UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 23, 2011
Graco Inc.
(Exact
name of registrant as specified in its charter)
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| Minnesota
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001-9249
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41-0285640 |
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(State or other jurisdiction
of incorporation)
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(Commission
File Number)
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(IRS Employer
Identification No.) |
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| 88-11th Avenue Northeast |
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| Minneapolis, Minnesota
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55413 |
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| (Address of principal executive offices)
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(Zip Code) |
Registrant’s telephone number, including area code (612) 623-6000
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy
the filing obligation of the registrant under any of the following provisions (see General
Instruction A.2. below):
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR 240.13e-4(c))
Item 1.01. Entry into a Material Definitive Agreement.
On May 23, 2011, Graco Inc. (the “Company”) entered into a Credit Agreement (the “Credit
Agreement”) with U.S. Bank National Association, as administrative agent (the “Agent”) and a
lender, certain other lenders, and other banks from time to time party thereto. The Credit
Agreement provides the Company and certain of its subsidiaries access to a $450 million unsecured
revolving credit facility until May 23, 2016. The size of the
credit facility may be increased by up to
$150 million upon exercise of an accordion feature. Borrowings under the Credit Agreement may be
denominated in U.S. Dollars or certain other currencies. Outstanding loans in currencies other than
U.S. Dollars cannot exceed $200 million in the aggregate.
Although the Credit Agreement has been entered into, the Company may not obtain any loans
thereunder until certain conditions are met, including the closing of the acquisition of the
operations of the finishing businesses of Illinois Tool Works Inc. and ITW Finishing LLC (the
“Finishing Group Acquisition”) and the Company receiving not less than $75 million in proceeds from
the issuance of additional senior notes. As announced previously, the Finishing
Group Acquisition is expected to close in the third quarter of 2011, pending regulatory
reviews and other customary conditions. Proceeds of the
first loan under the Credit Agreement may be used to fund the Finishing Group Acquisition. The
Company’s existing credit agreement with the Agent remains in effect pending the first loan under
this Credit Agreement.
Loans denominated in U.S. Dollars may bear interest, at the Company’s option, at either a base
rate or a LIBOR-based rate. Loans denominated in currencies other than U.S. Dollars will bear interest at a LIBOR-based rate.
The base rate is an annual rate equal to a margin ranging from 0.00% to 1.00%, depending on the
Company’s cash flow leverage ratio, plus the highest of (i) the rate of interest from time to time
announced by the Agent as its prime rate, (ii) the federal funds effective rate plus 0.50%, or
(iii) one-month a LIBOR plus 1.50%. In general, LIBOR-based loans bear interest at a rate per annum equal
to LIBOR, plus a margin ranging from 1.00% to 2.00%, depending on the Company’s cash flow leverage
ratio.
In addition to paying interest on the outstanding loans, the Company is required to pay a
facility fee on the full amount of the loan commitments (whether used or unused) beginning on the
date when the Company obtains any loans under the Credit Agreement at a rate per annum ranging from
0.15% to 0.40%, depending on the Company’s cash flow leverage ratio.
The Credit Agreement contains customary representations, warranties, covenants and events of
default, including but not limited to covenants restricting the Company’s and its subsidiaries’
ability to (i) merge or consolidate with another entity, (ii) sell, transfer, lease or convey their
assets, (iii) make any material change in the nature of the core business of the Company, (iv) make
certain investments, or (v) incur secured indebtedness. The Credit Agreement also requires the
Company to maintain a cash flow leverage ratio of not more than 3.25 to 1.00 (unless a significant
acquisition has been consummated, in which case, not more than 3.75 to 1.00 during the four fiscal
quarter period beginning with the quarter in which such acquisition occurs) and an interest
coverage ratio of not less than 3.00 to 1.00 (unless a significant acquisition has been
consummated, in which case, not less than 2.50 to 1.00 during
the four fiscal quarter period beginning with the quarter in which such acquisition occurs). A
change in control of the Company will constitute an event of default under the Credit Agreement.
The full terms and conditions of the credit facility are set forth in the Credit Agreement. A
copy of the Credit Agreement is filed as Exhibit 10.1 hereto and is incorporated by reference
herein.
Item 9.01. Financial Statements and Exhibits.
10.1 Credit Agreement, dated May 23, 2011, among Graco Inc., the borrowing
subsidiaries from time to time party thereto, the banks from time to time party
thereto and U.S. Bank National Association, as administrative agent.
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