Minnesota
|
41-0285640 | ||
(State of incorporation)
|
(I.R.S. Employer Identification Number) |
88 - 11th Avenue N.E. |
||||
Minneapolis, Minnesota
|
55413 | |||
(Address of principal executive offices)
|
(Zip Code) |
Yes X
|
No |
Yes X
|
No |
Large Accelerated Filer
|
X | Accelerated Filer | ||||
Non-accelerated Filer
|
Smaller reporting company |
Yes
|
No X |
Page Number | ||||||||
PART I | FINANCIAL INFORMATION | |||||||
Item 1. | ||||||||
3 | ||||||||
4 | ||||||||
5 | ||||||||
6 | ||||||||
Item 2. | 13 | |||||||
Item 3. | 18 | |||||||
Item 4. | 18 | |||||||
PART II | OTHER INFORMATION | |||||||
Item 1A. | 19 | |||||||
Item 2. | 19 | |||||||
Item 6. | 20 | |||||||
SIGNATURES | ||||||||
EXHIBITS |
2
Thirteen Weeks Ended | Thirty-nine Weeks Ended | |||||||||||||||
Sep 24, | Sep 25, | Sep 24, | Sep 25, | |||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Net Sales |
$ | 189,963 | $ | 147,308 | $ | 546,772 | $ | 432,900 | ||||||||
Cost of products sold |
85,405 | 69,167 | 250,999 | 217,423 | ||||||||||||
Gross Profit |
104,558 | 78,141 | 295,773 | 215,477 | ||||||||||||
Product development |
9,263 | 8,752 | 28,209 | 28,584 | ||||||||||||
Selling, marketing and distribution |
33,280 | 26,589 | 95,087 | 86,814 | ||||||||||||
General and administrative |
18,592 | 16,613 | 57,139 | 49,317 | ||||||||||||
Operating Earnings |
43,423 | 26,187 | 115,338 | 50,762 | ||||||||||||
Interest expense |
1,038 | 1,148 | 3,159 | 3,735 | ||||||||||||
Other expense (income), net |
254 | 203 | 147 | 889 | ||||||||||||
Earnings Before Income Taxes |
42,131 | 24,836 | 112,032 | 46,138 | ||||||||||||
Income taxes |
11,700 | 7,500 | 36,200 | 14,400 | ||||||||||||
Net Earnings |
$ | 30,431 | $ | 17,336 | $ | 75,832 | $ | 31,738 | ||||||||
Basic Net Earnings |
||||||||||||||||
per Common Share |
$ | 0.51 | $ | 0.29 | $ | 1.26 | $ | 0.53 | ||||||||
Diluted Net Earnings |
||||||||||||||||
per Common Share |
$ | 0.50 | $ | 0.29 | $ | 1.25 | $ | 0.53 | ||||||||
Cash Dividends Declared |
||||||||||||||||
per Common Share |
$ | 0.20 | $ | 0.19 | $ | 0.60 | $ | 0.57 |
3
Sep 24, | Dec 25, | |||||||
2010 | 2009 | |||||||
ASSETS |
||||||||
Current Assets |
||||||||
Cash and cash equivalents |
$ | 9,666 | $ | 5,412 | ||||
Accounts receivable, less allowances of $5,300 and $6,500 |
135,583 | 100,824 | ||||||
Inventories |
85,342 | 58,658 | ||||||
Deferred income taxes |
20,441 | 20,380 | ||||||
Other current assets |
2,636 | 3,719 | ||||||
Total current assets |
253,668 | 188,993 | ||||||
Property, Plant and Equipment |
||||||||
Cost |
340,287 | 334,440 | ||||||
Accumulated depreciation |
(207,963 | ) | (195,387 | ) | ||||
Property, plant and equipment, net |
132,324 | 139,053 | ||||||
Goodwill |
91,740 | 91,740 | ||||||
Other Intangible Assets, net |
31,274 | 40,170 | ||||||
Deferred Income Taxes |
9,618 | 8,372 | ||||||
Other Assets |
8,516 | 8,106 | ||||||
Total Assets |
$ | 527,140 | $ | 476,434 | ||||
LIABILITIES AND SHAREHOLDERS EQUITY |
||||||||
Current Liabilities |
||||||||
Notes payable to banks |
$ | 11,066 | $ | 12,028 | ||||
Trade accounts payable |
24,869 | 17,983 | ||||||
Salaries and incentives |
29,059 | 14,428 | ||||||
Dividends payable |
11,977 | 12,003 | ||||||
Other current liabilities |
46,338 | 47,373 | ||||||
Total current liabilities |
123,309 | 103,815 | ||||||
Long-term Debt |
90,000 | 86,260 | ||||||
Retirement Benefits and Deferred Compensation |
65,977 | 73,705 | ||||||
Uncertain Tax Positions |
- | 3,000 | ||||||
Shareholders Equity |
||||||||
Common stock |
59,868 | 59,999 | ||||||
Additional paid-in-capital |
205,353 | 190,261 | ||||||
Retained earnings |
30,035 | 11,121 | ||||||
Accumulated other comprehensive income (loss) |
(47,402 | ) | (51,727 | ) | ||||
Total shareholders equity |
247,854 | 209,654 | ||||||
Total Liabilities and Shareholders Equity |
$ | 527,140 | $ | 476,434 | ||||
4
Thirty-nine Weeks Ended | ||||||||
Sep 24, | Sep 25, | |||||||
2010 | 2009 | |||||||
Cash Flows From Operating Activities |
||||||||
Net Earnings |
$ | 75,832 | $ | 31,738 | ||||
Adjustments to reconcile net earnings to net cash provided by operating activities |
||||||||
Depreciation and amortization |
25,496 | 26,200 | ||||||
Deferred income taxes |
(3,848 | ) | 4,671 | |||||
Share-based compensation |
7,339 | 7,441 | ||||||
Excess tax benefit related to share-based payment arrangements |
