Graco 2008 Annual Report Download - page 59

Newell Rubbermaid Inc. 2008 Annual Report
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distributions with respect to its common or preferred stock or debt securities that do not rank senior to the Debentures. The Preferred Securities are
mandatorily redeemable upon the repayment of the Debentures at maturity or upon acceleration of the Debentures. As of December 31, 2008, the Company
has not elected to defer interest payments. In connection with the Company’s purchase of the Preferred Securities in 2005 and 2004, the Company negotiated
the early retirement of the corresponding Debentures with the Subsidiary. The Company accounted for these transactions as extinguishments of debt, which
resulted in $436.7 million of Debentures outstanding as of December 31, 2008.
FOOTNOTE 10
DERIVATIVE FINANCIAL INSTRUMENTS
Interest Rate Risk Management
At December 31, 2008, the Company had interest rate swaps designated as fair value hedges with an outstanding notional principal amount of $750.0 million
of medium term notes. The net accrued interest receivable as of December 31, 2008 was $4.0 million. The fair value of the interest rate swaps at December 31,
2008 was $62.3 million and is included in other assets and is added to the principal of medium term notes in long-term debt.
At December 31, 2008, the Company had one cross currency interest rate swap with an outstanding notional principal amount of $157.6 million and
net accrued interest receivable of $1.2 million. The contractual amounts and the fair value of the cross currency swap are included in the table summarizing
the forward exchange contracts in Foreign Currency Management below.
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’s forward exchange contracts, cross currency interest rate swaps and
option contracts in U.S. dollars by major currency and contractual amount. The “buy” amounts represent the U.S. equivalent of commitments to purchase
foreign currencies, and the “sell” amounts represent the U.S. equivalent of commitments to sell foreign currencies according to the local needs of the
subsidiaries. The contractual amounts of significant forward exchange contracts, cross currency interest rate swaps and option contracts and their fair
values as of December 31, were as follows (in millions):
2008 2007
Buy Sell Buy Sell
British Pounds $ 500.6 $ 12.2 $485.6 $ 221.7
Canadian Dollars 1.0 251.1 1.2 296.7
Euro — 682.4 3.6 871.2
Other 8.9 14.3 40.6 14.4
Contractual value $ 510.5 $960.0 $531.0 $1,404.0
Fair value $(135.9) $ 21.6 $ (35.9) $ 36.7
The net gain (loss) recognized in 2008, 2007 and 2006 for matured cash flow forward exchange contracts, option contracts and commodity swaps
was $5.1 million, $(6.6) million and $(4.2) million, net of tax, respectively, which was recognized in the Consolidated Statements of Operations. The
Company estimates that a gain of $3.7 million, net of tax, deferred in accumulated other comprehensive loss will be recognized in earnings in 2009.
FOOTNOTE 11
COMMITMENTS
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 lease term, was $129.2 million,
$109.7 million and $106.5 million in 2008, 2007 and 2006, respectively.
Future minimum rental payments for operating leases with initial or remaining terms in excess of one year are as follows as of December 31, 2008
(in millions):
2009 2010 2011 2012 2013 Thereafter Total
$95.2 $75.5 $58.6 $48.7 $41.3 $118.1 $437.4