10-Q 1 ggg-20220701.htm 10-Q ggg-20220701
July 1, 2022FALSE0000042888--12-30169,115,5612022Q216,99416,99400000428882022-01-012022-07-0100000428882022-07-14xbrli:shares00000428882022-04-022022-07-01iso4217:USD00000428882021-03-272021-06-2500000428882020-12-262021-06-25iso4217:USDxbrli:shares00000428882022-07-0100000428882021-12-3100000428882020-12-2500000428882021-06-250000042888us-gaap:CommonStockMember2022-04-010000042888us-gaap:AdditionalPaidInCapitalMember2022-04-010000042888us-gaap:RetainedEarningsMember2022-04-010000042888us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-04-0100000428882022-04-010000042888us-gaap:CommonStockMember2022-04-022022-07-010000042888us-gaap:AdditionalPaidInCapitalMember2022-04-022022-07-010000042888us-gaap:RetainedEarningsMember2022-04-022022-07-010000042888us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-04-022022-07-010000042888us-gaap:CommonStockMember2022-07-010000042888us-gaap:AdditionalPaidInCapitalMember2022-07-010000042888us-gaap:RetainedEarningsMember2022-07-010000042888us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-07-010000042888us-gaap:CommonStockMember2021-12-310000042888us-gaap:AdditionalPaidInCapitalMember2021-12-310000042888us-gaap:RetainedEarningsMember2021-12-310000042888us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-12-310000042888us-gaap:CommonStockMember2022-01-012022-07-010000042888us-gaap:AdditionalPaidInCapitalMember2022-01-012022-07-010000042888us-gaap:RetainedEarningsMember2022-01-012022-07-010000042888us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-01-012022-07-010000042888us-gaap:CommonStockMember2021-03-260000042888us-gaap:AdditionalPaidInCapitalMember2021-03-260000042888us-gaap:RetainedEarningsMember2021-03-260000042888us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-03-2600000428882021-03-260000042888us-gaap:CommonStockMember2021-03-272021-06-250000042888us-gaap:AdditionalPaidInCapitalMember2021-03-272021-06-250000042888us-gaap:RetainedEarningsMember2021-03-272021-06-250000042888us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-03-272021-06-250000042888us-gaap:CommonStockMember2021-06-250000042888us-gaap:AdditionalPaidInCapitalMember2021-06-250000042888us-gaap:RetainedEarningsMember2021-06-250000042888us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-06-250000042888us-gaap:CommonStockMember2020-12-250000042888us-gaap:AdditionalPaidInCapitalMember2020-12-250000042888us-gaap:RetainedEarningsMember2020-12-250000042888us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-12-250000042888us-gaap:CommonStockMember2020-12-262021-06-250000042888us-gaap:AdditionalPaidInCapitalMember2020-12-262021-06-250000042888us-gaap:RetainedEarningsMember2020-12-262021-06-250000042888us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-12-262021-06-25ggg:segment0000042888us-gaap:OperatingSegmentsMemberggg:IndustrialMember2022-04-022022-07-010000042888us-gaap:OperatingSegmentsMemberggg:IndustrialMember2021-03-272021-06-250000042888us-gaap:OperatingSegmentsMemberggg:IndustrialMember2022-01-012022-07-010000042888us-gaap:OperatingSegmentsMemberggg:IndustrialMember2020-12-262021-06-250000042888ggg:ProcessMemberus-gaap:OperatingSegmentsMember2022-04-022022-07-010000042888ggg:ProcessMemberus-gaap:OperatingSegmentsMember2021-03-272021-06-250000042888ggg:ProcessMemberus-gaap:OperatingSegmentsMember2022-01-012022-07-010000042888ggg:ProcessMemberus-gaap:OperatingSegmentsMember2020-12-262021-06-250000042888us-gaap:OperatingSegmentsMemberggg:ContractorMember2022-04-022022-07-010000042888us-gaap:OperatingSegmentsMemberggg:ContractorMember2021-03-272021-06-250000042888us-gaap:OperatingSegmentsMemberggg:ContractorMember2022-01-012022-07-010000042888us-gaap:OperatingSegmentsMemberggg:ContractorMember2020-12-262021-06-250000042888us-gaap:CorporateNonSegmentMember2022-04-022022-07-010000042888us-gaap:CorporateNonSegmentMember2021-03-272021-06-250000042888us-gaap:CorporateNonSegmentMember2022-01-012022-07-010000042888us-gaap:CorporateNonSegmentMember2020-12-262021-06-250000042888us-gaap:OperatingSegmentsMemberggg:IndustrialMember2022-07-010000042888us-gaap:OperatingSegmentsMemberggg:IndustrialMember2021-12-310000042888ggg:ProcessMemberus-gaap:OperatingSegmentsMember2022-07-010000042888ggg:ProcessMemberus-gaap:OperatingSegmentsMember2021-12-310000042888us-gaap:OperatingSegmentsMemberggg:ContractorMember2022-07-010000042888us-gaap:OperatingSegmentsMemberggg:ContractorMember2021-12-310000042888us-gaap:CorporateNonSegmentMember2022-07-010000042888us-gaap:CorporateNonSegmentMember2021-12-310000042888country:US2022-04-022022-07-010000042888country:US2021-03-272021-06-250000042888country:US2022