MINNEAPOLIS--(BUSINESS WIRE)--Graco Inc. (NYSE: GGG) today announced results for the fourth quarter ended December 27, 2024.

Summary

$ in millions except per share amounts

• Net sales for the fourth quarter decreased 3 percent, with decreases in all regions. Incremental sales from acquired operations partially offset the decrease and contributed 3 percentage points of growth for the quarter.
• The gross profit margin rate declined approximately 2 percentage points for the fourth quarter, including approximately a 1 percentage point impact from the unfavorable effects of lower margin rates from acquired operations. Lower sales volume and higher product costs more than offset realized pricing and further reduced the gross margin rate.
• Operating expenses for the fourth quarter increased $19 million, and included $7 million of incremental litigation costs in the Contractor segment associated with a trial that concluded in December of 2024, $7 million of business reorganization costs and $7 million of expenses from acquired operations.
• Operating earnings decreased 23 percent for the fourth quarter as lower sales volume and higher operating expenses drove the decline in operating earnings. Adjusted to exclude the effects of the business reorganization and other prior year items, operating earnings decreased 19 percent.
• Net earnings decreased 1 percent for the fourth quarter. Adjusted net earnings decreased 20 percent due to lower operating earnings and a higher effective income tax rate.

“We continued to experience slower demand across many end markets in the fourth quarter," said Mark Sheahan, Graco's President and CEO. "Soft demand for Industrial products in China, lower sales of semiconductor equipment and the timing of projects in the powder coatings equipment business were notable headwinds. We completed the Corob acquisition in November that contributed 3 percent of sales growth in the quarter. The strategic fit between Corob and our Contractor Division will serve us well in the future, and we welcome this business, and its dedicated employees into the Graco family. While 2024 has been challenging from a growth standpoint, I would like to thank our employees, suppliers, and distributors for their continued dedication and hard work.”

Consolidated Results

Net sales for the fourth quarter decreased 3 percent from the comparable period last year. Fourth quarter net sales decreased 1 percent in the Americas, decreased 2 percent in EMEA, and decreased 10 percent in Asia Pacific (9 percent at consistent translation rates). Net sales for the year decreased 4 percent compared to last year (3 percent at consistent translation rates). Net sales for the year decreased 1 percent in the Americas, decreased 2 percent in EMEA (3 percent at consistent translation rates) and decreased 16 percent in Asia Pacific (15 percent at consistent translation rates).

For the quarter, changes in currency translation rates decreased net sales by approximately $2 million. For the year, changes in currency translation rates decreased net sales by approximately $6 million (1 percentage point). Acquired operations contributed approximately 3 percentage points of sales growth for the quarter and 1 percentage point for the year.

The gross profit margin rate declined approximately 2 percentage points for the fourth quarter, including approximately a 1 percentage point impact from the unfavorable effects of lower margin rates from acquired operations. Lower sales volume and higher product costs more than offset realized pricing and further reduced the gross margin rate. For the year, the gross profit margin rate increased slightly as the favorable effects of realized pricing more than offset unfavorable product and channel mix and higher product costs.

Total operating expenses increased $19 million (15 percent) for the fourth quarter and $38 million (7 percent) for the year, respectively, compared to last year. Operating expenses for the fourth quarter included $7 million of incremental litigation costs in the Contractor segment associated with a trial that concluded in December of 2024, $7 million of business reorganization costs and $7 million of expenses from acquired operations. Operating expenses for the year included $13 million of incremental litigation costs associated with the aforementioned trial, $7 million of business reorganization costs, $7 million of expenses from acquired operations and $13 million of investments in new product development and other growth initiatives, including the relocation to a new distribution center. Reductions in volume and earnings-based expenses of $6 million for the quarter and $14 million for the year partially offset the increase in operating expenses.

Interest expense was flat for the fourth quarter and $2 million lower for the year compared to the same periods last year as private placement debt was repaid in the third quarter of 2023. Excluding a prior year pension settlement loss of $42 million, other income increased $3 million for the fourth quarter and $13 million for the year, largely due to increased interest income.

The effective income tax rate was 18 percent for both the quarter and year. Adjusted to exclude certain non-recurring items (see Financial Results Adjusted for Comparability below), the adjusted effective income tax rate was 22 percent for the quarter and 20 percent for the year, up approximately 2 percentage points and 1 percentage point, respectively, from the same periods last year largely due to the unfavorable effects of foreign earnings taxed at higher rates than the U.S.

Segment Results

Management assesses performance of segments by reference to operating earnings excluding unallocated corporate expenses. For a reconciliation of segment operating earnings to consolidated operating earnings, refer to the segment information table included in the financial statement section of this release. Certain measurements of segment operations are summarized below: