Graco 2007 Annual Report Download

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2007 Annual Report
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Newell Rubbermaid Inc. 2007 Annual Report

Table of contents

  • Page 1
    2007 Annual Report next Watch what happens

  • Page 2
    ..., provided as part of this annual report, for a reconciliation to the most directly comparable GAAP financial measure. Se g me n t O v e r v ie w Cleaning, Organization & Décor Sales (in millions) Office Products Sales (in millions) Tools & Hardware Sales (in millions) Home & Family Sales (in...

  • Page 3
    ... sustainable growth by building a consumer-driven branding company; increase productivity and efficiency by optimizing our supply chain and leveraging One Newell Rubbermaid; and change our culture to foster a globally collaborative organization that produces best-in-class results. Watch what...

  • Page 4
    Next: We will generate sustainable growth 2

  • Page 5
    ...-centric company by investing in research that helps us to better understand our target consumers and their needs. In turn, these insights are helping us to develop breakthrough product innovations that deliver meaningful solutions. We create consumer demand by investing in marketing and promotion...

  • Page 6
    ...We are extending trusted names that perform well in their original categories to near-neighbor categories through new product innovation. Similarly, we are working to understand consumers in local markets around the globe so that we can customize and adapt our products to meet their unique needs and...

  • Page 7
    5

  • Page 8
    ... branding company supports its brand portfolio by ensuring that the company's products are delivered at the best total cost. We are now working as One Newell Rubbermaid to optimize center-led functions such as distribution, transportation and other shared services. We are continuing to deliver good...

  • Page 9
    7

  • Page 10
    ... a highly collaborative, team-oriented organization that can work as one; organizing into global business units that have a worldwide view of their operations; and investing in training and development programs that build world-class expertise. All of this will foster a culture that produces best-in...

  • Page 11
    9

  • Page 12
    ... shareholders, In 2007, we made excellent progress in our multi-year effort to transform Newell Rubbermaid into a global company of Brands That Matter and great people, known for best-in-class results. Our strategic focus on developing our brand-building capabilities, achieving best cost, leveraging...

  • Page 13
    ... resources in this project, and we are pleased to have had a seamless transition to the new system in our North American Office Products business. Our first launch has provided a useful roadmap and solid base of experience to reapply as we approach our next development, integrity and best-in-class...

  • Page 14
    ... in point, our Rubbermaid Commercial business delivered double-digit sales growth in 2007, driven significantly by creative offerings in new product categories such as microfiber cleaning systems and decorative waste management. Finally, global penetration by many of our brands is low, which creates...

  • Page 15
    Next steps: How we get there 13

  • Page 16
    ... willing to pay for the benefit the product delivers. We then work backward from a desired margin to identify a target cost and formulate a supply strategy. By following this well-defined process, we are ensuring the introduction of innovative new products that meet consumer needs and strengthen our...

  • Page 17
    ...measuring these investments carefully to ensure that we are investing in the highest-impact programs and activities. The Fourth Trimester The Graco® Sweetpeace™ Newborn Soothing Center™ is one example of the integrated brand-building process that is emerging within Newell Rubbermaid today. The...

  • Page 18
    ... Sourcing Our new business model is focused on achieving the best product cost at the right quality and service levels, often by engaging supply partners in low-cost countries. In the process of making this transformation, we have rationalized our manufacturing and sourcing footprint. By the end of...

  • Page 19
    ... cash management, accounting systems, order processing, billing, credit, Sharpie Runs SAP We have invested the required resources to ensure the successful rollout of SAP. Its launch in October 2007 at our North American Office Products business unit went extremely well. This initial go-live is...

  • Page 20
    ... consumer-driven marketing company. During 2007, we worked hard to begin bringing this culture to life. We introduced a new set of corporate values to employees and had honest conversations about what will be required to realize our cultural aspirations. In fact, Newell Rubbermaid employees around...

  • Page 21
    ...-building activities, such as consumer insight, product innovation and manufacturing. We are actively recruiting a new generation of brand-focused marketers in order to build longterm capabilities in marketing at every level of the company. encompasses inclusion and diversity, community investment...

  • Page 22
    ... Division; Vice President and Controller, Kraft USA Operations; and Chief Financial Officer, Kraft Foods Canada. Thomas E. Clarke has been President of New Business Ventures of Nike, Inc. (a designer, developer and marketer of footwear, apparel, equipment and accessory products) since 2001. Dr...

