| JARDEN CORP Item 1A Risk Factors The ownership of our common stock involves a number of risks and uncertainties |
| Potential investors should carefully consider the risks and uncertainties described below and the other information in this Form 10-K and Annual Report before deciding whether to invest in the Company’s securities |
| The Company’s business, financial condition or results of operations could be materially adversely affected by any of these risks |
| The risks described below are not the only ones facing us |
| Additional risks that are currently unknown to us or that we currently consider to be immaterial may also impair our business or adversely affect our financial condition or results of operations |
| Our sales are highly dependent on purchases from several large customers and any significant decline in these purchases or pressure from these customers to reduce prices could have a negative effect on our future financial performance |
| Due to consolidation in the US retail industry, our customer base has become relatively concentrated |
| On a historical basis in 2005, one customer accounted for approximately 23prca of our consolidated net sales |
| Although we have long-established relationships with many of our customers, we do not have any long-term supply or binding contracts or guarantees of minimum purchases |
| Purchases by our customers are generally made using individual purchase orders |
| Significant or numerous cancellations, reductions, or delays in purchases by customers could have a material adverse effect on our business, results of operations and financial condition |
| In addition, because many of our costs are fixed, a reduction in customer demand could have an adverse effect on our gross profit margins and operating income |
| 15 ______________________________________________________________________ We depend on a continuous flow of new orders from our large, high-volume retail customers; however, we may be unable to continually meet the needs of our customers |
| Furthermore, on-time delivery and satisfactory customer service are becoming increasingly important to our customers |
| Retailers are increasing their demands on suppliers to: • reduce lead times for product delivery, which may require us to increase inventories; • improve customer service, such as with direct import programs whereby product is supplied directly to retailers from third party suppliers; and • adopt new technologies related to inventory management such as Radio Frequency Identification, otherwise known as RFID, technology, which may have substantial implementation costs |
| We cannot provide any assurance that we can continue to successfully meet the needs of our customers |
| A substantial decrease in sales to any of our major customers could have a material adverse effect on our business, results of operations and financial condition |
| Seasonality and weather conditions may cause our operating results to vary from quarter to quarter |
| Additionally, sales of our home canning products generally reflect the pattern of the growing season, sales of our home improvement products are concentrated in the spring and summer months and sales of our consumer solutions products generally are strongest in the fourth quarter preceding the holiday season |
| Weather conditions may also negatively impact sales |
| For instance, we may not sell as many of certain outdoor recreation products (such as lanterns, tents and sleeping bags) as anticipated if there are fewer natural disasters such as hurricanes and ice storms; mild winter weather may negatively impact sales of electric blankets, some health products and smoke or carbon monoxide detectors; and the late arrival of summer weather may negatively impact sales of outdoor camping equipment and grills |
| Additionally, sales of our home canning products and our home improvement products may be negatively impacted by unfavorable weather conditions and other market trends |
| Periods of drought, for example, could adversely affect the supply and price of fruit, vegetables and other foods available for home canning, and inclement weather may reduce the amount of time spent on home improvement projects |
| These factors could have a material adverse effect on our business, results of operations and financial condition |
| Our operations are dependent upon third-party suppliers whose failure to perform adequately could disrupt our business operations |
| We currently source a significant portion of parts and products from third parties |
| Our ability to select and retain reliable vendors who provide timely deliveries of quality parts and products will impact our success in meeting customer demand for timely delivery of quality products |
| We typically do not enter into long-term contacts with our primary vendors and suppliers |
| Instead, most parts and products are supplied on a “purchase order” basis |
| Any inability of our suppliers to timely deliver quality parts and products or any unanticipated change in supply, quality or pricing of products could be disruptive and costly to us |
| Our reliance on manufacturing facilities and suppliers in Asia could make us vulnerable to supply interruptions related to the political, legal and cultural environment in Asia |
| A significant portion of our products are manufactured by third-party suppliers in Asia, primarily the People’s Republic of China, or at our owned facility in southern China |
