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Jarden Corporation (NYSE:JAH)

Q4 2008 Earnings Call

February 11, 2009 4:45 pm ET

Executives

Erica Pettit – Financial Dynamics

Martin E. Franklin - Chairman of the Board & Chief Executive Officer

Ian G.H. Ashken - Vice Chairman of the Board & Chief Financial Officer

James E. Lillie – President & Chief Operating Officer

Analysts

William Chappell, CFA – SunTrust Robinson Humphrey

Charles Strauzer – CJS Securities

Lauren R. Lieberman – Barclays Capital

Christopher Agnew – Goldman Sachs

Greg Badishkanian – Citigroup Global Markets

Reza Vahabzadeh – Barclays Capital

Hayley Wolf – Rochdale Securities

Joseph Altobello – Oppenheimer & Co.

Todd Harkrider – Goldman Sachs

Jon R. Anderson – William Blair & Co.

Operator

Welcome to the Jarden Corporation’s conference call. Today’s call is being recorded. Today’s call will begin with management making some formal remarks. When they have concluded a question-and-answer period will follow. (Operator Instructions) I’d now like to turn the conference over to Erica Pettit.

Erica Pettit

Thank you for joining us for Jarden's fourth quarter 2008 financial results. When management has concluded making its formal remarks a question-and-answer period will follow. The Operator will provide instructions on the procedure for asking a question again at that time. In accordance with Regulation FD or Fair Disclosure we are webcasting this conference call.

Any redistribution, retransmission or rebroadcast of this call in any form without the express written consent of Jarden is strictly prohibited. Please note that on this call the company may discuss forward-looking statements within the meaning of the Federal Securities laws that are intended to qualify for the Safe Harbor from liability established by the Private Securities Litigation Reform Act of 1995.

These statements reflect our best judgment today of future events or results including our expected future business and financial performance, earnings, price to earnings ratios, leverage multiples, cash flows, organic growth, gross margins and renewability of our credit facility based on current market trends and conditions but are not guarantees and are subject to risks and uncertainties including those listed in the cautionary language at the end our earnings press release issued this afternoon.

As a result actual results may differ materially from those projected in the forward-looking statements. For details concerning these risks and uncertainties you should refer to the company's fillings with the Securities and Exchange Commission including the company's Form 10-K and recent Form 10-Q. The company undertakes no obligation to update these forward-looking statements.

And now I would like to turn the call over to Martin Franklin, Chairman and Chief Executive Officer.

Martin E. Franklin

With me on the call today is Ian Ashken, our Vice Chairman and Chief Financial Officer and Jim Lillie, our President and Chief Operating Officer. As you will have seen from our press release we delivered record revenue, segment earnings and adjusted earnings per share for the year ended December 31, 2008. These results were achieved during an extraordinary year of macro economic challenges and volatility.

The fact that we delivered another strong operating performance in 2008 following our success in 2007 only serves to highlight the strength of our diversified business model based on market leading global brands our diversified and innovative product offerings and our unique operating culture described in our Jarden D&A.

Ian will cover in his comments the details of our overall financial performance as well as the goodwill impairment charge we recorded in the quarter. Jim will follow this with an update on developments within the operation and I’d like to start by recapping a few of the highlights of 2008 as well as answer some of the questions I’m most frequently asked.

First and foremost Jarden delivered a year of record revenue, segment earnings and as adjusted earnings per share on the back of both gross margin improvements and tightly controlled SG&A costs. While our overall sales in our three primary segments was down approximately 2% for the year on an organic basis this decline was less than the average market decline of most of the categories we serve.

The fact that revenues declined and yet gross profit and adjusted EBITDA improved in both dollar and percentage terms in Q4 2008 versus Q4 2007 it is a testament to the flexible cost structure we maintain across most of our businesses. As Jim will discuss during 2008 many of our businesses won industry awards, our products won awards for innovation and value and our employees earned recognition for service in our communities as well as within the industries we serve.

We pride ourselves on taking the best aspects of being a Fortune 500 company. For example scalability, systems, best in class programs, retailer significance and marrying this with the best of having an entrepreneurial culture such as individual empowerment, saving corporate money as if it was our own and rewards for creativity and results.

We believe that one of Jarden’s strengths in these recessionary times is the fact that our culture is more than just words on a piece of paper. Our brands are basic and provide a strong value proposition in this economy. They are market leaders and leading innovators. This shows through in our POS performance at retail and our market share growth. During 2008 we took actions we believed appropriate to protect our balance sheet as well as the operations of the business.

We closed plants, we reduced our workforce in line with our revised revenue expectations, cut discretionary expenditures and trimmed our capital budgets. These are not easy undertakings but we believe they are essential to the long term success of our business. We will continue to be proactive and take whatever actions are necessary in 2009 to help ensure we are well positioned to benefit early when the macro economy eventually does pick up.

Turning now to some of the top investor questions that I get asked, the topic I’m asked the most about relates to the leverage within our business, any needs we may have to access capital markets and compliance with our bank covenants. This line of questioning reflects macro economic concerns and potential issues at other companies rather than anything specific to Jarden.

Ironically during the good times we were criticized by some for maintaining what at the time was considered an overly conservative goal of not more than 3.5 times leverage ratio. We are pleased that our consistency and fiscal conservatism over the last eight years has left us in a good position to weather the current credit crunch without having it adversely impact the long term prospects for the business.

We achieved the goal we set for ourselves at the beginning of 2008 by finishing the year with a 3.5 times leverage ratio for bank covenant purposes. We anticipate finishing 2009 with a bank covenant leverage ratio of between 3.0 and 3.25 times. Our long term financing is in place until 2012 and 2017.

We do not anticipate any issues in renewing our $250 million securitization facility in July 2009 given the nature of this facility and the relatively active nature of this market. The exact same questions were raised last year and we renewed the facility in the normal course. Today we have no borrowings on our $185 million revolving credit facility and do not anticipate having the need to replace this facility when it expires in Q1 2010.

In fact it is our current intention to cancel this facility in early Q3 2009 to save the unused line fees given that our cash flow generation is strongest in the second half of the year. Jarden has always demonstrated strong free cash flow and this is one of our most significant advantages in this period where there is such a premium on liquidity.

As already announced we anticipate that Jarden will have its strongest cash flow year ever in 2009 with over $250 million of expected cash flow from operations after capital expenditures as the benefits of lower interest rates, in flows from working capital and reduced capital expenditures combined with good operating cash flow from the businesses.

The second most frequent question I receive is why has Jarden stock price been trading so far below any normal valuation metric and those of comparable companies? As a shareholder and a buyer of our stock over the last two years I share in this frustration. To this question I simply answer that our job is to run the company while also providing the investment community with the information they need to make an informed decision on the business.

