<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended DECEMBER 31, 1997
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from to
Commission file Number 333-29123
CLN HOLDINGS INC.
---------------------------------------------------
(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
- ----------------------------------------- -----------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 954-772-9000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
- -------------------------------------- ------------------------
SENIOR SECURED FIRST PRIORITY DISCOUNT
EXCHANGE NOTES DUE 2001 N.A.
SENIOR SECURED SECOND PRIORITY DISCOUNT
EXCHANGE NOTES DUE 2001 N.A.
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
X Yes No
---- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [X]
The number of shares outstanding of the registrant's par value $1.00
common stock was 1,000 shares as of March 3, 1998 all of which were held by an
indirect wholly-owned subsidiary of Mafco Holdings Inc.
Exhibit Index at pages 44 through 52
<PAGE>
CLN HOLDINGS INC. AND SUBSIDIARIES
1997 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I PAGE
----
<S> <C> <C>
Item 1. Business.............................................................. 3
Item 2. Properties............................................................ 9
Item 3. Legal Proceedings..................................................... 10
Item 4. Submission of Matters to a Vote of Security Holders................... 12
PART II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters..................................... 12
Item 6. Selected Financial Data............................................... 13
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations....................................... 14
Item 8. Financial Statements and Supplementary Data........................... 23
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure........................................ 23
PART III
Item 10. Directors and Executive Officers of the Registrant.................... 24
Item 11. Executive Compensation................................................ 28
Item 12. Security Ownership of Certain Beneficial Owners and Management........ 40
Item 13. Certain Relationships and Related Transactions........................ 41
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K...... 44
Signatures............................................................ 53
</TABLE>
2
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PART I
ITEM 1. BUSINESS
OVERVIEW
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 "Old
First Priority Notes") and Senior Secured Second Priority Discount Notes due
2001 (the "Old Second Priority Notes" and together with the Old First
Priority Notes, the "Old Priority Notes") to hold all of the outstanding
shares of capital stock of Coleman Holdings Inc. ("Coleman Holdings"). In
November 1997, CLN Holdings consummated a registered exchange offer whereby
the Old First Priority Notes and the Old Second Priority Notes were exchanged
for a like principal amount of Senior Secured First Priority Discount
Exchange Notes due 2001 and the Senior Security Second Priority Discount
Exchange Notes due 2001, respectively, (the "Exchange Notes" and collectively
with the Old Priority Notes, the "Escrow Notes"). The Old Priority Notes and
the Exchange Notes have substantially identical terms. 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 Option Notes -TM- due 2013 (the
"LYONs" -TM-). Coleman Worldwide also holds 44,067,520 shares of the common
stock of The Coleman Company, Inc. ("Coleman" or the "Company") which
represents approximately 82% of the outstanding Coleman common stock as of
March 3, 1998. Coleman is a leading manufacturer and marketer of consumer
products for outdoor recreation and home hardware use on a global basis. The
Company's products have been sold domestically and internationally under the
Coleman brand name since the 1920s. The Company believes its strong market
position is attributable primarily to its well-recognized trademarks,
particularly the Coleman brand name, broad product line, product quality and
innovation, and marketing, distribution and manufacturing expertise.
The Company has two primary classes of products, outdoor recreation and
hardware. The Company's principal outdoor recreation products include a
comprehensive line of lanterns and stoves, fuel-related products such as
disposable fuel cartridges, a broad range of coolers and jugs, sleeping bags,
backpacks, daypacks, adventure travel gear, tents, outdoor folding furniture,
portable electric lights, spas, camping accessories and other products. The
Company's principal hardware products include portable generators, portable and
stationary air compressors, and safety and security products such as smoke
alarms, carbon monoxide detectors and thermostats. The Company has entered into
a Stock Purchase Agreement dated as of February 18, 1998 (the "CSS Sale
Agreement") with Ranco Incorporated of Delaware ("Ranco") and Siebe plc, the
parent of Ranco, for the sale of Coleman Safety & Security Products, Inc.
("CSS"), which manufactures such safety and security products. The Company's
products, which are mostly used for outdoor recreation, home improvement
projects, and emergency preparedness, are distributed predominantly through mass
merchandisers, home centers and other retail outlets.
BACKGROUND
Coleman is a subsidiary of Coleman Worldwide. Coleman Worldwide is a
wholly-owned subsidiary of CLN Holdings, an indirect wholly-owned subsidiary of
New Coleman Holdings Inc. ("Holdings"), an indirect wholly-owned subsidiary of
MacAndrews & Forbes Holdings Inc. ("MacAndrews Holdings"), a corporation wholly
owned through Mafco Holdings Inc. ("Mafco" and, together with MacAndrews
Holdings, "MacAndrews & Forbes") by Ronald O. Perelman. Coleman Worldwide owns
44,067,520 shares of the common stock of Coleman which represented approximately
82% of the outstanding Coleman common stock as of December 31, 1997.
On February 27, 1998, CLN Holdings and Coleman (Parent) Holdings Inc.,
the parent company of CLN Holdings, entered into an Agreement and Plan of Merger
(the "CLN Holdings Merger Agreement") with Sunbeam Corporation ("Sunbeam") and a
wholly-owned subsidiary of Sunbeam ("Laser Merger Sub"). The CLN Holdings Merger
Agreement provides that, among other things, Laser Merger Sub will be merged
(the "CLN Holdings Merger") with CLN Holdings. Pursuant to the CLN Holdings
Merger Agreement, the shares of CLN Holdings' common stock issued and
outstanding immediately prior to the effective time of the CLN
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Holdings Merger will be converted into the right to receive in the aggregate
14,099,749 shares of Sunbeam's common stock and $159,957,756 in cash, without
interest. In addition, the outstanding $732.0 million principal amount at
maturity of Escrow Notes of CLN Holdings will remain an obligation of CLN
Holdings following the CLN Holdings Merger.
Coincident with the execution of the CLN Holdings Merger Agreement, the
Company, Sunbeam and a wholly-owned subsidiary of Sunbeam ("Merger Sub"),
entered into an Agreement and Plan of Merger (the "Coleman Merger Agreement" and
with the CLN Holdings Merger Agreement, collectively the "Merger Agreements"),
providing that, among other things, Merger Sub will be merged (the "Coleman
Merger") with the Company. Pursuant to the Coleman Merger Agreement, each share
of the Company's common stock issued and outstanding immediately prior to the
effective time of the Coleman Merger (other than shares held by Coleman
Worldwide and dissenting shares, if any) will be converted into the right to
receive (a) 0.5677 of a share of Sunbeam common stock, with cash paid in lieu of
fractional shares, and (b) $6.44 in cash, without interest.
Consummation of the CLN Holdings Merger is subject to the expiration of
the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and the satisfaction of certain other customary
conditions. It is currently anticipated that the CLN Holdings Merger will be
completed later this month or early next month. Consummation of the Company
Merger is subject to the completion of the CLN Holdings Merger at the filing of
certain definitive documents required in connection therewith with the
Securities and Exchange Commission. It is anticipated that the Company Merger
will be consummated later this Spring.
Following consummation of the CLN Holdings Merger, CLN Holdings will be
a direct wholly-owned subsidiary of Sunbeam. Following consummation of the
Coleman Merger, the Company will be an indirect wholly-owned subsidiary of
Sunbeam.
The Company has made several acquisitions in recent years designed to
expand its product lines. In 1996, the Company acquired the French company
Application des Gaz ("Camping Gaz") which is a leader in the European camping
equipment market and also acquired the assets of Seatt Corporation ("Seatt"), a
leading designer, manufacturer and distributor of smoke alarms, thermostats and
carbon monoxide detectors. In 1995, the Company acquired Sierra Corporation of
Fort Smith, Inc. ("Sierra"), a manufacturer of portable outdoor and recreational
folding furniture and accessories and substantially all of the assets of Active
Technologies, Inc. ("ATI"), a manufacturer of technologically advanced
lightweight generators and battery charging equipment. In 1994, the Company
acquired substantially all of the assets of Eastpak, Inc. and all of the capital
stock of M.G. Industries, Inc. (together, "Eastpak"), a leading designer,
manufacturer and distributor of branded daypacks, sports bags and related
products; and substantially all of the assets of Sanborn Manufacturing Company
("Sanborn"), a manufacturer of a broad line of portable and stationary air
compressors.
The Company also restructured certain operations. In 1994, the Company
completed the restructuring of its German manufacturing operations (the "German
Restructuring"), including selling its plastic cooler business located in
Inheiden, Germany and Loucka, Czech Republic. In 1996, the Company closed the
Brazilian manufacturing operations it had acquired from Metal Yanes, Ltda. in
1994. In 1997, the Company undertook further restructuring including (i) exiting
various low margin products, including pressure washers, (ii) closing and
relocating certain administrative and sales offices, and (iii) closing several
manufacturing facilities.
On February 18, 1998, the Company entered into the CSS Sale Agreement.
The sale price is approximately $105.0 million and is subject to adjustment. The
closing under the CSS Sale Agreement is expected to occur by the end of March
1998. In addition, the Company will license to Ranco the right to use the
"Coleman" name on retail smoke alarms and carbon monoxide detectors, and certain
other products.
4
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BUSINESS STRATEGY
The Company's business strategy is to build upon its reputation as a
leading manufacturer and marketer of high quality brand name consumer products
for the outdoor recreation and hardware markets. The specific operating
strategies include:
FOCUS ON QUALITY AND SERVICE. Since the business of the
Company was founded in the early 1900's, Coleman has built a reputation
for its quality products and superior customer service. The Company is
committed to continuing, and building upon, this reputation.
INTRODUCING NEW PRODUCTS. The Company plans to continue
introducing new products. Management intends to focus on leveraging the
Company's existing technologies, processes and expertise to maximize
the speed and efficiency of new product development and introductions.
DEVELOPING EXISTING BRANDS. The Company believes it has some
of the more prominent brand names for outdoor recreation and home
hardware use and plans to strengthen these brands through superior
product design, advertising, and promotion.
EXPANDING INTERNATIONAL MARKETS. Coleman is currently a market
leader in several product categories in various markets around the
world, including the United States, Europe and Japan. The Company plans
to utilize its well-established infrastructures in these markets to
expand its core product categories and to invest appropriately to
develop and build businesses in new geographic markets.
DEVELOPING HUMAN RESOURCES. The Company plans to continue
developing, training, and motivating its personnel at all levels to
achieve excellence, including developing and building its team of
experienced managers.
OPERATING EFFICIENCY. The Company plans to continue seeking
ways to further improve the quality and efficiency of its business
processes in order to ensure quality, realize cost savings, and improve
customer service.
Following the consummation of the CLN Holdings Merger, such business
strategy may change.
PRODUCTS
OUTDOOR RECREATION
The Company's principal products include a comprehensive line of
lanterns and stoves for outdoor recreational use, fuel-related products such as
disposable fuel cartridges, a broad range of coolers and jugs, sleeping bags,
backpacks, tents, outdoor folding furniture, portable electric lights, spas,
camping accessories and other products. These products are used predominantly in
outdoor recreation, but many products have applications in emergency
preparedness and some are also used in home improvement projects and are
distributed predominantly through mass merchandisers, home centers and other
retail outlets.
LANTERNS AND STOVES. Coleman believes it is the leading manufacturer of
lanterns and stoves for outdoor recreational use in the world. Coleman's liquid
fuel appliances include single and dual fuel-powered lanterns and stoves.
Coleman also manufactures a broad range of propane- and butane-fueled lanterns
and stoves, which allow the user to regulate the intensity of light or heat.
These products are manufactured at the Company's facilities located in the
United States and Europe and are marketed under the Coleman, Campingaz and Peak
1 brand names.
FUEL. The Company is a leading supplier to the worldwide camping
and outdoor recreation market of propane and butane cartridges and camping
fuel. In addition to manufacturing and filling disposable propane
5
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cartridges and refillable liquid propane gas cylinders, Coleman sells camping
fuel that is refined and canned to its specifications by various suppliers,
fills butane gas cartridges and purchases butane-filled gas cartridges from
third-party vendors for sale to customers throughout the world. These products
are marketed under the Coleman, Campingaz and Peak 1 brand names.
COOLERS AND JUGS. The Company manufactures and sells a wide variety of
insulated coolers and jugs and reusable ice substitutes. The Company's cooler
line includes personal coolers for camping, picnics or lunch box use; large
coolers; beverage coolers for use at work sites and recreational and social
events; and soft-sided coolers. Coleman's cooler products are manufactured
predominantly at the Company's facilities located in the United States and are
marketed under the Coleman brand name worldwide and under the Campingaz brand
name in Europe.
RECREATIONAL SOFT GOODS. The Company designs, manufactures or sources,
and markets textile products, including tents, sleeping bags, backpacks,
daysacks, sports bags, duffle bags and rucksacks. These products are
manufactured at the Company's facilities located in the United States and Puerto
Rico or sourced from third-party vendors who manufacture them to the Company's
specifications. The Company's tents and sleeping bags are marketed under the
Coleman and Peak 1 brand names, while its daysacks, sport bags and related
products are marketed under the Coleman, Eastpak and the licensed Timberland
brand names.
OUTDOOR FURNITURE. The Company manufactures and markets aluminum- and
steel-framed, portable, outdoor, folding furniture under the Coleman and Sierra
Trails brand names. These products are manufactured predominantly at the
Company's facilities located in the United States.
ELECTRIC LIGHTS. The Company designs and markets electric lighting
products that are manufactured by others and sold under the Coleman, Powermate,
Job-Pro and Campingaz brand names. These products include portable electric
lights such as hand held spotlights, flashlights and fluorescent lanterns and a
line of rechargeable lanterns and flashlights.
SPAS. The Company manufactures and markets a wide range of spas, which
are made primarily from acrylic, for residential applications. These products
are manufactured at the Company's facility located in the United States and are
distributed through a nationwide dealer network.
CAMPING ACCESSORIES. The Company designs, sources and markets a variety
of small accessories for camping and outdoor use, such as cookware and utensils.
These products are manufactured by third-party vendors to Coleman's
specifications and are marketed under the Coleman brand name.
HARDWARE
The Company's principal products include portable generators, portable
and stationary air compressors. In addition, through CSS, the Company
manufactures and markets safety and security products such as smoke alarms,
carbon monoxide detectors and thermostats. On February 18, 1998, the Company
entered into the CSS Sale Agreement and the closing under such agreement is
expected to occur by the end of March 1998.
GENERATORS. The Company is a leading manufacturer and distributor of
portable generators in the United States and worldwide. Generators are used for
home improvement projects, emergency preparedness and outdoor recreation. These
products are manufactured by the Company, using engines manufactured by
Tecumseh, Briggs & Stratton, Vanguard, Honda and Kawasaki, at its facilities
located in the United States, are marketed under the Coleman Powermate brand
name and are distributed predominantly through mass merchandisers and home
center chains. The Company also produces advanced, light-weight generators
incorporating proprietary technology.
AIR COMPRESSORS. The Company's air compressors are manufactured at its
facilities located in the United States, are marketed under the Coleman
Powermate brand name and are distributed predominantly through mass
merchandisers and home center chains.
6
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SAFETY AND SECURITY PRODUCTS. The Company manufactures a range of
safety and security products for residential use, primarily smoke alarms, carbon
monoxide detectors and thermostats. The Company manufactures these products at
its facilities located in Mexico and markets them under the Firex, Code 1 and
Coleman Sheltra brand names. These products are distributed predominantly
through electrical wholesalers, mass merchandisers, and home center chains in
North America and selected foreign countries, primarily Australia and the United
Kingdom.
SALES AND MARKETING
The following table sets forth the net revenues by class of products
for the years ended December 31, 1997, 1996 and 1995.
<TABLE>
<CAPTION>
1997 1996 1995
-------------- -------------- ---------
(In millions)
<S> <C> <C> <C>
Outdoor Recreation............................... $ 859.7 $ 859.6 $ 688.9
Hardware......................................... 294.6 360.6 244.7
---------- --------- ----------
Total......................................... $ 1,154.3 $ 1,220.2 $ 933.6
---------- --------- ----------
---------- --------- ----------
</TABLE>
In the United States and Canada, the Company's outdoor recreation
products are sold by the Company's own sales force and, to a lesser extent, by
sales representatives that serve specialty markets and related distribution
channels. Spa products, however, are sold by independent sales representatives
to a nationwide dealer network and, to a lesser extent, by regional sales
managers employed by the Company. The Company's hardware products are sold by
Company and independent sales representatives that serve specialty markets and
related distribution channels.
The Company promotes its products through national and local
advertising campaigns, frequently coordinating with retailers' promotions to
maximize the benefits of its advertising efforts.
Coleman's major customers include Canadian Tire, Home Depot, Kmart,
Price/Costco, Target, and Wal-Mart. Wal-Mart and its affiliates accounted for
approximately 13% of the Company's 1997 consolidated net revenues. Although the
loss of Wal-Mart as a customer could have an adverse effect on the Company, the
Company believes its relationship with Wal-Mart is satisfactory and the Company
has no reason to believe Wal-Mart will not continue as a customer.
International sales represented 31%, 32% and 24% of net revenues for
the years ended December 31, 1997, 1996 and 1995, respectively. For 1997,
approximately 80% of the Company's international sales were in Japan and Europe,
with the balance in Latin America, Asia-Pacific, Africa and the Middle East. The
Company has sales administration offices and warehouse and distribution
facilities in Australia, Austria, Belgium, Brazil, the Czech Republic, France,
Germany, Hungary, Italy, Japan, The Netherlands, Portugal, Spain, Switzerland,
the United Arab Emirates and the United Kingdom. Each office is responsible for
sales and distribution of the Company's products in the territories assigned to
that office. The Company's direct export operations market its products directly
to international customers in certain other markets through Company sales
managers, independent distributors, and commissioned sales representatives. In
total, the Company sells its products in more than 100 countries.
SEASONALITY
The Company's sales generally are highest in the second quarter of
the year and lowest in the fourth quarter. As a result of this seasonality,
the Company has generally incurred a loss in the fourth quarter. The
Company's sales may be affected by weather conditions.
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COMPETITION
The markets in which the Company operates are generally highly
competitive, based primarily on product quality, product innovation, price and
customer service and support. The Company's competitors vary according to
product line. The Company believes that no other company produces and markets
the breadth of camping and outdoor recreation products marketed by the Company.
Lanterns and stoves compete with, among others, products offered by Century
Primus (a unit of Century Tool & Manufacturing Inc.), American Camper (a unit of
Brunswick Corporation) and Dayton Hudson Corporation. The Company's insulated
cooler and jug products compete with products offered by Rubbermaid
Incorporated, Igloo Products Corp. (a unit of Brunswick Corporation) and The
Thermos Company (a unit of Nippon Sanso KK). The Company's sleeping bags compete
with, among others, American Recreation and Slumberjack (units of Kellwood
Company), Academy Broadway Corp. and MZH Inc. (a unit of Brunswick Corporation),
as well as certain private label manufacturers. In the tent market, the Company
competes with, among others, Sears, Wenzel (a unit of Kellwood Company), Eureka
(a unit of Johnson Worldwide Associates, Inc.) and Mountain Safety Research (a
unit of Thaw Corporation), as well as certain private label manufacturers. The
Company's backpack products compete with, among others, American Camper (a unit
of Brunswick Corporation), JanSport (a unit of VF Corporation), Nike, Outdoor
Products and Kelty (a unit of Kellwood Company), as well as certain private
label manufacturers. The Company's competition in the electric light business
includes, among others, Eveready (a unit of Ralston Purina Company) and Rayovac
Corporation. The Company's spas compete with, among others, Watkins
Manufacturing Corporation (d.b.a. Hot Springs, a unit of Masco Corporation) and
Clark Manufacturing Company, Inc. (d.b.a. Sundance Spas). The Company's camping
accessories compete primarily with Coughlan's. The Company's primary competitors
in the generator business are Generac Corporation, Honda Motor Co., Ltd.,
Kawasaki and Yamaha. Primary competitors in the air compressor business include
DeVilbiss and Campbell Hausfield. The Company's safety and security products
compete primarily with First Alert, American Sensor and Nighthawk (a unit of
Williams Holding PLC). In addition, the Company competes with various other
entities in international markets.
PATENTS, TRADEMARKS, AND LICENSES
The Company's operations are not significantly dependent upon any
single or related group of patents. While the Company does not believe any
single trademark is material to its business other than the "Coleman" word mark
and the "Coleman in parallelogram with lantern symbol" logo mark and the
"Eastpak" trademark, it believes its trademarks taken as a whole are material to
its business. Accordingly, the Company has taken actions to protect its
interests in all such trademarks.
The Company licenses the Coleman name and logo under two types of
licensing arrangements: general merchandise licenses and licenses to purchasers
of businesses divested by the Company and Holdings. The Company's general
merchandise licensing activities involve licensing the Coleman name and logo,
for a royalty fee, to certain companies that manufacture and sell products that
complement the Company's product lines.
RESEARCH AND DEVELOPMENT
The Company's research and development efforts are linked to the
process of marketing its products. New products and improvements to existing
products are developed based upon the perceived needs and demands of consumers.
The Company's research and development is performed primarily by an in-house
team of marketing managers, engineers, draftsmen and product testers using tools
such as computer-assisted design and a variety of consumer research techniques.
Research and development expenditures are expensed as incurred. The amounts
charged against operations for the years ended December 31, 1997, 1996 and 1995
were $11.9 million, $11.1 million and $6.5 million, respectively.
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INDUSTRY SEGMENTS, FOREIGN AND DOMESTIC OPERATIONS
The Company operates in a single business segment. Certain information
concerning geographic segments of the Company is set forth in Note 17 of the
Notes to Consolidated Financial Statements contained elsewhere in this Form 10-K
Annual Report.
EMPLOYEES
As of December 31, 1997 the Company employed approximately 3,700
persons full time in the United States and 2,300 persons internationally. None
of the Company's United States employees are represented by unions. The
Company's Canadian warehouse employees are represented by a union. All of the
approximately 525 production employees at the Company's operations in France and
Italy and the approximately 900 production employees at CSS's operations in
Mexico are represented by unions. The Company believes that its relations with
its employees are satisfactory.
ITEM 2. PROPERTIES
The Company's principal properties as of December 31, 1997 are as
follows:
<TABLE>
<CAPTION>
Building
Square
Location Principal Use Footage
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<S> <C> <C>
St Genis Laval, France Manufacture of lanterns and stoves, filling of gas 2,070,000
cylinders, and assembly of barbeques; office and
warehouse
Wichita, KS Manufacture of lanterns and stoves and insulated coolers 1,197,000
and jugs; research and development and design operations;
office and warehouse
New Braunfels, TX Manufacture of insulated coolers and other plastic 338,000
products
Lake City, SC Manufacture of sleeping bags 168,000
Springfield, MN Manufacture of air compressors 166,000
Cedar City, UT Manufacture of sleeping bags 160,000
Kearney, NE Manufacture/assembly of portable generators and pressure 155,000
washers; office and warehouse
Pocola, OK Manufacture of outdoor folding furniture 123,000
Maize, KS Manufacture of propane cylinders and machined parts 116,000
Chihuahua, Mexico * Manufacture of smoke alarms and carbon monoxide 110,000
detectors
Morovis and Orocovis, Manufacture of daypacks, sports bags, and related 110,000
Puerto Rico products; office and warehouse
Chandler, AZ Manufacture of acrylic spas; office and warehouse 78,000
Centenaro di Lonato, Italy Manufacture of butane lanterns, stoves and heaters; office 77,000
and warehouse
</TABLE>
* To be disposed of as part of the CSS Sale Agreement.
The Wichita, Kansas; New Braunfels, Texas; Lake City, South Carolina;
Cedar City, Utah; Pocola, Oklahoma; Chandler, Arizona; Springfield, Minnesota;
and Centenaro di Lonato, Italy facilities are owned by the Company. The owned
facilities at Kearney, Nebraska reside on land leased under three leases that
expire in 2007 with options to extend for three additional ten-year periods. The
Maize, Kansas facility is leased by the
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Company under leases that terminate in 2005. The Company has an option to
purchase this facility at the end of the lease period. The Puerto Rico
facilities in Morovis and Orocovis are leased for terms that expire in 1999 and
2007, respectively. The warehouse portion of St. Genis Laval, France is leased
for terms that expire in 1998, the remaining facility is owned; and 48,000
square feet of the Chihuahua, Mexico property are leased for terms that expire
in 2004, the remaining facility is owned. Company management considers the
Company's facilities to be well maintained, adequate, suitable and satisfactory
for the Company's operations, and believes that the Company's facilities provide
sufficient capacity for its production requirements.
PRODUCT LIABILITY AND INSURANCE
The Company is party to various product liability lawsuits relating to
its products and incidental to its business. The Company believes that many of
the personal injury and damage claims brought against it arise from the misuse
or misapplication of the Company's products. In such cases, the Company
vigorously defends against such actions. Since the beginning of 1986, in only
one policy period did the Company have a product liability award that exceeded
the individual per occurrence self-insured retention amount and product
liability awards that exceeded the aggregate self-insured retention amount.
There can be no assurance, however, that the Company's future product liability
experience will be consistent with its past experience. The Company believes
that the ultimate conclusion of the various pending product liability claims and
lawsuits of the Company will not have a material adverse effect on the financial
position or results of operations of the Company.
The Company participates in product liability insurance programs
maintained by Holdings and reimburses Holdings for its allocable share of the
cost of such coverage. Such liability insurance is written on a "claims made"
basis. A "claims made" policy generally insures the Company for any claims made
while such insurance coverage is in effect regardless of when the incident or
event occurred. There can be no assurance that the Company's insurance carrier
would not discontinue the Company's policy after the occurrence of, but prior to
a claims with respect to, an incident or event giving rise to a claim. The
Company believes that, in such event, it would be able to obtain insurance
coverage that would cover the particular incident or event and replace the
Company's existing policy, although there can be no assurance that the Company
could obtain such coverage or that it would be on terms comparable to its
existing coverage.
Under Holdings' product liability insurance coverages, the Company
retains liability in the amount of $2 million per occurrence and $4 million in
the aggregate for the policy year. The Company believes that this type and level
of coverage is adequate. For a discussion of the Company's policy on accrual of
reserves for the self-insured portions of the risks covered by the insurance
programs maintained by Holdings, see Notes 1 and 12 of the Consolidated
Financial Statements of CLN Holdings.
As a result of and effective with the consummation of the CLN Holdings
Merger, the Company will no longer participate in insurance programs sponsored
by Holdings (except for claims made prior to the consummation of the CLN
Holdings Merger), and will either obtain replacement insurance on its own and/or
obtain replacement insurance under policies maintained by Sunbeam.
ITEM 3. LEGAL PROCEEDINGS
ENVIRONMENTAL MATTERS
GILBERT AND MOSLEY SITE. As a result of investigations undertaken in
1986, the Kansas Department of Health and Environment ("KDHE") discovered that
groundwater in the downtown Wichita area (the "Gilbert and Mosley Site") was
contaminated with volatile organic chemicals ("VOCs"). Coleman occupied a
facility within the boundaries of the Gilbert and Mosley Site. Subsequent
investigations in the area, including investigations in November 1988 by
Coleman, indicated that the groundwater beneath the Coleman property is
contaminated with VOCs. Coleman is in the process of remediating the
contamination on its property.
10
<PAGE>
The City of Wichita has entered into a voluntary agreement with KDHE in
which the City agreed to investigate and then remediate contamination in the
Gilbert and Mosley Site. Coleman has entered into an agreement with KDHE in
which Coleman agreed to perform a similar study for the Coleman property and to
implement remedial activities at its property. In addition, Coleman entered into
an agreement with the City of Wichita in which Coleman agreed to fund its
proportionate share of the City's study and remediation of the Gilbert and
Mosley site.
All previously filed lawsuits alleging that properties in the downtown
Wichita area were diminished in value as a result of discharges of volatile
organic chemicals from Coleman's downtown Wichita facility have been settled and
dismissed.
MAIZE SITE. Coleman has undertaken a soil and groundwater investigation
at its facility in Maize, Kansas (the "Maize Site"). Results indicate that
limited VOC contamination is present in the groundwater under and to the
southeast of the facility. The data has been reported to the KDHE, and Coleman
has entered into an agreement with KDHE to implement appropriate remedial
actions. The remediation system has been installed, and Coleman is in the
process of remediating the contaminated groundwater.
NORTHEAST SITE. In 1990 Coleman undertook a soil and groundwater
investigation of its facility in northeast Wichita (the "Northeast Site").
Results indicated the presence of VOCs in the groundwater and soils. Although
some of the contamination may be a result of Coleman's operations at the
facility, the data also indicated that contamination was migrating onto the
Coleman property from up gradient sources. Coleman reported the initial results
of its study to KDHE. Coleman has also provided copies of all data to the United
States Environmental Protection Agency (the "EPA"), at its request. The EPA has
not initiated any actions against the Company with respect to the Northeast
Site. An agreement has been entered into with KDHE to undertake additional
investigatory activities, and an interim remediation system has been installed.
LAKE CITY SITE. In 1992, Coleman undertook a soil and groundwater
investigation of its facility in Lake City, South Carolina (the "Lake City
Site"). Results indicated limited VOC and fuel oil contamination in the soil and
groundwater. In both instances, the contamination appeared to relate to the
activities of a previous occupant of the Lake City Site. The results of the
investigation were reported to the appropriate South Carolina environmental
agency and Coleman took legal action against the prior owner. In early 1998, the
lawsuit was settled and the prior owner agreed to take over further site
investigations and remediation actions and to reimburse Coleman for a
significant part of Coleman's past costs related to site investigation.
The Company has not been named as a potentially responsible party
("PRP") by the EPA nor does it have joint and several liability with any other
PRP for remediation at any of the above sites.
The Company has adopted an environmental policy designed to ensure that
the Company operates in full compliance with applicable environmental
regulations and, where appropriate, the Company's own internal standards.
Coleman has also undertaken an environmental compliance audit program. The
Company makes expenditures that it believes are necessary to comply with
environmental management practices. Environmental expenditures that relate to
current operations are expensed or capitalized as appropriate and were not
significant in 1997 and are not expected to be significant in the foreseeable
future. Coleman has established reserves, which it believes are adequate, for
environmental matters, including the investigations, remedial activities and
litigation described above.
OTHER
GENERAL. The Company is involved in various claims and legal actions
arising in the ordinary course of business, including environmental matters
and product liability lawsuits that are incidental to its business. CLN
Holdings believes the ultimate disposition of these matters is not expected
to have a material adverse effect on CLN Holdings' consolidated financial
condition or results of operations. The Company has entered into a
cross-indemnification agreement with Holdings pursuant to which Coleman will
indemnify
11
<PAGE>
Holdings against all liabilities related to businesses transferred by Holdings
to the Company, and Holdings will indemnify the Company against all liabilities
of Holdings other than liabilities related to the businesses transferred to the
Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
fourth quarter of 1997.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
All of the equity securities of CLN Holdings are owned indirectly by
Mafco and there is no public market therefor.
