UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report
Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 27, 2015
Commission File Number: 001-09249
GRACO INC.
(Exact name of registrant
as specified in its charter)
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Minnesota |
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41-0285640 |
(State of incorporation) |
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(I.R.S. Employer Identification Number) |
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88 -
11th Avenue N.E.
Minneapolis, Minnesota |
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55413
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(Address of principal executive offices) |
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(Zip Code) |
(612) 623-6000
(Registrants
telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days.
Yes X No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files).
Yes X No
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
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Large Accelerated Filer |
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X |
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Accelerated Filer |
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Non-accelerated Filer |
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Smaller reporting company |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
No X
58,678,000 shares of the Registrants Common Stock, $1.00
par value, were outstanding as of April 17, 2015.
INDEX
2
PART I Item 1.
GRACO INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited) (In thousands except per share amounts)
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Thirteen Weeks Ended |
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March 27, 2015 |
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March 28, 2014 |
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Net Sales |
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$ |
306,453 |
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$ |
289,962 |
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Cost of products sold |
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144,324 |
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130,650 |
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Gross Profit |
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162,129 |
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159,312 |
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Product development |
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15,290 |
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13,159 |
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Selling, marketing and distribution |
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51,424 |
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46,342 |
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General and administrative |
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30,184 |
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25,106 |
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Operating Earnings |
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65,231 |
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74,705 |
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Interest expense |
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5,303 |
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4,588 |
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Held separate investment (income), net |
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(29,523) |
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(3,675) |
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Other expense (income), net |
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710 |
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247 |
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Earnings Before Income Taxes |
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88,741 |
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73,545 |
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Income taxes |
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19,900 |
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22,800 |
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Net Earnings |
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$ |
68,841 |
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$ |
50,745 |
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Per Common Share |
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Basic net earnings |
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$ |
1.17 |
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$ |
0.83 |
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Diluted net earnings |
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$ |
1.14 |
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$ |
0.81 |
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Cash dividends declared |
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$ |
0.30 |
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$ |
$0.28 |
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See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited) (In thousands)
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Thirteen Weeks Ended |
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March 27, 2015 |
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March 28, 2014 |
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Net Earnings |
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$ |
68,841 |
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$ |
50,745 |
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Other comprehensive income (loss) |
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Cumulative translation adjustment |
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(3,011) |
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(86) |
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Pension and postretirement medical liability adjustment |
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2,438 |
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1,188 |
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Income taxes |
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Pension and postretirement medical liability adjustment |
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(902) |
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(428) |
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Other comprehensive income (loss) |
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(1,475) |
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674 |
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Comprehensive Income |
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$ |
67,366 |
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$ |
51,419 |
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See notes to consolidated financial statements.
3
GRACO INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
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March 27, 2015 |
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Dec 26, 2014 |
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ASSETS |
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Current Assets |
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Cash and cash equivalents |
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$ |
27,678 |
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$ |
23,656 |
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Accounts receivable, less allowances of $8,800 and $8,100 |
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243,228 |
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214,944 |
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Inventories |
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182,485 |
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159,797 |
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Deferred income taxes |
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20,972 |
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19,969 |
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Investment in businesses held separate |
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421,767 |
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421,767 |
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Other current assets |
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9,174 |
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19,374 |
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Total current assets |
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905,304 |
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859,507 |
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Property, Plant and Equipment |
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Cost |
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439,566 |
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433,751 |
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Accumulated depreciation |
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(271,445) |
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(272,521) |
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Property, plant and equipment, net |
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168,121 |
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161,230 |
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Goodwill |
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393,448 |
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292,574 |
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Other Intangible Assets, net |
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242,665 |
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176,278 |
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Deferred Income Taxes |
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32,205 |
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28,982 |
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Other Assets |
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26,062 |
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26,207 |
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Total Assets |
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$ |
1,767,805 |
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$ |
1,544,778 |
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LIABILITIES AND SHAREHOLDERS EQUITY |
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Current Liabilities |
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Notes payable to banks |
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$ |
52,013 |
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$ |
5,016 |
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Trade accounts payable |
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45,930 |
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39,306 |
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Salaries and incentives |
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24,707 |
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40,775 |
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Dividends payable |
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17,700 |
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17,790 |
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Other current liabilities |
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78,327 |
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71,593 |
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Total current liabilities |
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218,677 |
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174,480 |
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Long-term Debt |
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767,040 |
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615,000 |
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Retirement Benefits and Deferred Compensation |
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136,722 |
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136,812 |
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Deferred Income Taxes |
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22,055 |
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22,454 |
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Other non-current liabilities |
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6,375 |
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- |
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Shareholders Equity |
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Common stock |
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58,806 |
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59,199 |
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Additional paid-in-capital |
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398,253 |
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384,704 |
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Retained earnings |
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262,088 |
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252,865 |
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Accumulated other comprehensive income (loss) |
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(102,211) |
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(100,736) |
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Total shareholders equity |
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616,936 |
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596,032 |
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Total Liabilities and Shareholders Equity |
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$ |
1,767,805 |
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$ |
1,544,778 |
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See notes to consolidated financial statements.
4
GRACO INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (In thousands)
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Thirteen Weeks Ended |
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March 27, 2015 |
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March 28, 2014 |
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Cash Flows From Operating Activities |
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Net Earnings |
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$ |
68,841 |
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$ |
50,745 |
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Adjustments to reconcile net earnings to net cash provided by operating activities |
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Depreciation and amortization |
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10,810 |
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9,262 |
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Deferred income taxes |
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(4,044) |
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(3,244) |
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Share-based compensation |
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5,033 |
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4,401 |
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Excess tax benefit related to share-based payment arrangements |
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(300) |
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(1,500) |
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Change in |
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Accounts receivable |
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(26,632) |
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(23,251) |
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Inventories |
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(13,545) |
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(9,985) |
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Trade accounts payable |
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6,088 |
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6,164 |
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Salaries and incentives |
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(16,910) |
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(16,125) |
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Retirement benefits and deferred compensation |
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3,171 |
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1,496 |
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Other accrued liabilities |
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|
4,947 |
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6,044 |
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Other |
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9,762 |
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4,235 |
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Net cash provided by operating activities |
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47,221 |
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28,242 |
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Cash Flows From Investing Activities |
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Property, plant and equipment additions |
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(9,796) |
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(6,879) |
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Acquisition of businesses, net of cash acquired |
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(182,904) |
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(65,150) |
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Other |
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38 |
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3 |
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Net cash used in investing activities |
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(192,662) |
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(72,026) |
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Cash Flows From Financing Activities |
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Borrowings (payments) on short-term lines of credit, net |
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47,605 |
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|
|
1,141 |
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Borrowings on long-term line of credit |
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|
379,095 |
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|
|
177,710 |
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Payments on long-term line of credit |
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|
(227,055) |
|
|
|
(83,070) |
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Excess tax benefit related to share-based payment arrangements |
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|
300 |
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|
|
1,500 |
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Common stock issued |
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|
12,746 |
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|
15,275 |
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Common stock repurchased |
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|
(46,935) |
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|
|
(47,542) |
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Cash dividends paid |
|
|
(17,730) |
|
|
|
(16,813) |
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|
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|
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Net cash provided by (used in) financing activities |
|
|
148,026 |
|
|
|
48,201 |
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|
|
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Effect of exchange rate changes on cash |
|
|
1,437 |
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(91) |
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Net increase (decrease) in cash and cash equivalents |
|
|
4,022 |
|
|
|
4,326 |
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Cash and cash equivalents |
|
|
|
|
|
|
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|
Beginning of year |
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|
23,656 |
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|
|
19,756 |
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|
|
|
|
|
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End of period |
|
$ |
27,678 |
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$ |
24,082 |
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|
|
|
|
|
|
|
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|
See notes to consolidated financial statements.
5
GRACO INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. |
The consolidated balance sheet of Graco Inc. and Subsidiaries (the Company) as of March 27, 2015 and the related statements of earnings for the thirteen weeks
ended March 27, 2015 and March 28, 2014, and cash flows for the thirteen weeks ended March 27, 2015 and March 28, 2014 have been prepared by the Company and have not been audited. |
In the opinion of management, these consolidated financial statements reflect all adjustments (consisting of only normal recurring adjustments)
necessary to present fairly the financial position of the Company as of March 27, 2015, and the results of operations and cash flows for all periods presented.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. Therefore, these
statements should be read in conjunction with the financial statements and notes thereto included in the Companys 2014 Annual Report on Form 10-K.
