-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VfPev/WGRzSGVZAVjxex9yWB8T5CAyBxfrDNGTC7cxhuN+HDcWJXpFfE6TqhfipB UXPppqae+2Mo9ULwR9luhg== 0000950136-04-002496.txt : 20040809 0000950136-04-002496.hdr.sgml : 20040809 20040809090124 ACCESSION NUMBER: 0000950136-04-002496 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20040630 FILED AS OF DATE: 20040809 FILER: COMPANY DATA: COMPANY CONFORMED NAME: JARDEN CORP CENTRAL INDEX KEY: 0000895655 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-MISCELLANEOUS NONDURABLE GOODS [5190] IRS NUMBER: 351828377 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-13665 FILM NUMBER: 04959532 BUSINESS ADDRESS: STREET 1: 555 THEODORE FREMD AVE CITY: RYE STATE: NY ZIP: 10580 BUSINESS PHONE: 914 967 9400 MAIL ADDRESS: STREET 1: 555 THEODORE FREMD STREET 2: AVE CITY: RYE STATE: NY ZIP: 10580 10-Q 1 file001.txt FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q [XX] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended JUNE 30, 2004 OR ___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to _________ JARDEN CORPORATION DELAWARE 0-21052 35-1828377 State of Incorporation Commission File Number IRS Identification Number 555 THEODORE FREMD AVENUE RYE, NEW YORK 10580 REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (914) 967-9400 ------------------------------------------------------------------------ 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. Yes [X] No [ ] Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes [X] No [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at July 23, 2004 ----- ---------------------------- Common Stock, par value $.01 per share 27,219,344 shares JARDEN CORPORATION QUARTERLY REPORT ON FORM 10-Q FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2004 INDEX
Page Number ----------- PART I. FINANCIAL INFORMATION: Item 1. Financial Statements (Unaudited): Condensed Consolidated Statements of Income for the three and six month periods ended June 30, 2004 and June 30, 2003...................... 3 Condensed Consolidated Statements of Comprehensive Income for the three and six month periods ended June 30, 2004 and June 30, 2003.. 4 Condensed Consolidated Balance Sheets at June 30, 2004 and December 31, 2003............................................................... 5 Condensed Consolidated Statements of Cash Flows for the six month periods ended June 30, 2004 and June 30, 2003...................... 6 Notes to Condensed Consolidated Financial Statements.................... 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations...................................................... 14 Item 3. Quantitative and Qualitative Disclosures About Market Risk.............. 20 Item 4. Controls and Procedures................................................. 20 PART II. OTHER INFORMATION: Item 4. Submission of Matters to a Vote of Security Holders..................... 21 Item 6. Exhibits and Reports on Form 8-K........................................ 22 Signature Certifications
2 PART I. FINANCIAL INFORMATION Item 1. Financial Statements JARDEN CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTH PERIOD ENDED SIX MONTH PERIOD ENDED ------------------------------- --------------------------- JUNE 30, JUNE 30, JUNE 30, JUNE 30, 2004 2003 2004 2003 --------------- --------------- ------------ -------------- Net sales....................................... $ 199,035 $ 130,769 $ 357,359 $ 228,215 Costs and expenses: Cost of sales............................... 131,236 81,238 238,255 140,264 Selling, general and administrative expenses... 35,757 28,897 69,287 56,407 ----------- ----------- ---------- ----------- Operating earnings.............................. 32,042 20,634 49,817 31,544 Interest expense, net........................... 6,075 4,267 11,695 8,219 ----------- ----------- ---------- ----------- Income before taxes............................. 25,967 16,367 38,122 23,325 Provision for income taxes...................... 9,920 6,416 14,562 9,144 ----------- ----------- ---------- ----------- Net income...................................... $ 16,047 $ 9,951 $ 23,560 $ 14,181 =========== =========== ========== =========== Basic earnings per share........................ $ 0.59 $ 0.47 $ 0.87 $ 0.66 Diluted earnings per share...................... $ 0.57 $ 0.45 $ 0.83 $ 0.64 Weighted average shares outstanding: Basic....................................... 27,171 21,339 27,108 21,363 Diluted..................................... 28,292 22,068 28,242 22,091
See accompanying notes to condensed consolidated financial statements. 3 JARDEN CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) (IN THOUSANDS)
THREE MONTH PERIOD ENDED SIX MONTH PERIOD ENDED ---------------------------- ----------------------------- JUNE 30, JUNE 30, JUNE 30, JUNE 30, 2004 2003 2004 2003 ------------- ------------ ------------ -------------- Net income........................... $ 16,047 $ 9,951 $ 23,560 $ 14,181 Foreign currency translation......... (621) 1,950 (825) 3,328 Unrealized gain/(loss) on interest rate swap....................... 73 (138) 65 (138) ----------- ---------- ----------- ------------ Comprehensive income................. $ 15,499 $ 11,763 $ 22,800 $ 17,371 =========== ========== =========== ============
See accompanying notes to condensed consolidated financial statements. 4 JARDEN CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
JUNE 30, DECEMBER 31, 2004 2003 ----------- ------------- (Unaudited) (Note 1) Current assets: Cash and cash equivalents................................... $ 4,493 $ 125,400 Accounts receivable, net.................................... 129,298 92,777 Inventories, net............................................ 157,825 105,573 Other current assets........................................ 24,871 23,369 ----------- ----------- Total current assets.................................... 316,487 347,119 ----------- ----------- Non-current assets: Property, plant and equipment, at cost...................... 217,701 188,823 Accumulated depreciation.................................... (117,420) (109,704) ----------- ----------- 100,281 79,119 Goodwill.................................................... 434,507 236,413 Other intangible assets, net................................ 133,865 79,413 Other assets................................................ 20,774 17,610 ----------- ----------- Total assets.................................................... $1,005,914 $ 759,674 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Short-term debt and current portion of long-term debt....... $ 22,446 $ 17,512 Accounts payable............................................ 50,614 34,211 Deferred consideration for acquisitions..................... 42,864 - Other current liabilities................................... 59,558 53,357 ----------- ----------- Total current liabilities............................... 175,482 105,080 ----------- ----------- Non-current liabilities: Long-term debt.............................................. 476,846 369,870 Other non-current liabilities............................... 78,206 34,819 ----------- ----------- Total non-current liabilities........................... 555,052 404,689 ----------- ----------- Commitments and contingencies................................... - - Stockholders' equity: Common stock ($.01 par value, 28,720 and 28,720 shares issued and 27,220 and 27,007 shares outstanding at June 30, 2004 and December 31, 2003, respectively)............... 287 287 Additional paid-in capital.................................. 166,880 165,056 Retained earnings........................................... 124,370 100,811 Other stockholders' equity.................................. (16,157) (16,249) ----------- ----------- Total stockholders' equity.................................. 275,380 249,905 ----------- ----------- Total liabilities and stockholders' equity...................... $1,005,914 $ 759,674 =========== ===========
See accompanying notes to condensed consolidated financial statements. 5 JARDEN CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS)
SIX MONTH PERIOD ENDED -------------------------- JUNE 30, JUNE 30, 2004 2003 ------------ ------------ Net cash provided by operations................................... $ 93 $ 15,193 Financing activities: Proceeds from revolving credit borrowings..................... 8,900 78,000 Payments on revolving credit borrowings....................... (2,000) (71,700) Proceeds from issuance of long-term debt...................... 116,000 10,000 Payments on long-term debt.................................... (5,289) (3,027) Proceeds from bond issuance................................... - 31,950 Payments on seller notes...................................... (5,400) (10,000) Debt issue and amendment costs................................ (2,010) (1,423) Other......................................................... 1,715 3,520 ---------- ---------- Net cash provided by financing activities................. 111,916 37,320 ---------- ---------- Investing activities: Additions to property, plant and equipment.................... (3,517) (4,569) Acquisition of businesses, net of cash acquired............... (228,876) (100,019) Other......................................................... (523) - ---------- ---------- Net cash used in investing activities..................... (232,916) (104,588) ---------- ---------- Decrease in cash and cash equivalents............................. (120,907) (52,075) Cash and cash equivalents at beginning of period.................. 125,400 56,779 ---------- ---------- Cash and cash equivalents at end of period........................ $ 4,493 $ 4,704 ========== ==========
See accompanying notes to condensed consolidated financial statements. 6 JARDEN CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements of Jarden Corporation (the "Company") have been prepared in accordance with generally accepted accounting principles in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles in the United States for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation (consisting of normal recurring adjustments) have been included. Results of operations for the periods shown are not necessarily indicative of results for the year, particularly in view of the varying seasonality of certain of our product line sales and the acquisitions the Company has completed during 2004 (see Note 4). The balance sheet at December 31, 2003 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles in the United States for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2003. Certain reclassifications have been made in the Company's financial statements of prior years to conform to the current year presentation. These reclassifications have no impact on previously reported net income. 2. STOCK OPTIONS As allowed for by Statement of Financial Accounting Standard No. 148, Accounting for Stock-Based Compensation - Transition and Disclosure, the Company accounts for the issuance of stock options using the intrinsic value method in accordance with Accounting Principles Board ("APB") No. 25, Accounting for Stock Issued to Employees, and related interpretations. Generally for the Company's stock option plans, no compensation cost is recognized in the Consolidated Statements of Income because the exercise price of the Company's stock options equals the market price of the underlying stock on the date of grant. Had compensation cost for the Company's stock option plans been determined based on the fair value at the grant dates for awards under those plans, the Company's net income and earnings per share would have been reduced to the pro forma amounts indicated (in thousands of dollars, except per share data):
