Slide 1: 4th Quarter 2017 Earnings Conference Call
4th Quarter 2017 Earnings Conference Call January 30, 2018
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 webcast are available online at www.graco.com/ir Telephone replay will be available after 2 p.m. ET, January 30, 2018. The replay by telephone will be available through February 3, 2018 888-203-1112 – Conference ID #1103021 719-45
Slide 4: Key 2017 Fourth Quarter Items
Key 2017 Fourth Quarter Items 3 for 1 stock split completed on December 27, 2017 Notes payable of $75 million were repaid during the fourth quarter As discussed in the third quarter, the Company has restructured its U.S. pension plan, with the purchase of annuities for certain plan participants. The
Slide 5: Financial Results
Financial Results Statement of Earnings Fourth Quarter Year $ in millions except per share amounts 2017 2016 Change 2017 2016 Change 13 Weeks 14 Weeks 52 Weeks 53 Weeks Sales $ 375 $ 349 7% $ 1,475 $ 1,329 11 % Gross Profit 200 185 8% 793 708 12 % % of Sales 53.5 % 52.9 % 0.6 pts 53.8 % 53.3 % 0.5 p
Slide 6: Non-GAAP Disclosure Reconciliation
Non-GAAP Disclosure Reconciliation There were multiple events in the last two years that caused significant fluctuations in financial results, including impairment charges recorded in 2016 and changes in accounting for tax benefits related to stock compensation, federal income tax reform and pension
Slide 7: Financial Results: Components of Net Sales Change
Financial Results Components of Net Sales Change Fourth Quarter December 2017 Segment Region Industrial Process Contractor Americas EMEA Asia Pacific Consolidated Volume and Price 1% 7% 9% 4% 4% 9% 5% Acquisitions 1% 1% 0% 1% 0% 0% 0% Currency 2% 2% 2% 0% 7% 2% 2% Total 4% 10 % 11 % 5% 11 % 11 % 7%
Slide 8: Tax Items
Tax Items The effective tax rate for the fourth quarter 2017 was 51% compared to a rate of 29% last year, excluding the impact of the 2016 impairment which decreased the 2016 rate approximately 23 percentage points 2017 Tax Reform increased the rate approximately 48 percentage points; revaluation
Slide 9: Operating Earnings
Operating Earnings Change in Operating Earnings Fourth Quarter Year-to-Date 2016 Operating Earnings/(Loss) ($M and % of sales) ($107) (31)% $ 114 9% 2016 Oil and Natural Gas impairment of intangible assets 192 55 192 14 2016 Operating Earnings - excluding impairment $ 85 24 % $ 306 23 % Translation
Slide 10: Fourth Quarter 2017 Results
Fourth Quarter 2017 Results Sales Sales increase of 7% Favorable effect of currency translation rates increased sales by approximately $7 million, 2 percentage points Acquired businesses had no significant impact on the Q4 17 $211M $90M $73M quarter Fourth quarter 2016 included an extra week c
Slide 11: Full Year 2017 Results
Full Year 2017 Results Sales Sales increase of 11% Currency translation rates and acquired businesses had no significant impact on the year Fourth quarter 2016 included an extra week compared 2017 $850M $343M $281M to our normal fiscal calendar Gross margin rate up 0.5 percentage point from 2016
Slide 12: Cash Flow and Liquidity
Cash Flow and Liquidity Net Earnings, as Reported, and Cash from Operations $150 M $114M $110M $100 M $92M $54M $55M $54M $68M $80M $86M $75M $40M $29M $51M $65M $61M $50M $36M $50 M $- $(50M) $(100M) $(150M) ($104M) Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Net Earnings Cash Flow from O
Slide 13: Other Discussion Items
Other Discussion Items Capital expenditure expectations of approximately $40 million in 2018, excluding bricks and mortar Planning and design for several production and distribution facilities that are nearing capacity is underway Unallocated corporate expenses in 2018 are expected to be approxima
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 Current Sales Growth Sales Growth Sales Growth Sales Growth Q4 2017 4% Q4 2017 4% Q4 2017 9% Q4 2017 5% Environment Full Year 2017 9% Full Year 201
Slide 15: Industrial Segment Results
Industrial Segment Results Sales 2017 2016 Industrial Industrial Segment Fourth Quarter Year-to-Date Sales as % of Graco $ in millions 2017 2016 Change 2017 2016 Change Americas $ 80 $ 80 0% $ 300 $ 281 6% EMEA 53 51 6 199 185 8 Asia Pacific 49 44 12 193 164 18 Total $ 182 $ 175 4% $ 692 $ 630 10 %
Slide 16: Operating Margins
Industrial Segment Results Change in % of sales Fourth Quarter Year-to-Date 2016 Operating Earnings (% of sales) 34 % 33 % Translation effect 1 0 Product and channel mix, net of favorable volume, price 0 0 Volume and earnings based incentives (1) (1) Investment in regional and product growth initiat
Slide 17: Process Segment Results
Process Segment Results Sales 2017 Process Segment Fourth Quarter Year-to-Date Sales as % of Graco $ in millions 2017 2016 Change 2017 2016 Change Americas $ 49 $ 46 5% $ 188 $ 171 10 % EMEA 15 13 20 56 52 7 Asia Pacific 14 12 18 51 44 16 Total $ 78 $ 71 10 % $ 295 $ 267 11 % 20% Operating $ 13 $ 10
Slide 18: Operating Margins
Process Segment Results Change in % of sales Fourth Quarter Year-to-Date 2016 Operating Earnings (% of sales) 15 % 13 % Translation effect 0 1 Volume, price, cost and mix 1 1 Volume and earnings based incentives (1) (1) Decrease in intangible amortization related to 2016 Oil and Natural Gas impairme
Slide 19: Contractor Segment Results
Contractor Segment Results Sales 2017 Contractor Segment Fourth Quarter Year-to-Date Sales as % of Graco $ in millions 2017 2016 Change 2017 2016 Change Americas $ 83 $ 76 10 % $ 363 $ 325 12 % EMEA 23 19 18 88 74 19 Asia Pacific 9 9 0 37 34 9 Total $ 115 $ 104 11 % $ 488 $ 433 13 % 33% Operating $
Slide 20: Operating Margins
Contractor Segment Results Change in % of sales Fourth Quarter Year-to-Date 2016 Operating Earnings (% of sales) 19 % 21 % Translation effect 1 0 Product and channel mix, volume, product cost (1) 1 Volume and earnings based incentives (2) (1) Expense leverage 1 2 2017 Operating Earnings (% of sales)
Slide 21: Worldwide Leaders in Fluid Handling
move measure mix control dispense spray Worldwide Leaders in Fluid Handling www.graco.com