On this page of StockholderLetter.com we present the 3/15/2023 shareholder letter from GRACO INC — ticker symbol GGG. Reading current and past GGG letters to shareholders can bring important insights into the investment thesis.

 •  3/15/2023 Letter Continued (Full PDF)
 •  3/13/2024 GGG Stockholder Letter
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GGG 3/15/2023 Shareholder/Stockholder Letter Transcript:

Graco Inc. 2022 Overview and
Annual Report on Form 10-K

To Our Shareholders
Mark W. Sheahan
We are pleased to report that 2022 was another year of growth
and strategic progress for Graco. Our revenue grew 12 percent
on a constant currency basis, and we increased our diluted
earnings per share in an environment where inflation
accelerated beyond our (and many others   ) expectations. Like
most industrial manufacturers, Graco was faced with logistical
challenges in 2022, which tested our long-standing reputation
for on-time deliveries and overall customer experience. I am
proud to say that despite record backorders and heightened
pressure to deliver, our employees rolled up their sleeves, put
in extra time and did everything possible to produce groundbreaking innovation, turn out industry-leading quality and
deliver on Graco   s promise of A+ service to every customer,
every time.
President and CEO
Our businesses made significant progress worldwide in
increasing our product offering and improving our presence in
markets such as alternative energy, electronics, semiconductor
equipment and other new areas. We are also actively
implementing changes to our purchasing and pricing practices
that will improve our ability to react to vendor disruptions and
unexpected cost pressures on a more fluid basis. I am
confident that what we are working on will have a lasting
beneficial impact on our performance going forward.
Additionally, Graco   s warranty expense as a percentage of
sales declined in 2022, which says a lot about our ongoing
culture and commitment to taking care of our customers.
We continued to make smart investments that will benefit our
businesses, manufacturing operations and communities. This
past year, we added to our manufacturing capacity by
opening a new facility in Dayton, Minnesota. This
538,000-square-foot building houses the production and
operations management for our Process Equipment Division
and the protective coatings and spray foam business in our
Contractor Equipment Division. In addition to being a
state-of-the-art manufacturing facility, it was built with over
3,000 solar panels on the roof, which will generate enough
electricity

to fulfill roughly 20 percent of the building   s energy needs.
Graco will seek to invest in additional sustainable energy
initiatives that improve our performance and result in tangible
shareholder value. As highlighted in our inaugural ESG report,
issued this past December, the Company is committed to
helping customers with similar initiatives through the products
we develop.
Our Dayton, Minnesota, campus will also be home to a new
distribution center, which, at roughly 500,000 square feet, will
more than double our current capacity. We broke ground on
this facility in August 2022 and anticipate the building will
provide ample room for growth in the coming years.
Additionally, our Lubrication Equipment Division, located in
Anoka, Minnesota, is planning to expand manufacturing
capacity by adding on to its existing facility in the near future.
We are also working on facility capacity projects in Sioux Falls,
South Dakota; St. Gallen, Switzerland; and Sibiu, Romania. All
of these investments will provide us with much-needed space
while supporting our growth plans for the next decade. As
always, our facilities will be equipped with state-of-the-art
machinery to capitalize on our strong competency in
manufacturing and our commitment to operational excellence.
2022 was also a great year for the continued enhancement of
our employee value proposition. We were recognized by
Fortune magazine as a 2022 Best Workplace in Manufacturing
and Production and named a Great Place to Work   for the fifth
time. Our employees are what make Graco successful, and it is
both rewarding and humbling to know that those who work
here hold the Company in such high regard.
I am certain that 2023 will present us with new and
unexpected challenges, but we know our ability to create value
makes us resilient and contributes to long-term growth. As a
leading industrial brand for nearly 100 years, we will stay true
to our heritage of value creation as we focus on these four
growth priorities:
    New Product Development. Build on our legacy of
innovation by bringing more products to market and adding
more patents to our portfolio.
    New Markets. Sharpen our focus on customers and
strengthen our relationships with distributors and end users in
both traditional and emerging markets.
    Expanded Distribution Channel. As we invent intelligent,
connected solutions and enter new markets, we will strengthen
existing and create new go-to-market channels.
    Strategic Acquisitions. In addition to organic growth, we
will continue to pursue inorganic growth through selective
acquisition opportunities.
Looking forward, we are confident that Graco is well-positioned
for continued growth and success. We have a talented and
dedicated team, proven strategies that have guided our actions
in the past and a strong balance sheet, all serving as pillars for
growth in the future. We remain committed to delivering our
shareholders long-term profitable growth based on clear-eyed
investment decision-making.
Thank you for your continued support of Graco. We are grateful
for your trust and confidence in our business.