During 1997, CLN Holdings sold $732.0 million aggregate principal
amount at maturity of Old Priority Notes in a private placement pursuant to
Rule 144A under the Securities Act of 1933, as amended.
12
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
CLN Holdings is a holding company formed in May 1997 to hold all of
the outstanding shares of capital stock of Coleman Worldwide. Coleman
Worldwide is a holding company formed in March 1993 and holds 44,067,520
shares of Coleman common stock which represented approximately 82% of the
outstanding Coleman common stock as of March 3, 1998. Due to CLN Holdings'
100% direct ownership of Coleman Worldwide and approximately 82% indirect
ownership of Coleman, the Consolidated Financial Statements of CLN Holdings
include the accounts of Coleman Worldwide and its subsidiaries after
elimination of all material intercompany accounts and transactions. Minority
interest primarily represents the minority shareholders' proportionate share
of the results of operations and equity of Coleman. The selected financial
data for the years presented in the table below have been derived from the
Consolidated Financial Statements. The selected financial data should be read
in conjunction with the Consolidated Financial Statements and the notes
thereto included elsewhere in this Form 10-K Annual Report.
<TABLE>
<CAPTION>
(IN THOUSANDS)
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------
1997 1996 1995 1994 1993
----------- ----------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net revenues............................. $ 1,154,294 $ 1,220,216 $ 933,574 $ 751,580 $ 575,415
Cost of sales (a)........................ 840,331 928,497 649,427 535,710 400,052
----------- ----------- ---------- ---------- ---------
Gross profit............................. 313,963 291,719 284,147 215,870 175,363
Selling, general and
administrative expenses (a)............ 266,635 292,012 175,036 128,664 102,214
Asset impairment charge (b).............. -- -- 12,289 -- --
Restructuring expense (c)................ -- -- -- 18,456 --
Interest expense, net.................... 90,886 75,120 57,830 43,736 23,760
Amortization of goodwill and
deferred charges....................... 14,704 12,304 9,558 7,864 6,322
Other expense (income), net.............. 1,867 (1,604) 283 1,138 766
----------- ----------- ---------- ---------- ---------
(Loss) earnings before income taxes,
minority interest and
extraordinary item .................... (60,129) (86,113) 29,151 16,012 42,301
Income tax (benefit) expense (a)......... (24,162) (23,766) 11,701 3,091 18,210
Minority interest........................ 940 (5,390) 6,696 5,734 6,401
----------- ----------- ---------- ---------- ---------
(Loss) earnings before
extraordinary item .................... (36,907) (56,957) 10,754 7,187 17,690
Extraordinary loss on early
extinguishment of debt, net of
income taxes........................... (15,239) (1,244) (787) (677) --
----------- ----------- ---------- ---------- --------
Net (loss) earnings...................... $ (52,146) $ (58,201) $ 9,967 $ 6,510 $ 17,690
----------- ----------- ---------- ---------- --------
----------- ----------- ---------- ---------- --------
<CAPTION>
DECEMBER 31,
--------------------------------------------------------------------
1997 1996 1995 1994 1993
----------- ----------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets............................ $ 1,097,869 $ 1,208,275 $ 909,460 $ 759,417 $ 558,243
Long-term debt
(including current portions).......... 983,473 1,000,541 738,672 642,297 489,618
Minority interest....................... 43,386 45,088 49,266 42,233 39,952
Total stockholder's deficit............. (256,649) (177,936) (113,320) (114,998) (115,692)
</TABLE>
- -----------------------
(a) The Company recorded restructuring and certain other charges totaling
$22,501 and $52,516, net of tax for the years ended December 31, 1997 and
1996, respectively. Cost of sales includes pre-tax charges of $19,673 and
$44,005; selling, general and administrative expenses include pre-tax
charges of $16,746 and $30,195; and the provision for income tax benefit
includes $13,918 and $21,684 of net tax benefits in the years ended
December 31, 1997 and 1996, each respectively, resulting from these
charges.
(b) Asset impairment charge reflects primarily the non-recurring charge taken in
connection with the adoption of FAS 121.
(c) Restructuring expense reflects primarily the non-recurring charge taken in
connection with the German Restructuring which includes severance costs,
commitments to third parties and write-downs of leasehold improvements and
other assets to estimated realizable values.
13
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
CLN Holdings and Coleman Worldwide are holding companies with no business
operations or source of income of their own. Accordingly, except as otherwise
indicated, the following discussion relates to the results of operations of the
Company. The following discussion should be read in conjunction with the
Consolidated Financial Statements of CLN Holdings and the notes thereto included
elsewhere in this Form 10-K Annual Report.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997 COMPARED WITH THE YEAR ENDED DECEMBER 31, 1996
Net revenues of $1,154.3 million in 1997 were $65.9 million or 5.4% less
than in 1996 with outdoor recreation products unchanged at $859.7 million and
hardware products decreasing $66.0 million or 18.3%. The outdoor recreation
products revenues were adversely affected by (i) a restructuring program which
eliminated certain low margin SKUs (stock keeping units), (ii) lower sales in
Japan and Korea due to weak market conditions, and (iii) a program to reduce
wholesaler inventories in Japan; however, growth in the core products outside of
Japan and Korea offset these declines. Hardware products revenues decreased due
to the Company's decision to exit the pressure washer business and lower
generator sales resulting from fewer storms on the East Coast of the United
States in the second half of 1997. Geographically, United States and Canadian
revenues decreased $24.0 million or 2.9% due to lower hardware product sales
while international revenues decreased $41.9 million or 10.6% primarily related
to lower sales in Japan and Korea. Results in the 1996 period include the
Camping Gaz operations from the date of acquisition.
The gross margin percentage of 28.9%, excluding the impact of restructuring
and other charges which are more fully described below, increased from 27.5% in
1996. The improvement was driven by increased demand for higher margin products
and the elimination of certain low margin SKUs.
SG&A expenses, excluding the impact of restructuring and other charges
which are more fully described below, were $249.5 million in 1997 compared to
$261.5 million in 1996, a decrease of 4.5%. The inclusion of a full twelve
months of Camping Gaz SG&A costs in the 1997 period increased SG&A expenses;
however, these increases were more than offset by benefits resulting from the
integration of Camping Gaz operations and the restructuring initiatives.
During 1997, the Company recorded pre-tax restructuring and other charges
totaling $36.4 million of which $19.7 million was reflected in cost of sales and
$16.7 million in SG&A expenses. Tax benefits of $13.9 million associated with
these charges are reflected in income tax expense. The restructuring and other
charges consisted of (i) $15.7 million to exit various low margin products,
including pressure washers, (ii) $15.0 million to close and relocate certain
administrative and sales offices, and (iii) $5.7 million to close several
manufacturing facilities. Most of these activities were substantially complete
as of December 31, 1997, and remaining actions are expected to be completed in
1998.
During 1996, the Company recorded restructuring charges of $66.2 million,
certain other charges of $8.0 million and related net tax benefits of $21.7
million. The 1996 pre-tax restructuring charges of $66.2 million consisted of
(i) $29.1 million to integrate the Camping Gaz and Coleman operations into a
global recreation products business, (ii) $19.0 million to exit the low end
electric pressure washer business, (iii) $14.1 million to exit a portion of the
Company's battery powered light business, and (iv) $4.0 million to settle
certain litigation with respect to the battery powered light business.
The 1996 pre-tax restructuring charges of $66.2 million included $64.4
million related to exiting products and facilities and $1.8 million of
termination costs for 174 administrative employees, of which $40.8 million was
reflected in cost of sales and $25.4 million in SG&A expenses. The pre-tax
charges for exit costs were comprised
14
<PAGE>
of (i) $41.3 million which related primarily to writing down inventory, fixed
assets, accounts receivable and certain other receivable and prepaid amounts to
estimated net realizable value, and (ii) $23.1 million of other exit costs,
including carrying costs of idle facilities, relocation costs, and costs to exit
the pressure washer business. The 1996 other pre-tax charges of $8.0 million
related primarily to certain asset write-offs. These other charges, of which
$3.2 million was reflected in cost of sales and $4.8 million in SG&A expenses,
were incurred in the Company's normal course of business, although the amounts
involved were higher than similar charges the Company had recorded in prior
periods. The provision for income taxes included $21.7 million of tax benefits
resulting from these restructuring and other charges, net of an increase in the
valuation reserve related to certain foreign deferred tax assets and other
foreign tax charges totaling $5.6 million.
The components of the combined 1997 and 1996 restructuring and other
charges and an analysis of the amounts charged against the reserves are outlined
in the following table (dollars in millions):
<TABLE>
<CAPTION>
1996 Charges During 1997 Charges During
Original Year Ended Balance at Additional Year Ended Balance at
Reserve 12/31/96 12/31/96 Reserves 12/31/97 12/31/97
--------- ----------- ---------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Impairment of
fixed assets........... $ 10.0 $ (1.8) $ 8.2 $ 6.4 $ (6.5) $ 8.1
Inventory and other
asset impairments...... 38.3 (25.9) 12.4 11.0 (15.0) 8.4
Termination costs......... 2.0 (1.6) .4 12.1 (9.7) 2.8
Idle facilities, relocation and
other exit costs....... 23.9 (12.4) 11.5 6.9 (9.7) 8.7
--------- ----------- ---------- ---------- ------------ ----------
$ 74.2 $ (41.7) $ 32.5 $ 36.4 $ (40.9) $ 28.0
--------- ----------- ---------- ---------- ------------ ----------
--------- ----------- ---------- ---------- ------------ ----------
</TABLE>
The termination costs recognized in 1996 related to approximately 200
employees and the 1997 termination costs related to approximately 525 employees.
As of December 31, 1997, $11.3 million of termination costs were paid on behalf
of the approximately 700 employees who were terminated as of that date.
The Company's interest expense was $40.9 million in 1997 compared with
$38.7 million in 1996, an increase of $2.2 million. This increase was a
result of the effects of higher interest rates on the Company's variable rate
debt partially offset by the favorable effects of lower borrowings in 1997
resulting from the Company's working capital management programs. On an
unconsolidated basis, Coleman Worldwide had an additional $6.1 million of
interest expense in 1997 compared with $12.1 million in 1996, a decrease of
$6.0 million. This decrease is primarily due to the decrease in principal
amount of LYONs outstanding due to the exchange of LYONs for cash in 1997. In
addition, on an unconsolidated basis, CLN Holdings and Coleman Holdings had
$43.9 million of interest expense in 1997 compared with $24.3 million in
1996, an increase of $19.6 million. This increase reflects the issuance of
the Escrow Notes partially offset by the redemption of the Holdings Notes on
July 15, 1997.
Minority interest in the 1997 period reflects the minority interests in
certain subsidiary operations acquired with the Camping Gaz business. On March
1, 1996, the Company acquired control of approximately 70% of Camping Gaz and in
early July 1996 obtained control of the remaining 30% of Camping Gaz and,
accordingly, in the 1996 period, minority interest reflects the minority
shareholders' approximate 30% proportionate share of the results of operations
of Camping Gaz for the period March through June of 1996 and also includes
interests of other minority shareholders in certain subsidiary operations
acquired with the Camping Gaz business. Minority interest in the loss of Coleman
represents the minority shareholders' proportionate share of the results of
operations of Coleman, which is reflected on CLN Holdings' consolidated
financial statements because of CLN Holdings' approximate 82% ownership of
Coleman's common stock.
The Company recorded income tax benefits of $5.2 million in 1997 and $10.9
million in 1996, which includes the net tax benefits of $13.9 million in 1997
and $21.7 million in 1996 associated with restructuring and other charges
discussed above. Excluding the net tax benefits from the restructuring and other
charges, the
15
<PAGE>
provision for income tax expense would have been $8.7 million or 28.9% of
pre-tax earnings in 1997 as compared to a provision for income tax expense of
$10.8 million or 45.0% of pre-tax earnings in 1996. This decrease is primarily
due to the impact of increased foreign tax rates on deferred tax assets and
increased foreign earnings at lower tax rates. On an unconsolidated basis,
Coleman Worldwide recorded an income tax benefit of $2.5 million in 1997 and
$3.9 million in 1996, or approximately 37% and 38% of Coleman Worldwide's
unconsolidated pre-tax loss in 1997 and 1996, respectively. In addition, on an
unconsolidated basis, CLN Holdings and Coleman Holdings recorded an income tax
benefit of $16.5 million in 1997 and $9.0 million in 1996, or approximately 35%
of CLN Holdings and Coleman Holdings' unconsolidated pre-tax loss in each year.
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 1997, in connection with the exchange of $554.1 million aggregate
principal amount at maturity of LYONs for cash, Coleman Worldwide recorded an
extraordinary loss of $10.9 million, net of tax benefits of $7.1 million,
relating to the excess of the exchange offer price over the accreted value of
the LYONs, the write-off of deferred charges related to the LYONs exchanged and
redemption fees and expenses. During 1996, holders of LYONs with a principal
amount at maturity of $9.8 million elected to exchange such LYONs pursuant to
the terms of the LYONs indenture. In connection with these exchanges, Coleman
Worldwide delivered 74,107 shares of Coleman common stock owned by Coleman
Worldwide to the holders of the LYONs which were exchanged. Coleman Worldwide
recognized a gain of $2.7 million in connection with these exchanges which is
included in other income. Coleman Worldwide also recognized an extraordinary
loss on early extinguishment of debt as a result of the LYONs exchange in an
amount of $1.0 million ($0.6 million after tax). This extraordinary loss
represents (i) the excess fair value of the property delivered by Coleman
Worldwide to the holders of the LYONs which were exchanged over the accreted
value of the LYONs obligations at the time of the exchange, along with (ii) a
pro-rata portion of the related unamortized financing costs associated with the
LYONs issuance. In 1996, in connection with the renegotiation of its credit
agreement, the Company recorded an extraordinary loss of $1.1 million ($0.6
million net of tax) which represented a write-off of the related unamortized
financing costs associated with its then existing credit agreement.
YEAR ENDED DECEMBER 31, 1996 COMPARED WITH THE YEAR ENDED DECEMBER 31, 1995
Net revenues in 1996 and 1995 were $1,220.2 million and $933.6 million,
respectively, an increase of $286.6 million, or 30.7%, with outdoor recreation
products increasing by $170.7 million or 24.8% and hardware products increasing
$115.9 million or 47.4%.
The outdoor recreation products revenues increase included $152.5 million
of revenues associated with the Camping Gaz operations acquired in 1996 and
approximately $13.4 million of additional revenues associated with the Sierra
operations acquired in 1995. Excluding (i) the impact of the Camping Gaz and
Sierra acquisitions, (ii) the effect of a weaker yen in 1996 as compared to
1995, which reduced revenues approximately $21.1 million, and (iii) the one-time
1995 thermo-electric cooler premium promotion revenue gain of approximately
$16.6 million, outdoor recreation product revenues increased approximately $42.5
million or 6.4%. Increases in revenue were experienced in the backpack, tent and
sleeping bag businesses, primarily in international markets. In addition, the
Company successfully introduced a new line of camping accessories and expanded
its heater and light businesses. These gains were substantially offset by poor
weather conditions during the camping season in North America and the economic
downturn experienced in Japan, both of which adversely affected the demand for
the Company's camping products. The hardware products revenues increase includes
approximately $82.1 million as a result of the acquisition of CSS (then named
Seatt Corporation) in 1996. Excluding the impact of the CSS acquisition,
hardware products revenues increased approximately $33.8 million or 13.8%,
driven by increases in generator and pressure washer sales. Geographically,
United States and Canada revenues increased $111.6 million or 15.6% primarily
related to the CSS acquisition, while international revenues increased $175.0
million or 79.5% primarily related to the Camping Gaz acquisition.
16
<PAGE>
Gross margins, excluding the impact of restructuring and other charges
totaling $44.0 million which are more fully discussed below, decreased as a
percent of sales by 2.9 percentage points from 30.4% in 1995 to 27.5% in 1996.
This decrease was primarily the result of lower margins associated with the
Company's backpack business and the unfavorable effects of product mix including
significantly higher sales of pressure washers at lower gross margin percentages
and lower sales of camping products which tend to have higher gross margin
percentages than the Company's average.
SG&A expenses, excluding $30.2 million of restructuring and other charges
as discussed more fully below, were $261.5 million in 1996 compared to $174.7
million in 1995, an increase of 49.7%. The increase in SG&A expenses primarily
reflects SG&A expenses associated with the Camping Gaz and CSS business
acquisitions of approximately $60.3 million and increased advertising and
marketing expenses of approximately $16.6 million.
During 1996, the Company recorded restructuring charges of $66.2 million,
certain other charges of $8.0 million and related net tax benefits of $21.7
million. The pre-tax restructuring charges of $66.2 million consisted of (i)
$29.1 million to integrate the Camping Gaz and Coleman operations into a global
recreation products business, (ii) $19.0 million to exit the low end electric
pressure washer business, (iii) $14.1 million to exit a portion of the Company's
battery powered light business and (iv) $4.0 million to settle certain
litigation with respect to the battery powered light business.
The charges to integrate the Camping Gaz and Coleman operations reflected
primarily the cost to dispose of duplicate manufacturing, distribution and
administrative facilities and the related severance cost. These actions are
substantially completed at December 31, 1997 and are expected to be fully
completed in 1998. The exiting of the battery powered light business was
completed by July 1997 and the exiting of the low end pressure washer business
was substantially completed in 1997.
The pre-tax restructuring charges of $66.2 million included $64.4 million
related to exiting products and facilities and $1.8 million of termination costs
for 174 administrative employees, of which $40.8 million was reflected in cost
of sales and $25.4 million in SG&A expenses. The pre-tax charges for exit costs
were comprised of (i) $41.3 million which related primarily to writing down
inventory, fixed assets, accounts receivable and certain other receivable and
prepaid amounts to estimated net realizable value, and (ii) $23.1 million of
other exit costs, including carrying costs of idle facilities, relocation costs,
and costs to exit the pressure washer business. Other pre-tax charges of $8.0
million related primarily to certain asset write-offs. These other charges, of
which $3.2 million was reflected in cost of sales and $4.8 million in SG&A
expenses, were incurred in the Company's normal course of business, although the
amounts involved were higher than similar charges the Company had recorded in
prior periods. The provision for income taxes includes $21.7 million of tax
benefits resulting from these restructuring and other charges, net of an
increase in the valuation reserve related to certain foreign deferred tax assets
and other foreign tax charges totaling $5.6 million.
The Company's interest expense was $38.7 million in 1996 compared with
$24.5 million in 1995, an increase of $14.2 million. This increase was primarily
the result of higher borrowings to fund business acquisitions and support
increased working capital. On an unconsolidated basis, Coleman Worldwide had an
additional $12.1 million of interest expense in 1996 compared with $11.4 million
in 1995, an increase of $0.7 million, or 5.8%. This increase is a result of the
effects of compounding interest related to the LYONs. In addition, Coleman
Holdings, on an unconsolidated basis, had $24.3 million of interest expense in
1996 compared with $21.9 million in 1995, an increase of $2.4 million. This
increase is a result of the effects of compounding interest related to the
Holdings Notes.
The Company recorded an income tax benefit in 1996 of $10.9 million, which
included net tax benefits of $21.7 million associated with restructuring and
other charges discussed above. Excluding the net tax benefit from restructuring
and other charges, the provision for income taxes would have been $10.8 million
or 45.0% of pre-tax earnings, excluding restructuring and other charges, as
compared to a provision for income tax expense of $24.5 million or 37.9% of
pre-tax earnings in 1995. The increase was primarily due to losses of certain
foreign
17
<PAGE>
subsidiaries for which the Company has not recognized a tax benefit and the
impact of non-deductible goodwill amortization. On an unconsolidated basis,
Coleman Worldwide recorded an income tax benefit of $3.9 million in 1996 and
$4.6 million in 1995 or approximately 38% of Coleman Worldwide's unconsolidated
pre-tax loss in each year. In addition, Coleman Holdings on an unconsolidated
basis, recorded a provision for income tax benefit of $9.0 million in 1996 and
$8.2 million in 1995 or approximately 35% of Coleman Holdings' unconsolidated
pre-tax loss in each year.
The Company obtained control of approximately 70% of Camping Gaz on March
1, 1996 and obtained control of the remaining 30% in early July 1996.
Accordingly, the minority interest for 1996 primarily represents the minority
shareholders' approximate 30% proportionate share of the results of operations
of Camping Gaz for the period March through June of 1996 and also includes
interests of other minority shareholders in certain subsidiary operations of
Camping Gaz.
Minority interest in the loss 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' approximate 82% ownership of Coleman's common stock.
During the second quarter of 1996, in connection with the renegotiation of
its then existing credit agreement, the Company recorded an extraordinary loss
of $1.1 million ($0.6 million after taxes, or $0.01 per share) which represents
a write-off of the related unamortized financing costs associated with its then
existing credit agreement. During the third quarter of 1995, the Company
completed a $200.0 million private placement debt issue. In connection with the
private placement, the Company renegotiated its previous credit agreement and
recorded an extraordinary loss of $1.3 million ($0.8 million after taxes) which
represents a write-off of the related unamortized financing costs associated
with its previous credit agreement.
LIQUIDITY AND CAPITAL RESOURCES
Operating activities of CLN Holdings and its subsidiaries provided
(used) $69.8 million, ($5.5) million, and $9.3 million of cash during the
years ended December 31, 1997, 1996, and 1995, respectively. Improved
management of receivables and inventories and rationalization of product
lines during 1997 as compared to 1996 led to the improvement in cash provided
by operating activities. Net cash used by CLN Holdings and its subsidiaries
for investing activities was $16.2 million, $204.3 million, and $68.3 million
for the years ended December 31, 1997, 1996 and 1995, respectively, and was
composed primarily of the Company's capital expenditures, purchases of
businesses, and also advances (from) to Mafco under the Coleman Worldwide tax
sharing agreement and the terms of the LYONs indenture (the "Indenture") of
($19.3) million, $4.1 million and $6.7 million for the years ended December
31, 1997, 1996 and 1995, respectively. The Company used $161.9 million of
cash for business acquisitions during the year ended December 31, 1996 and an
additional $14.3 million in 1997 related to contingent payments and
transaction costs. The Company's capital expenditures were $27.0 million and
$41.3 million during the years ended December 31, 1997 and 1996, respectively.
Net cash (used) provided by financing activities by CLN Holdings and its
subsidiaries was ($53.4) million, $210.7 million, and $64.4 million for the
years ended December 31, 1997, 1996, and 1995, respectively, and consisted
primarily of increases in long-term borrowings during the years ended December
31, 1996 and 1995 and a reduction in long-term borrowings during the year ended
December 31, 1997 partially offset by the net proceeds from the issuance of the
Escrow Notes.
As part of its strategy to improve profitability, the Company announced
several restructuring initiatives during 1997. The Company recognized 1997
pre-tax charges of $36.4 million associated with these actions. These
restructuring initiatives are expected to generate cost savings in the future
from reductions in personnel, production facilities and administrative overhead.
There can be no assurance as to the Company's success in implementing its
planned initiatives or the results therefrom, the amount of future charges, or
against any adverse impact of the Company's restructuring initiatives.
18
<PAGE>
The Company's working capital requirements are currently funded by cash
flow from operations and domestic and foreign bank lines of credit. In April
1996, the Company amended its credit agreement to: a) provide a term loan of
French Franc 385.1 million ($64.9 million at December 31, 1997 exchange
rates), b) provide an unsecured revolving credit facility in an amount of
$275.0 million, c) allow for the Camping Gaz acquisition and d) extend the
maturity of the credit agreement (as amended, the "Company Credit Agreement").
Availability under the Company Credit Agreement is reduced by any
commercial paper borrowings outstanding. The Company Credit Agreement is
available to the Company until April 30, 2001. At December 31, 1997, $217.4
million would have been available for borrowings under the Company Credit
Agreement. The Company intends to use the net proceeds from the sale of CSS
to repay first the term loan portion of the Company Credit Agreement and use
the remaining proceeds to repay the revolving credit borrowings, which will
result in a dollar for dollar reduction in available revolving credit
commitments.
The outstanding loans under the Company Credit Agreement bear interest at
either of the following rates, as selected by the Company from time to time: (i)
the higher of the agent's base lending rate or the federal funds rate plus .50%
or (ii) the London Inter-Bank Offered Rate ("LIBOR") plus a margin ranging from
.25% to 2.125% based on the Company's financial performance. If there is a
default, the interest rate otherwise in effect will be increased by 2% per
annum. The Company Credit Agreement also bears an overall facility fee ranging
from .15% to .375% based on the Company's financial performance.
The Company Credit Agreement contains various restrictive covenants
including, without limitation, requirements for the maintenance of specified
financial ratios, levels of consolidated net worth and profits, and certain
other provisions limiting the incurrence of additional debt, purchase or
redemption of the Company's common stock, issuance of preferred stock of the
Company, and also prohibits the Company from paying any dividends until on or
after January 1, 1999 and limits the amount of dividends the Company may pay
thereafter. The Company Credit Agreement also contains an event of default upon
a change of control of the Company (as defined in the Company Credit Agreement)
and other customary events of default. The consummation of the CLN Holdings
Merger will constitute a change of control under the Company Credit Agreement.
In addition, all of the shares of the Company's common stock owned by Coleman
Worldwide are pledged to secure indebtedness of Coleman Worldwide and of its
parent, CLN Holdings Inc.
The Company's ability to meet its current cash operating requirements,
including projected capital expenditures, tax sharing payments and other
obligations is dependent upon a combination of cash flows from operations and
borrowings under the Company Credit Agreement and foreign lines of credit. The
Company's ability to borrow under the terms of the Company Credit Agreement is
subject to the Company's continuing requirement to meet the various restrictive
covenants, including without limitation, those described above , and the various
covenants in the Company's senior notes.
If the Company fails to meet the various restrictive covenants of the
Company Credit Agreement, or upon a change of control as a result of the
consummation of the CLN Holdings Merger, the Company will need to seek a waiver
of such provisions, renegotiate its current Company Credit Agreement, and/or
enter into alternative financing arrangements. There is no assurance that the
Company would be able to obtain such waiver, or that terms and conditions of
such waiver or alternative financing arrangements, if any, would be as favorable
as those now contained in the Company Credit Agreement.
Coleman financed the acquisition of the shares of Camping Gaz with the net
proceeds from (i) a private placement issuance and sale of $85.0 million
aggregate principal amount of 7.10% Senior Notes, Series A, due 2006 (the "Notes
due 2006") and (ii) a private placement issuance and sale of $75.0 million
aggregate principal amount of 7.25% Senior Notes, Series B, due 2008 (the "Notes
due 2008"). The Notes due 2006 bear interest at the rate of 7.10% per annum
payable semiannually, and the principal amount is payable in annual installments
of $12.1 million commencing June 13, 2000, with a final payment due on June 13,
2006. If there is a default, the interest rate will be the greater of (i) 9.10 %
or (ii) 2% above the prime interest rate. The Notes due 2008 bear
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<PAGE>
interest at the rate of 7.25% per annum payable semiannually, and the principal
amount is payable in annual installments of $15.0 million commencing June 13,
2004 with a final payment due on June 13, 2008. If there is a default, the
interest rate will be the greater of (i) 9.25 % or (ii) 2% above the prime
interest rate. The Notes due 2006 and the Notes due 2008 are unsecured and are
subject to various restrictive covenants, including without limitation,
requirements for the maintenance of specified financial ratios and levels of
consolidated net worth and certain other provisions limiting the incurrence of
additional debt and sale and leaseback transactions under the terms of the Note
Purchase Agreement.
The Company's international operations are located primarily in Japan,
Europe, and Canada, which are not considered to be highly inflationary
environments. The Company uses a variety of derivative financial instruments to
manage its foreign currency and interest rate exposures. The Company does not
speculate on interest rates or foreign currency rates. Instead, it uses
derivatives when implementing its risk management strategies to reduce the
possible effects of these exposures.
With respect to foreign currency exposures, the Company principally uses
forward and option contracts to reduce risks arising from firm commitments,
anticipated intercompany sales transactions and intercompany receivable and
payable balances. The Company generally uses interest rate swaps and interest
rate caps to fix certain of its variable rate debt. The Company manages credit
risk related to these derivative contracts through credit approvals, exposure
limits and other monitoring procedures.
All of the shares of the Company's common stock owned by Coleman
Worldwide are pledged to secure indebtedness of Coleman Worldwide and CLN
Holdings. On May 20, 1997, CLN Holdings issued the Escrow Notes. Concurrently
with the closing of the issuance of the Escrow Notes, CLN Holdings deposited
the net proceeds from the issuance of the Escrow Notes, which were
approximately $455.3 million, (the "Escrowed Funds"), with an escrow agent. A
portion of the net proceeds from the issuance of the Escrow Notes was
contributed to Coleman Holdings and used by it to redeem, on July 15, 1997,
the Holdings Notes due 1998 (the "Holdings Notes"). Following the redemption
of the Holdings Notes, Coleman Holdings was merged into CLN Holdings. A
portion of the net proceeds from the issuance of the Escrow Notes was
contributed to Coleman Worldwide and used by it to accept for exchange, $554.1
million aggregate principal amount at maturity of LYONs. Coleman Worldwide
plans to redeem the remaining $7.5 million aggregate principal amount at
maturity of LYONs no later than May 27, 1998 with the remaining proceeds from
the issuance of the Escrow Notes. The LYONs and the Escrow Notes, to which the
Company is not a party, provide that it is an additional purchase right event
and an event of default, respectively, under these debt instruments if, among
other things, the amount of debt incurred by the Company exceeds certain
limitations or if there is a change of control of Coleman Worldwide or CLN
Holdings, as the case may be, or the Company, which would permit the holder of
LYONs or Escrow Notes to sell such notes to the issuer of such notes.
Consummation of the CLN Holdings Merger would be an additional purchase right
under their debt instruments. There are expected to be sufficient funds in
escrow from the net proceeds of the Escrow Notes to repurchase the LYONs in
the event a holder of LYONs seeks to have such LYONs repurchased. CLN Holdings
may be required to borrow funds to repurchase the Escrow Notes if a holder of
Escrow Notes seeks to have such Escrow Notes repurchased.
Coleman Worldwide is a holding company with no business operations or
source of income of its own, and its ability to meet its obligations with
respect to the LYONs and any other obligations is contingent upon distributions
from the Company, including payments under the Company tax sharing agreement,
capital contributions or loans from its direct and indirect parent companies,
other borrowings and proceeds from the disposition of the common stock of
Coleman owned by Coleman Worldwide. As the holder of approximately 82% of the
capital stock of the Company, Coleman Worldwide has the ability to cause the
Company to make distributions up to the maximum amount permitted by law, subject
to limitations in the debt instruments of the Company. However, Coleman
Worldwide currently expects that, for the foreseeable future, the net earnings
and cash flow of the Company will be retained and used in the business of the
Company and that Coleman Worldwide will not receive any distributions from the
Company other than payments under the Company's tax sharing agreement.
