<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 MARCH 31, 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: 33-67058
COLEMAN HOLDINGS INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3722380
(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 $1.00 common
stock was 1,000 shares as of April 30, 1996, all of which were held by an
indirect wholly-owned subsidiary of Mafco Holdings Inc.
Exhibit Index on Page 14.
<PAGE>
COLEMAN HOLDINGS INC. AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION PAGE
----
Item 1. Condensed Consolidated Financial Statements:
Condensed Consolidated Statements of Earnings
Three months ended March 31, 1996 and 1995 . . . . . . . . . . 3
Condensed Consolidated Balance Sheets
March 31, 1996 and December 31, 1995 . . . . . . . . . . . . . 4
Condensed Consolidated Statements of Cash Flows
Three months ended March 31, 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. . . . . . . . . . . . . . . . . . . 9
PART II. OTHER INFORMATION
Item I. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . 14
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . 14
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2
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COLEMAN HOLDINGS INC. AND SUBSIDIARIES
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
--------------------
1996 1995
--------- ---------
<S> <C> <C>
Net revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 273,560 $ 224,024
Cost of sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 192,594 155,528
--------- ---------
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80,966 68,496
Selling, general and administrative expenses . . . . . . . . . . . . . 46,800 39,681
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,960 13,704
Amortization of goodwill and deferred charges. . . . . . . . . . . . . 2,704 2,359
Other (income), net. . . . . . . . . . . . . . . . . . . . . . . . . . (2,721) (150)
--------- ---------
Earnings before income taxes, minority interest and extraordinary item 17,223 12,902
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . 6,508 5,046
Minority interest. . . . . . . . . . . . . . . . . . . . . . . . . . . 2,535 2,270
--------- ---------
Earnings before extraordinary item . . . . . . . . . . . . . . . . . . 8,180 5,586
Extraordinary loss on early extinguishment
of debt, net of income tax benefit . . . . . . . . . . . . . . . . . (582) --
--------- ---------
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,598 $ 5,586
--------- ---------
--------- ---------
</TABLE>
See Notes to Condensed Consolidated Financial Statements
3
<PAGE>
COLEMAN HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
MARCH 31, DECEMBER 31,
1996 1995
---------- ---------
<S> <C> <C>
Current assets:
Cash and cash equivalents. . . . . . . . . . . . . . . . $ 6,816 $ 12,065
Accounts receivable, net . . . . . . . . . . . . . . . . 262,656 165,309
Inventories . . . . . . . . . . . . . . . . . . . . . . 257,886 216,236
Deferred tax assets. . . . . . . . . . . . . . . . . . . 21,485 20,481
Prepaid assets and other . . . . . . . . . . . . . . . . 25,675 22,475
---------- ---------
Total current assets. . . . . . . . . . . . . . . . . 574,518 436,566
Property, plant and equipment, net . . . . . . . . . . . . 169,677 162,691
Intangible assets related to businesses acquired, net. . . 264,158 225,247
Note receivable - affiliate. . . . . . . . . . . . . . . . 50,685 50,685
Deferred tax assets and other. . . . . . . . . . . . . . . 28,262 34,271
---------- ---------
$1,087,300 $ 909,460
---------- ---------
---------- ---------
LIABILITIES AND STOCKHOLDER'S (DEFICIT) EQUITY
Current liabilities:
Accounts and notes payable . . . . . . . . . . . . . . . $ 133,274 $ 90,679
Other current liabilities. . . . . . . . . . . . . . . . 48,866 59,296
---------- ---------
Total current liabilities . . . . . . . . . . . . . . 182,140 149,975
Long-term debt . . . . . . . . . . . . . . . . . . . . . . 868,910 737,621
Income taxes payable - affiliate . . . . . . . . . . . . . 43,528 37,846
Other liabilities. . . . . . . . . . . . . . . . . . . . . 47,856 48,072
Minority interest. . . . . . . . . . . . . . . . . . . . . 52,390 49,266
Contingencies. . . . . . . . . . . . . . . . . . . . . . .
