Company Quick10K Filing
Quick10K
Graco
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$50.87 167 $8,470
10-Q 2019-06-28 Quarter: 2019-06-28
10-Q 2019-03-29 Quarter: 2019-03-29
10-K 2018-12-28 Annual: 2018-12-28
10-Q 2018-09-28 Quarter: 2018-09-28
10-Q 2018-06-29 Quarter: 2018-06-29
10-Q 2018-03-30 Quarter: 2018-03-30
10-K 2017-12-29 Annual: 2017-12-29
10-Q 2017-09-29 Quarter: 2017-09-29
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-30 Annual: 2016-12-30
10-Q 2016-09-23 Quarter: 2016-09-23
10-Q 2016-06-24 Quarter: 2016-06-24
10-Q 2016-03-25 Quarter: 2016-03-25
10-K 2015-12-25 Annual: 2015-12-25
10-Q 2015-09-25 Quarter: 2015-09-25
10-Q 2015-06-26 Quarter: 2015-06-26
10-Q 2015-03-27 Quarter: 2015-03-27
10-K 2014-12-26 Annual: 2014-12-26
10-Q 2014-09-26 Quarter: 2014-09-26
10-Q 2014-06-27 Quarter: 2014-06-27
10-Q 2014-03-28 Quarter: 2014-03-28
10-K 2013-12-27 Annual: 2013-12-27
8-K 2019-04-26 Leave Agreement, Officers, Shareholder Vote, Exhibits
8-K 2019-01-28 Earnings, Exhibits
8-K 2019-01-28 Earnings, Exhibits
8-K 2018-06-18 Officers, Exhibits
8-K 2018-05-01 Enter Agreement, Shareholder Vote
8-K 2018-01-29 Earnings, Exhibits
HEI Heico 13,880
URI United Rentals 10,520
ACOR Acorda Therapeutics 559
WHLM Wilhelmina 31
RDGL Vivos 0
TGRO Tiger Oil & Energy 0
IBKR Interactive Brokers Group 0
RDC Rowan Companies 0
AEXE AIM Exploration 0
SAB Grupo Casa Saba 0
GGG 2019-06-28
Part I Item 1.
Item 2. Graco Inc. and Subsidiaries
Item 3.Quantitative and Qualitative Disclosures About Market Risk
Item 4.Controls and Procedures
Part Iiother Information
Item 1A.Risk Factors
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
Item 6.Exhibits
EX-10.2 ggg2019q2exhibit102.htm
EX-10.3 ggg2019q2exhibit103.htm
EX-31.1 ggg2019q2exhibit311.htm
EX-31.2 ggg2019q2exhibit312.htm
EX-32 ggg2019q2exhibit32.htm
EX-99.1 ggg06282019exhibit991.htm

Graco Earnings 2019-06-28

GGG 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Document
false--12-27Q220190000042888530000052000000.13250.26500.16000.3200225000000 0000042888 2018-12-29 2019-06-28 0000042888 2019-07-17 0000042888 2019-03-30 2019-06-28 0000042888 2018-03-31 2018-06-29 0000042888 2017-12-30 2018-06-29 0000042888 2019-06-28 0000042888 2018-12-28 0000042888 2018-06-29 0000042888 2017-12-29 0000042888 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-12-29 2019-06-28 0000042888 us-gaap:RetainedEarningsMember 2018-12-29 2019-06-28 0000042888 us-gaap:CommonStockMember 2018-12-29 2019-06-28 0000042888 us-gaap:AdditionalPaidInCapitalMember 2018-12-29 2019-06-28 0000042888 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-06-28 0000042888 us-gaap:RetainedEarningsMember 2019-06-28 0000042888 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-12-28 0000042888 us-gaap:RetainedEarningsMember 2018-12-28 0000042888 us-gaap:AdditionalPaidInCapitalMember 2019-06-28 0000042888 us-gaap:CommonStockMember 2019-06-28 0000042888 us-gaap:CommonStockMember 2018-12-28 0000042888 us-gaap:AdditionalPaidInCapitalMember 2018-12-28 0000042888 us-gaap:CommonStockMember 2017-12-30 2018-06-29 0000042888 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2017-12-30 2018-06-29 0000042888 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-06-29 0000042888 us-gaap:AdditionalPaidInCapitalMember 2017-12-30 2018-06-29 0000042888 us-gaap:AdditionalPaidInCapitalMember 2018-06-29 0000042888 us-gaap:RetainedEarningsMember 2018-06-29 0000042888 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2017-12-29 0000042888 us-gaap:RetainedEarningsMember 2017-12-30 2018-06-29 0000042888 us-gaap:CommonStockMember 2017-12-29 0000042888 us-gaap:RetainedEarningsMember 2017-12-29 0000042888 us-gaap:CommonStockMember 2018-06-29 0000042888 us-gaap:AdditionalPaidInCapitalMember 2017-12-29 0000042888 us-gaap:CommonStockMember 2018-03-31 2018-06-29 0000042888 us-gaap:RetainedEarningsMember 2018-03-31 2018-06-29 0000042888 us-gaap:AdditionalPaidInCapitalMember 2018-03-31 2018-06-29 0000042888 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-03-31 2018-06-29 0000042888 2018-03-30 0000042888 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-03-30 0000042888 us-gaap:CommonStockMember 2018-03-30 0000042888 us-gaap:RetainedEarningsMember 2018-03-30 0000042888 us-gaap:AdditionalPaidInCapitalMember 2018-03-30 0000042888 us-gaap:RetainedEarningsMember 2019-03-30 2019-06-28 0000042888 us-gaap:CommonStockMember 2019-03-29 0000042888 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-03-30 2019-06-28 0000042888 us-gaap:CommonStockMember 2019-03-30 2019-06-28 0000042888 us-gaap:RetainedEarningsMember 2019-03-29 0000042888 2019-03-29 0000042888 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-03-29 0000042888 us-gaap:AdditionalPaidInCapitalMember 2019-03-30 2019-06-28 0000042888 us-gaap:AdditionalPaidInCapitalMember 2019-03-29 0000042888 country:US 2019-06-28 0000042888 us-gaap:NonUsMember 2019-06-28 0000042888 country:US 2018-12-28 0000042888 us-gaap:NonUsMember 2018-12-28 0000042888 country:US 2018-03-31 2018-06-29 0000042888 country:US 2018-12-29 2019-06-28 0000042888 country:US 2017-12-30 2018-06-29 0000042888 us-gaap:NonUsMember 2018-03-31 2018-06-29 0000042888 country:US 2019-03-30 2019-06-28 0000042888 us-gaap:NonUsMember 2017-12-30 2018-06-29 0000042888 us-gaap:NonUsMember 2018-12-29 2019-06-28 0000042888 us-gaap:NonUsMember 2019-03-30 2019-06-28 0000042888 us-gaap:OperatingSegmentsMember ggg:ProcessMember 2018-12-28 0000042888 us-gaap:CorporateNonSegmentMember 2019-06-28 0000042888 us-gaap:OperatingSegmentsMember ggg:IndustrialMember 2019-06-28 0000042888 us-gaap:OperatingSegmentsMember ggg:ProcessMember 2019-06-28 0000042888 us-gaap:OperatingSegmentsMember ggg:ContractorMember 2018-12-28 0000042888 us-gaap:OperatingSegmentsMember ggg:IndustrialMember 2018-12-28 0000042888 us-gaap:OperatingSegmentsMember ggg:ContractorMember 2019-06-28 0000042888 us-gaap:CorporateNonSegmentMember 2018-12-28 0000042888 us-gaap:OperatingSegmentsMember ggg:IndustrialMember 2018-03-31 2018-06-29 0000042888 us-gaap:OperatingSegmentsMember ggg:ProcessMember 2018-12-29 2019-06-28 0000042888 us-gaap:OperatingSegmentsMember ggg:IndustrialMember 2018-12-29 2019-06-28 0000042888 us-gaap:OperatingSegmentsMember ggg:IndustrialMember 2019-03-30 2019-06-28 0000042888 us-gaap:OperatingSegmentsMember ggg:ProcessMember 2018-03-31 2018-06-29 0000042888 us-gaap:OperatingSegmentsMember ggg:ContractorMember 2018-03-31 2018-06-29 0000042888 us-gaap:OperatingSegmentsMember ggg:IndustrialMember 2017-12-30 2018-06-29 0000042888 us-gaap:CorporateNonSegmentMember 2018-12-29 2019-06-28 0000042888 us-gaap:OperatingSegmentsMember ggg:ProcessMember 2017-12-30 2018-06-29 0000042888 