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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Total deferred tax assets were $99.3 million and $95.3 million, and total deferred tax liabilities were $64.6 million and $70.6 million on December 25, 2015 and December 26, 2014. The difference between the deferred income tax provision and the change in net deferred income taxes is due to the change in other comprehensive income (loss) items and the impact of acquisitions.

The Company files income tax returns in the U.S. federal jurisdiction, and various states and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2009.

The Company records penalties and accrued interest related to uncertain tax positions in income tax expense. Total reserves for uncertain tax positions were not material.

F. Debt

A summary of debt follows (dollars in thousands):
 
 
Average Interest Rate December 25, 2015
 
Maturity
 
2015
 
2014
Private placement unsecured fixed-rate notes
 
 
 
 
 
 
 
Series A
4.00
%
 
March 2018
 
$
75,000

 
$
75,000

Series B
5.01
%
 
March 2023
 
75,000

 
75,000

Series C
4.88
%
 
January 2020
 
75,000

 
75,000

Series D
5.35
%
 
July 2026
 
75,000

 
75,000

Unsecured revolving credit facility
1.50
%
 
June 2019
 
92,695

 
315,000

Notes payable to banks
0.87
%
 
2016
 
15,901

 
5,016

Total debt, including current portion
 
 
 
 
$
408,596

 
$
620,016


The estimated fair value of the fixed interest rate private placement debt was $320 million on December 25, 2015 and $330 million on December 26, 2014. The fair value of variable rate borrowings approximates carrying value. The Company uses significant other observable inputs to estimate fair value (level 2 of the fair value hierarchy) based on the present value of future cash flows and rates that would be available for issuance of debt with similar terms and remaining maturities.

On June 26, 2014, the Company executed an amendment to its revolving credit agreement, extending the expiration date to June 26, 2019. The amended agreement with a syndicate of lenders provides up to $500 million of committed credit, available for general corporate purposes, 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 terms of the amended revolving credit agreement, loans denominated in U.S. dollars bear interest, at the Company’s option, at either a base rate or a LIBOR-based rate. Loans denominated in currencies other than U.S. dollars bear interest at a LIBOR-based rate. The base rate 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 (debt to earnings before interest, taxes, depreciation, amortization and extraordinary non-operating or non-cash charges and expenses) 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. The Company is also required to pay a fee on the undrawn amount of the loan commitment at an annual rate ranging 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. In addition, the Company has unused, uncommitted lines of credit with foreign banks totaling $26 million. Borrowing rates under these credit lines vary with the prime rate, rates on domestic certificates of deposit and the London Interbank market. The Company pays facility fees of up to 0.15 percent per annum on certain of these lines. No compensating balances are required.

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.


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