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 April 1, 1994
Commission File Number: 1-9249
GRACO INC
(Exact name of Registrant as specified in its charter)
Minnesota 41-0285640
(State of incorporation) (I.R.S. Employer Identification Number)
4050 Olson Memorial Highway
Golden Valley, Minnesota 55422
(Address of principal executive offices) (Zip Code)
(612) 623-6000
(Registrant's telephone number, including area code)
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, and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
11,629,462 common shares were outstanding as of April 1, 1994.
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GRACO INC. AND SUBSIDIARIES
INDEX
Page Number
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Earnings 3
Consolidated Balance Sheets 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial
Statements 6
Item 2. Management's Discussion and Analysis
of Results of Operations and
Financial Condition 7
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 8
SIGNATURES 9
Computation of Net Earnings per Common Share Exhibit 11
2
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PART I
GRACO INC. AND SUBSIDIARIES
Item 1 CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
<CAPTION>
Thirteen Weeks Ended
April 1, 1994 March 26, 1993
(In thousands except per share amounts)
<S> <C> <C>
Net sales $80,930 $77,811
Cost of products sold 42,494 41,602
Gross profit 38,436 36,209
Product development 3,556 2,777
Selling 22,299 19,440
General and administrative 9,488 9,150
Operating profit 3,093 4,842
Interest expense 368 606
Other expense, net 39 114
Earnings before income taxes 2,686 4,122
Income taxes 850 1,550
Net earnings $1,836 $2,572
Net earnings per common share $0.16 $0.23
Cash dividend per common share $0.14 $0.13
See notes to consolidated financial statements.
</TABLE>
3
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<TABLE>
GRACO INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
April 1, 1994 December 31, 1993
ASSETS (Unaudited)
(in thousands)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $1,116 $11,095
Marketable securities 359 26,345
Accounts receivable, less allowances of 67,678 62,178
$4,400 and $4,100
Inventories 42,223 35,719
Deferred income taxes 9,210 8,843
Other current assets 3,845 3,079
Total current assets 124,431 147,259
Property, plant and equipment:
Cost 132,029 129,876
Less accumulated depreciation (74,120) (72,132)
57,909 57,744
Other assets 11,241 11,362
$193,581 $216,365
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable to banks $12,525 $3,234
Current portion of long-term debt 5,540 5,543
Trade accounts payable 15,682 16,737
Dividends payable 1,605 32,535
Income taxes payable 6,609 5,658
Other current liabilities 31,039 35,904
Total current liabilities 73,000 99,611
Long-term debt, less current portion above 13,929 13,937
Retirement benefits and deferred compensation 29,212 28,132
Shareholders' equity:
Preferred stock 1,484 1,485
Common stock 11,629 11,449
Additional paid-in capital 22,197 19,813
Retained earnings 42,367 42,430
Other, net (237) (492)
77,440 74,685
$193,581 $216,365
See notes to consolidated financial statements.
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4
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<TABLE>
GRACO INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Thirteen Weeks Ended
April 1, 1994 March 26, 1993
(In thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $1,836 $2,572
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 2,600 2,458
Deferred income taxes (340) 247
Change in:
Accounts receivable (5,213) (1,360)
Inventories (6,231) 4,533
Trade accounts payable (1,216) (4,000)
Accrued salaries (2,154) (4,490)
Retirement benefits and deferred compensaion 938 724
Other accrued liabilities (1,747) (6,237)
Other (852) (2,920)
(12,379) (8,473)
CASH FLOWS FROM INVESTING ACTIVITIES:
Property, plant and equipment additions (2,711) (2,047)
Proceeds from sale of property, plant, an 123
Purchases of marketable securities (5,464) (3,891)
Proceeds from marketable securities 31,450 3,617
23,398 (2,321)
CASH FLOWS FROM FINANCING ACTIVITIES:
Notes payable, net change 9,102 1,885
Common stock issued 2,663 1,947
Cash dividends paid (32,829) (1,471)
(21,064) 2,361
Effect of exchange rate changes on cash 66 256
Net decrease in cash and cash equivalents (9,979) (8,177)
Cash and cash equivalents:
Beginning of year 11,095 18,869
End of period $1,116 $10,692
See notes to consolidated financial statements.
</TABLE>
5
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GRACO INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. The consolidated balance sheet as of April 1, 1994, the consolidated
statements of earnings for the thirteen weeks ended April 1, 1994, and
March 26, 1993, and the consolidated statements of cash flows for the
thirteen weeks then ended have been prepared by the Company without being
audited.
