GRACO INC 10-K

Item 8. Financial Statements and Supplementary Data 34 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the shareholders and the Board of Directors of Graco Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Graco Inc. and subsidiaries (the "Company") as of December 26, 2025 and December 27, 2024, the related consolidated statements of earnings, comprehensive income, shareholders' equity, and cash flows, for each of the three years in the period ended December 26, 2025, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 26, 2025 and December 27, 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 26, 2025, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 26, 2025, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 17, 2026, expressed an unqualified opinion on the Company's internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Retirement Benefits – U.S. Pension Benefit Obligation – Refer to Note 10 to the financial statements Critical Audit Matter Description The Company has both funded and unfunded defined benefit pension plans. The actuarial determination of the present value of the pension obligation on an annual basis requires management to make significant assumptions related to the selection of the discount rates used in the calculation of the net present value of future pension benefits. The Company establishes the discount rate assumptions for the U.S. pension plans by reference to a yield curve published by an actuary based on yields of highly rated corporate bonds and projected plan cash flows. Given the significance of the U.S. pension obligation and the requirement of management to make significant assumptions related to the selection of the discount rates, performing audit procedures to evaluate the reasonableness of the discount rates selected for the U.S. pension plans required a high degree of auditor judgment and an increased extent of effort, including the need to involve our actuarial specialists. 35 Table of Contents How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to selection of the discount rates for the U.S. pension obligation included the following, among others: a. We tested the effectiveness of internal controls over the valuation of the pension obligation, including management’s controls over selection of the discount rates. b. With the assistance of our actuarial specialists, we evaluated the reasonableness of the discount rates by: • Evaluating the methodology utilized to select the discount rates for conformity with applicable accounting guidance. • Testing the source information underlying the determination of the discount rates, including the methodology used to construct the yield curve, the characteristics of the bonds underlying the yield curve analysis, and the mathematical accuracy of the calculation. • Developing independent estimates using external published yield curves and comparing them to the discount rates selected by management. /s/ DELOITTE & TOUCHE LLP Minneapolis, Minnesota February 17, 2026 We have served as the Company’s auditor since at least 1969, however, an earlier year could not be readily determined. 36 Table of Contents GRACO INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (In thousands, except per share amounts) Years Ended December 26, 2025 December 27, 2024 December 29, 2023 Net Sales $ 2,236,604 $ 2,113,316 $ 2,195,606 Cost of products sold 1,063,421 990,855 1,034,585 Gross Profit 1,173,183 1,122,461 1,161,021 Product development 82,297 87,230 82,822 Selling, marketing and distribution 273,939 273,741 260,712 General and administrative 206,211 191,392 171,444 Contingent consideration ( 14,061 ) — ( 8,600 ) Impairment — — 7,800 Operating Earnings 624,797 570,098 646,843 Interest expense 2,893 2,828 5,191 Other (income) expense, net ( 19,296 ) ( 22,013 ) 32,850 Earnings Before Income Taxes 641,200 589,283 608,802 Income taxes 119,361 103,199 102,291 Net Earnings $ 521,839 $ 486,084 $ 506,511 Basic Net Earnings per Common Share $ 3.14 $ 2.88 $ 3.01 Diluted Net Earnings per Common Share $ 3.08 $ 2.82 $ 2.94 See notes to consolidated financial statements. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands) Years Ended December 26, 2025 December 27, 2024 December 29, 2023 Net Earnings $ 521,839 $ 486,084 $ 506,511 Components of other comprehensive income (loss) Cumulative translation adjustment 84,429 ( 32,446 ) 25,661 Pension and postretirement medical liability adjustment 3,379 23,264 11,426 Income taxes - pension and postretirement medical liability ( 729 ) ( 5,397 ) ( 2,704 ) Other comprehensive income (loss) 87,079 ( 14,579 ) 34,383 Comprehensive Income $ 608,918 $ 471,505 $ 540,894 See notes to consolidated financial statements. 37 Table of Contents GRACO INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share amounts) December 26, 2025 December 27, 2024 ASSETS Current Assets Cash and cash equivalents $ 624,083 $ 675,336 Accounts receivable, less allowances of $ 6,000 and $ 6,000 393,753 362,533 Inventories 401,138 404,676 Other current assets 52,907 54,896 Total current assets 1,471,881 1,497,441 Property, Plant and Equipment, net 755,064 771,656 Goodwill 585,304 487,468 Other Intangible Assets, net 303,851 233,306 Operating Lease Assets 26,073 19,678 Deferred Income Taxes 35,975 46,910 Other Assets 96,122 82,753 Total Assets $ 3,274,270 $ 3,139,212 LIABILITIES AND SHAREHOLDERS’ EQUITY Current Liabilities Notes payable to banks $ 23,072 $ 28,537 Current portion of long-term debt 1,624 — Trade accounts payable 78,573 60,816 Salaries and incentives 73,420 58,169 Dividends payable 48,705 46,558 Other current liabilities 241,867 211,728 Total current liabilities 467,261 405,808 Retirement Benefits and Deferred Compensation 87,179 80,381 Operating Lease Liabilities 18,131 12,278 Deferred Income Taxes 36,708 37,822 Other Non-current Liabilities 11,060 18,788 Commitments and Contingencies (Note 11) Shareholders’ Equity Common stock, $ 1 par value; 291,000,000 shares authorized; 165,150,142 and 169,393,735 shares outstanding in 2025 and 2024 165,150 169,394 Additional paid-in-capital 994,566 955,051 Retained earnings 1,456,710 1,509,264 Accumulated other comprehensive income (loss) 37,505 ( 49,574 ) Total shareholders’ equity 2,653,931 2,584,135 Total Liabilities and Shareholders’ Equity $ 3,274,270 $ 3,139,212 See notes to consolidated financial statements. 38 Table of Contents GRACO INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Years Ended December 26, 2025 December 27, 2024 December 29, 2023 Cash Flows From Operating Activities Net Earnings $ 521,839 $ 486,084 $ 506,511 Adjustments to reconcile net earnings to net cash provided by operating activities Depreciation and amortization 107,433 86,749 74,321 Deferred income taxes ( 8,673 ) 6,060 ( 8,502 ) Share-based compensation 34,333 31,892 30,229 Gain on sale of building ( 4,737 ) ( 1,216 ) — Pension settlement loss — — 42,129 Contingent consideration ( 14,061 ) — ( 8,600 ) Impairment — — 7,800 Change in Accounts receivable ( 7,383 ) 10,251 ( 3,245 ) Inventories 55,206 55,836 42,716 Trade accounts payable 7,712 ( 13,298 ) ( 12,348 ) Salaries and incentives 6,632 ( 12,187 ) ( 2,158 ) Retirement benefits and deferred compensation ( 571 ) ( 14,171 ) ( 13,661 ) Other accrued liabilities ( 11,479 ) ( 11,242 ) ( 5,269 ) Other ( 2,660 ) ( 3,058 ) 1,094 Net cash provided by operating activities 683,591 621,700 651,017 Cash Flows From Investing Activities Property, plant and equipment additions ( 45,669 ) ( 106,737 ) ( 184,775 ) Proceeds from sale of building 11,182 5,630 — Acquisition of businesses, net of cash acquired ( 135,262 ) ( 241,767 ) — Other ( 3,047 ) 59 ( 499 ) Net cash used in investing activities ( 172,796 ) ( 342,815 ) ( 185,274 ) Cash Flows From Financing Activities (Payments) borrowings on short-term lines of credit, net ( 6,588 ) ( 766 ) 9,725 Borrowings (payments) on long-term debt and lines of credit 25 — ( 75,000 ) Payments of debt issuance costs — ( 1,707 ) ( 1,025 ) Common stock issued 43,023 70,659 60,182 Common stock repurchased ( 423,108 ) ( 31,350 ) ( 102,344 ) Taxes paid related to net share settlement of equity awards ( 6,055 ) ( 4,611 ) ( 1,225 ) Cash dividends paid ( 183,352 ) ( 172,088 ) ( 158,323 ) Net cash used in financing activities ( 576,055 ) ( 139,863 ) ( 268,010 ) Effect of exchange rate changes on cash 14,007 ( 1,637 ) 1,022 Net (decrease) increase in cash and cash equivalents ( 51,253 ) 137,385 198,755 Cash and Cash Equivalents Beginning of year 675,336 537,951 339,196 End of year $ 624,083 $ 675,336 $ 537,951 See notes to consolidated financial statements. 