Graco 2012 Annual Report Download - page 40

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Partially offset by
• a $30.0 million decline in contributions to the Company’s primary U.S. defined benefit pension plan, from $50.0 million
in 2010 to $20.0 million in 2011; and
• a $43.4 million decline in cash paid for income taxes.
During 2012, the Company received net proceeds of $106.0 million from its short-term borrowing arrangements compared to
$34.4 million of net payments related to these borrowing arrangements in 2011. The Company's short-term borrowings, which
include commercial paper and the receivables financing facility, were $210.7 million at December 31, 2012 compared to $103.6
million at December 31, 2011. The increase in short-term borrowings is primarily due to the redemption of the $436.7 million of
the 5.25% Junior Convertible Subordinated Debentures (the "Debentures") in July 2012 and the repayments of an aggregate $750.0
million principal amount of medium-term notes during 2012, partially offset by proceeds from long-term debt issuances in the
second and fourth quarters of 2012. In June 2012, the Company completed the offering and sale of $500.0 million of unsecured
senior notes, consisting of $250.0 million aggregate principal amount of 2.0% notes due 2015 (the "2015 Notes") and $250.0
million aggregate principal amount of 4.0% notes due 2022 (the "2022 Notes" and, together with the 2015 Notes, the "Notes").
The aggregate net proceeds from the Notes were $495.1 million, which were used in July 2012 to fund the redemption of all of
the $436.7 million outstanding principal amount of the Debentures that underlie the convertible preferred securities (the "Preferred
Securities"), to reduce short-term borrowings and for general corporate purposes. In December 2012, the Company completed the
offering and sale of $350.0 million aggregate principal amount of the 2.05% notes due 2017 (the "2017 Notes"). The net proceeds
of $346.8 million from the issuance of the 2017 Notes, together with cash on hand and short-term borrowings, were used to repay
the $500.0 million outstanding principal amount of the 5.50% notes due 2013.
In July 2011, the Company sold its hand torch and solder business to an affiliate of Worthington Industries, Inc. (”Worthington”)
for cash consideration of $51.0 million, $8.0 million of which was held in escrow. The cash consideration paid to the Company
also provided for settlement of all claims involving the Company’s litigation with Worthington. During 2012, the conditions related
to the escrow were satisfied and resolved, and the Company received $7.8 million from the escrow.
During 2011, the Company made net payments of $34.4 million related to its short-term borrowing arrangements, including
commercial paper and its receivables facility, compared to $133.6 million of net proceeds from these borrowing arrangements in
2010. The net proceeds in 2010 were used primarily to complete the Capital Structure Optimization Plan (the “Plan”).
During 2010, the Company substantially completed the Plan. The Plan included the issuance of $550.0 million of 4.70% senior
notes due 2020. The Company used the proceeds from the sale of the new notes, cash on hand, and the $133.6 million of short-
term borrowings to fund the repurchase of $500.0 million of shares of its common stock through an accelerated stock buyback
program and to complete a cash tender offer for its outstanding $300.0 million principal amount of 10.60% notes due 2019, which
resulted in the repurchase of $279.3 million principal amount of the notes. The Company received $544.9 million of net proceeds
from the issuance of the 4.70% notes due 2020. In addition, the Company received $71.1 million of net proceeds associated with
the settlement of the convertible note hedge and warrant transactions during 2010.
Uses
Historically, the Company’s primary uses of liquidity and capital resources have included dividend payments, share repurchases,
capital expenditures, payments on debt and acquisitions.
During 2012, the Company retired $250.0 million outstanding principal amount of 6.75% medium-term notes (the "2012 Notes")
at maturity in March 2012, for which interest expense was previously recorded at a rate of approximately 2.3% after contemplating
the effect of the terminated interest rate swaps related to the 2012 Notes. In July 2012, the Company redeemed $436.7 million
outstanding principal amount of Debentures that underlie the Preferred Securities. During the third quarter of 2012, the Company
repaid an additional $8.5 million outstanding principal amount of extant 6.11% medium-term notes due 2028 (the "2028 Notes").
In December 2012, the Company repaid $500.0 million outstanding principal amount of 5.50% notes due in April 2013 (the “2013
Notes”) and paid a premium of $7.1 million due to early repayment. The Company used a combination of short-term borrowings,
cash on hand and proceeds from the Notes and the 2017 Notes to repay the 2012 Notes, the 2013 Notes, the 2028 Notes and the
Debentures.
During 2011, the Company repaid the remaining $150.0 million outstanding principal amount of the unsecured three-year $400.0
million term loan (the “Term Loan”). In connection with the extinguishments of $20.2 million principal amount of Convertible
Notes, the Company paid $3.1 million in cash to the holders of such Convertible Notes during 2011.
In 2010, the Company completed a cash tender offer for $279.3 million of $300.0 million principal amount of 10.60% notes due
2019 and paid cash of $402.2 million upon settlement. Pursuant to the Plan, the Company also completed an exchange offer for
$324.7 million of $345.0 million principal amount of Convertible Notes (the “Exchange Offer”) and issued 37.7 million shares