<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the quarterly period ended JUNE 30, 1996
-------------
or
[ ] Transition Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the transition period from to
Commission File Number: 1-11962
-------
COLEMAN WORLDWIDE CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 13-3704484
------------------------------- -----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1526 COLE BLVD., SUITE 300, GOLDEN, COLORADO 80401
-------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
303-202-2400
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to
such filing requirement for the past 90 days. X Yes No
--- ---
The number of shares outstanding of the registrant's par value $.01 common
stock was 1,000 shares as of August 1, 1996 all of which were held by an
indirect wholly-owned subsidiary of Mafco Holdings Inc.
Exhibit Index on Page 16.
<PAGE>
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION Page
----
Item 1. Condensed Consolidated Financial Statements:
Condensed Consolidated Statements of Earnings
Three months ended June 30, 1996 and 1995 and
Six months ended June 30, 1996 and 1995................. 3
Condensed Consolidated Balance Sheets
June 30, 1996 and December 31, 1995...................... 4
Condensed Consolidated Statements of Cash Flows
Six months ended June 30, 1996 and 1995.................. 5
Notes to Condensed Consolidated Financial Statements.......... 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations..................................... 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings............................................. 16
Item 6. Exhibits and Reports on Form 8-K.............................. 16
Signatures.................................................... 17
2
<PAGE>
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands)
(Unaudited)
Three Months Six Months
Ended June 30, Ended June 30,
1996 1995 1996 1995
------- ---------- ---------- --------
Net revenues $ 452,654 $ 311,281 $ 726,214 $ 535,305
Cost of sales 315,116 211,706 507,710 367,234
--------- --------- --------- ---------
Gross profit 137,538 99,575 218,504 168,071
Selling, general and
administrative expenses 78,975 45,882 125,751 85,520
Interest expense 13,694 9,204 24,750 17,603
Amortization of goodwill and
deferred charges 3,066 1,983 5,458 4,000
Other expense (income), net 623 30 (2,098) (120)
--------- --------- --------- ---------
Earnings before income taxes,
minority interest and
extraordinary item 41,180 42,476 64,643 61,068
Provision for income tax expense 13,090 16,703 21,782 23,740
Minority interest in earnings
of Camping Gaz 1,951 -- 1,951 --
Minority interest in
earnings of Coleman 4,702 4,688 7,237 6,958
--------- --------- --------- ---------
Earnings before extraordinary item 21,437 21,085 33,673 30,370
Extraordinary loss on early
extinguishment of debt,
net of income tax benefit (657) -- (1,239) --
--------- --------- --------- ---------
Net earnings $ 20,780 $ 21,085 $ 32,434 $ 30,370
--------- --------- --------- ---------
--------- --------- --------- ---------
See Notes to Condensed Consolidated Financial Statements
3
<PAGE>
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
--------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 11,364 $ 12,065
Accounts receivable, net 370,409 165,309
Inventories 291,995 216,236
Deferred tax assets 20,115 20,481
Prepaid assets and other 20,827 22,420
---------- --------
Total current assets 714,710 436,511
Property, plant and equipment, net 212,257 162,691
Intangible assets related to businesses acquired, net 321,455 225,247
Note receivable - affiliate 54,764 50,685
Deferred tax assets and other 47,139 31,255
---------- --------
$1,350,325 $906,389
---------- --------
---------- --------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts and notes payable $ 203,519 $ 90,679
Other current liabilities 106,415 59,213
---------- --------
Total current liabilities 309,934 149,892
Long-term debt 727,045 519,640
Income taxes payable - affiliate 50,136 37,846
Other liabilities 65,909 48,072
Minority interest in Camping Gaz 5,393 --
Minority interest in Coleman 57,469 49,266
Contingencies
Stockholder's equity:
Common stock 1 1
Additional paid-in capital 23,533 23,496
Retained earnings 110,256 77,823
Currency translation adjustment 649 353
---------- --------
Total stockholder's equity 134,439 101,673
---------- --------
$1,350,325 $906,389
---------- --------
---------- --------
</TABLE>
See Notes to Condensed Consolidated Financial Statements
4
<PAGE>
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended June 30,
--------------------
1996 1995
--------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 32,434 $ 30,370
--------- --------
Adjustments to reconcile net earnings to net cash flows
from operating activities:
Depreciation and amortization 17,426 12,821
Extraordinary loss on early extinguishment of debt 2,082 --
Non-cash tax sharing agreement provision 12,290 15,442
Non-cash tax gain on LYON's conversion (2,755) --
Minority interest in earnings of Camping Gaz 1,951 --
Minority interest in earnings of Coleman 7,237 6,958
Interest accretion 5,943 5,600
Change in assets and liabilities:
Increase in receivables (141,964) (85,154)
Increase in inventories (14,318) (8,509)
Increase in accounts payable 24,298 12,397
Other, net 13,173 13,552
--------- --------
(74,637) (26,893)
--------- --------
Net cash (used by) provided by operating activities (42,203) 3,477
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (18,803) (10,664)
Purchases of businesses, net of cash acquired (158,228) (1,359)
Increase in note receivable - affiliate (4,079) (6,742)
