Graco Inc. · NYSE:GGG
Graco — Investor Presentation (February 2022)
47 slides from Graco's investor presentation, February 2022
Slide 1: Investor Presentation: Company Overview
////////////////// Investor Presentation Company Overview Fourth Quarter and Full Year 2021 1
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 dif
Slide 3: Distribution of Global Sales
58% Distribution 42% 38% of Global $1,988 M 23% 19% 20% Sales Full Year 2021 Americas EMEA Asia Pacific Industrial Process Contractor 61% 48% 55% 31% 32% 21% 26% 13% 13% Industrial Process Contractor Industrial Process Contractor Industrial Process Contractor 3
Slide 4: 2021 Net Sales by End Market
2021 Net Sales by End Market ////////////////// Wood − 1% White Goods − 1% Mining − 1% Oil & Natural Gas − 3% Electronics − 3% Vehicle Services − 4% Public Works − 4% Automotive − 9% Other − 9% Industrial & Machinery − 17% Construction − 48% 4
Slide 5: Graco is part of your everyday life
Graco is part of your everyday life. 5
Slide 6: Graco is part of your everyday life
Graco is part of your everyday life. 6
Slide 7: Niche Diversified Fluid Handling Business
Diversified Fluid Handling Business Niche 5.9%+ ~40% Difficult applications; corrosive, Organic Revenue CAGR* Of revenue is parts viscous, hard-to-move materials & accessories *20-year average, constant currency 7
Slide 8: High Customer Value, Strong Product Differentiation
Material Supplier Relationships Best in Class End User Delivery Interaction High Customer Value, Strong Customer Leading New ROI Strong Product Channel Product Investment Lowest Total Partners Cost of Ownership Differentiation Stringent Best in Class Product Requirements Quality Niche Markets 8
Slide 9: Growth Plans and Earnings Drivers
Growth Plans and Earnings Drivers ////////////////// Strategic Initiatives 12%+ ► New Product Development 10% ► New Markets ► Global Expansion ► Acquisitions ► End-user Conversion Targeted Revenue Targeted Earnings CAGR CAGR Through a cycle 9
Slide 10: Low Volume, High Mix Delivers Customer ROI
Low Volume, High Mix Delivers Customer ROI Average Number of Units 2021 Sales No. of SKUs Sold Per Day ($ in millions) Highly-valued products at low volumes 0-1 62,700 93% $ 854 43% 2-5 2,800 4% $ 361 18% 43% of our revenue comes from products 6 - 10 900 1% $ 164 8% that we sell 11 - 15 300 1% $ 77
Slide 11: Growth Plans and Earnings Drivers
Growth Plans and Earnings Drivers ////////////////// Acquisitions Strategic 3-4% + Initiatives 12% 12%+ Price 1-2% 9-10% 1-2% 5-7% 3% Industrial Production Targeted Organic Targeted Targeted Earnings Average Growth Rate CAGR Revenue CAGR CAGR Through a cycle 11
Slide 12: Exceptional Returns
Exceptional Returns 5.9%+ 28% 41% 19% Organic Revenue CAGR Return on Invested Capital Return on Equity Return on Assets Based on a 20-year average, constant currency 12
Slide 13: Business Model
Business Model ////////////////// ▶Brand Promise Company Overview ▶ Operational Excellence ▶ Engineering & Manufacturing Excellence ▶ Extensive Reach 13
Slide 14: Our Brand Promise
▶ Innovation – Leading with technologically-advanced features, pioneering design, high performance and unparalleled reliability ▶ Quality – Our customers invest in high-quality products built to last for years of reliable service ▶ A+ Service – We’re guided by a Our Brand mindset of integrity and a
Slide 15: Engineering Excellence
Engineering Excellence Annual R&D Investment 4.1% * Target More than Double-Digit Returns 2.2 x* as a percent of sales our peer group versus peers at 1.8% ▶ new product * Peers: ITW, CSL, DOV, CFX, IEX, NDSN, WTS, FLS, based on a 5-year average, 2017 - 2021. 15 15
Slide 16: Manufacturing Excellence
Manufacturing Excellence Goal is > 80% Zero < 1% Production based in the US cost change Warranty costs on the same basket of goods (yoy) 16
Slide 17: Service Excellence
Service Excellence Same Day 92% Orders in by noon, In-stock service ship the same day level goal 17
Slide 18: Extensive Reach
Extensive Reach Customers in over 100 Installed base 30,000+ countries ~100 Outlets/Distributors Facilities in years old 12 countries 18
Slide 19: Company Segments
Company Segments ////////////////// ▶ Industrial Company ▶ Process Overview ▶ Contractor 19
Slide 20: Industrial $840M
Industrial December 2021, Twelve Months $840M 21% 35.3% Segment Revenue Organic Operating Margin +190 basis points 20
Slide 21: Industrial: Key End Markets and Growth Drivers
Industrial Key End Markets ▶ General industrial ▶ Automotive ▶ Res & non-res construction ▶ Alternative energy & others Growth Drivers & Trends ▶ Factory movement & upgrades ▶ Automation ▶ Technology upgrades ▶ Energy-efficiency upgrades ▶ Material changes Select Representative Industry Participants
Slide 22: Process $398M
Process December 2021, Twelve Months $398M 23% 22.9% Segment Revenue Organic Operating Margin +310 basis points 22
Slide 23: Process: Key End Markets and Growth Drivers
Process Key End Markets ▶ Pharma, food & beverage ▶ Vehicle services ▶ Oil & natural gas ▶ Environmental ▶ Semiconductor & others Growth Drivers & Trends ▶ Factory movements and upgrades ▶ Technology upgrades ▶ Energy-efficiency upgrades ▶ Asset life maintenance ▶ Commodities extraction ▶ Environmen
Slide 24: Contractor $750M
Contractor December 2021, Twelve Months $750M 15% 22.6% Segment Revenue Organic Operating Margin -290 basis points 24
Slide 25: Contractor: Key End Markets and Growth Drivers
Contractor Key End Markets ► Res & non-res construction ► Res & non-res remodeling ► Transportation Infrastructure Growth Drivers & Trends ► End user conversion from brush and roll ► Product innovation & channel expansion ► Housing & new construction ► Infrastructure spending ► Regional labor rates
Slide 26: Capital Allocation
Capital Allocation Company Overview ////////////////// 26
Slide 27: Long-Term Cash Deployment Priorities
Long-Term Cash Deployment Priorities ////////////////// International footprint Organic Product development Growth Production capacity and capabilities Supplement to organic growth Acquisitions Leverage our strengths Solid dividend history Shareholder Return Approximately 18.5 million
Slide 28: Key Investment Attributes
▶ Drive long-term, above-market growth ▶ Premium products that deliver strong ROI for end users ▶ Leading industry positions ▶ Serve niche markets where customers are willing to purchase quality, technology-based products ▶ Products perform critical functions ▶ High margin, high recurring revenue ▶
Slide 29: Acquisitions
Acquisitions Company Overview ////////////////// 29
Slide 30: Acquisition: Industrial
Acquisition ▶ Industrial 2012 2013 2014 2014 2015 2015 2017 2018 2020 30
Slide 31: Acquisition: Process
Acquisition ▶ Process 2013 2014 2015 2015 2016 2019 31
Slide 32: Financial Results
Financial Results Company Overview ////////////////// 32
Slide 33: Financial Performance 2021
Minneapolis, MN Financial Performance 2021 20% 52.0% 31% 33% Revenue Gross Margin EPS Net Income (As Reported) 33
Slide 34: Financial Results
Financial Results Statement of Earnings Fourth Quarter Full Year $ in millions except per share amounts 2021 2020 Change 2021 2020 Change (1) Operating earnings, Net Sales $ 539.6 $ 470.3 15 % $1,987.6 $1,650.1 20 % net earnings and diluted earnings per share for Gross Profit 274.5 244.8 12 % 1,033.
Slide 35: Financial Results Adjusted for Comparability
Financial Results Adjusted for Comparability Non-GAAP Reconciliation Fourth Quarter Full Year Excluding the impacts In millions except per share amounts 2021 2020 Change 2021 2020 Change of pension settlement Operating earnings, as reported $ 144.6 $ 132.1 9% $ 531.3 $ 391.7 36 % loss, impairment Im
Slide 36: Fourth Quarter 2021 Results
Fourth Quarter 2021 Results Sales ► Up 15 percent from 2020, the same at consistent translation rates ► Rate down 1.2 percentage points from fourth quarter 2020 Favorable product and channel mix, realized pricing and increased production volume were not enough to offset the unfavorable impact of h
Slide 37: 2021 Results
2021 Results Sales ► Up 20 percent from 2020, up 19 percent at consistent translation rates ► Rate up 0.2 percentage point from 2020 Favorable effects of higher production volume, realized pricing, favorable currency Gross Margin translation rates were able to offset higher product cost ► Incremen
Slide 38: Financial Results: Components of Net Sales Changes
Financial Results Components of Net Sales Changes 2021 Fourth Quarter Segment Region Industrial Process Contractor Americas EMEA Asia Pacific Consolidated Volume and Price 13 % 35 % 8% 13 % 6% 33 % 15 % Acquisitions 1% 0% 0% 0% 2% 0% 0% Currency (1)% 0% (1)% 0% (4)% 1% 0% Total 13 % 35 % 7% 13 % 4%
Slide 39: Current Environment and Outlook
Current Environment and Outlook 2021 Organic Net Sales by Segment - Compared to 2020 Bookings October November December 6 Week Avg. Industrial Segment 33% 5% 4% 18% Process Segment 55% 25% 27% 49% Contractor Segment 16% 4% 3% 19% 30% 8% 8% 25% ▶ Broad based end market recovery and demand levels rema
Slide 40: Current Environment and Outlook
Current Environment and Outlook Constant currency basis and excluding acquisitions and divestitures completed in the prior 12 months We are initiating an Sales Growth Q4 2021 13% Sales Growth Q4 2021 6% Sales Growth Q4 2021 33% Sales Growth Q4 2021 15% outlook for the Full Year 15% Full Year 21% Ful
Slide 41: Other Items
Other Items Cap Ex Capital expenditure expectations of approximately $190 million in 2022, including approximately $140 million in facility expansion projects Expenses Unallocated corporate expenses in 2022 are expected to be approximately $28 - $30 million No share repurchases were made in 2021. We
Slide 42: Other Items
Other Items Pension Settlement In the fourth quarter of 2021, the Company transferred $63 million of its pension obligations to an insurance company through the purchase of an annuity contract. As a result, a non- cash settlement loss of $12 million ($0.05 per diluted share) was recorded in other no
Slide 43: Financial Summary: 2021 Appendix
Financial Summary ////////////////// ▶ 2021 Appendix Company Overview 43
Slide 44: Financial Performance
Financial Performance Sales and Operating Margin, as Reported Net Sales Operating Margins 2,000 30% 1,800 1,600 25% Operating Margins Sales ($ millions) 1,400 20% 1,200 1,000 15% 800 600 10% 400 5% 200 - 0% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Diluted
Slide 45: Stock Dividend Growth
Stock Dividend Growth ////////////////// $0.84 $0.90 $0.80 $0.70 $0.48 $0.60 $0.50 $0.30 $0.40 $0.22 $0.30 $0.20 Dividends $0.10 adjusted for stock splits 0 2007 2012 2017 2022 45
Slide 46: Strong Cash Generation
Strong Cash Generation ($ Millions) 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012 Operating Cash Flows $ 457 $ 394 $ 419 $ 368 $ 338 $ 269 $ 190 $ 241 $ 243 $ 190 % of Net Income 104% 119% 122% 108% 134% 661% 55% 107% 115% 127% Capital Expenditures 134 71 128 54 40 42 42 31 23 18 Free Cash Flow
Slide 47: Worldwide Leaders in Fluid Handling
Move | Measure | Mix | Control | Dispense | Spray WORLDWIDE LEADERS IN FLUID HANDLING www.graco.com 47