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Graco Inc. (NYSE: GGG) is a global leader in fluid and coating management technologies. The company designs, manufactures, and markets systems and equipment that move, measure, control, dispense, and spray fluid and coating materials. Its products serve a wide range of industries, including construction, automotive, aerospace, food and beverage, and oil and gas.
- Contractor - Markets sprayers and equipment for applying paint, texture, insulation, and coatings to surfaces, serving professional painters, specialty contractors, tradesmen, and do-it-yourselfers.
- Industrial - Provides equipment and solutions for moving and applying paints, coatings, sealants, adhesives, and other fluids, catering to industries such as automotive, aerospace, marine, and construction.
- Process - Offers pumps, valves, meters, and accessories for dispensing chemicals, oil, water, food, and other fluids, supporting industries like food and beverage, oil and gas, and pharmaceuticals.
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Given the significant decline in the Process segment sales, down 12% compared to the same quarter last year due to continued weakness in the semiconductor and mining markets and a slowdown in vehicle service business, with decremental margins of nearly 60%, what specific strategies are you implementing to mitigate these declines and improve profitability in this segment?
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Considering that over 90% of the overall revenue decline in the quarter, and over 60% year-to-date, was attributed to the decrease in China revenue across the Industrial and Process segments due to broad-based weakness and overcapacity in key end markets, how do you plan to address the challenges in China, and when do you expect to see a recovery in that market?
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With the recent acquisitions of PCT Systems and Corob, and the formation of the new Expansion Markets division aiming to drive inorganic growth, how will you ensure these investments lead to meaningful growth given that the organic growth in these segments isn't expected to be vastly different from Graco's overall growth, and what metrics will you use to measure success?
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Your operating expenses increased by $9 million or 7% in the quarter due to new product development spending, growth initiatives, and other items, while operating margins declined. With the adoption of the new global customer-centric operating structure in 2025, how will you balance the increased costs associated with this restructuring against the need to improve margins, and what specific cost savings do you anticipate?
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Given the 8% decrease in reported and adjusted net earnings to $122 million, and cash provided by operations decreasing by $55 million from last year, primarily due to inventory purchases related to new product launches and lower net earnings, what measures are you taking to improve cash flow, and how sustainable are your capital allocation plans, including share repurchases and dividends, under these conditions?