Graco 2012 Annual Report Download - page 36

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30
Home Solutions
Net sales for 2012 were $1,644.0 million, a decrease of $66.2 million, or 3.9%, from $1,710.2 million for 2011. Core sales declined
3.6%, primarily due to continuing challenges in the Décor business and also due to a change in merchandising strategy by a
significant retail customer in North America, which impacted the Décor and Culinary businesses. Excluding the impacts of currency,
sales at the segment’s North American and international businesses declined 3.6% and 1.5%, respectively. Foreign currency had
an unfavorable impact of 0.3%.
Operating income for 2012 was $217.5 million, or 13.2% of net sales, a decrease of $11.4 million, or 5.0%, from $228.9 million,
or 13.4% of net sales, for 2011. The 20 basis point decrease in operating margin is primarily attributable to a reduction in gross
margin, as input cost inflation and unfavorable mix were partially offset by pricing and productivity gains. In constant currency,
SG&A costs as a percentage of net sales remained relatively unchanged as reductions in SG&A driven by savings realized from
Project Renewal were consistent with the declines in net sales.
Writing
Net sales for 2012 were $1,416.2 million, an increase of $16.9 million, or 1.2%, from $1,399.3 million for 2011. Core sales
increased 3.2%, driven by a strong back-to-school season and double-digit core sales growth in the Latin American markets due
to the rollout of new products, partially offset by a challenging macroeconomic environment in Western Europe which adversely
impacted the fine writing business. Excluding the impacts of currency, sales at the segment’s North American and international
businesses increased 3.0% and 3.3%, respectively. Foreign currency had an unfavorable impact of 2.0%.
Operating income for 2012 was $261.9 million, or 18.5% of net sales, an increase of $15.0 million, or 6.1%, from $246.9 million,
or 17.6% of net sales, for 2011. The 90 basis point increase in operating margin is primarily attributable to gross margin expansion,
as pricing and productivity more than offset input cost inflation. In constant currency, SG&A costs as a percentage of net sales
increased 20 basis points, primarily due to higher brand building and ongoing strategic SG&A spending to support the continued
rollout of Paper Mate® InkJoy®.
Tools
Net sales for 2012 were $806.1 million, an increase of $26.5 million, or 3.4%, from $779.6 million for 2011. Core sales increased
7.0% driven by the introduction of new products in North America and continued investment in sales forces in international
markets. Excluding the impacts of foreign currency, sales at the segment’s North American and international businesses increased
6.6% and 7.7%, respectively. Foreign currency had an unfavorable impact of 3.6%.
Operating income for 2012 was $109.8 million, or 13.6% of net sales, a decrease of $9.3 million, or 7.8%, from $119.1 million,
or 15.3% of net sales, for 2011. The 170 basis point decrease in operating margin is partially attributable to input cost inflation
and unfavorable mix, partially offset by pricing and productivity. The decrease was also the result of a 100 basis point increase in
constant currency SG&A costs as a percentage of net sales due to higher brand building and ongoing strategic SG&A spending,
structural SG&A to support geographic expansion, and sustained investment in selling and marketing resources in certain
businesses.
Commercial Products
Net sales for 2012 were $759.7 million, an increase of $18.2 million, or 2.5%, from $741.5 million for 2011. Core sales increased
3.6%. Excluding the impacts of foreign currency, sales at the segment’s North American businesses increased 6.2% while sales
declined 10.1% at international businesses, primarily due to continued softness in the European markets. Foreign currency had
an unfavorable impact of 1.1%.
Operating income for 2012 was $92.9 million, or 12.2% of net sales, a decrease of $15.4 million, or 14.2%, from $108.3 million,
or 14.6% of net sales, for 2011. The 240 basis point decrease in operating margin is primarily attributable to a 290 basis point
increase in constant currency SG&A costs as a percentage of net sales due to higher brand building and ongoing strategic SG&A
spending, structural SG&A to support geographic expansion primarily in Latin America, and sustained investments in selling and
marketing resources, partially offset by gross margin expansion.
Baby & Parenting
Net sales for 2012 were $736.1 million, an increase of $55.7 million, or 8.2%, from $680.4 million for 2011. Core sales increased
9.8%, which was primarily attributable to improvements in sales at the retail level in North America and sustained growth
momentum in the Asia Pacific markets attributable to new products. Excluding the impacts of foreign currency, sales at the
segment’s North American and international businesses increased 10.5% and 8.8%, respectively. Foreign currency had an
unfavorable impact of 1.6%.