グラコの四半期報告

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 27, 2025

☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission File Number: 001-09249


GRACO INC.
(Exact name of registrant as specified in its charter)


Minnesota						41-0285640
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification Number)


88 - 11th Avenue N.E.
Minneapolis,	Minnesota	55413
(Address of principal executive offices)		(Zip Code)


(612)			623-6000
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $1.00 per share	GGG	The New York Stock Exchange

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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes

☒

☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes

☒

☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) 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

☐

☒

165,694,194 shares of the Registrant’s Common Stock, $1.00 par value, were outstanding as of July 9, 2025.

TABLE OF CONTENTS

Page

PART I - FINANCIAL INFORMATION

Item 1.

F inancial Statements

Consolidated Statements of Earnings

Consolidated Statements of Comprehensive Income

Consolidated Balance Sheets

Consolidated Statements of Cash Flows

Consolidated Statements of Shareholders' Equity

Notes to Consolidated Financial Statements

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Item 4.

Controls and Procedures

PART II - OTHER INFORMATION

Item 1A.

Risk Factors

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Item 5.

Item 6.

PART I Item 1.

GRACO INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

(Unaudited) (In thousands except per share amounts)


	Three Months Ended				Six Months Ended
	June 27, 2025		June 28, 2024		June 27, 2025		June 28, 2024
Net Sales	$	571,806	$	553,243	$	1,100,090	$	1,045,432
Cost of products sold	272,276		252,389		522,827		478,381
Gross Profit	299,530		300,854		577,263		567,051
Product development	20,731		21,897		40,106		43,769
Selling, marketing and distribution	68,337		69,001		135,548		135,632
General and administrative	52,978		48,597		100,112		93,295


Operating Earnings	157,484		161,359		301,497		294,355

Interest expense	655		634		1,368		1,378
Other income, net	(1,379)		(4,453)		(9,553)		(12,531)
Earnings Before Income Taxes	158,208		165,178		309,682		305,508
Income taxes	30,585		32,200		57,958		50,331
Net Earnings	$	127,623	$	132,978	$	251,724	$	255,177
Net Earnings per Common Share
Basic	$	0.77	$	0.79	$	1.51	$	1.51
Diluted	$	0.76	$	0.77	$	1.48	$	1.48

See notes to consolidated financial statements.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited) (In thousands)


	Three Months Ended				Six Months Ended
	June 27, 2025		June 28, 2024		June 27, 2025		June 28, 2024
Net Earnings	$	127,623	$	132,978	$	251,724	$	255,177
Components of other comprehensive income
Cumulative translation adjustment	56,983		(811)		76,886		(19,517)
Pension and postretirement medical liability adjustment	(358)		1,304		(274)		2,222
Income taxes - pension and postretirement medical liability adjustment	78		(352)		57		(589)
Other comprehensive income (loss)	56,703		141		76,669		(17,884)
Comprehensive Income	$	184,326	$	133,119	$	328,393	$	237,293

See notes to consolidated financial statements.

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GRACO INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited) (In thousands)


	June 27, 2025		December 27, 2024
ASSETS
Current Assets
Cash and cash equivalents	$	534,921	$	675,336
Accounts receivable, less allowances of $6,500 and $6,000	387,166		362,533
Inventories	403,156		404,676
Other current assets	55,399		54,896
Total current assets	1,380,642		1,497,441
Property, Plant and Equipment, net	762,960		771,656
Goodwill	516,922		487,468
Other Intangible Assets, net	241,524		233,306
Operating Lease Assets	22,164		19,678
Deferred Income Taxes	36,447		46,910
Other Assets	85,464		82,753
Total Assets	$	3,046,123	$	3,139,212
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Notes payable to banks	$	28,150	$	28,537

Trade accounts payable	78,868		60,816
Salaries and incentives	58,881		58,169
Dividends payable	45,540		46,558
Other current liabilities	177,141		211,728
Total current liabilities	388,580		405,808

Retirement Benefits and Deferred Compensation	81,960		80,381
Operating Lease Liabilities	14,947		12,278
Deferred Income Taxes	38,727		37,822
Other Non-current Liabilities	20,889		18,788

Shareholders’ Equity
Common stock	165,637		169,394
Additional paid-in-capital	970,332		955,051
Retained earnings	1,337,956		1,509,264
Accumulated other comprehensive income (loss)	27,095		(49,574)
Total shareholders’ equity	2,501,020		2,584,135
Total Liabilities and Shareholders’ Equity	$	3,046,123	$	3,139,212

See notes to consolidated financial statements.

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GRACO INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited) (In thousands)


	Six Months Ended
	June 27, 2025		June 28, 2024
Cash Flows From Operating Activities
Net Earnings	$	251,724	$	255,177
Adjustments to reconcile net earnings to net cash provided by operating activities
Depreciation and amortization	51,844		39,325
Deferred income taxes	7,392		7,677
Share-based compensation	16,594		20,105
Gain on sale of building	(4,737)		(1,216)


Change in
Accounts receivable	(9,377)		(1,373)
Inventories	10,983		(22,221)
Trade accounts payable	17,480		10,645
Salaries and incentives	(3,190)		(15,482)
Retirement benefits and deferred compensation	(983)		3,193
Other accrued liabilities	(36,362)		(28,649)
Other	6,735		(9,259)
Net cash provided by operating activities	308,103		257,922
Cash Flows From Investing Activities
Property, plant and equipment additions	(30,187)		(73,449)
Proceeds from sale of building	10,840		5,630
Acquisition of businesses, net of cash acquired	(10,454)		—
Other	(881)		(62)
Net cash used in investing activities	(30,682)		(67,881)
Cash Flows From Financing Activities
(Payments) borrowings on short-term lines of credit, net	(930)		712



Common stock issued	29,318		46,802
Common stock repurchased	(360,952)		(17,761)
Taxes paid related to net share settlement of equity awards	(3,833)		(4,612)
Cash dividends paid	(92,195)		(85,983)
Net cash used in financing activities	(428,592)		(60,842)
Effect of exchange rate changes on cash	10,756		(1,144)
Net (decrease) increase in cash and cash equivalents	(140,415)		128,055
Cash and Cash Equivalents
Beginning of year	675,336		537,951
End of period	$	534,921	$	666,006

See notes to consolidated financial statements.