  • Page 23
    ... Rubbermaid inc. 2007 Annual Report 2007 FinAnCiAl STATEMEnTS AnD RElATED inFORMATiOn TABlE OF COnTEnTS Selected Financial Data Quarterly Financial Summaries Management's Discussion and Analysis of Financial Condition and Results of Operations Quantitative and Qualitative Disclosures About Market...

  • Page 24
    newell Rubbermaid inc. 2007 Annual Report SElECTED FinAnCiAl DATA The following is a summary of certain consolidated financial information relating to the Company as of and for the year ended December 31, (in millions, except per share data ). The summary has been derived in part from, and should ...

  • Page 25
    newell Rubbermaid inc. 2007 Annual Report QUARTERlY FinAnCiAl SUMMARiES Summarized quarterly data for the last two years is as follows (in millions, except per share data ) (unaudited): Calendar Year 2007 net sales Gross margin income from continuing operations (loss) income from discontinued ...

  • Page 26
    ... and related kitchenware, beauty and style accessory products, infant and juvenile products, including high chairs, car seats, strollers and play yards, and other products within businesses that are individually immaterial and do not meet aggregation criteria Office Products Tools & Hardware Home...

  • Page 27
    ... systems and users to a common SAP global information platform. This will enable the Company to integrate and manage its worldwide business and reporting processes more efficiently. Achieve Best Total Cost The Company's objective is to reduce the cost of manufacturing, sourcing and supplying product...

  • Page 28
    ... due to investments in brand building, product development and other corporate initiatives, including SAP and Shared Services. These investments were partially offset by $15 million in savings from Project Acceleration and other structural overhead reductions. The Company recorded restructuring...

  • Page 29
    ... is related to the impact of acquisitions, 40% represented increased investment in strategic brand building, and the remainder resulted from the impact of foreign currency and stock option accounting and the pension curtailment benefit recognized in 2005 that did not repeat in 2006. The Company...

  • Page 30
    ... Rubbermaid inc. 2007 Annual Report BUSINESS SEGMENT OPERATING RESULTS 2007 vs. 2006 Business Segment Operating Results net sales by segment were as follows for the year ended December 31, (in millions, except percentages ): 2007 Cleaning, Organization & Décor Office Products Tools & Hardware Home...

  • Page 31
    newell Rubbermaid inc. 2007 Annual Report 2006 vs. 2005 Business Segment Operating Results net sales by segment were as follows for the year ended December 31, (in millions, except percentages ): 2006 Cleaning, Organization & Décor Office Products Tools & Hardware Home & Family Total net Sales $1,...

  • Page 32
    ... Rubbermaid inc. 2007 Annual Report LIQUIDITY AND CAPITAL RESOURCES Cash and cash equivalents increased (decreased) as follows for the year ended December 31, (in millions ): 2007 Cash provided by operating activities Cash used in investing activities Cash used in financing activities Exchange rate...

  • Page 33
    newell Rubbermaid inc. 2007 Annual Report Uses Historically, the Company's primary uses of liquidity and capital resources have included acquisitions, dividend payments, capital expenditures and payments on debt. in 2007, the Company made payments on notes payable, commercial paper and long-term ...

  • Page 34
    ... benefit plans. See Footnote 13 of the notes to Consolidated Financial Statements for additional information. As of December 31, 2007, the Company had $87.6 million in standby letters of credit primarily related to the Company's self-insurance programs, including workers' compensation, product...

  • Page 35
    ... may be present. The Company assesses the fair value of its reporting units for its goodwill based on discounted cash flow models, earnings multiples or an actual sales offer received from a prospective buyer, if available. The use of a discounted cash flow model involves several assumptions, and...

  • Page 36
    newell Rubbermaid inc. 2007 Annual Report Other Long-Lived Assets The Company continuously evaluates if impairment indicators related to its property, plant and equipment and other long-lived assets are present. These impairment indicators may include a significant decrease in the market price of a...

  • Page 37
    ...rates, expected return on plan assets, mortality rates and rate of compensation increase, 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...

  • Page 38
    ..., sales (including pricing), income/(loss), earnings per share, operating income or gross margin improvements, return on equity, return on invested capital, capital expenditures, working capital, cash flow, dividends, capital structure, debt to capitalization ratios, interest rates, internal growth...

  • Page 39
    ...raw material purchases, purchases of raw materials for future delivery and customer price adjustments help the Company address this risk. Where practical, the Company uses derivatives as part of its risk management process. The amounts shown below represent the estimated potential economic loss that...

