Graco Inc (GGG) 2005 Q2 法說會逐字稿

Good morning, and welcome to the second quarter 2005 earnings conference call for Graco Inc. If you wish to access a replay for this call, you may do so by dialing 1-800-405-2236 within the United States or Canada. The dial in number for International callers is 303-590-3000, and the conference I.D. number is 11035025. The replay will be available through July 28, 2005. At the request of the Company, we will open the conference up for question-and-answers after the presentation. During this call, various remarks may be made by management about their expectations, plans, and prospects for the future. These remarks constitute forward-looking statements for the purpose of the Safe Harbor provisions of the Private Securities Litigation Form Act. And actual results may differ materially from those indicated as a result of various risk factors, including those identified in Exhibit 99 to the Company's 2004 Annual Report from 10-K and its most recent from 10-Q. If anyone should require assistance during today's conference call, please press the star followed by the zero on your touch-tone phone. I would now like to turn the conference over to Mr. Mark Sheahan, Vice President and Treasurer. Please go ahead, sir.

Good morning, welcome. Dave Roberts and I are here this morning to talk about our second quarter results. We also have Chuck Jacob with us. He's our Financial Reporting Manager. I'm going to start out and just go through a couple of the highlights and then we'll open up the call for your questions. First of all, a strong growth, obviously, in the quarter, good underlying growth in all three of the business segments. This is our 13th consecutive quarter now with sales growth and our 8th consecutive quarter where all three segments reported revenue gains. As we indicated in the release, sales are up 24% in Q2, came in at a record $198.2 million. Sales are up 12% without acquisitions, adding to the strong organic growth was revenue associated with those acquisitions, which was about $18 billion in the second quarter. The 24% revenue growth can really be summarized as growth in all three segments, first of all, in Industrial/Automotive, their sales are up 41%. If you took out the acquisitions, they're up 14. Contractor sales were, again, very strong, up 10% and Lubrication sales were up 23%. And as reported, the earnings and earnings per share were both up 19% in the quarter.

Next I'll just briefly touch on the three segments, first of all, in Industrial/Automotive, again, sales $93.8 million, up 41%. Without acquisitions, they're up 14%. Really demand remained very good throughout the Americas and Asia-Pacific, and across all the major product categories. Second quarter IAED sales in Europe, excluding acquisitions were up 4%, while their year-to-date sales were up 9. It's worth noting that last year's second quarter for IAED in Europe was very strong, it was up 22%. On a global basis without acquisitions, all the major product categories in Industrial/Automotive, which are process, protective coating, sealants and adhesives, finishing and auto refinish are up on a year-to-date basis. Operating margins were up from the first quarter and came in at 26.3% of sales. And they were down from last year's second quarter really at -- fully as a result of the acquisitions. On an absolute basis operating, earnings were up [audio difficulty] versus last year's second quarter. And in summary, we continue to see, really, very good demand in the Industrial/Automotive business in the quarter across all the product categories and all the geographies. The business tempo is good and we're looking for that to continue here into the second half of the year.

If you look at the Contractor's segment, the worldwide sales were $89.6 million, they were up 10%, and in the Americas, sales were up 10%, we saw a good growth in both home center channel, which was up about 19 and the paint store channel, which was about 5%. We're seeing nice traction on our new products, things like our GMax Paint Sprayers, our new 390 and our Mark V Texture units are all doing very well and adding incremental sales for the Company. In Europe, just having a great year pretty much across the board, up 23% really throughout all of the regions of Europe. The team over there is doing a fabulous job, they are focused on converting the end-users and gaining new distribution and gaining market share from our competitors. The operating profit margins in Contractor were at 28.7%, that's up a little bit from last year, and the operating profits were dollars from -- 10% versus last year's second quarter. So Contractors really had a nice first half of the year.

Last, we are looking at our Lubrication segment. The second-quarter sales were 14.9 million, which was 23% higher than last year. Again, this business is experiencing very good demand across all of its product categories, very similar to what we had seen in the first quarter. In addition to that, we have got our new Mini Fire-Ball Pump that we've talked about, which is adding incremental sales. And as we discussed at last quarter's call, the Matrix Fluid Management System has been fully released for sale and it's starting to contribute to our revenue as well, and we expect that that will help us here in the second half of the year. The operating margins for lube were 27.2% for the quarter, versus 21.9 last year. Really, the story here is higher revenue and good expense management, and they're doing a great job leveraging their results into higher profitability and higher dollars on the bottom line. The operating profit dollars in Lubrication were up 53 % from last year's second quarter. So, again, they are off to a really good start this year.

