Amit Chokshi_

Analyst Estimates for Jarden in 2009 Look Ridiculously Optimistic

My whole write up is based on how much cash I think JAH can generate in the coming year. Q4 is a seasonally strong cash generation business for JAH but they burn through it in Q1-Q3, it's a seasonal business and they use a lot of cash in terms of working capital. Just look at how much operating cash flow JAH produced in the first 3Qs of 2008 and 2007, it's $55MM and $23MM. That's their operating cash flow, and then they still had capex of $70MM and $55MM meaning they were burning cash on a purely operational level. The only way they've managed to handle their debt load is refinancing, just look at the cash flow statement www.sec.gov/Archives/e... here and under page 5, financing cash flows, these guys pay back some debt, like $20.7MM but tap their revolver/short term debt for $69MM and issue new debt of $25MM. Look what they did in the previous period.

Q4 is basically JAH's entire year and is generally a strong operating cash flow period but they still don't get very far with their total cash production. Look at the 8-K www.sec.gov/Archives/e... for their Q4 07. They had $282MM in operating cash flow but still spent $32MM in investing cash flows and then they had to pay back about $150MM in debt, so the total net impact was $100MM in cash flow. Notice I didn't count the $40MM share repurchase either, I'm giving these guys as much lee way to show real, operating-related free cash flow. The biggest driver for JAH's cash flow in Q4 was the big swing in inventory since last year's xmas was much better than 08 will be.

The potential risk I see is that JAH has roughly the same inventory level of $1.3B going into Q4 08 that it had in Q4 07 and those quarters were comparable with K2 and Pure Fishing. If sales are not as strong in Q4 08 as they were in Q4 07, inventory turnover will be weak and a big part of JAH's cash flow won't show up meaning there will be very little net cash produced for Q4 08 and likely until Q4 09. Even with a "good" Q4 07, keep in mind that JAH at $2.7B in net debt in Q3 07 going into JAH's strongest quarter, and ended 2007 with net debt of $2.5B and that was a good Q4. They have roughly the same level of net debt going into a worse holiday season with the same level of inventory, I'm not too confident they can pare much debt back in the next few months.