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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Cash flows used in financing activities totaled $24 million in 2014, compared to $226 million in 2013. Cash inflows included net borrowings on outstanding lines of credit of $202 million and share issuances of $30 million. This was offset by share repurchases of $195 million and dividends paid of $66 million.

In September 2012, the Board of Directors authorized the Company to purchase up to 6 million shares of its outstanding stock, primarily through open-market transactions. This authorization expired on September 30, 2015. On April 24, 2015, the Board of Directors authorized the purchase of up to an additional 6 million shares over an indefinite period of time or until terminated by the Board. Under the current authorization, 4.6 million shares remain available for purchase as of December 25, 2015.

The Company repurchased and retired 3.9 million shares in 2015, compared to 2.6 million shares in 2014. Share repurchases are expected to continue in 2016 via open market transactions or short-dated accelerated share repurchase programs.

Off-Balance Sheet Arrangements and Contractual Obligations. As of December 25, 2015, the Company is obligated to make cash payments in connection with its long-term debt, operating leases and purchase obligations in the amounts listed below. The Company has no significant off-balance sheet debt or other unrecorded obligations other than the items noted in the following table. In addition to the commitments noted in the following table, the Company could be obligated to perform under standby letters of credit totaling $2 million at December 25, 2015. The Company has also guaranteed the debt of its subsidiaries up to $9 million. All debt of subsidiaries is reflected in the consolidated balance sheets.
 
Payments due by period (in millions)
 
Total
 
Less than
1 year
 
1-3
years
 
3-5
years
 
More than
5 years
Long-term debt
$
393

 
$

 
$
75

 
$
168

 
$
150

Other non-current liabilities1 
9

 

 
7

 
1

 
1

Operating leases
32

 
7

 
11

 
8

 
6

Purchase obligations2
112

 
112

 

 

 

Interest on long-term debt
98

 
16

 
29

 
21

 
32

Unfunded pension and postretirement medical benefits3
33

 
2

 
6

 
6

 
19

Total
$
677

 
$
137

 
$
128

 
$
204

 
$
208

1 
Other non-current liabilities include estimated obligations for representations and warranties associated with the Liquid Finishing business divestiture, additional purchase consideration based on future revenues of an acquired business in excess of specified thresholds, and amounts related to certain capitalized leasehold improvements.
 
2 
The Company is committed to pay suppliers under the terms of open purchase orders issued in the normal course of business. The Company also has commitments with certain suppliers to purchase minimum quantities, and under the terms of certain agreements, the Company is committed for certain portions of the supplier’s inventory. The Company does not purchase, or commit to purchase, quantities in excess of normal usage or amounts that cannot be used within one year.

3 
The amounts and timing of future Company contributions to the funded qualified defined benefit pension plan are unknown because they are dependent on pension fund asset performance and pension obligation valuation assumptions.
 
Critical Accounting Estimates

The Company prepares its consolidated financial statements in conformity with generally accepted accounting principles in the United States of America (“U.S. GAAP”). The Company’s most significant accounting policies are disclosed in Note A (Summary of Significant Accounting Policies) to the consolidated financial statements. The preparation of the consolidated financial statements, in conformity with U.S. GAAP, requires management to make estimates and judgments that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual amounts will differ from those estimates. The Company considers the following policies to involve the most judgment in the preparation of the Company’s consolidated financial statements.

Excess and Discontinued Inventory. The Company’s inventories are valued at the lower of cost or market. Reserves for excess and discontinued products are estimated. The amount of the reserve is determined based on projected sales information, plans for discontinued products and other factors. Though management considers these balances adequate, changes in sales volumes due to unanticipated economic or competitive conditions are among the factors that would result in materially different amounts for this item.

Goodwill and Other Intangible Assets. The Company performs impairment testing for goodwill and other intangible assets annually, or more frequently if events or changes in circumstances indicate that the asset might be impaired.


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