Graco Inc.
10/21/2026 | Press release | Distributed by Public on 10/21/2026 14:27
Quarterly Report for Quarter Ending September 25, 2026 (Form 10-Q)
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 25, 2026
OR
☐ 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 | ☒ | |||||||||||||||||
160,375,132 shares of the Registrant's Common Stock, $1.00 par value, were outstanding as of October 7, 2026.
TABLE OF CONTENTS
| Page | ||||||||||||||
| PART I - FINANCIAL INFORMATION | ||||||||||||||
| Item 1. |
Financial Statements
|
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Consolidated Statements of Earnings
|
3
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Consolidated Statements of Comprehensive Income
|
3
|
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Consolidated Balance Sheets
|
4
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Consolidated Statements of Cash Flows
|
5
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Consolidated Statements of Shareholders' Equity
|
6
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Notes to Consolidated Financial Statements
|
7
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| Item 2. |
Management's Discussion and Analysis of Financial Condition and Results of Operations
|
15
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| Item 3. |
Quantitative and Qualitative Disclosures About Market Risk
|
22
|
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| Item 4. |
Controls and Procedures
|
22
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| PART II - OTHER INFORMATION | ||||||||||||||
| Item 1A. |
Risk Factors
|
23
|
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| Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds
|
24
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| Item 5. |
Other Information
|
25
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| Item 6. |
Exhibits
|
26
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SIGNATURES
|
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2
Table of Contents
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 25, 2026 |
September 26, 2025 |
September 25, 2026 |
September 26, 2025 |
||||||||||||||||||||
| Net Sales | $ | 586,385 | $ | 543,358 | $ | 1,717,081 | $ | 1,643,448 | |||||||||||||||
| Cost of products sold | 290,162 | 254,133 | 823,273 | 776,960 | |||||||||||||||||||
| Gross Profit | 296,223 | 289,225 | 893,808 | 866,488 | |||||||||||||||||||
| Product development | 20,590 | 20,251 | 60,389 | 60,357 | |||||||||||||||||||
| Selling, marketing and distribution | 71,497 | 68,019 | 210,079 | 203,567 | |||||||||||||||||||
| General and administrative | 56,019 | 50,295 | 162,354 | 150,407 | |||||||||||||||||||
| Contingent consideration | - | (14,061) | - | (14,061) | |||||||||||||||||||
| Operating Earnings | 148,117 | 164,721 | 460,986 | 466,218 | |||||||||||||||||||
| Interest expense | 793 | 711 | 2,464 | 2,079 | |||||||||||||||||||
| Other income, net | (5,062) | (4,450) | (15,407) | (14,003) | |||||||||||||||||||
| Earnings Before Income Taxes | 152,386 | 168,460 | 473,929 | 478,142 | |||||||||||||||||||
| Income taxes | 30,825 | 30,832 | 88,935 | 88,790 | |||||||||||||||||||
| Net Earnings | $ | 121,561 | $ | 137,628 | $ | 384,994 | $ | 389,352 | |||||||||||||||
|
Net Earnings per Common Share
|
|||||||||||||||||||||||
|
Basic
|
$ | 0.75 | $ | 0.83 | $ | 2.36 | $ | 2.34 | |||||||||||||||
|
Diluted
|
$ | 0.75 | $ | 0.82 | $ | 2.32 | $ | 2.30 | |||||||||||||||
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited) (In thousands)
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
|
September 25, 2026 |
September 26, 2025 |
September 25, 2026 |
September 26, 2025 |
||||||||||||||||||||
| Net Earnings | $ | 121,561 | $ | 137,628 | $ | 384,994 | $ | 389,352 | |||||||||||||||
| Components of other comprehensive (loss) income | |||||||||||||||||||||||
|
Cumulative translation adjustment
|
(4,736) | 1,501 | (29,747) | 78,387 | |||||||||||||||||||
|
Pension and postretirement medical liability adjustment |
311 | 808 | 464 | 534 | |||||||||||||||||||
|
Income taxes - pension and postretirement medical liability adjustment |
(86) | (235) | (114) | (178) | |||||||||||||||||||
| Other comprehensive (loss) income | (4,511) | 2,074 | (29,397) | 78,743 | |||||||||||||||||||
| Comprehensive Income | $ | 117,050 | $ | 139,702 | $ | 355,597 | $ | 468,095 | |||||||||||||||
See notes to consolidated financial statements.
3
Table of Contents
GRACO INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited) (In thousands)
|
September 25, 2026 |
December 26, 2025 |
||||||||||
| ASSETS | |||||||||||
| Current Assets | |||||||||||
| Cash and cash equivalents | $ | 139,818 | $ | 624,083 | |||||||
|
Accounts receivable, less allowances of $6,700 and $6,000
|
446,144 | 393,753 | |||||||||
| Inventories | 463,829 | 401,138 | |||||||||
| Other current assets | 63,813 | 52,907 | |||||||||
| Total current assets | 1,113,604 | 1,471,881 | |||||||||
| Property, Plant and Equipment, net | 769,584 | 755,064 | |||||||||
| Goodwill | 793,764 | 585,304 | |||||||||
| Other Intangible Assets, net | 434,292 | 303,851 | |||||||||
| Operating Lease Assets | 29,688 | 26,073 | |||||||||
| Deferred Income Taxes | 21,749 | 35,975 | |||||||||
| Other Assets | 100,355 | 96,122 | |||||||||
| Total Assets | $ | 3,263,036 | $ | 3,274,270 | |||||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||||||
| Current Liabilities | |||||||||||
| Notes payable to banks | $ | 29,979 | $ | 23,072 | |||||||
| Current portion of long-term debt | 677 | 1,624 | |||||||||
| Trade accounts payable | 138,080 | 78,573 | |||||||||
| Salaries and incentives | 65,809 | 73,420 | |||||||||
| Dividends payable | 47,348 | 48,705 | |||||||||
| Other current liabilities | 242,163 | 241,867 | |||||||||
| Total current liabilities | 524,056 | 467,261 | |||||||||
| Long-term Debt | 103,802 | - | |||||||||
| Retirement Benefits and Deferred Compensation | 82,505 | 87,179 | |||||||||
| Operating Lease Liabilities | 21,089 | 18,131 | |||||||||
| Deferred Income Taxes | 48,087 | 36,708 | |||||||||
| Other Non-current Liabilities | 13,642 | 11,060 | |||||||||
| Shareholders' Equity | |||||||||||
| Common stock | 160,368 | 165,150 | |||||||||
| Additional paid-in-capital | 1,025,281 | 994,566 | |||||||||
| Retained earnings | 1,276,098 | 1,456,710 | |||||||||
| Accumulated other comprehensive income | 8,108 | 37,505 | |||||||||
| Total shareholders' equity | 2,469,855 | 2,653,931 | |||||||||
| Total Liabilities and Shareholders' Equity | $ | 3,263,036 | $ | 3,274,270 | |||||||
See notes to consolidated financial statements.
4
Table of Contents
GRACO INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (In thousands)
| Nine Months Ended | |||||||||||
|
September 25, 2026 |
September 26, 2025 |
||||||||||
| Cash Flows From Operating Activities | |||||||||||
| Net Earnings | $ | 384,994 | $ | 389,352 | |||||||
|
Adjustments to reconcile net earnings to net cash provided by operating activities |
|||||||||||
| Depreciation and amortization | 77,629 | 75,744 | |||||||||
| Deferred income taxes | 13,839 | 4,692 | |||||||||
| Share-based compensation | 23,553 | 24,495 | |||||||||
| Gain on sale of building | - | (4,737) | |||||||||
| Contingent consideration | - | (14,061) | |||||||||
| Change in | |||||||||||
| Accounts receivable | (27,112) | (6,470) | |||||||||
| Inventories | 2,955 | 19,671 | |||||||||
| Trade accounts payable | 23,942 | 11,952 | |||||||||
| Salaries and incentives | (11,094) | 2,146 | |||||||||
| Retirement benefits and deferred compensation | (3,383) | (769) | |||||||||
| Other accrued liabilities | (12,149) | (14,024) | |||||||||
| Other | (9,735) | (729) | |||||||||
| Net cash provided by operating activities | 463,439 | 487,262 | |||||||||
| Cash Flows From Investing Activities | |||||||||||
| Property, plant and equipment additions | (47,649) | (33,646) | |||||||||
| Proceeds from sale of building | - | 11,182 | |||||||||
| Acquisition of businesses, net of cash acquired | (436,313) | (70,107) | |||||||||
| Other | (566) | (2,215) | |||||||||
| Net cash used in investing activities | (484,528) | (94,786) | |||||||||
| Cash Flows From Financing Activities | |||||||||||
| Borrowings on short-term lines of credit | 5,818 | 5,912 | |||||||||
| Borrowings on long-term lines of credit | 219,000 | - | |||||||||
| Payments on long-term debt and lines of credit | (118,808) | - | |||||||||
| Common stock issued | 52,614 | 35,618 | |||||||||
| Common stock repurchased | (462,902) | (360,952) | |||||||||
| Taxes paid related to net share settlement of equity awards | (7,608) | (3,833) | |||||||||
| Cash dividends paid | (145,346) | (137,764) | |||||||||
| Net cash used in financing activities | (457,232) | (461,019) | |||||||||
| Effect of exchange rate changes on cash | (5,944) | 11,869 | |||||||||
| Net decrease in cash and cash equivalents | (484,265) | (56,674) | |||||||||
| Cash and Cash Equivalents | |||||||||||
| Beginning of year | 624,083 | 675,336 | |||||||||
| End of period | $ | 139,818 | $ | 618,662 | |||||||
See notes to consolidated financial statements.
5
Table of Contents
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 25, 2026
|
|||||||||||||||||||||||||||||
| Balance, June 26, 2026 | $ | 161,948 | $ | 1,026,376 | $ | 1,321,745 | $ | 12,619 | $ | 2,522,688 | |||||||||||||||||||
| Shares issued | 96 | 1,548 | - | - | 1,644 | ||||||||||||||||||||||||
| Shares repurchased | (1,676) | (10,094) | (119,999) | - | (131,769) | ||||||||||||||||||||||||
| Stock compensation cost | - | 7,451 | - | - | 7,451 | ||||||||||||||||||||||||
| Net earnings | - | - | 121,561 | - | 121,561 | ||||||||||||||||||||||||
|
Dividends declared ($0.295 per share)
|
- | - | (47,209) | - | (47,209) | ||||||||||||||||||||||||
| Other comprehensive loss | - | - | - | (4,511) | (4,511) | ||||||||||||||||||||||||
| Balance, September 25, 2026 | $ | 160,368 | $ | 1,025,281 | $ | 1,276,098 | $ | 8,108 | $ | 2,469,855 | |||||||||||||||||||
|
Nine Months Ended September 25, 2026
|
|||||||||||||||||||||||||||||
| Balance, December 26, 2025 | $ | 165,150 | $ | 994,566 | $ | 1,456,710 | $ | 37,505 | $ | 2,653,931 | |||||||||||||||||||
| Shares issued | 1,097 | 45,862 | - | - | 46,959 | ||||||||||||||||||||||||
| Shares repurchased | (5,879) | (35,405) | (421,618) | - | (462,902) | ||||||||||||||||||||||||
| Stock compensation cost | - | 22,211 | - | - | 22,211 | ||||||||||||||||||||||||
| Restricted stock issued | - | (1,953) | - | - | (1,953) | ||||||||||||||||||||||||
| Net earnings | - | - | 384,994 | - | 384,994 | ||||||||||||||||||||||||
|
Dividends declared ($0.885 per share)
|
- | - | (143,988) | - | (143,988) | ||||||||||||||||||||||||
| Other comprehensive loss | - | - | - | (29,397) | (29,397) | ||||||||||||||||||||||||
| Balance, September 25, 2026 | $ | 160,368 | $ | 1,025,281 | $ | 1,276,098 | $ | 8,108 | $ | 2,469,855 | |||||||||||||||||||
|
Three Months Ended September 26, 2025
|
|||||||||||||||||||||||||||||
| Balance, June 27, 2025 | $ | 165,637 | $ | 970,332 | $ | 1,337,956 | $ | 27,095 | $ | 2,501,020 | |||||||||||||||||||
| Shares issued | 137 | 6,888 | - | - | 7,025 | ||||||||||||||||||||||||
| Stock compensation cost | - | 7,542 | - | - | 7,542 | ||||||||||||||||||||||||
| Restricted stock issued | - | (724) | - | - | (724) | ||||||||||||||||||||||||
| Net earnings | - | - | 137,628 | - | 137,628 | ||||||||||||||||||||||||
|
Dividends declared ($0.275 per share)
|
- | - | (45,565) | - | (45,565) | ||||||||||||||||||||||||
| Other comprehensive income | - | - | - | 2,074 | 2,074 | ||||||||||||||||||||||||
| Balance, September 26, 2025 | $ | 165,774 | $ | 984,038 | $ | 1,430,019 | $ | 29,169 | $ | 2,609,000 | |||||||||||||||||||
|
Nine Months Ended September 26, 2025
|
|||||||||||||||||||||||||||||
| Balance, December 27, 2024 | $ | 169,394 | $ | 955,051 | $ | 1,509,264 | $ | (49,574) | $ | 2,584,135 | |||||||||||||||||||
| Shares issued | 764 | 31,745 | - | - | 32,509 | ||||||||||||||||||||||||
| Shares repurchased | (4,384) | (24,714) | (331,854) | - | (360,952) | ||||||||||||||||||||||||
| Stock compensation cost | - | 22,680 | - | - | 22,680 | ||||||||||||||||||||||||
| Restricted stock issued | - | (724) | - | - | (724) | ||||||||||||||||||||||||
| Net earnings | - | - | 389,352 | - | 389,352 | ||||||||||||||||||||||||
|
Dividends declared ($0.825 per share)
|
- | - | (136,743) | - | (136,743) | ||||||||||||||||||||||||
| Other comprehensive income | - | - | - | 78,743 | 78,743 | ||||||||||||||||||||||||
| Balance, September 26, 2025 | $ | 165,774 | $ | 984,038 | $ | 1,430,019 | $ | 29,169 | $ | 2,609,000 | |||||||||||||||||||
6
Table of Contents
GRACO INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Preparation
The consolidated balance sheet of Graco Inc. and subsidiaries (the "Company") as of September 25, 2026 and the related statements of earnings, comprehensive income and shareholders' equity for the three and nine months ended September 25, 2026 and September 26, 2025, and cash flows for the nine months ended September 25, 2026 and September 26, 2025 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 25, 2026, and the results of operations and cash flows for all periods presented.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. Therefore, these statements should be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 26, 2025 (the "2025 Annual Report").
The results of operations for interim periods are not necessarily indicative of results that will be realized for the full fiscal year.
2. Segment Information
The Company classifies its business into three reportable segments: Contractor, Industrial and Expansion Markets.
