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What changed in GRACO INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of GRACO INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+230 added−212 removedSource: 10-K (2024-02-20) vs 10-K (2023-02-21)

Top changes in GRACO INC's 2023 10-K

230 paragraphs added · 212 removed · 171 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeAlthough pressures from tariffs continued in 2022, we worked with our supplier base on a variety of opportunities to lessen the effect. 7 Table of Contents We endeavor to address fluctuations in the price and availability of various materials and components through close management of current suppliers, price negotiations and an intensive search for new suppliers.
Biggest changeWe endeavor to address fluctuations in the price and availability of various materials and components through close management of current suppliers, price negotiations and an intensive search for new suppliers. We have performed risk assessments of our key suppliers, and we factor the risks identified into our commodity plans.
Certain of our businesses sell their products directly to end-user customers and have direct relationships with customers. Outside of the U.S., our subsidiaries located in Australia, Belgium, Spain, Japan, Italy, Korea, India, the P.R.C., the United Kingdom and Brazil distribute our Company’s products. Operations in Maasmechelen, Belgium; St. Gallen, Switzerland; and Shanghai, P.R.C. reinforce our commitment to their regions.
Certain of our businesses sell their products directly to end-user customers and have direct relationships with customers. Outside of the U.S., our subsidiaries located in Australia, Belgium, Spain, Japan, Italy, Korea, India, the P.R.C., the United Kingdom and Brazil distribute our Company’s products. Operations in Maasmechelen, Belgium, St. Gallen, Switzerland, and Shanghai, P.R.C. reinforce our commitment to those regions.
We also manufacture products in Switzerland (Industrial segment), Italy (Industrial segment), the United Kingdom (Process segment), the People’s Republic of China (“P.R.C.”) (all segments), Belgium (all segments) and Romania (Industrial segment). Our manufacturing is aligned with our business segments and is co-located with product development to accelerate technology improvements and improve our cost structure.
We also manufacture products in Switzerland (Industrial segment), Italy (Industrial segment), the United Kingdom (Process segment), the People’s Republic of China (“P.R.C.”, or "China") (all segments), Belgium (all segments) and Romania (Industrial segment). Our manufacturing is aligned with our business segments and is co-located with product development to accelerate technology improvements and improve our cost structure.
These acquisitions may be integrated into existing Graco operations or may be managed as stand-alone operations. We completed business acquisitions in 2022, 2021 and 2020 that were not material to our consolidated financial statements.
These acquisitions may be integrated into existing Graco operations or may be managed as stand-alone operations. We completed business acquisitions in 2022 and 2021 that were not material to our consolidated financial statements.
Competition We encounter a wide variety of competitors that vary by product, industry and geographic area. Each of our segments generally has several competitors. Our competitors are both U.S. and foreign companies and range in size. We believe that our ability to compete depends upon product quality, product reliability, innovation, design, customer support and service, specialized engineering and competitive pricing.
Competition We encounter a wide variety of competitors that vary by product, industry and geographic area. Each of our segments generally has multiple competitors. Our competitors are both U.S. and foreign companies and range in size. We believe that our ability to compete depends upon product quality, product reliability, innovation, design, customer support and service, specialized engineering and competitive pricing.
Contractor products are also sold through general equipment distributors outside of North America. Industrial Segment The Industrial segment represented approximately 30 percent of our total sales in 2022. It includes the Industrial and Powder divisions. The Industrial segment markets equipment and solutions for moving and applying paints, coatings, sealants, adhesives and other fluids.
Contractor products are also sold through general equipment distributors outside of North America. Industrial Segment The Industrial segment represented approximately 30 percent of our total sales in 2023. It includes the Industrial and Powder divisions. The Industrial segment markets equipment and solutions for moving and applying paints, coatings, sealants, adhesives and other fluids.
We have grown our third-party distribution to have specialized experience in particular end-user applications. We leverage our product technologies for new applications and industries. We also make targeted acquisitions to broaden our product offering, enhance our capabilities in the end-user markets we serve, expand our manufacturing and distribution base and potentially strengthen our geographic presence.
We have grown our third-party distribution to have specialized experience in particular end-user applications. We leverage our product technologies for new applications and industries. We also make targeted acquisitions to broaden our product offerings, enhance our capabilities in the end-user markets we serve, expand our manufacturing and distribution base and potentially strengthen our geographic presence.
Of this total, approximately 1,400 were employees based outside of the U.S., and 1,700 were hourly factory workers in the U.S. None of our Company’s U.S. employees are covered by a collective bargaining agreement. Various national industry-wide labor agreements apply to certain employees in various countries outside of the U.S.
Of this total, approximately 1,400 were employees based outside of the U.S., and 1,300 were hourly factory workers in the U.S. None of our U.S. employees are covered by a collective bargaining agreement. Various national industry-wide labor agreements apply to certain employees in various countries outside of the U.S.
Our manufacturing, product development, warehouse and administrative employees are generally located in the same or adjacent facilities, which we believe contributes to our culture of strong manufacturing, engineering and customer service capabilities. Health, Wellness & Safety The personal health and safety of each of our employees is of primary importance.
Our manufacturing, product development, warehouse and administrative employees are generally located in the same or adjacent facilities, which we believe contributes to our culture of strong manufacturing, engineering and customer service capabilities. Health, Wellness & Safety 8 Table of Contents The personal health, wellness and safety of each of our employees is of primary importance.
Environmental Protection Our compliance with federal, state and local laws and regulations did not have a material effect upon our capital expenditures, earnings or competitive position during the fiscal year ended December 30, 2022. Human Capital Resources As of December 30, 2022, we employed approximately 4,000 persons.
Environmental Protection Our compliance with federal, state and local laws and regulations did not have a material effect upon our capital expenditures, earnings or competitive position during the fiscal year ended December 29, 2023. Human Capital Resources As of December 29, 2023, we employed approximately 4,000 persons.
Contractor equipment also includes sprayers that apply texture to walls and ceilings, highly viscous coatings to roofs, and markings on roads, parking lots, athletic fields and floors. 5 Table of Contents This segment also manufactures two-component proportioning systems that are used to spray polyurethane foam (spray foam) and polyurea coatings.
Contractor equipment also includes sprayers that apply texture to walls and ceilings, highly viscous coatings to roofs, and markings on roads, parking lots, athletic fields and floors. This segment also manufactures two-component proportioning systems that are used to spray polyurethane foam ("spray foam") and polyurea coatings.
Total product development expenditures for all segments were $80 million in 2022, $80 million in 2021 and $72 million in 2020. The amounts invested in product development averaged approximately 4 percent of sales over the last three years.
Total product development expenditures for all segments were $83 million in 2023, $80 million in 2022 and $80 million in 2021. The amounts invested in product development averaged approximately 4 percent of sales over the last three years.
Prior year segment information has been restated to conform to the current organizational structure. Contractor Segment The Contractor segment represented approximately 47 percent of our total sales in 2022. Through this segment, we offer sprayers that apply paint to walls and other structures, with product models for users ranging from do-it-yourself homeowners to professional contractors.
Prior year segment information has been restated to conform to the current organizational structure. 5 Table of Contents Contractor Segment The Contractor segment represented approximately 45 percent of our total sales in 2023. Through this segment, we offer sprayers that apply paint to walls and other structures, with product models for users ranging from do-it-yourself homeowners to professional contractors.
Each segment sells its products in North, Central and South America (the “Americas”), Europe, Middle East and Africa (“EMEA”), and Asia Pacific. For 2022, sales in the Americas represented approximately 60 percent of our Company’s total sales. Sales in EMEA represented approximately 21 percent. Sales in Asia Pacific represented approximately 19 percent.
Each segment sells its products in North, Central and South America (the “Americas”), Europe, Middle East and Africa (“EMEA”), and Asia Pacific. For 2023, sales in the Americas represented approximately 61 percent of our Company’s total sales. Sales in EMEA represented approximately 21 percent and sales in Asia Pacific represented approximately 18 percent.
Product Development Our primary product development efforts are carried out in facilities located in Minneapolis, Anoka and Rogers, Minnesota; North Canton, Ohio; St. Gallen, Switzerland; Barcelona, Spain; Suzhou and Shanghai, P.R.C.; Dexter, Michigan; Erie, Pennsylvania; Kamas, Utah; and Coventry, United Kingdom.
Product Development Our primary product development efforts are carried out in facilities located in Minneapolis, Anoka, Dayton and Rogers, Minnesota; North Canton, Ohio; St. Gallen, Switzerland; Barcelona, Spain; Aachen, Germany; Suzhou, Shanghai and Dongguan City, P.R.C.; Dexter, Michigan; Erie, Pennsylvania; and Kamas, Utah.
Markets served include automotive and vehicle assembly and components production, wood and metal products, rail, marine, aerospace, farm, construction, bus, recreational vehicles and various other industries. End users often invest in our equipment to gain process efficiencies, improve quality or save on material or energy costs. A majority of this segment's business is outside of North America.
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. End users often invest in our equipment to gain process efficiencies, improve quality or save on material or energy costs.
Most Process segment equipment is sold worldwide through third-party distributors and original equipment manufacturers. Some products are sold directly to end users, particularly in the oil and natural gas and semiconductor industries. Process The Process division makes pumps of various technologies that move chemicals, water, wastewater, petroleum, food and other fluids.
Some products are sold directly to end users, particularly in the oil and natural gas and semiconductor industries. Process The Process division makes pumps of various technologies that move chemicals, water, wastewater, petroleum, food and other fluids.
Our total rewards program is comprised of various elements, including base pay, variable pay, equity-based compensation for all employees, and health, welfare and retirement benefits. 8 Table of Contents Talent To achieve our strategic objectives, it is imperative that we attract, develop and retain qualified personnel.
Our total rewards program is comprised of various elements, including base pay, variable pay, equity-based compensation for all employees, and health, welfare and retirement benefits. Talent To achieve our strategic objectives, it is imperative that we attract, develop and retain qualified personnel. We seek to develop talent from within our organization and supplement our workforce with external hires as necessary.
Advanced fluid dispense equipment includes gel-coat equipment, chop and wet-out systems, resin transfer molding systems and applicators and precision dispensing solutions. This precision dispense equipment bonds, molds, seals, vacuum encapsulates and laminates parts and devices in a wide variety of industrial applications. Powder The Powder division makes powder finishing products and complete powder finishing systems that coat powder on metals.
Advanced fluid dispense equipment includes gel-coat equipment, chop and wet-out systems, resin transfer molding systems and applicators and precision dispensing solutions. This precision 6 Table of Contents dispense equipment bonds, molds, seals, vacuum encapsulates and laminates parts and devices in a wide variety of industrial applications.
Raw Materials The primary materials and components in our products are steel of various alloys, sizes and hardness; specialty stainless steel and aluminum bar stock, tubing and castings; tungsten carbide; electric and gas motors; injection molded plastics; sheet metal; forgings; powdered metal; hoses; electronic components and high performance plastics, such as polytetrafluoroethylene (PTFE).
The division also has a line of chemical injection pumping solutions for precise injection of chemicals into producing oil wells and pipelines. 7 Table of Contents Raw Materials The primary materials and components in our products are steel of various alloys, sizes and hardness; specialty stainless steel and aluminum bar stock, tubing and castings; tungsten carbide; electric and gas motors; injection molded plastics; sheet metal; forgings; powdered metal; hoses; electronic components and high-performance plastics, such as polytetrafluoroethylene ("PTFE").
This division’s products include liquid finishing equipment that applies liquids on metals, wood and plastics, with emphasis on solutions that provide easy integration to paint monitoring and control systems.
Industrial The Industrial division makes liquid finishing and advanced fluid dispense equipment primarily for use in industrial applications. This division’s products include liquid finishing equipment that applies liquids on metals, wood and plastics, with emphasis on solutions that provide easy integration to paint monitoring and control systems.
We are committed to maintaining a culture of trust that recognizes the dignity and uniqueness of the individual. We provide equal opportunities for professional growth and advancement based on performance, qualifications, demonstrated skill and achievements. All employees are encouraged, under a continuous improvement program with financial incentives, to submit ideas to improve profitability, quality, safety and environmental practices.
We provide equal opportunities for professional growth and advancement based on performance, qualifications, demonstrated skill and achievements. All employees are encouraged, under a continuous improvement program with financial incentives, to submit ideas to improve profitability, quality, safety and environmental practices. New employee orientation and regular ethics training are required for all employees.
The materials and components that we use are generally available through multiple sources of supply. To manage cost, we source significant amounts of materials and components from outside the U.S., primarily in the Asia Pacific region. In 2022, we continued to experience logistical and production constraints associated with raw materials and purchased components.
The materials and components that we use are generally available through multiple sources of supply. To manage cost, we source significant amounts of materials and components from outside the U.S., primarily in the Asia Pacific region. In 2023, the Company's supply chain stabilized, and the associated effects of inflation largely subsided.
We continue to enhance our product capabilities with particular emphasis on automation and configurability, easier integration with end-user customer manufacturing and business systems, and increased focus on data and analytics.
The product development and engineering groups focus on new product design, product improvements, and new applications for existing products and technologies for their specific customer base. We continue to enhance our product capabilities with particular emphasis on automation and configurability, easier integration with end-user customer manufacturing and business systems, and increased focus on data and analytics.
Most Industrial segment equipment is sold worldwide through specialized third-party distributors, integrators, design centers, original equipment manufacturers and material suppliers. Some products are sold directly to end users and may include design and installation to specific customer requirements. We work with material suppliers to develop or adapt our equipment for use with specialized or hard-to-handle materials.
A majority of this segment's business is outside of North America. Most Industrial segment equipment is sold worldwide through specialized third-party distributors, integrators, design centers, original equipment manufacturers and material suppliers. Some products are sold directly to end users and may include design and installation to specific customer requirements.
Our manufacturing capacity is sufficient for current business demand levels. Production requirements in the immediate future are expected to be met through existing facilities, planned facility expansions, the installation of new automatic and semi-automatic machine tools, efficiency and productivity improvements, the use of leased space and available subcontract services.
Following completion of these projects, production requirements in the immediate future are expected to be met through existing facilities, the installation of new automatic and semi-automatic machine tools, efficiency and productivity improvements, the use of leased space and available subcontract services. For more details on our facilities, see Item 2, Properties.
We have performed risk assessments of our key suppliers, and we factor the risks identified into our commodity plans. Intellectual Property We own a number of patents across our segments and have patent applications pending in the U.S. and other countries. We also license our patents to others and are a licensee of patents owned by others.
Intellectual Property We own a number of patents across our segments and have patent applications pending in the U.S. and other countries. We also license our patents to others and are a licensee of patents owned by others. In our opinion, our business is not materially dependent upon any one or more of these patents or licenses.
As of December 30, 2022, our executive officers responsible for setting overall strategy average nearly 21 years of tenure with us. Tenure of all employees averages nearly 10 years, reflective of our positive workplace culture. Our recruiting team uses internal and external resources to recruit highly skilled and talented workers, and we encourage and reward employee referrals for open positions.
Tenure of all employees averaged nearly 10 years, reflective of our positive workplace culture. Our recruiting team uses internal and external resources to recruit highly skilled and talented workers, and we encourage and reward employee referrals for open positions. We are committed to maintaining a culture of trust that recognizes the dignity and uniqueness of the individual.
The Process segment markets pumps, valves, meters and accessories to move and dispense chemicals, oil and natural gas, water, wastewater, petroleum, food, lubricants and other fluids. Markets served include food and beverage, dairy, oil and natural gas, pharmaceutical, cosmetics, semiconductor, electronics, wastewater, mining, fast oil change facilities, service garages, fleet service centers, automobile dealerships and industrial lubrication applications.
