Rayovac 2006 Annual Report Download - page 26

14 SPECTRUM BRANDS | 2006 ANNUAL REPORT
Although we have long-standing relationships with many of
our suppliers, we do not have long-term contracts with them.
Any adverse change in any of the following could have a material
adverse effect on our business, fi nancial condition and results
of operations:
• relationships with our suppliers;
• the fi nancial condition of our suppliers;
• the ability to import outsourced products; or
• our suppliers’ ability to manufacture and deliver outsourced
products on a timely basis.
If our relationship with one of our key suppliers is adversely
affected, we may not be able to quickly or effectively replace
such supplier and may not be able to retrieve tooling and molds
possessed by such supplier.
In addition, we manufacture the majority of our foil cutting
systems for our shaving product lines, using specially designed
machines and proprietary cutting technology, at one of our facili-
ties. Damage to this facility, or prolonged interruption in the
operations of this facility for repairs or other reasons, would have
a material adverse effect on our ability to manufacture and sell
our shaving products.
Adverse weather conditions during our peak selling
season for our lawn and garden and household insecti-
cide and repellent products could have a material
adverse effect on our business, fi nancial condition and
results of operations.
Weather conditions in North America have a signifi cant
impact on the timing of sales of certain of our lawn and garden
and household insecticide and repellent products. Periods of dry,
hot weather can decrease insecticide sales, while periods of cold
and wet weather can slow sales of herbicides and fertilizers. In
addition, an abnormally cold spring throughout North America
could adversely affect both fertilizer and insecticide sales and
therefore have a material adverse effect on our business, fi nancial
condition and results of operations.
We depend on key personnel and may not be able to
retain those employees or recruit additional qualifi ed
personnel.
We are highly dependent on the continuing efforts of our cur-
rent executive offi cers. Our business, fi nancial condition and
results of operations could be materially adversely affected by the
loss of any of these persons or if we are unable to attract and
retain qualifi ed replacements.
Class action and derivative action lawsuits and other
investigations, regardless of their merits, could have an
adverse effect on our business, fi nancial condition and
results of operations.
Spectrum and certain of its offi cers and directors have been
named in the past, are currently named and may be named in the
future as defendants of class action and derivative action lawsuits.
Spectrum has received requests for information from the SEC.
Regardless of their subject matter or the merits, class action law-
suits and other investigations may result in signifi cant cost to us,
which may not be covered by insurance, may divert the attention
of management or otherwise have an adverse effect on our busi-
ness, fi nancial condition and results of operations.
We may be exposed to signifi cant product liability
claims which our insurance may not cover and which
could harm our reputation.
In the ordinary course of our business, we may be named
defendants in lawsuits involving product liability claims. In some
of these proceedings, plaintiffs may seek to recover large and
sometimes unspecifi ed amounts of damages, and the matters may
remain unresolved for several years. These matters could have a
material adverse effect on our business, results of operations and
fi nancial condition if we are unable to successfully defend against
or settle these matters or if our insurance coverage is insuffi cient
to satisfy any judgments against us or settlements relating to
these matters. Although we have product liability insurance cov-
erage and an excess umbrella policy, we cannot assure you that
our insurance policies will provide coverage for any claim against
us or will be suffi cient to cover all possible liabilities. Moreover,
any adverse publicity arising from claims made against us, even if
the claims were not successful, could adversely affect the reputa-
tion and sales of our products.
We may incur material capital and other costs due to
environmental liabilities.
Because of the nature of our operations, our facilities are sub-
ject to a broad range of federal, state, local and foreign laws and
regulations relating to the environment. These include laws and
regulations that govern:
• discharges to the air, water and land;
• the handling and disposal of solid and hazardous substances
and wastes; and
• remediation of contamination associated with release of
hazardous substances at our facilities and at off-site disposal
locations.
Risk of environmental liability is inherent in our business. As
a result, material environmental costs may arise in the future. In
particular, we may incur capital and other costs to comply with
increasingly stringent environmental laws and enforcement poli-
cies, such as the EU Directives, RoHS and WEEE, discussed
above. Although we believe that we are substantially in compli-
ance with applicable environmental regulations at our facilities,
we may not be in compliance with such regulations in the future,
which could have a material adverse effect upon our business,
fi nancial condition and results of operations.
2006 Form 10-K Annual Report
Spectrum Brands, Inc.