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Graco Reports Record Fourth Quarter And Annual Sales - Fourth Quarter Profitability And EPS Growth Driven By Strong Operating Performance

Total operating expenses for the quarter increased $11 million, including $9 million from Powder Finishing operations. Operating expenses for the year increased $45 million, including $25 million from Powder Finishing and an $8 million increase in acquisition and divestiture expenses.

The April purchase of Powder Finishing and Liquid Finishing equipment operations had significant impacts on interest expense (increased $10 million for the year) and other expense (income), which included dividend income of $12 million ($4 million for the quarter) received from the Liquid Finishing businesses held as a cost-method investment.

The effective income tax rate was 28 percent for the quarter and 31 percent for the year, compared to 30 percent and 32 percent for the comparable periods last year. This year’s effective rates were reduced by the effects of the investment income from the Liquid Finishing businesses held separate and a tax rate reduction resulting from a tax holiday in a foreign jurisdiction.

Segment Results

Certain measurements of segment operations are summarized below:

     
Quarter Ended Year Ended
Industrial   Contractor   Lubrication Industrial   Contractor   Lubrication
 
Net sales (in millions) $ 156.4 $ 69.9 $ 27.4 $ 603.4 $ 298.8 $ 110.2

Net sales percentage change from last year

25 % 13 %

(3)

%

20 % 3 % 7 %

Operating earnings as a percentage of net sales

    2012

30 % 16 % 20 % 31 % 18 % 20 %

    2011

33 % 10 % 19 % 35 % 17 % 18 %
 

Industrial segment sales increased 25 percent for the quarter, all from the addition of Powder Finishing operations. Without Powder Finishing, sales for the quarter increased 10 percent in the Americas, decreased 4 percent in Europe and decreased 15 percent in Asia Pacific. On the same basis, sales for the year increased 10 percent in the Americas, decreased 2 percent in Europe (3 percent increase at consistent translation rates) and decreased 7 percent in Asia Pacific. Powder Finishing operations contributed to segment operating earnings in the third and fourth quarters, but at a lower rate on sales, which drove the decrease in the operating margin rate for the Industrial segment.

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