Sunbeam 2007 Annual Report Download - page 31

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We cannot assure you that we could quickly or effectively replace any of our suppliers if the need arose, and
we cannot assure you that we could retrieve tooling and molds possessed by any of our third-party suppliers. Our
dependence on these few suppliers could also adversely affect our ability to react quickly and effectively to
changes in the market for our products. In addition, international manufacturing is subject to significant risks,
including, among other things:
• labor unrest;
• political instability;
• restrictions on transfer of funds;
• domestic and international customs and tariffs;
• unexpected changes in regulatory environments; and
• potentially adverse tax consequences.
Labor in China has historically been readily available at relatively low cost as compared to labor costs in
North America. China has experienced rapid social, political and economic change in recent years. We cannot
assure you that labor will continue to be available to us in China at costs consistent with historical levels or that
changes in labor or other laws will not be enacted which would have a material adverse effect on our operations
in China. A substantial increase in labor costs in China could have a material adverse effect on our business,
results of operations and financial condition. Although China currently enjoys “most favored nation” trading
status with the United States, the U.S. government has in the past proposed to revoke such status and to impose
higher tariffs on products imported from China. We cannot assure you that our business will not be affected by
the aforementioned risks, each of which could have a material adverse effect on our business, results of
operations and financial condition.
Our operating results can be adversely affected by changes in the cost or availability of raw materials.
Pricing and availability of raw materials for use in our businesses can be volatile due to numerous factors
beyond our control, including general, domestic and international economic conditions, labor costs, production
levels, competition, consumer demand, import duties and tariffs and currency exchange rates. This volatility can
significantly affect the availability and cost of raw materials for us, and may, therefore, have a material adverse
effect on our business, results of operations and financial condition.
During periods of rising prices of raw materials, there can be no assurance that we will be able to pass any
portion of such increases on to customers. Conversely, when raw material prices decline, customer demands for
lower prices could result in lower sale prices and, to the extent we have existing inventory, lower margins. As a
result, fluctuations in raw material prices could have a material adverse effect on our business, results of
operations and financial condition.
Some of the products we manufacture require particular types of glass, metal, paper, plastic, wax, wood or
other materials. Supply shortages for a particular type of material can delay production or cause increases in the
cost of manufacturing our products. This could have a material adverse effect on our business, results of
operations and financial condition. In particular, we rely on wax for certain products in our Branded
Consumables segment and resin for many of the products in our Consumer Solutions and Outdoor Solutions
segments and the plastics part of our Process Solutions segment. Wax and resin prices have risen in response to,
among other things, higher oil prices. If wax prices, resin prices or other material prices rise further in the future
we can expect the cost of goods for our businesses to increase. Given that only some of this increase relates to
contracts where we have pass-through pricing, the effect of the remainder of the increase could have a material
adverse effect on our margins. We also rely on glass for certain of the products in our Branded Consumables
segment. Glass prices have risen in response to higher natural gas prices. If glass prices rise further in the future,
we can expect the cost of goods to increase, which could have a material adverse effect on our business, results
of operations and financial condition.
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