Jarden Corporation - University of Oregon Investment Group

May 17th, 2013
Consumer Goods
Jarden Corporation
Ticker: JAH
Recommendation: Hold
Current Price: $48.06
Investment Thesis
Key Statistics
52 Week Price Range

24.93-47.96
43.96

Estimated Beta
1.09

Dividend Yield
N/A
50-Day M oving Average
M arket Capitalization (B)
3-Year Revenue CAGR
Implied Price: $55.70

5.6
4.42%
Jarden’s leading market share across a diverse range of retail segments
positions Jarden to excel in the recovering global economy
The newly launched tailgating initiative creates an anti-cyclical hedge,
lowering Jarden’s dependency on weather conditions
Jarden’s international expansion initiatives in Latin America, Eastern
Europe, and the Asia Pacific Rim will expand Jarden’s market share to new
heights
The increase in manufacturing and distribution centers worldwide allows
Jarden to minimize both labor and shipping costs, while increasing the
supply chain to retailers around the globe
Trading Statistics
Diluted Shares Outstanding (M )
118.29
Five-Year Stock Chart
Average Volume (3-M onth)
Institutional Ownership
Insider Ownership
484,000
90%
6.27%
$50.00
18,000,000
$45.00
16,000,000
$40.00
14,000,000
$35.00
EV/EBITDA (LTM )
12,000,000
11.22
$30.00
10,000,000
Margins and Ratios
$25.00
8,000,000
Gross M argin (LTM )
28.74%
$20.00
6,000,000
$15.00
EBITDA M argin (LTM )
9.62%
4,000,000
$10.00
Net M argin (LTM )
Debt to Enterprise Value
3.64%
0.42
2,000,000
$5.00
$0.00
Feb-06
0
Feb-07
Feb-08
Volume
Covering Analyst: Maury Bardovi
Feb-09
Adj Close
Feb-10
Feb-11
50-Day Avg
Feb-12
Feb-13
200-Day Avg
mbardovi@uoregon.edu
1
University of Oregon Investment Group
May 17, 2013
University of Oregon Investment Group
Figure 1: 2012 Revenue by Segment
Process
Solutions
5%
Branded
Consumables
26%
Outdoor
Solutions
40%
Consumer
Solutions
29%
Source: JAH Financials
Figure 2: Jarden Brands
Business Overview
Jarden Corporation is a leading provider of consumer products with a diversified
portfolio of roughly 120 name brands currently sold in more than 100 countries.
The company operated under the name Alltrista from 1991-2002. Alltrista
manufactured plastic and metal products, sold to both consumer and industrial
markets. Through Alltrista’s metal operation, the company became the primary
supplier of zinc penny blanks to the U.S. and Canadian Mints. In 2002, Alltrista
changed its business vision and adopted a new name, Jarden Corporation. With
headquarters based in Rye, New York, and over 23,000 employees worldwide,
Jarden currently ranks number 371 on the fortune 500 list. Jarden operates under
4 business segments:
Outdoor Solutions:
With roughly 40% of revenue coming from this sector, Outdoor Solutions is
Jarden’s largest operating segment. Outdoor Solutions recorded net sales of $2.7
billion in 2012, making Jarden the world’s largest sports equipment company.
Under this segment Jarden manufactures and sells goods to consumers covering
a diverse range of outdoor sub-sectors. Two of Jarden’s largest brands, Coleman
and Marmot, provide consumers with outdoor necessities, while holding #1
market position in categories that include: Camp Stoves, Lanterns, Tents,
Sleeping Bags, and Inflatable Beds. Additionally, Outdoor Solutions is
comprised of many athletic driven brands with large market share positions.
Rawlings is the official batting helmet and ball supplier of Major League
Baseball and K2 sports is the number one provider of Skis and Bindings in the
U.S. Other notable brands in this segment include: Aerobed, Penn, Marker, and
Volki.
Consumer Solutions:
Consumer Solutions is Jarden’s second largest operating segment with roughly
29% of total sales. This segment produces household goods and appliances sold
mainly to mass merchants and in department stores. With household token
brands such as Oster, Mr. Coffee, and CrockPot, Jarden Consumer Solutions is
the most broadly distributed brand portfolio in America. These brands are found
in homes across the globe and hold numerous #1 market positions. Other notable
brands include: Rival, FoodSaver, SkyBar, and Sunbeam.
Branded Consumables:
With nearly 26% of total revenue, Branded Consumables is the last of Jarden’s
three main business segments. The Branded Consumables segment is a leading
provider of primarily niche consumer household staples. The brands Bicycle,
Bee, and Aviator combine to make Jarden Corp. the largest playing card
manufacturer in the world. Jarden’s First Alert home protection line is an
industry leader in the smoke and carbon dioxide detection market. With 2012
net sales of $1.8 billion and Jarden’s highest gross margin product mix, this
segment is the backbone behind Jarden’s strong stable cash flow generation.
Other notable brands in this segment include: Pine Mountain, Ball, Lehigh, and
Diamond.
Source: Google Images
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Process Solutions:
Figure 3: Supply of Penny Blanks
Process Solutions is Jarden’s smallest segment representing roughly 5% of total
revenue. This segment manufactures and distributes a variety of industrial
products both in the US and overseas. These products include copper-plated zinc
penny blanks to the U.S. mint, military grade antennas, and a broad range of
conductive fibers. Many of these products are inputs in the production of other
goods.
Strategic Positioning
Source: Google Images
Figure 4: Niche Market’s
Production:
Improving production costs is a significant focus for Jarden in 2013. These
margin improvements will be driven by the ongoing expansion of Jarden’s
global infrastructure. Jarden currently has 70 manufacturing centers spanning
the globe in 16 countries. Jarden’s ability to outsource production to a
diversified range of countries not only minimizes labor costs, but also reduces
distribution costs as the company continues to expand globally.
Niche Markets:
Source: Google Images
Jarden’s stable cash flow generation is driven by their ability to capture niche
markets. Niche markets are subsets of the broader market that focus on a
specific product or segment. Niche markets tend to be dominated by a few
leading brands. Jarden has leveraged their recognizable brands into twenty-three
number one market share positions, extending across a wide range of markets.
Each of Jarden’s three consumer goods segments have at least six different
leading positions, with the most coming from the Branded Consumables
segment. Niche markets in which Jarden brands hold leading positions include:
Coffee Makers, Slow Cookers, Playing Cards, Fire Logs, Matches, and
Toothpicks.
Distribution Channels:
Figure 5: Distribution Channels
The high market share positions held by Jarden’s brands allow for their products
to be distributed in the largest retail chains across the globe. These mass
merchants and department stores provide Jarden’s products with high levels of
exposure to consumers. Wal-Mart, which purchased products from every
operating segment, was Jarden’s largest customer in 2012, accounting for
approximately 20% of net sales. No other single buyer represented more than
5% of net sales. Other leading customers include: Amazon.com, Bed Bath &
Beyond, Costco, Dick’s Sporting Goods, The Home Depot, Target, and Lowes.
Business Growth Strategies
Source: Google Images
The substantial growth Jarden has realized in the last few years is attributable to
strong organic growth combined with strategic acquisitions. Jarden is currently
implementing a diverse range of targeted growth initiatives directed to drive
growth in numerous brands, spanning a wide range of geographies. These
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initiatives will expand Jarden’s international presence, grow existing product
lines, and increase brand awareness.
Figure 6: 2002 Net Sales
International Expansion:
United States
90%
Figure 6b: 2012 Net Sales
A major focus of Jarden is the expansion of its lines to reach consumers
worldwide. As shown by figure 6, Jarden has been able to increase its
international presence by 290% in the last 10 years. Jarden currently has explicit
International brand initiatives focused on continuing their international expansion going
10%
forward. One of the largest projects in the pipeline is the re-establishment of
Rawling’s operations in Japan, the world’s second largest baseball market. The
combination of the Japan expansion with the recently introduced softball brands
in China will allow Rawlings to increase its global market share from its current
level of 10%. Jarden is also focused on growing its baby products worldwide. Its
baby brands NUK and Annabel Karmel both received product innovation
awards in 2012. Management has cited Latin America, Eastern Europe, and the
Asia Pacific Rim as areas to expect a lot of movement in the coming years for
baby products under these brands. The mid-late 2012 acquisition of Pulse, the
maker of Breville Kettle in the UK rounds out Jarden’s international expansion
with increased market share in Europe. All of these initiatives will continue to
foster Jarden’s increased international exposure.
Product Line Growth:
International
39%
United States
61%
Source: Jarden 2013 Investor Presentation
Figure 7: Rawlings Product Line Growth
Jarden’s organic growth will largely be driven by product line expansion within
existing brands. Management has given organic revenue growth guidance of 3%
to 5% for 2013. Jarden’s largest product expansion is the recently launched
tailgating initiative. Jarden venturing into tailgating encompasses both a market
expansion as well as a cross business-segment product development. The
tailgate line allows Jarden to brand its NFL, MLB, and NCAA licenses on a
diverse range of Jarden brands. Selling an array of logoed products such as a
Coleman canopy, cooler, or grill alongside a Crock-Pot, and a deck of Bicycle
playing cards allows Jarden to leverage multiple brands and business segments
under one marketing and distribution channel. Not only does the tailgating line
leverage SG&A costs, additionally, the year-round sale of Coleman products
creates an anti-cyclical hedge, making Coleman less dependent on weather
fluctuations.