In the opinion of management, these consolidated statements reflect all
adjustments necessary to present fairly the financial position of Graco
Inc. at April 1, 1994, and March 26, 1993, 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 1993 Form 10-K.
The results of operations for interim periods are not necessarily
indicative of results which will be realized for the full fiscal year.
2. Major components of inventories were as follows:
<TABLE>
<CAPTION>
April 1, 1994 Dec.31,1993
(In thousands)
<S> <C> <C>
Finished products and components $45,829 $42,010
Products and components in
various stages of completion 24,580 21,410
Raw materials 8,382 8,642
Reduction to LIFO cost (36,568) (36,343)
$42,223 $35,719
</TABLE>
3. On February 25, 1994, the Board of Directors authorized a plan to
purchase up to a total of 400,000 shares of its outstanding common stock.
These common shares will be acquired through open-market purchases to be
made through February 28, 1996. The shares to be acquired will be
available for issuance to satisfy stock options and for other corporate
purposes. No shares have been repurchased under this plan as of April 1,
1994.
6
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Item 2. GRACO INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Results of Operations
Net earnings of $1,836,000 for the first quarter ended April 1, 1994 were
$736,000 below 1993 earnings due to higher expenses.
Sales of $80,930,000 for the first quarter increased 4 percent compared to 1993.
Sales in the Americas increased 12 percent to $58,684,000. In the Pacific,
sales were down 15 percent to $10,193,000 (a 20 percent volume decline, offset
by a 5 percent exchange rate gain). Sales in Europe were down 11 percent to
$12,053,000 (a 5 percent volume decline, and 6 percent due to exchange rates).
Gross profit margins increased during the first quarter 1994 to 47.5 percent of
sales from 46.5 percent for the same period in 1993, due to improved
manufacturing efficiencies and higher production levels.
Operating expenses increased $3,976,000 or 13 percent compared to the same
period in 1993. Product development expense increased 28 percent over 1993, as
the Company continues to substantially expand its investment in new products.
Selling expenses were up 15 percent, and general and administrative expenses
were up 4 percent.
At the end of the first quarter, bookings were very strong in the Americas, flat
in Europe, and down in the Pacific. For the Company, bookings were up 13
percent. Backlog at April 1, 1994, was $33 million, an increase of $10 million
from $23 million on March 26, 1993, and an increase of $13 million from $20
million on December 31, 1993. Graco expects to ship most of this increase
during the second quarter.
The Company expects strong demand in the Americas to continue to drive its sales
growth and profitability. The sharp sales decline experienced in Europe last
year appears to be leveling off, based on recent booking trends. The Japanese
market remains very depressed, and is expected to remain so in the foreseeable
future. Graco expects some sales growth in the other Asia/Pacific-countries,
but not at the extraordinary rate of last year. Overall, the Company expects
continued sales growth and improved margins throughout 1994, as investments
already underway begin to take effect and help improve performance.
Financial Condition
Cash uses were for operating activities. The Company has unused lines of credit
available at April 1, 1994, totaling $43 million.
7
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PART II
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Statement on Computation Exhibit 11
of Per Share Earnings
(b) No reports on Form 8-K have been
filed during the quarter for which this
report is filed.
8
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GRACO INC.
Date: May 12, 1994 By: \David A. Koch
David A. Koch
Chairman and Chief Executive Officer
Date: May 12, 1994 By: \Robert A. Wagner
Robert A. Wagner
Vice President and Treasurer
(Principal Financial Officer)
9
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EXHIBIT NO. 11
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GRACO INC. AND SUBSIDIARIES
COMPUTATION OF NET EARNINGS PER COMMON SHARE
(Unaudited)
<CAPTION>
Thirteen Weeks Ended
April 1, 1994 March 26, 1993
(In thousands except per share amounts)
<S> <C> <C>
Net earnings applicable to common stock:
Net earnings $1,836 $2,572
Less dividends on preferred stock 19 19
$1,817 $2,553
Average number of common and common
equivalent shares outstanding:
Average number of common
shares outstanding 11,515 11,350
Dilutive effect of stock options
computed on the treasury stock 65 56
11,580 11,406
Net earnings per common share
and common equivalent share $0.16 $0.23
Primary and fully diluted earnings per share are substantially the same.
</TABLE>
10
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