GGG 10-Q Quarterly Report Sept. 29, 2023 | Alphaminr
ALPHAMINR

GGG 10-Q Quarter ended Sept. 29, 2023

Balance Sheet
Cash Flow
Income Statement
Debt
GRACO INC
10-Ks and 10-Qs
10-Q
Quarter ended Sept. 26, 2025
10-Q
Quarter ended June 27, 2025
10-Q
Quarter ended March 28, 2025
10-K
Fiscal year ended Dec. 27, 2024
10-Q
Quarter ended Sept. 27, 2024
10-Q
Quarter ended June 28, 2024
10-Q
Quarter ended March 29, 2024
10-K
Fiscal year ended Dec. 29, 2023
10-Q
Quarter ended Sept. 29, 2023
10-Q
Quarter ended June 30, 2023
10-Q
Quarter ended March 31, 2023
10-K
Fiscal year ended Dec. 30, 2022
10-Q
Quarter ended Sept. 30, 2022
10-Q
Quarter ended July 1, 2022
10-Q
Quarter ended April 1, 2022
10-K
Fiscal year ended Dec. 31, 2021
10-Q
Quarter ended Sept. 24, 2021
10-Q
Quarter ended June 25, 2021
10-Q
Quarter ended March 26, 2021
10-K
Fiscal year ended Dec. 25, 2020
10-Q
Quarter ended Sept. 25, 2020
10-Q
Quarter ended June 26, 2020
10-Q
Quarter ended March 27, 2020
10-K
Fiscal year ended Dec. 27, 2019
10-Q
Quarter ended Sept. 27, 2019
10-Q
Quarter ended June 28, 2019
10-Q
Quarter ended March 29, 2019
10-K
Fiscal year ended Dec. 28, 2018
10-Q
Quarter ended Sept. 28, 2018
10-Q
Quarter ended June 29, 2018
10-Q
Quarter ended March 30, 2018
10-K
Fiscal year ended Dec. 29, 2017
10-Q
Quarter ended Sept. 29, 2017
10-Q
Quarter ended June 30, 2017
10-Q
Quarter ended March 31, 2017
10-K
Fiscal year ended Dec. 30, 2016
10-Q
Quarter ended Sept. 23, 2016
10-Q
Quarter ended June 24, 2016
10-Q
Quarter ended March 25, 2016
10-K
Fiscal year ended Dec. 25, 2015
10-Q
Quarter ended Sept. 25, 2015
10-Q
Quarter ended June 26, 2015
10-Q
Quarter ended March 27, 2015
10-K
Fiscal year ended Dec. 26, 2014
10-Q
Quarter ended Sept. 26, 2014
10-Q
Quarter ended June 27, 2014
10-Q
Quarter ended March 28, 2014
10-K
Fiscal year ended Dec. 27, 2013
10-Q
Quarter ended Sept. 27, 2013
10-Q
Quarter ended June 28, 2013
10-Q
Quarter ended March 29, 2013
10-K
Fiscal year ended Dec. 28, 2012
10-Q
Quarter ended Sept. 28, 2012
10-Q
Quarter ended June 29, 2012
10-Q
Quarter ended March 30, 2012
10-K
Fiscal year ended Dec. 30, 2011
10-Q
Quarter ended Sept. 30, 2011
10-Q
Quarter ended July 1, 2011
10-Q
Quarter ended April 1, 2011
10-K
Fiscal year ended Dec. 31, 2010
10-Q
Quarter ended Sept. 24, 2010
10-Q
Quarter ended June 25, 2010
10-Q
Quarter ended March 26, 2010
10-K
Fiscal year ended Dec. 25, 2009
PROXIES
DEF 14A
Filed on April 25, 2025
DEF 14A
Filed on March 12, 2025
DEF 14A
Filed on April 26, 2024
DEF 14A
Filed on March 13, 2024
DEF 14A
Filed on March 15, 2023
DEF 14A
Filed on April 29, 2022
DEF 14A
Filed on March 16, 2022
DEF 14A
Filed on March 10, 2021
DEF 14A
Filed on March 11, 2020
DEF 14A
Filed on March 13, 2019
DEF 14A
Filed on March 14, 2018
DEF 14A
Filed on March 15, 2017
DEF 14A
Filed on March 9, 2016
DEF 14A
Filed on March 11, 2015
DEF 14A
Filed on March 12, 2014
DEF 14A
Filed on March 13, 2013
DEF 14A
Filed on March 7, 2012
DEF 14A
Filed on March 7, 2011
DEF 14A
Filed on March 11, 2010
ggg-20230929
FALSE 0000042888 --12-29 168,788,078 2023 Q3 — — — — 0000042888 2022-12-31 2023-09-29 0000042888 2023-10-11 xbrli:shares 0000042888 2023-07-01 2023-09-29 iso4217:USD 0000042888 2022-07-02 2022-09-30 0000042888 2022-01-01 2022-09-30 iso4217:USD xbrli:shares 0000042888 2023-09-29 0000042888 2022-12-30 0000042888 2021-12-31 0000042888 2022-09-30 0000042888 us-gaap:CommonStockMember 2023-06-30 0000042888 us-gaap:AdditionalPaidInCapitalMember 2023-06-30 0000042888 us-gaap:RetainedEarningsMember 2023-06-30 0000042888 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2023-06-30 0000042888 2023-06-30 0000042888 us-gaap:CommonStockMember 2023-07-01 2023-09-29 0000042888 us-gaap:AdditionalPaidInCapitalMember 2023-07-01 2023-09-29 0000042888 us-gaap:RetainedEarningsMember 2023-07-01 2023-09-29 0000042888 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2023-07-01 2023-09-29 0000042888 us-gaap:CommonStockMember 2023-09-29 0000042888 us-gaap:AdditionalPaidInCapitalMember 2023-09-29 0000042888 us-gaap:RetainedEarningsMember 2023-09-29 0000042888 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2023-09-29 0000042888 us-gaap:CommonStockMember 2022-12-30 0000042888 us-gaap:AdditionalPaidInCapitalMember 2022-12-30 0000042888 us-gaap:RetainedEarningsMember 2022-12-30 0000042888 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2022-12-30 0000042888 us-gaap:CommonStockMember 2022-12-31 2023-09-29 0000042888 us-gaap:AdditionalPaidInCapitalMember 2022-12-31 2023-09-29 0000042888 us-gaap:RetainedEarningsMember 2022-12-31 2023-09-29 0000042888 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2022-12-31 2023-09-29 0000042888 us-gaap:CommonStockMember 2022-07-01 0000042888 us-gaap:AdditionalPaidInCapitalMember 2022-07-01 0000042888 us-gaap:RetainedEarningsMember 2022-07-01 0000042888 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2022-07-01 0000042888 2022-07-01 0000042888 us-gaap:CommonStockMember 2022-07-02 2022-09-30 0000042888 us-gaap:AdditionalPaidInCapitalMember 2022-07-02 2022-09-30 0000042888 us-gaap:RetainedEarningsMember 2022-07-02 2022-09-30 0000042888 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2022-07-02 2022-09-30 0000042888 us-gaap:CommonStockMember 2022-09-30 0000042888 us-gaap:AdditionalPaidInCapitalMember 2022-09-30 0000042888 us-gaap:RetainedEarningsMember 2022-09-30 0000042888 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2022-09-30 0000042888 us-gaap:CommonStockMember 2021-12-31 0000042888 us-gaap:AdditionalPaidInCapitalMember 2021-12-31 0000042888 us-gaap:RetainedEarningsMember 2021-12-31 0000042888 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-12-31 0000042888 us-gaap:CommonStockMember 2022-01-01 2022-09-30 0000042888 us-gaap:AdditionalPaidInCapitalMember 2022-01-01 2022-09-30 0000042888 us-gaap:RetainedEarningsMember 2022-01-01 2022-09-30 0000042888 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2022-01-01 2022-09-30 ggg:segment 0000042888 us-gaap:OperatingSegmentsMember ggg:ContractorMember 2023-07-01 2023-09-29 0000042888 us-gaap:OperatingSegmentsMember ggg:ContractorMember 2022-07-02 2022-09-30 0000042888 us-gaap:OperatingSegmentsMember ggg:ContractorMember 2022-12-31 2023-09-29 0000042888 us-gaap:OperatingSegmentsMember ggg:ContractorMember 2022-01-01 2022-09-30 0000042888 us-gaap:OperatingSegmentsMember ggg:IndustrialMember 2023-07-01 2023-09-29 0000042888 us-gaap:OperatingSegmentsMember ggg:IndustrialMember 2022-07-02 2022-09-30 0000042888 us-gaap:OperatingSegmentsMember ggg:IndustrialMember 2022-12-31 2023-09-29 0000042888 us-gaap:OperatingSegmentsMember ggg:IndustrialMember 2022-01-01 2022-09-30 0000042888 us-gaap:OperatingSegmentsMember ggg:ProcessMember 2023-07-01 2023-09-29 0000042888 us-gaap:OperatingSegmentsMember ggg:ProcessMember 2022-07-02 2022-09-30 0000042888 us-gaap:OperatingSegmentsMember ggg:ProcessMember 2022-12-31 2023-09-29 0000042888 us-gaap:OperatingSegmentsMember ggg:ProcessMember 2022-01-01 2022-09-30 0000042888 us-gaap:CorporateNonSegmentMember 2023-07-01 2023-09-29 0000042888 us-gaap:CorporateNonSegmentMember 2022-07-02 2022-09-30 0000042888 us-gaap:CorporateNonSegmentMember 2022-12-31 2023-09-29 0000042888 us-gaap:CorporateNonSegmentMember 2022-01-01 2022-09-30 0000042888 us-gaap:OperatingSegmentsMember ggg:ContractorMember 2023-09-29 0000042888 us-gaap:OperatingSegmentsMember ggg:ContractorMember 2022-12-30 0000042888 us-gaap:OperatingSegmentsMember ggg:IndustrialMember 2023-09-29 0000042888 us-gaap:OperatingSegmentsMember ggg:IndustrialMember 2022-12-30 0000042888 us-gaap:OperatingSegmentsMember ggg:ProcessMember 2023-09-29 0000042888 us-gaap:OperatingSegmentsMember ggg:ProcessMember 2022-12-30 0000042888 us-gaap:CorporateNonSegmentMember 2023-09-29 0000042888 us-gaap:CorporateNonSegmentMember 2022-12-30 0000042888 country:US 2023-07-01 2023-09-29 0000042888 country:US 2022-07-02 2022-09-30 0000042888 country:US 2022-12-31 2023-09-29 0000042888 country:US 2022-01-01 2022-09-30 0000042888 us-gaap:NonUsMember 2023-07-01 2023-09-29 0000042888 us-gaap:NonUsMember 2022-07-02 2022-09-30 0000042888 us-gaap:NonUsMember 2022-12-31 2023-09-29 0000042888 us-gaap:NonUsMember 2022-01-01 2022-09-30 0000042888 country:US 2023-09-29 0000042888 country:US 2022-12-30 0000042888 us-gaap:NonUsMember 2023-09-29 0000042888 us-gaap:NonUsMember 2022-12-30 0000042888 us-gaap:EmployeeStockOptionMember 2022-12-31 2023-09-29 0000042888 us-gaap:EmployeeStockOptionMember 2022-01-01 2022-09-30 xbrli:pure 0000042888 us-gaap:EmployeeStockMember 2022-12-31 2023-09-29 0000042888 us-gaap:EmployeeStockMember 2022-01-01 2022-09-30 0000042888 us-gaap:PensionPlansDefinedBenefitMember 2023-07-01 2023-09-29 0000042888 us-gaap:PensionPlansDefinedBenefitMember 2022-07-02 2022-09-30 0000042888 us-gaap:PensionPlansDefinedBenefitMember 2022-12-31 2023-09-29 0000042888 us-gaap:PensionPlansDefinedBenefitMember 2022-01-01 2022-09-30 0000042888 us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember 2023-07-01 2023-09-29 0000042888 us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember 2022-07-02 2022-09-30 0000042888 us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember 2022-12-31 2023-09-29 0000042888 us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember 2022-01-01 2022-09-30 0000042888 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2023-06-30 0000042888 us-gaap:AccumulatedTranslationAdjustmentMember 2023-06-30 0000042888 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2023-07-01 2023-09-29 0000042888 us-gaap:AccumulatedTranslationAdjustmentMember 2023-07-01 2023-09-29 0000042888 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2023-09-29 0000042888 us-gaap:AccumulatedTranslationAdjustmentMember 2023-09-29 0000042888 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2022-12-30 0000042888 us-gaap:AccumulatedTranslationAdjustmentMember 2022-12-30 0000042888 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2022-12-31 2023-09-29 0000042888 us-gaap:AccumulatedTranslationAdjustmentMember 2022-12-31 2023-09-29 0000042888 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2022-07-01 0000042888 us-gaap:AccumulatedTranslationAdjustmentMember 2022-07-01 0000042888 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2022-07-02 2022-09-30 0000042888 us-gaap:AccumulatedTranslationAdjustmentMember 2022-07-02 2022-09-30 0000042888 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2022-09-30 0000042888 us-gaap:AccumulatedTranslationAdjustmentMember 2022-09-30 0000042888 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2021-12-31 0000042888 us-gaap:AccumulatedTranslationAdjustmentMember 2021-12-31 0000042888 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2022-01-01 2022-09-30 0000042888 us-gaap:AccumulatedTranslationAdjustmentMember 2022-01-01 2022-09-30 0000042888 us-gaap:CustomerRelationshipsMember 2023-09-29 0000042888 ggg:PatentsProprietaryTechnologyAndProductDocumentationMember 2023-09-29 0000042888 us-gaap:TrademarksAndTradeNamesMember 2023-09-29 0000042888 us-gaap:TradeNamesMember 2023-09-29 0000042888 us-gaap:CustomerRelationshipsMember 2022-12-31 2023-09-29 0000042888 ggg:PatentsProprietaryTechnologyAndProductDocumentationMember 2022-12-31 2023-09-29 0000042888 us-gaap:TrademarksAndTradeNamesMember 2022-12-31 2023-09-29 0000042888 us-gaap:TradeNamesMember 2022-12-31 2023-09-29 0000042888 us-gaap:CustomerRelationshipsMember 2022-12-30 0000042888 ggg:PatentsProprietaryTechnologyAndProductDocumentationMember 2022-12-30 0000042888 us-gaap:TrademarksAndTradeNamesMember 2022-12-30 0000042888 us-gaap:TradeNamesMember 2022-12-30 0000042888 us-gaap:CustomerRelationshipsMember 2022-12-31 2023-03-31 0000042888 ggg:PatentsProprietaryTechnologyAndProductDocumentationMember 2022-12-31 2023-03-31 0000042888 us-gaap:TrademarksAndTradeNamesMember 2022-12-31 2023-03-31 0000042888 us-gaap:TradeNamesMember 2022-12-31 2023-03-31 0000042888 2022-12-31 2023-03-31 0000042888 ggg:ContractorMember 2022-12-30 0000042888 ggg:IndustrialMember 2022-12-30 0000042888 ggg:ProcessMember 2022-12-30 0000042888 ggg:ContractorMember 2022-12-31 2023-09-29 0000042888 ggg:ProcessMember 2022-12-31 2023-09-29 0000042888 ggg:IndustrialMember 2022-12-31 2023-09-29 0000042888 ggg:ContractorMember 2023-09-29 0000042888 ggg:IndustrialMember 2023-09-29 0000042888 ggg:ProcessMember 2023-09-29 0000042888 us-gaap:RevolvingCreditFacilityMember ggg:CommittedFacilityMember us-gaap:LineOfCreditMember 2023-06-07 0000042888 us-gaap:RevolvingCreditFacilityMember ggg:CommittedFacilityMember us-gaap:LineOfCreditMember 2023-06-08 0000042888 us-gaap:RevolvingCreditFacilityMember srt:MinimumMember ggg:CommittedFacilityMember us-gaap:LineOfCreditMember 2023-06-07 2023-06-07 0000042888 us-gaap:RevolvingCreditFacilityMember ggg:CommittedFacilityMember srt:MaximumMember us-gaap:LineOfCreditMember 2023-06-07 2023-06-07 0000042888 us-gaap:RevolvingCreditFacilityMember srt:MinimumMember ggg:CommittedFacilityMember us-gaap:LineOfCreditMember 2023-06-08 2023-06-08 0000042888 us-gaap:RevolvingCreditFacilityMember ggg:CommittedFacilityMember srt:MaximumMember us-gaap:LineOfCreditMember 2023-06-08 2023-06-08 0000042888 ggg:SecuredOvernightFinancingRateSOFRMember us-gaap:RevolvingCreditFacilityMember srt:MinimumMember ggg:CommittedFacilityMember us-gaap:LineOfCreditMember 2023-06-07 2023-06-07 0000042888 ggg:SecuredOvernightFinancingRateSOFRMember us-gaap:RevolvingCreditFacilityMember ggg:CommittedFacilityMember srt:MaximumMember us-gaap:LineOfCreditMember 2023-06-07 2023-06-07 0000042888 ggg:SecuredOvernightFinancingRateSOFRMember us-gaap:RevolvingCreditFacilityMember srt:MinimumMember ggg:CommittedFacilityMember us-gaap:LineOfCreditMember 2023-06-08 2023-06-08 0000042888 ggg:SecuredOvernightFinancingRateSOFRMember us-gaap:RevolvingCreditFacilityMember ggg:CommittedFacilityMember srt:MaximumMember us-gaap:LineOfCreditMember 2023-06-08 2023-06-08 0000042888 us-gaap:FairValueInputsLevel2Member 2023-09-29 0000042888 us-gaap:FairValueInputsLevel2Member 2022-12-30 0000042888 us-gaap:FairValueInputsLevel3Member 2023-09-29 0000042888 us-gaap:FairValueInputsLevel3Member 2022-12-30

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 29, 2023

☐ 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 ☒ No ☐
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 ☒ No ☐
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 ☐ No ☒

168,788,078 shares of the Registrant’s Common Stock, $1.00 par value, were outstanding as of October 11, 2023.


TABLE OF CONTENTS
Page
PART I - FINANCIAL INFORMATION
Item 1.
Item 2.
Item 3.
Item 4.
PART II - OTHER INFORMATION
Item 1A.
Item 2.
Item 5.
Item 6.
2
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 29,
2023 		September 30,
2022 		September 29,
2023 		September 30,
2022
Net Sales $ 539,672 $ 545,644 $ 1,628,962 $ 1,588,476
Cost of products sold 255,148 284,556 767,883 803,853
Gross Profit 284,524 261,088 861,079 784,623
Product development 19,817 19,704 61,582 58,749
Selling, marketing and distribution 60,495 61,386 194,258 186,457
General and administrative 41,823 36,849 129,130 119,225
Contingent consideration ( 8,600 ) — ( 8,600 ) —
Impairment 7,800 — 7,800 —
Operating Earnings 163,189 143,149 476,909 420,192
Interest expense 1,391 1,542 4,536 8,555
Other (income) expense, net ( 2,483 ) ( 866 ) ( 8,877 ) ( 106 )
Earnings Before Income Taxes 164,281 142,473 481,250 411,743
Income taxes 31,158 26,241 84,693 77,290
Net Earnings $ 133,123 $ 116,232 $ 396,557 $ 334,453
Net Earnings per Common Share
Basic
$ 0.79 $ 0.69 $ 2.35 $ 1.97
Diluted
$ 0.77 $ 0.67 $ 2.30 $ 1.93
See notes to consolidated financial statements.


CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited) (In thousands)
Three Months Ended Nine Months Ended
September 29,
2023 		September 30,
2022 		September 29,
2023 		September 30,
2022
Net Earnings $ 133,123 $ 116,232 $ 396,557 $ 334,453
Components of other comprehensive
income (loss)
Cumulative translation adjustment
( 9,022 ) ( 13,335 ) 506 ( 29,827 )
Pension and postretirement medical
liability adjustment 		1,100 1,340 3,427 3,602
Income taxes - pension and postretirement
medical liability adjustment 		( 252 ) ( 312 ) ( 760 ) ( 826 )
Other comprehensive income (loss) ( 8,174 ) ( 12,307 ) 3,173 ( 27,051 )
Comprehensive Income $ 124,949 $ 103,925 $ 399,730 $ 307,402
See notes to consolidated financial statements.
3
GRACO INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited) (In thousands)
September 29,
2023 		December 30,
2022
ASSETS
Current Assets
Cash and cash equivalents $ 525,785 $ 339,196
Accounts receivable, less allowances of $ 4,900 and $ 7,000
352,505 346,010
Inventories 457,604 476,790
Other current assets 41,438 43,624
Total current assets 1,377,332 1,205,620
Property, Plant and Equipment, net 707,828 607,609
Goodwill 360,715 368,171
Other Intangible Assets, net 124,824 137,507
Operating Lease Assets 28,047 29,785
Deferred Income Taxes 40,014 57,090
Other Assets 36,157 33,118
Total Assets $ 2,674,917 $ 2,438,900
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Notes payable to banks $ 29,043 $ 20,974
Trade accounts payable 75,249 84,218
Salaries and incentives 62,292 63,969
Dividends payable 39,715 39,963
Other current liabilities 189,589 190,793
Total current liabilities 395,888 399,917
Long-term Debt — 75,000
Retirement Benefits and Deferred Compensation 61,361 61,672
Operating Lease Liabilities 18,996 21,057
Deferred Income Taxes 8,050 9,443
Other Non-current Liabilities 2,096 12,159
Shareholders’ Equity
Common stock 168,775 167,702
Additional paid-in-capital 859,307 784,477
Retained earnings 1,226,649 976,851
Accumulated other comprehensive income (loss) ( 66,205 ) ( 69,378 )
Total shareholders’ equity 2,188,526 1,859,652
Total Liabilities and Shareholders’ Equity $ 2,674,917 $ 2,438,900
See notes to consolidated financial statements.
4
GRACO INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (In thousands)
Nine Months Ended
September 29,
2023 		September 30,
2022
Cash Flows From Operating Activities
Net Earnings $ 396,557 $ 334,453
Adjustments to reconcile net earnings to net cash
provided by operating activities
Depreciation and amortization 54,179 48,223
Deferred income taxes 14,910 20,062
Share-based compensation 25,456 19,480
Contingent consideration ( 8,600 ) —
Impairment 7,800 —
Change in
Accounts receivable ( 7,229 ) ( 56,524 )
Inventories 19,227 ( 86,455 )
Trade accounts payable ( 8,411 ) 8,456
Salaries and incentives ( 2,993 ) ( 20,841 )
Retirement benefits and deferred compensation 2,955 473
Other accrued liabilities ( 1,840 ) 411
Other ( 641 ) 3,814
Net cash provided by operating activities 491,370 271,552
Cash Flows From Investing Activities
Property, plant and equipment additions ( 145,626 ) ( 147,193 )
Acquisition of businesses, net of cash acquired — ( 25,296 )
Other ( 694 ) ( 477 )
Net cash used in investing activities ( 146,320 ) ( 172,966 )
Cash Flows From Financing Activities
Borrowings on short-term lines of credit, net 9,125 4,110
Payments on long-term debt ( 75,000 ) ( 75,000 )
Payments of debt issuance costs ( 1,025 ) —
Common stock issued 55,492 28,299
Common stock repurchased ( 27,057 ) ( 155,181 )
Taxes paid related to net share settlement of equity awards ( 1,225 ) ( 1,219 )
Cash dividends paid ( 118,710 ) ( 106,855 )
Net cash provided (used) in financing activities ( 158,400 ) ( 305,846 )
Effect of exchange rate changes on cash ( 61 ) ( 2,215 )
Net increase (decrease) in cash and cash equivalents 186,589 ( 209,475 )
Cash and Cash Equivalents
Beginning of year 339,196 624,302
End of period $ 525,785 $ 414,827
See notes to consolidated financial statements.
5
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 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 ($ 0.2350 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
Three Months Ended September 30, 2022
Balance, July 1, 2022 $ 169,114 $ 770,209 $ 912,864 $ ( 94,913 ) $ 1,757,274
Shares issued 182 4,707 — — 4,889
Shares repurchased ( 773 ) ( 3,369 ) ( 43,126 ) — ( 47,268 )
Stock compensation cost — 5,047 — — 5,047
Net earnings — — 116,232 — 116,232
Dividends declared ($ 0.210 per share)
— — ( 35,556 ) — ( 35,556 )
Other comprehensive income (loss) — — — ( 12,307 ) ( 12,307 )
Balance, September 30, 2022 $ 168,523 $ 776,594 $ 950,414 $ ( 107,220 ) $ 1,788,311
Nine Months Ended September 30, 2022
Balance, December 31, 2021 $ 170,308 $ 742,288 $ 876,916 $ ( 80,169 ) $ 1,709,343
Shares issued 689 26,392 — — 27,081
Shares repurchased ( 2,474 ) ( 10,781 ) ( 154,034 ) — ( 167,289 )
Stock compensation cost — 18,696 — — 18,696
Restricted stock canceled (issued) — ( 1 ) — — ( 1 )
Net earnings — — 334,453 — 334,453
Dividends declared ($ 0.6300 per share)
— — ( 106,921 ) — ( 106,921 )
Other comprehensive income (loss) — — — ( 27,051 ) ( 27,051 )
Balance, September 30, 2022 $ 168,523 $ 776,594 $ 950,414 $ ( 107,220 ) $ 1,788,311
See notes to consolidated financial statements.
6
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 29, 2023 and the related statements of earnings, comprehensive income and shareholders' equity for the three and nine months ended September 29, 2023 and September 30, 2022, and cash flows for the nine months ended September 29, 2023 and September 30, 2022 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 29, 2023, 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 2022 Annual Report on Form 10-K.

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

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 29,
2023 		September 30,
2022 		September 29,
2023 		September 30,
2022
Net Sales
Contractor $ 245,269 $ 264,086 $ 746,888 $ 764,417
Industrial 157,084 156,182 470,797 459,176
Process 137,319 125,376 411,277 364,883
Total $ 539,672 $ 545,644 $ 1,628,962 $ 1,588,476
Operating Earnings
Contractor $ 73,512 $ 65,123 $ 216,152 $ 192,314
Industrial 54,298 53,964 162,955 161,795
Process 43,001 30,638 127,186 89,183
Unallocated corporate (expense) ( 8,422 ) ( 6,576 ) ( 30,184 ) ( 23,100 )
Contingent consideration 8,600 — 8,600 —
Impairment ( 7,800 ) — ( 7,800 ) —
Total $ 163,189 $ 143,149 $ 476,909 $ 420,192

Assets by segment were as follows (in thousands):
September 29,
2023 		December 30,
2022
Contractor
$ 740,771 $ 752,729
Industrial
610,367 578,302
Process
573,028 564,539
Unallocated corporate
750,751 543,330
Total
$ 2,674,917 $ 2,438,900

7
Geographic information follows (in thousands):
Three Months Ended Nine Months Ended
September 29,
2023 		September 30,
2022 		September 29,
2023 		September 30,
2022
Net Sales (based on customer location)
United States
$ 288,610 $ 289,831 $ 879,552 $ 840,922
Other countries
251,062 255,813 749,410 747,554
Total
$ 539,672 $ 545,644 $ 1,628,962 $ 1,588,476

September 29,
2023 		December 30,
2022
Long-lived Assets
United States
$ 604,727 $ 532,401
Other countries
103,101 75,208
Total
$ 707,828 $ 607,609


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 29,
2023 		September 30,
2022 		September 29,
2023 		September 30,
2022
Net earnings available to common shareholders
$ 133,123 $ 116,232 $ 396,557 $ 334,453
Weighted average shares outstanding for basic earnings per share 169,005 169,166 168,569 169,368
Dilutive effect of stock options computed using the treasury stock method and the average market price 3,775 3,623 3,767 4,020
Weighted average shares outstanding for diluted earnings per share 172,780 172,789 172,336 173,388
Basic earnings per share
$ 0.79 $ 0.69 $ 2.35 $ 1.97
Diluted earnings per share
$ 0.77 $ 0.67 $ 2.30 $ 1.93
Anti-dilutive shares not included in diluted earnings per share computation 1,200 1,618 2,033 1,616



8
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 30, 2022 10,265 $ 44.40 7,793 $ 37.22
Granted 1,114 71.45
Exercised ( 1,191 ) 30.89
Canceled ( 82 ) 66.15
Outstanding, September 29, 2023 10,106 $ 48.79 7,439 $ 41.10

The Company recognized year-to-date share-based compensation of $ 25.5 million in 2023 and $ 17.9 million in 2022. As of September 29, 2023, there was $ 20.4 million of unrecognized compensation cost related to unvested options, expected to be recognized over a weighted average period of 2.6 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 29,
2023 		September 30,
2022
Expected life in years
6.7 7.3
Interest rate
4.0 % 1.9 %
Volatility
26.3 % 25.5 %
Dividend yield
1.3 % 1.2 %
Weighted average fair value per share
$ 21.76 $ 19.06

Under the Company’s Employee Stock Purchase Plan, the Company issued 323,000 shares in 2023 and 316,000 shares in 2022. 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 29,
2023 		September 30,
2022
Expected life in years
1.0 1.0
Interest rate
5.1 % 0.9 %
Volatility
26.4 % 20.5 %
Dividend yield
1.4 % 1.2 %
Weighted average fair value per share
$ 18.04 $ 16.01

9
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 29,
2023 		September 30,
2022 		September 29,
2023 		September 30,
2022
Pension Benefits
Service cost
$ 1,438 $ 2,053 $ 4,369 $ 6,187
Interest cost
3,632 2,745 11,207 8,249
Expected return on assets
( 6,399 ) ( 5,237 ) ( 14,354 ) ( 14,816 )
Amortization and other
3,041 1,200 3,896 3,695
Net periodic benefit cost
$ 1,712 $ 761 $ 5,118 $ 3,315
Postretirement Medical
Service cost
$ 61 $ 129 $ 261 $ 387
Interest cost
454 209 874 629
Amortization
( 280 ) 86 ( 100 ) 259
Net periodic benefit cost
$ 235 $ 424 $ 1,035 $ 1,275

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 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 )

Three Months Ended September 30, 2022
Balance, July 1, 2022 $ ( 58,359 ) $ ( 36,554 ) $ ( 94,913 )
Other comprehensive income (loss) before reclassifications — ( 13,335 ) ( 13,335 )
Reclassified to pension cost and deferred tax 1,028 — 1,028
Balance, September 30, 2022 $ ( 57,331 ) $ ( 49,889 ) $ ( 107,220 )

Nine Months Ended September 30, 2022
Balance, December 31, 2021 $ ( 60,107 ) $ ( 20,062 ) $ ( 80,169 )
Other comprehensive income (loss) before reclassifications — ( 29,827 ) ( 29,827 )
Reclassified to pension cost and deferred tax 2,776 — 2,776
Balance, September 30, 2022 $ ( 57,331 ) $ ( 49,889 ) $ ( 107,220 )
10

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


7. Receivables and Credit Losses

Accounts receivable include trade receivables of $ 341 million and other receivables of $ 12 million as of September 29, 2023 and $ 334 million and $ 12 million of trade receivables and other receivables, respectively, as of December 30, 2022.

Allowance for Credit Losses

Following is a summary of activity for credit losses (in thousands):
Three Months Ended Nine Months Ended
September 29,
2023 		September 30,
2022 		September 29,
2023 		September 30,
2022
Balance, beginning $ 4,199 $ 5,689 $ 6,130 $ 3,254
Additions charged to costs and expenses 366 16 646 3,262
Deductions from reserves (1)
( 595 ) 11 ( 2,864 ) ( 564 )
Other additions (deductions) (2)
( 88 ) ( 216 ) ( 30 ) ( 452 )
Balance, ending $ 3,882 $ 5,500 $ 3,882 $ 5,500

(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 29,
2023 		December 30,
2022
Finished products and components $ 233,224 $ 222,326
Products and components in various stages of completion 139,389 138,957
Raw materials and purchased components 215,668 248,636
Subtotal 588,281 609,919
Reduction to LIFO cost ( 130,677 ) ( 133,129 )
Total $ 457,604 $ 476,790

11
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 29, 2023
Cost
$ 197,417 $ 26,374 $ 1,300 $ 62,633 $ 287,724
Accumulated amortization
( 130,424 ) ( 19,751 ) ( 503 ) — ( 150,678 )
Foreign currency translation ( 9,647 ) ( 882 ) — ( 1,693 ) ( 12,222 )
Book value
$ 57,346 $ 5,741 $ 797 $ 60,940 $ 124,824
Weighted average life in years
13 9 6 N/A
As of December 30, 2022
Cost
$ 202,103 $ 26,374 $ 1,300 $ 62,633 $ 292,410
Accumulated amortization
( 123,603 ) ( 18,027 ) ( 330 ) — ( 141,960 )
Foreign currency translation ( 10,060 ) ( 894 ) — ( 1,989 ) ( 12,943 )
Book value
$ 68,440 $ 7,453 $ 970 $ 60,644 $ 137,507
Weighted average life in years
13 10 6 N/A

Amortization of intangibles for the third quarter was $ 4.4 million in 2023 and $ 4.8 million in 2022, and for the year to date was $ 13.2 million in 2023 and $ 14.1 million in 2022. Estimated annual amortization expense based on the current carrying amount of other intangible assets is as follows (in thousands):
2023 (Remainder) 2024 2025 2026 2027 Thereafter
Estimated Amortization Expense $ 4,166 $ 16,155 $ 15,739 $ 8,982 $ 6,358 $ 12,484

Changes in the carrying amount of goodwill for each reportable segment were as follows (in thousands):
Contractor Industrial Process Total
Balance, December 30, 2022 $ 77,034 $ 134,771 $ 156,366 $ 368,171
Impairment — — ( 7,800 ) ( 7,800 )
Foreign currency translation ( 122 ) 286 180 344
Balance, September 29, 2023 $ 76,912 $ 135,057 $ 148,746 $ 360,715

In the third quarter of 2023, the Company recognized a goodwill impairment related to the reorganization of a business acquired in 2020 that is not material to the consolidated financial statements.
12
10. Other Current Liabilities
Components of other current liabilities were as follows (in thousands):
September 29,
2023 		December 30,
2022
Accrued self-insurance retentions
$ 9,395 $ 9,338
Accrued warranty and service liabilities
15,044 14,674
Accrued trade promotions
14,196 13,799
Payable for employee stock purchases
12,061 16,497
Customer advances and deferred revenue
60,332 50,747
Income taxes payable
13,891 15,987
Tax payable, other 8,816 9,614
Right of return refund liability 17,965 18,449
Operating lease liabilities, current 8,888 9,555
Other
29,001 32,133
Total
$ 189,589 $ 190,793

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 30, 2022 $ 14,674
Charged to expense 7,842
Margin on parts sales reversed 2,819
Reductions for claims settled ( 10,291 )
Balance, September 29, 2023 $ 15,044

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 29, 2023, we recognized $ 6.7 million and $ 43.3 million, respectively, that was included in deferred revenue at December 30, 2022. During the three and nine months ended September 30, 2022, we recognized $ 11.2 million and $ 52.0 million, respectively, that was included in deferred revenue at December 31, 2021.

11. Debt

On May 23, 2023 and June 8, 2023, the Company executed amendments to its amended and restated credit agreement that amended, superseded and restated in its entirety the Company's existing credit agreement with U.S. Bank National Association, as administrative agent and a lender, and the other lenders that are parties thereto. The first amendment removed references to LIBOR for calculating rates and replaced them with SOFR and its equivalent benchmark rates such as EURIBOR, TIBOR and RFR loans.
The second amendment increased, from $ 500 million to $ 750 million, the amount of availability under an unsecured revolving credit facility, as well as increased, from $ 200 million to $ 375 million, the maximum amount of outstanding loans in currencies other than U.S. Dollars. The amendment also increased, from $ 250 million to $ 375 million, the amount by which the size of the credit facility may be increased upon exercise of an accordion feature. The accordion feature may be exercised by means of an increase in the revolving commitments or the addition of term loans.
In addition, the second amendment increased the applicable margin percentages used for purposes of calculating the interest rates applicable to base rate loans and non-base rate loans (e.g., SOFR, EURIBOR, TIBOR and RFR loans). Under the amendment, the applicable margin percentages for base rate loans (which ranged from 0.000 % to 0.750 % under the prior credit agreement) range from 0.125 % to 0.875 %, and the applicable margin percentages for non-base rate loans (which ranged from 1.000 % to 1.750 % under the prior credit agreement) range from 1.125 % to 1.875 %.

13


12. 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 29,
2023 		December 30,
2022
Assets
Cash surrender value of life insurance 2 $ 20,207 $ 19,192
Forward exchange contracts 2 233 —
Total assets at fair value $ 20,440 $ 19,192
Liabilities
Contingent consideration 3 $ 1,375 $ 14,914
Deferred compensation 2 6,325 5,842
Forward exchange contracts 2 — 520
Total liabilities at fair value $ 7,700 $ 21,276

Contracts insuring the lives of certain employees who are eligible to participate in certain non-qualified pension and deferred compensation plans are held in trust. Cash surrender value of the contracts is based on performance measurement funds that shadow the deferral investment allocations made by participants in certain deferred compensation plans. The deferred compensation liability balances are valued based on amounts allocated by participants to the underlying performance measurement funds.

Contingent consideration liabilities represent the estimated value (using a probability-weighted expected return approach) of future payments to be made to previous owners of certain acquired businesses based on future revenues. In the third quarter of 2023, the Company recognized an $ 8.6 million gain from the reduction in fair value of contingent consideration related to the reorganization of a business acquired in 2020 that is not material to the consolidated financial statements. Contingent consideration liabilities were further reduced $ 4.9 million in 2023 by payments made to previous owners of those businesses.

Long-term notes payable with fixed interest rates had a carrying amount of $ 75 million and an estimated fair value of $ 75 million as of December 30, 2022. These notes were repaid as of July 12, 2023. 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.
14
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 channel and technologies.

The Company continued to experience supply chain disruptions and the associated effects of inflation through the third quarter of 2023; however, the impact was not as significant as compared to the same period in the prior year. Pricing actions implemented have generally mitigated the effects of increased costs and expenses. The Company expects isolated supply chain disruptions and an overall inflationary environment to continue through the remainder of 2023.

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 29,
2023 		Sep 30,
2022 		%
Change 		Sep 29,
2023 		Sep 30,
2022 		%
Change
Net Sales
$ 539.7 $ 545.6 (1) % $ 1,629.0 $ 1,588.5 3 %
Operating Earnings
163.2 143.1 14 % 476.9 420.2 13 %
Operating Earnings, adjusted (1)
162.4 143.1 13 % 476.1 420.2 13 %
Net Earnings
133.1 116.2 15 % 396.6 334.5 19 %
Net Earnings, adjusted (1)
131.5 114.8 15 % 386.9 331.3 17 %
Diluted Net Earnings per Common Share
$ 0.77 $ 0.67 15 % $ 2.30 $ 1.93 19 %
Diluted Net Earnings per Common Share, adjusted (1)
$ 0.76 $ 0.66 15 % $ 2.24 $ 1.91 17 %
(1) See below for a reconciliation of adjusted non-GAAP financial measures to GAAP.

Net sales decreased 1 percent for the quarter from the comparable period last year. Sales growth in the Process segment was more than offset by a decline in sales in the Contractor segment. Sales were flat in the Americas and decreased in EMEA and Asia Pacific. Changes in currency translation rates increased sales and net earnings by approximately $5 million and $2 million, respectively, for the quarter.
Gross profit margin rate for the quarter was 5 percentage points higher than the comparable period last year due to realized pricing and lower product costs.
Total operating expenses increased 3 percent and increased as a percentage of net sales by 1 percentage point.
15
Excluding the impacts of contingent consideration fair value adjustments, impairment charges and excess tax benefits related to stock option exercises presents a more consistent basis for comparison of financial results. A calculation of the non-GAAP measurements of adjusted 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 29,
2023 		September 30,
2022 		September 29,
2023 		September 30,
2022
Operating earnings, as reported $ 163.2 $ 143.1 $ 476.9 $ 420.2
Contingent consideration (8.6) — (8.6) —
Impairment 7.8 — 7.8 —
Operating earnings, adjusted $ 162.4 $ 143.1 $ 476.1 $ 420.2
Earnings before income taxes $ 164.3 $ 142.4 $ 481.3 $ 411.8
Contingent consideration (8.6) — (8.6) —
Impairment 7.8 — 7.8 —
Earnings before income taxes, adjusted $ 163.5 $ 142.4 $ 480.5 $ 411.8
Income taxes, as reported $ 31.2 $ 26.2 $ 84.7 $ 77.3
Excess tax benefit from option exercises 0.8 1.4 8.9 3.2
Income taxes, adjusted $ 32.0 $ 27.6 $ 93.6 $ 80.5
Effective income tax rate
As reported 19.0 % 18.4 % 17.6 % 18.8 %
Adjusted 19.6 % 19.4 % 19.5 % 19.6 %
Net Earnings, as reported $ 133.1 $ 116.2 $ 396.6 $ 334.5
Contingent consideration (8.6) — (8.6) —
Impairment 7.8 — 7.8 —
Excess tax benefit from option exercises (0.8) (1.4) (8.9) (3.2)
Net Earnings, adjusted $ 131.5 $ 114.8 $ 386.9 $ 331.3
Weighted Average Diluted Shares 172.8 172.8 172.3 173.4
Diluted Earnings per Share
As reported $ 0.77 $ 0.67 $ 2.30 $ 1.93
Adjusted $ 0.76 $ 0.66 $ 2.24 $ 1.91


16
The following table presents an overview of components of net earnings as a percentage of net sales:
Three Months Ended Nine Months Ended
September 29,
2023 		September 30,
2022 		September 29,
2023 		September 30,
2022
Net Sales 100.0 % 100.0 % 100.0 % 100.0 %
Cost of products sold 47.3 52.2 47.1 50.6
Gross Profit 52.7 47.8 52.9 49.4
Product development 3.7 3.6 3.8 3.7
Selling, marketing and distribution 11.2 11.3 11.9 11.7
General and administrative 7.7 6.8 7.9 7.5
Contingent consideration (1.6) — (0.5) —
Impairment 1.5 — 0.5 —
Operating Earnings 30.2 26.2 29.3 26.5
Interest expense 0.3 0.3 0.3 0.5
Other (income) expense, net (0.5) (0.2) (0.5) —
Earnings Before Income Taxes 30.4 26.1 29.5 25.9
Income taxes 5.7 4.8 5.2 4.9
Net Earnings 24.7 % 21.3 % 24.3 % 21.1 %

Net Sales

The following table presents net sales by geographic region (in millions):
Three Months Ended Nine Months Ended
September 29,
2023 		September 30,
2022 		September 29,
2023 		September 30,
2022
Americas (1)
$ 332.7 $ 333.4 $ 1,010.5 $ 964.8
EMEA (2)
107.1 111.3 331.7 325.8
Asia Pacific 99.9 100.9 286.8 297.9
Consolidated $ 539.7 $ 545.6 $ 1,629.0 $ 1,588.5
(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 0% 0% 0% 0% 5% 0% 0% 5%
EMEA (10)% 0% 6% (4)% 0% 0% 2% 2%
Asia Pacific 2% 0% (3)% (1)% 0% 0% (4)% (4)%
Consolidated (2)% 0% 1% (1)% 3% 0% 0% 3%

Gross Profit

Gross profit margin rates for the quarter and year to date increased from the comparable periods last year mainly due to realized pricing. The impact of lower product costs further increased the gross profit margin rate in the quarter from the comparable period last year.


17
Operating Expenses

Total operating expenses for the quarter and year to date included a non-cash goodwill impairment charge of $8 million and a $9 million gain from the reduction in fair value of contingent consideration related to the reorganization of a business acquired in 2020. Excluding these items, total operating expenses increased $4 million (4 percent) for the quarter and $21 million (6 percent) for the year to date from the comparable periods last year due to volume and rate-related increases and incremental share-based compensation.

Interest and Other (Income) Expense

Interest expense was flat for the quarter and decreased $4 million for the year to date as private placement debt was repaid in the first quarter last year and in the third quarter of the current year. Other non-operating income increased $2 million for the quarter and $9 million for the year to date mostly due to increased interest income.
Income Taxes

The effective income tax rate increased 1 percentage point to 19 percent for the quarter and decreased 1 percentage point to 18 percent for the year to date from the comparable periods last year due to variations in excess tax benefits from stock option exercises.

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 29,
2023 		September 30,
2022 		September 29,
2023 		September 30,
2022
Net Sales
Americas
$ 185.7 $ 196.7 $ 558.2 $ 566.9
EMEA
41.2 46.6 131.8 132.8
Asia Pacific
18.4 20.8 56.9 64.7
Total
$ 245.3 $ 264.1 $ 746.9 $ 764.4
Operating earnings as a percentage of net sales
30 % 25 % 29 % 25 %

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 (5)% 0% (1)% (6)% (1)% 0% (1)% (2)%
EMEA (17)% 0% 6% (11)% (2)% 0% 1% (1)%
Asia Pacific (9)% 0% (3)% (12)% (8)% 0% (4)% (12)%
Segment Total (8)% 0% 1% (7)% (2)% 0% 0% (2)%

Contractor segment sales decreased for the quarter and year to date as favorable response to new product offerings and improved product availability were unable to offset reduced demand from slower economic activity in worldwide construction markets. Strong realized pricing and lower product costs drove the operating margin rate for this segment 5 percentage points higher for the quarter. Realized pricing offset higher product costs and drove an increase of 4 percentage points in the operating margin rate for the year to date.