us-gaap:CorporateNonSegmentMember 2018-03-31 2018-06-29 0000042888 us-gaap:OperatingSegmentsMember ggg:ContractorMember 2018-12-29 2019-06-28 0000042888 us-gaap:CorporateNonSegmentMember 2019-03-30 2019-06-28 0000042888 us-gaap:OperatingSegmentsMember ggg:ProcessMember 2019-03-30 2019-06-28 0000042888 us-gaap:OperatingSegmentsMember ggg:ContractorMember 2019-03-30 2019-06-28 0000042888 us-gaap:CorporateNonSegmentMember 2017-12-30 2018-06-29 0000042888 us-gaap:OperatingSegmentsMember ggg:ContractorMember 2017-12-30 2018-06-29 0000042888 us-gaap:EmployeeStockOptionMember 2018-12-29 2019-06-28 0000042888 us-gaap:EmployeeStockOptionMember 2017-12-30 2018-06-29 0000042888 us-gaap:EmployeeStockMember 2017-12-30 2018-06-29 0000042888 us-gaap:EmployeeStockMember 2018-12-29 2019-06-28 0000042888 us-gaap:PensionPlansDefinedBenefitMember 2017-12-30 2018-06-29 0000042888 us-gaap:PensionPlansDefinedBenefitMember 2019-03-30 2019-06-28 0000042888 us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember 2018-12-29 2019-06-28 0000042888 us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember 2017-12-30 2018-06-29 0000042888 us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember 2019-03-30 2019-06-28 0000042888 us-gaap:PensionPlansDefinedBenefitMember 2018-03-31 2018-06-29 0000042888 us-gaap:PensionPlansDefinedBenefitMember 2018-12-29 2019-06-28 0000042888 us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember 2018-03-31 2018-06-29 0000042888 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2019-06-28 0000042888 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2018-12-29 2019-06-28 0000042888 us-gaap:AccumulatedTranslationAdjustmentMember 2019-06-28 0000042888 us-gaap:AccumulatedTranslationAdjustmentMember 2018-12-29 2019-06-28 0000042888 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2018-12-28 0000042888 us-gaap:AccumulatedTranslationAdjustmentMember 2018-12-28 0000042888 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2017-12-30 2018-06-29 0000042888 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2017-12-29 0000042888 us-gaap:AccumulatedTranslationAdjustmentMember 2017-12-29 0000042888 us-gaap:AccumulatedTranslationAdjustmentMember 2018-06-29 0000042888 us-gaap:AccumulatedTranslationAdjustmentMember 2017-12-30 2018-06-29 0000042888 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2018-06-29 0000042888 us-gaap:AccumulatedTranslationAdjustmentMember 2019-03-30 2019-06-28 0000042888 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2019-03-30 2019-06-28 0000042888 us-gaap:AccumulatedTranslationAdjustmentMember 2019-03-29 0000042888 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2019-03-29 0000042888 us-gaap:AccumulatedTranslationAdjustmentMember 2018-03-31 2018-06-29 0000042888 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2018-03-30 0000042888 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2018-03-31 2018-06-29 0000042888 us-gaap:AccumulatedTranslationAdjustmentMember 2018-03-30 0000042888 ggg:ContractorMember 2018-12-29 2019-06-28 0000042888 ggg:ContractorMember 2019-06-28 0000042888 ggg:ProcessMember 2019-06-28 0000042888 ggg:ProcessMember 2018-12-29 2019-06-28 0000042888 ggg:IndustrialMember 2018-12-29 2019-06-28 0000042888 ggg:IndustrialMember 2019-06-28 0000042888 ggg:ContractorMember 2018-12-28 0000042888 ggg:ProcessMember 2018-12-28 0000042888 ggg:IndustrialMember 2018-12-28 0000042888 us-gaap:TrademarksAndTradeNamesMember 2018-12-28 0000042888 ggg:PatentsProprietaryTechnologyAndProductDocumentationMember 2017-12-30 2018-12-28 0000042888 us-gaap:CustomerRelationshipsMember 2018-12-28 0000042888 us-gaap:TrademarksAndTradeNamesMember 2017-12-30 2018-12-28 0000042888 ggg:PatentsProprietaryTechnologyAndProductDocumentationMember 2018-12-28 0000042888 us-gaap:TradeNamesMember 2017-12-30 2018-12-28 0000042888 us-gaap:CustomerRelationshipsMember 2017-12-30 2018-12-28 0000042888 us-gaap:TradeNamesMember 2018-12-28 0000042888 2017-12-30 2018-12-28 0000042888 ggg:PatentsProprietaryTechnologyAndProductDocumentationMember 2018-12-29 2019-06-28 0000042888 us-gaap:TrademarksAndTradeNamesMember 2019-06-28 0000042888 us-gaap:TradeNamesMember 2019-06-28 0000042888 ggg:PatentsProprietaryTechnologyAndProductDocumentationMember 2019-06-28 0000042888 us-gaap:TrademarksAndTradeNamesMember 2018-12-29 2019-06-28 0000042888 us-gaap:CustomerRelationshipsMember 2019-06-28 0000042888 us-gaap:CustomerRelationshipsMember 2018-12-29 2019-06-28 0000042888 us-gaap:TradeNamesMember 2018-12-29 2019-06-28 0000042888 us-gaap:FairValueInputsLevel2Member 2019-06-28 0000042888 us-gaap:FairValueInputsLevel2Member 2018-12-28 0000042888 us-gaap:FairValueInputsLevel3Member 2018-12-28 0000042888 us-gaap:FairValueInputsLevel3Member 2019-06-28 0000042888 2018-12-29 iso4217:USD xbrli:shares xbrli:pure iso4217:USD xbrli:shares ggg:segment