Looking next at the gross profit margin for the quarter, Graco's gross profit margin was 51.6% for the quarter, that compares to 53.2% for the second quarter last year. Approximately 120 basis points of that difference can be attributed to the initial value of the acquired inventory from Liquid Control and Gusmer, and we talked about that in the last quarter. As that inventory has now been fully sold off, the margin shouldn't be higher going forward here in the second half of the year. Some of the other factors that impacted the gross margin would include things like lower margin rates for the acquired businesses, higher component costs, and favorable currency rates. We're doing the operating expenses in the quarter, our operating expenses as a percentage of sales were 24.2% in the second quarter and that compares to 25.1% in the same-period last year. Despite the fact that the acquired businesses have higher operating expenses as a percentage of sales than our traditional Graco businesses, we're able to get good leverage on the rest of the business. Our operating expenses, excluding acquisitions were up a modest 3% in the second quarter and the year-to-date operating expenses without acquisitions are virtually flat. Including acquisitions our year-to-date operating expenses were up 16% on a 25% sales increase. If you just look at absolute dollar-to-dollar operating expenses in the second quarter of 2005 versus the 2004, 85% of the increase in our operating expenses was the result of acquisitions. Needless to say, the rest of the business is running very well on the expense side and that's why the comparisons are looking better here in the second quarter.

Next on the tax rate at 33.6% for the quarter, which is very similar to what we experienced in the first quarter of the year. Some other items, cash flow you can see, on the cash flow statement, our operating cash flow was good at $49.8 million. Some of the more significant uses would be acquisitions, 103 million; dividends, 18 million; share repurchases, 25 million; and plant, property, and equipment editions of $9 million. And to summarize Graco had a good second quarter, 24% increase in revenue, 19% increase in net earnings. Again, the business was strong against across all of our segments and geographies and the tempo's good as we head into the third quarter. The businesses that we acquired, they are contributing to our cash flow today. We expect that they're going to start to contribute to earnings now here in the second half of the year. These businesses are running well in terms of the revenue. They're in-line with what we're expecting. And our -- we are very excited about the prospects for improving these businesses and making them generate more profits and more cash flow here in the future. At this point, that concludes my opening remarks. Matt, why don't you go ahead and open up the call and we'll take some questions.

Thank you, sir. Ladies and gentlemen, (OPERATOR INSTRUCTIONS). Our first question comes from Michael Schneider. Please state your company name followed by your question.

Good morning, guys. It's Robert W. Baird.

Hi, Mike.

Good morning, Mike.

First great quarter, obviously. Nice growth worldwide even in Europe, it's impressive. Cost of goods sold, there was a topic of conversation last quarter and I guess it is again this quarter. I'm wondering, Mark, if you could dive into where the expenses specifically are running higher year-over-year because, with call it 10, 10.5% organic growth, the gross margins, excluding the acquisitions were still up only slightly. I wonder if you could just give us some detail and some comfort that, indeed, there is gross margin leverage left?

Yes, well we are, like every other company, we're seeing higher component costs, the things that we buy. I will say that we think that the first half comparisons are tougher than what we're going to see in the second half of the year. Things seem like they're starting to stabilize here a bit for us. Without getting into a lot of detail our freight costs are a little bit higher than last year. Our component costs are a little bit higher than last year. Actually our labor costs and overhead are pretty good. They're running pretty flat with last year. So we think that we have gotten through the first half, which, again, is from a comparison standpoint is probably going to be tougher than what we have seen in the second half and going forward here the comparison should get a little bit easier for us.

Mike, there are also a couple of other elements in the margin, we moved our Tips Factory -- or are in the process of moving it to Sioux Falls. And then also, we have got some expenses flowing through relative to the China plant and, obviously, that is not up and running yet. So there is certainly upside as those two operations get up and running.

And in rough figures, can you guys just, a ballpark what you're spending on first, the move and then the China ramp as well on a quarterly basis?

Yes, it might be $1 million, is about as close as I can get it for both of them.

Okay, and it's $1 million each?

No, total.

Okay. And then any other unusual expenses? Are you funding warranty costs or something this quarter, and during the first half?