Stockholder's (deficit) equity:
Common stock . . . . . . . . . . . . . . . . . . . . . . 1 1
(Deficiency in) additional paid-in capital . . . . . . . (126,188) (123,992)
Retained earnings. . . . . . . . . . . . . . . . . . . . 17,916 10,318
Currency translation adjustment. . . . . . . . . . . . . 747 353
---------- ---------
Total stockholder's (deficit) equity. . . . . . . . . (107,524) (113,320)
---------- ---------
$1,087,300 $ 909,460
---------- ---------
---------- ---------
</TABLE>
See Notes to Condensed Consolidated Financial Statements
4
<PAGE>
COLEMAN HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
----------------------
1996 1995
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . $ 7,598 $ 5,586
--------- ---------
Adjustments to reconcile net earnings to net cash flows
from operating activities:
Depreciation and amortization. . . . . . . . . . . . . . 8,045 6,690
Non-cash tax sharing agreement provision . . . . . . . . 3,498 2,243
Minority interest. . . . . . . . . . . . . . . . . . . . 2,535 2,270
Interest accretion . . . . . . . . . . . . . . . . . . . 8,880 8,094
Non-cash gain on LYONs conversion. . . . . . . . . . . . (2,751) --
Extraordinary loss on early extinguishment of debt . . . 986 --
Change in assets and liabilities:
Increase in receivables. . . . . . . . . . . . . . . . (84,659) (67,109)
Increase in inventories. . . . . . . . . . . . . . . . (28,420) (28,165)
Increase in accounts payable . . . . . . . . . . . . . 8,741 10,582
Other, net . . . . . . . . . . . . . . . . . . . . . . (17,297) (384)
--------- ---------
(100,442) (65,779)
--------- ---------
Net cash used by operating activities . . . . . . . . . . . . (92,844) (60,193)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures. . . . . . . . . . . . . . . . . . . . . (6,866) (5,619)
Purchases of businesses, net of cash acquired . . . . . . . . (60,132) --
Increase in note receivable - affiliate . . . . . . . . . . . -- (10,734)
Proceeds from sale of fixed assets. . . . . . . . . . . . . . 186 273
--------- ---------
Net cash used by investing activities . . . . . . . . . . . . (66,812) (16,080)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from revolving credit agreement borrowings . . . 125,713 54,900
Net change in short-term borrowings . . . . . . . . . . . . . 29,611 17,775
Repayment of long-term debt . . . . . . . . . . . . . . . . . (172) (2,270)
Purchases of Company common stock . . . . . . . . . . . . . . (2,329) --
Proceeds from stock options exercised . . . . . . . . . . . . 967 3,410
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . (12) 35
--------- ---------
Net cash provided by financing activities . . . . . . . . . . 153,778 73,850
--------- ---------
Effect of exchange rate changes on cash . . . . . . . . . . . 629 (2,471)
--------- ---------
Net decrease in cash and cash equivalents . . . . . . . . . . (5,249) (4,894)
Cash and cash equivalents at beginning of the period . . . . 12,065 8,319
--------- ---------
Cash and cash equivalents at end of the period. . . . . . . . $ 6,816 $ 3,425
--------- ---------
--------- ---------
</TABLE>
See Notes to Condensed Consolidated Financial Statements
5
<PAGE>
COLEMAN HOLDINGS INC. AND SUBIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
(Unaudited)
1. BASIS OF FINANCIAL STATEMENT PRESENTATION
Coleman Holdings Inc. ("Coleman Holdings") is a holding company formed
in July 1993 in connection with the offering of Senior Secured Discount Notes
due 1998 (the "Old Notes") to hold all of the outstanding shares of capital
stock of Coleman Worldwide Corporation ("Coleman Worldwide"). Coleman
Worldwide is a holding company formed in March 1993 in connection with the
offering of Liquid Yield OptionTM Notes due 2013 (the "LYONs" TM). Coleman
Worldwide also holds 22,033,760 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 March 31, 1996.
The accompanying unaudited condensed consolidated financial statements
of Coleman Holdings 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 three months ended March 31, 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 Holdings' annual report on Form 10-K for the year ended December
31, 1995.