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 June 28, 2019

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)     
 
Minnesota
 
41-0285640
(State or other jurisdiction of incorporation or organization)  
 
(I.R.S. Employer Identification Number)     
 
88 - 11th Avenue N.E.
 
 
Minneapolis,
Minnesota
 
55413
(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 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.
 
Yes
 
No
 

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).
 
Yes
 
No
 

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 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).
 
Yes
 
No
 

166,805,000 shares of the Registrant’s Common Stock, $1.00 par value, were outstanding as of July 17, 2019.



TABLE OF CONTENTS 
 
 
 
 
Page
PART I - FINANCIAL INFORMATION
 
 
 
 
 
 
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
 
 
 
 
Item 3.
 
 
 
 
 
 
 
Item 4.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PART II - OTHER INFORMATION
 
 
 
 
 
 
 
Item 1A.
 
 
 
 
 
 
 
Item 2.
 
 
 
 
 
 
 
Item 6.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EXHIBITS
 

2

Table of Contents

PART I     Item 1.
GRACO INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited) (In thousands except per share amounts)
 
Three Months Ended
 
Six Months Ended
 
June 28,
2019
 
June 29,
2018
 
June 28,
2019
 
June 29,
2018
Net Sales
$
428,328

 
$
424,570

 
$
833,198

 
$
830,918

Cost of products sold
201,374

 
194,667

 
390,202

 
378,594

Gross Profit
226,954

 
229,903

 
442,996

 
452,324

Product development
17,324

 
16,112

 
33,893

 
31,401

Selling, marketing and distribution
60,441

 
62,949

 
121,258

 
125,471

General and administrative
36,828

 
37,464

 
70,957

 
70,378

Operating Earnings
112,361

 
113,378

 
216,888

 
225,074

Interest expense
3,431

 
3,891

 
6,966

 
7,124

Other expense, net
1,119

 
4,251

 
1,388

 
5,286

Earnings Before Income Taxes
107,811

 
105,236

 
208,534

 
212,664

Income taxes
19,674

 
16,096

 
33,648

 
38,014

Net Earnings
$
88,137

 
$
89,140

 
$
174,886

 
$
174,650

Net Earnings per Common Share
 
 
 
 
 
 
 
Basic
$
0.53

 
$
0.53

 
$
1.05

 
$
1.04

Diluted
$
0.51

 
$
0.51

 
$
1.02

 
$
1.00

See notes to consolidated financial statements.


CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited) (In thousands)
 
Three Months Ended
 
Six Months Ended
 
June 28,
2019
 
June 29,
2018
 
June 28,
2019
 
June 29,
2018
Net Earnings
$
88,137

 
$
89,140

 
$
174,886

 
$
174,650

Components of other comprehensive
income (loss)
 
 
 
 
 
 
 
Cumulative translation adjustment
1,232

 
(15,112
)
 
2,401

 
(6,366
)
Pension and postretirement medical
liability adjustment
1,910

 
2,705

 
4,037

 
4,531

Income taxes - pension and postretirement
medical liability adjustment
(423
)
 
(596
)
 
(893
)
 
(997
)
Other comprehensive income
2,719

 
(13,003
)
 
5,545

 
(2,832
)
Comprehensive Income
$
90,856

 
$
76,137

 
$
180,431

 
$
171,818

See notes to consolidated financial statements.