Based on yesterday’s closing price Jarden’s stock price currently trades at over 25% projected free cash flow yield, 4.2 times our historic price earnings ratio and between five and six times our historical and future EBITDA multiple, approximately two thirds of book value multiple and less than two thirds of our historic revenue multiple.

Investors will eventually figure out whether these valuations are appropriate for a Fortune 500 company with a diversified portfolio of market leading consumer product brands that has proven its resilience with relatively strong operating performance over the last few years. Even though the valuation of all consumer stocks has come down over the last year Jarden still trades at a significant discount to its comp group.

All concerns about acquisitions and transparency of the numbers no longer applied as we’ve not completed any acquisitions in 2008, in fact for 18 months. 2009 will the be the last year of reorganization expenses relating to prior acquisitions as these will be limited to our Outdoor Solution segment. Our belief remains that if we continue to perform well whether in good or bad economies investors will eventually take notice.

The third question and by far the least frequently asked relates to actually how we operate our business, our strategy, long term growth outlook and new products, etc. This again is a reflection of the times. As we have stated many times before our belief is that long term value is created by growing and improving operations.

I hope that you will all have the opportunity to attend or listen to our analysts at Investor Day on March the 3rd as I think you’ll be pleasantly surprised to find out how Jarden has continued to focus on developing our core business despite the static of the macro economic environment. in many ways the tough economic climate affords us time to really focus on achieving excellence deep into our operating platform

Slowly but surely we are proving out our belief that being the market leader in niche markets can provide opportunities to grow and succeed even in down markets. I believe this resilience will ultimately be reflected in our long term price earnings multiple. I’d now like to hand over to Ian to review the numbers in more detail.

Ian G.H. Ashken

During this call I will focus on our as adjusted numbers and then cover separately the main reconciling items to our GAAP results. For 2008 our reported sales were $5.4 billion an increase of $723 million or 16% over the prior year due to the acquisitions of K2 and Pure Fishing in 2007.

On a pro forma basis sales in our three primary segments declined by $103 million or 2% reflecting the tough macro economic conditions particularly in the fourth quarter where overall sales declined by 8% to $1.35 billion compared to the fourth quarter of 2007. For the full year our Outdoor Solutions revenue declined on a pro forma basis by 1.8% with a 13% decline in Q4 being driven primarily by weak retailer reorders, declines in our Paintball business and unfavorable foreign exchange translation.

Similarly our Consumer Solutions top line declined 3% for the year with a 6% fourth quarter decline being primarily due to a lack of retailer reorders despite US results that were generally favorable compared to the fourth quarter of 2007. Branded Consumables was essentially flat both for the full year and fourth quarter 2008 led by a strong performance by our Ball fresh preserving business and solid performances at First Alert and United States Playing Cards.

Our Lehigh business was able to deliver organic growth for the first time since 2006 in Q4 2008 suggesting this category has finally turned the corner. On a consolidated basis we continued our sequential quarterly gross margin improvement with full year gross margin of 27.9% and fourth quarter gross margin of 28%. We had approximately 70 and 75 basis points better than the previous year respectively.

This improvement is especially satisfying considering the unfavorable cost environment during the majority of 2008. We were successful in mitigating this negative impact with favorable mix within retailers, price increases, leveraging our flexible SG&A platform and the benefit of integration related savings.

We are hopeful that the current lower commodity cost environment will help us roll back price increases while still expanding gross margins. As I mentioned before although historically the impact of cost changes lags by six to nine months and flow through to the P&L we do expect to benefit in the second half of 2009 which would also benefit retailers and the end consumer.

Our as adjusted SG&A costs were approximately $1 billion or 18.5% of sales compared to 18.2% of sales in '07. The relative year-over-year increase is due to a mix change arising from the acquisitions we completed in 2007. For the fourth quarter the $235 million in SG&A expense was 17.4% of sales versus $275 million or 18.8% for the fourth quarter of '08.

Even excluding the difference in FAS 110(3)R charges in the quarter SG&A improved by approximately 40 basis points. This improvement reflects the additional cost containment efforts that were implemented during the quarter to support the lower sales volume. As Jim Lillie will review the company will continue these cost reduction actions during 2009.

For 2008 depreciation and amortization was $120 million including $16 million of intangible amortization versus $96 million in '07. G&A for the quarter was almost $31 million compared to $32 million in the same quarter last year. Capital expenditures for the full year and quarter were $102 million and $32 million respectively. The full year figure was 1.9% of sales less than our key benchmark of 2%.

We expect capital expenditures to be less than depreciation for the full year 2009 as we focus on cash flow and incur less infrastructure expenditure both on the systems and distribution side. During the fourth quarter the company recorded a non-cash charge of $283 million related to the impairment of goodwill and other intangibles. At least annually the company reviews the recoverability of its goodwill and the other intangibles.

Due to the acceleration of the current global economic crisis in the fourth quarter the decline in the equity market capitalization during this period and the uncertainty around the timing of any economic rebound the company recorded the impairment charge during the fourth quarter. We believe the underlying fundamentals of our businesses still remains strong and that normal valuations will return when the economy stabilizes and returns to growth.

The impairment charge has no impact on our cash flows, no impact on the way we operate our business and no impact on our bank covenants. We do not have a net worth covenant and we spread it across all three of our primary business segments. Based on the current outlook for our business in the economy we do not anticipate any future impairment charges. Reorganization and acquisition related integration costs in 2008 were just under $60 million.

The bulk of this expense was in the Outdoor Solutions segment where the work on integrating K2 and Pure Fishing is now over two thirds complete. Of the $32.6 million expensed within Outdoor Solutions approximately half was for employee terminations and the other half for terminated lease expenses, consultants, professional services, travel and other expenses relating to the integration of the businesses.

2009 will be the last year of reorg expense for prior acquisitions and will be limited to the Outdoor Solutions segment with estimated annual expense of less than $30 million. There should be no reorganization or acquisition related integration costs in any other segments during 2009. The 2008 expense in Branded Consumables was in Process Solutions largely related to employee terminations, plant closures, lease terminations and other reorg expenses.

It is important to note that all cash reorg expenses flow through the cash flow from operations line. As a result cash flow from ops should improve in 2009 and the again in 2010 as the level of acquisitions, reorganization, integration spend full and then stop. Net interest expense for the quarter ended December 31st, '08 was $46 million versus $49 million in Q4 '07 representing an average effective interest rate of 6.4% for the quarter.

