Graco Reports Record Second Quarter Results
biz.yahoo.com
Wednesday July 26, 5:11 pm ET
Net Sales Increase 10 Percent
Diluted Net Earnings Per Share Increase 18 Percent
Year-to-Date Net Profit Margin is a Record 18.7 Percent
MINNEAPOLIS--(BUSINESS WIRE)--July 26, 2006--Graco Inc. (NYSE:GGG) today announced second quarter net earnings of $41.3 million on net sales of $218.6 million - increases over the prior year of 16 percent and 10 percent, respectively. Diluted net earnings per share were $0.60 versus $0.51 last year, an 18 percent increase. For the first six months, Graco reported net earnings of $76.8 million on net sales of $410.8 million - increases over the prior year of 22 percent and 11 percent, respectively.
Second quarter and year-to-date 2006 results include $1.8 million and $3.3 million of after-tax costs and expenses for stock-based compensation, respectively due to the adoption of Statement of Financial Accounting Standards No. 123®. There were no significant expenses for stock-based compensation last year. When compared to the second quarter of last year, exchange rate changes did not have a meaningful impact on this quarter's results.
Second quarter Industrial segment sales of $104.6 million increased 11 percent versus the same period last year. Sales increased in all three regions. In the Americas, sales were up 13 percent with strong gains in the finishing, process and protective coatings product categories. In Europe, sales were up 13 percent versus last year with increases across all of the major product categories and regions. In Asia Pacific, sales were 7 percent higher than last year.
When compared to the second quarter of 2005, Contractor Equipment segment sales of $96.5 million increased 8 percent with growth in all regions. The business continued to experience growth in the Americas, up 5 percent for the quarter, characterized by a combination of well-received new product introductions and growth in the professional paint stores and home center channel. In Europe, sales were up 12 percent as growth continued in all major regions this quarter. In Asia Pacific, sales were 42 percent higher than last year. Most of this growth is coming from China and Southeast Asia where Graco continues to focus on converting end users to airless spray and is leveraging its new products.
Second quarter sales for the Lubrication Equipment Division were $17.6 million, up 18 percent from last year. All of the major lubrication products, including electric fuel and oil pumps, are contributing to the growth this year.
On a geographic basis, business tempo remained solid in the second quarter. Second quarter sales in the Americas increased 9 percent to $144.4 million, led by double-digit growth in the Industrial and Lubrication segments. In Europe, net sales of $45.4 million were 12 percent higher than the second quarter of 2005. The Industrial and Contractor segments experienced double-digit volume growth in Europe in the second quarter. Sales rebounded nicely in Asia Pacific this quarter where net sales of $28.9 million were 14 percent higher than the second quarter of 2005.
Graco's gross profit margin, expressed as a percentage of sales, was 53.5 percent for the quarter versus 51.6 percent for the same period last year. Last year's gross profit margin was reduced by approximately 120 basis points from the higher cost of inventory of acquired businesses. Despite higher material costs, the remaining portion of the improved gross margin was due to manufacturing cost improvements.
Graco's operating profit margin, expressed as a percentage of sales, was 29.2 percent for the second quarter, a 180 basis point improvement from the same quarter last year and the highest quarterly operating profit margin in company history. The improved operating profit margin, versus the same period last year, was driven by a higher gross profit margin.
Acquisition Update
Graco previously announced plans to close its facility in New Jersey and relocate its spray foam production from Vilanova, Spain, by the end of 2006 to enhance customer support and service while improving its cost structure. In the second quarter, Graco incurred approximately $1.5 million of the estimated $4 to $6 million of costs and expenses for actions related to these plans, and it is estimated that similar amounts will be incurred in each of the last two quarters of this year.
On July 11, 2006, Graco announced the acquisition of Lubriquip, Inc. with facilities in Warrensville Heights, Ohio, and Madison, Wisconsin. To leverage significant operational efficiencies, Graco will close both the Warrensville Heights and Madison facilities in 2007 and combine these operations with its existing Lubrication business at a separate facility located in Minnesota. It is estimated that the new facility and improvements will cost approximately $14 million. There will also be other costs and expenses related to these actions which will be discussed as they are incurred. Lubriquip will begin to contribute to Graco's sales and cash flow immediately.
"We are pleased to report another quarter of record performance in sales, earnings and earnings per share," said Chairman, President and Chief Executive Officer David A. Roberts. "When compared to the same periods in the prior year, this represents our seventeenth consecutive quarter of sales growth and it's the twelfth consecutive quarter where all three segments have reported higher sales. Our actions to improve the profitability and cash flow of Liquid Control and Gusmer are on track and we are pleased with the opportunities we have identified to improve the profitability of Lubriquip. In addition, our product development and distribution efforts are paying off with strong organic growth across all of our businesses and geographies. While the short cycle nature of our business provides us with a limited view of future product demand, as we head into the second half of 2006, we remain confident that we can achieve another year of record sales and earnings." |