THREE MONTH PERIOD ENDED SIX MONTH PERIOD ENDED ----------------- --------------- ------------------------------ JUNE 30, 2004 JUNE 30, 2003 JUNE 30, 2004 JUNE 30, 2003 ----------------- --------------- ------------------------------ Net income, as reported............................ $ 16,047 $ 9,951 $ 23,560 $ 14,181 Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects....... (620) (470) (1,263) (894) ---------- --------- ---------- ---------- Pro forma net income.............................. $ 15,427 $ 9,481 $ 22,297 $ 13,287 ========== ========= ========== ========== Basic earnings per share: As reported...................................... $ 0.59 $ 0.47 $ 0.87 $ 0.66 Pro forma........................................ $ 0.57 $ 0.44 $ 0.82 $ 0.62 Diluted earnings per share: As reported...................................... $ 0.57 $ 0.45 $ 0.83 $ 0.64 Pro forma ....................................... $ 0.55 $ 0.43 $ 0.79 $ 0.60
7 The Company granted 111,500 stock options, including a grant of 25,000 stock options to an executive officer of the Company, in the six month period ended June 30, 2004. The stock options that were granted have a four year vesting period with the exception of 37,500 stock options granted to directors of the Company in the first six months of 2004, which have a one year vesting period. The fair value of each option granted is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants in 2004: no dividend yield, expected volatility of 32 percent, risk-free interest rate of 3.1 percent and expected life of 7.0 years. 3. INVENTORIES Inventories at June 30, 2004 and December 31, 2003 were comprised of the following (in thousands):
JUNE 30, DECEMBER 31, 2004 2003 -------------- -------------- Raw materials and supplies.............................. $ 18,050 $ 15,254 Work in process......................................... 13,520 6,653 Finished goods.......................................... 126,255 83,666 ---------- ---------- Total inventories................................... $ 157,825 $ 105,573 ========== ==========
4. ACQUISITIONS On June 28, 2004, the Company acquired approximately 75.4% of the issued and outstanding stock of United States Playing Card Company and its subsidiaries ("USPC" and "USPC Acquisition"), with the remaining 24.6% subject to a put/call agreement starting in the fourth quarter of 2004. USPC is the world's largest manufacturer and distributor of playing cards and a leader in marketing children's card games, collectible tins, puzzles and card accessories for the North American retail market and is also the largest supplier of premium playing cards to casinos worldwide. USPC's portfolio of owned brands includes Aviator(R), Bee(R), Bicycle(R) and Hoyle(R). In addition, USPC has an extensive list of licensed brands, including Disney(R), Harley-Davidson(R), NASCAR(R) and World Poker Tour(TM). USPC's international holdings include Naipes Heraclio Fournier, S.A., a leading playing card manufacturer in Europe. The purchase price (including an estimate of the call price expected to be paid for the remaining 24.6% of the shares) was approximately $237.8 million, including transaction expenses and an estimate of the deferred consideration to be paid when the put/call agreement is exercised of approximately $34.1 million. Such consideration and the current portion of a $15.1 million holdback of consideration deferred for purposes of guaranteeing potential indemnification liabilities of the sellers is accrued as of June 30, 2004 and included in "Deferred Consideration for Acquisitions" on the Condensed Consolidated Balance Sheet included herein. The holdback amount is secured by a stand-by letter of credit under our senior credit facility. The cash portion of the purchase price funded on June 28, 2004 was financed using a combination of cash on hand, new debt financing (see Note 6) and borrowings under the Company's existing revolving credit facility. The goodwill and other intangibles amounts recorded in connection with the USPC Acquisition are discussed in detail in Note 5. Based on management's intention to exercise the put/call agreement resulting in 100% ownership of USPC within the current year, the Company has not accounted for the 24.6% minority interest in USPC. Therefore, the Company's Condensed Consolidated Financial Statements reflect 100% of the assets and liabilities of USPC as of June 30, 2004 and 100% of the results of USPC for the period from June 28, 2004 through June 30, 2004. In connection with the USPC Acquisition, the Company has preliminarily allocated approximately $159.1 million to goodwill and approximately $51.1 million to other intangibles. In addition, the USPC Acquisition includes an earn-out provision with a potential payment in cash or Company common stock, at the Company's sole discretion, up to $10 million payable in 2007, provided that certain earnings performance targets are met. If paid, the Company expects to capitalize the cost of the earn-out. The USPC business is included in the branded consumables segment (see Note 10). On September 2, 2003, the Company acquired all of the issued and outstanding stock of Lehigh Consumer Products Corporation and its subsidiary ("Lehigh" and the "Lehigh Acquisition"). Lehigh is the largest supplier of rope, cord and twine for the U.S. consumer marketplace and a leader in innovative storage and organization products and workshop accessories for the home and garage as well as in the security screen door and ornamental metal fencing market. The purchase price of the transaction was approximately $157.6 million, including transaction expenses. In connection with the Lehigh Acquisition, the Company has preliminarily allocated approximately $108.5 million to goodwill and approximately $3.4 million to trademarks (see Note 5). Lehigh is included in the branded consumables segment from September 2, 2003 (see Note 10). 8 On February 7, 2003, the Company completed its acquisition of the business of Diamond Brands International, Inc. and its subsidiaries ("Diamond Brands" and the "Diamond Acquisition"), a manufacturer and distributor of niche household products, including clothespins, kitchen matches, plastic cutlery and toothpicks under the Diamond(R) and Forster(R) trademarks. The purchase price of this transaction was approximately $91.5 million, including transaction expenses. The acquired plastic manufacturing operation is included in the plastic consumables segment from February 1, 2003 and the acquired wood manufacturing operation and branded product distribution business is included in the branded consumables segment from February 1, 2003 (see Note 10). The USPC Acquisition, the Lehigh Acquisition and the Diamond Acquisition were all entered into as part of the Company's strategy of acquiring branded consumer products businesses with leading market positions in niche markets for products used in and around the home. The following unaudited pro forma financial information gives pro forma effect to the USPC Acquisition, the Lehigh Acquisition and the Diamond Acquisition with the related financings as if they had been consummated as of the beginning of the period presented and as if the Company had acquired 100% of USPC. The pro forma net income for the six month period ended June 30, 2003 includes $1.5 million of reorganization expenses incurred by Diamond Brands prior to February 7, 2003 (in thousands, except per share data):
THREE MONTH PERIOD ENDED SIX MONTH PERIOD ENDED ------------------------------------ ----------------------------------------- JUNE 30, 2004 JUNE 30, 2003 JUNE 30, 2004 JUNE 30, 2003 PRO FORMA PRO FORMA PRO FORMA PRO FORMA --------------- --------------- ----------------- ------------------ Net sales....................... $ 231,251 $ 201,935 $ 420,538 $ 364,633 Net income...................... 19,340 16,803 29,941 25,118 Diluted earnings per share...... 0.68 0.62 1.06 0.93
During the first quarter of 2004, the Company also completed a tuck-in acquisition of Loew-Cornell, Inc. ("Loew-Cornell"), a leading marketer and distributor of paintbrushes and other arts and crafts products. The acquired business is included in the branded consumables segment from March 18, 2004. Additionally, the Company completed two other tuck-in acquisitions in 2003, one in the branded consumables segment and the other in the consumer solutions segment. The results of Loew-Cornell and the other two tuck-in acquisitions in 2003 did not have a material effect on the Company's results of operations for either the three or the six month periods ended June 30, 2004 and June 30, 2003 and are not included in the pro forma financial information presented herein. 5. INTANGIBLES As of June 30, 2004 and December 31, 2003, the Company had recorded the following amounts for intangible assets (millions of dollars):
BRANDED CONSUMER CONSUMABLES SOLUTIONS TOTAL ------------- ----------- ----------- June 30, 2004 - ------------- Intangible assets not subject to amortization: Goodwill.................................................. $ 361.7 $ 72.8 $ 434.5 Trademarks................................................ 72.1 56.1 128.2 ------- -------- ------- Intangible assets not subject to amortization........... 433.8 128.9 562.7 ------- -------- ------- Intangible assets subject to amortization: Manufacturing processes and expertise..................... - 6.5 6.5 Non-compete agreements.................................... 1.1 - 1.1 Accumulated amortization.................................. - (1.9) (1.9) ------- -------- ------- Net amount of intangible assets subject to amortization. 1.1 4.6 5.7 ------- -------- ------- Total goodwill and other intangible assets.............. $ 434.9 $ 133.5 $ 568.4 ======= ======== =======
9
BRANDED CONSUMER CONSUMABLES SOLUTIONS TOTAL ------------- ------------ ----------- December 31, 2003 - ----------------- Intangible assets not subject to amortization: Goodwill...................................................... $ 167.3 $ 69.1 $ 236.4 Trademarks.................................................... 18.9 55.9 74.8 -------- ------- ------- Intangible assets not subject to amortization.............. 186.2 125.0 311.2 -------- ------- ------- Intangible assets subject to amortization: Manufacturing processes and expertise......................... - 6.0 6.0 Accumulated amortization...................................... - (1.4) (1.4) -------- ------- ------- Net amount of intangible assets subject to amortization.... - 4.6 4.6 -------- ------- -------- Total goodwill and other intangible assets.................. $ 186.2 $ 129.6 $ 315.8 ======== ======== ========
