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Tickers in this Article: JAH, WMT, TGT, DKS, VFC, NKE, NC, ZQK
Last summer I wrote an article entitled "Is Jarden's Basket Of Brands A Value Trap?" It was an attempt to untangle all of Jarden's different operating businesses to assess whether its stock was cheap or not. At the time, it was trading at $23.36, down 34% in the previous 52 weeks. Since then, it's dropped another 49% (what stock hasn't?) as the global economy deteriorated.

In the end, I cautioned investors that Jarden (NYSE:JAH) would have to perform flawlessly for several years to pay down its significant long-term debt. While its stock is down significantly from 18 months ago, Jarden recently announced reasonably good year-end earnings. So, the question I have to ask today is this: What's new at Jarden, and is it still a value trap? (Find out how to avoid getting sucked in by a deceiving bargain stock. Read Value Traps: Bargain Hunters Beware!)

2008 Was A Good Year
Jarden announced fourth-quarter and year-end numbers on February 11, and as I said above, they were actually solid considering the economic meltdown we're facing. Once you peel back the $283 million non-cash impairment charge against goodwill, as well as some other reorganization costs, its adjusted net income on a non-GAAP basis in fiscal 2008 was $209 million or $2.74 a share, up from $171 million or $2.33 a share in 2007. That 17.6% increase, along with a 16% increase in sales ($5.4 billion from $4.7 billion) demonstrates CEO Martin Franklin's business plan is working. Whether that continues is another matter.

Bring More To The Table
In Jarden's Q4 conference call, Franklin laid out the company's plan for growth. He suggested that its diversified business model allows aligning it more closely with larger retailers such as Wal-Mart (NYSE:WMT), Target (NYSE:TGT) and Dick's Sporting Goods (NYSE:DKS). The big players are looking to reduce the number of vendors they deal with, preferring a select group who can provide the right products at the right prices at the right time. The result is a service level you just can't get from smaller vendors.

Jarden's plan is the classic consolidation play. In fact, it may have gotten the idea from the prototypical consolidator himself, Richard Heckmann, former CEO of K2, the ski business Jarden acquired in 2007. Over a 20-year period, Heckmann acquired 172 businesses while at the helm of two different companies, and he's not done yet. His feeling at K2 was that if you brought more to the retail buyer's table in one shot, you increased margins for both the retailer and the manufacturer. Today, this working arrangement is commonplace. (Take a deeper look at a company's profitability with the help of profit-margin ratios in The Bottom Line On Margins.)

Stock Valuation
As I mentioned in the opening, Jarden's stock is down considerably, 65% to be exact, since it began its consolidation transformation 18 months ago. While the stock's performance has been disappointing, I don't think you can say the same about the company. Frankly, I'm amazed sales have held up as well as they have. In the conference call, Franklin alluded to the fact that Jarden's stock currently trades at two-thirds its book value per share and six times EBITDA. By most valuation metrics, Jarden is definitely cheap right now. So, what's holding it back? I believe the same issue that I wrote about in my first piece: the long-term debt. While it ended the year with $250 million in cash flow from operations, the long-term debt and interest expense are still worrisome. In 2008, it reduced debt by just $12.6 million to $2.4 billion while the interest expense increased 16.2% to $178.7 million. It's clearly not going away as fast as investors would like. Combine that with a very cloudy 2009, and you get a stock price under pressure.

Company Six-Month Price Change
Jarden (NYSE:JAH) -49%
Nacco Industries (NYSE:NC) -69%
Nike (NYSE:NKE) -30%
Quiksilver (NYSE:ZQK) -80%
VF Corp. (NYSE:VFC) -31%
S&P 500 -36%
Price: August 14, 2008 to February 13, 2009

Bottom Line
Looking at the table above, you'll see that Jarden's stock has done about what its competitors have. I'm divided whether now is a good time to buy the stock. While I do think it will weather the economic storm in 2009, I can't get past the overwhelming debt burden it carries. For this reason, I suggest continuing to sit on the sidelines until the economic picture brightens somewhat.

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