-----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, bzNupNYLN0+3oA0eFCFsaHK2f45JGOYx+9FiyF0u1z/wPCnLbWqwHOOHrEtD9FBN eClOZYgXznFjpQzgbqw2vQ== 0000042888-95-000013.txt : 19950814 0000042888-95-000013.hdr.sgml : 19950814 ACCESSION NUMBER: 0000042888-95-000013 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950811 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-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09249 FILM NUMBER: 95561788 BUSINESS ADDRESS: STREET 1: PO BOX 1441 CITY: MINNEAPOLIS STATE: MN ZIP: 55440-1441 BUSINESS PHONE: 6126236000 MAIL ADDRESS: STREET 1: P O BOX 1441 STREET 2: P O BOX 1441 CITY: MINNEAPOLIS STATE: MN ZIP: 55440-1441 10-Q 1 SECOND QTR 10-Q FOR PERIOD ENDING 06/30/95 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 For the quarterly period ended June 30, 1995. Commission File Number: 1-9249 -------- GRACO INC. ---------------------------------------------------- (Exact name of Registrant as specified in its charter) Minnesota 41-0285640 ---------------------- --------------------------------------- (State of incorporation) (I.R.S. Employer Identification Number) 4050 Olson Memorial Highway Golden Valley, Minnesota 55422 - --------------------------------------- --------- (Address of principal executive offices) (Zip Code) (612) 623-6000 --------------------------------------------------- (Registrant's telephone number, including area code) Indicate by 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, and (2) has been subject to such filing requirements for the past 90 days. Yes X No 11,492,931 common shares were outstanding as of June 30, 1995. GRACO INC. AND SUBSIDIARIES INDEX Page Number PART I FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Statements of Earnings 3 Consolidated Balance Sheets 4 Consolidated Statements of Cash Flows 5 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 PART II OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders 8 Item 6. Exhibits and Reports on Form 8-K 8 SIGNATURES 9 1995 Corporate and Business Unit Annual Bonus Plan Exhibit 10 Computation of Net Earnings per Common Share Exhibit 11 Financial Data Schedule Exhibit 27 2 PART I GRACO INC. AND SUBSIDIARIES Item I. CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited)
Thirteen Weeks Ended Twenty-Six Weeks Ended ----------------------- ------------------------- June 30, 1995 July 1, 1994 June 30, 1995 July 1, 1994 ------------- ------------- ------------- ------------- (In thousands except per share amounts) Net sales $103,402 $94,179 $198,929 $175,109 Cost of products sold 51,987 49,952 100,987 92,446 ------------- ------------- ------------- ------------- Gross profit 51,415 44,227 97,942 82,663 Product development 3,941 3,566 7,862 7,122 Selling 22,068 22,789 43,758 45,088 General and administrative 10,982 10,659 22,082 20,147 ------------- ------------- ------------- ------------- Operating profit 14,424 7,213 24,240 10,306 Interest expense 745 480 1,429 848 Other expense, net (53) 138 343 177 ------------- ------------- ------------- ------------- Earnings before income taxes 13,732 6,595 22,468 9,281 Income taxes 5,200 2,400 8,500 3,250 ------------- ------------- ------------- ------------- Net earnings $8,532 $4,195 $13,968 $6,031 ============= ============= ============= ============= Net earnings per common and common equivalent share $.73 $.36 $1.20 $.52 ============= ============= ============= ============= Cash dividend per common share $.16 $.14 $.32 $.28 ============= ============= ============= ============= See notes to consolidated financial statements.
3 GRACO INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
June 30, 1995 December 30, 1994 ------------- ------------------ ASSETS (Unaudited) (In thousands) Current Assets: Cash and cash equivalents $1,137 $2,444 Accounts receivable, less allowances of $5,700 and $4,700 82,493 75,589 Inventories 53,039 50,529 Deferred income taxes 11,890 11,755 Other current assets 2,795 3,628 ------------- ------------- Total current assets 151,354 143,945 Property, plant and equipment: Cost 154,117 145,164 Less Accumulated Depreciation (79,377) (75,124) ------------- ------------- 74,740 70,040 Other assets 14,991 14,400 ------------- ------------- $241,085 $228,385 ============= ============= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Notes payable to banks $16,276 $11,675 Current portion of long-term debt 5,905 5,685 Trade accounts payable 18,707 19,764 Dividends payable 1,838 1,857 Income taxes payable 2,005 5,761 Other current liabilities 42,697 44,798 ------------- ------------- Total current liabilities 87,428 89,540 Long-term debt, less current portion above 26,025 26,798 Retirement benefits and deferred compensation 32,957 30,196 Shareholders' equity: Preferred stock 1,474 1,474 Common stock 11,486 11,377 Additional paid-in capital 20,167 18,289 Retained earnings 60,924 50,702 Other, net 624 9 ------------- ------------- 94,675 81,851 ------------- ------------- $241,085 $228,385 ============= ============= See notes to consolidated financial statements.
