Graco 2008 Annual Report Download

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2008 ANNUAL REPORT
THE JOURNEY CONTINUES

Table of contents

  • Page 1
    THE JOURNEY CONTINUES 2008 ANNUAL REPORT

  • Page 2
    BUSINESS BUSINESS DESCRIPTION DESCRIPTION Newell Newell Rubbermaid Rubbermaid is a isglobal a global marketer marketer of consumer of consumer and and commercial commercial products products that that touch touch the the lives lives of people of people where where they they work, work, live live and...

  • Page 3
    ... considerable momentum after returning the Company to two years of consecutive growth in sales and profitability. This momentum continued through the first half of 2008 with 60 percent of our businesses posting year-over-year sales growth. Even with cost pressures from record-high oil and commodity...

  • Page 4
    ... two acquisitions that fit our business criteria nicely. Aprica® is a leading Japanese brand of premium strollers, car seats and related juvenile products that has joined our Baby & Parenting Global Business Unit (GBU). Technical Concepts, which was added to our Rubbermaid Commercial Products GBU...

  • Page 5
    ...million in annualized cost savings by the end of 2010. During 2008, three of the businesses in our Home & Family segment implemented the second phase of our Company-wide SAP information system rollout. We consolidated a number of locations into our new corporate offices in Atlanta and into regional...

  • Page 6
    ...can grow even in a contracting market. We will aggressively manage costs to protect earnings, maximize cash ï¬,ow and fortify the balance sheet. We will do whatever is necessary to adapt our business to new realities. Much of my confidence in our future rests with the thousands of Newell Rubbermaid...

  • Page 7
    PORTFOLIOS EXIST TO EVOLVE Companies with portfolios that evolve know how to make change work for them. We continue to transform our portfolio toward a more focused, more global and more profitable collection of world-class brands. 5 5

  • Page 8
    ... leading brands, including Rubbermaid®, Graco®, Calphalon®, Goody® and Levolor®, names that represent the highest commitment to quality, we offer consumers an expansive line of food storage and home organization solutions, infant and juvenile products, premium kitchenware, hair care accessories...

  • Page 9
    ... maintenance products for commercial and do-it-yourself users, including premium hand tools and power tool accessories marketed under the Lenox® and Irwin® brands and complete janitorial, sanitation and washroom solutions under the Rubbermaid® Commercial Products and Technical Concepts™ brands...

  • Page 10
    ... a springboard to broaden our baby and parenting presence in Asia. This expanded presence also will enhance our regional corporate scale in Japan, opening the door to expansion for other Newell Rubbermaid business units. In North America, Graco's large customer base provides the potential to broaden...

  • Page 11
    BRAND BUILDING NEVER TOPS OUT Sustained growth is created through a continuous cycle of consumer demand creation. Our new consumer-centric business model seeks to fuel this cycle through investments in consumer insight, differentiated products and innovative commercialization processes. 9 9

  • Page 12
    ... the business model in 2006, we have significantly increased our annual investment in brand-building, market-facing activities. This investment is funding a product pipeline that encompasses sophisticated consumer research, innovative product development and highly targeted, integrated marketing...

  • Page 13
    ...'s global business development team. Endicia has also partnered with the U.S. Postal Service and is the number-one online shipping postage provider in the U.S. Product฀Innovation:฀฀Parents no longer have to purchase multiple car seats to accommodate their child's growth stages. The Graco...

  • Page 14
    ... three product lines helped drive high-single-digit sales growth for Rubbermaid Food in 2008. When Newell Rubbermaid set out to change its business model, this process and these results were the goal. At Rubbermaid Food & Home, clearly the model is working. 1 American Institute for Cancer Research...

  • Page 15
    EFFICIENCY HAS NO FINISH LINE There is no such thing as "done" or "enough" when it comes to efficiency, productivity and profitability. Our efforts to restructure the supply chain and leverage corporate scale are critical to realizing our best-in-class aspirations. 13 13

  • Page 16
    ... three years. SKU optimization will help us enhance new product planning and execution. Finally, the ongoing implementation of SAP, our enterprise resource platform of choice, will be an invaluable tool for all functions throughout the Company. SAP, which is already operational in our North American...

  • Page 17
    ...and encourages employees to share insights and innovations across all of our brands. Mega฀Distribution฀Center฀-฀Fradley,฀UK:฀฀Our ongoing strategy to consolidate into more centrally located, multi-branded distribution centers enables Newell Rubbermaid to better leverage scale, improve...

  • Page 18
    ... as an organization. For a complete overview of Newell Rubbermaid's corporate responsibility programs, we invite you to visit our Web site, newellrubbermaid.com. Hands฀On฀Atlanta:฀Our centralized corporate philanthropy program - Investing in Community™ - encourages our employees to...

  • Page 19
    ... 2008 Annual Report 2008 FINANCIAL STATEMENTS AND RELATED INFORMATION TABLE OF CONTENTS Selected Financial Data Acquisitions of Businesses Quarterly Summaries Management's Discussion and Analysis of Financial Condition and Results of Operations Quantitative and Qualitative Disclosures About Market...

  • Page 20
    Newell Rubbermaid Inc. 2008 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 be...

  • Page 21
    ... of Dymo strengthened the Company's position in the Office Products segment by expanding and enhancing the Company's product lines and customer base. No significant acquisitions occurred during 2004. QUARTERLY SUMMARIES Summarized quarterly data for the last two years is as follows (in millions...

  • Page 22
    ...® and Goody.® The Company's multi-product offering consists of well-known name-brand consumer and commercial products in four business segments during 2008: Cleaning, Organization & Décor; Office Products; Tools & Hardware; and Home & Family. Business Strategy Newell Rubbermaid's vision is to...

  • Page 23
    ... legacy systems and users to a common SAP global information platform in a phased, multi-year rollout. SAP is expected to enable the Company to integrate and manage its worldwide business and reporting processes more efficiently. To date, the North American operations of its Home & Family and Office...

  • Page 24
    ... during the fourth quarter of 2008 principally related to goodwill of certain business units in the Tools & Hardware and Office Products segments. No similar impairment charges were recorded in 2007 or 2006. The Company may be required to perform additional impairment tests based on changes in...

  • Page 25
    ... 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 costs of...

  • Page 26
    ... SG&A spending for new product launches and brand-building investments, mainly related to Aprica. Additionally, child safety protection laws enacted during the latter half of 2008 contributed to the year-over-year decline in operating income for the Baby & Parenting Essentials business unit. 2007 vs...

  • Page 27
    .... Top line growth and productivity initiatives were more than offset by investments in strategic brand building. Home & Family Net sales for 2007 were $979.9 million, an increase of $68.4 million, or 7.5%, from $911.5 million in 2006. Broad based success in all three business units was fueled by new...

  • Page 28
    Newell Rubbermaid Inc. 2008 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. The Company made payments on notes payable, commercial paper and long-term debt of $...

  • Page 29
    Newell Rubbermaid Inc. 2008 Annual Report Debt The Company's objective is to finance the business through the appropriate mix of short-term and long-term debt. The Company has varying needs for short-term working capital financing as a result of the seasonal nature of its business. The volume and ...

  • Page 30
    ... as Current portion of long-term debt and Long-term debt in the Company's Consolidated Balance Sheet at December 31, 2008. (5) Primarily consists of purchase commitments entered into as of December 31, 2008 for finished goods, raw materials, components and services and joint venture interests...

  • Page 31
    ... during the fourth quarter of 2008. In its goodwill impairment testing, if the carrying amount of a reporting unit is greater than the fair value, impairment may be present. The Company assesses the fair value of its reporting units generally based on discounted cash flow models, market multiples of...

  • Page 32
    ... 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 this...

  • Page 33
    ...health care cost trend rates, expected return on plan assets, mortality rates and rate of compensation increases, 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...

  • Page 34
    ... year ended December 31, (in millions): 2008 Net pension cost Net postretirement benefit costs Total $18.3 8.8 $27.1 2007 $14.4 10.1 $24.5 2006 $15.7 10.1 $25.8 The Company used weighted-average discount rates of 6.0% and 6.3% to determine the expenses for 2008 for the pension and post retirement...

  • Page 35
    ... an orderly transaction between market participants at the measurement date. SFAS 157 discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity...

  • Page 36
    ... 132(R)-1 is not expected to have a material impact on the Company's financial statements. INTERNATIONAL OPERATIONS For the years ended December 31, 2008, 2007 and 2006, the Company's non-U.S. businesses accounted for approximately 31%, 28% and 26% of net sales, respectively (see Footnote 18 of the...

  • Page 37
    ... raw material costs are uncertain, a variety of programs, including periodic 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...

  • Page 38
    Newell Rubbermaid Inc. 2008 Annual Report Value at Risk The amounts shown below represent the estimated potential economic loss that the Company could incur from adverse changes in either interest rates or foreign exchange rates using the value-at-risk estimation model. The value-at-risk model uses...

  • Page 39
    ... as of December 31, 2008. In making its assessment, the Company's management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework . The Company completed its acquisitions of Technical Concepts and Aprica...