(1,000 | ) | (300 | ) | ||||
Change in |
||||||||
Accounts receivable |
(34,845 | ) | 22,434 | |||||
Inventories |
(26,740 | ) | 30,745 | |||||
Trade accounts payable |
6,892 | (2,050 | ) | |||||
Salaries and incentives |
14,637 | (3,853 | ) | |||||
Retirement benefits and deferred compensation |
(2,810 | ) | (4,741 | ) | ||||
Other accrued liabilities |
(258 | ) | (2,437 | ) | ||||
Other |
1,744 | 313 | ||||||
Net cash provided by operating activities |
62,439 | 110,161 | ||||||
Cash Flows From Investing Activities |
||||||||
Property, plant and equipment additions |
(9,416 | ) | (9,375 | ) | ||||
Proceeds from sale of property, plant and equipment |
180 | 615 | ||||||
Investment in life insurance |
(1,499 | ) | (1,499 | ) | ||||
Capitalized software and other intangible asset additions |
(342 | ) | (501 | ) | ||||
Net cash used in investing activities |
(11,077 | ) | (10,760 | ) | ||||
Cash Flows From Financing Activities |
||||||||
Net borrowings (payments) on short-term lines of credit |
(334 | ) | (4,700 | ) | ||||
Borrowings on long-term line of credit |
10,000 | 75,491 | ||||||
Payments on long-term line of credit |
(6,260 | ) | (148,127 | ) | ||||
Excess tax benefit related to share-based payment arrangements |
1,000 | 300 | ||||||
Common stock issued |
9,667 | 6,119 | ||||||
Common stock retired |
(24,218 | ) | (157 | ) | ||||
Cash dividends paid |
(36,171 | ) | (34,069 | ) | ||||
Net cash provided by (used in) financing activities |
(46,316 | ) | (105,143 | ) | ||||
Effect of exchange rate changes on cash |
(792 | ) | (1,313 | ) | ||||
Net increase (decrease) in cash and cash equivalents |
4,254 | (7,055 | ) | |||||
Cash and cash equivalents: |
||||||||
Beginning of year |
5,412 | 12,119 | ||||||
End of period |
$ | 9,666 | $ | 5,064 | ||||
5
1. | The consolidated balance sheet of Graco Inc. and Subsidiaries (the Company) as of September 24, 2010 and the related statements of earnings for the thirteen and thirty-nine weeks ended September 24, 2010 and September 25, 2009, and cash flows for the thirty-nine weeks ended September 24, 2010 and September 25, 2009 have been prepared by the Company and have not been audited. | |
In the opinion of management, these consolidated financial statements reflect all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the financial position of Graco Inc. and Subsidiaries as of September 24, 2010, and the results of operations and cash flows for all periods presented. | ||
Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. Therefore, these statements should be read in conjunction with the financial statements and notes thereto included in the Companys 2009 Annual Report on Form 10-K. | ||
The results of operations for interim periods are not necessarily indicative of results that will be realized for the full fiscal year. | ||
2. | The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share amounts): |
Thirteen Weeks Ended | Thirty-nine Weeks Ended | |||||||||||||||
Sep 24, | Sep 25, | Sep 24, | Sep 25, | |||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Net earnings available to common shareholders |
$ | 30,431 | $ | 17,336 | $ | 75,832 | $ | 31,738 | ||||||||
Weighted average shares outstanding for basic earnings per share |
60,107 | 59,940 | 60,304 | 59,827 | ||||||||||||
Dilutive effect of stock options computed using the treasury stock method and the average market price |
517 | 374 | 536 | 306 | ||||||||||||
Weighted average shares outstanding for diluted earnings per share |
60,624 | 60,314 | 60,840 | 60,133 | ||||||||||||
Basic earnings per share |
$ | 0.51 | $ | 0.29 | $ | 1.26 | $ | 0.53 | ||||||||
Diluted earnings per share |
$ | 0.50 | $ | 0.29 | $ | 1.25 | $ | 0.53 |
6
Stock options to purchase 2,965,000 and 2,834,000 shares were not included in the 2010 and 2009 computations of diluted earnings per share, respectively, because they would have been anti-dilutive. | ||
3. | Information on option shares outstanding and option activity for the thirty-nine weeks ended September 24, 2010 is shown below (in thousands, except per share amounts): |
Weighted | Weighted | |||||||||||||||
Average | Average | |||||||||||||||
Option | Exercise | Options | Exercise | |||||||||||||
Shares | Price | Exercisable | Price | |||||||||||||
Outstanding, December 25, 2009 |
4,813 | $ | 28.98 | 2,445 | $ | 28.38 | ||||||||||
Granted |
