Financial Analysis

"Acquisitions On November 4, 2024, the Company acquired Corob S.p.A. (""Corob"") for 230 million in cash, subject to normal post-closing purchase price adjustments, with up to 30 million in additional contingent consideration. The contingent consideration is related to the sellers' eligibility to receive cash earn out payments, calculated based on qualified revenue performance metrics for two individual twelve-month periods. The earn out payments are capped at 15.0 million for both periods. The first twelve-month performance period did not result in an earn-out payment. The purchase price allocation was completed in the fourth quarter of 2025. Measurement period adjustments related to the finalization of income taxes resulted in a $3 million decrease in goodwill and deferred income taxes, net. The adjustments were recorded retrospectively, and prior period financial information has been revised accordingly. The total purchase consideration consisted of the following (in thousands): Cash paid $ 276,188 Contingent consideration 14,498 Total purchase consideration $ 290,686 Purchase consideration was allocated to assets acquired and liabilities assumed based on estimated fair values as follows (in thousands): Cash and cash equivalents $ 30,899 Accounts receivable 28,120 Inventories 26,119 Other current assets 18,515 Property, plant and equipment 16,619 Other non-current assets 5,854 Identifiable intangible assets 131,240 Goodwill 123,817 Current liabilities (52,968) Deferred inc …

BusinessCombinationDisclosureTextBlock · excerpt; the full note is in the filing

Commitments and Contingencies Operating Lease Liabilities and Assets The Company owns most of the assets used in its operations, but leases certain buildings and land, vehicles, office equipment and other rental assets. The Company determines if an arrangement is a lease at inception. All of the Companys current lease arrangements are classified as operating leases. The Company historically has not entered into financing leases. Operating lease assets and obligations are recognized at the lease commencement date based on the present value of lease payments over the lease term. Lease expense is recognized by amortizing the amount recorded as an asset on a straight-line basis over the lease term. In determining lease asset value, the Company considers fixed or variable payment terms, prepayments, incentives, and options to extend, terminate or purchase. Renewal, termination or purchase options affect the lease term used for determining lease asset value only if the option is reasonably certain to be exercised. The Company generally uses its incremental borrowing rate based on information available at the lease commencement date in determining the present value of lease payments. Supplemental information related to the Company's lease activities were as follows (in thousands): 2025 2024 Operating lease expense $ 12,243 $ 10,464 Operating lease payments 11,330 9,752 Non-cash additions to operating lease assets 6,395 511 Additional information related to operating leases were as f …

CommitmentsAndContingenciesDisclosureTextBlock · excerpt; the full note is in the filing

Debt A summary of debt follows (dollars in thousands): Average Interest Rate as of December 26, 2025 Maturity 2025 2024 Unsecured revolving credit facility N/A October 2029 Unsecured revolving credit facility - offshore renminbi denominated 2.74% N/A 22,820 27,375 Long-term loan issued by Intesa Sanpaolo S.p.A. 2.18% 2026 1,624 Notes payable to banks % 2026 252 1,162 Total debt $ 24,696 $ 28,537 On October 25, 2024, the Company executed an amendment to its amended and restated credit agreement, extending the expiration date to October 25, 2029, that amended, superseded and restated in its entirety the Company's existing credit agreement with U.S. Bank National Association, as administrative agent and a lender, and the other lenders that are parties thereto. The amended agreement with a syndicate of lenders provides up to $750 million of committed credit, available for general corporate purposes, working capital needs, share repurchases and acquisitions. The Company may borrow up to $50 million under the swingline portion of the facility for daily working capital needs. Borrowings under the amended and restated credit agreement may be denominated in U.S. dollars or certain other currencies. In addition to paying interest on the outstanding loans, the Company is required to pay a facility fee on the unused amount of the loan commitments at a rate per annum ranging from 0.125% to 0.25%, depending on the Companys cash flow leverage ratio. The amended and restated credit agreement …