Proceeds from sale of fixed assets 433 731
--------- --------
Net cash used by investing activities (180,677) (18,034)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (payments of) proceeds from revolving credit
agreement borrowings (31,996) 3,544
Net change in short-term borrowings 24,068 16,752
Proceeds from issuance of long-term debt 235,000 --
Repayment of long-term debt (6,022) (4,021)
Debt issuance and refinancing costs (1,765) --
Purchases of Company common stock (2,329) (4,086)
Proceeds from stock options exercised 1,655 3,510
Other, net 37 103
--------- --------
Net cash provided by financing activities 218,648 15,802
--------- --------
Effect of exchange rate changes on cash 3,531 (2,801)
--------- --------
Net decrease in cash and cash equivalents (701) (1,556)
Cash and cash equivalents at beginning of the period 12,065 8,319
--------- --------
Cash and cash equivalents at end of the period $ 11,364 $ 6,763
--------- --------
--------- --------
</TABLE>
See Notes to Condensed Consolidated Financial Statements
5
<PAGE>
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
(Unaudited)
1. BASIS OF FINANCIAL STATEMENT PRESENTATION
Coleman Worldwide Corporation ("Coleman Worldwide") is a holding company
formed in March 1993 in connection with the offering of Liquid Yield
Option-Registered Trademark- Notes due 2013 (the "LYONs"-Registered Trademark-).
Coleman Worldwide also holds 44,067,520 shares of the common stock of The
Coleman Company, Inc. (the "Company" or "Coleman") which represents
approximately 83% of the outstanding Coleman common stock as of June 30, 1996.
The accompanying unaudited condensed consolidated financial statements of
Coleman Worldwide have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the six months ended June 30, 1996 are not necessarily indicative of
the results that may be expected for the year ended December 31, 1996. The
balance sheet at December 31, 1995 has been derived from the audited financial
statements for that date but does not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Coleman Worldwide's
annual report on Form 10-K for the year ended December 31, 1995.
2. INVENTORIES
The components of inventories consist of the following:
June 30, December 31,
1996 1995
--------- ------------
Raw material and supplies $ 84,066 $ 57,653
Work-in-process 10,355 5,389
Finished goods 197,574 153,194
-------- --------
$291,995 $216,236
-------- --------
-------- --------
3. ACQUISITIONS
On January 2, 1996, the Company purchased substantially all the
assets and assumed certain liabilities of Seatt Corporation ("Seatt"), a leading
designer, manufacturer and distributor of a broad range of safety related
electronic products for residential and commercial applications. The Seatt
acquisition, which was accounted for under the purchase method, was completed
for approximately $64,982 including fees and expenses and was financed through
borrowings under the Company Credit Agreement, and assumption of certain
liabilities in the amount of $7,157 by the Company. The results of operations
of Seatt have been included in the consolidated financial statements from the
date of acquisition. In connection with the preliminary purchase price
allocation of the Seatt acquisition, the Company recorded goodwill of
approximately $37,821. The Company is amortizing this amount over 40 years on
the straight-line method.
On February 28, 1996, the Company and Butagaz S.N.C. ("Butagaz"), a
subsidiary of Societe de Petroles Shell S.A., jointly announced they had entered
into an agreement (the "Share Purchase Agreement") in connection
6
<PAGE>
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
(Unaudited)
with the sale to Coleman of approximately 60 percent of the outstanding
shares of Application des Gaz, S.A. ("ADG" or "Camping Gaz"). Pursuant to
the terms of the Share Purchase Agreement and other related documents dated
February 27, 1996, Coleman has the right to, and intends to, acquire the
remaining shares held by Butagaz, which represents approximately 10% of the
outstanding shares of ADG, and accordingly considers this 10% stock ownership
as under the control of the Company. The Company obtained effective control
of Camping Gaz on March 1, 1996. Camping Gaz is the leading manufacturer and
distributor of camping appliances in Europe. On June 24, 1996, Coleman
commenced a public tender offer for the purchase of all the publicly traded
outstanding shares of ADG, or approximately 30% of the outstanding shares.
The tender offer period expired in July 1996 with approximately 28% of the
outstanding shares of ADG tendered for purchase. The Company is currently
completing the necessary steps to acquire the remaining publicly held stock
and expects to complete those actions during the third quarter of 1996. As of
June 30, 1996, the acquisition of approximately 89% of the outstanding shares
of ADG amounts to approximately French Franc 443,646 (approximately $87,622
based on the exchange rates in effect on the dates paid) including estimated
fees and expenses. The acquisition of Camping Gaz is being accounted for
under the purchase method. In connection with the preliminary allocation of
purchase price to the fair values of assets and liabilities acquired, the
Company recorded goodwill of approximately $60,682, which is being amortized
over 40 years on the straight-line basis. The Company has included the
results of operations of Camping Gaz in the consolidated financial statements
from March 1, 1996, the date on which the Company obtained effective control
of Camping Gaz, and has recognized minority interest related to the publicly
traded shares for the period March 1, 1996 through June 30, 1996.
The following summarized, unaudited pro forma results of operations for
the six months ended June 30, 1996 and 1995 assumes the acquisition of Seatt
and the acquisition of all the outstanding shares of Camping Gaz occurred as
of the beginning of the respective periods. The pro forma results include
certain adjustments, primarily reflecting increased amortization and interest
expense and a lower income tax provision, and are not necessarily indicative
of what the results of operations would have been had the Seatt and Camping
Gaz acquisitions occurred at the beginning of the respective periods.
Moreover, the pro forma information is not intended to be indicative of
future results of operations.
Six Months ended
June 30,
--------------------
1996 1995
-------- --------
Net revenues $752,368 $692,980
Earnings before extraordinary item 33,535 33,894
Net earnings 32,296 33,894
4. RELATED PARTY TRANSACTION
The Company has entered into an agreement with an affiliate in which the
Company will be able to realize tax benefits associated with certain foreign tax
net operating loss carryforwards that had not previously been recognized.
Approximately $1,236 of this benefit is reflected in Coleman Worldwide's
provision for income taxes in the three month and six month periods ended June
30, 1996.
7
<PAGE>
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
(Unaudited)
5. LONG-TERM DEBT
On April 30, 1996, the Company amended the Company Credit Agreement to
revise several of the terms and provisions of the Company Credit Agreement and
to allow for the issuance of additional long-term notes. The Company Credit
Agreement, as amended, provides for (a) an unsecured French Franc term loan in
the amount of French Franc 385,125 ($75,000 at the then current exchange rates)
and (b) an unsecured revolving credit facility of $275,000. The Company Credit
Agreement, as amended, is available to the Company until April 30, 2001.
The outstanding loans under the Company Credit Agreement bear interest
at either of the following rates, as selected by the Company from time to time:
(i) the higher of the agent's base lending rate or the federal funds rate plus
.50% or (ii) the London Inter-Bank Offered Rate ("LIBOR") plus a margin ranging
from .25% to 1.1% based on the Company's financial performance. If there is a
default, the interest rate otherwise in effect will be increased by 2% per annum
and the margin will be 1.0% in the case of U.S. Dollar denominated LIBOR loans
and 1.1% for foreign currency denominated LIBOR loans. The Company Credit
Agreement also bears an overall facility fee ranging from .15% to .375% based on
the Company's financial performance.
The amended Company Credit Agreement contains various restrictive
covenants, including without limitation, requirements for the maintenance of
specified financial ratios and levels of consolidated net worth and certain
other provisions limiting the incurrence of additional debt, purchase or
redemption of Coleman Common Stock, issuance of Coleman Preferred Stock, and the
payment of dividends. Under the most restrictive of these covenants of the
amended Company Credit Agreement, approximately $83,560 would have been
available for payment by the Company of cash dividends at June 30, 1996.
In connection with the amending and restating of the Company's previous
credit agreement, the Company recognized an extraordinary loss of approximately
$1,078 ($647 after taxes, or $0.01 per share) in the quarter ended June 30,
1996, which represents the write-off of the related unamortized financing costs
associated with the Company's previous credit agreement.
On June 13, 1996, the Company completed (i) a private placement issuance
and sale of $85,000 aggregate principal amount of 7.10% Senior Notes, Series A,
due 2006 (the "Notes due 2006") and (ii) a private placement issuance and sale
of $75,000 aggregate principal amount of 7.25% Senior Notes, Series B, due 2008
(the "Notes due 2008"). Proceeds from these private placement issuances were
used (i) to finance the acquisition of Camping Gaz, and (ii) to pay down
existing indebtedness under the revolving credit facility under the Company
Credit Agreement. The Notes due 2006 bear interest at the rate of 7.10% per
annum payable semiannually, and the principal amount is payable in annual
installments of $12,143 commencing June 13, 2000 with a final payment due on
June 13, 2006. If there is a default, the interest rate will be the greater of
(i) 9.10% or (ii) 2% above the prime interest rate. The Notes due 2008 bear
interest at the rate of 7.25% per annum payable semiannually, and the principal
amount is payable in annual installments of $15,000 commencing June 13, 2004
with a final payment on June 13, 2008. If there is a default, the interest rate
will be the greater of (i) 9.25% or (ii) 2% above the prime interest rate. The
Notes due 2006 and the Notes due 2008 are unsecured and are subject to various
restrictive covenants, including without limitation, requirements for the
maintenance of specified financial ratios and levels of consolidated net worth
and certain other provisions limiting the incurrence of additional debt and sale
and leaseback transactions under the terms of the Note Purchase Agreement.
