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Executives

Rachel Schacter - ICR

Martin Franklin - Executive Chairman

Ian Ashken - Vice Chairman & CFO

Jim Lillie - CEO

Analysts

Bill Chappell - SunTrust

Joe Altobello - Oppenheimer

Charlie Strauzer - CJS Securities

Greg Badishkanian - Citigroup

Jason Gere - RBC Capital Markets

Andrew Burns - D.A. Davidson

Karru Martinson - Deutsche Bank

Jarden Corp. (JAH) Q4 2011 Earnings Call February 15, 2012 4:45 PM ET

Operator

Good afternoon ladies and gentlemen and welcome to the Jarden Corporation’s conference call. As a reminder today's conference is being recorded. This afternoon’s call will begin with management making some formal remarks. When they have concluded a question-and-answer period will follow. (Operator Instructions)

I will now turn the call over to Rachel Schacter with ICR. Please go ahead.

Rachel Schacter

Good afternoon and thank you for joining us for Jarden’s 2011 fourth quarter and full-year results conference call. 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 expressed written consent of Jarden is strictly prohibited.

Before we begin, please take note of our cautionary statement regarding forward-looking statements at the end of our earnings press release issued today. While forward-looking statements made during this conference call are based on currently available information, our actual results could differ materially from those predicted. However, we undertake no obligation to update any such statements, whether as a result of new information, future events, or otherwise.

Please note that the company has posted supplemental financial data slides, as well as reconciliations of certain non-GAAP to comparable GAAP financial measures to its website. The presentation can be downloaded in the section "For Investors" on Jarden's website under the "Presentations" heading.

And now, I'd like to turn the call over to Executive Chairman, Martin Franklin. Martin, please go ahead.

Martin Franklin

Thank you, Rachel. Good afternoon ladies and gentlemen. With me on the call today are Ian Ashken, our Vice Chairman and CFO; and Jim Lillie, our CEO. Hopefully, you have all had a chance to review the earnings release we issued earlier today.

For 2011, Jarden delivered record revenues, segment earnings and adjusted earnings per share to culminate what has been a decade of outstanding performance. We met all of our principle financial goals for 2011, we achieved organic sales growth of over 3% with actual sales growth of almost 11%. We generated cash flow from operations of over $425 million against our target of $350 million and up significantly from $289 million in 2010. And we recorded an increase in adjusted earnings per share of approximately 18% well in excess of our 10% growth target.

We were very close to achieving our long-term goal of expanding gross margins by 50 basis points per annum with a companywide increase of 44 basis points this year on an adjusted basis. Additionally, we ended the year with over $800 million of cash. We have continued along our path of consistent profitable growth and once again our record results are a testament to the strength and diversified business model and our proactive entrepreneurial culture. We are very proud of the performance we delivered in 2011 and remain confident that the strategies we have implemented to leverage our market leading brands with product innovation and geographic expansion will allow us to increase our future sales rates above GDP growth while expanding margins.

As many of you know in 2011, Jarden celebrated its tenth anniversary since Ian and I joined the company and took over leadership in September 2001. Over this time, we’ve remained true to the core principles on which Jarden has been built and as encapsulated in Jarden’s DNA. We have remained focus on our strategic mission to provide consumers with authentic brands they can trust, product innovation and compelling value. Through a combination of organic growth and disciplined acquisitions, we have grown from a primarily US focused company with annual revenues of approximately $300 million into a Global Fortune 500 consumer products company with annual revenues approaching $7 billion.

As we have grown, we have sought diversification; diversification across our brands, product lines, distribution and supply chain. Today almost 40% of our sales are generated outside the United States versus less than 2% ten years ago. We are the largest hard goods, sporting goods company in the world, a major player in the small appliance market in the Americas as well as a leader in a number of other niche domestic markets such infant care, food preservation and home safety.

This diversity in product strength creates natural hedges, which, in my view are a key differentiating factor that has allowed us to outperform our peers during the recent turbulent times. Today, our company is not only larger but far stronger. This was certainly put to the test in the recent economic crisis and the company proved its extraordinary resiliency.

While our stock price has risen by more than a 1000% over the last decade significantly outperforming the S&P 500, we’re disappointed that this increase has been driven almost entirely by Jarden’s earnings per share growth rather than any multiple expansion.

In our opinion, the quality and resilience of our company has not been fully recognized by the public markets. As such, given the strength in our liquidity, in August 2011, the Board approved a new share repurchase program to purchase up to $500 million in value of our shares from time to time. Since the time of this authorization, we’ve been active in the market, but limited in our ability to acquire a meaningful number of shares due to daily volume rules and quiet period restrictions.

