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 1-11962
COLEMAN WORLDWIDE CORPORATION
-----------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 13-3704484
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5900 North Andrews Avenue, Suite 700
Fort Lauderdale, Florida 33309
------------------------------------------ ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 954-772-9000
------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- ---------------------
LIQUID YIELD OPTION-TM- NOTES DUE 2013 NA
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 number of shares outstanding of the registrant's par value $1.00 common
stock was 1,000 shares as of March 3, 1998 all of which were held by an indirect
wholly-owned subsidiary of Mafco Holdings Inc.
Exhibit Index at pages 44 through 51
COLEMAN WORLDWIDE CORPORATION 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..................... 22
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure...................................... 22
PART III
Item 10. Directors and Executive Officers of the Registrant.............. 23
Item 11. Executive Compensation.......................................... 28
Item 12. Security Ownership of Certain Beneficial Owners and Management.. 40
Item 13. Certain Relationships and Related Transactions.................. 41
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K...................................................... 44
Signatures...................................................... 52
2
PART I
ITEM 1. BUSINESS
OVERVIEW
Coleman Worldwide Corporation ("Coleman Worldwide") was formed in March
1993 in connection with the offering of Liquid Yield Option -TM- Notes due
2013 (the "LYONs" -TM-). Coleman Worldwide also holds 44,067,520 shares of
the common stock of The Coleman Company, Inc. ("Coleman " or the "Company" )
which represents approximately 82% of the outstanding Coleman common stock as
of March 3, 1998. Coleman 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. Coleman Worldwide is a
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
3
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.
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 acquired 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.
4
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.
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
5
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 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 17 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, 2,070,000
filling of gas cylinders, and
assembly of barbeques; office and
warehouse
Wichita, KS Manufacture of lanterns and stoves 1,197,000
and insulated coolers and jugs;
research and development and design
operations; office and warehouse
New Braunfels, TX Manufacture of insulated coolers 338,000
and other plastic products
Lake City, SC Manufacture of sleeping bags 168,000
Springfield, MN Manufacture of air compressors 166,000
Cedar City, UT Manufacture of sleeping bags 160,000
Kearney, NE Manufacture/assembly of portable 155,000
generators and pressure washers;
office and warehouse
Pocola, OK Manufacture of outdoor folding 123,000
furniture
Maize, KS Manufacture of propane cylinders 116,000
and machined parts
Chihuahua, Mexico * Manufacture of smoke alarms and 110,000
carbon monoxide detectors
Morovis and Orocovis, Manufacture of daypacks, sports 110,000
Puerto Rico bags, and related products; office
and warehouse
Chandler, AZ Manufacture of acrylic spas; office 78,000
and warehouse
Centenaro di Lonato, Manufacture of butane lanterns, 77,000
Italy stoves and heaters; 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 Coleman Worldwide.
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.
10
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. Coleman
Worldwide believes the ultimate disposition of these matters is not expected
to have a material adverse effect on Coleman Worldwide's consolidated
financial condition or results of operations. The Company has entered into a
cross-indemnification agreement with Holdings pursuant to which Coleman will
indemnify Holdings against all liabilities related to businesses transferred
by Holdings to the Company, and Holdings will indemnify the Company against
all liabilities of Holdings other than liabilities related to the businesses
transferred to the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of 1997.
11
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
All of the equity securities of Coleman Worldwide are owned indirectly
by Mafco and there is no public market therefor.
Coleman Worldwide did not sell any unregistered securities during 1997.
12
ITEM 6. SELECTED FINANCIAL DATA
Coleman Worldwide is a holding company formed in March 1993 and holds
44,067,520 shares of Coleman common stock which represents approximately 82%
of the outstanding Coleman common stock as of March 3, 1998. Due to Coleman
Worldwide's approximately 82% ownership of Coleman, the Consolidated
Financial Statements of Coleman Worldwide include the accounts of Coleman and
its subsidiaries after elimination of all material intercompany accounts and
transactions. Minority interest primarily represents the minority
shareholders' proportionate share of the results of operations and equity of
Coleman. The selected financial data for the years presented in the table
below have been derived from the Consolidated Financial Statements. The
selected financial data should be read in conjunction with the Consolidated
Financial Statements and the notes thereto included elsewhere in this Form
10-K Annual Report.
(IN THOUSANDS)
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
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)..... 266,501 291,862 174,870 128,561 102,197
Asset impairment charge (b)........... -- -- 12,289 -- --
Restructuring expense (c)............. -- -- -- 18,456 --
Interest expense, net................. 46,989 50,767 35,930 24,031 15,733
Amortization of goodwill and
deferred charges................ 11,723 11,056 8,309 6,667 5,752
Other expense (income), net........... 1,867 (1,604) 283 1,138 766
---------- ---------- ---------- --------- ---------
(Loss) earnings before income taxes,
minority interest and
extraordinary item.............. (13,117) (60,362) 52,466 37,017 50,915
Income tax (benefit) expense (a)...... (7,708) (14,753) 19,861 10,437 21,225
Minority interest..................... 940 (5,390) 6,696 5,734 6,401
---------- ---------- ---------- --------- ---------
(Loss) earnings before
extraordinary item.............. (6,349) (40,219) 25,909 20,846 23,289
Extraordinary loss on early
extinguishment of debt, net of
income taxes........................ (10,939) (1,244) (787) (677) --
---------- ---------- ---------- --------- ---------
Net (loss) earnings $ (17,288) $ (41,463) $ 25,122 $ 20,169 $ 23,289
---------- ---------- ---------- --------- ---------
---------- ---------- ---------- --------- ---------
DECEMBER 31,
-----------------------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- ---------- --------- ---------
BALANCE SHEET DATA:
Total assets.......................... $1,079,062 $1,206,449 $906,389 $755,026 $552,660
Long-term debt
(including current portions)........ 480,302 758,207 520,691 446,216 313,242
Minority interest..................... 43,386 45,088 49,266 42,233 39,952
Total stockholder's equity............ 228,735 62,668 101,673 76,782 55,220
- ------------------------------------
(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
Coleman Worldwide is a holding company with no business operations or
source of income of its own. Accordingly, except as otherwise indicated, the
following discussion relates to the results of operations of the Company.
The following discussion should be read in conjunction with the Consolidated
Financial Statements of Coleman Worldwide and the notes thereto included
elsewhere in this Form 10-K Annual Report.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 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
14
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. 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.
The Company's 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. On an unconsolidated
basis, Coleman Worldwide had an additional $6.1 million of interest expense in
1997 compared with $12.1 million in 1996, a decrease of $6.0 million. This
decrease is primarily due to the decrease in principal amount of LYONs
outstanding due to the exchange of LYONs for cash in 1997.
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. Minority interest in the loss of
Coleman represents the minority shareholders' proportionate share of the results
of operations of Coleman, which is reflected on Coleman Worldwide's consolidated
financial statements because of Coleman Worldwide's approximate 82% ownership of
Coleman's common stock.
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. On an unconsolidated
basis, Coleman Worldwide recorded an income tax benefit of
15
$2.5 million in 1997 and $3.9 million in 1996, or approximately 37% and 38% of
Coleman Worldwide's unconsolidated pre-tax loss in 1997 and 1996, respectively.
During 1997, in connection with the exchange of $554.1 million
aggregate principal amount at maturity of LYONs for cash, Coleman Worldwide
recorded an extraordinary loss of $10.9 million, net of tax benefits of $7.1
million, relating to the excess of the exchange offer price over the accreted
value of the LYONs, the write-off of deferred charges related to the LYONs
exchanged and redemption fees and expenses. During 1996, holders of LYONs with
a principal amount at maturity of $9.8 million elected to exchange such LYONs
pursuant to the terms of the LYONs indenture. In connection with these
exchanges, Coleman Worldwide delivered 74,107 shares of Coleman common stock
owned by Coleman Worldwide to the holders of the LYONs which were exchanged.