Markets served include food and beverage, dairy, oil and natural gas, pharmaceutical, cosmetics, semiconductor, electronics, wastewater, mining, fast oil change facilities, service garages, fleet service centers, automobile dealerships and industrial lubrication applications. Most Process segment equipment is sold worldwide through third-party distributors and original equipment manufacturers.
We strive to provide innovative solutions in powder coating for end users in emerging and developed markets. Process Segment The Process segment represented approximately 23 percent of our total sales in 2022. It includes the Process and Lubrication divisions.
Primary end users of our powder finishing products include manufacturers in the construction, home appliance, automotive component and custom project coater industries. We strive to provide innovative solutions in powder coating for end users in emerging and developed markets. Process Segment The Process segment represented approximately 25 percent of our total sales in 2023.
Distributors promote and sell the equipment, hold inventory, provide product application expertise and offer on-site service, technical support and integration capabilities. Integrators implement large individual installations in manufacturing plants where products and services from a number of different manufacturers are aggregated into a single system. Design centers engineer systems for their customers using our products.
Integrators implement large individual installations in manufacturing plants where products and services from a number of different manufacturers are aggregated into a single system. Design centers engineer systems for their customers using our products. Original equipment manufacturers incorporate our Industrial segment products into systems and assemblies that they then supply to their customers.
The Graco Foundation places emphasis on educational programs, especially STEM (science, technology, engineering and math) programs; human service programs promoting workforce development; and youth development programs.
The Graco Foundation’s goal is to help organizations grow their ability to serve community needs through grants focused on capital projects, specific programs and technology needs. The Graco Foundation places emphasis on educational programs, especially STEM (science, technology, engineering and math) programs; human service programs promoting workforce development; and youth development programs.
We seek to develop talent from within our organization and supplement our workforce with external hires as necessary. This approach has helped create among our employees an in-depth understanding of our business, products, competition and customers, while also adding new employee ideas and perspectives in support of our continuous improvement initiatives.
This approach has helped create among our employees an in-depth understanding of our business, products, competition and customers, while also adding new employee ideas and perspectives in support of our continuous improvement initiatives. As of December 29, 2023, our executive officers responsible for setting overall strategy averaged nearly 21 years of tenure with us.
These products are sold under the Gema® and SAT™ brands. Gema powder systems coat window frames, 6 Table of Contents metallic furniture, automotive components and sheet metal. Primary end users of our powder finishing products include manufacturers in the construction, home appliance, automotive component and custom project coater industries.
Powder The Powder division makes powder finishing products and complete powder finishing systems that coat powder on metals. These products are sold under the Gema® and SAT™ brands. Gema powder systems coat window frames, metallic furniture, automotive components and sheet metal.
New employee orientation and regular ethics training are required for all employees. We complete a biennial survey of our employees to assess our culture, benchmark us against industry leaders, and to make improvements as necessary.
We complete a biennial survey of our employees to assess our culture, benchmark us against industry leaders, and to make improvements as necessary. Community We have a long history of giving back to the communities where we live and work through the volunteer efforts of our employees and the giving efforts of the Graco Foundation.
In 2022, we completed a construction project on a new facility in Dayton, Minnesota that contains manufacturing operations for portions of our Contractor segment and Process division. We also began facility construction and expansion projects in our Sioux Falls, South Dakota; St.
In addition, in 2023, we continued construction of a new facility in St. Gallen, Switzerland that will contain manufacturing operations for our Powder division, as well as began an expansion of our Anoka, Minnesota facility.
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Gallen, Switzerland; and Sibiu, Romania manufacturing facilities in 2022, as well as the construction of a new worldwide distribution center in Dayton, Minnesota. We are in the planning and design phases of additional projects to expand capacity in other manufacturing and distribution locations in 2023 and beyond. For more details on our facilities, see Item 2, Properties.
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Our manufacturing capacity is sufficient for current business demand levels. In 2023, we completed an expansion of our Sioux Falls, South Dakota manufacturing facility and the construction of a new manufacturing facility in Sibiu, Romania. We also took possession of our newly constructed worldwide distribution center in Dayton, Minnesota, which we anticipate will first be operational later in 2024.
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In 2021, we opened facilities in Dongguan City, P.R.C. and Aachen, Germany, devoted to the support and development of products for electronics assembly, battery and new energy vehicles. The product development and engineering groups focus on new product design, product improvements, and new applications for existing products and technologies for their specific customer base.
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The completion of these projects, which we expect to occur in 2024, represents the culmination of a period of significant investment in expansion and modernization of our key manufacturing and distribution facilities.
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Original equipment manufacturers incorporate our Company’s Industrial segment products into systems and assemblies that they then supply to their customers. Industrial The Industrial division makes liquid finishing and advanced fluid dispense equipment primarily for use in industrial applications.
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We work with material suppliers to develop or adapt our equipment for use with specialized or hard-to-handle materials. Distributors promote and sell the equipment, hold inventory, provide product application expertise and offer on-site service, technical support and integration capabilities.
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The division also has a line of chemical injection pumping solutions for precise injection of chemicals into producing oil wells and pipelines.
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It includes the Process and Lubrication divisions. The Process segment markets pumps, valves, meters and accessories to move and dispense chemicals, oil and natural gas, water, wastewater, petroleum, food, lubricants and other fluids.
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These constraints were due to limited component availability, reduced freight capacity, shipping delays, and labor shortages. While we were generally able to find alternative suppliers to source raw materials and components for our products as interruptions persisted, these constraints reduced our ability to meet demand and increased lead times across many of our product lines.
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While the Company experienced isolated supply chain disruptions in 2023, the impact was not as significant as compared to previous years in 2022 and 2021. We are generally able to find alternative suppliers to source raw materials and components for our products in the event of isolated disruptions.
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Additionally, we experienced price inflation related to raw materials and purchased components. The effects of inflation were most pronounced on motors, electronics, and commodity prices for materials, such as aluminum, stainless steel, carbon steel bar stock, plastics and copper.
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In our opinion, our business is not materially dependent upon any one or more of these patents or licenses.
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Community We have a long history of giving back to the communities where we live and work through the volunteer efforts of our employees and the giving efforts of the Graco Foundation. The Graco Foundation’s goal is to help organizations grow their ability to serve community needs through grants focused on capital projects, specific programs and technology needs.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThese risks include: complying with foreign legal and regulatory requirements; international trade factors (export controls, customs clearance, trade policy, trade sanctions, trade agreements, duties, tariff barriers and other restrictions); protection of our proprietary technology in certain countries; potentially burdensome taxes; potential difficulties staffing and managing local operations; and changes in exchange rates.
Biggest changeThese risks include: complying with foreign legal and regulatory requirements; international trade factors (export controls, customs clearance, trade policy, trade sanctions, trade agreements, duties, tariff barriers and other restrictions); trade disruptions arising out of geopolitical activity (such as those caused by the Russia-Ukraine and Israel-Hamas conflicts, or any conflict or threatened conflict between China and Taiwan); protection of our proprietary technology in certain countries; potentially burdensome taxes; potential difficulties staffing and managing local operations; and changes in exchange rates. 12 Table of Contents Catastrophic Events - Our operations are at risk of damage, destruction or disruption by natural disasters and other unexpected events.
The extent to which a pandemic, including the COVID-19 pandemic, impacts us will depend on numerous factors and future developments that are uncertain and that we are not able to predict, including: the severity of the virus and new variants of the virus; the duration and scope of the pandemic; the efficacy, distribution and adoption rate of vaccines and therapeutic treatments; infection rates in the areas in which we or our suppliers, distributors or end-user customers operate; governmental, business, societal, individual and other actions taken in response to the pandemic; the effect on our suppliers and distributors, and disruptions to the global supply chain; the impact on economic activity; the effect on our end-user customers and their demand and buying patterns for our products and services; the effect of any closures or other changes in operations of our and our suppliers’, distributors’ and end-user customers’ facilities; the health of and the effect on our employees and our ability to meet staffing needs; our ability to sell our products and services and provide product support; restrictions or disruptions to transportation, including reduced availability of ground, sea or air transport; and the effect on our ability to access capital on favorable terms and continue to meet our liquidity needs, all of which are highly uncertain and cannot be predicted.
The extent to which a public health crisis impacts us will depend on numerous factors and future developments that are uncertain and that we are not able to predict, including: the severity of the virus and new variants of the virus; the duration and scope of the pandemic; the efficacy, distribution and adoption rate of vaccines and therapeutic treatments; infection rates in the areas in which we or our suppliers, distributors or end-user customers operate; governmental, business, societal, individual and other actions taken in response to the pandemic; the effect on our suppliers and distributors, and disruptions to the global supply chain; the impact on economic activity; the effect on our end-user customers and their demand and buying patterns for our products and services; the effect of any closures or other changes in operations of our and our suppliers’, distributors’ and end-user customers’ facilities; the health of and the effect on our employees and our ability to meet staffing needs; our ability to sell our products and services and provide product support; restrictions or disruptions to transportation, including reduced availability of ground, sea or air transport; and the effect on our ability to access capital on favorable terms and continue to meet our liquidity needs, all of which are highly uncertain and cannot be predicted.
Changes in industries that we serve, including consolidation of competitors, distributors and customers, could affect our success. Changes in the competitive landscape, increases in the market reach of competitors, and improvements in the quality of competitive products could also affect our success.
Changes in industries and markets that we serve, including consolidation of competitors, distributors and customers, could affect our success. Changes in the competitive landscape, increases in the market reach of competitors, and improvements in the quality of competitive products could also affect our success.
We have experienced and expect to continue to 10 Table of Contents experience cybersecurity threats and attacks on our systems and networks and those of our third party service providers. To date, none of the cybersecurity threats and attacks we have experienced have had a material adverse impact on our operations, business or financial condition.
We have experienced and expect to continue to experience cybersecurity threats and attacks on our systems and networks and those of our third-party service providers. To date, none of the cybersecurity threats and attacks we have experienced have had a material adverse impact on our operations, business or financial condition.
Information Systems - Interruption of or intrusion into information systems may impact our business. We rely on information systems and networks, including the internet, to conduct and support our business. Some of these systems and networks are managed, hosted and provided by third parties.
Information Systems - Interruption of or intrusion into information systems may impact our business. We rely on information systems and networks to conduct and support our business. Some of these systems and networks are managed, hosted and provided by third parties.
Once successfully integrated into our existing businesses or added to our corporate structure, the acquired businesses may not perform as planned, be accretive to earnings, generate positive cash flows, provide an acceptable return on investment or otherwise be beneficial to us. We may not realize projected efficiencies and cost-savings from the businesses we acquire.
Once successfully integrated into our existing businesses or 13 Table of Contents added to our corporate structure, an acquired business may not perform as planned, be accretive to earnings, generate positive cash flows, provide an acceptable return on investment or otherwise be beneficial to us. We may not realize projected efficiencies and cost-savings from the businesses we acquire.
Flooding, tornadoes, hurricanes, unusually heavy precipitation or other severe weather events, earthquakes, tsunamis, fires, explosions, acts of war, terrorism, civil unrest or outbreaks, epidemics or pandemics of infectious diseases (such as the COVID-19 pandemic) could adversely impact our operations. Personnel - Our success may be affected if we are not able to attract, develop and retain qualified personnel.
Flooding, tornadoes, hurricanes, unusually heavy precipitation or other severe weather events, earthquakes, tsunamis, fires, explosions, acts of war, terrorism, civil unrest or outbreaks, epidemics or pandemics of infectious diseases could adversely impact our operations. Personnel - Our success may be affected if we are not able to attract, develop and retain qualified personnel.
Our ability to develop, market and sell products that meet our customers’ needs and desires depends upon a number of factors, including anticipating the features and products that our customers will need or want in the future, identifying and entering into new markets, training our distributors, and anticipating market trends.
Our ability to develop or acquire, and market and sell, products that meet our customers’ needs and desires depends upon a number of factors, including anticipating the features and products that our customers will need or want in the future, successfully implementing our acquisition strategies, identifying and entering into new markets, training our distributors, and anticipating market trends.
Declines in interest rates, the market value of plan assets, and investment returns could significantly increase our net periodic pension costs and our future pension contribution requirements and adversely affect our results of operations and financial condition.
Declines in interest rates, the market value of plan assets, and investment returns could significantly increase our future estimated pension liabilities, net periodic pension costs and pension contribution requirements and, as a result, adversely affect our results of operations and financial condition.
These effects included: employees being infected by, or exposed to, the virus; adverse impacts on the efficiency and productivity of our workforce and our operations; adverse impacts on our ability to manufacture products and provide related services in a 11 Table of Contents timely manner; supply chain disruptions, including increased costs of raw materials and components, and delays, shortages and difficulties in sourcing raw materials and components; volatility in demand for certain of our products; inability to meet end-user customer demand; distribution and logistics challenges, including increased freight costs, reduced freight capacity, and shipping delays; restrictions on our employees’ ability to meet customers in person and the cancellation, postponement and reformatting of trade shows, industry events and product demonstrations, which impacted our selling activities and our ability to convert those activities into actual sales; and a significant investment of time, energy and resources by management in mitigating the effects of the pandemic on our employees and our business and complying with existing, new or modified governmental rules, regulations, standards and mandates.
Any such public health crisis could have negative impacts similar to those we experienced during the recent COVID-19 pandemic, including: employees being infected by, or exposed to, the virus; adverse impacts on the efficiency and productivity of our workforce and our operations; adverse impacts on our ability to manufacture products and provide related services in a timely manner; supply chain disruptions, including increased costs of raw materials and components, and delays, shortages and difficulties in sourcing raw materials and components; volatility in demand for certain of our products; inability to meet end-user customer demand; distribution and logistics challenges, including increased freight costs, reduced freight capacity, and shipping delays; restrictions on our employees’ ability to meet customers in person and the cancellation, postponement and reformatting of trade shows, industry events and product demonstrations, which impacted our selling activities and our ability to convert those activities into actual sales; and a significant investment of time, energy and resources by management in mitigating the effects of the pandemic on our employees and our business and complying with existing, new or modified governmental rules, regulations, standards and mandates.
From time to time, we have been faced with instances where competitors have infringed or unfairly used our intellectual property or taken advantage of our design and development efforts. The ability to protect and enforce intellectual property rights varies across jurisdictions. Competitors who copy our products are prevalent in Asia.
From time to time, we have been faced with instances where competitors have infringed or unfairly used our intellectual property or taken advantage of our design and development efforts. The ability to protect and enforce intellectual property rights varies across jurisdictions.
Changes in exchange rates between the U.S. dollar and other currencies and fluctuations in the price of raw materials and components have impacted and may continue to impact the manufacturing costs of our products and affect our profitability.
Our suppliers may allocate the supply of certain raw materials, parts or components to other purchasers. Changes in exchange rates between the U.S. dollar and other currencies and fluctuations in the price of raw materials and components have impacted and may continue to impact the manufacturing costs of our products and affect our profitability.
The occurrence of a security breach or an intrusion into an information system or a network, or the breakdown, interruption in or inadequate upgrading or maintenance of our information processing software, hardware or networks or the internet, may adversely affect our business, reputation, results of operations and financial condition.
The occurrence of a security breach or an intrusion into an information system or a network, or the breakdown, interruption in or inadequate upgrading or maintenance of our information processing software, hardware or networks or the internet, may adversely affect our business, reputation, results of operations and financial condition. We do not currently maintain specific cyber insurance coverage.
Security breaches or intrusion into our information systems or networks or the information systems or networks of the third parties with whom we do business pose a risk to the confidentiality, availability and integrity of our data, and could lead to any one or more of the following: the compromising of confidential information; manipulation, unauthorized use, theft or destruction of data; product defects or malfunctions; production downtimes and operations disruptions; litigation; regulatory action; fines; and other costs and adverse consequences.