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GRACO INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Unaudited) (In thousands)


	Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive (Loss) Income		Total
Three Months Ended June 27, 2025
Balance, March 28, 2025	$	167,218	$	972,655	$	1,367,455	$	(29,608)	$	2,477,720
Shares issued (cancelled)	5		(2,187)		—		—		(2,182)
Shares repurchased	(1,586)		(8,940)		(112,337)		—		(122,863)
Stock compensation cost	—		8,804		—		—		8,804
Net earnings	—		—		127,623		—		127,623
Dividends declared ($0.275 per share)	—		—		(44,785)		—		(44,785)
Other comprehensive income	—		—		—		56,703		56,703
Balance, June 27, 2025	$	165,637	$	970,332	$	1,337,956	$	27,095	$	2,501,020

Six Months Ended June 27, 2025
Balance, December 27, 2024	$	169,394	$	955,051	$	1,509,264	$	(49,574)	$	2,584,135
Shares issued	627		24,858		—		—		25,485
Shares repurchased	(4,384)		(24,714)		(331,854)		—		(360,952)
Stock compensation cost	—		15,137		—		—		15,137
Net earnings	—		—		251,724		—		251,724
Dividends declared ($0.550 per share)	—		—		(91,178)		—		(91,178)
Other comprehensive income	—		—		—		76,669		76,669
Balance, June 27, 2025	$	165,637	$	970,332	$	1,337,956	$	27,095	$	2,501,020

Three Months Ended June 28, 2024
Balance, March 29, 2024	$	169,125	$	912,414	$	1,307,130	$	(53,020)	$	2,335,649
Shares issued	26		1,407		—		—		1,433
Shares repurchased	(224)		(946)		(16,591)		—		(17,761)
Stock compensation cost	—		9,328		—		—		9,328
Net earnings	—		—		132,978		—		132,978
Dividends declared ($0.255 per share)	—		—		(43,283)		—		(43,283)
Other comprehensive income	—		—		—		141		141
Balance, June 28, 2024	$	168,927	$	922,203	$	1,380,234	$	(52,879)	$	2,418,485

Six Months Ended June 28, 2024
Balance, December 29, 2023	$	167,946	$	863,336	$	1,227,938	$	(34,995)	$	2,224,225
Shares issued	1,205		40,985		—		—		42,190
Shares repurchased	(224)		(946)		(16,591)		—		(17,761)
Stock compensation cost	—		18,828		—		—		18,828
Net earnings	—		—		255,177		—		255,177
Dividends declared ($0.510 per share)	—		—		(86,290)		—		(86,290)
Other comprehensive loss	—		—		—		(17,884)		(17,884)
Balance, June 28, 2024	$	168,927	$	922,203	$	1,380,234	$	(52,879)	$	2,418,485

See notes to consolidated financial statements.

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GRACO INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Basis of Preparation

The consolidated balance sheet of Graco Inc. and subsidiaries (the “Company”) as of June 27, 2025 and the related statements of earnings, comprehensive income and shareholders' equity for the three and six months ended June 27, 2025 and June 28, 2024, and cash flows for the six months ended June 27, 2025 and June 28, 2024 have been prepared by the Company and have not been audited.

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 27, 2025, 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 Annual Report on Form 10-K for the year ended December 27, 2024 (the "2024 Annual Report").

The results of operations for interim periods are not necessarily indicative of results that will be realized for the full fiscal year. Certain reclassifications have been made to the prior year's consolidated financial statements to conform to the current year presentation.

2. Segment Information

Effective January 1, 2025, the Company has classified its business into three reportable segments: Contractor, Industrial and Expansion Markets. The Industrial segment consists of the newly formed Industrial Division and the Powder Division. The Company’s former Industrial and Lubrication Equipment Divisions, along with the Process Transfer Equipment business that was part of the Company’s former Process Division, were combined to form the new global Industrial Division. The Powder Division remains unchanged. The Expansion Markets segment consists of the Expansion Markets Division. The Company’s environmental, semiconductor, high-pressure valves and electric motors businesses, together with select future ventures and acquisitions, reside within this division. The Contractor segment, consisting of the Contractor Division, remains unchanged as a reportable segment relative to prior periods. Prior year segment information has been recast to conform to the current organizational structure.

Segment information follows (in thousands):


	Three Months Ended				Six Months Ended
	June 27, 2025		June 28, 2024		June 27, 2025		June 28, 2024
Contractor
Net Sales	$	288,959	$	269,638	$	543,991	$	499,680
Cost of products sold	149,539		128,261		281,422		238,832
Gross Profit	139,420		141,377		262,569		260,848
Operating expenses	63,931		57,015		125,150		110,345
Contractor Operating Earnings	$	75,489	$	84,362	$	137,419	$	150,503

Industrial
Net Sales	$	242,277	$	241,878	$	473,930	$	466,738
Cost of products sold	101,051		101,882		197,875		196,601
Gross Profit	141,226		139,996		276,055		270,137
Operating expenses	58,854		58,432		114,088		115,484
Industrial Operating Earnings	$	82,372	$	81,564	$	161,967	$	154,653

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Expansion Markets
Net Sales	$	40,570	$	41,727	$	82,169	$	79,014
Cost of products sold	19,566		20,708		39,729		39,199
Gross Profit	21,004		21,019		42,440		39,815
Operating expenses	12,175		12,584		23,546		24,628
Expansion Markets Operating Earnings	$	8,829	$	8,435	$	18,894	$	15,187

Reportable Segment Operating Earnings Total	$	166,690	$	174,361	$	318,280	$	320,343
Unallocated corporate expense	9,206		13,002		16,783		25,988


Operating Earnings	157,484		161,359		301,497		294,355
Interest expense	655		634		1,368		1,378
Other income, net	(1,379)		(4,453)		(9,553)		(12,531)
Earnings Before Income Taxes	$	158,208	$	165,178	$	309,682	$	305,508

Geographic information follows (in thousands):


	Three Months Ended				Six Months Ended
	June 27, 2025		June 28, 2024		June 27, 2025		June 28, 2024
Net Sales (based on customer location)
United States	$	305,027	$	315,095	$	587,584	$	582,927
Other countries	266,779		238,148		512,506		462,505
Total	$	571,806	$	553,243	$	1,100,090	$	1,045,432


	June 27, 2025		December 27, 2024
Long-lived Assets
United States	$	615,998	$	635,698
Other countries	146,962		135,958
Total	$	762,960	$	771,656

3. Inventories

Major components of inventories were as follows (in thousands):


	June 27, 2025		December 27, 2024
Finished products and components	$	203,946	$	197,242
Products and components in various stages of completion	109,998		114,647
Raw materials and purchased components	210,244		214,902
Subtotal	524,188		526,791
Reduction to LIFO cost	(121,032)		(122,115)
Total	$	403,156	$	404,676

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4. Shareholders’ Equity

Changes in components of accumulated other comprehensive income (loss), net of tax were as follows (in thousands):


	Pension and Post-retirement Medical		Cumulative Translation Adjustment		Total
Three Months Ended June 27, 2025
Balance, March 28, 2025	$	(13,082)	$	(16,526)	$	(29,608)
Other comprehensive income (loss) before reclassifications	—		56,983		56,983
Reclassified to pension cost and deferred tax	(280)		—		(280)

Balance, June 27, 2025	$	(13,362)	$	40,457	$	27,095



Six Months Ended June 27, 2025
Balance, December 27, 2024	$	(13,145)	$	(36,429)	$	(49,574)
Other comprehensive income (loss) before reclassifications	—		76,886		76,886
Reclassified to pension cost and deferred tax	(217)		—		(217)

Balance, June 27, 2025	$	(13,362)	$	40,457	$	27,095



Three Months Ended June 28, 2024
Balance, March 29, 2024	$	(30,331)	$	(22,689)	$	(53,020)
Other comprehensive income (loss) before reclassifications	—		(811)		(811)
Reclassified to pension cost and deferred tax	952		—		952

Balance, June 28, 2024	$	(29,379)	$	(23,500)	$	(52,879)


Six Months Ended June 28, 2024
Balance, December 29, 2023	$	(31,012)	$	(3,983)	$	(34,995)
Other comprehensive income (loss) before reclassifications	—		(19,517)		(19,517)
Reclassified to pension cost and deferred tax	1,633		—		1,633

Balance, June 28, 2024	$	(29,379)	$	(23,500)	$	(52,879)

Amounts related to pension and post-retirement medical adjustments are reclassified to non-service components of pension cost that are included within other income, net.

