-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, C1GnOKJKXPrPxqy29zmHHvWF6QEv2AtpNVTguf00sOWn25QqtCtCCCJTMRP0pcpy 5y5htOow4ctSQhXlFbDyyA== 0000042888-95-000006.txt : 19950616 0000042888-95-000006.hdr.sgml : 19950616 ACCESSION NUMBER: 0000042888-95-000006 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19941230 FILED AS OF DATE: 19950322 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: GRACO INC CENTRAL INDEX KEY: 0000042888 STANDARD INDUSTRIAL CLASSIFICATION: PUMPS & PUMPING EQUIPMENT [3561] IRS NUMBER: 410285640 STATE OF INCORPORATION: MN FISCAL YEAR END: 1228 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-09249 FILM NUMBER: 95522359 BUSINESS ADDRESS: STREET 1: 4050 OLSON MEMORIAL HWY CITY: GOLDEN VALLEY STATE: MN ZIP: 55422 BUSINESS PHONE: 6126236000 MAIL ADDRESS: STREET 2: P O BOX 1441 CITY: MINNEAPOLIS STATE: MN ZIP: 55440-1441 10-K 1 ANNUAL REPORT ON FORM 10-K FOR YEAR ENDED 12/30/94 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K [X]Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 30, 1994 (Fee Required) or [ ]Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from ___________ to ___________. Commission File No. 1-9249 Graco Inc. (Exact name of Registrant as specified in its charter) Minnesota 41-0285640 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 4050 Olson Memorial Highway Golden Valley, Minnesota 55422-5332 (Address of principal executive offices) (Zip Code) (612) 623-6000 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Common Stock, par value $1.00 per share Preferred Share Purchase Rights Shares registered on the New York Stock Exchange. Securities registered pursuant to Section 12(g) of the Act: None As of March 6, 1995, 11,377,904 shares of Common Stock were outstanding. Indicate by a check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No . Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K [ ] The aggregate market value of approximately 7,313,000 shares held by non- affiliates of the registrant was approximately $167 million on March 6, 1995. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Company's definitive Proxy Statement for its Annual Meeting of Shareholders to be held on May 2, 1995, are incorporated by reference into Part III, as specifically set forth in said Part III. 1 GRACO INC. INDEX TO ANNUAL REPORT ON FORM 10-K Page Part I Item 1 Business 3 Item 2 Properties 5 Item 3 Legal Proceedings 5 Item 4 Submission of Matters to a Vote of Security Holders 5 Executive Officers of the Company 6 Part II Item 5 Market for the Company's Common Stock and Related Stockholder Matters 8 Item 6 Selected Financial Data 9 Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations 9 Item 8 Financial Statements and Supplementary Data 13 Item 9 Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 26 Part III Item 10 Directors and Executive Officers of the Company 27 Item 11 Executive Compensation 27 Item 12 Security Ownership of Certain Beneficial Owners and Management 27 Item 13 Certain Relationships and Related Transactions 27 Part IV Item 14 Exhibits, Financial Statement Schedules, and Reports on Form 8-K 27 Signatures 29 NOTE: Certain exhibits listed in the Index to Exhibits beginning on page 30, and filed with the Securities and Exchange Commission, have been omitted. Copies of such exhibits may be obtained upon written request directed to: Treasurer Graco Inc. P.O. Box 1441 Minneapolis, Minnesota 55440-1441 2 PART I Item 1. Business General Information. Graco Inc. ("Graco" or "the Company") supplies technology and expertise for the management of fluids in both industrial and commercial settings. It manufactures and markets systems and equipment to move, measure, control, dispense and apply fluid materials. The Company helps customers solve difficult manufacturing problems, increase productivity, improve quality, conserve energy, save expensive materials, control environmental emissions and reduce labor costs. Primary uses of the Company's equipment include the application of coatings and finishes to various industrial and commercial products; the mixing, metering, dispensing and application of adhesive, chemical bonding, and sealant materials; the application of paint and other materials to architectural structures; the lubrication and maintenance of vehicles and industrial machinery; and the transferring and dispensing of various fluids. Graco is the successor to Gray Company, Inc., which was incorporated in 1926 as a manufacturer of auto lubrication equipment, and became a public company in 1969. It is Graco's goal to become the highest quality, lowest cost, most responsive supplier in the world for its principal products. In working to achieve these goals to become a world class manufacturer, Graco has been converting its Minneapolis manufacturing operations to focused factories, organized around team-directed manufacturing cells, a process expected to be completed in 1997. Substantial investments in new manufacturing technology have reduced cycle time and improved quality. The Company operates in one industry segment, namely, the design, manufacture, marketing, sale and installation of systems and equipment for the management of fluids. Financial information concerning geographic operations and export sales for the last three fiscal years is set forth in Note B of the Notes to Consolidated Financial Statements. Recent Developments. During 1994, the Company began the restructuring and consolidation of its operations in Europe and Japan. The European customer service and distribution functions were relocated from the Company's facility in Rungis, France to the new facility in Maasmechelen, Belgium. In the fall of 1994, Graco announced that management of its European operations would be centralized in a new headquarters operation at the Company's recently expanded facility in Maasmechelen, Belgium during 1995. In June of 1994, Graco initiated an intensive evaluation of its domestic marketing and sales groups with the goal of maximizing effectiveness and substantially reducing the cost of sales. Implementation of the recommendations generated by this evaluation are currently underway. As of January 1, 1995, the majority of order entry, customer service, and accounting functions for Graco's Canadian subsidiary was being performed in the United States. In 1994, Graco began a construction project to more than double the size of the Russell J. Gray Technical Center to house additional testing and product development activities and personnel. Manufacturing in Minneapolis operated at near peak capacity during 1994. Products. Graco Inc. manufactures a wide array of specialized pumps, applicators, regulators, valves, meters, atomizing devices, replacement parts, and accessories, which are used in industrial and commercial applications in the movement, measurement, control, dispensing and application of many fluids and semi-solids, including paints, adhesives, sealants, and lubricants. In addition, it offers an extensive line of portable equipment which is used in construction and maintenance businesses for the application of paint and other materials. Graco fluid systems incorporate sophisticated paint circulating and fluid application technology. Commercial and industrial equipment offered by Graco includes specialized pumps, air and airless spray units, manual finishing equipment and fluid handling systems. A variety of pumps provide fluid pressures ranging from 20 to more than 6,000 pounds per square inch and flow rates from under 1 gallon to 140 gallons per minute. The Company sells accessories for use with its equipment, including hoses, couplings, regulators, valves, filters, reels, meters, and gauges, as well as a complete line of spray guns, tips and applicators. These accessories increase the flexibility, efficiency and effectiveness of Graco equipment. Packings, seals, hoses and other parts, which must be replaced periodically in order to maintain efficiency and prevent loss of material, are also sold. Sales of replacement parts and accessories have averaged 43 percent of the Company's consolidated net sales and approximately 49 percent of gross profits during the last three years. The following table summarizes the consolidated net sales and gross profits (net sales less cost of products sold) by the Company's principal product groups for that same period. 3 Product Group Sales and Gross Profit
(In thousands) 1994 1993 1992 NET SALES Commercial and industrial equipment $204,584 56.8% $179,619 55.7% $188,681 58.9% Accessories and replacement parts 155,429 43.2 142,983 44.3 131,653 41.1 $360,013 100.0% $322,602 100.0% $320,334 100.0% GROSS PROFIT Commercial and industrial equipment $ 89,262 51.3% $ 76,325 49.8% $ 82,859 52.9% Accessories and replacement parts 84,749 48.7 76,802 50.2 73,827 47.1 $174,011 100.0% $153,127 100.0% $156,686 100.0%
Marketing and Distribution. Graco's operations are organized to allow its full line of fluid handling products and systems to be offered in each major geographic market: the Americas, Europe and Pacific. The Industrial Equipment Division, the Automotive Equipment Division, the Contractor Equipment Division, and the Lubrication Equipment Division provide worldwide marketing direction and product design and application assistance to each of these geographic markets. Graco's equipment is sold worldwide principally through the Company's international sales subsidiaries, direct sales personnel and regional distributors. Manufacturers' representatives are used with some product lines. In the Americas, the Company maintains a specialized direct sales force which handles sales of large systems and sales to certain corporate accounts. In 1994, Graco's net sales in the Americas were $241,169,000 or approximately 67 percent of the Company's consolidated net sales; in Europe (including the Middle East and Africa) net sales were $65,888,000 or approximately 18 percent; and in the Pacific region, net sales were $52,956,000 or approximately 15 percent. Research, Product Development and Technical Services. Graco's research, development and engineering activities focus on new product design, product improvements, applied engineering and strategic technologies. A dedicated support group of application engineers and technicians also provides specialized technical assistance to customers in the design and evaluation of fluid transfer and application systems. It is one of Graco's financial goals to generate 30 percent of each year's sales from products introduced in the prior three years. To achieve this goal, Graco substantially increased its new product design and application engineering staff, and more than doubled the size of the Russell J. Gray Technical Center to provide expansion space for engineering, testing and laboratory activities during 1994. Occupancy of the new wing of the Technical Center will be completed by May 1995. Total research and development expenditures were $14,591,000, $12,382,000 and $10,616,000 for the 1994, 1993 and 1992 fiscal years, respectively. Intellectual Property. Graco owns a number of patents and has patent applications pending both in the United States and in foreign countries, licenses its patents to others, and is licensed under patents owned by others. In the opinion of the Company, its business is not materially dependent upon any one or more of these patents or licenses. The Company also owns a number of trademarks in the United States and foreign countries, including the registered trademarks for "GRACO," several forms of a capital "G" and various product trademarks which are material to the business of the Company in that they identify Graco and its products to its customers. Competition. Graco faces substantial competition in all of its markets. The nature and extent of this competition varies in different markets due to the diversity of the Company's products. Product quality, reliability, design, customer support and service, specialized engineering and pricing are the major competitive factors. Although no competitor duplicates all of Graco's products, some competitors are larger than the Company, both in terms of sales of directly competing products and in terms of total sales and financial resources. Graco believes it is one of the world's leading producers of high-quality specialized fluid management equipment and systems. It is impossible, because of the absence of reliable industry- wide figures, to determine its exact relative market position. Environmental Protection. During the fiscal year ending December 30, 1994, the amounts incurred to comply with federal, state and local legislation pertaining to environmental standards did not have a material effect upon the capital expenditures or earnings of the Company. 