Graco 2007 Annual Report Download - page 32

Newell Rubbermaid Inc. 2007 Annual Report
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LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents increased (decreased) as follows for the year ended December 31, (in millions):
2007 2006 2005
Cash provided by operating activities $ 655.3 $ 643.4 $ 641.6
Cash used in investing activities (265.6) (11.9) (766.7)
Cash used in financing activities (266.8) (550.1) (257.2)
Exchange rate effect on cash and cash equivalents 5.3 4.1 (7.8)
Increase (decrease) in cash and cash equivalents $ 128.2 $ 85.5 $(390.1)
Sources
Historically, the Company’s primary sources of liquidity and capital resources have included cash provided by operations, proceeds from divestitures and
use of available borrowing facilities.
Cash provided by operating activities for the year ended December 31, 2007 was $655.3 million compared to $643.4 million for the comparable
period of 2006. The increase in cash provided by operating activities is primarily a result of increased net income, offset by increased investments in
working capital, including cash restructuring costs.
In 2007, the Company received proceeds from the issuance of debt of $420.8 million compared to $177.0 million in 2006. Proceeds in 2007 reflect the
issuance of commercial paper to fund the acquisition of PSI Systems, Inc. (“Endicia”), a provider of Endicia Internet postage, and to pay off a $250.0 million,
6.0% fixed rate medium-term note that matured.
On November 14, 2005, the Company entered into a $750.0 million five-year syndicated revolving credit facility (the “Revolver”). On an annual
basis, the Company may request an extension of the Revolver (subject to lender approval) for additional one-year periods. The Company elected to extend
the Revolver for additional one-year periods in both October 2006 and October 2007, and, as a result, the Revolver will now expire in November 2012. All but
one lender approved the 2006 and 2007 extensions. Accordingly, the Company has a $750.0 million facility through November 2010, and a $725.0 million
facility from November 2010 to November 2012. At December 31, 2007 and 2006, there were no borrowings under the Revolver.
In lieu of borrowings under the Revolver, the Company may issue up to $750.0 million of commercial paper through 2010 and $725.0 million thereafter
through 2012. The Revolver provides the committed backup liquidity required to issue commercial paper. Accordingly, commercial paper may only be issued
up to the amount available for borrowing under the Revolver. The Revolver also provides for the issuance of up to $100.0 million of standby letters of credit
so long as there is a sufficient amount available for borrowing under the Revolver. At December 31, 2007, there was $197.0 million of commercial paper
outstanding, classified as current long-term debt, and no standby letters of credit issued under the Revolver. At December 31, 2006, there was no
commercial paper outstanding and there were no standby letters of credit issued under the Revolver.
The Revolver permits the Company to borrow funds on a variety of interest rate terms and requires, among other things, that the Company maintain
certain Interest Coverage and Total Indebtedness to Total Capital Ratio, as defined in the agreement. The Revolver also limits Subsidiary Indebtedness, as
defined in the agreement. As of December 31, 2007 and 2006, the Company was in compliance with the terms of the agreement governing the Revolver.
Under a 2001 receivables facility with a financial institution, the Company created a financing entity that is consolidated in the Company’s financial
statements. Under this facility, the Company regularly enters into transactions with the financing entity to sell an undivided interest in substantially all of
the Company’s U.S. trade receivables to the financing entity. In 2001, the financing entity issued $450.0 million in preferred debt securities to the financial
institution. Certain levels of accounts receivable write-offs and other events would permit the financial institution to terminate the receivables facility.
On September 18, 2006, in accordance with the terms of the receivables facility, the financing entity caused the preferred debt securities to be exchanged
for cash of $2.2 million, a two year floating rate note in an aggregate principal amount of $448.0 million and a cash premium of $5.2 million. Because this
debt matures in September 2008, the entire amount is considered to be short-term at December 31, 2007. At any time prior to maturity of the note, the
holder may elect to convert it into new preferred debt securities of the financing entity with a par value equal to the outstanding principal amount of the
note. The note must be repaid and any preferred debt securities into which the note is converted must be retired or redeemed before the Company can have
access to the financing entity’s receivables. As of December 31, 2007 and December 31, 2006, the aggregate amount of outstanding receivables sold under
this facility was $643.3 million and $696.7 million, respectively. The receivables and the preferred debt securities or note, as applicable, are recorded in
the consolidated financial statements of the Company.
The Company believes that available cash, cash flows generated from future operations, access to debt markets and availability under its revolving
credit facility, including issuing commercial paper, will be adequate to fund the Company’s short-term and long-term financing needs.