Monday, Graco Inc. (GGG), a fluid handling solutions provider, reported a 72% decline in its fourth-quarter earnings impacted by costs related to work force reduction, impairment charges and currency translation.
The Minneapolis, Minnesota-based company reported a fourth-quarter net income of $10.1 million or $0.17 per share, compared to $35.7 million or $0.56 per share in the same quarter last year.
On average, seven analysts polled by First Call/Thomson Financial expected the company to earn $0.31 per share for the quarter. Analysts' estimates typically exclude special items.Fourth quarter costs related to workforce reductions and impairment charges reduced earnings by about $0.08 per share. Costs related to the rollout of entry-level paint sprayers totaled $6 million and reduced earnings by approximately $0.06 per share. Currency translation had an unfavorable effect of $3 million in the fourth quarter.
Net sales for the quarter declined 19% to $166.7 million from $205.2 million in the comparable quarter last year. Analysts expected revenue of $176.01 million for the quarter.
Operating earnings were $15.4 million, down from $54.1 million in the prior year quarter.
Gross profit for the quarter decreased to $81.4 million or 48.8% of sales from $109.7 million or 53.5% of sales. The company noted that the decline in gross profit was due to lower production volumes, unfavorable currency translation rates and workforce reduction costs.
Selling, marketing and distribution expenses for the quarter rose to $36.6 million from $33.0 million in the year ago quarter. General and administrative expenses were $19.4 million, an increase from $15.2 million in the prior year quarter.
For the full year 2008, the company reported a net income of $120.9 million or $1.99 per share, compared to $152.8 million or $2.32 million in the prior year.
Seven analysts expected the company to earn $2.13 per share for the full year.
Net sales for the full year declined to $817.3 million from $841.3 million last year. Analysts expected the company to report revenue of $826.71 million for the full year.
The company said sales for the quarter and full year included a total of $4 million and $12 million respectively from GlasCraft and Airlessco operations acquired in 2008.
Commenting on the outlook, Patrick McHale, President and Chief Executive Officer said the company has taken steps to better align its operations with market conditions and expects that the workforce reductions would yield savings of $9 million in 2009. The company is selectively reducing capital expenditures and discretionary spending to further control costs, he added.
GGG closed Monday's regular trade at $22.26, up $0.47 or 2.16%, on a volume of 1.02 million shares on the Nasdaq.
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