827 | 27.80 | ||||||||||||||
Exercised |
(251 | ) | 12.54 | |||||||||||||
Canceled |
(61 | ) | 32.23 | |||||||||||||
Outstanding, September 24, 2010 |
5,328 | $ | 29.53 | 2,841 | $ | 30.41 | ||||||||||
The Company recognized year-to-date share-based compensation of $7.3 million in 2010 and $7.7 million in 2009. As of September 24, 2010, there was $7.3 million of unrecognized compensation cost related to unvested options, expected to be recognized over a weighted average period of 2.1 years. | ||
The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions and results: |
Thirty-nine Weeks Ended | ||||||||
Sep 24, | Sep 25, | |||||||
2010 | 2009 | |||||||
Expected life in years |
6.0 | 6.0 | ||||||
Interest rate |
2.7 | % | 2.1 | % | ||||
Volatility |
34.0 | % | 30.1 | % | ||||
Dividend yield |
3.0 | % | 3.7 | % | ||||
Weighted average fair value per share |
$ | 7.38 | $ | 4.27 |
Under the Companys Employee Stock Purchase Plan, the Company issued 436,000 shares in 2010 and 312,000 shares in 2009. The fair value of the employees purchase rights under this Plan was estimated on the date of grant. The benefit of the 15 percent discount from the lesser of the fair market value per common share on the first day and the last day of the plan year was added to the fair value of the employees purchase rights determined using the Black-Scholes option-pricing model with the following assumptions and results: |
7
Thirty-nine Weeks Ended | ||||||||
Sep 24, | Sep 25, | |||||||
2010 | 2009 | |||||||
Expected life in years |
1.0 | 1.0 | ||||||
Interest rate |
0.3 | % | 0.7 | % | ||||
Volatility |
42.8 | % | 51.5 | % | ||||
Dividend yield |
2.9 | % | 4.5 | % | ||||
Weighted average fair value per share |
$ | 8.48 | $ | 5.60 |
4. | The components of net periodic benefit cost for retirement benefit plans were as follows (in thousands): |
Thirteen Weeks Ended | Thirty-nine Weeks Ended | |||||||||||||||
Sep 24, | Sep 25, | Sep 24, | Sep 25, | |||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Pension Benefits |
||||||||||||||||
Service cost |
$ | 1,038 | $ | 1,078 | $ | 3,173 | $ | 3,498 | ||||||||
Interest cost |
3,160 | 2,926 | 9,575 | 9,261 | ||||||||||||
Expected return on assets |
(3,564 | ) | (2,593 | ) | (10,364 | ) | (8,143 | ) | ||||||||
Amortization and other |
1,547 | 2,034 | 4,599 | 6,761 | ||||||||||||
Net periodic benefit cost |
$ | 2,181 | $ | 3,445 | $ | 6,983 | $ | 11,377 | ||||||||
Postretirement Medical |
||||||||||||||||
Service cost |
$ | 138 | $ | 174 | $ | 413 | $ | 424 | ||||||||
Interest cost |
310 | 335 | 930 | 985 | ||||||||||||
Amortization |
(50 | ) | (45 | ) | (145 | ) | (45 | ) | ||||||||
Net periodic benefit cost |
$ | 398 | $ | 464 | $ | 1,198 | $ | 1,364 | ||||||||
The Company made voluntary tax-deductible contributions to its funded defined benefit plan in the amount of $10 million in the third quarter of 2010 and $15 million in the third quarter of 2009. | ||
The Company paid $1.5 million in June 2010 and $1.5 million in June 2009 for contracts insuring the lives of certain employees who are eligible to participate in certain non-qualified pension and deferred compensation plans. These insurance contracts will be used to fund the non-qualified pension and deferred compensation arrangements. The insurance contracts are held in a trust and are available to general creditors in the event of the Companys insolvency. Cash surrender value of $6.0 million and $4.4 million is included in other assets in the consolidated balance sheet as of September 24, 2010 and December 25, 2009, respectively. |
8
5. | Total comprehensive income was as follows (in thousands): |
Thirteen Weeks Ended | Thirty-nine Weeks Ended | |||||||||||||||
Sep 24, | Sep 25, | Sep 24, | Sep 25, | |||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Net earnings |
$ | 30,431 | $ | 17,336 | $ | 75,832 | $ | 31,738 | ||||||||
Cumulative translation adjustment |
- | - | - | 234 | ||||||||||||
Pension and postretirement medical liability adjustment |
1,507 | 2,432 | 4,466 | 7,183 | ||||||||||||
Gain (loss) on interest
rate hedge contracts |
763 | 303 | 2,401 | 594 | ||||||||||||
Income taxes |
(841 | ) | (1,011 | ) | (2,542 | ) | (2,877 | ) | ||||||||
Comprehensive income |
$ | 31,860 | $ | 19,060 | $ | 80,157 | $ | 36,872 | ||||||||
Components of accumulated other comprehensive income (loss) were (in thousands): |
