Slide 1: 3rd Quarter 2014 Earnings Conference Call
3rd Quarter 2014 Earnings Conference Call October 23, 2014
Slide 2: Safe Harbor
Safe Harbor Today’s presentation includes forward-looking statements that reflect management’s current expectations about the Company’s future business and financial performance. These statements are subject to certain risks and uncertainties that could cause actual results to differ from anticipate
Slide 3: Conference Call Logistics
Conference Call Logistics The release, accompanying slides and replay web cast are available online at www.graco.com/ir Telephone replay will be available after 1 p.m. CT, October 23, 2014. The replay by telephone will be available through October 27, 2014 • 888-203-1112 – Conference ID #9078737 • 7
Slide 4: Financial Results
Financial Results $ millions except EPS Third Quarter Year-to-Date 2014 2013 Change 2014 2013 Change Sales $ 302.6 $ 277.0 9% $ 915.1 $ 832.1 10 % Gross Profit 165.8 150.9 10 % 502.0 460.3 9% % of Sales 54.8 % 54.5 % 0.3 pts 54.9 % 55.3 % (0.4) pts Operating Earnings 78.9 69.7 13 % 239.5 216.4 11 %
Slide 5: Financial Results: Components of Net Sales Change
Financial Results Components of Net Sales Change Third Quarter 2014 Segment Region Industrial Contractor Lubrication Americas EMEA Asia Pacific Consolidated Volume and Price 4% 7% 6% 6% 3% 5% 6% Acquisitions 6% — — 6% — 1% 3% Currency 1% — — — 1% 1% — Total 11 % 7% 6% 12 % 4% 7% 9% Year-to-Date Sept
Slide 6: Third Quarter 2014 Results
Third Quarter 2014 Results Sales Operating Earnings 26% Q3 14 $175 M $73 M $54 M 25% $79 M $70 M Q3 13 $156 M $70 M $51 M Q3 13 Q3 14 Americas EMEA Asia Pacific $M % of Sales • Sales increase of 9% • Interest expense $5 million consistent with Volume/Price, 6% Acquisitions, 3% third quarter 2013 • L
Slide 7: September 2014 Year-to-Date Results
September 2014 Year-to-Date Results Sales Operating Earnings 26% 26% YTD Sep 14 $519 M $226 M $170 M $216 M $239 M YTD Sep 13 $455 M $210 M $167 M YTD YTD Sep 13 Sep 14 Americas EMEA Asia Pacific $M % of Sales • Sales increase of 10% • Interest expense $14 million consistent Volume/Price, 6% Acquisi
Slide 8: Operating Earnings
Operating Earnings Change in Operating Earnings Third Quarter Year-to-Date 2013 Q3 Operating Earnings ($M and % of sales) $ 70 25 % $ 216 26 % Translation effect — — 1 — Volume, mix, cost, price 10 — 26 — Effect of acquired businesses on operating earnings leverage 2 — 3 — Incremental investment in
Slide 9: Cash Flow and Liquidity
Cash Flow and Liquidity Net Earnings and Cash from Operations 80 $86 $81 60 $66 $58 $61 $56 $62 $56 $60 $ millions $52 $51 40 $45 $39 $28 20 - Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Net Earnings Cash flow from Operations YTD September 2014 Significant Uses of Cash • 2014 year-to-date cash flow fr
Slide 10: Other Discussion Items
Other Discussion Items • Capital expenditures expected to be approximately $30 million in 2014 • The tax rate is expected to be approximately 30-31% for the fourth quarter and 29% for the year, excluding any impact from the sale of the Liquid Finishing business – Assumes $4 million (post-tax) divide
Slide 11: Industrial Equipment Results
Industrial Equipment Results 58% September 2014 YTD Industrial Segment Sales as % of Consolidated Third Quarter Year-to-Date Sales ($M) 2014* 2013 Change 2014* 2013 Change Americas $ 79 $ 69 14 % $ 240 $ 205 17 % EMEA 54 52 5 164 152 8 Asia Pacific 41 36 15 128 123 4 Total $ 174 $ 157 11 % $ 532 $ 4
Slide 12: Operating Margins: Industrial Equipment Results
Industrial Equipment Results Change in % of sales Third Quarter Year-to-Date 2013 Q3 Operating Earnings (percentage of sales) 32 % 33 % Translation effect — — Mix, product cost and pricing 1 — Effect of acquired businesses on operating earnings leverage (1) (1) Incremental investment in regional and
Slide 13: Contractor Equipment Results
Contractor Equipment Results 32% September 2014 YTD Contractor Sales as % of Consolidated Third Quarter Year-to-Date Sales ($ M) 2014 2013 Change 2014 2013 Change Americas $ 74 $ 67 10 % $ 211 $ 188 12 % EMEA 16 17 (2) 54 51 6 Asia Pacific 9 9 1 30 30 1 Total $ 99 $ 93 7% $ 295 $ 269 10 % Operating
Slide 14: Operating Margins: Contractor Equipment Results
Contractor Equipment Results Change in % of sales Third Quarter Year-to-Date 2013 Q3 Operating Earnings (percentage of sales) 23 % 23 % Translation effect — — Product mix (1) (1) Expense leverage 1 2 2014 Q3 Operating Earnings (percentage of sales) 23 % 24 % Sales and Operating Margins Contractor Op
Slide 15: Lubrication Equipment Results
Lubrication Equipment Results 10% September 2014 YTD Lubrication Sales as % of Consolidated Third Quarter Year-to-Date Sales ($ M) 2014 2013 Change 2014 2013 Change Americas $ 23 $ 20 13 % $ 67 $ 61 10 % EMEA 3 2 27 8 8 1 Asia Pacific 3 5 (33) 12 14 (10) Total $ 29 $ 27 6% $ 87 $ 83 6% Operating Ear
Slide 16: Operating Margins: Lubrication Equipment Results
Lubrication Equipment Results Change in % of sales Third Quarter Year-to-Date 2013 Q3 Operating Earnings (percentage of sales) 20 % 21 % Translation effect — — Pricing, mix and product cost 1 1 Expense leverage 1 1 2014 Q3 Operating Earnings (percentage of sales) 22 % 23 % Sales and Operating Margin
Slide 17: Divestiture of Liquid Finishing Business Assets
Divestiture of Liquid Finishing Business Assets • The Federal Trade Commission (FTC) issued its final Decision and Order in October requiring Graco to complete the sale of the Liquid Finishing business assets that were acquired in a larger transaction from Illinois Tool Works (ITW) in April 2012. Th
Slide 18: Net Proceeds From Sale to be Approximately $570 million
Net Proceeds From Sale to be Approximately $570 million • The all-cash sale price for the Liquid Finishing business assets is $590 million, subject to normal post-closing adjustments • Net proceeds from the sale are expected to be approximately $570 million – The difference between the purchase pric
Slide 19: Priorities for the Divestiture Proceeds
Priorities for the Divestiture Proceeds • Reduce debt, as allowed under debt agreements: – Post-closing net debt position of nearly zero $300 million in private placement debt will remain, offset by a nearly equal amount in cash • Redeploy proceeds in strategic acquisitions – Immediately available
Slide 20: Acquisition of Alco Valves Group
Acquisition of Alco Valves Group • The Alco Valves Group (Alco), a United Kingdom based manufacturer of high quality, high pressure values used in Oil & Natural Gas (O&NG) and other industrial processes was acquired on October 1, 2014 – Double block-and-bleed, gate, needle, ball valves • Alco genera
Slide 21: Worldwide Leaders in Fluid Handling
move measure mix control dispense spray Worldwide Leaders in Fluid Handling www.graco.com