<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the quarterly period ended SEPTEMBER 30, 1997
------------------
or
[ ] Transition Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the transition period from to
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Commission File Number: 333-29123
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CLN HOLDINGS INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 65-0752460
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5900 NORTH ANDREWS AVENUE, SUITE 700
FORT LAUDERDALE, FLORIDA 33309
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(Address of principal executive offices) (Zip Code)
954-772-9000
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(Registrant's telephone number, including area code)
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
requirement for the past 90 days. Yes X No
----- -----
The number of shares outstanding of the registrant's par value $1.00 common
stock was 1,000 shares as of November 4, 1997, all of which were held by an
indirect wholly-owned subsidiary of Mafco Holdings Inc.
Exhibit Index on Page 17
<PAGE>
CLN HOLDINGS INC. AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION Page
----
Item 1. Condensed Consolidated Financial Statements:
Condensed Consolidated Statements of Operations
Three months ended September 30, 1997 and 1996 and
Nine months ended September 30, 1997 and 1996. . . . . . . . 3
Condensed Consolidated Balance Sheets
September 30, 1997 and December 31, 1996 . . . . . . . . . . 4
Condensed Consolidated Statements of Cash Flows
Nine months ended September 30, 1997 and 1996. . . . . . . . 5
Notes to Condensed Consolidated Financial Statements. . . . . . 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . . 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . 17
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . . . 17
Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2
<PAGE>
CLN HOLDINGS INC. AND SUBSIDIARIES
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
------------------------- -------------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net revenues . . . . . . . . . . . . . . . . . . . . . . . $ 252,434 $ 269,607 $ 931,412 $ 995,821
Cost of sales. . . . . . . . . . . . . . . . . . . . . . . 182,567 229,713 678,590 737,423
---------- ---------- ---------- ----------
Gross profit . . . . . . . . . . . . . . . . . . . . . . . 69,867 39,894 252,822 258,398
Selling, general and administrative expenses . . . . . . . 69,246 89,399 205,378 215,218
Interest expense, net. . . . . . . . . . . . . . . . . . . 23,696 19,233 67,863 55,839
Amortization of goodwill and deferred charges. . . . . . . 4,062 3,256 11,060 9,338
Other expense (income), net. . . . . . . . . . . . . . . . 703 578 1,500 (1,520)
---------- ---------- ---------- ----------
Loss before income taxes, minority interest
and extraordinary item. . . . . . . . . . . . . . . . . . (27,840) (72,572) (32,979) (20,477)
Income tax benefit . . . . . . . . . . . . . . . . . . . . (10,191) (17,837) (11,750) (447)
Minority interest in earnings (loss) of Camping Gaz. . . . 292 (81) 1,135 1,870
Minority interest in (loss) earnings of Coleman. . . . . . (1,411) (8,329) 475 (1,092)
---------- ---------- ---------- ----------
Loss before extraordinary item . . . . . . . . . . . . . . (16,530) (46,325) (22,839) (20,808)
Extraordinary loss on early extinguishment
of debt, net of income tax benefit. . . . . . . . . . . . (4,300) (5) (15,229) (1,244)
---------- ---------- ---------- ----------
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . $ (20,830) $ (46,330) $ (38,068) $ (22,052)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
See Notes to Condensed Consolidated Financial Statements
3
<PAGE>
CLN HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents. . . . . . . . . . . . . . . . $ 9,896 $ 17,299
Short term investments in escrow . . . . . . . . . . . . 9,227 --
Accounts and notes receivable, less allowance
of $9,705 in 1997 and $11,512 in 1996. . . . . . . . . 219,480 209,942
Inventories. . . . . . . . . . . . . . . . . . . . . . . 245,849 287,502
Deferred tax assets. . . . . . . . . . . . . . . . . . . 39,574 40,466
Prepaid assets and other . . . . . . . . . . . . . . . . 18,351 14,943
----------- -----------
Total current assets . . . . . . . . . . . . . . . . . 542,377 570,152
Property, plant and equipment, net . . . . . . . . . . . . 176,607 199,182
Intangible assets related to businesses acquired, net. . . 331,048 349,761
Note receivable - affiliate. . . . . . . . . . . . . . . . 35,395 54,739
Deferred tax assets and other. . . . . . . . . . . . . . . 44,377 34,441
----------- -----------
$ 1,129,804 $ 1,208,275
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----------- -----------
LIABILITIES AND STOCKHOLDER'S DEFICIT
Current liabilities:
Accounts and notes payable . . . . . . . . . . . . . . . $ 155,791 $ 132,841
Other current liabilities. . . . . . . . . . . . . . . . 119,329 113,787
----------- -----------
Total current liabilities. . . . . . . . . . . . . . . 275,120 246,628
Long-term debt . . . . . . . . . . . . . . . . . . . . . . 968,826 999,794
Income taxes payable - affiliate . . . . . . . . . . . . . 9,670 18,528
Other liabilities. . . . . . . . . . . . . . . . . . . . . 65,609 76,173
Minority interest. . . . . . . . . . . . . . . . . . . . . 45,032 45,088
Contingencies. . . . . . . . . . . . . . . . . . . . . . .
Stockholder's deficit:
Common stock . . . . . . . . . . . . . . . . . . . . . . 1 1
Capital deficiency . . . . . . . . . . . . . . . . . . . (127,094) (117,963)
Accumulated deficit. . . . . . . . . . . . . . . . . . . (100,662) (62,594)
Currency translation adjustment. . . . . . . . . . . . . (6,045) 2,856
Minimum pension liability adjustment . . . . . . . . . . (653) (236)
----------- -----------
Total stockholder's deficit. . . . . . . . . . . . . . (234,453) (177,936)
----------- -----------
$ 1,129,804 $ 1,208,275
----------- -----------
----------- -----------
</TABLE>
See Notes to Condensed Consolidated Financial Statements
4
<PAGE>
CLN HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months
Ended September 30,
--------------------------
1997 1996
---------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . $ (38,068) $ (22,052)
---------- ----------
Adjustments to reconcile net loss to net cash flows
from operating activities:
Depreciation and amortization. . . . . . . . . . . . . 32,086 28,710
Non-cash restructuring and other charges . . . . . . . 16,774 33,268
Extraordinary loss on early extinguishment of debt . . 24,620 2,090
Non-cash tax sharing agreement benefit . . . . . . . . (22,501) (936)
Non-cash gain on LYONs conversion. . . . . . . . . . . -- (2,755)
Minority interest in earnings of Camping Gaz . . . . . 1,135 1,870
Minority interest in earnings of Coleman . . . . . . . 475 (1,092)
Interest accretion . . . . . . . . . . . . . . . . . . 39,720 27,053
Change in assets and liabilities:
Increase in short term investments in escrow . . . . (9,227) --
Increase in receivables. . . . . . . . . . . . . . . (18,232) (60,693)
Decrease (increase) in inventories . . . . . . . . . 28,092 (29,513)
Increase in accounts payable . . . . . . . . . . . . (8,977) (22,216)
Other, net . . . . . . . . . . . . . . . . . . . . . (8,979) 23,782
---------- ----------
74,986 (432)
---------- ----------
Net cash provided (used) by operating activities . . . . . 36,918 (22,484)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures . . . . . . . . . . . . . . . . . . . (19,075) (27,666)
Purchases of businesses, net of cash acquired. . . . . . . (1,000) (158,414)
Decrease (increase) in note receivable - affiliate . . . . 19,344 (4,054)
Proceeds from sale of fixed assets . . . . . . . . . . . . 4,151 1,567
---------- ----------
Net cash provided (used) by investing activities . . . . . 3,420 (188,567)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net payments of revolving credit agreement borrowings. . . (91,741) (14,686)
Net change in short-term borrowings. . . . . . . . . . . . 39,648 33,215
Proceeds from issuance of long-term debt . . . . . . . . . 470,007 235,678
Repayment of long-term debt. . . . . . . . . . . . . . . . (452,287) (9,908)
Debt issuance and refinancing costs. . . . . . . . . . . . (16,516) (2,296)
Purchases of Company common stock. . . . . . . . . . . . . -- (2,329)
Proceeds from stock options exercised. . . . . . . . . . . 1,783 1,724
Other, net . . . . . . . . . . . . . . . . . . . . . . . . 81 108
---------- ----------
Net cash (used) provided by financing activities . . . . . (49,025) 241,506
---------- ----------
Effect of exchange rate changes on cash. . . . . . . . . . 1,284 1,237
---------- ----------
Net (decrease) increase in cash and cash equivalents . . . (7,403) 31,692
Cash and cash equivalents at beginning of the period . . . 17,299 12,065
---------- ----------
Cash and cash equivalents at end of the period . . . . . . $ 9,896 $ 43,757
---------- ----------
---------- ----------
</TABLE>
See Notes to Condensed Consolidated Financial Statements
5
<PAGE>
CLN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
(Unaudited)
1. BASIS OF FINANCIAL STATEMENT PRESENTATION
CLN Holdings Inc. (formerly known as Coleman Escrow Corp. ("CLN Holdings")),
is a holding company formed in May 1997 in connection with the offering of
Senior Secured First Priority Discount Notes due 2001 (the "First Priority
Notes") and Senior Secured Second Priority Discount Notes due 2001 ( the "Second
Priority Notes" and together with the First Priority Notes, the "Escrow Notes")
to hold all of the outstanding shares of capital stock of Coleman Holdings Inc.
("Coleman Holdings"). Coleman Holdings was a holding company formed in July
1993 in connection with the offering of Senior Secured Discount Notes due 1998
(the "Holdings Notes") to hold all of the outstanding shares of capital stock of
Coleman Worldwide Corporation ("Coleman Worldwide"). On July 15, 1997, Coleman
Holdings was merged into CLN Holdings. Coleman Worldwide is a holding company
formed in March 1993 in connection with the offering of Liquid Yield OptionTM
Notes due 2013 (the "LYONs"TM). Coleman Worldwide also holds 44,067,520 shares
of the common stock of The Coleman Company, Inc. ("Coleman" or the "Company")
which represents approximately 83% of the outstanding Coleman common stock as of
September 30, 1997. CLN Holdings and Coleman Worldwide are holding companies
with no business operations of their own.
The accompanying unaudited condensed consolidated financial statements of
CLN Holdings include the accounts of CLN Holdings, Coleman Holdings, Coleman
Worldwide and Coleman and its subsidiaries after elimination of all material
intercompany accounts and transactions, and have been prepared in accordance
with generally accepted accounting principles 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 for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the nine months ended September 30, 1997 are not
necessarily indicative of the results that may be expected for future periods.
The balance sheet at December 31, 1996 has been derived from the audited
financial statements for that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Registration
Statement on Form S-1 of CLN Holdings filed on October 6, 1997.
2. INVENTORIES
The components of inventories consist of the following:
September 30, December 31,
1997 1996
------------- ------------
Raw material and supplies. . . . . . . . . . $ 63,391 $ 82,399
Work-in-process. . . . . . . . . . . . . . . 7,393 12,878
Finished goods . . . . . . . . . . . . . . . 175,065 192,225
--------- ---------
$ 245,849 $ 287,502
--------- ---------
--------- ---------
6
<PAGE>
CLN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
(Unaudited)
3. RESTRUCTURING AND OTHER CHARGES
During the nine months ended September 30, 1997, the Company recorded
cash and non-cash restructuring and other charges totaling $36,023 and related
tax benefits of $12,608. Pre-tax restructuring and other costs totaling $3,928
were recorded, primarily in selling, general and administrative ("SG&A")
expenses, in the first quarter of 1997 and related primarily to executive
severance costs. The second quarter pre-tax restructuring charge of $18,623
related primarily to (i) exiting various low margin products, including pressure
washers, (ii) closing and relocating certain administrative and sales offices,
and (iii) closing several manufacturing facilities. The third quarter pre-tax
restructuring charge of $13,472 related primarily to exiting low margin product
lines, facilities consolidations and revised estimates of costs for prreviously
announced restructuring actions. These restructuring initiatives are expected to
be substantially completed within one year.
The costs associated with the second and third quarter restructuring
charges included pre-tax charges of $24,202 related to exiting certain products
and facilities of which $19,202 was reflected in cost of sales and $5,000 in
SG&A expenses. Included in these restructuring charges were $16,774 of pre-tax
charges related primarily to the write down of inventory and fixed assets to
estimated net realizable value, and $7,428 of liabilities for other exit costs,
including carrying costs of idle facilities and relocation costs, of which
$1,369 was paid as of September 30, 1997.
The costs associated with the second and third quarter restructuring
charges also included $7,893 of termination costs for 492 factory and
administrative employees of which $1,210 was reflected in cost of sales and
$6,683 in SG&A expenses. As of September 30, 1997 $4,676 of these termination
benefits were paid to the 393 employees who were terminated as of that date.
During 1996, the Company recorded restructuring charges primarily to (i)
integrate the Camping Gaz and Coleman operations, and (ii) exit certain
products. Activities associated with the implementation of those plans are
substantially completed or are in process at September 30, 1997. Remaining
liabilities of approximately $5,383 at September 30, 1997, relate primarily to
anticipated returns of discontinued products and to closing certain factory,
warehouse and office facilities.
4. LONG-TERM DEBT
On May 20, 1997, CLN Holdings issued approximately $600,475 in principal
amount at maturity of First Priority Notes and approximately $131,560 in
principal amount at maturity of Second Priority Notes resulting in aggregate
net proceeds of approximately $455,257. The First Priority Notes and Second
Priority Notes were issued at a discount from their principal amount at
maturity to yield 11 1/8% and 12 7/8%, respectively, per annum calculated from
May 20, 1997. The indenture governing the Escrow Notes (the "Indenture")
requires, subject to certain exceptions, that the retirement of the remaining
outstanding LYONs be consummated no later than June 10, 1998. The Indenture
requires CLN Holdings to hold, directly or indirectly, a majority of the
voting power of the Company at all times, unless and until CLN Holdings
exercises its right to substitute U.S. Government obligations for all of the
pledged collateral. The Indenture, to which Coleman is not a party, also
contains certain covenants that, among other things, generally prohibit the
incurrence of additional debt by CLN Holdings and the issuance of additional
debt and the issuance of preferred stock by Coleman Worldwide, and limit (i)
the incurrence of additional debt and the issuance of preferred stock by the
Company, (ii) the payment of dividends on the capital stock of CLN Holdings
and its subsidiaries and the redemption or repurchase of the
7
<PAGE>
CLN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
(Unaudited)
capital stock of CLN Holdings, (iii) the sale of assets and subsidiary stock,
(iv) transactions with affiliates, (v) the creation of liens on the assets of
CLN Holdings and Coleman Worldwide, and (vi) consolidations, mergers and
transfers of all or substantially all of CLN Holdings' assets. The foregoing
limitations and prohibitions, however, are subject to a number of
qualifications. The Escrow Notes also contain customary events of defaults
and a put right by the holders in the event of a change of control of CLN
Holdings (as defined in the Indenture).
On October 6, 1997, CLN Holdings commenced an exchange offer registered
under the Securities Act to exchange senior secured notes having substantially
identical terms as the Escrow Notes. If the exchange offer is not consummated
by November 17, 1997, the Escrow Notes will accrue interest at a rate of 0.5%
of the accreted value of the Escrow Notes, payable semiannually in cash, from
November 17, 1997 until the date the exchange offer is consummated.
Approximately $262,194 of the net proceeds of the Escrow Notes were
contributed to Coleman Holdings, then a subsidiary of CLN Holdings, and used
by it to redeem, on July 15, 1997, the Holdings Notes. Coleman Holdings
recorded an extraordinary loss of $4,300, net of tax benefits of $2,315,
relating to the excess of the redemption price over the accreted value of the
Holdings Notes and the write-off of deferred charges related to the Holdings
Notes. Approximately $188,286 of the net proceeds of the Escrow Notes were
contributed to Coleman Worldwide and used by it to accept for exchange on
June 20, 1997, $545,053 aggregate principal amount at maturity of LYONs,
including redemption fees and expenses. Coleman Worldwide recorded an
extraordinary loss of $10,929, net of tax benefits of $7,076, relating to the
excess of the exchange offer price over the accreted value of the LYONs, the
write-off of deferred charges related to the LYONs exchanged and redemption
fees and expenses. Coleman Worldwide plans to redeem the remaining $16,500
aggregate principal amount at maturity of LYONs on May 27, 1998 with the
remaining proceeds from the issuance of the Escrow Notes which are being held
in escrow. The LYONs, to which the Company is not a party, provide that it
is an Additional Purchase Right Event (as defined below) if, among other
things, the amount of debt incurred by the Company exceeds certain
limitations. The $16,500 principal amount at maturity of LYONs which remain
outstanding are secured by a pledge of 7,834,208 shares of Company common
stock owned by Coleman Worldwide. The Escrow Notes are secured by a pledge
of all the shares of common stock of Coleman Worldwide and guaranteed
pursuant to a non-recourse guaranty of Coleman Worldwide (the "Guaranty"),
which Guaranty is currently secured by a pledge of 36,233,312 shares of
Company common stock and will be secured by the shares currently securing the
LYONs upon their redemption.
5. RELATED PARTY TRANSACTIONS
As of March 31, 1997, the Company purchased an inactive subsidiary from an
affiliate for $1,000. The Company expects to realize certain foreign tax
benefits from this transaction in future years. The Company has accounted for
this transaction in a manner similar to a pooling-of-interests due to the
Mafco Holdings Inc. ("Mafco") common control over each of the parties involved
in the transaction. The $2,608 excess value of estimated realizable tax
benefits acquired over the purchase price has been accounted for as a capital
contribution.
On March 31, 1997, MacAndrews & Forbes Holdings Inc., an indirect parent,
assumed a liability of Coleman Worldwide in the amount of $2,271. The
assumption was accounted for as a capital contribution.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
CLN Holdings and Coleman Worldwide are holding companies with no
business operations of their own. Accordingly, except as otherwise indicated,
the following discussion relates to the results of operations of the Company.
As part of its strategy to improve profitability, the Company has developed
a restructuring program including (i) closing its executive offices in Golden,
Colorado, with most of its administrative functions relocating to its Wichita,
Kansas facility, (ii) reducing its work force by approximately 1,000 employees,
(iii) closing or relocating several of its factories and administrative offices,
(iv) closing its Geneva, Switzerland international headquarters, (v)
rationalizing its product lines, including a significant reduction in SKUs, and
(vi) exiting its pressure washer business. In addition, the Company continues
to evaluate the various components of its business operations and may, as a
result of those ongoing evaluations, decide to sell certain businesses or assets
if suitable opportunities arise. Several of the initiatives involved in the
Company's restructuring plan, including closing and relocating certain
administrative and manufacturing facilities, were substantially completed as of
September 30, 1997. The remaining initiatives are expected to be substantially
completed within one year.
THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED WITH THE THREE MONTHS ENDED
SEPTEMBER 30, 1996
Net revenues of $252.4 million in 1997 were $17.2 million or 6.4% less than
in 1996 with outdoor recreation products increasing $4.7 million or 2.7% and
hardware products decreasing $21.9 million or 23.6%. The outdoor recreation
products revenues increase primarily reflects stronger sales of backpacks and
related products worldwide, largely offset by the effects of the SKU reductions.
The hardware products revenues decrease is primarily due to lower generator
sales resulting from fewer storms on the East Coast of the United States,
coupled with a decline in pressure washer sales as a result of the Company's
decision to exit the pressure washer business. Geographically, United States
and Canadian revenues decreased $21.9 million or 11.5% while international
revenues increased $4.7 million or 5.9%.
Gross margins of 31.2%, excluding the impact of restructuring and other
charges which are more fully described below, increased as a percent of sales by
4.0 percentage points from 27.2% in 1996. The improvement is primarily the
result of increased demand for higher margin products and the elimination of low
margin SKUs.
Selling, general and administrative ("SG&A") expenses, excluding the impact
of restructuring and other charges which are more fully described below, were
$64.7 million in 1997 compared to $65.5 million in 1996.
During the third quarter of 1997, the Company recorded restructuring
charges totaling $13.4 million of which $9.0 million was reflected in cost of
sales and $4.4 million in SG&A expenses. These charges relate to (i) the
Company's continuing restructuring initiatives designed to improve
profitability, and (ii) revised estimates of the costs for previously announced
restructuring actions. Tax benefits of $4.0 million associated with these
charges are reflected in income tax expense.
During the third quarter of 1996, the Company recorded restructuring
charges of $49.7 million, certain other charges of $7.7 million and related tax
benefits of $12.9 million. The pre-tax restructuring charges of $49.7 million,
of which $28.6 million was reflected in cost of sales and $21.1 million in SG&A
expenses, consisted of (i) $24.7 million to integrate the Camping Gaz and
Coleman operations into a global recreation business, (ii) $20.0 million to exit
the low end pressure washer business, and (iii) $5.0 million related to
litigation associated with certain of the Company's battery powered lights.
Other pre-tax charges of $7.7 million relate primarily to
9
<PAGE>
CLN HOLDINGS INC. AND SUBSIDIARIES
certain asset write-offs. These other charges, of which $5.0 million was
reflected in cost of sales and $2.7 million in SG&A expenses, were incurred in
the Company's normal course of business, although the amounts involved were
higher than similar charges the Company had recorded in prior periods. The
provision for income taxes includes $12.9 million of tax benefits resulting
from these restructuring and other charges, net of an increase in the
valuation reserve related to certain foreign deferred tax assets and other
foreign tax charges totaling $7.7 million.
The Company's net interest expense was $9.9 million in 1997 compared with
$10.0 million in 1996, a decrease of $0.1 million. The favorable effects of
lower borrowings in the 1997 period resulting from the Company's working capital
management programs were almost offset by the effects of higher interest rates
on the Company's variable rate debt and lower interest income in 1997. On an
unconsolidated basis, Coleman Worldwide had $0.1 million of interest expense in
1997 compared with $3.0 million in 1996, a decrease of $2.9 million. This
decrease is primarily due to the decrease in principal amount of LYONs
outstanding due to the exchange of LYONs for cash in June 1997. On an
unconsolidated basis, CLN Holdings and Coleman Holdings had $13.7 million of
interest expense in 1997 compared with $6.2 million in 1996, a increase of $7.5
million. This increase reflects the issuance of the Escrow Notes partially
offset by the redemption of the Holdings Notes on July 15, 1997.
During the third quarter of 1997, in connection with the redemption of
$281.3 million aggregate principal amount at maturity of Holdings Notes for
cash, Coleman Holdings recorded an extraordinary loss of $4.3 million, net of
tax benefits of $2.3 million, relating to the excess of the redemption price
over the accreted value of the Holdings Notes and the write-off of deferred
charges related to the Holdings Notes.
Minority interest in the earnings of Camping Gaz reflects the minority
interests held by other shareholders in certain subsidiary operations acquired
with the Camping Gaz business. Minority interest in the earnings of Coleman
represents the minority shareholders' proportionate share of the results of
operations of Coleman, which is reflected on CLN Holdings' consolidated
financial statements because of CLN Holdings' ownership through Coleman
Worldwide ownership of approximately 83% of Coleman's common stock.
The Company recorded an income tax benefit of $5.1 million in 1997 and
$14.2 million in 1996. Excluding the impact of the restructuring and other
charges, the income tax benefit in 1997 was favorably impacted by the cumulative
impact of the Company's decrease in its expected annual effective income tax
rate from 38.0% to 35.0% whereas the income tax benefit in 1996 was negatively
impacted by the cumulative impact of the Company's increase in its expected
annual effective income tax rate from 34.0% to 34.7%. On an unconsolidated
basis, Coleman Worldwide recorded an income tax benefit of $0.0 million in 1997
and $1.3 million in 1996, or approximately 40% of Coleman Worldwide's
unconsolidated pre-tax loss in each period. On an unconsolidated basis, CLN
Holdings and Coleman Holdings recorded an income tax benefit of $5.2 million in
1997 and $2.3 million in 1996, or approximately 35% of CLN Holdings and Coleman
Holdings' unconsolidated pre-tax loss in each period.