39 Table of Contents GRACO INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (In thousands) Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Balance December 30, 2022 $ 167,702 $ 784,477 $ 976,851 $ ( 69,378 ) $ 1,859,652 Shares issued 1,666 57,291 — — 58,957 Shares repurchased ( 1,422 ) ( 6,650 ) ( 94,272 ) — ( 102,344 ) Stock compensation cost — 28,218 — — 28,218 Net earnings — — 506,511 — 506,511 Dividends declared ($ 0.960 per share) — — ( 161,152 ) — ( 161,152 ) Other comprehensive income — — — 34,383 34,383 Balance December 29, 2023 167,946 863,336 1,227,938 ( 34,995 ) 2,224,225 Shares issued 1,847 64,201 — — 66,048 Shares repurchased ( 399 ) ( 2,049 ) ( 28,902 ) — ( 31,350 ) Stock compensation cost — 29,563 — — 29,563 Net earnings — — 486,084 — 486,084 Dividends declared ($ 1.040 per share) — — ( 175,856 ) — ( 175,856 ) Other comprehensive loss — — — ( 14,579 ) ( 14,579 ) Balance December 27, 2024 169,394 955,051 1,509,264 ( 49,574 ) 2,584,135 Shares issued 911 36,781 — — 37,692 Shares repurchased ( 5,155 ) ( 29,059 ) ( 388,894 ) — ( 423,108 ) Stock compensation cost — 32,517 — — 32,517 Restricted stock issued — ( 724 ) — — ( 724 ) Net earnings — — 521,839 — 521,839 Dividends declared ($ 1.120 per share) — — ( 185,499 ) — ( 185,499 ) Other comprehensive income — — — 87,079 87,079 Balance December 26, 2025 $ 165,150 $ 994,566 $ 1,456,710 $ 37,505 $ 2,653,931 See notes to consolidated financial statements. 40 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Graco Inc. and Subsidiaries Years Ended December 26, 2025, December 27, 2024 and December 29, 2023 1. Summary of Significant Accounting Policies Fiscal Year . The fiscal year of Graco Inc. and Subsidiaries (the Company) is 52- or 53-weeks, ending on the last Friday in December. The years ended December 26, 2025, December 27, 2024, and December 29, 2023 were 52-week years. Basis of Statement Presentation . The consolidated financial statements include the accounts of the parent company and its subsidiaries after elimination of intercompany balances and transactions. Certain reclassifications have been made to the prior year's consolidated financial statements to conform to the current year presentation. Foreign Currency Translation . The functional currency of certain subsidiaries is the local currency. Accordingly, adjustments resulting from the translation of those subsidiaries’ financial statements into U.S. dollars are charged or credited to accumulated other comprehensive income (loss). The U.S. dollar is the functional currency for all other foreign subsidiaries. Accordingly, gains and losses from the translation of foreign currency balances and transactions of those subsidiaries are included in other (income) expense, net. Accounting Estimates . The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Such estimates and assumptions also affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Fair Value Measurements. The three levels of inputs in the fair value measurement hierarchy are as follows: Level 1 – based on quoted prices in active markets for identical assets Level 2 – based on significant observable inputs Level 3 – based on significant unobservable inputs Assets and liabilities measured at fair value on a recurring basis and fair value measurement level were as follows (in thousands): Level 2025 2024 Assets Cash surrender value of life insurance 2 $ 28,893 $ 24,411 Forward exchange contracts 2 — 116 Total assets at fair value $ 28,893 $ 24,527 Liabilities Contingent consideration 3 $ 1,649 $ 14,647 Deferred compensation 2 8,336 8,196 Forward exchange contracts 2 268 — Total liabilities at fair value $ 10,253 $ 22,843 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. The Company’s policy and accounting for forward exchange contracts are described below in Derivative Instruments and Hedging Activities. Contingent consideration liability represents the estimated value (using a probability-weighted expected return approach) of future payments to be made to previous owners of certain acquired businesses based on future revenues. In the third quarter of 2025, the Company recognized a $ 14 million gain from the reduction in the fair value of the contingent consideration related to an acquisition. 41 Table of Contents Disclosures related to other fair value measurements are included below in Impairment of Long-Lived Assets, in Note 6 (Debt), in Note 10 (Retirement Benefits) and in Note 12 (Acquisitions). Cash Equivalents . All highly liquid investments with a maturity of three months or less at the date of purchase are considered to be cash equivalents. Accounts Receivable. Accounts receivable includes trade receivables of $ 376 million in 2025 and $ 348 million in 2024. Other receivables totaled $ 18 million in 2025 and $ 15 million in 2024. Allowance for Credit Losses. Receivables reflected in the financial statements represent the net amount expected to be collected. An allowance for credit losses is established based on expected losses. Expected losses are estimated by reviewing individual accounts, considering aging, financial condition of the debtor, recent payment history, current and forecast economic conditions and other relevant factors. Following is a summary of activity in the allowance for credit losses (in thousands): 2025 2024 2023 Balance, beginning $ 4,973 $ 4,655 $ 6,130 Additions charged to costs and expenses 584 930 1,125 (Deductions) additions from reserves (1) ( 539 ) ( 383 ) ( 2,711 ) Other additions (deductions) (2) 246 ( 229 ) 111 Balance, ending $ 5,264 $ 4,973 $ 4,655 (1) Additions represents amounts identified in acquisitions. Deductions represent amounts determined to be uncollectible and charged against reserves, net of collections on accounts previously charged against reserves. (2) Includes effects of foreign currency translation. Inventory Valuation . Inventories are stated at the lower of cost or net realizable value. The last-in, first-out (LIFO) cost method is used for valuing most U.S. inventories. Inventories of most foreign subsidiaries are valued using the first-in, first-out (FIFO) cost method. Other Current Assets. Amounts included in other current assets were (in thousands): 2025 2024 Prepaid income taxes $ 21,500 $ 25,097 Prepaid expenses and other 31,407 29,799 Total $ 52,907 $ 54,896 Impairment of Long-Lived Assets. The Company evaluates long-lived assets (including property and equipment, goodwill and other intangible assets) for impairment annually in the fourth quarter, or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. We completed our annual impairment test of all long-lived assets in the fourth quarter of 2025. No impairment charges were recorded as a result of that review. In connection with the reorganization of a business acquired in 2020, impairment charges of $ 7.8 million were recorded in 2023. There were no additional impairment charges in 2024 and 2023. Property, Plant and Equipment . For financial reporting purposes, plant and equipment are depreciated over their estimated useful lives, primarily by using the straight-line method as follows: Buildings and improvements 10 to 30 years Leasehold improvements lesser of 5 to 10 years or life of lease Manufacturing equipment lesser of 5 to 10 years or life of equipment Office, warehouse and automotive equipment 3 to 10 years 42 Table of Contents Goodwill and Other Intangible Assets. Goodwill has been assigned to reporting units. Changes in the carrying amounts of goodwill for each reportable segment were (in thousands): Contractor Industrial Expansion Markets Total Balance, December 29, 2023 $ 77,542 $ 224,605 $ 68,081 $ 370,228 Additions, adjustments from business acquisitions 126,101 — 4,022 130,123 Foreign currency translation ( 5,605 ) ( 6,907 ) ( 371 ) ( 12,883 ) Balance, December 27, 2024 198,038 217,698 71,732 487,468 Adjustments from business acquisitions 23,030 44,092 ( 266 ) 66,856 Foreign currency translation 17,507 13,473 — 30,980 Balance, December 26, 2025 $ 238,575 $ 275,263 $ 71,466 $ 585,304 Components of other intangible assets, net were (dollars in thousands): Finite Life Indefinite Life Customer Relationships Patents and Proprietary Technology Trademarks, Trade Names and Other Trade Names Total As of December 26, 2025 Cost $ 316,962 $ 44,304 $ 4,786 $ 107,034 $ 473,086 Accumulated amortization ( 165,150 ) ( 10,649 ) ( 2,027 ) — ( 177,826 ) Foreign currency translation ( 877 ) 1,464 54 7,950 8,591 Book value $ 150,935 $ 35,119 $ 2,813 $ 114,984 $ 303,851 Weighted average life in years 13 10 2 N/A As of December 27, 2024 Cost $ 270,910 $ 34,731 $ 3,756 $ 95,091 $ 404,488 Accumulated amortization ( 143,689 ) ( 10,534 ) ( 1,478 ) — ( 155,701 ) Foreign currency translation ( 12,102 ) ( 1,182 ) ( 79 ) ( 2,118 ) ( 15,481 ) Book value $ 115,119 $ 23,015 $ 2,199 $ 92,973 $ 233,306 Weighted average life in years 14 9 3 N/A Amortization of intangibles was $ 28 million in 2025, $ 19 million in 2024 and $ 18 million in 2023. Estimated future annual amortization expense based on the current carrying amount of other intangible assets is as follows (in thousands): 2026 2027 2028 2029 2030 Thereafter Estimated Amortization Expense $ 25,144 $ 19,838 $ 17,758 $ 17,141 $ 16,382 $ 92,604 43 Table of Contents Other Assets. Components of other assets were (in thousands): 2025 2024 Cash surrender value of life insurance $ 28,893 $ 24,411 Capitalized software 3,788 2,853 Equity method investment 10,776 10,140 Prepaid pension 44,785 37,888 Deposits and other 7,880 7,461 Total $ 96,122 $ 82,753 The Company has entered into contracts insuring the lives of certain employees who are eligible to participate in certain non-qualified pension and deferred compensation plans. These insurance contracts are used to fund the non-qualified pension and deferred compensation arrangements. The insurance contracts are held in a trust and are available to general creditors in the event of the Company’s insolvency. Changes in cash surrender value are recorded in other (income) expense, net. The cash surrender value increased $ 4 million in 2025, increased $ 2 million in 2024 and increased $ 3 million in 2023. Capitalized software is amortized over its estimated useful life (generally 2 to 5 years) beginning at date of implementation. Other Current Liabilities. Components of other current liabilities were (in thousands): 2025 2024 Accrued self-insurance retentions $ 8,013 $ 8,240 Accrued warranty and service liabilities 21,103 18,712 Accrued trade promotions 7,511 11,086 Payable for employee stock purchases 15,546 16,767 Customer advances and deferred revenue 93,995 52,522 Income taxes payable 15,493 8,102 Tax payable, other 14,693 14,557 Operating lease liabilities, current 8,769 7,838 Right of return refund liability 15,055 15,557 Acquisition-related consideration payable — 10,339 Other 41,689 48,008 Total $ 241,867 $ 211,728 Self-Insurance. The Company is self-insured for certain losses and costs relating to product liability, workers’ compensation, and employee medical benefit claims. The Company has stop-loss coverage in order to limit its exposure to significant claims. Accrued self-insurance retentions are based on claims filed, estimates of claims incurred but not reported, and other actuarial assumptions. Self-insured reserves totaled $ 8 million as of December 26, 2025 and $ 8 million as of December 27, 2024. 