Segment information follows (in thousands):
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
|
September 25, 2026 |
September 26, 2025 |
September 25, 2026 |
September 26, 2025 |
||||||||||||||||||||
| Contractor | |||||||||||||||||||||||
| Net Sales | $ | 276,032 | $ | 262,428 | $ | 835,436 | $ | 806,419 | |||||||||||||||
| Cost of products sold | 142,441 | 134,398 | 421,901 | 415,820 | |||||||||||||||||||
| Gross Profit | 133,591 | 128,030 | 413,535 | 390,599 | |||||||||||||||||||
| Operating expenses | 62,354 | 60,157 | 188,902 | 185,307 | |||||||||||||||||||
| Contractor Operating Earnings | $ | 71,237 | $ | 67,873 | $ | 224,633 | $ | 205,292 | |||||||||||||||
| Industrial | |||||||||||||||||||||||
| Net Sales | $ | 264,623 | $ | 238,591 | $ | 754,272 | $ | 712,521 | |||||||||||||||
| Cost of products sold | 123,428 | 98,121 | 332,840 | 295,996 | |||||||||||||||||||
| Gross Profit | 141,195 | 140,470 | 421,432 | 416,525 | |||||||||||||||||||
| Operating expenses | 66,743 | 59,737 | 186,827 | 173,825 | |||||||||||||||||||
| Industrial Operating Earnings | $ | 74,452 | $ | 80,733 | $ | 234,605 | $ | 242,700 | |||||||||||||||
7
Table of Contents
| Expansion Markets | |||||||||||||||||||||||
| Net Sales | $ | 45,730 | $ | 42,339 | $ | 127,373 | $ | 124,508 | |||||||||||||||
| Cost of products sold | 22,621 | 20,139 | 63,202 | 59,868 | |||||||||||||||||||
| Gross Profit | 23,109 | 22,200 | 64,171 | 64,640 | |||||||||||||||||||
| Operating expenses | 12,167 | 11,811 | 34,099 | 35,357 | |||||||||||||||||||
| Expansion Markets Operating Earnings | $ | 10,942 | $ | 10,389 | $ | 30,072 | $ | 29,283 | |||||||||||||||
| Reportable Segment Operating Earnings Total | $ | 156,631 | $ | 158,995 | $ | 489,310 | $ | 477,275 | |||||||||||||||
| Unallocated corporate expense | 8,514 | 8,335 | 28,324 | 25,118 | |||||||||||||||||||
| Contingent consideration | - | (14,061) | - | (14,061) | |||||||||||||||||||
| Operating Earnings | 148,117 | 164,721 | 460,986 | 466,218 | |||||||||||||||||||
| Interest expense | 793 | 711 | 2,464 | 2,079 | |||||||||||||||||||
| Other income, net | (5,062) | (4,450) | (15,407) | (14,003) | |||||||||||||||||||
| Earnings Before Income Taxes | $ | 152,386 | $ | 168,460 | $ | 473,929 | $ | 478,142 | |||||||||||||||
Geographic information follows (in thousands):
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
|
September 25, 2026 |
September 26, 2025 |
September 25, 2026 |
September 26, 2025 |
||||||||||||||||||||
| Net Sales (based on customer location) | |||||||||||||||||||||||
|
United States
|
$ | 307,924 | $ | 293,517 | $ | 922,362 | $ | 881,101 | |||||||||||||||
|
Other countries
|
278,461 | 249,841 | 794,719 | 762,347 | |||||||||||||||||||
|
Total
|
$ | 586,385 | $ | 543,358 | $ | 1,717,081 | $ | 1,643,448 | |||||||||||||||
|
September 25, 2026 |
December 26, 2025 |
||||||||||
|
Long-lived Assets
|
|||||||||||
|
United States
|
$ | 605,487 | $ | 600,011 | |||||||
|
Other countries
|
164,097 | 155,053 | |||||||||
|
Total
|
$ | 769,584 | $ | 755,064 | |||||||
3. Inventories
Major components of inventories were as follows (in thousands):
|
September 25, 2026 |
December 26, 2025 |
||||||||||
| Finished products and components | $ | 215,171 | $ | 175,684 | |||||||
| Products and components in various stages of completion | 110,494 | 123,866 | |||||||||
| Raw materials and purchased components | 261,477 | 216,559 | |||||||||
| Subtotal | 587,142 | 516,109 | |||||||||
| Reduction to LIFO cost | (123,313) | (114,971) | |||||||||
| Total | $ | 463,829 | $ | 401,138 | |||||||
8
Table of Contents
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 26, 2025 | 9,786 | $ | 61.38 | 7,017 | $ | 52.94 | |||||||||||||||||
| Granted | 1,003 | 92.81 | |||||||||||||||||||||
| Exercised | (930) | 41.39 | |||||||||||||||||||||
| Canceled | (239) | 83.59 | |||||||||||||||||||||
| Outstanding, September 25, 2026 | 9,620 | $ | 66.00 | 7,002 | $ | 57.92 | |||||||||||||||||
The Company recognized year-to-date share-based compensation of $24 million in 2026 and $25 million in 2025. As of September 25, 2026, there was $29 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 25, 2026 |
September 26, 2025 |
||||||||||
|
Expected life in years
|
6.7 | 6.6 | |||||||||
|
Interest rate
|
3.9 | % | 4.4 | % | |||||||
|
Volatility
|
24.9 | % | 26.2 | % | |||||||
|
Dividend yield
|
1.3 | % | 1.3 | % | |||||||
|
Weighted average fair value per share
|
$ | 27.16 | $ | 26.80 | |||||||
Under the Company's Employee Stock Purchase Plan, the Company issued 235,000 shares in 2026 and 257,000 shares in 2025. 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 25, 2026 |
September 26, 2025 |
||||||||||
|
Expected life in years
|
1.0 | 1.0 | |||||||||
|
Interest rate
|
3.5 | % | 4.1 | % | |||||||
|
Volatility
|
20.6 | % | 19.6 | % | |||||||
|
Dividend yield
|
1.2 | % | 1.3 | % | |||||||
|
Weighted average fair value per share
|
$ | 25.69 | $ | 19.65 | |||||||
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5. 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 25, 2026 |
September 26, 2025 |
September 25, 2026 |
September 26, 2025 |
||||||||||||||||||||
|
Net earnings available to common shareholders
|
$ | 121,561 | $ | 137,628 | $ | 384,994 | $ | 389,352 | |||||||||||||||
| Weighted average shares outstanding for basic earnings per share | 161,075 | 165,733 | 163,473 | 166,693 | |||||||||||||||||||
| Dilutive effect of stock options computed using the treasury stock method and the average market price | 1,946 | 2,890 | 2,220 | 2,896 | |||||||||||||||||||
| Weighted average shares outstanding for diluted earnings per share | 163,021 | 168,623 | 165,693 | 169,589 | |||||||||||||||||||
|
Basic earnings per share
|
$ | 0.75 | $ | 0.83 | $ | 2.36 | $ | 2.34 | |||||||||||||||
|
Diluted earnings per share
|
$ | 0.75 | $ | 0.82 | $ | 2.32 | $ | 2.30 | |||||||||||||||
| Anti-dilutive shares not included in diluted earnings per share computation | 3,102 | 1,825 | 3,101 | 1,827 | |||||||||||||||||||
6. 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 25, 2026 |
September 26, 2025 |
September 25, 2026 |
September 26, 2025 |
||||||||||||||||||||
|
Pension Benefits
|
|||||||||||||||||||||||
|
Service cost
|
$ | 726 | $ | 1,162 | $ | 3,058 | $ | 3,454 | |||||||||||||||
|
Interest cost
|
1,910 | 2,375 | 7,205 | 7,086 | |||||||||||||||||||
|
Expected return on assets
|
(3,419) | (2,917) | (9,967) | (8,724) | |||||||||||||||||||
|
Amortization and other
|
(82) | (218) | (234) | 148 | |||||||||||||||||||
| Net periodic benefit (credit) cost | $ | (865) | $ | 402 | $ | 62 | $ | 1,964 | |||||||||||||||
|
Postretirement Medical
|
|||||||||||||||||||||||
|
Service cost
|
$ | 60 | $ | 76 | $ | 210 | $ | 229 | |||||||||||||||
|
Interest cost
|
323 | 285 | 773 | 854 | |||||||||||||||||||
|
Amortization
|
(395) | (68) | (395) | (204) | |||||||||||||||||||
| Net periodic benefit (credit) cost | $ | (12) | $ | 293 | $ | 588 | $ | 879 | |||||||||||||||
7. Receivables and Credit Losses
Accounts receivable includes trade receivables of $428 million and other receivables of $18 million as of September 25, 2026, and $376 million and $18 million of trade receivables and other receivables as of December 26, 2025.