-01-012022-07-010000042888country:US2020-12-262021-06-250000042888us-gaap:NonUsMember2022-04-022022-07-010000042888us-gaap:NonUsMember2021-03-272021-06-250000042888us-gaap:NonUsMember2022-01-012022-07-010000042888us-gaap:NonUsMember2020-12-262021-06-250000042888country:US2022-07-010000042888country:US2021-12-310000042888us-gaap:NonUsMember2022-07-010000042888us-gaap:NonUsMember2021-12-310000042888us-gaap:EmployeeStockOptionMember2022-01-012022-07-010000042888us-gaap:EmployeeStockOptionMember2020-12-262021-06-25xbrli:pure0000042888us-gaap:EmployeeStockMember2022-01-012022-07-010000042888us-gaap:EmployeeStockMember2020-12-262021-06-250000042888us-gaap:PensionPlansDefinedBenefitMember2022-04-022022-07-010000042888us-gaap:PensionPlansDefinedBenefitMember2021-03-272021-06-250000042888us-gaap:PensionPlansDefinedBenefitMember2022-01-012022-07-010000042888us-gaap:PensionPlansDefinedBenefitMember2020-12-262021-06-250000042888us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember2022-04-022022-07-010000042888us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember2021-03-272021-06-250000042888us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember2022-01-012022-07-010000042888us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember2020-12-262021-06-250000042888us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2022-04-010000042888us-gaap:AccumulatedTranslationAdjustmentMember2022-04-010000042888us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2022-04-022022-07-010000042888us-gaap:AccumulatedTranslationAdjustmentMember2022-04-022022-07-010000042888us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2022-07-010000042888us-gaap:AccumulatedTranslationAdjustmentMember2022-07-010000042888us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2021-12-310000042888us-gaap:AccumulatedTranslationAdjustmentMember2021-12-310000042888us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2022-01-012022-07-010000042888us-gaap:AccumulatedTranslationAdjustmentMember2022-01-012022-07-010000042888us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2021-03-260000042888us-gaap:AccumulatedTranslationAdjustmentMember2021-03-260000042888us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2021-03-272021-06-250000042888us-gaap:AccumulatedTranslationAdjustmentMember2021-03-272021-06-250000042888us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2021-06-250000042888us-gaap:AccumulatedTranslationAdjustmentMember2021-06-250000042888us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2020-12-250000042888us-gaap:AccumulatedTranslationAdjustmentMember2020-12-250000042888us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2020-12-262021-06-250000042888us-gaap:AccumulatedTranslationAdjustmentMember2020-12-262021-06-250000042888us-gaap:CustomerRelationshipsMember2022-07-010000042888ggg:PatentsProprietaryTechnologyAndProductDocumentationMember2022-07-010000042888us-gaap:TrademarksAndTradeNamesMember2022-07-010000042888us-gaap:TradeNamesMember2022-07-010000042888us-gaap:CustomerRelationshipsMember2022-01-012022-07-010000042888ggg:PatentsProprietaryTechnologyAndProductDocumentationMember2022-01-012022-07-010000042888us-gaap:TrademarksAndTradeNamesMember2022-01-012022-07-010000042888us-gaap:TradeNamesMember2022-01-012022-07-010000042888us-gaap:CustomerRelationshipsMember2021-12-310000042888ggg:PatentsProprietaryTechnologyAndProductDocumentationMember2021-12-310000042888us-gaap:TrademarksAndTradeNamesMember2021-12-310000042888us-gaap:TradeNamesMember2021-12-310000042888us-gaap:CustomerRelationshipsMember2020-12-262021-12-310000042888ggg:PatentsProprietaryTechnologyAndProductDocumentationMember2020-12-262021-12-310000042888us-gaap:TrademarksAndTradeNamesMember2020-12-262021-12-310000042888us-gaap:TradeNamesMember2020-12-262021-12-3100000428882020-12-262021-12-310000042888us-gaap:CustomerRelationshipsMember2022-01-012022-04-010000042888ggg:PatentsProprietaryTechnologyAndProductDocumentationMember2022-01-012022-04-010000042888us-gaap:TrademarksAndTradeNamesMember2022-01-012022-04-010000042888ggg:IndustrialMember2021-12-310000042888ggg:ProcessMember2021-12-310000042888ggg:ContractorMember2021-12-310000042888ggg:IndustrialMember2022-01-012022-07-010000042888ggg:ProcessMember2022-01-012022-07-010000042888ggg:ContractorMember2022-01-012022-07-010000042888ggg:IndustrialMember2022-07-010000042888ggg:ProcessMember2022-07-010000042888ggg:ContractorMember2022-07-010000042888us-gaap:FairValueInputsLevel2Member2022-07-010000042888us-gaap:FairValueInputsLevel2Member2021-12-310000042888us-gaap:FairValueInputsLevel3Member2022-07-010000042888us-gaap:FairValueInputsLevel3Member2021-12-31

