Graco Inc.

    Print Page | Close Window

SEC Filings

10-Q
GRACO INC filed this Form 10-Q on 04/26/2017
Entire Document
 << Previous Page | Next Page >>

Item 2. GRACO INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

The Company designs, manufactures and markets systems and equipment to move, measure, control, dispense and spray fluid and coating materials. Management classifies the Company’s business into three reportable segments: Industrial, Process and Contractor. Key strategies include developing and marketing new products, leveraging products and technologies into additional, growing end-user markets, expanding distribution globally and completing strategic acquisitions that provide additional channel and technologies.

The following Management’s Discussion and Analysis reviews significant factors affecting the Company’s results of operations and financial condition. This discussion should be read in conjunction with the financial statements and the accompanying notes to the financial statements.

Consolidated Results

A summary of financial results follows (in millions except per share amounts):
 
Three Months Ended    
 
March 31,
2017
 
March 25,
2016
 
%
 Change 
Net Sales
$
340.6

 
$
304.9

 
12
%
Operating Earnings
85.8

 
60.9

 
41
%
Net Earnings
60.7

 
39.6

 
54
%
Diluted Net Earnings per Common Share
$
1.05

 
$
0.70

 
50
%
Strong sales increases in all segments and regions along with improved gross margin rate and operating expense leverage drove increases in operating and net earnings. The increase in diluted earnings per share includes $0.05 from a required change in accounting for stock compensation, and $0.01 from reduced intangible amortization expense resulting from the non-cash impairment charge recorded in the fourth quarter of 2016.

The following table presents an overview of components of net earnings as a percentage of net sales:
 
Three Months Ended   
 
March 31,
2017
 
March 25,
2016
Net Sales
100.0
%
 
100.0
 %
Cost of products sold
45.6

 
46.9

Gross profit
54.4

 
53.1

Product development
4.3

 
4.8

Selling, marketing and distribution
16.1

 
17.3

General and administrative
8.8

 
11.0

Operating earnings
25.2

 
20.0

Interest expense
1.2

 
1.5

Other expense (income), net
0.1

 
(0.4
)
Earnings before income taxes
23.9

 
18.9

Income taxes
6.1

 
5.9

Net Earnings
17.8
%
 
13.0
 %



13

 << Previous Page | Next Page >>