GRACO INC - Annual Report: 2023 (Form 10-K)

Income taxes, adjusted$126.2 $110.2 Effective income tax rate As reported16.8 %18.6 % Adjusted19.4 %19.5 %Net Earnings, as reported$506.5 $460.6 Pension settlement loss, net33.3 — Contingent consideration(8.6)— Impairment7.8 — Other non-recurring tax benefit(4.8)— Excess tax benefit from option exercises(10.3)(5.1)Net Earnings, adjusted$523.9 $455.5 Weighted Average Diluted Shares172.2 172.9 Diluted Net Earnings per Share As reported$2.94 $2.66 Adjusted$3.04 $2.63

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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:


	2023		2022
Net Sales	100.0	%	100.0	%
Cost of products sold	47.1		50.7
Gross profit	52.9		49.3
Product development	3.7		3.7
Selling, marketing and distribution	11.9		11.7
General and administrative	7.8		7.2
Contingent consideration	(0.4)		—
Impairment	0.4		—
Operating earnings	29.5		26.7
Interest expense	0.2		0.4
Other expense, net	1.6		(0.1)
Earnings before income taxes	27.7		26.4
Income taxes	4.6		4.9
Net Earnings	23.1	%	21.5	%
Net Earnings, adjusted (see non-GAAP measurements above)	23.9	%	21.3	%

Net Sales

The following table presents net sales by geographic region (in millions):


	2023		2022
Americas(1)	$	1,338.0	$	1,281.9
EMEA(2)	463.9		451.8
Asia Pacific	393.7		409.8
Consolidated	$	2,195.6	$	2,143.5

(1) North, Central and South America, including the U.S. Sales in the U.S. were $1,162 million in 2023 and $1,116 million in 2022.

(2) Europe, Middle East and Africa.

The following table presents the components of net sales change by geographic region:


	2023				2022
	Volume and Price	Acquisitions	Currency	Total	Volume and Price	Acquisitions	Currency	Total
Americas	4%	0%	0%	4%	11%	1%	(1)%	11%
EMEA	0%	0%	3%	3%	7%	0%	(10)%	(3)%
Asia Pacific	(1)%	0%	(3)%	(4)%	16%	0%	(6)%	10%
Consolidated	2%	0%	0%	2%	11%	1%	(4)%	8%

Sales in the Americas were up modestly in 2023, as conditions varied by end market. Sales of industrial products remained favorable, however rising interest rates and other economic conditions adversely impacted sales in construction markets. EMEA sales growth in 2023 benefited mostly from favorable changes in currency translation rates. Lower finishing system sales in EMEA for 2023 offset broad-based sales growth in Western Europe and emerging countries. In the Asia Pacific region, economic conditions in China and unfavorable changes in currency translation rates more than offset underlying growth in the rest of the region for 2023.

Gross Profit

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The gross profit margin rate for 2023 increased approximately 4 percentage points compared to 2022 mostly due to realized pricing.

Operating Expenses

Total operating expenses for 2023 increased $29 million compared to 2022. The increase includes increased spending on product development and other growth initiatives of $7 million, incremental share-based compensation of $6 million and higher sales and earnings-based expenses of $4 million. Investment in new product development in 2023 was $83 million, approximately 4 percent of sales.

Operating Earnings

Sales growth led to an 8 percent increase in operating earnings. Operating earnings expressed as a percentage of sales in 2023 increased 3 percentage points compared to 2022 as realized pricing more than offset higher product costs and operating expenses.

Other Expense

Interest expense decreased $5 million compared to 2022 as private placement debt was repaid in the first quarter of 2022 and in the third quarter of 2023. Other non-operating expenses for 2023 included a non-cash pension settlement loss of $42 million in connection with the transfer of certain pension obligations to an insurance company. Partially offsetting the pension settlement loss was an increase in interest income of approximately $11 million for the year.

Income Taxes

The effective income tax rate for 2023 was 17 percent, down 2 percentage points from 2022. The decrease in 2023 was due to additional non-recurring tax benefits and excess tax benefits from stock option exercises.

Segment Results

The Company has five operating segments which are aggregated into three reportable segments: Contractor, Industrial and Process. Refer to Part I Item 1. Business, for a description of the Company’s three reportable segments. Management assesses performance of segments by reference to operating earnings excluding unallocated corporate expenses and asset impairments.

The following table presents net sales and operating earnings by reporting segment (in millions):


	2023		2022
Sales
Contractor	$	985.7	$	999.1
Industrial	662.8		649.3
Process	547.1		495.1
Total	$	2,195.6	$	2,143.5
Operating Earnings
Contractor	$	285.3	$	249.9
Industrial	234.1		231.3
Process	165.3		122.3
Unallocated corporate (expense) (1)	(38.7)		(30.8)
Contingent consideration	8.6		—
Impairment	(7.8)		—
Total	$	646.8	$	572.7

(1) Unallocated corporate (expense) includes such items as stock compensation, certain acquisition transaction items, bad debt expense, charitable contributions, and certain facility expenses.

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Contractor Segment

The following table presents net sales and operating earnings as a percentage of sales for the Contractor segment (dollars in millions):


	2023			2022
Sales
Americas	$	730.2		$	739.1
EMEA	179.5			176.8
Asia Pacific	76.0			83.2
Total	$	985.7		$	999.1
Operating Earnings as a Percentage of Sales	29		%	25		%

The following table presents the components of net sales change by geographic region for the Contractor segment:


	2023				2022
	Volume and Price	Acquisitions	Currency	Total	Volume and Price	Acquisitions	Currency	Total
Americas	(1)%	0%	0%	(1)%	7%	0%	(1)%	6%
EMEA	(1)%	0%	2%	1%	(6)%	1%	(9)%	(14)%
Asia Pacific	(5)%	0%	(4)%	(9)%	0%	0%	(6)%	(6)%
Segment Total	(1)%	0%	0%	(1)%	4%	0%	(3)%	1%

Contractor segment sales decreased 1 percent for the year. Favorable response to new product offerings was more than offset for the year by slower economic activity in worldwide construction markets. The operating margin rate for this segment improved 4 percentage points for the year. Realized pricing drove most of the improvement in the operating margin rate for the year.

Sales in the Americas represents the majority of sales for the Contractor segment. Management regularly reviews economic and financial indicators for North America, including levels of residential, commercial and institutional construction, remodeling rates and interest rates. Management also reviews gross domestic product for the regions and the level of the U.S. dollar versus the Euro and other currencies.

Industrial Segment

The following table presents net sales and operating earnings as a percentage of sales for the Industrial segment (dollars in millions):


	2023			2022
Sales
Americas	$	263.6		$	239.3
EMEA	207.6			205.7
Asia Pacific	191.6			204.3
Total	$	662.8		$	649.3
Operating Earnings as a Percentage of Sales	35		%	36		%

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The following table presents the components of net sales change by geographic region for the Industrial segment:


	2023				2022
	Volume and Price	Acquisitions	Currency	Total	Volume and Price	Acquisitions	Currency	Total
Americas	10%	0%	0%	10%	13%	0%	(1)%	12%
EMEA	(2)%	0%	3%	1%	15%	0%	(12)%	3%
Asia Pacific	(3)%	0%	(3)%	(6)%	14%	0%	(6)%	8%
Segment Total	2%	0%	0%	2%	14%	0%	(6)%	8%

Industrial segment sales increased 2 percent for the year as continued strength in the automotive, industrial and machinery end markets in the Americas was mostly offset by lower finishing system sales in EMEA and Asia Pacific. The operating margin rate for this segment decreased 1 percentage point for the year as realized pricing and lower product costs were offset by unfavorable changes in currency translation rates and higher operating expenses.

In this segment, sales in each geographic region are significant, and management looks at economic and financial indicators in each region, including gross domestic product, industrial production, capital investment rates, automobile production, building construction and the level of the U.S. dollar versus the euro, the Swiss franc, the Canadian dollar, the Chinese renminbi and various other Asian currencies.