3

Table of Contents

GRACO INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited) (In thousands)
 
June 28,
2019
 
December 28,
2018
ASSETS
 
 
 
Current Assets
 
 
 
Cash and cash equivalents
$
180,883

 
$
132,118

Accounts receivable, less allowances of $5,200 and $5,300
291,008

 
274,608

Inventories
297,545

 
283,982

Other current assets
29,457

 
32,508

Total current assets
798,893

 
723,216

Property, Plant and Equipment, net
286,521

 
229,295

Goodwill
296,273

 
293,846

Other Intangible Assets, net
163,564

 
166,310

Operating Lease Assets
32,170

 

Deferred Income Taxes
32,691

 
32,055

Other Assets
30,435

 
28,019

Total Assets
$
1,640,547

 
$
1,472,741

LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
Current Liabilities
 
 
 
Notes payable to banks
$
7,284

 
$
11,083

Current portion of long term debt
75,000

 

Trade accounts payable
61,958

 
56,902

Salaries and incentives
47,109

 
62,297

Dividends payable
26,716

 
26,480

Other current liabilities
141,535

 
143,041

Total current liabilities
359,602

 
299,803

Long-term Debt
179,081

 
266,391

Retirement Benefits and Deferred Compensation
135,209

 
133,388

Operating Lease Liabilities
25,734

 

Deferred Income Taxes
14,963

 
16,586

Other Non-current Liabilities

 
4,700

Shareholders’ Equity
 
 
 
Common stock
166,792

 
165,171

Additional paid-in-capital
556,170

 
510,825

Retained earnings
342,308

 
220,734

Accumulated other comprehensive income (loss)
(139,312
)
 
(144,857
)
Total shareholders’ equity
925,958

 
751,873

Total Liabilities and Shareholders’ Equity
$
1,640,547

 
$
1,472,741

See notes to consolidated financial statements.

4

Table of Contents

GRACO INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (In thousands)
 
Six Months Ended
 
June 28,
2019
 
June 29,
2018
Cash Flows From Operating Activities
 
 
 
Net Earnings
$
174,886

 
$
174,650

Adjustments to reconcile net earnings to net cash
provided by operating activities
 
 
 
Depreciation and amortization
24,087

 
23,755

Deferred income taxes
(3,881
)
 
355

Share-based compensation
17,548

 
15,832

Change in
 
 
 
Accounts receivable
(16,051
)
 
(26,100
)
Inventories
(13,157
)
 
(17,700
)
Trade accounts payable
4,603

 
2,298

Salaries and incentives
(18,514
)
 
(13,231
)
Retirement benefits and deferred compensation
5,780

 
6,627

Other accrued liabilities
(10,789
)
 
6,493

Other
(690
)
 
(2,202
)
Net cash provided by operating activities
163,822

 
170,777

Cash Flows From Investing Activities
 
 
 
Property, plant and equipment additions
(70,186
)
 
(27,443
)
Acquisition of businesses, net of cash acquired
(6,176
)
 
(10,519
)
Other
(828
)
 
(65
)
Net cash provided by (used in) investing activities
(77,190
)
 
(38,027
)
Cash Flows From Financing Activities
 
 
 
Borrowings (payments) on short-term lines of credit, net
(3,767
)
 
112

Borrowings on long-term lines of credit
23,944

 
389,340

Payments on long-term debt and lines of credit
(36,453
)
 
(320,603
)
Common stock issued
33,954

 
20,052

Common stock repurchased
(2,438
)
 
(155,601
)
Taxes paid related to net share settlement of equity awards
(1,268
)

(16,151
)
Cash dividends paid
(53,075
)
 
(44,650
)
Net cash provided by (used in) financing activities
(39,103
)
 
(127,501
)
Effect of exchange rate changes on cash
1,236

 
448

Net increase (decrease) in cash and cash equivalents
48,765

 
5,697

Cash, Cash Equivalents and Restricted Cash
 
 
 
Beginning of year
132,118

 
112,904

End of period
$
180,883

 
$
118,601

Reconciliation to Consolidated Balance Sheets
 
 
 
Cash and cash equivalents
$
180,883

 
$
109,854

Restricted cash included in other current assets

 
8,747

Cash, cash equivalents and restricted cash
$
180,883

 
$
118,601

See notes to consolidated financial statements.

5

Table of Contents

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 June 28, 2019
 
 
 
 
 
 
 
 
 
Balance, March 29, 2019
$
166,364

 
$
539,067

 
$
281,038

 
$
(142,031
)
 
$
844,438

Shares issued
428

 
8,678

 

 

 
9,106

Stock compensation cost

 
8,425

 

 

 
8,425

Net earnings

 

 
88,137

 

 
88,137

Dividends declared ($0.1600 per share)

 

 
(26,867
)
 

 
(26,867
)
Other comprehensive income (loss)

 

 

 
2,719

 
2,719

Balance, June 28, 2019
$
166,792

 
$
556,170

 
$
342,308

 
$
(139,312
)
 
$
925,958

Six Months Ended June 28, 2019
 
 
 
 
 
 
 
 
 
Balance, December 28, 2018
$
165,171

 
$
510,825

 
$
220,734

 
$
(144,857
)
 
$
751,873

Shares issued
1,621

 
31,064

 