To address this, in January of this year, the Board approved an acceleration of our buyback activity through a launch of modified Dutch auction self-tender offer to purchase up to $500 million in value of our shares within a price range of $30 to $33 per share.

Within this range, a fully subscribed offering would represent approximately 16.6% to 18.2% of our shares outstanding. As previously stated, we continuously prioritized our uses of cash to try to maximize shareholder returns over the long term. Reinvesting in our existing businesses, our brands, our products and our people always remains our top priority followed by paying down debt to ensure that we are within the targeted range for our bank leverage ratio.

With additional excess cash, we look to complete complementary accretive strategic acquisitions to provide new avenues for profitable growth or when we believe our own company represents the best available investment opportunity we repurchase shares. In conjunction with our Board’s decision to launch a self-tender offer, our Board decided to suspend our dividend program as we believe the accelerated share buyback offers better value to shareholders.

In 2011, we remain focused on integrating our 2010 acquisitions with our legacy businesses and driving organic growth. In December we are delighted to open our first subsidiary in Africa as we continue to focus on investments to increase our presence in new and underpenetrated international markets with high growth potential.

As a global leader in the consumer product sector, Jarden takes pride in also giving back to the communities we operate in. In 2011 we were particularly gratified by the proactive response of our businesses particularly Coleman to relief efforts in Japan in the aftermath of the devastating Tsunami and earthquake in March. I was also personally honored to accept the Fire Commissioner’s Humanitarian Award from the FDNY on behalf of our First Alert business in recognition of our company’s commitment to public safety and fire prevention in New York City including the donation of over 75000 First Alert carbon monoxide and smoke alarms.

As Jarden enters its second decade in 2012, we are proud of our past and equally enthusiastic about our future. We are excited to celebrate the heritage of our iconic brands including K2’s 50th anniversary and Rawlings’ 125th anniversary in 2012 and to build upon each of their legacies. I look forward to updating you in more detail on our 2012 strategy on our first quarter conference call. I would now like to pass the call over to Ian.

Ian Ashken

Thank you, Martin. As a reminder consistent with our quarterly practice, we’ve posted a presentation containing more detailed financial analysis of our performance during Q4 and fiscal 2011 on our website. We’ve also continued to disclose both as reported and as adjusted results separately in our press release.

For 2011 sales grew by almost 11% on actual basis, 5% on organic basis and over 3% on an organic basis adjusted for FX movements. As you can see from our supplementary slides we reported organic growth in each primary segment for the quarter and on a full year basis.

Gross margins as adjusted increased by 44 basis points for the full year compared to 2010. We continue to execute on our long-term target of expanding gross margins by approximately 50 basis points per annum.

During 2011 we benefited from the successful integration of our 2010 acquisitions and several proactive initiatives to undertake them throughout the year to offset commodity cost inflation especially from China. Adjusted EBITDA margins for the quarter and full year were roughly flat as compared to the prior year period. We believe our new product and marketing spends are now at an appropriate run rate level to drive our growth objectives and with a strong pipeline in place we expect a continuation of gross margin improvements to result in EBITDA margin expansion in 2012 and beyond.

Cash flow from operations in Q4 were $403 million as compared to $275 million in the fourth quarter of 2010 and $427 million for the full year as compared to $289 million in 2010. We exceeded our previously stated target for the full year of $350 million based on strong operating profits and attention to working capital management. As mentioned on our prior call achieving greater efficiencies from working capital management primarily through improved inventory tons will be a focus area for our businesses in 2012.

We look forward to the additional constant impact this will have on our cash flows going forward, although this will be some what offset cosmetically by reclassification in the range of $35 million to $40 million between cash flow from operations and cash flow from financing in 2012 for excess tax benefit on shares.

For 2012, we’ve expect cash flows from operation to be at least as much as in 2011. We ended the quarter with the bank leverage ratio well below our three times target at approximately 2.6 times. If the full $500 million tender was accepted, which will be funded from a combination of existing cash on hand and new debt, we anticipate our bank leverage ratio will move back above three times.

Our intention would be to bring this ratio back to our targeted three times or less over the course of the year. Interest expense decreased by 2.6 million in the quarter compared to the prior year. Our weighted average interest rate for the full year and quarter were 5.4% and 5.2% versus 5.8 and 5.7% in the prior year respectively.

The low interest expense for the quarter and lower average interest rate was driven by opportunistic $1.3 billion refinancing of our senior secure credit facility completed in Q1 of last year, as well as LIBOR rates staying at historically low levels throughout 2011. Our current ratio of fixed to floating debt remains conservative at approximately 70% fixed to 30% floating.

As preview on prior calls and in our preliminary earnings announcement last month, during fiscal 2011 we had a number of adjustments in addition to our write off of deferred tax insurance cost, our customary non-cash intangible amortization and the effective tax rate. These adjustments consist of a $53 million non-cash charge for goodwill, intangibles and other asset impairment within our branded consumable segment primarily related to the United States Playing Card business, $23 million of re-organization charges primarily associated with international platform rationalization, $29 million of charges in cost of goods sold related to the rationalization of manufacturing facilities and a non-cash charges for the purchase accounting fair value adjustment for manufacturer’s profit and inventory primarily associated with the 2010 Quickie acquisition and $4 million of net other costs, primarily associated with domestic rationalization offset by the gain of the sale of a domestic business.

While the bulk of expense for our international and domestic reorganization has been taken in 2011, we anticipate an additional final charge of less than $10 million in 2012. We also anticipate taking a charge of about $25 million in 2012 to repay trade cash from Venezuela, not held for permanent reinvestment.

As Martin has discussed, we recently launched a modified Dutch auction self-tender of up to $500 million in value for a purchase price in the range of $30.00 to $33.00 per share. Following completion of the tender offer, we will confirm how many shares were tendered and the impact on our anticipated lower share count and additional leverage on EPS for 2012 to assist analyst in updating their model. We will also provide clarity on the outlook for the year between the quarters as we currently anticipate most of the 2012 growth will be in the second and fourth quarter.

In 2011 we were pleased to meet each of principal financial goals. Looking forward, we remain committed to delivering long-term organic revenue growth of 3% to 5%, gross margin expansion of 50 basis points and EPS growth of a minimum 10%. As Jim will outline, these goals will not be easy to achieve in 2012, but as always, we will work hard to do so.

On the working capital front, even though we plan to grow the top line, we aim to reduce our inventory by between 5% to 10% during 2012 and put the systems and incentives in place to help drive this performance. Our longer term goal of $5 of adjusted earnings per share by the end of 2014 remains unchanged.

Other considerations for modeling our 2012 performance, include the impact of year-over-year rate fluctuations in the Euro and other currencies, which based on current projected rate, we anticipate, will lead to a net reduction in sales in the range of $80 million to $90 million in 2012 versus a benefit of $102 million in 2011.

We anticipate our average cost of borrowing will be fairly flat between 2011 and ’12, and approximately 5.5% and those capital expenditures will continue to approximate depreciation at approximately 2% of sales.

We also anticipate our effective tax rate of 35.5% fall to 35% in 2012, as our business expands more in the lower tax rate international market.

And I would like to pass the call over to Jim.

Jim Lillie

Thank you Ian. As both Martin and Ian mentioned, we’re pleased with the strong results our business has delivered during Q4 and fiscal 2011, particularly in light of the challenging retail and consumer environment and the extreme weather we contended with this past year, including the warm starts of the winter in the US.

Having achieved our stated top and bottom line goals in 2011 of organically growing revenue between 3% to 5% and increasing adjusted EPS by at least 10% we are now firmly focused on delivering another year of strong financial performance in 2012.

Ian has outlined some of the updated assumptions that should be used for 2012 but in addition to the $80 to $90 million of estimated negative aspect impacts on sales now expected, we estimate the warm winter will negatively impact sales by $30 to $50 million in 2012. Based on the current outlook and management’s estimates, excluding any accretion that may result from the tender offer, we are providing our first specific guidance for as adjusted diluted EPS for 2012 which we anticipate to be in the range of $3.65 to $3.78 per share.

Each of our primary business segments reported organic growth for 2011 on the back of solid results in 2010. In addition many of our business won industry and product rewards reflecting our continued focus on new product development. These can awards can viewed on website.

As you would recall on the third quarter call I discussed the amounts of shipments that normally occur in any given year in the September and October timeframe and how this timing has the ability to impact the balance of revenue that ends up being reported between quarters. As a result of this we noted then that Q3 benefited by approximately $35 million of revenue that had been forecast for Q4. Despite this pull forward, our revenues and earnings in Q3 still surpass the endless expectations for the quarter and did so again in Q4 after adjusting for the shift between Q3 and Q4. We achieved this despite negative FX and the warm start to the winter season.

Our top line growth was led by branded consumables and outdoor solutions, which grew by 10% and 2% respectively on an actual basis and 5% and 4% respectively on organic basis. Within Outdoor Solutions commendable performances were reported in every business this quarter with particularly strong growth in Team Sports and Technical Apparel. Our Team Sports business delivered double digit growth in line with new growth initiatives supported by healthy POS and specialty sporting goods retailers and continued demand for our new products, including Rawlings BBCOR Bats and recently launched Worth Softball and Baseball Bats.

