Form 10-Q - Quarterly report [Sections 13 or 15(d)]

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 September 27, 2024

☐ 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

☐

☒

168,849,576 shares of the Registrant’s Common Stock, $1.00 par value, were outstanding as of October 9, 2024.

TABLE OF CONTENTS

Page

PART I - FINANCIAL INFORMATION

Item 1.

Financial 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				Nine Months Ended
	September 27, 2024		September 29, 2023		September 27, 2024		September 29, 2023
Net Sales	$	519,212	$	539,672	$	1,564,644	$	1,628,962
Cost of products sold	243,082		255,148		721,463		767,883
Gross Profit	276,130		284,524		843,181		861,079
Product development	21,306		19,817		65,076		61,582
Selling, marketing and distribution	65,143		60,495		200,773		194,258
General and administrative	43,958		41,823		137,252		129,130
Contingent consideration	—		(8,600)		—		(8,600)
Impairment	—		7,800		—		7,800
Operating Earnings	145,723		163,189		440,080		476,909

Interest expense	656		1,391		2,034		4,536
Other income, net	(6,225)		(2,483)		(18,756)		(8,877)
Earnings Before Income Taxes	151,292		164,281		456,802		481,250
Income taxes	29,095		31,158		79,426		84,693
Net Earnings	$	122,197	$	133,123	$	377,376	$	396,557
Net Earnings per Common Share
Basic	$	0.72	$	0.79	$	2.24	$	2.35
Diluted	$	0.71	$	0.77	$	2.19	$	2.30

See notes to consolidated financial statements.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited) (In thousands)


	Three Months Ended				Nine Months Ended
	September 27, 2024		September 29, 2023		September 27, 2024		September 29, 2023
Net Earnings	$	122,197	$	133,123	$	377,376	$	396,557
Components of other comprehensive income (loss)
Cumulative translation adjustment	19,491		(9,022)		(26)		506
Pension and postretirement medical liability adjustment	(268)		1,100		1,954		3,427
Income taxes - pension and postretirement medical liability adjustment	66		(252)		(523)		(760)
Other comprehensive income (loss)	19,289		(8,174)		1,405		3,173
Comprehensive Income	$	141,486	$	124,949	$	378,781	$	399,730

See notes to consolidated financial statements.

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GRACO INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited) (In thousands)


	September 27, 2024		December 29, 2023
ASSETS
Current Assets
Cash and cash equivalents	$	764,453	$	537,951
Accounts receivable, less allowances of $6,200 and $5,300	354,999		354,439
Inventories	440,917		438,349
Other current assets	52,126		35,070
Total current assets	1,612,495		1,365,809



Property, Plant and Equipment, net	766,698		741,713
Goodwill	374,462		370,228
Other Intangible Assets, net	116,964		126,258
Operating Lease Assets	16,310		18,768
Deferred Income Taxes	45,173		61,381
Other Assets	43,541		37,850
Total Assets	$	2,975,643	$	2,722,007
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Notes payable to banks	$	30,178	$	30,036

Trade accounts payable	61,777		72,214
Salaries and incentives	56,650		64,802
Dividends payable	43,044		42,789
Other current liabilities	168,724		185,359
Total current liabilities	360,373		395,200

Retirement Benefits and Deferred Compensation	82,858		80,347
Operating Lease Liabilities	9,494		11,785
Deferred Income Taxes	7,115		8,215
Other Non-current Liabilities	2,509		2,235

Shareholders’ Equity
Common stock	168,829		167,946
Additional paid-in-capital	930,924		863,336
Retained earnings	1,447,131		1,227,938
Accumulated other comprehensive loss	(33,590)		(34,995)
Total shareholders’ equity	2,513,294		2,224,225
Total Liabilities and Shareholders’ Equity	$	2,975,643	$	2,722,007

See notes to consolidated financial statements.

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GRACO INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited) (In thousands)


	Nine Months Ended
	September 27, 2024		September 29, 2023
Cash Flows From Operating Activities
Net Earnings	$	377,376	$	396,557
Adjustments to reconcile net earnings to net cash provided by operating activities
Depreciation and amortization	62,054		54,179
Deferred income taxes	14,646		14,910
Share-based compensation	27,312		25,456
Contingent consideration	—		(8,600)
Impairment	—		7,800
Change in
Accounts receivable	(460)		(7,229)
Inventories	(1,871)		19,227
Trade accounts payable	(2,133)		(8,411)
Salaries and incentives	(9,901)		(2,993)
Retirement benefits and deferred compensation	4,525		2,955
Other accrued liabilities	(27,977)		(1,840)
Other	(7,085)		(641)
Net cash provided by operating activities	436,486		491,370
Cash Flows From Investing Activities
Property, plant and equipment additions	(92,788)		(145,626)
Acquisition of businesses, net of cash acquired	(7,750)		—
Other	5,322		(694)
Net cash used in investing activities	(95,216)		(146,320)
Cash Flows From Financing Activities
Borrowings on short-term lines of credit, net	(338)		9,125

Payments on long-term debt	—		(75,000)
Payments of debt issuance costs	—		(1,025)
Common stock issued	50,002		55,492
Common stock repurchased	(31,350)		(27,057)
Taxes paid related to net share settlement of equity awards	(4,612)		(1,225)
Cash dividends paid	(129,026)		(118,710)
Net cash used in financing activities	(115,324)		(158,400)
Effect of exchange rate changes on cash	556		(61)
Net increase in cash and cash equivalents	226,502		186,589
Cash and Cash Equivalents
Beginning of year	537,951		339,196
End of period	$	764,453	$	525,785

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
Income (Loss)

Total



Three Months Ended September 27, 2024
Balance, June 28, 2024	$	168,927	$	922,203	$	1,380,234	$	(52,879)	$	2,418,485

Shares issued	77		3,124		—		—		3,201
Shares repurchased	(175)		(1,104)		(12,308)		—		(13,587)
Stock compensation cost	—		6,701		—		—		6,701


Net earnings	—		—		122,197		—		122,197
Dividends declared ($0.255 per share)	—		—		(42,992)		—		(42,992)

Other comprehensive income (loss)	—		—		—		19,289		19,289
Balance, September 27, 2024	$	168,829	$	930,924	$	1,447,131	$	(33,590)	$	2,513,294



Nine Months Ended September 27, 2024
Balance, December 29, 2023	$	167,946	$	863,336	$	1,227,938	$	(34,995)	$	2,224,225

Shares issued	1,282		44,108		—		—		45,390
Shares repurchased	(399)		(2,049)		(28,902)		—		(31,350)
Stock compensation cost	—		25,529		—		—		25,529


Net earnings	—		—		377,376		—		377,376
Dividends declared ($0.765 per share)	—		—		(129,281)		—		(129,281)

Other comprehensive income (loss)	—		—		—		1,405		1,405
Balance, September 27, 2024	$	168,829	$	930,924	$	1,447,131	$	(33,590)	$	2,513,294



Three Months Ended September 29, 2023
Balance, June 30, 2023	$	168,985	$	850,900	$	1,154,453	$	(58,031)	$	2,116,307

Shares issued	101		3,338		—		—		3,439
Shares repurchased	(311)		(1,459)		(21,184)		—		(22,954)
Stock compensation cost	—		6,528		—		—		6,528


Net earnings	—		—		133,123		—		133,123
Dividends declared ($0.235 per share)	—		—		(39,743)		—		(39,743)

Other comprehensive income (loss)	—		—		—		(8,174)		(8,174)
Balance, September 29, 2023	$	168,775	$	859,307	$	1,226,649	$	(66,205)	$	2,188,526



Nine Months Ended September 29, 2023
Balance, December 30, 2022	$	167,702	$	784,477	$	976,851	$	(69,378)	$	1,859,652

Shares issued	1,500		52,767		—		—		54,267
Shares repurchased	(427)		(1,997)		(28,296)		—		(30,720)
Stock compensation cost	—		24,060		—		—		24,060


Net earnings	—		—		396,557		—		396,557
Dividends declared ($0.705 per share)	—		—		(118,463)		—		(118,463)

Other comprehensive income (loss)	—		—		—		3,173		3,173
Balance, September 29, 2023	$	168,775	$	859,307	$	1,226,649	$	(66,205)	$	2,188,526

See notes to consolidated financial statements.

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GRACO INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.Basis of Presentation

The consolidated balance sheet of Graco Inc. and subsidiaries (the “Company”) as of September 27, 2024 and the related statements of earnings, comprehensive income and shareholders' equity for the three and nine months ended September 27, 2024 and September 29, 2023, and cash flows for the nine months ended September 27, 2024 and September 29, 2023 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 September 27, 2024, 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 29, 2023 (the "2023 Annual Report").

The results of operations for interim periods are not necessarily indicative of results that will be realized for the full fiscal year.

2.Segment Information

The Company has three reportable segments: Contractor, Industrial and Process. Sales and operating earnings by segment were as follows (in thousands):


	Three Months Ended				Nine Months Ended
	September 27, 2024		September 29, 2023		September 27, 2024		September 29, 2023
Net Sales
Contractor	$	242,295	$	245,269	$	741,975	$	746,888
Industrial	156,294		157,084		453,993		470,797
Process	120,623		137,319		368,676		411,277
Total	$	519,212	$	539,672	$	1,564,644	$	1,628,962
Operating Earnings
Contractor	$	71,053	$	73,512	$	221,555	$	216,152
Industrial	52,361		54,298		149,881		162,955
Process	32,452		43,001		104,772		127,186
Unallocated corporate (expense)	(10,143)		(8,422)		(36,128)		(30,184)
Contingent consideration	—		8,600		—		8,600
Impairment	—		(7,800)		—		(7,800)
Total	$	145,723	$	163,189	$	440,080	$	476,909

Assets by segment were as follows (in thousands):


	September 27, 2024		December 29, 2023
Contractor	$	754,154	$	712,224
Industrial	616,317		640,487
Process	547,054		554,753
Unallocated corporate	1,058,118		814,543
Total	$	2,975,643	$	2,722,007

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Geographic information follows (in thousands):


	Three Months Ended				Nine Months Ended
	September 27, 2024		September 29, 2023		September 27, 2024		September 29, 2023
Net Sales (based on customer location)
United States	$	289,553	$	288,610	$	872,480	$	879,552
Other countries	229,659		251,062		692,164		749,410
Total	$	519,212	$	539,672	$	1,564,644	$	1,628,962


	September 27, 2024		December 29, 2023
Long-lived Assets
United States	$	642,163	$	622,430
Other countries	124,535		119,283
Total	$	766,698	$	741,713

3.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				Nine Months Ended
	September 27, 2024		September 29, 2023		September 27, 2024		September 29, 2023
Net earnings available to common shareholders	$	122,197	$	133,123	$	377,376	$	396,557
Weighted average shares outstanding for basic earnings per share	168,810		169,005		168,800		168,569
Dilutive effect of stock options computed using the treasury stock method and the average market price	3,301		3,775		3,548		3,767
Weighted average shares outstanding for diluted earnings per share	172,111		172,780		172,348		172,336
Basic earnings per share	$	0.72	$	0.79	$	2.24	$	2.35
Diluted earnings per share	$	0.71	$	0.77	$	2.19	$	2.30

