Graco Inc.

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SEC Filings

10-Q
GRACO INC filed this Form 10-Q on 10/25/2017
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Item 2. GRACO INC. AND SUBSIDIARIES

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

Overview

The Company supplies technology and expertise for the management of fluids and coatings in both industrial and commercial applications. It 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    
 
Nine Months Ended
 
September 29,
2017
 
September 23,
2016
 
%
 Change 
 
September 29,
2017
 
September 23,
2016
 
%
 Change 
Net Sales
$
379.8

 
$
327.2

 
16
%
 
$
1,099.9

 
$
980.2

 
12
%
Operating Earnings
99.6

 
81.5

 
22
%
 
284.2

 
220.8

 
29
%
Net Earnings
75.5

 
54.4

 
39
%
 
216.0

 
144.9

 
49
%
Net Earnings adjusted (1)
66.8

 
54.4

 
23
%
 
190.0

 
144.9

 
31
%
Diluted Net Earnings per Common Share
$
1.30

 
$
0.95

 
37
%
 
$
3.73

 
$
2.55

 
46
%
Diluted Net Earnings per Common Share, adjusted (1)
$
1.15

 
$
0.95

 
21
%
 
$
3.28

 
$
2.55

 
29
%
(1) See below for a reconciliation of adjusted non-GAAP financial measures to GAAP.

All segments and regions had double-digit percentage sales growth for the quarter and year to date. Sales growth and operating expense leverage drove operating earnings increases of 22 percent for the quarter and 29 percent for the year to date.

Adoption of a new stock compensation accounting standard and recognition of certain tax planning benefits in 2017 created large fluctuations in net earnings compared to prior periods. Excluding the excess tax benefits on exercised stock options and other tax planning benefits recognized as reductions of income taxes in 2017 presents a more consistent comparison of financial results. A calculation of the non-GAAP measurements of adjusted income taxes, net earnings and diluted earnings per share follows (in millions except per share amounts):

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