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 or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification Number)
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88 - 11th Avenue N.E.
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Minneapolis,
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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)
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623-6000
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(Registrant’s telephone number, including area code)
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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Common Stock, par value $1.00 per share
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GGG
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The New York Stock Exchange
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Yes
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☒
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No
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☐
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Yes
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☒
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No
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☐
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Large accelerated filer
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☒
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Accelerated filer
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☐
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Non-accelerated filer
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☐
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Smaller reporting company
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☐
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Emerging growth company
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☐
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Yes
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☐
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No
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☒
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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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Three Months Ended
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||||||
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March 27,
2020 |
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March 29,
2019 |
||||
Net Sales
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$
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373,567
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$
|
404,870
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Cost of products sold
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174,936
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188,828
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Gross Profit
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198,631
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216,042
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Product development
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17,081
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16,569
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Selling, marketing and distribution
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57,388
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60,817
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General and administrative
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34,350
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34,129
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Operating Earnings
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89,812
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104,527
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|
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Interest expense
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2,486
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3,535
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Other expense, net
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5,223
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269
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Earnings Before Income Taxes
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82,103
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100,723
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Income taxes
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9,285
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13,974
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Net Earnings
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$
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72,818
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$
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86,749
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Net Earnings per Common Share
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||||
Basic
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$
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0.43
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$
|
0.52
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Diluted
|
$
|
0.42
|
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$
|
0.51
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Three Months Ended
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||||||
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March 27,
2020 |
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March 29,
2019 |
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Net Earnings
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$
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72,818
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$
|
86,749
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Components of other comprehensive
income (loss) |
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||||
Cumulative translation adjustment
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(4,677
|
)
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|
1,169
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Pension and postretirement medical
liability adjustment |
2,749
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2,127
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Income taxes - pension and postretirement
medical liability adjustment |
(615
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)
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(470
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)
|
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Other comprehensive income
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(2,543
|
)
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2,826
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Comprehensive Income
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$
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70,275
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$
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89,575
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March 27,
2020 |
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December 27,
2019 |
||||
ASSETS
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||||