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 July 1, 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
GRACO INC.
(Exact name of registrant as specified in its charter)     
 
Minnesota41-0285640
(State or other jurisdiction of incorporation or organization)  (I.R.S. Employer Identification Number)     
 
88 - 11th Avenue N.E.
Minneapolis,Minnesota55413
(Address of principal executive offices)    (Zip Code)     
(612)623-6000
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $1.00 per shareGGGThe 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.
YesNo
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).
YesNo
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.
Large accelerated filerAccelerated filerNon-accelerated filerSmaller 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).
YesNo

169,115,561 shares of the Registrant’s Common Stock, $1.00 par value, were outstanding as of July 14, 2022.



TABLE OF CONTENTS 
2

PART I     Item 1.
GRACO INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited) (In thousands except per share amounts)
 Three Months EndedSix Months Ended
 July 1,
2022
June 25,
2021
July 1,
2022
June 25,
2021
Net Sales$548,547 $507,164 $1,042,832 $961,293 
Cost of products sold279,487 243,340 519,297 450,135 
Gross Profit269,060 263,824 523,535 511,158 
Product development19,967 21,406 39,045 40,977 
Selling, marketing and distribution62,076 69,126 125,071 131,354 
General and administrative38,337 39,449 82,376 76,698 
Operating Earnings148,680 133,843 277,043 262,129 
Interest expense1,726 2,528 7,013 4,956 
Other expense, net607 (434)760 (313)
Earnings Before Income Taxes146,347 131,749 269,270 257,486 
Income taxes28,969 21,631 51,049 41,681 
Net Earnings$117,378 $110,118 $218,221 $215,805 
Net Earnings per Common Share
Basic
$0.69 $0.65 $1.29 $1.27 
Diluted
$0.68 $0.63 $1.26 $1.24 
See notes to consolidated financial statements.


CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited) (In thousands)
 Three Months EndedSix Months Ended
 July 1,
2022
June 25,
2021
July 1,
2022
June 25,
2021
Net Earnings$117,378 $110,118 $218,221 $215,805 
Components of other comprehensive
income (loss)
Cumulative translation adjustment
(13,532)5,693 (16,492)(4,777)
Pension and postretirement medical
liability adjustment
1,368 2,373 2,262 5,681 
Income taxes - pension and postretirement
medical liability adjustment
(320)(535)(514)(1,207)
Other comprehensive income (loss)(12,484)7,531 (14,744)(303)
Comprehensive Income$104,894 $117,649 $203,477 $215,502 
See notes to consolidated financial statements.
3

GRACO INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited) (In thousands)
July 1,
2022
December 31,
2021
ASSETS
Current Assets
Cash and cash equivalents$413,359 $624,302 
Accounts receivable, less allowances of $6,600 and $3,900
373,141 325,132 
Inventories450,974 382,301 
Other current assets39,002 31,886 
Total current assets1,276,476 1,363,621 
Property, Plant and Equipment, net516,156 451,061 
Goodwill365,491 356,255 
Other Intangible Assets, net145,201 149,740 
Operating Lease Assets31,055 30,046 
Deferred Income Taxes37,137 55,786 
Other Assets32,762 36,689 
Total Assets$2,404,278 $2,443,198 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Notes payable to banks$55,522 $43,489 
Current portion of long term debt 75,000 
Trade accounts payable85,452 78,432 
Salaries and incentives53,198 82,941 
Dividends payable35,794 35,771 
Other current liabilities194,092 191,159 
Total current liabilities424,058 506,792 
Long-term Debt75,000 75,000 
Retirement Benefits and Deferred Compensation103,341 106,897 
Operating Lease Liabilities23,112 23,527 
Deferred Income Taxes9,273 10,661 
Other Non-current Liabilities12,220 10,978 
Shareholders’ Equity
Common stock169,114 170,308 
Additional paid-in-capital770,209 742,288 
Retained earnings912,864 876,916 
Accumulated other comprehensive income (loss)(94,913)(80,169)
Total shareholders’ equity1,757,274 1,709,343 
Total Liabilities and Shareholders’ Equity$2,404,278 $2,443,198 
See notes to consolidated financial statements.
4

GRACO INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (In thousands)
 Six Months Ended
 July 1,
2022
June 25,
2021
Cash Flows From Operating Activities
Net Earnings$218,221 $215,805 
Adjustments to reconcile net earnings to net cash
provided by operating activities
Depreciation and amortization31,453 29,812 
Deferred income taxes14,743 (10,313)
Share-based compensation14,386 13,745 
Change in
Accounts receivable(56,263)(38,747)
Inventories(70,879)(51,359)
Trade accounts payable8,369 14,496 
Salaries and incentives(29,201)8,334 
Retirement benefits and deferred compensation349 5,980 
Other accrued liabilities(386)32,399 
Other4,193 (105)
Net cash provided by operating activities134,985 220,047 
Cash Flows From Investing Activities
Property, plant and equipment additions(88,861)(54,759)
Acquisition of businesses, net of cash acquired(25,296)(19,322)
Other(397)(112)
Net cash used in investing activities(114,554)(74,193)
Cash Flows From Financing Activities
Borrowings on short-term lines of credit, net13,830 (9,282)
Payments on long-term debt(75,000)(70)
Payments of debt issuance costs (1,422)
Common stock issued23,410 33,216 
Common stock repurchased(120,021) 
Taxes paid related to net share settlement of equity awards(1,219) 
Cash dividends paid(71,341)(63,414)
Net cash used in financing activities(230,341)(40,972)
Effect of exchange rate changes on cash(1,033)(1,004)
Net increase in cash and cash equivalents(210,943)103,878 
Cash and Cash Equivalents
Beginning of year624,302 378,909 
End of period$413,359 $482,787 
See notes to consolidated financial statements.
5

GRACO INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Unaudited) (In thousands)
Common
Stock
Additional
Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Total
Three Months Ended July 1, 2022
Balance, April 1, 2022$169,223 $761,959 $841,503 $(82,429)$1,690,256 
Shares issued70 2,047 2,117 
Shares repurchased(179)(777)(10,360)(11,316)
Stock compensation cost6,980 6,980 
Restricted stock canceled (issued)  
Net earnings117,378 117,378 
Dividends declared ($0.210 per share)
(35,657)(35,657)
Other comprehensive income (loss)(12,484)(12,484)
Balance, July 1, 2022$169,114 $770,209 $912,864 $(94,913)$1,757,274 
Six Months Ended July 1, 2022
Balance, December 31, 2021$170,308 $742,288 $876,916 $(80,169)$1,709,343 
Shares issued507 21,685 22,192 
Shares repurchased(1,701)(7,412)(110,908)(120,021)
Stock compensation cost13,649 13,649 
Restricted stock canceled (issued)(1)(1)
Net earnings218,221 218,221 
Dividends declared ($0.420 per share)
(71,365)(71,365)
Other comprehensive income (loss)(14,744)(14,744)
Balance, July 1, 2022$169,114 $770,209 $912,864 $(94,913)$1,757,274 
Three Months Ended June 25, 2021
Balance, March 26, 2021$169,413 $702,829 $642,259 $(131,999)$1,382,502 
Shares issued254 8,838   9,092 
Stock compensation cost 6,304   6,304 
Restricted stock canceled (issued) (2,336)  (2,336)
Net earnings  110,118  110,118 
Dividends declared ($0.188 per share)
  (31,948) (31,948)
Other comprehensive income (loss)   7,531 7,531 
Balance, June 25, 2021$169,667 $715,635 $720,429 $(124,468)$1,481,263 
Six Months Ended June 25, 2021
Balance, December 25, 2020$168,568 $671,206 $568,295 $(124,165)$1,283,904 
Shares issued1,099 34,453   35,552 
Stock compensation cost 12,312   12,312 
Restricted stock canceled (issued) (2,336)  (2,336)
Net earnings  215,805  215,805 
Dividends declared ($0.375 per share)
  (63,671) (63,671)
Other comprehensive income (loss)   (303)(303)
Balance, June 25, 2021$169,667 $715,635 $720,429 $(124,468)$1,481,263 
See notes to consolidated financial statements.
6

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 July 1, 2022 and the related statements of earnings, comprehensive income and shareholders' equity for the three and six months ended July 1, 2022 and June 25, 2021, and cash flows for the six months ended July 1, 2022 and June 25, 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 July 1, 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 EndedSix Months Ended
 July 1,
2022
June 25,
2021
July 1,
2022
June 25,
2021
Net Sales
 Industrial$158,325 $144,448 $302,994 $274,312 
 Process124,483 97,232 239,507 188,605 
 Contractor265,739 265,484 500,331 498,376 
 Total$548,547 $507,164 $1,042,832 $961,293 
Operating Earnings
 Industrial$55,201 $45,709 $107,831 $88,067 
 Process31,057 21,676 58,545 43,409 
 Contractor68,244 73,656 127,191 144,707 
 Unallocated corporate (expense)(5,822)(7,198)(16,524)(14,054)
 Total$148,680 $133,843 $277,043 $262,129 

7

Assets by segment were as follows (in thousands): 
July 1,
2022
December 31,
2021
Industrial
$604,654 $601,843 
Process
517,098 436,203 
Contractor
658,361 599,726 
Unallocated corporate
624,165 805,426 
Total
$2,404,278 $2,443,198 

Geographic information follows (in thousands):
 Three Months EndedSix Months Ended
 July 1,
2022
June 25,
2021
July 1,
2022
June 25,
2021
Net Sales (based on customer location)
United States
$296,009 $263,722 $551,091 $495,223 
Other countries
252,538 243,442 491,741 466,070 
Total
$548,547 $507,164 $1,042,832 $961,293 

 July 1,
2022
December 31,
2021
Long-lived Assets
United States
$456,238 $388,835 
Other countries
59,918 62,226 
Total
$516,156 $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 EndedSix Months Ended
 July 1,
2022
June 25,
2021
July 1,
2022
June 25,
2021
Net earnings available to common shareholders
$117,378 $110,118 $218,221 $215,805 
Weighted average shares outstanding for basic earnings per share169,128 169,594 169,469 169,271 
Dilutive effect of stock options computed using the treasury stock method and the average market price3,570 4,978 4,219 4,939 
Weighted average shares outstanding for diluted earnings per share172,698 174,572 173,688 174,210 
Basic earnings per share
$0.69 $0.65 $1.29 $1.27 
Diluted earnings per share
$0.68 $0.63 $1.26 $1.24 

Stock options to purchase 1,632,000 and 737,000 shares were not included in the July 1, 2022 and June 25, 2021 computations of diluted earnings per share, respectively, because they would have been anti-dilutive.

