<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended SEPTEMBER 30, 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. Yes X No
--- ---
The number of shares outstanding of the registrant's par value $1.00 common
stock was 1,000 shares as of November 5, 1996 all of which were held by an
indirect wholly-owned subsidiary of Mafco Holdings Inc.
Exhibit Index on Page 17.
<PAGE>
COLEMAN HOLDINGS INC. AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION PAGE
----
Item 1. Condensed Consolidated Financial Statements:
Condensed Consolidated Statements of Operations
Three months ended September 30, 1996 and 1995 and
Nine months ended September 30, 1996 and 1995. . . . . 3
Condensed Consolidated Balance Sheets
September 30, 1996 and December 31, 1995 . . . . . . . 4
Condensed Consolidated Statements of Cash Flows
Nine months ended September 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 . . . . . . . . . . . . . . . . . . . . 17
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . 17
Signatures. . . . . . . . . . . . . . . . . . . . . . . . 19
2
<PAGE>
COLEMAN HOLDINGS INC. AND SUBSIDIARIES
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)
(Unaudited)
<TABLE>
Three Months Nine Months
Ended September 30, Ended September 30,
------------------- -------------------
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net revenues . . . . . . . . . . . . . . . . . . $269,607 $211,817 $995,821 $747,122
Cost of sales. . . . . . . . . . . . . . . . . . 229,713 145,885 737,423 513,119
-------- -------- -------- --------
Gross profit . . . . . . . . . . . . . . . . . . 39,894 65,932 258,398 234,003
Selling, general and administrative expenses . . 89,399 42,815 215,218 128,413
Interest expense . . . . . . . . . . . . . . . . 19,233 14,737 55,839 42,999
Amortization of goodwill and deferred charges. . 3,256 2,420 9,338 7,044
Other expense (income), net. . . . . . . . . . . 578 133 (1,520) 13
-------- -------- -------- --------
(Loss) earnings before income taxes,
minority interest and extraordinary item. . . . (72,572) 5,827 (20,477) 55,534
Provision for income tax (benefit) expense . . . (17,837) 2,476 (447) 22,240
Minority interest in (loss) earnings of
Camping Gaz . . . . . . . . . . . . . . . . . . (81) -- 1,870 --
Minority interest in (loss) earnings of Coleman. (8,329) 1,391 (1,092) 8,349
-------- -------- -------- --------
(Loss) earnings before extraordinary item. . . . (46,325) 1,960 (20,808) 24,945
Extraordinary loss on early extinguishment
of debt, net of income tax benefit. . . . . . . (5) (787) (1,244) (787)
-------- -------- -------- --------
Net (loss) earnings. . . . . . . . . . . . . . . $(46,330) $ 1,173 $(22,052) $ 24,158
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
See Notes to Condensed Consolidated Financial Statements
3
<PAGE>
COLEMAN HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
September 30, December 31,
1996 1995
---------- ---------
ASSETS
Current assets:
Cash and cash equivalents. . . . . . . . . . . . . . . $ 43,757 $ 12,065
Accounts receivable, net . . . . . . . . . . . . . . . 285,529 165,309
Inventories . . . . . . . . . . . . . . . . . . . . . 288,884 216,236
Deferred tax assets. . . . . . . . . . . . . . . . . . 30,060 20,481
Prepaid assets and other . . . . . . . . . . . . . . . 21,254 22,475
---------- ---------
Total current assets . . . . . . . . . . . . . . . . 669,484 436,566
Property, plant and equipment, net . . . . . . . . . . . 203,652 162,691
Intangible assets related to businesses acquired, net . 339,140 225,247
Note receivable - affiliate. . . . . . . . . . . . . . . 54,739 50,685
Deferred tax assets and other. . . . . . . . . . . . . . 41,189 34,271
---------- ---------
$1,308,204 $ 909,460
---------- ---------
---------- ---------
LIABILITIES AND STOCKHOLDER'S DEFICIT
Current liabilities:
Accounts and notes payable. . . . . . . . . . . . . . . $ 166,674 $ 90,679
Other current liabilities . . . . . . . . . . . . . . . 135,145 59,296
---------- ---------
Total current liabilities . . . . . . . . . . . . . . 301,819 149,975
Long-term debt . . . . . . . . . . . . . . . . . . . . . 980,626 737,621
Income taxes payable - affiliate . . . . . . . . . . . . 43,605 37,846
Other liabilities. . . . . . . . . . . . . . . . . . . . 71,839 48,072
Minority interest in Camping Gaz . . . . . . . . . . . . 1,416 --
Minority interest in Coleman . . . . . . . . . . . . . . 49,404 49,266
Contingencies. . . . . . . . . . . . . . . . . . . . . .
