UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d)
of
the Securities Exchange Act of 1934
Date of
Report (Date of earliest event reported): October 21, 2009
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Graco
Inc.
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(Exact
name of registrant as specified in its
charter)
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Minnesota
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001-09249
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41-0285640
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(State
or other jurisdiction of incorporation)
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(Commission
File Number)
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(I.R.S.
Employer
Identification
No.)
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88-11th
Avenue Northeast
Minneapolis,
Minnesota
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55413
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(Address
of principal executive offices)
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(Zip
Code)
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Registrant’s
telephone number, including area code: (612)
623-6000
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Not
Applicable
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(Former
name or former address, if changed since last
report)
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Check
the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
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[ ]
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Written
communications pursuant to Rule-425 under the Securities Act (17 CFR
230.425)
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[ ]
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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[ ]
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
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[ ]
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
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Item
2.02.
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Results
of Operations and Financial
Condition
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On October 21, 2009, Graco Inc. issued
a press release to report the Company’s results of operations and financial
condition for the quarter ended September 25, 2009. A copy of this press release
is furnished as Exhibit 99.1 hereto and is incorporated herein by
reference.
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Item
9.01.
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Financial
Statements and Exhibits
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(d)
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Exhibits
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99.1
Press Release dated October 21, 2009.
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Signature
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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.
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Date:
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October
22, 2009
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By:
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/s/Karen
Park Gallivan
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Karen
Park Gallivan
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Its: Vice
President, General Counsel and
Secretary
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News
Release
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FOR
IMMEDIATE RELEASE:
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FOR
FURTHER INFORMATION:
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Wednesday,
October 21, 2009
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James
A. Graner (612) 623-6635
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GRACO
REPORTS THIRD QUARTER SALES AND EARNINGS
MINNEAPOLIS, MN (October 21, 2009)
- Graco Inc. (NYSE:
GGG) today announced results for the quarter and nine months ended
September 25, 2009.
Summary
$ in
millions except per share amounts
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Thirteen
Weeks Ended
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Thirty-nine
Weeks Ended
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|||||||||||||||||||||||
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Sep
25,
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Sep
26,
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%
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Sep
25,
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Sep
26,
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%
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|||||||||||||||||||
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2009
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2008
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Change
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2009
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2008
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Change
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|||||||||||||||||||
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Net
Sales
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$ | 147.3 | $ | 207.2 | (29 | )% | $ | 432.9 | $ | 650.6 | (33 | )% | ||||||||||||
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Net
Earnings
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17.3 | 32.8 | (47 | )% | 31.7 | 110.8 | (71 | )% | ||||||||||||||||
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Diluted
Net Earnings
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per
Common Share
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$ | 0.29 | $ | 0.54 | (46 | )% | $ | 0.53 | $ | 1.81 | (71 | )% | ||||||||||||
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·
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Net
earnings were $17 million in the third quarter, on sales of $147
million.
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·
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Sales
of $147 million for the quarter are steady compared to the second quarter
and up 7 percent compared to the first quarter. Compared to the
third quarter last year, sales and orders decreased in all segments and
regions.
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·
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Gross
margin rate of 53 percent for the third quarter improved from 49 percent
in the second quarter and 47 percent in the first quarter, and equals last
year’s third quarter rate.
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·
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Currency
translation had an unfavorable effect on year-to-date sales ($14 million)
and net earnings ($5 million).
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·
Cash flow from year-to-date operations totaled $110
million.
“While
sales remain low compared to last year, we are pleased with the improvement in
profitability over the most recent two quarters of 2009,” said Patrick J.
McHale, President and Chief Executive Officer. “Cash flow remains
strong, and our focus on managing working capital has reduced inventories by $31
million and receivables by $21 million since the end of last year. We
also reduced long-term debt by $73 million and made a voluntary $15 million
tax-deductible contribution to our defined benefit pension plan. We
intend to continue making targeted investments in our strategic growth
initiatives while managing working capital.”
Consolidated
Results
Sales are
down 29 percent for the quarter and 33 percent year-to-date. For the
quarter, sales decreased 25 percent in the Americas, 39 percent in Europe (36
percent at consistent translation rates) and 25 percent in Asia
Pacific. Year-to-date sales decreased 30 percent in the Americas, 44
percent in Europe (38 percent at consistent translation rates) and 26 percent in
Asia Pacific.