Sep 24, | Dec 25, | |||||||
2010 | 2009 | |||||||
Pension and postretirement medical
liability adjustment |
$ | (45,747 | ) | $ | (48,560 | ) | ||
Gain (loss) on interest rate hedge contracts |
(832 | ) | (2,344 | ) | ||||
Cumulative translation adjustment |
(823 | ) | (823 | ) | ||||
Total |
$ | (47,402 | ) | $ | (51,727 | ) | ||
6. | The Company has three reportable segments: Industrial, Contractor and Lubrication. The Company does not track assets by segment. Sales and operating earnings by segment for the thirteen and thirty-nine weeks ended September 24, 2010 and September 25, 2009 were as follows (in thousands): |
Thirteen Weeks Ended | Thirty-nine Weeks Ended | |||||||||||||||
Sep 24, | Sep 25, | Sep 24, | Sep 25, | |||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Net Sales |
||||||||||||||||
Industrial |
$ | 99,236 | $ | 78,242 | $ | 296,489 | $ | 226,808 | ||||||||
Contractor |
70,362 | 55,379 | 194,941 | 163,213 | ||||||||||||
Lubrication |
20,365 | 13,687 | 55,342 | 42,879 | ||||||||||||
Total |
$ | 189,963 | $ | 147,308 | $ | 546,772 | $ | 432,900 | ||||||||
Operating Earnings |
||||||||||||||||
Industrial |
$ | 31,195 | $ | 20,332 | $ | 91,234 | $ | 45,262 | ||||||||
Contractor |
13,753 | 11,138 | 31,839 | 24,420 | ||||||||||||
Lubrication |
2,751 | (167 | ) | 6,326 | (3,348 | ) | ||||||||||
Unallocated
corporate (expense) |
(4,276 | ) | (5,116 | ) | (14,061 | ) | (15,572 | ) | ||||||||
Total |
$ | 43,423 | $ | 26,187 | $ | 115,338 | $ | 50,762 | ||||||||
9
7. | Major components of inventories were as follows (in thousands): |
Sep 24, | Dec 25, | |||||||
2010 | 2009 | |||||||
Finished products and components |
$ | 48,690 | $ | 36,665 | ||||
Products and components in various stages of completion |
28,742 | 22,646 | ||||||
Raw materials and purchased components |
41,284 | 31,826 | ||||||
118,716 | 91,137 | |||||||
Reduction to LIFO cost |
(33,374 | ) | (32,479 | ) | ||||
Total |
$ | 85,342 | $ | 58,658 | ||||
8. | Information related to other intangible assets follows (dollars in thousands): |
Estimated | Foreign | |||||||||||||||||||
Life | Original | Accumulated | Currency | Book | ||||||||||||||||
(years) | Cost | Amortization | Translation | Value | ||||||||||||||||
September 24, 2010 |
||||||||||||||||||||
Customer relationships |
3 - 8 | $ | 41,075 | $ | (23,294 | ) | $ | (181 | ) | $ | 17,600 | |||||||||
Patents, proprietary technology and product documentation |
3 - 10 | 21,072 | (14,347 | ) | (85 | ) | 6,640 | |||||||||||||
Trademarks, trade names and other |
3 - 10 | 8,154 | (4,300 | ) | - | 3,854 | ||||||||||||||
70,301 | (41,941 | ) | (266 | ) | 28,094 | |||||||||||||||
Not Subject to Amortization: |
||||||||||||||||||||
Brand names |
3,180 | - | - | 3,180 | ||||||||||||||||
Total |
$ | 73,481 | $ | (41,941 | ) | $ | (266 | ) | $ | 31,274 | ||||||||||
December 25, 2009 |
||||||||||||||||||||
Customer relationships |
3 - 8 | $ | 41,075 | $ | (18,655 | ) | $ | (181 | ) | $ | 22,239 | |||||||||
Patents, proprietary technology
and product documentation |
3 - 10 | 22,862 | (13,708 | ) | (87 | ) | 9,067 | |||||||||||||
Trademarks, trade names
and other |
3 - 10 | 8,154 | (2,470 | ) | - | 5,684 | ||||||||||||||
72,091 | (34,833 | ) | (268 | ) | 36,990 | |||||||||||||||
Not Subject to Amortization: | ||||||||||||||||||||
Brand names |
3,180 | - | - | 3,180 | ||||||||||||||||
Total |
$ | 75,271 | $ | (34,833 | ) | $ | (268 | ) | $ | 40,170 | ||||||||||
10
Amortization of intangibles was $3.0 million in the third quarter of 2010 and $8.9 million year-to-date. Estimated annual amortization expense is as follows: $11.8 million in 2010, $10.7 million in 2011, $8.8 million in 2012, $4.1 million in 2013, $0.9 million in 2014 and $0.7 million thereafter. | ||
9. | Components of other current liabilities were (in thousands): |
Sep 24, | Dec 25, | |||||||
2010 | 2009 | |||||||
Accrued self-insurance retentions |
$ | 7,282 | $ | 7,785 | ||||
Accrued warranty and service liabilities |
6,815 | 7,437 | ||||||
Accrued trade promotions |
4,757 | 2,953 | ||||||
Payable for employee stock purchases |
4,040 | 5,115 | ||||||
Income taxes payable |
2,739 | 1,550 | ||||||
Other |
20,705 | 22,533 | ||||||
Total other current liabilities |
$ | 46,338 | $ | 47,373 | ||||
