Graco 2005 Annual Report Download - page 25

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are not recognized as liabilities in the Company's consolidated Ñnancial statements but are required to be
disclosed. Examples of items not recognized as liabilities in the Company's consolidated Ñnancial
statements are commitments to purchase raw materials or inventory that has not yet been received as of
December 31, 2005 and future minimum lease payments for the use of property and equipment under
operating lease agreements.
The following table summarizes the eÅect that lease and other material contractual obligations listed
below are expected to have on the Company's cash Öow in the indicated period. In addition, the table
reÖects the timing of principal and interest payments on borrowings outstanding as of December 31, 2005.
Additional details regarding these obligations are provided in the footnotes to the Consolidated Financial
Statements, as referenced in the table (in millions):
Payments Due By Period
Less than 1-3 3-5 More than
Total 1 Year Years Years 5 Years
Long-term debt Ì maturities(1) ÏÏÏÏÏÏÏ $2,592.5 $162.8 $705.4 $706.3 $1,018.0
Interest on long-term debt(2) ÏÏÏÏÏÏÏÏÏÏ 1,323.7 145.8 230.8 163.8 783.3
Operating lease obligations(3) ÏÏÏÏÏÏÏÏÏ 290.9 90.4 103.1 50.8 46.6
Purchase obligations(4) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 600.0 407.7 191.8 0.4 0.1
Total contractual obligations(5) ÏÏÏÏÏÏÏÏ $4,807.1 $806.7 $1,231.1 $921.3 $1,848.0
(1) Amounts represent contractual obligations due, excluding interest, based on borrowings outstanding as of
December 31, 2005. For further information relating to these obligations, see Footnotes 9 and 10 to the
Consolidated Financial Statements.
(2) Amounts represent estimated interest expense on borrowings outstanding as of December 31, 2005. Interest on
Öoating debt was estimated using the index rate in eÅect as of December 31, 2005. For further information
relating to this obligation, see Footnotes 9 and 10 to the Consolidated Financial Statements.
(3) Amounts represent contractual minimum lease obligations on operating leases as of December 31, 2005. For
further information relating to this obligation, see Footnote 12 to the Consolidated Financial Statements.
(4) Primarily consists of purchase commitments entered into as of December 31, 2005 for Ñnished goods, raw
materials, components and services pursuant to legally enforceable and binding obligations, which include all
signiÑcant terms.
(5) Total does not include contractual obligations reported on the December 31, 2005 balance sheet as current
liabilities, except for current portion of long-term debt.
The Company also has obligations with respect to its pension and post retirement medical beneÑt
plans. See Footnote 13 to the Consolidated Financial Statements.
As of December 31, 2005, the Company had $96.7 million in standby letters of credit primarily
related to the Company's self-insurance programs, including workers' compensation, product liability, and
medical. See Footnote 21 to the Consolidated Financial Statements for further information.
As of December 31, 2005, the Company did not have any signiÑcant oÅ-balance sheet arrangements,
as deÑned in Item 303(a)(4)(ii) of SEC Regulation S-K.
Critical Accounting Policies
The Company's accounting policies are more fully described in Footnote 1 to the Consolidated
Financial Statements. As disclosed in Footnote 1 to the Consolidated Financial Statements, the
preparation of Ñnancial statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions about future events that aÅect the amounts reported in
the Ñnancial statements and accompanying footnotes. Future events and their eÅects cannot be determined
with absolute certainty. Therefore, the determination of estimates requires the exercise of judgment. Actual
results inevitably will diÅer from those estimates, and such diÅerences may be material to the
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