Slide 1: 2nd Quarter 2016 Earnings Conference Call
2nd Quarter 2016 Earnings Conference Call July 21, 2016
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, July 21, 2016. The replay by telephone will be available through July 25, 2016 • 888-203-1112 – Conference ID #6816490 • 719-457
Slide 4: Financial Results
Financial Results Second Quarter Year-to-Date $ millions except EPS 2016 2015 Change 2016 2015 Change Sales $ 348.1 $ 335.5 4% $ 653.0 $ 641.9 2% Gross Profit 185.1 180.6 3% 346.9 342.8 1% % of Sales 53.2 % 53.8 % (0.6) pts 53.1 % 53.4 % (0.3) pts Operating Earnings 78.3 83.9 (7)% 139.3 149.1 (7)% %
Slide 5: Non-GAAP Reconciliation
Non-GAAP Reconciliation • The Liquid Finishing business assets were sold in the second quarter of 2015. 2015 net earnings included after-tax net gain on the sale and investment income of $110 million ($1.85 per diluted share) for the quarter and $139 million ($2.32 per diluted share) for the year-to
Slide 6: Financial Results: Components of Net Sales Change
Financial Results Components of Net Sales Change Second Quarter June 2016 Segment Region Industrial Process Contractor Americas EMEA Asia Pacific Consolidated Volume and Price 3% (15)% 15 % 4% 3% (1)% 3% Acquisitions — 6% — 2% 3% — 1% Currency (1)% (1)% — (1)% — (2)% — Total 2% (10)% 15 % 5% 6% (3)%
Slide 7: Second Quarter 2016 Results
Second Quarter 2016 Results Sales • Sales increase of 4% (the same at consistent currency translation rates) – Acquired businesses sales of $5 million account for 1 Q2 16 $208 M $80 M $61 M percentage point of growth • Gross margin rate down 0.6 percentage point from second quarter 2015 – Product an
Slide 8: June Year-to-Date 2016 Results
June Year-to-Date 2016 Results Sales • Sales increase of 2% (at consistent currency translation rates sales increase 3%) – Acquired businesses sales of $11 million account for 2 percentage points of growth 2016 $381 M $156 M $116 M – Effect of currency translation rates negatively impacted sales by
Slide 9: Operating Earnings
Operating Earnings Change in Operating Earnings Second Quarter Year-to-Date 2015 Operating Earnings ($M and % of sales) $ 84 25 % $ 149 23 % Translation effect (1) — (3) — Mix, pricing and product cost 6 — 10 — Incremental investment in growth initiatives and other corporate items (2) — (3) — Facili
Slide 10: Cash Flow and Liquidity
Cash Flow and Liquidity Net Earnings and Cash from Operations $173M $86M $66M $71M $69M $56M $60M $62M $49M $47M $49M $51 M $54 M $54M $51M $39M $40M $26M Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Net Earnings Gain Cash Flow from Operations 2016 Uses of Cash • Net cash provided by operat
Slide 11: Other Discussion Items
Other Discussion Items • Capital expenditures expected to be approximately $40 million in 2016 – Building expansion for the Contractor business is not expected until 2017, at the earliest • Unallocated corporate expenses may vary by quarter; full year 2016 expenses are expected to be approximately $
Slide 12: Current Environment and Outlook
Current Environment and Outlook Constant currency basis and excluding acquisitions completed in the prior 12 months Americas EMEA Asia Pacific Worldwide Sales Growth Sales Growth Sales Growth Sales Growth Current Q2 2016 4% Q2 2016 3% Q2 2016 (1%) Q2 2016 3% Environment YTD 2016 (1%) YTD 2016 6% YTD
Slide 13: Industrial Segment Results
Industrial Segment Results Sales 2016 Industrial Segment Sales as % of Graco Second Quarter Year-to-Date $ in millions 2016 2015 Change 2016 2015 Change Americas $ 69 $ 72 (3)% $ 134 $ 139 (4)% EMEA 46 41 10 90 83 9 Asia Pacific 42 41 4 80 75 6 46% Total $ 157 $ 154 2% $ 304 $ 297 2% Operating $ 51
Slide 14: Operating Margins: Industrial Segment
Industrial Segment Results Change in % of sales Second Quarter Full Year 2015 Operating Earnings (% of sales) 33 % 32 % Translation effect ̶ ̶ Expense leverage ̶ ̶ 2016 Operating Earnings (% of sales) 33 % 32 % Industrial Segment Sales and Operating Margins Industrial Operating Earnings QTD $250 M 4
Slide 15: Process Segment Results
Process Segment Results Sales 2016 Process Segement Second Quarter Year-to-Date Sales as % of Graco $ in millions 2016 2015 Change 2016 2015 Change Americas $ 41 $ 44 (7)% $ 81 $ 87 (7)% EMEA 14 15 (10) 28 29 (5) Asia Pacific 10 13 (21) 20 24 (14) Total $ 65 $ 72 (10)% $ 129 $ 140 (8)% 20% Operating
Slide 16: Operating Margins: Process Segment
Process Segment Results Change in % of sales Second Quarter Full Year 2015 Operating Earnings (% of sales) 19 % 18 % Translation effect — — Price, cost, mix 1 — Effect of acquisition operations, inventory step-up and acquisition costs, net — 1 Facility relocation and integration costs for acquired b
Slide 17: Contractor Segment Results
Contractor Segment Results Sales 2016 Contractor Segment Second Quarter Year-to-Date Sales as % of Graco $ in millions 2016 2015 Change 2016 2015 Change Americas $ 97 $ 81 19 % $ 165 $ 156 6% EMEA 21 19 9 39 33 16 Asia Pacific 8 10 (9) 16 17 (4) Total $ 126 $ 110 15 % $ 220 $ 206 7% 34% Operating $
Slide 18: Operating Margins: Contractor Segment
Contractor Segment Results Change in % of sales Second Quarter Year-to-Date 2015 Operating Earnings (% of sales) 25 % 23 % Translation effect — — Mix, price, cost (1) (1) New Product Launch (1) — Expense leverage — (1) 2016 Operating Earnings (% of sales) 23 % 21 % Contractor Segment Sales and Opera
Slide 19: Worldwide Leaders in Fluid Handling
move measure mix control dispense spray Worldwide Leaders in Fluid Handling www.graco.com