Graco Inc.

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SEC Filings

10-K
GRACO INC filed this Form 10-K on 02/17/2015
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In 2013, sales in Asia Pacific grew by 3 percent (5 percent at consistent translation rates). Sales increased by 7 percent in the Industrial segment (10 percent at consistent translation rates). Sales in the Contractor segment decreased by 4 percent (3 percent at consistent translation rates) and sales in the Lubrication segment decreased by 13 percent (10 percent at consistent translation rates). Industrial project activity was strong in the fourth quarter, which brought the Industrial segment back to modest growth for the year. However, we saw lack of growth in a number of end user markets throughout Asia Pacific, including shipyards, container manufacturing, heavy machinery, general manufacturing, housing, paint and mining.

The following table presents components of net sales change:

 

  2014  
  Segment   Region      
  Industrial   Contractor   Lubrication   Americas   Europe   Asia Pacific   Consolidated  

Volume and Price

  6 %      10 %      9 %      10 %      5 %      2 %      7 %   

Acquisitions

  6 %      -  %      -  %      6 %      2 %      2 %      4 %   

Currency

  -  %      -  %      (1)%      (1)%      1 %      (1)%      -  %   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

  12 %      10 %      8 %      15 %      8 %      3 %      11 %   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
  2013  
  Segment   Region      
  Industrial   Contractor   Lubrication   Americas   Europe   Asia Pacific   Consolidated  

Volume and Price

  3 %      14 %      -  %      10 %      2 %      1 %      6 %   

Acquisitions

  5 %      -  %      -  %      1 %      6 %      4 %      3 %   

Currency

  -  %      1 %      (1)%      -  %      2 %      (2)%      -  %   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

  8 %      15 %      (1)%      11 %      10 %      3 %      9 %   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

The following table presents an overview of components of operating earnings as a percentage of net sales:

 

  2014   2013   2012  

Net Sales

  100.0  %    100.0    100.0 

Cost of products sold

  45.4     45.0     45.6  
  

 

 

   

 

 

   

 

 

 

Gross profit

  54.6     55.0     54.4  

Product development

  4.4     4.7     4.8  

Selling, marketing and distribution

  16.0     16.1     16.2  

General and administrative

  8.9     8.9     11.2  
  

 

 

   

 

 

   

 

 

 

Operating earnings

  25.3     25.3     22.2  

Interest expense

  1.5     1.6     1.9  

Other expense (income), net

  (2.0)      (2.5)      (1.1)   
  

 

 

   

 

 

   

 

 

 

Earnings before income taxes

  25.8     26.2     21.4  

Income taxes

  7.3     7.1     6.7  
  

 

 

   

 

 

   

 

 

 

Net Earnings

  18.5  %    19.1    14.7 
  

 

 

   

 

 

   

 

 

 

2014 Compared to 2013

Operating earnings as a percentage of sales were 25 percent in 2014, consistent with 2013. The impact of purchase accounting, acquisition and divestiture costs, and spending on regional and product expansion offset the improvement in operating expense leverage from higher sales.

Gross profit margin as a percentage of sales decreased approximately one-half percentage point from 2013. Acquisitions negatively impacted the margin rate in 2014, decreasing the rate by 0.2 percentage point for purchase accounting, and 0.3 percentage point for lower margins in the acquired businesses. The favorable effect of realized price increases and higher production volume offset the unfavorable effect of changes in product mix.

Operating expenses for 2014 increased $30 million. The increase included $15 million from acquired operations, $8 million from regional and product expansion initiatives and a $2 million increase in divestiture and acquisition costs. Product development spending increased $3 million (including approximately $1 million from acquired operations), and represents 4 percent of sales, down slightly from 2013.

 

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