SUNBEAM CORP/FL/, 10-Q, 1999-11-19

SUNBEAM CORP/FL/
10-Q, 1999-11-19
ELECTRIC HOUSEWARES & FANS

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

[X] Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

For the period ended September 30, 1999

[ ] Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934

For the transition period from ___________ to ___________

Commission File No. 1-000052

SUNBEAM CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE 25-1638266
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
INCORPORATION OR ORGANIZATION)

2381 EXECUTIVE CENTER DRIVE 33431
BOCA RATON, FL (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

(561) 912-4100
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

NOT APPLICABLE
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes [X] No [ ]

On November 18, 1999 there were 100,902,392 shares of the registrant's Common
Stock ($.01 par value) outstanding.

<PAGE>

SUNBEAM CORPORATION AND SUBSIDIARIES

QUARTERLY REPORT
ON FORM 10-Q

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Condensed Consolidated Statements of Operations (Unaudited)
for the three months and nine months ended September 30, 1999
and September 30, 1998........................................................... 2

Condensed Consolidated Balance Sheets (Unaudited)
as of September 30, 1999 and December 31, 1998................................... 3

Condensed Consolidated Statements of Cash Flows (Unaudited)
for the nine months ended September 30, 1999 and September 30, 1998.............. 4

Notes to Condensed Consolidated Financial Statements (Unaudited)................. 5

Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations........................................................ 24

PART II. OTHER INFORMATION

Item 1. Legal Proceedings................................................................ 41

Item 6. Exhibits and Reports on Form 8-K ................................................ 48

SIGNATURE .......................................................................................... 49

</TABLE>

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<PAGE>

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SUNBEAM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
--------------------------------- ---------------------------------
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net sales ............................... $ 601,554 $ 496,039 $ 1,786,428 $ 1,322,129
Cost of goods sold ...................... 442,764 428,629 1,334,177 1,273,424
Selling, general and administrative
expense ............................ 154,480 228,441 449,263 440,381
----------- ----------- ----------- -----------
Operating income (loss) ................. 4,310 (161,031) 2,988 (391,676)
Interest expense, net ................... 48,334 42,677 136,631 88,476
Other income, net ....................... (5,219) (10,995) (4,619) (4,065)
----------- ----------- ----------- -----------
Loss before income taxes, minority
interest and extraordinary charge .. (38,805) (192,713) (129,024) (476,087)
Income tax provision (benefit):
Current .............................. (5,276) 396 1,370 3,995
Deferred ............................. 8,928 (2,814) 11,291 (1,280)
----------- ----------- ----------- -----------
3,652 (2,418) 12,661 2,715

Minority interest ....................... 4,897 (1,384) 13,354 (3,447)
----------- ----------- ----------- -----------
Loss before extraordinary charge ........ (47,354) (188,911) (155,039) (475,355)
Extraordinary charge from
early extinguishments of debt ........ -- -- -- (111,715)
----------- ----------- ----------- -----------
Net loss ................................ $ (47,354) $ (188,911) $ (155,039) $ (587,070)
=========== =========== =========== ===========
Basic and diluted loss per share:
Loss from continuing operations before
extraordinary charge ............... $ (0.47) $ (1.88) $ (1.54) $ (4.96)
Extraordinary charge ................. -- -- -- (1.16)
----------- ----------- ----------- -----------
Net loss ............................. $ (0.47) $ (1.88) $ (1.54) $ (6.12)
=========== =========== =========== ===========
Basic and diluted weighted average common
shares outstanding ................... 100,746 100,722 100,743 95,919

</TABLE>

See Notes to Condensed Consolidated Financial Statements.

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<PAGE>

SUNBEAM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................... $ 29,088 $ 61,432
Restricted investments.............................................. -- 74,386
Receivables, net.................................................... 443,223 361,774
Inventories......................................................... 507,821 519,189
Prepaid expenses, deferred income taxes and other current assets.... 70,681 74,187
------------- -------------
Total current assets.......................................... 1,050,813 1,090,968
Property, plant and equipment, net..................................... 457,293 455,172
Trademarks, tradenames, goodwill and other, net........................ 1,809,868 1,859,377
------------- -------------
$ 3,317,974 $ 3,405,517
============= =============

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt and current portion of long-term debt............... $ 1,505,576 $ 119,103
Accounts payable.................................................... 188,899 162,173
Other current liabilities........................................... 303,075 321,185
------------- -------------
Total current liabilities..................................... 1,997,550 602,461
Long-term debt, less current portion................................... 817,128 2,142,362
Other long-term liabilities............................................ 231,898 248,459
Deferred income taxes.................................................. 111,516 100,473
Minority interest...................................................... 65,195 51,325

Commitments and contingencies

Shareholders' equity:
Preferred stock (2,000,000 shares authorized, none outstanding) .... -- --
Common stock (100,746,400 and 100,739,053 shares issued)............ 1,007 1,007
Additional paid-in capital.......................................... 1,122,896 1,123,457
Accumulated deficit................................................. (965,036) (809,997)
Accumulated other comprehensive loss................................ (64,180) (54,030)
-------------- --------------
Total shareholders' equity.................................... 94,687 260,437
------------- -------------
$ 3,317,974 $ 3,405,517
============= =============
</TABLE>

See Notes to Condensed Consolidated Financial Statements.

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<PAGE>

SUNBEAM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
------------------------------------
SEPTEMBER 30, SEPTEMBER 30,
1999 1998
-------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss........................................................... $ (155,039) $ (587,070)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization.................................. 93,917 70,123
Non-cash interest charges...................................... 34,120 19,387
Deferred income taxes.......................................... 11,291 (1,280)
Minority interest.............................................. 13,354 (3,447)
(Gain) loss on sale of property, plant and equipment........... (3,405) 2,406
Provision for fixed assets..................................... -- 32,642
Provision for excess and obsolete inventory.................... -- 86,167
Warrants charged to expense.................................... -- 70,000
Non-cash compensation charge................................... -- 23,359
Extraordinary charge from early extinguishments of debt........ -- 111,715
Changes in working capital and other, net of acquisitions...... (67,409) (48,697)
--------------- --------------
Net cash used in operating activities.................... (73,171) (224,695)
--------------- --------------
INVESTING ACTIVITIES:
Capital expenditures............................................... (63,205) (32,766)
Purchases of businesses, net of cash acquired...................... -- (379,159)
Other.............................................................. 4,838 307
--------------- -------------
Net cash used in investing activities.................... (58,367) (411,618)
--------------- --------------
FINANCING ACTIVITIES:
Issuance of convertible subordinated debentures, net of
financing fees.................................................. -- 729,622
Net borrowings under revolving credit facilities................... 105,025 1,353,041
Payments of debt obligations, including prepayment penalties....... (2,940) (1,464,245)
Proceeds from exercise of stock options............................ 35 19,553
Other.............................................................. (2,926) (1,875)
--------------- --------------
Net cash provided by financing activities................ 99,194 636,096
-------------- -------------

Net decrease in cash and cash equivalents.............................. (32,344) (217)
Cash and cash equivalents at beginning of period....................... 61,432 52,298
-------------- -------------
Cash and cash equivalents at end of period............................. $ 29,088 $ 52,081
============== =============
</TABLE>

See Notes to Condensed Consolidated Financial Statements

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<PAGE>

SUNBEAM CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

1. OPERATIONS AND BASIS OF PRESENTATION

ORGANIZATION

Sunbeam Corporation ("Sunbeam" or the "Company") is a leading designer,
manufacturer and marketer of branded consumer products. The Company's primary
business is the manufacturing, marketing and distribution of durable household
and outdoor leisure consumer products through mass market and other distribution
channels in the United States and internationally. The Company also sells its
products to professional and commercial end users such as small businesses,
health care providers, hotels and other institutions. The Company's principal
products include household kitchen appliances; health monitoring and care
products for home use; scales for consumer and professional use for weight
management and business uses; electric blankets and throws; clippers and
trimmers for consumer, professional and animal uses; smoke and carbon monoxide
detectors; outdoor barbecue grills; camping equipment such as tents, lanterns,
sleeping bags and stoves; coolers; backpacks and book bags; and portable
generators and compressors.

In 1998 the Company acquired an indirect controlling interest in The
Coleman Company, Inc. ("Coleman") and all the outstanding common stock of
Signature Brands USA, Inc. ("Signature Brands") and First Alert, Inc. ("First
Alert").

BASIS OF PRESENTATION

The Condensed Consolidated Balance Sheet of the Company as of September
30, 1999 and the Condensed Consolidated Statements of Operations and Cash Flows
for the three and nine months ended September 30, 1999 and 1998 are unaudited.
The unaudited condensed consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions of Form 10-Q and Rule 10-01 of Regulation
S-X. The December 31, 1998 Condensed Consolidated Balance Sheet was derived from
the consolidated financial statements contained in the Company's Annual Report
on Form 10-K/A for the year ended December 31, 1998. The condensed consolidated
financial statements contained herein should be read in conjunction with the
consolidated financial statements and related notes contained in the Company's
1998 Annual Report on Form 10-K/A. In the opinion of management, the unaudited
condensed consolidated financial statements contained herein include all
adjustments (consisting of only recurring adjustments) necessary for a fair
presentation of the results of operations for the interim periods presented.
These interim results of operations are not necessarily indicative of results
for the entire year or future periods.

BASIC AND DILUTED LOSS PER SHARE OF COMMON STOCK

Loss per common share calculations are determined by dividing loss
attributable to common shareholders by the weighted average number of shares of
common stock outstanding. Loss per share for the nine months ended September 30,
1999 and 1998, is based only on the weighted average number of common shares
outstanding, as potential common shares have been excluded as a result of the
loss during the periods presented. Loss per share for the nine months ended
September 30, 1999 excluded 78,562 shares related to stock options, as their
effect would have been anti-dilutive. Stock options to purchase 19,420,292
common shares for the nine months ended September 30, 1999, were excluded from
potential common shares as the option exercise prices were greater than the
average market price of the Company's common stock during the period. The nine
months ended September 30, 1998 loss per share excluded 3,017,516 shares related
to stock options, as their effect would have been anti-dilutive. The nine month
1998 period also excluded 63,016 related to restricted stock. Stock options to
purchase 9,609,033 common shares for the nine months ended September 30, 1998
were excluded from potential common shares as the option exercise prices were
greater than the average market price of the Company's common stock during the
period. Diluted average common shares outstanding for all periods presented
excluded 13,242,050 shares issuable upon the conversion of the Zero Coupon
Convertible Senior Subordinated Debentures due 2018 (the "Debentures"). In
addition, diluted average common shares outstanding for the periods ended
September 30, 1999 excluded 23,000,000 shares issuable on the exercise of
warrants.

- 5 -
<PAGE>

SUNBEAM CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)

1. OPERATIONS AND BASIS OF PRESENTATION - (CONTINUED)

NEW ACCOUNTING STANDARDS

Effective January 1, 1999, the Company adopted Statement of Position
98-1, ACCOUNTING FOR THE COSTS OF COMPUTER SOFTWARE DEVELOPED OR OBTAINED FOR
INTERNAL USE ("SOP 98-1"). SOP 98-1 requires computer software costs associated
with internal use software to be expensed as incurred until certain
capitalization criteria are met. Adoption of this statement did not have a
material impact on the Company's consolidated financial position, results of
operations, or cash flows.

In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133 ("SFAS No. 133"), ACCOUNTING FOR
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES, which, as amended, is effective
for fiscal years beginning after June 15, 2000. SFAS No. 133 requires the
recognition of all derivatives in the Consolidated Balance Sheets as either
assets or liabilities measured at fair value. The Company has not yet determined
the impact SFAS No. 133 will have on its consolidated financial position,
results of operations, or cash flows.

RECLASSIFICATIONS

Certain prior year amounts have been reclassified to conform with the
1999 presentation.

2. ACQUISITIONS

On March 30, 1998, the Company, through a wholly-owned subsidiary,
acquired approximately 81% of the total number of then outstanding shares of
common stock of Coleman from a subsidiary of MacAndrews & Forbes Holdings, Inc.
("M&F"), in exchange for 14,099,749 shares of the Company's common stock and
approximately $160 million in cash. In addition, the Company assumed
approximately $1,016 million in debt. The value of the common stock issued at
the date of acquisition was derived by using the average closing stock price as
reported on the New York Stock Exchange ("NYSE") Composite Tape for the day
before and day of the public announcement of the acquisition. Immediately
thereafter, as a result of the exercise of employee stock options, Sunbeam's
indirect beneficial ownership of Coleman decreased to approximately 79% of the
total number of the outstanding shares of Coleman common stock. (See Note 10.)

On August 12, 1998, the Company announced that, following investigation
and negotiation conducted by a Special Committee of the Board consisting of four
outside directors not affiliated with M&F, the Company had entered into a
settlement agreement with a subsidiary of M&F pursuant to which the Company was
released from certain threatened claims of M&F and its subsidiaries arising from
the Coleman acquisition and M&F agreed to provide certain management personnel
and assistance to the Company in exchange for the issuance to the M&F subsidiary
of a warrant expiring August 24, 2003 to purchase up to 23 million shares of the
Company's common stock at a cash exercise price of $7.00 per share, subject to
anti-dilution adjustments. The Company concluded that the agreement to issue
this warrant did not result in a new measurement date for the purposes of
determining the purchase price for Coleman and has accounted for the issuance of
this warrant in the third quarter of 1998 as a cost of settling a potential
claim. Accordingly, a $70.0 million non-cash SG&A expense was recorded in the
third quarter of 1998, based upon a valuation performed as of August 1998 using
facts existing at that time. The valuation was conducted by an independent
consultant engaged by the special committee of the board of directors.

The Company expects to acquire the remaining equity interest in Coleman
pursuant to a merger transaction in which the existing Coleman minority
shareholders will receive 0.5677 of a share of the Company's common stock and
$6.44 in cash for each share of Coleman common stock outstanding. In addition,
unexercised options under Coleman's stock option plans will be cashed out at a
price per share equal to the difference between $27.50 and the exercise price of
such options. The Company expects to issue approximately 6.7 million shares of
common stock and expend approximately $87 million in cash to complete the
Coleman acquisition. Although there can be no assurance, it is anticipated the
Coleman merger will occur in the fourth quarter of 1999 or early in the first
quarter of 2000. The acquisition of the remaining outstanding shares of Coleman
common stock will be accounted for under the purchase method of accounting from
the date of consummation of the Coleman merger.

- 6 -
<PAGE>

SUNBEAM CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)

2. ACQUISITIONS - (CONTINUED)

On October 21, 1998, the Company announced that it had entered into a
Memorandum of Understanding to settle, class action claims made by minority
shareholders of Coleman relating to the Coleman merger. Under the terms of the
settlement, the Company will issue to the Coleman public shareholders, and
plaintiff's counsel in this action, warrants to purchase up to 4.98 million
shares of the Company's common stock at a cash exercise price of $7.00 per
share, subject to certain anti-dilution provisions. These warrants would
generally have the same terms as the warrants issued to a subsidiary of M&F and
will be issued when the Coleman merger is consummated. Issuance of these
warrants will be accounted for as additional purchase consideration. As a
consequence of entering into the Memorandum of Understanding and agreeing to
issue additional consideration in the form of warrants to purchase Sunbeam
common stock, a new measurement date was established for the remaining equity
interest in Coleman. The total consideration to be paid (cash, Sunbeam common
stock and Sunbeam warrants) to the Coleman shareholders will therefore be
measured as of October 21, 1998.

On April 6, 1998, the Company completed the acquisitions of First
Alert, valued at approximately $182 million (including $133 million of cash and
$49 million of assumed debt) and Signature Brands valued at approximately $255
million (reflecting cash paid, including the required retirement of defeasance
of debt).

As of the date of the acquisition of Coleman, management of the Company
determined approximately 117 employees of Coleman would need to be involuntarily
terminated in order to eliminate duplicate activities and functions and fully
integrate Coleman into Sunbeam's operations. The Company recognized a liability
of approximately $8 million representing severance and benefit costs related to
117 employees pursuant to the termination plan. This liability was included in
the allocation of purchase price. As of September 30, 1999, 113 employees were
terminated and paid benefits of approximately $7 million. The four remaining
employees are expected to be terminated by March 31, 2000. Remaining termination
costs are expected to be paid by December 31, 2000 and no additional charges are
anticipated in future periods related to this issue.

All of these acquisitions were accounted for by the purchase method of
accounting. Accordingly, the results of operations of the acquired entities are
included in the accompanying Condensed Consolidated Statements of Operations
from their respective dates of acquisition.

The following pro forma financial information for the Company gives
effect to the Coleman and Signature Brands acquisitions as if they had occurred
at the beginning of the period presented. No pro forma adjustments have been
made for the First Alert acquisition as its effects are not significant. These
pro forma results have been prepared for informational purposes only and do not
purport to be indicative of the results of operations which actually would have
occurred had the acquisitions been consummated on the date indicated, or which
may result in the future. The pro forma results follow (in millions, except per
share data):

NINE MONTHS ENDED
SEPTEMBER 30, 1998
------------------
Net sales................................................... $ 1,584.0
Loss before extraordinary charge............................ (498.1)
Basic and diluted loss per share from continuing operations
before extraordinary charge............................... (4.78)

3. DEBT

In order to finance the acquisitions described in Note 2 and to
refinance substantially all of the indebtedness of the Company and the acquired
companies, the Company consummated an offering of the Debentures at a yield to
maturity of 5.0% (approximately $2,014 million principal amount at maturity) in
March 1998, which resulted in approximately $730 million of net proceeds and
entered into a revolving and term credit facility ("New Credit Facility").

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<PAGE>

SUNBEAM CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)

3. DEBT - (CONTINUED)

The Debentures are exchangeable for shares of the Company's common
stock at an initial conversion rate of 6.575 shares for each $1,000 principal
amount at maturity of the Debentures, subject to adjustment upon occurrence of
specified events. The Debentures are subordinated in right of payment to all
existing and future senior indebtedness of the Company. The Debentures are not
redeemable by the Company prior to March 25, 2003. On or after such date, the
Debentures are redeemable for cash with at least 30 days notice, at the option
of the Company. The Company is required to purchase Debentures at the option of
the holder as of March 25, 2003, March 25, 2008 and March 25, 2013, at purchase
prices equal to the issue price plus accrued original discount to such dates.
The Company may, at its option, elect to pay any such purchase price in cash or
common stock, or any combination thereof. However, the New Credit Facility
prohibits the Company from redeeming or repurchasing Debentures for cash. The
Company was required to file a registration statement with the SEC to register
the Debentures by June 23, 1998. This registration statement was filed on
February 4, 1999 and, as amended, was declared effective on November 8, 1999.
The Company's failure to file the registration statement by June 23, 1998 did
not constitute default under the terms of the Debentures. From June 23, 1998
until the registration statement was declared effective, the Company was
required to pay to the Debenture holders cash liquidated damages accruing, for
each day during such period, at a rate per annum equal to 0.25% during the first
90 days and 0.50% thereafter multiplied by the total of the issue price of the
Debentures plus the original issue discount thereon on such day. The Company has
made total payments for liquidated damages since June 23, 1998 of $4.5 million,
of which $1.5 million related to damages for the period through December 31,
1998. A final payment of approximately $0.5 million, representing liquidated
damages from September 26, 1999 until the registration statement was declared
effective, will be payable on March 25, 2000.

Concurrent with the acquisitions, the Company replaced its $250 million
syndicated unsecured five-year revolving credit facility with the New Credit
Facility. The New Credit Facility provided for aggregate borrowings of up to
$1.7 billion and in addition to other customary covenants, required the Company
to maintain specified consolidated leverage, interest coverage and fixed charge
coverage ratios as of the end of each fiscal quarter occurring after March 31,
1998 and on or prior to the latest stated maturity date for any of the
borrowings under the New Credit Facility.

As a result of, among other things, its operating losses incurred
during the first half of 1998, the Company did not achieve the specified
financial ratios for June 30, 1998 and it appeared unlikely that the Company
would achieve the specified financial ratios for September 30, 1998.
Consequently, the Company and its lenders entered into an agreement dated as of
June 30, 1998 that waived through December 31, 1998 all defaults arising from
the failure of the Company to satisfy the specified financial ratios for June
30, 1998 and September 30, 1998. Pursuant to an agreement with the Company dated
as of October 19, 1998, the Company's lenders extended all of the waivers under
the June 30, 1998 agreement through April 10, 1999 and also waived through such
date all defaults arising from any failure by the Company to satisfy the
specified financial ratios for December 31, 1998. As part of the October 19,
1998 agreement, the Company agreed to a minimum monthly earnings before
interest, taxes, depreciation and amortization ("EBITDA") covenant (as defined
in the New Credit Facility) which covenant the Company has been able to satisfy.

On April 10, 1999, among other things, the lenders extended all of the
waivers set forth in the October 19, 1998 agreement through April 15, 1999. On
April 15, 1999, the Company and its lenders entered into a comprehensive
amendment to the New Credit Facility that, among other things, extended all of
the waivers under the April 10, 1999 agreement until April 10, 2000 and waived
until such date all defaults arising from any failure by the Company to satisfy
the specified financial ratios for any fiscal quarter end occurring during 1999
and for March 31, 2000. The Company intends to negotiate with its lenders an
amendment to the New Credit Facility, or to negotiate further waiver of such
covenants and other terms beyond April 10, 2000, or to refinance the New Credit
Facility. There can be no assurance that an amendment, further waiver of
existing covenants and other terms, or refinancing will be entered into by April
10, 2000. The failure to obtain such an amendment, further waiver or debt
refinancing would likely result in violation of the existing covenants and
compliance with other terms, which would permit the bank lenders to accelerate
the maturity of all outstanding borrowings under the New Credit Facility and
could otherwise have a material adverse effect on the Company. Accordingly, debt
related to the New Credit Facility and all debt containing cross-default
provisions is classified as current in the September 30, 1999 Condensed
Consolidated Balance Sheet.

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<PAGE>

SUNBEAM CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)

3. DEBT - (CONTINUED)

As part of the April 15, 1999 New Credit Facility amendment, the
Company agreed to a minimum cumulative EBITDA covenant that is based on
post-December 31, 1998 consolidated EBITDA and is tested at the end of each
month occurring on or prior to March 31, 2000, as well as a covenant limiting
the amount of revolving loans (other than those used to fund the Coleman merger)
that may be outstanding under the New Credit Facility as of the end of each such
month. The minimum cumulative EBITDA was initially $6.3 million for the period
January 1, 1999 through April 30, 1999 and generally grows on a monthly basis
until it reaches $121.0 million for the period from January 1, 1999 through
March 31, 2000.

The following description of the New Credit Facility reflects its
significant terms as amended April 15, 1999.

The New Credit Facility provides for aggregate borrowings of up to $1.7
billion through: (i) a revolving credit facility in an aggregate principal
amount of up to $400.0 million maturing March 30, 2005, ($52.5 million of which
may only be used to complete the Coleman merger); (ii) up to $800.0 million in
term loans maturing on March 30, 2005, (of which $35.0 million may only be used
to complete the Coleman merger); and (iii) a $500.0 million term loan maturing
September 30, 2006, (of which $5.0 million has already been repaid through
September 30, 1999). As of September 30, 1999, approximately $1.5 billion was
outstanding and approximately $0.2 billion was available for borrowing under the
New Credit Facility.

Under the New Credit Facility, interest accrues, at the Company's
option: (i) at the London Interbank Offered Rate ("LIBOR"); or (ii) at the base
rate of the administrative agent which is generally the higher of the prime
commercial lending rate of the administrative agent or the Federal Funds Rate
plus 0.50%; in each case plus an interest margin which is currently 4.00% for
LIBOR loans and 2.50% for base rate loans. The interest margin is subject to
potential decreases in the future, including a decrease to 3.00% for LIBOR loans
and 1.75% for base rate loans upon consummation of the Coleman merger and the
effectiveness of the pledge of substantially all of Coleman's and its domestic
subsidiaries' assets to secure the obligations under the New Credit Facility.
Borrowings under the New Credit Facility are secured by a pledge of the stock of
the Company's material subsidiaries, including Coleman, and by a security
interest in substantially all of the assets of the Company and its material
domestic subsidiaries, other than Coleman and its material subsidiaries except
as described below. Currently, Coleman's inventory and related assets are
pledged to secure its obligations for letters of credit issued for its account
under the New Credit Facility. Additionally, as security for Coleman's note
payable to the Company, Coleman pledged substantially all of its domestic
assets, other than real property, including 66% of the stock of its direct
foreign subsidiaries and domestic holding companies for its foreign
subsidiaries, and all of the stock of its other direct domestic subsidiaries
(but not the assets of Coleman's subsidiaries). The pledge runs in favor of the
Company's lending banks, to which the Coleman note has been pledged as security
for the Company's obligations to them. Upon completion of the Coleman merger,
substantially all of Coleman's assets and the assets of Coleman's domestic
subsidiaries will be pledged to secure the obligations under the New Credit
Facility. In addition, borrowings under the New Credit Facility are guaranteed
by a number of the Company's wholly-owned material domestic subsidiaries and
these subsidiary guarantees are secured as described above. Upon completion of
the Coleman merger, Coleman and each of its United States subsidiaries will
become guarantors of the obligations under the New Credit Facility. To the
extent extensions of credit are made to any subsidiaries of the Company, the
obligations of such subsidiaries are guaranteed by the Company.

In addition to the above described ratios and tests, the New Credit
Facility contains covenants customary for credit facilities of a similar nature,
including limitations on the ability of the Company and its subsidiaries,
including Coleman, to, among other things, (i) declare dividends or repurchase
stock, (ii) prepay, redeem or repurchase debt, incur liens and engage in
sale-leaseback transactions, (iii) make loans and investments, (iv) incur
additional debt, including revolving loans under the New Credit Facility, (v)
amend or otherwise alter material agreements or enter into restrictive
agreements, (vi) make capital and year 2000 compliance expenditures, (vii)
engage in mergers, acquisitions and asset sales, (viii) engage in certain
transactions with affiliates, (ix) settle certain litigation, (x) alter its cash
management system and (xi) alter the businesses they conduct. The Company is
also required to comply with specified financial covenants and ratios. The New
Credit Facility provides for events of default customary for transactions of
this type, including nonpayment, misrepresentation, breach of covenant,
cross-defaults, bankruptcy, material adverse change arising from compliance with
ERISA, material adverse judgments, entering into guarantees and change of
ownership and control. It is also an event of default under the New Credit
Facility, as amended November 16, 1999, if the Company's registration statement
in connection with the Coleman merger is not declared effective by the SEC on or
before January 10, 2000, or if the merger

- 9 -

<PAGE>

SUNBEAM CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)

3. DEBT - (CONTINUED)

does not occur within 25 business days of the effectiveness of the registration
statement or if the cash consideration (including any payments on account of the
exercise of any appraisal rights, but excluding related legal, accounting and
other customary fees and expenses) to consummate the Coleman merger exceeds
$87.5 million. Although there can be no assurance, the Company anticipates that
it will satisfy these conditions. Furthermore, the New Credit Facility requires
the Company to prepay term loans on December 31, 1999 to the extent that cash on
hand in the Company's concentration accounts plus the aggregate amount of unused
revolving loan commitments on this date exceeds $125 million, but the Company is
not required to prepay more than $69.3 million as a result of the provision.
Unless waived by the bank lenders, the failure to satisfy any of the financial
ratios and tests contained in the New Credit Facility or the occurrence of any
other event of default under the New Credit Facility would entitle the bank
lenders to (a) receive a 2.00% increase in the interest rate applicable to
outstanding loans and increase the trade letter of credit fees to 1.00% and (b)
accelerate the maturity of the outstanding borrowings under the New Credit
Facility and exercise all or any of their other rights and remedies. Any such
acceleration or other exercise rights and remedies would likely have a material
adverse effect on the Company. The New Credit Facility also includes provisions
for the deferral of the September 30, 1999 and the March 31, 2000 scheduled term
loan payments of $69.3 million each until April 10, 2000 as a result of the
satisfaction by the Company of the agreed upon conditions to the deferral.

In March 1998, the Company prepaid a $75.0 million 7.85% industrial
revenue bond related to its Hattiesburg facility originally due in 2009. In
connection with the early extinguishment of this debt, the Company recognized an
extraordinary charge in the first quarter of 1998. As a result of repayment of
certain indebtedness assumed in the Coleman acquisition, the Company also
recognized an extraordinary charge in the second quarter of 1998. The debt
assumed in connection with the Coleman acquisition was repaid as a result of the
requirements under the terms of the New Credit Facility. These extraordinary
charges consisted of redemption premiums ($106.9 million), unamortized debt
discount ($13.8 million) and unamortized deferred financing costs ($1.7 million)
and were net of an income tax benefit ($10.7 million).

In connection with the acquisition of Signature Brands, the Company was
required to defease $70.0 million of acquired debt. Cash was placed with a
trustee to provide for the defeasance, including the related prepayment penalty.
This cash was used to purchase Treasury Notes. Accordingly, $74.4 million of
restricted investments held by the trustee for the August 1999 liquidation of
this acquired debt are reflected as an asset at December 31, 1998. The
prepayment penalty is reflected as part of the acquisition price of Signature
Brands. This debt was redeemed in August, 1999 utilizing the proceeds from
investments restricted for this purpose.

4. ACCOUNTS RECEIVABLE SECURITIZATION

The Company has entered into a receivables securitization program that
expires in March 2000. The Company has received $228.4 million and $130.6
million in the first nine months of each 1999 and 1998, respectively, for the
sale of trade accounts receivable. Trade accounts receivable at September 30,
1999 and 1998 reflect a reduction of $36.9 million and $10.5 million,
respectively, for receivables sold under this program. Costs of the program,
which primarily consist of the purchaser's financing cost of issuing commercial
paper backed by the receivables, totaled $1.7 million and $1.9 million in the
first nine months of 1999 and 1998, respectively, and have been classified as
interest expense in the accompanying Condensed Consolidated Statements of
Operations. The Company, through a wholly-owned subsidiary, retains collection
and administrative responsibilities for the purchased receivables. This
agreement contains cross-default provisions that provide the purchaser of the
receivables an option to cease purchasing receivables from the Company if the
Company is in default under the New Credit Facility.

- 10 -
<PAGE>

SUNBEAM CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)

5. COMPREHENSIVE LOSS

The components of the Company's comprehensive loss are as follows (in
thousands):

NINE MONTHS ENDED
-----------------------------
SEPTEMBER 30, SEPTEMBER 30,
1999 1998
------------- -------------
Net loss....................................... $ (155,039) (587,070)
Foreign currency translation adjustment,
net of taxes............................... (10,150) 154
Change in minimum pension liability............ -- (266)
------------ -----------
Comprehensive loss............................. $ (165,189) $ (587,182)
============ ===========

As of September 30, 1999 and December 31, 1998, "Accumulated other
comprehensive loss," as reflected in the Condensed Consolidated Balance Sheets
is comprised of the following:

<TABLE>
<CAPTION>
CURRENCY MINIMUM
TRANSLATION PENSION
ADJUSTMENTS LIABILITY TOTAL
------------ ----------- -----------
<S> <C> <C> <C>
Balance at September 30, 1999....................... $ (22,172) $ (42,008) $ (64,180)
Balance at December 31, 1998........................ (12,022) (42,008) (54,030)
</TABLE>

The accumulated other comprehensive loss associated with the minimum
pension liability is net of deferred taxes of approximately $5 million as of
September 30, 1999 and December 31, 1998.

6. SUPPLEMENTARY FINANCIAL STATEMENT DATA

Supplementary Balance Sheet data at the end of each period is as
follows (in thousands):

SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
Receivables:
Trade................................. $ 475,595 $ 407,452
Sundry................................ 10,090 7,347
---------- ----------
485,685 414,799
Valuation allowance................... (42,462) (53,025)
---------- ----------
$ 443,223 $ 361,774
========== ==========
Inventories:
Finished goods........................ $ 353,561 $ 370,622
Work in process....................... 46,191 39,143
Raw materials and supplies............ 108,069 109,424
---------- ----------
$ 507,821 $ 519,189
========== ==========

Supplementary Statements of Cash Flows data is as follows (in
thousands):

NINE MONTHS ENDED
-------------------------------
SEPTEMBER 30, SEPTEMBER 30,
1999 1998
-------------- -------------
Cash paid (received) during the period for:
Interest........................... $ 125,642 $ 37,796
============= ==========
Income taxes, net of refunds....... $ 2,145 $ (13,077)
============= ==========

- 11 -
<PAGE>

SUNBEAM CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)

7. ASSET IMPAIRMENT AND OTHER CHARGES

In the second quarter of 1998, decisions were made to outsource or
discontinue a substantial number of products previously made by the Company
(principally breadmakers, toasters and certain other appliances, air and water
filtration products and the elimination of certain stock keeping units ("SKU's")
within existing product lines, primarily relating to appliances, grills and
grill accessories). As a result, certain facilities and equipment would either
no longer be used or would be utilized in a significantly different manner.
Accordingly, a charge of $29.6 million was recorded in Cost of Goods Sold to
write certain of these assets down to their estimated fair market value.
Approximately 80% of this charge related to machinery, equipment and tooling at
the Company's Mexico City, Mexico and Hattiesburg, Mississippi manufacturing
plants, the estimated fair value for which was derived through an auction
process. The remainder of this charge related to tooling and equipment at
various other facilities, which either had a nominal value or the fair market
value of which was derived through an auction process. These assets were taken
out of service at the time of the write-down and consequently were not
depreciated further after the write-down. The net carrying value of these assets
after the write-down approximated $2.2 million and these assets are expected to
be substantially disposed of by December 31, 1999. Depreciation expense
associated with these assets approximated $2.6 million in the first half of
1998.

Personnel at the Mexico City facility were notified in the second
quarter of 1998 that the plant was scheduled for closure at year-end 1998,
accordingly, at that time, a liability of $1.8 million was recorded in Cost of
Goods Sold primarily for employee severance. The employee severance related to
approximately 1,200 positions of which 100 employees, representing a $0.4
million severance obligation remained to be terminated at December 31, 1998.
Substantially all of these remaining positions had been eliminated and the
severance payments had been made by June 30, 1999. Subsequent to the decisions
made in conjunction with the acquisitions, management decided to discontinue
certain SKU's within product lines (principally generators, compressors and
propane cylinders). As a result, in the third quarter of 1998, the Company
recorded as Cost of Goods Sold, an additional provision for impairment of fixed
assets of $3.1 million in an acquired entity, relating to assets taken out of
service for which there was no remaining value. These fixed assets were taken
out of service at the time of the write-down and consequently were not
depreciated further after the write-down. Depreciation expense associated with
these assets approximated $0.8 million in 1998.

During 1997 and the first half of 1998, the Company built inventories
in anticipation of 1998 sales volumes which did not materialize. As a result, it
has been and will continue to be necessary to dispose of some portions of excess
inventories at amounts less than cost. Accordingly, during 1998, when the facts
and circumstances were known that such sales volume would not materialize, the
Company recorded $48.6 million in charges (of which $46.4 million and $2.2
million were recorded in the second and third quarters, respectively) to
properly state this inventory at the lower-of-cost-or-market. This inventory
primarily related to certain appliances, grills and grill accessories.

The Company also recorded a charge during the second quarter of 1998 of
$11.0 million for excess inventories for raw material and work in process that
will not be used due to outsourcing the production of breadmakers, toasters, and
certain other appliances. In addition, during the second quarter of 1998, the
Company made the decision to exit certain product lines, primarily air and water
filtration products and eliminate certain SKU's within existing product lines,
primarily relating to appliances, grills and grill accessories. As a result of
this decision, a $26.6 million charge was recorded during the second quarter to
properly state this inventory at the lower-of-cost-or market. Total charges for
excess inventory recorded at the lower-of-cost-or-market, based upon
management's best estimate of net realizable value, amounted to $86.2 million
through September 30, 1998.

In the fourth quarter of 1998, in connection with management's decision
to outsource the production of certain appliances (principally irons) the
Company recorded $0.4 million of severance costs related to the elimination of
approximately 45 production positions. During the nine months ended September
30, 1999, 8 positions were eliminated and $0.1 million of the severance was
paid. The remaining positions are expected to be eliminated by December 31,
1999.

- 12 -
<PAGE>

SUNBEAM CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)

7. ASSET IMPAIRMENT AND OTHER CHARGES - (CONTINUED)

At December 31, 1998, the Company had $1.7 million of restructuring
accruals relating to its 1996 restructuring plan. This $1.7 million was
comprised of $1.2 million relating to lease payments and termination fees and
$0.5 million relating to discontinued operations. During the nine months ended
September 30, 1999, the Company expended $0.2 million for lease payments and
termination fees and $0.4 million relating to discontinued operations,
respectively. It is anticipated that the remaining restructuring accrual of $1.1
million ($1.0 million relating to lease payments and termination fees and $0.1
million to discontinued operations) will be paid through 2006.

8. SHAREHOLDERS' EQUITY

COMPENSATORY STOCK GRANTS

On February 20, 1998, the Company entered into new three-year
employment agreements with its then Chairman and Chief Executive Officer and two
other senior officers of the Company (the "February 1998 Employment
Agreements"). These agreements replaced previous employment agreements entered
into in July 1996 that were scheduled to expire in July 1999. The new employment
agreements provided for, among other items, the acceleration of vesting of
restricted stock and the forfeiture of unvested restricted stock that had been
granted under the July 1996 agreement, new restricted stock grants and options
to purchase the Company's common stock. In addition, the new employment
agreements provided for income tax gross-ups with respect to any tax assessed on
the restricted stock grants and acceleration of vesting of restricted stock.

Compensation expense attributed to the equity grant, the acceleration
of vesting of restricted stock and the related income tax gross-ups was
recognized in the first quarter of 1998 and compensation expense related to the
new restricted stock grants and related tax gross-ups was amortized to expense
beginning in the first quarter of 1998 with amortization to continue over the
period in which the restrictions lapse. Total compensation expense recognized in
the first quarter of 1998 related to these items was approximately $31 million.

On June 15, 1998, the Company's Board of Directors announced the
removal of the then Chairman and Chief Executive Officer and subsequently
announced the removal or resignation of other senior officers, including the
Company's then Chief Financial Officer. The Company and certain of its former
officers are in litigation as to the Company's obligations to these individuals
under prior agreements and arising from their termination. (See Note 10).

