Graco 2008 Annual Report Download - page 49

Newell Rubbermaid Inc. 2008 Annual Report
47
Long-Term Debt
The fair values of the Company’s long-term debt, including the Company’s medium-term notes and the preferred securities underlying its junior convertible
subordinated debentures, are based on quoted market prices and are as follows as of December 31, (in millions):
2008 2007
Medium-term notes $1,418.3 $1,085.2
Preferred securities underlying the junior convertible subordinated debentures $ 219.0 $ 390.7
The carrying amounts of all other significant debt approximate fair value.
Foreign Currency Translation
Assets and liabilities of foreign subsidiaries are translated into U.S. dollars at the rates of exchange in effect at year-end. The related translation adjustments
are made directly to accumulated other comprehensive income (loss). Income and expenses are translated at the average monthly rates of exchange in
effect during the year. Gains and losses from foreign currency transactions of these subsidiaries are included in net income (loss). International subsidiaries
operating in highly inflationary economies translate nonmonetary assets at historical rates, while net monetary assets are translated at current rates, with
the resulting translation adjustment included in net income as other expense (income), net.
The Company designates certain foreign currency denominated, long-term intercompany financing transactions as economic hedges of net investments
in foreign operations and records the gain or loss on the transaction arising from changes in exchange rates as a translation adjustment to the extent the
intercompany financing arrangement is effective as a hedge. During the year ended December 31, 2008, the Company recorded a $101.0 million loss in
accumulated other comprehensive income (loss) related to the cumulative translation adjustment for these hedges.
Income Taxes
In accordance with SFAS No. 109, “Accounting for Income Taxes,” the Company accounts for deferred income taxes using the asset and liability approach.
Under this approach, deferred income taxes are recognized based on the tax effects of temporary differences between the financial statement and tax
bases of assets and liabilities, as measured by current enacted tax rates. Valuation allowances are recorded to reduce the deferred tax assets to an amount
that will more likely than not be realized. No provision is made for the U.S. income taxes on the undistributed earnings of non-U.S. subsidiaries that are
considered to be permanently invested.
The Company’s income tax provisions are based on calculations and assumptions that are subject to examination by the Internal Revenue Service
and other tax authorities. Although the Company believes that the positions taken on previously filed tax returns are reasonable, it has established tax
and interest reserves in recognition that various taxing authorities may challenge the positions taken, which could result in additional liabilities for taxes
and interest. The Company regularly reviews its deferred tax assets for recoverability considering historical profitability, projected future taxable income,
the expected timing of the reversals of existing temporary differences and tax planning strategies.
The Company adopted the provisions of Financial Accounting Standards Board (“FASB”) Interpretation No. 48, “Accounting for Uncertainty in Income
Taxes” (“FIN 48”), on January 1, 2007. FIN 48 requires application of a “more likely than not” threshold to the recognition and derecognition of tax positions.
The Company’s ongoing assessments of the more-likely-than-not outcomes of tax authority examinations and related tax positions require significant
judgment and can increase or decrease the Company’s effective tax rate, as well as impact operating results. The adoption of FIN 48 did not result in an
adjustment to beginning retained earnings; however, it did result in the reclassification of certain income tax assets and liabilities from current to long-term
in the Company’s Consolidated Balance Sheet. See Footnote 15 for additional information on income taxes.
Stock-Based Compensation
The Company applies the provisions of SFAS No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123(R)”). 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 on its historical experience. See Footnote 14 for
additional information.
Accumulated Other Comprehensive Loss
The following table displays the components of accumulated other comprehensive loss (in millions):
Foreign Unrecognized After-tax Accumulated
Currency Pension & Other Derivative Other
Translation Postretirement Hedging Comprehensive
Gain (Loss) Costs, net of tax Gain Loss
Balance at December 31, 2007 $ 69.8 $(202.4) $ 9.4 $(123.2)
Current year change (312.0) (106.7) 39.5 (379.2)
Balance at December 31, 2008 $(242.2) $(309.1) $48.9 $(502.4)