SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

☒ Quarterly Report Pursuant to Section 13 or 15 (d) of the

Securities Exchange Act of 1934

For the quarterly period ended ~~September 29, 2017~~June 30, 2023

☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission File Number: 001-09249



GRACO INC.
(Exact name of registrant as specified in its charter)



Minnesota						41-0285640
(State or other jurisdiction of ~~incorporation)~~ incorporation or organization)						(I.R.S. Employer Identification Number)



88 - 11th Avenue N.E. ~~Minneapolis, Minnesota~~		~~55413~~
Minneapolis,	Minnesota	55413
(Address of principal executive offices)		(Zip Code)



(612)			623-6000
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $1.00 per share	GGG	The New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes

X☒

☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files).

Yes

X☒

☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated ~~filer” and~~filer,” “smaller reporting ~~company”~~company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated ~~Filer~~filer

X☐

~~Accelerated Filer~~Non-accelerated filer

☐

~~Non-accelerated Filer~~

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes

☐

X☒

~~56,130,000~~168,992,778 shares of the Registrant’s Common Stock, $1.00 par value, were outstanding as of ~~October 19, 2017.~~July 12, 2023.

TABLE OF CONTENTS

Page

PART I - FINANCIAL INFORMATION

~~Page~~

~~PART I - FINANCIAL INFORMATION~~

Item 1.

Financial Statements

Consolidated Statements of Earnings

Consolidated Statements of Comprehensive Income

Consolidated Balance Sheets

Consolidated Statements of Cash Flows

Consolidated Statements of Shareholders' Equity

Notes to Consolidated Financial Statements

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

1415

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

2021

Item 4.

Controls and Procedures

2021

PART II - OTHER INFORMATION

Item 1A.

Risk Factors

2122

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

2123

Item 6.5.

~~Exhibits~~Other Information

Item 6.

EXHIBITS

PART I Item 1.

GRACO INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

(Unaudited) (In thousands except per share amounts)


	Three Months Ended					Nine Months Ended							Three Months Ended				Six Months Ended
	September 29, 2017			September 23, 2016		September 29, 2017			September 23, 2016				June 30, 2023		July 1, 2022		June 30, 2023		July 1, 2022
Net Sales	$	379,812		$	327,192	$	1,099,885		$	980,230		Net Sales	$	559,644	$	548,547	$	1,089,290	$	1,042,832
Cost of products sold	176,347			150,594		507,206			456,695			Cost of products sold	268,229		279,487		512,735		519,297
Gross Profit	203,465			176,598		592,679			523,535			Gross Profit	291,415		269,060		576,555		523,535
Product development	14,815			14,671		44,215			44,964			Product development	21,286		19,967		41,765		39,045
Selling, marketing and distribution	57,941			49,269		168,912			158,106			Selling, marketing and distribution	68,380		62,076		133,763		125,071
General and administrative	31,072			31,194		95,325			99,710			General and administrative	44,697		38,337		87,307		82,376

Operating Earnings	99,637			81,464		284,227			220,755			Operating Earnings	157,052		148,680		313,720		277,043

Interest expense	3,901			4,432		12,110			13,468			Interest expense	1,798		1,726		3,145		7,013
Other expense (income), net	(656		)	416		(1,454		)	(338		)

Other (income) expense, net												Other (income) expense, net	(4,365)		607		(6,394)		760
Earnings Before Income Taxes	96,392			76,616		273,571			207,625			Earnings Before Income Taxes	159,619		146,347		316,969		269,270
Income taxes	20,932			22,228		57,551			62,738			Income taxes	25,351		28,969		53,535		51,049
Net Earnings	$	75,460		$	54,388	$	216,020		$	144,887		Net Earnings	$	134,268	$	117,378	$	263,434	$	218,221
Per Common Share
Basic net earnings	$	1.35		$	0.98	$	3.87		$	2.61
Diluted net earnings	$	1.30		$	0.95	$	3.73		$	2.55
Cash dividends declared	$	0.36		$	0.33	$	1.08		$	0.99
Net Earnings per Common Share												Net Earnings per Common Share
Basic												Basic	$	0.80	$	0.69	$	1.56	$	1.29
Diluted												Diluted	$	0.78	$	0.68	$	1.53	$	1.26

See notes to consolidated financial statements.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited) (In thousands)


	Three Months Ended						Nine Months Ended							Three Months Ended				Six Months Ended
	September 29, 2017			September 23, 2016			September 29, 2017			September 23, 2016				June 30, 2023		July 1, 2022		June 30, 2023		July 1, 2022
Net Earnings	$	75,460		$	54,388		$	216,020		$	144,887		Net Earnings	$	134,268	$	117,378	$	263,434	$	218,221
Components of other comprehensive income (loss)													Components of other comprehensive income (loss)
Cumulative translation adjustment	574			(6,642		)	17,921			(16,679		)	Cumulative translation adjustment	4,553		(13,532)		9,528		(16,492)
Pension and postretirement medical liability adjustment	2,250			1,707			6,034			4,957			Pension and postretirement medical liability adjustment	1,195		1,368		2,327		2,262
Income taxes - pension and postretirement medical liability adjustment	(797		)	(619		)	(2,280		)	(1,823		)	Income taxes - pension and postretirement medical liability adjustment	(264)		(320)		(508)		(514)
Other comprehensive income (loss)	2,027			(5,554		)	21,675			(13,545		)	Other comprehensive income (loss)	5,484		(12,484)		11,347		(14,744)
Comprehensive Income	$	77,487		$	48,834		$	237,695		$	131,342		Comprehensive Income	$	139,752	$	104,894	$	274,781	$	203,477

See notes to consolidated financial statements.

Table of Contents

GRACO INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited) (In thousands)


	September 29, 2017			December 30, 2016				June 30, 2023		December 30, 2022
ASSETS							ASSETS
Current Assets							Current Assets
Cash and cash equivalents	$	140,000		$	52,365		Cash and cash equivalents	$	520,633	$	339,196
Accounts receivable, less allowances of $14,100 and $12,700	258,632			218,365
Accounts receivable, less allowances of $5,100 and $7,000							Accounts receivable, less allowances of $5,100 and $7,000	365,818		346,010
Inventories	222,878			201,609			Inventories	479,095		476,790
Other current assets	20,889			31,023			Other current assets	44,907		43,624
Total current assets	642,399			503,362			Total current assets	1,410,453		1,205,620
Property, Plant and Equipment
Cost	518,486			489,642
Accumulated depreciation	(319,058		)	(300,046		)

Property, Plant and Equipment, net	199,428			189,596			Property, Plant and Equipment, net	680,040		607,609
Goodwill	272,858			259,849			Goodwill	371,880		368,171
Other Intangible Assets, net	181,108			178,336			Other Intangible Assets, net	131,089		137,507
Operating Lease Assets							Operating Lease Assets	29,158		29,785
Deferred Income Taxes	81,756			86,653			Deferred Income Taxes	48,189		57,090
Other Assets	26,674			25,313			Other Assets	36,916		33,118
Total Assets	$	1,404,223		$	1,243,109		Total Assets	$	2,707,725	$	2,438,900
LIABILITIES AND SHAREHOLDERS’ EQUITY							LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities							Current Liabilities
Notes payable to banks	$	6,215		$	8,913		Notes payable to banks	$	49,099	$	20,974
Current portion of long term debt	75,000			—			Current portion of long term debt	75,000		—
Trade accounts payable	46,603			39,988			Trade accounts payable	81,540		84,218
Salaries and incentives	49,574			37,109			Salaries and incentives	55,150		63,969
Dividends payable	20,196			20,088			Dividends payable	39,692		39,963
Other current liabilities	90,683			71,887			Other current liabilities	188,857		190,793
Total current liabilities	288,271			177,985			Total current liabilities	489,338		399,917
Long-term Debt	225,000			305,685			Long-term Debt	—		75,000
Retirement Benefits and Deferred Compensation	145,224			159,250			Retirement Benefits and Deferred Compensation	61,995		61,672
Operating Lease Liabilities							Operating Lease Liabilities	20,343		21,057
Deferred Income Taxes	17,433			17,672			Deferred Income Taxes	8,730		9,443
Other Non-current Liabilities	8,306			8,697			Other Non-current Liabilities	11,012		12,159

Shareholders’ Equity							Shareholders’ Equity
Common stock	56,115			55,834			Common stock	168,985		167,702
Additional paid-in-capital	504,072			453,394			Additional paid-in-capital	850,900		784,477
Retained earnings	280,355			206,820			Retained earnings	1,154,453		976,851
Accumulated other comprehensive income (loss)	(120,553		)	(142,228		)	Accumulated other comprehensive income (loss)	(58,031)		(69,378)
Total shareholders’ equity	719,989			573,820			Total shareholders’ equity	2,116,307		1,859,652
Total Liabilities and Shareholders’ Equity	$	1,404,223		$	1,243,109		Total Liabilities and Shareholders’ Equity	$	2,707,725	$	2,438,900

See notes to consolidated financial statements.

GRACO INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited) (In thousands)

See notes to consolidated financial statements.

