Company Quick10K Filing
Quick10K
Graco
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$44.21 167 $7,362
10-Q 2019-09-27 Quarter: 2019-09-27
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 2019-09-19 Officers
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
XYL Xylem 13,365
IEX IDEX 12,166
FLS Flowserve 5,356
ITT ITT 4,813
CFX Colfax 2,912
CUB Cubic 2,135
GRC Gorman Rupp 777
EYPT Eyepoint Pharmaceuticals 152
SORL Sorl Auto Parts 63
AP Ampco Pittsburgh 46
GGG 2019-09-27
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-31.1 ggg2019q3exhibit311.htm
EX-31.2 ggg2019q3exhibit312.htm
EX-32 ggg2019q3exhibit32.htm
EX-99.1 ggg09272019exhibit991.htm

Graco Earnings 2019-09-27

GGG 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Document
false--12-27Q320190000042888530000052000000.13250.39750.16000.4800 0000042888 2018-12-29 2019-09-27 0000042888 2019-10-16 0000042888 2019-06-29 2019-09-27 0000042888 2018-06-30 2018-09-28 0000042888 2017-12-30 2018-09-28 0000042888 2018-12-28 0000042888 2019-09-27 0000042888 2018-09-28 0000042888 2017-12-29 0000042888 us-gaap:RetainedEarningsMember 2019-06-29 2019-09-27 0000042888 us-gaap:AdditionalPaidInCapitalMember 2019-06-29 2019-09-27 0000042888 us-gaap:CommonStockMember 2019-06-29 2019-09-27 0000042888 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-06-29 2019-09-27 0000042888 us-gaap:AdditionalPaidInCapitalMember 2019-06-28 0000042888 us-gaap:CommonStockMember 2019-06-28 0000042888 2019-06-28 0000042888 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-06-28 0000042888 us-gaap:AdditionalPaidInCapitalMember 2019-09-27 0000042888 us-gaap:RetainedEarningsMember 2019-06-28 0000042888 us-gaap:RetainedEarningsMember 2019-09-27 0000042888 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-09-27 0000042888 us-gaap:CommonStockMember 2019-09-27 0000042888 us-gaap:RetainedEarningsMember 2018-12-29 2019-09-27 0000042888 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-12-29 2019-09-27 0000042888 us-gaap:AdditionalPaidInCapitalMember 2018-12-29 2019-09-27 0000042888 us-gaap:RetainedEarningsMember 2018-12-28 0000042888 us-gaap:CommonStockMember 2018-12-28 0000042888 us-gaap:CommonStockMember 2018-12-29 2019-09-27 0000042888 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-12-28 0000042888 us-gaap:AdditionalPaidInCapitalMember 2018-12-28 0000042888 us-gaap:CommonStockMember 2018-06-30 2018-09-28 0000042888 us-gaap:RetainedEarningsMember 2018-06-30 2018-09-28 0000042888 us-gaap:CommonStockMember 2018-09-28 0000042888 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-09-28 0000042888 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-06-29 0000042888 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-06-30 2018-09-28 0000042888 us-gaap:AdditionalPaidInCapitalMember 2018-06-30 2018-09-28 0000042888 us-gaap:RetainedEarningsMember 2018-06-29 0000042888 us-gaap:AdditionalPaidInCapitalMember 2018-09-28 0000042888 us-gaap:RetainedEarningsMember 2018-09-28 0000042888 us-gaap:CommonStockMember 2018-06-29 0000042888 2018-06-29 0000042888 us-gaap:AdditionalPaidInCapitalMember 2018-06-29 0000042888 us-gaap:AdditionalPaidInCapitalMember 2017-12-29 0000042888 us-gaap:CommonStockMember 2017-12-30 2018-09-28 0000042888 us-gaap:AdditionalPaidInCapitalMember 2017-12-30 2018-09-28 0000042888 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2017-12-30 2018-09-28 0000042888 us-gaap:RetainedEarningsMember 2017-12-29 0000042888 us-gaap:RetainedEarningsMember 2017-12-30 2018-09-28 0000042888 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2017-12-29 0000042888 us-gaap:CommonStockMember 2017-12-29 0000042888 country:US 2019-09-27 0000042888 us-gaap:NonUsMember 2019-09-27 0000042888 country:US 2018-12-28 0000042888 us-gaap:NonUsMember 2018-12-28 0000042888 country:US 2018-06-30 2018-09-28 0000042888 country:US 2018-12-29 2019-09-27 0000042888 country:US 2017-12-30 2018-09-28 0000042888 us-gaap:NonUsMember 2018-06-30 2018-09-28 0000042888 country:US 2019-06-29 2019-09-27 0000042888 us-gaap:NonUsMember 2017-12-30 2018-09-28 0000042888 us-gaap:NonUsMember 2018-12-29 2019-09-27 0000042888 us-gaap:NonUsMember 2019-06-29 2019-09-27 0000042888 us-gaap:OperatingSegmentsMember ggg:ProcessMember 2018-12-28 0000042888 us-gaap:CorporateNonSegmentMember 2019-09-27 0000042888 us-gaap:OperatingSegmentsMember ggg:IndustrialMember 2019-09-27 0000042888 us-gaap:OperatingSegmentsMember ggg:ProcessMember 2019-09-27 0000042888 us-gaap:OperatingSegmentsMember ggg:ContractorMember 2018-12-28 0000042888 us-gaap:OperatingSegmentsMember ggg:IndustrialMember 2018-12-28 0000042888 us-gaap:OperatingSegmentsMember ggg:ContractorMember 2019-09-27 0000042888 us-gaap:CorporateNonSegmentMember 2018-12-28 0000042888 us-gaap:OperatingSegmentsMember ggg:IndustrialMember 2018-06-30 2018-09-28 0000042888 us-gaap:OperatingSegmentsMember ggg:ProcessMember 2018-12-29 2019-09-27 0000042888 us-gaap:OperatingSegmentsMember ggg:IndustrialMember 2018-12-29 2019-09-27 0000042888 us-gaap:OperatingSegmentsMember ggg:IndustrialMember 2019-06-29 2019-09-27 0000042888 us-gaap:OperatingSegmentsMember ggg:ProcessMember 2018-06-30 2018-09-28 0000042888 us-gaap:OperatingSegmentsMember ggg:ContractorMember 2018-06-30 2018-09-28 0000042888 us-gaap:OperatingSegmentsMember ggg:IndustrialMember 2017-12-30 2018-09-28 0000042888 us-gaap:CorporateNonSegmentMember 2018-12-29 2019-09-27 0000042888 us-gaap:OperatingSegmentsMember ggg:ProcessMember 2017-12-30 2018-09-28 0000042888 us-gaap:CorporateNonSegmentMember 2018-06-30 2018-09-28 0000042888 us-gaap:OperatingSegmentsMember ggg:ContractorMember 2018-12-29 2019-09-27 0000042888 us-gaap:CorporateNonSegmentMember 2019-06-29 2019-09-27 0000042888 us-gaap:OperatingSegmentsMember ggg:ProcessMember 2019-06-29 2019-09-27 0000042888 us-gaap:OperatingSegmentsMember ggg:ContractorMember 2019-06-29 2019-09-27 0000042888 us-gaap:CorporateNonSegmentMember 2017-12-30 2018-09-28 0000042888 us-gaap:OperatingSegmentsMember ggg:ContractorMember 2017-12-30 2018-09-28 0000042888 us-gaap:EmployeeStockOptionMember 2018-12-29 2019-09-27 0000042888 us-gaap:EmployeeStockOptionMember 2017-12-30 2018-09-28 0000042888 us-gaap:EmployeeStockMember 2017-12-30 2018-09-28 0000042888 us-gaap:EmployeeStockMember 2018-12-29 2019-09-27 0000042888 us-gaap:PensionPlansDefinedBenefitMember 2017-12-30 2018-09-28 0000042888 us-gaap:PensionPlansDefinedBenefitMember 2019-06-29 2019-09-27 0000042888 us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember 2018-12-29 2019-09-27 0000042888 us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember 2017-12-30 2018-09-28 0000042888 us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember 2019-06-29 2019-09-27 0000042888 us-gaap:PensionPlansDefinedBenefitMember 2018-06-30 2018-09-28 0000042888 us-gaap:PensionPlansDefinedBenefitMember 2018-12-29 2019-09-27 0000042888 us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember 2018-06-30 2018-09-28 0000042888 us-gaap:AccumulatedTranslationAdjustmentMember 2019-06-29 2019-09-27 0000042888 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2019-09-27 0000042888 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2019-06-29 2019-09-27 0000042888 us-gaap:AccumulatedTranslationAdjustmentMember 2019-06-28 0000042888 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2019-06-28 0000042888 us-gaap:AccumulatedTranslationAdjustmentMember 2019-09-27 0000042888 us-gaap:AccumulatedTranslationAdjustmentMember 2018-09-28 0000042888 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2018-09-28 0000042888 us-gaap:AccumulatedTranslationAdjustmentMember 2018-06-30 2018-09-28 0000042888 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2018-06-29 0000042888 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2018-06-30 2018-09-28 0000042888 us-gaap:AccumulatedTranslationAdjustmentMember 2018-06-29 0000042888 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2017-12-30 2018-09-28 0000042888 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2017-12-29 0000042888 us-gaap:AccumulatedTranslationAdjustmentMember 2017-12-29 0000042888 us-gaap:AccumulatedTranslationAdjustmentMember 2017-12-30 2018-09-28 0000042888 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2018-12-29 2019-09-27 0000042888 us-gaap:AccumulatedTranslationAdjustmentMember 2018-12-29 2019-09-27 0000042888 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2018-12-28 0000042888 us-gaap:AccumulatedTranslationAdjustmentMember 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 2019-09-27 0000042888 us-gaap:TrademarksAndTradeNamesMember 2019-09-27 0000042888 us-gaap:TradeNamesMember 2019-09-27 0000042888 ggg:PatentsProprietaryTechnologyAndProductDocumentationMember 2019-09-27 0000042888 us-gaap:TrademarksAndTradeNamesMember 2018-12-29 2019-09-27 0000042888 us-gaap:CustomerRelationshipsMember 2019-09-27 0000042888 us-gaap:CustomerRelationshipsMember 2018-12-29 2019-09-27 0000042888 us-gaap:TradeNamesMember 2018-12-29 2019-09-27 0000042888 ggg:ContractorMember 2018-12-29 2019-09-27 0000042888 ggg:ContractorMember 2019-09-27 0000042888 ggg:ProcessMember 2019-09-27 0000042888 ggg:ProcessMember 2018-12-29 2019-09-27 0000042888 ggg:IndustrialMember 2018-12-29 2019-09-27 0000042888 ggg:IndustrialMember 2019-09-27 0000042888 ggg:ContractorMember 2018-12-28 0000042888 ggg:ProcessMember 2018-12-28 0000042888 ggg:IndustrialMember 2018-12-28 0000042888 us-gaap:FairValueInputsLevel2Member 2019-09-27 0000042888 us-gaap:FairValueInputsLevel2Member 2018-12-28 0000042888 us-gaap:FairValueInputsLevel3Member 2018-12-28 0000042888 us-gaap:FairValueInputsLevel3Member 2019-09-27 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 September 27, 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
 

166,780,000 shares of the Registrant’s Common Stock, $1.00 par value, were outstanding as of October 16, 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
 
Nine Months Ended
 
September 27,
2019
 
September 28,
2018
 
September 27,
2019
 
September 28,
2018
Net Sales
$
400,555

 
$
415,936

 
$
1,233,753

 
$
1,246,854

Cost of products sold
193,176

 
194,477

 
583,378

 
573,071

Gross Profit
207,379

 
221,459

 
650,375

 
673,783

Product development
16,723

 
15,734

 
50,616

 
47,135

Selling, marketing and distribution
55,538

 
57,270

 
176,796

 
182,741

General and administrative
31,719

 
33,676

 
102,676

 
104,054

Operating Earnings
103,399

 
114,779

 
320,287

 
339,853

Interest expense
3,618

 
3,583

 
10,584

 
10,707

Other expense, net
2,972

 
3,139

 
4,360

 
8,425

Earnings Before Income Taxes
96,809

 
108,057

 
305,343

 
320,721

Income taxes
12,677

 
15,376

 
46,325

 
53,390

Net Earnings
$
84,132

 
$
92,681

 
$
259,018

 
$
267,331

Net Earnings per Common Share
 
 
 
 
 
 
 
Basic
$
0.50

 
$
0.55

 
$
1.56

 
$
1.59

Diluted
$
0.49

 
$
0.54

 
$
1.51

 
$
1.54

See notes to consolidated financial statements.


CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited) (In thousands)
 
Three Months Ended
 
Nine Months Ended
 
September 27,
2019
 
September 28,
2018
 
September 27,
2019
 
September 28,
2018
Net Earnings
$
84,132

 
$
92,681

 
$
259,018

 
$
267,331

Components of other comprehensive
income (loss)
 
 
 
 
 
 
 
Cumulative translation adjustment
(6,396
)
 
4,161

 
(3,995
)
 
(2,205
)
Pension and postretirement medical
liability adjustment
2,268

 
1,972

 
6,305

 
6,503

Income taxes - pension and postretirement
medical liability adjustment
(505
)
 
(448
)
 
(1,398
)
 
(1,445
)
Other comprehensive income
(4,633
)
 
5,685

 
912

 
2,853

Comprehensive Income
$
79,499

 
$
98,366

 
$
259,930

 
$
270,184

See notes to consolidated financial statements.

3

Table of Contents

GRACO INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited) (In thousands)
 
September 27,
2019
 
December 28,
2018
ASSETS
 
 
 
Current Assets
 
 
 
Cash and cash equivalents
$
177,306

 
$
132,118

Accounts receivable, less allowances of $5,200 and $5,300
277,417

 
274,608

Inventories
288,588

 
283,982

Other current assets
29,316

 
32,508

Total current assets
772,627

 
723,216

Property, Plant and Equipment, net
308,656

 
229,295

Goodwill
301,420

 
293,846

Other Intangible Assets, net
161,525

 
166,310

Operating Lease Assets
30,898

 

Deferred Income Taxes
32,069

 
32,055

Other Assets
30,229

 
28,019

Total Assets
$
1,637,424

 
$
1,472,741

LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
Current Liabilities
 
 
 
Notes payable to banks
$
4,686

 
$
11,083

Trade accounts payable
54,882

 
56,902

Salaries and incentives
49,798

 
62,297

Dividends payable
26,716

 
26,480

Other current liabilities
151,445

 
143,041

Total current liabilities
287,527

 
299,803

Long-term Debt
192,101

 
266,391

Retirement Benefits and Deferred Compensation
136,871

 
133,388

Operating Lease Liabilities
24,822

 

Deferred Income Taxes
12,307

 
16,586

Other Non-current Liabilities

 
4,700

Shareholders’ Equity
 
 
 
Common stock
166,858

 
165,171

Additional paid-in-capital
563,566

 
510,825

Retained earnings
397,317

 
220,734

Accumulated other comprehensive income (loss)
(143,945
)
 
(144,857
)
Total shareholders’ equity
983,796

 
751,873

Total Liabilities and Shareholders’ Equity
$
1,637,424

 
$
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)
 
Nine Months Ended
 
September 27,
2019
 
September 28,
2018
Cash Flows From Operating Activities
 
 
 
Net Earnings
$
259,018

 
$
267,331

Adjustments to reconcile net earnings to net cash
provided by operating activities
 
 
 
Depreciation and amortization
36,401

 
35,570

Deferred income taxes
(6,067
)
 
15,407

Share-based compensation
23,186

 
22,016

Change in
 
 
 
Accounts receivable
(2,906
)
 
(25,576
)
Inventories
(5,052
)
 
(23,094
)
Trade accounts payable
(776
)
 
74

Salaries and incentives
(15,422
)
 
(4,943
)
Retirement benefits and deferred compensation
10,206

 
(30,202
)
Other accrued liabilities
198

 
(1,348
)
Other
695

 
(974
)
Net cash provided by operating activities
299,481

 
254,261

Cash Flows From Investing Activities
 
 
 
Property, plant and equipment additions
(102,496
)
 
(39,569
)
Acquisition of businesses, net of cash acquired
(19,216
)
 
(10,769
)
Other
(961
)
 
(1,386
)
Net cash provided by (used in) investing activities
(122,673
)
 
(51,724
)
Cash Flows From Financing Activities
 
 
 
Borrowings (payments) on short-term lines of credit, net
(6,240
)
 
(2,558
)
Borrowings on long-term lines of credit
106,454

 
612,979

Payments on long-term debt and lines of credit
(179,270
)
 
(575,113
)
Common stock issued
36,244

 
23,471

Common stock repurchased
(5,121
)
 
(155,601
)
Taxes paid related to net share settlement of equity awards
(1,268
)

(16,151
)
Cash dividends paid
(79,762
)
 
(66,794
)
Net cash provided by (used in) financing activities
(128,963
)
 
(179,767
)
Effect of exchange rate changes on cash
(2,657
)
 
1,915

Net increase (decrease) in cash and cash equivalents
45,188

 
24,685

Cash and Cash Equivalents
 
 
 
Beginning of year
132,118

 
112,904

End of period
$
177,306

 
$
137,589

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 September 27, 2019
 
 
 
 
 
 
 
 
 
Balance, June 28, 2019
$
166,792

 
$
556,170

 
$
342,308

 
$
(139,312
)
 
$
925,958

Shares issued
126

 
2,163

 

 

 
2,289

Shares repurchased
(60
)
 
(186
)
 
(2,437
)
 

 
(2,683
)
Stock compensation cost

 
5,419

 

 

 
5,419

Net earnings

 

 
84,132

 

 
84,132

Dividends declared ($0.1600 per share)

 

 
(26,686
)
 

 
(26,686
)
Other comprehensive income (loss)

 

 

 
(4,633
)
 
(4,633
)
Balance, September 27, 2019
$
166,858

 
$
563,566

 
$
397,317

 
$
(143,945
)
 
$
983,796

Nine Months Ended September 27, 2019
 
 
 
 
 
 
 
 
 
Balance, December 28, 2018
$
165,171

 
$
510,825

 
$
220,734

 
$
(144,857
)
 
$
751,873

Shares issued
1,747

 
33,227

 

 

 
34,974

Shares repurchased
(60
)
 
(186
)
 
(2,437
)
 

 
(2,683
)
Stock compensation cost

 
19,700

 

 

 
19,700

Net earnings

 

 
259,018

 

 
259,018

Dividends declared ($0.4800 per share)

 

 
(79,998
)
 

 
(79,998
)
Other comprehensive income (loss)

 

 

 
912

 
912

Balance, September 27, 2019
$
166,858

 
$
563,566

 
$
397,317

 
$
(143,945
)
 
$
983,796

Three Months Ended September 28, 2018
 
 
 
 
 
 
 
 
 
Balance, June 29, 2018
$
167,130

 
505,342

 
185,407

 
$
(146,074
)
 
$
711,805

Shares issued
279

 
3,140

 

 

 
3,419

Stock compensation cost

 
5,161

 

 

 
5,161

Net earnings

 

 
92,681

 

 
92,681

Dividends declared ($0.1325 per share)

 

 
(22,189
)
 

 
(22,189
)
Other comprehensive income (loss)

 

 

 
5,685

 
5,685

Balance, September 28, 2018
$
167,409

 
513,643

 
255,899

 
$
(140,389
)
 
$
796,562

Nine Months Ended September 28, 2018
 
 
 
 
 
 
 
 
 
Balance, December 29, 2017
$
169,319

 
$
499,934

 
$
181,599

 
$
(127,789
)
 
$
723,063

Shares issued
1,592

 
6,500

 

 

 
8,092

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

 
(155,601
)
Stock compensation cost

 
18,321

 

 

 
18,321

Restricted stock canceled (issued)

 
(772
)
 

 

 
(772
)
Net earnings

 

 
267,331

 

 
267,331

Dividends declared ($0.3975 per share)

 

 
(66,725
)
 

 
(66,725
)
Reclassified to retained earnings from AOCI

 

 
15,453

 
(15,453
)
 

Other comprehensive income (loss)

 

 

 
2,853

 
2,853

Balance, September 28, 2018
$
167,409

 
$
513,643

 
$
255,899

 
$
(140,389
)
 
$
796,562


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 September 27, 2019 and the related statements of earnings, comprehensive income and shareholders' equity for the three and nine months ended September 27, 2019 and September 28, 2018, and cash flows for the nine months ended September 27, 2019 and September 28, 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 September 27, 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
 
Nine Months Ended
 
September 27,
2019
 
September 28,
2018
 
September 27,
2019
 
September 28,
2018
Net Sales
 
 
 
 
 
 
 
 Industrial
$
175,016

 
$
195,855

 
$
552,623

 
$
581,510

 Process
84,090

 
84,556

 
256,048

 
249,650

 Contractor
141,449

 
135,525

 
425,082

 
415,694

 Total
$
400,555

 
$
415,936

 
$
1,233,753

 
$
1,246,854

Operating Earnings
 
 
 
 
 
 
 
 Industrial
$
57,023

 
$
70,572

 
$
186,654

 
$
206,727

 Process
18,194

 
17,862

 
56,586

 
52,629

 Contractor
34,005

 
32,739

 
100,598

 
102,532

 Unallocated corporate (expense)
(5,823
)
 
(6,394
)
 
(23,551
)
 
(22,035
)
 Total
$
103,399

 
$
114,779

 
$
320,287

 
$
339,853



Assets by segment were as follows (in thousands): 
 
September 27,
2019
 
December 28,
2018
Industrial
$
611,075

 
$
640,683

Process
375,933

 
350,306

Contractor
370,707

 
283,727

Unallocated corporate
279,709

 
198,025

Total
$
1,637,424

 
$
1,472,741




7

Table of Contents

Geographic information follows (in thousands):
 
Three Months Ended
 
Nine Months Ended
 
September 27,
2019
 
September 28,
2018
 
September 27,
2019
 
September 28,
2018
Net Sales (based on customer location)
 
 
 
 
 
 
 
United States
$
214,468

 
$
208,269

 
$
638,918

 
$
614,592

Other countries
186,087

 
207,667

 
594,835

 
632,262

Total
$
400,555

 
$
415,936

 
$
1,233,753

 
$
1,246,854

 
September 27,
2019
 
December 28,
2018
Long-lived Assets
 
 
 
United States
$
253,039

 
$
178,331

Other countries
55,617

 
50,964

Total
$
308,656

 
$
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
 
Nine Months Ended
 
September 27,
2019
 
September 28,
2018
 
September 27,
2019
 
September 28,
2018
Net earnings available to common shareholders
$
84,132

 
$
92,681

 
$
259,018

 
$
267,331

Weighted average shares outstanding for basic earnings per share
166,848

 
167,247

 
166,383

 
167,860

Dilutive effect of stock options computed using the treasury stock method and the average market price
4,929

 
5,790

 
5,178

 
6,124

Weighted average shares outstanding for diluted earnings per share
171,777

 
173,037

 
171,561

 
173,984

Basic earnings per share
$
0.50

 
$
0.55

 
$
1.56

 
$
1.59

Diluted earnings per share
$
0.49

 
$
0.54

 
$
1.51

 
$
1.54



Stock options to purchase 802,000 and 435,000 shares were not included in the September 27, 2019 and September 28, 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
(1,364
)
 
15.73

 
 
 
 
Canceled
(35
)
 
32.09

 
 
 
 
Outstanding, September 27, 2019
12,156

 
$
27.89

 
7,620

 
$
23.08




8

Table of Contents

The Company recognized year-to-date share-based compensation of $23.2 million in 2019 and $22.0 million in 2018. As of September 27, 2019, there was $8.2 million of unrecognized compensation cost related to unvested options, expected to be recognized over a weighted average period of 2.4 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 27,
2019
 
September 28,
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:
 
