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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934
For the quarterly period ended September 30, 2022
☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from to
Commission File Number: 001-09249
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GRACO INC. |
(Exact name of registrant as specified in its charter) |
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Minnesota | | 41-0285640 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification Number) |
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88 - 11th Avenue N.E. | | |
Minneapolis, | Minnesota | | 55413 |
(Address of principal executive offices) | | (Zip Code) |
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(612) | 623-6000 |
(Registrant’s telephone number, including area code) |
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock, par value $1.00 per share | GGG | The New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
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Large accelerated filer | ☒ | Accelerated filer | ☐ | Non-accelerated filer | ☐ | Smaller reporting company | ☐ |
Emerging growth company | ☐ | | | | | | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
168,529,015 shares of the Registrant’s Common Stock, $1.00 par value, were outstanding as of October 12, 2022.
TABLE OF CONTENTS
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PART I - FINANCIAL INFORMATION | |
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| Item 1. | | | |
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| Item 2. | | | |
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| Item 3. | | | |
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| Item 4. | | | |
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PART II - OTHER INFORMATION | |
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| Item 1A. | | | |
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| Item 2. | | | |
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| Item 6. | | | |
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EXHIBITS | |
PART I Item 1.
GRACO INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited) (In thousands except per share amounts)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| September 30, 2022 | | September 24, 2021 | | September 30, 2022 | | September 24, 2021 |
Net Sales | $ | 545,644 | | | $ | 486,696 | | | $ | 1,588,476 | | | $ | 1,447,989 | |
Cost of products sold | 284,556 | | | 238,462 | | | 803,853 | | | 688,597 | |
Gross Profit | 261,088 | | | 248,234 | | | 784,623 | | | 759,392 | |
Product development | 19,704 | | | 19,762 | | | 58,749 | | | 60,739 | |
Selling, marketing and distribution | 61,386 | | | 66,078 | | | 186,457 | | | 197,432 | |
General and administrative | 36,849 | | | 37,795 | | | 119,225 | | | 114,493 | |
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Operating Earnings | 143,149 | | | 124,599 | | | 420,192 | | | 386,728 | |
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Interest expense | 1,542 | | | 2,500 | | | 8,555 | | | 7,456 | |
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Other expense (income), net | (866) | | | 344 | | | (106) | | | 31 | |
Earnings Before Income Taxes | 142,473 | | | 121,755 | | | 411,743 | | | 379,241 | |
Income taxes | 26,241 | | | 17,926 | | | 77,290 | | | 59,607 | |
Net Earnings | $ | 116,232 | | | $ | 103,829 | | | $ | 334,453 | | | $ | 319,634 | |
Net Earnings per Common Share | | | | | | | |
Basic | $ | 0.69 | | | $ | 0.61 | | | $ | 1.97 | | | $ | 1.89 | |
Diluted | $ | 0.67 | | | $ | 0.59 | | | $ | 1.93 | | | $ | 1.83 | |
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See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited) (In thousands)
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| Three Months Ended | | Nine Months Ended |
| September 30, 2022 | | September 24, 2021 | | September 30, 2022 | | September 24, 2021 |
Net Earnings | $ | 116,232 | | | $ | 103,829 | | | $ | 334,453 | | | $ | 319,634 | |
Components of other comprehensive income (loss) | | | | | | | |
Cumulative translation adjustment | (13,335) | | | (3,537) | | | (29,827) | | | (8,314) | |
Pension and postretirement medical liability adjustment | 1,340 | | | 2,559 | | | 3,602 | | | 8,240 | |
Income taxes - pension and postretirement medical liability adjustment | (312) | | | (564) | | | (826) | | | (1,771) | |
Other comprehensive income (loss) | (12,307) | | | (1,542) | | | (27,051) | | | (1,845) | |
Comprehensive Income | $ | 103,925 | | | $ | 102,287 | | | $ | 307,402 | | | $ | 317,789 | |
See notes to consolidated financial statements.
GRACO INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited) (In thousands)
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| September 30, 2022 | | December 31, 2021 |
ASSETS | | | |
Current Assets | | | |
Cash and cash equivalents | $ | 414,827 | | | $ | 624,302 | |
Accounts receivable, less allowances of $6,600 and $3,900 | 364,073 | | | 325,132 | |
Inventories | 462,220 | | | 382,301 | |
Other current assets | 44,783 | | | 31,886 | |
Total current assets | 1,285,903 | | | 1,363,621 | |
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Property, Plant and Equipment, net | 562,807 | | | 451,061 | |
Goodwill | 359,645 | | | 356,255 | |
Other Intangible Assets, net | 136,948 | | | 149,740 | |
Operating Lease Assets | 30,996 | | | 30,046 | |
Deferred Income Taxes | 30,450 | | | 55,786 | |
Other Assets | 31,451 | | | 36,689 | |
Total Assets | $ | 2,438,200 | | | $ | 2,443,198 | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | | | |
Current Liabilities | | | |
Notes payable to banks | $ | 42,692 | | | $ | 43,489 | |
Current portion of long term debt | — | | | 75,000 | |
Trade accounts payable | 99,025 | | | 78,432 | |
Salaries and incentives | 60,458 | | | 82,941 | |
Dividends payable | 35,836 | | | 35,771 | |
Other current liabilities | 192,757 | | | 191,159 | |
Total current liabilities | 430,768 | | | 506,792 | |
Long-term Debt | 75,000 | | | 75,000 | |
Retirement Benefits and Deferred Compensation | 101,626 | | | 106,897 | |
Operating Lease Liabilities | 22,107 | | | 23,527 | |
Deferred Income Taxes | 8,310 | | | 10,661 | |
Other Non-current Liabilities | 12,078 | | | 10,978 | |
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Shareholders’ Equity | | | |
Common stock | 168,523 | | | 170,308 | |
Additional paid-in-capital | 776,594 | | | 742,288 | |
Retained earnings | 950,414 | | | 876,916 | |
Accumulated other comprehensive income (loss) | (107,220) | | | (80,169) | |
Total shareholders’ equity | 1,788,311 | | | 1,709,343 | |
Total Liabilities and Shareholders’ Equity | $ | 2,438,200 | | | $ | 2,443,198 | |
See notes to consolidated financial statements.
GRACO INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (In thousands)
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| Nine Months Ended |
| September 30, 2022 | | September 24, 2021 |
Cash Flows From Operating Activities | | | |
Net Earnings | $ | 334,453 | | | $ | 319,634 | |
Adjustments to reconcile net earnings to net cash provided by operating activities | | | |
Depreciation and amortization | 48,223 | | | 44,846 | |
Deferred income taxes | 20,062 | | | (10,219) | |
Share-based compensation | 19,480 | | | 19,882 | |
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Change in | | | |
Accounts receivable | (56,524) | | | (10,793) | |
Inventories | (86,455) | | | (77,531) | |
Trade accounts payable | 8,456 | | | 14,033 | |
Salaries and incentives | (20,841) | | | 22,770 | |
Retirement benefits and deferred compensation | 473 | | | 6,676 | |
Other accrued liabilities | 411 | | | 27,307 | |
Other | 3,814 | | | 626 | |
Net cash provided by operating activities | 271,552 | | | 357,231 | |
Cash Flows From Investing Activities | | | |
Property, plant and equipment additions | (147,193) | | | (82,628) | |
Acquisition of businesses, net of cash acquired | (25,296) | | | (19,386) | |
Other | (477) | | | (102) | |
Net cash used in investing activities | (172,966) | | | (102,116) | |
Cash Flows From Financing Activities | | | |
Borrowings on short-term lines of credit, net | 4,110 | | | 27,880 | |
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Payments on long-term debt | (75,000) | | | (69) | |
Payments of debt issuance costs | — | | | (1,422) | |
Common stock issued | 28,299 | | | 40,445 | |
Common stock repurchased | (155,181) | | | — | |
Taxes paid related to net share settlement of equity awards | (1,219) | | | — | |
Cash dividends paid | (106,855) | | | (95,238) | |
Net cash used in financing activities | (305,846) | | | (28,404) | |
Effect of exchange rate changes on cash | (2,215) | | | (1,792) | |
Net increase (decrease) in cash and cash equivalents | (209,475) | | | 224,919 | |
Cash and Cash Equivalents | | | |
Beginning of year | 624,302 | | | 378,909 | |
End of period | $ | 414,827 | | | $ | 603,828 | |
See notes to consolidated financial statements.