Gross
profit margin, expressed as a percentage of sales, was 53 percent for the
quarter and 50 percent year-to-date, compared to 53 percent and 54 percent,
respectively, for the comparable periods last year. For the quarter,
the favorable effects of pricing, lower material costs and cost reduction
actions are offset by decreases from lower production volume and increased
pension cost. Decreases in the year-to-date rate were due to lower
production volumes (approximately 5 percentage points), unfavorable currency
translation rates (approximately 1 percentage point) and increased pension cost
(approximately 1 percentage point). Decreases were offset somewhat by
the effects of favorable material costs and pricing.
Total
operating expenses for the quarter and year-to-date are down 10 percent and 8
percent, respectively. For both the quarter and year-to-date, the
effects of spending reductions and lower volume-related expenses are partially
offset by higher pension expenses. Year-to-date, a $4 million
decrease from translation effects is partially offset by $2 million related to
workforce reductions.
Effective
income tax rates were 30 percent for the quarter and 31 percent year-to-date,
down from last year’s rates of 34 percent for the quarter and 33 percent
year-to-date. A higher-than-expected benefit upon filing of prior
year tax returns contributed to lower rates in 2009. Effective rates
were higher in 2008 because the R&D tax credit was not renewed until the
fourth quarter and no credit was included in the provisions for the first three
quarters of 2008.
Segment
Results
Certain
measurements of segment operations are summarized below:
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Thirteen
Weeks
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Thirty-nine
Weeks
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Industrial
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Contractor
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Lubrication
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Industrial
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Contractor
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Lubrication
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Net
sales (in millions)
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$ | 78.2 | $ | 55.4 | $ | 13.7 | $ | 226.8 | $ | 163.2 | $ | 42.9 | ||||||||||||
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Net
sales percentage change
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from
last year
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(34 | )% | (18 | )% | (37 | )% | (38 | )% | (24 | )% | (38 | )% | ||||||||||||
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Operating
earnings as a
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||||||||||||||||||||||||
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percentage
of net sales
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2009
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26 | % | 20 | % | (1 | )% | 20 | % | 15 | % | (8 | )% | ||||||||||||
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2008
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30 | % | 22 | % | 16 | % | 32 | % | 23 | % | 18 | % | ||||||||||||
All
segments experienced double-digit percentage decreases in sales compared to last
year for both the quarter and year-to-date. Improved third quarter
operating earnings of all segments reflect the lower cost structure resulting
from workforce and other spending reduction actions taken in the first quarter
of 2009 and the fourth quarter of 2008. Year-to-date operating
earnings of all segments reflect the impacts of low volume, workforce reduction
costs and higher pension cost. Contractor operating results are
affected by sales, costs and expenses related to the rollout of entry-level
paint sprayers to additional paint and home center stores earlier in 2009 and in
2008. Mix of product sold and costs related to discontinued products
contributed to lower margin rates in the Lubrication segment.
Outlook
“While
economic conditions continue to create headwinds for our business, we are
encouraged by improved profitablility in each of the last two quarters,
resulting from our efforts to improve production costs and control expenses”
said Patrick J. McHale, President and Chief Executive Officer. “We
expect to continue investing in growth initiatives including product
development, international expansion and entering new markets. We
believe the Company will emerge from the recession with strong, profitable
growth.”
Cautionary
Statement Regarding Forward-Looking Statements
A
forward-looking statement is any statement made in this earnings release and
other reports that the Company files periodically with the Securities and
Exchange Commission, as well as in press releases, analyst briefings, conference
calls and the Company’s Annual Report to shareholders, which reflects the
Company’s current thinking on market trends and the Company’s future financial
performance at the time they are made. All forecasts and projections
are forward-looking statements. The Company undertakes no obligation
to update these statements in light of new information or future
events.
The
Company desires to take advantage of the “safe harbor” provisions of the Private
Securities Litigation Reform Act of 1995 by making cautionary statements
concerning any forward-looking statements made by or on behalf of the
Company. The Company cannot give any assurance that the results
forecasted in any forward-looking statement will actually be
achieved. Future results could differ materially from those
expressed, due to the impact of changes in various factors. These
risk factors include, but are not limited to: economic conditions in the United
States and other major world economies, currency fluctuations, political
instability, changes in laws and regulations, and changes in product
demand. Please refer to Item 1A of, and Exhibit 99 to, the Company’s
Annual Report on Form 10-K for fiscal year 2008 (and most recent Form 10-Q, if
applicable) for a more comprehensive discussion of these and other risk factors.
These reports are available on the Company’s website at www.graco.com and the
Securities and Exchange Commission’s website at www.sec.gov.
Conference
Call
Graco
management will hold a conference call, including slides via webcast, with
analysts and institutional investors on Thursday, October 22, 2009, at
11:00 a.m. ET to discuss Graco’s third quarter results.
A
real-time Webcast of the conference call will be broadcast live over the
Internet. Individuals wanting to listen and view slides can access the call at
the Company’s website at www.graco.com.