Anti-dilutive shares not included in diluted earnings per share computation	1,154		1,200		3,293		2,033

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4.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 29, 2023	9,904	$	49.09	7,274	$	41.46
Granted	925	89.23
Exercised	(997)	29.59
Canceled	(114)	75.65
Outstanding, September 27, 2024	9,718	$	55.20	7,105	$	46.62

The Company recognized year-to-date share-based compensation expense of $27.3 million in 2024 and $25.5 million in 2023. As of September 27, 2024, there was $19.7 million of unrecognized compensation cost related to unvested options, expected to be recognized over a weighted average period of 2.4 years.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions and results:


	Nine Months Ended
	September 27, 2024			September 29, 2023
Expected life in years	6.6			6.7
Interest rate	4.2		%	4.0		%
Volatility	26.3		%	26.3		%
Dividend yield	1.1		%	1.3		%
Weighted average fair value per share	$	28.03		$	21.76

Under the Company’s Employee Stock Purchase Plan, the Company issued 330,000 shares in 2024 and 323,000 shares in 2023. 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:


	Nine Months Ended
	September 27, 2024			September 29, 2023
Expected life in years	1.0			1.0
Interest rate	4.9		%	5.1		%
Volatility	24.2		%	26.4		%
Dividend yield	1.1		%	1.4		%
Weighted average fair value per share	$	23.16		$	18.04

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5.Retirement Benefits

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


	Three Months Ended				Nine Months Ended
	September 27, 2024		September 29, 2023		September 27, 2024		September 29, 2023
Pension Benefits
Service cost	$	1,102	$	1,438	$	3,822	$	4,369
Interest cost	2,256		3,632		6,890		11,207
Expected return on assets	(2,543)		(6,399)		(7,610)		(14,354)
Amortization and other	835		3,041		2,478		3,896
Net periodic benefit cost	$	1,650	$	1,712	$	5,580	$	5,118
Postretirement Medical
Service cost	$	91	$	61	$	258	$	261
Interest cost	305		454		861		874
Amortization	53		(280)		—		(100)
Net periodic benefit cost	$	449	$	235	$	1,119	$	1,035

6.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 September 27, 2024
Balance, June 28, 2024	$	(29,379)	$	(23,500)	$	(52,879)
Other comprehensive income (loss) before reclassifications	—		19,491		19,491
Reclassified to pension cost and deferred tax	(202)		—		(202)

Balance, September 27, 2024	$	(29,581)	$	(4,009)	$	(33,590)



Nine Months Ended September 27, 2024
Balance, December 29, 2023	$	(31,012)	$	(3,983)	$	(34,995)
Other comprehensive income (loss) before reclassifications	—		(26)		(26)
Reclassified to pension cost and deferred tax	1,431		—		1,431

Balance, September 27, 2024	$	(29,581)	$	(4,009)	$	(33,590)



Three Months Ended September 29, 2023
Balance, June 30, 2023	$	(37,915)	$	(20,116)	$	(58,031)
Other comprehensive income (loss) before reclassifications	—		(9,022)		(9,022)
Reclassified to pension cost and deferred tax	848		—		848

Balance, September 29, 2023	$	(37,067)	$	(29,138)	$	(66,205)


Nine Months Ended September 29, 2023
Balance, December 30, 2022	$	(39,734)	$	(29,644)	$	(69,378)
Other comprehensive income (loss) before reclassifications	—		506		506
Reclassified to pension cost and deferred tax	2,667		—		2,667

Balance, September 29, 2023	$	(37,067)	$	(29,138)	$	(66,205)

Amoun

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

7.Receivables and Credit Losses

Accounts receivable include trade receivables of $344.1 million and other receivables of $10.9 million as of September 27, 2024 and $343.0 million and $11.4 million of trade receivables and other receivables as of December 29, 2023.

Allowance for Credit Losses

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


	Three Months Ended				Nine Months Ended
	September 27, 2024		September 29, 2023		September 27, 2024		September 29, 2023
Balance, beginning	$	4,885	$	4,199	$	4,655	$	6,130
Additions charged to costs and expenses	233		366		738		646
Deductions from reserves (1)	(295)		(595)		(462)		(2,864)
Other additions (deductions) (2)	118		(88)		10		(30)
Balance, ending	$	4,941	$	3,882	$	4,941	$	3,882

(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.

8.Inventories

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


	September 27, 2024		December 29, 2023
Finished products and components	$	231,345	$	221,847
Products and components in various stages of completion	121,994		131,906
Raw materials and purchased components	207,551		202,294
Subtotal	560,890		556,047
Reduction to LIFO cost	(119,973)		(117,698)
Total	$	440,917	$	438,349

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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 September 27, 2024
Cost	$	194,417	$	14,174	$	1,700	$	62,633	$	272,924
Accumulated amortization	(139,594)		(9,828)		(734)		—		(150,156)
Foreign currency translation	(7,287)		(330)		—		1,813		(5,804)
Book value	$	47,536	$	4,016	$	966	$	64,446	$	116,964
Weighted average life in years	13		9		6		N/A


As of December 29, 2023
Cost	$	191,417	$	14,174	$	1,300	$	62,633	$	269,524
Accumulated amortization	(128,248)		(8,547)		(561)		—		(137,356)
Foreign currency translation	(7,591)		(344)		—		2,025		(5,910)
Book value	$	55,578	$	5,283	$	739	$	64,658	$	126,258
Weighted average life in years	13		9		6		N/A

Amortization of intangibles for the third quarter was $4.5 million in 2024 and $4.4 million in 2023, and for the year to date was $12.8 million in 2024 and $13.2 million in 2023. Estimated annual amortization expense based on the current carrying amount of other intangible assets is as follows (in thousands):


	2024 (Remainder)		2025		2026		2027		2028		Thereafter
Estimated Amortization Expense	$	4,264	$	16,908	$	9,729	$	6,913	$	4,707	$	9,997

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


	Contractor		Industrial		Process		Total
Balance, December 29, 2023	$	77,542	$	143,132	$	149,554	$	370,228
Additions, adjustments from business acquisitions	—		—		4,022		4,022

Foreign currency translation	65		(667)		814		212
Balance, September 27, 2024	$	77,607	$	142,465	$	154,390	$	374,462

In the third quarter the Company completed an acquisition of a business that is not material to the consolidated financial statements.

On September 26, 2024, the Company entered into a definitive agreement to acquire Corob S.p.A. ("Corob") for €230 million, subject to certain customary adjustments, with up to €30 million in additional contingent consideration. Corob is a global leader in the design and manufacturing of high-performance volumetric and gravimetric dispensing, mixing, and shaking equipment used in mission-critical tinting applications. The acquisition is expected to be completed during the fourth quarter of fiscal 2024 and funded with cash on hand.

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10.Other Current Liabilities

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


	September 27, 2024		December 29, 2023
Accrued self-insurance retentions	$	8,735	$	8,654
Accrued warranty and service liabilities	15,074		15,408
Accrued trade promotions	10,254		14,312
Payable for employee stock purchases	12,806		16,639
Customer advances and deferred revenue	52,155		51,578
Income taxes payable	7,054		9,837
Tax payable, other	12,076		12,289
Right of return refund liability	16,967		17,826
Operating lease liabilities, current	7,089		8,242

Other	26,514		30,574
Total	$	168,724	$	185,359

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 29, 2023	$	15,408

Charged to expense	7,514
Margin on parts sales reversed	977
Reductions for claims settled	(8,825)
Balance, September 27, 2024	$	15,074

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 nine months ended September 27, 2024, we recognized $7.7 million and $49.8 million, respectively, that was included in deferred revenue at December 29, 2023. During the three and nine months ended September 29, 2023, we recognized $6.7 million and $43.3 million, respectively, that were included in deferred revenue at December 30, 2022.

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	September 27, 2024		December 29, 2023
Assets
Cash surrender value of life insurance	2	$	25,040	$	22,255


Liabilities
Contingent consideration	3	$	600	$	1,375
Deferred compensation	2	7,772		6,445
Forward exchange contracts	2	22		422
Total liabilities at fair value		$	8,394	$	8,242

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

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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.

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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 Process. 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.

Consolidated Results

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


	Three Months Ended						Nine Months Ended
	Sep 27, 2024		Sep 29, 2023		% Change		Sep 27, 2024		Sep 29, 2023		% Change
Net Sales	$	519.2	$	539.7	(4)	%	$	1,564.6	$	1,629.0	(4)	%
Operating Earnings	145.7		163.2		(11)	%	440.1		476.9		(8)	%
Operating Earnings, adjusted (1)	145.7		162.4		(10)	%	440.1		476.1		(8)	%
Net Earnings	122.2		133.1		(8)	%	377.4		396.6		(5)	%
Net Earnings, adjusted (1)	122.2		131.5		(7)	%	367.1		386.9		(5)	%
Diluted Net Earnings per Common Share	$	0.71	$	0.77	(8)	%	$	2.19	$	2.30	(5)	%
Diluted Net Earnings per Common Share, adjusted (1)	$	0.71	$	0.76	(7)	%	$	2.13	$	2.24	(5)	%

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

Net sales for the third quarter decreased 4 percent from the comparable period last year. Regionally, net sales decreased in EMEA and Asia Pacific. Net sales in the Americas increased in the third quarter and were flat for the year to date. Changes in currency translation rates did not have a significant impact on worldwide net sales for the third quarter and decreased worldwide net sales by $4 million for the year to date.

Operating earnings for the third quarter decreased 11 percent from the comparable period last year due to lower sales volume and higher operating expenses.

Net earnings for the third quarter decreased 8 percent from the comparable period last year as increased interest income and lower interest expense partially offset the decrease in operating earnings. On an adjusted basis, net earnings decreased 7 percent.

