Graco Reports Record Sales and Operating Earnings
Strong Sales Growth in All Segments and Regions
Raises
Full-Year Outlook
Summary | ||||||||||||||||||||||||
$ in millions except per share amounts |
||||||||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||||||
Jun 30, |
Jun 24, |
% |
Jun 30, |
Jun 24, |
% | |||||||||||||||||||
2017 | 2016 | Change | 2017 | 2016 | Change | |||||||||||||||||||
Net Sales | $ | 379.5 | $ | 348.1 | 9 | % | $ | 720.1 | $ | 653.0 | 10 | % | ||||||||||||
Operating Earnings | 98.8 | 78.3 | 26 | % | 184.6 | 139.3 | 33 | % | ||||||||||||||||
Net Earnings | 79.8 | 50.9 | 57 | % | 140.6 | 90.5 | 55 | % | ||||||||||||||||
Diluted Net Earnings per Common Share |
$ | 1.38 | $ | 0.89 | 55 | % | $ | 2.43 | $ | 1.59 | 53 | % | ||||||||||||
- Sales for the quarter and year to date increased in all segments and regions.
- Gross profit margin rates for the quarter and year to date increased due to higher production volume and realized pricing.
- Solid sales growth combined with improved gross margins and lower operating expenses levered operating earnings to increases of 26 percent and 33 percent for the quarter and year to date, respectively.
-
Diluted earnings per share include
$0.23 for the quarter and$0.28 for the year to date from a required change in accounting for stock compensation. -
Increases in diluted earnings per share include
$0.01 for the quarter and$0.02 for the year to date from reduced amortization expense resulting from the impairment charge recorded in the fourth quarter of 2016.
"I am pleased with
Consolidated Results
Sales for the quarter increased 9 percent, with increases of 7 percent
in the
Changes in currency translation rates decreased sales by approximately
Gross profit margin rate increased by one-half percentage point for the quarter and one percentage point for the year to date. Favorable effects from higher production volume and realized pricing were partially offset by unfavorable impacts of currency translation and product mix.
Total operating expenses for the quarter and year to date were slightly lower than last year. Year-to-date reductions from the impact of currency translation, decreased amortization expense and lower unallocated corporate expenses (mostly central warehouse) more than offset volume and rate-related increases.
The effective income tax rate for the quarter was 17 percent, down from
31 percent last year. The effective income tax rate for the year to date
was 21 percent, down from 31 percent last year. Adoption of a new
accounting standard, requiring excess tax benefits related to stock
option exercises to be credited to the income tax provision (formerly
credited to equity), reduced the tax provision by
Segment Results
Certain measurements of segment operations are summarized below:
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||
Industrial | Process | Contractor | Industrial | Process | Contractor | |||||||||||||||||||||||||
Net sales (in millions) | $ | 174.9 | $ | 73.4 | $ | 131.2 | $ | 331.3 | $ | 143.4 | $ | 245.4 | ||||||||||||||||||
Percentage change from last year | ||||||||||||||||||||||||||||||
Sales | 11 | % | 13 | % | 4 | % | 9 | % | 11 | % | 12 | % | ||||||||||||||||||
Operating earnings | 21 | % | 76 | % | 15 | % | 19 | % | 80 | % | 30 | % | ||||||||||||||||||
Operating earnings as a percentage of sales | ||||||||||||||||||||||||||||||
2017 |
35 | % | 18 | % | 26 | % | 35 | % | 19 | % | 24 | % | ||||||||||||||||||
2016 |
33 | % | 12 | % | 23 | % | 32 | % | 12 | % | 21 | % | ||||||||||||||||||
Components of net sales change by geographic region for the Industrial segment were as follows:
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||
Volume |
Acquisitions | Currency | Total |
Volume |
Acquisitions | Currency | Total | |||||||||||||||||||||||||
Americas | 9 | % | 0 | % | 0 | % | 9 | % | 7 | % | 1 | % | 0 | % | 8 | % | ||||||||||||||||
EMEA | 12 | % | 0 | % | (3 | )% | 9 | % | 8 | % | 0 | % | (3 | )% | 5 | % | ||||||||||||||||
Asia Pacific | 19 | % | 1 | % | (3 | )% | 17 | % | 18 | % | 1 | % | (3 | )% | 16 | % | ||||||||||||||||
Consolidated | 13 | % | 0 | % | (2 | )% | 11 | % | 10 | % | 1 | % | (2 | )% | 9 | % | ||||||||||||||||
Sales increased in all Industrial segment product applications. Year-to-date operating margin rate for the Industrial segment increased 3 percentage points compared to last year. Favorable effects of higher sales volume, improved gross margin rate and expense leverage were partially offset by the unfavorable effect of currency translation.
