Summary
$ in millions except per share amounts
|
|
Three Months Ended |
|
Nine Months Ended |
||||||||||||||
|
|
|
|
|
|
% Change |
|
|
|
|
|
% Change |
||||||
|
|
$ |
519.2 |
|
$ |
539.7 |
|
(4 |
)% |
|
$ |
1,564.6 |
|
$ |
1,629.0 |
|
(4 |
)% |
|
Operating Earnings |
|
145.7 |
|
|
163.2 |
|
(11 |
)% |
|
|
440.1 |
|
|
476.9 |
|
(8 |
)% |
|
Net Earnings |
|
122.2 |
|
|
133.1 |
|
(8 |
)% |
|
|
377.4 |
|
|
396.6 |
|
(5 |
)% |
|
Diluted Net Earnings per Common Share |
$ |
0.71 |
|
$ |
0.77 |
|
(8 |
)% |
|
$ |
2.19 |
|
$ |
2.30 |
|
(5 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Adjusted (non-GAAP): (1) |
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Operating Earnings, adjusted |
$ |
145.7 |
|
$ |
162.4 |
|
(10 |
)% |
|
$ |
440.1 |
|
$ |
476.1 |
|
(8 |
)% |
|
Net Earnings, adjusted |
$ |
122.2 |
|
$ |
131.5 |
|
(7 |
)% |
|
$ |
367.1 |
|
$ |
386.9 |
|
(5 |
)% |
|
Diluted Net Earnings per Common Share, adjusted |
$ |
0.71 |
|
$ |
0.76 |
|
(7 |
)% |
|
$ |
2.13 |
|
$ |
2.24 |
|
(5 |
)% |
|
(1) |
Excludes impacts of excess tax benefits from stock option exercises, contingent consideration fair value adjustments and impairment charges. See Financial Results Adjusted for Comparability below for a reconciliation of adjusted non-GAAP financial measures to GAAP. |
-
Net sales for the third quarter decreased 4 percent, with decreases in all segments. Regionally, sales increased modestly in the
Americas and decreased in EMEA andAsia Pacific . - Lower sales volume and higher operating expenses contributed to an 11 percent decline in operating earnings for the third quarter.
- Net earnings for the third quarter decreased 8 percent as increased interest income and lower interest expense partially offset the decrease in operating earnings.
"We continued to experience soft demand trends in our core end markets, especially in
Consolidated Results
Net sales for the third quarter decreased 4 percent from the comparable period last year. Third quarter net sales increased 1 percent in the
Gross profit margin rate improved approximately 1 percentage point for both the third quarter and year to date from the comparable periods last year due to favorable price-cost dynamics.
Total operating expenses increased
Interest expense was
The effective income tax rate was 19 percent for the third quarter and 17 percent for the year to date. Adjusted to exclude the impacts of excess tax benefits from stock option exercises (see Financial Results Adjusted for Comparability below), the adjusted effective income tax rate of 19 percent for the quarter and 20 percent for the year to date was comparable to last year.
Segment Results
Management assesses performance of segments by reference to operating earnings excluding unallocated corporate expenses. For a reconciliation of segment operating earnings to consolidated operating earnings, refer to the segment information table included in the financial statement section of this release. Certain measurements of segment operations are summarized below:
|
|
Three Months |
|
Nine Months |
||||||||||||||||||||
|
|
Contractor |
|
Industrial |
|
Process |
|
Contractor |
|
Industrial |
|
Process |
||||||||||||
|
|
$ |
242.3 |
|
|
$ |
156.3 |
|
|
$ |
120.6 |
|
|
$ |
742.0 |
|
|
$ |
454.0 |
|
|
$ |
368.7 |
|
|
Percentage change from last year |
