Graco Inc.

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SEC Filings

10-K
GRACO INC filed this Form 10-K on 02/17/2015
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Table of Contents

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions and results:

 

  2014   2013   2012  

Expected life in years

  6.5     5.9     6.5  

Interest rate

  2.0   1.3   1.3

Volatility

  36.1   35.4   36.6

Dividend yield

  1.5   1.6   1.8

Weighted average fair value per share

$   24.83   $   19.44   $   15.60  

Expected life is estimated based on vesting terms and exercise and termination history. Interest rate is based on the U.S. Treasury rate on zero-coupon issues with a remaining term equal to the expected life of the option. Expected volatility is based on historical volatility over a period commensurate with the expected life of options.

The fair value of employees’ purchase rights under the Employee Stock Purchase Plan was estimated on the date of grant. The benefit of the 15 percent discount from the lesser of the fair market value per common share on the first day and the last day of the plan year was added to the fair value of the employees’ purchase rights determined using the Black-Scholes option-pricing model with the following assumptions and results:

 

  2014   2013   2012  

Expected life in years

  1.0     1.0     1.0  

Interest rate

  0.1   0.2   0.2

Volatility

  21.4   26.0   40.6

Dividend yield

  1.4   1.7   1.7

Weighted average fair value per share

$   17.81   $   14.16   $   15.58  

I. Earnings per Share

The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share amounts):

 

  2014   2013   2012  

Net earnings available to common shareholders

$   225,573   $   210,822   $   149,126  
  

 

 

    

 

 

    

 

 

 

Weighted average shares outstanding for basic earnings per share

  60,148     61,203     60,451  

Dilutive effect of stock options computed based on the treasury stock method using the average market price

  1,597     1,587     1,260  
  

 

 

    

 

 

    

 

 

 

Weighted average shares outstanding for diluted earnings per share

  61,745     62,790     61,711  
  

 

 

    

 

 

    

 

 

 

Basic earnings per share

$ 3.75   $ 3.44   $ 2.47  

Diluted earnings per share

$ 3.65   $ 3.36   $ 2.42  

Stock options to purchase 0.6 million, 0.4 million and 0.6 million shares were not included in the 2014, 2013 and 2012 computations of diluted earnings per share, respectively, because they would have been anti-dilutive.

J. Retirement Benefits

The Company has a defined contribution plan, under Section 401(k) of the Internal Revenue Code, which provides retirement benefits to most U.S. employees. For all employees who choose to participate, the Company matches employee contributions at a 100 percent rate, up to 3 percent of the employee’s compensation. For employees not covered by a defined benefit plan, the Company contributes an amount equal to 1.5 percent of the employee’s compensation. Employer contributions totaled $6.9 million in 2014, $6.3 million in 2013 and $5.6 million in 2012.

The Company’s postretirement medical plan provides certain medical benefits for retired U.S. employees. Employees hired before January 1, 2005, are eligible for these benefits upon retirement and fulfillment of other eligibility requirements as specified by the plan.

The Company has both funded and unfunded noncontributory defined benefit pension plans that together cover most U.S. employees hired before January 1, 2006, certain directors and some of the employees of the Company’s non-U.S. subsidiaries. For U.S. plans,

 

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