Graco Inc. (NYSE: GGG) today announced results for the
quarter and year ended December 25, 2009.
Summary
$ in millions except per share
amounts
Quarter Ended Year Ended
Dec 25, Dec 26, %
Dec 25, Dec 26, %
2009 2008 Change 2009 2008
Change Net Sales $ 146.3 $ 166.7 (12 )% $ 579.2 $
817.3 (29 )% Net Earnings 17.2 10.1 71 % 49.0 120.9 (59 )% Diluted
Net Earnings per Common Share $ 0.28 $ 0.17 65 % $ 0.81 $ 1.99 (59
)%
- Cash flow from operations
totaled $147 million in 2009, including $36 million in the fourth
quarter.
- Net earnings for the quarter
were 12 percent of sales.
- Sales for the fourth quarter are
steady compared to the preceding two quarters.
- Gross margin rate of 53 percent
for the quarter is 4 percentage points higher than last year’s
fourth quarter rate.
- Lower operating expenses in 2009
reflect the results of lower volume and cost reduction actions
taken in the fourth quarter of 2008 and the first quarter of
2009.
- Currency translation had a
favorable effect on fourth quarter sales ($5 million) and net
earnings ($3 million), but had an unfavorable effect on full-year
sales ($10 million) and net earnings ($4 million).
“While we are not satisfied with our 2009 results, we are
encouraged by higher order activity in the fourth quarter in Asia
Pacific,” said Patrick J. McHale, President and Chief Executive
Officer. “We began a limited recall of factory employees, and cash
flow remains strong. Our focus on managing working capital reduced
inventories and receivables by a total of $60 million since the end
of last year. We also reduced debt by $100 million (50 percent) and
made a voluntary $15 million tax-deductible contribution to our
defined benefit pension plan. We intend to continue making targeted
investments in our strategic growth initiatives while managing
capital.”
Consolidated Results
Sales were down 12 percent for the quarter and 29 percent for
the year. For the quarter, sales decreased 20 percent in the
Americas and 14 percent in Europe (21 percent at consistent
translation rates). Sales for the quarter increased 15 percent in
Asia Pacific (10 percent at consistent translation rates). Sales
for the year decreased 28 percent in the Americas, 39 percent in
Europe (35 percent at consistent translation rates) and 17 percent
in Asia Pacific.
Gross profit margin, expressed as a percentage of sales, was 53
percent for the quarter, up from 49 percent for the fourth quarter
last year. Approximately half of the increase was from favorable
effects of currency translation. Costs related to workforce
reductions lowered the 2008 fourth quarter gross margin rate,
accounting for approximately 1 percentage point of the increase in
2009. For the year, gross profit margin rate was 51 percent in
2009, down from 53 percent last year. The decrease was primarily
due to lower production volumes (approximately 4 percentage points)
and increased pension cost (approximately 1 percentage point).
Decreases were partially offset by the effects of favorable
material costs and pricing.
Total operating expenses for the quarter and year were down 19
percent and 11 percent, respectively. For both the quarter and
year, the effects of spending reductions (including lower workforce
reduction expenses) and lower volume-related expenses were
partially offset by higher pension expenses. The effects of
currency translation increased expenses for the quarter by
approximately $1 million and decreased expenses for the year by
approximately $3 million.
The effective income tax rate for the fourth quarter was 24
percent in 2009 and 21 percent in 2008. A higher-than-expected
benefit upon filing of prior year tax returns contributed to a
lower rate in the fourth quarter of 2009. The effective rate for
the fourth quarter of 2008 was low because the federal R&D tax
credit was not renewed until the fourth quarter and no credit was
included in the first three quarters of 2008. The effective rate
for the year was 29 percent in 2009 and 32 percent in 2008. The
effect of federal business credits and the domestic production
deduction was greater in 2009 as a percentage of pre-tax earnings
as compared to the prior year.
Segment Results
Certain measurements of segment
operations are summarized below:
Quarter Ended Year Ended
Industrial Contractor
Lubrication Industrial Contractor
Lubrication Net sales (in millions) $ 86.1 $
45.3 $ 14.9 $ 312.9 $ 208.5 $ 57.7 Net sales percentage change from
last year (12)% (11)% (17)% (32)% (22)% (34)% Operating earnings as
a percentage of net sales
2009
27% 10% 3% 22% 14% (5)% 2008 21% (5)% 1% 30% 18% 14%
All segments had decreases in sales compared to last year for
both the quarter and year. Improved fourth quarter operating
earnings of all segments reflect the lower cost structure resulting
from workforce and other spending reduction actions taken in the
fourth quarter of 2008 and the first quarter of 2009. Contractor
operating results for the fourth quarter of 2008 were affected by
sales, costs and expenses related to the rollout of entry-level
paint sprayers to additional paint and home center stores. For the
year, operating earnings of all segments reflect the impacts of low
volume and higher pension cost. Mix of product sold and costs
related to discontinued products further contributed to lower
margin rates in the Lubrication segment.