8
<PAGE>
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
(Unaudited)
6. CONTINGENCIES
On July 22, 1993, Coleman Worldwide's parent, Coleman Holdings Inc.,
("Coleman Holdings") issued and sold $281,281 principal amount at maturity of
Senior Secured Discount Notes due 1998 (the "Old Notes") in a private placement
offering. Subsequent to the private placement offering, a registration
statement on Form S-1 was filed to exchange the Old Notes for Series B Senior
Secured Discount Notes (the "Notes").
The Notes will mature on May 27, 1998 and are secured by all the shares of
Coleman Worldwide. In connection with Coleman Holdings' Notes issuance, Coleman
Worldwide has provided a non-recourse guaranty, which is secured by its pledge
of 13,000,000 shares of Coleman Common Stock. There will be no periodic payment
of interest on the Notes. The aggregate principal amount of the Notes
represents a yield to maturity of 10.875% per annum (computed on a semi-annual
bond equivalent basis) calculated from July 22, 1993.
9
<PAGE>
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Coleman Worldwide is a holding company with no business operations or
source of income of its own. Accordingly, except as otherwise indicated, the
following discussion relates to the results of operations of the Company.
THREE MONTHS ENDED JUNE 30, 1996 COMPARED WITH THE THREE MONTHS ENDED JUNE 30,
1995
Net revenues in the 1996 and 1995 periods were $452.7 million and $311.3
million, respectively, an increase of $141.4 million, or 45.4%. All classes of
the Company's products contributed to this increase with recreation products
increasing by $101.5 million, hardware/home center products contributing $22.5
million, and the Company's new class of home safety and security products
recording revenues of $17.4 million. Net revenues in the United States and
Canada increased 17.3%, and net revenues from international markets increased
126.5%.
Recreation products revenues increased $101.5 million or 40.6%. Excluding
the impact of the Camping Gaz and Sierra acquisitions, the effect of a weaker
yen in 1996 as compared to 1995 and the one-time 1995 thermo-electric cooler
premium promotion, comparable recreation revenues increased approximately 11.0%.
Strong new product growth was partially offset by a decrease in camping
appliances which were affected by adverse weather in the spring. Hardware/home
center revenues increased 36.8% or $22.5 million. The increase was driven by
continued growth of pressure washers sales and sales of compressors and new
lighting products. Total revenues in the 1996 period also include revenues from
home safety and security products associated with the Seatt business, which was
acquired in January 1996.
Cost of sales was $315.1 million in 1996 compared with $211.7 million in
1995, an increase of 48.8%. Cost of sales as a percent of net revenues
increased to 69.6% in 1996 from 68.0% in 1995. Gross margins as a percent of
sales decreased to 30.4% in 1996 from 32.0% in 1995. Significantly higher sales
of pressure washers at reduced gross margins and lower sales of high margin
camping appliances primarily contributed to the decrease. Electric pressure
washer gross margins were significantly below 1995 as the Company continued to
experience declining sales prices. The Company does not plan to participate in
the opening price point electric pressure washer business in 1997.
Selling, general and administrative ("SG&A") expenses were $78.9 million in
1996 compared to $45.8 million in 1995, an increase of 72.2%. The increase in
SG&A expenses primarily reflects SG&A expenses associated with recent business
acquisitions and to a lesser extent increased advertising and marketing
expenses.
The Company's interest expense was $10.7 million in 1996 compared with $6.4
million in 1995, an increase of $4.3 million. This increase was primarily the
result of higher borrowings to fund business acquisitions and to support the
increased working capital. On an unconsolidated basis, Coleman Worldwide had an
additional $3.0 million of interest expense in 1996 compared with $2.8 million
in 1995, an increase of $0.2 million. This increase is a result of the effects
of compounding interest related to the LYONs.
The Company's effective income tax rate was 32.4% in 1996 compared with
39.3% in 1995. Coleman Worldwide's consolidated effective income tax rate was
31.8% in 1996 compared with 39.3% in 1995. In each case, the decrease in the
effective tax rate in 1996 as compared to 1995 is primarily due to tax benefits
associated with the Company's manufacturing operations in Puerto Rico along with
lower taxes on foreign operations, primarily in France. The 1996 effective tax
rate also includes recognition of tax benefits associated with certain foreign
net operating loss carryforwards that had not been previously recognized.
10
<PAGE>
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
During the second quarter of 1996, in connection with the renegotiation of
its then existing credit agreement, the Company recorded an extraordinary loss
of $1.1 million ($0.6 million after taxes) which represents a write-off of the
related unamortized financing costs associated with its then existing credit
agreement
The Company obtained control of approximately 70% of Camping Gaz in March
1996. Accordingly, the minority interest in the earnings of Camping Gaz for
the 1996 period represents the minority shareholders' approximate 30%
proportionate share of the results of operations of Camping Gaz.
