Graco 2007 Annual Report Download - page 33

Newell Rubbermaid Inc. 2007 Annual Report
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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 debt of $478.3 million compared to $511.0 million in 2006.
In 2007, the Company issued commercial paper to fund the acquisition of Endicia and to retire a $250.0 million, 6.0% fixed rate medium-term note that
matured. In 2006, the Company used available cash to pay off commercial paper and retire a $150.0 million, 6.6% fixed rate medium-term note that
matured. See Footnote 10 of the Notes to Consolidated Financial Statements for additional information on these transactions.
Aggregate dividends paid were $234.7 million and $232.8 million in 2007 and 2006, respectively. In 2008, the Company expects to make similar
dividend payments.
Capital expenditures were $157.3 million and $138.3 million in 2007 and 2006, respectively. The increase in capital expenditures was driven by spending
related to the Company’s SAP initiative. Capital expenditures, including SAP, for 2008 are expected to be in the range of $160 million to $180 million.
Cash used for acquisitions was $106.0 million in 2007, compared to $60.6 million in 2006. In 2007, the Company acquired Endicia for $51.2 million.
In 2006, the Company did not invest in significant acquisitions. See Footnote 2 of the Notes to Consolidated Financial Statements for additional information.
Cash used for restructuring activities was $53.1 million and $26.1 million in 2007 and 2006, respectively. These payments relate primarily to
employee termination benefits. In 2008, the Company expects to use approximately $100 million of cash on restructuring activities related to Project
Acceleration. See Footnote 4 of the Notes to Consolidated Financial Statements for additional information.
In 2007, the Company used net cash of $2.3 million for the disposals of businesses and assets. The amount included payments for transaction fees
relating to the divestiture of the Home Décor Europe and Little Tikes businesses, partially offset by proceeds received from the sale of facilities. The
Company generated cash proceeds from the disposal of noncurrent assets and sale of businesses of $187.0 million in 2006 relating primarily to the sale
of the European Cookware and Little Tikes businesses, as well as the largest portion of its Home Décor Europe business.
Liquidity Metrics
Working capital at December 31, 2007 was $87.9 million compared to $580.3 million at December 31, 2006. The current ratio at December 31, 2007 was
1.03:1 compared to 1.31:1 at December 31, 2006. The decrease in working capital is due to an increase of approximately $700 million in current portion of
long-term debt. See Footnote 10 of the Notes to Consolidated Financial Statements for additional information.
Total debt to total capitalization (total debt is net of cash and cash equivalents, and total capitalization includes total debt and stockholders’ equity)
was .45:1 at December 31, 2007 and .52:1 at December 31, 2006.
The Company believes that cash provided from operations and available borrowing facilities will continue to provide adequate support for the cash
needs of existing businesses on a short-term basis; however, certain events, such as significant acquisitions, could require additional external financing
on a long-term basis.
RESOLUTION OF INCOME TAX CONTINGENCIES
In 2007 and 2006, the Company recorded $41.3 million and $102.8 million, respectively, in income tax benefits as a result of favorable resolution of certain
tax matters with the IRS, the expiration of the statute of limitations on certain tax matters and the reorganization of certain legal entities in Europe. These
benefits are reflected in the Company’s 2007 and 2006 Consolidated Statements of Income.
CONTRACTUAL OBLIGATIONS, COMMITMENTS AND OFF-BALANCE SHEET ARRANGEMENTS
The Company has various contractual obligations that are recorded as liabilities in its consolidated financial statements. 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, 2007 and future minimum lease payments for the use of property and equipment
under operating lease agreements.