GRACO INC.
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(Exact name of registrant as specified in its charter)
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Minnesota
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41-0285640
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(State of incorporation)
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(I.R.S. Employer Identification Number)
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88 - 11th Avenue N.E.
Minneapolis, Minnesota
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55413
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(Address of principal executive offices)
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(Zip Code)
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(612) 623-6000
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(Registrant’s telephone number, including area code)
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Large Accelerated Filer
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X
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Accelerated Filer
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Non-accelerated Filer
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Smaller reporting company
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Page
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PART I - FINANCIAL INFORMATION
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Item 1.
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Item 2.
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Item 3.
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Item 4.
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PART II - OTHER INFORMATION
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Item 1A.
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Item 2.
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Item 6.
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EXHIBITS
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Thirteen Weeks Ended
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Twenty-six Weeks Ended
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||||||||||||
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June 24,
2016 |
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June 26,
2015 |
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June 24,
2016 |
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June 26,
2015 |
||||||||
Net Sales
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$
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348,126
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$
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335,489
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$
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653,038
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$
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641,942
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Cost of products sold
|
162,985
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154,866
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306,101
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299,190
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||||
Gross Profit
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185,141
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180,623
|
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346,937
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342,752
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||||
Product development
|
15,607
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14,907
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30,293
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30,197
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||||
Selling, marketing and distribution
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56,136
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50,126
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108,837
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101,550
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||||
General and administrative
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35,056
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31,699
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68,516
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61,883
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||||
Operating Earnings
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78,342
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83,891
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139,291
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149,122
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|
||||
Interest expense
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4,543
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4,125
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9,036
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9,428
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|
||||
Held separate investment (income), net
|
—
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(158,833
|
)
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—
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(188,356
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)
|
||||
Other expense (income), net
|
392
|
|
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(438
|
)
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(754
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)
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|
272
|
|
||||
Earnings Before Income Taxes
|
73,407
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239,037
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131,009
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327,778
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||||
Income taxes
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22,460
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66,400
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40,510
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86,300
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Net Earnings
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$
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50,947
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$
|
172,637
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$
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90,499
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$
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241,478
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Per Common Share
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Basic net earnings
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$
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0.92
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$
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2.96
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$
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1.63
|
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$
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4.12
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Diluted net earnings
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$
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0.89
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$
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2.90
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$
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1.59
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$
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4.02
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Cash dividends declared
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$
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0.33
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$
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0.30
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$
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0.66
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$
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0.60
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Thirteen Weeks Ended
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Twenty-six Weeks Ended
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||||||||||||
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June 24,
2016 |
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June 26,
2015 |
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June 24,
2016 |
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June 26,
2015 |
||||||||
Net Earnings
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$
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50,947
|
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$
|
172,637
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$
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90,499
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$
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241,478
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Components of other comprehensive
income (loss)
|
|
|
|
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|
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|
||||||||
Cumulative translation adjustment
|
(7,635
|
)
|
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12,404
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|
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(10,037
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)
|
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9,393
|
|
||||
Pension and postretirement medical
liability adjustment
|
1,777
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1,919
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3,250
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4,357
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|
||||
Income taxes - pension and postretirement
medical liability adjustment
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(635
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)
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(739
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)
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(1,204
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)
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(1,641
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)
|
||||
Other comprehensive income (loss)
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(6,493
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)
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13,584
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(7,991
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)
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12,109
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||||
Comprehensive Income
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$
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44,454
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$
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186,221
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$
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82,508
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$
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253,587
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June 24,
2016 |
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December 25,
2015 |
||||
ASSETS
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Current Assets
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Cash and cash equivalents
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$
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43,864
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$
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52,295
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Accounts receivable, less allowances of $11,800 and $10,400
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244,047
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225,509
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Inventories
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205,344
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202,136
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Other current assets
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24,971
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29,077
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Total current assets