18
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 29,
2023 		September 30,
2022 		September 29,
2023 		September 30,
2022
Net Sales
Americas
$ 61.5 $ 60.1 $ 190.5 $ 175.9
EMEA
46.2 48.1 143.4 141.6
Asia Pacific
49.4 47.9 136.9 141.7
Total
$ 157.1 $ 156.1 $ 470.8 $ 459.2
Operating earnings as a percentage of net sales
35 % 35 % 35 % 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 1% 0% 1% 2% 8% 0% 0% 8%
EMEA (11)% 0% 7% (4)% 0% 0% 1% 1%
Asia Pacific 6% 0% (3)% 3% 1% 0% (4)% (3)%
Segment Total (1)% 0% 2% 1% 3% 0% 0% 3%

Industrial segment sales increased 1 percent for the quarter as improved project activity in Asia Pacific was mostly offset by declines in finishing system sales in EMEA. Underlying end market strength in the Americas drove Industrial segment sales higher for the year to date. The operating margin rate for this segment was flat for the quarter and year to date.


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 29,
2023 		September 30,
2022 		September 29,
2023 		September 30,
2022
Net Sales
Americas
$ 85.5 $ 76.6 $ 261.7 $ 222.0
EMEA
19.7 16.6 56.5 51.4
Asia Pacific
32.1 32.2 93.1 91.5
Total
$ 137.3 $ 125.4 $ 411.3 $ 364.9
Operating earnings as a percentage of net sales
31 % 24 % 31 % 24 %

19
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 12% 0% 0% 12% 17% 1% 0% 18%
EMEA 14% 0% 4% 18% 9% 0% 1% 10%
Asia Pacific 2% 0% (2)% 0% 4% 0% (2)% 2%
Segment Total 9% 0% 1% 10% 13% 1% (1)% 13%

Process segment sales increased double digits for the quarter and year to date, although the rate of growth slowed in the third quarter. The operating margin rate for this segment increased 7 percentage points for both the quarter and year to date from the comparable periods last year primarily due to price realization and expense leverage.

Liquidity and Capital Resources

Net cash provided by operating activities of $491 million for the first nine months of 2023 increased $220 million from the comparable period in 2022, mostly driven by higher net earnings, decreased inventory purchases and lower accounts receivable due to continued cash collections. Inventory purchases were lower for the first nine months of 2023 compared to the same period last year as logistical and production constraints from disruptions in the supply chain improved. Significant uses of cash in 2023 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 in 2023 totaled $54 million, which were partially offset by share repurchases of $27 million.

For the first nine months of 2022, significant uses of cash included share repurchases of $155 million, plant and equipment additions of $147 million, long-term debt payments of $75 million, dividend payments of $107 million, and $25 million to acquire businesses that were not material to the consolidated financial statements. Proceeds from shares issued in 2022 totaled $27 million.

As of September 29, 2023, the Company had available liquidity of $1,305 million, including cash and cash equivalents of $526 million, of which $267 million was held outside of the U.S., and available credit under existing committed credit facilities of $779 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, acquisitions and operating requirements. Capital expenditures for 2023 are expected to be approximately $200 million, including $130 million in facility expansion projects. The Company may make opportunistic share repurchases going forward.

Outlook
The Company's results reflect underlying business trends that were in line with expectations of revenue growth for the full year of low single-digits 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 2022 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
20
materially from those expressed in these statements. The Company undertakes no obligation to update these statements in light of new information or future events.

Future results could differ materially from those expressed due to the impact of changes in various factors. These risk factors include, but are not limited to: the impact of the COVID-19 pandemic on our business; Russia's invasion of Ukraine, and the sanctions and actions taken against Russia and Belarus in response to the invasion; economic conditions in the United States and other major world economies; our Company’s growth strategies, which include making acquisitions, investing in new products, expanding geographically and targeting new industries; changes in currency translation rates; the ability to meet our customers’ needs and changes in product demand; supply interruptions or delays; security breaches; new entrants who copy our products or infringe on our intellectual property; risks incident to conducting business internationally; catastrophic events; changes in laws and regulations; compliance with anti-corruption and trade laws; changes in tax rates or the adoption of new tax legislation; the possibility of asset impairments if acquired businesses do not meet performance expectations; political instability; results of and costs associated with litigation, administrative proceedings and regulatory reviews incident to our business; our ability to attract, develop and retain qualified personnel; the possibility of decline in purchases from a few large customers of the Contractor segment; variations in activity in the construction, automotive, electronics, aerospace, semiconductor, and agriculture and construction equipment industries; and the impact of declines in interest rates, asset values and investment returns on pension costs and required pension contributions. Please refer to Item 1A of our Annual Report on Form 10-K for fiscal year 2022 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 Company’s 2022 Annual Report on Form 10-K.

Item 4. Controls and Procedures

Evaluation of disclosure controls and procedures

As of the end of the fiscal quarter covered by this report, the Company carried out an evaluation of the effectiveness of the design and operation of its disclosure controls and procedures. This evaluation was done under the supervision and with the participation of the Company’s President and Chief Executive Officer and the Chief Financial Officer and Treasurer. Based upon that evaluation, the Company's President and Chief Executive Officer and the Chief Financial Officer and Treasurer concluded that the Company’s disclosure controls and procedures are effective.

Changes in internal controls

During the quarter, there was no change in the Company’s internal control over financial reporting that has materially affected or is reasonably likely to materially affect the Company’s internal control over financial reporting.
21


PART II OTHER INFORMATION

Item 1A. Risk Factors

There have been no material changes to the Company’s risk factors from those disclosed in the Company’s 2022 Annual Report on Form 10-K.


22
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities

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)
July 1, 2023 - July 28, 2023 — $ — — 14,856,080
July 29, 2023 - August 25, 2023 11,500 $ 74.98 — 14,844,580
August 26, 2023 - September 29, 2023 300,279 $ 73.57 — 14,544,301


23
Item 5. Other Information

During the three months ended September 29, 2023, 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).
24
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
Certification of President and Chief Executive Officer pursuant to Rule 13a-14(a).
Certification of Chief Financial Officer and Treasurer pursuant to Rule 13a-14(a).
Certification of President and Chief Executive Officer and Chief Financial Officer and Treasurer pursuant to Section 1350 of Title 18, U.S.C.
Press Release Reporting Third Quarter Earnings dated October 25, 2023.
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).
25

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 25, 2023 By: /s/ Mark W. Sheahan
Mark W. Sheahan
President and Chief Executive Officer
(Principal Executive Officer)
Date: October 25, 2023 By: /s/ David M. Lowe
David M. Lowe
Chief Financial Officer and Treasurer
(Principal Financial Officer)
Date: October 25, 2023 By: /s/ Christopher D. Knutson
Christopher D. Knutson
Executive Vice President, Corporate Controller
(Principal Accounting Officer)

TABLE OF CONTENTS