The results of operations for interim periods are not necessarily indicative of results that will be realized for the full fiscal year.
2. |
The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share amounts): |
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Thirteen Weeks Ended |
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March 27, 2015 |
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March 28, 2014 |
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Net earnings available to common
shareholders |
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$ |
68,841 |
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$ |
50,745 |
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|
Weighted average shares outstanding
for basic earnings per share |
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|
58,981 |
|
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|
60,822 |
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Dilutive effect of stock options
computed using the treasury stock method and the average market price |
|
|
1,484 |
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|
1,616 |
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Weighted average shares outstanding
for diluted earnings per share |
|
|
60,465 |
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|
|
62,438 |
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Basic earnings per
share |
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$ |
1.17 |
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$ |
0.83 |
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Diluted earnings per
share |
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$ |
1.14 |
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$ |
0.81 |
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6
Stock options to purchase 1,186,000 and 838,000 shares were not included in the March 27, 2015
and March 28, 2014 computations of diluted earnings per share, respectively, because they would have been anti-dilutive.
3. |
Options on common shares granted and outstanding, as well as the weighted average exercise price, are shown below (in thousands, except exercise prices):
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Option Shares |
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Weighted Average Exercise Price |
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Options Exercisable |
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Weighted Average Exercise Price |
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Outstanding, December 26, 2014 |
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4,975 |
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$ |
44.72 |
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|
|
3,318 |
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$ |
34.86 |
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Granted |
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|
496 |
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|
74.39 |
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Exercised |
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(60) |
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|
32.57 |
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Canceled |
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|
(6) |
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|
|
72.12 |
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Outstanding, March 27, 2015 |
|
|
5,405 |
|
|
$ |
47.55 |
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|
|
3,722 |
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|
$ |
37.63 |
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The Company recognized year-to-date share-based compensation of $5.0 million in 2015 and $4.4 million in 2014. As
of March 27, 2015, there was $21.3 million of unrecognized compensation cost related to unvested options, expected to be recognized over a weighted average period of 1.9 years.
The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted
average assumptions and results:
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Thirteen Weeks Ended |
|
|
|
March 27, 2015 |
|
|
March 28, 2014 |
|
Expected life in years |
|
|
6.5 |
|
|
|
6.5 |
|
Interest rate |
|
|
1.7 % |
|
|
|
2.0 % |
|
Volatility |
|
|
35.3 % |
|
|
|
36.1 % |
|
Dividend yield |
|
|
1.6 % |
|
|
|
1.5 % |
|
Weighted average fair value per share |
|
$ |
23.42 |
|
|
$ |
24.90 |
|
7
Under the Companys Employee Stock Purchase Plan, the Company issued 166,000 shares in 2015 and
193,000 shares in 2014. The fair value of the employees purchase rights under this Plan was estimated on the date of grant. The benefit of the 15 percent discount from the lesser of the fair market value per common share on the first day and
the last day of the plan year was added to the fair value of the employees purchase rights determined using the Black-Scholes option-pricing model with the following assumptions and results:
|
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|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended |
|
|
|
|
|
March 27, 2015 |
|
|
March 28, 2014 |
|
|
Expected life in years |
|
|
1.0 |
|
|
|
1.0 |
|
|
Interest rate |
|
|
0.2 % |
|
|
|
0.1 % |
|
|
Volatility |
|
|
18.9 % |
|
|
|
21.4 % |
|
|
Dividend yield |
|
|
1.6 % |
|
|
|
1.4 % |
|
|
Weighted average fair value per share |
|
$ |
16.51 |
|
|
$ |
17.81 |
|
|
4. |
The components of net periodic benefit cost for retirement benefit plans were as follows (in thousands): |
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended |
|
|
|
March 27, 2015 |
|
|
March 28, 2014 |
|
Pension Benefits |
|
|
|
|
|
|
|
|
Service cost |
|
$ |
2,096 |
|
|
$ |
1,742 |
|
Interest cost |
|
|
3,775 |
|
|
|
4,136 |
|
Expected return on assets |
|
|
(4,917) |
|
|
|
(5,419) |
|
Amortization and other |
|
|
2,353 |
|
|
|
1,333 |
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost |
|
$ |
3,307 |
|
|
$ |
1,792 |
|
|
|
|
|
|
|
|
|
|
Postretirement
Medical |
|
|
|
|
|
|
|
|
Service cost |
|
$ |
150 |
|
|
$ |
125 |
|
Interest cost |
|
|
226 |
|
|
|
277 |
|
Amortization |
|
|
(101) |
|
|
|
(128) |
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost |
|
$ |
275 |
|
|
$ |
274 |
|
|
|
|
|
|
|
|
|
|
8
5. |
Changes in components of accumulated other comprehensive income (loss), net of tax were (in thousands): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension and
Post- retirement Medical |
|
|
Cumulative Translation Adjustment
|
|
|
Total |
|
Thirteen Weeks Ended March 28, 2014 |
|
|
|
|
|
|
|
|
|
Beginning balance |
|
$ |
(50,132) |
|
|
$ |
3,783 |
|
|
$ |
(46,349) |
|
Other comprehensive income before reclassifications |
|
|
- |
|
|
|
(86) |
|
|
|
(86) |
|
Amounts reclassified from accumulated other comprehensive income |
|
|
760 |
|
|
|
- |
|
|
|
760 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance |
|
$ |
(49,372) |
|
|
$ |
3,697 |
|
|
$ |
(45,675) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended March 27, 2015 |
|
|
|
|
|
|
|
|
|
Beginning balance |
|
$ |
(76,584) |
|
|
$ |
(24,152) |
|
|
$ |
(100,736) |
|
Other comprehensive income before reclassifications |
|
|
- |
|
|
|
(3,011) |
|
|
|
(3,011) |
|
Amounts reclassified from accumulated other comprehensive income |
|
|
1,536 |
|
|
|
- |
|
|
|
1,536 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance |
|
$ |
(75,048) |
|
|
$ |
(27,163) |
|
|
$ |
(102,211) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
Amounts related to pension and postretirement medical adjustments are reclassified to pension cost,
which is allocated to cost of products sold and operating expenses based on salaries and wages, approximately as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended |
|
|
|
March 27, 2015 |
|
|
March 28, 2014 |
|
Cost of products sold |
|
$ |
938 |
|
|
$ |
436 |
|
Product development |
|
|
383 |
|
|
|
187 |
|
Selling, marketing and distribution |
|
|
703 |
|
|
|
335 |
|
General and administrative |
|
|
414 |
|
|
|
230 |
|
|
|
|
|
|
|
|
|
|
Total before tax |
|
$ |
2,438 |
|
|
$ |
1,188 |
|
Income tax (benefit) |
|
|
(902) |
|
|
|
(428) |
|
|
|
|
|
|
|
|
|
|
Total after tax |
|
$ |
1,536 |
|
|
$ |
760 |
|
|
|
|
|
|
|
|
|
|
6. |
Beginning with the first quarter of 2015 the Company revised the presentation of its financial reporting segments. Operations of the Process and the Oil and Natural Gas
divisions, historically included in the Industrial segment, are now aggregated with the Lubrication division (formerly reported as a separate segment) in the newly-formed Process segment. This change aligns the types of products offered and markets
served within the segments. Prior year segment information has been restated to conform to 2015 reporting. |
A summary of
the Companys three reportable segments (Industrial, Process and Contractor) follows.
The Industrial segment includes the
Industrial Products and the Applied Fluid Technologies divisions. The Industrial segment markets equipment and pre-engineered packages for moving and applying paints, coatings, sealants, adhesives and other fluids. Markets served include automotive
and vehicle assembly and components production, wood and metal products, rail, marine, aerospace, farm, construction, bus, recreational vehicles, and various other industries.
The Process segment includes the Process, the Oil and Natural Gas, and the Lubrication divisions. The Process segment markets pumps, valves, meters and accessories to move and dispense chemicals, oil and natural
gas, water, waste water, petroleum, food, lubricants and other fluids. Markets served include food and beverage, dairy, oil and natural gas, pharmaceutical, cosmetics, electronics, waste water, mining, fast oil change facilities, service garages,
fleet service centers, automobile dealerships and industrial lubrication applications.
