UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 26, 2015
Commission File Number: 001-09249
GRACO INC.
88 - 11th Avenue N.E.
Minneapolis, Minnesota
(612) 623-6000
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days.
Yes X No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes No X
57,729,000 shares of the Registrant’s Common Stock, $1.00 par value, were outstanding as of July 15, 2015.
INDEX
PART I
Item 4.
Controls and Procedures
PART II
SIGNATURES
EXHIBITS
2
PART I Item 1.
GRACO INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited) (In thousands except per share amounts)
Net Sales
Cost of products sold
Gross Profit
Product development
Selling, marketing and distribution
General and administrative
Operating Earnings
Interest expense
Held separate investment (income), net
Other expense (income), net
Earnings Before Income Taxes
Income taxes
Net Earnings
Per Common Share
Basic net earnings
Diluted net earnings
Cash dividends declared
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited) (In thousands)
Other comprehensive income (loss)
Cumulative translation adjustment
Pension and postretirement medical liability adjustment
Comprehensive Income
3
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
ASSETS
Current Assets
Cash and cash equivalents
Accounts receivable, less allowances of $9,300 and $8,100
Inventories
Deferred income taxes
Investment in businesses held separate
Other current assets
Total current assets
Property, Plant and Equipment
Cost
Accumulated depreciation
Property, plant and equipment, net
Goodwill
Other Intangible Assets, net
Deferred Income Taxes
Other Assets
Total Assets
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Notes payable to banks
Trade accounts payable
Salaries and incentives
Dividends payable
Other current liabilities
Total current liabilities
Long-term Debt
Retirement Benefits and Deferred Compensation
Other non-current liabilities
Shareholders’ Equity
Common stock
Additional paid-in-capital
Retained earnings
Accumulated other comprehensive income (loss)
Total shareholders’ equity
Total Liabilities and Shareholders’ Equity
4
CONSOLIDATED STATEMENTS OF CASH FLOWS
Cash Flows From Operating Activities
Adjustments to reconcile net earnings to net cash provided by operating activities
Depreciation and amortization
Share-based compensation
Excess tax benefit related to share-based payment arrangements
(Gain) loss on sale of business
Change in
Accounts receivable
Retirement benefits and deferred compensation
Other accrued liabilities
Other
Net cash provided by operating activities
Cash Flows From Investing Activities
Property, plant and equipment additions
Acquisition of businesses, net of cash acquired
Proceeds from sale of assets
Net cash provided by (used in) investing activities
Cash Flows From Financing Activities
Borrowings (payments) on short-term lines of credit, net
Borrowings on long-term line of credit
Payments on long-term line of credit
Payments of debt issuance costs
Common stock issued
Common stock repurchased
Cash dividends paid
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash
Net increase (decrease) in cash and cash equivalents
Beginning of year
End of period
5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In the opinion of management, these consolidated financial statements reflect all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the financial position of the Company as of June 26, 2015, and the results of operations and cash flows for all periods presented.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. Therefore, these statements should be read in conjunction with the financial statements and notes thereto included in the Company’s 2014 Annual Report on Form 10-K.
The results of operations for interim periods are not necessarily indicative of results that will be realized for the full fiscal year.
Net earnings available to common shareholders
Weighted average shares outstanding for basic earnings per share
Dilutive effect of stock options computed using the treasury stock method and the average market price
Weighted average shares outstanding for diluted earnings per share
Basic earnings per share
Diluted earnings per share
6
Stock options to purchase 1,357,000 and 876,000 shares were not included in the June 26, 2015 and June 27, 2014 computations of diluted earnings per share, respectively, because they would have been anti-dilutive.
Outstanding, December 26, 2014
Granted
Exercised
Canceled
Outstanding, June 26, 2015
The Company recognized year-to-date share-based compensation of $11.0 million in 2015 and $9.8 million in 2014. As of June 26, 2015, there was $17.2 million of unrecognized compensation cost related to unvested options, expected to be recognized over a weighted average period of 1.8 years.