Minority interest in the earnings of Coleman represents the minority
shareholders' proportionate share of the results of operations of Coleman, which
is reflected on Coleman Worldwide's consolidated financial statements because of
Coleman Worldwide's approximate 83% ownership of Coleman's common stock.
SIX MONTHS ENDED JUNE 30, 1996 COMPARED WITH THE SIX MONTHS ENDED JUNE 30, 1995
Net revenues in the 1996 and 1995 periods were $726.2 million and $535.3
million, respectively, an increase of $190.9 million, or 35.7%. All classes of
the Company's products contributed to this increase with recreation products
increasing by $116.7 million, hardware/home center products contributing $38.9
million, and the Company's new class of home safety and security products
recording revenues of $35.3 million. Net revenues in the United States and
Canada increased 20.4%, and net revenues from international markets increased
80.6%.
Recreation products revenues increased $116.7 million or 27.7%. Excluding
the impact of the Camping Gaz and Sierra acquisitions, the effect of a weaker
yen in 1996 as compared to 1995 and the one-time 1995 thermo-electric cooler
premium promotion, comparable recreation revenues increased approximately 11.2%.
Strong new product growth was partially offset by a decrease in camping
appliances which were affected by adverse weather in the spring. Hardware/home
center revenues increased 34.2% or $38.9 million. The increase was driven by
strong generator sales in the winter and early spring, pressure washer growth
and new products. Total revenues in the 1996 period also include revenues from
home safety and security products associated with the Seatt business, which was
acquired in January 1996.
Cost of sales was $507.7 million in 1996 compared with $367.2 million in
1995, an increase of 38.3%. Cost of sales as a percent of net revenues
increased to 69.9% in 1996 from 68.6% in 1995. Gross margins as a percent of
sales decreased to 30.1% in 1996 from 31.4% in 1995. Significantly higher sales
of pressure washers at reduced gross margins and lower sales of high margin
camping appliances primarily contributed to the decrease. Electric pressure
washer gross margins were significantly below 1995 as the Company continued to
experience declining sales prices. The Company does not plan to participate in
the opening price point electric pressure washer business in 1997.
SG&A expenses were $125.7 million in 1996 compared to $85.4 million in
1995, an increase of 47.1%. The increase in SG&A expenses primarily reflects
SG&A expenses associated with recent business acquisitions and to a lesser
extent increased advertising and marketing expenses.
The Company's interest expense was $18.8 million in 1996 compared with
$12.0 million in 1995, an increase of $6.8 million. This increase was primarily
the result of higher borrowings to fund business acquisitions and support the
increased working capital. On an unconsolidated basis, Coleman Worldwide had an
additional $5.9 million of interest expense in 1996 compared with $5.6 million
in 1995, an increase of $0.3 million. This increase is a result of the effects
of compounding interest related to the LYONs.
During the six months ended June 30, 1996, holders of LYONs with a
principal amount at maturity of $9.8 million elected to exchange such LYONs
pursuant to the terms of the LYONs indenture. In connection with these
exchanges, Coleman Worldwide delivered 74,107 shares of Coleman Common Stock
that Coleman Worldwide
11
<PAGE>
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
owned to the holders of the LYONs which were exchanged. Coleman Worldwide
recognized a gain of $2.7 million in connection with these exchanges and is
included in other income. Coleman Worldwide also recognized an extraordinary
loss on early extinguishment of debt as a result of the LYONs exchange in an
amount of $1.0 million ($0.6 million after tax). This extraordinary loss
represents i) the excess fair value of the property delivered by Coleman
Worldwide to the holders of the LYONs which were exchanged over the accreted
value of the LYONs obligations at the time of the exchange, along with ii) a
pro-rata portion of the related unamortized financing costs associated with
the LYONs issuance.
The Company's effective income tax rate was 34.0% in 1996 compared with
39.0% in 1995. Coleman Worldwide's consolidated effective income tax rate was
33.7% in 1996 compared with 38.9% in 1995. In each case, the decrease in the
effective tax rate in 1996 as compared to 1995 is primarily due to tax benefits
associated with the Company's manufacturing operations in Puerto Rico along with
lower taxes on foreign operations, primarily in France. The 1996 effective
tax rate also includes recognition of tax benefits associated with certain
foreign net operating loss carryforwards that had not been previously
recognized.
The Company obtained control of approximately 70% of Camping Gaz in March
1996. Accordingly, the minority interest in the earnings of Camping Gaz for
the 1996 period represents the minority shareholders approximate 30%
proportionate share of the results of operations of Camping Gaz.
Minority interest in the earnings of Coleman represents the minority
stockholders' proportionate share of the results of operations of Coleman, which
is reflected on Coleman Worldwide's consolidated financial statements because of
Coleman Worldwide's approximate 83% ownership of Coleman's common stock.