GRACO INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Unaudited) (In thousands)



Three Months Ended June 30, 2023
Balance, March 31, 2023	$	168,308	$	821,570	$	1,059,980	$	(63,515)	$	1,986,343

Shares issued	677		20,350		—		—		21,027

Stock compensation cost	—		8,980		—		—		8,980


Net earnings	—		—		134,268		—		134,268
Dividends declared (0.2350 per share)	—		—		(39,795)		—		(39,795)

Other comprehensive income (loss)	—		—		—		5,484		5,484
Balance, June 30, 2023	$	168,985	$	850,900	$	1,154,453	$	(58,031)	$	2,116,307



Six Months Ended June 30, 2023
Balance, December 30, 2022	$	167,702	$	784,477	$	976,851	$	(69,378)	$	1,859,652

Shares issued	1,398		49,430		—		—		50,828
Shares repurchased	(115)		(539)		(7,112)		—		(7,766)
Stock compensation cost	—		17,532		—		—		17,532


Net earnings	—		—		263,434		—		263,434
Dividends declared ($0.470 per share)	—		—		(78,720)		—		(78,720)

Other comprehensive income (loss)	—		—		—		11,347		11,347
Balance, June 30, 2023	$	168,985	$	850,900	$	1,154,453	$	(58,031)	$	2,116,307



Three Months Ended July 1, 2022
Balance, April 1, 2022	$	169,223	$	761,959	$	841,503	$	(82,429)	$	1,690,256

Shares issued	70		2,047		—		—		2,117
Shares repurchased	(179)		(777)		(10,360)		—		(11,316)
Stock compensation cost	—		6,980		—		—		6,980

Restricted stock canceled (issued)	—		—		—		—		—
Net earnings	—		—		117,378		—		117,378
Dividends declared ($0.210 per share)	—		—		(35,657)		—		(35,657)

Other comprehensive income (loss)	—		—		—		(12,484)		(12,484)
Balance, July 1, 2022	$	169,114	$	770,209	$	912,864	$	(94,913)	$	1,757,274



Six Months Ended July 1, 2022
Balance, December 31, 2021	$	170,308	$	742,288	$	876,916	$	(80,169)	$	1,709,343

Shares issued	507		21,685		—		—		22,192
Shares repurchased	(1,701)		(7,412)		(110,908)		—		(120,021)
Stock compensation cost	—		13,649		—		—		13,649

Restricted stock canceled (issued)	—		(1)		—		—		(1)
Net earnings	—		—		218,221		—		218,221
Dividends declared ($0.4200 per share)	—		—		(71,365)		—		(71,365)

Other comprehensive income (loss)	—		—		—		(14,744)		(14,744)
Balance, July 1, 2022	$	169,114	$	770,209	$	912,864	$	(94,913)	$	1,757,274

See notes to consolidated financial statements.

GRACO INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.Basis of Presentation

The consolidated balance sheet of Graco Inc. and ~~Subsidiaries~~subsidiaries (the “Company”) as of ~~September 29, 2017~~June 30, 2023 and the related statements of earnings, ~~and~~ comprehensive income and shareholders' equity for the three and ~~nine~~six months ended ~~September 29, 2017~~June 30, 2023 and ~~September 23, 2016,~~July 1, 2022, and cash flows for the ~~nine~~six months ended ~~September 29, 2017~~June 30, 2023 and ~~September 23, 2016~~July 1, 2022 have been prepared by the Company and have not been audited.

In the opinion of management, these consolidated financial statements reflect all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the financial position of the Company as of ~~September 29, 2017,~~June 30, 2023, and the results of operations and cash flows for all periods presented.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. Therefore, these statements should be read in conjunction with the financial statements and notes thereto included in the Company’s ~~2016~~2022 Annual Report on Form 10-K.

The results of operations for interim periods are not necessarily indicative of results that will be realized for the full fiscal year.

2.Segment Information

The Company has three reportable segments: Contractor, Industrial and Process. Sales and operating earnings by segment were as follows (in thousands):


	Three Months Ended				Six Months Ended
	June 30, 2023		July 1, 2022		June 30, 2023		July 1, 2022
Net Sales
Contractor	$	255,648	$	265,739	$	501,619	$	500,331
Industrial	163,523		158,325		313,713		302,994
Process	140,473		124,483		273,958		239,507
Total	$	559,644	$	548,547	$	1,089,290	$	1,042,832
Operating Earnings
Contractor	$	68,868	$	68,244	$	142,640	$	127,191
Industrial	55,887		55,201		108,657		107,831
Process	43,620		31,057		84,185		58,545
Unallocated corporate (expense)	(11,323)		(5,822)		(21,762)		(16,524)

Total	$	157,052	$	148,680	$	313,720	$	277,043

Assets by segment were as follows (in thousands):


	June 30, 2023		December 30, 2022
Contractor	$	769,654	$	752,729
Industrial	617,270		578,302
Process	583,002		564,539
Unallocated corporate	737,799		543,330
Total	$	2,707,725	$	2,438,900

Geographic information follows (in thousands):


	Three Months Ended				Six Months Ended
	June 30, 2023		July 1, 2022		June 30, 2023		July 1, 2022
Net Sales (based on customer location)
United States	$	301,953	$	296,009	$	590,942	$	551,091
Other countries	257,691		252,538		498,348		491,741
Total	$	559,644	$	548,547	$	1,089,290	$	1,042,832


	June 30, 2023		December 30, 2022
Long-lived Assets
United States	$	583,160	$	532,401
Other countries	96,880		75,208
Total	$	680,040	$	607,609

3.Earnings per Share

The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share amounts):


	Three Months Ended				Six Months Ended
	June 30, 2023		July 1, 2022		June 30, 2023		July 1, 2022
Net earnings available to common shareholders	$	134,268	$	117,378	$	263,434	$	218,221
Weighted average shares outstanding for basic earnings per share	168,683		169,128		168,351		169,469
Dilutive effect of stock options computed using the treasury stock method and the average market price	3,868		3,570		3,763		4,219
Weighted average shares outstanding for diluted earnings per share	172,551		172,698		172,114		173,688
Basic earnings per share	$	0.80	$	0.69	$	1.56	$	1.29
Diluted earnings per share	$	0.78	$	0.68	$	1.53	$	1.26

Anti-dilutive shares not included in diluted earnings per share computation	1,868		1,632		2,206		1,625

Three Months Ended Nine Months Ended
September 29,
2017 September 23,
2016 September 29,
2017 September 23,
2016
Net earnings available to common shareholders $ 75,460
$ 54,388
$ 216,020
$ 144,887
Weighted average shares outstanding for basic earnings per share 56,023
55,684
55,864
55,571
Dilutive effect of stock options computed using the treasury stock method and the average market price 2,181
1,285
2,084
1,335
Weighted average shares outstanding for diluted earnings per share 58,204
56,969
57,948
56,906
Basic earnings per share $ 1.35
$ 0.98
$ 3.87
$ 2.61
Diluted earnings per share $ 1.30
$ 0.95
$ 3.73
$ 2.55

Stock options to purchase 6,000 and 1,034,000 shares were not included in the September 29, 2017 and September 23, 2016 computations of diluted earnings per share, respectively, because they would have been anti-dilutive.

3.4.Share-Based Awards

Options on common shares granted and outstanding, as well as the weighted average exercise price, are shown below (in thousands, except exercise prices):


	Option Shares	Weighted Average Exercise Price		Options Exercisable	Weighted Average Exercise Price
Outstanding, December 30, 2022	10,265	$	44.40	7,793	$	37.22
Granted	1,114	71.45
Exercised	(1,093)	30.74
Canceled	(62)	64.80
Outstanding, June 30, 2023	10,224	$	48.68	7,529	$	40.96

Option
Shares

Weighted Average
Exercise Price

Options
Exercisable

Weighted Average
Exercise Price
Outstanding, December 30, 2016 5,535
$ 55.26
3,672
$ 45.40
Granted 575
92.13

Exercised (1,138 ) 40.97

Canceled (38 ) 80.31

Outstanding, September 29, 2017 4,934
$ 62.66
3,071
$ 51.40

The Company recognized year-to-date share-based compensation of ~~$19.2~~$18.4 million in ~~2017~~2023 and ~~$16.1~~$12.9 million in ~~2016.~~2022. As of ~~September 29, 2017,~~June 30, 2023, there was ~~$12.5~~$25.8 million of unrecognized compensation cost related to unvested options, expected to be recognized over a weighted average period of ~~2.3~~2.9 years.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes ~~option-pricing~~option pricing model with the following weighted average assumptions and results:


	Six Months Ended
	June 30, 2023			July 1, 2022
Expected life in years	6.7			7.3
Interest rate	4.0		%	1.9		%
Volatility	26.3		%	25.5		%
Dividend yield	1.3		%	1.2		%
Weighted average fair value per share	$	21.76		$	19.06

Nine Months Ended
September 29,
2017 September 23,
2016
Expected life in years 7.0
7.0
Interest rate 2.2 % 1.4 %
Volatility 26.7 % 30.1 %
Dividend yield 1.6 % 1.8 %
Weighted average fair value per share $ 24.23
$ 19.00

Under the Company’s Employee Stock Purchase Plan, the Company issued ~~167,000~~323,000 shares in ~~2017~~2023 and ~~170,000~~319,000 shares in ~~2016.~~2022. The fair value of the employees’ purchase rights under this Plan was estimated on the date of grant. The benefit of the 15 percentdiscount 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~~option pricing model with the following assumptions and results:


	Six Months Ended
	June 30, 2023			July 1, 2022
Expected life in years	1.0			1.0
Interest rate	5.1		%	0.9		%
Volatility	26.4		%	20.5		%
Dividend yield	1.4		%	1.2		%
Weighted average fair value per share	$	18.04		$	16.01

Nine Months Ended
September 29,
2017 September 23,
2016
Expected life in years 1.0
1.0
Interest rate 0.9 % 0.7 %
Volatility 22.3 % 24.6 %
Dividend yield 1.5 % 1.7 %
Weighted average fair value per share $ 21.97
$ 19.14

4.5.Retirement Benefits

The components of net periodic benefit cost for retirement benefit plans were as follows (in thousands):


	Three Months Ended				Six Months Ended
	June 30, 2023		July 1, 2022		June 30, 2023		July 1, 2022
Pension Benefits
Service cost	$	1,467	$	1,964	$	2,931	$	4,134
Interest cost	3,798		2,766		7,575		5,504
Expected return on assets	(3,980)		(4,777)		(7,955)		(9,579)
Amortization and other	415		1,419		855		2,495
Net periodic benefit cost	$	1,700	$	1,372	$	3,406	$	2,554
Postretirement Medical
Service cost	$	100	$	83	$	200	$	258
Interest cost	210		195		420		420
Amortization	90		(2)		180		173
Net periodic benefit cost	$	400	$	276	$	800	$	851

Three Months Ended Nine Months Ended
September 29,
2017 September 23,
2016 September 29,
2017 September 23,
2016
Pension Benefits
Service cost $ 1,917
$ 1,968
$ 5,732
$ 5,880
Interest cost 3,874
3,902
11,477
11,765
Expected return on assets (4,236 ) (4,504 ) (12,700 ) (13,509 )
Amortization and other 2,408
2,491
6,932
7,410
Net periodic benefit cost $ 3,963
$ 3,857
$ 11,441
$ 11,546
Postretirement Medical
Service cost $ 150
$ 136
$ 451
$ 407
Interest cost 274
271
820
813
Amortization (2 ) (120 ) (7 ) (360 )
Net periodic benefit cost $ 422
$ 287
$ 1,264
$ 860

The Company made a $20 million tax-deductible contribution to its funded U.S. defined benefit plan in the third quarter of 2017. Also in the third quarter, the Company approved an amendment to restructure the plan effective October 30, 2017. Under the restructuring, the plan will purchase insurance contracts to settle a portion of its benefit obligations. The Company expects that net periodic benefit cost for the fourth quarter will include a settlement loss related to the restructuring~~, estimated to be in the range of $11 million to $13 million.~~ ~~The actual amount of the settlement loss will depend on the value of plan assets, the amount transferred to the insurance company and the discount rate as of the measurement date.~~

5.6.Shareholders’ Equity

Changes in components of accumulated other comprehensive income (loss), net of tax were as follows (in thousands):


	Pension and Post-retirement Medical		Cumulative Translation Adjustment		Total
Three Months Ended June 30, 2023
Balance, March 31, 2023	$	(38,846)	$	(24,669)	$	(63,515)
Other comprehensive income (loss) before reclassifications	—		4,553		4,553
Reclassified to pension cost and deferred tax	931		—		931

Balance, June 30, 2023	$	(37,915)	$	(20,116)	$	(58,031)



Six Months Ended June 30, 2023
Balance, December 30, 2022	$	(39,734)	$	(29,644)	$	(69,378)
Other comprehensive income (loss) before reclassifications	—		9,528		9,528
Reclassified to pension cost and deferred tax	1,819		—		1,819

Balance, June 30, 2023	$	(37,915)	$	(20,116)	$	(58,031)



Three Months Ended July 1, 2022
Balance, April 1, 2022	$	(59,407)	$	(23,022)	$	(82,429)
Other comprehensive income (loss) before reclassifications	—		(13,532)		(13,532)
Reclassified to pension cost and deferred tax	1,048		—		1,048

Balance, July 1, 2022	$	(58,359)	$	(36,554)	$	(94,913)



Six Months Ended July 1, 2022
Balance, December 31, 2021	$	(60,107)	$	(20,062)	$	(80,169)
Other comprehensive income (loss) before reclassifications	—		(16,492)		(16,492)
Reclassified to pension cost and deferred tax	1,748		—		1,748

Balance, July 1, 2022	$	(58,359)	$	(36,554)	$	(94,913)

Pension and
Postretirement
Medical

Cumulative
Translation
Adjustment
Total
Balance, June 24, 2016 $ (67,876 ) $ (44,612 ) $ (112,488 )
Other comprehensive income (loss) before reclassifications —
(6,642 ) (6,642 )
Amounts reclassified from accumulated other comprehensive income 1,088
—
1,088
Balance, September 23, 2016 $ (66,788 ) $ (51,254 ) $ (118,042 )

Balance, June 30, 2017 $ (74,125 ) $ (48,455 ) $ (122,580 )
Other comprehensive income (loss) before reclassifications —
574
574
Amounts reclassified from accumulated other comprehensive income 1,453
—
1,453
Balance, September 29, 2017 $ (72,672 ) $ (47,881 ) $ (120,553 )

Balance, December 25, 2015 $ (69,922 ) $ (34,575 ) $ (104,497 )
Other comprehensive income (loss) before reclassifications —
(16,679 ) (16,679 )
Amounts reclassified from accumulated other comprehensive income 3,134
—
3,134
Balance, September 23, 2016 $ (66,788 ) $ (51,254 ) $ (118,042 )

Balance, December 30, 2016 $ (76,426 ) $ (65,802 ) $ (142,228 )
Other comprehensive income (loss) before reclassifications —
17,921
17,921
Amounts reclassified from accumulated other comprehensive income 3,754
—
3,754
Balance, September 29, 2017 $ (72,672 ) $ (47,881 ) $ (120,553 )

Amounts related to pension and ~~postretirement~~post-retirement medical adjustments are reclassified to non-service components of pension cost ~~which~~that are included within other non-operating expenses.

7.Receivables and Credit Losses

Accounts receivable include trade receivables of $354 million and other receivables of $12 million as of June 30, 2023 and $334 million and $12 million, respectively, as of December 30, 2022.

Allowance for Credit Losses

Following is ~~allocated to cost~~a summary of ~~products sold and operating expenses based on salaries and wages, approximately as follows (in thousands):~~

Three Months Ended Nine Months Ended
September 29,
2017 September 23,
2016 September 29,
2017 September 23,
2016
Cost of products sold $ 765
$ 611
$ 2,093
$ 1,776
Product development 331
241
887
706
Selling, marketing and distribution 703
578
1,865
1,633
General and administrative 451
277
1,189
842
Total before tax $ 2,250
$ 1,707
$ 6,034
$ 4,957
Income tax (benefit) (797 ) (619 ) (2,280 ) (1,823 )
Total after tax $ 1,453
$ 1,088
$ 3,754
$ 3,134

Three Months Ended Nine Months Ended
September 29,
2017 September 23,
2016 September 29,
2017 September 23,
2016
Net Sales
Industrial $ 178,461
$ 150,893
$ 509,719
$ 454,978
Process 73,656
67,077
217,084
196,068
Contractor 127,695
109,222
373,082
329,184
Total $ 379,812
$ 327,192
$ 1,099,885
$ 980,230
Operating Earnings
Industrial $ 61,790
$ 50,573
$ 177,121
$ 147,419
Process 12,088
10,394
38,969
25,305
Contractor 33,471
25,593
93,249
71,700
Unallocated corporate (expense) (7,712 ) (5,096 ) (25,112 ) (23,669 )
Total $ 99,637
$ 81,464
$ 284,227
$ 220,755

~~Assets by segment were as follows (in thousands):~~

September 29,
2017 December 30,
2016
Industrial $ 575,024
$ 546,366
Process 335,769
318,444
Contractor 254,342
208,016
Unallocated corporate 239,088
170,283
Total $ 1,404,223
$ 1,243,109

~~Geographic information follows~~credit losses (in thousands):

Deductions from reserves (1)

Other additions (deductions) (2)

(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.