Security breaches or intrusion into our information systems or networks or the information systems or networks of the third parties with whom we do business pose a risk to the confidentiality, availability and integrity of our data and of our customers, suppliers and employees, and could lead to any one or more of the following: the compromising of confidential information; manipulation, unauthorized use, theft or destruction of data; product defects or malfunctions; production downtimes and operations disruptions; litigation; regulatory action; reputational harm, including loss of confidence by our customers, suppliers and employees in our ability to adequately protect their information; fines; ransoms; and other costs and adverse consequences.
Regardless of whether infringement claims against us are successful, defending against such claims could significantly increase our costs, divert management’s time and attention away from other business matters, and otherwise adversely affect our results of operations and financial condition. Foreign Operations - Conducting business internationally exposes our Company to risks that could harm our business.
Regardless of whether infringement claims against us are successful, defending against such claims could significantly increase our costs, divert management’s time and attention away from other business matters, and otherwise adversely affect our results of operations and financial condition.
A significant escalation or expansion of the conflict beyond its current geographic, political and economic scope and scale could have a material adverse effect on our business, results of operations and financial condition, and could exacerbate other risks discussed in this report.
While our sales into Russia and Belarus prior to 2022 were not material to our overall business, a significant escalation or expansion of the conflict beyond its current geographic, political and economic scope and scale could have a material adverse effect on our business, results of operations and financial condition, and could exacerbate other risks discussed in this report.
A significant number of routine transactions are conducted in foreign currencies. Changes in exchange rates have impacted, and in the future may impact, our reported sales and earnings and the valuation of assets denominated in foreign currencies. A majority of our manufacturing and cost structure is based in the U.S.
Changes and volatility in exchange rates have impacted, and in the future may impact, our sales, cost of materials and earnings and the valuation of assets denominated in foreign currencies. A majority of our manufacturing and cost structure is based in the U.S.
Protective tariffs, unpredictable changes in duty rates, and changes in trade policies, agreements, relations and regulations have made and may continue to make certain foreign-sourced parts no longer competitively priced. Long supply chains may be disrupted by environmental events, public health crises (such as the COVID-19 pandemic), political or other factors.
Geopolitical instability (including in Europe and the Middle East), protective tariffs, unpredictable changes in duty rates, and changes in trade policies, agreements, relations and regulations have made and may continue to make certain foreign-sourced parts of limited availability or no longer competitively priced. Long supply chains may be disrupted by environmental events, public health crises, political or other factors.
Significant declines in the level of purchases by these customers could reduce our sales and impact segment profitability. Our Contractor segment derives a significant amount of revenue from a few large customers. Substantial decreases in purchases by these customers, difficulty in collecting amounts due or the loss of their business would adversely affect the profitability of this segment.
Our Contractor segment, which is our largest reporting segment by sales, derives a significant amount of revenue from a few large channel partners. Substantial decreases in purchases by these customers, difficulty in collecting amounts due or the loss of their business would adversely affect the profitability of this segment.
Political Instability - Uncertainty surrounding political leadership may limit our growth opportunities. Domestic political instability, including government shut downs, may limit our ability to grow our business.
Domestic political instability, including government shut downs, may limit our ability to grow our business.
We may be required to pay substantial damages if it is determined our products infringe their intellectual property. We may also be required to develop an alternative, non-infringing product that could be costly and time-consuming, or acquire a license (if available) on terms that are not favorable to us.
We may also be required to develop an alternative, non-infringing product that could be costly and time-consuming, or acquire a license (if available) on terms that are not favorable to us.
As a result, in April 2022 we suspended sales into Russia and Belarus indefinitely. We expect our ability to sell certain products in Russia and Belarus to continue to be restricted for the foreseeable future.
As a consequence, beginning in 2022, we indefinitely suspended sales into Russia and Belarus, which continued throughout the entirety of 2023 and into 2024. We expect our ability to sell certain products in Russia and Belarus to continue to be restricted for the foreseeable future.
Long lead times or supply interruptions associated with a global supply base may reduce our flexibility and make it more difficult to respond promptly to fluctuations in demand or respond quickly to product quality problems.
Long lead times or supply interruptions associated with a global supply base may reduce our flexibility and make it more difficult to respond promptly to fluctuations in demand or respond quickly to product quality problems. The availability and prices for raw materials, parts and components may be curtailed for a variety of reasons.
We cannot predict whether and when we will be able to realize the expected financial results and accretive effect of the acquisitions that we close, the new products that we develop and the channel expansions that we make.
We cannot predict whether and when we will be able to realize the expected financial results and accretive effect of the acquisitions that we close, the new products that we develop and the channel expansions that we make. Impairment - If acquired businesses do not meet performance expectations, acquired assets could be subject to impairment.
Catastrophic Events - Our operations are at risk of damage, destruction or disruption by natural disasters and other unexpected events. The loss of, or substantial damage to, one of our facilities, our information system infrastructure or the facilities of our suppliers could make it difficult to manufacture product, fulfill customer orders and provide our employees with work.
The loss of, or substantial damage to, one of our facilities, our information system infrastructure or the facilities of our suppliers could make it difficult to manufacture product, fulfill customer orders and provide our employees with work.
The business of these customers is dependent upon the economic vitality of the construction and home improvement markets. If these markets decline, the business of our customers could be adversely affected and their purchases of our equipment could decrease which could have an adverse impact on our results of operations.
The business of these customers is dependent upon prevailing levels of residential, commercial, industrial and institutional building and remodeling activities. If these activities decline, the business of our customers could be adversely affected and their purchases of our equipment could decrease which could have an adverse impact on our results of operations.
The Company’s effective tax rate has been and may continue to be affected by changes in the mix of earnings in jurisdictions with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, and changes in tax laws or their interpretation.
The Company’s effective tax rate has been and may continue to be affected by changes in the mix of earnings in jurisdictions with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, and changes in tax laws or their interpretation, such as the 15% global minimum tax under the Organization for Economic Cooperation and Development ("OECD") Pillar Two, Global Anti-Base Erosion Rules.
We use these systems and networks to record, process, summarize, transmit and store electronic information, and to manage or support our business processes and activities. We have implemented measures intended to secure our information systems and networks and prevent unauthorized access to or loss of sensitive data.
We use these systems and networks to record, process, summarize, transmit and store electronic information, and to manage or support our business processes and activities.
ESG Expectations – Expectations relating to environmental, social and governance (ESG) matters may increase our cost of doing business and expose us to reputational harm and potential liability. Many regulators, investors, employees, vendors, customers, community members and other stakeholders are increasingly focused on ESG matters such as climate change, greenhouse gas emissions, human capital, and diversity, equity and inclusion.
Many regulators, investors, employees, vendors, customers, community members and other stakeholders are increasingly focused on ESG matters such as climate change, greenhouse gas emissions, human capital, and diversity, equity and inclusion.
Pandemic Risks A pandemic, including the COVID-19 pandemic, could have a material and adverse effect on our business, results of operations and financial condition. The COVID-19 pandemic and related governmental, business and societal responses to the pandemic had an adverse effect on our operations, employees, supply chains, distribution channels, and end-user customers.
Public health crises, such as an epidemic or pandemic, could have a material and adverse effect on our business, results of operations and financial condition. A significant public health crisis, and any associated governmental, business and societal responses, could have an adverse effect on our operations, employees, supply chains, distribution channels, and end-user customers.
Similarly, any public statements we 13 Table of Contents make about ESG-related matters and initiatives may result in legal and regulatory proceedings against us which could adversely affect our business and results of operations.
Similarly, any public statements we make about ESG-related matters and initiatives may result in legal and regulatory proceedings against us which could adversely affect our business and results of operations. Anti-Corruption and Trade Laws - We may incur costs and suffer damages if our employees, agents, distributors or suppliers violate anti-bribery, anti-corruption or trade laws and regulations.
In 2022, approximately 48 percent of our sales were generated by customers located outside the U.S. Operating and selling outside of the U.S. exposes us to certain risks that could adversely impact our sales volume, rate of growth or profitability.
Operations and sales outside of the U.S. expose us to certain risks that could adversely impact our sales volume, rate of growth or profitability.
We may make public statements about various ESG-related matters and initiatives from time to time, including on our website, in our press releases, in our ESG report, and in other communications. Addressing stakeholder expectations relating to ESG matters requires an investment of time, money and other resources, any or all of which may increase our cost of doing business.
We may make public statements about various ESG-related matters and initiatives from time to time, including on our website, in our press releases, in our ESG report, and in other communications.
Even after the pandemic subsides, we may continue to experience adverse effects to our business as a result of ongoing or new economic impacts. A pandemic, including the COVID-19 pandemic, could also exacerbate or trigger other risks discussed in this report, any of which could have a material and adverse effect on our business, results of operations and financial condition.
A public health crisis, including a pandemic, could also exacerbate or trigger other risks discussed in this report, any of which could have a material and adverse effect on our business, results of operations and financial condition.
Competition - Our success depends upon our ability to develop, market and sell new products that meet our customers’ needs and desires, and anticipate industry changes. Our profitability will be affected if we do not develop new products and technologies that meet our customers’ needs and desires.
Our profitability will be affected if we do not develop or acquire new products and technologies that meet our customers’ evolving needs and desires.
Legal, Regulatory and Compliance Risks Laws and Regulations - Changes in laws and regulations, and the imposition of new or additional laws and regulations, may impact how we can do business and the cost of doing business around the world.
Legal, Regulatory and Compliance Risks Laws and Regulations - Changes in laws and regulations, and the imposition of new or additional laws and regulations, may impact how we can do business and the cost of doing business around the world. 14 Table of Contents We are subject to many laws and regulations in the jurisdictions where we operate, and as the nature and geographic scope of our business grows and expands, we may become subject to additional laws and regulations previously inapplicable to our business.
If our distributors and original equipment manufacturers are unable to purchase our products because of unavailable credit or unfavorable credit terms, depressed end-user demand, or are simply unwilling to purchase our products, our net sales and earnings will be adversely affected.
If our distributors and original equipment manufacturers are unable to, or have a diminished ability to, purchase our products because of unavailable credit or unfavorable credit terms, depressed end-user demand, or are simply unwilling to purchase our products, our net sales and earnings will be adversely affected. 9 Table of Contents An economic downturn may have an adverse effect on our results of operations and financial condition and affect our ability to satisfy the financial covenants in the terms of our financing arrangements.
We may also need to pursue claims or litigation to protect our interests. The cost of pursuing, defending and insuring against such matters is increasing, particularly in the U.S. Such costs may adversely affect our Company’s profitability.
As we grow, we are at an increased risk of being a target in matters related to the assertion of claims and demands, litigation, administrative proceedings and regulatory reviews. We may also need to pursue claims or litigation to protect our interests. The cost of pursuing, defending and insuring against such matters is increasing, particularly in the U.S.
We may experience similar or additional adverse impacts to our business, results of operations and financial condition in the future as a result of a pandemic, including the COVID-19 pandemic.
We could experience similar or additional, and potentially more significant, adverse effects on our business, results of operations and financial condition as a result of any future pandemic.
The continued geographic expansion of our business increases our exposure to, and cost of complying with, these laws and regulations.
As a global manufacturer, we are subject to a variety of complex and stringent laws and regulations related to bribery, corruption and trade. The continued geographic expansion of our business increases our exposure to, and cost of complying with, these laws and regulations.
Any impairment in the value of our goodwill would have an adverse non-cash impact on our results of operations and reduce our net worth. Major Customers - Our Contractor segment depends on a few large customers for a significant portion of its sales.
Price competition and competitor strategies could negatively impact our growth and have an adverse impact on our results of operations. Major Customers - Our Contractor segment depends on a few large customers for a significant portion of its sales. Significant declines in the level of purchases by these customers could reduce our sales and impact segment profitability.
Economic uncertainty and volatility in various geographies and industries in which we conduct business may adversely affect our net sales and earnings.
An economic downturn, recession, depression, sustained inflationary pressures or financial market turmoil may depress demand for our equipment in all or some major geographies and markets. Economic uncertainty and volatility in various geographies and industries in which we conduct business may adversely affect our net sales and earnings.
While our sales into Russia and Belarus were not material to our overall business, and we did not have any physical operations in Russia or Belarus or source raw materials or components directly from either country, the Russian invasion 9 Table of Contents of Ukraine and the resulting sanctions and actions taken against Russia and Belarus by the United States, the United Kingdom, the European Union, Switzerland and others considerably restricted our ability to sell certain products in Russia and Belarus.
The Russian invasion of Ukraine in 2022 and the resulting sanctions and actions taken against Russia and Belarus by the U.S., the United Kingdom, the European Union, Switzerland and others considerably restricted our ability to sell certain products in Russia and Belarus.
Economic, Financial and Political Risks Economic Environment - Demand for our products depends on the level of commercial and industrial activity worldwide. An economic downturn, recession, depression, sustained inflationary pressures or financial market turmoil may depress demand for our equipment in all major geographies and markets.
Economic, Financial and Political Risks Economic Environment - Demand for our products depends on the level of commercial and industrial activity worldwide. The demand for our products depends, in part, on the general economic conditions of the industries, geographies or economies in which our customers operate.
If we are unable to effectively meet these challenges, they could adversely affect our revenues and profits and hamper our ability to grow. Competitors and others may also initiate litigation to challenge the validity of our intellectual property or allege that we infringe their intellectual property.
Competitors and others may also initiate litigation to challenge the validity of our intellectual property or allege that we infringe their intellectual property. We may be required to pay substantial damages if it is determined our products infringe their intellectual property.
In addition, decreased value of local currency may make it difficult for some of our distributors and end users to purchase products. Russian Invasion of Ukraine – Russia’s invasion of Ukraine, and the sanctions and actions taken against Russia and Belarus in response to the invasion, could adversely impact our business.
In addition, decreased value of local currency may make it difficult for some of our distributors and end users to purchase our products. A significant fluctuation in exchange rates may negatively impact our financial condition and results of operations.
Cyclical Industries - Our success may be affected by variations in the construction, automotive, electronics, aerospace, semiconductor, and agriculture and construction equipment industries. Our business may be affected by fluctuations in residential, commercial and institutional building and remodeling activity. Changes in construction materials and techniques may also impact our business.
Cyclical Industries - Our success may be affected by variations in the construction, automotive, electronics, aerospace, semiconductor, and agriculture and construction equipment industries. A substantial portion of our revenues is attributable to sales to customers in cyclical industries.
However, these measures may not be effective against all eventualities, and our information systems and networks and those of our third party service providers may be vulnerable to hacking, human error, fraud or other misconduct, system error, faulty password management or other irregularities. Cybersecurity threats are increasing in frequency, sophistication and severity.
However, these measures may not be effective against all eventualities, and there is a possibility that our information systems, networks, and those of our third-party service providers may be exposed to risks, including unauthorized access, operational errors, fraudulent activities, system failures, poor password management, and other potential irregularities.
Pension Plan – Declines in interest rates, asset values and investment returns could significantly increase our pension costs and required pension contributions. The Company sponsors a qualified defined benefit pension plan for certain U.S. employees and retirees of the Company. The pension plan is funded with trust assets invested in a diversified portfolio of equity, fixed income and other investments.
The pension plan is funded with trust assets invested in a diversified portfolio of equity, fixed income and other investments.
Operational Risks Global Sourcing - Risks associated with foreign sourcing, supply interruption, delays in raw material or component delivery, supply shortages and counterfeit components may adversely affect our production or profitability. We source certain of our materials and components from suppliers outside the U.S., and from suppliers within the U.S. who engage in foreign sourcing.
While we manufacture many of our parts and product components in the U.S., we source certain of our materials and components from suppliers outside the U.S., and from suppliers within the U.S. who engage in foreign sourcing.
International political instability (including tensions between the U.S. and the countries in which we conduct business, threats of war, terrorism and other hostilities, and governmental instability) may prevent us or our customers from expanding our business into certain geographies and may also limit our ability to grow our business. Civil disturbances may harm our business.
The occurrence of any of these events could result in a prolonged economic slowdown, prevent us or our customers from expanding into certain geographies or limit our ability to grow our business. Civil disturbances may harm our business.
Legal Proceedings - Costs associated with claims, litigation, administrative proceedings and regulatory reviews, and potentially adverse outcomes, may affect our profitability. As our Company grows, we are at an increased risk of being a target in matters related to the assertion of claims and demands, litigation, administrative proceedings and regulatory reviews.
Legal Proceedings - Costs associated with claims, litigation, administrative proceedings and regulatory reviews, and potentially adverse outcomes, may affect our profitability. 15 Table of Contents The nature of our business, including the equipment we develop, manufacture and sell, or have in the past developed, manufactured and sold, exposes us to the risk of product liability, warranty and tort (including toxic tort), commercial and employment-related claims, demands and litigation .
An economic downturn may have an adverse effect on our results of operations and financial condition and affect our ability to satisfy the financial covenants in the terms of our financing arrangements. Currency - Changes in currency translation rates could adversely impact our revenue, earnings and the valuation of assets denominated in foreign currencies.
We cannot predict the timing, severity or duration of any such downturn, or the timing of any recovery. Currency - Changes in currency translation rates could adversely impact our revenue, earnings and the valuation of assets denominated in foreign currencies. A significant number of routine transactions to which we are a party are conducted in foreign currencies.
Removed
Price competition and competitor strategies could negatively impact our growth and have an adverse impact on our results of operations. 12 Table of Contents Impairment - If acquired businesses do not meet performance expectations, acquired assets could be subject to impairment.
Added
Russian Invasion of Ukraine and Political Instability – Russia’s invasion of Ukraine, and the sanctions and actions taken against Russia and Belarus in response to the invasion, has adversely impacted our business and may continue to do so.
Removed
We are subject to many laws and regulations in the jurisdictions where we operate, and as our business grows and expands geographically, we may become subject to additional laws and regulations previously inapplicable to our business.
Added
Uncertainty surrounding political leadership, as well as geopolitical unrest, could cause economic conditions in the U.S. or abroad to deteriorate, which could limit our growth opportunities and otherwise harm our business.
Removed
Anti-Corruption and Trade Laws - We may incur costs and suffer damages if our employees, agents, distributors or suppliers violate anti-bribery, anti-corruption or trade laws and regulations. As a global manufacturer, we are subject to a variety of complex and stringent laws and regulations related to bribery, corruption and trade.
Added
International political instability (including tensions between the U.S. and the countries in which we conduct business, rumors or threats of war, terrorism and other hostilities, and geopolitical activity or trade disruptions, such as those caused by the Russia-Ukraine and Israel-Hamas conflicts, or any conflict or threatened conflict between China and Taiwan) may cause economic conditions in the U.S. or abroad to deteriorate.
Removed
Our businesses expose us to potential toxic tort, product liability, commercial and employment claims. Successful claims against the Company and settlements may adversely affect our results.
Added
Interest Rate Fluctuations and Credit Markets – Declines in interest rates, asset values and investment returns could increase our pension costs and required pension contributions.
Added
Increases in interest rates, or the reduced availability of credit due to instability in the financial markets, could limit our ability to pursue growth initiatives and our customers’ ability to invest in their businesses, which could adversely impact demand for our products. The Company sponsors a qualified defined benefit pension plan for certain U.S. employees and retirees of the Company.
Added
While we believe our current cash position is strong and will enable us to fund many of our foreseeable growth initiatives, including acquisitions and capital investments, rising interest rates or reduced access to debt financing could impact our ability to pursue these initiatives.
Added
Reduced credit availability or a higher cost of capital may also limit the ability of end users of our products to invest in their businesses, which could depress demand for our equipment in all or some major geographies and markets. 10 Table of Contents Operational Risks Global Sourcing - Risks associated with foreign sourcing, supply interruption, delays in raw material or component delivery, supply shortages and counterfeit components may adversely affect our production or profitability.
Added
While many of our raw materials, parts and components are generally commercially available from a number of sources, some of them are sourced from single suppliers, which has limited, and could continue to limit, their availability when those suppliers are unable or unwilling to meet our production requirements and we are unable to timely source such items from an alternative supplier.
Added
In addition, we source some of our materials, parts and components from suppliers located in China. As such, we are exposed to potential disruptions in deliveries from these suppliers due to political tensions with China, geopolitical risks, government-mandated facility closures in China due to public health matters or other causes.
Added
We have implemented measures and incurred costs intended to secure our information systems and networks and prevent unauthorized access to or loss of sensitive data by employing a number of measures, including employee training, comprehensive monitoring of our networks and systems, and maintenance of backup and protective systems.
Added
Our employees, customers and others may be the subject of social engineering attacks and induced to disclose confidential, proprietary or other sensitive information, including their network credentials, to cybercriminals, who may then gain access to our and our customers’ information, data and information technology systems. Cybersecurity threats are increasing in frequency, sophistication and severity.
Added
The tactics and capabilities of cybercriminals are growing increasingly sophisticated, and it is virtually impossible for any organization, including us, to completely eliminate the risk of cyberattacks.
Added
As a 11 Table of Contents manufacturer, our operating technology assets and systems are susceptible to disruption through cyberattacks. We anticipate that meaningful investments in our operating technology infrastructure will be necessary as we continue to assess our operating technology posture and respond to the increasingly-pronounced risks posed by third-party cyber actors.
Added
Any insurance coverage we do have may be inadequate to compensate us for losses arising from any security breach or cybersecurity incident, and may in the future not be available to us on economically reasonable terms, or at all. The laws, regulations and customer-imposed controls governing cybersecurity and privacy continue to evolve and are becoming increasingly complex.
Added
We will be required to commit significant resources to keep pace with continued changes in information technology processes, legal, regulatory and customer requirements, and the increased frequency and severity of cyberattacks and the sophistication of the methods used by those who perpetrate them. There can be no assurance that our efforts will be successful.
Added
In addition, we are subject to new cybersecurity disclosure rules, and we may face increased costs and be required to incur significant costs in the event of an actual or perceived cybersecurity incident and to comply with these rules.
Added
Competitors who attempt to copy our products are prevalent in Asia, and they are increasingly offering their low-cost copies outside of Asia, including in Europe and North America.
Added
While we believe these copies oftentimes are of inferior quality to our products and lack much of the technology and many of the features inherent in our products, if we are unable to effectively meet these challenges, they could adversely affect our revenues and profits and hamper our ability to grow.
Added
Generative Artificial Intelligence ("AI") – Use of generative AI technologies in the conduct of our business could result in the unintentional loss of confidential or proprietary information and have other adverse impacts on us.
Added
While we believe the development and adoption of generative AI technologies are in their early stages, the increased use of these technologies in the conduct of our business poses risks which, if they materialize, could adversely impact our business, financial condition, results of operation and reputation.
Added
The employment of generative AI tools creates opportunities for the potential loss or misuse of personal data, the inadvertent dissemination of our confidential or proprietary information, or the unintentional use of third parties’ intellectual property.
Added
In addition, the content, analyses, recommendations or other output that generative AI tools produce could be deficient, inaccurate or biased or be based on flawed or insufficient datasets. Foreign Operations - Conducting business internationally exposes our Company to risks that could harm our business. In 2023, approximately 47 percent of our sales were generated by customers located outside the U.S.
Added
Even after a public health crisis subsides, we may continue to experience adverse effects to our business as a result of ongoing or new economic impacts.

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Item 2. Properties

Properties — owned and leased real estate

4 edited+0 added−1 removed0 unchanged
Biggest changeFacility Owned or Leased Square Footage Facility Activities Operating Segment North America Rogers, Minnesota, United States Owned 782,000 Manufacturing, warehouse, office and product development Contractor Dayton, Minnesota, United States Owned 538,000 Manufacturing, warehouse, office and product development Contractor and Process Minneapolis, Minnesota, United States Owned 390,000 Manufacturing and office Industrial Rogers, Minnesota, United States Leased 268,000 Distribution center and office All segments Anoka, Minnesota, United States Owned 208,000 Manufacturing, warehouse, office and product development Process Sioux Falls, South Dakota, United States Owned 203,000 Manufacturing, warehouse and office Industrial and Contractor 14 Table of Contents Minneapolis, Minnesota, United States Owned 141,000 Worldwide headquarters; office and product development Corporate and Industrial North Canton, Ohio, United States Owned 131,000 Manufacturing, warehouse, office and application laboratory Industrial Pompano Beach, Florida, United States Leased 109,000 Office, assembly and warehouse Contractor Erie, Pennsylvania, United States Owned 89,000 Manufacturing, warehouse, office and product development Process Minneapolis, Minnesota, United States Owned 87,000 Assembly Industrial Kamas, Utah, United States Owned 74,000 Manufacturing, warehouse, office, product development and test laboratory Process Dexter, Michigan, United States Owned 65,000 Manufacturing, warehouse, office and product development Process Indianapolis, Indiana, United States Owned 64,000 Warehouse, office, product development and application laboratory Industrial Minneapolis, Minnesota, United States Owned 42,000 Corporate administrative office All segments Irvine, California, United States Leased 21,000 Office, assembly and warehouse Process Europe Maasmechelen, Belgium Owned 210,000 EMEA headquarters, warehouse and assembly All segments Verona, Italy Leased 164,000 Manufacturing and warehouse Industrial St.
Biggest changeFacility Owned or Leased Square Footage Facility Activities Operating Segment North America Rogers, Minnesota, United States Owned 782,000 Manufacturing, warehouse, office and product development Contractor Dayton, Minnesota, United States Owned 538,000 Manufacturing, warehouse, office and product development Contractor and Process Dayton, Minnesota, United States Owned 520,000 Distribution center and office All segments Minneapolis, Minnesota, United States Owned 390,000 Manufacturing and office Industrial Rogers, Minnesota, United States Leased 268,000 Distribution center and office All segments Anoka, Minnesota, United States Owned 208,000 Manufacturing, warehouse, office and product development Process Sioux Falls, South Dakota, United States Owned 203,000 Manufacturing, warehouse and office Industrial and Contractor Minneapolis, Minnesota, United States Owned 141,000 Worldwide headquarters; office and product development Corporate and Industrial North Canton, Ohio, United States Owned 131,000 Manufacturing, warehouse, office and application laboratory Industrial Erie, Pennsylvania, United States Owned 89,000 Manufacturing, warehouse, office and product development Process Minneapolis, Minnesota, United States Owned 87,000 Assembly Industrial Kamas, Utah, United States Owned 70,000 Manufacturing, warehouse, office, product development and test laboratory Process Dexter, Michigan, United States Owned 65,000 Manufacturing, warehouse, office and product development Process Indianapolis, Indiana, United States Owned 64,000 Warehouse, office, product development and application laboratory Industrial Minneapolis, Minnesota, United States Owned 42,000 Corporate administrative office All segments Europe Maasmechelen, Belgium Owned 210,000 EMEA headquarters, warehouse and assembly All segments Verona, Italy Owned 164,000 Manufacturing and warehouse Industrial Sibiu, Romania Owned 129,000 Manufacturing Industrial St.
Item 2. Properties Our facilities are in satisfactory condition, suitable for their respective uses, and are generally adequate to meet current needs. A description of our principal facilities as of February 21, 2023, is set forth in the chart below.
Item 2. Properties Our facilities are in satisfactory condition, suitable for their respective uses, and are generally adequate to meet current needs. A description of our principal facilities as of February 20, 2024, is set forth in the chart below.
Gallen, Switzerland Leased 26,000 Manufacturing Industrial Maasmechelen, Belgium Leased 25,000 Office and assembly All segments Aachen, Germany Leased 22,000 Office and warehouse All segments Asia Pacific Shanghai, P.R.C. Leased 80,000 Asia Pacific headquarters All segments Suzhou, P.R.C. Owned 80,000 Manufacturing, warehouse, office and product development All segments Gyeonggi-do, South Korea Leased 33,000 Office All segments Shanghai, P.R.C.
Leased 80,000 Asia Pacific headquarters All segments Suzhou, P.R.C. Owned 80,000 Manufacturing, warehouse, office and product development All segments 17 Table of Contents Derrimut, Australia Leased 38,000 Warehouse All segments Gyeonggi-do, South Korea Leased 33,000 Office and warehouse All segments Shanghai, P.R.C. Leased 27,000 Office and warehouse Industrial
Gallen, Switzerland Owned 82,000 Manufacturing, warehouse, office, product development and application laboratory Industrial Sibiu, Romania Leased 77,000 Manufacturing Industrial Coventry, United Kingdom Owned 38,000 Office and assembly Process Rödermark, Germany Leased 32,000 Office and warehouse Industrial Verona, Italy Owned 31,000 Office and warehouse Industrial St.
Gallen, Switzerland Owned 82,000 Manufacturing, warehouse, office, product development and application laboratory Industrial Maasmechelen, Belgium Leased 64,000 Warehouse All segments Rödermark, Germany Leased 32,000 Office and warehouse Industrial Verona, Italy Owned 31,000 Office and warehouse Industrial St. Gallen, Switzerland Leased 26,000 Manufacturing Industrial Aachen, Germany Leased 22,000 Office and warehouse All segments Asia Pacific Shanghai, P.R.C.
Removed
Leased 27,000 Office and warehouse Industrial Derrimut, Australia Leased 22,000 Warehouse All segments

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

28 edited+10 added−5 removed6 unchanged
Biggest changeDuring this time, he also served as Group President, ITW Finishing from 2010 to 2012 and Group President, ITW Dynatec from 2008 to 2009. From 2004 to 2007, he was President, Gema Europe. From 1999 to 2004, he was Managing Director, Gema Italy. From 1994 to 1999, he held different positions in R&D, Sales and After Sales for Gema.
Biggest changeFrom 1999 to 2004, he was Managing Director, Gema Italy. From 1994 to 1999, he held different positions in R&D, Sales and After Sales for Gema. Gema has been part of Graco since the acquisition of the ITW Finishing Group in 2012. Mr. Merengo joined Gema in 1994. Peter J.
He was Vice President and General Manager, Applied Fluid Technologies Division from February 2008 until June 2018. He served as Chief Administrative Officer from September 2005 until February 2008, and was Vice President and Treasurer from December 1998 to September 2005. Prior to becoming Treasurer in December 1996, he was Manager, Treasury Services. Mr. Sheahan joined the Company in 1995.
He was Vice President and General Manager, Applied Fluid Technologies Division from February 2008 to June 2018. He served as Chief Administrative Officer from September 2005 to February 2008, and was Vice President and Treasurer from December 1998 to September 2005. Prior to becoming Treasurer in December 1996, he was Manager, Treasury Services. Mr. Sheahan joined the Company in 1995.
From October 2020 to July 2021, he was Vice President of Sales and Marketing for the Advanced Fluid Dispense business segment in Asia Pacific. He served as Vice President of Sales and Marketing for the global High Performance Coatings and Foams business segment from September 2018 until October 2020.
From October 2020 to July 2021, he was Vice President of Sales and Marketing for the Advanced Fluid Dispense business segment in Asia Pacific. He served as Vice President of Sales and Marketing for the global High Performance Coatings and Foams business segment from September 2018 to October 2020.
From December 2018 to April 2020, she was Executive Vice President, Operations. From April 2017 to December 2018, she was Purchasing Director. From January 2017 to April 2017, she served as Strategic Sourcing Director. From March 2010 until January 2017, she was Operations Director, Industrial Products Division and China Factory.
