Graco Inc. (NYSE:GGG) Q4 2019 Earnings Conference Call - Final Transcript

Jan 28, 2020 • 11:00 am ET

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Graco Inc. (NYSE:GGG) Q4 2019 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Good morning and welcome to the Fourth Quarter Conference Call for Graco Inc. If you wish to access the replay for this call, you may do so by dialing 1-888-203-1112 within the United States or Canada. The dial-in number for international callers is 719-457-0820. The conference ID number is 8157037. The replay will be available through 1:00 PM Eastern time, Saturday, February 1st, 2020. Graco has additional information available in a PowerPoint slide presentation which is available as part of the webcast player. [Operator Instructions]

During this call various remarks may be made by management about their expectations, plans and prospects for the future. These remarks constitute forward-looking statements for the purposes of the Safe Harbor provisions of the Private Securities Litigations Reform Act. Actual results may differ materially from those indicated as a result of various risk factors, including those identified in Item 1A of the Company's 2018 annual report on Form 10-K and in the Item 1A of the Company's most recent quarterly report on Form 10-Q. These reports are available on the Company's website at www.graco.com and the SEC's website at www.sec.gov.

Forward-looking statements reflect management's current views and speak only as of the time they are made. The Company undertakes no obligation to update these statements in light of new information or future events.

I would now turn the conference over to Caroline Chambers, Executive Vice President, Corporate Controller and Information Systems.

Executive
Caroline M. Chambers

Good morning. I'm here this morning with Pat McHale and Mark Sheahan. Our conference call slides have been posted on our website and provide additional information that may be helpful. Sales totaled $412 million this quarter, an increase of 1% from the fourth quarter last year. While changes in currency translation rates decreased sales by approximately 1 percentage point, acquisitions added 1 percentage point of revenue growth this quarter.

Net earnings totaled $85 million for the quarter or $0.49 per diluted share. After adjusting for the impact of excess tax benefits from stock option exercises and other non-recurring items, net earnings totaled $82 million or $0.48 per diluted share. Gross margin rates decreased by 60 basis points as compared to the fourth quarter last year. Realized pricing more than offset higher material costs and tariffs. So the effects of lower factory volume, unfavorable channel and product mix and changes in currency translation rates resulted in a decline in gross margin rates from the prior year.

Operating expenses were $7 million lower in the fourth quarter as compared to a year ago as reductions in volume and earnings-based expenses more than offset higher product development cost. Reported income tax rate was 16% for the quarter, approximately 2 percentage points lower than last year, primarily due to an increase in excess tax benefits related to stock option exercises. After adjusting for the effect of excess tax benefits from stock option exercises and other non-recurring tax benefits, our tax rate for the quarter was 18.5%, essentially the same as the fourth quarter last year.

Cash flow from operations