4 Employees. As of December 30, 1994, the Company employed approximately 2,075 persons on a full-time basis. Of this total, approximately 390 were employees based outside the United States, and 815 were hourly factory workers in the United States. Although Graco's U.S. employees are not covered by collective bargaining agreements, various national industry-wide labor agreements apply to select employees in Europe. The Company believes it has a good relationship with its employees. Item 2. Properties The Company owns the four buildings which house its corporate offices, principal manufacturing, assembly and research and development activities. These buildings, located in Minneapolis, Minnesota, have an aggregate area of approximately 664,200 square feet. The Company's distribution operations are located in 123,800 square feet of space in a Minneapolis suburb under a lease which expires at the end of 1996. The Company's technical assistance, product service and technical publications departments are located in 18,200 square feet of space in Minneapolis, under a lease which will expire in 1996. The Company owns a 106,000 square foot facility in Plymouth, Michigan, which contains manufacturing, engineering and administrative operations devoted primarily to sales to the automotive industry. A 55,000 square foot building in Farmington Hills, Michigan and a 57,000 square foot building in Wixom, Michigan are currently for sale. Graco manufactures paint spray guns and other products and accessories in a Company-owned 55,000 square foot building in Sioux Falls, South Dakota. The Company owns an office and plant located in Franklin Park, Illinois, of approximately 82,000 square feet. Graco's Japanese subsidiary leases an office building which functions as its technical sales center which houses engineering, demonstration and test activities, customer service, information systems and administration and a warehouse, all under long-term leases with renewal options on favorable terms. Graco's Canadian subsidiary owns a 20,000 square foot facility in Mississaugua, Ontario, which contains office and warehouse space. With the exception of the Maasmechelen facility, which is owned by the Belgium subsidiary, the Company leases branch or subsidiary sales offices in the United States and abroad, some of which have demonstration areas and/or warehouse space. During 1994, Graco built a 67,000 square foot warehouse, production and office building in Maasmechelen, Belgium. An expansion of 8,800 square feet was started in late 1994 to accommodate the European headquarters operations being relocated from France to Belgium, with completion expected the second quarter of 1995. European customer service, distribution and modular assembly functions formerly based in France and assembly operations previously carried on in Houthhalen, Belgium, were consolidated in 1994 at this location. In 1995, Graco plans to relocate its operations in the Midlands region of the United Kingdom to a better quality leased facility with office, systems assembly and warehouse space. In Minneapolis, an 80,000 square foot expansion of the Company's Russell J. Gray Technical Center is nearing completion, with occupancy expected to be complete by May, 1995. Graco's facilities are in good operating condition, suitable for their respective uses and are sufficient and adequate to meet current needs, with the recent and planned expansions. Item 3. Legal Proceedings The Company is engaged in routine litigation incident to its business, which management believes will not have a material adverse effect upon its operations or consolidated financial position. Item 4. Submission of Matters to a Vote of Security Holders No issues were submitted to a vote of security holders during the fourth quarter of 1994. 5 Executive Officers of the Company The following are all the executive officers of the Company as of March 1, 1995. There are no family relationships between any of the officers named. David A. Koch, 64, is Chairman and Chief Executive Officer, positions he has held since 1985. He joined the Company in 1956 and held various sales and marketing positions with the Company prior to assuming the office of President in 1962. For a five month period from January to June 1993, he also held the office of President. He has served as a director of the Company since 1962. George Aristides, 59, was named President and Chief Operating Officer and was elected a director of the Company in June 1993. He became Executive Vice President, Industrial/Automotive Equipment Division, Manufacturing, Distribution and Eurafrican Operations, in March 1993. From 1985 until 1993, he was Vice President, Manufacturing Operations and Controller. He joined the Company in 1973 as Corporate Controller and became Vice President and Controller in 1980. John L. Heller, 58, was named Senior Vice President and General Manager - Contractor Equipment Division in July 1993. He became Vice President, Far East Operations and Latin America, in 1992. Prior to becoming Vice President, Far East Operations in 1984, he held various management and staff positions in sales and human resources. He joined the Company in 1972. Roger L. King, 49, was named Senior Vice President and General Manager - International Operations in July 1993. He is responsible for Graco's sales activities and operations outside North America. He became Senior Vice President and Chief Financial Officer in March 1993, and Vice President and Treasurer in 1987. Prior to becoming Vice President, Treasurer and Secretary in 1980, he held the position of Treasurer and Secretary and various treasury management positions with Graco. He joined the Company in 1970. James A. Graner, 50, was elected Vice President and Controller in February 1994. He became Treasurer in May 1993. Prior to becoming Assistant Treasurer in 1988, he held various managerial positions in the treasury, accounting and information systems departments. He joined Graco in 1974 as an accountant. Clyde W. Hansen, 62, was elected Vice President, Human Resources, in December 1993. He joined the Company in 1984 as Employee Relations Director, a position he held until his election. David M. Lowe, 39, was elected to the position of Treasurer in February 1995. Prior to joining the Company, he was employed by Ecolab Inc. in St. Paul, Minnesota, where he held various positions in the Treasury Department, including Manager-Corporate Finance; Director, Corporate Finance and most recently Director, Corporate Development. Robert M. Mattison, 47, was elected Vice President, General Counsel and Secretary, in January 1992. Prior to joining the Company, he held various legal positions with Honeywell Inc., most recently as Associate General Counsel. Robert A. Wagner, 44, was elected Vice President, Asia Pacific of Graco Inc. and President, Graco K.K. effective January 1995. He became Vice President and Treasurer, Graco Inc., in February 1994. He joined the Company in December 1991, as Vice President, Corporate Development and Planning. Prior to joining the Company, he was employed by Texas Instruments for nearly five years, where he held various managerial positions, including Vice President and Manager, Corporate Development, a position which he held immediately prior to his departure. Clayton R. Carter, 56, was appointed to the position of Vice President, Lubrication Equipment Division, effective January 1, 1995. He became Director, Vehicle Services Division, in February 1994. He joined the Company in 1962 and has held various sales management positions, most recently in the Contractor Equipment Division. Thomas J. Fay, 44, is Vice President, European Operations, a position to which he was appointed on January 1, 1995. Prior to becoming General Manager of European Operations in March 1994, he held the position of General Manager, Region III, in Europe. Mr. Fay joined the Company in 1984 and held various sales management positions before moving to Europe in 1990. 6 Vincent C. Hren, 44, is Vice President and General Manager, Automotive Division, a position to which he was appointed in December 1994. Prior to joining the Company, he was employed by Fisher-Rosemount in various managerial positions in manufacturing, most recently as Vice President of Worldwide Operations. Charles L. Rescorla, 43, is Vice President, Manufacturing Operations, a position to which he was appointed on January 1, 1995. Prior to becoming the Director of Manufacturing in March 1994, he was the Director of Engineering, Industrial Division, a position which he assumed in 1988 when he joined the Company. With the exception of David M. Lowe, Clayton R. Carter, Thomas J. Fay, Vincent C. Hren, and Charles L. Rescorla, the officers identified were elected by the Board of Directors on May 3, 1994, to hold office until the next annual meeting of directors or until their successors are elected and qualify. In addition, effective January 1, 1995, Robert A. Wagner, who formerly held the position of Vice President and Treasurer, was elected to the office of Vice President, Asia Pacific, and on February 24, 1995, David M. Lowe was elected to the office of Vice President and Treasurer. Messrs. Carter, Fay, Hren, and Rescorla were appointed to their positions by management effective January 1, 1995, January 1, 1995, December 27, 1994, and January 1, 1995, respectively. 7 PART II Item 5. Market for the Company's Common Stock and Related Stockholder Matters Graco Common Stock. Graco common stock is traded on the New York Stock Exchange under the ticker symbol "GGG." As of March 6, 1995, there were 11,377,904 shares outstanding and 1,800 common shareholders of record, with another estimated 1,800 shareholders whose stock is held by nominees or broker dealers.
Quarterly Financial Information. (In thousands, except per share amounts) First Second Third Fourth 1994 Quarter Quarter Quarter Quarter Net Sales $80,930 $94,179 $89,048 $95,856 Gross Profit 38,436 44,227 43,269 48,079 Net Earnings (Loss) 1,836 4,195 4,248 5,047 Per Common Share: Net Earnings (Loss) .16 .36 .37 .44 Dividends Declared .14 .14 .14 .16 Stock Price (per share) High $ 24.16 $ 23.00 $ 18.88 $ 21.75 Low 20.00 18.75 16.88 18.00 Volume (# of shares) 2,056.7 373.6 603.1 288.4 1993 Net Sales $ 77,811 $ 79,415 $ 81,751 $ 83,625 Gross Profit 36,209 39,321 39,337 38,260 Net Earnings (Loss) 2,572 4,114 3,463 (656) Per Common Share: Net Earnings (Loss) .23 .36 .30 (.06) Dividends Declared .127 .127 .127 2.84 Stock Price (per share) High $ 17.83 $ 21.67 $ 22.00 $ 24.25 Low 15.42 17.33 20.75 21.17 Volume (# of shares) 573.9 692.0 635.1 424.1 1 Includes the special one-time dividend of $2.70 per share declared December 17, 1993, paid March 21, 1994.
8 Item 6. Selected Financial Data
Graco Inc. & Subsidiaries (In thousands, except per share amounts) 1994 1993 1992 1991 1990 Net Sales $360,013 $322,602 $320,334 $311,874 $321,263 Earnings Before Change in Accounting Principles 15,326 9,493 11,145 8,946 17,713 Net Earnings 15,326 9,493 5,301 8,946 17,713 Per Common Share: Earnings Before Change in Accounting Principles $ 1.32 $ .82 $ .97 $ .79 $ 1.63 Net Earnings 1.32 .82 .46 .79 1.63 Total Assets $228,385 $216,365 $220,418 $205,929 $209,480 Long-term Debt (including current portion) 32,483 19,480 22,762 23,898 28,651 Redeemable Preferred Stock 1,474 1,485 1,487 1,493 1,493 Cash Dividends Declared per Common Share $ .58 $ 3.22 $ .49 $ .45 $ .41 1 All per share data has been restated for the three-for-two stock split paid February 2, 1994. 2 Includes the special one-time dividend of $2.70 per post-split share paid March 21, 1994.
Above information includes Lockwood Technical, Inc. (LTI) and Graco Robotics Inc. (GRI), former wholly-owned subsidiaries, sold in 1992 and 1991, respectively. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations MANAGEMENT'S REVIEW AND DISCUSSION The following is Management's Review and Discussion and is not covered by the Independent Auditors' Report. Net earnings in 1994 of $15,326,000 were significantly higher than the $9,493,000 in 1993, and the $5,301,000 in 1992. The 61 percent increase in 1994 primarily reflects the impact of higher sales and the decline in operating costs as a percent of sales. Operating costs include increased product development costs and restructuring charges. The increase in net earnings between 1993 and 1992 principally resulted from the one-time net reduction in 1992 of $5,844,000 for the cumulative effect of changes in two accounting principles. The following table indicates the percentage relationship of income and expense items, before changes in accounting principles, included in the Consolidated Statements of Earnings for the three most recent fiscal years and the percentage changes in those items for such years.
Revenue & Expense Item Revenue & Expense Item As a Percentage of Net Sales Percentage Increase (Decrease) 1994 1993 1992 1994/93 1993/92 1992/91 Net Sales 100.0 100.0 100.0 12 1 3 Cost of Products Sold 51.7 52.6 51.1 10 4 2 Product Development 4.0 3.8 3.3 18 17 (11) Selling 25.8 26.6 26.7 8 0 7 General & Administrative 11.2 11.8 12.8 6 (7) 3 Operating Profit 7.3 5.2 6.1 56 (13) 1 Interest Expense (0.5) (0.7) (0.9) (16) (16) (27) Other (Expense) Income, Net (0.3) (0.3) 0.4 nmf nmf nmf Earnings Before Income Taxes and Changes in Accounting Principles 6.5 4.2 5.6 70 (24) 18 Income Taxes 2.2 1.3 2.1 88 (38) 8 Earnings Before Changes in Accounting Principles 4.3 2.9 3.5 61 (15) 25 nmf - No Meaningful Figure
9 NET SALES Graco achieved record sales in 1994. Net sales increased 12 percent to $360,013,000, principally as the result of significantly higher sales in the Americas in all divisions. Geographically, higher sales in the Americas, Europe and the Pacific were partially offset by a 14 percent sales decline in Japan. In 1993, sales increased 1 percent over 1992 as significant increases in the Americas and the Pacific were offset by declines in Europe and Japan. The impact of exchange rate movement on sales was not significant in 1994 when compared to 1993, or in 1993 when compared to 1992. Consolidated backlog at December 30, 1994 was $25 million, compared to $20 million at year-end 1993 and $18 million at the end of 1992. The increased backlog at the end of 1994 resulted primarily from increased Automotive Equipment Division system orders in the Pacific. Sales increased 12 percent in 1994 when compared to 1993 and 2 percent in 1993 from 1992, excluding operations divested in 1992.
% Increase (Decrease) (In thousands) 1994 1993 1992 1994/93 1993/92 Division Sales: Industrial Equipment $136,995 $118,155 $129,078 16 (8) Automotive Equipment 67,457 64,765 62,587 4 3 Contractor Equipment 121,478 110,802 97,592 10 14 Lubrication Equipment 34,083 28,880 25,837 18 12 360,013 322,602 315,094 12 2 Divested Operations - - 5,240 nmf nmf Consolidated $360,013 $322,602 $320,334 12 1 Geographic Sales: Americas $241,169 $206,464 $183,181 17 13 Europe 65,888 60,546 75,807 9 (20) Pacific 52,956 55,592 56,106 (5) (1) 360,013 322,602 315,094 12 2 Divested Operations - - 5,240 nmf nmf Consolidated $360,013 $322,602 $320,334 12 1 nmf - No Meaningful Figure
COST OF PRODUCTS SOLD Cost of products sold in 1994, as a percent of net sales, decreased to 51.7 from 52.6 in 1993, primarily due to manufacturing efficiencies gained from continued investment in technology and increased manufacturing volumes. Manufacturing efficiencies gained from continued investment in state-of-the- art manufacturing technology, principally in Minneapolis, Minnesota, and Sioux Falls, South Dakota, have more than offset increases in raw material and subcontract costs. Partially offsetting these factors were an increased proportion of lower-margin, engineered industrial and automotive system sales. Periodic price increases have generally permitted the Company to recover increases in the cost of products sold. The Company's last U.S. price change was effective in January 1995, and represented an average 2 percent increase from its April 1994 price lists. The April 1994 price change was an average 2 percent increase from June 1992 prices. OPERATING EXPENSES Operating expenses in 1994 increased 8.4 percent from 1993, due primarily to continued investment in product development and ongoing restructuring initiatives. Restructuring and work force reduction costs worldwide accounted for approximately 50 percent of the increase. Product development expenses in 1994 increased 18 percent to $14,591,000 as the Company added engineering personnel to achieve its goal of increasing sales of new products. Included in 1993 selling and general and administrative expenses are $1,700,000 of non-recurring costs, including costs for the relocation of administrative and technical facilities in Japan. 10 Included in 1992 selling and general and administrative expenses were $5,200,000 in costs associated with the relocation and consolidation of the Company's Detroit-based operations, reductions in the U.S. sales force and European operations, and other personnel reductions. FOREIGN CURRENCY EFFECTS The costs of the Company's products are generally denominated in U.S. dollars, with approximately 17 percent sourced in non-U.S. currencies. A greater proportion of its sales, approximately 32 percent, is denominated in currencies other than the U.S. dollar. As a result, a weakening of the U.S. dollar increases sales more than costs and expenses, improving the Company's gross and operating profits. During 1994 when compared to 1993, the U.S. dollar was generally weaker against other major currencies. In 1993 when compared to 1992, it was stronger. The gains and losses that result from the translation of the financial statements for all non-U.S. subsidiaries, except Japan, and the gains and losses on the forward and option contracts used to hedge these exposures, are included in Other (expense) income. For 1995, the translation gains or losses included in Other (expense) income will include Japan. In total, the effect of the changes in exchange rates on operating profits and the gains and losses included in Other (expense) income increased earnings before income taxes by $2,300,000 in 1994, when compared to 1993, and decreased earnings before income taxes by $4,500,000 in 1993, when compared to 1992. OTHER (EXPENSE) INCOME The decrease in interest expense in 1994 reflects a reduction in the amount of and interest rate on long-term debt. This decrease was offset by higher floating rate borrowings used primarily to finance the Company's increased working capital requirements and investments in plant and equipment during the year. Increased product demand accelerated previously scheduled investments in manufacturing equipment. Other (expense) income of ($1,040,000), ($821,000) and $1,293,000 for 1994, 1993 and 1992, respectively, includes, among other things, the exchange gains and losses discussed previously, and a $1,800,000 gain on the sale of Lockwood Technical, Inc. (LTI) in 1992. INCOME TAXES The Company's net effective tax rate for 1994 was at the U.S. federal tax rate of 35 percent. The increase from the 31 percent rate for 1993 results principally from a non-recurring tax benefit received in 1993 associated with the increase in value of deferred tax assets caused by the U.S. statutory tax rate change to 35 percent. The effective tax rate of 38 percent in 1992 was higher than the then U.S. federal rate of 34 percent with the difference resulting principally from state taxes and foreign earnings taxed at rates higher than the U.S. rate. Reconciliation of the U.S. federal rate to the effective rates is discussed in Note D to the Consolidated Financial Statements. EARNINGS BEFORE CHANGES IN ACCOUNTING PRINCIPLES Earnings during 1994 increased by 61 percent to $15,326,000, or $1.32 per share, as compared to 1993, when earnings decreased by 15 percent to $9,493,000, or $.82 per share, from 1992 before changes in accounting principles. CHANGES IN ACCOUNTING PRINCIPLES The Company recorded one-time adjustments in 1992 for the cumulative effect of its required adoption of Statements of Financial Accounting Standards (SFAS) No. 106 (Employers' Accounting for Postretirement Benefits Other Than Pensions) and No. 109 (Accounting for Income Taxes), as described in Note A to the Consolidated Financial Statements. OUTLOOK The Company anticipates higher sales in 1995 as the result of continued new product introductions, focus on specific industries, positive economic conditions in the Americas, improving conditions in Europe, and continued economic growth in the Pacific region, excluding Japan. 11 The restructuring efforts undertaken in recent years have positioned the Company to capitalize on future growth opportunities while benefiting from overall lower operating expenses as a percent of sales. The Company expects its restructuring efforts to continue, however, at a lower level than 1994. Full year gross profit margins are expected to improve moderately in 1995, as a result of manufacturing efficiencies and higher volumes, subject to the strength of the U.S. dollar (see Foreign Currency Effects). Operating expenses as a percent of sales are expected to decrease, even though the Company will continue to fund its long-term strategic initiatives in product development. DIVIDEND ACTIONS Over the last two years the Company has undertaken a number of measures to enhance shareholder value, broaden ownership, improve the liquidity of its common shares, and distribute excess cash balances: - A three-for-two stock split distributed in 1994; - A special one-time dividend of $2.70 per post-split share declared in 1993($31,224,000 in total); - A 10 percent increase in the regular dividend in 1993; - A 14 percent increase in the regular dividend in 1994. ASSETS The following table highlights several key measures of asset performance.
($ in thousands) 1994 1993 1992 Cash, Cash Equivalents and Marketable Securities $ 2,444 $37,440 $38,186 Working Capital $54,405 $47,648 $84,828 Current Ratio 1.6 1.5 2.1 Average Days Receivables Outstanding 71 71 67 Inventory Turnover 4.3 4.0 3.3
Improved inventory management early in 1994 led to an increase in inventory turns to 4.3 compared to 4.0 in 1993. However, year-end inventory balances were 41 percent higher than 1993, principally due to new product introductions, increased volume and additional inventory carried to support customer service levels. Management is focusing its efforts to further improve inventory turns in 1995. Overall, 1994 collection performance was flat at 71 average days receivables outstanding. The 22 percent increase in accounts receivable to $75,589,000, resulted primarily from increased fourth quarter sales compared to 1993. LIABILITIES At year-end, long-term debt (including current portion) was 28 percent of total capital (long-term debt plus shareholders' equity) compared to 21 percent in 1993 and 18 percent in 1992. The Company had $19 million in unused credit lines available at December 30, 1994. While the Company believes available credit lines plus operating cash flows are adequate to fund the Company's short and long-term initiatives, additional credit lines may be arranged from time to time as necessary. SHAREHOLDERS' EQUITY Shareholders' equity totaled $81,851,000 on December 30, 1994, $7,166,000 higher than 1993, but down from 1992, as the result of the Company's decision to pay the special one-time dividend of $2.70 per share as previously noted. CASH FLOWS FROM OPERATING ACTIVITIES In 1994, cash flow from operations was $8,587,000, substantially less than net earnings. This is primarily the result of increased working capital requirements for inventory and accounts receivable. Cash flow from operating activities in 1993 was $23,116,000, $2,986,000 less than the $26,102,000 recorded in 1992. 12 Cash flows from operating activities have been, and are expected to be, the principal source of funds required for future additions to property, plant and equipment, and working capital, as well as for other corporate purposes. CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures were $23,100,000 in 1994, $16,178,000 in 1993 and $10,194,000 in 1992. These expenditures have enhanced the Company's engineering and manufacturing capabilities, improved product quality, increased capacity, and lowered costs. Expenditures in 1994 include the construction of an 80,000 square foot addition to the Company's technical center in Minneapolis, Minnesota and the acceleration of planned machinery purchases. The Company expects to make approximately $25,000,000 in capital investments in 1995: $15,000,000 for machinery and equipment, $6,000,000 for the expansion of the Russell L. Gray Technical Center and $4,000,000 for manufacturing capacity expansion. During 1994, the Company sold its marketable securities to fund the special one-time dividend of $31,224,000 paid to shareholders on March 21, 1994. The Company realized cash proceeds of $8,569,000 on its sale of LTI in April 1992. CASH FLOWS FROM FINANCING ACTIVITIES The amount of common stock issued represents the funds received to purchase shares through the Company's dividend reinvestment plan, its Employee Stock Purchase Plan, and the distribution of shares pursuant to its Long Term Stock Incentive Plan, more fully described in Note F to the Consolidated Financial Statements. Graco offers an Automatic Dividend Reinvestment Plan, which provides shareholders with a simple and convenient way to reinvest quarterly cash dividends in additional shares of Graco common stock. Brokerage and service charges are paid by the Company. All Graco employees in the U.S. participate in the Graco Employee Stock Ownership Plan. Eligible employees may also purchase Graco common stock through the Company's Employee Stock Purchase Plan. From time to time, the Company makes open market purchases of its common shares. These shares are available for issuance to satisfy grants under its Long Term Stock Incentive Plan and other plans, as well as for other corporate purposes. On February 25, 1994, the Company's Board of Directors authorized management to repurchase up to 400,000 shares. As of December 31, 1994, under this repurchase program, the Company had repurchased 253,400 shares at an average price per share of $17.94. The Company is currently paying 16 cents per share as its regular quarterly dividend. Annual cash dividends paid on the Company's common and preferred stock, including a special one-time dividend of $31,224,000 paid on March 21, 1994, were $37,732,000 in 1994, $5,879,000 in 1993 and $5,484,000 in 1992. The Company expects to continue paying regular quarterly dividends to its common shareholders at amounts which will be adjusted periodically to reflect earnings and cash flow performance and expectations. In 1994, debt increased by $21,444,000, reflecting increased working capital investment, primarily in inventory, receivables and capital expenditures. Item 8. Financial Statements and Supplementary Data Page - Responsibility for Financial Reporting 14 - Independent Auditors' Report 14 - Consolidated Statements of Earnings for fiscal years 1994, 1993 and 1992 15 - Consolidated Statements of Changes in Shareholders' Equity Accounts (See Footnote F, Notes to Consolidated Financial Statements) 22 - Consolidated Balance Sheets for fiscal years 1994, 1993 and 1992 16 - Consolidated Statements of Cash Flows for fiscal years 1994, 1993 and 1992 17 - Notes to Consolidated Financial Statements 18 - Selected Quarterly Financial Data (See Part II, Item 5, Market for the Company's Common Stock and Related Stockholder Matters) 8 13 Responsibility For Financial Reporting Management is responsible for the accuracy, consistency, and integrity of the information presented in this annual report on Form 10-K. The consolidated financial statements and financial statement schedules have been prepared in accordance with generally accepted accounting principles and, where necessary, include estimates based upon management's informed judgment. In meeting this responsibility, management believes that its internal control structure provides reasonable assurance that the Company's assets are safeguarded and transactions are executed and recorded by qualified personnel in accordance with approved procedures. Internal auditors periodically review the internal control structure. Deloitte & Touche LLP, independent certified public accountants, are retained to audit the consolidated financial statements, and express an opinion thereon. Their opinion follows. The Board of Directors pursues its oversight role through its Audit Committee. The Audit Committee, composed of directors who are not employees, meets twice a year with management, internal auditors, and Deloitte & Touche LLP to review the internal control structure, accounting practices, financial reporting, and the results of auditing activities. INDEPENDENT AUDITORS' REPORT Shareholders and Board of Directors Graco Inc. Minneapolis, Minnesota We have audited the accompanying Consolidated Balance Sheets of Graco Inc. and Subsidiaries (the "Company") as of December 30, 1994, December 31, 1993, and December 25, 1992, and the related statements of earnings and cash flows for each of the three years in the period ended December 30, 1994. Our audit also included the financial statement schedule listed in the Index at Item 14. These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements and financial statement schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such Consolidated Financial Statements present fairly, in all material respects, the financial position of Graco Inc. and Subsidiaries as of December 30, 1994, December 31, 1993, and December 25, 1992, and the results of their operations and their cash flows for each of the three years in the period ended December 30, 1994, in conformity with generally accepted accounting principles. Also, on our opinion, such financial statement schedule, when considered in relation to the basic Consolidated Financial Statements taken as a whole, presents fairly in all material respects the information set forth therein. As discussed in Note A to the Consolidated Financial Statements, the Company changed its method of accounting for income taxes and postretirement health care benefits during the year ended December 25, 1992. Deloitte & Touche LLP Minneapolis, Minnesota February 7, 1995 14
CONSOLIDATED STATEMENTS OF EARNINGS GRACO INC. & Subsidiaries Years Ended December 30, December 31, December 25, (In thousands, except per share amounts) 1994 1993 1992 Net Sales $360,013 $322,602 $320,334 Cost of products sold 186,002 169,475 163,648 Gross Profit 174,011 153,127 156,686 Product development 14,591 12,382 10,616 Selling 92,752 85,757 85,583 General and administrative 40,279 38,086 41,019 Operating Profit 26,389 16,902 19,468 Interest expense (1,923) (2,288) (2,716) Other (expense) income, net (1,040) (821) 1,293 Earnings Before Income Taxes And Changes In Accounting Principles 23,426 13,793 18,045 Income taxes 8,100 4,300 6,900 Earnings Before Changes In Accounting Principles 15,326 9,493 11,145 Cumulative effect of change in accounting principle relating to postretirement benefits - - (6,768) Cumulative effect of change in accounting principle relating to income taxes - - 924 Net Earnings $ 15,326 $ 9,493 $ 5,301 Per Common Share Amounts: Earnings before changes in accounting principles $ 1.32 $ .82 $ .97 Cumulative effect of change in accounting principle relating to postretirement benefits - - (.60) Cumulative effect of change in accounting principle relating to income taxes - - .09 Net Earnings Per Common Share $ 1.32 $ .82 $ .46 See Notes to Consolidated Financial Statements.
