Slide 1: 4th Quarter 2014 Earnings Conference Call
4th Quarter 2014 Earnings Conference Call January 27,2015
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 27, 2015. The replay by telephone will be available through January 31, 2015 • 800-203-1112 – Conference ID #2880728 • 7
Slide 4: Financial Results
Financial Results $ millions except EPS Fourth Quarter Year-to-Date 2014 2013 Change 2014 2013 Change Sales $ 306.0 $ 271.9 13 % $ 1,221.1 $ 1,104.0 11 % Gross Profit 164.8 147.2 12 % 666.7 607.5 10 % % of Sales 53.8 % 54.1 % (0.3) pts 54.6 % 55.0 % (0.4) pts Operating Earnings 69.5 63.3 10 % 308.9
Slide 5: Financial Results: Components of Net Sales Change
Financial Results Components of Net Sales Change Fourth Quarter 2014 Segment Region Industrial Contractor Lubrication Americas EMEA Asia Pacific Consolidated Volume and Price 8% 11 % 18 % 13 % 8% 4% 11 % Acquisitions 9% — — 6% 6% 4% 5% Currency (4)% (2)% (2)% (1)% (6)% (3)% (3)% Total 13 % 9% 16 % 1
Slide 6: Fourth Quarter 2014 Results
Fourth Quarter 2014 Results Sales Operating Earnings 23% 23% Q4 14 $166 M $78 M $62 M $69 M $63 M Q4 13 $140 M $73 M $59 M Q4 13 Q4 14 Americas EMEA Asia Pacific $M % of Sales • Sales increase of 13% (16% at consistent • Interest expense $5 million up from $4M exchange rates) fourth quarter 2013 – A
Slide 7: December 2014 Year-to-Date Results
December 2014 Year-to-Date Results Sales Operating Earnings 25% 25% 2014 $684 M $305 M $232 M $309 M $280 M 2013 $595 M $283 M $226 M Americas EMEA Asia Pacific 2013 2014 $M % of Sales • Sales increase of 11%, no net impact from currency • Interest expense $19 million up from $18 translation million
Slide 8: Operating Earnings
Operating Earnings Change in Operating Earnings Fourth Quarter Year-to-Date 2013 Operating Earnings ($M and % of sales) $ 63 23 % $ 280 25 % Translation effect (3) — (3) — Volume, mix, cost, price 16 1 43 — Effect of acquired businesses on operating earnings leverage 2 (1) 6 — Effect of inventory st
Slide 9: Cash Flow and Liquidity
Cash Flow and Liquidity Net Earnings and Cash from Operations 80 $86 $81 $71 60 $66 $58 $61 $56 $62 $56 $60 $ millions $52 $51 $49 40 $45 $39 $28 20 - Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Net Earnings Cash flow from Operations 2014 Significant Uses of Cash • 2014 year-to-date cash flow fr
Slide 10: Other Discussion Items
Other Discussion Items • Capital expenditures expected to be approximately $35 million in 2015 • 2015 annualized tax rate is projected to be approximately 32-33% – The Federal R&D tax credit has not been extended into 2015. If approved, the 2015 annualized tax rate is expected to be approximately 31
Slide 11: Industrial Equipment Results
Industrial Equipment Results 59% 2014 Industrial Segment Sales as % of Consolidated Fourth Quarter Year-to-Date Sales ($M) 2014* 2013 Change 2014* 2013 Change Americas $ 87 $ 71 22 % $ 327 $ 276 18 % EMEA 60 55 11 224 206 9 Asia Pacific 48 46 3 176 170 3 Total $ 195 $ 172 13 % $ 727 $ 652 12 % Opera
Slide 12: Operating Margins: Industrial Equipment Results
Industrial Equipment Results Change in % of sales Fourth Quarter Year-to-Date 2013 Operating Earnings (percentage of sales) 32 % 32 % Translation effect — — Mix, product cost and pricing 1 — Effect of acquired businesses on operating earnings leverage (2) (1) Effect of inventory step-up and acquisit
Slide 13: Contractor Equipment Results
Contractor Equipment Results 31% 2014 Contractor Sales as % of Consolidated Fourth Quarter Year-to-Date Sales ($ M) 2014 2013 Change 2014 2013 Change Americas $ 54 $ 48 12 % $ 265 $ 237 12 % EMEA 16 16 — 71 67 5 Asia Pacific 10 9 11 40 39 3 Total $ 80 $ 73 9% $ 376 $ 343 10 % Operating Earnings $ 12
Slide 14: Operating Margins: Contractor Equipment Results
Contractor Equipment Results Change in % of sales Fourth Quarter Year-to-Date 2013 Operating Earnings (percentage of sales) 13 % 21 % Translation effect (1) — Product mix 1 (1) Expense leverage 2 2 2014 Operating Earnings (percentage of sales) 15 % 22 % Sales and Operating Margins Contractor Operati
Slide 15: Lubrication Equipment Results
Lubrication Equipment Results 10% 2014 Lubrication Sales as % of Consolidated Fourth Quarter Year-to-Date Sales ($ M) 2014 2013 Change 2014 2013 Change Americas $ 25 $ 21 21 % $ 92 $ 82 13 % EMEA 2 3 (10) 10 10 (1) Asia Pacific 4 3 9 16 17 (7) Total $ 31 $ 27 16 % $ 118 $ 109 8% Operating Earnings $
Slide 16: Operating Margins: Lubrication Equipment Results
Lubrication Equipment Results Change in % of sales Fourth Quarter Year-to-Date 2013 Operating Earnings (percentage of sales) 20 % 21 % Translation effect (1) (1) Pricing, mix and product cost — 1 Expense leverage 2 1 2014 Operating Earnings (percentage of sales) 21 % 22 % Sales and Operating Margins
Slide 17: Divestiture of Liquid Finishing Business Assets
Divestiture of Liquid Finishing Business Assets • The Federal Trade Commission (FTC) issued its final Decision and Order in October 2014 requiring Graco to complete the sale of the Liquid Finishing business assets that were acquired in a larger transaction from Illinois Tool Works (ITW) in April 201
Slide 18: Net Proceeds From Sale to be Approximately $570 million
Net Proceeds From Sale to be Approximately $570 million • The all-cash sale price for the Liquid Finishing business assets is $590 million, subject to normal post-closing adjustments • Net proceeds from the sale are expected to be approximately $570 million – The difference between the purchase pric
Slide 19: Acquisition – High Pressure Equipment
Acquisition – High Pressure Equipment • High Pressure Equipment Company (HiP), an Erie, Pennsylvania based manufacturer of high quality, high pressure values used in Oil & Natural Gas (O&NG) and other industrial processes was acquired on January 20th, 2015 • The acquisition was an all cash transacti
Slide 20: Worldwide Leaders in Fluid Handling
move measure mix control dispense spray Worldwide Leaders in Fluid Handling www.graco.com