Certain working capital balances recorded in connection with the USPC Acquisition and the Lehigh Acquisition are preliminary and when finalized within one year of the respective dates of acquisition may result in changes to the intangible balances shown above. The Company intends to obtain a third party valuation for the fixed assets acquired in connection with the USPC Acquisition. In the branded consumables segment, the only intangible assets which have a definitive life and are currently subject to amortization are two non-compete agreements in the aggregate amount of approximately $1.1 million, which were assumed by the Company in connection with the USPC Acquisition and which will be fully amortized by February 2005 and March 2006, respectively. In the consumer solutions segment, the only intangible assets which have a definitive life and are currently subject to amortization are the manufacturing processes and expertise, which are being amortized over a period of 7-8 years. Amortization for the manufacturing processes and expertise in the aggregate amount of $0.5 million was recorded in the first six months of 2004 and is included in Selling, General and Administrative expenses in the Condensed Consolidated Statements of Income. A portion of the consumer solutions segment's goodwill is recorded on a Canadian subsidiary's books. Due to the effect of foreign currency translations the amount of goodwill recorded decreased by approximately $0.6 million in the first six months of 2004. Approximately $216 million of the goodwill and other intangible assets recorded by the Company is not deductible for income tax purposes. 6. DEBT AND DERIVATIVE FINANCIAL INSTRUMENTS On June 28, 2004, in connection with its USPC Acquisition, the Company completed an add-on to its Term B loan facility ("Term B Add-on") under its amended and restated senior credit facility ("Amended Credit Agreement"). The gross proceeds from the Term B Add-on offering were $116 million and were used to partially fund the USPC acquisition. The spread on the Term B Add-on debt is 2.25% over London Interbank Offered Rate ("LIBOR"). Additionally, under this offering the spread on the Company's existing Term B loan facility was reduced from 2.75% over LIBOR to 2.25% over LIBOR. The Company's Amended Credit Agreement matures on April 24, 2008. In connection with its USPC Acquisition, the Company assumed approximately $2.3 million of debt relating to a Spanish subsidiary. This debt relates to bank notes that are payable in equal quarterly, semi-annual or annual installments through 2007 with varying rates of interest ranging from 3.25% to 4.5%. In April 2004, the Company repaid seller debt financing incurred in connection with a 2002 acquisition, which included both principal and accrued interest thereon, in the amount of approximately $5.4 million. As of June 30, 2004, the Company had $310.3 million outstanding under its term loan facilities and $6.9 million outstanding under its revolving credit facility. As of June 30, 2004, net availability under the revolving credit agreement was approximately $42.2 million, after deducting $20.9 million of issued letters of credit. As discussed in Note 4 above, the letters of credit outstanding include an amount of approximately $15.2 million securing the USPC holdback amount. The Company is required to pay commitment fees on the unused balance of the revolving credit facility. 10 As of June 30, 2004, the fair market value of the Company's interest rate swaps, which are accounted for as fair value hedges, was negative in an amount of approximately $5.5 million and is included as a liability in the Condensed Consolidated Balance Sheet, with a corresponding offset to long-term debt. 7. CONTINGENCIES The Company is involved in various legal disputes in the ordinary course of business. In addition, the Environmental Protection Agency has designated the Company as a potentially responsible party, along with numerous other companies, for the clean up of several hazardous waste sites. Based on currently available information, the Company does not believe that the disposition of any of the legal or environmental disputes the Company is currently involved in will have a material adverse effect upon the financial condition, results of operations, cash flows or competitive position of the Company. It is possible, that as additional information becomes available, the impact on the Company of an adverse determination could have a different effect. 8. EQUITY During the first six months of 2004, the Company issued 24,750 restricted shares of common stock to certain employees under the Company's 2003 Stock Incentive Plan. The restrictions on these shares will lapse ratably over five years of employment with the Company. In August 2004, the Company's board of directors approved the granting of an aggregate of 140,000 restricted shares of the Company's common stock to three executive officers of the Company. The restrictions on these shares lapse ratably over a three year period commencing January 1, 2005 and would lapse immediately in the event of a change in control. Non-cash compensation expense will be recognized ratably over the lapsing period based upon the fair market value of the Company's common stock on the date of grant. The Company issued these shares out of its treasury account. 9. EARNINGS PER SHARE CALCULATION Basic earnings per share are computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted earnings per share are calculated based on the weighted average number of outstanding common shares plus the dilutive effect of stock options as if they were exercised and restricted common stock. A computation of earnings per share is as follows (in thousands, except per share data):
THREE MONTH PERIOD ENDED SIX MONTH PERIOD ENDED ---------------------------------- ------------------------------ JUNE 30, JUNE 30, JUNE 30, JUNE 30, 2004 2003 2004 2003 ----------------- ---------------- --------------- ------------- Net income......................................... $ 16,047 $ 9,951 $ 23,560 $ 14,181 -------- -------- -------- -------- Weighted average shares outstanding................ 27,171 21,339 27,108 21,363 Additional shares assuming conversion of stock options and restricted stock............. 1,121 729 1,134 728 -------- -------- -------- -------- Weighted average shares outstanding assuming conversion............................ 28,292 22,068 28,242 22,091 -------- --------- -------- -------- Basic earnings per share........................... $ 0.59 $ 0.47 $ 0.87 $ 0.66 Diluted earnings per share......................... $ 0.57 $ 0.45 $ 0.83 $ 0.64
11 10. SEGMENT INFORMATION The Company reports four business segments: branded consumables, consumer solutions, plastic consumables and other. In the branded consumables segment, the Company markets, distributes and in certain cases manufactures a broad line of branded products that includes arts and crafts paintbrushes, children's card games, clothespins, collectible tins, food preparation kits, home canning jars, jar closures, kitchen matches, other craft items, plastic cutlery, playing cards and card accessories, puzzles, rope, cord and twine, storage and workshop accessories, toothpicks and other accessories marketed under the Aviator(R), Ball(R), Bee(R), Bernardin(R), Bicycle(R), Crawford(R), Diamond(R), Forster(R), Hoyle(R), Kerr(R), Lehigh(R), Leslie-Locke(R) and Loew-Cornell(R) brand names. As discussed in Note 4, the Diamond Brands wood manufacturing operation and branded product distribution business, the Lehigh home improvement business, the Loew-Cornell arts and crafts business and the USPC playing cards business have been included in the branded consumables segment effective February 1, 2003, September 2, 2003, March 18, 2004 and June 28, 2004, respectively. In the consumer solutions segment, the Company sources, markets and distributes an array of innovative kitchen products under the market leading FoodSaver(R) brand name, as well as the VillaWare(R) brand name. The plastic consumables segment manufactures, markets and distributes a wide variety of consumer and medical plastic products, including products sold to retailers by the Company's branded consumables segment (plastic cutlery) and consumer solutions segment (containers). As discussed in Note 4, the Diamond Brands plastic manufacturing operation is included in the plastic consumables segment effective February 1, 2003. The other segment is primarily a producer of zinc strip. Net sales, operating earnings, depreciation and amortization, and assets employed in operations by segment are summarized as follows (in thousands of dollars):
THREE MONTH PERIOD ENDED SIX MONTH PERIOD ENDED ------------------------------------- ---------------------------------- JUNE 30, JUNE 30, JUNE 30, JUNE 30, 2004 2003 2004 2003 ----------------- ------------------ --------------- --------------- Net sales: Branded consumables (1)........................ $ 122,719 $ 70,211 $ 197,617 $ 100,381 Consumer solutions............................. 36,180 34,624 81,354 75,549 Plastic consumables (2)........................ 34,532 26,736 68,182 50,231 Other.......................................... 19,911 9,253 38,716 17,872 Intercompany (3).............................. (14,307) (10,055) (28,510) (15,818) --------- --------- --------- --------- Total net sales............................ $ 199,035 $ 130,769 $ 357,359 $ 228,215 ========= ========= ========= ========= Operating earnings: Branded consumables (1)........................ $ 22,495 $ 11,868 $ 28,787 $ 13,127 Consumer solutions ............................ 3,507 4,520 9,904 11,464 Plastic consumables (2)........................ 3,095 2,646 5,901 5,084 Other.......................................... 2,626 1,952 5,490 2,916 Intercompany (3).............................. 319 (352) (265) (1,047) --------- --------- --------- --------- Total operating earnings................... 32,042 20,634 49,817 31,544 Interest expense, net.......................... 6,075 4,267 11,695 8,219 --------- --------- --------- --------- Income before taxes............................ $ 25,967 $ 16,367 $ 38,122 $ 23,325 ========= ========= ========= ========= Depreciation and amortization: Branded consumables (1)........................ $ 1,156 $ 1,051 $ 2,434 $ 1,868 Consumer solutions ............................ 828 530 1,676 1,043 Plastic consumables (2)........................ 1,837 1,700 3,702 3,196 Other.......................................... 468 543 957 1,076 Corporate (4).................................. 35 20 67 47 --------- --------- --------- --------- Total depreciation and amortization ....... $ 4,324 $ 3,844 $ 8,836 $ 7,230 ========= ========= ========= =========
12