44 Table of Contents Product Warranties. 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): 2025 2024 Balance, beginning of year $ 18,712 $ 15,408 Assumed in business acquisition 714 3,861 Charged to expense 12,636 10,567 Margin on parts sales reversed 5,227 3,391 Reductions for claims settled ( 16,186 ) ( 14,515 ) Balance, end of year $ 21,103 $ 18,712 Revenue Recognition . Revenue is recognized at a single point in time upon the satisfaction of performance obligations, which occurs when control of the goods or service transfers to the customer. This is generally on the date of shipment for product sales; however certain sales have terms requiring recognition when the goods are received by the customer. In cases where there are specific customer acceptance provisions, revenue is recognized at the later of customer acceptance or shipment (subject to shipping terms). Payment terms are established based on the type of product, distributor capabilities and competitive market conditions, and do not exceed one year. Standalone selling prices are determined based on the prices charged to customers for all material performance obligations. Variable consideration is accounted for as a price adjustment (sales adjustment). The following are examples of variable consideration that affect the Company’s reported revenue. Early payment discounts are provided to certain customers and within certain regions. Rights of return are typically contractually limited and amounts are estimable. The Company records a refund liability and establishes a recovery asset for the value of product expected to be returned at the time revenue is recognized. This includes promotions when, from time to time, the Company may promote the sale of new products by agreeing to accept returns of superseded products. Provisions for sales returns are recorded as a reduction of net sales, and provisions for warranty claims are recorded in selling, marketing and distribution expenses. Historically, sales returns have been approximately 2 percent of sales. Trade promotions are offered to distributors and end users through various programs, generally with terms of one year or less. Such promotions include rebates based on annual purchases and sales growth, coupons and reimbursement for competitive products. Payment of incentives may take the form of cash, trade credit, promotional merchandise or free product. Rebates are accrued based on the program rates and progress toward the probability weighted estimate of annual sales amount and sales growth. Additional promotions include cooperative advertising arrangements. Under cooperative advertising arrangements, the Company reimburses the distributor for a portion of its advertising costs related to the Company’s products. Estimated costs are accrued at the time of sale and classified as selling, marketing and distribution expense. The estimated costs related to coupon programs are accrued at the time of sale and classified as selling, marketing and distribution expense or cost of products sold, depending on the type of incentive offered. The considerations payable to customers are deemed as broad based and are not recorded against net sales. Shipping and handling costs incurred for the delivery of goods to customers are included in cost of goods sold. Amounts billed to customers for shipping and handling are included in net sales. Revenue is deferred when cash payments are received or due in advance of performance, including amounts which are refundable. This is also the case for services associated with certain product sales. The balance of customer advances and deferred revenue was $ 94 million as of December 26, 2025 and $ 53 million as of December 27, 2024. Net sales for 2025 included $ 51 million that was in customer advances and deferred revenue as of December 27, 2024. Net sales for 2024 included $ 50 million that was in customer advances and deferred revenue as of December 29, 2023. Shipping and handling activities that occur after control of the related good transfers are accounted for as fulfillment activities instead of assessing such activities as performance obligations. Sales taxes related to revenue producing transactions collected from the customer for a governmental authority are excluded from the transaction price. Revenue standard requirements are applied to a portfolio of contracts (or performance obligations) with similar characteristics for transactions where it is expected that the effects on the financial statements of applying the revenue 45 Table of Contents recognition guidance to the portfolio would not differ materially from applying this guidance to the individual contracts (or performance obligations) within that portfolio. Promised goods or services are not assessed as performance obligations if they are immaterial in the context of the contract with the customer. If the revenue related to a performance obligation that includes goods or services that are immaterial in the context of the contract is recognized before those immaterial goods or services are transferred to the customer, then the related costs to transfer those goods or services are accrued. Incremental costs of obtaining a contract are generally expensed when incurred because the amortization period would be less than one year. Such costs primarily relate to sales commissions and are recorded in selling, marketing and distribution expense. Earnings Per Common Share . Basic net earnings per share is computed by dividing earnings available to common shareholders by the weighted average number of shares outstanding during the year. Diluted net earnings per share is computed after giving effect to the exercise of all dilutive outstanding option grants. Comprehensive Income. Comprehensive income is a measure of all changes in shareholders’ equity except those resulting from investments by and distributions to owners, and includes such items as net earnings, certain foreign currency translation items, changes in the value of qualifying hedges and pension liability adjustments. Derivative Instruments and Hedging Activities . The Company accounts for all derivatives, including those embedded in other contracts, as either assets or liabilities and measures those financial instruments at fair value. The accounting for changes in the fair value of derivatives depends on their intended use and designation. As part of its risk management program, the Company may periodically use forward exchange contracts to manage known market exposures. Terms of derivative instruments are structured to match the terms of the risk being managed and are generally held to maturity. The Company does not hold or issue derivative financial instruments for trading purposes. All other contracts that contain provisions meeting the definition of a derivative also meet the requirements of, and have been designated as, normal purchases or sales. The Company’s policy is to not enter into contracts with terms that cannot be designated as normal purchases or sales. The Company periodically evaluates its monetary asset and liability positions denominated in foreign currencies. The Company enters into forward contracts or options, or borrows in various currencies, in order to hedge its net monetary positions. These instruments are recorded at fair value and the gains and losses are included in other (income) expense, net. The notional amounts of contracts outstanding as of December 26, 2025, totaled $ 53 million. The Company believes it uses strong financial counterparties in these transactions and that the resulting credit risk under these hedging strategies is not significant. The Company uses significant other observable inputs (level 2 in the fair value hierarchy) to value the derivative instruments used to hedge net monetary positions, including reference to market prices and financial models that incorporate relevant market assumptions. Net derivative assets are reported on