15
CONSOLIDATED BALANCE SHEETS GRACO INC. & Subsidiaries December 30, December 31, December 25, (In thousands, except share amounts) 1994 1993 1992 Assets Current Assets: Cash and cash equivalents $ 2,444 $ 11,095 $ 18,869 Marketable securities 0 26,345 19,317 Accounts receivable, less allowances of $4,700, $4,100, and $4,500 75,589 62,178 61,195 Inventories 50,529 35,719 49,871 Deferred income taxes, net 11,755 8,843 10,704 Other current assets 3,628 3,079 1,985 Total current assets 143,945 147,259 161,941 Property, Plant And Equipment, At Cost: Land 3,547 3,125 2,976 Buildings and improvements 46,777 41,526 38,733 Manufacturing equipment 60,014 53,629 47,871 Office, warehouse and automotive equipment 27,337 29,092 26,457 Construction in progress 7,489 2,504 773 145,164 129,876 116,810 Accumulated depreciation (75,124) (72,132) (65,772) 70,040 57,744 51,038 Other Assets 14,400 11,362 7,439 $228,385 $216,365 $220,418 Liabilities and Shareholders' Equity Current Liabilities: Notes payable to banks $ 11,675 $ 3,234 $ 3,615 Current portion of long-term debt 5,685 5,543 4,917 Trade accounts payable 19,764 16,737 19,267 Salaries, wages and commissions 13,433 12,115 13,292 Dividends payable 1,857 32,535 1,471 Accrued insurance liabilities 9,918 8,783 7,850 Income taxes payable 5,761 5,658 6,588 Other current liabilities 21,447 15,006 20,113 Total current liabilities 89,540 99,611 77,113 Long-Term Debt, less current portion 26,798 13,937 17,845 Retirement Benefits And Deferred Compensation 30,196 28,132 25,290 Commitments And Contingencies (Note H) Shareholders' Equity 5% Cumulative Preferred Stock, $100 par value; 22,549 shares authorized; 14,740, 14,845 and 14,870 shares outstanding 1,474 1,485 1,487 Common stock, $1 par value; 15,000,000 shares authorized; 11,377,004, 11,449,623 and 7,547,478 shares outstanding 11,377 11,449 7,547 Additional paid-in capital 18,289 19,813 18,569 Retained earnings 50,702 42,430 73,697 Other, net 9 (492) (1,130) 81,851 74,685 100,170 $228,385 $216,365 $220,418 See Notes to Consolidated Financial Statements.
16
CONSOLIDATED STATEMENTS OF CASH FLOWS GRACO INC. & Subsidiaries Years Ended December 30, December 31, December 25, (In thousands) 1994 1993 1992 Cash Flows From Operating Activities: Net earnings $ 15,326 $ 9,493 $ 5,301 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 10,447 9,292 8,629 Deferred income taxes (4,042) 827 (5,997) Gain on sale of business - - (1,792) Change in: Accounts receivable (10,806) (730) 3,399 Inventories (13,967) 14,901 (2,889) Trade accounts payable 2,358 (3,226) (3,924) Accrued salaries 1,439 (749) 2,905 Retirement benefits and deferred compensation 1,670 2,481 13,558 Other accrued liabilities 6,858 (4,782) 6,664 Other (696) (4,391) 248 8,587 23,116 26,102 Cash Flows From Investing Activities: Property, plant and equipment additions (23,100) (16,178) (10,194) Proceeds from sale of property, plant and equipment 693 795 264 Proceeds from sale of business - - 8,569 Purchases of marketable securities (5,464) (25,703) (20,504) Proceeds from sales of marketable securities 31,809 18,675 1,187 3,938 (22,411) (20,678) Cash Flows From Financing Activities: Proceeds from short-term borrowings 10,411 15,098 19,163 Payments on short-term borrowings (2,395) (15,567) (22,997) Proceeds from long-term debt 16,632 1,297 569 Payments on long-term debt (5,380) (5,739) (4,407) Common stock issued 3,102 3,390 2,524 Retirement of common and preferred stock (4,564) (1,750) (248) Cash dividends paid (37,732) (5,879) (5,484) (19,926) (9,150) (10,880) Effect of exchange rate changes on cash (1,250) 671 347 Net decrease in cash and cash equivalents (8,651) (7,774) (5,109) Cash and cash equivalents Beginning of year 11,095 18,869 23,978 End of year $ 2,444 $ 11,095 $ 18,869 See Notes to Consolidated Financial Statements.
17 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS GRACO INC. & Subsidiaries Years Ended December 30, 1994, December 31, 1993, and December 25, 1992 A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FISCAL YEAR. The Company's fiscal year is 52 or 53 weeks, ending on the last Friday in December. BASIS OF STATEMENT PRESENTATION. The Consolidated Financial Statements include the accounts of the parent company and its subsidiaries after elimination of all significant intercompany balances and transactions. As of December 30, 1994, all subsidiaries are 100 percent owned. Subsidiaries outside North America have been included principally on the basis of fiscal years ended November 30 to effect more timely consolidated financial reporting. The U.S. dollar was the functional currency for all foreign subsidiaries, except Graco K.K. (Japan), where the local currency was the functional currency. CASH, CASH EQUIVALENTS, AND MARKETABLE SECURITIES. All highly liquid investments with a maturity of three months or less at the date of purchase are considered to be cash equivalents. Marketable securities include debt securities of various maturities. Realized gains and losses are computed based on the specific identified cost method. At December 31, 1993, the securities were reported at fair value. At December 25, 1992, the securities were recorded at the lower of cost or market. Cost approximated market at both December 31, 1993 and December 25, 1992. INVENTORY VALUATION. Inventories are stated at the lower of cost or market. The last-in, first-out (LIFO) cost method is used for valuing all U.S. inventories. Inventories of foreign subsidiaries are valued using the first-in, first-out (FIFO) cost method. CURRENCY HEDGES. The Company periodically evaluates its monetary asset and liability positions denominated in foreign currencies. Subsequently, the Company enters into forward contracts, borrowings in various currencies, or options in order to hedge its net monetary positions. Consistent with financial reporting requirements, these hedges and net monetary positions are marked to market. The Company believes it uses strong financial counterparties in these transactions and that the resulting credit risk under these hedging strategies is not significant. The amounts (which do not represent credit or market risk) of such contracts were (in U.S. dollars) $9,086,000, $15,258,000, and $16,709,000 at December 30, 1994, December 31, 1993, and December 25, 1992, respectively. PROPERTY, PLANT AND EQUIPMENT. For financial reporting purposes, plant and equipment are depreciated over their estimated useful lives, primarily by using the straight-line method as follows: Buildings and improvements 10 to 45 years Leasehold improvements 3 to 10 years Manufacturing equipment and tooling 3 to 10 years Office, warehouse and automotive equipment 4 to 10 years REVENUE RECOGNITION. Revenue is recognized on large contracted systems using the percentage-of-completion method of accounting. The Company recognizes revenue on other products when title passes, which is usually upon shipment. INCOME TAXES. Effective the beginning of 1992, the Company adopted SFAS No. 109 (Accounting for Income Taxessee Note D). The Company provides taxes on unremitted earnings of subsidiaries. EARNINGS PER COMMON SHARE. On December 17, 1993, the Board of Directors approved a three-for-two stock split, effected in the form of a stock dividend, payable February 2, 1994, to shareholders of record on January 5, 1994. All share and per share data has been restated to reflect the split. Earnings per common share are computed on earnings reduced by dividend requirements on preferred stock and based upon the weighted average number of common shares and common equivalent shares, consisting of the dilutive effect of stock options outstanding during each year. Earnings per common share assuming full dilution are substantially the same. RETIREE HEALTH CARE BENEFITS. Effective the beginning of 1992, the Company adopted SFAS No. 106 (Employers' Accounting for Postretirement Benefits Other Than Pensions). This Statement requires the accrual of postretirement benefit costs during the years an employee provides services. The Company elected to charge the entire unfunded obligation of $10,254,000 18 ($6,768,000 after tax), against earnings as of the beginning of 1992, as a cumulative effect of a change in accounting principle. In addition, the effect of this change decreased 1992 earnings before income taxes by $848,000. 1992 SALE OF SUBSIDIARY. On April 24, 1992, the Company sold a wholly owned subsidiary, Lockwood Technical, Inc., (LTI) and a related Japanese joint venture affiliate (LTI-Graco K.K.). A gain on the sale of $1,792,000 is reflected in 1992 results. B. INDUSTRY SEGMENT AND FOREIGN OPERATIONS The Company operates in one industry segment, namely, the design, manufacture, marketing, sale and installation of systems and equipment for the management of fluids. The Company's operations by geographical area for the last three years are shown below.
(In thousands) 1994 1993 1992 Sales to unaffiliated customers: Americas $241,169 $206,464 $187,724 Europe 65,888 60,546 75,914 Pacific 52,956 55,592 56,696 360,013 322,602 320,334 Intercompany sales between geographic area: Americas 51,939 38,902 43,957 Europe 14 3,798 3,073 Pacific 450 402 542 Eliminations (52,403) (43,102) (47,572) Total sales $360,013 $322,602 $320,334 Operating profit: Americas $ 62,650 $ 46,260 $ 41,950 Europe ( 5,463) ( 2,780) 1,810 Pacific 1,639 654 4,600 Eliminations ( 2,205) 1,627 2,067 56,621 45,761 50,427 General corporate expenses (31,272) (29,680) (29,666) Interest expense ( 1,923) ( 2,288) ( 2,716) Earnings before income taxes and changes in accounting principles $ 23,426 $ 13,793 $ 18,045 Assets: Americas $163,201 $128,713 $129,219 Europe 50,503 30,737 34,829 Pacific 26,605 25,680 25,043 Corporate 2,444 37,440 38,186 Eliminations (14,368) ( 6,205) ( 6,859) Total assets $228,385 $216,365 $220,418 1 Included are U.S. export sales to unaffiliated customers of $23,408, $25,251, and $18,675, in 1994, 1993, and 1992, respectively. 2 Transfers between entities are made at prices which allow appropriate markups to the manufacturing and selling unit.
Net earnings (loss) for subsidiaries operating outside the U.S. were ($5,624,000), ($2,261,000), and $6,608,000 for 1994, 1993, and 1992, respectively. Retained earnings for subsidiaries operating outside the U.S. were $8,860,000, $9,760,000, and $9,908,000 for 1994, 1993, and 1992, respectively. Transaction and translation net gains or losses, included in Other income (expense), net were $366,000, ($1,294,000), and ($670,000) for 1994, 1993, and 1992, respectively. 19 C. INVENTORIES Major components of inventories for the last three years were as follows:
(In thousands) 1994 1993 1992 Finished products and components $ 46,694 $ 42,010 $ 46,234 Products and components in various stages of completion 24,826 21,410 27,700 Raw materials 13,918 8,642 10,315 85,438 72,062 84,249 Reduction to LIFO cost (34,909) (36,343) (34,378) $ 50,529 $ 35,719 $ 49,871
Inventories valued under the LIFO method were $32,743,000, $19,700,000, and $30,309,000 for 1994, 1993, and 1992, respectively. The balance of the inventory was valued on the FIFO method. In 1993, certain inventory quantities were reduced, resulting in liquidation of LIFO inventory quantities carried at lower costs from prior years. The effect was to increase net earnings by approximately $900,000 in 1993. D. INCOME TAXES The Company adopted SFAS No. 109 (Accounting for Income Taxes) as of the beginning of 1992. Earnings before income tax expense and changes in accounting principles consist of:
(In thousands) 1994 1993 1992 Domestic $ 28,168 $ 13,796 $ 11,573 Foreign (4,742) (3) 6,472 Total $ 23,426 $ 13,793 $ 18,045
Income tax expense, before the cumulative effect of changes in accounting principles, consists of:
(In thousands) 1994 1993 1992 Current: Domestic: Federal $ 9,383 $ 1,598 $ 4,987 State and local 1,030 385 745 Foreign 2,596 1,551 2,833 13,009 3,534 8,565 Deferred: Domestic (3,617) (134) (2,117) Foreign (1,292) 900 452 (4,909) 766 (1,665) Total $ 8,100 $ 4,300 $ 6,900
Income taxes paid were $12,136,000, $4,620,000, and $6,186,000 in 1994, 1993, and 1992, respectively. 20 A reconciliation between the U.S. federal statutory tax rate and the effective tax rate is as follows:
1994 1993 1992 Statutory tax rate 35% 35% 34% Foreign earnings with higher tax rates 2 1 4 State taxes, net of federal effect 3 2 3 (Increase) in deferred tax assets from statutory tax rate increase - (3) - U.S. general business tax credits (3) (1) (1) Other (2) (3) (2) Effective tax rate 35% 31% 38%
Deferred income taxes are provided for all temporary differences between the financial reporting and the tax basis of assets and liabilities. The deferred tax assets (liabilities) resulting from these differences are as follows:
(In thousands) 1994 1993 1992 Inventory valuations $ 4,616 $ 3,004 $ 3,673 Cost reductions and severance accruals 1,377 742 2,268 Insurance accruals 3,232 2,876 2,230 Vacation accruals 1,428 1,398 1,199 Bad debt reserves 893 894 979 Other 422 (71) 355 Valuation allowance (213) - - Current 11,755 8,843 10,704 Unremitted earnings of consolidated foreign subsidiaries * (2,938) (4,141) (4,637) Excess of tax over book depreciation (3,104) (2,845) (2,657) Postretirement benefits 4,447 4,194 3,775 Pension and deferred compensation 5,103 4,856 4,291 Net operating loss carry forward 6,715 2,066 - Other 407 895 308 Valuation allowance (6,680) (2,740) - Non-current 3,950 2,285 1,080 Net deferred tax assets $15,705 $11,128 $11,784 * Payable at the time these earnings are distributed to the parent
Net non-current deferred tax assets above are included in other assets. Total deferred tax assets were $22,506,000, $18,637,000 and $19,218,000, and total deferred tax liabilities were $6,801,000, $7,509,000, and $7,434,000 on December 30, 1994, December 31, 1993 and December 25, 1992, respectively. A valuation allowance of $6,893,000 and $2,740,000 has been recorded as of December 30, 1994 and December 31, 1993, respectively, primarily related to the uncertainty of obtaining tax benefits for subsidiary operating losses, which expire beginning in 1998 in Japan and in later years for other subsidiaries. The effect of these allowances has been considered in "Foreign earnings with higher tax rates" in the Company's tax rate reconciliation. 21 E. DEBT Long-term debt consists of the following:
(In thousands) 1994 1993 1992 Term debt, 6.53%, payable in equal annual installments through 1995 $ 4,000 $ 8,000 $12,000 Term debt, 5.70% at December 30, 1994, payable in equal annual installments through 1997 900 1,200 1,500 Industrial development refunding revenue bonds, 4.65% at December 30, 1994, payable through 2002 (property carried at $3,219 pledged as collateral) 5,000 5,500 6,000 Revolving credit agreement, 7% at December 30,1994, payable September 30, 1996 14,850 - - Obligations related to low income housing investments 4,534 2,867 - Other 3,199 1,913 3,262 Total long-term debt 32,483 19,480 22,762 Less current portion: 5,685 5,543 4,917 Long-term portion $26,798 $13,937 $17,845
Aggregate annual scheduled maturities of long-term debt for the next five years are as follows: 1995, $5,685,000; 1996, $16,744,000; 1997, $1,886,000; 1998, $1,803,000; 1999, $2,763,000. Interest paid on debt during 1994, 1993, and 1992 amounted to $1,923,000, $3,230,000, and $1,910,000, respectively. The fair value of the Company's long-term debt at December 30, 1994, December 31, 1993 and December 25, 1992, is not materially different than its recorded value. During 1992, the Company entered into an interest rate swap agreement whereby it fixed the interest rate of the remaining principal amounts of the Company's previously variable interest rate revenue bond debt at 4.65 percent through 1997, at which time the debt will revert back to a variable interest rate. The cash flows related to the swap agreement are recorded as income when received and expense when paid. Market and credit risk are not significant. On December 30, 1994, the Company had lines of credit with U.S. and foreign banks of $44,280,000, including a $15,000,000 revolving credit agreement. The unused portion of these credit lines was $18,993,000 at December 30, 1994. Borrowing rates under these facilities vary with the prime rate, rates on domestic certificates of deposit, and the London interbank market. During the years ended December 30, 1994, December 31, 1993 and December 25, 1992, the Company's weighted average short term borrowing rates were 4.8 percent, 10.3 percent and 11.5 percent, respectively. The Company pays commitment fees of up to 3/16 percent per annum on the daily average unused amounts on certain of these lines. No compensating balances are required. The Company is in compliance with the covenants of its debt agreements. Under the most restrictive terms of the agreements, approximately $7,378,000 of retained earnings were available for payment of cash dividends at December 30, 1994. F. SHAREHOLDERS' EQUITY The holders of cumulative preferred stock are entitled to fixed cumulative dividends of 5 percent per annum on the par value before cash dividends may be paid or declared on common stock. The preferred stock may be redeemed at the option of the Company at $105 per share plus accrued and unpaid dividends. Preferred stockholders are entitled to $105 per share in the event of voluntary liquidation of the Company or $100 per share for involuntary liquidation, plus all accrued and unpaid dividends. All required dividends have been paid. The Company has authorized, but not issued, a separate class of 3,000,000 shares of preferred stock, $1 par value. 22 The Company has a leveraged Employee Stock Ownership Plan (ESOP) under which outstanding debt was $900,000, $1,200,000 and $1,500,000 at December 30, 1994, December 31, 1993 and December 25, 1992, respectively. This is also the remaining balance of a concurrent loan to the ESOP Trust from the Company on the same terms. The Company's loan is included in long-term debt with the receivable from the ESOP in a like amount recorded as a reduction of shareholders' equity reflected in the Other, net category. The Company is obligated to make annual contributions to the ESOP Trust through 1997 sufficient to repay the loan and interest thereon. On May 3, 1994, the shareholders approved a Nonemployee Director Stock Plan which enables individual nonemployee directors of the Company to elect to receive all or part of a director's annual retainer in the form of shares of the Company's common stock instead of cash. On December 17, 1993, the Board of Directors approved a three-for-two stock split, effected in the form of a stock dividend, payable February 2, 1994 to shareholders of record on January 5, 1994. Accordingly, December 31, 1993 balances reflect the split with an increase in common stock and a reduction in retained earnings of $3,817,000. All stock option, share and per share data have been restated to reflect the split. On December 17, 1993, the Board of Directors also approved a special one-time dividend of $2.70 per common share to be paid March 21, 1994, on post-split shares to shareholders of record on March 7, 1994. Dividends payable at December 31, 1993, reflect the special one-time dividend. Under the Company's Employee Stock Purchase Plan, 2,100,000 common shares have been authorized for sale to employees, 434,546 of which remained unissued at the end of 1994. The purchase price of the shares under the Plan is the lesser of 85 percent of the fair market value on the first day or the last day of the Plan year. The Company maintains a Plan in which one preferred share purchase right (Right) exists for each common share of the Company. Each Right will entitle its holder to purchase one one-hundredth of a share of a new series of junior participating preferred stock at an exercise price of $80, subject to adjustment. The Rights are exercisable only if a person or group acquires beneficial ownership of 20 percent or more of the Company's outstanding common stock. The Rights expire in March 2000 and may be redeemed earlier by the Board of Directors for $.01 per Right. The Company has a Long Term Stock Incentive Plan, under which a total of 1,650,000 common shares have been reserved for issuance, with 790,812 shares remaining reserved at December 30, 1994. Grants under this Plan are in the form of restrictive share awards and stock options. Restrictive share awards of 398,406 common shares have been made to certain key employees under the Plan, with 62,316 shares restricted for disposition, such restrictions lapsing from 1995 to 1997. Unearned compensation expense relating to the remaining restricted shares is $745,000 at December 30, 1994, and is included as a reduction of shareholders' equity in the Other, net category. Stock options for 801,622 common shares have also been granted under the Plan. The option price is the market price at the date of grant. Options become exercisable at such time and in such installments as set by the Company, and expire in five to ten years from the date of grant. In 1993, the Company granted Stock Appreciation Rights (SARs) to certain key employees, utilizing a portion of the above options. Upon the exercise of the SARs, the employee will surrender the unexercised related option and will receive a cash payment equal to the excess of the fair market value at the time of exercise over the price of the related option. Compensation expense related to the SARs is not significant. 23 Shares and options on common shares granted and exercisable, as well as the exercise price, are shown for the last three years in the table below:
NUMBER OF SHARES Option Price Reserved Granted Exercisable Per Share Balance at December 27, 1991 249,060 250,080 238,830 $ 5.22 - 14.45 Reserved 750,000 - - - Granted - 157,020 25,470 5.22 - 17.67 Exercised (84,729) (84,729) (84,729) 5.22 - 17.67 Canceled 27,947 (4,950) (4,950) 12.67 - 17.75 Balance at December 25, 1992 942,278 317,421 174,621 11.59 - 16.09 Granted - 82,800 25,875 15.50 - 19.92 Exercised (130,632) (130,632) (130,632) 11.59 - 18.92 Canceled 23,322 (3,450) 4,950 12.67 - 17.75 Balance at December 31, 1993 834,968 266,139 74,814 11.59 - 19.92 Granted - 258,370 53,835 11.50 - 22.63 Exercised (52,210) (52,210) (52,210) 11.58 - 18.92 Canceled 8,054 (15,937) (2,590) 11.58 - 18.92 Balance at December 30, 1994 790,812 456,362 73,849 $11.50 - 22.63
The changes in shareholders' equity accounts are as follows:
(In thousands) 1994 1993 1992 Preferred stock Balance, beginning of year $ 1,485 $ 1,487 $ 1,493 Shares repurchased (11) (2) (6) Balance, end of year 1,474 1,485 1,487 Common stock Balance, beginning of year 11,449 7,547 7,446 Stock split - 3,817 - Shares issued 188 157 120 Shares repurchased (260) (72) (19) Balance, end of year 11,377 11,449 7,547 Additional paid-in capital Balance, beginning of year 19,813 18,569 16,633 Shares issued 2,914 3,198 2,404 Shares repurchased (4,438) (1,954) (468) Balance, end of year 18,289 19,813 18,569 Retained earnings Balance, beginning of year 42,430 73,697 74,048 Net Income 15,326 9,493 5,301 Cash Dividends (7,054) (36,943) (5,652) Stock split - (3,817) - Balance, end of year 50,702 42,430 73,697 Cumulative translation adjustment Balance, end of year 1,654 1,958 2,368 Other, net Balance, end of year (1,645) (2,450) (3,498) Total Shareholders' Equity $ 81,851 $ 74,685 $100,170