Coleman Worldwide recognized a gain of $2.7 million in connection with these
exchanges which is included in other income. Coleman Worldwide also recognized
an extraordinary loss on early extinguishment of debt as a result of the LYONs
exchange in an amount of $1.0 million ($0.6 million after tax). This
extraordinary loss represents (i) the excess fair value of the property
delivered by Coleman Worldwide to the holders of the LYONs which were exchanged
over the accreted value of the LYONs obligations at the time of the exchange,
along with (ii) a pro-rata portion of the related unamortized financing costs
associated with the LYONs issuance. 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.
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
16
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
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. On an unconsolidated basis, Coleman Worldwide had an
additional $12.1 million of interest expense in 1996 compared with $11.4 million
in 1995, an increase of $0.7 million, or 5.8%. This increase is a result of the
effects of compounding interest related to the LYONs.
The Company recorded an income tax benefit in 1996 of $10.9 million,
which 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. On an
unconsolidated basis, Coleman Worldwide recorded an income tax benefit of $3.9
million in 1996 and $4.6 million in 1995 or approximately 38% of Coleman
Worldwide's unconsolidated pre-tax loss in each year.
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.
17
Minority interest in the loss of Coleman represents the minority
shareholders' proportionate share of the results of operations of Coleman, which
is reflected on Coleman Worldwide's consolidated financial statements because of
Coleman Worldwide's approximate 82% ownership of Coleman's common stock.
During the second quarter of 1996, in connection with the
renegotiation of its then existing credit agreement, the Company recorded an
extraordinary loss of $1.1 million ($0.6 million after taxes, 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
Operating activities of Coleman Worldwide and its subsidiaries
provided (used) $41.7 million, ($5.3) million, and $9.4 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. Net cash used by Coleman Worldwide and its subsidiaries
for investing activities was $16.2 million, $204.3 million, and $68.3 million
for the years ended December 31, 1997, 1996 and 1995, respectively, and was
composed primarily of the Company's capital expenditures, purchases of
businesses, and also advances (from) to Mafco under the Coleman Worldwide tax
sharing agreement and the terms of the LYONs indenture (the "Indenture")
of ($19.3) million, $4.1 million and $6.7 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 by Coleman Worldwide
and its subsidiaries was ($55.3) million, $210.6 million, and $64.3 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.
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.
18
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.
Coleman financed the acquisition of the shares of Camping Gaz with the
net proceeds from (i) a private placement issuance and sale of $85.0 million
aggregate principal amount of 7.10% Senior Notes, Series A, due 2006 (the
"Notes due 2006") and (ii) a private placement issuance and sale of $75.0
million aggregate principal amount of 7.25% Senior Notes, Series B, due 2008
(the "Notes due 2008"). The Notes due 2006 bear interest at the rate of 7.10%
per annum payable semiannually, and the principal amount is payable in annual
installments of $12.1 million commencing June 13, 2000, with a final payment due
on June 13, 2006. If there is a default, the interest rate will be the greater
of (i) 9.10% or (ii) 2% above the prime interest rate. The Notes due 2008 bear
interest at the rate of 7.25% per annum payable semiannually, and the principal
amount is payable in annual installments of $15.0 million commencing June 13,
2004 with a final payment due on June 13, 2008. If there is a default, the
interest rate will be the greater of (i) 9.25% or (ii) 2% above the prime
interest rate. The Notes due 2006 and the Notes due 2008 are unsecured and are
subject to various restrictive covenants, including without limitation,
requirements for the maintenance of specified financial ratios and levels of
consolidated net worth and certain other provisions limiting the incurrence of
additional debt and sale and leaseback transactions under the terms of the Note
Purchase Agreement.
The 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.
19
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.
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 LYONs.
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, which
would permit the holder of LYONs or Escrow Notes to sell such notes to the
issuer of such notes. Consummation of the CLN Holdings Merger would be an
additional purchase right under their 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.
Coleman Worldwide is a holding company with no business operations or
source of income of its own, and its ability to meet its obligations with
respect to the LYONs and any other obligations is contingent upon distributions
from the Company, including payments under the Company tax sharing agreement,
capital contributions or loans from its direct and indirect parent companies,
other borrowings and proceeds from the disposition of the common stock of
Coleman owned by Coleman Worldwide. As the holder of approximately 82% of the
capital stock of the Company, Coleman Worldwide has the ability to cause the
Company to make distributions up to the maximum amount permitted by law, subject
to limitations in the debt instruments of the Company. However, Coleman
Worldwide currently expects that, for the foreseeable future, the net earnings
and cash flow of the Company will be retained and used in the business of the
Company and that Coleman Worldwide will not receive any distributions from the
Company other than payments under the Company's tax sharing agreement.
Furthermore, the terms of the Company Credit Agreement prohibits the Company
from paying any dividends until on or after January 1, 1999, and limits the
amount of dividends the Company may pay thereafter. The receipt by Coleman
Worldwide of tax sharing payments from the Company will cease upon Coleman
Worldwide's ownership interest in Coleman falling below 80%, and the Indenture
does not require Coleman Worldwide to own more than a majority of the Coleman
common stock. Pursuant to the LYONs indenture agreement, at any time that the
LYONs are outstanding, the amounts that Coleman Worldwide would be required to
pay to Mafco under the Worldwide Tax Sharing Agreement, together with any
remaining funds paid to Coleman Worldwide by the Company under the tax sharing
agreement between Coleman Worldwide and the Company, may not be paid as tax
sharing payments, but Coleman Worldwide may advance such funds to Mafco as long
as the aggregate amount of such advances at any time does not exceed the issue
price plus accrued OID of the LYONs. Such advances are evidenced by noninterest
bearing unsecured demand promissory notes from Mafco in the amount of $35.4
million at December 31, 1997. Upon the redemption of the remaining LYONs,
such demand notes will be cancelled.
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.
20
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.
21
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 and supplementary data
listed in the accompanying List of Financial Statements and Schedules on
Page F-1 herein. Information required by other schedules called for under
Regulation S-X is either not applicable or is included in the consolidated
financial statements or notes thereto.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
22
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
DIRECTORS AND EXECUTIVE OFFICERS OF COLEMAN WORLDWIDE
The name, age, present principal occupation or employment, five year
employment history, selected biographical information, and period of service
concerning the directors and executive officers of Coleman Worldwide set forth
below.
DIRECTORS
NAME AGE
---- ---
Ronald O. Perelman....................... 55
Donald G. Drapkin........................ 63
Jerry W. Levin........................... 53
Bruce Slovin............................. 62
EXECUTIVE OFFICERS
NAME AGE POSITION
---- --- --------
Ronald O. Perelman....... 55 Chief Executive Officer
Bruce Slovin............. 62 President
Irwin Engelman........... 63 Executive Vice President, Chief Financial
Officer and Treasurer
Barry F. Schwartz........ 48 Executive Vice President and General
Counsel
Ronald O. Perelman has been a director and Chairman of the Board of
Coleman Worldwide since its formation in March 1993, and a director of the
Company since 1989. Mr. Perelman 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, 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 has been a director of Coleman Worldwide since its
formation in March 1993, and of the Company since 1989. He 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 of the following corporations which file reports pursuant to the
Exchange Act: Alogos Pharmaceutical Corporation, Black Rock Asset Investors,
Cardio Technologies, Inc., 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.)
23
Jerry W. Levin has been a director of Coleman Worldwide since March
1994 and of the Company since 1989. Mr. Levin has also been Chairman and
Chief Executive Officer of the Company since February 1997, and a past
Chairman of the Company from 1989 to 1991. 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: The Cosmetic Center, Inc., Ecolab Inc., U.S. Bancorp Inc.,
Meridian, Revlon, Revlon Products, and REV Holdings.