No, actually our warranty has been coming down over the last couple of years. We had the issue with the Matrix system back -- it was probably a year-and-a-half ago I guess, or 24 months ago that cost us some money. And we have seen some nice downward trend in our warranty costs over the last probably three, four quarters.

Okay. And then, I guess, a similar expense question on the selling costs. The lowest ratio, I think I have seen since I have been following this Company about 14% of sales.

Right.

Any unusual changes in commissions, compensations, headcount?

Now, we're, in fact, we're accruing obviously, our commissions at higher levels just because the revenue's up. But we talked about, my gosh, it was probably two years ago or so, specialization of the sales force.

Right.

Along, with to greater focus, and actually with fewer people. And we think that's driving our revenue costs and actually is having a positive impact on the selling expense.

Okay. Well, I'll get back in line. Thanks again.

Okay.

Thank you, sir. Our next question comes from Matt Summerville. Please state your company name followed by your question.

Good morning, KeyBanc. A couple of questions, first, on the margin side, do you actually have what the gross number and operating margin numbers were, Mark, excluding the acquisitions altogether?

Yes, I can probably give you those. Matt, if you have got a follow-up I can -- .

Yes, sure. I was wondering, you talked about a couple of new products during the quarter, can you talk about what your pipeline looks like across the three business units in the back half of the year, Dave?

Well, there are some new products coming out in lube later this year. Contractors traditionally releases at the start of each year. So there probably won't be a lot coming through the contractor channels in the latter half of this year. And then we have got some big projects that we're working on in Industrial that really are 2006 projects. So, I think you'll see limited rollouts in each of the two divisions with the exception of lube and then they have got a couple of products that are coming out the latter part of this year; they being Lubrication. The others will really be 2006 projects.

Okay, and then maybe another follow-up, just -- if you can talk about Europe a little bit -- a little more granularity in terms of what you saw across your business units in Europe during the quarter and if there is anything more broadly, Dave, from a macro standpoint that either has you more or less upbeat than you were at the end of the first quarter?

No, actually, Matt, as we look at it -- other than Industrial being relatively flat second quarter to second quarter of last year, but we had a huge second quarter last year, so we really anticipated that. Everything in Europe is very strong. We have seen nothing that would indicate that we anticipate a slowdown. Our Contractor business has just been incredible for us, as Mark said in the opening comments. The guys have done just a wonderful job in growing that business and I honestly feel they are taking share. And it really is up in all the regions of Europe as compared to -- we talked last time about Southern Europe. They are really growing across the entire continent. They've done a very nice job there. There is nothing I have seen so far that indicates that we'll see a slower growth coming out of Europe in the second half of the year, I guess.

Matt, let me give you some number here on the quarter, second quarter without acquisitions. The gross margin would have been about 200 basis points higher than what we reported. So, around 53.5%.

Okay. I'll get back in line. Thanks.

Yes.

Okay, Matt.

Thank you, sir. Our next question comes from John Franzreb. Please go ahead with your question. Please state your company name.

Sidoti & Company. Good morning, guys.

Hey, John.

Good morning, John.

I was wondering if you could just update us on your consolidation integration plans with Gusmer and Liquid Controls?

Sure. There is a tremendous amount of planning that is under way, John. There are -- particularly with the consolidation of the plant that we had down in Palm City, Florida, that's being combined up in Lakewood, New Jersey, part of that operation. And the other part is being combined with the North Canton operations that we got with Liquid Control. That really is the first step. There is not much else that we can talk about other than we see tremendous synergies in that business, even greater than we originally anticipated when we bought them. And I think that Fred Sutter and his team have been very aggressive about what they're doing there and have done it with protecting revenue. Generally, you end up in these cases where our revenue declines. We have actually seen revenue grow in both of the businesses and there is some very good plans in place over the next 24 months or so to really get this synergy out of the business.

So, can that business -- get back to what we call, I guess, a Graco operating margin?

I think so, John. I think that as you look at it, there is some factors -- the gross margins aren't quite as high as our gross margins are, but we think we can help that. Certainly as you look down at the operating expense line, I think their operating expenses will drop to Graco levels and you'll certainly see the operating margins get very close to what Graco operating margins were.

Okay. Great. Second question, if I heard this correctly, you said the home center business is up 19% and --?

Correct.

-- the paint store channel was 5%?

Yes.

Why is there such a disconnect between the two, I don't know, considering the strength in the overall market? Is there something there?

