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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Page 2 GRACO


Consolidated Results

Sales for the quarter increased 16 percent, with increases of 12 percent in the Americas, 18 percent in EMEA (14 percent at consistent translation rates) and 27 percent in Asia Pacific (28 percent at consistent translation rates). Sales for the year to date increased 12 percent, with increases of 11 percent in the Americas, 10 percent in EMEA (12 percent at consistent translation rates) and 18 percent in Asia Pacific (20 percent at consistent translation rates).

Changes in currency translation rates increased sales by approximately $3 million (1 percentage point) for the quarter and decreased sales by approximately $6 million (1 percentage point) for the year to date.

Gross profit margin rate decreased by one-half percentage point for the quarter and increased one-half percentage point for the year to date. Favorable effects from higher production volume and realized pricing were offset in varying degrees for the quarter and the year to date by the unfavorable impact of product mix.

Total operating expenses for the quarter increased $9 million (9 percent) compared to the third quarter last year. More than half of the increase was from increases in sales and earnings-based incentives and unallocated corporate operating expense (mostly from market-based stock compensation and pension costs). Year-to-date operating expenses increased $6 million (2 percent). Volume and rate-related increases were partially offset by a $3 million decrease in amortization expense and the impact of currency translation.

The effective income tax rate for the quarter was 22 percent, down from 29 percent last year. The effective income tax rate for the year to date was 21 percent, down from 30 percent last year. Adoption of a new accounting standard, requiring excess tax benefits related to stock option exercises to be credited to the income tax provision (formerly credited to equity), reduced the tax provision by $3.2 million for the quarter and $20.5 million for the year to date, decreasing the effective tax rate for the quarter and year to date by 3 and 7 percentage points, respectively. The effective tax rates for both the quarter and year to date were further reduced by the impacts of tax planning that will not recur in 2018 and foreign earnings taxed at lower rates than the U.S.

Segment Results

Certain measurements of segment operations are summarized below:
 
Three Months Ended   
 
Nine Months Ended
 
Industrial
 
Process
 
Contractor
 
Industrial
 
Process
 
Contractor
Net Sales (in millions)
$
178.5

 
$
73.7

 
$
127.7

 
$
509.7

 
$
217.1

 
$
373.1

Percentage change from last year
 
 
 
 
 
 
 
 
 
 
 
Sales
18
%
 
10
%
 
17
%
 
12
%
 
11
%
 
13
%
Operating earnings
22
%
 
16
%
 
31
%
 
20
%
 
54
%
 
30
%
Operating earnings as a percentage of sales
 
 
 
 
 
 
 
 
 
 
 
2017
35
%
 
16
%
 
26
%
 
35
%
 
18
%
 
25
%
2016
34
%
 
15
%
 
23
%
 
32
%
 
13
%
 
22
%


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