The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions and results:
Expected life in years
Interest rate
Volatility
Dividend yield
Weighted average fair value per share
Under the Company’s Employee Stock Purchase Plan, the Company issued 166,000 shares in 2015 and 193,000 shares in 2014. The fair value of the employees’ purchase rights under this Plan was estimated on the date of grant. The benefit of the 15 percent discount from the lesser of the fair market value per common share on the first day and the last day of the plan year was added to the fair value of the employees’ purchase rights determined using the Black-Scholes option-pricing model with the following assumptions and results:
7
In April 2015, shareholders of the Company approved the Graco Inc. 2015 Stock Incentive Plan. The plan provides for issuance of up to 3.5 million shares of Graco common stock.
Shares authorized for issuance under stock option and purchase plans are shown below (in thousands):
Stock Incentive Plan (2015)
Employee Stock Purchase Plan (2006)
Total
Amounts available for future issuance exclude outstanding options. Options outstanding as of June 26, 2015 include options granted under three plans that were replaced by subsequent plans. No shares are available for future grants under those plans.
Pension Benefits
Service cost
Interest cost
Expected return on assets
Amortization and other
Net periodic benefit cost
Postretirement Medical
Amortization
8
June 27, 2014
Beginning balance
Other comprehensive income before reclassifications
Amounts reclassified from accumulated other comprehensive income
Ending balance
June 26, 2015
9
Amounts related to pension and postretirement medical adjustments are reclassified to pension cost, which is allocated to cost of products sold and operating expenses based on salaries and wages, approximately as follows (in thousands):
Total before tax
Income tax (benefit)
Total after tax
On May 11, 2015, the Company entered into an accelerated share repurchase arrangement (“ASR”) with a financial institution. In exchange for an up-front payment of $60 million, the financial institution delivered 742,880 shares of Company common stock with a fair value of $54 million. The total number of shares ultimately delivered under the ASR is determined at the end of the purchase period (up to three months, but not less than one month) based on the volume weighted-average price (“VWAP”) of the Company’s common stock during that period. If there were no change in the market price of the Company’s stock during the purchase period, the Company would receive approximately 90,000 additional shares at the end of the purchase period.
The Company accounted for the up-front payment as a reduction of shareholders’ equity in the period made. Shares received under the ASR were retired and reflected as a reduction of outstanding shares on the date delivered for purposes of calculating earnings per share. The forward contract aspect of the ASR met all of the applicable criteria for equity classification, and therefore, was accounted for as a derivative indexed to the Company’s equity.
Subsequent to the end of the second quarter, the purchase period ended and the Company received an additional 94,515 shares to complete the ASR at an average realized price of $71.65 per share.
A summary of the Company’s three reportable segments (Industrial, Process and Contractor) follows.
The Industrial segment includes our Industrial Products and Applied Fluid Technologies divisions. The Industrial segment markets equipment and pre-engineered packages for moving and applying paints, coatings, sealants, adhesives and other fluids. Markets served
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include automotive and vehicle assembly and components production, wood and metal products, rail, marine, aerospace, farm, construction, bus, recreational vehicles, and various other industries.
The Process segment includes our Process, Oil and Natural Gas, and Lubrication divisions. The Process segment markets pumps, valves, meters and accessories to move and dispense chemicals, oil and natural gas, water, waste water, petroleum, food, lubricants and other fluids. Markets served include food and beverage, dairy, oil and natural gas, pharmaceutical, cosmetics, electronics, waste water, mining, fast oil change facilities, service garages, fleet service centers, automobile dealerships and industrial lubrication applications.
The Contractor segment remains unchanged. The Contractor segment markets sprayers for architectural coatings for painting, corrosion control, texture, and line striping.
Sales and operating earnings by segment were as follows (in thousands):
Industrial
Process
Contractor
Unallocated corporate (expense)
Assets by segment were as follows (in thousands):
Unallocated corporate
Unallocated corporate assets decreased due to the sale of the Liquid Finishing assets in the second quarter of 2015 (see note 12).
11
Geographic information follows (in thousands):
Net sales
(based on customer location)
United States
Other countries
Long-lived assets
Finished products and components
Products and components in various stages of completion
Raw materials and purchased components
Reduction to LIFO cost
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Customer relationships
Patents, proprietary technology and product documentation
Trademarks, trade names and other
Not Subject to Amortization:
Brand names
December 26, 2014
Amortization of intangibles for the quarter was $4.4 million in 2015 and $2.7 million in 2014 and for the year-to-date was $8.5 million in 2015 and $5.8 million in 2014. Estimated annual amortization expense is as follows: $17.4 million in 2015, $17.6 million in 2016, $17.3 million in 2017, $17.0 million in 2018, $16.9 million in 2019 and $98.8 million thereafter.
