What do the brands Rawlings, Ball, Hoyle, Oster, Mr. Coffee, K2 and Berkley have in common? They're a few of the more than 100 brands owned by Jarden Corporation (NYSE:JAH).

The odd mix was cobbled together by current CEO Martin Franklin. He was hired in 2001 after he failed to take over Alltrista, a manufacturer of glass preserving jars; the board was impressed with his vision, so he was made CEO in 2001. Alltrista was renamed Jarden in 2003, and Franklin went to work acquiring a group that could build a strong relationship with retailers and consumers.

Second Quarter Was Bountiful
Its sales for the second quarter June 30 increased 30% to $1.4 billion, up from $1.1 billion the year before. Net income was $43 million compared to $16.7 million in 2006. The non-GAAP numbers, which include K2 and Pure Fishing, delivered net income of $54.8 million compared to $44.5 million year-over-year. All three of its segments: Branded Consumables, Consumer Solutions and Outdoor Solutions delivered organic sales growth in the quarter and are expected to do so for the remainder of 2008. (Discover how to keep score of companies to increase your chances of choosing a winner. Read What You Need To Know About Financial Statements.)

Management believes its diversified business and strong brands are helping the company stay afloat in a tough economy. Second-quarter earnings beat estimates by 8 cents, coming in at 72 cents per share. CEO Franklin believes the company is in a good position to meet analyst expectations after the excellent second quarter. EPS estimates for 2008 are $2.86. Outdoor product sales did well and revenue to date early in the third quarter is good, despite selective price increases to offset higher commodity costs. Mass merchants like Wal-Mart (NYSE:WMT), one of its biggest customers, are doing well. Historically, when these mass merchants have done well, so has Jarden.

An Interesting Collection
Beauty is in the eye of the beholder. Jarden will tell you it's building strong brand equity with products that have recurring revenue and are distributed in more than 100 countries through various channels including mass market, home improvement, specialty, grocery and club stores from a manufacturing base in 11 countries.

On an annualized basis, its Branded Consumables segment contributes 15% of total revenues, or $850 million. Its products are No.1 in several categories including playing cards, matches and toothpicks, firelogs, smoke alarms, and fresh preserving jars - those really are actual categories, honest. Consumer Solutions account for 33% of total sales, or $1.9 billion annually, where it's No.1 in blenders, coffee makers, air purifiers and slow cookers. (To learn more, check out The Importance Of Segment Data.)

The Great Outdoors
Outdoor Solutions accounts for 45% of sales, or $2.5 billion, and is No.1 in baseball gloves, balls, fishing tackle, ski equipment, sleeping bags and tents. The size of the Outdoor Solutions segment increased dramatically last August when it acquired K2 Inc., a sports equipment manufacturer based in Carlsbad, California with well-known brands like K2, Rawlings, Shakespeare, Marmot and Coleman. With an enterprise value of approximately $1.2 billion, this was the largest acquisition of the 19 it has completed in the past seven years. If you owned every one of its brands, you'd certainly be well provisioned, if not a little bloated.

Too Many Brands to Manage?
When was the last time you saw a company doing well that owned this many brands? Procter & Gamble (NYSE:PG) and Johnson & Johnson (NYSE:JNJ) come to mind. Beyond these global players, few companies can execute at a high level across so many reporting segments.

A classic example of what can go wrong with this strategy is Liz Claiborne (NYSE:LIZ), the once brand-heavy fashion icon that has been slimming down in the past 18 months. Shedding close to half of its brands, Liz Claiborne has decided to focus exclusively on those that can develop into powerhouses, realizing 30-plus brands were just too bulky. Some in the financial world feel the same realization will hit Jarden, albeit in a less orderly fashion.

Herb Greenberg, former writer at Marketwatch and The Wall Street Journal, wrote an article in November 2007 that highlighted the difference of opinion between CEO Martin Franklin and James Chanos. Then and today Chanos' firm, Kynikos Associates, believes the $2.4 billion in debt Jarden has amassed to secure this largesse is much too burdensome in slow economic times and is likely to put even more downward pressure on the stock. It's down 34% in the last 52 weeks, thanks in part to the shorts holding 23.5% of the stock. With the price-to-sales and PEG ratios both well below 1 and the price-to-book just over 1, are we not looking at a value trap? (To learn more, check out Value Traps: Bargain Hunters Beware!)

Bottom Line
While sales have grown from $588 million in 2003 to $4.7 billion in 2007, the interest expense on the debt has also grown from $19.2 million in 2003 to $149.7 million in 2007. I like many of the brands Jarden owns; however, it seems to me that the company needs to perform flawlessly for several years in order to pay down its debt. Realistically, I have to believe that at some point it will slip up. When and if it does, you could be looking at fire sale prices for some of these No.1 brands. I'd tread carefully with Jarden.

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Tickers in this Article: JAH, WMT, PG, JNJ, LIZ

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