In November, we hosted the Rawlings Gold Glove Award Ceremony in New York where special honoraries included Hall of Fame legends such as Andre Dawson, Tony Gwynn, Ozzie Smith and Dave Winfield. We also introduced the First-Ever Rawlings Platinum Glove Award for best overall fielder at any position in both Leagues. The inaugural winners were Adrian Beltre of Texas and Yadier Molina of St. Louis. For retailers and consumers alike this event further linked the market leading brand in baseball Rawlings with the game’s top performers.

Reflecting the iconic nature of our brands and constant commitment to investing in them, in October Rawlings was honored to be named one of America’s Greatest Brands by the American Brands’ Counsel. Rawlings joined Major League Baseball and NASCAR as the only sports centric brands to be included on this distinguished list.

Jarden Technical Apparel, while you may recall we implemented a multi-year plan in 2010 to double revenues, again delivered double digit revenue growth this quarter and for the full year boosted by several new styles including Marmot’s Zion Jacket, the first full-taped waterproof softshell. Clearly, we are pleased that Marmot is performing in line with our accelerated growth plan and that it continues to take market share while being recognized as a performance leader by retailers and consumers alike.

Our Coleman business continued its momentum from earlier in 2011 particularly with its LED lighting solutions in Japan. The impact of sales of new products, such as Instant tents and the CPX 6 lighting system continue to exceed retailers’ expectations.

The healthy growth enjoyed in the international markets such as Japan was fully driven by after effect of the natural disaster, but importantly by expanding population of camping and outdoor enthusiasts. Coleman always at the forefront of change like our other businesses has been encouraged in this progression through targeted marketing campaigns such as the recent step-up camp event held in Japan.

Our focus on international growth in this business is reflected in the opening of our new world leadership center in Denver, Colorado earlier this quarter which will allow us to better service and drive growth on a global basis.

Our Fishing businesses continue to deliver its forecasted growth objectives and geographical expansion plans particularly in Europe, Asia and Australia. Following the listen, learn and innovate culture embodied in Jarden’s DNA, our Fishing business like several of our the businesses and brands across our portfolio serves its category captains for many of its customer leading innovation and proactively engaging in targeted initiatives to drive growth for the overall category. As an example, of this Pure Fishing recently formed a strategic partnership with KeepAmericaFishing to combine efforts to grow the support by advocating rights to fish in nations waterways.

In our Winter Sports businesses, K2 and Marker and Völkl which benefited from strong early orders in Q3 as retailers replenished low inventory levels from the strong 2010 and ‘11 winter season were modestly impacted by the unseasonably warm start to the winter in Q4 across the US and Europe. The selling period occurs primarily in February and March, but as noted earlier, we currently forecast this year-over-year impact to be 5% to 10% reduction in winter sports sales between 2011 and 2012.

In any given season the weather may help or hinder our award winning new product pipeline, but once again as Martin mentioned earlier, this is where the diversity of Jarden’s portfolio protects our overall results.

As expected within our Branded Consumables segment, our growth was driven by our Safety and Security and Home and Family businesses in the Quickie acquisition completed in December 2010.

Our First Alert carbon monoxide combo alarm has recruited strong POS data generated by the California CO Legislation introduced in January of 2011. We also saw high selling for some of our new products such as our new First Alert Security Cameras to help drive momentum among other initiatives we have now launched a direct-to-consumer marketing campaign supplemented through Facebook called our High Five campaign to commemorate the upcoming five year anniversaries of CO Laws starting with Illinois and Massachusetts in 2012.

In line with our forecast, our Consumer Solutions segment reported organic growth of 2% this quarter to 1% for the year with strong growth from our international businesses in Latin America and Canada. Certainly, with our seasonal FKU such as heaters and electric blankets were adversely impacted by the warm starts of the winter domestically, but this was partially offset by some of our higher margin, new products such as the Oster VOLT Lithium Ion clipper in the pet category. Several of our new products introduced in 2011 such as the Mr. Coffee, Power Serve as well as Mr. Coffee K-Cup products, Oster Personal Blenders and Crock-Pot Triple Dippers continue to enjoy high consumer demand.

Finally on the commodity front, as experienced, we experienced some volatility in Q4 and consistent with our past practices took proactive steps to lock-in costs where appropriate. However, none of the movements were meaningful enough to impact our long-term anticipated performance.

And with that update, I would like to now turn the call back over to Martin for some final comments.

Martin Franklin

Thank you, Jim. As you all know, we were pleased earlier this year to promote Jim to the position of CEO in recognition of his outstanding contributions since joining the company in 2003. We’re equally delighted by the seamless transition that has followed as Ian, Jim and I continue to work cohesively in what we refer to as the office of the Chairman and remain as committed as ever to Jarden’s future.

To conclude, Jarden’s success over the last decade would not have been possible without the dedication of our employees, our Board of Directors and support from our suppliers, distributors and customers. I would like to thank them all for their contribution.