5. Share-Based Awards

Options on common shares granted and outstanding, as well as the weighted average exercise price, are shown below (in thousands, except exercise prices):


	Option Shares	Weighted Average Exercise Price		Options Exercisable	Weighted Average Exercise Price
Outstanding, December 27, 2024	9,139	$	55.60	6,582	$	47.16
Granted	963	85.93
Exercised	(428)	29.47
Canceled	(53)	73.99
Outstanding, June 27, 2025	9,621	$	59.68	6,885	$	51.38

The Company recognized year-to-date share-based compensation of $17 million in 2025 and $20 million in 2024. As of June 27, 2025, there was $29 million of unrecognized compensation cost related to unvested options, expected to be recognized over a weighted average period of 2.8 years.

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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:


	Six Months Ended
	June 27, 2025			June 28, 2024
Expected life in years	6.6			6.6
Interest rate	4.4		%	4.2		%
Volatility	26.2		%	26.3		%
Dividend yield	1.3		%	1.1		%
Weighted average fair value per share	$	26.80		$	28.03

Under the Company’s Employee Stock Purchase Plan, the Company issued 246,000 shares in 2025 and 330,000 shares in 2024. 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:


	Six Months Ended
	June 27, 2025			June 28, 2024
Expected life in years	1.0			1.0
Interest rate	4.1		%	4.9		%
Volatility	19.6		%	24.2		%
Dividend yield	1.3		%	1.1		%
Weighted average fair value per share	$	19.65		$	23.16

6. Earnings per Share

The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share amounts):


	Three Months Ended				Six Months Ended
	June 27, 2025		June 28, 2024		June 27, 2025		June 28, 2024
Net earnings available to common shareholders	$	127,623	$	132,978	$	251,724	$	255,177
Weighted average shares outstanding for basic earnings per share	165,785		169,100		167,173		168,795
Dilutive effect of stock options computed using the treasury stock method and the average market price	2,776		3,386		2,899		3,671
Weighted average shares outstanding for diluted earnings per share	168,561		172,486		170,072		172,466
Basic earnings per share	$	0.77	$	0.79	$	1.51	$	1.51
Diluted earnings per share	$	0.76	$	0.77	$	1.48	$	1.48

Anti-dilutive shares not included in diluted earnings per share computation	1,837		1,199		3,697		2,139

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7. Retirement Benefits

The components of net periodic benefit cost for retirement benefit plans were as follows (in thousands):


	Three Months Ended				Six Months Ended
	June 27, 2025		June 28, 2024		June 27, 2025		June 28, 2024
Pension Benefits
Service cost	$	1,039	$	1,253	$	2,292	$	2,720
Interest cost	2,568		2,204		4,711		4,634
Expected return on assets	(2,904)		(2,623)		(5,807)		(5,067)
Amortization and other	202		707		366		1,643
Net periodic benefit cost	$	905	$	1,541	$	1,562	$	3,930
Postretirement Medical
Service cost	$	78	$	67	$	153	$	167
Interest cost	369		256		569		556
Amortization	(136)		(28)		(136)		(53)
Net periodic benefit cost	$	311	$	295	$	586	$	670

8. Receivables and Credit Losses

Accounts receivable include trade receivables of $371 million and other receivables of $16 million as of June 27, 2025 and $348 million and $15 million of trade receivables and other receivables, respectively, as of December 27, 2024.

Allowance for Credit Losses

Following is a summary of activity for credit losses (in thousands):


	Three Months Ended				Six Months Ended
	June 27, 2025		June 28, 2024		June 27, 2025		June 28, 2024
Balance, beginning	$	5,360	$	4,593	$	4,973	$	4,655
(Reversals) additions charged to costs and expenses	(138)		455		93		505
Deductions from reserves (1)	(3)		(135)		(5)		(167)
Other additions (deductions) (2)	112		(28)		270		(108)
Balance, ending	$	5,331	$	4,885	$	5,331	$	4,885

(1) Represents amounts determined to be uncollectible and charged against reserves, net of collections on accounts previously charged against reserves.

(2) Includes effects of foreign currency translation.

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9. Intangible Assets

Components of other intangible assets were as follows (dollars in thousands):


	Finite Life						Indefinite Life
	Customer Relationships		Patents and Proprietary Technology		Trademarks, Trade Names and Other		Trade Names		Total
As of June 27, 2025
Cost	$	270,586	$	30,990	$	3,756	$	95,091	$	400,423
Accumulated amortization	(154,344)		(8,524)		(3,112)		—		(165,980)
Foreign currency translation	(1,165)		1,288		86		6,872		7,081
Book value	$	115,077	$	23,754	$	730	$	101,963	$	241,524
Weighted average life in years	14		10		3		N/A


As of December 27, 2024
Cost	$	270,910	$	34,731	$	3,756	$	95,091	$	404,488
Accumulated amortization	(143,689)		(10,534)		(1,478)		—		(155,701)
Foreign currency translation	(12,102)		(1,182)		(79)		(2,118)		(15,481)
Book value	$	115,119	$	23,015	$	2,199	$	92,973	$	233,306
Weighted average life in years	14		9		3		N/A

Amortization of intangibles for the year to date was $13 million in 2025 and $8 million in 2024. Estimated annual amortization expense based on the current carrying amount of other intangible assets is as follows (in thousands):


	2025 (Remainder)		2026		2027		2028		2029		Thereafter
Estimated Amortization Expense	$	11,674	$	17,578	$	14,538	$	12,439	$	11,802	$	71,530

Changes in the carrying amount of goodwill for each reportable segment were as follows (in thousands):


	Contractor		Industrial		Expansion Markets		Total
Balance, December 27, 2024	$	198,038	$	217,698	$	71,732	$	487,468
Adjustments from business acquisitions	1,164		—		(266)		898

Foreign currency translation	16,568		11,988		—		28,556
Balance, June 27, 2025	$	215,770	$	229,686	$	71,466	$	516,922

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10. Other Current Liabilities

Components of other current liabilities were as follows (in thousands):


	June 27, 2025		December 27, 2024
Accrued self-insurance retentions	$	8,263	$	8,240
Accrued warranty and service liabilities	19,937		18,712
Accrued trade promotions	8,455		11,086
Payable for employee stock purchases	7,814		16,767
Customer advances and deferred revenue	59,980		52,522
Income taxes payable	7,876		8,102
Tax payable, other	9,408		14,557
Right of return refund liability	14,731		15,557
Operating lease liabilities, current	8,271		7,838
Acquisition-related consideration payable	—		10,339

Other	32,406		48,008
Total	$	177,141	$	211,728

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, December 27, 2024	$	18,712

Charged to expense	6,176
Margin on parts sales reversed	1,055
Reductions for claims settled	(6,006)
Balance, June 27, 2025	$	19,937

Customer Advances and Deferred Revenue

Revenue is deferred when cash payments are received or due in advance of performance, including amounts which are refundable. This is also the case for services associated with certain product sales. During the three and six months ended June 27, 2025, we recognized $17 million and $46 million, respectively, that was included in deferred revenue at December 27, 2024. During the three and six months ended June 28, 2024, we recognized $13 million and $42 million, respectively, that was included in deferred revenue at December 29, 2023.

11. Fair Value

Assets and liabilities measured at fair value on a recurring basis and fair value measurement level were as follows (in thousands):


	Level	June 27, 2025		December 27, 2024
Assets
Cash surrender value of life insurance	2	$	26,283	$	24,411
Forward exchange contracts	2	—		116
Total assets at fair value		$	26,283	$	24,527
Liabilities
Contingent consideration	3	$	16,281	$	14,647
Deferred compensation	2	7,562		8,196
Forward exchange contracts	2	207		—
Total liabilities at fair value		$	24,050	$	22,843

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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 liabilities represent the estimated value (using a probability-weighted expected return approach) of future payments to be made to previous owners of certain acquired businesses based on future revenues.

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.

12. Acquisitions

On November 4, 2024, the Company acquired Corob S.p.A. ("Corob") for €230 million in cash, subject to normal post-closing purchase price adjustments, with up to €30 million in additional contingent consideration. As of June 27, 2025, the purchase price allocation remains preliminary as the Company completes its assessment, principally related to income taxes. Amounts within the tables below are revised related to the finalization of post-close price adjustments as reported from March 28, 2025.

The total purchase consideration consisted of the following (in thousands):


Cash paid	$	276,188
Contingent consideration	14,498
Total purchase consideration	$	290,686

Preliminary purchase consideration was allocated to assets acquired and liabilities assumed based on estimated fair values as follows (in thousands):


Cash and cash equivalents	$	30,899
Accounts receivable	28,120
Inventories	26,119
Other current assets	18,515
Property, plant and equipment	16,619
Other non-current assets	5,854
Identifiable intangible assets	131,240
Goodwill	127,252
Current liabilities	(52,968)
Deferred income taxes, net	(33,474)
Other non-current liabilities	(7,490)
Total net assets acquired	$	290,686

Goodwill recognized from the Corob acquisition primarily reflects an intangible asset that does not qualify for separate recognition. None of the goodwill acquired with Corob is deductible for tax purposes.

Identifiable intangible assets and estimated useful life are as follows (in thousands):


			Estimated Life (years)
Trade name	$	32,458	Indefinite
Customer relationship	76,169		15
Developed technology	20,557		10
Backlog	2,056		0.5
Total identifiable intangibles assets	$	131,240

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The following unaudited pro forma information provides the results of operations for the periods ended June 27, 2025 and June 28, 2024, as if the acquisition had been completed at the beginning of fiscal year 2023 (in thousands, except per share amounts):


	Three Months Ended				Six Months Ended
	June 27, 2025		June 28, 2024		June 27, 2025		June 28, 2024
Net sales	$	571,806	$	588,253	$	1,100,090	$	1,113,273
Net earnings	128,138		134,698		253,258		257,755
Earnings per share
Basic	$	0.77	$	0.80	$	1.51	$	1.53
Diluted	$	0.76	$	0.78	$	1.49	$	1.49

Unaudited pro forma information has been provided for comparative purposes only and the information does not necessarily reflect what the combined company's results of operations would have been had the acquisition occurred at the beginning of 2023. It also may not be useful in predicting the future results of operations of the combined company.

The Company completed another acquisition in 2024 that was not material to the consolidated financial statements.

Subsequent Event

On July 17, 2025, the Company entered into a definitive agreement to acquire Color Service s.r.l. ("Color Service") for €63 million, subject to certain customary adjustments. Color Service is a global leader in automated dosing systems for powder and liquid applications and serves a wide range of industries including textiles, rubber, cosmetics plastics and food. The acquisition is expected to be completed during the third quarter of fiscal year 2025 and its results will be included within the Powder Division in the Industrial Segment. The acquisition will be funded with cash on hand.

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Item 2. GRACO INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

The Company supplies technology and expertise for the management of fluids and coatings in both industrial and commercial applications. It 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: Contractor, Industrial and Expansion Markets. Key strategies include developing and marketing new products, leveraging products and technologies into additional, growing end-user markets, expanding distribution globally and completing strategic acquisitions that provide additional channels and technologies.

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.

Global Trade Uncertainty

Our operations, supply chain and financial performance are directly impacted by evolving global trade policies and tariffs as well as associated geopolitical tensions. Our global operating footprint and worldwide sales reach expose us to risks associated with trade conflicts between the U.S. and its trading partners. Escalating global trade conflicts could result in inflationary costs to manufacture, assemble and export our products. We may be required to increase prices to our customers, which may reduce demand, or if we do not or are unable to increase prices without reducing demand, we will experience reduced profitability. Continued geopolitical issues may cause customers outside of the U.S. seeking to source products from local suppliers. We continue to analyze the impact of these global tariffs on our business and we are working to mitigate the impact of tariffs through pricing and sourcing strategies. We cannot be sure these strategies will effectively mitigate the impact of these costs and if we are unable to do so or if demand for our products otherwise decreases, we expect these new tariffs will have a material impact on our results of operations in fiscal year 2025.

Consolidated Results

A summary of financial results follows (in millions except per share amounts):


	Three Months Ended						Six Months Ended
	Jun 27, 2025		Jun 28, 2024		% Change		Jun 27, 2025		Jun 28, 2024		% Change
Net Sales	$	571.8	$	553.2	3	%	$	1,100.1	$	1,045.4	5	%
Operating Earnings	157.5		161.4		(2)	%	301.5		294.4		2	%

Net Earnings	127.6		133.0		(4)	%	251.7		255.2		(1)	%
Net Earnings, adjusted (1)	126.9		132.2		(4)	%	247.3		244.8		1	%
Diluted Net Earnings per Common Share	$	0.76	$	0.77	(1)	%	$	1.48	$	1.48	—	%
Diluted Net Earnings per Common Share, adjusted (1)	$	0.75	$	0.77	(3)	%	$	1.45	$	1.42	2	%

(1) See below for a reconciliation of adjusted non-GAAP financial measures to GAAP.

Net sales for the second quarter increased 3 percent from the comparable period last year. Incremental sales from acquired operations contributed 6 percentage points of sales growth. EMEA and Asia Pacific sales growth was partially offset by a decrease in the Americas.