No, I think basically not. I think the thing that's helped us in the home center market is the growth of the new product, the texture unit has helped that, as well as the existing business, plus the fact they continue to add stores. I think the -- if you look at our major customers in the Contractor business, it is very strong. We had a couple of customers that were down, but nothing -- none of significant size. I don't see anything that is really a disconnect between the two. It's been just still a good solid growth for us.

The only other thing that I might add is that last year was kind of a flattish year in the home center and the comparisons --.

That's true.

-- are a little bit easier there for us this year than in the home and then the paint channel, which was really pretty good for us last year.

Okay. And one last question, can you just talk a little bit about the currency impact -- we've dropped a little -- or the dollar strength and a lot against the Euro?

Yes, this --.

How is it going to effect you maybe more the last quarter this year, the first quarter next year?

Well, I mean the only thing we can tell you is that we think there will probably be -- if the currency remains at like $1.20, there will be headwind in the fourth quarter, we think that's fairly neutral in the third quarter. And then it started to decline in the first quarter of last year -- or, I'm sorry, this year, that we would end up probably having more favorable comparisons, as long as the currency stays at the 120 range or so. We have got some headwind in the fourth quarter and then first quarter it gets a little easier again.

Good. Thanks, guys.

Okay.

Thank you, sir. Our next question comes from Ned Armstrong. Please state your company name followed by your question.

FBR. Good morning.

Hi, Ned.

Morning, Ned.

With regard to your Contractor units, are you able to discern the relative contributions of residential construction and commercial construction and whether one is strengthening and the other's weakening or what the dynamics are amongst the two?

The only thing I can tell you is I look at product mix of new product rolled out, and the amount of dollars that we have generated from new product, and the GMax units that were being -- that are being sold primarily into commercial are up significantly compared to other residential-type products that we have rolled out. Now, the residential products have been very strong as well. It's just that the GMax units have been extremely strong in the first half of the year. So that would indicate to us that commercial real estate is really -- has started to recover and to the point where they're painting now, so, says they're further along in the construction process than perhaps they were last year.

Is that dynamic the same in Europe as well as the U.S.?

I don't have that information. My feel is, is that it's primarily driven residential in Europe as compared to commercial. I just don't have the stats in front of me and I have not really looked at it that way. But my, again, gut feel says that it's primarily residential that's driving Europe.

Great. Thank you.

Okay.

Thank you, sir. Our next question comes from Dan Khoshaba. Please state your company name followed by your question.

Hi, good morning. KSA Capital Partners.

Good morning.

Can you expand a little bit on your comment that you made, Mark, earlier about continuing to see strength in the Industrial and Automotive sector that you served. I'm interested in -- and I don't know if you can answer this -- but how much of that might be replacement kind of growth, okay, replacement cycles versus just new growth? And the reason I say that is because automotive, obviously, has been relatively weak --.

Right.

-- in general, while industrials has been relatively strong. So a little more color on maybe your earlier comments would be helpful.

What I can tell you, and this is Dave. What I can tell you really is that our price business has not changed dramatically over the last number of years. And when I say that remains a fairly constant percent of total revenue. What we continue to get out of automotive is that there is still some nice projects that are occurring across the world for either a new sealant application, adhesive application, and there has been a real nice number of projects that have taken place in Asia moving from solvent-based paints to waterborne paints and that drives new equipment placements.

Okay.

In the -- if you really look at our Industrial/Automotive business, and we've talked about this with a number of you by now, that we have got to rename that because automotive is such a small component of the total that it's somewhat misleading in the way we name that division.

Okay. Yes, that would be helpful.

In fact, we're going to do that January 1st. So Automotive will be gone on January 1st.

Oh, that's a good, that's a good thing there. Good. Another question I have on a different item is that working capital was negative, in the quarter receivables were up about 13 million or so, and we can certainly understand that with the growth in sales. The payables were actually down a couple of million. Do you expect to turn that around in the next couple of quarters and what are your goals, Mark, for working capital this year?

Well, we do have goals and we do expect to turn it around.

Can you talk -- what was not a thing unique that created the nugget of working capital situation last quarter?

No, actually we're -- our DSOs are down. We did pick up some receivables and inventory with the acquisitions that we're working through.

Yes.

Some opportunities there. And as we head into the second half of the year, we really don't see it as a big issue for us.

All right, so -- are you expecting to be working capital-positive for the full year?

I don't have any specific financial projections, Dan, but I can tell you that it will improve.