4 GRACO INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) Twenty-Six Weeks Ended June 30, 1995 July 1, 1994 ------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES: (In thousands) Net Earnings $13,968 $6,031 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 6,381 5,157 Deferred income taxes 321 (549) Change in: Accounts receivable (2,623) (11,644) Inventories (1,542) (12,868) Trade accounts payable (2,125) 1,895 Accrued salaries (1,570) (872) Retirement benefits and deferred compensation 1,950 1,025 Other accrued liabilities (5,438) 1,097 Other 1,449 (831) ------------- ------------- 10,771 (11,559) ------------- ------------- CASH FLOWS FROM INVESTING ACTIVITIES: Property, plant and equipment additions (11,189) (7,659) Proceeds from sale of property, plant, and equipment 260 169 Purchases of marketable securities 0 (5,464) Proceeds from marketable securities 0 31,809 ------------- ------------- (10,929) 18,855 ------------- ------------- CASH FLOWS FROM FINANCING ACTIVITIES: Borrowing on notes payable and lines of credit 92,331 37,140 Payments on notes payable and lines of credit (89,041) (20,497) Payments on long-term debt (410) (332) Common stock issued 2,157 2,774 Retirement of common and preferred stock 0 (5) Cash dividends paid (3,765) (34,493) ------------- ------------- 1,272 (15,413) ------------- ------------- Effect of exchange rate changes on cash (2,421) (401) ------------- ------------- Net decrease in cash and cash equivalents (1,307) 8,518 Cash and cash equivalents: Beginning of year 2,444 11,095 ------------- ------------- End of period $1,137 $2,577 ============= ============= See notes to consolidated financial statements.
5 GRACO INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. The consolidated balance sheet of Graco Inc. and Subsidiaries (the Company) as of June 30, 1995, and the related statements of earnings and cash flows for the twenty-six weeks ended June 30, 1995, and July 1, 1994, have been prepared by the Company without being audited. In the opinion of management, these consolidated statements reflect all adjustments necessary to present fairly the financial position of Graco Inc. and Subsidiaries as of June 30, 1995, and the results of operations and cash flows for all periods presented. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. Therefore, these statements should be read in conjunction with the financial statements and notes thereto included in the Company's 1994 Form 10-K. The results of operations for interim periods are not necessarily indicative of results which will be realized for the full fiscal year. 2. Major components of inventories were as follows:
(In thousands) June 30, 1995 Dec. 30, 1994 -------------- --------------- Finished products and components $48,013 $46,694 Products and components in various stages of completion 28,024 24,826 Raw materials 12,237 13,918 Reduction to LIFO cost (35,235) (34,909) -------------- --------------- $53,039 $50,529 ============== ===============
6 Item 2. GRACO INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Net earnings in the second quarter of $8,532,000 increased $4,337,000 from the same period a year ago as the Company's sales continue to improve in Europe and the Pacific offset by the recent softening of sales in the North American markets. In addition to increased sales, gross margin levels have improved from 1994 and operating expenses as a percent of sales have declined due primarily to cost reduction efforts initiated in 1994. Sales in the second quarter of $103,402,000 increased $9,223,000, or 10 percent, from the same period in 1994. Second quarter sales in the Americas decreased 4 percent to $63,847,000, and European sales were up 40 percent to $21,085,000 (a 23 percent volume increase, and a 17 percent gain due to exchange rates). In the Pacific (excluding Japan), sales increased 43 percent to $8,619,000 (a 41 percent volume increase, and a gain of 2 percent on exchange rates). In Japan, sales increased 48 percent to $9,851,000 (a 21 percent volume increase and a gain of 27 percent on exchange rates). Sales for the six months were $198,929,000, a 14 percent increase over the same period last year. In the Americas, sales increased 3 percent to $128,962,000. European sales were up 38 percent to $37,327,000 (a volume increase of 23 percent and a 15 percent gain due to exchange rates). Sales in the Pacific (excluding Japan) increased 59 percent to $17,161,000 (a 57 percent volume increase and a 2 percent gain due to exchange rates). In Japan sales increased 28 percent to $15,479,000 (a 9 percent volume increase and a 19 percent gain on exchange rates). Operating expenses in the second quarter of $36,991,000 are at approximately the same level as the second quarter of 1994. Product development expense increased 11 percent over 1994, as previously announced new product initiatives continue. Selling expenses were 3 percent lower than the same period last year, largely due to lower headcount levels. General and administrative costs were up by 3 percent, due primarily to expense items related to increased profitability. The effective income tax rate for the quarter was 38 percent compared to 36 percent for the same period in 1994. The increase was due primarily to foreign results effectively taxed at higher rates. For