2. INVENTORIES
The components of inventories consist of the following:
MARCH 31, DECEMBER 31,
1996 1995
--------- ---------
Raw material and supplies . . . $ 72,450 $ 57,653
Work-in-process . . . . . . . . 7,118 5,389
Finished goods. . . . . . . . . 178,318 153,194
--------- ---------
$ 257,886 $ 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.
6
<PAGE>
COLEMAN HOLDINGS INC. AND SUBIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
(Unaudited)
The following summarized, unaudited pro forma results of operations for
the three months ended March 31,1995 assumes the acquisition of Seatt
occurred as of the beginning of 1995. The pro forma results do not purport
to be indicative of what would have occurred had the Seatt acquisition been
consummated at the beginning of 1995. Moreover, the pro forma information is
not intended to be indicative of future results of operations.
THREE MONTHS ENDED
MARCH 31,
1995
----------
Net revenues. . . . . . . . . . . . . $ 238,185
Net earnings. . . . . . . . . . . . . 5,675
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 in connection with the sale to Coleman of 60
percent of the outstanding shares of Application des Gaz, S.A. ("ADG" or
"Camping Gaz") at a price of French Franc 404 per share (approximately $81
per share at the then current exchange rate) or approximately $58,000 in the
aggregate. Coleman has the right to purchase the balance of Butagaz' 10
percent economic interest at a later date at the same price per share of
French Franc 404, with Butagaz retaining a seat on the board of ADG. The
transaction is subject to several conditions and once these have been
satisfied, the purchase of the remaining 30 percent of the outstanding shares
of Camping Gaz held by ADG public shareholders shall be proposed through a
tender offer at the same price of French Franc 404 per share. The Company
expects the conditions to the acquisition will be satisfied and expects to
complete the acquisition of Camping Gaz late in the second quarter of 1996.
Camping Gaz has a significant presence in the market for camping equipment in
Europe and has recently pursued its development internationally. The Company's
current intention is to finance the Camping Gaz acquisition through a private
placement issuance of approximately $160,000 aggregate principal amount senior
notes due in 2008. 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.
4. SUBSEQUENT EVENTS
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.
7
<PAGE>
COLEMAN HOLDINGS INC. AND SUBIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
(Unaudited)
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 $69,860 would have been
available for payment by the Company of cash dividends at March 31, 1996.
In connection with the amending and restating of the Company's previous
credit agreement, the Company will recognize an extraordinary loss of
approximately $1,078 ($652 after taxes, or $0.03 per share) in the quarter
ended June 30, 1996, which represents a write-off of the related unamortized
financing costs associated with the Company's previous credit agreement.
8
<PAGE>
COLEMAN HOLDINGS INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Coleman Holdings and Coleman Worldwide are holding companies with no
business operations or source of income of their own. Accordingly, except as
otherwise indicated, the following discussion relates to the results of
operations of the Company.
RESULTS OF OPERATIONS
Net revenues in the 1996 and 1995 periods were $273.6 million and $224.0
million, respectively, an increase of $49.6 million, or 22.1%. All classes
of the Company's products contributed to this increase with recreation
products increasing by $15.2 million, hardware/home center products
contributing $16.5 million, and the Company's new class of home safety and
security products recording revenues of $17.9 million. Net revenues in the
United States and Canada increased 24.7%, and net revenues from international
markets increased 14.3%.
Recreation products revenues reflect strong growth in sleeping bags,
tents and camping accessories and along with sales of Sierra camp furniture
products, a business acquired in July 1995, helped offset a decline in
revenues from cooler and jugs which is primarily attributable to a large
thermo-electric cooler premium promotion in the 1995 period which was not
repeated in 1996. The increase in sales of the Company's hardware/home
center products include strong sales of generators as a result of the winter
weather and continued growth in pressure washer revenues as the overall
pressure washer market continues to grow and become more competitive. 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. Seatt revenues exceeded expectations and were up when compared
to Seatt's respective period in 1995. International revenues were adversely
affected by the unfavorable translation of foreign revenues, primarily in
Japan, due to the strengthening of the U.S. dollar in the 1996 period as
compared to the 1995 period.
