Slide 1: Investor Presentation Third Quarter 2015
10/27/2015 Investor Presentation Third Quarter 2015 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
Slide 2: Overview and Business Overview
10/27/2015 Overview Enduring Business Model Strategies for Long-Term Growth – Invest in New Products – Expand Geographically – Target New Markets – Make Acquisitions Company Performance 3 Business Overview • Graco manufactures premium equipment to pump, move, meter, mix and dispense a wide variety o
Slide 3: YTD September 2015 Sales and 2014 Sales by End Market
10/27/2015 Year-To-Date September 2015 Sales — $961 Million EMEA 22% 59% Industrial 19% Process Asia Pacific 18% 22% Contractor 65% Industrial 20% Process 15% Contractor 37% Industrial 22% Process 47% Industrial 41% Contractor 21% Process 32% Contractor 5 2014 Sales by End Market* Residential & Non-
Slide 4: Industrial and Process Equipment Segments
10/27/2015 Industrial Equipment Segment • Growth Drivers and Trends – Factory movements and upgrades – Integration of equipment with factory data and control systems – Reducing energy consumption – Material changes driving demand • Other Representative Industry Participants – Exel, Wagner, Carlisle
Slide 5: Contractor Equipment Segment
10/27/2015 Contractor Equipment Segment • Growth Drivers and Trends – Conversion of end users from manual application methods to equipment is a major focus outside North America – Application of texture & cementitious materials – Entry level product & channel expansion – Expanding pavement maintenan
Slide 6: High Customer Value; Manufacturing and Engineering Excellence
10/27/2015 High Customer Value, Strong Product Differentiation Material Supplier Relationships Best in End Class User Delivery Interaction Customer Leading Strong NPD ROI Channel Investment Lowest Total Partners Cost of Ownership Stringent Best in Product Class Requirements Quality Niche Markets 11
Slide 7: Low Volume, High Mix Delivers Customer ROI
10/27/2015 Low Volume, High Mix Delivers Customer ROI Average Number of 2014 Sales # of SKUs Units Sold Per Day ($ in millions) 0-1 39,188 (91%) $516 (49%) 2-5 2,552 (6%) $197 (19%) 6 - 10 612 (1%) $85 (8%) 11 - 15 216 (1%) $45 (4%) Greater than 15 547 (1%) $217 (20%) Legacy Graco Total 43,115 $1,06
Slide 8: Graco's Growth Plans and Earnings Drivers
10/27/2015 Graco’s Growth Plans and Earnings Drivers 12%+ ► Acquisitions ► New Product Development Graco ► New Markets Targeted Earnings 3% - 5% ► Global Expansion CAGR Industrial ► End User Conversion Production Average Growth Rate 15 Overview Enduring Business Model Strategies for Long-Term Growth
Slide 9: Targeting Growth Through New Products and Markets
10/27/2015 Targeting Growth Through New Products & Markets New Product Development Expense as a Percentage of Revenues – 2014 Graco 4.4% R&D Spending Peers 1.6% Innovation 17 Contractor – Professional Gas Airless Upgrade • New Standard Series − No frills, Day-In-Day-Out Performance/Reliability at an
Slide 10: Industrial – Reactor and Therm-O-Flow
10/27/2015 Industrial – Reactor® 2 Hydraulic Advancing the Industry through improved control • On board data recording of key process parameters • Graco InSiteTM – Remote Reporting Technology − Real-time remote viewing of machine status w/ PC or smart device − Cloud storage of all key processing par
Slide 11: Industrial – M2K and Pro Xp Auto
10/27/2015 Industrial – M2K Fixed Ratio, Entry Level Mechanical Proportioner • Increases mix material accuracy to improve finish quality and reduce material waste compared to hand mixing • Compact size makes it faster and easier to flush, saving time and disposal costs • Ideal for lower volume two c
Slide 12: Expand Geographically – Multimaq Brazil
10/27/2015 Overview Enduring Business Model Strategies for Long-Term Growth – Invest in New Products Expand Geographically – Target New Markets – Make Acquisitions Company Performance Acquired December 2014 • A manufacturer and distributor of finishing products in Brazil • Establishes Graco’s firs
Slide 13: Target New Markets – Chemical Injection Pumps
10/27/2015 Overview Enduring Business Model Strategies for Long-Term Growth – Invest in New Products – Expand Geographically Target New Markets – Make Acquisitions Company Performance Oil & Natural Gas – Chemical Injection Pumps Pumping solution for precise injection of chemicals into producing well
Slide 14: ToughTek and TrueCoat 360 Series
10/27/2015 Industrial Technology – Big performance, from a small sprayer – Grab the power of ToughTek pumps • Utilizes proven Graco technology • Expands presence in several attractive markets Flooring Fireproofing • Strong fit with existing products − Fireproofing Infrastructure Stucco and Repair
Slide 15: Process – Chemsafe and Husky 1050e Pumps
10/27/2015 Process – Chemsafe Diaphragm Pumps Pumping Solution for Corrosive Chemicals • Features 100% PTFE or UHMW polyethylene fluid paths • PTFE over-molded diaphragm • CNC machined design insures precision fit and superior chemical containment • Full line available in 1.5”, 1”,1/2”, 3/8”, 1/4
