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GRACO REPORTS EARNINGS GAIN ON LOWER THIRD QUARTER SALES

 GRACO REPORTS EARNINGS GAIN ON LOWER THIRD QUARTER SALES
 MINNEAPOLIS, Oct. 14 /PRNewswire/ -- Graco Inc. (NYSE: GGG) today


announced operating results for its third quarter ended Sept. 25, 1992. Net sales for the quarter were $76,311,000, a decline of 5 percent from last year's third quarter sales of $80,045,000. Net earnings for the period were $3,462,000, or 45 cents per share, an increase of 12 percent from $3,079,000, or 40 cents per share in the 1991 period.
 Graco previously announced that it was experiencing slowing revenue growth in its core businesses and that its earnings for the period would be below analysts' estimates. Sales of these core business units (excluding its recently divested robotics operations and its Lockwood Technical Inc. subsidiary), which were up 12 percent during the first half of 1992, declined 1 percent in the third quarter compared with the same period last year. Net earnings, which were not expected to exceed last year's level, benefited from higher than anticipated gross margins and increased foreign currency exchange gains.
 GRACO INC.
 (In thousands, except per share amounts)
 3rd Quarter Ended 9 Months Ended
 9/25/92 9/27/91 9/25/92 9/27/91
 Net Sales $76,311 $80,045 $235,314 $233,840
 Net Earnings 3,462 3,079 10,206 6,716
 Net Earnings Per
 Common Share $.45 $.40 $1.34 $.89
 Sales in the Americas for the quarter decreased by 5 percent to $45,680,000, with increases in sales of contractor and general industrial equipment being offset by declines in the sale of paint circulating and sealant and adhesive application equipment, principally to automotive manufacturers. Sales in Europe increased 15 percent to $17,876,000 as the result of translation of foreign currency sales at more favorable exchange rates. Sales in the Pacific declined 23 percent to $12,755,000 because of lower sales in Japan.
 Operating expenses totaled $32,699,000, an increase of 6 percent from the prior year due to higher selling expenses. Other income of $837,000 for the third quarter compares with other expense of $232,000 in the third quarter of 1991, principally the result of a foreign exchange gain of $515,000 in 1992 compared to a loss of $268,000 last year.
 Consolidated sales for the nine months were $235,314,000, an increase of 1 percent from the same period in 1991. Excluding from the comparison the sales of recently divested operations, core business sales were up 7 percent. Sales to customers in the Americas increased slightly to $141,807,000 from $141,482,000 in 1991. Sales in Europe were $53,159,000, an increase of 11 percent, while sales in the Pacific declined by 9 percent to $40,348,000. Net earnings for the nine months were $10,206,000, or $1.34 per share, an increase of 52 percent from net earnings of $6,716,000, or 89 cents per share in 1991.
 Included in earnings before income taxes for the nine months ended Sept. 25, 1992, is a $1,700,000 gain ($1,000,000 after taxes, or 13 cents per share) resulting from the sale during the second quarter of the Company's wholly-owned subsidiary, Lockwood Technical Inc. and a related Japanese joint-venture affiliate. Included in 1991 earnings before taxes were $2,400,000 in costs associated with the sale of the Company's robotics business and a $1,000,000 gain on the sale of a facility.
 Consolidated backlog at Sept. 25, 1992, was $29 million, equal to the beginning of the quarter but down from $32 million on Sept. 27, 1991.
 Company Chairman David A. Koch said, "A slowing of the business tempo in several of our U.S. markets and the downturn in economic activity in Japan are expected to result in further pressure on earnings in the fourth quarter.
 "While pleased with our earnings improvement for the nine months, we face the prospect of continuing slow revenue growth over the next few quarters and are positioning the Company to respond to these challenging economic times."
 The Company also announced it intends to adopt SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pension" for the current 1992 fiscal year. It expects to finalize the valuation of its liability for its postretirement medical plan in this year's fourth quarter. The intent is to record the Company's liability associated with this change in accounting principle, currently estimated at $12-14 million before income taxes, as a one-time charge in 1992.
 Graco Inc. supplies technology and expertise for the management of fluids in both industrial and commercial applications. It designs, manufactures and markets systems and equipment to move, measure, control, dispense and apply fluid materials. A recognized leader in its specialties, Minneapolis-based Graco serves customers around the world in the manufacturing, processing, construction and maintenance industries.
 GRACO INC. AND SUBSIDIARIES
 Consolidated Statements of Earnings
 (In thousands, except per share amounts)
 Third Quarter Ended Nine Months Ended
 9/25/92 9/27/91 9/25/92 9/27/91
 NET SALES $76,311 $80,045 $235,314 $233,840
 Cost of products sold 38,111 42,431 118,682 121,209
 GROSS PROFIT 38,200 37,614 116,632 112,631
 Product development 2,702 2,816 7,894 9,055
 Selling 20,558 18,634 62,125 59,159
 General and
 administrative(a) 9,439 9,437 29,437 29,901
 OPERATING PROFIT 5,501 6,727 17,176 14,516
 Interest expense 626 891 2,044 2,767
 Other (income) expense,
 net(b) (837) 232 (1,874) 133
 EARNINGS BEFORE INCOME
 TAXES 5,712 5,604 17,006 11,616
 Income taxes 2,250 2,525 6,800 4,900
 NET EARNINGS $3,462 $3,079 $10,206 $6,716
 NET EARNINGS PER COMMON
 SHARE $.45 $.40 $1.34 $.89
 WEIGHTED AVERAGE NUMBER
 OF COMMON SHARES 7,585 7,570 7,569 7,506
 (a) Included in 1991 general and administrative expenses for the nine months is $2,400,000 in costs associated with the sale of the robotics business.
 (b) Included in 1992 other income for the nine months is a gain of $1,700,000 resulting from the sale of the Company's wholly-owned subsidiary, Lockwood Technical Inc. and a related Japanese joint-venture affiliate.
 All figures are subject to audit and adjustment at the end of the fiscal year.
 -0- 10/14/92
 /CONTACT: Roger L. King, 612-623-6700, or David L. Schoeneck, 612-623-6679, both of Graco/
 (GGG) CO: Graco Inc. ST: Minnesota IN: SU: ERN


KH -- MN006 -- 9745 10/14/92 09:58 EDT
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