The lower than anticipated fourth quarter expense represents the benefit of the floating component of our debt structure. At December 31st, '08 we were approximately 67% fixed. Today we are 53% fixed and assuming we do not enter into anymore swaps we will be 44% fixed at the end of 2009. Three months’ LIBOR is currently less than 1.5% indicating that the cost of existing debt as opposed to new capital is extremely cheap at this time.

Net interest expense for the full year 2008 was $179 million the increase over $150 million in '07 being primarily due to the indebtedness incurred to fund the K2 and Pure Fishing acquisitions. Our estimated effective tax rate was 36% for Q4 and full year '08. Cash taxes paid in 2008 were $58 million less than half of the adjusted tax expense of $118 million for the year.

The actual tax charge for 2008 was $26 million due primarily to the impact of the impairment charge on domestic effective tax rate. Due to the expected high levels of taxation on profits earned worldwide in '09 we anticipate our effective tax rate in '09 will tend towards 36.5%. We delivered strong full year and Q4 segment earnings or as adjusted EBITDA with 2008 as adjusted EBITDA of $609 million or 11.3% of sales compared to 2007 as adjusted EBITDA of $501 million or 10.8% of sales.

Q4 as adjusted EBITDA improved to $171 million from $153 million in '07 an increase of over 11%. Adjusted diluted EPS for the quarter was $0.83 versus $0.64 in the prior year. For the full year 2008 Jarden recorded as adjusted diluted EPS of $2.74 versus $2.33 in 2007 an increase of 18%.

At December 31st, '08 our net current assets were $1.4 billion, net indebtedness was approximately $2.5 billion, our total book stockholders equity was $1.3 billion and equity market cap of approximately $900 million. Our continued strong cash flow from operations reflects the solid performance of all four business segments as well as our continued focus on the management of receivables and payables during 2008.

Inventory levels at December 31st, '08 were approximately $50 million or 5% higher than we would have liked as we were not able to adjust fully for the rapid drop off in retailer demand in Q4. We expect the inventory levels at 12/31/08 versus '07 should lead to favorable working capital in flows in '09 as we bring our inventory levels into line with the current sales level of the business.

Inventory levels should also fall as commodity cost decreases flow into inventory. During 2008 we used some of our excess cash to repurchase $23 million of our common stock $12 million of which was in the fourth quarter. Our primary goal remains to use excess cash to reduce our leverage ratio to the 3 to 1 level but we will remain opportunistic of stock or bond buy back opportunities.

Under our authorized repurchase program we have $48 million remaining. The cash flow statements shows $43 million spent on acquisitions. This amount was entirely for earn out payments the main two being $25 million on Pure Fishing and $10 million on Dicon. There are no further payments due on Dicon and no payment will be made on Pure Fishing in 2009.

The other investment of $30 million was primarily our passive investment in [Rosen Young] for $16 million. As we are not anticipating any significant cash out flows pertaining to acquisitions or investments in 2009 this will enhance our free cash flow for the year. At December 31st, 2008 the company maintained over $392 million cash on hand and net debt to adjusted EBITDA ratio for bank covenant purposes of 3.5 times versus 3.6 times at 12/31/07.

As Martin noted in his comments from a bank covenant and liquidity perspective we currently feel comfortable that we are well positioned not to have to go the capital markets until they improve other than the annual renewal of our $250 million securitization facility. It is important to note that Jarden’s strong historical and projected free cash flows and flexibility over SG&A spend should position us extremely well to continue to reduce absolute debt and our leverage ratio.

At 12/31/08 our DSOs improved by approximately one day to 59 days primarily due to increased focus on collection. This improvement has been positive in light of the current economic conditions. The company remains proactive in reviewing any potential credit risks in its receivable portfolio.

Our accounts payable days improved slightly to 43.5 days as we continue to expand turns and leverage our financial strength with our suppliers. Our goal is to get accounts payable days to approximately 45 days and narrow the gap with our DSOs. I would now like to hand over to Jim and would be happy to answer questions during the Q&A session at the end.

James E. Lillie

In Q4 we spent a significant amount of time planning for 2009 in addition to our everyday focus on operational execution in maintaining our leading market positions in each of the categories we serve. Given the nature of our seasonal businesses as well as our scale we often see what’s occurring in the global marketplace earlier than many others and this allows us to be proactive in the actions we take.

We evaluate and benchmark our performance, the performance of our retail partners, our suppliers and our competitors and analyze macro trends in all areas that impact our businesses such as commodities and distribution. Based on our internal performance metrics we were pleased with how the business performed during Q4.

Our POS trends on traditional Q4 products were generally favorable across our primary product categories and the performance of our Consumer Solutions business which is the business segment most dependent on Q4 activity showed healthy POS growth on a year-over-year basis. This was particularly the case for certain seasonal skews which benefited from the early cold weather and snow across the US.

The most impactful challenge we faced in Q4 which we believe will continue into 2009 were a result of retailers not reordering our products to their historical norms based on POS data. Retailers were typically focused on reducing their overall inventory levels.

With many retailers having now completed their January 31st fiscal year end and with many categories of inventory being at new lows we believe that the distribution channel will be open for significant growth once the macro economy starts to improve. We expect that we will continue to see market share gains as retailers simplify their offerings within a classical good, better, best strategy.

As the number one player in most of the categories we serve our new product offerings and brand positioning help drive the performance of the overall categories. Our product creativity, a focus on value and investment in the categories ensures that our brands stay fresh and relevant during the current downturn.

You may have heard us say throughout the last two years that Jarden’s not immune to macro economic pressures and conditions. This remains true as can be seen from our prior revenue guidance of $5 billion for 2009 versus $5.4 billion in 2008. However we continue to believe that we are better positioned than most companies to manage our way through the current economic environment on my fronts.

In addition to the strategic competitive advantages Martin outlined earlier one of the key reasons for Jarden’s resilience is our practice of being as preemptive and proactive as possible to try and ensure that we are making effective decisions today. This approach is a fundamental aspect of Jarden’s D&A and has served us well in the past and we expect it to continue to serve us well in the future.

Jarden’s long term health and success has not only been based on our ability to be proactive and swift in our decision making but also our willingness to make difficult decisions when they are called for. Despite an already lean organizational structure to compete and thrive in the back half of 2008 and through 2009 we chose to restructure our costs and our organization.

In Q4 we initiated several programs to contain costs across the entire corporation. Additionally we challenged each business unit to develop longer term plans within their respective companies to address the challenges unique to their market and operations. Among the actions we took were the suspension of pay increases for all employees as well as the reduction of pay for certain senior executives including a 7.5% reduction for Martin, Ian and me.

We changed employer matching contributions to the 401K plan for 2009 from a fixed to a discretionary match and continued our company wide hiring freeze. Structurally we’ve always maintained a flexible operating platform which has allowed us to absorb revenue declines without significant impact to our cash flows or our bottom line.

