Graco 2012 Annual Report Download - page 29

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23
Organizational Structure
The Company’s segments reflect the Company’s focus on building large consumer and professional brands and leveraging its
understanding of similar markets and distribution channels.The Company’s six segments and the key brands included in each of
the six business segments are as follows:
Segment Key Brands Description of Primary Products
Home Solutions Rubbermaid®, Calphalon®
Levolor®, Goody®Indoor/outdoor organization, food storage and home storage
products; gourmet cookware, bakeware, cutlery and small kitchen
electrics; drapery hardware and window treatments; hair care
accessories
Writing Sharpie®, Paper Mate®,
Expo®, Parker®, Waterman®Writing instruments, including markers and highlighters, pens and
pencils; art products; fine writing instruments
Tools Irwin®, Lenox®, Dymo®
Industrial
Hand tools and power tool accessories; industrial bandsaw blades;
cutting tools for pipes and HVAC systems; label makers and printers
for industrial use
Commercial Products Rubbermaid®
Commercial
Products, Rubbermaid®
Healthcare
Cleaning and refuse products, hygiene systems, material handling
solutions; medical and computer carts, and wall-mounted
workstations
Baby & Parenting Graco®, Aprica®Infant and juvenile products such as car seats, strollers, highchairs
and playards
Specialty Bulldog®, Shur-line®,
Dymo®, Endicia®, Mimio®Convenience and window hardware; manual paint applicators; office
technology solutions such as label makers and printers, on-line
postage and interactive teaching solutions
Market and Performance Overview
The Company operates in the consumer and commercial products markets, which are generally impacted by overall economic
conditions in the regions in which the Company operates. The Company’s results in 2012 were impacted by the following factors:
• Core sales, which exclude foreign currency, increased 2.2% in 2012 compared to the same period last year. New products,
geographic expansion and core sales growth in emerging markets were the primary drivers of the core sales growth, with
double- and high-single-digit core sales growth in Latin America and Asia Pacific, respectively. Deteriorating
macroeconomic conditions in Western Europe and lower merchandising in Europe in advance of the SAP go-live adversely
impacted core sales and were the primary drivers of a 4.7% core sales decline in the Europe, Middle East, and Africa
region. Core sales is determined by applying the prior year monthly exchange rates to the current year local currency
monthly sales amounts, with the difference in core sales and prior year reported sales representing core sales increases
or decreases.
• Core sales increased 9.8% in the Baby & Parenting segment, with improved retail-level sales in North America and
sustained momentum in the Asia Pacific region primarily due to new product launches. Core sales grew 7.0% in the Tools
segment with approximately half of the growth attributable to the segment’s international businesses. Core sales increased
3.2% in the Writing segment driven by the continued global rollout of Paper Mate® InkJoy® and a strong back-to-school
season. The Home Solutions segment realized a core sales decline of 3.6%, primarily due to continued operational
challenges in the Décor business (Levolor window treatments) within the Home Solutions segment and challenges in the
Culinary and Décor businesses related to a change in merchandising strategy at a significant retail customer.
• Input and sourced product cost inflation was more than offset by pricing and productivity, which resulted in a 20 basis
point improvement in gross margin compared to 2011. The Company’s gross margin increased despite continued
operational challenges in the Décor business within the Home Solutions segment and pressures due to uncertain
macroeconomic conditions in Western Europe.
• Continued focused spend for strategic SG&A activities to drive sales, enhance the new product pipeline, develop growth
platforms and expand geographically. During 2012, the Company’s spend for strategic brand-building and consumer
demand creation and commercialization activities included spend for the following:
• Continued investments to support the global roll out of Paper Mate®’s InkJoy® line of writing instruments, which
feature innovative ultra-low viscosity ink for a smooth writing experience;