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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Assumptions used to determine the Company’s net periodic benefit cost are shown below:
 
 
Pension Benefits
 
Postretirement Medical Benefits
Weighted average assumptions            
 
2015
 
2014
 
2013
 
2015
 
2014
 
2013
U.S. Plans
 
 
 
 
 
 
 
 
 
 
 
 
Discount rate
 
4.2
%
 
5.0
%
 
4.2
%
 
4.2
%
 
5.0
%
 
4.2
%
Rate of compensation increase
 
3.0
%
 
3.0
%
 
3.0
%
 
N/A

 
N/A

 
N/A

Expected return on assets
 
7.8
%
 
8.5
%
 
8.5
%
 
N/A

 
N/A

 
N/A

Non-U.S. Plans
 
 
 
 
 
 
 
 
 
 
 
 
Discount rate
 
1.4
%
 
2.5
%
 
2.3
%
 
N/A

 
N/A

 
N/A

Rate of compensation increase
 
1.3
%
 
1.3
%
 
1.2
%
 
N/A

 
N/A

 
N/A

Expected return on assets
 
2.0
%
 
2.0
%
 
3.0
%
 
N/A

 
N/A

 
N/A


Several sources of information are considered in determining the expected rate of return assumption, including the allocation of plan assets, the input of actuaries and professional investment advisors, and historical long-term returns. In setting the return assumption, the Company recognizes that historical returns are not always indicative of future returns and also considers the long-term nature of its pension obligations.

The Company’s U.S. retirement medical plan limits the annual cost increase that will be paid by the Company to 3 percent. In measuring the accumulated postretirement benefit obligation (APBO), the annual trend rate for health care costs was assumed to be 7.1 percent for 2016, decreasing each year to a constant rate of 4.5 percent for 2038 and thereafter, subject to the plan’s annual increase limitation.

At December 25, 2015, a one percent change in assumed health care cost trend rates would not have a significant impact on the service and interest cost components of net periodic postretirement health care benefit cost or the APBO for health care benefits.

The Company expects to contribute $2.1 million to its unfunded pension plans and $1.3 million to the postretirement medical plan in 2016. The Company will not be required to make contributions to the funded pension plan under minimum funding requirements for 2016. Estimated future benefit payments are as follows (in thousands):
 
Pension
Benefits
 
Postretirement
Medical
Benefits
2016
$
17,576

 
$
1,282

2017
15,825

 
1,395

2018
17,185

 
1,466

2019
17,713

 
1,559

2020
19,302

 
1,662

Years 2021 - 2025
110,344

 
8,777


K. Commitments and Contingencies

Lease Commitments. Aggregate annual rental commitments under operating leases with noncancelable terms of more than one year were as follows at December 25, 2015 (in thousands):
 
Buildings
 
Vehicles &
Equipment
 
Total
2016
$
4,508

 
$
2,490

 
$
6,998

2017
3,924

 
2,173

 
6,097

2018
3,297

 
1,535

 
4,832

2019
3,272

 
1,147

 
4,419

2020
2,553

 
793

 
3,346

Thereafter
5,925

 
715

 
6,640

Total
$
23,479

 
$
8,853

 
$
32,332


Total rental expense was $6.9 million in 2015, $5.0 million in 2014 and $3.6 million in 2013.


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