Outlook
“During the recession, we continued to fully fund our key growth
initiatives,” said Patrick J. McHale, President and Chief Executive
Officer. “Our product offering, global distribution channel,
competitive position and served market segments are broader and
stronger than ever. We believe many of our key end markets will
improve as we move through 2010, and as our revenue returns, we
expect to deliver impressive incremental margins.”
Cautionary Statement Regarding Forward-Looking
Statements
A forward-looking statement is any statement made in this
earnings release and other reports that the Company files
periodically with the Securities and Exchange Commission, as well
as in press releases, analyst briefings, conference calls and the
Company’s Annual Report to shareholders, which reflects the
Company’s current thinking on market trends and the Company’s
future financial performance at the time it is made. All forecasts
and projections are forward-looking statements. The Company
undertakes no obligation to update these statements in light of new
information or future events.
The Company desires to take advantage of the “safe harbor”
provisions of the Private Securities Litigation Reform Act of 1995
by making cautionary statements concerning any forward-looking
statements made by or on behalf of the Company. The Company cannot
give any assurance that the results forecasted in any
forward-looking statement will actually be achieved. Future results
could differ materially from those expressed, due to the impact of
changes in various factors. These risk factors include, but are not
limited to: economic conditions in the United States and other
major world economies, currency fluctuations, political
instability, changes in laws and regulations, and changes in
product demand. Please refer to Item 1A of, and Exhibit 99 to, the
Company’s Annual Report on Form 10-K for fiscal year 2008 (and most
recent Form 10-Q, if applicable) for a more comprehensive
discussion of these and other risk factors. These reports are
available on the Company’s website at www.graco.com and the
Securities and Exchange Commission’s website at www.sec.gov.
Conference Call
Graco management will hold a conference call, including slides
via webcast, with analysts and institutional investors on Tuesday,
January 26, 2010, at 11:00 a.m. ET, to discuss Graco’s fourth
quarter and year-end results.
A real-time Webcast of the conference call will be broadcast
live over the Internet. Individuals wanting to listen and view
slides can access the call at the Company’s website at www.graco.com. Listeners should go to the
website at least 15 minutes prior to the live conference call to
install any necessary audio software.
For those unable to listen to the live event, a replay will be
available soon after the conference call at Graco’s website, or by
telephone beginning at approximately 2:00 p.m. ET on January 26,
2010, by dialing 800.406.7325, Conference ID #4200188, if calling
within the U.S. or Canada. The dial-in number for international
participants is 303.590.3030, with the same Conference ID #. The
replay by telephone will be available through January 31, 2010.
Graco Inc. supplies technology and expertise for the management
of fluids in both industrial and commercial applications. It
designs, manufactures and markets systems and equipment to move,
measure, control, dispense and spray fluid materials. A recognized
leader in its specialties, Minneapolis-based Graco serves customers
around the world in the manufacturing, processing, construction and
maintenance industries. For additional information about Graco
Inc., please visit us at www.graco.com.
GRACO INC. AND SUBSIDIARIES Consolidated Statement of
Earnings (Unaudited) Quarter Ended
Year Ended Dec 25, Dec 26, Dec 25, Dec 26, 2009 2008 2009 2008
Net Sales $ 146,312 $ 166,689 $ 579,212 $ 817,270 Cost of
products sold 68,973 85,288
286,396 385,093
Gross Profit 77,339
81,401 292,816 432,177 Product development 8,954 9,953 37,538
36,558 Selling, marketing and distribution 28,736 36,582 115,550
138,665 General and administrative 15,944
19,447 65,261 69,589
Operating Earnings 23,705 15,419 74,467 187,365 Interest
expense 1,119 2,190 4,854 7,633 Other expense, net 57
547 946 1,153
Earnings