Furthermore, the terms of the Company Credit Agreement prohibits the Company
from paying any
20
<PAGE>
dividends until on or after January 1, 1999, and limits the amount of dividends
the Company may pay thereafter. The receipt by Coleman Worldwide of tax sharing
payments from the Company will cease upon Coleman Worldwide's ownership interest
in Coleman falling below 80%, and the Indenture does not require Coleman
Worldwide to own more than a majority of the Coleman common stock. Pursuant to
the LYONs indenture agreement, at any time that the LYONs are outstanding, the
amounts that Coleman Worldwide would be required to pay to Mafco under the
Worldwide Tax Sharing Agreement, together with any remaining funds paid to
Coleman Worldwide by the Company under the tax sharing agreement between Coleman
Worldwide and the Company, may not be paid as tax sharing payments, but Coleman
Worldwide may advance such funds to Mafco as long as the aggregate amount of
such advances at any time does not exceed the issue price plus accrued OID of
the LYONs. Such advances are evidenced by noninterest bearing unsecured demand
promissory notes from Mafco in the amount of $35.4 million at December 31, 1997.
Upon redemption of the remaining LYONs, such demand notes will be cancelled.
CLN Holdings is a holding company with no business operations or source of
income of its own. CLN Holdings' only significant asset is all of the common
stock of Coleman Worldwide, which owns approximately 82% of the outstanding
shares of Coleman common stock as of March 3, 1998, 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 for so long as they remain outstanding, and certain other expense. As the
indirect holder through Coleman Worldwide of approximately 82% of the Coleman
common stock as of March 3, 1998, 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. The terms of
the Company Credit Agreement prohibit the Company from paying 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 or retained by Coleman Worldwide (except under
certain limited circumstances which are unlikely to occur prior to the LYONs
Retirement).
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 Coleman Worldwide Non-Recourse 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 paid or repurchased, to enforce
their security interests in the shares of Coleman common stock securing the
LYONs. Any such
21
<PAGE>
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 to realize value through
sales of the collateral.
Sunbeam has informed the Company that, following the consummation of the
CLN Holdings Merger, it plans to refinance existing revolving and term debt of
Coleman.
IMPACT OF YEAR 2000
Some of the Company's older computer programs were written using two digits
rather than four to represent the applicable year. As a result, those computer
programs recognize a date represented by "00" as the year 1900 rather than the
year 2000. This situation, known as the "Year 2000" issue, could cause a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send invoices, or
engage in similar normal business activities.
Based on ongoing assessments of the Company's operations, the Company has
determined it will be required to modify or replace portions of its computer
software so the computer systems will function properly with respect to dates in
the year 2000 and thereafter. The Company believes that, in most instances, with
minor modifications to existing software, the Year 2000 issue will not pose
significant operational problems for its computer systems. The Company has
identified one location with significant Year 2000 software issues. Failure to
complete a timely conversion of this location to a Year 2000 compliant system
could have a material impact on the operations of the Company; however, the
Company has begun to replace the software at this location, and such replacement
software is expected to be installed prior to December 31, 1999.
The Company has initiated formal communications with some of its
significant suppliers and large customers to determine the extent to which the
Company's interface systems are vulnerable to those third parties' failure to
remediate their own Year 2000 issues. There can be no guarantee that the systems
of other companies on which the Company's systems rely will be timely converted
and would not have an adverse effect on the Company's systems.
In 1996, the Company began a project to select and install a Company-wide
enterprise resource computer software system designed to improve operational
efficiency. The selected system is Year 2000 compliant and complete installation
of this software system is expected to take three years. The cost of the
purchase of the software and installation costs is expected to range from $20.0
million to $25.0 million. The Company will capitalize a significant portion of
these costs and does not believe the costs of this project will have a
significant impact on the Company's financial condition or results of
operations.
The costs of the project and the date on which the Company believes it will
be Year 2000 compliant are based on management's best estimates, which were
derived utilizing numerous assumptions of future events, including the continued
availability of certain resources, third party modification plans and other
factors. However, there can be no guarantee that these estimates will be
achieved and actual results could differ materially from those anticipated.
Specific factors that might cause such material differences include, but are not
limited to, the availability and cost of personnel trained in this area, the
ability to locate and correct all relevant computer codes, and similar
uncertainties.
SEASONALITY
The Company's sales generally are highest in the second quarter of the year
and lowest in the fourth quarter. As a result of this seasonality, the Company
has generally incurred a loss in the fourth quarter. The Company's sales may be
affected by weather conditions. For the years ended December 31, 1997, 1996 and
1995, second quarter sales comprised approximately 33%, 37% and 33% of annual
sales, respectively. Consequently, the company's annual results are largely
impacted by its results during the second quarter.
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<PAGE>
INFLATION
In general, manufacturing costs are affected by inflation and the effects
of inflation may be experienced by the Company in future periods. Management
believes, however, that such effects have not been material to the Company
during the past three years.
FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for certain forward-looking statements. The forward-looking statements
contained in this Form 10-K are subject to certain risks and uncertainties.
Actual results could differ materially from current expectations. Among the
factors that could affect the Company's actual results and could cause results
to differ from those contained in the forward-looking statements are (i)
unanticipated costs or delays in developing new products, (ii) a decrease in the
public's interest in camping and related activities, (iii) economic softness in
Japan, Korea, and other Asian countries, (iv) weather conditions which are
adverse to the specific businesses of the Company, (v) significant adverse
market or economic conditions which negatively affect demand for the Company's
products, (vi) disruptions or delays resulting from the transactions
contemplated by the Merger Agreements with Sunbeam for the acquisition of CLN
Holdings and the Company, and (vii) changes in operating philosophy following
the consummation of the CLN Holdings Merger and the Company Merger. Other
factors could also cause actual results to vary materially from the future
results covered in such forward-looking statements.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See the consolidated financial statements and supplementary data listed in
the accompanying List of Financial Statements and Schedules on Page F-1 herein.
Information required by other schedules called for under Regulation S-X is
either not applicable or is included in the consolidated financial statements or
notes thereto.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
DIRECTORS AND EXECUTIVE OFFICERS OF CLN HOLDINGS
The name, age, present principal occupation or employment, five year
employment history, selected biographical information, and period of service
concerning the directors and executive officers of CLN Holdings are set forth
below.
<TABLE>
<CAPTION>
DIRECTORS
NAME AGE
---- ---
<S> <C>
Ronald O. Perelman............... 55
Howard Gittis.................... 63
</TABLE>
EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<C> <C> <C>
Ronald O. Perelman............. 55 Chairman of the Board, President and
Chief Executive Officer
Howard Gittis.................. 63 Vice Chairman of the Board
Irwin Engelman................. 63 Executive Vice President, Chief Financial
Officer and Treasurer
Barry F. Schwartz.............. 48 Executive Vice President and General Counsel
</TABLE>
Ronald O. Perelman has been a director and Chairman of the Board of CLN
Holdings since its formation in May 1997, and a director of the Company since
1989. Mr. Perelman has been Chairman of the Board and Chief Executive
Officer of Mafco, MacAndrews Holdings and various of their affiliates since
1980. Mr. Perelman is also Chairman of the Executive Committee of the Board
of Consolidated Cigar Holdings Inc. ("Cigar Holdings"), M&F Worldwide
Corporation, and Revlon, Inc. ("Revlon") and Chairman of the Board of
Meridian Sports Incorporated ("Meridian"). Mr. Perelman is also a director
of the following corporations which file reports pursuant to the Securities
Exchange Act of 1934, as amended (the "Exchange Act"): California Federal
Bank, A Federal Savings Bank ("Cal Fed"), Cigar Holdings, Coleman Worldwide,
First Nationwide Holdings Inc. ("FN Holdings"), First Nationwide (Parent)
Holdings Inc. ("FN Parent"), Meridian, M&F Worldwide Corporation ("MFW"),
Revlon Consumer Products Corporation ("Revlon Products"), Revlon, and REV
Holdings Inc. ("REV Holdings"). (On December 27, 1996, Marvel Holdings Inc.,
Marvel (Parent) Holdings Inc., and Marvel Entertainment Group, Inc.
("Marvel"), of which Mr. Perelman was then a director, and Marvel III
Holdings Inc., of which Mr. Perelman is a director, and several of the
subsidiaries of Marvel filed voluntary petitions for reorganization under
Chapter 11 of the United States Bankruptcy Code.)
Howard Gittis has been Vice Chairman of the Board of CLN Holdings since its
formation in May 1997. He has been Vice Chairman of MacAndrews Holdings and
various of its affiliates since 1985. Mr. Gittis is a Director of the following
corporation which file reports pursuant to the Exchange Act: Cigar Holdings, FN
Holdings, FN Parent, MFW, Revlon, Revlon products, REV Holdings, Jones Apparel
Group, Inc., Loral Space & Communications Ltd. and Rutherford-Moran Oil
Corporation.
Irwin Engelman has been Executive Vice President, Chief Financial Officer
and Treasurer of CLN Holdings since its formation in May 1997 and has been the
Executive Vice President and Chief Financial Officer of MacAndrews Holdings and
certain of its affiliates since February 1992. Mr. Engelman was Executive Vice
President and Chief Financial Officer of GAF Corporation, a specialty chemical
and building materials company, from 1990 to 1991; Director, President and Chief
Operating Officer of Citytrust Bancorp Inc. from 1988 to 1990; Executive Vice
President of the Blackstone Group LP from 1987 to 1988; and Director and
Executive Vice
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President of General Foods Corporation for more than five years prior to 1987.
(On December 27, 1996, Marvel III, of which Mr. Engelman is an executive
officer, and Marvel Holdings and Marvel Parent, of which Mr. Engelman was an
executive officer, filed voluntary petitions for reorganization under Chapter 11
of the United States Bankruptcy Code.)
Barry F. Schwartz has been Executive Vice President & General Counsel of
CLN Holdings since its formation in May 1997. He has been Executive Vice
President of MacAndrews Holdings and certain of its affiliates since 1993. Mr.
Schwartz was Senior Vice President of MacAndrews Holdings from 1989 to 1993. (On
December 27, 1996, Marvel III, of which Mr. Schwartz is an executive officer,
and Marvel Holdings and Marvel Parent, of which Mr. Schwartz was an executive
officer, filed voluntary petitions for reorganization under Chapter 11 of the
United States Bankruptcy Code.)
All directors serve terms of one year and until the election of their
respective successors. Executive officers serve at the pleasure of the Board of
Directors.
DIRECTORS OF COLEMAN
The name, age, present principal occupation or employment, five year
employment history, selected biographical information, and period of service as
a director of the Company of each of the current directors of the Company are
set forth below.
Ronald O. Perelman, age 55, a director of the Company since 1989, has been
Chairman of the Board and Chief Executive Officer of Mafco, MacAndrews Holdings
and various of their affiliates since 1980. Mr. Perelman is also Chairman of the
Executive Committee of the Board of Consolidated Cigar Holdings Inc. ("Cigar
Holdings"), M&F Worldwide Corporation, and Revlon, Inc. ("Revlon") and Chairman
of the Board of Meridian Sports Incorporated ("Meridian"). Mr. Perelman is also
a director of the following corporations which file reports pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange Act"): California
Federal Bank, A Federal Savings Bank ("Cal Fed"), Cigar Holdings, CLN Holdings
Inc. ("CLN Holdings"), Coleman Worldwide Corporation ("Coleman Worldwide"),
First Nationwide Holdings Inc., First Nationwide (Parent) Holdings Inc.,
Meridian, M&F Worldwide Corporation, Revlon Consumer Products Corporation
("Revlon Products"), Revlon, and REV Holdings Inc. ("REV Holdings"). (On
December 27, 1996, Marvel Holdings Inc., Marvel (Parent) Holdings Inc., and
Marvel Entertainment Group, Inc. ("Marvel"), of which Mr. Perelman was then a
director, and Marvel III Holdings Inc., of which Mr. Perelman is a director, and
several of the subsidiaries of Marvel filed voluntary petitions for
reorganization under Chapter 11 of the United States Bankruptcy Code.)
Donald G. Drapkin, age 50, a director of the Company since 1989, has been a
director and Vice Chairman of Mafco and various of its affiliates since 1987.
Mr. Drapkin was a partner in the law firm of Skadden, Arps, Slate, Meagher &
Flom in New York for more than five years prior to March 1987. Mr. Drapkin is
also a director of the following corporations which file reports pursuant to the
Exchange Act: Alogos Pharmaceutical Corporation, Black Rock Asset Investors,
Cardio Technologies, Inc., Coleman Worldwide, The Cosmetic Center, Inc., Genta,
Inc., Playboy Enterprises, Inc., Revlon, Revlon Products, VIMRx Pharmaceuticals
Inc., and Weider Nutrition International, Inc. (On December 27, 1996, Marvel
Holdings Inc., Marvel (Parent) Holdings Inc., and Marvel, of which Mr. Drapkin
was then a director, and Marvel III Holdings Inc., of which Mr. Drapkin is a
director, and several of the subsidiaries of Marvel filed voluntary petitions
for reorganization under Chapter 11 of the United States Bankruptcy Code.)
Frank Gifford, age 67, has been a director of the Company since 1997. Mr.
Gifford has been a commentator with ABC Sports since 1971. (On December 27,
1996, Marvel, of which Mr. Gifford was a director, and several of its
subsidiaries filed voluntary petitions for reorganization under Chapter 11 of
the United States Bankruptcy Code.)
Lawrence M. Jones, age 66, has been a director of the Company since
1989. Mr. Jones was Chairman and Chief Executive Officer of the Company from
October 1990 to December 1993 and has been associated with the
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<PAGE>
Company for more than 36 years, including serving as President and Chief
Executive Officer from July 1989 to September 1990. Prior to rejoining the
Company in 1989, Mr. Jones was Vice Chairman and Chief Financial Officer of
Fleming Companies, Inc. (a distributor of food products, health and beauty
items) from December 1987 to June 1989. Mr. Jones presently serves as
director of Union Pacific Resources, and was a director of Fourth Financial
Corporation until January 1996, of Fleming Companies, Inc. until December
1996, and of Prince Sports Group, Inc. until March 1997. Mr. Jones also
served as Chairman of Rollerblade, Inc. from February 1996 to April 1997.
Ann D. Jordan, age 63, has been a director of the Company since June 1997.
Ms. Jordan is a consultant and a director of Johnson & Johnson, Automatic Data
Processing, Inc., The Travelers Corporation, and Salant Corporation. Ms. Jordan
also serves on the Board of Directors of the National Symphony Orchestra, Sloan
Kettering Memorial Medical Center, Child Welfare League, Sasha Bruce Youthworks,
University of Chicago, Spellman College, The John F. Kennedy Center for the
Performing Arts and the SEC Consumer Affairs Advisory Commission. She was
formerly a Field Work Associate Professor at the School of Social Service
Administration of the University of Chicago and served as Director of the
Department of Social Services for the University of Chicago Medical Center.
Jerry W. Levin, age 53, has been Chairman and Chief Executive Officer of
the Company since February 1997, a past Chairman of the Company from 1989 to
1991, and a director since 1989. Mr. Levin has been Chairman of the Board of
Revlon and of Revlon Products since their respective formations in 1992 and
Chairman of the Board of The Cosmetic Center, Inc. since April 1997. Mr. Levin
served as Chief Executive Officer of Revlon and of Revlon Products from 1992
until January 1997, and President of Revlon and of Revlon Products from their
respective formations in 1992 to November 1995. Mr. Levin has been Executive
Vice President of MacAndrews Holdings since March 1989. For 15 years prior to
joining MacAndrews Holdings, he held various senior positions with The Pillsbury
Company ("Pillsbury"). Mr. Levin is a director of the following corporations
which file reports pursuant to the Exchange Act: The Cosmetic Center, Inc.,
Ecolab Inc., U.S. Bancorp Inc., Meridian, Revlon, Revlon Products, and REV
Holdings.
John A. Moran, age 65, has been a director of the Company since July 1996.
Mr. Moran currently serves as Chairman of Rutherford-Moran Oil Corporation. From
1967, Mr. Moran was affiliated with Dyson-Kissner- Moran Corporation, a private
holding company, serving in various executive positions including Chairman of
the Board, President and Chief Executive Officer, and Executive Vice President.
He is a director of Bessemer Securities Corporation. He is a member and former
Chairman of the National Advisory Council of the University of Utah, as well as
a member of World Presidents Organization, the Chief Executives Organization and
The Foreign Policy Association. He is a former director of the United Nations
Association and trustee of the Brooklyn Museum.
James D. Robinson, age 62, has been a director of the Company since June
1997. Mr. Robinson is Chairman and Chief Executive Officer of RRE Investors,
LLC, a private venture investment firm, and Chairman of Violy, Byorum & Partners
Holdings, LLC, a private firm specializing in financial advisory and investment
banking activities in Latin America. He previously served as Chairman, and Chief
Executive Officer of the American Express Company from 1977 to 1993. Mr.
Robinson is a director of Bristol-Myers Squibb Company, Cambridge Technology
Partners, Inc., The Coca-Cola Company, First Data Corporation and Union Pacific
Corporation.
Bruce Slovin, age 62, a director of the Company since February 1993, has
been President of MacAndrews Holdings and various of its affiliates since 1980.
Mr. Slovin is also a director of the following corporations which file reports
pursuant to the Exchange Act: Cantel Industries, Inc., Coleman Worldwide,
Continental Health Affiliates, Inc., Infu-Tech, Inc., Meridian, and M&F
Worldwide Corporation.
William H. Spoor, age 75, has been a director of the Company since May
1992. Mr. Spoor retired in September 1985 as Chairman and Chief Executive
Officer of Pillsbury after 14 years in that position and 36 years with
Pillsbury. He returned to Pillsbury as Chairman of the Executive Committee in
September 1987, and resumed as Chairman, Chief Executive Officer and President
of Pillsbury in March 1988, from which he retired
26
<PAGE>
in August 1988. Mr. Spoor now serves as Chairman Emeritus of Pillsbury, and
is in the business of personal investments. He is a director of L & L
Holdings and Inner City Tennis.
COMPENSATION OF DIRECTORS
Directors who are not currently receiving compensation as employees of
the Company or any of its affiliates are paid an annual $25,000 retainer fee
and are reimbursed for reasonable out-of-pocket expenses incurred in connection
with Company business. In addition, such directors receive a fee of $1,000 for
each meeting of the Board of Directors or any committee meeting they attend.
EXECUTIVE OFFICERS OF COLEMAN
The following table sets forth certain information as of March 3, 1998,
concerning the executive officers of the Company. All executive officers serve
at the pleasure of the Board of Directors.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Jerry W. Levin................................ 53 Chairman of the Board, and Chief Executive Officer
Mark Goldman.................................. 43 Executive Vice President (Chairman - Eastpak)
Patrick McEvoy................................ 47 Executive Vice President
(President - Coleman Safety & Security Products)
Joseph P. Page................................ 44 Executive Vice President and
Chief Financial Officer
David A. Ramon................................ 42 Executive Vice President
(President - Outdoor Recreation Group)
Paul E. Shapiro............................... 56 Executive Vice President and General Counsel
David K. Stearns.............................. 50 Executive Vice President
(President - Coleman Powermate)
James L. Rasmus............................... 45 Senior Vice President - Human Resources
Karen Clark................................... 37 Vice President - Finance
</TABLE>
The following sets forth the position with the Company and selected
biographical information for the executive officers of the Company who are not
directors.
Mark Goldman has been Executive Vice President since April 1995 and
President of Eastpak since 1978. He joined Eastpak in 1976.
Patrick McEvoy has been Executive Vice President since March 1996 and
President of Coleman Safety & Security Products, Inc. since January 1996. He
joined Coleman in April 1994 as the Senior Vice President of Product
Development and Operations for the Company's North American Recreation
business unit. Prior to joining Coleman, he served as Vice President of Black
& Decker Corporation from 1990 to 1994, and Vice President for the Chrysler
Corporation from 1988 to 1990.
Joseph P. Page joined the Company in August 1997 as Executive Vice
President and Chief Financial Officer. Since December 1993, Mr. Page has
served as Executive Vice President and Chief Financial Officer of Andrews
Group Incorporated ("Andrews Group"). From December 1993 through January
1997, Mr. Page was Executive Vice President and Chief Financial Officer of
New World Communications Group. Prior to his employment with Andrews Group,
Mr. Page was a partner in the accounting firm of Price Waterhouse for more
than five years.
David A. Ramon has been Executive Vice President since May 1997. Prior
to joining the Company, Mr. Ramon was a Director, President, and Chief
Operating Officer for New World Television Incorporated from 1995 to 1997,
and Executive Vice President and Chief Financial Officer for Gillett
Holdings, Inc. from 1985 to 1994.
27
<PAGE>
Paul E. Shapiro has been Executive Vice President and General Counsel of
the Company since July 1997. Mr. Shapiro has been an Executive Vice President of
Andrews Group since 1994, and from January 1994 to June 1997, served as the
Executive Vice President and General Counsel of Marvel. Prior to January 1994,
Mr. Shapiro was a shareholder in the law firm of Greenberg, Traurig, Hoffman,
Lipoff, Rosen & Quental from 1991 to 1993, and is currently Of Counsel to that
firm. Mr. Shapiro is a director of Toll Brothers, Inc. (On December 27, 1996,
Marvel, of which Mr. Shapiro was an executive officer and director, and several
of the subsidiaries of Marvel, filed voluntary petitions for reorganization
under Chapter 11 of the United States Bankruptcy Code.)
David K. Stearns has been Executive Vice President since January 1995, and
Senior Vice President Marketing from October 1991 to January 1995. He joined the
Company in 1976 and has served in various positions, including Vice
President/General Manager - Import Division from 1985 to 1990.
James L. Rasmus joined the Company in April 1997 as Senior Vice
President - Human Resources. Prior to joining Coleman, Mr. Rasmus was the
Executive Project Director, Shared Services for Tenneco. He has also held
senior human resource positions with Case Corporation, United Technologies
and Xerox Corporation.
Karen Clark has been Vice President - Finance since July 1997. Prior to
joining Coleman, Ms. Clark served as Corporate Controller for Precision
Castparts Corp. from 1994 to 1997. She was also Manager - Corporate Planning
for Tektronix from 1990 to 1994. Ms. Clark is a member of the Financial
Executives Institute and the American Institute of Certified Public
Accountants.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than 10 percent of the Company
common stock, to file reports of ownership and changes in ownership with the
Securities and Exchange Commission.
Based solely on the Company's review of the reporting forms received by it,
the Company believes that for 1997 all such filing requirements were satisfied.
ITEM 11. EXECUTIVE COMPENSATION
CLN Holdings is a holding company with no business operations of its own.
The officers of CLN Holdings received no compensation for their services to CLN
Holdings during 1997. The information regarding certain compensation awarded to
the Chief Executive Officer, the next four most highly-compensation executive
officers, and three former executive officers of Coleman, who served as
executive officers of Coleman during 1997 is set forth below.
28
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning annual, long term
and other compensation of the Company's Chief Executive Officer and the next
four most highly-compensated executive officers, and three of its former
executive officers.
<TABLE>
<CAPTION>
Long Term Compensation
-------------------------------------
Annual Compensation Awards Payouts
-------------------------------- ---------- ----------------------
Securities
Other Annual Underlying LTIP All Other
Name and Principal Position Year Salary Bonus Compensation Options Payouts Compensation
- --------------------------- ---- ------ ----- ------------ ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Jerry W. Levin (1).............. 1997 $ 300,000 $ 300,000 $ 2,567 500,000 $ 0 $ 0
Chairman and Chief Executive
Officer
David A. Ramon (2).............. 1997 400,000 125,000 2,912 100,000 0 0
Executive Vice President
Mark Goldman (3)................ 1997 250,000 0 6,300 40,000 0 4,230
Executive Vice President 1996 250,000 0 0 0 0 4,270
1995 250,000 0 0 20,000 0 4,492
David K. Stearns (4)............ 1997 240,000 134,844 105,930 20,000 0 6,212
Executive Vice President 1996 225,500 0 16,899 25,000 0 4,455
1995 189,996 159,425 121,880 40,000 0 3,877
Patrick McEvoy (5).............. 1997 200,000 0 72,675 0 0 4,064
Executive Vice President 1996 200,000 0 190,114 15,000 0 3,717
1995 190,000 159,290 38,305 20,000 0 794
Michael N. Hammes (6)........... 1997 116,668 0 27,441 0 0 1,212,035
Former Chief Executive Officer 1996 625,000 0 0 80,000 0 3,270
1995 600,000 891,103 163,950 100,000 0 3,117
Frederik van den Bergh (7)...... 1997 250,000 0 22,769 10,000 0 641,409
Former Executive Vice President 1996 333,333 233,333 204,266 130,000 0 2,124
Steven Kaplan (8)............... 1997 186,666 180,666 1,713 10,000 0 175,686
Former Executive Vice President 1996 116,667 50,000 31,592 125,000 0 501
- --------------------------------
</TABLE>
(1) "Bonus" in 1997 includes $300,000 paid in January 1998 for 1997 performance.
"Other Annual Compensation" in 1997 includes $2,567 for Company-paid parking
expenses.
(2) "Bonus" in 1997 includes $125,000 paid in March 1998 for 1997 performance.
"Other Annual Compensation" in 1997 includes Company-paid expense of $2,912
related to relocation.
(3) "Other Annual Compensation" in 1997 includes $6,300 for car allowance. "All
Other Compensation" in 1997 includes $3,230 for the Company's 401(k) match
and $1,000 for premiums paid for term life insurance.
(4) "Bonus" in 1997 includes $60,000 bonus paid for relocation during 1997, and
$74,844 paid in March 1998 for 1997 performance. "Other Annual Compensation"
includes (i) for 1997, $82,500 ordinary income realized upon the
exercise/sale of certain stock options during 1997, $4,284 interest
differential housing allowance, $8,700 car allowance, $5,455 relocation
expenses and $4,991 tax gross-up thereon, (ii) for 1996, $10,155 for
interest differential housing allowance, $3,844 for personal use of Company
vehicle, $2,900 for car allowance, and (iii) for 1995, $113,561 for
relocation costs. "All Other Compensation" includes (i) for 1997, $3,230 and
$2,982, respectively, for the Company's 401(k) match and premiums paid for
term life insurance, (ii) for 1996, $3,164 and $1,291, respectively, for the
Company's 401(k) match and premiums paid for term life insurance, and (iii)
in 1995, $3,077 and $800, respectively, for the Company's 401(k) match and
premiums paid for term life insurance.
(5) "Bonus" for 1995 includes $159,290 paid in February 1996 for 1995
performance. "Other Annual Compensation" includes (i) for 1997, $42,222
forgiveness of a loan, $21,753 interest differential housing allowance,
$8,700 car allowance, (ii) for 1996, $141,376
29
<PAGE>
reimbursement of capital loss due to relocation ($45,877 of which is a tax
gross-up), $20,844 for other payments related to relocation ($3,510 of which
is a tax gross-up), $19,194 interest differential housing allowance, $8,700
car allowance, and (ii) for 1995, $25,513 (which includes $4,402 tax
gross-up) related to the forgiveness of a loan, $8,700 car allowance, and
$4,092 related to various gifts ($1,410 of which is a tax gross-up on the
gifts). "All Other Compensation" includes (i) for 1997, $3,230 and $834,
respectively, for the Company's 401(k) match and premiums paid for term life
insurance, (ii) for 1995, $3,183 and $534, respectively, for the Company's
401(k) match and premiums paid for term life insurance, and (iii) for 1995,
$0 and $794, respectively, for the Company's 401(k) match and premiums paid
for term life insurance.
(6) Mr. Hammes ceased to be an employee of the Company in February 1997. "Bonus"
includes $591,103 paid in February 1996 for 1995 performance pursuant to a
predecessor incentive plan and a $300,000 special bonus paid in 1995
pursuant to Mr. Hammes' employment agreement. "Other Annual Compensation"
includes (i) for 1997, $13,663 for personal use of a Company vehicle,
$10,853 for relocation costs ($4,912 of which is a tax gross-up), and $2,925
interest differential housing allowance, and (ii) for 1995, $137,703 for
relocation costs. "All Other Compensation" includes (i) for 1997, $2,380 and
$0, respectively, for the Company's 401(k) match and premiums paid for term
life insurance, and $1,209,655 for termination of employment payments
including but not limited to severance payments, lump sum payments, and the
value of benefits received pursuant to a severance agreement entered into
with Mr. Hammes as of February 28, 1997 (see "Employment Agreements and
Termination of Employment Arrangements"), (ii) for 1996, $3,230 and $40,
respectively, for the Company's 401(k) match and premiums paid for term life
insurance and (iii) for 1995, $3,077 and $40, respectively, for the
Company's 401(k) match and premiums paid for term life insurance.
(7) Mr. van den Bergh ceased to be an employee of the Company in June 1997.
"Bonus" for 1996 includes $233,333 guaranteed incentive payment made in 1996
pursuant to Mr. van den Bergh's employment agreement. "Other Annual
Compensation" includes (i) for 1997, $9,630 for Company vehicle expenses,
$5,493 for tax preparation expenses, $6,822 for housing allowance, and $824
for representation allowance, and (ii) for 1996, includes a $153,100 payment
made to Mr. van den Bergh to compensation him for the loss of stock option
price appreciation upon leaving his former employer. "All Other
Compensation" includes (i) for 1997, $641,409 for termination of employment
payments including, but not limited to, severance payments, lump sum
payments, and the value of benefits received pursuant to a severance
agreement entered into with Mr. van den Bergh as of June 30, 1997 (see
"Employment Agreements and Termination of Employment Arrangements"), and
(ii) for 1996, $2,124 for premiums paid for term life insurance.
(8) Mr. Kaplan ceased to be an employee of the Company in August 1997.
"Bonus" includes (i) for 1997, $130,666 guaranteed incentive and $50,000
(final installment) signing bonus payments made in 1997 pursuant to Mr.
Kaplan's employment agreement and (ii) for 1996, $50,000 payments made
during 1996 for first installment of signing bonus pursuant to Mr.
Kaplan's employment agreement. "Other Annual Compensation" includes (i)
for 1997, $1,416 for the personal use of a Company car, and $297 for
relocation costs , and (ii) for 1996, $31,592 for relocation costs
($14,103 of which is a tax gross-up). "All Other Compensation" includes
(i) for 1997, $174,812 for payments including, but not limited to,
severance payments, lump sum payments and value of benefits received
pursuant to a termination agreement entered into with Mr. Kaplan as of
August 31, 1997 (see "Employment Agreements and Termination of Employment
Arrangements"), and $874 for premiums paid for term life insurance, and
(ii) for 1996, $501 for premiums paid for term life insurance.