The Contractor segment remains unchanged. The
Contractor segment markets sprayers for architectural coatings for painting, corrosion control, texture, and line striping.
10
Sales and operating earnings by segment were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended |
|
|
|
March 27, 2015 |
|
|
March 28, 2014 |
|
Net Sales |
|
|
|
|
|
|
|
|
Industrial |
|
$ |
143,266 |
|
|
$ |
152,046 |
|
Process |
|
|
67,681 |
|
|
|
53,010 |
|
Contractor |
|
|
95,506 |
|
|
|
84,906 |
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
306,453 |
|
|
$ |
289,962 |
|
|
|
|
|
|
|
|
|
|
Operating Earnings |
|
|
|
|
|
|
|
|
Industrial |
|
$ |
42,940 |
|
|
$ |
49,105 |
|
Process |
|
|
10,498 |
|
|
|
12,643 |
|
Contractor |
|
|
19,375 |
|
|
|
18,250 |
|
Unallocated corporate (expense) |
|
|
(7,582) |
|
|
|
(5,293) |
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
65,231 |
|
|
$ |
74,705 |
|
|
|
|
|
|
|
|
|
|
Assets by segment were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
March 27, 2015 |
|
|
Dec 26, 2014 |
|
Industrial |
|
$ |
546,930 |
|
|
$ |
548,868 |
|
Process |
|
|
489,775 |
|
|
|
304,903 |
|
Contractor |
|
|
209,864 |
|
|
|
176,757 |
|
Unallocated corporate |
|
|
521,236 |
|
|
|
514,250 |
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
1,767,805 |
|
|
$ |
1,544,778 |
|
|
|
|
|
|
|
|
|
|
11
Geographic information follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended |
|
|
|
|
|
|
|
March 27, 2015 |
|
|
March 28, 2014 |
|
|
|
|
|
Net sales |
|
|
|
|
|
|
|
|
|
|
|
|
(based on customer location) |
|
|
|
|
|
|
|
|
|
|
|
|
United States |
|
$ |
159,328 |
|
|
$ |
133,922 |
|
|
|
|
|
Other countries |
|
|
147,125 |
|
|
|
156,040 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
306,453 |
|
|
$ |
289,962 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 27, 2015 |
|
|
Dec 26, 2014 |
|
|
|
|
|
Long-lived assets |
|
|
|
|
|
|
|
|
|
|
|
|
United States |
|
$ |
137,538 |
|
|
$ |
131,131 |
|
|
|
|
|
Other countries |
|
|
30,583 |
|
|
|
30,099 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
168,121 |
|
|
$ |
161,230 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7. |
Major components of inventories were as follows (in thousands): |
|
|
|
|
|
|
|
|
|
|
|
|
|
March 27, 2015 |
|
|
Dec 26, 2014 |
|
|
|
Finished products and components |
|
$ |
100,372 |
|
|
$ |
87,384 |
|
|
Products and components in various stages of completion |
|
|
46,420 |
|
|
|
47,682 |
|
|
Raw materials and purchased components |
|
|
80,753 |
|
|
|
69,212 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
227,545 |
|
|
|
204,278 |
|
|
Reduction to LIFO cost |
|
|
(45,060) |
|
|
|
(44,481) |
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
182,485 |
|
|
$ |
159,797 |
|
|
|
|
|
|
|
|
|
|
|
|
|
12
8. |
Information related to other intangible assets follows (dollars in thousands): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Life (years) |
|
Cost |
|
|
Accumulated Amortization |
|
|
Foreign Currency Translation |
|
|
Book Value |
|
March 27, 2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer relationships |
|
3 - 14 |
|
$ |
196,884 |
|
|
$ |
(25,488) |
|
|
$ |
(7,471) |
|
|
$ |
163,925 |
|
Patents, proprietary technology
and product documentation |
|
3 - 11 |
|
|
20,168 |
|
|
|
(7,628) |
|
|
|
(477) |
|
|
|
12,063 |
|
Trademarks, trade names and other |
|
5 |
|
|
495 |
|
|
|
(68) |
|
|
|
(50) |
|
|
|
377 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
217,547 |
|
|
|
(33,184) |
|
|
|
(7,998) |
|
|
|
176,365 |
|
Not Subject to Amortization: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brand names |
|
|
|
|
69,165 |
|
|
|
- |
|
|
|
(2,865) |
|
|
|
66,300 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
$ |
286,712 |
|
|
$ |
(33,184) |
|
|
$ |
(10,863) |
|
|
$ |
242,665 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 26,
2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer relationships |
|
3 - 14 |
|
$ |
143,144 |
|
|
$ |
(21,948) |
|
|
$ |
(7,334) |
|
|
$ |
113,862 |
|
Patents, proprietary technology
and product documentation |
|
3 - 11 |
|
|
18,268 |
|
|
|
(7,126) |
|
|
|
(655) |
|
|
|
10,487 |
|
Trademarks, trade names and other |
|
5 |
|
|
175 |
|
|
|
(44) |
|
|
|
- |
|
|
|
131 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
161,587 |
|
|
|
(29,118) |
|
|
|
(7,989) |
|
|
|
124,480 |
|
Not Subject to Amortization: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brand names |
|
|
|
|
55,265 |
|
|
|
- |
|
|
|
(3,467) |
|
|
|
51,798 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
$ |
216,852 |
|
|
$ |
(29,118) |
|
|
$ |
(11,456) |
|
|
$ |
176,278 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangibles for the quarter was $4.1 million in 2015 and $3.1 million in 2014. Estimated annual
amortization expense is as follows: $17.1 million in 2015, $17.1 million in 2016, $16.9 million in 2017, $16.6 million in 2018, $16.4 million in 2019 and $96.4 million thereafter.
Changes in the carrying amount of goodwill in 2015 were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industrial |
|
|
Process |
|
|
Contractor |
|
|
Total |
|
Beginning balance |
|
$ |
188,273 |
|
|
$ |
91,569 |
|
|
$ |
12,732 |
|
|
$ |
292,574 |
|
Additions from business acquisitions |
|
|
759 |
|
|
|
102,645 |
|
|
|
- |
|
|
|
103,404 |
|
Foreign currency translation |
|
|
925 |
|
|
|
(3,455) |
|
|
|
- |
|
|
|
(2,530) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance |
|
$ |
189,957 |
|
|
$ |
190,759 |
|
|
$ |
12,732 |
|
|
$ |
393,448 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13
9. |
Components of other current liabilities were (in thousands): |
|
|
|
|
|
|
|
|
|
|
|
|
|
March 27, 2015 |
|
|
Dec 26, 2014 |
|
|
|
Accrued self-insurance retentions |
|
$ |
7,330 |
|
|
$ |
7,089 |
|
|
Accrued warranty and service liabilities |
|
|
7,644 |
|
|
|
7,609 |
|
|
Accrued trade promotions |
|
|
7,326 |
|
|
|
7,697 |
|
|
Payable for employee stock purchases |
|
|
2,217 |
|
|
|
9,126 |
|
|
Customer advances and deferred revenue |
|
|
10,985 |
|
|
|
8,918 |
|
|
Income taxes payable |
|
|
15,048 |
|
|
|
5,997 |
|
|
Other |
|
|
27,777 |
|
|
|
25,157 |
|
|
|
|
|
|
|
|
|
|
|
|
Total other current liabilities |
|
$ |
78,327 |
|
|
$ |
71,593 |
|
|
|
|
|
|
|
|
|
|
|
|
A liability is established for estimated future warranty and service claims that relate to current and prior period
sales. The Company estimates warranty costs based on historical claim experience and other factors including evaluating specific product warranty issues. Following is a summary of activity in accrued warranty and service liabilities (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended March 27, 2015 |
|
|
Year Ended Dec 26, 2014 |
|
|
|
Balance, beginning of year |
|
$ |
7,609 |
|
|
$ |
7,771 |
|
|
Assumed in business acquisition |
|
|
- |
|
|
|
12 |
|
|
Charged to expense |
|
|
1,685 |
|
|
|
6,069 |
|
|
Margin on parts sales reversed |
|
|
549 |
|
|
|
1,920 |
|
|
Reductions for claims settled |
|
|
(2,199) |
|
|
|
(8,163) |
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of period |
|
$ |
7,644 |
|
|
$ |
7,609 |
|
|
|
|
|
|
|
|
|
|
|
|
14
10. |
Assets and liabilities measured at fair value on a recurring basis and fair value measurement level were as follows (in thousands): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level |
|
March 27, 2015 |
|
|
Dec 26, 2014 |
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
Cash surrender value of life insurance |
|
2 |
|
$ |
13,403 |
|
|
$ |
13,187 |
|
|
Forward exchange contracts |
|
2 |
|
|
- |
|
|
|
280 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets at fair value |
|
|
|
$ |
13,403 |
|
|
$ |
13,467 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
Contingent consideration |
|
3 |
|
$ |
8,100 |
|
|
$ |
- |
|
|
Deferred compensation |
|
2 |
|
|
3,114 |
|
|
|
2,676 |
|
|
Forward exchange contracts |
|
2 |
|
|
102 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities at fair value |
|
|
|
$ |
11,316 |
|
|
$ |
2,676 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contracts insuring the lives of certain employees who are eligible to participate in certain non-qualified pension
and deferred compensation plans are held in trust. Cash surrender value of the contracts is based on performance measurement funds that shadow the deferral investment allocations made by participants in certain deferred compensation plans. The
deferred compensation liability balances are valued based on amounts allocated by participants to the underlying performance measurement funds.