  • Page 40
    ... and footnotes contained in this annual report. The Company's management is also responsible for establishing and maintaining adequate internal control over financial reporting. newell Rubbermaid inc. operates under a system of internal accounting controls designed to provide reasonable assurance...

  • Page 41
    ... inc. 2007 Annual Report REPORT OF inDEPEnDEnT REGiSTERED PUBliC ACCOUnTinG FiRM The Board of Directors and Stockholders newell Rubbermaid inc. We have audited the accompanying consolidated balance sheets of newell Rubbermaid inc. and subsidiaries as of December 31, 2007 and 2006, and the related...

  • Page 42
    ... the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of newell Rubbermaid inc. as of December 31, 2007 and 2006, and the related consolidated statements of income, stockholders' equity and comprehensive income, and cash flows for each of the three years in...

  • Page 43
    newell Rubbermaid inc. 2007 Annual Report COnSOliDATED STATEMEnTS OF inCOME (Amounts in millions, except per share data) Year Ended December 31, net sales Cost of products sold Gross margin Selling, general and administrative expenses impairment charges Restructuring costs Operating income ...

  • Page 44
    ...Equity: Common stock, authorized shares, 800.0 at $1.00 par value; Outstanding shares, before treasury: 2007 - 292.6 2006 - 291.0 Treasury stock, at cost; Shares held: 2007 - 15.9 2006 - 15.7 Additional paid-in capital Retained earnings Accumulated other comprehensive loss Total Stockholders' Equity...

  • Page 45
    ... assets and sales of businesses net Cash Used in investing Activities Financing Activities Proceeds from issuance of debt Payments on notes payable and long-term debt Cash dividends Proceeds from exercised stock options and other net Cash Used in Financing Activities Exchange rate effect on...

  • Page 46
    ...Total comprehensive income Cash dividends on common stock Exercise of stock options Stock-based compensation and other Balance at December 31, 2007 See notes to Consolidated Financial Statements. Treasury Stock $(411.6 411.6 411.6 3.5) $(415.1) Additional Paid in Capital $437.5 - - - - - 0.4 15...

  • Page 47
    ... BernzOmatic,® Rubbermaid,® levolor,® Graco,® Calphalon® and Goody.® The Company's multi-product offering consists of well known name-brand consumer and commercial products in four business segments: Cleaning, Organization & Décor; Office Products; Tools & Hardware; and Other (Home & Family...

  • Page 48
    ...the future cash flows using a discount rate required for a similar investment of like risk and records an impairment charge as the difference between the fair value and the carrying value of the asset group. Generally, the Company performs its testing of the asset group at the product-line level, as...

  • Page 49
    ... are generally used to manage certain commodity, interest rate and foreign currency risks. These instruments include commodity swaps, interest rate swaps, long-term cross currency interest rate swaps, forward exchange contracts and options. The Company's forward exchange contracts, options and long...

  • Page 50
    ...on the Consolidated Balance Sheet depending on the maturity of the Company's cross currency interest rate swaps and forward contracts at December 31, 2007 and 2006. The earnings impact of cash flow hedges relating to forecasted purchases of inventory is generally reported in cost of products sold to...

  • Page 51
    ...(R). Compensation expense is adjusted for estimated forfeitures and is recognized on a straight-line basis over the requisite service period of the award, which is generally five years for stock options and three years for restricted stock. The Company estimates future forfeiture rates based on its...

  • Page 52
    ...other technology brands by developing a full range of innovative and integrated solutions for small and medium-sized businesses. This acquisition was accounted for using the purchase method of accounting and accordingly, based on a preliminary purchase price allocation, the Company recorded goodwill...

  • Page 53
    ...2007 Annual Report Acquisition of Dymo On november 23, 2005, the Company acquired Dymo, a global leader in designing, manufacturing and marketing on-demand labeling solutions, from Esselte AB. The purchase price of $699.2 million was finalized in 2006, after consideration of certain working capital...

  • Page 54
    ...business designed, manufactured and sold drapery hardware and window treatments in Europe under Gardinia® and other local brands and was previously classified in the Company's former Home Fashions segment. in 2005, Home Décor Europe had net sales of approximately $377 million. in the first quarter...