Three Months Ended Nine Months Ended
September 29,
2017 September 23,
2016 September 29,
2017 September 23,
2016
Net Sales (based on customer location)
United States $ 190,178
$ 171,988
$ 559,651
$ 511,273
Other countries 189,634
155,204
540,234
468,957
Total $ 379,812
$ 327,192
$ 1,099,885
$ 980,230

September 29,
2017 December 30,
2016
Long-lived Assets
United States $ 161,034
$ 151,911
Other countries 38,394
37,685
Total $ 199,428
$ 189,596

Major components of inventories were as follows (in thousands):


	June 30, 2023		December 30, 2022
Finished products and components	$	245,480	$	222,326
Products and components in various stages of completion	138,264		138,957
Raw materials and purchased components	227,972		248,636
Subtotal	611,716		609,919
Reduction to LIFO cost	(132,621)		(133,129)
Total	$	479,095	$	476,790

September 29,
2017 December 30,
2016
Finished products and components $ 111,481
$ 113,643
Products and components in various stages of completion 59,961
50,557
Raw materials and purchased components 98,720
84,631
Subtotal 270,162
248,831
Reduction to LIFO cost (47,284 ) (47,222 )
Total $ 222,878
$ 201,609

8.9.Intangible Assets

Components of other intangible assets were as follows (dollars in thousands):

Finite Life Indefinite Life
Customer
Relationships Patents and
Proprietary
Technology Trademarks,
Trade Names
and Other Trade
Names Total
As of September 29, 2017
Cost $ 176,065
$ 18,322
$ 1,070
$ 57,853
$ 253,310
Accumulated amortization (51,312 ) (7,448 ) (472 ) —
(59,232 )
Foreign currency translation (9,029 ) (703 ) (57 ) (3,181 ) (12,970 )
Book value $ 115,724
$ 10,171
$ 541
$ 54,672
$ 181,108
Weighted average life in years 13
10
4
N/A


																	Finite Life						Indefinite Life
As of December 30, 2016
																	Customer Relationships		Patents and Proprietary Technology		Trademarks, Trade Names and Other		Trade Names		Total
As of June 30, 2023																As of June 30, 2023
Cost	$	170,284		$	17,321		$	895		$	57,853		$	246,353		Cost	$	197,417	$	26,374	$	1,300	$	62,633	$	287,724
Accumulated amortization	(41,599		)	(6,088		)	(337		)	—			(48,024		)	Accumulated amortization	(126,617)		(19,245)		(445)		—		(146,307)
Foreign currency translation	(13,630		)	(1,055		)	(59		)	(5,249		)	(19,993		)	Foreign currency translation	(8,803)		(848)		—		(677)		(10,328)
Book value	$	115,055		$	10,178		$	499		$	52,604		$	178,336		Book value	$	61,997	$	6,281	$	855	$	61,956	$	131,089
Weighted average life in years	13			10			4			N/A						Weighted average life in years	13		9		6		N/A


As of December 30, 2022
Cost	$	202,103	$	26,374	$	1,300	$	62,633	$	292,410
Accumulated amortization	(123,603)		(18,027)		(330)		—		(141,960)
Foreign currency translation	(10,060)		(894)		—		(1,989)		(12,943)
Book value	$	68,440	$	7,453	$	970	$	60,644	$	137,507
Weighted average life in years	13		10		6		N/A

Amortization of intangibles for the second quarter was ~~$3.8~~$4.4 million in ~~2017~~2023 and $4.6 million in ~~2016~~2022, and for the year to date was ~~$11.0~~$8.9 million in ~~2017~~2023 and ~~$14.3~~$9.4 million in ~~2016.~~2022. Estimated annual amortization expense based on the current carrying amount of other intangible assets is as follows (in thousands):

2017 2018 2019 2020 2021 Thereafter
Estimated Amortization Expense $ 14,834
$ 14,959
$ 14,630
$ 14,448
$ 14,279
$ 64,311


	2023 (Remainder)		2024		2025		2026		2027		Thereafter
Estimated Amortization Expense	$	8,526	$	16,448	$	15,986	$	9,105	$	6,443	$	12,625

Changes in the carrying amount of goodwill for each reportable segment were as follows (in thousands):


	Contractor		Industrial		Process		Total
Balance, December 30, 2022	$	77,034	$	134,771	$	156,366	$	368,171
Additions, adjustments from business acquisitions	—		—		—		—
Foreign currency translation	276		2,646		787		3,709
Balance, June 30, 2023	$	77,310	$	137,417	$	157,153	$	371,880

Industrial Process Contractor Total
Balance, December 30, 2016 $ 150,556
$ 96,561
$ 12,732
$ 259,849
Additions (adjustments) from business acquisitions 7,152
(63 ) —
7,089
Foreign currency translation 4,480
1,440
—
5,920
Balance, September 29, 2017 $ 162,188
$ 97,938
$ 12,732
$ 272,858

10.Other Current Liabilities

Components of other current liabilities were as follows (in thousands):

The Company manages certain self-insured loss exposures through a wholly-owned captive insurance subsidiary. Cash balances of $7.9 million as of September 29, 2017 and $9.2 million as of December 30, 2016 were restricted to funding of the captive's loss reserves and are included within other current assets on the Company's Consolidated Balance Sheets.

A liability is established for estimated future warranty and service claims that relate to current and prior period sales. The Company estimates warranty costs based on historical claim experience and other factors, including evaluating specific product warranty issues. Following is a summary of activity in accrued warranty and service liabilities (in thousands):


Balance, December 30, 2022	$	14,674

Charged to expense	5,229
Margin on parts sales reversed	2,179
Reductions for claims settled	(6,669)
Balance, June 30, 2023	$	15,413

Customer Advances and Deferred Revenue

Revenue is deferred when cash payments are received or due in advance of performance, including amounts which are refundable. This is also the case for services associated with certain product sales. During the three and six months ended June 30, 2023, we recognized $16.0 million and $36.6 million, respectively, that was included in deferred revenue at December 30, 2022. During the three and six months ended July 1, 2022, we recognized $18.3 million and $40.8 million, respectively, that was included in deferred revenue at December 31, 2021.

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 it with SOFR and its equivalent benchmark rates such as EURIBOR, TIBOR and RFR loans.

The second amendment increased, from $500 million to $750 million, the amount of availability under an unsecured revolving credit facility, as well as increasing, from $200 million to $375 million, the maximum amount of outstanding loans in currencies other than U.S. Dollars. The amendment also increased, from $250 million to $375 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 0.000% to 0.750% under the prior credit agreement) range from 0.125% to 0.875%, and the applicable margin percentages for non-base rate loans (which ranged from 1.000% to 1.750% under the prior credit agreement) range from 1.125% to 1.875%.

Balance, December 30, 2016 $ 8,934
Charged to expense 5,708
Margin on parts sales reversed 1,977
Reductions for claims settled (6,743 )
Balance, September 29, 2017 $ 9,876
Subsequent Event

In July 2023, the Company prepaid $75 million of its Series D private placement note in addition to a $0.7 million prepayment fee, which will be recognized as interest expense in the third quarter of 2023.

Assets and liabilities measured at fair value on a recurring basis and fair value measurement level were as follows (in thousands):


	Level	June 30, 2023		December 30, 2022
Assets
Cash surrender value of life insurance	2	$	21,015	$	19,192
Forward exchange contracts	2	160		—
Total assets at fair value		$	21,175	$	19,192
Liabilities
Contingent consideration	3	$	9,975	$	14,914
Deferred compensation	2	5,984		5,842
Forward exchange contracts	2	—		520
Total liabilities at fair value		$	15,959	$	21,276

Level September 29,
2017 December 30,
2016
Assets
Cash surrender value of life insurance 2 $ 15,480
$ 13,785
Forward exchange contracts 2 513
571
Total assets at fair value $ 15,993
$ 14,356
Liabilities
Contingent consideration 3 $ 4,081
$ 4,081
Deferred compensation 2 3,640
3,265
Forward exchange contracts 2 —
—
Total liabilities at fair value $ 7,721
$ 7,346

Contracts insuring the lives of certain employees who are eligible to participate in certain non-qualified pension and deferred compensation plans are held in trust. Cash surrender value of the contracts is based on performance measurement funds that shadow the deferral investment allocations made by participants in certain deferred compensation plans. The deferred compensation liability balances are valued based on amounts allocated by participants to the underlying performance measurement funds.

Contingent consideration liability represents the estimated value (using a probability-weighted expected return approach) of future payments to be made to previous owners of ancertain acquired ~~business~~businesses based on future revenues.

Long-term notes payable with fixed interest rates ~~have~~had a carrying amount of ~~$300 million (including~~ $75 million ~~classified as current)~~ and an estimated fair value of ~~$325~~$75 million as of ~~September 29, 2017~~both June 30, 2023 and ~~$325 millionas of~~ December 30, ~~2016.~~2022. The fair value of variable rate borrowings approximates carrying value. The Company uses significant other observable inputs to estimate fair value (level 2 of the fair value hierarchy) based on the present value of future cash flows and rates that would be available for issuance of debt with similar terms and remaining maturities.

~~11.Recent Accounting Pronouncements~~

In May 2014, the Financial Accounting Standards Board (FASB) issued a final standard on revenue from contracts with customers. The new standard sets forth a single comprehensive model for recognizing and reporting revenue. The new standard will become effective for the Company beginning with the first quarter of 2018, and the Company plans to adopt the accounting standard using the modified retrospective transition approach. The modified retrospective transition approach will recognize any changes from the beginning of the year of initial application through retained earnings with no restatement of comparative periods.

In March 2017, the FASB issued a final standard that changes the presentation of net periodic benefit cost related to defined benefit plans. The Company will adopt the standard when it becomes effective in fiscal 2018 and it will be applied retrospectively to all periods presented. Under the new standard, net periodic benefit costs are required to be disaggregated between service costs presented as operating expenses and other components of pension costs presented as non-operating expenses. The Company currently charges service costs to segment operations and includes other components of pension cost in unallocated corporate operating expenses. Under the new standard, unallocated corporate operating expenses will decrease, operating earnings will increase and other expense will increase by the amount of other (non-service) components of pension cost. There will be no impact on reported segment earnings, net earnings or earnings per share.

