCE SHEET DATA:
Total assets $1,041,764 $1,160,086 $844,487 $712,265 $526,706
Long-term debt
(including current portions) 477,799 583,613 355,257 291,175 168,858
Total stockholders' equity 240,469 252,945 292,342 253,363 228,104
- ------------
(a) The Company recorded restructuring and certain other charges totaling
$22,501 and $52,516, net of tax for the years ended December 31, 1997 and
1996, respectively. Cost of sales includes pre-tax charges of $19,673 and
$44,005; selling, general and administrative expenses include pre-tax
charges of $16,746 and $30,195; and the provision for income tax benefit
includes $13,918 and $21,684 of net tax benefits in the years ended
December 31, 1997 and 1996, each respectively, resulting from these
charges.
(b) Asset impairment charge reflects primarily the non-recurring charge
taken in connection with the adoption of FAS 121.
(c) Restructuring expense reflects primarily the non-recurring charge taken
in connection with the German Restructuring which includes severance costs,
commitments to third parties and write-downs of leasehold improvements and
other assets to estimated realizable values.
13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
Consolidated Financial Statements and the notes thereto included elsewhere in
this Form 10-K Annual Report.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997 COMPARED WITH THE YEAR ENDED DECEMBER 31, 1996
Net revenues of $1,154.3 million in 1997 were $65.9 million or 5.4% less
than in 1996 with outdoor recreation products unchanged at $859.7 million and
hardware products decreasing $66.0 million or 18.3%. The outdoor recreation
products revenues were adversely affected by (i) a restructuring program
which eliminated certain low margin SKUs (stock keeping units), (ii) lower
sales in Japan and Korea due to weak market conditions, and (iii) a program
to reduce wholesaler inventories in Japan; however, growth in the core
products outside of Japan and Korea offset these declines. Hardware products
revenues decreased due to the Company's decision to exit the pressure washer
business and lower generator sales resulting from fewer storms on the East
Coast of the United States in the second half of 1997. Geographically,
United States and Canadian revenues decreased $24.0 million or 2.9% due to
lower hardware product sales while international revenues decreased $41.9
million or 10.6% primarily related to lower sales in Japan and Korea.
Results in the 1996 period include the Camping Gaz operations from the date
of acquisition.
The gross margin percentage of 28.9%, excluding the impact of
restructuring and other charges which are more fully described below,
increased from 27.5% in 1996. The improvement was driven by increased demand
for higher margin products and the elimination of certain low margin SKUs.
SG&A expenses, excluding the impact of restructuring and other charges
which are more fully described below, were $249.5 million in 1997 compared to
$261.5 million in 1996, a decrease of 4.5%. The inclusion of a full twelve
months of Camping Gaz SG&A costs in the 1997 period increased SG&A expenses;
however, these increases were more than offset by benefits resulting from the
integration of Camping Gaz operations and the restructuring initiatives.
During 1997, the Company recorded pre-tax restructuring and other
charges totaling $36.4 million of which $19.7 million was reflected in cost
of sales and $16.7 million in SG&A expenses. Tax benefits of $13.9 million
associated with these charges are reflected in income tax expense. The
restructuring and other charges consisted of (i) $15.7 million to exit
various low margin products, including pressure washers, (ii) $15.0 million
to close and relocate certain administrative and sales offices, and (iii)
$5.7 million to close several manufacturing facilities. Most of these
activities were substantially complete as of December 31, 1997, and remaining
actions are expected to be completed in 1998.
During 1996, the Company recorded restructuring charges of $66.2
million, certain other charges of $8.0 million and related net tax benefits
of $21.7 million. The 1996 pre-tax restructuring charges of $66.2 million
consisted of (i) $29.1 million to integrate the Camping Gaz and Coleman
operations into a global recreation products business, (ii) $19.0 million to
exit the low end electric pressure washer business, (iii) $14.1 million to
exit a portion of the Company's battery powered light business, and (iv) $4.0
million to settle certain litigation with respect to the battery powered
light business.
The 1996 pre-tax restructuring charges of $66.2 million included $64.4
million related to exiting products and facilities and $1.8 million of
termination costs for 174 administrative employees, of which $40.8 million
was reflected in cost of sales and $25.4 million in SG&A expenses. The
pre-tax charges for exit costs were comprised of (i) $41.3 million which
related primarily to writing down inventory, fixed assets, accounts
receivable and certain other receivable and prepaid amounts to estimated net
realizable value, and (ii) $23.1 million of other exit costs, including
carrying costs of idle facilities, relocation costs, and costs to exit the
pressure washer business.
14
The 1996 other pre-tax charges of $8.0 million related primarily to certain
asset write-offs. These other charges, of which $3.2 million was reflected
in cost of sales and $4.8 million in SG&A expenses, were incurred in the
Company's normal course of business, although the amounts involved were
higher than similar charges the Company had recorded in prior periods. The
provision for income taxes included $21.7 million of tax benefits resulting
from these restructuring and other charges, net of an increase in the
valuation reserve related to certain foreign deferred tax assets and other
foreign tax charges totaling $5.6 million.
The components of the combined 1997 and 1996 restructuring and other
charges and an analysis of the amounts charged against the reserves are
outlined in the following table (dollars in millions):
1996 Charges During 1997 Charges During
Original Year Ended Balance at Additional Year Ended Balance at
Reserve 12/31/96 12/31/96 Reserves 12/31/97 12/31/97
------- -------- -------- -------- -------- --------
Impairment of
fixed assets $10.0 $ (1.8) $ 8.2 $ 6.4 $ (6.5) $ 8.1
Inventory and other
asset impairments 38.3 (25.9) 12.4 11.0 (15.0) 8.4
Termination costs 2.0 (1.6) .4 12.1 (9.7) 2.8
Idle facilities, relocation and
other exit costs 23.9 (12.4) 11.5 6.9 (9.7) 8.7
----- ------ ----- ----- ------ -----
$74.2 $(41.7) $32.5 $36.4 $(40.9) $28.0
----- ------ ----- ----- ------ -----
----- ------ ----- ----- ------ -----
The termination costs recognized in 1996 related to approximately
200 employees and the 1997 termination costs related to approximately 525
employees. As of December 31, 1997, $11.3 million of termination costs were
paid on behalf of the approximately 700 employees who were terminated as of
that date.
Interest expense was $40.9 million in 1997 compared with $38.7
million in 1996, an increase of $2.2 million. This increase was a result of
the effects of higher interest rates on the Company's variable rate debt
partially offset by the favorable effects of lower borrowings in 1997
resulting from the Company's working capital management programs.
Minority interest in the 1997 period reflects the minority
interests 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 early July 1996 obtained control of the remaining
30% of Camping Gaz and, accordingly, in the 1996 period, minority interest
reflects the minority shareholders' approximate 30% proportionate share of
the results of operations of Camping Gaz for the period March through June of
1996 and also includes interests of other minority shareholders in certain
subsidiary operations acquired with the Camping Gaz business.
The Company recorded income tax benefits of $5.2 million in 1997
and $10.9 million in 1996, which includes the net tax benefits of $13.9
million in 1997 and $21.7 million in 1996 associated with restructuring and
other charges discussed above. Excluding the net tax benefits from the
restructuring and other charges, the provision for income tax expense would
have been $8.7 million or 28.9% of pre-tax earnings in 1997 as compared to a
provision for income tax expense of $10.8 million or 45.0% of pre-tax
earnings in 1996. This decrease is primarily due to the impact of increased
foreign tax rates on deferred tax assets and increased foreign earnings at
lower tax rates.
In 1996, in connection with the renegotiation of its 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.
15
YEAR ENDED DECEMBER 31, 1996 COMPARED WITH THE YEAR ENDED DECEMBER 31, 1995
Net revenues in 1996 and 1995 were $1,220.2 million and $933.6
million, respectively, an increase of $286.6 million, or 30.7%, with outdoor
recreation products increasing by $170.7 million or 24.8% and hardware
products increasing $115.9 million or 47.4%.
The outdoor recreation products revenues increase included $152.5
million of revenues associated with the Camping Gaz operations acquired in
1996 and approximately $13.4 million of additional revenues associated with
the Sierra operations acquired in 1995. Excluding (i) the impact of the
Camping Gaz and Sierra acquisitions, (ii) the effect of a weaker yen in 1996
as compared to 1995, which reduced revenues approximately $21.1 million, and
(iii) the one-time 1995 thermo-electric cooler premium promotion revenue gain
of approximately $16.6 million, outdoor recreation product revenues increased
approximately $42.5 million or 6.4%. Increases in revenue were experienced in
the backpack, tent and sleeping bag businesses, primarily in international
markets. In addition, the Company successfully introduced a new line of
camping accessories and expanded its heater and light businesses. These
gains were substantially offset by poor weather conditions during the camping
season in North America and the economic downturn experienced in Japan, both
of which adversely affected the demand for the Company's camping products.
The hardware products revenues increase includes approximately $82.1 million
as a result of the acquisition of CSS (then named Seatt Corporation) in 1996.
Excluding the impact of the CSS acquisition, hardware products revenues
increased approximately $33.8 million or 13.8%, driven by increases in
generator and pressure washer sales. Geographically, United States and
Canada revenues increased $111.6 million or 15.6% primarily related to the
CSS acquisition, while international revenues increased $175.0 million or
79.5% primarily related to the Camping Gaz acquisition.
Gross margins, excluding the impact of restructuring and other
charges totaling $44.0 million which are more fully discussed below,
decreased as a percent of sales by 2.9 percentage points from 30.4% in 1995
to 27.5% in 1996. This decrease was primarily the result of lower margins
associated with the Company's backpack business and the unfavorable effects
of product mix including significantly higher sales of pressure washers at
lower gross margin percentages and lower sales of camping products which tend
to have higher gross margin percentages than the Company's average.
SG&A expenses, excluding $30.2 million of restructuring and other
charges as discussed more fully below, were $261.5 million in 1996 compared
to $174.7 million in 1995, an increase of 49.7%. The increase in SG&A
expenses primarily reflects SG&A expenses associated with the Camping Gaz and
CSS business acquisitions of approximately $60.3 million and increased
advertising and marketing expenses of approximately $16.6 million.
During 1996, the Company recorded restructuring charges of $66.2
million, certain other charges of $8.0 million and related net tax benefits
of $21.7 million. The pre-tax restructuring charges of $66.2 million
consisted of (i) $29.1 million to integrate the Camping Gaz and Coleman
operations into a global recreation products business, (ii) $19.0 million to
exit the low end electric pressure washer business, (iii) $14.1 million to
exit a portion of the Company's battery powered light business and (iv) $4.0
million to settle certain litigation with respect to the battery powered
light business.
The charges to integrate the Camping Gaz and Coleman operations
reflected primarily the cost to dispose of duplicate manufacturing,
distribution and administrative facilities and the related severance cost.
These actions are substantially completed at December 31, 1997 and are
expected to be fully completed in 1998. The exiting of the battery powered
light business was completed by July 1997 and the exiting of the low end
pressure washer business was substantially completed in 1997.
The pre-tax restructuring charges of $66.2 million included $64.4
million related to exiting products and facilities and $1.8 million of
termination costs for 174 administrative employees, of which $40.8 million
was reflected in cost of sales and $25.4 million in SG&A expenses. The
pre-tax charges for exit costs were comprised of (i) $41.3 million which
related primarily to writing down inventory, fixed assets, accounts
receivable and
16
certain other receivable and prepaid amounts to estimated net realizable
value, and (ii) $23.1 million of other exit costs, including carrying costs
of idle facilities, relocation costs, and costs to exit the pressure washer
business. Other pre-tax charges of $8.0 million related primarily to certain
asset write-offs. These other charges, of which $3.2 million was reflected
in cost of sales and $4.8 million in SG&A expenses, were incurred in the
Company's normal course of business, although the amounts involved were
higher than similar charges the Company had recorded in prior periods. The
provision for income taxes includes $21.7 million of tax benefits resulting
from these restructuring and other charges, net of an increase in the
valuation reserve related to certain foreign deferred tax assets and other
foreign tax charges totaling $5.6 million.
The Company's interest expense was $38.7 million in 1996 compared
with $24.5 million in 1995, an increase of $14.2 million. This increase was
primarily the result of higher borrowings to fund business acquisitions and
support increased working capital.
The Company recorded an income tax benefit in 1996 of $10.9
million, which included net tax benefits of $21.7 million associated with
restructuring and other charges discussed above. Excluding the net tax
benefit from restructuring and other charges, the provision for income taxes
would have been $10.8 million or 45.0% of pre-tax earnings, excluding
restructuring and other charges, as compared to a provision for income tax
expense of $24.5 million or 37.9% of pre-tax earnings in 1995. The increase
was primarily due to losses of certain foreign subsidiaries for which the
Company has not recognized a tax benefit and the impact of non-deductible
goodwill amortization.
The Company obtained control of approximately 70% of Camping Gaz on
March 1, 1996 and obtained control of the remaining 30% in early July 1996.
Accordingly, the minority interest for 1996 primarily represents the minority
shareholders' approximate 30% proportionate share of the results of
operations of Camping Gaz for the period March through June of 1996 and also
includes interests of other minority shareholders in certain subsidiary
operations of Camping Gaz.
During the second quarter of 1996, in connection with the
renegotiation of its then existing credit agreement, the Company recorded an
extraordinary loss of $1.1 million ($0.6 million after taxes, or $0.01 per
share) which represents a write-off of the related unamortized financing
costs associated with its then existing credit agreement. During the third
quarter of 1995, the Company completed a $200.0 million private placement
debt issue. In connection with the private placement, the Company
renegotiated its previous credit agreement and recorded an extraordinary
loss of $1.3 million ($0.8 million after taxes) which represents a write-off
of the related unamortized financing costs associated with its previous
credit agreement.
LIQUIDITY AND CAPITAL RESOURCES
The Company's operating activities provided (used) $91.2 million,
($9.3) million, and $2.2 million of cash during the years ended December 31,
1997, 1996, and 1995, respectively. Improved management of receivables and
inventories and rationalization of product lines during 1997 as compared to
1996 led to the improvement in cash provided by operating activities. The
Company's net cash used for investing activities was $35.5 million, $200.3
million, and $61.5 million for the years ended December 31, 1997, 1996 and
1995, respectively. The Company used $161.9 million of cash for business
acquisitions during the year ended December 31, 1996 and an additional $14.3
million in 1997 related to contingent payments and transaction costs. The
Company's capital expenditures were $27.0 million and $41.3 million during
the years ended December 31, 1997 and 1996, respectively.
Net cash (used) provided by financing activities was ($55.5)
million, $210.5 million, and $64.8 million for the years ended December 31,
1997, 1996, and 1995, respectively, and consisted primarily of increases in
long-term borrowings during the years ended December 31, 1996 and 1995 and a
reduction in long-term borrowings during the year ended December 31, 1997.
17
As part of its strategy to improve profitability, the Company
announced several restructuring initiatives during 1997. The Company
recognized 1997 pre-tax charges of $36.4 million associated with these
actions. 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. In
April 1996, the Company amended its credit agreement to: a) provide a term
loan of French Franc 385.1 million ($64.9 million at December 31, 1997
exchange rates), b) provide an unsecured revolving credit facility in an
amount of $275.0 million, c) allow for the Camping Gaz acquisition and d)
extend the maturity of the credit agreement (as amended, the "Company Credit
Agreement").
Availability under the Company Credit Agreement is reduced by any
commercial paper borrowings outstanding. The Company Credit Agreement is
available to the Company until April 30, 2001. At December 31, 1997, $217.4
million would have been available for borrowings under the Company Credit
Agreement. The Company intends to use the net proceeds from the sale of CSS
to repay first the term loan portion of the Company Credit Agreement and use
the remaining proceeds to repay the revolving credit borrowings, which will
result in a dollar for dollar reduction in available revolving credit
commitments.
The outstanding loans under the Company Credit Agreement bear
interest at either of the following rates, as selected by the Company from
time to time: (i) the higher of the agent's base lending rate or the federal
funds rate plus .50% or (ii) the London Inter-Bank Offered Rate ("LIBOR")
plus 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 contains an event of default
upon a change of control of the Company (as defined in the Company Credit
Agreement) and other customary events of default. The consummation of the
CLN Holdings Merger will constitute a change of control under the Company
Credit Agreement. In addition, all of the shares of the Company's common
stock owned by Coleman Worldwide are pledged to secure indebtedness of
Coleman Worldwide and of its parent, CLN Holdings Inc.
The Company's ability to meet its current cash operating
requirements, including projected capital expenditures, tax sharing payments
and other obligations is dependent upon a combination of cash flows from
operations and borrowings under the Company Credit Agreement and foreign
lines of credit. The Company's ability to borrow under the terms of the
Company Credit Agreement is subject to the Company's continuing requirement
to meet the various restrictive covenants, including without limitation,
those described above, and the various covenants in the Company's senior
notes.
If the Company fails to meet the various restrictive covenants of
the Company Credit Agreement, or upon a change of control as a result of the
consummation of the CLN Holdings Merger, 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 waiver or alternative financing arrangements, if any,
would be as favorable as those now contained in the Company Credit Agreement.
18
Coleman financed the acquisition of the shares of Camping Gaz with
the net proceeds from (i) a private placement issuance and sale of $85.0
million aggregate principal amount of 7.10% Senior Notes, Series A, due 2006
(the "Notes due 2006") and (ii) a private placement issuance and sale of
$75.0 million aggregate principal amount of 7.25% Senior Notes, Series B, due
2008 (the "Notes due 2008"). The Notes due 2006 bear interest at the rate of
7.10% per annum payable semiannually, and the principal amount is payable in
annual installments of $12.1 million commencing June 13, 2000, with a final
payment due on June 13, 2006. If there is a default, the interest rate will
be the greater of (i) 9.10% or (ii) 2% above the prime interest rate. The
Notes due 2008 bear interest at the rate of 7.25% per annum payable
semiannually, and the principal amount is payable in annual installments of
$15.0 million commencing June 13, 2004 with a final payment due on June 13,
2008. If there is a default, the interest rate will be the greater of (i)
9.25% or (ii) 2% above the prime interest rate. The Notes due 2006 and the
Notes due 2008 are unsecured and are subject to various restrictive
covenants, including without limitation, requirements for the maintenance of
specified financial ratios and levels of consolidated net worth and certain
other provisions limiting the incurrence of additional debt and sale and
leaseback transactions under the terms of the Note Purchase Agreement.
All of the shares of the Company's common stock owned by Coleman
Worldwide are pledged to secure indebtedness of Coleman Worldwide and CLN
Holdings. On May 20, 1997, CLN Holdings issued 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").
Following the redemption of the Holdings Notes, Coleman Holdings was merged
into CLN Holdings. 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, $554.1 million aggregate principal amount at maturity of Liquid
Yield Option Notes-TM- due 2013 (the "LYONs"-TM-). Coleman Worldwide plans
to redeem the remaining $7.5 million aggregate principal amount at maturity
of LYONs no later than May 27, 1998 with the remaining proceeds from the
issuance of the Escrow Notes. The LYONs and the Escrow Notes, to which the
Company is not a party, provide that it is an additional purchase right event
and an event of default, respectively, under these debt instruments if, among
other things, the amount of debt incurred by the Company exceeds certain
limitations or if there is a change of control of Coleman Worldwide or CLN
Holdings, as the case may be, or the Company. A change of control of CLN
Holdings or Coleman Worldwide would permit the holder of LYONs or Escrow
Notes, as the case may be, to sell such notes to the issuer of such notes.
Consummation of the CLN Holdings Merger would be an additional purchase right
under these debt instruments. There are expected to be sufficient funds in
escrow from the net proceeds of the Escrow Notes to repurchase the LYONs in
the event a holder of LYONs seeks to have such LYONs repurchased. CLN
Holdings may be required to borrow funds to repurchase the Escrow Notes if a
holder of Escrow Notes seeks to have such Escrow Notes repurchased.
Sunbeam has informed the Company that, following the consummation
of the CLN Holdings Merger, it plans to refinance existing revolving and term
debt of Coleman.
The Company's international operations are located primarily in
Japan, Europe, and Canada, which are not considered to be highly inflationary
environments. The Company uses a variety of derivative financial instruments
to manage its foreign currency and interest rate exposures. The Company does
not speculate on interest rates or foreign currency rates. Instead, it uses
derivatives when implementing its risk management strategies to reduce the
possible effects of these exposures.
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.
19
IMPACT OF YEAR 2000
Some of the Company's older computer programs were written using
two digits rather than four to represent the applicable year. As a result,
those computer programs recognize a date represented by "00" as the year 1900
rather than the year 2000. This situation, known as the "Year 2000" issue,
could cause a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions, send invoices, or engage in similar normal business activities.
Based on ongoing assessments of the Company's operations, the
Company has determined it will be required to modify or replace portions of
its computer software so the computer systems will function properly with
respect to dates in the year 2000 and thereafter. The Company believes that,
in most instances, with minor modifications to existing software, the Year
2000 issue will not pose significant operational problems for its computer
systems. The Company has identified one location with significant Year 2000
software issues. Failure to complete a timely conversion of this location to
a Year 2000 compliant system could have a material impact on the operations
of the Company; however, the Company has begun to replace the software at
this location, and such replacement software is expected to be installed
prior to December 31, 1999.
The Company has initiated formal communications with some of its
significant suppliers and large customers to determine the extent to which
the Company's interface systems are vulnerable to those third parties'
failure to remediate their own Year 2000 issues. There can be no guarantee
that the systems of other companies on which the Company's systems rely will
be timely converted and would not have an adverse effect on the Company's
systems.
In 1996, the Company began a project to select and install a
Company-wide enterprise resource computer software system designed to improve
operational efficiency. The selected system is Year 2000 compliant and
complete installation of this software system is expected to take three
years. The cost of the purchase of the software and installation costs is
expected to range from $20.0 million to $25.0 million. The Company will
capitalize a significant portion of these costs and does not believe the
costs of this project will have a significant impact on the Company's
financial condition or results of operations.
The costs of the project and the date on which the Company believes
it will be Year 2000 compliant are based on management's best estimates,
which were derived utilizing numerous assumptions of future events, including
the continued availability of certain resources, third party modification
plans and other factors. However, there can be no guarantee that these
estimates will be achieved and actual results could differ materially from
those anticipated. Specific factors that might cause such material
differences include, but are not limited to, the availability and cost of
personnel trained in this area, the ability to locate and correct all
relevant computer codes, and similar uncertainties.
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. For the years ended
December 31, 1997, 1996 and 1995, second quarter sales comprised
approximately 33%, 37% and 33% of annual sales, respectively. Consequently,
the company's annual results are largely impacted by its results during the
second quarter.
INFLATION
In general, manufacturing costs are affected by inflation and the
effects of inflation may be experienced by the Company in future periods.
Management believes, however, that such effects have not been material to the
Company during the past three years.
20
FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a
"safe harbor" for certain forward-looking statements. The forward-looking
statements contained in this Form 10-K are subject to certain risks and
uncertainties. Actual results could differ materially from current
expectations. Among the factors that could affect the Company's actual
results and could cause results to differ from those contained in the
forward-looking statements are (i) unanticipated costs or delays in
developing new products, (ii) a decrease in the public's interest in camping
and related activities, (iii) economic softness in Japan, Korea, and other
Asian countries, (iv) weather conditions which are adverse to the specific
businesses of the Company, (v) significant adverse market or economic
conditions which negatively affect demand for the Company's products, (vi)
disruptions or delays resulting from the transactions contemplated by the
Merger Agreements with Sunbeam for the acquisition of CLN Holdings and the
Company, and (vii) changes in operating philosophy following the consummation
of the CLN Holdings Merger and the Company Merger. Other factors could also
cause actual results to vary materially from the future results covered in
such forward-looking statements.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See the consolidated financial statements listed in the
accompanying List of Financial Statements and Schedules on Page F-1 herein.
Information required by schedules called for under Regulation S-X is either
not applicable or is included in the consolidated financial statements or
notes thereto.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
DIRECTORS
The name, age, present principal occupation or employment, five year
employment history, selected biographical information, and period of service
as a director of the Company of each of the current directors of the Company
are set forth below.
Ronald O. Perelman, age 55, a director of the Company since 1989, has
been Chairman of the Board and Chief Executive Officer of Mafco, MacAndrews
Holdings and various of their affiliates since 1980. Mr. Perelman is also
Chairman of the Executive Committee of the Board of Consolidated Cigar
Holdings Inc. ("Cigar Holdings"), M&F Worldwide Corporation, and Revlon, Inc.
("Revlon") and Chairman of the Board of Meridian Sports Incorporated
("Meridian"). Mr. Perelman is also a director of the following corporations
which file reports pursuant to the Securities Exchange Act of 1934, as
amended (the "Exchange Act"): California Federal Bank, A Federal Savings
Bank ("Cal Fed"), Cigar Holdings, CLN Holdings Inc. ("CLN Holdings"), Coleman
Worldwide Corporation ("Coleman Worldwide"), First Nationwide Holdings Inc.,
First Nationwide (Parent) Holdings Inc., Meridian, M&F Worldwide Corporation,
Revlon Consumer Products Corporation ("Revlon Products"), Revlon, and REV
Holdings Inc. ("REV Holdings"). (On December 27, 1996, Marvel Holdings Inc.,
Marvel (Parent) Holdings Inc., and Marvel Entertainment Group, Inc.
("Marvel"), of which Mr. Perelman was then a director, and Marvel III
Holdings Inc., of which Mr. Perelman is a director, and several of the
subsidiaries of Marvel filed voluntary petitions for reorganization under
Chapter 11 of the United States Bankruptcy Code.)
Donald G. Drapkin, age 50, a director of the Company since 1989, has
been a director and Vice Chairman of Mafco and various of its affiliates
since 1987. Mr. Drapkin was a partner in the law firm of Skadden, Arps,
Slate, Meagher & Flom in New York for more than five years prior to March
1987. Mr. Drapkin is also a director
21
of the following corporations which file reports pursuant to the Exchange
Act: Alogos Pharmaceutical Corporation, Black Rock Asset Investors, Cardio
Technologies, Inc., Coleman Worldwide, The Cosmetic Center, Inc., Genta,
Inc., Playboy Enterprises, Inc., Revlon, Revlon Products, VIMRx
Pharmaceuticals Inc., and Weider Nutrition International, Inc. (On December
27, 1996, Marvel Holdings Inc., Marvel (Parent) Holdings Inc., and Marvel, of
which Mr. Drapkin was then a director, and Marvel III Holdings Inc., of which
Mr. Drapkin is a director, and several of the subsidiaries of Marvel filed
voluntary petitions for reorganization under Chapter 11 of the United States
Bankruptcy Code.)
Frank Gifford, age 67, has been a director of the Company since 1997.
Mr. Gifford has been a commentator with ABC Sports since 1971. (On December
27, 1996, Marvel, of which Mr. Gifford was a director, and several of its
subsidiaries filed voluntary petitions for reorganization under Chapter 11 of
the United States Bankruptcy Code.)
Lawrence M. Jones, age 66, has been a director of the Company since
1989. Mr. Jones was Chairman and Chief Executive Officer of the Company from
October 1990 to December 1993 and has been associated with the Company for
more than 36 years, including serving as President and Chief Executive
Officer from July 1989 to September 1990. Prior to rejoining the Company in
1989, Mr. Jones was Vice Chairman and Chief Financial Officer of Fleming
Companies, Inc. (a distributor of food products, health and beauty items)
from December 1987 to June 1989. Mr. Jones presently serves as director of
Union Pacific Resources, and was a director of Fourth Financial Corporation
until January 1996, of Fleming Companies, Inc. until December 1996, and of
Prince Sports Group, Inc. until March 1997. Mr. Jones also served as Chairman
of Rollerblade, Inc. from February 1996 to April 1997.
Ann D. Jordan, age 63, has been a director of the Company since June
1997. Ms. Jordan is a consultant and a director of Johnson & Johnson,
Automatic Data Processing, Inc., The Travelers Corporation, and Salant
Corporation. Ms. Jordan also serves on the Board of Directors of the
National Symphony Orchestra, Sloan Kettering Memorial Medical Center, Child
Welfare League, Sasha Bruce Youthworks, University of Chicago, Spellman
College, The John F. Kennedy Center for the Performing Arts and the SEC
Consumer Affairs Advisory Commission. She was formerly a Field Work
Associate Professor at the School of Social Service Administration of the
University of Chicago and served as Director of the Department of Social
Services for the University of Chicago Medical Center.
Jerry W. Levin, age 53, has been Chairman and Chief Executive officer of
the Company since February 1997, and a past Chairman of the Company from 1989
to 1991, and a director since 1989. Mr. Levin has been Chairman of the Board
of Revlon and of Revlon Products since their respective formations in 1992
and Chairman of the Board of The Cosmetic Center, Inc. since April 1997. Mr.
Levin served as Chief Executive Officer of Revlon and of Revlon Products from
1992 until January 1997, and President of Revlon and of Revlon Products from
their respective formations in 1992 to November 1995. Mr. Levin has been
Executive Vice President of MacAndrews Holdings since March 1989. For 15
years prior to joining MacAndrews Holdings, he held various senior positions
with The Pillsbury Company ("Pillsbury"). Mr. Levin is a director of the
following corporations which file reports pursuant to the Exchange Act:
Coleman Worldwide, The Cosmetic Center, Inc., Ecolab Inc., U.S. Bancorp Inc.,
Meridian, Revlon, Revlon Products, and REV Holdings.
John A. Moran, age 65, has been a director of the Company since July
1996. Mr. Moran currently serves as Chairman of Rutherford-Moran Oil
Corporation. From 1967, Mr. Moran was affiliated with Dyson-Kissner-Moran
Corporation, a private holding company, serving in various executive
positions including Chairman of the Board, President and Chief Executive
Officer, and Executive Vice President. He is a director of Bessemer
Securities Corporation. He is a member and former Chairman of the National
Advisory Council of the University of Utah, as well as a member of World
Presidents Organization, the Chief Executives Organization and The Foreign
Policy Association. He is a former director of the United Nations
Association and trustee of the Brooklyn Museum.
22
James D. Robinson, age 62, has been a director of the Company since June
1997. Mr. Robinson is Chairman and Chief Executive Officer of RRE Investors,
LLC, a private venture investment firm, and Chairman of Violy, Byorum &
Partners Holdings, LLC, a private firm specializing in financial advisory and
investment banking activities in Latin America. He previously served as
Chairman, and Chief Executive Officer of the American Express Company from
1977 to 1993. Mr. Robinson is a director of Bristol-Myers Squibb Company,
Cambridge Technology Partners, Inc., The Coca-Cola Company, First Data
Corporation and Union Pacific Corporation.
Bruce Slovin, age 62, a director of the Company since February 1993, has
been President of MacAndrews Holdings and various of its affiliates since
1980. Mr. Slovin is also a director of the following corporations which file
reports pursuant to the Exchange Act: Cantel Industries, Inc., Coleman
Worldwide, Continental Health Affiliates, Inc., Infu-Tech, Inc., Meridian,
and M&F Worldwide Corporation.
William H. Spoor, age 75, has been a director of the Company since May
1992. Mr. Spoor retired in September 1985 as Chairman and Chief Executive
Officer of Pillsbury after 14 years in that position and 36 years with
Pillsbury. He returned to Pillsbury as Chairman of the Executive Committee
in September 1987, and resumed as Chairman, Chief Executive Officer and
President of Pillsbury in March 1988, from which he retired in August 1988.
Mr. Spoor now serves as Chairman Emeritus of Pillsbury, and is in the
business of personal investments. He is a director of L & L Holdings and
Inner City Tennis.
COMPENSATION OF DIRECTORS
Directors who are not currently receiving compensation as employees of
the Company or any of its affiliates are paid an annual $25,000 retainer fee
and are reimbursed for reasonable out-of-pocket expenses incurred in
connection with Company business. In addition, such directors receive a fee
of $1,000 for each meeting of the Board of Directors or any committee meeting
they attend.
EXECUTIVE OFFICERS
The following table sets forth certain information as of March 3, 1998,
concerning the executive officers of the Company. All executive officers
serve at the pleasure of the Board of Directors.
NAME AGE POSITION
---- --- --------
Jerry W. Levin 53 Chairman of the Board, and Chief Executive Officer
Mark Goldman 43 Executive Vice President
(Chairman - Eastpak)
Patrick McEvoy 47 Executive Vice President
(President - Coleman Safety & Security Products)
Joseph P. Page 44 Executive Vice President and
Chief Financial Officer
David A. Ramon 42 Executive Vice President
(President - Outdoor Recreation Group)
Paul E. Shapiro 56 Executive Vice President and General Counsel
David K. Stearns 50 Executive Vice President
(President - Coleman Powermate)
James L. Rasmus 45 Senior Vice President - Human Resources
Karen Clark 37 Vice President - Finance
The following sets forth the position with the Company and selected
biographical information for the executive officers of the Company who are
not directors.
Mark Goldman has been Executive Vice President since April 1995 and
President of Eastpak since 1978. He joined Eastpak in 1976.
23
Patrick McEvoy has been Executive Vice President since March 1996 and
President of Coleman Safety & Security Products, Inc. since January 1996. He
joined Coleman in April 1994 as the Senior Vice President of Product
Development and Operations for the Company's North American Recreation
business unit. Prior to joining Coleman, he served as Vice President of
Black & Decker Corporation from 1990 to 1994, and Vice President for the
Chrysler Corporation from 1988 to 1990.
Joseph P. Page joined the Company in August 1997 as Executive Vice
President and Chief Financial Officer. Since December 1993, Mr. Page has
served as Executive Vice President and Chief Financial Officer of Andrews
Group Incorporated ("Andrews Group"). From December 1993 through January
1997, Mr. Page was Executive Vice President and Chief Financial Officer of
New World Communications Group. Prior to his employment with Andrews Group,
Mr. Page was a partner in the accounting firm of Price Waterhouse for more
than five years.
David A. Ramon has been Executive Vice President since May 1997. Prior
to joining the Company, Mr. Ramon was a Director, President, and Chief
Operating Officer for New World Television Incorporated from 1995 to 1997,
and Executive Vice President and Chief Financial Officer for Gillett
Holdings, Inc. from 1985 to 1994.
Paul E. Shapiro has been Executive Vice President and General Counsel of
the Company since July 1997. Mr. Shapiro has been an Executive Vice
President of Andrews Group since 1994, and from January 1994 to June 1997,
served as the Executive Vice President and General Counsel of Marvel. Prior
to January 1994, Mr. Shapiro was a shareholder in the law firm of Greenberg,
Traurig, Hoffman, Lipoff, Rosen & Quental from 1991 to 1993, and is currently
Of Counsel to that firm. Mr. Shapiro is a director of Toll Brothers, Inc.
(On December 27, 1996, Marvel, of which Mr. Shapiro was an executive officer
and director, and several of the subsidiaries of Marvel, filed voluntary
petitions for reorganization under Chapter 11 of the United States Bankruptcy
Code.)
David K. Stearns has been Executive Vice President since January 1995,
and Senior Vice President - Marketing from October 1991 to January 1995. He
joined the Company in 1976 and has served in various positions, including
Vice President/General Manager - Import Division from 1985 to 1990.
James L. Rasmus joined the Company in April 1997 as Senior Vice
President - Human Resources. Prior to joining Coleman, Mr. Rasmus was the
Executive Project Director, Shared Services for Tenneco. He has also held
senior human resource positions with Case Corporation, United Technologies
and Xerox Corporation.
Karen Clark has been Vice President - Finance since July 1997. Prior to
joining Coleman, Ms. Clark served as Corporate Controller for Precision
Castparts Corp. from 1994 to 1997. She was also Manager - Corporate Planning
for Tektronix from 1990 to 1994. Ms. Clark is a member of the Financial
Executives Institute and the American Institute of Certified Public
Accountants.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than 10 percent of the Company
common stock, to file reports of ownership and changes in ownership with the
Securities and Exchange Commission.
Based solely on the Company's review of the reporting forms received by
it, the Company believes that for 1997 all such filing requirements were
satisfied.
24
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning annual, long term
and other compensation of the Company's Chief Executive Officer and the next
four most highly-compensated executive officers, and three of its former
executive officers.
Long Term Compensation
-----------------------------------
Annual Compensation Awards Payouts
------------------------------------------- ---------- ----------------------
Securities
Other Annual Underlying LTIP All Other
Name and Principal Position Year Salary Bonus Compensation Options Payouts Compensation
- --------------------------- ---- -------- -------- ------------ ---------- ------- ------------
Jerry W. Levin (1) 1997 $300,000 $300,000 $ 2,567 500,000 $ 0 $ 0
Chairman and Chief Executive
Officer
David A. Ramon (2) 1997 400,000 125,000 2,912 100,000 0 0
Executive Vice President
Mark Goldman (3) 1997 250,000 0 6,300 40,000 0 4,230
Executive Vice President 1996 250,000 0 0 0 0 4,270
1995 250,000 0 0 20,000 0 4,492
David K. Stearns (4) 1997 240,000 134,844 105,930 20,000 0 6,212
Executive Vice President 1996 225,500 0 16,899 25,000 0 4,455
1995 189,996 159,425 121,880 40,000 0 3,877
Patrick McEvoy (5) 1997 200,000 0 72,675 0 0 4,064
Executive Vice President 1996 200,000 0 190,114 15,000 0 3,717
1995 190,000 159,290 38,305 20,000 0 794
Michael N. Hammes (6) 1997 116,668 0 27,441 0 0 1,212,035
Former Chief Executive Officer 1996 625,000 0 0 80,000 0 3,270
1995 600,000 891,103 163,950 100,000 0 3,117
Frederik van den Bergh (7) 1997 250,000 0 22,769 10,000 0 641,409
Former Executive Vice President 1996 333,333 233,333 204,266 130,000 0 2,124
Steven Kaplan (8) 1997 186,666 180,666 1,713 10,000 0 175,686
Former Executive Vice President 1996 116,667 50,000 31,592 125,000 0 501
- -----------------------
(1) "Bonus" in 1997 includes $300,000 paid in January 1998 for 1997
performance. "Other Annual Compensation" in 1997 includes $2,567 for
Company-paid parking expenses.
(2) "Bonus" in 1997 includes $125,000 paid in March 1998 for 1997
performance. "Other Annual Compensation" in 1997 includes Company-paid
expense of $2,912 related to relocation.
(3) "Other Annual Compensation" in 1997 includes $6,300 for car allowance.
"All Other Compensation" in 1997 includes $3,230 for the Company's 401(k)
match and $1,000 for premiums paid for term life insurance.
(4) "Bonus" in 1997 includes $60,000 bonus paid for relocation during 1997,
and $74,844 paid in March 1998 for 1997 performance. "Other Annual
Compensation" includes (i) for 1997, $82,500 ordinary income realized upon
the exercise/sale of certain stock options during 1997, $4,284 interest
differential housing allowance, $8,700 car allowance, $5,455 relocation
expenses and $4,991 tax gross-up thereon, (ii) for 1996, $10,155 for
interest differential housing allowance, $3,844 for personal use of
Company vehicle, $2,900 for car allowance, and (iii) for 1995, $113,561
for relocation costs. "All Other Compensation" includes (i) for 1997,
$3,230 and $2,982, respectively, for the Company's 401(k) match and
premiums paid for term life insurance, (ii) for 1996, $3,164 and $1,291,
respectively, for the Company's 401(k) match and premiums paid for term
life insurance, and (iii) in 1995, $3,077 and $800, respectively, for the
Company's 401(k) match and premiums paid for term life insurance.
25
(5) "Bonus" for 1995 includes $159,290 paid in February 1996 for 1995
performance. "Other Annual Compensation" includes (i) for 1997,
$42,222 forgiveness of a loan, $21,753 interest differential housing
allowance, $8,700 car allowance, (ii) for 1996, $141,376 reimbursement
of capital loss due to relocation ($45,877 of which is a tax gross-up),
$20,844 for other payments related to relocation ($3,510 of which is a
tax gross-up), $19,194 interest differential housing allowance, $8,700
car allowance, and (ii) for 1995, $25,513 (which includes $4,402 tax
gross-up) related to the forgiveness of a loan, $8,700 car allowance,
and $4,092 related to various gifts ($1,410 of which is a tax gross-up
on the gifts). "All Other Compensation" includes (i) for 1997, $3,230
and $834, respectively, for the Company's 401(k) match and premiums
paid for term life insurance, (ii) for 1995, $3,183 and $534,
respectively, for the Company's 401(k) match and premiums paid for term
life insurance, and (iii) for 1995, $0 and $794, respectively, for the
Company's 401(k) match and premiums paid for term life insurance.
(6) Mr. Hammes ceased to be an employee of the Company in February 1997.
"Bonus" includes $591,103 paid in February 1996 for 1995 performance
pursuant to a predecessor incentive plan and a $300,000 special bonus paid
in 1995 pursuant to Mr. Hammes' employment agreement. "Other Annual
Compensation" includes (i) for 1997, $13,663 for personal use of a Company
vehicle, $10,853 for relocation costs ($4,912 of which is a tax gross-up),
and $2,925 interest differential housing allowance, and (ii) for 1995,
$137,703 for relocation costs. "All Other Compensation" includes (i) for
1997, $2,380 and $0, respectively, for the Company's 401(k) match and
premiums paid for term life insurance, and $1,209,655 for termination of
employment payments including but not limited to severance payments, lump
sum payments, and the value of benefits received pursuant to a severance
agreement entered into with Mr. Hammes as of February 28, 1997 (see
"Employment Agreements and Termination of Employment Arrangements"), (ii)
for 1996, $3,230 and $40, respectively, for the Company's 401(k) match and
premiums paid for term life insurance and (iii) for 1995, $3,077 and $40,
respectively, for the Company's 401(k) match and premiums paid for term
life insurance.
(7) Mr. van den Bergh ceased to be an employee of the Company in June 1997.