Changes in the carrying amount of goodwill in 2015 were as follows (in thousands):
Additions from business acquisitions
Foreign currency translation
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Accrued self-insurance retentions
Accrued warranty and service liabilities
Accrued trade promotions
Payable for employee stock purchases
Customer advances and deferred revenue
Income taxes payable
Total other current liabilities
A liability is established for estimated future warranty and service claims that relate to current and prior period sales. The Company estimates warranty costs based on historical claim experience and other factors including evaluating specific product warranty issues. Following is a summary of activity in accrued warranty and service liabilities (in thousands):
Balance, beginning of year
Assumed in business acquisition
Charged to expense
Margin on parts sales reversed
Reductions for claims settled
Balance, end of period
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Assets
Cash surrender value of life insurance
Forward exchange contracts
Total assets at fair value
Liabilities
Contingent consideration
Deferred compensation
Total liabilities at fair value
Contracts insuring the lives of certain employees who are eligible to participate in certain non-qualified pension and deferred compensation plans are held in trust. Cash surrender value of the contracts is based on performance measurement funds that shadow the deferral investment allocations made by participants in certain deferred compensation plans. The deferred compensation liability balances are valued based on amounts allocated by participants to the underlying performance measurement funds.
Contingent consideration liability represents the estimated value (using a market approach) of future payments to be made to previous owners of an acquired business (see Note 11).
Long-term notes payable with fixed interest rates have a carrying amount of $300 million and an estimated fair value of $330 million as of June 26, 2015 and $330 million as of December 26, 2014. The fair value of variable rate borrowings approximates carrying value. The Company uses significant other observable inputs to estimate fair value (level 2 of the fair value hierarchy) based on the present value of future cash flows and rates that would be available for issuance of debt with similar terms and remaining maturities.
15
Purchase consideration was allocated to assets acquired and liabilities assumed based on estimated fair values as follows (in thousands):
Property, plant and equipment
Identifiable intangible assets
Total assets acquired
Liabilities assumed
Net assets acquired
Post-closing working capital adjustments that completed the HIP purchase price allocation resulted in a $0.5 million reduction of goodwill in the second quarter of 2015.
Identifiable intangible assets and estimated useful life are as follows (dollars in thousands):
Estimated Life (years)
Trade names
Total identifiable intangible assets
Approximately two-thirds of the goodwill acquired with HiP is deductible for tax purposes.
On January 2, 2015 the Company acquired White Knight Fluid Handling for $16 million cash and a commitment for additional consideration if future revenues exceed certain thresholds, valued at $8 million. The maximum payout is not limited. White Knight designs and manufactures high purity, metal-free pumps used in the production process of manufacturing semiconductors, solar panels, LED flat panel displays and various other electronics. The products, brands and distribution channels of White Knight expand and complement the offerings of the Company’s Process segment. The purchase price was allocated based on estimated fair values, including $12 million of goodwill, $9 million of other identifiable intangible assets and $3 million of net tangible assets.
Post-closing working capital adjustments that completed the Alco purchase price allocation, acquired in the fourth quarter of 2014, resulted in a $4 million addition to goodwill in the first quarter of 2015.
The Company completed other acquisitions in 2015 that were not material to the consolidated financial statements.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
The Company designs, manufactures and markets systems and equipment to move, measure, control, dispense and spray fluid and coating materials. Management classifies the Company’s business into three reportable segments: Industrial, Process and Contractor. Key strategies include developing and marketing new products, expanding distribution globally, opening new markets with technology and channel expansion and completing strategic acquisitions.
The following Management’s Discussion and Analysis reviews significant factors affecting the Company’s results of operations and financial condition. This discussion should be read in conjunction with the financial statements and the accompanying notes to the financial statements.