Okay, great. Thank you.

Okay.

Okay.

Thank you, sir. Our next question comes from Stewart Scharf. Please state your company name followed by your question.

Standard & Poor's Equity Group. Hi.

Hi.

First, I was wondering if you could quantify your projected synergies this year and next year?

No, we really have not done that primarily because we're still going through that process, plus the fact we don't provide guidance. All I can tell you is that those businesses are running significantly below what the Graco margin expectation is and we would expect them to get very close to where we are.

Okay. And do you have an average price for your repurchases --?

Yes, I do.

-- for this quarter?

If you bear with me here for -- .

Sure.

-- 10 seconds I should be able to put my fingers on it. For the quarter, second quarter, the average price was $34.50; year-to-date $35.60.

60. And do you see any impact from the revaluation of the wand?

It will be very minimal, particularly the way that -- what they have done there, you know, at this point we don't see there will be a dramatic impact as a result of the revaluation.

Okay. Thank you very much.

You're welcome.

Thank you, sir. Our next question comes from Kevin Monroe. Please go ahead with your question and please state your company name.

Good morning it's Thomas Weisel Partners.

Good morning.

Could you quantify the foreign currency impact on gross margins in the quarter?

No, we didn't do that, Kevin, and we don't have that data.

Okay. Next question would be -- your Lubrication segment --.

Yes.

May you give a little more color on what is driving the growth there? And, especially, if you look back -- if my numbers are right -- last year you had a nice pick up in growth from the second quarter to the third quarter.

Right. The --.

Which drove that and just kind of give me a little more color on that?

Well, what has been happening in the marketplace really is -- indicates what's driving that business. As new automotive dealerships are being built, they want to keep their customer basically from the time they buy the car until they sell the car when that includes service. And they have all put -- or many of them have put very nice Lubrication centers in their new dealerships, and really, that's what has driven our Lubrication business over the past, oh, probably 12 months or so. You know, going forward that will continue for a -- awhile and then on top of that, we have got some new products that are coming out. Matrix now is fully released. We think that will have a nice impact on our growth, and then there are a couple of other new products that will be coming out the latter this -- latter part of this year.

Thank you.

Thank you, sir. Our next question is a follow-up question from Michael Schneider. Please go ahead with your question, sir.

Mark, could you just address the corporate expense line for the quarter? I guess I was anticipating a payment to the Graco Foundation. Was there one this quarter and what is the forecast for the second half?

Mike, we did not make it. This is Dave, while Mark's looking up. We did not make a contribution to the Foundation this year. We funded it last year, a little higher than we normally did. In 0 -- in the second quarter of last year, we actually funded it $700,000 --.

Right.

-- last year, and then I think year-to-date, we were a million seven at this point in the Foundation, we just did not fund it so far.

Okay. And do you anticipate doing so in the second half then?

You know, really, that's a Board of Director's decision that we normally make. As we get further down the road here, we'll take a look at it and make a recommendation. We haven't really decided what we're going to do with it at this point, Mike.

Okay. And were there any other puts and takes within that line-item because it was, in fact, barely negative this quarter?

Right.

Yes, the -- I mean, it was down about $1 billion from last year and about 700,000 was the Foundation. The rest of it is what we call initiatives and [indiscernible]. Really last year, we had some facility spending rearrangement of offices and things like that as to about $400,000. So those were the two items.

Okay. And then take a step back and just look at the productivity or continuous process improvement initiatives you have got in place for this year, where are you saving money already year-to-date and, I guess, what is in store in the coming six months?

Well, I think we continue to -- as you know, the continuous process improvements in the operations, and we see the cost of manufacturing, aside from materials, has been headed down, there have been some materials -- or, I'm sorry, labor savings. What you will see going forward or what we'll realize going forward is that with the move of the Tips Factory to Sioux Falls, eventually there will be some savings out of that, and we'll see our normal savings that we realize, as a result of continuous improvement throughout the operations. We don't have a forecast on it. And then as we look forward, the material costs have been a -- obviously, a negative impact on us as, I think most people. And well -- we're starting to see those stabilize. And we would hope that they would start to come down here in the second half of the year.

Okay. And where are you running on capacity at this point? You've basically gone from, what, three facilities to nine acquisitions?

Yes, well, to actually eight. We've announced a closing of one. Mike, I mean, you know how we run our operations. It would be highly unlikely to anticipate the we would have that many factories. We did $605 million in revenue last year with three factories. You know, where -- you can do the run rate from where we are today and we're going to be quite a bit higher than that. But not significantly that we would need eight factories to do that.