the second quarter, consolidated bookings were up 2 percent. Bookings declined in the Americas, but were up sharply in Europe, the Pacific and Japan. Backlog at June 30, 1995 was $27,000,000, approximately 3 percent lower than it was in the previous quarter and 9 percent lower than the second quarter of 1994. The Company expects favorable sales and order trends in Europe and the Pacific region as these economies strengthen. The slowing of the U.S. economy will continue to impact domestic bookings and backlog during the second half of 1995. The Company will make further investments in improvements to manufacturing efficiency and new product development, while closely controlling expenses throughout the organization. Financial Condition Cash was used for operating activities and fixed asset additions. Accounts receivable increased $6,904,000 from the prior year-end due to the increased sales volume, and inventories increased $2,510,000 primarily in production. Property, plant and equipment was purchased year-to-date totaling $11,189,000. The Company has unused lines of credit available at June 30, 1995, totaling $47 million. 7 PART II Item 4. Submission of Matters to a Vote of Security Holders. At the Annual Meeting of Shareholders held on May 2, 1995, Dale R. Olseth, Charles M. Osborne, and William G. Van Dyke were elected to the Office of Director with the following votes: For Withheld ---------- ---------- Dale R. Olseth 10,471,622 23,846 Charles M. Osborne 10,483,868 11,600 William G. Van Dyke 10,484,964 10,504 At the same meeting, the selection of Deloitte & Touche as independent auditors for the current year was approved and ratified, with the following votes: For Against Abstentions Broker Non-Vote --------- -------- ----------- --------------- 10,398,535 86,574 10,358 0 No other matters were voted on at the meeting. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 1995 Corporate and Business Unit Exhibit 10 Annual Bonus Plan Statement on Computation Exhibit 11 of Per Share Earnings Financial Data Schedule Exhibit 27 (b) No reports on Form 8-K have been filed during the quarter for which this report is filed. 8 SIGNATURES Pursuant to the requirements 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. Date: August 7, 1995 By: /S/David A. Koch David A. Koch Chairman and Chief Executive Officer Date: August 8, 1995 By: /S/David M. Lowe David M. Lowe Treasurer (Principal Financial Officer) 9 EX-10 2 1995 CORPORATE & BUSINESS UNIT ANNUAL BONUS PLAN GRACO INC. 1995 CORPORATE & BUSINESS UNIT ANNUAL BONUS PLAN Effective January 1, 1995 Human Resources GRACO INC. CORPORATE & BUSINESS UNIT ANNUAL BONUS PLAN Objectives - - To create shareholder value through achievement of annual financial objectives. - - To motivate and retain those key executives and managers who work in positions where they can impact the Company's annual financial objectives. Plan Design The Plan links the size of each individual's award to specific financial objectives. These objectives are tailored for the Corporation and for each Business Unit. These objectives are: - - Corporation - Corporate earnings - - Business Units - Profitability objective Eligibility Requirements Only those positions which carry clear managerial responsibility for directly contributing to Graco's Corporate earnings objective and Business Unit profitability and sales objectives are eligible to be included in this Plan. Only those individuals in eligible positions who have demonstrated and are maintaining a performance level that meets the supervisor's normal expectations for that position are eligible for annual participation in this Plan as well as the receipt of any annual Bonus Payments. Participation The top executive in each organizational unit may nominate managers for participation in this Plan when the established position and individual eligibility requirements have been met. The Management Organization and Compensation Committee of the Graco Inc. Board of Directors has sole authority to approve the participation of the Chief Executive Officer in the Plan. The Chief Executive Officer of Graco Inc. has sole authority to select and approve all other Plan participants. Bonus Maximum Taken in conjunction with base salary market comparisons, bonus maximum for all positions will be: - - Commensurate with the position's ability to impact the annual Corporate earnings objective and Business Unit profitability and sales objectives. - - Consistent with total compensation levels prevalent for similar positions in the market place. Based on these criteria, bonus maximums ranging from 10% to 80% have been established for each individual. Bonus Payment The determination of a participant's annual Bonus Payment will be calculated by adding the bonus results attained for Corporate earnings performance (expressed in percent) to the bonus results attained for any applicable Business Unit's contribution or margin growth performance (expressed in percent). These bonus results are then multiplied by the participant's Maximum Bonus Percentage and then multiplied by the participant's Base Salary for the Plan Year, to determine the total Bonus Payment. Example: ________ _____ | Annual Annual | Participant's Participant's | Corporate + Business | X Maxiumum X Annual = Bonus | Performance Unit Performance | Bonus