"Bonus" for 1996 includes $233,333 guaranteed incentive payment made in
1996 pursuant to Mr. van den Bergh's employment agreement. "Other
Annual Compensation" includes (i) for 1997, $9,630 for Company vehicle
expenses, $5,493 for tax preparation expenses, $6,822 for housing
allowance, and $824 for representation allowance, and (ii) for 1996,
includes a $153,100 payment made to Mr. van den Bergh to compensation
him for the loss of stock option price appreciation upon leaving his
former employer. "All Other Compensation" includes (i) for 1997,
$641,409 for termination of employment payments including, but not
limited to, severance payments, lump sum payments, and the value of
benefits received pursuant to a severance agreement entered into with
Mr. van den Bergh as of June 30, 1997 (see "Employment Agreements and
Termination of Employment Arrangements"), and (ii) for 1996, $2,124 for
premiums paid for term life insurance.
(8) Mr. Kaplan ceased to be an employee of the Company in August 1997.
"Bonus" includes (i) for 1997, $130,666 guaranteed incentive and
$50,000 (final installment) signing bonus payments made in 1997
pursuant to Mr. Kaplan's employment agreement and (ii) for 1996,
$50,000 payments made during 1996 for first installment of signing
bonus pursuant to Mr. Kaplan's employment agreement. "Other Annual
Compensation" includes (i) for 1997, $1,416 for the personal use of a
Company car, and $297 for relocation costs, and (ii) for 1996, $31,592
for relocation costs ($14,103 of which is a tax gross-up). "All Other
Compensation" includes (i) for 1997, $174,812 for payments including,
but not limited to, severance payments, lump sum payments and value of
benefits received pursuant to a termination agreement entered into with
Mr. Kaplan as of August 31, 1997 (see "Employment Agreements and
Termination of Employment Arrangements"), and $874 for premiums paid
for term life insurance, and (ii) for 1996, $501 for premiums paid for
term life insurance.
26
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning individual grants
of stock options during 1997 to the Company's Chief Executive Officer and the
next four most highly-compensated executive officers, and three of its former
executive officers. Pursuant to the Company Merger Agreement, each
outstanding option to acquire the Company's common stock, which is not
currently exercisable, will vest and become exercisable at the effective time
of the CLN Holdings Merger and, to the extent not exercised prior to the
effective time of the Company Merger, will be converted into the right to
receive cash in an amount equal to the excess, if any, of $27.50 over the per
share exercise price of such option.
% of Total
Options
Granted to
Employees Expiration Grant Date
Options in Fiscal Exercise Date Present
Name Granted Year Price of Options Value (7)
- ------------------ ------- ---------- --------- ---------- -----------
Jerry W. Levin (1) 200,000 9.27% $ 12.250 02/11/07 $ 1,257,120
300,000 13.91% 14.000 04/15/07 2,150,835
David A. Ramon (2) 62,500 2.89% 12.250 02/11/07 392,850
37,500 1.73% 16.875 05/13/07 334,558
Mark Goldman (3) 20,000 .92% 15.000 02/12/07 100,422
20,000 .92% 16.125 12/17/07 160,930
David K. Stearns (4) 20,000 .92% 16.125 12/17/07 158,532
Patrick McEvoy -- -- -- -- --
Michael N. Hammes -- -- -- -- --
Frederik van den Bergh (5) 10,000 .46% 14.000 4/15/07 67,527
Steven F. Kaplan (6) 10,000 .46% 14.000 4/15/07 67,527
- --------------------
(1) Mr. Levin's options were granted on February 11, 1997 and April 15, 1997,
respectively. The February 11, 1997 and 200,000 of the April 15, 1997
options were granted pursuant to the 1996 Stock Option Plan. The remainder
of the April 15, 1997 option was granted pursuant to the 1993 Stock Option
Plan. The options are exercisable in installments of 50%. The earlier
option vested on April 15, 1997 and December 31, 1997. The later option
vested on April 15, 1997 and is scheduled to vest again on April 15, 1998.
(2) Mr. Ramon's options were granted on February 11, 1997 and May 13, 1997,
respectively. The February 11, 1997 and May 13, 1997 options were granted
pursuant to the 1996 Stock Option Plan. The options are exercisable in
installments of 50%. The earlier option vested on April 15, 1997 and
December 31, 1997. The later option vested on May 13, 1997 and December
31, 1997.
(3) Mr. Goldman's options were granted on February 12, 1997 and December 17,
1997, Respectively. ThE February 12, 1997 option was granted pursuant to
the 1996 Stock Option Plan and the December 17, 1997 option was granted
pursuant to the 1993 Stock Option Plan. The February 12, 1997 option is
exercisable in installments of 33%, 33% and 34%. This option is scheduled
to vest on February 12, 2000, February 12, 2001, and February 12, 2002,
respectively. The December 17, 1997 option is exercisable in installments
of 50%. This option is scheduled to vest on June 17, 1998 and December 17,
1998.
(4) Mr. Stearns' options were granted on December 17, 1997 pursuant to the 1996
Stock Option Plan. The option becomes exercisable in installments of 25%.
The option is scheduled to vest on December 17, 1998, December 17, 1999,
December 17, 2000, and December 17, 2001, respectively.
(5) Mr. van den Bergh's options were granted on April 15, 1997 pursuant to the
1996 Stock Option Plan. Pursuant to an agreement entered into with Mr. van
den Bergh as of June 30, 1997, Mr. van den Berg's options expired
unexercised.
(6) Mr. Kaplan's options were granted on April 15, 1997 pursuant to the 1996
Stock Option Plan. Pursuant to an agreement entered into with Mr. Kaplan
as of August 31, 1997, Mr. Kaplan's options expired unexercised.
27
(7) The grant date present values were estimated using the Black-Scholes option
pricing model and the following weighted-average assumptions; risk-free
interest rates from 5.84% to 6.89%, dividend yield of 0%, volatility of the
expected market price of the Company's common stock from 27.25% to 35.43%,
and a weighted-average expected life of the options from 4.5 to 8.5 years.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth aggregated option exercises in the last
fiscal year and fiscal year-end option values for the Company's Chief
Executive Officer and the next four most highly-compensated executive
officers, and three of its former executive officers.
Value of
Number of Unexercised
Unexercised In-the-Money
Shares Options at Options at
Acquired FY-End FY-End (1)
on Value Exercisable/ Exercisable/
Name Exercise Realized Unexercisable Unexercisable
- -------------- -------- -------- -------------- -------------
Jerry W. Levin 0 0 350,000/ $ 1,071,875/
150,000 309,375
David A. Ramon 0 0 100,000/ 238,281/
0 0
Mark Goldman 0 0 0/ 0/
60,000 21,250
David K. Stearns 15,000 82,500 28,720/ 41,790/
110,280 46,253
Patrick McEvoy 0 0 21,900/ 35,989/
63,100 39,923
Michael N. Hammes 0 0 0/ 0/
580,000 (2) 0
Frederik van den Bergh 0 0 0/ 0/
130,000 (3) 0
Steven F. Kaplan 0 0 0/ 0/
135,000 (4) 0
- --------------------
(1) Market closing price of $16.0625 per share on December 31, 1997 was used in
computing year-end values.
(2) Mr. Hammes' right to exercise the options expired on May 29, 1997, pursuant
to the agreement entered into with Mr. Hammes on February 28, 1997. The
options expired by their terms unexercised on May 29, 1997.
(3) Mr. van den Bergh was paid in lieu of the vested options that were
in-the-money on August 27, 1997, pursuant to the agreement entered into
with Mr. van den Bergh as of June 30, 1997. The options were allowed to
expire by their terms unexercised on September 30, 1997.
(4) Mr. Kaplan's right to exercise the options expired on November 30, 1997,
pursuant to the agreement entered into with Mr. Kaplan as of August 31,
1997. The options expired by their terms unexercised on November 30, 1997.
EMPLOYMENT AGREEMENTS AND TERMINATION OF EMPLOYMENT ARRANGEMENTS
The Company has an employment agreement with Mr. Levin effective for
the term October 1, 1997 through December 31, 2000. Pursuant to the Company
Merger Agreement, the Company will not have any responsibility for the Company's
obligations under Mr. Levin's employment agreement following consummation of the
CLN Holdings Merger, except for payment of the transaction bonus described
below. The employment agreement provides for a base salary of $1,000,000 per
annum, and participation in The Coleman Company, Inc. Executive Annual Incentive
Plan (the "Incentive Plan") with a 100% target bonus opportunity. The
employment agreement
28
with Mr. Levin also provides for, among other things, participation in the
Company's other benefit plans, certain pension benefits and payments upon
death, disability, termination without cause and change of control of the
Company. Upon a termination of employment without cause, Mr. Levin would be
entitled, among other things, to receive payments equal to base salary for
the balance of the term of the agreement (but in any event not less than one
year). Upon a change of control Mr. Levin would be entitled to a lump sum
payment equal to base salary and target bonus payable for the remainder of
the term. In addition, Mr. Levin's employment agreement provides for a
gross-up for certain excise taxes resulting from payments and benefits under
the employment agreement. Pursuant to the employment agreement, Mr. Levin is
entitled to a transaction bonus equal to 1.5% of the enterprise value of
certain divestitures, up to a maximum aggregate amount of $1.5 million. The
consummation of the sale of CSS would result in a transaction bonus payable
to Mr. Levin of $1.5 million.
The Company has an employment agreement with Mr. Shapiro effective for
the term July 1, 1997 through June 30, 2000. Pursuant to the Company Merger
Agreement, the Company will not have any responsibility for the Company's
obligations under Mr. Shapiro's employment agreement following consummation
of the CLN Holdings Merger. The employment agreement provides for a base
salary of $350,000 per annum, and participation in the Incentive Plan with a
70% target bonus opportunity. The employment agreement with Mr. Shapiro also
provides for, among other things, participation in the Company's other
benefit plans and payments upon death, disability, termination without cause
and change of control of the Company. Upon termination of employment without
cause, Mr. Shapiro would be entitled, among other things, to receive payments
equal to base salary for the balance of the term of the agreement (but in any
event not less than one year). Upon a change of control, Mr. Shapiro would
be entitled to a lump sum payment equal to base salary and target bonus
payable for the remainder of the term. In addition, Mr. Shapiro's employment
agreement provides for a gross-up for certain excise taxes resulting from
payments and benefits under the employment agreement.
The Company has an employment agreement with Mr. McEvoy effective for
the term January 1, 1996 through December 31, 1998. Pursuant to the
employment agreement, Mr. McEvoy is paid a base salary of $200,000 per annum,
and is entitled to participate in the Incentive Plan with a 70% target bonus
opportunity. The employment agreement with Mr. McEvoy also provides for,
among other things, participation in the Company's other benefit plans and
payments upon death, disability, termination without cause, and subject to
certain conditions, change of control of the Company. Upon a termination of
employment without cause, or termination of employment upon a change of
control, Mr. McEvoy would be entitled, for two years, among other things, to
receive payments equal to base salary and target bonus and to participate in
the Company's medical plans. In addition, Mr. McEvoy's employment agreement
provides for a gross-up of certain excise taxes resulting from payments and
benefits under the employment agreement. In addition, in connection with the
sale of CSS, the Company and Mr. McEvoy entered into a retention agreement.
Pursuant to such retention agreement, Mr. McEvoy will receive, among other
things, a special bonus for one year in an amount equal to Mr. McEvoy's base
salary, provided that if Mr. McEvoy becomes entitled to severance payments
under his employment contracts as a result of a termination of employment
within three months of a sale of CSS, the severance payments to Mr. McEvoy
under his employment agreement will be reduced by the payments of the special
bonus.
Mr. Goldman had two employment agreements with the Company which became
effective November 1, 1994 and terminated December 31, 1997. Under the
agreements, which had identical material terms, Mr. Goldman's base salary was
$250,000 per year, and Mr. Goldman was eligible for a discretionary incentive
payment each year.
Mr. Hammes had an employment agreement with the Company effective
January 1, 1996, which provided for, among other things, a base salary of
$700,000 per annum. Mr. Hammes' employment was terminated February 28, 1997.
Effective such date, Mr. Hammes' entered into a severance agreement with the
Company having a severance period of two years. Pursuant to the severance
agreement, Mr. Hammes is entitled to, among other things, severance payments
during the severance period at the rate of $700,000 per annum, and continued
participation in the Company's medical plans during the severance period, and
is entitled to certain pension
29
payments beginning March 1, 1999. In addition, pursuant to the severance
agreement, Mr. Hammes was paid a lump sum payment during 1997 of $450,000 and
is entitled to another $450,000 lump sum payment at the end of the severance
period.
Mr. van den Bergh had an employment agreement with the Company effective
as of May 1, 1996, which provided for, among other things, a base salary of
$500,000 per annum. Mr. van den Bergh's employment was terminated effective
June 30, 1997. Effective such date, Mr. van den Bergh entered into a
severance agreement with the Company having a severance period of one year.
Pursuant to the severance agreement, Mr. van den Bergh was paid two lump sum
payments during 1997 totaling $550,000 and is entitled to, among other
things, continued participation in the Company's medical plans during the
severance period.
Mr. Kaplan had an employment agreement with the Company effective as of
August 1, 1996, which provided for, among other things, a base salary of
$280,000 per annum. Mr. Kaplan's employment was terminated effective August
31, 1997. Effective such date Mr. Kaplan entered into a severance agreement
with the Company, having a severance period or two years. Pursuant to the
severance agreement, Mr. Kaplan is entitled to, among other things, severance
payments during the severance period at the rate of $426,000 per annum, and
continued participation in the Company's medical plans during the severance
period.
PENSION PLANS
RETIREMENT PLAN. The Company participates in the New Coleman Company,
Inc. Retirement Plan for Salaried Employees (the "Salaried Pension Plan")
which replaced a prior plan that was terminated on June 30, 1989.
Participants in the Salaried Pension Plan include participants under the
prior plan and certain salaried exempt employees who are at least 21 years
old and have completed at least one year of service with the Company.
Benefits to participants vest fully after five years of Vesting Service
(as defined in the Salaried Pension Plan) and such benefits are determined
primarily by a formula based on the average of the five consecutive years of
greatest compensation earned during the last ten years of the participant's
service to the Company, and the number of years of service attained by the
individual participant. Such compensation is composed primarily of regular
base salary and contributions to qualified deferred compensation plans and
does not include amounts paid pursuant to the Company's annual cash incentive
compensation plans. Participants make no contributions to the Salaried
Pension Plan.
EXCESS BENEFIT PLAN. The Company participates in the New Coleman
Holdings Inc. Excess Benefit Plan (the "Excess Benefit Plan") for designated
employees who are participants in the Salaried Pension Plan and whose
retirement income from the Salaried Pension Plan in the form of payment to be
made under the Salaried Pension Plan exceeds the maximum permissible under
the Employee Retirement Income Security Act, as amended, and certain
provisions of the Internal Revenue Code of 1986, as amended (the "Code").
The Excess Benefit Plan supplements the Salaried Pension Plan by providing
additional retirement benefits to its participants in excess of the maximum
amount permitted under the Salaried Pension Plan, which benefits generally
are payable in conjunction with payments made under the Salaried Pension
Plan. Benefits payable under the Excess Benefit Plan have been included in
the estimated annual benefits payable listed on the table following
discussion of the Consolidated Supplemental Retirement Plan. The Excess
Benefit Plan was amended and restated effective January 1, 1995 to add a
provision allowing annual cash incentive compensation plan payments to
designated participants to be included as compensation in the formula used to
determine benefits under the Excess Benefit Plan. Thirteen executives
participated in this feature of the Excess Benefit Plan during 1997.
CONSOLIDATED SUPPLEMENTAL RETIREMENT PLAN. In addition to the obligation
of the Company under the Salaried Pension Plan and the Excess Benefit Plan,
the Company had committed to provide other supplemental retirement benefits
solely for Mr. Hammes, including credit for additional years of service and
certain other formula changes. Pursuant to an agreement entered into with
Mr. Hammes in February 1997, discussed above, Mr. Hammes is no longer a
participant in the Consolidated Supplemental Retirement Plan.
30
The following table shows estimated annual benefits payable under the
Salaried Pension Plan and the Excess Benefit Plan, and reflects the straight
life benefit form of payment for employees, assumes normal retirement at age 65,
and reflects deductions for Social Security and other offset amounts:
Estimated Annual Pension
----------------------------------------------------------------------
Final Average 10 Years 20 Years 30 Years 35 Years
Earnings of Service of Service of Service of Service
------------- ---------- ---------- ---------- ----------
$ 100,000 $ 15,896 $ 31,792 $ 47,688 $ 55,636
200,000 35,896 71,792 107,688 125,636
300,000 55,896 111,792 167,688 195,636
400,000 75,896 151,792 227,688 265,636
500,000 95,896 191,792 287,688 335,636
600,000 115,896 231,792 347,688 405,636
700,000 135,896 271,792 407,688 475,636
800,000 155,896 311,792 467,688 545,636
900,000 175,896 351,792 527,688 615,636
1,000,000 195,896 391,792 587,688 685,636
1,100,000 215,896 431,792 647,688 755,636
1,200,000 235,896 471,792 707,688 825,636
1,300,000 255,896 511,792 767,688 895,636
1,400,000 275,896 551,792 827,688 965,636
1,500,000 295,896 591,792 887,688 1,035,636
1,600,000 315,896 631,792 947,688 1,105,636
1,700,000 335,896 671,792 1,007,688 1,175,636
1,800,000 355,896 711,792 1,067,688 1,245,636
Benefits under the Salaried Pension Plan are payable upon normal
retirement at age 65, and at age 55 following vested termination, disability,
and death. A participant may elect to commence early benefit payments at any
time after the participant's 55th birthday or may retire with 30 years of
Vesting Service at amounts reduced from those payable upon normal retirement
age. As of December 31, 1997, credited years of service for each of the
individuals listed on the Summary Compensation Table are as follows: Mr.
Levin, 8.7 years; Mr. Ramon, 4.6 years; Mr. Goldman, 4 years; Mr. Stearns,
21.2 years; Mr. McEvoy, 3.8 years; Mr. Hammes, 3.4 years; Mr. van den Bergh,
zero years; and Mr. Kaplan, 1.1 years. In accordance with Mr. Hammes'
termination of employment agreement (see Employment Agreements and
Termination of Employment Arrangements), discussed above, Mr. Hammes will be
entitled to receive a pension of $15,110 per month commencing March 1, 1999.
Pursuant to the Company Merger Agreement, from and after the effective
time of the CLN Holdings Merger, Sunbeam has agreed to allow Company
employees to participate in Sunbeam benefit plans on substantially the same
basis as similarly situated Sunbeam employees, and has also agreed to cause
the Company to continue its employee benefit plans for a period of at least
six (6) months following such date. Sunbeam has also agreed to give Company
employees full credit for purposes of eligibility and vesting of benefits and
benefit accrual for service with the Company and its affiliates prior to the
effective time of the CLN Holdings Merger provided, however, that no such
crediting of service results in duplication of benefits.
31
REPORT ON EXECUTIVE COMPENSATION BY THE COMPENSATION COMMITTEE
The Compensation Committee is comprised entirely of directors who are
not officers or employees of the Company. The Compensation Committee is
composed of Messrs. Robinson (Chairman), Drapkin and Slovin, and Ms. Jordan.
The Compensation Committee is responsible for:
- Reviewing and approving the salary and annual incentive compensation
of the Company's executive officers;
- Reviewing, approving or modifying performance standards against which
annual incentive compensation awards will be made for executive
officers;
- Reviewing, approving or modifying annual incentive compensation
awards for executive officers;
- Reviewing, approving or modifying stock option awards for all
employees, including executive officers;
- Reviewing, approving or modifying supplemental benefit or
compensation plans which are available to designated executives;
- Reviewing and recommending to the Board of Directors changes to
current executive officer benefit plans or the adoption of new
executive compensation programs requiring shareholder approval; and
- Reviewing and acting as appropriate on any other issues relating to
executive compensation and brought to the Compensation Committee by
the Chairman for its consideration.
COMPENSATION PHILOSOPHY
In 1994, the compensation philosophy for the Company was developed
and adapted. The philosophy includes the following principles:
- Support the achievement of the Company's desired financial
performance and return to shareholders;
- Provide compensation that will attract and retain the required high
level talent; and
- Align executives officers' interest with the Company's success by
linking both annual incentive compensation and long-term incentive
compensation, in the form of stock option and/or stock appreciation
rights awards, with the Company's success in achieving performance
goals.
The executive compensation philosophy for the Company, as
approved and adopted by the Compensation Committee, provides for an overall
level of potential compensation opportunity that, if aggressive financial goals
are achieved and superior shareholder returns are realized, will be at a 75th
percentile level of competitiveness with consumer products companies of
comparable size. To determine pay level opportunities, the Compensation
Committee consulted with outside consultants and with the Company's officers
responsible for human resources.
The Compensation Committee intends, over time, to set salaries in
a manner consistent with the foregoing. Annual incentive and stock option
opportunities are intended to be set above predicted competitive norms. Actual
individual compensation levels may be greater or lesser than median competitive
levels, based upon annual and long-term Company performance. The Compensation
Committee, at its discretion, sets executive compensation at levels which it
judges are justified by external, internal and other circumstances.
32
COMPLIANCE WITH FEDERAL TAX LEGISLATION
The Omnibus Budget Reconciliation Act of 1993 added Section
162(m) to the Code which, generally precludes the Company and other public
companies from taking a tax deduction for compensation over $1 million which is
not "performance-based" and is paid, or otherwise taxable, to executives named
in the Summary Compensation Table and employed by the Company at the end of the
applicable tax year. The Company attempts to preserve as much deduction as
possible without undercutting the compensation objectives set forth above. Each
director on the Compensation Committee is an "outside director" within the
meaning of Section 162(m) of the Code.
BASE COMPENSATION
During 1997, the base compensation of each executive officer was
reviewed and compared to median levels of competitiveness for similarly sized
consumer products companies. The Company has adopted the practice of base
compensation increases for executive officers based on an annual review of the
executive performance and to adjust compensation and to keep it approximately to
the standard described above.
ANNUAL CASH INCENTIVE COMPENSATION
The Chief Executive Officer was paid a bonus based on the targets
in the Incentive Plan, even though a certain condition to payment of the target
bonus was not satisfied. The other named executive officers who were employed
by Coleman at the end of the year were also paid a bonus based on the same
criteria. During 1997, no bonus was paid to the former Chief Executive Officer.
The bonuses were paid to recognize the substantial progress made in the
restructuring of Coleman.
LONG TERM INCENTIVES
In 1997, the Compensation Committee approved option grants to the
Chief Executive Officer of 200,000 shares on February 11, 1997, at an exercise
price of $12.25 and 300,000 shares on April 14, 1997 at an exercise price of
$14.00. It also approved grants totaling in the aggregate 160,000 shares to the
other named executive officers employed by the Company at the end of 1997. The
Compensation Committee believes that these grants, which were primarily made in
the first half of 1997, provide an appropriate link between the interest of
executives with those of the Company's shareholders.
OTHER BENEFITS
The Company provides medical and retirement benefits to executive
officers that are generally available to Company salaried employees, including
participation in medical and dental benefit plans, a qualified 401(k) employee
savings plan and a qualified defined benefit retirement plan. In addition, the
Company provides certain officers and key management employees a nonqualified
benefit equalization plan which is designed to make up for benefits that would
otherwise to lost due to various tax limitations. The Company's benefit plans
are intended to provide a median level of benefits when compared to similarly
sized consumer products companies. The Company also provides certain executive
officers with certain executive prerequisites which may be deemed to be a
personal benefit or constitute compensation to such executive officers,
including (for example) car allowances and reimbursements, and club membership
dues.
33
The Compensation Committee believes the executive compensation
philosophy and programs are appropriate and serve the interest of the
shareholders and the Company.
Compensation Committee:
James D. Robinson, Chairman
Donald G. Drapkin
Ann D. Jordan
Bruce Slovin
CUMULATIVE SHAREHOLDER RETURN PERFORMANCE GRAPH
The graph set forth below presents a comparison of cumulative
shareholder return for the Company's common stock for the five-year period
December 31, 1992 through December 31, 1997, on an indexed basis, as compared
with the S&P Midcap 400 stock index and a selected peer group of companies.
The group of companies selected for the peer group represents a
portfolio of companies which share certain characteristics considered relevant
to the earnings performance and related cumulative shareholder return for the
Company's common stock. Selection of the peer group for the performance line was
impacted by the fact that many of the Company's direct competitors are privately
held or are subsidiaries of much larger public companies. Selection criteria
applied in formulating the group of 12 companies, each of whose stock is
publicly traded, required each company to share one or more of the following
characteristics representative of the Company: (a) competitors with the Company
in one or more of its product lines; (b) companies which serve mass
merchandisers and their customers; (c) companies offering strong brand name
consumer products; and (d) companies serving recreational products consumers.
34
The 12 companies selected as the peer group are as follows: Johnson
Worldwide Associates, Inc.; Anthony Industries, Inc.; Huffy Corporation;
Kellwood Company (parent of American Recreation Products, Inc.); Russell
Corporation; Snap-on Tools Corporation; Sunbeam; Brunswick Corporation; V.F.
Corporation (parent of JanSport, Inc.); Newell Co.; Rubbermaid Incorporated; and
Cooper Industries, Inc.
[GRAPH]
12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
---------------------------------------------------------------
Coleman $100 $ 98 $123 $123 $ 96 $113
S&P MidCap 400 $100 $114 $110 $143 $171 $226
Peer Group $100 $107 $100 $106 $124 $160
35
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information concerning beneficial ownership,
as of the close of business on March 3, 1998, of the Company's common stock by
its 5% beneficial owners, its directors, Chief Executive Officer and the next
four most highly-compensated executives, and of directors and executive
officers as a group.
Name of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership of Class
- ---------------- -------------------- --------
Ronald O. Perelman 44,067,520 (1) 82%
35 E. 62nd Street
New York, New York 10021
Sunbeam Corporation 44,067,520 (2) 82%
1615 South Congress Avenue, Suite 200
Delray Beach, Florida 33445
Donald G. Drapkin 30,000 (3) *
Frank Gifford 0 *
Lawrence M. Jones 40,512 *
Ann Jordan 0 *
Jerry W. Levin 373,000 (4) *
John A. Moran 10,000 *
James D. Robinson III 0 *
Bruce Slovin 52,600 (5) *
William H. Spoor 6,000 (6) *
David A. Ramon 100,000 (7) *
Mark Goldman 0 *
David K. Stearns 25,342 (8) *
Patrick McEvoy 0 *
Michael N. Hammes 0 (9) *
Steven Kaplan 0 (9) *
Frederik van den Bergh 11,000 (9) *
All Directors and Executive 44,768,474(10) 83%
Officers as a Group
(21 persons)
* Less than 1%
- -------------
(1) Substantially all of the shares owned are pledged to secure obligations of
Coleman Worldwide and CLN Holdings and shares of intermediate holding
companies are or from time to time may be pledged to secure obligations of
MacAndrews & Forbes Holdings, Inc. or its affiliates.
(2) The Statement on Schedule 13D filed by Sunbeam on March 9, 1998 indicates
that Sunbeam may be deemed to be the beneficial owner of 44,067,520 shares
by reason of its execution of the CLN Holdings Merger Agreement.
(3) Includes 10,000 shares owned by trusts for the benefit of Mr. Drapkin's
children and as to which beneficial ownership is disclaimed.
(4) Includes 2,000 shares owned by trusts for the benefit of Mr. Levin's
children and as to which beneficial ownership is disclaimed. Includes
350,000 shares which may be acquired within 60 days pursuant to stock
options.
(5) Includes 46,300 shares held in trust for family members and as to which
beneficial ownership is disclaimed.
(6) Includes 4,000 shares held in trust for the benefit of Mr. Spoor pursuant
to the IDS Bank & Trust, Trustee, The Pillsbury Company 401(k) Savings
Plan.
36
(7) Includes 100,000 shares which may be acquired within 60 days pursuant to
stock options.
(8) Includes 520 shares held by Mr. Stearns' spouse and as to which beneficial
ownership is disclaimed. Includes 20,720 shares which may be acquired
within 60 days pursuant to stock options.
(9) No current information is available as to share ownership. Reflects
information in the Company's records as of the date of termination of
employment.
(10) Includes an additional 52,500 shares which may be acquired within 60 days
by directors and executive officers as a group pursuant to stock options.
Excludes 1,002,380 shares which may be acquired by directors and executive
officers pursuant to stock options which will vest and become exercisable
upon consummation of the CLN Holdings Merger.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
RELATIONSHIP WITH MACANDREWS & FORBES
Ronald O. Perelman, through MacAndrews & Forbes, beneficially owns
indirectly 82% of Coleman's common stock. Due to its stock ownership,
MacAndrews & Forbes controls Coleman and is able to elect the entire board of
directors. On February 27, 1998, the CLN Holdings Merger Agreement and the
Company Merger Agreement were executed as described in further detail above. As
a result of the CLN Holdings Merger, CLN Holdings will become a wholly-owned
subsidiary of Sunbeam and Sunbeam will become the indirect owner of
approximately 82% of the outstanding Coleman common stock. Additionally, upon
consummation of the CLN Holdings Merger, all of the current members of Coleman's
board of directors will resign from their positions as directors, and five
individuals designated by Sunbeam will become directors of the Company.
MacAndrews & Forbes is a diversified holding company with interests in
several industries. The principal executive offices of MacAndrews & Forbes are
located at 35 East 62nd Street, New York, New York 10021.
CROSS-INDEMNIFICATION AGREEMENT
Coleman and Holdings are parties to a cross-indemnification agreement
(the "Cross-Indemnification Agreement"), pursuant to which Coleman has agreed to
indemnify Holdings against all liabilities related to the outdoor products
business transferred to Coleman by Holdings, and Holdings has agreed to
indemnify Coleman and its immediate corporate parent against all liabilities of
Holdings other than liabilities related to the outdoor products business
transferred by Holdings to Coleman. The liabilities that Coleman will indemnify
Holdings against include (i) asserted and potential product liability claims
arising out of products manufactured or sold by the outdoor products business,
and (ii) asserted and potential environmental claims and liabilities related to
facilities currently or formerly owned or used by the outdoor products business.
TAX SHARING AGREEMENT
The Company is included in the consolidated tax group of which Mafco
is the common parent and Coleman's tax liability will be included in the
consolidated Federal income tax liability of Mafco. Coleman is also included in
certain state and local tax returns of Mafco or its affiliates. Coleman
participates in a Tax Sharing Agreement (the "Tax Sharing Agreement") pursuant
to which it pays to Coleman Worldwide amounts equal to the taxes that Coleman
would otherwise have to pay if it were to file separate Federal, state or local
income tax returns (including any amounts determined to be due as a result of a
redetermination of the tax liability of Mafco arising from an audit or
otherwise). Under Federal law, Coleman is subject to liability for the
consolidated Federal income tax liabilities of the consolidated group of which
Mafco is the common parent, for any taxable period during which Coleman or a
subsidiary is a member of that consolidated group. Mafco has agreed, however,
to indemnify Coleman for any such Federal income tax liability (and certain
state and local tax liabilities) of Mafco or any of its subsidiaries that
Coleman is actually required to pay. Because the payments to be made by Coleman
under the Tax Sharing Agreement are determined by the amount of taxes that
Coleman would otherwise have to pay if it were to file separate Federal, state
or local income tax returns, the Tax Sharing Agreement will benefit Mafco to the
extent that Mafco can offset the taxable income generated by Coleman against
losses and tax credits
37
generated by Mafco and its other subsidiaries. Following the consummation of
the CLN Holdings Merger, Coleman will no longer be included in the Mafco
consolidated tax group. The Tax Sharing Agreement will be terminated on the
date of the CLN Holdings Merger. The CLN Holdings Merger Agreement provides
for certain tax indemnities and tax sharing payments with respect to Mafco,
Coleman and their respective affiliates.
INSURANCE PROGRAMS
Coleman is insured under policies maintained by MacAndrews & Forbes or
its affiliates, including health and life insurance, workers compensation, and
liability insurance. The Company's expense represents its expected costs for
self-insured retentions and premiums for excess coverage insurance. For 1997,
such expense, including the Company's allocable share of premiums for such
insurance, was approximately $13.3 million. Management believes that the terms
for such insurance are at least as favorable as terms that could be obtained by
the Company were it separately insured.
SERVICES PROVIDED BY OTHER AFFILIATES
From time to time, Coleman purchases from affiliates, at negotiated
rates, specialized accounting and other services. Coleman also provides, at
negotiated rates, specialized accounting services and other services to an
affiliate. The net expense for such services was approximately $394,000 during
1997. Coleman believes that the terms of such arrangements are at least as
favorable to Coleman as those it could have negotiated with nonaffiliated
parties. In addition, certain employees of the Company have been paid by
MacAndrews & Forbes or other affiliates of the Company, and the Company
reimburses such affiliates for the compensation expense for such employees.
PURCHASE OF INACTIVE SUBSIDIARIES
During the first quarter of 1997, Coleman purchased an inactive
subsidiary from an affiliate for approximately $1.0 million, plus a portion of
certain tax benefits to the extent such benefits are realized by Coleman.
During the fourth quarter of 1997, Coleman purchased an inactive subsidiary from
an affiliate for which the Company agreed to pay 50% of the tax benefits
realized by Coleman when and if such benefits are realized. Coleman expects to
realize certain tax benefits from the tax losses of such subsidiaries.
OFFICE LEASE
Coleman subleases office space in New York City from an affiliate.
The rent paid by Coleman represents the allocable portion, based on the space
leased, of the rent paid by the affiliate to its third party landlord. The
expense for such rent during 1997 was approximately $158,000. Coleman believes
that the terms of the sublease are at least as favorable to Coleman as those it
could have negotiated with nonaffiliated parties.
PENSION PLANS
Holdings maintains pension and other retirement plans in various forms
covering employees of Coleman who meet eligibility requirements. Holdings also
has an unfunded excess benefit plan covering certain of Coleman's U.S. employees
whose benefits under the plans described above are limited by provisions of the
Code. Coleman pays to Holdings it allocable costs of maintaining such plans for
Coleman's employees. As part of the consummation of the CLN Holdings Merger,
such pension and other benefits plans will be assigned and assumed by Coleman.
OTHER ARRANGEMENTS
At the beginning of 1995, Mr. McEvoy, an Executive Vice President of
Coleman, had a noninterest-bearing loan from Coleman in the amount of $63,333.
At the end of 1997, the principal balance of the loan was $0.
38
During 1997, Coleman purchased licensing services from an affiliate,
for which it paid approximately $650,000.
During 1997, Coleman sold products to an affiliate, for which it
received approximately $900,000.
During 1997, Coleman used an airplane owned by a corporation of which
a director of Coleman is a stockholder, for which Coleman paid approximately
$158,000.
During 1997, a subsidiary of Coleman paid approximately $254,000 for
warehouse space leased from a real estate partnership in which Mr. Goldman, an
Executive Vice President of Coleman, and three other immediate family members of
Mr. Goldman's are partners. A manufacturing business owned by Mr. Goldman's
father contracted with Coleman's subsidiary for the manufacture of goods sold to
the subsidiary, for which the subsidiary paid approximately $2.6 million during
1997. Pursuant to the agreement by which Coleman acquired the Eastpak business,
Mr. Goldman is entitled to certain additional payments from Coleman upon Eastpak
achieving certain operating targets. In accordance with such agreement, a final
additional payment of $12.0 million was paid to Mr. Goldman for 1997 financial
performance.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1) and (2) Financial Statements and Schedule.
See List of Financial Statements and Schedules which appears
on page F-1 herein.
(3) Exhibits
EXHIBIT NO. DESCRIPTION
---------- -----------
2.1 Agreement and Plan of Merger among Sunbeam
Corporation, Camper Acquisition Corp. and The Coleman
Company, Inc. dated as of February 27, 1998
(incorporated by reference to Exhibit 2.1 to The
Coleman Company, Inc. Current Report on Form 8-K/A
filed on March 5, 1998).
2.2 Agreement and Plan of Merger among Sunbeam
Corporation, Laser Acquisition Corp, CLN Holdings Inc.
and Coleman (Parent) Holdings Inc. dated as of
February 27, 1998 (incorporated by reference to
Exhibit 10.1 to The Coleman Company, Inc. Current
Report on Form 8-K/A filed on March 5, 1998).
3.1 Certificate of Incorporation of The Coleman Company,
Inc., filed with the Secretary of State of Delaware on
December 17, 1991 (incorporated by reference to
Exhibit 3.1 to The Coleman Company, Inc. 1993 Annual
Report on Form 10-K).
3.2 Bylaws of The Coleman Company, Inc., as amended
(incorporated by reference to Exhibit 3.1 to The
Coleman Company, Inc. Form 10-Q for the period ended
June 30, 1997).
4.1 Amended and Restated Credit Agreement dated as of
August 3, 1995 among the Company, the Lenders party
thereto, the Issuing Bank, the Agent, and the
Co-Agents (incorporated by reference to Exhibit 4.2 to
The Coleman Company Inc. Form 10-Q for the period
ended June 30, 1995).
39
4.2 Amendment No. 1 dated as of April 30, 1996 to the
Amended and Restated Credit Agreement, dated as of
August 3, 1995 among The Coleman Company, Inc., the
Lenders party thereto, the Issuing Bank, the Agent and
the Co-Agents (incorporated by reference to Exhibit
4.1 to The Coleman Company, Inc. Form 10-Q for the
period ended March 31, 1996).
4.3 Amendment No. 2 dated as of April 30, 1996 to the
Amended and Restated Credit Agreement, dated as of
August 3, 1995 among The Coleman Company, Inc., the
Lenders party thereto, the Issuing Bank, the Agent and
the Co-Agents (incorporated by reference to Exhibit
4.2 to The Coleman Company, Inc. Form 10-Q for the
period ended March 31, 1996).
4.4 Amendment No. 3 dated as of May 29, 1996 to the
Amended and Restated Credit Agreement, dated as of
August 3, 1995 among The Coleman Company, Inc., the
Lenders party thereto, the Issuing Bank, the Agent and
the Co-Agents (incorporated by reference to Exhibit
4.1 to The Coleman Company, Inc. Form 10-Q for the
period ended September 30, 1996).
4.5 Amendment No. 4 dated as of October 25, 1996 to the
Amended and Restated Credit Agreement, dated as of
August 3, 1995 among The Coleman Company, Inc., the
Lenders party thereto, the Issuing Bank, the Agent and
the Co-Agents (incorporated by reference to Exhibit
4.2 to The Coleman Company, Inc. Form 10-Q for the
period ended September 30, 1996).
4.6 Amendment No. 5 dated as of March 7, 1997 to the
Amended and Restated Credit Agreement, dated as of
August 3, 1995 among The Coleman Company, Inc., the
Lenders party thereto, the Issuing Bank, the Agent and
the Co-Agents (incorporated by reference to Exhibit
4.6 to The Coleman Company, Inc. 1996 Annual Report on
Form 10-K).
4.7 Note Purchase Agreement dated as of August 3, 1995
among The Coleman Company, Inc., and Purchasers party
thereto (incorporated by reference to Exhibit 4.3 to
The Coleman Company Inc. Form 10-Q for the period
ended June 30, 1995).
4.8 Note Purchase Agreement dated as of May 1, 1996 among
The Coleman Company, Inc., and Purchasers party
thereto (incorporated by reference to Exhibit 4.1 to
The Coleman Company, Inc., Current Report on Form 8-K
dated June 28, 1996).
4.9 Specimen copy of definitive certificate of common
stock of The Coleman Company, Inc., par value $.01 per
share (incorporated by reference to Exhibit 4.4 to The
Coleman Company, Inc. 1992 Annual Report on Form 10-K).
10.1 Cross-Indemnification Agreement dated as of February
26, 1992 among New Coleman Holdings Inc., Coleman
Finance Holdings Inc., The Coleman Company, Inc., and
certain subsidiaries of New Coleman Holdings Inc. and
The Coleman Company, Inc., (incorporated by reference
to Exhibit 10.1 to The Coleman Company, Inc. 1992
Annual Report on Form 10-K).
10.2 Amendment No. 1 dated as of December 30, 1992 to the
Cross-Indemnification Agreement (incorporated by
reference to Exhibit 10.2 to The Coleman Company, Inc.
1992 Annual Report on Form 10-K).
40
10.3 Reimbursement Agreement dated as of February 26, 1992
between The Coleman Company, Inc., and MacAndrews
Holdings (incorporated by reference to Exhibit 10.4 to
The Coleman Company, Inc. 1992 Annual Report on Form
10-K).
10.4 Tax Allocation Agreement dated as of August 24, 1990
among MacAndrews Holdings, New Coleman Holdings Inc.
and subsidiaries of New Coleman Holdings Inc.
(incorporated by reference to Exhibit 10.29 to The
Coleman Company, Inc. 1992 Annual Report on Form 10-K).
10.5 Amendment No. 1 dated as of February 26, 1992 to the
Tax Allocation Agreement dated as of August 24, 1990
among MacAndrews Holdings, New Coleman Holdings Inc.
and subsidiaries of New Coleman Holdings Inc.
(incorporated by reference to Exhibit 10.30 to The
Coleman Company, Inc. 1992 Annual Report on Form 10-K).
10.6 Amendment No. 2 dated as of December 30, 1992 to the
Tax Allocation Agreement dated as of August 24, 1990
among MacAndrews Holdings, New Coleman Holdings Inc.
and subsidiaries of New Coleman Holdings Inc.
(incorporated by reference to Exhibit 10.31 to The
Coleman Company, Inc. 1992 Annual Report on Form 10-K).
10.7 Amendment No. 3 dated as of May 27, 1993 to the Tax
Allocation Agreement dated as of August 24, 1990
among MacAndrews Holdings, New Coleman Holdings Inc.
and subsidiaries of New Coleman Holdings Inc.
(incorporated by reference to Exhibit 10.45 to the
Coleman Holdings Inc. Registration Statement Form S-1
(File No. 33- 67058), filed on August 6, 1993.
10.8 Tax Sharing Agreement II dated as of February 26,
1992, among Mafco, Coleman Finance Holdings Inc., The
Coleman Company, Inc. and certain subsidiaries of The
Coleman Company, Inc. (incorporated by reference to
Exhibit 10.25 to The Coleman Company, Inc. 1992 Annual
Report on Form 10-K).
10.9 Amendment No. 1 dated as of December 30, 1992 to the
Tax Sharing Agreement II dated as of February 26,
1992, among Mafco, Coleman Finance Holdings Inc., The
Coleman Company, Inc. and certain subsidiaries of The
Coleman Company, Inc. (incorporated by reference to
Exhibit 10.26 to The Coleman Company, Inc. 1992 Annual
Report on Form 10-K).
10.10 Supplemental Tax Sharing Agreement dated as of
February 26, 1992, between The Coleman Company, Inc.
and MacAndrews and Forbes Holdings Inc. (incorporated
by reference to Exhibit 10.32 to The Coleman Company,
Inc. 1992 Annual Report on Form 10-K).
10.11 Tax Sharing Agreement III dated as of February 26,
1992 among Mafco, New Coleman Holdings Inc., Coleman
Finance Holdings Inc. and subsidiaries of Coleman
Finance Holdings Inc. (incorporated by reference to
Exhibit 10.27 to The Coleman Company, Inc. 1992 Annual
Report on Form 10-K).
10.12 Amendment No. 1 dated as of December 30, 1992 to the
Tax Sharing Agreement III dated as of February 26,
1992 among Mafco, New Coleman Holdings Inc., Coleman
Finance Holdings Inc. and subsidiaries of Coleman
Finance Holdings Inc. (incorporated by reference to
Exhibit 10.28 to The Coleman Company, Inc. 1992 Annual
Report on Form 10-K).
41
10.13 Tax Sharing Agreement V dated as of May 27, 1993 among
Mafco, Coleman Worldwide Corporation, The Coleman
Company, Inc. and certain subsidiaries of The Coleman
Company, Inc. (incorporated by reference to Exhibit
10.38 to the Coleman Holdings Inc. Registration
Statement Form S-1 (File 33-67058), filed on August 6,
1993).
10.14 Tax Sharing Termination Agreement dated as of May 27,
1993 among Mafco, New Coleman Holdings Inc., Coleman
Finance Holdings Inc., The Coleman Company, Inc. and
subsidiaries of The Coleman Company, Inc. and Coleman
Finance Holdings Inc. (incorporated by reference to
Exhibit 10.40 to the Coleman Holdings Inc.
Registration Statement Form S-1 (File 33-67058), filed
on August 6, 1993).
10.15 Worldwide Registration Rights Agreement dated as of
May 27, 1993 among Coleman Worldwide Corporation, The
Coleman Company, Inc. the Lenders Party thereto and
the Agent (incorporated by reference to Exhibit 10.47
to the Coleman Holdings Inc. Registration Statement
Form S-1 (File 33-67058), filed on August 6, 1993).
10.16*X The Coleman Company, Inc. Executive Severance
Policy effective as of February 27, 1998.
10.17 Contingent Payment Agreement dated as of October 10,
1994, by and among E. Acquisition Corporation, M.
Acquisition Corporation, The Coleman Company, Inc. and
Mark Goldman (incorporated by reference to Exhibit
10.3 to The Coleman Company, Inc. Current Report on
Form 8-K dated November 2, 1994).
10.18 Share Purchase Agreement dated as of February 27, 1996
by and among Butagaz S.N.C. and Bafiges S.A.
(incorporated by reference to Exhibit 10.26 to The
Coleman Company, Inc. 1995 Annual Report on Form 10-K).
10.19 Amendment to the Share Purchase Agreement dated as of
February 27, 1996 by and among Bafiges S.A. and
Butagaz S.N.C. (incorporated by reference to Exhibit
10.27 to The Coleman Company, Inc. 1995 Annual Report
on Form 10-K).
10.20 Shareholders Agreement dated as of February 27, 1996
by and among Butagaz S.N.C., The Coleman Company, Inc.
and Bafiges S.A. (incorporated by reference to Exhibit
10.28 to The Coleman Company, Inc. 1995 Annual Report
on Form 10-K).
10.21 Agreement dated as of February 27, 1996 by and between
Shell International Petroleum Company Limited, Butagaz
S.N.C. on the first part, and Bafiges S.A. and The
Coleman Company, Inc. on the second part (incorporated
by reference to Exhibit 10.29 to The Coleman Company,
Inc. 1995 Annual Report on Form 10-K).
10.22* Letter Agreement dated as of February 28, 1997
between The Coleman Company, Inc. and Michael N.
Hammes (incorporated by reference to Exhibit 10.81
to The Coleman Company, Inc. 1996 Annual Report on
Form 10-K).
10.23* Employment Agreement dated as of January 1, 1996
between The Coleman Company, Inc. and Patrick
McEvoy (incorporated by reference to Exhibit 10.1
to The Coleman Company, Inc. Form 10-Q for the
period ended March 31, 1996).
10.24* First Amendment dated August 1, 1996 to Employment
Agreement effective as of January 1, 1996, by and
between The Coleman Company, Inc., and Patrick
McEvoy
42
(incorporated by reference to Exhibit 10.6 to The
Coleman Company, Inc. Form 10-Q for the period ended
September 30, 1996).
10.25*X Retention Agreement dated September 22, 1997
between The Coleman Company, Inc. and Patrick
McEvoy.
10.26* Employment Agreement dated as of January 1, 1996
between The Coleman Company, Inc. and David
Stearns (incorporated by reference to Exhibit
10.50 to The Coleman Company, Inc. 1995 Annual
Report on Form 10-K).
10.27* First Amendment dated August 1, 1996 to Employment
Agreement effective as of January 1, 1996, by and
between The Coleman Company, Inc. and David
Stearns (incorporated by reference to Exhibit 10.4
to The Coleman Company, Inc. Form 10-Q for the
period ended September 30, 1996).
10.28* Letter Agreement dated as of June 30, 1997 between
The Coleman Company, Inc. and Frederik van den
Bergh (incorporated by reference to Exhibit 10.5
to The Coleman Company, Inc. Form 10-Q for the
period ended June 30, 1997).
10.29* Employment Agreement dated as of November 1, 1994
between E. Acquisition Corporation and Mark
Goldman (incorporated by reference to Exhibit
10.79 to The Coleman Company, Inc. 1996 Annual
Report on Form 10-K).
10.30* Employment Agreement dated as of November 1, 1994
between M. Acquisition Corporation and Mark
Goldman (incorporated by reference to Exhibit
10.80 to The Coleman Company, Inc. 1996 Annual
Report on Form 10-K).
10.31*X The Coleman Company, Inc. Executive Annual
Incentive Plan.
10.32* The Coleman Retirement Salaried Incentive Savings
Plan (incorporated by reference to Exhibit 10.3 to
The Coleman Company, Inc. Form 10-Q for the period
ended March 31, 1996).
10.33* The Coleman Retirement Incentive Savings Plan (the
"Savings Plan") (incorporated by reference to
Exhibit 10.54 to The Coleman Company, Inc. 1995
Annual Report on Form 10-K).
10.34* First Amendment dated as of October 11, 1994 to
the Savings Plan (incorporated by reference to
Exhibit 10.55 to The Coleman Company, Inc. 1995
Annual Report on Form 10-K).
10.35* Second Amendment dated as of January 1, 1995 to
the Savings Plan (incorporated by reference to
Exhibit 10.56 to The Coleman Company, Inc. 1995
Annual Report on Form 10-K).
10.36* Third Amendment dated as of December 14, 1995 to
the Savings Plan (incorporated by reference to
Exhibit 10.57 to The Coleman Company, Inc. 1995
Annual Report on Form 10-K).
10.37* Fourth Amendment dated as of December 14, 1995 to
the Savings Plan (incorporated by reference to
Exhibit 10.58 to The Coleman Company, Inc. 1995
Annual Report on Form 10-K).
43
10.38* Fifth Amendment dated as of January 1, 1996 to the
Savings Plan (incorporated by reference to Exhibit
10.59 to The Coleman Company, Inc. 1995 Annual
Report on Form 10-K).
10.39* Amendment dated as of December 14, 1995 to the
Savings Plan (incorporated by reference to Exhibit
10.60 to The Coleman Company, Inc. 1995 Annual
Report on Form 10-K).
10.40* Amendment dated as of December 14, 1995 to the
Savings Plan (incorporated by reference to Exhibit
10.61 to The Coleman Company, Inc. 1995 Annual
Report on Form 10-K).
10.41* Amendment dated as of January 1, 1996 to the
Savings Plan (incorporated by reference to Exhibit
10.62 to The Coleman Company, Inc. 1995 Annual
Report on Form 10-K).
10.42* New Coleman Holdings Inc. Excess Benefit Plan
dated as of January 1, 1995 (incorporated by
reference to Exhibit 10.1 to The Coleman Company,
Inc. Form 10-Q for the period ended June 30,
1996).
10.43* The New Coleman Company, Inc. Retirement Plan for
Salaried Employees (the "Retirement Plan")
(incorporated by reference to Exhibit 10.63 to The
Coleman Company, Inc. 1995 Annual Report on Form
10-K).
10.44* Amendment dated as of October 17, 1994 to the
Retirement Plan (incorporated by reference to
Exhibit 10.64 to The Coleman Company, Inc. 1995
Annual Report on Form 10-K).
10.45* Amendment dated as of December 14, 1995 to the
Retirement Plan (incorporated by reference to
Exhibit 10.65 to The Coleman Company, Inc. 1995
Annual Report on Form 10-K).
10.46* Amendment dated as of December 14, 1995 to the
Retirement Plan (incorporated by reference to
Exhibit 10.66 to The Coleman Company, Inc. 1995
Annual Report on Form 10-K).
10.47* Amendment dated as of October 12, 1995 to the
Retirement Plan (incorporated by reference to
Exhibit 10.67 to The Coleman Company, Inc. 1995
Annual Report on Form 10-K).
10.48* Amendment dated as of January 1, 1996 to the
Retirement Plan (incorporated by reference to
Exhibit 10.68 to The Coleman Company, Inc. 1995
Annual Report on Form 10-K).
10.49* Amendment dated as of December 31, 1995 to the
Retirement Plan (incorporated by reference to
Exhibit 10.69 to The Coleman Company, Inc. 1995
Annual Report on Form 10-K).
10.50* The Coleman Company, Inc. Consolidated
Supplemental Retirement Plan, dated as of January
1, 1996 (incorporated by reference to Exhibit
10.73 to The Coleman Company, Inc. 1995 Annual
Report on Form 10-K).
44
10.51* First Amendment dated July 1, 1996 to the
Consolidated Supplemental Retirement Plan adopted
January 1, 1996 (incorporated by reference to
Exhibit 10.5 to The Coleman Company, Inc. Form 10-Q
for the period ended June 30, 1996).
10.52* The Coleman Company, Inc. Executive Employees
Deferred Compensation Plan, as amended by the
First Amendment thereto (incorporated by reference
to Exhibit 10.11 to The Coleman Company, Inc.
Registration Statement on Form S-1 (File 33-44728),
filed on December 23, 1991).
10.53* The Coleman Company, Inc. 1992 Stock Option Plan,
as amended (incorporated by reference to Exhibit
10.3 to The Coleman Company, Inc. Form 10-Q for
the period ended June 30, 1997).
10.54* The Coleman Company, Inc. 1993 Stock Option Plan,
as amended (incorporated by reference to Exhibit
10.1 to The Coleman Company, Inc. Form 10-Q for
the period ended June 30, 1997).
10.55* The Coleman Company, Inc. 1996 Stock Option Plan,
as amended (incorporated by reference to Exhibit
10.53 to The Coleman Company, Inc. 1996 Annual
Report on Form 10-K).
10.56X Stock Purchase Agreement among The Coleman
Company, Inc., as Seller, Siebe plc, as Guarantor,
and Ranco Incorporated of Delaware, as Buyer,
dated as of February 18, 1998.
10.57*X Amendment No. 2 to The New Coleman Company, Inc.
Retirement Plan for Salaried Employees.
10.58*X Special Amendment to The New Coleman Company, Inc.
Retirement Plan for Salaried Employees.
10.59*X The New Coleman Company, Inc. Pension Plan for
Weekly Salaried and Hourly Paid Employees.
21.1X Subsidiaries of the Company.
23.1X Consent of Independent Auditors.
24.1X Powers of Attorney executed by Ronald O. Perelman,
Donald G. Drapkin, Frank Gifford, Lawrence M. Jones,
Ann D. Jordan, Jerry W. Levin, John A. Moran, James D.
Robinson, Bruce Slovin, William H. Spoor.
27X Financial Data Schedule
--------------------
* Management Contracts and Compensatory Plans
X Filed herewith
(b) Reports on Form 8-K
A Current Report on Form 8-K was filed on March 3, 1998 to
disclose certain information with regard to the acquisition of CLN
Holdings and the Company by Sunbeam Corporation.
A Current Report on Form 8-K/A was filed on March 5, 1998 to
amend and restate the Company's Current Report on Form 8-K filed on
March 3, 1998.
45
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: March 18, 1998 By: /s/ Jerry W. Levin
-------------------- ------------------------------------
Jerry W. Levin
Chairman of the Board,
Chief Executive Officer, and Director
Date: March 18, 1998 By: /s/ Joseph P. Page
-------------------- ------------------------------------
Joseph P. Page
Executive Vice President and
Chief Financial Officer
Date: March 18, 1998 By: /s/ Karen Clark
-------------------- ------------------------------------
Karen Clark
Vice-President Finance
Pursuant to the requirements of the Securities and Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: March 18, 1998 By: Ronald O. Perelman *
-------------------- ------------------------------------
Ronald O. Perelman
Director
Date: March 18, 1998 By: Donald G. Drapkin *
-------------------- ------------------------------------
Donald G. Drapkin
Director
Date: March 11, 1998 By: Frank Gifford *
-------------------- ------------------------------------
Frank Gifford
Director
Date: March 11, 1998 By: Lawrence M. Jones *
-------------------- ------------------------------------
Lawrence M. Jones
Director
Date: March 18, 1998 By: Ann D. Jordan *
-------------------- ------------------------------------
Ann D. Jordan
Director
46
Date: March 18, 1998 By: Jerry W. Levin *
-------------------- ------------------------------------
Jerry W. Levin
Director
Date: March 14, 1998 By: John A. Moran *
-------------------- ------------------------------------
John A. Moran
Director
Date: March 11, 1998 By: James D. Robinson *
-------------------- ------------------------------------
James D. Robinson
Director
Date: March 18, 1998 By: Bruce Slovin *
-------------------- ------------------------------------
Bruce Slovin
Director
Date: March 18, 1998 By: William H. Spoor *
-------------------- ------------------------------------
William H. Spoor
Director
* Executed on behalf of the named director pursuant to a power of attorney.
Date: March 23, 1998 By: /s/ Paul E. Shapiro
-------------------- ------------------------------------
Paul E. Shapiro
Attorney-in-fact
47
ANNUAL REPORT ON FORM 10-K
ITEM 8, ITEM 14(a)(1) AND (2) AND (d)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
YEAR ENDED DECEMBER 31, 1997
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
The following consolidated financial statements of The Coleman Company,
Inc. and Subsidiaries are included in Item 8:
PAGE
----
Consolidated Balance Sheets as of December 31, 1997 and 1996........ F-3
Consolidated Statements of Operations
for the years ended December 31, 1997, 1996 and 1995............... F-4
Consolidated Statements of Stockholders' Equity
for the years ended December 31, 1997, 1996 and 1995............... F-5
Consolidated Statements of Cash Flows
for the years ended December 31, 1997, 1996 and 1995............... F-6
Notes to Consolidated Financial Statements.......................... F-7
Consolidated financial statement schedules of The Coleman Company, Inc. and
Subsidiaries included in Item 14(d):
All schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under
the related instructions or are inapplicable and, therefore, have been
omitted.
F-1
REPORT OF INDEPENDENT AUDITORS
Stockholders and Board of Directors
The Coleman Company, Inc.
We have audited the accompanying consolidated balance sheets of The Coleman
Company, Inc. and subsidiaries as of December 31, 1997 and 1996, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended December 31, 1997. 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
The Coleman Company, Inc. and subsidiaries at December 31, 1997 and 1996, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 1997, in conformity with
generally accepted accounting principles.
/s/ Ernst & Young LLP
Wichita, Kansas
February 18, 1998
F-2
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
December 31,
-------------------------
1997 1996
---------- ----------
ASSETS
Current assets:
Cash and cash equivalents...................... $ 13,031 $ 17,299
Accounts receivable, less allowance of
$8,930 in 1997 and $11,512 in 1996............ 154,279 182,418
Notes receivable............................... 25,477 27,524
Inventories.................................... 236,327 287,502
Income tax refunds receivable - affiliate...... 14,860 21,661
Deferred tax assets............................ 26,378 40,466
Prepaid assets and other....................... 21,344 15,769
---------- ----------
Total current assets......................... 491,696 592,639
Property, plant and equipment, net............... 175,494 199,182
Intangible assets related to businesses
acquired, net................................... 332,468 341,715
Deferred tax assets and other.................... 42,106 26,550
---------- ----------
$1,041,764 $1,160,086
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt.............. $ 523 $ 747
Short-term borrowings.......................... 64,207 33,935
Accounts payable............................... 91,846 98,628
Accounts payable - affiliates.................. 2,825 278
Accrued expenses............................... 93,796 112,906
---------- ----------
Total current liabilities.................... 253,197 246,494
Long-term debt................................... 477,276 582,866
Other liabilities................................ 69,586 76,173
Minority interest................................ 1,236 1,608
Commitments and contingencies
Stockholders' equity:
Preferred stock, par value $.01 per share;
20,000,000 shares authorized, no shares issued
or outstanding................................ -- --
Common stock, par value $.01 per share;
80,000,000 shares authorized; 53,433,414
shares issued and outstanding in 1997; and
53,222,420 shares issued and outstanding in 1996 534 532
Additional paid-in capital..................... 172,072 166,690
Retained earnings.............................. 80,296 82,832
Currency translation adjustment................ (11,510) 3,176
Minimum pension liability adjustment........... (923) (285)
---------- ----------
Total stockholders' equity................... 240,469 252,945
---------- ----------
$1,041,764 $1,160,086
---------- ----------
---------- ----------
See Notes to Consolidated Financial Statements
F-3
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE DATA)
Year Ended December 31,
--------------------------------------
1997 1996 1995
---------- ---------- --------
Net revenues......................................... $1,154,294 $1,220,216 $933,574
Cost of sales........................................ 840,331 928,497 649,427
---------- ---------- --------
Gross profit......................................... 313,963 291,719 284,147
Selling, general and administrative expenses......... 266,283 291,669 174,688
Asset impairment charge.............................. -- -- 12,289
Interest expense, net................................ 40,852 38,727 24,545
Amortization of goodwill and deferred charges........ 11,338 10,473 7,745
Other expense, net................................... 1,867 1,151 334
---------- ---------- --------
(Loss) earnings before income taxes, minority
interest and extraordinary item.................... (6,377) (50,301) 64,546
Income tax (benefit) expense......................... (5,227) (10,927) 24,479
Minority interest.................................... 1,386 1,872 --
---------- ---------- --------
(Loss) earnings before extraordinary item............ (2,536) (41,246) 40,067
Extraordinary loss on early extinguishment of debt,
net of income tax benefit of $431 in 1996,
and $503 in 1995................................ -- (647) (787)
---------- ---------- --------
Net (loss) earnings $ (2,536) $ (41,893) $ 39,280
---------- ---------- --------
---------- ---------- --------
Basic (loss) earnings per share:
(Loss) earnings before extraordinary item.......... $ (.05) $ (0.78) $ 0.75
Extraordinary item................................. -- (0.01) (0.01)
---------- ---------- --------
Net (loss) earnings.............................. $ (.05) $ (0.79) $ 0.74
---------- ---------- --------
---------- ---------- --------
Diluted (loss) earning per share:
(Loss) earnings before extraordinary item.......... $ (.05) $ (0.78) $ 0.75
Extraordinary item................................. -- (0.01) (0.01)
---------- ---------- --------
Net (loss) earnings.............................. $ (.05) $ (0.79) $ 0.74
---------- ---------- --------
---------- ---------- --------
See Notes to Consolidated Financial Statements
F-4
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
Common Stock
--------------------- Additional Currency Minimum
Number Paid-In Retained Translation Pension
of Shares Amount Capital Earnings Adjustment Liability
---------- ------ ---------- -------- ----------- ---------
Balance at December 31, 1994.......... 53,071,532 $531 $162,873 $ 89,059 $ 900 $ --
Purchases of common stock........... (220,000) (2) (1,924) (2,160) -- --
Stock issued under stock
option plans....................... 325,748 3 3,935 -- -- --
Stock option tax benefits........... -- -- 582 -- -- --
Net earnings........................ -- -- -- 39,280 -- --
Currency translation adjustment..... -- -- -- -- (735) --
---------- ---- -------- -------- -------- -----
Balance at December 31, 1995.......... 53,177,280 532 165,466 126,179 165 --
Purchases of common stock........... (100,000) (1) (874) (1,454) -- --
Stock split issuance costs.......... -- -- (93) -- -- --
Stock issued under stock
option plans....................... 145,140 1 1,737 -- -- --
Stock option tax benefits........... -- -- 454 -- -- --
Net loss............................ -- -- -- (41,893) -- --
Currency translation adjustment..... -- -- -- -- 3,011 --
Minimum pension liability
adjustment, net of tax............. -- -- -- -- -- (285)
---------- ---- -------- -------- -------- -----
Balance at December 31, 1996.......... 53,222,420 532 166,690 82,832 3,176 (285)
Stock issued under stock
option plans....................... 210,994 2 2,358 -- -- --
Stock option tax benefits........... -- -- 225 -- -- --
Contribution to capital by parent... -- -- 2,799 -- -- --
Net loss............................ -- -- -- (2,536) -- --
Currency translation adjustment..... -- -- -- -- (14,686) --
Minimum pension liability
adjustment, net of tax............. -- -- -- -- -- (638)
---------- ---- -------- -------- -------- -----
Balance at December 31, 1997.......... 53,433,414 $534 $172,072 $80,296 $(11,510) $(923)
---------- ---- -------- -------- -------- -----
---------- ---- -------- -------- -------- -----
See Notes to Consolidated Financial Statements
F-5
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
Year Ended December 31,
---------------------------------
1997 1996 1995
-------- --------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) earnings............................................... $ (2,536) $ (41,893) $ 39,280
-------- --------- --------
Adjustments to reconcile net (loss) earnings to net cash flows
from operating activities:
Depreciation and amortization.................................. 37,977 36,358 26,523
Non-cash restructuring and other charges....................... 17,325 48,269 12,289
Extraordinary loss on early extinguishment of debt............. -- 1,078 1,290
Minority interest.............................................. 1,386 1,872 --
Change in assets and liabilities:
Decrease (increase) in receivables........................... 23,296 976 (37,833)
Decrease (increase) in inventories........................... 35,250 (42,402) (49,396)
Increase (decrease) in accounts.payable...................... 1,226 (12,308) 13,825
Other, net................................................... (22,683) (1,279) (3,780)
-------- --------- --------
93,777 32,564 (37,091)
-------- --------- --------
Net cash provided (used) by operating activities.................. 91,241 (9,329) 2,189
-------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures.............................................. (26,973) (41,334) (29,053)
Purchases of businesses, net of cash acquired..................... (14,300) (161,875) (33,385)
Proceeds from sale of fixed assets................................ 5,728 2,924 928
-------- --------- --------
Net cash used by investing activities............................. (35,545) (200,285) (61,510)
-------- --------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in short-term borrowings............................... 37,071 (11,043) 3,106
Net payments of revolving credit agreement borrowings............. (91,498) (2,779) (61,289)
Proceeds from issuance of long-term debt.......................... -- 235,000 200,000
Repayment of long-term debt....................................... (2,867) (6,648) (73,884)
Debt issuance and refinancing costs............................... (766) (3,902) (3,569)
Purchases of Company common stock................................. -- (2,329) (4,086)
Proceeds from stock options exercised including tax benefits...... 2,585 2,192 4,520
-------- --------- --------
Net cash (used) provided by financing activities.................. (55,475) 210,491 64,798
-------- --------- --------
Effect of exchange rate changes on cash........................... (4,489) 4,357 (1,731)
-------- --------- --------
Net (decrease) increase in cash and cash equivalents.............. (4,268) 5,234 3,746
Cash and cash equivalents at beginning of the year................ 17,299 12,065 8,319
-------- --------- --------
Cash and cash equivalents at end of the year...................... $ 13,031 $ 17,299 $ 12,065
-------- --------- --------
-------- --------- --------
See Notes to Consolidated Financial Statements
F-6
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BACKGROUND:
The Coleman Company, Inc. ("Coleman" or the "Company") is a global
manufacturer and marketer of consumer products for outdoor recreation and
home hardware use.
