-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UMLR5KgyefPrgKB7qs36R1gp9MTS1dsXLIwXC1RRVCIGtDIXbUDXvURDDOYBlNW5 xXCAecyVlXiipPikma8ryw== 0000042888-98-000018.txt : 19980817 0000042888-98-000018.hdr.sgml : 19980817 ACCESSION NUMBER: 0000042888-98-000018 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980626 FILED AS OF DATE: 19980814 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/A SEC ACT: SEC FILE NUMBER: 001-09249 FILM NUMBER: 98689077 BUSINESS ADDRESS: STREET 1: 4050 OLSON MEMORIAL HIGHWAY CITY: GOLDEN VALLEY STATE: MN ZIP: 55422-5332 BUSINESS PHONE: 6126236000 MAIL ADDRESS: STREET 1: C/O CT CORPORATION SYSTEMS INC STREET 2: 405 SECOND AVENUE SOUTH CITY: MINNEAPOLIS STATE: MN ZIP: 55401 10-Q/A 1 AMENDMENT TO 2ND QUARTER 10Q, 1998 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q/A Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 For the quarterly period ended June 26, 1998 Commission File Number: 001-9249 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 ------ ----------- 20,039,793 common shares were outstanding as of July 24, 1998. PART I GRACO INC. AND SUBSIDIARIES Item 1. CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) Thirteen Weeks Ended Twenty-Six Weeks Ended -------------------- ---------------------- June 26, 1998 June 27, 1997 June 26, 1998 June 27, 1997 (In thousands except per share amounts) Net Sales $ 115,153 $ 111,721 $ 220,870 $ 203,820 Cost of products sold 57,066 58,322 110,838 105,888 ------------- ------------- ------------- ------------- Gross Profit 58,087 53,399 110,032 97,932 Product development 4,716 4,828 9,498 9,653 Selling 21,550 23,764 44,197 45,397 General and administrative 12,254 8,284 22,419 16,839 ------------- ------------- ------------- ------------- Operating Profit 19,567 16,523 33,918 26,043 Interest expense 173 240 398 447 Other (income) expense, net (171) 615 108 247 ------------- ------------- ------------- ------------- Earnings Before Income Taxes 19,565 15,668 33,412 25,349 Income taxes 6,800 5,250 11,700 8,750 ------------- ------------- ------------- ------------- Net Earnings $ 12,765 $ 10,418 $ 21,712 $ 16,599 ============= ============= ============= ============= Basic Net Earnings Per Common Share* $ .49 $ .41 $ .84 $ .65 ============= ============= ============= ============= Diluted Net Earnings Per Common Share* .48 $ .40 $ .82 $ .64 ============= ============= ============= ============= Basic Weighted Average Number of Common Shares* 25,817 25,701 25,644 25,680 Diluted Weighted Average Number of Common Shares* 26,755 26,208 26,497 26,243 *All 1997 per share data has been restated for the three-for-two stock split paid February 4, 1998. See notes to consolidated financial statements. 2
GRACO INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands) June 26, 1998 December 26, 1997 ------------- ----------------- ASSETS (Unaudited) Current Assets: Cash and cash equivalents $ 34,226 $ 13,523 Accounts receivable, less allowances of $5,200 and $4,100 86,499 86,148 Inventories 43,822 43,942 Deferred income taxes 11,322 11,140 Other current assets 1,526 1,539 ------------- ----------------- Total current assets 177,395 156,292 Property, Plant and Equipment: Cost 199,671 196,940 Accumulated depreciation (101,065) (96,760) ------------- ----------------- 98,606 100,180 Other Assets 7,797 8,060 ------------- ----------------- $ 283,798 $ 264,532 ============= ================= LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Notes payable to banks $ 4,472 $ 2,911 Current portion of long-term debt 1,788 1,796 Trade accounts payable 12,731 12,542 Salaries, wages & commissions 12,586 14,903 Accrued insurance liabilities 10,887 10,227 Income taxes payable 6,089 5,546 Other current liabilities 20,321 21,055 ------------- ----------------- Total current liabilities 68,874 68,980 Long-term Debt, less current portion 5,422 6,163 Retirement Benefits and Deferred Compensation 31,301 31,880 Shareholders' Equity: Common stock 25,833 25,553 Additional paid-in capital 29,970 26,085 Retained earnings 121,376 105,030 Other, net 1,022 841 ------------- ----------------- Total shareholders' equity 178,201 157,509 ------------- ----------------- $ 283,798 $ 264,532 ============= ================= See notes to consolidated financial statements. 3 GRACO INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Twenty-Six Weeks ---------------- June 26, 1998 June 27, 1997 ------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES: (In thousands) Net Earnings $ 21,712 $ 16,599 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 7,864 7,284 Deferred income taxes (436) (1,715) Change in: Accounts receivable (2,063) (8,832) Inventories 45 (3,042) Trade accounts payable 236 950 Retirement benefits and deferred compensation (348) 1,286 Other accrued liabilities (1,816) (7,633) Other 538 (1,055) ------------- ------------- 25,732 3,842 ------------- ------------- CASH FLOWS FROM INVESTING ACTIVITIES: Property, plant and equipment additions (6,492) (12,881) Proceeds from sale of property, plant and equipment 386 1,555 ------------- ------------- (6,106) (11,326) ------------- ------------- CASH FLOWS FROM FINANCING ACTIVITIES: Borrowing on notes payable and lines of credit 5,789 37,420 Payments on notes payable and lines of credit (3,960) (28,805) Payments on long-term debt (722) (714) Common stock issued 4,164 2,850 Retirement of common stock (12) (5,145) Cash dividends paid (5,649) (4,836) ------------- ------------- (390) 770 ------------- ------------- Effect of exchange rate changes on cash 1,467 2,437 ------------- ------------- Net increase (decrease) in cash and cash equivalents 20,703 (4,277) Cash and cash equivalents: Beginning of year 13,523 6,535 ------------- ------------- End of period $ 34,226 $ 2,258 ============= ============= See notes to consolidated financial statements. 4 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 26, 1998 and the related statements of earnings for the thirteen and twenty-six weeks ended June 26, 1998, and June 27, 1997, and cash flows for the twenty-six weeks ended June 26, 1998, and June 27, 1997, 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 26, 1998, 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 1997 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 26, 1998 Dec 26, 1997 ------------- ------------ Finished products and components $ 35,897 $ 38,290 Products and components in various stages of completion 25,527 25,320 Raw materials 18,846 16,715 ------------- ------------ 80,270 80,325 Reduction to LIFO cost (36,448) (36,383) ------------- ------------ $ 43,822 $ 43,942 5 GRACO INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued) 3. In June 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 131, "Disclosures about Segments of an Enterprise and Related Information", which will be effective for the Company at the end of the 1998 fiscal year. SFAS No. 131 redefines how operating segments are determined and requires disclosure of certain financial and descriptive information about a company's operating segments. The Company has not yet determined the nature of its segments, nor has it determined how adoption of SFAS No. 131 will impact its future disclosures. 4. To match North American and European fiscal years, Europe's December 1997 operating results were recorded as an adjustment to equity. Those results included sales of $3,836,000 and net earnings of $300,000. The results of operations for Graco Inc. for the quarter ended June 26, 1998 include Europe's operations for the months of April, May and June. Second quarter 1997 results included the months of March, April and May, 1997. The inclusion of the months of April, May, and June in the operating results for Europe in the second quarter of 1997 would have had an immaterial impact on sales, net earnings, and diluted earnings per share. 5. On July 2, 1998, the Company repurchased 5,800,000 shares of common stock, for $190,887,000, from its largest shareholder, the Trust under the Will of Clarissa L. Gray, pursuant to an agreement executed in May, 1998. The stock repurchase was funded with cash of $32,887,000 and $158,000,000 from the credit facility discussed below. On July 2, 1998 the Company entered into a five-year $190,000,000 reducing revolving credit facility (the Revolver) with a syndicate of ten banks including the lead bank, US Bank National Association. The Company's initial borrowing of $158,000,000 financed a portion of the stock repurchase discussed above. $135,500,000 of the outstanding balance bears interest at the London Interbank Offered Rate ("LIBOR") plus 0.625%. The remaining $22,500,000 balance bears interest at Prime. The Revolver requires quarterly reductions of the maximum amount of the credit line, and requires the Company to maintain certain financial covenants as to net worth, cash flow leverage and fixed charge coverage. In conjunction with the aforementioned Revolver, the Company entered into a two-year, $75,000,000 interest rate swap agreement on July 2, 1998 with Wachovia Bank, National Association to manage its exposure to interest rate changes. 6 GRACO INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued) 5. (cont.) The pro forma net income of the Company, assuming the stock repurchase and related signing of the Revolver had occurred on December 27, 1997, would have been $18.3 million for the six months ended June 26, 1998, including the impact of increased interest expense net of related income taxes. For the six months then ended, the pro forma basic and diluted earnings per share are $.92 and $.88. The pro forma condensed balance sheet of the Company as of June 26, 1998 is shown below. June 26, 1998 June 26, 1998 As Reported Pro Forma ------------- ------------- Cash $ 34,226 $ 1,226 Current Assets 177,395 144,395 Total Assets 283,798 250,798 Current Liabilities 68,874 68,874 Long-term Debt 5,422 163,422 Total Liabilities 105,597 263,597 Shareholders' Equity $ 178,201 $ (12,799) Common Shares Outstanding 25,836 20,036 7 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 14, 1998 By:/s/Mark W. Sheahan Title: Treasurer 8 -----END PRIVACY-ENHANCED MESSAGE-----