Graco(GGG) - 2025 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Financial Statements This section presents Graco Inc.'s unaudited consolidated financial statements for Q1 2025, covering earnings, comprehensive income, balance sheets, cash flows, and shareholders' equity Consolidated Statements of Earnings Graco reported a 7.3% increase in Q1 2025 Net Sales to $528.3 million, with Operating Earnings up 8.3% to $144.0 million and Net Earnings up 1.6% to $124.1 million Q1 2025 vs Q1 2024 Earnings Summary (In thousands, except per share amounts) | Metric | Q1 2025 (ended Mar 28) | Q1 2024 (ended Mar 29) | YoY Change | | :--- | :--- | :--- | :--- | | Net Sales | $528,284 | $492,189 | +7.3% | | Gross Profit | $277,733 | $266,197 | +4.3% | | Operating Earnings | $144,013 | $132,996 | +8.3% | | Net Earnings | $124,101 | $122,199 | +1.6% | | Diluted EPS | $0.72 | $0.71 | +1.4% | Consolidated Statements of Comprehensive Income Q1 2025 comprehensive income significantly increased to $144.1 million, primarily due to a positive cumulative translation adjustment of $19.9 million Q1 Comprehensive Income (In thousands) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Earnings | $124,101 | $122,199 | | Cumulative translation adjustment | $19,903 | $(18,706) | | Comprehensive Income | $144,067 | $104,174 | Consolidated Balance Sheets Total assets decreased to $3.01 billion as of March 28, 2025, from $3.14 billion at year-end 2024, primarily due to reduced cash and cash equivalents Balance Sheet Summary (In thousands) | Metric | March 28, 2025 | December 27, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $536,138 | $675,336 | | Total current assets | $1,369,000 | $1,497,441 | | Total Assets | $3,008,314 | $3,139,212 | | Total current liabilities | $379,644 | $405,808 | | Total shareholders' equity | $2,477,720 | $2,584,135 | Consolidated Statements of Cash Flows Q1 2025 net cash from operations was $125.4 million, with significant uses in financing activities, leading to a $139.2 million net decrease in cash Q1 Cash Flow Summary (In thousands) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $125,416 | $118,923 | | Net cash used in investing activities | $(10,486) | $(31,620) | | Net cash used in financing activities | $(258,083) | $(1,864) | | Net (decrease) increase in cash | $(139,198) | $84,777 | - Significant uses of cash in Q1 2025 included $238.1 million for common stock repurchases and $46.6 million for cash dividends[17] Consolidated Statements of Shareholders' Equity Shareholders' equity decreased to $2.48 billion in Q1 2025, primarily due to $238.1 million in share repurchases and $46.4 million in dividends Q1 2025 Changes in Shareholders' Equity (In thousands) | Description | Amount | | :--- | :--- | | Balance, December 27, 2024 | $2,584,135 | | Shares repurchased | $(238,089) | | Net earnings | $124,101 | | Dividends declared | $(46,393) | | Other comprehensive income | $19,966 | | Balance, March 28, 2025 | $2,477,720 | Notes to Consolidated Financial Statements Notes detail a Q1 2025 business reorganization into three segments and provide preliminary purchase price allocation for the Corob S.p.A. acquisition - Effective January 1, 2025, the company reorganized into three reportable segments: Contractor, Industrial, and Expansion Markets, with prior year information recast to conform[27] - The company acquired Corob S.p.A. on November 4, 2024, for €230 million in cash plus up to €30 million in contingent consideration, with the purchase price allocation remaining preliminary[48] Q1 2025 Segment Net Sales (In thousands) | Segment | Q1 2025 Net Sales | Q1 2024 Net Sales | | :--- | :--- | :--- | | Contractor | $255,032 | $230,042 | | Industrial | $231,653 | $224,860 | | Expansion Markets | $41,599 | $37,287 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses a 7% Q1 net sales increase, 8% operating earnings growth, segment performance, and maintains full-year guidance despite potential China tariff impacts Consolidated Results Q1 2025 net sales increased 7% to $528.3 million, operating earnings rose 8% to $144.0 million, while net earnings grew 2% to $124.1 million Q1 Consolidated Financial Results (In millions) | Metric | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $528.3 | $492.2 | 7% | | Operating Earnings | $144.0 | $133.0 | 8% | | Net Earnings | $124.1 | $122.2 | 2% | | Diluted EPS | $0.72 | $0.71 | 1% | - Sales growth of 7% was driven by a 6 percentage point contribution from acquired operations and a 3 percentage point increase from volume and price, offset by a 2 percentage point negative impact from currency translation[58][63] - The gross profit margin rate declined by approximately 2 percentage points due to unfavorable effects from acquired operations and higher product costs[64] Segment Results Contractor segment sales grew 11% with a 5-point margin decrease, Industrial sales rose 3% with a 1-point margin improvement, and Expansion Markets sales increased 12% with a 6-point margin increase - Contractor Segment: Sales increased 11% to $255.0 million, including a 13% contribution from acquisitions, with the operating margin rate decreasing 5 percentage points to 24%[68] - Industrial Segment: Sales grew 3% to $231.7 million, with increases in all regions, and the operating margin rate improved by 1 percentage point to 34%[69] - Expansion Markets Segment: Sales rose 12% to $41.6 million, driven by semiconductor product applications, and the operating margin rate increased significantly by 6 percentage points to 24%[70] Liquidity and Capital Resources Q1 2025 net cash from operations was $125 million, with $238 million used for share repurchases, and total available liquidity stood at $1.32 billion - Significant uses of cash in Q1 2025 were share repurchases of $238 million and dividend payments of $47 million[71] - Total available liquidity was $1,322 million as of March 28, 2025, consisting of $536 million in cash and $786 million in available credit[72] - Projected capital expenditures for the full year 2025 are expected to be approximately $50 to $60 million[73] Outlook Graco maintains its full-year low-single-digit organic revenue growth guidance, but warns of potential 1-2% negative impact from China tariffs - The company maintains its full-year revenue guidance of low-single-digit growth on an organic constant currency basis[74] - Management warns that economic uncertainty from China tariffs could negatively impact full-year revenue guidance by 1% to 2%[74] Item 3. Quantitative and Qualitative Disclosures About Market Risk No material changes to market risk disclosures have occurred since the 2024 Annual Report on Form 10-K - There have been no material changes in market risk since the 2024 Annual Report on Form 10-K[78] Item 4. Controls and Procedures Disclosure controls and procedures were deemed effective, with no material changes to internal control over financial reporting during the quarter - The President and CEO, along with the CFO, concluded that the company's disclosure controls and procedures are effective as of the end of the fiscal quarter[79] - No changes occurred during the quarter that materially affected or are likely to materially affect the company's internal control over financial reporting[80] PART II - OTHER INFORMATION Item 1A. Risk Factors No material changes to the company's risk factors have occurred since the 2024 Annual Report on Form 10-K - There have been no material changes to the risk factors previously disclosed in the 2024 Annual Report on Form 10-K[81] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased approximately 2.8 million shares in Q1 2025, with 10.35 million shares remaining under the authorization plan Issuer Purchases of Equity Securities (Q1 2025) | Period | Shares Purchased | Average Price Paid | | :--- | :--- | :--- | | Jan 25 - Feb 21, 2025 | 1,470,567 | $85.17 | | Feb 22 - Mar 28, 2025 | 1,327,169 | $85.02 | - As of March 28, 2025, a maximum of 10,353,273 shares may still be purchased under the existing Board authorization[84] Item 5. Other Information No directors or officers adopted, terminated, or modified Rule 10b5-1 trading arrangements during Q1 2025 - No directors or officers adopted, terminated, or modified a Rule 10b5-1 trading arrangement during the three months ended March 28, 2025[85] Item 6. Exhibits This section lists exhibits filed with Form 10-Q, including CEO/CFO certifications, the Q1 earnings press release, and iXBRL data files - Exhibits filed include CEO and CFO certifications (31.1, 31.2, 32), the Q1 earnings press release (99.1), and interactive data files (101)[87]