PURCHASE OF COLEMAN PREFERRED STOCK

On July 12, 1999, the Company acquired 3,000,000 shares of a newly
created series of Coleman voting preferred stock for an aggregate purchase price
of approximately $31 million. These shares, together with the shares of Coleman
common stock the Company owns, enable Sunbeam to exercise 80.01% of the total
voting power of Coleman's outstanding capital stock as of July 12, 1999. This
class of preferred stock was created by Coleman and acquired by the Company in
order to enable Coleman and the Company to file consolidated federal income tax
returns, and in certain jurisdictions, consolidated state income tax returns,
prior to the consummation of the Coleman merger. The issue price per share of
the voting preferred stock was equal to 110% of the average closing price per
share of common stock of Coleman over the five trading days prior to the date of
issuance of the voting preferred stock. Except for as required by law, the
holders of the voting preferred stock vote as a single class with the holders of
the Coleman common stock on all matters submitted to a vote of the holders of
Coleman common stock, with each share of voting preferred stock and each share
of Coleman common stock having one vote. The voting preferred stock has an
annual dividend equal to 7% of $10.35, the issue price per share of the voting
preferred stock, which accrues but will not be paid in cash unless a liquidation
of Coleman occurs or certain transactions are consummated as described below. In
addition, the voting preferred stock will participate ratably with the Coleman
common stock in all other dividends and distributions (other than liquidating
distributions) made by Coleman to the holders of its common stock. The voting
preferred stock will participate with the Coleman common stock in any merger,
consolidation, or any other transaction (other than a merger of a wholly owned
subsidiary of the Company with Coleman, including the Coleman merger) and will
receive on a per share basis the same type and amount of consideration as the
Coleman common stock. On liquidations of Coleman: (1) the holders of the voting
preferred stock would receive a preferential distribution equal to $10.35 per
share, plus accrued and unpaid dividends, (2) next, the holders of the Coleman
common stock would receive an amount equal to $10.35 per share of Coleman common
stock and (3) any assets remaining after such distributions would be shared by
the holders of voting preferred stock and the Coleman common stock on a share

- 13 -
<PAGE>

SUNBEAM CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)

8. SHAREHOLDERS' EQUITY - (CONTINUED)

PURCHASE OF COLEMAN PREFERRED STOCK - (Continued)

for share basis. In connection with the issuance of the shares of preferred
stock, Coleman entered into a tax sharing agreement with the Company pursuant to
which Coleman will pay to Sunbeam amounts equal to the federal and state income
taxes that would have been payable by Coleman had Coleman not been included in
the consolidated income tax return of the Company. The terms of the voting
preferred stock, their issue price and the terms of the tax sharing agreement
were approved on Coleman's behalf by Coleman's then sole independent director.
The net proceeds from the issuance of the shares by Coleman of its voting
preferred stock to the Company were used by Coleman to make a partial repayment
of loans outstanding from Sunbeam under the Intercompany Note.

9. SEGMENT, CUSTOMER AND GEOGRAPHIC DATA

The following tables include selected financial information with
respect to Sunbeam's four operating segments. Corporate expenses include, among
other items, expenses for services which are provided in varying levels to the
three operating groups and for Year 2000 efforts. The increase from 1998 to 1999
is largely due to an expansion of centralized services related to the
acquisitions, Year 2000 expenses and increased costs associated with outside
services and insurance.

<TABLE>
<CAPTION>
OUTDOOR
HOUSEHOLD LEISURE INTERNATIONAL CORPORATE TOTAL
------------ ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
NINE MONTHS ENDED SEPTEMBER 30, 1999
Net sales to unaffiliated customers...... $ 555,207 $ 774,698 $ 444,305 $ 12,218 $ 1,786,428
Intersegment net sales................... 57,070 126,681 6,896 -- 190,647
Segment earnings (loss).................. 22,363 71,877 41,021 (93,872) 41,389
Segment depreciation expense............. 19,436 27,654 4,034 4,392 55,516

NINE MONTHS ENDED SEPTEMBER 30, 1998
Net sales to unaffiliated customers...... $ 454,974 $ 524,409 $ 328,628 $ 14,118 $ 1,322,129
Intersegment net sales................... 50,103 76,538 53,143 -- 179,784
Segment (loss) earnings.................. (29,608) (41,520) 11,541 (78,425) (138,012)
Segment depreciation expense............. 19,778 18,260 3,812 3,087 44,937

SEGMENT ASSETS
September 30, 1999....................... $ 787,956 $ 1,771,883 $ 403,609 $ 354,526 $ 3,317,974
December 31, 1998........................ 864,745 1,782,994 413,755 344,023 3,405,517

</TABLE>

- 14 -
<PAGE>

SUNBEAM CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)

9. SEGMENT, CUSTOMER AND GEOGRAPHIC DATA - (CONTINUED)

Reconciliation of selected segment information to Sunbeam's consolidated totals:

<TABLE>
<CAPTION>
NINE MONTHS ENDED
---------------------------------------
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998
------------------ ------------------
<S> <C> <C>
Net sales:
Net sales for reportable segments.................... $ 1,977,075 $ 1,501,916
Elimination of intersegment net sales................ (190,647) (179,787)
----------- -----------
Consolidated net sales............................ $ 1,786,428 $ 1,322,129
=========== ===========

Segment earnings (loss):
Total earnings (loss) for reportable segments........ $ 41,389 $ (138,012)
Unallocated amounts:
Interest expense.................................. (136,631) (88,476)
Other income, net................................. 4,619 4,065
Amortization of intangible assets................. (38,401) (25,186)
Former employees deferred
compensation (Note 8) and severance........... -- (34,410)
Provision for inventory (Note 7).................. -- (86,167)
Asset impairment (Note 7)......................... -- (32,642)
Issuance of warrants (Note 2)..................... -- (70,000)
Office relocation expense......................... -- (4,011)
Other charges..................................... -- (1,248)
----------- ------------
(170,413) (338,075)
----------- ------------
Consolidated loss before income taxes,
minority interest and extraordinary charge..... $ (129,024) $ (476,087)
============ ============
</TABLE>

10. COMMITMENTS AND CONTINGENCIES

LITIGATION

On April 23, 1998, two class action lawsuits were filed on behalf of
purchasers of the Company's common stock in the U.S. District Court for the
Southern District of Florida against the Company and some of its present and
former directors and former officers alleging violations of the federal
securities laws as discussed below. After that date, approximately fifteen
similar class actions were filed in the same Court. One of the lawsuits also
named as defendant Arthur Andersen, the Company's independent accountants for
the period covered by the lawsuit.

On June 16, 1998, the court entered an order consolidating all these
suits and all similar class actions subsequently filed (collectively, the
"Consolidated Federal Actions") and providing time periods for the filing of a
consolidated amended complaint and defendants' response thereto. On June 22,
1998, two groups of plaintiffs made motions to be appointed lead plaintiffs and
to have their selection of counsel approved as lead counsel. On July 20, 1998,
the court entered an order appointing lead plaintiffs and lead counsel. This
order also stated that it shall apply to all subsequently filed actions that are
consolidated with the other actions. On August 28, 1998, plaintiffs in one of
the subsequently filed actions filed an objection to having their action
consolidated pursuant to the June 16, 1998 order, arguing that the class period
in their action differs from the class periods in the originally filed
consolidated actions. On December 9, 1998, the court entered an order overruling
plaintiffs' objections and affirming its prior order appointing lead plaintiffs
and lead counsel.

- 15 -
<PAGE>

SUNBEAM CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)

10. COMMITMENTS AND CONTINGENCIES - (Continued)

LITIGATION - (Continued)

all persons and entities who purchased the Company's common stock or who
purchased call options or sold put options with respect to the Company's common
stock during the period April 23, 1997 through June 30, 1998, excluding the
defendants, their affiliates, and employees of the Company. Defendants' response
to the motion for class certification was filed on May 6, 1999. On March 8,
1999, all defendants who had been served with the consolidated amended class
action complaint moved to dismiss it. Under the Private Securities Litigation
Reform Act of 1995, all discovery in the consolidated action is stayed pending
resolution of the motions to dismiss.

On April 7, 1998, a purported derivative action was filed in the
Circuit Court for the Fifteenth Judicial Circuit in and for Palm Beach County,
Florida against the Company and some of its present and former directors and
former officers. The action alleged that the individual defendants breached
their fiduciary duties and wasted corporate assets when the Company granted
stock options on or about February 2, 1998 at an exercise price of $36.85 to
three of its officers and directors who were subsequently terminated by the
Company. On June 25, 1998, all defendants filed a motion to dismiss the
complaint for failure to make a pre-suit demand on the Company's board of
directors. On October 22, 1998, the plaintiff amended the complaint against all
but one of the defendants named in the original complaint. On February 19, 1999,
plaintiffs filed a second amended derivative complaint nominally on behalf of
the Company against some of its present and former directors and former officers
and Arthur Andersen. The second amended complaint alleges, among other things,
that Messrs. Dunlap and Kersh, the Company's former Chairman and Chief Executive
Officer and former Chief Financial Officer, respectively, caused the Company to
employ fraudulent accounting procedures in order to enable them to secure new
employment contracts, and seeks a declaration that the individual defendants
have violated fiduciary duties, an injunction against the payment of
compensation to Messrs. Dunlap and Kersh or the imposition of a constructive
trust on such payments, and unspecified money damages. The defendants have each
moved to dismiss the second amended complaint in whole or in part.

On June 25, 1998, four purported class actions were filed in the Court
of Chancery of the State of Delaware in New Castle County by minority
shareholders of Coleman against Coleman, the Company and certain of the
Company's and Coleman's present and former officers and directors. An additional
class action was filed on August 10, 1998 against the same parties. The
complaints in these class actions allege, in essence, that the existing exchange
ratio for the proposed Coleman merger is no longer fair to Coleman minority
shareholders as a result of the decline in the market value of the Company's
common stock. On October 21, 1998, the Company announced that it had entered
into a memorandum of understanding to settle, subject to court approval, the
class actions. The court approved the settlement on November 12, 1999. Under the
terms of the settlement, the Company will issue to Coleman minority shareholders
and plaintiffs' counsel in this action warrants to purchase up to approximately
4.98 million shares of the Company's common stock at $7 per share, subject to
anti-dilution adjustments. Coleman minority shareholders who elect an appraisal
under Delaware law will not receive warrants. These warrants will generally have
the same terms as the warrant issued to the MacAndrews & Forbes subsidiary and
will be issued when the Coleman merger is consummated, which is now expected to
occur in the fourth quarter of 1999 or early in the first quarter of 2000.
Issuance of these warrants will be accounted for as additional purchase
consideration.

During the months of August and October 1998, purported class action
and derivative lawsuits were filed in the Court of Chancery of the State of
Delaware in New Castle County and in the U.S. District Court for the Southern
District of Florida by shareholders of the Company against the Company,
MacAndrews & Forbes and some of the Company's present and former directors.
These complaints allege that the defendants breached their fiduciary duties when
the Company entered into a settlement agreement with the MacAndrews & Forbes
subsidiary that sold the Company a controlling interest in Coleman. In the
settlement agreement the MacAndrews & Forbes subsidiary released the Company
from threatened claims arising out of the Company's acquisition of its interest
in Coleman, and MacAndrews & Forbes agreed to provide management support to the
Company. Under the settlement agreement, the MacAndrews & Forbes subsidiary was
granted a warrant expiring August 24, 2003 to purchase up to an additional 23
million shares of the Company's common stock at an exercise price of $7 per
share, subject to anti-dilution provisions. The plaintiffs have requested an
injunction against the issuance of stock to MacAndrews & Forbes upon the
exercise of its warrant and unspecified money damages. These complaints also
allege that the rights of the minority shareholders have been compromised, as
the settlement would normally require shareholder approval under the rules and
regulations of the NYSE. The audit committee of the Company's

- 16 -
<PAGE>

SUNBEAM CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)

10. COMMITMENTS AND CONTINGENCIES - (Continued)

LITIGATION - (Continued)

board of directors determined that obtaining such shareholder approval would
have seriously jeopardized the financial viability of the Company which is an
allowable exception to the NYSE shareholder approval requirements. By order of
the Delaware Court of Chancery dated January 7, 1999, the derivative actions
filed in that court were consolidated, and the Company and the other defendants
have moved to dismiss these actions. The action filed in the U.S. District Court
for the Southern District of Florida has been dismissed.

On September 16, 1998, an action was filed in the 56th Judicial
District Court of Galveston County, Texas alleging various claims in violation
of the Texas Securities Act and Texas Business and Commercial Code as well as
common law fraud as a result of the Company's alleged misstatements and
omissions regarding the Company's financial condition and prospects during a
period beginning May 1, 1998 and ending June 16, 1998, in which the U.S.
National Bank of Galveston, Kempner Capital Management, Inc. and Legacy Trust
Company engaged in transactions in the Company's common stock on their own
behalf and on behalf of their respective clients. The Company is the only named
defendant in this action. The complaint requests recovery of compensatory
damages, punitive damages and expenses in an unspecified amount. This action was
removed to the U.S. District Court for the Southern District of Texas and
subsequently transferred to the Southern District of Florida and consolidated
with the Consolidated Federal Actions. Plaintiffs in this action have objected
to the consolidation and have sought reconsideration by the Southern District of
Florida of the order of the Southern District of Texas denying plaintiffs'
motion to remand the case to state court and transferring it to Florida. A
similar suit was brought by the same group of plaintiffs in the above action
against Arthur Andersen. In that action, the plaintiffs allege that Arthur
Andersen violated the Texas Securities Act, committed statutory and common law
fraud and was negligent in its audits of the Company's 1996 and 1997 financial
statements. On September 29, 1999, Arthur Andersen filed a motion for leave to
join the Company and certain of its former officers as responsible third parties
and contribution defendants. Their motion was denied.

On October 30, 1998, a class action lawsuit was filed on behalf of
certain purchasers of the Debentures in the U.S. District Court for the Southern
District of Florida against the Company and some of the Company's former
officers and directors, alleging violations of the federal securities laws and
common law fraud. The complaint alleges that the Company's offering memorandum
used for the marketing of the Debentures contained false and misleading
information regarding the Company's financial position and that the defendants
engaged in a plan to inflate the Company's earnings for the purpose of
defrauding the plaintiffs and others. The plaintiffs seek a declaration that
defendants violated federal securities laws and either unspecified monetary
damages or rescission of their purchase of the Debentures. The parties have
negotiated a proposed coordination plan in order to coordinate proceedings in
this action with those in the Consolidated Federal Actions.

The Company has been named as a defendant in an action filed in the
District Court of Tarrant County, Texas, 48th Judicial District, on November 20,
1998. The Company was served in this action through the Secretary of State of
Texas on January 15, 1999. The plaintiffs in this action are purchasers of the
Debentures. The plaintiffs allege that the Company violated the Texas Securities
Act and the Texas Business & Commercial Code and committed state common law
fraud by materially misstating the financial position of the Company in
connection with the offering and sale of the Debentures. The complaint seeks
rescission, as well as compensatory and exemplary damages in an unspecified
amount. The Company specially appeared to assert an objection to the Texas
court's exercise of personal jurisdiction over the Company, and a hearing on
this objection took place on April 15, 1999. On April 23, 1999, the court
entered an order granting the Company's special appearance and dismissing the
case without prejudice. The plaintiffs moved for reconsideration of the court
order, which motion the court denied on May 24, 1999. The plaintiffs have
appealed to the Texas Court of Appeals the order dismissing the case and that
appeal is pending.

- 17 -
<PAGE>

SUNBEAM CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)

10. COMMITMENTS AND CONTINGENCIES - (Continued)

LITIGATION - (Continued)

On April 12, 1999, a class action lawsuit was filed in the U.S.
District Court for the Southern District of Florida. The lawsuit was filed on
behalf of persons who purchased Debentures during the period of March 20, 1998
through June 30, 1998, inclusive, but after the initial offering of such
Debentures. The complaint asserts that the Company made material omissions and
misrepresentations that had the effect of inflating the market price of the
Debentures. The complaint names as defendants the Company, its former auditor,
Arthur Andersen, and two former Company officers, Messrs. Dunlap and Kersh. The
plaintiff is an institution which allegedly acquired in excess of $150,000,000
face amount of the Debentures and now seeks unspecified money damages. The
Company was served on April 16, 1999 in connection with this pending lawsuit.
The Company has requested that this action be coordinated with the Consolidated
Federal Actions.

On February 9, 1999, Messrs. Dunlap and Kersh filed with the American
Arbitration Association demands for arbitration of claims under their respective
employment agreements with the Company. Messrs. Dunlap and Kersh are requesting
a finding by the arbitrators that the Company terminated their employment
without cause and that they should be awarded certain benefits based upon their
respective employment agreements. On March 12, 1999, the Company asked the
Circuit Court for the Fifteenth Judicial Circuit in and for Palm Beach County,
Florida to issue an injunction prohibiting Messrs. Dunlap and Kersh from
pursuing their arbitration proceedings against the Company on the grounds, among
others, that the simultaneous litigation of the action filed in that court on
April 7, 1998, described above, and the arbitration proceedings would subject
the Company to the threat of inconsistent adjudications with respect to certain
rights to compensation asserted by Messrs. Dunlap and Kersh and would cause
irreparable harm to the Company and its shareholders. On March 19, 1999, the
plaintiff in the April 7, 1998 action discussed above moved for an injunction on
similar grounds. On May 11, 1999, the court denied the motions for a preliminary
injunction filed by the Company and the plaintiff. The Company has answered the
arbitration demands of Messrs. Dunlap and Kersh and has filed counterclaims
seeking, among other things, the return of all consideration paid, or to be
paid, under the February 1998 Employment Agreements between the Company and
Messrs. Dunlap and Kersh. An answer was filed by Messrs. Dunlap and Kersh
generally denying the Company's counterclaims. Discovery is pending.

On May 24, 1999, an action naming the Company as defendant was filed in
the Circuit Court for Ozaukee County, Wisconsin. Prior to service of the
complaint, the plaintiff dismissed its claims, voluntarily, without prejudice.
The plaintiff in this action was a purchaser of the Debentures. The plaintiff
alleged that the Company violated the Wisconsin Uniform Securities Act and
committed acts of false advertising and misrepresentation in connection with the
offering and sale of the Debentures. The plaintiff sought rescission, as well as
compensatory and exemplary damages in an unspecified amount.

On September 13, 1999, an action naming the Company and Arthur Andersen
as defendants was filed in the Circuit Court for Montgomery County, Alabama. The
plaintiffs in this action are purchasers of the Company's common stock during
the period March 19, 1998 through May 6, 1998. The plaintiffs allege, among
other things, that the defendants violated the Alabama Security Laws and SEC
Rule 10b-5. The plaintiffs seek compensatory and punitive damages in an
unspecified amount. The Company has removed this case to the U.S. District Court
for the District of Alabama. In addition, Arthur Andersen has filed a cross
claim against the Company for contribution and indemnity. The Company has filed
a motion with the Judicial Panel on Multidistrict Litigation to consolidate this
action with the Consolidated Federal Actions.

The Company intends to vigorously defend each of the foregoing lawsuits
other than those as to which a memorandum of understanding to settle has been
reached, but cannot predict the outcome and is not currently able to evaluate
the likelihood of the Company's success in each case or the range of potential
loss. However, if the Company were to lose these lawsuits, judgments would
likely have a material adverse effect on the Company's consolidated financial
position, results of operations and cash flows.

