Slide 1: 3rd Quarter 2016 Earnings Conference Call
3rd Quarter 2016 Earnings Conference Call October 20, 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, October 20, 2016. The replay by telephone will be available through October 24, 2016 • 888-203-1112 – Conference ID #5026669 • 7
Slide 4: Financial Results
Financial Results Third Quarter Year-to-Date $ millions except EPS 2016 2015 Change 2016 2015 Change Sales $ 327.2 $ 319.0 3% $ 980.2 $ 960.9 2% Gross Profit 176.6 170.2 4% 523.5 512.9 2% % of Sales 54.0 % 53.4 % 0.6 pts 53.4 % 53.4 % 0.0 pts Operating Earnings 81.5 76.9 6% 220.8 226.0 (2)% % of Sal
Slide 5: Financial Results: Components of Net Sales Change
Financial Results Components of Net Sales Change Third Quarter September 2016 Segment Region Industrial Process Contractor Americas EMEA Asia Pacific Consolidated Volume and Price (1)% − 7% 2% 2% 3% 2% Acquisitions − 5% − − 2% 1% 1% Currency − (1)% − − (2)% − − Total (1)% 4% 7% 2% 2% 4% 3% Year-to-D
Slide 6: Third Quarter 2016 Results
Third Quarter 2016 Results Sales • Sales increase of 3% (the same at consistent currency translation rates) – Acquired businesses sales of $4 million account for 1 Q3 16 $194M $74M $59M percentage point of growth • Gross margin rate up 0.6 percentage point from third quarter 2015 – Realized pricing
Slide 7: September Year-to-Date 2016 Results
September Year-to-Date 2016 Results Sales • Sales increase of 2% (at consistent currency translation rates sales increase 3%) – Acquired businesses sales of $15 million account for 2 percentage points of growth 2016 $575M $229M $175M – Effect of currency translation rates negatively impacted sales b
Slide 8: Operating Earnings
Operating Earnings Change in Operating Earnings Third Quarter Year-to-Date 2015 Operating Earnings ($M and % of sales) $ 77 24 % $ 226 24 % Translation effect — — (3) — Mix, volume and pricing 4 — 7 — Effect of acquired businesses operations, inventory set-up and acquisition costs, net 1 — 3 — Incre
Slide 9: Cash Flow and Liquidity
Cash Flow and Liquidity Net Earnings and Cash from Operations $173M $114M $86M $71M $69M $60M $62M $51M $54M $54M $51M $54M $49M $47M $49M $39M $40M $26M Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Net Earnings Gain Cash Flow from Operations 2016 Uses of Cash • Net cash provided by operati
Slide 10: Goodwill Impairment
Goodwill Impairment • In 2016, operating results of our Oil and Natural Gas reporting unit ("ONG") within the Process segment have fallen short of expectations due to weakness in oil and natural gas markets • After considering third quarter operating results and preliminary projections from our 2017
Slide 11: Other Discussion Items
Other Discussion Items • Capital expenditures expected to be approximately $40 million in 2016 • Unallocated corporate expenses for the full year 2016 are expected to be $1 million higher than 2015; expenses vary by quarter • Opportunistic share repurchases may continue via open market transactions
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 Q3 2016 2% Q3 2016 2% Q3 2016 3% Q3 2016 2% Environment YTD 2016 (0%) YTD 2016 5% YTD 2
Slide 13: Industrial Segment Results
Industrial Segment Results Sales 2016 2016Industrial Industrial Segement Segment Third Quarter Year-to-Date Sales as % of Graco $ in millions 2016 2015 Change 2016 2015 Change Americas $ 67 $ 70 (4)% $ 201 $ 209 (4)% EMEA 44 45 (3) 134 128 5 Asia Pacific 40 37 8 120 112 7 Total $ 151 $ 152 (1)% $ 45
Slide 14: Operating Margins
Industrial Segment Results Change in % of sales Third Quarter Full Year 2015 Operating Earnings (% of sales) 33 % 32 % Translation effect ̶ ̶ Price, cost, mix 1 ̶ 2016 Operating Earnings (% of sales) 34 % 32 % Industrial Segment Sales and Operating Margins Industrial Operating Earnings QTD $250 M 40
Slide 15: Process Segment Results
Process Segment Results Sales 2016 Process Segement Sales as % of Graco Third Quarter Year-to-Date $ in millions 2016 2015 Change 2016 2015 Change Americas $ 43 $ 41 5% $ 124 $ 128 (3)% EMEA 13 13 − 40 42 (4) Asia Pacific 11 11 4 32 34 (8) Total $ 67 $ 65 4% $ 196 $ 204 (4)% 20% Operating $ 10 $ 10
Slide 16: Operating Margins
Process Segment Results Change in % of sales Third Full Year 2015 Operating Earnings (% of sales) 16 % 17 % Translation effect — — Effect of acquisition operations, inventory step-up and acquisition costs, net — 1 Incremental investment in growth initiatives — (1) Expense leverage (1) (4) 2016 Opera
Slide 17: Contractor Segment Results
Contractor Segment Results Sales 2016 Contractor Segment Third Quarter Year-to-Date Sales as % of Graco $ in millions 2016 2015 Change 2016 2015 Change Americas $ 85 $ 79 7% $ 250 $ 235 6% EMEA 16 14 20 55 47 17 Asia Pacific 8 9 (11) 24 26 (6) 34% Total $ 109 $ 102 7% $ 329 $ 308 7% Operating $ 26 $
Slide 18: Operating Margins
Contractor Segment Results Change in % of sales Third Quarter Year-to-Date 2015 Operating Earnings (% of sales) 24 % 23 % Translation effect — — Expense leverage (1) (1) 2016 Operating Earnings (% of sales) 23 % 22 % Contractor Segment Sales and Operating Margins Contractor Operating Earnings QTD $1
Slide 19: Non-GAAP Reconciliation
Non-GAAP Reconciliation • The Held Separate Liquid Finishing business assets were sold in the second quarter of 2015. 2015 net earnings included after-tax investment income of $2 million ($0.02 per diluted share) for the quarter (from post-closing purchase price adjustments) and $141 million ($2.36
Slide 20: Worldwide Leaders in Fluid Handling
move measure mix control dispense spray Worldwide Leaders in Fluid Handling www.graco.com