| Our ability to continue to select reliable vendors who provide timely deliveries of quality parts and products will impact our success in meeting customer 16 ______________________________________________________________________ demand for timely delivery of quality products |
| Furthermore, the ability of our owned facility to timely deliver finished goods, and the ability of third-party suppliers to timely deliver finished goods and/or raw materials, may be affected by events beyond their control, such as inability of shippers to timely deliver merchandise due to work stoppages or slowdowns, or significant weather and health conditions (such as SARS) affecting manufacturers and/or shippers |
| Any adverse change in, among other things, any of the following could have a material adverse effect on our business, results of operations and financial condition: • our relationship with third-party suppliers; • the financial condition of third-party suppliers; • our ability to import products from these third-party suppliers or our owned facility; or • third-party suppliers’ ability to manufacture and deliver outsourced products on a timely basis |
| 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 |
| 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 US 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 |
| 17 ______________________________________________________________________ Some of the products we manufacture require particular types of glass, paper, plastic, metal, 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 resin for many of the products in our consumer solutions and outdoor solutions business segments and the plastics solutions part of our other business segment |
| Resin prices have been rising in response to, among other things, higher oil prices |
| If resin prices or other material prices continue to rise 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 business, results of operations and financial condition |
| We also rely on glass for many of the products in our branded consumables business segment |
| Glass prices have been rising in response to higher natural gas prices |
| If glass prices continue to rise 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 |
| In order to realize sales and operating profits at anticipated levels, we must manufacture or source and deliver in a timely manner products of high quality |
| Among others, the following factors can have a negative effect on our ability to do these things: • labor difficulties; • scheduling and transportation difficulties; • management dislocation; • substandard product quality, which can result in higher warranty, product liability and product recall costs; • delays in development of quality new products; • changes in laws and regulations, including changes in tax rates, accounting standards, environmental laws and occupational • health and safety laws; and • changes in the availability and costs of labor |
| Any adverse change in the above-listed factors could have a material adverse effect on our business, results of operations and financial condition |
| Because we manufacture or source a significant portion of our products from Asia, our production lead times are relatively long |
| Therefore, we often commit to production in advance of firm customer orders |
| If we fail to forecast customer or consumer demand accurately we may encounter difficulties in filling customer orders or in liquidating excess inventories, or may find that customers are canceling orders or returning products |
| Additionally, changes in retailer inventory management strategies could make inventory management more difficult |
| Any of these results could have a material adverse effect on our business, results of operations and financial condition |
| Competition in our industries may hinder our ability to execute our business strategy, achieve profitability, or maintain relationships with existing customers |
| We operate in some highly competitive industries |
| In these industries, we compete against numerous other domestic and foreign companies |
| Competition in the markets in which we operate is based primarily on product quality, product innovation, price and customer service and support, although the degree and nature of such competition vary by location and product line |
| 18 ______________________________________________________________________ In our branded consumables segment, we have direct competitors in most of our niche markets |
| In addition, in the market for home canning we compete with companies who specialize in other food preservation mediums such as freezing and dehydration |
| The market for plastic cutlery is extremely price sensitive and our competitors include Far East and domestic suppliers |
| Our competition in the market for rope, cord and twine includes Peerless and Bevis |
| In the market for playing cards our competition includes Angel, Cardinal Carta Mundi, Gemaco, Patch Products, Paul-Son, and a number of other manufacturers located in China |
| In our consumer solutions segment, our FoodSaver^® and Seal-a-Meal^® appliances and bags compete with marketers of “conventional” food storage solutions, such as non-vacuum plastic bags and containers |
| In addition, our competitors include other manufacturers of home sealing appliances that heat- or vacuum-seal bags |
| As household penetration of home vacuum packaging systems has increased, more competitors have entered the market |
