Graco (GGG) 22 Oct 202020 Q3 Earnings call transcript

Company Profile

Participants

Kathy Schoenrock	Executive Vice President and Corporate Controller
Pat McHale	President and Chief Executive Officer
Mark Sheahan	Chief Financial Officer and Treasurer
Deane Dray	RBC Capital Markets
Mike Halloran	Robert W. Baird & Company
Jeff Hammond	KeyBanc
Matt Summerville	D.A. Davidson
Saree Boroditsky	Jefferies
Bryan Blair	Oppenheimer
Walter Liptak	Seaport
Joe Ritchie	Goldman Sachs
Andrew Buscaglia	Berenberg
Brett Kearney	Gabelli Funds

Call transcript

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Operator

Good morning, and welcome to the Third Quarter Conference Call for Graco Inc.

If you wish to access the replay for this call, you may do so by dialing 1-855-859-2056 within the United States or Canada. The dial-in number for international callers is 404-537-3406. The conference ID number is 8334616. The replay will be available through 1:00 p.m. XX, October Wednesday, Time, XXXX. Eastern information Graco presentation, a slide in is has available player. additional which webcast as PowerPoint the available part of conference management. of will answers request company, their up the after from the and for remarks At opening questions the open we

These various statements be made Actual call, provisions including www.sec.gov. of of Company's are Safe for expectations, the various the about by and Company's These future. of may materially the risk at for XA identified www.graco.com available factors, Form from a as Item differ Securities Annual in may those most XXXX Harbor recent Act. prospects purposes results the and the on the remarks Litigation the Report XX-K remarks reports this management on their indicated SEC at During of plans website XX-Q. constitute website Company's quarterly Reform of Item and report Private forward-looking the XA in Form those on result

management's Schoenrock, these they and update are I turn over Forward-looking statements company future time of of information to The Controller. obligation Kathy President or the current as only reflect now new no to events. undertakes in made. Executive the light statements Vice will speak and Corporate conference views

Kathy Schoenrock

Good morning. and McHale I'm here today Mark Sheahan. with Pat

XX% helpful. of slides totaled increase $XXX or posted $XXX million X quarter Net totaled conference provide the totaled the option tax impact the point on be sale quarter, the in million last currency quarter year-to-date. No After of been adjusting that quarter. The $XXX have at consistent items, exercises earnings Alco translation or share. rate. the an year, may net from an percentage $X.XX in stock Acquisitions UK-based expected Sales are quarter added Our additional additional million X% and Company's increase million call diluted the of earnings from our for valve third of website per business information totaled and $XXX,XXX impairment $X.XX share. third July for from other non-recurring sale. was tax diluted the and Impairment per and excess XXXX. in charges for charges $XX.X the finalized of of benefits growth

was margin year, third volumes, favorable segment up increased, impact the mix, unfavorable effect quarter and material rate currency in pricing the offset channel the in declined. compared Industrial last cost, as gross lower improved and more the sales slightly to of Process factory and product realized of Our sales than the while Contractor segments

products the products increasing contract production additional the employees managed certain home the for levels by factory is labor other from over center moving lines, capacity particularly time. in segment, in Given the growth in channel Contractor working investing We've in increase demand and factories, strained.

first in earnings in rates due is first tax continue XXXX. rate XX% the expenses quarter X% the countries levels basis, points current XX% the last as the than as Operating of to adjusted an X reported closely. the On year. We for and rate. lower to to product impact compared the lower earnings situation half reductions towards quarter demand the and down percentage are half in tax last volume in progress decrease to based the costs. The from higher quarter meeting development expenses third rate were from year, earnings foreign in offset quarter with and was comparable the rate The the of and making was U.S. monitor the

million the operations the fourth to flow quarter and related in $XXX expansion for option stock to operating from million working as as year-to-date year. lower continue excess increases exercises several to we well year, of capabilities, in as totaled rate totaled and the earnings XX% $XX manufacturing XX% one-time Cash due to our compared primarily invest tax locations. to benefits items, full other expected expenditures million last from to effect tax as and is the capital. Excluding year-to-date be $XXX Capital both

point XX expenditures and in period we would are you including thought the see be inherent year. we of expansion so order our expected projects, are approximately there’s the last XX the On to approximately XXXX, experiencing quarter. rates the Page ago, declines for reflected For to in forward final they facility million, helpful data, rest provide from segment. of what our our booking while I what although Similar heading less remains experiencing QX, an in we into October still the than short million Process two deck, such $XX it time. severe be $XX year year business Industrial a can are fourth rate by quarters, were businesses a contractor average looking strong. volatility to our slide six-week know comments Nonetheless, order of through that full would out capital to few current a

mix favorable a impact prior year. would comments. the to As now Pat U.S. the continues have on – of turn full call business rates, continue assuming X% negligible approximately have X% to earnings, translation and the sales At the full the to to weaken, year on the effect of of been current on the have I’ll as quarter fourth impact favorable. further and for and over sales currency be same will the dollar earnings for

Pat McHale

the segment working to it’s Residential the and display. to full to want been comments to of product assist, organic been responded market unusual construction The customers across region. Asia growth temporary along employees, well the Thank for The our appetite low new Industrial activity been accounted from the relocated remains tirelessly major single activity demand muted incredibly end remains is our regions the markets. to solid long and been who company’s has who capital has special construction limited, quarter, hours, our in be during factory the to spending improving home quarter. most business as thank on teamwork improved employees morning with segment for to constant All quarter, digits singlehandedly been who’ve grew American year facilities my Graco employees, Pacific achieved demand. for basis. currency the the improvement QX although I and the offerings. this [indiscernible] you, factory for gradually market factories Kathy. favorably the many on North meet unprecedented of Contractor Contractor morning, constrained. sales management and decline working from all record industries Despite The all have other quarterly by the in have contractor Graco robust. is below will driven a last Access sales environment, Good we strength an operating this everyone. the thanks industrial

showing areas such of specific aren’t as Some foam, offset and spray battery electronics large enough signs life, clients elsewhere. the to

although significantly the an pump than Reduced and year, during lubrication and year. The lower Demand quarter, easier low in segment by last factory comp with it and that by improved you’ll earnings more semiconductor quarter, management, expense very businesses. Process declines end spending performance for environmental our teens the the sound resulted declined despite in and was from Pacific discretionary the on market growth realization in quarter our solid the up industrial recall of businesses, segment diaphragm industrial offset operating as sales. improved for softened for this half travel, XXXX. the in good demand against Asia second in price

to While economic we it’s for things conditions, near-term difficult the to predict expect remain short-term. challenging

strategies. to our to we’ve throughout we fully execute done downturns, against intend As prior continue XXXX and through

morale factories steam full solid on in and markets, expect our to conditions ahead good We’re and workforce product improve. are make our initiatives development globally continue do by or niche for new adding finding we’re We’ve focused organically growth attractive kept on are to channels well as capital whether we profitable our Operator, investments in ROI opportunities ready acquisition. questions. is intact, economic

Operator

session you. this Capital time. [Operator at your comes from question. will The Instructions] question-and-answer first question with RBC Deane Our Please state Thank Dray Markets. begin

Deane Dray

morning, everyone. Good you. Thank

Pat McHale

morning, Good Deane.

Kathy Schoenrock

morning. Good

Deane Dray

manufacturing start globe, of explained like gives counterparts quarter, an concentration shift opposed option over observation manufacturing Graco’s employees many to off all your the around. that you you Hey, in this with flexibility the Minnesota, just as as spread that and of the purposely really you

some So Is bit I What’s the we’ve context. volatility, your question. seeing a been cadence here’s steady segment slowing? monthly that. love the and issues, here of seeing monthly take this to – of your the within monthly there’s brought the on But a industrials really get are but because numbers liked and their comps improvement, slowing

Pat McHale

it. So I into read too much would

of As we’ve influence business, that and industrial as the even past, the about projects incoming got number talked we quarter-to-quarter variability fair can sales in timing have of we’ve our orders. a of in timing the

thinking rebound be industrial, it’s more QX. and seeing quarter, that into business the that we’re activity reflective that still industrial we in fourth our of in we’re should just challenging is like going kind the I the you of saw here – strong contractor in seeing the fact not like think

Deane Dray

helpful. That’s

do really Just address strength? work from of then sustainability can on seen but what’s the we how megatrend, your helpful. introductions, but going would some first still terms be typically, the get XXXX to that color on new that have home, point, And expectation work Thanks. mean, outlook of of this I this pricing you there are increase, would your home, contractor in the product quarter, on this. you you

Pat McHale

Yes.

terms think it’s pricing going internal be own cost of in as factories, control our of in and our launches. terms new I to In investments usual initiatives, product business

in that’s We impact be an going us ahead. haven’t full XXXX. cut went on and to speed anything It’s

April internally we the for So Obviously, the points of market numbers of external see there’s frame. magnitude probably into we’re that we up putting XXXX. real okay XXXX. and from is data and The saw demand right looks what external environment I But about up think construction is. down that there. that time on into terms influence some ascertain I in going hard And going of don’t feel the and kind pretty good now, changes to that slow that pent really any we’re seeing contractor huge May that it’s

to in carrying that is business hopefully going So and keep hang there us.

Deane Dray

Congrats helpful. That’s really to everyone.

Operator

line question the with state Baird of Mike from Please W. Halloran question. comes Our & Company. your Robert next

Mike Halloran

good morning everyone. Hey,

Pat McHale

Mike. morning, Good

Mike Halloran

are one So guys contractor things here, facilities. a the CapEx from guys pretty build out in You here? full couple retrospect, the speed. of well timed obviously, you a did side, plan running What’s pretty

to float that needs of segments? we meet that while three you demand better around or maneuvering like is throughout Is the lot understanding all this can we just for a core to doing demand. CapEx happen make get there the a You’re incremental a what sure looks can

Pat McHale

is CapEx on I’ll here a done decentralized basis. call So it

got with going to get good comes So an ROI is that’s anybody that in idea, a CapEx.

areas CapEx because be other say, projects have and investments outlook Those and that as the muted a going on is think if fairly are we talk mortar. the business basis of given is in for going machines bit continue of you, couple but are of factory do that part the some And world and demand adding some the So that our usual, Kathy less teed just gave look, there a the bricks expectations We bricks reflected and be we or to up. company about lower. in mortar perhaps just are we spending program. more grow, I around regular here and to to a size

Mike Halloran

and Is internally later some clarification to early segment band. to guys through pent quarter, I assuming a how least part on was forward cadence question. at in a month, are stability still the there quarter earlier the The basis? you but the then So thinking and of going of a of up in month demand he’s then there the through from kind choppy the probably you’ve quarter. at a feeling industrial bottom an And some that reached mix washed there be secondarily, within a industrial about that level was

Pat McHale

back to me, going things spending of side likely capital to to the to think we return to all normal. however, kind engineers of like the and it industrial there less home from people working that to QX, numbers feels work saw And be is a we’re until back get in get lot there’s still on I not and

is view likely well, seen the more of and come home think it and as that resulting the our to some when is probably are to the back implemented some it’s given going I orders maybe of yet. And fact of Europe from awhile. lows. COVID in especially, I So the It’s here that we’ve weeks back, think not kind the here work for being increases kind are last few geographies, continue that’s in undetermined

Mike Halloran

the then And question. mix

Pat McHale

project year last again I this see year. have the don’t that major business we I some in did QX see think any mix, probably won’t in shipped changes QX, we Mike, of in that

on an as been could seeing and last that order line, But incoming the top terms I our mix overall the in so Pat’s rates for have profitability. consistent as right, we’re few think months. obviously what of here well impact has fairly And

Mike Halloran

Well, I Very execution, it. appreciate Great. Thanks. good guys.

Operator

Hammond comes KeyBanc. with Please state question. Our next from Jeff question your

Jeff Hammond

Hey, good morning.

Pat McHale

morning. Good

Mark Sheahan

Hi, Jeff.

Jeff Hammond

just concerns non-res it maybe know contractor, the lot about hearing what commercial at about stay is and of contractor. on speak drivers Just a the and residential. you’re I the lot cycle of there’s seems a of anecdotally like kind on home

Pat McHale

plays Yes. big to is it My interesting pretty, be cities going is, the view probably It’s is going how going on to that be particularly office forward. pretty out. the in to this all see space dampened,

of some There’s office housing some talk of of also However metros other into of potential warehousing conversion segments and the strong. looking really and for about these more buildings units. some sorts are

happening there’s dislocation So a here.

of all to it if when that in is I part a vaccine going a next could good beginning there the depend year. and on, vaccine picture different how it’s early think if was is of I think good it? and there’s look

if it next available there’s baked look different, I vaccine could half that’s think year. a later

everybody’s – as to of to out it’s to kind think to this going watch figure go. we’re I have going So we and have

Jeff Hammond

know, see in starting there. slow then tariffs like kind just you’re can down you’re a it’s uptick. Asia? trade don’t of growth speak or what I it seeing some the challenges big you around know, were easy to some if and if And see you Okay. and of you’re starting comps to, seems to just real demand I seeing

Pat McHale

I’d from say Yes. Jeff, what in saying it’s we definitely year. earlier improved were the

easy in last fairly You’re what right, to We QX year. last in we down were really versus did we a comparison XX% QX had close year.

the hockey here. seeing an So it a we’re growth not stick, we’re – bounce comp a and easier that rates seeing back was

we’re out we get We’re lockdowns future really kind next of that and the a hopeful whether dependent will happen the growth of underlying of seeing upon that of some as play course, improvement that thing. for year and in us spot rest and put here into all type decent year,

Jeff Hammond

lot. Okay. a Thanks

Operator

Summerville D.A. Davidson. Our state from next with comes question Matt Please your question.

Matt Summerville

Thanks.

me here. color a for just little market one more Just Maybe business. the bit on industrial end

may to little of what might be more a what mentioned Jeff the of are was the markets You be a hit, curious maybe among Thank referencing to couple end brighter you. specificity then hardest I’m spots. and what or markets still around signs with driving inflection, as Asia. that respect showing did that improvement

Pat McHale

its make Yes, that’s Graco I’ll is Automotive and challenged. a much in. aerospace let on I’ll couple mean, I obviously been market a and nice comments back. pretty has for chime Mark

factors. the think depend is other in I rebound to automotive on going some

industries of and oil not and So while a can definitely see we’re it’s now. going world to gas, around to watch automotive how is other challenged influences our the have right lot space, quickly gas industrial Oil directly market and the in recover. and

before When think are I general wants markets of needs us most picture and back be easy running, may highs, comments start any it kind to a market of again. A that of and chime that we to with other the lot big industrial clean I’ll from working Mark want look to home. seems not make. get in-plant, on new some don’t they it’s technical factory it’s into, it’s So really that at And end in are And their really staff certainly true he some are the let visitors. testing of up if big I side, like negative. that those for – ones the are stepped

Mark Sheahan

a until are for market, there. we to XXX% of called tough foam, that it’s business. into that growth contractor going that agree. the our get industrial can that’s side some plants, obviously sledding diaphragm group and I The we pump out, called more we the we based our in back out process so markets be especially of Yeah, seeing group, spray

Pacific of called happening is out activity in and also battery some region. the We that Asia

We’re space. projects and getting some in involved that around in

that seeing the isn’t enough in the that I think we’re experiencing though, mentioned some parts that other quite the to offset we of we’re declines of growth business.

again, the said continues hopefully is But rest Asia low better. before growth, for the overall, rapid that here And year as us throughout it’s growth. it’s I not of

Matt Summerville

quick maybe last just to maybe then few in And valuations if any one follow-up, et change with to speak cetera, and respect actionability M&A the pipeline months. you’ve your seen in multiples,

Pat McHale

a couple I now, seeing not high find And are need may of uppers a whole One and happen maybe say we that on are benefiting seen that don’t We’ve that we just sustainable. which of to businesses. have the we’re to I’ll pandemic, is right a fixer quality really a M&A lot more things the for side that couple think Yes. that. us. few be from

So disciplined. that into things rewards this pretty difficult it’s environment rate find up depressed that, and generate pricing see taxes the we really and kinds and that and interest a then We like driven secondly, we to very low we our we are have to see. like with it where shareholders of need to that returns zone, valuations

also that going want And in see to For investors in And us our of projects. example, invest factories, we of our rates they Or really those don’t get feel invest deploy mindset to that going development I investments. in very are good capital good feel the those product smartly. when forward confident here. of still rates if we to going we changing we’re return believe that on return get on that we like projects, our we’re we

it’s in right move dynamics tough. our hope now, But let’s maybe favor. those So pretty that for

Matt Summerville

you, it. guys. Got Thank

Operator

Please question. comes question Saree Jefferies. with state your next from Our Boroditsky

Saree Boroditsky

congratulations on the morning. Good quarter. And

Pat McHale

Good morning.

Kathy Schoenrock

Good morning.

Saree Boroditsky

that results positive X%, slightly for rate week October. average believe The booking in I down implies process six

So on you markets some can And end improvement? you geographies just driving that think provide this the are color sustainable? do is this

Pat McHale

along like can industrial not And is It any fashion. doing say the in predictor a we’ve six I week run example, an a business but seen indicator, our for Knight is, a it’s Yes. has equipment, some our we’ve semiconductor The car would Again, and certainly been gas business. and side, the strong. still been like with We pretty some showing it’s White what on little our oil bit environmental oil of markets, growth. things our business rate seen opportunities classic well. lubrication We’ve dealerships gas sanitary got that’s on business where heavily is process production and industrial see mining, real which depressed. focuses has

it’s businesses So growing bag sort are in challenging to tough we out. a little mentioned, mixed – in then really as we and And it’s there. And I some some have have environments. do that a

So overall economy, negatives. to growth the we’d that see so out in improvement washed an by like the we stories the that have

Saree Boroditsky

remain orders Thank just could XXXX, you. you year? back you And back obviously, in decline comp on on should the about think to excluding then week? strong, but the how half very sales Would just the extra you contractor, next of touch expect for

Pat McHale

never expect to decline. sales we Well,

guy America. group very pretty XXXX the of The here in you’re sales decent active half So going the We’ve October opportunities into We’ve we decline development. outside last up going a got product there, I’m for that in data channel, they’re a I’m got saying next to a growth North strong year. expecting that strong have looks get sitting us. in last

up w contractor column the put So another that in going for we’re for year. I’m next hoping to

Saree Boroditsky

Great. much. so Thank you

Operator

with from state next Blair question. Please Our question your Bryan comes Oppenheimer.

Bryan Blair

morning, everyone. Good Thanks.

Pat McHale

Bryan. morning, Good

Bryan Blair

on affects I’m and and rates. starts, team million for on your pandemic of sprawl curious returns that a X.X build the years Pat, how you’ve just normalized the housing mentioned obviously its views. more impact suburban has banked while lower

level demand be robust. We’re obviously that quite and seems approaching now to

Pat McHale

that’s don’t question happens market I construction here, sprayer, Yes, really buying, a believe what get extent that of And and it’s four contractors has to three, over they I are in kind then does to suppose they've on short-term building. the years. the really roads, the and people more the that People’s and this a exited have suburbs the approved think pandemic them that course then got influenced the of next really changed. the to of land to have all materialize start and stuff paint get the to it two,

wait more changes on that things to the that's go And again, normal could because then in quickly, that than think if become and I are that guests have drag back these resolved think go permanent world people of And they if faster mode, might make. changes bet see people on, I'm forward I or think. some society. to to and we are a of So going potentially still a

is for So to of launching a now Mark. I think don't We're change new going our way. whole right know. We're and what's not I either with to part going that products big the question, strategy happen world

Bryan Blair

given CapEx? Okay, appreciate in business recent teams last. the put the how to Mark, is expansion And surge imagine the I close brick-and-mortar in the demand, the you requiring the Contractor color. that meaningful for thankful

Mark Sheahan

made in now. great it, that we're the probably in up be that there and with bit about did you, good we in right we honest that we We're us to glad year. did investment little the we're but feel a running. when really factory hindsight, it lucky capacity up Yes. needed. we And we space gave shape that It is Contractor, last And

Bryan Blair

Okay, the and to excellent. at gas remaining I what's of least a out one X%, was portfolio, Alco X% And of point direct kind your sales exposure of on it previously. think clarification basis? only oil with

Mark Sheahan

now that, and here we've exposure valves back got go and oil where exposure high a gas. in protective line had things. we bit too. at pressure minuscule business little then Pennsylvania, those industrial and our coatings called we are offshore some we pretty types we a end market And Pressure a small. that of to we're mean this But developed point. It's High while is designed putting in I a pretty acquired small. internal get that also involved Erie, rigs pretty products it’s business, then and have our and Yes, also And they of initiative going into pipelines Equipment in or sell oil an of on on

Pat McHale

say would and busy, businesses over but and and oil gas get years, and trickledown it's market. the then when I hard a from benefit nice indirect busy gas of measure, mining we pretty there's is that's oil a Yes, definitely effect. and other But to that strong a lots

Bryan Blair

understood. again. Thanks Okay,

Operator

question And comes Seaport. Liptak question. our from Walter next state with Please your

Walter Liptak

Hi, thanks. Good morning, guys.

Pat McHale

Good morning.

Mark Sheahan

Good morning.

Walter Liptak

wanted market the ask of has quick miles to come lube I and about the some driven back.

I of customers, spending. you might or to any those some if lube are see openings? new even of What kind start quick replacement So thought they're maybe funnel you those for hearing from project store a

Pat McHale

Yes.

would until from list. – the to looking worse coming say it I hesitancy better, is getting excited the better overly to So want make CapEx right in a think quote I on, the there by you not I at It's our stronger forward. as see a if I'm to we say little list orders I'll actually the has. point in going space standpoint, a it bit still, little than looks an now. be from project But we're not to is door, think And bit investments little optimistic look but bit I coating get going that – this look

maybe And there. some see we'll so recovery

Walter Liptak

back having of getting I'm getting trouble And the plans working bit industrial or industrial to get that Okay, those should quite new get factory there And sell is the that there internship do even engineers the in? it where is something equipment if you they're and to and because a on can mistaken back groups. kind being down groups the engineering guys through groups on new out rep in the not where and, products. be floor, ROI with reps the and because an pushing Is issue to and replacing great. you a industrial into there, able get to of nice guys is, distribution rep with out rep

Pat McHale

There own we the Yes, really But partners. not direct. our in up they groups we are our channel a lot do manage we and sell that they don't We joint in a with use salespeople. rep segments so And industrial, industrial. calls then and distributor we have of territory sell then manage some sales we make and generally set direct. distribution they

So But getting following in opportunity to we different, frankly, any do in. to the to and our that they factories factories out and on have there sure influence our can get the and aren't job distributors are here. doing try our make where trying some payment, get to

Our having negative. factory anybody then come having busy. be that somebody in on they because particularly exposure need interested our and and not unless would really employees people quarantine they come you in are about in having here. out, absolutely factories be are event there got to XX Having then an But when think

so different. And our customers any aren't really

make dampened product proactive And come environment we an in a new where in so them really is and or upgraded that's can't the opportunity calls. to sell or product a something got an ROI an

really by distributors us some you isn't runs. it's they call the a but business not environment. and us, great get in our as the they do and And there's certainly, door, that need milk when industrial customers are terrible, allowing are in we that us Now fact see make our there can

spending on, internet, savings customers fair can't it. it message industrial to to great sure using time We effectively can, and fix media, to totally that have using a consider social we the quality they environment. trying other them. find amount to using We been reach of the try ways web extent make our email using that to the influence But in it. front can cost we a get can't isn't fix We improvements of could projects we our that campaigns,