  • Page 40
    ... standards of the Public Company Accounting Oversight Board (United States), Newell Rubbermaid Inc.'s internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the...

  • Page 41
    ... material respects, effective internal control over financial reporting as of December 31, 2008, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Newell Rubbermaid...

  • Page 42
    Newell Rubbermaid Inc. 2008 Annual Report CONSOLIDATED STATEMENTS OF OPERATIONS (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 43
    Newell Rubbermaid Inc. 2008 Annual Report CONSOLIDATED BALANCE SHEETS (Amounts in millions, except par value) December 31, Assets Current Assets: Cash and cash equivalents Accounts receivable, net of allowances of $40.6 for 2008 and $39.1 for 2007 Inventories, net Deferred income taxes Prepaid ...

  • Page 44
    ...Investing Activities Acquisitions, net of cash acquired Capital expenditures Disposals of non-current assets and sales of businesses Net Cash Used in Investing Activities Financing Activities Proceeds from issuance of debt, net of debt issuance costs Payments on notes payable and debt Cash dividends...

  • Page 45
    Newell Rubbermaid Inc. 2008 Annual Report CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME (Amounts in millions) Common Stock Balance at December 31, 2005 Net income Foreign currency translation Minimum pension liability adjustment, net of $27.1 tax Loss on derivative ...

  • Page 46
    ...,® Rubbermaid,® TC,® Levolor,® Graco,® Aprica,® Calphalon® and Good.® 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...

  • Page 47
    ... 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 this...

  • Page 48
    ... the Consolidated Balance Sheets depending on the maturity of the Company's cross currency interest rate swaps and forward contracts at December 31, 2008 and 2007. The earnings impact of cash flow hedges relating to forecasted purchases of inventory is generally reported in cost of products sold to...

  • Page 49
    ... Stock-based 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...

  • Page 50
    ...Inc. 2008 Annual Report The Company recorded an adjustment at January 1, 2008 to accumulated other comprehensive loss of $0.7 million related to the adoption of the change in measurement date for the Company's defined benefit and postretirement plans pursuant to SFAS No. 158, "Employers' Accounting...

  • Page 51
    ...% of its sales outside the U.S., Technical Concepts increases the global footprint of the Company's Rubbermaid Commercial Products business. This acquisition was accounted for using the purchase method of accounting and accordingly, the Company allocated the total purchase price to the identifiable...

  • Page 52
    ... an agreement for the intended sale of its Little Tikes business unit to a global family and children's entertainment company. Little Tikes is a global marketer and manufacturer of children's toys and furniture for consumers. The transaction closed in the fourth quarter of 2006, resulting in a gain...

  • Page 53
    ... shows restructuring costs recognized for Project Acceleration restructuring activities for the years ended December 31, aggregated by reportable business segment (in millions): Segment Cleaning, Organization & Décor Office Products Tools & Hardware Other (Home & Family) Corporate 2008 $ 37.4 35...

  • Page 54
    ... The table below shows total restructuring costs for the Plan since inception through December 31, 2008, aggregated by reportable business segment (in millions): Segment Cleaning, Organization & Décor Office Products Tools & Hardware Other (Home & Family) Corporate Provision $ 93.2 127.9 60.8 15...

  • Page 55
    ... 31, (in millions). 2008 Cleaning, Organization & Décor Office Products Tools & Hardware Other (Home & Family) Total goodwill Other intangible assets, net consisted of the following as of December 31, (in millions): 2008 Gross Carrying Amount Trade names - Indefinite life Trade names - Other Other...

  • Page 56
    ...differ materially from these estimates as a result of acquisitions, changes in useful lives and other relevant factors. The adverse impact of the macroeconomic environment on the Company during the fourth quarter of 2008 combined with the updated outlook for certain business units led the Company to...

  • Page 57
    ...summarizes the Company's average commercial paper obligations and interest rate for the year ended December 31, (in millions, except percentages): 2008 Borrowing Average interest rate $168.9 3.2% 2007 $147.3 5.3% The aggregate maturities of long-term debt outstanding, based on the earliest date the...

  • Page 58
    ... mark-to-market adjustments to record the fair value of the interest rate hedges of fixed rate debt, pursuant to SFAS 133, and the mark-to-market adjustments increased the reported value of the medium term notes by $62.3 million as of December 31, 2008. Term Loan In September 2008, the Company...

  • Page 59
    ... Lease Commitments The Company leases manufacturing, warehouse and other facilities, real estate, transportation, and data processing and other equipment under leases that expire at various dates through the year 2020. Rent expense, which is recognized on a straight-line basis over the life of the...