Stockholder's deficit:
Common stock . . . . . . . . . . . . . . . . . . . . . 1 1
(Deficiency in) additional paid-in capital . . . . . . (130,580) (123,992)
(Accumulated deficit) retained earnings. . . . . . . . (11,735) 10,318
Currency translation adjustment. . . . . . . . . . . . 1,809 353
---------- ---------
Total stockholder's deficit. . . . . . . . . . . . . (140,505) (113,320)
---------- ---------
$ 1,308,204 $ 909,460
---------- ---------
---------- ---------
See Notes to Condensed Consolidated Financial Statements
4
<PAGE>
COLEMAN HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months
Ended September 30,
---------------------
1996 1995
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) earnings. . . . . . . . . . . . . . . . . . $(22,052) $24,158
--------- ---------
Adjustments to reconcile net (loss) earnings to
net cash flows from operating activities:
Depreciation and amortization. . . . . . . . . . . . 28,710 20,782
Non-cash tax sharing agreement provision . . . . . . (936) 14,216
Non-cash restructuring and other charges . . . . . . 33,268 --
Interest accretion . . . . . . . . . . . . . . . . . 27,053 24,730
Non-cash gain on LYONs conversion. . . . . . . . . . (2,755) --
Extraordinary loss on early extinguishment of debt . 2,090 1,290
Minority interest in earnings of Camping Gaz . . . . 1,870 --
Minority interest in (loss) earnings of Coleman. . . (1,092) 8,349
Change in assets and liabilities:
Increase in receivables. . . . . . . . . . . . . . (60,693) (58,547)
Increase in inventories. . . . . . . . . . . . . . (29,513) (22,203)
(Decrease) increase in accounts payable. . . . . . (22,216) 4,667
Other, net . . . . . . . . . . . . . . . . . . . . 23,782 3,219
--------- ---------
(432) (3,497)
--------- ---------
Net cash (used) provided by operating activities . . . (22,484) 20,661
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures . . . . . . . . . . . . . . . . . (27,666) (21,024)
Purchases of businesses, net of cash acquired. . . . . (158,414) (19,915)
Increase in note receivable - affiliate. . . . . . . . (4,054) (6,742)
Proceeds from sale of fixed assets . . . . . . . . . . 1,567 1,391
--------- ---------
Net cash used by investing activities. . . . . . . . . (188,567) (46,290)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net payments of revolving credit
agreement borrowings. . . . . . . . . . . . . . . . . (14,686) (100,213)
Net change in short-term borrowings. . . . . . . . . . 33,215 14,137
Proceeds from issuance of long-term debt . . . . . . . 235,678 200,000
Repayment of long-term debt. . . . . . . . . . . . . . (9,908) (74,320)
Debt issuance and refinancing costs. . . . . . . . . . (2,296) (3,494)
Purchases of Company common stock. . . . . . . . . . . (2,329) (4,086)
Proceeds from stock options exercised. . . . . . . . . 1,724 3,633
Other, net . . . . . . . . . . . . . . . . . . . . . 108 162
--------- ---------
Net cash provided by financing activities. . . . . . . 241,506 35,819
--------- ---------
Effect of exchange rate changes on cash. . . . . . . . 1,237 1,360
--------- ---------
Net decrease in cash and cash equivalents. . . . . . . 31,692 11,550
Cash and cash equivalents at beginning of the period . 12,065 8,319
--------- ---------
Cash and cash equivalents at end of the period . . . . $ 43,757 $ 19,869
--------- ---------
--------- ---------
See Notes to Condensed Consolidated Financial Statements
5
<PAGE>
COLEMAN HOLDINGS INC. AND SUBSIDIARIES
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 Option-TM- Notes due 2013 (the "LYONs"-TM-). Coleman
Worldwide also holds 44,067,520 shares of the common stock of The Coleman
Company, Inc. (the "Company" or "Coleman") which represents approximately 83%
of the outstanding Coleman common stock as of September 30, 1996. Coleman
Holdings and Coleman Worldwide are holding companies with no business
operations or source of income of their own.
The accompanying unaudited condensed consolidated financial statements
of Coleman Holdings include the accounts of Coleman Holdings, Coleman
Worldwide, and Coleman and its subsidiaries after elimination of all material
intercompany accounts and transactions and have been prepared in accordance
with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the nine months ended
September 30, 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:
September 30, December 31,
1996 1995
-------- --------
Raw material and supplies . . . . . . . $ 84,639 $ 57,653
Work-in-process . . . . . . . . . . . . 7,667 5,389
Finished goods. . . . . . . . . . . . . 196,578 153,194
-------- --------
$288,884 $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 and
security related electronic products for residential and commercial
applications. The Seatt acquisition, which was accounted for under the
purchase method, was completed for approximately $65,200 including fees and
expenses. 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 $40,400. The
Company is amortizing this amount over 40 years on the straight-line method.
6
<PAGE>
COLEMAN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
(Unaudited)
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"). Camping Gaz is the
leading manufacturer and distributor of camping appliances in Europe.
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 fourth quarter of 1996, acquire the remaining shares held by
Butagaz for approximately French Franc 48,434 (approximately $9,400 at
current exchange rates), which represents approximately 10% of the
outstanding shares of ADG, and accordingly considers these shares as under
the control of the Company. The Company obtained effective control of
Camping Gaz on March 1, 1996. 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 94% of the outstanding
publicly traded shares of ADG tendered for purchase. The Company completed
the necessary steps to acquire the remaining publicly held stock during the
third quarter of 1996. The cost of acquiring all the shares of ADG is
approximately French Franc 477,822 (approximately $94,100) plus fees and
expenses of approximately $5,000.
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 acquired and liabilities assumed in connection with
the acquisition of Camping Gaz, the Company recorded goodwill of
approximately $75,800, which is being amortized over 40 years on the
straight-line method.
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 nine months ended September 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.
Nine Months ended
September 30,
----------------------
1996 1995
---------- --------
Net revenues. . . . . . . . . . . . . . . . . $1,021,975 $971,840
(Loss) earnings before extraordinary item . . (20,942) 28,140
Net (loss) earnings . . . . . . . . . . . . . (22,186) 27,353
4. RELATED PARTY TRANSACTION
The Company has entered into an agreement with an affiliate in which the
Company expects to realize
7
<PAGE>
COLEMAN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
(Unaudited)
tax benefits associated with certain foreign tax net operating loss
carryforwards that had not previously been recognized. Substantially all of
the estimated $1,800 benefit is reflected in Coleman Holdings' consolidated
provision for income taxes for the nine month period ended September 30,
1996, with approximately $564 of this benefit reflected in Coleman Holdings'
consolidated provision for income taxes during the three month period ended
September 30, 1996.
5. RESTRUCTURING AND OTHER CHARGES
During the three month period ended September 30, 1996, the Company
recorded restructuring and certain other charges totaling $44,495, net of tax.
The restructuring charges total $32,380, net of tax, and consist of charges
to integrate the Camping Gaz and Coleman operations into a single global
recreation products business, exit the low end electric pressure washer
business, and increase the valuation reserve for certain foreign deferred
income tax assets. Other charges of $12,115, net of tax, relate to
litigation associated with certain of the Company's battery powered lights,
certain asset write-offs and certain foreign tax matters. These other
charges were incurred in the Company's normal course of business, although
the amounts involved are higher than similar charges that the Company has
recorded in prior periods. Cost of sales includes a pre-tax charge of
$33,567, selling, general and administrative expenses includes a pre-tax
charge of $23,767 and the provision for income tax benefit includes $12,839
of tax benefits resulting from these charges, net of the effect of an
increase in the valuation reserve related to certain foreign deferred tax
assets and other foreign tax charges. The Company anticipates incurring
additional charges of $5,000 to $7,000, net of tax, during the fourth quarter
of 1996 related to the Company's restructuring actions.
6. LONG-TERM DEBT
On April 30, 1996, the Company amended its unsecured credit agreement
(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. In connection with the Company recording the
restructuring and other charges as discussed in footnote 6, the Company
further amended the Company Credit Agreement on October 25, 1996. 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, as amended,
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 1.875% based on the Company's
financial performance. If there is a default, the interest rate otherwise in
effect will be increased by 2% per annum. The Company Credit Agreement also
bears an overall facility fee ranging from .15% to .375% based on the
Company's financial performance.
The 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
also prohibits the Company from paying any dividends until on or after
January 1, 1999.
8
<PAGE>
COLEMAN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
(Unaudited)
In connection with the amending and restating of the Company's previous
credit agreement in April 1996, the Company recognized an extraordinary loss
of approximately $1,078 ($647 after taxes, or $0.01 per share) in the nine
months ended September 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.
7. SUBSEQUENT EVENT
On November 1, 1996, the Company settled all outstanding claims and
litigation with Black & Decker involving certain of the Company's light
products. The Company estimates that it will incur an after tax charge in
the fourth quarter of 1996 of approximately $8,000 to $10,000 representing
costs associated with the settlement that are in excess of reserves
previously recorded by the Company on this matter.
9
<PAGE>
COLEMAN HOLDINGS INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
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.
THREE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED WITH THE THREE MONTHS ENDED
SEPTEMBER 30, 1995
Net revenues of $269.6 million in 1996 were $57.8 million or 27.3%
greater than in 1995 with recreation products increasing $27.3 million or
18.7% and hardware/home center products increasing $9.6 million or 14.6%.
Revenues in 1996 also include revenues of $20.9 million from the Company's
home safety and security products. Geographically, United States and Canada
revenues increased 16.9% while international revenues increased 60.5%.
Recreation products revenues increased $27.3 million or 18.7%. Excluding
the impact of the Camping Gaz acquisition and the one-time 1995
thermo-electric cooler premium promotion, comparable recreation revenues
decreased approximately 8.2%. Strong revenue performance in soft goods,
primarily Eastpak products, were offset by softness in the Company's North
America and Japanese base camping business. The weather across key areas of
the United States adversely affected demand for the Company's camping
products and Japan experienced an economic downturn in the third quarter of
1996 which significantly reduced revenues as compared to 1995. The increase
in hardware/home center revenues of 14.6% or $9.6 million was driven by new
products and increased generator sales. The Company's 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.
Gross margins, excluding the impact of restructuring and other charges
totaling $33.6 million (which are more fully discussed below), decreased as a
percent of sales by 3.9 percentage points from 31.1% in 1995. This decrease
is primarily the result of softness in the Company's camping business in
North America and Japan as discussed above. The Company's camping products
tend to have a higher gross margin percentage than the Company's average.
Selling, general and administrative ("SG&A") expenses, excluding $23.8
million of restructuring and other charges as discussed more fully below,
were $65.5 million in 1996 compared to $42.7 million in 1995, an increase of
53.4%. The increase in SG&A expenses primarily reflects SG&A expenses
associated with the Camping Gaz and Seatt business acquisitions and to a
lesser extent increased advertising and marketing expenses.
During the 1996 period, the Company recorded restructuring and certain
other charges totaling $44.5 million, net of tax. The restructuring charges
total $32.4 million, net of tax, and consist of charges to integrate the
Camping Gaz and Coleman operations into a single global recreation products
business, exit the low end electric pressure washer business, and increase
the valuation reserve for certain foreign deferred income tax assets. Other
charges of $12.1 million, net of tax, relate to litigation associated with
certain of the Company's battery powered lights, certain asset write-offs and
certain foreign tax matters. These other charges were incurred in the
Company's normal course of business, although the amounts involved are higher
than similar charges that the Company has recorded in prior periods. Cost of
sales includes a pre-tax charge of $33.6 million, selling, general and
administrative expenses includes a pre-tax charge of $23.8 million, and the
provision for income tax benefit includes $12.9 million of tax benefits
resulting from these charges, net
10
<PAGE>
COLEMAN HOLDINGS INC. AND SUBSIDIARIES
of the effect of an increase in the valuation reserve related to certain
foreign deferred tax assets and other foreign tax charges. The Company
anticipates incurring additional charges of $5.0 million to $7.0 million, net
of tax, during the fourth quarter of 1996 related to the Company's
restructuring actions.