Bruce Slovin has been a director of Coleman Worldwide since March
1993 and of the Company since February 1993, and 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., Continental Health Affiliates,
Inc., Infu-Tech, Inc., Meridian, and M&F Worldwide Corporation.
Irwin Engelman has been Executive Vice President, Chief Financial
Officer and Treasurer of Coleman Worldwide since February 1997 and has been
the Executive Vice President and Chief Financial Officer of MacAndrews
Holdings and certain of its affiliates since February 1992. Mr. Engelman was
Executive Vice President and Chief Financial Officer of GAF Corporation, a
specialty chemical and building materials company, from 1990 to 1991;
Director, President and Chief Operating Officer of Citytrust Bancorp Inc.
from 1988 to 1990; Executive Vice President of the Blackstone Group LP from
1987 to 1988; and Executive Vice President of General Foods Corporation for
more than five years prior to 1987. (On December 27, 1996, Marvel III, of
which Mr. Engelman is an executive officer, and Marvel Holdings and Marvel
Parent, of which Mr. Engelman was an executive officer, filed voluntary
petitions for reorganization under Chapter 11 of the United States Bankruptcy
Code.)
Barry F. Schwartz has been Executive Vice President & General
Counsel of Coleman Worldwide since its formation in March 1993. He has been
Executive Vice President of MacAndrews Holdings and certain of its affiliates
since 1993. Mr. Schwartz was Senior Vice President of MacAndrews Holdings
from 1989 to 1993. (On December 27, 1996, Marvel III, of which Mr. Schwartz
is an executive officer, and Marvel Holdings and Marvel Parent, of which Mr.
Schwartz was an executive officer, filed voluntary petitions for
reorganization under Chapter 11 of the United States Bankruptcy Code.)
All directors serve terms of one year and until the election of
their respective successors. Executive officers serve at the pleasure of the
Board of Directors.
DIRECTORS OF COLEMAN
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
24
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 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, 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: 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-
25
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.
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.
26
EXECUTIVE OFFICERS OF COLEMAN
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.
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.)
27
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.
ITEM 11. EXECUTIVE COMPENSATION
Coleman Worldwide is a holding company with no business operations of
its own. The officers of Coleman Worldwide received no compensation for
their services to Coleman Worldwide during 1997. The information regarding
certain compensation awarded to the Chief Executive Officer, the next four
most highly-compensation executive officers, and three former executive
officers of Coleman, who served as executive officers of Coleman during 1997
is set forth below.
28
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.
29
(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.
30
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.
31
(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/
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
32
Annual Incentive Plan (the "Incentive Plan") with a 100% target bonus
opportunity. The employment agreement 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
33
participation in the Company's medical plans during the severance period, and
is entitled to certain pension 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
34
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.
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
35
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.
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
36
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.
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 $l 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.
37
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.
38
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.
[GRAPHIC]
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
39
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Coleman Worldwide has 1,000 shares of common stock, par value $1.00 per
share, issued and outstanding. Ronald O. Perelman, 35 East 62nd Street, New
York, New York 10021, through MacAndrews & Forbes, beneficially owns 100% of
the outstanding shares of common stock of Coleman Worldwide. Sunbeam may be
deemed to be the beneficial owner of 1,000 shares of Coleman Worldwide's
common stock by reason of its execution of the CLN Holdings Merger Agreement.
No other director, executive officer or person beneficially owns any shares
of common stock of Coleman Worldwide.
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
Beneficial Owner Beneficial Ownership Percent 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.
40
(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.
(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.
TAX SHARING AGREEMENTS
Coleman Worldwide and the Company are, for federal income tax
purposes, included in the consolidated group of which Mafco is the common
parent, and the federal taxable income and loss of Coleman Worldwide and the
Company will be included in the consolidated federal income tax return filed
by Mafco. Coleman Worldwide and the Company also may be included in certain
state and local tax returns of Mafco or its subsidiaries. In connection with
the offering of the LYONs, Coleman Worldwide and Mafco entered into a tax
sharing agreement (the "Worldwide Tax Sharing Agreement"), pursuant to which
Coleman Worldwide is required to pay to Mafco amounts equal to the taxes that
Coleman Worldwide would otherwise have to pay if it were to file separate
consolidated federal, state or local income tax returns including only itself
and its domestic subsidiaries (including any amounts determined to be due as
a result of a redetermination of the tax liability of the Mafco consolidated
group ensuing from an audit or otherwise). At any time the LYONs are
outstanding, the amounts Coleman Worldwide would be required to pay to Mafco
under the Worldwide Tax Sharing Agreement, together with any remaining funds
paid to Coleman Worldwide by the Company under the Company Tax Sharing
Agreement (as defined below), will instead be advanced by Coleman Worldwide
to Mafco as long as the aggregate amount of such advances at any time does
not exceed the Issue Price plus accrued Original Issue Discount on the LYONs.
Such advances will be evidenced by noninterest bearing unsecured demand
promissory notes from Mafco. Upon the redemption of the LYONs, such demand
notes will be cancelled. In addition, the Company, Coleman Worldwide and
Mafco entered into a Tax Sharing Agreement with the Company (the "Company Tax
Sharing Agreement") pursuant to which the Company is required to pay to
Coleman Worldwide amounts equal to the taxes that the Company would otherwise
have to pay if it were to file separate
41
consolidated federal, state or local income tax returns including only itself
and its domestic subsidiaries (including any amounts determined to be due as
a result of a redetermination of the tax liability of the Mafco consolidated
group ensuing from an audit or otherwise). Under federal tax law, Coleman
Worldwide and the Company will be subject to several liability with respect
to the consolidated federal income tax liabilities of the affiliated group of
which Mafco is the common parent for any taxable period during which Coleman
Worldwide or the Company or a subsidiary of any of them is a member of such
group. Mafco has agreed, however, to indemnify Coleman Worldwide and the
Company for any such federal income tax liability (and certain state and
local tax liabilities) of Mafco or any of its subsidiaries that Coleman
Worldwide or the Company or any of their subsidiaries are actually required
to pay. Because the tax sharing payments to be made under the respective tax
sharing agreements will be determined by the amount of taxes that the Company
or Coleman Worldwide, as the case may be, would otherwise have to pay if it
were to file federal, state or local income tax returns, including only
itself and, in the case of Coleman Worldwide and the Company, its domestic
subsidiaries, the tax sharing agreements will not increase the taxes payable
by the Company or Coleman Worldwide . Mafco may benefit, however, to the
extent that Mafco can offset the taxable income generated by Coleman
Worldwide and the Company against losses and tax credits generated by Mafco
and its other subsidiaries. Following the consummation of the CLN Holdings
Merger, Coleman will no longer be included in the Mafco consolidated tax
group. The Tax Sharing Agreements 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.
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.
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.
42
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.
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.
43
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 Coleman Worldwide
Corporation, filed with the Secretary of State of
Delaware on March 12, 1993 (incorporated by reference
to Exhibit 3.1 to the Coleman Worldwide Corporation
1993 Annual Report on Form 10-K).
3.2 Bylaws of Coleman Worldwide Corporation, as adopted
March 12, 1993 (incorporated by reference to Exhibit
3.2 to the Coleman Worldwide Corporation 1993 Annual
Report on Form 10-K).
4.1 Indenture, dated as of May 20, 1997, by and among the
Coleman Escrow Corp., Coleman Worldwide (only with
respect to the non-recourse guaranty and certain
collateral security agreements contained in Articles X
and XI thereof) and First Trust National Association,
as Trustee, relating to the Senior Secured First
Priority Discount Notes due 2001, the Senior Secured
Second Priority Discount Notes due 2001, the Senior
Secured First Priority Discount Exchange Notes due
2001 and the Senior Secured Second Priority Discount
Exchange Notes due 2001 (incorporated by reference to
Exhibit (a) to the Transaction Statement on Schedule
13E-3 of Coleman Worldwide).
4.2 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).
4.3 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).
44
4.4 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).
4.5 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).
4.6 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).
4.7 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).
4.8 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).
4.9 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).
4.10 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).
4.11 Indenture dated as of May 27, 1993 between Coleman
Worldwide and Continental Bank National Association,
as Trustee (incorporated by reference to Exhibit 4.10
to the Coleman Holdings Inc. Registration Statement
Form S-1 (File No. 33-67058), filed on August 6,
1993).
4.12 Escrow and Pledge Agreement dated as of May 27, 1993
among Coleman Worldwide and the Trustee, as Escrow
Agent (incorporated by reference to Exhibit 4.2 to the
Coleman Holdings Inc. Registration Statement Form S-1
(File No. 33-67058), filed on August 6, 1993).
4.13 Worldwide Non-Recourse Guaranty dated as of
May 27, 1993 (incorporated by reference to Exhibit 4.6
to the Coleman Holdings Inc. Registration Statement
Form S-1 (File No. 33-67058), filed on August 6,
1993).
4.14 Worldwide Pledge Agreement dated as of May 27, 1993
between Coleman Worldwide and the Agent (incorporated
by reference to Exhibit 4.7 to the Coleman Holdings
Inc. Registration Statement Form S-1 (File No.
33-67058), filed on August 6, 1993).
45
4.15 Indenture dated as of July 15, 1993, between Coleman
Holdings Inc., Coleman Worldwide, as guarantor, and
the Trustee (incorporated by reference to Exhibit 4.1
to the Coleman Holdings Inc. Registration Statement
Form S-1 (File No. 33-67058), filed on August 6,
1993).
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).
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
46
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).
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 Tax Sharing Agreement VI dated as of May 27, 1993
between Mafco and Coleman Worldwide (incorporated by
reference to Exhibit 10.39 to the Coleman Holdings
Inc. Registration Statement Form S-1 (File 33-67058),
filed on August 6, 1993).
10.16* The Coleman Company, Inc. Executive Severance
Policy effective as of February 27, 1998
(incorporated by reference to Exhibit 10.16 to The
Coleman Company, Inc. 1997 Annual Report on Form
10-K).
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
47
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 (incorporated by reference to Exhibit 10.6
to The Coleman Company, Inc. Form 10-Q for the
period ended September 30, 1996).
10.25* Retention Agreement dated September 22, 1997
between The Coleman Company, Inc. and Patrick
McEvoy (incorporated by reference to Exhibit 10.25
to The Coleman Company, Inc. 1997 Annual Report on
Form 10-K).
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* The Coleman Company, Inc. Executive Annual
Incentive Plan (incorporated by reference to
Exhibit 10.31 to The Coleman Company, Inc. 1997
Annual Report on Form 10-K).
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).
48
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).
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).
49
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).
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).
10.56 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 (incorporated by reference to
Exhibit 10.56 to The Coleman Company, Inc. 1997
Annual Report on Form 10-K).
10.57* Amendment No. 2 to The New Coleman Company, Inc.
Retirement Plan for Salaried Employees
(incorporated by reference to Exhibit 10.57 to The
Coleman Company, Inc. 1997 Annual Report on Form
10-K).
10.58* Special Amendment Regarding Transfers to The New
Coleman Company, Inc. Retirement Plan for Salaried
Employees (incorporated by reference to Exhibit
10.58 to The Coleman Company, Inc. 1997 Annual
Report on Form 10-K).
10.59* The New Coleman Company, Inc. Pension Plan for
Weekly Salaried and Hourly Paid Employees
(incorporated by reference to Exhibit 10.59 to The
Coleman Company, Inc. 1997 Annual Report on Form
10-K).
50
10.60 Worldwide Registration Rights Agreement dated as of
May 27, 1993 among Coleman Worldwide, the Company, the
Lenders Party thereto and the Agent (incorporated by
reference to Exhibit 10.47 to the Coleman Holdings
Inc. Registration Statement Form S-1 (File 33-67058),
filed on August 6, 1993).
10.61 Indemnity Agreement dated as of May 27, 1993 among
Coleman Worldwide, New Coleman Holdings Inc. and
certain subsidiaries of New Coleman Holdings Inc.
(incorporated by reference to Exhibit 10.3 to the
Coleman Holdings Inc. Registration Statement Form S-1
(File 33-67058), filed on August 6, 1993).
10.62 Reimbursement Agreement dated as of May 27, 1993
between Coleman Worldwide and MacAndrews Holdings
(incorporated by reference to Exhibit 10.8 to the
Coleman Holdings Inc. Registration Statement Form S-1
(File 33-67058), filed on August 6, 1993).
21.1- Subsidiaries of the Company.
24.1- Powers of Attorney executed by Ronald O. Perelman,
Donald G. Drapkin, Jerry W. Levin, and Bruce Slovin.
27- Financial Data Schedule
-------------
* Management Contracts and Compensatory Plans
- 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.
51
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
COLEMAN WORLDWIDE CORPORATION
(Registrant)
Date: March 18, 1998 By: Bruce Slovin *
------------------- -----------------------------
Bruce Slovin
President and Director
Date: March 23, 1998 By: Irwin Engelman
------------------- -----------------------------
Irwin Engelman
Executive Vice President and
Chief Financial Officer
Date: March 23, 1998 By: Laurence Winoker
------------------- -----------------------------
Laurence Winoker
Chief Accounting Officer
Pursuant to the requirements of the Securities and Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: March 18, 1998 By: Ronald O. Perelman *
------------------- -----------------------------
Ronald O. Perelman
Chairman of the Board and Director
Date: March 18, 1998 By: Donald G. Drapkin *
------------------- -----------------------------
Donald G. Drapkin
Director
Date: March 18, 1998 By: Jerry W. Levin*
------------------- -----------------------------
Jerry W. Levin
Director
* Executed on behalf of the individual pursuant to a power of attorney.
Date: March 23, 1998 By: /s/ Joram C. Salig
------------------- -----------------------------
Joram C. Salig
Attorney-in-fact
52
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
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
The following consolidated financial statements of Coleman Worldwide
Corporation and Subsidiaries are included in Item 8:
Page
----
Consolidated Balance Sheets as of December 31, 1997 and 1996.......... F-3
Consolidated Statements of Operations
for the years ended December 31, 1997, 1996 and 1995................ F-4
Consolidated Statements of Stockholder's 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 Coleman Worldwide
Corporation and Subsidiaries included in Item 14(d):
Schedule I - Condensed Financial Information of Registrant............ F-33
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable and, therefore,
have been omitted.
F-1
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholder
Coleman Worldwide Corporation
We have audited the accompanying consolidated balance sheets of Coleman
Worldwide Corporation and subsidiaries as of December 31, 1997 and 1996, and the
related consolidated statements of operations, stockholder's equity, and cash
flows for each of the three years in the period ended December 31, 1997. Our
audits also included the financial statement schedule listed in the Index at
Item 14(a). These financial statements and schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Coleman Worldwide Corporation 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. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects, the
information set forth therein.
