Sunbeam 2004 Annual Report Download - page 38

Management’s Report on Internal Control Over Financial Reporting
Management of the Company is responsible for establishing and maintaining adequate internal
control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act.
The Company’s internal control over financial reporting is designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with accounting principles generally accepted in the United States of America
(“GAAP”). The Company’s internal control over financial reporting includes those policies and
procedures that:
‰pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the Company;
‰provide reasonable assurance that transactions are recorded as necessary to permit preparation
of financial statements in accordance with GAAP, and that receipts and expenditures of the
Company are being made only in accordance with authorizations of management and directors
of the Company; and
‰provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the Company’s assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to
the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
As required by Section 404 of the Sarbanes-Oxley Act of 2002, management assessed the
effectiveness of the Company’s internal control over financial reporting as of December 31, 2004. In
making this assessment, management used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework.
Based on our assessment and those criteria, management concluded that the Company maintained
effective internal control over financial reporting as of December 31, 2004.
On June 28, 2004, the Company acquired approximately 75.4% of the issued and outstanding stock
of Bicycle Holding, Inc., including its wholly owned subsidiary United States Playing Card Company
(collectively “USPC”), and acquired the remaining 24.6% pursuant to a put/call agreement on October
4, 2004. The Company has excluded from its assessment of and conclusion on the effectiveness of
internal control over financial reporting, USPC’s internal controls over financial reporting. For the year
ended December 31, 2004, USPC accounted for 10.5% of the Company’s total net sales. As of December
31, 2004, USPC accounted for 7.5% of the Company’s total assets, excluding $225.3 million of goodwill
and other intangible asset amounts that were recorded in connection with the acquisition of USPC.
Our management’s assessment of the effectiveness of our internal control over financial reporting
as of December 31, 2004, has been audited by Ernst & Young LLP, an independent registered public
accounting firm, as stated in their report which is included elsewhere herein.
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