Graco 2010 Annual Report Download - page 40

Newell Rubbermaid Inc. 2010 Annual Report
36 NEWELL RUBBERMAID 2010 Annual Report
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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 increases, as 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 historical and anticipated future long-term performance of individual asset classes. The Company’s analysis
gives consideration to historical returns and 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 increases 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, 2010 (in millions):
U.S. International
Pension plan assets and obligations, net:
Prepaid benefit cost $ — $ 19.4
Accrued current benefit cost (7.7) (4.0)
Accrued noncurrent benefi t cost (326.9) (71.6)
Net liability recognized in the Consolidated Balance Sheet $ (334.6) $ (56.2)
U.S.
Other postretirement benefit obligations:
Accrued current benefit cost $ (15.1)
Accrued noncurrent benefi t cost (151.4)
Liability recognized in the Consolidated Balance Sheet $ (166.5)
The following table summarizes the net pre-tax cost associated with pensions and other postretirement benefit obligations
in the Consolidated Statement of Operations for the year ended December 31, (in millions):
2010 2009 2008
Net pension cost $ 21.5 $ 18.1 $ 18.3
Net postretirement benefi t costs 9.2 8.7 8.8
Total $ 30.7 $ 26.8 $ 27.1
The Company used weighted-average discount rates of 5.7% and 5.8% to determine the expenses for 2010 for the pension
and postretirement plans, respectively. The Company used a weighted-average expected return on assets of 7.4% to determine
the expense for the pension plans for 2010. The following table illustrates the sensitivity to a change in certain assumptions for
the pension and postretirement plan expenses, holding all other assumptions constant (in millions):
Impact on 2010
Expense
25 basis point decrease in discount rate +$0.9
25 basis point increase in discount rate -$0.9
25 basis point decrease in expected return on assets +$2.8
25 basis point increase in expected return on assets -$2.8