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Newell Rubbermaid Inc. 2009 Annual Report
29
Pension Obligations
The Company has adopted and sponsors pension plans in the U.S. and in various other countries. The Company’s ongoing funding requirements for its
pension plans are largely dependent on the value of each of the plan’s assets and the investment returns realized on plan assets. In 2009, the Company
made a $75.0 million voluntary cash contribution to its primary U.S. defined benefit pension plan in order to improve the overall funded status of the plan.
The Company expects to contribute approximately $33.0 million to its pension plans in 2010.
Future increases or decreases in pension liabilities and required cash contributions are highly dependent on changes in interest rates and the actual
return on plan assets. The Company determines its plan asset investment mix, in part, on the duration of each plan’s liabilities. To the extent each plan’s
assets decline in value or do not generate the returns expected by the Company, the Company may be required to make contributions to the pension plans
to ensure the pension obligations are adequately funded as required by law or mandate.
Dividends
In the first quarter of 2009, the Company reduced the quarterly dividend payable on its common stock from $0.21 per share to $0.05 per share to improve
liquidity and maintain its current investment-grade credit rating. The payment of dividends to holders of the Company’s common stock remains at the discretion
of the Board of Directors and will depend upon many factors, including the Company’s financial condition, earnings, legal requirements and other factors
the Board of Directors deems relevant.
Credit Ratings
The Company’s credit ratings are periodically reviewed by rating agencies. The Company’s current senior debt credit ratings from Moody’s Investors Service,
Standard & Poor’s and Fitch Ratings are Baa3, BBB- and BBB, respectively. Its current short-term debt credit ratings from Moody’s Investors Service, Standard
& Poor’s and Fitch Ratings are P-3, A-3 and F-2, respectively. Standard & Poor’s has a stable outlook, and Moody’s and Fitch maintain a negative outlook on
their ratings. Changes in the Company’s operating results, cash flows or financial position could impact the ratings assigned by the various rating agencies.
The ratings from credit agencies are not recommendations to buy, sell or hold the Company’s securities, and each rating should be evaluated independently of
any other rating. Refer to Item 1A. Risk Factors for a more detailed discussion of the Company’s credit ratings.
Outlook
For the year ending December 31, 2010, the Company expects to generate cash flows from operations of more than $500.0 million after restructuring cash
payments of approximately $70.0 million to $80.0 million. The Company plans to fund capital expenditures of approximately $160.0 million, which include
expenditures associated with the implementation of SAP.
Overall, the Company believes that available cash and cash equivalents, cash flows generated from future operations, access to capital markets and
availability under the Revolver and new receivables facility will be adequate to support the cash needs of existing businesses. The Company plans to use
available cash to repay debt maturities as they come due, including $105.1 million of medium-term notes that mature in May 2010 and a $100.0 million
principal payment due under the Term Loan in September 2010.
Resolution of Income Tax Contingencies
In 2009, 2008 and 2007, the Company recorded $3.1 million, $29.9 million and $41.3 million, respectively, in net income tax benefits as a result of the 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 2009, 2008
and 2007 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 outstanding debt obligations maturing at various dates through 2028. 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, 2009 and future minimum lease payments for the use of property and equipment under operating lease agreements.