Current Assets
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||||
Cash and cash equivalents
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$
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456,656
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$
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220,973
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Accounts receivable, less allowances of $5,600 and $5,300
|
273,789
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267,345
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Inventories
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289,567
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273,233
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Other current assets
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28,760
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29,917
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Total current assets
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1,048,772
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791,468
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Property, Plant and Equipment, net
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332,078
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325,546
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Goodwill
|
306,850
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307,663
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Other Intangible Assets, net
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158,069
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162,623
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Operating Lease Assets
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30,478
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29,891
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Deferred Income Taxes
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38,081
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|
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39,327
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Other Assets
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33,012
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35,692
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Total Assets
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$
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1,947,340
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$
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1,692,210
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LIABILITIES AND SHAREHOLDERS’ EQUITY
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Current Liabilities
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|
||||
Notes payable to banks
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$
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45,742
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$
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7,732
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Trade accounts payable
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64,324
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54,117
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Salaries and incentives
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31,178
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51,301
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Dividends payable
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29,442
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29,235
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Other current liabilities
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141,077
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142,937
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Total current liabilities
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311,763
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285,322
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Long-term Debt
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400,000
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164,298
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Retirement Benefits and Deferred Compensation
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183,292
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182,707
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Operating Lease Liabilities
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23,210
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24,176
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Deferred Income Taxes
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10,417
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10,776
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Shareholders’ Equity
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||||
Common stock
|
166,840
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167,287
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Additional paid-in-capital
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612,698
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578,440
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Retained earnings
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411,450
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448,991
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Accumulated other comprehensive income (loss)
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(172,330
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)
|
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(169,787
|
)
|
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Total shareholders’ equity
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1,018,658
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1,024,931
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Total Liabilities and Shareholders’ Equity
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$
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1,947,340
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$
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1,692,210
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Three Months Ended
|
||||||
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March 27,
2020 |
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March 29,
2019 |
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Cash Flows From Operating Activities
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|
||||
Net Earnings
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$
|
72,818
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$
|
86,749
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Adjustments to reconcile net earnings to net cash
provided by operating activities |
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||||
Depreciation and amortization
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13,062
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12,013
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Deferred income taxes
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(65
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)
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(2,215
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)
|
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Share-based compensation
|
6,318
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7,221
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Change in
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||||
Accounts receivable
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(10,139
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)
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(13,874
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)
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Inventories
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(17,726
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)
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(13,547
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)
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Trade accounts payable
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5,185
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8,043
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Salaries and incentives
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(20,182
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)
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(23,692
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)
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Retirement benefits and deferred compensation
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3,172
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3,547
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Other accrued liabilities
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1,441
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(11,437
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)
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Other
|
349
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(2,262
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)
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Net cash provided by operating activities
|
54,233
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50,546
|
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Cash Flows From Investing Activities
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|
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|
||||
Property, plant and equipment additions
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(18,944
|
)
|
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(30,433
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)
|
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Acquisition of businesses, net of cash acquired
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—
|
|
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(5,353
|
)
|
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Other
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(256
|
)
|
|
(367
|
)
|
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Net cash provided by (used in) investing activities
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(19,200
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)
|
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(36,153
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)
|
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Cash Flows From Financing Activities
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|
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|
||||
Borrowings (payments) on short-term lines of credit, net
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24,576
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(3,596
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)
|
||
Borrowings on long-term lines of credit
|
250,000
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|
|
16,057
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|
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Payments on long-term debt and lines of credit
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—
|
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(34,540
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)
|
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Common stock issued
|
38,882
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|
|
24,847
|
|
||
Common stock repurchased
|
(82,176
|
)
|
|
(2,438
|
)
|
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Taxes paid related to net share settlement of equity awards
|
(1,796
|
)
|
|
(1,268
|
)
|
||
Cash dividends paid
|
(29,333
|
)
|
|
(26,438
|
)
|
||
Net cash provided by (used in) financing activities
|
200,153
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|
|
(27,376
|
)
|
||
Effect of exchange rate changes on cash
|
497
|
|
|
576
|
|
||
Net increase (decrease) in cash and cash equivalents
|
235,683
|
|
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(12,407
|
)
|
||
Cash, Cash Equivalents and Restricted Cash
|
|
|
|
||||
Beginning of year
|
220,973
|
|
|
132,118
|
|
||
End of period
|
$
|
456,656
|
|
|
$
|
119,711
|
|
|
Common
Stock |
|
Additional
Paid-In Capital |
|
Retained
Earnings |
|
Accumulated
Other Comprehensive Income (Loss) |
|
Total
|
Three Months Ended March 27, 2020
|
|
|
|
|
|
|
|
|
|
||||||||||
Balance, December 27, 2019
|
$
|
167,287
|
|
|
$
|
578,440
|
|
|
$
|
448,991
|
|
|
$
|
(169,787
|
)
|
|
$
|
1,024,931
|
|
Shares issued
|
1,620
|
|
|
35,467
|
|
|
|
|
|
|
|
|
37,087
|
|
|||||
Shares repurchased
|
(2,067
|
)
|
|
(7,143
|
)
|
|
(80,819
|
)
|
|
|
|
|
(90,029
|
)
|
|||||
Stock compensation cost
|
|
|
|
5,934
|
|
|
|
|
|
|
|
|
5,934
|
|
|||||
Net earnings
|
|
|
|
|
|
|
72,818
|
|
|
|
|
|
72,818
|
|
|||||
Dividends declared ($0.1750 per share)
|
|
|
|
|
|
|
(29,540
|
)
|
|
|
|
|
(29,540
|
)
|
|||||
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
(2,543
|
)
|
|
(2,543
|
)
|
|||||
Balance, March 27, 2020
|
$
|
166,840
|
|
|
$
|
612,698
|
|
|
$
|
411,450
|
|
|
$
|
(172,330
|
)
|
|
$
|
1,018,658
|
|
Balance, December 28, 2018
|
$
|
165,171
|
|
|
510,825
|
|
|
220,734
|
|
|
$
|
(144,857
|
)
|
|
$
|
751,873
|
|
Shares issued
|
1,193
|
|
|
22,386
|
|
|
—
|
|
|
—
|
|
|
23,579
|
|
|||
Stock compensation cost
|
—
|
|
|
5,856
|
|
|
—
|
|
|
—
|
|
|
5,856
|
|
|||
Net earnings
|
—
|
|
|
—
|
|
|
86,749
|
|
|
—
|
|
|
86,749
|
|
|||
Dividends declared ($0.1600 per share)
|
—
|
|
|
—
|
|
|
(26,445
|
)
|
|
—
|
|
|
(26,445
|
)
|
|||
Other comprehensive income (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
2,826
|
|
|
2,826
|
|
|||
Balance, March 29, 2019
|
$
|
166,364
|
|
|
539,067
|
|
|
281,038
|
|
|
$
|
(142,031
|
)
|
|
$
|
844,438
|
|
2.
|
Segment Information
|
|
Three Months Ended
|
||||||
|
March 27,
2020 |
|
March 29,
2019 |
||||
Net Sales
|
|
|
|
||||
Industrial
|
$
|
158,684
|
|
|
$
|
189,100
|
|
Process
|
86,078
|
|
|
86,894
|
|
||
Contractor
|
128,805
|
|
|
128,876
|
|
||
Total
|
$
|
373,567
|
|
|
$
|
404,870
|
|
Operating Earnings
|
|
|
|
||||
Industrial
|
$
|
50,233
|
|
|
$
|
65,203
|
|
Process
|
18,111
|
|
|
20,014
|
|
||
Contractor
|
28,630
|
|
|
26,539
|
|
||
Unallocated corporate (expense)
|
(7,162
|
)
|
|
(7,229
|
)
|
||
Total
|
$
|
89,812
|
|
|
$
|
104,527
|
|
|
March 27,
2020 |
|
December 27,
2019 |
||||
Industrial
|
$
|
616,333
|
|
|
$
|
615,486
|
|
Process
|
383,876
|
|
|
387,216
|
|
||
Contractor
|
396,721
|
|
|
368,832
|
|
||
Unallocated corporate
|
550,410
|
|
|
320,676
|
|
||
Total
|
$
|
1,947,340
|
|
|
$
|
1,692,210
|
|
|
Three Months Ended
|
||||||
|
March 27,
2020 |
|
March 29,
2019 |
||||
Net Sales (based on customer location)
|
|
|
|
||||
United States
|
$
|
198,243
|
|
|
$
|
202,885
|
|
Other countries
|
175,324
|
|
|
201,985
|
|
||
Total
|
$
|
373,567
|
|
|
$
|
404,870
|
|
|
March 27,
2020 |
|
December 27,
2019 |
||||
Long-lived Assets
|
|
|
|
||||
United States
|
$
|
275,513
|
|
|
$
|
268,864
|
|
Other countries
|
56,565
|
|
|
56,682
|
|
||
Total
|
$
|
332,078
|
|
|
$
|
325,546
|
|
|
Three Months Ended
|
||||||
|
March 27,
2020 |
|
March 29,
2019 |
||||
Net earnings available to common shareholders
|
$
|
72,818
|
|
|
$
|
86,749
|
|
Weighted average shares outstanding for basic earnings per share
|
167,977
|
|
|
165,616
|
|
||
Dilutive effect of stock options computed using the treasury stock method and the average market price
|
4,665
|
|
|
5,243
|
|
||
Weighted average shares outstanding for diluted earnings per share
|
172,642
|
|
|
170,859
|
|
||
Basic earnings per share
|
$
|
0.43
|
|
|
$
|
0.52
|
|
Diluted earnings per share
|
$
|
0.42
|
|
|
$
|
0.51
|
|
|
Option
Shares
|
|
Weighted Average
Exercise Price
|
|
Options
Exercisable
|
|
Weighted Average
Exercise Price
|
||||||
Outstanding, December 27, 2019
|
12,112
|
|
|
$
|
28.91
|
|
|
8,231
|
|
|
$
|
23.75
|
|
Granted
|
1,275
|
|
|
56.30
|
|
|
|
|
|
||||
Exercised
|
(1,286
|
)
|
|
19.00
|
|
|
|
|
|
||||
Canceled
|
(14
|
)
|
|
44.47
|
|
|
|
|
|
||||
Outstanding, March 27, 2020
|
12,087
|
|
|
$
|
32.84
|
|
|
8,294
|
|
|
$
|
26.19
|
|
|
Three Months Ended
|
||||||
|
March 27,
2020 |
|
March 29,
2019 |
||||
Expected life in years
|
7.5
|
|
|
7.5
|
|
||
Interest rate
|
1.5
|
%
|
|
2.6
|
%
|
||
Volatility
|
21.7
|
%
|
|
24.6
|
%
|
||
Dividend yield
|
1.2
|
%
|
|
1.4
|
%
|
||
Weighted average fair value per share
|
$
|
12.44
|
|
|
$
|
12.19
|
|
|
Three Months Ended
|
||||||
|
March 27,
2020 |
|
March 29,
2019 |
||||
Expected life in years
|
1.0
|
|
|
1.0
|
|
||
Interest rate
|
1.5
|
%
|
|
2.6
|
%
|
||
Volatility
|
21.9
|
%
|
|
22.7
|
%
|
||
Dividend yield
|
1.4
|
%
|
|
1.4
|
%
|
||
Weighted average fair value per share
|
$
|
11.55
|
|
|
$
|
11.36
|
|
|
Three Months Ended
|
||||||
|
March 27,
2020 |
|
March 29,
2019 |
||||
Pension Benefits
|
|
|
|
||||
Service cost
|
$
|
2,422
|
|
|
$
|
2,009
|
|
Interest cost
|
3,407
|
|
|
3,738
|
|
||
Expected return on assets
|
(4,750
|
)
|
|
(4,359
|
)
|
||
Amortization and other
|
2,721
|
|
|
1,979
|
|
||
Net periodic benefit cost
|
$
|
3,800
|
|
|
$
|
3,367
|
|
Postretirement Medical
|
|
|
|
||||
Service cost
|
$
|
175
|
|
|
$
|
150
|
|
Interest cost
|
248
|
|
|
317
|
|
||
Amortization
|
177
|
|
|
108
|
|
||
Net periodic benefit cost
|
$
|
600
|
|
|
$
|
575
|
|
|
Pension and
Postretirement
Medical
|
|
Cumulative
Translation
Adjustment
|
|
Total
|
||||||
Three Months Ended March 27, 2020
|
|
|
|
|
|
||||||
Balance, December 27, 2019
|
$
|
(113,721
|
)
|
|
$
|
(56,066
|
)
|
|
$
|
(169,787
|
)
|
Other comprehensive income (loss) before reclassifications
|
—
|
|
|
(4,677
|
)
|
|
(4,677
|
)
|
|||
Reclassified to pension cost and deferred tax
|
2,134
|
|
|
—
|
|
|
2,134
|
|
|||
Balance, March 27, 2020
|
$
|
(111,587
|
)
|
|
$
|
(60,743
|
)
|
|
$
|
(172,330
|
)
|
Three Months Ended March 29, 2019
|
|
|
|
|
|
||||||
Balance, December 28, 2018
|
$
|
(86,889
|
)
|
|
$
|
(57,968
|
)
|
|
$
|
(144,857
|
)
|
Other comprehensive income (loss) before reclassifications
|
—
|
|
|
1,169
|
|
|
1,169
|
|
|||
Reclassified to pension cost and deferred tax
|
1,657
|
|
|
—
|
|
|
1,657
|
|
|||
Balance, March 29, 2019
|
$
|
(85,232
|
)
|
|
$
|
(56,799
|
)
|
|
$
|
(142,031
|
)
|
|
March 27,
2020 |
|
December 27,
2019 |
||||
Finished products and components
|
$
|
151,087
|
|
|
$
|
132,128
|
|
Products and components in various stages of completion
|
86,956
|
|
|
86,957
|
|
||
Raw materials and purchased components
|
114,888
|
|
|
117,026
|
|
||
Subtotal
|
352,931
|
|
|
336,111
|
|
||
Reduction to LIFO cost
|
(63,364
|
)
|
|
(62,878
|
)
|
||
Total
|
$
|
289,567
|
|
|
$
|
273,233
|
|
|
Finite Life
|
|
Indefinite Life
|
|
|
||||||||||||||
|
Customer
Relationships |
|
Patents and
Proprietary Technology |
|
Trademarks,
Trade Names and Other |
|
Trade
Names |
|
Total
|
||||||||||
As of March 27, 2020
|
|
|
|
|
|
|
|
|
|
||||||||||
Cost
|
$
|
186,310
|
|
|
$
|
20,413
|
|
|
$
|
700
|
|
|
$
|
61,920
|
|
|
$
|
269,343
|
|
Accumulated amortization
|
(84,246
|
)
|
|
(11,057
|
)
|
|
(444
|
)
|
|
—
|
|
|
(95,747
|
)
|
|||||
Foreign currency translation
|
(11,039
|
)
|
|
(931
|
)
|
|
—
|
|
|
(3,557
|
)
|
|
(15,527
|
)
|
|||||
Book value
|
$
|
91,025
|
|
|
$
|
8,425
|
|
|
$
|
256
|
|
|
$
|
58,363
|
|
|
$
|
158,069
|
|
Weighted average life in years
|
13
|
|
|
10
|
|
|
4
|
|
|
N/A
|
|
|
|
As of December 27, 2019
|
|
|
|
|
|
|
|
|
|
||||||||||
Cost
|
$
|
186,310
|
|
|
$
|
20,413
|
|
|
$
|
1,020
|
|
|
$
|
61,920
|
|
|
$
|
269,663
|
|
Accumulated amortization
|
(80,764
|
)
|
|
(10,526
|
)
|
|
(650
|
)
|
|
—
|
|
|
(91,940
|
)
|
|||||
Foreign currency translation
|
(10,412
|
)
|
|
(885
|
)
|
|
(73
|
)
|
|
(3,730
|
)
|
|
(15,100
|
)
|
|||||
Book value
|
$
|
95,134
|
|
|
$
|
9,002
|
|
|
$
|
297
|
|
|
$
|
58,190
|
|
|
$
|
162,623
|
|
Weighted average life in years
|
13
|
|
|
10
|
|
|
4
|
|
|
N/A
|
|
|
|
|
2020
|
|
2021
|
|
2022
|
|
2023
|
|
2024
|
|
Thereafter
|
||||||||||||
Estimated Amortization Expense
|
$
|
15,947
|
|
|
$
|
15,750
|
|
|
$
|
15,670
|
|
|
$
|
14,745
|
|
|
$
|
13,208
|
|
|
$
|
28,479
|
|
|
Industrial
|
|
Process
|
|
Contractor
|
|
Total
|
||||||||
Balance, December 27, 2019
|
$
|
177,112
|
|
|
$
|
110,997
|
|
|
$
|
19,554
|
|
|
$
|
307,663
|
|
Foreign currency translation
|
440
|
|
|
(1,253
|
)
|
|
—
|
|
|
(813
|
)
|
||||
Balance, March 27, 2020
|
$
|
177,552
|
|
|
$
|
109,744
|
|
|
$
|
19,554
|
|
|
$
|
306,850
|
|
9.
|
Other Current Liabilities
|
|
March 27,
2020 |
|
December 27,
2019 |
||||
Accrued self-insurance retentions
|
$
|
7,600
|
|
|
$
|
7,570
|
|
Accrued warranty and service liabilities
|
12,759
|
|
|
12,785
|
|
||
Accrued trade promotions
|
6,654
|
|
|
8,390
|
|
||
Payable for employee stock purchases
|
2,976
|
|
|
13,722
|
|
||
Customer advances and deferred revenue
|
42,515
|
|
|
33,138
|
|
||
Income taxes payable
|
12,803
|
|
|
8,706
|
|
||
Right of return refund liability
|
13,788
|
|
|
13,791
|
|
||
Operating lease liability, current
|
9,116
|
|
|
7,690
|
|
||
Other
|
32,866
|
|
|
37,145
|
|
||
Total
|
$
|
141,077
|
|
|
$
|
142,937
|
|
Balance, December 27, 2019
|
$
|
12,785
|
|
Charged to expense
|
1,897
|
|
|
Margin on parts sales reversed
|
741
|
|
|
Reductions for claims settled
|
(2,664
|
)
|
|
Balance, March 27, 2020
|
$
|
12,759
|
|
|
Level
|
|
March 27,
2020 |
|
December 27,
2019 |
||||
Assets
|
|
|
|
|
|
||||
Cash surrender value of life insurance
|
2
|
|
$
|
13,779
|
|
|
$
|
17,702
|
|
Liabilities
|
|
|
|
|
|
||||
Contingent consideration
|
3
|
|
$
|
2,965
|
|
|
$
|
9,072
|
|
Deferred compensation
|
2
|
|
4,361
|
|
|
4,719
|
|
||
Forward exchange contracts
|
2
|
|
410
|
|
|
87
|
|
||
Total liabilities at fair value
|
|
|
$
|
7,736
|
|
|
$
|
13,878
|
|
|
Three Months Ended
|
||||||
|
March 27, 2020
|
|
March 29, 2019
|
||||
Balance, beginning
|
$
|
4,828
|
|
|
$
|
4,771
|
|
Additions charged to costs and expenses
|
317
|
|
|
30
|
|
||
Deductions from reserves (1)
|
(253
|
)
|
|
(836
|
)
|
||
Other additions (deductions) (2)
|
(94
|
)
|
|
447
|
|
||
Balance, ending
|
$
|
4,798
|
|
|
$
|
4,412
|
|
(1)
|
Represents amounts determined to be uncollectible and charged against reserves, net of collections on accounts previously charged against reserves.