A liability is established for estimated future warranty and service claims that relate to current and prior period sales. The Company estimates warranty costs based on historical claim experience and other factors including evaluating specific product warranty issues. Following is a summary of activity in accrued warranty and service liabilities (in thousands): |
Thirty-nine | ||||||||
Weeks Ended | Year Ended | |||||||
Sep 24, | Dec 25, | |||||||
2010 | 2009 | |||||||
Balance, beginning of year |
$ | 7,437 | $ | 8,033 | ||||
Charged to expense |
2,203 | 4,548 | ||||||
Margin on parts sales reversed |
1,921 | 2,876 | ||||||
Reductions for claims settled |
(4,746 | ) | (8,020 | ) | ||||
Balance, end of period |
$ | 6,815 | $ | 7,437 | ||||
10. | The Company accounts for all derivatives, including those embedded in other contracts, as either assets or liabilities and measures those financial instruments at fair value. The accounting for changes in the fair value of derivatives depends on their intended use and designation. | |
As part of its risk management program, the Company may periodically use forward exchange contracts and interest rate swaps to manage known market exposures. Terms of derivative instruments are structured to match the terms of the risk being managed and are generally held to maturity. The Company does not hold or issue derivative financial instruments for trading purposes. All other contracts that contain provisions meeting the definition of a derivative also meet the requirements of, and have been designated as, normal purchases or sales. The Companys policy is to not enter into contracts with terms that cannot be designated as normal purchases or sales. |
11
In 2007, the Company entered into interest rate swap contracts that effectively fix the rates paid on a total of $80 million of variable rate borrowings. One contract fixed the rate on $40 million of borrowings at 4.7 percent plus the applicable spread (depending on cash flow leverage ratio) until December 2010. The second contract fixed an additional $40 million of borrowings at 4.6 percent plus the applicable spread until January 2011. Both contracts have been designated as cash flow hedges against interest rate volatility. Consequently, changes in the fair market value are recorded in accumulated other comprehensive income (loss) (AOCI). Amounts included in AOCI will be reclassified to earnings as interest rates increase and as the swap contracts approach their expiration dates. Net amounts paid or payable under terms of the contracts were charged to interest expense and totaled $2.6 million in the first nine months of 2010. | ||
The Company periodically evaluates its monetary asset and liability positions denominated in foreign currencies. The Company enters into forward contracts or options, or borrows in various currencies, in order to hedge its net monetary positions. These instruments are recorded at current market values and the gains and losses are included in other expense (income), net. There were seven contracts outstanding as of September 24, 2010, with notional amounts totaling $20 million. The Company believes it uses strong financial counterparts in these transactions and that the resulting credit risk under these hedging strategies is not significant. | ||
The Company uses significant other observable inputs to value the derivative instruments used to hedge interest rate volatility and net monetary positions. The fair market value and balance sheet classification of such instruments follows (in thousands): |
Balance Sheet | Sep 24, | Dec 25, | ||||||||
Classification | 2010 | 2009 | ||||||||
Gain (loss) on interest rate hedge contracts |
Other current liabilities | $ | (1,321 | ) | $ | (3,722 | ) | |||
Gain (loss) on foreign currency forward contracts |
||||||||||
Gains |
$ | 42 | $ | 207 | ||||||
Losses |
(280 | ) | (249 | ) | ||||||
Net |
Other current liabilities | $ | (238 | ) | $ | (42 | ) | |||
12
Item 2. | GRACO INC. AND SUBSIDIARIES | |||
MANAGEMENTS DISCUSSION AND ANALYSIS OF | ||||
FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Thirteen Weeks Ended | Thirty-nine Weeks Ended | |||||||||||||||||||||||
Sep 24, | Sep 25, | % | Sep 24, | Sep 25, | % | |||||||||||||||||||
2010 | 2009 | Change | 2010 | 2009 | Change | |||||||||||||||||||
Net Sales |
$ | 190.0 | $ | 147.3 | 29 | % | $ | 546.8 | $ | 432.9 | 26 | % | ||||||||||||
Net Earnings |
$ | 30.4 | $ | 17.3 | 76 | % | $ | 75.8 | $ | 31.7 | 139 | % | ||||||||||||