During the second quarter of 1996, in connection with the renegotiation of
its then existing credit agreement, the Company recorded an extraordinary loss
of $1.1 million ($0.6 million after taxes) which represents a write-off of the
related unamortized financing costs associated with its then existing credit
agreement
LIQUIDITY AND CAPITAL RESOURCES
Cash flows used in Coleman Worldwide's consolidated operations were $42.2
million during the six months ended June 30, 1996; where as, Coleman Worldwide's
consolidated operations provided cash flows of $3.5 million for the six months
ended June 30, 1995. Cash used during the 1996 period reflects the Company's
seasonal working capital requirements associated with generally higher sales in
the first half of the year as compared to the second half of the year.
Receivables increased by $142.0 million and $85.2 million for the six months
ended June 30, 1996 and 1995, respectively, as a result of the seasonality of
the Company's sales and an increase in the overall level of the Company's sales.
Inventories increased by $14.3 million and $8.5 million in the six months ended
June 30, 1996 and 1995, respectively, to support the growth of the Company,
especially in new products. Coleman Worldwide's consolidated net cash used for
investing activities was $180.7 million and $18.0 million for the six months
ended June 30, 1996 and 1995, respectively. The Company's capital expenditures
were $18.8 million and $10.7 million in the six months ended June 30, 1996 and
1995, respectively. The increase in capital expenditures reflects the addition
of equipment to expand the Company's capacity to manufacture certain of its
product lines. The Company used $158.2 million and $1.4 million of cash for
business acquisitions during the six months ended June 30, 1996 and 1995,
respectively. Coleman Worldwide also had net advances to Mafco Holdings Inc.
under the Coleman Worldwide tax sharing agreement and the terms of the LYONs
trust indenture in the amounts of $4.1 million and $6.7 million during the six
months ended June 30, 1996 and 1995, respectively. Net cash provided by
financing activities for the six months ended June 30, 1996 consisted primarily
of increases in long-term and short-term borrowings to finance the seasonal
increase in working capital and the Company's investing activities. The Company
also paid $2.3 million to acquire 200,000 shares of its Common Stock and $4.1
million to acquire 440,000 shares of its Common Stock in the open market during
the six months ended June 30, 1996 and 1995, respectively.
12
<PAGE>
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
The Company's working capital requirements are currently funded by cash
flow from operations and domestic and foreign bank lines of credit. In April
1996, the Company amended its credit agreement to allow for the Camping Gaz
acquisition as well as to extend the maturity of the credit agreement (the
"Company Credit Agreement"). The Company Credit Agreement provides a term loan
of French Franc 385,125 ($75.0 million at the then current exchange rates) and a
revolving credit facility in an amount of $275.0 million. Availability under
the Company Credit Agreement is reduced by any commercial paper borrowings
outstanding. The Company Credit Agreement is available to the Company until
April 30, 2001. At June 30, 1996, $156.8 million would have been available for
borrowings under the Company Credit Agreement.
The outstanding loans under the Company Credit Agreement bear interest at
either of the following rates, as selected by the Company from time to time:
(i) the higher of the agent's base lending rate or the federal funds rate plus
.50% or (ii) the London Inter-Bank Offered Rate ("LIBOR") plus a margin ranging
from .25% to 1.1% based on the Company's financial performance. If there is a
default, the interest rate otherwise in effect will be increased by 2% per annum
and the margin will be 1.0% in the case of U.S. Dollar denominated LIBOR loans
and 1.1% for foreign currency denominated LIBOR loans. The Company Credit
Agreement also bears an overall facility fee ranging from .15% to .375% based on
the Company's financial performance.
The Company Credit Agreement contains various restrictive covenants,
including without limitation, requirements for the maintenance of specified
financial ratios and levels of consolidated net worth and certain other
provisions limiting the incurrence of additional debt, purchase or redemption of
Coleman Common Stock, issuance of Coleman Preferred Stock, and the payment of
dividends. Under the most restrictive of these covenants of the Company Credit
Agreement, approximately $83.6 million would have been available for payment by
the Company of cash dividends at June 30, 1996.
On February 28, 1996, the Company and Butagaz S.N.C. ("Butagaz"), a
subsidiary of Societe de Petroles Shell S.A., jointly announced they had entered
into an agreement (the "Share Purchase Agreement") in connection with the sale
to Coleman of approximately 60 percent of the outstanding shares of Application
des Gaz, S.A. ("ADG" or "Camping Gaz"). Pursuant to the terms of the Share
Purchase Agreement and other related documents dated February 27, 1996, Coleman
has the right to, and intends to during the third quarter of 1996, acquire the
remaining shares held by Butagaz, which represents approximately 10% of the
outstanding shares of ADG, and accordingly considers this 10% stock ownership as
under the control of the Company. The Company obtained effective control of
Camping Gaz on March 1, 1996. Camping Gaz is the leading manufacturer and
distributor of camping appliances in Europe. On June 24, 1996, the Company
commenced a tender offer for the purchase of all the publicly traded outstanding
shares of ADG, or approximately 30% of the outstanding shares, for French Franc
404 per share. The tender offer period expired in July 1996 with approximately
28% of the outstanding shares of ADG tendered for purchase. The Company is
currently completing the necessary steps to acquire the remaining publicly held
stock and expects to complete those actions during the third quarter of 1996.