Allowance for Credit Losses
Following is a summary of activity for credit losses (in thousands):
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| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
|
September 25, 2026 |
September 26, 2025 |
September 25, 2026 |
September 26, 2025 |
||||||||||||||||||||
| Balance, beginning | $ | 6,372 | $ | 5,331 | $ | 5,264 | $ | 4,973 | |||||||||||||||
| (Reversals) additions charged to costs and expenses | (379) | (47) | 1,092 | 46 | |||||||||||||||||||
|
Deductions from reserves (1)
|
(74) | (152) | (393) | (157) | |||||||||||||||||||
|
Other (deductions) additions (2)
|
(8) | 5 | (52) | 275 | |||||||||||||||||||
| Balance, ending | $ | 5,911 | $ | 5,137 | $ | 5,911 | $ | 5,137 | |||||||||||||||
(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. 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 25, 2026 | |||||||||||||||||||||||||||||
|
Cost
|
$ | 300,762 | $ | 62,071 | $ | 9,086 | $ | 140,334 | $ | 512,253 | |||||||||||||||||||
|
Accumulated amortization
|
(68,734) | (10,473) | (4,638) | - | (83,845) | ||||||||||||||||||||||||
| Foreign currency translation | 446 | 1,025 | 13 | 4,400 | 5,884 | ||||||||||||||||||||||||
|
Book value
|
$ | 232,474 | $ | 52,623 | $ | 4,461 | $ | 144,734 | $ | 434,292 | |||||||||||||||||||
|
Weighted average life in years
|
14 | 10 | 2 | N/A | |||||||||||||||||||||||||
| As of December 26, 2025 | |||||||||||||||||||||||||||||
|
Cost
|
$ | 316,962 | $ | 44,304 | $ | 4,786 | $ | 107,034 | $ | 473,086 | |||||||||||||||||||
|
Accumulated amortization
|
(165,150) | (10,649) | (2,027) | - | (177,826) | ||||||||||||||||||||||||
| Foreign currency translation | (877) | 1,464 | 54 | 7,950 | 8,591 | ||||||||||||||||||||||||
|
Book value
|
$ | 150,935 | $ | 35,119 | $ | 2,813 | $ | 114,984 | $ | 303,851 | |||||||||||||||||||
|
Weighted average life in years
|
13 | 10 | 2 | N/A | |||||||||||||||||||||||||
Amortization of acquired and other intangible assets for the year to date was $20 million in both 2025 and 2026. Estimated annual amortization expense based on the current carrying amount of other intangible assets is as follows (in thousands):
| 2026 (Remainder) | 2027 | 2028 | 2029 | 2030 | Thereafter | ||||||||||||||||||||||||||||||
| Estimated Amortization Expense | $ | 10,002 | $ | 29,668 | $ | 26,188 | $ | 25,584 | $ | 24,815 | $ | 173,301 | |||||||||||||||||||||||
Changes in the carrying amount of goodwill for each reportable segment were as follows (in thousands):
| Contractor | Industrial | Expansion Markets | Total | ||||||||||||||||||||
| Balance, December 26, 2025 | $ | 238,575 | $ | 275,263 | $ | 71,466 | $ | 585,304 | |||||||||||||||
| Additions, adjustments from business acquisitions | (397) | 219,701 | - | 219,304 | |||||||||||||||||||
| Foreign currency translation | (4,738) | (6,106) | - | (10,844) | |||||||||||||||||||
| Balance, September 25, 2026 | $ | 233,440 | $ | 488,858 | $ | 71,466 | $ | 793,764 | |||||||||||||||
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9. Other Current Liabilities
Components of other current liabilities were as follows (in thousands):
|
September 25, 2026 |
December 26, 2025 |
||||||||||
|
Accrued self-insurance retentions
|
$ | 8,011 | $ | 8,013 | |||||||
|
Accrued warranty and service liabilities
|
20,404 | 21,103 | |||||||||
|
Accrued trade promotions
|
10,650 | 7,511 | |||||||||
|
Payable for employee stock purchases
|
11,444 | 15,546 | |||||||||
|
Customer advances and deferred revenue
|
98,414 | 93,995 | |||||||||
|
Income taxes payable
|
13,191 | 15,493 | |||||||||
| Tax payable, other | 13,967 | 14,693 | |||||||||
| Right of return refund liability | 13,003 | 15,055 | |||||||||
| Operating lease liabilities, current | 9,126 | 8,769 | |||||||||
|
Other
|
43,953 | 41,689 | |||||||||
|
Total
|
$ | 242,163 | $ | 241,867 | |||||||
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 26, 2025 | $ | 21,103 | |||
| Charged to expense | 8,302 | ||||
| Margin on parts sales reversed | 3,651 | ||||
| Reductions for claims settled | (12,652) | ||||
| Balance, September 25, 2026 | $ | 20,404 | |||
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 25, 2026, the Company recognized $18 million and $81 million, respectively, that was included in deferred revenue at December 26, 2025. During the three and nine months ended September 26, 2025, the Company recognized $4 million and $50 million, respectively, that was included in deferred revenue at December 27, 2024.
10. 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 25, 2026 |
December 26, 2025 |
|||||||||||||||
| Assets | |||||||||||||||||
| Cash surrender value of life insurance | 2 | $ | 31,600 | $ | 28,893 | ||||||||||||
| Forward exchange contracts | 2 | 6 | - | ||||||||||||||
| Total assets at fair value | $ | 31,606 | $ | 28,893 | |||||||||||||
| Liabilities | |||||||||||||||||
| Contingent consideration | 3 | $ | 1,593 | $ | 1,649 | ||||||||||||
| Deferred compensation | 2 | 8,970 | 8,336 | ||||||||||||||
| Forward exchange contracts | 2 | - | 268 | ||||||||||||||
| Total liabilities at fair value | $ | 10,563 | $ | 10,253 | |||||||||||||
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
12
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measurement funds that shadow the deferral investment allocations made by participants in certain deferred compensation plans. The deferred compensation liability balances are valued based on amounts allocated by participants to the underlying performance measurement funds.
Contingent consideration liabilities represent the estimated value (using a probability-weighted expected return approach) of future payments to be made to previous owners of certain acquired businesses based on future revenues.
The fair value of variable rate borrowings approximates carrying value. The Company uses significant other observable inputs to estimate fair value (level 2 of the fair value hierarchy) based on the present value of future cash flows and rates that would be available for issuance of debt with similar terms and remaining maturities.
