Graco Inc.

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SEC Filings

10-K
GRACO INC filed this Form 10-K on 02/21/2017
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E. Income Taxes

In 2015, the Company asserted that it will indefinitely reinvest earnings of foreign subsidiaries to support expansion of its international business. The change in assertion decreased deferred income taxes related to undistributed foreign earnings and reduced the effective tax rate compared to prior years. As of December 30, 2016, the amount of cash held outside the United States was not significant to the Company’s liquidity and was available to fund investments abroad. If the Company repatriated all foreign earnings, the estimated effect on income taxes payable would be an increase of approximately $30 million as of December 30, 2016.

Earnings before income tax expense (income) consist of (in thousands):
 
2016
 
2015
 
2014
Domestic
$
107,440

 
$
402,453

 
$
266,627

Foreign
(10,785
)
 
72,260

 
48,446

Total
$
96,655

 
$
474,713

 
$
315,073


Income tax expense (income) consists of (in thousands):
 
2016
 
2015
 
2014
Current
 
 
 
 
 
Domestic
 
 
 
 
 
Federal
$
67,126

 
$
117,883

 
$
73,584

State and local
4,868

 
4,576

 
2,775

Foreign
18,195

 
18,115

 
12,263

 
90,189

 
140,574

 
88,622

Deferred
 
 
 
 
 
Domestic
(27,509
)
 
(10,175
)
 
2,497

Foreign
(6,699
)
 
(1,399
)
 
(1,619
)
 
(34,208
)
 
(11,574
)
 
878

Total
$
55,981

 
$
129,000

 
$
89,500


Income taxes paid were $78.6 million in 2016, $150.5 million in 2015 and $92.1 million in 2014.

A reconciliation between the U.S. federal statutory tax rate and the effective tax rate follows:
 
2016
 
2015
 
2014
Statutory tax rate
35
 %
 
35
 %
 
35
 %
Tax effect of international operations
4

 
(3
)
 
(1
)
State taxes, net of federal effect
1

 
1

 
1

U.S. general business tax credits
(3
)
 
(1
)
 
(1
)
Domestic production deduction
(7
)
 
(2
)
 
(3
)
Impairment
28

 

 

Dividends from Liquid Finishing

 
(3
)
 
(3
)
Effective tax rate
58
 %
 
27
 %
 
28
 %

42

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