- 18 -

<PAGE>

SUNBEAM CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)

10. COMMITMENTS AND CONTINGENCIES - (Continued)

LITIGATION - (Continued)

On March 23, 1999, Messrs. Dunlap and Kersh filed a complaint in the
Court of Chancery of the State of Delaware seeking an order directing the
Company to advance attorneys' fees and other expenses incurred in connection
with various state and federal class and derivative actions and an investigation
instituted by the SEC. The complaint alleges that such advancements are required
by the Company's by-laws and by a forbearance agreement entered into between the
Company and Messrs. Dunlap and Kersh in August, 1998. A trial of this summary
proceeding was held on June 15 and 16, 1999. On June 23, 1999, the court issued
a memorandum opinion directing the Company to pay about $1.4 million on account
of expenses incurred to date and to advance the reasonable future expenses in
those actions and investigations. Messrs. Dunlap and Kersh have agreed to repay
all amounts advanced to them if it is ultimately determined that they are not
entitled to indemnification under Delaware law.

On July 2, 1998, the American Alliance Insurance Company filed suit
against the Company in the U.S. District Court for the Southern District of New
York requesting a declaratory judgment of the court that the directors' and
officers' liability insurance policy for excess coverage issued by American
Alliance was invalid and/or had been properly canceled by American Alliance.
American Alliance has filed a motion for summary judgment on the ground that
coverage was never bound. The Company has opposed that motion. As a result of a
motion made by the Company, this case has been transferred to the U.S. District
Court for the Southern District of Florida for coordination and consolidation of
pre-trial proceedings with the various actions pending in that court. On October
20, 1998, an action was filed by Federal Insurance Company in the U.S. District
Court for the Middle District of Florida requesting the same relief as that
requested by American in the previously filed action as to additional coverage
levels under the Company's directors' and officers' liability insurance policy.
This action has been transferred to the U.S. District Court for the Southern
District of Florida and is currently in discovery. The Company is seeking a stay
of discovery to coordinate discovery in this action with any discovery that may
occur in the Consolidated Federal Actions. Plaintiff has moved to compel
production of various documents. On December 22, 1998, an action was filed by
Executive Risk Indemnity, Inc. in the Circuit Court of the Seventeenth Judicial
Circuit in and for Broward County, Florida requesting the same relief as that
requested by American and Federal in their previously filed actions as to
additional coverage levels under the Company's directors' and officers'
liability insurance policy. On April 15, 1999, the Company filed an action in
the U.S. District Court for the Southern District of Florida against National
Union Fire Insurance Company of Pittsburgh, PA, Gulf Insurance Company and St.
Paul Mercury Insurance Company requesting, among other things, a declaratory
judgment that National Union is not entitled to rescind its directors' and
officers' liability insurance policies to the Company and a declaratory judgment
that the Company is entitled to coverage from these insurance companies for the
various lawsuits described herein under directors' and officers' liability
insurance policies issued by each of the defendants. In response to the
Company's complaint, defendants St. Paul and Gulf have answered and asserted
counterclaims seeking rescission and declaratory relief that no coverage is
available to the Company. The Company has denied the allegations of Gulf's and
St. Paul's counterclaims. Defendant National Union has filed a motion to dismiss
or stay the claims filed by the Company against National Union on the basis,
among others, that the Company must submit the dispute to arbitration or
mediation. The Company has filed a response opposing that motion. The Company
intends to pursue recovery from all of its insurers if damages are awarded
against the Company or its indemnified officers and/or directors under any of
the foregoing actions and to recover attorneys' fees covered under those
policies. The Company's failure to obtain such insurance recoveries following an
adverse judgment in any of the actions described above could have a material
adverse effect on the Company's financial position, results of operations and
cash flows.

By letter dated June 17, 1998, the staff of the Division of Enforcement
of the SEC advised the Company that it was conducting an informal inquiry into
the Company's accounting policies and procedures and requested that the Company
produce certain documents. On July 2, 1998, the SEC issued a Formal Order of
Private Investigation, designating SEC officers to take testimony and pursuant
to which a subpoena was served on the Company requiring the production of
certain documents. On November 4, 1998, another SEC subpoena requiring the
production of additional documents was received by the Company. The Company has
provided numerous documents to the SEC staff and continues to cooperate with the
SEC staff. The Company has, however, declined to provide the SEC with material
that the Company believes is subject to the attorney-client privilege and the
work product immunity.

- 19 -
<PAGE>

SUNBEAM CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)

10. COMMITMENTS AND CONTINGENCIES - (CONTINUED)

LITIGATION - (Continued)

The SEC has not commenced any civil or administrative proceedings as a
result of its investigation, and the Company cannot predict at this time whether
the SEC will seek to impose any monetary or other penalties against the Company.
Under these circumstances, the Company cannot estimate the duration of the
investigation or its outcome.

The Company and its subsidiaries are also involved in various other
lawsuits arising from time to time which the Company considers to be ordinary
routine litigation incidental to its business. In the opinion of the Company,
the resolution of these routine matters, and of certain matters relating to
prior operations, individually or in the aggregate, will not have a material
adverse effect upon the financial position, results of operations or cash flows
of the Company.

Amounts accrued for litigation matters represent the anticipated costs
(damages and/or settlement amounts) in connection with pending litigation and
claims and related anticipated legal fees for defending such actions. The costs
are accrued when it is both probable that an asset has been impaired or a
liability has been incurred and the amount can be reasonably estimated. The
accruals are based upon the Company's assessment, after consultation with
counsel, of probable loss based on the facts and circumstances of each case, the
legal issues involved, the nature of the claim made, the nature of the damages
sought and any relevant information about the plaintiffs and other significant
factors which vary by case. When it is not possible to estimate a specific
expected cost to be incurred, the Company evaluates the range of probable loss
and records the minimum end of the range. As of September 30, 1999, the Company
had established accruals for litigation matters of $22.6 million (representing
$11.3 million and $11.3 million for estimated damages or settlement amounts and
legal fees, respectively.) As of December 31, 1998 the Company had established
accruals for litigation matters of $31.2 million (representing $17.5 million and
$13.7 million for estimated damages or settlement amounts and legal fees,
respectively). It is anticipated that the $22.6 million accrual will be paid as
follows: $5.2 million in 1999, $14.9 million in 2000, and $2.5 million in 2001.
The Company believes, based on information known to the Company on September 30,
1999, that anticipated probable costs of litigation matters existing as of
September 30, 1999 have been adequately reserved, to the extent determinable.

PRODUCTS LIABILITY

As a consumer goods manufacturer and distributor, the Company faces the
constant risks of product liability and related lawsuits involving claims for
substantial money damages, product recall actions and higher than anticipated
rates of warranty returns or other returns of goods. These claims could result
in liabilities that could have a material adverse effect on the Company's
consolidated financial position, results of operations, or cash flows. Some of
the product lines the Company acquired in the 1998 acquisitions have increased
its exposure to product liability and related claims.

BRK Brands, Inc., a wholly owned subsidiary of the Company, was a
defendant in the case Gordon v. BRK Brands, Inc., et al. in the Circuit Court
for the City of St. Louis. In Gordon, the plaintiff alleged, among other things,
that the plaintiff's smoke detector (which had been manufactured by a
predecessor of BRK Brands) did not alarm quickly enough. In July 1999, the jury
in the Gordon case awarded $20 million in compensatory damages and $30 million
in punitive damages. This case has been settled and BRK's obligation under the
settlement is to pay the balance of its self-insured retention.

The Company is party to various personal injury and property damage
lawsuits relating to its products and incidental to its business. Annually, the
Company sets its product liability insurance program based on the Company's
current and historical claims experience and the availability and cost of
insurance. The Company's program for 1999 was comprised of a self-insurance
retention of $3.5 million per occurrence, and was limited to $28.0 million in
the aggregate.

Cumulative amounts estimated to be payable by the Company with respect
to pending and potential claims for all years in which the Company is liable
under its self-insurance retention have been accrued as liabilities. Such
accrued liabilities are necessarily based on estimates (which include actuarial
determinations made by independent actuarial consultants as to liability
exposure, taking into account prior experience, numbers of claims and other
relevant factors); thus, the Company's ultimate liability may exceed or be less
than the amounts accrued. The methods of making such estimates and establishing
the resulting liability are reviewed continually and any adjustments resulting
therefrom are reflected in current operating results.

- 20 -
<PAGE>

SUNBEAM CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)

10. COMMITMENTS AND CONTINGENCIES - (Continued)

PRODUCTS LIABILITY - (Continued)

Historically, product liability awards have rarely exceeded the
Company's individual per occurrence self-insured retention. There can be no
assurance, however, that the Company's future product liability experience will
be consistent with its past experience. Based on existing information, the
Company believes that the ultimate conclusion of the various pending product
liability claims and lawsuits of the Company, individually or in the aggregate,
will not have a material adverse effect on the financial position, results of
operations or cash flows of the Company.

ENVIRONMENTAL MATTERS

The Company's operations, like those of comparable businesses, are
subject to certain federal, state, local and foreign environmental laws and
regulations in addition to laws and regulations regarding labeling and packaging
of products and the sales of products containing certain environmentally
sensitive materials. The Company believes it is in substantial compliance with
all environmental laws and regulations which are applicable to its operations.
Compliance with environmental laws and regulations involves certain continuing
costs; however, such costs of ongoing compliance have not resulted, and are not
anticipated to result, in a material increase in the Company's capital
expenditures or to have a material adverse effect on the Company's results of
operations, financial condition or competitive position.

In addition to ongoing environmental compliance at its operations, the
Company also is actively engaged in environmental remediation activities many of
which related to divested operations. As of December 31, 1998, the Company has
been identified by the United States Environmental Protection Agency ("EPA") or
a state environmental agency as a potentially responsible party ("PRP") in
connection with seven sites subject to the federal Superfund Act and five sites
subject to state Superfund laws comparable to the federal law (collectively the
"Environmental Sites"), exclusive of sites at which the Company has been
designated (or expects to be designated) as a de minimis (less than 1%)
participant.

The Superfund Act, and related state environmental remediation laws,
generally authorize governmental authorities to remediate a Superfund site and
to assess the costs against the PRPs or to order the PRPs to remediate the site
at their expense. Liability under the Superfund Act is joint and several and is
imposed on a strict basis, without regard to degree of negligence or
culpability. As a result, the Company recognizes its responsibility to determine
whether other PRPs at a Superfund site are financially capable of paying their
respective shares of the ultimate cost of remediation of the site. Whenever the
Company has determined that a particular PRP is not financially responsible, it
has assumed for purposes of establishing reserve amounts that such PRP will not
pay its respective share of the costs of remediation. To minimize the Company's
potential liability with respect to the Environmental Sites, the Company has
actively participated in steering committees and other groups of PRPs
established with respect to such sites. The Company currently is engaged in
active remediation activities at 11 sites, six of which are among the
Environmental Sites referred to above, and five of which have not been
designated as Superfund sites under federal or state law. The remediation
efforts in which the Company is involved include facility investigations,
including soil and groundwater investigations, corrective measure studies,
including feasibility studies, groundwater monitoring, extraction and treatment,
soil sampling, excavation and treatment relating to environmental clean-ups. In
certain instances, the Company has entered into agreements with governmental
authorities to undertake additional investigatory activities and in other
instances has agreed to implement appropriate remedial actions. The Company has
also established reserve amounts for certain non-compliance matters including
those involving air emissions.

- 21 -
<PAGE>

SUNBEAM CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)

10. COMMITMENTS AND CONTINGENCIES - (Continued)

ENVIRONMENTAL MATTERS - (Continued)

million accrual at September 30, 1999 will be paid as follows: $5.2 million in
1999, $3.9 million in 2000, $1.8 million in 2001, $2.0 million in 2002, $0.6
million in 2003 and $9.8 million, thereafter. The Company has accrued its best
estimate of investigation and remediation costs based upon facts known to the
Company at such dates and because of the inherent difficulties in estimating the
ultimate amount of environmental costs, which are further described below, these
estimates may materially change in the future as a result of the uncertainties
described below. Estimated costs, which are based upon experience with similar
sites and technical evaluations, are judgmental in nature and are recorded at
undiscounted amounts without considering the impact of inflation and are
adjusted periodically to reflect changes in applicable laws or regulations,
changes in available technologies and receipt by the Company of new information.
It is difficult to estimate the ultimate level of future environmental
expenditures due to a number of uncertainties surrounding environmental
liabilities. These uncertainties include the applicability of laws and
regulations, changes in environmental remediation requirements, the enactment of
additional regulations, uncertainties surrounding remediation procedures
including the development of new technology, the identification of new sites for
which the Company could be a PRP, information relating to the exact nature and
extent of the contamination at each site and the extent of required cleanup
efforts, the uncertainties with respect to the ultimate outcome of issues which
may be actively contested and the varying costs of alternative remediation
strategies. The Company continues to pursue the recovery of some environmental
remediation costs from certain of its liability insurance carriers; however,
such potential recoveries have not been offset against potential liabilities and
have not been considered in determining the Company's environmental reserves.

Due to uncertainty over remedial measures to be adopted at some sites,
the possibility of changes in environmental laws and regulations and the fact
that joint and several liability with the right of contribution is possible at
federal and state Superfund sites, the Company's ultimate future liability with
respect to sites at which remediation has not been completed may vary from the
amounts reserved as of September 30, 1999.

The Company believes, based on existing information for sites where
costs are estimable, that the costs of completing environmental remediation of
all sites for which the Company has a remediation responsibility have been
adequately reserved and that the ultimate resolution of these matters will not
have a material adverse effect upon the Company's financial condition, results
of operations or cash flows.

COMMITMENT FEE

Under the terms of the April 15, 1999 amendment to the New Credit
Facility, the Company is obligated to pay a loan commitment fee of between $4.2
million and $17.0 million. The ultimate amount of the fee is determined based on
multiplying the sum of the outstanding borrowings and amounts available for
borrowings as of April 15, 1999 by a factor that is determined at the earlier of
September 30, 2000 or upon repayment of the New Credit Facility. This fee is
payable at the earlier of September 30, 2000 or upon repayment of the New Credit
Facility. At a minimum, the Company is obligated under these terms to pay $4.2
million. The ultimate amount due could be as high as $17.0 million if the sum of
the outstanding borrowings and amounts available for borrowings at September 30,
2000 (the "aggregate availability") exceeds $1.2 billion. If the aggregate
availability is between $1.0 billion and $1.2 billion, a fee of $8.4 million
will be due. If the aggregate availability is $1.0 billion or less, the $4.2
million minimum will be due. Under any circumstances, the $4.2 million will be
due; therefore, the Company has accrued the minimum liability and an offsetting
asset which is being amortized and included in interest expense through April
10, 2000, the term of the current amendment extension period.

The Company has not accrued for amounts in excess of the $4.2 million,
as there are numerous uncertainties which may individually or in the aggregate
impact the level of aggregate availability at September 30, 2000. These
uncertainties include, but are not limited to: the ability to obtain an
amendment or further waiver of existing covenants from the lenders under the New
Credit Facility for the period beyond April 10, 2000; proceeds from the sales of
assets or businesses, if any; changes in debt structure, including the effects
of refinancing, if any; and cash flows generated or used by future operations.
Given these uncertainties, the Company is currently not able to predict the
probable level of aggregate availability at September 30, 2000. As events
develop, the Company will periodically review the expected aggregate
availability at September 30, 2000. If it becomes likely than an amount in
excess of $4.2 million will be paid, the Company will recognize that change in
estimate over the remaining period of the New Credit Facility Amendment.

- 22 -
<PAGE>

SUNBEAM CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)

11. SUBSEQUENT EVENT

On November 9, 1999, the Company announced a plan to divest Eastpak and
certain non-essential assets. Net proceeds from these assets sales are estimated
to be $200 million and will be primarily used to pay down debt.

- 23 -
<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following discussion should be read in conjunction with the
accompanying condensed consolidated financial statements and the related
footnotes included in this quarterly report on Form 10-Q, as well as the
consolidated financial statements, related footnotes and management's discussion
and analysis of financial condition and results of operations in the Company's
Annual Report on Form 10-K/A for the year ended December 31, 1998.

ACQUISITIONS

On March 30, 1998, the Company, through a wholly-owned subsidiary,
acquired approximately 81% of the total number of then outstanding shares of
common stock of Coleman from a subsidiary of MacAndrews & Forbes ("M&F"), in
exchange for 14,099,749 shares of the Company's common stock and approximately
$160 million in cash. In addition, the Company assumed approximately $1,016
million in debt. Immediately thereafter, as a result of the exercise of Coleman
employee stock options, Sunbeam's indirect beneficial ownership of Coleman
decreased to approximately 79% of the total number of the outstanding shares of
Coleman common stock. The Company's agreement for the acquisition of the
remaining publicly held Coleman shares pursuant to a merger transaction provides
that the remaining Coleman shareholders will receive:

o approximately 6.7 million shares of Sunbeam common stock
(0.5677 of a share for each outstanding Coleman share); and,

o approximately $87 million in cash ($6.44 for each outstanding
Coleman share and the cash-out of unexercised Coleman employee
stock options for an amount equal to the difference between
$27.50 per share and the exercise price of such options).

The Company expects to complete the Coleman merger during the fourth
quarter of 1999 or early in the first quarter of 2000, although there can be no
assurance that the merger will occur during that time. See the discussion below
under the heading "Issuance of Warrants to M&F" for information regarding the
settlement claims relating to the Coleman acquisition, the terms of which
provide for the issuance at the time of the merger of warrants to purchase up to
4.98 million shares of Sunbeam's common stock at $7 per share.

On April 6, 1998, the Company completed the cash acquisitions of First
Alert, a leading manufacturer of smoke and carbon monoxide detectors, and
Signature Brands, a leading manufacturer of consumer and professional products.
The First Alert and the Signature Brands acquisitions were valued at
approximately $182 million (including $133 million of cash and $49 million of
assumed debt) and approximately $255 million (reflecting cash paid, including
the required retirement or defeasance of debt), respectively.

The acquisitions were recorded under the purchase method of accounting
and accordingly, the financial position and results of operations of each
acquired entity are included in the Condensed Consolidated Financial Statements
from the respective dates of acquisition. The purchase prices of the acquired
entities have been allocated to individual assets acquired and liabilities
assumed based on estimates of fair values determined by independent appraisals
at the dates of acquisition.

- 24 -
<PAGE>

NON-RECURRING CHARGES

Consolidated operating results for 1999 and 1998 were impacted by a
number of largely non-recurring charges. Operating income, adjusted for these
items, is summarized in the following table and succeeding narrative.