An additional upcoming growth driver for Jarden is the newly innovated
Rawlings NRG Quantum Plus football helmet. The release of the new helmet in
the middle of 2012 marks the first year any Rawlings football helmet has earned
a 5 star rating. The helmet was well received by professionals, with 10 players
wearing the new line at this year’s Super Bowl, compared to none the year
before. The line is expected to gain market share among all football ranks,
ranging from youth to the NFL.
Brand Awareness:
Source: Google Images
The last piece to Jarden’s sustained organic revenue growth is increased brand
awareness. Jarden’s biggest focus on increasing brand awareness is with its
Outdoor Solutions staple, Marmot. Marmot opened its seventh flagship store in
November, and management expects additional stores to open throughout 2013.
One of Jarden’s largest projects, Marmot.com will launch towards the end of Q3
this year. The rise in flagship stores will provide an increase in domestic sales
growth, while Marmot.com will allow for expansion in emerging markets.
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Acquisitions:
Figure 8: Marmot England Store
Source: Jarden 2012 Annual Report
Acquisitions have been a significant source of supplemental growth for Jarden
in the past, and will likely continue to do so as Jarden ventures into new markets
and regions. Jarden’s acquisition strategy is consistent with their business model
of purchasing leading, niche consumer-oriented brands with strong cash flow
generation and experienced management. Because of the difficulty in attaining
top market share with new products, Jarden acquires companies with leading
positions to further their market control. In order to maximize SG&A efficiency,
Jarden looks to acquire companies with expansion into related fields, so the
newly acquired lines can be marketed through existing distribution channels. In
2012, Jarden completed three tuck-in acquisitions. Jarden’s most recent
substantial acquisition came in 2010, when they acquired Mapa Spontex baby
and Home Care businesses. Jarden’s strategic acquisition strategy has played an
imperative role in the growth of its diversified brand portfolio and is expected to
continue to do so going forward.
Industry
Figure 9: Sports Participation Rate %
20
19
With its portfolio of over 120 consumer oriented brands, Jarden as a whole does
not operate in one single industry. Jarden’s three main operating segments can
be accurately broken into two industries within the Consumer Goods sector:
Athletic & Sporting Goods, and Housewares & Accessories.
Athletic & Sporting Goods:
18
Athletic and Sporting Goods is an $8.9 billion industry with the majority of
distribution coming from retailers and wholesalers. The main segments within
the industry are: Team Sports, Golf, Firearms/Hunting, Fishing, and Camping.
Demand for products in the industry is primarily driven by retail-level trends as
consumer preferences change. One of the best industry metrics for monitoring
consumer demand growth is the sports participation rate. As shown in Figure 9,
our economy has seen a rise in sports participation over the past five years,
suggesting consumers are allocating more of their leisure time to athletic
activities. IBIS World projects sport participation to continue its slow rise in the
next five years, mostly due to the growing preference towards a more active and
healthier lifestyle. The steady rise of athletic activities will benefit Jarden’s
outdoor brands as consumers will demand more products to fulfill their growing
needs.
17
16
Source: IBIS World
Figure 10: Percent Change in Per Capita Disposable
Income
4
2
0
-2
-4
2007
2009
2011
2013
2015
Source: IBIS World
2017
Housewares & Accessories:
Housewares and Accessories is a $3.3 billion dollar industry dominated by
Jarden with 6% overall market share. Firms in this industry manufacture and
distribute primarily small electric appliances and housewares such as: Blenders,
Coffee Makers, Blow Driers, Portable Heaters, and Vacuum Cleaners. Major
household appliances such as refrigerators, dishwashers and microwave ovens
are not included in this industry. Growth in the Housewares and Accessories
industry is driven by per capita disposable income. Because most of these
products fall under the discretionary consumer purchases category, the ability to
grow top line sales relies greatly on individual disposable income levels. Figure
10 shows the percent change in per capita disposable income from 2000
projected out through 2018. The graph demonstrates the recent poor disposable
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750
income growth caused by the recession. However, the future is much more
optimistic, with a 2.4% CAGR projected for 2013-2018, compared to the
realized CAGR of -0.1% from 2008-2013. The projected upcoming growth will
increase topline sales for both Jarden and the industry as a whole.
500
Macro Factors:
Figure 11: Annual Snowfall (Inches)
250
0
2009
2010
2011
2012 10 yr avg
Source: Mammoth Mountain
Figure 12: Price index of Plastic Materials &
Resin
Jarden’s Outdoor Solutions segment was hit hard by the 2012 weather oddities.
Snowfall in 2012 was well below historic averages across the country. Figure 11
shows annual snowfall in inches, recorded at Mammoth Mountain one of the
largest ski resorts in the country. While there is no way to be certain about future
snow seasons, historic snowfall data suggests the 2012 amount to be an outlier.
Consumer goods manufactures are reliant on raw material and thus can be
greatly affected by changes in commodity prices. Historically, the prices of
plastic materials have been closely in line with movements in the value of oil,
and therefore are fairly volatile. The IBIS World commodity report projects oil
prices and subsequently input prices to fall in 2013 due to moderated growth in
Europe and China. Figure 12 shows the forecasted trend of the price of plastic
materials and resin. The index is projected to grow at a CAGR of 2.5% through
2018.
300
250
200
150
2006
2008
2010
2012
2014E 2016E 2018E
Source: IBIS World
Figure 13: Existing Home Sales (millions)
8
The in or around the home nature of Jarden’s housewares and accessories
products makes the existing homes sales metric a great indicator of future
opportunities. In the first quarter of this year, new home sales grew at their
fastest pace since 2008, while existing home sales were at their highest rates
since the end of 2009. The future outlook on home sales is very promising due
to the combination of the Federal Reserve’s commitment to low interest rates
and the shrinking U.S. unemployment rate. As shown by Figure 13, IBIS world
projects existing home sales to grow at a CAGR of 6.9% through 2018. The
overall improvement in the housing market will translate into increased sales for
Jarden’s in-home brands, the majority of which already hold top market share
positions.
As with all international distributors like Jarden, currency fluctuations represent
a constant macro economical risk. In the past year, Jarden was hit hard with
inventory revaluation charges caused by the strong Venezuelan currency
devaluation. In 2012 the Venezuelan government intentionally devalued its
currency roughly 50% in an attempt to cut their fiscal deficit. Management has
done a great job of staying ahead of the curve with these charges and do not
anticipate a lasting effect going forward.
6
4
2
2005
The Athletic and Sporting Goods industry faces many issues related to changes
in weather. The outdoor nature of the industry creates a strong correlation
between weather conditions and sales. These seasonal changes spike demand for
different areas of recreation. For example, stronger winter seasons lead to an
increase in snow related sales, where as a longer summer raises the demand for
golf equipment. As a result of the timing of weather changes, the first and fourth
quarters of the year tend to record lower sales industry wide.
2007
2009
2011
2013E
2015E
2017E
Source: IBIS World
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Competition:
Competition in the consumer goods retail market is highly competitive. Firms
mostly compete for the best prices on innovative products. Jarden’s size puts
them at a strong advantage in both of these areas. Jarden’s massive
manufacturing and supply chain in over 16 countries allows them to deliver the
lowest prices while still improving gross margin numbers going forward. The
pairing of Jarden’s product innovation initiatives with strategic acquisitions
allows them to stay ahead of changing consumer preferences, giving Jarden the
ability to produce the products in highest demand.
Figure 14: Competition
Management
Martin E. Franklin, Founder and Executive Chairman
Source: Google Images
Martin Franklin is the founder and Executive Chairman of Jarden Corporation.
Mr. Franklin has been with the company since 1993 and is responsible for the
2002 transformation from Alltrista to Jarden. Mr. Franklin founded Jarden
alongside current Vice Chairman, Ian Ashken in 2002. Since then, Mr. Franklin
has served as Chairman and Chief Executive Officer until his promotion to
Executive Chairman in June of 2011. Mr. Franklin has guided Jarden into a
consumer goods conglomerate with a portfolio of over 120 brands. Under
Franklin’s reign, Jarden’s revenue and market capitalization have grown roughly
200% and 12,000% respectively. Mr. Franklin is well respected in the industry
and he currently serves as a director on multiple boards, including Burger King
Worldwide and Marlin Equities.
In 2012 Mr. Franklin earned a base salary of $1.9 million, along with a year-end
bonus of $2.1 million. With all stock awards included, Martin’s total
compensation in 2012 was $17.2 million.
Figure 15: Company Performance & Executive
Compensation
Ian G.H. Ashken, Vice Chairman and Chief Financial Officer
40
250%
30
20
100%
10
-50%
0
2009
Net Income Growth
2010
EPS Growth
2011
2012
Executive Compensation (M)
Source: JAH Proxy Statement & Financials
Mr. Ashken co-founded Jarden alongside Martin Franklin in 2002. Mr. Ashken
currently serves as Vice Chairman and Chief Financial Officer. As with Martin
Franklin, Mr. Ashken has been with Jarden for over 20 years. Before coming to
Jarden in 1993, Mr. Ashken served as the CFO for Benson Eyecare Corp. and
Lumen Technologies. Mr. Ashken also currently serves as a director of Phoenix
Group Holdings.
