GRACO INC
For the period ended Dec 26, 2025. Filed Feb 17, 2026.
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FY2025 · Filed Feb 17, 2026
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Item 7. Results of Operations
Results of Operations
A summary of financial results follows (in millions except per share amounts):
| 2025 | 2024 | |
|---|---|---|
| Net Sales | $2,236.6 | $2,113.3 |
| Operating Earnings | 624.8 | 570.1 |
| Net Earnings | 521.8 | 486.1 |
| Diluted Net Earnings per Common Share | $3.08 | $2.82 |
| Adjusted (non-GAAP)(1): | ||
| Operating Earnings, adjusted | $610.7 | $577.8 |
| Net Earnings, adjusted | 498.8 | 477.1 |
| Diluted Net Earnings per Common Share, adjusted | $2.95 | $2.77 |
(1) Excludes the impact of excess tax benefits from stock option exercises, contingent consideration fair value adjustments, certain non-recurring tax provision adjustments and prior year business reorganization charges. See
Financial Results Adjusted for Comparability below for a reconciliation of adjusted non-GAAP financial measures to GAAP.
Certain events in the last two years caused fluctuations in financial results. Excess tax benefits related to stock option exercises reduced income taxes by $6 million in 2025 and $15 million in 2024. Other non-recurring tax provision adjustments from tax planning activities further reduced income taxes by $3 million in 2025. Operating earnings were increased by contingent consideration fair value adjustments of $14 million in 2025 and reduced by business reorganization charges of $8 million in 2024. Excluding the impacts of those items presents a more consistent basis for comparison of financial results, which management believes is useful information to help investors and others evaluate the Company's performance relative to other similarly-situated companies. A calculation of the non-GAAP adjusted measurements of operating earnings, earnings before income taxes, income taxes, effective income tax rates, net earnings and diluted earnings per share follows (in millions except per share amounts):
| 2025 | 2024 | |
|---|---|---|
| Operating earnings, as reported | $624.8 | $570.1 |
| Contingent consideration | (14.1) | — |
| Business reorganization | — | 7.7 |
| Operating earnings, adjusted | $610.7 | $577.8 |
| Earnings before income taxes, as reported | $641.2 | $589.3 |
| Contingent consideration | (14.1) | — |
| Business reorganization | — | 7.7 |
| Earnings before income taxes, adjusted | $627.1 | $597.0 |
| Income taxes, as reported | $119.4 | $103.2 |
| Other non-recurring tax benefit | 2.9 | — |
| Excess tax benefit from option exercises | 6.0 | 14.9 |
| Business reorganization tax effect | — | 1.8 |
| Income taxes, adjusted | $128.3 | $119.9 |
| Effective income tax rate | ||
| As reported | 18.6% | 17.5% |
| Adjusted | 20.5% | 20.1% |
| Net Earnings, as reported | $521.8 | $486.1 |
| Contingent consideration | (14.1) | — |
| Other non-recurring tax benefit | (2.9) | — |
| Excess tax benefit from option exercises | (6.0) | (14.9) |
| Business reorganization | — | 5.9 |
| Net Earnings, adjusted | $498.8 | $477.1 |
| Weighted Average Diluted Shares | 169.2 | 172.4 |
| Diluted Net Earnings per Share | ||
| As reported | $3.08 | $2.82 |
| Adjusted | $2.95 | $2.77 |
Components of Net Earnings as a Percentage of Sales:
The following table presents an overview of components of net earnings as a percentage of net sales:
| 2025 | 2024 | |
|---|---|---|
| Net Sales | 100.0% | 100.0% |
| Cost of products sold | 47.5 | 46.9 |
| Gross profit | 52.5 | 53.1 |
| Product development | 3.7 | 4.0 |
| Selling, marketing and distribution | 12.2 | 13.0 |
| General and administrative | 9.3 | 9.1 |
| Contingent consideration | (0.6) | — |
| Operating earnings | 27.9 | 27.0 |
| Interest expense | 0.1 | 0.1 |
| Other (income) expense, net | (0.9) | (1.0) |
| Earnings before income taxes | 28.7 | 27.9 |
| Income taxes | 5.4 | 4.9 |
| Net Earnings | 23.3% | 23.0% |
| Net Earnings, adjusted (see non-GAAP measurements above) | 22.3% | 22.6% |
Net Sales
The following table presents net sales by geographic region (in millions):
| 2025 | 2024 | |
|---|---|---|
| Americas(1) | $1,353.0 | $1,329.3 |
| EMEA(2) | 527.5 | 454.2 |
| Asia Pacific | 356.1 | 329.8 |
| Consolidated | $2,236.6 | $2,113.3 |
(1) North, Central and South America, including the U.S. Sales in the U.S. were $1,170 million in 2025 and $1,149 million in 2024.
(2) Europe, Middle East and Africa.
The following table presents the components of net sales change by geographic region:
| 2025 | 2024 | |||||||
|---|---|---|---|---|---|---|---|---|
| Volume and Price | Acquisitions | Currency | Total | Volume and Price | Acquisitions | Currency | Total | |
| Americas | (1)% | 3% | 0% | 2% | (1)% | 0% | 0% | (1)% |
| EMEA | 2% | 10% | 4% | 16% | (4)% | 1% | 1% | (2)% |
| Asia Pacific | 1% | 8% | (1)% | 8% | (16)% | 1% | (1)% | (16)% |
| Consolidated | 0% | 5% | 1% | 6% | (4)% | 1% | (1)% | (4)% |
In 2025, net sales increased in all regions compared to 2024, driven mostly by acquisitions in the Contractor and Industrial segments. Improved industrial and vehicle services end markets in the Americas were partially offset by continued softness in residential and non-residential construction markets. In EMEA, increased industrial and finishing system project activity led to higher sales in 2025. Sales growth in China in 2025 from improved construction and semiconductor end markets more than offset reduced industrial activity in the rest of the Asia Pacific region.
Gross Profit
The gross profit margin rate for 2025 decreased approximately 1 percentage point compared to 2024 as price realization was unable to offset higher product costs, including $14 million of increased tariff costs, and the unfavorable effect of lower margin rates of acquired operations.
Operating Expenses
Total operating expenses decreased $4 million (1 percent) for 2025 compared to 2024. Operating expenses for 2025 included $36 million of expenses from acquired operations and were mostly offset by a $14 million non-cash gain from the reduction in the fair value of acquisition-related contingent consideration recognized in the current year and $21 million of litigation and business reorganization costs from the prior year that did not repeat. Investment in new product development in 2025 was $82 million, approximately 4 percent of sales.
Operating Earnings
Sales growth and decreased operating expenses led to a 10 percent increase in operating earnings. Operating earnings expressed as a percentage of sales in 2025 increased approximately 1 percentage point compared to 2024 primarily due to a $14 million non-cash gain from the reduction in the fair value of acquisition-related contingent consideration in 2025.
Interest & Other (Income) Expense
Interest expense for 2025 was flat compared to 2024. Other income decreased $3 million in 2025 compared to 2024 and included higher exchange losses on net liabilities of certain foreign operations of $8 million and decreased interest income of $8 million. Partially offsetting these items were a $5 million gain in 2025 from the sale of a former manufacturing and distribution facility in Switzerland and $2 million of favorable market valuation changes on investments held to fund certain retirement benefits.
Income Taxes
The effective income tax rate for 2025 was 19 percent, up 1 percentage point from 2024. The increase in 2025 was largely due to variations in excess tax benefits from stock option exercises.
The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.