11. Acquisitions
On August 31, 2026, the Company acquired Valco Cincinnati LLC and certain affiliated entities (collectively "Valco Melton"). Under the terms of the purchase agreement, the purchase price of $447 million was adjusted for cash acquired, estimated unpaid pre-close liabilities of the selling shareholders and estimated excess working capital. The acquisition was completed for the total cash consideration of approximately $462 million, subject to normal post-closing purchase price adjustments. The purchase price was funded with cash on hand and borrowings under the Company's revolving credit facility. Valco Melton is a global provider of adhesive application and quality assurance systems. The acquired business expands and complements the Company's Industrial segment.
Results of operations for Valco Melton have been included in the Company's Industrial segment since the acquisition date and included sales of $12 million and operating losses of $5 million for the period ended September 25, 2026. As of September 25, 2026, the purchase price allocation remains preliminary as the Company completes its assessment of certain acquired assets and assumed liabilities, principally related to the valuation of intangible assets, income taxes and the finalization of post-closing purchase price adjustments. Based on the preliminary purchase price allocation, the Company recorded goodwill of $220 million and intangible assets of $159 million. Identifiable intangible assets include $33 million related to indefinite-lived trade names and $126 million related to amortizable intangible assets with estimated useful lives ranging from 0.5 to 15 years. The preliminary amounts recognized are subject to adjustment during the measurement period as additional information becomes available and valuations are finalized. Such adjustments may be material to the amounts allocated to acquired assets and liabilities, including goodwill. The purchase price allocation is expected to be finalized as soon as practicable, but no later than one year from the acquisition date.
Consideration transferred was preliminarily allocated to assets acquired and liabilities assumed based on estimated fair values as follows (in thousands):
| Cash and cash equivalents | $ | 25,445 | |||
| Accounts receivable | 29,842 | ||||
| Inventories | 69,839 | ||||
| Other current assets | 2,715 | ||||
| Property, plant and equipment | 13,664 | ||||
| Other non-current assets | 7,936 | ||||
| Identifiable intangible assets | 158,600 | ||||
| Goodwill | 219,771 | ||||
| Current liabilities | (43,831) | ||||
| Deferred income taxes, net | (12,944) | ||||
| Other non-current liabilities | (9,052) | ||||
| Total net assets acquired | $ | 461,985 | |||
Goodwill recognized from the Valco Melton acquisition primarily reflects an intangible asset that does not qualify for separate recognition. Approximately $150 million of goodwill acquired with Valco Melton is deductible for tax purposes.
The following unaudited pro forma information provides the results of operations for the periods ended September 25, 2026 and September 26, 2025, as if the acquisition of Valco Melton had been completed at the beginning of fiscal year 2025 (in thousands, except per share amounts):
13
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| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
|
September 25, 2026 |
September 26, 2025 |
September 25, 2026 |
September 26, 2025 |
||||||||||||||||||||
| Net sales | $ | 611,271 | $ | 581,294 | $ | 1,824,031 | $ | 1,749,917 | |||||||||||||||
| Net earnings | 125,913 | 139,246 | 395,192 | 375,132 | |||||||||||||||||||
| Earnings per share | |||||||||||||||||||||||
| Basic | $ | 0.78 | $ | 0.84 | $ | 2.42 | $ | 2.26 | |||||||||||||||
| Diluted | $ | 0.77 | $ | 0.83 | $ | 2.39 | $ | 2.21 | |||||||||||||||
The unaudited pro forma information includes the impact of intangible asset amortization of approximately $6 million in 2026 and $9 million in 2025. The nine months ended September 25, 2026, excludes the impact of $6 million of transaction-related expenses and non-recurring expense, related to the fair value adjustment to acquisition-date inventory. The nine months ended September 26, 2025 was adjusted to include transaction-related expenses and nonrecurring expenses related to the fair value adjustment to acquisition-date inventory. The information also reflects the pro forma cost of foregone interest income but does not reflect the effect of any synergies or integration costs that may result from the acquisition.
Unaudited pro forma information has been provided for comparative purposes only and the information does not necessarily reflect what the combined Company's results of operations would have been had the Valco Melton acquisition occurred at the beginning of fiscal year 2025. It also may not be useful in predicting the future results of operations of the combined company.
Subsequent to the end of the third quarter, the Company completed the acquisition of a business that is not material to the consolidated financial statements.
14
Table of Contents
Item 2. GRACO INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
The Company supplies technology and expertise for the management of fluids and coatings in both industrial and commercial applications. It designs, manufactures and markets systems and equipment to move, measure, control, dispense and spray fluid and coating materials. Management classifies the Company's business into three reportable segments: Contractor, Industrial and Expansion Markets. Key strategies include developing and marketing new products, leveraging products and technologies into additional, growing end-user markets, expanding distribution globally and completing strategic acquisitions that provide additional channels and technologies.
The following Management's Discussion and Analysis reviews significant factors affecting the Company's results of operations and financial condition. This discussion should be read in conjunction with the consolidated financial statements and the accompanying notes to the consolidated financial statements.
Tariffs
On February 20, 2026, the U.S. Supreme Court issued a decision invalidating certain tariffs imposed under the International Emergency Economic Powers Act ("IEEPA"). The U.S. Court of International Trade subsequently issued orders directing the U.S. Customs and Border Protection to refund previously collected IEEPA tariffs. Given the significant uncertainty involved, the Company determined to only recognize IEEPA tariff refunds upon receipt. The Company began receiving IEEPA tariff refunds during the second quarter of 2026. Through the nine months ended September 25, 2026, the Company received $9 million in refunds, net of related surcharges.
Consolidated Results
A summary of financial results follows (in millions except per share amounts):
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||||||||||
|
Sep 25, 2026 |
Sep 26, 2025 |
% Change |
Sep 25, 2026 |
Sep 26, 2025 |
% Change |
||||||||||||||||||||||||||||||
|
Net Sales
|
$ | 586.4 | $ | 543.4 | 8 | % | $ | 1,717.1 | $ | 1,643.4 | 4 | % | |||||||||||||||||||||||
|
Operating Earnings
|
148.1 | 164.7 | (10) | % | 461.0 | 466.2 | (1) | % | |||||||||||||||||||||||||||
|
Operating Earnings, adjusted (1)
|
160.9 | 158.7 | 1 | % | 490.2 | 474.5 | 3 | % | |||||||||||||||||||||||||||
|
Net Earnings
|
121.6 | 137.6 | (12) | % | 385.0 | 389.4 | (1) | % | |||||||||||||||||||||||||||
|
Net Earnings, adjusted (1)
|
131.3 | 129.1 | 2 | % | 400.6 | 387.2 | 3 | % | |||||||||||||||||||||||||||
|
Diluted Net Earnings per Common Share
|
$ | 0.75 | $ | 0.82 | (9) | % | $ | 2.32 | $ | 2.30 | 1 | % | |||||||||||||||||||||||
|
Diluted Net Earnings per Common Share, adjusted (1)
|
$ | 0.81 | $ | 0.77 | 5 | % | $ | 2.42 | $ | 2.28 | 6 | % | |||||||||||||||||||||||
(1) The adjusted measures of operating earnings, net earnings and diluted net earnings per common share reflect the Company's updated non-GAAP methodology introduced in the second quarter of 2026. See below for a reconciliation of GAAP to non-GAAP measurements.
Net sales for the third quarter increased by 8 percent, with 4 percentage points of organic sales growth and 4 percentage points of sales growth from acquired operations.
Operating earnings decreased 10 percent for the third quarter, primarily due to a non-cash gain of $14 million from the reduction in fair value of acquisition-related contingent consideration in the prior year that did not repeat. Adjusted operating earnings increased 1 percent, as price realization offset higher product costs in the quarter.