From December 2018 to April 2020, she was Executive Vice President, Operations. From April 2017 to December 2018, she was Purchasing Director. From January 2017 to April 2017, she served as Strategic Sourcing Director. From March 2010 to January 2017, she was Operations Director, Industrial Products Division and China Factory.
Prior to January 2008, he held various manufacturing management positions. Mr. White joined the Company in 1992. Angela F. Wordell, 51, became Executive Vice President, Operations in January 2022. From April 2020 to January 2022, she was Executive Vice President, Operations, and President, Worldwide Oil & Natural Gas Division.
Prior to January 2008, he held various manufacturing management positions. Mr. White joined the Company in 1992. Angela F. Wordell, 52, became Executive Vice President, Operations, in January 2022. From April 2020 to January 2022, she was Executive Vice President, Operations, and President, Worldwide Oil & Natural Gas Division.
Chambers joined the Company in 1992. Laura L. Evanson, 42, became Executive Vice President, Marketing in January 2023. From September 2021 to December 2022, she served as Vice President of Marketing for the Lubrication Equipment Division and Vice President of Marketing for South and Central America.
Chambers joined the Company in 1992. Laura L. Evanson, 43, became Executive Vice President, Marketing in January 2023. From September 2021 to December 2022, she served as Vice President of Marketing for the Lubrication Equipment Division and Vice President of Marketing for South and Central America.
Prior to that, she worked in various Product Marketing and Channel Marketing roles for the Lubrication Equipment Division and Industrial Products Division. Ms. Evanson joined the Company in 2008. Anthony J. Gargano, 52, became President, Asia Pacific in July 2021.
Prior to that, she worked in various product marketing and channel marketing roles for the Lubrication Equipment Division and Industrial Products Division. Ms. Evanson joined the Company in 2008. Anthony J. Gargano, 53, became President, Asia Pacific in July 2021.
Rothe, 49, became President, Worldwide Industrial Division in January 2022. From June 2018 to January 2022, he was President, Worldwide Applied Fluid Technologies Division. He was Chief Financial Officer and Treasurer from September 2015 to June 2018. From June 2011 through August 2015, he was Vice President and Treasurer.
Rothe, 50, became President, Worldwide Industrial Division in January 2022. From June 2018 to January 2022, he was President, Worldwide Applied Fluid Technologies Division. He was Chief Financial Officer and Treasurer from September 2015 to June 2018. From June 2011 through August 2015, he was Vice President and Treasurer.
From February 2008 until March 2010, she was Operations Manager, Industrial Products Division. Prior to February 2008, she held various manufacturing management and engineering positions. Ms. Wordell joined the Company in 1993. 18 Table of Contents PART II
From February 2008 to March 2010, she was Operations Manager, Industrial Products Division. Prior to February 2008, she held various manufacturing management and engineering positions. Ms. Wordell joined the Company in 1993. 20 Table of Contents PART II
He was Country Manager, Australia - New Zealand from 2005 to 2008, and from 2002 to 2005 he served as Business Development Manager, Australia - New Zealand. Prior to becoming Business Development Manager, Australia - New Zealand, he worked in various Graco sales management positions. Mr. O’Shea joined the Company in 1995. Christian E.
He was Country Manager, Australia - New Zealand from 2005 to 2008, and from 2002 to 2005 he served as Business Development Manager, Australia - New Zealand. Prior to becoming Business Development Manager, Australia - New Zealand, he worked in various Graco sales management positions. Mr. O’Shea joined the Company in 1995. 19 Table of Contents Christian E.
From 2017 to 2021, she served as the Director of Marketing for the Lubrication Equipment Division. From 2015 to 2017 she served as a Senior Global Marketing Manager for the Lubrication Equipment Division. From 2010 to 2015, she was a Senior Global Product Marketing Manager for the Lubrication Equipment Division.
From July 2017 to September 2021, she served as the Director of Marketing for the Lubrication Equipment Division. From December 2015 to July 2017 she served as a Senior Global Marketing Manager for the Lubrication Equipment Division. From 2010 to December 2015, she was a Senior Global Product Marketing Manager for the Lubrication Equipment Division.
From August 2020 to January 2022, she also held the additional role of Executive Vice President, Information Systems. From June 2018 to August 2020, she served as Executive Vice President, Corporate Controller and Information Systems. She also served as the Company’s principal accounting officer from September 2007 to August 2020.
Chambers, 59, became President, EMEA in August 2020. From August 2020 to January 2022, she also held the additional role of Executive Vice President, Information Systems. From June 2018 to August 2020, she served as Executive Vice President, Corporate Controller and Information Systems. She also served as the Company’s principal accounting officer from September 2007 to August 2020.
Item 4. Mine Safety Disclosures Not applicable. 15 Table of Contents Information About Our Executive Officers The following are all the executive officers of Graco Inc. as of February 21, 2023: Mark W. Sheahan, 58, became President and Chief Executive Officer in June 2021. From June 2018 to June 2021, he served as Chief Financial Officer and Treasurer.
Item 4. Mine Safety Disclosures Not applicable. Information About Our Executive Officers The following are all the executive officers of Graco Inc. as of February 20, 2024: Mark W. Sheahan, 59, became President and Chief Executive Officer in June 2021. From June 2018 to June 2021, he served as Chief Financial Officer and Treasurer.
From January 2017 to December 2018, he served as President of Global Automotive. He served as Director of Sales and Marketing for the Applied Fluid Technologies Division in Asia Pacific from February 2012 to January 2017. From June 2008 to February 2012, he was Director of Sales and Marketing for the PMG business in the Lubrication Equipment Division.
From January 2017 to December 2018, he served as President of Global Automotive. He served as Director of Sales and Marketing for the Applied Fluid Technologies Division in Asia Pacific from February 2012 to January 2017.
Humke, 52, became Executive Vice President, General Counsel and Corporate Secretary in July 2021. Before joining Graco, he was an equity partner in the Mergers & Acquisitions and Private Equity practice groups at Ballard Spahr LLP and Lindquist & Vennum LLP (which combined in January 2018) from 2004 to June 2021, and an associate from 2001 to 2003.
Before joining Graco, he was an equity partner in the Mergers & Acquisitions and Private Equity practice groups at Ballard Spahr LLP and Lindquist & Vennum LLP (which combined in January 2018) from 2004 to June 2021, and an associate from 2001 to 2003.
Timothy R. White, 53, became President, Worldwide Process Division in June 2021. From August 2020 to June 2021, he served as President, White Knight and QED Environmental Systems. From December 2018 to August 2020, he served as President, EMEA. From August 2015 to December 2018, he was President of Q.E.D. Environmental Systems, Inc., a Graco subsidiary.
Thompson joined the Company in 1988. Timothy R. White, 54, became President, Worldwide Process Division, in June 2021. From August 2020 to June 2021, he served as President, White Knight and QED Environmental Systems. From December 2018 to August 2020, he served as President, EMEA. From August 2015 to December 2018, he was President of Q.E.D.
He served as Director of Sales and Marketing, Applied Fluid Technologies Division, from April 2012 to August 2015. From May 2011 to April 2012, he was North American Sales Manager, Applied Fluid Technologies Division. 17 Table of Contents From January 2008 until April 2011, he was Operations Director, Contractor Equipment Division.
Environmental Systems, Inc., a Graco subsidiary. He served as Director of Sales and Marketing, Applied Fluid Technologies Division, from April 2012 to August 2015. From May 2011 to April 2012, he was North American Sales Manager, Applied Fluid Technologies Division. From January 2008 to April 2011, he was Operations Director, Contractor Equipment Division.
He was Vice President and General Manager, European Operations from September 1999 to February 2005. Prior to becoming Vice President, Lubrication Equipment Division in December 1996, he was Treasurer. Mr. Lowe joined the Company in 1995. Claudio Merengo, 53, became President, Worldwide Gema in 2007.
From February 2005 to April 2012, he was Vice President and General Manager, Industrial Products Division. He was Vice President and General Manager, European Operations from September 1999 to February 2005. Prior to becoming Vice President, Lubrication Equipment Division in December 1996, he was Treasurer. Mr. Lowe joined the Company in 1995.
From 2007 to 2012, he was Vice President Investment Banking at Piper Jaffray & Co. Prior to joining Piper Jaffray, he held various roles in finance, consulting and engineering, including most recently as Director of Finance – Analytics at United Health Group from 2003 to 2007. Mr. Grasdal joined the Company in January 2022. Joseph J.
Prior to joining Piper Jaffray, he held various roles in finance, consulting and engineering, including most recently as Director of Finance – Analytics at United Health Group from 2003 to 2007. Mr. Grasdal joined the Company in January 2022. Joseph J. Humke, 53, became Executive Vice President, General Counsel and Corporate Secretary in July 2021.
From January 2013 to December 2015, he was Vice President and General Manager, Asia Pacific. From January 2012 until December 2012, he was Director of Sales and Marketing, Industrial Products Division, and from 2008 to 2012, he was Director of Sales and Marketing, Industrial Products Division and Applied Fluid Technologies Division.
From January 2012 to December 2012, he was Director of Sales and Marketing, Industrial Products Division, and from 2008 to January 2012, he was Director of Sales and Marketing, Industrial Products Division and Applied Fluid Technologies Division.
From July 2021 to January 2022, he was President, Worldwide Industrial Products Division, and President, South and Central America. From April 2020 to January 2022, he was President, Worldwide Lubrication Equipment Division. He was Vice President and General Manager, Lubrication Equipment Division from January 2016 to June 2018.
O’Shea, 59, became President, Worldwide Lubrication Equipment Division, and President, South and Central America in January 2022. From July 2021 to January 2022, he was President, Worldwide Industrial Products Division, and President, South and Central America. From April 2020 to January 2022, he was President, Worldwide Lubrication Equipment Division.
Prior to joining Graco, he was Vice President Corporate Development at Ecolab Inc., a global provider of water, hygiene and infection prevention solutions and services, from November 2018 to January 2022. Prior to joining Ecolab, he was Senior Director Corporate Development at 3M Company, a diversified global technology company, from 2012 to October 2018.
Inge Grasdal, 53, became Executive Vice President, Corporate Development in January 2022. Prior to joining Graco, he was Vice President Corporate Development at Ecolab Inc., a global provider of water, hygiene and infection prevention solutions and services, from November 2018 to January 2022.
From December 1996 to January 2000, he was Vice President, Contractor Equipment Division. Prior to becoming Director of Marketing, Contractor Equipment Division in June 1996, he held various marketing and sales positions in the Contractor Equipment Division and the Industrial Equipment Division. Mr. Johnson joined the Company in 1976. Jeffrey P.
From January 2000 through March 2001, he served as President and Chief Operating Officer. From December 1996 to January 2000, he was Vice President, Contractor Equipment Division. Prior to becoming Director of Marketing, Contractor Equipment Division in June 1996, he held various marketing and sales positions in the Contractor Equipment Division and the Industrial Equipment Division. Mr.
Rothe joined the Company in 2011. Kathryn L. Schoenrock, 45, became Executive Vice President, Corporate Controller and Information Systems in January 2022. From August 2020 to January 2022, she was Executive Vice President, Corporate Controller. She has served as the Company’s principal accounting officer since August 2020. From December 2018 to August 2020, she served as Director of Corporate Finance.
From January 2022 to April 2023, she was Executive Vice President, Corporate Controller and Information Systems, and from August 2020 to January 2022, she was Executive Vice President, Corporate Controller. She also served as the Company’s principal accounting officer from August 2020 to April 2023. From December 2018 to August 2020, she served as Director of Corporate Finance.
Humke joined the Company in July 2021. 16 Table of Contents Dale D. Johnson, 68, became President, Worldwide Contractor Equipment Division in February 2017. From April 2001 through January 2017, he served as Vice President and General Manager, Contractor Equipment Division. From January 2000 through March 2001, he served as President and Chief Operating Officer.
Humke joined the Company in July 2021. Dale D. Johnson, 69, became Chief Commercial Development Officer in January 2024, prior to which he was President, Worldwide Contractor Equipment Division, from February 2017 to December 2023. From April 2001 through January 2017, he served as Vice President and General Manager, Contractor Equipment Division.
Prior to becoming Director of Sales and Marketing for the PMG business in the Lubrication Equipment Division, he held various product and sales management positions. Mr. Gargano joined the Company in 2005. Inge Grasdal, 52, became Executive Vice President, Corporate Development in January 2022.
From June 2008 to February 2012, he was Director of Sales and Marketing for the PMG business 18 Table of Contents in the Lubrication Equipment Division. Prior to becoming Director of Sales and Marketing for the PMG business in the Lubrication Equipment Division, he held various product and sales management positions. Mr. Gargano joined the Company in 2005.
From April 2020 until June 2021, he served as President, Worldwide Process Division. He was President, Worldwide Industrial Products Division from June 2018 to April 2020. From April 2012 to June 2018, he was Executive Vice President, Industrial Products Division. From February 2005 to April 2012, he was Vice President and General Manager, Industrial Products Division.
He joined the Company in 2008. David M. Lowe, 68, became Chief Financial Officer and Treasurer in June 2021. From April 2020 to June 2021, he served as President, Worldwide Process Division. He was President, Worldwide Industrial Products Division from June 2018 to April 2020. From April 2012 to June 2018, he was Executive Vice President, Industrial Products Division.
Johnson, 63, became President, Electric Motor Division in April 2020. From December 2018 to April 2020, he was President, New Ventures. From June 2018 to December 2018, he was President, EMEA. He served as Vice President and General Manager, EMEA from January 2013 to June 2018.
He was Vice President and General Manager, Lubrication Equipment Division from January 2016 to June 2018. From January 2013 to December 2015, he was Vice President and General Manager, Asia Pacific.
Removed
David M. Ahlers, 64, became Executive Vice President, Human Resources and Corporate Communications in June 2018. From April 2010 to June 2018, he was Vice President, Human Resources and Corporate Communications. From September 2008 through March 2010, he served as the Company’s Vice President, Human Resources. Prior to joining Graco, Mr.
Added
Ronita Banerjee, 46, became Executive Vice President and Chief Human Resources Officer in May 2023. Before joining Graco, Ms. Banerjee was Global Human Resources Vice President and Chief Human Resources Officer at Westinghouse Electric Company LLC, a provider of nuclear products and services to utilities globally, from May 2019 to April 2023.
Removed
Ahlers held various human resources positions, including, most recently, Chief Human Resources Officer and Senior Managing Director of GMAC Residential Capital from August 2003 to August 2008. Mr. Ahlers joined the Company in 2008. Caroline M. Chambers, 58, became President, EMEA, in August 2020.
Added
From December 2017 to May 2019, she served as Global Human Resources Vice President, Building Solutions, and Global Human Resources Director, at Honeywell Inc., a diversified technology and manufacturing company, prior to which she served as Global Human Resources Director from April 2015 to December 2017. Prior to her time at Honeywell, Ms.
Removed
From February 2008 to December 2012, he was Vice President and General Manager, Asia Pacific. He served as Director of Sales and Marketing, Applied Fluid Technologies Division, from June 2006 until February 2008.
Added
Banerjee was Senior Human Resources Manager at General Mills, Inc., a global manufacturer and marketer of branded consumer foods, from May 2007 to March 2015, and Compensation Consultant and Staffing Specialist at Dell Technologies Inc., from October 2003 to May 2005 and March 2003 to September 2003, respectively. Ms. Banerjee joined the Company in May 2023. Caroline M.
Removed
Prior to joining Graco, he held various sales and marketing positions, including, most recently, President of Johnson Krumwiede Roads, a full-service advertising agency, and European sales manager at General Motors Corp. Mr. Johnson joined the Company in 2006. David M. Lowe, 67, became Chief Financial Officer and Treasurer in June 2021.