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518,226
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509,017
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Property, Plant and Equipment
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||||
Cost
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479,612
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461,173
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Accumulated depreciation
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(289,943
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)
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(282,736
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)
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Property, plant and equipment, net
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189,669
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178,437
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Goodwill
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416,188
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394,488
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Other Intangible Assets, net
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240,407
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227,987
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Deferred Income Taxes
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62,029
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56,976
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Other Assets
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24,370
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24,447
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Total Assets
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$
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1,450,889
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$
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1,391,352
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LIABILITIES AND SHAREHOLDERS’ EQUITY
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||||
Current Liabilities
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|
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|
||||
Notes payable to banks
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$
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13,306
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$
|
15,901
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Trade accounts payable
|
40,030
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40,505
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|
||
Salaries and incentives
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32,852
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44,673
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Dividends payable
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18,150
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18,447
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Other current liabilities
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65,478
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75,090
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Total current liabilities
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169,816
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194,616
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Long-term Debt
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429,495
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392,695
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|
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Retirement Benefits and Deferred Compensation
|
139,225
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|
|
137,457
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||
Deferred Income Taxes
|
27,491
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|
22,303
|
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Other Non-current Liabilities
|
8,730
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|
8,730
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|
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Shareholders’ Equity
|
|
|
|
||||
Common stock
|
55,673
|
|
|
55,766
|
|
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Additional paid-in-capital
|
435,452
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|
|
398,774
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|
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Retained earnings
|
297,495
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|
285,508
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|
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Accumulated other comprehensive income (loss)
|
(112,488
|
)
|
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(104,497
|
)
|
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Total shareholders’ equity
|
676,132
|
|
|
635,551
|
|
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Total Liabilities and Shareholders’ Equity
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$
|
1,450,889
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$
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1,391,352
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Twenty-six Weeks Ended
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||||||
|
June 24,
2016 |
|
June 26,
2015 |
||||
Cash Flows From Operating Activities
|
|
|
|
||||
Net Earnings
|
$
|
90,499
|
|
|
$
|
241,478
|
|
Adjustments to reconcile net earnings to net cash provided
by operating activities
|
|
|
|
||||
Depreciation and amortization
|
24,500
|
|
|
21,969
|
|
||
Deferred income taxes
|
(7,397
|
)
|
|
(11,324
|
)
|
||
Share-based compensation
|
12,736
|
|
|
10,990
|
|
||
Excess tax benefit related to share-based payment arrangements
|
(5,500
|
)
|
|
(700
|
)
|
||
Gain on sale of business, net
|
—
|
|
|
(147,261
|
)
|
||
Change in
|
|
|
|
||||
Accounts receivable
|
(14,826
|
)
|
|
(33,934
|
)
|
||
Inventories
|
(1,744
|
)
|
|
(24,540
|
)
|
||
Trade accounts payable
|
(34
|
)
|
|
7,879
|
|
||
Salaries and incentives
|
(12,336
|
)
|
|
(8,230
|
)
|
||
Retirement benefits and deferred compensation
|
4,217
|
|
|
6,094
|
|
||
Other accrued liabilities
|
(38
|
)
|
|
56,035
|
|
||
Other
|
(2,070
|
)
|
|
(21,792
|
)
|
||
Net cash provided by operating activities
|
88,007
|
|
|
96,664
|
|
||
Cash Flows From Investing Activities
|
|
|
|
||||
Property, plant and equipment additions
|
(25,961
|
)
|
|
(19,886
|
)
|
||
Acquisition of businesses, net of cash acquired
|
(49,110
|
)
|
|
(187,853
|
)
|
||
Proceeds from sale of assets
|
—
|
|
|
589,808
|
|
||
Investment in restricted assets
|
934
|
|
|
—
|
|
||
Other
|
(146
|
)
|
|
(250
|
)
|
||
Net cash provided by (used in) investing activities
|
(74,283
|
)
|
|
381,819
|
|
||
Cash Flows From Financing Activities
|
|
|
|
||||
Borrowings (payments) on short-term lines of credit, net
|
(2,616
|
)
|
|
5,336
|
|
||
Borrowings on long-term line of credit
|
416,079
|
|
|
458,540
|
|
||
Payments on long-term line of credit
|
(379,279
|
)
|
|
(773,130
|
)
|
||
Excess tax benefit related to share-based payment arrangements
|
5,500
|
|
|
700
|
|
||
Common stock issued
|
24,478
|
|
|
14,511
|
|
||
Common stock repurchased
|
(48,050
|
)
|
|
(130,635
|
)
|
||
Cash dividends paid
|
(36,685
|
)
|
|
(35,339
|
)
|
||
Net cash provided by (used in) financing activities
|
(20,573
|
)
|
|
(460,017
|
)
|
||
Effect of exchange rate changes on cash
|
(1,582
|
)
|
|
2,136
|
|
||
Net increase (decrease) in cash and cash equivalents
|
(8,431
|
)
|
|
20,602
|
|
||
Cash and cash equivalents
|
|
|
|
||||
Beginning of year
|
52,295
|
|
|
23,656
|
|
||
End of period
|
$
|
43,864
|
|
|
$
|
44,258
|
|
|
Thirteen Weeks Ended
|
|
Twenty-six Weeks Ended
|
||||||||||||
|
June 24,
2016 |
|
June 26,
2015 |
|
June 24,
2016 |
|
June 26,
2015 |
||||||||
Net earnings available to common shareholders
|
$
|
50,947
|
|
|
$
|
172,637
|
|
|
$
|
90,499
|
|
|
$
|
241,478
|
|
Weighted average shares outstanding for basic earnings per share
|
55,634
|
|
|
58,235
|
|
|
55,514
|
|
|
58,608
|
|
||||
Dilutive effect of stock options computed using the treasury stock method and the average market price
|
1,406
|
|
|
1,387
|
|
|
1,361
|
|
|
1,436
|
|
||||
Weighted average shares outstanding for diluted earnings per share
|
57,040
|
|
|
59,622
|
|
|
56,875
|
|
|
60,044
|
|
||||
Basic earnings per share
|
$
|
0.92
|
|
|
$
|
2.96
|
|
|
$
|
1.63
|
|
|
$
|
4.12
|
|
Diluted earnings per share
|
$
|
0.89
|
|
|
$
|
2.90
|
|
|
$
|
1.59
|
|
|
$
|
4.02
|
|
|
Option Shares
|
|
Weighted Average Exercise Price
|
|
Options Exercisable
|
|
Weighted Average Exercise Price
|
||||||
Outstanding, December 25, 2015
|
5,165
|
|
|
$
|
48.16
|
|
|
3,583
|
|
|
$
|
38.49
|
|
Granted
|
700
|
|
|
72.24
|
|
|
|
|
|
||||
Exercised
|
(568
|
)
|
|
38.40
|
|
|
|
|
|
||||
Canceled
|
(13
|
)
|
|
69.16
|
|
|
|
|
|
||||
Outstanding, June 24, 2016
|
5,284
|
|
|
$
|
52.35
|
|
|
3,517
|
|
|
$
|
42.14
|
|
|
Twenty-six Weeks Ended
|
||||||
|
June 24,
2016 |
|
June 26,
2015 |
||||
Expected life in years
|
7.0
|
|
|
6.5
|
|
||
Interest rate
|
1.4
|
%
|
|
1.7
|
%
|
||
Volatility
|
30.1
|
%
|
|
35.1
|
%
|
||
Dividend yield
|
1.8
|
%
|
|
1.6
|
%
|
||
Weighted average fair value per share
|
$
|
19.00
|
|
|
$
|
23.22
|
|
|
Twenty-six Weeks Ended
|
||||||
|
June 24,
2016 |
|
June 26,
2015 |
||||
Expected life in years
|
1.0
|
|
|
1.0
|
|
||
Interest rate
|
0.7
|
%
|
|
0.2
|
%
|
||
Volatility
|
24.6
|
%
|
|
18.9
|
%
|
||
Dividend yield
|
1.7
|
%
|
|
1.6
|
%
|
||
Weighted average fair value per share
|
$
|
19.14
|
|
|
$
|
16.51
|
|
|
Thirteen Weeks Ended
|
|
Twenty-six Weeks Ended
|
||||||||||||
|
June 24,
2016 |
|
June 26,
2015 |
|
June 24,
2016 |
|
June 26,
2015 |
||||||||
Pension Benefits
|
|
|
|
|
|
|
|
||||||||
Service cost
|
$
|
1,915
|
|
|
$
|
1,907
|
|
|
$
|
3,912
|
|
|
$
|
4,003
|
|
Interest cost
|
3,846
|
|
|
3,605
|
|
|
7,863
|
|
|
7,380
|
|
||||
Expected return on assets
|
(4,368
|
)
|
|
(4,659
|
)
|
|
(9,005
|
)
|
|
(9,576
|
)
|
||||
Amortization and other
|
2,619
|
|
|
2,426
|
|
|
4,919
|
|
|
4,779
|
|
||||
Net periodic benefit cost
|
$
|
4,012
|
|
|
$
|
3,279
|
|
|
$
|
7,689
|
|
|
$
|
6,586
|
|
Postretirement Medical
|
|
|
|
|
|
|
|
||||||||
Service cost
|
$
|
121
|
|
|
$
|
150
|
|
|
$
|
271
|
|
|
$
|
300
|
|
Interest cost
|
280
|
|
|
227
|
|
|
542
|
|
|
453
|
|
||||
Amortization
|
(102
|
)
|
|
(101
|
)
|
|
(240
|
)
|
|
(202
|
)
|
||||
Net periodic benefit cost
|
$
|
299
|
|
|
$
|
276
|
|
|
$
|
573
|
|
|
$
|
551
|
|
|
Pension and Post-
retirement Medical
|
|
Cumulative
Translation
Adjustment
|
|
Total
|
||||||
Balance, March 27, 2015
|
$
|
(75,048
|
)
|
|
$
|
(27,163
|
)
|
|
$
|
(102,211
|
)
|
Other comprehensive income before reclassifications
|
—
|
|
|
12,404
|
|
|
12,404
|
|
|||
Amounts reclassified from accumulated other comprehensive income
|
1,180
|
|
|
—
|
|
|
1,180
|
|
|||
Balance, June 26, 2015
|
$
|
(73,868
|
)
|
|
$
|
(14,759
|
)
|
|
$
|
(88,627
|
)
|
Balance, March 25, 2016
|
$
|
(69,018
|
)
|
|
$
|
(36,977
|
)
|
|
$
|
(105,995
|
)
|
Other comprehensive income before reclassifications
|
—
|
|
|
(7,635
|
)
|
|
(7,635
|
)
|
|||
Amounts reclassified from accumulated other comprehensive income
|
1,142
|
|
|
—
|
|
|
1,142
|
|
|||
Balance, June 24, 2016
|
$
|
(67,876
|
)
|
|
$
|
(44,612
|
)
|
|
$
|
(112,488
|
)
|
Balance, December 26, 2014
|
$
|
(76,584
|
)
|
|
$
|
(24,152
|
)
|
|
$
|
(100,736
|
)
|
Other comprehensive income before reclassifications
|
—
|
|
|
9,393
|
|
|
9,393
|
|
|||
Reclassified from accumulated other comprehensive income
|
2,716
|
|
|
—
|
|
|
2,716
|
|
|||
Balance, June 26, 2015
|
$
|
(73,868
|
)
|
|
$
|
(14,759
|
)
|
|
$
|
(88,627
|
)
|
Balance, December 25, 2015
|
$
|
(69,922
|
)
|
|
$
|
(34,575
|
)
|
|
$
|
(104,497
|
)
|
Other comprehensive income before reclassifications
|
—
|
|
|
(10,037
|
)
|
|
(10,037
|
)
|
|||
Reclassified from accumulated other comprehensive income
|
2,046
|
|
|
—
|
|
|
2,046
|
|
|||
Balance, June 24, 2016
|
$
|
(67,876
|
)
|
|
$
|
(44,612
|
)
|
|
$
|
(112,488
|
)
|
|
Thirteen Weeks Ended
|
|
Twenty-six Weeks Ended
|
||||||||||||
|
June 24,
2016 |
|
June 26,
2015 |
|
June 24,
2016 |
|
June 26,
2015 |
||||||||
Cost of products sold
|
$
|
637
|
|
|
$
|
707
|
|
|
$
|
1,165
|
|
|
$
|
1,645
|
|
Product development
|
261
|
|
|
319
|
|
|
465
|
|
|
702
|
|
||||
Selling, marketing and distribution
|
569
|
|
|
529
|
|
|
1,055
|
|
|
1,232
|
|
||||
General and administrative
|
310
|
|
|
364
|
|
|
565
|
|
|
778
|
|
||||
Total before tax
|
$
|
1,777
|
|
|
$
|
1,919
|
|
|
$
|
3,250
|
|
|
$
|
4,357
|
|
Income tax (benefit)
|
(635
|
)
|
|
(739
|
)
|
|
(1,204
|
)
|
|
(1,641
|
)
|
||||
Total after tax
|
$
|
1,142
|
|
|
$
|
1,180
|
|
|
$
|
2,046
|
|
|
$
|
2,716
|
|
6.
|
Segment Information
|
|
Thirteen Weeks Ended
|
|
Twenty-six Weeks Ended
|
||||||||||||
|
June 24,
2016 |
|
June 26,
2015 |
|
June 24,
2016 |
|
June 26,
2015 |
||||||||
Net Sales
|
|
|
|
|
|
|
|
||||||||
Industrial
|
$
|
156,997
|
|
|
$
|
153,502
|
|
|
$
|
304,085
|
|
|
$
|
296,768
|
|
Process
|
64,706
|
|
|
71,946
|
|
|
128,991
|
|
|
139,627
|
|
||||
Contractor
|
126,423
|
|
|
110,041
|
|
|
219,962
|
|
|
205,547
|
|
||||
Total
|
$
|
348,126
|
|
|
$
|
335,489
|
|
|
$
|
653,038
|
|
|
$
|
641,942
|
|
Operating Earnings
|
|
|
|
|
|
|
|
||||||||
Industrial
|
$
|
51,052
|
|
|
$
|
50,738
|
|
|
$
|
96,846
|
|
|
$
|
93,678
|
|
Process
|
7,634
|
|
|
13,988
|
|
|
14,911
|
|
|
24,486
|
|
||||
Contractor
|
29,364
|
|
|
27,040
|
|
|
46,107
|
|
|
46,415
|
|
||||
Unallocated corporate (expense)
|
(9,708
|
)
|
|
(7,875
|
)
|
|
(18,573
|
)
|
|
(15,457
|
)
|
||||
Total
|
$
|
78,342
|
|
|
$
|
83,891
|
|
|
$
|
139,291
|
|
|
$
|
149,122
|
|
|
June 24,
2016 |
|
December 25,
2015 |
||||
Industrial
|
$
|
563,914
|
|
|
$
|
558,799
|
|
Process
|
520,931
|
|
|
481,677
|
|
||
Contractor
|
228,587
|
|
|
205,632
|
|
||
Unallocated corporate
|
137,457
|
|
|
145,244
|
|
||
Total
|
$
|
1,450,889
|
|
|
$
|
1,391,352
|
|
|
Thirteen Weeks Ended
|
|
Twenty-six Weeks Ended
|
||||||||||||
|
June 24,
2016 |
|
June 26,
2015 |
|
June 24,
2016 |
|
June 26,
2015 |
||||||||
Net sales
(based on customer location)
|
|
|
|
|
|
|
|
||||||||
United States
|
$
|
186,284
|
|
|
$
|
170,921
|
|
|
$
|
339,285
|
|
|
$
|
330,249
|
|
Other countries
|
161,842
|
|
|
164,568
|
|
|
313,753
|
|
|
311,693
|
|
||||
Total
|
$
|
348,126
|
|
|
$
|
335,489
|
|
|
$
|
653,038
|
|
|
$
|
641,942
|
|
|
June 24,
2016 |
|
December 25,
2015 |
||||
Long-lived assets
|
|
|
|
||||
United States
|
$
|
152,885
|
|
|
$
|
144,571
|
|
Other countries
|
36,784
|
|
|
33,866
|
|
||
Total
|
$
|
189,669
|
|
|
$
|
178,437
|
|
|
June 24,
2016 |
|
December 25,
2015 |
||||
Finished products and components
|
$
|
112,402
|
|
|
$
|
112,267
|
|
Products and components in various stages of completion
|
53,886
|
|
|
51,033
|
|
||
Raw materials and purchased components
|
83,999
|
|
|
82,894
|
|
||
|
250,287
|
|
|
246,194
|
|
||
Reduction to LIFO cost
|
(44,943
|
)
|
|
(44,058
|
)
|
||
Total
|
$
|
205,344
|
|
|
$
|
202,136
|
|
|
Estimated Life
(years)
|
|
Cost
|
|
Accumulated
Amortization
|
|
Foreign
Currency Translation
|
|
Book
Value
|
||||||||
June 24, 2016
|
|
|
|
|
|
|
|
|
|
||||||||
Customer relationships
|
3 - 14
|
|
$
|
218,227
|
|
|
$
|
(45,238
|
)
|
|
$
|
(10,949
|
)
|
|
$
|
162,040
|
|
Patents, proprietary technology and product documentation
|
3 - 11
|
|
17,422
|
|
|
(5,287
|
)
|
|
(649
|
)
|
|
11,486
|
|
||||
Trademarks, trade names and other
|
3 - 5
|
|
895
|
|
|
(232
|
)
|
|
(66
|
)
|
|
597
|
|
||||
|
|
|
236,544
|
|
|
(50,757
|
)
|
|
(11,664
|
)
|
|
174,123
|
|
||||
Not Subject to Amortization:
|
|
|
|
|
|
|
|
|
|
||||||||
Brand names
|
|
|
70,528
|
|
|
—
|
|
|
(4,244
|
)
|
|
66,284
|
|
||||
Total
|
|
|
$
|
307,072
|
|
|
$
|
(50,757
|
)
|
|
$
|
(15,908
|
)
|
|
$
|
240,407
|
|
December 25, 2015
|
|
|
|
|
|
|
|
|
|
||||||||
Customer relationships
|
3 - 14
|
|
$
|
197,900
|
|
|
$
|
(36,852
|
)
|
|
$
|
(9,738
|
)
|
|
$
|
151,310
|
|
Patents, proprietary technology and product documentation
|
3 - 11
|
|
20,400
|
|
|
(8,952
|
)
|
|
(658
|
)
|
|
10,790
|
|
||||
Trademarks, trade names and other
|
5
|
|
495
|
|
|
(132
|
)
|
|
(94
|
)
|
|
269
|
|
||||
|
|
|
218,795
|
|
|
(45,936
|
)
|
|
(10,490
|
)
|
|
162,369
|
|
||||
Not Subject to Amortization:
|
|
|
|
|
|
|
|
|
|
||||||||
Brand names
|
|
|
69,514
|
|
|
—
|
|
|
(3,896
|
)
|
|
65,618
|
|
||||
Total
|
|
|
$
|
288,309
|
|
|
$
|
(45,936
|
)
|
|
$
|
(14,386
|
)
|
|
$
|
227,987
|
|
|
Industrial
|
|
Process
|
|
Contractor
|
|
Total
|
||||||||
Balance, December 25, 2015
|
$
|
153,283
|
|
|
$
|
228,473
|
|
|
$
|
12,732
|
|
|
$
|
394,488
|
|
Additions from business acquisitions
|
—
|
|
|
28,348
|
|
|
—
|
|
|
28,348
|
|
||||
Foreign currency translation
|
1,430
|
|
|
(8,078
|
)
|
|
—
|
|
|
(6,648
|
)
|
||||
Balance, June 24, 2016
|
$
|
154,713
|
|
|
$
|
248,743
|
|
|
$
|
12,732
|
|
|
$
|
416,188
|
|
9.
|
Other Current Liabilities
|
|
June 24,
2016 |
|
December 25,
2015 |
||||
Accrued self-insurance retentions
|
$
|
6,998
|
|
|
$
|
6,908
|
|
Accrued warranty and service liabilities
|
8,051
|
|
|
7,870
|
|
||
Accrued trade promotions
|
5,724
|
|
|
8,522
|
|
||
Payable for employee stock purchases
|
4,619
|
|
|
8,825
|
|
||
Customer advances and deferred revenue
|
9,475
|
|
|
9,449
|
|
||
Income taxes payable
|
5,965
|
|
|
1,308
|
|
||
Other
|
24,646
|
|
|
32,208
|
|
||
Total
|
$
|
65,478
|
|
|
$
|
75,090
|
|
Balance, December 25, 2015
|
$
|
7,870
|
|
Charged to expense
|
3,355
|
|
|
Margin on parts sales reversed
|
589
|
|
|
Reductions for claims settled
|
(3,763
|
)
|
|
Balance, June 24, 2016
|
$
|
8,051
|
|
|
Level
|
|
June 24,
2016 |
|
December 25,
2015 |
||||
Assets
|
|
|
|
|
|
||||
Cash surrender value of life insurance
|
2
|
|
$
|
12,805
|
|
|
$
|
12,856
|
|
Forward exchange contracts
|
2
|
|
—
|
|
|
107
|
|
||
Total assets at fair value
|
|
|
$
|
12,805
|
|
|
$
|
12,963
|
|
Liabilities
|
|
|
|
|
|
||||
Contingent consideration
|
3
|
|
$
|
4,081
|
|
|
$
|
9,600
|
|
Deferred compensation
|
2
|
|
3,176
|
|
|
2,958
|
|
||
Forward exchange contracts
|
2
|
|
374
|
|
|
—
|
|
||
Total liabilities at fair value
|
|
|
$
|
7,631
|
|
|
$
|
12,558
|
|
|
Thirteen Weeks Ended
|
|
Twenty-six Weeks Ended
|
||||||||||||||||||
|
June 24,
2016 |
|
June 26,
2015 |
|
%
Change
|
|
June 24,
2016 |
|
June 26,
2015 |
|
%
Change
|
||||||||||
Net Sales
|
$
|
348.1
|
|
|
$
|
335.5
|
|
|
4
|
%
|
|
$
|
653.0
|
|
|
$
|
641.9
|
|
|
2
|
%
|
Operating Earnings
|
78.3
|
|
|
83.9
|
|
|
(7
|
)%
|
|
139.3
|
|
|
149.1
|
|
|
(7
|
)%
|
||||
Net Earnings
|
50.9
|
|
|
172.6
|
|
|
(70
|
)%
|
|
90.5
|
|
|
241.5
|
|
|
(63
|
)%
|
||||
Diluted Net Earnings per Common Share
|
$
|
0.89
|
|
|
$
|
2.90
|
|
|
(69
|
)%
|
|
$
|
1.59
|
|
|
$
|
4.02
|
|
|
(60
|
)%
|
|
Thirteen Weeks Ended
|
|
Twenty-six Weeks Ended
|
||||||||||||
|
June 24,
2016 |
|
June 26,
2015 |
|
June 24,
2016 |
|
June 26,
2015 |
||||||||
Net Earnings, as reported
|
$
|
50.9
|
|
|
$
|
172.6
|
|
|
$
|
90.5
|
|
|
$
|
241.5
|
|
Held separate investment (income), net
|
—
|
|
|
(158.8
|
)
|
|
—
|
|
|
(188.4
|
)
|
||||
Income tax effect
|
—
|
|
|
49.1
|
|
|
—
|
|
|
48.9
|
|
||||
Net Earnings, adjusted
|
$
|
50.9
|
|
|
$
|
62.9
|
|
|
$
|
90.5
|
|
|
$
|
102.0
|
|
Diluted earnings per share
|
|
|
|
|
|
|
|
||||||||
As reported
|
$
|
0.89
|
|
|
$
|
2.90
|
|
|
$
|
1.59
|
|
|
$
|
4.02
|
|
Adjusted
|
$
|
0.89
|
|
|
$
|
1.05
|
|
|
$
|
1.59
|
|
|
$
|
1.70
|
|
|
Quarter
|
|||||||||||||||||||
|
Segment
|
|
Region
|
|
Total
|
|||||||||||||||
|
Industrial
|
|
Process
|
|
Contractor
|
|
Americas
(1)
|
|
EMEA
(2)
|
|
Asia Pacific
|
|
||||||||
Volume and Price
|
3
|
%
|
|
(15
|
)%
|
|
15
|
%
|
|
4
|
%
|
|
3
|
%
|
|
(1
|
)%
|
|
3
|
%
|
Acquisitions
|
—
|
%
|
|
6
|
%
|
|
—
|
%
|
|
2
|
%
|
|
3
|
%
|
|
—
|
%
|
|
1
|
%
|
Currency
|
(1
|
)%
|
|
(1
|
)%
|
|
—
|
%
|
|
(1
|
)%
|
|
—
|
%
|
|
(2
|
)%
|
|
—
|
%
|
Total
|
2
|
%
|
|
(10
|
)%
|
|
15
|
%
|
|
5
|
%
|
|
6
|
%
|
|
(3
|
)%
|
|
4
|
%
|
|
Year-to-Date
|
|||||||||||||||||||
|
Segment
|
|
Region
|
|
Total
|
|||||||||||||||
|
Industrial
|
|
Process
|
|
Contractor
|
|
Americas
(1)
|
|
EMEA
(2)
|
|
Asia Pacific
|
|
||||||||
Volume and Price
|
3
|
%
|
|
(13
|
)%
|
|
8
|
%
|
|
(1
|
)%
|
|
6
|
%
|
|
2
|
%
|
|
1
|
%
|
Acquisitions
|
1
|
%
|
|
7
|
%
|
|
—
|
%
|
|
1
|
%
|
|
3
|
%
|
|
2
|
%
|
|
2
|
%
|
Currency
|
(2
|
)%
|
|
(2
|
)%
|
|
(1
|
)%
|
|
—
|
%
|
|
(1
|
)%
|
|
(3
|
)%
|
|
(1
|
)%
|
Total
|
2
|
%
|
|
(8
|
)%
|
|
7
|
%
|
|
—
|
%
|
|
8
|
%
|
|
1
|
%
|
|
2
|
%
|
(1)
North and South America, including the United States
|
(2)
Europe, Middle East and Africa
|
|
Thirteen Weeks Ended
|
|
Twenty-six Weeks Ended
|
||||||||||||
|
June 24,
2016 |
|
June 26,
2015 |
|
June 24,
2016 |
|
June 26,
2015 |
||||||||
Americas
|
$
|
207.5
|
|
|
$
|
197.3
|
|
|
$
|
380.9
|
|
|
$
|
382.1
|
|
EMEA
|
80.1
|
|
|
75.6
|
|
|
155.8
|
|
|
144.4
|
|
||||
Asia Pacific
|
60.5
|
|
|
62.6
|
|
|
116.3
|
|
|
115.4
|
|
||||
Consolidated
|
$
|
348.1
|
|
|
$
|
335.5
|
|
|
$
|
653.0
|
|
|
$
|
641.9
|
|
|
Thirteen Weeks Ended
|
|
Twenty-six Weeks Ended
|
||||||||||||
|
June 24,
2016 |
|
June 26,
2015 |
|
June 24,
2016 |
|
June 26,
2015 |
||||||||
Net sales (in millions)
|
|
|
|
|
|
|
|
||||||||
Americas
|
$
|
69.4
|
|
|
$
|
71.6
|
|
|
$
|
134.5
|
|
|
$
|
139.3
|
|
EMEA
|
45.6
|
|
|
41.4
|
|
|
89.8
|
|
|
82.4
|
|
||||
Asia Pacific
|
42.0
|
|
|
40.5
|
|
|
79.8
|
|
|
75.1
|
|
||||
Total
|
$
|
157.0
|
|
|
$
|
153.5
|
|
|
$
|
304.1
|
|
|
$
|
296.8
|
|
Operating earnings as a percentage of net sales
|
33
|
%
|
|
33
|
%
|
|
32
|
%
|
|
32
|
%
|
|
Thirteen Weeks Ended
|
|