In 201 Mr. Ashken earned a base salary of $982,000, along with a year-end
bonus of $982,000. With all stock compensation included, Ashken’s total
compensation in 2012 was $6.0 million.
James E. Lillie, Chief Executive Officer
Mr. Lillie joined Jarden in 2003 and currently serves as the Chief Executive
Officer. Mr. Lillie joined Jarden’s management team as Chief Operating Officer
and was then promoted to CEO in 2004. Prior to his tenure with Jarden, Mr.
Lillie served as the Executive Vice President of Operations at Walter Industries,
a commercial printing and business communications company.
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In 2012, Mr. Lillie earned a base salary of $982,000, along with a year-end
bonus of $982,000. With all stock compensation included, Lillie’s total
compensation in 2012 was $6.0 million.
Management Guidance
Figure 16: Jarden 1-year stock chart
$60.00
16
$45.00
12
$30.00
8
$15.00
Management has given direction on their primary focuses for the current fiscal
year and beyond. This year’s biggest focuses are on growing their brands while
improving gross margins and SG&A. At the end of 2012, management projected
2013 organic revenue growth of 3%-5% with a conservative view in mind.
Management had projected their production and distribution initiatives to
increase gross margins for 2013 by 50 basis points. They also announced the
lowering of Jarden’s effective tax rate by 200 basis points to 33%. While
management does not give direction on any upcoming acquisitions, they did
give guidance for capital expenditures of roughly 2% of revenue for 2013. All of
these projections are taken into account, and well represented in my report.
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Portfolio History
0
$0.00
Nov-11 Feb-12 May-12 Aug-12 Nov-12 Feb-13
Volume
Adj Close
50-Day Avg
Source: Yahoo Finance
Jarden was originally pitched to the University of Oregon Investment Group in
late 2011. The group purchased 400 shares in the Tall Firs portfolio at a cost
basis of $12,657 at $31.64 per share. In March of this year we sold roughly 38%
of our position for a realized gain of $4,663 or roughly $31.10 per share. With a
103.1% return on investment in 2012, Jarden was the Tall Firs Portfolio’s best
performing consumer goods stock, and the portfolios 4 th best performing stock
overall.
The large size of Jarden combined with its low beta and corresponding high
alpha makes Jarden a great fit with the Tall Firs portfolio. Jarden has been a
great addition to the portfolio, and my analysis suggests Jarden will continue to
do so going forward.
Recent News
Figure 17: Rawlings S100 Pro Comp
Press Release: “Rawlings Wins Gold at 2013 Edison Awards”
April 26th 2013
Rawlings’ new S100 Pro Comp batting helmet received the highest award in the
material science (composites) category at the 2013 Edison Awards. The newly
innovated helmet is constructed of aerospace-grade carbon fiber composite.
Rawlings is the official batting helmet of Major League Baseball. 2013 marks
the first year of the league-wide mandated use of the S100 Pro Comp.
Source: Rawlings Press Release
AP: “Jarden’s 1st quarter adjusted results beat estimates”
April 24th 2013
Jarden’s 2013 Q1 results beat Wall Street estimates absent one-time items.
Without the lingering Venezuelan devaluation charges, Jarden recorded a net
income of $33.1 million. Year over year revenue grew 5.7% as newly innovated
products performed well in the market. Shares rose over 5% in after-market
trading once earnings were released.
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Press Release: “Jarden Announces 3-for-2 Stock Split”
Figure 18: Tailgate Initiative
February 14th 2013
Jarden’s 3-for-2 stock split in February represented the company’s fourth stock
split since 2002. The stock split is a reflection of management’s confidence in
Jarden’s business strategy and the company’s ability to progress going forward.
Catalysts
Upside



Implementation of Jarden’s tailgating initiative will expand revenue
growth in all three consumer segments, while leveraging SG&A costs
and creating an anti-cyclical hedge
Expansion of newly acquired NUK and Annabel Karmel baby lines
into Latin America, Eastern Europe, and the Asia Pacific Rim will
increase Jarden’s global market share
Increase in production and distribution centers around the world will
lower labor and shipping costs, which will result in increased margins
Downside



Source: Google Images
Highly dependent on the strength of retail economies, which have
proven to be volatile in recent years
The sales of many outdoor solutions brands fluctuate with irregular
weather conditions
Consolidation in the U.S. retail industry has created a concentrated
customer base for Jarden, with Wal-Mart accounting for roughly 20%
of net sales
Comparable Analysis
Two comparable analyses were constructed in order to value Jarden Corporation
against an industry benchmark. Due to the large diversification covered by
Jarden’s brands, comparable companies were chosen to match their
corresponding segments of Jarden. In addition to their respective operating
segments, the companies were chosen based on a number of factors including:
EBITDA growth, revenue growth, market cap, international exposure, product
offering, and beta. Weightings were assigned based on how well the companies
matched Jarden on the outlined metrics.
VF Corporation: VFC (30 %)
VF Corporation is the world’s largest apparel company. VFC is constructed of
25 brands diversified across five main operating segments: Outdoor & Action
Sports, Sportswear, Jeanswear, Imagewear, and Contemporary Brands. Outdoor
& Actions Sports is VFC’s largest and fastest growing segment, accounting for
roughly half of global revenues. VFC has many industry leading brands in top
market share positions. Majestic Athletic wear is the official uniform of Major
League Baseball, and The North Face is a leader among outdoor lifestyle brands.
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VFC continues to grow their company both organically and through
acquisitions. The combination of VFC’s diversified portfolio, stable acquisition
strategy, and strong organic growth makes them the strongest comparable to
Jarden. For these reasons, VF Corporation is weighted 30% in the comparable
analysis.
Other notable VFC brands include: Vans, Wrangler, Nautica, Timberland, and
JanSport.
The Clorox Company: CLX (30%)
Founded 100 years ago, The Clorox Company has since built itself into one of
the most common household names. Operating in the Housewares &
Accessories industry, Clorox is a direct competitor to Jarden’s Consumer
Solutions segment. Clorox offers a diverse portfolio of products with nearly 90
percent of its brands holding Number 1 or Number 2 market share positions.
Clorox’s lines include Formula 409, Pine-Sol, Glad, Hidden Valley, KC
Masterpiece, Brita, Burt’s Bees, and Kingsford charcoal.
The magnitude of Clorox’s market share and diversity align them well with
Jarden’s business structure. Clorox’s industry leading product line coupled with
their matching management guidance of 3-5% sales growth for 2013 makes
Clorox Company a strong comparable. For these reasons, Clorox is weighted
30% in the comparable analysis.
Newell Rubbermaid: NWL (20%)
Newell Rubbermaid is a leading global producer of branded consumer and
commercial products. With almost 20,000 employees worldwide, Newell’s lines
cover a wide range of segments and are sold in more than 100 countries across
the globe. Newell’s large portfolio of brands includes common household names
such as Rubbermaid, Sharpie, and Paper Mate.
Newell Rubbermaid’s future outlook is comprised of the blend of both organic
expansion drivers and effective acquisitions. Newell’s vast branded portfolio
coupled with their ability to compete with Jarden’s niche market share makes
them a great comparable company. For these reasons, Newell Rubbermaid is
weighted 20% in the comparable analysis.
Tupperware Brands: TUP (20%)
Tupperware Brands produces, markets, and distributes kitchen and home
products to consumers around the world. After its large acquisitions in 2005,
Tupperware Corporation became Tupperware Brands and now reaches
consumers through eight well-diversified brands. Tupperware has been a market
leader for nearly 60 years in food storage, preparation, cookware and serving
items. Now included in Tupperware Brands are seven beauty and personal care
product lines with products ranging from cosmetics to household fragrances.
Tupperware Brands has built itself a strong market share within the household
consumables segment and challenges large corporations such as Jarden. For
these reasons, Tupperware Brands is weighted 20% in the comparable analysis.
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Discounted Cash Flow Analysis
Figure 19: Total Revenue
For the Discounted Cash Flow Analysis I projected revenue broken down by
each operating segment, and then used the percent of revenue method to project
out most line items. These projections were based off a combination of
management guidance, historical trends, and my own analysis of expectations
going forward.
$100
$80
$60
$40
Revenue Model:
$20
A revenue model was constructed in order to project Jarden’s sales growth going
forward. The model breaks out Jarden’s total revenue into each operating
segment. In order to most accurately capture revenue growth going forward,
each segment was projected as a percent of total revenue as Jarden’s product
mix evolves from targeted growth initiatives.
$0
Source: JAH Financials & UOIG Projections
Out of Jarden’s three main operating segments, Consumer Solutions was the
fastest growing segment in 2012. In addition to Jarden’s tailgating initiative, the
growth in this segment will be driven by a substantial increase in the demand for
in and around the home products as home sales return to normal levels.
Consumer Solutions will increase as a percent of revenue by 9 basis points in
2013.
Figure 20: Jarden’s Growth Rate vs. U.S.
