By David Gill
RYE, N.Y.-- Jarden Corp. set yet another quarterly record in sales in the third quarter?and its chairman and chief executive officer, Martin Franklin, says the company is on course to break more records next year.
The company posted sales of $1.3 billion in the quarter, an increase of a staggering 28 percent over the third quarter of 2006.
Although net income [$21.2 million] for the quarter suffered a 59 percent hit from adjustments relating to its acquisition of K2 and other one-time costs, without these items, Jarden finished the quarter at $70.3 million, up a powerful 19.4 percent over last year.
Most of the sales increase occurred from Jarden's K2 and Pure Fishing businesses, which were absorbed into its Outdoor Solutions unit. According to Ian Ashken, vice chairman and chief financial officer, sales growth was flat leaving out those two businesses.
Speaking to financial analysts during a Webcast following the release of these results, Franklin said, "We anticipate another record year in 2008, but we still have to deliver on this year. We are focusing on generating total cash flow of $300 million for 2007."
During the Webcast, Ashken said Jarden expects to generate $275 million in cash flow during the fourth quarter alone. "The lion's share of our cash flow occurs in the fourth quarter each year," Ashken said.
Ashken attributed the third quarter's record results to "the diversified nature of our product portfolio," which delivered those results "in a difficult retail environment." He also said the Consumer Solutions unit, under which the company's housewares products are marketed, experienced flat sales growth and a slight decline in earnings.
Franklin said Jarden posted strong results "despite pressure from a tough retail environment on the top line. We had an outstanding performance on a year-to-date basis by maintaining discipline on our margins. We are not chasing revenues at the expense of profits. We're not sacrificing our brand equity for short-term gains."
Through the first three quarters, Jarden logged a 15 percent increase in sales, which totaled $3.2 billion. Net income without the adjustment items reached $142.9 million, up 25 percent over the first nine months of 2006.
Expanding on this point, Franklin cited the company's Coleman brand of outdoor products. "We could have chased dollars in Coleman in the second quarter by marking down the product aggressively, but we elected not to do that," he said. "Some of the retailers tried to do that on their private-label products, but it didn?t work."
Ashken added, "We want to stick to the disciplines we've agreed on at the beginning. We're holding the line on prices, even with retailers that request markdowns."
Although Franklin acknowledged that the retail economy has become difficult, he added that there are opportunities for strong business nevertheless.
"From what we've seen, the performance at our retail customers is fairly healthy," Franklin said. "It's not as robust as in recent years, but the customers are still there. Where you have new products and innovation, you are able to get shelf space because consumers are still buying to meet their real wants and needs."
Innovation is another advantage Jarden holds over its competition, Franklin said, citing the company's next generation of Margaritaville margarita makers, which was launched earlier this year. "Innovation and the diversified nature of our product portfolio gives Jarden a unique position and a qualified edge in competing in these markets," he said.
Franklin also said Jarden is "in pretty good shape" in inventories going into the fourth quarter. "We've managed our inventories well on a go-forward basis," he said. "Some of our retail customers have pulled back on inventories, though. They are taking a cautious view of their own businesses in anticipation of an economic slowdow" in the quarter.
Continued discipline will be necessary for Jarden if it is to meet its goal of new records next year. Ashken said the company is anticipating cost increases in 2008, "but not as dramatically as what we saw in 2005 and 2006, when oil prices skyrocketed. We don't anticipate increases as high next year, but we'll have to manage through those increases. You'll see a lot of increases coming from higher labor costs in China. We definitely believe that we're in an inflationary environment."