Twenty-six Weeks Ended
|
||||||||||||
|
June 24,
2016 |
|
June 26,
2015 |
|
June 24,
2016 |
|
June 26,
2015 |
||||||||
Net sales (in millions)
|
|
|
|
|
|
|
|
||||||||
Americas
|
$
|
41.3
|
|
|
$
|
44.4
|
|
|
$
|
81.3
|
|
|
$
|
87.3
|
|
EMEA
|
13.5
|
|
|
14.9
|
|
|
27.4
|
|
|
28.8
|
|
||||
Asia Pacific
|
9.9
|
|
|
12.6
|
|
|
20.3
|
|
|
23.5
|
|
||||
Total
|
$
|
64.7
|
|
|
$
|
71.9
|
|
|
$
|
129.0
|
|
|
$
|
139.6
|
|
Operating earnings as a percentage of net sales
|
12
|
%
|
|
19
|
%
|
|
12
|
%
|
|
18
|
%
|
|
Thirteen Weeks Ended
|
|
Twenty-six Weeks Ended
|
||||||||||||
|
June 24,
2016 |
|
June 26,
2015 |
|
June 24,
2016 |
|
June 26,
2015 |
||||||||
Net sales (in millions)
|
|
|
|
|
|
|
|
||||||||
Americas
|
$
|
96.8
|
|
|
$
|
81.3
|
|
|
$
|
165.1
|
|
|
$
|
155.5
|
|
EMEA
|
21.0
|
|
|
19.3
|
|
|
38.7
|
|
|
33.2
|
|
||||
Asia Pacific
|
8.6
|
|
|
9.4
|
|
|
16.2
|
|
|
16.8
|
|
||||
Total
|
$
|
126.4
|
|
|
$
|
110.0
|
|
|
$
|
220.0
|
|
|
$
|
205.5
|
|
Operating earnings as a percentage of net sales
|
23
|
%
|
|
25
|
%
|
|
21
|
%
|
|
23
|
%
|
3.1
|
|
|
Restated Articles of Incorporation as amended June 13, 2014. (Incorporated by reference to Exhibit 3.1 to the Company’s Report on Form 8-K filed June 16, 2014.)
|
|
|
|
|
3.2
|
|
|
Restated Bylaws as amended February 14, 2014. (Incorporated by reference to Exhibit 3.2 to the Company’s 2013 Annual Report on Form 10-K.)
|
|
|
|
|
10.1
|
|
|
Stock Option Agreement. Form of agreement used for award of non-incentive stock options to nonemployee directors under the Graco Inc. 2015 Stock Incentive Plan in 2016.
|
|
|
|
|
31.1
|
|
|
Certification of President and Chief Executive Officer pursuant to Rule 13a-14(a).
|
|
|
|
|
31.2
|
|
|
Certification of Chief Financial Officer and Treasurer pursuant to Rule 13a-14(a).
|
|
|
|
|
32
|
|
|
Certification of President and Chief Executive Officer and Chief Financial Officer and Treasurer pursuant to Section 1350 of Title 18, U.S.C.
|
|
|
|
|
99.1
|
|
|
Press Release Reporting Second Quarter Earnings dated July 20, 2016.
|
|
|
|
|
101
|
|
|
Interactive Data File.
|
|
|
|
|
|
|
|
Date:
|
|
July 20, 2016
|
|
By:
|
|
/s/ Patrick J. McHale
|
|
|
|
|
|
|
Patrick J. McHale
|
|
|
|
|
|
|
President and Chief Executive Officer
|
|
|
|
|
|
|
(Principal Executive Officer)
|
|
|
|
|
|||
Date:
|
|
July 20, 2016
|
|
By:
|
|
/s/ Christian E. Rothe
|
|
|
|
|
|
|
Christian E. Rothe
|
|
|
|
|
|
|
Chief Financial Officer and Treasurer
|
|
|
|
|
|
|
(Principal Financial Officer)
|
|
|
|
|
|||
Date:
|
|
July 20, 2016
|
|
By:
|
|
/s/ Caroline M. Chambers
|
|
|
|
|
|
|
Caroline M. Chambers
|
|
|
|
|
|
|
Vice President, Corporate Controller
and Information Systems
|
|
|
|
|
|
|
(Principal Accounting Officer)
|
|
|
|
|
Exhibit 10.1
|
Graco Inc. Non-Qualified Stock Option Agreement
|
[Grant Plan Long Name]
|
|
|
Graco Inc., a Minnesota corporation, (the “Company”), pursuant to the terms of the Graco Inc. 2015 Stock Incentive Plan (the “Plan”), wishes to grant this Option (as defined in the Terms and Conditions below) to you (“Nonemployee Director”).
You must carefully read the Terms and Conditions governing this Option, as well as the Prospectus and any other documents provided in connection with the Option grant. Be sure you understand these documents and what your responsibilities and obligations are before acknowledging receipt of the Option. If you are not willing to agree to the Option Terms and Conditions, you must not accept the Option and you should not sign the Option Grant Acknowledgment and Agreement. If you accept the Option, you are accepting all of the Terms and Conditions that are applicable to your receipt of the Option. If you do not accept the Option, you are forfeiting your right to receive any potential benefits from the Option.
|
|
|
Participant: XXXX
|
Global ID: XXXXXXX
|
Award Type: XXXXXX
|
Date of Grant: XXXX
|
Award Expiration Date: XXXXX
|
Shares Granted: XXXXXX
|
Award Price: XX.XXUSD
|
Note
: The statements above are qualified in their entirety by the Terms and Conditions below, and should be read in conjunction with such Terms and Conditions.
|
A.
|
No portion of this Option may be exercised by Nonemployee Director until the first anniversary of the Date of Grant, and then only in accordance with the Vesting Schedule set forth below. In no event shall this Option or any portion of this Option be exercisable following the tenth anniversary of the Date of Grant.
|
Vesting Date
|
Portion of Option Exercisable
|
First Anniversary of Date of Grant
|
25%
|
Second Anniversary of Date of Grant
|
50%
|
Third Anniversary of Date of Grant
|
75%
|
Fourth Anniversary of Date of Grant
|
100%
|
B.