DebtDisclosureTextBlock · excerpt; the full note is in the filing

Share-Based Awards, Purchase Plans and Compensation Cost Stock Option and Award Plan. The Company has a stock incentive plan under which it grants stock options and share awards to directors, officers and other employees. Option price is the market price on the date of grant. Options become exercisable at such time, generally over 3 years or 4 years, and in such installments as set by the Company, and expire 10 years from the date of grant. Restricted share awards have been made to certain key employees under the plan. The market value of restricted stock at the date of grant is charged to operations over the vesting period. Compensation cost related to restricted shares is not significant. The Company has a stock appreciation plan that provides for payments of cash to eligible foreign employees based on the change in the market price of the Companys common stock over a period of time. Compensation cost related to the stock appreciation plan was an expense of $2 million in 2025 and $2 million in 2024 and a benefit of $2 million in 2023. Individual nonemployee directors of the Company may elect to receive, either currently or deferred, all or part of their retainer in the form of shares of the Companys common stock instead of cash. Under this arrangement, the Company issued 8,121 shares in 2025, 9,940 shares in 2024 and 11,150 shares in 2023. The expense related to this arrangement is not significant. Options on common shares granted and outstanding, as well as the weighted av …

DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock · excerpt; the full note is in the filing

Income Taxes Earnings before income tax expense consist of (in thousands): 2025 2024 2023 Domestic $ 512,686 $ 484,088 $ 450,806 Foreign 128,514 105,195 157,996 Total $ 641,200 $ 589,283 $ 608,802 Income tax expense consists of (in thousands): 2025 2024 2023 Current Federal $ 81,064 $ 62,402 $ 79,732 State and local 7,177 6,256 7,282 Foreign 35,656 28,481 23,779 Current income tax expense 123,897 97,139 110,793 Deferred Domestic 4,459 8,344 (6,919) Foreign (8,995) (2,284) (1,583) Deferred income tax (benefit) expense (4,536) 6,060 (8,502) Total $ 119,361 $ 103,199 $ 102,291 In the current year, we adopted a new income tax disclosure accounting standard. The disclosure was retrospectively applied to all periods presented. Income taxes paid were as follows (in thousands): 2025 2024 2023 Federal $ 76,000 $ 68,000 $ 65,000 State 5,921 6,665 7,112 Foreign 29,370 29,569 39,174 Total $ 111,291 $ 104,234 $ 111,286 Income taxes paid (net of refunds) exceeded 5 percent of total income taxes paid (net of refunds) in the following jurisdictions: Foreign 2025 2024 2023 Belgium * * $ 8,732 China * * $ 7,806 Switzerland * * $ 6,230 *Jurisdiction below the threshold for the period presented. A reconciliation between the U.S. federal statutory tax rate and the effective tax rate follows (dollars in thousands): 2025 2024 2023 Amount Percent Amount Percent Amount Percent Statutory tax rate $ 134,652 21.0 % $ 123,750 21.0 % $ 127,848 21.0 % State taxes, net of federal effect 6,285 1.0 5,756 1.0 …

IncomeTaxDisclosureTextBlock · excerpt; the full note is in the filing

Retirement Benefits The Company has a defined contribution plan, under Section 401(k) of the Internal Revenue Code, which provides retirement benefits to most U.S. employees. For all employees who choose to participate, the Company matches employee contributions at a 100 percent rate, up to 3 percent of the employees compensation. For employees not covered by a defined benefit plan, the Company contributed an amount equal to 2 percent of the employees compensation. Employer contributions totaled $11 million in 2025, $12 million in 2024 and $12 million in 2023. The Companys postretirement medical plan provides certain medical benefits for retired U.S. employees. Employees hired before January 1, 2005, are eligible for these benefits upon retirement and fulfillment of other eligibility requirements as specified by the plan. The Company has both funded and unfunded noncontributory defined benefit pension plans that together cover most U.S. employees hired before January 1, 2006, certain directors and some of the employees of the Companys non-U.S. subsidiaries. For U.S. plans, benefits are based on years of service and the highest 5 consecutive years earnings in the 10 years preceding retirement. Plans are funded annually in amounts consistent with minimum funding levels and maximum tax deduction limits, although the Company may make additional voluntary contributions from time to time to improve the funded status of its plans. Investment policies and strategies of the U.S. funde …