Added
Prior to joining Ecolab, he was Senior Director Corporate Development at 3M Company, a diversified global technology company, from 2012 to October 2018. From 2007 to 2012, he was Vice President Investment Banking at Piper Jaffray & Co.
Removed
He joined Gema in 1994. Gema has been part of Graco since the acquisition of the ITW Finishing Group in 2012. Mr. Merengo became an executive officer of Graco in 2023. Peter J. O’Shea, 58, became President, Worldwide Lubrication Equipment Division, and President, South and Central America in January 2022.
Added
Johnson joined the Company in 1976. Christopher D. Knutson, 46, became Executive Vice President, Corporate Controller in May 2023. He has served as the Company’s principal accounting officer since May 2023.
Added
From April 2020 to May 2023, he was Director of Corporate Treasury and Investor Relations, and from July 2017 to April 2020, was Director of Corporate Treasury and Regional Controller, South and Central America. From May 2016 to July 2017, he was Vice President of Finance at United Skin Specialists, after which he returned to Graco.
Added
From June 2010 to May 2016, he served in several Controller roles at Graco, including in the Applied Fluid Technologies Division, the Asia Pacific region, and the Lubrication Equipment Division, and from August 2008 to August 2010 was Internal Audit Manager. Prior to joining Graco, Mr. Knutson worked at PricewaterhouseCoopers for seven years within their audit practice.
Added
Claudio Merengo, 54, became President, Worldwide Gema in 2007, his title having been changed to President, Worldwide Powder Division in February 2024. During this time, he also served as Group President, ITW Finishing from 2010 to 2012 and Group President, ITW Dynatec from 2008 to 2009. From 2004 to 2007, he was President, Gema Europe.
Added
Rothe joined the Company in 2011. Kathryn L. Schoenrock, 46, became Executive Vice President and Chief Technology Officer in May 2023, her title having been changed to Executive Vice President and Chief Information Officer in February 2024.
Added
David J. Thompson, 56, became President, Worldwide Contractor Equipment Division in January 2024. From December 2021 to December 2023, he was Vice President of Engineering, Worldwide Contractor Equipment Division, and from 2007 to December 2021, he was Director of Engineering, Worldwide Contract Equipment Division. Prior to 2007, he held various engineering-related positions within the Contractor Equipment Division. Mr.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

5 edited+0 added−1 removed2 unchanged
Biggest changeThere were approximately 3.3 million shares remaining under the authorization on December 7, 2018, when the Board of Directors authorized the purchase of up to an additional 18 million shares. The authorizations are for an indefinite period of time or until terminated by the Board.
Biggest changeThe authorization is for an indefinite period of time or until terminated by the Board. There are no shares available for repurchase under previous authorizations.
Industrial Machinery Index over the same period (assuming the value of the investment in Graco common stock and each index was $100 on December 31, 2017, and all dividends were reinvested). 2017 2018 2019 2020 2021 2022 Dow Jones U.S.
Industrial Machinery Index over the same period (assuming the value of the investment in Graco common stock and each index was $100 on December 31, 2018, and all dividends were reinvested). 2018 2019 2020 2021 2022 2023 Dow Jones U.S.
Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities Graco Common Stock Graco common stock is traded on the New York Stock Exchange under the ticker symbol “GGG.” As of January 11, 2023, the share price was $70.36 and there were 167,776,564 shares outstanding and 1,686 common shareholders of record, which includes nominees or broker dealers holding stock on behalf of an estimated 128,202 beneficial owners.
Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities Graco Common Stock Graco common stock is traded on the New York Stock Exchange under the ticker symbol “GGG.” As of January 26, 2024, the share price was $84.75 and there were 168,178,661 shares outstanding and 1,641 common shareholders of record, which includes nominees or broker dealers holding stock on behalf of an estimated 147,980 beneficial owners.
Information on issuer purchases of equity securities follows: Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (at end of period) Oct 01, 2022 - Oct 28, 2022 1,078,199 $ 61.34 — 14,971,377 Oct 29, 2022 - Nov 25, 2022 — $ — — 14,971,377 Nov 26, 2022 - Dec 30, 2022 — $ — — 14,971,377
Information on issuer purchases of equity securities follows: Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (at end of period) Sep 30, 2023 - Oct 27, 2023 971,961 $ 71.96 — 13,572,340 Oct 28, 2023 - Nov 24, 2023 22,700 $ 74.17 — 13,549,640 Nov 25, 2023 - Dec 29, 2023 — $ — — 13,549,640
Industrial Machinery 100 86 117 136 168 147 S&P 500 100 96 126 149 192 157 Graco Inc. 100 92 118 167 187 158 19 Table of Contents Issuer Purchases of Equity Securities On April 24, 2015, the Board of Directors authorized the Company to purchase up to 18 million shares of its outstanding common stock, primarily through open-market transactions.
Industrial Machinery $100 $136 $158 $196 $172 $218 S&P 500 100 131 156 200 164 207 Graco Inc. 100 129 182 203 172 225 21 Table of Contents Issuer Purchases of Equity Securities On December 7, 2018, the Board of Directors authorized the Company to purchase up to 18 million shares of its outstanding common stock, primarily through open-market transactions.
Removed
Shares available for purchase under the April 2015 authorization were exhausted in the first quarter of 2022. Therefore, all remaining purchases during 2022 were made under the December 2018 authorization.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

38 edited+9 added−22 removed18 unchanged
Biggest changeA calculation of the non-GAAP measurements of earnings before income taxes, income taxes, effective income tax rates, net earnings and diluted earnings per share follows (in millions except per share amounts): 2022 2021 Earnings before income taxes, as reported $ 565.7 $ 508.5 Pension settlement loss — 12.0 Earnings before income taxes, adjusted $ 565.7 $ 520.5 Income taxes, as reported $ 105.1 $ 68.6 Pension settlement tax effect — 2.5 Excess tax benefit from option exercises 5.1 11.5 Other non-recurring tax benefit — 12.2 Income taxes, adjusted $ 110.2 $ 94.8 Effective income tax rate As reported 18.6 % 13.5 % Adjusted 19.5 % 18.2 % Net Earnings, as reported $ 460.6 $ 439.9 Pension settlement loss, net — 9.5 Excess tax benefit from option exercises (5.1) (11.5) Other non-recurring tax benefit — (12.2) Net Earnings, adjusted $ 455.5 $ 425.7 Weighted Average Diluted Shares 172.9 174.5 Diluted Net Earnings per Share As reported $ 2.66 $ 2.52 Adjusted $ 2.63 $ 2.44 23 Table of Contents Components of Net Earnings as a Percentage of Sales: The following table presents an overview of components of net earnings as a percentage of net sales: 2022 2021 Net Sales 100.0 % 100.0 % Cost of products sold 50.7 48.0 Gross profit 49.3 52.0 Product development 3.7 4.0 Selling, marketing and distribution 11.7 13.7 General and administrative 7.2 7.6 Operating earnings 26.7 26.7 Interest expense 0.4 0.5 Other expense, net (0.1) 0.6 Earnings before income taxes 26.4 25.6 Income taxes 4.9 3.5 Net Earnings 21.5 % 22.1 % Net Earnings, adjusted (see non-GAAP measurements above) 21.3 % 21.4 % Net Sales The following table presents net sales by geographic region (in millions): 2022 2021 Americas (1) $ 1,281.9 $ 1,150.2 EMEA (2) 451.8 464.1 Asia Pacific 409.8 373.3 Consolidated $ 2,143.5 $ 1,987.6 (1) North, Central and South America, including the U.S.
Biggest changeA calculation of the non-GAAP adjusted measurements of operating earnings, earnings before income taxes, income taxes, effective income tax rates, net earnings and diluted earnings per share follows (in millions except per share amounts): 2023 2022 Operating earnings, as reported $ 646.8 $ 572.7 Contingent consideration (8.6) — Impairment 7.8 — Operating earnings, adjusted $ 646.0 $ 572.7 Earnings before income taxes, as reported $ 608.8 $ 565.7 Pension settlement loss 42.1 — Contingent consideration (8.6) — Impairment 7.8 — Earnings before income taxes, adjusted $ 650.1 $ 565.7 Income taxes, as reported $ 102.3 $ 105.1 Pension settlement tax effect 8.8 — Other non-recurring tax benefit 4.8 — Excess tax benefit from option exercises 10.3 5.1 Income taxes, adjusted $ 126.2 $ 110.2 Effective income tax rate As reported 16.8 % 18.6 % Adjusted 19.4 % 19.5 % Net Earnings, as reported $ 506.5 $ 460.6 Pension settlement loss, net 33.3 — Contingent consideration (8.6) — Impairment 7.8 — Other non-recurring tax benefit (4.8) — Excess tax benefit from option exercises (10.3) (5.1) Net Earnings, adjusted $ 523.9 $ 455.5 Weighted Average Diluted Shares 172.2 172.9 Diluted Net Earnings per Share As reported $ 2.94 $ 2.66 Adjusted $ 3.04 $ 2.63 25 Table of Contents Components of Net Earnings as a Percentage of Sales: The following table presents an overview of components of net earnings as a percentage of net sales: 2023 2022 Net Sales 100.0 % 100.0 % Cost of products sold 47.1 50.7 Gross profit 52.9 49.3 Product development 3.7 3.7 Selling, marketing and distribution 11.9 11.7 General and administrative 7.8 7.2 Contingent consideration (0.4) — Impairment 0.4 — Operating earnings 29.5 26.7 Interest expense 0.2 0.4 Other expense, net 1.6 (0.1) Earnings before income taxes 27.7 26.4 Income taxes 4.6 4.9 Net Earnings 23.1 % 21.5 % Net Earnings, adjusted (see non-GAAP measurements above) 23.9 % 21.3 % Net Sales The following table presents net sales by geographic region (in millions): 2023 2022 Americas (1) $ 1,338.0 $ 1,281.9 EMEA (2) 463.9 451.8 Asia Pacific 393.7 409.8 Consolidated $ 2,195.6 $ 2,143.5 (1) North, Central and South America, including the U.S.
The Company specializes in equipment for applications that involve difficult-to-handle materials with high viscosities, materials with abrasive or corrosive properties and multiple-component materials that require precise ratio control. Graco sells primarily through independent third-party distributors worldwide to industrial and contractor end users. Graco’s business is classified by management into three reportable segments: Industrial, Process and Contractor.
The Company specializes in equipment for applications that involve difficult-to-handle materials with high viscosities, materials with abrasive or corrosive properties and multiple-component materials that require precise ratio control. Graco sells primarily through independent third-party distributors worldwide to industrial and contractor end users. Graco’s business is classified by management into three reportable segments: Contractor, Industrial and Process.
We also manufacture some of our products in Switzerland (Industrial segment), Italy (Industrial segment), the United Kingdom (Process segment), the People’s Republic of China (“P.R.C.”) (all segments), Belgium (all segments) and Romania (Industrial segment). Our primary distribution facilities are located in the U.S., Belgium, Switzerland, United Kingdom, P.R.C., Japan, Italy, Korea, India, Australia and Brazil.
We also manufacture some of our products in Switzerland (Industrial segment), Italy (Industrial segment), the United Kingdom (Process segment), the People’s Republic of China (all segments), Belgium (all segments) and Romania (Industrial segment). Our primary distribution facilities are located in the U.S., Belgium, Switzerland, United Kingdom, P.R.C., Japan, Italy, Korea, India, Australia and Brazil.
The Company has made and may continue to make opportunistic share repurchases in 2023 via open market transactions or short-dated accelerated share repurchase (“ASR”) programs. 29 Table of Contents Critical Accounting Estimates The Company prepares its consolidated financial statements in conformity with generally accepted accounting principles in the United States of America (“U.S. GAAP”).
The Company has made and may continue to make opportunistic share repurchases in 2024 via open market transactions or short-dated accelerated share repurchase (“ASR”) programs. 31 Table of Contents Critical Accounting Estimates The Company prepares its consolidated financial statements in conformity with generally accepted accounting principles in the United States of America (“U.S. GAAP”).
In 2022, we completed our annual impairment testing of goodwill and other intangible assets in the fourth quarter. No impairment charges were recorded as a result of that test. Income Taxes. In the preparation of the Company’s consolidated financial statements, management calculates income taxes.
We completed our annual impairment testing of goodwill and other intangible assets in the fourth quarter of 2023. No additional impairment charges were recorded as a result of that test. Income Taxes. In the preparation of the Company’s consolidated financial statements, management calculates income taxes.
A discussion of changes in our financial condition and the results of operations from the year ended December 31, 2021 to December 25, 2020 can be found in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended December 31, 2021.
A discussion of changes in our financial condition and the results of operations from the year ended December 30, 2022 compared to December 31, 2021 can be found in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended December 30, 2022.
Internally generated funds and unused financing sources are expected to provide the Company with the flexibility to meet its liquidity needs in 2023, including its capital expenditure plan of approximately $200 million, including $130 million for building projects to expand production capacity, planned dividends estimated at $158 million, share repurchases and acquisitions.
Internally generated funds and unused financing sources are expected to provide the Company with the flexibility to meet its liquidity needs in 2024, including its capital expenditure plan of approximately $120 million, including $60 million for building projects to expand production capacity, planned dividends estimated at $171 million, share repurchases and acquisitions.
See Financial Results Adjusted for Comparability below for a reconciliation of adjusted non-GAAP financial measures to GAAP. 22 Table of Contents Multiple events in the last two years caused fluctuations in financial results. Excess tax benefits related to stock option exercises reduced income taxes by $5 million in 2022 and $12 million in 2021.
See Financial Results Adjusted for Comparability below for a reconciliation of adjusted non-GAAP financial measures to GAAP 24 Table of Contents Certain events in the last two years caused fluctuations in financial results. Excess tax benefits related to stock option exercises reduced income taxes by $10 million in 2023 and $5 million in 2022.
Cash flows used in financing activities totaled $57 million in 2021 and included dividends of $127 million and net proceeds from share issuances totaling $51 million. On December 7, 2018, the Board of Directors authorized the purchase of up to 18 million shares of common stock, primarily through open market transactions.
Cash flows used in financing activities totaled $434 million in 2022 and included dividends of $142 million and net proceeds from share issuances totaling $36 million. On December 7, 2018, the Board of Directors authorized the purchase of up to 18 million shares of common stock, primarily through open market transactions.
Mortality rates are based on current common group mortality tables for males and females. At December 30, 2022, a one-half percentage point decrease in the indicated assumptions would have the following effects (in millions): Assumption Funded Status Expense Discount rate $ (18.4) $ 3.3 Expected return on assets — 1.6 Goodwill and Other Intangible Assets.
Mortality rates are based on current common group mortality tables for males and females. At December 29, 2023, a one-half percentage point decrease in the indicated assumptions would have the following effects (in millions): Assumption Funded Status Expense Discount rate $ (15.3) $ 2.0 Expected return on assets — 1.2 Goodwill and Other Intangible Assets.
Although the Americas represent the substantial majority of sales for the Process segment, and indicators in that region are the most significant, management monitors indicators such as levels of gross domestic product, capital investment, industrial production, oil and natural gas markets and mining activity worldwide. 27 Table of Contents Financial Condition and Cash Flow Working Capital.
Although the Americas represent the majority of sales for the Process segment, management monitors indicators such as levels of gross domestic product, capital investment, industrial production, oil and natural gas markets and mining activity worldwide. 29 Table of Contents Financial Condition and Cash Flow Working Capital.