Diluted Net Earnings per Common Share |
$ | 0.50 | $ | 0.29 | 72 | % | $ | 1.25 | $ | 0.53 | 136 | % |
13
Thirteen Weeks Ended | Thirty-nine Weeks Ended | |||||||||||||||
Sep 24, | Sep 25, | Sep 24, | Sep 25, | |||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Americas1 |
$ | 108.7 | $ | 84.1 | $ | 305.6 | $ | 252.6 | ||||||||
Europe2 |
43.4 | 35.6 | 129.2 | 105.9 | ||||||||||||
Asia Pacific |
37.9 | 27.6 | 112.0 | 74.4 | ||||||||||||
Consolidated |
$ | 190.0 | $ | 147.3 | $ | 546.8 | $ | 432.9 | ||||||||
1 North and South America, including the U.S. | ||
2 Europe, Africa and Middle East |
14
Thirteen Weeks Ended | Thirty-nine Weeks Ended | |||||||||||||||
Sep 24, | Sep 25, | Sep 24, | Sep 25, | |||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Net sales (in millions) |
||||||||||||||||
Americas |
$ | 46.7 | $ | 37.0 | $ | 134.1 | $ | 108.3 | ||||||||
Europe |
25.6 | 22.0 | 80.6 | 65.7 | ||||||||||||
Asia Pacific |
26.9 | 19.2 | 81.8 | 52.8 | ||||||||||||
Total |
$ | 99.2 | $ | 78.2 | $ | 296.5 | $ | 226.8 | ||||||||
Operating earnings as a
percentage of net sales |
31 % | 26 % | 31 % | 20 % | ||||||||||||
Thirteen Weeks Ended | Thirty-nine Weeks Ended | |||||||||||||||
Sep 24, | Sep 25, | Sep 24, | Sep 25, | |||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Net sales (in millions) |
||||||||||||||||
Americas |
$ | 46.8 | $ | 36.2 | $ | 130.2 | $ | 109.0 | ||||||||
Europe |
16.2 | 12.5 | 44.1 | 37.3 | ||||||||||||
Asia Pacific |
7.4 | 6.7 | 20.6 | 16.9 | ||||||||||||
Total |
$ | 70.4 | $ | 55.4 | $ | 194.9 | $ | 163.2 | ||||||||
Operating earnings as a
percentage of net sales |
20 % | 20 % | 16 % | 15 % | ||||||||||||
15
Thirteen Weeks Ended | Thirty-nine Weeks Ended | |||||||||||||||
Sep 24, | Sep 25, | Sep 24, | Sep 25, | |||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Net sales (in millions) |
||||||||||||||||
Americas |
$ | 15.2 | $ | 10.9 | $ | 41.2 | $ | 35.4 | ||||||||
Europe |
1.6 | 1.1 | 4.5 | 2.9 | ||||||||||||
Asia Pacific |
3.6 | 1.7 | 9.6 | 4.6 | ||||||||||||
Total |
$ | 20.4 | $ | 13.7 | $ | 55.3 | $ | 42.9 | ||||||||
Operating earnings as a
percentage of net sales |
14 % | (1)% | 11 % | (8)% | ||||||||||||
16
17
18
Maximum | ||||||||||||||||
Total | Number of | |||||||||||||||
Number | Shares that | |||||||||||||||
of Shares | May Yet Be | |||||||||||||||
Purchased | Purchased | |||||||||||||||
as Part of | Under the | |||||||||||||||
Total | Average | Publicly | Plans or | |||||||||||||
Number | Price | Announced | Programs | |||||||||||||
of Shares | Paid per | Plans or | (at end of | |||||||||||||
Period | Purchased | Share | Programs | period) | ||||||||||||
Jun 26, 2010 Jul 23, 2010 |
86,411 | $ | 29.30 | 86,411 | 5,590,000 | |||||||||||
Jul 24, 2010 Aug 20, 2010 |
215,000 | $ | 29.58 | 215,000 | 5,375,000 | |||||||||||
Aug 21, 2010 Sep 24, 2010 |
195,362 | $ | 28.13 | 195,362 | 5,179,638 |
19
10.1 | Graco Restoration Plan (2005 Statement). Fifth Amendment adopted September 16, 2010. | ||
31.1 | Certification of President and Chief Executive Officer pursuant to Rule 13a-14(a). | ||
31.2 | Certification of Chief Financial Officer and Treasurer pursuant to rule 13a-14(a). | ||
32 | Certification of President and Chief Executive Officer and Chief Financial Officer and Treasurer pursuant to Section 1350 of Title 18, U.S.C. | ||
99.1 | Press Release, Reporting Third Quarter Earnings, dated October 20, 2010. | ||
101 | Interactive Data File. |
20
GRACO INC. | ||||||||
Date:
|
October 20, 2010 | By: | /s/ Patrick J. McHale | |||||
President and Chief Executive Officer | ||||||||
(Principal Executive Officer) | ||||||||
Date:
|
October 20, 2010 | By: | /s/ James A. Graner | |||||
James A. Graner | ||||||||
Chief Financial Officer and Treasurer | ||||||||
(Principal Financial Officer) | ||||||||
Date:
|
October 20, 2010 | By: | /s/ Caroline M. Chambers | |||||
Caroline M. Chambers | ||||||||
Vice President and Controller | ||||||||
(Principal Accounting Officer) |
(e) | One-Time Election. If a Participant is an active employee of an Employer on
October 1, 2010 and has accrued benefits under the Plan, the Participant shall be
eligible to make a one-time election as described in this Section 7.1.2(e) with respect
to the form of payment for benefits accrued under the Plan on and after January 1,
2011. The following rules shall apply if a Participant makes the one-time election
