Graco 2007 Annual Report Download - page 37

Download and view the complete annual report

Please find page 37 of the 2007 Graco annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 84

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84

Newell Rubbermaid Inc. 2007 Annual Report
35
Pensions and Other Postretirement Benefits
Pension and other postretirement benefit costs and liabilities are dependent on assumptions used in calculating such amounts. The primary assumptions
include factors such as discount rates, health care cost trend rates, expected return on plan assets, mortality rates and rate of compensation increase,
discussed below:
• Discount rates: The Company generally estimates the discount rate for its pension and other postretirement benefit obligations using an iterative
process based on a hypothetical investment in a portfolio of high-quality bonds that approximate the estimated cash flows of the pension and
other postretirement benefit obligations. The Company believes this approach permits a matching of future cash outflows related to benefit
payments with future cash inflows associated with bond coupons and maturities.
•
Health care cost trend rate: The Company’s health-care cost trend rate is based on historical retiree cost data, near term health care outlook,
and industry benchmarks and surveys.
•
Expected return on plan assets: The Company’s expected return on plan assets is derived from reviews of asset allocation strategies and
anticipated future long-term performance of individual asset classes. The Company’s analysis gives appropriate consideration to recent plan
performance and historical returns; however, the assumptions are primarily based on long-term, prospective rates of return.
•
Mortality rates: Mortality rates are based on actual and projected plan experience.
•
Rate of compensation increase: The rate of compensation increase reflects the Company’s long-term actual experience and its outlook,
including consideration of expected rates of inflation.
In accordance with generally accepted accounting principles, actual results that differ from the assumptions are accumulated and amortized over
future periods, and therefore, generally affect recognized expense and the recorded obligation in future periods. While management believes that the
assumptions used are appropriate, differences in actual experience or changes in assumptions may affect the Company’s pension and other postretirement
plan obligations and future expense. See Footnote 13 of the Notes to Consolidated Financial Statements for additional information on the assumptions used.
The following tables summarize the Company’s pension and other postretirement plan assets and obligations included in the Consolidated Balance Sheet
as of December 31, 2007 (in millions):
U.S. International
Pension plan assets and obligations, net:
Prepaid benefit cost $
—
$ 1.9
Accrued current benefit cost (6.7) (4.2)
Accrued noncurrent benefit cost (98.2) (113.2)
Net liability recognized in the Consolidated Balance Sheet $(104.9) $(115.5)
U.S.
Other postretirement benefit obligations:
Accrued current benefit cost $ (17.6)
Accrued noncurrent benefit cost (142.9)
Liability recognized in the Consolidated Balance Sheet $(160.5)
The following table summarizes the net pre-tax cost (benefit) associated with pensions and other postretirement benefit obligations in the
Consolidated Statement of Income for the year ended December 31, (in millions):
2007 2006 2005
Net pension cost (benefit) $14.4 $15.7 $ (7.8)
Net postretirement benefit costs 10.1 10.1 16.3
Total $24.5 $25.8 $ 8.5
NEW ACCOUNTING PRONOUNCEMENTS
In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141 (Revised 2007), “Business Combinations” (“SFAS 141(R)”).
SFAS 141(R) significantly changes the accounting for business combination transactions by requiring an acquiring entity to recognize all the assets
acquired and liabilities assumed in a transaction at the acquisition-date fair value. Additionally, SFAS 141(R) modifies the accounting treatment for certain
specified items related to business combinations and requires a substantial number of new disclosures. SFAS 141(R) is effective for business combinations
with an acquisition date in fiscal years beginning on or after December 15, 2008 and earlier adoption is prohibited. The Company expects to prospectively
adopt SFAS 141(R) on January 1, 2009.