Contingent consideration liability represents the estimated value (using a market approach) of future payments to be made to previous owners of an acquired business (see Note 11).
Long-term notes payable with fixed interest rates have a carrying amount of $300 million and an estimated fair value of $330 million as of
March 27, 2015 and $330 million as of December 26, 2014. The fair value of variable rate borrowings approximates carrying value. The Company uses significant other observable inputs to estimate fair value (level 2 of the fair value
hierarchy) based on the present value of future cash flows and rates that would be available for issuance of debt with similar terms and remaining maturities.
11. |
On January 20, 2015, the Company completed the acquisition of High Pressure Equipment Holdings, LLC (HiP) for $160 million cash. HiP designs and manufactures valves,
fittings and other flow control equipment engineered to perform in ultra-high pressure environments. HiPs products and business relationships will enhance Gracos position in the oil and natural gas industry and complement Gracos
core competencies of designing and manufacturing advanced flow control technologies. HiP had sales of $38 million in 2014. Results of HiP operations, including $7 million of sales, have been included in the Companys Process segment from the
date of acquisition. |
15
Purchase consideration was allocated to assets acquired and liabilities assumed based on estimated
fair values, subject to post-closing adjustments, as follows (in thousands):
|
|
|
|
|
Cash and cash equivalents |
|
$ |
1,904 |
|
Accounts receivable |
|
|
4,714 |
|
Inventories |
|
|
7,605 |
|
Other current assets |
|
|
69 |
|
Property, plant and equipment |
|
|
1,962 |
|
Deferred income taxes |
|
|
1,840 |
|
Identifiable intangible assets |
|
|
60,100 |
|
Goodwill |
|
|
86,623 |
|
|
|
|
|
|
Total assets acquired |
|
|
164,817 |
|
Liabilities assumed |
|
|
(3,414) |
|
|
|
|
|
|
Net assets acquired |
|
$ |
161,403 |
|
|
|
|
|
|
Identifiable intangible assets and estimated useful life are as follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Life (years) |
Customer relationships |
|
|
47,100 |
|
|
12 |
Trade names |
|
|
13,000 |
|
|
Indefinite |
|
|
|
|
|
|
|
Total identifiable intangible assets |
|
$ |
60,100 |
|
|
|
|
|
|
|
|
|
|
Approximately two-thirds of the goodwill acquired with HiP is deductible for tax purposes.
On January 2, 2015 the Company acquired White Knight Fluid Handling for $16 million cash and a commitment for additional consideration if
future revenues exceed certain thresholds, valued at $8 million. The maximum payout is not limited. White Knight designs and manufactures high purity, metal-free pumps used in the production process of manufacturing semiconductors, solar panels, LED
flat panel displays and various other electronics. The products, brands and distribution channels of White Knight expand and complement the offerings of the Companys Process segment. The purchase price was allocated based on estimated fair
values, including $12 million of goodwill, $9 million of other identifiable intangible assets and $3 million of net tangible assets.
Post-closing working capital adjustments that completed the Alco purchase price allocation, acquired in the fourth quarter of 2014, resulted in a
$4 million addition to goodwill in the first quarter of 2015.
The Company completed another acquisition in 2015 that was not material
to the consolidated financial statements.
16
12. |
In March 2015, the FTC approved the Companys application to sell the Liquid Finishing business assets it acquired in 2012. The sale was completed on April 1, 2015 in a
$590 million cash transaction, subject to customary post-closing adjustments. The Company used proceeds from the sale to repay approximately $500 million of debt, including $40 million drawn on a short-term credit agreement that expired upon closing
of the sale transaction. |
The Liquid Finishing business assets were held as a cost-method investment on Gracos
balance sheet, and income was recognized based on dividends received from current earnings. The Company received dividends of $30 million in the first quarter of 2015 and $4 million in the comparable period of 2014. Dividends for the full year
totaled $28 million in 2014 and $28 million in 2013.
17
|
|
|
|
|
Item 2. |
|
GRACO INC. AND SUBSIDIARIES |
|
|
|
|
|
|
|
MANAGEMENTS DISCUSSION AND ANALYSIS OF |
|
|
|
|
FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
|
|
Overview
The
Company designs, manufactures and markets systems and equipment to move, measure, control, dispense and spray fluid and coating materials. Management classifies the Companys business into three reportable segments: Industrial, Process and
Contractor. Key strategies include developing and marketing new products, expanding distribution globally, opening new markets with technology and channel expansion and completing strategic acquisitions.
The following Managements Discussion and Analysis reviews significant factors affecting the Companys results of operations and financial condition.
This discussion should be read in conjunction with the financial statements and the accompanying notes to the financial statements.
Consolidated
Results
Net sales, net earnings and earnings per share were as follows (in millions except per share amounts and percentages):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended |
|
|
|
March 27, 2015 |
|
|
March 28, 2014 |
|
|
% Change |
|
|
|
|
|
Net Sales |
|
$ |
306.5 |
|
|
$ |
290.0 |
|
|
|
6 % |
|
Operating Earnings |
|
$ |
65.2 |
|
|
$ |
74.7 |
|
|
|
(13) % |
|
Net Earnings |
|
$ |
68.8 |
|
|
$ |
50.7 |
|
|
|
36 % |
|
Diluted Net Earnings per Common Share |
|
$ |
1.14 |
|
|
$ |
0.81 |
|
|
|
41 % |
|
The following table presents components of changes in sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year-to-Date |
|
|
|
Segment |
|
|
Region |
|
|
|
|
|
|
Industrial |
|
|
Process |
|
|
Contractor |
|
|
Americas |
|
|
EMEA |
|
|
Asia Pacific |
|
|
Total |
|
Volume and Price |
|
|
(1) % |
|
|
|
5 % |
|
|
|
16 % |
|
|
|
12 % |
|
|
|
- % |
|
|
|
(10) % |
|
|
|
5 % |
|
Acquisitions |
|
|
- % |
|
|
|
27 % |
|
|
|
- % |
|
|
|
5 % |
|
|
|
8 % |
|
|
|
4 % |
|
|
|
5 % |
|
Currency |
|
|
(5) % |
|
|
|
(4) % |
|
|
|
(4) % |
|
|
|
(1) % |
|
|
|
(14) % |
|
|
|
(3) % |
|
|
|
(4) % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
(6) % |
|
|
|
28 % |
|
|
|
12 % |
|
|
|
16 % |
|
|
|
(6) % |
|
|
|
(9) % |
|
|
|
6 % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
Sales by geographic area were as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended |
|
|
|
March 27, 2015 |
|
|
March 28, 2014 |
|
|
|
|
Americas1 |
|
$ |
184.8 |
|
|
$ |
158.8 |
|
EMEA2 |
|
|
68.8 |
|
|
|
73.4 |
|
Asia Pacific |
|
|
52.9 |
|
|
|
57.8 |
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
$ |
306.5 |
|
|
$ |
290.0 |
|
|
|
|
|
|
|
|
|
|
1 North and South America, including the U.S.
2 Europe, Middle East and Africa
Changes in currency translation rates reduced sales and net earnings by approximately $13 million and $4 million, respectively, for the quarter.