On November 1, 1996, the Company settled all outstanding claims and
litigation with Black & Decker involving certain of the Company's light
products. The Company estimates that it will incur an after tax charge in
the fourth quarter of 1996 of approximately $8.0 million to $10.0 million
representing costs associated with the settlement that are in excess of
reserves previously recorded by the Company on this matter. In addition, the
Company's results of operations in the fourth quarter of 1996 will also be
reduced by an estimated $2.5 million to $5.0 million due to the loss of
projected after tax earnings associated with the light products that are to
be discontinued in connection with the Black & Decker settlement.
The Company's interest expense was $10.0 million in 1996 compared with
$6.3 million in 1995, an increase of $3.7 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. In addition, Coleman Holdings, on an unconsolidated basis, had $6.2
million of interest expense in 1996 compared with $5.6 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.
Minority interest in Camping Gaz represents the interest of minority
shareholders in certain subsidiary 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.
The Company recorded a provision for income tax benefit of $14.2 million
or 22.7% of the pre-tax loss in 1996 compared to a provision for income tax
expense of $5.8 million or 39.0% of the pre-tax earnings in 1995. Excluding
the impact of the restructuring and other charges, the provision for income
tax benefit in 1996 was negatively impacted by the cumulative impact of the
Company's increase in its expected annual effective income tax rate from
34.0% to 34.7%. On an unconsolidated basis, Coleman Worldwide recorded a
provision for income tax benefit of $1.3 million in 1996 and $1.2 million in
1995 or approximately 40.0% of Coleman Worldwide's unconsolidated pre-tax
loss in each period. In addition, Coleman Holdings' on an unconsolidated
basis, recorded a provision for income tax benefit of $2.3 million in 1996
and $2.1 million in 1995 or approximately 35.0% of Coleman Holdings'
unconsolidated pre-tax loss in each period.
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED WITH THE NINE MONTHS ENDED
SEPTEMBER 30, 1995
Net revenues in the 1996 and 1995 periods were $995.8 million and $747.1
million, respectively, an increase of $248.7 million, or 33.3% with
recreation products increasing by $143.9 million or 25.4% and hardware/home
center products increasing $48.5 million or 27.0%. The Company's home
safety and security products contributed revenues of $56.2 million.
Geographically, United States and Canada revenues increased a 19.4%, while
international revenues increased 75.2%.
Recreation products revenues increased $143.9 million or 25.4%.
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 6.4%. Strong revenue performance in soft goods and
new products was partially offset by
11
<PAGE>
COLEMAN HOLDINGS INC. AND SUBSIDIARIES
softness in the Company's North America and Japanese camping business. The
weather across key areas of the United States adversely affected demand for
the Company's camping products and Japan experienced an economic downturn in
the third quarter of 1996 which significantly reduced revenues as compared to
1995. The increase in hardware/home center revenues of 27.0% or $48.5 million
was driven by pressure washer growth, strong generator sales and new
products. The Company's 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.
Gross margins, excluding the impact of restructuring and other charges
totaling $33.6 million (which are more fully discussed below), decreased as a
percent of sales by 2.0 percentage points from 31.3% in 1995 to 29.3% in
1996. This decrease is primarily the result of the unfavorable effects of
product mix including significantly higher sales of pressure washers at lower
gross margin percentages and lower sales of camping products which tend to
have higher gross margin percentages than the Company's average.
SG&A expenses, excluding $23.8 million of restructuring and other
charges as discussed more fully below, were $191.2 million in 1996 compared
to $128.2 million in 1995, an increase of 49.1%. The increase in SG&A
expenses primarily reflects SG&A expenses associated with the Camping Gaz and
Seatt business acquisitions and to a lesser extent increased advertising and
marketing expenses.