the balance sheet in accounts receivable and net derivative liabilities are reported as other current liabilities. The fair market value of such instruments follows (in thousands): 2025 2024 Foreign Currency Contracts Assets $ — $ 136 Liabilities ( 268 ) ( 20 ) Net (Liabilities) Assets $ ( 268 ) $ 116 46 Table of Contents 2. Segment Information Effective January 1, 2025, the Company began to classify its business into three reportable segments: Contractor, Industrial and Expansion Markets. The Industrial segment consists of the newly formed Industrial Division and the Powder Division. The Company’s former Industrial and Lubrication Equipment Divisions, along with the Process Transfer Equipment business that was part of the Company’s former Process Division, were combined to form the new global Industrial Division. The Powder Division remains unchanged. The Expansion Markets segment consists of the Expansion Markets Division. The Company’s environmental, semiconductor, high-pressure valves and electric motors businesses, together with select future ventures and acquisitions, reside within this division. The Contractor segment, consisting of the Contractor Division, remains unchanged as a reportable segment relative to prior periods. Prior year segment information has been recast to conform to the current organizational structure. The Company has four operating segments which are aggregated into three reportable segments: Contractor, Industrial and Expansion Markets. The Contractor segment markets sprayers and equipment that apply paint to walls and other structures, texture to walls and ceilings, insulation to building walls and other items, highly viscous coatings to roofs, markings on roads, parking lots, athletic fields and floors and high-performance volumetric and gravimetric dispense, mixing, and shaking equipment. The Industrial segment includes our Industrial and Powder divisions. The Industrial division designs and manufactures liquid finishing and advanced fluid dispensing equipment; pumps to move chemicals, petroleum, food, and other fluids; and systems, components, and accessories for the automatic lubrication of bearings, gears, and generators. The Industrial division also manufactures and supplies equipment for equipment maintenance and vehicle servicing applications, including supply pumps, hose reels, meters, valves, and accessories used by fast oil change facilities, service garages, fleet service centers, automobile dealerships, auto parts stores, truck builders, and heavy equipment service centers. The Powder division makes powder finishing products and complete powder finishing systems that coat powder on metals. Markets served include automotive and vehicle assembly and components production, including Electro or e-mobility, wood and metal products, rail, marine, aerospace, farm, construction, bus, recreational vehicles and various other industries. The Expansion Markets segment markets and manufactures pumps for use in the semiconductor industry; high pressure and ultra-high pressure valves used in the oil and natural gas industry; and environmental monitoring and remediation equipment that is used to conduct ground water sampling, ground water remediation, and for landfill liquid and gas management. This segment also provides product design and licensing services for the development of high torque electric motors used in a variety of applications, including heating, ventilation, and air conditioning equipment, pumps, sprayers and other material handling equipment. Markets served include oil and natural gas, environmental, electronics, industrial, renewable energy, semiconductor fabrication and wastewater. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The cost of manufacturing for each segment is based on product cost, and expenses are based on actual costs incurred along with cost allocations of shared and centralized functions based on activities performed, sales or space utilization. Depreciation expense is charged to the manufacturing or operating cost center that utilizes the asset and is then allocated to segments on the same basis as other expenses within that cost center. Segments are responsible for development, manufacturing, marketing and sales of their products. This allows for focused marketing and efficient product development. The segments share common purchasing, certain manufacturing, distribution and administration functions. The Company’s chief operating decision maker is the chief executive officer. The Company’s chief operating decision maker uses operating earnings excluding unallocated corporate expense to assess the operating performance of each segment. Operating earnings is used to make resource allocation decisions amongst segments and to determine compensation for certain employees. Gross profit is additionally used to evaluate product pricing and operating performance. Unallocated corporate expenses include such items as stock compensation, certain acquisition transaction costs, bad debt expense, charitable contributions and certain facility expenses. Asset information by segment is not reported to the chief operating decision maker and therefore is not disclosed. 47 Table of Contents Segment information follows (in thousands): 2025 2024 2023 Contractor Net Sales $ 1,071,878 $ 988,865 $ 985,675 Cost of products sold 552,798 484,926 493,857 Gross Profit 519,080 503,939 491,818 Operating Expenses 248,772 233,795 206,424 Contractor Operating Earnings $ 270,308 $ 270,144 $ 285,394 Industrial Net Sales $ 996,814 $ 958,023 $ 1,018,142 Cost of products sold 423,938 413,038 440,598 Gross Profit 572,876 544,985 577,544 Operating Expenses 238,290 233,275 221,550 Industrial Operating Earnings $ 334,586 $ 311,710 $ 355,994 Expansion Markets Net Sales $ 167,912 $ 166,428 $ 191,788 Cost of products sold 78,344 86,013 93,937 Gross Profit 89,568 80,415 97,851 Operating Expenses 48,072 48,905 54,518 Expansion Markets Operating Earnings $ 41,496 $ 31,510 $ 43,333 Reportable Segment Operating Earnings Total $ 646,390 $ 613,364 $ 684,721 Unallocated corporate expense 35,654 43,266 38,678 Contingent consideration ( 14,061 ) — ( 8,600 ) Impairment — — 7,800 Operating Earnings 624,797 570,098 646,843 Interest expense 2,893 2,828 5,191 Other (income) expense, net ( 19,296 ) ( 22,013 ) 32,850 Earnings Before Income Taxes $ 641,200 $ 589,283 $ 608,802 Geographic information follows (in thousands): 2025 2024 2023 Net Sales (based on customer location) United States $ 1,169,881 $ 1,149,044 $ 1,161,607 Other countries 1,066,723 964,272 1,033,999 Total $ 2,236,604 $ 2,113,316 $ 2,195,606 Long-lived Assets United States $ 600,011 $ 635,698 Other countries 155,053 135,958 Total $ 755,064 $ 771,656 Sales to Major Customers. Worldwide sales to one customer in the Contractor and Industrial segments individually represented over 10 percent of the Company’s consolidated sales in 2025, 2024 and 2023. 48 Table of Contents 3. Inventories Major components of inventories were as follows (in thousands): 2025 2024 Finished products and components $ 175,684 $ 197,242 Products and components in various stages of completion 123,866 114,647 Raw materials and purchased components 216,559 214,902 Subtotal 516,109 526,791 Reduction to LIFO cost ( 114,971 ) ( 122,115 ) Total $ 401,138 $ 404,676 Inventories valued under the LIFO method were $ 148 million in 2025 and $ 179 million in 2024. Most other inventory was valued on the FIFO method. In 2025, certain inventory quantities were reduced, resulting in liquidation of LIFO inventory quantities, although increases in current product costs, including tariffs, offset the impact of the decrement. The impact on net earnings was not significant. 4. Property, Plant and Equipment Property, plant and equipment were as follows (in thousands): 2025 2024 Land and improvements $ 78,420 $ 73,767 Buildings and improvements 628,060 610,580 Manufacturing equipment 491,351 481,400 Office, warehouse and automotive equipment 74,870 71,901 Additions in progress 29,623 25,205 Total property, plant and equipment 1,302,324 1,262,853 Accumulated depreciation ( 547,260 ) ( 491,197 ) Net property, plant and equipment $ 755,064 $ 771,656 Depreciation expense was $ 77 million in 2025, $ 67 million in 2024 and $ 55 million in 2023. 