30
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning individual grants
of stock options during 1997 to the Company's Chief Executive Officer and the
next four most highly-compensated executive officers, and three of its former
executive officers. Pursuant to the Company Merger Agreement, each
outstanding option to acquire the Company's common stock, which is not
currently exercisable, will vest and become exercisable at the effective time
of the CLN Holdings Merger and, to the extent not exercised prior to the
effective time of the Company Merger, will be converted into the right to
receive cash in an amount equal to the excess, if any, of $27.50 over the per
share exercise price of such option.
<TABLE>
<CAPTION>
% of Total
Options
Granted to
Employees Expiration Grant Date
Options in Fiscal Exercise Date Present
Name Granted Year Price of Options Value (7)
- ------------------------- --------- ------ ----- ---------- -----------
<S> <C> <C> <C> <C> <C>
Jerry W. Levin (1).......... 200,000 9.27% $ 12.250 02/11/07 $ 1,257,120
300,000 13.91% 14.000 04/15/07 2,150,835
David A. Ramon (2).......... 62,500 2.89% 12.250 02/11/07 392,850
37,500 1.73% 16.875 05/13/07 334,558
Mark Goldman (3)............ 20,000 .92% 15.000 02/12/07 100,422
20,000 .92% 16.125 12/17/07 160,930
David K. Stearns (4)........ 20,000 .92% 16.125 12/17/07 158,532
Patrick McEvoy.............. -- -- -- -- --
Michael N. Hammes........... -- -- -- -- --
Frederik van den Bergh (5) 10,000 .46% 14.000 4/15/07 67,527
Steven F. Kaplan (6)........ 10,000 .46% 14.000 4/15/07 67,527
</TABLE>
- -------------------------
(1) Mr. Levin's options were granted on February 11, 1997 and April 15, 1997,
respectively. The February 11, 1997 and 200,000 of the April 15, 1997
options were granted pursuant to the 1996 Stock Option Plan. The remainder
of the April 15, 1997 option was granted pursuant to the 1993 Stock Option
Plan. The options are exercisable in installments of 50%. The earlier
option vested on April 15, 1997 and December 31, 1997. The later option
vested on April 15, 1997 and is scheduled to vest again on April 15, 1998.
(2) Mr. Ramon's options were granted on February 11, 1997 and May 13, 1997,
respectively. The February 11, 1997 and May 13, 1997 options were granted
pursuant to the 1996 Stock Option Plan. The options are exercisable in
installments of 50%. The earlier option vested on April 15, 1997 and
December 31, 1997. The later option vested on May 13, 1997 and December 31,
1997.
(3) Mr. Goldman's options were granted on February 12, 1997 and December 17,
1997, respectively. The February 12, 1997 option was granted pursuant to
the 1996 Stock Option Plan and the December 17, 1997 option was granted
pursuant to the 1993 Stock Option Plan. The February 12, 1997 option is
exercisable in installments of 33%, 33% and 34%. This option is scheduled
to vest on February 12, 2000, February 12, 2001, and February 12, 2002,
respectively. The December 17, 1997 option is exercisable in installments
of 50%. This option is scheduled to vest on June 17, 1998 and December 17,
1998.
(4) Mr. Stearns' options were granted on December 17, 1997 pursuant to the 1996
Stock Option Plan. The option becomes exercisable in installments of 25%.
The option is scheduled to vest on December 17, 1998, December 17, 1999,
December 17, 2000, and December 17, 2001, respectively.
(5) Mr. van den Bergh's options were granted on April 15, 1997 pursuant to the
1996 Stock Option Plan. Pursuant to an agreement entered into with Mr. van
den Bergh as of June 30, 1997, Mr. van den Berg's options expired
unexercised.
(6) Mr. Kaplan's options were granted on April 15, 1997 pursuant to the 1996
Stock Option Plan. Pursuant to an agreement entered into with Mr. Kaplan as
of August 31, 1997, Mr. Kaplan's options expired unexercised.
31
<PAGE>
(7) The grant date present values were estimated using the Black-Scholes option
pricing model and the following weighted-average assumptions; risk-free
interest rates from 5.84% to 6.89%, dividend yield of 0%, volatility of the
expected market price of the Company's common stock from 27.25% to 35.43%,
and a weighted-average expected life of the options from 4.5 to 8.5 years.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth aggregated option exercises in the last
fiscal year and fiscal year-end option values for the Company's Chief Executive
Officer and the next four most highly-compensated executive officers, and three
of its former executive officers.
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT OPTIONS AT
ACQUIRED FY-END FY-END (1)
ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
---- -------- -------- -------------- ----------------
<S> <C> <C> <C> <C>
Jerry W. Levin................... 0 $0 350,000/ $ 1,071,875/
150,000 309,375
David A. Ramon .................. 0 0 100,000/ 238,281/
0 0
Mark Goldman..................... 0 0 0/ 0/
60,000 21,250
David K. Stearns................. 15,000 82,500 28,720/ 41,790/
110,280 46,253
Patrick McEvoy................... 0 0 21,900/ 35,989/
63,100 39,923
Michael N. Hammes................ 0 0 0/ 0/
580,000 (2) 0
Frederik van den Bergh........... 0 0 0/ 0/
130,000 (3) 0
Steven F. Kaplan................. 0 0 0/ 0/
135,000 (4) 0
</TABLE>
- -----------------------------
(1) Market closing price of $16.0625 per share on December 31, 1997 was used
in computing year-end values.
(2) Mr. Hammes' right to exercise the options expired on May 29, 1997, pursuant
to the agreement entered into with Mr. Hammes on February 28, 1997. The
options expired by their terms unexercised on May 29, 1997.
(3) Mr. van den Bergh was paid in lieu of the vested options that were
in-the-money on August 27, 1997, pursuant to the agreement entered into
with Mr. van den Bergh as of June 30, 1997. The options were allowed to
expire by their terms unexercised on September 30, 1997.
(4) Mr. Kaplan's right to exercise the options expired on November 30, 1997,
pursuant to the agreement entered into with Mr. Kaplan as of August 31,
1997. The options expired by their terms unexercised on November 30, 1997.
EMPLOYMENT AGREEMENTS AND TERMINATION OF EMPLOYMENT ARRANGEMENTS
The Company has an employment agreement with Mr. Levin effective for the
term October 1, 1997 through December 31, 2000. Pursuant to the Company Merger
Agreement, the Company will not have any responsibility for the Company's
obligations under Mr. Levin's employment agreement following consummation of the
CLN Holdings Merger, except for payment of the transaction bonus described
below. The employment agreement provides for a base salary of $1,000,000 per
annum, and participation in The Coleman Company, Inc. Executive
32
<PAGE>
Annual Incentive Plan (the "Incentive Plan") with a 100% target bonus
opportunity. The employment agreement with Mr. Levin also provides for, among
other things, participation in the Company's other benefit plans, certain
pension benefits and payments upon death, disability, termination without cause
and change of control of the Company. Upon a termination of employment without
cause, Mr. Levin would be entitled, among other things, to receive payments
equal to base salary for the balance of the term of the agreement (but in any
event not less than one year). Upon a change of control Mr. Levin would be
entitled to a lump sum payment equal to base salary and target bonus payable for
the remainder of the term. In addition, Mr. Levin's employment agreement
provides for a gross-up for certain excise taxes resulting from payments and
benefits under the employment agreement. Pursuant to the employment agreement,
Mr. Levin is entitled to a transaction bonus equal to 1.5% of the enterprise
value of certain divestitures, up to a maximum aggregate amount of $1.5 million.
The consummation of the sale of CSS would result in a transaction bonus payable
to Mr. Levin of $1.5 million.
The Company has an employment agreement with Mr. Shapiro effective for the
term July 1, 1997 through June 30, 2000. Pursuant to the Company Merger
Agreement, the Company will not have any responsibility for the Company's
obligations under Mr. Shapiro's employment agreement following consummation of
the CLN Holdings Merger. The employment agreement provides for a base salary of
$350,000 per annum, and participation in the Incentive Plan with a 70% target
bonus opportunity. The employment agreement with Mr. Shapiro also provides for,
among other things, participation in the Company's other benefit plans and
payments upon death, disability, termination without cause and change of control
of the Company. Upon termination of employment without cause, Mr. Shapiro would
be entitled, among other things, to receive payments equal to base salary for
the balance of the term of the agreement (but in any event not less than one
year). Upon a change of control, Mr. Shapiro would be entitled to a lump sum
payment equal to base salary and target bonus payable for the remainder of the
term. In addition, Mr. Shapiro's employment agreement provides for a gross-up
for certain excise taxes resulting from payments and benefits under the
employment agreement.
The Company has an employment agreement with Mr. McEvoy effective for the
term January 1, 1996 through December 31, 1998. Pursuant to the employment
agreement, Mr. McEvoy is paid a base salary of $200,000 per annum, and is
entitled to participate in the Incentive Plan with a 70% target bonus
opportunity. The employment agreement with Mr. McEvoy also provides for, among
other things, participation in the Company's other benefit plans and payments
upon death, disability, termination without cause, and subject to certain
conditions, change of control of the Company. Upon a termination of employment
without cause, or termination of employment upon a change of control, Mr. McEvoy
would be entitled, for two years, among other things, to receive payments equal
to base salary and target bonus and to participate in the Company's medical
plans. In addition, Mr. McEvoy's employment agreement provides for a gross-up of
certain excise taxes resulting from payments and benefits under the employment
agreement. In addition, in connection with the sale of CSS, the Company and
Mr. McEvoy entered into a retention agreement. Pursuant to such retention
agreement, Mr. McEvoy will receive, among other things, a special bonus for one
year in an amount equal to Mr. McEvoy's base salary, provided that if Mr. McEvoy
becomes entitled to severance payments under his employment contracts as a
result of a termination of employment within three months of a sale of CSS, the
severance payments to Mr. McEvoy under his employment agreement will be reduced
by the payments of the special bonus.
Mr. Goldman had two employment agreements with the Company which became
effective November 1, 1994 and terminated December 31, 1997. Under the
agreements, which had identical material terms, Mr. Goldman's base salary was
$250,000 per year, and Mr. Goldman was eligible for a discretionary incentive
payment each year.
Mr. Hammes had an employment agreement with the Company effective January
1, 1996, which provided for, among other things, a base salary of $700,000 per
annum. Mr. Hammes' employment was terminated February 28, 1997. Effective such
date, Mr. Hammes' entered into a severance agreement with the Company having a
severance period of two years. Pursuant to the severance agreement, Mr. Hammes
is entitled to, among other things, severance payments during the severance
period at the rate of $700,000 per annum, and continued
33
<PAGE>
participation in the Company's medical plans during the severance period, and
is entitled to certain pension payments beginning March 1, 1999. In addition,
pursuant to the severance agreement, Mr. Hammes was paid a lump sum payment
during 1997 of $450,000 and is entitled to another $450,000 lump sum payment
at the end of the severance period.
Mr. van den Bergh had an employment agreement with the Company effective
as of May 1, 1996, which provided for, among other things, a base salary of
$500,000 per annum. Mr. van den Bergh's employment was terminated effective
June 30, 1997. Effective such date, Mr. van den Bergh entered into a
severance agreement with the Company having a severance period of one year.
Pursuant to the severance agreement, Mr. van den Bergh was paid two lump sum
payments during 1997 totaling $550,000 and is entitled to, among other
things, continued participation in the Company's medical plans during the
severance period.
Mr. Kaplan had an employment agreement with the Company effective as of
August 1, 1996, which provided for, among other things, a base salary of
$280,000 per annum. Mr. Kaplan's employment was terminated effective August
31, 1997. Effective such date Mr. Kaplan entered into a severance agreement
with the Company, having a severance period or two years. Pursuant to the
severance agreement, Mr. Kaplan is entitled to, among other things, severance
payments during the severance period at the rate of $426,000 per annum, and
continued participation in the Company's medical plans during the severance
period.
PENSION PLANS
RETIREMENT PLAN. The Company participates in the New Coleman Company,
Inc. Retirement Plan for Salaried Employees (the "Salaried Pension Plan")
which replaced a prior plan that was terminated on June 30, 1989.
Participants in the Salaried Pension Plan include participants under the
prior plan and certain salaried exempt employees who are at least 21 years
old and have completed at least one year of service with the Company.
Benefits to participants vest fully after five years of Vesting Service
(as defined in the Salaried Pension Plan) and such benefits are determined
primarily by a formula based on the average of the five consecutive years of
greatest compensation earned during the last ten years of the participant's
service to the Company, and the number of years of service attained by the
individual participant. Such compensation is composed primarily of regular
base salary and contributions to qualified deferred compensation plans and
does not include amounts paid pursuant to the Company's annual cash incentive
compensation plans. Participants make no contributions to the Salaried
Pension Plan.
EXCESS BENEFIT PLAN. The Company participates in the New Coleman
Holdings Inc. Excess Benefit Plan (the "Excess Benefit Plan") for designated
employees who are participants in the Salaried Pension Plan and whose
retirement income from the Salaried Pension Plan in the form of payment to be
made under the Salaried Pension Plan exceeds the maximum permissible under
the Employee Retirement Income Security Act, as amended, and certain
provisions of the Internal Revenue Code of 1986, as amended (the "Code"). The
Excess Benefit Plan supplements the Salaried Pension Plan by providing
additional retirement benefits to its participants in excess of the maximum
amount permitted under the Salaried Pension Plan, which benefits generally
are payable in conjunction with payments made under the Salaried Pension
Plan. Benefits payable under the Excess Benefit Plan have been included in
the estimated annual benefits payable listed on the table following
discussion of the Consolidated Supplemental Retirement Plan. The Excess
Benefit Plan was amended and restated effective January 1, 1995 to add a
provision allowing annual cash incentive compensation plan payments to
designated participants to be included as compensation in the formula used to
determine benefits under the Excess Benefit Plan. Thirteen executives
participated in this feature of the Excess Benefit Plan during 1997.
CONSOLIDATED SUPPLEMENTAL RETIREMENT PLAN. In addition to the obligation
of the Company under the Salaried Pension Plan and the Excess Benefit Plan,
the Company had committed to provide other supplemental retirement benefits
solely for Mr. Hammes, including credit for additional years of service and
certain other
34
<PAGE>
formula changes. Pursuant to an agreement entered into with Mr. Hammes in
February 1997, discussed above, Mr. Hammes is no longer a participant in the
Consolidated Supplemental Retirement Plan.
The following table shows estimated annual benefits payable under the
Salaried Pension Plan and the Excess Benefit Plan, and reflects the straight
life benefit form of payment for employees, assumes normal retirement at age
65, and reflects deductions for Social Security and other offset amounts:
<TABLE>
<CAPTION>
Estimated Annual Pension
----------------------------------------------------------
Final Average 10 Years 20 Years 30 Years 35 Years
Earnings of Service of Service of Service of Service
------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
$ 100,000 $ 15,896 $ 31,792 $ 47,688 $ 55,636
200,000 35,896 71,792 107,688 125,636
300,000 55,896 111,792 167,688 195,636
400,000 75,896 151,792 227,688 265,636
500,000 95,896 191,792 287,688 335,636
600,000 115,896 231,792 347,688 405,636
700,000 135,896 271,792 407,688 475,636
800,000 155,896 311,792 467,688 545,636
900,000 175,896 351,792 527,688 615,636
1,000,000 195,896 391,792 587,688 685,636
1,100,000 215,896 431,792 647,688 755,636
1,200,000 235,896 471,792 707,688 825,636
1,300,000 255,896 511,792 767,688 895,636
1,400,000 275,896 551,792 827,688 965,636
1,500,000 295,896 591,792 887,688 1,035,636
1,600,000 315,896 631,792 947,688 1,105,636
1,700,000 335,896 671,792 1,007,688 1,175,636
1,800,000 355,896 711,792 1,067,688 1,245,636
</TABLE>
Benefits under the Salaried Pension Plan are payable upon normal
retirement at age 65, and at age 55 following vested termination, disability,
and death. A participant may elect to commence early benefit payments at any
time after the participant's 55th birthday or may retire with 30 years of
Vesting Service at amounts reduced from those payable upon normal retirement
age. As of December 31, 1997, credited years of service for each of the
individuals listed on the Summary Compensation Table are as follows: Mr.
Levin, 8.7 years; Mr. Ramon, 4.6 years; Mr. Goldman, 4 years; Mr. Stearns,
21.2 years; Mr. McEvoy, 3.8 years; Mr. Hammes, 3.4 years; Mr. van den Bergh,
zero years; and Mr. Kaplan, 1.1 years. In accordance with Mr. Hammes'
termination of employment agreement (see Employment Agreements and
Termination of Employment Arrangements), discussed above, Mr. Hammes will be
entitled to receive a pension of $15,110 per month commencing March 1, 1999.
Pursuant to the Company Merger Agreement, from and after the
effective time of the CLN Holdings Merger, Sunbeam has agreed to allow
Company employees to participate in Sunbeam benefit plans on substantially
the same basis as similarly situated Sunbeam employees, and has also agreed
to cause the Company to continue its employee benefit plans for a period of
at least six (6) months following such date. Sunbeam has also agreed to
35
<PAGE>
give Company employees full credit for purposes of eligibility and vesting of
benefits and benefit accrual for service with the Company and its affiliates
prior to the effective time of the CLN Holdings Merger provided, however,
that no such crediting of service results in duplication of benefits.
REPORT ON EXECUTIVE COMPENSATION BY THE COMPENSATION COMMITTEE
The Compensation Committee is comprised entirely of directors who
are not officers or employees of the Company. The Compensation Committee is
composed of Messrs. Robinson (Chairman), Drapkin and Slovin, and Ms. Jordan.
The Compensation Committee is responsible for:
- Reviewing and approving the salary and annual incentive compensation
of the Company's executive officers;
- Reviewing, approving or modifying performance standards against
which annual incentive compensation awards will be made for
executive officers;
- Reviewing, approving or modifying annual incentive compensation
awards for executive officers;
- Reviewing, approving or modifying stock option awards for all
employees, including executive officers;
- Reviewing, approving or modifying supplemental benefit or
compensation plans which are available to designated executives;
- Reviewing and recommending to the Board of Directors changes to
current executive officer benefit plans or the adoption of new
executive compensation programs requiring shareholder approval;
and
- Reviewing and acting as appropriate on any other issues relating
to executive compensation and brought to the Compensation
Committee by the Chairman for its consideration.
COMPENSATION PHILOSOPHY
In 1994, the compensation philosophy for the Company was
developed and adapted. The philosophy includes the following principles:
- Support the achievement of the Company's desired financial
performance and return to shareholders;
- Provide compensation that will attract and retain the required high
level talent; and
- Align executives officers' interest with the Company's success by
linking both annual incentive compensation and long-term
incentive compensation, in the form of stock option and/or stock
appreciation rights awards, with the Company's success in
achieving performance goals.
The executive compensation philosophy for the Company, as approved
and adopted by the Compensation Committee, provides for an overall level of
potential compensation opportunity that, if aggressive financial goals are
achieved and superior shareholder returns are realized, will be at a 75th
percentile level of competitiveness with consumer products companies of
comparable size. To determine pay level opportunities, the Compensation
Committee consulted with outside consultants and with the Company's officers
responsible for human resources.
The Compensation Committee intends, over time, to set salaries in a
manner consistent with the foregoing. Annual incentive and stock option
opportunities are intended to be set above predicted competitive norms.
Actual individual compensation levels may be greater or lesser than median
competitive levels, based
36
<PAGE>
upon annual and long-term Company performance. The Compensation Committee, at
its discretion, sets executive compensation at levels which it judges are
justified by external, internal and other circumstances.
COMPLIANCE WITH FEDERAL TAX LEGISLATION
The Omnibus Budget Reconciliation Act of 1993 added Section 162(m)
to the Code, which generally precludes the Company and other public companies
from taking a tax deduction for compensation over $l million which is not
"performance-based" and is paid, or otherwise taxable, to executives named in
the Summary Compensation Table and employed by the Company at the end of the
applicable tax year. The Company attempts to preserve as much deduction as
possible without undercutting the compensation objectives set forth above.
Each director on the Compensation Committee is an "outside director" within
the meaning of Section 162(m) of the Code.
BASE COMPENSATION
During 1997, the base compensation of each executive officer was
reviewed and compared to median levels of competitiveness for similarly sized
consumer products companies. The Company has adopted the practice of base
compensation increases for executive officers based on an annual review of
the executive performance and to adjust compensation and to keep it
approximately to the standard described above.
ANNUAL CASH INCENTIVE COMPENSATION
The Chief Executive Officer was paid a bonus based on the targets
in the Incentive Plan, even though a certain condition to payment of the
target bonus was not satisfied. The other named executive officers who were
employed by Coleman at the end of the year were also paid a bonus based on
the same criteria. During 1997, no bonus was paid to the former Chief
Executive Officer. The bonuses were paid to recognize the substantial
progress made in the restructuring of Coleman.
LONG TERM INCENTIVES
In 1997, the Compensation Committee approved option grants to the
Chief Executive Officer of 200,000 shares on February 11, 1997, at an
exercise price of $12.25 and 300,000 shares on April 14, 1997 at an exercise
price of $14.00. It also approved grants totaling in the aggregate 160,000
shares to the other named executive officers employed by the Company at the
end of 1997. The Compensation Committee believes that these grants, which
were primarily made in the first half of 1997, provide an appropriate link
between the interest of executives with those of the Company's shareholders.
OTHER BENEFITS
The Company provides medical and retirement benefits to executive
officers that are generally available to Company salaried employees,
including participation in medical and dental benefit plans, a qualified
401(k) employee savings plan and a qualified defined benefit retirement plan.
In addition, the Company provides certain officers and key management
employees a nonqualified benefit equalization plan which is designed to make
up for benefits that would otherwise to lost due to various tax limitations.
The Company's benefit plans are intended to provide a median level of
benefits when compared to similarly sized consumer products companies. The
Company also provides certain executive officers with certain executive
prerequisites which may be deemed to be a personal benefit or constitute
compensation to such executive officers, including (for example) car
allowances and reimbursements, and club membership dues.
37
<PAGE>
The Compensation Committee believes the executive compensation
philosophy and programs are appropriate and serve the interest of the
shareholders and the Company.
Compensation Committee:
James D. Robinson, Chairman
Donald G. Drapkin
Ann D. Jordan
Bruce Slovin
CUMULATIVE SHAREHOLDER RETURN PERFORMANCE GRAPH
The graph set forth below presents a comparison of cumulative
shareholder return for the Company's common stock for the five-year period
December 31, 1992 through December 31, 1997, on an indexed basis, as compared
with the S&P Midcap 400 stock index and a selected peer group of companies.
The group of companies selected for the peer group represents a
portfolio of companies which share certain characteristics considered
relevant to the earnings performance and related cumulative shareholder
return for the Company's common stock. Selection of the peer group for the
performance line was impacted by the fact that many of the Company's direct
competitors are privately held or are subsidiaries of much larger public
companies. Selection criteria applied in formulating the group of 12
companies, each of whose stock is publicly traded, required each company to
share one or more of the following characteristics representative of the
Company: (a) competitors with the Company in one or more of its product
lines; (b) companies which serve mass merchandisers and their customers; (c)
companies offering strong brand name consumer products; and (d) companies
serving recreational products consumers.
38
<PAGE>
The 12 companies selected as the peer group are as follows: Johnson
Worldwide Associates, Inc.; Anthony Industries, Inc.; Huffy Corporation;
Kellwood Company (parent of American Recreation Products, Inc.); Russell
Corporation; Snap-on Tools Corporation; Sunbeam; Brunswick Corporation; V.F.
Corporation (parent of JanSport, Inc.); Newell Co.; Rubbermaid Incorporated;
and Cooper Industries, Inc.
[GRAPHIC]
<TABLE>
<CAPTION>
12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Coleman $100 $98 $123 $123 $96 $113
S&P MidCap 400 $100 $114 $110 $143 $171 $226
Peer Group $100 $107 $100 $106 $124 $160
</TABLE>
39
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
CLN Holdings has 1,000 shares of common stock, par value $1.00 per
share, issued and outstanding. Ronald O. Perelman, 35 East 62nd Street, New
York, New York 10021, through MacAndrews & Forbes, beneficially owns 100% of
the outstanding shares of common stock of CLN Holdings. Sunbeam may be deemed
to be the beneficial owner of 1,000 shares of CLN Holdings' common stock by
reason of its execution of the CLN Holdings Merger Agreement. No other
director, executive officer or person beneficially owns any shares of common
stock of CLN Holdings.
The following table sets forth information concerning beneficial ownership,
as of the close of business on March 3, 1998, of the Company's common stock by
its 5% beneficial owners, its directors, Chief Executive Officer and the next
four most highly-compensated executives, and of directors and executive officers
as a group.
<TABLE>
<CAPTION>
Name of Amount and Nature of
Beneficial Owner Beneficial Ownership Percent of Class
- ---------------- -------------------- ----------------
<S> <C> <C>
Ronald O. Perelman................................. 44,067,520 (1) 82%
35 E. 62nd Street
New York, New York 10021
Sunbeam Corporation................................ 44,067,520 (2) 82%
1615 South Congress Avenue, Suite 200
Delray Beach, Florida 33445
Donald G. Drapkin.................................. 30,000 (3) *
Frank Gifford...................................... 0 *
Lawrence M. Jones.................................. 40,512 *
Ann Jordan......................................... 0 *
Jerry W. Levin..................................... 373,000 (4) *
John A. Moran...................................... 10,000 *
James D. Robinson III.............................. 0 *
Bruce Slovin....................................... 52,600 (5) *
William H. Spoor................................... 6,000 (6) *
David A. Ramon..................................... 100,000 (7) *
Mark Goldman....................................... 0 *
David K. Stearns................................... 25,342 (8) *
Patrick McEvoy..................................... 0 *
Michael N. Hammes.................................. 0 (9) *
Steven Kaplan...................................... 0 (9) *
Frederik van den Bergh............................. 11,000 (9) *
All Directors and Executive........................ 44,768,474(10) 83%
Officers as a Group
(21 persons)
</TABLE>
* Less than 1%
- ---------------------------
(1) Substantially all of the shares owned are pledged to secure obligations of
Coleman Worldwide and CLN Holdings and shares of intermediate holding
companies are or from time to time may be pledged to secure obligations of
MacAndrews & Forbes Holdings, Inc. or its affiliates.
40
<PAGE>
(2) The Statement on Schedule 13D filed by Sunbeam on March 9, 1998 indicates
that Sunbeam may be deemed to be the beneficial owner of 44,067,520 shares
by reason of its execution of the CLN Holdings Merger Agreement.
(3) Includes 10,000 shares owned by trusts for the benefit of Mr. Drapkin's
children and as to which beneficial ownership is disclaimed.
(4) Includes 2,000 shares owned by trusts for the benefit of Mr. Levin's
children and as to which beneficial ownership is disclaimed. Includes
350,000 shares which may be acquired within 60 days pursuant to stock
options.
(5) Includes 46,300 shares held in trust for family members and as to which
beneficial ownership is disclaimed.
(6) Includes 4,000 shares held in trust for the benefit of Mr. Spoor pursuant
to the IDS Bank & Trust, Trustee, The Pillsbury Company 401(k) Savings
Plan.
(7) Includes 100,000 shares which may be acquired within 60 days pursuant to
stock options.
(8) Includes 520 shares held by Mr. Stearns' spouse and as to which beneficial
ownership is disclaimed. Includes 20,720 shares which may be acquired
within 60 days pursuant to stock options.
(9) No current information is available as to share ownership. Reflects
information in the Company's records as of the date of termination of
employment.
(10) Includes an additional 52,500 shares which may be acquired within 60 days
by directors and executive officers as a group pursuant to stock
options. Excludes 1,002,380 shares which may be acquired by directors
and executive officers pursuant to stock options which will vest and
become exercisable upon consummation of the CLN Holdings Merger.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
RELATIONSHIP WITH MACANDREWS & FORBES
Ronald O. Perelman, through MacAndrews & Forbes, beneficially owns
indirectly 82% of Coleman's common stock. Due to its stock ownership, MacAndrews
& Forbes controls Coleman and is able to elect the entire board of directors. On
February 27, 1998, the CLN Holdings Merger Agreement and the Company Merger
Agreement were executed as described in further detail above. As a result of the
CLN Holdings Merger, CLN Holdings will become a wholly-owned subsidiary of
Sunbeam and Sunbeam will become the indirect owner of approximately 82% of the
outstanding Coleman common stock. Additionally, upon consummation of the CLN
Holdings Merger, all of the current members of Coleman's board of directors will
resign from their positions as directors, and five individuals designated by
Sunbeam will become directors of the Company.
TAX SHARING AGREEMENTS
CLN Holdings, Coleman Worldwide and the Company are, for federal income
tax purposes, included in the consolidated group of which Mafco is the common
parent, and the federal taxable income and loss of CLN Holdings, Coleman
Worldwide and the Company will be included in the consolidated federal income
tax return filed by Mafco. CLN Holdings, Coleman Worldwide and the Company
may also be included in certain state and local tax returns of Mafco or its
subsidiaries. Coleman Holdings and Mafco had entered into a tax sharing
agreement (the "Holdings Tax Sharing Agreement"), pursuant to which Coleman
Holdings was required to pay to Mafco amounts equal to the taxes that Coleman
Holdings would otherwise have to pay if it were to file separate returns
including only itself (including any amounts determined to be due as a result
of a redetermination of the tax liability of the Mafco consolidated group
arising from an audit or otherwise). Following the Coleman Holdings Merger,
the Holdings Tax Sharing Agreement will be terminated.
In connection with the offering of the LYONs, Coleman Worldwide and Mafco
entered into a tax sharing agreement (the "Worldwide Tax Sharing Agreement" and
together with the Holdings Tax Sharing Agreement, the "Tax Sharing Agreements"),
pursuant to which Coleman Worldwide is required to pay to Mafco amounts equal to
the taxes that Coleman Worldwide would otherwise have to pay if it were to file
separate consolidated federal, state or local income tax returns including only
itself and its domestic subsidiaries (including any amounts
41
<PAGE>
determined to be due as a result of a redetermination of the tax liability of
the Mafco consolidated group ensuing from an audit or otherwise). At any time
the LYONs are outstanding, the amounts Coleman Worldwide would be required to
pay to Mafco under the Worldwide Tax Sharing Agreement, together with any
remaining funds paid to Coleman Worldwide by the Company under the Company Tax
Sharing Agreement (as defined below), will instead be advanced by Coleman
Worldwide to Mafco as long as the aggregate amount of such advances at any time
does not exceed the Issue Price plus accrued Original Issue Discount on the
LYONs. Such advances will be evidenced by noninterest bearing unsecured demand
promissory notes from Mafco. Upon the redemption of the LYONs, such demand
notes will be cancelled. In addition, the Company, Coleman Worldwide and
Mafco entered into a Tax Sharing Agreement with the Company (the "Company Tax
Sharing Agreement") pursuant to which the Company is required to pay to Coleman
Worldwide amounts equal to the taxes that the Company would otherwise have to
pay if it were to file separate consolidated federal, state or local income tax
returns including only itself and its domestic subsidiaries (including any
amounts determined to be due as a result of a redetermination of the tax
liability of the Mafco consolidated group ensuing from an audit or otherwise).