Building on the well-rounded, scalable platform we have set in place, we now look forward to delivering another decade of consistent profitable growth and creating compelling returns for our shareholders. Thank you.

That concludes formal remarks. We’ll now open the call to questions.

Question-and-Answer Session

Operator

(Operator Instructions) Our first question comes from Bill Chappell with SunTrust.

Bill Chappell - SunTrust

Can you may be just give us an idea what you’re hearing from the retailers or what you’re seeing from the retailers especially as we move to the spring, summer season? I mean it sounds like that (inaudible) opening up a little bit more first holidays and you feel pretty good about the start of the year, ex-weather. So Jim, what are you hearing and how has that changed over the past few months?

Jim Lillie

You know, I think, unlike other years, Bill, where there was tight constraint on inventory. While we haven’t seen a lot of opened by expansion; we feel that this a reasonably healthy retail environment and normal retail patterns are going to emerge.

Bill Chappell - SunTrust

And so, when we look at kind of the different growth rates in the fourth quarter from Outdoor Solutions versus Consumer Solutions is there any better strength in one versus the other or are they all pretty steady coming into 2012?

Jim Lillie

They are all pretty steady, and I think there is a lot of excitement about new products that we have in the pipeline and that are being delivered right now. I think on a macro basis, retailers are reasonably conservative probably no more than normal in January as they are focused on the inventory levels as they end their fiscal years. But I think, the order pattern that we’re seeing is in line with our expectations and I think the excitement about new products that we’ve created over the last couple of years are going to be received well by both consumers and retailers.

Bill Chappell - SunTrust

And then two quick ones for Ian, in your prepared remarks I didn’t fully understand, I think you had said growth this year would come most in the second quarter and fourth quarter. I understand second quarter, but fourth quarter I would think you would have (inaudible) with winter sports? And then also you said cash flow would be kind of flat with 2011 at least, but if you are taking 5% to 10% out of inventory and improving working capital by that much, I would think your cash from operations could be significantly better?

Ian Ashken

Let me just answer the second question first. I mentioned in the prepared remarks that there is going to be a reclassification of $35 million plus between cash flow from operations and cash flow from financing. So we take a step backwards to start with; so by saying that we think it’s going to be flat that also means that we think that that should be a minimum of $35 million higher. But when you see – and we’ll it out in the quarter or when it happens, but I think that we felt very good about the cash flow that we had in 2011. We feel very good about where it will be in 2012. Having said that of the $427 million that we made in 2011, over $400 million of it was in Q4. So as I said here in February as in previous years I think it’s prudent on us to be somewhat conservative on where we think the cash flows will be. What was your first question?

Bill Chappell - SunTrust

On the quarterly growth rate as you said that the growth will be strongest in the fourth quarter and I didn't fully understand that?

Ian Ashken

If you remember we brought forward sales in Q3 last year, about $35 million of sales and Jim mentioned that. My guess is that those sales will flip flop in 2012. So it’s really more of a question of the timing on the September-October and therefore what you are comping against in Q3 of 2011 and Q4 of 2011, so that's the assumption. Obviously as we get closer to seeing where the seasons finish up on the winter businesses, by April/May time we should have better visibility on that.

Jim Lillie

And then Bill on your Q2 point, if you recall we had the flooding in Q2 last year that negatively impacted the fishing business and then we headed into the drought that negatively impacted the home canning business. So assuming some normalization in weather, we should expect to see a rebound in both of those businesses which are as both higher gross margin businesses as well.

Operator

And for next question we will go to Joe Altobello with Oppenheimer.

Joe Altobello - Oppenheimer

A couple of quick questions, I guess first in terms of 2012, obviously you are talking about another year of let's call it 3% to 5% organic growth and hopefully another year of 50 basis points of gross margin expansion, but in terms of the puts and takes on the gross margin, if you could help us there a little bit. I mean obviously this year you probably have a little bit easier of a commodity and shipping cost comparison, but you also don't have as much savings or shouldn’t have as much savings from integrating the 2010 acquisitions as you did in 2011. So if you could sort of help us figure out how those two dynamics should work out this year?

Ian Ashken

Yeah, I think that's a fair point Joe. Typically, the answer is obviously that it’s new products that drives the gross margin expansion along with the fact that every year we try and improve and we have continuous improvement of programs. Well I think that’s different on why we feel that the target is achievable in 2012, it's because a number of our higher margin business and Jim said that two of them and our fishing business and our fresh preserving business had tougher years in 2011. So a really mixed impact and you saw it particularly in Q4 with the gross margins. Mix was not our friend in 2011. So if mix goes back to the normal levels and you add that on top of new products and stuff, I think that’s where you will see the gross margins coming from.