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED WITH THE NINE MONTHS ENDED
SEPTEMBER 30, 1996
Net revenues of $931.4 million in 1997 were $64.4 million or 6.5% less
than in 1996 with outdoor recreation products decreasing $14.6 million or
2.0% and hardware products decreasing $49.8 million or 18.1%. The outdoor
recreation products revenues decrease is largely attributable to lower sales
in Japan due to weak market conditions and a program to reduce wholesaler
inventories partially offset by stronger sales of backpacks and related
products worldwide. The hardware products revenues decrease is due to a
decline in pressure washer sales as a result of the Company's decision to
exit the pressure washer business and lower generator sales resulting from
fewer storms on the East Coast of the United States in the third quarter of
1997. Geographically, United States and Canadian revenues decreased $37.7
million or 5.6% while international revenues decreased $26.7 million or 8.4%
primarily related to
10
<PAGE>
CLN HOLDINGS INC. AND SUBSIDIARIES
lower sales of outdoor recreation products in Japan. Results in the 1996
period include the Camping Gaz operations from the date of acquisition.
The gross margin percentage of 29.3%, excluding the impact of restructuring
and other charges which are more fully described below, remained unchanged from
the 1996 period. The effects of lower sales of high margin products in Japan
which reduced the overall margin percentage in the earlier part of 1997 were
offset by an improved mix of product sales in the third quarter. The closing of
several of the Company's factories as part of the Company's restructuring
initiatives is intended to reduce manufacturing costs in future periods.
SG&A expenses, excluding the impact of restructuring and other charges
which are more fully described below, were $189.1 million in 1997 compared to
$191.2 million in 1996, a decrease of 1.1%. The inclusion of a full nine months
of Camping Gaz SG&A costs in the 1997 period increased SG&A expenses; however,
these increases were more than offset by reduced costs in the Company's various
promotional programs and benefits resulting from the integration of Camping Gaz
operations and the restructuring initiatives.
During the 1997 period, the Company recorded restructuring charges totaling
$36.0 million of which $20.0 million was reflected in cost of sales and $16.0
million in SG&A expenses. These charges relate to the Company's restructuring
initiatives designed to improve profitability. Tax benefits of $12.6 million
associated with these charges are reflected in income tax expense. During the
third quarter of 1996, the Company recorded restructuring charges of $49.7
million, certain other charges totaling $7.7 million and related tax benefits of
$12.9 million as described above.
The Company's net interest expense was $31.6 million in 1997 compared with
$28.8 million in 1996, an increase of $2.8 million. This increase was primarily
the result of higher interest rates and increased borrowings related to the
Camping Gaz acquisition. On an unconsolidated basis, Coleman Worldwide had $6.1
million of interest expense in 1997 compared with $9.0 million in 1996, an
decrease of $2.9 million. This decrease is primarily due to the decrease in
principal amount of LYONs outstanding due to the exchange of LYONs for cash in
June 1997 partially offset by the effects of compounding interest related to the
LYONs. On an unconsolidated basis, CLN Holdings and Coleman Holdings had $30.2
million of interest expense in 1997 compared with $18.0 million in 1996, an
increase of $12.2 million. This increase reflects the issuance of the Escrow
Notes and the effects of compounding interest related to the Holdings Notes
partially offset by the redemption of the Holdings Notes on July 15, 1997.
During the third quarter of 1997, in connection with the redemption of
$281.3 million aggregate principal amount at maturity of Holdings Notes for
cash, Coleman Holdings recorded an extraordinary loss of $4.3 million, net of
tax benefits of $2.3 million, relating to the excess of the redemption price
over the accreted value of the Holdings Notes and the write-off of deferred
charges related to the Holdings Notes. During the second quarter of 1997, in
connection with the exchange of $545.1 million aggregate principal amount at
maturity of LYONs for cash, Coleman Worldwide recorded an extraordinary loss of
$10.9 million, net of tax benefits of $7.1 million, relating to the excess of
the exchange offer price over the accreted value of the LYONs, the write-off of
deferred charges related to the LYONs exchanged and redemption fees and
expenses.
During the nine months ended September 30, 1996, holders of LYONs with a
principal amount at maturity of $9.8 million elected to exchange such LYONs
pursuant to the terms of the LYONs indenture. In connection with these
exchanges, Coleman Worldwide delivered 74,107 shares of Coleman Common Stock
owned by Coleman Worldwide to the holders of the LYONs which were exchanged.
Coleman Worldwide recognized a gain of $2.7 million in connection with these
exchanges which is included in other income. Coleman Worldwide also recognized
an extraordinary loss on early extinguishment of debt as a result of the LYONs
exchange in an amount of $0.6 million, net of tax benefits of $0.4 million.
This extraordinary loss represents (i) the excess fair value of the property
delivered by Coleman Worldwide to the holders of the LYONs which were exchanged
over the
11
<PAGE>
CLN HOLDINGS INC. AND SUBSIDIARIES
accreted value of the LYONs obligations at the time of the exchange, and
(ii) a pro-rata portion of the related unamortized financing costs associated
with the LYONs issuance. In addition, during the second quarter of 1996, in
connection with the renegotiation of its then existing credit agreement, the
Company recorded an extraordinary loss of $0.6 million, net of tax benefits
of $0.5 million, which represents a write-off of the related unamortized
financing costs associated with its then existing credit agreement.
Minority interest in the earnings of Camping Gaz in the 1997 period
reflects the minority interests held by other shareholders in certain
subsidiary operations acquired with the Camping Gaz business. On March 1,
1996, the Company acquired control of approximately 70% of Camping Gaz and in
July 1996 obtained control of the remaining 30% of Camping Gaz and,
accordingly, in the 1996 period, minority interest in the earnings of Camping
Gaz reflects the minority shareholders' approximate 30% proportionate share
of the results of operations of Camping Gaz for the period March through June
of 1996 and also includes interests of minority shareholders in certain
subsidiary operations acquired with the Camping Gaz business. Minority
interest in the earnings of Coleman represents the minority shareholders'
proportionate share of the results of operations of Coleman, which is
reflected on CLN Holdings' consolidated financial statements because of CLN
Holdings' ownership through Coleman Worldwide of approximately 83% of
Coleman's common stock.
The Company recorded a provision for income tax expense of $2.1 million in
1997 and $9.0 million in 1996. Excluding the net tax benefits from the
restructuring and other charges, the provision for income tax expense would have
been $14.7 million or 35.0% of pre-tax earnings in 1997 as compared to a
provision for income tax expense of $21.9 million or 34.7% of pre-tax earnings
in 1996. On an unconsolidated basis, Coleman Worldwide recorded an income tax
benefit of $2.5 million in 1997 and $2.8 million in 1996, or approximately 38%
and 40% of Coleman Worldwide's unconsolidated pre-tax loss in 1997 and 1996,
respectively. On an unconsolidated basis, CLN Holdings and Coleman Holdings
recorded an income tax benefit of $11.3 million in 1997 and $6.7 million in
1996, or approximately 35% of CLN Holdings and Coleman Holdings' unconsolidated
pre-tax loss in each period.