Okay, fair enough. Let's see what else. I guess just a -- in organic growth overall, I'm trying to get a sense of the pricing that's benefiting you at this point. If I run the numbers you did about 10.5% organic growth, can you ballpark what you think of the 10.5 points is actually price?

Yes, about 1%.

Okay, so unit growth is still running 9 plus percent.

Yes, it's -- there was -- we've had price increases that we've implemented. It's been difficult, frankly, to get those price increases. Realize price is about 1%. So if you look at the growth it truly is real growth.

Okay. And I guess I'm surprised that you're wrestling with price because there is, many other companies in my [indiscernible] or passing through, double-digit price increases who have far less leverage in the channel --.

I'd like to know who those guys are because I'll tell you what, if we -- there is no way we would ever get a double-digit price increase. You have got to look at two of our large customers --.

Yes.

-- that, you know, both being Home Depot and Sherwin-Williams, that it's difficult to get a price increase in those. And then the automotive sector is difficult. The feeders -- it's not an easy pricing environment that we have found.

I think the price will get better for us, too, as we get through the year here because we didn't really roll out a lot of our increases until the end of February so that 1% is sort of a blended from day one -- January 1.

So, there is actually incrementally more price to hit in the third quarter?

Yes, I think it will get -- I think we'll start to see a little bit more of a take hold in the second half of the year.

Okay. That's all. Thanks again.

Yes.

Okay.

Thank you, sir. And our next question is a follow-up question from Matt Summerville. Please go ahead, sir.

A couple of questions. Can you talk a little bit about, Dave, I think in the first quarter you mentioned that your business in China slowed down a bit. Has that picked back up? And then more broadly, can you talk about what you are seeing in Asia-Pac?

Yes, the business -- if you look at China -- China alone, it is relatively flat. Now, interesting about that is that if you look at the other regions around China, Korea, Japan, and so those businesses are up significantly. And as we went through and analyzed what was going on there much of what is being moved in the China is being sold either through our -- a Japanese customer, they buy it in Japan and then it's delivered into China. If you look at Korea it's the same way, primarily on the automotive side. Southeast Asia, the business is down a bit in Vietnam only because we had those huge orders last year and the year before. For the wood furniture manufacturing businesses, but still it's up significantly as a whole in Southeast Asia. I'm not as concerned about China as perhaps the numbers would indicate only because we know we're getting the business via other countries that's being shipped into China.

Okay. And then is there anyway to quantify potentially what you think your input costs are going to do in the back half of the year?

Probably not quantify it, but I think we just stand by the comment that the comparisons should get easier for us.

Right.

Because we're seeing things stabilize.

Okay. And then, Dave, can you talk a little bit about your acquisition pipeline, is there anything in there, how the notables look, what are your thoughts there?

We don't talk about acquisitions, obviously. But I can tell you that the market is still relatively active. The notables are probably in the range of what we saw with both Liquid Control and Gusmer, there are still things out there.

Okay, great. Thanks.

Okay.

Thank you, sir. (OPERATOR INSTRUCTIONS). One moment please for our next question. Our next question is a follow-up question from Dan Khoshaba. Please go ahead with your question, sir.

Hi, Dave, you mentioned to the last quarter your response was that there was -- acquisitions were still active and I guess there is a lot out there. Can you comment a little bit on how valuations may or may not have changed over the last year? What are you seeing in terms of attractiveness of opportunities?

Oh, I think there is still attractive acquisition opportunities out there. I think I mentioned to Matt that we haven't really seen a dramatic change in what the valuations have been over the last couple of years, now, certainly they're higher than they were three years ago.

Yes.

But I would think that we can still make acquisitions in the notable ranges that we did with Liquid Control and Gusmer.

Okay. Good. Thanks.

Okay.

Thank you, sir. There are no further questions, I will now turn the conference over to Dave Roberts. Sir, please continue.

Well, as Mark said in his opening remarks, we had a phenomenal quarter, sales up 24%, earnings up 19%. We, obviously, attribute all of that to our employers, they have done a great job. We appreciate them doing that. And for all of you that joined the call, we thank you for the interest in Graco and we'll talk to you next quarter.

Thank you. This concludes our conference for today. Thank you for all participating and have a nice day. You may all now disconnect.