During the 1996 period, the Company recorded restructuring and certain
other charges totaling $44.5 million, net of tax. The restructuring charges
total $32.4 million, net of tax, and consist of charges to integrate the
Camping Gaz and Coleman operations into a single global recreation products
business, exit the low end electric pressure washer business, and increase
the valuation reserve for certain foreign deferred income tax assets. Other
charges of $12.1 million, net of tax, relate to litigation associated with
certain of the Company's battery powered lights, certain asset write-offs and
certain foreign tax matters. These other charges were incurred in the
Company's normal course of business, although the amounts involved are higher
than similar charges that the Company has recorded in prior periods. Cost of
sales includes a pre-tax charge of $33.6 million, selling, general and
administrative expenses includes a pre-tax charge of $23.8 million, and the
provision for income tax expense includes $12.9 million of tax benefits
resulting from these charges, net of the effect of an increase in the
valuation reserve related to certain foreign deferred tax assets and other
foreign tax charges. The Company anticipates incurring additional charges of
$5.0 million to $7.0 million, net of tax, during the fourth quarter of 1996
related to the Company's restructuring actions.
The Company's interest expense was $28.8 million in 1996 compared with
$18.3 million in 1995, an increase of $10.5 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 $9.0 million of interest expense in 1996 compared
with $8.4 million in 1995, an increase of $0.6 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 $18.1 million of
interest expense in 1996 compared with $16.3 million in 1995, an increase of
$1.8 million. This increase is a result of the effects of compounding
interest related to the Discount Notes.
During the nine months ended September 30, 1996, holders of LYONs with a
principal amount at maturity of $9.8 million elected to exchange such LYONs
pursuant to the terms of the LYONs indenture. In connection with these
exchanges, Coleman Worldwide delivered 74,107 shares of Coleman Common Stock
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 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
12
<PAGE>
COLEMAN HOLDINGS INC. AND SUBSIDIARIES
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 recorded a provision for income tax expense in 1996 of $9.0
million, which includes the net tax benefits of $12.9 million discussed
above. Excluding the net tax benefit from restructuring and other charges,
the provision for income taxes would have been $21.9 million or 34.7% of
pre-tax earnings as compared to a provision for income tax expense of $31.9
million or 39.0% of pre-tax earnings in 1995. The decrease in the effective
tax rate before restructuring and other charges 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, and to a lesser extent due to the recognition of tax
benefits associated with certain foreign net operating loss carryforwards
that had not been previously recognized. On an unconsolidated basis, Coleman
Worldwide recorded a provision for income tax benefit of $2.7 million in 1996
and $3.6 million in 1995 or approximately 40.0% of Coleman Worldwide's
unconsolidated pre-tax loss in each period. In addition, Coleman Holdings'
on an unconsolidated basis, recorded a provision for income tax benefit of
$6.7 million in 1996 and $6.1 million in 1995 or approximately 35.0% of
Coleman Holdings' unconsolidated pre-tax loss in each period.
The Company obtained effective control of approximately 70% of Camping
Gaz in March 1996 and obtained control of the remaining 30% in July 1996.
Accordingly, the minority interest in Camping Gaz for the 1996 period
primarily represents the minority shareholders approximate 30% proportionate
share of the results of operations of the Camping Gaz operations for the
period March through June of 1996. Minority interest in Camping Gaz also
includes the interests of minority shareholders in certain subsidiary
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 Holdings' consolidated financial statements
because of Coleman Holdings' 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, or $0.01 per share) which
represents a write-off of the related unamortized financing costs associated
with its then existing credit agreement. During the third quarter of 1995,
the Company completed a $200.0 million private placement debt issue. In
connection with the private placement, the Company renegotiated its previous
credit agreement and recorded an extraordinary loss of $1.3 million ($0.8
million after taxes, or $0.01 per share) which represents a write-off of the
related unamortized financing costs associated with its previous credit
agreement.
LIQUIDITY AND CAPITAL RESOURCES
Coleman Holdings' consolidated operations used $22.5 million of cash
during the nine months ended September 30, 1996 and provided $20.7 million of
cash during the nine months ended September 30, 1995. During the 1996
period, receivables, excluding the amount of receivables acquired in
connection with business acquisitions, increased by $60.7 million as a result
of the seasonality of the Company's sales and an increase in the overall
level of the Company's sales. Inventories, excluding the amount of inventories
acquired in connection with business acquisitions, increased by $29.5 million
in the nine months ended September 30, 1996 to support the growth of the
Company, especially in new products. Coleman Holdings' net cash used for
investing activities was $188.6 million and $46.3 million for the nine months
ended September 30, 1996 and 1995, respectively. The Company's capital
expenditures were $27.7 million in the nine months ended September 30, 1996.
The Company used $158.4 million of cash for business acquisitions during the
nine months ended September 30, 1996. Coleman Worldwide also had net
advances to Mafco Holdings Inc. under the Coleman Worldwide tax sharing
agreement and the terms
13
<PAGE>
COLEMAN HOLDINGS INC. AND SUBSIDIARIES
of the LYONs trust indenture in the amounts of $4.1 million and $6.7 million
during the nine months ended September 30, 1996 and 1995, respectively.
Net cash provided by financing activities for the nine months ended September
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 100,000 shares of its Common Stock in the open market during the nine
months ended September 30, 1996.
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"). In connection with the Company recording the
restructuring and other charges as discussed previously, the Company further
amended the Company Credit Agreement in October 1996. The Company Credit
Agreement, as amended, provides a term loan of French Franc 385,125 ($75.0
million at the then current exchange rates) and an unsecured revolving credit
facility in an amount of $275.0 million. Availability under the Company
Credit Agreement, as amended, is reduced by any commercial paper borrowings
outstanding. The Company Credit Agreement, as amended, is available to the
Company until April 30, 2001. At September 30, 1996, $137.9 million would
have been available for borrowings under the Company Credit Agreement, as
amended.
The outstanding loans under the Company Credit Agreement, as amended,
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 1.875% based on the Company's
financial performance. If there is a default, the interest rate otherwise in
effect will be increased by 2% per annum. The Company Credit Agreement, as
amended, also bears an overall facility fee ranging from .15% to .375% based
on the Company's financial performance.
The Company Credit Agreement, as amended, 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
also prohibits the Company from paying any dividends until on or after
January 1, 1999.
The Company's ability to meet its current cash operating requirements,
including projected capital expenditures, tax sharing payments and other
obligations is dependent upon a combination of cash flows from operations and
borrowings under the Company Credit Agreement, as amended. The Company's
ability to borrow under the terms of the Company Credit Agreement, as
amended, is subject to the Company's continuing requirement to meet the
various restrictive covenants, including without limitation, those described
above. If the Company fails to meet the various restrictive covenants of the
Company Credit Agreement, as amended, the Company will need to renegotiate
its current Company Credit Agreement, as amended, and/or enter into
alternative financing arrangements and there is no assurance that the terms
and conditions of such agreements would be as favorable as those now
contained in the Company Credit Agreement, as amended.
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 fourth quarter of
1996, acquire the remaining shares held by Butagaz for approximately French
Franc 48,434
14
<PAGE>
COLEMAN HOLDINGS INC. AND SUBSIDIARIES
(approximately $9,400 at current exchange rates), which represents
approximately 10% of the outstanding shares of ADG, and accordingly considers
these shares as under the control of the Company. 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 94% of the outstanding publicly traded shares of ADG
tendered for purchase. The Company completed the necessary steps to acquire
the remaining publicly held stock during the third quarter of 1996.
Coleman financed 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, requirements for the maintenance of specified financial ratios
and levels of consolidated net worth and certain other provisions limiting
the incurrence of additional debt and sale and leaseback transactions under
the terms of the Note Purchase Agreement.
The Company's 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 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, as amended, prohibits the Company from paying any dividends
until on or after January 1, 1999. The receipt by Coleman Worldwide of tax
sharing payments from the Company will cease upon Coleman Worldwide's
ownership
15
<PAGE>
COLEMAN HOLDINGS INC. AND SUBSIDIARIES
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 $54.7 million at September 30, 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 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
16
<PAGE>
COLEMAN HOLDINGS INC. AND SUBSIDIARIES
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.
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for certain forward-looking statements. The forward-looking
statements contained in this Form 10-Q are subject to certain risks and
uncertainties. Actual results could differ materially from current
expectations. Among the factors which could affect Coleman Worldwide's
actual results and could cause results to differ from those contained in the
forward-looking statements contained herein are the success of the Company's
restructuring programs, the potential impact of the Black & Decker settlement
on the Company's operations being different than anticipated, the possibility
that negative external factors like the adverse weather in North America and
the consumer spending decline in Japan will continue to impact the Company's
business, and the possibility the Company may be required to renegotiate its
credit agreement.
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.