 

 
32,685

Stock compensation cost

 
14,281

 

 

 
14,281

Net earnings

 

 
174,886

 

 
174,886

Dividends declared ($0.3200 per share)

 

 
(53,312
)
 

 
(53,312
)
Other comprehensive income (loss)

 

 

 
5,545

 
5,545

Balance, June 28, 2019
$
166,792

 
$
556,170

 
$
342,308

 
$
(139,312
)
 
$
925,958

Three Months Ended June 29, 2018
 
 
 
 
 
 
 
 
 
Balance, March 30, 2018
$
168,033

 
515,693

 
176,524

 
$
(133,071
)
 
$
727,179

Shares issued
548

 
(13,963
)
 

 

 
(13,415
)
Shares repurchased
(1,451
)
 
(4,285
)
 
(58,352
)
 

 
(64,088
)
Stock compensation cost

 
7,897

 

 

 
7,897

Restricted stock canceled (issued)

 

 

 

 

Net earnings

 

 
89,140

 

 
89,140

Dividends declared ($0.1325 per share)

 

 
(21,905
)
 

 
(21,905
)
Other comprehensive income (loss)

 

 

 
(13,003
)
 
(13,003
)
Balance, June 29, 2018
$
167,130

 
505,342

 
185,407

 
$
(146,074
)
 
$
711,805

Six Months Ended June 29, 2018
 
 
 
 
 
 
 
 
 
Balance, December 29, 2017
$
169,319

 
$
499,934

 
$
181,599

 
$
(127,789
)
 
$
723,063

Shares issued
1,313

 
3,360

 

 

 
4,673

Shares repurchased
(3,502
)
 
(10,340
)
 
(141,759
)
 

 
(155,601
)
Stock compensation cost

 
13,160

 

 

 
13,160

Restricted stock canceled (issued)

 
(772
)
 

 

 
(772
)
Net earnings

 

 
174,650

 

 
174,650

Dividends declared ($0.2650 per share)

 

 
(44,536
)
 

 
(44,536
)
Reclassified to retained earnings from AOCI

 

 
15,453

 
(15,453
)
 

Other comprehensive income (loss)

 

 

 
(2,832
)
 
(2,832
)
Balance, June 29, 2018
$
167,130

 
$
505,342

 
$
185,407

 
$
(146,074
)
 
$
711,805


See notes to consolidated financial statements.

6

Table of Contents

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 June 28, 2019 and the related statements of earnings, comprehensive income and shareholders' equity for the three and six months ended June 28, 2019 and June 29, 2018, and cash flows for the six months ended June 28, 2019 and June 29, 2018 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 June 28, 2019, 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 2018 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

The Company has three reportable segments: Industrial, Process and Contractor. Sales and operating earnings by segment were as follows (in thousands): 
 
Three Months Ended
 
Six Months Ended
 
June 28,
2019
 
June 29,
2018
 
June 28,
2019
 
June 29,
2018
Net Sales
 
 
 
 
 
 
 
 Industrial
$
188,507

 
$
190,459

 
$
377,607

 
$
385,655

 Process
85,064

 
85,059

 
171,958

 
165,094

 Contractor
154,757

 
149,052

 
283,633

 
280,169

 Total
$
428,328

 
$
424,570

 
$
833,198

 
$
830,918

Operating Earnings
 
 
 
 
 
 
 
 Industrial
$
64,428

 
$
67,030

 
$
129,631

 
$
136,155

 Process
18,378

 
17,065

 
38,392

 
34,767

 Contractor
40,054

 
38,382

 
66,593

 
69,793

 Unallocated corporate (expense)
(10,499
)
 
(9,099
)
 
(17,728
)
 
(15,641
)
 Total
$
112,361

 
$
113,378

 
$
216,888

 
$
225,074



Assets by segment were as follows (in thousands): 
 
June 28,
2019
 
December 28,
2018
Industrial
$
633,813

 
$
640,683

Process
364,496

 
350,306

Contractor
361,832

 
283,727

Unallocated corporate
280,406

 
198,025

Total
$
1,640,547

 
$
1,472,741




7

Table of Contents

Geographic information follows (in thousands):
 
Three Months Ended
 
Six Months Ended
 
June 28,
2019
 
June 29,
2018
 
June 28,
2019
 
June 29,
2018
Net Sales (based on customer location)
 
 
 
 
 
 
 
United States
$
221,565

 
$
212,541

 
$
424,450

 
$
406,323

Other countries
206,763

 
212,029

 
408,748

 
424,595

Total
$
428,328

 
$
424,570

 
$
833,198

 
$
830,918

 
June 28,
2019
 
December 28,
2018
Long-lived Assets
 
 
 