The authorization is for an indefinite period of time or until terminated by the Board. As of December 30, 2022, approximately 15 million shares remain available for purchase under the authorization. The Company repurchased and retired 3.6 million shares in 2022. The Company did not repurchase and retire shares in 2021, and repurchased and retired 2.3 million shares in 2020.
The authorization is for an indefinite period of time or until terminated by the Board. As of December 29, 2023, approximately 14 million shares remain available for purchase under the authorization. The Company repurchased and retired 1.4 million shares in 2023 and 3.6 million shares in 2022. The Company did not repurchase and retire shares in 2021.
Cash flows used in investing activities totaled $227 million in 2022, including $201 million for capital additions and $25 million for business acquisitions. Cash flows used in investing activities totaled $153 million in 2021 including $134 million for capital additions and $19 million for business acquisitions. Cash Flows Used in Financing Activities .
Cash flows used in investing activities totaled $185 million in 2023, including $185 million for capital additions. Cash flows used in investing activities totaled $227 million in 2022 including $201 million for capital additions and $25 million for business acquisitions. Cash Flows Used in Financing Activities .
The following table highlights several key measures of asset performance (dollars in millions): 2022 2021 Working capital $ 805.7 $ 856.8 Current ratio 3.0 2.7 Days of sales in receivables outstanding 57 60 Inventory turnover (LIFO) 2.5 2.8 Lower cash and cash equivalent balances primarily drove decreases in working capital in 2022.
The following table highlights several key measures of asset performance (dollars in millions): 2023 2022 Working capital $ 970.6 $ 805.7 Current ratio 3.5 3.0 Days of sales in receivables outstanding 58 57 Inventory turnover (LIFO) 2.2 2.5 Higher cash and cash equivalent balances primarily drove increases in working capital in 2023.
In setting this number, the Company considers the input of actuaries and investment advisers, its long-term historical returns, the allocation of plan assets and projected returns on plan assets. For 2023, the Company will use an investment return assumption of 7.60 percent for the funded U.S. plan, up 1.35 percentage points from the rate assumed for 2022.
In setting this number, the Company considers the input of actuaries and investment advisers, its long-term historical returns, the allocation of plan assets and projected returns on plan assets. For 2024, the Company will use an investment return assumption of 7.6 percent for the funded U.S. plan, consistent with the rate assumed for 2023.
A summary of cash flow follows (in millions): 2022 2021 Operating activities $ 377.4 $ 456.9 Investing activities (226.8) (153.3) Financing activities (434.4) (57.1) Effect of exchange rates on cash (1.3) (1.1) Net cash provided (285.1) 245.4 Cash and cash equivalents at end of year $ 339.2 $ 624.3 Cash Flows From Operating Activities .
A summary of cash flow follows (in millions): 2023 2022 Operating activities $ 651.0 $ 377.4 Investing activities (185.3) (226.8) Financing activities (268.0) (434.4) Effect of exchange rates on cash 1.0 (1.3) Net cash provided 198.7 (285.1) Cash and cash equivalents at end of year $ 537.9 $ 339.2 Cash Flows From Operating Activities .
Cash flows used in financing activities totaled $434 million in 2022 and included share repurchases of $233 million (partially offset by net proceeds from share issuances of $36 million), dividends of $142 million, and net payments on long-term debt and outstanding lines of credit of $93 million.
Cash flows used in financing activities totaled $268 million in 2023 and included share repurchases of $102 million (partially offset by net proceeds from share issuances of $60 million), dividends of $158 million, and net payments on long-term debt and outstanding lines of credit of $65 million.
Process Segment The following table presents net sales and operating earnings as a percentage of sales for the Process segment (dollars in millions): 2022 2021 Sales Americas $ 303.5 $ 242.7 EMEA 69.3 60.1 Asia Pacific 122.3 94.8 Total $ 495.1 $ 397.6 Operating Earnings as a Percentage of Sales 25 % 23 % The following table presents the components of net sales change by geographic region for the Process segment: 2022 2021 Volume and Price Acquisitions Currency Total Volume and Price Acquisitions/Divestitures Currency Total Americas 22% 3% 0% 25% 17% 0% 1% 18% EMEA 22% 1% (8)% 15% 14% (5)% 4% 13% Asia Pacific 34% 0% (5)% 29% 48% (11)% 6% 43% Segment Total 25% 2% (2)% 25% 23% (3)% 2% 22% The Process segment had double-digit sales growth in all product applications in 2022, reflecting favorable conditions in many end markets, such as vehicle services, industrial pumps, oil and gas, mining, industrial lubrication and semi-conductors.
Process Segment The following table presents net sales and operating earnings as a percentage of sales for the Process segment (dollars in millions): 2023 2022 Sales Americas $ 344.2 $ 303.5 EMEA 76.8 69.3 Asia Pacific 126.1 122.3 Total $ 547.1 $ 495.1 Operating Earnings as a Percentage of Sales 30 % 25 % The following table presents the components of net sales change by geographic region for the Process segment: 2023 2022 Volume and Price Acquisitions Currency Total Volume and Price Acquisitions Currency Total Americas 13% 0% 0% 13% 22% 3% 0% 25% EMEA 10% 0% 1% 11% 22% 1% (8)% 15% Asia Pacific 5% 0% (2)% 3% 34% 0% (5)% 29% Segment Total 11% 0% 0% 11% 25% 2% (2)% 25% Process segment sales increased in all businesses and regions for the year, reflecting continued favorable conditions in many end markets, such as vehicle services, industrial pumps, oil and gas, mining, industrial lubrication and semi-conductors.
Historically the Company has funded cash requirements for working capital, capital expenditures, businesses acquisitions, repayment of debt obligations, retirement plans, dividends, and common stock repurchases, all as applicable, through cash provided by its operations. The Company's other primary source of liquidity includes funds available through various debt financing arrangements.
The Company evaluates liquidity as its ability to generate cash to fund its operating, investing and financing activities. Historically the Company has funded cash requirements for working capital, capital expenditures, businesses acquisitions, repayment of debt obligations, retirement plans, dividends, and common stock repurchases, all as applicable, through cash provided by its operations.
The repayment of a current debt obligation in 2022 partially offset the increase in the current ratio. Capital Structure. At December 30, 2022, the Company’s capital structure included current notes payable of $21 million, long-term debt of $75 million and shareholders’ equity of $1,860 million.
At December 29, 2023, the Company’s capital structure included current notes payable of $30 million and shareholders’ equity of $2,224 million. At December 30, 2022, the Company’s capital structure included current notes payable of $21 million, long-term debt of $75 million and shareholders’ equity of $1,860 million. Shareholders’ equity increased by $365 million in 2023.
(2) Europe, Middle East and Africa The following table presents the components of net sales change by geographic region: 2022 2021 Volume and Price Acquisitions Currency Total Volume and Price Acquisitions/Divestitures Currency Total Americas 11% 1% (1)% 11% 15% 0% 0% 15% EMEA 7% 0% (10)% (3)% 21% 0% 4% 25% Asia Pacific 16% 0% (6)% 10% 30% (3)% 6% 33% Consolidated 11% 1% (4)% 8% 19% 0% 1% 20% Sales in the Americas were up solidly again in 2022, as economic conditions in North America remained broadly favorable.
The following table presents the components of net sales change by geographic region: 2023 2022 Volume and Price Acquisitions Currency Total Volume and Price Acquisitions Currency Total Americas 4% 0% 0% 4% 11% 1% (1)% 11% EMEA 0% 0% 3% 3% 7% 0% (10)% (3)% Asia Pacific (1)% 0% (3)% (4)% 16% 0% (6)% 10% Consolidated 2% 0% 0% 2% 11% 1% (4)% 8% Sales in the Americas were up modestly in 2023, as conditions varied by end market.
Management makes several assumptions, including earnings and cash flow projections, discount rate, product offerings and market strategies, customer attrition, and royalty rates, each of which have a significant impact on the estimated fair 30 Table of Contents values. Though management considers its judgments and assumptions to be reasonable, changes in these assumptions could impact the estimated fair value.
A considerable amount of management judgment and assumptions are required in performing the impairment tests. Management makes several assumptions, including earnings and cash flow projections, discount rate, product offerings and market strategies, customer attrition, and royalty rates, each of which have a significant impact on the estimated fair values.
Indefinite lived intangibles are reviewed for impairment annually in the fourth quarter, or more frequently if events or changes in circumstances indicate the asset might be impaired. A considerable amount of management judgment and assumptions are required in performing the impairment tests.
Finite lived intangibles are amortized and are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Indefinite lived intangibles are reviewed for impairment annually in the fourth quarter, or more frequently if events or changes in circumstances indicate the asset might be impaired.
The following table presents net sales and operating earnings by reporting segment (in millions): 2022 2021 Sales Contractor $ 999.1 $ 987.6 Industrial 649.3 602.4 Process 495.1 397.6 Total $ 2,143.5 $ 1,987.6 Operating Earnings Contractor $ 249.9 $ 266.2 Industrial 231.3 199.8 Process 122.3 91.0 Unallocated corporate (expense) (1) (30.8) (25.7) Total $ 572.7 $ 531.3 (1) Unallocated corporate (expense) includes such items as stock compensation, certain acquisition transaction items, bad debt expense, charitable contributions, and certain facility expenses. 25 Table of Contents Contractor Segment The following table presents net sales and operating earnings as a percentage of sales for the Contractor segment (dollars in millions): 2022 2021 Sales Americas $ 739.1 $ 694.1 EMEA 176.8 204.6 Asia Pacific 83.2 88.9 Total $ 999.1 $ 987.6 Operating Earnings as a Percentage of Sales 25 % 27 % The following table presents the components of net sales change by geographic region for the Contractor segment: 2022 2021 Volume and Price Acquisitions Currency Total Volume and Price Acquisitions Currency Total Americas 7% 0% (1)% 6% 12% 0% 0% 12% EMEA (6)% 1% (9)% (14)% 26% 3% 4% 33% Asia Pacific 0% 0% (6)% (6)% 23% 0% 5% 28% Segment Total 4% 0% (3)% 1% 15% 1% 1% 17% Contractor segment sales growth slowed in 2022, as the on-going favorable construction market environment in North America moderated due to increases in interest rates and lower levels of new construction activity.
The following table presents net sales and operating earnings by reporting segment (in millions): 2023 2022 Sales Contractor $ 985.7 $ 999.1 Industrial 662.8 649.3 Process 547.1 495.1 Total $ 2,195.6 $ 2,143.5 Operating Earnings Contractor $ 285.3 $ 249.9 Industrial 234.1 231.3 Process 165.3 122.3 Unallocated corporate (expense) (1) (38.7) (30.8) Contingent consideration 8.6 — Impairment (7.8) — Total $ 646.8 $ 572.7 (1) Unallocated corporate (expense) includes such items as stock compensation, certain acquisition transaction items, bad debt expense, charitable contributions, and certain facility expenses. 27 Table of Contents Contractor Segment The following table presents net sales and operating earnings as a percentage of sales for the Contractor segment (dollars in millions): 2023 2022 Sales Americas $ 730.2 $ 739.1 EMEA 179.5 176.8 Asia Pacific 76.0 83.2 Total $ 985.7 $ 999.1 Operating Earnings as a Percentage of Sales 29 % 25 % The following table presents the components of net sales change by geographic region for the Contractor segment: 2023 2022 Volume and Price Acquisitions Currency Total Volume and Price Acquisitions Currency Total Americas (1)% 0% 0% (1)% 7% 0% (1)% 6% EMEA (1)% 0% 2% 1% (6)% 1% (9)% (14)% Asia Pacific (5)% 0% (4)% (9)% 0% 0% (6)% (6)% Segment Total (1)% 0% 0% (1)% 4% 0% (3)% 1% Contractor segment sales decreased 1 percent for the year.
Results of Operations A summary of financial results follows (in millions except per share amounts): 2022 2021 Net Sales $ 2,143.5 $ 1,987.6 Operating Earnings 572.7 531.3 Net Earnings 460.6 439.9 Diluted Net Earnings per Common Share $ 2.66 $ 2.52 Adjusted (non-GAAP) (1) : Net Earnings, adjusted 455.5 425.7 Diluted Net Earnings per Common Share, adjusted $ 2.63 $ 2.44 (1) Excludes impacts of excess tax benefits from stock option exercises, prior year non-recurring tax provision adjustments and a prior year pension settlement loss.
Pricing actions implemented in 2022 and 2023 have generally mitigated the effects of inflation. 23 Table of Contents Results of Operations A summary of financial results follows (in millions except per share amounts): 2023 2022 Net Sales $ 2,195.6 $ 2,143.5 Operating Earnings 646.8 572.7 Net Earnings 506.5 460.6 Diluted Net Earnings per Common Share $ 2.94 $ 2.66 Adjusted (non-GAAP) (1) : Operating Earnings, adjusted $ 646.0 $ 572.7 Net Earnings, adjusted 523.9 455.5 Diluted Net Earnings per Common Share, adjusted $ 3.04 $ 2.63 (1) Excludes the impact of a pension settlement loss, contingent consideration fair value adjustment, impairment charge, excess tax benefits from stock option exercises and certain non-recurring tax provision adjustments.
Sales in the U.S. were $1,116 million in 2022 and $1,004 million in 2021.
Sales in the U.S. were $1,162 million in 2023 and $1,116 million in 2022. (2) Europe, Middle East and Africa.
Industrial Segment The following table presents net sales and operating earnings as a percentage of sales for the Industrial segment (dollars in millions): 2022 2021 Sales Americas $ 239.3 $ 213.4 EMEA 205.7 199.4 Asia Pacific 204.3 189.6 Total $ 649.3 $ 602.4 Operating Earnings as a Percentage of Sales 36 % 33 % 26 Table of Contents The following table presents the components of net sales change by geographic region for the Industrial segment: 2022 2021 Volume and Price Acquisitions Currency Total Volume and Price Acquisitions Currency Total Americas 13% 0% (1)% 12% 24% 0% 1% 25% EMEA 15% 0% (12)% 3% 18% 0% 3% 21% Asia Pacific 14% 0% (6)% 8% 25% 0% 5% 30% Segment Total 14% 0% (6)% 8% 22% 0% 3% 25% The Industrial segment experienced solid sales growth in all regions for the year.
Industrial Segment The following table presents net sales and operating earnings as a percentage of sales for the Industrial segment (dollars in millions): 2023 2022 Sales Americas $ 263.6 $ 239.3 EMEA 207.6 205.7 Asia Pacific 191.6 204.3 Total $ 662.8 $ 649.3 Operating Earnings as a Percentage of Sales 35 % 36 % 28 Table of Contents The following table presents the components of net sales change by geographic region for the Industrial segment: 2023 2022 Volume and Price Acquisitions Currency Total Volume and Price Acquisitions Currency Total Americas 10% 0% 0% 10% 13% 0% (1)% 12% EMEA (2)% 0% 3% 1% 15% 0% (12)% 3% Asia Pacific (3)% 0% (3)% (6)% 14% 0% (6)% 8% Segment Total 2% 0% 0% 2% 14% 0% (6)% 8% Industrial segment sales increased 2 percent for the year as continued strength in the automotive, industrial and machinery end markets in the Americas was mostly offset by lower finishing system sales in EMEA and Asia Pacific.
The Company believes it has the ability to meet its long-term cash requirements by using available cash and internally generated funds and to borrow under its committed and uncommitted credit facilities.
The Company believes it has the ability to meet its long-term cash requirements by using available cash and internally generated funds and to borrow under its committed and uncommitted credit facilities. In December 2023, the Board of Directors increased the Company’s regular quarterly dividend from $0.235 to $0.255 per share, an increase of 9 percent. Cash Flow.
As of December 30, 2022, the Company had available liquidity of $884 million, including cash held in deposit accounts of $339 million, of which $111 million was held outside of the U.S., and available credit under existing committed credit facilities of $545 million.
