# EDGAR Filing Document

**Accession Number:** 0000042888
**File Stem:** 0000042888-23-000003
**Filing Date:** 2023-1
**Character Count:** 31044
**Document Hash:** 7dc54a42187623efdf8698aa083aeb32
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0000042888-23-000003.hdr.sgml**: 20230130

**ACCESSION NUMBER**: 0000042888-23-000003

**CONFORMED SUBMISSION TYPE**: 8-K

**PUBLIC DOCUMENT COUNT**: 15

**CONFORMED PERIOD OF REPORT**: 20230130

**ITEM INFORMATION**: Results of Operations and Financial Condition

**ITEM INFORMATION**: Financial Statements and Exhibits

**FILED AS OF DATE**: 20230130

**DATE AS OF CHANGE**: 20230130

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** GRACO INC
- **CENTRAL INDEX KEY:** 0000042888
- **STANDARD INDUSTRIAL CLASSIFICATION:** PUMPS & PUMPING EQUIPMENT [3561]
- **IRS NUMBER:** 410285640
- **STATE OF INCORPORATION:** MN
- **FISCAL YEAR END:** 1227

**FILING VALUES:**
- **FORM TYPE:** 8-K
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-09249
- **FILM NUMBER:** 23567865

**BUSINESS ADDRESS:**
- **STREET 1:** 88 11TH AVENUE NE
- **CITY:** MINNEAPOLIS
- **STATE:** MN
- **ZIP:** 55413-1894
- **BUSINESS PHONE:** 6126236000

**MAIL ADDRESS:**
- **STREET 1:** CT CORPORATION SYSTEM, INC.
- **STREET 2:** 100 SOUTH FIFTH STREET, SUITE 1075
- **CITY:** MINNEAPOLIS
- **STATE:** MN
- **ZIP:** 55401

?xml version="1.0" ? ggg-20230130

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

**FORM 8-K** 

**CURRENT REPORT**

**Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934**

Date of Report (Date of earliest event reported): January 30, 2023

**Graco Inc.** 

(Exact name of registrant as specified in charter)

---

| | | |
|:---|:---|:---|
| **Minnesota** | **001-09249** | **41-0285640** |
| (State or other Jurisdiction of Incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) |

---

---

| | | |
|:---|:---|:---|
| **88 – 11th Avenue Northeast** | **88 – 11th Avenue Northeast** | |
| **Minneapolis,** | **Minnesota** | **55413** |
| (Address of principal executive offices) | (Address of principal executive offices) | (Zip Code) |

---

&nbsp;&nbsp;&nbsp;&nbsp;

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| | |
|:---|:---|
| **(612)** | **623-6000** |
| Registrant's telephone number, including area code | Registrant's telephone number, including area code |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

---

| |
|:---|
| **Not Applicable** |
| (Former name or former address if changed since last report.) |

---

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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

Title of each class Trading Symbol(s) Name of each exchange on which registered <br> <u>Common Stock</u> <u>GGG</u> <u>The New York Stock Exchange</u>

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

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. ☐

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| | |
|:---|:---|
| **Item 2.02.** | **Results of Operations and Financial Condition** |

---

On January 30, 2023, Graco Inc. issued a press release to report the Company's results of operations and financial condition for the year ended December 30, 2022. A copy of this press release is furnished as Exhibit 99.1 hereto and is incorporated herein by reference.

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| | |
|:---|:---|
| **Item 9.01.** | **Financial Statements and Exhibits** |

---

&nbsp;&nbsp;&nbsp;&nbsp;

(d) Exhibits

---

| | |
|:---|:---|
| <u>[99.1](ggg12302022exhibit991q4.htm)</u> | Press Release dated January 30, 2023 |
| 104 | Cover Page Interactive Data File (included within the Inline XBRL document). |

---

**<u>Signature</u>**

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.

---

| | | | |
|:---|:---|:---|:---|
| Date: | January 30, 2023 | GRACO INC. | GRACO INC. |
|  |  | By: | /s/ Joseph J. Humke |
|  |  |  | Joseph J. Humke |
|  |  |  | Its: Executive Vice President, General Counsel and Corporate Secretary |

---

## Exhibit 99.1

---

| | | |
|:---|:---|:---|
| Exhibit 99.1 | GRACO INC. | ![image0a02a.jpg](image0a02a.jpg) |
| | P.O. Box 1441 | ![image0a02a.jpg](image0a02a.jpg) |
| ![image1a02a.jpg](image1a02a.jpg) | Minneapolis, MN | ![image0a02a.jpg](image0a02a.jpg) |
| ![image1a02a.jpg](image1a02a.jpg) | 55440-1441 | ![image0a02a.jpg](image0a02a.jpg) |
| ![image1a02a.jpg](image1a02a.jpg) | NYSE: GGG | ![image0a02a.jpg](image0a02a.jpg) |

---

---

| | |
|:---|:---|
| **FOR IMMEDIATE RELEASE:** | **FOR FURTHER INFORMATION:** |
| Monday, January 30, 2023 | Financial Contact: David Lowe, 612-623-6456<br>Media Contact: Laura Evanson, 612-656-7435<br><u>Laura_L_Evanson@graco.com</u> |

---

**Graco Reports Record Quarter and Annual Sales and Operating Earnings**

**Process and Industrial Segments Contribute to 2022 Performance**

**MINNEAPOLIS (January 30, 2023)** – Graco Inc. **(NYSE: GGG)** today announced results for the fourth quarter ended December 30, 2022.

**Summary**

$ in millions except per share amounts

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | Three Months Ended | Three Months Ended | Three Months Ended | Twelve Months Ended | Twelve Months Ended | Twelve Months Ended |
| | Dec 30,<br>2022 | Dec 31,<br>2021 | %<br>Change | Dec 30,<br>2022 | Dec 31,<br>2021 | %<br>Change |
| Net Sales | $555.0 | $539.6 | 3% | $2143.5 | $1987.6 | 8% |
| Operating Earnings | 152.5 | 144.6 | 5% | 572.7 | 531.3 | 8% |
| Net Earnings | 126.2 | 120.3 | 5% | 460.6 | 439.9 | 5% |
| Diluted Net Earnings per Common Share | $0.74 | $0.69 | 7% | $2.66 | $2.52 | 6% |
| Adjusted (non-GAAP): <sup>(1)</sup> |  |  |  |  |  |  |
| Net Earnings, adjusted | $124.3 | $115.8 | 7% | $455.5 | $425.7 | 7% |
| Diluted Net Earnings per Common Share, adjusted | $0.73 | $0.66 | 11% | $2.63 | $2.44 | 8% |

---

(1) Excludes impacts of excess tax benefits from stock option exercises, prior year non-recurring tax provision adjustments and a prior year pension settlement loss. See Financial Results Adjusted for Comparability below for a reconciliation of adjusted non-GAAP financial measures to GAAP.

• Net sales for the quarter increased 3 percent, including 6 percentage points of organic sales growth and 1 percentage point of sales growth from acquired operations, partially offset by 4 percentage points of currency translation headwinds. There were 14 weeks in the fiscal fourth quarter of 2021 compared to 13 weeks in 2022.

• The gross profit margin rate declined approximately 2 percentage points for the quarter as strong realized pricing was offset by higher product costs and unfavorable changes in currency translation rates.

• Total operating expenses decreased 7 percent due to lower sales and earnings-based expenses and changes in currency translation rates.

• Expense leverage offset the effects of lower gross profit margin rates for the quarter and drove an increase in operating earnings as a percentage of sales.

"Graco reported record results in 2022 with annual growth in all reportable segments and regions on an organic, constant currency basis," said Mark Sheahan, Graco's President and CEO. "While the year was challenging, our people persevered and handled both commercial and operational hurdles in typical Graco

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**Page 2 GRACO**

fashion. I am proud of the work our teams have done and want to thank our employees, customers and vendors for another year of growth and success."

**Consolidated Results**

Changes in currency translation rates reduced sales and net earnings by approximately $23 million and $12 million, respectively, for the quarter and $66 million and $31 million, respectively, for the year.

Net sales for the quarter increased 3 percent from the comparable period last year (7 percent at consistent translation rates). Sales increased 5 percent in the Americas, 1 percent in EMEA (up 12 percent at consistent translation rates), and were flat in Asia Pacific (up 10 percent at consistent translation rates). Sales for the year increased 8 percent (12 percent at consistent translation rates). Sales increased 11 percent in the Americas, 10 percent in Asia Pacific (16 percent at consistent translation rates) and decreased 3 percent in EMEA (up 7 percent at consistent translation rates). Sales from acquired operations contributed approximately $3 million (1 percentage point) to the fourth quarter and $11 million (1 percentage point) to the year.

Gross profit margin rates decreased 2 percentage points for the quarter and 3 percentage points for the year from the comparable periods last year. Realized pricing was unable to offset higher product costs and the adverse impacts of changes in currency translation rates.

Total operating expenses for the quarter decreased $10 million (7 percent) compared to the fourth quarter last year. Reductions of $7 million from lower sales and earnings-based expenses and $5 million from the impact of currency translation were partially offset by volume and rate related increases. Operating expenses for the year decreased $18 million compared to last year. Reductions of $16 million from lower sales and earnings-based expenses and $14 million from the impact of currency translation were partially offset by $3 million of allowances for credit losses on customer receivables in Russia and volume and rate related increases.

Other expense decreased $15 million for the quarter and $16 million for the year. Other expense in the fourth quarter of 2021 included a non-cash pension settlement loss of $12 million in connection with the transfer of certain pension obligations to an insurance company.

The effective income tax rate was 18 percent for the quarter and 19 percent for the year, up approximately 11 and 6 percentage points, respectively, from the comparable periods last year. Adjusted to exclude non-recurring foreign tax benefits and the impact of excess tax benefits related to stock option exercises (see Financial Results Adjusted for Comparability below), the effective income tax rate was approximately 19 percent for both the quarter and year, 1 percentage point higher than the comparable periods last year due to the unfavorable effects of foreign earnings taxed at higher rates than the U.S.

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**Page 3 GRACO**

**Segment Results**

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

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | Three Months | Three Months | Three Months | Twelve Months | Twelve Months | Twelve Months |
| | Industrial | Process | Contractor | Industrial | Process | Contractor |
| Net Sales (in millions) | $190.2 | $130.2 | $234.6 | $649.3 | $495.1 | $999.1 |
| Percentage change from last year |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Sales | 10% | 15% | (7)% | 8% | 25% | 1% |
| &nbsp;&nbsp;&nbsp;&nbsp;Operating earnings | 14% | 27% | (8)% | 16% | 34% | (6)% |
| Operating earnings as a percentage of sales |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;2022 | 37% | 25% | 25% | 36% | 25% | 25% |
| &nbsp;&nbsp;&nbsp;&nbsp;2021 | 35% | 23% | 25% | 33% | 23% | 27% |

---

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

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | Three Months | Three Months | Three Months | Three Months | Twelve Months | Twelve Months | Twelve Months | Twelve Months |
| | Volume and Price | Acquisitions | Currency | Total | Volume and Price | Acquisitions | Currency | Total |
| Americas | 5% | 0% | (1)% | 4% | 13% | 0% | (1)% | 12% |
| EMEA | 30% | 0% | (13)% | 17% | 15% | 0% | (12)% | 3% |
| Asia Pacific | 20% | 0% | (11)% | 9% | 14% | 0% | (6)% | 8% |
| Consolidated | 17% | 0% | (7)% | 10% | 14% | 0% | (6)% | 8% |

---

The Industrial segment experienced solid growth in all regions for the quarter and year. Increases in finishing system sales drove a double-digit percentage increase in EMEA and Asia Pacific for the quarter. The operating margin rate increased for both the quarter and year as strong realized pricing and expense leverage more than offset higher product costs and the adverse impacts of currency translation.

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

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | Three Months | Three Months | Three Months | Three Months | Twelve Months | Twelve Months | Twelve Months | Twelve Months |
| | Volume and Price | Acquisitions | Currency | Total | Volume and Price | Acquisitions | Currency | Total |
| Americas | 17% | 4% | (1)% | 20% | 22% | 3% | 0% | 25% |
| EMEA | 23% | 1% | (9)% | 15% | 22% | 1% | (8)% | 15% |
| Asia Pacific | 11% | 0% | (7)% | 4% | 34% | 0% | (5)% | 29% |
| Consolidated | 16% | 3% | (4)% | 15% | 25% | 2% | (2)% | 25% |

---

The Process segment had double-digit sales growth in all product applications for the quarter and year. Acquired operations contributed 3 percentage points of growth to the quarter and 2 percentage points to the year. The operating margin rate for this segment increased 2 percentage points for the quarter and year as increased volume and expense leverage offset higher product costs and the adverse impacts of currency translation.

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**Page 4 GRACO**

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

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | Three Months | Three Months | Three Months | Three Months | Twelve Months | Twelve Months | Twelve Months | Twelve Months |
| | Volume and Price | Acquisitions | Currency | Total | Volume and Price | Acquisitions | Currency | Total |
| Americas | (1)% | 0% | 0% | (1)% | 7% | 0% | (1)% | 6% |
| EMEA | (10)% | 0% | (9)% | (19)% | (6)% | 1% | (9)% | (14)% |
| Asia Pacific | (17)% | 0% | (8)% | (25)% | 0% | 0% | (6)% | (6)% |
| Consolidated | (4)% | 0% | (3)% | (7)% | 4% | 0% | (3)% | 1% |

---

Contractor segment sales decreased 7 percent for the quarter due to softening demand in all regions. Sales increased 1 percent for the year primarily due to North American construction markets. Price realization and expense leverage offset the impact of higher product costs for the quarter, which resulted in a consistent operating margin rate compared to last year. For the year, the operating margin rate decreased 2 percentage points primarily due to higher product costs and the adverse impacts of currency translation.

**Outlook**

"As we head into 2023, order rates and business tempo will be closely monitored and we are cautiously optimistic that Graco will see sales growth on a full-year basis," said Sheahan. "We are initiating a revenue outlook for the year of low single-digit growth on an organic, constant currency. Our core growth strategies of developing new products, expanding distribution, seeking adjacent markets and pursuing strategic acquisitions will help our growth prospects this year and in the future."

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**Page 5 GRACO**

**Financial Results Adjusted for Comparability**

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

---

| | | | | |
|:---|:---|:---|:---|:---|
| | Three Months Ended | Three Months Ended | Twelve Months Ended | Twelve Months Ended |
| | Dec 30,<br>2022 | Dec 31,<br>2021 | Dec 30,<br>2022 | Dec 31,<br>2021 |
| Earnings before income taxes | $154.0 | $129.3 | $565.7 | $508.5 |
| &nbsp;&nbsp;&nbsp;&nbsp;Pension settlement loss |  | 12.0 |  | 12.0 |
| Earnings before income taxes, adjusted | $154.0 | $141.3 | $565.7 | $520.5 |
| Income taxes, as reported | $27.8 | $9.0 | $105.1 | $68.6 |
| &nbsp;&nbsp;&nbsp;&nbsp;Pension settlement tax effect |  | 2.5 |  | 2.5 |
| &nbsp;&nbsp;&nbsp;&nbsp;Excess tax benefit from option exercises | 1.9 | 2.7 | 5.1 | 11.5 |
| &nbsp;&nbsp;&nbsp;&nbsp;Other non-recurring tax benefit |  | 11.3 |  | 12.2 |
| Income taxes, adjusted | $29.7 | $25.5 | $110.2 | $94.8 |
| Effective income tax rate |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;As reported | 18.1% | 7.0% | 18.6% | 13.5% |
| &nbsp;&nbsp;&nbsp;&nbsp;Adjusted | 19.3% | 18.1% | 19.5% | 18.2% |
| Net Earnings, as reported | $126.2 | $120.3 | $460.6 | $439.9 |
| &nbsp;&nbsp;&nbsp;&nbsp;Pension settlement loss, net of tax |  | 9.5 |  | 9.5 |
| &nbsp;&nbsp;&nbsp;&nbsp;Excess tax benefit from option exercises | (1.9) | (2.7) | (5.1) | (11.5) |
| &nbsp;&nbsp;&nbsp;&nbsp;Other non-recurring tax benefit |  | (11.3) |  | (12.2) |
| Net Earnings, adjusted | $124.3 | $115.8 | $455.5 | $425.7 |
| Weighted Average Diluted Shares | 171.4 | 174.9 | 172.9 | 174.5 |
| Diluted Earnings per Share |  |  |  |  |
| &nbsp;&nbsp; As reported | $0.74 | $0.69 | $2.66 | $2.52 |
| &nbsp;&nbsp; Adjusted | $0.73 | $0.66 | $2.63 | $2.44 |

---

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**Page 6 GRACO**

**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 overview report, press releases, earnings releases, analyst briefings, conference calls and other written documents or oral statements released by our Company, may contain forward-looking statements. Forward-looking statements generally use words such as "expect," "foresee," "anticipate," "believe," "project," "should," "estimate," "will," and similar expressions, and reflect our Company's expectations concerning the future. All forecasts and projections are forward-looking statements. Forward-looking statements are based upon currently available information, but various risks and uncertainties may cause our Company's actual results to differ materially from those expressed in these statements. The Company undertakes no obligation to update these statements in light of new information or future events.

Future results could differ materially from those expressed due to the impact of changes in various factors. These risk factors include, but are not limited to: 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, mining and oil and natural gas 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 2021 (and 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 <u>www.graco.com</u> and the Securities and Exchange Commission's website at <u>www.sec.gov</u>. 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.

**Conference Call** 

Graco management will hold a conference call, including slides via webcast, with analysts and institutional investors on Tuesday, January 31, 2023, at 11 a.m. ET, 10 a.m. CT, to discuss Graco's fourth 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 <u>www.graco.com</u>. 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,

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**Page 7 GRACO**

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 <u>www.graco.com</u>.

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**Page 8 GRACO**

**GRACO INC. AND SUBSIDIARIES**

**CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited)**

(In thousands except per share amounts)

---

| | | | | |
|:---|:---|:---|:---|:---|
| | Three Months Ended | Three Months Ended | Twelve Months Ended | Twelve Months Ended |
| | Dec 30,<br>2022 | Dec 31,<br>2021 | Dec 30,<br>2022 | Dec 31,<br>2021 |
| &nbsp;&nbsp;&nbsp;Net Sales | $555045 | $539619 | $2143521 | $1987608 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cost of products sold | 282229 | 265062 | 1086082 | 953659 |
| &nbsp;&nbsp;&nbsp;Gross Profit | 272816 | 274557 | 1057439 | 1033949 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Product development | 21259 | 18912 | 80008 | 79651 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Selling, marketing and distribution | 64491 | 74094 | 250948 | 271526 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;General and administrative | 34558 | 36956 | 153783 | 151449 |
| &nbsp;&nbsp;&nbsp;Operating Earnings | 152508 | 144595 | 572700 | 531323 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest expense | 1342 | 2759 | 9897 | 10215 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other expense (income), net | (2815) | 12612 | (2921) | 12643 |
| &nbsp;&nbsp;&nbsp;Earnings Before Income Taxes | 153981 | 129224 | 565724 | 508465 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income taxes | 27789 | 8992 | 105079 | 68599 |
| &nbsp;&nbsp;&nbsp;Net Earnings | $126192 | $120232 | $460645 | $439866 |
| Net Earnings per Common Share |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Basic | $0.75 | $0.71 | $2.73 | $2.59 |
| &nbsp;&nbsp;&nbsp;&nbsp;Diluted | $0.74 | $0.69 | $2.66 | $2.52 |
| Weighted Average Number of Shares |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Basic | 167706 | 170164 | 168952 | 169635 |
| &nbsp;&nbsp;&nbsp;&nbsp;Diluted | 171406 | 174910 | 172893 | 174526 |

---

**SEGMENT INFORMATION (Unaudited)**

(In thousands)

---

| | | | | |
|:---|:---|:---|:---|:---|
| | Three Months Ended | Three Months Ended | Twelve Months Ended | Twelve Months Ended |
| | Dec 30,<br>2022 | Dec 31,<br>2021 | Dec 30,<br>2022 | Dec 31,<br>2021 |
| Net Sales |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Industrial | $190171 | $173504 | $649347 | $602376 |
| &nbsp;&nbsp;&nbsp;&nbsp; Process | 130231 | 112836 | 495114 | 397626 |
| &nbsp;&nbsp;&nbsp;&nbsp; Contractor | 234643 | 253279 | 999060 | 987606 |
| Total | $555045 | $539619 | $2143521 | $1987608 |
| Operating Earnings |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Industrial | $69503 | $60977 | $231298 | $199856 |
| &nbsp;&nbsp;&nbsp;&nbsp; Process | 33161 | 26114 | 122344 | 91037 |
| &nbsp;&nbsp;&nbsp;&nbsp; Contractor | 57519 | 62838 | 249833 | 266204 |
| &nbsp;&nbsp;&nbsp;&nbsp; Unallocated corporate (expense) | (7675) | (5334) | (30775) | (25774) |
| Total | $152508 | $144595 | $572700 | $531323 |

---

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**Page 9 GRACO**

**GRACO INC. AND SUBSIDIARIES**

**CONSOLIDATED BALANCE SHEETS (Unaudited)**

(In thousands)

---

| | | |
|:---|:---|:---|
| | Dec 30,<br>2022 | Dec 31,<br>2021 |
| **ASSETS** |  |  |
| Current Assets |  |  |
| &nbsp;&nbsp;Cash and cash equivalents | $339196 | $624302 |
| &nbsp;&nbsp;Accounts receivable, less allowances of $7,000 and $3,900 | 346010 | 325132 |
| &nbsp;&nbsp;Inventories | 476790 | 382301 |
| &nbsp;&nbsp;Other current assets | 43624 | 31886 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current assets | 1205620 | 1363621 |
| Property, Plant and Equipment, net | 607609 | 451061 |
| Goodwill | 368171 | 356255 |
| Other Intangible Assets, net | 137507 | 149740 |
| Operating Lease Assets | 29785 | 30046 |
| Deferred Income Taxes | 57090 | 55786 |
| Other Assets | 33118 | 36689 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total Assets | $2438900 | $2443198 |
| **LIABILITIES AND SHAREHOLDERS' EQUITY** |  |  |
| Current Liabilities |  |  |
| &nbsp;&nbsp;Notes payable to banks | $20974 | $43489 |
| &nbsp;&nbsp;Current portion of long term debt |  | 75000 |
| &nbsp;&nbsp;Trade accounts payable | 84218 | 78432 |
| &nbsp;&nbsp;Salaries and incentives | 63969 | 82941 |
| &nbsp;&nbsp;Dividends payable | 39963 | 35771 |
| &nbsp;&nbsp;Other current liabilities | 190793 | 191159 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current liabilities | 399917 | 506792 |
| Long-term Debt | 75000 | 75000 |
| Retirement Benefits and Deferred Compensation | 61672 | 106897 |
| Operating Lease Liabilities | 21057 | 23527 |
| Deferred Income Taxes | 9443 | 10661 |
| Other Non-current Liabilities | 12159 | 10978 |
| Shareholders' Equity |  |  |
| &nbsp;&nbsp;Common stock | 167702 | 170308 |
| &nbsp;&nbsp;Additional paid-in-capital | 784477 | 742288 |
| &nbsp;&nbsp;Retained earnings | 976851 | 876916 |
| &nbsp;&nbsp;Accumulated other comprehensive income (loss) | (69378) | (80169) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total shareholders' equity | 1859652 | 1709343 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total Liabilities and Shareholders' Equity | $2438900 | $2443198 |

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**Page 10 GRACO**

**GRACO INC. AND SUBSIDIARIES**

**CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)**

(In thousands)

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| | | |
|:---|:---|:---|
| | Year Ended | Year Ended |
| | Dec 30,<br>2022 | Dec 31,<br>2021 |
| **Cash Flows From Operating Activities** |  |  |
| &nbsp;&nbsp;Net Earnings | $460645 | $439866 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Adjustments to reconcile net earnings to net cash<br>provided by operating activities |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation and amortization | 65997 | 59325 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred income taxes | (9997) | (46572) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Share-based compensation | 24695 | 24931 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Change in |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable | (29944) | (13801) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories | (95691) | (97780) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Trade accounts payable | 4195 | 12397 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Salaries and incentives | (18442) | 29089 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Retirement benefits and deferred compensation | (18674) | 1219 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other accrued liabilities | (4191) | 51342 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other | (1199) | (3120) |
| Net cash provided by operating activities | 377394 | 456896 |
| **Cash Flows From Investing Activities** |  |  |
| &nbsp;&nbsp;Property, plant and equipment additions | (201161) | (133566) |
| &nbsp;&nbsp;Acquisition of businesses, net of cash acquired | (25296) | (19386) |
| &nbsp;&nbsp;Other | (362) | (347) |
| Net cash used in investing activities | (226819) | (153299) |
| **Cash Flows From Financing Activities** |  |  |
| &nbsp;&nbsp;Borrowings on short-term lines of credit, net | (18252) | 20497 |
| &nbsp;&nbsp;Payments on long-term debt | (75000) | (70) |
| &nbsp;&nbsp;Payments of debt issuance costs |  | (1422) |
| &nbsp;&nbsp;Common stock issued | 35619 | 50963 |
| &nbsp;&nbsp;Common stock repurchased | (233426) |  |
| &nbsp;&nbsp;Taxes paid related to net share settlement of equity awards | (1219) |  |
| &nbsp;&nbsp;Cash dividends paid | (142125) | (127110) |
| Net cash used in financing activities | (434403) | (57142) |
| Effect of exchange rate changes on cash | (1278) | (1062) |
| Net increase (decrease) in cash and cash equivalents | (285106) | 245393 |
| **Cash and Cash Equivalents** |  |  |
| &nbsp;&nbsp;Beginning of year | 624302 | 378909 |
| &nbsp;&nbsp;End of year | $339196 | $624302 |

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