Listeners should go to the website at least 15 minutes prior to the live
conference call to install any necessary audio software.
For those
unable to listen to the live event, a replay will be available soon after the
conference call at Graco’s website, or by telephone beginning at approximately
2:00 p.m. ET on October 22, 2009, by dialing 800.406.7325, Conference ID
#4170310, if calling within the U.S. or Canada. The dial-in number for
international participants is 303.590.3030, with the same Conference ID #. The
replay by telephone will be available through October 27, 2009.
Graco
Inc. supplies technology and expertise for the management of fluids in both
industrial and commercial applications. It designs, manufactures and markets
systems and equipment to move, measure, control, dispense and spray fluid
materials. A recognized leader in its specialties, Minneapolis-based Graco
serves customers around the world in the manufacturing, processing, construction
and maintenance industries. For additional information about Graco Inc., please
visit us at www.graco.com.
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GRACO
INC. AND SUBSIDIARIES
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Consolidated
Statement of Earnings (Unaudited)
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Thirteen
Weeks Ended
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Thirty-nine
Weeks Ended
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Sep
25,
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Sep
26,
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Sep
25,
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Sep
26,
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(in
thousands, except per share amounts)
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2009
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2008
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2009
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2008
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Net
Sales
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$ | 147,308 | $ | 207,231 | $ | 432,900 | $ | 650,581 | ||||||||
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Cost
of products sold
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69,167 | 97,071 | 217,423 | 299,805 | ||||||||||||
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Gross
Profit
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78,141 | 110,160 | 215,477 | 350,776 | ||||||||||||
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Product
development
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8,752 | 9,626 | 28,584 | 26,605 | ||||||||||||
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Selling,
marketing and distribution
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26,589 | 32,420 | 86,814 | 102,083 | ||||||||||||
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General
and administrative
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16,613 | 15,585 | 49,317 | 50,142 | ||||||||||||
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Operating
Earnings
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26,187 | 52,529 | 50,762 | 171,946 | ||||||||||||
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Interest
expense
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1,148 | 1,934 | 3,735 | 5,443 | ||||||||||||
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Other
expense (income), net
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203 | 623 | 889 | 606 | ||||||||||||
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Earnings
Before Income Taxes
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24,836 | 49,972 | 46,138 | 165,897 | ||||||||||||
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Income
taxes
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7,500 | 17,200 | 14,400 | 55,100 | ||||||||||||
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Net
Earnings
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$ | 17,336 | $ | 32,772 | $ | 31,738 | $ | 110,797 | ||||||||
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Net
Earnings per Common Share
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Basic
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$ | 0.29 | $ | 0.55 | $ | 0.53 | $ | 1.83 | ||||||||
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Diluted
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0.29 | 0.54 | $ | 0.53 | $ | 1.81 | ||||||||||
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Weighted
Average Number of Shares
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Basic
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59,940 | 59,769 | 59,827 | 60,521 | ||||||||||||
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Diluted
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60,314 | 60,365 | 60,133 | 61,168 | ||||||||||||
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Segment
Information (Unaudited)
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Thirteen
Weeks Ended
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Thirty-nine
Weeks Ended
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Sep
25,
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Sep
26,
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Sep
25,
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Sep
26,
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Net
Sales
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Industrial
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$ | 78,242 | $ | 117,685 | $ | 226,808 | $ | 365,028 | ||||||||
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Contractor
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55,379 | 67,751 | 163,213 | 215,992 | ||||||||||||
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Lubrication
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13,687 | 21,795 | 42,879 | 69,561 | ||||||||||||
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Consolidated
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$ | 147,308 | $ | 207,231 | $ | 432,900 | $ | 650,581 | ||||||||
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Operating
Earnings
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Industrial
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$ | 20,332 | $ | 35,874 | $ | 45,262 | $ | 117,847 | ||||||||
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Contractor
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11,138 | 15,226 | 24,420 | 49,663 | ||||||||||||
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Lubrication
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(167 | ) | 3,409 | (3,348 | ) | 12,333 | ||||||||||
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Unallocated
corporate
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(5,116 | ) | (1,980 | ) | (15,572 | ) | (7,897 | ) | ||||||||
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Consolidated
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$ | 26,187 | $ | 52,529 | $ | 50,762 | $ | 171,946 | ||||||||
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All
figures are subject to audit and adjustment at the end of the fiscal
year.
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The
Consolidated Balance Sheets, Consolidated Statements of Cash Flows and
Management's Discussion and Analysis are available in our Quarterly Report
on Form 10-Q on our website at www.graco.com.
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