Coleman is a subsidiary of Coleman Worldwide Corporation ("Coleman
Worldwide"). Coleman Worldwide is a subsidiary of CLN Holdings Inc. ("CLN
Holdings"), an indirect wholly-owned subsidiary of New Coleman Holdings Inc.
("Holdings"), an indirect wholly-owned subsidiary of MacAndrews & Forbes
Holdings Inc. ("MacAndrews Holdings"), a corporation wholly owned through
Mafco Holdings Inc. ("Mafco" and, together with MacAndrews Holdings,
"MacAndrews & Forbes") by Ronald O. Perelman. Coleman Worldwide owns
44,067,520 shares of the common stock of Coleman which represent
approximately 82% of the outstanding Coleman common stock as of December 31,
1997.
PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements include the accounts of the
Company and its subsidiaries after elimination of all material intercompany
accounts and transactions.
CASH AND CASH EQUIVALENTS:
All highly liquid investments with a maturity of three months or
less at the date of purchase are considered to be cash equivalents. The
Company's cash equivalents consist primarily of investments in money market
funds and commercial paper. The Company's cash equivalents are generally
held until maturity and are carried at cost, which approximates fair value.
INVENTORIES:
Inventories are stated at the lower of cost or market. Cost is
determined by the first-in, first-out method.
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment is recorded at cost and depreciated
on a straight-line basis over the estimated useful lives of such assets as
follows: land improvements, 5 to 25 years; buildings and building
improvements, 7 to 45 years; and machinery and equipment, 3 to 15 years.
Leasehold improvements are amortized over their estimated useful lives or the
terms of the leases, whichever is shorter. Repairs and maintenance are
charged to operations as incurred, and significant expenditures for additions
and improvements are capitalized.
INTANGIBLE ASSETS:
Intangible assets primarily represent goodwill which is being
amortized on a straight-line basis over periods not in excess of 40 years.
The carrying amount of goodwill is reviewed if facts and circumstances
suggest it may be impaired. If this review indicates goodwill will not be
recoverable over the remaining amortization period, as determined based on
the estimated undiscounted cash flows of the entity acquired, the carrying
amount
F-7
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
of the goodwill is reduced to estimated fair value based on market value or
discounted cash flows, as appropriate. Accumulated amortization aggregated
$47,250 and $38,851 at December 31, 1997 and 1996, respectively.
REVENUE RECOGNITION:
The Company recognizes revenues at the time title passes to the
customer. Net revenues comprise gross revenues less provisions for estimated
customer returns and allowances.
RESEARCH AND DEVELOPMENT:
Research and development expenditures are expensed as incurred.
The amounts charged against operations for the years ended December 31, 1997,
1996 and 1995 were $11,871, $11,082, and $6,548, respectively.
ADVERTISING AND PROMOTION EXPENSE:
Production costs of future media advertising are deferred until the
advertising occurs. All other advertising and promotion costs are expensed
when incurred. The amounts charged against operations for the years ended
December 31, 1997, 1996 and 1995 were $53,408, $58,823, and $37,544,
respectively.
INSURANCE PROGRAMS:
The Company obtains insurance coverage for catastrophic exposures
as well as those risks required to be insured by law or contract. It is the
policy of the Company to retain a significant portion of certain losses
related primarily to workers' compensation, employee health benefits,
physical loss and property, and product and vehicle liability. Provisions
for losses expected under these programs are recorded based upon the
Company's estimates of the aggregate liability for claims incurred.
FOREIGN CURRENCY TRANSLATION:
Assets and liabilities of foreign operations are generally
translated into United States dollars at the rates of exchange in effect at
the balance sheet date. Income and expense items are generally translated at
the weighted average exchange rates prevailing during each period presented.
Gains and losses resulting from foreign currency transactions are included in
the results of operations. Gains and losses resulting from translation of
financial statements of foreign subsidiaries and branches operating in
non-highly inflationary economies are recorded as a component of
stockholder's equity. Foreign subsidiaries and branches operating in highly
inflationary economies translate nonmonetary assets and liabilities at
historical rates and include translation adjustments in the results of
operations.
DERIVATIVE FINANCIAL INSTRUMENTS:
The Company uses derivative financial instruments to reduce
interest rate and foreign exchange exposures. The Company maintains a
control environment which includes policies and procedures for risk
assessment and for the approval, reporting and monitoring of derivative
financial instrument activities. The Company does not hold or issue
derivative financial instruments for trading purposes.
F-8
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
Amounts to be received or paid under interest rate swap and cap
contracts designated as hedges are recognized over the life of the contracts
as adjustments to interest expense. Gains and losses on terminations of
interest rate swap and cap contracts designated as hedges are deferred and
amortized as adjustments to interest expense over the remaining life of the
terminated contracts. Unrealized gains and losses on outstanding interest
rate contracts designated as hedges are not recognized.
Foreign currency forward contracts are marked to market and gains
and losses on foreign currency forward contracts to hedge firm foreign
currency commitments are deferred and accounted for as part of the related
foreign currency transaction. Gains and losses on all other forward
contracts to hedge third-party and intercompany transactions are recorded in
operations as foreign exchange gains and losses. Gains and losses on
purchased foreign currency option contracts are deferred and recognized as
adjustments to cost of sales upon the sale of the related inventory to the
third-party customers.
CREDIT RISK:
Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of trade receivables and
derivative financial instruments. Credit risk on trade receivables is
minimized as a result of the large and diversified nature of the Company's
worldwide customer base. Although the Company has one significant customer
(See Note 15), there have been no credit losses related to this customer.
With respect to its derivative contracts, the Company is also subject to
credit risk of non-performance by counterparties and its maximum potential
loss may exceed the amount recognized in the financial statements. The
Company controls its exposure to credit risk through credit approvals, credit
limits and monitoring procedures. Collateral is generally not required for
the Company's financial instruments.
FAIR VALUE OF FINANCIAL INSTRUMENTS:
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:
CASH AND CASH EQUIVALENTS: The carrying amount reported in
the balance sheet for cash and cash equivalents approximates
its fair value.
LONG- AND SHORT-TERM DEBT: The carrying amounts of the
Company's borrowings under its foreign bank lines of credit,
revolving credit agreement and other variable rate debt
approximate their fair value. The fair value of the
Company's senior notes issues (see Note 9) are estimated
using discounted cash flow analysis based on the Company's
estimated current borrowing rate for similar types of
borrowing arrangements.
FOREIGN CURRENCY EXCHANGE CONTRACTS: The fair values of the
Company's foreign currency contracts are estimated based on
quoted market prices of comparable contracts, adjusted
through interpolation where necessary for maturity
differences.
F-9
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
The carrying amounts and fair values of the Company's financial
instruments are as follows:
December 31, 1997 December 31, 1996
-------------------------- ------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
of Asset/ of Asset/ of Asset/ of Asset/
(Liability) (Liability) (Liability) (Liability)
----------- ----------- ----------- -----------
Cash and cash equivalents............... $ 13,031 $ 13,031 $ 17,299 $ 17,299
Short-term debt......................... (64,207) (64,207) (33,935) (33,935)
Long-term debt excluding capital leases. (477,499) (445,792) (583,019) (578,921)
Foreign currency exchange ocntracts..... 128 128 940 1,629
STOCK-BASED COMPENSATION:
Statement of Financial Accounting Standards ("SFAS") No. 123,
"Accounting for Stock-Based Compensation", encourages, but does not require
companies to record compensation cost for stock-based employee compensation
plans at fair value. The Company has chosen to account for stock-based
compensation plans using the intrinsic value method prescribed in Accounting
Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to
Employees", and related Interpretations. Accordingly, compensation cost for
stock options is measured as the excess, if any, of the quoted market price
of Coleman's stock at the date of the grant over the amount an employee must
pay to acquire the stock.
F-10
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
(LOSS) EARNINGS PER SHARE:
In 1997, the Financial Accounting Standards Board (the "FASB") issued
SFAS No. 128, "Earnings per Share". SFAS No. 128 replaced the calculation of
primary and fully diluted earnings per share with basic and diluted earnings per
share. Unlike primary earnings per share, basic earnings per share excludes any
dilutive effects of options, warrants, and convertible securities. Diluted
earnings per share is very similar to the previously reported fully diluted
earnings per share. All earnings per share amounts for all periods have been
presented, and where appropriate, restated to conform to SFAS No. 128
requirements. In 1997 and 1996, diluted loss per share does not include any
incremental shares that would have been outstanding assuming the exercise of any
stock options because the effect of these shares would have been antidilutive.
The following table sets forth the computation of basic and diluted earnings per
share:
Earnings Per Share
(Loss) Shares Amount
-------- ---------- ---------
Year Ended December 31, 1995
Basic earnings before extraordinary item...... $ 40,067 53,225,746 $ 0.75
Effect of dilutive securities stock options... -- 361,269 ------
-------- ---------- ------
Diluted earnings.............................. $ 40,067 53,587,015 $ 0.75
-------- ---------- ------
-------- ---------- ------
Year Ended December 31, 1996
Basic loss before extraordinary item.......... $(41,246) 53,196,979 $(0.78)
Effect of dilutive securities stock options... -- -- ------
-------- ---------- ------
Diluted loss.................................. $(41,246) 53,196,979 $(0.78)
-------- ---------- ------
-------- ---------- ------
Year Ended December 31, 1997
Basic loss before extraordinary item.......... $ (2,536) 53,343,680 $ (.05)
Effect of dilutive securities stock options... -- -- ------
-------- ---------- ------
Diluted loss.................................. $ (2,536) 53,343,680 $ (.05)
-------- ---------- ------
-------- ---------- ------
RECLASSIFICATIONS:
Certain prior year amounts in the financial statements have been
reclassified to conform to the current year presentation.
USE OF ESTIMATES:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ materially from those
estimates.
RECENTLY ISSUED ACCOUNTING STANDARDS:
In June 1997, the FASB issued SFAS No. 130 "Reporting Comprehensive
Income". SFAS No. 130 establishes standards for reporting and display of
comprehensive income and its components in the financial statements. SFAS No.
130 is effective for fiscal years beginning after December 15, 1997.
Reclassification of financial statements for earlier periods provided for
comparative purposes is required.
F-11
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
In June 1997, the FASB issued SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information". SFAS No. 131 establishes
standards for the way public business enterprises report information about
operating segments in annual financial statements and requires those enterprises
report selected information about operating segments in interim financial
reports. It also establishes standards for related disclosures about products
and services, geographic areas, and major customers. SFAS No. 131 is effective
for financial statements for fiscal years beginning after December 15, 1997.
Financial statement disclosures for prior periods are required to be restated.
In February 1998, the FASB issued SFAS No. 132, "Employers'
Disclosures about Pensions and Other Postretirement Benefits". SFAS No. 132
revises employers' disclosures about pension and other postretirement benefits
to the extent practicable. It also requires additional information on changes
in the benefit obligations and fair value of plan assets and eliminates certain
other disclosures. SFAS No. 132 is effective for financial statements for
fiscal years beginning after December 15, 1997. Financial statement disclosures
for prior periods are required to be restated.
The Company has not yet determined the impact of adoption of these
standards; however, the adoption of these standards will have no impact on
Coleman's consolidated results of operations, financial position or cash flows.
2. ACQUISITIONS AND DIVESTITURES
On November 2, 1994, the Company purchased substantially all the assets of
Eastpak, Inc. and all the capital stock of M.G. Industries, Inc. (collectively,
"Eastpak"), a leading designer, manufacturer and distributor of branded
daypacks, sports bags and related products. The Company also entered into an
agreement with the predecessor owner of Eastpak to make additional payments
based upon the achievement of certain annual sales levels of Eastpak products
and other products substantially similar to the Eastpak products during the
years ended December 31, 1995, 1996, and 1997. A total of $23,000 was earned by
the predecessor owner of Eastpak under the terms of this agreement. This amount
has been recorded as additional goodwill.
During 1995, the Company purchased all of the outstanding shares of capital
stock of Sierra Corporation of Fort Smith, Inc., a manufacturer of portable
outdoor and recreational folding furniture and accessories, and substantially
all of the assets of Active Technologies, Inc. ("ATI"), a manufacturer of
technologically advanced lightweight generators and battery charging equipment.
The aggregate purchase price for these acquisitions was $19,516 including fees
and expenses. These acquisitions were accounted for using the purchase method
of accounting. The purchase price and expenses associated with these
acquisitions exceeded the fair value of net assets acquired by $11,186 and the
excess has been assigned to goodwill and is being amortized over 20 to 30 years
on the straight-line method. In connection with the ATI purchase, the Company
may also be required to make payments to the predecessor owner of ATI of up to
$18,750 based on the Company's sales of ATI related products and royalties
received by the Company for licensing arrangements related to ATI patents. As
of December 31, 1997, the amounts recorded, as additional goodwill, under the
terms of this agreement have been immaterial. The results of operations of
these companies on a pro forma basis as if their acquisitions had occurred at
the beginning of 1995 individually and in the aggregate were not significant to
the Company.
On January 2, 1996, the Company purchased substantially all the assets and
assumed certain liabilities of Seatt Corporation ("Seatt"), a leading designer,
manufacturer and distributor of safety and security related electronic products
for residential and commercial applications. The Seatt acquisition, which was
accounted for under the purchase method, was completed for approximately $65,300
including fees and expenses. The results
F-12
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
of operations of Seatt have been included in the consolidated financial
statements from the date of acquisition. In connection with the purchase price
allocation of the Seatt acquisition, the Company recorded goodwill of
approximately $38,800. The Company is amortizing this amount over 40 years on
the straight-line method.
On February 18, 1998, the Company announced an agreement was signed for the
sale of Coleman Safety & Security Products, Inc., the successor to Seatt, to
Ranco Incorporated of Delaware, a U.S. subsidiary of Siebe plc, a United Kingdom
diversified engineering group. The sale price is approximately $105,000 and is
subject to adjustment upon closing which is expected to occur by the end of
March 1998. Net assets of Coleman Safety & Security Products, Inc. at December
31, 1997 were approximately $73,000.
On February 28, 1996, the Company purchased approximately 70% of the
outstanding shares of Application des Gaz, S.A. ("ADG" or "Camping Gaz"), a
leading manufacturer and distributor of camping appliances in Europe. The
Company completed the necessary steps to acquire the remaining 30% of the
outstanding shares during the second quarter of 1996. The cost of acquiring all
the shares of ADG was approximately $100,000 including fees and expenses.
The acquisition of Camping Gaz was accounted for under the purchase method.
In connection with the final allocation of purchase price to the fair values of
assets acquired and liabilities assumed, the Company recorded goodwill of
approximately $78,900, which is being amortized over 40 years on the straight-
line method. At acquisition, the Company recognized liabilities in the amount
of $21,898 representing severance and other termination benefits for certain
production and administrative employees of Camping Gaz. As of December 31,
1997, the Company had paid termination costs of approximately $13,350 and
anticipates all remaining termination costs will be paid during 1998.
The Company has included the results of operations of Camping Gaz in the
consolidated financial statements from March 1, 1996, the date on which the
Company obtained control of Camping Gaz, and has recognized minority interest
related to the remaining shares for the period March 1, 1996 through June 30,
1996.
The following summarized, unaudited pro forma results of operations for the
years ended December 31, 1996 and 1995 assume the acquisition of Seatt and the
acquisition of all the outstanding shares of Camping Gaz occurred as of the
beginning of the respective periods. The pro forma results include certain
adjustments, primarily reflecting increased amortization and interest expense
and a lower income tax provision, and are not necessarily indicative of what the
results of operations would have been had the Seatt and Camping Gaz acquisitions
occurred at the beginning of the respective periods. Moreover, the pro forma
information is not intended to be indicative of future results of operations.
Year Ended
December 31,
------------------------
1996 1995
---------- ----------
Net revenues................................ $1,246,370 $1,193,295
(Loss) earnings before extraordinary item... (41,407) 39,153
Net (loss) earnings......................... (42,054) 38,366
Basic (loss) earnings per common share:
(Loss) earnings before extraordinary item. $ (0.78) $ 0.73
Net (loss) earnings....................... (0.79) 0.72
F-13
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
3. RESTRUCTURING AND OTHER CHARGES
During 1997, the Company recorded restructuring charges of $32,791 and
certain other charges of $3,628, (collectively, the "1997 Restructuring
Charges") and related tax benefits of $13,918. The Company reflected $19,673 of
the 1997 Restructuring Charges in cost of sales and reflected $16,746 in
selling, general and administrative ("SG&A") expenses. The 1997 Restructuring
Charges of $36,419 consisted of (i) $15,735 to exit various low margin products,
including pressure washers, (ii) $14,943 to close and relocate certain
administrative and sales offices, and (iii) $5,741 to close several
manufacturing facilities. Most of these activities were substantially complete
as of December 31, 1997, and remaining actions are expected to be completed in
1998.
During 1996, the Company recorded restructuring charges of $66,202 and
certain other charges of $7,998 (collectively, the "1996 Restructuring Charges")
and related net tax benefits of $21,684. The Company reflected $44,005 of the
1996 Restructuring Charges in cost of sales and $30,195 in SG&A. The pre-tax
restructuring charges of $66,202 consisted of (i) $29,067 to integrate Camping
Gaz and Coleman operations into a global recreation products business, (ii)
$19,000 to exit the low end electric pressure washer business, (iii) $14,135 to
exit a portion of the Company's battery powered light business and (iv) $4,000
to settle certain litigation with respect to the battery-powered light business.
The charges to integrate the Camping Gaz and Coleman operations reflect
primarily the cost to dispose of duplicate manufacturing, distribution and
administrative facilities and the related severance costs, which actions were
substantially completed in 1997 and are expected to be fully completed in 1998.
The low end pressure washer and battery powered light businesses were exited by
discontinuing the manufacturing and distribution of these products in 1997. The
other pre-tax charges of $7,998 related primarily to certain asset write-offs.
These charges were incurred in the Company's normal course of business, although
the amounts involved were higher than similar charges the Company had recorded
in prior years. The provision for income taxes included $21,684 of tax benefits
resulting from these restructuring and other charges, net of an increase in the
valuation reserve related to certain foreign deferred tax assets and other
foreign tax charges totaling $5,595.