Base | Results Results | Salary Salary | (if applicable) | | % % | $ $ $ |_______ ____| Administration The following rules have been established to insure equitable administration of Graco's Annual Bonus Plan (the Plan): 1. The Plan will be administered by the Management Organization and Compensation Committee of the Board of Directors. The Committee may cancel the Plan and interpret the Plan. 2. The Management Organization and Compensation Committee shall establish the annual corporate bonus plan financial objectives. Within the basic framework of the Plan, the Chief Executive Officer may establish the annual bonus plan financial objectives for individual Business Units. The CEO may also establish deadlines for filing administrative forms and adopt other administrative rules. The CEO has established the Bonus Administrative Committee consisting of the President, the Vice President, Human Resources, and the Compensation Manager. This Committee is responsible for making approval recommendations on all Annual Bonus Program administrative matters, such as participation award payments, performance measures, and performance results. All requests for adjustments or exceptions are to be formally submitted to this Committee for review through the Compensation Manager. 3. Key executives and managers selected to participate in the Plan after its annual effective date (January 1st) may be included on a pro-rata basis. 4. Participation in the Plan one year does not necessarily assure participation in subsequent years. Eligibility requirements for both the position and individual performance must be met continually. 5. Participation continues during any paid time off such as short term disability (up to six months). Participation ceases with retirement, death, or long term disability (over six months). In the event participation ceases due to retirement, death, or long term disability, the Participant will be eligible for a Bonus Payment, calculated using the Maximum Bonus Percent and Base Salary up to the time of retirement, death, or long term disability and the annual performance results for the year in which retirement, death, or long term disability occurs. 6. A participant who transfers to a position not eligible for inclusion in the Plan will be eligible for a pro-rata award based on the actual time employed in the eligible position during the year. The pro-rated award will be paid as described in Administrative Rule #11. 7. A participant who resigns or is terminated effective during the Plan Year is ineligible for a bonus. Participants must maintain satisfactory performance throughout the Plan year in order to be eligible to receive a bonus award payment. In addition, a participant whose employment termination has been requested due to performance or otherwise for cause will be ineligible for a bonus payment even though the participant is still employed at year-end. 8. Corporate earnings calculations will include such effects as those created by foreign exchange gain/loss translation and income tax rate changes. 9. Corporate earnings calculations will be based on actual exchange rates, not plan rates. 10.Acquisitions and divestitures not included in the annual business plan for the Plan Year will be excluded from the corporate earnings calculations. 11.Significant changes in historical FASB accounting practices or income tax rates will be included in corporate earnings calculations at the discretion of the Management Organization and Compensation Committee of the Board of Directors. 12.Payments will be made by March 15th of the year following each successive Corporate and Business Unit performance year. EX-11 3 COMPUTATION OF NET EARNINGS PER COMMON SHARE EXHIBIT 11 GRACO INC. AND SUBSIDIARIES COMPUTATION OF NET EARNINGS PER COMMON SHARE (Unaudited)
Thirteen Weeks Ended Twenty-Six Weeks Ended _______________________ ________________________ June 30, 1995 July 1, 1994 June 30, 1995 July 1, 1995 _____________ ____________ _____________ ____________ (In thousands except per share amounts) Net earnings applicable to common stock: Net earnings $8,532 $4,195 $13,968 $6,031 Less dividends on preferred stock 19 19 37 37 _____________ ____________ _____________ ____________ $8,513 $4,176 $13,931 $5,994 ============= ============ ============= ============ Average number of common and common equivalent shares outstanding: Average number of common shares outstanding 11,489 11,514 11,453 11,514 Dilutive effect of stock options computed on the treasury stock method 147 49 115 57 _____________ ____________ _____________ ____________ 11,636 11,563 11,568 11,571 ============= ============ ============= ============ Net earnings per common share and common equivalent share $0.73 $0.36 $1.20 $0.52 ============= ============ ============= ============ Primary and fully diluted earnings per share are substantially the same.
EX-27 4 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 QUARTERLY PERIOD ENDING JUNE 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000042888 GRACO INC. 1,000 6-MOS DEC-29-1995 JUN-30-1995 1,137 0 88,188 5,695 53,039 151,354 154,117 79,377 241,085 87,428 31,930 11,486 1,474 0 81,715 241,085 198,929 198,929 100,987 100,987 75,474 1,132 1,429 22,468 8,500 13,968 0 0 0 13,968 1.20 1.20
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