Graco Inc.

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SEC Filings

10-K
GRACO INC filed this Form 10-K on 02/16/2016
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working capital needs, share repurchases and acquisitions. The Company may borrow up to $50 million under the swingline portion of the facility for daily working capital needs.

Under the amended agreement, the base rate applied to borrowings is an annual rate equal to a margin ranging from zero percent to 0.875 percent, depending on the Company’s cash flow leverage ratio, plus the highest of (i) the bank’s prime rate, (ii) the federal funds rate plus 0.5 percent, or (iii) one-month LIBOR plus 1.5 percent. In general, LIBOR-based loans bear interest at LIBOR plus 1 percent to 1.875 percent, depending on the Company’s cash flow leverage ratio. Fees on the undrawn amount of the loan commitment range from 0.15 percent to 0.30 percent, depending on the Company’s cash flow leverage ratio.

On December 25, 2015, the Company had $545 million in lines of credit, including the $500 million in committed credit facilities described above and $45 million with foreign banks. The unused portion of committed credit lines was $412 million as of December 25, 2015.

Various debt agreements require the Company to maintain certain financial ratios as to cash flow leverage and interest coverage. The Company is in compliance with all financial covenants of its debt agreements as of December 25, 2015.

Internally generated funds and unused financing sources are expected to provide the Company with the flexibility to meet its liquidity needs in 2016, including its capital expenditure plan of approximately $40 million, planned dividends (estimated at $73 million) and acquisitions. If acquisition opportunities increase, the Company believes that reasonable financing alternatives are available for the Company to execute on those opportunities.

In December 2015, the Company’s Board of Directors increased the Company’s regular common dividend from an annual rate of $1.20 to $1.32 per share, an increase of 10 percent.

Subsequent to the end of 2015, the Company used proceeds from its revolving line of credit to acquire two related businesses for a total cash price of $49 million. The acquired businesses will enhance and complement the Company’s position in environmental monitoring and remediation markets, and will be included in our Process segment.

Cash Flow. A summary of cash flow follows (in millions):
 
2015
 
2014
 
2013
Operating activities
$
190

 
$
241

 
$
243

Investing activities
370

 
(217
)
 
(31
)
Financing activities
(535
)
 
(23
)
 
(226
)
Effect of exchange rates on cash
3

 
3

 
3

Net cash provided (used)
28

 
4

 
(11
)
Cash and cash equivalents at year-end
$
52


$
24

 
$
20


Cash Flows From Operating Activities. Net cash provided by operating activities was $190 million in 2015, down $51 million compared to 2014, mainly due to transaction costs and income taxes related to the sale of Liquid Finishing business assets. Accounts receivable and inventory balances increased since the end of 2014 due to acquisitions, increases in business activity and inventory increases to improve customer service levels.

Net cash provided by operating activities was $241 million in 2014 and $243 million in 2013. The increase in accounts receivable and inventories in 2014 was $20 million higher in 2014 than the increase in the comparable period of 2013. Accounts receivable and inventory balances increased since the end of 2013 due to increases in business activity.

Cash Flows Used in Investing Activities. Cash inflows from investing activities totaled $370 million in 2015 compared to outflows of $217 million in 2014. Proceeds of $610 million from the sale of the Liquid Finishing business assets were partially offset by cash outflows of $189 million for acquisitions and $42 million for additions to property, plant and equipment.

Cash flows used in investing activities totaled $217 million in 2014, compared to $31 million in 2013. During 2014, cash outflows included acquisitions of $185 million and additions to property, plant and equipment of $31 million. During 2013, cash used in investing activities included $23 million of additions to property, plant and equipment, and business acquisitions of $12 million.

Cash Flows Used in Financing Activities. Cash flows used in financing activities totaled $535 million in 2015, compared to $23 million in 2014. Cash outflows included net payments on outstanding lines of credit of $211 million, share repurchases of $275 million and dividends paid of $69 million.


24

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