Graco 2011 Annual Report Download - page 41

2011 Financial Statements and Related Information
NEWELL RUBBERMAID 2011 Annual Report 39
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,
income/(loss), earnings per share, operating income or gross margin improvements or declines, Project Acceleration, the European
Transformation Plan, the Capital Structure Optimization Plan, Project Renewal, 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, impacts 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 continuation or escalation of the global economic slowdown or sovereign debt issues; 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 this Report generally
and Item 1A in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011. 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.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
MARKET RISK
The Company’s market risk is impacted by changes in interest rates, foreign currency exchange rates and certain commodity prices.
Pursuant to the Company’s policies, natural hedging techniques and derivative financial instruments may be utilized to reduce the
impact of adverse changes in rates and prices. The Company does not hold or issue derivative instruments for trading purposes.
Interest Rates
Interest rate risk is present with both fixed- and floating-rate debt. The Company manages its interest rate exposure through its mix of
fixed- and floating-rate debt and its conservative debt ratio target. Interest rate swap agreements designated as fair value hedges are
used to mitigate the Company’s exposure to changes in the fair value of fixed-rate debt resulting from fluctuations in benchmark interest
rates. Accordingly, benchmark interest rate fluctuations impact the fair value of the Company’s fixed-rate debt, which are offset by
corresponding changes in the fair value of the swap agreements. Interest rate swaps may also be used to adjust interest rate exposures
when appropriate based on market conditions, and for qualifying hedges, the interest differential of swaps is included in interest
expense. Excluding debt for which a fixed rate has been swapped for a floating rate, fixed-rate debt represented approximately 82.3%
of the Company’s $2.18 billion of total debt as of December 31, 2011.
Foreign Currency Exchange Rates
The Company is exposed to foreign currency risk in the ordinary course of business since a portion of the Company’s sales, expenses
and operating transactions is conducted on a global basis in various foreign currencies. To the extent that business transactions are not
denominated in the functional currency of the entity entering into the transaction, the Company is exposed to transactional foreign
currency exchange rate risk. The Company’s foreign exchange risk management policy emphasizes hedging anticipated intercompany
and third-party commercial transaction exposures of one-year duration or less. The Company uses foreign exchange forward contracts
as economic hedges for commercial transactions and to offset the future impact of gains and losses resulting from changes in the
expected amount of functional currency cash flows to be received or paid upon settlement of the anticipated intercompany and third-
party commercial transactions. Gains and losses related to the settlement of qualifying hedges of commercial and intercompany
transactions are deferred and included in the basis of the underlying transactions. The Company also uses natural hedging techniques
such as offsetting or netting like foreign currency flows and denominating contracts in the appropriate functional currency.
The Company also realizes gains and losses recorded within shareholders’ equity due to the translation of the financial statements
from the functional currency of its subsidiaries to U.S. Dollars. The Company utilizes capital structures of foreign subsidiaries combined
with forward contracts to minimize its exposure to foreign currency risk. The Company may hedge portions of its net investments in
foreign subsidiaries, including intercompany loans, with forward contracts and cross-currency hedges. Gains and losses related to
qualifying forward exchange contracts and cross-currency hedges, which are generally used to hedge intercompany loans and net
investments in foreign subsidiaries, are recognized in other comprehensive income (loss).