Graco 2008 Annual Report Download - page 30

Newell Rubbermaid Inc. 2008 Annual Report
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RESOLUTION OF INCOME TAX CONTINGENCIES
In 2008, 2007 and 2006, the Company recorded $29.9 million, $41.3 million and $102.8 million, respectively, in net income tax benefits as a result of
favorable resolution of certain tax matters with the IRS, the settlement of certain tax contingency reserves, the reversal of a valuation allowance, 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 2008, 2007 and 2006 Consolidated Statements of Operations. The ultimate resolution of outstanding tax matters may be different than that
reflected in the historical income tax provisions and accruals, which may adversely impact future operating results and cash flows.
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, 2008 and future minimum lease payments for the use of property and equipment
under operating lease agreements.
The following table summarizes the effect that lease and other material contractual obligations are expected to have on the Company’s cash flow
in the indicated period. In addition, the table reflects the timing of principal and interest payments on borrowings outstanding as of December 31, 2008.
Additional details regarding these obligations are provided in the Notes to Consolidated Financial Statements (in millions):
Payments Due by Period
Less Than More Than
Total 1 Year 1-3 Years 3-5 Years 5 Years
Debt (1) $2,863.5 $ 750.0 $604.1 $ 782.5 $ 726.9
Interest on debt (2) 837.5 127.4 181.6 128.0 400.5
Operating lease obligations (3) 437.4 95.2 134.1 90.0 118.1
Capital Lease Obligations (4) 7.5 2.7 2.0 0.8 2.0
Purchase obligations (5) 248.7 237.4 11.3 — —
Total contractual obligations (6) $4,394.6 $1,212.7 $933.1 $1,001.3 $1,247.5
(1) Amounts represent contractual obligations based on the earliest date that the obligation may become due, excluding interest, based on borrowings outstanding as of December 31, 2008.
For further information relating to these obligations, see Footnote 9 of the Notes to Consolidated Financial Statements.
(2) Amounts represent estimated interest expense on borrowings outstanding as of December 31, 2008 based on the earliest date that the obligation may become due. Interest on floating debt
was estimated using the index rate in effect as of December 31, 2008. For further information, see Footnote 9 of the Notes to Consolidated Financial Statements.
(3) Amounts represent contractual minimum lease obligations on operating leases as of December 31, 2008. For further information relating to these obligations, see Footnote 11 of the Notes
to Consolidated Financial Statements.
(4) Amounts represent contractual obligations based on the earliest date that the obligations are due as provided in the lease agreements as of December 31, 2008. Capital lease obligation
balances are classified 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 pursuant to
legally enforceable and binding obligations, which include all significant terms. The Company purchased the minority interest of a majority owned subsidiary in the first quarter of 2009
for approximately $30.0 million which is included in the purchase obligations amount shown in the table above.
(6) Total does not include contractual obligations reported on the December 31, 2008 balance sheet as current liabilities, except for Current portion of long-term debt.
The Company also has liabilities for uncertain tax liabilities and unrecognized tax benefits. As a large taxpayer, the Company is under continual audit
by the IRS and other taxing authorities on several open tax positions, and it is possible that the amount of the liability for uncertain tax liabilities and
unrecognized tax benefits could change in the coming year. While it is possible that one or more of these examinations may be resolved in the next year, the
Company is not able to reasonably estimate the timing or the amount by which the liability will increase or decrease over time; therefore, the $164.2 million
in unrecognized tax benefits, including interest and penalties, at December 31, 2008 is excluded from the preceding table. See Footnote 15 of the Notes to
Consolidated Financial Statements for additional information.
Additionally, the Company has obligations with respect to its pension and postretirement medical benefit plans which are excluded from the preceding
table. The timing and amounts of the funding requirements are uncertain because they are dependent on interest rates and actual returns on plan assets,
among other factors. As of December 31, 2008, the Company had liabilities related to its unfunded and underfunded pension and postretirement benefit
plans of $607.7 million. See Footnote 12 of the Notes to Consolidated Financial Statements for further information.
As of December 31, 2008, the Company had $82.2 million in standby letters of credit primarily related to the Company’s self-insurance programs,
including workers’ compensation, product liability and medical. See Footnote 19 of the Notes to Consolidated Financial Statements for further information.
As of December 31, 2008, the Company did not have any significant off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC
Regulation S-K.