The gross profit margin rate declined approximately 2 percentage points for the second quarter due to higher product costs, including $4 million of increased tariff costs, and the unfavorable effects of lower margin rates from acquired operations.

Total operating expenses for the second quarter increased 2 percentage points but were flat as a percentage of sales.

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Other non-operating income decreased $3 million for the second quarter, primarily due to $5 million of exchange losses on net liabilities of certain foreign operations and lower interest income.

Net earnings decreased 4 percent for the second quarter due to a lower gross margin rate and lower non-operating income.

Excluding the impacts of excess tax benefits from stock option exercises presents a more consistent basis for comparison of financial results. A calculation of the non-GAAP adjusted measurements of income taxes, effective income tax rate, net earnings and diluted earnings per share follows (in millions except per share amounts):


	Three Months Ended						Six Months Ended
	June 27, 2025			June 28, 2024			June 27, 2025			June 28, 2024





Earnings before income taxes	$	158.2		$	165.2		$	309.7		$	305.5




Income taxes, as reported	$	30.6		$	32.2		$	58.0		$	50.3


Excess tax benefit from option exercises	0.7			0.8			4.4			10.4
Income taxes, adjusted	$	31.3		$	33.0		$	62.4		$	60.7

Effective income tax rate
As reported	19.3		%	19.5		%	18.7		%	16.5		%
Adjusted	19.8		%	20.0		%	20.1		%	19.9		%

Net Earnings, as reported	$	127.6		$	133.0		$	251.7		$	255.2


Excess tax benefit from option exercises	(0.7)			(0.8)			(4.4)			(10.4)
Net Earnings, adjusted	$	126.9		$	132.2		$	247.3		$	244.8

Weighted Average Diluted Shares	168.6			172.5			170.1			172.5
Diluted Earnings per Share
As reported	$	0.76		$	0.77		$	1.48		$	1.48
Adjusted	$	0.75		$	0.77		$	1.45		$	1.42

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The following table presents an overview of components of net earnings as a percentage of net sales:


	Three Months Ended				Six Months Ended
	June 27, 2025		June 28, 2024		June 27, 2025		June 28, 2024
Net Sales	100.0	%	100.0	%	100.0	%	100.0	%
Cost of products sold	47.6		45.6		47.5		45.8
Gross Profit	52.4		54.4		52.5		54.2
Product development	3.6		4.0		3.6		4.1
Selling, marketing and distribution	12.0		12.5		12.3		13.0
General and administrative	9.3		8.8		9.2		8.9


Operating Earnings	27.5		29.2		27.4		28.2
Interest expense	0.1		0.1		0.1		0.1

Other income, net	(0.2)		(0.8)		(0.9)		(1.1)
Earnings Before Income Taxes	27.6		29.9		28.2		29.2
Income taxes	5.3		5.8		5.3		4.7
Net Earnings	22.3	%	24.0	%	22.9	%	24.4	%

Net Sales

The following table presents net sales by geographic region (in millions):


	Three Months Ended				Six Months Ended
	June 27, 2025		June 28, 2024		June 27, 2025		June 28, 2024
Americas(1)	$	351.9	$	364.3	$	675.1	$	670.8
EMEA(2)	129.9		108.7		250.9		219.8
Asia Pacific	90.0		80.2		174.1		154.8
Consolidated	$	571.8	$	553.2	$	1,100.1	$	1,045.4

(1) North, South and Central America, including the United States

(2) Europe, Middle East and Africa

The following table presents the components of net sales change by geographic region:


	Three Months				Six Months
	Volume and Price	Acquisitions	Currency	Total	Volume and Price	Acquisitions	Currency	Total
Americas	(6)%	3%	0%	(3)%	(2)%	3%	0%	1%
EMEA	2%	12%	5%	19%	1%	12%	1%	14%
Asia Pacific	5%	8%	(1)%	12%	5%	9%	(2)%	12%
Consolidated	(3)%	6%	0%	3%	0%	6%	(1)%	5%

Gross Profit

The gross profit margin rate declined approximately 2 percentage points for both the second quarter and year to date from the comparable periods last year due to higher product costs, including $4 million of increased tariff costs, and the unfavorable effects of lower margin rates from acquired operations.

Operating Expenses

Total operating expenses increased $3 million (2 percent) for the second quarter and $3 million (1 percent) for the year to date, respectively, compared to last year. Incremental expenses from acquired operations of $9 million for the quarter and $19 million for the year to date were partially offset by decreases in product development spending, sales and earnings-based incentives and share-based compensation.

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The second quarter and year to date periods last year included $3 million of expenses associated with the relocation to a new distribution center.

Other (Income) Expense

Other non-operating income decreased $3 million for both the second quarter and year to date from the comparable periods last year and included exchange losses on net liabilities of certain foreign operations of $5 million for the quarter and $8 million for the year to date. Favorable market valuation changes on investments held to fund certain retirement benefits partially offset these exchange losses. Other income for the year to date included a $5 million gain in the first quarter from the sale of a former manufacturing and distribution facility in Switzerland.

Income Taxes

The effective income tax rate was 19 percent for both the second quarter and the year to date. Adjusted to exclude the impacts of excess tax benefits from stock option exercises (see Financial Results Adjusted for Comparability below), the adjusted effective income tax rate of 20 percent for both the quarter and year to date was comparable to the respective periods last year.

Segment Results

Certain measurements of segment operations compared to last year are summarized below:

Contractor Segment

The following table presents net sales and operating earnings as a percentage of sales for the Contractor segment

(dollars in millions):


	Three Months Ended						Six Months Ended
	June 27, 2025			June 28, 2024			June 27, 2025			June 28, 2024
Net Sales
Americas	$	201.4		$	204.9		$	377.3		$	370.5
EMEA	61.1			44.7			115.6			91.1
Asia Pacific	26.5			20.0			51.1			38.1
Total	$	289.0		$	269.6		$	544.0		$	499.7
Operating earnings as a percentage of net sales	26		%	31		%	25		%	30		%

The following table presents the components of net sales change by geographic region for the Contractor segment:


	Three Months				Six Months
	Volume and Price	Acquisitions	Currency	Total	Volume and Price	Acquisitions	Currency	Total
Americas	(8)%	6%	0%	(2)%	(4)%	6%	0%	2%
EMEA	1%	30%	6%	37%	(4)%	30%	1%	27%
Asia Pacific	3%	31%	(2)%	32%	2%	35%	(3)%	34%
Segment Total	(5)%	12%	0%	7%	(3)%	12%	0%	9%

Incremental sales from acquired operations in the Contractor segment for the quarter and year to date were partially offset by weakness in worldwide construction markets, particularly in North America. The operating margin rate declined 5 percentage points for the quarter and year to date, including 3 percentage points from higher product costs, mainly due to increased tariffs, and 2 percentage points from the unfavorable effects of lower margin rates of acquired operations.

