Slide 1: 4th Quarter 2011 Earnings Conference Call
4th Quarter 2011 Earnings Conference Call Tuesday, January 31, 2012, 10 a.m. CT
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 (click on “Investor Relations”) Telephone replay available after 2 p.m. ET, January 31, 2012. The replay by telephone will be available through February 04, 2012. • 800-406-7325 – Con
Slide 4: Consolidated Financial Results
Consolidated Financial Results Fourth Quarter Year-to-Date $ millions except EPS (13 weeks in 2011, 14 weeks in 2010) (52 weeks in 2011, 53 weeks in 2010) 2011 2010 Change 2011 2010 Change Sales $ 215.6 $ 197.3 9% $ 895.3 $ 744.1 20 % Gross Profit 117.0 107.7 9% 500.2 403.4 24 % % of Sales 54.3 % 54
Slide 5: Consolidated Financial Results – Net Sales
Consolidated Financial Results – Net Sales Fourth Quarter (13 weeks in 2011, 14 weeks in 2010) Segment Region Industrial Contractor Lubrication Americas Europe Asia Pacific Consolidated Volume and Price 11% 0% 25% 9% 0% 18% 9% Currency 0% 1% 1% 0% 0% 2% 0% Total 11% 1% 26% 9% 0% 20% 9% Year‐to‐Date
Slide 6: Consolidated Fourth Quarter Results
Consolidated Fourth Quarter Results Operating Earnings 80 30% 22% 60 20% % of Sales $ Millions 19% 40 $47 $38 10% 20 ‐ 0% Q4 10 Q4 11 $M % of Sales • Sales increase of 9% (none from • Operating expenses flat to last year, currency translation) decreasing 3 percentage points as a • The fourth quarter
Slide 7: Consolidated Year-to-Date Results
Consolidated Year-to-Date Results Operating Earnings 300 30% 25% 250 21% 200 20% % of Sales $ Millions $219 150 $153 100 10% 50 ‐ 0% YTD 10 YTD 11 $M % of Sales • Sales increased 20% (2 percentage • Operating expenses up $30 million, down 2 points from currency translation) percentage points as a pe
Slide 8: Consolidated Results
Consolidated Results Change in % of sales Fourth Quarter Year-to-Date 2010 Operating Earnings (percentage of sales) 19 % 21 % Translation effect — 1 Product cost and mix (1) — Unabsorbed manufacturing costs, reduction 1 1 Transaction costs for proposed acquisition (1) (1) Volume effect on expense le
Slide 9: Cash Flow and Liquidity
Cash Flow and Liquidity 2011 cash flow from operations of $162M Working capital versus $101M in 2010 – Increase in inventories $13M – Cash uses • Down $6M in fourth quarter • Capital expenditures $24M – Increase in accounts receivable $27M • Dividends $51M • Down $5M in fourth quarter • Share repurc
Slide 10: Capital Structure
Capital Structure • Cash deployment priorities include: • International footprint • Product development Organic Growth Investments • Production capacity and capabilities • Supplement to organic growth Acquisitions • Leverage our strengths • Dividend payout ratio 25-30% • 6 million authorized share D
Slide 11: Acquisition of Finishing Businesses from ITW
Acquisition of Finishing Businesses from ITW Entered into a definitive agreement to purchase the finishing business operations of Illinois Tool Works, Inc. (ITW) in April 2011. • As announced in mid-December, the Federal Trade Commission has filed a complaint to challenge Graco’s proposed acquisitio
Slide 12: Other Discussion Items
Other Discussion Items • Pension expense is expected to be approximately $5 million higher in 2012 and additional funding of $10 to $20 million is also expected. • 2012 annualized tax rate is projected to be approximately 34 percent. • Capital expenditures are expected to be approximately $30 millio
Slide 13: Industrial Equipment Results
Industrial Equipment Results Fourth Quarter Year-to-Date Sales ($ M) 2011 2010 Change 2011 2010 Change Americas $ 57 $ 54 7% $ 220 $ 188 17 % Europe 31 29 8 135 109 23 Asia Pacific 37 30 20 147 112 31 Total $ 125 $ 113 11 % $ 502 $ 410 23 % Operating Earnings $ 41 $ 35 16 % $ 174 $ 126 38 % % of sal
Slide 14: Industrial Equipment Results
Industrial Equipment Results Change in % of sales Fourth Quarter Year-to-Date 2010 Operating Earnings (percentage of sales) 31 % 31 % Translation effect — 1 Product cost / mix / price (1) — Unabsorbed manufacturing costs, reduction — 1 Volume effect on expense leverage 3 2 2011 Operating Earnings (p
Slide 15: Contractor Equipment Results
Contractor Equipment Results Fourth Quarter Year-to-Date Sales ($ M) 2011 2010 Change 2011 2010 Change Americas $ 35 $ 33 8% $ 184 $ 163 13 % Europe 16 18 (15) 68 63 9 Asia Pacific 11 11 5 39 31 25 Total $ 62 $ 62 1% $ 291 $ 257 13 % Operating Earnings $ 6 $ 5 24 % $ 51 $ 37 37 % % of sales 10 % 8%
Slide 16: Contractor Equipment Results
Contractor Equipment Results Change in % of sales Fourth Quarter Year-to-Date 2010 Operating Earnings (percentage of sales) 8% 14 % Translation effect — 1 Product cost / mix / price (2) — Unabsorbed manufacturing costs — 1 Channel mix — (1) Volume effect on expense leverage 4 2 2011 Operating Earnin
Slide 17: Lubrication Equipment Results
Lubrication Equipment Results Fourth Quarter Year-to-Date Sales ($ M) 2011 2010 Change 2011 2010 Change Americas $ 19 $ 16 17% $ 72 $ 58 25% Europe 2 2 17 9 6 38 Asia Pacific 7 5 59 22 14 57 Total $ 28 $ 23 26% $ 103 $ 78 32% Operating Earnings $ 5 $ 3 105% $ 19 $ 9 113% % of sales 19% 11% 18% 11% *
Slide 18: Lubrication Equipment Results
Lubrication Equipment Results Change in % of sales Fourth Quarter Year-to-Date 2010 Operating Earnings (percentage of sales) 11 % 11 % Translation effect — 1 Product cost and factory performance (1) (1) Unabsorbed manufacturing costs, reduction 3 3 Volume effect on expense leverage 6 4 2011 Operatin
Slide 19: Move – Measure – Control – Dispense – Apply
Move – Measure – Control – Dispense – Apply