Graco 2010 Annual Report Download - page 36

Newell Rubbermaid Inc. 2010 Annual Report
32 NEWELL RUBBERMAID 2010 Annual Report
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CONTRACTUAL OBLIGATIONS, COMMITMENTS AND OFF-BALANCE SHEET ARRANGEMENTS
The Company has outstanding debt obligations maturing at various dates through 2028. Certain other items, such as purchase
commitments and other executory contracts, are not recognized as liabilities in the Company’s consolidated financial statements
but are required to be disclosed. Examples of items not recognized as liabilities in the Company’s consolidated financial statements
are commitments to purchase raw materials or inventory that has not yet been received as of December 31, 2010 and future
minimum lease payments for the use of property and equipment under operating lease agreements.
The following table summarizes the effect that lease and other material contractual obligations are expected to have on
the Company’s cash flow in the indicated period. In addition, the table reflects the timing of principal and interest payments
on borrowings outstanding as of December 31, 2010. Additional details regarding these obligations are provided in the Notes to
Consolidated Financial Statements (in millions):
Payments Due by Period
Less Than More Than
Total 1 Year 1-3 Years 3-5 Years 5 Years
Debt(1) $ 2,368.9 $ 305.0 $ 778.0 $ — $ 1,285.9
Interest on debt(2) 899.7 116.5 186.3 137.8 459.1
Operating lease obligations(3) 414.6 97.2 140.1 89.4 87.9
Purchase obligations(4) 642.2 511.0 131.2 — —
Total contractual obligations(5) $ 4,325.4 $ 1,029.7 $ 1,235.6 $ 227.2 $ 1,832.9
(1) Amounts represent contractual obligations based on the earliest date that the obligation may become due, excluding interest, based on borrowings outstanding
as of December 31, 2010. For further information relating to these obligations, see Footnote 9 of the Notes to Consolidated Financial Statements.
(2) Amounts represent estimated interest payable on borrowings outstanding as of December 31, 2010, excluding the impact of interest rate swaps that adjust the
fixed rate to a floating rate for $1.0 billion of medium-term notes. Interest on floating-rate debt was estimated using the rate in effect as of December 31, 2010.
For further information, see Footnote 9 of the Notes to Consolidated Financial Statements.
(3) Amounts represent contractual minimum lease obligations on operating leases as of December 31, 2010. For further information relating to these obligations,
see Footnote 12 of the Notes to Consolidated Financial Statements.
(4) Primarily consists of purchase commitments entered into as of December 31, 2010 for finished goods, raw materials, components and services pursuant to legally
enforceable and binding obligations, which include all significant terms.
(5) Total does not include contractual obligations reported on the December 31, 2010 balance sheet as current liabilities, except for current portion of long-term
debt and short-term debt.
The Company also has liabilities for uncertain tax positions and unrecognized tax benefits. As a large taxpayer, the Company is
under continual audit by the IRS and other taxing authorities on several open tax positions, and it is possible that the amount of
the liability for uncertain tax positions and unrecognized tax benefits could change in the coming year. While it is possible that
one or more of these examinations may be resolved in the next year, the Company is not able to reasonably estimate the timing
or the amount by which the liability will increase or decrease over time; therefore, the $113.1 million in unrecognized tax benefits,
including interest and penalties, at December 31, 2010 is excluded from the preceding table. See Footnote 16 of the Notes to
Consolidated Financial Statements for additional information.
Additionally, the Company has obligations with respect to its pension and postretirement medical benefit plans, which are
excluded from the preceding table. The timing and amounts of the funding requirements are uncertain because they are dependent
on interest rates and actual returns on plan assets, among other factors. As of December 31, 2010, the Company had liabilities
related to its unfunded and underfunded pension and postretirement benefit plans of $576.7 million. See Footnote 13 of the Notes
to Consolidated Financial Statements for further information.
As of December 31, 2010, the Company had $61.6 million in standby letters of credit primarily related to the Company’s
self-insurance programs, including workers’ compensation, product liability and medical. See Footnote 20 of the Notes to
Consolidated Financial Statements for further information.
As of December 31, 2010, the Company did not have any significant off-balance sheet arrangements, as defined in Item 303(a)(4)(ii)
of SEC Regulation S-K.
CRITICAL ACCOUNTING POLICIES
The Company’s accounting policies are more fully described in Footnote 1 of the Notes to Consolidated Financial Statements. As
disclosed in that footnote, the preparation of financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions about future events that affect the amounts reported in the financial
statements and accompanying footnotes. Future events and their effects cannot be determined with absolute certainty. Therefore,
the determination of estimates requires the exercise of judgment. Actual results inevitably will differ from those estimates,
and such differences may be material to the Consolidated Financial Statements. The following sections describe the Company’s
critical accounting policies.
Sales Recognition
Sales of merchandise and freight billed to customers are recognized when title passes and all substantial risks of ownership transfer,
which generally 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.
Recovery of Accounts Receivable
The Company evaluates the collectibility of accounts receivable based on a combination of factors. When aware of a specific
customer’s inability to meet its financial obligations, such as in the case of bankruptcy filings or deterioration in the customer’s
operating results or financial position, the Company records a specific reserve for bad debt to reduce the related receivable to