AS OF ------------------------------------- JUNE 30, DECEMBER 31, 2004 2003 ----------------- ---------------- Assets employed in operations: Branded consumables (1)........................ $ 680,586 $ 310,451 Consumer solutions ............................ 211,589 216,289 Plastic consumables (2)........................ 59,002 62,623 Other.......................................... 14,385 13,867 ---------- ---------- Total assets employed in operations........ 965,562 603,230 Corporate (4).................................. 40,352 156,444 ---------- ---------- Total assets............................... $1,005,914 $ 759,674 ========== ==========
(1) The USPC business, Loew-Cornell business, Lehigh business and the Diamond Brands wood manufacturing operation and branded product distribution business are included in the branded consumables segment effective June 28, 2004, March 18, 2004, September 2, 2003 and February 1, 2003, respectively. (2) The Diamond Brands plastic manufacturing operation is included in the plastic consumables segment effective February 1, 2003. (3) Intersegment sales are recorded at cost plus an agreed upon intercompany profit on intersegment sales. (4) Corporate assets primarily include cash and cash equivalents, amounts relating to benefit plans, deferred tax assets and corporate facilities and equipment. Within the branded consumables segment are four product lines: kitchen products, home improvement products, playing card products and other specialty products. Kitchen products include food preparation kits, home canning and accessories, kitchen matches, plastic cutlery, straws and toothpicks. Home improvement products include rope, cord and twine, storage and organizational products for the home and garage and security door and fencing products. Playing card products include children's card games, collectible tins, playing cards and card accessories and puzzles. Other specialty products include arts and crafts paintbrushes, book and advertising matches, institutional plastic cutlery and sticks, laundry care products, lighters and fire starters, other craft items and other commercial products. Net sales of these products for the three and six month periods ended June 30, 2004 and 2003, respectively, were as follows (in millions):
THREE MONTH PERIOD ENDED SIX MONTH PERIOD ENDED --------------------------------- ------------------------------ JUNE 30, JUNE 30, JUNE 30, JUNE 30, 2004 2003 2004 2003 ----------------- --------------- --------------- -------------- Kitchen products.................................. $ 70.4 $ 63.8 $ 107.7 $ 89.5 Home improvement products......................... 38.3 - 68.8 - Playing cards products............................ 1.6 - 1.6 - Other specialty products.......................... 12.4 6.4 19.5 10.9 -------- -------- -------- ------- Total branded consumables net sales............... $ 122.7 $ 70.2 $ 197.6 $ 100.4 ======== ======== ======== =======
13 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following "Overview" section is a brief summary of the significant issues addressed in Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A"). Investors should read the relevant sections of this MD&A for a complete discussion of the issues summarized below. OVERVIEW We are a leading provider of niche consumer products used in and around the home, under well-known brand names including Aviator(R), Ball(R), Bee(R), Bernardin(R), Bicycle(R), Crawford(R), Diamond(R), FoodSaver(R), Forster(R), Hoyle(R), Kerr(R), Lehigh(R), Leslie-Locke(R), Loew-Cornell(R) and VillaWare(R). In North America, we are the market leader in several consumer categories, including home canning, home vacuum packaging, kitchen matches, plastic cutlery, playing cards, rope, cord and twine and toothpicks. We also manufacture zinc strip and a wide array of plastic products for third party consumer product and medical companies as well as our own businesses. Results of Operations o Our net sales for the second quarter ended June 30, 2004 increased to $199.0 million or 52.2% over the same period in 2003. Our net sales for the six months ended June 30, 2004 increased to $357.4 million or 56.6% over the same period in 2003; o Our operating income for the second quarter ended June 30, 2004 increased to $32.0 million or 55.3% over the same period in 2003. Our operating income for the six months ended June 30, 2004 increased to $49.8 million or 57.9% over the same period in 2003; o Our net income for the second quarter ended June 30, 2004 increased to $16.0 million or 61.3% over the same period in 2003. Our net income for the six months ended June 30, 2004 increased to $23.6 million or 66.1% over the same period in 2003; and o The increases to our net sales, operating income and net income are principally the result of the acquisitions we completed in 2004 and 2003, which are described in detail in "Acquisition Activities" below. In addition, on an overall basis we had significant organic growth in three of our four business segments in both the second quarter and first six months of 2004 compared to the same period in 2003. Liquidity and Capital Resources o We ended the second quarter of 2004 with a higher net debt-to-total capitalization ratio, than as of December 31, 2003 due to the additional debt incurred to partially fund the acquisition of United States Playing Card Company and its subsidiaries ("USPC" and "USPC Acquisition"), partially offset by an increase in our market capitalization; o Our liquidity, as measured by cash and cash equivalents on hand and availability under our debt facility, was lower at June 30, 2004 than at December 31, 2003, due to the use of cash on hand during the first half of 2004 to fund the USPC Acquisition and the acquisition of Loew-Cornell, Inc. ("Loew-Cornell" and "Loew-Cornell Acquisition"); and o Our cash flows from operations in the first six months of 2004 was flat due to higher inventory amounts as a result of early buys of certain commodity items in order to take advantage of pricing trends in raw materials, increasing commodity costs which increases the dollar value of the same quantity of inventory, the addition of a number of new product stock keeping units for launch in the third quarter of 2004 and continuing sales growth requiring greater levels of inventory. Accounts receivable were also higher, primarily due to strong sales during the quarter. We intend for the discussion of our financial condition and results of operations (including our acquisition activities) that follows to provide information that will assist in understanding our financial statements, the changes in certain key items in those financial statements from year to year, and the primary factors that accounted for those changes, as well as how certain accounting principles, policies and estimates affect our financial statements. ACQUISITION ACTIVITIES We have grown through strategic acquisitions of complementary businesses and by expanding sales of our existing product lines. Our strategy to achieve future growth is to sustain profitable internal growth, acquire new businesses or brands that complement our existing product portfolio and expand our international business. 14 On June 28, 2004, we acquired approximately 75.4% of the issued and outstanding stock of USPC, with the remaining 24.6% subject to a put/call agreement starting in the fourth quarter of 2004. USPC is the world's largest manufacturer and distributor of playing cards and a leader in marketing children's card games, collectible tins, puzzles and card accessories for the North American retail market and is also the largest supplier of premium playing cards to casinos worldwide. USPC's portfolio of owned brands includes Aviator(R), Bee(R), Bicycle(R) and Hoyle(R). In addition, USPC has an extensive list of licensed brands, including Disney(R), Harley-Davidson(R), NASCAR(R) and World Poker Tour(TM). USPC's international holdings include Naipes Heraclio Fournier, S.A., a leading playing card manufacturer in Europe. The purchase price (including an estimate of the call price expected to be paid for the remaining 24.6% of the shares) was approximately $237.8 million, including transaction expenses and an estimate of the deferred consideration to be paid when the put/call agreement is exercised of approximately $34.1 million. Such consideration and the current portion of a $15.1 million holdback of consideration deferred for purposes of guaranteeing potential indemnification liabilities of the sellers is accrued as of June 30, 2004 and included in "Deferred Consideration for Acquisitions" on the Condensed Consolidated Balance Sheet included herein. The holdback amount is secured by a stand-by letter of credit under our senior credit facility. The cash portion of the purchase price funded on June 28, 2004 was financed using a combination of cash on hand, new debt financing (see discussion in "Financial Condition, Liquidity and Capital Resources" below) and borrowings under our existing revolving credit facility. The goodwill and other intangibles amounts recorded in connection with the USPC Acquisition are discussed in detail in Note 5 of the Condensed Consolidated Financial Statements included herein. Based on our intention to exercise the put/call agreement resulting in 100% ownership of USPC within the current year, we have not accounted for the 24.6% minority interest in USPC. Therefore, our Condensed Consolidated Financial Statements reflect 100% of the assets and liabilities of USPC as of June 30, 2004 and 100% of the results of USPC for the period from June 28, 2004 through June 30, 2004. In addition, the USPC Acquisition includes an earn-out provision with a potential payment in cash or our common stock, at our sole discretion, up to $10 million payable in 2007, provided that certain earnings performance targets are met. If paid, we expect to capitalize the cost of the earn-out. The USPC business is included in our branded consumables segment. On September 2, 2003, we acquired all of the issued and outstanding stock of Lehigh Consumer Products Corporation and its subsidiary ("Lehigh" and the "Lehigh Acquisition"). Lehigh is the largest supplier of rope, cord and twine in the U.S. consumer marketplace and a leader in innovative storage and organization products and workshop accessories for the home and garage as well as in the security screen door and ornamental metal fencing market. The purchase price of the transaction was approximately $157.6 million, including transaction expenses. Lehigh is included in the branded consumables segment from September 2, 2003. On February 7, 2003, we completed our acquisition of the business of Diamond Brands International, Inc. and its subsidiaries ("Diamond Brands" and the "Diamond Acquisition"), a manufacturer and distributor of niche household products, including clothespins, kitchen matches, plastic cutlery and toothpicks under the Diamond(R) and Forster(R) trademarks. The purchase price of this transaction was approximately $91.5 million, including transaction expenses. The acquired plastic manufacturing operation is included in the plastic consumables segment from February 1, 2003. The acquired wood manufacturing operation and branded product distribution business is included in the branded consumables segment from February 1, 2003. The USPC Acquisition, the Lehigh Acquisition and the Diamond Acquisition were all entered into as part of our strategy of acquiring branded consumer products businesses with leading market positions in niche markets for products used in and around the home. For the three and six month periods ended June 30, 2004 and June 30, 2003, pro forma financial information reflecting the USPC Acquisition, the Lehigh Acquisition and the Diamond Acquisition has been included in Note 4 to our Condensed Consolidated Financial Statements. During the first quarter of 2004, we completed a tuck-in acquisition of Loew-Cornell, a leading marketer and distributor of paintbrushes and other arts and crafts products. The acquired business is included in the branded consumables segment from March 18, 2004. Additionally, we completed two other tuck-in acquisitions in 2003, one in the branded consumables segment and the other in the consumer solutions segment. The results of Loew-Cornell and the other two tuck-in acquisitions in 2003 did not have a material effect on our results of operations for either the three or the six month periods ended June 30, 2004 and June 30, 2003 and are not included in the pro forma financial information presented in Note 4 to our Condensed Consolidated Financial Statements. 15 RESULTS OF OPERATIONS - COMPARISON OF SECOND QUARTER 2004 TO SECOND QUARTER 2003 We reported net sales of $199.0 million for the second quarter of 2004, a 52.2% increase from net sales of $130.8 million in the second quarter of 2003. In the second quarter of 2004, our branded consumables segment reported net sales of $122.7 million compared to $70.2 million in the second quarter of 2003. This increase of 74.8% was principally a result of acquisitions. Excluding the effect of acquisitions, net sales of our branded consumables segment were approximately 9% higher in the second quarter of 2004 compared to the same period in 2003, partly due to the 2003 period being negatively affected by a weaker retail environment. In the second quarter of 2004, our consumer solutions segment recorded net sales of $36.2 million compared to $34.6 million in the second quarter of 2003. This increase of 4.5% was principally the result of the tuck-in acquisition of VillaWare Manufacturing Company ("VillaWare") in the fourth quarter of 2003, partially offset by lower revenues from FoodSaver(R) products primarily due to lower average sales prices on FoodSaver(R) machines. In the second quarter of 2004, our plastic consumables segment reported net sales of $34.5 million compared to $26.7 million in the second quarter of 2002. The principal reason for this increase of 29.2% was an increase in intercompany sales. Excluding the effect of intercompany sales, net sales of our plastics consumables segment were approximately 20% higher in the second quarter of 2004 compared to the same period in 2003 principally due to increased sales to certain existing OEM customers and new international sales. In the second quarter of 2004, our other segment reported net sales of $19.9 million compared to $9.3 million in the second quarter of 2003. The principal reasons for this increase of 115.2% were due to the increase in net sales resulting from contractual changes with two major customers whereby this segment took on the responsibility of purchasing the raw material inventory for the customers, increased volume sales of low denomination coinage and industrial zinc, and the effect of increases in the price of zinc which were passed through to customers. We reported operating earnings of $32.0 million in the second quarter of 2004 compared to operating earnings of $20.6 million in the second quarter of 2003. The principal reason for this increase of $11.4 million, or 55.3%, was an increase in the operating earnings of the branded consumables segment of $10.6 million, primarily due to the effect of 2003 and 2004 acquisitions now included in this segment. Exclusive of the effect of acquisitions, operating earnings of the branded consumables segment were $0.5 million higher than the comparative period in the prior year primarily due to higher sales volumes and favorable home canning sales mix being partially offset by unfavorable flatware sales mix and higher overall freight costs. The operating earnings of the consumer solutions segment decreased by $1.0 million principally due to higher legal costs and the sales effects discussed above. The operating earnings of the plastic consumables segment increased by $0.4 million due to the sales effects discussed above, partially offset by higher plastic resin prices which could not be passed through with respect to plastic cutlery sales and higher validation costs incurred for new business development projects. The operating earnings of the other segment increased by $0.7 million due to the sales effects discussed above and positive manufacturing variances resulting from the increased sales volume. Gross margin percentages on a consolidated basis decreased to 34.1% in the second quarter of 2004 from 37.9% in the second quarter of 2003. The principal reasons for this decrease are the inclusion in the branded consumables segment of the relatively lower gross margin Lehigh business, higher freight costs in our branded consumables segment, lower average selling prices in our consumer solutions segment and the effect of the contractual changes for two major customers in our other segment as discussed above. Selling, general and administrative expenses increased to $35.8 million in the second quarter of 2004 from $28.9 million in the second quarter of 2003, or, as a percentage of net sales, decreased to 18.0% in the second quarter of 2004 from 22.1% in the second quarter of 2003. The increase in dollar terms was principally the result of the acquisitions completed during 2003 and 2004, higher legal costs in our consumer solutions segment, and higher validation costs incurred for new business development projects in our plastic consumables segment, partially offset by lower media spending in the consumer solutions segment. The decrease in percentage terms was principally due to the inclusion of the Lehigh business which has relatively lower selling, general and administrative expenses as a percentage of net sales. In addition, we had significant growth in our branded consumables, plastic consumables and other segment's net sales and all of these segments have lower selling, general and administrative expenses as a percentage of net sales than our consumer solutions segment. Net interest expense increased to $6.1 million for the second quarter of 2004 compared to $4.3 million in the same period last year. This increase resulted from higher levels of outstanding debt in the second quarter of 2004 compared to the same period in 2003. Our effective tax rate for the second quarter of 2004 was 38.2% compared to an effective tax rate of 39.2% in 2003. 16 RESULTS OF OPERATIONS - COMPARISON OF YEAR TO DATE 2004 TO YEAR TO DATE 2003 We reported net sales of $357.4 million in the first six months of 2004, a 56.6% increase from net sales of $228.2 million in the first six months of 2003. In the first six months of 2004, our branded consumables segment reported net sales of $197.6 million compared to $100.4 million in the first six months of 2003. This increase of 96.7% was principally a result of acquisitions. Excluding the effect of acquisitions, net sales of our branded consumables segment were approximately 8% higher in the first six months of 2004 compared to the same period in 2003. In the first six months of 2004, our consumer solutions segment reported net sales of $81.4 million compared to $75.5 million in net sales for the first six months of 2003. This increase of 7.7% was principally the result of the acquisition of VillaWare in the fourth quarter of 2003. Excluding the effect of this acquisition, net sales of our consumer solutions segment were lower in the first six months of 2004 compared to the same period in 2003 due to lower average sales prices on FoodSaver(R) machines, partially offset by sales volume increases for FoodSaver(R) machines and increased bag unit sales. In the first six months of 2004, our plastic consumables segment reported net sales of $68.2 million compared to $50.2 million in the first six months of 2003. The principal reason for this increase of 35.7% was both an increase in intercompany sales as well as a full six month period effect of the intercompany sales generated by the addition of the plastic manufacturing business acquired in the Diamond Acquisition in February 2003. Excluding the effect of intercompany sales, net sales of our plastics consumables segment were approximately 15% higher in the first six months of 2004 compared to the same period in 2003 principally due to increased sales to certain existing OEM customers and new international sales. In the first six months of 2004, our other segment reported net sales of $38.7 million compared to $17.9 million in the first six months of 2003. The principal reason for this increase of 116.6% was due to the effect on net sales resulting from contractual changes with two major customers whereby this segment took on the responsibility of purchasing the raw material inventory for the customers, increased volume sales of low denomination coinage and industrial zinc, and the effect of increases in the price of zinc which were passed through to customers. We reported operating earnings of $49.8 million in the first six months of 2004 compared to operating earnings of $31.5 million in the first six months of 2003. The principal reason for this increase of $18.3 million, or 57.9%, was an increase in the operating earnings of the branded consumables segment of $15.7 million, primarily due to the effect of 2003 and 2004 acquisitions now included in this segment. Due to the integration of certain of the Company's acquisitions it is no longer possible to compare the operating earnings in this segment exclusive of acquisitions for the first six months of the year. The operating earnings of the consumer solutions segment decreased by $1.6 million principally due to higher legal costs as well as the sales effects discussed above. The operating earnings of the plastic consumables segment increased by $0.8 million due to the sales effects discussed above, partially offset by higher plastic resin prices which could not be passed through with respect to plastic cutlery sales and higher validation costs incurred for new business development projects. The operating earnings of the other segment increased by $2.6 million due to the sales effects discussed above and positive manufacturing variances resulting from the increased sales volume. Gross margin percentages on a consolidated basis decreased to 33.3% in the first six months of 2004 from 38.5% in the first six months of 2003. The principal reasons for this decrease are the inclusion in the branded consumables segment of the relatively lower gross margin Diamond Brands and Lehigh businesses, higher freight costs in our branded consumables segment, lower average selling prices in our consumer solutions segment, and the effect of the contractual changes for two major customers in our other segment as discussed above. Selling, general and administrative expenses increased to $69.3 million in the first six months of 2004 from $56.4 million in the first six months of 2003, or, as a percentage of net sales, increased to 19.4% in the first six months of 2004 from 24.7% in the first six months of 2003. The increase in dollar terms was principally the result of the acquisitions completed during 2003 and 2004, higher legal costs in our consumer solutions segment, and higher validation costs incurred for new business development projects in our plastic consumables segment partially offset by lower media spending in the consumer solutions segment. The decrease in percentage terms was principally due to the inclusion of the Lehigh business which has relatively lower selling, general and administrative expenses as a percentage of net sales. In addition, we had significant growth in our branded consumables, plastic consumables and other segment's net sales and all of these segments have lower selling, general and administrative expenses as a percentage of net sales than our consumer solutions segment. Net interest expense increased to $11.7 million for the first six months of 2004 compared to $8.2 million in the same period last year. This increase primarily resulted from higher levels of outstanding debt in the first six months of 2004 compared to the same period in 2003. 