Graco 2005 Annual Report Download - page 17

In the second quarter of 2005, the Company committed to the disposal of a business in the
Cleaning & Organization segment and recognized impairment charge of $24.5 million, net of tax, in order
to state the assets of this business at their estimated fair values. In the third and fourth quarters of 2005,
the Company revised its estimation related to the fair value of this business after winning several line
reviews with a key retailer and reversed the full amount of the impairment charge. In the fourth quarter of
2005, the Company changed its decision to dispose of this business as a result of the aforementioned line
review wins and the identiÑcation of signiÑcant productivity opportunities. The results of this business are
reÖected in continuing operations.
Income from continuing operations for 2005 was $356.4 million, compared to $70.6 million for 2004.
Diluted earnings per share from continuing operations were $1.30 for 2005 compared to $0.26 for 2004.
The loss from discontinued operations for 2005 was $105.1 million, compared to $186.7 million for
2004. For 2005, the loss on disposal of discontinued operations was $96.8 million, comprised primarily of a
$62.0 million loss on the disposal of the Curver business and a $33.9 million loss related to the sale of the
European Cookware business. For 2004, the Company recorded a $21.5 million loss on the disposal of the
U.S. picture frames business (Burnes), the Anchor Hocking glassware business, and the Mirro cookware
business, a $72.2 million loss on the disposal of the Panex Brazilian low-end cookware division, and a
$6.4 million loss, net of tax, on the disposal of the European picture frames business, partially oÅset by a
gain on the disposal of the Little Tikes Commercial Playground Systems business of $9.6 million. Diluted
loss per share from discontinued operations was $0.38 for 2005 compared to $0.68 for 2004. See
Footnote 3 to the Consolidated Financial Statements for further information.
Net income (loss) for 2005 was $251.3 million, compared to ($116.1) million for 2004. Diluted
earnings (loss) per share was $0.91 for 2005 compared to ($0.42) for 2004.
Results of OperationsÌ2004 vs. 2003
Net sales for 2004 were $6,479.8 million, representing a decrease of $135.0 million, or 2.0% from
$6,614.8 million for 2003, consisting of the following (in millions, except percentages):
$%
Favorable currency translationÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 134 2.0%
Unfavorable pricingÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (3) Ì
Product line rationalization ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (257) (3.9)
Core sales decline ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (9) (0.1)
$(135) (2.0)%
Net sales in the Company's Invest businesses improved 1.0% in 2004 versus 2003 led by single digit
growth in Tools & Hardware and Rubbermaid Commercial Products.
Net sales in the Company's Fix businesses declined 6.0% in 2004 versus 2003, as a result of planned
rationalization of low margin products in the Rubbermaid Home Products and Graco Children's Products
businesses.
Gross margin, as a percentage of net sales, for 2004 was 28.4%, or $1,838.8 million, versus 28.5%, or
$1,882.1 million, for 2003. The decline in gross margin is primarily related to raw material inÖation of
$116 million and unfavorable pricing of $3 million, partially oÅset by favorable mix driven by the
rationalization of unproÑtable product lines, primarily in the Rubbermaid Home Products business, gross
productivity and other savings of $76 million.
Selling, general and administrative expenses (SG&A) for 2004 were 18.7% of net sales, or
$1,208.8 million, versus 17.5%, or $1,160.7 million, for 2003. The increase in SG&A reÖects a currency
impact of $37 million and pension cost increases of $16 million. All other SG&A was down $5 million,
with strategic investments more than oÅset by streamlining in the Company's Fix businesses.
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