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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Table of Contents

In 2014, sales in the Lubrication segment increased by 8 percent for the year. Sales increased 13 percent in the Americas, decreased 1 percent in EMEA and 7 percent in Asia Pacific.

Operating earnings increased by 1 percentage point in 2014. Higher sales volume and expense leverage led to higher operating margin in the Lubrication segment.

In 2013, sales in the Lubrication segment decreased by 1 percentage point compared to 2012. By geography, sales were flat in the Americas, increased 14 percent in EMEA, and decreased 13 percent in Asia Pacific.

Although the Americas represent the substantial majority of sales for the Lubrication segment, and indicators in that region are the most significant, management monitors indicators such as levels of gross domestic product, capital investment, industrial production and mining activity worldwide.

Unallocated corporate

(in millions)

 

  2014   2013   2012  

Unallocated corporate (expense)

$ (24 $ (26 $ (38

Unallocated corporate includes such items as stock compensation, divestiture and certain acquisition transaction costs, bad debt expense, charitable contributions, certain portions of pension expense, and in 2014, central warehouse startup expenses. In 2014, unallocated corporate expenses included $17 million of stock compensation expense, $3 million of acquisition and divestiture costs, and $2 12 million of contributions to the Company’s charitable foundation, and $1  12 million related to the new central warehouse. In 2013, unallocated corporate included $16 million of stock compensation, $6 million related to the non-service cost portion of pension expense, $2 million related to acquisition/divestiture activities, and $2 million of contributions to the Company’s charitable foundation.

Financial Condition and Cash Flow

Working Capital. The following table highlights several key measures of asset performance (dollars in millions):

 

  2014   2013  

Working capital

$   685   $   624  

Current ratio

  4.9     4.7  

Days of sales in receivables outstanding

  64     60  

Inventory turnover (LIFO)

  3.8     3.8  

Accounts receivable and inventory balances increased in both 2014 and 2013 due to increases in business activity.

Changes in receivables and inventories increased in line with volume growth.

Capital Structure. At December 26, 2014, the Company’s capital structure included current notes payable of $5 million, long-term debt of $615 million and shareholders’ equity of $596 million. At December 27, 2013, the Company’s capital structure included current notes payable of $10 million, long-term debt of $408 million and shareholders’ equity of $634 million.

Shareholders’ equity decreased by $38 million in 2014. The decreases in shareholders’ equity include $195 million of shares repurchased, $67 million of dividends declared, and decreases of $54 million in other comprehensive income (loss) due to pension and post-retirement medical liability adjustments and foreign currency translation. The decreases in shareholders’ equity were offset by current year earnings of $226 million and $30 million for shares issued.

Liquidity and Capital Resources. The Company had cash totaling $24 million at December 26, 2014 and $20 million at December 27, 2013, held in deposit accounts.

In January 2014, the Company paid $65 million cash to acquire QED Environmental Systems, a manufacturer of fluid management solutions for environmental monitoring and remediation, markets where Graco had little or no previous exposure. The acquired business will expand and complement the Company’s Industrial segment.

On June 26, 2014, the Company executed an amendment to its revolving credit agreement, extending the expiration date to June 26, 2019, and increasing the amount of credit available to $500 million, a $50 million increase. The credit facility is with a syndicate of

 

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