Item 2. GRACO INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The Company supplies technology and expertise for the management of fluids and coatings in both industrial and commercial applications. It designs, manufactures and markets systems and equipment to move, measure, control, dispense and spray fluid and coating materials. Management classifies the Company’s business into three reportable segments: Contractor, Industrial ~~Process~~ and ~~Contractor.~~Process. Key strategies include developing and marketing new products, leveraging products and technologies into additional, growing end-user markets, expanding distribution globally and completing strategic acquisitions that provide additional channel and technologies.

The Company continued to experience supply chain disruptions and the associated effects of inflation in the first half of 2023; however, the impact was not as significant as compared to the same period in the prior year. Pricing actions implemented have generally mitigated the effects of increased costs and expenses. The Company expects isolated supply chain disruptions and an overall inflationary environment to continue through the remainder of 2023.

The following Management’s Discussion and Analysis reviews significant factors affecting the Company’s results of operations and financial condition. This discussion should be read in conjunction with the financial statements and the accompanying notes to the financial statements.

Consolidated Results

A summary of financial results follows (in millions except per share amounts):

Net Earnings, adjusted (1)

Diluted Net Earnings per Common Share, adjusted (1)

(1) See below for a reconciliation of adjusted non-GAAP financial measures to GAAP.

~~All segments~~Sales increased 2 percent for the quarter. Strong growth in the Process segment more than offset a decrease in the Contractor segment. Sales increases in the Americas and ~~regions had double-digit percentage~~EMEA were partially offset by a decrease in Asia Pacific. Changes in currency translation rates decreased sales ~~growth~~and net earnings by approximately $3 million and $2 million, for the quarter and ~~year to date. Sales growth~~$14 million and ~~operating expense leverage drove operating earnings increases of 22 percent for the quarter and 29 percent~~$8 million for the year to ~~date.~~date, respectively.

Gross profit margin rate for the quarter was more than 3 percentage points higher than the second quarter last year mainly due to the realized pricing and favorable product and channel mix.

~~Adoption~~Total operating expenses increased 12 percentage points and increased as a percentage of ~~a new stock compensation accounting standard and recognition~~sales by 2 percentage points.

Excluding the impact of excess tax benefits ~~on exercised~~related to stock ~~options and other tax planning benefits recognized as reductions of income taxes in 2017~~option exercises presents a more consistent basis for comparison of financial results. A calculation of the non-GAAP measurements of adjusted income taxes, effective income tax rates, net earnings and diluted earnings per share follows (in millions except per share amounts):


	Three Months Ended						Six Months Ended
	June 30, 2023			July 1, 2022			June 30, 2023			July 1, 2022






Earnings before income taxes	$	159.6		$	146.3		$	317.0		$	269.3

Income taxes, as reported	$	25.4		$	29.0		$	53.5		$	51.1

Excess tax benefit from option exercises	5.5			0.4			8.1			1.9

Income taxes, adjusted	$	30.9		$	29.4		$	61.6		$	53.0

Effective income tax rate
As reported	15.9		%	19.8		%	16.9		%	19.0		%
Adjusted	19.4		%	20.0		%	19.4		%	19.7		%

Net Earnings, as reported	$	134.3		$	117.4		$	263.4		$	218.2

Excess tax benefit from option exercises	(5.5)			(0.4)			(8.1)			(1.9)

Net Earnings, adjusted	$	128.8		$	117.0		$	255.3		$	216.3

Weighted Average Diluted Shares	172.6			172.7			172.1			173.7
Diluted Earnings per Share
As reported	$	0.78		$	0.68		$	1.53		$	1.26
Adjusted	$	0.75		$	0.68		$	1.48		$	1.25

Three Months Ended Nine Months Ended
Sep 29,
2017 Sep 23,
2016 Sep 29,
2017 Sep 23,
2016
Income taxes, as reported $ 20.9
$ 22.2
$ 57.6
$ 62.7
Excess tax benefit from option exercises 3.2
—
20.5
—
Tax planning benefit 5.5
—
5.5
—
Income taxes, adjusted $ 29.6
$ 22.2
$ 83.6
$ 62.7

Effective income tax rate
   As reported 22 % 29 % 21 % 30 %
   Adjusted 31 % 29 % 31 % 30 %

Net Earnings, as reported $ 75.5
$ 54.4
$ 216.0
$ 144.9
Excess tax benefit from option exercises (3.2 ) —
(20.5 ) —
Tax planning benefit (5.5 ) —
(5.5 ) —
Net Earnings, adjusted $ 66.8
$ 54.4
$ 190.0
$ 144.9

Weighted Average Diluted Shares 58.2
57.0
57.9
56.9
Diluted Earnings per Share
   As reported $ 1.30
$ 0.95
$ 3.73
$ 2.55
   Adjusted $ 1.15
$ 0.95
$ 3.28
$ 2.55

Table of Contents

The following table presents an overview of components of net earnings as a percentage of net sales:


	Three Months Ended				Six Months Ended
	June 30, 2023		July 1, 2022		June 30, 2023		July 1, 2022
Net Sales	100.0	%	100.0	%	100.0	%	100.0	%
Cost of products sold	47.9		51.0		47.1		49.8
Gross Profit	52.1		49.0		52.9		50.2
Product development	3.8		3.6		3.8		3.7
Selling, marketing and distribution	12.2		11.3		12.3		12.0
General and administrative	8.0		7.0		8.0		7.9

Operating Earnings	28.1		27.1		28.8		26.6
Interest expense	0.3		0.3		0.3		0.7

Other (income) expense, net	(0.8)		0.1		(0.6)		0.1
Earnings Before Income Taxes	28.5		26.7		29.1		25.8
Income taxes	4.5		5.3		4.9		4.9
Net Earnings	24.0	%	21.4	%	24.2	%	20.9	%

Three Months Ended Nine Months Ended
September 29,
2017 September 23,
2016 September 29,
2017 September 23,
2016
Net Sales 100.0 % 100.0 % 100.0 % 100.0 %
Cost of products sold 46.4
46.0
46.1
46.6
Gross Profit 53.6
54.0
53.9
53.4
Product development 3.9
4.5
4.0
4.6
Selling, marketing and distribution 15.3
15.1
15.4
16.1
General and administrative 8.2
9.5
8.7
10.2
Operating Earnings 26.2
24.9
25.8
22.5
Interest expense 1.0
1.4
1.1
1.3
Other expense (income), net (0.2 ) 0.1
(0.1 ) —
Earnings Before Income Taxes 25.4
23.4
24.8
21.2
Income taxes 5.5
6.8
5.2
6.4
Net Earnings 19.9 % 16.6 % 19.6 % 14.8 %

Net Sales

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


	Three Months Ended				Six Months Ended
	June 30, 2023		July 1, 2022		June 30, 2023		July 1, 2022
Americas(1)	$	345.8	$	338.1	$	677.7	$	631.3
EMEA(2)	115.7		108.3		224.6		214.5
Asia Pacific	98.1		102.1		187.0		197.0
Consolidated	$	559.6	$	548.5	$	1,089.3	$	1,042.8

Three Months Ended Nine Months Ended
September 29,
2017 September 23,
2016 September 29,
2017 September 23,
2016
Americas⁽¹⁾
$ 217.7
$ 194.4
$ 639.1
$ 575.3
EMEA⁽²⁾
86.7
73.6
252.8
229.4
Asia Pacific 75.4
59.2
208.0
175.5
Consolidated $ 379.8
$ 327.2
$ 1,099.9
$ 980.2
(1) North, South and Central America, including the United States


~~(1)~~	~~North, South and Central America, including the United States~~


~~(2)~~	~~Europe, Middle East and Africa~~

(2)Europe, Middle East and Africa

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


	Three Months				Six Months
	Volume and Price	Acquisitions	Currency	Total	Volume and Price	Acquisitions	Currency	Total
Americas	2%	0%	0%	2%	7%	0%	0%	7%
EMEA	5%	0%	2%	7%	6%	0%	(1)%	5%
Asia Pacific	0%	0%	(4)%	(4)%	(1)%	0%	(4)%	(5)%
Consolidated	3%	0%	(1)%	2%	6%	0%	(2)%	4%

Three Months Ended Nine Months Ended
Volume and Price Acquisitions Currency Total Volume and Price Acquisitions Currency Total
Americas 11% 1% 0% 12% 11% 0% 0% 11%
EMEA 14% 0% 4% 18% 12% 0% (2)% 10%
Asia Pacific 28% 0% (1)% 27% 20% 0% (2)% 18%
Consolidated 15% 0% 1% 16% 13% 0% (1)% 12%

Gross Profit

Gross profit margin ~~rate decreased by one-half percentage point~~rates for the quarter and ~~increased one-half percentage point for the year to date. Favorable effects from higher production volume and realized pricing were offset in varying degrees for the quarter and the~~ year to date byincreased approximately 3 percentage points from the ~~unfavorable impact~~comparable periods last year. Strong price realization and favorable product and channel mix more than offset higher product costs.

Table of ~~product mix.~~Contents

Operating Expenses

Total operating expenses for the quarter increased $9$14 million (9(12 percent) ~~compared to~~from the ~~third quarter~~comparable period last year. ~~More than half~~The increase includes $4 million of ~~the increase was from increases in sales and earnings-based incentives and unallocated corporate operating expense (mostly from market-based stock~~incremental share-based compensation and ~~pension costs). Year-to-date~~$3 million of increased spending related to product development and other growth initiatives. Total operating expenses for the year to date increased $6$16 million (2(7 percent). from the comparable period last year. Volume and rate-related increases, higher product development spending and incremental share-based compensation accounted for most of the increase. Partially offsetting the year-to-date increase were ~~partially offset by a~~ $3 million ~~decrease~~of credit losses on customer receivables in ~~amortization~~Russia in the prior year that did not repeat and $2 million from favorable changes in currency translation rates.

Interest and Other (Income) Expense

Interest expense was flat for the quarter and for the ~~impact of currency translation.~~

year to date decreased $4 million as private placement debt was repaid in the first quarter last year. Other non-operating expenses decreased $5 million for the quarter and $7 million for the year-to-date mostly due to increased interest income and favorable market valuation changes on investments held to fund certain retirement benefits.

Income Taxes

The effective income tax rate was 16 percent for the quarter ~~was 22~~and 17 percent ~~down from 29 percent last year. The effective income tax rate~~ for the year to date, ~~was 21 percent,~~ down 4 percentage points and 2 percentage points, respectively, from ~~30 percent~~the comparable periods last ~~year. Adoption of a new accounting standard, requiring~~year, primarily due to increases in excess tax benefits ~~related to~~from stock option exercises to be credited to the income tax provision (formerly credited to equity), reduced the tax provision by $3.2 million for the quarter and $20.5 million for the year to date, decreasing the effective tax rate for the quarter and year to date by 3 and 7 percentage points, respectively. The effective tax rates for both the quarter and year to date were further reduced by the impacts of tax planning that will not recur in 2018 and foreign earnings taxed at lower rates than the U.S.exercises.

Segment Results

Certain measurements of segment operations compared to last year are summarized below:

Contractor Segment

The following table presents net sales and operating earnings as a percentage of sales for the Contractor segment

(dollars in millions):


	Three Months Ended						Six Months Ended
	June 30, 2023			July 1, 2022			June 30, 2023			July 1, 2022
Net Sales
Americas	$	188.4		$	199.7		$	372.5		$	370.2
EMEA	48.4			45.0			90.6			86.2
Asia Pacific	18.8			21.0			38.5			43.9
Total	$	255.6		$	265.7		$	501.6		$	500.3
Operating earnings as a percentage of net sales	27		%	26		%	28		%	25		%

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


	Three Months				Six Months
	Volume and Price	Acquisitions	Currency	Total	Volume and Price	Acquisitions	Currency	Total
Americas	(5)%	0%	(1)%	(6)%	1%	0%	0%	1%
EMEA	6%	0%	2%	8%	6%	0%	(1)%	5%
Asia Pacific	(6)%	0%	(5)%	(11)%	(7)%	0%	(5)%	(12)%
Segment Total	(3)%	0%	(1)%	(4)%	1%	0%	(1)%	0%

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Slower economic activity in construction markets in the Americas and Asia Pacific drove Contractor segment sales down 4 percent for the quarter. For the year to date, favorable response to new product offerings and improved product availability were able to offset reduced demand. Operating margin rates for the quarter and year to date increased 1 percentage point and 3 percentage points, respectively, as price realization and favorable product and channel mix more than offset higher product costs and increased spending on product development and growth initiatives.

Industrial Segment

The following table presents net sales and operating earnings as a percentage of sales for the Industrial segment

(dollars in millions):


	Three Months Ended						Six Months Ended
	June 30, 2023			July 1, 2022			June 30, 2023			July 1, 2022
Net Sales
Americas	$	65.7		$	61.5		$	129.0		$	115.8
EMEA	49.1			45.6			97.2			93.5
Asia Pacific	48.7			51.2			87.5			93.7
Total	$	163.5		$	158.3		$	313.7		$	303.0
Operating earnings as a percentage of net sales	34		%	35		%	35		%	36		%

Three Months Ended Nine Months Ended
September 29,
2017 September 23,
2016 September 29,
2017 September 23,
2016
Net Sales
Americas $ 74.9
$ 66.8
$ 219.8
$ 201.3
EMEA 52.1
44.4
146.1
134.2
Asia Pacific 51.5
39.7
143.8
119.5
Total $ 178.5
$ 150.9
$ 509.7
$ 455.0
Operating earnings as a percentage of net sales 35 % 34 % 35 % 32 %

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


	Three Months				Six Months
	Volume and Price	Acquisitions	Currency	Total	Volume and Price	Acquisitions	Currency	Total
Americas	7%	0%	0%	7%	11%	0%	0%	11%
EMEA	5%	0%	3%	8%	5%	0%	(1)%	4%
Asia Pacific	(1)%	0%	(4)%	(5)%	(2)%	0%	(5)%	(7)%
Segment Total	4%	0%	(1)%	3%	6%	0%	(2)%	4%

Three Months Ended Nine Months Ended
Volume and Price Acquisitions Currency Total Volume and Price Acquisitions Currency Total
Americas 11% 1% 0% 12% 9% 0% 0% 9%
EMEA 13% 0% 5% 18% 10% 0% (1)% 9%
Asia Pacific 30% 1% (1)% 30% 22% 1% (3)% 20%
Segment Total 17% 0% 1% 18% 12% 1% (1)% 12%

Sales ~~increased~~growth in ~~all Industrial segment product applications. Year-to-date~~the Americas and EMEA for the quarter and year to date was partially offset by weakness in Asia Pacific, where declines in finishing system sales and other project activity continued. The unfavorable effects of currency translation drove a 1 percentage point decrease in the operating margin rate for the ~~Industrial segment increased 3 percentage points compared~~quarter and year to ~~last year. Favorable effects of higher sales volume and expense leverage were partially offset by the unfavorable effect of currency translation.~~date.

Process Segment

The following table presents net sales and operating earnings as a percentage of sales for the Process segment

(dollars in millions):


	Three Months Ended						Six Months Ended
	June 30, 2023			July 1, 2022			June 30, 2023			July 1, 2022
Net Sales
Americas	$	91.7		$	77.0		$	176.2		$	145.4
EMEA	18.2			17.6			36.8			34.7
Asia Pacific	30.6			29.9			61.0			59.4
Total	$	140.5		$	124.5		$	274.0		$	239.5
Operating earnings as a percentage of net sales	31		%	25		%	31		%	24		%

Three Months Ended Nine Months Ended
September 29,
2017 September 23,
2016 September 29,
2017 September 23,
2016
Net Sales
Americas $ 47.9
$ 43.0
$ 139.1
$ 124.3
EMEA 12.4
12.7
41.2
40.1
Asia Pacific 13.4
11.4
36.8
31.7
Total $ 73.7
$ 67.1
$ 217.1
$ 196.1
Operating earnings as a percentage of net sales 16 % 15 % 18 % 13 %

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


	Three Months				Six Months
	Volume and Price	Acquisitions	Currency	Total	Volume and Price	Acquisitions	Currency	Total
Americas	19%	0%	0%	19%	20%	1%	0%	21%
EMEA	3%	0%	1%	4%	7%	0%	(1)%	6%
Asia Pacific	5%	0%	(3)%	2%	6%	0%	(3)%	3%
Segment Total	14%	0%	(1)%	13%	15%	1%	(2)%	14%

Three Months Ended Nine Months Ended
Volume and Price Acquisitions Currency Total Volume and Price Acquisitions Currency Total
Americas 11% 0% 0% 11% 12% 0% 0% 12%
EMEA (3)% 0% 1% (2)% 7% 0% (4)% 3%
Asia Pacific 17% 0% 0% 17% 17% 0% (1)% 16%
Segment Total 9% 0% 1% 10% 12% 0% (1)% 11%

~~The~~Double-digit sales growth continued in the Process segment ~~had solid sales~~for the quarter and year to date from the comparable periods last year. Sales growth for the quarter and year to date was particularly strong in ~~legacy~~the automatic lubrication, vehicle service and semiconductor product ~~applications, partially offset by the effects of continued weakness in Oil and Natural Gas. Year-to-date~~applications. The operating margin ~~rates~~rate for this segment increased 56 percentage points ~~compared to last year due to higher sales volume, favorable expense leverage and a decrease in intangible amortization related to the impairment recorded in the fourth quarter of 2016.~~

~~Contractor Segment~~

~~The following table presents net sales and operating earnings as a percentage of sales~~ for ~~the Contractor segment~~

~~(dollars in millions):~~

Three Months Ended Nine Months Ended
September 29,
2017 September 23,
2016 September 29,
2017 September 23,
2016
Net Sales
Americas $ 94.9
$ 84.6
$ 280.2
$ 249.7
EMEA 22.3
16.5
65.6
55.2
Asia Pacific 10.5
8.1
27.3
24.3
Total $ 127.7
$ 109.2
$ 373.1
$ 329.2
Operating earnings as a percentage of net sales 26 % 23 % 25 % 22 %

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

Three Months Ended Nine Months Ended
Volume and Price Acquisitions Currency Total Volume and Price Acquisitions Currency Total
Americas 12% 0% 0% 12% 12% 0% 0% 12%
EMEA 29% 0% 5% 34% 20% 0% (1)% 19%
Asia Pacific 30% 0% 1% 31% 13% 0% 0% 13%
Segment Total 16% 0% 1% 17% 13% 0% 0% 13%

~~Contractor segment sales increased in all channels. Operating margin rates for both~~ the quarter and ~~the~~7 percentage points year to date ~~for~~from the ~~Contractor segment increased 3 percentage points compared to~~comparable periods last year primarily due to ~~higher sales volume, improved gross margin rate~~price realization and ~~favorable~~ expense leverage.

