Graco 2005 Annual Report Download - page 32

materials for future delivery, long-term contracts and price adjustments help the Company mitigate this
risk. Where practical, the Company uses derivatives to help manage the volatility related to this risk. In
2005, the Company experienced raw material inÖation of approximately $153 million (primarily in resin
and steel), partially oÅset by pricing increases of approximately $132 million.
The amounts shown below represent the estimated potential economic loss that the Company could
incur from adverse changes in either interest rates or foreign exchange rates using the value-at-risk
estimation model. The value-at-risk model uses historical foreign exchange rates and interest rates to
estimate the volatility and correlation of these rates in future periods. It estimates a loss in fair market
value using statistical modeling techniques that are based on a variance/covariance approach and includes
substantially all market risk exposures (speciÑcally excluding equity-method investments). The fair value
losses shown in the table below have no impact on results of operations or Ñnancial condition, but are
shown as an illustration of the impact of potential adverse changes in interest rates. The following table
indicates the calculated amounts for each of the years ended December 31, 2005 and 2004 (in millions,
except percentages):
2005 December 31, 2004 December 31, ConÑdence
Market Risk Average 2005 Average 2004 Level
Interest rates ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $9.5 $8.1 $12.1 $11.3 95%
Foreign exchange ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $3.1 $5.6 $ 2.2 $ 1.9 95%
The 95% conÑdence interval signiÑes the Company's degree of conÑdence that actual losses would not
exceed the estimated losses shown above. The amounts shown here disregard the possibility that interest
rates and foreign currency exchange rates could move in the Company's favor. The value-at-risk model
assumes that all movements in these rates will be adverse. Actual experience has shown that gains and
losses tend to oÅset each other over time, and it is highly unlikely that the Company could experience
losses such as these over an extended period of time. These amounts should not be considered projections
of future losses, because actual results may diÅer signiÑcantly depending upon activity in the global
Ñnancial markets.
BUSINESS SEGMENTS
The Company's reporting segments reÖect the Company's focus on building large consumer and
commercial brands, promoting organizational integration, achieving operating eÇciencies and aligning the
businesses with the Company's strategic account management strategy. The Company reports its results in
Ñve reportable segments as follows:
Cleaning & Organization
The Company's Cleaning & Organization segment is conducted by the Rubbermaid Home Products,
Rubbermaid Foodservice Products, Rubbermaid Commercial Products, Rubbermaid Europe, Rubbermaid
Canada, and Rubbermaid Asia PaciÑc divisions. These divisions design, manufacture or source, package
and distribute indoor and outdoor organization, home storage, food storage, cleaning, refuse and material
handling products.
Rubbermaid Home Products, Rubbermaid Foodservice Products, Rubbermaid Commercial Products,
Rubbermaid Europe, Rubbermaid Canada, and Rubbermaid Asia PaciÑc primarily sell their products
under the Rubbermaid», Brute», Roughneck» and TakeAlongs» trademarks.
Rubbermaid Home Products, Rubbermaid Foodservice Products, Rubbermaid Europe, Rubbermaid
Canada, and Rubbermaid Asia PaciÑc market their products directly and through distributors to mass
merchants, home centers, warehouse clubs, grocery/drug stores and hardware distributors. Rubbermaid
Commercial Products markets its products directly and through distributors to commercial channels and
home centers.
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