24 G. RETIREMENT BENEFITS The Company has a defined contribution plan, under Section 401(k) of the Internal Revenue Code, which provides additional retirement benefits to all U.S. employees who elect to participate. Currently, the Company matches employee contributions at a 50 percent rate, up to 3 percent of the employee's compensation. Employer contributions were $850,000 in 1994, $819,000 in 1993, and $813,000 in 1992. The Company has non-contributory defined benefit pension plans covering substantially all U.S. employees and directors and most of the employees of the Company's non-U.S. subsidiairies. For the U.S. plans, the benefits are based on years of service and the highest five consecutive years' earnings in the ten years preceding retirement. The Company funds these plans annually in amounts consistent with minimum funding requirements and maximum tax deduction limits and invests primarily in common stocks and bonds. The expenses for these plans consist of the following components:
(In thousands) 1994 1993 1992 Service cost - benefits earned during the period $ 2,499 $ 2,244 $ 2,389 Interest cost on projected benefit obligation 4,301 4,115 3,917 Actual return on assets 579 (11,736) (1,325) Net amortization and deferral (5,583) 7,354 (2,688) Cost of pension plans which are not significant and have not adopted SFAS No. 87 312 190 289 Net periodic pension cost $ 2,108 $ 2,167 $ 2,582
The status of the Company's plans and the amounts recognized in the financial statements are:
(In thousands) 1994 1993 1992 Actuarial present value: Vested benefit obligation $ 49,429 $ 43,492 $ 33,850 Accumulated benefit obligation $ 54,884 $ 48,644 $ 37,603 Projected benefit obligation $ 66,093 $ 60,144 $ 52,724 Plan assets at fair value 55,057 57,151 46,520 Funded status (11,036) (2,993) (6,204) Unrecognized net gain (3,787) (10,910) (5,989) Unrecognized net liability being amortized 204 249 265 Adjustment required to recognize minimum liability (1,192) (467) (269) Accrued pension cost ($ 15,811) ($ 14,121) ($ 12,197)
Major assumptions at year-end:
1994 1993 1992 Discount rate 4 - 7 1/2% 4 - 7 1/2% 6 - 8 1/2% Rate of increase in future compensation levels 3 - 7% 3 - 7% 4 - 8% Expected long-term rate of return on plan assets 9% 9% 9%
In addition to providing pension benefits, the Company pays part of the health insurance costs for its retired U.S. employees and their dependents. The cost of retiree health benefit expense for 1994, 1993 and 1992 was as follows:
(In thousands) 1994 1993 1992 Service cost $ 503 $ 454 $ 345 Interest cost 947 976 851 Net benefit expense $1,450 $1,430 $1,196
25 The Company's policy is to fund these benefits on a pay-as-you-go basis. The actuarial present value of these health benefit obligations and the amount recognized in the Consolidated Balance Sheets were as follows:
(In thousands) 1994 1993 1992 Accumulated postretirement benefit obligation Retirees and beneficiaries ($ 5,502) ($ 5,387) ($ 4,756) Fully eligible active plan participants (2,168) (2,010) (2,070) Other active plan participants (6,104) (6,090) (4,141) Accumulated benefit obligations (13,774) (13,487) (10,967) Unrecognized net (gain) loss 1,069 1,504 (135) Accrued postretirement benefit cost ($ 12,705) ($ 11,983) ($ 11,102)
The Company's retirement medical benefit plan limits the annual cost increase that will be paid by the Company. Actuarial computations shown above have assumed the maximum cost increase. The discount rate assumption for 1994, 1993 and 1992 was 7.5 percent, 7.5 percent and 8.5 percent, respectively. H. COMMITMENTS AND CONTINGENCIES LEASE COMMITMENTS: Aggregate rental commitments at December 30, 1994, under operating leases with noncancelable terms of more than one year, were $10,970,000, payable as follows:
Vehicles & (In thousands) Buildings Equipment Total 1995 $ 2,587 $ 899 $ 3,486 1996 2,249 342 2,591 1997 1,764 118 1,882 1998 1,580 43 1,623 1999 733 7 740 Thereafter 648 0 648 $ 9,561 $ 1,409 $10,970
Total rental expense was $4,103,000 for 1994, $4,276,000 for 1993, and $3,646,000 for 1992. CONTINGENCIES: On June 29, 1993, the U.S. District Court for the Southern District of Texas ruled that Binks Manufacturing Company of Franklin Park, Illinois deliberately infringed the patent covering Graco Inc.'s Glutton pumps. The court awarded compensatory damages, treble damages and attorneys' fees to Graco Inc., plus prejudgement interest, in a total amount of $2,750,000. Because Binks Manufacturing Company has appealed the decision, the Company will not recognize this award in the financial statements until the appeal reaches an appropriate state of resolution. Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure None. 26 PART III Part III, Items 10, 11, 12 and 13, except for certain information relating to Executive Officers included in Part I, is omitted as the Company intends to file with the Securities and Exchange Commission within 120 days of the close of the fiscal year ended December 30, 1994, a definitive proxy statement containing such information pursuant to Regulation 14A of the Securities Exchange Act of 1934 and such information shall be deemed to be incorporated herein by reference from the date of filing such document. The Company knows of no contractual arrangements which may, at a subsequent date, result in a change in control of the Company. PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (a) The following documents are filed as part of this report: (1) Financial Statements See Part II (2) Financial Statement Schedule Page - Schedule II - Valuation and Qualifying Accounts 28 All other schedules are omitted because they are not applicable, or not required, or because the required information is included in the Consolidated Financial Statements or Notes thereto. (3) Management Contract, Compensatory Plan or Arrangement. (See Exhibit Index) 30 Those entries marked by an asterisk are Management Contracts, Compensatory Plans or Arrangements. (b) Reports on Form 8-K There were no reports on Form 8-K for the fourteen weeks ended December 30, 1994. (c) Exhibit Index. 30 27
Schedule II - Valuation and Qualifying Accounts GRACO INC. & Subsidiaries (In thousands) Additions Balance at charged to Deductions beginning costs and from Balance at Description of year expenses reserves end of year Year ended December 30 1994: Allowance for doubtful accounts $ 2,200 $ 1,200 $ 700 $ 2,700 Allowance for obsolete and overstock inventory 5,500 3,100 2,200 6,400 Allowance for returns and credits 1,900 2,000 1,900 2,000 Valuation allowance for tax benefits 2,740 4,160 6,900 $12,340 $10,460 $ 4,800 $18,000 Year ended December 31, 1993: Allowance for doubtful accounts $ 2,700 $ 500 $ 1,000 $ 2,200 Allowance for obsolete and overstock inventory 6,100 1,300 1,900 5,500 Allowance for returns and credits 1,800 1,900 1,800 1,900 Valuation allowance for tax benefits 2,740 2,740 $10,600 $ 6,440 $ 4,700 $12,340 Year ended December 25, 1992: Allowance for doubtful accounts $ 2,800 $ 500 $ 600 $ 2,700 Allowance for obsolete and overstock inventory 6,000 1,700 1,600 6,100 Allowance for returns and credits 1,800 1,700 1,700 1,800 $10,600 $ 3,900 $ 3,900 $10,600 1Accounts determined to be uncollectible and charged against reserve, net of collections on accounts previously chargedagainst reserves. 2Items scrapped or otherwise disposed of during the year. 3Credits issued and returns processed, related to prior years.
28 Signatures Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Graco Inc. \David A. Koch March 20, 1995 David A. Koch Chairman and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. \David M. Lowe March 20, 1995 David M. Lowe Treasurer (Principal Financial Officer) \James A. Graner March 20, 1995 James A. Graner Vice President and Controller (Principal Accounting Officer) D. A. Koch Director, Chairman and Chief Executive Officer G. Aristides Director, President and Chief Operating Officer R. O. Baukol Director J. W. Lacey Director J. R. Lee Director L. R. Mitau Director R. D. McFarland Director D. R. Olseth Director G. C. Planchon Director C. B. Thompson Director David A. Koch, by signing his name hereto, does hereby sign this document on behalf of himself and each of the above named directors of the Registrant pursuant to powers of attorney duly executed by such persons. \David A. Koch March 20, 1995 David A. Koch (For himself and as attorney-in-fact) 29 Exhibit Index Exhibit Number Description 3.1 Restated Articles of Incorporation. See also Exhibit 4.4. (Incorporated by reference to Exhibit 3.1 to the Company's 1993 Annual Report on Form 10-K.) 3.2 Restated Bylaws. (Incorporated by reference to Exhibit 2 to the Company's Report on Form 8-K dated January 12, 1988.) 3.3 Bylaws Amendment. (Incorporated by reference to Exhibit 1 to the Company's Report on Form 8-K dated March 1, 1990.) 4.1 Credit Agreement dated October 1, 1990, between the Company and First Bank National Association. (Incorporated by reference to Exhibit 5 to the Company's Report on Form 10- Q for the thirty-nine weeks ended September 28, 1990.) 4.2 Amendment 1 dated June 12, 1992, to Credit Agreement dated October 1, 1990, between the Company and First Bank National Association; and Amendment 2 dated December 31, 1992, to the same Agreement. (Incorporated by reference to Exhibit 1 to the Company's Report on Form 8-K dated March 11, 1993.) Amendment 3 dated November 8, 1993, and Amendment 4, dated February 8, 1994. (Incorporated by reference to Exhibit 4.2 to the Company's 1993 Annual Report on Form 10- K.) 4.3 Loan Agreement dated November 24, 1993, between the Company and Metropolitan Life Insurance Company, as amended on January 13, 1994. Pursuant to Item 601(b)(4)(iii) of Regulation S-K, copies of certain instruments defining the rights of holders of certain long-term debt of the Company and its subsidiaries are not filed and, in lieu thereof, the Company agrees to furnish copies thereof to the Securities and Exchange Commission upon request. 4.4 Rights Agreement dated as of March 9, 1990, between the Company and Norwest Bank Minnesota, National Association, as Rights Agent, including as Exhibit A the form of the Certificate of Designation, Preferences and Rights of Series A Junior Participating Preferred Shares. (Incorporated by reference to Exhibit 1 to the Company's Report on Form 8-K dated March 19. 1990.) *10.1 1994 Corporate and Business Unit Annual Bonus Plan. (Incorporated by reference to Exhibit 2 to the Company's Report on Form 10-Q for the twenty-six weeks ended July 1, 1994.) *10.2 Deferred Compensation Plan Restated, effective December 1, 1992. (Incorporated by reference to Exhibit 2 to the Company's Report on Form 8-K dated March 11, 1993.) *10.3 Executive Deferred Compensation Agreement. Form of supplementary agreement entered into by the Company which provides a retirement benefit to executive officers, as amended by Amendment 1, effective September 1, 1990. (Incorporated by reference to Exhibit 3 to the Company's Report on Form 8-K dated March 11, 1993.) *10.4 Chairman's Award Plan. (Incorporated by reference to Exhibit 3 to the Company's Report on Form 8-K dated March 7, 1988.) *10.5 Executive Long Term Incentive Agreements. Form of restricted stock award agreement used for awards to executive officers. (Incorporated by reference to Attachment B to Item 5 to the Company's Report on Form 10-Q for the thirteen weeks ended March 29, 1991.) Form of restricted stock award agreement used for awards to Chairman. (Incorporated by reference to Attachment A to Item 5 to the Company's Report on Form 10-Q for the twenty-six weeks ended June 28, 1991.) 30 *10.6 Executive Long Term Incentive Agreement. Form of agreement used for restricted stock awards to two new officers. (Incorporated by reference to Attachment B to Company's Report on Form 10-Q for the thirteen weeks ended March 27, 1992.) *10.7 Executive Long Term Incentive Agreement. Form of agreement used for one year restricted stock award to one officer. (Incorporated by reference to Exhibit 2 to Company's Report on Form 10-Q for the twenty-six weeks ended June 25, 1993.) *10.8 Long Term Stock Incentive Plan (Incorporated by reference to Attachment C to the Company's Report on Form 10- Q for the thirteen weeks ended March 27, 1992.) *10.9 Retirement Plan for Non-Employee Directors. (Incorporated by reference to Attachment C to Item 5 to the Company's Report on Form 10-Q for the thirteen weeks ended March 29, 1991.) *10.10 Deferred Compensation Plan for Non-Employee Directors. (Incorporated by reference to Exhibit 2 to the Company's Report on Form 8-K dated March 7, 1988.) *10.11 Restoration Plan, restating Excess Benefit Plan, effective as of July 1, 1988. (Incorporated by reference to Exhibit 1 to the Company's Report on Form 10-Q for the thirteen weeks ended March 26, 1993.) *10.12 Stock Option Agreement. Form of agreement used for incentive stock option/alternative stock appreciation right award to selected officers, dated February 25, 1993. (Incorporated by reference to Exhibit 10.14 to the Company's 1993 Annual Report on Form 10-K.) *10.13 Stock Option Agreement. Form of agreement used for non-incentive stock option/alternative stock appreciation right award to selected officers, dated May 4, 1993. (Incorporated by reference to Exhibit 10.15 to the Company's 1993 Annual Report on Form 10-K.) *10.14 Nonemployee Director Stock Plan (Incorporated by reference to Exhibit 1 to the Company's Report on Form 10-Q for the twenty-six weeks ended July 1, 1994.) *10.15 Stock Option Agreement. Form of agreement used for award of non-incentive stock options to executive officers, dated May 2, 1994. (Incorporated by reference to Exhibit 3 to the Company's Report on Form 10-Q for the twenty-six weeks ended July 1, 1994.) *10.16 Stock Option Agreement. Form of agreement used for award of non-incentive stock options to selected officers, dated December 15, 1994, December 27, 1994 and February 23, 1995. *10.17 Separation and Supplemental Retirement Agreement between Barry A. Calhoon and the Company, dated January 3, 1995. 11 Statement of Computation of Earnings per share included herein on page 32. 21 Subsidiaries of the Registrant included herein on page 33. 23 Independent Auditor's Consent included herein on page 33. 24 Power of Attorney included herein on page 34. 27 Financial Data Schedule (EDGAR filing only). *Management Contracts, Compensatory Plans or Arrangements. 31 EX-11 2 COMPUTATION OF PER SHARE EARNINGS Exhibit Number 11