Walter Liptak

just on so then that. I Got make the just CapEx, a I Okay. sure follow-up thanks. it, And understand

and CapEx maintenance and about of million that's going right? machines sounds in million $XX bricks like Is So it and $XX incremental, that mortar. into

Mark Sheahan

right. and That's what looking seen CapEx, finish I of from year-to-date. the brick-and-mortar here it's half will We're the around back we the you've mean projects chunk total Yes. in That'll $XX big – be do XXXX. of million to some increase here in a have funny. about That year be

Walter Liptak

next CapEx year? right. And Okay. about what All are thinking for you

Mark Sheahan

about and tune I that report spot where fine we but get you I a QX. know after good here yet we'll don't time at definitely number, we're something out that feel a giving the by

Walter Liptak

Okay. you. Thank All right, great.

Mark Sheahan

Yes.

Operator

Joe next Instructions] Goldman from comes Our Ritchie Sachs. [Operator with your question. question Please state

Joe Ritchie

Thank you. Good morning, everybody.

Pat McHale

Good morning, Joe.

Mark Sheahan

morning. Good

Kathy Schoenrock

Good morning.

Joe Ritchie

impacted sites more worse maybe had enter access the cases. We've Pat, side. with as quarter. the kind that COVID of your a on surge that point throughout change following-up Hey got obviously at wondering here Did a bit if that regarding little all quarter? I'm things industrial just to just on sales all of that at

Pat McHale

like seen the let's definitely a for that we've QX weeks, I here a seen awhile happening. surge coming three see say or change. nothing did positive change the that four So of say there I've out We can't last was

And that summer. the haven't course now And it I this seen at itself reversed some are regress happening. backwards over so the point. things of really

and further taken However, there's we've the and got action. everyday are new stories that states countries

So I it's a TBD. guess

Joe Ritchie

Got up and it, helpful. strong were you for I strained That's about okay. on notably margin maybe think Contractor, interesting capacity how your did quarter. a But it just back incremental this bit little strong. things following And your talk is look guys being really

from the have. thinking it's this should I increased issue the capacity of And we what negative good know you're on about because potentially to I quarter. Contractor? like higher able there so really headwinds through margin quarter. that how then are a guess forward imagine of this a kind we perspective. issues And cost secondly, offset costs I going Was some to was be would And

Pat McHale

shot I'll in Mark a then weigh well. as I'll and let take

busy on really still dig there and working Contractor out. side, is hard. the team First are we're The up trying still we to still

out work to woods Where today October, So definitely of we've got the do. not some we're yet. we're here in sitting still

In a factory we margins. high And when and margins there in when get out bad And of generally And a don't model is Graco we're volume, unit, or challenging. we're get high incremental terms to the not cutting a it's year. a volume quarter detrimental going have we or generally because headcount, business we then perform. bad

more to tend costs our So fixed. be

travel, in to QX, the the year. performance expense what in the would fluctuating programs around of the of that normal is the happen XXXX that cases in dealing business side. drop expenses course with One and in around the wildly incentive things squirrely us with compared variable what wide helps and And in we're here some rebates around that a fact course, distributor on are unit variation of big

Of going back, back then course, too. to when are come comes those business

our to a we intact basic got of of here none bumpy that money have bit and model through we we're – that's but changed. if dynamics we going expense really side, we around good So make the get you whereas revenue, of work make patch money that a little have on its the to and Graco variable

Mark Sheahan

lot to I our and Yes. in still I not able home a that a have just that. revenue people of from areas. aren't say in different obviously that here, we get with traveling. agree huge And into and we sales up QX would are had we ramp And working

money We fairs aren't going down. to much trade spending shows. as not We're way here

environment strong. where X% a In margin rates see business the more So target, good. to growth normalized the QX grow which range. They're our really in are within trying organic we're is X% to that somewhere that you in Contractor in

on people road. the got You

we're trade growth. more doing of got try to spending money to a that shows, demos, type You support

So a environment, get I wouldn't normal into profitability able be still spending back drive see tick be we as to in decent that but up surprised should we to business.