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Sales |
|
(1 |
)% |
|
|
(1 |
)% |
|
|
(12 |
)% |
|
|
(1 |
)% |
|
|
(4 |
)% |
|
|
(10 |
)% |
|
Operating earnings |
|
(3 |
)% |
|
|
(4 |
)% |
|
|
(25 |
)% |
|
|
3 |
% |
|
|
(8 |
)% |
|
|
(18 |
)% |
|
Operating earnings as a percentage of sales |
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
2024 |
|
29 |
% |
|
|
34 |
% |
|
|
27 |
% |
|
|
30 |
% |
|
|
33 |
% |
|
|
28 |
% |
|
2023 |
|
30 |
% |
|
|
35 |
% |
|
|
31 |
% |
|
|
29 |
% |
|
|
35 |
% |
|
|
31 |
% |
Components of net sales change by geographic region for the Contractor segment were as follows:
|
|
Three Months |
|
Nine Months |
||||||||||||||||||||
|
|
Volume
|
|
Acquisitions |
|
Currency |
|
Total |
|
Volume
|
|
Acquisitions |
|
Currency |
|
Total |
||||||||
|
|
(2 |
)% |
|
0 |
% |
|
0 |
% |
|
(2 |
)% |
|
(1 |
)% |
|
0 |
% |
|
0 |
% |
|
(1 |
)% |
|
EMEA |
(4 |
)% |
|
0 |
% |
|
1 |
% |
|
(3 |
)% |
|
(1 |
)% |
|
0 |
% |
|
1 |
% |
|
0 |
% |
|
|
7 |
% |
|
0 |
% |
|
0 |
% |
|
7 |
% |
|
4 |
% |
|
0 |
% |
|
(2 |
)% |
|
2 |
% |
|
Consolidated |
(1 |
)% |
|
0 |
% |
|
0 |
% |
|
(1 |
)% |
|
0 |
% |
|
0 |
% |
|
(1 |
)% |
|
(1 |
)% |
Contractor segment net sales decreased 1 percent for both the third quarter and year to date as favorable response to new product offerings was unable to offset softness in worldwide construction markets. For the quarter, price realization was unable to offset higher expenses, which resulted in a 1 percentage point decrease in the operating margin rate. The operating margin rate for the year to date increased 1 percentage point as price realization and lower product costs combined to more than offset higher expenses.
Components of net sales change by geographic region for the Industrial segment were as follows:
|
|
Three Months |
|
Nine Months |
||||||||||||||||||||
|
|
Volume
|
|
Acquisitions |
|
Currency |
|
Total |
|
Volume
|
|
Acquisitions |
|
Currency |
|
Total |
||||||||
|
|
18 |
% |
|
0 |
% |
|
(1 |
)% |
|
17 |
% |
|
8 |
% |
|
0 |
% |
|
0 |
% |
|
8 |
% |
|
EMEA |
3 |
% |
|
0 |
% |
|
1 |
% |
|
4 |
% |
|
(1 |
)% |
|
0 |
% |
|
0 |
% |
|
(1 |
)% |
|
|
(27 |
)% |
|
0 |
% |
|
0 |
% |
|
(27 |
)% |
|
(22 |
)% |
|
0 |
% |
|
(1 |
)% |
|
(23 |
)% |
|
Consolidated |
0 |
% |
|
0 |
% |
|
(1 |
)% |
|
(1 |
)% |
|
(3 |
)% |
|
0 |
% |
|
(1 |
)% |
|
(4 |
)% |
Industrial segment net sales decreased 1 percent for the third quarter as timing of finishing system sales in the
Components of net sales change by geographic region for the Process segment were as follows:
|
|
Three Months |
|
Nine Months |
||||||||||||||||||||
|
|
Volume
|
|
Acquisitions |
|
Currency |
|
Total |
|
Volume
|
|
Acquisitions |
|
Currency |
|
Total |
||||||||
|
|
(6 |
)% |
|
0 |
% |
|
0 |
% |
|
(6 |
)% |
|
(6 |
)% |
|
0 |
% |
|
0 |
% |
|
(6 |
)% |
|
EMEA |
(14 |
)% |
|
0 |
% |
|
0 |
% |
|
(14 |
)% |
|
(10 |
)% |
|
0 |
% |
|
0 |
% |
|
(10 |
)% |
|
|
(27 |
)% |
|
0 |
% |
|
0 |
% |
|
(27 |
)% |
|
(23 |
)% |
|
0 |
% |
|
0 |
% |
|
(23 |
)% |
|
Consolidated |
(12 |
)% |
|
0 |
% |
|
0 |
% |
|
(12 |
)% |
|
(10 |
)% |
|
0 |
% |
|
0 |
% |
|
(10 |
)% |
Continued weakness in the Process segment's semiconductor product application drove a double-digit decrease in net sales for both the third quarter and year to date. Operating margin rates for the quarter and year to date declined, driven by lower sales volume and higher expenses.
