Slide 1: Investor Presentation 4th Quarter and Year-End 2017
2/5/2018 Investor Presentation 4th Quarter and Year-End 2017 Safe Harbor Today’s presentation includes forward-looking statements that reflect management’s current expectations about the Company’s future business and financial performance. These statements are subject to certain risks and uncertaint
Slide 2: Overview: Business Overview
2/5/2018 Overview Enduring Business Model Strategies for Long-Term Growth − Invest in New Products − Global Expansion – Target New Markets – Make Acquisitions Company Performance Business Overview ► Graco manufactures premium equipment to pump, move, meter, mix and dispense a wide variety of fluids
Slide 3: 2017 Sales by End Market
2/5/2018 Year-to-Date December 2017 Sales – $1,475 Million EMEA 23% 58% Industrial 16% Process Asia Pacific 19% 26% Contractor 69% Industrial 18% Process 13% Contractor 35% Industrial 22% Process 47% Industrial 43% Contractor 20% Process 33% Contractor 5 2017 Sales by End Market Residential & Non-Re
Slide 4: Industrial and Process Equipment Segments
2/5/2018 Industrial Equipment Segment ► Growth Drivers and Trends Factory movements and upgrades Integration of equipment with factory data and control systems Reducing energy consumption Material changes driving demand ► Other Representative Industry Participants Exel, Wagner, Carlisle Companies, N
Slide 5: Contractor Equipment Segment
2/5/2018 Contractor Equipment Segment ► Growth Drivers and Trends Conversion of end users from manual application methods to equipment is a major focus outside North America Application of texture & cementitious materials Entry level product & channel expansion Expanding pavement maintenance product
Slide 6: Manufacturing & Engineering Excellence
2/5/2018 High Customer Value, Strong Product Differentiation Material Supplier Relationships Best in End Class User Delivery Interaction Customer Leading Strong NPD ROI Channel Investment Lowest Total Partners Cost of Ownership Stringent Best in Product Class Requirements Quality Niche Markets 11 Ma
Slide 7: Low Volume, High Mix Delivers Customer ROI
2/5/2018 Low Volume, High Mix Delivers Customer ROI Average Number of Units 2016 Sales # of SKUs Sold Per Day ($ in millions) 0-1 55,600 90% $ 614 46% 2-5 4,200 7% $ 282 21% 6 - 10 800 1% $ 112 8% 11 - 15 300 1% $ 49 4% Greater than 15 700 1% $ 272 21% Graco 2016 Sales $1,329 13 Overview Enduring Bu
Slide 8: Growth Plans and Earnings Drivers
2/5/2018 Growth Plans and Earnings Drivers 12%+ ► End User Conversion ► New Product Development Graco ► New Markets Targeted Earnings 3% - 5% ► Global Expansion CAGR Industrial ► Acquisitions Production Average Growth Rate 15 Overview Enduring Business Model Strategies for Long-Term Growth Invest in
Slide 9: Targeting Growth Through New Products & Markets
2/5/2018 Targeting Growth Through New Products & Markets New Product Development Expense as a Percentage of Revenues – 2017* Graco R&D Spending 4.1% Peers 1.7% Innovation * Peer average R&D spending as a percentage of revenues based on 2016 data 17 Process – Power Pro ESPTM Portable Electric Groundw
Slide 10: Process – SST AODD Flange Pumps and PSB Series
2/5/2018 Process – SST AODD Flange Pumps ► Stainless Steel Pumps for the chemical and marine industries ► Rotating flange design allows for connection flexibility and easy install ► Up to five times longer diaphragm life compared to others in its class ► Rugged construction with high corrosion and a
Slide 11: Process – BIOGAS 3000; Industrial – EcoQuip 2 EQp
2/5/2018 Process – BIOGAS 3000 Fixed Biogas Analyzer for Landfill and Anaerobic Digestion Sites ► Up to 4 sample points for constant monitoring of the complete gas control process, maximizing yield for plant operators ► Gases Measured: CH4, CO2, O2, H2S, H2 & CO ► Ability to monitor the gas control
Slide 12: Industrial – Spray Automation and Intelligent Paint Kitchen
2/5/2018 Industrial – Spray Automation Improving End-User Profitability and Efficiency ► Delivering finishing equipment that is easy to integrate into automation Simple integration into existing automation Reduces end-user integration costs Serves a wide range of end-user technical needs and markets
Slide 13: Contractor – 2017 New Products
2/5/2018 Contractor – 2017 New Products Handheld Airless Sprayers Low Pressure Spray Tips ► Breakthrough performance, reliability, finish ► SmartTip™ technology delivers the Fastest way to finish small jobs industry’s best finish at the lowest airless spray pressure Perfect Airless Finish™ at any ha
