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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Purchase consideration was allocated to assets acquired and liabilities assumed based on estimated fair values as follows (in thousands):

 

            
 

Cash and cash equivalents

   $ 6,007  
 

Accounts receivable

     17,835  
 

Inventories

     21,733  
 

Other current assets

     2,534  
 

Property, plant and equipment

     18,359  
 

Other non-current assets

     50  
 

Identifiable intangible assets

     150,500  
 

Goodwill

     86,056  
    

 

 

 

Total assets acquired

  303,074  

Current liabilities assumed

  (27,434

Non-current liabilities assumed

  (7,984

Deferred income taxes

  (26,105
    

 

 

 

Net assets acquired, Powder Finishing

  241,551  

Investment in businesses held separate

  426,813  
    

 

 

 

Total purchase consideration

$   668,364  
    

 

 

 

Identifiable intangible assets and estimated useful life are as follows (dollars in thousands):

 

                  
            Estimated
     Life (years)     
  

Customer relationships

   $ 103,500      14   

Developed technology

     9,600      11   

Trade names

     37,400      Indefinite   
  

 

 

       

Total identifiable intangible assets

$   150,500  
  

 

 

       

The Company adjusted the preliminary purchase price allocation in the fourth quarter of 2012 to recognize deferred tax liability on certain identifiable intangible assets, which resulted in an $8 million increase in goodwill. Substantially none of the goodwill acquired in 2012 is deductible for tax purposes.

In the fourth quarter of 2014, the FTC approved a final decision and order that became effective on October 9, 2014. Pursuant to the final order, Graco must sell the Liquid Finishing business assets within 180 days of the effective date. On October 8, 2014, the Company announced it had signed a definitive agreement to sell the Liquid Finishing business assets for $590 million cash, subject to regulatory approval and other customary closing conditions. The sale transaction is expected to close in the first half of 2015, in compliance with the FTC’s final decision and order. Graco will continue to hold the Liquid Finishing businesses separate and maintain them as viable and competitive until the sale process is complete.

The Liquid Finishing business assets are held as a cost-method investment on the Consolidated Balance Sheets. Income is recognized based on dividends received from after-tax earnings of Liquid Finishing and included in other expense (income) on the Consolidated Statements of Earnings. Dividends received totaled $28 million in 2014, $28 million in 2013 and $12 million in 2012. Once the Company completes the sale of its investment, there will be no further dividends from Liquid Finishing.

The Company evaluates its cost-method investment for other-than-temporary impairment at each reporting period. As of December 26, 2014, the Company evaluated its investment in Liquid Finishing and determined that there is no impairment.

Sales and operating earnings of the Liquid Finishing businesses were as follows (unaudited, in thousands):

 

    2014   2013   2012  

Net Sales

$   288,231   $   278,543   $   269,099  

Operating Earnings

  62,605     61,174     52,256  

 

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