Liquidity and Capital Resources

Net cash provided by operating activities of ~~$246~~$282 million increased ~~$38~~$147 million compared to the first ~~nine months~~half of last year, mostly driven by higher net earnings, decreased inventory purchases and lower salary and incentive payments. Inventory purchases were lower in the ~~increase~~first six months of 2023 compared to the same period last year as logistical and production constraints from disruptions in ~~net earnings.~~the supply chain improved. Increases in accounts receivable ~~inventories and accrued liabilities~~ reflect growth in business activity in the first ~~nine months~~half of ~~2017. The Company used~~2023. Significant uses of cash in 2023 included plant and equipment additions of ~~$13~~$92 million and dividend payments of $79 million. Net proceeds from shares issued in ~~2017~~2023 totaled $52 million, which was partially offset by share repurchases of $8 million.

In 2022, significant uses of cash included share repurchases of $120 million, plant and ~~$49~~equipment additions of $89 million, ~~in 2016~~long-term debt payments of $75 million, dividend payments of $71 million, and $25 million to acquire businesses that were not material to the consolidated financial statements. ~~Other significant uses of cash in 2017 included share repurchases of $90 million (partially offset by $43 million of net proceeds~~Proceeds from shares ~~issued), cash dividends~~issued in 2022 totaled $23 million.

As of ~~$60 million, property, plant and equipment additions of $29 million and a contribution of $20 million to a funded pension plan.~~

At September 29, 2017, cash balances of $8 million were restricted to funding of certain self-insured loss reserves. Restricted cash is included within other current assets on the Company's consolidated balance sheet.

~~At September 29, 2017,~~June 30, 2023, the Company had ~~various lines~~available liquidity of ~~credit totaling $545~~$1,280 million, including cash and cash equivalents of $521 million, of which ~~$540~~$206 million was ~~unused. Internally generated funds~~held outside of the U.S., and available credit under existing committed credit facilities of $759 million.

Cash balances and unused financing sources are expected to provide the Company with the flexibility to meet its liquidity needs in ~~2017.~~2023, including its capital expenditure plan, planned dividends, share repurchases, acquisitions and operating requirements. Capital expenditures for 2023 are expected to be approximately $200 million, including $130 million in facility expansion projects. The Company may make opportunistic share repurchases going forward.

Outlook

~~Demand levels remained robust and broad based~~Incoming order rates are in line with the ~~third quarter. We expect the positive business environment to continue into 2018, however we do note that our fourth quarter represents our most difficult comparable~~Company's expectations of the year. In addition to the strong fourth quarter last year, we also had 14 weeks compared to only 13 weeks in this year's fourth quarter. Consequently, we anticipate low single-digit organic, constant currency growth in the fourth quarter. With that outlook we have the possibility to achieve double-digit salesrevenue growth for the full year ~~2017.~~of low single-digits on an organic, constant currency basis.

Cautionary Statement Regarding Forward-Looking Statements

The Company desires to take advantage of the “safe harbor” provisions regarding forward-looking statements of the Private Securities Litigation Reform Act of 1995 and is filing this Cautionary Statement in order to do so. From time to time various forms filed by our Company with the Securities and Exchange Commission, including our Form 10-K, Form 10-Qs and Form 8-Ks, and other disclosures, including our ~~2016~~2022 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

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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: the impact of the COVID-19 pandemic on our business; Russia's invasion of Ukraine, and the sanctions and actions taken against Russia and Belarus in response to the invasion;economic conditions in the United States and other major world economies; our Company’s growth strategies, which include making acquisitions, investing in new products, expanding geographically and targeting new industries; ~~economic conditions in the United States and other major world economies;~~ changes in currency translation rates; the ability to meet our customers’ needs and changes in ~~laws and regulations; compliance with anti-corruption and trade laws;~~product demand; supply interruptions or delays; security breaches; new entrants who copy our products or infringe on our intellectual property; risks incident to conducting business internationally; ~~the ability to meet our customers’ needs and~~catastrophic events; changes in ~~product demand; supply interruptions~~laws and regulations; compliance with anti-corruption and trade laws; changes in tax rates or ~~delays; security breaches;~~the adoption of new tax legislation; the possibility of asset impairments if acquired businesses do not meet performance expectations; political instability; results of and costs associated with litigation, administrative proceedings and regulatory reviews incident to our ~~business as well as indemnification claims under~~business; our ~~asset purchase agreement with Carlisle Companies Incorporated, Carlisle Fluid Technologies, Inc.,~~ability to attract, develop and ~~Finishing Brands Holdings Inc.;~~retain qualified personnel; the possibility of decline in purchases from a few large customers of the Contractor segment; variations in activity in the construction, automotive, mining and oil and natural gas industries; ~~our ability to attract, develop~~ and ~~retain qualified personnel;~~the impact of declines in interest rates, asset values and ~~catastrophic events.~~investment returns on pension costs and required pension contributions. Please refer to Item 1A of our Annual Report on Form 10-K for fiscal year ~~2016~~2022 and Item 1A of this Form 10-Q for a more comprehensive discussion of these and other risk factors. These reports are available on the Company’s website at www.graco.com and the Securities and Exchange Commission’s website at www.sec.gov. Shareholders, potential investors and other readers are urged to consider these factors in evaluating forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements.

Investors should realize that factors other than those identified above and in Item 1A might prove important to the Company’s future results. It is not possible for management to identify each and every factor that may have an impact on the Company’s operations in the future as new factors can develop from time to time.

Item 3.Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes related to market risk from the disclosures made in the Company’s ~~2016~~2022 Annual Report on Form 10-K.

Item 4.Controls and Procedures

Evaluation of disclosure controls and procedures

As of the end of the fiscal quarter covered by this report, the Company carried out an evaluation of the effectiveness of the design and operation of its disclosure controls and procedures. This evaluation was done under the supervision and with the participation of the Company’s President and Chief Executive Officer and the Chief Financial Officer and Treasurer. Based upon that evaluation, the Company's President and Chief Executive Officer and the Chief Financial Officer and Treasurer ~~the Vice President, Controller and Information Systems, and the Vice President, General Counsel and Secretary. Based upon that evaluation, they~~ concluded that the Company’s disclosure controls and procedures are effective.

Changes in internal controls

During the quarter, there was no change in the Company’s internal control over financial reporting that has materially affected or is reasonably likely to materially affect the Company’s internal control over financial reporting.

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PART IIOTHER INFORMATION

Item 1A.Risk Factors

There have been no material changes to the Company’s risk factors from those disclosed in the Company’s ~~2016~~2022 Annual Report on Form 10-K.

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Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

On ~~April 24, 2015,~~December 7, 2018, the Board of Directors authorized the ~~Company to~~ purchase of up to ~~6,000,000~~18 million shares of ~~its outstanding~~ common stock, primarily through ~~open-market~~open market transactions. The authorization is for an indefinite period of time or until terminated by the Board.

In addition to shares purchased under the Board ~~authorizations,~~authorization, the Company purchases shares of common stock held by employees who wish to tender owned shares to satisfy the exercise price or tax due upon exercise of options or vesting of restricted stock.

Information on issuer purchases of equity securities follows:


Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (at end of period)
April 1, 2023 - April 28, 2023	—	$	—	—	14,856,080
April 29, 2023 - May 26, 2023	—	$	—	—	14,856,080
May 27, 2023 - June 30, 2023	—	$	—	—	14,856,080

Period
Total Number
of Shares Purchased

Average Price
Paid per Share
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
Maximum Number of Shares that May Yet Be
Purchased Under the Plans or Programs
(at end of period)
Jul 1, 2017 - Jul 28, 2017 (1) 31,499
$ 102.10
—
2,935,868
Jul 29, 2017 - Aug 25, 2017 —
$ —
—
2,935,868
Aug 26, 2017 - Sep 29, 2017 —
$ —
—
2,935,868

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Item 5.Other Information

~~(1) On February 21, 2017,~~

During the Company entered into an accelerated share repurchase arrangement (“ASR”) with a financial institution. In exchange for an up-front payment of $90 million, the financial institution delivered 850,000 shares of Company common stock with a fair value of $78 million. The total number of shares ultimately delivered under the ASR is determined at the end of the purchase period based on the volume weighted-average price (“VWAP”)three months ended June 30, 2023, none of the Company’s ~~common stock during that period. The purchase period ended~~directors or officers (as defined in Rule 16a-1(f) of the ~~third quarter and~~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 ~~Company received an additional 31,499 shares to complete the ASR at an average realized price~~Securities Act of ~~$102.10 per share.~~1933).

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Item 6.Exhibits



3.1	Restated Articles of Incorporation as amended December ~~9, 2016.~~ 8, 2017. ((Incorporated by reference to Exhibit 3.1 to the ~~Company’s~~Company's Report on Form 8-K filed December ~~9, 2016.~~8, 2017.)