/s/ Ernst & Young LLP
Wichita, Kansas
February 18, 1998
F-2
COLEMAN WORLDWIDE CORPORATION 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
Deferred tax assets....................................... 26,378 40,466
Prepaid assets and other.................................. 21,406 14,885
----------- -----------
Total current assets.................................... 476,898 570,094
Property, plant and equipment, net.......................... 175,494 199,182
Intangible assets related to businesses acquired, net....... 338,989 349,761
Note receivable - affiliate................................. 35,395 54,739
Deferred tax assets and other............................... 52,286 32,673
----------- -----------
$1,079,062 $1,206,449
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current portion of long-term debt......................... $ 3,026 $ 747
Short-term borrowings..................................... 64,207 33,935
Accounts payable.......................................... 91,846 98,628
Accounts payable - affiliates............................. 2,825 278
Accrued expenses.......................................... 93,838 112,944
----------- -----------
Total current liabilities............................... 255,742 246,532
Long-term debt.............................................. 477,276 757,460
Income taxes payable - affiliate............................ 13,317 18,528
Other liabilities........................................... 60,606 76,173
Minority interest........................................... 43,386 45,088
Commitments and contingencies...............................
Stockholder's equity:
Common stock, par value $1.00 per share;
1,000 shares issued and outstanding..................... 1 1
Additional paid-in capital................................ 219,712 23,687
Retained earnings......................................... 19,072 36,360
Currency translation adjustment........................... (9,287) 2,856
Minimum pension liability adjustment...................... (763) (236)
----------- -----------
Total stockholder's equity.............................. 228,735 62,668
----------- -----------
$1,079,062 $1,206,449
----------- -----------
----------- -----------
See Notes to Consolidated Financial Statements
F-3
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
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............... 266,501 291,862 174,870
Asset impairment charge.................................... -- -- 12,289
Interest expense, net...................................... 46,989 50,767 35,930
Amortization of goodwill and deferred charges.............. 11,723 11,056 8,309
Other expense (income), net................................ 1,867 (1,604) 283
----------- ----------- ----------
(Loss) earnings before income taxes, minority
interest and extraordinary item....................... (13,117) (60,362) 52,466
Income tax (benefit) expense............................... (7,708) (14,753) 19,861
Minority interest in earnings of Camping Gaz............... 1,386 1,872 --
Minority interest in (loss) earnings of Coleman............ (446) (7,262) 6,696
----------- ----------- ----------
(Loss) earnings before extraordinary item.................. (6,349) (40,219) 25,909
Extraordinary loss on early extinguishment of debt,
net of income tax benefit of $7,076 in 1997, $846 in 1996,
and $503 in 1995......................................... (10,939) (1,244) (787)
----------- ----------- ----------
Net (loss) earnings........................................ $ (17,288) $ (41,463) $ 25,122
----------- ----------- ----------
----------- ----------- ----------
See Notes to Consolidated Financial Statements
F-4
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
Common Stock
-------------------- Additional Currency Minimum
Number Paid-In Retained Translation Pension
of Shares Amount Capital Earnings Adjustment Liability
--------- -------- ---------- -------- ----------- ---------
Balance at December 31, 1994.......... 1,000 $ 1 $ 23,110 $ 52,701 $ 970 $ --
Net earnings..................... -- -- -- 25,122 -- --
Currency translation adjustment.. -- -- -- -- (617)
Contributions.................... -- -- 386 --
--------- -------- ---------- -------- ----------- ---------
Balance at December 31, 1995.......... 1,000 1 23,496 77,283 353 --
Net loss......................... -- -- -- (41,463) -- --
Currency translation adjustment.. -- -- -- -- 2,503 --
Minimum pension liability
adjustment, net of tax...... -- -- -- -- -- (236)
Contributions.................... -- -- 191 -- --
--------- -------- ---------- -------- ----------- ---------
Balance at December 31, 1996.......... 1,000 1 23,687 36,360 2,856 (236)
Net loss......................... -- -- -- (17,288) -- --
Currency translation adjustment.. -- -- -- -- (12,143) --
Minimum pension liability
adjustment, net of tax...... -- -- -- -- -- (527)
Contributions.................... -- -- 196,025 -- -- --
--------- -------- ---------- -------- ----------- ---------
Balance at December 31, 1997.......... 1,000 $ 1 $ 219,712 $ 19,072 $ (9,287) $ (763)
--------- -------- ---------- -------- ----------- ---------
--------- -------- ---------- -------- ----------- ---------
See Notes to Consolidated Financial Statements
F-5
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
Year Ended December 31,
------------------------------------
1997 1996 1995
---------- ---------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) earnings. . . . . . . . . . . . . . . . . . . . . . . . . $ (17,288) $ (41,463) $ 25,122
---------- ---------- --------
Adjustments to reconcile net (loss) earnings to net cash flows
from operating activities:
Depreciation and amortization. . . . . . . . . . . . . . . 38,362 36,941 27,087
Non-cash tax sharing agreement (benefit) provision . . . . (5,211) 4,637 15,722
Minority interest in (loss) earnings of Coleman. . . . . . (446) (7,262) 6,696
Minority interest in earnings of Camping Gaz . . . . . . . 1,386 1,872 --
Interest accretion . . . . . . . . . . . . . . . . . . . . 6,137 12,051 11,388
Non-cash gain on LYONs conversion. . . . . . . . . . . . . -- (2,755) --
Non-cash restructuring and other charges . . . . . . . . . 17,325 48,269 12,289
Extraordinary loss on early extinguishment of debt . . . . 18,015 2,090 1,290
Change in assets and liabilities:
Decrease (increase) in receivables. . . . . . . . . . 3,952 976 (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. . . . . . . . . . . . . . . . . . . . . . (26,970) (5,982) (16,747)
---------- ---------- --------
89,026 36,127 (15,679)
---------- ---------- --------
Net cash provided (used) by operating activities . . . . . . . . . . 41,738 (5,336) 9,443
---------- ---------- --------
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)
Decrease (increase) in note receivable - affiliate . . . . . . . . . 19,344 (4,054) (6,742)
Proceeds from sale of fixed assets . . . . . . . . . . . . . . . . . 5,728 2,924 928
---------- ---------- --------
Net cash used by investing activities. . . . . . . . . . . . . . . . (16,201) (204,339) (68,252)
---------- ---------- --------
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. . . . . . . . . . . . . . . . . . . . . (193,145) (6,778) (74,782)
Debt issuance and refinancing costs. . . . . . . . . . . . . . . . . (1,766) (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
Contributions from parent. . . . . . . . . . . . . . . . . . . . . . 191,437 191 386
---------- ---------- --------
Net cash (used) provided by financing activities . . . . . . . . . . (55,316) 210,552 64,286
---------- ---------- --------
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
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
1. SIGNIFICANT ACCOUNTING POLICIES
BACKGROUND:
Coleman Worldwide Corporation ("Coleman Worldwide") is a holding
company formed in March 1993 in connection with the offering of Liquid Yield
Option-TM- Notes due 2013 (the "LYONs"-TM-). Coleman Worldwide also holds
44,067,520 shares of the common stock of The Coleman Company, Inc. ("Coleman"
or the "Company") which represented approximately 82% of the outstanding
Coleman common stock as of December 31, 1997. Coleman Worldwide is a holding
company with no business operations of its own. In connection with an
initial public offering in March 1992, Coleman was formed in December 1991 to
succeed to the assets and liabilities of the outdoor products business of New
Coleman Holdings Inc. ("Holdings") an indirect wholly-owned subsidiary of
Mafco Holdings Inc. ("Mafco"). Holdings (then named The Coleman Company,
Inc.) was acquired in 1989 by MacAndrews & Forbes Holdings Inc. ("MacAndrews
Holdings", and together with Mafco, "MacAndrews & Forbes"), a corporation
wholly owned through Mafco by Ronald O. Perelman. Coleman is a subsidiary of
Coleman Worldwide, a subsidiary of CLN Holdings, Inc. ("CLN Holdings"), an
indirect wholly-owned subsidiary of Holdings.
PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements include the accounts of
Coleman Worldwide and its subsidiaries after elimination of all material
intercompany accounts and transactions.
CASH 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. Coleman
Worldwide's cash equivalents consist primarily of investments in money market
funds and commercial paper. Coleman Worldwide'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
F-7
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
period, as determined based on the estimated undiscounted cash flows of the
entity acquired, the carrying amount of the goodwill is reduced to estimated
fair value based on market value or discounted cash flows, as appropriate.
Accumulated amortization aggregated $48,148 and $39,520 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
COLEMAN WORLDWIDE CORPORATION 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 Coleman Worldwide
to concentrations of credit risk consist primarily of trade receivables and
derivative financial instruments. Credit risk on trade receivables is
minimized as a result of the large and diversified nature of the Company's
worldwide customer base. Although the Company has one significant customer
(See Note 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 Coleman
Worldwide in estimating its fair value disclosures for financial instruments:
CASH AND CASH EQUIVALENTS: The carrying amount reported in
the balance sheet for cash and cash equivalents approximates
its fair value.
LONG- AND SHORT-TERM DEBT: The carrying amounts of Coleman
Worldwide's borrowings under its foreign bank lines of
credit, revolving credit agreement and other variable rate
debt approximate their fair value. The fair value of the
Company's senior notes issues (see Note 9) are estimated
using discounted cash flow analysis based on the Company's
estimated current borrowing rate for similar types of
borrowing arrangements.
FOREIGN CURRENCY EXCHANGE CONTRACTS: The fair values of
Coleman Worldwide's foreign currency contracts are estimated
based on quoted market prices of comparable contracts,
adjusted through interpolation where necessary for maturity
differences.
F-9
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
The carrying amounts and fair values of Coleman Worldwide'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 . . . . (480,002) (448,295) (757,613) (738,964)
Foreign currency exchange contracts . . . . . . 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.
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 Financial Accounting Standards Board (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.
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
F-10
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
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.
Coleman Worldwide has not yet determined the impact of adoption of
these standards; however, the adoption of these standards will have no impact
on Coleman Worldwide'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 Coleman Worldwide.
On January 2, 1996, the Company purchased substantially all the assets
and assumed certain liabilities of Seatt Corporation ("Seatt"), a leading
designer, manufacturer and distributor of safety and security related
electronic products for residential and commercial applications. The Seatt
acquisition, which was accounted for under the purchase method, was completed
for approximately $65,300 including fees and expenses. The results of
operations of Seatt have been included in the consolidated financial
statements from the date of acquisition. In connection with the purchase
price allocation of the Seatt acquisition, the Company recorded goodwill of
approximately $38,800. The Company is amortizing this amount over 40 years
on the straight-line method.
F-11
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
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 of
Coleman Worldwide for the years ended December 31, 1996 and 1995 assume the
acquisition of Seatt and the acquisition of all the outstanding shares of
Camping Gaz occurred as of the beginning of the respective periods. The pro
forma results include certain adjustments, primarily reflecting increased
amortization and interest expense and a lower income tax provision, and are
not necessarily indicative of what the results of operations would have been
had the Seatt and Camping Gaz acquisitions occurred at the beginning of the
respective periods. Moreover, the pro forma information is not intended to
be indicative of future results of operations.
Year Ended December 31,
-------------------------
1996 1995
----------- ----------
Net revenues.................................. $1,246,370 $1,193,295
(Loss) earnings before extraordinary item..... (40,353) 25,151
Net (loss) earnings........................... (41,597) 24,364
3. RESTRUCTURING 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
F-12
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.
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
F-13
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.
6. ACCRUED EXPENSES
Accrued expenses consisted of the following:
December 31,
------------------------
1997 1996
--------- ---------
Compensation and related benefits.... $20,385 $ 29,331
Other................................ 73,453 83,613
--------- --------
$93,838 $112,944
--------- --------
--------- --------
F-14
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
7. OTHER LIABILITIES
Other liabilities consisted of the following:
December 31,
--------------------
1997 1996
-------- --------
Pensions and other postretirement benefits...... $ 49,121 $ 52,229
Other........................................... 11,485 23,944
-------- --------
$ 60,606 $ 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.
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
Liquid Yield Option-TM- Notes
due 2013 (e)........................... 2,503 174,594
Other.................................... 778 3,785
--------- ---------
480,302 758,207
Less current portion..................... 3,026 747
--------- ---------
$477,276 $757,460
--------- ---------
--------- ---------
(a) On August 8, 1995, the Company completed a private placement
issuance and sale of $200,000 aggregate principal amount of 7.26%
Senior Notes due 2007 (the "2007 Notes"). Interest on the 2007
Notes is payable semiannually, and the principal is payable in
annual installments of $40,000 each commencing August 8, 2003,
with a final installment payment of $40,000 due on August 8,
2007. If there is a default, the interest rate will be the
greater of (i) 9.26% or (ii) 2.0% above the prime interest
rate.
F-15
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
The 2007 Notes are unsecured and are subject to various restrictive
covenants including, without limitation, requirements for the
maintenance of specified financial ratios and levels of
consolidated net worth and certain other provisions limiting the
incurrence of additional debt and sale and leaseback transactions
under the terms of the note purchase agreement.
(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.
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
F-16
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
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.
(e) On May 27, 1993, Coleman Worldwide issued and sold $500,000 principal
amount at maturity of LYONs in an underwritten public offering. On
June 7, 1993, an additional $75,000 principal amount at maturity of
LYONs was sold upon exercise of the underwriter's overallotment
option. During 1997, Coleman Worldwide redeemed $554,053 principal
amount at maturity of LYONs. The $7,500 principal amount at maturity
of LYONs which remain outstanding are secured by a pledge of 7,692,854
shares of Coleman common stock owned by Coleman Worldwide. There are
no periodic payments of interest on the LYONs. The aggregate
principal amount of the LYONs represents a yield to maturity of 7.25%
per annum (computed on a semi-annual bond equivalent basis) calculated
from May 27, 1993. Coleman Worldwide plans to redeem the remaining
$7,500 aggregate principal amount at maturity of LYONs no later than
May 27, 1998. The LYONs, to which the Company is not a party, provide
that it is an Additional Purchase Right Event (as defined below) if,
among other things, the amount of debt incurred by the Company exceeds
certain limitations. The Indenture governing the LYONs, to which the
Company is not a party, provides the holders of LYONs with the option
to require Coleman Worldwide to purchase the LYONs at a price
specified in the Indenture after the occurrence of certain events
("Additional Purchase Right Events"). Additional Purchase Right
Events occur, among other things, upon the Company's Consolidated Debt
Ratio (as defined) exceeding 0.75 to 1.0 or the Consolidated Net Worth
(as defined) of Coleman Worldwide as of the end of any fiscal quarter
being less than a specified amount which is $70,000 at December 31,
1997.
The aggregate scheduled amounts of long-term debt maturities in the
years 1998 through 2002 are $3,026, $78, $12,207 $129,204, and $12,159,
respectively.
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.
F-17
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
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
Coleman Worldwide is included in the consolidated federal and certain
consolidated state income tax returns of Mafco and/or its affiliates.