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


	Three Months Ended						Nine Months Ended
	September 27, 2024			September 29, 2023			September 27, 2024			September 29, 2023
Operating earnings	$	145.7		$	163.2		$	440.1		$	476.9
Contingent consideration	—			(8.6)			—			(8.6)
Impairment	—			7.8			—			7.8
Operating earnings, adjusted	$	145.7		$	162.4		$	440.1		$	476.1

Earnings before income taxes	$	151.3		$	164.3		$	456.8		$	481.3
Contingent consideration	—			(8.6)			—			(8.6)
Impairment	—			7.8			—			7.8
Earnings before income taxes, adjusted	$	151.3		$	163.5		$	456.8		$	480.5

Income taxes, as reported	$	29.1		$	31.2		$	79.4		$	84.7


Excess tax benefit from option exercises	—			0.8			10.3			8.9
Income taxes, adjusted	$	29.1		$	32.0		$	89.7		$	93.6

Effective income tax rate
As reported	19.2		%	19.0		%	17.4		%	17.6		%
Adjusted	19.2		%	19.6		%	19.7		%	19.5		%

Net Earnings, as reported	$	122.2		$	133.1		$	377.4		$	396.6
Contingent consideration	—			(8.6)			—			(8.6)
Impairment	—			7.8			—			7.8
Excess tax benefit from option exercises	—			(0.8)			(10.3)			(8.9)
Net Earnings, adjusted	$	122.2		$	131.5		$	367.1		$	386.9

Weighted Average Diluted Shares	172.1			172.8			172.3			172.3
Diluted Earnings per Share
As reported	$	0.71		$	0.77		$	2.19		$	2.30
Adjusted	$	0.71		$	0.76		$	2.13		$	2.24

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


	Three Months Ended				Nine Months Ended
	September 27, 2024		September 29, 2023		September 27, 2024		September 29, 2023
Net Sales	100.0	%	100.0	%	100.0	%	100.0	%
Cost of products sold	46.8		47.3		46.1		47.1
Gross Profit	53.2		52.7		53.9		52.9
Product development	4.1		3.7		4.2		3.8
Selling, marketing and distribution	12.5		11.2		12.8		11.9
General and administrative	8.5		7.7		8.8		7.9
Contingent consideration	—		(1.6)		—		(0.5)
Impairment	—		1.5		—		0.5
Operating Earnings	28.1		30.2		28.1		29.3
Interest expense	0.1		0.3		0.1		0.3

Other income, net	(1.2)		(0.5)		(1.2)		(0.5)
Earnings Before Income Taxes	29.2		30.4		29.2		29.5
Income taxes	5.7		5.7		5.1		5.2
Net Earnings	23.5	%	24.7	%	24.1	%	24.3	%

Net Sales

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


	Three Months Ended				Nine Months Ended
	September 27, 2024		September 29, 2023		September 27, 2024		September 29, 2023
Americas(1)	$	334.7	$	332.7	$	1,005.5	$	1,010.5
EMEA(2)	105.1		107.1		324.9		331.7
Asia Pacific	79.4		99.9		234.2		286.8
Consolidated	$	519.2	$	539.7	$	1,564.6	$	1,629.0

(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				Nine Months
	Volume and Price	Acquisitions	Currency	Total	Volume and Price	Acquisitions	Currency	Total
Americas	1%	0%	0%	1%	0%	0%	0%	0%
EMEA	(3)%	0%	1%	(2)%	(3)%	0%	1%	(2)%
Asia Pacific	(21)%	0%	0%	(21)%	(17)%	0%	(1)%	(18)%
Consolidated	(4)%	0%	0%	(4)%	(4)%	0%	0%	(4)%

Gross Profit

Gross profit margin rate improved approximately 1 percentage point for both the third quarter and year to date from the comparable periods last year due to favorable price-cost dynamics.

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Operating Expenses

Total operating expenses increased $9 million (7 percent) for the third quarter and $19 million (5 percent) for the year to date, respectively, compared to last year. More than half of the increase for the quarter and year to date was from investments in new product development and other growth initiatives, including the relocation to a new distribution center. Reductions in volume and earnings-based expenses of $3 million for the quarter and $8 million for the year to date partially offset the increase in operating expenses.

Interest and Other (Income) Expense

Interest expense was $1 million lower for the third quarter and $3 million lower for the year to date compared to the same periods last year as private placement debt was repaid in the third quarter of 2023. Other income increased $4 million for the quarter and $10 million for the year to date from the comparable periods last year largely due to increased interest income.

Income Taxes

The effective income tax rate was 19 percent for the third quarter and 17 percent for the year to date. Adjusted to exclude the impacts of excess tax benefits from stock option exercises, the adjusted effective income tax rate of 19 percent for the quarter and 20 percent for the year to date was comparable to 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						Nine Months Ended
	September 27, 2024			September 29, 2023			September 27, 2024			September 29, 2023
Net Sales
Americas	$	182.4		$	185.7		$	552.9		$	558.2
EMEA	40.1			41.2			131.2			131.8
Asia Pacific	19.8			18.4			57.9			56.9
Total	$	242.3		$	245.3		$	742.0		$	746.9
Operating earnings as a percentage of net sales	29		%	30		%	30		%	29		%

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


	Three Months				Nine Months
	Volume and Price	Acquisitions	Currency	Total	Volume and Price	Acquisitions	Currency	Total
Americas	(2)%	0%	0%	(2)%	(1)%	0%	0%	(1)%
EMEA	(4)%	0%	1%	(3)%	(1)%	0%	1%	0%
Asia Pacific	7%	0%	0%	7%	4%	0%	(2)%	2%
Segment Total	(1)%	0%	0%	(1)%	0%	0%	(1)%	(1)%

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Contractor segment net sales decreased 1 percent for both the third quarter and year to date as favorable response to new product offerings was unable to offset softness in worldwide construction markets. For the quarter, price realization was unable to offset higher expenses, which resulted in a 1 percentage point decrease in the operating margin rate. The operating margin rate for the year to date increased 1 percentage point as price realization and lower product costs combined to more than offset higher expenses.

Industrial Segment

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

(dollars in millions):


	Three Months Ended						Nine Months Ended
	September 27, 2024			September 29, 2023			September 27, 2024			September 29, 2023
Net Sales
Americas	$	72.1		$	61.5		$	206.2		$	190.5
EMEA	48.0			46.2			142.7			143.4
Asia Pacific	36.2			49.4			105.1			136.9
Total	$	156.3		$	157.1		$	454.0		$	470.8
Operating earnings as a percentage of net sales	34		%	35		%	33		%	35		%

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


	Three Months				Nine Months
	Volume and Price	Acquisitions	Currency	Total	Volume and Price	Acquisitions	Currency	Total
Americas	18%	0%	(1)%	17%	8%	0%	0%	8%
EMEA	3%	0%	1%	4%	(1)%	0%	0%	(1)%
Asia Pacific	(27)%	0%	0%	(27)%	(22)%	0%	(1)%	(23)%
Segment Total	0%	0%	(1)%	(1)%	(3)%	0%	(1)%	(4)%

Industrial segment net sales decreased 1 percent for the third quarter as timing of finishing system sales in the Americas largely offset declines in Asia Pacific. For the year to date, net sales declined 4 percent as sales growth in the Americas was unable to offset decreases in both EMEA and Asia Pacific. The operating margin rate decreased 1 percentage point for the quarter and 2 percentage points for the year to date as price realization was unable to offset the unfavorable effects of lower volume, product and channel mix, and higher expenses.

Process Segment

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

(dollars in millions):


	Three Months Ended						Nine Months Ended
	September 27, 2024			September 29, 2023			September 27, 2024			September 29, 2023
Net Sales
Americas	$	80.2		$	85.5		$	246.4		$	261.7
EMEA	17.0			19.7			51.1			56.5
Asia Pacific	23.4			32.1			71.2			93.1
Total	$	120.6		$	137.3		$	368.7		$	411.3
Operating earnings as a percentage of net sales	27		%	31		%	28		%	31		%

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


	Three Months				Nine Months
	Volume and Price	Acquisitions	Currency	Total	Volume and Price	Acquisitions	Currency	Total
Americas	(6)%	0%	0%	(6)%	(6)%	0%	0%	(6)%
EMEA	(14)%	0%	0%	(14)%	(10)%	0%	0%	(10)%
Asia Pacific	(27)%	0%	0%	(27)%	(23)%	0%	0%	(23)%
Segment Total	(12)%	0%	0%	(12)%	(10)%	0%	0%	(10)%

Continued weakness in the Process segment's semiconductor product application drove a double-digit decrease in net sales for both the third quarter and year to date. Operating margin rates for the quarter and year to date declined, driven by lower sales volume and higher expenses.

Liquidity and Capital Resources

Net cash provided by operating activities totaled $436 million in the first nine months of 2024 compared to $491 million in the same period last year. Lower net earnings, increased inventory purchases, and the timing of estimated income tax payments in 2024 drove most of the decrease. Inventory levels increased in 2024 primarily due to the effect of new product offerings. Significant uses of cash in the first nine months of 2024 included plant and equipment additions of $93 million and dividend payments of $129 million. Net proceeds from shares issued totaled $45 million, which were partially offset by share repurchases of $31 million.

For the first nine months of 2023, significant uses of cash included plant and equipment additions of $146 million, dividend payments of $119 million, and long-term debt payments of $75 million. Net proceeds from shares issued totaled $54 million, which was partially offset by share repurchases of $27 million.

As of September 27, 2024, the Company had available liquidity of $1,539 million, including cash and cash equivalents of $764 million, of which $226 million was held outside of the U.S., and available credit under existing committed credit facilities of $775 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 2024 are expected to be approximately $120 million, including $70 million in facility expansion projects. The Company may make opportunistic share repurchases going forward.

Outlook

The Company's end markets and regions continue to face demand challenges. The Company reaffirms its full-year 2024 revenue guidance of a low single-digit decline 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 2023 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.

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industrial activity worldwide; changes in currency translation rates; international and domestic political 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 rates or the adoption of new tax legislation; and costs associated with legal proceedings. Please refer to Item 1A of the 2023 Annual Report 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.

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 2023 Annual Report.

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 2023 Annual Report.

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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)
June 29, 2024 - July 26, 2024	144,134	$	78.46	—	13,181,563
July 27, 2024 - August 23, 2024	30,554	$	78.87	—	13,151,009
August 24, 2024 - September 27, 2024	—	$	—	—	13,151,009

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Item 5.Other Information

During the three months ended September 27, 2024, 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 2022 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 Third Quarter Earnings dated October 23, 2024.

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:

October 23, 2024

By:

/s/ Mark W. Sheahan

Mark W. Sheahan

President and Chief Executive Officer

(Principal Executive Officer)

Date:

October 23, 2024

By:

/s/ David M. Lowe

David M. Lowe

Chief Financial Officer and Treasurer

(Principal Financial Officer)

Date:

October 23, 2024

By:

/s/ Christopher D. Knutson

Christopher D. Knutson

Executive Vice President, Corporate Controller

(Principal Accounting Officer)

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:

October 23, 2024

/s/ Mark W. Sheahan

Mark W. Sheahan

President and Chief Executive Officer

Exhibit 31.2

CERTIFICATION

I, David M. Lowe, certify that:

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

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:

October 23, 2024

/s/ David M. Lowe

David M. Lowe

Chief Financial Officer and Treasurer

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:

October 23, 2024

/s/ Mark W. Sheahan

Mark W. Sheahan

President and Chief Executive Officer

Date:

October 23, 2024

/s/ David M. Lowe

David M. Lowe

Chief Financial Officer and Treasurer

Exhibit 99.1

GRACO INC.

P.O. Box 1441

Minneapolis, MN

55440-1441

NYSE: GGG


FOR IMMEDIATE RELEASE:			FOR FURTHER INFORMATION:
Wednesday, October 23, 2024			Financial Contact: David M. Lowe, 612-623-6456 Media Contact: Meredith A. Sobieck, 612-623-6427 Meredith_A_Sobieck@graco.com

Graco Reports Third Quarter Results

MINNEAPOLIS (October 23, 2024) – Graco Inc. (NYSE: GGG) today announced results for the third quarter ended September 27, 2024.

Summary

$ in millions except per share amounts


	Three Months Ended						Nine Months Ended
	Sep 27, 2024		Sep 29, 2023		% Change		Sep 27, 2024		Sep 29, 2023		% Change
Net Sales	$	519.2	$	539.7	(4)	%	$	1,564.6	$	1,629.0	(4)	%
Operating Earnings	145.7		163.2		(11)	%	440.1		476.9		(8)	%
Net Earnings	122.2		133.1		(8)	%	377.4		396.6		(5)	%
Diluted Net Earnings per Common Share	$	0.71	$	0.77	(8)	%	$	2.19	$	2.30	(5)	%

Adjusted (non-GAAP): (1)
Operating Earnings, adjusted	$	145.7	$	162.4	(10)	%	$	440.1	$	476.1	(8)	%
Net Earnings, adjusted	$	122.2	$	131.5	(7)	%	$	367.1	$	386.9	(5)	%
Diluted Net Earnings per Common Share, adjusted	$	0.71	$	0.76	(7)	%	$	2.13	$	2.24	(5)	%

(1) Excludes impacts of excess tax benefits from stock option exercises, contingent consideration fair value adjustments and impairment charges. See Financial Results Adjusted for Comparability below for a reconciliation of adjusted non-GAAP financial measures to GAAP.

•Net sales for the third quarter decreased 4 percent, with decreases in all segments. Regionally, sales increased modestly in the Americas and decreased in EMEA and Asia Pacific.

•Lower sales volume and higher operating expenses contributed to an 11 percent decline in operating earnings for the third quarter.

•Net earnings for the third quarter decreased 8 percent as increased interest income and lower interest expense partially offset the decrease in operating earnings.

"We continued to experience soft demand trends in our core end markets, especially in Asia Pacific, which negatively affected our sales for the third quarter," said Mark Sheahan, Graco's President and CEO. "The decline in demand was widespread, with the most significant impact felt in the Industrial and Process segments. However, our gross margin remained resilient despite the decrease in volume."

Page 2 GRACO

Consolidated Results

Net sales for the third quarter decreased 4 percent from the comparable period last year. Third quarter net sales increased 1 percent in the Americas, decreased 2 percent in EMEA (3 percent at consistent translation rates) and decreased 21 percent in Asia Pacific. Year-to-date net sales decreased 4 percent from the comparable period last year. Year-to-date net sales were flat in the Americas, decreased 2 percent in EMEA (3 percent at consistent translation rates) and decreased 18 percent in Asia Pacific (17 percent at consistent translation rates). Changes in currency translation rates did not have a significant impact on worldwide net sales for the third quarter and decreased worldwide net sales by $4 million for the year to date.

Gross profit margin rate improved approximately 1 percentage point for both the third quarter and year to date from the comparable periods last year due to favorable price-cost dynamics.

The effective income tax rate was 19 percent for the third quarter and 17 percent for 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 19 percent for the quarter and 20 percent for the year to date was comparable to last year.

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									Nine Months
	Contractor			Industrial			Process			Contractor			Industrial			Process
Net Sales (in millions)	$	242.3		$	156.3		$	120.6		$	742.0		$	454.0		$	368.7
Percentage change from last year
Sales	(1)		%	(1)		%	(12)		%	(1)		%	(4)		%	(10)		%
Operating earnings	(3)		%	(4)		%	(25)		%	3		%	(8)		%	(18)		%
Operating earnings as a percentage of sales
2024	29		%	34		%	27		%	30		%	33		%	28		%
2023	30		%	35		%	31		%	29		%	35		%	31		%

Page 3 GRACO

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


	Three Months				Nine Months
	Volume and Price	Acquisitions	Currency	Total	Volume and Price	Acquisitions	Currency	Total
Americas	(2)%	0%	0%	(2)%	(1)%	0%	0%	(1)%
EMEA	(4)%	0%	1%	(3)%	(1)%	0%	1%	0%
Asia Pacific	7%	0%	0%	7%	4%	0%	(2)%	2%
Consolidated	(1)%	0%	0%	(1)%	0%	0%	(1)%	(1)%

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


	Three Months				Nine Months
	Volume and Price	Acquisitions	Currency	Total	Volume and Price	Acquisitions	Currency	Total
Americas	18%	0%	(1)%	17%	8%	0%	0%	8%
EMEA	3%	0%	1%	4%	(1)%	0%	0%	(1)%
Asia Pacific	(27)%	0%	0%	(27)%	(22)%	0%	(1)%	(23)%
Consolidated	0%	0%	(1)%	(1)%	(3)%	0%	(1)%	(4)%

Industrial segment net sales decreased 1 percent for the third quarter as timing of finishing system sales in the Americas largely offset declines in Asia Pacific. For the year to date, sales growth in the Americas was unable to offset decreases in both EMEA and Asia Pacific. The operating margin rate decreased 1 percentage point for the quarter and 2 percentage points for the year to date as price realization was unable to offset the unfavorable effects of lower volume, product and channel mix, and higher expenses.

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


	Three Months				Nine Months
	Volume and Price	Acquisitions	Currency	Total	Volume and Price	Acquisitions	Currency	Total
Americas	(6)%	0%	0%	(6)%	(6)%	0%	0%	(6)%
EMEA	(14)%	0%	0%	(14)%	(10)%	0%	0%	(10)%
Asia Pacific	(27)%	0%	0%	(27)%	(23)%	0%	0%	(23)%
Consolidated	(12)%	0%	0%	(12)%	(10)%	0%	0%	(10)%

Outlook

"Overall, many of our end markets and regions continue to face challenges," said Sheahan. "We are reaffirming our full-year revenue guidance, which anticipates a low single-digit decline on an organic, constant currency basis. Despite this outlook, we remain dedicated to our established core strategies: creating innovative products, expanding our distribution, exploring new and adjacent markets, and pursuing strategic acquisitions. We are eager to continue advancing these strategies within the framework of the new organizational structure."

Page 4 GRACO

2025 Change in Organizational Structure

As previously announced, effective January 1, 2025, the Company will move to a global, customer-centric operating structure with four business divisions: Industrial, Powder, Expansion Markets and Contractor.

Industrial Division:

The Company’s current Industrial and Lubrication Equipment Divisions, along with the Process Transfer Equipment business that is part of the Company’s Process Division, will be combined to form the new global Industrial Division.

Powder Division:

The Powder Division is currently structured as a global business and will continue to operate as it does today.

Expansion Markets Division:

The Expansion Markets Division will focus on driving the Company's inorganic growth in new and adjacent markets. The Company’s existing environmental, semiconductor, high-pressure valves and electric motors businesses, together with select future ventures and acquisitions, will reside within this newly-formed division.

Contractor Division:

The Company's current Contractor Equipment Division, renamed the Contractor Division, will be restructured to serve the needs of its global customers.

Reportable Segments:

Starting January 1, 2025, the Company will classify its business into three reportable segments: Industrial, Expansion Markets and Contractor.

•The Industrial segment, consisting of the newly formed Industrial Division and the Powder Division.

•The Expansion Markets segment consisting of the Expansion Markets Division.

•The Contractor segment, consisting of the Contractor Division, will remain unchanged as a reporting segment relative to prior periods.

Segment operating results will be reported under the new organizational structure for the first quarter of 2025, in connection with the effective date of the realignment. Historic segment information will be recasted to conform to the new organizational structure. The Company expects to provide recast segment financial information in connection with its earnings release for the fourth quarter of 2024 as supplemental information on the Company’s website at www.graco.com.

Page 5 GRACO

Financial Results Adjusted for Comparability

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


	Three Months Ended						Nine Months Ended
	Sep 27, 2024			Sep 29, 2023			Sep 27, 2024			Sep 29, 2023
Operating earnings, as reported	$	145.7		$	163.2		$	440.1		$	476.9
Contingent consideration	—			(8.6)			—			(8.6)
Impairment	—			7.8			—			7.8
Operating earnings, adjusted	$	145.7		$	162.4		$	440.1		$	476.1

Earnings before income taxes	$	151.3		$	164.3		$	456.8		$	481.3

Contingent consideration	—			(8.6)			—			(8.6)
Impairment	—			7.8			—			7.8
Earnings before income taxes, adjusted	$	151.3		$	163.5		$	456.8		$	480.5

Income taxes, as reported	$	29.1		$	31.2		$	79.4		$	84.7


Excess tax benefit from option exercises	—			0.8			10.3			8.9

Income taxes, adjusted	$	29.1		$	32.0		$	89.7		$	93.6

Effective income tax rate
As reported	19.2		%	19.0		%	17.4		%	17.6		%
Adjusted	19.2		%	19.6		%	19.7		%	19.5		%

Net Earnings, as reported	$	122.2		$	133.1		$	377.4		$	396.6

Contingent consideration	—			(8.6)			—			(8.6)
Impairment	—			7.8			—			7.8

Excess tax benefit from option exercises	—			(0.8)			(10.3)			(8.9)
Net Earnings, adjusted	$	122.2		$	131.5		$	367.1		$	386.9

Weighted Average Diluted Shares	172.1			172.8			172.3			172.3
Diluted Earnings per Share
As reported	$	0.71		$	0.77		$	2.19		$	2.30
Adjusted	$	0.71		$	0.76		$	2.13		$	2.24

Page 6 GRACO

Cautionary Statement Regarding Forward-Looking Statements

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 political 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 rates or the adoption of new tax legislation; and costs associated with legal proceedings. Please refer to Item 1A of our Annual Report on Form 10-K for fiscal year 2023 (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 2023 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, October 24, 2024, at 11 a.m. ET, 10 a.m. CT, to discuss Graco’s third 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				Nine Months Ended
	Sep 27, 2024		Sep 29, 2023		Sep 27, 2024		Sep 29, 2023
Net Sales	$	519,212	$	539,672	$	1,564,644	$	1,628,962
Cost of products sold	243,082		255,148		721,463		767,883
Gross Profit	276,130		284,524		843,181		861,079
Product development	21,306		19,817		65,076		61,582
Selling, marketing and distribution	65,143		60,495		200,773		194,258
General and administrative	43,958		41,823		137,252		129,130
Contingent consideration	—		(8,600)		—		(8,600)
Impairment	—		7,800		—		7,800
Operating Earnings	145,723		163,189		440,080		476,909
Interest expense	656		1,391		2,034		4,536
Other (income) expense, net	(6,225)		(2,483)		(18,756)		(8,877)
Earnings Before Income Taxes	151,292		164,281		456,802		481,250
Income taxes	29,095		31,158		79,426		84,693
Net Earnings	$	122,197	$	133,123	$	377,376	$	396,557
Net Earnings per Common Share
Basic	$	0.72	$	0.79	$	2.24	$	2.35
Diluted	$	0.71	$	0.77	$	2.19	$	2.30
Weighted Average Number of Shares
Basic	168,810		169,005		168,800		168,569
Diluted	172,111		172,780		172,348		172,336

SEGMENT INFORMATION (Unaudited)

(In thousands)


	Three Months Ended				Nine Months Ended
	Sep 27, 2024		Sep 29, 2023		Sep 27, 2024		Sep 29, 2023
Net Sales
Contractor	$	242,295	$	245,269	$	741,975	$	746,888
Industrial	156,294		157,084		453,993		470,797
Process	120,623		137,319		368,676		411,277
Total	$	519,212	$	539,672	$	1,564,644	$	1,628,962
Operating Earnings
Contractor	$	71,053	$	73,512	$	221,555	$	216,152
Industrial	52,361		54,298		149,881		162,955
Process	32,452		43,001		104,772		127,186
Unallocated corporate (expense)	(10,143)		(8,422)		(36,128)		(30,184)
Contingent consideration	—		8,600		—		8,600
Impairment	—		(7,800)		—		(7,800)
Total	$	145,723	$	163,189	$	440,080	$	476,909