Net earnings decreased 12 percent for the third quarter, related to lower operating earnings and a higher effective tax rate. Adjusted net earnings increased 2 percent.
Beginning in the second quarter of 2026, the Company updated its non-GAAP adjusted measurements to exclude acquisition costs and amortization of acquired intangible assets. The Company excludes acquisition costs and
15
Table of Contents
amortization of acquired intangible assets to provide a consistent comparison of operating results across reporting periods. While the Company has a history of acquisition activity, the Company's acquisitions do not occur on a predictable cycle, and transactions vary in complexity, timing, size and nature. Acquisition costs include third-party legal, valuation, consulting and other incremental costs incurred in connection with acquisition activities as well as purchase accounting adjustments. Management uses these adjusted measures to evaluate operating performance and, for acquisition costs, in determining incentive compensation. These excluded items to the non-GAAP adjusted measurements provide supplemental information useful in evaluating the Company's underlying operating performance. Prior-period amounts have been recast to conform to the current presentation.
Excluding the impact of acquisition costs, amortization of acquired intangible assets, the related income tax effects of these items and excess tax benefits from stock option exercises presents a more consistent basis for comparison of financial results. A calculation of the non-GAAP adjusted measurements of operating earnings, earnings before income taxes, income taxes, effective income tax rate, net earnings and diluted earnings per share follows (in millions except per share amounts):
16
Table of Contents
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
|
September 25, 2026 |
September 26, 2025 |
September 25, 2026 |
September 26, 2025 |
||||||||||||||||||||
| Operating earnings | $ | 148.1 | $ | 164.7 | $ | 461.0 | $ | 466.2 | |||||||||||||||
| Acquisition costs | 5.8 | 1.0 | 8.9 | 2.0 | |||||||||||||||||||
|
Amortization of acquired intangible assets
|
7.0 | 7.1 | 20.3 | 20.4 | |||||||||||||||||||
| Contingent consideration | - | (14.1) | - | (14.1) | |||||||||||||||||||
| Operating earnings, adjusted | $ | 160.9 | $ | 158.7 | $ | 490.2 | $ | 474.5 | |||||||||||||||
| Earnings before income taxes, as reported | $ | 152.4 | $ | 168.5 | $ | 473.9 | $ | 478.1 | |||||||||||||||
| Acquisition costs | 5.8 | 1.0 | 8.9 | 2.0 | |||||||||||||||||||
| Amortization of acquired intangible assets | 7.0 | 7.1 | 20.3 | 20.4 | |||||||||||||||||||
| Contingent consideration | - | (14.1) | - | (14.1) | |||||||||||||||||||
| Earnings before income taxes, adjusted | $ | 165.2 | $ | 162.5 | $ | 503.1 | $ | 486.4 | |||||||||||||||
| Income taxes, as reported | $ | 30.8 | $ | 30.8 | $ | 88.9 | $ | 88.8 | |||||||||||||||
| Tax impact of acquisition costs | 1.3 | 0.2 | 1.9 | 0.4 | |||||||||||||||||||
| Tax impact of amortization of acquired intangible assets | 1.7 | 1.6 | 4.9 | 5.0 | |||||||||||||||||||
| Excess tax benefit from option exercises | 0.1 | 0.7 | 6.8 | 5.1 | |||||||||||||||||||
| Income taxes, adjusted | $ | 33.9 | $ | 33.3 | $ | 102.5 | $ | 99.3 | |||||||||||||||
| Effective income tax rate | |||||||||||||||||||||||
| As reported | 20.2 | % | 18.3 | % | 18.8 | % | 18.6 | % | |||||||||||||||
| Adjusted | 20.5 | % | 20.6 | % | 20.4 | % | 20.4 | % | |||||||||||||||
| Net Earnings, as reported | $ | 121.6 | $ | 137.6 | $ | 385.0 | $ | 389.4 | |||||||||||||||
| Acquisition costs, net of tax | 4.5 | 0.8 | 7.0 | 1.6 | |||||||||||||||||||
| Amortization of acquired intangible assets, net of tax | 5.3 | 5.5 | 15.4 | 15.4 | |||||||||||||||||||
| Contingent consideration | - | (14.1) | - | (14.1) | |||||||||||||||||||
| Excess tax benefit from option exercises | (0.1) | (0.7) | (6.8) | (5.1) | |||||||||||||||||||
| Net Earnings, adjusted | $ | 131.3 | $ | 129.1 | $ | 400.6 | $ | 387.2 | |||||||||||||||
| Weighted Average Diluted Shares | 163.0 | 168.6 | 165.7 | 169.6 | |||||||||||||||||||
| Diluted Earnings per Share | |||||||||||||||||||||||
| As reported | $ | 0.75 | $ | 0.82 | $ | 2.32 | $ | 2.30 | |||||||||||||||
| Adjusted | $ | 0.81 | $ | 0.77 | $ | 2.42 | $ | 2.28 | |||||||||||||||
17
Table of Contents
The following table presents an overview of components of net earnings as a percentage of net sales:
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
|
September 25, 2026 |
September 26, 2025 |
September 25, 2026 |
September 26, 2025 |
||||||||||||||||||||
| Net Sales | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |||||||||||||||
| Cost of products sold | 49.5 | 46.8 | 47.9 | 47.3 | |||||||||||||||||||
| Gross Profit | 50.5 | 53.2 | 52.1 | 52.7 | |||||||||||||||||||
| Product development | 3.5 | 3.7 | 3.5 | 3.7 | |||||||||||||||||||
| Selling, marketing and distribution | 12.2 | 12.5 | 12.2 | 12.4 | |||||||||||||||||||
| General and administrative | 9.5 | 9.3 | 9.6 | 9.2 | |||||||||||||||||||
| Contingent consideration | - | (2.6) | - | (0.9) | |||||||||||||||||||
| Operating Earnings | 25.3 | 30.3 | 26.8 | 28.4 | |||||||||||||||||||
| Interest expense | 0.1 | 0.1 | 0.1 | 0.1 | |||||||||||||||||||
| Other income, net | (0.8) | (0.8) | (0.9) | (0.9) | |||||||||||||||||||
| Earnings Before Income Taxes | 26.0 | 31.0 | 27.6 | 29.2 | |||||||||||||||||||
| Income taxes | 5.3 | 5.7 | 5.2 | 5.4 | |||||||||||||||||||
| Net Earnings | 20.7 | % | 25.3 | % | 22.4 | % | 23.8 | % | |||||||||||||||
Net Sales
The following table presents net sales by geographic region (in millions):
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
|
September 25, 2026 |
September 26, 2025 |
September 25, 2026 |
September 26, 2025 |
||||||||||||||||||||
|
Americas(1)
|
$ | 360.5 | $ | 341.0 | $ | 1,066.3 | $ | 1,016.1 | |||||||||||||||
|
EMEA(2)
|
129.3 | 117.8 | 382.7 | 368.6 | |||||||||||||||||||
| Asia Pacific | 96.6 | 84.6 | 268.1 | 258.7 | |||||||||||||||||||
| Consolidated | $ | 586.4 | $ | 543.4 | $ | 1,717.1 | $ | 1,643.4 | |||||||||||||||
(1) North, South and Central America, including the United States
(2) Europe, Middle East and Africa
The following table presents the components of net sales change by geographic region:
| Three Months | Nine Months | ||||||||||||||||||||||||||||||||||||||||||||||
| Volume and Price | Acquisitions | Currency | Total | Volume and Price | Acquisitions | Currency | Total | ||||||||||||||||||||||||||||||||||||||||
| Americas | 1% | 5% | 0% | 6% | 0% | 5% | 0% | 5% | |||||||||||||||||||||||||||||||||||||||
| EMEA | 11% | 0% | (1)% | 10% | (3)% | 3% | 4% | 4% | |||||||||||||||||||||||||||||||||||||||
| Asia Pacific | 13% | 0% | 1% | 14% | 1% | 1% | 2% | 4% | |||||||||||||||||||||||||||||||||||||||
| Consolidated | 4% | 4% | 0% | 8% | (1)% | 4% | 1% | 4% | |||||||||||||||||||||||||||||||||||||||
Gross Profit
The gross profit margin rate decreased approximately 3 percentage points for the third quarter compared to the same period last year, primarily driven by higher product costs, the unfavorable effects of lower margin rates of acquired operations and unfavorable product and channel mix. Tariff refunds and changes in tariff costs were not significant for the third quarter. The gross profit margin rate decreased 1 percentage point for the year to date, as the unfavorable effects of lower margin rates of acquired operations and unfavorable product and channel mix were partially offset by tariff refunds, net of related surcharges.
