Sunbeam 2007 Annual Report Download - page 94

Cumulative amounts estimated to be payable by the Company with respect to pending and potential claims
for all years in which the Company is liable under its self-insurance retention have been accrued as liabilities.
Such accrued liabilities are based on estimates (which include actuarial determinations made by an independent
actuarial consultant as to liability exposure, taking into account prior experience, number of claims and other
relevant factors); thus, the Company’s ultimate liability may exceed or be less than the amounts accrued. The
methods of making such estimates and establishing the resulting liability are reviewed on a regular basis and any
adjustments resulting therefrom are reflected in current operating results.
Based on current information, the Company believes that the ultimate conclusion of the various pending
product liability claims and lawsuits of the Company, in the aggregate, will not have a material adverse effect on
the Company’s consolidated financial position, results of operations or cash flows.
Securities and Related Litigation
In January and February 2006, purported class action lawsuits were filed in the Federal District Court for the
Southern District of New York against the Company and certain Company officers alleging violations of the
federal securities laws. The actions were filed on behalf of purchasers of the Company’s common stock during
the period from June 29, 2005 (the date the Company announced the signing of the agreement to acquire Holmes)
through January 11, 2006.
The complaints, which are substantially similar to one another, allege, among other things, that the plaintiffs
were injured by reason of certain allegedly false and misleading statements made by the Company relating to the
expected benefits of the THG Acquisition. Joint lead plaintiffs were appointed on June 9, 2006. No class has
been certified in the actions.
The lead plaintiffs filed an amended consolidated complaint on August 25, 2006 naming the Company,
Consumer Solutions and certain officers of the Company as defendants (collectively “Defendants”) and
containing substantially the same allegations as in the initial complaints. On October 20, 2006, Defendants filed a
motion to dismiss the consolidated amended complaint. On May 31, 2007, the Court issued an opinion denying
Defendants’ motion to dismiss. On July 3, 2007, Defendants filed a Motion for Reconsideration of the order
denying Defendants’ motion to dismiss. On September 5, 2007, the court granted Defendants’ motion for
reconsideration, but reaffirmed its May 31, 2007 denial of Defendants’ motion to dismiss. Defendants answered
the amended consolidated complaint on July 10, 2007. On September 10, 2007, Plaintiffs moved for class
certification. That motion has been fully briefed and the Court held oral argument on January 11, 2008. The
Court has not yet issued a decision.
In February 2006, a derivative complaint was filed against certain Company officers and the Board of
Directors of the Company in the United States District Court for the Southern District of New York. The
Company is named as a nominal defendant. The complaint alleges, among other things, that the individual
defendants violated their fiduciary duties by failing to disclose material information and/or by misleading the
investing public about the Company’s business and financial condition relating to the THG Acquisition. The
complaint seeks damages and other monetary relief against the individual defendants. The Company and the
individual defendants filed a motion to dismiss the complaint on June 15, 2006. That motion has been fully
briefed, but the Court has not yet issued a decision.
These actions are in the early stages of litigation and an outcome cannot be predicted. Management does not
believe that the outcome of this litigation will have a material adverse effect on the consolidated financial
position, results of operations or cash flows of the Company. The Company intends to defend itself vigorously in
these actions.
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