Industrial Segment

The following table presents net sales and operating earnings as a percentage of sales for the Industrial segment The following table presents the components of net sales change by geographic region for the Industrial segment:

(dollars in millions):

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	Three Months Ended						Six Months Ended
	June 27, 2025			June 28, 2024			June 27, 2025			June 28, 2024
Net Sales
Americas	$	126.8		$	132.1		$	248.0		$	249.3
EMEA	61.1			57.6			120.5			115.4
Asia Pacific	54.3			52.2			105.4			102.0
Total	$	242.2		$	241.9		$	473.9		$	466.7
Operating earnings as a percentage of net sales	34		%	34		%	34		%	33		%


	Three Months				Six Months
	Volume and Price	Acquisitions	Currency	Total	Volume and Price	Acquisitions	Currency	Total
Americas	(4)%	0%	0%	(4)%	0%	0%	(1)%	(1)%
EMEA	1%	0%	5%	6%	3%	0%	1%	4%
Asia Pacific	4%	0%	0%	4%	5%	0%	(2)%	3%
Segment Total	(1)%	0%	1%	0%	2%	0%	0%	2%

Industrial segment sales for the second quarter were flat and increased 2 percentage points for the year to date as favorable volumes in EMEA and Asia Pacific offset decreased sales in the Americas. The operating margin rate for this segment was flat for the quarter as realized pricing offset unfavorable product and channel mix and higher product costs. The year to date operating margin increased 1 percentage point as realized pricing and lower expenses more than offset higher product costs.

Expansion Markets Segment

The following table presents net sales and operating earnings as a percentage of sales for the Expansion Markets segment (dollars in millions):


	Three Months Ended						Six Months Ended
	June 27, 2025			June 28, 2024			June 27, 2025			June 28, 2024
Net Sales
Americas	$	23.8		$	27.3		$	49.8		$	51.1
EMEA	7.6			6.4			14.7			13.2
Asia Pacific	9.2			8.0			17.7			14.7
Total	$	40.6		$	41.7		$	82.2		$	79.0
Operating earnings as a percentage of net sales	22		%	20		%	23		%	19		%

The following table presents the components of net sales change by geographic region for the Expansion Markets segment:


	Three Months				Six Months
	Volume and Price	Acquisitions	Currency	Total	Volume and Price	Acquisitions	Currency	Total
Americas	(12)%	0%	0%	(12)%	(2)%	0%	0%	(2)%
EMEA	14%	0%	2%	16%	9%	0%	1%	10%
Asia Pacific	14%	0%	1%	15%	21%	0%	0%	21%
Segment Total	(3)%	0%	0%	(3)%	4%	0%	0%	4%

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Expansion Market net sales decreased for the second quarter as continued sales growth in the semiconductor product application was more than offset by decreased sales in the environmental product application. For the year to date, double-digit sales growth in the semiconductor product application more than offset softness in other applications. The operating margin rate for this segment increased for both the quarter and year to date driven by increased sales volume and lower expenses.

Liquidity and Capital Resources

Net cash provided by operating activities of $308 million in the first six months of 2025 increased $50 million compared to the same period last year, mostly due to decreased inventory purchases and lower performance-based incentive payouts. Significant uses of cash in the first half of 2025 included share repurchases of $361 million (partially offset by $25 million of net proceeds from shares issued), dividend payments of $92 million and plant and equipment additions of $30 million.

For the first half of 2024, significant uses of cash included plant and equipment additions of $73 million and dividend payments of $86 million. Net proceeds from shares issued totaled $42 million, which were partially offset by share repurchases of $18 million.

As of June 27, 2025, the Company had available liquidity of $1,322 million, including cash and cash equivalents of $535 million, of which $223 million was held outside of the U.S., and available credit under existing committed credit facilities of $787 million.

Cash balances and unused financing sources are expected to provide the Company with the flexibility to meet its liquidity needs for the next 12 months and beyond, including its capital expenditure plan, planned dividends, share repurchases, announced and potential future acquisitions and operating requirements. Capital expenditures for 2025 are expected to be approximately $60 to $70 million. The Company may make opportunistic share repurchases going forward.

Outlook

Pricing actions combined with upcoming new product launches and steady incoming order rates reaffirms the Company's 2025 revenue outlook of low single-digit sales growth on an organic constant-currency basis.

Cautionary Statement Regarding Forward-Looking Statements

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 our Form 10-K, Form 10-Qs and Form 8-Ks, and other disclosures, including our 2024 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, risks relating to the demand for our products and the level of commercial and industrial activity worldwide; changes in currency translation rates; international and domestic instability; interest rate fluctuations and changes in credit markets; global sourcing of materials; interruptions of or intrusions into our information systems; intellectual property rights; the use of generative artificial intelligence; conducting business internationally; catastrophic events; our ability to attract, develop and retain qualified personnel; public health crises; our growth strategies and acquisitions; potential goodwill impairment; our ability to compete effectively; our dependence on a few large customers; our dependence on cyclical industries; changes in laws and regulations; climate-related laws, regulations and accords; environmental, social and governance-related expectations and requirements; compliance with anti-corruption and trade laws; changes in tax or tariff rates or the adoption of new tax or tariff legislation; and costs associated with legal proceedings. Please refer to Item 1A of our 2024 Annual Report on Form 10-K and Item 1A of this Form 10-Q 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.

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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.

Item 3.Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes related to market risk from the disclosures made in the 2024 Annual Report on Form 10-K.

Item 4.Controls and Procedures

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 and the Chief Financial Officer and Treasurer. Based upon that evaluation, the Company’s President and Chief Executive Officer and the Chief Financial Officer and Treasurer 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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PART IIOTHER INFORMATION

Item 1A.Risk Factors

There have been no material changes to the Company’s risk factors from those disclosed in the Company’s 2024 Annual Report on Form 10-K.

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Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

On December 7, 2018, the Board of Directors authorized the purchase of up to 18 million shares of common stock, primarily through open market transactions. The authorization is for an indefinite period of time or until terminated by the Board.

In addition to shares purchased under the Board authorization, 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	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (at end of period)
March 29, 2025 - April 25, 2025	1,585,715	$	77.37	—	8,767,558
April 26, 2025 - May 23, 2025	—	$	—	—	8,767,558
May 24, 2025 - June 27, 2025	—	$	—	—	8,767,558

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Item 5.Other Information

During the three months ended June 27, 2025, none of the Company’s directors or officers (as defined in Rule 16a-1(f) of the Securities Exchange Act of 1934) adopted, terminated or modified a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408 of Regulation S-K of the Securities Act of 1933).

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Item 6.Exhibits


3.1						Restated Articles of Incorporation as amended December 8, 2017. (Incorporated by reference to Exhibit 3.1 to the Company's Report on Form 8-K filed December 8, 2017.)

3.2						Restated Bylaws as amended February 17, 2023. (Incorporated by reference to Exhibit 3.2 to the Company’s 2024 Annual Report on Form 10-K.)

31.1						Certification of President and Chief Executive Officer pursuant to Rule 13a-14(a).

31.2						Certification of Chief Financial Officer and Treasurer pursuant to Rule 13a-14(a).

32						Certification of President and Chief Executive Officer and Chief Financial Officer and Treasurer pursuant to Section 1350 of Title 18, U.S.C.

99.1						Press Release Reporting Second Quarter Earnings dated July 23, 2025.

101						Interactive data files pursuant to Rule 405 of Regulation S-T formatted in iXBRL (Inline eXtensible Business Reporting Language).

104						Cover Page Interactive Data File (formatted as iXBRL and contained in Exhibit 101).

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SIGNATURES

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.

GRACO INC.

Date:

July 23, 2025

By:

/s/ Mark W. Sheahan

Mark W. Sheahan

President and Chief Executive Officer

(Principal Executive Officer)

Date:

July 23, 2025

By:

/s/ David M. Lowe

David M. Lowe

Chief Financial Officer and Treasurer

(Principal Financial Officer)

Date:

July 23, 2025

By:

/s/ Christopher D. Knutson

Christopher D. Knutson

Vice President, Controller and Chief Accounting Officer

(Principal Accounting Officer)

EX-31.1 2 ggg2025q2ex311-quarteronly.htm EX-31.1 Document

Exhibit 31.1

CERTIFICATION

I, Mark W. Sheahan, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Graco Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:

July 23, 2025

/s/ Mark W. Sheahan

Mark W. Sheahan

President and Chief Executive Officer

EX-31.2 3 ggg2025q2ex312-quarteronly.htm EX-31.2 Document

Exhibit 31.2

CERTIFICATION

I, David M. Lowe, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Graco Inc.;

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:

July 23, 2025

/s/ David M. Lowe

David M. Lowe

Chief Financial Officer and Treasurer

EX-32 4 ggg2025q2ex32-quarteronly.htm EX-32 Document

Exhibit 32

CERTIFICATION UNDER SECTION 1350

Pursuant to Section 1350 of Title 18 of the United States Code, each of the undersigned certifies that this periodic report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in this periodic report fairly presents, in all material respects, the financial condition and results of operations of Graco Inc.

Date:

July 23, 2025

/s/ Mark W. Sheahan

Mark W. Sheahan

President and Chief Executive Officer

Date:

July 23, 2025

/s/ David M. Lowe

David M. Lowe

Chief Financial Officer and Treasurer

EX-99.1 5 ggg7232025exhibit991q2.htm EX-99.1 Document

Exhibit 99.1

GRACO INC.

P.O. Box 1441

Minneapolis, MN

55440-1441

NYSE: GGG


FOR IMMEDIATE RELEASE:			FOR FURTHER INFORMATION:
Wednesday, July 23, 2025			Financial Contact: David M. Lowe, 612-623-6456 Media Contact: Meredith A. Sobieck, 612-623-6427 Meredith_A_Sobieck@graco.com

Graco Reports Second Quarter Results

Sales Growth From Acquired Operations

MINNEAPOLIS (July 23, 2025) – Graco Inc. (NYSE: GGG) today announced results for the second quarter ended June 27, 2025.

Summary

$ in millions except per share amounts


	Three Months Ended						Six Months Ended
	Jun 27, 2025		Jun 28, 2024		% Change		Jun 27, 2025		Jun 28, 2024		% Change
Net Sales	$	571.8	$	553.2	3	%	$	1,100.1	$	1,045.4	5	%
Operating Earnings	157.5		161.4		(2)	%	301.5		294.4		2	%
Net Earnings	127.6		133.0		(4)	%	251.7		255.2		(1)	%
Diluted Net Earnings per Common Share	$	0.76	$	0.77	(1)	%	$	1.48	$	1.48	0	%

Adjusted (non-GAAP): (1)

Net Earnings, adjusted	$	126.9	$	132.2	(4)	%	$	247.3	$	244.8	1	%
Diluted Net Earnings per Common Share, adjusted	$	0.75	$	0.77	(3)	%	$	1.45	$	1.42	2	%

(1) Excludes the impact of excess tax benefits from stock option exercises. See Financial Results Adjusted for Comparability below for a reconciliation of adjusted non-GAAP financial measures to GAAP.

•Net sales for the second quarter increased 3 percent. Incremental sales from acquired operations contributed 6 percentage points of sales growth. EMEA and Asia Pacific sales growth was partially offset by a decrease in the Americas.

•The gross profit margin rate declined approximately 2 percentage points for the second quarter due to higher product costs, including $4 million of increased tariff costs, and the unfavorable effects of lower margin rates from acquired operations.

•Total operating expenses for the second quarter increased 2 percentage points, including a total of 7 percentage points from acquired operations. Excluding the impact of acquired operations, operating expenses decreased $7 million (5 percentage points).

•Other non-operating income decreased $3 million for the quarter, mostly due to $5 million of exchange losses on net liabilities of certain foreign operations and lower interest income.

•Net earnings decreased 4 percent for the second quarter due to a lower gross margin rate and lower non-operating income.

•Other notable items for the year to date included an increase in cash flow from operations of $50 million to $308 million, primarily reflective of reductions in inventory levels. Year-to-date share repurchases totaled 4.4 million shares for $361 million.

Page 2 GRACO

"Overall sales were up 3% in the quarter despite an organic revenue decline of 3%, primarily due to lower sales in the Contractor segment," said Mark Sheahan, Graco's President and Chief Executive Officer. "The Contractor segment organic sales decline was driven by softness in the North American construction markets, cautious channel and contractor investment, and reduced foot traffic in the home centers. The Americas drove the organic revenue decline as we saw growth in volume in both the EMEA and Asia Pacific regions. In addition, sales of powder finishing equipment continued to be strong during the quarter with improved activity in China."

Consolidated Results

Net sales for the second quarter increased 3 percent from the comparable period last year. Second quarter net sales decreased 3 percent in the Americas, increased 19 percent in EMEA (14 percent at consistent translation rates), and increased 12 percent in Asia Pacific (13 percent at consistent translation rates). Year-to-date net sales increased 5 percent compared to last year (6 percent at consistent translation rates). Year-to-date net sales increased 1 percent in the Americas, increased 14 percent in EMEA (13 percent at consistent translation rates), and increased 12 percent in Asia Pacific (14 percent at consistent translation rates).

Changes in currency translation rates increased worldwide sales by $4 million for the second quarter and decreased worldwide sales by $3 million for the year to date. Acquired operations contributed $32 million of sales growth for the second quarter and $62 million of sales growth for the year to date.

