GRACO INC
For the period ended Jun 28, 2024. Filed Jul 24, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 28, 2024 · Filed Jul 24, 2024
GGG$67.86-0.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-29; filed 2024-04-24.
0000042888-24-000014
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-28; filed 2024-07-24.
0000042888-24-000028
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 52 previous paragraphs and 52 current paragraphs.
36 unchanged; 8 reworded; 8 added; 8 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 11 previous and 11 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (8)
Current report
Net sales for the second quarter decreased 1 percent from the comparable period last year. Sales growth in the Contractor segment was unable to offset declines in the Industrial and Process segments. Regionally, sales decreased in EMEA and Asia Pacific and increased in the Americas. Changes in currency translation rates decreased worldwide net sales by $3 million for the quarter and $4 million for the year to date.
Current report
Gross profit margin rate improved 2 percentage points for the second quarter and 1 percentage point for the year to date from the comparable periods last year mostly due to lower product costs and realized price increases.
Current report
Total operating expenses for the second quarter were $5 million (4 percent) higher than the second quarter last year. The increase for the quarter included approximately $3 million of expenses associated with the relocation to a new distribution center and $2 million related to product development, growth initiatives and other corporate items. Year-to-date operating expenses increased $10 million (4 percent) compared to the first half last year. The increase included $5 million related to product development, growth initiatives and other corporate items, $3 million associated with the distribution center relocation, and $2 million of incremental share-based compensation. Operating expense rate-related increases of approximately 3 percent for both the quarter and year to date were mostly offset by reductions in sales and earnings-based expenses.
Current report
Interest and Other (Income) Expense
Current report
Interest expense was $1 million lower for the second quarter and $2 million lower for the year to date compared to the same periods last year as private placement debt was repaid in the third quarter of 2023. Other income was flat for the quarter and increased $6 million year to date from the comparable periods last year. The year-to-date increase was largely due to increased interest income.
Current report
Favorable response from new product offerings led to a 5 percent increase in net sales for the second quarter. Net sales were flat for the year to date as favorable response from new product offerings offset softness in worldwide construction markets. The operating margin rate increased 4 percentage points for the quarter driven by lower product costs and price realization. For the year to date, lower product costs and price realization were partially offset by higher expenses, particularly in new product development, resulting in a 2 percentage point increase to the operating margin rate.
Current report
Industrial segment net sales decreased 5 percent for the second quarter and year to date, as growth in the Americas was more than offset by double-digit declines in Asia Pacific. The operating margin rate was flat for the quarter and decreased 2 percentage points for the year to date. The favorable effects of product and channel mix was able to offset higher expenses for the quarter, but unable to offset higher expenses for the year to date. Changes in foreign currency translation rates further reduced the operating margin rate for the year to date.
Current report
Given the slow first half of the year in both the Industrial and Process segments, we lowered our full-year 2024 worldwide outlook to low single-digit sales decline on an organic, constant currency basis. While overall economic conditions are challenging, particularly in Asia Pacific, we continue to pursue our proven growth strategies and invest in our businesses.
Removed paragraphs (8)
Previous report
Net sales for the quarter decreased 7 percent from the comparable period last year, with decreases in all segments. Regionally, sales decreased in the Americas and Asia Pacific and were up modestly in EMEA.
Previous report
Gross profit margin rate for the quarter improved slightly from the comparable period last year. The favorable effect of realized price increases more than offset unfavorable product and channel mix.
Previous report
Total operating expenses for the quarter increased $5 million (4 percent) compared to last year, including approximately $3 million (2 percentage points) of increased unallocated corporate operating expense (mostly from incremental share-based compensation) and $1 million (1 percentage point) of increases in product development spending.
Previous report
Other (Income) Expense
Previous report
Other income for the quarter increased $6 million from the comparable period last year, largely due to increased interest income of approximately $4 million.
Previous report
Continued weakness in North American construction markets led to a 6 percent decrease in sales for the quarter compared to last year. Unfavorable product and channel mix and increased spending related to product development resulted in a 1 percentage point decrease in the operating margin rate for the quarter. Improved price realization and lower product costs were unable to offset the decline in the operating margin rate.
Previous report
Industrial segment sales decreased in all regions for the quarter from the comparable period last year, including a double-digit decrease in Asia Pacific, where economic activity weakened compared to last year. The decline was partially offset by an increase in powder finishing system sales in the Americas. The first quarter operating margin rate for this segment deceased 3 percentage points compared to last year, mainly due to the unfavorable effects of product and channel mix and expense leverage.
Previous report
The Company continues to target low single-digit sales growth for 2024 on an organic constant-currency basis.
Reworded paragraphs (8)
Previous wording
Operating earnings for the quarter decreased 15 percent compared to last year, as an improved gross profit margin rate was unable to offset lower sales volume and higher operating expenses.
Current wording
Operating earnings for the second quarter increased 3 percent from the comparable period last year, as an improved gross profit margin rate offset lower sales volume and higher operating expenses.
Previous wording
Net earnings decreased 5 percent for the quarter from the comparable period last year, as increased interest income and lower interest expense softened the decrease in operating earnings. On an adjusted basis, net earnings decreased 11 percent.
Current wording
Net earnings for the second quarter decreased 1 percent from the comparable period last year as higher operating earnings and lower interest expense were unable to offset the impact of a higher effective income tax rate. On an adjusted basis, net earnings increased 3 percent.
Previous wording
The effective income tax rate was 13 percent, down approximately 5 percentage points from last year. The decrease was due primarily to an increase in excess tax benefits related to stock option exercises.
Current wording
The effective income tax rate was up 4 percentage points to 20 percent for the second quarter and down 1 percentage point to 16 percent for the year to date from the comparable periods last year due primarily to variations in excess tax benefits related to stock option exercises.
Previous wording
Process segment sales decreased in all regions for the quarter compared to last year primarily due to weakness in the semiconductor product application. The operating margin rate for this segment decreased approximately 1 percentage point in the quarter from the comparable period last year as price realization was more than offset by unfavorable expense leverage on lower sales volume.
Current wording
Process segment net sales decreased 9 percent for both the second quarter and year to date, as sales decreased in most product applications. Weakness in the semiconductor and industrial lubrication product applications was notable for both the quarter and year to date. The operating margin rate for this segment decreased approximately 2 percentage points for the quarter and year to date due primarily to unfavorable expense leverage on lower sales volume.
Previous wording
Net cash provided by operating activities totaled $119 million in the first quarter of 2024 compared to $91 million in 2023. Decreases in accounts receivable, reflective of a decline in business activity in 2024, drove most of the increase. Significant uses of cash in the first quarter of 2024 included plant and equipment additions of $37 million and dividend payments of $43 million. Net proceeds from shares issued totaled $41 million.
Current wording
Net cash provided by operating activities totaled $258 million in the first six months of 2024 compared to $282 million in 2023. Lower net earnings and increased inventory purchases in 2024 drove most of the decrease. Inventory levels increased in 2024 primarily due to the effect of new product offerings. Significant uses of cash in the first half of 2024 included plant and equipment additions of $73 million and dividend payments of $86 million. Net proceeds from shares issued totaled $42 million, which were partially offset by share repurchases of $18 million.
Previous wording
For the first three months of 2023, significant uses of cash included plant and equipment additions of $38 million and dividend payments of $39 million. Net proceeds from shares issued totaled $30 million, which was partially offset by share repurchases of $8 million.
Current wording
In the first half of 2023, significant uses of cash included plant and equipment additions of $92 million and dividend payments of $79 million. Net proceeds from shares issued totaled $51 million, which was partially offset by share repurchases of $8 million.
Previous wording
As of March 29, 2024, the Company had available liquidity of $1,398 million, including cash and cash equivalents of $623 million, of which $167 million was held outside of the U.S., and available credit under existing committed credit facilities of $775 million.
Current wording
As of June 28, 2024, the Company had available liquidity of $1,441 million, including cash and cash equivalents of $666 million, of which $226 million was held outside of the U.S., and available credit under existing committed credit facilities of $775 million.
Previous wording
Future results could differ materially from those expressed, due to the impact of changes in various factors. These risk factors include, but are not limited to, risks relating to the demand for our products and the level of commercial and industrial activity worldwide; changes in currency translation rates; Russia’s invasion of Ukraine and other political instability; interest rate fluctuations and changes in credit markets; global sourcing of materials; interruptions of or intrusions into our information systems; intellectual property rights; the use of generative artificial intelligence; conducting business internationally; catastrophic events; our ability to attract, develop and retain qualified personnel; public health crises; our growth strategies and acquisitions; potential goodwill impairment; our ability to compete effectively; our dependence on a few large customers; our dependence on cyclical industries; changes in laws and regulations; climate-related laws, regulations and accords; environmental, social and governance-related expectations and requirements; compliance with anti-corruption and trade laws; changes in tax rates or the adoption of new tax legislation; and costs associated with legal proceedings. Please refer to Item 1A of our Annual Report on Form 10-K for fiscal year 2023 and Item 1A of this Form 10-Q for a more comprehensive discussion of these and other risk factors. These reports are available on the Company’s website atwww.graco.com and the Securities and Exchange Commission’s website atwww.sec.gov. Shareholders, potential investors and other readers are urged to consider these factors in evaluating forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements.
Current wording
Future results could differ materially from those expressed, due to the impact of changes in various factors. These risk factors include, but are not limited to, risks relating to the demand for our products and the level of commercial and industrial activity worldwide; changes in currency translation rates; international and domestic political instability; interest rate fluctuations and changes in credit markets; global sourcing of materials; interruptions of or intrusions into our information systems; intellectual property rights; the use of generative artificial intelligence; conducting business internationally; catastrophic events; our ability to attract, develop and retain qualified personnel; public health crises; our growth strategies and acquisitions; potential goodwill impairment; our ability to compete effectively; our dependence on a few large customers; our dependence on cyclical industries; changes in laws and regulations; climate-related laws, regulations and accords; environmental, social and governance-related expectations and requirements; compliance with anti-corruption and trade laws; changes in tax rates or the adoption of new tax legislation; and costs associated with legal proceedings. Please refer to Item 1A of our 2023 Annual Report and Item 1A of this Form 10-Q for a more comprehensive discussion of these and other risk factors. These reports are available on the Company’s website atwww.graco.com and the Securities and Exchange Commission’s website atwww.sec.gov. Shareholders, potential investors and other readers are urged to consider these factors in evaluating forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements.