Graco 2007 Annual Report Download - page 12

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Dear fellow shareholders,
In 2007, we made excellent progress in our multi-year
effort to transform Newell Rubbermaid into a global
company of Brands That Matter and great people, known
for best-in-class results.
Our strategic focus on developing our
brand-building capabilities, achieving best
cost, leveraging the power of One Newell
Rubbermaid and creating a culture of
excellence will enable us to generate
sustainable sales and earnings growth
well into the future.
Meeting and Exceeding our
Financial Commitments
We are pleased to report that in 2007, we
once again delivered on all of our nancial
commitments, continuing the growth
“trifecta” of higher top-line sales, healthy
gross-margin expansion and increased
operating prot. Net sales rose 3.3 percent,
gross margins expanded 185 basis points
and operating income increased 14 percent
over the prior year. Since embarking upon
our transformation two years ago, we have
delivered 4 percent average annual inter-
nal sales growth, improved gross margins
from 30 percent to 35 percent and achieved
over $200 million in operating income
improvement. This performance helped
drive a 46-percent increase in normalized
earnings per share and over $600 million in
annual operating cash ow. Our investments
in strategic brand-building activities, fueled
by our signicant gross margin expansion
and productivity-enhancing initiatives,
are paying off as we advance in our multi-
year transformation.
Continued Progress on
Key Strategic Initiatives
In 2007, we made considerable progress
on our Marketing Build & Transform
initiative, which is focused on creating
a best-in-class consumer branding
capability. We have developed a detailed
blueprint and roadmap for achieving
brand-building excellence over time, com-
plete with annual targets and measures.
We have also recruited top executive talent
from some of the world’s leading consumer
products companies and launched a
comprehensive series of Marketing
Excellence training programs, covering
both basic and advanced curriculums.
To support the key activities that lead to
consumer understanding, innovation and
demand creation, we boosted our invest-
ment in strategic brand building to 6.2
percent of sales, a 60-percent increase over
the past two years.
10
Superior
Branding
Premium
Margins
Differentiated
Product
Encourages
More Plus
Funds Yields
Drives Plus
Best-in-Class
Cost Structure
Incremental
Demand
Creation
Incremental
Sales and
Profit
The New Virtuous Cycle
Brands That Matter
Win With Unique Consumers and Customers and Beat Relevant Competition