Sales increased 6 percent, with a 16 percent increase in the Americas and decreases of 6 percent in EMEA and 9 percent in Asia Pacific. Sales from operations acquired in the fourth quarter of 2014 and the first
quarter of 2015 totaled $15 million, contributing 5 percentage points of growth. Organic sales at consistent translation rates increased 5 percent, with a 12 percent increase in the Americas, flat in EMEA, and a 10 percent decrease in Asia Pacific.
Gross profit margin rate was 53 percent, down 2 percentage points from the comparable period last year. Changes in currency translation rates accounted
for more than half of the decrease. Effects of purchase accounting totaling approximately $3 million and changes in mix also contributed to the decrease.
Total operating expenses were $12 million (15 percent) higher than the comparable period last year. The increase included expenses of acquired operations totaling
$6 million, incremental spending related to regional expansion and product initiatives of $2 million, Contractor marketing and new product launch costs of $2 million and additional unallocated corporate expense (mostly pension, stock compensation
and new central warehouse) totaling $2 million.
Held separate investment income, net included dividends received from the Liquid Finishing businesses
that were held separate from the Companys other businesses. First quarter dividend income was $30 million in 2015 and $4 million in 2014.
The
effective income tax rate of 22 percent for the quarter was 9 percentage points lower than the comparable period last year, mostly due to the impact of higher post-tax dividend income.
19
Segment Results
Certain measurements of segment operations compared to last year are summarized below:
Industrial
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended |
|
|
|
March 27, 2015 |
|
|
March 28, 2014 |
|
|
|
|
Net sales (in millions) |
|
|
|
|
|
|
|
|
Americas |
|
$ |
67.8 |
|
|
$ |
65.7 |
|
EMEA |
|
|
41.0 |
|
|
|
47.6 |
|
Asia Pacific |
|
|
34.5 |
|
|
|
38.7 |
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
143.3 |
|
|
$ |
152.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings as a percentage of net sales |
|
|
30 % |
|
|
|
32 % |
|
|
|
|
|
|
|
|
|
|
Industrial segment sales decreased 6 percent (1 percent at consistent translation rates). Sales in this segment increased 3 percent
in the Americas and decreased 14 percent in EMEA (1 percent at consistent translation rates) and 11 percent in Asia Pacific (8 percent at consistent translation rates). Operating margin rate for the Industrial segment decreased 2 percentage points
compared to last year, driven by changes in currency translation rates and higher expenses relative to sales.
Process
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended |
|
|
|
March 27, 2015 |
|
|
March 28, 2014 |
|
|
|
|
Net sales (in millions) |
|
|
|
|
|
|
|
|
Americas |
|
$ |
42.9 |
|
|
$ |
34.5 |
|
EMEA |
|
|
13.9 |
|
|
|
9.4 |
|
Asia Pacific |
|
|
10.9 |
|
|
|
9.1 |
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
67.7 |
|
|
$ |
53.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings as a percentage of net sales |
|
|
16 % |
|
|
|
24 % |
|
|
|
|
|
|
|
|
|
|
Process segment sales increased 28 percent (32 percent at consistent translation rates), including double-digit percentage
increases in all regions. Nearly all of the sales increase was from acquired operations including Alco Valves (acquired fourth quarter of 2014), White Knight Fluid Handling and High Pressure Equipment (both acquired in January 2015). Changes in
currency translation rates and incremental investment in oil and natural gas products led to the decrease in operating margin rate for this segment.
20
Contractor
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended |
|
|
|
March 27, 2015 |
|
|
March 28, 2014 |
|
|
|
|
Net sales (in millions) |
|
|
|
|
|
|
|
|
Americas |
|
$ |
74.2 |
|
|
$ |
58.5 |
|
EMEA |
|
|
13.9 |
|
|
|
16.4 |
|
Asia Pacific |
|
|
7.4 |
|
|
|
10.0 |
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
95.5 |
|
|
$ |
84.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings as a percentage of net sales |
|
|
20 % |
|
|
|
21 % |
|
|
|
|
|
|
|
|
|
|
Contractor segment sales increased 12 percent (16 percent at consistent translation rates). Sales increased 27 percent in the
Americas and decreased 15 percent in EMEA (2 percent at consistent translation rates) and decreased 26 percent in Asia Pacific (23 percent at consistent translation rates). Operating margin rate in the Contractor segment decreased by one percentage
point mostly due to changes in currency translation rates and $2 million additional marketing spending, including new product launch costs and other volume-related increases.
Liquidity and Capital Resources
Net cash provided by operating activities was $47 million in 2015, a
$19 million increase over the comparable period of 2014, due mostly to the increase in net earnings. Accounts receivable and inventory balances have increased since the end of 2014 due to acquisitions and increases in business activity. In the first
quarter, the Company used borrowings under its credit agreements and operating cash flow to fund business acquisitions totaling $183 million, purchases of Company common stock of $47 million and dividends of $18 million paid to shareholders.
In January 2015, the Company completed the acquisition of High Pressure Equipment Holdings, LLC (HiP) for $160 million. HiP designs and manufactures
valves, fittings and other flow control equipment engineered to perform in ultra-high pressure environments. The Company also acquired White Knight Fluid Handling, a manufacturer of high purity, metal-free pumps used in the production process of
manufacturing semiconductors, solar panels, LED flat panel displays and various other electronics.
At March 27, 2015, the Company had various
lines of credit totaling $588 million, of which $70 million was unused. Internally generated funds and unused financing sources are expected to provide the Company with the flexibility to meet its liquidity needs in 2015.
Subsequent Event - Divestiture
In March 2015, the
FTC approved the Companys application to sell the Liquid Finishing business assets it acquired in 2012. The sale was completed on April 1, 2015 in a $590 million cash transaction, subject to customary post-closing adjustments. The Company
used proceeds from the sale to repay approximately $500 million of debt, including $40 million drawn on a short-term credit agreement that expired upon closing of the sale transaction. The Company expects to use the remaining proceeds from the sale
for ongoing share repurchases and to make investments in strategic acquisitions that provide synergistic opportunities.
21
The Liquid Finishing business assets were held separate as a cost-method investment on Gracos balance sheet, and
income was recognized based on dividends received from current earnings. The Company received dividends of $30 million in the first quarter of 2015 and $4 million in the comparable period of 2014. Dividends for the full year totaled $28 million in
2014 and $28 million in 2013.
Results excluding Liquid Finishing investment income and expense are a better measure of the Companys on-going
operations and provide a more consistent base of comparison to future results. A calculation of the non-GAAP measurement of net earnings excluding investment income and expense follows (in millions except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended |
|
|
|
March 27, 2015 |
|
|
March 28, 2014 |
|
Net Earnings |
|
$ |
68.8 |
|
|
$ |
50.7 |
|
|
|
|
Held separate investment (income), net |
|
|
(29.7) |
|
|
|
(3.8) |
|
|
|
|
|
|
|
|
|
|
Adjusted Net Earnings |
|
$ |
39.1 |
|
|
$ |
46.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share |
|
|
|
|
|
|
|
|
Including investment income, net |
|
$ |
1.14 |
|
|
$ |
0.81 |
|
Excluding investment income, net |
|
|
0.65 |
|
|
|
0.75 |
|
Outlook
We remain
committed to achieving mid-single digit organic sales growth, on a constant currency basis, for the full year 2015 as well as growth in every reportable segment and geography. Continued investments in our long-term growth initiatives are a priority
in 2015, which support our organic sales growth expectations but will hamper near-term profitability. Ongoing currency headwinds and geopolitical instability remain a concern. At current exchange rates, unfavorable changes in foreign currency
translation rates create a full-year headwind of approximately 5 percent on sales and 11 percent on earnings in 2015.
