Graco 2005 Annual Report Download - page 24

($35.3 million). In 2004, the Company purchased 825,000 shares of its 5.25% convertible preferred
securities from a holder for $43.6875 per share ($36.0 million). See Footnote 10 to the Consolidated
Financial Statements for additional information on these transactions.
Aggregate dividends paid were $231.5 million and $231.0 million in 2005 and 2004, respectively. In
2006, the Company expects to make similar dividend payments.
Cash used for restructuring activities was $35.5 million and $79.7 million in 2005 and 2004,
respectively. These payments relate primarily to employee termination beneÑts. In 2006, the Company
expects to use approximately $100 million of cash on restructuring activities related to Project
Acceleration. See Footnote 4 to the Consolidated Financial Statements for additional information.
In 2005, the Company made a voluntary $25.0 million cash contribution to fund its foreign pension
plans. In 2004, the Company made a voluntary $50.0 million cash contribution to fund the Company's
U.S. pension plan.
In 2005, the Company terminated a cross currency interest rate swap and paid $26.9 million. This
payment has been recognized in operating cash Öow. In 2004, the Company recognized $5.5 million
related to the fair value of an interest rate swap that was terminated as a source in operating cash Öow.
Retained earnings increased in 2005 by $19.7 million. The increase in retained earnings is due to the
current year net income, partially oÅset by cash dividends paid on common stock.
Working capital at December 31, 2005 was $675.3 million compared to $1,141.1 million at
December 31, 2004. The current ratio at December 31, 2005 was 1.38:1 compared to 1.61:1 at
December 31, 2004. The decrease in working capital is due to cash used to fund the DYMO acquisition,
partially oÅset by favorable tax settlements and the reduction of other accrued liabilities, primarily as a
result of spending on previously announced restructuring plans.
Total debt to total capitalization (total debt is net of cash and cash equivalents, and total
capitalization includes total debt and stockholders' equity) was .60:1 at December 31, 2005 and .55:1 at
December 31, 2004.
The Company believes that cash provided from operations and available borrowing facilities will
continue to provide adequate support for the cash needs of existing businesses on a short-term basis;
however, certain events, such as signiÑcant acquisitions, could require additional external Ñnancing on a
long-term basis.
Minimum Pension Liability
In accordance with Financial Accounting Standards Board (FASB) Statement No. 87, Employers'
Accounting for Pensions, the Company recorded an additional minimum pension liability adjustment at
December 31, 2005. The eÅect of this non-cash adjustment was to increase the pension liability by
approximately $89.1 million, with a corresponding charge to equity, net of taxes, of approximately
$60 million. The Company believes that its pension plan has the appropriate long-term investment strategy
and the Company's liquidity position is expected to remain strong.
Resolution of Income Tax Contingencies
In 2005 and 2004, the Company recorded $73.9 million and $15.5 million, respectively, in income tax
beneÑt as a result of favorable resolution of certain tax issues and the expiration of the statute of
limitations on certain tax issues. These beneÑts are reÖected in the Company's 2005 and 2004
Consolidated Statements of Operations.
Contractual Obligations, Commitments and OÅ-Balance Sheet Arrangements
The Company has various contractual obligations that are recorded as liabilities in its consolidated
Ñnancial statements. Certain other items, such as purchase commitments and other executory contracts,
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