Graco Inc. & Subsidiaries Computation of Per Share Earnings Years Ended (In thousands, except per share amounts) December 30, December 31, December 25, 1994 1993 1992 PRIMARY Net earnings applicable to common stock: Net earnings $ 15,326 $ 9,493 $ 5,301 Less dividends on preferred stock 74 74 75 $ 15,252 $ 9,419 $ 5,226 Average number of common shares and common equivalent shares outstanding: Average number of common shares outstanding 11,539 11,386 11,294 Dilutive effect of stock options computed based on the treasury stock method using average market price 42 79 61 11,581 11,465 11,355 Net earnings per common share and common equivalent share $ 1.32 $ .82 $ .46 FULLY DILUTED Net earnings applicable to common stock: Net earnings $ 15,326 $ 9,493 $ 5,301 Less dividends on preferred stock 74 74 75 $ 15,252 $ 9,419 $ 5,226 Average number of common shares and common equivalent shares outstanding: Average number of common shares outstanding 11,539 11,386 11,294 Dilutive effect of stock options computed based on the treasury stock method using the year end market price, if higher than average market price 49 91 63 11,588 11,477 11,357 Net earnings per common share and common equivalent share $ 1.32 $ .82 $ .46 1 All share and per share data has been restated for the three-for-two stock split paid February 2, 1994.
32 EX-21 3 SUBSIDIARIES OF GRACO INC. Exhibit 21 Subsidiaries of Graco Inc. The following are subsidiaries of the Company: Jurisdiction Percentage of Voting of Securities Owned by Subsidiary Organization the Company Graco N.V. Belgium 100%* Graco Canada Incorporated Canada 100% Graco Chile Limitada Chile 100%* Graco (Jamaica) FSC Limited Jamaica 100% Graco GmbH Germany 100% Graco Hong Kong Limited Hong Kong 100%* Graco K.K. Japan 100% Graco Korea Inc. Korea 100% Graco Norge A.S. Norway 100% Graco Pumps Scandinavia AB Sweden 100% Graco S.A. France 100%* Graco S.r.l. Italy 100%* Graco UK Limited England 100%* * Includes shares held by selected directors and/or executive officers of the Company or the relevant subsidiary to satisfy the requirements of local law. The Registrant has additional subsidiaries, which considered in the aggregate as a single subsidiary, do not constitute a significant subsidiary. EX-23 4 INDEPENDENT AUDITORS' CONSENT Exhibit 23 Independent Auditors' Consent We consent to the incorporation by reference in Registration Statement No. 33-47829 on Form S-8 (the Company's Long Term Stock Incentive Plan), in Registration Statement No. 33-44821 on Form S-8 (the Company's Employee Stock Purchase Plan) and in Registration Statement No. 33-54205 on Form S- 8 (the Company's Nonemployee Director Stock Plan) of our report dated February 7, 1995, on the audit of the consolidated financial statements and financial statement schedule of Graco Inc. and Subsidiaries for each of the three years in the period ended December 30, 1994, included in the Annual Report on Form 10-K for the year ended December 30, 1994. Deloitte & Touche LLP Minneapolis, Minnesota March 20, 1995 33 EX-24 5 POWER OF ATTORNEY Exhibit 24 Power of Attorney Know all by these presents, that each person whose signature appears below hereby constitutes and appoints David A. Koch, George Aristides or David M. Lowe, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution for him and in his name, place and stead, in any and all capacities, to sign the Report on Form 10-K for the year ended December 30, 1994, of Graco Inc. (and any and all amendments thereto) and to file the same with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitutes, may lawfully do or cause to be done by virtue hereof. In witness whereof, this Power of Attorney has been signed by the following persons on the date indicated. Date \G. Aristides February 24, 1995 G. Aristides \R. O. Baukol February 24, 1995 R. O. Baukol \D. A. Koch February 24, 1995 D. A. Koch \J. W. Lacey February 24, 1995 J. W. Lacey \J. R. Lee February 24, 1995 J. R. Lee \R. D. McFarland February 24, 1995 R. D. McFarland \L. R. Mitau February 24, 1995 L. R. Mitau \D. R. Olseth February 24, 1995 D. R. Olseth \G. C. Planchon February 24, 1995 G. C. Planchon \C. B. Thompson February 24, 1995 C. B. Thompson 34 EX-10.16 6 STOCK OPTION AGREEMENT Exhibit 10.16 STOCK OPTION AGREEMENT (NON-ISO) THIS AGREEMENT, made this day of , 199 , by and between Graco Inc., a Minnesota corporation (the "Company") and (the "Employee"). WITNESSETH THAT: WHEREAS, the Company pursuant to it's Long-Term Incentive Stock Plan wishes to grant this stock option to Employee; NOW THEREFORE, in consideration of the premises and of the mutual covenants herein contained, the parties hereto hereby agree as follows: 1. Grant of Option The Company hereby grants to Employee, the right and option (hereinafter called the "option") to purchase all or any part of an aggregate of Common Shares, par value $1.00 per share, at the price of $ per share on the terms and conditions set forth herein. 2. Duration and Exercisability (a) This option may not be exercised by Employee until the expiration of two (2) years from the date of grant, and this option shall in all events terminate ten (10) years after the date of grant. During the first two years from the date of grant of this option, no portion of this option may be exercised. Thereafter this option shall become exercisable in four cumulative installments of 25% as follows: Total Portion of Option Which is Exercisable Two Years after Date of Grant 25% Three Years after Date of Grant 50% Four Years after Date of Grant 75% Five Years after Date of Grant 100% In the event that Employee does not purchase in any one year the full number of shares of Common Stock of the Company to which he/she is entitled under this option, he/she may, subject to the terms and conditions of Section 3 hereof, purchase such shares of Common Stock in any subsequent year during the term of this option. (b) During the lifetime of the Employee, the option shall be exercisable only by him/her and shall not be assignable or transferable by him/her otherwise than by will or the laws of descent and distribution. 3. Effect of Termination of Employment (a) In the event that Employee shall cease to be employed by the Company or its subsidiaries for any reason other than his/her gross and willful misconduct, death, retirement (as defined in Section 3(d) below), or disability (as defined in Section 3(d) below), Employee shall have the right to exercise the option at any time within one month after such termination of employment to the extent of the full number of shares he/she was entitled to purchase under the option on the date of termination, subject to the condition that no option shall be exercisable after the expiration of the term of the option. (b) In the event that Employee shall cease to be employed by the Company or its subsidiaries by reason of his/her gross and willful misconduct during the course of his/her employment, including but not limited to wrongful appropriation of Company funds or the commission of a felony, the option shall be terminated as of the date of the misconduct. (c) If the Employee shall die while in the employ of the Company or a subsidiary or within one month after termination of employment for any reason other than gross and willful misconduct and shall not have fully exercised the option, all remaining shares shall become immediately exerciseable and such option may be exercised at any time within twelve months after his/her death by the executors or administrators of the Employee or by any person or persons to whom the option is transferred by will or the applicable laws of descent and distribution, and subject to the condition that no option shall be exercisable after the expiration of the term of the option. (d) If the Employee's termination of employment is due to retirement (either after attaining age 55 with 10 years of service, or attaining age 65, or due to disability within the meaning of the provisions of the Graco Long-Term Disability Plan), all remaining shares shall become immediately exerciseable and the option may be exercised by the Employee at any time within three years of the employee's retirement, or in the event of the death of the Employee within the three-year period after retirement, the option may be exercised at any time within twelve months after his/her death by the executors or administrators of the Employee or by any person or persons to whom the option is transferred by will or the applicable laws of descent and distribution, to the extent of the full number of shares he/she was entitled to purchase under the option on the date of death, and subject to the condition that no option shall be exercisable after the expiration of the term of the option. 4. Manner of Exercise (a) The option can be exercised only by Employee or other proper party within the option period delivering written notice to the Company at its principal office in Minneapolis, Minnesota, stating the number of shares as to which the option is being exercised and, except as provided in Section 4(c), accompanied by payment-in-full of the option price for all shares designated in the notice. (b) The Employee may, at Employee's election, pay the option price either by check (bank check, certified check, or personal check) or by delivering to the Company for cancellation Common Shares of the Company with a fair market value equal to the option price. For these purposes, the fair market value of the Company's Common Shares shall be the closing price of the Common Shares on the date of exercise on the New York Stock Exchange (the "NYSE") or on the principal national securities exchange on which the shares are traded if the shares are not then traded on the NYSE. If there is not a quotation available for such day, then the closing price on the next preceding day for which such a quotation exists shall be determinative of fair market value. If the shares are not then traded on an exchange, the fair market value shall be the average of the closing bid and asked prices of the Common Shares as reported by the National Association of Securities Dealers Automated Quotation System. If the Common Shares are not then traded on NASDAQ or on an exchange, then the fair market value shall be determined in such manner as the Company shall deem reasonable. (c) The Employee may, with the consent of the Company, pay the option price by arranging for the immediate sale of some or all of the shares issued upon exercise of the option by a securities dealer and the payment to the Company by the securities dealer of the option exercise price. 5. Payment of Withholding Taxes Upon exercise of any portion of this option, Employee shall pay to the Company an amount sufficient to satisfy any federal, state, or local withholding tax requirements which arise as a result of the exercise of the option or provide the Company with satisfactory indemnification for such payment. 6. Adjustments If Employee exercises all or any portion of the option subsequent to any change in the number or character of the Common Shares of the Company (through merger, consolidation, reorganization, recapitalization, stock dividend, or otherwise), Employee shall then receive for the aggregate price paid by him/her on such exercise of the option, the number and type of securities or other consideration which he/she would have received if such option had been exercised prior to the event changing the number or character of outstanding shares. 7. Miscellaneous (a) This option is issued pursuant to the Company's Long-Term Incentive Stock Plan and is subject to its terms. A copy of the Plan has been given to the Employee. The terms of the Plan are also available for inspection during business hours at the principal offices of the company. (b) This Agreement shall not confer on Employee any right with respect to continuance of employment by the Company or any of its subsidiaries, nor will it interfere in any way with the right of the Company to terminate such employment at any time. Employee shall have none of the rights of a shareholder with respect to shares subject to this option until such shares shall have been issued to him upon exercise of this option. (c) The Company shall at all times during the term of the option reserve and keep available such number of shares as will be sufficient to satisfy the requirements of this Agreement. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed on the day and year first above written. GRACO INC. By Its: Chairman and Chief Executive Officer Employee EX-10.17 7 SEPARATION & SUPP RETIRE AGMT-CALHOON Exhibit 10.17 SEPARATION AND SUPPLEMENTAL RETIREMENT AGREEMENT THIS AGREEMENT made this 3rd day of January, 1995, by and between Graco Inc., a Minnesota corporation ("Graco"), and Barry A. Calhoon ("Employee"). WHEREAS, Employee is now employed by Graco; and WHEREAS, The parties have agreed that Employee will retire as an employee of Graco effective December 31, 1994, and terminate the employment relationship between Employee and Graco in accordance with the terms of this Agreement. NOW, THEREFORE, It is hereby agreed by and between the parties as follows: 1. Separation Payments. Upon execution of this Agreement, Graco will pay to Employee in a lump sum the amount of one hundred seventy-eight thousand ($178,000) dollars, subject to tax deductions required by law. 2. Supplemental Retirement Payments a. Pension payments. Beginning January 1, 1995, Graco shall pay to Employee on the first day of each month the sum of nine hundred seven ($907.00) dollars. Graco shall make a good faith effort to deliver this sum to Employee's residence, as the address may appear in Graco's records, on or before the last day of the month preceding the due date. Such payments shall continue until the first day of the month in which Employee dies. b. Source of Payments. Benefits due under this Article 2 shall be paid out of the general funds of Graco, and the Employee and the Survivor Annuitant shall not have any preferred interest by way of trust, escrow, lien or otherwise in any specific assets. The rights accruing to the Employee and the Survivor Annuitant hereunder shall be solely those of unsecured creditors of Graco. c. Nontransferability. The Employee and the Survivor Annuitant shall not have the right to assign, encumber or otherwise anticipate the payments to be made under this Article 2, and the benefits provided hereunder shall not be subject to seizure for payment of any debts or judgments against the Employee or the Survivor Annuitant. d. Making a Claim Payments will be paid to the Employee and Survivor Annuitant automatically. If the Employee or the Survivor Annuitant is in disagreement with any determination that has been made, a claim may be presented in accordance with the procedure set forth in subparagraph e of this Article 2. e. Claims Procedure. (i). Any claim presented to Graco pursuant to subparagraph d of this Article must be in writing and delivered to the Vice President - Human Resources of Graco. The claimant may, at the claimant's own expense, have an attorney or other representative act on behalf of the claimant. Within 90 days after the claim is delivered, the claimant will receive either: (a) a decision ; or (b) a notice describing special circumstances requiring a specified amount of additional time (but no more than 180 days from the day the claim was delivered) to reach a decision. (ii). If the claim is wholly or partially denied, the claimant will receive a written notice specifying: (a) the reasons for denial; (b) the provisions of the Agreement on which the denial is based; and (c) any additional information needed in connection with the claim and the reason such information is needed. Information concerning the claimant's right to request a review will also be given to the claimant. (iii). A claimant may request that a denied claim be reviewed. The request for review must be in writing and delivered to the Vice President - Human Resources of Graco within 60 days after the claimant's receipt of written notice that the claim was denied. A request for review may, but is not required to, include issues and comments the claimant wants considered in the review. The claimant may examine pertinent documents by asking the Vice President - Human Resources of Graco for permission to do so. Within 60 days after delivery of a request for review, claimant will receive either (a) a decision; or (b) a notice describing special circumstances requiring a specified amount of additional time (but no more than 120 days from the day the request for review was delivered) to reach a decision. (iv). If a claimant does not receive a decision within the specified time, the claimant should assume the claim was denied or re-denied on the date the specified time expired. (v). The Vice President - Human Resources of Graco will make all decisions on claims and reviews of denied claims . The Vice President - Human Resources of Graco may delegate his authority to make such decisions and may, in his or her sole discretion, hold one or more hearings. 3. Long-term Stock Incentive Plan. a. Graco Executive Long-term Incentive Agreement. With respect to the grants of restricted stock made to the Employee pursuant to the Executive Long-term Incentive Agreement executed by the Employee and Graco on March 1, 1991, the Employee will receive on March 1, 1995, one thousand eight hundred and eighty-one (1881) shares of Graco common stock, freely tradeable without further restrictions, representing the fourth installment of the total shares granted to the Employee under said Agreement. The fifth and sixth installments of shares shall not vest in the Employee and his right to these unvested installments shall be immediately and irrevocably forfeited on the date of execution of this Separation and Supplemental Retirement Agreement. All other terms and conditions of the subject Incentive Agreement to the extent applicable shall remain in full force and effect. b. Non-Incentive Stock Option Agreement. On December 31, 1994, all Five thousand two hundred ninety- eight options granted to the Employee pursuant to the Non- Incentive Stock Option Agreement executed by the Employee and Graco on May 2, 1994 shall become immediately and fully exercisable by the Employee and shall remain exercisable by him until the close of business on December 30, 1997, at which time all options not previously exercised will expire. All other terms and conditions of the subject Stock Option Agreement to the extent applicable shall remain in full force and effect. 4. Annual Bonus Plan. The Employee is a participant in the Graco Inc. 1994 Corporate and Business Unit Annual Bonus Plan and shall be entitled to a Bonus Payment pursuant to the terms of that Plan, calculated up to the time of his retirement. 5. Cooperation. Employee shall render all reasonable cooperation to Graco in connection with the prosecution or defense of any lawsuit or other judicial or administrative action, including participating as a source of information or witness in any such action. Graco shall reimburse Employee for any reasonable out-of-pocket expenses (including attorney's fees, if necessary) incurred by him in connection with rendering such cooperation. 6. Confidentiality a. Employee hereby agrees that, for a period of five (5) years after December 31, 1994, he will not, directly or indirectly, disclose any Confidential Information, as defined in subsection (b) below, to any other party, and will not in any way use such Confidential Information in the course of his employment. b. As used herein, the term "Confidential Information" shall mean all information which is treated as confidential or proprietary by Graco in the normal course of its business, including, without limitation, documents so marked, or is a trade secret of Graco, which has been disclosed by Graco to Employee including, without limitation, information relating to Graco products, processes, product development or research, equipment, machinery, apparatus, business operations, financial results or condition, strategic plans or projections, customers, employees, suppliers, marketing, sales, management practices, technical information, drawings, specifications, material, and the like, and any knowledge or information developed by Employee relating to the same, provided, however, that Confidential Information shall not include information which is, at the time of disclosure or thereafter becomes, a part of the public domain through no act or omission by the Employee or information which the Employee is required to disclose in a court or other judicial proceeding or is otherwise legally required to disclose. c. Employee agrees that all written or otherwise documented, including, without limitation, by any electronic medium, Confidential Information and all copies thereof, are and shall be Graco property exclusively, and the Employee hereby represents that he has either turned over to Graco all such documents or destroyed them, and has no documents or other records, including, without limitation, electronic records, containing Graco Confidential Information in his possession or control. 7. Release a. Except with respect to the provisions of this Agreement and the provisions of a letter from Susan Boettcher and Debbie Hill, dated October 17, 1994, describing the benefits to which Employee shall be entitled upon his retirement, the Employee hereby releases and forever discharges Graco and its officers, employees, agents, successors, and assigns from any and all claims, causes of action, demands, damages, liability and responsibility whatsoever, arising prior to the date of this Agreement, including without limitation, any rights or claims for further compensation, or any rights to participate in any Company-sponsored program relating to the purchase or acquisition of any Graco common stock, preferred stock, or other equity in Graco or any subsidiary thereof, except as specifically provided in this Agreement, including the Exhibits hereto, or any right or claim the Employee may have or assert under the common law or any state, municipal, federal, or other law or regulation regarding the rights of employees generally or based on discrimination on the basis of race, creed, gender, age, or other protected status. This Article 7 shall not affect the Employee's rights to indemnification as an officer, director, and employee of Graco under Graco's By-Laws and applicable Minnesota law nor any rights which he has accrued by participating in any Graco benefit plan, subject to the provisions of this Agreement and the terms and conditions set forth in such plan as of his retirement date. b. The Employee certifies, represents and agrees that: (i). this Agreement is written in a manner that he understands; (ii). he understands that this Article 7 specifically waives any rights or claims he may have arising under federal, state, and local laws prohibiting employment discrimination, such as the Age Discrimination in Employment Act, the Minnesota Human Rights Act, Title VII of the Civil Rights Act of 1964, the Rehabilitation Act of 1973, the Americans with Disabilities Act and/or any claims for damages or for injuries based on common law theories of contract, quasi-contract or tort; (iii). the waiver herein of rights or claims are to those which may have arisen prior to the execution date of this Agreement; (iv). a portion of the consideration set out in this Agreement is in addition to compensation that he may already have been entitled to; (v). he has been specifically advised in writing to consult with an attorney prior to executing this Agreement; (vi). he has been informed that he has a period of at least twenty-one (21) calendar days within which to consider this Agreement; (vii). he specifically understands that he may revoke this Agreement for a period of at least fifteen (15) calendar days following his execution of this Agreement, and that this Agreement is not effective or enforceable until the fifteen (15) day revocation period has expired. (viii). If he decides to revoke this Agreement within said fifteen (15) day period, he should provide written notice to the Vice President - Human Resources, delivered in person or by mail. If his revocation is sent by mail, it must be postmarked on or before January 18, 1995, properly addressed to Clyde Hansen, Vice President - Human Resources, Graco, Inc., P.O. Box 1441, Minneapolis, MN. 55440, and sent by certified mail, return receipt requested. Employee understands that Graco will have no obligation to pay him anything under this Agreement, if he revokes his acceptance within the time limit specified. (ix). The Employee expressly agrees that the waiver of his rights pursuant to the Agreement is knowing and voluntary on his part. 8. Applicability to Successors. This Agreement shall be binding upon and inure to the benefit of Graco and the Employee and the Survivor Annuitant, and the successors and assigns of Graco. If Graco becomes a party to any merger, consolidation or reorganization, this Agreement shall remain in full force and effect as an obligation of Graco or its successors in interest. 9. Amendment. This Agreement may be amended at any time by mutual agreement of the parties. The Vice President - Human Resources of Graco may issue rules implementing this Agreement and will inform the Employee (or the Survivor Annuitant) of any such rules in the event same are issued. 10. Applicable Law. Except to the extent governed by federal law, this Agreement and any controversies between the parties shall be governed by and construed in accordance with the laws of the State of Minnesota. 11. Entire Agreement. This Agreement, including Exhibit A hereto, constitutes the entire agreement and understanding between the parties with respect to the subject matter hereof, and, except as otherwise specifically provided herein or in Exhibit A, specifically supersedes and replaces any and all prior written or oral agreements or understandings. 12. Headings. The headings of the paragraphs herein are included solely for the convenience of reference and shall not control the meaning or interpretation of any provisions of this Agreement. IN WITNESS WHEREOF, the parties hereto have executed this Agreement in duplicate originals on the day and year first above written. GRACO INC. By Clyde W. Hansen Vice President of Human Resources EMPLOYEE ______________________________ Barry A. Calhoon EX-27 8 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM GRACO INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS AND CONSOLIDATED BALANCE SHEETS FOR THE FISCAL YEAR ENDING DECEMBER 30, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000042888 GRACO INC. 1,000 YEAR DEC-30-1994 DEC-30-1994 2,444 0 80,284 4,695 50,529 143,945 145,164 75,124 228,385 89,540 11,948 11,377 1,474 0 69,000 228,385 360,013 360,013 186,002 186,002 150,585 1,147 1,923 23,426 8,100 15,326 0 0 0 15,326 1.32 1.32
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