Graco 2008 Annual Report Download - page 28

Newell Rubbermaid Inc. 2008 Annual Report
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Uses
Historically, the Company’s primary uses of liquidity and capital resources have included acquisitions, dividend payments, capital expenditures and
payments on debt.
The Company made payments on notes payable, commercial paper and long-term debt of $772.5 million, $478.3 million and $511.0 million in 2008,
2007 and 2006, respectively. In July 2008, the Company redeemed its $250.0 million of Reset notes due July 2028 for $302.2 million, which includes the
Company’s purchase of the remarketing option embedded in the Reset notes from a third party for $52.2 million. In July 2008, the Company also repaid
$65.0 million of its $75.0 million outstanding 6.11% medium term notes due July 2028 in accordance with the terms of the notes. The Company utilized its
commercial paper program to fund the redemption of the Reset notes, the purchase of the remarketing option, and the repayment of the $65.0 million of
6.11% medium term notes due July 2028. The remaining payments made on debt during 2008 mainly represent the pay off of commercial paper. In 2007,
the Company retired a five-year, $250 million, 6% fixed rate note, at maturity, and made payments on commercial paper. In 2006, the Company used
available cash to pay off commercial paper and retire a $150.0 million, 6.6% fixed rate medium-term note that matured. See Footnote 9 of the Notes to
Consolidated Financial Statements for additional information on these transactions.
Cash used for acquisitions was $655.7 million, $106.0 million, and $60.6 million in 2008, 2007 and 2006, respectively. The cash used in 2008 relates
primarily to the acquisitions of Technical Concepts and Aprica, while cash used in 2007 included the acquisition of Endicia. The Company did not invest in
significant acquisitions in 2006. See Footnote 2 of the Notes to Consolidated Financial Statements for further information.
Aggregate dividends paid were $234.5 million, $234.7 million and $232.8 million in 2008, 2007 and 2006, respectively.
Capital expenditures were $157.8 million, $157.3 million and $138.3 million in 2008, 2007 and 2006, respectively. The largest single capital project
in each of 2008, 2007 and 2006 was the implementation of SAP.
Cash used for restructuring activities was $60.9 million, $53.1 million, and $26.1 million in 2008, 2007 and 2006, respectively, and is included in the
cash flows from operating activities. These payments relate primarily to employee termination benefits.
Financial Position
The Company is committed to maintaining a strong financial position through maintaining sufficient levels of available liquidity, managing working capital,
and monitoring the Company’s overall capitalization.
•฀ ฀Cash฀and฀cash฀equivalents฀at฀December฀31,฀2008฀were฀$275.4฀million,฀and฀the฀Company฀had฀$690.0฀million฀available฀for฀borrowing฀under฀its฀
syndicated revolving credit facility (the “Revolver”).
•฀ ฀Working฀capital฀at฀December฀31,฀2008฀was฀$187.9฀million฀compared฀to฀$87.9฀million฀at฀December฀31,฀2007,฀and฀the฀current฀ratio฀at฀December฀31,฀
2008 was 1.09:1 compared to 1.03:1 at December 31, 2007. The increase in working capital and the current ratio is primarily due to the repayment
of current maturities of long-term debt and commercial paper during 2008 with proceeds from the Term Loan.
•฀ ฀The฀Company฀monitors฀its฀overall฀capitalization฀by฀evaluating฀total฀debt฀to฀total฀capitalization.฀Total฀debt฀to฀total฀capital฀capitalization฀is฀
defined as the sum of short- and long-term debt, less cash, divided by the sum of total debt and stockholders’ equity, less cash. Total debt to
total capitalization was .62:1 at December 31, 2008 and .45:1 at December 31, 2007. The Company’s debt to total capitalization in 2008 was
adversely impacted by the performance of the Company’s pension plan assets in 2008, fluctuations in foreign currency, borrowings to fund the
acquisitions of Aprica and Technical Concepts, and the net loss recorded in 2008 which was primarily attributable to the impairment charges
totaling $299.4 million.
Over the long-term, the Company plans to improve its current ratio and total debt to total capitalization by improving operating results, managing
working capital and using cash generated from operations to repay certain debt maturities. In addition, the Company reduced the dividend payable on its
common stock by 50%.
Borrowing Arrangements
The Company’s Revolver expires in November 2012. As of December 31, 2008, there were no borrowings outstanding under the Revolver, and the Company
had $690.0 million available for borrowing. In lieu of borrowings under the Revolver, the Company may issue up to $690.0 million of commercial paper. 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. However, the Company’s current short-term debt credit ratings, coupled with turmoil in the credit markets, may
preclude it from accessing the commercial paper market. 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. There was no commercial paper outstanding at December 31, 2008, and
there were no standby letters of credit issued under the Revolver.
The Company has several covenants under its Revolver and Term Loan facilities, two of which are interest coverage and debt to total capitalization.
As of December 31, 2008, the Company had complied with all covenants under the facilities and had sufficiently exceeded the requirements for both the
interest coverage and debt to total capitalization covenants. A failure to maintain the financial covenants would impair the Company’s ability to borrow
under the Revolver and Term Loan.