LIQUIDITY AND CAPITAL RESOURCES
CLN Holdings' consolidated operating activities provided $36.9 million of
cash during the nine months ended September 30, 1997 and used $22.5 million
of cash during the nine months ended September 30, 1996. Improved
management of receivables and inventories and rationalization of product
lines during the 1997 period as compared to the 1996 period led to the
improvement in cash provided by operating activities.
CLN Holdings' consolidated investing activities provided net cash of $3.4
million and used cash of $188.6 million for the nine months ended September
30 1997 and 1996, respectively. The Company used $158.4 million of cash in
the 1996 period for the Camping Gaz and Seatt business acquisitions. The
Company's capital expenditures were $19.1 million in the nine months ended
September 30, 1997 and Coleman Worldwide also had a reduction in the net
advances to Mafco Holdings Inc. under the Coleman Worldwide tax sharing
agreement and the terms of the LYONs trust indenture in the amount of $19.3
million during the nine months ended September 30, 1997.
Net cash provided by financing activities consisted primarily of the
issuance of the Escrow Notes resulting in net proceeds of approximately $455.3
million, and the use of most of the net proceeds to consummate the LYONs
exchange offer and Holdings Notes redemption as described below.
As part of its strategy to improve profitability, the Company has
announced several restructuring initiatives. The Company has recognized
year-to-date pre-tax charges of $36.0 million associated with these actions.
These restructuring
12
<PAGE>
CLN HOLDINGS INC. AND SUBSIDIARIES
initiatives are expected to generate cost savings in the future from
reductions in personnel, production facilities and overhead. There can be no
assurance as to the Company's success in implementing its planned initiatives
or the results therefrom, the amount of future charges, or against any adverse
impact of the Company's restructuring initiatives.
The Company's working capital requirements are currently funded by cash
flow from operations and domestic and foreign bank lines of credit. The
Company's Amended and Restated Credit Agreement, dated as of August 3, 1995, as
amended (the "Company Credit Agreement"), consists of a $275.0 million unsecured
revolving credit facility (the "Revolving Credit Facility") and a term loan
facility of approximately 385.0 million French Francs (approximately $65.2
million at September 30, 1997 exchange rates). Availability under the Revolving
Credit Agreement is reduced by any commercial paper borrowings outstanding. The
Company Credit Agreement is available to the Company until April 30, 2001. At
September 30, 1997, $215.3 million was available for borrowings under the
Company Credit Agreement.
The outstanding loans under the Company Credit Agreement bear interest at
either of the following rates, as selected by the Company from time to time:
(i) the higher of the agent's base lending rate or the federal funds rate plus
.50% or (ii) the London Inter-Bank Offered Rate ("LIBOR") plus a margin ranging
from .25% to 2.125% based on the Company's financial performance. If there is a
default, the interest rate otherwise in effect will be increased by 2% per
annum. The Company Credit Agreement also bears an overall facility fee ranging
from .15% to .375% based on the Company's financial performance.
The Company Credit Agreement contains various restrictive covenants
including, without limitation, requirements for the maintenance of specified
financial ratios, levels of consolidated net worth and profits, and certain
other provisions limiting the incurrence of additional debt, purchase or
redemption of the Company's common stock, issuance of preferred stock of the
Company, and also prohibits the Company from paying any dividends until on or
after January 1, 1999, and limits the amount of dividends the Company may pay
thereafter. The Company Credit Agreement also provides for a specific
requirement relating to the Company's financial leverage at December 31, 1997,
which, if not achieved, will result in the Company Credit Agreement becoming
secured by the Company's assets. For purposes of determining the Company's
compliance with certain of such covenants, the Company Credit Agreement
excludes, among other things, up to $30.0 million of pre-tax cash charges, as
defined in the Company Credit Agreement, in connection with the Company's
restructuring initiatives. In addition to the Company Credit Agreement, the
Company has private placement notes outstanding totaling $360.0 million (the
"Private Placement Notes") which, among other provisions, provide for the
Private Placement Notes to become secured if the Company Credit Agreement
becomes secured.
The Company believes that cash flow from operations and borrowings under
the Company Credit Agreement will be sufficient for the Company to meet its
current cash operating requirements, including projected capital expenditures,
tax sharing payments and other obligations. The Company's ability to borrow
under the terms of the Company Credit Agreement is subject to the Company's
continuing requirement to meet the various covenants, including without
limitation, those described above, and the various covenants in the Private
Placement Notes. If the Company fails to meet the various restrictive covenants
of the Company Credit Agreement, the Company will need to seek a waiver of such
provisions, renegotiate its current Company Credit Agreement, and/or enter into
alternative financing arrangements. There is no assurance that the Company
would be able to obtain such waiver or that terms and conditions of such
renegotiated or alternative agreements, if any, would be as favorable as those
now contained in the Company Credit Agreement.
The Company periodically uses a variety of derivative financial instruments
to manage its foreign currency and interest rate exposures. The Company does
not speculate on interest rates or foreign currency rates. Instead it uses
derivatives when implementing its risk management strategies to reduce the
possible effects of these exposures.
13
<PAGE>
CLN HOLDINGS INC. AND SUBSIDIARIES
With respect to foreign currency exposures, the Company principally uses
forward and option contracts to reduce risks arising from firm commitments,
anticipated intercompany sales transactions and intercompany receivable and
payable balances. The Company generally uses interest rate swaps and interest
rate caps to fix certain of its variable rate debt. The Company manages credit
risk related to these derivative contracts through credit approvals, exposure
limits and other monitoring procedures.
On May 20, 1997, CLN Holdings issued approximately $600.5 million in
principal amount at maturity of First Priority Notes and $131.5 million
principal amount at maturity of Second Priority Notes resulting in net proceeds
of approximately $455.3 million. The First Priority Notes and Second Priority
Notes were issued at a discount from their principal amount at maturity to yield
11 1/8% and 12 7/8%, respectively, per annum calculated from May 20, 1997.
