Graco 2012 Annual Report Download - page 44

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38
The payment of dividends to holders of the Company’s common stock remains at the discretion of the Board of Directors and will
depend upon many factors, including the Company’s financial condition, earnings, legal requirements, payout ratio and other
factors the Board of Directors deems relevant.
Share Repurchase Program
In August 2011, the Company announced a $300.0 million share repurchase program (the “SRP”). Under the SRP, the Company
may repurchase its own shares of common stock through a combination of a 10b5-1 automatic trading plan, discretionary market
purchases or in privately negotiated transactions. The SRP is authorized to run for a period of three years ending in August 2014.
During 2012, the Company repurchased 4.9 million shares pursuant to the SRP for $91.5 million, and such shares were immediately
retired. From the commencement of the SRP in August 2011 through December 31, 2012, the Company has repurchased and
retired a total of 8.3 million shares for $137.6 million. During January 2013, the Company purchased an additional 0.5 million
shares at an aggregate cost of $12.3 million. The repurchase of additional shares will depend upon many factors, including the
Company’s financial condition, liquidity and legal requirements.
Credit Ratings
The Company’s credit ratings are periodically reviewed by rating agencies. The Company’s current senior and short-term debt
credit ratings from three credit rating agencies are listed below:
Senior Debt
Credit Rating Short-term Debt
Credit Rating Outlook
Moody’s Investors Service Baa3 P-3 Stable
Standard & Poor’s BBB- A-3 Stable
Fitch Ratings BBB F-2 Stable
Outlook
For the year ending December 31, 2013, the Company expects to generate cash flows from operations of $575 to $625 million
after restructuring and restructuring-related cash payments of $70 to $90 million and approximately $100 million in contributions
to the Company’s primary U.S. pension plan. The Company plans to fund capital expenditures of approximately $175 to $200
million, which include expenditures associated with the implementation of SAP in Brazil.
Overall, the Company believes that available cash and cash equivalents, cash flows generated from future operations, access to
capital markets, and availability under the Facility and receivables facility will be adequate to support the cash needs of existing
businesses. The Company plans to use available cash, borrowing capacity, cash flows from future operations and alternative
financing arrangements to repay debt maturities as they come due, including short-term debt of $210.7 million, primarily
representing borrowings under the receivables facility.
Resolution of Income Tax Contingencies
In 2011 and 2010, the Company recorded $49.0 million and $79.3 million, respectively, in net income tax benefits as a result of
the favorable resolution of certain tax matters with taxing authorities and the expiration of the statute of limitations on certain tax
matters. In 2012, amounts recognized as income tax benefits as a result of the favorable resolution of certain tax matters with
taxing authorities and the expiration of the statute of limitations were not material. These benefits are reflected in the Company’s
2012, 2011 and 2010 Consolidated Statements of Operations. The ultimate resolution of outstanding tax matters may be different
from that reflected in the historical income tax provisions and accruals, which may adversely impact future operating results and
cash flows.
Contractual Obligations, Commitments and Off-Balance Sheet Arrangements
The Company has outstanding debt obligations maturing at various dates through 2028. Certain other items, such as purchase
commitments and other executory contracts, are not recognized as liabilities in the Company’s consolidated financial statements
but are required to be disclosed. Examples of items not recognized as liabilities in the Company’s consolidated financial statements
are commitments to purchase raw materials or inventory that has not yet been received as of December 31, 2012, and future
minimum lease payments for the use of property and equipment under operating lease agreements.