| There are also several companies that manufacture industrial and commercial vacuum packaging products |
| In more mature small household appliance categories outside of home vacuum packaging, including blenders, toasters and irons, among others, our key competitors in the United States and Canada include Applica Incorporated, Cuisinart^®, Kitchen Aid^®, NACCO and Salton, Inc |
| In heated bedding products, our primary competitor is Biddeford |
| In scales, the key competitors include Homedics^®/Metro-Taylor, and private label brands |
| Our key competitors for clippers, trimmers and accessories for professional users include Andis^® and Wahl |
| The primary competitor to our hospitality business is Proctor-Silex^® |
| Our key competitors in the home safety business include Kidde, Invensys and Universal Security Instruments Inc |
| In portable air cleaning products, our primary competitors are DeLonghi, Honeywell/Kaz, Hunter, Ionic Breeze^® and Ionic Pro LLC In vaporizers and humidifiers, the key competitors are Honeywell/Kaz, Hunter and Lasko |
| The key competitors in portable heaters are Honeywell/Kaz, Lakewood, Lasko and Soleus |
| Our primary competitors in fans are Honeywell/Kaz, Hunter, King of Fans and Lasko |
| In the outdoor solutions segment, our largest competitors include Igloo Corporation, Intex Corporation, VF Corporation, Johnson Outdoors, Kellwood Company and Rubbermaid |
| We also face competition from the manufacturing operations of some of our current and potential customers with private label brands |
| Many of our competitors are more established in their industries and have substantially greater revenue or resources than we do |
| Our competitors may take actions to match new product introductions and other initiatives |
| Since many of our competitors source their products from third parties, our ability to obtain a cost advantage through sourcing is reduced |
| Certain of our competitors may be willing to reduce prices and accept lower profit margins to compete with us |
| Further, retailers often demand that suppliers reduce their prices on existing products |
| Competition could cause price reductions, reduced profits or losses, or loss of market share, any of which could have a material adverse effect on our business, results of operations and financial condition |
| To compete effectively in the future in the consumer products industry, among other things, we must: • maintain strict quality standards; • develop new products that appeal to consumers; and • deliver products on a reliable basis at competitive prices |
| Our inability to do any of these things could have a material adverse effect on our business, results of operations and financial condition |
| If we fail to develop new or expand existing customer relationships, our ability to grow our business will be impaired |
| Our growth depends to a significant degree upon our ability to develop new customer relationships and to expand existing relationships with current customers |
| We cannot guarantee that new customers will be found, that any such new relationships will be successful when they are in place, or that business with current customers will increase |
| Failure to develop and expand such relationships could have a material adverse effect on our business, results of operations and financial condition |
| 19 ______________________________________________________________________ If we cannot continue to develop new products in a timely manner, and at favorable margins, we may not be able to compete effectively |
| We believe that our future success will depend, in part, upon our ability to continue to introduce innovative design extensions for our existing products and to develop, manufacture and market new products |
| We cannot assure you that we will be successful in the introduction, manufacturing and marketing of any new products or product innovations, or develop and introduce, in a timely manner, innovations to our existing products that satisfy customer needs or achieve market acceptance |
| Our failure to develop new products and introduce them successfully and in a timely manner, and at favorable margins, would harm our ability to successfully grow our business and could have a material adverse effect on our business, results of operations and financial condition |
| Our failure to successfully integrate recently acquired businesses could have a material adverse effect on our business and results of operations |
| We have achieved growth through the acquisition of companies, including the recent acquisitions of American Household and Holmes |
| There can be no assurance that we will be able to integrate successfully the American Household and Holmes businesses into our existing business without substantial costs, delays or other operational or financial difficulties |
| There is also no assurance that we will be able to successfully leverage synergies among our businesses to increase sales and obtain cost savings |
| Additionally, the failure of the American Household and Holmes businesses to achieve expected results, diversion of our management’s attention, and failure to retain key American Household and Holmes personnel, could have a material adverse effect on our business, results of operations and financial condition |
| Our results could be harmed if the cost of compliance with environmental, health and safety laws and regulations becomes too burdensome |