Disposable Income Growth Rate
Branded Consumables has been growing at a steady rate and will continue to do
so in 2013. The growth in this segment is driven by the newly acquired baby
lines, which already hold the top market position in baby care, as well as the
record sales of First Alert smoke and carbon dioxide detectors resulting from the
recently passed legislation in multiple U.S. states. Branded Consumables will
increase as a percent of total revenue by 7 basis points in 2013.
25%
15%
5%
While I am projecting Outdoor Solutions to have positive growth in 2013, it is
slightly decreasing as a percent of revenue as the other segments benefit from
their leading market shares in an improving economy. The tailgating initiative
lowers the segment’s dependency on weather conditions and with snowfall
likely to be higher than 2012’s record lows, the future for Outdoor Solutions is
promising.
-5%
2009
2011
2013
2015
2017
Jarden's Housewares & Acc. Revenue Growth Rate
U.S. Disposible Income Growth Rate
Source: IBIS World, JAH Financials, and UOIG Spreads
With the 2013 product mix established, I projected total growth going forward
by taking into consideration management’s organic growth guidance, Jarden’s
historical trend of acquisitions, and macro-economic factors. I derived an overall
total year over year revenue growth rate of 4.9% for 2012. The growth rate steps
down into perpetuity to the average GDP growth rate of 3%.
Terminal Year
Gross Margin
Cost of Goods Sold:
58
29.1%
29.2%
29.3%
29.4%
29.5%
Implied Price
Terminal Growth Rate
2.0%
2.5%
3.0%
3.5%
37.57
45.55
56.11
70.76
38.45
46.55
57.28
72.15
39.33
47.56
58.44
73.55
40.21
48.56
59.61
74.94
41.09
49.56
60.78
76.33
4.0%
92.43
94.16
95.89
97.61
99.34
Cost of Goods Sold includes the costs of raw materials and finished goods,
purchases, manufacturing costs, and warehouse and distribution costs.
Increasing gross margins is one of Jarden’s biggest focuses for 2013. From the
combination of management guidance and my own research I am projecting a
gross margin improvement of 50 basis points in 2013. This improvement will be
driven by the introduction of new products with higher margins, as well as the
further implementation of Jarden’s ongoing manufacturing and operational
UOIG 11
May 17, 2013
University of Oregon Investment Group
efficiency programs. After 2013, cost of goods sold remains relatively constant
as a percent of revenue, decreasing slightly by 1-2 basis points per year.
Tax Rate
Selling, General, & Administrative:
58
23.0%
28.0%
33.0%
38.0%
43.0%
Implied Price
Terminal Growth Rate
2.0%
2.5%
3.0%
3.5%
48.15
56.87
68.26
83.77
43.84
52.33
63.49
78.83
39.33
47.56
58.44
73.55
34.63
42.54
53.09
67.88
29.70
37.25
47.41
61.79
Undervalued/(Overvalued)
4.0%
106.11
101.21
95.89
90.08
83.73
Selling, General, and Administrative
expenses
consist of marketing, media
Terminal Growth
Rate
placement and promotions, product development, and other administrative costs.
I have projected an increase in SG&A in 2013, due to the initial launch of
Jarden’s new growth initiatives. After these initiatives are in place, SG&A will
slowly decrease as a percent of revenue due to the leveraging of multiple
business segments into one marketing campaign.
Depreciation & Amortization:
A straight line depreciation and amortization table was used based on the
weighted average useful life of depreciable assets. All projected capital
expenditures are depreciated with this method. The percent of Jarden
Corporation’s goodwill to total assets ratio was used as a proxy in determining
the depreciable proportion of acquisitions.
Net Working Capital:
Adjusted Beta
58
0.89
0.99
1.09
1.19
1.29
Implied Price
Terminal Growth Rate
2.0%
2.5%
3.0%
3.5%
53.85
66.52
84.49 111.97
45.91
56.02
69.81
89.77
39.33
47.55
58.44
73.54
33.78
40.58
49.37
61.15
29.04
34.74
41.96
51.38
Undervalued/(Overvalued)
4.0%
159.18
121.21
95.87
77.77
64.19
Terminal Growth Rate
Following managements guidance,
there are no significant changes to net
working cap. Line items were projected as a percent of revenue, adjusted for
seasonal averages, slowing increasing as the company expands its operations.
Acquisitions & Capital Expenditures:
Jarden has typically completed substantial acquisitions roughly every other year.
Due to the fact management does not give any guidance on the timing of
acquisitions, historical averages were taken and averaged out, trending slightly
down into perpetuity.
Capital Expenditures are projected following management’s guidance of 2%2.5% of revenue.
Tax Rate:
The effective tax rate of 33% was projected per management guidance. This rate
is lower than Jarden’s historical rates due to the hyperinflation issues in
Venezuela. The tax rate remains constant going into perpetuity.
Figure 21: Beta Calculation
SD
Weighting
5-Year-Daily
Beta
1.38
0.04
0.00%
5-Year-Weekly
1.74
0.11
0.00%
5-Year-Monthly
1.54
0.24
0.00%
3-Year-Daily
1.11
0.04
26.67%
3-Year-Weekly
1.27
0.09
26.67%
1-Year-Daily
0.91
0.08
26.67%
Damodaran Indusrty Beta
0.98
0.00%
3 Year Daily Hamada Beta
1.10
10.00%
3 Year Daily Vasicek Beta
1.00
10.00%
Jarden Corporation Beta
1.09
Source: UOIG Beta Regressions
Beta:
Jarden’s beta was calculated using a weighted average of several methods. Six
linear regressions covering one, three, and five year periods were performed
against the S&P 500. The one and three year regressions were weighted in the
final beta calculation because their respective time frames best represent the
current market risk Jarden faces. The five year period encompasses the
systematic risk associated with the global recession of 2009. In addition to the
linear regressions, the Vasicek method was calculated in order to attain an
industry Beta, whereas the Hamada method was performed in order to consider
Jarden’s financial leverage. In both of these methods, company weightings were
the same percentage as the comparable analysis. Damodaran’s household
UOIG 12
May 17, 2013
University of Oregon Investment Group
products industry beta is included but not weighted to give further representation
of Jarden’s risk.
Recommendation: Hold
Figure 22: Final Implied Price
Final Implied Price
Method:
Implied Price:
Weight:
DCF
58.44
50%
Forward Comps
52.39
50%
LTM Comps
55.87
Implied Price
0%
55.42
Current Price
48.06
Undervalued
15.31%
Source: UOIG Spreads
In 2012, Jarden was faced with many obstacles, including poor snowfall
throughout the country, and hyperinflation in Venezuela. Yet Jarden stuck to its
proven business plan and was able to deliver remarkable value to its
shareholders, as Jarden was the number one performing consumer stock in 2012.
Jarden’s newly launched tailgating initiative leverages multiple business
segments into one marketing campaign, giving Jarden the opportunity to
increase sales while decreasing SG&A costs. Additionally, the sale of Coleman
products in a weather independent industry creates an anti-cyclical hedge with
one of Jarden’s largest brands. Jarden’s top-line revenue growth initiatives and
bottom-line future profitability are recognized in both the DCF and Comparable
analyses. My final undervaluation of 15.31 %, quantitatively reiterates the future
value in this company. Jarden will continue to prove to be a great addition to the
Tall-Firs portfolio, and thus my final recommendation of a strong hold.
UOIG 13
May 17, 2013
University of Oregon Investment Group
Appendix 1 – Forward Comparables Analysis
Forward Comparables Analysis
JAH
Jarden
Corporation
($ in millions)
Stock Characteristics
Current Price
Beta
Max
$181.65
1.17
Min
$27.42
0.46
Size
Short-Term Debt
Long-Term Debt
Cash and Cash Equivalent
Diluted Basic Shares
Market Capitalization
Enterprise Value
505.0
3,293.4
1,034.1
299.9
20,303.8
21,550.5
203.4
414.4
119.8
56.2
4,523.3
5,021.3
313.5
1,567.9
314.4
121.9
9,735.7
11,717.5
Growth Expectations
% Revenue Growth 2013E
% Revenue Growth 2014E
% EBITDA Growth 2013E
% EBITDA Growth 2014E
% EPS Growth 2013E
% EPS Growth 2014E
7.30%
8.10%
11.40%
9.80%
17.50%
14.10%
2.50%
3.00%
1.90%
4.66%
5.00%
7.60%
Profitability Margins
Gross Margin
EBIT Margin
EBITDA Margin
Net Margin
67.12%
17.27%
20.47%
10.70%
Credit Metrics
Interest Expense
Debt/EV
Leverage Ratio
Interest Coverage Ratio
Operating Results
Revenue
Gross Profit
EBIT
EBITDA
Net Income
Capital Expenditures
Multiples
EV/Revenue
EV/Gross Profit
EV/EBIT
EV/EBITDA
EV/(EBITDA-Capex)
Market Cap/Net Income = P/E
Median
Weight Avg.