Process Segment

The following table presents net sales and operating earnings as a percentage of sales for the Process segment (dollars in millions):


	2023			2022
Sales
Americas	$	344.2		$	303.5
EMEA	76.8			69.3
Asia Pacific	126.1			122.3
Total	$	547.1		$	495.1
Operating Earnings as a Percentage of Sales	30		%	25		%

The following table presents the components of net sales change by geographic region for the Process segment:


	2023				2022
	Volume and Price	Acquisitions	Currency	Total	Volume and Price	Acquisitions	Currency	Total
Americas	13%	0%	0%	13%	22%	3%	0%	25%
EMEA	10%	0%	1%	11%	22%	1%	(8)%	15%
Asia Pacific	5%	0%	(2)%	3%	34%	0%	(5)%	29%
Segment Total	11%	0%	0%	11%	25%	2%	(2)%	25%

Process segment sales increased in all businesses and regions for the year, reflecting continued favorable conditions in many end markets, such as vehicle services, industrial pumps, oil and gas, mining, industrial lubrication and semi-conductors. The operating margin rate for this segment increased 5 percentage points for the year, primarily due to realized pricing, lower product costs and expense leverage.

Although the Americas represent the majority of sales for the Process segment, management monitors indicators such as levels of gross domestic product, capital investment, industrial production, oil and natural gas markets and mining activity worldwide.

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Financial Condition and Cash Flow

Working Capital. The following table highlights several key measures of asset performance (dollars in millions):


	2023		2022
Working capital	$	970.6	$	805.7
Current ratio	3.5		3.0
Days of sales in receivables outstanding	58		57
Inventory turnover (LIFO)	2.2		2.5

Higher cash and cash equivalent balances primarily drove increases in working capital in 2023. Changes in receivables were consistent with higher sales levels. Inventories decreased as supply chain disruptions eased and the associated effects of inflation subsided. As inventory purchases decreased, trade accounts payable decreased. The current ratio increased in 2023 in line with the changes in working capital.

Capital Structure. At December 29, 2023, the Company’s capital structure included current notes payable of $30 million and shareholders’ equity of $2,224 million. At December 30, 2022, the Company’s capital structure included current notes payable of $21 million, long-term debt of $75 million and shareholders’ equity of $1,860 million.

Shareholders’ equity increased by $365 million in 2023. The increase provided by current year earnings of $507 million was primarily offset by dividends of $161 million and share repurchases of $102 million. Other increases in shareholders' equity included share issuances, stock compensation and other comprehensive income of $122 million.

Liquidity and Capital Resources. The Company evaluates liquidity as its ability to generate cash to fund its operating, investing and financing activities. Historically the Company has funded cash requirements for working capital, capital expenditures, businesses acquisitions, repayment of debt obligations, retirement plans, dividends, and common stock repurchases, all as applicable, through cash provided by its operations. The Company's other primary source of liquidity includes funds available through various debt financing arrangements.

As of December 29, 2023, the Company had available liquidity of $1,313 million, including cash held in deposit accounts of $538 million, of which $129 million was held outside of the U.S., and available credit under existing committed credit facilities of $775 million.

Internally generated funds and unused financing sources are expected to provide the Company with the flexibility to meet its liquidity needs in 2024, including its capital expenditure plan of approximately $120 million, including $60 million for building projects to expand production capacity, planned dividends estimated at $171 million, share repurchases and acquisitions. If acquisition opportunities increase, the Company believes that reasonable financing alternatives are available for the Company to execute on those opportunities. The Company has no significant off-balance sheet debt or other unrecorded obligations. The Company believes it has the ability to meet its long-term cash requirements by using available cash and internally generated funds and to borrow under its committed and uncommitted credit facilities.

In December 2023, the Board of Directors increased the Company’s regular quarterly dividend from $0.235 to $0.255 per share, an increase of 9 percent.

Cash Flow. A summary of cash flow follows (in millions):


	2023		2022
Operating activities	$	651.0	$	377.4
Investing activities	(185.3)		(226.8)
Financing activities	(268.0)		(434.4)
Effect of exchange rates on cash	1.0		(1.3)
Net cash provided	198.7		(285.1)
Cash and cash equivalents at end of year	$	537.9	$	339.2

Cash Flows From Operating Activities. Net cash provided by operating activities was $651 million in 2023, up $274 million compared to 2022, due primarily to higher net earnings and fewer inventory purchases in 2023. Other decreases in working capital further contributed to the increase in cash provided by operating activities in 2023.

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Cash Flows Used in Investing Activities. Cash flows used in investing activities totaled $185 million in 2023, including $185 million for capital additions. Cash flows used in investing activities totaled $227 million in 2022 including $201 million for capital additions and $25 million for business acquisitions.

Cash Flows Used in Financing Activities. Cash flows used in financing activities totaled $268 million in 2023 and included share repurchases of $102 million (partially offset by net proceeds from share issuances of $60 million), dividends of $158 million, and net payments on long-term debt and outstanding lines of credit of $65 million.

Cash flows used in financing activities totaled $434 million in 2022 and included dividends of $142 million and net proceeds from share issuances totaling $36 million.

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. The authorization is for an indefinite period of time or until terminated by the Board. As of December 29, 2023, approximately 14 million shares remain available for purchase under the authorization.

The Company repurchased and retired 1.4 million shares in 2023 and 3.6 million shares in 2022. The Company did not repurchase and retire shares in 2021. The Company has made and may continue to make opportunistic share repurchases in 2024 via open market transactions or short-dated accelerated share repurchase (“ASR”) programs.

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Critical Accounting Estimates

The Company prepares its consolidated financial statements in conformity with generally accepted accounting principles in the United States of America (“U.S. GAAP”). The Company’s most significant accounting policies are disclosed in Note A (Summary of Significant Accounting Policies) to the consolidated financial statements. The preparation of the consolidated financial statements, in conformity with U.S. GAAP, requires management to make estimates and judgments that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual amounts will differ from those estimates. The Company considers the following policies to involve the most judgment in the preparation of the Company’s consolidated financial statements.

Retirement Benefits. The measurements of the Company’s pension and postretirement medical obligations are dependent on a number of assumptions including estimates of the present value of projected future payments, taking into consideration future events such as salary increases and demographic experience. These assumptions may have an impact on the expense and timing of future contributions.

The assumptions used in developing the required estimates for pension obligations include discount rate, inflation, salary increases, retirement rates, expected return on plan assets and mortality rates. The assumptions used in developing the required estimates for postretirement medical obligations include discount rates, rate of future increase in medical costs and participation rates.

For U.S. plans, the Company establishes its discount rate assumption by reference to a yield curve published by an actuary and projected plan cash flows. For plans outside the U.S., the Company establishes a rate by country by reference to highly rated corporate bonds. These reference points have been determined to adequately match expected plan cash flows. The Company bases its inflation assumption on an evaluation of external market indicators. The salary assumptions are based on actual historical experience, the near-term outlook and assumed inflation. Retirement rates are based on experience. The investment return assumption is based on the expected long-term performance of plan assets. In setting this number, the Company considers the input of actuaries and investment advisers, its long-term historical returns, the allocation of plan assets and projected returns on plan assets. For 2024, the Company will use an investment return assumption of 7.6 percent for the funded U.S. plan, consistent with the rate assumed for 2023. Mortality rates are based on current common group mortality tables for males and females.

At December 29, 2023, a one-half percentage point decrease in the indicated assumptions would have the following effects (in millions):


Assumption	Funded Status		Expense
Discount rate	$	(15.3)	$	2.0
Expected return on assets	—		1.2

Goodwill and Other Intangible Assets. The Company performs impairment testing for goodwill annually in the fourth quarter or more frequently if events or changes in circumstances indicate that the asset might be impaired. The Company estimates the fair value of the reporting units using a present value of future cash flows calculation cross-checked by an allocation of market capitalization approach. The goodwill impairment test is performed by comparing the fair value of the relevant reporting unit with its carrying amount. An impairment charge is recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value.

The Company’s primary identifiable intangible assets include customer relationships, trademarks, trade names, proprietary technology and patents. Finite lived intangibles are amortized and are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Indefinite lived intangibles are reviewed for impairment annually in the fourth quarter, or more frequently if events or changes in circumstances indicate the asset might be impaired.

A considerable amount of management judgment and assumptions are required in performing the impairment tests. Management makes several assumptions, including earnings and cash flow projections, discount rate, product offerings and market strategies, customer attrition, and royalty rates, each of which have a significant impact on the estimated fair values. Though management considers its judgments and assumptions to be reasonable, changes in these assumptions could impact the estimated fair value.

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In the third quarter of 2023, the Company recognized a goodwill impairment related to the reorganization of a business acquired in 2020 that is not material to the consolidated financial statements. We completed our annual impairment testing of goodwill and other intangible assets in the fourth quarter of 2023. No additional impairment charges were recorded as a result of that test.

Income Taxes. In the preparation of the Company’s consolidated financial statements, management calculates income taxes. This includes estimating current tax liability as well as assessing temporary differences resulting from different treatment of items for tax and financial statement purposes. These differences result in deferred tax assets and liabilities, which are recorded on the balance sheet using statutory rates in effect for the year in which the differences are expected to reverse. These assets and liabilities are analyzed regularly, and management assesses the likelihood that deferred tax assets will be recoverable from future taxable income. A valuation allowance is established to the extent that management believes that recovery is not likely. Liabilities for uncertain tax positions are also established for potential and ongoing audits of federal, state and international issues. The Company routinely monitors the potential impact of such situations and believes that liabilities are properly stated. Valuations related to amounts owed and tax rates could be impacted by changes to tax codes and the Company’s interpretation thereof, changes in statutory rates, the Company’s future taxable income levels and the results of tax audits.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

The Company sells and purchases products and services in currencies other than the U.S. dollar and pays variable interest rates on borrowings under certain credit facilities. Consequently, the Company is subject to profitability risk arising from exchange and interest rate movements. The Company may use a variety of financial and derivative instruments to manage foreign currency and interest rate risks. The Company does not enter into any of these instruments for trading purposes to generate revenue. Rather, the Company’s objective in managing these risks is to reduce fluctuations in earnings and cash flows associated with changes in foreign currency exchange and interest rates.

The Company may use forward exchange contracts, options and other hedging activities to hedge the U.S. dollar value resulting from anticipated currency transactions and net monetary asset and liability positions. At December 29, 2023, the currencies to which the Company had the most significant balance sheet exchange rate exposure were the euro, Swiss franc, Canadian dollar, British pound, Japanese yen, Australian dollar, Chinese renminbi, South Korean won and Indian rupee. It is not possible to determine the true impact of currency rate changes; however, the direct translation effect on net sales and net earnings can be estimated. In 2023, changes in currency translation rates reduced sales by approximately $2 million and reduced net earnings by approximately $4 million. In 2022, changes in currency translation rates reduced sales by approximately $66 million and reduced net earnings by approximately $31 million.

2024 Outlook

The Company expects its core growth strategies of developing new products, expanding distribution, seeking adjacent markets and targeting strategic acquisitions will continue to drive shareholder value. Entering 2024, demand levels generally remain steady in an uncertain macroeconomic environment. As a result, the Company's outlook for 2024 is low single-digit revenue growth on an organic, constant currency basis.

At January 31, 2024 exchange rates, assuming the same volumes, mix of products and mix of business by currency as in 2023, the movement in foreign currencies would not have an impact on net sales or net earnings for 2024.

While the Company's backlog in recent years has been elevated relative to historic levels, backlog is not a good indicator of future long-term business levels. In addition to economic growth, the successful launch of new products and expanded distribution coverage, the sales outlook is dependent on many factors, including realization of price increases and stable foreign currency exchange rates.

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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 this Annual Report on Form 10-K and our Form 10-Qs and Form 8-Ks, and other disclosures, including our 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 and industrial activity worldwide; changes in currency translation rates; Russia’s invasion of Ukraine and other political instability; interest rate fluctuations and changes in credit markets; global sourcing of materials; interruptions of or intrusions into our information systems; intellectual property rights; the use of generative artificial intelligence; 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 rates or the adoption of new tax legislation; costs associated with legal proceedings; and other risks and uncertainties including those discussed in Item 1A of this Annual Report on Form 10-K. 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 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 8. Financial Statements and Supplementary Data

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of Graco Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Graco Inc. and subsidiaries (the "Company") as of December 29, 2023 and December 30, 2022, the related consolidated statements of earnings, comprehensive income, shareholders' equity, and cash flows, for each of the three years in the period ended December 29, 2023, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 29, 2023 and December 30, 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 29, 2023, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 29, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 20, 2024, expressed an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Retirement Benefits – U.S. Pension Benefit Obligation – Refer to Note J to the financial statements

Critical Audit Matter Description

The Company has both funded and unfunded defined benefit pension plans. The actuarial determination of the present value of the pension obligation on an annual basis requires management to make significant assumptions related to the selection of the discount rates used in the calculation of the net present value of future pension benefits. The Company establishes the discount rate assumptions for the U.S. pension plans by reference to a yield curve published by an actuary and projected plan cash flows.

Given the significance of the U.S. pension obligation and the requirement of management to make significant assumptions related to the selection of the discount rates, performing audit procedures to evaluate the reasonableness of the discount rates selected for the U.S. pension plans required a high degree of auditor judgment and an increased extent of effort, including the need to involve our actuarial specialists.

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How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to selection of the discount rates for the U.S. pension obligation included the following, among others:

a. We tested the effectiveness of internal controls over the valuation of the pension obligation, including management’s controls over selection of the discount rates.

b. With the assistance of our actuarial specialists, we evaluated the reasonableness of the discount rates by:

•Evaluating the methodology utilized to select the discount rates for conformity with applicable accounting guidance.

•Testing the source information underlying the determination of the discount rates, including the methodology used to construct the yield curve, the characteristics of the bonds underlying the yield curve analysis, and the mathematical accuracy of the calculation.

•Developing independent estimates using external published yield curves and comparing them to the discount rates selected by management.

/s/

February 20, 2024

We have served as the Company’s auditor since at least 1969, however, an earlier year could not be readily determined.

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GRACO INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

(In thousands, except per share amounts)

Years Ended

December 29,
2023

December 30,
2022

December 31,
2021

Net Sales

Cost of products sold

Gross Profit

Product development

Selling, marketing and distribution

General and administrative

Contingent consideration

()

Impairment

Operating Earnings

Interest expense

Other (income) expense, net

()

Earnings Before Income Taxes

Income taxes

Net Earnings

Basic Net Earnings per Common Share

Diluted Net Earnings per Common Share

See notes to consolidated financial statements.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

Years Ended

December 29,
2023

December 30,
2022

December 31,
2021

Net Earnings

Components of other comprehensive income (loss)

Cumulative translation adjustment

()

Pension and postretirement medical liability adjustment

Income taxes - pension and postretirement medical liability

()

Other comprehensive income

Comprehensive Income

See notes to consolidated financial statements.

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GRACO INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)


	December 29, 2023	December 30, 2022
ASSETS
Current Assets
Cash and cash equivalents	$	$
Accounts receivable, less allowances of $ and $
Inventories
Other current assets
Total current assets
Property, Plant and Equipment, net
Goodwill
Other Intangible Assets, net
Operating Lease Assets
Deferred Income Taxes
Other Assets
Total Assets	$	$
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Notes payable to banks	$	$
Trade accounts payable
Salaries and incentives
Dividends payable
Other current liabilities
Total current liabilities
Long-term Debt
Retirement Benefits and Deferred Compensation
Operating Lease Liabilities
Deferred Income Taxes
Other Non-current Liabilities
Commitments and Contingencies (Note K)
Shareholders’ Equity
Common stock, $ par value; shares authorized; and shares outstanding in 2023 and 2022
Additional paid-in-capital
Retained earnings
Accumulated other comprehensive income (loss)	()	()
Total shareholders’ equity
Total Liabilities and Shareholders’ Equity	$	$

See notes to consolidated financial statements.

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GRACO INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Years Ended

December 29,
2023

December 30,
2022

December 31,
2021

Cash Flows From Operating Activities

Net Earnings

Adjustments to reconcile net earnings to net cash
provided by operating activities

Depreciation and amortization

Deferred income taxes

()

Share-based compensation

Pension settlement loss

Contingent consideration

()

Impairment

Change in

Accounts receivable

()

Inventories

()

Trade accounts payable

()

Salaries and incentives

()

Retirement benefits and deferred compensation

()

Other accrued liabilities

()

Other

()

Net cash provided by operating activities

Cash Flows From Investing Activities

Property, plant and equipment additions

()

Acquisition of businesses, net of cash acquired

()

Other

()

Net cash used in investing activities

()

Cash Flows From Financing Activities

Borrowings on short-term lines of credit, net

()

Payments on long-term debt

()

Payments of debt issuance costs

()

Common stock issued

Common stock repurchased

()

Taxes paid related to net share settlement of equity awards

()

Cash dividends paid

()

Net cash used in financing activities

()

Effect of exchange rate changes on cash

()

Net increase (decrease) in cash and cash equivalents

()

Cash and Cash Equivalents

Beginning of year

End of year

See notes to consolidated financial statements.

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GRACO INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(In thousands)

Common
Stock

Additional
Paid-In
Capital

Retained
Earnings

Accumulated
Other Comprehensive
Income (Loss)

Total

Balance December 26, 2020

()

Shares issued

—

Stock compensation cost

—

Restricted stock canceled (issued)

—

()

—

()

Net earnings

—

Dividends declared ($ per share)

—

()

—

()

Other comprehensive income (loss)

—

Balance December 31, 2021

()

Shares issued

—

Shares repurchased

()

—

()

Stock compensation cost

—

Net earnings

—

Dividends declared $ per share)

—

()

—

()

Other comprehensive income (loss)

—

Balance December 30, 2022

()

Shares issued

—

Shares repurchased

()

—

()

Stock compensation cost

—

Net earnings

—

Dividends declared ($ per share)

—

()

—

()

Other comprehensive income (loss)

—

Balance December 29, 2023

()

See notes to consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Graco Inc. and Subsidiaries

Years Ended December 29, 2023, December 30, 2022 and December 31, 2021

Basis of Statement Presentation.

Foreign Currency Translation.

Accounting Estimates.

Fair Value Measurements.

$ ) $ $

(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.

Inventory Valuation.

Other Current Assets.

$ Prepaid expenses and other Total$ $

Impairment of Long-Lived Assets.

In the third quarter of 2023, the Company recognized a goodwill impairment related to the reorganization of a business acquired in 2020 that is not material to the consolidated financial statements. We completed our annual impairment test of all long-lived assets in the fourth quarter of 2023. additional impairment charges were recorded as a result of that review. There were impairment charges in 2022 or 2021.

Property, Plant and Equipment.

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$ $ $ Additions, adjustments from business acquisitions Foreign currency translation()()()()Balance, December 30, 2022 Additions, adjustments from business acquisitions Impairment () ()Foreign currency translation Balance, December 29, 2023$ $ $ $

$ $ $ $

Accumulated amortization

()()()— ()Foreign currency translation()() ()

Book value

$ $ $ $ $

Weighted average life in years

N/A

As of December 30, 2022

Cost

Accumulated amortization

()

—

()

Foreign currency translation

()

Book value

Weighted average life in years

N/A

Amortization of intangibles was $ million in 2023, $ million in 2022 and $ million in 2021.

$ $ $ $ $

In 2022 and 2021 the Company completed acquisitions that were not material to the consolidated financial statements.

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$ Capitalized software Equity method investment Deposits and other Total$ $

The cash surrender value increased $ million in 2023, decreased $ million in 2022 and increased $ million in 2021.

to years) beginning at date of implementation.

Other Current Liabilities.

$ Accrued warranty and service liabilities Accrued trade promotions Payable for employee stock purchases Customer advances and deferred revenue Income taxes payable Tax payable, other Operating lease liabilities, current Right of return refund liability Other Total$ $

Self-Insurance. million as of December 29, 2023 and $ million as of December 30, 2022.

Product Warranties.

$ Assumed in business acquisition Charged to expense Margin on parts sales reversed Reductions for claims settled()()Balance, end of year$ $

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percent of sales. Trade promotions are offered to distributors and end users through various programs, generally with terms of one year or less. Such promotions include rebates based on annual purchases and sales growth, coupons and reimbursement for competitive products. Payment of incentives may take the form of cash, trade credit, promotional merchandise or free product. Rebates are accrued based on the program rates and progress toward the probability weighted estimate of annual sales amount and sales growth.

Additional promotions include cooperative advertising arrangements. Under cooperative advertising arrangements, the Company reimburses the distributor for a portion of its advertising costs related to the Company’s products. Estimated costs are accrued at the time of sale and classified as selling, marketing and distribution expense. The estimated costs related to coupon programs are accrued at the time of sale and classified as selling, marketing and distribution expense or cost of products sold, depending on the type of incentive offered. The considerations payable to customers are deemed as broad based and are not recorded against net sales.

Shipping and handling costs incurred for the delivery of goods to customers are included in cost of goods sold. Amounts billed to customers for shipping and handling are included in net sales.

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. The balance in the deferred revenue and customer advances was $ million as of December 29, 2023 and $ million as of December 30, 2022. Net sales for 2023 included $ million that was in deferred revenue and customer advances as of December 30, 2022. Net sales for 2022 included $ million that was in deferred revenue and customer advances as of December 31, 2021.

Shipping and handling activities that occur after control of the related good transfers are accounted for as fulfillment activities instead of assessing such activities as performance obligations.

Sales taxes related to revenue producing transactions collected from the customer for a governmental authority are excluded from the transaction price.

Revenue standard requirements are applied to a portfolio of contracts (or performance obligations) with similar characteristics for transactions where it is expected that the effects on the financial statements of applying the revenue recognition guidance to the portfolio would not differ materially from applying this guidance to the individual contracts (or performance obligations) within that portfolio.

Promised goods or services are not assessed as performance obligations if they are immaterial in the context of the contract with the customer. If the revenue related to a performance obligation that includes goods or services that are immaterial in the context of the contract is recognized before those immaterial goods or services are transferred to the customer, then the related costs to transfer those goods or services are accrued.

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Comprehensive Income.

Derivative Instruments and Hedging Activities.

million. The Company believes it uses strong financial counterparties in these transactions and that the resulting credit risk under these hedging strategies is not significant.

$ Liabilities()()Net Assets (Liabilities)$()$()

operating segments which are aggregated into reportable segments: Contractor, Industrial and Process.

Beginning with the first quarter of 2022, our high performance coatings and foam product offerings previously included within the Applied Fluid Technologies division of the Industrial segment were realigned and are now managed under the Contractor segment. This change aligns the types of products offered and markets served within the segments. Prior year segment information has been restated to conform to the current organizational structure.

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, and markings on roads, parking lots, athletic fields and floors.

The Industrial segment includes our Industrial and Powder divisions. The Industrial segment markets equipment and solutions for moving and applying paints, coatings, sealants, adhesives and other fluids. Markets served include automotive and vehicle assembly and components production, including Electro or e-mobility, wood and metal products, rail, marine, aerospace, farm, construction, bus, recreational vehicles and various other industries.

The Process segment includes our Process and Lubrication divisions. The Process segment markets pumps, valves, meters and accessories to move and dispense chemicals, oil and natural gas, water, wastewater, petroleum, food,

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$ $ Industrial Process Total$ $ $ Operating EarningsContractor$ $ $ Industrial Process Unallocated corporate (expense)()()()Contingent consideration Impairment() Total$ $ $ AssetsContractor$ $ Industrial Process Unallocated corporate Total$ $

Management assesses performance of segments by reference to operating earnings excluding unallocated corporate expenses and asset impairments. Unallocated corporate (expense) includes such items as stock compensation, certain acquisition transaction costs, bad debt expense, charitable contributions and certain facility expenses. Unallocated assets include cash, allowances and valuation reserves, deferred income taxes, certain capital and other assets.

$ $ Other countries Total$ $ $ Long-lived AssetsUnited States$ $ Other countries Total$ $

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percent of the Company’s consolidated sales in 2023, 2022 and 2021.

$ Products and components in various stages of completion Raw materials and purchased components Subtotal Reduction to LIFO cost()()Total$ $

Inventories valued under the LIFO method were $ million in 2023 and $ million in 2022. All other inventory was valued on the FIFO method.

$ Buildings and improvements Manufacturing equipment Office, warehouse and automotive equipment Additions in progress Total property, plant and equipment Accumulated depreciation()()Net property, plant and equipment$ $

Depreciation expense was $ million in 2023, $ million in 2022 and $ million in 2021.

$ $ Foreign Total$ $ $

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$ $ State and local Foreign Current income tax expense DeferredDomestic()()()Foreign()()()Deferred income tax expense (benefit)()()()Total$ $ $

Income taxes paid were $ million in 2023, $ million in 2022 and $ million in 2021.

% % %Tax effect of international operations() ()State taxes, net of federal effect U.S. general business tax credits()()()Stock compensation excess tax benefit()()()Foreign Derived Intangible Income (FDII)()()()Effective tax rate % % %

Deferred income taxes are provided for temporary differences between the financial reporting and the tax basis of assets and liabilities.

$ Accrued self-insurance retentions Accrued warranty and service liabilities Vacation accruals Customer allowances Excess of tax over book depreciation and amortization()()Pension benefit obligation Postretirement medical benefit obligation Stock compensation Deferred compensation Deferred revenue Research and development Prepayments from foreign subsidiaries Other Net deferred tax assets$ $

Total deferred tax assets were $ million and $ million, and total deferred tax liabilities were $ million and $ million on December 29, 2023 and December 30, 2022, respectively. The difference between the deferred income tax provision and the change in net deferred income taxes is due to the changes in other comprehensive income (loss) items.

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% Unsecured revolving credit facilityN/A Unsecured revolving credit facility - offshore renminbi denominated%N/A Notes payable to banks% Total debt$ $

The estimated fair value of the fixed interest rate Series D private placement debt was $ million on December 30, 2022. This debt was repaid in July of 2023. 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.

On May 23, 2023 and June 8, 2023, the Company executed amendments to its amended and restated credit agreement 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 first amendment removed references to LIBOR for calculating rates and replaced them with SOFR and its equivalent benchmark rates such as EURIBOR, TIBOR and RFR loans.

The second amendment increased, from $ million to $ million, the amount of availability under an unsecured revolving credit facility, as well as increased, from $ million to $ million, the maximum amount of outstanding loans in currencies other than U.S. dollars. The amendment also increased, from $ million to $ million, the amount by which the size of the credit facility may be increased upon exercise of an accordion feature. The accordion feature may be exercised by means of an increase in the revolving commitments or the addition of term loans.

In addition, the second amendment increased the applicable margin percentages used for purposes of calculating the interest rates applicable to base rate loans and non-base rate loans (e.g., SOFR, EURIBOR, TIBOR and RFR loans). Under the amendment, the applicable margin percentages for base rate loans (which ranged from % to % under the prior credit agreement) range from % to %, and the applicable margin percentages for non-base rate loans (which ranged from % to % under the prior credit agreement) range from % to %.

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 % to %, depending on the Company’s cash flow leverage ratio.

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to (unless a significant acquisition has been consummated, in which case, not more than to during the four fiscal quarter period beginning with the quarter in which such acquisition occurs) and an interest coverage ratio of not less than to (unless a significant acquisition has been consummated, in which case, not less than to during the four fiscal quarter period beginning with the quarter in which such acquisition occurs). A change in control of the Company will constitute an event of default under the amended and restated credit agreement.

The Company maintains a revolving credit agreement with a sole lender that provides up to $ million of committed credit, available for general corporate purposes, working capital needs, share repurchases and acquisitions. Under the terms of the agreement, loans may be denominated in U.S. dollars or Chinese renminbi (offshore). Loans denominated in U.S. dollars bear interest, at the Company’s option, at either a base rate or a HIBOR-based rate. Loans denominated in Chinese renminbi (offshore) bear interest at a HIBOR-based rate based on the Chinese offshore rate. Other terms of this revolving credit agreement are substantially similar to those of the Company’s amended and restated credit agreement that expires in March 2026.

On December 16, 2022, the Company entered into an amendment to its master note agreement that extends the period in which the Company may issue, and affiliates of the lender may purchase, the Company’s senior notes from January 29, 2023 to December 16, 2027. The amendment also increases the maximum aggregate principal amount of senior notes the Company may issue under the master note agreement from $ million to $ million, although the maximum aggregate amount of senior notes bearing interest at a floating rate that may be outstanding at any one time will continue to be $ million. The amendment also extends the maturity and average life of each senior note bearing interest at a fixed rate that may be issued under the master note agreement from no more than years after the date of issuance to no more than years after the date of issuance, and includes customary provisions for the replacement of LIBOR with SOFR and customary benchmark replacement provisions with respect to senior notes bearing interest at a floating rate. All other material items of the master note agreement remain unchanged. Under the terms of the master note agreement, the Company is required to maintain certain financial ratios as to cash flow leverage and interest coverage similar to the requirements of its other debt agreements.

On December 29, 2023, the Company had $ million in lines of credit, including the $ million in committed credit facilities described above and $ million with foreign banks. The unused portion of committed credit lines was $ million as of December 29, 2023. In addition, the Company has unused, uncommitted lines of credit with foreign banks totaling $ million. Borrowing rates under these credit lines vary with the prime rate, rates on domestic certificates of deposit and other benchmark rates (e.g. SOFR, EURIBOR, HIBOR, TIBOR and RFR). The Company pays facility fees at an annual rate of up to % on certain of these lines. No compensating balances are required.

Various debt agreements require the Company to maintain certain financial ratios as to cash flow leverage and interest coverage. The Company is in compliance with all financial covenants of its debt agreements as of December 29, 2023.

$ $ $ $ $

Interest paid on debt was $ million in 2023, $ million in 2022 and $ million in 2021.

authorized, but unissued, cumulative preferred shares, $ par value. The Company also has authorized, but not issued, a separate class of million shares of preferred stock, $ par value.

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)$()$()Other comprehensive income (loss) before reclassifications () Amounts reclassified from accumulated other comprehensive income Balance, December 31, 2021()()()Other comprehensive income (loss) before reclassifications () Amounts reclassified from accumulated other comprehensive income Balance, December 30, 2022()()()Other comprehensive income (loss) before reclassifications() ()Amounts reclassified from accumulated other comprehensive income Balance, December 29, 2023$()$()$()

million and $ million, respectively, of pension settlement losses. See Note J

years or years, and in such installments as set by the Company, and expire 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 Company’s common stock over a period of time. Compensation cost related to the stock appreciation plan was expense of $ million in 2023, a benefit of $ million in 2022 and expense of $ million in 2021.

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 Company’s common stock instead of cash. Under this arrangement, the Company issued shares in 2023, shares in 2022 and shares in 2021. The expense related to this arrangement is not significant.

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$ $ Granted Exercised() Canceled() Outstanding, December 31, 2021 Granted Exercised() Canceled() Outstanding, December 30, 2022 Granted Exercised() Canceled() Outstanding, December 29, 2023 $ $

$ $ $ 35-50 $ 50-65 $ 65-80 $ 20-80 $ $

The aggregate intrinsic value of exercisable option shares was $ million as of December 29, 2023, with a weighted average contractual term of years. There were approximately million vested share options and share options expected to vest as of December 29, 2023, with an aggregate intrinsic value of $ million, a weighted average exercise price of $ and a weighted average contractual term of years.

$ $ Aggregate intrinsic value Tax benefit realized

Employee Stock Purchase Plan. Under the Company’s Employee Stock Purchase Plan, the purchase price of the shares is the lesser of percent of the fair market value on the first day or the last day of the plan year. Under this plan, the Company issued shares in 2023, shares in 2022 and shares in 2021.

Authorized Shares. In April 2019, shareholders of the Company approved the Graco Inc. 2019 Stock Incentive Plan. The Plan provides for issuance of up to million shares of Graco common stock.

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Employee Stock Purchase Plan (2006) Total

Amounts available for future issuance exclude outstanding options. Options outstanding as of December 29, 2023, include options granted under plans that were replaced by subsequent plans. shares are available for future grants under those plans.

Share-based Compensation.

$ $ Tax benefit Share-based compensation, net of tax$ $ $

As of December 29, 2023, there was $ million of unrecognized compensation cost related to unvested options, expected to be recognized over a weighted average period of approximately years.

Interest rate % % %Volatility % % %Dividend yield % % %Weighted average fair value per share$ $ $

Expected life is estimated based on vesting terms and exercise and termination history. Interest rate is based on the U.S. Treasury rate on zero-coupon issues with a remaining term equal to the expected life of the option. Expected volatility is based on historical volatility over a period commensurate with the expected life of options.