17 Our effective tax rate for the first six months of 2004 was 38.2% compared to an effective tax rate of 39.2% in the first six months of 2003. FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES On June 28, 2004, in connection with our USPC Acquisition, we completed an add-on to our Term B loan facility ("Term B Add-on") under our amended and restated senior credit facility ("Amended Credit Agreement"). The gross proceeds from the Term B Add-on offering were $116 million and were used to partially fund the USPC acquisition. The spread on the Term B Add-on debt is 2.25% over London Interbank Offered Rate ("LIBOR"). Additionally, under this offering the spread on our existing Term B loan facility was reduced from 2.75% over LIBOR to 2.25% over LIBOR. Our Amended Credit Agreement matures on April 24, 2008. In connection with our USPC Acquisition, we assumed approximately $2.3 million of debt relating to a Spanish subsidiary. This debt relates to bank notes that are payable in equal quarterly, semi-annual or annual installments through 2007 with varying rates of interest ranging from 3.25% to 4.5%. In April 2004, we repaid seller debt financing incurred in connection with a 2002 acquisition, which included both principal and accrued interest thereon, in the amount of approximately $5.4 million. During the first six months of 2004, we issued 24,750 restricted shares of common stock to certain employees under our 2003 Stock Incentive Plan. The restrictions on these shares will lapse ratably over five years of employment with us. In August 2004, our board of directors approved the granting of an aggregate of 140,000 restricted shares of common stock to three executive officers of our Company. The restrictions on these shares lapse ratably over a three year period commencing January 1, 2005 and would lapse immediately in the event of a change in control. Non-cash compensation expense will be recognized ratably over the lapsing period based upon the fair market value of our common stock on the date of grant. We issued these shares out of its treasury account. As of June 30, 2004, we had $310.3 million outstanding under our term loan facilities and $6.9 million outstanding under our revolving credit facility. As of June 30, 2004, net availability under our revolving credit agreement was approximately $42.2 million, after deducting $20.9 million of issued letters of credit. The letters of credit outstanding include an amount of approximately $15.2 million securing the USPC holdback amount (see "Acquisition Activities"). We are required to pay commitment fees on the unused balance of the revolving credit facility. As of June 30, 2004, the fair market value of our interest rate swaps, which are accounted for as fair value hedges, was negative in an amount of approximately $5.5 million and is included as a liability in the Condensed Consolidated Balance Sheet, with a corresponding offset to long-term debt. Net current assets decreased to approximately $141 million at June 30, 2004 from approximately $242 million at December 31, 2003, due primarily to the use of cash on hand to finance the USPC Acquisition and the Loew-Cornell Acquisition and the establishment of the Deferred Consideration for Acquisitions balance (see "Acquisition Activities" above), partially offset by the working capital balances of USPC and Loew-Cornell. Our cash flow from operations was flat in the first six months of 2004, compared to a cash flow from operations of $15.2 million in the first six months of 2003. This decrease in cash flow from operations is primarily due to higher inventory amounts as a result of early buys of certain commodity items in order to take advantage of pricing trends in raw materials, increasing commodity costs which increases the dollar value of the same quantity of inventory, the addition of a number of new product stock keeping units for launch in the third quarter of 2004 and continuing sales growth requiring greater levels of inventory. Accounts receivable amounts were also higher due to strong sales during the quarter. Capital expenditures were $3.5 million in the first six months of 2004 compared to $4.6 million for the first six months of 2003 and are largely related to maintaining facilities, tooling projects and improving manufacturing efficiencies. As of June 30, 2004, we had capital expenditure commitments in the aggregate for all our segments of approximately $2.7 million. As of June 30, 2004, our other segment had forward buy contracts through September 2004 to purchase zinc ingots in the aggregate amount of approximately $3.3 million, which are expected to be used in operations in 2004. We believe that our cash and cash equivalents on hand, cash generated from our operations and our availability under our senior credit facility is adequate to satisfy our working capital and capital expenditure requirements for the foreseeable future. However, we may raise additional capital from time to time to take advantage of favorable conditions in the capital markets or in connection with our corporate development activities. 18 RELATED PARTY TRANSACTIONS On July 27, 2004, the agreement between one of our Company's wholly owned subsidiaries and NewRoads, Inc. ("NewRoads"), a third party provider of pick, pack and ship services, order fulfillment, warehousing and other services to the retail industry was terminated. Pursuant to this agreement, NewRoads had agreed to provide such services to our Company's consumer solutions segment. Mr. Martin Franklin's, our Chairman and Chief Executive Officer, brother-in-law was the executive chairman of the board of NewRoads at the time of the agreement being consummated. Mr. Franklin has an indirect ownership interest of less than 1/2% in NewRoads. Our consumer solutions segment now uses a different third party provider for these services. In July 2004, our Company's board of directors approved the granting of 10,000 restricted shares of common stock to Mr. Jonathan Franklin, a consultant to our Company, who is the brother of Mr. Franklin. The restrictions on 5,000 of these shares lapsed immediately and we recorded a non-cash compensation charge in the second quarter of 2004 based on the fair market value of our Company's common stock on the date of grant. The restrictions on the remaining 5,000 of these shares lapse ratably over a four year period. Non-cash compensation expense will be recognized based on the market value of our Company's common stock at the time of the lapsing. All of the shares which still have a restriction remaining will have the restrictions lapse immediately upon the event of a change in control. We issued these shares out of our treasury account. CONTINGENCIES We are involved in various legal disputes in the ordinary course of business. In addition, the Environmental Protection Agency has designated our Company as a potentially responsible party, along with numerous other companies, for the clean up of several hazardous waste sites. Based on currently available information, we do not believe that the disposition of any of the legal or environmental disputes our Company is currently involved in will require material capital or operating expenses or will otherwise have a material adverse effect upon the financial condition, results of operations, cash flows or competitive position of our Company. It is possible, that as additional information becomes available, the impact on our Company of an adverse determination could have a different effect. FORWARD-LOOKING INFORMATION Our disclosure and analysis in this report contains forward looking information about our Company's financial results and estimates and business prospects. From time to time, we may make or publish forward-looking statements relating to such matters as anticipated financial performance, business prospects, technological developments, new products and similar matters. Such statements are necessarily estimates reflecting management's best judgment based on current information. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. Such statements are usually identified by the use of words or phrases such as "believes", "anticipates", "expects", "estimates", "planned", "outlook", and "goal". Because forward-looking statements involve risks and uncertainties, our actual results could differ materially. We cannot guarantee that any forward-looking statement will be realized, although we believe we have been prudent in our plans and assumptions. Achievement of future results is subject to risks, uncertainties and inaccurate assumptions. Should known or unknown risks or uncertainties materialize, or should underlying assumptions prove inaccurate, actual results could vary materially from past results and those anticipated, estimated or projected. Investors should bear this in mind as they consider forward-looking statements. We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any further disclosures we make on related subjects in our Forms 10-Q, 8-K and 10-K reports to the Securities and Exchange Commission. Please see our Company's Annual Report on Form 10-K for 2003 for a list of factors which could cause our Company's actual results to differ materially from those projected in our Company's forward-looking statements and certain risks and uncertainties that may affect the operations, performance and results of our business. You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider any such list to be a complete set of all potential risks or uncertainties. 