$84.13
$102.29
1.06
0.90
VFC
CLX
V.F. Corporation Clorox Company
NWL
Newell
Rubbermaid
TUP
Tupperware
Brands
$48.06
1.09
30.00%
$181.65
0.99
30.00%
$86.60
0.46
20.00%
$27.42
1.13
20.00%
$81.66
1.17
359.1
1,503.6
373.5
144.3
12,024.2
13,513.4
504.7
3,293.4
1,034.1
118.3
5,676.5
8,940.5
415.0
1,429.2
597.5
112.8
20,303.8
21,550.5
505.0
2,169.0
445.0
131.0
11,341.3
13,570.3
211.9
1,706.5
183.8
299.9
8,130.1
9,864.7
203.4
414.4
119.8
56.2
4,523.3
5,021.3
4.55%
4.85%
7.90%
8.05%
10.00%
10.80%
4.86%
5.27%
7.66%
7.78%
9.42%
10.41%
4.90%
4.35%
8.04%
4.66%
17.50%
14.10%
7.30%
8.10%
11.40%
9.80%
12.80%
12.30%
3.50%
3.00%
7.00%
5.40%
5.00%
7.60%
2.50%
3.40%
1.90%
7.40%
7.20%
9.30%
5.60%
6.30%
8.80%
8.70%
13.20%
12.90%
29.24%
9.20%
11.64%
4.40%
45.18%
15.38%
17.31%
10.30%
48.23%
15.43%
17.96%
9.78%
29.24%
9.20%
11.64%
4.40%
47.58%
14.74%
16.73%
10.54%
42.77%
17.27%
20.47%
10.06%
38.52%
13.12%
16.10%
7.32%
67.12%
16.02%
17.89%
10.70%
$185.30
42.48%
4.65
20.64
$34.90
8.56%
0.95
4.41
$84.85
15.88%
1.67
13.06
$89.88
14.83%
1.65
14.05
$185.30
42.48%
4.65
4.41
$93.61
8.56%
0.95
20.64
$132.00
19.70%
2.31
8.77
$76.10
19.45%
2.08
12.14
$34.90
12.30%
1.27
13.98
$11,547.0
$5494.0
$1702.0
$1932.0
$1217.0
$316.0
$2,728.0
$1831.0
$437.0
$488.0
$292.0
$78.0
$5,698.0
$2315.0
$865.0
$1041.0
$494.5
$199.0
$6,854.7
$3182.4
$1041.7
$1209.4
$678.2
$211.4
$7,024.2
$2053.8
$646.5
$817.6
$309.2
$140.5
$11,547.0
$5494.0
$1702.0
$1932.0
$1217.0
$316.0
$5,658.0
$2420.0
$977.0
$1158.0
$569.0
$214.0
$5,738.0
$2210.0
$753.0
$924.0
$420.0
$184.0
$2,728.0
$1831.0
$437.0
$488.0
$292.0
$78.0
2.40x
5.61x
13.89x
11.72x
14.38x
19.93x
1.27x
2.74x
11.49x
10.29x
12.25x
15.49x
1.85x
4.19x
12.88x
10.92x
13.33x
18.02x
1.99x
4.30x
12.88x
11.06x
13.43x
17.95x
1.27x
4.35x
13.83x
10.94x
13.20x
18.36x
1.9x
3.9x
12.7x
11.2x
13.3x
16.7x
2.4x
5.6x
13.9x
11.7x
14.4x
19.9x
1.7x
4.5x
13.1x
10.7x
13.3x
19.4x
1.8x
2.7x
11.5x
10.3x
12.2x
15.5x
Multiple
EV/Revenue
EV/Gross Profit
EV/EBIT
EV/EBITDA
EV/(EBITDA-Capex)
Market Cap/Net Income = P/E
Price Target
Current Price
Undervalued
Implied Price
Weight
94.89
0.00%
51.30
10.00%
47.04
0.00%
53.04
50.00%
53.50
30.00%
46.93
10.00%
$52.39
48.06
9.01%
UOIG 14
May 17, 2013
University of Oregon Investment Group
Appendix 2 – LTM Comparables Analysis
LTM Comparables Analysis
JAH
Jarden
Corporation
($ in millions)
Stock Characteristics
Current Price
Beta
Max
$181.65
1.17
Min
$27.42
0.46
505.0
3,293.4
1,034.1
299.9
203.4
414.4
119.8
56.2
313.5
1,567.9
314.4
121.9
20,303.8
21,550.5
4,523.3
5,021.3
Growth Expectations
% Revenue Growth 2013E
% Revenue Growth 2014E
% EBITDA Growth 2013E
% EBITDA Growth 2014E
% EPS Growth 2013E
% EPS Growth 2014E
7.30%
8.10%
11.40%
9.80%
16.40%
13.40%
Profitability Margins
Gross Margin
EBIT Margin
EBITDA Margin
Net Margin
Size
Short-Term Debt
Long-Term Debt
Cash and Cash Equivalent
Diluted Basic Shares
Market Capitalization
Enterprise Value
Credit Metrics
Interest Expense
Debt/EV
Leverage Ratio
Interest Coverage Ratio
Operating Results
Revenue
Gross Profit
EBIT
EBITDA
Net Income
Capital Expenditures
Multiples
EV/Revenue
EV/Gross Profit
EV/EBIT
EV/EBITDA
EV/(EBITDA-Capex)
Market Cap/Net Income = P/E
Median
Weight Avg.
$84.13
$102.29
1.06
0.90
VFC
CLX
V.F. Corporation Clorox Company
NWL
Newell
Rubbermaid
TUP
Tupperware
Brands
$48.06
1.09
30.00%
$181.65
0.99
30.00%
$86.60
0.46
20.00%
$27.42
1.13
20.00%
$81.66
1.17
359.1
1,503.6
373.5
144.3
504.7
3,293.4
1,034.1
118.3
415.0
1,429.2
597.5
112.8
505.0
2,169.0
445.0
131.0
211.9
1,706.5
183.8
299.9
203.4
414.4
119.8
56.2
9,735.7
11,717.5
12,024.2
13,513.4
5,676.5
8,940.5
20,303.8
21,550.5
11,341.3
13,570.3
8,130.1
9,864.7
4,523.3
5,021.3
2.50%
3.00%
1.90%
4.66%
5.00%
7.60%
4.55%
4.85%
7.90%
8.05%
10.00%
10.80%
4.86%
5.27%
7.66%
7.78%
9.42%
10.41%
4.90%
4.35%
8.04%
4.66%
16.40%
13.40%
7.30%
8.10%
11.40%
9.80%
12.80%
12.30%
3.50%
3.00%
7.00%
5.40%
5.00%
7.60%
2.50%
3.40%
1.90%
7.40%
7.20%
9.30%
5.60%
6.30%
8.80%
8.70%
13.20%
12.90%
66.86%
17.61%
20.80%
10.03%
28.74%
9.62%
11.90%
3.64%
44.57%
13.52%
15.66%
8.73%
47.66%
14.49%
17.04%
8.86%
28.74%
9.62%
11.90%
3.64%
46.53%
14.75%
16.94%
9.98%
42.60%
17.61%
20.80%
10.03%
37.76%
11.60%
14.37%
6.80%
66.86%
12.28%
14.20%
7.47%
$185.30
0.42
4.77
19.69
$34.90
0.09
1.00
4.30
$84.85
0.16
1.97
10.83
$89.88
0.15
1.78
12.89
$185.30
0.42
4.77
4.30
$93.61
0.09
1.00
19.69
$132.00
0.20
2.29
8.83
$76.10
0.19
2.26
11.15
$34.90
0.12
1.68
10.52
$10,879.9
$5,062.0
$1,604.9
$1,842.9
$1,086.1
$251.9
$2,583.8
$1,727.4
$317.4
$367.0
$193.0
$75.6
$5,753.9
$2,308.6
$835.9
$1,007.3
$481.7
$194.6
$6,642.8
$3,026.3
$978.0
$1,145.8
$613.3
$189.7
$6,696.1
$1,924.4
$643.9
$796.7
$243.9
$154.5
$10,879.9
$5,062.0
$1,604.9
$1,842.9
$1,086.1
$251.9
$5,605.0
$2,388.0
$987.0
$1,166.0
$562.0
$212.0
$5,902.7
$2,229.1
$684.8
$848.5
$401.3
$177.2
$2,583.8
$1,727.4
$317.4
$367.0
$193.0
$75.6
2.42x
5.68x
15.82x
13.68x
17.23x
23.44x
1.34x
2.91x
13.43x
11.22x
13.55x
18.69x
1.96x
4.34x
14.08x
11.67x
14.46x
20.22x
2.04x
4.45x
14.20x
12.06x
14.72x
20.40x
1.34x
4.65x
13.88x
11.22x
13.92x
23.27x
2.0x
4.3x
13.4x
11.7x
13.5x
18.7x
2.4x
5.7x
13.7x
11.6x
14.2x
20.2x
1.7x
4.4x
14.4x
11.6x
14.7x
20.3x
1.9x
2.9x
15.8x
13.7x
17.2x
23.4x
Multiple
EV/Revenue
EV/Gross Profit
EV/EBIT
EV/EBITDA
EV/(EBITDA-Capex)
Market Cap/Net Income = P/E
Price Target
Current Price
Undervalued
Implied Price
Weight
$92.31
0.00%
$49.00
10.00%
$53.92
0.00%
$57.87
50.00%
$56.53
30.00%
$50.81
10.00%
$55.87
48.06
16.26%
UOIG 15
May 17, 2013
University of Oregon Investment Group
Appendix 3 – Discounted Cash Flow Analysis
Discounted Cash Flow Analysis
($ in millions)
2008A
2009A
2010A
2011A
2012A
Q1
Q2
Q3
Q4
03/31/2013A
06/30/2013E
09/30/2013E
12/31/2013E
2013E
2014E
2015E
2016E
2017E
2018E
Total Revenue
5383.30
5152.60
6022.70
6679.90
6696.10
1580.70
1722.90
1804.82
1908.69
7024.21
7329.76
7622.95
7902.49
8165.88
% YoY Growth
N/A
(4.29%)
16.89%
10.91%
.24%
5.70%
2.82%
5.80%
4.92%
4.90%
4.35%
4.00%
3.67%
3.33%
3.00%
2880.50
3726.60
4383.90
4821.80
4771.70
1137.20
1222.72
1267.45
1342.01
4970.39
5184.77
5,391.40
5,588.31
5,773.75
5,946.13
Cost of Goods Sold
8410.85
% Revenue
53.51%
72.32%
72.79%
72.18%
71.26%
71.94%
70.97%
70.23%
70.31%
70.76%
70.74%
70.73%
70.72%
70.71%
70.70%
Gross Profit
$2,502.80
$1,426.00
$1,638.80
$1,858.10
$1,924.40
$443.50
$500.18
$537.37
$566.68
$2,053.82
$2,144.99
$2,231.55
$2,314.17
$2,392.12
$2,464.72
46.49%
27.68%
27.21%
27.82%
28.74%
28.06%
29.03%
29.77%
29.69%
29.24%
29.26%
29.27%
29.28%
29.29%
29.30%
893.40
833.60
1069.00
1095.50
1167.70
315.43
306.10
305.73
309.07
1,236.26
1,289.31
1,340.12
1,388.47
1,433.93
1,476.10
Gross Margin
Selling General and Administrative Expense
% Revenue
16.60%
16.18%
17.75%
16.40%
17.44%
19.96%
17.77%
16.94%
16.19%
17.60%
17.59%
17.58%
17.57%
17.56%
17.55%
Depreciation and Amortization
120.30
130.30
142.80
163.70
152.80
37.07
40.87
44.68
48.48
171.10
231.87
315.23
375.69
316.53
333.13
% Revenue
2.23%
2.53%
2.37%
2.45%
2.28%
2.35%
2.37%
2.48%
2.54%
2.44%
3.16%
4.14%
4.75%
3.88%
3.96%
Other Expense
343.00
75.20
19.70
75.90
27.10
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
% Revenue
6.37%
1.46%
0.33%
1.14%
0.40%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
$1,146.10
$386.90
$407.30
$510.20
$576.80
$91.00
$153.21
$186.96
$209.14
$646.46
$623.82
$576.21
$550.02
$641.67
$655.49
21.29%
7.51%
6.76%
7.64%
8.61%
5.76%
8.89%
10.36%
10.96%
9.20%
8.51%
7.56%
6.96%
7.86%
7.79%
178.70
147.50
177.80
179.70
185.30
49.60
45.13
45.13
45.13
185.00
194.24
202.77
208.63
213.95
219.52
Earnings Before Interest & Taxes
% Revenue
Interest Expense
% Revenue
3.32%
2.86%
2.95%
2.69%
2.77%
3.14%
2.62%
2.50%
2.36%
2.63%
2.65%
2.66%
2.64%
2.62%
2.61%
Earnings Before Taxes
967.40
239.40
229.50
330.50
391.50
41.40
108.08
141.83
164.01
461.46
429.58
373.44
341.39
427.72
435.96
% Revenue
17.97%
4.65%
3.81%
4.95%
5.85%
2.62%
6.27%
7.86%
8.59%
6.57%
5.86%
4.90%
4.32%
5.24%
5.18%
26.30
110.70
122.80
125.70
147.60
13.66
35.67
46.81
54.12
152.28
141.76
123.24
112.66
141.15
143.87
Less Taxes (Benefits)
Tax Rate
80.70%
46.20%
53.50%
38.00%
37.70%
33.00%
33.00%
33.00%
33.00%
33.00%
33.00%
33.00%
33.00%
33.00%
33.00%
Net Income
$941.10
$128.70
$106.70
$204.80
$243.90
$27.74
$72.42
$95.03
$109.89
$309.18
$287.82
$250.20
$228.73
$286.57
$292.10
Net Margin
17.48%
2.50%
1.77%
3.07%
3.64%
1.75%
4.20%
5.27%
5.76%
4.40%
3.93%
3.28%
2.89%
3.51%
3.47%
120.30
130.30
142.80
163.70
152.80
37.07
40.87
44.68
48.48
171.10
231.87
315.23
375.69
316.53
333.13
Add Back: Depreciation and Amortization
Add Back: Interest Expense*(1-Tax Rate)
Operating Cash Flow
% Revenue
Current Assets
% Revenue
Current Liabilities
34.49
79.36
82.68
111.41
115.44
1095.89
338.36
332.18
479.91
512.14
33.23
$98.04
30.24
30.24
30.24
143.53
169.94
188.60
123.95
$604.22
130.14
135.86
139.78
143.34
147.08
$649.82
$701.29
$744.20
$746.44
$772.31
20.36%
6.57%
5.52%
7.18%
7.65%
6.20%
8.33%
9.42%
9.88%
8.60%
8.87%
9.20%
9.42%
9.14%
9.18%
2,336.30
2,675.40
2,675.40
2,685.20
2,776.30
3,036.90
2,718.74
2,848.00
2,939.63
2,939.63
3,077.03
3,205.45
3,332.48
3,453.35
3,567.04
43.40%
51.92%
44.42%
40.20%
41.46%
192.12%
157.80%
157.80%
154.01%
41.85%
41.98%
42.05%
42.17%
42.29%
42.41%
1,354.40
1,677.20
1,677.20
1,463.70
1,728.70
1,702.40
1,789.74
1,851.99
1,826.34
1,826.34
1,921.18
2,010.99
2,098.17
2,181.98
2,261.74
% Revenue
25.16%
32.55%
27.85%
21.91%
25.82%
107.70%
103.88%
102.61%
95.69%
26.00%
26.21%
26.38%
26.55%
26.72%
26.89%
Net Working Capital
$981.90
$998.20
$998.20
$1,221.50
$1,047.60
$1,334.50
$929.00
$996.01
$1,113.29
$1,113.29
$1,155.85
$1,194.46
$1,234.31
$1,271.37
$1,305.30
% Revenue
18.24%
19.37%
16.57%
18.29%
15.64%
84.42%
53.92%
55.19%
58.33%
15.85%
15.77%
15.67%
15.62%
15.57%
15.52%
104.9
128.8
16.3
223.3
-173.9
$286.90
($405.50)
$67.01
$117.28
$65.69
$42.56
$38.61
$39.85
$37.06
$33.94
Capital Expenditures
102.20
107.40
137.50
126.90
154.50
35.12
35.12
35.12
35.12
140.48
146.60
152.46
158.05
163.32
% Revenue
1.90%
2.08%
2.28%
1.90%
2.31%
2.22%
2.04%
1.95%
1.84%
2.00%
2.00%
2.00%
2.00%
2.00%
2.00%
42.60
13.70
755.50
14.40
286.30
55.63
55.63
55.63
55.63
222.50
213.60
205.06
196.85
190.95
192.86
Change in Working Capital
Acquisitions
% Revenue
168.22
.79%
.27%
12.54%
.22%
4.28%
3.52%
3.23%
3.08%
2.91%
3.17%
2.91%
2.69%
2.49%
2.34%
2.29%
Unlevered Free Cash Flow
846.19
88.46
-577.12
115.31
245.24
-279.61
458.28
12.18
-19.42
175.55
247.07
305.16
349.45
355.12
377.30
Discounted Free Cash Flow
846.19
88.46
-577.12
115.31
245.24
-279.61
451.56
11.83
-18.58
167.94
222.80
259.40
280.01
268.23
268.64
0.25
0.50
0.75
0.75
1.75
2.75
3.75
4.75
5.75
Discount Year:
EBITDA
EBITDA Margin
EBITDA Growth
1266.4
517.2
550.1
697.3
756.7
128.1
194.1
231.6
257.6
817.6
855.7
891.4
925.7
958.2
988.6
23.52%
10.04%
9.13%
10.44%
11.30%
8.10%
11.27%
12.83%
13.50%
11.64%
11.67%
11.69%
11.71%
11.73%
11.75%
-59.16%
6.36%
26.76%
8.52%
8.04%
4.66%
4.18%
3.84%
3.51%
3.18%
UOIG 16
May 17, 2013
University of Oregon Investment Group
Appendix 4 – Revenue Model
Revenue Model
($ in millions)
Outdoor Solutions
2008A
2009A
2010A
2011A
2012A
Q1
Q2
Q3
Q4
03/31/2013A
06/30/2013E
09/30/2013E
12/31/2013E
2013E
Q1
Q2
Q3
Q4
03/31/2014E
06/30/2014E
09/30/2014E
12/31/2014E
2014E
2015E
2016E
2017E
2018E
2481
2311.8
2518.7
2772.1
2692.9
694.9
760.2
703.9
654.6
2815.5
721.5
813.8
730.5
660.0
2925.9
3036.2
3144.0
3248.7
% YoY Growth
46.06%
(6.82%)
8.95%
10.06%
(2.86%)
3.70%
1.73%
7.04%
5.94%
4.55%
3.83%
7.05%
3.78%
.82%
3.92%
3.77%
3.55%
3.33%
3.00%
% of Total Revenue
46.09%
44.87%
41.82%
41.50%
40.22%
43.96%
44.12%
39.00%
34.30%
40.08%
44.07%
44.40%
39.11%
33.14%
39.92%
39.83%
39.78%
39.78%
39.78%
Consumer Solutions
1812.9
1835.9
1869.6
1880.3
1940.9
363.3
423.1
538.3
717.0
2042.9
388.0
442.4
576.6
727.0
2134.0
2224.0
2308.3
2385.9
2457.5
N/A
1.27%
1.84%
.57%
3.22%
4.43%
4.98%
5.63%
5.38%
5.25%
6.79%
4.56%
7.12%
1.40%
4.46%
4.22%
3.79%
3.36%
3.00%
33.68%
35.63%
31.04%
28.15%
28.99%
22.98%
24.56%
29.83%
37.57%
29.08%
23.70%
24.14%
30.87%
36.50%
29.11%
29.18%
29.21%
29.22%
29.22%
2229.7
% YoY Growth
% of Total Revenue
Branded Consumables
% YoY Growth
% of Total Revenue
Process Solutions
% YoY Growth
% of Total Revenue
3346.2
804.9
792.1
1345.3
1734.4
1753.1
443.7
454.7
481.2
437.7
484.7
520.1
493.3
1935.7
2017.9
2094.6
2164.8
(1.59%)
69.84%
28.92%
1.08%
10.21%
3.55%
4.85%
468.3
3.52%
1843.9
N/A
5.18%
(1.36%)
6.60%
8.08%
5.34%
4.98%
4.25%
3.80%
3.35%
3.00%
14.95%
15.37%
22.34%
25.96%
26.18%
28.07%
26.39%
26.66%
24.54%
26.25%
26.73%
26.44%
27.84%
24.77%
26.41%
26.47%
26.51%
26.51%
26.51%
348.6
262.6
342.7
351.2
377.1
97.6
102.4
99.5
84.5
392.2
100.4
108.5
105.5
89.8
404.3
415.0
425.8
436.7
447.8
N/A
(24.67%)
30.50%
2.48%
7.37%
6.32%
(.91%)
1.97%
.17%
4.00%
2.91%
6.02%
6.04%
6.18%
3.10%
2.63%
2.60%
2.57%
2.54%
5.32%
6.48%
5.10%
5.69%
5.26%
5.63%
6.17%
5.94%
5.51%
4.43%
5.58%
6.14%
5.92%
5.65%
4.51%
5.52%
5.44%
5.39%
5.35%
Corporate Elimination
-64.1
-49.8
-53.6
-58.1
-67.9
-18.8
-17.4
-18.1
-15.8
-70.2
-18.4
-17.7
-18.5
-15.8
-70.4
-70.6
-70.7
-70.8
-70.8
% YoY Growth
N/A
(22.31%)
7.63%
8.40%
16.87%
10.59%
1.95%
1.30%
-0.42%
3.45%
(1.88%)
1.57%
1.96%
(.49%)
.23%
.21%
.19%
.10%
.09%
% of Total Revenue
(1.19%)
(.97%)
(.89%)
(.87%)
(1.01%)
(1.19%)
(1.01%)
(1.00%)
(.83%)
(1.00%)
(1.13%)
(.97%)
(.99%)
(.79%)
(.96%)
(.93%)
(.89%)
(.87%)
(.84%)
Total Revenue
5383.3
5152.6
6022.7
6679.9
6696.1
1580.7
1722.9
1804.8
1908.7
7024.2
1637.1
1832.9
1868.0
1991.7
7329.8
7623.0
7902.5
8165.9
8410.9
% YoY Growth
N/A
(4.29%)
16.89%
10.91%
.24%
5.70%
2.82%
5.80%
4.92%
4.90%
3.57%
6.38%
3.50%
4.35%
4.35%
4.00%
3.67%
3.33%
3.00%
UOIG 17
May 17, 2013
University of Oregon Investment Group
Appendix 5 – Working Capital Model
Working Capital Model
($ in millions)
Total Revenue
Current Assets
Accounts Receivable
Days Sales Outstanding A/R
% of Revenue
Inventory
Days Inventory Outstanding
% of Revenue
Prepaid Expenses & other current assets
% of Revenue
Deferred taxes on income
% of Revenue
Total Current Assets
% of Revenue
Long Term Assets
Net PP&E Beginning
Capital Expenditures
Acquisitions
Depreciation and Amortization
Net PP&E Ending
Total Current Assets & Net PP&E
% of Revenue
Current Liabilities
Accounts Payable
% of Revenue
Accrued Charges
% of Revenue
Unpaid Taxes on Income
% of Revenue
Current Portion of Long Term Debt
% of Revenue
Other Liabilities
% of Revenue
Total Current Liabilities
% of Revenue
2008A
2009A
2010A
2011A
2012A
Q1
Q2
Q3
Q4
03/31/2013A
06/30/2013E
09/30/2013E
12/31/2013E
2013E
2014E
2015E
2016E
2017E
2018E
$5,383.30
$5,152.60
$6,022.70
$6,679.90
$6,696.10
$1,580.70
$1,722.90
$1,804.82
$1,908.69
$7,024.21
$7,329.76
$7,622.95
$7,902.49
$8,165.88
$8,410.85
894.10
61
16.61%
1180.40
150
21.93%
114.50
2.13%
147.30
2.74%
2336.30
43.40%
851.30
60
16.52%
974.10
95
18.91%
182.00
3.53%
153.20
2.97%
2160.60
41.93%
1067.70
65
17.73%
1294.60
108
21.50%
146.60
2.43%
166.50
2.76%
2675.40
44.42%
1080.50
59
16.18%
1274.40
96
19.08%
148.70
2.23%
181.60
2.72%
2685.20
40.20%
1137.70
62
16.99%
1310.30
101
19.57%
153.80
2.30%
174.50
2.61%
2776.30
41.46%
1236.80
70
78.24%
1442.40
114
91.25%
191.10
12.09%
166.60
10.54%
3036.90
192.12%
1117.47
59
64.86%
1279.77
95
74.28%
152.65
8.86%
168.84
9.80%
2718.74
157.80%
1170.60
60
64.86%
1340.62
97
74.28%
159.91
8.86%
176.87
9.80%
2848.00
157.80%
1208.16
58
63.30%
1383.77
95
72.50%
165.07
8.65%
182.63
9.57%
2939.63
154.01%
1208.16
63
17.20%
1383.77
102
19.70%
165.07
2.35%
182.63
2.60%
2939.63
41.85%
1264.38
63
17.25%
1447.63
102
19.75%
173.72
2.37%
191.31
2.61%
3077.03
41.98%
1318.77
63
17.30%
1505.53
102
19.75%
182.19
2.39%
198.96
2.61%
3205.45
42.05%
1371.08
63
17.35%
1564.69
102
19.80%
190.45
2.41%
206.25
2.61%
3332.48
42.17%
1420.86
64
17.40%
1620.93
102
19.85%
198.43
2.43%
213.13
2.61%
3453.35
42.29%
1467.69
64
17.45%
1673.76
103
19.90%
206.07
2.45%
219.52
2.61%
3567.04
42.41%
510.9
102.2
42.60
120.3
506.9
2843.2
52.82%
506.9
107.4
13.70
130.3
505.7
2666.3
51.75%
505.7
137.5
755.5
142.8
658.9
3334.3
55.36%
658.9
126.9
14.4
163.7
615.9
3301.1
49.42%
615.9
154.5
286.3
152.8
678.6
3454.9
51.60%
678.6
35.1
55.6
37.1
664.2
3701.1
234.14%
664.2
35.1
55.6
40.9
714.1
3432.8
199.25%
714.1
35.1
55.6
44.7
760.1
3608.1
199.92%
760.1
35.1
55.6
48.5
802.4
3742.0
196.05%
802.4
140.5
222.5
171.1
994.3
3933.9
56.01%
1122.6
146.6
213.6
231.9
1251.0
4328.0
59.05%
1251.0
152.5
205.1
315.2
1293.2
4498.7
59.02%
1293.2
158.0
196.9
375.7
1272.5
4604.9
58.27%
1272.5
163.3
190.9
316.5
1310.2
4763.6
58.33%
1310.2
168.2
192.9
333.1
1338.1
4905.2
58.32%
422.10
7.84%
142.00
2.64%
22.70
0.42%
431.40
8.01%
336.20
6.25%
1354.40
25.16%
390.70
7.58%
162.30
3.15%
26.60
0.52%
520.30
10.10%
384.60
7.46%
1484.50
28.81%
573.30
9.52%
180.20
2.99%
27.90
0.46%
434.60
7.22%
461.20
7.66%
1677.20
27.85%
557.50
8.35%
181.10
2.71%
22.30
0.33%
269.30
4.03%
433.50
6.49%
1463.70
21.91%
615.40
9.19%
187.60
2.80%
0.00
0.00%
504.70
7.54%
421.00
6.29%
1728.70
25.82%
632.70
40.03%
154.80
9.79%
0.00
0.00%
520.20
32.91%
394.70
24.97%
1702.40
107.70%
620.24
36.00%
172.29
10.00%
0.00
0.00%
567.00
32.91%
430.21
24.97%
1789.74
103.88%
649.73
36.00%
189.86
10.52%
0.00
0.00%
593.96
32.91%
418.44
23.18%
1851.99
102.61%
649.74
34.04%
200.79
10.52%
0.00
0.00%
533.29
27.94%
442.53
23.18%
1826.34
95.69%
649.74
9.25%
200.79
2.86%
0.00
0.00%
533.29
7.59%
442.53
6.30%
1826.34
26.00%
681.67
9.30%
216.85
2.96%
0.00
0.00%
560.16
7.64%
462.51
6.31%
1921.18
26.21%
712.75
9.35%
233.15
3.06%
0.00
0.00%
586.37
7.69%
478.72
6.28%
2010.99
26.38%
742.83
9.40%
249.60
3.16%
0.00
0.00%
611.83
7.74%
493.91
6.25%
2098.17
26.55%
771.68
9.45%
266.08
3.26%
0.00
0.00%
636.30
7.79%
507.92
6.22%
2181.98
26.72%
799.03
9.50%
282.48
3.36%
0.00
0.00%
659.60
7.84%
520.63
6.19%
2261.74
26.89%
Appendix 6 –Discounted Cash Flows Analysis Assumptions
UOIG 18
May 17, 2013
University of Oregon Investment Group
Appendix 6 – Discounted Cash Flow Analysis Assumptions
Discounted Free Cash Flow Assumptions
Tax Rate
Risk Free Rate
Beta
Market Risk Premium
33.00% Terminal Growth Rate
1.82% Terminal Value
1.09 PV of Terminal Value
5.79% Sum of PV Free Cash Flows
Considerations
Implied Price
3.00%
12,595
Terminal Gro
Avg. Industry Debt / Equity
17.48%
8,968
Avg. Industry Tax Rate
28.79%
1,744
Current Reinvestment Rate
31.75%
Reinvestment Rate in Year 2018E
14.09%
21.29%
% Equity
59.95% Firm Value
10,712
% Debt
40.05% Total Debt
3,798
Implied Return on Capital in Perpetuity
Cost of Debt
4.55% Cash & Cash Equivalents
1,034
Terminal Value as a % of Total
83.7%
CAPM
8.12% Market Capitalization
6,913
Implied 2014E EBITDA Multiple
12.5x
WACC
6.09% Fully Diluted Shares
118
Implied Price
58.44
Current Price
48.06
Undervalued
21.61%
Implied Multiple in Year 2018E
9.1x
Free Cash Flow Growth Rate in Year 2018E
6%
UOIG 19
University of Oregon Investment Group
May 17, 2013
Appendix 7: Sensitivity Analysis
Implied Price
Undervalued/(Overvalued)
Terminal Growth Rate
58
2.0%
2.5%
3.0%
3.5%
4.0%
0
2.0%
2.5%
3.0%
3.5%
4.0%
0.89
53.85
66.52
84.49
111.97
159.18
0.89
12.04%
38.41%
75.81%
132.97%
231.22%
0.99
45.91
56.02
69.81
89.77
121.21
1.09
39.33
47.55
58.44
73.54
95.87
1.19
33.78
40.58
49.37
61.15
77.77
1.29
29.04
34.74
41.96
51.38
64.19
Adjusted Beta
Adjusted Beta
Terminal Growth Rate
0.99
(4.47%)
16.56%
45.26%
86.79%
152.20%
1.09
(18.17%)
(1.06%)
21.60%
53.01%
99.49%
1.19
(29.72%)
(15.56%)
2.72%
27.23%
61.82%
1.29
(39.59%)
(27.71%)
(12.69%)
6.91%
33.56%
Implied Price
Undervalued/(Overvalued)
Market Risk Premium
58
4.79%
5.29%
5.79%
6.29%
6.79%
0
4.79%
5.29%
5.79%
6.29%
6.79%
0.89
117.63
98.99
84.49
72.90
63.42
0.89
144.75%
105.96%
75.81%
51.69%
31.96%
0.99
97.70
82.07
69.81
59.95
51.84
0.99
103.29%
70.76%
45.26%
24.74%
7.88%
1.09
82.48
69.04
58.44
49.87
42.79
1.09
71.61%
43.65%
21.60%
3.76%
(10.96%)
1.19
70.47
58.69
49.37
41.79
35.52
1.19
46.62%
22.13%
2.72%
(13.04%)
(26.09%)
1.29
60.75
50.29
41.96
35.18
29.55
1.29
26.41%
4.63%
(12.69%)
(26.80%)
(38.51%)
Adjusted Beta
Adjusted Beta
Market Risk Premium
Implied Price
Undervalued/(Overvalued)
Terminal Growth Rate
58
2.0%
2.5%
3.0%
3.5%
4.0%
0
2.0%
2.5%
3.0%
3.5%
4.0%
23.0%
48.15
56.87
68.26
83.77
106.11
23.0%
0.18%
18.33%
42.03%
74.30%
120.79%
28.0%
43.84
52.33
63.49
78.83
101.21
33.0%
39.33
47.56
58.44
73.55
95.89
38.0%
34.63
42.54
53.09
67.88
90.08
43.0%
29.70
37.25
47.41
61.79
83.73
Tax Rate
Tax Rate
Terminal Growth Rate
28.0%
(8.79%)
8.88%
32.11%
64.02%
110.59%
33.0%
(18.16%)
(1.05%)
21.61%
53.03%
99.51%
38.0%
(27.95%)
(11.49%)
10.47%
41.24%
87.44%
43.0%
(38.20%)
(22.48%)
(1.35%)
28.57%
74.22%
Implied Price
Undervalued/(Overvalued)
Terminal Growth Rate
58
2.0%
2.5%
3.0%
3.5%
4.0%
0
2.0%
2.5%
3.0%
3.5%
4.0%
5.59%
49.22
60.36
75.80
98.65
135.91
5.59%
2.42%
25.59%
57.72%
105.26%
182.78%
5.84%
43.95
53.48
66.36
84.75
113.17
5.84%
(8.54%)
11.27%
38.07%
76.35%
135.47%
6.09%
39.33
47.56
58.44
73.54
95.88
6.09%
(18.16%)
(1.05%)
21.61%
53.03%
99.51%
6.34%
35.24
42.41
51.72
64.31
82.30
6.34%
(26.67%)
(11.76%)
7.61%
33.82%
71.25%
6.59%
31.60
37.89
45.93
56.58
71.35
6.59%
(34.24%)
(21.16%)
(4.43%)
17.73%
48.45%
WACC
WACC
Terminal Growth Rate
Implied Price
Undervalued/(Overvalued)
Terminal Growth Rate
58
2.0%
2.5%
3.0%
3.5%
4.0%
0
2.0%
2.5%
3.0%
3.5%
4.0%
3.55%
44.32
53.95
66.99
85.67
114.63
3.55%
(7.79%)
12.25%
39.40%
78.26%
138.51%
4.05%
41.74
50.63
62.52
79.28
104.61
4.05%
(13.15%)
5.34%
30.10%
64.95%
117.67%
4.55%
39.33
47.56
58.44
73.54
95.89
4.55%
(18.16%)
(1.05%)
21.61%
53.03%
99.51%
5.05%
37.08
44.71
54.71
68.38
88.22
5.05%
(22.85%)
(6.98%)
13.83%
42.28%
83.55%
5.55%
34.96
42.06
51.27
63.70
81.42
5.55%
(27.25%)
(12.49%)
6.67%
32.54%
69.41%
Cost of Debt
Cost of Debt
Terminal Growth Rate
WACC
Implied Price
Terminal Growth Rate
0
2.0%
2.5%
3.0%
3.5%
4.0%
23.0%
6.27%
6.27%
6.27%
6.27%
6.27%
28.0%
6.18%
6.18%
6.18%
6.18%
6.18%
33.0%
6.09%
6.09%
6.09%
6.09%
6.09%
38.0%
5.99%
5.99%
5.99%
5.99%
5.99%
43.0%
5.90%
5.90%
5.90%
5.90%
5.90%
Terminal Year
Gross Margin
Tax Rate
Terminal Growth Rate
58
2.0%
2.5%
3.0%
3.5%
4.0%
29.1%
37.57
45.55
56.11
70.76
92.43
29.2%
38.45
46.55
57.28
72.15
94.16
29.3%
39.33
47.56
58.44
73.55
95.89
29.4%
40.21
48.56
59.61
74.94
97.61
29.5%
41.09
49.56
60.78
76.33
99.34
UOIG 20
University of Oregon Investment Group
May 17, 2013
Appendix 8 – Sources
Jarden Corporation Financial Statements
Jarden Corporation Earnings Calls
Jarden Corporation 2012 Annual Report
Jarden Corporation March 2013 Investor Presentation
Jarden Corporation Press Releases
Jarden Corporation Proxy Statements
IBIS World
Factset
Yahoo Finance
UOIG 21