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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B. Segment Information

The Company has six operating segments which are aggregated into three reportable segments: Industrial, Process and Contractor.

The Industrial segment includes our Industrial Products and Applied Fluid Technologies divisions. The Industrial segment markets equipment and pre-engineered packages for moving and applying paints, coatings, sealants, adhesives and other fluids. Markets served include automotive and vehicle assembly and components production, wood and metal products, rail, marine, aerospace, farm, construction, bus, recreational vehicles and various other industries.

The Process segment includes our Process, Oil and Natural Gas, and Lubrication divisions. The Process segment markets pumps, valves, meters and accessories to move and dispense chemicals, oil and natural gas, water, wastewater, petroleum, food, lubricants and other fluids. Markets served include food and beverage, dairy, oil and natural gas, pharmaceutical, cosmetics, electronics, wastewater, mining, fast oil change facilities, service garages, fleet service centers, automobile dealerships and industrial lubrication applications.

The Contractor segment markets sprayers for architectural coatings for painting, corrosion control, texture and line striping.

The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The cost of manufacturing for each segment is based on product cost, and expenses are based on actual costs incurred along with cost allocations of shared and centralized functions based on activities performed, sales or space utilization. Depreciation expense is charged to the manufacturing or operating cost center that utilizes the asset, and is then allocated to segments on the same basis as other expenses within that cost center. Reportable segments are defined by product. Segments are responsible for development, manufacturing, marketing and sales of their products. This allows for focused marketing and efficient product development. The segments share common purchasing, certain manufacturing, distribution and administration functions.

Segments information follows (in thousands):
 
2016
 
2015
 
2014
Net Sales
 
 
 
 
 
Industrial
$
629,581

 
$
616,069

 
$
622,343

Process
266,630

 
273,631

 
223,213

Contractor
433,082

 
396,785

 
375,574

Total
$
1,329,293

 
$
1,286,485

 
$
1,221,130

Operating Earnings
 
 
 
 
 
Industrial
$
207,183

 
$
201,749

 
$
203,910

Process
35,750

 
43,833

 
47,830

Contractor
91,837

 
86,447

 
81,892

Unallocated corporate (expense)
(28,871
)
 
(29,904
)
 
(24,707
)
Impairment
(192,020
)
 

 

Total
$
113,879

 
$
302,125

 
$
308,925

Assets
 
 
 
 
 
Industrial
$
546,366

 
$
558,799

 
 
Process
318,444

 
481,677

 
 
Contractor
208,016

 
205,632

 
 
Unallocated corporate
170,283

 
145,244

 
 
Total
$
1,243,109

 
$
1,391,352

 
 

Management assesses performance of segments by reference to operating earnings excluding unallocated corporate expenses and asset impairments. Unallocated corporate (expense) includes such items as stock compensation, divestiture and certain acquisition transaction costs, bad debt expense, charitable contributions, certain portions of pension expense and certain central warehouse expenses. Unallocated assets include cash, allowances and valuation reserves, deferred income taxes, certain capital and other assets.


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