  • Page 60
    ... foreign and domestic employees. Plan benefits are generally based on years of service and/or compensation. The Company's funding policy is to contribute not less than the minimum amounts required by the Employee Retirement Income Security Act of 1974, as amended, the Internal Revenue Code of 1986...

  • Page 61
    ...Rubbermaid Inc. 2008 Annual Report 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...

  • Page 62
    ... 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 assets. Historical markets are studied and long-term...

  • Page 63
    Newell Rubbermaid Inc. 2008 Annual Report Other Postretirement Benefit Plans Several of the Company's subsidiaries currently provide retiree health care and life insurance benefits for certain employee groups. The following provides a reconciliation of benefit obligations and funded status of the ...

  • Page 64
    Newell Rubbermaid Inc. 2008 Annual Report Assumed health care cost trends have been used in the valuation of the benefit obligations for postretirement benefits. The trend rate used to measure the benefit obligation was 9% for all retirees in 2008, declining by 0.5% each year to 5% in 2016 and ...

  • Page 65
    Newell Rubbermaid Inc. 2008 Annual Report FOOTNOTE 14 STOCK-BASED COMPENSATION The Company offers stock-based compensation to its employees that includes stock options, restricted stock units, performance share units and an employee stock purchase plan, as follows: Stock Options The Company's ...

  • Page 66
    ... and options exercisable was 7 years and 5 years, respectively, as of December 31, 2008. The following table summarizes the changes in the number of shares of restricted stock and restricted stock units for the following periods (shares in millions): Weighted-average grant date fair value $23...

  • Page 67
    ...Rubbermaid Inc. 2008 Annual Report The following table summarizes the Company's total unrecognized compensation cost related to stock-based compensation as of December 31, 2008 (in millions): Weighted Average Period of Expense Recognition (in years) 2 2 Unrecognized Compensation Cost Stock options...

  • Page 68
    ... for the Company's U.S. federal income tax returns has expired for years prior to 2005. During the three months ended December 31, 2008, the Company received an IRS Revenue Agent Report for tax years 2005 and 2006, assessing additional tax and interest relating to the Company's tax treatment...

  • Page 69
    ... Company adjusts the value of its investments and derivative instruments to fair value each reporting period, no adjustment to retained earnings resulted from the adoption of SFAS 157. The Company determines the fair value of its mutual fund investments based on quoted market prices (Level 1). Level...

  • Page 70
    ..., card-scanning solutions, and on-line postage; and art and office organization products Hand tools, power tool accessories, industrial bandsaw blades, propane torches, manual paint applicators and cabinet and window hardware Infant and juvenile products such as car seats, strollers, highchairs, and...

  • Page 71
    Newell Rubbermaid Inc. 2008 Annual Report The Company's segment results are as follows as of and for the years ended December 31, (in millions): 2008 Net sales Cleaning, Organization & Décor Office Products Tools & Hardware Other (Home & Family) Operating income (2) Cleaning, Organization & Décor...

  • Page 72
    Newell Rubbermaid Inc. 2008 Annual Report Geographic Area Information 2008 Net sales U.S. Canada North America Europe Central and South America Other Operating income (loss) (2),(5) U.S. Canada North America Europe Central and South America Other Property, plant and equipment, net U.S. Canada North...

  • Page 73
    ... in the Consolidated Balance Sheet. No insurance recovery was taken into account in determining the Company's cost estimates or reserve, nor do the Company's cost estimates or reserves reflect any discounting for present value purposes, except with respect to four long-term (30 year) operations and...

  • Page 74
    Newell Rubbermaid Inc. 2008 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 2004 through 2008, with the cumulative total return...

  • Page 75
    ... 2008 Annual Report MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's common stock is listed on the New York and Chicago Stock Exchanges (symbol: NWL). As of January 31, 2009, there were 16,178 stockholders of record. The following table sets forth the high and low sales prices...

  • Page 76
    ..., Newell Rubbermaid Latin America Gordon C. Steele Senior Vice President, Program Management Office and Chief Information Officer James M. Sweet Executive Vice President, Human Resources and Corporate Communications Theodore W. Woehrle Senior Vice President, Marketing & Brand Management FORWARD...

  • Page 77
    ... Information Newell Newell Rubbermaid Rubbermaid is traded is traded on the on the New New York York Stock Stock Exchange Exchange under under the the symbol symbol NWL. NWL. Additional Additional copies copies of this of this annual annual report, report, Newell Newell Rubbermaid's Rubbermaid...

  • Page 78
    Newell Rubbermaid Inc. 3 Glenlake Parkway Atlanta, GA 30328 www.newellrubbermaid.com