United States
$
229,398

 
$
178,331

Other countries
57,123

 
50,964

Total
$
286,521

 
$
229,295



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
 
Six Months Ended
 
June 28,
2019
 
June 29,
2018
 
June 28,
2019
 
June 29,
2018
Net earnings available to common shareholders
$
88,137

 
$
89,140

 
$
174,886

 
$
174,650

Weighted average shares outstanding for basic earnings per share
166,684

 
167,260

 
166,150

 
168,166

Dilutive effect of stock options computed using the treasury stock method and the average market price
5,363

 
6,005

 
5,303

 
6,291

Weighted average shares outstanding for diluted earnings per share
172,047

 
173,265

 
171,453

 
174,457

Basic earnings per share
$
0.53

 
$
0.53

 
$
1.05

 
$
1.04

Diluted earnings per share
$
0.51

 
$
0.51

 
$
1.02

 
$
1.00



Stock options to purchase 1,532,000 and 1,099,000 shares were not included in the June 28, 2019 and June 29, 2018 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 28, 2018
12,270

 
$
24.67

 
7,312

 
$
20.17

Granted
1,285

 
45.91

 
 
 
 
Exercised
(1,241
)
 
15.59

 
 
 
 
Canceled
(22
)
 
32.72

 
 
 
 
Outstanding, June 28, 2019
12,292

 
$
27.79

 
7,731

 
$
22.98



The Company recognized year-to-date share-based compensation of $17.5 million in 2019 and $15.8 million in 2018. As of June 28, 2019, there was $12.4 million of unrecognized compensation cost related to unvested options, expected to be recognized over a weighted average period of 2.0 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
 
June 28,
2019
 
June 29,
2018
Expected life in years
7.5

 
7.5

Interest rate
2.6
%
 
2.8
%
Volatility
24.6
%
 
25.5
%
Dividend yield
1.4
%
 
1.2
%
Weighted average fair value per share
$
12.26

 
$
12.84



Under the Company’s Employee Stock Purchase Plan, the Company issued 398,000 shares in 2019 and 480,000 shares in 2018. 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
 
June 28,
2019
 
June 29,
2018
Expected life in years
1.0

 
1.0

Interest rate
2.6
%
 
2.1
%
Volatility
22.7
%
 
21.3
%
Dividend yield
1.4
%
 
1.2
%
Weighted average fair value per share
$
11.36

 
$
10.28



5.Retirement Benefits

The components of net periodic benefit cost for retirement benefit plans were as follows (in thousands):
 
Three Months Ended
 
Six Months Ended
 
June 28,
2019
 
June 29,
2018
 
June 28,
2019
 
June 29,
2018
Pension Benefits
 
 
 
 
 
 
 
Service cost
$
1,635

 
$
1,998

 
$
3,644

 
$
4,211

Interest cost
3,572

 
3,411

 
7,310

 
6,845

Expected return on assets
(4,216
)
 
(4,632
)
 
(8,575
)
 
(8,718
)
Amortization and other
1,838

 
2,080

 
3,817

 
4,175

Net periodic benefit cost
$
2,829

 
$
2,857

 
$
6,196

 
$
6,513

Postretirement Medical
 
 
 
 
 
 
 
Service cost
$
123

 
$
175

 
$
273

 
$
350

Interest cost
264

 
265

 
581

 
529

Amortization
29

 
136

 
137

 
272

Net periodic benefit cost
$
416

 
$
576

 
$
991

 
$
1,151




8

Table of Contents

6.Shareholders’ Equity

Changes in components of accumulated other comprehensive income (loss), net of tax were (in thousands):

 
Pension and
Postretirement
Medical
 
Cumulative
Translation
Adjustment
 
Total
Three Months Ended June 28, 2019
 
 
 
 
 
Balance, March 29, 2019
$
(85,232
)
 
$
(56,799
)
 
$
(142,031
)
Other comprehensive income (loss) before reclassifications

 
1,232

 
1,232

Reclassified to pension cost and deferred tax
1,487

 

 
1,487

Balance, June 28, 2019
$
(83,745
)
 
$
(55,567
)
 
$
(139,312
)
Six Months Ended June 28, 2019
 
 
 
 
 
Balance, December 28, 2018
$
(86,889
)
 
$
(57,968
)
 
$
(144,857
)
Other comprehensive income (loss) before reclassifications

 
2,401

 
2,401

Reclassified to pension cost and deferred tax
3,144

 

 
3,144

Balance, June 28, 2019
$
(83,745
)
 