The fair value of employees’ purchase rights under the Employee Stock Purchase Plan was estimated on the date of grant. 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:

Interest rate % % %Volatility % % %Dividend yield % % %Weighted average fair value per share$ $ $

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$ $ Weighted average shares outstanding for basic earnings per share Dilutive effect of stock options computed based on the treasury stock method using the average market price Weighted average shares outstanding for diluted earnings per share Basic earnings per share$ $ $ Diluted earnings per share$ $ $

Anti-dilutive stock options excluded from computations of diluted earnings per share totaled million shares in 2023, million shares in 2022 and million 2021.

percent rate, up to percent of the employee’s compensation. For employees not covered by a defined benefit plan, the Company contributed an amount equal to percent of the employee’s compensation. Employer contributions totaled $ million in 2023, $ million in 2022 and $ million in 2021.

The Company’s 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 Company’s non-U.S. subsidiaries.

In December of 2023, the Company entered into an agreement under which approximately $ million of pension obligations of its U.S. funded defined benefit pension plan were transferred to an insurance company. Under the agreement, the Company purchased a group annuity contract for approximately plan participants that provides for an irrevocable commitment to make annuity payments to the affected participants. The payment obligation and administration thereof for the affected participants was transferred from the pension plans to the insurance company. The transfer did not change the amount of the monthly pension benefits received by the affected participants.

This arrangement is part of the Company’s effort to reduce the overall size and volatility of its pension plan obligations. The purchase of the group annuity contract was funded through existing plan assets. The Company recognized a non-cash pension settlement loss of approximately $ million as a result of the transaction. This charge represents the acceleration of deferred charges currently accrued in accumulated other comprehensive income (loss).

For U.S. plans, benefits are based on years of service and the highest consecutive years’ earnings in the 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.

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percent equity securities, percent fixed income securities and percent real estate and alternative investments.

Plan assets are held in a trust for the benefit of plan participants and are invested in various commingled funds, most of which are sponsored by the trustee. The fair values for commingled equity, fixed-income and real estate investments are measured using net asset values, which take into consideration the value of underlying fund investments, as well as the other accrued assets and liabilities of a fund, in order to determine a per share market value. Certain trustee-sponsored funds allow redemptions monthly or quarterly, with days or days advance notice, while most of the funds allow redemptions . The plan had unfunded commitments to make additional investments in certain funds totaling $ million as of December 29, 2023 and December 30, 2022.

The Company maintains a defined contribution plan covering employees of a Swiss subsidiary, funded by Company and employee contributions. Responsibility for pension coverage under Swiss law has been transferred to a Swiss insurance company. Plan assets are invested in an insurance contract that guarantees a federally mandated annual rate of return. The value of the plan assets is effectively the value of the insurance contract. The performance of the underlying assets held by the insurance company has no direct impact on the surrender value of the insurance contract. The insurance backed assets have no active market and are classified as level 3 in the fair value hierarchy.

$ Insurance contract3 Investments categorized in fair value hierarchy EquityU.S. Large CapN/A U.S. Small/Mid CapN/A InternationalN/A Total equity Fixed incomeN/A Real estate and otherN/A Investments measured at net asset value Total$ $

$ Purchases Redemptions()()Unrealized gains (losses) ()Balance, end of year$ $

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$ $ $ Service cost Interest cost Actuarial (gain) loss ()()()Benefit payments()()()()Plan amendments()() Settlements() Exchange rate changes () Obligation, end of year$ $ $ $ Change in plan assetsFair value, beginning of year$ $ $ $ Actual return on assets () Employer contributions Benefit payments()()()()Settlements() Exchange rate changes () Fair value, end of year$ $ $ $ Unfunded status$()$()$()$() $ $ $ Current liabilities Non-current liabilities Net$ $ $ $

Changes in discount rates used to value pension obligations were the main drivers of actuarial losses in 2023 and gains in 2022. In 2023 and 2022, the Company made a $ million voluntary contribution each year to one of its U.S. qualified defined benefit plans.

The accumulated benefit obligation as of year-end for all defined benefit pension plans was $ million for 2023 and $ million for 2022.

$ Accumulated benefit obligation Fair value of plan assets

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$ $ $ $ $ Interest cost on projected benefit obligation Expected return on assets()()() Amortization of prior service cost Amortization of net loss () Settlement loss Cost of pension plans which are not significant and have not adopted ASC 715 N/AN/AN/ANet periodic benefit cost$ $ $ $ $ $

Net periodic benefit cost is disaggregated between service cost presented as operating expense and other components of pension cost presented as non-operating expense. Other components of pension cost and changes in cash surrender value of insurance contracts intended to fund certain non-qualified pension and deferred compensation arrangements included in non-operating expenses totaled $ million in 2023, $ million in 2022 and $ million in 2021.

)$ $ $ Amortization of net loss (gain) () Prior service credit (cost) arising during the period Settlement loss Amortization of prior service (credit) cost Total$ $ $ $

$ $ $ Net gain (loss)()() Net gain (loss) before income taxes()() Income taxes ()()Net$()$()$ $

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% % % %Rate of compensation increase % %N/AN/ANon-U.S. PlansDiscount rate % %N/AN/ARate of compensation increase % %N/AN/A

Assumptions used to determine the Company’s net periodic benefit cost are shown below:


	Pension Benefits						Postretirement Medical Benefits
Weighted average assumptions	2023		2022		2021		2023		2022		2021
U.S. Plans
Discount rate		%		%		%		%		%		%
Rate of compensation increase		%		%		%	N/A		N/A		N/A
Expected return on assets		%		%		%	N/A		N/A		N/A
Non-U.S. Plans
Discount rate		%		%		%	N/A		N/A		N/A
Rate of compensation increase		%		%		%	N/A		N/A		N/A
Expected return on assets		%		%		%	N/A		N/A		N/A

Several sources of information are considered in determining the expected rate of return assumption, including the allocation of plan assets, the input of actuaries and professional investment advisers, and historical long-term returns. In setting the return assumption, the Company recognizes that historical returns are not always indicative of future returns and also considers the long-term nature of its pension obligations.

The Company’s U.S. retirement medical plan limits the annual cost increase that will be paid by the Company to percent. In measuring the accumulated postretirement benefit obligation (APBO), the annual trend rate for health care costs was assumed to be percent for 2024, decreasing each year to a constant rate of percent for and thereafter, subject to the plan’s annual increase limitation.

The Company expects to contribute $ million to its unfunded pension plans and $ million to the postretirement medical plan in 2024. The Company will not be required to make contributions to the funded pension plan under minimum funding requirements for 2024.

$ 2025 2026 2027 2028 Years 2029-2033

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$ Operating lease payments Non-cash additions to operating lease assets

Weighted average discount rate % %

Variable lease costs and short term lease costs were not significant for the twelve months ended December 29, 2023 and December 30, 2022.

2025 2026 2027 2028 Thereafter Total lease payments$ Present value adjustment()Operating lease liabilities$

Other Commitments. The Company is committed to pay suppliers under the terms of open purchase orders issued in the normal course of business totaling approximately $ million at December 29, 2023. The Company also has commitments with certain suppliers to purchase minimum quantities, and under the terms of certain agreements, the Company is committed for certain portions of the supplier’s inventory. The Company does not purchase, or commit to purchase, quantities in excess of normal usage or amounts that cannot be used within one year. The Company estimates that the maximum commitment amount under such agreements does not exceed $ million.

The Company enters into contracts with vendors to receive services. Commitments under these service contracts with non-cancelable terms of more than one year totaled $ million in 2024, $ million in 2025, $ million in 2026 and $ million thereafter.

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million at December 29, 2023. The Company has also guaranteed the debt of its subsidiaries for up to $ million. All debt of subsidiaries is reflected in the consolidated balance sheets.

Contingencies. The Company is party to various legal proceedings arising in the normal course of business. The Company is actively pursuing and defending these matters and has recorded an estimate of the probable costs where appropriate. Management does not expect that resolution of these matters will have a material adverse effect on the Company, although the ultimate outcome cannot be determined based on available information.

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Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of the end of the fiscal year covered by this Annual Report, the Company carried out an evaluation of the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended. This evaluation was done under the supervision and with the participation of the Company’s President and Chief Executive Officer, the Chief Financial Officer and Treasurer, and the Executive Vice President, Corporate Controller and Information Systems. Based upon that evaluation, they concluded that the Company’s disclosure controls and procedures are effective.

Management’s Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting. The internal control system was designed to provide reasonable assurance to management and the board of directors regarding the reliability of financial reporting and preparation of financial statements in accordance with generally accepted accounting principles.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 29, 2023. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013).

Based on our assessment and those criteria, management believes the Company’s internal control over financial reporting is effective as of December 29, 2023.

The Company’s independent auditors have issued an attestation report on the Company’s internal control over financial reporting, which is included herein.

Changes in Internal Control Over Financial Reporting

During the fourth 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.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of Graco Inc.

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of Graco Inc. and subsidiaries (the “Company”) as of December 29, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 29, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 29, 2023, of the Company and our report dated February 20, 2024, expressed an unqualified opinion on those financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are

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required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ DELOITTE & TOUCHE LLP

Minneapolis, Minnesota

February 20, 2024

Item 9B. Other Information

During the three months ended December 29, 2023, 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).

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not applicable.

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PART III

Item 10. Directors, Executive Officers and Corporate Governance

The information under the heading “Information About Our Executive Officers” in Part I of this 2023 Annual Report on Form 10-K and the information under the heading “Board of Directors” in our Company’s Proxy Statement for its 2024 Annual Meeting of Shareholders to be held on April 26, 2024 (the “Proxy Statement”), is incorporated herein by reference.

Audit Committee Members and Audit Committee Financial Expert

The information under the heading “Committees of the Board of Directors” in our Company’s Proxy Statement is incorporated herein by reference.

Corporate Governance Guidelines, Committee Charters and Code of Ethics

Our Company has adopted Corporate Governance Guidelines and Charters for each of the Audit, Governance, and Management Organization and Compensation Committees of the Board of Directors. We have also issued a Code of Ethics and Business Conduct (“Code of Ethics”) that applies to our principal executive officer, principal financial officer, principal accounting officer, all officers, directors, and employees of Graco Inc. and all of its subsidiaries, representative offices and branches worldwide. The Corporate Governance Guidelines, Committee Charters, and Code of Ethics, with any amendments or waivers thereto, may be accessed free of charge by visiting the Graco website at www.graco.com.

Our Company intends to post on the Graco website any amendment to, or waiver from, a provision of the Code of Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer, controller and other persons performing similar functions within four business days following the date of such amendment or waiver.

Delinquent Section 16(a) Reports

The information under the heading “Delinquent Section 16(a) Reports” in our Company’s Proxy Statement is incorporated herein by reference.

Item 11. Executive Compensation

The information contained under the headings “Director Compensation,” “Executive Compensation” (other than under the subheading "Pay Versus Performance"); and “Report of the Management Organization and Compensation Committee” in the Proxy Statement is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information contained under the headings “Equity Compensation Plan Information” and “Beneficial Ownership of Shares” in the Proxy Statement is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions, and Director Independence

The information under the headings “Related Person Transaction Approval Policy” and “Director Independence” in the Proxy Statement is incorporated herein by reference.

Item 14. Principal Accountant Fees and Services

The information under the headings “Independent Registered Public Accounting Firm Fees and Services” and “Pre-Approval Policies” in the Proxy Statement is incorporated herein by reference.

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PART IV

Item 15. Exhibits and Financial Statement Schedules

(a)The following documents are filed as part of this report:


		Page
(1)	Financial Statements	37

(2)	Financial Statement Schedule

	All financial statement schedules are omitted as the required information is inapplicable or the information is presented in the consolidated financial statements or related notes.

(3)	Management Contract, Compensatory Plan or Arrangement. (See Exhibit Index)	66
	Those entries marked by an asterisk are Management Contracts, Compensatory Plans or Arrangements.

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Exhibit Index


Exhibit Number						Description


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 2022 Annual Repo rt on Form 10-K filed February 21, 2023.)

4.1						Description of Our Securities. (Incorporated by reference to Exhibit 4.1 to the Company’s 2019 Annual Report on Form 10-K.)

*10.1						Graco Inc. Incentive Bonus Plan. (Incorporated by reference to Exhibit 10.1 to the Company's Report on Form 8-K filed September 19, 2019.)

*10.2						Graco Inc. 2010 Stock Incentive Plan. (Incorporated by reference to Appendix A to the Company’s Definitive Proxy Statement on Schedule 14A filed March 11, 2010.)

*10.3						Graco Inc. 2015 Stock Incentive Plan. (Incorporated by reference to Appendix A to the Company’s Definitive Proxy Statement on Schedule 14A filed March 11, 2015.)

*10.4						Graco Inc. 2019 Stock Incentive Plan. (Incorporated by reference to Appendix A to the Company’s Definitive Proxy Statement on Schedule 14A filed March 13, 2019.)

*10.5						Deferred Compensation Plan (2005 Statement) as amended and restated on April 4, 2005. (Incorporated by reference to Exhibit 10.1 of the Company’s Report on Form 10-Q for the thirteen weeks ended July 1, 2005.) Second Amendment dated November 1, 2005. (Incorporated by reference to Exhibit 10.8 to the Company’s 2005 Annual Report on Form 10-K.) Third Amendment adopted on December 29, 2008. (Incorporated by reference to Exhibit 10.8 to the Company’s 2008 Annual Report on Form 10-K.) Second Amendment dated October 25, 2012. (Incorporated by reference to Exhibit 10.9 to the Company’s 2012 Annual Report on Form 10-K.)

*10.6						Graco Restoration Plan (2005 Statement). (Incorporated by reference to Exhibit 10.1 to the Company’s Report on Form 10-Q for the thirteen weeks ended September 29, 2006.) First Amendment adopted December 8, 2006. (Incorporated by reference to Exhibit 10.12 to the Company’s 2006 Annual Report on Form 10-K.) Second Amendment adopted August 15, 2007. (Incorporated by reference to Exhibit 10.1 to the Company’s Report on Form 10-Q for the thirteen weeks ended September 28, 2007.) Third Amendment adopted March 27, 2008. (Incorporated by reference to Exhibit 10.1 to the Company’s Report on Form 10-Q for the thirteen weeks ended March 28, 2008.) Fourth Amendment adopted December 29, 2008. (Incorporated by reference to Exhibit 10.11 to the Company’s 2008 Annual Report on Form 10-K.) Fifth Amendment adopted September 16, 2010. (Incorporated by reference to Exhibit 10.1 to the Company’s Report on Form 10-Q for the thirteen weeks ended September 24, 2010.) Sixth Amendment adopted February 15, 2018 (Incorporated by reference to Exhibit 10.7 to the Company’s 2017 Annual Report on Form 10-K.) Seventh Amendment adopted December 6, 2018. (Incorporated by reference to Exhibit 10.6 to the Company’s 2018 Annual Report on Form 10-K.)

*10.7						Graco Inc. Retirement Plan for Non-Employee Directors. (Incorporated by reference to Exhibit 10.7 to the Company’s 2018 Annual Report on Form 10-K.) (Initially filed by the Company in paper form as Attachment C to Item 5 to the Company’s Report on Form 10-Q for the thirteen weeks ended March 29, 1991.) First Amendment adopted on December 29, 2008. (Incorporated by reference to Exhibit 10.10 to the Company’s 2008 Annual Report on Form 10-K.)

*10.8						Stock Option Agreement. Form of agreement used for award of non-incentive stock options to nonemployee directors under the Graco Inc. 2010 Stock Incentive Plan in 2011. (Incorporated by reference to Exhibit 10.16 to the Company’s 2010 Annual Report on Form 10-K.) Amended form of agreement for awards made to nonemployee directors commencing in 2012 (and subsequently used for awards made to nonemployee directors under the Graco Inc. 2015 Stock Incentive Plan in 2015). (Incorporated by reference to Exhibit 10.4 of the Company’s Report on Form 10-Q for the thirteen weeks ended March 30, 2012.)

*10.9						Stock Option Agreement. Form of agreement used for award of non-incentive stock options to executive officers under the Graco Inc. 2010 Stock Incentive Plan in 2011. (Incorporated by reference to Exhibit 10.4 to the Company’s Report on Form 10-Q for the thirteen weeks ended April 1, 2011.) Amended form of agreement for awards made to executive officers commencing in 2012. (Incorporated by reference to Exhibit 10.3 of the Company’s Report on Form 10-Q for the thirteen weeks ended March 30, 2012.)

*10.10						Stock Option Agreement. Form of agreement used for award of non-incentive stock options to nonemployee directors under the Graco Inc. 2015 Stock Incentive Plan commencing in 2016. (Incorporated by reference to Exhibit 10.1 to the Company’s Report on Form 10-Q for the thirteen weeks ended June 24, 2016.)

