Graco 2012 Annual Report Download - page 68

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Other recently issued ASUs were assessed and determined to be either not applicable or are expected to have a minimal impact
on the Company’s consolidated financial position and results of operations.
FOOTNOTE 2
Discontinued Operations
On July 1, 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 for a period of one year. The cash consideration
paid in connection with the transaction provided for settlement of all claims involving the Company’s litigation with Worthington
referenced in Footnote 20. In connection with the sale of the business, the Company transferred net assets with a carrying value
of approximately $11.1 million to Worthington, representing property, plant and equipment, certain intangible assets, and net
working capital. The Company allocated $35.2 million of the Hardware business’s goodwill (presently included in the Specialty
segment) to the hand torch and solder business on a relative fair value basis as of July 1, 2011, and the $35.2 million of goodwill
was written off in connection with the sale. The Company retained approximately $13.0 million of accounts receivable associated
with the hand torch and solder business that resulted from sales prior to July 1, 2011. During 2012, the conditions related to the
escrow were satisfied and resolved, and the Company received $7.8 million from the escrow and recognized the proceeds as a
gain from the sale of the hand torch and solder business in discontinued operations.
The following table provides a summary of amounts included in discontinued operations, which primarily relate to the hand torch
and solder business (in millions):
2012 2011 2010
Net sales $ — $ 58.8 $ 101.0
Income from operations, net of income tax expense of $2.6 and $2.0 for 2011
and 2010, respectively $ — $ 5.8 $ 4.6
Gain (loss) on disposal, including income tax expense of $3.4 and $1.3 for
2012 and 2011, respectively 1.7 (15.2) —
Income (loss) from discontinued operations, net of tax $ 1.7 $ (9.4) $ 4.6
FOOTNOTE 3
Stockholders’ Equity
In August 2011, the Company announced a $300.0 million three-year share repurchase program (the “SRP”). Under the SRP, the
Company may repurchase its own shares of common stock through a combination of a 10b5-1 automatic trading plan, discretionary
market purchases or in privately negotiated transactions. The SRP is authorized to run for a period of three years ending in August
2014. During 2012, the Company repurchased 4.9 million shares pursuant to the SRP for $91.5 million, and such shares were
immediately retired. From the commencement of the SRP in August 2011 through December 31, 2012, the Company repurchased
and retired 8.3 million shares at an aggregate cost of $137.6 million.
During 2010, the Company executed a series of transactions pursuant to a Capital Structure Optimization Plan (the “Plan”) in
order to simplify the Company’s capital structure, lower interest costs and reduce potential future dilution from the convertible
notes due 2014 (the “Convertible Notes”) and the associated hedge and warrant transactions (see Footnotes 9 and 10 of the Notes
to Consolidated Financial Statements). 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 notes, cash on hand and short-term borrowings to fund the repurchase of $500.0
million of shares of its common stock through an accelerated stock buyback program; to complete a cash tender offer for any and
all of the $300.0 million principal amount of outstanding 10.60% notes due 2019; and to exchange common stock and cash for
any and all of the $345.0 million principal amount of outstanding Convertible Notes. In addition, the Plan contemplated the
settlement of the convertible note hedge and warrant transactions entered into in connection with the issuance of the Convertible
Notes in March 2009.
In connection with the Plan, on August 2, 2010, the Company entered into an accelerated stock buyback program (the “ASB”)
with Goldman, Sachs & Co. (“Goldman Sachs”). Under the ASB, on August 10, 2010, the Company paid Goldman Sachs an initial
purchase price of $500.0 million, and Goldman Sachs delivered approximately 25.8 million shares of common stock to the
Company. The final number of shares that the Company purchased under the ASB was determined based on the average of the
daily volume-weighted average share prices of the Company’s common stock from August 11, 2010 until March 21, 2011, subject
to certain adjustments. Based on a calculated per share price of $17.95, Goldman Sachs delivered 2.0 million additional shares to
the Company on March 24, 2011 in connection with the completion of the ASB, and such shares were immediately retired.