19 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK In general, business enterprises can be exposed to market risks including fluctuations in commodity prices, foreign currency values, and interest rates that can affect the cost of operating, investing, and financing. The Company's exposures to these risks are relatively low. The Company's plastic consumables business purchases resin from regular commercial sources of supply and, in most cases, multiple sources. The supply and demand for plastic resins is subject to cyclical and other market factors. With many of our external customers, we have the ability to pass through price increases with an increase in our selling price and certain of our external customers purchase the resin used in products we manufacture for them. This pass-through pricing is not applicable to plastic cutlery, which we supply to our branded consumables segment. Plastic cutlery is principally made of polystyrene and for each $0.01 change in the price of polystyrene the material cost in our plastics consumables segment will change by approximately $0.5 million per annum. The Company's zinc business has sales arrangements with a majority of its customers such that sales are priced either based upon supply contracts that provide for fluctuations in the price of zinc to be passed on to the customer or are conducted on a tolling basis whereby customers supply zinc to the Company for processing. Such arrangements as well as the zinc business utilizing forward buy contracts reduce the exposure of this business to changes in the price of zinc. The Company, from time to time, invests in short-term financial instruments with original maturities usually less than fifty days. The Company is exposed to short-term interest rate variations with respect to Eurodollar or Base Rate on certain of its term and revolving debt obligations and six month LIBOR in arrears on certain of its interest rate swaps. The spreads on the interest rate swaps range from 523 to 528 basis points. Settlements on the interest rate swaps are made on May 1 and November 1. The Company is exposed to credit loss in the event of non-performance by the other party to its current existing swaps, a large financial institution. However, the Company does not anticipate non-performance by the other party. Changes in Eurodollar or LIBOR interest rates would affect the earnings of the Company either positively or negatively depending on the direction of the change. Assuming that Eurodollar and LIBOR rates each increased 100 basis points over period end rates on the outstanding term debt and interest rate swaps, the Company's interest expense would have increased by approximately $1.4 million for the six month period ended June 30, 2004 and $0.7 million for the six month period ended June 30, 2003. The amount was determined by considering the impact of the hypothetical interest rates on the Company's borrowing cost, short-term investment rates, interest rate swaps and estimated cash flow. Actual changes in rates may differ from the assumptions used in computing this exposure. Other than the short-term forward buys of zinc discussed above in "Financial Condition, Liquidity and Capital Resources", the Company does not invest or trade in any derivative financial or commodity instruments, nor does it invest in any foreign financial instruments. ITEM 4. CONTROLS AND PROCEDURES An evaluation was performed under the supervision and with the participation of the Company's management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the Company's management, including the Chief Executive Officer and Chief Financial Officer, concluded that the Company's disclosure controls and procedures were effective. There have been no significant changes in the Company's internal controls or in other factors that could significantly affect internal controls subsequent to the date of their evaluation. 20 PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS We held our annual meeting of stockholders on May 11, 2004. Of the 27,189,783 shares of common stock entitled to vote at the meeting, 25,310,651 shares of common stock were present in person or by proxy and entitled to vote. Such number of shares represented approximately 93.1% of our outstanding shares of common stock. Listed below are the matters voted upon at our annual meeting of stockholders and the respective voting results:
Voted Voted FOR AGAINST ------------- ------------- Election of Class II Directors for three-year terms expiring in 2007: Ian G.H. Ashken................................................. 23,764,146 - Richard L. Molen................................................ 23,920,747 -
Voted Voted FOR AGAINST Abstained ------------- ------------- ------------ Ratification of the appointment of Ernst & Young LLP as our independent auditors for the year ending December 31, 2004............ 24,930,162 372,165 8,324
Our board of directors is currently comprised of each of the Class II Directors listed in the table above, including Ian G.H. Ashken and Richard L. Molen, the Class I Directors, including Martin E. Franklin and Rene-Pierre Azria, and the Class III Directors, including Douglas W. Huemme, Robert L. Wood, and Irwin D. Simon. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K A. EXHIBITS
Exhibit Description ------- ----------- * 4.1 Fourth Supplemental Indenture to the April 2002 Indenture, dated as of April 16, 2004, among the Company, the guarantors named therein and The Bank of New York, as trustee. * 4.2 Fifth Supplemental Indenture to the April 2002 Indenture, dated as of July 23, 2004, among the Company, the guarantors named therein and The Bank of New York, as trustee. 10.1 Second Amended and Restated Credit Agreement, dated as of June 11, 2004, among the Company, the lenders party thereto, Canadian Imperial Bank of Commerce., as Administrative Agent, Citigroup North America, Inc., as Syndication Agent, and National City Bank of Indiana and Bank of America, N.A., as Co-Documentation Agents (filed as Exhibit 10.1 to the Company's Current Report on Form 8-K, filed with the Commission on July 13, 2004, and incorporated herein by reference). 10.2 Securities Purchase Agreement, dated as of February 24, 2004, as amended and restated as of April 19, 2004, by and among Bicycle Holding, Inc. the sellers identified therein, the seller representative identified therein and Jarden Corporation (filed as Exhibit 10.1 to the Company's Quarterly Report on form 10-Q filed with the Commission on May 7, 2004, and incorporated herein by reference). 10.3 Put and Call Agreement, dated as of February 24, 2004, as amended and restated as of April 19, 2004, by and among the shareholders of Bicycle Holding, Inc. set forth on the signature pages thereto and Jarden Corporation (filed as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q, filed with the Commission on May 7, 2004, and incorporated herein by reference). * 31.1 Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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Exhibit Description ------- ----------- * 31.2 Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. * 32.1 Certifications Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
* Filed herewith. b. Reports on Form 8-K We filed a Form 8-K on April 29, 2004, with respect to Items 7 and 12, relating to a press release, dated April 29, 2004, announcing our earnings for the three month period ended March 31, 2004. 22 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. JARDEN CORPORATION Date: August 9, 2004 By: /s/ Ian G.H. Ashken -------------------------------------- Ian G.H. Ashken Vice Chairman, Chief Financial Officer and Secretary 23 EX-4.1 2 file002.txt FOURTH SUPPLEMENTAL INDENTURE EXHIBIT 4.1 FOURTH SUPPLEMENTAL INDENTURE FOURTH SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of April 16, 2004, among Loew-Cornell, Inc., a New Jersey corporation, Jarden Acquisition I, Inc., a Delaware corporation (collectively, the "Guaranteeing Subsidiaries"), which are subsidiaries of Jarden Corporation, formerly known as Alltrista Corporation, a Delaware corporation (the "Company"), the Company, the other Guarantors (as defined in the Indenture referred to herein) and The Bank of New York, as trustee under the indenture referred to below (the "Trustee"). W I T N E S S E T H WHEREAS, the Company has heretofore executed and delivered to the Trustee the Indenture dated as of April 24, 2002, among the Company, the Guarantors named therein, and the Trustee, as supplemented by the First Supplemental Indenture dated as of May 7, 2003, among the Company, the Guarantors named therein and the Trustee, as further supplemented by the Second Supplemental Indenture dated as of May 28, 2003, among the Company, the Guarantors named therein, and the Trustee, and as further supplemented by the Third Supplemental Indenture dated as of August 28, 2003, among the Company, the Guarantors named therein and the Trustee (collectively, the "Indenture"), providing for the issuance of 9 3/4% Senior Subordinated Notes due 2012 (the "Notes"); WHEREAS, the Indenture provides that under certain circumstances the Guaranteeing Subsidiaries shall execute and deliver to the Trustee a supplemental indenture pursuant to which the Guaranteeing Subsidiaries shall unconditionally guarantee all of the Company's Obligations under the Notes and the Indenture on the terms and conditions set forth herein (the "Subsidiary Guarantee"); and WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture. NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Company, the Guarantors, the Guaranteeing Subsidiaries and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes as follows: 1. CAPITALIZED TERMS. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture. 2. AGREEMENT TO GUARANTEE. The Guaranteeing Subsidiaries hereby agree to provide an unconditional Guarantee on the terms and subject to the conditions set forth in the Subsidiary Guarantee and in the Indenture, including but not limited to Article 11 thereof. 3. EXECUTION AND DELIVERY. The Guaranteeing Subsidiaries agree that the Subsidiary Guarantee shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Subsidiary Guarantee. 4. NO RECOURSE AGAINST OTHERS. No past, present or future director, officer, employee, incorporator, stockholder or agent of the Guaranteeing Subsidiaries, as such, shall have any liability for any obligations of the Company, the Guarantors or any Guaranteeing Subsidiaries under the Notes, any Subsidiary Guarantee, the Indenture or this Supplemental Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of the Notes by accepting a Note or a Subsidiary Guarantee waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the SEC that such a waiver is against public policy. 5. NEW YORK LAW TO GOVERN. THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. 6. COUNTERPARTS. The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. 7. EFFECT OF HEADINGS. The Section headings herein are for convenience only and shall not affect the construction hereof. 8. THE TRUSTEE. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the recitals and statements contained herein, all of which recitals and statements are made solely by the Guaranteeing Subsidiaries and the Company. 2 IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed, all as of the date first above written.