Cover - shares	9 Months Ended
Cover - shares	Sep. 27, 2024	Oct. 09, 2024
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Sep. 27, 2024
Document Transition Report	false
Entity File Number	001-09249
Entity Registrant Name	GRACO INC.
Entity Incorporation, State	MN
Entity Tax Identification Number	41-0285640
Entity Address, Address Description	88 - 11th Avenue N.E.
Entity Address, City or Town	Minneapolis,
Entity Address, State or Province	MN
Entity Address, Postal Zip Code	55413
City Area Code	(612)
Local Phone Number	623-6000
Title of 12(b) Security	Common Stock, par value $1.00 per share
Trading Symbol	GGG
Security Exchange Name	NYSE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		168,849,576
Amendment Flag	false
Entity Central Index Key	0000042888
Current Fiscal Year End Date	--12-27
Document Fiscal Year Focus	2024
Document Fiscal Period Focus	Q3

Consolidated Statements of Earnings (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 27, 2024	Sep. 29, 2023	Sep. 27, 2024	Sep. 29, 2023
Income Statement [Abstract]
Net Sales	$ 519,212	$ 539,672	$ 1,564,644	$ 1,628,962
Cost of products sold	243,082	255,148	721,463	767,883
Gross Profit	276,130	284,524	843,181	861,079
Product development	21,306	19,817	65,076	61,582
Selling, marketing and distribution	65,143	60,495	200,773	194,258
General and administrative	43,958	41,823	137,252	129,130
Contingent consideration	0	(8,600)	0	(8,600)
Impairment	0	7,800	0	7,800
Operating Earnings	145,723	163,189	440,080	476,909
Interest expense	656	1,391	2,034	4,536
Other income, net	(6,225)	(2,483)	(18,756)	(8,877)
Earnings Before Income Taxes	151,292	164,281	456,802	481,250
Income taxes	29,095	31,158	79,426	84,693
Net Earnings	$ 122,197	$ 133,123	$ 377,376	$ 396,557
Net Earnings per Common Share
Basic (in dollars per share)	$ 0.72	$ 0.79	$ 2.24	$ 2.35
Diluted (in dollars per share)	$ 0.71	$ 0.77	$ 2.19	$ 2.30

Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 27, 2024	Sep. 29, 2023	Sep. 27, 2024	Sep. 29, 2023
Statement of Comprehensive Income [Abstract]
Net Earnings	$ 122,197	$ 133,123	$ 377,376	$ 396,557
Components of other comprehensive income (loss)
Cumulative translation adjustment	19,491	(9,022)	(26)	506
Pension and postretirement medical liability adjustment	(268)	1,100	1,954	3,427
Income taxes - pension and postretirement medical liability adjustment	66	(252)	(523)	(760)
Other comprehensive income (loss)	19,289	(8,174)	1,405	3,173
Comprehensive Income	$ 141,486	$ 124,949	$ 378,781	$ 399,730

Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Sep. 27, 2024	Dec. 29, 2023
Current Assets
Cash and cash equivalents	$ 764,453	$ 537,951
Accounts receivable, less allowances of $6,200 and $5,300	354,999	354,439
Inventories	440,917	438,349
Other current assets	52,126	35,070
Total current assets	1,612,495	1,365,809
Property, Plant and Equipment, net	766,698	741,713
Goodwill	374,462	370,228
Other Intangible Assets, net	116,964	126,258
Operating Lease Assets	16,310	18,768
Deferred Income Taxes	45,173	61,381
Other Assets	43,541	37,850
Total Assets	2,975,643	2,722,007
Current Liabilities
Notes payable to banks	30,178	30,036
Trade accounts payable	61,777	72,214
Salaries and incentives	56,650	64,802
Dividends payable	43,044	42,789
Other current liabilities	168,724	185,359
Total current liabilities	360,373	395,200
Retirement Benefits and Deferred Compensation	82,858	80,347
Operating Lease Liabilities	9,494	11,785
Deferred Income Taxes	7,115	8,215
Other Non-current Liabilities	2,509	2,235
Shareholders’ Equity
Common stock	168,829	167,946
Additional paid-in-capital	930,924	863,336
Retained earnings	1,447,131	1,227,938
Accumulated other comprehensive loss	(33,590)	(34,995)
Total shareholders’ equity	2,513,294	2,224,225
Total Liabilities and Shareholders’ Equity	$ 2,975,643	$ 2,722,007

Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) $ in Thousands	Sep. 27, 2024	Dec. 29, 2023
Statement of Financial Position [Abstract]
Allowance for Credits	$ 6,200	$ 5,300

Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Sep. 27, 2024	Sep. 29, 2023
Cash Flows From Operating Activities
Net Earnings	$ 377,376	$ 396,557
Adjustments to reconcile net earnings to net cash provided by operating activities
Depreciation and amortization	62,054	54,179
Deferred income taxes	14,646	14,910
Share-based compensation	27,312	25,456
Contingent consideration	0	(8,600)
Impairment	0	7,800
Change in
Accounts receivable	(460)	(7,229)
Inventories	(1,871)	19,227
Trade accounts payable	(2,133)	(8,411)
Salaries and incentives	(9,901)	(2,993)
Retirement benefits and deferred compensation	4,525	2,955
Other accrued liabilities	(27,977)	(1,840)
Other	(7,085)	(641)
Net cash provided by operating activities	436,486	491,370
Cash Flows From Investing Activities
Property, plant and equipment additions	(92,788)	(145,626)
Acquisition of businesses, net of cash acquired	(7,750)	0
Other	5,322	(694)
Net cash used in investing activities	(95,216)	(146,320)
Cash Flows From Financing Activities
Borrowings on short-term lines of credit, net	(338)	9,125
Payments on long-term debt	0	(75,000)
Payments of debt issuance costs	0	(1,025)
Common stock issued	50,002	55,492
Common stock repurchased	(31,350)	(27,057)
Taxes paid related to net share settlement of equity awards	(4,612)	(1,225)
Cash dividends paid	(129,026)	(118,710)
Net cash used in financing activities	(115,324)	(158,400)
Effect of exchange rate changes on cash	556	(61)
Net increase in cash and cash equivalents	226,502	186,589
Cash and Cash Equivalents
Beginning of year	537,951	339,196
End of period	$ 764,453	$ 525,785

Consolidated Statements of Shareholders' Equity (Unaudited) - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-In Capital	Retained Earnings	Accumulated Other Comprehensive Income (Loss)
Beginning balance at Dec. 30, 2022	$ 1,859,652	$ 167,702	$ 784,477	$ 976,851	$ (69,378)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Shares issued	54,267	1,500	52,767
Shares repurchased	(30,720)	(427)	(1,997)	(28,296)
Stock compensation cost	24,060		24,060
Net earnings	396,557			396,557
Dividends declared	(118,463)			(118,463)
Other comprehensive income (loss)	3,173				3,173
Ending balance at Sep. 29, 2023	2,188,526	168,775	859,307	1,226,649	(66,205)
Beginning balance at Jun. 30, 2023	2,116,307	168,985	850,900	1,154,453	(58,031)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Shares issued	3,439	101	3,338
Shares repurchased	(22,954)	(311)	(1,459)	(21,184)
Stock compensation cost	6,528		6,528
Net earnings	133,123			133,123
Dividends declared	(39,743)			(39,743)
Other comprehensive income (loss)	(8,174)				(8,174)
Ending balance at Sep. 29, 2023	2,188,526	168,775	859,307	1,226,649	(66,205)
Beginning balance at Dec. 29, 2023	2,224,225	167,946	863,336	1,227,938	(34,995)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Shares issued	45,390	1,282	44,108
Shares repurchased	(31,350)	(399)	(2,049)	(28,902)
Stock compensation cost	25,529		25,529
Net earnings	377,376			377,376
Dividends declared	(129,281)			(129,281)
Other comprehensive income (loss)	1,405				1,405
Ending balance at Sep. 27, 2024	2,513,294	168,829	930,924	1,447,131	(33,590)
Beginning balance at Jun. 28, 2024	2,418,485	168,927	922,203	1,380,234	(52,879)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Shares issued	3,201	77	3,124
Shares repurchased	(13,587)	(175)	(1,104)	(12,308)
Stock compensation cost	6,701		6,701
Net earnings	122,197			122,197
Dividends declared	(42,992)			(42,992)
Other comprehensive income (loss)	19,289				19,289
Ending balance at Sep. 27, 2024	$ 2,513,294	$ 168,829	$ 930,924	$ 1,447,131	$ (33,590)

Consolidated Statements of Shareholders' Equity (Unaudited) (Parenthetical) - $ / shares	3 Months Ended		9 Months Ended
	Sep. 27, 2024	Sep. 29, 2023	Sep. 27, 2024	Sep. 29, 2023
Statement of Stockholders' Equity [Abstract]
Common stock dividends declared per share (in dollars per share)	$ 0.255	$ 0.235	$ 0.765	$ 0.705

Basis of Presentation	9 Months Ended
Basis of Presentation	Sep. 27, 2024
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Basis of Presentation	Basis of Presentation The consolidated balance sheet of Graco Inc. and subsidiaries (the “Company”) as of September 27, 2024 and the related statements of earnings, comprehensive income and shareholders' equity for the three and nine months ended September 27, 2024 and September 29, 2023, and cash flows for the nine months ended September 27, 2024 and September 29, 2023 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 September 27, 2024, 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 29, 2023 (the "2023 Annual Report"). The results of operations for interim periods are not necessarily indicative of results that will be realized for the full fiscal year.