PensionAndOtherPostretirementBenefitsDisclosureTextBlock · excerpt; the full note is in the filing

Segment Information Effective January 1, 2025, the Company began to classify its business into three reportable segments: Contractor, Industrial and Expansion Markets. The Industrial segment consists of the newly formed Industrial Division and the Powder Division. The Companys former Industrial and Lubrication Equipment Divisions, along with the Process Transfer Equipment business that was part of the Companys former Process Division, were combined to form the new global Industrial Division. The Powder Division remains unchanged. The Expansion Markets segment consists of the Expansion Markets Division. The Companys environmental, semiconductor, high-pressure valves and electric motors businesses, together with select future ventures and acquisitions, reside within this division. The Contractor segment, consisting of the Contractor Division, remains unchanged as a reportable segment relative to prior periods. Prior year segment information has been recast to conform to the current organizational structure. The Company has four operating segments which are aggregated into three reportable segments: Contractor, Industrial and Expansion Markets. The Contractor segment markets sprayers and equipment that apply paint to walls and other structures, texture to walls and ceilings, insulation to building walls and other items, highly viscous coatings to roofs, markings on roads, parking lots, athletic fields and floors and high-performance volumetric and gravimetric dispense, mixing, a …

SegmentReportingDisclosureTextBlock · excerpt; the full note is in the filing

Summary of Significant Accounting Policies Fiscal Year . The fiscal year of Graco Inc. and Subsidiaries (the Company) is 52- or 53-weeks, ending on the last Friday in December. The years ended December 26, 2025, December 27, 2024, and December 29, 2023 were 52-week years. Basis of Statement Presentation . The consolidated financial statements include the accounts of the parent company and its subsidiaries after elimination of intercompany balances and transactions. Certain reclassifications have been made to the prior year's consolidated financial statements to conform to the current year presentation. Foreign Currency Translation . The functional currency of certain subsidiaries is the local currency. Accordingly, adjustments resulting from the translation of those subsidiaries financial statements into U.S. dollars are charged or credited to accumulated other comprehensive income (loss). The U.S. dollar is the functional currency for all other foreign subsidiaries. Accordingly, gains and losses from the translation of foreign currency balances and transactions of those subsidiaries are included in other (income) expense, net. Accounting Estimates . The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Such estimates and assumptions also affect the reported …

SignificantAccountingPoliciesTextBlock · excerpt; the full note is in the filing

Shareholders Equity At December 26, 2025, the Company had 22,549 authorized, but unissued, cumulative preferred shares, $100 par value. The Company also has authorized, but not issued, a separate class of 3 million shares of preferred stock, $1 par value. Changes in components of accumulated other comprehensive income (loss), net of tax were (in thousands): Pension and Postretirement Medical Cumulative Translation Adjustment Total Balance, December 30, 2022 $ (39,734) $ (29,644) $ (69,378) Other comprehensive income (loss) before reclassifications (28,162) 25,661 (2,501) Amounts reclassified from accumulated other comprehensive income 36,884 36,884 Balance, December 29, 2023 (31,012) (3,983) (34,995) Other comprehensive income (loss) before reclassifications 15,098 (32,446) (17,348) Amounts reclassified from accumulated other comprehensive income 2,769 2,769 Balance, December 27, 2024 (13,145) (36,429) (49,574) Other comprehensive income (loss) before reclassifications 2,636 84,429 87,065 Amounts reclassified from accumulated other comprehensive income 14 14 Balance, December 26, 2025 $ (10,495) $ 48,000 $ 37,505 Amounts related to pension and postretirement medical adjustments are classified to non-service components of pension cost that are included within other non-operating expenses . Included in the 2023 reclassifications were $42 million of pension settlement losses. See Note 10 for additional details regarding pension and postretirement medical plans. …

StockholdersEquityNoteDisclosureTextBlock · excerpt; the full note is in the filing