Consolidated Results
Net sales, net earnings and earnings per share were as follows (in millions except per share amounts and percentages):
Diluted Net Earnings per Common Share
In April 2015, the Company sold the Liquid Finishing business assets acquired in 2012. Held separate investment income includes the net gain on sale of $147 million and dividends of $12 million for the quarter and $42 million year-to-date. Net earnings include after-tax net gain on the sale and dividend income totaling $110 million ($1.85 per diluted share) for the quarter and $139 million ($2.32 per diluted share) for the year-to-date. Net earnings in 2014 included after-tax net investment income of $11 million ($0.18 per diluted share) for the quarter and $15 million ($0.23 per diluted share) for the year-to-date. No further Liquid Finishing dividends will be received.
Results excluding Liquid Finishing investment income and expense are a better measure of the Company’s on-going operations and provide a more consistent base of comparison to future results. A calculation of the non-GAAP measurement of net earnings excluding investment income and expense follows (in millions except per share amounts):
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Net Earnings, as reported
Income tax effect
Net Earnings, adjusted
As reported
Adjusted
The following table presents components of changes in sales:
Volume and Price
Acquisitions
Currency
Sales by geographic area were as follows (in millions):
Americas1
EMEA2
Asia Pacific
Consolidated
1 North and South America, including the U.S.
2 Europe, Middle East and Africa
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Changes in currency translation rates reduced sales and net earnings by approximately $17 million and $6 million, respectively, for the quarter and $30 million and $10 million, respectively for the year-to-date.
Sales for the quarter increased 4 percent, with increases in the Americas and Asia Pacific partially offset by a decrease in EMEA. Sales from operations acquired in the fourth quarter of 2014 and the first half of 2015 totaled $19 million for the quarter, contributing 6 percentage points of growth. Organic sales at consistent translation rates increased 3 percent, with increases of 3 percent in the Americas, 1 percent in EMEA and 5 percent in Asia Pacific.
Year-to-date sales increased 5 percent, with a double digit percentage increase in the Americas partially offset by decreases in EMEA and Asia Pacific. Sales from acquired operations totaled $34 million, contributing 6 percentage points of growth. Organic sales at consistent translation rates increased 4 percent, including a 7 percent increase in the Americas, a slight increase in EMEA and a 2 percent decrease in Asia Pacific.
Gross profit margin rates for the quarter and year-to-date were lower than rates in the comparable periods last year due mostly to changes in currency translation rates. Lower average gross margin rates of acquired operations (including purchase accounting effects) decreased overall gross margin rates by approximately one-half percentage point for both the quarter and the year-to-date.
Total operating expenses for the quarter were $6 million (6 percent) higher than the second quarter last year. Year-to-date operating expenses were $18 million (10 percent) higher than last year. The increases included expenses of acquired operations totaling $7 million for the quarter and $13 million for the year-to-date. Spending related to regional and product expansion initiatives increased year-to-date expenses by approximately $3 million. Unallocated corporate expenses increased $1 million for the quarter and $3 million year-to-date, mostly from increases in pension, stock compensation and new central warehouse.
The effective income tax rate was 28 percent for the quarter, consistent with the comparable period last year, and 26 percent for the year-to-date, down 3 percentage points compared to last year. In the second quarter, the Company asserted that it will indefinitely reinvest earnings of foreign subsidiaries to support expansion of its international business. The change in assertion decreased deferred income taxes related to undistributed foreign earnings by $7 million and reduced the effective tax rate compared to last year. The tax rate effects of the gain on the sale of the Liquid Finishing assets offset the effects of the foreign earnings reinvestment assertion. Higher post-tax dividend income and an additional non-recurring tax benefit of $2 million further reduced the year-to-date effective tax rate.
20
Segment Results
Certain measurements of segment operations compared to last year are summarized below:
Net sales (in millions)
Americas
EMEA
Operating earnings as a percentage of net sales
Industrial segment sales for the quarter decreased 2 percent, but increased 4 percent at consistent translation rates. Sales in this segment increased 3 percent in the Americas, decreased 16 percent in EMEA (2 percent at consistent translation rates) and increased 7 percent in Asia Pacific (12 percent at consistent translation rates). Year-to-date sales decreased 4 percent, but increased 2 percent at consistent translation rates. Sales increased 3 percent in the Americas, decreased 15 percent in EMEA (1 percent at consistent translation rates) and decreased 2 percent in Asia Pacific (increased 2 percent at consistent translation rates). Operating margin rates for the Industrial segment for the quarter and year-to-date were consistent with last year.
