Slide 1: Investor Presentation: Company Overview, First Quarter 2021
////////////////// Investor Presentation Company Overview First Quarter 2021 1
Slide 2: Safe Harbor
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 uncertainties that could cause actual results to dif
Slide 3: Distribution of Global Sales
58% Distribution 41% 39% of Global $454 M 24% 18% 20% Sales First Quarter 2021 Americas EMEA Asia Pacific Industrial Process Contractor 61% 48% 52% 30% 35% 22% 25% 13% 14% Industrial Process Contractor Industrial Process Contractor Industrial Process Contractor 3
Slide 4: 2020 Net Sales by End Market
2020 Net Sales by End Market ////////////////// Wood −1% Mining − 1% White Goods − 2% Oil & Natural Gas − 3% Vehicle Services − 3% Public Works − 5% Automotive − 9% Other − 12% Industrial & Machinery − 15% Construction − 49% 4
Slide 5: Graco is part of your everyday life
Graco is part of your everyday life. 5
Slide 6: Graco is part of your everyday life
Graco is part of your everyday life. 6
Slide 7: Niche Diversified Fluid Handling Business
Diversified Fluid Handling Business Niche 5.5%+ ~40% Difficult applications; corrosive, Organic Revenue CAGR* Of revenue is parts viscous, hard-to-move materials & accessories *20-year average, constant currency 7
Slide 8: High Customer Value, Strong Product
Material Supplier Relationships Best in Class End User Delivery Interaction High Customer Value, Strong Customer Leading New ROI Strong Product Channel Product Investment Lowest Total Partners Cost of Ownership Differentiation Stringent Best in Class Product Requirements Quality Niche Markets 8
Slide 9: Low Volume, High Mix Delivers Customer ROI
Low Volume, High Mix Delivers Customer ROI Average Number of Units 2020 Sales No. of SKUs Sold Per Day ($ in millions) Highly-valued products at low volumes 0-1 63,900 93% $ 840 51% 2-5 2,800 4% $ 266 16% 51% of our revenue comes from products 6 - 10 800 1% $ 120 7% that we sell 11 - 15 300 0% $ 59
Slide 10: Growth Plans and Earnings Drivers
Growth Plans and Earnings Drivers ////////////////// Strategic Initiatives 12%+ ► New Product Development 10% ► New Markets ► Global Expansion ► Acquisitions ► End-user Conversion Targeted Revenue Targeted Earnings CAGR CAGR Through a cycle 10
Slide 11: Growth Plans and Earnings Drivers
Growth Plans and Earnings Drivers ////////////////// Acquisitions Strategic 3-4% + Initiatives 12% 12%+ Price 1-2% 9-10% 1-2% 5-7% 3% Industrial Production Targeted Organic Targeted Targeted Earnings Average Growth Rate CAGR Revenue CAGR CAGR Through a cycle 11
Slide 12: Exceptional Returns
Exceptional Returns 5.5%+ 29% 42% 19% Organic Revenue CAGR Return on Invested Capital Return on Equity Return on Assets Based on a 20-year average, constant currency 12
Slide 13: Business Model
Business Model ////////////////// Brand Promise ▶ Company Overview ▶ Operational Excellence ▶ Engineering & Manufacturing Excellence ▶ Extensive Reach 13
Slide 14: Our Brand Promise
▶ Innovation – Leading with technologically-advanced features, pioneering design, high performance and unparalleled reliability ▶ Quality – Our customers invest in high-quality products built to last for years of reliable service ▶ A+ Service – We’re guided by a Our Brand mindset of integrity and a
Slide 15: Engineering Excellence
Engineering Excellence Annual R&D Investment 4.2% * Target More than Double-Digit Returns 2.5 x* as a percent of sales our peer group versus peers at 1.7% ▶ new product * Peers: ITW, CSL, DOV, CFX, IEX, NDSN, WTS, FLS, based on a 5-year average, 2016 - 2020. 15 15
Slide 16: Manufacturing Excellence
Manufacturing Excellence Goal is > 80% Zero < 1% Production based in the US cost change Warranty costs on the same basket of goods (yoy) 16
Slide 17: Service Excellence
Service Excellence Same Day 96%+ Orders in by noon, In-stock service level ship the same day (goal is > 92%) 17
Slide 18: Extensive Reach
Extensive Reach Customers in over 100 Installed base 30,000+ countries ~100 Outlets/Distributors Facilities in years old 12 countries 18
Slide 19: Company Segments
Company Segments ////////////////// ▶ Industrial Company ▶ Process Overview ▶ Contractor 19
Slide 20: Industrial
Industrial March 2021, Three Months $185M 12% 35.3% Segment Revenue Organic Operating Margin +360 basis points 20
Slide 21: Industrial: End Markets and Growth Drivers
Industrial Key End Markets ▶ General industrial ▶ Automotive ▶ Res & non-res construction ▶ Alternative energy & others Growth Drivers & Trends ▶ Factory movement & upgrades ▶ Automation ▶ Technology upgrades ▶ Energy-efficiency upgrades ▶ Material changes Select Representative Industry Participants
Slide 22: Process
Process March 2021, Three Months $91M 7% 23.8% Segment Revenue Organic Operating Margin +280 basis points 22
Slide 23: Process: End Markets and Growth Drivers
Process Key End Markets ▶ Pharma, food & beverage ▶ Vehicle services ▶ Oil & natural gas ▶ Environmental ▶ Semiconductor & others Growth Drivers & Trends ▶ Factory movements and upgrades ▶ Technology upgrades ▶ Energy-efficiency upgrades ▶ Asset life maintenance ▶ Commodities extraction ▶ Environmen
Slide 24: Contractor
Contractor March 2021, Three Months $178M 35% 27.1% Segment Revenue Organic Operating Margin +490 basis points 24
Slide 25: Contractor: End Markets and Growth Drivers
Contractor Key End Markets ► Res & non-res construction ► Res & non-res remodeling ► Transportation Infrastructure Growth Drivers & Trends ► End user conversion from brush and roll ► Product innovation & channel expansion ► Housing & new construction ► Infrastructure spending ► Regional labor rates
Slide 26: Capital Allocation
Capital Allocation Company Overview ////////////////// 26
Slide 27: Long-Term Cash Deployment Priorities
Long-Term Cash Deployment Priorities ////////////////// International footprint Organic Product development Growth Production capacity and capabilities Supplement to organic growth Acquisitions Leverage our strengths Solid dividend history Shareholder Return Approximately 18.5 million
Slide 28: Key Investment Attributes
▶ Drive long-term, above-market growth ▶ Premium products that deliver strong ROI for end users ▶ Leading industry positions ▶ Serve niche markets where customers are willing to purchase quality, technology-based products ▶ Products perform critical functions ▶ High margin, high recurring revenue ▶
Slide 29: Acquisitions
Acquisitions Company Overview ////////////////// 29
Slide 30: Acquisitions: Industrial
Acquisition ▶ Industrial 2012 2013 2014 2014 2015 2015 2017 2018 30
Slide 31: Acquisitions: Process
Acquisition ▶ Process 2013 2014 2015 2015 2016 2019 31
Slide 32: Financial Results
Financial Results Company Overview ////////////////// 32
Slide 33: Financial Performance March YTD
Minneapolis, MN Financial Performance March YTD 22% 54.5% 45% 45% Revenue Gross Margin EPS Net Income (As Reported) 33
Slide 34: Financial Results
Financial Results Statement of Earnings First Quarter $ in millions except per share amounts 2021 2020 Change (1) Net earnings and Net Sales $ 454.1 $ 373.6 22 % diluted earnings per share for 2021 and 2020 Gross Profit 247.3 198.6 25 % have been adjusted to % of Net Sales 54.5% 53.2% 1.3 pts provid
Slide 35: Financial Results Adjusted for Comparability
Financial Results Adjusted for Comparability Excluding the impact Non-GAAP Reconciliation First Quarter of excess tax benefits $ in millions except per share amounts 2021 2020 Change related to stock option exercises presents a Income taxes, as reported $ 20.0 $ 9.3 115 % more consistent basis Exces
Slide 36: First Quarter 2021 Results
First Quarter 2021 Results Net Sales ► Up 22 percent from 2020, up 18 percent at consistent translation rates ► Rate up 1.3 percentage points from 2020 Gross Margin Favorable effects of changes in currency translation rates, realized pricing and higher production volume were partially offset by un
Slide 37: Components of Net Sales Changes
Financial Results Components of Net Sales Changes First Quarter March 2021 Segment Region Industrial Process Contractor Americas EMEA Asia Pacific Consolidated Volume and Price 12 % 7% 35 % 17 % 18 % 25 % 19 % Acquisitions and Divestitures 0% (3)% 0% 1% (1)% (3)% (1)% Currency 4% 2% 3% 0% 8% 8% 4% T
Slide 38: Other Items
Other Items Cap Ex Capital expenditure expectations of approximately $140 million in 2021, including approximately $90 million in facility expansion Expenses Unallocated corporate expenses in 2021 are expected to be approximately $30 million No share repurchases were made in the first quarter. We ma
Slide 39: Financial Summary: 2020 Appendix
Financial Summary ////////////////// ▶ 2020 Appendix Company Overview 39
Slide 40: Financial Performance: Sales and Operating Margin
Financial Performance Sales and Operating Margin, as Reported Net Sales Operating Margins 2,000 30% 1,800 1,600 25% Operating Margins Sales ($ millions) 1,400 20% 1,200 1,000 15% 800 600 10% 400 5% 200 - 0% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Diluted
Slide 41: Stock Dividend Growth
Stock Dividend Growth ////////////////// $0.75 $0.70 $0.64 $0.40 $0.25 $0.07 Dividends adjusted for stock splits 2003 2009 2015 2021 41
Slide 42: Strong Cash Generation
Strong Cash Generation ($ Millions) 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011 Operating Cash Flows $ 394 $ 419 $ 368 $ 338 $ 276 $ 190 $ 241 $ 243 $ 190 $ 162 % of Net Income 119% 122% 108% 134% 679% 55% 107% 115% 127% 114% Capital Expenditures 71 128 54 40 42 42 31 23 18 24 Free Cash Flow $
Slide 43: Capital Efficiency – 5 Year Average
Capital Efficiency – 5 Year Average ////////////////// Note: 5 year average includes adjustment for 2016 impairment charge Source: S&P Capital IQ Peer Group: CSL, NDSN, IEX, DOV, IR 43
Slide 44: Worldwide Leaders in Fluid Handling
Move | Measure | Mix | Control | Dispense | Spray WORLDWIDE LEADERS IN FLUID HANDLING www.graco.com 44