As an example from the beginning of Q4 '08 to the end of Q1 '09 we will have reduced our overall employee base by 1,500 employees or approximately 6% through attrition and certain job eliminations. None of these actions were taken lightly but it’s our belief that they were appropriate in the best long term interest of the company.

Now I’d like to take a few minutes and discuss certain fourth quarter highlights. For instance two of our products as you may have seen were named bestsellers in their respective categories by Amazon.com based on total units sold in 2008.

Our First Alert plug in carbon monoxide alarm was the top seller in the home improvement category while the Oster Electric Wine Opener was named the top seller in the home and garden category once again demonstrating that we continue to develop products that retailers and consumers both want and need.

In our Branded Consumables segment our home canning business had a very strong year with over 25% revenue growth versus the prior year echoing the continued consumer cocooning theme I discussed last quarter. During the fourth quarter we also kicked off the 125th anniversary of its hallmark Ball jar brand with a significant segment on the Martha Stewart show.

We will begin distributing a limited edition Ball jar set to commemorate that 125th anniversary this year and we also expect that given the current state of the economy home canning is well positioned for a strong 2009. In our Outdoor Solutions segment new offerings from the Volkl and K2 brands received top honors in Ski Magazine’s 2009 Gear of the Year competition the latest in a series of honors Jarden’s brands have received in recent months.

Recognized as winners for overall excellence they top the list which appeared in the December 2008 issue. In fact the Volkl Tiger Shark was the only ski to receive a unanimous perfect score in this year’s test across 12 categories. Additionally the K2 Apache Explorer is a new addition to the Apache series of skis and was dubbed to be among the favorites in the important AME Free Ride category in the issue earning 11 gold medals in 12 categories.

As we look forward into 2009 in our JOS segment you will continue to see innovative new products across categories from Coleman to Rawlings reinforcing our commitment to being a market leader and investing wisely even during these challenging macro economic times.

In our Consumer Solutions segment we introduced a number of new products that also support our belief that the right innovation with the right brand that has a high relevance to consumers will continue to perform well even in this economy. For example the Crockpot Trio Slow Cooker was introduced as a uniquely designed slow cooker featuring three cooking vessels in a deep drawn metal housing.

Also new was the Foodsaver G3 which keeps your food fresh up to five times longer so that you can save up to $600 per year in unwasted food. The relevant message of cost savings in a difficult economy enabled this product to perform quite well in the fourth quarter as well as many others which replicated this compelling marketing message.

We believe that our success is largely attributable to our diversified business model which is better able to withstand the stress of the current recession. We are committed to taking a long term view for our brands and our categories while working extremely hard in the short term to maximize operational opportunities, reduce costs and leverage the company’s scale across the niche categories we serve.

By executing faster, better and more efficiently from one year to the next our goal remains to improve our margins and continue investing in our future.

Martin E. Franklin

We intend to maintain our intense focus on product and brand initiatives, our commitment to improving operational performance, controlling costs and leveraging our scale to make the next several years as exciting and rewarding as the last seven have been. We currently have no plans to pursue any major acquisitions in 2009 but will remain opportunistic in exploring any transactions that can create additional stockholder value.

2009 will undoubtedly be another challenging year but we believe that Jarden will exit this recession far stronger and better positioned than when the recession started back in 2007. We look forward to reporting our progress to you during the year and I’d now like to open the call to any questions.

Question-And-Answer Session

Operator

(Operator Instructions) Our first question today will come from William Chappell, CFA – SunTrust Robinson Humphrey.

William Chappell, CFA – SunTrust Robinson Humphrey

My first question is just trying to understand the destock issue in the quarter. Should we look at each of the businesses, did they all post single digit growth and then the reported numbers are all due to the step back from destock?

Jim

From a POS performance, Bill, the products that were in season performed very well and our other products also performed well. We saw POS gains up to 7% on a year-over-year basis and what we really saw though was the fact that even though products were performing part of the reason why we changed the revenue number in December was that we just weren’t seeing the reorders.

Retailers were focused on destocking other products even if it meant a high velocity product of ours wasn’t going to be reordered. The focus really was more on reducing their overall inventory.

William Chappell, CFA – SunTrust Robinson Humphrey

Martin E. Franklin

What that does from our perspective, Bill, as you can imagine positions us very well when the buyers get their open to buy back because they know the POS performance of our product but if you like getting through the January balance sheet of all the retailers, the priority is by the bean counters not by the merchants. It’s understandable and we were kind of prepared for it from a G&A perspective but that’s just the nature of what the retailers were doing.

I can’t completely blame them for it, it’s mark it down and move it out, the slow moving inventory during that period.

William Chappell, CFA – SunTrust Robinson Humphrey

I guess what I’m confused is, it looks like on the Consumer Solutions side being down about 6% and that actually makes sense just on the POS side but the Outdoor Solutions which I guess expect for skis would be off season, had a bigger drop. I’m just trying to understand why it would have such a big drop when it’s not a big season there.

Ian G.H. Ashken

I mentioned in my comments, Bill, our Paintball business, that’s the only business within Outdoor Solutions apart from ski that the season and the season really wasn’t. Our major retailer decided to really move out of the category in a major way. That’s driving that plus the foreign exchange aspect on that business is actually more than on the Consumer Solutions side.

Martin E. Franklin

And we’ve taken the overhead out of that business. We lost the volume but we’ve taken the overhead out of that business to run it as a smaller entity.

Ian G.H. Ashken

Those are the two differences really if you’re looking at JCS against the Outdoor Solutions.

William Chappell, CFA – SunTrust Robinson Humphrey

One other on the interest expense line, Ian why would it go up sequentially as you were paying down debt in the quarter and then any range you can give us for interest expense for '09?

Ian G.H. Ashken

Sequentially it went up because we had more debt, that was for the full year. We drew down $130 million on our revolver that we’re sitting with cash in Q4 up until we got Lehman sorted out in January so we were paying the [inaudible] there as well. To be conservative I think interest expense not more than $165 million for '09 would be conservative there.

Martin E. Franklin

I think that hindsight’s always 20/20. I think The Treasury Department’s done a good job for our business in the sense that we’re rolling off a lot of our hedges from fixed to floating at a time when we’re going to be able to see to benefit from that.

Operator

Our next question will come from Charles Strauzer – CJS Securities.

Charles Strauzer – CJS Securities

Quick question for you Ian if you can pick up on the some of the other pieces of the cash flow puzzle, you gave out interest of $165 million and reorg expenses of about $30 million. Can you walk us through the other inputs that can get you to the $250 million or so of free cash flow that you were talking about for '09?

Ian G.H. Ashken

If you take, I think where your EBITDA number is for '09 of around $580 million interest expense around $165 million then taxes will continue to be about 50% or as it was this year a little less. If you look at that, that would be about $50 million. Cap ex this year was around $100 million. I think in '09 we’ll be close to $85 million and then if you assume as you mentioned the full restructuring charge in cash terms that’s another $30 million so that gets you to $250 million of cash flow after cap ex without taking into consideration working capital and obviously we’ve already commented that we think in '09 working capital will actually be a cash in flow.

In '08 it was a cash out flow and we think it’s going to be a cash in flow for two reasons. One is our inventory will come down whether it be through commodities or just shrinking, we have too much at the end of '08. Secondly as the top line comes down working capital normally moves in line with that. That’s the basis upon which as Martin said we’re looking at over $250 million for '09.

Martin E. Franklin

Whatever in flows we get on working capital would be on top of that $250 million but you can call that cushion.

Charles Strauzer – CJS Securities

Martin, if you can just talk a little bit more about the environment for your peers. You’ve seen some pre-packaged bankruptcies announced, etc. What has that done for you in terms of discussions with your vendors and how has that accelerated any shelf space gains?

Martin E. Franklin

It’s very interesting. There’s been a flight quality. It’s one of the things that has helped us in our business. The largest retailers and you can do very superficial digging to confirm this to be the case if you can take the WalMarts and the Targets of the world are strategically aligning themselves with their core vendors.

They’re trying to deal with fewer vendors who can provide them the service that they need, they can rely on them from an inventory and delivery standpoint. They’re also trying to simplify their shelving. That all takes, if you like, drives them towards our business. They’re obviously being as you can imagine very careful and aggressive when it comes to making sure that they’re getting the best deals they can get.

Remember we have the most efficient platform out there in most of our categories. That’s helping us from a macro perspective. I think that there are other aspects and I’ve said this all along, I said we’ve always been more vulnerable to the weather than we’ve been to the economy. This has been a very tough economy if you want to think about it from the standpoint of let’s say the ski business which you would imagine it’d be the most vulnerable.

On the other hand this has been the most amazing ski season from snow. You’ve had the best snow in 10 years in Europe. You’ve had an equally good snow season of last year which was a phenomenal year on the West of the United States and a great year on the East. That’s really helped offset what you would imagine to be an economic slowdown of a product like skis.

Obviously we’ve had products that are truly benefiting from the cocooning and from people doing more backyard activities. I think you’ll see out Outdoor business of which Coleman is obviously a big part will be a beneficiary of just the basic trends that are going on. In some other cases we’ve just done a great job of taking market share and I would put Consumer Solutions into that category.

Charles Strauzer – CJS Securities

Lastly, Martin on [Rosen Young] and the investment there it seems like it was a very timely investment. What’s happening with that turnaround process, if you can comment on that?

Martin E. Franklin

The right way to describe it is we are passive investors. As far as we can see it’s tracking in exactly the way that it had been modeled and planned and we think that’s obviously going to provide some opportunities for our company in the next couple years.

Operator

We’ll move on next to Lauren R. Lieberman – Barclays Capital.

Lauren R. Lieberman – Barclays Capital

First thing was I was hoping you could to talk a little bit about the hit to profitability in Consumer Solutions because your operating margins or EBITDA margins have held up really well there up until this quarter. Was it the surprise of retailer destocking and so it didn’t fit with what you had produced going into the quarter?

Martin E. Franklin

I think two things on that, Lauren, one is if you look at the seasonality of a lot of our businesses in their key quarter which obviously for Consumer Solutions is Q4 they leveraged their SG&A and their platform a lot more to drive overall profitability. When the sales come down even although it be 6% you see more in terms of a percentage decline than you would in a different quarter.

The second thing is that we did see some reduction in our international business which has helped drive that profitability in those margins more so than if you like from a mixed point of view 67 is tough in the Mexico and the like where they started to soften more than the domestic business and therefore you see also a mix within the sales.

Lauren R. Lieberman – Barclays Capital

I don’t really understand the first explanation though because in last year’s fourth quarter margins held up relatively well despite sales being weak.

Ian G.H. Ashken

Yes, it’s just comparing one to the other. Last year I think they were about 19% in the quarter and this year they’re still very respectful over 15%. Those incremental sales dropped to the bottom line.

Lauren R. Lieberman – Barclays Capital

Then last year that margin was up over 200 basis points in the quarter?

Ian G.H. Ashken

Right.

Lauren R. Lieberman – Barclays Capital

With sales down 6%. So that means something was different in whether you were maybe more surprised by the magnitude of revenue decline this year or was it a delay in source product inflation or is it the currency hit or was it really just that the international business is very, very profitable and that slowed more than you expected?

Martin E. Franklin

I think the other thing, Lauren, if you’re comparing '07 against '08 is that just generally the gross margin in that business because of the commodity cost increase particularly on something like copper will have affected so that even if the revenue had come in you would have seen lower margins because the commodity cost, if you think of that six to nine month lag where in Q2 of '08 when they were doing their purchasing locking in we were in a pretty bad environment.

That would impact the obviously coming down EBITDA margin.

Lauren R. Lieberman – Barclays Capital

The reverse would be on Outdoor Solutions actually because a huge margin improvement there in the quarter. Is that related to synergies really kind of flowing through? What changed in that business that margins were up so much?

Martin E. Franklin

Two things. Very simplistically obviously the integration savings are the largest in that business and that’s the first time you see an apples to apples comparison between since when we gained the business. Also some of the businesses that we didn’t do quite so well in for example Paintball have never been a very exciting margin business. Again you do see some mix in there on the business.

Lauren R. Lieberman – Barclays Capital

Looking forward then it sounds like we should be able to expect pretty healthy year on year margin improvement even with sales being down in that business over the next couple of quarters?

Martin E. Franklin

In the next couple of quarters I think that by the time you get to Q3 and Q4 we’re lapping the savings that we’ve got so you work, depending obviously if we get the commodity benefits how much of those but I think the Outdoor Solutions business is going to hang on to their savings.

Lauren R. Lieberman – Barclays Capital

My final question for the moment was just on the 3.5 times. We’re actually having a hard time getting there. Is there a change in what we should be using for the adjusted D&A?

Ian G.H. Ashken

Let me give you the simple math. Obviously we start with $609 million of segment earnings. Then you add back the largest single component [inaudible] charge which is about $21 million. So that takes you to $630 million. Then for the bank covenant purposes all sorts of other minor adjustments that take you to about $635 million and then obviously for our purposes we don’t include the bank covenants, the $250 million of securitization so if you do the math that should get to 3.5 something which rounds to 3.5.