The components of the combined 1997 Restructuring Charges and 1996
Restructuring Charges and an analysis of the amounts charged against the reserve
are outlined in the following table:
1996 Charges During 1997 Charges During
Original Year Ended Balance at Additional Year Ended Balance at
Reserve 12/31/96 12/31/96 Reserves 12/31/97 12/31/97
-------- -------------- ---------- ---------- -------------- ----------
Impairment of
fixed assets......... $10,012 $ (1,789) $ 8,223 $ 6,449 $ (6,530) $ 8,142
Inventory and other
asset impairments.... 38,257 (25,875) 12,382 10,961 (14,966) 8,377
Termination costs..... 2,018 (1,633) 385 12,146 (9,729) 2,802
Idle facilities,
relocation and
other exit costs..... 23,913 (12,429) 11,484 6,863 (9,656) 8,691
------- -------- ------- ------- -------- -------
$74,200 $(41,726) $32,474 $36,419 $(40,881) $28,012
------- -------- ------- ------- -------- -------
------- -------- ------- ------- -------- -------
The termination costs recognized in 1996 related to approximately 200
employees and the 1997 termination costs related to approximately 525 employees.
As of December 31, 1997, $11,362 of termination costs were paid on behalf of
the approximately 700 employees who were terminated as of that date.
F-14
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
During 1995, the Company recognized an asset impairment charge of $12,289
related to its Brazilian operations. The Brazilian operations had not
performed to the Company's expectations since acquisition of this business in
April of 1994, and in the fourth quarter of 1995, the Company initiated
actions to reduce the operating losses in Brazil. These actions included
replacing management, increasing prices, downsizing the manufacturing
operations and reducing SG&A and other expenses. Because of these actions,
the Company performed an impairment review and concluded recognition of an
asset impairment charge was appropriate. The basis of the fair values used in
the computation of the charge were appraisals for property and equipment and
estimated discounted cash flows for goodwill. The charge has been included in
the statement of operations under the caption "Asset Impairment Charge".
4. INVENTORIES
Inventories consisted of the following:
December 31,
--------------------
1997 1996
-------- --------
Raw material and supplies........... $ 59,406 $ 82,399
Work-in-process..................... 7,813 12,878
Finished goods...................... 169,108 192,225
-------- --------
$236,327 $287,502
-------- --------
-------- --------
5. PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, net consisted of the following:
December 31,
---------------------
1997 1996
--------- --------
Land and land improvements.......... $ 7,700 $ 8,772
Buildings and building improvements. 79,101 78,760
Machinery and equipment............. 192,650 194,714
Construction-in-progress............ 10,076 15,519
--------- --------
289,527 297,765
Accumulated depreciation............ (114,033) (98,583)
--------- --------
$ 175,494 $199,182
--------- --------
--------- --------
Depreciation expense was $26,956, $25,770, and $19,142 for the years ended
December 31, 1997, 1996 and 1995, respectively.
F-15
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
6. ACCRUED EXPENSES
Accrued expenses consisted of the following:
December 31,
------------------------
1997 1996
----------- ----------
Compensation and related benefits......... $ 20,385 $ 29,331
Other..................................... 73,411 83,575
---------- ----------
$ 93,796 $ 112,906
---------- ----------
---------- ----------
7. OTHER LIABILITIES
Other liabilities consisted of the following:
December 31,
------------------------
1997 1996
----------- ----------
Pensions and other postretirement benefits. $ 49,121 $ 52,229
Other...................................... 20,465 23,944
---------- ----------
$ 69,586 $ 76,173
---------- ----------
---------- ----------
8. SHORT-TERM BORROWINGS
The Company maintained short-term bank lines of credit at December 31, 1997
and 1996 aggregating approximately $115,249, and $119,101, respectively, of
which approximately $64,207 and $33,935 were outstanding at December 31, 1997
and 1996, respectively. The weighted average interest rate on amounts borrowed
under these short-term lines was approximately 2.7% and 2.4% at December 31,
1997 and 1996, respectively.
Outstanding letters of credit aggregated approximately $37,208 and $32,897
at December 31, 1997 and 1996, respectively.
F-16
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
9. LONG-TERM DEBT
Long-term debt consisted of the following:
December 31,
-----------------------
1997 1996
---------- ----------
7.26% Senior Notes due 2007 (a)... $ 200,000 $ 200,000
7.10% Senior Notes due 2006 (b)... 85,000 85,000
7.25% Senior Notes due 2008 (c)... 75,000 75,000
Revolving credit facility (d)..... 52,127 146,350
Term loan (d)..................... 64,894 73,478
Other............................. 778 3,785
---------- ----------
477,799 583,613
Less current portion.............. 523 747
---------- ----------
$ 477,276 $ 582,866
---------- ----------
---------- ----------
(a) On August 8, 1995, the Company completed a private placement
issuance and sale of $200,000 aggregate principal amount of 7.26%
Senior Notes due 2007 (the "2007 Notes"). Interest on the 2007
Notes is payable semiannually, and the principal is payable in
annual installments of $40,000 each commencing August 8, 2003,
with a final installment payment of $40,000 due on August 8,
2007. If there is a default, the interest rate will be the
greater of (i) 9.26% or (ii) 2.0% above the prime interest rate.
The 2007 Notes are unsecured and are subject to various
restrictive covenants including, without limitation, requirements
for the maintenance of specified financial ratios and levels of
consolidated net worth and certain other provisions limiting the
incurrence of additional debt and sale and leaseback transactions
under the terms of the note purchase agreement.
(b) On June 13, 1996, the Company completed a private placement
issuance and sale of $85,000 aggregate principal amount of 7.10%
Senior Notes due 2006 (the "2006 Notes"). Interest on the 2006
Notes is payable semiannually, and the principal is payable in
annual installments of $12,143 each commencing June 13, 2000,
with a final installment payment of $12,143 due on June 13, 2006.
If there is a default, the interest rate will be the greater of
(i) 9.10% or (ii) 2.0% above the prime interest rate.
The 2006 Notes are unsecured and are subject to various
restrictive covenants including, without limitation, requirements
for the maintenance of specified financial ratios and levels of
consolidated net worth and certain other provisions limiting the
incurrence of additional debt and sale and leaseback transactions
under the terms of the note purchase agreement.
(c) On June 13, 1996, the Company completed a private placement
issuance and sale of $75,000 aggregate principal amount of 7.25%
Senior Notes due 2008 (the "2008 Notes"). Interest on the 2008
Notes is payable semiannually, and the principal is payable in
annual installments of $15,000 each commencing June 13, 2004,
with a final installment payment of $15,000 due on June 13, 2008.
If there is a default, the interest rate will be the greater of
(i) 9.25% or (ii) 2.0% above the prime interest rate.
F-17
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
The 2008 Notes are unsecured and are subject to various
restrictive covenants including, without limitation, requirements
for the maintenance of specified financial ratios and levels of
consolidated net worth and certain other provisions limiting the
incurrence of additional debt and sale and leaseback transactions
under the terms of the note purchase agreement.
(d) In April 1996, the Company amended its credit agreement to: a)
provide a term loan of French Franc 385,125 ($64,894 at December
31, 1997 exchange rates) (the "Term Loan"), b) provide a $275,000
unsecured revolving credit facility line (the "Credit Facility"),
c) allow for the Camping Gaz acquisition and d) extend the
maturity of the credit agreement (as amended, the "Company Credit
Agreement"). In connection with the Company recording the
restructuring and other charges as discussed in Note 3 and lower
than expected operating results, the Company further amended the
Company Credit Agreement in October 1996 and again in March 1997.
The Company Credit Agreement is available to the Company until
April 30, 2001. The outstanding loans under the Company Credit
Agreement bear interest at either of the following rates, as
selected by the Company from time to time: (i) the higher of the
agent's base lending rate or the federal funds rate plus .50% or
(ii) the London Inter-Bank Offered Rate ("LIBOR") plus 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.
In addition, the Company Credit Agreement provides, subject to
certain exceptions, for the net cash proceeds from disposition of
assets other than in the ordinary course of business, to be used
to prepay any outstanding Term Loan balances with any remaining
excess net cash proceeds to be applied to outstanding borrowings
under the Credit Facility with a corresponding reduction in the
overall amount of the Credit Facility line.
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 contains an event of default upon a change of
control of the Company (as defined in the Company Credit
Agreement) and other customary events of default. In addition,
substantially all of the shares of the Company's common stock
owned by Coleman Worldwide are pledged to secure indebtedness of
Coleman Worldwide and of its parent, CLN Holdings Inc. The
indentures governing this indebtedness contain various covenants
including a covenant placing certain limitations on the
Company's indebtedness.
The aggregate scheduled amounts of long-term debt maturities in the years
1998 through 2002 are $523, $78, $12,207 $129,204, and $12,159, respectively.
F-18
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
10. DERIVATIVE FINANCIAL INSTRUMENTS
The Company periodically enters into a variety of foreign currency exchange
contracts to reduce its foreign currency exposure resulting primarily from firm
commitments, intercompany foreign sales transactions expected to occur within
the next twelve months, and intercompany accounts receivable and payable.
At December 31, 1997 and December 31, 1996, the Company did not have any
outstanding foreign currency exchange contracts related to firm commitments.
During the fourth quarter of 1995, the Company elected to adopt the
provisions of the Emerging Issues Task Force Issue No. 95-2, "Determination of
What Constitutes a Firm Commitment for Foreign Currency Transactions Not
Involving a Third Party" ("EITF 95-2") which narrowed the scope of intercompany
foreign currency commitments eligible to be hedged for financial reporting
purposes. As a result of this change, the Company increased net income by
$3,796 in the fourth quarter of 1995. Prior to the adoption of EITF 95-2, the
gains and losses associated with these contracts were accounted for under the
deferral method. At December 31, 1997, the Company did not have any outstanding
foreign currency forward contracts related to intercompany foreign sales
transactions. At December 31, 1996, the Company had forward exchange contracts
to sell $8,500 in Canadian dollars maturing on February 28, 1997, for which the
Company has recognized a net gain of $40 as a component of cost of sales.
At December 31, 1997, the Company did not have any outstanding option
contracts. At December 31, 1996, the Company had outstanding option contracts
for the sale of Japanese yen at fixed exchange rates totaling $20,038 for
specified periods of time which expired during 1997. Net unrealized gains
deferred at December 31, 1996 were $653.
With respect to intercompany accounts receivable and payable, at December
31, 1997, the Company had foreign currency forward contracts to sell $1,580 in
foreign currencies, which contracts matured in February 1998, and had deferred a
net gain of $128. At December 31, 1996, the Company had foreign currency
forward contracts to sell $26,623 and to buy $3,898 in foreign currencies, which
contracts matured at various dates in 1997, and had deferred a net gain of $185.
At December 31, 1997, $25,000 of the Company's outstanding long-term debt
was subject to an interest rate swap agreement and $25,000 of the Company's
outstanding long-term debt was subject to an interest rate cap. Under the
interest rate swap agreement, the Company pays the counterparty interest at a
fixed rate of 6.115%, and the counterparty pays the Company interest at a
variable rate equal to the three month LIBOR for a seven-year period commencing
January 2, 1996. The agreement is with a major financial institution which is
expected to fully perform under the terms of the agreement, thereby mitigating
the credit risk from the transaction. The interest rate cap agreement entitles
the Company to receive from a major financial institution the amount, if any, by
which the Company's interest payments on $25,000 of its variable rate debt
exceed 7.35%. The $509 premium paid for this interest rate cap agreement is
included in other assets and was amortized to interest expense over the
three-year term of the cap, which commenced January 3, 1995.
11. INCOME TAXES
The Company is included in the consolidated federal income tax return of
Mafco and certain state tax returns of Mafco or its affiliates. For all periods
presented, federal and state income taxes are provided as if the Company filed
its own income tax returns. The accompanying consolidated balance sheet
includes approximately
F-19
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
$14,860 and $21,661 of federal and state income taxes receivable from
affiliates at December 31, 1997 and 1996, respectively.
For financial reporting purposes, (loss) earnings before income taxes,
minority interest and extraordinary item include the following components:
Year Ended December 31,
------------------------------------
1997 1996 1995
---------- ----------- ----------
(Loss) earnings before income taxes, minority
interest and extraordinary item:
Domestic.................................. $ (14,129) $ (29,532) $ 78,980
Foreign................................... 7,752 (20,769) (14,434)
---------- ----------- ----------
$ (6,377) $ (50,301) $ 64,546
---------- ----------- ----------
---------- ----------- ----------
Significant components of the provision for income tax (benefit) expense
were as follow:
Year Ended December 31,
------------------------------------
1997 1996 1995
---------- ----------- -----------
Current:
Federal........................... $ (11,045) $ (709) $ 18,415
State............................. -- (334) 3,825
Foreign........................... 1,485 3,454 3,853
---------- ----------- ----------
Total current................. (9,560) 2,411 26,093
---------- ----------- ----------
Deferred:
Federal........................... 7,851 (10,686) (3,104)
State............................. (1,493) (2,178) (725)
Foreign........................... (2,025) (474) 2,215
---------- ----------- ----------
Total deferred................ 4,333 (13,338) (1,614)
---------- ----------- ----------
$ (5,227) $ (10,927) $ 24,479
---------- ----------- ----------
---------- ----------- ----------
The effective tax rate on (loss) earnings before income taxes, minority
interest and extraordinary item varies from the current statutory federal
income tax rate as follows:
Year Ended December 31,
---------------------------
1997 1996 1995
------- ------- -----
(Benefit) provision at statutory rate.. (35.0)% (35.0)% 35.0%
State taxes, net....................... (15.2) (4.6) 2.5
Nondeductible amortization............. 37.1 5.0 2.9
Foreign operations..................... (66.4) 4.3 (0.1)
Change in tax rates.................... (20.8) -- --
Valuation allowance.................... 37.0 7.0 --
Puerto Rico operations................. (12.9) 0.4 (2.6)
Other, net............................. (5.8) 1.2 0.2
------- ------- -----
Effective tax rate (benefit) provision. (82.0)% (21.7)% 37.9%
------- ------- -----
------- ------- -----
F-20
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred tax liabilities and assets
are as follows:
December 31,
------------------------
1997 1996
---------- ----------
Deferred tax assets:
Postretirement benefits other than pensions..... $ 12,964 $ 12,370
Reserves for self-insurance and warranty costs.. 4,898 6,678
Pension liabilities............................. 7,377 8,828
Inventory....................................... 6,626 8,245
Net operating loss carryforwards................ 56,739 47,013
Other, net...................................... 12,728 24,026
---------- ----------
Total deferred tax assets.................... 101,332 107,160
Valuation allowance............................. (39,990) (39,639)
---------- ----------
Net deferred tax assets.................. 61,342 67,521
---------- ----------
---------- ----------
Deferred tax liabilities:
Depreciation.................................... 19,872 18,248
Other, net...................................... 10,676 7,675
---------- ----------
Total deferred tax liabilities.............. 30,548 25,923
---------- ----------
Net deferred tax assets.................. $ 30,794 $ 41,598
---------- ----------
---------- ----------
The deferred tax account balance at December 31, 1997 differs from the
account balance at December 31, 1996 due primarily to the 1997 deferred tax
provision, the tax effects of the foreign exchange gain recorded as a component
of stockholder's equity, the tax effects of adjustments related to the
finalization of the purchase accounting related to the acquisition of Camping
Gaz, and the deferred tax asset recorded related to the acquisition in 1997 of
inactive companies which were recorded as a capital contribution (see Note 12).
During 1997, the Company increased the valuation allowance related to
certain foreign deferred tax assets due to uncertainties over realization. At
December 31, 1997, the Company had net operating loss carryforwards ("NOL's") of
approximately $107,229 for certain foreign income tax purposes. These NOL's
expire beginning in 1998.
The Company has not provided for taxes on undistributed foreign earnings
of approximately $20,860 at December 31, 1997, as the Company intends to
permanently reinvest these earnings in the future growth of the business.
Determination of the amount of unrecognized deferred U.S. income tax liability
is not practicable because of the complexities associated with its hypothetical
calculation.
12. RELATED PARTY TRANSACTIONS
CAPITAL CONTRIBUTIONS:
As of March 31, 1997, the Company purchased an inactive subsidiary
from an affiliate for net cash consideration of $1,031, including transaction
costs. The Company expects to realize certain foreign tax benefits
F-21
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
from this transaction in future years. Under certain circumstances, a
portion of these tax benefits will be payable to the affiliate to the extent
such tax benefits are realized by the Company. During the fourth quarter of
1997, the Company purchased an inactive subsidiary from an affiliate in a
transaction in which the Company expects to realize certain foreign tax
benefits in future years and for which the Company agreed to pay 50% of those
realized benefits to the affiliate. The Company has recorded a liability to
the affiliate in the amount of $219 which represents 50% of the estimated
amount of future tax benefits. The Company has accounted for these
transactions 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
transactions. The $2,799 excess value of estimated realizable tax benefits
acquired over the total acquisition costs have been accounted for as a
capital contribution.
INSURANCE PROGRAMS:
The Company participates in certain of Holdings' insurance programs,
including health and life insurance, workers compensation, and liability
insurance. The Company's expense represents its expected costs for self-insured
retentions and premiums for excess coverage insurance. The expense was $13,339,
$13,923 and $9,875 for the years ended December 31, 1997, 1996 and 1995,
respectively.
SERVICES AGREEMENT:
From time to time, Coleman purchases, at negotiated rates, specialized
accounting and other services provided by an affiliate. Coleman also provides,
at negotiated rates, services to an affiliate. The net expense for such
services was $394 during 1997 and was immaterial in prior years.
MANAGEMENT AGREEMENT:
The Company provided management services to certain affiliates
pursuant to a management agreement through June 30, 1995. The consolidated
financial statements reflect the management fees as a reduction in selling,
general and administration expenses. For the year ended December 31, 1995,
management fees earned by the Company were $2,400.
LICENSING AGREEMENT:
During 1997, the Company engaged an affiliate of MacAndrews & Forbes
to provide licensing services. The Company recorded expenses of $650 related to
these services in 1997.
OTHER:
In 1996, the Company entered into an agreement with an affiliate in
which the Company realized approximately $1,800 of net tax benefits associated
with certain foreign tax net operating loss carryforwards that had not
previously been recognized.
The Company purchases and sells products from and to certain
affiliates. These amounts are not, in the aggregate, material.
The Company subleases six thousand square feet of office space in New
York City from an affiliate pursuant to a month-to-month occupancy memorandum
(the "Lease") entered into during 1997. The rent paid by the Company during the
year ended December 31, 1997 pursuant to the Lease was $158.
F-22
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
During 1997, Coleman used an airplane owned by a corporation of
which a director of Coleman is a stockholder, for which Coleman paid
approximately $158.
13. EMPLOYEE BENEFIT PLANS
PENSION PLANS:
Holdings maintains pension and other retirement plans in various
forms covering employees of the Company who meet eligibility requirements.
The U.S. salaried retirement plan is a non-contributory defined benefit plan
and provides benefits based on a formula of each participant's final average
pay and years of service. The U.S. hourly pension plan is a non-contributory
defined benefit plan and contains a flat benefit formula. The salaried and
hourly plans provide reduced benefits for early retirement and the salaried
plan takes into account offsets for Social Security benefits. The Company's
policy is to contribute annually the minimum amount required pursuant to the
Employee Retirement Income Security Act, as amended. Under certain
circumstances, the Company may make additional contributions to the pension
plans up to the maximum deductible amounts for income tax purposes.
Holdings also has an unfunded excess benefit plan covering certain
of the Company's U.S. employees whose benefits under the plans described
above are limited by provisions of the Internal Revenue Code. The following
table reconciles the funded status of the pension plans with the amount
recognized in the Company's consolidated balance sheets as of the dates
indicated:
December 31,
-------------------
1997 1996
-------- --------
Actuarial present value of benefit obligation:
Accumulated benefit obligation, including vested
benefits of $24,296 and $18,686...................... $(27,843) $(21,933)
-------- --------
-------- --------
Projected benefit obligation for service
rendered to date..................................... $(43,246) $(37,092)
Plan assets at fair value................................ 23,102 16,197
-------- --------
Projected benefit obligation in excess of plan assets.... (20,144) (20,895)
Unrecognized prior service cost.......................... 130 50
Unrecognized net loss.................................... 6,259 7,999
-------- --------
Accrued pension cost..................................... (13,755) (12,846)
Amount reflected as an intangible asset.................. (143) (288)
Amount reflected as minimum pension liability adjustment. (1,526) (470)
-------- --------
Amount reflected as pension liability.................... $(15,424) $(13,604)
-------- --------
-------- --------
The weighted-average discount rate used in determining the
actuarial present value of the projected benefit obligation was 7.5% as of
December 31, 1997 and 1996. The rate of increase in future compensation
levels reflected in such determination was 5% as of December 31, 1997 and
1996. The expected long-term rate of return on assets was 9% as of December
31, 1997, 1996 and 1995. Plan assets consist primarily of common stock,
mutual funds and fixed income securities stated at fair market value, and
cash equivalents stated at cost, which approximates fair market value.
Unrecognized items are being recognized over the estimated remaining service
lives of active employees.
F-23
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
Net pension expense includes the following components:
Year Ended December 31,
------------------------------
1997 1996 1995
------ ------- -------
Service cost-benefits attributed to
service during the year.............. $3,081 $ 3,098 $ 2,125
Interest cost on projected
benefit obligation................... 2,813 2,442 2,004
Curtailment loss....................... 972 -- --
Actual return on plan assets........... (2,908) (1,490) (1,347)
Net amortization and deferrals......... 1,537 844 834
------ ------- -------
Net pension expense.................. $5,495 $ 4,894 $ 3,616
------ ------- -------
------ ------- -------
Net pension expense for the year ended December 31, 1997 includes
$972 of curtailment loss associated with certain executive officer changes
during the year.
SAVINGS PLAN:
Holdings maintains an employee savings plan under Section 401(k) of
the Internal Revenue Code. This plan covers substantially all of the
Company's full-time U.S. employees and allows employees to contribute up to
10% of their salary to the plan. The Company matches, at a 34% rate,
employee contributions of up to 6% of their salary. Amounts charged to
expense for matching contributions were $1,401, $1,314, and $1,165 for the
years ended December 31, 1997, 1996 and 1995, respectively.
RETIREE HEALTH CARE AND LIFE INSURANCE:
The Company, through Holdings, provides certain unfunded health and
life insurance benefits for certain retired employees. Approximately 55% of
the Company's U.S. employees may become eligible for these benefits if they
reach retirement age while working for the Company.
The following table reconciles the funded status of the Company's
allocable portion of Holdings' postretirement benefit plans with the amount
recognized in the Company's consolidated balance sheets as of the dates
indicated:
December 31,
--------------------
1997 1996
-------- --------
Accumulated postretirement benefit obligation:
Retirees............................................ $ (6,852) $ (6,682)
Fully eligible active plan participants............. (3,308) (3,015)
Other active plan participants...................... (10,322) (10,664)
-------- --------
Total accumulated postretirement benefit obligation... (20,482) (20,361)
Unrecognized transition benefit....................... (3,707) (3,973)
Unrecognized prior service cost....................... (404) (492)
Unrecognized net gain................................. (2,415) (976)
-------- --------
Net postretirement benefit liability.................. $(27,008) $(25,802)
-------- --------
-------- --------
F-24
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
Net periodic postretirement benefit expense includes the following
components:
Year Ended December 31,
-------------------------
1997 1996 1995
------ ------ ------
Service cost-benefits attributed to service
during the year.............................. $ 927 $1,044 $ 756
Interest cost on accumulated postretirement
benefit obligation........................... 1,453 1,454 1,352
Amortization of transition benefit
and other net gains.......................... (358) (354) (455)
------ ------ ------
Net periodic postretirement benefit expense.... $2,022 $2,144 $1,653
------ ------ ------
------ ------ ------
The discount rate used in determining the accumulated
postretirement benefit obligation ("APBO") was 7.5% as of December 31, 1997
and 1996. At December 31, 1997, the assumed health care cost trend rate used
in measuring the APBO was 7.5% starting in 1998 then gradually decreasing to
5% by the year 2003 and remaining at that level thereafter. The health care
cost trend rate assumption has a significant effect on the amount of the
obligation and periodic benefit expense reported. An increase in the assumed
health care cost trend rates by 1% in each year would increase the APBO as of
December 31, 1997 by approximately 19% and the service and interest cost
components of net periodic postretirement benefit expense by approximately
22%.
STOCK OPTION PLANS:
The Company adopted The Coleman Company, Inc. 1992 Stock Option
Plan (the "1992 Stock Option Plan") in 1992. During 1993, the shareholders
approved the 1993 Stock Option Plan (the "1993 Stock Option Plan") and during
1996, the shareholders approved The Coleman Company, Inc. 1996 Stock Option
Plan (the "1996 Stock Option Plan"). Under the terms of the 1992 Stock
Option Plan, the 1993 Stock Option Plan and the 1996 Stock Option Plan
(collectively the "Stock Option Plans"), incentive stock options ("ISOs"),
non-qualified stock options ("NQSOs") and stock appreciation rights may be
granted to key employees of the Company and any of its affiliates from time
to time. Stock options have been granted under the Stock Option Plans with
vesting terms and maximum terms of approximately five years and ten years,
respectively. The aggregate number of shares of common stock as to which
options and rights may be granted under the Stock Option Plans may not exceed
4,700,000.
F-25
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
The following table summarizes the stock option transactions under
the Stock Option Plans:
1997 1996 1995
--------------------------- --------------------------- ---------------------------
Weighted- Weighted- Weighted-
Average Average Average
Options Exercise Price Options Exercise Price Options Exercise Price
----------- -------------- --------- -------------- ---------- --------------
Outstanding - January 1, 3,017,630 $15.84 2,572,930 $15.25 2,310,888 $14.03
Granted:
at market price......... 2,081,000 14.77 294,000 19.73 637,000 17.89
above market price...... 75,000 15.00 381,000 15.00 - -
Exercised................. (220,750) 11.42 (154,890) 12.17 (325,748) 12.09
Forfeited................. (1,605,330) 16.49 (75,410) 14.19 (49,210) 13.14
----------- --------- ----------
Outstanding - December 31,.. 3,347,550 15.14 3,017,630 15.84 2,572,930 15.25
----------- --------- ----------
----------- --------- ----------
Exercisable - December 31,.. 927,000 14.02 513,440 13.25 413,526 12.84
----------- --------- ----------
----------- --------- ----------
Weighted-average fair value
of options granted during
the year:
at market price......... $ 7.43 $ 6.62 $ 7.13
----------- --------- ----------
----------- --------- ----------
above market price...... $ 5.28 $ 3.21 $ --
----------- --------- ----------
----------- --------- ----------
The following table summarizes information concerning currently
outstanding and exercisable options at December 31, 1997:
Options Outstanding Options Exercisable
- -------------------------------------------------------------- -----------------------------
Range Weighted-Average
of Exercise Number Remaining Weighted-Average Number Weighted-Average
Prices Outstanding Contractual Life Exercise Price Exercisable Exercise Price
- ------------- ----------- ---------------- ---------------- ----------- ----------------
$12.25-$13.82 543,030 5.26 years $12.96 425,230 $12.79
$13.83-$14.00 878,500 9.29 14.00 181,250 14.00
$14.01-$16.12 806,520 6.66 15.38 226,020 15.24
$16.13-$20.38 1,119,500 9.20 16.92 94,500 16.67
--------- -------
$12.25-$20.38 3,347,550 7.97 15.14 927,000 14.02
--------- -------
--------- -------
As described in Note 1, the Company follows APB Opinion No. 25 in
accounting for stock compensation arrangements. Pro forma financial
information regarding net income and earnings per share has been determined
as if the Company had accounted for its employee stock options under the fair
value method of SFAS No. 123. The fair value of ISOs and NQSOs granted during
1997, 1996 and 1995 were estimated at the date of grant using the
Black-Scholes option pricing model with the following weighted-average
assumptions: risk-free interest rates of 6.53%, 6.11% and 5.91% for 1997,
1996 and 1995, respectively, dividend yield of 0.0%, volatility of the
expected market price of the Company's common stock of 31.3%, 20.2% and 30.8%
for 1997, 1996 and 1995, respectively, and a weighted-average expected life
of the option of 7.7, 5.5 and 5.5 years for 1997, 1996 and 1995, respectively.
F-26
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
SFAS No. 123 requires the use of option valuation models, one of which
is the Black-Scholes model, that were not developed for use valuing ISOs or
NQSOs. Further, these option valuation models require the input of highly
subjective assumptions, including the expected stock price volatility. In
management's opinion, based on the above, the existing models do not necessarily
provide a reliable single measure of the fair value of its ISOs or NQSOs.
The following summarized, unaudited pro forma results of operations
assume the estimated fair value of the ISOs and NQSOs granted during the years
ended December 31, 1997, 1996 and 1995 is amortized to expense over the ISOs'
and NQSOs' vesting period. SFAS No. 123 does not require disclosure of the
effect of any grants of stock based compensation prior to 1995 and, therefore,
the pro forma effect of SFAS No. 123 on net earnings is not representative of
the pro forma effect on net earnings in future years.
Year Ended December 31,
------------------------------
1997 1996 1995
-------- --------- -------
Pro forma net (loss) earnings......... $(6,069) $(42,760) $39,009
Pro forma basic net (loss) earnings
per common share.................... (0.11) (0.80) 0.73
Pro forma diluted net (loss) earnings
per common share.................... (0.11) (0.80) 0.73
14. COMMITMENTS AND CONTINGENCIES
LEASES:
The Company leases manufacturing, administrative and sales facilities
and various types of equipment under operating lease agreements expiring through
2007. Rental expense was $15,620, $14,164, and $11,526 for the years ended
December 31, 1997, 1996 and 1995, respectively. Minimum rental commitments
under all noncancellable operating leases with remaining lease terms in excess
of one year from December 31, 1997, aggregated $31,506; such commitments for
each of the five years subsequent to December 31, 1997 are $7,571, $6,683,
$4,622, $2,848, and $3,560, respectively, and $6,222 thereafter.
The Company leases its former corporate office building in Denver,
Colorado under agreements which give the Company the right, subject to certain
qualifications, to renew or terminate the lease, or purchase the property. Upon
termination, the Company has guaranteed the lessor certain residual values.
ENVIRONMENTAL MATTERS:
GILBERT AND MOSLEY SITE. As a result of investigations undertaken in
1986, the Kansas Department of Health and Environment ("KDHE") discovered that
groundwater in the downtown Wichita area (the "Gilbert and Mosley Site") was
contaminated with volatile organic chemicals ("VOCs"). Coleman occupied a
facility within the boundaries of the Gilbert and Mosley Site. Subsequent
investigations in the area, including investigations in November 1988 by
Coleman, indicated the groundwater beneath the Coleman property is contaminated
with VOCs. Coleman is in the process of remediating the contamination on its
property.
The City of Wichita has entered into a voluntary agreement with KDHE
in which the City agreed to investigate and then remediate contamination in the
Gilbert and Mosley Site. Coleman has entered into an
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THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
agreement with KDHE in which Coleman agreed to perform a similar study for
the Coleman property and to implement remedial activities at its property.
In addition, Coleman entered into an agreement with the City of Wichita in
which Coleman agreed to fund its proportionate share of the City's study and
remediation of the Gilbert and Mosley site.
MAIZE SITE. Coleman has undertaken a soil and groundwater
investigation at its facility in Maize, Kansas (the "Maize Site"). Results
indicate that limited VOC contamination is present in the groundwater under and
to the southeast of the facility. The data has been reported to the KDHE, and
Coleman has entered into an agreement with KDHE to implement appropriate
remedial actions. The remediation system has been installed, and Coleman is in
the process of remediating the contaminated groundwater.
NORTHEAST SITE. In 1990, Coleman undertook a soil and groundwater
investigation of its facility in northeast Wichita (the "Northeast Site").
Results indicated the presence of VOCs in the groundwater and soils. Although
some of the contamination may be a result of Coleman's operations at the
facility, the data also indicated that contamination was migrating onto the
Coleman property from up gradient sources. Coleman reported the initial results
of its study to KDHE. Coleman has also provided copies of all data to the
United States Environmental Protection Agency (the "EPA"), at its request. The
EPA has not initiated any actions against the Company with respect to the
Northeast Site. An agreement has been entered into with KDHE to undertake
additional investigatory activities, and an interim remediation system has been
installed.
The Company has not been named as a potentially responsible party
("PRP") by the EPA nor does it have joint and several liability with any other
PRP for remediation at any of the above sites.
The Company has adopted an environmental policy designed to ensure the
Company operates in full compliance with applicable environmental regulations
and, where appropriate, the Company's own internal standards. Coleman has also
undertaken an environmental compliance audit program. The Company makes
expenditures it believes are necessary to comply with environmental management
practices. Environmental expenditures that relate to current operations are
expensed or capitalized as appropriate and were not significant in 1997 and are
not expected to be significant in the foreseeable future. The Company accrues
for losses associated with environmental remediation obligations when such
losses are probable and reasonably estimable. Accruals for estimated losses from
environmental remediation obligations generally are recognized no later than
completion of the remedial feasibility study. Such accruals are adjusted as
further information develops or circumstances change. Costs of future
expenditures for environmental remediation obligations are not discounted to
their present value. Recoveries of environmental remediation costs from other
parties are recognized as assets when their receipt is deemed probable.
While it is possible the Company reserves may change in the near term,
the Company believes the reserves established for environmental matters are
adequate. This belief is based on results of environmental investigations of
the groundwater and soils at the manufacturing facilities operated by Coleman
conducted by independent consultants specializing in environmental
investigations and remediation and estimates provided by such independent
consultants, together with estimates provided by Coleman's environmental
engineering staff.
OTHER:
The Company and Holdings are involved in various claims and legal
actions arising in the ordinary course of business. The Company believes the
ultimate disposition of these matters is not expected to have a material adverse
effect on the Company's consolidated financial condition or results of
operations. The Company has
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THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
entered into a cross-indemnification agreement with Holdings pursuant to
which it will indemnify Holdings against all liabilities related to
businesses transferred to the Company by Holdings, and Holdings will
indemnify the Company against all liabilities of Holdings other than
liabilities related to the businesses transferred to the Company.
The Company is party to a license agreement which requires payments
of minimum guaranteed royalties aggregating to $11,778 at December 31, 1997;
such commitments for each of the five years remaining under the agreement
subsequent to December 31, 1997 are $1,040, $1,745, $2,434, $3,010, and $3,549,
respectively.
15. SIGNIFICANT CUSTOMERS
The Company's U.S. and Canadian operations have one significant customer
which accounted for approximately 13%, 15%, and 19% of net revenues in the years
ended December 31, 1997, 1996 and 1995, respectively.
16. CASH FLOW REPORTING
The Company uses the indirect method to report cash flows from operating
activities. Interest paid was $42,217, $37,608, and $23,976 and net income taxes
(refunded) paid were $(16,138), $7,041, and $12,246 for the years ended December
31, 1997, 1996 and 1995, respectively. Certain non-cash transactions relating
to acquisitions and the issuance of long-term debt have been reported in Notes 2
and 9.
17. PREFERRED STOCK
The Company has authorized 20,000,000 shares of preferred stock, par value
$0.01 per share. The Company's Certificate of Incorporation authorizes the Board
of Directors to provide for the issuance of a series of preferred stock, to
establish the number of shares of each such series and to fix the designation,
powers, preferences and rights of the shares of each such series and any
qualifications, limitations or restrictions thereof.
18. GEOGRAPHIC SEGMENTS
The Company designs, manufactures and markets a wide variety of multiuse
products and accessories, which are primarily marketed through independent
retail markets, for the outdoor recreation and hardware consumers. The Company
is a leading manufacturer and marketer of brand name consumer products for the
camping and related outdoor recreation markets in the United States, Canada,
Europe, and Japan.
Operating profit, as indicated below, represents net revenues less
operating expenses and amortization of goodwill. Generally, sales between
geographic areas are made at cost plus a share of operating profit. Identifiable
assets are those used by each geographic segment. Corporate assets are
principally cash, certain property and equipment, income tax refunds receivable
- - affiliate, and deferred charges.
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THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
Information related to the Company's geographic segments is as follows:
Year Ended December 31,
----------------------------------
1997 1996 1995
---------- ---------- --------
Net revenues:
Domestic - U.S.................................. $ 855,365 $ 916,260 $716,018
- Export............................... 78,120 91,125 90,434
Europe.......................................... 217,863 168,780 52,233
Other foreign................................... 167,119 219,350 169,836
Eliminations.................................... (164,173) (175,299) (94,947)
---------- ---------- --------
$1,154,294 $1,220,216 $933,574
---------- ---------- --------
---------- ---------- --------
Operating profit:
Domestic (a).................................... $ 34,754 $ 19,915 $120,915
Europe (b)...................................... 1,299 (17,505) (3,241)
Other foreign (c)............................... 26,384 4,027 (10,540)
---------- ---------- --------
62,437 6,437 107,134
Corporate expenses (d).......................... (27,962) (18,011) (18,043)
Interest expense................................ (40,852) (38,727) (24,545)
---------- ---------- --------
(Loss) earnings before income taxes, minority
interest and extraordinary item.................. $ (6,377) $ (50,301) $ 64,546
---------- ---------- --------
---------- ---------- --------
Identifiable assets:
Domestic........................................ $ 681,325 $ 782,373 $696,681
Europe.......................................... 216,816 247,412 70,478
Other foreign................................... 91,192 83,033 59,107
Corporate....................................... 52,431 47,268 18,221
---------- ---------- --------
$1,041,764 $1,160,086 $844,487
---------- ---------- --------
---------- ---------- --------
- ---------------
(a) Includes restructuring and other charges of $21,025 in 1997 and $49,257
in 1996.
(b) Includes restructuring and other charges of $114 in 1997 and $20,002
in 1996.
(c) Includes restructuring and other charges of $4,151 in 1997 and $4,941
in 1996; and $12,289 of asset impairment charges in 1995.
(d) Includes restructuring and other charges of $11,129 in 1997.
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THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
19. QUARTERLY FINANCIAL SUMMARIES (UNAUDITED)
Summarized quarterly financial data for 1997 and 1996 are as follow:
Quarter Ended
---------------------------------------------------
March 31, June 30, September 30, December 31,
--------- -------- ------------- ------------
1997
- ----
Net revenues........................ $295,464 $383,514 $252,434 $222,882
Gross profit (a).................... 81,042 101,913 69,867 61,141
Net earnings (loss) (a)............. 699 10,119 (8,077) (5,277)
Basic earnings (loss) per share..... $ 0.01 $ 0.19 $ (0.15) $ (0.10)
1996
- ----
Net revenues........................ $273,560 $452,654 $269,607 $224,395
Gross profit (a).................... 80,966 137,538 39,894 33,321
Earnings (loss) before
extraordinary item (a)............. 15,039 28,046 (48,458) (35,873)
Net earnings (loss) (a)............. 15,039 27,399 (48,458) (35,873)
Basic earnings (loss) per share:
Earnings (loss) before
extraordinary item............... $ 0.28 $ 0.53 $ (0.91) $ (0.67)
Net earnings (loss)............... 0.28 0.52 (0.91) (0.67)
- --------------
(a) Includes restructuring and other charges (credits) as follows:
1997
----
Gross profit................... $ (425) $ 11,402 $ 9,010 $ (314)
Net earnings................... 2,435 11,547 9,433 (914)
1996
----
Gross profit.................. -- -- 33,567 10,438
Earnings before
extraordinary item........... -- -- 44,495 8,021
Net earnings.................. -- -- 44,495 8,021
20. SUBSEQUENT EVENT (UNAUDITED)
On February 27, 1998, CLN Holdings and Coleman (Parent) Holdings Inc.,
the parent company of CLN Holdings, entered into an Agreement and Plan of Merger
(the "CLN Holdings Merger Agreement") with Sunbeam Corporation ("Sunbeam") and a
wholly-owned subsidiary of Sunbeam ("Laser Merger Sub"). The CLN Holdings
Merger Agreement provides that, among other things, Laser Merger Sub will be
merged (the "CLN Holdings Merger") with CLN Holdings. Pursuant to the CLN
Holdings Merger Agreement, the shares of CLN Holdings' common stock issued and
outstanding immediately prior to the effective time of the CLN Holdings Merger
will be converted into the right to receive in the aggregate 14,099,749 shares
of Sunbeam's common stock and $159,957 in cash, without interest. In addition,
the outstanding debt of CLN Holdings will remain an obligation of CLN Holdings
following the CLN Holdings Merger.
F-31
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONCLUDED)
(IN THOUSANDS, EXCEPT SHARE DATA)
Coincident with the execution of the CLN Holdings Merger Agreement, the
Company, Sunbeam and a wholly-owned subsidiary of Sunbeam ("Merger Sub"),
entered into an Agreement and Plan of Merger (the "Coleman Merger Agreement"
and with the CLN Holdings Merger Agreement, collectively the "Merger
Agreements"), providing that, among other things, Merger Sub will be merged
(the "Coleman Merger") with the Company. Pursuant to the Coleman Merger
Agreement, each share of the Company's common stock issued and outstanding
immediately prior to the effective time of the Coleman Merger (other than
shares held by Coleman Worldwide and dissenting shares, if any) will be
converted into the right to receive (a) 0.5677 of a share of Sunbeam common
stock, with cash paid in lieu of fractional shares, and (b) $6.44 in cash,
without interest.
Following consummation of the CLN Holdings Merger, CLN Holdings will
be a direct wholly-owned subsidiary of Sunbeam. Following consummation of the
Coleman Merger, the Company will be an indirect wholly-owned subsidiary of
Sunbeam.
The CLN Holdings Merger is subject to the expiration of antitrust
waiting periods and certain other customary conditions. The Coleman Merger
Agreement is subject to consummation of the CLN Holdings Merger. These
transactions will constitute a change in control as defined in the Company
Credit Agreement. Per the terms of the Merger Agreements, certain arrangements
with related parties may be altered or terminated. In addition, outstanding,
unvested Company stock options immediately vest upon consummation of the CLN
Holdings Merger.
F-32