Slide 14: Recent Acquisitions by Segment
2/5/2018 Overview Enduring Business Model Strategies for Long-Term Growth – Invest in New Products – Target New Markets Make Acquisitions Company Performance Recent Acquisitions by Segment Industrial Process Contractor TM TM TM TM High Pressure Equipment Company ® TM & 28 14
Slide 15: Acquisitions – Environmental Focus; Smith Manufacturing
2/5/2018 Acquisitions – Environmental Focus Geotechnical Instruments – UK manufacturer of portable and fixed landfill gas analyzers Acquired Jan 2016 and biogas analyzers used for monitoring, compliance, and control of landfill and biogas processes Landtec – Manufacturer of landfill gas wellheads an
Slide 16: Financial Results
2/5/2018 Overview Enduring Business Model Strategies for Long-Term Growth – Invest in New Products – Target New Markets – Make Acquisitions Company Performance Financial Results Statement of Earnings Fourth Quarter Year $ in millions except per share amounts 2017 2016 Change 2017 2016 Change 13 Week
Slide 17: Non-GAAP Disclosure Reconciliation; Cash Flow and Liquidity
2/5/2018 Non-GAAP Disclosure Reconciliation There were multiple events in the last two years that caused significant fluctuations in financial results, including impairment charges recorded in 2016, changes in accounting for tax benefits related to stock compensation, federal income tax reform and p
Slide 18: Operating Earnings; Notable Info from Q4 2017 Earnings Release
2/5/2018 Operating Earnings Change in Operating Earnings Fourth Quarter Year-to-Date 2016 Operating Earnings/(Loss) ($M and % of sales) ($107) (31)% $ 114 9% 2016 Oil and Natural Gas impairment of intangible assets 192 55 192 14 2016 Operating Earnings - excluding impairment $ 85 24 % $ 306 23 % Tra
Slide 19: Tax Items; Full Year 2017 Results
2/5/2018 Tax Items The effective tax rate for the fourth quarter 2017 was 51% compared to a rate of 29% last year, excluding the impact of the 2016 impairment which decreased the 2016 rate approximately 23 percentage points 2017 Tax Reform increased the rate approximately 48 percentage points; reval
Slide 20: Current Environment and Outlook; Cash Deployment Priorities
2/5/2018 Current Environment and Outlook Constant currency basis and excluding acquisitions completed in the prior 12 months Americas EMEA Asia Pacific Worldwide Current Sales Growth Sales Growth Sales Growth Sales Growth Q4 2017 4% Q4 2017 4% Q4 2017 9% Q4 2017 5% Environment Full Year 2017 9% Full
Slide 21: Key Investment Attributes; Financial Summary Q4 2017 Appendix
2/5/2018 Key Investment Attributes ► Strategies that will drive long-term, above-market growth ► Premium products that provide a strong ROI for end users ► Leading industry positions ► Serve niche markets where customers are willing to purchase quality, technology-based products ► Products perform c
Slide 22: Financial Results – Fourth Quarter
2/5/2018 Financial Results – Fourth Quarter Statement of Earnings Fourth Quarter $ in millions except per share amounts 2017 2016 Change 13 Weeks 14 Weeks Sales $ 375 $ 349 7% Gross Profit 200 185 8% % of Sales 53.5 % 52.9 % 0.6 pts Operating Earnings (Loss) 76 (107) 171 % % of Sales 20.3 % (30.6)%
Slide 23: Financial Summary 2017
2/5/2018 Fourth Quarter 2017 Results Sales increase of 7% Favorable effect of currency translation rates increased sales by approximately $7 million, 2 percentage points Acquired businesses had no significant impact on the quarter Fourth quarter 2016 included an extra week compared to our normal fis
Slide 24: Financial Performance
2/5/2018 Financial Performance Sales and Operating Margin, as Reported Net Sales Operating Margins 1,800 30% 1,600 25% 1,400 Operating Margins Sales ($ millions) 1,200 20% 1,000 15% 800 600 10% 400 5% 200 - 0% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Diluted $0.52 $0.60
Slide 25: Stock Dividend Growth; Strong Cash Generation
2/5/2018 Stock Dividend Growth $0.53 $0.33 2018 $0.25 2013* 2008* $0.07 2003* *Dividends adjusted for 2017 3-for-1 stock split 49 Strong Cash Generation ($ Millions) 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008 Operating Cash Flows $ 338 $ 276 $ 190 $ 241 $ 243 $ 190 $ 162 $ 101 $ 147 $ 162 % o
Slide 26: Capital Efficiency; Worldwide Leaders in Fluid Handling
2/5/2018 Capital Efficiency – 5 Year Average 40% 30% 20% 10% 0% Return on Assets Return on Capital Net Profit Margin Return on Equity Peer Group GGG 2016 adjusted for impairment Source: S&P Capital IQ 51 move measure mix control dispense spray Worldwide Leaders in Fluid Handling www.graco.com 26