5. Income Taxes Earnings before income tax expense consist of (in thousands): 2025 2024 2023 Domestic $ 512,686 $ 484,088 $ 450,806 Foreign 128,514 105,195 157,996 Total $ 641,200 $ 589,283 $ 608,802 49 Table of Contents Income tax expense consists of (in thousands): 2025 2024 2023 Current Federal $ 81,064 $ 62,402 $ 79,732 State and local 7,177 6,256 7,282 Foreign 35,656 28,481 23,779 Current income tax expense 123,897 97,139 110,793 Deferred Domestic 4,459 8,344 ( 6,919 ) Foreign ( 8,995 ) ( 2,284 ) ( 1,583 ) Deferred income tax (benefit) expense ( 4,536 ) 6,060 ( 8,502 ) Total $ 119,361 $ 103,199 $ 102,291 In the current year, we adopted a new income tax disclosure accounting standard. The disclosure was retrospectively applied to all periods presented. Income taxes paid were as follows (in thousands): 2025 2024 2023 Federal $ 76,000 $ 68,000 $ 65,000 State 5,921 6,665 7,112 Foreign 29,370 29,569 39,174 Total $ 111,291 $ 104,234 $ 111,286 Income taxes paid (net of refunds) exceeded 5 percent of total income taxes paid (net of refunds) in the following jurisdictions: Foreign 2025 2024 2023 Belgium * * $ 8,732 China * * $ 7,806 Switzerland * * $ 6,230 *Jurisdiction below the threshold for the period presented. A reconciliation between the U.S. federal statutory tax rate and the effective tax rate follows (dollars in thousands): 2025 2024 2023 Amount Percent Amount Percent Amount Percent Statutory tax rate $ 134,652 21.0 % $ 123,750 21.0 % $ 127,848 21.0 % State taxes, net of federal effect 6,285 1.0 5,756 1.0 5,897 1.0 Tax effect of international operations ( 326 ) ( 0.1 ) 4,106 0.7 ( 5,204 ) ( 0.9 ) Cross-border tax law effects Foreign-derived intangible income ( 10,842 ) ( 1.7 ) ( 10,523 ) ( 1.8 ) ( 13,068 ) ( 2.1 ) Other 996 0.2 1,589 0.3 ( 523 ) ( 0.1 ) Tax credits ( 4,150 ) ( 0.7 ) ( 4,972 ) ( 0.8 ) ( 4,781 ) ( 0.8 ) Nontaxable or nondeductible items Share-based payment awards ( 6,068 ) ( 0.9 ) ( 14,888 ) ( 2.5 ) ( 10,315 ) ( 1.7 ) Other ( 1,186 ) ( 0.2 ) ( 1,619 ) ( 0.4 ) 2,437 0.4 Effective tax rate $ 119,361 18.6 % $ 103,199 17.5 % $ 102,291 16.8 % 50 Table of Contents Deferred income taxes are provided for temporary differences between the financial reporting and the tax basis of assets and liabilities. The deferred tax (liabilities) assets resulting from these differences were as follows (in thousands): 2025 2024 Inventory valuations $ 5,605 $ 3,456 Accrued self-insurance retentions 1,712 1,187 Accrued warranty and service liabilities 3,545 2,392 Vacation accruals 3,718 3,409 Customer allowances 6,496 4,080 Excess of tax over book depreciation and amortization ( 101,010 ) ( 79,728 ) Pension benefit obligation 87 915 Postretirement medical benefit obligation 5,001 5,002 Acquisition costs 810 442 Stock compensation 14,823 12,634 Deferred compensation 2,911 5,305 Net operating loss carryforward 3,511 — Deferred revenue 7,073 927 Interest expenses 5,132 — Research and development 34,985 31,543 Prepayments from foreign subsidiaries — 13,872 Other 4,868 3,652 Net deferred tax (liabilities) assets $ ( 733 ) $ 9,088 Total deferred tax assets were $ 36 million and $ 47 million, and total deferred tax liabilities were $ 37 million and $ 38 million on December 26, 2025 and December 27, 2024, respectively. The difference between the deferred income tax provision and the change in net deferred income taxes is due to the changes in other comprehensive income (loss) items and acquisition purchase accounting. The Company files income tax returns in the U.S. federal jurisdiction, and various states and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2019. The Company continues to assert that it will indefinitely reinvest earnings of foreign subsidiaries to support the expansion of its international business. No additional income or withholding taxes have been provided for any remaining undistributed foreign earnings, as these amounts continue to be indefinitely reinvested in foreign operations. As of December 26, 2025, the amount of cash held outside the U.S. was not significant to the Company’s liquidity and was available to fund investments abroad. The Company records penalties and accrued interest related to uncertain tax positions in income tax expense. Total reserves for uncertain tax positions were not material. 51 Table of Contents 6. Debt A summary of debt follows (dollars in thousands): Average Interest Rate as of December 26, 2025 Maturity 2025 2024 Unsecured revolving credit facility N/A October 2029 — — Unsecured revolving credit facility - offshore renminbi denominated 2.74 % N/A 22,820 27,375 Long-term loan issued by Intesa Sanpaolo S.p.A. 2.18 % 2026 1,624 — Notes payable to banks — % 2026 252 1,162 Total debt $ 24,696 $ 28,537 On October 25, 2024, the Company executed an amendment to its amended and restated credit agreement, extending the expiration date to October 25, 2029, 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 amended agreement with a syndicate of lenders provides up to $ 750 million of committed credit, available for general corporate purposes, working capital needs, share repurchases and acquisitions. The Company may borrow up to $ 50 million under the swingline portion of the facility for daily working capital needs. Borrowings under the amended and restated credit agreement may be denominated in U.S. dollars or certain other currencies. In addition to paying interest on the outstanding loans, the Company is required to pay a facility fee on the unused amount of the loan commitments at a rate per annum ranging from 0.125 % to 0.25 %, depending on the Company’s cash flow leverage ratio. The amended and restated credit agreement contains customary representations, warranties, covenants and events of default, including but not limited to covenants restricting the Company’s and its subsidiaries’ ability to (i) merge or consolidate with another entity, (ii) sell, transfer, lease or convey their assets, (iii) make any material change in the nature of the core business of the Company, (iv) make certain investments, or (v) incur secured indebtedness. The amended and restated credit agreement also requires the Company to maintain a cash flow leverage ratio of not more than 3.50 to 1.00 (unless a significant acquisition has been consummated, in which case, not more than 4.00 to 1.00 during the four fiscal quarter period beginning with the quarter in which such acquisition occurs) and an interest coverage ratio of not less than 3.00 to 1.00 (unless a significant acquisition has been consummated, in which case, not less than 2.50 to 1.00 during the four fiscal quarter period beginning with the quarter in which such acquisition occurs). A change in control of the Company will constitute an event of default under the amended and restated credit agreement. The Company maintains a revolving credit agreement with a sole lender that provides up to $ 50 million of committed credit, available for general corporate purposes, working capital needs, share repurchases and acquisitions. Under the terms of the agreement, loans may be denominated in U.S. dollars or Chinese renminbi (offshore). Loans denominated in U.S. dollars bear interest, at the Company’s option, at either a base rate or a HIBOR-based rate. Loans denominated in Chinese renminbi (offshore) bear interest at a HIBOR-based rate based on the Chinese offshore rate. Other terms of this revolving credit agreement are substantially similar to those of the Company’s amended and restated credit agreement that expires in October 2029. On December 16, 2022, the Company entered into an amendment to its master note agreement that extends the period in which the Company may issue, and affiliates of the lender may purchase, the Company’s senior notes from January 29, 2023 to December 16, 2027. The amendment also increases the maximum aggregate principal amount of senior notes the Company may issue under the master note agreement from $ 200 million to $ 250 million, although the maximum aggregate amount of senior notes bearing interest at a floating rate that may be outstanding at any one time will continue to be $ 100 million. The amendment also extends the maturity and average life of each senior note bearing interest at a fixed rate that may be issued under the master note agreement from no more than 12 years after the date of issuance to no more than 15 years after the date of issuance, and includes customary provisions for the replacement of LIBOR with SOFR and customary benchmark replacement provisions with respect to senior notes bearing interest at a floating rate. All other material items of the master note agreement remain unchanged. Under the terms of the master note agreement, the Company is required to maintain certain financial ratios as to cash flow leverage and interest coverage similar to the requirements of its other debt agreements. 52 Table of Contents On December 26, 2025, the Company had $ 845 million in lines of credit, including the $ 800 million in committed credit facilities described above and $ 45 million with foreign banks. The unused portion of committed credit lines was $ 777 million as of December 26, 2025. In addition, the Company has unused, uncommitted lines of credit with foreign banks totaling $ 37 million. Borrowing rates under these credit lines vary with the prime rate, rates on domestic certificates of deposit and other benchmark rates (e.g. SOFR, EURIBOR, HIBOR, TIBOR and RFR). The Company pays facility fees at an annual rate of up to 0.15 % on certain of these lines. No compensating balances are required. Various debt agreements require the Company to maintain certain financial ratios as to cash flow leverage and interest coverage. The Company is in compliance with all financial covenants of its debt agreements as of December 26, 2025. Annual maturities of debt are as follows (in thousands): 2026 2027 2028 2029 2030 Thereafter Maturities of debt $ 24,696 $ — $ — $ — $ — $ — Interest paid on debt was $ 3 million in 2025, $ 3 million in 2024 and $ 6 million in 2023. 