Process segment sales for the quarter increased 31 percent (36 percent at consistent translation rates), including double-digit percentage increases in all regions. Year-to-date sales in this segment increased 29 percent (34 percent at consistent translation rates). Most of the sales increases were from acquired operations including Alco Valves (acquired fourth quarter of 2014), White Knight Fluid Handling and High Pressure Equipment (both acquired in January 2015). Organic sales growth at consistent translation rates was 4 percent for both the quarter and the year-to-date. Lower average profit margins of acquired operations, changes in currency translation rates and incremental investment in oil and natural gas products led to decreases in operating margin rates for this segment.
21
Contractor segment sales for the quarter decreased 1 percent, but increased 3 percent at consistent translation rates, mostly in the Americas. Year-to-date sales in this segment increased 5 percent (9 percent at consistent translation rates). Sales increased 13 percent in the Americas, decreased 12 percent in EMEA (but increased 2 percent at consistent translation rates) and decreased 18 percent in Asia Pacific (15 percent at consistent translation rates). Operating margin rate for the quarter was consistent with the comparable period last year. Year-to-date operating margin rate decreased by one percentage point, mostly due to changes in currency translation rates and additional marketing spending, including new product launch costs and other volume-related increases.
Liquidity and Capital Resources
Net cash provided by operating activities was $97 million in 2015, a $13 million increase over the comparable period of 2014. Accounts receivable and inventory balances increased since the end of 2014 due to acquisitions, increases in business activity and inventory increases to improve customer service levels. Proceeds of $590 million from the sale of Liquid Finishing assets were principally used to retire debt. Other significant uses of cash in the first half of 2015 included business acquisitions totaling $188 million, purchases of Company common stock of $131 million and dividend payments to shareholders of $35 million.
In January 2015, the Company completed the acquisition of High Pressure Equipment Holdings, LLC (HiP) for $160 million. HiP designs and manufactures valves, fittings and other flow control equipment engineered to perform in ultra-high pressure environments. The Company also acquired White Knight Fluid Handling, a manufacturer of high purity, metal-free pumps used in the production process of manufacturing semiconductors, solar panels, LED flat panel displays and various other electronics. The Company completed other acquisitions in the second quarter that were not material to the consolidated financial statements.
At June 26, 2015, the Company had various lines of credit totaling $549 million, of which $539 million was unused. Internally generated funds and unused financing sources are expected to provide the Company with the flexibility to meet its liquidity needs in 2015.
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Outlook
The Company continues to target mid-single-digit organic sales growth, on a constant currency basis, and growth in all reportable segments and regions for the full-year 2015. The Americas remains our strongest performing region and we are optimistic Contractor Americas will perform in the second half. Currency uncertainty and geopolitical instability continue to generate volatility and present challenges for EMEA and Asia Pacific growth. At current exchange rates, unfavorable changes in foreign currency translation rates create a full-year headwind of approximately 5 percent on sales and 11 percent on earnings in 2015.
SAFE HARBOR CAUTIONARY STATEMENT
The Company desires to take advantage of the “safe harbor” provisions regarding forward-looking statements of the Private Securities Litigation Reform Act of 1995 and is filing this Cautionary Statement in order to do so. From time to time various forms filed by our Company with the Securities and Exchange Commission, including this Form 10-Q and our Form 10-K and Form 8-Ks, and other disclosures, including our 2014 Overview report, press releases, earnings releases, analyst briefings, conference calls and other written documents or oral statements released by our Company, may contain forward-looking statements. Forward-looking statements generally use words such as “expect,” “foresee,” “anticipate,” “believe,” “project,” “should,” “estimate,” “will,” and similar expressions, and reflect our Company’s expectations concerning the future. All forecasts and projections are forward-looking statements. Forward-looking statements are based upon currently available information, but various risks and uncertainties may cause our Company’s actual results to differ materially from those expressed in these statements. The Company undertakes no obligation to update these statements in light of new information or future events.