|
(2)
|
Includes amounts assumed or established in connection with acquisitions and effects of foreign currency translation.
|
|
Three Months Ended
|
|||||||||
|
March 27,
2020 |
|
March 29,
2019 |
|
%
Change
|
|||||
Net Sales
|
$
|
373.6
|
|
|
$
|
404.9
|
|
|
(8
|
)%
|
Operating Earnings
|
89.8
|
|
|
104.5
|
|
|
(14
|
)%
|
||
Net Earnings
|
72.8
|
|
|
86.7
|
|
|
(16
|
)%
|
||
Net Earnings, adjusted (1)
|
65.0
|
|
|
80.1
|
|
|
(19
|
)%
|
||
Diluted Net Earnings per Common Share
|
$
|
0.42
|
|
|
$
|
0.51
|
|
|
(18
|
)%
|
Diluted Net Earnings per Common Share, adjusted (1)
|
$
|
0.38
|
|
|
$
|
0.47
|
|
|
(19
|
)%
|
|
Three Months Ended
|
||||||
|
March 27,
2020 |
|
March 29,
2019 |
||||
Earnings before income taxes
|
$
|
82.1
|
|
|
$
|
100.7
|
|
|
|
|
|
||||
Income taxes, as reported
|
$
|
9.3
|
|
|
$
|
14.0
|
|
Excess tax benefit from option exercises
|
7.8
|
|
|
5.1
|
|
||
Other non-recurring tax benefit
|
—
|
|
|
1.5
|
|
||
Income taxes, adjusted
|
$
|
17.1
|
|
|
$
|
20.6
|
|
|
|
|
|
||||
Effective income tax rate
|
|
|
|
||||
As reported
|
11.3
|
%
|
|
13.9
|
%
|
||
Adjusted
|
20.8
|
%
|
|
20.5
|
%
|
||
|
|
|
|
||||
Net Earnings, as reported
|
$
|
72.8
|
|
|
$
|
86.7
|
|
Excess tax benefit from option exercises
|
(7.8
|
)
|
|
(5.1
|
)
|
||
Other non-recurring tax benefit
|
—
|
|
|
(1.5
|
)
|
||
Net Earnings, adjusted
|
$
|
65.0
|
|
|
$
|
80.1
|
|
|
|
|
|
||||
Weighted Average Diluted Shares
|
172.6
|
|
|
170.9
|
|
||
Diluted Earnings per Share
|
|
|
|
||||
As reported
|
$
|
0.42
|
|
|
$
|
0.51
|
|
Adjusted
|
$
|
0.38
|
|
|
$
|
0.47
|
|
|
Three Months Ended
|
||||
|
March 27,
2020 |
|
March 29,
2019 |
||
Net Sales
|
100.0
|
%
|
|
100.0
|
%
|
Cost of products sold
|
46.8
|
|
|
46.6
|
|
Gross Profit
|
53.2
|
|
|
53.4
|
|
Product development
|
4.6
|
|
|
4.1
|
|
Selling, marketing and distribution
|
15.4
|
|
|
15.0
|
|
General and administrative
|
9.2
|
|
|
8.4
|
|
Operating Earnings
|
24.0
|
|
|
25.9
|
|
Interest expense
|
0.6
|
|
|
0.9
|
|
Other expense, net
|
1.4
|
|
|
0.1
|
|
Earnings Before Income Taxes
|
22.0
|
|
|
24.9
|
|
Income taxes
|
2.5
|
|
|
3.5
|
|
Net Earnings
|
19.5
|
%
|
|
21.4
|
%
|
|
Three Months Ended
|
||||||
|
March 27,
2020 |
|
March 29,
2019 |
||||
Americas(1)
|
$
|
224.8
|
|
|
$
|
232.0
|
|
EMEA(2)
|
87.8
|
|
|
99.5
|
|
||
Asia Pacific
|
61.0
|
|
|
73.4
|
|
||
Consolidated
|
$
|
373.6
|
|
|
$
|
404.9
|
|
(1)
|
North, South and Central America, including the United States
|
(2)
|
Europe, Middle East and Africa
|
|
Three Months
|
||||||
|
Volume and Price
|
|
Acquisitions
|
|
Currency
|
|
Total
|
Americas
|
(4)%
|
|
1%
|
|
0%
|
|
(3)%
|
EMEA
|
(11)%
|
|
1%
|
|
(2)%
|
|
(12)%
|
Asia Pacific
|
(18)%
|
|
3%
|
|
(2)%
|
|
(17)%
|
Consolidated
|
(8)%
|
|
1%
|
|
(1)%
|
|
(8)%
|
|
Three Months Ended
|
||||||
|
March 27,
2020 |
|
March 29,
2019 |
||||
Net Sales
|
|
|
|
||||
Americas
|
$
|
74.4
|
|
|
$
|
80.9
|
|
EMEA
|
46.2
|
|
|
58.1
|
|
||
Asia Pacific
|
38.1
|
|
|
50.1
|
|
||
Total
|
$
|
158.7
|
|
|
$
|
189.1
|
|
Operating earnings as a percentage of net sales
|
32
|
%
|
|
34
|
%
|
|
Three Months
|
||||||
|
Volume and Price
|
|
Acquisitions
|
|
Currency
|
|
Total
|
Americas
|
(8)%
|
|
0%
|
|
0%
|
|
(8)%
|
EMEA
|
(19)%
|
|
0%
|
|
(1)%
|
|
(20)%
|
Asia Pacific
|
(22)%
|
|
0%
|
|
(2)%
|
|
(24)%
|
Segment Total
|
(15)%
|
|
0%
|
|
(1)%
|
|