provided for under this paragraph: |
(i) | The election provided for under this paragraph
may be made only once with respect to the benefits accrued on and after
January 1, 2011. A one-time election form shall be completed, signed
and returned to Gracos Vice President-Human Resources on or before
December 1, 2010. |
||
(ii) | On and after January 1, 2011, a Participant may
make a subsequent election to change the form of payment of the
benefits for which a one-time election has been made (benefits accrued
on and after January 1, 2011), provided that the Participant complies
with the provisions of Section 7.1.2(b) of the Plan. The Participant
may also make a separate subsequent election pursuant to the provisions
of Section 7.1.2(b) with respect to the benefits the Participant
accrued prior to January 1, 2011. |
||
(iii) | If a Participants benefits under the Plan on
or after January 1, 2011 exceed the Participants benefits as of
December 31, 2010, the excess amount shall be subject to the one-time
election (if any) made by the Participant between October 1, 2010 and
December 1, 2010. |
||
(iv) | If a Participant makes a one-time election,
this Section 7.1.2(e) is intended to bifurcate the Participants
benefits under the Plan into (1) benefits accrued prior to January 1,
2011 and (2) benefits accrued on and after January 1, 2011. The
Participants benefits accrued as of December 31, 2010 shall be
calculated in accordance with the provisions of the Plan and the
guidance provided under section 409A of the Code. |
Any change in the amount of benefits accrued under the Plan is not
intended to impermissibly accelerate or delay payment of those
benefits within the meaning of section 409A of the Code. The intent
is to freeze the benefits accrued as of December 31, 2010, so that no
benefits are shifted from being paid under one form of payment to
being paid under any other form of payment. If, at the time that the
distribution of the Participants benefits is to commence, the
Participants benefit exceeds the amount of the Participants benefit
as of December 31, 2010, the additional amount shall be paid as
directed by the Participant in the one-time election made between
October 1, 2010 and December 1, 2010, as modified by any subsequent
election made pursuant to Section 7.1.2(b) with respect to benefits
accrued on and after January 1, 2011. If, at the time that the
distribution of the Participants benefits is to commence, the
Participants benefit is equal to or less than the amount of the
Participants benefits as of December 31, 2010, the one-time election
shall not apply and all of the Participants benefits shall be paid
as provided by the Plan as modified by any subsequent election with
respect to the benefits accrued as of December 31, 2010, made
pursuant to Section 7.1.2(b) |
|||
(v) | If a Participant does not make the one-time
election provided for in this Section 7.1.2(e), then the provisions of
this Section 7.1.2(e) shall not apply. No Participant shall be
eligible to make the one-time election provided for under Section
7.1.2(e) after December 31, 2010. |
||
(vi) | The Committee shall have complete discretion to
interpret this Section 7.1.2(e) and to determine the Participants
benefit in a manner consistent with the intent of Section 7.1.2(e) and
section 409A of the Code. The Committee may resolve questions
regarding, and make adjustments to, the factors (such as compensation
and years of service) used to calculate a Participants benefits. |
1. | I have reviewed this quarterly report on Form 10-Q of Graco Inc.; | |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors: |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and | |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date:
|
October 20, 2010 | /s/ Patrick J. McHale | ||
Patrick J. McHale | ||||
President and Chief Executive Officer |
1. | I have reviewed this quarterly report on Form 10-Q of Graco Inc.; | |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors: |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and | |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date:
|
October 20, 2010 | /s/ James A. Graner | ||
James A. Graner | ||||
Chief Financial Officer and Treasurer |
Date:
|
October 20, 2010 | /s/ Patrick J. McHale | ||
Patrick J. McHale | ||||
