Graco 2010 Annual Report Download - page 42

Newell Rubbermaid Inc. 2010 Annual Report
38 NEWELL RUBBERMAID 2010 Annual Report
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Prior to the use of the SITME rate, the Company’s results in Venezuela in 2010 were being reflected in the consolidated
financial statements at the parallel exchange rate, and during substantially all of 2009, the Company used the official rate of
2.15 to 1 U.S. Dollar to report the results of its Venezuelan operations. As a result of using the less favorable SITME rate and
parallel rate during 2010, consolidated net sales and operating income declined 1% and 3%, respectively, for the year ended
December 31, 2010 compared to the year ended December 31, 2009 due solely to the change in exchange rates used to translate
the results of the Company’s Venezuelan operations. The change in the rate does not impact reported changes in core sales,
which exclude the impact of foreign currency. Since the introduction of SITME in June 2010, the Venezuelan government has
held the rate constant at 5.3 Bolivar Fuerte to U.S. Dollar. However, future changes in the rate are possible, and such changes
could materially impact the Company’s net income, primarily as a result of foreign exchange gains and losses that would result
from the change in the rate.
FAIR VALUE MEASUREMENTS
Fair value is a market-based measurement, not an entity-specific measurement, defined as the price that would be received
to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date. Various
valuation techniques exist for measuring fair value, including 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 of an asset
or replacement cost). These valuation techniques are based upon observable and unobservable inputs. Observable inputs reflect
market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. The
authoritative accounting guidance for fair value provides a hierarchy that prioritizes these two inputs to valuation techniques
used to measure fair value into three broad levels.
The following is a brief description of those three levels:
• Level 1: Observable inputs such as quoted prices for identical assets or liabilities in active markets.
• Level 2: Observable inputs other than quoted prices that are directly or indirectly observable for the asset or liability,
including quoted prices for similar assets or liabilities in active markets; quoted prices for similar or identical assets or
liabilities in markets that are not active; and model-derived valuations whose inputs are observable or whose significant
value drivers are observable.
• Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions.
The Company’s assets and liabilities adjusted to fair value at least annually are its money market fund investments, included
in cash and cash equivalents; mutual fund investments, included in other assets; and derivative instruments, primarily included
in other assets, other accrued liabilities and other noncurrent liabilities, and these assets and liabilities are therefore subject to
the measurement and disclosure requirements outlined in the authoritative guidance. The Company determines the fair value of
its money market fund investments based on the values of the underlying assets (Level 2) and its mutual fund investments based
on quoted market prices (Level 1). The Company generally uses derivatives for hedging purposes, and the Company’s derivatives
are primarily foreign currency forward contracts and interest rate swaps. The Company determines the fair value of its derivative
instruments based on Level 2 inputs in the fair value hierarchy. Level 2 fair value determinations are derived from directly or
indirectly observable (market-based) information.
FORWARD-LOOKING STATEMENTS
Forward-looking statements in this Report are made in reliance upon the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. Such forward-looking statements may relate to, but are not limited to, information or assumptions about the
effects of sales (including pricing), income/(loss), earnings per share, operating income or gross margin improvements or declines,
Project Acceleration, the European Transformation Plan, the Capital Structure Optimization Plan, capital and other expenditures,
working capital, cash flow, dividends, capital structure, debt to capitalization ratios, debt ratings, availability of financing, interest
rates, restructuring and restructuring-related costs, impairment and other charges, potential losses on divestitures, impact of changes
in accounting standards, pending legal proceedings and claims (including environmental matters), future economic performance,
costs and cost savings (including raw material and sourced product inflation, productivity and streamlining), synergies, management’s
plans, goals and objectives for future operations, performance and growth or the assumptions relating to any of the forward-looking
statements. These statements generally are accompanied by words such as “intend,” “anticipate,” “believe,” “estimate,” “project,”
“target,” “plan,” “expect,” “will,” “should,” “would” or similar statements. The Company cautions that forward-looking statements
are not guarantees because there are inherent difficulties in predicting future results. Actual results could differ materially from
those expressed or implied in the forward-looking statements. Important factors that could cause actual results to differ materially
from those suggested by the forward-looking statements include, but are not limited to, the Company’s dependence on the strength
of retail, commercial and industrial sectors of the economy in light of the global economic slowdown; currency fluctuations;
competition with other manufacturers and distributors of consumer products; major retailers’ strong bargaining power; changes
in the prices of raw materials and sourced products and the Company’s ability to obtain raw materials and sourced products in a
timely manner from suppliers; the Company’s ability to develop innovative new products and to develop, maintain and strengthen
its end-user brands; the Company’s ability to expeditiously close facilities and move operations while managing foreign regulations
and other impediments; the Company’s ability to implement successfully information technology solutions throughout its organization;
the Company’s ability to improve productivity and streamline operations; changes to the Company’s credit ratings; significant
increases in the funding obligations related to the Company’s pension plans due to declining asset values or otherwise; the
imposition of tax liabilities greater than the Company’s provisions for such matters; the risks inherent in the Company’s foreign
operations and those matters set forth in Item 1A in the Company’s Annual Report on Form 10-K for the year ended December 31,
2010. In addition, there can be no assurance that the Company has correctly identified and assessed all of the factors affecting
the Company or that the publicly available and other information the Company receives with respect to these factors is
complete or correct.