7. Shareholders’ Equity At December 26, 2025, the Company had 22,549 authorized, but unissued, cumulative preferred shares, $ 100 par value. The Company also has authorized, but not issued, a separate class of 3 million shares of preferred stock, $ 1 par value. Changes in components of accumulated other comprehensive income (loss), net of tax were (in thousands): Pension and Postretirement Medical Cumulative Translation Adjustment Total Balance, December 30, 2022 $ ( 39,734 ) $ ( 29,644 ) $ ( 69,378 ) Other comprehensive income (loss) before reclassifications ( 28,162 ) 25,661 ( 2,501 ) Amounts reclassified from accumulated other comprehensive income 36,884 — 36,884 Balance, December 29, 2023 ( 31,012 ) ( 3,983 ) ( 34,995 ) Other comprehensive income (loss) before reclassifications 15,098 ( 32,446 ) ( 17,348 ) Amounts reclassified from accumulated other comprehensive income 2,769 — 2,769 Balance, December 27, 2024 ( 13,145 ) ( 36,429 ) ( 49,574 ) Other comprehensive income (loss) before reclassifications 2,636 84,429 87,065 Amounts reclassified from accumulated other comprehensive income 14 — 14 Balance, December 26, 2025 $ ( 10,495 ) $ 48,000 $ 37,505 Amounts related to pension and postretirement medical adjustments are classified to non-service components of pension cost that are included within other non-operating expenses . Included in the 2023 reclassifications were $ 42 million of pension settlement losses. See Note 10 for additional details regarding pension and postretirement medical plans. 8. Share-Based Awards, Purchase Plans and Compensation Cost Stock Option and Award Plan. The Company has a stock incentive plan under which it grants stock options and share awards to directors, officers and other employees. Option price is the market price on the date of grant. Options become exercisable at such time, generally over 3 years or 4 years, and in such installments as set by the Company, and expire 10 years from the date of grant. Restricted share awards have been made to certain key employees under the plan. The market value of restricted stock at the date of grant is charged to operations over the vesting period. Compensation cost related to restricted shares is not significant. The Company has a stock appreciation plan that provides for payments of cash to eligible foreign employees based on the change in the market price of the Company’s common stock over a period of time. Compensation cost related to the 53 Table of Contents stock appreciation plan was an expense of $ 2 million in 2025 and $ 2 million in 2024 and a benefit of $ 2 million in 2023. Individual nonemployee directors of the Company may elect to receive, either currently or deferred, all or part of their retainer in the form of shares of the Company’s common stock instead of cash. Under this arrangement, the Company issued 8,121 shares in 2025, 9,940 shares in 2024 and 11,150 shares in 2023. The expense related to this arrangement is not significant. 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 ( 1,354 ) 30.77 Canceled ( 121 ) 62.75 Outstanding, December 29, 2023 9,904 49.09 7,274 41.46 Granted 925 89.23 Exercised ( 1,535 ) 32.10 Canceled ( 155 ) 76.03 Outstanding, December 27, 2024 9,139 55.60 6,582 47.16 Granted 1,470 84.91 Exercised ( 705 ) 33.63 Canceled ( 118 ) 76.88 Outstanding, December 26, 2025 9,786 $ 61.38 7,017 $ 52.94 The following table summarizes information for options outstanding and exercisable at December 26, 2025 (in thousands, except exercise prices and contractual term amounts): Options Outstanding Options Exercisable Range of Prices Options Outstanding Weighted Average Remaining Contractual Term in Years Weighted Average Exercise Price Options Exercisable Weighted Average Exercise Price $ 20-40 1,476 0.9 $ 29.02 1,476 $ 29.02 $ 40-60 3,159 3.3 48.96 3,159 48.96 $ 60-80 2,863 6.4 71.54 2,175 71.55 $ 80-100 2,288 9.0 86.68 207 88.73 $ 20-100 9,786 5.2 $ 61.38 7,017 $ 52.94 The aggregate intrinsic value of exercisable option shares was $ 215 million as of December 26, 2025 with a weighted average contractual term of 3.9 years. There were approximately 9.8 million vested share options and share options expected to vest as of December 26, 2025 with an aggregate intrinsic value of $ 223 million, a weighted average exercise price of $ 61.38 and a weighted average contractual term of 5.2 years. Information related to options exercised as follows (in thousands): 2025 2024 2023 Cash received $ 23,724 $ 49,566 $ 40,708 Aggregate intrinsic value 36,191 84,328 61,624 Tax benefit realized 7,375 17,675 12,605 54 Table of Contents Employee Stock Purchase Plan. Under the Company’s Employee Stock Purchase Plan, the purchase price of the shares is the lesser of 85 percent of the fair market value on the first day or the last day of the plan year. Under this plan, the Company issued 256,798 shares in 2025, 330,413 shares in 2024 and 322,764 shares in 2023. Authorized Shares. In April 2019, shareholders of the Company approved the Graco Inc. 2019 Stock Incentive Plan. The Plan provides for issuance of up to 15 million shares of Graco common stock. Shares authorized for issuance under the stock option and purchase plans are shown below (in thousands): Total Shares Authorized Available for Future Issuance as of December 26, 2025 Stock Incentive Plan (2019) 15,000 7,518 Employee Stock Purchase Plan (2006) 21,000 10,854 Total 36,000 18,372 Amounts available for future issuance exclude outstanding options. Options outstanding, as of December 26, 2025, include options granted under two plans that were replaced by subsequent plans. No shares are available for future grants under those plans. Share-based Compensation. The Company recognized share-based compensation cost as follows (in thousands): 2025 2024 2023 Share-based compensation $ 34,333 $ 31,892 $ 30,229 Tax benefit 3,689 3,295 3,177 Share-based compensation, net of tax $ 30,644 $ 28,597 $ 27,052 As of December 26, 2025, there was $ 23 million of unrecognized compensation cost related to unvested options, expected to be recognized over a weighted average period of approximately 2.5 years. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions and results: 2025 2024 2023 Expected life in years 6.1 6.6 6.7 Interest rate 4.1 % 4.2 % 4.0 % Volatility 25.0 % 26.3 % 26.3 % Dividend yield 1.3 % 1.1 % 1.3 % Weighted average fair value per share $ 24.21 $ 28.03 $ 21.76 Expected life is estimated based on vesting terms and exercise and termination history. Interest rate is based on the U.S. Treasury rate on zero-coupon issues with a remaining term equal to the expected life of the option. Expected volatility is based on historical volatility over a period commensurate with the expected life of options. The fair value of employees’ purchase rights under the Employee Stock Purchase Plan was estimated on the date of grant. The benefit of the 15 percent discount from the lesser of the fair market value per common share on the first day and the last day of the plan year was added to the fair value of the employees’ purchase rights determined using the Black-Scholes option-pricing model with the following assumptions and results: 2025 2024 2023 Expected life in years 1.0 1.0 1.0 Interest rate 4.1 % 4.9 % 5.1 % Volatility 19.6 % 24.2 % 26.4 % Dividend yield 1.3 % 1.1 % 1.4 % Weighted average fair value per share $ 19.65 $ 23.16 $ 18.04 55 Table of Contents 9. Earnings per Share The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share amounts): 2025 2024 2023 Net earnings available to common shareholders $ 521,839 $ 486,084 $ 506,511 Weighted average shares outstanding for basic earnings per share 166,381 168,884 168,442 Dilutive effect of stock options computed based on the treasury stock method using the average market price 2,838 3,521 3,757 Weighted average shares outstanding for diluted earnings per share 169,219 172,405 172,199 Basic earnings per share $ 3.14 $ 2.88 $ 3.01 Diluted earnings per share $ 3.08 $ 2.82 $ 2.94 Anti-dilutive stock options excluded from computations of diluted earnings per share totaled 2.3 million shares in 2025, 0.9 million shares in 2024 and 2.0 million shares in 2023. 10. Retirement Benefits The Company has a defined contribution plan, under Section 401(k) of the Internal Revenue Code, which provides retirement benefits to most U.S. employees. For all employees who choose to participate, the Company matches employee contributions at a 100 percent rate, up to 3 percent of the employee’s compensation. For employees not covered by a defined benefit plan, the Company contributed an amount equal to 2 percent of the employee’s compensation. Employer contributions totaled $ 11 million in 2025, $ 12 million in 2024 and $ 12 million in 2023. The Company’s postretirement medical plan provides certain medical benefits for retired U.S. employees. Employees hired before January 1, 2005, are eligible for these benefits upon retirement and fulfillment of other eligibility requirements as specified by the plan. The Company has both funded and unfunded noncontributory defined benefit pension plans that together cover most U.S. employees hired before January 1, 2006, certain directors and some of the employees of the Company’s non-U.S. subsidiaries. For U.S. plans, benefits are based on years of service and the highest 5 consecutive years’ earnings in the 10 years preceding retirement. Plans are funded annually in amounts consistent with minimum funding levels and maximum tax deduction limits, although the Company may make additional voluntary contributions from time to time to improve the funded status of its