Slide 1: 3rd Quarter 2015 Earnings Conference Call
3rd Quarter 2015 Earnings Conference Call October 22, 2015
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 2 p.m. ET, October 22, 2015. The replay by telephone will be available through October 26, 2015 • 888-203-1112 – Conference ID #263158 • 71
Slide 4: Financial Results
Financial Results $ millions except EPS Third Quarter Year-to-Date 2015 2014 Change 2015 2014 Change Sales $ 319.0 $ 302.6 5% $ 960.9 $ 915.1 5% Gross Profit 170.2 165.8 3% 512.9 502.0 2% % of Sales 53.4 % 54.8 % (1.4) pts 53.4 % 54.9 % (1.5) pts Operating Earnings 76.9 78.9 (3)% 226.0 239.5 (6)% %
Slide 5: Divestiture of Held Separate Business Assets
Divestiture of Held Separate Business Assets • April 1, 2015, pursuant to the Federal Trade Commission final order, the Company sold the Liquid Finishing business assets acquired in 2012 • The sale proceeds were $610 million, including the post-closing purchase price adjustment settled in the third
Slide 6: Tax Items
Tax Items • The effective tax rate was 31% for the quarter, up from 28% last year due to post-tax dividends that reduced the rate in the third quarter of 2014 • The year-to-date effective income tax rate of 27% decreased 2 percentage points compared to last year – A change in the Company’s assertion
Slide 7: Financial Results: Components of Net Sales Change
Financial Results Components of Net Sales Change Third Quarter September 2015 Segment Region Industrial Process Contractor Americas EMEA Asia Pacific Consolidated Volume and Price 5% (3)% 6% 5% 3% 3% 4% Acquisitions 3% 31 % — 5% 9% 9% 7% Currency (7)% (5)% (3)% (2)% (13)% (7)% (6)% Total 1% 23 % 3%
Slide 8: Third Quarter 2015 Results
Third Quarter 2015 Results Sales Operating Earnings 26% 24% Q3 15 $190 M $72 M $57 M $79 M $77 M Q3 14 $175 M $73 M $55 M Q3 14 Q3 15 Americas EMEA Asia Pacific $M % of Sales • Sales increase of 5% (11% at consistent • Operating earnings down $2 million, 2 currency translation rates) percentage poin
Slide 9: September 2015 Year-to-Date Results
September 2015 Year-to-Date Results Sales Operating Earnings 26% 24% 2015 $572 M $217 M $172 M $239 M $226 M 2014 $519 M $226 M $170 M 2014 2015 Americas EMEA Asia Pacific $M % of Sales • Sales increase of 5% (10% at consistent • Operating earnings down $13 million, 2 percentage points lower, as a p
Slide 10: Operating Earnings
Operating Earnings Change in Operating Earnings Third Quarter Year-to-Date 2014 Q3 Operating Earnings ($M and % of sales) $ 79 26 % $ 239 26 % Translation effect (8) (1) (23) (1) Mix, pricing and product cost 7 — 22 — Effect of acquired businesses on operating earnings leverage 2 (1) 7 (1) Effect of
Slide 11: Cash Flow and Liquidity
Cash Flow and Liquidity Net Earnings and Cash from Operations $173M $81M $86M $62M $66M $71M $69M $56M $56M $60M $51M $49M $47M $49M $51 M $45M $39M $28M Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Net Earnings Gain Cash Flow from Operations 2015 Significant Uses of Cash • Effect of divest
Slide 12: Other Discussion Items
Other Discussion Items • Capital expenditures expected to be approximately $40 million in 2015 • Share repurchases will continue via open market transactions and/or short-dated accelerated share repurchase programs • Full year 2015 unallocated corporate expenses are expected to be approximately $7-8
Slide 13: Current Environment and Outlook (as of October 2015)
Current Environment and Outlook (as of October 2015) Constant currency basis and excluding acquisition completed in the prior 12 months Worldwide Americas EMEA Asia Pacific Current Environment Sales Growth Sales Growth Sales Growth Sales Growth Q3 2015 +4% Q3 2015 +5% Q3 2015 +3% Q3 2015 +3% YTD 201
Slide 14: Industrial Segment Results
Industrial Segment Results Third Quarter Year-to-Date Sales ($M) 2015 2014 Change 2015 2014 Change Americas $ 70 $ 65 7% $ 209 $ 200 4% EMEA 45 48 (6) 128 146 (12) 47% Asia Pacific 37 37 — 112 113 (1) Total $ 152 $ 150 1% $ 449 $ 459 (2)% Operating $ 51 $ 49 3% $ 144 $ 149 (3)% Sept. 2015 YTD Indust
Slide 15: Operating Margins: Industrial Segment
Industrial Segment Results Change in % of sales Third Quarter Year-to-Date 2014 Q3 Operating Earnings (percentage of sales) 33 % 32 % Translation effect (1) (1) Price, cost, mix 1 1 Effect of acquired businesses on operating leverage (1) — Expense leverage 1 — 2015 Q3 Operating Earnings (percentage
Slide 16: Process Segment Results
Process Segment Results Third Quarter Year-to-Date Sales ($M) 2015 2014 Change 2015 2014 Change 21% Americas $ 41 $ 37 13 % $ 128 $ 107 20 % EMEA 13 8 56 42 27 56 Asia Pacific 11 8 32 34 27 28 Total $ 65 $ 53 23 % $ 204 $ 161 27 % Operating $ 10 $ 12 (14)% $ 35 $ 38 (9)% Earnings Sept. 2015 YTD Proc
Slide 17: Operating Margins: Process Segment
Process Segment Results Change in % of sales Third Quarter Year-to-Date 2014 Q3 Operating Earnings (percentage of sales) 23 % 24 % Translation effect (2) (2) Effect of acquired businesses on operating earnings leverage (2) (1) Effect of inventory step-up and acquisition costs, net of 2014 costs — (1
Slide 18: Contractor Segment Results
Contractor Segment Results Third Quarter Year-to-Date Sales ($M) 2015 2014 Change 2015 2014 Change Americas $ 79 $ 74 8% $ 235 $ 211 11 % EMEA 14 16 (16) 47 54 (13) 32% Asia Pacific 9 9 (3) 26 30 (14) Total $ 102 $ 99 3% $ 308 $ 295 4% Operating $ 24 $ 23 3% $ 71 $ 70 1% Earnings Sept. 2015 YTD Cont
Slide 19: Operating Margins: Contractor Segment
Contractor Segment Results Change in % of sales Third Quarter Year-to-Date 2014 Q3 Operating Earnings (percentage of sales) 23 % 24 % Translation effect (1) (1) New product launch — (1) Expense/volume leverage 2 1 2015 Q3 Operating Earnings (percentage of sales) 24 % 23 % Contractor Segment Sales an
Slide 20: Change in Segment Reporting
Change in Segment Reporting • During Q1, the Company revised the presentation of its financial reporting segments into the following three segments: – Industrial includes Industrial Products and Applied Fluid Technologies divisions – Process includes Process, Oil and Natural Gas, and Lubrication div
Slide 21: Worldwide Leaders in Fluid Handling
move measure mix control dispense spray Worldwide Leaders in Fluid Handling www.graco.com