$
(55,567
)
 
$
(139,312
)

Three Months Ended June 29, 2018
 
 
 
 
 
Balance, March 30, 2018
$
(92,458
)
 
$
(40,613
)
 
$
(133,071
)
Other comprehensive income (loss) before reclassifications

 
(15,112
)
 
(15,112
)
Reclassified to pension cost and deferred tax
2,109

 

 
2,109

Balance, June 29, 2018
$
(90,349
)
 
$
(55,725
)
 
$
(146,074
)
Six Months Ended June 29, 2018
 
 
 
 
 
Balance, December 29, 2017
$
(78,430
)
 
$
(49,359
)
 
$
(127,789
)
Other comprehensive income (loss) before reclassifications

 
(6,366
)
 
(6,366
)
Reclassified to pension cost and deferred tax
3,534

 

 
3,534

Reclassified to retained earnings
(15,453
)
 

 
(15,453
)
Balance, June 29, 2018
$
(90,349
)
 
$
(55,725
)
 
$
(146,074
)

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.

In February 2018, the Financial Accounting Standards Board ("FASB") issued a new standard related to reclassification of certain tax effects from accumulated other comprehensive income (AOCI). We adopted the new standard in the first quarter of 2018. We elected to reclassify $15.5 million from accumulated other comprehensive income to retained earnings, representing the amount of "stranded" tax effects resulting from the change in the U.S. federal tax rate and the consequent revaluation of deferred tax assets related to pension and postretirement medical expense.



9

Table of Contents

7.Inventories

Major components of inventories were as follows (in thousands):
 
June 28,
2019
 
December 28,
2018
Finished products and components
$
147,159

 
$
142,535

Products and components in various stages of completion
87,670

 
83,768

Raw materials and purchased components
122,318

 
115,705

Subtotal
357,147

 
342,008

Reduction to LIFO cost
(59,602
)
 
(58,026
)
Total
$
297,545

 
$
283,982



8.Intangible Assets

Components of other intangible assets were (dollars in thousands):
 
Finite Life
 
Indefinite Life
 
 
 
Customer
Relationships
 
Patents and
Proprietary
Technology
 
Trademarks,
Trade Names
and Other
 
Trade
Names
 
Total
As of June 28, 2019
 
 
 
 
 
 
 
 
 
Cost
$
182,410

 
$
18,913

 
$
1,020

 
$
60,220

 
$
262,563

Accumulated amortization
(73,974
)
 
(9,557
)
 
(545
)
 

 
(84,076
)
Foreign currency translation
(10,352
)
 
(861
)
 
(72
)
 
(3,638
)
 
(14,923
)
Book value
$
98,084

 
$
8,495

 
$
403

 
$
56,582

 
$
163,564

Weighted average life in years
13

 
10

 
4

 
N/A

 
 
As of December 28, 2018
 
 
 
 
 
 
 
 
 
Cost
$
179,449

 
$
18,571

 
$
1,020

 
$
59,537

 
$
258,577

Accumulated amortization
(67,322
)
 
(8,647
)
 
(439
)
 

 
(76,408
)
Foreign currency translation
(10,817
)
 
(895
)
 
(73
)
 
(4,074
)
 
(15,859
)
Book value
$
101,310

 
$
9,029

 
$
508

 
$
55,463

 
$
166,310

Weighted average life in years
13

 
10

 
4

 
N/A

 
 


Amortization of intangibles for the quarter was $3.8 million in 2019 and $4.0 million in 2018 and for the year to date was $7.7 million in 2019 and $8.0 million in 2018. Estimated annual amortization expense based on the current carrying amount of other intangible assets is as follows (in thousands):
 
2019
 
2020
 
2021
 
2022
 
2023
 
Thereafter
Estimated Amortization Expense
$
15,503

 
$
15,289

 
$
15,089

 
$
15,001

 
$
14,088

 
$
39,686



Changes in the carrying amount of goodwill for each reportable segment were (in thousands): 
 
Industrial    
 
Process    
 
Contractor    
 
Total    
Balance, December 28, 2018
$
177,124

 
$
97,168

 
$
19,554

 
$
293,846

Additions, adjustments from business acquisitions

 
1,575

 

 
1,575

Foreign currency translation
803

 
49

 

 
852

Balance, June 28, 2019
$
177,927

 
$
98,792

 
$
19,554

 
$
296,273



The Company completed business acquisitions in 2019 that were not material to the consolidated financial statements.


10

Table of Contents

9.
Other Current Liabilities
Components of other current liabilities were (in thousands):
 
June 28,
2019
 
December 28,
2018
Accrued self-insurance retentions
$