(16)%
|
|
Three Months Ended
|
||||||
|
March 27,
2020 |
|
March 29,
2019 |
||||
Net Sales
|
|
|
|
||||
Americas
|
$
|
55.1
|
|
|
$
|
57.1
|
|
EMEA
|
15.8
|
|
|
15.8
|
|
||
Asia Pacific
|
15.2
|
|
|
14.0
|
|
||
Total
|
$
|
86.1
|
|
|
$
|
86.9
|
|
Operating earnings as a percentage of net sales
|
21
|
%
|
|
23
|
%
|
|
Three Months
|
||||||
|
Volume and Price
|
|
Acquisitions
|
|
Currency
|
|
Total
|
Americas
|
(6)%
|
|
2%
|
|
0%
|
|
(4)%
|
EMEA
|
(7)%
|
|
8%
|
|
(1)%
|
|
0%
|
Asia Pacific
|
(3)%
|
|
15%
|
|
(3)%
|
|
9%
|
Segment Total
|
(6)%
|
|
5%
|
|
0%
|
|
(1)%
|
|
Three Months Ended
|
||||||
|
March 27,
2020 |
|
March 29,
2019 |
||||
Net Sales
|
|
|
|
||||
Americas
|
$
|
95.3
|
|
|
$
|
94.0
|
|
EMEA
|
25.8
|
|
|
25.6
|
|
||
Asia Pacific
|
7.7
|
|
|
9.3
|
|
||
Total
|
$
|
128.8
|
|
|
$
|
128.9
|
|
Operating earnings as a percentage of net sales
|
22
|
%
|
|
21
|
%
|
|
Three Months
|
||||||
|
Volume and Price
|
|
Acquisitions
|
|
Currency
|
|
Total
|
Americas
|
2%
|
|
0%
|
|
(1)%
|
|
1%
|
EMEA
|
3%
|
|
0%
|
|
(2)%
|
|
1%
|
Asia Pacific
|
(14)%
|
|
0%
|
|
(4)%
|
|
(18)%
|
Segment Total
|
1%
|
|
0%
|
|
(1)%
|
|
0%
|
Period
|
|
Total Number
of Shares Purchased
|
|
Average Price
Paid per Share
|
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
|
|
Maximum Number of Shares that May Yet Be
Purchased Under the Plans or Programs
(at end of period)
|
|||||
Dec 28,2019 - Jan 24, 2020
|
|
835
|
|
|
$
|
52.00
|
|
|
—
|
|
|
20,844,131
|
|
Jan 25, 2020 - Feb 21, 2020
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
20,844,131
|
|
Feb 22, 2020 - Mar 27, 2020
|
|
2,064,830
|
|
|
$
|
43.58
|
|
|
2,064,830
|
|
|
18,779,301
|
|
3.1
|
|
|
Restated Articles of Incorporation as amended December 8, 2017. (Incorporated by reference to Exhibit 3.1 to the Company's Report on Form 8-K filed December 8, 2017.)
|
|
|
|
|
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 Chief Executive Officer under the Graco Inc. 2019 Stock Incentive Plan in 2020. (Incorporated by reference to Exhibit 10.21 to the Company’s 2019 Annual Report on Form 10-K.)
|
|
|
|
|
10.2
|
|
|
Stock Option Agreement. Form of agreement used for award of non-incentive stock options to executive officers under the Graco Inc. 2019 Stock Incentive Plan in 2020. (Incorporated by reference to Exhibit 10.22 to the Company’s 2019 Annual Report on Form 10-K.)
|
|
|
|
|
10.3
|
|
|
Master Note Agreement, dated January 29, 2020, between Graco Inc. and NYL Investors LLC. (Incorporated by reference to Exhibit 10.1 to the Company’s Report on Form 8-K filed February 3, 2020.)
|
|
|
|
|
|
|
Amendment No. 5 dated as of April 17, 2020 to Note Agreement dated as of March 11, 2011.
|
|
|
|
|
|
|
|
Fifth Amendment to Credit Agreement dated as of April 17, 2020, amending the Credit Agreement among Graco Inc., the borrowing subsidiaries from time to time party thereto, the banks from time to time party thereto and U.S. Bank National Association, as administrative agent.
|
|
|
|
|
|
|
|
Certification of President and Chief Executive Officer pursuant to Rule 13a-14(a).
|
|
|
|
|
|
|
|
Certification of Chief Financial Officer and Treasurer pursuant to Rule 13a-14(a).
|
|
|
|
|
|
|
|
Certification of President and Chief Executive Officer and Chief Financial Officer and Treasurer pursuant to Section 1350 of Title 18, U.S.C.
