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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 10-K
[ X ] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended DECEMBER 31, 1996
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
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Commission file Number 33-67058
COLEMAN HOLDINGS INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 13-3722380
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1767 DENVER WEST BLVD., GOLDEN, COLORADO 80401
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(Address of principal executive offices) (Zip Code)
1526 COLE BLVD., GOLDEN, COLORADO 80401
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(Former address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 303-202-2400
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
- ----------------------------------------------- ---------------------
SERIES B SENIOR SECURED DISCOUNT NOTES DUE 1998 NONE
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. X Yes No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [ X ]
The number of shares outstanding of the registrant's par value $1.00
common stock was 1,000 shares as of March 17, 1997 all of which were held by
an indirect wholly-owned subsidiary of Mafco Holdings Inc.
INCORPORATED BY REFERENCE
Portions of the definitive proxy statement of The Coleman Company, Inc.
for its Annual Meeting of Shareholders to be held on May 13, 1997, which is
to be filed within 120 days of the end of the fiscal year, are incorporated
by reference into Part III of this Annual Report on Form 10-K.
Exhibit Index at pages 23 through 31.
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COLEMAN HOLDINGS INC. AND SUBSIDIARIES
1996 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
PART I
PAGE
----
Item 1. Business 3
Item 2. Properties 9
Item 3. Legal Proceedings 10
Item 4. Submission of Matters to a Vote of Security Holders 11
PART II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters 11
Item 6. Selected Financial Data 12
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 13
Item 8. Financial Statements and Supplementary Data 20
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 20
PART III
Item 10. Directors and Executive Officers of the Registrant 20
Item 11. Executive Compensation 22
Item 12. Security Ownership of Certain Beneficial Owners
and Management 22
Item 13. Certain Relationships and Related Transactions 22
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K 23
Signatures 32
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PART I
ITEM 1. BUSINESS
OVERVIEW
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") and subsequent exchange of the Old Notes for
Series B Senior Secured Discount Notes (the "Discount Notes"), and to hold
all of the outstanding shares of capital stock of Coleman Worldwide
Corporation ("Coleman Worldwide"). Coleman Worldwide was formed in March
1993 in connection with the offering of Liquid Yield Option TM Notes due 2013
(the "LYONs" TM). Coleman Worldwide also holds 44,067,520 shares of the
common stock of The Coleman Company, Inc. ("Coleman " or the "Company" )
which represents approximately 83% of the outstanding Coleman common stock as
of March 15, 1997. Coleman is a leading manufacturer and marketer of
consumer products for the out door recreation and hardware markets on a
global basis. The Company's products have been sold domestically and
internationally under the Coleman brand name since the 1920s. The Company
believes its strong market position is attributable primarily to its
well-recognized trademarks, particularly the Coleman brand name, broad
product line, product quality and innovation, and marketing, distribution and
manufacturing expertise.
BACKGROUND
Coleman was formed in December 1991 to succeed to the assets and
liabilities of the outdoor products business of New Coleman Holdings Inc.
("Holdings"), an indirect wholly-owned subsidiary of Mafco Holdings Inc.
("Mafco"). Holdings (then named The Coleman Company, Inc.) was acquired (the
"Acquisition") in 1989 by MacAndrews & Forbes Holdings Inc. ("MacAndrews
Holdings", and, together with Mafco, "MacAndrews & Forbes"), a corporation
wholly owned through Mafco by Ronald O. Perelman. Coleman is a subsidiary of
Coleman Worldwide, which is an indirect wholly-owned subsidiary of Holdings.
In March 1992, the Company completed an initial public offering of its common
stock (the "IPO"), and Coleman Worldwide's ownership inter est in the Company
is approximately 83%.
The Company has made several acquisitions in recent years designed to
expand its product lines in the outdoor recreation market. In 1996, the
Company acquired the French company Application des Gaz ("ADG" or "Camping
Gaz"), which is a leader in the European camping equipment market. In 1995,
the Company acquired Sierra Corporation of Fort Smith, Inc. ("Sierra"), a
manufacturer of portable outdoor and recreational folding furniture and
accessories. In 1994, the Company acquired substantially all of the assets
of Eastpak, Inc. and all of the capital stock of M.G. Industries, Inc.
(together, "Eastpak"), a leading designer, manufacturer and distributor of
branded daypacks, sports bags and related products. In 1993, the Company
acquired substantially all of the assets associated with the butane business
of the Taymar Group ("Taymar") in the United Kingdom and substantially all of
the assets of S.V.B. Caravan Camping S.p.a. and Cadia S.r.l. (together,
"S.V.B.") in Italy. Taymar manufactures and distributes lightweight butane
camping lanterns and stoves, as well as butane gas torches and other
accessories. S.V.B. manufactures and distributes a wide range of products
for the camping and hardware markets under the S.V.B. brand name.
The Company also restructured certain operations in the outdoor
recreation market. In 1994, the Company restructured its German
manufacturing operations (the "German Restructuring"), including selling its
plastic cooler business located in Inheiden, Germany and Loucka, Czech
Republic. In 1996, the Company closed the Brazilian manufacturing operations
it had acquired from Metal Yanes, Ltda. in 1994.
The Company has also expanded its presence in the hardware market
through its acquisition in 1996 of the assets of Seatt Corporation ("Seatt"),
a leading designer, manufacturer and distributor of smoke alarms, thermostats
and carbon monoxide detectors, its acquisition in 1995 of substantially all
of the assets of Active Technologies, Inc. ("ATI"), a manufacturer of
technologically advanced lightweight generators and battery
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charging equipment, and its acquisition in 1994 of substantially all of the
assets of Sanborn Manufacturing Company ("Sanborn"), a manufacturer of a
broad line of portable and stationary air compressors.
PRODUCTS
The Company participates in two primary markets, outdoor recreation and
hardware.
OUTDOOR RECREATION
The Company's principal products include a comprehensive line of
lanterns and stoves for outdoor recre ational use, fuel-related products such
as disposable fuel cartridges, a broad range of coolers and jugs, sleeping
bags, backpacks, tents, outdoor folding furniture, portable electric lights,
spas, camping accessories and other products for recreational use. These
products are distributed predominantly through mass merchandisers, sport ing
goods chains and outdoor specialty stores.
LANTERNS AND STOVES. Coleman believes it is the leading manufacturer of
lanterns and stoves for outdoor recreational use in the world. Coleman's
liquid fuel appliances include single and dual fuel-powered lanterns and
stoves. Coleman also manufactures a broad range of propane- and butane-fueled
lanterns and stoves, which allow the user to regulate the intensity of light
or heat. These products are manufactured at the Company's facilities located
in the United States and Europe and are marketed under the Coleman, Camping
Gaz and Peak 1 brand names.
FUEL. The Company is a leading supplier to the worldwide camping and
outdoor recreation market of propane and butane cartridges and camping fuel.
In addition to manufacturing and filling disposable propane cartridges and
refillable LPG cylinders, Coleman sells camping fuel that is refined and
canned to its specifications by various suppliers, fills butane gas
cartridges and purchases butane-filled gas cartridges from third-party
vendors for sale to customers throughout the world. These products are
marketed under the Coleman, Camping Gaz and Peak 1 brand names.
COOLERS AND JUGS. The Company manufactures and sells a wide variety of
insulated coolers and jugs and reusable ice substitutes. The Company's
cooler line includes personal coolers for camping, picnics or lunch box use;
large coolers; beverage coolers for use at work sites and recreational and
social events; and soft-sided coolers. Coleman's cooler products are
manufactured predominantly at the Company's facilities located in the United
States and are marketed under the Coleman brand name worldwide and under the
Camping Gaz brand name in Europe. In addition, the Company also manufactures
coolers and jugs for third parties to be given away as promotions or sold
with the customer's own products as a premium.
RECREATIONAL SOFT GOODS. The Company designs, manufactures or sources,
and markets textile products, including tents, sleeping bags, backpacks,
daysacks, sports bags, duffle bags and rucksacks. These products are
manufactured at the Company's facilities located in the United States and
Puerto Rico or sourced from third-party vendors who manufacture them to the
Company's specifications. The Company's tents and sleeping bags are mar keted
under the Coleman and Peak 1 brand names, while its daysacks, sport bags and
related products are market ed under the Coleman, Eastpak and newly licensed
Timberland brand names. In addition to mass merchandisers, sporting goods
chains and outdoor specialty stores, the Company distributes daysacks, sports
bags and duffle bags through college bookstores and luggage shops.
OUTDOOR FURNITURE. The Company manufactures and markets aluminum- and
steel-framed, portable, outdoor, folding furniture under the Coleman and
Sierra Trails brand names. These products are manufactured predominantly at
the Company's facilities located in the United States.
ELECTRIC LIGHTS. The Company designs and markets electric lighting
products that are manufactured by others and sold under the Coleman,
Powermate, Job-Pro and Camping Gaz brand names. These products include
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portable electric lights such as hand held spotlights, flashlights and
fluorescent lanterns and a line of rechargeable lanterns and flashlights.
SPAS. The Company manufactures and markets a wide range of spas, which
are made primarily from acrylic, for residential applications. These
products are manufactured at the Company's facility located in the United
States and are distributed through a nationwide dealer network.
CAMPING ACCESSORIES. The Company designs, sources and markets a variety
of small accessories for camping and outdoor use, such as cookware and
utensils. These products are manufactured by third-party vendors to Coleman's
specifications and are marketed under the Coleman brand name.
HARDWARE
The Company's principal products include portable generators, portable
and stationary air compressors, pressure washers, and safety and security
products such as smoke alarms, carbon monoxide detectors and thermo stats.
GENERATORS. The Company is a leading manufacturer and distributor of
portable generators in the United States and worldwide. These products are
manufactured by the Company, using engines manufactured by Tecumseh, Briggs &
Stratton, Vanguard, Honda and Kawasaki, at its facilities located in the
United States, are marketed under the Coleman Powermate brand name and are
distributed predominantly through mass merchandisers and home center chains.
With its acquisition of ATI, the Company now produces advanced, light-weight
generators.
AIR COMPRESSORS. The Company's air compressors are manufactured at its
facilities located in the United States, are marketed under the Coleman
Powermate brand name and are distributed predominantly through mass
merchandisers and home center chains.
PRESSURE WASHERS. The Company offers a line of pressure washers
manufactured at its facilities located in the United States and distributed
predominantly through mass merchandisers and home center chains under the
Coleman Powermate brand name.
SAFETY AND SECURITY PRODUCTS. The Company manufactures a range of
safety and security products for residential use, primarily smoke alarms,
carbon monoxide detectors and thermostats. The Company manufactures these
products at its facilities located in Mexico and markets them under the
Firex, Code 1 and Coleman Sheltra brand names. These products are
distributed predominantly through electrical wholesalers, mass merchandisers,
and home center chains in North America and selected foreign countries,
primarily Australia and the United Kingdom.
BUSINESS STRATEGY
The Company's business strategy is to build upon its reputation as a
leading manufacturer and marketer of high quality brand name consumer
products for the outdoor recreation and hardware markets. The specific
operating strategies include:
FOCUS ON QUALITY AND SERVICE
Since the business of the Company was founded in the early 1900's,
Coleman has built a reputation for its quality products and superior customer
service. The Company is committed to continuing, and building upon, this
reputation.
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INTRODUCING NEW PRODUCTS
The Company plans to continue introducing new products. Management
intends to focus on leveraging the Company's existing technologies, processes
and expertise to maximize the speed and efficiency of new product development
and introductions.
DEVELOPING EXISTING BRANDS
The Company believes it has some of the more prominent brand names in
the outdoor recreation and hardware markets and plans to strengthen these
brands through superior product design, advertising, and promotion.
EXPANDING INTERNATIONAL MARKETS
Coleman is currently a market leader in several product categories in
Europe and Japan. The Company plans to utilize its well-established
infrastructures in Europe and Japan to expand in other core product
categories and to invest appropriately to develop and build businesses in new
geographic markets.
DEVELOPING HUMAN RESOURCES
The Company plans to continue developing, training, and motivating its
personnel at all levels to achieve excellence, including developing and
building its team of experienced managers.
OPERATING EFFICIENCY
The Company plans to continue seeking ways to further improve the
quality and efficiency of its business processes in order to ensure quality
and realize cost savings, including, among other things, exiting low margin
product lines and businesses and consolidating manufacturing, distribution
and administrative facilities.
SALES AND MARKETING
The following table sets forth the net revenues by class of products for
the years ended December 31, 1996, 1995 and 1994.
1996 1995 1994
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(In millions)
Outdoor Recreation........ $ 859.6 $688.9 $563.7
Hardware.................. 360.6 244.7 187.9
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Total................ $1,220.2 $933.6 $751.6
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In the United States and Canada, the Company's outdoor recreation
products are sold by the Company's own sales force and, to a lesser extent,
by sales representatives that serve specialty markets and related distribu
tion channels. Spa products, however, are sold by independent sales
representatives to a nationwide dealer network and, to a lesser extent, by
regional sales managers employed by the Company. The Company's hardware
products are sold by Company and independent sales representatives.
The Company promotes its products through national and local advertising
campaigns, frequently coordi nating with retailers' promotions to maximize
the benefits of its advertising efforts.
Coleman's major customers include Canadian Tire, Home Depot, Kmart,
Price/Costco, Target, and Wal-Mart. Wal-Mart and its affiliates accounted
for approximately 15% of the Company's 1996 consolidated net
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revenues. Although the loss of Wal-Mart as a customer could have an adverse
effect on the Company, the Company believes its relationship with Wal-Mart is
satisfactory and the Company has no reason to believe Wal- Mart will not
continue as a customer.
International sales represented 32%, 24% and 23% of net revenues for the
years ended December 31, 1996, 1995 and 1994, respectively. For 1996,
approximately 79% of the Company's international sales were in Japan and
Europe, with the balance in Latin America, Asia-Pacific, Africa and the
Middle East. The Company has sales administration offices and warehouse and
distribution facilities in Australia, Austria, Belgium, Brazil, the Czech
Republic, France, Germany, Hungary, Italy, Japan, The Netherlands, Portugal,
Spain, Switzerland, the United Arab Emirates and the United Kingdom. Each
office is responsible for sales and distribution of the Company's products in
the territories assigned to that office. The Company's direct export
operations market its products directly to international customers in certain
other markets through Company sales managers, indepen dent distributors, and
commissioned sales representatives. In total, the Company sells its products
in more than 100 countries.
SEASONALITY
The Company's sales generally are highest in the second quarter of the
year and lowest in the fourth quarter. As a result of this seasonality, the
Company has generally incurred a loss in the fourth quarter. The Company's
sales may be affected by weather conditions, especially during the second and
third quarters of the year.
COMPETITION
The markets in which the Company operates are highly competitive, based
primarily on product quality, product innovation, price and customer service
and support. The Company's competitors vary according to product lines. The
Company believes that no other company produces and markets the breadth of
camping and outdoor recreation products marketed by the Company. Lanterns
and stoves compete with, among others, products offered by Century Primus (a
unit of Century Tool & Manufacturing Inc.), American Camper (a unit of Bruns
wick Corporation) and Dayton Hudson Corporation. The Company's insulated
cooler and jug products compete with products offered by Rubbermaid
Incorporated, Igloo Products Corp. (a unit of Brunswick Corporation) and The
Thermos Company (a unit of Nippon Sanso KK). The Company's sleeping bags
compete with, among others, American Recreation and Slumberjack (units of
Kellwood Company), Academy Broadway Corp. and MZH Inc. (a unit of Brunswick
Corporation), as well as certain private label manufacturers. In the tent
market, the Company competes with, among others, Sears, Wenzel (a unit of
Kellwood Company), Eureka (a unit of Johnson Worldwide Associates, Inc.) and
Mountain Safety Research (a unit of Thaw Corporation), as well as certain
private label manufacturers. The Company's backpack products compete with,
among others, American Camper (a unit of Brunswick Corporation), JanSport (a
unit of VF Corporation), Nike, Outdoor Products and
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Kelty (a unit of Kellwood Company), as well as certain private label
manufacturers. The Company's competition in the electric light business
includes, among others, Eveready (a unit of Ralston Purina Company) and
Rayovac Corporation. The Company's spas compete with, among others, Watkins
Manufacturing Corporation (d.b.a. Hot Springs, a unit of Masco Corporation)
and Clark Manufacturing Company, Inc. (d.b.a. Sundance Spas). The Company's
camping accessories compete primarily with Coughlan's. The Company's primary
competitors in the generator business are Generac Corporation, Honda Motor
Co., Ltd., Kawasaki and Yamaha. Primary competitors in the air compressor
business include DeVilbiss and Campbell Hausfield. Alfred Karcher, Inc. and
Sears are the Company's primary competitors in pressure washers. The
Company's safety and security products compete primarily with First Alert,
American Sensor and Nighthawk (a unit of Williams Holding PLC). In addition,
the Company competes with various other entities in international markets.
PATENTS, TRADEMARKS, AND LICENSES
The Company's operations are not significantly dependent upon any single
or related group of patents. While the Company does not believe any single
trademark is material to its business other than the "Coleman" word mark and
the "Coleman in parallelogram with lantern symbol" logo mark, it believes its
trademarks taken as a whole are material to its business. Accordingly, the
Company has taken, and will continue to take, actions to protect its
interests in all such trademarks.
The Company licenses the Coleman name and logo under two types of
licensing arrangements: general merchandise licenses and licenses to
purchasers of businesses divested by Holdings. The Company's general
merchandise licensing activities involve licensing the Coleman name and logo,
for a royalty fee, to certain companies that manufacture and sell products
that complement the Company's product lines. In connection with the
divestitures of certain businesses after the Acquisition, Holdings entered
into trademark license agreements with the purchasers of these businesses.
The Company and Holdings receive no direct financial remuneration from the
use of the Coleman name by the purchasers of the divested businesses. The
Company's licensing activities are not material to the results of operations
of the Company.
RESEARCH AND DEVELOPMENT
The Company's research and development efforts are linked to the process
of marketing its products. New products and improvements to existing products
are developed based upon the perceived needs and demands of consumers. The
Company's research and development is performed primarily by an in-house team
of marketing managers, engineers, draftsmen and product testers using tools
such as computer-assisted design and a variety of consumer research
techniques.
INDUSTRY SEGMENTS, FOREIGN AND DOMESTIC OPERATIONS
The Company operates in a single business segment. Certain information
concerning geographic segments of the Company is set forth in Note 16 of the
Notes to Consolidated Financial Statements contained elsewhere in this Form
10-K Annual Report.
EMPLOYEES
As of December 31, 1996 the Company employed approximately 4,200 persons
full time in the United States and 2,800 persons internationally. None of
the Company's United States employees are represented by unions. The
Company's Canadian warehouse employees are represented by a union. All of
the approximately 350 production employees at the Company's operations in
France and Italy and the approximately 1,100 production employees at the
Company's operations in Mexico are represented by unions. The Company
believes that its relations with its employees are satisfactory and that its
employees, many of whom have long experience with the Company, represent a
valuable resource.
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ITEM 2. PROPERTIES
The Company's principal properties as of December 31, 1996 are as follows:
Building
Square
Location Principal Use Footage
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St Genis Laval, France Manufacture of lanterns and stoves, 2,070,000
filling of gas cylinders, and assembly
of barbeques; office and warehouse
Wichita, KS Manufacture of lanterns and stoves and 1,162,000
insulated coolers and jugs; research
and development and design operations;
office and warehouse
New Braunfels, TX Manufacture of insulated coolers and 338,000
other plastic products
Lake City, SC Manufacture of sleeping bags 168,000
Springfield, MN Manufacture of air compressors 166,000
Cedar City, UT Manufacture of sleeping bags 160,000
Kearney, NE Manufacture/assembly of portable 155,000
generators and pressure washers;
office and warehouse
Pacola, OK Manufacture of outdoor folding furniture 123,000
Maize, KS Manufacture of propane cylinders and 116,000
machined parts
Chihuahua, Mexico Manufacture of smoke alarms and carbon 110,000
monoxide detectors
Hastings, NE Manufacture of pressure washers and 103,000
generators
New Ulm, MN Manufacture of air compressors 90,000
Morovis and Orocovis, Manufacture of daypacks, sports bags, 80,000
Puerto Rico and related products
Chandler, AZ Manufacture of acrylic spas; office and 78,000
warehouse
Centenaro di Lonato, Manufacture of butane lanterns, stoves 77,000
Italy and heaters; office and warehouse
Stockport, England Manufacture of butane cylinders, torches, 60,000
lanterns and stoves; office and warehouse
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The Wichita, Kansas; New Braunfels, Texas; Lake City, South Carolina;
Cedar City, Utah; Pacola, OK; Chandler, Arizona; New Ulm and Springfield,
Minnesota; Centenaro di Lonato, Italy; and Stockport, England facilities are
owned by the Company. The owned facilities at Kearney, Nebraska reside on
land leased under three leases that expire in 2007 with options to extend for
three additional ten-year periods. The Maize, Kansas facility is leased by
the Company under leases that terminate in 2005. The Company has an option
to purchase this facility at the end of the lease period. The Hastings,
Nebraska facility is leased by the Company for a term that expires in 1999
with options to extend the lease for three additional one-year periods and an
option to purchase the facility during the lease term including renewal
periods. The Puerto Rico facilities in Morovis and Orocovis are leased for
terms that expire in 1999 and 2007, respectively. The warehouse portion of
St. Genis Laval, France is leased for terms that expire in 1998, the
remaining facility is owned. 48,000 square feet of the Chihuahua, Mexico
property are leased for terms that expire in 1998, and the remaining
facility is owned.