22
SAFE HARBOR CAUTIONARY STATEMENT
The Company desires to take advantage of the safe harbor provisions regarding forward-looking statements of the Private Securities Litigation Reform Act of 1995 and is filing this Cautionary Statement
in order to do so. From time to time various forms filed by our Company with the Securities and Exchange Commission, including this Form 10-Q and our Form 10-K and Form 8-Ks, and other disclosures, including our 2014 Overview report, press releases,
earnings releases, analyst briefings, conference calls and other written documents or oral statements released by our Company, may contain forward-looking statements. Forward-looking statements generally use words such as expect,
foresee, anticipate, believe, project, should, estimate, will, and similar expressions, and reflect our Companys expectations concerning the future. All
forecasts and projections are forward-looking statements. Forward-looking statements are based upon currently available information, but various risks and uncertainties may cause our Companys actual results to differ materially from those
expressed in these statements. The Company undertakes no obligation to update these statements in light of new information or future events.
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: our Companys growth strategies, which include making acquisitions, investing in new
products, expanding geographically and targeting new industries; economic conditions in the United States and other major world economies; changes in currency translation rates; changes in laws and regulations; compliance with anti-corruption laws;
new entrants who copy our products or infringe on our intellectual property; risks incident to conducting business internationally; the ability to meet our customers needs and changes in product demand; supply interruptions or delays; security
breaches; political instability; results of and costs associated with, litigation, administrative proceedings and regulatory reviews incident to our business; the possibility of decline in purchases from few large customers of the Contractor
segment; variations in activity in the construction and automotive industries; and natural disasters. Please refer to Item 1A of our Annual Report on Form 10-K for fiscal year 2014 for a more comprehensive discussion of these and other risk
factors. These reports are available on the Companys website at www.graco.com/ir and the Securities and Exchange Commissions website at www.sec.gov. Shareholders, potential investors and other readers are urged to consider
these factors in evaluating forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements.
Investors
should realize that factors other than those identified above and in Item 1A might prove important to the Companys future results. It is not possible for management to identify each and every factor that may have an impact on the
Companys operations in the future as new factors can develop from time to time.
23
Item 3. Quantitative and
Qualitative Disclosures About Market Risk
There have been no material changes related to market risk from the disclosures made in the
Companys 2014 Annual Report on Form 10-K.
Item 4. Controls and Procedures
Evaluation of disclosure controls and procedures
As
of the end of the fiscal quarter covered by this report, the Company carried out an evaluation of the effectiveness of the design and operation of its disclosure controls and procedures. This evaluation was done under the supervision and with the
participation of the Companys President and Chief Executive Officer, the Chief Financial Officer, the Vice President, Controller and Information Systems, and the Vice President, General Counsel and Secretary. Based upon that evaluation, they
concluded that the Companys disclosure controls and procedures are effective.
Changes in internal controls
During the quarter, there was no change in the Companys internal control over financial reporting that has materially affected or is reasonably likely to
materially affect the Companys internal control over financial reporting.
24
PART II OTHER INFORMATION
Item 1A. Risk Factors
There have been no material changes to the Companys risk factors from those disclosed in the Companys 2014 Annual Report on Form 10-K, except for the deletion of the risk factor relating to our
divestiture of the Liquid Finishing business assets acquired from ITW as the divestiture was completed April 1, 2015.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
On September 14, 2012, the Board of Directors authorized the Company to purchase up to 6,000,000 shares of its outstanding common stock, primarily through
open-market transactions. The authorization expires on September 30, 2015.
In addition to shares purchased under the Board authorizations, the
Company purchases shares of common stock held by employees who wish to tender owned shares to satisfy the exercise price or tax due upon exercise of options or vesting of restricted stock.
Information on issuer purchases of equity securities follows:
|
|
|
|
|
|
|
|
|
|
|
Period |
|
Total Number of Shares Purchased |
|
|
|
Average Price Paid per Share |
|
Total Number of Shares Purchased as Part of Publicly Announced Plans
or Programs |
|
Maximum Number of Shares that May Yet Be Purchased Under the Plans
or Programs (at end of period) |
|
|
|
|
|
|
Dec 27, 2014 Jan 23, 2015 |
|
180,000 |
|
|
|
$ 78.55 |
|
180,000 |
|
2,277,377 |
|
|
|
|
|
|
Jan 24, 2015 Feb 20, 2015 |
|
190,000 |
|
|
|
$ 73.48 |
|
190,000 |
|
2,087,377 |
|
|
|
|
|
|
Feb 21, 2015 Mar 27, 2015 |
|
250,000 |
|
|
|
$ 74.11 |
|
250,000 |
|
1,837,377 |
25
Item 6. Exhibits
|
|
|
|
|
|
|
|
2.1 |
|
|
Amendment No. 1 to Asset Purchase Agreement entered into as of March 6, 2015 by and among Carlisle Companies Incorporated, Carlisle Fluid Technologies, Inc., Graco Inc. and
Finishing Brands Holdings Inc. (excluding schedules and exhibits, which the Registrant agrees to furnish supplementally to the Securities and Exchange Commission upon request). (Incorporated by reference to Exhibit 2.1 to the Companys Report
on Form 8-K filed on March 9, 2015.) |
|
|
|
3.1 |
|
|
Restated Articles of Incorporation as amended June 13, 2014. (Incorporated by reference to Exhibit 3.1 to the Companys Report on Form 8-K filed June 16, 2014.) |
|
|
|
3.2 |
|
|
Restated Bylaws as amended February 14, 2014. (Incorporated by reference to Exhibit 3.2 to the Companys 2013 Annual Report on Form 10-K.) |
|
|
|
31.1 |
|
|
Certification of President and Chief Executive Officer pursuant to Rule 13a-14(a). |
|
|
|
31.2 |
|
|
Certification of Chief Financial Officer pursuant to Rule 13a-14(a). |
|
|
|
32 |
|
|
Certification of President and Chief Executive Officer and Chief Financial Officer pursuant to Section 1350 of Title 18, U.S.C. |
|
|
|
99.1 |
|
|
Press Release Reporting First Quarter Earnings dated April 22, 2015. |
|
|
|
101 |
|
|
Interactive Data File. |
26
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
GRACO INC.
|
|
|
|
|
|
|
Date: |
|
April 22, 2015 |
|
By: |
|
/s/ Patrick J. McHale |
|
|
|
|
|
|
Patrick J. McHale |
|
|
|
|
|
|
President and Chief Executive Officer |
|
|
|
|
|
|
(Principal Executive Officer) |
|
|
|
|
Date: |
|
April 22, 2015 |
|
By: |
|
/s/ James A. Graner |
|
|
|
|
|
|
James A. Graner |
|
|
|
|
|
|
Chief Financial Officer |
|
|
|
|
|
|
(Principal Financial Officer) |
|
|
|
|
Date: |
|
April 22, 2015 |
|
By: |
|
/s/ Caroline M. Chambers |
|
|
|
|
|
|
Caroline M. Chambers |
|
|
|
|
|
|
Vice President, Corporate Controller and Information Systems |
|
|
|
|
|
|
(Principal Accounting Officer) |
Exhibit 31.1
CERTIFICATION
I, Patrick J. McHale, certify that:
1. |
I have reviewed this quarterly report on Form 10-Q of Graco Inc.; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) |
Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) |
Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the
registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. |
The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants
auditors and the audit committee of the registrants board of directors: |
a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the
registrants ability to record, process, summarize and report financial information; and |
b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
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Date: |
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April 22, 2015 |
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/s/ Patrick J. McHale |
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Patrick J. McHale |
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President and Chief Executive Officer |
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Exhibit 31.2
CERTIFICATION
I, James A. Graner, certify that:
1. |
I have reviewed this quarterly report on Form 10-Q of Graco Inc.; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) |
Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) |
Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the
registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. |
The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants
auditors and the audit committee of the registrants board of directors: |
a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the
registrants ability to record, process, summarize and report financial information; and |
b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
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Date: |
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April 22, 2015 |
|
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/s/ James A. Graner |
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James A. Graner |
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Chief Financial Officer |
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Exhibit 32
CERTIFICATION UNDER SECTION 1350
Pursuant to Section 1350 of Title 18 of the United States Code, each of the
undersigned certifies that this periodic report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in this periodic report fairly presents, in all material
respects, the financial condition and results of operations of Graco Inc.
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Date: |
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April 22, 2015 |
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/s/ Patrick J. McHale |
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Patrick J. McHale |
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President and Chief Executive Officer |
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Date: |
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April 22, 2015 |
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/s/ James A. Graner |
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James A. Graner |
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Chief Financial Officer |
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Exhibit 99.1
|
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GRACO INC.
