Graco 2005 Annual Report Download - page 42

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOOTNOTE 1
Description of Business and SigniÑcant Accounting Policies
Description of Business: Newell Rubbermaid Inc. (the ""Company'') is a global manufacturer and
marketer of branded consumer products and their commercial extensions, serving a wide array of retail
channels including department stores, discount stores, warehouse clubs, home centers, hardware stores,
commercial distributors, oÇce superstores, contract stationers, automotive stores, and baby superstores.
The Company's basic business strategy is to create brands that matter by marketing a multi-product
oÅering of everyday consumer and commercial products, backed by a focus on innovation and customer
service excellence, in order to achieve maximum results for its stockholders. The Company's multi-product
oÅering consists of well known name-brand consumer products and their commercial extensions in Ñve
business segments: Cleaning & Organization; OÇce Products; Tools & Hardware; Home Fashions; and
Other.
Principles of Consolidation: The Consolidated Financial Statements include the accounts of the
Company, its majority owned subsidiaries and variable interest entities where the Company is the primary
beneÑciary, after elimination of intercompany transactions.
Use of Estimates: The preparation of these Ñnancial statements requires the use of certain estimates
by management in determining the Company's assets, liabilities, revenue and expenses and related
disclosures. Actual results could diÅer from those estimates.
ReclassiÑcations: Certain 2004 and 2003 amounts have been reclassiÑed to conform to the 2005
presentation. See Footnote 3 for a discussion of discontinued operations.
Concentration of Credit Risk: The Company sells products to customers in diversiÑed industries and
geographic regions and, therefore, has no signiÑcant concentrations of credit risk. The Company
continuously evaluates the creditworthiness of its customers and generally does not require collateral.
The Company evaluates the collectibility of accounts receivable based on a combination of factors.
When aware of a speciÑc customer's inability to meet its Ñnancial obligations, such as in the case of
bankruptcy Ñlings or deterioration in the customer's operating results or Ñnancial position, the Company
records a speciÑc reserve for bad debt to reduce the related receivable to the amount the Company
reasonably believes is collectible. The Company also records reserves for bad debt for all other customers
based on a variety of factors, including the length of time the receivables are past due and historical
collection experience. If circumstances related to speciÑc customers change, the Company's estimates of
the recoverability of receivables could be further adjusted.
The Company's forward exchange contracts, long-term cross currency interest rate swaps, and option
contracts do not subject the Company to risk due to foreign exchange rate movement, because gains and
losses on these instruments generally oÅset gains and losses on the assets, liabilities, and other transactions
being hedged. The Company is exposed to credit-related losses in the event of non-performance by
counterparties to certain derivative Ñnancial instruments. The Company does not obtain collateral or other
security to support derivative Ñnancial instruments subject to credit risk, but monitors the credit standing
of the counterparties.
The credit exposure that results from commodity, interest rate, and foreign exchange is the fair value
of contracts with a positive fair value as of the reporting date. There is no credit exposure on the
Company's interest rate derivatives at December 31, 2005. The credit exposure on foreign currency
derivatives at December 31, 2005 was $17.8 million.
Sales Recognition: Sales of merchandise and freight billed to customers are recognized when title
passes and all substantial risks of ownership change, which occurs either upon shipment or upon delivery
based upon contractual terms. Sales are net of provisions for cash discounts, returns, customer discounts
(such as volume or trade discounts), cooperative advertising and other sales related discounts.
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