Graco 2012 Annual Report Download - page 80

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liquidation of the Company's equity interest in the Subsidiary. The Company repaid the Debentures at 100% of their face amount;
therefore, substantially all of the $6.0 million loss on extinguishment of the Debentures was due to the write-off of deferred
financing costs.
Receivables-Related Borrowings
In September 2009, the Company entered into a 364-day receivables facility that provides for borrowings of up to $200.0 million
(the “Receivables Facility”), and the maturity date has been extended such that it expires in September 2013. Under the Receivables
Facility, the Company and certain operating subsidiaries (collectively, “the Originators”) sell their receivables to a financing
subsidiary as the receivables are originated. The financing subsidiary is wholly owned by the Company and is the owner of the
purchased receivables and the borrower under the facility. The assets of the financing subsidiary are restricted as collateral for the
payment of debt or other obligations arising under the facility, and the financing subsidiary’s assets and credit are not available to
satisfy the debts and obligations owed to the Company’s or any other Originator’s creditors. The Company includes the financing
subsidiary’s assets, liabilities and results of operations in its consolidated financial statements. The Receivables Facility requires,
among other things, that the Company maintain certain interest coverage and total indebtedness to total capital ratios, and the
Company was in compliance with such requirements as of December 31, 2012. As of December 31, 2012, the financing subsidiary
owned $679.9 million of outstanding accounts receivable, and these amounts are included in accounts receivable, net in the
Company’s Consolidated Balance Sheet at December 31, 2012. The amount that may be borrowed under the Receivables Facility
is subject to various limitations based on the character of the receivables owned by the financing subsidiary. As of December 31,
2012, the Company had outstanding borrowings of $200.0 million under the Receivables Facility, which have been classified as
short-term borrowings and bear interest at a weighted-average rate of 0.9%.
Revolving Credit Facility and Commercial Paper
On December 2, 2011, the Company entered into a five-year credit agreement (the “Credit Agreement”) with a syndicate of banks.
The Credit Agreement provides for an unsecured syndicated revolving credit facility with a maturity date of December 2, 2016,
and an aggregate commitment at any time outstanding of up to $800.0 million (the “Facility”). During 2012, the Company obtained
an extension of the term of the Credit Agreement for a period of one year beyond its original maturity date such that the Credit
Agreement will expire on December 1, 2017. The Company may from time to time request increases in the aggregate commitment
to up to $1.25 billion upon the satisfaction of approval requirements. The Company may request extensions of the maturity date
of the Facility (subject to lender approval) for additional one-year periods. Borrowings under the Facility will be used for general
corporate purposes, and the Facility provides the committed backup liquidity required to issue commercial paper. Accordingly,
commercial paper may be issued only up to the amount available for borrowing under the Facility. Under the Facility, the Company
may borrow funds on a variety of interest rate terms. The Facility also provides for the issuance of up to $100.0 million of letters
of credit, so long as there is a sufficient amount available for borrowing under the Facility. The Company may borrow, prepay and
re-borrow amounts under the Facility at any time prior to termination of the facility. As of December 31, 2012, there were no
borrowings or standby letters of credit issued or outstanding under the Facility, and there was no commercial paper outstanding.
In addition to the committed portion of the Facility, the Credit Agreement provides for extensions of competitive bid loans from
one or more lenders (at the lenders’ discretion) of up to $500.0 million, which are not a utilization of the amount available for
borrowing under the Facility.
The Credit Agreement contains customary representations and warranties, covenants and events of default. The covenants set forth
in the Credit Agreement include certain affirmative and negative operational and financial covenants, including, among other
things, restrictions on the Company’s ability to incur certain liens, make fundamental changes to its business or engage in
transactions with affiliates, limitations on the amount of indebtedness that may be incurred by the Company’s subsidiaries and a
requirement that the Company maintain certain interest coverage and total indebtedness to total capital ratios, as defined in the
Credit Agreement. In addition, the Credit Agreement provides for certain events of default, the occurrence of which could result
in the acceleration of the Company’s obligations under the Credit Agreement and the termination of the lenders’ obligation to
extend credit pursuant to the Credit Agreement. As of December 31, 2012, the Company was in compliance with the provisions
of the Credit Agreement.
FOOTNOTE 10
Convertible Note Hedge and Warrant Transactions
In connection with the issuance of the Convertible Notes in March 2009, the Company entered into separate convertible note
hedge transactions and warrant transactions with respect to the Company’s common stock to minimize the impact of the potential
dilution upon conversion of the Convertible Notes. The Company purchased call options in private transactions to cover 40.1
million shares of the Company’s common stock at a strike price of $8.61 per share, subject to adjustment in certain circumstances,
for $69.0 million. The call options generally allowed the Company to receive shares of the Company’s common stock from
counterparties equal to the number of shares of common stock payable to the holders of the Convertible Notes upon conversion.