Components of net sales change by geographic region for the Process segment were as follows:
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||
Volume |
Acquisitions | Currency | Total |
Volume |
Acquisitions | Currency | Total | |||||||||||||||||||||||||
Americas | 13 | % | 0 | % | 0 | % | 13 | % | 12 | % | 0 | % | 0 | % | 12 | % | ||||||||||||||||
EMEA | 9 | % | 0 | % | (6 | )% | 3 | % | 12 | % | 0 | % | (7 | )% | 5 | % | ||||||||||||||||
Asia Pacific | 33 | % | 0 | % | (3 | )% | 30 | % | 17 | % | 0 | % | (2 | )% | 15 | % | ||||||||||||||||
Consolidated | 15 | % | 0 | % | (2 | )% | 13 | % | 13 | % | 0 | % | (2 | )% | 11 | % | ||||||||||||||||
The Process segment had solid sales growth across most product
applications, partially offset by the effects of continued weakness in
Components of net sales change by geographic region for the Contractor segment were as follows:
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||
Volume |
Acquisitions | Currency | Total |
Volume |
Acquisitions | Currency | Total | |||||||||||||||||||||||||
Americas | 2 | % | 0 | % | 0 | % | 2 | % | 12 | % | 0 | % | 0 | % | 12 | % | ||||||||||||||||
EMEA | 14 | % | 0 | % | (4 | )% | 10 | % | 16 | % | 0 | % | (4 | )% | 12 | % | ||||||||||||||||
Asia Pacific | 7 | % | 0 | % | (1 | )% | 6 | % | 4 | % | 0 | % | 0 | % | 4 | % | ||||||||||||||||
Consolidated | 5 | % | 0 | % | (1 | )% | 4 | % | 12 | % | 0 | % | 0 | % | 12 | % | ||||||||||||||||
Contractor segment sales increased 4 percent compared to second quarter last year, which included new product launches that created a tough comparable for this year. Operating margin rates for the Contractor segment increased 3 percentage points compared to last year due to higher sales volume, improved gross margin rate and favorable expense leverage.
Outlook
"Demand in the second quarter remained broad-based across products and geographies and continues to exceed our expectations," stated McHale. "As a result, we are raising our full-year 2017 outlook to mid-to-high single-digit organic sales growth on a constant currency basis worldwide, from a prior outlook of mid single-digit growth. We expect to achieve mid-to-high single-digit growth in each geographic region for the full year 2017."
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
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 Company’s growth strategies, which include
making acquisitions, investing in new products, expanding geographically
and targeting new industries; economic conditions in
Investors should realize that factors other than those identified above and in Item 1A might prove important to the Company’s future results. It is not possible for management to identify each and every factor that may have an impact on the Company’s operations in the future as new factors can develop from time to time.
Conference Call
A real-time webcast of the conference call will be broadcast live over the Internet. Individuals wanting to listen and view slides can access the call at the Company’s website at www.graco.com. Listeners should go to the website at least 15 minutes prior to the live conference call to install any necessary audio software.
For those unable to listen to the live event, a replay will be available
soon after the conference call at Graco’s website, or by telephone
beginning at approximately
GRACO INC. AND SUBSIDIARIES | |||||||||||||||||||
CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) | |||||||||||||||||||
(In thousands except per share amounts) |
|||||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||||
Jun 30, | Jun 24, | Jun 30, | Jun 24, | ||||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||||||
Net Sales | $ | 379,483 | $ | 348,126 | $ | 720,073 | $ | 653,038 | |||||||||||
Cost of products sold | 175,542 | 162,985 | 330,859 | 306,101 | |||||||||||||||
Gross Profit | 203,941 | 185,141 | 389,214 | 346,937 | |||||||||||||||
Product development | 14,901 | 15,607 | 29,400 | 30,293 | |||||||||||||||
Selling, marketing and distribution | 56,060 | 56,136 | 110,971 | 108,837 | |||||||||||||||
General and administrative | 34,211 | 35,056 | 64,253 | 68,516 | |||||||||||||||
Operating Earnings | 98,769 | 78,342 | 184,590 | 139,291 | |||||||||||||||
Interest expense | 4,154 | 4,543 | 8,209 | 9,036 | |||||||||||||||
Other expense (income), net | (989 | ) | 392 | (798 | ) | (754 | ) | ||||||||||||
Earnings Before Income Taxes | 95,604 | 73,407 | 177,179 | 131,009 | |||||||||||||||
Income taxes | 15,776 | 22,460 | 36,619 | 40,510 | |||||||||||||||
Net Earnings | $ | 79,828 | $ | 50,947 | $ | 140,560 | $ | 90,499 | |||||||||||
Net Earnings per Common Share | |||||||||||||||||||
Basic | $ | 1.43 | $ | 0.92 | $ | 2.52 | $ | 1.63 | |||||||||||
Diluted | $ | 1.38 | $ | 0.89 | $ | 2.43 | $ | 1.59 | |||||||||||
Weighted Average Number of Shares | |||||||||||||||||||
Basic | 55,801 | 55,634 | 55,785 | 55,514 | |||||||||||||||
Diluted | 57,927 | 57,040 | 57,820 | 56,875 | |||||||||||||||
SEGMENT INFORMATION (Unaudited) | ||||||||||||||||||||
(In thousands) |
||||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||
Jun 30, | Jun 24, | Jun 30, | Jun 24, | |||||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||||||
Net Sales | ||||||||||||||||||||
Industrial | $ | 174,868 | $ | 156,997 | $ | 331,258 | $ | 304,085 | ||||||||||||
Process | 73,399 | 64,706 | 143,428 | 128,991 | ||||||||||||||||
Contractor | 131,216 | 126,423 | 245,387 | 219,962 | ||||||||||||||||
Total | $ | 379,483 | $ | 348,126 | $ | 720,073 | $ | 653,038 | ||||||||||||
Operating Earnings | ||||||||||||||||||||
Industrial | $ | 61,596 | $ | 51,052 | $ | 115,331 | $ | 96,846 | ||||||||||||
Process | 13,418 | 7,634 | 26,881 | 14,911 | ||||||||||||||||
Contractor | 33,759 | 29,364 | 59,778 | 46,107 | ||||||||||||||||
Unallocated corporate (expense) | (10,004 | ) | (9,708 | ) | (17,400 | ) | (18,573 | ) | ||||||||||||
Total | $ | 98,769 | $ | 78,342 | $ | 184,590 | $ | 139,291 | ||||||||||||
The Consolidated Balance Sheets, Consolidated Statements of Cash Flows and Management's Discussion and Analysis are available in our Quarterly Report on Form 10-Q on our website at www.graco.com.
View source version on businesswire.com: http://www.businesswire.com/news/home/20170726006340/en/
Source:
Graco Inc.
Financial Contact:
Christian Rothe,
612-623-6205
or
Media Contact:
Charlotte Boyd,
612-623-6153
Charlotte_M_Boyd@graco.com