Under federal tax law, CLN Holdings, Coleman Worldwide and the Company will be
subject to several liability with respect to the consolidated federal income tax
liabilities of the affiliated group of which Mafco is the common parent for any
taxable period during which CLN Holdings, Coleman Worldwide or the Company or a
subsidiary of any of them is a member of such group. Mafco has agreed, however,
to indemnify CLN Holdings, Coleman Worldwide and the Company for any such
federal income tax liability (and certain state and local tax liabilities) of
Mafco or any of its subsidiaries that CLN Holdings, Coleman Worldwide or the
Company or any of their subsidiaries are actually required to pay. Because the
tax sharing payments to be made under the respective tax sharing agreements will
be determined by the amount of taxes that the Company or Coleman Worldwide, as
the case may be, would otherwise have to pay if it were to file federal, state
or local income tax returns, including only itself and, in the case of Coleman
Worldwide and the Company, its domestic subsidiaries, the tax sharing agreements
will not increase the taxes payable by CLN Holdings if CLN Holdings were to file
separate returns for itself, or by the Company or Coleman Worldwide . Mafco may
benefit, however, to the extent that Mafco can offset the taxable income
generated by CLN Holdings' domestic subsidiaries (including Coleman Worldwide
and the Company) against losses and tax credits generated by Mafco and its other
subsidiaries. Following the consummation of the CLN Holdings Merger, Coleman
will no longer be included in the Mafco consolidated tax group. The Tax Sharing
Agreements will be terminated on the date of the CLN Holdings Merger. The CLN
Holdings Merger Agreement provides for certain tax indemnities and tax sharing
payments with respect to Mafco, Coleman and their respective affiliates.
CROSS-INDEMNIFICATION AGREEMENT
Coleman and Holdings are parties to a cross-indemnification agreement
(the "Cross-Indemnification Agreement"), pursuant to which Coleman has agreed to
indemnify Holdings against all liabilities related to the outdoor products
business transferred to Coleman by Holdings, and Holdings has agreed to
indemnify Coleman and its immediate corporate parent against all liabilities of
Holdings other than liabilities related to the outdoor products business
transferred by Holdings to Coleman. The liabilities that Coleman will indemnify
Holdings against include (i) asserted and potential product liability claims
arising out of products manufactured or sold by the outdoor products business,
and (ii) asserted and potential environmental claims and liabilities related to
facilities currently or formerly owned or used by the outdoor products business.
INSURANCE PROGRAMS
Coleman is insured under policies maintained by MacAndrews & Forbes or
its affiliates, including health and life insurance, workers compensation, and
liability insurance. The Company's expense represents its expected costs for
self-insured retentions and premiums for excess coverage insurance. For 1997,
such expense, including the Company's allocable share of premiums for such
insurance, was approximately $13.3 million. Management believes that the terms
for such insurance are at least as favorable as terms that could be obtained by
the Company were it separately insured.
42
<PAGE>
SERVICES PROVIDED BY OTHER AFFILIATES
From time to time, Coleman purchases from affiliates, at negotiated
rates, specialized accounting and other services. Coleman also provides, at
negotiated rates, specialized accounting services and other services to an
affiliate. The net expense for such services was approximately $394,000 during
1997. Coleman believes that the terms of such arrangements are at least as
favorable to Coleman as those it could have negotiated with nonaffiliated
parties. In addition, certain employees of the Company have been paid by
MacAndrews & Forbes or other affiliates of the Company, and the Company
reimburses such affiliates for the compensation expense for such employees.
PURCHASE OF INACTIVE SUBSIDIARIES
During the first quarter of 1997, Coleman purchased an inactive
subsidiary from an affiliate for approximately $1.0 million, plus a portion of
certain tax benefits to the extent such benefits are realized by Coleman. During
the fourth quarter of 1997, Coleman purchased an inactive subsidiary from an
affiliate for which the Company agreed to pay 50% of the tax benefits realized
by Coleman when and if such benefits are realized. Coleman expects to realize
certain tax benefits from the tax losses of such subsidiaries.
OFFICE LEASE
Coleman subleases office space in New York City from an affiliate. The
rent paid by Coleman represents the allocable portion, based on the space
leased, of the rent paid by the affiliate to its third party landlord. The
expense for such rent during 1997 was approximately $158,000. Coleman believes
that the terms of the sublease are at least as favorable to Coleman as those it
could have negotiated with nonaffiliated parties.
PENSION PLANS
Holdings maintains pension and other retirement plans in various forms
covering employees of Coleman who meet eligibility requirements. Holdings also
has an unfunded excess benefit plan covering certain of Coleman's U.S. employees
whose benefits under the plans described above are limited by provisions of the
Code. Coleman pays to Holdings it allocable costs of maintaining such plans for
Coleman's employees. As part of the consummation of the CLN Holdings Merger,
such pension and other benefits plans will be assigned and assumed by Coleman.
OTHER ARRANGEMENTS
At the beginning of 1995, Mr. McEvoy, an Executive Vice President of
Coleman, had a noninterest-bearing loan from Coleman in the amount of $63,333.
At the end of 1997, the principal balance of the loan was $0.
During 1997, Coleman purchased licensing services from an affiliate,
for which it paid approximately $650,000.
During 1997, Coleman sold products to an affiliate, for which it
received approximately $900,000.
During 1997, Coleman used an airplane owned by a corporation of which a
director of Coleman is a stockholder, for which Coleman paid approximately
$158,000.
During 1997, a subsidiary of Coleman paid approximately $254,000 for
warehouse space leased from a real estate partnership in which Mr. Goldman, an
Executive Vice President of Coleman, and three other immediate family members of
Mr. Goldman's are partners. A manufacturing business owned by Mr. Goldman's
father contracted with Coleman's subsidiary for the manufacture of goods sold to
the subsidiary, for which the subsidiary paid approximately $2.6 million during
1997. Pursuant to the agreement by which Coleman acquired
43
<PAGE>
the Eastpak business, Mr. Goldman is entitled to certain additional payments
from Coleman upon Eastpak achieving certain operating targets. In accordance
with such agreement, a final additional payment of $12.0 million was paid to Mr.
Goldman for 1997 financial performance.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1) and (2) Financial Statements and Schedule.
See List of Financial Statements and Schedules which appears on
page F-1 herein.
(3) Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
2.1 Agreement and Plan of Merger among Sunbeam
Corporation, Camper Acquisition Corp. and The
Coleman Company, Inc. dated as of February 27, 1998
(incorporated by reference to Exhibit 2.1 to The
Coleman Company, Inc. Current Report on Form 8-K/A
filed on March 5, 1998).
2.2 Agreement and Plan of Merger among Sunbeam
Corporation, Laser Acquisition Corp, CLN Holdings
Inc. and Coleman (Parent) Holdings Inc. dated as of
February 27, 1998 (incorporated by reference to Exhibit
10.1 to The Coleman Company, Inc. Current Report on
Form 8-K/A filed on March 5, 1998).
3.1 Certificate of Incorporation of CLN Holdings Inc.
filed with the Secretary of State of the State of
Delaware on May 7, 1997 (incorporated by reference
to Exhibit 3.1 to the CLN Holdings Inc. Registration
Statement Form S-1 (File No. 333-29123) filed on
October 6, 1997).
3.2 Certificate of Ownership and Merger of Coleman
Holdings Inc., merging Coleman Holdings Inc. with
and into Coleman Escrow Corp., as filed with the
Secretary of State of the State of Delaware on July
15, 1997 (incorporated by reference to Exhibit 3.2
to the CLN Holdings Inc. Registration Statement Form
S-1 (File No. 333-29123) filed on October 6, 1997).
3.3 Certificate of Amendment of the Certificate of
Incorporation of Coleman Holdings Inc., as filed
with the Secretary of State of the State of Delaware
on September 4, 1997 (incorporated by reference to
Exhibit 3.3 to the CLN Holdings Inc. Registration
Statement Form S-1 (File No. 333-29123) filed on
October 6, 1997).
3.4 Bylaws of CLN Holdings Inc. as adopted May 7, 1997
(incorporated by reference to Exhibit 3.5 to the
CLN Holdings Inc. Registration Statement Form S-1
(File No. 333-29123) filed on October 6, 1997).
4.1 Indenture, dated as of May 20, 1997, by and among
the Coleman Escrow Corp., Coleman Worldwide (only
with respect to the non-recourse guaranty and
certain collateral security agreements contained in
Articles X and XI thereof) and First Trust National
Association, as Trustee, relating to the Senior
Secured First Priority Discount Notes due 2001, the
Senior Secured Second Priority Discount Notes due
2001, the Senior Secured First Priority Discount
Exchange Notes due 2001 and the Senior
44
<PAGE>
<S> <C>
Secured Second Priority Discount Exchange Notes due
2001 (incorporated by reference to Exhibit (a) to
the Transaction Statement on Schedule 13E-3 of
Coleman Worldwide).
4.2 Registration Agreement, dated as of May 20, 1997,
among Coleman Escrow Corp. and Bear, Stearns & Co., Inc.,
Chase Securities Inc. and Credit Suisse First Boston
Corporation (incorporated by reference to Exhibit 4.2
to the CLN Holdings Inc. Registration Statement Form S-1
(File No. 333-29123) filed on October 6, 1997).
4.3 Amended and Restated Credit Agreement dated as of
August 3, 1995 among the Company, the Lenders party
thereto, the Issuing Bank, the Agent, and the
Co-Agents (incorporated by reference to Exhibit 4.2
to The Coleman Company Inc. Form 10-Q for the period
ended June 30, 1995).
4.4 Amendment No. 1 dated as of April 30, 1996 to the
Amended and Restated Credit Agreement, dated as of
August 3, 1995 among The Coleman Company, Inc., the
Lenders party thereto, the Issuing Bank, the Agent
and the Co-Agents (incorporated by reference to
Exhibit 4.1 to The Coleman Company, Inc. Form 10-Q
for the period ended March 31, 1996).
4.5 Amendment No. 2 dated as of April 30, 1996 to the
Amended and Restated Credit Agreement, dated as of
August 3, 1995 among The Coleman Company, Inc., the
Lenders party thereto, the Issuing Bank, the Agent
and the Co-Agents (incorporated by reference to
Exhibit 4.2 to The Coleman Company, Inc. Form 10-Q
for the period ended March 31, 1996).
4.6 Amendment No. 3 dated as of May 29, 1996 to the
Amended and Restated Credit Agreement, dated as of
August 3, 1995 among The Coleman Company, Inc., the
Lenders party thereto, the Issuing Bank, the Agent
and the Co-Agents (incorporated by reference to
Exhibit 4.1 to The Coleman Company, Inc. Form 10-Q
for the period ended September 30, 1996).
4.7 Amendment No. 4 dated as of October 25, 1996 to the
Amended and Restated Credit Agreement, dated as of
August 3, 1995 among The Coleman Company, Inc., the
Lenders party thereto, the Issuing Bank, the Agent
and the Co-Agents (incorporated by reference to
Exhibit 4.2 to The Coleman Company, Inc. Form 10-Q
for the period ended September 30, 1996).
4.8 Amendment No. 5 dated as of March 7, 1997 to the
Amended and Restated Credit Agreement, dated as of
August 3, 1995 among The Coleman Company, Inc., the
Lenders party thereto, the Issuing Bank, the Agent
and the Co-Agents (incorporated by reference to
Exhibit 4.6 to The Coleman Company, Inc. 1996 Annual
Report on Form 10-K).
4.9 Note Purchase Agreement dated as of August 3, 1995
among The Coleman Company, Inc., and Purchasers
party thereto (incorporated by reference to Exhibit
4.3 to The Coleman Company Inc. Form 10-Q for the
period ended June 30, 1995).
4.10 Note Purchase Agreement dated as of May 1, 1996
among The Coleman Company, Inc., and Purchasers
party thereto (incorporated by reference to Exhibit
4.1 to The Coleman Company, Inc., Current Report on
Form 8-K dated June 28, 1996).
45
<PAGE>
<S> <C>
4.11 Specimen copy of definitive certificate of common
stock of The Coleman Company, Inc., par value $.01
per share (incorporated by reference to Exhibit 4.4
to The Coleman Company, Inc. 1992 Annual Report on
Form 10-K).
4.12 Indenture dated as of May 27, 1993 between Coleman
Worldwide and Continental Bank National Association,
as Trustee (incorporated by reference to Exhibit
4.10 to the Coleman Holdings Inc. Registration
Statement Form S-1 (File No. 33-67058), filed on
August 6, 1993).
4.13 Escrow and Pledge Agreement dated as of May 27, 1993
among Coleman Worldwide and the Trustee, as Escrow
Agent (incorporated by reference to Exhibit 4.2 to
the Coleman Holdings Inc. Registration Statement
Form S-1 (File No. 33-67058), filed on August 6,
1993).
4.14 Worldwide Non-Recourse Guaranty dated as of May 27,
1993 (incorporated by reference to Exhibit 4.6 to
the Coleman Holdings Inc. Registration Statement
Form S-1 (File No. 33-67058), filed on August 6,
1993).
4.15 Worldwide Pledge Agreement dated as of May 27, 1993
between Coleman Worldwide and the Agent (incorporated
by reference to Exhibit 4.7 to the Coleman Holdings Inc.
Registration Statement Form S-1 (File No. 33-67058),
filed on August 6, 1993).
10.1 Cross-Indemnification Agreement dated as of February
26, 1992 among New Coleman Holdings Inc., Coleman
Finance Holdings Inc., The Coleman Company, Inc.,
and certain subsidiaries of New Coleman Holdings
Inc. and The Coleman Company, Inc., (incorporated by
reference to Exhibit 10.1 to The Coleman Company,
Inc. 1992 Annual Report on Form 10-K).
10.2 Amendment No. 1 dated as of December 30, 1992 to
the Cross-Indemnification Agreement (incorporated by
reference to Exhibit 10.2 to The Coleman Company, Inc.
1992 Annual Report on Form 10-K).
10.3 Reimbursement Agreement dated as of February 26,
1992 between The Coleman Company, Inc., and
MacAndrews Holdings (incorporated by reference to
Exhibit 10.4 to The Coleman Company, Inc. 1992
Annual Report on Form 10-K).
10.4 Tax Allocation Agreement dated as of August 24, 1990
among MacAndrews Holdings, New Coleman Holdings Inc.
and subsidiaries of New Coleman Holdings Inc.
(incorporated by reference to Exhibit 10.29 to The
Coleman Company, Inc. 1992 Annual Report on Form 10-K).
10.5 Amendment No. 1 dated as of February 26, 1992 to the
Tax Allocation Agreement dated as of August 24, 1990
among MacAndrews Holdings, New Coleman Holdings Inc.
and subsidiaries of New Coleman Holdings Inc.
(incorporated by reference to Exhibit 10.30 to The
Coleman Company, Inc. 1992 Annual Report on Form 10-K).
10.6 Amendment No. 2 dated as of December 30, 1992 to the
Tax Allocation Agreement dated as of August 24, 1990
among MacAndrews Holdings, New Coleman Holdings
46
<PAGE>
<S> <C>
Inc. and subsidiaries of New Coleman Holdings Inc.
(incorporated by reference to Exhibit 10.31 to
The Coleman Company, Inc. 1992 Annual Report on Form 10-K).
10.7 Amendment No. 3 dated as of May 27, 1993 to the Tax
Allocation Agreement dated as of August 24, 1990 among
MacAndrews Holdings, New Coleman Holdings Inc.
and subsidiaries of New Coleman Holdings Inc.
(incorporated by reference to Exhibit 10.45 to the
Coleman Holdings Inc. Registration Statement Form S-1
(File No. 33-67058), filed on August 6, 1993.
10.8 Tax Sharing Agreement II dated as of February 26,
1992, among Mafco, Coleman Finance Holdings Inc.,
The Coleman Company, Inc. and certain subsidiaries
of The Coleman Company, Inc. (incorporated by
reference to Exhibit 10.25 to The Coleman Company,
Inc. 1992 Annual Report on Form 10-K).
10.9 Amendment No. 1 dated as of December 30, 1992 to the
Tax Sharing Agreement II dated as of February 26,
1992, among Mafco, Coleman Finance Holdings Inc.,
The Coleman Company, Inc. and certain subsidiaries
of The Coleman Company, Inc. (incorporated by
reference to Exhibit 10.26 to The Coleman Company,
Inc. 1992 Annual Report on Form 10-K).
10.10 Supplemental Tax Sharing Agreement dated as of
February 26, 1992, between The Coleman Company, Inc.
and MacAndrews and Forbes Holdings Inc. (incorporated by
reference to Exhibit 10.32 to The Coleman Company, Inc.
1992 Annual Report on Form 10-K).
10.11 Tax Sharing Agreement III dated as of February 26, 1992
among Mafco, New Coleman Holdings Inc., Coleman Finance
Holdings Inc. and subsidiaries of Coleman Finance
Holdings Inc. (incorporated by reference to Exhibit 10.27
to The Coleman Company, Inc. 1992 Annual Report on Form 10-K).
10.12 Amendment No. 1 dated as of December 30, 1992 to the Tax
Sharing Agreement III dated as of February 26, 1992
among Mafco, New Coleman Holdings Inc., Coleman Finance
Holdings Inc. and subsidiaries of Coleman Finance
Holdings Inc. (incorporated by reference to Exhibit 10.28
to The Coleman Company, Inc. 1992 Annual Report on Form 10-K).
10.13 Tax Sharing Agreement V dated as of May 27, 1993
among Mafco, Coleman Worldwide Corporation, The
Coleman Company, Inc. and certain subsidiaries of
The Coleman Company, Inc. (incorporated by reference
to Exhibit 10.38 to the Coleman Holdings Inc.
Registration Statement Form S-1 (File 33-67058),
filed on August 6, 1993).
10.14 Tax Sharing Termination Agreement dated as of May
27, 1993 among Mafco, New Coleman Holdings Inc.,
Coleman Finance Holdings Inc., The Coleman Company,
Inc. and subsidiaries of The Coleman Company, Inc.
and Coleman Finance Holdings Inc. (incorporated by
reference to Exhibit 10.40 to the Coleman Holdings
Inc. Registration Statement Form S-1 (File
33-67058), filed on August 6, 1993).
10.15 Tax Sharing Agreement VI dated as of May 27, 1993
between Mafco and Coleman Worldwide (incorporated by
reference to Exhibit 10.39 to the Coleman Holdings
Inc. Registration Statement Form S-1 (File
33-67058), filed on August 6, 1993).
47
<PAGE>
<S> <C>
10.16* The Coleman Company, Inc. Executive Severance Policy
effective as of February 27, 1998 (incorporated by
reference to Exhibit 10.16 to The Coleman Company,
Inc.
1997 Annual Report on Form 10-K).
10.17 Contingent Payment Agreement dated as of October 10,
1994, by and among E. Acquisition Corporation, M.
Acquisition Corporation, The Coleman Company, Inc.
and Mark Goldman (incorporated by reference to
Exhibit 10.3 to The Coleman Company, Inc. Current
Report on Form 8-K dated November 2, 1994).
10.18 Share Purchase Agreement dated as of February 27, 1996
by and among Butagaz S.N.C. and Bafiges S.A. (incorporated
by reference to Exhibit 10.26 to The Coleman Company,
Inc. 1995 Annual Report on Form 10-K).
10.19 Amendment to the Share Purchase Agreement dated as
of February 27, 1996 by and among Bafiges S.A. and
Butagaz S.N.C. (incorporated by reference to Exhibit
10.27 to The Coleman Company, Inc. 1995 Annual
Report on Form 10-K).
10.20 Shareholders Agreement dated as of February 27, 1996
by and among Butagaz S.N.C., The Coleman Company,
Inc. and Bafiges S.A. (incorporated by reference to
Exhibit 10.28 to The Coleman Company, Inc. 1995
Annual Report on Form 10-K).
10.21 Agreement dated as of February 27, 1996 by and
between Shell International Petroleum Company Limited,
Butagaz S.N.C. on the first part, and Bafiges S.A. and
The Coleman Company, Inc. on the second part
(incorporated by reference to Exhibit 10.29 to The
Coleman Company, Inc. 1995 Annual Report on Form 10-K).
10.22* Letter Agreement dated as of February 28, 1997
between The Coleman Company, Inc. and Michael N.
Hammes (incorporated by reference to Exhibit 10.81
to The Coleman Company, Inc. 1996 Annual Report on
Form 10-K).
10.23* Employment Agreement dated as of January 1, 1996
between The Coleman Company, Inc. and Patrick McEvoy
(incorporated by reference to Exhibit 10.1 to The
Coleman Company, Inc. Form 10-Q for the period ended
March 31, 1996).
10.24* First Amendment dated August 1, 1996 to Employment
Agreement effective as of January 1, 1996, by and
between The Coleman Company, Inc., and Patrick
McEvoy (incorporated by reference to Exhibit 10.6 to
The Coleman Company, Inc. Form 10-Q for the period
ended September 30, 1996).
10.25* Retention Agreement dated September 22, 1997 between
The Coleman Company, Inc. and Patrick McEvoy
(incorporated by reference to Exhibit 10.25 to The
Coleman Company, Inc. 1997 Annual Report on Form
10-K).
10.26* Employment Agreement dated as of January 1, 1996
between The Coleman Company, Inc. and David Stearns
(incorporated by reference to Exhibit 10.50 to The
Coleman Company, Inc. 1995 Annual Report on Form
10-K).
10.27* First Amendment dated August 1, 1996 to Employment
Agreement effective as of January 1, 1996, by and
between The Coleman Company, Inc. and David Stearns
(incorporated by reference to Exhibit 10.4 to The
Coleman Company, Inc. Form 10-Q for the period ended
September 30, 1996).
48
<PAGE>
<S> <C>
10.28* Letter Agreement dated as of June 30, 1997 between
The Coleman Company, Inc. and Frederik van den Bergh
(incorporated by reference to Exhibit 10.5 to The
Coleman Company, Inc. Form 10-Q for the period ended
June 30, 1997).
10.29* Employment Agreement dated as of November 1, 1994
between E. Acquisition Corporation and Mark Goldman
(incorporated by reference to Exhibit 10.79 to The
Coleman Company, Inc. 1996 Annual Report on Form
10-K).
.
10.30* Employment Agreement dated as of November 1, 1994
between M. Acquisition Corporation and Mark Goldman
(incorporated by reference to Exhibit 10.80 to The
Coleman Company, Inc. 1996 Annual Report on Form
10-K).
10.31* The Coleman Company, Inc. Executive Annual Incentive
Plan (incorporated by reference to Exhibit 10.31 to
The Coleman Company, Inc. 1997 Annual Report on
Form 10-K).
10.32* The Coleman Retirement Salaried Incentive Savings
Plan (incorporated by reference to Exhibit 10.3 to
The Coleman Company, Inc. Form 10-Q for the period
ended March 31, 1996).
10.33* The Coleman Retirement Incentive Savings Plan (the
"Savings Plan") (incorporated by reference to
Exhibit 10.54 to The Coleman Company, Inc. 1995
Annual Report on Form 10-K).
10.34* First Amendment dated as of October 11, 1994 to the
Savings Plan (incorporated by reference to Exhibit
10.55 to The Coleman Company, Inc. 1995 Annual
Report on Form 10-K).
10.35* Second Amendment dated as of January 1, 1995 to the
Savings Plan (incorporated by reference to Exhibit
10.56 to The Coleman Company, Inc. 1995 Annual
Report on Form 10-K).
10.36* Third Amendment dated as of December 14, 1995 to the
Savings Plan (incorporated by reference to Exhibit
10.57 to The Coleman Company, Inc. 1995 Annual
Report on Form 10-K).
10.37* Fourth Amendment dated as of December 14, 1995 to
the Savings Plan (incorporated by reference to
Exhibit 10.58 to The Coleman Company, Inc. 1995
Annual Report on Form 10-K).
10.38* Fifth Amendment dated as of January 1, 1996 to the
Savings Plan (incorporated by reference to Exhibit
10.59 to The Coleman Company, Inc. 1995 Annual
Report on Form 10-K).
10.39* Amendment dated as of December 14, 1995 to the
Savings Plan (incorporated by reference to Exhibit
10.60 to The Coleman Company, Inc. 1995 Annual
Report on Form 10-K).
10.40* Amendment dated as of December 14, 1995 to the
Savings Plan (incorporated by reference to Exhibit
10.61 to The Coleman Company, Inc. 1995 Annual
Report on Form 10-K).
49
<PAGE>
<S> <C>
10.41* Amendment dated as of January 1, 1996 to the Savings
Plan (incorporated by reference to Exhibit 10.62 to
The Coleman Company, Inc. 1995 Annual Report on Form
10-K).
10.42* New Coleman Holdings Inc. Excess Benefit Plan dated
as of January 1, 1995 (incorporated by reference to
Exhibit 10.1 to The Coleman Company, Inc. Form 10-Q
for the period ended June 30, 1996).
10.43* The New Coleman Company, Inc. Retirement Plan for
Salaried Employees (the "Retirement Plan")
(incorporated by reference to Exhibit 10.63 to The
Coleman Company, Inc. 1995 Annual Report on Form
10-K).
10.44* Amendment dated as of October 17, 1994 to the
Retirement Plan (incorporated by reference to
Exhibit 10.64 to The Coleman Company, Inc. 1995
Annual Report on Form 10-K).
10.45* Amendment dated as of December 14, 1995 to the
Retirement Plan (incorporated by reference to
Exhibit 10.65 to The Coleman Company, Inc. 1995
Annual Report on Form 10-K).
10.46* Amendment dated as of December 14, 1995 to the
Retirement Plan (incorporated by reference to
Exhibit 10.66 to The Coleman Company, Inc. 1995
Annual Report on Form 10-K).
10.47* Amendment dated as of October 12, 1995 to the
Retirement Plan (incorporated by reference to
Exhibit 10.67 to The Coleman Company, Inc. 1995
Annual Report on Form 10-K).
10.48* Amendment dated as of January 1, 1996 to the
Retirement Plan (incorporated by reference to
Exhibit 10.68 to The Coleman Company, Inc. 1995
Annual Report on Form 10-K).
10.49* Amendment dated as of December 31, 1995 to the
Retirement Plan (incorporated by reference to
Exhibit 10.69 to The Coleman Company, Inc. 1995
Annual Report on Form 10-K).
10.50* The Coleman Company, Inc. Consolidated Supplemental
Retirement Plan, dated as of January 1, 1996
(incorporated by reference to Exhibit 10.73 to The
Coleman Company, Inc. 1995 Annual Report on Form
10-K).
10.51* First Amendment dated July 1, 1996 to the
Consolidated Supplemental Retirement Plan adopted
January 1, 1996 (incorporated by reference to
Exhibit 10.5 to The Coleman Company, Inc. Form 10-Q
for the period ended June 30, 1996).
10.52* The Coleman Company, Inc. Executive Employees
Deferred Compensation Plan, as amended by the First
Amendment thereto (incorporated by reference to
Exhibit 10.11 to The Coleman Company, Inc.
Registration Statement on Form S-1 (File 33-44728),
filed on December 23, 1991).
10.53* The Coleman Company, Inc. 1992 Stock Option Plan, as
amended (incorporated by reference to Exhibit 10.3
to The Coleman Company, Inc. Form 10-Q for the
period ended June 30, 1997).
50
<PAGE>
<S> <C>
10.54* The Coleman Company, Inc. 1993 Stock Option Plan, as
amended (incorporated by reference to Exhibit 10.1
to The Coleman Company, Inc. Form 10-Q for the
period ended June 30, 1997).
10.55* The Coleman Company, Inc. 1996 Stock Option Plan, as
amended (incorporated by reference to Exhibit 10.53
to The Coleman Company, Inc. 1996 Annual Report on
Form 10-K).
10.56 Stock Purchase Agreement among The Coleman Company,
Inc., as Seller, Siebe plc, as Guarantor, and Ranco
Incorporated of Delaware, as Buyer, dated as of
February 18, 1998 (incorporated by reference to
Exhibit 10.56 to The Coleman Company, Inc.
1997 Annual Report on Form 10-K).
10.57* Amendment No. 2 to The New Coleman Company, Inc.
Retirement Plan for Salaried Employees (incorporated
by reference to Exhibit 10.57 to The Coleman Company,
Inc. 1997 Annual Report on Form 10-K).
10.58* Special Amendment Regarding Transfers to The New Coleman
Company, Inc. Retirement Plan for Salaried Employees
(incorporated by reference to Exhibit 10.58 to The
Coleman Company, Inc. 1997 Annual Report on Form 10-K).
10.59* The New Coleman Company, Inc. Pension Plan for Weekly
Salaried and Hourly Paid Employees (incorporated by
reference to Exhibit 10.59 to The Coleman Company,
Inc. 1997 Annual Report on Form 10-K).
10.60 Worldwide Registration Rights Agreement dated as of
May 27, 1993 among Coleman Worldwide, the Company,
the Lenders Party thereto and the Agent
(incorporated by reference to Exhibit 10.47 to the
Coleman Holdings Inc. Registration Statement Form
S-1 (File 33-67058), filed on August 6, 1993).
10.61 Indemnity Agreement dated as of May 27, 1993 among
Coleman Worldwide, New Coleman Holdings Inc. and
certain subsidiaries of New Coleman Holdings Inc.
(incorporated by reference to Exhibit 10.3 to the
Coleman Holdings Inc. Registration Statement Form
S-1 (File 33-67058), filed on August 6, 1993).
10.62 Reimbursement Agreement dated as of May 27, 1993
between Coleman Worldwide and MacAndrews Holdings
(incorporated by reference to Exhibit 10.8 to the
Coleman Holdings Inc. Registration Statement Form
S-1 (File 33-67058), filed on August 6, 1993).
10.63 Escrow Agreement, dated as of May 15, 1997, between
Coleman Escrow Corp. and First Trust National
Association, as Escrow Agent (incorporated by
reference to Exhibit 10.1 to the CLN Holdings Inc.
Registration Statement Form S-1 (File No.
333-29123) filed on October 6, 1997).
10.64 Indemnity Agreement, dated as of May 20, 1997,
between Bear, Stearns & Co. Inc. and CLN Holdings
Inc. (incorporated by reference to Exhibit 10.2
to the CLN Holdings Inc. Registration Statement
Form S-1 (File No. 333-29123) filed on October 6, 1997).
10.65 Indemnity Agreement dated as of July 22, 1993 between
Coleman Holdings Inc., New Coleman Holdings Inc. and
certain of New Coleman Holdings Inc.'s subsidiaries
51
<PAGE>
<S> <C>
(incorporated by reference to Exhibit 10.4 to the
Coleman Holdings Inc. Registration Statement Form S-1
(File No. 33-67058), filed on August 6, 1993).