President and Chief Executive Officer | ||||
Date:
|
October 20, 2010 | /s/ James A. Graner | ||
James A. Graner | ||||
Chief Financial Officer and Treasurer |
News Release
|
GRACO INC. P.O. Box 1441 Minneapolis, MN 55440-1441 NYSE: GGG |
FOR IMMEDIATE RELEASE: Wednesday, October 20, 2010 |
FOR FURTHER INFORMATION: James A. Graner (612) 623-6635 |
Thirteen Weeks Ended | Thirty-nine Weeks Ended | |||||||||||||||||||||||
Sep 24, | Sep 25, | % | Sep 24, | Sep 25, | % | |||||||||||||||||||
2010 | 2009 | Change | 2010 | 2009 | Change | |||||||||||||||||||
Net Sales |
$ | 190.0 | $ | 147.3 | 29 % | $ | 546.8 | $ | 432.9 | 26 | % | |||||||||||||
Net Earnings |
30.4 | 17.3 | 76 % | 75.8 | 31.7 | 139 | % | |||||||||||||||||
Diluted Net Earnings per Common Share |
$ | 0.50 | $ | 0.29 | 72 % | $ | 1.25 | $ | 0.53 | 136 | % |
| All divisions and regions had double-digit percentage revenue growth for the quarter and year-to-date. | ||
| Year-to-date gross margin rate of 54 percent was 4 percentage points higher than the rate for the comparable period last year. | ||
| Return on sales for the quarter was 16 percent, up from 12 percent for the third quarter last year. Year-to-date return on sales was 14 percent, up from 7 percent for the comparable period last year. | ||
| Sales of new products contributed to third-quarter growth in the Contractor segment. | ||
| Strong sales growth in Asia Pacific continued (up 37 percent for the quarter and 51 percent year-to-date). |
Thirteen Weeks | Thirty-nine Weeks | |||||||||||||||||||||||
Industrial | Contractor | Lubrication | Industrial | Contractor | Lubrication | |||||||||||||||||||
Net sales (in millions) |
$ | 99.2 | $ | 70.4 | $ | 20.4 | $ | 296.5 | $ | 194.9 | $ | 55.3 | ||||||||||||
Net sales percentage change from last year |
27 % | 27 % | 49 % | 31 % | 19 % | 29 | % | |||||||||||||||||
Operating earnings as a percentage of net sales |
||||||||||||||||||||||||
2010 |
31 % | 20 % | 14 % | 31 % | 16 % | 11 | % | |||||||||||||||||
2009 |
26 % | 20 % | (1)% | 20 % | 15 % | (8 | )% |
Thirteen Weeks Ended | Thirty-nine Weeks Ended | |||||||||||||||
(in thousands, except per share amounts) | Sep 24, | Sep 25, | Sep 24, | Sep 25, | ||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Net Sales |
$ | 189,963 | $ | 147,308 | $ | 546,772 | $ | 432,900 | ||||||||
Cost of products sold |
85,405 | 69,167 | 250,999 | 217,423 | ||||||||||||
Gross Profit |
104,558 | 78,141 | 295,773 | 215,477 | ||||||||||||
Product development |
9,263 | 8,752 | 28,209 | 28,584 | ||||||||||||
Selling, marketing and distribution |
33,280 | 26,589 | 95,087 | 86,814 | ||||||||||||
General and administrative |
18,592 | 16,613 | 57,139 | 49,317 | ||||||||||||
Operating Earnings |
43,423 | 26,187 | 115,338 | 50,762 | ||||||||||||
Interest expense |
1,038 | 1,148 | 3,159 | 3,735 | ||||||||||||
Other expense (income), net |
254 | 203 | 147 | 889 | ||||||||||||
Earnings Before Income Taxes |
42,131 | 24,836 | 112,032 | 46,138 | ||||||||||||
Income taxes |
11,700 | 7,500 | 36,200 | 14,400 | ||||||||||||
Net Earnings |
$ | 30,431 | $ | 17,336 | $ | 75,832 | $ | 31,738 | ||||||||
Net Earnings per Common Share |
||||||||||||||||
Basic |
$ | 0.51 | $ | 0.29 | $ | 1.26 | $ | 0.53 | ||||||||
Diluted |
$ | 0.50 | $ | 0.29 | $ | 1.25 | $ | 0.53 | ||||||||
Weighted Average Number of Shares |
||||||||||||||||
Basic |
60,107 | 59,940 | 60,304 | 59,827 | ||||||||||||
Diluted |
60,624 | 60,314 | 60,840 | 60,133 | ||||||||||||
Segment Information (Unaudited) | ||||||||||||||||
Thirteen Weeks Ended | Thirty-nine Weeks Ended | |||||||||||||||
Sep 24, | Sep 25, | Sep 24, | Sep 25, | |||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Net Sales |
||||||||||||||||
Industrial |
$ | 99,236 | $ | 78,242 | $ | 296,489 | $ | 226,808 | ||||||||
Contractor |
70,362 | 55,379 | 194,941 | 163,213 | ||||||||||||
Lubrication |
20,365 | 13,687 | 55,342 | 42,879 | ||||||||||||
Total |
$ | 189,963 | $ | 147,308 | $ | 546,772 | $ | 432,900 | ||||||||
Operating Earnings |
||||||||||||||||
Industrial |
$ | 31,195 | $ | 20,332 | $ | 91,234 | $ | 45,262 | ||||||||
Contractor |
13,753 | 11,138 | 31,839 | 24,420 | ||||||||||||
Lubrication |
2,751 | (167) | 6,326 | (3,348 | ) | |||||||||||
Unallocated corporate (expense) |
(4,276) | (5,116) | (14,061) | (15,572 | ) | |||||||||||
Total |
$ | 43,423 | $ | 26,187 | $ | 115,338 | $ | 50,762 | ||||||||