Nine Months Ended
 
September 27,
2019
 
September 28,
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
 
Nine Months Ended
 
September 27,
2019
 
September 28,
2018
 
September 27,
2019
 
September 28,
2018
Pension Benefits
 
 
 
 
 
 
 
Service cost
$
2,161

 
$
2,165

 
$
5,805

 
$
6,376

Interest cost
3,711

 
3,227

 
11,021

 
10,072

Expected return on assets
(4,289
)
 
(4,369
)
 
(12,864
)
 
(13,087
)
Amortization and other
3,095

 
2,077

 
6,912

 
6,252

Net periodic benefit cost
$
4,678

 
$
3,100

 
$
10,874

 
$
9,613

Postretirement Medical
 
 
 
 
 
 
 
Service cost
$
136

 
$
127

 
$
409

 
$
477

Interest cost
291

 
284

 
872

 
813

Amortization
68

 
213

 
205

 
485

Net periodic benefit cost
$
495

 
$
624

 
$
1,486

 
$
1,775




9

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 September 27, 2019
 
 
 
 
 
Balance, June 28, 2019
$
(83,745
)
 
$
(55,567
)
 
$
(139,312
)
Other comprehensive income (loss) before reclassifications

 
(6,396
)
 
(6,396
)
Reclassified to pension cost and deferred tax
1,763

 

 
1,763

Balance, September 27, 2019
$
(81,982
)
 
$
(61,963
)
 
$
(143,945
)
Nine Months Ended September 27, 2019
 
 
 
 
 
Balance, December 28, 2018
$
(86,889
)
 
$
(57,968
)
 
$
(144,857
)
Other comprehensive income (loss) before reclassifications

 
(3,995
)
 
(3,995
)
Reclassified to pension cost and deferred tax
4,907

 

 
4,907

Balance, September 27, 2019
$
(81,982
)
 
$
(61,963
)
 
$
(143,945
)

Three Months Ended September 28, 2018
 
 
 
 
 
Balance, June 29, 2018
$
(90,349
)
 
$
(55,725
)
 
$
(146,074
)
Other comprehensive income (loss) before reclassifications

 
4,161

 
4,161

Reclassified to pension cost and deferred tax
1,524

 

 
1,524

Balance, September 28, 2018
$
(88,825
)
 
$
(51,564
)
 
$
(140,389
)
Nine Months Ended September 28, 2018
 
 
 
 
 
Balance, December 29, 2017
$
(78,430
)
 
$
(49,359
)
 
$
(127,789
)
Other comprehensive income (loss) before reclassifications

 
(2,205
)
 
(2,205
)
Reclassified to pension cost and deferred tax
5,058

 

 
5,058

Reclassified to retained earnings
(15,453
)
 

 
(15,453
)
Balance, September 28, 2018
$
(88,825
)
 
$
(51,564
)
 
$
(140,389
)

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.



10

Table of Contents

7.Inventories

Major components of inventories were as follows (in thousands):
 
September 27,
2019
 
December 28,
2018
Finished products and components
$
142,184

 
$
142,535

Products and components in various stages of completion
88,345

 
83,768

Raw materials and purchased components
119,242

 
115,705

Subtotal
349,771

 
342,008

Reduction to LIFO cost
(61,183
)
 
(58,026
)
Total
$
288,588

 
$
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 September 27, 2019
 
 
 
 
 
 
 
 
 
Cost
$
184,410

 
$
20,013

 
$
1,020

 
$
61,020

 
$
266,463

Accumulated amortization
(77,345
)
 
(10,053
)
 
(597
)
 

 
(87,995
)
Foreign currency translation
(11,581
)
 
(978
)
 
(74
)
 
(4,310
)
 
(16,943
)
Book value
$
95,484

 
$
8,982

 
$
349

 
$
56,710

 
$
161,525

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 $3.9 million in 2019 and $3.8 million in 2018 and for the year to date was $11.6 million in 2019 and $11.8 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
$
15,497

 
$
15,543

 
$
15,343

 
$
15,253

 
$
14,359

 
$
40,413




11

Table of Contents

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

 
9,197

 

 
9,197

Foreign currency translation
(1,192
)
 
(431
)
 

 
(1,623
)
Balance, September 27, 2019
$