Jim Lillie

I will just add, Joe. The supplementing, a lot of the gross margin activity is just the KPI plan across the businesses that are designed to improve the gross margins despite what might occur with the mix.

Joe Altobello - Oppenheimer

And just secondly in terms of putting the EPS guidance you gave us today in a little more perspective. On the FX side, what was the boost to EPS from FX in 2011 and what are you expecting as a headwind in 2012?

Ian Ashken

Well we haven’t called out the impact on EPS I wish on this. The top line, it’s a $100 million of additional revenue and we’ve said that in 2012 based on where we see right at the momentum, it’s going to be an $80 million to $90 million headwind. When we filed the K which will be towards the end of next week, we’ll have a better idea of having finished the analysis of what the bottom line impact is on that.

Operator

Our next question comes from Charlie Strauzer with CJS Securities.

Charlie Strauzer - CJS Securities

Picking up with left up on the EPS range, Jim can you give us a little more color as to what your assumptions are behind the range and what would have to happen to get that 378 number versus the 365?

Jim Lillie

Well, I think we have talked about it. With the winter sports, the impact seeing $30 million to $50 million across the winter product lines in general and the FX, I think that’s our best estimate right now. But as I said in the prepared remarks, most of the ordering for ski occurs in February-March timeframe. And so we just don’t have our arms around what those orders are going to be. The good thing is with market leading brands, I think that this is not the year to be selling some unknown pair of skis into the market place. People want products that turn and we certainly have the brands and the technology behind our products to entice consumers and retailers to pick up our products this year may be in lieu of other people’s products.

Charlie Strauzer - CJS Securities

Got and obviously you are not making any share repurchases in that range soon?

Jim Lillie

No. No, there is no assumption in the share count for any share purchase.

Charlie Strauzer - CJS Securities

Got it. And then just talk a little bit too about in Q4, when you look at your shelf space versus your competitors, give us a sense of your gains and losses in various categories there?

Jim Lillie

I mean, I wouldn’t say but we have lost share. I think the impact on our business has been that of weather patterns as opposed to anything else as we described before.

Operator

And our next question comes from Greg Badishkanian with Citigroup.

Greg Badishkanian - Citigroup

Thanks. Hey, how are you? Could you talk a little bit about POS fourth quarter, may be even January if you have some color there, and how you feel about inventory levels right now, just given the retail momentum?

Martin Franklin

Well, I think, you know the POS for the fourth quarter was in line with our expectations with the caveat being that winter-related products because of the relatively warm December. Winter-related products fell off from a POS perspective as one might expect. And, we don’t have a lot of color yet, but January POS performance was good. I would say that the reorders that we received in January would not reflect of the POS performance as retailers kind of had the breaks on inventory during the month of January.

Greg Badishkanian - Citigroup

And then also, you talked a little bit about gross margins and the opportunity, in terms of just commodity cost pricing, could you, maybe give a little bit color on that too?

Martin Franklin

Yeah, I think I may have said on the third quarter call that in a typical year, over the last three or four years, we’ve typically seen about $25 million to $30 million in year-over-year commodity expenses, assuming flat volume and then you adjust for volume coming after that. Heading in to this year, we saw commodity increases slightly lower than that range, kind of in the $15 million to $20 million period with less volatility.

So I think from a commodity standpoint, we’re not expecting that to negatively impact the performance in 2012 the way it may have done in 2009 and 2010, to a relatively calm commodity world at the moment.

Operator

Our next question comes from Jason Gere with RBC Capital Markets.

Jason Gere - RBC Capital Markets

Ok thanks good afternoon I guess the first question I want to go on to is the Dutch auction and the 30 to 33. Based on where your stock price is now and what the performance you put up today it doesn’t seem like, I will my fingers crossed, your are going to be in that level. We have done the math and there is lot of accretion obviously out there for you to buying your stock I think even up in the high $30 to $40 so would you if, I guess the commitment level is low what you consider raising that level in order to buy back your stock?

Ian Ashken

I would just like to comment given the SEC rules and with disclosure requirements regarding to the tender offer, we are not really going to comment on this call about anything we talked about previously, we are saying that obviously that terms of $30 to $33 per share offers as outlined in the tender documents that we filed with the SEC and that it is up to our Board to determine whether or not to extend the offer beyond February 23rd or change and even its terms here prior to that date. Having said that obviously we had a stock buy back program three stock buyback programs in place over the last five years we have used too, then put a new one in place $500 million in August we used some of that. So our commitment to the concept is obviously fully that.