10.66 Reimbursement Agreement dated as of July 22, 1993
between Coleman Holdings Inc. and MacAndrews
Holdings (incorporated by reference to Exhibit 10.7
to the Coleman Holdings Inc. Registration Statement
Form S-1 (File No. 33-67058), filed on August 6,
1993).
10.67 Tax Sharing Agreement VII dated as of July 22, 1993
between Coleman Holdings Inc. and Mafco
(incorporated by reference to Exhibit 10.41 to the
Coleman Holdings Inc. Registration Statement Form
S-1 (File No. 33-67058), filed on August 6, 1993).
21.1X Subsidiaries of the Company.
24.1X Powers of Attorney executed by Ronald O. Perelman,
Howard Gittis, Irwin Engelman, and Barry F. Schwartz.
27X Financial Data Schedule
</TABLE>
-------------------
* Management Contracts and Compensatory Plans
X Filed herewith
(b) Reports on Form 8-K
A Current Report on Form 8-K was filed on March 3, 1998 to
disclose certain information with regard to the acquisition of CLN
Holdings and the Company by Sunbeam Corporation.
A Current Report on Form 8-K/A was filed on March 5, 1998 to
amend and restate the Company's Current Report on Form 8-K filed on
March 3, 1998.
52
<PAGE>
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: March 18, 1998 By: Ronald O. Perelman *
-------------- -------------------------------------
Ronald O. Perelman
Chairman of the Board, President and
Chief Executive Officer
Date: March 23, 1998 By: Irwin Engelman
-------------- -------------------------------------
Irwin Engelman
Executive Vice President and
Chief Financial Officer
Date: March 23, 1998 By: Laurence Winoker
-------------- -------------------------------------
Laurence Winoker
Chief Accounting Officer
Pursuant to the requirements of the Securities and Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: March 18, 1998 By: Ronald O. Perelman *
-------------- -------------------------------------
Ronald O. Perelman
Chairman of the Board and Director
Date: March 18, 1998 By: Howard Gittis*
-------------- -------------------------------------
Howard Gittis
Director
* Executed on behalf of the individual pursuant to a power of attorney.
Date: March 23, 1998 By: /s/ Joram C. Salig
-------------------------------------
Joram C. Salig
Attorney-in-fact
53
<PAGE>
ANNUAL REPORT ON FORM 10-K
ITEM 8, ITEM 14(a)(1) AND (2) AND (d)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
YEAR ENDED DECEMBER 31, 1997
CLN HOLDINGS INC. AND SUBSIDIARIES
The following consolidated financial statements of CLN Holdings Inc.
and Subsidiaries are included in Item 8:
<TABLE>
<CAPTION>
Page
----
<S> <C>
Consolidated Balance Sheets as of December 31, 1997 and 1996......... F-3
Consolidated Statements of Operations
for the years ended December 31, 1997, 1996 and 1995............... F-4
Consolidated Statements of Stockholder's Deficit
for the years ended December 31, 1997, 1996 and 1995............... F-5
Consolidated Statements of Cash Flows
for the years ended December 31, 1997, 1996 and 1995............... F-6
Notes to Consolidated Financial Statements........................... F-7
Consolidated financial statement schedules of CLN Holdings Inc. and
Subsidiaries included in Item 14(d):
Schedule I - Condensed Financial Information of Registrant........... F-35
</TABLE>
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable and, therefore,
have been omitted.
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholder
CLN Holdings Inc.
We have audited the accompanying consolidated balance sheets of CLN
Holdings Inc. and subsidiaries as of December 31, 1997 and 1996, and the
related consolidated statements of operations, stockholder's deficit, and
cash flows for each of the three years in the period ended December 31, 1997.
Our audits also included the financial statement schedule listed in the Index
at Item 14(a). These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated financial
position of CLN Holdings Inc. and subsidiaries at December 31, 1997 and 1996,
and the consolidated results of their operations and their cash flows for
each of the three years in the period ended December 31, 1997, in conformity
with generally accepted accounting principles. Also, in our opinion, the
related financial statement schedule, when considered in relation to the
basic financial statements taken as a whole, presents fairly in all material
respects, the information set forth therein.
/s/ Ernst & Young LLP
Wichita, Kansas
February 18, 1998
F-2
<PAGE>
CLN HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
December 31,
----------------------------
1997 1996
------------ --------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................ $ 13,031 $ 17,299
Short term investments in escrow................................. 6,331 --
Accounts receivable, less allowance of $8,930 in 1997
and $11,512 in 1996.......................................... 154,279 182,418
Notes receivable................................................. 25,477 27,524
Inventories...................................................... 236,327 287,502
Deferred tax assets.............................................. 26,378 40,466
Prepaid assets and other......................................... 21,437 14,943
------------ --------------
Total current assets......................................... 483,260 570,152
Property, plant and equipment, net................................. 175,494 199,182
Intangible assets related to businesses acquired, net.............. 338,989 349,761
Note receivable - affiliate........................................ 35,395 54,739
Deferred tax assets and other...................................... 64,731 34,441
------------ --------------
$ 1,097,869 $ 1,208,275
------------ --------------
------------ --------------
LIABILITIES AND STOCKHOLDER'S DEFICIT
Current liabilities:
Current portion of long-term debt................................ $ 3,026 $ 747
Short-term borrowings............................................ 64,207 33,935
Accounts payable................................................. 91,846 98,628
Accounts payable - affiliates.................................... 2,825 278
Accrued expenses................................................. 94,858 113,040
------------ --------------
Total current liabilities.................................... 256,762 246,628
Long-term debt..................................................... 980,447 999,794
Income taxes payable - affiliate................................... 13,317 18,528
Other liabilities.................................................. 60,606 76,173
Minority interest.................................................. 43,386 45,088
Commitments and contingencies......................................
Stockholder's deficit:
Common stock, par value $1.00 per share;
1,000 shares issued and outstanding.......................... 1 1
Capital deficiency............................................... (131,860) (117,963)
Accumulated deficit.............................................. (114,740) (62,594)
Currency translation adjustment.................................. (9,287) 2,856
Minimum pension liability adjustment............................. (763) (236)
------------ --------------
Total stockholder's deficit.................................. (256,649) (177,936)
------------ --------------
$ 1,097,869 $ 1,208,275
------------ --------------
------------ --------------
</TABLE>
See Notes to Consolidated Financial Statements
F-3
<PAGE>
CLN HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------
1997 1996 1995
------------- ------------ -----------
<S> <C> <C> <C>
Net revenues......................................................... $ 1,154,294 $ 1,220,216 $ 933,574
Cost of sales........................................................ 840,331 928,497 649,427
------------- ------------ -----------
Gross profit......................................................... 313,963 291,719 284,147
Selling, general and administrative expenses......................... 266,635 292,012 175,036
Asset impairment charge.............................................. -- -- 12,289
Interest expense, net................................................ 90,886 75,120 57,830
Amortization of goodwill and deferred charges........................ 14,704 12,304 9,558
Other expense (income), net.......................................... 1,867 (1,604) 283
------------- ------------ -----------
(Loss) earnings before income taxes, minority
interest and extraordinary item.................................... (60,129) (86,113) 29,151
Income tax (benefit) expense......................................... (24,162) (23,766) 11,701
Minority interest in earnings of Camping Gaz......................... 1,386 1,872 --
Minority interest in (loss) earnings of Coleman...................... (446) (7,262) 6,696
------------- ------------ -----------
(Loss) earnings before extraordinary item............................ (36,907) (56,957) 10,754
Extraordinary loss on early extinguishment of debt,
net of income tax benefit of $9,391 in 1997, $846 in 1996,
and $503 in 1995................................................... (15,239) (1,244) (787)
------------- ------------ -----------
Net (loss) earnings.................................................. $ (52,146) $ (58,201) $ 9,967
------------- ------------ -----------
------------- ------------ -----------
</TABLE>
See Notes to Consolidated Financial Statements
F-4
<PAGE>
CLN HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S DEFICIT
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
Common Stock
------------------------- Currency Minimum
Number Capital Accumulated Translation Pension
of Shares Amount Deficiency Deficit Adjustment Liability
-------------- -------- ------------ ------------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994.............. 1,000 $ 1 $ (112,669) $ (3,300) $ 970 $ --
Net earnings........................... -- -- -- 9,967 -- --
Currency translation adjustment........ -- -- -- -- (617)
Net distributions...................... -- -- (1,005) (6,667) --
-------------- -------- ------------ ------------ ---------- --------
Balance at December 31, 1995.............. 1,000 1 (113,674) -- 353 --
Net loss .............................. -- -- -- (58,201) -- --
Currency translation adjustment........ -- -- -- -- 2,503 --
Minimum pension liability
adjustment, net of tax............... -- -- -- -- -- (236)
Net distributions...................... -- -- (4,289) (4,393) -- --
-------------- -------- ------------ ------------ ---------- --------
Balance at December 31, 1996.............. 1,000 1 (117,963) (62,594) 2,856 (236)
Net loss............................... -- -- -- (52,146) -- --
Currency translation adjustment........ -- -- -- -- (12,143) --
Minimum pension liability
adjustment, net of tax............... -- -- -- -- -- (527)
Net distributions...................... -- -- (13,897) -- -- --
-------------- -------- ------------ ------------ ---------- ---------
Balance at December 31, 1997.............. 1,000 $ 1 $ (131,860) $ (114,740) $ (9,287) $ (763)
-------------- -------- ------------ ------------ ---------- --------
-------------- -------- ------------ ------------ ---------- --------
</TABLE>
See Notes to Consolidated Financial Statements
F-5
<PAGE>
CLN HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------
1997 1996 1995
---------- ----------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) earnings.................................................... $ (52,146) $ (58,201) $ 9,967
---------- ----------- ----------
Adjustments to reconcile net (loss) earnings to net cash flows
from operating activities:
Depreciation and amortization.................................... 41,343 38,189 28,335
Non-cash tax sharing agreement (benefit) provision............... (23,980) (4,376) 7,562
Minority interest in (loss) earnings of Coleman.................. (446) (7,262) 6,696
Minority interest in earnings of Camping Gaz..................... 1,386 1,872 --
Interest accretion............................................... 53,581 36,404 33,288
Non-cash gain on LYONs conversion................................ -- (2,755) --
Non-cash restructuring and other charges......................... 17,325 48,269 12,289
Extraordinary loss on early extinguishment of debt............... 24,630 2,090 1,290
Change in assets and liabilities:
Increase in short term investments in escrow................... (6,331) -- --
Decrease (increase) in receivables............................. 3,952 976 (37,833)
Decrease (increase) in inventories............................. 35,250 (42,402) (49,396)
Increase (decrease) in accounts payable........................ 1,226 (12,308) 13,825
Other, net..................................................... (25,962) (5,972) (16,682)
----------- ----------- ----------
121,974 52,725 (626)
----------- ----------- ----------
Net cash provided (used) by operating activities....................... 69,828 (5,476) 9,341
----------- ----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures................................................... (26,973) (41,334) (29,053)
Purchases of businesses, net of cash acquired.......................... (14,300) (161,875) (33,385)
Decrease (increase) in note receivable - affiliate..................... 19,344 (4,054) (6,742)
Proceeds from sale of fixed assets..................................... 5,728 2,924 928
----------- ----------- ----------
Net cash used by investing activities.................................. (16,201) (204,339) (68,252)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in short-term borrowings.................................... 37,071 (11,043) 3,106
Net payments of revolving credit agreement borrowings.................. (91,498) (2,779) (61,289)
Proceeds from issuance of long-term debt............................... 470,007 235,000 200,000
Repayment of long-term debt............................................ (455,339) (6,778) (74,782)
Debt issuance and refinancing costs.................................... (16,516) (3,902) (3,569)
Purchases of Company common stock...................................... -- (2,329) (4,086)
Proceeds from stock options exercised including tax benefits........... 2,585 2,192 4,520
Contributions from parent.............................................. 284 331 488
----------- ----------- ----------
Net cash (used) provided by financing activities....................... (53,406) 210,692 64,388
----------- ----------- ----------
Effect of exchange rate changes on cash................................ (4,489) 4,357 (1,731)
----------- ----------- ----------
Net (decrease) increase in cash and cash equivalents................... (4,268) 5,234 3,746
Cash and cash equivalents at beginning of the year..................... 17,299 12,065 8,319
----------- ----------- ----------
Cash and cash equivalents at end of the year........................... $ 13,031 $ 17,299 $ 12,065
----------- ----------- ----------
----------- ----------- ----------
</TABLE>
See Notes to Consolidated Financial Statements
F-6
<PAGE>
CLN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
1. SIGNIFICANT ACCOUNTING POLICIES
BACKGROUND:
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 "Old
First Priority Notes") and Senior Secured Second Priority Discount Notes due
2001 ( the "Old Second Priority Notes" and together with the Old First
Priority Notes, the "Old 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 Option-TM- Notes due
2013 (the "LYONs"-TM-). Coleman Worldwide also holds 44,067,520 shares of the
common stock of The Coleman Company, Inc. ("Coleman" or the "Company") which
represents approximately 82% of the outstanding Coleman common stock as of
December 31, 1997. CLN Holdings and Coleman Worldwide are holding companies
with no business operations of their own. In connection with an initial
public offering in March 1992, Coleman was formed in December 1991 to succeed to
the assets and liabilities of the outdoor products business of New Coleman
Holdings Inc. ("Holdings") an indirect wholly-owned subsidiary of Mafco
Holdings Inc. ("Mafco"). Holdings (then named The Coleman Company, Inc.) was
acquired in 1989 by MacAndrews & Forbes Holdings Inc. ("MacAndrews Holdings",
and together with Mafco, "MacAndrews & Forbes"), a corporation wholly owned
through Mafco by Ronald O. Perelman. Coleman is a subsidiary of Coleman
Worldwide Corporation which is an indirect wholly-owned subsidiary of
Holdings.
PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements include the accounts of CLN
Holdings and its subsidiaries after elimination of all material intercompany
accounts and transactions.
CASH AND CASH EQUIVALENTS:
All highly liquid investments with a maturity of three months or less
at the date of purchase are considered to be cash equivalents. The Company's
cash equivalents consist primarily of investments in money market funds and
commercial paper. The Company's cash equivalents are generally held until
maturity and are carried at cost, which approximates fair value.
INVENTORIES:
Inventories are stated at the lower of cost or market. Cost is
determined by the first-in, first-out method.
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment is recorded at cost and depreciated on
a straight-line basis over the estimated useful lives of such assets as
follows: land improvements, 5 to 25 years; buildings and building
improvements, 7 to 45 years; and machinery and equipment, 3 to 15 years.
Leasehold improvements are amortized over their estimated useful lives or the
terms of the leases, whichever is shorter. Repairs and
F-7
<PAGE>
CLN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
maintenance are charged to operations as incurred, and significant
expenditures for additions and improvements are capitalized.
INTANGIBLE ASSETS:
Intangible assets primarily represent goodwill which is being
amortized on a straight-line basis over periods not in excess of 40 years.
The carrying amount of goodwill is reviewed if facts and circumstances
suggest it may be impaired. If this review indicates goodwill will not be
recoverable over the remaining amortization period, as determined based on
the estimated undiscounted cash flows of the entity acquired, the carrying
amount of the goodwill is reduced to estimated fair value based on market
value or discounted cash flows, as appropriate. Accumulated amortization
aggregated $48,148 and $39,520 at December 31, 1997 and 1996, respectively.
REVENUE RECOGNITION:
The Company recognizes revenues at the time title passes to the
customer. Net revenues comprise gross revenues less provisions for estimated
customer returns and allowances.
RESEARCH AND DEVELOPMENT:
Research and development expenditures are expensed as incurred. The
amounts charged against operations for the years ended December 31, 1997,
1996 and 1995 were $11,871, $11,082, and $6,548, respectively.
ADVERTISING AND PROMOTION EXPENSE:
Production costs of future media advertising are deferred until the
advertising occurs. All other advertising and promotion costs are expensed
when incurred. The amounts charged against operations for the years ended
December 31, 1997, 1996 and 1995 were $53,408, $58,823, and $37,544,
respectively.
INSURANCE PROGRAMS:
The Company obtains insurance coverage for catastrophic exposures as
well as those risks required to be insured by law or contract. It is the
policy of the Company to retain a significant portion of certain losses
related primarily to workers' compensation, employee health benefits,
physical loss and property, and product and vehicle liability. Provisions for
losses expected under these programs are recorded based upon the Company's
estimates of the aggregate liability for claims incurred.
FOREIGN CURRENCY TRANSLATION:
Assets and liabilities of foreign operations are generally translated
into United States dollars at the rates of exchange in effect at the balance
sheet date. Income and expense items are generally translated at the weighted
average exchange rates prevailing during each period presented. Gains and
losses resulting from foreign currency transactions are included in the
results of operations. Gains and losses resulting from translation of
financial statements of foreign subsidiaries and branches operating in
non-highly inflationary economies are recorded as a component of
stockholder's equity. Foreign subsidiaries and branches operating in highly
inflationary economies translate nonmonetary assets and liabilities at
historical rates and include translation adjustments in the results of
operations.
F-8
<PAGE>
CLN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
DERIVATIVE FINANCIAL INSTRUMENTS:
The Company uses derivative financial instruments to reduce interest
rate and foreign exchange exposures. The Company maintains a control
environment which includes policies and procedures for risk assessment and
for the approval, reporting and monitoring of derivative financial instrument
activities. The Company does not hold or issue derivative financial
instruments for trading purposes.
Amounts to be received or paid under interest rate swap and cap
contracts designated as hedges are recognized over the life of the contracts
as adjustments to interest expense. Gains and losses on terminations of
interest rate swap and cap contracts designated as hedges are deferred and
amortized as adjustments to interest expense over the remaining life of the
terminated contracts. Unrealized gains and losses on outstanding interest
rate contracts designated as hedges are not recognized.
Foreign currency forward contracts are marked to market and gains and
losses on foreign currency forward contracts to hedge firm foreign currency
commitments are deferred and accounted for as part of the related foreign
currency transaction. Gains and losses on all other forward contracts to
hedge third-party and intercompany transactions are recorded in operations as
foreign exchange gains and losses. Gains and losses on purchased foreign
currency option contracts are deferred and recognized as adjustments to cost
of sales upon the sale of the related inventory to the third-party customers.
CREDIT RISK:
Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of trade receivables and
derivative financial instruments. Credit risk on trade receivables is
minimized as a result of the large and diversified nature of the Company's
worldwide customer base. Although the Company has one significant customer
(See Note 15), there have been no credit losses related to this customer.
With respect to its derivative contracts, the Company is also subject to
credit risk of non-performance by counterparties and its maximum potential
loss may exceed the amount recognized in the financial statements. The
Company controls its exposure to credit risk through credit approvals, credit
limits and monitoring procedures. Collateral is generally not required for
the Company's financial instruments.
FAIR VALUE OF FINANCIAL INSTRUMENTS:
The following methods and assumptions were used by CLN Holdings in
estimating its fair value disclosures for financial instruments:
CASH AND CASH EQUIVALENTS: The carrying amount reported in the
balance sheet for cash and cash equivalents approximates its fair
value.
LONG- AND SHORT-TERM DEBT: The carrying amounts of CLN Holdings'
borrowings under its foreign bank lines of credit, revolving
credit agreement and other variable rate debt approximate their
fair value. The fair value of the Company's senior notes issues
(see Note 9) are estimated using discounted cash flow analysis
based on the Company's estimated current borrowing rate for
similar types of borrowing arrangements. The fair value of the
publicly traded LYONs debt and Escrow Notes is based on quoted
market prices.
F-9
<PAGE>
CLN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
FOREIGN CURRENCY EXCHANGE CONTRACTS: The fair values of CLN
Holdings' foreign currency contracts are estimated based on quoted
market prices of comparable contracts, adjusted through
interpolation where necessary for maturity differences.
The carrying amounts and fair values of CLN Holdings' financial
instruments are as follows:
<TABLE>
<CAPTION>
December 31, 1997 December 31, 1996
---------------------------- --------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
of Asset/ of Asset/ of Asset/ of Asset/
(Liability) (Liability) (Liability) (Liability)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Cash and cash equivalents..................... $ 13,031 $ 13,031 $ 17,299 $ 17,299
Short-term debt............................... (64,207) (64,207) (33,935) (33,935)
Long-term debt excluding capital leases....... (983,173) (929,157) (999,947) (972,821)
Foreign currency exchange contracts........... 128 128 940 1,629
</TABLE>
STOCK-BASED COMPENSATION:
Statement of Financial Accounting Standards ("SFAS") No. 123,
"Accounting for Stock-Based Compensation," encourages, but does not require
companies to record compensation cost for stock-based employee compensation
plans at fair value. The Company has chosen to account for stock-based
compensation plans using the intrinsic value method prescribed in Accounting
Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to
Employees," and related Interpretations. Accordingly, compensation cost for
stock options is measured as the excess, if any, of the quoted market price
of Coleman's stock at the date of the grant over the amount an employee must
pay to acquire the stock.
RECLASSIFICATIONS:
Certain prior year amounts in the financial statements have been
reclassified to conform to the current year presentation.
USE OF ESTIMATES:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ materially from those
estimates.
RECENTLY ISSUED ACCOUNTING STANDARDS:
In June 1997, the Financial Accounting Standards Board (the "FASB")
issued SFAS No. 130 "Reporting Comprehensive Income". SFAS No. 130
establishes standards for reporting and display of comprehensive income and
its components in the financial statements. SFAS No. 130 is effective for
fiscal years beginning after December 15, 1997. Reclassification of
financial statements for earlier periods provided for comparative purposes is
required.
F-10
<PAGE>
CLN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
In June 1997, the FASB issued SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information". SFAS No. 131 establishes
standards for the way public business enterprises report information about
operating segments in annual financial statements and requires those
enterprises report selected information about operating segments in interim
financial reports. It also establishes standards for related disclosures
about products and services, geographic areas, and major customers. SFAS No.
131 is effective for financial statements for fiscal years beginning after
December 15, 1997. Financial statement disclosures for prior periods are
required to be restated.
In February 1998, the FASB issued SFAS No. 132, "Employers'
Disclosures about Pensions and Other Postretirement Benefits". SFAS No. 132
revises employers' disclosures about pension and other postretirement
benefits to the extent practicable. It also requires additional information
on changes in the benefit obligations and fair value of plan assets and
eliminates certain other disclosures. SFAS No. 132 is effective for financial
statements for fiscal years beginning after December 15, 1997. Financial
statement disclosures for prior periods are required to be restated.
CLN Holdings has not yet determined the impact of adoption of these
standards; however, the adoption of these standards will have no impact on
CLN Holdings' consolidated results of operations, financial position or cash
flows.
2. ACQUISITIONS AND DIVESTITURES
On November 2, 1994, the Company purchased substantially all the assets
of Eastpak, Inc. and all the capital stock of M.G. Industries, Inc.
(collectively, "Eastpak"), a leading designer, manufacturer and distributor
of branded daypacks, sports bags and related products. The Company also
entered into an agreement with the predecessor owner of Eastpak to make
additional payments based upon the achievement of certain annual sales levels
of Eastpak products and other products substantially similar to the Eastpak
products during the years ended December 31, 1995, 1996, and 1997. A total of
$23,000 was earned by the predecessor owner of Eastpak under the terms of
this agreement. This amount has been recorded as additional goodwill.
During 1995, the Company purchased all of the outstanding shares of
capital stock of Sierra Corporation of Fort Smith, Inc., a manufacturer of
portable outdoor and recreational folding furniture and accessories, and
substantially all of the assets of Active Technologies, Inc. ("ATI"), a
manufacturer of technologically advanced lightweight generators and battery
charging equipment. The aggregate purchase price for these acquisitions was
$19,516 including fees and expenses. These acquisitions were accounted for
using the purchase method of accounting. The purchase price and expenses
associated with these acquisitions exceeded the fair value of net assets
acquired by $11,186 and the excess has been assigned to goodwill and is being
amortized over 20 to 30 years on the straight-line method. In connection with
the ATI purchase, the Company may also be required to make payments to the
predecessor owner of ATI of up to $18,750 based on the Company's sales of ATI
related products and royalties received by the Company for licensing
arrangements related to ATI patents. As of December 31, 1997, the amounts
recorded, as additional goodwill, under the terms of this agreement have been
immaterial. The results of operations of these companies on a pro forma basis
as if their acquisitions had occurred at the beginning of 1995 individually
and in the aggregate were not significant to CLN Holdings.
On January 2, 1996, the Company purchased substantially all the assets
and assumed certain liabilities of Seatt Corporation ("Seatt"), a leading
designer, manufacturer and distributor of safety and security related
electronic products for residential and commercial applications. The Seatt
acquisition, which was accounted for under the purchase method, was completed
for approximately $65,300 including fees and expenses. The results
F-11
<PAGE>
CLN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
of operations of Seatt have been included in the consolidated financial
statements from the date of acquisition. In connection with the purchase
price allocation of the Seatt acquisition, the Company recorded goodwill of
approximately $38,800. The Company is amortizing this amount over 40 years on
the straight-line method.
On February 18, 1998, the Company announced an agreement was signed for
the sale of Coleman Safety & Security Products, Inc., the successor to Seatt,
to Ranco Incorporated of Delaware, a U.S. subsidiary of Siebe plc, a United
Kingdom diversified engineering group. The sale price is approximately
$105,000 and is subject to adjustment upon closing which is expected to occur
by the end of March 1998. Net assets of Coleman Safety & Security Products,
Inc. at December 31, 1997 were approximately $73,000.
On February 28, 1996, the Company purchased approximately 70% of the
outstanding shares of Application des Gaz, S.A. ("ADG" or "Camping Gaz"), a
leading manufacturer and distributor of camping appliances in Europe. The
Company completed the necessary steps to acquire the remaining 30% of the
outstanding shares during the second quarter of 1996. The cost of acquiring
all the shares of ADG was approximately $100,000 including fees and expenses.
The acquisition of Camping Gaz was accounted for under the purchase
method. In connection with the final allocation of purchase price to the fair
values of assets acquired and liabilities assumed, the Company recorded
goodwill of approximately $78,900, which is being amortized over 40 years on
the straight-line method. At acquisition, the Company recognized liabilities
in the amount of $21,898 representing severance and other termination
benefits for certain production and administrative employees of Camping Gaz.
As of December 31, 1997, the Company had paid termination costs of
approximately $13,350 and anticipates all remaining termination costs will be
paid during 1998.
The Company has included the results of operations of Camping Gaz in the
consolidated financial statements from March 1, 1996, the date on which the
Company obtained control of Camping Gaz, and has recognized minority interest
related to the remaining shares for the period March 1, 1996 through June 30,
1996.
The following summarized, unaudited pro forma results of operations of
CLN Holdings for the years ended December 31, 1996 and 1995 assume the
acquisition of Seatt and the acquisition of all the outstanding shares of
Camping Gaz occurred as of the beginning of the respective periods. The pro
forma results include certain adjustments, primarily reflecting increased
amortization and interest expense and a lower income tax provision, and are
not necessarily indicative of what the results of operations would have been
had the Seatt and Camping Gaz acquisitions occurred at the beginning of the
respective periods. Moreover, the pro forma information is not intended to be
indicative of future results of operations.
<TABLE>
<CAPTION>
Year Ended
December 31,
--------------------------
1996 1995
------------ ------------
<S> <C> <C>
Net revenues...................................................... $ 1,246,370 $ 1,193,295
(Loss) earnings before extraordinary item......................... (57,091) 9,996
Net (loss) earnings............................................... (58,335) 9,209
</TABLE>
3. RESTRUCTURING AND OTHER CHARGES
During 1997, the Company recorded restructuring charges of $32,791 and
certain other charges of $3,628, (collectively, the "1997 Restructuring
Charges") and related tax benefits of $13,918. The Company reflected $19,673
of the 1997 Restructuring Charges in cost of sales and reflected $16,746 in
selling, general and
F-12
<PAGE>
CLN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
administrative ("SG&A") expenses. The 1997 Restructuring Charges of $36,419
consisted of (i) $15,735 to exit various low margin products, including
pressure washers, (ii) $14,943 to close and relocate certain administrative
and sales offices, and (iii) $5,741 to close several manufacturing
facilities. Most of these activities were substantially complete as of
December 31, 1997, and remaining actions are expected to be completed in 1998.
During 1996, the Company recorded restructuring charges of $66,202 and
certain other charges of $7,998 (collectively, the "1996 Restructuring
Charges") and related net tax benefits of $21,684. The Company reflected
$44,005 of the 1996 Restructuring Charges in cost of sales and $30,195 in
SG&A. The pre-tax restructuring charges of $66,202 consisted of (i) $29,067
to integrate Camping Gaz and Coleman operations into a global recreation
products business, (ii) $19,000 to exit the low end electric pressure washer
business, (iii) $14,135 to exit a portion of the Company's battery powered
light business and (iv) $4,000 to settle certain litigation with respect to
the battery-powered light business. The charges to integrate the Camping Gaz
and Coleman operations reflect primarily the cost to dispose of duplicate
manufacturing, distribution and administrative facilities and the related
severance costs, which actions were substantially completed in 1997 and are
expected to be fully completed in 1998. The low end pressure washer and
battery powered light businesses were exited by discontinuing the
manufacturing and distribution of these products in 1997. The other pre-tax
charges of $7,998 related primarily to certain asset write-offs. These
charges were incurred in the Company's normal course of business, although
the amounts involved were higher than similar charges the Company had
recorded in prior years. The provision for income taxes included $21,684 of
tax benefits resulting from these restructuring and other charges, net of an
increase in the valuation reserve related to certain foreign deferred tax
assets and other foreign tax charges totaling $5,595.
The components of the combined 1997 Restructuring Charges and 1996
Restructuring Charges and an analysis of the amounts charged against the
reserve are outlined in the following table:
<TABLE>
<CAPTION>
1996 Charges During 1997 Charges During
Original Year Ended Balance at Additional Year Ended Balance at
Reserve 12/31/96 12/31/96 Reserves 12/31/97 12/31/97
--------- -------------- ---------- ---------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Impairment of
fixed assets............ $ 10,012 $ (1,789) $ 8,223 $ 6,449 $ (6,530) $ 8,142
Inventory and other
asset impairments....... 38,257 (25,875) 12,382 10,961 (14,966) 8,377
Termination costs.......... 2,018 (1,633) 385 12,146 (9,729) 2,802
Idle facilities, relocation and
other exit costs........ 23,913 (12,429) 11,484 6,863 (9,656) 8,691
--------- ----------- --------- --------- ----------- ---------
$ 74,200 $ (41,726) $ 32,474 $ 36,419 $ (40,881) $ 28,012
--------- ----------- --------- --------- ----------- ---------
--------- ----------- --------- --------- ----------- ---------
</TABLE>
The termination costs recognized in 1996 related to approximately 200
employees, and the 1997 termination costs related to approximately 525
employees. As of December 31, 1997, $11,362 of termination costs were paid on
behalf of the approximately 700 employees who were terminated as of that date.