|
|
|
|
|
|
|
|
Press Release Reporting First Quarter Earnings dated April 22, 2020.
|
|
|
|
|
|
101
|
|
|
Interactive data files pursuant to Rule 405 of Regulation S-T formatted in iXBRL (Inline eXtensible Business Reporting Language).
|
|
|
|
|
104
|
|
|
Cover Page Interactive Data File (formatted as iXBRL and contained in Exhibit 101).
|
|
|
|
|
|
|
|
|
|
|
Date:
|
|
April 22, 2020
|
|
By:
|
|
/s/ Patrick J. McHale
|
|
|
|
|
|
|
Patrick J. McHale
|
|
|
|
|
|
|
President and Chief Executive Officer
|
|
|
|
|
|
|
(Principal Executive Officer)
|
|
|
|
|
|||
Date:
|
|
April 22, 2020
|
|
By:
|
|
/s/ Mark W. Sheahan
|
|
|
|
|
|
|
Mark W. Sheahan
|
|
|
|
|
|
|
Chief Financial Officer and Treasurer
|
|
|
|
|
|
|
(Principal Financial Officer)
|
|
|
|
|
|||
Date:
|
|
April 22, 2020
|
|
By:
|
|
/s/ Caroline M. Chambers
|
|
|
|
|
|
|
Caroline M. Chambers
|
|
|
|
|
|
|
Executive Vice President, Corporate Controller
and Information Systems
|
|
|
|
|
|
|
(Principal Accounting Officer)
|
Issuer:
|
Graco Global Holdings
|
Jurisdiction of Organization:
|
Luxembourg
|
Type of Interest:
|
Parts sociales (shares)
|
Percentage Ownership:
|
65.00%
|
Certificate No(s).:
|
N/A
|
Number of Units/Shares:
|
13,000
|
|
|
Issuer:
|
Graco Finance Hong Kong Limited
|
Jurisdiction of Organization:
|
Hong Kong
|
Type of Interest:
|
Shares
|
Percentage Ownership:
|
65.00%
|
Certificate No(s).:
|
2
|
Number of Units/Shares:
|
650
|
|
|
|
|
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:
|
|
April 22, 2020
|
|
/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:
|
|
April 22, 2020
|
|
/s/ Mark W. Sheahan
|
|
|
|
|
Mark W. Sheahan
|
|
|
|
|
Chief Financial Officer and Treasurer
|
|
|
|
|
Exhibit 32
|
|
|
|
|
|
Date:
|
|
April 22, 2020
|
|
/s/ Patrick J. McHale
|
|
|
|
|
Patrick J. McHale
|
|
|
|
|
President and Chief Executive Officer
|
|
|
|
|
|
Date:
|
|
April 22, 2020
|
|
/s/ Mark W. Sheahan
|
|
|
|
|
Mark W. Sheahan
|
|
|
|
|
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, April 22, 2020
|
Financial Contact: Mark Sheahan, 612-623-6656
Media Contact: Charlotte Boyd, 612-623-6153
Charlotte_M_Boyd@graco.com
|
|
Three Months Ended
|
|||||||||
|
Mar 27,
2020 |
|
Mar 29,
2019 |
|
%
Change
|
|||||
Net Sales
|
$
|
373.6
|
|
|
$
|
404.9
|
|
|
(8)
|
%
|
Operating Earnings
|
89.8
|
|
|
104.5
|
|
|
(14)
|
%
|
||
Net Earnings
|
72.8
|
|
|
86.7
|
|
|
(16)
|
%
|
||
Diluted Net Earnings per Common Share
|
$
|
0.42
|
|
|
$
|
0.51
|
|
|
(18)
|
%
|
|
|
|
|
|
|
|||||
Adjusted (non-GAAP): (1)
|
|
|
|
|
|
|||||
Net Earnings, adjusted
|
$
|
65.0
|
|
|
$
|
80.1
|
|
|
(19)
|
%
|
Diluted Net Earnings per Common Share, adjusted
|
$
|
0.38
|
|
|
$
|
0.47
|
|
|
(19)
|
%
|
•
|
Sales decreased 8 percent, with double-digit percentage declines in the Industrial segment and in the EMEA and Asia Pacific regions.
|
•
|
Gross margin rate remained relatively strong as favorable realized pricing mostly offset the adverse impacts of lower factory volume, unfavorable product and channel mix, and changes in currency translation rates.
|
•
|
Total operating expenses decreased 2 percent. Reductions in volume and earnings-based expenses more than offset a 3 percent increase in product development expenses.
|
•
|
Other non-operating expenses increased $5 million due to market valuation losses on investments held to fund certain retirement benefits liabilities.