Future results could differ materially from those expressed, due to the impact of changes in various factors. These risk factors include, but are not limited to: our Company’s growth strategies, which include making acquisitions, investing in new products, expanding geographically and targeting new industries; economic conditions in the United States and other major world economies; changes in currency translation rates; changes in laws and regulations; compliance with anti-corruption laws; new entrants who copy our products or infringe on our intellectual property; risks incident to conducting business internationally; the ability to meet our customers’ needs and changes in product demand; supply interruptions or delays; security breaches; political instability; results of and costs associated with, litigation, administrative proceedings and regulatory reviews incident to our business as well as indemnification claims under our asset purchase agreement with Carlisle Companies Incorporated, Carlisle Fluid Technologies, Inc., and Finishing Brands Holdings Inc.; the possibility of decline in purchases from few large customers of the Contractor segment; variations in activity in the construction and automotive industries; and natural disasters. Please refer to Item 1A of our Annual Report on Form 10-K for fiscal year 2014 for a more comprehensive discussion of these and other risk factors. These reports are available on the Company’s website at www.graco.com and the Securities and Exchange Commission’s website at www.sec.gov. Shareholders, potential investors and other readers are urged to consider these factors in evaluating forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements.
Investors should realize that factors other than those identified above and in Item 1A might prove important to the Company’s future results. It is not possible for management to identify each and every factor that may have an impact on the Company’s operations in the future as new factors can develop from time to time.
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There have been no material changes related to market risk from the disclosures made in the Company’s 2014 Annual Report on Form 10-K.
Evaluation of disclosure controls and procedures
As of the end of the fiscal quarter covered by this report, the Company carried out an evaluation of the effectiveness of the design and operation of its disclosure controls and procedures. This evaluation was done under the supervision and with the participation of the Company’s President and Chief Executive Officer, the Chief Financial Officer, the Vice President, Controller and Information Systems, and the Vice President, General Counsel and Secretary. Based upon that evaluation, they concluded that the Company’s disclosure controls and procedures are effective.
Changes in internal controls
During the quarter, there was no change in the Company’s internal control over financial reporting that has materially affected or is reasonably likely to materially affect the Company’s internal control over financial reporting.
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There have been no material changes to the Company’s risk factors from those disclosed in the Company’s 2014 Annual Report on Form 10-K, except for the changes disclosed in the Company’s Quarterly Report on Form 10-Q for the quarter ended March 27, 2015 and except for the update to the “Legal Proceedings” risk factor as follows:
Legal Proceedings – Costs associated with claims, litigation, administrative proceedings and regulatory reviews, and potentially adverse outcomes, may affect our profitability.
As our Company grows, we are at an increased risk of being a target in litigation, administrative proceedings and regulatory reviews. We also may be exposed to litigation, claims for indemnification or other claims relating to acquisitions or the divestiture of the liquid finishing business assets under the asset purchase agreement with Carlisle Companies Incorporated, Carlisle Fluid Technologies, Inc., and Finishing Brands Holdings Inc. The cost of defending such matters appears to be increasing, particularly in the United States. We may also need to pursue claims or litigation to protect our interests. Such costs may adversely affect our Company’s profitability. Our businesses expose us to potential toxic tort, product liability and commercial claims. Successful claims against the Company may adversely affect our results.
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Issuer Purchases of Equity Securities
On September 14, 2012, the Board of Directors authorized the Company to purchase up to 6,000,000 shares of its outstanding common stock, primarily through open-market transactions. The authorization expires on September 30, 2015. On April 24, 2015, the Board of Directors authorized the purchase of up to an additional 6,000,000 shares over an indefinite period of time or until terminated by the Board.
In addition to shares purchased under the Board authorizations, the Company purchases shares of common stock held by employees who wish to tender owned shares to satisfy the exercise price or tax due upon exercise of options or vesting of restricted stock.
Information on issuer purchases of equity securities follows:
Period
Mar 28, 2015 – Apr 24, 2015
Apr 25, 2015 – May 22, 2015
May 2015 ASR (1)
May 23, 2015 – Jun 26, 2015
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Item 6. Exhibits
27
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
July 22, 2015
/s/ Patrick J. McHale
/s/ James A. Graner
/s/ Caroline M. Chambers
Vice President, Corporate Controller
and Information Systems