Outlook
"Overall, many of our end markets and regions continue to face challenges," said Sheahan. "We are reaffirming our full-year revenue guidance, which anticipates a low single-digit decline on an organic, constant currency basis. Despite this outlook, we remain dedicated to our established core strategies: creating innovative products, expanding our distribution, exploring new and adjacent markets, and pursuing strategic acquisitions. We are eager to continue advancing these strategies within the framework of the new organizational structure."
2025 Change in Organizational Structure
As previously announced, effective
Industrial Division:
The Company’s current Industrial and Lubrication Equipment Divisions, along with the Process Transfer Equipment business that is part of the Company’s Process Division, will be combined to form the new global Industrial Division.
Powder Division:
The Powder Division is currently structured as a global business and will continue to operate as it does today.
Expansion Markets Division:
The Expansion Markets Division will focus on driving the Company's inorganic growth in new and adjacent markets. The Company’s existing environmental, semiconductor, high-pressure valves and electric motors businesses, together with select future ventures and acquisitions, will reside within this newly-formed division.
Contractor Division:
The Company's current Contractor Equipment Division, renamed the Contractor Division, will be restructured to serve the needs of its global customers.
Reportable Segments:
Starting
- The Industrial segment, consisting of the newly formed Industrial Division and the Powder Division.
- The Expansion Markets segment consisting of the Expansion Markets Division.
- The Contractor segment, consisting of the Contractor Division, will remain unchanged as a reporting segment relative to prior periods.
Segment operating results will be reported under the new organizational structure for the first quarter of 2025, in connection with the effective date of the realignment. Historic segment information will be recasted to conform to the new organizational structure. The Company expects to provide recast segment financial information in connection with its earnings release for the fourth quarter of 2024 as supplemental information on the Company’s website at www.graco.com.
Financial Results Adjusted for Comparability
Excluding the impacts excess tax benefits from stock option exercises, contingent consideration fair value adjustments and impairment charges presents a more consistent basis for comparison of financial results. A calculation of the non-GAAP adjusted measurements of operating earnings, earnings before income taxes, income taxes, effective income tax rates, net earnings and diluted earnings per share follows (in millions except per share amounts):
|
|
Three Months Ended |
|
Nine Months Ended |
||||||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Operating earnings, as reported |
$ |
145.7 |
|
|
$ |
163.2 |
|
|
$ |
440.1 |
|
|
$ |
476.9 |
|
|
Contingent consideration |
|
— |
|
|
|
(8.6 |
) |
|
|
— |
|
|
|
(8.6 |
) |
|
Impairment |
|
— |
|
|
|
7.8 |
|
|
|
— |
|
|
|
7.8 |
|
|
Operating earnings, adjusted |
$ |
145.7 |
|
|
$ |
162.4 |
|
|
$ |
440.1 |
|
|
$ |
476.1 |
|
|
|
|
|
|
|
|
|
|
||||||||
|
Earnings before income taxes |
$ |
151.3 |
|
|
$ |
164.3 |
|
|
$ |
456.8 |
|
|
$ |
481.3 |
|
|
Contingent consideration |
|
— |
|
|
|
(8.6 |
) |
|
|
— |
|
|
|
(8.6 |
) |
|
Impairment |
|
— |
|
|
|
7.8 |
|
|
|
— |
|
|
|
7.8 |
|
|
Earnings before income taxes, adjusted |
$ |
151.3 |
|
|
$ |
163.5 |
|
|
$ |
456.8 |
|
|
$ |
480.5 |
|
|
|
|
|
|
|
|
|
|
||||||||
|
Income taxes, as reported |
$ |
29.1 |
|
|
$ |
31.2 |
|
|
$ |
79.4 |
|
|
$ |
84.7 |
|
|
Excess tax benefit from option exercises |
|
— |
|
|
|
0.8 |
|
|
|
10.3 |
|
|
|
8.9 |
|
|
Income taxes, adjusted |
$ |
29.1 |
|
|
$ |