| Our operations are subject to federal, state and local environmental and health and safety laws and regulations including those that impose workplace standards and regulate the discharge of pollutants into the environment and establish standards for the handling, generation, emission, release, discharge, treatment, storage and disposal of materials and substances including solid and hazardous wastes |
| We believe that we are in material compliance with such laws and regulations and that the cost of maintaining compliance will not have a material adverse effect on our business, results of operations or financial condition |
| We do not anticipate having to make, and historically have not had to make, significant capital expenditures in order to comply with applicable environmental laws and regulations |
| However, due to the nature of our operations and the frequently changing nature of environmental compliance standards and technology, we cannot predict with any certainty that future material capital expenditures will not be required |
| In January 2003, the European Union (“EU”) issued two directives relating to chemical substances in electronic products |
| The Waste Electrical and Electronic Equipment Directive requires producers of electrical goods to pay for specified collection, recycling, treatment and disposal of past and future covered products |
| EU governments were required to enact and implement legislation that complies with this directive by August 13, 2004 (such legislation together with the directive, the “WEEE Legislation”), and certain producers are to be financially responsible under the WEEE Legislation beginning in August 2005 |
| The EU has issued another directive that requires electrical and electronic equipment placed on the EU market after July 1, 2006 to be free of lead, mercury, cadmium, hexavalent chromium (above a threshold limit) and brominated flame retardants |
| EU governments were required to enact and implement legislation that complies with this directive by August 13, 2004 (such legislation together with this directive, the “RoHS Legislation”) |
| If we do not comply with these directives, we may suffer a loss of revenue, be unable to sell in certain markets and/or countries, be subject to penalties and enforced fees and/or suffer a competitive disadvantage |
| Similar legislation could be enacted in other jurisdictions, including in the United States |
| Costs to comply with the WEEE Legislation, RoHS Legislation and/or similar future legislation, if applicable, could include costs associated with modifying our products, recycling and other waste processing costs, legal and regulatory costs and insurance costs |
| We may also 20 ______________________________________________________________________ be required to take reserves for costs associated with compliance with these regulations |
| We cannot assure you that the costs to comply with these new laws, or with current and future environmental and worker health and safety laws will not have a material adverse effect on our business, results of operations and financial condition |
| We may incur significant costs in order to comply with environmental remediation obligations |
| In addition to operational standards, environmental laws also impose obligations on various entities to clean up contaminated properties or to pay for the cost of such remediation, often upon parties that did not actually cause the contamination |
| Accordingly, we may be liable, either contractually or by operation of law, for remediation costs even if the contaminated property is not presently owned or operated by us, is a landfill or other location where we have disposed wastes, or if the contamination was caused by third parties during or prior to our ownership or operation of the property |
| Given the nature of the past industrial operations conducted by us and others at these properties, there can be no assurance that all potential instances of soil or groundwater contamination have been identified, even for those properties where an environmental site assessment has been conducted |
| We do not believe that any of our existing remediation obligations, including at third-party sites where we have been named a potentially responsible party, will have a material adverse effect upon our business, results of operations or financial condition |
| However, future events, such as changes in existing laws or policies or their enforcement, or the discovery of currently unknown contamination, may give rise to additional remediation liabilities that may be material |
| Our business, results of operations and financial condition could be materially adversely affected by the loss of any key personnel and the inability to attract and retain appropriately qualified replacements |
| We are highly dependent on the continuing efforts of our executive officers, including Martin E Franklin, our Chairman and Chief Executive Officer, Ian GH Ashken, our Vice Chairman and Chief Financial Officer, and James E Lillie, our President and Chief Operating Officer |
| We believe these officers’ experience in the branded consumer products industry and our business, and with strategic acquisitions of complementary businesses within our primary business segments, has been vital to our historical growth and is instrumental to our future growth strategy |
| We also depend on the senior management of our operating segments |
| We currently have employment agreements with our executive officers |