Operating Expenses
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Total operating expenses increased $24 million (19 percent) for the third quarter and increased $32 million (8 percent) year to date compared to the same periods last year and included a non-cash gain of $14 million from the reduction in fair value of acquisition-related contingent consideration in the prior year that did not repeat. Other increases in operating expenses primarily related to incremental expenses from acquired operations of $7 million for the quarter and $18 million for the year to date and incremental acquisition costs of $2 million for the quarter and $3 million for the year to date.
Other Income, net
Other non-operating income increased by $1 million in both the third quarter and the year to date from the comparable periods last year, primarily due to lower foreign exchange losses on net assets of foreign operations. The year to date increase in other non-operating income was partially offset by a prior year gain of $5 million from the sale of a former manufacturing and distribution facility in Switzerland that did not repeat.
Income Taxes
The effective income tax rate was 20 percent for the third quarter and 19 percent for the year to date. Adjusted to exclude the impacts of certain non-GAAP adjustments (see reconciliation of GAAP to non-GAAP measurements), the adjusted effective income tax rate of 20 percent for both the third quarter and year to date was comparable to the respective periods last year.
Segment Results
Certain measurements of segment operations compared to last year are summarized below:
Contractor Segment
The following table presents net sales and operating earnings as a percentage of sales for the Contractor segment
(dollars in millions):
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
|
September 25, 2026 |
September 26, 2025 |
September 25, 2026 |
September 26, 2025 |
||||||||||||||||||||
|
Net Sales
|
|||||||||||||||||||||||
|
Americas
|
$ | 196.2 | $ | 186.1 | $ | 592.1 | $ | 563.4 | |||||||||||||||
|
EMEA
|
54.6 | 52.6 | 170.7 | 168.2 | |||||||||||||||||||
|
Asia Pacific
|
25.2 | 23.7 | 72.6 | 74.8 | |||||||||||||||||||
|
Total
|
$ | 276.0 | $ | 262.4 | $ | 835.4 | $ | 806.4 | |||||||||||||||
|
Operating earnings as a percentage of net sales
|
26 | % | 26 | % | 27 | % | 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 | 2% | 3% | 0% | 5% | 1% | 3% | 1% | 5% | |||||||||||||||||||||||||||||||||||||||
| EMEA | 5% | 0% | (1)% | 4% | (2)% | 0% | 4% | 2% | |||||||||||||||||||||||||||||||||||||||
| Asia Pacific | 5% | 0% | 1% | 6% | (6)% | 0% | 3% | (3)% | |||||||||||||||||||||||||||||||||||||||
| Segment Total | 2% | 3% | 0% | 5% | 1% | 2% | 1% | 4% | |||||||||||||||||||||||||||||||||||||||
Contractor segment incremental sales from acquired operations for the third quarter and year to date included $7 million and $20 million, respectively. Organic sales growth in the Americas for the third quarter was primarily driven by growth within the professional paint channel. For the year to date, sales growth was broad-based with growth in the protective coating and spray foam product categories as well as within the professional paint and home center channels. The operating margin rate for this segment was flat for the quarter and increased 2 percentage points for the year to date, primarily driven by the net impact of tariff refunds and related surcharges.
Industrial Segment
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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 25, 2026 |
September 26, 2025 |
September 25, 2026 |
September 26, 2025 |
||||||||||||||||||||
|
Net Sales
|
|||||||||||||||||||||||
|
Americas
|
$ | 139.8 | $ | 129.4 | $ | 402.8 | $ | 377.4 | |||||||||||||||
|
EMEA
|
68.6 | 58.6 | 193.3 | 179.1 | |||||||||||||||||||
|
Asia Pacific
|
56.2 | 50.6 | 158.1 | 156.0 | |||||||||||||||||||
|
Total
|
$ | 264.6 | $ | 238.6 | $ | 754.2 | $ | 712.5 | |||||||||||||||
|
Operating earnings as a percentage of net sales
|
28 | % | 34 | % | 31 | % | 34 | % | |||||||||||||||
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)% | 9% | 0% | 8% | (1)% | 7% | 1% | 7% | |||||||||||||||||||||||||||||||||||||||
| EMEA | 19% | 0% | (2)% | 17% | (2)% | 6% | 4% | 8% | |||||||||||||||||||||||||||||||||||||||
| Asia Pacific | 9% | 1% | 1% | 11% | (2)% | 1% | 2% | 1% | |||||||||||||||||||||||||||||||||||||||
| Segment Total | 6% | 5% | 0% | 11% | (2)% | 6% | 2% | 6% | |||||||||||||||||||||||||||||||||||||||
Industrial segment sales growth included incremental sales from acquired operations of $13 million for the third quarter and $43 million for the year to date. The timing of finishing system sales and other project-related activity contributed to an increase of 6 percentage points in sales for the third quarter, while resulting in a decrease of 2 percentage points in sales for the year to date. The operating margin rate for this segment decreased 6 percentage points for the third quarter and 3 percentage points for the year to date, primarily due to unfavorable product and channel mix and the impact of acquired operations. Tariff refunds, net of related surcharges, partially offset the year-to-date decrease.
Expansion Markets Segment
The following table presents net sales and operating earnings as a percentage of sales for the Expansion Markets segment (dollars in millions):
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| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
|
September 25, 2026 |
September 26, 2025 |
September 25, 2026 |
September 26, 2025 |
||||||||||||||||||||
|
Net Sales
|
|||||||||||||||||||||||
|
Americas
|
$ | 24.4 | $ | 25.5 | $ | 71.3 | $ | 75.3 | |||||||||||||||
|
EMEA
|
6.0 | 6.6 | 18.6 | 21.3 | |||||||||||||||||||
|
Asia Pacific
|
15.3 | 10.3 | 37.5 | 27.9 | |||||||||||||||||||
|
Total
|
$ | 45.7 | $ | 42.4 | $ | 127.4 | $ | 124.5 | |||||||||||||||
|
Operating earnings as a percentage of net sales
|
24 | % | 25 | % | 24 | % | 24 | % | |||||||||||||||
The following table presents the components of net sales change by geographic region for the Expansion Markets segment:
| Three Months | Nine Months | ||||||||||||||||||||||||||||||||||||||||||||||
| Volume and Price | Acquisitions | Currency | Total | Volume and Price | Acquisitions | Currency | Total | ||||||||||||||||||||||||||||||||||||||||
| Americas | (4)% | 0% | 0% | (4)% | (5)% | 0% | 0% | (5)% | |||||||||||||||||||||||||||||||||||||||
| EMEA | (9)% | 0% | 0% | (9)% | (13)% | 0% | 0% | (13)% | |||||||||||||||||||||||||||||||||||||||
| Asia Pacific | 50% | 0% | 0% | 50% | 34% | 0% | 0% | 34% | |||||||||||||||||||||||||||||||||||||||
| Segment Total | 8% | 0% | 0% | 8% | 2% | 0% | 0% | 2% | |||||||||||||||||||||||||||||||||||||||
Expansion Markets net sales increased $3 million for both the third quarter and year to date compared to the same periods last year due to improved sales volume in the semiconductor and environmental product applications. The segment's operating margin rate for the third quarter decreased 1 percentage point, primarily due to upfront license fees related to the electric motor product application in the prior year that did not recur. The year to date operating margin rate was flat.