Coleman Worldwide and Mafco are parties to a tax sharing agreement (the "Tax
Sharing Agreement"), pursuant to which Coleman Worldwide is required to pay
to Mafco amounts equal to the taxes Coleman Worldwide would otherwise have to
pay if it were to file separate consolidated federal, state or local income
tax returns including only itself and its domestic subsidiaries. Pursuant to
the LYONs indenture agreement, at any time the LYONs are outstanding, the
amounts Coleman Worldwide would be required to pay to Mafco under the Tax
Sharing Agreement, together with any remaining funds paid to Coleman
Worldwide by the Company under the tax sharing agreement between Coleman
Worldwide and the Company, may not be paid as tax sharing payments, but
Coleman Worldwide may advance such funds to Mafco as long as the aggregate
amount of such advances at any time does not exceed the issue price plus
accrued OID of the LYONs. Such advances are evidenced by noninterest bearing
unsecured demand promissory notes (the "Mafco Demand Notes") from Mafco in
the amount of $35,395 at December 31, 1997. Following the redemption or
retirement in full of
F-18
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
the LYONs, expected to occur no later than May 27, 1998, the Mafco Demand
Notes shall be canceled automatically without further action of any person,
and shall be of no further force or effect whatsoever, and, until the time of
such cancellation, no demand or request for payment of any kind shall be made
with respect to the Mafco Demand Notes. As a result of the restriction on
the payment of the tax sharing amounts, income taxes provided pursuant to the
Tax Sharing Agreement are reflected as a non-cash charge. For all periods
presented, federal and state income taxes are provided as if Coleman
Worldwide filed its own income tax returns. The accompanying consolidated
balance sheet includes approximately $13,317 and $18,528 of federal and state
income taxes payable to Mafco pursuant to the Tax Sharing Agreement 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....................................... $ (20,869) $ (39,593) $ 66,900
Foreign........................................ 7,752 (20,769) (14,434)
--------- --------- --------
$ (13,117) $ (60,362) $ 52,466
--------- --------- --------
--------- --------- --------
Significant components of the provision for income tax (benefit) expense
were as follow:
Year Ended December 31,
-----------------------------------
1997 1996 1995
--------- --------- ---------
Current:
Federal.................... $ (4,740) $ (3,932) $ 14,520
State...................... -- (937) 3,102
Foreign.................... 1,485 3,454 3,853
--------- --------- ---------
Total current........... (3,255) (1,415) 21,475
--------- --------- ---------
Deferred:
Federal.................... (538) (10,686) (3,104)
State...................... (1,890) (2,178) (725)
Foreign.................... (2,025) (474) 2,215
--------- --------- ---------
Total deferred.......... (4,453) (13,338) (1,614)
--------- --------- ---------
$ (7,708) $ (14,753) $ 19,861
--------- --------- ---------
--------- --------- ---------
F-19
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
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........................... (8.9) (4.5) 2.2
Nondeductible amortization................. 18.6 4.3 3.8
Foreign operations......................... (32.3) 3.6 (0.2)
Valuation allowance........................ 18.1 5.8 --
Change in tax rates........................ (10.2) -- --
Puerto Rico operations..................... (6.3) 0.3 (3.1)
Other, net................................. (2.8) 1.1 0.2
------ ------ ------
Effective tax rate (benefit) provision..... (58.8)% (24.4)% 37.9%
------ ------ ------
------ ------ ------
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.
Significant components of Coleman Worldwide's deferred tax liabilities and
assets are as follows:
Year Ended 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.................. 73,628 47,013
Other, net........................................ 12,728 24,026
-------- --------
Total deferred tax assets.................... 118,221 107,160
Valuation allowance............................... (39,990) (39,639)
-------- --------
Net deferred tax assets................. 78,231 67,521
-------- --------
Deferred tax liabilities:
Depreciation...................................... 19,872 18,248
Other, net........................................ 8,405 7,675
-------- --------
Total deferred tax liabilities............... 28,277 25,923
-------- --------
Net deferred tax assets................. $ 49,954 $ 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 acquisitions
in 1997 of inactive companies which were recorded as a capital contribution
(see Note 12).
F-20
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
During 1997, Coleman Worldwide increased the valuation allowance related
to certain foreign deferred tax assets due to uncertainties over realization.
At December 31, 1997, Coleman Worldwide had net operating loss carryforwards
("NOL's") of approximately $107,229 for certain foreign income tax purposes.
These NOL's expire beginning in 1998.
Coleman Worldwide has not provided for taxes on undistributed foreign
earnings of approximately $20,860 at December 31, 1997, as Coleman Worldwide
intends to permanently reinvest these earnings in the future growth of the
business. Determination of the amount of unrecognized deferred U.S. income
tax liability is not practicable because of the complexities associated with
its hypothetical calculation.
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 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.
F-21
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
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.
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.
F-22
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
Holdings also has an unfunded excess benefit plan covering certain of
the Company's U.S. employees whose benefits under the plans described above
are limited by provisions of the Internal Revenue Code. The following table
reconciles the funded status of the pension plans with the amount recognized
in Coleman Worldwide's consolidated balance sheets as of the dates indicated:
December 31,
-----------------------
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.
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
curtailment loss associated with certain executive officer changes during the
year.
F-23
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
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 Coleman Worldwide'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)
---------- ----------
---------- ----------
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
F-24
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
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.
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 $ -
----------- --------- ---------
----------- --------- ---------
F-25
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
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.
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.
F-26
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
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 $ (20,187) $ (42,180) $ 24,897
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 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.
F-27
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
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 Coleman Worldwide'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.
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.
F-28
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
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
Coleman Worldwide 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 paid were $3,206, $2,857, and $4,606 for the years ended
December 31, 1997, 1996 and 1995, respectively. Certain non-cash
transactions relating to acquisitions, the issuance of long-term debt and
income taxes have been reported in Notes 2, 9 and 11.
17. GEOGRAPHIC SEGMENTS
Coleman Worldwide, through the Company, designs, manufactures and
markets a wide variety of multiuse products and accessories, which are
primarily marketed through independent retail markets for outdoor recreation
and hardware consumers. Coleman Worldwide, through 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.
F-29
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
Information related to Coleman Worldwide'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)....................... (28,565) (16,032) (18,738)
Interest expense............................. (46,989) (50,767) (35,930)
---------- ---------- ---------
(Loss) earnings before income taxes, minority
interest and extraordinary item.............. $ (13,117) $ (60,362) $ 52,466
---------- ---------- ---------
---------- ---------- ---------
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.................................... 89,729 93,631 80,123
---------- ---------- ---------
$1,079,062 $1,206,499 $ 906,389
---------- ---------- ---------
---------- ---------- ---------
- --------------------------
(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.