P.O. Box 1441 Minneapolis, MN
55440-1441 NYSE:
GGG |
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FOR IMMEDIATE RELEASE: |
|
FOR FURTHER INFORMATION: |
Wednesday, April 22, 2015 |
|
Financial Contact: James A. Graner (612) 623-6635
Media Contact: Bryce Hallowell (612) 623-6679
bhallowell@graco.com |
Graco Reports First Quarter Results
Currency Headwinds, Acquisitions and Growth Initiatives Reduce Earnings, Offset by Investment Income
MINNEAPOLIS, MN (April 22, 2015) - Graco Inc. (NYSE: GGG) today announced results for the first quarter ended March 27, 2015.
Summary
$ in millions except per share amounts
|
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|
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|
|
|
|
|
|
Thirteen Weeks Ended |
|
|
|
March 27, 2015 |
|
|
March 28, 2014 |
|
|
% Change |
|
|
|
|
|
Net Sales |
|
$ |
306.5 |
|
|
$ |
290.0 |
|
|
|
6 % |
|
Operating Earnings |
|
|
65.2 |
|
|
|
74.7 |
|
|
|
(13)% |
|
Net Earnings |
|
|
68.8 |
|
|
|
50.7 |
|
|
|
36 % |
|
Diluted Net Earnings per Common Share |
|
$ |
1.14 |
|
|
$ |
0.81 |
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|
|
41 % |
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|
|
Total Company sales increased 6 percent, including 5 percentage points of organic sales growth and 5 percentage points of sales growth from acquired operations, partially offset by 4 percentage points of currency
translation headwinds. |
|
|
Gross margin rate was 2 percentage points lower than the comparable period last year due to currency translation (accounting for more than half of the decrease), purchase accounting and changes in mix.
|
|
|
Operating income decreased $9 1⁄2 million to 21 percent of sales, 5 percentage points lower than the comparable period last year.
The decrease as a percentage of sales included 2 percentage points from foreign currency headwinds and 1 percentage point related to acquisitions. |
|
|
Operating expenses increased $12 million, including $6 million from acquired operations, $2 million related to regional expansion and product initiatives, $2 million in Contractor marketing and product launch costs and
$2 million additional unallocated corporate expense (mostly pension, stock compensation and new central warehouse). |
|
|
Dividend income from the Liquid Finishing businesses increased to $30 million from $4 million received in the first quarter last year. Subsequent to first quarter-end, the Company completed the sale of its Liquid
Finishing business assets for $590 million, subject to customary post-closing adjustments. |
Company sales grew at a mid-single digit pace
organically in the first quarter, on a constant currency basis, consistent with our outlook, said Patrick J. McHale, Gracos President and CEO. Our strongest region remains the Americas, growing at a double-digit rate in the
quarter, led by 27 percent growth in our Contractor segment. The Contractor business continues to benefit from the recovery in the U.S. construction market.
More . . .
Page
2
GRACO
Operating earnings declined in the quarter, reflecting multiple headwinds, continued McHale. As
expected, unfavorable currency exchange rates pressured both sales and earnings. During the quarter, the Contractor segment successfully launched new products, although associated launch costs held segment incremental margins in check. In the
Industrial segment, sales declines in the EMEA and Asia Pacific regions resulted in an unfavorable regional sales mix and decremental margins for the segment. Investment in regional and product growth initiatives, focused on organic growth in the
Oil & Natural Gas market, continued expansion of our presence in South & Central America, and a new warehouse in China to enhance product availability, was a $2 million headwind in the first quarter.
Consolidated Results
Changes in currency translation rates reduced sales
and net earnings by approximately $13 million and $4 million, respectively, for the quarter.
Sales increased 6 percent, with a 16 percent increase in the
Americas and decreases of 6 percent in EMEA and 9 percent in Asia Pacific. Sales from operations acquired in the fourth quarter of 2014 and the first quarter of 2015 totaled $15 million, contributing 5 percentage points of growth. Organic sales at
consistent translation rates increased 5 percent, with a 12 percent increase in the Americas, flat in EMEA, and a 10 percent decrease in Asia Pacific.
Gross profit
margin rate was 53 percent, down 2 percentage points from the comparable period last year. Changes in currency translation rates accounted for more than half of the decrease. Effects of purchase accounting totaling approximately $3 million and
changes in mix also contributed to the decrease.
Total operating expenses were $12 million (15 percent) higher than the comparable period last year. The increase
included expenses of acquired operations totaling $6 million, incremental spending related to regional expansion and product initiatives of $2 million, Contractor marketing and new product launch costs of $2 million and additional unallocated
corporate expense (mostly pension, stock compensation and new central warehouse) totaling $2 million.
Held separate investment income, net included dividends
received from the Liquid Finishing businesses that were held separate from the Companys other businesses. First quarter dividend income was $30 million in 2015 and $4 million in 2014.
The effective income tax rate of 22 percent for the quarter was 9 percentage points lower than the comparable period last year, mostly due to the impact of higher
post-tax dividend income.
Change in Financial Reporting Segments
Beginning with the first quarter of 2015 the Company revised the presentation of its financial reporting segments. Operations of the Process and the Oil and Natural Gas
divisions, historically included in the Industrial segment, are now aggregated with the Lubrication division (formerly reported as a separate segment) in the newly-formed Process segment. This change aligns the types of products offered and markets
served within the segments. Prior year segment information has been restated to conform to 2015 reporting.
A summary of the Companys three reportable
segments (Industrial, Process and Contractor) follows.
The Industrial segment includes the Industrial Products and the Applied Fluid Technologies divisions. The
Industrial segment markets equipment and pre-engineered packages for moving and applying paints, coatings, sealants, adhesives and other fluids. Markets served include automotive and vehicle assembly and components production, wood and metal
products, rail, marine, aerospace, farm, construction, bus, recreational vehicles, and various other industries.
More . . .
Page
3
GRACO
The Process segment includes the Process, the Oil and Natural Gas, and the Lubrication divisions. The Process segment
markets pumps, valves, meters and accessories to move and dispense chemicals, oil and natural gas, water, waste water, petroleum, food, lubricants and other fluids. Markets served include food and beverage, dairy, oil and natural gas,
pharmaceutical, cosmetics, electronics, waste water, mining, fast oil change facilities, service garages, fleet service centers, automobile dealerships and industrial lubrication applications.
The Contractor segment remains unchanged. The Contractor segment markets sprayers for architectural coatings for painting, corrosion control, texture, and line
striping.
Segment Results
Certain measurements of segment operations
are summarized below:
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|
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Thirteen Weeks |
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|
|
Industrial |
|
|
Process |
|
|
Contractor |
|
|
|
|
|
Net sales (in millions) |
|
$ |
143.3 |
|
|
$ |
67.7 |
|
|
$ |
95.5 |
|
|
|
|
|
Percentage change from last year |
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|
|
|
|
|
|
|
|
|
|
|
Sales |
|
|
(6)% |
|
|
|
28 % |
|
|
|
12 % |
|
Operating earnings |
|
|
(13)% |
|
|
|
(17)% |
|
|
|
6 % |
|
|
|
|
|
Operating earnings as a percentage of sales |
|
|
|
|
|
|
|
|
|
|
|
|
2015 |
|
|
30 % |
|
|
|
16 % |
|
|
|
20 % |
|
2014 |
|
|
32 % |
|
|
|
24 % |
|
|
|
21 % |
|
Industrial segment sales decreased 6 percent (1 percent at consistent translation rates). Sales in this segment increased 3 percent in
the Americas and decreased 14 percent in EMEA (1 percent at consistent translation rates) and 11 percent in Asia Pacific (8 percent at consistent translation rates). Operating margin rate for the Industrial segment decreased 2 percentage points
compared to last year, driven by changes in currency translation rates and higher expenses relative to sales.
Process segment sales increased 28 percent (32
percent at consistent translation rates), including double-digit percentage increases in all regions. Nearly all of the sales increase was from acquired operations including Alco Valves (acquired fourth quarter of 2014), White Knight Fluid Handling
and High Pressure Equipment (both acquired in January 2015). Lower profit margins of acquired operations, changes in currency translation rates and incremental investment in oil and natural gas products led to the decrease in operating margin rate
for this segment.