<TABLE>
<CAPTION>
COMBINED HISTORICAL
THREE MONTHS ENDED NINE MONTHS ENDED RESULTS
---------------------------- ---------------------------- NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1999 1998 1998
------------- ------------- ------------- ------------- -------------------
<S> <C> <C> <C> <C> <C>
(Amounts in millions)
Net sales - As reported..................... $ 601.6 $ 496.0 $ 1,786.4 $ 1,322.1 $ 1,624.0

Gross margin - As reported.................. 158.8 67.4 452.3 48.7 123.8
Non-recurring items:
Provision for inventory................. - 2.2 - 86.2 86.2
Asset impairment........................ - 3.1 - 32.7 32.7
Purchase accounting..................... - 7.6 - 28.1 28.1
------- ------- --------- --------- ---------
Adjusted gross margin................. 158.8 80.3 452.3 195.7 270.8

Selling, general and administrative
expense ("SG&A") - As reported........... 154.5 228.4 449.3 440.4 541.3
Non-recurring items:
Issuance of warrants to M&F............. - (70.0) - (70.0) (70.0)
Former employees' deferred
compensation/severance............... - (3.8) - (34.4) (34.4)
Year 2000 and system initiatives
expenses.............................. (5.2) (2.1) (18.7) (2.1) (2.1)
Restatement related expenses............ - (10.8) - (10.8) (10.8)
Office relocation expense............... - (4.0) - (4.0) (4.0)
------- ------- --------- --------- ---------
Adjusted SG&A expense................. 149.3 137.7 430.6 319.1 420.0
------- ------- --------- --------- ---------
Adjusted operating income (loss)............ $ 9.5 $ (57.4) $ 21.7 $ (123.4) $ (149.2)
======= ======= ======== ======== =========
</TABLE>

The combined results from operations for the nine months ended
September 30, 1998 include the combined historical results of Coleman, Signature
Brands and First Alert from the beginning of 1998 to their respective
acquisition dates. The combined historical results do not include pro forma
purchase accounting adjustments including those relating to the amortization of
the purchase price of these acquisitions. Certain amounts included in the
historical results of the acquired companies have been reclassified to conform
to the Company's presentation. Presentation of these combined results is made to
enhance comparability between the periods presented and such amounts are not
necessarily indicative of the combined results that would have occurred had
these acquisitions been consummated at the beginning of 1998.

PROVISION FOR INVENTORY

In the second and third quarters of 1998, the Company recorded charges
totaling $86.2 million as a result of the following:

o Inventories were built during 1997 and the first half of 1998
in anticipation of 1998 sales volumes which did not
materialize. As a result, it has been and will continue to be
necessary to dispose of some portions of excess inventories at
amounts less than cost. Accordingly, during 1998, when the
facts and circumstances were known that such sales volume
would not materialize, the Company recorded $48.6 million in
charges (of which $46.4 million and $2.2 million were recorded
in the second and third quarters, respectively) to properly
state this inventory at the lower-of-cost-or-market. This
inventory primarily related to certain appliances, grills and
grill accessories.

o A charge of $11.0 million was recorded during the second
quarter of 1998 for excess inventories for raw material and
work in process that will not be used due to outsourcing the
production of breadmakers, toasters, and some other
appliances.

- 25 -
<PAGE>

o In the second quarter of 1998, the Company made the decision
to exit certain product lines, primarily air and water
filtration products and eliminate some stock keeping units
("SKU's") within existing product lines, primarily relating to
appliances, grills and grill accessories. As a result of this
decision, a $26.6 million charge was recorded during the
second quarter of 1998 to properly state this inventory at the
lower-of-cost-or market.

These charges to record excess inventories at the
lower-of-cost-or-market were based upon management's best estimate of net
realizable value. (See Note 7 to the Condensed Consolidated Financial
Statements.)

In addition to the charge taken in 1998, the excess and obsolete
inventory referenced above has impacted the Company's operating results in
several ways, with two primary effects. First, gross margins have been impacted
by sales, at below normal prices, of obsolete inventory into non-traditional
channels and excess inventory into traditional channels. In addition, due to the
high levels of excess inventory at the end of 1998, the Company's usage of its
manufacturing facilities has been lower than normal, resulting in lower fixed
cost absorption, which in turn, reduced gross margins in 1999.

ASSET IMPAIRMENT

During 1998, management made decisions to outsource or discontinue a
substantial number of products previously made by the Company (principally
breadmakers, toasters and certain other appliances, air and water filtration
products and the elimination of some SKU's within existing product lines,
primarily relating to appliances, grills and grill accessories). As a result,
some facilities and equipment held by the Company at such time are either no
longer used or are utilized in a significantly different manner. Accordingly, a
charge of $29.6 million was recorded in Cost of Goods Sold to write some of
these assets down to their estimated fair market value. Subsequent to the
decisions made in conjunction with the acquisitions, management decided to
discontinue certain SKU's within product lines, principally generators,
compressors and propane cylinders. As a result, in the third quarter of 1998,
the Company recorded in Cost of Goods Sold an additional provision for
impairment of fixed assets of $3.1 million in an acquired entity relating to
assets taken out of service for which there was no remaining value. These assets
are expected to be substantially disposed of by December 31, 1999. (See Note 7
to the Condensed Consolidated Financial Statements.)

PURCHASE ACCOUNTING

The Company recorded the 1998 acquisitions using the purchase method of
accounting. In accordance with this accounting method, inventory pertaining to
the acquisitions was recorded at fair value. The fair value of the inventory
exceeded the book value reflected on the balance sheets of the acquired
companies as of the respective acquisition dates. The excess of the fair value
of inventory over its pre-acquisition book value was recorded in cost of sales
as the inventory was sold. The non-recurring impact of this purchase accounting
adjustment was $20.5 million and $7.6 million in the second and third quarters
of 1998, respectively.

ISSUANCE OF WARRANTS TO M&F

On August 12, 1998, the Company announced that, following investigation
and negotiation conducted by a Special Committee of the Board of Directors
consisting of four outside directors not affiliated with M&F, the Company had
entered into a settlement agreement with a subsidiary of M&F pursuant to which
the Company was released from certain threatened claims of M&F and its
subsidiaries arising from the Coleman acquisition and M&F agreed to provide
certain management personnel and assistance to the Company in exchange for the
issuance to the M&F subsidiary of a warrant expiring August 24, 2003 to purchase
up to 23 million shares of the Company's common stock at a cash exercise price
of $7.00 per share, subject to anti-dilution adjustments. The Company concluded
that the agreement to issue this warrant did not result in a new measurement
date for the purposes of determining the purchase price for Coleman and
accounted for the issuance of this warrant in the third quarter of 1998 as a
cost of settling a potential claim. Accordingly, a $70.0 million non-cash SG&A
expense was recorded in the third quarter of 1998, based upon a valuation
performed as of August 1998 using facts existing at that time. The valuation was
conducted by an independent consultant engaged by the special committee of the
board of directors.

FORMER EMPLOYEES' DEFERRED COMPENSATION/SEVERANCE

On February 20, 1998, the Company entered into new three-year
employment agreements with its then Chairman and Chief Executive Officer and two
other senior officers of the Company. The new employment agreements provided
for, among other items, the acceleration of vesting of restricted stock and the
forfeiture of unvested restricted stock that had

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<PAGE>

been granted under the executives' prior employment agreements, new restricted
stock grants and options to purchase common shares. In addition, the new
employment agreements provided for income tax gross-ups with respect to any tax
assessed on the restricted stock grants and acceleration of vesting of
restricted stock. Total compensation expense recognized in the first quarter of
1998 related to these items was approximately $31 million. The Company also
recognized approximately $3.8 million of severance for former employees in the
third quarter of 1998. (See Note 8 to the Condensed Consolidated Financial
Statements.)

YEAR 2000 AND SYSTEMS INITIATIVES EXPENSES

See "Year 2000 Readiness Disclosure" within this Item II -
"Management's Discussion and Analysis of Financial Condition and Results of
Operations".

RESTATEMENT RELATED EXPENSES

On June 30, 1998, the Company announced that the Audit Committee was
initiating a review into the accuracy of the Company's prior financial
statements. The Audit Committee's review was completed and, as a result of its
findings, the Company was required to restate its previously issued consolidated
financial statements for 1996 and 1997 and the first quarter of 1998. In
connection with the restatement efforts, the Company incurred $10.8 million of
costs in the third quarter of 1998 principally representing legal and accounting
and auditing costs of $6.1 million and $4.7 million, respectively.

OFFICE RELOCATION EXPENSE

In 1998, the Company made the decision to relocate the corporate
headquarters and exit several existing building leases in connection with a plan
to consolidate office space. Accordingly, a charge of $4.0 million was recorded
in the third quarter primarily related to lease termination fees and
cancellation penalties.

THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1998

Consolidated net sales for the three months ended September 30, 1999
and 1998 were $601.6 million and $496.0 million respectively, an increase of
$105.6 million or approximately 21%. This increase was driven primarily by the
Outdoor Leisure group where net sales increased $62.5 million to $221.1 million
in the third quarter of 1999. This increase was predominately driven by strong
retail replenishment demand of outdoor recreation products and
Powermate/registered trademark/ generators (aggregating approximately $58
million). The increase in outdoor recreation products and Powermate/registered
trademark/ generators is believed to be partially attributable to heightened
consumer sensitivity to the need for emergency preparedness. This increased
sensitivity is believed to be reflective of a combination of factors including
weather conditions and Year 2000 considerations. Outdoor cooking product net
sales increases in the 1999 period as compared to the third quarter of 1998
accounted for the balance of the sales increase. The increase in outdoor cooking
product sales was largely the result of strong retail conditions. Household net
sales increased $20.7 million to $239.9 million in 1999. After adjusting for the
Company's estimate of the effect of reduced shipments in the year ago quarter to
allow trade inventories to return to normal levels, which impacted all segments,
but which was most significant for the Household segment. Household segment
sales were essentially flat as compared to the third quarter in 1998. Within the
Household segment, net sales of personal care and health products increased as a
result of a strengthening retail environment largely offset by decreases in
sales of appliances and timing of First Alert product sales. International net
sales increased $25.3 million to $139.0 million. This increase in net sales was
largely driven by improved net sales in Canada of approximately $12 million,
resulting predominantly from strong retail demand for Powermate/registered
trademark/. Net sales increases in Europe, Japan and Asia Pacific, resulting
primarily from increased sales of outdoor recreation products and reduced levels
of sales returns, account for the remainder of the increase in International net
sales.

Gross margin for the third quarter in 1999 was $158.8 million or $91.4
million higher than the comparable period in 1998. Excluding the effects of 1998
non-recurring items, as summarized above under "Non-Recurring Charges", gross
margin was $80.3 million in the third quarter of 1998. As a percentage of net
sales, gross margin improved to approximately 26% in the third quarter of 1999
as compared to the third quarter 1998 gross margin of approximately 14% and 1998
adjusted gross margin of approximately 16%. Three-quarters of the increase in
gross margin dollars was generated through higher sales volumes, volume-related
manufacturing fixed cost absorption improvements and improvements in
manufacturing performance driven by the Outdoor Leisure group which contributed
over 50% of the

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<PAGE>

improvement in total gross margin dollars in the third quarter of 1999.
Decreases in customer allowances, which are deductions from gross sales to
arrive at net sales, along with improvements in the product sales mix accounted
for the remainder of the improvement in gross margin in the third quarter.

SG&A expense in the third quarter of 1999 was $154.5 million,
representing a 32.4% decrease over the same period in the prior year. Excluding
the effects of non-recurring items, as summarized above under "Non-Recurring
Charges", SG&A expense for 1999 was approximately $12 million higher than the
same period in 1998. The increase in SG&A expense was driven predominantly by
higher net sales during the quarter and costs related to additional personnel,
which together account for approximately $20 million. Approximately two-thirds
of this increase is attributable to higher levels of selling and administrative
costs primarily in the Outdoor Leisure and International segments driven by
increased net sales. The remaining increase in SG&A expense is primarily related
to additional personnel, largely as a result of the Company building staffing
levels to support future growth, a process that commenced in the third quarter
of 1998. In addition, SG&A expense in 1999 includes costs associated with
certain redundant operations resulting from the Company's 1998 acquisitions
which operations the Company is integrating, as well as the decision to bring
in-house certain functions that had previously been outsourced. The Company is
in the process of fully integrating certain of these functions and expects that
when this process has been completed consolidated SG&A expense for these
functions will be reduced. Partially offsetting these increases in SG&A expense
are certain 1998 expenses which did not reoccur in 1999. These 1998 expenses
include increases associated with restructuring reserve at Coleman
(approximately $7 million) and higher bad debt expense (approximately $3
million).

Consolidated operating results for the third quarters of 1999 and 1998,
were a profit of $4.3 million in 1999 and a loss of $161.0 million in 1998.
Operating results, as adjusted, were a profit of $9.5 million and a loss of
$57.4 million in the third quarter of 1999 and 1998, respectively. This change
resulted from the factors discussed above.

Interest expense, net in the third quarter of 1999 was $48.3 million as
compared to $42.7 million in the same period in the prior year. Approximately
40% of this increase is attributable to higher levels of borrowings during the
third quarter of 1999. The increased level of borrowings was attributable to
capital expenditures since the third quarter of 1998. The balance of the
increase was driven by the amortization of the loan commitment fee
(approximately $1 million) the Company is obligated to pay under the terms of
the New Credit Facility and the debenture expense related to liquidated damages
payable to debenture holders (approximately $1 million). See Notes 3 and 10 to
the Condensed Consolidated Financial Statements.

Other income, net of $5.2 million for the third quarter of 1999
included a gain of approximately $4 million relating to the sale of the Mexico
City facility. This gain was partially offset by losses from other miscellaneous
asset sales of approximately $1.5 million. The balance of other income, net in
1999 resulted from favorable foreign exchange rates, primarily from the
Company's operations in Japan. Other income, net of $11.0 million for the third
quarter of 1998 included $8.0 million from the settlement of a lawsuit. The
balance of other income, net in 1999 resulted from favorable foreign exchange
rates, primarily from Mexico.

The minority interest reported for the third quarter of 1999 and 1998
relates to the minority interest held in Coleman by public shareholders.

Tax expense recorded in the third quarter of 1999 ($3.7 million)
related primarily to taxes on foreign income. Income taxes in the third quarter
of 1998 reflect tax benefits on earnings of foreign operations. No net tax
benefit was recorded due to the Company's U.S. losses in either year as it is
management's assessment that the Company cannot demonstrate that it is more
likely than not that deferred tax assets resulting from these losses would be
realized through future taxable income.

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<PAGE>

repayment of loans outstanding from Sunbeam under the Intercompany Note. (See
Note 8 to the Condensed Consolidated Financial Statements.)

On November 9, 1999, the Company announced a plan to divest Eastpak and
also plans to divest certain non-essential assets. Proceeds from these assets
sales are estimated to be $200 million and will be primarily used to pay down
debt.

NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1998

Net sales for the nine months ended September 30, 1999 and 1998 were
$1,786.4 million and $1,322.1 million respectively, an increase of $464.3
million. Results for the nine months ended September 30, 1998 include Coleman,
Signature Brands and First Alert from their respective acquisition dates. After
adjusting 1998 sales to include sales of the acquired companies for the periods
from the beginning of 1998 through the respective dates of acquisition, combined
historical net sales would be $1,624.0 million. 1999 net sales increased
approximately $162 million or approximately 10% over 1998 combined historical
net sales. Information that adjusts for the results of the acquisitions prior to
the actual acquisition dates (the "combined historical" information) is provided
for informational purposes only and is to enhance comparability of the period
presented. This information is not necessarily indicative of what the combined
results would have been had these acquisitions occurred at the beginning of the
periods presented or the results for any future period. The increase in net
sales is driven by the Outdoor Leisure group which had an increase of
approximately $123 million in 1999 as compared to the combined historical net
sales in the same period in the prior year. This increase over combined
historical net sales was largely due to sales of outdoor recreation products and
Powermate/registered trademark/ generators. The higher level of sales of these
products is believed to be partially attributable to heightened consumer
sensitivity to the need for emergency preparedness. The Company believes that
this heightened sensitivity is reflective of a combination of factors, including
weather conditions and Year 2000 considerations. Household net sales in 1999
increased approximately $11 million compared to 1998 combined historical net
sales. The Company believes that the decrease in shipments in the prior year in
order to allow trade inventories to return to a normal level is primarily
responsible for this increase. This factor affects the year to year comparisons
for each of the operating groups. Adjusting for the effect on 1998 of loading,
the Company believes that Household net sales in 1999 were approximately the
same as in the prior year. Within the Household segment, net sales of personal
care products increased as a result of a strengthening retail environment
largely offset by decreases in sales of appliances. International net sales in
1999 increased $30.3 million over 1998 combined historical net sales. Higher
sales in Canada, Europe and Japan resulted predominantly from strong retail
demand of Powermate/registered trademark/ and outdoor recreation products. This
increase was partially offset by the impact of weak economic conditions in Latin
America.

Gross margin for the first nine months of 1999 was $452.3 million or
$403.6 million higher than the comparable period in 1998. Adjusting for the
combined results of the acquired companies and excluding the effects of 1998
non-recurring items, which are summarized above under the heading "Non-Recurring
Charges", gross margin for the first nine months of 1999 increased approximately
$182 million over the 1998 combined historical gross margin. As a percentage of
net sales, gross margin improved to approximately 25% in the first nine months
of 1999 as compared to approximately 4% in the 1998 period. The gross margin
percentage for the 1998 period adjusted for the non-recurring charges and for
the effect of the acquired companies was approximately 17% of combined
historical net sales. The Household group contributed approximately 30% of the
1999 gross margin improvement over the 1998 combined historical gross margin.
The improvement in the Household group's gross margin resulted primarily from
lower sales deduction rates, improved manufacturing processes and controls,
additional sales volume, and improved product mix. The Outdoor Leisure group
contributed approximately 50% of the 1999 gross margin improvement over the 1998
combined historical gross margin. Approximately 80% of the improvement in the
Outdoor Leisure group's gross margin resulted from additional volume and related
improved manufacturing overhead absorption, as well as improvements in
manufacturing. The balance of the increase resulted from improved product mix.
The International group contributed approximately 20% of the 1999 gross margin
improvement over 1998 combined historical gross margin. Approximately 40% of the
improvement in the International group's gross margin resulted from the shut
down of the Mexico City manufacturing facility which had experienced high
material usage costs and employee benefit costs in the prior year. The remaining
improvement resulted from increased sales volume, a lower level of product
returns and improved product mix.

SG&A expense for the first nine months of 1999 was $449.3 million, an
increase of $8.9 million or 2.0% over the same period in the prior year. After
adjusting 1998 SG&A expense to include the acquired companies' SG&A expense for
the period from the beginning of 1998 through the respective dates of
acquisition ($100.9 million), combined historical

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<PAGE>

SG&A expense was $541.3 million. Since the combined historical 1998 SG&A
expenses were derived by adding the acquired companies' pre-acquisition period
costs to the reported nine months' results of Sunbeam, the combined historical
SG&A expenses include $30.4 million of amortization of intangibles expense
representing both pre- and post-acquisition periods, as well as approximately
$12 million of transaction costs incurred by the acquired companies relating to
them being purchased by Sunbeam. Excluding these costs and the effects of 1998
non-recurring charges, as described above under "Non-Recurring Charges",
adjusted 1998 SG&A expenses were approximately $378 million. Excluding
amortization of intangibles expense of $38.4 million for the first nine months
of 1999 and the non-recurring charges, as described above under "Non-Recurring
Charges", adjusted 1999 SG&A costs were $392.2 million, an increase of
approximately $14 million over adjusted 1998 SG&A expense. As previously
discussed, this increase is primarily attributable to higher levels of selling
and administrative costs driven by increased net sales, headcount increases to
support future growth and costs associated with certain redundant operations
resulting from the Company's 1998 acquisitions which operations the Company is
integrating and the decision to bring in-house certain functions that had
previously been outsourced. The Company is in the process of fully integrating
certain of these functions and expects that when this process has been completed
consolidated SG&A expense for these functions will be reduced. Partially
offsetting these increases in SG&A expense are certain 1998 expenses which did
not reoccur in 1999. These 1998 expenses include increases associated with
restructuring reserve at Coleman (approximately $7 million) and higher bad debt
expense (approximately $5 million).