New Products 2022
INDUSTRIAL
Electric UniDrum
The Electric UniDrum is the only bulk unloader that furthers electrification for
factories worldwide, including automotive original equipment manufacturers who
need more efficient ways to supply ambient sealants and underbody material to
their assembly lines. With a new electric driver providing closed-loop
communication, factories can collect data critical to decreasing waste and
increasing environmental regulation compliance.
Elite Construction
Electric UniDrum
Elite Construction is a dispense pump and valve construction that holds up against
the most abrasive materials and provides customers with 10 times the standard
system lifespan.
E-Flo   DCi    and DCi Link
Elite Construction
E-Flo DCi direct current (DC) electric pumps with intelligent control drive efficiency
and sustainability for high-volume industrial paint circulation and supply. Compared
to pneumatic and other electric pumps, the E-Flo DCi pump offers more power and
efficiency in a smaller footprint with fewer parts and hardware.
EVR Metering System
With electric variable ratio (EVR) metering, manufacturers in the automotive,
e-mobility and electronics industries, as well as, general industry can now change
ratios on the fly. Such versatility allows manufacturers to mix, meter and dispense
two different component materials with the same equipment.
E-Flo DCi and DCi Link
GemaConnect    Dashboard
EVR Metering System
The GemaConnect Dashboard is a cloud-based, real-time digital management tool
that provides production information, comprehensive monitoring and analyzing
capabilities of a Gema powder coating system on standard PCs, tablets and
cellphones.
Multi-Gun Axis UA05-2 and UA05-3
The multi-gun axis UA05-x is a horizontal infeed axis that significantly increases the
automated coating capability of a Gema powder coating line. In addition, the product
opens up new coating solutions due to its flexible application possibilities.
GemaConnect Dashboard
OptiCenter   OC09 Expansion
With the extension of the mid-level powder center OC09, Gema now offers a
powder supply of up to 30 guns, allowing a broader spectrum of application
solutions.
Multi-Gun Axis
UA05-2 and UA05-3
OptiMove CR09 OptiMove CR09-C
OptiMove axis control encompasses the control, visualization and input data
responsible for the axis carriage's exact movement and positioning adjustment. The
control unit is extremely compact, user-friendly and easy to operate. Each control
module controls a single axis without needing a higher-level master control.
OptiCenter OC09 Expansion
OptiMove CR09 OptiMove CR09-C

New Products 2022
PROCESS
G3    Hammer Pump
Designed specifically for hydraulic hammer and breaker applications, the G3
Hammer Pump features a spin-off reservoir cover for conveniently adding chisel
paste and other difficult-to-pump greases containing additives. The pump utilizes
precision-engineered pump elements based on our industry-leading G3 platform.
G5    Standard and Pro Grease Lubrication Pumps
Developed for the harsh demands of fracking operations, G5 Standard and Pro
pumps come with five adjustable pump elements to provide on-time lubrication for
quintuplex and other pump-to-point applications. G5 Pro models include a built-in
controller and are available either as a stand-alone pump or within an enclosure
with pre-installed run lights.
G3 Hammer Pump
G5 Standard and Pro
Grease Lubrication Pumps
GREEN Aquarius
The GREEN Aquarius is a high-purity deionized (DI) water heating system operating
in a single pass and recirculates unused DI water from point-of-use during process
idle. The system can adapt to a variety of flow rates and process idle timing while
maintaining temperature accuracy. The product lowers overall operational costs and
helps minimize environmental impact by reducing electricity for heating and
reclaiming unused DI water.
Header Line Check Valve
The Header Line Check Valve is made from 316 stainless steel, including checking
components, maximizing reliability and durability.
Header Line Check Valve
HFI Immersion Heaters
HFI Immersion Heaters feature standardized components, streamlining production to
improve lead time and pricing for high-purity, custom chemical bath immersion
heaters.
GREEN Aquarius
Husky   2150LP
The Husky 2150LP pump is designed for large particle transfer     up to nearly 2
inches     and is built to transfer waste and trash in mines, in sumps and in-plant.
HFI Immersion Heaters
Husky 2150LP



 3/15/2023 Letter Continued (Full PDF)