GRACO INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Unaudited) (In thousands)
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| Common Stock | | Additional Paid-In Capital | | Retained Earnings | | Accumulated Other Comprehensive Income (Loss) | | Total |
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Three Months Ended September 30, 2022 | | | | | | | | | |
Balance, July 1, 2022 | $ | 169,114 | | | $ | 770,209 | | | $ | 912,864 | | | $ | (94,913) | | | $ | 1,757,274 | |
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Shares issued | 182 | | | 4,707 | | | — | | | — | | | 4,889 | |
Shares repurchased | (773) | | | (3,369) | | | (43,126) | | | — | | | (47,268) | |
Stock compensation cost | — | | | 5,047 | | | — | | | — | | | 5,047 | |
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Net earnings | — | | | — | | | 116,232 | | | — | | | 116,232 | |
Dividends declared ($0.210 per share) | — | | | — | | | (35,556) | | | — | | | (35,556) | |
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Other comprehensive income (loss) | — | | | — | | | — | | | (12,307) | | | (12,307) | |
Balance, September 30, 2022 | $ | 168,523 | | | $ | 776,594 | | | $ | 950,414 | | | $ | (107,220) | | | $ | 1,788,311 | |
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Nine Months Ended September 30, 2022 | | | | | | | | | |
Balance, December 31, 2021 | $ | 170,308 | | | $ | 742,288 | | | $ | 876,916 | | | $ | (80,169) | | | $ | 1,709,343 | |
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Shares issued | 689 | | | 26,392 | | | — | | | — | | | 27,081 | |
Shares repurchased | (2,474) | | | (10,781) | | | (154,034) | | | — | | | (167,289) | |
Stock compensation cost | — | | | 18,696 | | | — | | | — | | | 18,696 | |
| | | | | | | | | |
Restricted stock canceled (issued) | — | | | (1) | | | — | | | — | | | (1) | |
Net earnings | — | | | — | | | 334,453 | | | — | | | 334,453 | |
Dividends declared ($0.630 per share) | — | | | — | | | (106,921) | | | — | | | (106,921) | |
| | | | | | | | | |
Other comprehensive income (loss) | — | | | — | | | — | | | (27,051) | | | (27,051) | |
Balance, September 30, 2022 | $ | 168,523 | | | $ | 776,594 | | | $ | 950,414 | | | $ | (107,220) | | | $ | 1,788,311 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
Three Months Ended September 24, 2021 | | | | | | | | | |
Balance, June 25, 2021 | $ | 169,667 | | | $ | 715,635 | | | $ | 720,429 | | | $ | (124,468) | | | $ | 1,481,263 | |
| | | | | | | | | |
Shares issued | 287 | | | 6,942 | | | — | | | — | | | 7,229 | |
| | | | | | | | | |
Stock compensation cost | — | | | 5,438 | | | — | | | — | | | 5,438 | |
| | | | | | | | | |
| | | | | | | | | |
Net earnings | — | | | — | | | 103,829 | | | — | | | 103,829 | |
Dividends declared ($0.188 per share) | — | | | — | | | (31,868) | | | — | | | (31,868) | |
| | | | | | | | | |
Other comprehensive income (loss) | — | | | — | | | — | | | (1,542) | | | (1,542) | |
Balance, September 24, 2021 | $ | 169,954 | | | $ | 728,015 | | | $ | 792,390 | | | $ | (126,010) | | | $ | 1,564,349 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
Nine Months Ended September 24, 2021 | | | | | | | | | |
Balance, December 25, 2020 | $ | 168,568 | | | $ | 671,206 | | | $ | 568,295 | | | $ | (124,165) | | | $ | 1,283,904 | |
| | | | | | | | | |
Shares issued | 1,386 | | | 41,395 | | | — | | | — | | | 42,781 | |
| | | | | | | | | |
Stock compensation cost | — | | | 17,750 | | | — | | | — | | | 17,750 | |
| | | | | | | | | |
Restricted stock canceled (issued) | — | | | (2,336) | | | — | | | — | | | (2,336) | |
Net earnings | — | | | — | | | 319,634 | | | — | | | 319,634 | |
Dividends declared ($0.563 per share) | — | | | — | | | (95,539) | | | — | | | (95,539) | |
| | | | | | | | | |
Other comprehensive income (loss) | — | | | — | | | — | | | (1,845) | | | (1,845) | |
Balance, September 24, 2021 | $ | 169,954 | | | $ | 728,015 | | | $ | 792,390 | | | $ | (126,010) | | | $ | 1,564,349 | |
See notes to consolidated financial statements.