Jason Gere - RBC Capital Markets

And just trying to gauge what the response has been you have seen in terms of suspending the dividend and it is only $30 million a year. So obviously in this environment people like a dividend even whatever yield that you are receiving and so that $30 million just feels like you guys generated enough cash that you could continue. I guess I just want to get a little bit more color on the thinking behind that. I do agree that buy back is more accretive to shareholder value but just from the psychological standpoint what you've been hearing from investors once you've made the announcement few weeks ago.

Martin Franklin

I will tell you this. We've had literally universal support and approval and thanks from shareholders who’ve called us to express their view. We have had no push back on our decision to replace the dividend with the buyback. The logic behind it to answer your question is a very simple one and that is use of cash to do the buyback really means we want to keep availability for other purposes inside the company. We don't want to limit the company's resources to do other things, whether it be acquisition or investments in the existing businesses and obviously a buyback when you look at financing costs etcetera, you use cash for other reasons. Buying $500 million worth of stock would at most use up $30 million of cash on an interest basis and they basically net each other out.

But as a side point, we have to go back to just looking at the history. When we went back and looked at the history we haven't gained one new shareholders as a result of having this dividend, not one. We haven't gained any increase in our multiple, zero. So if somebody could show me empirical evidence of how giving $30 million in dividends improves our stock’s performance then we will review it again. But I can tell you as of today there is absolutely no evidence of that. So our choices were, either have among the choices, they were many choices but one of them was have a completely different dividend policy, far more aggressive one that maybe would be meaningful or do a major buyback. Those two of the choices and obviously the choice of the Board of Directors speak for itself.

Jason Gere - RBC Capital Markets

Okay. I appreciate the color and the fundamental question I have it and I guess I am trying to understand I know you are talking within the guidance that you are providing. It sound like you didn’t do your best for three to five organic in 50, I mean did you, I don’t know if you actually blessed three to five organics sales and it seems like the warm weather probably I think its less than 1%. But it does seems that this year maybe versus the prior years you might have to lean on consumer solutions, branded consumables to be more consistent, especially when you are facing I think a little bit more of the headaches, just in terms of the warm weather on the Outdoor Solution. If that’s the case can you just talk about it? Is the level of innovation what you have seen from the retailers in terms of inventory levels out there? What gives you the confidence that those sorts of businesses can be more consistent like Outdoor Solution has been for the last two years?

Martin Franklin

I think that’s the beauty of having the diversified portfolio. You do lean on others when certain businesses are underperforming. Go back to Q2 when we had the flood, the other businesses picked up where Fishing left off and the other businesses picked off where the Home Canning business wasn’t performing because of the weather. So I think that’s the beauty of having the portfolio of way it is. There is a lot of innovation in the pipeline. We are spending on innovations, it is continually increasing. I think we’ve reached a nice level. You will see that innovation on display this spring. As you know we are having an investor day tomorrow on the back of the media day to show off some that innovation and I think it could be clearly evident where the money is begin spent in the corporation in line with our goals to increase the revenue 3% to 5%, expand the gross margin to 50 basis points and improve the overall profitability So I think the model is working where one picks up where the other drops off.

Jim Lillie

But Jason your comment is fair that obviously JAH has carried the ball for the last year or two and what you will see in the next year or two is the branded consumables and consumer solutions stock to carry more of that pressure.

Operator

Our next question comes from Andrew Burns with D.A. Davidson.

Andrew Burns - D.A. Davidson

Thanks and good afternoon. I guess my first question which is being in terms of the Jarden Home and Family and thoughts for 2012. Now that you have had some time to integrate the Mapa Spontex business, are there revenue opportunities that you are realizing as expected given some time you had to integrate? Thanks?

Jim Lillie

Well, I think that we are expecting Mapa Home and Family in conjunction with, it’s partnering with Quickie, you will see in array of new products in Europe this year. That are really modeled off Quickie products. Also you are seeing geographical extension utilizing the overall Jarden platform. That being said most of their business is in Europe and with the overall weaker European economy as well as some FX rates, we have very conservative view for the performance of that business because we like to budget conservatively when there are economic headwinds. But I would expect that it will outperform our expectations as we move throughout the year because of those new products and because of the Jarden platform. It is helping them to be stronger than if they were on their own.

Andrew Burns - D.A. Davidson

Great, thanks. And then something for some clarification in terms of how you are framing up that $30 million to $50 million impact for 2012 to the top line for Outdoor, I was hoping you could quantify where the sports goods is as a percentage of the overall outdoor business? And then also, when you’re trying to forecast out, are you expecting the channel to do a very heavy promotional discounting in the season with inventories where they need to be or are you expecting a fair amount of customers will carryover a decent portion of inventory into next season? Thanks.