Lauren R. Lieberman – Barclays Capital

So the adjusted D&A is still about $100 million?

Ian G.H. Ashken

Yes. That comes out, Lauren, in the segment footnote, the starting point of $609 million has the D&A backed out.

Lauren R. Lieberman – Barclays Capital

I do have one more question, the corporate unallocated within your breakdown of operating profit was down pretty significantly. Can you just talk about what the difference is there from $16 million last year to $9 this year?

Ian G.H. Ashken

Yes, the largest single component of that is bonuses because obviously up until Q3 we were tracking to where we thought and then we didn’t hit the numbers.

Operator

Your next question comes from Christopher Agnew – Goldman Sachs.

Christopher Agnew – Goldman Sachs

First question on cash flow, is there anything about the seasonality, your normal seasonality that we need to be aware of thinking through this year and maybe particularly as you ended the year with higher inventory?

Ian G.H. Ashken

Yes, I think it’s tough to divided a business up in to quarters when really our businesses are six month businesses. So, I think what I am looking at is to have the inventory really try to correct it by June 30th. We’ll start the year obviously with low receivables, we’re anticipating our receivables will continue to come down because we have lower sales. But, effectively I think overall if you look at Jarden as a first half second half the seasonality will be pretty consistent to last year.

Christopher Agnew – Goldman Sachs

So the bulk of the cash flow in the fourth quarter?

Ian G.H. Ashken

Yes.

Christopher Agnew – Goldman Sachs

Following up on a couple of comments on the cocooning theme, which probably [vacations] [inaudible] will be to a greater degree this year. Are there any specific examples of retailers talking to you about specific products or initiatives targeting those themes? And, maybe are there – you gave us the example of the Ball canning jars being up substantially, are there any other products that you can reference?

James E. Lillie

I think people are staying closer to home not just necessarily at home. But, the new product that I talked about the crock pot slow cooker, we’re doing a lot of kind of tailgating which is evolving in to driveway party activity to backyard activity. We’re seeing more kind of tri-state travel, at least in the northeast and that’s benefitted the sky business.

Martin E. Franklin

I’ll something, there’s one thing, there’s one thing that I’ve got my eye on for sort of 2009, one of our concerns was when oil was $140 people were concerned on the things like the fishing side that people wouldn’t take out their boats because of the cost of actually operating their boat even if they owned it. Oil at $35 people are out there fishing again. We hope to see some benefit from some things like that. We’re not counting on it, we’re not budgeting for it but it’s one of the opportunities that I think is in front of us.

Christopher Agnew – Goldman Sachs

I apologize, I’m not a fisherman so I might be off on my timing, and you also talked about great snow this season, what’s the sell through been like in your skiing and fishing businesses? Does that pose any problems for next year if there’s going to be a lot of inventory maybe stuck in the channel?

Ian G.H. Ashken

Well first of all, the season for last year was pretty good in the fishing business so in terms of a channel situation, we have a decent shot at having a decent year. In terms of the snow, our ski business and I will repeat, I don’t think you will find that there are many ski companies that perform like ours, that’s pretty evident if you look around, our sell through has been good. Our product has moved, it’s because we keep our product fresh, there’s a lot of new technology in what we’ve provided the market and the snow season has been good. When the snow is good, the product tends to turn. So, the channel going in to 2009, 2010 is going to be healthy.

Christopher Agnew – Goldman Sachs

Final question, a smaller point, just on the impairment and goodwill charge most if it was, if I’m reading correctly, branded consumables and I’m just wondering if there was any one particular business that you’re writing down? Also, was it in goodwill or other intangibles which actually goes through the income statement? Is D&A going to be lower next year?

Ian G.H. Ashken

The last part first, there is no impact on D&A, it’s totally immaterial. The only intangible asset we amortize is our customer relations and that wasn’t impacted by the impairment charge. Obviously, the overall valuation on Jarden has meant – I mean, our market cap today is well under our book value so that causes a problem. But, when you look at the detail it’s nothing in particular, it’s really spread across different brands within all three of the segments.

Just so you know Chris, we as part of our normal process, we do our impairment testing at September 30th and what happened was we did the impairment testing then and there wasn’t any impairment as of October 1st. With what happened in Q4, we reopened it because of the decline that happened in Q4 and the economic situation in Q4 to take a secondary look and that’s what drove the charge.

Operator

Your next question comes from Greg Badishkanian – Citigroup Global Markets.

Greg Badishkanian – Citigroup Global Markets

You answered part of the question in terms of cost cutting in outdoor solutions but total company SG&A was down significantly below my estimate and I think also last year. So, what led to that improvement and are some of those cost cuttings and the improvements sustainable for 2009?

Ian G.H. Ashken

One thing Greg, particularly in Q4 that you should be aware of is that on the EBITDA numbers, the FAS 123R charge in Q4 ’07 was significantly higher than it was in Q4 of ’08. If you back that out, we still improved our gross margin and our EBITDA margin but the size of it is smaller. Obviously, you guys love to include FAS 123R so we present the numbers that way. But, from our perspective we look at it excluding it. The savings were driven by the things Jim talked about particularly on the integration side and just being very, very careful on costs in this environment.

James E. Lillie

The hiring freeze for example, the salary freezes that we put in to place. All these things because we addressed them early in Q4 you saw an impact in Q4 as well.

Martin E. Franklin

Headcount across the company is down over about 6%.

James E. Lillie

And most of that occurred towards the beginning of Q4, middle of Q4.

Greg Badishkanian – Citigroup Global Markets

So you’ll have another few quarters up until I guess end of third quarter in term of benefit there?

James E. Lillie

Yes, you won’t lap until probably November.

Greg Badishkanian – Citigroup Global Markets

With respect to just inventory levels and market share, can you characterize, I know you had mentioned that inventory levels have been coming down. Let’s say just looking at early February a snapshot, at this point going forward when do you think sell through at the retail level will equal shipments?

Ian G.H. Ashken

Our view Greg, is you’ve got to look at it by individual business because they’re so seasonal, each of the businesses. So, obviously something like Coleman and our Rawlings business are ramping up at the moment because it’s a sell in. As Martin commented, the sell in of our businesses is good and we feel that our products will perform.

We are being conservative in the sense we are not anticipating or building inventory to the historical reorder levels which will do two things, one is your sales will be more skewed to your sell in quarters than your sell through and reorder quarters. Secondly, that should leave the channels nice and clear for when we come to the sell in, in the following year.

That’s why I said that I’m giving it through the end of Q2 to flush through some of the inventory where we have more than we would like. Certainly, obviously by that time when you get to the end of the year I expect our inventory levels to be lower than they were coming in at the end of ’07.

