Graco 2005 Annual Report Download - page 57

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FOOTNOTE 11
Derivative Financial Instruments
Interest Rate Risk Management: At December 31, 2005, the Company had interest rate swaps
designated as fair value hedges with an outstanding notional principal amount of $650.0 million, with a net
accrued interest payable of $2.6 million. There is no credit exposure on the Company's interest rate
derivatives at December 31, 2005.
At December 31, 2005, the Company had long-term cross currency interest rate swaps with an
outstanding notional principal amount of $285.5 million, with a net accrued interest receivable of
$0.8 million. The maturities on these long-term cross currency interest rate swaps range from three to four
years.
Foreign Currency Management: The following table summarizes the Company's forward exchange
contracts, long-term cross currency interest rate swaps and option contracts in U.S. dollars by major
currency and contractual amount. The ""buy'' amounts represent the U.S. equivalent of commitments to
purchase foreign currencies, and the ""sell'' amounts represent the U.S. equivalent of commitments to sell
foreign currencies according to the local needs of the subsidiaries. The contractual amounts of signiÑcant
forward exchange contracts, long-term cross currency interest rate swaps and option contracts and their fair
values as of December 31, were as follows (in millions):
2005 2004
Buy Sell Buy Sell
British Pounds ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $272.1 $ 59.2 $269.9 $ 66.2
Canadian Dollars ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 0.9 348.0 2.6 145.4
EuroÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 60.9 805.2 61.0 516.5
Other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 31.7 18.2 29.8 57.8
$365.6 $1,230.6 $363.3 $ 785.9
Fair ValueÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $396.1 $1,248.6 $491.4 $1,004.2
The net loss recognized in 2005 and 2004 for matured natural gas and cash Öow forward exchange
contracts was $4.5 million and $8.9 million, net of tax, respectively, which was recognized in the
Consolidated Statements of Operations. The Company estimates that $0.9 million of losses, net of tax,
deferred in accumulated other comprehensive income, will be recognized in earnings in 2006.
See Footnote 19 to the Consolidated Financial Statements for information regarding the termination
of a cross currency interest rate swap.
FOOTNOTE 12
Leases
The Company leases manufacturing warehouse and other facilities, real estate, transportation, data
processing and other equipment under leases that expire at various dates through the year 2018. Rent
expense was $119.5 million, $121.5 million and $112.4 million in 2005, 2004 and 2003, respectively.
Future minimum rental payments for operating leases with initial or remaining terms in excess of one
year are as follows as of December 31, 2005 (in millions):
2006 2007 2008 2009 2010 Thereafter Total
$90.4 $61.8 $41.3 $29.7 $21.1 $46.6 $290.9
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