GRACO INC
For the period ended Mar 27, 2026. Filed Apr 22, 2026.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 27, 2026 · Filed Apr 22, 2026
GGG$67.86-0.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-09-26; filed 2025-10-22.
0000042888-25-000047
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-03-27; filed 2026-04-22.
0000042888-26-000098
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 57 previous paragraphs and 56 current paragraphs.
38 unchanged; 7 reworded; 11 added; 12 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 11 previous and 11 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (11)
Current report
Net sales for the first quarter increased 2 percent, with 5 percentage points of sales growth from acquired operations and 3 percentage points of sales growth from the effects of changes in currency translation rates. Sales growth for the quarter was partially offset by a 6 percentage point organic decline.
Current report
The gross margin rate was lower than the first quarter last year, primarily due to unfavorable product and channel mix and lower margin rates of acquired operations. Price realization was able to mostly offset the impact of incremental tariffs of $7 million.
Current report
Operating expenses increased 7 percent, including 4 percentage points from acquired operations and 3 percentage points from the effects of currency translation.
Current report
Operating earnings decreased 4 percent, due to a lower gross margin rate and increased expenses.
Current report
Net earnings decreased 5 percent for the first quarter. Adjusted net earnings decreased 7 percent, driven by lower operating earnings and a prior year gain from the sale of a former manufacturing and distribution facility in Switzerland that did not repeat.
Current report
The first quarter gross margin rate was lower than the first quarter last year, primarily due to unfavorable product and channel mix and lower margin rates of acquired operations. Price realization was able to mostly offset the impact of incremental tariffs of $7 million.
Current report
Total operating expenses for the first quarter increased $9 million (7 percent) compared to the same period last year, including approximately $5 million (4 percentage points) from acquired operations and $4 million (3 percentage points) from the effects of currency translation.
Current report
The effective income tax rate was 15 percent for the quarter, down approximately 3 percentage points from the first quarter last year. The decrease was due primarily to an increase in excess tax benefits related to stock option exercises.
Current report
Contractor segment net sales increased 2 percent for the first quarter compared to the same period last year. Incremental sales from acquired operations and favorable changes in currency translation rates were partially offset by continued weakness in the worldwide construction markets. The operating margin rate was flat as price realization offset higher product costs, including increased tariff costs of $4 million.
Current report
Industrial segment sales growth for the first quarter included $20 million (8 percentage points) from acquired operations, which more than offset the impact of the timing of finishing system sales and other project activity compared to the first quarter last year. Higher product costs, including increased tariff costs of $3 million, and unfavorable product and channel mix drove a 2 percentage point decline in the operating margin rate for the quarter.
Current report
Net sales for the first quarter in the Expansion Markets segment decreased 4 percent, primarily due to lower semiconductor application sales in the Americas. The decline in sales volume was offset by lower expenses and an improved gross margin rate, resulting in an operating margin rate that was comparable to the same period last year.
Removed paragraphs (12)
Previous report
Global Trade Uncertainty
Previous report
Our operations, supply chain and financial performance are directly impacted by evolving global trade policies and tariffs as well as associated geopolitical tensions. Our global operating footprint and worldwide sales reach expose us to risks associated with trade conflicts between the U.S. and its trading partners. Escalating global trade conflicts have resulted in, and their further escalation could result in additional inflationary costs to manufacture, assemble and export our products. We may be required to further increase prices to our customers, which may reduce demand, or if we do not or are unable to increase prices without reducing demand, we will experience reduced profitability. Continued geopolitical issues may cause customers outside of the U.S. seeking to source products from local suppliers. We continue to analyze the impact of these global tariffs on our business and we are working to mitigate the impact of tariffs through pricing and sourcing strategies. We cannot be sure these strategies will effectively mitigate the impact of these costs and if we are unable to do so or if demand for our products otherwise decreases, we expect these new tariffs will have a material impact on our results of operations in fiscal year 2025.
Previous report
Net sales for the third quarter increased 5 percent. Incremental sales from acquired operations contributed 6 percentage points of sales growth.
Previous report
The gross profit margin rate was flat for the third quarter as price realization and favorable product and channel mix offset higher product costs and the unfavorable effects of lower margin rates from acquired operations.
Previous report
Operating expenses for the third quarter decreased 5 percent and included a non-cash gain of $14 million from the reduction in fair value of acquisition-related contingent consideration.
Previous report
Net earnings increased 13 percent for the third quarter. Adjusted net earnings were flat, as higher sales offset increased operating expenses and lower non-operating income.
Previous report
The gross profit margin rate was flat for the third quarter and decreased approximately 1 percentage point for the year to date from the comparable periods last year as price realization and favorable product and channel mix offset higher product costs and the unfavorable effects of lower margin rates from acquired operations for the quarter but unable to offset these items for the year to date. Higher product costs included increased tariff costs of $5 million for the quarter and $9 million for the year to date. Interim pricing actions in the third quarter began to offset the effects of increased tariff costs.