plans. Investment policies and strategies of the U.S. funded pension plan are based on participant demographics. As the plan covers active participants and retirees with higher benefit amounts, investments are based on a long-term view of economic growth and weighted toward equity securities. The primary goal of the plan’s investments is to ensure that the plan’s liabilities are met over time. In developing strategic asset allocation guidelines, an emphasis is placed on the long-term characteristics of individual asset classes, and the benefits of diversification among multiple asset classes. The plan invests primarily in domestic and international equities, fixed income securities, which include treasuries, highly-rated corporate bonds and high-yield bonds and real estate. Strategic target allocations for plan assets are 52 percent equity securities, 43 percent fixed income securities and 5 percent real estate and alternative investments. Plan assets are held in a trust for the benefit of plan participants and are invested in various commingled funds, most of which are sponsored by the trustee. The fair values for commingled equity, fixed-income and real estate investments are measured using net asset values, which take into consideration the value of underlying fund investments, as well as the other accrued assets and liabilities of a fund, in order to determine a per share market value. Certain trustee-sponsored funds allow redemptions monthly or quarterly, with 10 days or 60 days advance notice, while most of the funds allow redemptions daily . The plan had unfunded commitments to make additional investments in certain funds totaling $ 2 million as of December 26, 2025 and December 27, 2024. The Company maintains a defined contribution plan covering employees of a Swiss subsidiary, funded by Company and employee contributions. Responsibility for pension coverage under Swiss law has been transferred to a Swiss insurance company. Plan assets are invested in an insurance contract that guarantees a federally mandated annual rate of return. 56 Table of Contents The value of the plan assets is effectively the value of the insurance contract. The performance of the underlying assets held by the insurance company has no direct impact on the surrender value of the insurance contract. The insurance backed assets have no active market and are classified as level 3 in the fair value hierarchy. Assets of all plans by category and fair value measurement level were as follows (in thousands): Level December 26, 2025 December 27, 2024 Cash and cash equivalents 1 $ 166 $ 115 Insurance contract 3 39,319 32,466 Investments categorized in fair value hierarchy 39,485 32,581 Equity N/A 79,622 81,089 Fixed income N/A 82,650 64,331 Real estate and other N/A 4,612 4,545 Investments measured at net asset value 166,884 149,965 Total $ 206,369 $ 182,546 The following table is a reconciliation of pension assets measured at fair value using level 3 inputs (in thousands): 2025 2024 Balance, beginning of year $ 32,466 $ 36,151 Purchases 2,709 2,331 Redemptions ( 937 ) ( 4,133 ) Unrealized gains (losses) 5,081 ( 1,883 ) Balance, end of year $ 39,319 $ 32,466 57 Table of Contents The following provides a reconciliation of the changes in the plans’ benefit obligations and fair value of assets over the periods ending December 26, 2025 and December 27, 2024, and a statement of the funded status as of the same dates (in thousands): Pension Benefits Postretirement Medical Benefits 2025 2024 2025 2024 Change in benefit obligation Obligation, beginning of year $ 197,309 $ 213,575 $ 20,335 $ 22,654 Service cost 4,623 5,097 305 344 Interest cost 9,444 9,194 1,138 1,148 Actuarial loss (gain) 3,897 ( 19,973 ) 311 ( 2,153 ) Benefit payments ( 3,678 ) ( 3,117 ) ( 1,330 ) ( 1,658 ) Plan amendments ( 189 ) ( 285 ) — — Settlements — ( 3,579 ) — — Exchange rate changes 7,091 ( 3,603 ) — — Obligation, end of year $ 218,497 $ 197,309 $ 20,759 $ 20,335 Change in plan assets Fair value, beginning of year $ 182,546 $ 160,851 $ — $ — Actual return on assets 19,268 7,658 — — Employer contributions 3,571 23,216 1,330 1,658 Benefit payments ( 3,678 ) ( 3,117 ) ( 1,330 ) ( 1,658 ) Settlements — ( 3,579 ) — — Exchange rate changes 4,662 ( 2,483 ) — — Fair value, end of year $ 206,369 $ 182,546 $ — $ — Unfunded status $ ( 12,128 ) $ ( 14,763 ) $ ( 20,759 ) $ ( 20,335 ) Amounts recognized in consolidated balance sheets Non-current assets $ 44,785 $ 37,888 $ — $ — Current liabilities 2,742 2,421 1,594 1,633 Non-current liabilities 54,171 50,230 19,165 18,702 Net $ 12,128 $ 14,763 $ 20,759 $ 20,335 Changes in discount rates used to value pension obligations were the main drivers of actuarial losses in 2025 and gains in 2024. In 2024, the Company made a $ 20 million voluntary contribution to one of its U.S. qualified defined benefit plans. The accumulated benefit obligation as of year-end for all defined benefit pension plans was $ 201 million for 2025 and $ 180 million for 2024. Information for plans with an accumulated benefit obligation in excess of plan assets follows (in thousands): 2025 2024 Projected benefit obligation $ 96,231 $ 85,117 Accumulated benefit obligation 90,954 80,746 Fair value of plan assets 39,318 32,466 58 Table of Contents The components of net periodic benefit cost for the plans for 2025, 2024 and 2023 were as follows (in thousands): Pension Benefits Postretirement Medical Benefits 2025 2024 2023 2025 2024 2023 Service cost-benefits earned during the period $ 4,623 $ 5,097 $ 5,729 $ 305 $ 344 $ 348 Interest cost on projected benefit obligation 9,444 9,194 16,535 1,138 1,148 1,165 Expected return on assets ( 11,642 ) ( 10,147 ) ( 19,141 ) — — — Amortization of prior service cost ( 280 ) ( 281 ) 36 — — — Amortization of net loss 835 3,255 5,999 ( 272 ) — ( 133 ) Curtailment (gain) loss ( 223 ) — — — — — Settlement loss — 346 42,169 — — — Cost of pension plans which are not significant and have not adopted ASC 715 22 171 368 N/A N/A N/A Net periodic benefit cost $ 2,779 $ 7,635 $ 51,695 $ 1,171 $ 1,492 $ 1,380 Net periodic benefit cost is disaggregated between service cost presented as operating expense and other components of pension cost presented as non-operating expense. Other components of pension cost and changes in cash surrender value of insurance contracts intended to fund certain non-qualified pension and deferred compensation arrangements included in non-operating (income) expenses totaled income of $ 5 million in 2025, and expense of $ 3 million and $ 44 million in 2024 and 2023, respectively. In December of 2023, the Company entered into an agreement under which approximately $ 147 million of pension obligations of its U.S. funded defined benefit pension plan were transferred to an insurance company. The Company recognized a non-cash pension settlement loss of approximately $ 42 million as a result of the transaction. Amounts recognized in other comprehensive income (loss) in 2025 and 2024 were as follows (in thousands): Pension Benefits Postretirement Medical Benefits 2025 2024 2025 2024 Net gain (loss) arising during the period $ 3,672 $ 17,506 $ ( 311 ) $ 2,153 Amortization of net loss (gain) 835 3,255 ( 272 ) — Prior service (cost) credit arising during the period ( 42 ) 285 — — Curtailment (gain) loss ( 223 ) — — — Settlement loss — 346 — — Amortization of prior service (credit) cost ( 280 ) ( 281 ) — — Total $ 3,962 $ 21,111 $ ( 583 ) $ 2,153 Amounts included in accumulated other comprehensive income (loss) as of December 26, 2025 and December 27, 2024, that had not yet been recognized as components of net periodic benefit cost, were as follows (in thousands): Pension Benefits Postretirement Medical Benefits 2025 2024 2025 2024 Prior service cost $ 1,975 $ 2,026 $ — $ — Net (loss) gain ( 18,988 ) ( 22,954 ) 3,564 4,148 Net (loss) gain before income taxes ( 17,013 ) ( 20,928 ) 3,564 4,148 Income taxes 3,393 4,549 ( 439 ) ( 914 ) Net $ ( 13,620 ) $ ( 16,379 ) $ 3,125 $ 3,234 59 Table of Contents Assumptions used to determine the Company’s benefit obligations are shown below: Pension Benefits Postretirement Medical Benefits Weighted average assumptions 2025 2024 2025 2024 U.S. Plans Discount rate 5.8 % 5.9 % 5.6 % 5.8 % Rate of compensation increase 2.5 % 2.5 % N/A N/A Non-U.S. Plans Discount rate 1.7 % 1.4 % N/A N/A Rate of compensation increase 2.0 % 2.0 % N/A N/A Assumptions used to determine the Company’s net periodic benefit cost are shown below: Pension Benefits Postretirement Medical Benefits Weighted average assumptions 2025 2024 2023 2025 2024 2023 U.S. Plans Discount rate 5.9 % 5.3 % 5.6 % 5.8 % 5.3 % 5.6 % Rate of compensation increase 2.5 % 2.7 % 2.7 % N/A N/A N/A Expected return on assets 7.3 % 7.6 % 7.6 % N/A N/A N/A Non-U.S. Plans Discount rate 1.4 % 2.1 % 0.4 % N/A N/A N/A Rate of compensation increase 2.0 % 1.7 % 1.3 % N/A N/A N/A Expected return on assets 2.2 % 2.1 % 1.6 % N/A N/A N/A Several sources of information are considered in determining the expected rate of return assumption, including the allocation of plan assets, the input of actuaries and professional investment advisers, and historical long-term returns. In setting the return assumption, the Company recognizes that historical returns are not always indicative of future returns and also considers the long-term