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. 3 dated as of May 29, 1996 to the Amended
and Restated Company Credit Agreement among the Company,
the Lenders party thereto, the Issuing Bank, the Agent,
and the Co-Agents; (incorporated by reference to Exhibit
4.1 to The Coleman Company Inc.'s Form 10-Q for the
period ended September 30, 1996 (the "Company's September
30, 1996 Form 10-Q")).
17
<PAGE>
COLEMAN HOLDINGS INC. AND SUBSIDIARIES
4.2 Amendment No. 4 dated as of October 25, 1996 to the
Amended and Restated Company Credit Agreement among the
Company, the Lenders party thereto, the Issuing Bank, the
Agent, and the Co-Agents; (incorporated by reference to
Exhibit 4.2 to the Company's September 30, 1996 Form
10-Q).
10.1* First Amendment dated August 1, 1996 to Employment
Agreement effective as of August 1, 1996, by and between
The Coleman Company, Inc. and Steven F. Kaplan;
(incorporated by reference to Exhibit 10.1 to the
Company's September 30, 1996 Form 10-Q).
18
<PAGE>
COLEMAN HOLDINGS INC. AND SUBSIDIARIES
10.2* First Amendment dated August 1, 1996 to Employment
Agreement effective as of May 1, 1996, by and between The
Coleman Company, Inc. and Frederik van den Bergh;
(incorporated by reference to Exhibit 10.2 to the
Company's September 30, 1996 Form 10-Q).
10.3* First Amendment dated August 1, 1996 to Employment
Agreement effective as of January 1, 1996, by and between
The Coleman Company, Inc. and Michael N. Hammes;
(incorporated by reference to Exhibit 10.3 to the
Company's September 30, 1996 Form 10-Q).
10.4* First Amendment dated August 1, 1996 to Employment
Agreement effective as of January 1, 1996, by and between
The Coleman Company, Inc. and David Stearns;
(incorporated by reference to Exhibit 10.4 to the
Company's September 30, 1996 Form 10-Q).
10.5* First Amendment dated August 1, 1996 to Employment
Agreement effective as of January 1, 1996, by and between
The Coleman Company, Inc. and George Mileusnic;
(incorporated by reference to Exhibit 10.5 to the
Company's September 30, 1996 Form 10-Q).
10.6* First Amendment dated August 1, 1996 to Employment
Agreement effective as of January 1, 1996, by and between
The Coleman Company, Inc. and Patrick McEvoy;
(incorporated by reference to Exhibit 10.6 to the
Company's September 30, 1996 Form 10-Q).
10.7* First Amendment dated August 1, 1996 to Employment
Agreement effective as of January 1, 1996, by and between
The Coleman Company, Inc. and Larry E. Sanford;
(incorporated by reference to Exhibit 10.7 to the
Company's September 30, 1996 Form 10-Q).
10.8* First Amendment dated August 1, 1996 to Employment
Agreement effective as of January 1, 1996, by and between
The Coleman Company, Inc. and Gerry E. Brown;
(incorporated by reference to Exhibit 10.8 to the
Company's September 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/A was filed on August 28, 1996 to disclose
certain information with regard to the Company's acquisition of Application
des Gaz, S.A.
19
<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: November 13, 1996 By: /s/ STEVEN F. KAPLAN
-----------------------------------
Steven F. Kaplan
Executive Vice President and
Chief Financial Officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS FILED IN THE COMPANY'S FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1996 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-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 43,757
<SECURITIES> 0
<RECEIVABLES> 296,045
<ALLOWANCES> 10,516
<INVENTORY> 288,884
<CURRENT-ASSETS> 669,484
<PP&E> 298,611
<DEPRECIATION> 94,959
<TOTAL-ASSETS> 1,308,204
<CURRENT-LIABILITIES> 301,819
<BONDS> 980,626
0
0
<COMMON> 1
<OTHER-SE> (140,506)
<TOTAL-LIABILITY-AND-EQUITY> 1,308,204
<SALES> 992,863
<TOTAL-REVENUES> 995,821
<CGS> 737,423
<TOTAL-COSTS> 737,423
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,448
<INTEREST-EXPENSE> 55,839
<INCOME-PRETAX> (20,477)
<INCOME-TAX> (447)
<INCOME-CONTINUING> (20,808)
<DISCONTINUED> 0
<EXTRAORDINARY> (1,244)
<CHANGES> 0
<NET-INCOME> (22,052)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
