ggg-20230630

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 June 30, 2023

☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission File Number: 001-09249


GRACO INC.
(Exact name of registrant as specified in its charter)


Minnesota						41-0285640
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification Number)


88 - 11th Avenue N.E.
Minneapolis,	Minnesota	55413
(Address of principal executive offices)		(Zip Code)


(612)			623-6000
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $1.00 per share	GGG	The New York Stock Exchange

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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes

☒

☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes

☒

☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes

☐

☒

168,992,778 shares of the Registrant’s Common Stock, $1.00 par value, were outstanding as of July 12, 2023.

TABLE OF CONTENTS

Page

PART I - FINANCIAL INFORMATION

Item 1.

Financial Statements

Consolidated Statements of Earnings

Consolidated Statements of Comprehensive Income

Consolidated Balance Sheets

Consolidated Statements of Cash Flows

Consolidated Statements of Shareholders' Equity

Notes to Consolidated Financial Statements

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Item 4.

Controls and Procedures

PART II - OTHER INFORMATION

Item 1A.

Risk Factors

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Item 5.

Item 6.

EXHIBITS

PART I Item 1.

GRACO INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

(Unaudited) (In thousands except per share amounts)


	Three Months Ended				Six Months Ended
	June 30, 2023		July 1, 2022		June 30, 2023		July 1, 2022
Net Sales	$	559,644	$	548,547	$	1,089,290	$	1,042,832
Cost of products sold	268,229		279,487		512,735		519,297
Gross Profit	291,415		269,060		576,555		523,535
Product development	21,286		19,967		41,765		39,045
Selling, marketing and distribution	68,380		62,076		133,763		125,071
General and administrative	44,697		38,337		87,307		82,376

Operating Earnings	157,052		148,680		313,720		277,043

Interest expense	1,798		1,726		3,145		7,013

Other (income) expense, net	(4,365)		607		(6,394)		760
Earnings Before Income Taxes	159,619		146,347		316,969		269,270
Income taxes	25,351		28,969		53,535		51,049
Net Earnings	$	134,268	$	117,378	$	263,434	$	218,221
Net Earnings per Common Share
Basic	$	0.80	$	0.69	$	1.56	$	1.29
Diluted	$	0.78	$	0.68	$	1.53	$	1.26

See notes to consolidated financial statements.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited) (In thousands)


	Three Months Ended				Six Months Ended
	June 30, 2023		July 1, 2022		June 30, 2023		July 1, 2022
Net Earnings	$	134,268	$	117,378	$	263,434	$	218,221
Components of other comprehensive income (loss)
Cumulative translation adjustment	4,553		(13,532)		9,528		(16,492)
Pension and postretirement medical liability adjustment	1,195		1,368		2,327		2,262
Income taxes - pension and postretirement medical liability adjustment	(264)		(320)		(508)		(514)
Other comprehensive income (loss)	5,484		(12,484)		11,347		(14,744)
Comprehensive Income	$	139,752	$	104,894	$	274,781	$	203,477

See notes to consolidated financial statements.

Table of Contents

GRACO INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited) (In thousands)


	June 30, 2023		December 30, 2022
ASSETS
Current Assets
Cash and cash equivalents	$	520,633	$	339,196
Accounts receivable, less allowances of $5,100 and $7,000	365,818		346,010
Inventories	479,095		476,790
Other current assets	44,907		43,624
Total current assets	1,410,453		1,205,620



Property, Plant and Equipment, net	680,040		607,609
Goodwill	371,880		368,171
Other Intangible Assets, net	131,089		137,507
Operating Lease Assets	29,158		29,785
Deferred Income Taxes	48,189		57,090
Other Assets	36,916		33,118
Total Assets	$	2,707,725	$	2,438,900
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Notes payable to banks	$	49,099	$	20,974
Current portion of long term debt	75,000		—
Trade accounts payable	81,540		84,218
Salaries and incentives	55,150		63,969
Dividends payable	39,692		39,963
Other current liabilities	188,857		190,793
Total current liabilities	489,338		399,917
Long-term Debt	—		75,000
Retirement Benefits and Deferred Compensation	61,995		61,672
Operating Lease Liabilities	20,343		21,057
Deferred Income Taxes	8,730		9,443
Other Non-current Liabilities	11,012		12,159

Shareholders’ Equity
Common stock	168,985		167,702
Additional paid-in-capital	850,900		784,477
Retained earnings	1,154,453		976,851
Accumulated other comprehensive income (loss)	(58,031)		(69,378)
Total shareholders’ equity	2,116,307		1,859,652
Total Liabilities and Shareholders’ Equity	$	2,707,725	$	2,438,900

See notes to consolidated financial statements.

Table of Contents

GRACO INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited) (In thousands)


	Six Months Ended
	June 30, 2023		July 1, 2022
Cash Flows From Operating Activities
Net Earnings	$	263,434	$	218,221
Adjustments to reconcile net earnings to net cash provided by operating activities
Depreciation and amortization	36,117		31,453
Deferred income taxes	7,650		14,743
Share-based compensation	18,417		14,386

Change in
Accounts receivable	(17,421)		(56,263)
Inventories	(184)		(70,879)
Trade accounts payable	(8,243)		8,369
Salaries and incentives	(10,179)		(29,201)
Retirement benefits and deferred compensation	1,953		349
Other accrued liabilities	(5,728)		(386)
Other	(3,493)		4,193
Net cash provided by operating activities	282,323		134,985
Cash Flows From Investing Activities
Property, plant and equipment additions	(92,232)		(88,861)
Acquisition of businesses, net of cash acquired	—		(25,296)
Other	(940)		(397)
Net cash used in investing activities	(93,172)		(114,554)
Cash Flows From Financing Activities
Borrowings on short-term lines of credit, net	28,966		13,830

Payments on long-term debt	—		(75,000)
Payments of debt issuance costs	(1,025)		—
Common stock issued	52,053		23,410
Common stock repurchased	(7,766)		(120,021)
Taxes paid related to net share settlement of equity awards	(1,225)		(1,219)
Cash dividends paid	(78,991)		(71,341)
Net cash provided (used) in financing activities	(7,988)		(230,341)
Effect of exchange rate changes on cash	274		(1,033)
Net increase (decrease) in cash and cash equivalents	181,437		(210,943)
Cash and Cash Equivalents
Beginning of year	339,196		624,302
End of period	$	520,633	$	413,359

See notes to consolidated financial statements.

Table of Contents

GRACO INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Unaudited) (In thousands)

Common
Stock

Additional
Paid-In
Capital

Retained
Earnings

Accumulated
Other
Comprehensive
Income (Loss)

Total



Three Months Ended June 30, 2023
Balance, March 31, 2023	$	168,308	$	821,570	$	1,059,980	$	(63,515)	$	1,986,343

Shares issued	677		20,350		—		—		21,027

Stock compensation cost	—		8,980		—		—		8,980


Net earnings	—		—		134,268		—		134,268
Dividends declared (0.2350 per share)	—		—		(39,795)		—		(39,795)

Other comprehensive income (loss)	—		—		—		5,484		5,484
Balance, June 30, 2023	$	168,985	$	850,900	$	1,154,453	$	(58,031)	$	2,116,307



Six Months Ended June 30, 2023
Balance, December 30, 2022	$	167,702	$	784,477	$	976,851	$	(69,378)	$	1,859,652

Shares issued	1,398		49,430		—		—		50,828
Shares repurchased	(115)		(539)		(7,112)		—		(7,766)
Stock compensation cost	—		17,532		—		—		17,532


Net earnings	—		—		263,434		—		263,434
Dividends declared ($0.470 per share)	—		—		(78,720)		—		(78,720)

Other comprehensive income (loss)	—		—		—		11,347		11,347
Balance, June 30, 2023	$	168,985	$	850,900	$	1,154,453	$	(58,031)	$	2,116,307



Three Months Ended July 1, 2022
Balance, April 1, 2022	$	169,223	$	761,959	$	841,503	$	(82,429)	$	1,690,256

Shares issued	70		2,047		—		—		2,117
Shares repurchased	(179)		(777)		(10,360)		—		(11,316)
Stock compensation cost	—		6,980		—		—		6,980

Restricted stock canceled (issued)	—		—		—		—		—
Net earnings	—		—		117,378		—		117,378
Dividends declared ($0.210 per share)	—		—		(35,657)		—		(35,657)

Other comprehensive income (loss)	—		—		—		(12,484)

SEC Form 10-Q filed by Graco Inc.