Operating results for the first nine months of 1999 and 1998, were a
profit of $3.0 million in 1999 and a loss of $391.7 million in 1998. Adjusted
for the historical results of the acquired companies and excluding non-recurring
charges, as previously described, operating results for the 1999 and 1998
periods were a profit of $21.7 million and a loss of $149.2 million,
respectively. This change resulted from the factors discussed above.

Interest expense increased from $88.5 million in 1998 to $136.6 million
in 1999. Approximately 75% of the change related to higher borrowing levels in
1999 resulting primarily from borrowings for the acquisitions that were
outstanding for the entire 1999 nine month period as compared to only a portion
of the 1998 period. The balance of this increase was primarily driven by the
amortization of the loan commitment fee (approximately $2 million) the Company
is obligated to pay under the terms of the New Credit Facility and the expense
related to liquidated damages payable to debenture holders (approximately $3
million).

Other income, net of $4.6 million in 1999 included a gain of
approximately $4 million relating to the sale of the Mexico City facility. This
gain was partially offset by losses from other miscellaneous asset sales of
approximately $0.3 million. The remaining other income, net in 1999 resulted
from favorable foreign exchange rates, primarily from the Company's operations
in Japan. Other income, net of $4.1 million in 1998 included $8.0 million from
the settlement of a lawsuit partially offset by net foreign exchange losses,
primarily from Mexico.

The minority interest reported in 1999 and 1998 relates to the minority
interest held in Coleman by public shareholders.

Approximately $6 million of the $12.7 million income tax expense
recorded in 1999 related to U.S. tax liability generated by Coleman as a
separate U.S. tax filing entity. As previously discussed, in July 1999, the
Company acquired a sufficient ownership interest in Coleman to permit it to file
consolidated U.S. tax returns with Coleman for all future periods. The remaining
tax expense recorded in 1999 related to taxes on foreign income and was
partially offset by the favorable resolution of an income tax audit. Tax expense
recorded in 1998 was nearly all related to foreign taxes. No net tax benefit was
recorded on the Company's losses in either year as it is management's assessment
that the Company cannot demonstrate that it is more likely than not that
deferred tax assets resulting from these losses would be realized through future
taxable income.

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<PAGE>

FOREIGN OPERATIONS

Approximately 75% of the Company's business is conducted in U.S.
dollars (including both domestic sales, U.S. dollar denominated export sales,
primarily to certain Latin American markets, Asian sales and the majority of
European sales). The Company's non-U.S. dollar denominated sales are made
principally by subsidiaries in Europe, Canada, Japan, Latin America and Mexico.
Mexico reverted to a hyperinflationary status for accounting purposes in 1997;
therefore, translation adjustments related to Mexican net monetary assets were
included as a component of net (loss) earnings. Mexico is not considered
hyperinflationary as of January 1, 1999. This change in Mexico's
hyperinflationary status is not expected to have a material effect on the
Company's financial results. Translation adjustments resulting from the
Company's non-U.S. dollar denominated subsidiaries have not had a material
impact on the Company's financial condition, results of operations, or cash
flows.

While revenues generated in Asia have traditionally not been
significant, economic instability in this region is expected to have a negative
effect on earnings. Economic instability and the political environment in Latin
America have also affected sales in that region. It is anticipated that sales in
and exports to these regions will continue to be impacted so long as the
economic environments in those regions remain unsettled.

On a limited basis, the Company selectively uses derivatives (foreign
exchange option and forward contracts) to manage foreign exchange exposures that
arise in the normal course of business. No derivative contracts are entered into
for trading or speculative purposes. The use of derivatives has not had a
material impact on the Company's financial results.

SEASONALITY

Sunbeam's consolidated sales are not expected to exhibit substantial
seasonality; however, sales are expected to be strongest during the second
quarter of the calendar year. Furthermore, sales of a number of products,
including warming blankets, vaporizers, humidifiers, grills, First Alert
products, camping and generator products may be impacted by unseasonable weather
conditions.

LIQUIDITY AND CAPITAL RESOURCES

DEBT INSTRUMENTS

In order to finance the acquisition of Coleman, First Alert and
Signature Brands and to refinance substantially all of the indebtedness of the
Company and the three acquired companies, the Company consummated an offering in
March 1998 of zero coupon debentures having a yield to maturity of 5%, which
resulted in approximately $730 million of net proceeds and borrowed about $1,325
million under its new bank credit facility.

The debentures are exchangeable for shares of the Company 's common
stock at an initial conversion rate of 6.575 shares for each $1,000 principal
amount at maturity of the debentures, subject to adjustments upon occurrence of
specified events. The debentures are subordinated in right of payment to all
existing and future senior indebtedness of the Company. The debentures are not
redeemable by the Company prior to March 25, 2003. On or after such date, the
debentures are redeemable for cash with at least 30 days notice, at the option
of the Company. The Company is required to purchase debentures at the option of
the holder as of March 25, 2003, March 25, 2008 and March 25, 2013, at purchase
prices equal to the issue price plus accrued original discount to such dates.
Sunbeam may, at its option, elect to pay any such purchase price in cash or
common stock or any combination thereof. However, the bank credit facility
prohibits the Company from redeeming or repurchasing debentures for cash. The
Company was required to file a registration statement with the SEC to register
the debentures by June 23, 1998. This registration statement was filed on
February 4, 1999 and, as amended, was declared effective on November 8, 1999.
The Company 's failure to file the registration statement by June 23, 1998 did
not constitute default under the terms of the debentures. From June 23, 1998
until the registration statement was declared effective, the Company was
required to pay to the debenture holders cash liquidated damages accruing, for
each day during such period, at a rate per annum equal to 0.25% during the first
90 days and 0.50% thereafter multiplied by the total of the issue price of the
debentures plus the original issue discount thereon on such day. The Company has
made total payments for liquidated damages since June 23, 1998 of $4.5 million,
of which $1.5 million related to damages for the period through December 31,
1998. A final payment of approximately $0.5 million, representing liquidated
damages from September 26, 1999 until the registration statement was declared
effective, will be payable on March 25, 2000.

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<PAGE>

Concurrent with the acquisitions, the Company replaced its $250 million
syndicated unsecured five-year revolving credit facility with the bank credit
facility. The bank credit facility provided for aggregate borrowings of up to
$1.7 billion and in addition to other customary covenants, required the Company
to maintain specified consolidated leverage, interest coverage and fixed charge
coverage ratios as of the end of each fiscal quarter occurring after March 31,
1998 and on or prior to the latest stated maturity date for any of the
borrowings under the bank credit facility.

As a result of, among other things, its operating losses incurred
during the first half of 1998, the Company did not achieve the specified
financial ratios for June 30, 1998 and it appeared unlikely that the Company
would achieve the specified financial ratios for September 30, 1998.
Consequently, the Company and its lenders entered into an agreement dated as of
June 30, 1998 that waived through December 31, 1998 all defaults arising from
the failure of the Company to satisfy the specified financial ratios for June
30, 1998 and September 30, 1998. Pursuant to an agreement with the Company dated
as of October 19, 1998, the Company 's lenders extended all of the waivers under
the June 30 agreement through April 10, 1999 and also waived through such date
all defaults arising from any failure by the Company to satisfy the specified
financial ratios for December 31, 1998. As part of the October 19, 1998
agreement, the Company agreed to a minimum monthly earnings before interest,
taxes, depreciation and amortization ("EBITDA") covenant (as defined in the bank
credit facility) which covenant the Company has been able to satisfy.

As part of the April 15, 1999 bank credit facility amendment, the
Company agreed to a minimum cumulative EBITDA covenant that is based on
post-December 31, 1998 consolidated EBITDA and is tested at the end of each
month occurring on or prior to March 31, 2000, as well as a covenant limiting
the amount of revolving loans (other than those used to fund the Coleman merger)
that may be outstanding under the bank credit facility as of the end of each
such month. The minimum cumulative EBITDA was initially $6.3 million for the
period January 1, 1999 through April 30, 1999 and generally grows on a monthly
basis until it reaches $121.0 million for the period from January 1, 1999
through March 31, 2000. Following is a description of the significant terms of
the bank credit facility as amended April 15, 1999.

The bank credit facility provides for aggregate borrowings of up to $1.7 billion
through:

o a revolving credit facility in an aggregate principal amount
of up to $400.0 million maturing March 30, 2005, $52.5 million
of which may only be used to complete the Coleman merger;

o up to $800.0 million in term loans maturing on March 30, 2005,
of which $35.0 million may only be used to complete the
Coleman merger; and

o a $500.0 million term loan maturing September 30, 2006, of
which $5.0 million has already been repaid through September
30, 1999.

As of September 30, 1999, approximately $1.5 billion was outstanding
and approximately $0.2 billion was available for borrowing under the bank credit
facility.

Under the bank credit facility, interest accrues, at the Company 's option:

o at the London Interbank Offered Rate ("LIBOR");

o or at the base rate of the administrative agent which is
generally the higher of the prime commercial lending rate of
the administrative agent or the Federal Funds Rate plus 0.50%;

in each case plus an interest margin which is currently 4.00% for LIBOR
borrowings and 2.50% for base rate borrowings. The applicable interest margin is
subject to downward adjustment upon the occurrence of specified events including
a 1.00% decrease for LIBOR borrowings and a 0.75% decrease for base rate
borrowings concurrent with the effective date of the Coleman merger.

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<PAGE>

Under the terms of the April 15, 1999 amendment to the bank credit
facility, the Company is obligated to pay the bank lenders a loan commitment fee
of between 0.25% to 1.00% of the commitments under the bank credit facility as
of April 15, 1999. The percentage used to calculate the fee will be determined
by reference to the bank lenders' aggregate commitments and loan exposure under
the bank credit facility as they may be reduced on or before September 30, 2000.
The fee is payable on the earlier of September 30, 2000 and the date the
commitments are terminated and the loans and other amount payable under the bank
credit facility are repaid. (See Note 10 to the Condensed Consolidated Financial
Statements.)

Borrowings under the bank credit facility are secured by a pledge of
the stock of the Company's material subsidiaries, including Coleman, and by a
security interest in substantially all of the assets of the Company and its
material domestic subsidiaries, other than Coleman and its material subsidiaries
except as described below. Currently, Coleman's inventory and related assets are
pledged to secure its obligations for letters of credit issued for its account
under the bank credit facility. Additionally, as security for Coleman's note
payable to the Company, Coleman pledged substantially all of its domestic
assets, other than real property, including 66% of the stock of its direct
foreign subsidiaries and domestic holding companies for its foreign subsidiaries
and all of the stock of its other direct domestic subsidiaries but not the
assets of Coleman's subsidiaries. The pledge runs in favor of the Company 's
lending banks, to which the Coleman note has been pledged as security for the
Company 's obligations to them. Upon completion of the Coleman merger,
substantially all of Coleman's assets and the assets of Coleman's domestic
subsidiaries will be pledged to secure the obligations under the bank credit
facility.

In addition, borrowings under the bank credit facility are guaranteed
by a number of the Company 's wholly-owned material domestic subsidiaries and
these subsidiary guarantees are secured as described above. Upon completion of
the Coleman merger, Coleman and each of its United States subsidiaries will
become guarantors of the obligations under the bank credit facility. To the
extent extensions of credit are made to any subsidiaries of the Company, the
obligations of such subsidiaries are guaranteed by the Company.

In addition to the above described financial ratios and tests, the bank
credit facility contains covenants customary for credit facilities of a similar
nature, including limitations on the ability of the Company and its
subsidiaries, including Coleman, to, among other things:

o declare dividends or repurchase stock;
o prepay, redeem or repurchase debt, incur liens and engage in
sale-leaseback transactions;
o make loans and investments;
o incur additional debt (including revolving loans under the
bank credit facility);
o amend or otherwise alter material agreements or enter into
restrictive agreements;
o make capital and Year 2000 compliance expenditures;
o engage in mergers, acquisitions and asset sales;
o engage in transactions with specified affiliates;
o settle specified litigation;
o alter its cash management system; and
o alter the businesses they conduct.

Sunbeam is also required to comply with specified financial covenants and
ratios.

The bank credit facility provides for events of default customary for
transactions of this type, including nonpayment, misrepresentation, breach of
covenant, cross-defaults, bankruptcy, material adverse change arising from
compliance with ERISA, material adverse judgments, entering into guarantees and
change of ownership and control. It is also an event of default under the bank
credit facility, as amended November 16, 1999, if the Company 's registration
statement in connection with the Coleman merger is not declared effective by the
SEC on or before January 10, 2000, or if the merger does not occur within 25
business days of the effectiveness of the registration statement or if the cash
consideration--including any payments on account of the exercise of any
appraisal rights, but excluding related legal, accounting and other customary
fees and expenses--to consummate the Coleman merger exceeds $87.5 million.
Although there can be no assurance, the Company anticipates that it will satisfy
these conditions. Furthermore, the bank credit facility requires the Company to
prepay term loans under the bank credit facility on December 31, 1999 to the
extent that cash on hand in the Company 's concentration accounts plus the
aggregate amount of unused revolving loan commitments

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on this date exceeds $125 million, but the Company is not required to prepay
more than $69.3 million in the aggregate as a result of this provision.

Unless waived by the bank lenders, the failure of the Company to
satisfy any of the financial ratios and tests contained in the bank credit
facility or the occurrence of any other event of default under the bank credit
facility would entitle the bank lenders to (a) receive a 2.00% increase in the
interest rate applicable to outstanding loans and increase the trade letter of
credit fees to 1.00% and (b) accelerate the maturity of the outstanding
borrowings under the bank credit facility and exercise all or any of their other
rights and remedies. Any such acceleration or other exercise of rights and
remedies would likely have a material adverse effect on the Company.

The bank credit facility also includes provisions for the deferral of
the September 30, 1999 and the March 31, 2000 scheduled term loan payments of
$69.3 million each until April 10, 2000 as a result of the satisfaction by the
Company of the agreed upon conditions to the deferral. (See Note 3 to the
Condensed Consolidated Financial Statements.)

CASH FLOWS

As of September 30, 1999, the Company had cash and cash equivalents of
$29.1 million and total debt of $2.3 billion. Because the waivers granted by the
Company's lenders expire on April 10, 2000, the borrowings under the bank credit
facility, as well as other debt containing cross-default provisions, are
classified as current in the September 30, 1999 Condensed Consolidated Balance
Sheet. Cash used in operating activities during the first nine months of 1999
was $73.2 million compared to $224.7 million in the first nine months of 1998.
This change is primarily attributable to improved operating results after giving
effect to non-cash items, partially offset by increased working capital needs
during the 1999 period. The increase in cash used for working capital during the
1999 period was primarily driven by accounts receivable, which increased $159.4
million as compared to the 1998 period, primarily attributable to the Company's
Outdoor Leisure division which experienced stronger second and third quarters
sales in 1999 than in 1998. Additionally, working capital for the 1998 period
was positively affected by the timing of the Company's acquisition of Coleman,
which was at the peak of its inventory build for the 1998 selling season. Cash
used for this acquired inventory is not reflected in working capital for the
1998 period. As a result of the effect of Company's management of inventory
levels in 1999, cash flow improved approximately $81 million as compared to 1998
despite the favorable impact of the inventory acquired in connection with the
1998 acquisitions. Increases in accounts payable of approximately $30 million in
the first nine months of 1999 positively impacted cash flow whereas payables
used approximately $76 million of cash in the same period of 1998, resulting in
an improvement in cash flow period-to-period of approximately $106 million. The
increase in payables in the current period resulted from payable balances having
been reduced to a low level by year-end 1998. This reduction in payables, which
included an effort to reduce delinquent payables, began in the second quarter of
1998. Decreases in other liabilities, primarily accrued interest, account for
the majority of the balance of the cash used for working capital in 1999. The
Company participates in an accounts receivable securitization program to finance
a portion of its accounts receivable. See Note 4 to the Condensed Consolidated
Financial Statements.

In the first nine months of 1999, cash used in investing activities was
driven by capital expenditures of $63.2 million, primarily for information
systems, including expenditures for Year 2000 readiness and equipment and
tooling for new products. Capital spending in the comparable 1998 period was
$32.8 million and was primarily for several manufacturing efficiency
initiatives, equipment and tooling for new products and management information
systems and software licenses. The new product capital spending in the 1998
period principally related to the appliance category and included costs related
to water and air filtration products which were discontinued in the second
quarter, blenders, standmixers and irons. Cash used in investing activities in
the first nine months of 1998 also reflects $379.2 million for the acquisitions
of the shares of Coleman from a subsidiary of MacAndrews & Forbes, as well as
the acquisitions of Signature Brands and First Alert. The Company anticipates
1999 capital spending to be less than 5% of net sales. Capital expenditures in
the current year are expected to primarily relate to information systems and
related support, including expenditures for Year 2000 readiness, new product
introductions and capacity additions.

Cash provided by financing activities totaled $99.2 million in the
first nine months of 1999 and reflected net borrowings under the Company's bank
credit facility. Cash provided by financing activities in the first nine months
of 1998 was $636.1 million and reflected net proceeds from the debentures of
$729.6 million, the cancellation and repayment of all outstanding balances under
the Company's $250 million September 1996 revolving credit facility, the
repayment of certain debt assumed in connection with the Coleman, Signature
Brands and First Alert acquisitions, and the early extinguishment of the $75.0
million Hattiesburg industrial revenue bond. In addition, cash provided by
financing

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activities in 1998 is net of $26.2 million of financing fees related to
Sunbeam's $1.7 billion bank credit facility and $19.6 million of proceeds from
the exercise of stock options. See Note 3 to the Condensed Consolidated
Financial Statements.

At September 30, 1999, standby and commercial letters of credit
aggregated $68.9 million and were predominately for insurance, pension,
environmental, workers' compensation, and international trade activities. In
addition, as of September 30, 1999, surety bonds with a contract value of $67.5
million were outstanding largely for the Company's pension plans and as a result
of litigation judgments that are currently under appeal.

The Company expects to acquire the remaining equity interest in Coleman
in a merger transaction in which the existing Coleman minority shareholders will
receive 0.5677 of a share of the Company's common stock and $6.44 in cash for
each share of Coleman common stock outstanding. In addition, unexercised options
under Coleman's stock option plans will be cashed out at a price per share equal
to the difference between $27.50 and the exercise price of such options. The
Company expects to issue approximately 6.7 million shares of common stock and
expend approximately $87 million in cash, including cash paid to option holders,
to complete the Coleman transaction. Under a settlement of certain litigation
relating to the Coleman merger, the Company will also issue warrants to purchase
up to 4.98 million shares of the Company's common stock to the Coleman public
shareholders and the plaintiff's litigation counsel upon consummation of the
Coleman merger. (See Notes 2 and 10 to the Condensed Consolidated Financial
Statements.) Although there can be no assurance, it is anticipated that the
Coleman merger will occur in the fourth quarter of 1999 or early in the first
quarter of 2000.

The Company believes its borrowing capacity under the bank credit
facility, cash flow from the combined operations of the Company and its acquired
companies, existing cash and cash equivalent balances, and its receivable
securitization program will be sufficient to support working capital needs,
capital expenditure and Year 2000 compliance spending, and debt service through
April 10, 2000. The Company intends to negotiate with its lenders on an
amendment to the bank credit facility, negotiate with its lenders on further
waiver of such covenants and other terms or refinance the bank credit facility.
Any decisions with respect to such amendment, waiver, or refinancing will be
made based on a review from time to time of the advisability of particular
transactions. There can be no assurance that an amendment, further waiver of
existing covenants and other terms, or refinancing will be entered into by April
10, 2000. The failure to obtain such an amendment, further waiver or debt
refinancing would likely result in violation of existing covenants and
non-compliance with other terms, which would permit the bank lenders to
accelerate the maturity of all outstanding borrowings under the bank credit
facility, which would likely have a material adverse effect on the Company.
Accordingly, debt related to the bank credit facility and all debt containing
cross-default provisions is classified as current in the September 30, 1999
Condensed Consolidated Balance Sheet.

In May, 1998, the NYSE advised the Company that it did not meet the
continuing listing standards of the NYSE because the Company did not have
tangible net assets of at least $12 million and average annual net income of at
least $600,000 for 1995, 1996 and 1997. Representatives from the Company met
with NYSE officials, and in March 1999, the NYSE informed the Company that the
Company's common stock would not be delisted at that time, although the NYSE
would, however, continue to monitor Sunbeam's financial condition and
operations. On August 5, 1999, the NYSE advised the Company that the NYSE had
revised its continuing listing standards, and that the Company is in compliance
with the revised standards.

In April, 1999 the NYSE advised Coleman that it did not meet the NYSE's
continuing listing standards because Coleman did not have tangible net assets of
at least $12 million and average annual net income of at least $600,000 for
1995, 1996 and 1997. At that time, Coleman requested the NYSE to continue to
list the Coleman common stock until completion of the merger. The NYSE
subsequently advised Coleman that Coleman also failed to satisfy certain
non-financial continuing listing standards. On August 5, 1999, the NYSE advised
the Company that the NYSE had revised its continuing listing standards, and that
the Company is in compliance with the revised financial standards. Coleman and
the NYSE have agreed upon a program whereby Coleman will correct the
deficiencies in its non-financial continuing listing standards by the end of
1999. Coleman is currently complying with such program. If Coleman were to be
delisted from the NYSE, it would adversely affect Coleman's ability to sell its
capital stock to third parties or use its capital stock as collateral for loans.
Sunbeam's bank credit facility currently restricts Coleman from taking such
actions.

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documents. On November 4, 1998, the Company received another SEC subpoena
requiring the production of additional documents. The Company has provided
numerous documents to the SEC staff and continues to cooperate with the SEC
staff. The Company has, however, declined to provide the SEC with material that
the Company believes is subject to the attorney-client privilege and the work
product immunity. The Company cannot predict the duration of such investigation
or its outcome.

The Company is involved in significant litigation, including class and
derivative actions, relating to events which led to the restatement of its
consolidated financial statements, the issuance of the MacAndrews & Forbes
warrant, the sale of the debentures and the employment agreements of Messrs.
Dunlap and Kersh. Sunbeam intends to vigorously defend each of the actions, but
cannot predict the outcome and is not currently able to evaluate the likelihood
of the Company 's success in each case or the range of potential loss. However,
if the Company were to lose these suits, judgments would likely have a material
adverse effect on the Company 's financial position, results of operations and
cash flows. Additionally, the Company's insurance carriers have filed various
suits requesting a declaratory judgment that the directors' and officers'
liability insurance policies for excess coverage was invalid and/or had been
properly canceled by the carriers or have advised Sunbeam of their intent to
deny coverage under such policies. The Company intends to pursue recovery from
all of its insurers if damages are awarded against the Company or its
indemnified officers and/or directors under any of the foregoing actions and to
recover attorneys' fees covered under those policies. The Company 's failure to
obtain such insurance recoveries following an adverse judgment against the
Company on any of the foregoing actions could have a material adverse effect on
the Company 's financial position, results of operations and cash flows.

Amounts accrued for litigation matters represent the anticipated costs
(damages and/or settlement amounts) in connection with pending litigation and
claims and related anticipated legal fees. The costs are accrued when it is both
probable that an asset has been impaired or a liability has been incurred and
the amount can be reasonably estimated. The accruals are based upon the Company
's assessment, after consultation with counsel, of probable loss based on the
facts and circumstances of each case, the legal issues involved, the nature of
the claim made, the nature of the damages sought and any relevant information
about the plaintiff, and other significant factors which vary by case. When it
is not possible to estimate a specific expected amount of loss to be incurred,
the Company evaluates the range of possible losses and records the minimum end
of the range. As of September 30, 1999 the Company had established accruals for
litigation matters of $22.6 million (representing $11.3 million and $11.3
million for estimated damages or settlement amounts and legal fees,
respectively) and $31.2 million as of December 31, 1998 (representing $17.5
million and $13.7 million for estimated damages or settlements and legal fees,
respectively.) It is anticipated that the $22.6 million accrual will be paid as
follows: $5.2 million in 1999, $14.9 million in 2000 and $2.5 million in 2001.
The Company believes, based on information known to the Company on September 30,
1999, that anticipated probable costs of litigation matters existing as of
September 30, 1999 have been adequately reserved, to the extent determinable.

As a consumer goods manufacturer and distributor, the Company faces the
constant risks of product liability and related lawsuits involving claims for
substantial money damages, product recall actions and higher than anticipated
rates of warranty returns or other returns of goods. These claims could result
in liabilities that could have a material adverse effect on the Company's
financial position, results of operations and cash flows. Some of the product
lines the Company acquired in the 1998 acquisitions have increased its exposure
to product liability and related claims.

The Company and its subsidiaries are also involved in various lawsuits
from time to time that Sunbeam considers to be ordinary routine litigation
incidental to its business. In the opinion of the Company, the resolution of
these routine matters, and of matters relating to prior operations, individually
or in the aggregate, will not have a material adverse effect on the financial
position, results of operations or cash flows of the Company.

See Note 10 to the Condensed Consolidated Financial Statements.

NEW ACCOUNTING STANDARDS

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YEAR 2000 READINESS DISCLOSURE

The Company is preparing for the impact of the Year 2000 on its
operations. Year 2000 issues could include potential problems in the information
technology ("IT") and non-IT systems that the Company uses in its operations and
problems in the Company's products. Year 2000 system failures could affect
routine but critical operations such as forecasting, purchasing, production,
order processing, inventory control, shipping, billing and collection. In
addition, system failures could affect the Company's security, payroll
operations, or employee safety. The Company may also be exposed to potential
risks from third parties with whom the Company interacts who fail to adequately
address their own Year 2000 issues.

SUNBEAM'S APPROACH TO YEAR 2000 ISSUES

While the Company's Year 2000 readiness planning had been underway for
over one year, during the third quarter of 1998 the Company established a
cross-functional project team consisting of senior managers, assisted by three
external consulting firms which were retained to provide consulting services and
to assist the Company in implementing its Year 2000 strategy. This team is
sponsored by the Company's Chief Financial Officer who reports directly to the
Company's Chief Executive Officer on this issue. The audit committee of the
board of directors is advised periodically on the status of the Company's Year
2000 readiness program.

The Year 2000 project team has developed a phased approach to identify
and resolve Year 2000 issues with many of these activities conducted in
parallel. The Company's approach and the anticipated timing of each phase are
described below.

PHASE 1 - INVENTORY AND ASSESSMENT: During the first phase of Sunbeam's
Year 2000 readiness program, the Company established a Year 2000 program
management office ("PMO") to centralize the management of all of the Company's
Year 2000 projects. Through this office, the Company developed a corporate-wide,
uniform strategy for assessing and addressing the Year 2000 issues.

The Company has completed an inventory of its hardware and software
systems, manufacturing equipment, electronic data interchange,
telecommunications and other technical assets potentially subject to Year 2000
problems, such as security systems and controls for lighting, air conditioning,
ventilation and facility access. This inventory was then entered into the
Company's Year 2000 database along with a determination of the item's level of
criticality to operations. For those inventory items anticipated to have a
significant effect on the business if not corrected, the Company's Year 2000
program envisions repair or replacement and testing of such items. All
information relative to each item is being tracked in the Company's Year 2000
database. The Company completed most of this phase during the third and fourth
quarters of 1998. The Company has completed a review of the readiness of
embedded microprocessors in its products and determined that none of the
Company's products have Year 2000 date sensitive systems.

PHASE 2 - CORRECTION AND TESTING: The second phase of Sunbeam's Year
2000 readiness program was structured to replace, upgrade or remediate (as
necessary) those items identified during Phase 1 as requiring corrective action.

Sunbeam relies on its IT functions to perform many tasks that are
critical to its operations. Significant transactions that could be impacted by
not being ready for any Year 2000 issues include, among others, purchases of
materials, production management, order entry and fulfillment, payroll
processing and billings and collections. Systems and applications that had been
identified by Sunbeam as not Year 2000 ready and which are critical to Sunbeam's
operations include its financial software systems, which process the order
entry, purchasing, production management, general ledger, accounts receivable,
and accounts payable functions, payroll applications, and critical applications
in the Company's manufacturing and distribution facilities, such as warehouse
management applications. Recognizing how dependent the entire company is on IT,
Sunbeam decided in 1997 to replace its primary business applications with a
uniform international business and accounting information system to address the
systems or applications listed above as well as to improve internal reporting
processes. Based upon representations from the manufacturer that the current

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version of this uniform information system is Year 2000 ready, the Company
upgraded its business sites that currently utilize this uniform system to the
Year 2000 ready version. In addition to the pre-acquisition Sunbeam locations
which had already utilized an earlier non-Year 2000 ready version of this
uniform business and accounting information system, Eastpak, Mr. Coffee,
Health-o-Meter and Sunbeam Latin America replaced their non-Year 2000 ready
systems with this new uniform system. In addition, Coleman Europe has also
replaced key business components with this new system.

The Company is also actively replacing and/or upgrading a number of
business systems that are not Year 2000 ready, including those that use
localized business system packages which were not candidates to be replaced by
the uniform business and accounting information system. For example, at Coleman
approximately 2,000 mainframe software programs that are used in lieu of
Sunbeam's uniform business and accounting information system have been
remediated and tested to be Year 2000 ready. With respect to the Company's
non-IT systems (for example, time and attendance, security, and in-line
manufacturing hardware) the Company has analyzed these items to assess any Year
2000 issues and is testing and correcting such times, if necessary.

PHASE 3 - CUSTOMERS, SUPPLIERS AND BUSINESS PARTNERS: The third phase
of Sunbeam's Year 2000 readiness program which was initiated during the third
and fourth quarters of 1998 is designed to assess and interact with the
Company's customers, suppliers, and business partners. As part of this effort,
the Company surveyed 1,100 vendors and suppliers, a portion of which did not
provide an initial response. During the first half of 1999, "high risk" vendors
were contacted directly and the number of non-respondents has since decreased
substantially. In fact, currently only 7% of the Company's vendors who were
surveyed are categorized as "high risk" which includes non-respondents. Based on
the most recent responses to the survey and continued evaluation, the Company
believes that there is only a low to a medium risk of Year 2000 issues for the
remaining vendors. The Company will continue to monitor the Year 2000 progress
of the "high risk" vendors and has re-surveyed these companies to determine the
appropriate course of action. Furthermore, the Company has contacted alternate
vendors who are Year 2000 ready to replace critical vendors deemed "high risk"
in the event that these vendors are not found to be Year 2000 ready. The Company
is in the process of completing a verification of the Year 2000 survey responses
for the most critical vendors to the Company.

Sunbeam has responded to numerous customer inquiries about the
Company's Year 2000 readiness. The Company has verified that all of the
Company's major customers have planned programs to deal with Year 2000 issues
and is currently completing the process of contacting its major customers to
confirm they are implementing their planned programs to address Year 2000
issues. In order to improve the Company's communication with its customers,
suppliers and business partners, the Company has set up a Sunbeam Year 2000
telephone number and is providing Year 2000 information on a Company web site.

PHASE 4 - CONTINGENCY PLANNING: This phase involves contingency
planning for unresolved Year 2000 issues, particularly any issues arising with
third party suppliers. The Company has designed and documented its Year 2000
contingency plan and is in the process of implementing it. The development of
the contingency plan included a process whereby the Company's critical IT and
non-IT systems were evaluated for Year 2000 readiness. As a result of this
evaluation, the Company does not expect to require additional operational
equipment or significant process contingency measures. Although the Company does
not currently believe there is significant risk associated with its third party
suppliers, the contingency plan includes the continuing evaluation of the
readiness of the Company's suppliers and minor increases in the Company's
inventory requirements to protect against supply disruption.

THE RISKS OF SUNBEAM'S YEAR 2000 APPROACH

The independent consultants assisting the Company in its Year 2000
readiness program have reviewed and concurred with the Company's approach, have
assisted in developing cost estimates and have monitored costs for the largest
single component (upgrade or installation of the Company's uniform system) of
the Company's Year 2000 program. Since Sunbeam's Year 2000 program was developed
and is monitored with the help of independent consultants, the Company did not
engage another independent third party to verify the program's overall approach
or total cost as the Company believes that the Company's exposure in this regard
is mitigated. In addition, through the use of external third-party diagnostic
software packages that are designed to analyze the Year 2000 readiness of
business software programs, the Company was able to identify potential Year 2000
issues at Coleman. Given this, the Company believes that it has also mitigated
its risk by validating and verifying key program components.

Management believes that, although there are significant systems that
are being modified or replaced, including the uniform business and accounting
information system, Sunbeam's information systems environment will be made Year

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2000 ready prior to January 1, 2000. Sunbeam's failure to timely complete such
corrective work could have a material adverse impact on the Company.

With respect to customers, suppliers and business partners, the failure
of certain of these third parties to become Year 2000 ready could also have a
material adverse impact on Sunbeam. For example, the failure of certain of the
Company's principal suppliers to have Year 2000 ready internal systems could
impact the Company's ability to manufacture and/or ship its products or to
maintain adequate inventory levels for production.

At this time, the Company believes that the most likely "worst-case"
scenario relating to Year 2000 involves potential disruptions in areas in which
the Company's operations must rely on third parties, such as suppliers, whose
systems may not work properly after January 1, 2000. While such system failures
could either directly or indirectly affect important operations of the Company
and its subsidiaries in a significant manner, the Company cannot at present
estimate either the likelihood or the potential cost of such failures. Subject
to the nature of the goods or services provided to the Company by third parties
whose operations are not made ready for Year 2000 issues, the potential impact
on Sunbeam's operations could be material. However, the Company believes that it
has mitigated such risks through the development and implementation of the
contingency plans discussed above.

The nature and focus of the Company's efforts to address the Year 2000
problem may be revised periodically as interim goals are achieved or new issues
are identified. In addition, it is important to note that the description of the
Company's efforts and assessments necessarily involves estimates and projections
with respect to activities required in the future. These estimates and
projections are subject to change as work continues, and such changes may be
substantial.

THE COSTS TO ADDRESS THE COMPANY'S YEAR 2000 ISSUES

Through the first nine months of 1999, including costs incurred in
1998, Sunbeam had expended approximately $60 million to address Year 2000 issues
of which approximately 50% was recorded as capital expenditures and the
remainder as SG&A expense. Sunbeam's current assessment of the total costs to
address and remedy Year 2000 issues and enhance its operating systems, including
costs for the acquired companies, is approximately $64 million. This estimate
includes the following categories:

o uniform international business and accounting systems $44 million
o localized business system software upgrades and remediation $ 9 million
o Year 2000 readiness assessment and tracking $ 6 million
o upgrade of personal computers and related software $ 5 million

The amount to be incurred for Year 2000 issues during 1999 of
approximately $44 million represents over 50% of the Company's total 1999 budget
for information systems and related support, including Year 2000 costs. A large
majority of these costs are expected to be incremental expenditures that will
not recur in the Year 2000 or thereafter. Fees and expenses related to third
party consultants, who are involved in the PMO as well as the modification and
replacement of software, represent approximately 75% of the total estimated
cost. The balance of the total estimated cost relates primarily to software
license fees and new hardware, but excludes the costs associated with Company
employees. Sunbeam expects these expenditures to be financed through operating
cash flows or borrowings, as applicable. A significant portion of these
expenditures will enhance Sunbeam's operating systems in addition to resolving
the Year 2000 issues. As Sunbeam completes its assessment of the Year 2000
issues, the actual expenditures incurred or to be incurred may differ materially
from the amounts shown above. The bank credit facility does not permit the
Company to spend more than $50 million on Year 2000 testing and remediation in
1999.

Because Year 2000 readiness is critical to the business, Sunbeam has
redeployed some resources from non-critical system enhancements to address Year
2000 issues, thereby deferring the non-critical systems enhancements. The
Company does not expect these redeployments and deferrals to have a material
impact on the Company's financial condition, results of operations, or cash
flows.

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CAUTIONARY STATEMENTS

Certain statements in this Quarterly Report on Form 10-Q may constitute
"forward-looking" statements within the meaning of the Private Securities
Litigation Reform Act of 1995, as the same may be amended from time to time
(herein the "Act") and in releases made by the SEC from time to time. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance, or achievements
of the Company to be materially different from any future results, performance,
or achievements expressed or implied by such forward-looking statements.
Statements that are not historical fact are forward-looking statements.
Forward-looking statements can be identified by, among other things, the use of
forward-looking language, such as the word "estimate," "project," "intend,"
"expect," "believe," "may," "will," "should," "seeks," "plans," "scheduled to,"
"anticipates," or "intends," or the negative of these terms or other variations
of these terms or comparable language, or by discussions of strategy or
intentions, when used in connection with the Company, including its management.
These forward-looking statements were based on various factors and were derived
utilizing numerous important assumptions and other important factors that could
cause actual results to differ materially from those in the forward-looking
statements. These Cautionary Statements are being made pursuant to the Act, with
the intention of obtaining the benefits of the "Safe Harbor" provisions of the
Act. The Company cautions investors that any forward-looking statements made by
the Company are not guarantees of future performance. Important assumptions and
other important factors that could cause actual results to differ materially
from those in the forward-looking statements with respect to the Company
include, but are not limited to risks associated with (i) high leverage, (ii)
Sunbeam's ability to comply with the terms of its bank credit facility,
including financial covenants and covenants relating to the completion of the
Coleman merger, or to enter into an amendment to its bank credit facility
containing financial covenants which it and its bank lenders find mutually
acceptable, or to continue to obtain waivers from its bank lenders with respect
to its compliance with the existing covenants contained in such agreement, and
to continue to have access to its revolving credit facility and/or term loan
facility or Sunbeam's ability to refinance its indebtedness at acceptable rates
with acceptable terms, (iii) Sunbeam's ability to integrate the recently
acquired Coleman, Signature Brands and First Alert companies and expenses
associated with such integration, (iv) Sunbeam's sourcing of products from
international vendors, including the ability to select reliable vendors and to
avoid delays in shipments, (v) Sunbeam's ability to maintain and increase market
share for its products at acceptable margins, (vi) Sunbeam's ability to
successfully introduce new products and to provide on-time delivery and a
satisfactory level of customer service, (vii) changes in domestic and/or foreign
laws and regulations, including changes in tax rates, accounting standards,
environmental laws, occupational, health and safety laws, (viii) access to
foreign markets together with foreign economic conditions, including currency
fluctuations and trade, monetary and/or tax policies, (ix) uncertainty as to the
effect of competition in existing and potential future lines of business, (x)
fluctuations in the cost and availability of raw materials and/or products, (xi)
changes in the availability and costs of labor, (xii) effectiveness of
advertising and marketing programs, (xiii) economic uncertainty in Japan, Korea
and other Asian countries, as well as in Mexico, Venezuela, and other Latin
American countries, (xiv) product quality, including excess warranty costs,
product liability expenses and costs of product recalls, (xv) weather conditions
which can have an unfavorable impact upon sales of certain of Sunbeam's
products, (xvi) the numerous lawsuits against the Company and the SEC
investigation into the Company's accounting practices and policies, and
uncertainty regarding the Company's coverage on its directors' and officers'
liability insurance, (xvii) the possibility of a recession in the United States
or other countries resulting in a decrease in consumer demands for the Company's
products, (xviii) actions by competitors including business combinations, new
product offerings and marketing and promotional activities, and (xix) failure of
the Company and/or its suppliers of goods or services to timely complete the
remediation of computer systems to effectively process Year 2000 information.
Other factors and assumptions not included in the foregoing may cause the
Company's actual results to materially differ from those projected. The Company
assumes no obligation to update any forward-looking statements or these
cautionary statements.