Contractor segment sales increased 12 percent (16 percent at consistent translation rates). Sales increased 27 percent in the Americas and
decreased 15 percent in EMEA (2 percent at consistent translation rates) and decreased 26 percent in Asia Pacific (23 percent at consistent translation rates). Operating margin rate in the Contractor segment decreased by one percentage point mostly
due to changes in currency translation rates and $2 million additional marketing spending, including new product launch costs and other volume-related increases.
More . . .
Page
4
GRACO
Subsequent Events
In March
2015, the FTC approved the Companys application to sell the Liquid Finishing business assets it acquired in 2012. The sale was completed on April 1, 2015 in a $590 million cash transaction, subject to customary post-closing adjustments.
The Company used proceeds from the sale to repay approximately $500 million of debt.
The Liquid Finishing business assets were held separate as a cost-method
investment on Gracos balance sheet, and income was recognized based on dividends received from current earnings. Results excluding Liquid Finishing investment income and expense are a better measure of the Companys on-going operations
and provide a more consistent base of comparison to future results. A calculation of the non-GAAP measurement of net earnings excluding investment income and expense follows (in millions except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended |
|
|
|
March 27, 2015 |
|
|
March 28, 2014 |
|
|
|
|
Net Earnings |
|
$ |
68.8 |
|
|
$ |
50.7 |
|
|
|
|
Held separate investment (income), net |
|
|
(29.7) |
|
|
|
(3.8) |
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|
|
|
|
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|
|
|
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|
|
|
|
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|
|
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|
|
|
Adjusted Net Earnings |
|
$ |
39.1 |
|
|
$ |
46.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share |
|
|
|
|
|
|
|
|
Including investment income, net |
|
$ |
1.14 |
|
|
$ |
0.81 |
|
Excluding investment income, net |
|
|
0.65 |
|
|
|
0.75 |
|
Outlook
We remain committed to
achieving mid-single digit organic sales growth, on a constant currency basis, for the full year 2015 as well as growth in every reportable segment and geography, stated McHale. Continued investments in our long-term growth initiatives
are a priority in 2015, which support our organic sales growth expectations but will hamper near-term profitability. Ongoing currency headwinds and geopolitical instability remain a concern. At current exchange rates, unfavorable changes in foreign
currency translation rates create a full-year headwind of approximately 5 percent on sales and 11 percent on earnings in 2015.
Cautionary Statement
Regarding Forward-Looking Statements
The Company desires to take advantage of the safe harbor provisions regarding forward-looking statements of the
Private Securities Litigation Reform Act of 1995 and is filing this Cautionary Statement in order to do so. From time to time various forms filed by our Company with the Securities and Exchange Commission, including this Form 10-Q and our Form 10-K
and Form 8-Ks, and other disclosures, including our 2014 Overview report, press releases, earnings releases, analyst briefings, conference calls and other written documents or oral statements released by our Company, may contain forward-looking
statements. Forward-looking statements generally use words such as expect, foresee, anticipate, believe, project, should, estimate, will, and similar
expressions, and reflect our Companys expectations concerning the future. All forecasts and projections are forward-looking statements. Forward-looking statements are based upon currently available information, but various risks and
uncertainties may cause our Companys actual results to differ materially from those expressed in these statements. The Company undertakes no obligation to update these statements in light of new information or future events.
More . . .
Page
5
GRACO
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: our Companys growth strategies, which include making acquisitions, investing in new products, expanding geographically and targeting new industries; economic conditions in the United States and
other major world economies; changes in currency translation rates; changes in laws and regulations; compliance with anti-corruption laws; new entrants who copy our products or infringe on our intellectual property; risks incident to conducting
business internationally; the ability to meet our customers needs and changes in product demand; supply interruptions or delays; security breaches; political instability; results of and costs associated with, litigation, administrative
proceedings and regulatory reviews incident to our business; the possibility of decline in purchases from few large customers of the Contractor segment; variations in activity in the construction and automotive industries; and natural disasters.
Please refer to Item 1A of our Annual Report on Form 10-K for fiscal year 2014 (and most recent Form 10-Q) for a more comprehensive discussion of these and other risk factors. These reports are available on the Companys website at
www.graco.com/ir and the Securities and Exchange Commissions website at www.sec.gov. Shareholders, potential investors and other readers are urged to consider these factors in evaluating forward-looking statements and are
cautioned not to place undue reliance on such forward-looking statements.
Investors should realize that factors other than those identified above and in
Item 1A might prove important to the Companys future results. It is not possible for management to identify each and every factor that may have an impact on the Companys operations in the future as new factors can develop from time
to time.
Conference Call
Graco management will hold a conference call,
including slides via webcast, with analysts and institutional investors on Thursday, April 23, 2015, at 10:00 a.m. CT, 11:00 a.m. ET, to discuss Gracos first 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
Companys website at www.graco.com/ir. 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 Gracos website, or by telephone beginning at
approximately 1:00 p.m. CT on April 23, 2015, by dialing 888-203-1112, Conference ID #1366681, if calling within the U.S. or Canada. The dial-in number for international participants is 719-457-0820, with the same Conference ID #. The replay by
telephone will be available through April 27, 2015.
Graco Inc. supplies technology and expertise for the management of fluids and coatings in both industrial
and commercial applications. It designs, manufactures and markets systems and equipment to move, measure, control, dispense and spray fluid and powder 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/ir.
More . . .
Page
6
GRACO
GRACO INC. AND SUBSIDIARIES
Consolidated Statement of Earnings (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended |
|
(in thousands, except per share amounts) |
|
March 27, 2015 |
|
|
March 28, 2014 |
|
Net Sales |
|
$ |
306,453 |
|
|
$ |
289,962 |
|
Cost of products sold |
|
|
144,324 |
|
|
|
130,650 |
|
|
|
|
|
|
|
|
|
|
Gross Profit |
|
|
162,129 |
|
|
|
159,312 |
|
Product development |
|
|
15,290 |
|
|
|
13,159 |
|
Selling, marketing and distribution |
|
|
51,424 |
|
|
|
46,342 |
|
General and administrative |
|
|
30,184 |
|
|
|
25,106 |
|
|
|
|
|
|
|
|
|
|
Operating Earnings |
|
|
65,231 |
|
|
|
74,705 |
|
Interest expense |
|
|
5,303 |
|
|
|
4,588 |
|
Held separate investment (income), net |
|
|
(29,523 |
) |
|
|
(3,675 |
) |
Other expense (income), net |
|
|
710 |
|
|
|
247 |
|
|
|
|
|
|
|
|
|
|
|
|
|
88,741 |
|
|
|
73,545 |
|
Income taxes |
|
|
19,900 |
|
|
|
22,800 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
68,841 |
|
|
$ |
50,745 |
|
|
|
|
|
|
|
|
|
|
Net Earnings per Common Share |
|
|
|
|
|
|
|
|
Basic |
|
$ |
1.17 |
|
|
$ |
0.83 |
|
Diluted |
|
$ |
1.14 |
|
|
$ |
0.81 |
|
Weighted Average Number of Shares |
|
|
|
|
|
|
|
|
Basic |
|
|
58,981 |
|
|
|
60,822 |
|
Diluted |
|
|
60,465 |
|
|
|
62,438 |
|
|
Segment Information (Unaudited) |
|
|
|
|
|
Thirteen Weeks Ended |
|
|
|
March 27, 2015 |
|
|
March 28, 2014 |
|
Net Sales |
|
|
|
|
|
|
|
|
Industrial |
|
$ |
143,266 |
|
|
$ |
152,046 |
|
Process |
|
|
67,681 |
|
|
|
53,010 |
|
Contractor |
|
|
95,506 |
|
|
|
84,906 |
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
306,453 |
|
|
$ |
289,962 |
|
|
|
|
|
|
|
|
|
|
Operating Earnings |
|
|
|
|
|
|
|
|
Industrial |
|
$ |
42,940 |
|
|
$ |
49,105 |
|
Process |
|
|
10,498 |
|
|
|
12,643 |
|
Contractor |
|
|
19,375 |
|
|
|
18,250 |
|
Unallocated corporate (expense) |
|
|
(7,582 |
) |
|
|
(5,293 |
) |
|
|
|
|
|
|
|
|
|
Total |
|
$ |
65,231 |
|
|
$ |
74,705 |
|
|
|
|
|
|
|
|
|
|
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 Managements Discussion and Analysis are available in
our Quarterly Report on Form 10-Q on our website at www.graco.com/ir.
# # #
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