ITEM 3. LEGAL PROCEEDINGS
ENVIRONMENTAL MATTERS
GILBERT AND MOSLEY SITE. As a result of investigations undertaken in
1986, the Kansas Department of Health and Environment ("KDHE") discovered
that groundwater in the downtown Wichita area (the "Gilbert and Mosley Site")
was contaminated with volatile organic chemicals ("VOCs"). Coleman occupied
a facility within the boundaries of the Gilbert and Mosley Site. Subsequent
investigations in the area, including investigations in November 1988 by
Coleman, indicated that the groundwater beneath the Coleman property is
contaminated with VOCs. Coleman is in the process of remediating the
contamination on its property.
The City of Wichita has entered into a voluntary agreement with KDHE in
which the City agreed to investigate and then remediate contamination in the
Gilbert and Mosley Site. Coleman has entered into an agreement with KDHE in
which Coleman agreed to perform a similar study for the Coleman property and
to implement remedial activities at its property. In addition, Coleman
entered into an agreement with the City of Wichita in which Coleman agreed to
fund its proportionate share of the City's study and remediation of the
Gilbert and Mosley site.
All previously filed lawsuits alleging that properties in the downtown
Wichita area were diminished in value as a result of discharges of volatile
organic chemicals from Coleman's downtown Wichita facility have been settled
and dismissed.
MAIZE SITE. Coleman has undertaken a soil and groundwater investigation
at its facility in Maize, Kansas (the "Maize Site"). Results indicate that
limited VOC contamination is present in the groundwater under and to the
southeast of the facility. The data has been reported to the KDHE, and
Coleman has entered into an agreement with KDHE to implement appropriate
remedial actions. The remediation system has been installed, and Coleman is
in the process of remediating the contaminated groundwater.
NORTHEAST SITE. In 1990 Coleman undertook a soil and groundwater
investigation of its facility in northeast Wichita (the "Northeast Site").
Results indicated the presence of VOCs in the groundwater and soils.
Although some of the contamination may be a result of Coleman's operations at
the facility, the data also indicated that contamination was migrating onto
the Coleman property from up gradient sources. Coleman reported the initial
results of its study to KDHE. Coleman has also provided copies of all data
to the United States Environmental Protection Agency (the "EPA"), at its
request. The EPA has not initiated any actions against the Company with
respect to the Northeast Site. An agreement has been entered into with KDHE
to undertake additional investigatory activities, and an interim remediation
system has been installed. Additions to the interim remediation system are
planned for installation during 1997.
LAKE CITY SITE. In 1992 Coleman undertook a soil and groundwater
investigation of its facility in Lake City, South Carolina (the "Lake City
Site"). Results indicated limited VOC and fuel oil contamination in the soil
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and groundwater. In both instances the contamination appears to relate to
the activities of a previous occupant of the Lake City Site. The results of
the investigation have been reported to the appropriate South Carolina
environmental agency. Coleman has demanded that the prior owner and occupant
undertake appropriate action. At the state's request, Coleman has undertaken
additional investigations. Coleman has also commenced legal proceedings
against the prior owner.
The Company has adopted an environmental policy designed to ensure that
the Company operates in full compliance with applicable environmental
regulations and, where appropriate, the Company's own internal standards.
Coleman has also undertaken an environmental compliance audit program. The
Company makes expenditures that it believes are necessary to comply with
environmental management practices. Environmental expenditures that relate
to current operations are expensed or capitalized as appropriate and were not
significant in 1996 and are not expected to be significant in the foreseeable
future. Coleman has established reserves for environmental matters, including
the investigations, remedial activities and litigation described above.
OTHER
The Company and Holdings are involved in various claims and legal
actions arising in the ordinary course of business, including environmental
matters and product liability lawsuits that are incidental to its business.
Coleman Holdings believes the ultimate disposition of these matters is not
expected to have a material adverse effect on Coleman Holdings's consolidated
financial condition or results of operations. Coleman Holdings and the
Company have entered into a cross-indemnification agreement with Holdings
pursuant to which Coleman will indemnify Holdings against all liabilities
related to businesses transferred to the Company, and Holdings will indemnify
the Company against all liabilities of Holdings other than liabilities
related to the businesses transferred to the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
fourth quarter of 1996.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
All of the equity securities of Coleman Holdings are owned indirectly by
Mafco Holdings Inc., a corporation wholly owned by Ronald O. Perelman, and
there is no public market therefor.
Coleman Holdings did not sell any unregistered securities during 1996.
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ITEM 6. SELECTED FINANCIAL DATA
Coleman Holdings is a holding company formed in July 1993 to hold all of
the outstanding shares of capital stock of Coleman Worldwide. Coleman
Worldwide is a holding company formed in March 1993 and holds 44,067,520
shares of Coleman Common Stock which represents approximately 83% of the
outstanding Coleman Common Stock as of March 15, 1997. Coleman was formed in
December 1991 to succeed to the assets and liabilities of the outdoor
products business of Holdings. Due to Coleman Holdings' 100% direct
ownership of Coleman Worldwide and approximately 83% indirect ownership of
Coleman, the Consolidated Financial Statements of Coleman Holdings include
the accounts of Coleman Worldwide and its subsidiaries after elimination of
all material intercompany accounts and transactions. Minority interest
primarily represents the minority shareholders' proportionate share of the
results of operations and equity of Coleman. The selected financial data for
the years presented in the table below have been derived from the
Consolidated Financial Statements. The selected financial data should be
read in conjunction with the Consolidated Financial Statements and the notes
thereto included elsewhere in this Form 10-K Annual Report.
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(IN THOUSANDS)
YEAR ENDED DECEMBER 31,
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1996 1995 1994 1993 1992
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STATEMENTS OF
OPERATIONS DATA:
Net revenues................................. $1,220,216 $ 933,574 $ 751,580 $ 575,415 $505,815
Cost of sales (a)............................ 928,497 649,427 535,710 400,052 350,141
---------- --------- --------- --------- --------
Gross profit................................. 291,719 284,147 215,870 175,363 155,674
Selling, general and
administrative expenses (a)................ 292,012 175,036 128,664 102,214 92,711
Asset impairment charge (b).................. -- 12,289 -- -- --
Restructuring expense (c).................... -- -- 18,456 -- --
Interest expense, net........................ 75,120 57,830 43,736 23,760 14,465
Amortization of goodwill and
deferred charges........................... 12,304 9,558 7,864 6,322 6,002
Gain on IPO (d).............................. -- -- -- -- (54,515)
Other (income) expense, net.................. (1,604) 283 1,138 766 1,343
---------- --------- --------- --------- --------
(Loss) earnings before income taxes,
minority interest and extraordinary item... (86,113) 29,151 16,012 42,301 95,668
Income tax (benefit) expense (a)............. (23,766) 11,701 3,091 18,210 40,713
Minority interest............................ (5,390) 6,696 5,734 6,401 4,428
---------- --------- --------- --------- --------
(Loss) earnings before extraordinary item.... (56,957) 10,754 7,187 17,690 50,527
Extraordinary loss on early extinguishment
of debt, net of income taxes............... (1,244) (787) (677) -- --
---------- --------- --------- --------- --------
Net (loss) earnings.......................... $ (58,201) $ 9,967 $ 6,510 $ 17,690 $ 50,527
---------- --------- --------- --------- --------
---------- --------- --------- --------- --------
DECEMBER 31,
-------------------------------------------------------------
1996 1995 1994 1993 1992
---------- --------- --------- --------- --------
BALANCE SHEET DATA:
Total assets................................. $1,208,275 $ 909,460 $759,417 $ 558,243 $443,781
Long-term debt
(including current portions)............... 1,000,541 738,672 642,297 489,618 237,098
Minority interest............................ 45,088 49,266 42,233 39,952 36,372
Total stockholder's (deficit) equity......... (177,936) (113,320) (114,998) (115,692) 54,778
</TABLE>
- --------------------
(a) During 1996, the Company recorded restructuring and certain other charges
totaling $52,516, net of tax. Cost of sales includes a pre-tax charge of
$44,005, selling, general and administrative expenses include a pre-tax
charge of $30,195, and the provision for income tax benefit includes
$21,684 of net tax benefits resulting from these charges.
(b) Asset impairment charge reflects primarily the non-recurring charge taken
in connection with the adoption of FAS 121.
(c) Restructuring expense reflects primarily the non-recurring charge taken in
connection with the German Restructuring which includes severance costs,
commitments to third parties and write-downs of leasehold improvements and
other assets to estimated realizable values.
(d) Gain on IPO represents the gain to Coleman Worldwide on the sale of
approximately 18% of the Coleman Common Stock in the IPO.
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ITEM 7. 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. The following discussion should be read in
conjunction with the Consolidated Financial Statements of Coleman Holdings and
the notes thereto included elsewhere in this Form 10-K Annual Report.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996 COMPARED WITH THE YEAR ENDED DECEMBER 31, 1995
Net revenues in 1996 and 1995 were $1,220.2 million and $933.6 million,
respectively, an increase of $286.6 million, or 30.7% with outdoor recreation
products increasing by $170.7 million or 24.8% and hardware products
increasing $115.9 million or 47.4%. Geographically, United States and Canada
revenues increased 15.6%, while international revenues increased 79.5%.
Outdoor recreation products revenues increased $170.7 million or 24.8%.
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 outdoor recreation
product revenues increased approximately 6.4%. Significant revenue gains
were experienced in the backpack, tent and sleeping bag businesses, primarily
in international markets. In addition, the Company successfully introduced a
new line of camping accessories and expanded its heater and light businesses.
These gains were substantially offset by poor weather conditions during the
camping season in North America and the economic downturn experienced in
Japan, both of which adversely affected the demand for the Company's camping
products. Hardware products revenues increased 47.4% or $115.9 million.
Excluding the impact of the Seatt acquisition, comparable hardware products
revenues increased approximately 13.8%, driven by strong generator and
pressure washer sales.
Gross margins, excluding the impact of restructuring and other charges
totaling $44.0 million which are more fully discussed below, decreased as a
percent of sales by 2.9 percentage points from 30.4% in 1995 to 27.5% in
1996. This decrease is primarily the result of lower margins associated with
the Company's backpack business and the unfavorable effects of product mix
including significantly higher sales of pressure washers at lower gross
margin percentages and lower sales of camping products which tend to have
higher gross margin percentages than the Company's average.
Selling, General and Administrative ("SG&A") expenses, excluding $30.2
million of restructuring and other charges as discussed more fully below,
were $261.5 million in 1996 compared to $174.7 million in 1995, an increase
of 49.7%. The increase in SG&A expenses primarily reflects SG&A expenses
associated with the Camping Gaz and Seatt business acquisitions and to a
lesser extent increased advertising and marketing expenses.
During 1996, the Company recorded restructuring and certain other
charges totaling $52.5 million net of tax. The restructuring charges total
$45.1 million, net of tax, and consist of charges to a) integrate the
Camping Gaz and Coleman operations into a single global recreation products
business, b) exit the low-end electric pressure washer business, c) exit a
portion of the Company's battery powered light business and settle certain
litigation with respect to this business, and d) increase the valuation
reserve for certain foreign deferred income tax assets. Other charges of
$7.4 million, net of tax, relate to certain asset write-offs and other 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 $44.0 million, SG&A expenses includes a pre-tax charge of $30.2
million, and the provision for income
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<PAGE>
tax expense includes $21.7 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's interest expense was $38.7 million in 1996 compared with
$24.5 million in 1995, an increase of $14.2 million. This increase was
primarily the result of higher borrowings to fund business acquisitions and
support the increased working capital. On an unconsolidated basis, Coleman
Worldwide had an additional $12.1 million of interest expense in 1996
compared with $11.4 million in 1995, an increase of $0.7 million. This
increase is a result of the effects of compounding interest related to the
LYONs. In addition, Coleman Holdings, on an unconsolidated basis, had $24.3
million of interest expense in 1996 compared with $21.9 million in 1995, an
increase of $2.4 million. This increase is a result of the effects of
compounding interest related to the Discount Notes.
The Company recorded an income tax benefit in 1996 of $10.9 million,
which includes the net tax benefits of $21.7 million associated with
restructuring and other charges discussed above. Excluding the net tax
benefit from restructuring and other charges, the provision for income taxes
would have been $10.8 million or 45.0% of pre-tax earnings, excluding
restructuring and other charges, as compared to a provision for income tax
expense of $24.5 million or 37.9% of pre-tax earnings in 1995. The increase
is primarily due to losses of certain foreign subsidiaries for which the
Company has not recognized a tax benefit and the impact of non-deductible
goodwill amortization. On an unconsolidated basis, Coleman Worldwide
recorded an income tax benefit of $3.9 million in 1996 and $4.6 million in
1995 or approximately 38% of Coleman Worldwide's unconsolidated pre-tax loss
in each period. In addition, Coleman Holdings on an unconsolidated basis,
recorded a provision for income tax benefit of $9.0 million in 1996 and $8.2
million in 1995 or approximately 35.0% of Coleman Holdings' unconsolidated
pre-tax loss in each period.
The Company obtained 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 1996 primarily
represents the minority shareholders' approximate 30% proportionate share of
the results of operations of Camping Gaz for the period March through June of
1996. Minority interest in Camping Gaz also includes the interests of
minority shareholders in certain subsidiary operations of Camping Gaz.
Minority interest in the loss 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) which represents a write-off
of the related unamortized financing costs associated with its then existing
credit agreement. During the third quarter of 1995, the Company completed a
$200.0 million private placement debt issue. In connection with the private
placement, the Company renegotiated its previous credit agreement and
recorded an extraordinary loss of $1.3 million ($0.8 million after taxes)
which represents a write-off of the related unamortized financing costs
associated with its previous credit agreement.
YEAR ENDED DECEMBER 31, 1995 COMPARED WITH THE YEAR ENDED DECEMBER 31, 1994
Net revenues in 1995 and 1994 were $933.6 million and $751.6 million,
respectively, an increase of $182.0 million, or 24.2% with outdoor recreation
products increasing by $125.2 million or 22.2% and hardware products
increasing $56.8 million or 30.2%. Geographically, United States and Canada
revenues increased 24.0%, while international revenues increased 25.1%.
Outdoor recreation products revenues increased $125.2 million or 22.2%.
The sales increase includes the effects of a full twelve months of the
Eastpak business, a business acquired in November 1994. The sales increase
also reflects strong performance in the sleeping bag, tent, and the core
camping businesses, particularly in Japan. Sales of coolers and jugs
increased overall in part due to a thermo-electric cooler premium promotion
14
<PAGE>
that began in early 1995. In addition, price increases in selected areas
also helped to compensate for the loss of revenues attributable to the German
operations which were sold in the third quarter of 1994. Hardware products
revenues increased 30.2% or $56.8 million. The sales increase includes the
effects of a full twelve months of the compressor business, a business
acquired in April of 1994. Pressure washer unit sales continued to increase
although per unit sales prices declined somewhat in the latter half of 1995
in response to a more competitive market. In addition, generator sales were
up primarily as a result of storm activity in the latter half of 1995.
Gross margins increased as a percent of sales by 1.7 percentage points
from in 28.7% in 1994 to 30.4% in 1995. The margin improvement is due to the
favorable effects of the mix of products sold including higher margin new
products. Gross margins were negatively impacted in 1995 due to
manufacturing inefficiencies, integration costs and pricing issues at the
Company's Brazilian operations. Cost of sales in 1995 also includes a $6.3
million benefit resulting from the effects of marking to market the Company's
forward exchange contracts pursuant to the guidance of the Emerging Issues
Task Force (the "EITF") in its consensus opinion of EITF 95-2 "Determination
of What Constitutes a Firm Commitment for Foreign Currency Transactions Not
Involving a Third Party", which was adopted in the fourth quarter of 1995.
Prior to the adoption of EITF 95-2, the Company routinely used forward
exchange contracts to hedge certain intercompany commitments and deferred
recognition of forward exchange contract gains and losses until the component
of the related hedge transaction was completed and recognized in income.
Cost of sales in 1994 also includes a $2.2 million charge resulting from an
increase in the Company's reserves for estimated costs of environmental
remediation efforts.
SG&A expenses were $174.7 million in 1995, compared to $128.5 million in
1994, an increase of 36.0%. The increase in SG&A expenses is primarily
related to the Company's selling and marketing organization, SG&A expenses
associated with the businesses acquired in 1994, and expenses associated with
the relocation of Corporate, certain International and Hardware offices.
Reduced annual expenses associated with certain insurance programs helped
reduce the overall increase in SG&A.
During the fourth quarter of 1995, the Company adopted Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of" ("FAS 121"). In
connection with the adoption of FAS 121 the Company recognized an asset
impairment charge of $12.3 million ($9.9 million after tax) related to its
Brazilian operations. The Brazilian operations had not performed to the
Company's expectations since acquisition of this business in April of 1994,
and, in the fourth quarter of 1995, the Company initiated actions to reduce
the operating losses in Brazil. These actions included replacing management,
increasing prices, dramatically downsizing the manufacturing operations and
reducing SG&A and other overhead. Because of these actions, the Company
performed an impairment review pursuant to the guidelines set forth in FAS
121 and concluded that a recognition of an asset impairment charge was
appropriate.
During September 1994, the Company restructured its German manufacturing
operations in a move to strengthen its European business and eliminate
unprofitable operations. The German restructuring resulted in a one-time
charge of approximately $18.0 million before tax and included severance costs
of $1.5 million, commitments to third parties of approximately $5.5 million,
and write-downs of leasehold improvements and other assets to estimated
realizable values aggregating $11.0 million. In connection with the
restructuring, the Company recognized tax benefits of approximately $10.9
million relating to the write-off of the Company's investment in its German
operations. The Company also announced a plan to change from manufacturing
to sourcing for certain textile product lines and to exit the market for
personal flotation devices. This plan resulted in a $0.5 million pretax
charge.
The Company's interest expense was $24.5 million in 1995 and $13.4
million in 1994, an increase of $11.1 million. This increase was primarily
the result of higher borrowings in 1995 necessary to support the Company's
acquisitions and increased working capital needs related to the growth of the
Company and, to a lesser extent, higher interest rates in 1995. On an
unconsolidated basis, Coleman Worldwide had an additional $11.4 million of
interest expense in 1995 compared with $10.6 million in 1994, an increase of
$0.8 million, or 6.9%. This increase is a result of the effects of
compounding interest related to the LYONs. In addition, Coleman Holdings, on
an unconsolidated basis, had $21.9 million of interest expense in 1995
compared with $19.7 million in 1994,
15
<PAGE>
an increase of $2.2 million, or 11.1%. This increase is a result of the
effects of compounding interest related to the Discount Notes.
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 the sale of
approximately 18% of the Coleman Common Stock in the IPO in 1992. Minority
interest increased in 1995 due to an increase in the Company's income in 1995.
The Company's effective income tax rate was 37.9% in 1995 compared with
30.6% in 1994. The increase in the effective tax rate in 1995 as compared to
1994 is primarily due to higher taxes on foreign earnings in the 1995 period
as compared to the 1994 period which was favorably impacted by the tax
benefits arising from permanent basis differences associated with the
restructuring of the German operations. The effective income tax rate in
1995 also reflects the favorable impact of tax benefits associated with the
Company's manufacturing operations in Puerto Rico, which were acquired in
late 1994. Coleman Holdings' consolidated effective income tax rate was
40.1% in 1995 compared with 19.3% in 1994. The increase in Coleman Holdings'
consolidated effective income tax rate reflects the proportionately greater
impact of the items discussed above when compared to Coleman Holdings'
consolidated earnings before income taxes, minority interest and
extraordinary item, partially offset by the proportionately higher impact of
nondeductible goodwill amortization when compared with 1994.
During the third quarter of 1995, the Company completed a $200.0 million
private placement debt issue. In connection with the private placement, the
Company renegotiated its previous credit agreement and recorded an
extraordinary loss of $1.3 million ($0.8 million after taxes), which
represents a write-off of the related unamortized financing costs associated
with its previous credit agreement. During the second quarter of 1994, in
connection with the renegotiation of its then existing credit agreement, the
Company recorded an extraordinary loss of $1.1 million ($0.7 million after
taxes) which represents a write-off of the related unamortized financing
costs associated with its then existing credit agreement.