Cost of sales was $192.6 million in 1996 compared with $155.5 million in
1995, an increase of 23.8%. Cost of sales as a percent of net revenues
increased to 70.4% in 1996 from 69.4% in 1995. The increase in cost of sales
as a percent of net revenues is primarily because of the effects of the mix
of products sold, as revenues from lower margin products, primarily electric
pressure washers, grew faster than other categories of products which carry
higher margins.
Selling, general and administrative ("SG&A") expenses were $46.7 million
in 1996 compared to $39.6 million in 1995, an increase of 18.0%. SG&A
expenses as a percent of net revenues improved to 17.1% in 1996 from 17.7% in
1995 as revenues grew faster than the growth in SG&A expenses. The increase
in SG&A expenses primarily reflects SG&A expenses associated with recent
business acquisitions and to a lesser extent increased advertising, marketing
and administrative expenses.
The Company's interest expense was $8.1 million in 1996 compared with
$5.6 million in 1995, an increase of $2.5 million. This increase was
primarily the result of higher borrowings to fund business acquisitions and
support the increase in 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. In
addition, Coleman Holdings, on an unconsolidated basis, had $5.9 million of
interest expense in 1996 compared with $5.3 million in 1995, an increase of
$0.6 million. This increase is a result of the effects of compounding
interest related to the Discount Notes.
During the three months ended March 31, 1996, holders of LYONs with a
principal amount at maturity of $9.4 million elected to exchange such LYONs
pursuant to the terms of the LYONs indenture. In connection
9
<PAGE>
COLEMAN HOLDINGS INC. AND SUBSIDIARIES
with these exchanges, Coleman Worldwide delivered 74,107 shares of Coleman
Common Stock that Coleman Worldwide 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 which is reflected 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.
Minority interest represents the minority stockholders' proportionate
share of the results of operations of the Company, which is reflected on
Coleman Holdings' consolidated financial statements because of Coleman
Holding' approximate 83% ownership of Coleman's common stock. Minority
interest increased in 1996 due to an increase in the Company's income in 1996.
The Company's effective income tax rate was 37.0% in 1996 compared with
38.4% in 1995. Coleman Holdings' consolidated effective income tax rate was
37.8% in 1996 compared with 39.1% 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.
LIQUIDITY AND CAPITAL RESOURCES
Cash flows used in Coleman Holdings' consolidated operations were $92.8
million and $60.2 million for the three months ended March 31, 1996 and 1995,
respectively. Cash used during these periods reflects the Company's seasonal
working capital requirements associated with generally higher sales in the
first quarter of the year as compared to the fourth quarter of the year.
Receivables increased by $84.7 million and $67.1 million for the three months
ended March 31, 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 $28.4 million in the three months ended March
31, 1996 to support the growth of the Company, especially in the camping
accessory and lighting products. Coleman Holdings' net cash used for
investing activities was $66.8 million and $16.1 million for the three months
ended March 31, 1996 and 1995, respectively. The Company's capital
expenditures were $6.9 million and $5.6 million in the three months ended
March 31, 1996 and 1995, respectively. The Company used $60.1 million of
cash for a business acquisition during the three months ended March 31, 1996.
The increase in capital expenditures reflects the addition of equipment to
expand the Company's capacity to manufacture certain of its products lines.
Net advances to Mafco Holdings Inc. under the Coleman Worldwide tax sharing
agreement and the terms of the LYONs trust indenture were $10.7 million
during the three months ended March 31, 1995. Net cash provided by financing
activities for the three months ended March 31, 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'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 previous 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 March 31, 1996, $70.7
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
10
<PAGE>
COLEMAN HOLDINGS INC. AND SUBSIDIARIES
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% for 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 $69.9 million would have been available for
payment by the Company of cash dividends at March 31, 1996.
In connection with the amending of the Company's credit agreement, the
Company will recognize an extraordinary loss of approximately $1.1 million
($0.7 million after taxes, or $0.03 per share) in the quarter ended June 30,
1996, which represents a write-off of the related unamortized financing costs
associated with the Company's credit agreement.
Coleman Worldwide 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.
