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    Graco Inc (GGG)

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    Business Description

    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.

    1. Contractor - Markets sprayers and equipment for applying paint, texture, insulation, and coatings to surfaces, serving professional painters, specialty contractors, tradesmen, and do-it-yourselfers.
    2. 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.
    3. 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.

    Key Metrics

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    Executive Team

    NamePositionStart DateShort Bio
    Mark W. SheahanPresident and Chief Executive OfficerJune 2021Mark W. Sheahan, 59, has been the President and CEO of Graco Inc. since June 2021. He joined the company in 1995 and has over 28 years of experience in manufacturing, finance, and administration roles.
    David M. LoweChief Financial Officer and TreasurerJune 2021David M. Lowe, 68, became CFO and Treasurer of Graco Inc. in June 2021. He joined the company in 1995 and has held various leadership roles, including President of the Worldwide Process Division.
    Christian E. RothePresident, Worldwide Industrial DivisionJanuary 2022Christian E. Rothe joined Graco in 2011 and became President, Worldwide Industrial Division in January 2022. He previously served as President, Worldwide Applied Fluid Technologies Division.
    Dale D. JohnsonChief Commercial Development OfficerJanuary 2024Dale D. Johnson assumed the role of Chief Commercial Development Officer in January 2024. He has been with Graco since 1976, holding various positions in marketing and sales.
    Caroline M. ChambersPresident, EMEAAugust 2020Caroline M. Chambers joined Graco in 1992 and became President, EMEA in August 2020. She has held various roles in internal audit, accounting, and information systems.
    Ronita BanerjeeExecutive Vice President and Chief HR OfficerMay 2023Ronita Banerjee, 46, became Executive Vice President and Chief HR Officer at Graco Inc. in May 2023. She has extensive experience in global human resources management.
    Laura L. EvansonExecutive Vice President, MarketingJanuary 2023Laura L. Evanson, 43, became Executive Vice President, Marketing at Graco Inc. in January 2023. She joined the company in 2008 and has held various marketing roles.
    Kathryn L. SchoenrockExecutive Vice President and Chief Information OfficerFebruary 2024Kathryn L. Schoenrock, 46, became Executive Vice President and CIO at Graco Inc. in February 2024. She joined the company in 2012 and has held various roles, including Executive Vice President and CTO.
    David J. ThompsonPresident, Worldwide Contractor Equipment DivisionJanuary 2024David J. Thompson became President, Worldwide Contractor Equipment Division at Graco Inc. on January 1, 2024. He joined the company in 1988 as an engineer.
    Timothy R. WhitePresident, Expansion Markets DivisionJanuary 2025Timothy R. White, 54, currently serves as President of the Expansion Markets Division at Graco Inc., effective January 1, 2025. He joined the company in 1992 and has held various leadership roles.
    Angela F. WordellExecutive Vice President, OperationsJanuary 2022Angela F. Wordell, 52, serves as the Executive Vice President, Operations at Graco Inc. She assumed this role in January 2022. She joined the company in 1993.
    Claudio MerengoPresident, Worldwide Powder DivisionFebruary 2024Claudio Merengo, 54, became President, Worldwide Gema in 2007, with his title changing to President, Worldwide Powder Division in February 2024. He joined Gema in 1994.
    Peter J. O’SheaPresident, Worldwide Lubrication Equipment Division and President, South and Central AmericaJanuary 2022Peter J. O’Shea joined Graco Inc. in 1995 and currently serves as President, Worldwide Lubrication Equipment Division and President, South and Central America, a role he has held since January 2022.
    Anthony J. GarganoGlobal Sales Lead, Industrial DivisionJanuary 2025Anthony J. Gargano joined Graco Inc. in 2005. He will serve as the Global Sales Lead for the Industrial Division starting January 1, 2025. He has held various leadership roles in sales and marketing.
    Inge GrasdalExecutive Vice President, Corporate DevelopmentJanuary 2022Inge Grasdal, Executive Vice President, Corporate Development at Graco Inc., joined the company in January 2022. He previously served as Vice President of Corporate Development at Ecolab Inc..
    Joseph J. HumkeExecutive Vice President, General Counsel and Corporate SecretaryJuly 2021Joseph J. Humke, aged 53, became the Executive Vice President, General Counsel, and Corporate Secretary at Graco Inc. in July 2021. Before joining Graco, he was an equity partner in Mergers & Acquisitions and Private Equity practice groups.
    Christopher D. KnutsonExecutive Vice President, Corporate ControllerMay 2023Christopher D. Knutson serves as Executive Vice President, Corporate Controller at Graco Inc. He assumed this role and became the company's principal accounting officer on May 1, 2023.

    Questions to Ask Management

    1. 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?

    2. 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?

    3. 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?

    4. 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?

    5. 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?

    Share Repurchase Program

    Program DetailsProgram 1
    Approval DateDecember 7, 2018
    End Date/DurationIndefinite
    Total Additional Amount18 million shares
    Remaining Authorization13,151,009 shares (as of 2025-01-28)
    DetailsOpportunistic; evaluated using discounted cash flow analysis. Historical IRR of 13%-14% on buybacks. Used to deploy excess cash when M&A opportunities are unavailable.