Graco Inc.

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SEC Filings

10-K
GRACO INC filed this Form 10-K on 02/21/2017
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The following table presents the components of net sales change by geographic region:
 
2016
 
2015
 
Volume and Price
 
Acquisitions
 
Currency
 
Total
 
Volume and Price
 
Acquisitions
 
Currency
 
Total
Americas
1%
 
1%
 
0%
 
2%
 
7%
 
5%
 
(1)%
 
11%
EMEA
6%
 
3%

(2)%
 
7%
 
1%
 
8%
 
(13)%
 
(4)%
Asia Pacific
3%
 
1%
 
(1)%
 
3%
 
0%
 
6%
 
(5)%
 
1%
Consolidated
3%
 
1%
 
(1)%
 
3%
 
4%
 
6%
 
(5)%
 
5%

There were 53 weeks in fiscal 2016, compared to 52 weeks in fiscal 2015. In 2016, net sales at consistent currency translation rates increased 4 percent, including 3 percentage points of organic growth and 1 percentage point from acquired operations. The effects of currency translation offset the impact of sales from acquired operations. Strong sales increases in the Americas from the Contractor segment were mostly offset by decreases in the Industrial and Process segments. EMEA had sales growth in both developed and emerging markets, with strong growth from Contractor and Industrial segments. Strong sales growth in China more than offset decreases in other areas of Asia Pacific.

In 2015, net sales at consistent currency translation rates increased 10 percent, including growth from acquired operations of 6 percentage points and organic growth of 4 percentage points. Incremental sales from operations acquired within the last 12 months totaled $67 million for the year. Changes in currency translation rates reduced sales by approximately $58 million in 2015. More than 90 percent of our organic growth at consistent translation rates in 2015 came from our Contractor and Industrial businesses in the Americas. The Contractor segment continued to benefit from strong residential and commercial construction markets in the United States. Sales growth in western and central Europe was offset by unfavorable currency translation rates for the euro and Swiss franc, and by declines in sales in Russia and the Middle East. While general industry and construction markets were generally stable in western Europe, weakness in oil and natural gas markets continued. Weakness in China offset growth in other Asia Pacific countries, such as Australia, Korea, Japan and India. While general industry and process markets were stable in most of the Asia Pacific region, weakness remained in industries such as mining, marine and general construction.

Gross Profit

In 2016, gross profit margin rate of 53% was consistent with the rate in the prior year. The favorable effects of realized pricing and product and channel mix offset the unfavorable impacts of lower factory volume.

In 2015, gross profit margin as a percentage of sales decreased from 2014, mostly due to changes in currency translation rates. Favorable effects of realized pricing and lower material costs offset the impact of lower average gross margin rates of acquired operations.

Operating Expenses

Total operating expenses for 2016 were $212 million higher than 2015, including the non-cash impairment charge of $192 million. Incremental expenses from acquired operations accounted for nearly half of the remainder of the increase. Incremental spending related to product and corporate initiatives increased expenses by approximately $3 million, and changes in currency translation rates reduced operating expenses by approximately $4 million. Investment in new product development was $61 million or 4½ percent of sales in 2016, consistent with 2015 expense as a percentage of sales.

In 2015, operating expenses were $25 million higher compared to 2014. Incremental expenses from acquired operations totaled $27 million, spending related to regional and product expansion initiatives increased expenses by approximately $4 million, and unallocated corporate expenses (mostly pension and stock compensation) increased $5 million. Currency translation rates reduced operating expenses by approximately $16 million. Investment in new product development was $59 million or 4½ percent of sales in 2015, consistent with 2014 expense as a percentage of sales.

Operating Earnings

Operating earnings in 2016 before non-cash impairment charges increased 1 percent, as the 5 percent increase in expenses exceeded the 3 percent increase in sales. Changes in currency translation rates reduced operating earnings by approximately $4 million in 2016.


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