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 in connection with the sale to Coleman of 60
percent of the outstanding shares of Application des Gaz, S.A. ("ADG" or
"Camping Gaz") at a price of French Franc 404 per share (approximately $81
per share at the then current exchange rate) or approximately $58.0 million
in the aggregate. Coleman has the right to purchase the balance of Butagaz'
10 percent economic interest at a later date at the same price per share of
French Franc 404, with Butagaz retaining a seat on the board of ADG. The
transaction is subject to several conditions and once these have been
satisfied, the purchase of the remaining 30 percent of the outstanding shares
of Camping Gaz held by ADG public shareholders shall be proposed through a
tender offer at the same price of French Franc 404 per share. The Company
expects the conditions to the acquisition will be satisfied and expects to
complete the acquisition of Camping Gaz late in the second quarter of 1996.
Camping Gaz has a significant presence in the market for camping equipment in
Europe and has recently pursued its development internationally. The
Company's current intention is to finance the Camping Gaz acquisition through
a private placement issuance of approximately $160.0 million aggregate
principal amount senior notes due in 2008. 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 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
11
<PAGE>
COLEMAN HOLDINGS INC. AND SUBSIDIARIES
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 $50.7 million at March 31, 1996.
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.
Coleman Holdings 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 Discount Notes and any other obligations is contingent upon
distributions from Coleman Worldwide, capital contributions or loans from its
direct and indirect parent companies and other borrowings. As the indirect
holder through Coleman Worldwide of approximately 83% of the capital stock of
the Company, Coleman Holdings has the ability to cause the Company and
Coleman Worldwide to make distributions up to the maximum amount permitted by
law, subject to limitations in the debt instruments of the Company and
Coleman Worldwide. However, Coleman Holdings currently expects that, for the
foreseeable future, the net earnings and cash flow of the Company will be
retained and used in the business of the Company and that Coleman Holdings
will not receive any distributions from the Company or Coleman Worldwide.
Furthermore, the terms of Coleman's Credit Agreement may limit its ability to
pay dividends or make other payments to Coleman Worldwide and Coleman
Holdings, and the LYONs Indenture restricts Coleman
12
<PAGE>
COLEMAN HOLDINGS INC. AND SUBSIDIARIES
Worldwide's ability to pay dividends and make other payments to Coleman
Holdings. Although Coleman Worldwide may receive payments from the Company
pursuant to the Company tax sharing agreement, Coleman Worldwide will not
distribute such payments to Coleman Holdings. In addition, the LYONs
Indenture requires that any such payments received from the Company be paid
to Mafco Holdings Inc. or retained by Coleman Worldwide (except under certain
limited circumstances which are unlikely to occur prior to the maturity of
the Discount Notes).
Coleman Holdings currently anticipates that in order to pay the
principal amount at maturity of the Discount Notes, to redeem the Discount
Notes or to repurchase the Discount Notes upon the occurrence of a change of
control, Coleman Holdings will be required to adopt one or more alternatives,
such as seeking capital contributions or loans from its direct and indirect
parent companies or refinancing its indebtedness. None of the affiliates of
Coleman Holdings will be required to make any capital contributions or other
payments to Coleman Holdings with respect to Coleman Holdings's obligations
on the Discount Notes, and, except for the non-recourse guaranty of Coleman
Worldwide, the obligations of Coleman Holdings with respect to the Discount
Notes will not be guaranteed by any affiliate of Coleman Holdings or any
other person. There can be no assurance that any of the foregoing actions
could be effected on satisfactory terms, that they would be sufficient to
enable Coleman Holdings to make any payments in respect of the Discount Notes
when required or that any of such actions would be permitted by the terms of
the Discount Notes trust indenture (the "Discount Notes Indenture"), the
LYONs Indenture or the debt instruments of the Company or Coleman Worldwide
then in effect. Moreover, the events that constitute a change of control
under the Discount Notes Indenture may also constitute events of default or
repurchase right events under certain debt instruments of Coleman Holdings'
subsidiaries. Such events may permit the lenders under such debt instruments
to accelerate the debt (or, in the case of LYONs, to require Coleman
Worldwide to repurchase LYONs) and, if the debt is not paid or repurchased,
to enforce their security interest in substantially all the assets of Coleman
Holdings' subsidiaries. Any such enforcement may limit Coleman Holdings'
ability to raise cash to purchase the Discount Notes and may have a material
adverse effect on the market price of Coleman Common Stock and on the price
that could be obtained for the Coleman Worldwide capital stock and thus on
the ability of the Discount Notes trustee to realize value through sales of
the collateral.
