Graco 2012 Annual Report Download - page 51

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The following table illustrates the sensitivity to a change in certain assumptions for the pension and postretirement plan expenses,
holding all other assumptions constant (in millions):
Impact on 2012
Expense
25 basis point decrease in discount rate $ 0.6
25 basis point increase in discount rate $ (0.7)
25 basis point decrease in expected return on assets $ 3.0
25 basis point increase in expected return on assets $ (3.0)
The total projected benefit obligations of the Company’s pension and postretirement plans as of December 31, 2012 were $1.77
billion and $158.8 million, respectively. The Company used a weighted-average discount rate of 3.7% to determine the projected
benefit obligations for the pension and postretirement plans as of December 31, 2012.
The following table illustrates the sensitivity to a change in certain assumptions for the projected benefit obligation for the pension
and postretirement plans, holding all other assumptions constant (in millions):
December 31, 2012
Impact on PBO
25 basis point decrease in discount rate $ 68.3
25 basis point increase in discount rate $ (65.7)
The Company has $621.1 million (after-tax) of net unrecognized pension and other postretirement losses ($931.3 million pretax)
included as a reduction to stockholders’ equity at December 31, 2012. The unrecognized gains and losses primarily result from
changes to life expectancies and other actuarial assumptions, changes in discount rates, as well as actual returns on plan assets
being more or less than expected. The unrecognized gain (loss) for each plan is amortized to expense over the life of each plan. The
net amount amortized to expense totaled $24.8 million (pretax) in 2012, and amortization of unrecognized net losses is expected
to continue to result in increases in pension and other postretirement plan expenses for the foreseeable future. Changes in actuarial
assumptions, changes in discount rates, actual returns on plan assets and changes in the actuarially determined life of the plans
impact the amount of unrecognized gain (loss) recognized as expense annually.
Recent Accounting Pronouncements
See Item 8 of Part II, “Financial Statements and Supplementary Data—Footnote 1—Description of Business and Significant
Accounting Policies—Recent Accounting Pronouncements.”
International Operations
For 2012, 2011 and 2010, the Company’s non-U.S. businesses accounted for approximately 32%, 33% and 32% of net sales,
respectively (see Footnote 19 of the Notes to Consolidated Financial Statements). Changes in both U.S. and non-U.S. net sales
are shown below for the years ended December 31, (in millions, except percentages):
2012 vs. 2011 2011 vs. 2010
2012 2011 2010 % Change % Change
U.S. $ 4,004.5 $ 3,915.7 $ 3,870.3 2.3% 1.2%
Non-U.S 1,898.2 1,948.9 1,787.9 (2.6) 9.0
$ 5,902.7 $ 5,864.6 $ 5,658.2 0.6% 3.6%
The Company began accounting for its Venezuelan operations using highly inflationary accounting in January 2010. Under highly
inflationary accounting, the Company remeasures assets, liabilities, sales and expenses denominated in Bolivar Fuertes into U.S.
Dollars using the applicable exchange rate, and the resulting translation adjustments are included in earnings. As of December 31,
2012, the Company’s Venezuelan subsidiary had $63.4 million of net monetary assets denominated in Bolivar Fuertes, and as a
result, a 10% increase (decrease) in the applicable exchange rate would result in a one-time estimated pretax charge (benefit) of
$6 million. On an ongoing basis, excluding the impacts of any actions management might otherwise take in response to a change
in exchange rates, such as raising or decreasing prices, a 10% increase (decrease) in the exchange rate would unfavorably (favorably)
impact annual net sales and operating income by an estimated $5 million and $3 million, respectively.
In May 2010, the Venezuelan government enacted reforms to its foreign currency exchange control regulations to close down the
parallel exchange market. In early June 2010, the Venezuelan government introduced a newly regulated foreign currency exchange
system, Transaction System for Foreign Currency Denominated Securities (“SITME”). Foreign currency exchange through SITME
is allowed within a specified band of 4.5 to 5.3 Bolivar Fuerte to U.S. Dollar, but most of the exchanges have been executed at