| Our business, results of operations and financial condition could be materially adversely affected by the loss of any of these persons and the inability to attract and retain appropriately qualified replacements |
| Our indebtedness imposes constraints and requirements on our business and financial performance and our compliance and performance in relationship to these could materially adversely affect our financial condition and operations |
| We have a significant amount of indebtedness |
| Our significant indebtedness could: • increase our vulnerability to general adverse economic and industry conditions; • require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, acquisitions and investments and other general corporate purposes; • limit our flexibility in planning for, or reacting to, changes in our business and the markets in which we operate; • place us at a competitive disadvantage compared to our competitors that have less debt; and • limit, among other things, our ability to borrow additional funds |
| The terms of our senior credit facility and the indenture governing our 9^^ 3/4prca senior subordinated notes due 2012, which we refer to as our Notes, allow us to issue and incur additional debt upon satisfaction of certain 21 ______________________________________________________________________ conditions |
| We anticipate that any future acquisitions we pursue as part of our growth strategy or potential stock repurchase programs may be financed through a combination of cash on hand, operating cash flow, availability under our existing credit facilities and new capital market offerings |
| If new debt is added to current debt levels, the related risks described above could increase |
| Our failure to generate sufficient cash to meet our liquidity needs may affect our ability to service our indebtedness and grow our business |
| Our ability to make payments on and to refinance our indebtedness, including our Notes and amounts borrowed under our senior credit facility, and to fund planned capital expenditures and expansion efforts and strategic acquisitions we may make in the future, if any, will depend on our ability to generate cash in the future |
| This, to a certain extent, is subject to general economic, financial, competitive and other factors that are beyond our control |
| Based on our current level of operations, we believe our cash flow from operations, together with available cash and available borrowings under our senior credit facility, will be adequate to meet future liquidity needs for at least the next twelve months |
| However, we cannot assure you that our business will generate sufficient cash flow from operations in the future, that our currently anticipated growth in revenues and cash flow will be realized on schedule or that future borrowings will be available to us under the senior credit facility in an amount sufficient to enable us to service indebtedness, including the debt securities, grow our business, or to fund other liquidity needs |
| We may need to refinance all or a portion of our indebtedness, including our Notes and our senior credit facility, on or before maturity |
| We cannot assure you that we will be able to do so on commercially reasonable terms or at all |
| Changes in foreign, cultural, political and financial market conditions could impair our sales from international operations and financial performance |
| Some of our products are sold in countries where economic growth has slowed, such as Japan; or where economies have suffered economic, social and/or political instability or hyperinflation in recent years, such as Mexico and Venezuela |
| The economies of other foreign countries important to our operations, including other countries in Europe, Latin America and Asia, could also suffer slower economic growth or economic, social and/or political instability in the future |
| International operations, including manufacturing and sourcing operations (and the international operations of our customers), are subject to inherent risks which could adversely affect us, including, among other things: • new restrictions on access to markets; • lack of developed infrastructure; • inflation; • fluctuations in the value of currencies; • changes in and the burdens and costs of compliance with a variety of foreign laws and regulations, including tax laws, accounting standards, environmental laws and occupational health and safety laws; • political and economic instability; • increases in duties and taxation; • restrictions on transfer of funds; and • other adverse changes in policies, including monetary, tax and/or lending policies, encouraging foreign investment or foreign trade by our host countries |
| Should any of these risks occur, our ability to export our products could be impaired and we could experience a loss of sales and profitability from our international operations |
| 22 ______________________________________________________________________ Currency fluctuations may significantly increase our expenses and affect our results of operations, especially where the currency is subject to intense political and other environmental pressure, such as in the case of the Venezuelan Bolivar and the Chinese Renminbi |
| While we transact business predominantly in US dollars and most of our revenues are collected in US dollars, a substantial portion of our costs, such as payroll, rent, and indirect operational costs, are denominated in other currencies, such as the European Euro, British Pound, Mexican Peso, Canadian Dollar, Venezuelan Bolivar, Japanese Yen and Chinese Renminbi |
