Graco Reports Record Third Quarter Results
Graco Inc. (NYSE: GGG) reported Q3 2022 net sales of $545.6 million, a 12% increase from Q3 2021, driven by robust organic sales growth. Operating earnings rose 15% to $143.1 million, while diluted EPS increased 14% to $0.67. Despite currency translation headwinds negatively impacting sales and earnings by approximately $20 million and $9 million, respectively, the company raised its full-year organic revenue growth outlook to low double digits. The industrial and contractor segments showed double-digit growth, although gross profit margins decreased due to rising product costs.
- Q3 2022 net sales increased 12% to $545.6 million.
- Operating earnings rose 15% to $143.1 million.
- Diluted EPS increased 14% to $0.67.
- Organic sales growth of 16% contributed to overall sales increase.
- The company raised full-year organic revenue growth outlook to low double digits.
- Gross profit margin decreased by approximately 3 percentage points.
- Currency translation negatively impacted sales and earnings by about $20 million and $9 million, respectively.
Double-Digit Sales Growth in Process and Contractor Segments
Summary $ in millions except per share amounts |
|||||||||||||||||
|
Three Months Ended |
|
Nine Months Ended |
||||||||||||||
|
|
|
|
|
%
|
|
|
|
|
|
%
|
||||||
|
$ |
545.6 |
|
$ |
486.7 |
|
12 |
% |
|
$ |
1,588.5 |
|
$ |
1,448.0 |
|
10 |
% |
Operating Earnings |
|
143.1 |
|
|
124.6 |
|
15 |
% |
|
|
420.2 |
|
|
386.7 |
|
9 |
% |
Net Earnings |
|
116.2 |
|
|
103.8 |
|
12 |
% |
|
|
334.5 |
|
|
319.6 |
|
5 |
% |
Diluted Net Earnings per Common Share |
$ |
0.67 |
|
$ |
0.59 |
|
14 |
% |
|
$ |
1.93 |
|
$ |
1.83 |
|
5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Adjusted (non-GAAP): (1) |
|
|
|
|
|
|
|
|
|
|
|
||||||
Net Earnings, adjusted |
$ |
114.8 |
|
$ |
100.3 |
|
14 |
% |
|
$ |
331.3 |
|
$ |
309.9 |
|
7 |
% |
Diluted Net Earnings per Common Share, adjusted |
$ |
0.66 |
|
$ |
0.57 |
|
16 |
% |
|
$ |
1.91 |
|
$ |
1.78 |
|
7 |
% |
(1) |
Excludes impacts of excess tax benefits from stock option exercises and certain non-recurring tax provision adjustments. See Financial Results Adjusted for Comparability below for a reconciliation of adjusted non-GAAP financial measures to GAAP. |
-
Changes in currency translation rates reduced sales and net earnings by approximately
and$20 million , respectively, for the quarter.$9 million - Sales for the quarter increased 12 percent, including 16 percentage points of organic sales growth and 1 percentage point of sales growth from acquired operations, partially offset by 5 percentage points of currency translation headwinds.
- The gross profit margin rate decreased approximately 3 percentage points for the quarter as strong realized pricing was unable to offset higher product costs and unfavorable currency translation.
- Total operating expenses decreased 5 percent for the quarter due to currency translation and lower sales and earnings-based expenses.
- Expense leverage largely offset the effects of lower gross profit margin rates on operating earnings.
"Graco delivered record third quarter sales and earnings despite rising costs and foreign currency headwinds," said
Consolidated Results
Changes in currency translation rates reduced sales and net earnings by approximately
Net sales for the quarter increased 12 percent from the comparable period last year (17 percent at consistent translation rates). Sales increased 19 percent in the
Gross profit margin rates for the quarter and year to date decreased 3 percentage points from the comparable periods last year. Realized pricing was unable to offset higher product costs and the adverse impacts of changes in currency translation rates.
Total operating expenses for the quarter decreased
The effective income tax rate was 18 percent for the quarter and 19 percent for the year to date, up approximately 3 percentage points respectively, from the comparable periods last year. The increases were primarily due to decreases in excess tax benefits from stock option exercises and the unfavorable effects of foreign earnings taxed at higher rates than the
Segment Results
Management assesses performance of segments by reference to operating earnings excluding unallocated corporate expenses. For a reconciliation of segment operating earnings to consolidated operating earnings, refer to the segment information table included in the financial statement section of this release. Certain measurements of segment operations are summarized below:
|
Three Months |
|
Nine Months |
||||||||||||||||||||
|
Industrial |
|
Process |
|
Contractor |
|
Industrial |
|
Process |
|
Contractor |
||||||||||||
|
$ |
156.1 |
|
|
$ |
125.4 |
|
|
$ |
264.1 |
|
|
$ |
459.2 |
|
|
$ |
364.9 |
|
|
$ |
764.4 |
|
Percentage change from last year |
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Sales |
|
1 |
% |
|
|
30 |
% |
|
|
12 |
% |
|
|
7 |
% |
|
|
28 |
% |
|
|
4 |
% |
Operating earnings |
|
6 |
% |
|
|
42 |
% |
|
|
11 |
% |
|
|
17 |
% |
|
|
37 |
% |
|
|
(5 |
)% |
Operating earnings as a percentage of sales |
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
2022 |
|
35 |
% |
|
|
24 |
% |
|
|
25 |
% |
|
|
35 |
% |
|
|
24 |
% |
|
|
25 |
% |
2021 |
|
33 |
% |
|
|
22 |
% |
|
|
25 |
% |
|
|
32 |
% |
|
|
23 |
% |
|
|
28 |
% |
Components of net sales change by geographic region for the Industrial segment were as follows:
|
Three Months |
|
Nine Months |
||||||||||||
|
Volume
|
|
Acquisitions |
|
Currency |
|
Total |
|
Volume
|
|
Acquisitions |
|
Currency |
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)% |
|
|
EMEA |
|
|
|
|
(14)% |
|
(11)% |
|
|
|
|
|
(11)% |
|
(2)% |
|
|
|
|
|
(8)% |
|
|
|
|
|
|
|
(5)% |
|
|
Consolidated |
|
|
|
|
(7)% |
|
|
|
|
|
|
|
(5)% |
|
|
For both the quarter and year to date, strong Industrial segment sales growth in the
Components of net sales change by geographic region for the Process segment were as follows:
|
Three Months |
|
Nine Months |
||||||||||||
|
Volume
|
|
Acquisitions |
|
Currency |
|
Total |
|
Volume
|
|
Acquisitions |
|
Currency |
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EMEA |
|
|
|
|
(11)% |
|
|
|
|
|
|
|
(7)% |
|
|
|
|
|
|
|
(7)% |
|
|
|
|
|
|
|
(5)% |
|
|
Consolidated |
|
|
|
|
(4)% |
|
|
|
|
|
|
|
(2)% |
|
|
The Process segment had double-digit sales growth in all product applications and regions for the quarter and year to date. The operating margin rate for this segment increased 2 percentage points for the quarter and 1 percentage point for the year to date as increased volume and expense leverage offset higher product costs, unfavorable product and channel mix and the adverse impacts of currency translation.
Components of net sales change by geographic region for the Contractor segment were as follows:
|
Three Months |
|
Nine Months |
||||||||||||
|
Volume
|
|
Acquisitions |
|
Currency |
|
Total |
|
Volume
|
|
Acquisitions |
|
Currency |
|
Total |
|
|
|
|
|
(1)% |
|
|
|
|
|
|
|
|
|
|
EMEA |
|
|
|
|
(13)% |
|
(1)% |
|
(4)% |
|
|
|
(9)% |
|
(12)% |
|
|
|
|
|
(8)% |
|
(1)% |
|
|
|
|
|
(5)% |
|
|
Consolidated |
|
|
|
|
(4)% |
|
|
|
|
|
|
|
(3)% |
|
|
Contractor segment sales increased 12 percent for the quarter compared to last year due to improved product availability. Sales increased 4 percent for the year to date primarily due to continued strength in North American construction markets. Price realization, favorable product and channel mix and expense leverage offset higher product costs for the quarter, which resulted in a consistent operating margin rate compared to last year. For the year to date, the operating margin rate decreased 3 percentage points primarily due to higher product costs and the adverse impacts of currency translation.
Outlook
"While macroeconomic conditions are uncertain, we are positioned to have a record year in 2022," said Sheahan. "We remain committed to our strategies of launching new products, entering new markets, expanding our global channel and pursuing strategic acquisitions. We are raising our full-year outlook to low double-digit organic revenue growth on a constant currency basis."
Financial Results Adjusted for Comparability
Excluding the impacts of excess tax benefits related to stock option exercises and certain non-recurring tax provision adjustments presents a more consistent basis for comparison of financial results. A calculation of the non-GAAP measurements of adjusted income taxes, effective income tax rates, net earnings and diluted earnings per share follows (in millions except per share amounts):
|
Three Months Ended |
|
Nine Months Ended |
||||||||||||
|
|
|
|
|
|
|
|
||||||||
Earnings before income taxes |
$ |
142.4 |
|
|
$ |
121.8 |
|
|
$ |
411.8 |
|
|
$ |
379.2 |
|
|
|
|
|
|
|
|
|
||||||||
Income taxes, as reported |
$ |
26.2 |
|
|
$ |
17.9 |
|
|
$ |
77.3 |
|
|
$ |
59.6 |
|
Excess tax benefit from option exercises |
|
1.4 |
|
|
|
2.6 |
|
|
|
3.2 |
|
|
|
8.8 |
|
Other non-recurring tax benefit |
|
— |
|
|
|
0.9 |
|
|
|
— |
|
|
|
0.9 |
|
Income taxes, adjusted |
$ |
27.6 |
|
|
$ |
21.4 |
|
|
$ |
80.5 |
|
|
$ |
69.3 |
|
|
|
|
|
|
|
|
|
||||||||
Effective income tax rate |
|
|
|
|
|
|
|
||||||||
As reported |
|
18.4 |
% |
|
|
14.7 |
% |
|
|
18.8 |
% |
|
|
15.7 |
% |
Adjusted |
|
19.4 |
% |
|
|
17.6 |
% |
|
|
19.6 |
% |
|
|
18.3 |
% |
|
|
|
|
|
|
|
|
||||||||
Net Earnings, as reported |
$ |
116.2 |
|
|
$ |
103.8 |
|
|
$ |
334.5 |
|
|
$ |
319.6 |
|
Excess tax benefit from option exercises |
|
(1.4 |
) |
|
|
(2.6 |
) |
|
|
(3.2 |
) |
|
|
(8.8 |
) |
Other non-recurring tax benefit |
|
— |
|
|
|
(0.9 |
) |
|
|
— |
|
|
|
(0.9 |
) |
Net Earnings, adjusted |
$ |
114.8 |
|
|
$ |
100.3 |
|
|
$ |
331.3 |
|
|
$ |
309.9 |
|
|
|
|
|
|
|
|
|
||||||||
Weighted Average Diluted Shares |
|
172.8 |
|
|
|
174.8 |
|
|
|
173.4 |
|
|
|
174.4 |
|
Diluted Earnings per Share |
|
|
|
|
|
|
|
||||||||
As reported |
$ |
0.67 |
|
|
$ |
0.59 |
|
|
$ |
1.93 |
|
|
$ |
1.83 |
|
Adjusted |
$ |
0.66 |
|
|
$ |
0.57 |
|
|
$ |
1.91 |
|
|
$ |
1.78 |
|
Cautionary Statement Regarding Forward-Looking Statements
The Company desires to take advantage of the “safe harbor” provisions regarding forward-looking statements of the Private Securities Litigation Reform Act of 1995 and is filing this Cautionary Statement in order to do so. From time to time various forms filed by our Company with the
Future results could differ materially from those expressed due to the impact of changes in various factors. These risk factors include, but are not limited to: the impact of the COVID-19 pandemic on our business;
Investors should realize that factors other than those identified above and in Item 1A might prove important to the Company’s future results. It is not possible for management to identify each and every factor that may have an impact on the Company’s operations in the future as new factors can develop from time to time.
Conference Call
Graco management will hold a conference call, including slides via webcast, with analysts and institutional investors on
A real-time listen-only webcast of the conference call will be broadcast by Nasdaq. Individuals can access the call and view the slides on the Company’s website at www.graco.com. Listeners should go to the website at least 15 minutes prior to the live conference call to install any necessary audio software.
About Graco
CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) (In thousands except per share amounts) |
|||||||||||||
|
Three Months Ended |
|
Nine Months Ended |
||||||||||
|
|
|
|
|
|
|
|
||||||
|
$ |
545,644 |
|
|
$ |
486,696 |
|
$ |
1,588,476 |
|
|
$ |
1,447,989 |
Cost of products sold |
|
284,556 |
|
|
|
238,462 |
|
|
803,853 |
|
|
|
688,597 |
Gross Profit |
|
261,088 |
|
|
|
248,234 |
|
|
784,623 |
|
|
|
759,392 |
Product development |
|
19,704 |
|
|
|
19,762 |
|
|
58,749 |
|
|
|
60,739 |
Selling, marketing and distribution |
|
61,386 |
|
|
|
66,078 |
|
|
186,457 |
|
|
|
197,432 |
General and administrative |
|
36,849 |
|
|
|
37,795 |
|
|
119,225 |
|
|
|
114,493 |
Operating Earnings |
|
143,149 |
|
|
|
124,599 |
|
|
420,192 |
|
|
|
386,728 |
Interest expense |
|
1,542 |
|
|
|
2,500 |
|
|
8,555 |
|
|
|
7,456 |
Other expense (income), net |
|
(866 |
) |
|
|
344 |
|
|
(106 |
) |
|
|
31 |
Earnings Before Income Taxes |
|
142,473 |
|
|
|
121,755 |
|
|
411,743 |
|
|
|
379,241 |
Income taxes |
|
26,241 |
|
|
|
17,926 |
|
|
77,290 |
|
|
|
59,607 |
Net Earnings |
$ |
116,232 |
|
|
$ |
103,829 |
|
$ |
334,453 |
|
|
$ |
319,634 |
Net Earnings per Common Share |
|
|
|
|
|
|
|
||||||
Basic |
$ |
0.69 |
|
|
$ |
0.61 |
|
$ |
1.97 |
|
|
$ |
1.89 |
Diluted |
$ |
0.67 |
|
|
$ |
0.59 |
|
$ |
1.93 |
|
|
$ |
1.83 |
Weighted Average Number of Shares |
|
|
|
|
|
|
|
||||||
Basic |
|
169,166 |
|
|
|
169,834 |
|
|
169,368 |
|
|
|
169,459 |
Diluted |
|
172,789 |
|
|
|
174,774 |
|
|
173,388 |
|
|
|
174,398 |
SEGMENT INFORMATION (Unaudited) (In thousands) |
|||||||||||||||
|
Three Months Ended |
|
Nine Months Ended |
||||||||||||
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
||||||||
Industrial |
$ |
156,182 |
|
|
$ |
154,560 |
|
|
$ |
459,176 |
|
|
$ |
428,872 |
|
Process |
|
125,376 |
|
|
|
96,185 |
|
|
|
364,883 |
|
|
|
284,790 |
|
Contractor |
|
264,086 |
|
|
|
235,951 |
|
|
|
764,417 |
|
|
|
734,327 |
|
Total |
$ |
545,644 |
|
|
$ |
486,696 |
|
|
$ |
1,588,476 |
|
|
$ |
1,447,989 |
|
Operating Earnings |
|
|
|
|
|
|
|
||||||||
Industrial |
$ |
53,964 |
|
|
$ |
50,812 |
|
|
$ |
161,795 |
|
|
$ |
138,879 |
|
Process |
|
30,638 |
|
|
|
21,514 |
|
|
|
89,183 |
|
|
|
64,923 |
|
Contractor |
|
65,123 |
|
|
|
58,659 |
|
|
|
192,314 |
|
|
|
203,366 |
|
Unallocated corporate (expense) |
|
(6,576 |
) |
|
|
(6,386 |
) |
|
|
(23,100 |
) |
|
|
(20,440 |
) |
Total |
$ |
143,149 |
|
|
$ |
124,599 |
|
|
$ |
420,192 |
|
|
$ |
386,728 |
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20221026005872/en/
Financial Contact:
Media Contact:
Taylor_M_Juve@graco.com
Source:
FAQ
What were Graco's Q3 2022 earnings results?
How did currency translation affect Graco's Q3 performance?
What is Graco's full-year revenue growth outlook?