Graco 2005 Annual Report Download - page 23

2010, replaces the Company's $650.0 million Ñve-year Syndicated Revolving Credit Agreement that was
scheduled to expire in June 2007. At December 31, 2005, there were no borrowings under the Revolver.
In lieu of borrowings under the Revolver, the Company may issue up to $750.0 million of commercial
paper. The Revolver provides the committed backup liquidity required to issue commercial paper.
Accordingly, commercial paper may only be issued up to the amount available for borrowing under the
Revolver. The Revolver also provides for the issuance of up to $100.0 million of standby letters of credit so
long as there is a suÇcient amount available for borrowing under the Revolver. At December 31, 2005,
$202.0 million of commercial paper was outstanding and there were no standby letters of credit issued
under the Revolver.
The Revolver permits the Company to borrow funds on a variety of interest rate terms and requires,
among other things, that the Company maintain certain Interest Coverage and Total Indebtedness to Total
Capital Ratio, as deÑned in the agreement. The Revolver also limits Subsidiary Indebtedness. As of
December 31, 2005, the Company was in compliance with the agreement governing the Revolver. On an
annual basis, the Company may request extension of the Revolver (subject to lender approval) for
additional one-year periods.
Under a 2001 receivables facility with a Ñnancial institution, the Company created a Ñnancing entity
that is consolidated in the Company's Ñnancial statements. Under this facility, the Company regularly
enters into transactions with the Ñnancing entity to sell an undivided interest in substantially all of the
Company's United States trade receivables to the Ñnancing entity. In 2001, the Ñnancing entity issued
$450.0 million in preferred debt securities to the Ñnancial institution. Certain levels of accounts receivable
write-oÅs and other events would permit the Ñnancial institution to terminate the receivables facility and
require redemption of the preferred debt securities. The receivables and preferred debt securities are
recorded in the consolidated accounts of the Company. The Ñnancing entity may cause the preferred debt
securities to be exchanged on September 18, 2006 for a two year Öoating rate note in an aggregate
principal amount equal to the par value of the preferred debt securities plus accrued but unpaid return.
Upon the exchange, the Ñnancing entity will pay to the preferred debt securities holder, a premium for
which the Company has accrued $4.6 million as of December 31, 2005. Because this debt matures in
2008, the entire amount is considered to be long-term debt. At any time prior to maturity of the note, the
holder may elect to convert it into new preferred debt securities of the Ñnancing company with a par value
equal to the outstanding principal amount of the note. The preferred debt securities must be retired or
redeemed, and any note for which such securities are exchanged must be repaid, before the Company can
have access to the Ñnancing entity's receivables. As of December 31, 2005 and 2004, the aggregate amount
of outstanding receivables sold under this facility was $746.9 million and $720.9 million, respectively.
Uses
The Company's primary uses of liquidity and capital resources include acquisitions, dividend
payments, capital expenditures and payments on debt.
Cash used for acquisitions was $740.0 million in 2005, compared to $6.6 million in 2004. The cash
used in 2005 related primarily to the acquisition of DYMO for $706 million, which was funded by
approximately $487 million of cash on hand and $219 million from existing credit facilities. See Footnote 2
to the Consolidated Financial Statements for additional information. In 2004, the Company did not invest
in signiÑcant acquisitions.
Capital expenditures were $92.2 million and $121.9 million in 2005 and 2004, respectively. The
decrease in capital expenditures is primarily due to the Company's focus on capital spending discipline in
2005. Capital expenditures for 2006 are expected to be in the range of $125 to $150 million.
In 2005, the Company made payments on notes payable and long-term debt of $360.1 million
compared to $298.4 million in 2004, including the purchases in 2005 of 750,000 shares of its
5.25% convertible preferred securities from holders at an average price of $47.075 per share
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