Slide 1: 4th Quarter 2016 Earnings Conference Call
4th Quarter 2016 Earnings Conference Call January 31, 2017
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, January 31, 2017. The replay by telephone will be available through February 4, 2017 • 888-203-1112 – Conference ID #9371987 • 7
Slide 4: Financial Results
Financial Results Statement of Earnings Fourth Quarter Year-to-Date $ in millions except per share amounts 2016 2015 Change 2016 2015 Change 14 Weeks 13 Weeks 53 Weeks 52 Weeks Sales $ 349.1 $ 325.6 7% $ 1,329.3 $ 1,286.5 3% Gross Profit 184.7 171.8 8% 708.2 684.7 3% % of Sales 52.9 % 52.8 % 0.1 pts
Slide 5: Non-GAAP Disclosure Reconciliation
Non-GAAP Disclosure Reconciliation Results excluding the 2016 non-cash impairment and 2015 Liquid Finishing investment income and expense provide a more consistent base of comparison of on-going results 2016 – Goodwill and Intangible Asset Impairment 2016 operating results of our Oil and Natural Gas
Slide 6: Financial Results: Components of Net Sales Change
Financial Results Components of Net Sales Change Fourth Quarter December 2016 Segment Region Industrial Process Contractor Americas EMEA Asia Pacific Consolidated Volume and Price 6% (1)% 17 % 6% 12 % 4% 7% Acquisitions 0% 5% 0% 1% 2% 1% 1% Currency (2)% (2)% (0)% (0)% (5)% (1)% (1)% Total 4% 2% 17
Slide 7: Tax Items
Tax Items The deferred tax benefit of $31 million related to non-cash impairment charges recorded in the fourth quarter had a significant impact on the effective tax rate for both the quarter and the year The effective tax rate for the quarter was 6% compared to 27% for the fourth quarter last year.
Slide 8: Operating Earnings
Operating Earnings Change in Operating Earnings Fourth Quarter Year-to-Date 2015 Operating Earnings ($M and % of sales) $ 76 23 % $ 302 23 % Translation effect (1) — (4) — Mix, volume and pricing 15 1 22 — Effect of acquired businesses operations, inventory set-up and acquisition costs, net — — 4 —
Slide 9: Fourth Quarter 2016 Results
Fourth Quarter 2016 Results Sales Sales increase of 7% (at consistent currency translation rates sales increase 8%) – Acquired businesses sales of $4 million account for 1 percentage point of growth Q4 16 $201M $82M $66M – Fourth quarter 2016 included 14 weeks compared to 13 weeks in 2015 – Effect o
Slide 10: Full Year 2016 Results
Full Year 2016 Results Sales Sales increase of 3% (at consistent currency translation rates sales increase 4%) – Acquired businesses sales of $19 million account for 1 percentage points of growth 2016 $777M $311M $241M – 2016 was a 53 week year compared to 52 weeks in 2015 – Effect of currency trans
Slide 11: Cash Flow and Liquidity
Cash Flow and Liquidity Net Earnings and Cash from Operations $200 M $173M $150 M $114M $100 M $71M $69M $51M $54M $54M $62M $54M $57M $67M $49M $47M $49M $40M $51M $50 M $63M $39M $26M $- $(50) $(100) ($104M) $(150) Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Net Earnings Held Separate Ga
Slide 12: Other Discussion Items
Other Discussion Items Capital expenditure expectations of approximately $40 million in 2017 Unallocated corporate expenses in 2017 are expected to be approximately $31 million, or $2 million higher compared to 2016 Non-cash impairment of intangible assets in fourth quarter 2016 is expected to reduc
Slide 13: 2016 U.S and Non-U.S. Business Data Points
2016 U.S and Non-U.S. Business Data Points* 2016 sales $1,329 million- Sales from U.S production to U.S. customers ~ 45-47% Sales Sales from U.S. production to foreign customers ~ 30% Sales from foreign production to foreign customers ~ 20% Sales from foreign production to U.S. customers ~ 3-5% 2016
Slide 14: 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 Q4 2016 6% Q4 2016 11% Q4 2016 4% Q4 2016 7% Environment FY 2016 1% FY 2016 6% FY 2016
Slide 15: Industrial Segment Results
Industrial Segment Results Sales 2016 2016Industrial Industrial Segement Segment Fourth Quarter Year-to-Date Sales as % of Graco $ in millions 2016 2015 Change 2016 2015 Change Americas $ 80 $ 80 0% $ 281 $ 289 (3)% EMEA 51 45 11 185 173 6 Asia Pacific 44 42 5 164 154 6 Total $ 175 $ 167 4% $ 630 $
Slide 16: Operating Margins: Industrial Segment
Industrial Segment Results Change in % of sales Fourth Quarter Full Year 2015 Operating Earnings (% of sales) 34 % 33 % Translation effect 0 0 Product and channel mix, price 1 0 Expense leverage (1) 0 2016 Operating Earnings (% of sales) 34 % 33 % Industrial Segment Sales and Operating Margins Indus
Slide 17: Process Segment Results
Process Segment Results Sales 2016 Process Segement Sales as % of Graco Fourth Quarter Year-to-Date $ in millions 2016 2015 Change 2016 2015 Change Americas $ 46 $ 43 6% $ 171 $ 172 (1)% EMEA 13 14 (9) 52 55 (5) Asia Pacific 12 12 (1) 44 47 (6) Total $ 71 $ 69 2% $ 267 $ 274 (3)% 20% Operating $ 10
Slide 18: Operating Margins: Process Segment
Process Segment Results Change in % of sales Fourth Full Year 2015 Operating Earnings (% of sales) 13 % 16 % Translation effect 0 0 Price, cost, mix 2 0 Effect of acquisition operations, inventory step-up and acquisition costs, net (1) 1 Decrease in intangible amortization related to non-cash impair
Slide 19: Contractor Segment Results
Contractor Segment Results Sales 2016 Contractor Segment Fourth Quarter Year-to-Date Sales as % of Graco $ in millions 2016 2015 Change 2016 2015 Change Americas $ 76 $ 64 17 % $ 325 $ 299 9% EMEA 19 16 19 74 63 18 Asia Pacific 9 9 8 34 35 (3) Total $ 104 $ 89 17 % $ 433 $ 397 9% 33% Operating $ 20
Slide 20: Operating Margins: Contractor Segment
Contractor Segment Results Change in % of sales Fourth Quarter Year-to-Date 2015 Operating Earnings (% of sales) 18 % 22 % Translation effect 0 0 Expense leverage 1 (1) 2016 Operating Earnings (% of sales) 19 % 21 % Contractor Segment Sales and Operating Margins Contractor Operating Earnings QTD $18
Slide 21: Worldwide Leaders in Fluid Handling
move measure mix control dispense spray Worldwide Leaders in Fluid Handling www.graco.com