Greg Badishkanian – Citigroup Global Markets

Martin, you had talked about this basically your retail sales were strong and then you sold out and they had other product was left so reorders weren’t there. You mentioned that you’re well positioned going in to next year. Can you give us some examples maybe of some market share gains that you’ve gotten? I know you have a lot of businesses but also as you track it are you [inaudible].

Martin E. Franklin

I can give you a few examples, I mean our cooler business is going to be up significantly because one or two of our major customers have gone to a two player strategy versus a three vendor strategy. One of our major retailers has realigned at how they are looking at their entire fishing business and has basically reduced down to a handful of core vendors down from over 60 and we’re a big component of that realignment for the better.

If you go in to some of the major retailers and you look at scales and humidifiers in some of the retailers you’ll have usually a two branded or there branded strategy but we will be the only company that will be the vendor in that segment. Again, it goes back to the thing that I told you before about retailers wanting to narrow the number of vendors they’re dealing with and concentrating on building a category with one vendor using a good, better, best pricing strategy.

Operator

Your next question comes from Reza Vahabzadeh – Barclays Capital.

Reza Vahabzadeh – Barclays Capital

Jim and Martin, your comments around inventory levels at retail, does that suggest that you’re relatively confident that inventory destocking is largely behind you give your POS trends?

Martin E. Franklin

I will answer that. I’m not confident of anything nor should anyone be. We are running the business expecting the worst and hoping for the best. We’ve gotten through to where we are I think managing things very well and very proactively. Our operating philosophy is we’re going to take all the lumps upfront and if things work out for the best fantastic. But, we’re not assuming any great behavior.

I mean look, we’ve already told the street to expect a revenue expectation that is $350 million that is lower than last year. So, I don’t think that’s being bullish. Now, do we have the potential to do better than that? Of course we do. But, it depends on the macros, it depends on the retailers doing rational things, it depends on big buys not going bust, it depends on things like what are happening today in terms of the government approving $785 billion worth of stimulus which seems to be getting through over the next day or so.

Those are going to be good things. They’re going to be good things for us. They’re going to help from a consumer standpoint. I could give you reasons to be very pessimistic but I could also give you things that I see that give me some encouragement. I don’t want to get in to the macros but I do think that people who are refinancing mortgages are doing them at 200 to 250 basis points better than they had their last one and that’s got to help.

There’s no question that $35 oil is better than $140 oil. There’s a whole bunch of things that give me hope but I’m not going to bank on it and I’m certainly not going to spend money expecting it until it flows through at retail.

Reza Vahabzadeh – Barclays Capital

How much did inventory destocking affect sales trends in the US in the fourth quarter? Was it one or two percentage points? Any kind of color on that?

Martin E. Franklin

To be honest with you I could throw out a number but I’d be making it up. I don’t know. We could tell you instinctively and based on conversations that we’ve had but to quantify it is tough. It’s sort of how long is a piece of string, there’s no way to be really, really sure.

Reza Vahabzadeh – Barclays Capital

Then as far as price points at retail do you think your price points are appropriate or do you need more trade support to bring down prices?

Martin E. Franklin

I think our prices are appropriate.

Reza Vahabzadeh – Barclays Capital

Lastly, Ian there is a non-cash use of cash in the fourth quarter, any color on that?

Ian G.H. Ashken

No, that normally is related to things that go through the tax line. I’m not quite sure what you’re referring to but once we file our 10K end of next week hopefully, any detail should be in there.

Operator

Your next question comes from Hayley Wolf – Rochdale Securities.

Hayley Wolf – Rochdale Securities

A couple of questions, first a more general question, can you give us a little sense of what happened in the international markets during the quarter and where you see those going in ’09?

Martin E. Franklin

We definitely saw a slowdown partly as the rest of the world caught up with the state’s recession and also with foreign exchanges. I think that as we look out we see softness continuing on the international market. What you’ll see from us though is only about 30% of our sales are international so we continue to see opportunity to expand our business there.

It’s a bit like the market share gains in the state that you’ve got two counteracting items, one is the global macro which will undoubtedly be down internationally versus our hopefully market share gains and development particularly on [inaudible] we’re doing some new initiatives in Latin America that will start to get some traction, so two offsetting items there.

Hayley Wolf – Rochdale Securities

Then just following up on the last question that was asked, the price points going in to 2009, are you seeing retailers move towards lower price point, any kind of substitution?

Martin E. Franklin

Let me answer that. It’s all about value proposition. I mean today, more than ever, the consumer is looking for value. So, why is our business doing relatively well compared to others? It’s because we provide very strong brand equity at a very reasonable price. I think some high end retailers are struggling obviously because people are looking for a value proposition and we’re able to provide it.

Now, in terms of how products are priced, obviously we price our products appropriately to every retailer and every market which is based on the day-to-day of what goes one. But, you know how it works there’s a good, better, best pricing strategy, that’s what we try to do with all of our brands. We try to have the right product for the right market. If you look the skill set, that’s what we’ve got our teams, and teams of people in every one of our business segments addressing.

The retailers are looking for value, they’re looking for value their customers are demanding but they also want brands. People don’t want just cheap, people want quality and I see this very much in our consumer solutions division. I mean I saw this in Q4 and the trends of how the POS was performing, the reason some of our products were performing very well is our price value proposition was very attractive and we’ll see the benefits of that in some of the gains that we make during 2009.

Hayley Wolf – Rochdale Securities

In the first quarter you started flowing outdoor team product and such in to the retailers. On a price point basis, we’re not going to see a mix shift?

James E. Lillie

For example, Rawlings is rolling in right now and the sell in which occurred in kind of July/August pointed to more of the better products as opposed to the best products. So, these $60 t $70 Rawlings baseball gloves, there was actually a high level of order for those and we would expect to see kind of the gloves that are locked up behind the case, the pro series, to decline somewhat. But, overall we see growth in the Rawlings business for example. There is a move towards that – there’s a bell curve of pricing.

Hayley Wolf – Rochdale Securities

Cost savings in the outdoor solution, how much incremental is left for 2009?

James E. Lillie

Well, at the end of Q3 we had said that we had hit the $50 million bogie that we had set and we said that we weren’t going to talk about it anymore in specific line items. But, clearly there are opportunities to continue to improve the platform.

Hayley Wolf – Rochdale Securities

In the consumer solutions segment, the margin decline, I guess I’m also confused by the magnitude of it. Is there any kind of markdown money that was given at retail in the fourth quarter to clear out product? What am I missing in that?

Ian G.H. Ashken

To put it in perspective consumer solutions did 14% for the full year EBITDA margins versus 14.5% last year. For the quarter they did 16.3% to get to 19.1%. So, I think it goes to you’ve got some volume decrease, you’ve got some foreign exchange and you’ve also got the commodity increases that really year-over-year hit this business for its major business in Q4. I think that you will see that business bounce back in the second half of next year because of course all of the commodity changes that we are now seeing will really benefit them in the second half of next year.

Hayley Wolf – Rochdale Securities

So the commodity issue was a bigger deal in the fourth quarter versus the third quarter?

Martin E. Franklin

Well yes. If you think about it in third quarter you had the sell in and in the fourth quarter you have the sell through but then you had the retailers doing less reorder activity in order to clear their shelves and warehouses of their own slower moving products.

James E. Lillie

That inventory was built in the second and third quarter.

Martin E. Franklin

It makes sense when you think of it in that way.

Hayley Wolf – Rochdale Securities

Last question, are you having any vendor issues over in China? Any areas of concern?

Martin E. Franklin

No. Nothing more than the day-to-day. Why do you ask? Is there anything I need to know?

Hayley Wolf – Rochdale Securities

No, just in some other segments that I look at there have been some vendor issues.

Martin E. Franklin

In terms of not being able to provide product?

Hayley Wolf – Rochdale Securities

Well there’s some financial stress in some of the supplier areas and they’ve had some headcount reductions and lead times have moved out so I’m just wondering if you’re seeing it?

Martin E. Franklin

Again, one of the things about our platform as you know, we’ve probably got one of the most sophisticated and well organized platforms from sourcing capabilities that is out there, at least in our space. So, if somebody is going to muck around with us they’re probably really mucking around with some else first.

Operator

Your next question comes from Joseph Altobello – Oppenheimer & Co.

Joseph Altobello – Oppenheimer & Co.

Just one question in regards to your retailer base, obviously you guys are in a lot of different categories and you have a lot of retailer customers, I imagine some are healthier than others at this point. Have you seen any weakness from your smaller retailers in terms of stretching out payables? Have you changed terms on them at all?

James E. Lillie

No. Joe, we keep a very close eye on it and with mom and pops you may have a few people that are struggling but we sell through distributors to them so we’re not left hanging for any financial amount with them. Everybody else, you’ve read the papers, Linen n’ Things we had no exposure to but we keep a very close eye on it. We don’t see anybody on the cusp but we have a weekly meeting to talk about it across the entire platform.

Martin E. Franklin

What we have done, it use to be an informal ad hoc group to review credits, we now have a formal committee that goes through across the entire company to talk about credit of every major customer we have.

Joseph Altobello – Oppenheimer & Co.

Then secondly if I could, you guys have I guess half the quarter behind you now, in terms of how things are trending in 1Q. Would you expect the sales decline to be better or worse than the -8 we saw in 4Q?

Ian G.H. Ashken

I think that where the street is for the moment, the sales in Q1look about right as we sit here today.

Joseph Altobello – Oppenheimer & Co.

And where is the street?

Ian G.H. Ashken

About $1.1 billion I think.

Operator

Your next question comes from Todd Harkrider – Goldman Sachs.

Todd Harkrider – Goldman Sachs

I know you don’t plan on making material acquisitions right now but I think you acquired Zoot Sports recently. Can you briefly talk about that business and what cash outlay was? And, do you expect to make any cash contributions to the JV you have on the [Rosen Young] business for working capital and so forth in 2009?

Ian G.H. Ashken

Zoot was in the small single digit of millions and we have no plans to make any contribution or any further capital contributions to [Rosen Young].

Todd Harkrider – Goldman Sachs

Regarding stock repurchases, since you believe your stock price offers very good value and you really don’t have too much leverage at the secured level, have you thought about going back to the banks to get an amendment to your total leverage covenants since it seems like that might be one of the only things holding you back from buying back your stock?

Ian G.H. Ashken

My view is if we went back to our banks who we pay LIBOR plus 1.75 and LIBOR plus 2.50 on our Term B and ask them for an amendment to do a buyback I would probably be in today’s environment I’d be paying a lot more to them for the sake of being able to buy something back. Look, our goal for ’09 is to get our leverage down and Martin said 3 to 3.25 times is where we expect it to be at the end of the year. But, we’re opportunistic guys.

Again, Martin mentioned that. It’s always for us, if we’ve got extra cash we’re hitting our bogies and then we’ll look at other things. But, our primary goal is to get our leverage down because I think that is the best value for the equity today as ironic as it may be.

Todd Harkrider – Goldman Sachs

I heard the specialty retailers, up to a quarter percent, like 25% of their sales were actually last year’s models. Is that what you heard is that they were pretty much clearing a lot of inventory?

Martin E. Franklin

I can give you a list of brands that would be true for but it wouldn’t be true for us.

Todd Harkrider – Goldman Sachs

Your technical apparel category is that part of the 6% to 7% winter sport exposure or is that separate?

Martin E. Franklin

You mean Marmot?

Todd Harkrider – Goldman Sachs

Yes.

Martin E. Franklin

No. when we talk about it we talk about the ski business.

Operator

Your last question comes from Jon R. Anderson – William Blair & Co.

Jon R. Anderson – William Blair & Co.

Just wondering how you’re looking at the investment in new product development and your marketing budget for 2009 in light of the top line outlook and the kind of tight cost environment that you talked about? Are you maintaining those investment levels, increasing them, trimming them? Just some thoughts on that would be appreciated.

James E. Lillie

It’s interesting Jon, we went back to several people we spend money with whether it be media, print, etc. and reduced some of our marketing spending but are still getting the same amount of impressions because we were able to drive the price down. But generally speaking across the board we intend to have the same level of investment in new product development because that’s really the differentiator.

Martin E. Franklin

I can’t emphasize this more, the thing that makes Jarden what it is, is that our brands and our market positions are the leaders and as the leaders we need to continually innovate and we need to continually drive the category or whatever the category is that we happen to be in. To me, I would rather cut in so many other areas, including salaries, before I cut that. That’s been the strategic direction of the company and it’s what paid best for the shareholders and it’s what keeps our business in the position that it’s in.

There’s a reason that the performance has been relatively strong in what is a very difficult economy and why we think our business will continue to grow. The biggest cushion that we’ve got that is going to help us in 2009 is we’re taking a lot of market share. The reason we’re taking a lot of market share is our products, not just because we’re nice guys or anything else. It’s because the product is turning and retailers want products that are going to sell in this market.

With that, thank you very much everybody. Interesting times but we hope to continue to perform in the business and look forward to reporting to you.

Operator

Ladies and gentlemen that does conclude our conference for today. You may disconnect and thank you for your participation.

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Source: Jarden Corporation Q4 2008 Earnings Call Transcript
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