Graco(GGG) - 2025 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Financial Statements This section presents unaudited consolidated financial statements, including earnings, comprehensive income, balance sheets, cash flows, and shareholders' equity, with detailed notes on accounting policies, segments, inventory, equity, share-based awards, EPS, retirement benefits, receivables, intangible assets, other liabilities, fair value, and recent acquisitions Consolidated Statements of Earnings For Q2 2025, Net Sales increased by 3% year-over-year to $571.8 million, but Net Earnings decreased by 4% to $127.6 million | Metric | Three Months Ended June 27, 2025 (in thousands) | Three Months Ended June 28, 2024 (in thousands) | Six Months Ended June 27, 2025 (in thousands) | Six Months Ended June 28, 2024 (in thousands) | | :----- | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net Sales | $571,806 | $553,243 | $1,100,090 | $1,045,432 | | Gross Profit | $299,530 | $300,854 | $577,263 | $567,051 | | Operating Earnings | $157,484 | $161,359 | $301,497 | $294,355 | | Net Earnings | $127,623 | $132,978 | $251,724 | $255,177 | | Diluted EPS | $0.76 | $0.77 | $1.48 | $1.48 | Consolidated Statements of Comprehensive Income Comprehensive income significantly increased for both the three and six months ended June 27, 2025, primarily driven by a positive cumulative translation adjustment | Metric | Three Months Ended June 27, 2025 (in thousands) | Three Months Ended June 28, 2024 (in thousands) | Six Months Ended June 27, 2025 (in thousands) | Six Months Ended June 28, 2024 (in thousands) | | :----- | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net Earnings | $127,623 | $132,978 | $251,724 | $255,177 | | Cumulative translation adjustment | $56,983 | $(811) | $76,886 | $(19,517) | | Other comprehensive income (loss) | $56,703 | $141 | $76,669 | $(17,884) | | Comprehensive Income | $184,326 | $133,119 | $328,393 | $237,293 | Consolidated Balance Sheets As of June 27, 2025, total assets decreased to $3,046.1 million from $3,139.2 million at December 27, 2024, mainly due to a decrease in cash and cash equivalents | Metric | June 27, 2025 (in thousands) | December 27, 2024 (in thousands) | | :----- | :----------------------------- | :------------------------------- | | Cash and cash equivalents | $534,921 | $675,336 | | Total current assets | $1,380,642 | $1,497,441 | | Total Assets | $3,046,123 | $3,139,212 | | Total current liabilities | $388,580 | $405,808 | | Total shareholders' equity | $2,501,020 | $2,584,135 | Consolidated Statements of Cash Flows Net cash provided by operating activities increased to $308.1 million for the six months ended June 27, 2025, but significant common stock repurchases led to a net decrease in cash and cash equivalents of $140.4 million | Metric | Six Months Ended June 27, 2025 (in thousands) | Six Months Ended June 28, 2024 (in thousands) | | :----- | :-------------------------------------------- | :-------------------------------------------- | | Net cash provided by operating activities | $308,103 | $257,922 | | Net cash used in investing activities | $(30,682) | $(67,881) | | Net cash used in financing activities | $(428,592) | $(60,842) | | Common stock repurchased | $(360,952) | $(17,761) | | Net (decrease) increase in cash and cash equivalents | $(140,415) | $128,055 | | Cash and Cash Equivalents, End of period | $534,921 | $666,006 | Consolidated Statements of Shareholders' Equity Total shareholders' equity decreased from $2,584.1 million to $2,501.0 million for the six months ended June 27, 2025, primarily due to $361.0 million in share repurchases and $91.2 million in dividends | Metric | Six Months Ended June 27, 2025 (in thousands) | Six Months Ended June 28, 2024 (in thousands) | | :----- | :-------------------------------------------- | :-------------------------------------------- | | Balance, December 27, 2024 (2023 for 2024 period) | $2,584,135 | $2,224,225 | | Shares repurchased | $(360,952) | $(17,761) | | Net earnings | $251,724 | $255,177 | | Dividends declared | $(91,178) | $(86,290) | | Other comprehensive income (loss) | $76,669 | $(17,884) | | Balance, June 27, 2025 (2024 for 2024 period) | $2,501,020 | $2,418,485 | Notes to Consolidated Financial Statements The notes provide detailed information on financial statement preparation, segment reporting changes, inventory, equity, share-based compensation, EPS, retirement benefits, receivables, intangible assets, other current liabilities, fair value, and recent acquisitions Basis of Preparation The unaudited consolidated financial statements reflect normal recurring adjustments and should be read with the 2024 Annual Report on Form 10-K - Financial statements are unaudited and include only normal recurring adjustments[21][22] - Statements should be read with the 2024 Annual Report on Form 10-K[23] - Interim results are not necessarily indicative of full fiscal year results[24] Segment Information Effective January 1, 2025, the Company reclassified its business into three reportable segments: Contractor, Industrial, and Expansion Markets, with prior year information recast for comparability - New Segment Structure (Effective Jan 1, 2025): * Contractor (unchanged) * Industrial (newly formed Industrial Division + Powder Division) * Expansion Markets (new division for environmental, semiconductor, high-pressure valves, electric motors, and future ventures/acquisitions)[25] | Segment | Net Sales (3 Months Ended June 27, 2025, in thousands) | Operating Earnings (3 Months Ended June 27, 2025, in thousands) | Net Sales (6 Months Ended June 27, 2025, in thousands) | Operating Earnings (6 Months Ended June 27, 2025, in thousands) | | :------ | :--------------------------------------- | :------------------------------------------------ | :--------------------------------------- | :------------------------------------------------ | | Contractor | $288,959 | $75,489 | $543,991 | $137,419 | | Industrial | $242,277 | $82,372 | $473,930 | $161,967 | | Expansion Markets | $40,570 | $8,829 | $82,169 | $18,894 | | Total Reportable Segment Operating Earnings | $166,690 | N/A | $318,280 | N/A | - Geographic Net Sales (6 Months Ended June 27, 2025): * United States: $587,584 thousand * Other countries: $512,506 thousand * Total: $1,100,090 thousand[27] Inventories Total inventories as of June 27, 2025, were $403.2 million, a slight decrease from $404.7 million at December 27, 2024 | Component | June 27, 2025 (in thousands) | December 27, 2024 (in thousands) | | :-------- | :----------------------------- | :------------------------------- | | Finished products and components | $203,946 | $197,242 | | Products and components in various stages of completion | $109,998 | $114,647 | | Raw materials and purchased components | $210,244 | $214,902 | | Total Inventories | $403,156 | $404,676 | Shareholders' Equity Accumulated other comprehensive income (loss) shifted from a $(49.6) million loss at December 27, 2024, to $27.1 million income at June 27, 2025, primarily due to a $76.9 million positive cumulative translation adjustment | Component | Balance, December 27, 2024 (in thousands) | Other comprehensive income (loss) before reclassifications (6 Months Ended June 27, 2025, in thousands) | Balance, June 27, 2025 (in thousands) | | :-------- | :---------------------------------------- | :---------------------------------------------------------------------------------------- | :------------------------------------ | | Pension and Post-retirement Medical | $(13,145) | $(217) (reclassified) | $(13,362) | | Cumulative Translation Adjustment | $(36,429) | $76,886 | $40,457 | | Total Accumulated Other Comprehensive Income (Loss) | $(49,574) | $76,669 | $27,095 | Share-Based Awards The Company recognized $17 million in share-based compensation for the six months ended June 27, 2025, with $29 million in unrecognized compensation cost expected to be recognized over 2.8 years - Share-based compensation recognized: $17 million (2025 YTD) vs. $20 million (2024 YTD)[30] - Unrecognized compensation cost: $29 million, to be recognized over 2.8 years[30] | Metric | Six Months Ended June 27, 2025 | Six Months Ended June 28, 2024 | | :----- | :----------------------------- | :----------------------------- | | Weighted average fair value per share (option grants) | $26.80 | $28.03 | | Weighted average fair value per share (ESPP) | $19.65 | $23.16 | Earnings per Share Diluted EPS for the six months ended June 27, 2025, remained flat at $1.48 compared to the prior year, despite a slight decrease in net earnings, due to a reduction in weighted average diluted shares outstanding | Metric | Three Months Ended June 27, 2025 | Three Months Ended June 28, 2024 | Six Months Ended June 27, 2025 | Six Months Ended June 28, 2024 | | :----- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net earnings available to common shareholders | $127,623 | $132,978 | $251,724 | $255,177 | | Weighted average shares outstanding for basic EPS | 165,785 | 169,100 | 167,173 | 168,795 | | Weighted average shares outstanding for diluted EPS | 168,561 | 172,486 | 170,072 | 172,466 | | Basic earnings per share | $0.77 | $0.79 | $1.51 | $1.51 | | Diluted earnings per share | $0.76 | $0.77 | $1.48 | $1.48 | Retirement Benefits Net periodic benefit cost for pension benefits significantly decreased to $1.6 million for the six months ended June 27, 2025, primarily due to higher expected return on assets | Metric | Six Months Ended June 27, 2025 (in thousands) | Six Months Ended June 28, 2024 (in thousands) | | :----- | :-------------------------------------------- | :-------------------------------------------- | | Pension Benefits - Net periodic benefit cost | $1,562 | $3,930 | | Postretirement Medical - Net periodic benefit cost | $586 | $670 | Receivables and Credit Losses Accounts receivable increased to $387.2 million as of June 27, 2025, while the allowance for credit losses remained stable at $5.3 million - Accounts receivable (June 27, 2025): $387.2 million ($371 million trade, $16 million other)[34] - Allowance for credit losses (June 27, 2025): $5.3 million[35] - Net (reversals) additions charged to costs and expenses (3 months ended June 27, 2025): $(138) thousand[35] Intangible Assets Other intangible assets, net, increased to $241.5 million as of June 27, 2025, and goodwill increased to $516.9 million, primarily due to foreign currency translation adjustments and business acquisitions | Intangible Asset Type | Book Value (June 27, 2025, in thousands) | Book Value (December 27, 2024, in thousands) | Weighted Average Life (years) | | :-------------------- | :--------------------------------------- | :------------------------------------------- | :---------------------------- | | Customer Relationships | $115,077 | $115,119 | 14 | | Patents and Proprietary Technology | $23,754 | $23,015 | 10 | | Trademarks, Trade Names and Other (Finite Life) | $730 | $2,199 | 3 | | Trade Names (Indefinite Life) | $101,963 | $92,973 | N/A | | Total Other Intangible Assets, net | $241,524 | $233,306 | N/A | | Segment | Goodwill (December 27, 2024, in thousands) | Adjustments from business acquisitions (in thousands) | Foreign currency translation (in thousands) | Goodwill (June 27, 2025, in thousands) | | :------ | :----------------------------------------- | :---------------------------------------------------- | :------------------------------------------ | :--------------------------------------- | | Contractor | $198,038 | $1,164 | $16,568 | $215,770 | | Industrial | $217,698 | — | $11,988 | $229,686 | | Expansion Markets | $71,732 | $(266) | — | $71,466 | | Total Goodwill | $487,468 | $898 | $28,556 | $516,922 | Other Current Liabilities Total other current liabilities decreased to $177.1 million as of June 27, 2025, from $211.7 million at December 27, 2024, mainly due to lower payable for employee stock purchases and other general liabilities | Component | June 27, 2025 (in thousands) | December 27, 2024 (in thousands) | | :-------- | :----------------------------- | :------------------------------- | | Accrued warranty and service liabilities | $19,937 | $18,712 | | Payable for employee stock purchases | $7,814 | $16,767 | | Customer advances and deferred revenue | $59,980 | $52,522 | | Acquisition-related consideration payable | — | $10,339 | | Other | $32,406 | $48,008 | | Total Other Current Liabilities | $177,141 | $211,728 | - Revenue recognized from deferred revenue (6 months ended June 27, 2025): $46 million[39] Fair Value Total assets measured at fair value increased to $26.3 million as of June 27, 2025, primarily due to an increase in the cash surrender value of life insurance, while liabilities also increased to $24.1 million due to higher contingent consideration | Item | Level | June 27, 2025 (in thousands) | December 27, 2024 (in thousands) | | :--- | :---- | :----------------------------- | :------------------------------- | | Assets: Cash surrender value of life insurance | 2 | $26,283 | $24,411 | | Assets: Forward exchange contracts | 2 | — | $116 | | Liabilities: Contingent consideration | 3 | $16,281 | $14,647 | | Liabilities: Deferred compensation | 2 | $7,562 | $8,196 | | Liabilities: Forward exchange contracts | 2 | $207 | — | - Contingent consideration liabilities are estimated using a probability-weighted expected return approach based on future revenues[42] Acquisitions The Company acquired Corob S.p.A. on November 4, 2024, for €230 million in cash plus up to €30 million in contingent consideration, recognizing $127.3 million in goodwill - Corob S.p.A. Acquisition (Nov 4, 2024): * Total purchase consideration: $290.7 million (cash paid $276.2 million, contingent consideration $14.5 million) * Goodwill recognized: $127.3 million (not tax deductible) * Identifiable intangible assets: Trade name ($32.5 million, indefinite life), Customer relationship ($76.2 million, 15 years), Developed technology ($20.6 million, 10 years), Backlog ($2.1 million, 0.5 years)[45][46] - Pro Forma Financials (6 Months Ended June 27, 2025, as if acquired Jan 2023): * Net sales: $1,100.1 million * Net earnings: $253.3 million * Diluted EPS: $1.49[47] Subsequent Event On July 17, 2025, the Company agreed to acquire Color Service s.r.l. for €63 million, expected to close in Q3 2025 and be part of the Industrial Segment's Powder Division - Color Service s.r.l. Acquisition (announced July 17, 2025): * Purchase price: €63 million * Expected completion: Q3 2025 * Segment: Industrial Segment (Powder Division) * Funding: Cash on hand[49] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides an overview of the Company's business, discusses global trade uncertainty, and analyzes consolidated and segment-specific financial results, highlighting a decline in gross profit margin and outlining liquidity Overview Graco Inc. supplies technology and expertise for fluid and coating management, operating in Contractor, Industrial, and Expansion Markets segments, with strategies focused on new product development, market expansion, global distribution, and strategic acquisitions - Company provides technology and expertise for fluid and coating management[51] - Business segments: Contractor, Industrial, and Expansion Markets[51] - Key strategies: new product development, market expansion, global distribution, strategic acquisitions[51] Global Trade Uncertainty The Company's operations are exposed to risks from evolving global trade policies, tariffs, and geopolitical tensions, which could lead to increased costs, reduced demand, and decreased profitability, with uncertain mitigation effectiveness - Operations, supply chain, and financial performance are impacted by global trade policies, tariffs, and geopolitical tensions[53] - Risks include inflationary costs, potential price increases, reduced demand, and decreased profitability[53] - Mitigation strategies (pricing and sourcing) may not fully offset impacts[53] Consolidated Results For Q2 2025, net sales increased 3% year-over-year, but operating earnings decreased 2% and net earnings decreased 4% due to a lower gross margin rate and reduced non-operating income | Metric | Three Months Ended June 27, 2025 (in millions) | Three Months Ended June 28, 2024 (in millions) | % Change | Six Months Ended June 27, 2025 (in millions) | Six Months Ended June 28, 2024 (in millions) | % Change | | :----- | :--------------------------------------------- | :--------------------------------------------- | :------- | :------------------------------------------- | :------------------------------------------- | :------- | | Net Sales | $571.8 | $553.2 | 3% | $1,100.1 | $1,045.4 | 5% | | Operating Earnings | $157.5 | $161.4 | (2)% | $301.5 | $294.4 | 2% | | Net Earnings | $127.6 | $133.0 | (4)% | $251.7 | $255.2 | (1)% | | Diluted Net Earnings per Common Share | $0.76 | $0.77 | (1)% | $1.48 | $1.48 | —% | - Gross profit margin rate declined ~2 percentage points in Q2 due to higher product costs ($4 million increased tariff costs) and lower margins from acquired operations[56][61] - Other non-operating income decreased $3 million in Q2, primarily due to $5 million in exchange losses on foreign operations' net liabilities[57] | Metric | Three Months Ended June 27, 2025 | Three Months Ended June 28, 2024 | Six Months Ended June 27, 2025 | Six Months Ended June 28, 2024 | | :----- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Gross Profit % | 52.4 % | 54.4 % | 52.5 % | 54.2 % | | Operating Earnings % | 27.5 % | 29.2 % | 27.4 % | 28.2 % | | Net Earnings % | 22.3 % | 24.0 % | 22.9 % | 24.4 % | Net Sales Consolidated net sales increased 3% for Q2 and 5% for the six months ended June 27, 2025, with acquired operations contributing 6 percentage points to sales growth, and EMEA and Asia Pacific showing growth | Region | Net Sales (3 Months Ended June 27, 2025, in millions) | Net Sales (3 Months Ended June 28, 2024, in millions) | Net Sales (6 Months Ended June 27, 2025, in millions) | Net Sales (6 Months Ended June 28, 2024, in millions) | | :----- | :---------------------------------------------------- | :---------------------------------------------------- | :---------------------------------------------------- | :---------------------------------------------------- | | Americas | $351.9 | $364.3 | $675.1 | $670.8 | | EMEA | $129.9 | $108.7 | $250.9 | $219.8 | | Asia Pacific | $90.0 | $80.2 | $174.1 | $154.8 | | Consolidated | $571.8 | $553.2 | $1,100.1 | $1,045.4 | | Region | Volume Acquisitions and Price (3 Months) | Currency (3 Months) | Total Change (3 Months) | Volume Acquisitions and Price (6 Months) | Currency (6 Months) | Total Change (6 Months) | | :----- | :------------------------------------- | :------------------ | :---------------------- | :------------------------------------- | :------------------ | :---------------------- | | Americas | (6)% | 0% | (3)% | (2)% | 0% | 1% | | EMEA | 2% | 5% | 19% | 1% | 1% | 14% | | Asia Pacific | 8% | (1)% | 12% | 9% | (2)% | 12% | | Consolidated | 6% | 0% | 3% | 6% | (1)% | 5% | Gross Profit The gross profit margin rate decreased by approximately 2 percentage points for both the second quarter and year-to-date periods, primarily due to higher product costs, including $4 million in increased tariff costs, and lower margins from acquired operations - Gross profit margin rate declined ~2 percentage points for Q2 and YTD[61] - Reasons: higher product costs (including $4 million increased tariff costs) and unfavorable effects of lower margin rates from acquired operations[61] Operating Expenses Total operating expenses increased by $3 million (2%) for Q2 and $3 million (1%) for the year-to-date, driven by incremental expenses from acquired operations, partially offset by reduced spending in product development, incentives, and share-based compensation - Total operating expenses increased $3 million (2%) for Q2 and $3 million (1%) for YTD[62] - Incremental expenses from acquired operations: $9 million (Q2), $19 million (YTD)[62] - Offset by decreases in product development, incentives, and share-based compensation[62] - Prior year periods included $3 million in expenses for distribution center relocation[63] Other (Income) Expense Other non-operating income decreased by $3 million for both Q2 and year-to-date, primarily due to exchange losses on foreign operations' net liabilities, partially offset by favorable market valuation changes on investments and a building sale gain - Other non-operating income decreased $3 million for Q2 and YTD[64] - Primary driver: exchange losses on foreign operations' net liabilities ($5 million for Q2, $8 million for YTD)[64] - Partially offset by favorable market valuation changes on retirement benefit investments and a $5 million gain from a Q1 building sale[64] Income Taxes The effective income tax rate was 19% for both Q2 and year-to-date, with the adjusted effective rate (excluding excess tax benefits from stock option exercises) at 20%, comparable to the prior year - Effective income tax rate: 19% for Q2 and YTD[65] - Adjusted effective income tax rate (excluding excess tax benefits from stock options): 20% for Q2 and YTD, comparable to prior year[65] Segment Results The Contractor segment experienced sales growth but a decline in operating margin, while the Industrial segment saw flat sales in Q2 but a year-to-date increase with stable margins, and Expansion Markets sales decreased in Q2 but grew year-to-date with improved margins Contractor Segment Contractor segment net sales increased 7% for Q2 and 9% for the six months ended June 27, 2025, driven by acquisitions, but operating earnings as a percentage of net sales declined by 5 percentage points due to higher product costs and lower margins from acquired operations | Metric | Net Sales (3 Months Ended June 27, 2025, in millions) | Operating Earnings as % of Net Sales (3 Months Ended June 27, 2025) | Net Sales (6 Months Ended June 27, 2025, in millions) | Operating Earnings as % of Net Sales (6 Months Ended June 27, 2025) | | :----- | :---------------------------------------------------- | :------------------------------------------------------------------ | :---------------------------------------------------- | :------------------------------------------------------------------ | | Total Net Sales | $289.0 | N/A | $544.0 | N/A | | Operating earnings as a percentage of net sales | N/A | 26 % | N/A | 25 % | - Net sales change (3 months): Volume/Acquisitions/Price (5)% (negative volume offset by acquisitions), Currency 0%, Total 7%[66] - Operating margin rate declined 5 percentage points (3 points from higher product costs/tariffs, 2 points from acquired operations' lower margins)[66] Industrial Segment Industrial segment net sales were flat for Q2 and increased 2% for the six months ended June 27, 2025, with favorable volumes in EMEA and Asia Pacific offsetting declines in the Americas, and the operating margin rate remained flat for Q2 | Metric | Net Sales (3 Months Ended June 27, 2025, in millions) | Operating Earnings as % of Net Sales (3 Months Ended June 27, 2025) | Net Sales (6 Months Ended June 27, 2025, in millions) | Operating Earnings as % of Net Sales (6 Months Ended June 27, 2025) | | :----- | :---------------------------------------------------- | :------------------------------------------------------------------ | :---------------------------------------------------- | :------------------------------------------------------------------ | | Total Net Sales | $242.2 | N/A | $473.9 | N/A | | Operating earnings as a percentage of net sales | N/A | 34 % | N/A | 34 % | - Net sales change (3 months): Volume/Acquisitions/Price (1)%, Currency 1%, Total 0%[68] - Operating margin rate: flat for Q2, increased 1 percentage point YTD[68] Expansion Markets Segment Expansion Markets net sales decreased for Q2 but increased 4% for the six months ended June 27, 2025, driven by double-digit growth in semiconductor products, with operating margin rates increasing due to higher sales volume and lower expenses | Metric | Net Sales (3 Months Ended June 27, 2025, in millions) | Operating Earnings as % of Net Sales (3 Months Ended June 27, 2025) | Net Sales (6 Months Ended June 27, 2025, in millions) | Operating Earnings as % of Net Sales (6 Months Ended June 27, 2025) | | :----- | :---------------------------------------------------- | :------------------------------------------------------------------ | :---------------------------------------------------- | :------------------------------------------------------------------ | | Total Net Sales | $40.6 | N/A | $82.2 | N/A | | Operating earnings as a percentage of net sales | N/A | 22 % | N/A | 23 % | - Net sales change (3 months): Volume/Acquisitions/Price (3)%, Currency 0%, Total (3)%[69] - Sales growth in semiconductor product application offset decreases in environmental product application[70] - Operating margin rate increased for both Q2 and YTD due to increased sales volume and lower expenses[70] Liquidity and Capital Resources Net cash from operating activities increased by $50 million to $308 million for the first six months of 2025, with significant cash uses including $361 million in share repurchases and $92 million in dividends, while maintaining strong liquidity - Net cash provided by operating activities (6 months 2025): $308 million (up $50 million year-over-year)[71] - Significant cash uses (6 months 2025): Share repurchases ($361 million), dividend payments ($92 million), plant and equipment additions ($30 million)[71] - Available liquidity (June 27, 2025): $1,322 million (including $535 million cash and $787 million credit facilities)[73] - 2025 Capital expenditures expected: $60 to $70 million[74] Outlook The Company reaffirms its 2025 revenue outlook of low single-digit sales growth on an organic constant-currency basis, supported by pricing actions, upcoming new product launches, and steady incoming order rates - 2025 revenue outlook: low single-digit sales growth on an organic constant-currency basis[75] - Outlook supported by: pricing actions, new product launches, steady order rates[75] Cautionary Statement Regarding Forward-Looking Statements Forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially, including global demand, currency rates, geopolitical instability, and supply chain issues - Forward-looking statements are subject to risks and uncertainties[76] - Risk factors include: demand, currency rates, international/domestic instability, interest rates, global sourcing, information systems, intellectual property, generative AI, international business, catastrophic events, personnel, growth strategies/acquisitions, goodwill impairment, competition, customer/industry dependence, laws/regulations, climate, ESG, anti-corruption/trade laws, tax/tariff rates, legal costs[77] - Investors should refer to Form 10-K and Form 10-Q for a comprehensive discussion of risk factors[77] Item 3. Quantitative and Qualitative Disclosures About Market Risk There have been no material changes to the Company's market risk disclosures since the 2024 Annual Report on Form 10-K - No material changes to market risk disclosures since the 2024 Annual Report on Form 10-K[79] Item 4. Controls and Procedures The Company's President and CEO, along with the CFO and Treasurer, evaluated the effectiveness of disclosure controls and procedures as of the end of the fiscal quarter and concluded they are effective, with no material changes to internal control over financial reporting - Disclosure controls and procedures were evaluated and deemed effective as of the end of the fiscal quarter[80] - No material changes in internal control over financial reporting during the quarter[81] PART II - OTHER INFORMATION Item 1A. Risk Factors There have been no material changes to the Company's risk factors from those disclosed in its 2024 Annual Report on Form 10-K - No material changes to risk factors from the 2024 Annual Report on Form 10-K[82] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The Board of Directors authorized the repurchase of up to 18 million shares of common stock, with 8,767,558 shares remaining under this authorization as of June 27, 2025, and 1,585,715 shares were repurchased during the period March 29, 2025 - April 25, 2025 - Board authorized repurchase of up to 18 million common shares (indefinite period)[83] - Shares remaining under authorization (as of June 27, 2025): 8,767,558[85] - Shares purchased (March 29, 2025 - April 25, 2025): 1,585,715 at $77.37 average price (not part of publicly announced plans)[85] Item 5. Other Information No directors or officers adopted, terminated, or modified a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the three months ended June 27, 2025 - No Rule 10b5-1 or non-Rule 10b5-1 trading arrangements adopted, terminated, or modified by directors or officers during the quarter[87] Item 6. Exhibits This section lists the exhibits filed with the 10-Q report, including restated articles of incorporation and bylaws, certifications from executive officers, a press release for Q2 earnings, and interactive data files in iXBRL format - Exhibits include: Restated Articles of Incorporation, Restated Bylaws, Certifications of CEO, CFO, and Chief Accounting Officer, Q2 Earnings Press Release, and Interactive Data Files (iXBRL)[89] SIGNATURES Signatures The report is duly signed on behalf of Graco Inc. by Mark W. Sheahan (President and CEO), David M. Lowe (CFO and Treasurer), and Christopher D. Knutson (VP, Controller and Chief Accounting Officer) on July 23, 2025 - Report signed by Mark W. Sheahan (President and CEO), David M. Lowe (CFO and Treasurer), and Christopher D. Knutson (VP, Controller and Chief Accounting Officer)[93] - Date of signing: July 23, 2025[93]