Graco Reports Record Sales and Operating Earnings

Graco Inc. (NYSE: GGG) announced results for the first quarter ended March 30, 2018.

Strong Sales Growth in All Segments and Regions

$ in millions except per share amounts
Three Months Ended
Mar 30,
Mar 31,
Net Sales $ 406.3 $ 340.6 19 %
Operating Earnings 111.7 87.4 28 %
Net Earnings 85.5 60.7 41 %
Diluted Net Earnings per Common Share $ 0.49 $ 0.35 40 %
Adjusted (non-GAAP): (1)
Net Earnings, adjusted $ 84.1 $ 57.0 48 %
Diluted Net Earnings per Common Share, adjusted $ 0.48 $ 0.33 45 %

(1)  Excludes impacts of excess tax benefits from stock option exercises. See Financial Results Adjusted for Comparability below for a reconciliation of adjusted non-GAAP financial measures to GAAP.

• Sales increased 19 percent, with double-digit percentage growth in all segments and regions. Favorable currency translation contributed 5 percentage points and acquired operations added 3 percentage points of sales growth.

• Gross margin rates remained strong, up slightly compared to the first quarter last year.

• Operating expenses increased 13 percent, including 3 percentage points from currency translation and 2 percentage points from acquired operations. Operating expenses as a percentage of sales decreased by nearly 2 percentage points.

• The effective income tax rate decreased by 5 percentage points, driven by the impacts of U.S. federal income tax reform, partially offset by the effect of a decrease in excess tax benefits from option exercises.

“The Company’s record performance from 2017 continued into the first quarter of 2018, achieving the highest sales and operating earnings for a quarter in Graco history,” said Patrick J. McHale, Graco’s President and CEO. “Year-over-year sales growth was strong in the quarter, as we posted organic, constant currency growth in every region of the world and double-digit growth in each of our reportable segments. First quarter profitability remained solid, aided by increased sales volumes, ongoing factory performance and good expense leverage. Our employees and channel partners around the world continue to execute at a high level and I thank them for their efforts to get this year off to a great start against tough 2017 comparables.”

Segment Results

Management assesses performance of segments by reference to operating earnings excluding unallocated corporate expenses and asset impairments. 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
Industrial Process Contractor
Net Sales (in millions) $ 195.2 $ 80.0 $ 131.1
Percentage change from last year
Sales 25 % 14 % 15 %
Operating earnings 29 % 31 % 21 %
Operating earnings as a percentage of sales
2018 35 % 22 % 24 %
2017 34 % 19 % 23 %

Components of net sales change by geographic region for the Industrial segment were as follows:

Three Months
and Price
Acquisitions Currency Total
Americas 7 % 0 % 0 % 7 %
EMEA 10 % 12 % 15 % 37 %
Asia Pacific 24 % 7 % 9 % 40 %
Consolidated 13 % 5 % 7 % 25 %

Contractor segment sales increased in all channels. Currency translation effects drove the segment’s 1 percentage point increase in operating margin rate.


“Demand in the first quarter continued to be broad-based across products and geographies,” stated McHale. “We are raising our full-year 2018 outlook to mid-to-high single-digit organic sales growth on a constant currency basis worldwide, from a prior outlook of mid single-digit growth. Industrial segment demand in the first quarter was consistent with our full-year Company outlook, with segment sales outgrowing bookings; we expect the Industrial segment’s second quarter growth to moderate and the first half sales growth to be consistent with the full-year Company outlook. Regionally, we expect to achieve mid-to-high single-digit growth for the full-year 2018.”

About Graco

Graco Inc. supplies technology and expertise for the management of fluids and coatings in both industrial and commercial applications. It designs, manufactures and markets systems and equipment to move, measure, control, dispense and spray fluid and powder materials. A recognized leader in its specialties, Minneapolis-based Graco serves customers around the world in the manufacturing, processing, construction and maintenance industries. For additional information about Graco Inc., please visit us at or on Twitter @GracoInc.

Full Quarterly Report and the Consolidated Balance Sheets, Consolidated Statements of Cash Flows and Management’s Discussion and Analysis are available in our Quarterly Report on Form 10-Q on our website at

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