Previous report
Total operating expenses decreased $6 million (5 percentage points) for the third quarter and decreased $3 million (1 percentage point) year to date and included a non-cash gain of $14 million from the reduction in fair value of acquisition-related contingent consideration. Incremental expenses from acquired operations of $10 million for the quarter and $29 million for the year to date were partially offset by decreases in product development spending and selling, marketing and distribution expenses.
Previous report
The effective income tax rate was 18 percent for the third quarter and 19 percent for the year to date. Adjusted to exclude the impacts of certain non-recurring items (see Financial Results Adjusted for Comparability), the adjusted effective income tax rate of 20 percent for the quarter increased 1 percentage point from the comparable period last year due to the unfavorable effects of foreign earnings taxed at higher rates than the U.S. For the year to date, the adjusted effective tax rate of 20 percent was flat compared to the same period last year.
Previous report
Incremental sales from acquired operations in the Contractor segment for the third quarter and year to date were partially offset by sales declines in ongoing operations primarily due to continued weakness in worldwide construction markets. The operating margin rate declined 3 percentage points for the quarter and 5 percentage points for the year to date mainly due to higher product costs from increased tariffs and the unfavorable effects of lower margin rates of acquired operations. The rate of decline in operating margin lessened as price realization improved as the third quarter progressed.
Previous report
Industrial segment sales increased 1 percent for both the third quarter and year to date. For the quarter, sales growth in the vehicle service product application in the Americas more than offset finishing system sales in the prior year that did not repeat. Year-to-date sales increased 1 percent largely due to improved activity in the Americas and Asia Pacific, particularly in China. The operating margin rate for this segment increased 1 percentage point for both the quarter and year to date as realized pricing and favorable product and channel mix offset higher product costs, including tariffs.
Previous report
Expansion Market net sales increased 3 percent for the third quarter and 4 percent for the year to date as continued sales growth in the semiconductor and electric motor product applications more than offset decreased sales in the environmental product application. The operating margin rate for this segment increased for both the quarter and year to date driven by increased sales volume and favorable product and channel mix.
Reworded paragraphs (7)
Previous wording
Excluding the impact of excess tax benefits from stock option exercises and contingent consideration fair value adjustments 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):
Current wording
Excluding the impact of 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 earnings before income taxes, income taxes, effective income tax rate, net earnings and diluted earnings per share follows (in millions except per share amounts):
Previous wording
Other non-operating income decreased $2 million for the third quarter from the comparable period last year largely due to decreased interest income. For the year to date, other non-operating income decreased $5 million compared to last year and included higher exchange losses on net liabilities of certain foreign operations of $8 million and decreased interest income of $7 million. Partially offsetting these year-to-date items were a $5 million gain in the first quarter from the sale of a former manufacturing and distribution facility in Switzerland and $1 million of favorable market valuation changes on investments held to fund certain retirement benefits.
Current wording
Other non-operating income for the first quarter decreased $5 million compared to the same period last year due to a prior year gain from the sale of a former manufacturing and distribution facility in Switzerland that did not repeat.
Previous wording
Net cash provided by operating activities of $487 million in the first nine months of 2025 increased $51 million compared to the same period last year, mostly due to decreased inventory purchases and lower performance-based incentive payouts. Significant uses of cash in the first nine months of 2025 included share repurchases of $361 million (partially offset by $32 million of net proceeds from shares issued), dividend payments of $138 million, business acquisitions totaling $70 million and plant and equipment additions of $34 million.
Current wording
Net cash provided by operating activities of $120 million in the first quarter of 2026 decreased $5 million compared to the same period last year, mostly due to higher performance-based incentive payouts. Significant uses of cash in the first three months of 2026 included dividend payments of $49 million and plant and equipment additions of $12 million. Net proceeds from shares issued in 2026 totaled $40 million, which was partially offset by share repurchases of $12 million.
Previous wording
For the first nine months of 2024, significant uses of cash included plant and equipment additions of $93 million and dividend payments of $129 million. Net proceeds from shares issued totaled $45 million, which were partially offset by share repurchases of $31 million.
Current wording
For the first three months of 2025, significant uses of cash included share repurchases of $238 million (partially offset by $28 million from shares issued) and dividend payments of $47 million.
Previous wording
As of September 26, 2025, the Company had available liquidity of $1,399 million, including cash and cash equivalents of $619 million, of which $190 million was held outside of the U.S., and available credit under existing committed credit facilities of $780 million.
Current wording
As of March 27, 2026, the Company had available liquidity of $1,485 million, including cash and cash equivalents of $712 million, of which $223 million was held outside of the U.S., and available credit under existing committed credit facilities of $773 million.
Previous wording
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 2025 are expected to be approximately $50 to $60 million. The Company may make opportunistic share repurchases going forward.
Current wording
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 $100 million. The Company may make opportunistic share repurchases going forward.
Previous wording
Pricing actions combined with steady incoming order rates reaffirms the Company's 2025 outlook of low single-digit sales growth on an organic constant-currency basis.
Current wording
Incoming order activity and end market demand trends support the Company's 2026 outlook of low single-digit sales growth on an organic constant-currency basis and mid-single-digit growth including the expected incremental sales from acquisitions.