|
During the lifetime of Nonemployee Director, the Option shall be exercisable only by Nonemployee Director and shall not be assignable or transferable by Nonemployee Director otherwise than (i) by will or the laws of descent and distribution, or (ii) by designating a beneficiary or beneficiaries (in a manner established by the Management Organization and Compensation Committee of the Board of Directors of the Company (the “Committee”)) to exercise the rights of Nonemployee Director and receive any property distributable with respect to the Option upon the death of the Nonemployee Director (any person to whom the Option has been transferred pursuant to this Section 2B, a “Transferee”). The Transferee shall be subject to the provisions of the Agreement, and, as a condition to the transfer of the Option becoming effective, the Transferee shall agree to be bound by the provisions of this Agreement.
|
C.
|
Under no circumstances may the Option or any portion of the Option granted by this Agreement be exercised after the term of the Option expires.
|
3.
|
Effect of Termination of Membership on the Board
|
A.
|
In the event Nonemployee Director ceases being a director of the Company for any reason other than the reasons identified in Section 3B below, Nonemployee Director shall have the right to exercise the Option as follows:
|
(1)
|
If Nonemployee Director was a member of the Board of Directors of the Company for five (5) or more years, the portion of the Option not yet exercisable shall become immediately exercisable upon the date Nonemployee Director ceases being a director. Nonemployee Director may exercise all or any portion of the Option not yet exercised for a period beginning on the day after the date of Nonemployee Director’s ceasing to be a director and ending at the close of trading on the Exchange on the tenth anniversary of the Date of Grant. If Nonemployee Director dies during the period between the date of Nonemployee Director ceasing to be a director and the expiration of the Option, the executor(s) or administrator(s) of Nonemployee Director’s estate or any Transferee may exercise the unexercised portion of the Option at any time during a period beginning the day after the date of Nonemployee Director’s death and ending at the close of trading on the Exchange on the tenth anniversary of the Date of Grant. In no event shall the Option be exercisable following the tenth anniversary of the Date of Grant.
|
(2)
|
If Nonemployee Director was a member of the Board of Directors of the Company for less than five (5) years, Nonemployee Director may exercise that portion of the Option exercisable upon the date Nonemployee Director ceases being a director at any time within the period beginning on the day after Nonemployee Director ceases being a director and ending at the close of trading on the Exchange ninety (90) days later. If Nonemployee Director dies within the ninety (90) day period and shall not have fully exercised the Option, the executor(s) or administrator(s) of Nonemployee Director’s estate or any Transferee may exercise the remaining portion of the Option at any time during a period beginning on the day after the date of Nonemployee Director’s death and ending at the close of trading on the Exchange on the anniversary of death one (1) year later.
|
(3)
|
If Nonemployee Director dies while a member of the Board of Directors of the Company, the Option, to the extent exercisable by Nonemployee Director at the date of death, may be exercised by the executor(s) or administrator(s) of Nonemployee Director’s estate or any Transferee at any time during a period beginning on the day after the date of Nonemployee Director’s death and ending at the close of trading on the Exchange on the tenth anniversary of the Date of Grant.
|
(4)
|
In the event the Option is exercised by a Transferee or the executors or administrators of the estate of a deceased Nonemployee Director, the Company shall be under no obligation to issue stock hereunder unless and until the Company is satisfied that the person(s) exercising the Option is the validly designated beneficiary or the duly appointed legal representative of Nonemployee Director’s estate or the proper legatee or distributee thereof.
|
B.
|
If Nonemployee Director ceases being a director of the Company by reason of Nonemployee Director’s gross and willful misconduct, including but not limited to (i) fraud or intentional misrepresentation, (ii) embezzlement, misappropriation or conversion of assets or opportunities of the Company or any affiliate of the Company, (iii) breach of fiduciary duty, or (iv) any other gross or willful misconduct, as determined by the Board, in its sole and conclusive discretion, the unexercised portion of the Option granted to such Nonemployee Director shall immediately be forfeited as of the time of the misconduct. If the Board determines subsequent to the time Nonemployee Director ceases being a director of the Company for whatever reason, that Nonemployee Director engaged in conduct while a member of the Board of Directors of the Company that would constitute gross and willful misconduct, the Option shall terminate as of the time of such misconduct. Furthermore, if the Option is exercised in whole or in part and the Board thereafter determines that Nonemployee Director engaged in gross and willful misconduct while a member of the Board of Directors of the Company at any time prior to the date of such exercise, the Option shall be deemed to have terminated as of the time of the misconduct and the Company may elect to rescind the Option exercise.
|
C.
|
For purposes of this Section 3, if the last day of the relevant period is a day upon which the Exchange is not open for trading or the Common Stock is not trading on that day, the relevant period will expire at the close of trading on such earlier business day on which the Exchange is open and the Common Stock is trading.
|
4.
|
Manner of Exercise
|
A.
|
Nonemployee Director or other proper party may exercise the Option only by delivering within the term of the Option written notice to the Company at its principal office in Minneapolis, Minnesota, stating the number of shares as to which the Option is being exercised and, except as provided in Sections 4B(2), 4B(3) and 4B(4), accompanied by payment in full of the Option price for all shares designated in the notice.
|
B.
|
The Nonemployee Director may, at Nonemployee Director’s election, pay the Option price as follows:
|
(1)
|
by cash or check (bank check, certified check, or personal check);
|
(2)
|
by delivering to the Company for cancellation, shares of Common Stock of the Company which have a fair market value equal to the Option price;
|
(3)
|
if the Nonemployee Director is still serving as a director of the Company on the date of exercise, by a reduction in the number of shares of Common Stock to be delivered upon exercise, which number of shares to be withheld shall have an aggregate fair market value on the date of exercise equal to the exercise price; or
|
(4)
|
by delivering to the Company a properly executed exercise notice, together with irrevocable instructions to a broker to promptly deliver to the Company from sale or loan proceeds the amount required to pay the exercise price.
|
5.
|
Change of Control
|
A.
|
Notwithstanding Section 2A hereof, the entire Option shall become immediately and fully exercisable upon a “Change of Control” and shall remain fully exercisable until either exercised or expiring by its terms. A “Change of Control” means:
|
(1)
|
an acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “1934 Act”)), (a “Person”), of beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Act) which, together with other acquisitions by such Person, results in the aggregate beneficial ownership by such Person of 30% or more of either
|
(a)
|
the then outstanding shares of Common Stock of the Company (the “Outstanding Company Common Stock”) or
|
(b)
|
the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”);
|
(i)
|
an acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company,
|
(ii)
|
an acquisition by the Employee or any group that includes the Employee, or
|
(iii)
|
an acquisition by any entity pursuant to a transaction that complies with clauses (a), (b) and (c) of Section 5A(3) below; or
|
(2)
|
Individuals who, as of the date hereof, constitute the Board of Directors of the Company (the “Incumbent Board”) cease for any reason to constitute at least a majority of said Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board will be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial membership on the Board occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies by or on behalf of a Person other than the Board; or
|
(3)
|
Consummation of a reorganization, merger or consolidation of the Company with or into another entity or a statutory exchange of Outstanding Company Common Stock or Outstanding Company Voting Securities or sale or other disposition of all or substantially all of the assets of the Company (“Business Combination”); excluding, however, such a Business Combination pursuant to which
|
(a)
|
all or substantially all of the individuals and entities who were the beneficial owners of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, a majority of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors (or comparable equity interests), as the case may be, of the surviving or acquiring entity resulting from such Business Combination (including, without limitation, an entity that as a result of such transaction beneficially owns 100% of the outstanding shares of common stock and the combined voting power of the then outstanding voting securities (or comparable equity securities) or all or substantially all of the Company’s assets either directly or indirectly) in substantially the same proportions (as compared to the other holders of the Company’s common stock and voting securities prior to the Business Combination) as their
|
(b)
|
no Person (excluding (i) any employee benefit plan (or related trust) sponsored or maintained by the Company or such entity resulting from such Business Combination or any entity controlled by the Company or the entity resulting from such Business Combination, (ii) any entity beneficially owning 100% of the outstanding shares of common stock and the combined voting power of the then outstanding voting securities (or comparable equity securities) or all or substantially all of the Company’s assets either directly or indirectly and (iii) the Employee and any group that includes the Employee) beneficially owns, directly or indirectly, 30% or more of the then outstanding shares of common stock (or comparable equity interests) of the entity resulting from such Business Combination or the combined voting power of the then outstanding voting securities (or comparable equity interests) of such entity, and
|
(c)
|
immediately after the Business Combination, a majority of the members of the board of directors (or comparable governors) of the entity resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or
|
(4)
|
approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.