LIQUIDITY AND CAPITAL RESOURCES
Coleman Holdings' operating activities used $5.5 million of cash during
the year ended December 31, 1996 and provided $9.3 million and $46.6 million
for the years ended December 31, 1995 and 1994, respectively. At December
31, 1996, receivables were approximately equal to 1995 year-end levels,
excluding the amount acquired in connection with the Camping Gaz and Seatt
acquisitions and the effect of the restructuring and other charges described
above. Inventories, excluding the amount acquired in connection with the
Camping Gaz and Seatt acquisitions and the effect of the restructuring and
other charges described above, increased by $42.4 million during the 1996
period primarily because of lower than expected sales as described above.
Coleman Holdings' net cash used for investing activities was $204.3
million, $68.3 million, and $157.1 million for the years ended December 31,
1996, 1995 and 1994, respectively, and was composed primarily of the
Company's capital expenditures, purchases of businesses, and also advances to
Mafco under the Coleman Worldwide tax sharing agreement and the terms of the
LYONs trust indenture (the "Indenture") of $4.1 million, $6.7 million and
$27.1 million for the years ended December 31, 1996, 1995 and 1994,
respectively. The Company's capital expenditures were $41.3 million in the
year ended December 31, 1996, and the Company used $161.9 million of cash for
business acquisitions during the year ended December 31, 1996. For 1997, the
Company expects capital expenditures to be within the range of $30.0 to $40.0
million.
Coleman Holdings' net cash provided by financing activities was $210.7
million, $64.4 million, and $114.7 million for the years ended December 31,
1996, 1995, and 1994, respectively, and consisted primarily of increases in
long-term borrowings and in 1994 from revolving credit agreement borrowings.
The Company paid $2.3 million to acquire 100,000 shares of its common stock
in the open market during 1996.
16
<PAGE>
The Company's working capital requirements are currently funded by cash
flow from operations and domestic and foreign bank lines of credit. In April
1996, the Company amended its credit agreement to: a) provide a term loan of
French Franc 385.1 million ($75.0 million at the then current exchange rates),
b) provide an unsecured revolving credit facility in an amount of $275.0
million, c) allow for the Camping Gaz acquisition and d) extend the maturity of
the credit agreement (as amended, the "Company Credit Agreement"). Due to the
restructuring and other charges as discussed previously and lower than expected
operating results, the Company further amended the Company Credit Agreement in
October 1996 and again in March 1997.
Availability under the Company Credit Agreement is reduced by any
commercial paper borrowings outstanding. The Company Credit Agreement is
available to the Company until April 30, 2001. At December 31, 1996, $128.1
million would have been available for borrowings under the Company Credit
Agreement. The outstanding loans under the Company Credit Agreement bear
interest at either of the following rates, as selected by the Company from time
to time: (i) the higher of the agent's base lending rate or the federal funds
rate plus .50% or (ii) the London Inter-Bank Offered Rate ("LIBOR") plus a
margin ranging from .25% to 2.125% based on the Company's financial performance.
If there is a default, the interest rate otherwise in effect will be increased
by 2% per annum. The Company Credit Agreement also bears an overall facility
fee ranging from .15% to .375% based on the Company's financial performance.
The Company Credit Agreement contains various restrictive covenants
including, without limitation, requirements for the maintenance of specified
financial ratios, levels of consolidated net worth and profits, and certain
other provisions limiting the incurrence of additional debt, purchase or
redemption of the Company's common stock, issuance of preferred stock of the
Company, and also prohibits the Company from paying any dividends until on or
after January 1, 1999 and limits the amount of dividends the Company may pay
thereafter. The Company Credit Agreement also provides for a specific
requirement relating to the Company's financial leverage at December 31, 1997
which, if not achieved, will result in the Company Credit Agreement becoming
secured by the Company's assets. In addition, substantially all of the shares
of the Company's common stock owned by Coleman Worldwide are pledged to secure
indebtedness of Coleman Worldwide and of its parent, Coleman Holdings Inc. The
indentures governing this indebtedness contain various covenants including a
covenant placing certain limitations on the Company's indebtedness.
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. The Company's ability to borrow
under the terms of the Company Credit Agreement is subject to the Company's
continuing requirement to meet the various restrictive covenants, including
without limitation, those described above. If the Company fails to meet the
various restrictive covenants of the Company Credit Agreement, the Company will
need to renegotiate its current Company Credit Agreement, and/or enter into
alternative financing arrangements. 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.
Coleman financed the acquisition of the shares of Camping Gaz with the net
proceeds from (i) a private placement issuance and sale of $85.0 million
aggregate principal amount of 7.10% Senior Notes, Series A, due 2006 (the
"Notes due 2006") and (ii) a private placement issuance and sale of $75.0
million aggregate principal amount of 7.25% Senior Notes, Series B, due 2008
(the "Notes due 2008"). The Notes due 2006 bear interest at the rate of 7.10%
per annum payable semiannually, and the principal amount is payable in annual
installments of $12.1 million commencing June 13, 2000 with a final payment due
on June 13, 2006. If there is a default, the interest rate will be the greater
of (i) 9.10 % or (ii) 2% above the prime interest rate. The Notes due 2008
bear 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
17
<PAGE>
terms of the Note Purchase Agreement. The Notes due 2006 and the Notes due
2008 and the Company's 7.26% Senior Notes due 2007 shall become secured if
the Company Credit Agreement becomes secured as discussed above.
The Company's international operations are located primarily in Japan,
Europe, and Canada, which are not considered to be highly inflationary
environments. The Company uses a variety of derivative financial instruments to
manage its foreign currency and interest rate exposures. The Company does not
speculate on interest rates or foreign currency rates. Instead, it uses
derivatives when implementing its risk management strategies to reduce the
possible effects of these exposures.
With respect to foreign currency exposures, the Company principally uses
forward and option contracts to reduce risks arising from firm commitments,
anticipated intercompany sales transactions and intercompany receivable and
payable balances. The Company generally uses interest rate swaps and interest
rate caps to fix certain of its variable rate debt. The Company manages credit
risk related to these derivative contracts through credit approvals, exposure
limits and other monitoring procedures.
Coleman Worldwide is a holding company with no business operations or
source of income of its own, and its ability to meet its obligations with
respect to the LYONs and any other obligations is contingent upon distributions
from the Company, including payments under the Company tax sharing agreement,
capital contributions or loans from its direct and indirect parent companies,
other borrowings and proceeds from the disposition of the common stock of
Coleman owned by Coleman Worldwide. As the holder of approximately 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 flow of the Company will be retained and used in the business of the
Company and that Coleman Worldwide will not receive any distributions from the
Company other than payments under the Company's tax sharing agreement.
Furthermore, the terms of the Company Credit Agreement prohibits the Company
from paying any dividends until on or after January 1, 1999 and limits the
amount of dividends the Company may pay thereafter. The receipt by Coleman
Worldwide of tax sharing payments from the Company will cease upon Coleman
Worldwide's ownership interest in Coleman falling below 80%, and the Indenture
does not require Coleman Worldwide to own more than a majority of the Coleman
Common Stock. Pursuant to the LYONs indenture agreement, at any time that the
LYONs are outstanding, the amounts that Coleman Worldwide would be required to
pay to Mafco under the Worldwide Tax Sharing Agreement, together with any
remaining funds paid to Coleman Worldwide by the Company under the tax sharing
agreement between Coleman Worldwide and the Company, may not be paid as tax
sharing payments, but Coleman Worldwide may advance such funds to Mafco as long
as the aggregate amount of such advances at any time does not exceed the issue
price plus accrued OID of the LYONs. Such advances are evidenced by noninterest
bearing unsecured demand promissory notes from Mafco in the amount of $54.7
million at December 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 the common stock of Coleman 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.
The Indenture governing the LYONs provides the holders of LYONs with
the option to require Coleman Worldwide to purchase the LYONs after the
occurrence of certain events ("Additional Purchase Right Events"). Additional
Purchase Right Events occur, among other things, upon the Company's
Consolidated Debt Ratio (as defined) exceeding 0.75 to 1.0 or the
Consolidated Net Worth (as defined) of Coleman Worldwide as of the end of any
fiscal quarter being less than a specified amount which is $60.0 million at
March 31, 1997 and increases to $70.0 million at June 30, 1997.
18
<PAGE>
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
the Company Credit Agreement prohibits the Company from paying any dividends
until on or after January 1, 1999 and limits the amount of dividends the Company
may pay thereafter. In addition, 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 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 Indenture governing the Discount Notes contains certain covenants
that, among other things, states that Coleman Holdings shall not permit the
Company to issue debt if after giving effect to such issuance the Company's
Consolidated Debt Ratio (as defined) exceeds 0.75 to 1.0.
FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for certain forward-looking statements. The forward-looking statements
contained in this Form 10-K are subject to certain risks and uncertainties.
Actual results could differ materially from current expectations. Among the
factors that could affect Coleman Holdings' actual results and could cause
results to differ from those contained in the forward- looking statements are
the success of the Company's restructuring programs, negative external factors
like adverse weather in North America or other regions and possible consumer
spending decline in Japan, and the possibility the Company may be required to
renegotiate its credit agreements. Other factors could also cause actual
results to vary materially from the future results covered in such forward-
looking statements.
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INFLATION
In general, manufacturing costs are affected by inflation and the effects
of inflation may be experienced by the Company in future periods. Management
believes, however, that such effect has not been material to the Company during
the past three years.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See the consolidated financial statements and supplementary data listed in
the accompanying List of Financial Statements and Schedules on Page F-1 herein.
Information required by other schedules called for under Regulation S-X is
either not applicable or is included in the consolidated financial statements or
notes thereto.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information concerning the directors
and executive officers of Coleman Holdings:
DIRECTORS
NAME AGE
---- ---
Ronald O. Perelman......... 54
Donald G. Drapkin.......... 49
Jerry W. Levin............. 52
Bruce Slovin............... 61
EXECUTIVE OFFICERS
NAME AGE POSITION
---- --- --------
Ronald O. Perelman.. 54 Chairman of the Board
Bruce Slovin........ 61 President
Irwin Engelman...... 62 Executive Vice President, Chief Financial Officer
and Treasurer
Barry F. Schwartz... 47 Executive Vice President & General Counsel
RONALD O. PERELMAN has been a Director and Chairman of the Board of
Coleman Worldwide and of Coleman Holdings since their formations in March 1993
and July 1993, respectively, and a Director of the Company since 1989. Mr.
Perelman has been Chairman of the Board and Chief Executive Officer of
MacAndrews Holdings and various of its affiliates for more than the past five
years. Mr. Perelman also is Chairman of the Board of Andrews Group Incorporated
("Andrews Group"), Consolidated Cigar Holdings Inc. ("Cigar Holdings"), Mafco
Consolidated Group Inc. ("Mafco Consolidated"), Meridian Sports Incorporated
("Meridian") and Power Control Technologies, Inc. ("PCT") and is Chairman of the
Executive Committee of the Board of Revlon, Inc. ("Revlon"), Revlon Consumer
Products Corporation ("Products Corporation"), and Marvel Entertainment Group,
Inc. ("Marvel"). Mr. Perelman is also a Director of the following corporations
which file reports pursuant to the Securities Exchange Act of 1934, as amended
(the "Exchange Act"): Andrews Group, Cigar Holdings, Consolidated Cigar
Corporation ("Consolidated Cigar"), California Federal Bank, A Federal
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Savings Bank ("Cal Fed"), First Nationwide (Parent) Holdings Inc., First
Nationwide Holdings Inc., Mafco Consolidated, Marvel, Marvel Holdings Inc.
("Marvel Holdings"), Marvel (Parent) Holdings Inc. ("Marvel Parent"), Marvel
III Holdings Inc. ("Marvel III"), Meridian, PCT, Pneumo Abex Corporation
("Pneumo Abex"), Products Corporation, Revlon, Revlon Worldwide Corporation
("Revlon Worldwide"), and Toy Biz, Inc. ("Toy Biz"). On December 27, 1996,
Marvel Holdings, Marvel Parent, Marvel III, and Marvel and several of its
subsidiaries filed voluntary petitions for reorganization under Chapter 11 of
the United States Bankruptcy Code.
DONALD G. DRAPKIN has been a Director of Coleman Worldwide and Coleman
Holdings since their respective formations and of the Company since 1989. He
has been Vice Chairman and a Director of MacAndrews & Forbes and various of its
affiliates since 1987. Mr. Drapkin also is a Director of the following
corporations which file reports pursuant to the Exchange Act: Alogos
Pharmaceutical Corporation, Andrews Group, Cigar Holdings, Consolidated Cigar,
Marvel, Marvel Holdings, Marvel Parent, Marvel III, Products Corporation,
Revlon, Revlon Worldwide, Toy Biz, VIMRx Pharmaceuticals Inc. Mr. Drapkin was a
partner in the law firm of Skadden, Arps, Slate, Meagher & Flom for more than
five years prior to March 1987. On December 27, 1996, Marvel Holdings, Marvel
Parent, Marvel III, and Marvel and several of its subsidiaries filed voluntary
petitions for reorganization under Chapter 11 of the United States Bankruptcy
Code.
JERRY W. LEVIN has been a director of Coleman Worldwide and Coleman
Holdings since March 14, 1994. He has been a director of the Company since 1989
and served as Chairman of the Board of the Company until October 1990. Mr. Levin
has been Chairman of the Board of the Company and Acting Chief Executive Officer
of the Company since February 1997. Mr. Levin has been Chairman of the Board of
Revlon and of Products Corporation since November 1995 and a Director of Revlon
and Products Corporation since their respective formations in 1992 to November
1995. Mr. Levin has been Executive Vice President of MacAndrews Holdings since
March 1989. For 15 years prior to joining MacAndrews Holdings, he held various
senior executive positions with The Pillsbury Company ("Pillsbury"). Mr. Levin
is also a Director of the following corporations which file reports pursuant to
the Exchange Act: Ecolab, Inc., First Bank System, Inc., Meridian, and Revlon
Worldwide.
BRUCE SLOVIN has been a director of Coleman Worldwide and Coleman Holdings
since their respective formations and of the Company since February 1993 and
President of Coleman Holdings and Coleman Worldwide since August 1, 1995. He
has been President of MacAndrews Holdings and various of its affiliates for more
than the past five years. Mr. Slovin is also a Director of the following
corporations which file reports pursuant to the Exchange Act: Andrews Group,
Cantel Industries, Inc., Continental Health Affiliates, Inc., Infu- Tech, Inc.,
Meridian, and PCT.
IRWIN ENGELMAN has been Executive Vice President, Chief Financial Officer
and Treasurer of Coleman Worldwide and Coleman Holdings since February 1997 and
has been the Executive Vice President and Chief Financial Officer of MacAndrews
& Forbes and certain of its affiliates since February 1992. Mr. Engelman was
Executive Vice President and Chief Financial Officer of GAF Corporation, a
specialty chemical and building materials company, from 1990 to February 1992.
Mr. Engelman was President and Chief Operating Officer of Citytrust Bancorp Inc.
from 1988 to 1990; Executive Vice President of the Blackstone Group LP from 1987
to 1988; and Executive Vice President of General Foods Corporation for more than
five years prior to 1987. On December 27, 1996, Marvel Holdings, Marvel Parent,
and Marvel III, of which Mr. Engelman is an executive officer, and several
subsidiaries filed voluntary petitions for reorganization under Chapter 11 of
the United States Bankruptcy Code.
BARRY F. SCHWARTZ has been Executive Vice President & General Counsel of
Coleman Worldwide and Coleman Holdings since September 1994. He has been
Executive Vice President of MacAndrews & Forbes and certain of its affiliates
since 1993. Mr. Schwartz was Senior Vice President of MacAndrews & Forbes from
1989 to 1993. On December 27, 1996, Marvel Holdings, Marvel Parent, and Marvel
III, of which Mr. Schwartz is an executive officer, and several subsidiaries
filed voluntary petitions for reorganization under Chapter 11 of the United
States Bankruptcy Code.
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All directors serve terms of one year and until the election of their
respective successors. Executive officers serve at the pleasure of the Board of
Directors.
Information required in this Item 10 as it relates to Coleman Holdings'
principal operating subsidiary, The Coleman Company, Inc., is incorporated by
reference from Coleman's definitive proxy statement for its 1997 annual meeting
of shareholders, which is to be filed pursuant to Regulation 14A no later than
120 days following the end of the fiscal year reported upon.
ITEM 11. EXECUTIVE COMPENSATION
The executive officers of Coleman Holdings do not receive any compensation
from Coleman Holdings for serving in such capacities. Information required by
this Item 11 as it relates to Coleman Holdings' principal operating, subsidiary,
The Coleman Company, Inc., is incorporated by reference from Coleman's
definitive proxy statement for its 1997 annual meeting of shareholders, which is
to be filed pursuant to Regulation 14A no later than 120 days following the end
of the fiscal year reported upon.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Coleman Holdings has 1,000 shares of common stock, par value $1.00 per
share, issued and outstanding. Ronald O. Perelman, 35 East 62nd Street, New
York, New York 10021, through MacAndrews & Forbes, beneficially owns 100% of the
outstanding shares of common stock of Coleman Holdings. No other director,
executive officer or person beneficially owns any shares of common stock of
Coleman Holdings. The shares of common stock of Coleman and shares of common
stock of intermediate holding companies are or may from time to time be pledged
to secure obligations of MacAndrews & Forbes or its affiliates.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Ronald O. Perelman, through MacAndrews & Forbes, beneficially owns 100% of
the common stock of Coleman Holdings. Due to its stock ownership, MacAndrews &
Forbes controls Coleman Holdings and is able to elect the entire board of
directors.
TAX SHARING AGREEMENTS. Coleman Holdings, Coleman Worldwide and the Company
are, for federal income tax purposes, included in the affiliated group of which
Mafco is the common parent, and the federal taxable income and loss of Coleman
Holdings, Coleman Worldwide and the Company will be included in the consolidated
federal income tax return filed by Mafco. Coleman Holdings, Coleman Worldwide
and the Company also may be included in certain state and local tax returns of
Mafco or its subsidiaries. Coleman Holdings and Mafco entered into a tax
sharing agreement (the "Holdings Tax Sharing Agreement"), pursuant to which
Coleman Holdings will pay to Mafco amounts equal to the taxes that Coleman
Holdings would otherwise have to pay if it were to file separate returns
including only itself (including any amounts determined to be due as a result of
a redetermination of the tax liability of the Mafco consolidated group arising
from an audit or otherwise). In connection with the offering of the LYONs,
Coleman Worldwide and Mafco entered into a tax sharing agreement (the "Worldwide
Tax Sharing Agreement" and together with the Holdings Tax Sharing Agreement, the
"Tax Sharing Agreements"), pursuant to which Coleman Worldwide is required to
pay to Mafco amounts equal to the taxes that Coleman Worldwide would otherwise
have to pay if it were to file separate consolidated federal, state or local
income tax returns including only itself and its domestic subsidiaries
(including any amounts determined to be due as a result of a redetermination of
the tax liability of the Mafco consolidated group ensuing from an audit or
otherwise). At any time 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 Company Tax Sharing Agreement, will instead be advanced
by Coleman Worldwide to Mafco as long as the aggregate amount of such advances
at any time does not exceed the Issue Price plus accrued Original Issue Discount
on the LYONs. Such advances will be evidenced by noninterest bearing unsecured
demand promissory notes from Mafco. In addition,
22
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the Company, Coleman Worldwide and Mafco entered into the Company Tax Sharing
Agreement pursuant to which the Company is required to pay to Coleman
Worldwide amounts equal to the taxes that the Company would otherwise have to
pay if it were to file separate consolidated federal, state or local income
tax returns including only itself and its domestic subsidiaries (including any
amounts determined to be due as a result of a redetermination of the tax
liability of the Mafco consolidated group ensuing from an audit or otherwise).
Under federal tax law, Coleman Holdings, Coleman Worldwide and the Company
will be subject to several liability with respect to the consolidated federal
income tax liabilities of the affiliated group of which Mafco is the common
parent for any taxable period during which Coleman Holdings, Coleman Worldwide
or the Company or a subsidiary of any of them is a member of such group.
Mafco has agreed, however, to indemnify Coleman Holdings, Coleman Worldwide
and the Company for any such federal income tax liability (and certain state
and local tax liabilities) of Mafco or any of its subsidiaries that Coleman
Holdings, Coleman Worldwide or the Company or any of their subsidiaries are
actually required to pay. Because the tax sharing payments to be made under
the respective Tax Sharing Agreements will be determined by the amount of
taxes that the Company, Coleman Worldwide or Coleman Holdings, as the case may
be, would otherwise have to pay if it were to file federal, state or local
income tax returns, including only itself and, in the case of Coleman
Worldwide and the Company, its domestic subsidiaries, the Tax Sharing
Agreements will not increase the taxes payable by Coleman Holdings, if Coleman
Holdings were to file separate returns for itself, or by the Company or
Coleman Worldwide. Mafco may benefit, however, to the extent that Mafco can
offset the taxable income generated by Coleman Holdings and its domestic
subsidiaries (including Coleman Worldwide and the Company) against losses and
tax credits generated by Mafco and its other subsidiaries.