Liquidity and Capital Resources
Net cash provided by operating activities of $463 million in the first nine months of 2026 decreased by $24 million compared to the same period last year. Increases in accounts receivable and accounts payable reflect growth in business activity in the third quarter of 2026. Significant uses of cash in the first nine months of 2026 included business acquisitions of $436 million, share repurchases of $463 million (partially offset by $45 million of net proceeds from shares issued), dividend payments of $145 million and plant and equipment additions of $48 million.
In the third quarter of 2026, the Company borrowed $219 million under its $750 million revolving credit facility in order to fund previously announced business acquisitions. In the third quarter of 2026, the Company made payments of $119 million against the revolving credit facility.
For the first nine months of 2025, significant uses of cash included share repurchases of $361 million (partially offset by $32 million from shares issued) and dividend payments of $138 million, business acquisitions totaling $70 million and plant and equipment additions of $34 million.
As of September 25, 2026, the Company had available liquidity of $808 million, including cash and cash equivalents of $140 million, of which $122 million was held outside of the U.S., and available credit under existing committed credit facilities of $668 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, potential future acquisitions and operating requirements. Capital expenditures for 2026 are expected to be approximately $80 million. The Company may make opportunistic share repurchases going forward.
Outlook
While end market conditions remain mixed, we have confidence in the position of our businesses and the opportunities ahead. We remain focused on executing our strategy and delivering sustainable long-term growth and shareholder value.
21
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The Company estimates fourth quarter total company sales of $610 million to $640 million, including the acquisition of Valco Melton.
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 2025 Overview report, press releases, earnings releases, analyst briefings, conference calls and other written documents or oral statements released by our Company, may contain forward-looking statements. Forward-looking statements generally use words such as "expect," "foresee," "anticipate," "believe," "project," "should," "estimate," "will," and similar expressions, and reflect our Company's expectations concerning the future. All forecasts and projections are forward-looking statements. Forward-looking statements are based upon currently available information, but various risks and uncertainties may cause our Company's actual results to differ materially from those expressed in these statements. The Company undertakes no obligation to update these statements in light of new information or future events.
Future results could differ materially from those expressed, due to the impact of changes in various factors. These risk factors include, but are not limited to, risks relating to the demand for our products and the level of commercial, industrial and construction activity worldwide; changes in currency translation rates; international and domestic instability; interest rate fluctuations and changes in credit markets; global sourcing of materials; inflationary cost pressures and our ability to raise prices without decreasing demand for our products; interruptions of or intrusions into our information systems; intellectual property rights; the use of generative artificial intelligence and other emerging technologies; conducting business internationally; catastrophic events; our ability to attract, develop and retain qualified personnel; public health crises; our growth strategies and acquisitions; potential goodwill impairment; our ability to compete effectively; our dependence on a few large customers; our dependence on cyclical industries; changes in laws and regulations; climate-related laws, regulations and accords; environmental, social and governance-related expectations and requirements; compliance with anti-corruption and trade laws; changes in tax or tariff rates or the adoption of new tax or tariff legislation; and costs associated with legal proceedings. Please refer to Item 1A of our 2025 Annual Report on Form 10-K and Item 1A of this Form 10-Q for a more comprehensive discussion of these and other risk factors. These reports are available on the Company's website at www.graco.com and the Securities and Exchange Commission's website at www.sec.gov. Shareholders, potential investors and other readers are urged to consider these factors in evaluating forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements.
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 2025 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.
22
Table of Contents
PART IIOTHER INFORMATION
Item 1A.Risk Factors
There have been no material changes to the Company's risk factors from those disclosed in the Company's 2025 Annual Report on Form 10-K.
23
Table of Contents
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
On December 7, 2018, the Board of Directors authorized the purchase of up to 18 million shares of common stock, primarily through open market transactions. On December 5, 2025, the Board of Directors authorized the Company to purchase up to an additional 15 million shares of its outstanding stock, primarily through open-market transactions. The authorization is for an indefinite period of time or until terminated by the Board.
In addition to shares purchased under the Board authorization, the Company purchases shares of common stock held by employees who wish to tender owned shares to satisfy the exercise price or tax due upon exercise of options or vesting of restricted stock.
Information on issuer purchases of equity securities follows:
| Period |
Total Number of Shares Purchased |
Average Price Paid per Share |
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs |
Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (at end of period) |
||||||||||||||||||||||
| June 27, 2026 - July 24, 2026 | 514,108 | $ | 73.93 | 514,108 | 18,279,781 | |||||||||||||||||||||
| July 25, 2026 - August 21, 2026 | 761,000 | $ | 81.75 | 761,000 | 17,518,781 | |||||||||||||||||||||
| August 22, 2026 - September 25, 2026 | 401,000 | $ | 78.67 | 401,000 | 17,117,781 | |||||||||||||||||||||
24
Table of Contents
Item 5.Other Information
During the three months ended September 25, 2026, 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).
25
Table of Contents
Item 6.Exhibits
| 3.1 |
Restated Articles of Incorporation as amended December 8, 2017. (Incorporated by reference to Exhibit 3.1 to the Company's Report on Form 8-K filed December 8, 2017.)
|
|||||||
| 3.2 |
Restated Bylaws as amended February 17, 2023. (Incorporated by reference to Exhibit 3.2 to the Company's 2024 Annual Report on Form 10-K.)
|
|||||||
|
31.1
|
Certification of President and Chief Executive Officer pursuant to Rule 13a-14(a). | |||||||
|
31.2
|
Certification of Chief Financial Officer and Treasurer pursuant to Rule 13a-14(a). | |||||||
|
32
|
Certification of President and Chief Executive Officer and Chief Financial Officer and Treasurer pursuant to Section 1350 of Title 18, U.S.C. | |||||||
|
99.1
|
Press Release Reporting Third Quarter Earnings dated October 21, 2026. | |||||||
| 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). | |||||||
26
Table of Contents
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 21, 2026 | By: | /s/ Mark W. Sheahan | |||||||||||||||||
| Mark W. Sheahan | ||||||||||||||||||||
| President and Chief Executive Officer | ||||||||||||||||||||
| (Principal Executive Officer) | ||||||||||||||||||||
| Date: | October 21, 2026 | By: | /s/ Sanjiv Gupta | |||||||||||||||||
| Sanjiv Gupta | ||||||||||||||||||||
| Chief Financial Officer and Treasurer | ||||||||||||||||||||
| (Principal Financial Officer) | ||||||||||||||||||||
| Date: | October 21, 2026 | By: | /s/ Christopher D. Knutson | |||||||||||||||||
| Christopher D. Knutson | ||||||||||||||||||||
| Vice President, Controller and Chief Accounting Officer | ||||||||||||||||||||
| (Principal Accounting Officer) | ||||||||||||||||||||
Graco Inc. published this content on October 21, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on October 21, 2026 at 20:28 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]