Segment Information

9 Months Ended

Sep. 27, 2024

Segment Reporting [Abstract]

Segment Information

The Company has three reportable segments: Contractor, Industrial and Process. Sales and operating earnings by segment were as follows (in thousands):


	Three Months Ended				Nine Months Ended
	September 27, 2024		September 29, 2023		September 27, 2024		September 29, 2023
Net Sales
Contractor	$	242,295	$	245,269	$	741,975	$	746,888
Industrial	156,294		157,084		453,993		470,797
Process	120,623		137,319		368,676		411,277
Total	$	519,212	$	539,672	$	1,564,644	$	1,628,962
Operating Earnings
Contractor	$	71,053	$	73,512	$	221,555	$	216,152
Industrial	52,361		54,298		149,881		162,955
Process	32,452		43,001		104,772		127,186
Unallocated corporate (expense)	(10,143)		(8,422)		(36,128)		(30,184)
Contingent consideration	—		8,600		—		8,600
Impairment	—		(7,800)		—		(7,800)
Total	$	145,723	$	163,189	$	440,080	$	476,909

Assets by segment were as follows (in thousands):


	September 27, 2024		December 29, 2023
Contractor	$	754,154	$	712,224
Industrial	616,317		640,487
Process	547,054		554,753
Unallocated corporate	1,058,118		814,543
Total	$	2,975,643	$	2,722,007

Geographic information follows (in thousands):


	Three Months Ended				Nine Months Ended
	September 27, 2024		September 29, 2023		September 27, 2024		September 29, 2023
Net Sales (based on customer location)
United States	$	289,553	$	288,610	$	872,480	$	879,552
Other countries	229,659		251,062		692,164		749,410
Total	$	519,212	$	539,672	$	1,564,644	$	1,628,962


	September 27, 2024		December 29, 2023
Long-lived Assets
United States	$	642,163	$	622,430
Other countries	124,535		119,283
Total	$	766,698	$	741,713

Earnings per Share

9 Months Ended

Sep. 27, 2024

Earnings Per Share [Abstract]

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				Nine Months Ended
	September 27, 2024		September 29, 2023		September 27, 2024		September 29, 2023
Net earnings available to common shareholders	$	122,197	$	133,123	$	377,376	$	396,557
Weighted average shares outstanding for basic earnings per share	168,810		169,005		168,800		168,569
Dilutive effect of stock options computed using the treasury stock method and the average market price	3,301		3,775		3,548		3,767
Weighted average shares outstanding for diluted earnings per share	172,111		172,780		172,348		172,336
Basic earnings per share	$	0.72	$	0.79	$	2.24	$	2.35
Diluted earnings per share	$	0.71	$	0.77	$	2.19	$	2.30

Anti-dilutive shares not included in diluted earnings per share computation	1,154		1,200		3,293		2,033

Share-Based Awards

9 Months Ended

Sep. 27, 2024

Share-Based Payment Arrangement, Additional Disclosure [Abstract]

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 29, 2023	9,904	$	49.09	7,274	$	41.46
Granted	925	89.23
Exercised	(997)	29.59
Canceled	(114)	75.65
Outstanding, September 27, 2024	9,718	$	55.20	7,105	$	46.62

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:


	Nine Months Ended
	September 27, 2024			September 29, 2023
Expected life in years	6.6			6.7
Interest rate	4.2		%	4.0		%
Volatility	26.3		%	26.3		%
Dividend yield	1.1		%	1.3		%
Weighted average fair value per share	$	28.03		$	21.76


	Nine Months Ended
	September 27, 2024			September 29, 2023
Expected life in years	1.0			1.0
Interest rate	4.9		%	5.1		%
Volatility	24.2		%	26.4		%
Dividend yield	1.1		%	1.4		%
Weighted average fair value per share	$	23.16		$	18.04

Retirement Benefits

9 Months Ended

Sep. 27, 2024

Defined Benefit Plans and Other Postretirement Benefit Plans Disclosures [Abstract]

Retirement Benefits

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


	Three Months Ended				Nine Months Ended
	September 27, 2024		September 29, 2023		September 27, 2024		September 29, 2023
Pension Benefits
Service cost	$	1,102	$	1,438	$	3,822	$	4,369
Interest cost	2,256		3,632		6,890		11,207
Expected return on assets	(2,543)		(6,399)		(7,610)		(14,354)
Amortization and other	835		3,041		2,478		3,896
Net periodic benefit cost	$	1,650	$	1,712	$	5,580	$	5,118
Postretirement Medical
Service cost	$	91	$	61	$	258	$	261
Interest cost	305		454		861		874
Amortization	53		(280)		—		(100)
Net periodic benefit cost	$	449	$	235	$	1,119	$	1,035

Shareholders' Equity

9 Months Ended

Sep. 27, 2024

Stockholders' Equity Note [Abstract]

Shareholders' Equity

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 September 27, 2024
Balance, June 28, 2024	$	(29,379)	$	(23,500)	$	(52,879)
Other comprehensive income (loss) before reclassifications	—		19,491		19,491
Reclassified to pension cost and deferred tax	(202)		—		(202)

Balance, September 27, 2024	$	(29,581)	$	(4,009)	$	(33,590)



Nine Months Ended September 27, 2024
Balance, December 29, 2023	$	(31,012)	$	(3,983)	$	(34,995)
Other comprehensive income (loss) before reclassifications	—		(26)		(26)
Reclassified to pension cost and deferred tax	1,431		—		1,431

Balance, September 27, 2024	$	(29,581)	$	(4,009)	$	(33,590)



Three Months Ended September 29, 2023
Balance, June 30, 2023	$	(37,915)	$	(20,116)	$	(58,031)
Other comprehensive income (loss) before reclassifications	—		(9,022)		(9,022)
Reclassified to pension cost and deferred tax	848		—		848

Balance, September 29, 2023	$	(37,067)	$	(29,138)	$	(66,205)


Nine Months Ended September 29, 2023
Balance, December 30, 2022	$	(39,734)	$	(29,644)	$	(69,378)
Other comprehensive income (loss) before reclassifications	—		506		506
Reclassified to pension cost and deferred tax	2,667		—		2,667

Balance, September 29, 2023	$	(37,067)	$	(29,138)	$	(66,205)

Amoun

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

Receivables and Credit Losses

9 Months Ended

Sep. 27, 2024

Credit Loss [Abstract]

Receivables and Credit Losses

Allowance for Credit Losses

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


	Three Months Ended				Nine Months Ended
	September 27, 2024		September 29, 2023		September 27, 2024		September 29, 2023
Balance, beginning	$	4,885	$	4,199	$	4,655	$	6,130
Additions charged to costs and expenses	233		366		738		646
Deductions from reserves (1)	(295)		(595)		(462)		(2,864)
Other additions (deductions) (2)	118		(88)		10		(30)
Balance, ending	$	4,941	$	3,882	$	4,941	$	3,882

(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.

Inventories

9 Months Ended

Sep. 27, 2024

Inventory, Net [Abstract]

Inventories

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


	September 27, 2024		December 29, 2023
Finished products and components	$	231,345	$	221,847
Products and components in various stages of completion	121,994		131,906
Raw materials and purchased components	207,551		202,294
Subtotal	560,890		556,047
Reduction to LIFO cost	(119,973)		(117,698)
Total	$	440,917	$	438,349

Intangible Assets

9 Months Ended

Sep. 27, 2024

Goodwill and Intangible Assets Disclosure [Abstract]

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 September 27, 2024
Cost	$	194,417	$	14,174	$	1,700	$	62,633	$	272,924
Accumulated amortization	(139,594)		(9,828)		(734)		—		(150,156)
Foreign currency translation	(7,287)		(330)		—		1,813		(5,804)
Book value	$	47,536	$	4,016	$	966	$	64,446	$	116,964
Weighted average life in years	13		9		6		N/A


As of December 29, 2023
Cost	$	191,417	$	14,174	$	1,300	$	62,633	$	269,524
Accumulated amortization	(128,248)		(8,547)		(561)		—		(137,356)
Foreign currency translation	(7,591)		(344)		—		2,025		(5,910)
Book value	$	55,578	$	5,283	$	739	$	64,658	$	126,258
Weighted average life in years	13		9		6		N/A


	2024 (Remainder)		2025		2026		2027		2028		Thereafter
Estimated Amortization Expense	$	4,264	$	16,908	$	9,729	$	6,913	$	4,707	$	9,997

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


	Contractor		Industrial		Process		Total
Balance, December 29, 2023	$	77,542	$	143,132	$	149,554	$	370,228
Additions, adjustments from business acquisitions	—		—		4,022		4,022

Foreign currency translation	65		(667)		814		212
Balance, September 27, 2024	$	77,607	$	142,465	$	154,390	$	374,462

In the third quarter the Company completed an acquisition of a business that is not material to the consolidated financial statements.

Other Current Liabilities

9 Months Ended

Sep. 27, 2024

Accrued Liabilities, Current [Abstract]

Other Current Liabilities

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


	September 27, 2024		December 29, 2023
Accrued self-insurance retentions	$	8,735	$	8,654
Accrued warranty and service liabilities	15,074		15,408
Accrued trade promotions	10,254		14,312
Payable for employee stock purchases	12,806		16,639
Customer advances and deferred revenue	52,155		51,578
Income taxes payable	7,054		9,837
Tax payable, other	12,076		12,289
Right of return refund liability	16,967		17,826
Operating lease liabilities, current	7,089		8,242

Other	26,514		30,574
Total	$	168,724	$	185,359


Balance, December 29, 2023	$	15,408

Charged to expense	7,514
Margin on parts sales reversed	977
Reductions for claims settled	(8,825)
Balance, September 27, 2024	$	15,074

Customer Advances and Deferred Revenue

Fair Value

9 Months Ended

Sep. 27, 2024

Fair Value Disclosures [Abstract]

Fair Value

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


	Level	September 27, 2024		December 29, 2023
Assets
Cash surrender value of life insurance	2	$	25,040	$	22,255


Liabilities
Contingent consideration	3	$	600	$	1,375
Deferred compensation	2	7,772		6,445
Forward exchange contracts	2	22		422
Total liabilities at fair value		$	8,394	$	8,242

compensation plans. The deferred compensation liability balances are valued based on amounts allocated by participants to the underlying performance measurement funds.

Pay vs Performance Disclosure - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
Pay vs Performance Disclosure - USD ($) $ in Thousands	Sep. 27, 2024	Sep. 29, 2023	Sep. 27, 2024	Sep. 29, 2023
Pay vs Performance Disclosure
Net Earnings	$ 122,197	$ 133,123	$ 377,376	$ 396,557

Insider Trading Arrangements	3 Months Ended
Insider Trading Arrangements	Sep. 27, 2024
Trading Arrangements, by Individual
Rule 10b5-1 Arrangement Adopted	false
Non-Rule 10b5-1 Arrangement Adopted	false
Rule 10b5-1 Arrangement Terminated	false
Non-Rule 10b5-1 Arrangement Terminated	false

Segment Information (Tables)

9 Months Ended

Sep. 27, 2024

Segment Reporting [Abstract]

Segment Reporting - Operations and Assets

Sales and operating earnings by segment were as follows (in thousands):


	Three Months Ended				Nine Months Ended
	September 27, 2024		September 29, 2023		September 27, 2024		September 29, 2023
Net Sales
Contractor	$	242,295	$	245,269	$	741,975	$	746,888
Industrial	156,294		157,084		453,993		470,797
Process	120,623		137,319		368,676		411,277
Total	$	519,212	$	539,672	$	1,564,644	$	1,628,962
Operating Earnings
Contractor	$	71,053	$	73,512	$	221,555	$	216,152
Industrial	52,361		54,298		149,881		162,955
Process	32,452		43,001		104,772		127,186
Unallocated corporate (expense)	(10,143)		(8,422)		(36,128)		(30,184)
Contingent consideration	—		8,600		—		8,600
Impairment	—		(7,800)		—		(7,800)
Total	$	145,723	$	163,189	$	440,080	$	476,909

Assets by segment were as follows (in thousands):


	September 27, 2024		December 29, 2023
Contractor	$	754,154	$	712,224
Industrial	616,317		640,487
Process	547,054		554,753
Unallocated corporate	1,058,118		814,543
Total	$	2,975,643	$	2,722,007

Segment Reporting - Geographic

Geographic information follows (in thousands):


	Three Months Ended				Nine Months Ended
	September 27, 2024		September 29, 2023		September 27, 2024		September 29, 2023
Net Sales (based on customer location)
United States	$	289,553	$	288,610	$	872,480	$	879,552
Other countries	229,659		251,062		692,164		749,410
Total	$	519,212	$	539,672	$	1,564,644	$	1,628,962


	September 27, 2024		December 29, 2023
Long-lived Assets
United States	$	642,163	$	622,430
Other countries	124,535		119,283
Total	$	766,698	$	741,713

Earnings per Share (Tables)

9 Months Ended

Sep. 27, 2024

Earnings Per Share [Abstract]

Computation of Basic and Diluted EPS

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


	Three Months Ended				Nine Months Ended
	September 27, 2024		September 29, 2023		September 27, 2024		September 29, 2023
Net earnings available to common shareholders	$	122,197	$	133,123	$	377,376	$	396,557
Weighted average shares outstanding for basic earnings per share	168,810		169,005		168,800		168,569
Dilutive effect of stock options computed using the treasury stock method and the average market price	3,301		3,775		3,548		3,767
Weighted average shares outstanding for diluted earnings per share	172,111		172,780		172,348		172,336
Basic earnings per share	$	0.72	$	0.79	$	2.24	$	2.35
Diluted earnings per share	$	0.71	$	0.77	$	2.19	$	2.30

Anti-dilutive shares not included in diluted earnings per share computation	1,154		1,200		3,293		2,033

Share-Based Awards (Tables)

9 Months Ended

Sep. 27, 2024

Share-Based Payment Arrangement, Additional Disclosure [Abstract]

Options Activity and Outstanding

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 29, 2023	9,904	$	49.09	7,274	$	41.46
Granted	925	89.23
Exercised	(997)	29.59
Canceled	(114)	75.65
Outstanding, September 27, 2024	9,718	$	55.20	7,105	$	46.62

Options Fair Value Inputs

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:


	Nine Months Ended
	September 27, 2024			September 29, 2023
Expected life in years	6.6			6.7
Interest rate	4.2		%	4.0		%
Volatility	26.3		%	26.3		%
Dividend yield	1.1		%	1.3		%
Weighted average fair value per share	$	28.03		$	21.76

ESPP Fair Value Inputs

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:


	Nine Months Ended
	September 27, 2024			September 29, 2023
Expected life in years	1.0			1.0
Interest rate	4.9		%	5.1		%
Volatility	24.2		%	26.4		%
Dividend yield	1.1		%	1.4		%
Weighted average fair value per share	$	23.16		$	18.04

Retirement Benefits (Tables)

9 Months Ended

Sep. 27, 2024

Defined Benefit Plans and Other Postretirement Benefit Plans Disclosures [Abstract]

Components of Net Periodic Benefit Cost

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


	Three Months Ended				Nine Months Ended
	September 27, 2024		September 29, 2023		September 27, 2024		September 29, 2023
Pension Benefits
Service cost	$	1,102	$	1,438	$	3,822	$	4,369
Interest cost	2,256		3,632		6,890		11,207
Expected return on assets	(2,543)		(6,399)		(7,610)		(14,354)
Amortization and other	835		3,041		2,478		3,896
Net periodic benefit cost	$	1,650	$	1,712	$	5,580	$	5,118
Postretirement Medical
Service cost	$	91	$	61	$	258	$	261
Interest cost	305		454		861		874
Amortization	53		(280)		—		(100)
Net periodic benefit cost	$	449	$	235	$	1,119	$	1,035

Shareholders' Equity (Tables)

9 Months Ended

Sep. 27, 2024

Stockholders' Equity Note [Abstract]

Changes in AOCI

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 September 27, 2024
Balance, June 28, 2024	$	(29,379)	$	(23,500)	$	(52,879)
Other comprehensive income (loss) before reclassifications	—		19,491		19,491
Reclassified to pension cost and deferred tax	(202)		—		(202)

Balance, September 27, 2024	$	(29,581)	$	(4,009)	$	(33,590)



Nine Months Ended September 27, 2024
Balance, December 29, 2023	$	(31,012)	$	(3,983)	$	(34,995)
Other comprehensive income (loss) before reclassifications	—		(26)		(26)
Reclassified to pension cost and deferred tax	1,431		—		1,431

Balance, September 27, 2024	$	(29,581)	$	(4,009)	$	(33,590)



Three Months Ended September 29, 2023
Balance, June 30, 2023	$	(37,915)	$	(20,116)	$	(58,031)
Other comprehensive income (loss) before reclassifications	—		(9,022)		(9,022)
Reclassified to pension cost and deferred tax	848		—		848

Balance, September 29, 2023	$	(37,067)	$	(29,138)	$	(66,205)


Nine Months Ended September 29, 2023
Balance, December 30, 2022	$	(39,734)	$	(29,644)	$	(69,378)
Other comprehensive income (loss) before reclassifications	—		506		506
Reclassified to pension cost and deferred tax	2,667		—		2,667

Balance, September 29, 2023	$	(37,067)	$	(29,138)	$	(66,205)

Receivables and Credit Losses (Tables)

9 Months Ended

Sep. 27, 2024

Credit Loss [Abstract]

Accounts Receivable, Allowance for Credit Loss

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


	Three Months Ended				Nine Months Ended
	September 27, 2024		September 29, 2023		September 27, 2024		September 29, 2023
Balance, beginning	$	4,885	$	4,199	$	4,655	$	6,130
Additions charged to costs and expenses	233		366		738		646
Deductions from reserves (1)	(295)		(595)		(462)		(2,864)
Other additions (deductions) (2)	118		(88)		10		(30)
Balance, ending	$	4,941	$	3,882	$	4,941	$	3,882

(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.

Inventories (Tables)

9 Months Ended

Sep. 27, 2024

Inventory, Net [Abstract]

Components of Inventories

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


	September 27, 2024		December 29, 2023
Finished products and components	$	231,345	$	221,847
Products and components in various stages of completion	121,994		131,906
Raw materials and purchased components	207,551		202,294
Subtotal	560,890		556,047
Reduction to LIFO cost	(119,973)		(117,698)
Total	$	440,917	$	438,349

Intangible Assets (Tables)

9 Months Ended

Sep. 27, 2024

Goodwill and Intangible Assets Disclosure [Abstract]

Other 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 September 27, 2024
Cost	$	194,417	$	14,174	$	1,700	$	62,633	$	272,924
Accumulated amortization	(139,594)		(9,828)		(734)		—		(150,156)
Foreign currency translation	(7,287)		(330)		—		1,813		(5,804)
Book value	$	47,536	$	4,016	$	966	$	64,446	$	116,964
Weighted average life in years	13		9		6		N/A


As of December 29, 2023
Cost	$	191,417	$	14,174	$	1,300	$	62,633	$	269,524
Accumulated amortization	(128,248)		(8,547)		(561)		—		(137,356)
Foreign currency translation	(7,591)		(344)		—		2,025		(5,910)
Book value	$	55,578	$	5,283	$	739	$	64,658	$	126,258
Weighted average life in years	13		9		6		N/A

Future Amortization Expense

Estimated annual amortization expense based on the current carrying amount of other intangible assets is as follows (in thousands):


	2024 (Remainder)		2025		2026		2027		2028		Thereafter
Estimated Amortization Expense	$	4,264	$	16,908	$	9,729	$	6,913	$	4,707	$	9,997

Goodwill Rollforward

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


	Contractor		Industrial		Process		Total
Balance, December 29, 2023	$	77,542	$	143,132	$	149,554	$	370,228
Additions, adjustments from business acquisitions	—		—		4,022		4,022

Foreign currency translation	65		(667)		814		212
Balance, September 27, 2024	$	77,607	$	142,465	$	154,390	$	374,462

Other Current Liabilities (Tables)

9 Months Ended

Sep. 27, 2024

Accrued Liabilities, Current [Abstract]

Components of Other Current Liabilities

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


	September 27, 2024		December 29, 2023
Accrued self-insurance retentions	$	8,735	$	8,654
Accrued warranty and service liabilities	15,074		15,408
Accrued trade promotions	10,254		14,312
Payable for employee stock purchases	12,806		16,639
Customer advances and deferred revenue	52,155		51,578
Income taxes payable	7,054		9,837
Tax payable, other	12,076		12,289
Right of return refund liability	16,967		17,826
Operating lease liabilities, current	7,089		8,242

Other	26,514		30,574
Total	$	168,724	$	185,359

Accrued Warranty Activity

Following is a summary of activity in accrued warranty and service liabilities (in thousands):


Balance, December 29, 2023	$	15,408

Charged to expense	7,514
Margin on parts sales reversed	977
Reductions for claims settled	(8,825)
Balance, September 27, 2024	$	15,074

Fair Value (Tables)

9 Months Ended

Sep. 27, 2024

Fair Value Disclosures [Abstract]

Fair Value Schedule

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


	Level	September 27, 2024		December 29, 2023
Assets
Cash surrender value of life insurance	2	$	25,040	$	22,255


Liabilities
Contingent consideration	3	$	600	$	1,375
Deferred compensation	2	7,772		6,445
Forward exchange contracts	2	22		422
Total liabilities at fair value		$	8,394	$	8,242

Segment Reporting Information - Operations and Assets (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 27, 2024 USD ($)	Sep. 29, 2023 USD ($)	Sep. 27, 2024 USD ($) segment	Sep. 29, 2023 USD ($)	Dec. 29, 2023 USD ($)
Segment Reporting Information [Line Items]
Number of reportable segments \| segment			3
Net Sales	$ 519,212	$ 539,672	$ 1,564,644	$ 1,628,962
Operating Earnings	145,723	163,189	440,080	476,909
Contingent consideration	0	8,600	0	8,600
Impairment	0	(7,800)	0	(7,800)
Total Assets	2,975,643		2,975,643		$ 2,722,007
Operating Segments \| Contractor
Segment Reporting Information [Line Items]
Net Sales	242,295	245,269	741,975	746,888
Operating Earnings	71,053	73,512	221,555	216,152
Total Assets	754,154		754,154		712,224
Operating Segments \| Industrial
Segment Reporting Information [Line Items]
Net Sales	156,294	157,084	453,993	470,797
Operating Earnings	52,361	54,298	149,881	162,955
Total Assets	616,317		616,317		640,487
Operating Segments \| Process
Segment Reporting Information [Line Items]
Net Sales	120,623	137,319	368,676	411,277
Operating Earnings	32,452	43,001	104,772	127,186
Total Assets	547,054		547,054		554,753
Unallocated corporate
Segment Reporting Information [Line Items]
Operating Earnings	(10,143)	$ (8,422)	(36,128)	$ (30,184)
Total Assets	$ 1,058,118		$ 1,058,118		$ 814,543

Segment Reporting Information - Geographic (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 27, 2024	Sep. 29, 2023	Sep. 27, 2024	Sep. 29, 2023	Dec. 29, 2023
Geographic Information [Line Items]
Net Sales	$ 519,212	$ 539,672	$ 1,564,644	$ 1,628,962
Long-lived Assets	766,698		766,698		$ 741,713
United States
Geographic Information [Line Items]
Net Sales	289,553	288,610	872,480	879,552
Long-lived Assets	642,163		642,163		622,430
Other countries
Geographic Information [Line Items]
Net Sales	229,659	$ 251,062	692,164	$ 749,410
Long-lived Assets	$ 124,535		$ 124,535		$ 119,283