Ian Ashken

Hi, this is Ian. As Jim I think mentioned in his comments, the impact is 5% to 10% on just the ski side of that business, which is a $500 million or less business. It does have an impact on other seasonal businesses whether they’d be electric blankets or fire logs and stuff. And that’s why, when you are towards the end of the season, the good thing is that there is not a huge inventory of retail. It’s more a question of how it covers by it’s appetite for the beginning of the next season, which shifts in that September-October timeframe, which really again, we won’t know until April-May. So, if you think about, Jarden typically six to nine months, that’s our estimate today. It could be more, it could be less. But that’s the best estimate today.

Andrew Burns - D.A. Davidson

Last question for you, just hoping you could elaborate a little bit on that 5% to 10% inventory reduction target for 2012. Just how you expect to get there? What is enabling that? And also whether it occurs throughout the year or is it more first half or second half and where you see the progress? Thanks.

Ian Ashken

The first thing to note is that’s just sort of apples-to-apples number. So if you got commodities that go up or down, that can take inventory up or down on its own. And secondly, obviously we intended to grow sales, you would expect your inventory to go up. We’ve invested a lot of money in the last two to five years in really building our systems so we get much better visibility for what inventory we need, which are the margin -- we want to have lots of the higher margin products and if we want to add some of the lower margin products its not going to kill anybody.

So we now basically have that information available to us not just in our major SKUs, but all the way down and the businesses are incentivized now to go and improve the turn of our business and that’s what we are telling you and that’s 5% to 10% is goal that we set for our business.

Jim Lillie

I would just add from a seasonality standpoint, obviously as we’ve set these goals in motion as we build the budget, it’s easier to impact the back half of the year than the front half of the year, because we’ve been ordering product you know again based on lead times and what we see the sales curve looking like. So I think if you look out over next 18 months to 24 months you’ll see a significant improvement in our overall working capital structure primarily driven by the inventory.

Operator

Our next question comes from Karru Martinson with Deutsche Bank.

Karru Martinson - Deutsche Bank

When we look at the cash on the balance sheet where you guys feel is the appropriate level that you need to run the business and where do you see that going forward?

Ian Ashken

Hi, this is Ian. We’re not afraid to keep the cash on the balance sheet, obviously we have the tender offer out there at the moment and certainly some of that cash if we are effected tender offer will go to that. I wouldn’t want to see less than probably $350 million on the balance sheet, but if it’s over $1 billion that doesn’t worry me either. So it goes up and down, it will depend obviously because of long-term debt in place, so we want to keep our leverage under that three times ratio. But I think that’s -- I would be surprised if you see it higher than $800 million in the next three quarters, but that’s where we are at the moment.

Karru Martinson - Deutsche Bank

When you look at the investment grade kind of above benefits, I mean is there a focus here to grow this company into an investment grade company?

Ian Ashken

It’s an interesting question, I will tell you this, if you go study, obviously we do this a lot, I wish we got the benefit of the doubt, if you like, that we get in the credit markets, that in our equity, because the reality is, on a relative basis our credit rating is a lot better than our equity against its peers. And I think that's because people recognize that Jarden generates a lot of cash and we’re prudent in what we do with that cash.

So today we continue to drive the business and try to drive returns with a leverage ratio that we feel comfortable with, I think that if we chose to do less operate as a more mature business and take our leverage down we could de-lever quite quickly and obviously that would put us into a different rating category. But the reality is with the cost of capital right now and the LIBOR spreads, there is not a huge return in becoming an investment grade company for us.

Karru Martinson - Deutsche Bank

And when you look out at the acquisition landscape, I mean what are the types of sizes that you are seeing and has there been a change in multiples in expectations?

Ian Ashken

That's an interesting thing; I mean first of all got to go back to the point, we haven't found it a more compelling acquisition opportunity than our own stock which is why we haven’t bought anything at all in 2011 and have a big repurchase program out there. We have locked some confidence, they are interesting businesses, they are mostly overpriced and particularly overpriced relative to how we trade.

So we haven’t pursued anything and I would say with the kind of depth that we -- you know we tend to spend very little time on the things that we aren’t going to actually get done but pretty efficient and we just haven’t seen anything that is being compelling for us to really drive towards. But, that’s not to say we haven’t had a lot of looking.

Operator

And we have time for one more question. We’ll take our last question from Bill Leach with TIAA-CREF.

Bill Leach - TIAA-CREF

My questions are all answered actually. Thank you.

Ian Ashken

Well, that concludes our call and thank you very much everyone for listening. For those of you who will speak to tomorrow at our New Product Day we are excited for that and we look forward to talking about our some of our new products. For the rest of you, we’ll look forward to reporting on our first quarter call to report on our progress in 2012. So thank you. Bye, bye.

Operator

Ladies and gentlemen, this does conclude our conference for today. You may all disconnect. Thank you for participating.

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