Graco Inc. (NYSE: GGG) today announced results for the
third quarter ended September 27, 2024.
Summary $ in millions except per share amounts
Three Months Ended
Nine Months Ended
Sep 27, 2024
Sep 29, 2023
%
Change
Sep 27, 2024
Sep 29, 2023
%
Change
Net Sales
$
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 and Asia 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 Asia Pacific, which negatively affected our
sales for the third quarter," said Mark Sheahan, Graco's President
and CEO. "The decline in demand was widespread, with the most
significant impact felt in the Industrial and Process segments.
However, our gross margin remained resilient despite the decrease
in volume."
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 Americas, decreased 2 percent in EMEA (3 percent at
consistent translation rates) and decreased 21 percent in Asia
Pacific. Year-to-date net sales decreased 4 percent from the
comparable period last year. Year-to-date net sales were flat in
the Americas, decreased 2 percent in EMEA (3 percent at consistent
translation rates) and decreased 18 percent in Asia Pacific (17
percent at consistent translation rates). Changes in currency
translation rates did not have a significant impact on worldwide
net sales for the third quarter and decreased worldwide net sales
by $4 million for the year to date.
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 $9 million (7 percent) for
the third quarter and $19 million (5 percent) for the year to date,
respectively, compared to last year. More than half of the increase
for the quarter and year to date was from investments in new
product development and other growth initiatives, including the
relocation to a new distribution center. Reductions in volume and
earnings-based expenses of $3 million for the quarter and $8
million for the year to date partially offset the increase in
operating expenses.
Interest expense was $1 million lower for the third quarter and
$3 million lower for the year to date compared to the same periods
last year as private placement debt was repaid in the third quarter
of 2023. Other income increased $4 million for the quarter and $10
million for the year to date from the comparable periods last year
largely due to increased interest income.
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
Net Sales (in millions)
$
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 and Price
Acquisitions
Currency
Total
Volume and Price
Acquisitions
Currency
Total
Americas
(2
)%
0
%
0
%
(2
)%
(1
)%
0
%
0
%
(1
)%
EMEA
(4
)%
0
%
1
%
(3
)%
(1
)%
0
%
1
%
0
%
Asia Pacific
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 and Price
Acquisitions
Currency
Total
Volume and Price
Acquisitions
Currency
Total
Americas
18
%
0
%
(1
)%
17
%
8
%
0
%
0
%
8
%
EMEA
3
%
0
%
1
%
4
%
(1
)%
0
%
0
%
(1
)%
Asia Pacific
(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 Americas largely
offset declines in Asia Pacific. For the year to date, sales growth
in the Americas was unable to offset decreases in both EMEA and
Asia Pacific. The operating margin rate decreased 1 percentage
point for the quarter and 2 percentage points for the year to date
as price realization was unable to offset the unfavorable effects
of lower volume, product and channel mix, and higher expenses.
Components of net sales change by geographic region for the
Process segment were as follows:
Three Months
Nine Months
Volume and Price
Acquisitions
Currency
Total
Volume and Price
Acquisitions
Currency
Total
Americas
(6
)%
0
%
0
%
(6
)%
(6
)%
0
%
0
%
(6
)%
EMEA
(14
)%
0
%
0
%
(14
)%
(10
)%
0
%
0
%
(10
)%
Asia Pacific
(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 January 1, 2025, the Company
will move to a global, customer-centric operating structure with
four business divisions: Industrial, Powder, Expansion Markets and
Contractor.
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 January 1, 2025, the Company will classify its business
into three reportable segments: Industrial, Expansion Markets and
Contractor.
- 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
Sep 27, 2024
Sep 29, 2023
Sep 27, 2024
Sep 29, 2023
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 Securities and Exchange
Commission, including our Form 10-K, Form 10-Qs and Form 8-Ks, and
other disclosures, including our 2023 Overview report, press
releases, earnings releases, analyst briefings, conference calls
and other written documents or oral statements released by our
Company, may contain forward-looking statements. Forward-looking
statements generally use words such as “expect,” “foresee,”
“anticipate,” “believe,” “project,” “should,” “estimate,” “will,”
and similar expressions, and reflect our Company’s expectations
concerning the future. All forecasts and projections are
forward-looking statements. Forward-looking statements are based
upon currently available information, but various risks and
uncertainties may cause our Company’s actual results to differ
materially from those expressed in these statements. The Company
undertakes no obligation to update these statements in light of new
information or future events.
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 Thursday,
October 24, 2024, at 11 a.m. ET, 10 a.m. CT, to discuss Graco’s
third quarter results.
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
Graco Inc. 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
powder materials. A recognized leader in its specialties,
Minneapolis-based Graco serves customers around the world in the
manufacturing, processing, construction and maintenance industries.
For additional information about Graco Inc., please visit us at
www.graco.com.
GRACO INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
EARNINGS (Unaudited)
(In thousands except per share
amounts)
Three Months Ended
Nine Months Ended
Sep 27, 2024
Sep 29, 2023
Sep 27, 2024
Sep 29, 2023
Net Sales
$
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
Sep 27, 2024
Sep 29, 2023
Sep 27, 2024
Sep 29, 2023
Net Sales
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: David M. Lowe, 612-623-6456 Media Contact:
Meredith A. Sobieck, 612-623-6427 Meredith_A_Sobieck@graco.com
Graco (NYSE:GGG)
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부터 10월(10) 2024 으로 11월(11) 2024
Graco (NYSE:GGG)
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