|
6.
|
Adjustments; Fundamental Change
|
A.
|
If there shall be any change in the number or character of the Common Stock of the Company through merger, consolidation, reorganization, recapitalization, dividend in the form of stock (of whatever amount), stock split or other change in the corporate structure of the Company, and all or any portion of the Option shall then be unexercised and not yet expired, appropriate adjustments in the outstanding Option shall be made by the Company, in order to prevent dilution or enlargement of Employee’s Option rights. Such adjustments shall include, where appropriate, changes in the number of shares of Common Stock and the price per share subject to the outstanding Option.
|
B.
|
In the event of a proposed (i) dissolution or liquidation of the Company, (ii) a sale of substantially all of the assets of the Company, (iii) a merger or consolidation of the Company with or into any other corporation, regardless of whether the Company is the surviving corporation, or (iv) a statutory share exchange involving the capital stock of the Company (each, a “Fundamental Change”), the Committee may, but shall not be obligated to:
|
(1)
|
with respect to a Fundamental Change that involves a merger, consolidation or statutory share exchange, make appropriate provision for the protection of the Option by the substitution of options and appropriate voting common stock of the corporation surviving any such merger or consolidation or, if appropriate, the “parent corporation” (as defined in Section 424(e) of the Internal Revenue
|
(2)
|
with respect to any Fundamental Change, including, without limitation, a merger, consolidation or statutory share exchange, declare, prior to the occurrence of the Fundamental Change, and provide written notice to the holder of the Option of the declaration, that the Option, whether or not then exercisable, shall be canceled at the time of, or immediately prior to the occurrence of, the Fundamental Change in exchange for payment to the holder of the Option, within 20 days after the Fundamental Change, of cash (or, if the Committee so elects in lieu of solely cash, of such form(s) of consideration, including cash and/or property, singly or in such combination as the Committee shall determine, that the holder of the Option would have received as a result of the Fundamental Change if the holder of the Option had exercised the Option immediately prior to the Fundamental Change) equal to, for each share of Common Stock covered by the canceled Option, the amount, if any, by which the Fair Market Value (as defined in this Section 6B) per share of Common Stock exceeds the exercise price per share of Common Stock covered by the Option. At the time of the declaration provided for in the immediately preceding sentence, the Option shall immediately become exercisable in full and the holder of the Option shall have the right, during the period preceding the time of cancellation of the Option, to exercise the Option as to all or any part of the shares of Common Stock covered thereby in whole or in part, as the case may be. In the event of a declaration pursuant to this Section 6B, the Option, to the extent that it shall not have been exercised prior to the Fundamental Change, shall be canceled at the time of, or immediately prior to, the Fundamental Change, as provided in the declaration. Notwithstanding the foregoing, the holder of the Option shall not be entitled to the payment provided for in this Section 6B if such Option shall have expired or been forfeited. For purposes of this Section 6B only, “Fair Market Value” per share of Common Stock means the fair market value, as determined in good faith by the Committee, of the consideration to be received per share of Common Stock by the shareholders of the Company upon the occurrence of the Fundamental Change, notwithstanding anything to the contrary provided in this Agreement.
|
7.
|
Miscellaneous
|
A.
|
This Option is issued pursuant to the Plan and is subject to its terms. The terms of the Plan are available for inspection during business hours at the principal offices of the Company.
|
B.
|
Neither the Plan nor any action taken hereunder shall be construed as giving Nonemployee Director any right to be retained in the service of the Company.
|
C.
|
Neither Nonemployee Director, Nonemployee Director’s legal representative, a Transferee, nor the executor(s) or administrator(s) of Nonemployee Director’s estate shall be, or have any of the rights or privileges of, a shareholder of the Company in respect of any shares of Common Stock receivable upon the exercise of this Option, in whole or in part, unless and until such shares shall have been issued upon exercise of this Option.
|
D.
|
The Company shall at all times during the term of the Option reserve and keep available such number of shares as will be sufficient to satisfy the requirements of this Agreement.
|
E.
|
The internal law, and not the law of conflicts, of the State of Minnesota, U.S.A., shall govern all questions concerning the validity, construction and effect of this Agreement, the Plan and any rules and regulations relating to the Plan or this Option.
|
F.
|
Nonemployee Director hereby consents to the transfer to Nonemployee Director’s employer or the Company of information relating to Nonemployee Director’s participation in the Plan, including the personal data set forth in this Agreement, between them or to other related parties in the United States or elsewhere, or to any financial institution or other third party engaged by the Company, but solely for the purpose of administering the Plan and this Option. Nonemployee Director also consents to the storage and processing of such data by such persons for this purpose.
|
|
|
|
|
Exhibit 31.1
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Graco Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date:
|
|
July 20, 2016
|
|
/s/ Patrick J. McHale
|
|
|
|
|
Patrick J. McHale
|
|
|
|
|
President and Chief Executive Officer
|
|
|
|
|
Exhibit 31.2
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Graco Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date:
|
|
July 20, 2016
|
|
/s/ Christian E. Rothe
|
|
|
|
|
Christian E. Rothe
|
|
|
|
|
Chief Financial Officer and Treasurer
|
|
|
|
|
Exhibit 32
|
|
|
|
|
|
Date:
|
|
July 20, 2016
|
|
/s/ Patrick J. McHale
|
|
|
|
|
Patrick J. McHale
|
|
|
|
|
President and Chief Executive Officer
|
|
|
|
|
|
Date:
|
|
July 20, 2016
|
|
/s/ Christian E. Rothe
|
|
|
|
|
Christian E. Rothe
|
|
|
|
|
Chief Financial Officer and Treasurer
|
Exhibit 99.1
|
|
|
GRACO INC.
|
|
|
|
|
P.O. Box 1441
|
|
|
Minneapolis, MN
|
|||
55440-1441
|
||||
NYSE: GGG
|
FOR IMMEDIATE RELEASE:
|
FOR FURTHER INFORMATION:
|
Wednesday, July 20, 2016
|
Financial Contact: Christian Rothe, 612-623-6205
Media Contact: Charlotte Boyd, 612-623-6153
Charlotte_M_Boyd@graco.com
|
|
Thirteen Weeks Ended
|
|
Twenty-six Weeks Ended
|
||||||||||||||||||
|
June 24,
2016 |
|
June 26,
2015 |
|
%
Change
|
|
June 24,
2016 |
|
June 26,
2015 |
|
%
Change
|
||||||||||
Net Sales
|
$
|
348.1
|
|
|
$
|
335.5
|
|
|
4
|
%
|
|
$
|
653.0
|
|
|
$
|
641.9
|
|
|
2
|
%
|
Operating Earnings
|
78.3
|
|
|
83.9
|
|
|
(7)
|
%
|
|
139.3
|
|
|
149.1
|
|
|
(7)
|
%
|
||||
Net Earnings
|
50.9
|
|
|
172.6
|
|
|
(70)
|
%
|
|
90.5
|
|
|
241.5
|
|
|
(63)
|
%
|
||||
Diluted Net Earnings per Common Share
|
0.89
|
|
|
2.90
|
|
|
(69)
|
%
|
|
$
|
1.59
|
|
|
$
|
4.02
|
|
|
(60)
|
%
|
||
Diluted Net Earnings per Common Share, adjusted
(1)
|
$
|
0.89
|
|
|
$
|
1.05
|
|
|
(15)
|
%
|
|
$
|
1.59
|
|
|
$
|
1.70
|
|
|
(6)
|
%
|
•
|
Sales for the quarter increased 4 percent, including 1 percentage point from acquired operations. Strong growth in the Contractor segment more than offset a decrease in the Process segment.
