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Previous: GOODYEAR TIRE & RUBBER CO /OH/, 10-Q, 1996-05-13 |
Next: GRAY COMMUNICATIONS SYSTEMS INC /GA/, S-1/A, 1996-05-13 |
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 March 29, 1996
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
----- ------
17,327,862 common shares were outstanding as of May 9, 1996.
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 Financial Condition and
Results of Operations 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
Financial Data Schedule Exhibit 27
2
<PAGE>
<TABLE>
PART I
GRACO INC. AND SUBSIDIARIES
Item I. CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
<CAPTION>
Thirteen Weeks Ended
--------------------
March 29, 1996 March 31, 1995
-------------- --------------
(In thousands except per share amounts)
<S> <C> <C>
Net Sales $90,153 $95,527
Cost of products sold 45,316 49,000
------- -------
Gross Profit 44,837 46,527
Product development 4,229 3,921
Selling 19,850 21,690
General and administrative 11,675 11,100
------- -------
Operating Profit 9,083 9,816
Interest expense 232 684
Other expense, net 566 396
------- -------
Earnings Before Income Taxes 8,285 8,736
Income taxes 2,700 3,300
------- -------
Net Earnings $5,585 $5,436
======= =======
Net Earnings Per Common and
Common Equivalent Share $.32 $.31
======= =======
Cash Dividend Per Common Share $.12 $.11
======= =======
See notes to consolidated financial statements.
</TABLE>
3
<PAGE>
<TABLE>
GRACO INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands)
<CAPTION>
March 29, 1996 December 29, 1995
-------------- -----------------
ASSETS (Unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $2,103 $1,643
Accounts receivable, less allowances
of $4,977 and $4,856 72,211 73,205
Inventories 44,915 41,693
Deferred income taxes 10,783 10,608
Other current assets 2,560 1,333
-------- --------
Total current assets 132,572 128,482
Property, Plant and Equipment:
Cost 160,162 156,168
Accumulated depreciation (82,152) (79,310)
-------- --------
78,010 76,858
Other Assets 12,642 12,493
-------- --------
$223,224 $217,833
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable to banks $5,164 $5,051
Current portion of long-term debt 1,857 1,935
Trade accounts payable 13,329 13,849
Dividends payable 2,092 2,072
Income taxes payable 8,869 4,229
Other current liabilities 40,336 44,447
-------- --------
Total current liabilities 71,647 71,583
Long-term Debt, less current portion 10,103 10,074
Retirement Benefits and Deferred Compensation 32,575 32,605
Shareholders' Equity:
Common stock 17,414 17,265
Additional paid-in capital 22,073 20,397
Retained earnings 68,388 64,949
Other, net 1,024 960
-------- --------
108,899 103,571
-------- --------
$223,224 $217,833
======== ========
See notes to consolidated financial statements.
</TABLE>
4
<PAGE>
<TABLE>
GRACO INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Thirteen Weeks
--------------
March 29, 1996 March 31, 1995
-------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES: (In thousands)
<S> <C> <C>
Net Earnings $5,585 $5,436
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 3,299 3,282
Deferred income taxes (605) (292)
Change in:
Accounts receivable 52 (3,044)
Inventories (3,355) (3,848)
Trade accounts payable (367) (2,405)
Retirement benefits and deferred
compensation 89 1,342
Other accrued liabilities 887 (3,185)
Other (1,084) 1,383
------ ------
4,501 (1,331)
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property, plant and equipment additions (4,485) (7,526)
Proceeds from sale of property, plant,
and equipment 5 322
------ ------
(4,480) (7,204)
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowing on notes payable and lines of credit 1,937 33,557
Payments on notes payable and lines of credit (1,662) (23,739)
Payments on long-term debt - (2,210)
Common stock issued 2,271 2,071
Retirement of common and preferred stock (446) -
Cash dividends paid (2,126) (1,905)
------ ------
(26) 7,774
------ ------
Effect of exchange rate changes on cash 465 (874)
------ ------
Net increase (decrease) in cash and cash equivalents 460 (1,635)
Cash and cash equivalents:
Beginning of year 1,643 2,444
------ ------
End of period $2,103 $809
====== ======
See notes to consolidated financial statements.
</TABLE>
5
<PAGE>
GRACO INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. The consolidated balance sheet of Graco Inc. and Subsidiaries (the
Company) as of March 29, 1996 and the related statements of earnings and
cash flows for the thirteen weeks ended March 29, 1996, and March 31,
1995, 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. and Subsidiaries as of March 29, 1996, 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 1995 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 (in thousands):
March 29, 1996 Dec. 29, 1995
-------------- -------------
Finished products and components $44,604 $40,335
Products and components in various
stages of completion 23,291 22,597
Raw materials 11,890 13,152
-------------- -------------
79,785 76,084
Reduction to LIFO cost (34,870) (34,391)
-------------- -------------
$44,915 $41,693
============== =============
6
<PAGE>
Item 2. GRACO INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Net earnings in the first quarter of $5.6 million increased $0.1 million from
the same period a year ago despite a decrease in sales. Sales were lower in
all geographic regions. The earnings improvement came primarily as a result
of a lower effective tax rate and lower interest expense in the first quarter
of 1996 compared to 1995. Also contributing to the Company's improved
earnings was a one percentage point increase in gross margin from 1995 as the
result of price increases.
Sales in the first quarter of $90.2 million decreased $5.4 million, or 6
percent, from the same period in 1995. First quarter sales in the Americas
decreased 5 percent to $61.8 million and European sales declined 2 percent to
$15.8 million (a 6 percent volume decrease, and a 4 percent gain due to
exchange rates). In Asia Pacific, sales decreased 12 percent to $12.5 million
(a volume decrease of 10 percent and a loss of 2 percent on exchange rates).
Operating expenses in the first quarter of $35.8 million decreased $1.0
million or 3 percent from the first quarter of 1995. Product development
expense increased 8 percent over 1995 due to increased occupancy costs
associated with the Company's Russell J. Gray Technical Center which opened in
1995. Selling expenses were 8 percent lower than the same period last year,
largely due to lower headcount. General and administrative costs were up 5
percent, due primarily to expense items related to consolidating the Company's
Franklin Park, Illinois operations. By relocating Franklin Park's industrial
systems application engineering and sales expertise to Minneapolis, the
Company will be well-suited to leverage its systems skills throughout the
Company's entire technical group.
The effective income tax rate for the quarter was 33 percent compared to 38
percent for the same period in 1995. The decrease was due primarily to
foreign earnings effectively taxed at lower rates.
While harsh winter conditions in North America and economic softness in many
markets contributed to a slow first quarter of 1996, the Company is encouraged
by recent positive trends. Incoming orders in the first quarter exceeded
sales by $10 million, increasing backlog to $30 million. Toyota Motor
Corporation in Cambridge, Ontario recently awarded an $11 million contract to
the Company to install a paint circulating system during the second half of
1996. Excluding subcontract work, the Company will recognize approximately $4
million of sales from this project. The Company will continue to make further
improvements to manufacturing efficiency and investments in new product
development, while closely controlling expenses throughout the organization.
Financial Condition
Cash was provided by earnings and operating activities and used principally to
fund property additions. Accounts receivable decreased $1.0 million from the
prior year-end due primarily to collection efforts in Europe and Japan, and
property, plant and equipment purchases total $4.5 million year-to-date.
The Company has unused lines of credit available at March 29, 1996 totaling
$66 million.
7
<PAGE>
PART II
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Statement on Computation Exhibit 11
of Per Share Earnings
Financial Data Schedule Exhibit 27
(b) No reports on Form 8-K have been filed during the quarter
for which this report is filed.
8
<PAGE>
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 13, 1996 By:/S/ George Aristides
George Aristides
President and Chief Executive Officer
Date: May 13, 1996 By:/S/ David M. Lowe
David M. Lowe
Treasurer
(Principal Financial Officer)
9
<PAGE>
EXHIBIT 11
GRACO INC. AND SUBSIDIARIES
COMPUTATION OF NET EARNINGS PER COMMON SHARE
(Unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
---------------------
March 29, 1996 March 31, 1995
-------------- --------------
(In thousands except per share amounts)
<S> <C> <C>
Net earnings applicable to common stock:
Net earnings $5,585 $5,436
Less dividends on preferred stock - 19
------- -------
$5,585 $5,417
======= =======
Average number of common and common
equivalent shares outstanding:
Average number of common
shares outstanding 17,315 17,124
Dilutive effect of stock options
computed on the treasury
stock method 238 124
------ ------
17,553 17,248
====== ======
Net earnings per common
and common equivalent share $.32 $.31
====== ======
Primary and fully diluted earnings per share are substantially the same.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM GRACO INC.
AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS AND CONSOLIDATED BALANCE
SHEETS FOR THE QUARTERLY PERIOD ENDING SEPTEMBER 29, 1995 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000042888
<NAME> GRACO INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-27-1996
<PERIOD-END> MAR-29-1996
<CASH> 2,103
<SECURITIES> 0
<RECEIVABLES> 72,211
<ALLOWANCES> 4,977
<INVENTORY> 44,915
<CURRENT-ASSETS> 132,572
<PP&E> 160,162
<DEPRECIATION> 82,152
<TOTAL-ASSETS> 223,224
<CURRENT-LIABILITIES> 71,647
<BONDS> 11,960
<COMMON> 17,414
0
0
<OTHER-SE> 91,485
<TOTAL-LIABILITY-AND-EQUITY> 223,224
<SALES> 90,153
<TOTAL-REVENUES> 90,153
<CGS> 45,316
<TOTAL-COSTS> 45,316
<OTHER-EXPENSES> 36,552
<LOSS-PROVISION> (131)
<INTEREST-EXPENSE> 232
<INCOME-PRETAX> 8,285
<INCOME-TAX> 2,700
<INCOME-CONTINUING> 5,585
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,585
<EPS-PRIMARY> .32
<EPS-DILUTED> .32
</TABLE>
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