OTHER RELATIONSHIPS WITH COLEMAN. Information required by this Item 13 as
it relates to Coleman Holdings' principal operating subsidiary, The Coleman
Company, Inc., is incorporated by reference from Coleman's definitive proxy
statement for its 1997 annual meeting of shareholders, which is to be filed
pursuant to Regulation 14A no later than 120 days following the end of the
fiscal year reported upon.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1) and (2) Financial Statements and Schedule.
See List of Financial Statements and Schedules which appears
on page F-1 herein.
(3) Exhibits
Exhibit No. Description
----------- -----------
3.1 Certificate of Incorporation of Coleman Holdings Inc.,
filed with the Secretary of State of Delaware on July
2, 1993 (incorporated by reference to Exhibit 3.1 to
the Coleman Holdings Inc. 1993 Annual Report on Form
10-K (the "1993 Holdings 10-K")).
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3.2 Bylaws of Coleman Holdings Inc., as adopted July 2,
1993 (incorporated by reference to Exhibit 3.2 to the
1993 Holdings 10-K).
4.1 Amended and Restated Credit Agreement dated as of
August 3, 1995 among the Company, the Lenders party
thereto, the Issuing Bank, the Agent, and the Co-Agents
(the "Company Credit Agreement") (incorporated by
reference to Exhibit 4.2 to The Coleman Company Inc.
Form 10-Q for the period ended June 30, 1995 ( the
"Company's June 30, 1995 Form 10-Q")).
4.2 Amendment No. 1 dated as of April 30, 1996 to the
Company Credit Agreement (incorporated by reference to
Exhibit 4.1 to The Coleman Company, Inc. Form 10-Q for
the period ended March 31, 1996 (the "Company's March
31, 1996 Form 10-Q")).
4.3 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).
4.4 Amendment No. 3 dated as of May 29, 1996 to the Company
Credit Agreement (incorporated by reference to Exhibit
4.1 to The Coleman Company, Inc. Form 10-Q for the
period ended September 30, 1996 (the "Company's
September 30, 1996 Form 10-Q").
4.5 Amendment No. 4 dated as of October 25, 1996 to the
Company Credit Agreement (incorporated by reference to
Exhibit 4.2 to the Company's September 30, 1996 Form 10-Q).
4.6 Amendment No. 5 dated as of March 10, 1997 to the
Company Credit Agreement (Incorporated by reference to
Exhibit 4.6 to The Coleman Company, Inc. 1996 Annual
Report on Form 10-K (the "1996 Coleman 10-K")).
4.7 Purchase Agreement dated as of August 3, 1995 among the
Company and Purchasers party thereto (the "Notes
Agreement") (incorporated by reference to Exhibit 4.3
to the Company's June 30, 1995 Form 10-Q).
4.8 Note Purchase Agreement dated as of May 1, 1996 among
the Company and Purchasers party thereto (incorporated
by reference to Exhibit 4.1 to the Company's Current
Report on Form 8-K dated June 28, 1996).
4.9 Specimen copy of definitive certificate of Common Stock
of The Coleman Company, Inc., par value $.01 per share
(incorporated by reference to Exhibit 4.4 to The
Coleman Company, Inc. 1992 Annual Report on Form 10-K
(the "1992 Coleman 10- K")).
4.10 Indenture dated as of May 27, 1993 between Coleman
Worldwide and Continental Bank National Association, as
Trustee (incorporated by reference to Exhibit 4.10 to
the Coleman Holdings Inc. S-1, filed on August 6, 1993
(the "Holdings S-1")).
4.11 Escrow and Pledge Agreement dated as of May 27, 1993
among Coleman Worldwide and the Trustee, as Escrow
Agent (incorporated by reference to Exhibit 4.2 to the
Holdings S-1).
4.12 Worldwide Non-Recourse Guaranty dated as of May 27, 1993
(incorporated by reference to Exhibit 4.6 to the
Holdings S-1).
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4.13 Worldwide Pledge Agreement dated as of May 27, 1993 between
Coleman Worldwide and the Agent (incorporated by
reference to Exhibit 4.7 to the Holdings S-1).
4.14 Indenture dated as of July 15, 1993 between Coleman
Holdings Inc., Coleman Worldwide Corporation, Guarantor
and Continental Bank, National Association, as Trustee
(incorporated by reference to Exhibit 4.1 to the
Holdings S-1).
10.1 Cross-Indemnification Agreement dated as of February
26, 1992 among New Coleman Holdings Inc., Coleman
Finance Holdings Inc., the Company and certain
subsidiaries of New Coleman Holdings Inc. and the
Company (the "Cross Indemnification Agreement")
(incorporated by reference to Exhibit 10.1 to the 1992
Coleman 10-K).
10.2 Amendment No. 1 dated as of December 30, 1992 to the
Cross-Indemnification Agreement (incorporated by
reference to Exhibit 10.2 to the 1992 Coleman 10-K).
10.3 Reimbursement Agreement dated as of February 26, 1992
between the Company and MacAndrews Holdings
(incorporated by reference to Exhibit 10.4 to the 1992
Coleman 10-K).
10.4 Subordination Agreement dated as of March 4, 1992 among
New Coleman Holdings Inc., Coleman Powermate, Inc.,
Coleman Spas, Inc., the Company, the Lenders party to
the Company Credit Agreement and Credit Suisse, as
agent (the "Subordination Agreement") (incorporated by
reference to Exhibit 10.17 to the 1992 Coleman 10-K).
10.5 Amendment No. 1 dated as of December 30, 1992, to the
Subordination Agreement (incorporated by reference to
Exhibit 10.18 to the 1992 Coleman 10-K).
10.6 Tax Allocation Agreement dated as of August 24, 1990
among MacAndrews Holdings, New Coleman Holdings Inc.
and subsidiaries of New Coleman Holdings Inc.
(incorporated by reference to Exhibit 10.29 to the 1992
Coleman 10-K).
10.7 Amendment No. 1 dated as of February 26, 1992 to the
Tax Allocation Agreement (incorporated by reference to
Exhibit 10.30 to the 1992 Coleman 10-K).
10.8 Amendment No. 2 dated as of December 30, 1992 to the
Tax Allocation Agreement (incorporated by reference to
Exhibit 10.31 to the 1992 Coleman 10-K).
10.9 Amendment No. 3 dated as of May 27, 1993 to the Tax
Allocation Agreement (incorporated by reference to
Exhibit 10.45 to the Coleman Holdings Inc. S-1, filed
on August 6, 1993 (the "Holdings S-1")).
10.10 Tax Sharing Agreement II dated as of February 26,
1992, among Mafco, Coleman Finance Holdings Inc., the
Company and certain subsidiaries of the Company
(incorporated by reference to Exhibit 10.25 to the 1992
Coleman 10-K).
10.11 Amendment No. 1 dated as of December 30, 1992 to
the Tax Sharing Agreement II (incorporated by reference
to Exhibit 10.26 to the 1992 Coleman 10-K).
10.12 Supplemental Tax Sharing Agreement dated as of
February 26, 1992, between the Company and MacAndrews
Holdings (incorporated by reference to Exhibit 10.32 to
the 1992 Coleman 10-K).
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<PAGE>
10.13 Tax Sharing Agreement III dated as of February 26, 1992 among Mafco,
New Coleman Holdings Inc., Coleman Finance Holdings Inc. and
subsidiaries of Coleman Finance Holdings Inc. (incorporated by
reference to Exhibit 10.27 to the 1992 Coleman 10-K).
10.14 Amendment No. 1 dated as of December 30, 1992 to the Tax Sharing
Agreement III (incorporated by reference to Exhibit 10.28 to the
1992 Coleman 10-K).
10.15 Tax Sharing Agreement V dated as of May 27, 1993 among Mafco,
Coleman Worldwide, the Company and certain subsidiaries of the
Company (incorporated by reference to Exhibit 10.38 to the
Holdings S-1).
10.16 Tax Sharing Agreement VI dated as of May 27, 1993 between Mafco and
Coleman Worldwide (incorporated by reference to Exhibit 10.39 to
the Holdings S-1).
10.17 Tax Sharing Termination Agreement dated as of May 27, 1993 among
Mafco, New Coleman Holdings Inc., Coleman Finance Holdings Inc.,
the Company and subsidiaries of the Company and Coleman Finance
Holdings Inc. (incorporated by reference to Exhibit 10.40 to the
Holdings S-1).
10.18 Registration Rights Agreement dated as of March 4, 1992 among the
Company, Coleman Finance Holdings Inc. and Credit Suisse, as agent
(incorporated by reference to Exhibit 10.33 to the 1992 Coleman 10-K).
10.19 Worldwide Registration Rights Agreement dated as of May 27, 1993
among Coleman Worldwide, the Company, the Lenders Party thereto and
the Agent (incorporated by reference to Exhibit 10.47 to the
Holdings S-1).
10.20 Asset Purchase Agreement dated as of October 10, 1994, by and among
E. Acquisition Corporation, the Company, Eastpak, Inc. and Mark
Goldman (incorporated by reference to Exhibit 10.1 to the Company's
Current Report on Form 8-K dated November 2, 1994 (the "Coleman
8-K")).
10.21 Stock Purchase Agreement dated as of October 10, 1994, by and among
M. Acquisition Corporation, the Company and Mark Goldman
(incorporated by reference to Exhibit 10.2 to the Coleman 8-K).
10.22 Contingent Payment Agreement dated as of October 10, 1994, by and
among E. Acquisition Corporation, M. Acquisition Corporation, the
Company and Mark Goldman (incorporated by reference to Exhibit 10.3
to the Coleman 8-K).
10.23 Agreement for Purchase and Sale of Assets of Seatt Corporation dated
October 26, 1995 by and among James McCrink, Seatt Corporation,
Seller, and The Coleman Company, Inc., Purchaser (incorporated by
reference to Exhibit 10.1 to the Company's Current Report on Form
8-K dated January 26, 1996).
10.24 Share Purchase Agreement dated as of February 27, 1996 by and among
Butagaz S.N.C. and Bafiges S.A. (incorporated by reference to
Exhibit 10.26 to The Coleman Company, Inc. 1995 Annual Report on
Form 10-K (the "1995 Coleman 10-K")).
10.25 Amendment to the Share Purchase Agreement dated as of February 27,
1996 by and among Bafiges S.A. and Butagaz S.N.C. (incorporated by
reference to Exhibit 10.27 to the 1995 Coleman 10-K).
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<PAGE>
10.26 Shareholders Agreement dated as of February 27, 1996 by and among
Butagaz S.N.C., The Coleman Company, Inc. and Bafiges S.A.
(incorporated by reference to Exhibit 10.28 to the 1995 Coleman 10-K).
10.27 Agreement dated as of February 27, 1996 by and between Shell
International Petroleum Company Limited, Butagaz S.N.C. on the first
part, and Bafiges S.A. and The Coleman Company, Inc. on the second
part (incorporated by reference to Exhibit 10.29 to the 1995 Coleman
10-K).
10.28* Non-Competition, Confidentiality and Release Agreement between the
Company and Robert L. Ring, dated as of February 11, 1994
(incorporated by reference to Exhibit 10.46 to the 1993 Coleman 10-K).
10.29* Employment Agreement dated as of January 1, 1996 between the Company
and George Mileusnic (incorporated by reference to Exhibit 10.44 to
the 1995 Coleman 10-K).
10.30* 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).
10.31* Employment Agreement dated as of January 1, 1996 between the Company
and Larry E. Sanford (incorporated by reference to Exhibit 10.46 to
the 1995 Coleman 10-K).
10.32* 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).
10.33* Employment Agreement dated as of January 1, 1996 between the Company
and Michael N. Hammes (incorporated by reference to Exhibit 10.47 to
the 1995 Coleman 10-K.
10.34* 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).
10.35* First Amendment dated July 1, 1996 to Employment Agreement effective
January 1, 1996 between the Company and Michael N. Hammes
(incorporated by reference to Exhibit 10.4 to the Company's June 30,
1996 Form 10-Q).
10.36* Second 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).
10.37* Letter Agreement between the Company and Lawrence M. Jones dated as
of January 14, 1994 (incorporated by reference to Exhibit 10.57 to
the 1993 Coleman 10-K).
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10.38* Employment Agreement dated as of January 20, 1995 between the Company
and Frederick J. Fritz (incorporated by reference to Exhibit 10.41
to the 1994 Coleman 10-K).
10.39* Employment Agreement dated as of January 1, 1996 between the Company
and Gerald E. Brown (incorporated by reference to Exhibit 10.48 to
the 1995 Coleman 10-K).
10.40* 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).
10.41* 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).
10.42* 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).
10.43* Employment Agreement dated as of January 1, 1996 between the Company
and David Stearns (incorporated by reference to Exhibit 10.50 to the
1995 Coleman 10-K).
10.44* 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).
10.45* Employment Agreement dated as of May 1, 1996 between the Company and
Frederik van den Bergh (incorporated by reference to Exhibit 10.1 to
the Company's June 30, 1996 Form 10-Q).
10.46* 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).
10.47* Second 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 10.47
to the 1996 Coleman 10-K).
10.48* Employment Agreement dated as of August 1, 1996 between the Company
and Steven F. Kaplan (incorporated by reference to Exhibit 10.2 to
the Company's June 30, 1996 Form 10-Q).
10.49* Addendum dated August 3, 1996 and effective August 1, 1996 to
Employment Agreement dated as of August 1, 1996 between the Company
and Steven F. Kaplan (incorporated by reference to Exhibit 10.3 to
the Company's June 30, 1996 Form 10-Q).
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10.50* 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).
10.51* The Coleman Company, Inc. Performance Incentive Plan for 1996
(incorporated by reference to Exhibit 10.53 to the 1995 Coleman 10-K).
10.52* The Coleman Company, Inc. Executive Annual Incentive Plan for 1995
(incorporated by reference to Exhibit 10.49 to the 1994 Coleman 10-K).
10.53* The Coleman Company, Inc. 1996 Stock Option Plan, as amended
(incorporated by reference to Exhibit 10.53 to the 1996 Coleman 10-K).
10.54* The Coleman Retirement Salaried Incentive Savings Plan (incorporated
by reference to Exhibit 10.3 to the Company's March 31, 1996
Form 10Q).
10.55* The Coleman Retirement Incentive Savings Plan (the "Savings Plan")
(incorporated by reference to Exhibit 10.54 to the 1995 Coleman 10-K).
10.56* First Amendment dated as of October 11, 1994 to the Savings Plan
(incorporated by reference to Exhibit 10.55 to the 1995 Coleman 10-K).
10.57* Second Amendment dated as of January 1, 1995 to the Savings Plan
(incorporated by reference to Exhibit 10.56 to the 1995 Coleman 10-K).
10.58* Third Amendment dated as of December 14, 1995 to the Savings Plan
(incorporated by reference to Exhibit 10.57 to the 1995 Coleman 10-K).
10.59* Fourth Amendment dated as of December 14, 1995 to the Savings Plan
(incorporated by reference to Exhibit 10.58 to the 1995 Coleman 10-K).
10.60* Fifth Amendment dated as of January 1, 1996 to the Savings Plan
(incorporated by reference to Exhibit 10.59 to the 1995 Coleman 10-K).
10.61* Amendment dated as of December 14, 1995 to the Savings Plan
(incorporated by reference to Exhibit 10.60 to the 1995 Coleman 10-K).
10.62* Amendment dated as of December 14, 1995 to the Savings Plan
(incorporated by reference to Exhibit 10.61 to the 1995 Coleman 10-K).
10.63* Amendment dated as of January 1, 1996 to the Savings Plan
(incorporated by reference to Exhibit 10.62 to the 1995 Coleman 10-K).
10.64* New Coleman Holdings Inc. Excess Benefit Plan dated as of January 1,
1995 (incorporated by reference to Exhibit 10.1 to the Company's
June 30, 1995 Form 10-Q).
10.65* The New Coleman Company, Inc. Retirement Plan for Salaried Employees
(the "Retirement Plan") (incorporated by reference to Exhibit 10.63
to the 1995 Coleman 10-K).
29
<PAGE>
10.66* Amendment dated as of October 17, 1994 to the Retirement Plan
(incorporated by reference to Exhibit 10.64 to the 1995 Coleman 10-K).
10.67* Amendment dated as of December 14, 1995 to the Retirement Plan
(incorporated by reference to Exhibit 10.65 to the 1995 Coleman 10-K).
10.68* Amendment dated as of December 14, 1995 to the Retirement Plan
(incorporated by reference to Exhibit 10.66 to the 1995 Coleman 10-K).
10.69* Amendment dated as of October 12, 1995 to the Retirement Plan
(incorporated by reference to Exhibit 10.67 to the 1995 Coleman 10-K).
10.70* Amendment dated as of January 1, 1996 to the Retirement Plan
(incorporated by reference to Exhibit 10.68 to the 1995 Coleman 10-K).
10.71* Amendment dated as of December 31, 1995 to the Retirement Plan
(incorporated by reference to Exhibit 10.69 to the 1995 Coleman 10-K).
10.72* The Coleman Company, Inc. Special Executive Retirement Plan for the
benefit of Robert L. Ring, dated as of April 11, 1994 (incorporated
by reference to Exhibit 10.2 to the Company's March 31, 1994 Form
10-Q).
10.73* The Coleman Company, Inc. Consolidated Supplemental Retirement Plan,
dated as of January 1, 1996 (incorporated by reference to Exhibit
10.73 to the 1995 Coleman 10-K).
10.74* First Amendment dated July 1, 1996 to the Consolidated Supplemental
Retirement Plan adopted January 1, 1996 (incorporated by reference
to Exhibit 10.5 to the Company's June 30, 1996 Form 10-Q).
10.75* The Coleman Company, Inc. Executive Employees Deferred Compensation
Plan, as amended by the First Amendment thereto (incorporated by
reference to Exhibit 10.11 to the Coleman S-1).
10.76* The Coleman Company, Inc. 1992 Stock Option Plan (incorporated by
reference to Exhibit 10.13 to Amendment No. 2 to the Coleman S-1).
10.77* The Coleman Company, Inc. 1993 Stock Option Plan (incorporated by
reference to Exhibit 10.18 to The Coleman Company, Inc. Quarterly
Report on Form 10-Q for the quarter ended September 30, 1993, filed
on November 15, 1993).
10.78* The Coleman Company, Inc. 1996 Stock Option Plan (incorporated by
reference to Exhibit 10.78 to the 1995 Coleman 10-K).
10.79* Employment Agreement dated as of November 1, 1994 between E.
Acquisition Corporation and Mark Goldman (incorporated by reference
to Exhibit 10.79 to the 1996 Coleman 10-K).
10.80* Employment Agreement dated as of November 1, 1994 between M.
Acquisition Corporation and Mark Goldman (incorporated by reference
to Exhibit 10.80 to the 1996 Coleman 10-K).
30
<PAGE>
10.81* Letter Agreement dated as of February 28, 1997 between the Company
and Michael N. Hammes (incorporated by reference to Exhibit 10.81 to
the 1996 Coleman 10-K).
10.82 Worldwide Registration Rights Agreement dated as of May 27, 1993
among Coleman Worldwide, the Company, the Lenders Party thereto and
the Agent (incorporated by reference to Exhibit 10.47 to the
Holdings S-1).
10.83 Indemnity Agreement dated as of May 27, 1993 among Coleman Worldwide,
New Coleman Holdings Inc. and certain subsidiaries of New Coleman
Holdings Inc. (incorporated by reference to Exhibit 10.3 to the
Holdings S-1).
10.84 Reimbursement Agreement dated as of May 27, 1993 between Coleman
Worldwide and MacAndrews Holdings (incorporated by reference to
Exhibit 10.8 to the Holdings S-1).
10.85 Indemnity Agreement dated as of July 22, 1993 between Coleman
Holdings Inc., New Coleman Holdings Inc. and certain of New Coleman
Holdings Inc.'s subsidiaries (incorporated by reference to
Exhibit 10.4 to the Holdings S-1).
10.86 Reimbursement Agreement dated as of July 22, 1993 between Coleman
Holdings Inc. and MacAndrews Holdings (incorporated by reference to
Exhibit 10.7 to the Holdings S-1).
10.87 Tax Sharing Agreement VII dated as of July 22, 1993 between Coleman
Holdings Inc. and Mafco (incorporated by reference to Exhibit 10.41
to the Holdings S-1).
10.88 Registration Agreement dated as of July 15, 1993 between Coleman
Holdings Inc., Bear, Stearns & Co. Inc. and Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated (incorporated by
reference to Exhibit 10.46 to the Holdings S- 1).
21.1+ Subsidiaries of the Company.
24.1+ Powers of Attorney executed by Ronald O. Perelman, Donald G. Drapkin
and Jerry W. Levin.
27+ Financial Data Schedule
- ----------------
* Management Contracts and Compensatory Plans
+ Filed herewith
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended December 31,
1996.