|
|
Three Months
|
||||||||||
|
Industrial
|
|
Process
|
|
Contractor
|
||||||
Net Sales (in millions)
|
$
|
158.7
|
|
|
$
|
86.1
|
|
|
$
|
128.8
|
|
Percentage change from last year
|
|
|
|
|
|
||||||
Sales
|
(16
|
)%
|
|
(1
|
)%
|
|
0
|
%
|
|||
Operating earnings
|
(23
|
)%
|
|
(10
|
)%
|
|
8
|
%
|
|||
Operating earnings as a percentage of sales
|
|
|
|
|
|
||||||
2020
|
32
|
%
|
|
21
|
%
|
|
22
|
%
|
|||
2019
|
34
|
%
|
|
23
|
%
|
|
21
|
%
|
|
Three Months
|
||||||
|
Volume and Price
|
|
Acquisitions
|
|
Currency
|
|
Total
|
Americas
|
(8)%
|
|
0%
|
|
0%
|
|
(8)%
|
EMEA
|
(19)%
|
|
0%
|
|
(1)%
|
|
(20)%
|
Asia Pacific
|
(22)%
|
|
0%
|
|
(2)%
|
|
(24)%
|
Consolidated
|
(15)%
|
|
0%
|
|
(1)%
|
|
(16)%
|
|
Three Months
|
||||||
|
Volume and Price
|
|
Acquisitions
|
|
Currency
|
|
Total
|
Americas
|
(6)%
|
|
2%
|
|
0%
|
|
(4)%
|
EMEA
|
(7)%
|
|
8%
|
|
(1)%
|
|
0%
|
Asia Pacific
|
(3)%
|
|
15%
|
|
(3)%
|
|
9%
|
Consolidated
|
(6)%
|
|
5%
|
|
0%
|
|
(1)%
|
|
Three Months
|
||||||
|
Volume and Price
|
|
Acquisitions
|
|
Currency
|
|
Total
|
Americas
|
2%
|
|
0%
|
|
(1)%
|
|
1%
|
EMEA
|
3%
|
|
0%
|
|
(2)%
|
|
1%
|
Asia Pacific
|
(14)%
|
|
0%
|
|
(4)%
|
|
(18)%
|
Consolidated
|
1%
|
|
0%
|
|
(1)%
|
|
0%
|
|
Three Months Ended
|
||||||
|
Mar 27,
2020 |
|
Mar 29,
2019 |
||||
Earnings before income taxes
|
$
|
82.1
|
|
|
$
|
100.7
|
|
|
|
|
|
||||
Income taxes, as reported
|
$
|
9.3
|
|
|
$
|
14.0
|
|
Excess tax benefit from option exercises
|
7.8
|
|
|
5.1
|
|
||
Other non-recurring tax benefit
|
—
|
|
|
1.5
|
|
||
Income taxes, adjusted
|
$
|
17.1
|
|
|
$
|
20.6
|
|
|
|
|
|
||||
Effective income tax rate
|
|
|
|
||||
As reported
|
11.3
|
%
|
|
13.9
|
%
|
||
Adjusted
|
20.8
|
%
|
|
20.5
|
%
|
||
|
|
|
|
||||
Net Earnings, as reported
|
$
|
72.8
|
|
|
$
|
86.7
|
|
Excess tax benefit from option exercises
|
(7.8
|
)
|
|
(5.1
|
)
|
||
Other non-recurring tax benefit
|
—
|
|
|
(1.5
|
)
|
||
Net Earnings, adjusted
|
$
|
65.0
|
|
|
$
|
80.1
|
|
|
|
|
|
||||
Weighted Average Diluted Shares
|
172.6
|
|
|
170.9
|
|
||
Diluted Earnings per Share
|
|
|
|
||||
As reported
|
$
|
0.42
|
|
|
$
|
0.51
|
|
Adjusted
|
$
|
0.38
|
|
|
$
|
0.47
|
|
|
Three Months Ended
|
||||||
|
Mar 27,
2020 |
|
Mar 29,
2019 |
||||
Net Sales
|
$
|
373,567
|
|
|
$
|
404,870
|
|
Cost of products sold
|
174,936
|
|
|
188,828
|
|
||
Gross Profit
|
198,631
|
|
|
216,042
|
|
||
Product development
|
17,081
|
|
|
16,569
|
|
||
Selling, marketing and distribution
|
57,388
|
|
|
60,817
|
|
||
General and administrative
|
34,350
|
|
|
34,129
|
|
||
Operating Earnings
|
89,812
|
|
|
104,527
|
|
||
Interest expense
|
2,486
|
|
|
3,535
|
|
||
Other expense, net
|
5,223
|
|
|
269
|
|
||
Earnings Before Income Taxes
|
82,103
|
|
|
100,723
|
|
||
Income taxes
|
9,285
|
|
|
13,974
|
|
||
Net Earnings
|
$
|
72,818
|
|
|
$
|
86,749
|
|
Net Earnings per Common Share
|
|
|
|
||||
Basic
|
$
|
0.43
|
|
|
$
|
0.52
|
|
Diluted
|
$
|
0.42
|
|
|
$
|
0.51
|
|
Weighted Average Number of Shares
|
|
|
|
||||
Basic
|
167,977
|
|
|
165,616
|
|
||
Diluted
|
172,642
|
|
|
170,859
|
|
|
Three Months Ended
|
||||||
|
Mar 27,
2020 |
|
Mar 29,
2019 |
||||
Net Sales
|
|
|
|
||||
Industrial
|
$
|
158,684
|
|
|
$
|
189,100
|
|
Process
|
86,078
|
|
|
86,894
|
|
||
Contractor
|
128,805
|
|
|
128,876
|
|
||
Total
|
$
|
373,567
|
|
|
$
|
404,870
|
|
Operating Earnings
|
|
|
|
||||
Industrial
|
$
|
50,233
|
|
|
$
|
65,203
|
|
Process
|
18,111
|
|
|
20,014
|
|
||
Contractor
|
28,630
|
|
|
26,539
|
|
||
Unallocated corporate (expense)
|
(7,162
|
)
|
|
(7,229
|
)
|
||
Total
|
$
|
89,812
|
|
|
$
|
104,527
|
|