Graco 2012 Annual Report Download - page 83

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77
In May 2012, the Company entered into a commodity swap contract with a counterparty for an aggregate $14.0 million notional
amount (the "Commodity Swap") relating to forecasted monthly purchases of resin. The Commodity Swap expired on December 31,
2012 with cash settlement occurring monthly through the expiration date. The Company determined that the Commodity Swap
met the hedge accounting criteria under the relevant authoritative guidance, and accordingly, the Commodity Swap was accounted
for as a cash flow hedge.
The Company (paid) received $(0.5) million, $2.4 million and $3.8 million to settle foreign exchange contracts on intercompany
borrowings during 2012, 2011, and 2010 respectively. Such amounts are included in changes in accrued liabilities and other in
the Consolidated Statements of Cash Flows for 2012, 2011 and 2010.
The ineffectiveness related to cash flow hedges during 2012 was not material and the Company did not realize any ineffectiveness
related to cash flow hedges during 2011 and 2010. The Company estimates that during the next 12 months it will reclassify losses
of $1.5 million included in the pretax amount recorded in AOCI as of December 31, 2012 into earnings.
FOOTNOTE 12
Commitments
Lease Commitments
The Company leases manufacturing, warehouse and other facilities, real estate, transportation, and data processing and other
equipment under leases that expire at various dates through the year 2023. Rent expense, which is recognized on a straight-line
basis over the life of the lease term, was $135.2 million, $129.4 million and $122.7 million in 2012, 2011 and 2010, 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, 2012 (in millions):
2013 2014 2015 2016 2017 Thereafter Total
$105.5 $81.0 $68.9 $53.3 $44.7 $103.9 $457.3
Purchase Obligations
The Company enters into certain obligations to purchase finished goods, raw materials, components and services pursuant to
legally enforceable and binding obligations, which include all significant terms.
As of December 31, 2012, the Company’s future estimated total purchase obligations are as follows (in millions):
2013 2014 2015 Total
$645.6 $90.9 $6.4 $742.9
FOOTNOTE 13
Employee Benefit and Retirement Plans
The Company and its subsidiaries have noncontributory pension, profit sharing and contributory 401(k) plans covering substantially
all of their international and domestic employees. Plan benefits are generally based on years of service and/or compensation. The
Company’s funding policy is to contribute not less than the minimum amounts required by the Employee Retirement Income
Security Act of 1974, as amended, the Internal Revenue Code of 1986, as amended, or foreign statutes to ensure that plan assets
will be adequate to provide retirement benefits.
Included in AOCI at December 31, 2012 is $931.3 million ($621.1 million net of tax) related to net unrecognized actuarial losses
and unrecognized prior service credit that have not yet been recognized in net periodic pension cost. The Company expects to
recognize $32.9 million ($21.6 million net of tax) of costs in 2013 associated with net actuarial losses and prior service credit.
The Company’s tax-qualified defined benefit pension plan is frozen for the entire non-union U.S. workforce, and the Company
has replaced the defined benefit pension plan with an additional defined contribution benefit arrangement, which has a three-year
cliff-vesting schedule. The Company recorded $19.0 million, $18.8 million and $17.9 million in expense for the defined contribution
benefit arrangement for 2012, 2011 and 2010, respectively. The liability associated with the defined contribution benefit
arrangement as of December 31, 2012 and 2011 is $18.8 million and is included in other accrued liabilities in the Consolidated
Balance Sheets.
As of December 31, 2012 and 2011, the Company maintained various nonqualified deferred compensation plans with varying
terms. The total liability associated with these plans was $65.3 million and $68.7 million as of December 31, 2012 and 2011,
respectively. These liabilities are included in other noncurrent liabilities in the Consolidated Balance Sheets. The Company