nature of its pension obligations. The Company’s U.S. retirement medical plan limits the annual cost increase that will be paid by the Company to 3 percent. In measuring the accumulated postretirement benefit obligation (APBO), the annual trend rate for health care costs was assumed to be 8.0 percent for 2026, decreasing each year to a constant rate of 4.0 percent for 2050 and thereafter, subject to the plan’s annual increase limitation. The Company expects to contribute $ 3 million to its unfunded pension plans and $ 2 million to the postretirement medical plan in 2026. The Company will not be required to make contributions to the funded pension plan under minimum funding requirements for 2026. Estimated future benefit payments are as follows (in thousands): Pension Benefits Postretirement Medical Benefits 2026 $ 8,539 $ 1,594 2027 10,328 1,593 2028 10,584 1,562 2029 12,104 1,534 2030 11,502 1,508 Years 2031-2035 73,575 7,436 60 Table of Contents 11. Commitments and Contingencies Operating Lease Liabilities and Assets The Company owns most of the assets used in its operations, but leases certain buildings and land, vehicles, office equipment and other rental assets. The Company determines if an arrangement is a lease at inception. All of the Company’s current lease arrangements are classified as operating leases. The Company historically has not entered into financing leases. Operating lease assets and obligations are recognized at the lease commencement date based on the present value of lease payments over the lease term. Lease expense is recognized by amortizing the amount recorded as an asset on a straight-line basis over the lease term. In determining lease asset value, the Company considers fixed or variable payment terms, prepayments, incentives, and options to extend, terminate or purchase. Renewal, termination or purchase options affect the lease term used for determining lease asset value only if the option is reasonably certain to be exercised. The Company generally uses its incremental borrowing rate based on information available at the lease commencement date in determining the present value of lease payments. Supplemental information related to the Company's lease activities were as follows (in thousands): 2025 2024 Operating lease expense $ 12,243 $ 10,464 Operating lease payments 11,330 9,752 Non-cash additions to operating lease assets 6,395 511 Additional information related to operating leases were as follows: 2025 2024 Weighted average remaining lease term (years) 3.2 2.2 Weighted average discount rate 4.96 % 3.76 % Variable lease costs and short-term lease costs were not significant for the twelve months ended December 26, 2025 and December 27, 2024. As of December 26, 2025, future maturities of operating lease liabilities were as follows (in thousands): 2026 $ 8,769 2027 9,491 2028 5,616 2029 2,906 2030 1,382 Thereafter 1,621 Total lease payments $ 29,785 Present value adjustment ( 2,885 ) Operating lease liabilities $ 26,900 Other Commitments. The Company is committed to pay suppliers under the terms of open purchase orders issued in the normal course of business totaling approximately $ 108 million at December 26, 2025. The Company also has commitments with certain suppliers to purchase minimum quantities, and under the terms of certain agreements, the Company is committed for certain portions of the supplier’s inventory. The Company does not purchase, or commit to purchase, quantities in excess of normal usage or amounts that cannot be used within one year. The Company estimates that the maximum commitment amount under such agreements does not exceed $ 68 million. The Company enters into contracts with vendors to receive services. Commitments under these service contracts with non-cancelable terms of more than one year totaled $ 18 million in 2026, $ 14 million in 2027, $ 8 million in 2028 and $ 4 million thereafter. 61 Table of Contents In addition, the Company could be obligated to perform under standby letters of credit totaling $ 2 million at December 26, 2025. The Company has also guaranteed the debt of its subsidiaries for up to $ 8 million. All debt of subsidiaries is reflected in the consolidated balance sheets. Contingencies. The Company is party to various legal proceedings arising in the normal course of business. The Company is actively pursuing and defending these matters and has recorded an estimate of the probable costs where appropriate. Management does not expect that the resolution of these matters will have a material adverse effect on the Company, although the ultimate outcome cannot be determined based on available information. 12. Acquisitions On November 4, 2024, the Company acquired Corob S.p.A. ("Corob") for € 230 million in cash, subject to normal post-closing purchase price adjustments, with up to € 30 million in additional contingent consideration. The contingent consideration is related to the sellers' eligibility to receive cash earn out payments, calculated based on qualified revenue performance metrics for two individual twelve-month periods. The earn out payments are capped at € 15.0 million for both periods. The first twelve-month performance period did not result in an earn-out payment. The purchase price allocation was completed in the fourth quarter of 2025. Measurement period adjustments related to the finalization of income taxes resulted in a $ 3 million decrease in goodwill and deferred income taxes, net. The adjustments were recorded retrospectively, and prior period financial information has been revised accordingly. The total purchase consideration consisted of the following (in thousands): Cash paid $ 276,188 Contingent consideration 14,498 Total purchase consideration $ 290,686 Purchase consideration was allocated to assets acquired and liabilities assumed based on estimated fair values as follows (in thousands): Cash and cash equivalents $ 30,899 Accounts receivable 28,120 Inventories 26,119 Other current assets 18,515 Property, plant and equipment 16,619 Other non-current assets 5,854 Identifiable intangible assets 131,240 Goodwill 123,817 Current liabilities ( 52,968 ) Deferred income taxes, net ( 30,039 ) Other non-current liabilities ( 7,490 ) Total net assets acquired $ 290,686 Goodwill recognized from the Corob acquisition primarily reflects an intangible asset that does not qualify for separate recognition. None of the goodwill acquired with Corob is deductible for tax purposes. Identifiable intangible assets and estimated useful life are as follows (in thousands): Estimated Life (years) Trade name $ 32,458 Indefinite Customer relationship 76,169 15 Developed technology 20,557 10 Backlog 2,056 0.5 Total identifiable intangibles assets $ 131,240 62 Table of Contents The fair values of the trade name and developed technology acquired in the acquisition were determined using a relief-from-royalty method, and customer relationships and backlog acquired were determined using an excess earnings method. These methods utilize unobservable inputs that are significant to these fair value measurements and thus classified as Level 3 of the fair value hierarchy described in Note 1. The following unaudited pro forma information provides the results of operations for the years ended December 27, 2024 and December 29, 2023, as if the acquisition had been completed at the beginning of fiscal year 2023 (in thousands, except per share amounts): 2024 2023 Net sales $ 2,218,982 $ 2,316,030 Net earnings 489,109 501,114 Earnings per share Basic $ 2.90 $ 2.97 Diluted $ 2.84 $ 2.91 The unaudited pro forma information includes the impact of intangible asset amortization of approximately $ 8 million in 2024 and $ 11 million in 2023. The year ended December 27, 2024 excludes the impact of $ 4 million of transaction-related expenses and non-recurring expense related to the fair value adjustment to acquisition-date inventory. The year ended December 29, 2023 was adjusted to include transaction-related expenses and non-recurring expenses related to the fair value adjustment to acquisition-date inventory. The information also reflects the pro forma cost of foregone interest income but does not reflect the effect of any synergies or integration costs that may result from the acquisition. Unaudited pro forma information has been provided for comparative purposes only and the information does not necessarily reflect what the combined company's results of operations would have been had the acquisition occurred at the beginning of 2023. It also may not be useful in predicting the future results of operations of the combined company. In the third quarter of 2025, the Company completed the acquisition of Color Service s.r.l for approximately $ 77 million of purchase consideration, and its results have been included within the Powder Division in the Industrial Segment. In the fourth quarter of 2025, the Company completed the acquisition of Red Devil Equipment Company, known in the market as Radia, for approximately $ 74 million of purchase consideration, and its results have been included with the Contractor Division and Segment. The Company completed another acquisition in 2024 that was not material to the consolidated financial statements. 63 Table of Contents Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure None.