| Changes in the relation of these and other currencies to the US dollar will affect our sales and profitability and could result in exchange losses |
| For example, a devaluation of the Venezuelan Bolivar would impact our results of operations because the earnings of our Venezuelan operations would be reduced when translated into US dollars |
| A stronger Mexican Peso would mean our products assembled or produced in Mexico would be more expensive to import into the United States or other countries, thereby reducing profitability of those products |
| Likewise, if the government of China allowed the Chinese Renminbi to rise substantially versus the US dollar, the cost of our products produced in China would rise |
| The impact of future exchange rate fluctuations on our results of operations cannot be accurately predicted |
| There can be no assurance that the US dollar foreign exchange rates will be stable in the future or that fluctuations in financial markets will not have a material adverse effect on our business, results of operations and financial condition |
| 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 branded consumables, consumer solutions and outdoor solutions 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 the carrying of 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 and product liability 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 |
| 23 ______________________________________________________________________ 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 |
| 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 our individual per occurrence self-insured retention |
| We cannot assure you, however, that our future product liability experience will be consistent with our past experience |
| If we fail to adequately protect our intellectual property rights, competitors may manufacture and market products similar to ours, which could adversely affect our market share and results of operations |
| Our success with our proprietary products depends, in part, on our ability to protect our current and future technologies and products and to defend our intellectual property rights |
| If we fail to adequately protect our intellectual property rights, competitors may manufacture and market products similar to ours |
| Our principal intellectual property rights include our trademarks |
| In the consumer solutions segment, the principal trademarks consist of Bionaire^®, BRK^®, Crock Pot^®, First Alert^®, FoodSaver^®, Health o meter^®, Holmes^®, Mr |
| The principal trademarks in outdoor solutions are Coleman^® and Campingaz^® |
| Other trademarks in that segment include Coleman Exponent^® and Roadtrip™ |
| We also hold numerous design and utility patents covering a wide variety of products |
| We cannot be sure that we will receive patents for any of our patent applications or that any existing or future patents that we receive or license will provide competitive advantages for our products |
| We also cannot be sure that competitors will not challenge, invalidate or avoid the application of any existing or future patents that we receive or license |
| In addition, patent rights may not prevent our competitors from developing, using or selling products that are similar or functionally equivalent to our products |
| We may not be able to implement or operate successfully and without interruptions the operating software systems and other computer technologies that we depend on to operate our business, which could negatively impact or disrupt our business |
| We are in the process of selecting or implementing new operating software systems within a number of our business segments and complications from these projects could cause considerable disruptions to our business |
| While significant testing will take place and the rollout will occur in stages, the period of change from the old system to the new system will involve risk |
| Application program bugs, system conflict crashes, user error, data integrity issues, customer data conflicts and integration issues among our legacy systems all pose potential risks |
| Implementing data standards such as RFID, which our largest customers are requiring that we use, involves significant effort across the entire organization |
| Any problems with or delays of this implementation could impact our ability to do business and could result in higher implementation costs and reallocation of human resources |
| We rely on other companies to maintain some of our information technology infrastructure |
| Should they fail to perform due to events outside our control, it could affect our service levels and threaten our ability to conduct business |
| In addition, natural disasters such as hurricanes may disrupt our infrastructure and our disaster recovery process may not be sufficient to protect against loss |
| 24 ______________________________________________________________________ Additionally, our business operations are dependent on our logistical systems, which include our order management systems and our computerized warehouse systems |
| Any interruption in our logistical systems could impact our ability to procure our products from our factories and suppliers, transport them to our distribution facilities, store them and deliver them to our customers on time and in the correct amounts |