(d) For separate financial statements and schedules of (1) Coleman Worldwide
Corporation, whose common stock is pledged as collateral and who has
provided a guarantee of the Discount Notes on a non-recourse basis, and
(2) The Coleman Company, Inc., whose common stock secures such guarantee,
see Item 8 of (1) the Coleman Worldwide Corporation Annual Report on
Form 10-K for the year ended December 31, 1996 and (2) The Coleman Company,
Inc. Annual Report on Form 10-K for the year ended December 31, 1996
incorporated herein by reference.
31
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
COLEMAN HOLDINGS INC.
(Registrant)
Date: March 27, 1997 By: /s/ Bruce Slovin
------------------------ --------------------------------
Bruce Slovin
President and Director
Date: March 27, 1997 By: /s/ Irwin Engelman
------------------------ --------------------------------
Irwin Engelman
Executive Vice President and
Chief Financial Officer
Date: March 27, 1997 By: /s/ Laurence Winoker
------------------------ --------------------------------
Laurence Winoker
Chief Accounting Officer
Pursuant to the requirements of the Securities and Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: March 27, 1997 By: Ronald O. Perelman*
------------------------ --------------------------------
Ronald O. Perelman
Chairman of the Board and Director
Date: March 27, 1997 By: Donald G. Drapkin*
------------------------ --------------------------------
Donald G. Drapkin
Director
Date: March 27, 1997 By: Jerry W. Levin*
------------------------ --------------------------------
Jerry W. Levin
Director
* Executed on behalf of the named director pursuant to a power of attorney.
Date: March 27, 1997 By: /s/ Larry E. Sanford
------------------------ --------------------------------
Larry E. Sanford
Attorney-in-fact
32
<PAGE>
ANNUAL REPORT ON FORM 10-K
ITEM 8, ITEM 14(a)(1) AND (2) AND (d)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
YEAR ENDED DECEMBER 31, 1996
COLEMAN HOLDINGS INC. AND SUBSIDIARIES
The following consolidated financial statements of Coleman Holdings Inc.
and Subsidiaries are included in Item 8:
Page
Consolidated Balance Sheets as of December 31, 1996 and 1995... F-3
Consolidated Statements of Operations
for the years ended December 31, 1996, 1995 and 1994...... F-4
Consolidated Statements of Stockholder's Deficit
for the years ended December 31, 1996, 1995 and 1994...... F-5
Consolidated Statements of Cash Flows
for the years ended December 31, 1996, 1995 and 1994...... F-6
Notes to Consolidated Financial Statements..................... F-7
The following consolidated financial statement schedules of Coleman
Holdings Inc. and Subsidiaries are included in Item 14(d):
Schedule I - Condensed Financial Information of Registrant..... F-31
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not required
under the related instructions or are inapplicable and, therefore, have been
omitted.
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholder
Coleman Holdings Inc.
We have audited the accompanying consolidated balance sheets of Coleman
Holdings Inc. and subsidiaries as of December 31, 1996 and 1995, and the related
consolidated statements of operations, stockholder's deficit, and cash flows for
each of the three years in the period ended December 31, 1996. Our audits also
included the financial statement schedule listed in the Index at Item 14(a).
These financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Coleman Holdings Inc. and subsidiaries at December 31, 1996 and 1995, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, present fairly in all material respects, the
information set forth therein.
/s/ Ernst & Young LLP
Denver, Colorado
March 10, 1997
F-2
<PAGE>
COLEMAN HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
December 31,
-----------------------
1996 1995
---------- ---------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents........................... $ 17,299 $ 12,065
Accounts receivable, less allowance of $11,512
in 1996 and $3,115 in 1995......................... 182,418 148,765
Notes receivable.................................... 27,524 16,544
Inventories......................................... 287,502 216,236
Deferred tax assets................................. 40,466 20,481
Prepaid assets and other............................ 14,943 22,475
---------- ---------
Total current assets........................... 570,152 436,566
Property, plant and equipment, net....................... 199,182 162,691
Intangible assets related to businesses acquired, net.... 349,761 225,247
Note receivable - affiliate.............................. 54,739 50,685
Deferred tax assets and other............................ 34,441 34,271
---------- ---------
$1,208,275 $ 909,460
---------- ---------
---------- ---------
LIABILITIES AND STOCKHOLDER'S DEFICIT
Current liabilities:
Current portion of long-term debt................... $ 747 $ 1,051
Short-term borrowings............................... 33,935 19,302
Accounts payable.................................... 98,906 71,377
Accrued expenses.................................... 113,040 58,245
---------- ---------
Total current liabilities...................... 246,628 149,975
Long-term debt........................................... 999,794 737,621
Income taxes payable - affiliate......................... 18,528 37,846
Other liabilities........................................ 76,173 48,072
Minority interest........................................ 45,088 49,266
Commitments and contingencies
Stockholder's deficit:
Common stock, par value $1.00 per share;
1,000 shares issued and outstanding............ 1 1
Capital deficiency.................................. (132,674) (123,992)
(Accumulated deficit) retained earnings............. (47,883) 10,318
Currency translation adjustment..................... 2,856 353
Minimum pension liability adjustment................ (236) --
---------- ---------
Total stockholder's deficit.................... (177,936) (113,320)
---------- ---------
$1,208,275 $ 909,460
---------- ---------
---------- ---------
</TABLE>
See Notes to Consolidated Financial Statements
F-3
<PAGE>
COLEMAN HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
Year Ended December 31,
-------------------------------------------
1996 1995 1994
----------- --------- ---------
<S> <C> <C> <C>
Net revenues.......................................... $ 1,220,216 $ 933,574 $ 751,580
Cost of sales......................................... 928,497 649,427 535,710
----------- --------- ---------
Gross profit.......................................... 291,719 284,147 215,870
Selling, general and administrative expenses.......... 292,012 175,036 128,664
Asset impairment charge............................... -- 12,289 --
Restructuring expense................................. -- -- 18,456
Interest expense, net................................. 75,120 57,830 43,736
Amortization of goodwill and deferred charges......... 12,304 9,558 7,864
Other (income) expense, net........................... (1,604) 283 1,138
----------- --------- ---------
(Loss) earnings before income taxes, minority
interest and extraordinary item..................... (86,113) 29,151 16,012
Income tax (benefit) expense.......................... (23,766) 11,701 3,091
Minority interest in earnings of Camping Gaz.......... 1,872 -- --
Minority interest in (loss) earnings of Coleman....... (7,262) 6,696 5,734
----------- --------- ---------
(Loss) earnings before extraordinary item............. (56,957) 10,754 7,187
Extraordinary loss on early extinguishment of debt,
net of income tax benefit of $846 in 1996, $503
in 1995, and $435 in 1994........................... (1,244) (787) (677)
----------- --------- ---------
Net (loss) earnings................................... $ (58,201) $ 9,967 $ 6,510
----------- --------- ---------
----------- --------- ---------
</TABLE>
See Notes to Consolidated Financial Statements
F-4
<PAGE>
COLEMAN HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S DEFICIT
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
Common Stock (Accumulated
--------------------- Deficit) Currency Minimum
Number Capital Retained Translation Pension
of Shares Amount Deficiency Earnings Adjustment Liability
--------- ------ ---------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1993......... 1,000 $ 1 $ (109,319) $ (6,159) $ (215) $ --
Net earnings.................... -- -- -- 6,510 -- --
Currency translation adjustment. -- -- -- -- 1,185
Net distributions............... -- -- (7,001) -- -- --
--------- ------ ---------- -------- ------- --------
Balance at December 31, 1994......... 1,000 1 (116,320) 351 970 --
Net earnings.................... -- -- -- 9,967 -- --
Currency translation adjustment. -- -- -- -- (617)
Net distributions............... -- -- (7,672) -- --
--------- ------ ---------- -------- ------- --------
Balance at December 31, 1995......... 1,000 1 (123,992) 10,318 353 --
Net loss........................ -- -- -- (58,201) -- --
Currency translation adjustment. -- -- -- -- 2,503 --
Minimum pension liability
adjustment, net of tax........ -- -- -- -- -- (236)
Net distributions............... -- -- (8,682) -- -- --
--------- ------ ---------- -------- ------- --------
Balance at December 31, 1996......... 1,000 $ 1 $ (132,674) $ (47,883) $ 2,856 $ (236)
--------- ------ ---------- -------- ------- --------
--------- ------ ---------- -------- ------- --------
</TABLE>
See Notes to Consolidated Financial Statements
F-5
<PAGE>
COLEMAN HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
Year Ended December 31,
-----------------------------------
1996 1995 1994
----------- ---------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) earnings.................................... $ (58,201) $ 9,967 $ 6,510
--------- --------- ---------
Adjustments to reconcile net (loss) earnings to
net cash flows from operating activities:
Depreciation and amortization...................... 38,189 28,335 24,410
Non-cash tax sharing agreement provision........... (4,376) 7,562 (3,678)
Minority interest in (loss) earnings of Coleman.... (7,262) 6,696 5,734
Minority interest in earnings of Camping Gaz....... 1,872 -- --
Interest accretion................................. 36,404 33,288 30,362
Non-cash gain on LYONs conversion.................. (2,755) -- --
Non-cash restructuring and other charges........... 48,269 12,289 10,950
Extraordinary loss on early extinguishment of debt. 2,090 1,290 1,112
Change in assets and liabilities:
Decrease (increase) in receivables.............. 976 (37,833) (22,001)
Increase in inventories......................... (42,402) (49,396) (10,852)
(Decrease) increase in accounts payable......... (12,308) 13,825 (1,403)
Other, net...................................... (5,972) (16,682) 5,504
--------- --------- ---------
52,725 (626) 40,138
--------- --------- ---------
Net cash (used) provided by operating activities....... (5,476) 9,341 46,648
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures................................... (41,334) (29,053) (34,915)
Purchases of businesses, net of cash acquired.......... (161,875) (33,385) (99,587)
Increase in note receivable - affiliate................ (4,054) (6,742) (27,052)
Proceeds from sale of fixed assets..................... 2,924 928 4,471
--------- --------- ---------
Net cash used by investing activities.................. (204,339) (68,252) (157,083)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in short-term borrowings.................... (11,043) 3,106 6,867
Net (payments of) proceeds from revolving credit
agreement borrowings.................................. (2,779) (61,289) 129,274
Proceeds from issuance of long-term debt............... 235,000 200,000 --
Repayment of long-term debt............................ (6,778) (74,782) (10,796)
Debt issuance and refinancing costs.................... (3,902) (3,569) (1,955)
Purchases of Company common stock...................... (2,329) (4,086) (9,571)
Proceeds from stock options exercised including tax
benefits.............................................. 2,192 4,520 584
Contributions from parent.............................. 331 488 345
--------- --------- ---------
Net cash provided by financing activities.............. 210,692 64,388 114,748
--------- --------- ---------
Effect of exchange rate changes on cash................ 4,357 (1,731) (1,587)
--------- --------- ---------
Net increase in cash and cash equivalents.............. 5,234 3,746 2,726
Cash and cash equivalents at beginning of the year..... 12,065 8,319 5,593
--------- --------- ---------
Cash and cash equivalents at end of the year........... $ 17,299 $ 12,065 $ 8,319
--------- --------- ---------
--------- --------- ---------
</TABLE>
See Notes to Consolidated Financial Statements
F-6
<PAGE>
COLEMAN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA)
1. SIGNIFICANT ACCOUNTING POLICIES
BACKGROUND:
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. ("Coleman "
or the "Company" ) which represents approximately 83% of the outstanding
Coleman common stock as of December 31, 1996. Coleman was formed in December
1991 to suc ceed to the assets and liabilities of the outdoor products business
of New Coleman Holdings Inc. ("Holdings") an indirect wholly-owned subsidiary of
Mafco Holdings Inc. ("Mafco"). Holdings (then named The Coleman Company, Inc.)
was acquired in 1989 by MacAndrews & Forbes Holdings Inc. ("MacAndrews
Holdings", and, together with Mafco, "MacAndrews & Forbes"), a corporation
wholly owned through Mafco by Ronald O. Perelman. Coleman is a subsidiary of
Coleman Worldwide Corporation ("Coleman Worldwide"), which is an indirect
wholly-owned subsidiary of Holdings. In March 1992, the Company completed an
initial public offering of its common stock.
PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements include the accounts of Coleman
Holdings and its subsidiaries after elimination of all material intercompany
accounts and transactions.
CASH EQUIVALENTS:
Cash equivalents (primarily investments in money market funds and
commercial paper which are purchased with original maturities of three months or
less) are carried at cost, which approximates fair value.
INVENTORIES:
Inventories are valued at the lower of cost or market. Cost is principally
determined by the first-in, first-out ("FIFO") method.
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment is recorded at cost and depreciated on a
straight-line basis over the estimated useful lives of such assets as follows:
land improvements, 5 to 25 years; buildings and building improvements, 7 to 45
years; and machinery and equipment, 3 to 15 years. Leasehold improvements are
amortized over their estimated useful lives or the terms of the leases,
whichever is shorter. Repairs and maintenance are charged to operations as
incurred, and significant expenditures for additions and improvements are
capitalized.
INTANGIBLE ASSETS:
Intangible assets represent goodwill which is being amortized on a
straight-line basis over periods not in excess of 40 years. Accumulated
amortization aggregated $39,520 and $29,664 at December 31, 1996 and 1995,
respectively. The carrying amount of goodwill is reviewed if facts and
circumstances suggest it may be impaired.
F-7
<PAGE>
COLEMAN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
If this review indicates goodwill will not be recoverable over the remaining
amortization period, as determined based on the estimated undiscounted cash
flows of the entity acquired, the carrying amount of the goodwill is reduced
to estimated fair value based on market value or discounted cash flows, as
appropriate.
DEFERRED CHARGES:
Expenses associated with borrowings, such as for underwriting, legal fees
and printing costs, are amortized over the term of the related debt.
REVENUE RECOGNITION:
The Company recognizes net revenues upon shipment of merchandise. Net
revenues comprise gross revenues less customer returns and allowances.
ADVERTISING AND PROMOTION EXPENSE:
Production costs of future media advertising are deferred until the
advertising occurs. All other advertising and promotion costs are expensed when
incurred. The amounts charged against operations for the years ended December
31, 1996, 1995 and 1994 were $58,823, $37,544 and $30,831, respectively.
RESEARCH AND DEVELOPMENT:
Research and development expenditures are expensed as incurred. The
amounts charged against operations for the years ended December 31, 1996, 1995
and 1994 were $11,082, $6,548, and $5,230, respectively.
SELF INSURANCE:
Coleman Holdings participates in insurance programs maintained by Holdings.
Coleman Holdings estimates its liability for the self-insured portions of the
risks covered by such programs and accrues appropriate reserves. (See Note 11.)
FOREIGN CURRENCY TRANSLATION:
The Company's international operations, other than its Brazilian and
Mexican operations, are conducted in economic environments which the Company
does not consider to be highly inflationary. Assets and liabilities of
international operations generally are translated into U.S. dollars at the rates
of exchange in effect at the balance sheet date, and income and expense items
generally are translated at the average exchange rates prevailing during the
period presented. Gains and losses resulting from the translation of these
financial statements are recorded as a component of stockholder's equity. Gains
and losses resulting from foreign currency transactions and translation of the
financial statements of the Company's Brazilian and Mexican operations are
included in the results of operations and have not been significant for the
years ended December 31, 1996, 1995 and 1994.
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK:
The Company periodically enters into a variety of foreign currency exchange
agreements in the management of foreign currency exposure related primarily to
firm commitments, intercompany foreign sales
F-8
<PAGE>
COLEMAN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
transactions expected to occur within the next twelve months and intercompany
accounts receivables and payables.
At December 31, 1996, the Company did not have any outstanding foreign
currency exchange agreements related to firm commitments. At December 31, 1995,
the Company had a forward exchange contract to buy $15,000 of Italian lira
maturing on May 31, 1996 and had an unrecognized gain of $93. The gains and
losses from this contract are accounted for under the deferral method and are
recognized and included in income in the same period as a component of the
related hedged transactions. In the event it is no longer probable the
transactions will be consummated, the gains and losses are recognized
immediately in income under the fair value method. At December 31, 1995, the
Company had outstanding option contracts for the purchase or sale of Italian
lira totaling $10,500, which contracts expired during 1996.
During the fourth quarter of 1995, the Company elected to adopt the
provisions of the Emerging Issues Task Force Issue No. 95-2, "Determination of
What Constitutes a Firm Commitment for Foreign Currency Transactions Not
Involving a Third Party" ("EITF 95-2") which narrowed the scope of intercompany
foreign currency commitments eligible to be hedged for financial reporting
purposes. Under EITF 95-2, the Company reflects the carrying value of its
forward currency contract positions relating to intercompany foreign sales
transactions on a mark-to-market basis and accounts for the resulting
unrecognized gains or losses in income as a component of cost of sales. As a
result of this change, the Company increased net income by $3,796 in the fourth
quarter of 1995. Prior to the adoption of EITF 95-2, the gains and losses
associated with these contracts were accounted for under the deferral method. At
December 31,1996, the Company had forward exchange contracts to sell $8,500 in
Canadian dollars maturing on February 28, 1997, for which the Company has
recognized a net gain of $40 as a component of cost of sales. At December
31,1995, the Company had forward exchange contracts to sell $22,969 in foreign
currencies, which contracts matured at various dates in 1996 and for which the
Company has recognized a net gain of $7,599 as a component of cost of sales.
The Company also enters into option contracts to hedge intercompany foreign
sales transactions. Gains and losses on these contracts are deferred and
recognized as an adjustment to cost of sales upon the sale of the related
inventory. At December 31, 1996 and 1995, the Company had outstanding option
contracts for the sale of Japanese yen at fixed exchange rates totaling $20,038
and $24,926 for specified periods of time which expire during 1997 and 1996,
respectively. Net unrealized gains deferred at December 31, 1996 and 1995 were
$653 and $125, respectively.
With respect to intercompany accounts receivable and payables, at December
31, 1996, the Company had forward exchange contracts to sell $26,623 and to buy
$3,898 in foreign currencies, which contracts matured at various dates in 1997,
and had deferred a net gain of $185. At December 31, 1995, the Company had
forward exchange contracts to sell $31,152 and to buy $1,712 in foreign
currencies, which contracts matured at various dates in 1996 and had deferred a
net gain of $56. The gains and losses from these contracts are accounted for
under the deferral method and are recognized and included in income in the same
period as a component of the related hedged transactions.
The Company periodically enters into interest rate swap and cap
agreements as a hedge against interest rate exposure of variable rate debt. At
December 31, 1996, $25,000 of the Company's outstanding long-term debt was
subject to an interest rate swap agreement and $25,000 of the Company's
outstanding long-term debt was subject to an interest rate cap. Under the
interest rate swap agreement, the Company pays the counterparty interest at a
fixed rate of 6.115%, and the counterparty pays the Company interest at a
variable rate equal to the three month LIBOR for a seven year period commencing
January 2, 1996. The agreement is with a major
F-9
<PAGE>
COLEMAN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
financial institution which is expected to fully perform under the terms of
the agreement, thereby mitigating the credit risk from the transaction. The
differences to be paid or received on interest rate swap agreements
designated as hedges are included in interest expense as payments are made or
received. The interest rate cap agreement entitles the Company to receive
from a major financial institution the amount, if any, by which the Company's
interest payments on $25,000 of its variable rate debt exceed 7.35%. The
$509 premium paid for this interest rate cap agreement is included in other
assets and is amortized to interest expense over the three-year term of the
cap, which commenced January 3, 1995. Payments received as a result of the
cap are accrued as a reduction of interest expense on the variable rate debt.
In the event the interest rate swap or cap agreements are terminated early
and the related debt remains outstanding, the amounts paid or received upon
the early termination, along with any unamortized premium, will continue to
be amortized over the terms of the original interest rate swap and cap
agreements.
CREDIT RISK:
Financial instruments which potentially subject Coleman Holdings to
concentrations of credit risk consist primarily of trade receivables and
derivative financial instruments. Credit risk on trade receivables is minimized
as a result of the large and diversified nature of the Company's worldwide
customer base. Although the Company has one significant customer (See Note 14),
there have been no credit losses related to this customer. With respect to its
derivative contracts, the Company is also subject to credit risk of non
performance by counterparties and its maximum potential loss may exceed the
amount recognized in the financial statements. The Company controls its
exposure to credit risk through credit approvals, credit limits and monitoring
procedures. Collateral is generally not required for the Company's financial
instruments.
FAIR VALUE OF FINANCIAL INSTRUMENTS:
The following methods and assumptions were used by Coleman Holdings in
estimating its fair value disclosures for financial instruments:
CASH AND CASH EQUIVALENTS: The carrying amount reported in the
balance sheet for cash and cash equivalents approximates its fair
value.
LONG- AND SHORT-TERM DEBT: The carrying amounts of Coleman
Holdings' borrowings under its foreign bank lines of credit, revolving
credit agreement and other variable rate debt approximate their fair
value. The fair value of the Company's senior notes issues (see Note
9) are estimated using discounted cash flow analysis based on the
Company's estimated current borrowing rate for similar types of
borrowing arrangements. The fair value of the publicly traded LYONs
debt and Discount Notes is based on quoted market prices.
FOREIGN CURRENCY EXCHANGE AGREEMENTS: The fair values of Coleman
Holdings' foreign currency agreements are estimated based on quoted
market prices of comparable agreements, adjusted through interpolation
where necessary for maturity differences.
INTEREST RATE SWAP AND CAP AGREEMENTS: The fair values of
interest rate swap and cap agreements are the amounts at which they
could be terminated, based on estimates obtained from dealers.
F-10
<PAGE>
COLEMAN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
The carrying amounts and fair values of Coleman Holdings' financial
instruments at December 31, 1996 and 1995 are as follows:
<TABLE>
December 31, 1996 December 31, 1995
--------------------------- ---------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
of Asset/ of Asset/ of Asset/ of Asset/
(Liability) (Liability) (Liability) (Liability)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Cash and cash equivalents.............. $ 17,299 $ 17,299 $ 12,065 $ 12,065
Short-term debt........................ (33,935) (33,935) (19,302) (19,302)
Long-term debt excluding
capital leases....................... (999,947) (972,821) (737,895) (770,667)
Foreign currency exchange agreements... 940 1,629 8,026 8,287
Interest rate swap agreements.......... -- 296 -- (635)
Interest rate cap agreement............ 170 1 340 18
</TABLE>
USE OF ESTIMATES:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
RECLASSIFICATIONS:
Certain amounts in the prior years' financial statements have been
reclassified to conform to the current year presentation.
ACCOUNTING FOR STOCK-BASED COMPENSATION:
The Company accounts for its stock compensation arrangements under the
provisions of Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" ("APB 25") and related pronouncements. Under the
provisions of APB 25, no compensation expense is recognized when stock
options are granted with exercise prices equal to or greater than market
value on the date of grant.
IMPAIRMENT OF LONG-LIVED ASSETS:
In March 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of" ("FAS 121"),
which requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted
cash flows estimated to be generated by those assets are less than the
assets' carrying amount. FAS 121 also addresses the accounting for
long-lived assets expected to be disposed of. The Company adopted FAS 121 in
the fourth quarter of 1995. The effect of the adoption of FAS 121 is
described in Note 3.
2. ACQUISITIONS
During April 1994, the Company purchased substantially all the assets of
Sanborn Manufacturing Company ("Sanborn") in Eden Prairie, Minnesota, a
manufacturer of a broad line of portable and stationary air
F-11
<PAGE>
COLEMAN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
compressors for consumer and commercial markets distributed primarily through
warehouse clubs, home centers and mass merchants in North America, and
substantially all the assets and business of Metal Yanes, Ltda. ("Yanes") in
Sao Paulo, Brazil, a manufacturer of camping products, including propane and
butane fueled lanterns, camp stoves, tents, lantern mantles and fuel. The
Sanborn and Yanes acquisitions, which were accounted for under the purchase
method of accounting, were completed for the following consideration: (a)
approximately $41,066 in cash financed through borrowings under the Company
Credit Agreement (as defined in Note 9), (b) assumption of liabilities in the
amount of $22,193, and (c) a note payable of $2,999. During 1995, in
connection with the Sanborn acquisition, the Company entered into a
settlement agreement with the predecessor owners which resolved certain
disputes between the parties as well as fulfilled certain obligations owed
and anticipated to be owed by the Company to the predecessor owners. These
anticipated obligations related to a requirement to make additional payments
of up to $4,000 based upon the achievement of certain annual sales levels
during the five year period ending December 31, 1998 by Coleman Powermate
Compressors, Inc. ("Compressors"), the Company's subsidiary that acquired the
Sanborn assets (the "Sales Agreement"). As a result of the settlement,
goodwill was increased by $3,282. For 1994, approximately $671 was earned
under the terms of the Sales Agreement based on the 1994 sales levels of
Compressors, and this amount was recorded as additional goodwill in 1994.
The results of operations of these businesses have been included in the
consolidated financial statements from the dates of acquisitions.
On November 2, 1994, the Company purchased substantially all the assets
of Eastpak, Inc. and all of the capital stock of M.G. Industries, Inc.
(collectively, "Eastpak"), a leading designer, manufacturer and distributor
of branded daypacks, sports bags and related products. The Eastpak
acquisition, which was accounted for under the purchase method, was completed
for approximately $57,850 in cash financed through borrowings under the
Company Credit Agreement, and assumption of certain liabilities in the amount
of $4,130. The Company also entered into an agreement with the predecessor
owner of Eastpak to make additional payments based upon the achievement of
certain annual sales levels of Eastpak products and other products
substantially similar to the Eastpak products during the years ended December
31, 1995, 1996, and 1997. For 1995 and 1996, a total of approximately
$11,000 was recorded under the terms of this agreement. An additional amount
of up to $12,000 may be earned during the year ended December 31, 1997.
These amounts are recorded as additional goodwill. The results of operations
of Eastpak have been included in the consolidated financial statements from
the date of acquisition.
In connection with the final purchase price allocations of the Sanborn
and Eastpak acquisitions, the Company recorded goodwill of approximately
$53,000. The Company is amortizing these amounts over 40 years. The goodwill
of approximately $7,700 associated with the Yanes acquisition was included in
the 1995 asset impairment charge of $12,289 related to the Company's
operations in Brazil, which is further discussed in Note 3.
During 1995, the Company purchased all of the outstanding shares of
capital stock of Sierra Corporation of Fort Smith, Inc. ("Sierra"), a
manufacturer of portable outdoor and recreational folding furniture and
accessories, and substantially all of the assets of Active Technologies, Inc.
("ATI"), a manufacturer of technologically advanced lightweight generators
and battery charging equipment. The aggregate purchase price for these
acquisitions was $19,516 including fees and expenses. These acquisitions
were accounted for using the purchase method of accounting. The purchase
price and expenses associated with these acquisitions exceeded the fair value
of net assets acquired by $11,186 and the excess has been assigned to
goodwill and is being amortized over 20 to 30 years on the straight-line
basis. In connection with the ATI purchase, the Company may also be required
to record an additional amount of up to $18,750 based on the Company's sales
of ATI related products and royalties received by the Company for licensing
arrangements related to ATI patents. For 1995 and
F-12
<PAGE>
COLEMAN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
1996, the amounts earned under the terms of this agreement were immaterial.
Amounts earned under the terms of the agreement are recorded as additional
goodwill. The results of operations of these companies on a pro forma basis
as if their acquisitions had occurred at the beginning of 1995 and 1994,
respectively, individually and in the aggregate were not significant to
Coleman Holdings.
On January 2, 1996, the Company purchased substantially all the assets
and assumed certain liabilities of Seatt Corporation ("Seatt"), a leading
designer, manufacturer and distributor of safety and security related
electronic products for residential and commercial applications. The Seatt
acquisition, which was accounted for under the purchase method, was completed
for approximately $65,300 including fees and expenses. The results of
operations of Seatt have been included in the consolidated financial
statements from the date of acquisition. In connection with the purchase
price allocation of the Seatt acquisition, the Company recorded goodwill of
approximately $38,800. The Company is amortizing this amount over 40 years
on the straight-line method.
On February 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 70% of the outstanding shares of
Application des Gaz, S.A. ("ADG" or "Camping Gaz"). Camping Gaz is a leading
manufacturer and distributor of camping appliances in Europe. On June 24,
1996, Coleman commenced a public tender offer for the purchase of all the
publicly traded outstanding shares of ADG, or approximately 30% of the
outstanding shares. The tender offer period expired in July 1996 with
approximately 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 was approximately $100,000 including fees and
expenses.
The acquisition of Camping Gaz is being accounted for under the purchase
method. In connection with the allocation of purchase price to the fair
values of assets acquired and liabilities assumed, the Company recorded
goodwill of approximately $84,200, which is being amortized over 40 years on
the straight-line method. The Company also recognized liabilities in the
amount of $21,898 representing severance and other termination benefits for
production and administrative employees of Camping Gaz who will be
terminated. The Company paid termination costs of approximately $4,385
during 1996 and anticipates all remaining termination costs will be paid
during 1997.
The Company has included the results of operations of Camping Gaz in the
consolidated financial statements from March 1, 1996, the date on which the
Company obtained control of Camping Gaz, and has recognized minority interest
related to the publicly traded shares for the period March 1, 1996 through
June 30, 1996.
The following summarized, unaudited pro forma results of operations of
Coleman Holdings for the years ended December 31, 1996 and 1995 assume the
acquisition of Seatt and the acquisition of all the outstanding shares of
Camping Gaz occurred as of the beginning of the respective periods. The pro
forma results include certain adjustments, primarily reflecting increased
amortization and interest expense and a lower income tax provision, and are
not necessarily indicative of what the results of operations would have been
had the Seatt and Camping Gaz acquisitions occurred at the beginning of the
respective periods. Moreover, the pro forma information is not intended to
be indicative of future results of operations.
F-13
<PAGE>
COLEMAN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
Year Ended
December 31,
-------------------------
1996 1995
---------- ----------
Net revenues................................ $1,246,370 $1,193,295
(Loss) earnings before extraordinary item... (57,091) 9,996
Net (loss) earnings......................... (58,335) 9,209
3. RESTRUCTURING, ASSET IMPAIRMENT AND OTHER CHARGES
During 1996, the Company recorded restructuring and certain other
charges totaling $52,516, net of tax. The restructuring charges total
$45,086, net of tax, and consist of charges to a) integrate the Camping Gaz
and Coleman operations into a single global recreation products business, b)
exit the low end electric pressure washer business, c) exit a portion of the
Company's battery powered light business and settle certain litigation with
respect to this business, and d) increase the valuation reserve for certain
foreign deferred income tax assets. Other charges of $7,430, net of tax,
relate to certain asset write-offs and other tax matters. These other
charges were incurred in the Company's normal course of business, although
the amounts involved are higher than similar charges the Company has recorded
in prior periods. Cost of sales includes a pre-tax charge of $44,005,
selling, general and administrative expenses includes a pre-tax charge of
$30,195, and the provision for income tax expense includes $21,684 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.
During 1995, in connection with the adoption of FAS 121, the Company
recognized an asset impairment charge of $12,289 related to its Brazilian
operations. The Brazilian operations had not performed to the Company's
expectations since acquisition of this business in April of 1994, and in the
fourth quarter of 1995, the Company initiated actions to reduce the operating
losses in Brazil. These actions included replacing management, increasing
prices, downsizing the manufacturing operations and reducing SG&A and other
expenses. Because of these actions, the Company performed an impairment
review pursuant to the guidelines set forth in FAS 121 and concluded
recognition of an asset impairment charge was appropriate. The basis of the
fair values used in the computation of the charge were appraisals for
property and equipment and estimated discounted cash flows for goodwill. The
charge has been included in the statement of operations under the caption
"Asset Impairment Charge".
During September 1994, the Company restructured its German manufacturing
operations. The German Restructuring included the sale of the low margin
plastic cooler business located in Inheiden, Germany and Loucka, Czech
Republic, including inventory, to a management group. The German
Restructuring resulted in a one-time charge of approximately $17,956 before
tax and included severance costs of $1,541, commitments to third parties of
approximately $5,465 and write-downs of leasehold improvements and other
assets to estimated realizable values aggregating $10,950. As a result of
the restructuring, the German work force was reduced by about 150 employees
from a pre-restructuring level of approximately 250 employees. The
restructuring was substantially completed in 1994. In connection with the
restructuring, the Company recognized tax benefits of approximately $10,900
relating to the write-off of the Company's investment in its German
operations. The Company also announced a plan to change from manufacturing
to sourcing for certain textile product lines and to exit the market for
personal flotation devices. This plan resulted in a $500 pre-tax charge.
F-14
<PAGE>
COLEMAN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
4. INVENTORIES
Inventories consisted of the following:
December 31,
---------------------
1996 1995
-------- --------
Raw material and supplies............ $ 82,399 $ 57,653
Work-in-process...................... 12,878 5,389
Finished goods....................... 192,225 153,194
-------- --------
$287,502 $216,236
-------- --------
-------- --------
Generally, inventory costs are determined by the FIFO method; however,
approximately 13% and 10% of total inventories at December 31, 1996 and
1995, respectively, are determined using the last-in, first-out ("LIFO")
method. If such inventories were stated using the FIFO method, such amounts
would approximate the LIFO carrying values.
5. PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, net consisted of the following:
December 31,
---------------------
1996 1995
-------- --------
Land and land improvements........... $ 8,772 $ 6,318
Buildings and building improvements.. 78,760 67,989
Machinery and equipment.............. 194,714 142,941
Construction-in-progress............. 15,519 13,105
-------- --------
297,765 230,353
Accumulated depreciation............ (98,583) (67,662)
-------- --------
$199,182 $162,691
-------- --------
-------- --------
Depreciation expense was $25,770, $19,142, and $16,793 for the years
ended December 31, 1996, 1995 and 1994, respectively.
6. ACCRUED EXPENSES
Accrued expenses consisted of the following:
December 31,
---------------------
1996 1995
-------- --------
Compensation and related benefits.... $ 29,331 $ 14,201
Other................................ 83,709 44,044
-------- --------
$113,040 $ 58,245
-------- --------
-------- --------
F-15
<PAGE>
COLEMAN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
7. OTHER LIABILITIES
Other liabilities consisted of the following:
December 31,
----------------------
1996 1995
---------- --------
Pensions and other postretirement
benefits........................... $ 52,229 $ 40,240
Other................................ 23,944 7,832
---------- --------
$ 76,173 $ 48,072
---------- --------
---------- --------
8. SHORT-TERM BORROWINGS
The Company maintained foreign bank lines of credit aggregating $119,101,
and $64,375, of which $33,935 and $19,302 were outstanding at December 31, 1996
and 1995, respectively. The weighted average interest rate on amounts borrowed
was approximately 2.4% and 7.1% at December 31, 1996 and 1995, respectively.
Outstanding letters of credit aggregated approximately $32,897 and $40,036
at December 31, 1996 and 1995, respectively.
9. LONG-TERM DEBT
Long-term debt consisted of the following:
December 31,
----------------------
1996 1995
---------- --------
7.26% Senior Notes due 2007 (a)............ $ 200,000 $200,000
7.10% Senior Notes due 2006 (b)............ 85,000 --
7.25% Senior Notes due 2008 (c)............ 75,000 --
Revolving credit facility (d).............. 146,350 150,150
Term loan (d).............................. 73,478 --
Liquid Yield Option -TM-Notes due 2013 (e). 174,594 165,434
Series B Senior Secured Discount
Notes due in 1998 (f).................... 242,334 217,981
Other...................................... 3,785 5,107
---------- --------
1,000,541 738,672
Less current portion....................... 747 1,051
---------- --------
$ 999,794 $737,621
---------- --------
---------- --------
(a) On August 8, 1995, the Company completed a private placement issuance
and sale of $200,000 aggregate principal amount of 7.26% Senior Notes
due 2007 (the "2007 Notes"). Interest on the 2007 Notes is payable
semiannually, and the principal is payable in annual installments of
$40,000 each commencing August 8, 2003, with a final installment
payment of $40,000 due on August 8, 2007. If there is a default, the
interest rate will be the greater of (i) 9.26% or (ii) 2.0% above the
prime interest rate.
F-16
<PAGE>
COLEMAN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
The 2007 Notes are unsecured and are subject to various restrictive
covenants including, without limitation, requirements for the
maintenance of specified financial ratios and levels of
consolidated net worth and certain other provisions limiting the
incurrence of additional debt and sale and leaseback transactions
under the terms of the note purchase agreement. The 2007 Notes
shall become secured if the Company Credit Agreement becomes
secured as discussed in (d) below.
(b) On June 13, 1996, the Company completed a private placement
issuance and sale of $85,000 aggregate principal amount of 7.10%
Senior Notes due 2006 (the "2006 Notes"). Interest on the 2006
Notes is payable semiannually, and the principal is payable in
annual installments of $12,143 each commencing June 13, 2000, with
a final installment payment of $12,143 due on June 13, 2006. If
there is a default, the interest rate will be the greater of (i)
9.10% or (ii) 2.0% above the prime interest rate.
The 2006 Notes are unsecured and are subject to various restrictive
covenants including, without limitation, requirements for the
maintenance of specified financial ratios and levels of
consolidated net worth and certain other provisions limiting the
incurrence of additional debt and sale and leaseback transactions
under the terms of the note purchase agreement. The 2006 Notes
shall become secured if the Company Credit Agreement becomes
secured as discussed in (d) below.
(c) On June 13, 1996, the Company completed a private placement
issuance and sale of $75,000 aggregate principal amount of 7.25%
Senior Notes due 2008 (the "2008 Notes"). Interest on the 2008
Notes is payable semiannually, and the principal is payable in
annual installments of $15,000 each commencing June 13, 2004, with
a final installment payment of $15,000 due on June 13, 2008. If
there is a default, the interest rate will be the greater of (i)
9.25% or (ii) 2.0% above the prime interest rate.
The 2008 Notes are unsecured and are subject to various restrictive
covenants including, without limitation, requirements for the
maintenance of specified financial ratios and levels of
consolidated net worth and certain other provisions limiting the
incurrence of additional debt and sale and leaseback transactions
under the terms of the note purchase agreement. The 2008 Notes
shall become secured if the Company Credit Agreement becomes
secured as discussed in (d) below.
(d) In April 1996, the Company amended its credit agreement to:
a) provide a term loan of French Franc 385,125 ($73,478 at current
exchange rates), b) provide an unsecured revolving credit facility
in an amount of $275,000, c) allow for the Camping Gaz acquisition
and d) extend the maturity of the credit agreement (as amended, the
"Company Credit Agreement"). In connection with the Company
recording the restructuring and other charges as discussed in Note
3 and lower than expected operating results, the Company further
amended the Company Credit Agreement in October 1996 and again in
March 1997.
The Company Credit Agreement is available to the Company until
April 30, 2001. The outstanding loans under the Company Credit
Agreement bear interest at either of the following rates, as
selected by the Company from time to time: (i) the higher of the
agent's base lending rate or the federal funds rate plus .50% or
(ii) the London Inter-Bank Offered Rate ("LIBOR") plus
F-17
<PAGE>
COLEMAN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
a margin ranging from .25% to 2.125% based on the Company's financial
performance. If there is a default, the interest rate otherwise
in effect will be increased by 2% per annum. The Company Credit
Agreement also bears an overall facility fee ranging from .15% to
.375% based on the Company's financial performance.
The Company Credit Agreement contains various restrictive covenants
including, without limitation, requirements for the maintenance of
specified financial ratios, levels of consolidated net worth and
profits, and certain other provisions limiting the incurrence of
additional debt, purchase or redemption of the Company's common
stock, issuance of preferred stock of the Company, and also
prohibits the Company from paying any dividends until on or after
January 1, 1999 and limits the amount of dividends the Company may
pay thereafter. The Company Credit Agreement also provides for a
specific requirement relating to the Company's financial leverage
at December 31, 1997 which, if not achieved, will result in the
Company Credit Agreement becoming secured by the Company's assets.
In addition, substantially all of the shares of the Company's
common stock owned by Coleman Worldwide are pledged to secure
indebtedness of Coleman Worldwide and of its parent, Coleman
Holdings Inc. The indentures governing this indebtedness contain
various covenants including a covenant placing certain limitations
on the Company's indebtedness.
(e) On May 27, 1993, Coleman Worldwide issued and sold $500,000
principal amount at maturity of LYONs in an underwritten public
offering. On June 7, 1993, an additional $75,000 principal amount
at maturity of LYONs was sold upon exercise of the underwriter's
overallotment option.
The LYONs mature on May 27, 2013 and are secured by 16,394,810
shares of common stock of Coleman. There are no periodic payments
of interest on the LYONs. The aggregate principal amount of the
LYONs represents a yield to maturity of 7.25% per annum (computed
on a semi-annual bond equivalent basis) calculated from May 27,
1993.
Each LYON has a principal amount at maturity of $1 and is exchangeable,
at the option of the holder, at any time on or prior to maturity
(unless previously redeemed or otherwise purchased) for shares of
common stock of Coleman securing the LYONs at an exchange rate of
15.706 shares of common stock of Coleman per LYON, subject to Coleman
Worldwide's right to pay cash equal to the then market value (as
defined) of such shares in lieu, in whole or in part, of delivering
such shares. The exchange rate will not be adjusted for original issue
discount ("OID") but will be subject to adjustment upon the occurrence
of certain events affecting the common stock of Coleman.
The LYONs are redeemable by Coleman Worldwide on or after May
27, 1998, at the option of Coleman Worldwide, in whole or in part,
at redemption prices equal to the issue price plus accrued OID
through but excluding the date of redemption, payable solely in
cash. Coleman Worldwide will purchase any LYON, at the option of
the holder, on May 27, 1998, May 27, 2003 and May 27, 2008 (each, a
"Purchase Date") for a purchase price per LYON equal to the issue
price plus accrued OID through but excluding each such Purchase
Date, representing a yield per annum to the holder on each such
date of 7.25% computed on a semi-annual bond equivalent basis.
Coleman Worldwide may, at its option, elect to pay the purchase
price on any Purchase Date either in cash or shares of common stock
of Coleman or any combination thereof.
F-18
<PAGE>
COLEMAN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
The Indenture governing the LYONs provides the holders of LYONs with the
option to require Coleman Worldwide to purchase the LYONs after the
occurrence of certain events ("Additional Purchase Right Events").
Additional Purchase Right Events occur, among other things, upon the
Company's Consolidated Debt Ratio (as defined) exceeding 0.75 to 1.0 or the
Consolidated Net Worth (as defined) of Coleman Worldwide as of the end of
any fiscal quarter being less than a specified amount which is $60,000
at March 31, 1997 and increases to $70,000 at June 30, 1997.
(f) On July 22, 1993, Coleman Holdings issued and sold $281,281
principal amount at maturity of Old Notes in a private placement
offering. Subsequent to the private placement offering, a
registration statement on Form S-1 was filed to exchange the Old Notes
for Series B Senior Secured Discount Notes (the "Discount Notes").
The Discount Notes mature on May 27, 1998 and are secured by all
the shares of Coleman Worldwide. In addition, Coleman Worldwide has
provided a non-recourse guaranty, which is secured by its pledge of
26,000,000 shares of Coleman Common Stock. There are no periodic
payments of interest on the Discount Notes. The aggregate principal
amount of the Discount Notes represents a yield to maturity of 10.875%
per annum (computed on a semi-annual bond equivalent basis) calculated
from July 22, 1993.
The Indenture governing the Discount Notes contains certain covenants
that, among other things, states that Coleman Holdings shall not permit
the Company to issue debt if after giving effect to such issuance the
Company's Consolidated Debt Ratio (as defined) exceeds 0.75 to 1.0.
The Discount Notes are redeemable by Coleman Holdings on or after
July 15, 1996, at the option of Coleman Holdings, in whole or in part,
at redemption prices listed below (expressed as percentages of
Accreted Value as of the redemption date) for the periods indicated
plus accrued and unpaid interest, if any, to the redemption date
(subject to the right of holders of record on the relevant record date
to receive interest due, if any, on the relevant interest payment
date):
Period Redemption Price
------ ----------------
From July 15, 1996 through July 14, 1997.......... 104.350%
From July 15, 1997 through January 14, 1998....... 102.175%
Thereafter, Coleman Holdings may redeem the Discount Notes in
whole at any time or in part from time to time at a redemption price
of 100% of the aggregate principal amount at maturity of the Discount
Notes to be redeemed plus accrued and unpaid interest, if any, to the
redemption date.
The aggregate scheduled amounts of long-term debt maturities in the years
1997 through 2001 are $747, $281,781, $2,357, $12,207, and $232,005,
respectively.
F-19
<PAGE>
COLEMAN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
10. INCOME TAXES
Coleman Holdings is included in the consolidated federal and certain
consolidated state income tax returns of Mafco Holdings Inc. ("Mafco") and/or
its affiliates. Coleman Holdings and Mafco have entered into a tax sharing
agreement (the "Holdings Tax Sharing Agreement") pursuant to which Coleman
Holdings will pay to Mafco amounts equal to the taxes that Coleman Holdings
would otherwise have to pay if it were to file separate tax returns for itself.
To the extent that Coleman Holdings is entitled to a tax benefit from Mafco as a
result of its tax losses, such amounts are recorded as a reduction in the
provision for income taxes and a distribution to its parent. During 1996 and
1995, Coleman Holdings recorded a $9,013 and $8,160, respectively, benefit for
income taxes and similar amounts were recorded as distributions to its parent.
Coleman Worldwide and Mafco are parties to a tax sharing agreement (the "Tax
Sharing Agreement"), pursuant to which Coleman Worldwide is required to pay to
Mafco amounts equal to the taxes that Coleman Worldwide would otherwise have to
pay if it were to file separate consolidated federal, state or local income tax
returns including only itself and its domestic subsidiaries. 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 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 $54,739 at December 31, 1996. As a result of the
restriction on the payment of the tax sharing amounts, income taxes provided
pursuant to the Tax Sharing Agreement are reflected as a non-cash charge. For
all periods presented, federal and state income taxes are provided as if Coleman
Worldwide filed its own income tax returns. The accompanying consolidated
balance sheet includes approximately $18,528 and $37,846 of federal and state
income taxes payable to Mafco pursuant to the Tax Sharing Agreement at December
31, 1996 and 1995, respectively.
For financial reporting purposes, (loss) earnings before income taxes,
minority interest and extraordinary item include the following components:
<TABLE>
Year Ended December 31,
--------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Earnings (loss) earnings before income taxes, minority
interest and extraordinary item:
Domestic....................................... $(65,344) $ 43,585 $ 38,387
Foreign........................................ (20,769) (14,434) (22,375)
-------- -------- --------
$(86,113) $ 29,151 $ 16,012
-------- -------- --------
-------- -------- --------
</TABLE>
F-20
<PAGE>
COLEMAN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
Significant components of the provision for income tax (benefit) expense
were as follow:
Year Ended December 31,
----------------------------------
1996 1995 1994
--------- ------- --------
Current:
Federal............ $(12,945) $ 6,360 $(4,199)
State.............. (937) 3,102 899
Foreign............ 3,454 3,853 2,248
-------- ------- -------
Total current.... (10,428) 13,315 (1,052)
-------- ------- -------
Deferred:
Federal............ (10,686) (3,104) 6,069
State.............. (2,178) (725) 1,114
Foreign............ (474) 2,215 (3,040)
-------- ------- -------
Total deferred... (13,338) (1,614) 4,143
-------- ------- -------
$(23,766) $11,701 $ 3,091
-------- ------- -------
-------- ------- -------
The effective tax rate on (loss) earnings before income taxes, minority
interest and extraordinary item varies from the current statutory federal
income tax rate as follows:
Year Ended December 31,
-----------------------
1996 1995 1994
------- ----- -----
(Benefit) provision at statutory rate............. (35.0)% 35.0% 35.0%
State taxes, net.................................. (3.2) 4.0 8.0
Recognition of permanent basis differences related
to loss on restructuring of foreign investment... -- -- (30.9)
Nondeductible amortization........................ 3.0 6.8 10.4
Foreign operations................................ 2.6 (0.4) (7.6)
Valuation allowance............................... 4.1 -- --
Puerto Rico operations............................ 0.2 (5.7) --
Other, net........................................ 0.7 0.4 4.4
----- ---- ----
Effective tax rate (benefit) provision............ (27.6)% 40.1% 19.3%
----- ---- ----
----- ---- ----
F-21
<PAGE>
COLEMAN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
Coleman Holdings' deferred tax liabilities and assets are as follows:
December 31,
------------------
1996 1995
------- -------
Deferred tax assets:
Postretirement benefits other than pensions..... $12,370 $11,986
Reserves for self-insurance and warranty costs.. 6,678 4,777
Pension liabilities............................. 8,828 4,942
Inventory....................................... 8,245 5,579
Net operating loss carryforwards................ 14,875 3,103
Impaired assets................................. -- 10,068
Other, net...................................... 24,026 5,555
------- -------
Total deferred tax assets..................... 75,022 46,010
Valuation allowance............................... (7,501) --
------- -------
Net deferred tax assets..................... 67,521 46,010
------- -------
Deferred tax liabilities:
Depreciation.................................... 18,248 17,611
Other, net...................................... 7,675 5,125
------- -------
Total deferred tax liabilities................ 25,923 22,736
------- -------
Net deferred tax assets..................... $41,598 $23,274
------- -------
------- -------
During 1996, Coleman Holdings increased the valuation allowance related to
certain foreign deferred tax assets due to uncertainties over realization. At
December 31, 1996, Coleman Holdings had net operating loss carryforwards
("NOL's") of approximately $42,677 for certain foreign income tax purposes.
These NOL's expire beginning in 1999.
Coleman Holdings has not provided for taxes on undistributed foreign
earnings of approximately $16,904 at December 31, 1996 as Coleman Holdings
intends to permanently reinvest these earnings in the future growth of the
business. Determination of the amount of unrecognized deferred U.S. income tax
liability is not practicable because of the complexities associated with its
hypothetical calculation.
11. RELATED PARTY TRANSACTIONS
In 1996, the Company entered into an agreement with an affiliate in which
the Company realized approximately $1,800 of net tax benefits associated with
certain foreign tax net operating loss carry forwards that had not previously
been recognized.
The Company provided management services to certain affiliates pursuant to
a management agreement through June 30, 1995. The consolidated financial
statements reflect the management fees as a reduction in selling, general and
administration expenses. For the years ended December 31, 1995 and 1994,
management fees earned by the Company were $2,400 and $4,800, respectively.
F-22
<PAGE>
COLEMAN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
MacAndrews & Forbes provides Coleman Holdings, at Coleman Holdings'
request, with certain allocated services, pursuant to a services agreement.
These allocated services are purchased by MacAndrews & Forbes from third
party providers on behalf of Coleman Holdings. Such services include
professional services, such as legal and accounting, insurance coverage and
other services. Coleman Holdings reimburses MacAndrews & Forbes for that
portion of amounts due to third party providers as is allocable to the
services purchased for and provided to Coleman Holdings and reimburses
MacAndrews & Forbes for their other out-of-pocket expenses incurred in
connection with providing such services. Coleman Holdings participates in
certain of Holdings' insurance programs, including health and life insurance,
workers compensation, and liability insurance. Coleman Holdings' expense
represents its expected costs for self-insured retentions and premiums for
excess coverage insurance. The expense was $13,923, $9,874, and $10,586 for
the years ended December 31, 1996, 1995 and 1994, respectively.
The Company purchases and sells products from and to certain affiliates.
These amounts are not, in the aggregate, material.
12. EMPLOYEE BENEFIT PLANS
PENSION PLANS:
Holdings maintains pension and other retirement plans in various forms
covering employees of the Company who meet eligibility requirements. The
U.S. salaried retirement plan is a non-contributory defined benefit plan and
provides benefits based on a formula of each participant's final average pay
and years of service. The U.S. hourly pension plan is a non-contributory
defined benefit plan and contains a flat benefit formula. The salaried and
hourly plans provide reduced benefits for early retirement and the salaried
plan takes into account offsets for Social Security benefits. The Company's
policy is to contribute annually the minimum amount required pursuant to the
Employee Retirement Income Security Act, as amended.
F-23
<PAGE>
COLEMAN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
Holdings also has an unfunded excess benefit plan covering certain of
the Company's U.S. employees whose benefits under the plans described above
are limited by provisions of the Internal Revenue Code. The following table
reconciles the funded status of the pension plans with the amount recognized
in Coleman Holdings' consolidated balance sheets as of the dates indicated:
<TABLE>
December 31,
----------------------
1996 1995
-------- --------
<S> <C> <C>
Actuarial present value of benefit obligation:
Accumulated benefit obligation, including
vested benefits of $18,686 and $15,282........ $(21,933) $(17,588)
-------- --------
-------- --------
Projected benefit obligation for service
rendered to date................................ $(37,092) $(32,284)
Plan assets at fair value......................... 16,197 9,696
-------- --------
Projected benefit obligation in excess of
plan assets..................................... (20,895) (22,588)
Unrecognized prior service cost................... 50 57
Unrecognized net loss............................. 7,999 8,869
-------- --------
Accrued pension cost.............................. (12,846) (13,662)
Amount reflected as an intangible asset........... (288) --
Amount reflected as minimum pension liability
adjustment...................................... (470) --
-------- --------
Amount reflected as pension liability............. $(13,604) $(13,662)
-------- --------
-------- --------
</TABLE>
The weighted-average discount rate used in determining the actuarial
present value of the projected benefit obligation was 7.5% and 7.25% as of
December 31, 1996 and 1995, respectively. The rate of increase in future
compensation levels reflected in such determination was 5% as of December 31,
1996 and 1995. The expected long-term rate of return on assets was 9% as of
December 31, 1996, 1995 and 1994. Plan assets consist primarily of common
stock, mutual funds and fixed income securities stated at fair market value,
and cash equivalents stated at cost, which approximates fair market value.
Unrecognized items are being recognized over the estimated remaining service
lives of active employees.
Net pension expense includes the following components:
Year Ended December 31,
------------------------------
1996 1995 1994
------- ------- ------
Service cost-benefits attributed to
service during the year.............. $ 3,098 $ 2,125 $2,051
Interest cost on projected
benefit obligation.................. 2,442 2,004 1,554
Actual return on plan assets........... (1,490) (1,347) 391
Net amortization and deferrals......... 844 834 (750)
------- ------- ------
Net pension expense.................... $ 4,894 $ 3,616 $3,246
------- ------- ------
------- ------- ------
SAVINGS PLAN:
In January 1990, Holdings initiated an employee savings plan under
Section 401(k) of the Internal Revenue Code. This plan covers substantially
all of the Company's full-time U.S. employees and allows employees to
contribute up to 10% of their salary to the plan. The Company matches, at a
33 1/3% rate, employee contributions
F-24
<PAGE>
COLEMAN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
of up to 6% of their salary. Amounts charged to expense for matching
contributions were $1,314, $1,165, and $927 for the years ended December
31,1996, 1995 and 1994, respectively.
RETIREE HEALTH CARE AND LIFE INSURANCE:
The Company, through Holdings, provides certain unfunded health and life
insurance benefits for certain retired employees. Approximately 53 percent
of the Company's U.S. employees may become eligible for these benefits if
they reach retirement age while working for the Company.
The following table reconciles the funded status of the Company's
allocable portion of Holdings' postretirement benefit plans with the amount
recognized in Coleman Holdings' consolidated balance sheets as of the dates
indicated:
December 31,
----------------------
1996 1995
-------- --------
Accumulated postretirement benefit obligation:
Retirees...................................... $ (6,682) $ (6,660)
Fully eligible active plan participants....... (3,015) (2,991)
Other active plan participants................ (10,664) (10,904)
-------- --------
Total accumulated postretirement benefit
obligation.................................... (20,361) (20,555)
Unrecognized transition benefit................. (3,973) (4,239)
Unrecognized prior service cost................. (492) (580)
Unrecognized net (gain) loss.................... (976) 936
-------- --------
Net postretirement benefit liability............ $(25,802) $(24,438)
-------- --------
-------- --------
Net periodic postretirement benefit expense includes the following
components:
Year Ended December 31,
---------------------------
1996 1995 1994
------ ------ ------
Service cost-benefits attributed to
service during the year.................... $1,044 $ 756 $ 901
Interest cost on accumulated postretirement
benefit obligation......................... 1,454 1,352 1,268
Amortization of transition benefit
and other net gains........................ (354) (455) (354)
------ ------ ------
Net periodic postretirement benefit expense.. $2,144 $1,653 $1,815
------ ------ ------
------ ------ ------
The discount rate used in determining the accumulated postretirement
benefit obligation ("APBO") was 7.5% and 7.25% as of December 31, 1996 and
1995, respectively. The assumed health care cost trend rate used in
measuring the APBO at December 31, 1996 was 8% starting in 1997, then
gradually decreasing to 5% by the year 2003 and remaining at that level
thereafter. The health care cost trend rate assumption has a significant
effect on the amount of the obligation and periodic benefit expense reported.
An increase in the assumed health care cost trend rates by 1% in each year
would increase the APBO as of December 31, 1996 by approximately 18% and the
service and interest cost components of net periodic postretirement benefit
expense by approximately 23%.
F-25
<PAGE>
COLEMAN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
STOCK OPTION PLAN:
The Company adopted The Coleman Company, Inc. 1992 Stock Option Plan
(the "1992 Stock Option Plan") prior to the effective date of the IPO.
During 1993, the shareholders approved the 1993 Stock Option Plan (the "1993
Stock Option Plan") and during 1996, the shareholders approved The Coleman
Company, Inc. 1996 Stock Option Plan (the "1996 Stock Option Plan"). Under
the terms of the 1992 Stock Option Plan, the 1993 Stock Option Plan and the
1996 Stock Option Plan (collectively the "Stock Option Plans"), incentive
stock options ("ISOs"), non-qualified stock options ("NQSOs") and stock
appreciation rights ("SARs") may be granted to key employees of the Company
and any of its affiliates from time to time. Stock options have been granted
under the Stock Option Plans with vesting terms and maximum terms of
approximately five years and ten years, respectively. The aggregate number
of shares of common stock as to which options and rights may be granted under
the Stock Option Plans may not exceed 4,700,000.
The following table summarizes the stock option transactions under the
Stock Option Plans:
<TABLE>
1996 1995 1994
---------------------------- --------------------------- ---------------------------
Weighted- Weighted- Weighted-
Average Average Average
Options Exercise Price Options Exercise Price Options Exercise Price
--------- -------------- --------- -------------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding - January 1, 2,572,930 $15.25 2,310,888 $14.03 1,256,540 $12.61
Granted:
at market price 294,000 19.73 637,000 17.89 1,272,450 15.13
above market price 381,000 15.00 - - - -
Exercised (154,890) 12.17 (325,748) 12.09 (53,362) 10.12
Forfeited (75,410) 14.19 (49,210) 13.14 (164,740) 12.98
---------- ---------- ---------
Outstanding - December 31, 3,017,630 15.84 2,572,930 15.25 2,310,888 14.03
---------- ---------- ---------
---------- ---------- ---------
Exercisable - December 31, 513,440 13.25 413,526 12.84 488,488 12.15
---------- ---------- ---------
---------- ---------- ---------
Weighted-average fair value
of options granted during
the year:
at market price $ 6.62 $ 7.13
---------- ----------
---------- ----------
above market price $ 3.21 -
---------- ----------
---------- ----------
</TABLE>
The following table summarizes information concerning currently
outstanding and exercisable options at December 31, 1996:
<TABLE>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ---------------------------------------------------------------------- --------------------------------
Range Weighted-Average
of Exercise Number Remaining Weighted-Average Number Weighted-Average
Prices Outstanding Contractual Life Exercise Price Exercisable Exercise Price
- ------------- ----------- ---------------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
$ 9.75-$14.32 770,630 1.59 years $13.05 393,440 $12.71
$14.33-$15.13 606,000 7.32 14.98 120,000 15.06
$15.14-$16.30 755,000 7.92 16.06 - -
$16.31-$23.13 886,000 8.86 18.65 - -
--------- -------
$ 9.75-$23.13 3,017,630 6.46 513,440
--------- -------
--------- -------
</TABLE>
F-26
<PAGE>
COLEMAN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
As described in Note 1, the Company follows APB 25 in accounting for its
stock compensation arrangements. Pro forma financial information regarding
net income is required by FASB Statement No. 123, "Accounting for Stock-Based
Compensation" ("FAS 123"), and has been determined as if the Company had
accounted for its employee stock options under the fair value method of FAS
123. The fair value of ISOs and NQSOs granted during 1996 and 1995 were
estimated at the date of grant using the Black-Scholes option pricing model
with the following weighted-average assumptions: risk-free interest rates of
6.11% and 5.91% for 1996 and 1995, respectively, dividend yield of 0.0%,
volatility of the expected market price of the Company's common stock of
20.2% and 30.8% for 1996 and 1995, respectively, and a weighted-average
expected life of the option of 5.5 years.
FAS 123 requires the use of option valuation models, one of which is the
Black-Scholes model, that were not developed for use valuing ISOs or NQSOs.
Further, these option valuation models require the input of highly subjective
assumptions, including the expected stock price volatility. In management's
opinion, based on the above, the existing models do not necessarily provide a
reliable single measure of the fair value of its ISOs or NQSOs.
The following summarized, unaudited pro forma results of operations assume
the estimated fair value of the ISOs and NQSOs granted in 1996 and 1995 is
amortized to expense over the ISOs' and NQSOs' vesting period. FAS 123 does not
require disclosure of the effect of any grants of stock based compensation prior
to 1995 and, therefore, the pro forma effect on net earnings of FAS 123 is not
representative of the pro forma effect on net earnings in future years.
Year Ended December 31,
-----------------------
1996 1995
--------- --------
Pro forma net (loss) earnings... $(58,918) $ 9,742
13. COMMITMENTS AND CONTINGENCIES
LEASES:
The Company leases manufacturing, administrative and sales facilities and
various types of equipment under operating lease agreements expiring through
2007. Rental expense was $14,164, $11,526, and $9,520 for the years ended
December 31, 1996, 1995 and 1994, respectively. Minimum rental commitments
under all noncancellable operating leases with remaining lease terms in excess
of one year from December 31, 1996, aggregated $43,573; such commitments for
each of the five years subsequent to December 31, 1996 are $12,379, $11,135,
$6,189, $4,296, and $2,619, respectively, and $6,955 thereafter.
The Company leases its Hastings, Nebraska facility and the corporate office
building in Denver, Colorado under agreements which give the Company the right,
subject to certain qualifications, to renew, terminate, or purchase the
properties. Upon termination, the Company has guaranteed the lessor certain
residual values.
ENVIRONMENTAL MATTERS:
The Company is subject to various environmental regulations and has adopted
an environmental policy designed to ensure the Company operates in full
compliance with applicable environmental regulations and, where appropriate, the
Company's own internal standards. Coleman has also undertaken an environmental
compliance
F-27
<PAGE>
COLEMAN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
audit program. The Company makes expenditures it believes are necessary to
comply with environmental management practices. Environmental expenditures
that relate to current operations are expensed or capitalized as appropriate,
were not significant in 1996, and are not expected to be significant in the
foreseeable future. Coleman has established reserves for various
environmental matters to cover the estimated costs of the investigations,
remedial activities and litigation.
OTHER:
The Company and Holdings are involved in various claims and legal actions
arising in the ordinary course of business. The Company believes the ultimate
disposition of these matters is not expected to have a material adverse effect
on Coleman Holdings' consolidated financial condition or results of operations.
Coleman Holdings and the Company have entered into a cross-indemnification
agreement with Holdings pursuant to which Coleman will indemnify Holdings
against all liabilities related to businesses transferred to the Company, and
Holdings will indemnify the Company against all liabilities of Holdings other
than liabilities related to the businesses transferred to the Company.
The Company is also party to a license agreement which requires payments of
minimum guaranteed royalties aggregating to $8,225 at December 31, 1996; such
commitments for each of the four years remaining under the agreement subsequent
to December 31, 1996 are $933, $1,768, $2,454, and $3,070, respectively.
14. SIGNIFICANT CUSTOMERS
The Company's U.S. and Canadian operations have one significant customer
which accounted for approximately 15%, 19%, and 21% of net revenues in the years
ended December 31, 1996, 1995 and 1994, respectively.
15. CASH FLOW REPORTING
Coleman Holdings uses the indirect method to report cash flows from
operating activities. Interest paid was $37,608, $23,976, and $11,933 and income
taxes paid were $2,857, $4,606, and $359 for the years ended December 31, 1996,
1995 and 1994, respectively. Certain non-cash transactions relating to
acquisitions and the issuance of long-term debt have been reported in Notes 2
and 9.
16. GEOGRAPHIC SEGMENTS
Coleman Holdings designs, manufactures and markets a wide variety of
multiuse products and accessories, which are primarily marketed through
independent retail markets, for the outdoor recreation and hardware consumers.
Coleman Holdings is a leading manufacturer and marketer of brand name consumer
products for the camping and related outdoor recreation markets in the United
States, Canada, Europe, and Japan.
Operating profit, as indicated below, represents net revenues less
operating expenses and amortization of goodwill. Generally, sales between
geographic areas are made at cost plus a share of operating profit. Identifiable
assets are those used by each geographic segment. Corporate assets are
principally cash, certain property and equipment, income tax refunds receivable
- - affiliate, and deferred charges. The geographic segment presentation has been
restated for the years ended December 31, 1995 and 1994 to reflect the European
segment which became a significant segment for the year ended December 31, 1996,
primarily due to the impact of the Camping Gaz operations.
F-28
<PAGE>
COLEMAN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
Information related to Coleman Holdings' geographic segments is as follows:
<TABLE>
YEAR ENDED DECEMBER 31,
----------------------------------
1996 1995 1994
----------- --------- ---------
<S> <C> <C> <C>
Net revenues:
Domestic - U.S. ............................. $ 916,260 $ 716,018 $ 566,098
- Export............................ 91,125 90,434 93,917
Europe....................................... 168,780 52,233 52,461
Other foreign................................ 219,350 169,836 121,545
Eliminations................................. (175,299) (94,947) (82,441)
----------- --------- ---------
$ 1,220,216 $ 933,574 $ 751,580
----------- --------- ---------
----------- --------- ---------
Operating profit:
Domestic (a)................................. $ 19,915 $ 120,915 $ 94,773
Europe (b)................................... (17,505) (3,241) (23,203)
Other foreign (c)............................ 4,027 (10,540) 2,222
----------- --------- ---------
6,437 107,134 73,792
Corporate expenses............................. (17,430) (20,153) (14,044)
Interest expense............................... (75,120) (57,830) (43,736)
----------- --------- ---------
(Loss) earnings before income taxes, minority
interest and extraordinary item.............. $ (86,113) $ 29,151 $ 16,012
----------- --------- ---------
----------- --------- ---------
Identifiable assets:
Domestic..................................... $ 782,373 $ 696,681 $ 559,599
Europe....................................... 247,412 70,478 72,908
Other foreign................................ 83,033 59,107 54,573
Corporate.................................... 95,457 83,194 72,337
----------- --------- ---------
$ 1,208,275 $ 909,460 $ 759,417
----------- --------- ---------
----------- --------- ---------
</TABLE>
- --------------------
(a) Includes $49,257 of restructuring and other charges in 1996.
(b) Includes $20,002 of restructuring and other charges in 1996 and
$17,956 related to German Restructuring in 1994.
(c) Includes $4,941 of restructuring and other charges in 1996 and $12,289
of asset impairment charges in 1995.
F-29
<PAGE>
COLEMAN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONCLUDED)
(IN THOUSANDS, EXCEPT SHARE DATA)
17. QUARTERLY FINANCIAL SUMMARIES (UNAUDITED)
Summarized quarterly financial data for 1996 and 1995 are as follow:
<TABLE>
Quarter Ended
-----------------------------------------------------------
March 31, June 30, September 30,(a) December 31,(b)(c)
--------- -------- ---------------- ------------------
<S> <C> <C> <C> <C>
1996
- ----
Net revenues........... $ 273,560 $ 452,654 $ 269,607 $ 224,395
Gross profit........... 80,966 137,538 39,894 33,321
Earnings (loss) before
extraordinary item... 8,180 17,337 (46,325) (36,149)
Net earnings (loss).... 7,598 16,680 (46,330) (36,149)
1995
- ----
Net revenues........... $ 224,024 $ 311,281 $ 211,817 $ 186,452
Gross profit........... 68,496 99,575 65,932 50,144
Earnings (loss) before
extraordinary item... 5,586 17,399 1,960 (14,191)
Net earnings (loss).... 5,586 17,399 1,173 (14,191)
</TABLE>
- ----------------
(a) For the third quarter of 1996, the gross profit amount includes $33,567 of
restructuring and other charges. The loss before extraordinary item and
net loss amounts include an after tax charge of $44,495 related to
restructuring and other charges.
(b) For the fourth quarter of 1996, the gross profit amount includes $10,438 of
restructuring and other charges. The loss before extraordinary item and
net loss amounts include an after tax charge of $8,021 related to
restructuring and other charges.
(c) For the fourth quarter of 1995, the gross profit amount includes $7,599 of
income as a result of adopting the provisions of EITF 95-2. The loss
before extraordinary item and net loss amounts include an after tax an
asset impairment charge of $9,856 as a result of adopting FAS 121 and
after tax credit of $3,796 as a result of adopting the provisions of
EITF 95-2.
F-30
<PAGE>
SCHEDULE 1
COLEMAN HOLDINGS INC. AND SUBSIDIARIES
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
COLEMAN HOLDINGS INC.
CONDENSED BALANCE SHEETS
(IN THOUSANDS)
December 31,
----------------------
1996 1995
--------- ---------
ASSETS
Investment in Coleman Worldwide Corporation....... $ 62,668 $ 101,673
Other assets...................................... 1,826 3,071
--------- ---------
$ 64,494 $ 104,744
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDER'S DEFICIT
Accrued expenses.................................. $ 96 $ 83
Long-term debt.................................... 242,334 217,981
Stockholder's deficit
Common stock.................................... 1 1
Capital deficiency.............................. (132,674) (123,992)
(Accumulated deficit) retained earnings......... (47,883) 10,318
Minimum pension liability adjustment............ (236) --
Currency translation adjustment................. 2,856 353
--------- ---------
Total stockholder's deficit................... (177,936) (113,320)
--------- ---------
$ 64,494 $ 104,744
--------- ---------
--------- ---------
F-31
<PAGE>
SCHEDULE I
COLEMAN HOLDINGS INC. AND SUBSIDIARIES
CONDENSED FINANCIAL INFORMATION OF REGISTRANT (CONTINUED)
COLEMAN HOLDINGS INC.
CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
Year Ended December 31,
-------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Administrative expenses........................... $ 150 $ 166 $ 103
Interest expense, net............................. 24,353 21,900 19,705
Amortization of deferred charges.................. 1,248 1,249 1,197
-------- -------- --------
Loss before income taxes, and equity in net earnings of
subsidiaries..................................... (25,751) (23,315) (21,005)
Income tax benefit................................ (9,013) (8,160) (7,346)
-------- -------- --------
Loss before equity in net earnings of
subsidiary....................................... (16,738) (15,155) (13,659)
Equity in net (loss) earnings of subsidiaries..... (41,463) 25,122 20,169
-------- -------- --------
Net (loss) earnings............................... $(58,201) $ 9,967 $ 6,510
-------- -------- --------
-------- -------- --------
</TABLE>
F-32
<PAGE>
SCHEDULE I
COLEMAN HOLDINGS INC. AND SUBSIDIARIES
CONDENSED FINANCIAL INFORMATION OF REGISTRANT (CONTINUED)
COLEMAN HOLDINGS INC.
CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
Year Ended December 31,
-----------------------
1996 1995 1994
----- ----- -----
Net cash used by operating activities..... $(140) $(102) $(137)
----- ----- -----
CASH FLOWS FROM INVESTING ACTIVITIES:
Contributions to subsidiary............... (45) (386) (208)
----- ----- -----
Net cash used by investing activities..... (45) (386) (208)
----- ----- -----
CASH FLOWS FROM FINANCING ACTIVITIES:
Contributions from parent................. 185 488 345
----- ----- -----
Net cash provided by financing activities. 185 488 345
----- ----- -----
Increase in cash.......................... $ -- $ -- $ --
----- ----- -----
----- ----- -----
F-33
<PAGE>
SCHEDULE I
COLEMAN HOLDINGS INC. AND SUBSIDIARIES
CONDENSED FINANCIAL INFORMATION OF REGISTRANT (CONTINUED)
COLEMAN HOLDINGS INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA)
1. BACKGROUND AND 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").
In the Coleman Holdings parent company-only financial statements, Coleman
Holdings investment in Coleman Worldwide is stated at cost plus equity in
undistributed earnings of Coleman Worldwide since date of acquisition.
Coleman Holdings' share of net income of its unconsolidated subsidiary is
included in consolidated income using the equity method. The Coleman
Holdings parent company-only financial statements should be read in
conjunction with Coleman Holdings' consolidated financial statements.
2. LONG-TERM DEBT
On July 22, 1993, Coleman Holdings issued and sold $281,281 principal
amount at maturity of Old Notes in a private placement offering. Subsequent
to the private placement offering, a registration statement on Form S-1 was
filed to exchange the Old Notes for Series B Senior Secured Discount Notes
(the "Discount Notes"). The net proceeds of approximately $162,299 were
distributed to Coleman Holdings' parent.
The Discount Notes mature on May 27, 1998 and are secured by all the
shares of Coleman Worldwide. In addition, Coleman Worldwide has provided a
non-recourse guaranty, which is secured by its pledge of 26,000,000 shares of
Coleman Common Stock. There are no periodic payments of interest on the
Discount Notes. The aggregate principal amount of the Discount Notes
represents a yield to maturity of 10.875% per annum (computed on a
semi-annual bond equivalent basis) calculated from July 22, 1993.
The Indenture governing the Discount Notes contain certain covenants
that, among other things, states that Coleman Holdings shall not permit the
Company to issue debt if after giving effect to such issuance the Company's
Consolidated Debt Ratio (as defined) exceeds 0.75 to 1.0.
The Discount Notes are redeemable by Coleman Holdings on or after July
15, 1996, at the option of Coleman Holdings, in whole or in part, at
redemption prices listed below (expressed as percentages of Accreted Value as
of the redemption date) for the periods indicated plus accrued and unpaid
interest, if any, to the redemption date (subject to the right of holders of
record on the relevant record date to receive interest due, if any, on the
relevant interest payment date):
Period Redemption Price
------ ----------------
From July 15, 1996 through July 14, 1997....... 104.350%
From July 15, 1997 through January 14, 1998.... 102.175%
Thereafter, Coleman Holdings may redeem the Discount Notes in whole at
any time or in part from time to time at a redemption price of 100% of the
aggregate principal amount at maturity of the Discount Notes to be redeemed
plus accrued and unpaid interest, if any, to the redemption date.
F-34
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES
The following is a list of all the subsidiaries of Coleman Holdings Inc.
JURISDICTION OF ASSUMED
NAME INCORPORATION NAME
---- --------------- -------
Application des Gaz, S.A. France
Australian Coleman, Inc. Kansas
Bafiges S.A. France
Beacon Exports, Inc. Kansas
Camping Gaz (Brazil) Brasil
Camping Gaz (Gb) Limited United Kingdom
Camping Gaz (Hong Kong) Hong Kong
Camping Gaz (India) Pvt. Ltd. India
Camping Gaz (Poland) Poland
Camping Gaz AG Switzerland
Camping Gaz Cs, Spol. S.r.l. Czech Republic
Camping Gaz GmbH Austria
Camping Gaz International Germany
Camping Gaz International Hellas Sarl Greece
Camping Gaz International (Portugal) Ltda Portugal
Camping Gaz K.K. Japan
Camping Gaz Kft Hungary
Camping Gaz Philippines, Inc. Philippines
Camping Gaz Senegal Senegal
<PAGE>
SUBSIDIARIES, CONTINUED
<TABLE>
JURISDICTION OF ASSUMED
NAME INCORPORATION NAME
---- --------------- -------
<S> <C> <C>
Camping Gaz Srl Italy
Campiran SA Iran
The Canadian Coleman Company, Limited Ontario (Canada) La Compagnie Canadien
Coleman
Coleman Argentina, Inc. Delaware
Coleman Belgium N.V. Belgium
Coleman do Brasil Ltda. Brazil
The Coleman Company, Inc. Delaware Lantern and Stove Co., Inc.
Coleman Country, Ltd. Kansas Coleman Dubai
Coleman (Deutschland) GmbH Germany
Coleman Holland B.V. The Netherlands
Coleman Japan Co., Ltd. Japan
Coleman Mexico S. A. de C.V. Mexico
Coleman Powermate Compressors, Inc. Delaware
Coleman Powermate, Inc. Nebraska
Coleman Powermate, Ltd. Manitoba (Canada)
Coleman Safety & Security Products, Inc. Delaware
Coleman SARL France
Coleman SARL Switzerland
Coleman Spas, Inc. California
Coleman SVB S.r.l. Italy
</TABLE>
<PAGE>
SUBSIDIARIES, CONTINUED
<TABLE>
JURISDICTION OF ASSUMED
NAME INCORPORATION NAME
---- --------------- -------
<S> <C> <C>
Coleman Taymar Limited United Kingdom
Coleman U.K. Holdings Limited United Kingdom
Coleman U.K. PLC United Kingdom
Coleman Venture Capital, Inc. Kansas
Coleman Worldwide Corporation Delaware
Crosman Arms Canada, Ltd. Canada
Eastpak Corporation Delaware American Lifestyles Group
Eastpak Manufacturing Corporation Delaware
Epigas International Limited United Kingdom
General Archery Industries, Inc. Arkansas
Jasan Products Ltd. Bermuda
Kansas Acquisition Corp. Delaware
Neves Caria & Ca Ltda Portugal
Nippon Coleman, Inc. Kansas
Pearson Holdings, Inc. Arkansas
Productos Coleman, S.A. Spain
PT Camping Gaz Indonesia
River View Corporation of Barling, Inc. Arkansas
Seatt de Mexico, S.A. de C.V. Mexico
Sierra Canada, Ltd. Ontario (Canada) Thomas L. Clark
Manufacturing Company
</TABLE>
<PAGE>
Sierra Corporation of Fort Smith, Inc. Arkansas
Taymar Gas Limited United Kingdom
Tsana Internacional, S.A. Costa Rica
Woodcraft Equipment Company Missouri
<PAGE>
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes
and appoints each of Irwin Engelman, Lynn E. Feldkamp, Larry E. Sanford and
Laurence Winoker or any of them, each acting alone, his true and lawful
attorney-in-fact and agent, with full power of substitution, for him and in
his name, place and stead, in any and all capacities, in connection with the
COLEMAN HOLDINGS INC. (the "Corporation") Annual Report on Form 10-K for the
year ended December 31, 1996 under the Securities Exchange Act of 1934, as
amended, including, without limiting the generality of the foregoing, to sign
the Form 10-K in the name of and on behalf of the Corporation or on behalf of
the undersigned as a director or officer of the Corporation, and any
amendments to the Form 10-K and any instrument, contract, document or other
writing, of or in connection with the Form 10-K or amendments thereto, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, including this power of attorney, with the Securities and Exchange
Commission and any applicable securities exchange or securities
self-regulatory body, granting unto said attorneys-in-fact and agents, each
acting alone, full power and authority to do and perform each and every act
and thing requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, each
acting alone, or his substitute or substitutes, may lawfully do or cause to
be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed these presents this 27th
day of March, 1997.
/s/ Jerry W. Levin
---------------------------
JERRY W. LEVIN
<PAGE>
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes
and appoints each of Irwin Engelman, Lynn E. Feldkamp, Larry E. Sanford and
Laurence Winoker or any of them, each acting alone, his true and lawful
attorney-in-fact and agent, with full power of substitution, for him and in
his name, place and stead, in any and all capacities, in connection with the
COLEMAN HOLDINGS INC. (the "Corporation") Annual Report on Form 10-K for the
year ended December 31, 1996 under the Securities Exchange Act of 1934, as
amended, including, without limiting the generality of the foregoing, to sign
the Form 10-K in the name of and on behalf of the Corporation or on behalf of
the undersigned as a director or officer of the Corporation, and any
amendments to the Form 10-K and any instrument, contract, document or other
writing, of or in connection with the Form 10-K or amendments thereto, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, including this power of attorney, with the Securities and Exchange
Commission and any applicable securities exchange or securities
self-regulatory body, granting unto said attorneys-in-fact and agents, each
acting alone, full power and authority to do and perform each and every act
and thing requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, each
acting alone, or his substitute or substitutes, may lawfully do or cause to
be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed these presents this 27th
day of March, 1997.
/s/ Ronald O. Perelman
---------------------------
RONALD O. PERELMAN
<PAGE>
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes
and appoints each of Irwin Engelman, Lynn E. Feldkamp, Larry E. Sanford and
Laurence Winoker or any of them, each acting alone, his true and lawful
attorney-in-fact and agent, with full power of substitution, for him and in
his name, place and stead, in any and all capacities, in connection with the
COLEMAN WORLDWIDE CORPORATION (the "Corporation") Annual Report on Form 10-K
for the year ended December 31, 1996 under the Securities Exchange Act of
1934, as amended, including, without limiting the generality of the
foregoing, to sign the Form 10-K in the name of and on behalf of the
Corporation or on behalf of the undersigned as a director or officer of the
Corporation, and any amendments to the Form 10-K and any instrument,
contract, document or other writing, of or in connection with the Form 10-K
or amendments thereto, and to file the same, with all exhibits thereto, and
other documents in connection therewith, including this power of attorney,
with the Securities and Exchange Commission and any applicable securities
exchange or securities self-regulatory body, granting unto said
attorneys-in-fact and agents, each acting alone, full power and authority to
do and perform each and every act and thing requisite and necessary to be
done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, each acting alone, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed these presents this 27th
day of March, 1997.
/s/ Donald G. Drapkin
---------------------------
DONALD G. DRAPKIN
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS AS FILED IN THE COMPANY'S ANNUAL REPORT
ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 17,299
<SECURITIES> 0
<RECEIVABLES> 221,454
<ALLOWANCES> 11,512
<INVENTORY> 287,502
<CURRENT-ASSETS> 570,152
<PP&E> 297,765
<DEPRECIATION> 98,583
<TOTAL-ASSETS> 1,208,275
<CURRENT-LIABILITIES> 246,628
<BONDS> 999,794
0
0
<COMMON> 1
<OTHER-SE> (177,937)
<TOTAL-LIABILITY-AND-EQUITY> 1,208,275
<SALES> 1,215,865
<TOTAL-REVENUES> 1,220,216
<CGS> 928,497
<TOTAL-COSTS> 928,497
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 5,225
<INTEREST-EXPENSE> 75,120
<INCOME-PRETAX> (86,113)
<INCOME-TAX> (23,766)
<INCOME-CONTINUING> (56,957)
<DISCONTINUED> 0
<EXTRAORDINARY> (1,244)
<CHANGES> 0
<NET-INCOME> (58,201)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