  • Page 55
    ... Board of Directors of the Company approved a restructuring plan (the "Plan") that commenced in the fourth quarter of 2005. The Plan is designed to reduce manufacturing overhead to achieve best cost positions and to allow the Company to increase investment in new product development, brand building...

  • Page 56
    ... 12/31/06 Balance $ 4.4 25.4 0.4 0.3 0.4 $30.9 Segment Cleaning, Organization & Décor Office Products Tools & Hardware Other (Home & Family) Corporate Provision $ 4.5 45.0 29.7 1.7 5.1 $86.0 Segment Cleaning, Organization & Décor Office Products Tools & Hardware Other (Home & Family) Corporate...

  • Page 57
    ... by reportable business segment, as follows (in millions ): Segment Cleaning, Organization & Décor Office Products Tools & Hardware Other (Home & Family) Provision $29.3 8.6 6.8 6.6 $51.3 Pre-Project Acceleration Restructuring Activities The Company announced a restructuring plan (the "2001 Plan...

  • Page 58
    newell Rubbermaid inc. 2007 Annual Report FOOTNOTE 5 inventories, net The components of net inventories were as follows as of December 31, (in millions ): 2007 Materials and supplies Work in process Finished products $178.8 179.8 581.8 $940.4 2006 $172.8 158.6 519.2 $850.6 inventory costs include...

  • Page 59
    ... and changes to goodwill balances in evaluating reportable segment performance. As a result, goodwill has been reflected as a corporate asset in the segment information included in Footnote 18. 2007 Cleaning, Organization & Décor Office Products Tools & Hardware Other (Home & Family) Total Goodwill...

  • Page 60
    ...$23.9 million, respectively, with weighted average interest rates of 10.9% and 6.3%, respectively. On november 14, 2005, the Company entered into a $750.0 million five-year syndicated revolving credit facility (the "Revolver"). On an annual basis, the Company may request an extension of the Revolver...

  • Page 61
    newell Rubbermaid inc. 2007 Annual Report FOOTNOTE 10 long-Term Debt The following is a summary of long-term debt as of December 31, (in millions ): 2007 Medium-term notes (original maturities ranging from 7 to 30 years, average interest rate of 5.48%) Commercial paper Floating rate note Junior ...

  • Page 62
    ...is classified as current), respectively, relating to terminated interest rate swap agreements. FOOTNOTE 11 Derivative Financial instruments Interest Rate Risk Management At December 31, 2007, the Company had interest rate swaps designated as fair value hedges with an outstanding notional principal...

  • Page 63
    newell Rubbermaid inc. 2007 Annual Report Foreign Currency Management The Company's foreign exchange risk management policy emphasizes hedging anticipated intercompany and third party commercial transaction exposures of generally one-year duration or less. The following table summarizes the Company...

  • Page 64
    ... Consolidated Balance Sheets. The Company has a Supplemental Executive Retirement Plan ("SERP"), which is a nonqualified defined benefit plan pursuant to which the Company will pay supplemental pension benefits to certain key employees upon retirement based upon the employees' years of service and...

  • Page 65
    newell Rubbermaid inc. 2007 Annual Report The Company used a September 30 measurement date for the majority of its pension plans in 2007 and 2006. The following provides a reconciliation of benefit obligations, plan assets and funded status of the Company's noncontributory defined benefit pension ...

  • Page 66
    ... equity, real estate, fixed income investments, and cash investments. Equity investments include large and small market capitalization stocks as well as growth, value and international stock positions. The Company employs a building block approach in determining the long-term rate of return for plan...

  • Page 67
    ... of corporate bonds rated AA or higher, adjusted to match the duration of each plan's benefits. The following are the weighted-average assumptions used to determine net periodic benefit cost for the other postretirement benefit plans: 2007 Discount rate long-term health care cost trend rate 6.00...

  • Page 68
    newell Rubbermaid inc. 2007 Annual Report Other postretirement benefit costs include the following components as of December 31, (in millions ): 2007 Service cost-benefits earned during the year interest cost on projected benefit obligation Amortization of: Prior service benefit Actuarial loss ...

  • Page 69
    newell Rubbermaid inc. 2007 Annual Report FOOTNOTE 14 Earnings per Share The calculation of basic and diluted earnings per share for the years ended December 31 is shown below (in millions, except per share data ): 2007 numerator for basic earnings per share: income from continuing operations loss...

