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Blaine Kitchenware was a mid-sized producer of small appliances primarily used in residential kitchens. By 2006, the company‟s products consisted of a wide range of small kitchen appliances including deep fryers, griddles, toasters, ovens etc. Blaine had just under 10% of the $2.3 billion U.S. market for small kitchen appliances. For the period 2003 to 2006, the industry posted modest annual unit sales growth of 2%. In 2006, 65% of its revenue was generated from shipments to U.S. wholesalers and retailers. The company shipped approximately 14 million units a year. There were three major segments in the small kitchen appliance industry: food preparation appliances, cooking and beverage making appliances but Blaine‟s maximum revenue came from cooking and food preparation appliances and its market share in beverage making appliances is only 2%. In 2006, Blaine had suppliers and contract manufacturers in China, Vietnam, Canada and Mexico. BKI‟s market research consistently showed that the Blaine brand was well-known and well-regarded by consumers.

During the year ended December 31, 2006, Blaine earned net income of $53.6 million on revenue of $342 million. Approximately 85% of Blaine‟s revenue and 80% of its operating income came from the sale of mid-tier products.

Blaine‟s 2006 EBITDA margin of nearly 22% was among the strongest within the peer group. Blaine‟s operating margins had decreased slightly over the last three years. Margins declined due to integration costs and inventory write-downs associated with recent acquisitions. Now that the integration activities were completed, BKI executives the firm to achieve operating margins as high as it historical margins. Most of the Blaine‟s rivals were cutting prices to maintain growth but Blaine did not follow suit and as a result its core products lost its market share. Growth in Blaine‟s top line was attributable almost exclusively to acquisitions. Despite the company‟s profitability,