Slide 16: Make Acquisitions – Recent Acquisitions
10/27/2015 Overview Enduring Business Model Strategies for Long-Term Growth – Invest in New Products – Expand Geographically – Target New Markets Make Acquisitions Company Performance Recent Acquisitions TM TM High Pressure Equipment Company 32 16
Slide 17: Acquisition of Alco Valves Group
10/27/2015 Acquisition of Alco Valves Group • The Alco Valves Group (Alco®), a United Kingdom based manufacturer of high quality, high pressure valves used in Oil & Natural Gas (O&NG) and other industrial processes was acquired on October 1, 2014 • Alco generated approximately £19 million of revenue
Slide 18: Acquisitions: Geo-Blaster and White Knight
10/27/2015 Acquired December 2014 • Adds new products and technologies to build our surface prep business • Expands rental channel opportunities worldwide • Manufacturing will relocate from Ontario to Minneapolis in 2015 • New product launch in February 2015 – upgrading all Geo-Blaster models – Impr
Slide 19: Acquisition – High Pressure Equipment
10/27/2015 Acquisition – High Pressure Equipment • High Pressure Equipment Company (HiP®), an Erie, Pennsylvania based manufacturer of high quality, high pressure valves used in Oil & Natural Gas (O&NG) and other industrial processes was acquired on January 20, 2015 • The acquisition was an all cash
Slide 20: Change in Segment Reporting
10/27/2015 Change in Segment Reporting • During Q1, the Company revised the presentation of our financial reporting segments into the following three segments: – Industrial includes Industrial Products and Applied Fluid Technologies divisions – Process includes Process, Oil and Natural Gas, and Lubr
Slide 21: Divestiture of Held Separate Business Assets
10/27/2015 Divestiture of Held Separate Business Assets • April 1, 2015, pursuant to the Federal Trade Commission final order, the Company sold the Liquid Finishing business assets acquired in 2012 • The sale proceeds were $610 million, including the post-closing purchase price adjustment settled in
Slide 22: Third Quarter 2015 Sales Data and Operating Earnings
10/27/2015 Third Quarter 2015 Sales Data Components of Net Sales Change Third Quarter September 2015 Segment Region Industrial Process Contractor Americas EMEA Asia Pacific Consolidated Volume and Price 5% (3)% 6% 5% 3% 3% 4% Acquisitions 3% 31 % — 5% 9% 9% 7% Currency (7)% (5)% (3)% (2)% (13)% (7)%
Slide 23: Notable Info from Q3 2015 Earnings; Current Environment
10/27/2015 Notable Info from Third Quarter 2015 Earnings Release & Call • Capital expenditures expected to be approximately $40 million in 2015 • Share repurchases will continue via open market transactions and/or short-dated accelerated share repurchase programs • Full year 2015 unallocated corpora
Slide 24: Long-Term Cash Deployment Priorities; Key Investment Attributes
10/27/2015 Long-Term Cash Deployment Priorities International Footprint Organic Growth Product Development Production Capacity and Capabilities Supplement to Organic Growth Acquisitions Leverage Our Strengths Dividend Payout Ratio ~30% Shareholder Return Approximately 5 Million Shares Remaining on A
Slide 25: Financial Summary Q3 2015
10/27/2015 Financial Summary Q3 2015 Appendix Financial Results – Year-to-Date September ($ Millions except EPS) 2015 2014 Change Sales $ 960.9 $ 915.1 5% Gross Profit Rate 53.4% 54.9% Operating Expenses 286.9 262.5 9% Operating Earnings 226.0 239.5 (6%) Net Earnings $ 292.2 $ 176.5 66% Earnings Per
Slide 26: Year-to-Date September 2015 Results
10/27/2015 Year-to-Date September 2015 Results • Sales increased 5 percent, 10 percent at consistent exchange rates, including 6 percentage points from acquired operations • Gross profit margin of 53½ percent, down 1½ percentage points from last year – Changes in currency translation rates and lower
Slide 27: Third Quarter 2015 Results
10/27/2015 Third Quarter 2015 Results • Sales increased 5 percent, 11 percent at consistent exchange rates, including 7 percentage points from acquired operations • Gross profit margin of 53½ percent, down 1½ percentage point from last year – Changes in currency translation rates and lower average g
Slide 28: Financial Performance: Sales and Operating Margin
10/27/2015 Financial Performance Sales and Operating Margin Net Sales Operating Margins 1,400 30% 1,200 25% Operating Margins Sales ($ millions) 1,000 20% 800 15% 600 10% 400 200 5% - 0% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 YTD Sept. 2015 EPS $1.55 $1.80 $2.17 $2.32 $1.99 $0.81 $1.
Slide 29: Stock Dividend Growth; Strong Cash Generation
10/27/2015 Stock Dividend Growth $1.20 $0.80 2015 $0.66 2010 2007 $0.37 2004 57 Strong Cash Generation ($ Millions) 2014 2013 2012 2011 2010 2009 2008 2007 2006 Operating Cash Flows $ 241 $ 243 $ 190 $ 162 $ 101 $ 147 $ 162 $ 177 $ 156 % of Net Income 107% 115% 127% 114% 98% 300% 134% 116% 104% Capi
Slide 30: Capital Efficiency – 5 Year Average
10/27/2015 Capital Efficiency – 5 Year Average Source: Interactive Data, MSN Money 59 move measure mix control dispense spray Worldwide Leaders in Fluid Handling www.graco.com 30