Earnings per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 27, 2024	Sep. 29, 2023	Sep. 27, 2024	Sep. 29, 2023
Earnings Per Share [Abstract]
Net earnings available to common shareholders	$ 122,197	$ 133,123	$ 377,376	$ 396,557
Weighted average shares outstanding for basic earnings per share (in shares)	168,810	169,005	168,800	168,569
Dilutive effect of stock options computed using the treasury stock method and the average market price (in shares)	3,301	3,775	3,548	3,767
Weighted average shares outstanding for diluted earnings per share (in shares)	172,111	172,780	172,348	172,336
Basic earnings per share (in dollars per share)	$ 0.72	$ 0.79	$ 2.24	$ 2.35
Diluted earnings per share (in dollars per share)	$ 0.71	$ 0.77	$ 2.19	$ 2.30
Anti-dilutive shares not included in diluted earnings per share computation (in shares)	1,154	1,200	3,293	2,033

Share-Based Awards - Options Activity and Outstanding (Details) - $ / shares shares in Thousands	9 Months Ended
	Sep. 27, 2024	Dec. 29, 2023
Option Shares
Beginning (in shares)	9,904
Options granted (in shares)	925
Options exercised (in shares)	(997)
Options canceled (in shares)	(114)
Ending (in shares)	9,718
Weighted Average Exercise Price
Beginning (dollars per share)	$ 49.09
Granted (dollars per share)	89.23
Exercised (dollars per share)	29.59
Canceled (dollars per share)	75.65
Ending (dollars per share)	$ 55.20
Options exercisable (in shares)	7,105	7,274
Weighted average exercise price of exercisable options (dollars per share)	$ 46.62	$ 41.46

Share-Based Awards - Narrative (Details) - USD ($) $ in Millions	9 Months Ended
	Sep. 27, 2024	Sep. 29, 2023
Share-Based Payment Arrangement [Abstract]
Share-based compensation expense	$ 27.3	$ 25.5
Unrecognized compensation cost	$ 19.7
Weighted average recognition period	2 years 4 months 24 days
Employee Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Employee stock purchase plan shares issued	330,000	323,000
Stock purchase plan discount from market value	15.00%

Share-Based Awards - Options Fair Value Inputs (Details) - Stock Option - $ / shares	9 Months Ended
	Sep. 27, 2024	Sep. 29, 2023
Fair Value Assumptions and Methodology [Abstract]
Expected life in years	6 years 7 months 6 days	6 years 8 months 12 days
Interest rate	4.20%	4.00%
Volatility	26.30%	26.30%
Dividend yield	1.10%	1.30%
Weighted average fair value per share (in dollars per share)	$ 28.03	$ 21.76

Share-Based Awards - ESPP Fair Value Inputs (Details) - Employee Stock Purchase Plan - $ / shares	9 Months Ended
	Sep. 27, 2024	Sep. 29, 2023
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected life in years	1 year	1 year
Interest rate	4.90%	5.10%
Volatility	24.20%	26.40%
Dividend yield	1.10%	1.40%
Weighted average fair value per share (in dollars per share)	$ 23.16	$ 18.04

Retirement Benefits (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
Retirement Benefits (Details) - USD ($) $ in Thousands	Sep. 27, 2024	Sep. 29, 2023	Sep. 27, 2024	Sep. 29, 2023
Pension Benefits
Defined Benefit Plan Disclosure [Line Items]
Service cost	$ 1,102	$ 1,438	$ 3,822	$ 4,369
Interest cost	2,256	3,632	6,890	11,207
Expected return on assets	(2,543)	(6,399)	(7,610)	(14,354)
Amortization and other	835	3,041	2,478	3,896
Net periodic benefit cost	1,650	1,712	5,580	5,118
Postretirement Medical
Defined Benefit Plan Disclosure [Line Items]
Service cost	91	61	258	261
Interest cost	305	454	861	874
Amortization	53	(280)	0	(100)
Net periodic benefit cost	$ 449	$ 235	$ 1,119	$ 1,035

Shareholders' Equity (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
Shareholders' Equity (Details) - USD ($) $ in Thousands	Sep. 27, 2024	Sep. 29, 2023	Sep. 27, 2024	Sep. 29, 2023
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Beginning balance	$ 2,418,485	$ 2,116,307	$ 2,224,225	$ 1,859,652
Ending balance	2,513,294	2,188,526	2,513,294	2,188,526
Pension and Post-retirement Medical
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Beginning balance	(29,379)	(37,915)	(31,012)	(39,734)
Other comprehensive income (loss) before reclassifications	0	0	0	0
Reclassified to pension cost and deferred tax	(202)	848	1,431	2,667
Ending balance	(29,581)	(37,067)	(29,581)	(37,067)
Cumulative Translation Adjustment
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Beginning balance	(23,500)	(20,116)	(3,983)	(29,644)
Other comprehensive income (loss) before reclassifications	19,491	(9,022)	(26)	506
Reclassified to pension cost and deferred tax	0	0	0	0
Ending balance	(4,009)	(29,138)	(4,009)	(29,138)
Total
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Beginning balance	(52,879)	(58,031)	(34,995)	(69,378)
Other comprehensive income (loss) before reclassifications	19,491	(9,022)	(26)	506
Reclassified to pension cost and deferred tax	(202)	848	1,431	2,667
Ending balance	$ (33,590)	$ (66,205)	$ (33,590)	$ (66,205)

Receivables and Credit Losses (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 27, 2024	Sep. 29, 2023	Sep. 27, 2024	Sep. 29, 2023	Dec. 29, 2023
Credit Loss [Abstract]
Accounts Receivable, before Allowance for Credit Loss	$ 344,100		$ 344,100		$ 343,000
Other Receivables	10,900		10,900		$ 11,400
Accounts Receivable, Allowance for Credit Loss [Roll Forward]
Balance, beginning	4,885	$ 4,199	4,655	$ 6,130
Additions charged to costs and expenses	233	366	738	646
Deductions from reserves	(295)	(595)	(462)	(2,864)
Other (deductions) additions	118	(88)	10	(30)
Balance, ending	$ 4,941	$ 3,882	$ 4,941	$ 3,882

Inventories (Details) - USD ($) $ in Thousands	Sep. 27, 2024	Dec. 29, 2023
Inventory, Net [Abstract]
Finished products and components	$ 231,345	$ 221,847
Products and components in various stages of completion	121,994	131,906
Raw materials and purchased components	207,551	202,294
Subtotal	560,890	556,047
Reduction to LIFO cost	(119,973)	(117,698)
Total	$ 440,917	$ 438,349

Intangible Assets - Other Intangible Assets (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 27, 2024	Dec. 29, 2023
Finite Life
Accumulated amortization	$ (150,156)	$ (137,356)
Indefinite Life
Total Cost	272,924	269,524
Total Foreign Currency Translation	(5,804)	(5,910)
Total Book Value	116,964	126,258
Trade Names
Indefinite Life
Cost	62,633	62,633
Indefinite-lived Intangible Assets, Foreign Currency Translation Gain (Loss)	1,813	2,025
Book value	64,446	64,658
Customer Relationships
Finite Life
Cost	194,417	191,417
Accumulated amortization	(139,594)	(128,248)
Foreign currency translation	(7,287)	(7,591)
Book value	$ 47,536	$ 55,578
Weighted average life in years	13 years	13 years
Patents and Proprietary Technology
Finite Life
Cost	$ 14,174	$ 14,174
Accumulated amortization	(9,828)	(8,547)
Foreign currency translation	(330)	(344)
Book value	$ 4,016	$ 5,283
Weighted average life in years	9 years	9 years
Trademarks, Trade Names and Other
Finite Life
Cost	$ 1,700	$ 1,300
Accumulated amortization	(734)	(561)
Foreign currency translation	0	0
Book value	$ 966	$ 739
Weighted average life in years	6 years	6 years

Intangible Assets - Narrative (Details) € in Millions, $ in Millions	3 Months Ended			9 Months Ended
	Dec. 27, 2024 EUR (€)	Sep. 27, 2024 USD ($)	Sep. 29, 2023 USD ($)	Sep. 27, 2024 USD ($)	Sep. 29, 2023 USD ($)
Goodwill and Intangible Assets Disclosure [Abstract]
Amortization of intangible assets \| $		$ 4.5	$ 4.4	$ 12.8	$ 13.2
Corob \| Forecast
Business Acquisition [Line Items]
Acquisition consideration	€ 230
Additional contingent consideration for acquisition	€ 30

Intangible Assets - Future Amortization Expense (Details) $ in Thousands	Sep. 27, 2024 USD ($)
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract]
2024 (Remainder)	$ 4,264
2025	16,908
2026	9,729
2027	6,913
2028	4,707
Thereafter	$ 9,997

Intangible Assets - Goodwill Rollforward (Details) $ in Thousands	9 Months Ended
	Sep. 27, 2024 USD ($)
Goodwill [Roll Forward]
Beginning balance	$ 370,228
Additions, adjustments from business acquisitions	4,022
Foreign currency translation	212
Ending balance	374,462
Contractor
Goodwill [Roll Forward]
Beginning balance	77,542
Additions, adjustments from business acquisitions	0
Foreign currency translation	65
Ending balance	77,607
Industrial
Goodwill [Roll Forward]
Beginning balance	143,132
Additions, adjustments from business acquisitions	0
Foreign currency translation	(667)
Ending balance	142,465
Process
Goodwill [Roll Forward]
Beginning balance	149,554
Additions, adjustments from business acquisitions	4,022
Foreign currency translation	814
Ending balance	$ 154,390

Other Current Liabilities - Components of Other Current Liabilities (Details) - USD ($) $ in Thousands	Sep. 27, 2024	Dec. 29, 2023
Other Current Liabilities Details [Abstract]
Accrued self-insurance retentions	$ 8,735	$ 8,654
Accrued warranty and service liabilities	15,074	15,408
Accrued trade promotions	10,254	14,312
Payable for employee stock purchases	12,806	16,639
Customer advances and deferred revenue	52,155	51,578
Income taxes payable	7,054	9,837
Tax payable, other	12,076	12,289
Right of return refund liability	16,967	17,826
Operating lease liabilities, current	7,089	8,242
Other	26,514	30,574
Total	$ 168,724	$ 185,359

Other Current Liabilities - Accrued Warranty Activity (Details) $ in Thousands	9 Months Ended
	Sep. 27, 2024 USD ($)
Activity In Accrued Warranty And Service Liabilities Abstract
Balance, beginning of year	$ 15,408
Charged to expense	7,514
Margin on parts sales reversed	977
Reductions for claims settled	(8,825)
Balance, end of period	$ 15,074

Other Current Liabilities - Narrative (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 27, 2024	Sep. 29, 2023	Sep. 27, 2024	Sep. 29, 2023
Accrued Liabilities, Current [Abstract]
Deferred revenue	$ 7.7	$ 6.7	$ 49.8	$ 43.3

Fair Value (Details) - USD ($) $ in Thousands	Sep. 27, 2024	Dec. 29, 2023
Liabilities
Total liabilities at fair value	$ 8,394	$ 8,242
Level 2
Assets
Cash surrender value of life insurance	25,040	22,255
Liabilities
Deferred compensation	7,772	6,445
Forward exchange contracts	22	422
Level 3
Liabilities
Contingent consideration	$ 600	$ 1,375