3.2	Restated Bylaws as amended February ~~14, 2014.~~ 17, 2023. ((Incorporated by reference to Exhibit 3.2 to the Company’s ~~2013~~2022 Annual Report on Form 10-K.)

10.1	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.)

10.2	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.)

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

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

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

99.1		Press Release Reporting ~~Third~~Second Quarter Earnings dated ~~October 25, 2017.~~July 26, 2023.

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.~~File (formatted as iXBRL and contained in Exhibit 101).

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

GRACO INC.

Date:

July 26, 2023

By:

/s/ Mark W. Sheahan

~~Date:~~

~~October 25, 2017~~

~~By:~~

~~/s/ Patrick J. McHale~~Mark W. Sheahan

~~Patrick J. McHale~~

President and Chief Executive Officer

(Principal Executive Officer)

Date:

~~October 25, 2017~~July 26, 2023

By:

/s/ ~~Christian E. Rothe~~David M. Lowe

~~Christian E. Rothe~~David M. Lowe

Chief Financial Officer and Treasurer

(Principal Financial Officer)

Date:

~~October 25, 2017~~July 26, 2023

By:

/s/ ~~Caroline M. Chambers~~Christopher D. Knutson

~~Caroline M. Chambers~~Christopher D. Knutson

Executive Vice President, Corporate Controller

~~and Information Systems~~

(Principal Accounting Officer)


	Nine Months Ended							Six Months Ended
	September 29, 2017			September 23, 2016				June 30, 2023		July 1, 2022
Cash Flows From Operating Activities							Cash Flows From Operating Activities
Net Earnings	$	216,020		$	144,887		Net Earnings	$	263,434	$	218,221
Adjustments to reconcile net earnings to net cash provided by operating activities							Adjustments to reconcile net earnings to net cash provided by operating activities
Depreciation and amortization	33,620			36,846			Depreciation and amortization	36,117		31,453
Deferred income taxes	58			(8,470		)	Deferred income taxes	7,650		14,743
Share-based compensation	19,154			16,143			Share-based compensation	18,417		14,386

Change in							Change in
Accounts receivable	(31,614		)	6,100			Accounts receivable	(17,421)		(56,263)
Inventories	(16,788		)	1,628			Inventories	(184)		(70,879)
Trade accounts payable	4,319			1,057			Trade accounts payable	(8,243)		8,369
Salaries and incentives	7,214			(6,914		)	Salaries and incentives	(10,179)		(29,201)
Retirement benefits and deferred compensation	(8,595		)	7,431			Retirement benefits and deferred compensation	1,953		349
Other accrued liabilities	25,402			9,379			Other accrued liabilities	(5,728)		(386)
Other	(2,642		)	(367		)	Other	(3,493)		4,193
Net cash provided by operating activities	246,148			207,720			Net cash provided by operating activities	282,323		134,985
Cash Flows From Investing Activities							Cash Flows From Investing Activities
Property, plant and equipment additions	(28,899		)	(34,347		)	Property, plant and equipment additions	(92,232)		(88,861)
Acquisition of businesses, net of cash acquired	(12,905		)	(48,643		)	Acquisition of businesses, net of cash acquired	—		(25,296)
Change in restricted assets	1,349			150
Other	(124		)	(130		)	Other	(940)		(397)
Net cash provided by (used in) investing activities	(40,579		)	(82,970		)
Net cash used in investing activities							Net cash used in investing activities	(93,172)		(114,554)
Cash Flows From Financing Activities							Cash Flows From Financing Activities
Borrowings (payments) on short-term lines of credit, net	(3,361		)	(7,349		)
Borrowings on long-term line of credit	293,880			532,724
Payments on long-term line of credit	(299,565		)	(569,639		)
Borrowings on short-term lines of credit, net							Borrowings on short-term lines of credit, net	28,966		13,830

Payments on long-term debt							Payments on long-term debt	—		(75,000)
Payments of debt issuance costs							Payments of debt issuance costs	(1,025)		—
Common stock issued	53,422			28,729			Common stock issued	52,053		23,410
Common stock repurchased	(90,160		)	(48,050		)	Common stock repurchased	(7,766)		(120,021)
Taxes paid related to net share settlement of equity awards	(10,735		)	(3,165		)	Taxes paid related to net share settlement of equity awards	(1,225)		(1,219)
Cash dividends paid	(60,273		)	(55,058		)	Cash dividends paid	(78,991)		(71,341)
Net cash provided by (used in) financing activities	(116,792		)	(121,808		)
Net cash provided (used) in financing activities							Net cash provided (used) in financing activities	(7,988)		(230,341)
Effect of exchange rate changes on cash	(1,142		)	(1,915		)	Effect of exchange rate changes on cash	274		(1,033)
Net increase (decrease) in cash and cash equivalents	87,635			1,027			Net increase (decrease) in cash and cash equivalents	181,437		(210,943)
Cash and Cash Equivalents							Cash and Cash Equivalents
Beginning of year	52,365			52,295			Beginning of year	339,196		624,302
End of period	$	140,000		$	53,322		End of period	$	520,633	$	413,359


	Three Months Ended				Six Months Ended
	June 30, 2023		July 1, 2022		June 30, 2023		July 1, 2022
Balance, beginning	$	4,232	$	6,474	$	6,130	$	3,254
Additions charged to costs and expenses	417		26		280		3,246
Deductions from reserves (1)	(449)		(542)		(2,269)		(575)
Other additions (deductions) (2)	(1)		(269)		58		(236)
Balance, ending	$	4,199	$	5,689	$	4,199	$	5,689


	September 29, 2017		December 30, 2016			June 30, 2023		December 30, 2022
Accrued self-insurance retentions	$	7,164	$	7,105	Accrued self-insurance retentions	$	9,203	$	9,338
Accrued warranty and service liabilities	9,876		8,934		Accrued warranty and service liabilities	15,413		14,674
Accrued trade promotions	8,126		6,007		Accrued trade promotions	11,434		13,799
Payable for employee stock purchases	7,188		9,328		Payable for employee stock purchases	7,515		16,497
Customer advances and deferred revenue	21,097		9,400		Customer advances and deferred revenue	58,226		50,747
Income taxes payable	9,778		8,608		Income taxes payable	19,369		15,987
Tax payable, other					Tax payable, other	9,337		9,614
Right of return refund liability					Right of return refund liability	18,257		18,449
Operating lease liabilities, current					Operating lease liabilities, current	9,126		9,555

Other	27,454		22,505		Other	30,977		32,133
Total	$	90,683	$	71,887	Total	$	188,857	$	190,793



	Pension and Postretirement Medical			Cumulative Translation Adjustment			Total
Balance, June 24, 2016	$	(67,876	)	$	(44,612	)	$	(112,488	)
Other comprehensive income (loss) before reclassifications	—			(6,642		)	(6,642		)
Amounts reclassified from accumulated other comprehensive income	1,088			—			1,088
Balance, September 23, 2016	$	(66,788	)	$	(51,254	)	$	(118,042	)



Balance, June 30, 2017	$	(74,125	)	$	(48,455	)	$	(122,580	)
Other comprehensive income (loss) before reclassifications	—			574			574
Amounts reclassified from accumulated other comprehensive income	1,453			—			1,453
Balance, September 29, 2017	$	(72,672	)	$	(47,881	)	$	(120,553	)



Balance, December 25, 2015	$	(69,922	)	$	(34,575	)	$	(104,497	)
Other comprehensive income (loss) before reclassifications	—			(16,679		)	(16,679		)
Amounts reclassified from accumulated other comprehensive income	3,134			—			3,134
Balance, September 23, 2016	$	(66,788	)	$	(51,254	)	$	(118,042	)



Balance, December 30, 2016	$	(76,426	)	$	(65,802	)	$	(142,228	)
Other comprehensive income (loss) before reclassifications	—			17,921			17,921
Amounts reclassified from accumulated other comprehensive income	3,754			—			3,754
Balance, September 29, 2017	$	(72,672	)	$	(47,881	)	$	(120,553	)



	2017		2018		2019		2020		2021		Thereafter
Estimated Amortization Expense	$	14,834	$	14,959	$	14,630	$	14,448	$	14,279	$	64,311



	Three Months Ended						Nine Months Ended
	Sep 29, 2017			Sep 23, 2016			Sep 29, 2017			Sep 23, 2016
Income taxes, as reported	$	20.9		$	22.2		$	57.6		$	62.7
Excess tax benefit from option exercises	3.2			—			20.5			—
Tax planning benefit	5.5			—			5.5			—
Income taxes, adjusted	$	29.6		$	22.2		$	83.6		$	62.7

Effective income tax rate
As reported	22		%	29		%	21		%	30		%
Adjusted	31		%	29		%	31		%	30		%

Net Earnings, as reported	$	75.5		$	54.4		$	216.0		$	144.9
Excess tax benefit from option exercises	(3.2		)	—			(20.5		)	—
Tax planning benefit	(5.5		)	—			(5.5		)	—
Net Earnings, adjusted	$	66.8		$	54.4		$	190.0		$	144.9

Weighted Average Diluted Shares	58.2			57.0			57.9			56.9
Diluted Earnings per Share
As reported	$	1.30		$	0.95		$	3.73		$	2.55
Adjusted	$	1.15		$	0.95		$	3.28		$	2.55