| Failure to successfully implement our reorganization and acquisition-related projects timely and economically could materially increase our costs and impair our results of operations |
| We are in the process of significant reorganization and acquisition-related projects |
| Furthermore, these projects will result in an increased reliance on sourced finished goods from third parties, particularly international vendors |
| Our failure to implement these projects economically and successfully could have a material adverse effect on our business, financial condition and results of operations |
| A deterioration of relations with our labor unions could have a material adverse effect on our business, financial condition and results of operations |
| Approximately 340 union workers are covered by four collective bargaining agreements at four of our US facilities |
| These agreements expire at our jar closure facility (Muncie, Indiana) in October 2006, at our kitchen match and toothpick manufacturing facility (Cloquet, Minnesota) in February 2008, at our metals facility (Greeneville, Tennessee) in October 2007, and at our fire extinguisher plant (Aurora, Illinois) in May 2007 |
| Additionally, approximately 165 employees at our Legutiano, Spain manufacturing facility, 90 employees at our Lyon, France facility, 75 employees at our Barquisemeto, Venezuela facility and 500 employees at our Acuna, Mexico facility are unionized |
| We have not experienced a work stoppage during the past five years except for brief work stoppages in 2004 in Lyon, France in connection with our restructurings at that location |
| Management believes that its relationships with our employees and collective bargaining unions are satisfactory |
| Our senior credit facility and the Indenture related to our Notes contain various covenants which limit our management’s discretion in the operation of our business and the failure to comply with such convents could have a material adverse effect on our business, financial condition and results of operations |
| Our senior credit facility and the indenture related to our Notes contain various provisions that limit our management’s discretion by restricting our and our subsidiaries’ ability to, among other things: • incur additional indebtedness; • pay dividends or distributions on, or redeem or repurchase, capital stock; • make investments; • engage in transactions with affiliates; • incur liens; • transfer or sell assets; and • consolidate, merge or transfer all or substantially all of our assets |
| In addition, our senior credit facility requires us to meet certain financial ratios |
| Any failure to comply with the restrictions of our senior credit facility and the indenture related to our Notes or any other subsequent financing agreements may result in an event of default |
| An event of default may allow the creditors, if the 25 ______________________________________________________________________ agreements so provide, to accelerate the related debt as well as any other debt to which a cross-acceleration or cross-default provision applies |
| In addition, the lenders may be able to terminate any commitments they had made to supply us with further funds |
| Furthermore, substantially all of our domestic assets are pledged to secure our indebtedness under our senior credit facility |
| If we default on the financial covenants in our senior credit facility, our lenders could foreclose on their security interest in our assets, which would have a material adverse effect on our business, results of operations and financial condition |
| Compliance with changing regulation of corporate governance and public disclosure may result in additional expenses |
| Changing laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002, new Securities and Exchange Commission regulations and New York Stock Exchange market rules, are creating uncertainty for companies such as ours |
| These new or changed laws, regulations and standards are subject to varying interpretations, in many cases due to their lack of specificity |
| As a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies, which could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices |
| We are committed to maintaining high standards of corporate governance and public disclosure |
| As a result, our efforts to comply with evolving laws, regulations and standards have resulted in, and are likely to continue to result in, increased general and administrative expenses and a diversion of management time and attention from revenue-generating activities to compliance activities |
| In particular, our efforts to comply with Section 404 of the Sarbanes-Oxley Act of 2002 and the related regulations regarding our required assessment of our internal controls over financial reporting and our external auditors’ audit of that assessment has required the commitment of significant financial and managerial resources |
| We expect these efforts to require the continued commitment of significant resources |
| Furthermore, our board members, chief executive officer and chief financial officer could face an increased risk of personal liability in connection with the performance of their duties |
| As a result, we may have difficulty attracting and retaining qualified board members and executive officers, which could harm our business |
| If our efforts to comply with new or changed laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to practice, our reputation may be harmed |