GRACO INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1.Basis of Presentation
The consolidated balance sheet of Graco Inc. and subsidiaries (the “Company”) as of September 30, 2022 and the related statements of earnings, comprehensive income and shareholders' equity for the three and nine months ended September 30, 2022 and September 24, 2021, and cash flows for the nine months ended September 30, 2022 and September 24, 2021 have been prepared by the Company and have not been audited.
In the opinion of management, these consolidated financial statements reflect all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the financial position of the Company as of September 30, 2022, and the results of operations and cash flows for all periods presented.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. Therefore, these statements should be read in conjunction with the financial statements and notes thereto included in the Company’s 2021 Annual Report on Form 10-K.
The results of operations for interim periods are not necessarily indicative of results that will be realized for the full fiscal year.
2.Segment Information
Effective January 1, 2022, our high performance coatings and foam product offerings previously included within the Applied Fluid Technologies division of the Industrial segment were realigned and are now managed under the Contractor segment. This change aligns the types of products offered and markets served within the segments. Prior year segment information has been restated to conform to the current organizational structure.
The Company has three reportable segments: Industrial, Process and Contractor. Sales and operating earnings by segment were as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| September 30, 2022 | | September 24, 2021 | | September 30, 2022 | | September 24, 2021 |
Net Sales | | | | | | | |
Industrial | $ | 156,182 | | | $ | 154,560 | | | $ | 459,176 | | | $ | 428,872 | |
Process | 125,376 | | | 96,185 | | | 364,883 | | | 284,790 | |
Contractor | 264,086 | | | 235,951 | | | 764,417 | | | 734,327 | |
Total | $ | 545,644 | | | $ | 486,696 | | | $ | 1,588,476 | | | $ | 1,447,989 | |
Operating Earnings | | | | | | | |
Industrial | $ | 53,964 | | | $ | 50,812 | | | $ | 161,795 | | | $ | 138,879 | |
Process | 30,638 | | | 21,514 | | | 89,183 | | | 64,923 | |
Contractor | 65,123 | | | 58,659 | | | 192,314 | | | 203,366 | |
Unallocated corporate (expense) | (6,576) | | | (6,386) | | | (23,100) | | | (20,440) | |
| | | | | | | |
Total | $ | 143,149 | | | $ | 124,599 | | | $ | 420,192 | | | $ | 386,728 | |
Assets by segment were as follows (in thousands):
| | | | | | | | | | | |
| September 30, 2022 | | December 31, 2021 |
Industrial | $ | 606,224 | | | $ | 601,843 | |
Process | 543,701 | | | 436,203 | |
Contractor | 698,698 | | | 599,726 | |
Unallocated corporate | 589,577 | | | 805,426 | |
Total | $ | 2,438,200 | | | $ | 2,443,198 | |
Geographic information follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| September 30, 2022 | | September 24, 2021 | | September 30, 2022 | | September 24, 2021 |
Net Sales (based on customer location) | | | | | | | |
United States | $ | 289,831 | | | $ | 244,086 | | | $ | 840,922 | | | $ | 739,309 | |
Other countries | 255,813 | | | 242,610 | | | 747,554 | | | 708,680 | |
Total | $ | 545,644 | | | $ | 486,696 | | | $ | 1,588,476 | | | $ | 1,447,989 | |
| | | | | | | | | | | |
| September 30, 2022 | | December 31, 2021 |
Long-lived Assets | | | |
United States | $ | 498,780 | | | $ | 388,835 | |
Other countries | 64,027 | | | 62,226 | |
Total | $ | 562,807 | | | $ | 451,061 | |
3.Earnings per Share
The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share amounts):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| September 30, 2022 | | September 24, 2021 | | September 30, 2022 | | September 24, 2021 |
Net earnings available to common shareholders | $ | 116,232 | | | $ | 103,829 | | | $ | 334,453 | | | $ | 319,634 | |
Weighted average shares outstanding for basic earnings per share | 169,166 | | | 169,834 | | | 169,368 | | | 169,459 | |
Dilutive effect of stock options computed using the treasury stock method and the average market price | 3,623 | | | 4,940 | | | 4,020 | | | 4,939 | |
Weighted average shares outstanding for diluted earnings per share | 172,789 | | | 174,774 | | | 173,388 | | | 174,398 | |
Basic earnings per share | $ | 0.69 | | | $ | 0.61 | | | $ | 1.97 | | | $ | 1.89 | |
Diluted earnings per share | $ | 0.67 | | | $ | 0.59 | | | $ | 1.93 | | | $ | 1.83 | |
Stock options to purchase 1,618,000 and 428,000 shares were not included in the September 30, 2022 and September 24, 2021 computations of diluted earnings per share, respectively, because they would have been anti-dilutive.
4.Share-Based Awards
Options on common shares granted and outstanding, as well as the weighted average exercise price, are shown below (in thousands, except exercise prices):
| | | | | | | | | | | | | | | | | | | | | | | |
| Option Shares | | Weighted Average Exercise Price | | Options Exercisable | | Weighted Average Exercise Price |
Outstanding, December 31, 2021 | 9,575 | | | $ | 39.31 | | | 7,296 | | | $ | 33.75 | |
Granted | 831 | | | 71.73 | | | | | |
Exercised | (391) | | | 24.00 | | | | | |
Canceled | (40) | | | 49.17 | | | | | |
Outstanding, September 30, 2022 | 9,975 | | | $ | 42.58 | | | 7,648 | | | $ | 36.35 | |
The Company recognized year-to-date share-based compensation of $17.9 million in 2022 and $19.9 million in 2021. As of September 30, 2022, there was $11.0 million of unrecognized compensation cost related to unvested options, expected to be recognized over a weighted average period of 2.7 years.