8

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, 20219,575 $39.31 7,296 $33.75 
Granted831 71.73 
Exercised(228)24.62 
Canceled(24)43.75 
Outstanding, July 1, 202210,154 $42.29 7,809 $36.06 

The Company recognized year-to-date share-based compensation of $12.9 million in 2022 and $13.7 million in 2021. As of July 1, 2022, there was $14.9 million of unrecognized compensation cost related to unvested options, expected to be recognized over a weighted average period of 3.0 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:
 Six Months Ended
 July 1,
2022
June 25,
2021
Expected life in years
7.37.5
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 319,000 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:
 Six Months Ended
 July 1,
2022
June 25,
2021
Expected life in years
1.01.0
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 

9

5.Retirement Benefits

The components of net periodic benefit cost for retirement benefit plans were as follows (in thousands):
 Three Months EndedSix Months Ended
 July 1,
2022
June 25,
2021
July 1,
2022
June 25,
2021
Pension Benefits
Service cost
$1,964 $2,724 $4,134 $5,445 
Interest cost
2,766 2,976 5,504 5,957 
Expected return on assets
(4,777)(5,131)(9,579)(10,261)
Amortization and other
1,419 2,555 2,495 5,106 
Net periodic benefit cost
$1,372 $3,124 $2,554 $6,247 
Postretirement Medical
Service cost
$83 $175 $258 $350 
Interest cost
195 250 420 500 
Amortization
(2)250 173 500 
Net periodic benefit cost
$276 $675 $851 $1,350 

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 July 1, 2022
Balance, April 1, 2022$(59,407)$(23,022)$(82,429)
Other comprehensive income (loss) before reclassifications (13,532)(13,532)
Reclassified to pension cost and deferred tax1,048  1,048 
Balance, July 1, 2022$(58,359)$(36,554)$(94,913)

Six Months Ended July 1, 2022
Balance, December 31, 2021$(60,107)$(20,062)$(80,169)
Other comprehensive income (loss) before reclassifications (16,492)(16,492)
Reclassified to pension cost and deferred tax1,748  1,748 
Balance, July 1, 2022$(58,359)$(36,554)$(94,913)

Three Months Ended June 25, 2021
Balance, March 26, 2021$(111,493)$(20,506)$(131,999)
Other comprehensive income (loss) before reclassifications 5,693 5,693 
Reclassified to pension cost and deferred tax1,838  1,838 
Balance, June 25, 2021$(109,655)$(14,813)$(124,468)

Six Months Ended June 25, 2021
Balance, December 25, 2020$(114,129)$(10,036)$(124,165)
Other comprehensive income (loss) before reclassifications (4,777)(4,777)
Reclassified to pension cost and deferred tax4,474  4,474 
Balance, June 25, 2021$(109,655)$(14,813)$(124,468)
10


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 $361 million and other receivables of $12 million as of July 1, 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):
July 1,
2022
June 25,
2021
Balance, beginning$3,254 $3,745 
Additions (reversals) charged to costs and expenses3,246 265 
Deductions from reserves (1)
(575)(495)
Other additions (deductions) (2)
(236)(4)
Balance, ending$5,688 $3,511 

(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):
July 1,
2022
December 31,
2021
Finished products and components$197,042 $166,922 
Products and components in various stages of completion137,268 117,063 
Raw materials and purchased components221,746 185,291 
Subtotal556,056 469,276 
Reduction to LIFO cost(105,082)(86,975)
Total$450,974 $382,301 

11

9.Intangible Assets

Components of other intangible assets were as follows (dollars in thousands):
Finite LifeIndefinite Life
Customer
Relationships
Patents and
Proprietary
Technology
Trademarks,
Trade Names
and Other
Trade
Names
Total
As of July 1, 2022
Cost
$202,903 $26,974 $1,700 $62,633 $294,210 
Accumulated amortization
(116,312)(17,176)(581)— (134,069)
Foreign currency translation(10,815)(930) (3,195)(14,940)
Book value
$75,776 $8,868 $1,119 $59,438 $145,201 
Weighted average life in years
1395N/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
13105N/A

Amortization of intangibles for the quarter was $4.6 million in 2022 and $4.6 million in 2021 and for the year to date was $9.4 million in 2022 and $8.9 million in 2021. Estimated annual amortization expense based on the current carrying amount of other intangible assets is as follows (in thousands):
2022 (Remainder)2023202420252026Thereafter
Estimated Amortization Expense$9,253 $17,309 $16,076 $15,511 $8,915 $18,699 

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(5,977)(1,781) (7,758)
Balance, July 1, 2022$179,756 $156,517 $29,218 $