SEASONALITY
The Company's sales generally are highest in the second quarter of the
year and lowest in the fourth quarter. As a result of this seasonality, the
Company has generally incurred a loss in the fourth quarter. The Company's
sales may be affected by weather conditions, especially during the second and
third quarters of the year.
13
<PAGE>
COLEMAN HOLDINGS INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT INDEX DESCRIPTION
------------- -----------
4.1 Amendment No. 1 dated as of April 30, 1996 to
the Amended and Restated Credit Agreement dated
as of August 3, 1996 among the Company, the Lenders
party thereto, the Issuing Bank, the Agent, and the
Co-Agents (the "Company Credit Agreement");
(incorporated by reference to Exhibit 4.1 to The
Coleman Company Inc.'s Form 10-Q for the period
ended March 31, 1996 (the "Company's March 31,
1996 Form 10-Q")).
4.2 Amendment No. 2 dated as of April 30, 1996 to
the Company Credit Agreement; (incorporated by
reference to Exhibit 4.2 to the Company's March 31,
1996 Form 10-Q).
MANAGEMENT CONTRACTS AND COMPENSATORY PLANS
10.1 Employment Agreement dated as of January 1, 1996
between the Company and Patrick McEvoy;
(incorporated by reference to Exhibit 10.1 to
the Company's March 31, 1996 Form 10-Q).
10.2 Corrected and Restated Employment Agreement
dated as of January 1, 1996 between the Company
and Michael N. Hammes; (incorporated by reference
to Exhibit 10.2 to the Company's March 31, 1996
Form 10-Q).
10.3 The Coleman Retirement Salaried Incentive Savings
Plan; (incorporated by reference to Exhibit 10.3
to the Company's March 31, 1996 Form 10-Q).
27.1 Financial Data Schedule
(b) Reports on Form 8-K
A report on Form 8-K was filed on January 12, 1996 to disclose the
purchase of assets andassumption of certain liabilities of Seatt
Corporation ("Seatt") and to provide the financial statements and
information required by Item 7(a) in connection with the Company's
acquisition of Seatt.
A report on Form 8-K/A was filed on March 17, 1996 to provide the
information required by Item 7(b) in connection with the Company's
acquisition of Seatt.
14
<PAGE>
COLEMAN HOLDINGS INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
COLEMAN HOLDINGS INC.
(Registrant)
Date: May 13, 1996 By: /s/ GEORGE MILEUSNIC
-----------------------------------
George Mileusnic
Executive Vice President and Chief
Financial Officer
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS AND CONDENSED CONSOLIDATED
BALANCE SHEETS FOUND ON PAGES THREE AND FOUR OF THE COMPANY'S FORM 10-Q FOR
THE YEAR-TO-DATE, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 6,816
<SECURITIES> 0
<RECEIVABLES> 266,203
<ALLOWANCES> 3,863
<INVENTORY> 257,886
<CURRENT-ASSETS> 574,518
<PP&E> 242,468
<DEPRECIATION> 72,791
<TOTAL-ASSETS> 1,087,300
<CURRENT-LIABILITIES> 182,140
<BONDS> 868,910
0
0
<COMMON> 1
<OTHER-SE> (107,525)
<TOTAL-LIABILITY-AND-EQUITY> 1,087,300
<SALES> 272,745
<TOTAL-REVENUES> 273,560
<CGS> 192,594
<TOTAL-COSTS> 192,594
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 840
<INTEREST-EXPENSE> 16,960
<INCOME-PRETAX> 17,223
<INCOME-TAX> 6,508
<INCOME-CONTINUING> 8,180
<DISCONTINUED> 0
<EXTRAORDINARY> (582)
<CHANGES> 0
<NET-INCOME> 7,598
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
