Sunbeam 2007 Annual Report Download - page 39

Changes in the retail industry and markets for consumer products affecting our customers or retailing
practices could negatively impact existing customer relationships and our results of operations.
We sell our Outdoor Solutions’, Consumer Solutions’ and Branded Consumables’ products to retailers,
including club, department store, drug, grocery, mass merchant, sporting goods and specialty retailers, as well as
direct to consumers. A significant deterioration in the financial condition of our major customers could have a
material adverse effect on our sales and profitability. We regularly monitor and evaluate the credit status of our
customers and attempt to adjust sales terms as appropriate. Despite these efforts, a bankruptcy filing by a key
customer could have a material adverse effect on our business, results of operations and financial condition.
In addition, as a result of the desire of retailers to more closely manage inventory levels, there is a growing
trend among retailers to make purchases on a “just-in-time” basis. This requires us to shorten our lead time for
production in certain cases and more closely anticipate demand, which could in the future require us to carry
additional inventories.
With the growing trend towards retail trade consolidation, we are increasingly dependent upon key retailers
whose bargaining strength is growing. We may be negatively affected by changes in the policies of our retailer
customers, such as inventory destocking, limitations on access to shelf space, use of private label brands, price
demands and other conditions, which could negatively impact our results of operations.
Our business involves the potential for product recalls, product liability and other claims against us, which
could affect our earnings and financial condition.
As a manufacturer and distributor of consumer products, we are subject to the Consumer Products Safety
Act, which empowers the Consumer Products Safety Commission to exclude from the market products that are
found to be unsafe or hazardous. Under certain circumstances, the Consumer Products Safety Commission could
require us to repurchase or recall one or more of our products. Additionally, laws regulating certain consumer
products exist in some cities and states, as well as in other countries in which we sell our products, and more
restrictive laws and regulations may be adopted in the future. Any repurchase or recall of our products could be
costly to us and could damage our reputation. If we were required to remove, or we voluntarily removed, our
products from the market, our reputation could be tarnished and we might have large quantities of finished
products that we could not sell.
We also face exposure to product liability claims in the event that one of our products is alleged to have
resulted in property damage, bodily injury or other adverse effects. Although we maintain product liability
insurance in amounts that we believe are reasonable, we cannot assure you that we will be able to maintain such
insurance on acceptable terms, if at all, in the future or that product liability claims will not exceed the amount of
insurance coverage. Additionally, we do not maintain product recall insurance. As a result, product recalls or
product liability claims could have a material adverse effect on our business, results of operations and financial
condition.
In addition, we face potential exposure to unusual or significant litigation arising out of alleged defects in
our products or otherwise. We spend substantial resources ensuring compliance with governmental and other
applicable standards. However, compliance with these standards does not necessarily prevent individual or class
action lawsuits, which can entail significant cost and risk. We do not maintain insurance against many types of
claims involving alleged defects in our products that do not involve personal injury or property damage. As a
result, these types of claims could have a material adverse effect on our business, results of operations and
financial condition.
Our product liability insurance program is an occurrence-based program based on our current and historical
claims experience and the availability and cost of insurance. We currently either self insure or administer a high
retention insurance program for product liability risks. Historically, product liability awards have rarely exceeded
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