Coleman is financing the acquisition of the shares of ADG with net proceeds
from (i) a private placement issuance and sale of $85.0 million aggregate
principal amount of 7.10% Senior Notes, Series A, due 2006 (the "Notes due
2006") and (ii) a private placement issuance and sale of $75.0 million aggregate
principal amount of 7.25% Senior Notes, Series B, due 2008 (the "Notes due
2008"). The Notes due 2006 bear interest at the rate of 7.10% per annum payable
semiannually, and the principal amount is payable in annual installments of
$12.1 million commencing June 13, 2000 with a final payment due on June 13,
2006. If there is a default, the interest rate will be the greater of (i) 9.10%
or (ii) 2% above the prime interest rate. The Notes due 2008 bear interest at
the rate of 7.25% per annum payable semiannually, and the principal amount is
payable in annual installments of $15.0 million commencing June 13, 2004 with a
final payment due on June 13, 2008. If there is a default, the interest rate
will be the greater of (i) 9.25% or (ii) 2% above the prime interest rate. The
Notes due 2006 and the Notes due 2008 are unsecured and are subject to various
restrictive covenants, including without limitation,
13
<PAGE>
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
requirements for the maintenance of specified financial ratios and levels of
consolidated net worth and certain other provisions limiting the incurrence
of additional debt and sale and leaseback transactions under the terms of the
Note Purchase Agreement.
Camping Gaz has a significant presence in the market for camping equipment
in Europe and has recently pursued its development internationally. The
Company is currently in the process of reviewing its integration alternatives
with respect to the combination of the business operations of Coleman and
Camping Gaz. The conclusions of the review could result in a charge against
earnings in 1996.
The Company's parent (Coleman Worldwide Corporation) and its parent
(Coleman Holdings Inc.) have entered into borrowing agreements which are
collateralized by the Company's common stock.
The Company expects that the combination of the cash flow generated by its
operations and borrowings under the Company Credit Agreement will be sufficient
to enable it to meet its current operating requirements, including projected
capital expenditures, tax sharing payments and other obligations.
The Company uses a variety of derivative financial instruments to manage
its foreign currency and interest rate exposures. The Company does not
speculate on interest rates or foreign currency rates. Instead it uses
derivatives when implementing its risk management strategies to reduce the
possible effects of these exposures.
With respect to foreign currency exposures the Company principally uses
forward and option contracts to reduce risks arising from firm commitments,
anticipated intercompany sales transactions and intercompany receivable and
payable balances. The Company generally uses interest rate swaps and interest
rate caps to fix certain of its variable rate debt. The Company manages credit
risk related to these derivative contracts through credit approvals, exposure
limits and other monitoring procedures.
Coleman Worldwide is a holding company with no business operations or
source of income of its own, and its ability to meet its obligations with
respect to the LYONs and any other obligations is contingent upon distributions
from the Company, including payments under the Company tax sharing agreement,
capital contributions or loans from its direct and indirect parent companies,
other borrowings and proceeds from the disposition of Coleman Common Stock owned
by Coleman Worldwide. As the holder of approximately 83% of the capital stock
of the Company, Coleman Worldwide has the ability to cause the Company to make
distributions up to the maximum amount permitted by law, subject to limitations
in the debt instruments of the Company. However, Coleman Worldwide currently
expects that, for the foreseeable future, the net earnings and cash flows of the
Company will be retained and used in the business of the Company and that
Coleman Worldwide will not receive any distributions from the Company other than
payments under the Company's tax sharing agreement. Furthermore, the terms of
the Company Credit Agreement may limit its ability to pay dividends or make
other payments to Coleman Worldwide. The receipt by Coleman Worldwide of tax
sharing payments from the Company will cease upon Coleman Worldwide's ownership
interest in Coleman falling below 80%, and the Indenture does not require
Coleman Worldwide to own more than a majority of the Coleman Common Stock.
Pursuant to the LYONs indenture agreement, at any time that the LYONs are
outstanding, the amounts that Coleman Worldwide would be required to pay to
Mafco under the Worldwide Tax Sharing Agreement, together with any remaining
funds paid to Coleman Worldwide by the Company under the tax sharing agreement
between Coleman Worldwide and the Company, may not be paid as tax sharing
payments, but Coleman Worldwide may advance such funds to Mafco as long as the
aggregate amount of such advances at any time does not exceed the issue price
plus accrued OID of the LYONs. Such advances are evidenced by noninterest
bearing unsecured demand promissory notes from Mafco in the amount of $54.8
million at June 30, 1996.
14
<PAGE>
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
Coleman Worldwide currently anticipates that in order to pay the principal
amount at maturity of the LYONs, to redeem the LYONs or to repurchase the LYONs
for cash, including upon a Purchase Date (as defined) or upon the occurrence of
any Additional Purchase Right Event (as defined), Coleman Worldwide will be
required to adopt one or more alternatives, such as seeking capital
contributions or loans from its direct and indirect parent companies,
refinancing its indebtedness or disposing of Coleman Common Stock owned by
Coleman Worldwide (which disposition could result in tax sharing payments
ceasing to be available to Coleman Worldwide). None of the affiliates of
Coleman Worldwide will be required to make any capital contributions or other
payments to Coleman Worldwide with respect to Coleman Worldwide's obligations on
the LYONs, nor has any affiliate of Coleman Worldwide or any other person
guaranteed the obligations of Coleman Worldwide with respect to the LYONs.
There can be no assurance that any of the foregoing actions could be effected on
satisfactory terms, that they would be sufficient to enable Coleman Worldwide to
make any payments in respect of the LYONs when required or that any of such
actions would be permitted by the terms of the Indenture or, with respect to
sales of Coleman Common Stock, the debt instruments of the Company then in
effect.
SEASONALITY
The Company's sales generally are highest in the second quarter of the year
and lowest in the fourth quarter. As a result of this seasonality, the Company
has generally incurred a loss in the fourth quarter. The Company's sales may be
affected by weather conditions, especially during the second and third quarters
of the year.
15
<PAGE>
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit Index Description
------------- -----------
10.1* Employment Agreement dated as of May 1, 1996 between the
Company and Frederik van den Bergh; (incorporated by
reference to Exhibit 10.1 to The Coleman Company Inc.'s
Form 10-Q for the period ended June 30, 1996 (the
"Company's June 30, 1996 Form 10-Q")).
10.2* Employment Agreement dated as of August 1, 1996
between the Company and Steven F. Kaplan;
(incorporated by reference to Exhibit 10.2 to the
Company's June 30, 1996 Form 10-Q).
10.3* Addendum dated August 3, 1996 and effective August 1,
1996 to Employment Agreement dated as of August 1,
1996 between the Company and Steven F. Kaplan;
(incorporated by reference to Exhibit 10.3 to the
Company's June 30, 1996 Form 10-Q).
10.4* First Amendment dated July 1, 1996 to Employment
Agreement effective January 1, 1996 between the
Company and Michael N. Hammes; (incorporated by
reference to Exhibit 10.4 to the Company's June 30,
1996 Form 10-Q).
10.5* First Amendment dated July 1, 1996 to the
Consolidated Supplemental Retirement Plan adopted
January 1, 1996; (incorporated by reference to
Exhibit 10.5 to the Company's June 30, 1996 Form
10-Q).
27 Financial Data Schedule.
------------------
* Management Contracts and Compensatory Plans
(b) Reports on Form 8-K
A report on Form 8-K was filed on June 14, 1996 to provide information
regarding the two-for-one stock split authorized by the Board of Directors
of Coleman on May 31, 1996.
A report on Form 8-K was filed on July 1, 1996 to disclose certain
information with regard to the Coleman's acquisition of Application des Gaz,
S.A.
16
<PAGE>
COLEMAN WORLDWIDE CORPORATION AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
COLEMAN WORLDWIDE CORPORATION
(Registrant)
Date: August 13, 1996 By: /s/ George Mileusnic
--------------------- ------------------------------
George Mileusnic
Executive Vice President and Chief
Financial Officer
17
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS FILED IN THE COMPANY'S FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 11,364
<SECURITIES> 0
<RECEIVABLES> 374,739
<ALLOWANCES> 4,575
<INVENTORY> 291,995
<CURRENT-ASSETS> 714,710
<PP&E> 290,104
<DEPRECIATION> 77,847
<TOTAL-ASSETS> 1,350,325
<CURRENT-LIABILITIES> 309,934
<BONDS> 727,045
0
0
<COMMON> 1
<OTHER-SE> 134,438
<TOTAL-LIABILITY-AND-EQUITY> 1,350,325
<SALES> 724,333
<TOTAL-REVENUES> 726,214
<CGS> 507,710
<TOTAL-COSTS> 507,710
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,906
<INTEREST-EXPENSE> 24,750
<INCOME-PRETAX> 64,643
<INCOME-TAX> 21,782
<INCOME-CONTINUING> 33,673
<DISCONTINUED> 0
<EXTRAORDINARY> (1,239)
<CHANGES> 0
<NET-INCOME> 32,434
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