Approximately $262.2 million of the net proceeds of the Escrow Notes were
contributed to Coleman Holdings and used by it to redeem, on July 15, 1997, the
Holdings Notes. Following the redemption of the Holdings Notes, Coleman
Holdings was merged into CLN Holdings. Approximately $188.3 million of the net
proceeds of the Escrow Notes were contributed to Coleman Worldwide and used by
it to accept for exchange on June 20, 1997, $545.1 million aggregate principal
amount at maturity of LYONs including redemption fees and expenses. The
Indenture requires, subject to certain exceptions, that the retirement of the
remaining outstanding LYONs be consummated no later than June 10, 1998. Coleman
Worldwide plans to redeem the remaining $16.5 million aggregate principal amount
at maturity of LYONs on May 27, 1998 with the remaining proceeds from the
issuance of the Escrow Notes. The Indenture requires CLN Holdings to hold,
directly or indirectly, a majority of the voting power of the Company at all
times, unless and until CLN Holdings exercises its right to substitute U.S.
Government obligations for all of the pledged collateral. The Indenture, to
which Coleman is not a party, also contains certain covenants that, among other
things, generally prohibit the incurrence of additional debt by CLN Holdings and
the issuance of additional debt and the issuance of preferred stock by Coleman
Worldwide, and limit (i) the incurrence of additional debt and the issuance of
preferred stock by the Company, (ii) the payment of dividends on the capital
stock of CLN Holdings and its subsidiaries and the redemption or repurchase of
the capital stock of CLN Holdings, (iii) the sale of assets and subsidiary
stock, (iv) transactions with affiliates, (v) the creation of liens on the
assets of CLN Holdings and Coleman Worldwide, and (vi) consolidations, mergers
and transfers of all or substantially all of CLN Holdings' assets. The
foregoing limitations and prohibitions, however, are subject to a number of
qualifications. The Escrow Notes also contain customary events of defaults and
a put right by the holders in the event of a change of control of CLN Holdings
(as defined in the Indenture).
The LYONs and the Escrow Notes, to which the Company is not a party,
provide that it is an additional purchase right event and an event of default,
respectively, under these debt instruments if, among other things, the amount of
debt incurred by the Company exceeds certain limitations. The $16.5 million
principal amount at maturity of LYONs which remain outstanding are secured by a
pledge of 7,834,208 shares of Company common stock owned by Coleman Worldwide.
The Escrow Notes are secured by a pledge of all the shares of common stock of
Coleman Worldwide and guaranteed pursuant to the Guaranty, which Guaranty is
currently secured by a pledge of 36,233,312 shares of Company common stock and
will be secured by the shares currently securing the LYONs upon their
redemption.
On October 6, 1997, CLN Holdings commenced an exchange offer registered
under the Securities Act to exchange senior secured notes having substantially
identical terms as the Escrow Notes. If the exchange offer is not consummated
by November 17, 1997, the Escrow Notes will accrue interest at a rate of 0.5% of
the accreted value of the Escrow Notes, payable semiannually in cash, from
either November 17, 1997 until the date the exchange offer is consummated.
On March 31, 1997, MacAndrews & Forbes Holdings Inc., an indirect parent,
assumed a liability of Coleman Worldwide in the amount of $2.3 million. The
assumption was accounted for as a capital contribution.
14
<PAGE>
CLN HOLDINGS INC. AND SUBSIDIARIES
Coleman Worldwide is a holding company with no business operations or
source of income of its own, and its ability to meet its obligations with
respect to the LYONs and any other obligations is contingent upon distributions
from the Company, including payments under the Company tax sharing agreement,
capital contributions or loans from its direct and indirect parent companies,
other borrowings and proceeds from the disposition of the common stock of
Coleman owned by Coleman Worldwide. As the holder of approximately 83% of the
capital stock of the Company, Coleman Worldwide has the ability to cause the
Company to make distributions up to the maximum amount permitted by law, subject
to limitations in the debt instruments of the Company. However, Coleman
Worldwide currently expects that, for the foreseeable future, the net earnings
and cash flow of the Company will be retained and used in the business of the
Company and that Coleman Worldwide will not receive any distributions from the
Company other than payments under the Company's tax sharing agreement.
Furthermore, the terms of the Company Credit Agreement prohibit the Company from
paying any dividends until on or after January 1, 1999 and limits the amount of
dividends the Company may pay thereafter. The receipt by Coleman Worldwide of
tax sharing payments from the Company will cease upon Coleman Worldwide's
ownership interest in Coleman falling below 80%, but the Indenture does not
require Coleman Worldwide to own more than a majority of the Coleman common
stock. Pursuant to the LYONs indenture, at any time the LYONs are outstanding,
the amounts Coleman Worldwide would be required to pay to Mafco under the
Coleman Worldwide tax sharing agreement, together with any remaining funds paid
to Coleman Worldwide by the Company under the tax sharing agreement between
Coleman Worldwide and the Company, may not be paid as tax sharing payments, but
Coleman Worldwide may advance such funds to Mafco as long as the aggregate
amount of such advances at any time does not exceed the issue price plus accrued
OID of the LYONs. Such advances are evidenced by noninterest bearing unsecured
demand promissory notes from Mafco in the amount of $35.4 million at
September 30, 1997.
The Indenture governing the LYONs provides the holders of LYONs with the
option to require Coleman Worldwide to purchase the LYONs after the occurrence
of certain events ("Additional Purchase Right Events"). Additional Purchase
Right Events occur, among other things, upon the Company's Consolidated Debt
Ratio (as defined) exceeding 0.75 to 1.0. The remaining net proceeds of the
Escrow Notes may be used to finance any required purchase of LYONs by Coleman
Worldwide following an Additional Purchase Right Event.