During 1995, the Company recognized an asset impairment charge of
$12,289 related to its Brazilian operations. The Brazilian operations had not
performed to the Company's expectations since acquisition of this business in
April of 1994, and in the fourth quarter of 1995, the Company initiated
actions to reduce the operating losses in Brazil. These actions included
replacing management, increasing prices, downsizing the
F-13
<PAGE>
CLN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
manufacturing operations and reducing SG&A and other expenses. Because of
these actions, the Company performed an impairment review and concluded
recognition of an asset impairment charge was appropriate. The basis of the
fair values used in the computation of the charge were appraisals for
property and equipment and estimated discounted cash flows for goodwill. The
charge has been included in the statement of operations under the caption
"Asset Impairment Charge".
4. INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
December 31,
--------------------------
1997 1996
------------ ------------
<S> <C> <C>
Raw material and supplies........................................... $ 59,406 $ 82,399
Work-in-process..................................................... 7,813 12,878
Finished goods...................................................... 169,108 192,225
------------ ------------
$ 236,327 $ 287,502
------------ ------------
------------ ------------
</TABLE>
5. PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, net consisted of the following:
<TABLE>
<CAPTION>
December 31,
--------------------------
1997 1996
------------ ------------
<S> <C> <C>
Land and land improvements............................................ $ 7,700 $ 8,772
Buildings and building improvements................................... 79,101 78,760
Machinery and equipment............................................... 192,650 194,714
Construction-in-progress.............................................. 10,076 15,519
------------ ------------
289,527 297,765
Accumulated depreciation.............................................. (114,033) (98,583)
------------ ------------
$ 175,494 $ 199,182
------------ ------------
------------ ------------
</TABLE>
Depreciation expense was $26,956, $25,770, and $19,142 for the years ended
December 31, 1997, 1996 and 1995, respectively.
6. ACCRUED EXPENSES
Accrued expenses consisted of the following:
<TABLE>
<CAPTION> December 31,
--------------------------
1997 1996
------------ ------------
<S> <C> <C>
Compensation and related benefits................................... $ 20,385 $ 29,331
Other............................................................... 74,473 83,709
------------ ------------
$ 94,858 $ 113,040
------------ ------------
------------ ------------
</TABLE>
F-14
<PAGE>
CLN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
7. OTHER LIABILITIES
Other liabilities consisted of the following:
<TABLE>
<CAPTION>
December 31,
--------------------
1997 1996
--------- ---------
<S> <C> <C>
Pensions and other postretirement benefits........ $49,121 $52,229
Other............................................. 11,485 23,944
--------- ---------
$60,606 $76,173
--------- ---------
--------- ---------
</TABLE>
8. SHORT-TERM BORROWINGS
The Company maintained short-term bank lines of credit at December 31,
1997 and 1996 aggregating approximately $115,249, and $119,101, respectively,
of which approximately $64,207 and $33,935 were outstanding at December 31,
1997 and 1996, respectively. The weighted average interest rate on amounts
borrowed under these short-term lines was approximately 2.7% and 2.4% at
December 31, 1997 and 1996, respectively.
Outstanding letters of credit aggregated approximately $37,208 and $32,897
at December 31, 1997 and 1996, respectively.
9. LONG-TERM DEBT
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
December 31,
--------------------
1997 1996
-------- --------
<S> <C> <C>
7.26% Senior Notes due 2007 (a)........................ $200,000 $200,000
7.10% Senior Notes due 2006 (b)........................ 85,000 85,000
7.25% Senior Notes due 2008 (c)........................ 75,000 75,000
Revolving credit facility (d).......................... 52,127 146,350
Term loan (d).......................................... 64,894 73,478
Senior Secured Discount Exchange Notes due 2001 (e).... 503,171 --
Liquid Yield Option(TM)Notes due 2013 (f).............. 2,503 174,594
Series B Senior Secured Discount Notes due 1998 (g).... -- 242,334
Other.................................................. 778 3,785
-------- --------
983,473 000,541
Less current portion................................... 3,026 747
-------- --------
$980,447 $999,794
-------- --------
-------- --------
</TABLE>
- --------------------
(a) On August 8, 1995, the Company completed a private placement issuance and
sale of $200,000 aggregate principal amount of 7.26% Senior Notes due
2007 (the "2007 Notes"). Interest on the 2007 Notes is payable
semiannually, and the principal is payable in annual installments of
$40,000 each commencing August 8, 2003, with a final installment payment
of $40,000 due on August 8, 2007. If
F-15
<PAGE>
CLN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
there is a default, the interest rate will be the greater of (i) 9.26%
or (ii) 2.0% above the prime interest rate.
The 2007 Notes are unsecured and are subject to various restrictive
covenants including, without limitation, requirements for the maintenance
of specified financial ratios and levels of consolidated net worth and
certain other provisions limiting the incurrence of additional debt and
sale and leaseback transactions under the terms of the note purchase
agreement.
(b) On June 13, 1996, the Company completed a private placement issuance and
sale of $85,000 aggregate principal amount of 7.10% Senior Notes due 2006
(the "2006 Notes"). Interest on the 2006 Notes is payable semiannually,
and the principal is payable in annual installments of $12,143 each
commencing June 13, 2000, with a final installment payment of $12,143 due
on June 13, 2006. If there is a default, the interest rate will be the
greater of (i) 9.10% or (ii) 2.0% above the prime interest rate.
The 2006 Notes are unsecured and are subject to various restrictive
covenants including, without limitation, requirements for the maintenance
of specified financial ratios and levels of consolidated net worth and
certain other provisions limiting the incurrence of additional debt and
sale and leaseback transactions under the terms of the note purchase
agreement.
(c) On June 13, 1996, the Company completed a private placement issuance and
sale of $75,000 aggregate principal amount of 7.25% Senior Notes due 2008
(the "2008 Notes"). Interest on the 2008 Notes is payable semiannually,
and the principal is payable in annual installments of $15,000 each
commencing June 13, 2004, with a final installment payment of $15,000 due
on June 13, 2008. If there is a default, the interest rate will be the
greater of (i) 9.25% or (ii) 2.0% above the prime interest rate.
The 2008 Notes are unsecured and are subject to various restrictive
covenants including, without limitation, requirements for the maintenance
of specified financial ratios and levels of consolidated net worth and
certain other provisions limiting the incurrence of additional debt and
sale and leaseback transactions under the terms of the note purchase
agreement.
(d) In April 1996, the Company amended its credit agreement to: a) provide a
term loan of French Franc 385,125 ($64,894 at December 31, 1997 exchange
rates) (the "Term Loan"), b) provide a $275,000 unsecured revolving
credit facility line (the "Credit Facility"), c) allow for the Camping
Gaz acquisition and d) extend the maturity of the credit agreement (as
amended, the "Company Credit Agreement"). In connection with the Company
recording the restructuring and other charges as discussed in Note 3 and
lower than expected operating results, the Company further amended the
Company Credit Agreement in October 1996 and again in March 1997.
The Company Credit Agreement is available to the Company until April 30,
2001. The outstanding loans under the Company Credit Agreement bear
interest at either of the following rates, as selected by the Company
from time to time: (i) the higher of the agent's base lending rate or the
federal funds rate plus .50% or (ii) the London Inter-Bank Offered Rate
("LIBOR") plus a margin ranging from .25% to 2.125% based on the
Company's financial performance. If there is a default, the interest rate
otherwise in effect will be increased by 2% per annum. The Company Credit
Agreement also bears an overall facility fee ranging from .15% to .375%
based on the Company's financial performance.
F-16
<PAGE>
CLN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
In addition, the Company Credit Agreement provides, subject to certain
exceptions, for the net cash proceeds from disposition of assets other
than in the ordinary course of business, to be used to prepay any
outstanding Term Loan balances with any remaining excess net cash
proceeds to be applied to outstanding borrowings under the Credit
Facility with a corresponding reduction in the overall amount of the
Credit Facility line.
The Company Credit Agreement contains various restrictive covenants
including, without limitation, requirements for the maintenance of
specified financial ratios, levels of consolidated net worth and profits,
and certain other provisions limiting the incurrence of additional debt,
purchase or redemption of the Company's common stock, issuance of
preferred stock of the Company, and also prohibits the Company from
paying any dividends until on or after January 1, 1999 and limits the
amount of dividends the Company may pay thereafter. The Company Credit
Agreement also contains an event of default upon a change of control of
the Company (as defined in the Company Credit Agreement) and other
customary events of default. In addition, substantially all of the shares
of the Company's common stock owned by Coleman Worldwide are pledged to
secure indebtedness of Coleman Worldwide and of its parent, CLN Holdings
Inc. The indentures governing this indebtedness contain various covenants
including a covenant placing certain limitations on the Company's
indebtedness.
(e) On May 20, 1997, CLN Holdings issued approximately $600,475 in principal
amount at maturity of Old First Priority Notes and approximately $131,560
in principal amount at maturity of Old Second Priority Notes resulting in
aggregate net proceeds of approximately $455,257 in a private placement
offering. The Old First Priority Notes and Old 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. Subsequent to the private placement offering, a registration
statement on Form S-1 was filed to exchange the Old First Priority Notes
for Senior Secured First Priority Discount Exchange Notes due 2001 (the
"First Priority Notes") and to exchange the Old Second Priority Notes for
Senior Secured Second Priority Discount Exchange Notes due 2001 (the
"Second Priority Notes" and together with the First Priority Notes, the
"Escrow Notes"). 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 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 at a price specified in the
Indenture in the event of a change of control of CLN Holdings (as defined
in the Indenture).
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 Discount Notes (as defined
below). Coleman Holdings recorded an extraordinary loss of $4,300, net of
tax benefits of $2,315,
F-17
<PAGE>
CLN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
relating to the excess of the redemption price over the accreted value of
the Discount Notes and the write-off of deferred charges related to the
Discount Notes. Approximately $191,278 of the net proceeds of the Escrow
Notes were contributed to Coleman Worldwide and used by it to accept for
exchange, $554,053 aggregate principal amount at maturity of LYONs,
including redemption fees and expenses. Coleman Worldwide recorded an
extraordinary loss of $10,939, 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. The $7,500 principal amount at maturity
of LYONs which remain outstanding are secured by a pledge of 7,692,854
shares of Coleman common stock owned by Coleman Worldwide. 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 36,374,666 shares of Company common stock and will be
secured by the shares currently securing the LYONs upon their redemption.
(f) On May 27, 1993, Coleman Worldwide issued and sold $500,000 principal
amount at maturity of LYONs in an underwritten public offering. On June
7, 1993, an additional $75,000 principal amount at maturity of LYONs was
sold upon exercise of the underwriter's overallotment option. During
1997, Coleman Worldwide redeemed $554,053 principal amount at maturity of
LYONs as described above. The $7,500 principal amount at maturity of
LYONs which remain outstanding are secured by a pledge of 7,692,854
shares of Coleman common stock owned by Coleman Worldwide. There are no
periodic payments of interest on the LYONs. The aggregate principal
amount of the LYONs represents a yield to maturity of 7.25% per annum
(computed on a semi-annual bond equivalent basis) calculated from May 27,
1993. Coleman Worldwide plans to redeem the remaining $7,500 aggregate
principal amount at maturity of LYONs no later than May 27, 1998 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 Indenture governing the LYONs, to which the
Company is not a party, provides the holders of LYONs with the option to
require Coleman Worldwide to purchase the LYONs at a price specified in
the Indenture after the occurrence of certain events ("Additional
Purchase Right Events"). Additional Purchase Right Events occur, among
other things, upon the Company's Consolidated Debt Ratio (as defined)
exceeding 0.75 to 1.0 or the Consolidated Net Worth (as defined) of
Coleman Worldwide as of the end of any fiscal quarter being less than a
specified amount which is $70,000 at December 31, 1997.
(g) On July 22, 1993, Coleman Holdings issued and sold $281,281 principal
amount at maturity of Old Notes in a private placement offering.
Subsequent to the private placement offering, a registration statement on
Form S-1 was filed to exchange the Old Notes for Series B Senior Secured
Discount Notes (the "Discount Notes"). During 1997, Coleman Holdings
redeemed the Discount Notes as described above.
The aggregate scheduled amounts of long-term debt maturities in the years
1998 through 2002 are $3,026, $78, $12,207 $632,376, and $12,159, respectively.
F-18
<PAGE>
CLN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
10. DERIVATIVE FINANCIAL INSTRUMENTS
The Company periodically enters into a variety of foreign currency exchange
contracts to reduce its foreign currency exposure resulting primarily from firm
commitments, intercompany foreign sales transactions expected to occur within
the next twelve months, and intercompany accounts receivable and payable.
At December 31, 1997 and December 31, 1996, the Company did not have any
outstanding foreign currency exchange contracts related to firm commitments.
During the fourth quarter of 1995, the Company elected to adopt the
provisions of the Emerging Issues Task Force Issue No. 95-2, "Determination of
What Constitutes a Firm Commitment for Foreign Currency Transactions Not
Involving a Third Party" ("EITF 95-2") which narrowed the scope of intercompany
foreign currency commitments eligible to be hedged for financial reporting
purposes. As a result of this change, the Company increased net income by $3,796
in the fourth quarter of 1995. Prior to the adoption of EITF 95-2, the gains and
losses associated with these contracts were accounted for under the deferral
method. At December 31, 1997, the Company did not have any outstanding foreign
currency forward contracts related to intercompany foreign sales transactions.
At December 31, 1996, the Company had forward exchange contracts to sell $8,500
in Canadian dollars maturing on February 28, 1997, for which the Company has
recognized a net gain of $40 as a component of cost of sales.
At December 31, 1997, the Company did not have any outstanding option
contracts. At December 31, 1996, the Company had outstanding option contracts
for the sale of Japanese yen at fixed exchange rates totaling $20,038 for
specified periods of time which expired during 1997. Net unrealized gains
deferred at December 31, 1996 were $653.
With respect to intercompany accounts receivable and payable, at December
31, 1997, the Company had foreign currency forward contracts to sell $1,580 in
foreign currencies, which contracts matured in February 1998, and had deferred a
net gain of $128. At December 31, 1996, the Company had foreign currency forward
contracts to sell $26,623 and to buy $3,898 in foreign currencies, which
contracts matured at various dates in 1997, and had deferred a net gain of $185.
At December 31, 1997, $25,000 of the Company's outstanding long-term debt
was subject to an interest rate swap agreement and $25,000 of the Company's
outstanding long-term debt was subject to an interest rate cap. Under the
interest rate swap agreement, the Company pays the counterparty interest at a
fixed rate of 6.115%, and the counterparty pays the Company interest at a
variable rate equal to the three month LIBOR for a seven-year period commencing
January 2, 1996. The agreement is with a major financial institution which is
expected to fully perform under the terms of the agreement, thereby mitigating
the credit risk from the transaction. The interest rate cap agreement entitles
the Company to receive from a major financial institution the amount, if any, by
which the Company's interest payments on $25,000 of its variable rate debt
exceed 7.35%. The $509 premium paid for this interest rate cap agreement is
included in other assets and was amortized to interest expense over the
three-year term of the cap, which commenced January 3, 1995.
11. INCOME TAXES
CLN Holdings is included in the consolidated federal and certain
consolidated state income tax returns of Mafco and/or its affiliates. CLN
Holdings and Mafco and subsidiaries provide taxes as if they were a separate
taxpayer. CLN Holdings will pay to Mafco amounts equal to the taxes that CLN
Holdings would otherwise have
F-19
<PAGE>
CLN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
to pay if it were to file separate tax returns for itself. To the extent that
CLN Holdings is entitled to a tax benefit from Mafco as a result of its tax
losses, such amounts are recorded as a reduction in the provision for income
taxes and a distribution to its parent. During 1997 and 1996, respectively, CLN
Holdings recorded a benefit of $18,769 and $9,013 for income taxes, and similar
amounts were recorded as distributions to its parent. Coleman Worldwide and
Mafco are parties to a tax sharing agreement (the "Tax Sharing Agreement"),
pursuant to which Coleman Worldwide is required to pay to Mafco amounts equal to
the taxes Coleman Worldwide would otherwise have to pay if it were to file
separate consolidated federal, state or local income tax returns including only
itself and its domestic subsidiaries. Pursuant to the LYONs indenture agreement,
at any time the LYONs are outstanding, the amounts Coleman Worldwide would be
required to pay to Mafco under the Tax Sharing Agreement, together with any
remaining funds paid to Coleman Worldwide by the Company under the tax sharing
agreement between Coleman Worldwide and the Company, may not be paid as tax
sharing payments, but Coleman Worldwide may advance such funds to Mafco as long
as the aggregate amount of such advances at any time does not exceed the issue
price plus accrued OID of the LYONs. Such advances are evidenced by noninterest
bearing unsecured demand promissory notes (the "Mafco Demand Notes") from Mafco
in the amount of $35,395 at December 31, 1997. Following the redemption or
retirement in full of the LYONs, expected to occur no later than May 27, 1998,
the Mafco Demand Notes shall be canceled automatically without further action of
any person, and shall be of no further force or effect whatsoever, and, until
the time of such cancellation, no demand or request for payment of any kind
shall be made with respect to the Mafco Demand Notes. As a result of the
restriction on the payment of the tax sharing amounts, income taxes provided
pursuant to the Tax Sharing Agreement are reflected as a non-cash charge. For
all periods presented, federal and state income taxes are provided as if Coleman
Worldwide filed its own income tax returns. The accompanying consolidated
balance sheet includes approximately $13,317 and $18,528 of federal and state
income taxes payable to Mafco pursuant to the Tax Sharing Agreement at December
31, 1997 and 1996, respectively.
For financial reporting purposes, (loss) earnings before income taxes,
minority interest and extraordinary item include the following components:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------
1997 1996 1995
---------- --------- ---------
<S> <C> <C> <C>
(Loss) earnings before income taxes, minority
interest and extraordinary item:
Domestic...................................... $(67,881) $(65,344) $ 43,585
Foreign....................................... 7,752 (20,769) (14,434)
--------- --------- ---------
$(60,129) $(86,113) $ 29,151
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-20
<PAGE>
CLN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
Significant components of the provision for income tax (benefit) expense were
as follow:
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Current:
Federal............................... $(21,194) $(12,945) $ 6,360
State................................. -- (937) 3,102
Foreign............................... 1,485 3,454 3,853
--------- --------- --------
Total current....................... (19,709) (10,428) 13,315
--------- --------- --------
Deferred:
Federal............................... (538) (10,686) (3,104)
State................................. (1,890) (2,178) (725)
Foreign............................... (2,025) (474) 2,215
--------- --------- --------
Total deferred...................... (4,453) (13,338) (1,614)
--------- --------- --------
$(24,162) $(23,766) $11,701
--------- --------- --------
--------- --------- --------
</TABLE>
The effective tax rate on (loss) earnings before income taxes, minority
interest and extraordinary item varies from the current statutory federal income
tax rate as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------
1997 1996 1995
-------- --------- -------
<S> <C> <C> <C>
(Benefit) provision at statutory rate..... (35.0)% (35.0)% 35.0%
State taxes, net.......................... (2.0) (3.2) 4.0
Nondeductible amortization ............... 4.1 3.0 6.8
Foreign operations........................ (7.0) 2.6 (0.4)
Valuation allowance....................... 3.9 4.1 --
Change in tax rates....................... (2.2) -- --
Puerto Rico operations.................... (1.4) 0.2 (5.7)
Other, net................................ (0.6) 0.7 0.4
-------- --------- -------
Effective tax rate (benefit) provision.... (40.2)% (27.6)% 40.1%
-------- --------- -------
-------- --------- -------
</TABLE>
F-21
<PAGE>
CLN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.
Significant components of CLN Holdings' deferred tax liabilities and assets
are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------
1997 1996
-------- --------
<S> <C> <C>
Deferred tax assets:
Postretirement benefits other than pensions......................... $ 12,964 $ 12,370
Reserves for self-insurance and warranty costs...................... 4,898 6,678
Pension liabilities................................................. 7,377 8,828
Inventory........................................................... 6,626 8,245
Net operating loss carryforwards.................................... 73,628 47,013
Other, net.......................................................... 12,728 24,026
-------- --------
Total deferred tax assets......................................... 118,221 107,160
Valuation allowance................................................. (39,990) (39,639)
-------- --------
Net deferred tax assets......................................... 78,231 67,521
-------- --------
Deferred tax liabilities:
Depreciation........................................................ 19,872 18,248
Other, net.......................................................... 8,405 7,675
-------- --------
Total deferred tax liabilities.................................... 28,277 25,923
-------- --------
Net deferred tax assets......................................... $ 49,954 $ 41,598
-------- --------
-------- --------
</TABLE>
The deferred tax account balance at December 31, 1997 differs from the
account balance at December 31, 1996 due primarily to the 1997 deferred tax
provision, the tax effects of the foreign exchange gain recorded as a
component of stockholder's equity, the tax effects of adjustments related to
the finalization of the purchase accounting related to the acquisition of
Camping Gaz and the deferred tax asset recorded related to the acquisitions
in 1997 of inactive companies which were recorded as a capital contribution
(see Note 12).
During 1997, CLN Holdings increased the valuation allowance related to
certain foreign deferred tax assets due to uncertainties over realization. At
December 31, 1997, CLN Holdings had net operating loss carryforwards
("NOL's") of approximately $107,229 for certain foreign income tax purposes.
These NOL's expire beginning in 1998.
CLN Holdings has not provided for taxes on undistributed foreign
earnings of approximately $20,860 at December 31, 1997, as CLN Holdings
intends to permanently reinvest these earnings in the future growth of the
business. Determination of the amount of unrecognized deferred U.S. income
tax liability is not practicable because of the complexities associated with
its hypothetical calculation.
F-22
<PAGE>
CLN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
12. RELATED PARTY TRANSACTIONS
CAPITAL CONTRIBUTIONS:
As of March 31, 1997, the Company purchased an inactive subsidiary from
an affiliate for net cash consideration of $1,031, including transaction
costs. The Company expects to realize certain foreign tax benefits from this
transaction in future years. Under certain circumstances, a portion of these
tax benefits will be payable to the affiliate to the extent such tax benefits
are realized by the Company. During the fourth quarter of 1997, the Company
purchased an inactive subsidiary from an affiliate in a transaction in which
the Company expects to realize certain foreign tax benefits in future years
and for which the Company agreed to pay 50% of those realized benefits to the
affiliate. The Company has recorded a liability to the affiliate in the
amount of $219 which represents 50% of the estimated amount of future tax
benefits. The Company has accounted for these transactions in a manner
similar to a pooling-of-interests due to the Mafco Holdings Inc. common
control over each of the parties involved in the transactions. The $2,799
excess value of estimated realizable tax benefits acquired over the total
acquisition costs have been accounted for as a capital contribution.
INSURANCE PROGRAMS:
The Company participates in certain of Holdings' insurance programs,
including health and life insurance, workers compensation, and liability
insurance. The Company's expense represents its expected costs for
self-insured retentions and premiums for excess coverage insurance. The
expense was $13,339, $13,923 and $9,875 for the years ended December 31,
1997, 1996 and 1995, respectively.
SERVICES AGREEMENT:
From time to time, Coleman purchases, at negotiated rates, specialized
accounting and other services provided by an affiliate. Coleman also
provides, at negotiated rates, services to an affiliate. The net expense for
such services was $394 during 1997 and was immaterial in prior years.
MANAGEMENT AGREEMENT:
The Company provided management services to certain affiliates
pursuant to a management agreement through June 30, 1995. The consolidated
financial statements reflect the management fees as a reduction in selling,
general and administration expenses. For the year ended December 31, 1995,
management fees earned by the Company were $2,400.
LICENSING AGREEMENT:
During 1997, the Company engaged an affiliate of MacAndrews & Forbes
to provide licensing services. The Company recorded expenses of $650 related
to these services in 1997.
OTHER:
In 1996, the Company entered into an agreement with an affiliate in
which the Company realized approximately $1,800 of net tax benefits
associated with certain foreign tax net operating loss carryforwards that had
not previously been recognized.
F-23
<PAGE>
CLN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
The Company purchases and sells products from and to certain
affiliates. These amounts are not, in the aggregate, material.
The Company subleases six thousand square feet of office space in
New York City from an affiliate pursuant to a month-to-month occupancy
memorandum (the "Lease") entered into during 1997. The rent paid by the
Company during the year ended December 31, 1997 pursuant to the Lease was $158.
During 1997, Coleman used an airplane owned by a corporation of which
a director of Coleman is a stockholder, for which Coleman paid approximately
$158.
13. EMPLOYEE BENEFIT PLANS
PENSION PLANS:
Holdings maintains pension and other retirement plans in various forms
covering employees of the Company who meet eligibility requirements. The
U.S. salaried retirement plan is a non-contributory defined benefit plan and
provides benefits based on a formula of each participant's final average pay
and years of service. The U.S. hourly pension plan is a non-contributory
defined benefit plan and contains a flat benefit formula. The salaried and
hourly plans provide reduced benefits for early retirement and the salaried
plan takes into account offsets for Social Security benefits. The Company's
policy is to contribute annually the minimum amount required pursuant to the
Employee Retirement Income Security Act, as amended. Under certain
circumstances, the Company may make additional contributions to the pension
plans up to the maximum deductible amounts for income tax purposes.
F-24
<PAGE>
CLN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
Holdings also has an unfunded excess benefit plan covering certain of
the Company's U.S. employees whose benefits under the plans described above
are limited by provisions of the Internal Revenue Code. The following table
reconciles the funded status of the pension plans with the amount recognized
in CLN Holdings' consolidated balance sheets as of the dates indicated:
<TABLE>
<CAPTION>
December 31,
----------------------
1997 1996
-------- --------
<S> <C> <C>
Actuarial present value of benefit obligation:
Accumulated benefit obligation, including vested
benefits of $24,296 and $18,686................................ $(27,843) $(21,933)
-------- --------
-------- --------
Projected benefit obligation for service
rendered to date................................................. $(43,246) $(37,092)
Plan assets at fair value.......................................... 23,102 16,197
-------- --------
Projected benefit obligation in excess of plan assets.............. (20,144) (20,895)
Unrecognized prior service cost.................................... 130 50
Unrecognized net loss.............................................. 6,259 7,999
-------- --------
Accrued pension cost............................................... (13,755) (12,846)
Amount reflected as an intangible asset............................ (143) (288)
Amount reflected as minimum pension liability adjustment........... (1,526) (470)
-------- --------
Amount reflected as pension liability.............................. $(15,424) $(13,604)
-------- --------
-------- --------
</TABLE>
The weighted-average discount rate used in determining the actuarial
present value of the projected benefit obligation was 7.5% as of December 31,
1997 and 1996. The rate of increase in future compensation levels reflected
in such determination was 5% as of December 31, 1997 and 1996. The expected
long-term rate of return on assets was 9% as of December 31, 1997, 1996 and
1995. Plan assets consist primarily of common stock, mutual funds and fixed
income securities stated at fair market value, and cash equivalents stated at
cost, which approximates fair market value. Unrecognized items are being
recognized over the estimated remaining service lives of active employees.
Net pension expense includes the following components:
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Service cost-benefits attributed to
service during the year.............................. $ 3,081 $ 3,098 $ 2,125
Interest cost on projected
benefit obligation................................... 2,813 2,442 2,004
Curtailment loss....................................... 972 -- --
Actual return on plan assets........................... (2,908) (1,490) (1,347)
Net amortization and deferrals......................... 1,537 844 834
------- ------- -------
Net pension expense.................................. $ 5,495 $ 4,894 $ 3,616
------- ------- -------
------- ------- -------
</TABLE>
Net pension expense for the year ended December 31, 1997 includes $972
curtailment loss associated with certain executive officer changes during the
year.
F-25
<PAGE>
CLN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
SAVINGS PLAN:
Holdings maintains an employee savings plan under Section 401(k) of
the Internal Revenue Code. This plan covers substantially all of the
Company's full-time U.S. employees and allows employees to contribute up to
10% of their salary to the plan. The Company matches, at a 34% rate, employee
contributions of up to 6% of their salary. Amounts charged to expense for
matching contributions were $1,401, $1,314, and $1,165 for the years ended
December 31, 1997, 1996 and 1995, respectively.
RETIREE HEALTH CARE AND LIFE INSURANCE:
The Company, through Holdings, provides certain unfunded health and
life insurance benefits for certain retired employees. Approximately 55% of
the Company's U.S. employees may become eligible for these benefits if they
reach retirement age while working for the Company.
The following table reconciles the funded status of the Company's
allocable portion of Holdings' postretirement benefit plans with the amount
recognized in CLN Holdings' consolidated balance sheets as of the dates
indicated:
<TABLE>
<CAPTION>
December 31,
----------------------
1997 1996
-------- --------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees......................................................... $ (6,852) $ (6,682)
Fully eligible active plan participants.......................... (3,308) (3,015)
Other active plan participants................................... (10,322) (10,664)
-------- --------
Total accumulated postretirement benefit obligation................ (20,482) (20,361)
Unrecognized transition benefit.................................... (3,707) (3,973)
Unrecognized prior service cost.................................... (404) (492)
Unrecognized net gain.............................................. (2,415) (976)
-------- --------
Net postretirement benefit liability............................... $(27,008) $(25,802)
-------- --------
-------- --------
</TABLE>
Net periodic postretirement benefit expense includes the following
components:
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Service cost-benefits attributed to service
during the year...................................... $ 927 $1,044 $ 756
Interest cost on accumulated postretirement
benefit obligation................................... 1,453 1,454 1,352
Amortization of transition benefit
and other net gains.................................. (358) (354) (455)
------ ------ ------
Net periodic postretirement benefit expense............ $2,022 $2,144 $1,653
------ ------ ------
------ ------ ------
</TABLE>
The discount rate used in determining the accumulated postretirement
benefit obligation ("APBO") was 7.5% as of December 31, 1997 and 1996. At
December 31, 1997, the assumed health care cost trend rate used in measuring
the APBO was 7.5% starting in 1998 then gradually decreasing to 5% by the
year 2003 and remaining at that level thereafter. The health care cost trend
rate assumption has a significant effect on the
F-26
<PAGE>
CLN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
amount of the obligation and periodic benefit expense reported. An increase in
the assumed health care cost trend rates by 1% in each year would increase the
APBO as of December 31, 1997 by approximately 19% and the service and interest
cost components of net periodic postretirement benefit expense by approximately
22%.