|
•
|
Operating earnings for the quarter decreased by $6 million, down 2 percentage points as a percentage of sales, driven by lower gross margin rate, an increase in unallocated corporate expenses (mostly stock compensation and non-divisional pension cost), and spending on new product launches and other initiatives.
|
•
|
Net earnings in 2015 included non-recurring income tax benefits totaling $9 million, or $0.15 per diluted share, for both the second quarter and the year to date.
|
|
Thirteen Weeks Ended
|
|
Twenty-six Weeks Ended
|
||||||||||||
|
June 24, 2016
|
|
June 26, 2015
|
|
Jun 24, 2016
|
|
Jun 26, 2015
|
||||||||
Net Earnings, as reported
|
$
|
50.9
|
|
|
$
|
172.6
|
|
|
$
|
90.5
|
|
|
$
|
241.5
|
|
Held separate investment (income), net
|
—
|
|
|
(158.8
|
)
|
|
—
|
|
|
(188.4
|
)
|
||||
Income tax effect
|
—
|
|
|
49.1
|
|
|
—
|
|
|
48.9
|
|
||||
Net Earnings, adjusted
|
$
|
50.9
|
|
|
$
|
62.9
|
|
|
$
|
90.5
|
|
|
$
|
102.0
|
|
|
|
|
|
|
|
|
|
||||||||
Diluted earnings per share
|
|
|
|
|
|
|
|
||||||||
As reported
|
$
|
0.89
|
|
|
$
|
2.90
|
|
|
$
|
1.59
|
|
|
$
|
4.02
|
|
Adjusted
|
$
|
0.89
|
|
|
$
|
1.05
|
|
|
$
|
1.59
|
|
|
$
|
1.70
|
|
|
Thirteen Weeks
|
|
Twenty-six Weeks
|
||||||||||||||||||||
|
Industrial
|
|
Process
|
|
Contractor
|
|
Industrial
|
|
Process
|
|
Contractor
|
||||||||||||
Net sales (in millions)
|
$
|
157.0
|
|
|
$
|
64.7
|
|
|
$
|
126.4
|
|
|
$
|
304.1
|
|
|
$
|
129.0
|
|
|
$
|
220.0
|
|
Percentage change from last year
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Sales
|
2
|
%
|
|
(10
|
)%
|
|
15
|
%
|
|
2
|
%
|
|
(8
|
)%
|
|
7
|
%
|
||||||
Operating earnings
|
1
|
%
|
|
(45
|
)%
|
|
9
|
%
|
|
3
|
%
|
|
(39
|
)%
|
|
(1
|
)%
|
||||||
Operating earnings as a percentage of sales
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
2016
|
33
|
%
|
|
12
|
%
|
|
23
|
%
|
|
32
|
%
|
|
12
|
%
|
|
21
|
%
|
||||||
2015
|
33
|
%
|
|
19
|
%
|
|
25
|
%
|
|
32
|
%
|
|
18
|
%
|
|
23
|
%
|
|
Thirteen Weeks Ended
|
|
Twenty-six Weeks Ended
|
||||||||||||
|
June 24,
2016 |
|
June 26,
2015 |
|
June 24,
2016 |
|
June 26,
2015 |
||||||||
Net Sales
|
$
|
348,126
|
|
|
$
|
335,489
|
|
|
$
|
653,038
|
|
|
$
|
641,942
|
|
Cost of products sold
|
162,985
|
|
|
154,866
|
|
|
306,101
|
|
|
299,190
|
|
||||
Gross Profit
|
185,141
|
|
|
180,623
|
|
|
346,937
|
|
|
342,752
|
|
||||
Product development
|
15,607
|
|
|
14,907
|
|
|
30,293
|
|
|
30,197
|
|
||||
Selling, marketing and distribution
|
56,136
|
|
|
50,126
|
|
|
108,837
|
|
|
101,550
|
|
||||
General and administrative
|
35,056
|
|
|
31,699
|
|
|
68,516
|
|
|
61,883
|
|
||||
Operating Earnings
|
78,342
|
|
|
83,891
|
|
|
139,291
|
|
|
149,122
|
|
||||
Interest expense
|
4,543
|
|
|
4,125
|
|
|
9,036
|
|
|
9,428
|
|
||||
Held separate investment (income), net
|
—
|
|
|
(158,833
|
)
|
|
—
|
|
|
(188,356
|
)
|
||||
Other expense (income), net
|
392
|
|
|
(438
|
)
|
|
(754
|
)
|
|
272
|
|
||||
Earnings Before Income Taxes
|
73,407
|
|
|
239,037
|
|
|
131,009
|
|
|
327,778
|
|
||||
Income taxes
|
22,460
|
|
|
66,400
|
|
|
40,510
|
|
|
86,300
|
|
||||
Net Earnings
|
$
|
50,947
|
|
|
$
|
172,637
|
|
|
$
|
90,499
|
|
|
$
|
241,478
|
|
Net Earnings per Common Share
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
0.92
|
|
|
$
|
2.96
|
|
|
$
|
1.63
|
|
|
$
|
4.12
|
|
Diluted
|
$
|
0.89
|
|
|
$
|
2.90
|
|
|
$
|
1.59
|
|
|
$
|
4.02
|
|
Weighted Average Number of Shares
|
|
|
|
|
|
|
|
||||||||
Basic
|
55,634
|
|
|
58,235
|
|
|
55,514
|
|
|
58,608
|
|
||||
Diluted
|
57,040
|
|
|
59,622
|
|
|
56,875
|
|
|
60,044
|
|
|
Thirteen Weeks Ended
|
|
Twenty-six Weeks Ended
|
||||||||||||
|
June 24,
2016 |
|
June 26,
2015 |
|
June 24,
2016 |
|
June 26,
2015 |
||||||||
Net Sales
|
|
|
|
|
|
|
|
||||||||
Industrial
|
$
|
156,997
|
|
|
$
|
153,502
|
|
|
$
|
304,085
|
|
|
$
|
296,768
|
|
Process
|
64,706
|
|
|
71,946
|
|
|
128,991
|
|
|
139,627
|
|
||||
Contractor
|
126,423
|
|
|
110,041
|
|
|
219,962
|
|
|
205,547
|
|
||||
Total
|
$
|
348,126
|
|
|
$
|
335,489
|
|
|
$
|
653,038
|
|
|
$
|
641,942
|
|
Operating Earnings
|
|
|
|
|
|
|
|
||||||||
Industrial
|
$
|
51,052
|
|
|
$
|
50,738
|
|
|
$
|
96,846
|
|
|
$
|
93,678
|
|
Process
|
7,634
|
|
|
13,988
|
|
|
14,911
|
|
|
24,486
|
|
||||
Contractor
|
29,364
|
|
|
27,040
|
|
|
46,107
|
|
|
46,415
|
|
||||
Unallocated corporate (expense)
|
(9,708
|
)
|
|
(7,875
|
)
|
|
(18,573
|
)
|
|
(15,457
|
)
|
||||
Total
|
$
|
78,342
|
|
|
$
|
83,891
|
|
|
$
|
139,291
|
|
|
$
|
149,122
|
|