CLN Holdings is a holding company with no business operations. CLN
Holdings' only significant asset is all of the common stock of Coleman
Worldwide, which owns approximately 83% of the outstanding share of Coleman
Common Stock, and the Escrowed Funds, which use is generally restricted to the
redemption of the remaining outstanding LYONs. CLN Holdings' principal business
operations are conducted by Coleman and its subsidiaries, and CLN Holdings has
no operations of its own. Accordingly, CLN Holdings' only source of cash to pay
its obligations with respect to the Escrow Notes and any other obligations is
expected to be distributions with respect to ownership interest in Coleman from
the net earnings and cash flow generated by Coleman, after payment by Coleman
Worldwide of amounts due on the LYONs, as the case may be, for so long as they
remain outstanding and certain other expenses. As the indirect holder through
Coleman Worldwide of approximately 83% of the capital stock of the Company, CLN
Holdings has the ability to cause the Company and Coleman Worldwide to make
distributions up to the maximum amount permitted by law, subject to limitations
in the debt instruments of the Company and Coleman Worldwide. However, CLN
Holdings currently expects that, for the foreseeable future, the net earnings
and cash flow of the Company will be retained and used in the business of the
Company and that CLN Holdings will not receive any distributions from the
Company or Coleman Worldwide. Furthermore, the terms of the Company Credit
Agreement prohibit the Company from paying any dividends until on or after
January 1, 1999 and thereafter restrict the Company's ability to pay dividends
or make other payments to Coleman Worldwide and CLN Holdings. In addition, the
LYONs Indenture restricts Coleman Worldwide's ability to pay dividends and make
other payments to CLN Holdings. Although Coleman Worldwide may receive payments
from the Company pursuant to the Company tax sharing agreement, Coleman
Worldwide will not distribute such payments to CLN Holdings. In addition, the
LYONs Indenture requires that any such payments received from the Company be
paid to Mafco Holdings Inc. or retained by
15
<PAGE>
CLN HOLDINGS INC. AND SUBSIDIARIES
Coleman Worldwide (except under certain limited circumstances which are
unlikely to occur prior to the retirement of the remaining outstanding LYONs).
CLN Holdings currently anticipates that in order to pay the principal
amount at maturity of the Escrow Notes or upon the occurrence of an Event of
Default, to redeem the Escrow Notes or to repurchase the Escrow Notes upon the
occurrence of a change of control, CLN Holdings will be required to adopt one or
more alternatives, such as seeking capital contributions or loans from its
affiliates, refinancing its indebtedness or selling its equity securities or the
equity securities or assets of Coleman. None of the affiliates of CLN Holdings
is required to make any capital contributions or other payments to CLN Holdings
with respect to CLN Holdings' obligations on the Escrow Notes, and, except for
the Guaranty, the obligations of CLN Holdings with respect to the Escrow Notes
are not guaranteed by any affiliate of CLN Holdings or any other person. There
can be no assurance that any of the foregoing actions could be effected on
satisfactory terms, that they would be sufficient to enable CLN Holdings to make
any payments in respect of the Escrow Notes when required or that any of such
actions would be permitted by the terms of the Indenture, the LYONs indenture or
the debt instruments of the Company or Coleman Worldwide then in effect.
Moreover, the events that constitute a change of control under the Indenture may
also constitute events of default or repurchase right events under certain debt
instruments of CLN Holdings' subsidiaries. Such events may permit the lenders
under such debt instruments to accelerate the debt (or, in the case of LYONs, to
require Coleman Worldwide to repurchase the LYONs) and, if the debt is not
repaid or repurchased, to enforce their security interests in substantially all
of the assets of CLN Holdings' subsidiaries. Any such enforcement may limit CLN
Holdings' ability to raise cash to purchase the Escrow Notes and may have a
material adverse effect on the market price of Coleman common stock and on the
price that could be obtained for the Coleman Worldwide capital stock and thus on
the ability of the trustee of the Escrow Notes to realize value through sales of
the collateral.
SEASONALITY
The Company's sales generally are highest in the second quarter of the
year and lowest in the fourth quarter. As a result of this seasonality, the
Company has generally incurred a loss in the fourth quarter. The Company's
sales may be affected by weather conditions, especially during the second and
third quarters of the year. Sales by Powermate of generators and certain
other products were adversely affected by weather in the third quarter of
1997. The Company's annual results are generally dependent on its results
during the second quarter.
FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for certain forward-looking statements. The forward-looking statements
contained in this Form 10-Q are subject to certain risks and uncertainties.
Actual results could differ materially from current expectations. Among the
factors which could affect the Company's actual results and could cause results
to differ from those contained in the forward-looking statements contained
herein are (i) difficulties or delays in the reduction of wholesaler inventories
in Japan exacerbated by the Japanese economy, (ii) unanticipated costs or delays
in eliminating low or unprofitable products or businesses or closing facilities
or consummating the Company's other restructuring activities, (iii)
unanticipated costs or delays in developing new products, (iv) the possibility
the Company fails to meet the various restrictive covenants of the Company
Credit Agreement, (v) a decrease in the public's interest in camping and related
activities, (vi) significant market or economic conditions which negatively
affect demand for the Company's products, and (vii) weather conditions which are
adverse to specific businesses of the Company. The Company assumes no
responsibility to update forward-looking information contained herein.
16
<PAGE>
CLN HOLDINGS INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit Index Description
------------- ------------
27.1* Financial Data Schedule
---------------
* Filed herewith
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended
September 30, 1997.
17
<PAGE>
CLN HOLDINGS INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CLN HOLDINGS INC.
(Registrant)
Date: November 13, 1997 By: /s/ Irwin Engelman
--------------------------- ------------------------------------
Irwin Engelman
Executive Vice President and
Chief Financial Officer
18
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS FILED IN THE COMPANY'S FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 9,896
<SECURITIES> 0
<RECEIVABLES> 229,185
<ALLOWANCES> 9,705
<INVENTORY> 245,849
<CURRENT-ASSETS> 542,377
<PP&E> 285,522
<DEPRECIATION> 108,915
<TOTAL-ASSETS> 1,129,804
<CURRENT-LIABILITIES> 275,120
<BONDS> 968,826
0
0
<COMMON> 1
<OTHER-SE> (234,454)
<TOTAL-LIABILITY-AND-EQUITY> 1,129,804
<SALES> 927,206
<TOTAL-REVENUES> 931,412
<CGS> 678,590
<TOTAL-COSTS> 678,590
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,917
<INTEREST-EXPENSE> 67,863
<INCOME-PRETAX> (32,979)
<INCOME-TAX> (11,750)
<INCOME-CONTINUING> (22,839)
<DISCONTINUED> 0
<EXTRAORDINARY> (15,229)
<CHANGES> 0
<NET-INCOME> (38,068)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
