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Newell Rubbermaid Inc. 2010 Annual Report
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48 NEWELL RUBBERMAID 2010 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOOTNOTE 1
DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Description of Business
Newell Rubbermaid (the “Company”) is a global marketer of consumer and commercial products that touch the lives of people where
they work, live and play. The Company’s products are marketed under a strong portfolio of brands, including Rubbermaid®, Graco®,
Aprica®, Levolor®, Calphalon®, Goody®, Sharpie®, Paper Mate®, Dymo®, Parker®, Waterman®, Irwin®, Lenox® and Technical Concepts™.
The Company’s multi-product offering consists of well-known name-brand consumer and commercial products in three business
segments: Home & Family; Office Products; and Tools, Hardware & Commercial Products.
Principles of Consolidation
The Consolidated Financial Statements include the accounts of the Company, its majority owned subsidiaries and variable interest
entities where the Company is the primary beneficiary, after elimination of intercompany transactions.
Use of Estimates
The preparation of these financial statements requires the use of certain estimates by management in determining the Company’s
assets, liabilities, revenues and expenses and related disclosures. Actual results could differ from those estimates.
Reclassifications
Certain 2009 and 2008 amounts have been reclassified to conform to the 2010 presentation.
Concentration of Credit Risk
The Company sells products to customers in diversified industries and geographic regions and, therefore, has no significant concentrations
of credit risk. The Company continuously evaluates the creditworthiness of its customers and generally does not require collateral.
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
the amount the Company reasonably believes is collectible. The Company also records reserves for bad debt for all other customers
based on a variety of factors, including the length of time the receivables are past due and historical collection experience.
Accounts are also reviewed for potential write-off on a case-by-case basis. Accounts deemed uncollectible are written off, net
of expected recoveries. If circumstances related to specific customers change, the Company’s estimates of the recoverability of
receivables could be further adjusted.
The Company’s forward exchange contracts, cross-currency interest rate swaps and option contracts do not subject the Company
to risk due to foreign exchange rate movement, because gains and losses on these instruments generally offset gains and losses
on the assets, liabilities, and other transactions being hedged. The Company is exposed to credit-related losses in the event of
non-performance by counterparties to certain derivative financial instruments. The Company does not obtain collateral or other
security to support derivative financial instruments subject to credit risk, but monitors the credit standing of the counterparties.
The credit exposure that results from commodity, interest rate, foreign exchange and other derivatives is the fair value of
contracts with a positive fair value as of the reporting date. The credit exposure on the Company’s interest rate and foreign
currency derivatives at December 31, 2010 was $42.3 million and $2.6 million, respectively. The credit exposure on the Company’s
commodity derivatives at December 31, 2010 was immaterial.
Sales Recognition
Sales of merchandise and freight billed to customers are recognized when title passes and all substantial risks of ownership change,
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.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and highly liquid investments that have a maturity of three months or less when purchased.
Inventories
Inventories are stated at the lower of cost or market value using the last-in, first-out (LIFO) or first-in, first-out (FIFO) methods (see
Footnote 5 for additional information). The Company reduces its inventory value for estimated obsolete and slow-moving inventory in
an amount equal to the difference between the cost of inventory and the net realizable value based upon estimates about future demand
and market conditions. As of December 31, 2010 and 2009, the Company’s reserves for excess and obsolete inventory and shrink
reserves totaled $70.7 million and $102.1 million, respectively. If actual market conditions are less favorable than those projected by
management, additional inventory write-downs may be required.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Expenditures for maintenance and repairs are expensed as incurred. Depreciation
expense is calculated principally on the straight-line basis. Useful lives determined by the Company are as follows: buildings and
improvements (20-40 years) and machinery and equipment (3-12 years).