The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions and results:
| | | | | | | | | | | |
| Nine Months Ended |
| September 30, 2022 | | September 24, 2021 |
Expected life in years | 7.3 | | 7.5 |
Interest rate | 1.9 | % | | 1.2 | % |
Volatility | 25.5 | % | | 25.3 | % |
Dividend yield | 1.2 | % | | 1.0 | % |
Weighted average fair value per share | $ | 19.06 | | | $ | 18.91 | |
Under the Company’s Employee Stock Purchase Plan, the Company issued 316,000 shares in 2022 and 416,000 shares in 2021. The fair value of the employees’ purchase rights under this Plan was estimated on the date of grant. The benefit of the 15 percent discount from the lesser of the fair market value per common share on the first day and the last day of the plan year was added to the fair value of the employees’ purchase rights determined using the Black-Scholes option-pricing model with the following assumptions and results:
| | | | | | | | | | | |
| Nine Months Ended |
| September 30, 2022 | | September 24, 2021 |
Expected life in years | 1.0 | | 1.0 |
Interest rate | 0.9 | % | | 0.1 | % |
Volatility | 20.5 | % | | 40.1 | % |
Dividend yield | 1.2 | % | | 1.1 | % |
Weighted average fair value per share | $ | 16.01 | | | $ | 21.50 | |
5.Retirement Benefits
The components of net periodic benefit cost for retirement benefit plans were as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| September 30, 2022 | | September 24, 2021 | | September 30, 2022 | | September 24, 2021 |
Pension Benefits | | | | | | | |
Service cost | $ | 2,053 | | | $ | 1,674 | | | $ | 6,187 | | | $ | 7,119 | |
Interest cost | 2,745 | | | 2,519 | | | 8,249 | | | 8,476 | |
Expected return on assets | (5,237) | | | (5,412) | | | (14,816) | | | (15,673) | |
Amortization and other | 1,200 | | | 2,148 | | | 3,695 | | | 7,254 | |
Net periodic benefit cost | $ | 761 | | | $ | 929 | | | $ | 3,315 | | | $ | 7,176 | |
Postretirement Medical | | | | | | | |
Service cost | $ | 129 | | | $ | 153 | | | $ | 387 | | | $ | 503 | |
Interest cost | 209 | | | 124 | | | 629 | | | 624 | |
Amortization | 86 | | | 252 | | | 259 | | | 752 | |
Net periodic benefit cost | $ | 424 | | | $ | 529 | | | $ | 1,275 | | | $ | 1,879 | |
6.Shareholders’ Equity
Changes in components of accumulated other comprehensive income (loss), net of tax were as follows (in thousands):
| | | | | | | | | | | | | | | | | |
| Pension and Postretirement Medical | | Cumulative Translation Adjustment | | Total |
Three Months Ended September 30, 2022 | | | | | |
Balance, July 1, 2022 | $ | (58,359) | | | $ | (36,554) | | | $ | (94,913) | |
Other comprehensive income (loss) before reclassifications | — | | | (13,335) | | | (13,335) | |
Reclassified to pension cost and deferred tax | 1,028 | | | — | | | 1,028 | |
| | | | | |
Balance, September 30, 2022 | $ | (57,331) | | | $ | (49,889) | | | $ | (107,220) | |
| | | | | | | | | | | | | | | | | |
| | | | | |
Nine Months Ended September 30, 2022 | | | | | |
Balance, December 31, 2021 | $ | (60,107) | | | $ | (20,062) | | | $ | (80,169) | |
Other comprehensive income (loss) before reclassifications | — | | | (29,827) | | | (29,827) | |
Reclassified to pension cost and deferred tax | 2,776 | | | — | | | 2,776 | |
| | | | | |
Balance, September 30, 2022 | $ | (57,331) | | | $ | (49,889) | | | $ | (107,220) | |
| | | | | | | | | | | | | | | | | |
| | | | | |
Three Months Ended September 24, 2021 | | | | | |
Balance, June 25, 2021 | $ | (109,655) | | | $ | (14,813) | | | $ | (124,468) | |
Other comprehensive income (loss) before reclassifications | — | | | (3,537) | | | (3,537) | |
Reclassified to pension cost and deferred tax | 1,995 | | | — | | | 1,995 | |
| | | | | |
Balance, September 24, 2021 | $ | (107,660) | | | $ | (18,350) | | | $ | (126,010) | |
| | | | | | | | | | | | | | | | | |
| | | | | |
Nine Months Ended September 24, 2021 | | | | | |
Balance, December 25, 2020 | $ | (114,129) | | | $ | (10,036) | | | $ | (124,165) | |
Other comprehensive income (loss) before reclassifications | — | | | (8,314) | | | (8,314) | |
Reclassified to pension cost and deferred tax | 6,469 | | | — | | | 6,469 | |
| | | | | |
Balance, September 24, 2021 | $ | (107,660) | | | $ | (18,350) | | | $ | (126,010) | |
Amounts related to pension and postretirement medical adjustments are reclassified to non-service components of pension cost that are included within other non-operating expenses.
