(From the Janesville Messenger, 7-5-09)
Dear Shareholder,
Those of you who are long time investors in Santa Claus Industries, Inc. know that I rarely find it necessary to send you a mid-year “Christmas in July” financial statement. However, these are extraordinary times, and due to the current state of the world economy, I feel that it is necessary to update you on unprecedented steps we are taking to remain a viable operation here at the North Pole.
Santa Claus Industries experienced a staggering decrease in revenue due to high unemployment and the eroding of disposable income, creating a budgetary shortfall that needed to be addressed swiftly. Difficult, but necessary, decisions needed to be made.
Early in the year, it was determined that we needed to consolidate toy-making operations and bring all manufacturing back to the main workshop here at the Pole. We were able to relocate about one-third of the affected elf workers to positions at the main workshop; unfortunately, it was necessary to give layoff notices to the rest. The layoffs were painful and unprecedented. The decisions on which elves to keep was based on seniority, which means that the original elves, the ones that built the Santa Claus brand into the solid marketing force that it is today, remain a part of the operation.
The elves that were brought on during our massive expansion of operations in the 20th Century are generally the ones that were affected by the layoffs. Our expectation is that, over time, we can bring these employees back into the operation as the economy recovers. I know that as shareholders, you are concerned that with nothing but manufacturing experience, current job prospects for many of the elves are limited. However, they are uniquely qualified for some specialty positions, and I am personally aware that a few have found employment in circuses and traveling entertainment shows featuring the characters of J.R.R. Tolkien and L. Frank Baum.
Also in the first half of this year, other personnel moves were deemed necessary to prevent financial losses:
· Of the elves still in our employ, each was required to take a one-week unpaid furlough during the second quarter.
· We determined that it was necessary to reduce reindeer headcount by two. This resulted in the delivery of layoff notices to Vixen and Cupid. Although Rudolph has less seniority, his departure would have put us in violation of FAA regulations that require the sleigh to be illuminated during flight.
These changes to our workforce will obviously result in a decrease of our toy output, as well as the speed of toy delivery on Christmas Eve. However, those factors will be balanced out by the fact that there has been a large increase in the number of poor children that will not be receiving Christmas presents this year.
These are indeed sad and unprecedented times for Santa Claus Industries. But the moves we have made were completely necessary to keep SCI in the black and operating in a manner that the public has come to expect. Let me personally assure you that everyone, including myself, has found it necessary to make sacrifices. I personally had to cut my post-Christmas 90-day Caribbean vacation short by three days.
Moving forward, we will be making changes in the distribution of coal on Christmas Eve during our worldwide run. Production of coal is down, and quite frankly, it is needed here at the Pole for warmth. We simply cannot spare coal for delivery to the stockings of those on the naughty list, even for those who greatly deserve it. However, one resource here at the Pole is plentiful and will serve as a “green” alternative to coal - reindeer manure. There is no lack of it to distribute to state and federal politicians and corporate managers.
Sincerely,
K. Kringle
Chairman and Chief Executive Officer
Santa Claus Industries, Inc.