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*10.11						Stock Option Agreement. Form of agreement used for award of non-incentive stock options to executive officers under the Graco Inc. 2015 Stock Incentive Plan commencing in 2016. (Incorporated by reference to Exhibit 10.2 to the Company’s Report on Form 10-Q for the thirteen weeks ended March 25, 2016.)

*10.12						Stock Option Agreement. Form of agreement used for award of non-incentive stock options to Chief Executive Officer under the Graco Inc. 2015 Stock Incentive Plan commencing in 2016. (Incorporated by reference to Exhibit 10.1 to the Company’s Report on Form 10-Q for the thirteen weeks ended March 25, 2016.)

*10.13						Stock Option Agreement. Form of agreement used for award of non-incentive stock options to nonemployee directors under the Graco Inc. 2019 Stock Incentive Plan commencing in 2019. (Incorporated by reference to Exhibit 10.2 to the Company’s Report on Form 10-Q for the thirteen weeks ended June 28, 2019.)

*10.14						Stock Option Agreement. Form of agreement used for award of non-incentive stock options to executive officers under the Graco Inc. 2019 Stock Incentive Plan commencing in 2020. (Incorporated by reference to Exhibit 10.22 to the Company’s 2019 Annual Report on Form 10-K.)

*10.15						Stock Option Agreement. Form of agreement used for award of non-incentive stock options to Chief Executive Officer under the Graco Inc. 2019 Stock Incentive Plan commencing in 2020. (Incorporated by reference to Exhibit 10.21 to the Company’s 2019 Annual Report on Form 10-K.)

*10.16						Executive Officer Restricted Stock Unit Agreement. Form of agreement used to award restricted stock units to Dale D. Johnson under the Graco Inc. 2019 Stock Incentive Plan. (Incorporated by reference to Exhibit 10.1 to the Company’s Report on Form 8-K filed February 26, 2021.)

*10.17						Nonemployee Director Stock and Deferred Stock Program (2019 Restatement). (Incorporated by reference to Exhibit 10.3 to the Company’s Report on Form 10-Q for the thirteen weeks ended June 28, 2019.)

*10.18						Key Employee Agreement. Form of agreement used with Chief Executive Officer and other executive officers. (Incorporated by reference to Exhibit 10.1 to the Company’s Report on Form 8-K filed April 27, 2021.) Key Employee Agreement. Form of agreement to be offered to all persons hired or promoted to be executive officers of the Company after November 30, 2023 where local legal requirements warrant a different form.

*10.19						Executive Group Long-Term Disability Policy as revised in 1995. (Incorporated by reference to Exhibit 10.23 to the Company’s 2004 Annual Report on Form 10-K.) Enhanced by Supplemental Income Protection Plan in 2004. (Incorporated by reference to Exhibit 10.28 to the Company’s 2007 Annual Report on Form 10-K.)

10.20						Amended and Restated Credit Agreement, dated March 25, 2021, among Graco Inc., the borrowing subsidiaries from time to time party thereto, the banks from time to time party thereto and U.S. Bank National Association, as administrative agent. (Incorporated by reference to Exhibit 10.1 to the Company’s Report on Form 8-K filed March 26, 2021.)

10.21						Amendment No. 1 to Amended and Restated Credit Agreement, dated May 23, 2023, among Graco Inc., the borrowing subsidiaries from time to time party thereto, the banks from time to time party thereto and U.S. Bank National Association, as administrative agent. (Incorporated by reference to Exhibit 10.1 to the Company's Report on Form 8-K filed May 23, 2023.)

10.22						Amendment No. 2 to Amended and Restated Credit Agreement, dated June 8, 2023, among Graco Inc., the borrowing subsidiaries from time to time party thereto, the banks from time to time party thereto and U.S. Bank National Association, as administrative agent. (Incorporated by reference to Exhibit 10.1 to the Company's Report on Form 8-K filed June 8, 2023.)

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10.23						Note Agreement, dated March 11, 2011, between Graco Inc. and the Purchasers listed on the Purchaser Schedule attached thereto, which includes as exhibits the form of Senior Notes. (Incorporated by reference to Exhibit 10.1 to the Company’s Report on Form 8-K filed March 16, 2011.) Amendment No. 1 dated May 23, 2011. (Incorporated by reference to Exhibit 10.2 to the Company’s Report on Form 10-Q for the thirteen weeks ended July 1, 2011.) Amendment and Restatement No. 1 to Note Agreement dated as of March 27, 2012. (Incorporated by reference to Exhibit 10.2 to the Company’s Report on Form 8-K filed April 2, 2012.) Amendment No. 2 dated as of June 26, 2014 to Note Agreement dated as of March 11, 2011. (Incorporated by reference to Exhibit 10.1 to the Company’s Report on Form 10-Q for the thirteen weeks ended June 27, 2014.) Amendment No. 3 dated as of December 15, 2016 to Note Agreement dated as of March 11, 2011. (Incorporated by reference to Exhibit 10.28 to the Company ’s 2016 Annual Report on Form 10-K.) Amendment No. 4 dated May 23, 2017 to Note Agreement dated as of March 11, 2011. (Incorporated by reference to Exhibit 10.1 to the Company ’s 10-Q for the thirteen weeks ended June 30, 2017.) Amendment No. 5 dated April 17, 2020 to Note Agreement dated as of March 11, 2011. (Incorporated by reference to Exhibit 10.4 to the Company ’s 10-Q for the thirteen weeks ended March 27, 2020.)

10.24						Master Note Agreement, dated January 29, 2020, between Graco Inc. and NYL Investors LLC. (Incorporated by reference to Exhibit 10.1 to the Company’s Report on Form 8-K filed February 3, 2020.) First Amendment to Master Note Agreement, dated December 16, 2022. (Incorporated by reference to Exhibit 10.1 to the Company’s Report on Form 8-K filed December 16, 2022.)

11						Statement of Computation of Earnings per share included in Note I on page 55

21						Subsidiaries of the Company

23						Independent Registered Public Accounting Firm’s Consent

24						Power of Attorney

31.1						Certification of President and Chief Executive Officer pursuant to Rule 13a-14(a)

31.2						Certification of Chief Financial Officer pursuant to Rule 13a-14(a)

32						Certification of President and Chief Executive Officer and Chief Financial Officer pursuant to Section 1350 of Title 18, U.S.C.

97						Graco Inc. Incentive Recovery Policy

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).

* Management Contracts, Compensatory Plans or Arrangements.

Pursuant to Item 601(b)(4)(iii) of Regulation S-K, copies of certain instruments defining the rights of holders of certain long-term debt of the Company and its subsidiaries are not filed as exhibits because the amount of debt authorized under any such instrument does not exceed 10 percent of the total assets of the Company and its subsidiaries. The Company agrees to furnish copies thereof to the Securities and Exchange Commission upon request.

Item 16. Form 10-K Summary

None.

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Signatures

Pursuant to the requirements of Section 13 or 15(d) 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.


/s/ Mark W. Sheahan						February 20, 2024
Mark W. Sheahan
President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.


/s/ Mark W. Sheahan						February 20, 2024
Mark W. Sheahan
President and Chief Executive Officer
(Principal Executive Officer)

/s/ David M. Lowe						February 20, 2024
David M. Lowe
Chief Financial Officer and Treasurer
(Principal Financial Officer)

/s/ Christopher D. Knutson						February 20, 2024
Christopher D. Knutson
Executive Vice President, Corporate Controller
(Principal Accounting Officer)



Lee R. Mitau						Director, Chairman of the Board
Heather L. Anfang						Director
Archie C. Black						Director
Brett C. Carter						Director
Eric P. Etchart						Director
Jody H. Feragen						Director
J. Kevin Gilligan						Director
Martha A. Morfitt						Director
Mark W. Sheahan						Director
R. William Van Sant						Director
Kevin J. Wheeler						Director

Mark W. Sheahan, by signing his name hereto, does hereby sign this document on behalf of himself and each of the above named directors of the Registrant pursuant to powers of attorney duly executed by such persons.


/s/ Mark W. Sheahan						February 20, 2024
Mark W. Sheahan
(For himself and as attorney-in-fact)

GRACO INC - Annual Report: 2023 (Form 10-K)

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