  • Page 70
    newell Rubbermaid inc. 2007 Annual Report FOOTNOTE 15 Stock-Based Compensation The Company offers stock-based compensation to its employees that includes stock options, restricted stock awards, performance share awards and an employee stock purchase plan, as follows: Stock Options The Company's ...

  • Page 71
    newell Rubbermaid inc. 2007 Annual Report The fair value of stock option awards granted during the years ended December 31, was estimated using the Black-Scholes option pricing model with the following weighted average assumptions: 2007 Risk-free interest rate Dividend yield Expected volatility ...

  • Page 72
    newell Rubbermaid inc. 2007 Annual Report The following table summarizes the changes in the number of shares of restricted stock for the following periods (shares in millions ): Weighted-Average Grant-Date Fair Value $23 22 24 $23 24 24 $24 30 23 24 $26 $26 Shares Outstanding at December 31, 2004 ...

  • Page 73
    ... in an adjustment to beginning retained earnings. However, the adoption of Fin 48 did result in the reclassification of certain income tax assets and liabilities from current to long-term in the Company's Consolidated Balance Sheet. As of January 1, 2007, the Company had unrecognized tax benefits of...

  • Page 74
    newell Rubbermaid inc. 2007 Annual Report A reconciliation of the U.S. statutory rate to the effective income tax rate is as follows for the years ended December 31: 2007 Statutory rate Add (deduct) effect of: State income taxes, net of federal income tax effect Foreign tax credit Foreign rate ...

  • Page 75
    newell Rubbermaid inc. 2007 Annual Report Resolution of Tax Contingencies 2007 in 2007, the Company recorded a benefit of $35.0 million due to the Company entering into an agreement with the iRS relating to the appropriate treatment of a specific deduction included in the Company's 2006 U.S. ...

  • Page 76
    ... Material handling, cleaning, refuse, indoor/outdoor organization, home storage, food storage, drapery hardware, window treatments Ball point/roller ball pens, markers, highlighters, pencils, correction fluids, office products, art supplies, on-demand labeling products, card-scanning solutions...

  • Page 77
    newell Rubbermaid inc. 2007 Annual Report The Company's segment results are as follows as of and for the years ended December 31, (in millions ): 2007 net Sales Cleaning, Organization & Décor Office Products Tools & Hardware Other (Home & Family) (1) 2006 $1,995.7 2,031.6 1,262.2 911.5 $6,201.0 $...

  • Page 78
    newell Rubbermaid inc. 2007 Annual Report Geographic Area Information 2007 net Sales U.S. Canada north America Europe Central and South America Other Operating income U.S. Canada (2),(5) 2006 $4,603.4 387.9 4,991.3 781.0 239.3 189.4 $6,201.0 $ 517.4 78.8 596.2 15.4 5.3 39.7 $ 656.6 $ 533.5 14.8 ...

  • Page 79
    ...strollers, car seats and other children's products, headquartered in Osaka, Japan. Complementing the Company's Graco brand and its recent acquisition of Germany's Teutonia, the addition of Aprica would give the Company strong brands and distribution channels in Asia Pacific, Europe and north America...

  • Page 80
    newell Rubbermaid inc. 2007 Annual Report COMMOn STOCK PRiCE PERFORMAnCE GRAPH The following common stock price performance graph compares the yearly change in the Company's cumulative total stockholder returns on its common stock during the years 2003 through 2007, with the cumulative total return...

  • Page 81
    ..., in 2007, the Company's Chief Executive Officer provided to the new York Stock Exchange the annual Chief Executive Officer certification regarding the Company's compliance with the new York Stock Exchange's corporate governance listing standards. MARKET FOR COMMOn EQUiTY AnD RElATED STOCKHOlDER...

  • Page 82
    ... are excluded from the adjusted tax rate calculation for 2005, 2006, and 2007, respectively. (2) Average invested capital includes notes payable, current portion of long-term debt, long-term debt, and stockholders' equity calculated as an average of the five most recent quarter-end balances. 80

  • Page 83
    ... M. Sweet Executive Vice President, Human Resources and Corporate Communications Age 55 Joined company 2004 Theodore W. Woehrle Senior Vice President, Marketing & Brand Management Age 46 Joined company 2007 Trading Information newell Rubbermaid is traded on the new York Stock Exchange under the...

  • Page 84
    Watch What Happens Next Stay tuned at www.newellrubbermaid.com Newell Rubbermaid Inc. 10B Glenlake Parkway, Suite 300 Atlanta, GA 30328 www.newellrubbermaid.com