Graco 2012 Annual Report Download - page 45

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The following table summarizes the effect that lease and other material contractual obligations are expected to have on the
Company’s cash flow in the indicated period. In addition, the table reflects the timing of principal and interest payments on
borrowings outstanding as of December 31, 2012. Additional details regarding these obligations are provided in the Notes to
Consolidated Financial Statements (in millions):
Payments Due by Period
Total Less than
1 Year 1-3 Years 3-5 Years More than 5 Years
Debt(1) $ 1,918.4 $ 211.9 $ 250.0 $ 350.0 $ 1,106.5
Interest on debt(2) 453.1 67.2 129.4 121.9 134.6
Operating lease obligations(3) 457.3 105.5 149.9 98.0 103.9
Purchase obligations(4) 742.9 645.6 97.3 — —
Total contractual obligations(5) $ 3,571.7 $ 1,030.2 $ 626.6 $ 569.9 $ 1,345.0
(1) Amounts represent contractual obligations based on the earliest date that the obligation may become due, excluding interest, based on borrowings outstanding
as of December 31, 2012. Includes $200.0 million in borrowings under the receivables facility that the Company intends to repay or refinance before
maturity in September 2013. For further information relating to these obligations, see Footnote 9 of the Notes to Consolidated Financial Statements.
(2) Amounts represent estimated interest payable on borrowings outstanding as of December 31, 2012, excluding the impact of interest rate swaps that adjust
the fixed rate to a floating rate for $750.0 million of medium-term notes. Interest on floating-rate debt was estimated using the rate in effect as of December 31,
2012. For further information, see Footnote 9 of the Notes to Consolidated Financial Statements.
(3) Amounts represent contractual minimum lease obligations on operating leases as of December 31, 2012. For further information relating to these obligations,
see Footnote 12 of the Notes to Consolidated Financial Statements.
(4) Primarily consists of purchase commitments entered into as of December 31, 2012 for finished goods, raw materials, components and services pursuant
to legally enforceable and binding obligations, which include all significant terms.
(5) Total does not include contractual obligations reported on the December 31, 2012 balance sheet as current liabilities, except for current portion of long-
term debt and short-term debt.
The Company also has liabilities for uncertain tax positions and unrecognized tax benefits. As a large taxpayer, the Company is
under audit from time-to-time by the IRS and other taxing authorities, and it is possible that the amount of the liability for uncertain
tax positions and unrecognized tax benefits could change in the coming year. While it is possible that one or more of these
examinations may be resolved in the next year, the Company is not able to reasonably estimate the timing or the amount by which
the liability will increase or decrease over time; therefore, the $112.7 million in unrecognized tax benefits, including interest and
penalties, at December 31, 2012, is excluded from the preceding table. See Footnote 16 of the Notes to Consolidated Financial
Statements for additional information.
Additionally, the Company has obligations with respect to its pension and other postretirement benefit plans, which are excluded
from the preceding table. The timing and amounts of the funding requirements are uncertain because they are dependent on interest
rates and actual returns on plan assets, among other factors. As of December 31, 2012, the Company had liabilities of $727.7
million related to its unfunded and underfunded pension and other postretirement benefit plans for which the Company expects
to make contributions of $144 million in 2013. See Footnote 13 of the Notes to Consolidated Financial Statements for further
information.
As of December 31, 2012, the Company had $45.7 million in standby letters of credit primarily related to the Company’s self-
insurance programs, including workers’ compensation, product liability and medical. See Footnote 20 of the Notes to Consolidated
Financial Statements for further information.
As of December 31, 2012, the Company did not have any significant off-balance sheet arrangements, as defined in Item 303(a)
(4)(ii) of SEC Regulation S-K.
Critical Accounting Policies
The Company’s accounting policies are more fully described in Footnote 1 of the Notes to Consolidated Financial Statements. As
disclosed in that footnote, the preparation of financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions about future events that affect the amounts reported in the financial
statements and accompanying footnotes. Future events and their effects cannot be determined with absolute certainty. Therefore,
the determination of estimates requires the exercise of judgment. Actual results inevitably will differ from those estimates, and
such differences may be material to the Consolidated Financial Statements. The following sections describe the Company’s critical
accounting policies.