Before Income Taxes 22,529 12,682 68,667 178,579 Income taxes
5,300 2,600 19,700
57,700
Net Earnings $ 17,229 $ 10,082 $
48,967 $ 120,879
Net Earnings per Common
Share Basic $ 0.29 $ 0.17 $ 0.82 $ 2.01 Diluted $ 0.28 $ 0.17 $
0.81 $ 1.99
Weighted Average Number of Shares Basic
59,980 59,493 59,865 60,264 Diluted 60,518 59,837 60,229 60,835
Segment Information (Unaudited) Quarter Ended
Year Ended Dec 25, Dec 26, Dec 25, Dec 26, 2009 2008 2009 2008
Net Sales Industrial 86,127 $ 97,913 $ 312,935 $ 462,941
Contractor 45,331 50,780 208,544 266,772 Lubrication 14,854
17,996 57,733 87,557
Total $ 146,312 $ 166,689 $ 579,212
$ 817,270
Operating Earnings Industrial
$ 23,048 $ 20,393 $ 68,310 $ 138,240 Contractor 4,532 (2,507 )
28,952 47,156 Lubrication 441 142 (2,907 ) 12,475 Unallocated
corporate (expense) (4,316 ) (2,609 ) (19,888
) (10,506 )
Total $ 23,705 $ 15,419 $
74,467 $ 187,365
GRACO INC. AND
SUBSIDIARIES Consolidated Balance Sheets (Unaudited) (In
thousands) Dec 25, Dec 26, 2009 2008
ASSETS
Current Assets Cash and cash equivalents $ 5,412 $ 12,119 Accounts
receivable, less allowances of $6,500 and $6,600 100,824 127,505
Inventories 58,658 91,604 Deferred income taxes 20,380 23,007 Other
current assets 3,719 6,360 Total
current assets 188,993 260,595 Property, Plant and Equipment
Cost 334,440 326,729 Accumulated depreciation (195,387 )
(176,975 ) Property, plant and equipment, net 139,053
149,754 Goodwill 91,740 91,740 Other Intangible Assets, net
40,170 52,231 Deferred Income Taxes 8,372 18,919 Other Assets
8,106 6,611 Total Assets $ 476,434
$ 579,850
LIABILITIES AND SHAREHOLDERS'
EQUITY Current Liabilities Notes payable to banks $ 12,028 $
18,311 Trade accounts payable 17,983 18,834 Salaries and incentives
14,428 17,179 Dividends payable 12,003 11,312 Other current
liabilities 47,373 55,524 Total current
liabilities 103,815 121,160 Long-term debt 86,260 180,000
Retirement Benefits and Deferred Compensation 73,705 108,656
Uncertain Tax Positions 3,000 2,400 Shareholders' Equity
Common stock 59,999 59,516 Additional paid-in-capital 190,261
174,161 Retained earnings 11,121 8,445 Accumulated other
comprehensive income (loss) (51,727 ) (74,488 ) Total
shareholders' equity 209,654 167,634
Total Liabilities and Shareholders' Equity $ 476,434 $
579,850
GRACO INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited) (In
thousands) Years Ended Dec 25, Dec 26, 2009 2008
Cash Flows From Operating Activities Net Earnings $ 48,967 $
120,879 Adjustments to reconcile net earnings to net cash provided
by operating activities: Depreciation and amortization 35,140
35,495 Deferred income taxes (69 ) (160 ) Share-based compensation
9,369 9,051 Excess tax benefit related to share-based payment
arrangements (375 ) (2,873 ) Change in: Accounts receivable 28,420
14,965 Inventories 32,663 (9,937 ) Trade accounts payable (701 )
(6,806 ) Salaries, wages and commissions (2,893 ) (3,169 )
Retirement benefits and deferred compensation (848 ) (2,672 ) Other
accrued liabilities (2,838 ) 5,658 Other (303 ) 2,047
Net cash provided by operating activities
146,532 162,478
Cash Flows From Investing
Activities Property, plant and equipment additions (11,463 )
(29,102 ) Proceeds from sale of property, plant and equipment 770
1,768 Investment in life insurance (1,499 ) (1,499 ) Capitalized
software and other intangible asset additions (602 ) (1,327 )
Acquisition of businesses, net of cash acquired -
(55,186 )
Net cash used in investing activities
(12,794 ) (85,346 )
Cash Flows From Financing
Activities: Net borrowings (payments) on short-term lines of
credit (6,385 ) (1,329 ) Borrowings on long-term line of credit
77,996 242,849 Payments on long-term line of credit (171,736 )
(169,909 ) Excess tax benefit related to share-based payment
arrangements 375 2,873 Common stock issued 6,570 13,701 Common
stock retired (188 ) (114,836 ) Cash dividends paid (45,444
) (44,702 )
Net cash provided by (used in) financing
activities (138,812 ) (71,353 ) Effect of
exchange rate changes on cash (1,633 ) 1,418
Net increase (decrease) in cash and cash equivalents (6,707 ) 7,197
Cash and cash equivalents: Beginning of year 12,119
4,922 End of year $ 5,412 $ 12,119
Graco (NYSE:GGG)
Historical Stock Chart
From Jun 2024 to Jul 2024
Graco (NYSE:GGG)
Historical Stock Chart
From Jul 2023 to Jul 2024