Graco Inc. (NYSE: GGG) today announced results for the
quarter and six months ended June 25, 2010.
Summary$ in millions except per share amounts
Thirteen Weeks Ended Twenty-six Weeks
Ended June 25, June 26, %
June 25, June 26, % 2010
2009 Change 2010 2009 Change
Net Sales $ 192.1 $ 147.7 30 % $ 356.8 $ 285.6 25 % Net
Earnings 24.8 11.6 113 % 45.4 14.4 215 % Diluted Net Earnings per
Common Share $ 0.41 $ 0.19 116 % $ 0.74 $ 0.24 208 %
- All divisions and regions had
double-digit percentage revenue growth for the quarter and
year-to-date.
- Year-to-date gross margin rate
of 53½ percent was 5½ percentage points higher than last year’s
first-half rate.
- Net earnings as a percentage of
sales increased to 13 percent for the year-to-date, up from 5
percent for the comparable period last year.
“Revenue growth continued to drive improved earnings in the
second quarter,” said Patrick J. McHale, President and Chief
Executive Officer. “Sales gains were strong worldwide, with Asia
Pacific leading the way with a 53 percent increase over last year.
New product introductions led to improved results for the
Contractor segment and solid sales growth continued in the
Industrial and Lubrication segments.”
Consolidated Results
Sales for the quarter increased 25 percent in the Americas, 27
percent in Europe (33 percent at consistent translation rates) and
53 percent in Asia Pacific (47 percent at consistent translation
rates). Translation rates did not have a significant impact on the
overall sales increase of 30 percent. Year-to-date sales increased
17 percent in the Americas, 22 percent in Europe and 59 percent in
Asia Pacific (51 percent at consistent translation rates). The
overall year-to-date growth rate of 25 percent included 2
percentage points from translation.
Gross profit margin, expressed as a percentage of sales, was 53
percent for the quarter and 53½ year-to-date, up from 49½ percent
and 48 percent, for the comparable periods last year, respectively.
Higher production volume in 2010 was the major factor in the
improvement in both the quarter and year-to-date rates. Costs
related to workforce reductions lowered the 2009 first-half gross
margin rate and the favorable effects of currency translation
contributed to the increase in the 2010 year-to-date rate. Selling
price increases, lower material and pension costs, and divisional
mix also contributed to the increase in margin rates.
Total operating expenses were up $7 million year-to-date.
Improved results drove the increase, mainly from higher incentives
expense, partially offset by lower pension expense.
The year-to-date effective income tax rate of 35 percent for
2010 was higher than the 32 percent rate for the comparable period
of 2009. The federal R&D credit has not been renewed for 2010,
so no credit is included in the 2010 rate.
Segment Results
Certain measurements of segment operations are summarized
below:
Thirteen Weeks Twenty-six Weeks
Industrial Contractor
Lubrication Industrial Contractor
Lubrication Net sales (in millions) $ 100.5 $
73.8 $ 17.8 $ 197.3 $ 124.6 $ 35.0 Net sales percentage change from
last year 37% 22% 28% 33% 16% 20% Operating earnings as a
percentage of net sales
2010
29% 18% 10% 30% 15% 10%
2009
18% 20% (12)% 17% 12% (11)%
All segments had double-digit percentage sales growth for the
quarter and year-to-date. The Industrial segment had strong
increases in all regions, including a 54 percent increase for the
quarter in Asia Pacific (63 percent year-to-date). Stocking
shipments of new products contributed to strong second quarter
sales in Contractor (up 22 percent for the quarter and 16 percent
year-to-date). Costs and expenses related to the new product
introduction contributed to a small decrease in Contractor’s
operating earnings as a percentage of sales. Lubrication sales
increased 28 percent for the quarter and 20 percent year-to-date,
with large increases on small bases in Europe and Asia Pacific.
Improved year-to-date operating earnings of all segments reflect
the effects of higher sales and 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.
Outlook
“Investments in new product development, international sales
people and our global distribution channel are paying dividends in
the form of improved results,” said Patrick J. McHale, President
and Chief Executive Officer. “We saw strong growth in Asia Pacific
and Europe in the second quarter, and Industrial segment sales
increased by 37 percent. We expect that activity in Asia will
remain strong. While second quarter is generally the strongest
quarter for our Contractor business, we look for modest improvement
in end markets in the Americas and Europe over the last half of
2010.”
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 2009 (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 Thursday,
July 22, 2010, at 11:00 a.m. ET, to discuss Graco’s second quarter
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 July 22, 2010,
by dialing 800.406.7325, Conference ID #4323043, 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 July 25, 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)
Thirteen Weeks Ended Twenty-six Weeks Ended (in thousands, except
per share amounts) June 25, June 26, June 25, June 26, 2010 2009
2010 2009
Net Sales $ 192,088 $ 147,712 $ 356,809 $ 285,592
Cost of products sold 90,168 74,704
165,594 148,256
Gross Profit
101,920 73,008 191,215 137,336 Product development 9,472 9,781
18,946 19,832 Selling, marketing and distribution 32,647 28,292
61,807 60,225 General and administrative 20,592
16,489 38,547 32,704
Operating Earnings 39,209 18,446 71,915 24,575 Interest
expense 1,041 1,221 2,121 2,587 Other expense (income), net
(268 ) 91 (107 ) 686
Earnings
Before Income Taxes 38,436 17,134 69,901 21,302 Income taxes
13,600 5,500 24,500
6,900
Net Earnings $ 24,836 $ 11,634
$ 45,401 $ 14,402
Net Earnings per
Common Share Basic $ 0.41 $ 0.19 $ 0.75 $ 0.24 Diluted $ 0.41 $
0.19 $ 0.74 $ 0.24
Weighted Average Number of Shares
Basic 60,597 59,903 60,402 59,770 Diluted 61,184 60,183 60,948
60,043
Segment Information (Unaudited)
Thirteen Weeks Ended Twenty-six Weeks Ended June 25, June 26, June
25, June 26, 2010 2009 2010 2009
Net Sales Industrial $
100,461 $ 73,334 $ 197,253 $ 148,566 Contractor 73,782 60,386
124,579 107,834 Lubrication 17,845 13,992
34,977 29,192
Total $
192,088 $ 147,712 $ 356,809 $ 285,592
Operating Earnings Industrial $ 29,565 $ 13,435 $
60,039 $ 24,930 Contractor 13,203 12,043 18,086 13,282 Lubrication
1,868 (1,745 ) 3,575 (3,181 ) Unallocated corporate (expense)
(5,427 ) (5,287 ) (9,785 ) (10,456 )
Total $ 39,209 $ 18,446 $ 71,915 $
24,575 All figures are subject to audit and
adjustment at the end of the fiscal year.
The consolidated Balance Sheets, Consolidated Statements of Cash
Flows and Management's Discussion and Analysis are available in our
Quarterly Report on Form 10-Q on our website at www.graco.com
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