The Company's other primary source of liquidity includes funds available through various debt financing arrangements. As of December 29, 2023, the Company had available liquidity of $1,313 million, including cash held in deposit accounts of $538 million, of which $129 million was held outside of the U.S., and available credit under existing committed credit facilities of $775 million.
The operating margin rate decreased 2 percentage points in 2022 primarily due to higher product costs and the adverse impacts of currency translation. Sales in the Americas represents the substantial majority of sales for the Contractor segment. Management regularly reviews economic and financial indicators in North America, including levels of residential, commercial and institutional construction, remodeling rates and interest rates.
Sales in the Americas represents the majority of sales for the Contractor segment. Management regularly reviews economic and financial indicators for North America, including levels of residential, commercial and institutional construction, remodeling rates and interest rates. Management also reviews gross domestic product for the regions and the level of the U.S. dollar versus the Euro and other currencies.
Other Expense Other expense decreased $16 million for 2022. Other expense in 2021 included a non-cash pension settlement loss of $12 million in connection with the transfer of certain pension obligations to an insurance company. Increased investment income in 2022 further reduced other expense by $4 million.
Other Expense Interest expense decreased $5 million compared to 2022 as private placement debt was repaid in the first quarter of 2022 and in the third quarter of 2023. Other non-operating expenses for 2023 included a non-cash pension settlement loss of $42 million in connection with the transfer of certain pension obligations to an insurance company.
Operating Earnings Sales growth led to an 8 percent increase in operating earnings. Operating earnings as a percentage of sales in 2022 was flat compared to 2021 as higher product costs and unfavorable changes in currency translation rates were offset by lower sales and earnings-based costs and the effects of expense leverage.
Operating Earnings Sales growth led to an 8 percent increase in operating earnings. Operating earnings expressed as a percentage of sales in 2023 increased 3 percentage points compared to 2022 as realized pricing more than offset higher product costs and operating expenses.
Income Taxes The effective income tax rate for 2022 was 19 percent, up 6 percentage points from 2021. The increase was due to non-recurring foreign-related tax benefits in 2021, a decrease in excess tax benefits from stock option exercises and the unfavorable effects of foreign earnings taxed at higher rates than the U.S.
Partially offsetting the pension settlement loss was an increase in interest income of approximately $11 million for the year. Income Taxes The effective income tax rate for 2023 was 17 percent, down 2 percentage points from 2022. The decrease in 2023 was due to additional non-recurring tax benefits and excess tax benefits from stock option exercises.
Gross Profit 24 Table of Contents Gross profit margin rate for 2022 decreased approximately 3 percentage points compared to 2021, as realized pricing was unable to offset higher product costs and the adverse impacts of changes in currency translation rates. Operating Expenses Total operating expenses for 2022 decreased $18 million compared to 2021.
The operating margin rate for this segment decreased 1 percentage point for the year as realized pricing and lower product costs were offset by unfavorable changes in currency translation rates and higher operating expenses.
Other expense for 2021 included a $12 million non-cash pension settlement loss. Other benefits from tax planning activities further reduced income taxes in 2021. Excluding the impacts of those items presents a more consistent basis for comparison of financial results.
Other expense for 2023 included a $42 million non-cash pension settlement loss. In 2023, the Company recorded a goodwill impairment and contingent consideration adjustment related to an acquisition that was not material to the financial statements. Other benefits from tax planning activities further reduced income taxes in 2023.
The operating margin rate increased for the year as strong realized pricing and expense leverage more than offset higher product costs and the adverse impacts of currency translation.
The operating margin rate for this segment increased 5 percentage points for the year, primarily due to realized pricing, lower product costs and expense leverage.
Net cash provided by operating activities was $377 million in 2022, down $80 million compared to 2021. The impact of the increase in net earnings in 2022 was offset by increases in working capital that reflect growth in business activity. Cash Flows Used in Investing Activities.
Net cash provided by operating activities was $651 million in 2023, up $274 million compared to 2022, due primarily to higher net earnings and fewer inventory purchases in 2023. Other decreases in working capital further contributed to the increase in cash provided by operating activities in 2023. 30 Table of Contents Cash Flows Used in Investing Activities.
Changes in receivables were consistent with higher sales levels. Inventories increased to meet higher demand and service levels and to accommodate for disruptions in the supply chain. The current ratio increased in 2022 due to increases in receivables and inventories as well as lower sales and earnings based accruals.
Changes in receivables were consistent with higher sales levels. Inventories decreased as supply chain disruptions eased and the associated effects of inflation subsided. As inventory purchases decreased, trade accounts payable decreased. The current ratio increased in 2023 in line with the changes in working capital. Capital Structure.
Removed
Certain prior year disclosures have been revised to conform with current year reporting.
Added
Supply Chain and Inflation In 2023, the Company's supply chain stabilized, and the associated effects of inflation largely subsided. While the Company experienced isolated supply chain disruptions in 2023, the impact was not as significant as compared to previous years in 2022 and 2021.
Removed
Russia's Invasion of Ukraine The Company has historically sold products to customers located in or associated with Russia and Belarus.
Added
Excluding the impacts of those items presents a more consistent basis for comparison of financial results.
Removed
In response to Russia's invasion of Ukraine, the United States, the United Kingdom, the European Union, Switzerland and others have implemented sanctions and export controls targeting Russia and Belarus and entities associated with those countries, which significantly limits our ability to sell certain products, serve certain customers and collect on our outstanding receivables in those countries.
Added
Sales of industrial products remained favorable, however rising interest rates and other economic conditions adversely impacted sales in construction markets. EMEA sales growth in 2023 benefited mostly from favorable changes in currency translation rates. Lower finishing system sales in EMEA for 2023 offset broad-based sales growth in Western Europe and emerging countries.
Removed
In April of 2022, we decided to suspend sales into Russia and Belarus indefinitely. Sales to Russia and Belarus accounted for approximately 1.5% of our 2021 net sales and were not material for 2022.
Added
In the Asia Pacific region, economic conditions in China and unfavorable changes in currency translation rates more than offset underlying growth in the rest of the region for 2023. Gross Profit 26 Table of Contents The gross profit margin rate for 2023 increased approximately 4 percentage points compared to 2022 mostly due to realized pricing.
Removed
In connection with the effect of these sanctions and export controls, we recognized $3 million of allowances for credit losses on customer receivables in Russia in 2022. The duration and extent to which trade sanctions against Russia and Belarus affect the Company's business will depend on future developments, which still remain uncertain.
Added
Operating Expenses Total operating expenses for 2023 increased $29 million compared to 2022. The increase includes increased spending on product development and other growth initiatives of $7 million, incremental share-based compensation of $6 million and higher sales and earnings-based expenses of $4 million. Investment in new product development in 2023 was $83 million, approximately 4 percent of sales.
Removed
Supply Chain and Inflation In 2022, the Company experienced logistical and production constraints due to limited raw material and component availability, reduced freight capacity, shipping delays, labor shortages and other supply chain disruptions. These supply chain disruptions have increased the Company's product costs and extended lead times.
Added
Favorable response to new product offerings was more than offset for the year by slower economic activity in worldwide construction markets. The operating margin rate for this segment improved 4 percentage points for the year. Realized pricing drove most of the improvement in the operating margin rate for the year.
Removed
The Company has undertaken steps to mitigate these impacts, including implementing interim price increases, maintaining higher inventory levels, 21 Table of Contents qualifying additional suppliers and making strategic component purchases. While freight capacity and shipping delays improved by the end of 2022, we expect these other challenges to continue into 2023.
Added
The increase provided by current year earnings of $507 million was primarily offset by dividends of $161 million and share repurchases of $102 million. Other increases in shareholders' equity included share issuances, stock compensation and other comprehensive income of $122 million. Liquidity and Capital Resources .
Removed
In connection with the supply chain disruptions described above, the Company has also experienced the effects of inflation related to raw materials, components and other expenses, including freight, labor and energy. In 2022, the cost of raw materials and components was significantly higher compared to the cost of raw materials and components in 2021.
Added
The goodwill impairment test is performed by comparing the fair value of the relevant reporting unit with its carrying amount. An impairment charge is recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value. The Company’s primary identifiable intangible assets include customer relationships, trademarks, trade names, proprietary technology and patents.
Removed
We expect cost increases from purchases of raw materials and components to moderate in 2023. The supply chain disruptions and associated effects of inflation have adversely impacted profitability in the near-term and limited our ability to satisfy customer demand.
Added
Though management considers its judgments and assumptions to be reasonable, changes in these assumptions could impact the estimated fair value. 32 Table of Contents In the third quarter of 2023, the Company recognized a goodwill impairment related to the reorganization of a business acquired in 2020 that is not material to the consolidated financial statements.
Removed
To the extent our pricing actions are unable to offset these supply chain disruptions and effects of inflation, our profitability could continue to be adversely impacted in 2023.
Removed
Sales growth in EMEA varied between products and countries in 2022, as the region experienced unfavorable geopolitical conditions. Solid sales growth to customers in Western Europe and emerging countries was partially offset by fewer sales to customers in Russia and Belarus.
Removed
Sales growth in Asia Pacific was more broadly based across products and countries, as pandemic-related restrictions eased in 2022 compared to 2021. There were 52 weeks in 2022, compared to 53 weeks in 2021.
Removed
Reductions of $16 million from lower sales and earnings-based expenses and $14 million from the impact of currency translation were partially offset by $3 million of allowances for credit losses on customer receivables in Russia and volume and rate related increases. Investment in new product development in 2022 was $80 million, approximately 4 percent of sales.
Removed
Management also reviews gross domestic product for the regions and the level of the U.S. dollar versus the euro and other currencies.
Removed
Generally favorable economic activity across many end markets, including general industry, automotive, electrical equipment and alternative energy drove demand in all regions. Finishing system sales contributed to sales growth in the Americas and EMEA, while improvement in automotive end markets contributed to sales growth in Asia Pacific.
Removed
Sales from acquired operations contributed approximately $9 million of growth in the Process segment. The operating margin rate for this segment increased 2 percentage points for the year as increased volume and expense leverage offset higher product costs and the adverse impacts of currency translation.
Removed
At December 31, 2021, the Company’s capital structure included current notes payable of $43 million, long-term debt, including current portion, of $150 million and shareholders’ equity of $1,709 million. Shareholders’ equity increased by $150 million in 2022. The increase from current year earnings of $461 million was offset by share repurchases of $233 million and dividends of $146 million.
Removed
Increases related to shares issued, stock compensation and other comprehensive income totaled $69 million. Liquidity and Capital Resources . The Company evaluates liquidity as its ability to generate cash to fund its operating, investing and financing activities.
Removed
In December 2022, the Board of Directors increased the Company’s regular quarterly dividend to $0.235 from $0.21 per share, an increase of 12 percent. 28 Table of Contents Cash Flow.
Removed
The impairment test is performed using a two-step process. In the first step, the fair value of each reporting unit is compared with the carrying amount of the reporting unit. If the estimated fair value exceeds its carrying value, step two of the impairment analysis is not required.
Removed
If the estimated fair value is less than its carrying amount, impairment is indicated and the second step must be completed in order to determine the amount, if any, of the impairment. In the second step, an impairment loss is recognized for the difference between the implied value of goodwill and the carrying value.
Removed
The Company’s primary identifiable intangible assets include customer relationships, trademarks, trade names, proprietary technology and patents. Finite lived intangibles are amortized and are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

7 edited+2 added−0 removed8 unchanged
Biggest changeAt January 31, 2023 exchange rates, assuming the same volumes, mix of products and mix of business by currency as in 2022, the movement in foreign currencies would have a favorable impact of approximately 1 percent on sales and 1 percent on net earnings in 2023. The Company’s backlog is not a good indicator of future long-term business levels.
Biggest changeAt January 31, 2024 exchange rates, assuming the same volumes, mix of products and mix of business by currency as in 2023, the movement in foreign currencies would not have an impact on net sales or net earnings for 2024.
In addition to economic growth, the successful launch of new products and expanded distribution coverage, the sales outlook is dependent on many factors, including realization of price increases and stable foreign currency exchange rates. 31 Table of Contents Forward-Looking Statements The Company desires to take advantage of the “safe harbor” provisions regarding forward-looking statements of the Private Securities Litigation Reform Act of 1995 and is filing this Cautionary Statement in order to do so.
In addition to economic growth, the successful launch of new products and expanded distribution coverage, the sales outlook is dependent on many factors, including realization of price increases and stable foreign currency exchange rates. 33 Table of Contents Forward-Looking Statements The Company desires to take advantage of the “safe harbor” provisions regarding forward-looking statements of the Private Securities Litigation Reform Act of 1995 and is filing this Cautionary Statement in order to do so.
At December 30, 2022, the currencies to which the Company had the most significant balance sheet exchange rate exposure were the euro, Swiss franc, Canadian dollar, British pound, Japanese yen, Australian dollar, Chinese renminbi, South Korean won and Indian rupee.
At December 29, 2023, the currencies to which the Company had the most significant balance sheet exchange rate exposure were the euro, Swiss franc, Canadian dollar, British pound, Japanese yen, Australian dollar, Chinese renminbi, South Korean won and Indian rupee.
It is not possible to determine the true impact of currency rate changes; however, the direct translation effect on net sales and net earnings can be estimated. In 2022, changes in currency translation rates reduced sales by approximately $66 million and reduced net earnings by approximately $31 million.
It is not possible to determine the true impact of currency rate changes; however, the direct translation effect on net sales and net earnings can be estimated. In 2023, changes in currency translation rates reduced sales by approximately $2 million and reduced net earnings by approximately $4 million.
In 2021, changes in currency translation rates increased sales by approximately $26 million and increased net earnings by approximately $12 million. 2023 Outlook The Company expects its core growth strategies of developing new products, expanding distribution, seeking adjacent markets and pursuing strategic acquisitions will help growth prospects in the future.
In 2022, changes in currency translation rates reduced sales by approximately $66 million and reduced net earnings by approximately $31 million. 2024 Outlook The Company expects its core growth strategies of developing new products, expanding distribution, seeking adjacent markets and targeting strategic acquisitions will continue to drive shareholder value.
As a result, the Company's outlook for 2023 is low single-digit revenue growth on an organic, constant currency basis.
Entering 2024, demand levels generally remain steady in an uncertain macroeconomic environment. As a result, the Company's outlook for 2024 is low single-digit revenue growth on an organic, constant currency basis.
Future results could differ materially from those expressed, due to the impact of changes in various factors. These risk factors include, but are not limited to, the factors discussed in Item 1A of this Annual Report on Form 10-K.
Future results could differ materially from those expressed, due to the impact of changes in various factors.
Added
While the Company's backlog in recent years has been elevated relative to historic levels, backlog is not a good indicator of future long-term business levels.
Added
These risk factors include, but are not limited to, risks relating to the demand for our products and the level of commercial and industrial activity worldwide; changes in currency translation rates; Russia’s invasion of Ukraine and other political instability; interest rate fluctuations and changes in credit markets; global sourcing of materials; interruptions of or intrusions into our information systems; intellectual property rights; the use of generative artificial intelligence; conducting business internationally; catastrophic events; our ability to attract, develop and retain qualified personnel; public health crises; our growth strategies and acquisitions; potential goodwill impairment; our ability to compete effectively; our dependence on a few large customers; our dependence on cyclical industries; changes in laws and regulations; climate-related laws, regulations and accords; environmental, social and governance-related expectations and requirements; compliance with anti-corruption and trade laws; changes in tax rates or the adoption of new tax legislation; costs associated with legal proceedings; and other risks and uncertainties including those discussed in Item 1A of this Annual Report on Form 10-K.

Other GGG 10-K year-over-year comparisons