32.0 |
|
|
$ |
89.7 |
|
|
$ |
93.6 |
|
|
|
|
|
|
|
|
|
|
||||||||
|
Effective income tax rate |
|
|
|
|
|
|
|
||||||||
|
As reported |
|
19.2 |
% |
|
|
19.0 |
% |
|
|
17.4 |
% |
|
|
17.6 |
% |
|
Adjusted |
|
19.2 |
% |
|
|
19.6 |
% |
|
|
19.7 |
% |
|
|
19.5 |
% |
|
|
|
|
|
|
|
|
|
||||||||
|
Net Earnings, as reported |
$ |
122.2 |
|
|
$ |
133.1 |
|
|
$ |
377.4 |
|
|
$ |
396.6 |
|
|
Contingent consideration |
|
— |
|
|
|
(8.6 |
) |
|
|
— |
|
|
|
(8.6 |
) |
|
Impairment |
|
— |
|
|
|
7.8 |
|
|
|
— |
|
|
|
7.8 |
|
|
Excess tax benefit from option exercises |
|
— |
|
|
|
(0.8 |
) |
|
|
(10.3 |
) |
|
|
(8.9 |
) |
|
Net Earnings, adjusted |
$ |
122.2 |
|
|
$ |
131.5 |
|
|
$ |
367.1 |
|
|
$ |
386.9 |
|
|
|
|
|
|
|
|
|
|
||||||||
|
Weighted Average Diluted Shares |
|
172.1 |
|
|
|
172.8 |
|
|
|
172.3 |
|
|
|
172.3 |
|
|
Diluted Earnings per Share |
|
|
|
|
|
|
|
||||||||
|
As reported |
$ |
0.71 |
|
|
$ |
0.77 |
|
|
$ |
2.19 |
|
|
$ |
2.30 |
|
|
Adjusted |
$ |
0.71 |
|
|
$ |
0.76 |
|
|
$ |
2.13 |
|
|
$ |
2.24 |
|
Cautionary Statement Regarding Forward-Looking Statements
The Company desires to take advantage of the “safe harbor” provisions regarding forward-looking statements of the Private Securities Litigation Reform Act of 1995 and is filing this Cautionary Statement in order to do so. From time to time various forms filed by our Company with the
Future results could differ materially from those expressed, due to the impact of changes in various factors. These risk factors include, but are not limited to, risks relating to the demand for our products and the level of commercial and industrial activity worldwide; changes in currency translation rates; international and domestic political instability; interest rate fluctuations and changes in credit markets; global sourcing of materials; interruptions of or intrusions into our information systems; intellectual property rights; the use of generative artificial intelligence; conducting business internationally; catastrophic events; our ability to attract, develop and retain qualified personnel; public health crises; our growth strategies and acquisitions; potential goodwill impairment; our ability to compete effectively; our dependence on a few large customers; our dependence on cyclical industries; changes in laws and regulations; climate-related laws, regulations and accords; environmental, social and governance-related expectations and requirements; compliance with anti-corruption and trade laws; changes in tax rates or the adoption of new tax legislation; and costs associated with legal proceedings. Please refer to Item 1A of our Annual Report on Form 10-K for fiscal year 2023 (and the most recent Form 10-Q) for a more comprehensive discussion of these and other risk factors. These reports are available on the Company’s website at www.graco.com and the Securities and Exchange Commission’s website at www.sec.gov. Shareholders, potential investors and other readers are urged to consider these factors in evaluating forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements.
Investors should realize that factors other than those identified above and in Item 1A of our Annual Report on Form 10-K for fiscal year 2023 might prove important to the Company’s future results. It is not possible for management to identify each and every factor that may have an impact on the Company’s operations in the future as new factors can develop from time to time.
Conference Call
Graco management will hold a conference call, including slides via webcast, with analysts and institutional investors on
A real-time listen-only webcast of the conference call will be broadcast by Nasdaq. Individuals can access the call and view the slides on the Company’s website at www.graco.com. Listeners should go to the website at least 15 minutes prior to the live conference call to install any necessary audio software.
About Graco
|
|
|||||||||||||||
|
CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) |
|||||||||||||||
|
(In thousands except per share amounts) |
|||||||||||||||
|
|
Three Months Ended |
|
Nine Months Ended |
||||||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
$ |
519,212 |
|
|
$ |
539,672 |
|
|
$ |
1,564,644 |
|
|
$ |
1,628,962 |
|
|
Cost of products sold |
|
243,082 |
|
|
|
255,148 |
|
|
|
721,463 |
|
|
|
767,883 |
|
|
Gross Profit |
|
276,130 |
|
|
|
284,524 |
|
|
|
843,181 |
|
|
|
861,079 |
|
|
Product development |
|
21,306 |
|
|
|
19,817 |
|
|
|
65,076 |
|
|
|
61,582 |
|
|
Selling, marketing and distribution |
|
65,143 |
|
|
|
60,495 |
|
|
|
200,773 |
|
|
|
194,258 |
|
|
General and administrative |
|
43,958 |
|
|
|
41,823 |
|
|
|
137,252 |
|
|
|
129,130 |
|
|
Contingent consideration |
|
— |
|
|
|
(8,600 |
) |
|
|
— |
|
|
|
(8,600 |
) |
|
Impairment |
|
— |
|
|
|
7,800 |
|
|
|
— |
|
|
|
7,800 |
|
|
Operating Earnings |
|
145,723 |
|
|
|
163,189 |
|
|
|
440,080 |
|
|
|
476,909 |
|
|
Interest expense |
|
656 |
|
|
|
1,391 |
|
|
|
2,034 |
|
|
|
4,536 |
|
|
Other (income) expense, net |
|
(6,225 |
) |
|
|
(2,483 |
) |
|
|
(18,756 |
) |
|
|
(8,877 |
) |
|
Earnings Before Income Taxes |
|
151,292 |
|
|
|
164,281 |
|
|
|
456,802 |
|
|
|
481,250 |
|
|
Income taxes |
|
29,095 |
|
|
|
31,158 |
|
|
|
79,426 |
|
|
|
84,693 |
|
|
Net Earnings |
$ |
122,197 |
|
|
$ |
133,123 |
|
|
$ |
377,376 |
|
|
$ |
396,557 |
|
|
Net Earnings per Common Share |
|
|
|
|
|
|
|
||||||||
|
Basic |
$ |
0.72 |
|
|
$ |
0.79 |
|
|
$ |
2.24 |
|
|
$ |
2.35 |
|
|
Diluted |
$ |
0.71 |
|
|
$ |
0.77 |
|
|
$ |
2.19 |
|
|
$ |
2.30 |
|
|
Weighted Average Number of Shares |
|
|
|
|
|
|
|
||||||||
|
Basic |
|
168,810 |
|
|
|
169,005 |
|
|
|
168,800 |
|
|
|
168,569 |
|
|
Diluted |
|
172,111 |
|
|
|
172,780 |
|
|
|
172,348 |
|
|
|
172,336 |
|
|
SEGMENT INFORMATION (Unaudited) |
|||||||||||||||
|
(In thousands) |
|||||||||||||||
|
|
Three Months Ended |
|
Nine Months Ended |
||||||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Contractor |
$ |
242,295 |
|
|
$ |
245,269 |
|
|
$ |
741,975 |
|
|
$ |
746,888 |
|
|
Industrial |
|
156,294 |
|
|
|
157,084 |
|
|
|
453,993 |
|
|
|
470,797 |
|
|
Process |
|
120,623 |
|
|
|
137,319 |
|
|
|
368,676 |
|
|
|
411,277 |
|
|
Total |
$ |
519,212 |
|
|
$ |
539,672 |
|
|
$ |
1,564,644 |
|
|
$ |
1,628,962 |
|
|
Operating Earnings |
|
|
|
|
|
|
|
||||||||
|
Contractor |
$ |
71,053 |
|
|
$ |
73,512 |
|
|
$ |
221,555 |
|
|
$ |
216,152 |
|
|
Industrial |
|
52,361 |
|
|
|
54,298 |
|
|
|
149,881 |
|
|
|
162,955 |
|
|
Process |
|
32,452 |
|
|
|
43,001 |
|
|
|
104,772 |
|
|
|
127,186 |
|
|
Unallocated corporate (expense) |
|
(10,143 |
) |
|
|
(8,422 |
) |
|
|
(36,128 |
) |
|
|
(30,184 |
) |
|
Contingent consideration |
|
— |
|
|
|
8,600 |
|
|
|
— |
|
|
|
8,600 |
|
|
Impairment |
|
— |
|
|
|
(7,800 |
) |
|
|
— |
|
|
|
(7,800 |
) |
|
Total |
$ |
145,723 |
|
|
$ |
163,189 |
|
|
$ |
440,080 |
|
|
$ |
476,909 |
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20241023318486/en/
Financial Contact:
Media Contact:
Meredith_A_Sobieck@graco.com
Source:
