Graco 2005 Annual Report Download - page 18

The Company recorded non-cash impairment charges of $295.1 million and $34.5 million for 2004
and 2003, respectively. The 2004 charge was required to write-down certain assets to fair value, primarily
in the Company's European and Latin American OÇce Products businesses. The 2003 charge was
required to write-down certain assets to fair value, primarily in the Company's Cleaning & Organization
segment, resulting from the decision to exit certain product lines. See Footnote 18 to the Consolidated
Financial Statements for additional information.
The Company recorded restructuring costs of $44.2 million and $189.3 million for 2004 and 2003,
respectively. The 2004 costs included $39.6 million of facility and other exit costs, $3.0 million of
employee severance and termination beneÑts and $1.6 million of exited contractual commitments and other
restructuring costs. The 2003 pre-tax costs included $83.2 million of facility and other exit costs,
$80.2 million of employee severance and termination beneÑts and $25.9 million of exited contractual
commitments and other restructuring costs. See Footnote 4 to the Consolidated Financial Statements for
further information on the restructuring costs.
Operating income for 2004 was $290.7 million, or 4.5% of net sales, versus $497.6 million, or 7.5% of
net sales, in 2003. The decline in operating margins is the result of the factors described above.
Net non-operating expenses for 2004 were 1.8% of net sales, or $116.1 million, versus 2.4% of net
sales, or $159.9 million, for 2003. The decrease in net non-operating expenses is attributable to a reduction
in net interest expense of $15.0 million in 2004 ($119.3 million in 2004 compared to $134.3 million in
2003), as a result of lower average debt outstanding, partially oÅset by increased interest rates. Also, in
2003, the Company recognized a $30.4 million non-cash loss on the sale of its Cosmolab and Photo
Fashions businesses. See Footnote 19 to the Consolidated Financial Statements for further information.
The eÅective tax rate was 59.6% for 2004 versus 35.5% for 2003. The change in the eÅective tax rate
is primarily related to the non-deductibility associated with a portion of the Company's $295.1 million
impairment charge in 2004, partially oÅset by the net income tax beneÑt of $15.5 million recorded in 2004,
as a result of the favorable resolution of certain tax positions and the expiration of the statute of
limitations. See Footnotes 17 and 18 to the Consolidated Financial Statements for further information.
Income from continuing operations for 2004 was $70.6 million, compared to $217.9 million for 2003.
Diluted earnings per share from continuing operations were $0.26 for 2004 compared to $0.79 for 2003.
The loss from discontinued operations in 2004 was $186.7 million compared to $264.5 million in 2003.
The loss from operations of discontinued operations for 2004 was $96.2 million, compared to
$264.5 million for 2003. For 2003, the Company recorded a non-cash pre-tax write-down of $254.9 million
on certain businesses that it was evaluating for potential sale and were presented in discontinued
operations. See Footnote 3 to the Consolidated Financial Statements for further information. The loss on
disposal of discontinued operations for 2004 was $90.5 million. In 2003, there were no disposals of
business. In 2004, the Company recorded a $21.5 million loss on the disposal of the U.S. picture frames
business (Burnes), Anchor Hocking glassware business, and Mirro cookware business, a $72.2 million loss
on the disposal of the Panex Brazilian low-end cookware division, a $6.4 million loss 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
$0.68 for 2004 compared to $0.96 for 2003. See Footnote 3 to the Consolidated Financial Statements for
further information.
Net loss for 2004 was $116.1 million, compared to $46.6 million for 2004. Diluted loss per share was
$0.42 for 2004 compared to $0.17 for 2003.
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