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Graco Reports Record Second Quarter Results - Diluted Net Earnings Per Share Increase 23 Percent - Net Sales Increase 9 Percent

Published on 2004-07-19. Author : SpecialChem

MINNEAPOLIS -- Graco Inc. (NYSE:GGG) announced second quarter net earnings of $30.0 million on net sales of $160.2 million - increases over the prior year of 23 percent and 9 percent, respectively. Diluted net earnings per share were $0.43 versus $0.35 last year, a 23 percent increase. For the first six months, Graco reported net earnings of $52.3 million on net sales of $295.1 million - increases over the prior year of 23 percent and 11 percent, respectively.

When compared to 2003 results, the weaker U.S. dollar versus foreign currencies helped to increase second quarter and year-to-date net earnings and net sales. Translated at consistent exchange rates, second quarter net earnings and net sales increased by 18 percent and 8 percent, respectively and year-to-date net earnings and net sales increased by 14 percent and 8 percent, respectively.

When compared to the second quarter of 2003, worldwide Contractor Equipment Division sales of $81.6 million increased 6 percent. In the Americas, sales were higher in the professional paint store channel and lower in the home center channel. In the professional paint channel sales were higher, aided by good demand for new products, including the new Ultra(R) Max II sprayers. In the home center channel, sales were lower in the second quarter and are virtually flat for the year. Second quarter 2003 home center sales were particularly strong due to a new product introduction. The Contractor Equipment Division posted strong volume gains in Asia and Europe in the second quarter and on a year-to-date basis.

Second quarter Industrial/Automotive Equipment Division sales of $66.5 million increased 15 percent versus the same period last year. When translated at constant exchange rates, sales were up 13 percent. Double-digit volume increases were experienced in all three regions this quarter. The increase in business occurred in all major product categories, similar to what was experienced in the first quarter of this year. New product introductions also contributed to sales growth, including the new ProMix(TM) II and ProMix(TM) Easy units, which were launched in the second quarter.

Second quarter sales for the Lubrication Equipment Division were $12.1 million, up 3 percent from last year. For the year, sales of $24.8 million are also up 3 percent from the same period of last year.

Second quarter sales in the Americas increased 5 percent to $107.8 million. In Europe, net sales of $33.1 million were 22 percent higher than the second quarter of 2003, and sales measured in local currencies were up 15 percent. In Asia Pacific, net sales of $19.3 million were 18 percent higher than the second quarter of 2003, and sales measured in local currencies increased 15 percent.

Graco's gross profit margin, expressed as a percentage of sales, was 53.2 percent for the quarter versus 51.9 percent for the same period last year. The higher gross margin was due to several factors including higher production volumes, improved productivity, and favorable exchange rates.

Graco's operating profit margin, expressed as a percentage of sales, was 28.1 percent for the second quarter versus 24.8 percent last year. Operating expenses were virtually flat versus last year's second quarter, despite a 26 percent increase in product development spending.

Graco also announced that it intends to open a manufacturing facility in the Shanghai region of China sometime in the latter half of 2005. The leased facility will be approximately 50,000 square feet and will require approximately $4 million of capital investment prior to beginning production. The factory will produce select lower technology products for sale worldwide and will give Graco manufacturing capacity in this fast-developing region of the world.

"Graco is off to a strong start this year with double digit increases in sales, net earnings and earnings per share," said President and Chief Executive Officer David A. Roberts. "All three regions and all three divisions reported sales increases in the first half of the year and we were able to leverage these solid revenue gains into even higher net earnings and earnings per share growth. We did this while substantially increasing our investment in product development and continuing to make significant capital investments. Our Industrial/Automotive Equipment division continues to experience strong underlying demand across all major product categories in the Americas and Asia, but we are especially pleased to report a double-digit increase in underlying demand in Europe for the first time in several quarters. Our Contractor segment continues to grow, driven by a combination of new product introductions, favorable housing conditions in North America and continued underlying growth in both Europe and Asia. Our results this year are good and indicate that an economic recovery is underway. We remain confident that 2004 will be a record year for the company."

Source: Graco


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