F-30
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
18. 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
(Loss) earnings before
extraordinary item (a). (1,473) 6,599 (6,927) (4,548)
Net loss (a)............... (1,473) (4,330) (6,927) (4,558)
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). 12,236 21,437 (42,047) (31,845)
Net earnings (loss) (a).... 11,654 20,780 (42,052) (31,845)
- -----------------------
(a) Includes restructuring and other charges (credits) as follows:
1997
----
Gross profit.......... $ (425) $ 11,402 $ 9,010 $ (314)
Earnings before
extraordinary item.. 2,435 11,547 9,433 (914)
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
19. 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
COLEMAN WORLDWIDE CORPORATION 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 and the LYONs. 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
SCHEDULE 1
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
COLEMAN WORLDWIDE CORPORATION
CONDENSED BALANCE SHEETS
(IN THOUSANDS)
December 31,
------------------------
1997 1996
------------------------
ASSETS
Investment in The Coleman Company, Inc.......... $ 198,319 $ 209,465
Note receivable - affiliate..................... 35,395 54,739
Other assets.................................... 14,680 13,285
--------- ---------
$ 248,394 $ 277,489
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDER'S EQUITY
Accrued expenses................................ $ 42 $ 38
Income taxes payable - subsidiary............... 3,797 21,661
Income taxes payable - affiliate - long term.... 13,317 18,528
Long-term debt.................................. 2,503 174,594
Stockholder's equity
Common stock............................... 1 1
Additional paid-in-capital................. 219,712 23,687
Retained earnings.......................... 19,072 36,360
Minimum pension liability adjustment....... (763) (236)
Currency translation adjustment............ (9,287) 2,856
---------- ---------
Total stockholder's equity............ 228,735 62,668
---------- ---------
$ 248,394 $ 277,489
---------- ---------
---------- ---------
F-33
SCHEDULE I
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
CONDENSED FINANCIAL INFORMATION OF REGISTRANT (CONTINUED)
COLEMAN WORLDWIDE CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
Year Ended December 31,
-------------------------------------------------
1997 1996 1995
------- --------- -------
Administrative expenses.............. $ 218 $ 193 $ 182
Interest expense, net................ 6,137 12,040 11,385
Amortization of deferred charges..... 385 583 564
Other income, net.................... -- (2,755) (51)
-------- --------- ---------
Loss before income taxes, equity
in net (loss) earnings of
subsidiaries and extraordinary
item................................ (6,740) (10,061) (12,080)
Income tax benefit................... (2,481) (3,826) (4,618)
--------- --------- ---------
Loss before equity in net (loss)
earnings of subsidiaries and
extraordinary item................... (4,259) (6,235) (7,462)
Equity in net (loss) earnings of
subsidiaries........................ (2,090) (34,631) 32,584
--------- ---------- ---------
(Loss) earnings before extra-
ordinary item....................... (6,349) (40,866) 25,122
Extraordinary loss on early
extinguishment of debt,net of
income tax benefit of $7,076
in 1997 and $415 in 1996............ (10,939) (597) --
--------- ---------- --------
Net (loss) earnings................. $ (17,288) $ (41,463) $ 25,122
------------ -------------- ------------
------------ -------------- ------------
F-34
SCHEDULE I
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
CONDENSED FINANCIAL INFORMATION OF REGISTRANT (CONTINUED)
COLEMAN WORLDWIDE CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
Year Ended December 31,
------------------------------------------
1997 1996 1995
----------- ----------- ---------
Net cash (used) provided by operating activities.......... $ (19,503) $ 3,993 $ 7,254
------------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease (increase) in note receivable - affiliate........ 19,344 (4,054) (6,742)
------------- ----------- ----------
Net cash provided (used) by investing activities.......... 19,344 (4,054) (6,742)
------------- ----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt............................... (190,278) (130) (898)
Debt redemption costs..................................... (1,000) -- --
Contributions from parent................................. 191,437 191 386
------------- ----------- ---------
Net cash provided (used) by financing activities.......... 159 61 (512)
------------ ----------- -----------
Change in cash............................................ $ -- $ -- $ --
------------ ----------- -----------
------------ ----------- -----------
F-35
SCHEDULE I
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
CONDENSED FINANCIAL INFORMATION OF REGISTRANT (CONTINUED)
COLEMAN WORLDWIDE CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA)
1. BACKGROUND AND BASIS OF FINANCIAL STATEMENT PRESENTATION
Coleman Worldwide Corporation ("Coleman Worldwide") was formed in March
1993 in connection with the offering of Liquid Yield Option-TM- Notes due
2013 (the "LYONs" -TM-). Coleman Worldwide holds 44,067,520 shares of the
common stock of The Coleman Company, Inc. (the "Company" or "Coleman") which
represented approximately 82% of the outstanding Coleman common stock as of
December 31, 1997.
In the Coleman Worldwide parent company-only financial statements,
Coleman Worldwide's investment in Coleman is stated at cost plus equity in
undistributed earnings of Coleman since date of acquisition. Coleman
Worldwide's share of net (loss) earnings of its unconsolidated subsidiary is
included in consolidated net (loss) earnings using the equity method. The
Coleman Worldwide parent company-only financial statements should be read in
conjunction with Coleman Worldwide's consolidated financial statements.
2. LONG-TERM DEBT
On May 27, 1993, Coleman Worldwide issued and sold $500,000 principal
amount at maturity of LYONs in an underwritten public offering. On June 7,
1993, an additional $75,000 principal amount at maturity of LYONs was sold
upon exercise of the underwriter's overallotment option. The LYONs mature on
May 27, 2013 and there is no periodic payments of interest on the LYONs. The
aggregate principal amount of the LYONs represents a yield to maturity of
7.25% per annum (computed on a semi-annual bond equivalent basis) calculated
from May 27, 1993.
On May 20, 1997, CLN Holdings issued approximately $732,035 in principal
amount at maturity of Senior Secured Discount Notes due 2001 (the "Escrow
Notes"). A portion of the net proceeds from the issuance of the Escrow Notes
was contributed to Coleman Holdings Inc. ("Coleman Holdings") and used by it
to redeem, on July 15, 1997, its Senior Secured Discount Notes due 1998 (the
"Holdings Notes"). 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 $554,053 aggregate principal amount at
maturity of LYONs. Coleman Worldwide plans to redeem the remaining $7,500
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, which would permit the holder of LYONs or Escrow Notes to sell such
notes to the issuer of such notes. Consummation of the CLN Holdings Merger
would be an additional purchase right under their debt instruments. There
are expected to be sufficient funds in escrow from the net proceeds of the
Escrow Notes to repurchase the LYONs upon such additional purchase right
event, and CLN Holdings will be required to obtain funds to repurchase or
repay the Escrow Notes, including but not limited to borrowing funds from its
affiliates at such time.
F-36
SCHEDULE I
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
CONDENSED FINANCIAL INFORMATION OF REGISTRANT (CONCLUDED)
COLEMAN WORLDWIDE CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
(in thousands)
3. COMMITMENTS AND CONTINGENCIES
In connection with the issuance of the Escrow Notes by CLN Holdings,
Coleman Worldwide has provided a non-recourse guaranty which is secured by
its pledge of 36,374,666 shares of Coleman common stock.
4. INCOME TAXES RECEIVABLE -, INCOME TAXES PAYABLE -, AND NOTE RECEIVABLE
-AFFILIATE
Coleman and Coleman Worldwide are included in the consolidated federal
and certain consolidated state income tax returns of Mafco Holdings Inc.
("Mafco") and/or its affiliates. Coleman and Coleman Worldwide have entered
into a tax sharing agreement (the "Company Tax Sharing Agreement") pursuant
to which Coleman is required to pay to Coleman Worldwide amounts equal to the
taxes that Coleman would otherwise have to pay if it were to file separate
consolidated federal, state or local income tax returns including only itself
and its domestic subsidiaries. The accompanying condensed balance sheet
includes approximately $3,797 and $21,661 of federal and state income taxes
payable to Coleman pursuant to the Company Tax Sharing Agreement at December
31, 1997 and 1996, respectively. Coleman Worldwide and Mafco are parties to
a tax sharing agreement (the "Worldwide Tax Sharing Agreement"), pursuant to
which Coleman Worldwide is required to pay to Mafco amounts equal to the
taxes that Coleman Worldwide would otherwise have to pay if it were to file
separate consolidated federal, state or local income tax returns including
only itself and its domestic subsidiaries. Pursuant to the LYONs indenture
agreement, at any time that the LYONs are outstanding, the amounts that
Coleman Worldwide would be required to pay to Mafco under the Worldwide Tax
Sharing Agreement, together with any remaining funds paid to Coleman
Worldwide by the Company under the Company Tax Sharing Agreement may not be
paid as tax sharing payments, but Coleman Worldwide may advance such funds to
Mafco as long as the aggregate amount of such advances at any time does not
exceed the issue price plus accrued OID of the LYONs. Such advances are
evidenced by noninterest bearing unsecured demand promissory notes from Mafco
in the amount of $35,395 and $54,739 at December 31, 1997 and 1996,
respectively. As a result of the restriction on the payment of the tax
sharing amounts, the accompanying condensed balance sheet includes
approximately $13,317 and $18,528 of federal and state income taxes payable
to Mafco pursuant to the Worldwide Tax Sharing Agreement at December 31, 1997
and 1996, respectively.
F-37