- 40 -
<PAGE>

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

On January 6, 1999, plaintiffs filed a consolidated amended class
action complaint against the Company, some of its present and former directors
and former officers, and Arthur Andersen. The consolidated amended class action
complaint alleges that, in violation of section 10(b) of the Exchange Act and
SEC Rule 10b-5, defendants made material misrepresentations and omissions
regarding the Company's business operations, future prospects and anticipated
earnings per share, in an effort to artificially inflate the price of the
Company's common stock and call options, and that, in violation of section 20(a)
of the Exchange Act, the individual defendants exercised influence and control
over the Company, causing the Company to make material misrepresentations and
omissions. The consolidated amended complaint seeks an unspecified award of
money damages. On February 5, 1999, plaintiffs moved for an order certifying a
class consisting of all persons and entities who purchased the Company's common
stock or who purchased call options or sold put options with respect to the
Company's common stock during the period April 23, 1997 through June 30, 1998,
excluding the defendants, their affiliates, and employees of the Company.
Defendants' response to the motion for class certification was filed on May 6,
1999. On March 8, 1999, all defendants who had been served with the consolidated
amended class action complaint moved to dismiss it. Under the Private Securities
Litigation Reform Act of 1995, all discovery in the consolidated action is
stayed pending resolution of the motions to dismiss.

- 41 -
<PAGE>

understanding to settle, subject to court approval, the class actions. The court
approved the settlement on November 12, 1999. Under the terms of the settlement,
the Company will issue to Coleman minority shareholders and plaintiffs' counsel
in this action warrants to purchase up to approximately 4.98 million shares of
the Company's common stock at $7 per share, subject to anti-dilution
adjustments. Coleman minority shareholders who elect an appraisal under Delaware
law will not receive warrants. These warrants will generally have the same terms
as the warrant issued to the MacAndrews & Forbes subsidiary and will be issued
when the Coleman merger is consummated, which is now expected to occur during
the fourth quarter of 1999 or early in the first quarter of 2000.

On October 30, 1998, a class action lawsuit was filed on behalf of
certain purchasers of the debentures in the U.S. District Court for the Southern
District of Florida against the Company and some of the Company's former
officers and directors, alleging violations of the federal securities laws and
common law fraud. The complaint alleges that the Company's offering memorandum
used for the marketing of the debentures contained false and misleading
information regarding the Company's financial position and that the defendants
engaged in a plan to inflate the Company's earnings for the purpose of
defrauding the plaintiffs and others. The plaintiffs seek a declaration that
defendants violated federal securities laws and either unspecified monetary
damages or rescission of their purchase of the debentures. The parties have
negotiated a proposed coordination plan in order to coordinate proceedings in
this action with those in the Consolidated Federal Actions.

- 42 -
<PAGE>

Texas on January 15, 1999. The plaintiffs in this action are purchasers of the
debentures. The plaintiffs allege that the Company violated the Texas Securities
Act and the Texas Business & Commercial Code and committed state common law
fraud by materially misstating the financial position of the Company in
connection with the offering and sale of the debentures. The complaint seeks
rescission, as well as compensatory and exemplary damages in an unspecified
amount. The Company specially appeared to assert an objection to the Texas
court's exercise of personal jurisdiction over the Company, and a hearing on
this objection took place on April 15, 1999. On April 23, 1999, the court
entered an order granting the Company's special appearance and dismissing the
case without prejudice. The plaintiffs moved for reconsideration of the court
order, which motion the court denied on May 24, 1999. The plaintiffs have
appealed to the Texas Court of Appeals the order dismissing the case and that
appeal is pending.

On April 12, 1999, a class action lawsuit was filed in the U.S.
District Court for the Southern District of Florida. The lawsuit was filed on
behalf of persons who purchased debentures during the period of March 20, 1998
through June 30, 1998, inclusive, but after the initial offering of such
debentures. The complaint asserts that the Company made material omissions and
misrepresentations that had the effect of inflating the market price of the
debentures. The complaint names as defendants the Company, its former auditor,
Arthur Andersen, and two former Company officers, Messrs. Dunlap and Kersh. The
plaintiff is an institution which allegedly acquired in excess of $150,000,000
face amount of the debentures and now seeks unspecified money damages. The
Company was served on April 16, 1999 in connection with this pending lawsuit.
The Company has requested that this action be coordinated with the Consolidated
Federal Actions.

On May 24, 1999, an action naming the Company as defendant was filed in
the Circuit Court for Ozaukee County, Wisconsin. Prior to service of the
complaint, the plaintiff dismissed its claims, voluntarily, without prejudice.
The plaintiff in this action was a purchaser of the debentures. The plaintiff
alleged that the Company violated the Wisconsin Uniform Securities Act and
committed acts of false advertising and misrepresentation in connection with the
offering and sale of the debentures. The plaintiff sought rescission, as well as
compensatory and exemplary damages in an unspecified amount.

- 43 -
<PAGE>

- 44 -
<PAGE>

resolution of these routine matters, and of certain matters relating to prior
operations, individually or in the aggregate, will not have a material adverse
effect upon the financial position, results of operations or cash flows of the
Company.

Amounts accrued for litigation matters represent the anticipated costs
(damages and/or settlement amounts) in connection with pending litigation and
claims and related anticipated legal fees for defending such actions. The costs
are accrued when it is both probable that an asset has been impaired or a
liability has been incurred and the amount can be reasonably estimated. The
accruals are based upon the Company's assessment, after consultation with
counsel, of probable loss based on the facts and circumstances of each case, the
legal issues involved, the nature of the claim made, the nature of the damages
sought and any relevant information about the plaintiffs and other significant
factors which vary by case. When it is not possible to estimate a specific
expected cost to be incurred, the Company evaluates the range of probable loss
and records the minimum end of the range. As of September 30, 1999, the Company
had established accruals for litigation matters of $22.6 million (representing
$11.3 million and $11.3 million for estimated damages or settlement amounts and
legal fees, respectively.) As of December 31, 1998 the Company had established
accruals for litigation matters of $31.2 million (representing $17.5 million and
$13.7 million for estimated damages or settlement amounts and legal fees,
respectively). It is anticipated that the $22.6 million accrual will be paid as
follows: $5.2 million in 1999, $14.9 million in 2000, and $24.5 million in 2001.
The Company believes, based on information known to the Company on September 30,
1999, that anticipated probable costs of litigation matters existing as of
September 30, 1999 have been adequately reserved, to the extent determinable.

PRODUCTS LIABILITY

BRK Brands, Inc., a wholly owned subsidiary of the Company, is a
defendant in the case Gordon v. BRK Brands, Inc., et al. in the Circuit Court
for the City of St. Louis. In Gordon, the plaintiff alleged, among other things,
that the plaintiff's smoke detector (which had been manufactured by a
predecessor of BRK Brands) did not alarm quickly enough. In July 1999, the jury
in the Gordon case awarded $20 million in compensatory damages and $30 million
in punitive damages. This case has been settled and BRK's obligation under the
settlement is to pay the balance of its self-insured retention.

ENVIRONMENTAL MATTERS

- 45 -
<PAGE>

products and the sales of products containing certain environmentally sensitive
materials. The Company believes it is in substantial compliance with all
environmental laws and regulations which are applicable to its operations.
Compliance with environmental laws and regulations involves certain continuing
costs; however, such costs of ongoing compliance have not resulted, and are not
anticipated to result, in a material increase in the Company's capital
expenditures or to have a material adverse effect on the Company's results of
operations, financial condition or competitive position.

The Company has established reserves to cover the anticipated probable
costs of investigation and remediation, based upon periodic reviews of all sites
for which the Company has, or may have remediation responsibility. The Company
accrues environmental investigation and remediation costs when it is both
probable that a liability has been incurred and the amount can be reasonably
estimated and the Company's responsibility is established. Generally, the timing
of these accruals coincides with the earlier of formal commitment to an
investigation plan, completion of a feasibility study or the Company's
commitment to a formal plan of action. As of September 30, 1999 and December 31,
1998, the Company's environmental reserves were $23.3 million (representing
$21.6 million for the estimated costs of facility investigations, corrective
measure studies or known remedial measures, and $1.7 million for estimated legal
costs) and $25.0 million (representing $22.9 million for the estimated costs of
facility investigations, corrective measure studies or known remedial measures,
and $2.1 million for estimated legal costs), respectively. The Company has
accrued its best estimate of investigation and remediation costs based upon
facts known to the Company at such dates and because of the inherent
difficulties in estimating the ultimate amount of environmental costs, which are
further described below, these estimates may materially change in the future as
a result of the uncertainties described below. Estimated costs, which are based
upon experience with similar sites and technical evaluations, are judgmental in
nature and are recorded at undiscounted amounts without considering the impact
of inflation and are adjusted periodically to reflect changes in applicable laws
or regulations, changes in available technologies and receipt by the Company of
new information. It is difficult to estimate the ultimate level of future
environmental expenditures due to a number of uncertainties surrounding
environmental liabilities. These uncertainties include the applicability of laws
and regulations, changes in environmental remediation requirements, the
enactment of additional regulations, uncertainties surrounding remediation
procedures including the development of new technology, the identification of
new sites for which the Company could be a PRP, information relating to the
exact nature and extent of the contamination at each site and the extent of
required cleanup efforts, the uncertainties with respect to the ultimate outcome
of issues which may be actively contested and the varying costs of alternative
remediation strategies. The Company continues to pursue the recovery of some
environmental remediation costs from certain of its liability insurance
carriers; however, such potential recoveries have not been offset against
potential liabilities and have not been considered in determining the Company's
environmental reserves.

- 46 -
<PAGE>

- 47 -
<PAGE>

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

EXHIBIT NO. DESCRIPTION
----------- -----------
10.1 Eighth Amendment to Credit Agreement, dated as of November 16,
1999 among Sunbeam Corporation ("Sunbeam"), the Subsidiary
Borrowers referred to therein, the Lenders party thereto,
Morgan Stanley Senior Funding, Inc., Bank of America National
Trust and Savings Association and First Union National Bank.

10.2 Seventh Amendment to Credit Agreement, dated as of October 25,
1999 among Sunbeam Corporation ("Sunbeam"), the Subsidiary
Borrowers referred to therein, the Lenders party thereto,
Morgan Stanley Senior Funding, Inc., Bank of America National
Trust and Savings Association and First Union National Bank
(incorporated by reference to Exhibit 10.33 to Amendment
Number 4 to Sunbeam's Registration Statement on Form S-1,
Registration Number 333-71819).

27 Financial Data Schedule submitted electronically to the
Securities and Exchange Commission for information only and
not filed.

(b) Report on Form 8-K

No reports on Form 8-K were filed through September 30, 1999.

- 48 -
<PAGE>

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

SUNBEAM CORPORATION

BY: /s/ BOBBY G. JENKINS
-------------------------
Bobby G. Jenkins
Executive Vice President, and
Chief Financial Officer
(Principal Financial Officer)

Dated: November 19, 1999

- 49 -
<PAGE>

EXHIBIT INDEX

EXHIBIT DESCRIPTION
- ------- -----------
10.1 Eighth Amendment to Credit Agreement, dated as of November 16, 1999
among Sunbeam Corporation ("Sunbeam"), the Subsidiary Borrowers
referred to therein, the Lenders party thereto, Morgan Stanley Senior
Funding, Inc., Bank of America National Trust and Savings Association
and First Union National Bank.

27 Financial Data Schedule submitted electronically to the Securities and
Exchange Commission for information only and not filed.

EXHIBIT 10.1

AMENDMENT NO. 8 TO CREDIT AGREEMENT

AMENDMENT NO. 8 AND AGREEMENT (this "AMENDMENT"), dated as of November
16, 1999, to and under the Credit Agreement, dated as of March 30, 1998 (as
amended by Amendment No. 1 dated as of May 8, 1998, Amendment No. 2 dated as of
June 30, 1998, Amendment No. 3 dated as of October 19, 1998, Amendment No. 4
dated as of April 10, 1999, Amendment No. 5 dated as of April 15, 1999,
Amendment No. 6 dated as of May 25, 1999 and Amendment No. 7 dated as of October
25, 1999, as so amended, the "CREDIT AGREEMENT"), among SUNBEAM CORPORATION (the
"PARENT"), the SUBSIDIARY BORROWERS referred to therein, the LENDERS party
thereto, MORGAN STANLEY SENIOR FUNDING, INC., as Syndication Agent, BANK OF
AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Documentation Agent, and
FIRST UNION NATIONAL BANK, as Administrative Agent.

W I T N E S S E T H :

WHEREAS, the Parent, the Subsidiary Borrowers, the Lenders and the
Agents are parties to the Credit Agreement;

WHEREAS, pursuant to paragraph (p)(i) of Article 7 of the Credit
Agreement, an Event of Default shall occur if the S-4 Registration Statement is
not declared effective by the SEC on or before November 30, 1999;

WHEREAS, in accordance with the procedures set forth in Section 68 of
Amendment No. 5, Third Waiver and Agreement, dated as of April 15, 1999
("AMENDMENT NO. 5"), to and under the Credit Agreement (as such Section 68 was
incorporated by reference into, and modified pursuant to, Section 3 of Amendment
No. 7 and Agreement, dated as of October 25, 1999 ("AMENDMENT NO. 7"), to and
under the Credit Agreement), the Parent and Coleman have advised the
Administrative Agent and the Lenders that they do not expect the S-4
Registration Statement to be declared effective by the SEC on or before November
30, 1999;

WHEREAS, the Parent has requested that the Administrative Agent and the
Lenders agree to amend paragraph (p)(i) of Article 7 of the Credit Agreement to
extend the date by which the S-4 Registration Statement is required to be
declared effective by the SEC; and

WHEREAS, the Administrative Agent and the Lenders are willing to agree
to such amendment, but only upon the terms and conditions of this Amendment.

NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration the receipt of which is hereby acknowledged, the parties
hereto agree as follows:

SECTION 1. DEFINED TERMS; REFERENCES. Unless otherwise specifically
defined herein, each term used herein which is defined in the Credit Agreement
has the meaning assigned to such term in the Credit Agreement. Each reference to
"hereof", "hereunder", "herein" and

<PAGE>

"hereby" and each other similar reference and each reference to "this Agreement"
and each other similar reference contained in the Credit Agreement shall, after
this Amendment becomes effective, refer to the Credit Agreement as amended
hereby. Except as herein specifically amended, all terms and provisions of the
Credit Agreement shall remain in full force and effect and shall be performed by
the parties hereto according to such terms and provisions. This Amendment is
limited as specified and shall not constitute a modification, amendment or
waiver of any other provision of the Credit Agreement or any other Loan Document
or indicate the Lenders' willingness to consent to any other modification,
amendment or waiver of the Credit Agreement or any other Loan Document,
including without limitation, any modification, amendment or waiver of the
Section amended pursuant to this Amendment for any other date or time period or
in connection with any other transaction.

SECTION 2. EVENTS OF DEFAULT. Article 7 of the Credit Agreement is
amended to replace the date "November 30, 1999" in paragraph (p)(i) of such
Article with the date "January 10, 2000".

SECTION 3. AGREEMENT. Section 68 of Amendment No. 5, as modified
pursuant to Amendment No. 7, is hereby incorporated by reference as if fully set
forth herein, PROVIDED that (a) all references to "November 30, 1999" contained
in such Section as incorporated herein shall be deemed to be references to
"January 10, 2000" and (b) the reference to "November 15, 1999" contained in
such Section as incorporated herein shall be deemed to be a reference to
"January 5, 2000".

SECTION 4. GOVERNING LAW. This Amendment shall be governed by and
construed in accordance with the laws of the State of New York.

SECTION 5. COUNTERPARTS. This Amendment may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.

SECTION 6. REPRESENTATIONS AND WARRANTIES; NO DEFAULT. After giving
effect to this Amendment, the Parent and the Subsidiary Borrower (to the extent
applicable to it thereunder) hereby represent and warrant that all
representations and warranties contained in the Credit Agreement are true and
correct on and as of the date hereof (unless stated to relate to a specific
earlier date, in which case, such representations and warranties shall be true
and correct as of such earlier date) and that no Default or Event of Default
shall have occurred and be continuing or would result from the execution and
delivery of this Amendment.

SECTION 7. EFFECTIVENESS. This Amendment shall become effective on the
date on which the Administrative Agent shall have received from each of the
Parent, the Subsidiary Borrower and the Required Lenders, a counterpart hereof
signed by such party or facsimile or other written confirmation (in form
satisfactory to the Administrative Agent) that such party has signed a
counterpart hereof.

<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the date first above written.

SUNBEAM CORPORATION

By __________________________________________
Name:
Title:

THE COLEMAN COMPANY, INC.

By __________________________________________
Name:
Title:

MORGAN STANLEY SENIOR FUNDING, INC.,
individually and as Syndication Agent

By __________________________________________
Name:
Title:

BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, individually and
as Documentation Agent

By __________________________________________
Name:
Title:

FIRST UNION NATIONAL BANK,
individually and as Administrative Agent

By __________________________________________
Name:
Title:

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE SUNBEAM
CORPORATION FINANCIAL STATEMENTS FOR THE PERIODS ENDED SEPTEMBER 30, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 29,088
<SECURITIES> 0
<RECEIVABLES> 485,685
<ALLOWANCES> 42,462
<INVENTORY> 507,821
<CURRENT-ASSETS> 1,050,813
<PP&E> 592,587
<DEPRECIATION> (135,294)
<TOTAL-ASSETS> 3,317,974
<CURRENT-LIABILITIES> 1,997,550
<BONDS> 817,128
0
0
<COMMON> 1,007
<OTHER-SE> 93,680
<TOTAL-LIABILITY-AND-EQUITY> 3,317,974
<SALES> 1,786,428
<TOTAL-REVENUES> 1,786,428
<CGS> 1,334,177
<TOTAL-COSTS> 1,334,177
<OTHER-EXPENSES> (4,619)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 136,631
<INCOME-PRETAX> (129,024)
<INCOME-TAX> 12,661
<INCOME-CONTINUING> (155,039)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (155,039)
<EPS-BASIC> (1.54)
<EPS-DILUTED> (1.54)

</TABLE>