Dated: April 16, 2004 LEHIGH CONSUMER PRODUCTS CORPORATION By: /s/ Desiree DeStefano ---------------------------------- Name: Desiree DeStefano Title: Senior Vice President JARDEN CORPORATION THE BANK OF NEW YORK, as Trustee By: /s/ Desiree DeStefano By: /s/ Julie Salovitch Miller ----------------------------------- ---------------------------------- Name: Desiree DeStefano Name: Julie Salovitch-Miller Title: Senior Vice President Title: Vice President ALLTRISTA NEWCO ALLTRISTA PLASTICS CORPORATION CORPORATION By: /s/ Desiree DeStefano By: /s/ Desiree DeStefano ------------------------------------ ---------------------------------- Name: Desiree DeStefano Name: Desiree DeStefano Title: Vice President Title: Vice President ALLTRISTA ZINC PRODUCTS, L.P. HEARTHMARK, LLC By: Alltrista Newco Corporation, its General Partner By: /s/ Desiree DeStefano By: /s/ Desiree DeStefano ------------------------------ ----------------------------------- Name: Desiree DeStefano Name: Desiree DeStefano Title: Vice President Title: Vice President 3 QUOIN, LLC TILIA, INC. By: /s/ Desiree DeStefano ------------------------------------- Name: Desiree DeStefano By: /s/ Desiree DeStefano Title: Vice President ------------------------------------ Name: Desiree DeStefano Title: Vice President TILIA DIRECT, INC. TILIA INTERNATIONAL, INC. By: /s/ Desiree DeStefano By: /s/ Desiree DeStefano ----------------------------------- ------------------------------------- Name: Desiree DeStefano Name: Desiree DeStefano Title: Vice President Title: Vice President TRIENDA CORPORATION X PROPERTIES, LLC By: Quoin Corporation, as sole member By: /s/ Desiree DeStefano By: /s/ Desiree DeStefano ----------------------------------- ------------------------------------- Name: Desiree DeStefano Name: Desiree DeStefano Title: Vice President Title: Vice President O.W.D., INCORPORATED TUPPER LAKE PLASTICS, INCORPORATED By: /s/ Desiree DeStefano By: /s/ Desiree DeStefano ----------------------------------- -------------------------------------- Name: Desiree DeStefano Name: Desiree DeStefano Title: Vice President Title: Vice President LOEW-CORNELL, INC. JARDEN ACQUISITION I, INC. By: /s/ Desiree DeStefano By: /s/ Desiree DeStefano ------------------------------------ --------------------------------------- Name: Desiree DeStefano Name: Desiree DeStefano Title: Vice President Title: Vice President
4 EX-4.2 3 file003.txt FIFTH SUPPLEMENTAL INDENTURE EXHIBIT 4.2 FIFTH SUPPLEMENTAL INDENTURE FIFTH SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of July 23, 2004, among Bicycle Holding, Inc., a Delaware corporation, USPC Holding, Inc., a Delaware corporation, The United States Playing Card Company, a Delaware corporation (collectively, the "Guaranteeing Subsidiaries"), which are subsidiaries of Jarden Corporation, formerly known as Alltrista Corporation, a Delaware corporation (the "Company"), the Company, the other Guarantors (as defined in the Indenture referred to herein) and The Bank of New York, as trustee under the Indenture referred to below (the "Trustee"). W I T N E S S E T H WHEREAS, the Company has heretofore executed and delivered to the Trustee the Indenture dated as of April 24, 2002, among the Company, the Guarantors named therein, and the Trustee, as supplemented by the First Supplemental Indenture dated as of May 7, 2003, among the Company, the Guarantors named therein and the Trustee, as further supplemented by the Second Supplemental Indenture dated as of May 28, 2003, among the Company, the Guarantors named therein, and the Trustee, as further supplemented by the Third Supplemental Indenture dated as of August 28, 2003, among the Company, the Guarantors named therein and the Trustee, and as further supplemented by the Fourth Supplemental Indenture dated as of April 16, 2004, among the Company, the Guarantors named therein and the Trustee, (collectively, the "Indenture"), providing for the issuance of 9 3/4% Senior Subordinated Notes due 2012 (the "Notes"); WHEREAS, the Indenture provides that under certain circumstances the Guaranteeing Subsidiaries shall execute and deliver to the Trustee a supplemental indenture pursuant to which the Guaranteeing Subsidiaries shall agree to unconditionally guarantee all of the Company's Obligations under the Notes and the Indenture on the terms and conditions set forth in a subsidiary guarantee to be executed by the Guaranteeing Subsidiaries on the date hereof (the "Subsidiary Guarantee"); and WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture. NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Company, the Guarantors, the Guaranteeing Subsidiaries and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes as follows: 1. CAPITALIZED TERMS. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture. 2. AGREEMENT TO GUARANTEE. The Guaranteeing Subsidiaries hereby agree to provide an unconditional Guarantee on the terms and subject to the conditions set forth in the Subsidiary Guarantee and in the Indenture, including but not limited to Article 11 thereof. 3. EXECUTION AND DELIVERY. The Guaranteeing Subsidiaries agree that the Subsidiary Guarantee shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Subsidiary Guarantee. 4. NO RECOURSE AGAINST OTHERS. No past, present or future director, officer, employee, incorporator, stockholder or agent of the Guaranteeing Subsidiaries, as such, shall have any liability for any obligations of the Company, the Guarantors or any Guaranteeing Subsidiaries under the Notes, any Subsidiary Guarantee, the Indenture or this Supplemental Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of the Notes by accepting a Note or a Subsidiary Guarantee waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the SEC that such a waiver is against public policy. 5. NEW YORK LAW TO GOVERN. THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. 6. COUNTERPARTS. The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. 7. EFFECT OF HEADINGS. The Section headings herein are for convenience only and shall not affect the construction hereof. 8. THE TRUSTEE. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the recitals and statements contained herein, all of which recitals and statements are made solely by the Guaranteeing Subsidiaries and the Company. 2 IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed, all as of the date first above written.
LEHIGH CONSUMER PRODUCTS CORPORATION By:/s/ Desiree DeStefano ----------------------------------- Name: Desiree DeStefano Title: Senior Vice President JARDEN CORPORATION THE BANK OF NEW YORK, as Trustee By: /s/ Desiree DeStefano By:/s/ Julie Salovitch Miller ----------------------------------- ---------------------------------- Name: Desiree DeStefano Name: Julie Salovitch-Miller Title: Senior Vice President Title: Vice President ALLTRISTA NEWCO ALLTRISTA PLASTICS CORPORATION CORPORATION By: /s/ Desiree DeStefano By: /s/ Desiree DeStefano ---------------------------------- ---------------------------------- Name: Desiree DeStefano Name: Desiree DeStefano Title: Vice President Title: Vice President ALLTRISTA ZINC PRODUCTS, L.P. HEARTHMARK, LLC By: Alltrista Newco Corporation, its General Partner By: /s/ Desiree DeStefano By: /s/ Desiree DeStefano ------------------------------ --------------------------------- Name: Desiree DeStefano Name: Desiree DeStefano Title: Vice President Title: Vice President 3 QUOIN, LLC TILIA, INC. By: /s/ Desiree DeStefano ------------------------------------ Name: Desiree DeStefano By: /s/ Desiree DeStefano Title: Vice President -------------------------------- Name: Desiree DeStefano Title: Vice President TILIA DIRECT, INC. TILIA INTERNATIONAL, INC. By: /s/ Desiree DeStefano By: /s/ Desiree DeStefano ------------------------------------ --------------------------------- Name: Desiree DeStefano Name: Desiree DeStefano Title: Vice President Title: Vice President X PROPERTIES, LLC O.W.D., INCORPORATED By: Quoin Corporation, as sole member By: /s/ Desiree DeStefano ---------------------------------- Name: Desiree DeStefano By: /s/ Desiree DeStefano Title: Vice President ------------------------------------- Name: Desiree DeStefano Title: Vice President TUPPER LAKE PLASTICS, INCORPORATED By: /s/ Desiree DeStefano ----------------------------------- Name: Desiree DeStefano Title: Vice President 4 LOEW-CORNELL, INC. JARDEN ACQUISITION I, INC. By: /s/ Desiree DeStefano By: /s/ Desiree DeStefano ------------------------------------ ------------------------------------ Name: Desiree DeStefano Name: Desiree DeStefano Title: Vice President Title: Vice President BICYCLE HOLDING, INC. USPC HOLDING, INC. By: /s/ Desiree DeStefano By: /s/ Desiree DeStefano ------------------------------------- ----------------------------------- Name: Desiree DeStefano Name: Desiree DeStefano Title: Vice President Title: Vice President THE UNITED STATES PLAYING CARD COMPANY By: /s/ Desiree DeStefano -------------------------------------- Name: Desiree DeStefano Title: Vice President
EX-31.1 4 file004.txt CERTIFICATION BY THE CHIEF EXECUTIVE OFFICER EXHIBIT 31.1 CERTIFICATION I, Martin E. Franklin, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Jarden Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: August 9, 2004 /s/ Martin E. Franklin ----------------------------------- Martin E. Franklin Chief Executive Officer EX-31.2 5 file005.txt CERTIFICATION BY THE CHIEF FINANCIAL OFFICER EXHIBIT 31.2 CERTIFICATION I, Ian Ashken, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Jarden Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: August 9, 2004 /s/ Ian G.H. Ashken ------------------------------------ Ian G.H. Ashken Chief Financial Officer EX-32.1 6 file006.txt CERTIFICATION REQUIRED UNDER SECTION 906 EXHIBIT 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Jarden Corporation (the "Company") on Form 10-Q for the period ended June 30, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Martin E. Franklin, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. /s/ Martin E. Franklin - ------------------------ Martin E. Franklin Chief Executive Officer August 9, 2004 In connection with the Quarterly Report of Jarden Corporation (the "Company") on Form 10-Q for the period ended June 30, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Ian G.H. Ashken, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. /s/ Ian G.H. Ashken - --------------------------- Ian G.H. Ashken Chief Financial Officer August 9, 2004 -----END PRIVACY-ENHANCED MESSAGE-----