Joe Ritchie

color. the all. you, Appreciate it. Got Thank

Pat McHale

Yes.

Operator

state with Our next your question question. comes Berenberg. from Please Andrew Buscaglia

Andrew Buscaglia

that? margins? sticking margins it demand too? do it just to much have product exiting really pricing your side, How you thing cost the Contractor on guys, we of of really that yourself this with homeowner maintain versus high wonder mean are to Like Hey a it continues I of level how I the function is for much do XXXX. believe those of

Mark Sheahan

great has think course, been that. And demand don't we – great, right. I we're it's the on about of to have then Pat think long last, visibility I Well, how talked going

Andrew Buscaglia

Yes.

Mark Sheahan

seen the in The still the the decent, history. I But half permits are are housing in in ever good interest and inventory rates homes are best low. of pretty mean up million space. macros I've is are starts a that range,

You housing. got that millennials for are XX market hitting million looking the

about is market think going good we're And where healthy. I So pretty the there. we to feel positioned itself remain

to little margins that a squeeze For the us pressure course, of could margin line that experience if the top the bit. on start on we side,

a line in it doing hopeful that growth And chance we're drive continue we to have of So I that that. awhile and for decent top runs we business. that think

Andrew Buscaglia

the kind that comparing And segments okay. all interesting they and of have the sort this in is of Yes, sub segment, Industrial Process cycle drivers. the different somewhat

now. you're then less Industrial do out got the oil do like segment and some you process, ramp in shorter see we you these of exposure these but within juice industrial see going momentum looking with as harder, Process areas, So or sort of some to of if you pretty have some some But more cycle interesting, that's cyclical indicators.

Pat McHale

back I'd surprised if – and be would go, be view. surprise other didn't. be if both didn't came it me I'd one strong be the my that one they would

So can different both We sell the be applications markets end different products of in just industries. many across those that fact segments. out used we and many of different many so make that given really

things to when good. I good, going get think be again they're both

Andrew Buscaglia

you commented indirect is on that oil you little to equally more or or say before hurts about would a And tied helps exposure, equally both one bit indirect? oil

Pat McHale

for hard hurt both, my guess. I hurt me top probably them little bit off say a head, it you the maybe if of more. to mean equally just would process That's I

Andrew Buscaglia

right. Thanks Okay, guys.

Operator

from with Our state your Gabelli question. Brett next comes question Please Kearney Funds.

Brett Kearney

Hi question. taking guys, morning. good for my Thanks

Pat McHale

Good morning.

Brett Kearney

end line. from Hey, [indiscernible] just users spray wanted on channel to partners you're ask your the some what of and hearing

year earlier out old available this rolled geographies. now that whether product You is and year in

Pat McHale

Yes.

performance home, been products A world. had There's successful performance So but around probably the locations we a few still available that standpoint, still quality now. that waiting shipped product get to available That's to geographies any or generally speaking it's surprises that's haven't Really have good. in kind for products. are been of some a with us. most overseas the surprises

with question stop fizzle could it's a sanitizing if a product get Graco. if cleaning. opportunity out or could happy has I good we're it new we guess also So for that, long-term be It mark. be it. a But people and It'd that nice vaccine and

far So while can, that horse it and going see we ride we're goes. we'll to how

Brett Kearney

Great. Thanks much. so

Operator

Thank you.

conference As there turn I further will questions, over Pat now no McHale. to the

Pat McHale

you time few we're we'll this back months. for in going get everyone to to and then talk morning. your work Thank a right. you And All to again

Operator

all you All This concludes parties, today. and have our nice for conference participating now day. a you for may disconnect. Thank

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