Page 3 GRACO

Segment Results

Management assesses performance of segments by reference to operating earnings excluding unallocated corporate expenses. For a reconciliation of segment operating earnings to consolidated operating earnings, refer to the segment information table included in the financial statement section of this release. Certain measurements of segment operations are summarized below:


	Three Months									Six Months
	Contractor			Industrial			Expansion Markets			Contractor			Industrial			Expansion Markets
Net Sales (in millions)	$	289.0		$	242.2		$	40.6		$	544.0		$	473.9		$	82.2
Percentage change from last year
Sales	7		%	0		%	(3)		%	9		%	2		%	4		%
Operating earnings	(11)		%	1		%	5		%	(9)		%	5		%	24		%
Operating earnings as a percentage of sales
2025	26		%	34		%	22		%	25		%	34		%	23		%
2024	31		%	34		%	20		%	30		%	33		%	19		%

Components of net sales change by geographic region for the Contractor segment were as follows:


	Three Months				Six Months
	Volume and Price	Acquisitions	Currency	Total	Volume and Price	Acquisitions	Currency	Total
Americas	(8)%	6%	0%	(2)%	(4)%	6%	0%	2%
EMEA	1%	30%	6%	37%	(4)%	30%	1%	27%
Asia Pacific	3%	31%	(2)%	32%	2%	35%	(3)%	34%
Consolidated	(5)%	12%	0%	7%	(3)%	12%	0%	9%

Components of net sales change by geographic region for the Industrial segment were as follows:


	Three Months				Six Months
	Volume and Price	Acquisitions	Currency	Total	Volume and Price	Acquisitions	Currency	Total
Americas	(4)%	0%	0%	(4)%	0%	0%	(1)%	(1)%
EMEA	1%	0%	5%	6%	3%	0%	1%	4%
Asia Pacific	4%	0%	0%	4%	5%	0%	(2)%	3%
Consolidated	(1)%	0%	1%	0%	2%	0%	0%	2%

Page 4 GRACO

Components of net sales change by geographic region for the Expansion Markets segment were as follows:


	Three Months				Six Months
	Volume and Price	Acquisitions	Currency	Total	Volume and Price	Acquisitions	Currency	Total
Americas	(12)%	0%	0%	(12)%	(2)%	0%	0%	(2)%
EMEA	14%	0%	2%	16%	9%	0%	1%	10%
Asia Pacific	14%	0%	1%	15%	21%	0%	0%	21%
Consolidated	(3)%	0%	0%	(3)%	4%	0%	0%	4%

Outlook

"Component costs have risen due to tariffs introduced this quarter," said Sheahan. "To help offset these higher costs, we will implement a targeted price increase beginning in September. Although the timing of this action differs from our usual approach, it is a necessary response to the current trade environment facing industrial manufacturers and should help mitigate the effects of the tariffs. This pricing decision, along with our upcoming new product launches and the steady order rates we saw throughout the quarter, gives us confidence in our previous guidance for the rest of the year. We are maintaining our 2025 revenue outlook of low single-digit sales growth on an organic constant-currency basis." Excluding the impact of excess tax benefits from stock option exercises presents a more consistent basis for comparison of financial results.

Page 5 GRACO

Financial Results Adjusted for Comparability

A calculation of the non-GAAP adjusted measurements of income taxes, effective income tax rate, net earnings and diluted earnings per share follows (in millions except per share amounts):


	Three Months Ended						Six Months Ended
	Jun 27, 2025			Jun 28, 2024			Jun 27, 2025			Jun 28, 2024






Earnings before income taxes	$	158.2		$	165.2		$	309.7		$	305.5






Income taxes, as reported	$	30.6		$	32.2		$	58.0		$	50.3


Excess tax benefit from option exercises	0.7			0.8			4.4			10.4


Income taxes, adjusted	$	31.3		$	33.0		$	62.4		$	60.7

Effective income tax rate
As reported	19.3		%	19.5		%	18.7		%	16.5		%
Adjusted	19.8		%	20.0		%	20.1		%	19.9		%

Net Earnings, as reported	$	127.6		$	133.0		$	251.7		$	255.2




Excess tax benefit from option exercises	(0.7)			(0.8)			(4.4)			(10.4)

Net Earnings, adjusted	$	126.9		$	132.2		$	247.3		$	244.8

Weighted Average Diluted Shares	168.6			172.5			170.1			172.5
Diluted Earnings per Share
As reported	$	0.76		$	0.77		$	1.48		$	1.48
Adjusted	$	0.75		$	0.77		$	1.45		$	1.42

Cautionary Statement Regarding Forward-Looking Statements

Page 6 GRACO

Please refer to Item 1A of our Annual Report on Form 10-K for fiscal year 2024 (and the most recent Form 10-Q) 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 of our Annual Report on Form 10-K for fiscal year 2024 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.

Conference Call

Graco management will hold a conference call, including slides via webcast, with analysts and institutional investors on Thursday, July 24, 2025, at 11 a.m. ET, 10 a.m. CT, to discuss Graco’s second quarter results.

A real-time listen-only webcast of the conference call will be broadcast by Nasdaq. Individuals can access the call and view the slides on the Company’s website at www.graco.com. Listeners should go to the website at least 15 minutes prior to the live conference call to install any necessary audio software.

About Graco

Graco Inc. supplies technology and expertise for the management of fluids and coatings in both industrial and commercial applications. It designs, manufactures and markets systems and equipment to move, measure, control, dispense and spray fluid and powder materials. A recognized leader in its specialties, Minneapolis-based Graco serves customers around the world in the manufacturing, processing, construction and maintenance industries. For additional information about Graco Inc., please visit us at www.graco.com.

Page 7 GRACO

GRACO INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited)

(In thousands except per share amounts)


	Three Months Ended				Six Months Ended
	Jun 27, 2025		Jun 28, 2024		Jun 27, 2025		Jun 28, 2024
Net Sales	$	571,806	$	553,243	$	1,100,090	$	1,045,432
Cost of products sold	272,276		252,389		522,827		478,381
Gross Profit	299,530		300,854		577,263		567,051
Product development	20,731		21,897		40,106		43,769
Selling, marketing and distribution	68,337		69,001		135,548		135,632
General and administrative	52,978		48,597		100,112		93,295


Operating Earnings	157,484		161,359		301,497		294,355
Interest expense	655		634		1,368		1,378
Other income, net	(1,379)		(4,453)		(9,553)		(12,531)
Earnings Before Income Taxes	158,208		165,178		309,682		305,508
Income taxes	30,585		32,200		57,958		50,331
Net Earnings	$	127,623	$	132,978	$	251,724	$	255,177
Net Earnings per Common Share
Basic	$	0.77	$	0.79	$	1.51	$	1.51
Diluted	$	0.76	$	0.77	$	1.48	$	1.48
Weighted Average Number of Shares
Basic	165,785		169,100		167,173		168,795
Diluted	168,561		172,486		170,072		172,466

SEGMENT INFORMATION (Unaudited)

(In thousands)


	Three Months Ended				Six Months Ended
	Jun 27, 2025		Jun 28, 2024		Jun 27, 2025		Jun 28, 2024
Net Sales
Contractor	$	288,959	$	269,638	$	543,991	$	499,680
Industrial	242,277		241,878		473,930		466,738
Expansion Markets	40,570		41,727		82,169		79,014
Total	$	571,806	$	553,243	$	1,100,090	$	1,045,432
Operating Earnings
Contractor	$	75,489	$	84,362	$	137,419	$	150,503
Industrial	82,372		81,564		161,967		154,653
Expansion Markets	8,829		8,435		18,894		15,187
Unallocated corporate (expense)	(9,206)		(13,002)		(16,783)		(25,988)


Total	$	157,484	$	161,359	$	301,497	$	294,355