Graco 2010 Annual Report Download - page 57

Newell Rubbermaid Inc. 2010 Annual Report
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NEWELL RUBBERMAID 2010 Annual Report 53
Aprica
On April 1, 2008, the Company acquired substantially all of the assets of Aprica Childcare Institute Aprica Kassai, Inc. (“Aprica”),
a maker of strollers, car seats and other children’s products, headquartered in Osaka, Japan. The Company acquired Aprica’s
assets for $145.7 million, which includes transaction costs and the repayment of Aprica’s outstanding debt obligations at closing.
Aprica is a Japanese brand of premium strollers, car seats and other related juvenile products. The acquisition provides the
opportunity for the Company’s Baby & Parenting Essentials business to broaden its presence worldwide, including expanding
the scope of Aprica’s sales outside Asia. The closing of the purchase of Aprica’s operations in China occurred in October 2008,
and the assets acquired and liabilities assumed are included in the amount of net liabilities acquired and goodwill recorded in
the Aprica acquisition; however, the impact of the acquisition of Aprica’s China operations did not significantly impact the
overall Aprica purchase price allocation.
This acquisition was accounted for using the purchase method of accounting and accordingly, the Company allocated the total
purchase price to the identifiable tangible and intangible assets acquired and liabilities assumed based on their estimated fair values
on the date of acquisition. Based on the purchase price allocation, the Company allocated $(34.7) million of the purchase price to
identified tangible net liabilities and $57.0 million of the purchase price to identified intangible assets. The Company recorded the
excess of the purchase price over the aggregate fair values of $123.4 million as goodwill. Aprica’s results of operations are included in
the Company’s Consolidated Financial Statements since the acquisition date. Pro forma results of operations for historical periods
would not be materially different and therefore are not presented.
Endicia
On July 1, 2007, the Company acquired all of the outstanding equity interests of PSI Systems, Inc. (“Endicia”), provider of Endicia
Internet Postage, for $51.2 million plus related acquisition costs and contingent payments of up to $25.0 million based on future
revenues. In 2009 and 2010, the Company paid $10.0 million and $1.5 million, respectively, of the contingent payments based on
Endicia’s revenues, and an additional $12.5 million may be paid in periods subsequent to December 31, 2010 based on Endicia’s
future revenues. This acquisition was accounted for using the purchase method of accounting.
Endicia is party to a lawsuit filed against it alleging patent infringement which was filed on November 22, 2006 in the U.S. District
Court for the Central District of California. In this case, Stamps.com seeks unspecified damages, attorneys’ fees and injunctive relief
in order to prevent Endicia from continuing to engage in activities that are alleged to infringe on Stamps.com’s patents. The court
granted Endicia’s motion for summary judgment, and the matter is on appeal to the U.S. Federal Circuit Court of Appeals. An unfavorable
outcome in this litigation could materially adversely affect the Endicia business.
FOOTNOTE 3
STOCKHOLDERS’ EQUITY
During 2010, the Company executed a series of transactions pursuant to a Capital Structure Optimization Plan (the “Plan”) in
order to simplify the Company’s capital structure, lower interest costs and reduce potential future dilution from the convertible
notes due 2014 (the “Convertible Notes”) and the associated hedge and warrant transactions (see Footnotes 9 and 10 of the
Notes to Consolidated Financial Statements). The Plan included the issuance of $550.0 million of 4.70% senior notes due 2020.
The Company used the proceeds from the sale of the notes, cash on hand and short-term borrowings to fund the repurchase of
$500.0 million of shares of its common stock through an accelerated stock buyback program; to complete a cash tender offer
for any and all of the $300.0 million principal amount of outstanding 10.60% notes due 2019; and to exchange common stock and
cash for any and all of the $345.0 million principal amount of outstanding Convertible Notes. In addition, the Plan contemplated
the settlement of the convertible note hedge and warrant transactions entered into in connection with the issuance of the
Convertible Notes in March 2009.
On August 2, 2010, the Company entered into an accelerated stock buyback program (the “ASB”) with Goldman, Sachs & Co.
(“Goldman Sachs”). Under the ASB, on August 10, 2010, the Company paid Goldman Sachs an initial purchase price of $500.0 million,
and Goldman Sachs delivered to the Company approximately 25.8 million shares of common stock, representing approximately
80% of the shares expected to be purchased under the program at the time the program was announced. Goldman Sachs delivered
the initial amount of shares on August 10, 2010, based on a per share amount of $15.50. The Company retired the 25.8 million
shares received under the ASB, and since the Company’s additional paid-in capital attributable to common stock was greater than
$500.0 million at the time such shares were retired, the repurchase and retirement of shares was recorded as a reduction to
common stock and additional paid-in capital. The number of shares that the Company ultimately purchases under the ASB will
be determined based on the average of the daily volume-weighted average share prices of the common stock over the course of
a calculation period and is subject to certain adjustments. Upon settlement following the end of the calculation period, Goldman
Sachs will deliver additional shares to the Company so that the aggregate value of the shares initially delivered plus such additional
shares, based on the final price, is $500.0 million. Alternatively, if the value of the shares initially delivered, based on the final price,
exceeds $500.0 million, the Company will deliver cash or shares of common stock (at the Company’s election) to Goldman Sachs
for the excess. The calculation period is scheduled to run from August 11, 2010 until March 21, 2011 and is subject to suspension.
On August 17, 2010, the Company commenced an exchange offer for its $345.0 million outstanding principal amount of
Convertible Notes (the “Exchange Offer”). The Company offered to exchange 116.198 shares of its common stock and a cash
payment of $160 for each $1,000 principal amount of Convertible Notes tendered in the Exchange Offer. Holders of the Convertible
Notes exchanged $324.7 million principal amount of Convertible Notes in the Exchange Offer. The Company issued approximately
37.7 million shares of its common stock valued at $638.0 million and paid approximately $52.0 million of cash in exchange for
the $324.7 million principal amount of Convertible Notes and retired the Convertible Notes received in the Exchange Offer. The