STOCK OPTION PLANS:
The Company adopted The Coleman Company, Inc. 1992 Stock Option Plan
(the "1992 Stock Option Plan") in 1992. During 1993, the shareholders approved
the 1993 Stock Option Plan (the "1993 Stock Option Plan") and during 1996, the
shareholders approved The Coleman Company, Inc. 1996 Stock Option Plan (the
"1996 Stock Option Plan"). Under the terms of the 1992 Stock Option Plan, the
1993 Stock Option Plan and the 1996 Stock Option Plan (collectively the "Stock
Option Plans"), incentive stock options ("ISOs"), non-qualified stock options
("NQSOs") and stock appreciation rights may be granted to key employees of the
Company and any of its affiliates from time to time. Stock options have been
granted under the Stock Option Plans with vesting terms and maximum terms of
approximately five years and ten years, respectively. The aggregate number of
shares of common stock as to which options and rights may be granted under the
Stock Option Plans may not exceed 4,700,000.
The following table summarizes the stock option transactions under the
Stock Option Plans:
<TABLE>
<CAPTION>
1997 1996 1995
------------------------- ------------------------- -------------------------
Weighted- Weighted- Weighted-
Average Average Average
Options Exercise Price Options Exercise Price Options Exercise Price
--------- -------------- --------- --------------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding - January 1, 3,017,630 $ 15.84 2,572,930 $ 15.25 2,310,888 $ 14.03
Granted:
at market price 2,081,000 14.77 294,000 19.73 637,000 17.89
above market price 75,000 15.00 381,000 15.00 - -
Exercised (220,750) 11.42 (154,890) 12.17 (325,748) 12.09
Forfeited (1,605,330) 16.49 (75,410) 14.19 (49,210) 13.14
---------- ----------- --------
Outstanding - December 31, 3,347,550 15.14 3,017,630 15.84 2,572,930 15.25
---------- ----------- --------
---------- ----------- --------
Exercisable - December 31, 927,000 14.02 513,440 13.25 413,526 12.84
---------- ----------- --------
---------- ----------- --------
Weighted-average fair value
of options granted during
the year:
at market price $ 7.43 $ 6.62 $ 7.13
---------- ----------- --------
---------- ----------- --------
above market price $ 5.28 $ 3.21 $ --
---------- ----------- --------
---------- ----------- --------
</TABLE>
F-27
<PAGE>
CLN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
The following table summarizes information concerning currently
outstanding and exercisable options at December 31, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------------------------------ ---------------------------------
Range Weighted-Average
of Exercise Number Remaining Weighted-Average Number Weighted-Average
Prices Outstanding Contractual Life Exercise Price Exercisable Exercise Price
------------- ----------- ----------------- ------------------ ------------ ------------------
<S> <C> <C> <C> <C> <C>
$12.25-$13.82 543,030 5.26 years $ 12.96 425,230 $ 12.79
$13.83-$14.00 878,500 9.29 14.00 181,250 14.00
$14.01-$16.12 806,520 6.66 15.38 226,020 15.24
$16.13-$20.38 1,119,500 9.20 16.92 94,500 16.67
---------- ---------
$12.25-$20.38 3,347,550 7.97 15.14 927,000 14.02
---------- ---------
---------- ---------
</TABLE>
As described in Note 1, the Company follows APB Opinion No. 25 in
accounting for stock compensation arrangements. Pro forma financial information
regarding net income and earnings per share has been determined as if the
Company had accounted for its employee stock options under the fair value method
of SFAS No. 123. The fair value of ISOs and NQSOs granted during 1997, 1996 and
1995 were estimated at the date of grant using the Black-Scholes option pricing
model with the following weighted-average assumptions: risk-free interest rates
of 6.53%, 6.11% and 5.91 % for 1997, 1996 and 1995, respectively, dividend yield
of 0.0%, volatility of the expected market price of the Company's common stock
of 31.3%, 20.2% and 30.8% for 1997, 1996 and 1995, respectively, and a
weighted-average expected life of the option of 7.7, 5.5 and 5.5 years for 1997,
1996 and 1995, respectively.
SFAS No. 123 requires the use of option valuation models, one of which
is the Black-Scholes model, that were not developed for use valuing ISOs or
NQSOs. Further, these option valuation models require the input of highly
subjective assumptions, including the expected stock price volatility. In
management's opinion, based on the above, the existing models do not necessarily
provide a reliable single measure of the fair value of its ISOs or NQSOs.
F-28
<PAGE>
CLN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
The following summarized, unaudited pro forma results of operations
assume the estimated fair value of the ISOs and NQSOs granted during the years
ended December 31, 1997, 1996 and 1995 is amortized to expense over the ISOs'
and NQSOs' vesting period. SFAS No. 123 does not require disclosure of the
effect of any grants of stock based compensation prior to 1995 and, therefore,
the pro forma effect of SFAS No. 123 on net earnings is not representative of
the pro forma effect on net earnings in future years.
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------
1997 1996 1995
------------ ------------ ----------
<S> <C> <C> <C>
Pro forma net (loss) earnings......................... $ (55,045) $ (58,918) $ 9,742
</TABLE>
14. COMMITMENTS AND CONTINGENCIES
LEASES:
The Company leases manufacturing, administrative and sales facilities
and various types of equipment under operating lease agreements expiring through
2007. Rental expense was $15,620, $14,164, and $11,526 for the years ended
December 31, 1997, 1996 and 1995, respectively. Minimum rental commitments under
all noncancellable operating leases with remaining lease terms in excess of one
year from December 31, 1997, aggregated $31,506; such commitments for each of
the five years subsequent to December 31, 1997 are $7,571, $6,683, $4,622,
$2,848, and $3,560, respectively, and $6,222 thereafter.
The Company leases its former corporate office building in Denver,
Colorado under agreements which give the Company the right, subject to certain
qualifications, to renew or terminate the lease, or purchase the property. Upon
termination, the Company has guaranteed the lessor certain residual values.
ENVIRONMENTAL MATTERS:
GILBERT AND MOSLEY SITE. As a result of investigations undertaken in
1986, the Kansas Department of Health and Environment ("KDHE") discovered that
groundwater in the downtown Wichita area (the "Gilbert and Mosley Site") was
contaminated with volatile organic chemicals ("VOCs"). Coleman occupied a
facility within the boundaries of the Gilbert and Mosley Site. Subsequent
investigations in the area, including investigations in November 1988 by
Coleman, indicated the groundwater beneath the Coleman property is contaminated
with VOCs. Coleman is in the process of remediating the contamination on its
property.
The City of Wichita has entered into a voluntary agreement with KDHE in
which the City agreed to investigate and then remediate contamination in the
Gilbert and Mosley Site. Coleman has entered into an agreement with KDHE in
which Coleman agreed to perform a similar study for the Coleman property and to
implement remedial activities at its property. In addition, Coleman entered into
an agreement with the City of Wichita in which Coleman agreed to fund its
proportionate share of the City's study and remediation of the Gilbert and
Mosley site.
MAIZE SITE. Coleman has undertaken a soil and groundwater investigation
at its facility in Maize, Kansas (the "Maize Site"). Results indicate that
limited VOC contamination is present in the groundwater under and to the
southeast of the facility. The data has been reported to the KDHE, and Coleman
has entered into an agreement with KDHE to implement appropriate remedial
actions. The remediation system has been installed, and Coleman is in the
process of remediating the contaminated groundwater.
F-29
<PAGE>
CLN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
NORTHEAST SITE. In 1990, Coleman undertook a soil and groundwater
investigation of its facility in northeast Wichita (the "Northeast Site").
Results indicated the presence of VOCs in the groundwater and soils. Although
some of the contamination may be a result of Coleman's operations at the
facility, the data also indicated that contamination was migrating onto the
Coleman property from up gradient sources. Coleman reported the initial results
of its study to KDHE. Coleman has also provided copies of all data to the United
States Environmental Protection Agency (the "EPA"), at its request. The EPA has
not initiated any actions against the Company with respect to the Northeast
Site. An agreement has been entered into with KDHE to undertake additional
investigatory activities, and an interim remediation system has been installed.
The Company has not been named as a potentially responsible party ("PRP")
by the EPA nor does it have joint and several liability with any other PRP for
remediation at any of the above sites.
The Company has adopted an environmental policy designed to ensure the
Company operates in full compliance with applicable environmental regulations
and, where appropriate, the Company's own internal standards. Coleman has also
undertaken an environmental compliance audit program. The Company makes
expenditures it believes are necessary to comply with environmental management
practices. Environmental expenditures that relate to current operations are
expensed or capitalized as appropriate and were not significant in 1997 and are
not expected to be significant in the foreseeable future. The Company accrues
for losses associated with environmental remediation obligations when such
losses are probable and reasonably estimable. Accruals for estimated losses from
environmental remediation obligations generally are recognized no later than
completion of the remedial feasibility study. Such accruals are adjusted as
further information develops or circumstances change. Costs of future
expenditures for environmental remediation obligations are not discounted to
their present value. Recoveries of environmental remediation costs from other
parties are recognized as assets when their receipt is deemed probable.
While it is possible the Company reserves may change in the near term, the
Company believes the reserves established for environmental matters are
adequate. This belief is based on results of environmental investigations of the
groundwater and soils at the manufacturing facilities operated by Coleman
conducted by independent consultants specializing in environmental
investigations and remediation and estimates provided by such independent
consultants, together with estimates provided by Coleman's environmental
engineering staff.
OTHER:
The Company and Holdings are involved in various claims and legal
actions arising in the ordinary course of business. The Company believes the
ultimate disposition of these matters is not expected to have a material
adverse effect on CLN Holdings' consolidated financial condition or results of
operations. The Company has entered into a cross-indemnification agreement
with Holdings pursuant to which it will indemnify Holdings against all
liabilities related to businesses transferred to the Company by Holdings, and
Holdings will indemnify the Company against all liabilities of Holdings other
than liabilities related to the businesses transferred to the Company.
The Company is party to a license agreement which requires payments of
minimum guaranteed royalties aggregating to $11,778 at December 31, 1997; such
commitments for each of the five years remaining under the agreement subsequent
to December 31, 1997 are $1,040, $1,745, $2,434, $3,010 and $3,549,
respectively.
F-30
<PAGE>
CLN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
15. SIGNIFICANT CUSTOMERS
The Company's U.S. and Canadian operations have one significant customer
which accounted for approximately 13%, 15%, and 19% of net revenues in the years
ended December 31, 1997, 1996 and 1995, respectively.
16. CASH FLOW REPORTING
CLN Holdings uses the indirect method to report cash flows from operating
activities. Interest paid was $42,217, $37,608, and $23,976 and net income taxes
paid were $3,206, $2,857, and $4,606 for the years ended December 31, 1997, 1996
and 1995, respectively. Certain non-cash transactions relating to acquisitions,
the issuance of long-term debt and income taxes have been reported in Notes 2, 9
and 11.
17. GEOGRAPHIC SEGMENTS
CLN Holdings, through the Company, designs, manufactures and markets a wide
variety of multiuse products and accessories, which are primarily marketed
through independent retail markets for outdoor recreation and hardware
consumers. CLN Holdings, through the Company, is a leading manufacturer and
marketer of brand name consumer products for the camping and related outdoor
recreation markets in the United States, Canada, Europe, and Japan.
Operating profit, as indicated below, represents net revenues less
operating expenses and amortization of goodwill. Generally, sales between
geographic areas are made at cost plus a share of operating profit. Identifiable
assets are those used by each geographic segment. Corporate assets are
principally cash, certain property and equipment, income tax refunds receivable
- - affiliate, and deferred charges.
F-31
<PAGE>
CLN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
Information related to CLN Holdings' geographic segments is as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------
1997 1996 1995
------------ ------------ ----------
<S> <C> <C> <C>
Net revenues:
Domestic - U.S..................................... $ 855,365 $ 916,260 $ 716,018
- Export.................................. 78,120 91,125 90,434
Europe ............................................ 217,863 168,780 52,233
Other foreign...................................... 167,119 219,350 169,836
Eliminations....................................... (164,173) (175,299) (94,947)
------------ ------------ ------------
$ 1,154,294 $ 1,220,216 $ 933,574
------------ ------------ ------------
------------ ------------ ------------
Operating profit:
Domestic (a)....................................... $ 34,754 $ 19,915 $ 120,915
Europe (b)......................................... 1,299 (17,505) (3,241)
Other foreign (c).................................. 26,384 4,027 (10,540)
------------ ------------ ------------
62,437 6,437 107,134
Corporate expenses (d)............................. (31,680) (17,430) (20,153)
Interest expense................................... (90,886) (75,120) (57,830)
------------ ------------ ------------
(Loss) earnings before income taxes, minority
interest and extraordinary item ................... $ (60,129) $ (86,113) $ 29,151
------------ ------------ ------------
------------ ------------ ------------
Identifiable assets:
Domestic........................................... $ 681,325 $ 782,373 $ 696,681
Europe............................................. 216,816 247,412 70,478
Other foreign ..................................... 91,192 83,033 59,107
Corporate.......................................... 108,536 95,457 83,194
------------ ------------ ------------
$ 1,097,869 $ 1,208,275 $ 909,460
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
- --------------------
(a) Includes restructuring and other charges of $21,025 in 1997 and
$49,257 in 1996.
(b) Includes restructuring and other charges of $114 in 1997 and $20,002
in 1996.
(c) Includes restructuring and other charges of $4,151 in 1997 and
$4,941 in 1996; and $12,289 of asset impairment charges in 1995.
(d) Includes restructuring and other charges of $11,129 in 1997.
F-32
<PAGE>
CLN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
18. QUARTERLY FINANCIAL SUMMARIES (UNAUDITED)
Summarized quarterly financial data for 1997 and 1996 are as follow:
<TABLE>
<CAPTION>
Quarter Ended
----------------------------------------------------------
March 31, June 30, September 30, December 31,
--------- --------- ------------- -----------
<S> <S> <C> <C> <C>
1997
- ----
Net revenues............................ $ 295,464 $ 383,514 $ 252,434 $ 222,882
Gross profit (a)........................ 81,042 101,913 69,867 61,141
Loss before extraordinary item (a)...... (5,959) (350) (16,530) (14,068)
Net loss (a) ......................... (5,959) (11,279) (20,830) (14,078)
1996
- ----
Net revenues............................ $ 273,560 $ 452,654 $ 269,607 $ 224,395
Gross profit (a)........................ 80,966 137,538 39,894 33,321
Earnings (loss) before
extraordinary item (a)............. 8,180 17,337 (46,325) (36,149)
Net earnings (loss) (a)................. 7,598 16,680 (46,330) (36,149)
</TABLE>
- --------------------
(a) Includes restructuring and other charges (credits) as follows:
<TABLE>
<S> <C> <C> <C> <C>
1997
----
Gross profit....................... $ (425) $ 11,402 $ 9,010 $ (314)
Earnings before
extraordinary item.............. 2,435 11,547 9,433 (914)
Net earnings ...................... 2,435 11,547 9,433 (914)
1996
----
Gross profit....................... -- -- 33,567 10,438
Earnings before
extraordinary item.............. -- -- 44,495 8,021
Net earnings....................... -- -- 44,495 8,021
</TABLE>
19. SUBSEQUENT EVENT (UNAUDITED)
On February 27, 1998, CLN Holdings and Coleman (Parent) Holdings Inc., the
parent company of CLN Holdings, entered into an Agreement and Plan of Merger
(the "CLN Holdings Merger Agreement") with Sunbeam Corporation ("Sunbeam") and a
wholly-owned subsidiary of Sunbeam ("Laser Merger Sub"). The CLN Holdings Merger
Agreement provides that, among other things, Laser Merger Sub will be merged
(the "CLN Holdings Merger") with CLN Holdings. Pursuant to the CLN Holdings
Merger Agreement, the shares of CLN Holdings' common stock issued and
outstanding immediately prior to the effective time of the CLN Holdings Merger
will be converted into the right to receive in the aggregate 14,099,749 shares
of Sunbeam's common stock and $159,957 in cash, without interest. In addition,
the outstanding debt of CLN Holdings will remain an obligation of CLN Holdings
following the CLN Holdings Merger.
Coincident with the execution of the CLN Holdings Merger Agreement, the
Company, Sunbeam and a wholly-owned subsidiary of Sunbeam ("Merger Sub"),
entered into an Agreement and Plan of Merger (the
F-33
<PAGE>
CLN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONCLUDED)
(IN THOUSANDS, EXCEPT SHARE DATA)
"Coleman Merger Agreement" and with the CLN Holdings Merger Agreement,
collectively the "Merger Agreements"), providing that, among other things,
Merger Sub will be merged (the "Coleman Merger") with the Company. Pursuant to
the Coleman Merger Agreement, each share of the Company's common stock issued
and outstanding immediately prior to the effective time of the Coleman Merger
(other than shares held by Coleman Worldwide and dissenting shares, if any) will
be converted into the right to receive (a) 0.5677 of a share of Sunbeam common
stock, with cash paid in lieu of fractional shares, and (b) $6.44 in cash,
without interest.
Following consummation of the CLN Holdings Merger, CLN Holdings will be a
direct wholly-owned subsidiary of Sunbeam. Following consummation of the Coleman
Merger, the Company will be an indirect wholly-owned subsidiary of Sunbeam.
The CLN Holdings Merger is subject to the expiration of antitrust waiting
periods and certain other customary conditions. The Coleman Merger Agreement is
subject to consummation of the CLN Holdings Merger. These transactions will
constitute a change in control as defined in the Company Credit Agreement, the
LYONs and the Escrow Notes. Per the terms of the Merger Agreements, certain
arrangements with related parties may be altered or terminated. In addition,
outstanding, unvested Company stock options immediately vest upon consummation
of the CLN Holdings Merger.
F-34
<PAGE>
SCHEDULE 1
CLN HOLDINGS INC. AND SUBSIDIARIES
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CLN HOLDINGS INC.
CONDENSED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
December 31,
-------------------------
1997 1996
----------- -----------
ASSETS
<S> <C> <C>
Short term investments in escrow.................................... $ 6,331 $ --
Investment in Coleman Worldwide Corporation......................... 228,735 62,668
Other assets........................................................ 12,476 1,826
----------- -----------
$ 247,542 $ 64,494
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDER'S DEFICIT
Accrued expenses.................................................... $ 1,020 $ 96
Long-term debt...................................................... 503,171 242,334
Stockholder's deficit
Common stock...................................................... 1 1
Capital deficiency................................................ (131,860) (117,963)
Accumulated deficit............................................... (114,740) (62,594)
Minimum pension liability adjustment.............................. (763) (236)
Currency translation adjustment................................... (9,287) 2,856
----------- -----------
Total stockholder's deficit................................... (256,649) (177,936)
------------ -----------
$ 247,542 $ 64,494
----------- -----------
----------- -----------
</TABLE>
F-35
<PAGE>
SCHEDULE I
CLN HOLDINGS INC. AND SUBSIDIARIES
CONDENSED FINANCIAL INFORMATION OF REGISTRANT (CONTINUED)
CLN HOLDINGS INC.
CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Administrative expenses...................................... $ 134 $ 150 $ 166
Interest expense, net........................................ 43,897 24,353 21,900
Amortization of deferred charges............................. 2,981 1,248 1,249
-------- -------- --------
Loss before income taxes, equity in net (loss) earnings of
subsidiaries and extraordinary item........................ (47,012) (25,751) (23,315)
Income tax benefit........................................... (16,454) (9,013) (8,160)
-------- -------- --------
Loss before equity in net (loss) earnings of
subsidiaries and extraordinary item........................ (30,558) (16,738) (15,155)
Equity in net (loss) earnings of subsidiaries................ (17,288) (41,463) 25,122
-------- -------- --------
(Loss) earnings before extraordinary item.................... (47,846) (58,201) 9,967
Extraordinary loss on early extinguishment of debt,
net of income tax benefit of $2,315........................ (4,300) -- --
-------- -------- -------
Net (loss) earnings.......................................... $(52,146) $(58,201) $ 9,967
-------- -------- --------
-------- -------- --------
</TABLE>
F-36
<PAGE>
SCHEDULE I
CLN HOLDINGS INC. AND SUBSIDIARIES
CONDENSED FINANCIAL INFORMATION OF REGISTRANT (CONTINUED)
CLN HOLDINGS INC.
CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------
1997 1996 1995
--------- -------- --------
<S> <C> <C> <C>
Net cash used by operating activities...................... $ (1,910) $ (102) $ (137)
--------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Contributions to subsidiary................................ (191,437) (386) (208)
--------- -------- -------
Net cash used by investing activities...................... (191,437) (386) (208)
--------- -------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt................... 470,007 -- --
Debt issuance costs........................................ (14,750) -- --
Repayment of long-term debt................................ (262,194) -- --
Contributions from parent.................................. 284 488 345
--------- -------- -------
Net cash provided by financing activities.................. 193,347 488 345
--------- -------- -------
Change in cash............................................. $ -- $ -- $ --
--------- -------- --------
--------- -------- --------
</TABLE>
F-37
<PAGE>
SCHEDULE I
CLN HOLDINGS INC. AND SUBSIDIARIES
CONDENSED FINANCIAL INFORMATION OF REGISTRANT (CONTINUED)
CLN HOLDINGS INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA)
1. BACKGROUND AND 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
("Old Priority 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 represented
approximately 82% of the outstanding Coleman common stock as of December 31,
1997. CLN Holdings and Coleman Worldwide are holding companies with no
business operations of their own.
In the CLN Holdings parent company-only financial statements, CLN
Holdings' investment in Coleman Worldwide is stated at cost plus equity in
undistributed (loss) earnings of Coleman Worldwide since date of acquisition.
Coleman Holdings' share of net earnings (loss) of its unconsolidated subsidiary
is included in consolidated earnings (loss) using the equity method. The CLN
Holdings parent company-only financial statements should be read in conjunction
with CLN Holdings' consolidated financial statements.
2. 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. Subsequent to the issuance of the Old Priority Notes, CLN
Holdings consummated a registered exchange offer whereby senior secured notes
having substantially identical terms as the Old Priority Notes were exchanged
for a like principal amount of Old Priority Notes (the "Exchange Notes" and
collectively with the Old Priority Notes, the "Escrow Notes"). 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 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).
F-38
<PAGE>
SCHEDULE I
CLN HOLDINGS INC. AND SUBSIDIARIES
CONDENSED FINANCIAL INFORMATION OF REGISTRANT (CONCLUDED)
CLN HOLDINGS INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA)
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
$191,278 of the net proceeds of the Escrow Notes were contributed to Coleman
Worldwide and used by it to accept for exchange during 1997, $554,053 aggregate
principal amount at maturity of LYONs, including redemption fees and expenses.
Coleman Worldwide recorded an extraordinary loss of $10,939, 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 $7,500 aggregate principal amount at maturity of LYONs no later
than May 27, 1998 with the remaining proceeds from the issuance of the Escrow
Notes 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 $7,500 principal amount at maturity of LYONs which
remain outstanding are secured by a pledge of 7,692,854 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 36,374,666 shares of Company common stock and
will be secured by the shares currently securing the LYONs upon their
redemption.
F-39
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES
The following is a list of all the subsidiaries of CLN Holdings, Inc.
<TABLE>
JURISDICTION OF ASSUMED
NAME INCORPORATION NAME
---- --------------- -------
<S> <C> <C>
Application des Gaz, S.A. France
Australian Coleman, Inc. Kansas
Bafiges S.A. France
Beacon Exports, Inc. Kansas
C C Outlet, Inc. Delaware Camp Coleman
Camping Gaz do Brasil Brazil
Camping Gaz Great Britian Limited United Kingdom
Camping Gaz (Poland) Poland
Camping Gaz Suisse AG Switzerland
Camping Gaz CS, Spol. SRO Czech Republic
Camping Gaz GmbH Austria
Camping Gaz International Deutschland
GmbH Germany
Camping Gaz Hellas Greece
Camping Gaz International
(Portugal) Ltd. Portugal
Camping Gaz Kft Hungary
Camping Gaz Philippines, Inc. Philippines
</TABLE>
<PAGE>
SUBSIDIARIES, CONTINUED
<TABLE>
JURISDICTION OF ASSUMED
NAME INCORPORATION NAME
---- --------------- -------
<S> <C> <C>
Camping Gaz Italie Srl Italy
Campiran SA Iran
The Canadian Coleman Company, Limited Ontario (Canada) La Compagnie
Canadien Coleman
Coleman Argentina, Inc. Delaware
Coleman Asia Limited Hong Kong
Coleman Country, Ltd. Kansas Coleman Dubai
Coleman (Deutschland) GmbH Germany
Coleman do Brasil Ltda. Brazil
Coleman Europe N.V. Belgium
Coleman Holland B.V. The Netherlands
Coleman Japan Co., Ltd. Japan
Coleman International SARL Switzerland
Coleman Lifestyles K.K. Japan
Coleman Manufacturing de Mexico,
S.A. de C.V. Mexico
Coleman Mexico S. A. de C.V. Mexico
Coleman Powermate Compressors, Inc. Delaware
Coleman Powermate, Inc. Nebraska
Coleman Puerto Rico, Inc. Delaware
Coleman Safety & Security Delaware
Products, Inc.
Coleman SARL France
</TABLE>
<PAGE>
SUBSIDIARIES, CONTINUED
<TABLE>
JURISDICTION OF ASSUMED
NAME INCORPORATION NAME
---- --------------- -------
<S> <C> <C>
Coleman Spas, Inc. California
Coleman SVB S.r.l. Italy
Coleman Taymar Limited United Kingdom
Coleman U.K. Holdings Limited United Kingdom
Coleman U.K. PLC United Kingdom
Coleman Venture Capital, Inc. Kansas
Coleman Worldwide Corporation Delaware
Eastpak Corporation Delaware American Lifestyles Group
Eastpak Manufacturing Corporation Delaware
Epigas International Limited United Kingdom
General Archery Industries, Inc. Arkansas
Jasan Products Ltd. Bermuda
Kansas Acquisition Corp. Delaware
Nippon Coleman, Inc. Kansas
Pearson Holdings, Inc. Arkansas
Productos Coleman, S.A. Spain
PT Camping Gaz Indonesia Indonesia
River View Corporation of Barling, Inc. Arkansas
Sierra Corporation of Fort Smith, Inc. Arkansas
TCCI Management Inc. Delaware
</TABLE>
<PAGE>
SUBSIDIARIES, CONTINUED
<TABLE>
JURISDICTION OF ASSUMED
NAME INCORPORATION NAME
---- --------------- -------
<S> <C> <C>
Taymar Gas Limited United Kingdom
The Coleman Company, Inc. Delaware
Tsana Internacional, S.A. Costa Rica
Woodcraft Equipment Company Missouri
</TABLE>
<PAGE>
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints each of Paul E. Shapiro, Steven R. Isko, Lynn E.
Feldkamp, Karen Clark and Joram C. Salig or any of them, each acting alone, his
true and lawful attorney-in-fact and agent, with full power of substitution, for
him and in his name, place and stead, in any and all capacities, in connection
with CLN HOLDINGS INC. (the "Corporation") Annual Report on Form 10-K for the
year ended December 31, 1997 under the Securities Exchange Act of 1934, as
amended, including, without limiting the generality of the foregoing, to sign
the Form 10-K in the name of and on behalf of the Corporation or on behalf of
the undersigned as a director or officer of the Corporation, and any amendments
to the Form 10-K and any instrument, contract, document or other writing, of or
in connection with the Form 10-K or amendments thereto, and to file the same,
with all exhibits thereto, and other documents in connection therewith,
including this power of attorney, with the Securities and Exchange Commission
and any applicable securities exchange or securities self-regulatory body,
granting unto said attorneys-in-fact and agents, each acting alone, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, each acting alone, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed these presents this
18th day of March, 1998.
Ronald O. Perelman
----------------------
Ronald O. Perelman
<PAGE>
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints each of Paul E. Shapiro, Steven R. Isko, Lynn E.
Feldkamp, Karen Clark and Joram C. Salig or any of them, each acting alone, his
true and lawful attorney-in-fact and agent, with full power of substitution, for
him and in his name, place and stead, in any and all capacities, in connection
with CLN HOLDINGS INC. (the "Corporation") Annual Report on Form 10-K for the
year ended December 31, 1997 under the Securities Exchange Act of 1934, as
amended, including, without limiting the generality of the foregoing, to sign
the Form 10-K in the name of and on behalf of the Corporation or on behalf of
the undersigned as a director or officer of the Corporation, and any amendments
to the Form 10-K and any instrument, contract, document or other writing, of or
in connection with the Form 10-K or amendments thereto, and to file the same,
with all exhibits thereto, and other documents in connection therewith,
including this power of attorney, with the Securities and Exchange Commission
and any applicable securities exchange or securities self-regulatory body,
granting unto said attorneys-in-fact and agents, each acting alone, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, each acting alone, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed these presents this
18th day of March, 1998.
Howard Gittis
----------------------
Howard Gittis
<PAGE>
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints each of Paul E. Shapiro, Steven R. Isko, Lynn E.
Feldkamp, Karen Clark and Joram C. Salig or any of them, each acting alone, his
true and lawful attorney-in-fact and agent, with full power of substitution, for
him and in his name, place and stead, in any and all capacities, in connection
with CLN HOLDINGS INC. (the "Corporation") Annual Report on Form 10-K for the
year ended December 31, 1997 under the Securities Exchange Act of 1934, as
amended, including, without limiting the generality of the foregoing, to sign
the Form 10-K in the name of and on behalf of the Corporation or on behalf of
the undersigned as a director or officer of the Corporation, and any amendments
to the Form 10-K and any instrument, contract, document or other writing, of or
in connection with the Form 10-K or amendments thereto, and to file the same,
with all exhibits thereto, and other documents in connection therewith,
including this power of attorney, with the Securities and Exchange Commission
and any applicable securities exchange or securities self-regulatory body,
granting unto said attorneys-in-fact and agents, each acting alone, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, each acting alone, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed these presents this
18th day of March, 1998.
Irwin Engelman
----------------------
Erwin Engelman
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS AS FILED IN THE COMPANY'S ANNUAL REPORT ON
FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 13,031
<SECURITIES> 0
<RECEIVABLES> 188,686
<ALLOWANCES> 8,930
<INVENTORY> 236,327
<CURRENT-ASSETS> 483,260
<PP&E> 289,527
<DEPRECIATION> 114,033
<TOTAL-ASSETS> 1,097,869
<CURRENT-LIABILITIES> 256,762
<BONDS> 980,447
0
0
<COMMON> 1
<OTHER-SE> (256,650)
<TOTAL-LIABILITY-AND-EQUITY> 1,097,869
<SALES> 1,143,349
<TOTAL-REVENUES> 1,154,294
<CGS> 840,331
<TOTAL-COSTS> 840,331
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,200
<INTEREST-EXPENSE> 90,886
<INCOME-PRETAX> (60,129)
<INCOME-TAX> (24,162)
<INCOME-CONTINUING> (36,907)
<DISCONTINUED> 0
<EXTRAORDINARY> (15,239)
<CHANGES> 0
<NET-INCOME> (52,146)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