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 1,000 92.86 Exercised (839) 39.71 Canceled (170) 81.40 Outstanding, June 26, 2026 9,777 $ 66.06 7,066 $ 57.80 The Company recognized year-to-date share-based compensation of $16 million in 2026 and $17 million in 2025. As of June 26, 2026, there was $36 million of unrecognized compensation cost related to unvested options, expected to be recognized over a weighted average period of 2.8 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: Six Months Ended June 26, 2026 June 27, 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 $ 27.17 $ 26.80 Under the Companys Employee Stock Purchase Plan, the Company issued 235,000 shares in 2026 and 246,000 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 th …

DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock · excerpt; the full note is in the filing

Fair Value Assets and liabilities measured at fair value on a recurring basis and fair value measurement level were as follows (in thousands): Level June 26, 2026 December 26, 2025 Assets Cash surrender value of life insurance 2 $ 31,076 $ 28,893 Forward exchange contracts 2 16 Total assets at fair value $ 31,092 $ 28,893 Liabilities Contingent consideration 3 $ 1,591 $ 1,649 Deferred compensation 2 8,840 8,336 Forward exchange contracts 2 268 Total liabilities at fair value $ 10,431 $ 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 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 fo …

FairValueDisclosuresTextBlock · excerpt; the full note is in the filing

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 June 26, 2026 Cost $ 201,562 $ 40,271 $ 4,786 $ 107,034 $ 353,653 Accumulated amortization (64,181) (9,202) (3,295) (76,678) Foreign currency translation 326 994 5 5,156 6,481 Book value $ 137,707 $ 32,063 $ 1,496 $ 112,190 $ 283,456 Weighted average life in years 14 10 3 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 $14 million in 2026 and $13 million in 2025. 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 $ 11,277 $ 19,473 $ 17,384 $ 16,783 $ 16,010 $ 90,339 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 Adjustments from business acquisitions (397) 254 (143) Foreign currency translation ( …

GoodwillAndIntangibleAssetsDisclosureTextBlock · excerpt; the full note is in the filing

Segment Information The Company classifies its business into three reportable segments: Contractor, Industrial and Expansion Markets. Segment information follows (in thousands): Three Months Ended Six Months Ended June 26, 2026 June 27, 2025 June 26, 2026 June 27, 2025 Contractor Net Sales $ 299,421 $ 288,959 $ 559,403 $ 543,991 Cost of products sold 145,817 149,539 279,460 281,422 Gross Profit 153,604 139,420 279,943 262,569 Operating expenses 62,443 63,931 126,547 125,150 Contractor Operating Earnings $ 91,161 $ 75,489 $ 153,396 $ 137,419 Industrial Net Sales $ 249,237 $ 242,277 $ 489,649 $ 473,930 Cost of products sold 104,775 101,051 209,412 197,875 Gross Profit 144,462 141,226 280,237 276,055 Operating expenses 60,116 58,854 120,084 114,088 Industrial Operating Earnings $ 84,346 $ 82,372 $ 160,153 $ 161,967 Expansion Markets Net Sales $ 41,894 $ 40,570 $ 81,644 $ 82,169 Cost of products sold 21,409 19,566 40,581 39,729 Gross Profit 20,485 21,004 41,063 42,440 Operating expenses 10,997 12,175 21,932 23,546 Expansion Markets Operating Earnings $ 9,488 $ 8,829 $ 19,131 $ 18,894 Reportable Segment Operating Earnings Total $ 184,995 $ 166,690 $ 332,680 $ 318,280 Unallocated corporate expense 9,902 9,206 19,811 16,783 Operating Earnings 175,093 157,484 312,869 301,497 Interest expense 835 655 1,671 1,368 Other (income) expense, net (7,196) (1,379) (10,345) (9,553) Earnings Before Income Taxes $ 181,454 $ 158,208 $ 321,543 $ 309,682 Geographic information follows (in thousands) …

SegmentReportingDisclosureTextBlock · excerpt; the full note is in the filing