7.Receivables and Credit Losses
Accounts receivable includes trade receivables of $350 million and other receivables of $14 million as of September 30, 2022 and $315 million and $10 million, respectively, as of December 31, 2021.
Allowance for Credit Losses
Following is a summary of activity in the year to date allowance for credit losses (in thousands):
| | | | | | | | | | | |
| |
| September 30, 2022 | | September 24, 2021 |
Balance, beginning | $ | 3,254 | | | $ | 3,745 | |
Additions (reversals) charged to costs and expenses | 3,262 | | | 164 | |
Deductions from reserves (1) | (564) | | | (425) | |
Other additions (deductions) (2) | (452) | | | 68 | |
Balance, ending | $ | 5,500 | | | $ | 3,552 | |
(1) Represents amounts determined to be uncollectible and charged against reserves, net of collections on accounts previously charged against reserves.
(2) Includes effects of foreign currency translation.
8.Inventories
Major components of inventories were as follows (in thousands):
| | | | | | | | | | | |
| September 30, 2022 | | December 31, 2021 |
Finished products and components | $ | 211,195 | | | $ | 166,922 | |
Products and components in various stages of completion | 140,892 | | | 117,063 | |
Raw materials and purchased components | 229,127 | | | 185,291 | |
Subtotal | 581,214 | | | 469,276 | |
Reduction to LIFO cost | (118,994) | | | (86,975) | |
Total | $ | 462,220 | | | $ | 382,301 | |
9.Intangible Assets
Components of other intangible assets were as follows (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Finite Life | | Indefinite Life | | |
| Customer Relationships | | Patents and Proprietary Technology | | Trademarks, Trade Names and Other | | Trade Names | | Total |
As of September 30, 2022 | | | | | | | | | |
Cost | $ | 202,103 | | | $ | 26,574 | | | $ | 1,700 | | | $ | 62,633 | | | $ | 293,010 | |
Accumulated amortization | (119,529) | | | (17,519) | | | (659) | | | — | | | (137,707) | |
Foreign currency translation | (12,791) | | | (1,042) | | | — | | | (4,522) | | | (18,355) | |
Book value | $ | 69,783 | | | $ | 8,013 | | | $ | 1,041 | | | $ | 58,111 | | | $ | 136,948 | |
Weighted average life in years | 13 | | 10 | | 5 | | N/A | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
As of December 31, 2021 | | | | | | | | | |
Cost | $ | 194,505 | | | $ | 26,074 | | | $ | 900 | | | $ | 62,633 | | | $ | 284,112 | |
Accumulated amortization | (108,657) | | | (15,734) | | | (452) | | | — | | | (124,843) | |
Foreign currency translation | (7,710) | | | (707) | | | — | | | (1,112) | | | (9,529) | |
Book value | $ | 78,138 | | | $ | 9,633 | | | $ | 448 | | | $ | 61,521 | | | $ | 149,740 | |
Weighted average life in years | 13 | | 10 | | 5 | | N/A | | |
Amortization of intangibles for the quarter was $4.8 million in 2022 and $4.6 million in 2021 and for the year to date was $14.1 million in 2022 and $13.4 million in 2021. Estimated annual amortization expense based on the current carrying amount of other intangible assets is as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2022 (Remainder) | | 2023 | | 2024 | | 2025 | | 2026 | | Thereafter |
Estimated Amortization Expense | $ | 4,556 | | | $ | 16,860 | | | $ | 15,639 | | | $ | 15,071 | | | $ | 8,660 | | | $ | 18,051 | |
Changes in the carrying amount of goodwill for each reportable segment were as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Industrial | | Process | | Contractor | | Total |
Balance, December 31, 2021 | $ | 185,733 | | | $ | 141,304 | | | $ | 29,218 | | | $ | 356,255 | |
Additions, adjustments from business acquisitions | — | | | 16,994 | | | — | | | 16,994 | |
Foreign currency translation | (10,162) | | | (3,442) | | | — | | | (13,604) | |
Balance, September 30, 2022 | $ | 175,571 | | | $ | 154,856 | | | $ | 29,218 | | | $ | |