MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview The Company supplies technology and expertise for the management of fluids and coatings in both industrial and commercial applications. It designs, manufactures and markets systems and equipment to move, measure, control, dispense and spray fluid and coating materials. Management classifies the Company’s business into three reportable segments: Contractor, Industrial and Expansion Markets. Key strategies include developing and marketing new products, leveraging products and technologies into additional, growing end-user markets, expanding distribution globally and completing strategic acquisitions that provide additional channels and technologies. The following Management’s Discussion and Analysis reviews significant factors affecting the Company’s results of operations and financial condition. This discussion should be read in conjunction with the consolidated financial statements and the accompanying notes to the consolidated financial statements. Tariffs On February 20, 2026, the U.S. Supreme Court issued a decision invalidating certain tariffs imposed under the International Emergency Economic Powers Act ("IEEPA"). The U.S. Court of International Trade subsequently issued orders directing the U.S. Customs and Border Protection to refund previously collected IEEPA tariffs. The situation continues to evolve, and further legislative, regulatory, or judicial developments may affect the ultimate outcome and the availability or timing of any refunds. Given the significant uncertainty involved, the Company determined to only recognize IEEPA tariff refunds upon receipt. The Company began receiving IEEPA tariff refunds during the second quarter of 2026. Through the three and six months ended June 26, 2026, the Company received $9 million in refunds, net of related surcharges. Consolidated Results A summary of financial results follows (in millions except per share amounts): Three Months Ended Six Months Ended Jun 26, 2026 Jun 27, 2025 % Change Jun 26, 2026 Jun 27, 2025 % Change Net Sales $ 590.6 $ 571.8 3 % $ 1,130.7 $ 1,100.1 3 % Operating Earnings 175.1 157.5 11 % 312.9 301.5 4 % Operating Earnings, adjusted (1) 183.2 164.4 11 % 329.3 315.8 4 % Net Earnings 144.9 127.6 14 % 263.4 251.7 5 % Net Earnings, adjusted (1) 151.0 131.9 15 % 269.2 258.0 4 % Diluted Net Earnings per Common Share $ 0.87 $ 0.76 14 % $ 1.58 $ 1.48 7 % Diluted Net Earnings per Common Share, adjusted (1) $ 0.91 $ 0.78 17 % $ 1.61 $ 1.52 6 % (1) Adjusted operating earnings, adjusted net earnings and adjusted diluted net earnings per common share reflect the Company's updated non-GAAP methodology. See below for additional information. Net sales for the second quarter increased 3 percent, with 3 percentage points of sales growth from acquired operations and 1 percentage point of sales growth from the effects of favorable changes in currency translation rates. Sales growth for the quarter was partially offset by a 1 percentage point organic decline related to the timing of finishing system sales and other project activity in the Industrial segment. Operating earnings increased 11 percent for the second quarter. Adjusted operating earnings increased 11 percent, due primarily to a higher gross margin rate driven by lower operating expenses and the receipt of $9 million in tariff refunds, net of related surcharges. Net earnings increased 14 percent for the second quarter. Adjusted net earnings increased 15 percent, driven by higher operating earnings and $5 million in lower exchange losses on net assets of foreign operations. 14 Table of Contents Beginning in the second quarter of 2026, the Company updated its non-GAAP adjusted measurements to exclude acquisition costs and amortization of acquired intangible assets. The Company excludes acquisition costs and amortization of acquired intangible assets to provide a consistent comparison of operating results across reporting periods. While the Company has a history of acquisition activity, the Company's acquisitions do not occur on a predictable cycle, and transactions vary in complexity, timing, size and nature. Acquisition costs include third-party legal, valuation, consulting and other incremental costs incurred in connection with acquisition activities as well as purchase accounting adjustments. Management uses these adjusted measures to evaluate operating performance and, for acquisition costs, in determining incentive compensation. These excluded items to the non-GAAP adjusted measurements provide supplemental information useful in evaluating the Company's underlying operating performance. Prior-period amounts have been recast to conform to the current presentation. Excluding the impact of acquisition costs, amortization of acquired intangible assets, the related income tax effects of these items and excess tax benefits from stock option exercises presents a more consistent basis for comparison of financial results. A calculation of the non-GAAP adjusted measurements of operating earnings, earnings before income taxes, income taxes, effective income tax rate, net earnings and diluted earnings per share follows (in millions except per share amounts): 15 Table of Contents Three Months Ended Six Months Ended June 26, 2026 June 27, 2025 June 26, 2026 June 27, 2025 Operating earnings $ 175.1 $ 157.5 $ 312.9 $ 301.5 Acquisition costs 2.5 0.3 3.1 1.0 Amortization of acquired intangible assets 5.6 6.6 13.3 13.3 Operating earnings, adjusted $ 183.2 $ 164.4 $ 329.3 $ 315.8 Earnings before income taxes, as reported $ 181.5 $ 158.2 $ 321.5 $ 309.7 Acquisition costs 2.5 0.3 3.1 1.0 Amortization of acquired intangible assets 5.6 6.6 13.3 13.3 Earnings before income taxes, adjusted $ 189.6 $ 165.1 $ 337.9 $ 324.0 Income taxes, as reported $ 36.5 $ 30.6 $ 58.1 $ 58.0 Tax impact of acquisition costs 0.5 0.1 0.7 0.2 Tax impact of amortization of acquired intangible assets 1.4 1.8 3.2 3.4 Excess tax benefit from option exercises 0.1 0.7 6.7 4.4 Income taxes, adjusted $ 38.5 $ 33.2 $ 68.7 $ 66.0 Effective income tax rate As reported 20.1 % 19.3 % 18.1 % 18.7 % Adjusted 20.4 % 20.1 % 20.3 % 20.4 % Net Earnings, as reported $ 144.9 $ 127.6 $ 263.4 $ 251.7 Acquisition costs, net of tax 2.0 0.2 2.4 0.8 Amortization of acquired intangible assets, net of tax 4.2 4.8 10.1 9.9 Excess tax benefit from option exercises (0.1) (0.7) (6.7) (4.4) Net Earnings, adjusted $ 151.0 $ 131.9 $ 269.2 $ 258.0 Weighted Average Diluted Shares 165.7 168.6 167.0 170.1 Diluted Earnings per Share As reported $ 0.87 $ 0.76 $ 1.58 $ 1.48 Adjusted $ 0.91 $ 0.78 $ 1.61 $ 1.52 16 Table of Contents The following table presents an overview of components of net earnings as a percentage of net sales: Three Months Ended Six Months Ended June 26, 2026 June 27, 2025 June 26, 2026 June 27, 2025 Net Sales 100.0 % 100.0 % 100.0 % 100.0 % Cost of products sold 46.3 47.6 47.1 47.5 Gross Profit 53.7 52.4 52.9 52.5 Product development 3.4 3.6 3.5 3.6 Selling, marketing and distribution 11.6 12.0 12.3 12.3 General and administrative 9.1 9.3 9.4 9.2 Operating Earnings 29.6 27.5 27.7 27.4 Interest expense 0.1 0.1 0.1 0.1 Other (income) expense, net (1.2) (0.2) (0.9) (0.9) Earnings Before Income Taxes 30.7 27.6 28.5 28.2 Income taxes 6.2 5.3 5.1 5.3 Net Earnings 24.5 % 22.3 % 23.4 % 22.9 % Net Sales The following table presents net sales by geographic region (in millions): Three Months Ended Six Months Ended June 26, 2026 June 27, 2025 June 26, 2026 June 27, 2025 Americas(1) $ 371.4 $ 351.9 $ 705.8 $ 675.1 EMEA(2) 127.8 129.9 253.4 250.9 Asia Pacific 91.4 90.0 171.5 174.1 Consolidated $ 590.6 $ 571.8 $ 1,130.7 $ 1,100.1 (1) North, South and Central America, including the United States (2) Europe, Middle East and Africa The following table presents the components of net sales change by geographic region: Three Months Six Months Volume and Price Acquisitions Currency Total Volume and Price Acquisitions Currency Total Americas 1% 5% 0% 6% (1)% 5% 1% 5% EMEA (4)% 0% 2% (2)% (9)% 5% 5% 1% Asia Pacific (2)% 2% 2% 2% (5)% 1% 2% (2)% Consolidated (1)% 3% 1% 3% (3)% 4% 2% 3% Gross Profit The gross profit margin rate increased approximately 1 percentage point for the second quarter and was flat for the year to date from the comparable periods last year. For the quarter, price realization and the receipt of $9 million in tariff refunds, net of related surcharges, more than offset the unfavorable effects of lower margin rates from acquired operations. For the year to date, price realization and $9 million in tariff refunds, net of related surcharges, more than offset $6 million of incremental tariff costs, unfavorable product and channel mix and lower margin rates of acquired operations. Operating Expenses 17 Table of Contents Total operating expenses decreased modestly for the second quarter and increased $9 million (3 percentage points) year to date compared to the same periods last year. Incremental expenses from acquired operations of $5 million for the quarter and $11 million for the year to date were partially offset by decreases in stock compensation, product development spending and selling, marketing and distribution expenses. Other (Income) Expense Other non-operating income increased by $6 million in the second quarter and $1 million for the year to date from the comparable periods last year, primarily due to lower foreign exchange losses on net assets of foreign operations of $5 million and $6 million, respectively. The year to date increase in other non-operating income was partially offset by a prior year gain of $5 million from the sale of a former manufacturing and distribution facility in Switzerland that did not repeat. Income Taxes The effective income tax rate was 20 percent for the second quarter and 18 percent for the year to date. Adjusted to exclude the impacts of certain non-recurring items (see Consolidated Results for Comparability), the adjusted effective income tax rate of 20 percent for both the quarter and year to date was comparable to the respective periods last year. Segment Results Certain measurements of segment operations compared to last year are summarized below: Contractor Segment The following table presents net sales and operating earnings as a percentage of sales for the Contractor segment (dollars in millions): Three Months Ended Six Months Ended June 26, 2026 June 27, 2025 June 26, 2026 June 27, 2025 Net Sales Americas $ 215.0 $ 201.4 $ 395.9 $ 377.3 EMEA 59.9 61.1 116.1 115.6 Asia Pacific 24.5 26.5 47.4 51.1 Total $ 299.4 $ 289.0 $ 559.4 $ 544.0 Operating earnings as a percentage of net sales 30 % 26 % 27 % 25 % The following table presents the components of net sales change by geographic region for the Contractor segment: Three Months Six Months Volume and Price Acquisitions Currency Total Volume and Price Acquisitions Currency Total Americas 3% 4% 0% 7% 1% 4% 0% 5% EMEA (4)% 0% 2% (2)% (5)% 0% 5% 0% Asia Pacific (10)% 0% 2% (8)% (10)% 0% 3% (7)% Segment Total 0% 3% 1% 4% (2)% 3% 2% 3% Contractor segment net sales growth for the second quarter and year to date included $7 million and $14 million, respectively, from acquired operations. Organic sales growth in the Americas for the second quarter and year to date was broad-based, and included growth in protective coating and spray foam product categories as well as within the professional paint and home center channels. The operating margin rate for this segment increased 4 percentage points for the quarter and 2 percentage points for the year to date, primarily due to lower operating expenses and the net impact of tariff refunds and related surcharges of $5 million. Industrial Segment The following table presents net sales and operating earnings as a percentage of sales for the Industrial segment 18 Table of Contents (dollars in millions): Three Months Ended Six Months Ended June 26, 2026 June 27, 2025 June 26, 2026 June 27, 2025 Net Sales Americas $ 131.6 $ 126.8 $ 263.0 $ 248.0 EMEA 62.0 61.1 124.7 120.5 Asia Pacific 55.6 54.3 101.9 105.4 Total $ 249.2 $ 242.2 $ 489.6 $ 473.9 Operating earnings as a percentage of net sales 34 % 34 % 33 % 34 % The following table presents the components of net sales change by geographic region for the Industrial segment: Three Months Six Months Volume and Price Acquisitions Currency Total Volume and Price Acquisitions Currency Total Americas (4)% 7% 1% 4% (2)% 7% 1% 6% EMEA (2)% 1% 2% 1% (12)% 9% 6% 3% Asia Pacific (2)% 2% 2% 2% (7)% 2% 2% (3)% Segment Total (3)% 5% 1% 3% (5)% 6% 2% 3% Industrial segment incremental sales from acquired operations of $11 million in the second quarter and $31 million for the year to date more than offset an organic sales decline, which was primarily attributable to the timing of finishing system sales and other project-related activity compared to the respective periods last year. The operating margin rate for this segment was flat for the second quarter compared to the same period last year as an improved gross margin rate, primarily due to the second quarter net impact of tariff refunds and related surcharges of $4 million, offset the unfavorable effects of lower margin rates of acquired operations. For the year to date, the operating margin rate decreased 1 percentage point as lower operating expenses and the net impact of tariff refunds and related surcharges were unable to offset the unfavorable effects of lower margin rates of acquired operations. Expansion Markets Segment The following table presents net sales and operating earnings as a percentage of sales for the Expansion Markets segment (dollars in millions): 19 Table of Contents Three Months Ended Six Months Ended June 26, 2026 June 27, 2025 June 26, 2026 June 27, 2025 Net Sales Americas $ 24.8 $ 23.8 $ 46.9 $ 49.8 EMEA 5.8 7.6 12.6 14.7 Asia Pacific 11.4 9.2 22.2 17.7 Total $ 42.0 $ 40.6 $ 81.7 $ 82.2 Operating earnings as a percentage of net sales 23 % 22 % 23 % 23 % The following table presents the components of net sales change by geographic region for the Expansion Markets segment: Three Months Six Months Volume and Price Acquisitions Currency Total Volume and Price Acquisitions Currency Total Americas 4% 0% 0% 4% (6)% 0% 0% (6)% EMEA (24)% 0% 0% (24)% (15)% 0% 1% (14)% Asia Pacific 23% 0% 0% 23% 25% 0% 0% 25% Segment Total 3% 0% 0% 3% (1)% 0% 0% (1)% Expansion Markets net sales increased 3% for the second quarter and decreased 1% year to date compared to the same periods last year. Improved order rates in the semiconductor product application drove most of the second quarter sales growth. The segment's operating margin rate increased 1 percentage point for the quarter due primarily to lower expenses. The year to date operating margin rate was flat, as lower expenses offset the impact of lower sales volume. Liquidity and Capital Resources Net cash provided by operating activities of $298 million in the first six months of 2026 decreased by $10 million compared to the same period last year. Increases in accounts receivable and accounts payable reflect growth in business activity in the second quarter of 2026. Significant uses of cash in the first half of 2026 included share repurchases of $331 million (partially offset by $43 million of net proceeds from shares issued), dividend payments of $98 million and plant and equipment additions of $29 million. For the first half of 2025, significant uses of cash included share repurchases of $361 million (partially offset by $25 million from shares issued) and dividend payments of $92 million and plant and equipment additions of $30 million. As of June 26, 2026, the Company had available liquidity of $1,279 million, including cash and cash equivalents of $508 million, of which $174 million was held outside of the U.S., and available credit under existing committed credit facilities of $771 million. Cash balances and unused financing sources are expected to provide the Company with the flexibility to meet its liquidity needs for the next 12 months and beyond, including its capital expenditure plan, planned dividends, share repurchases, potential future acquisitions and operating requirements. Capital expenditures for 2026 are expected to be approximately $100 million. The Company may make opportunistic share repurchases going forward. Outlook Incoming order activity and end market demand trends support the Company's 2026 outlook of low single-digit sales growth on an organic constant-currency basis and mid-single-digit growth including the expected incremental sales from acquisitions. The Company estimates third quarter total company sales of $580 million to $600 million, excluding the impact of the Company's announced acquisition of Valco Melton, which is expected to close in the third quarter. Cautionary Statement Regarding 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. From time to time 20 Table of Contents various forms filed by our Company with the Securities and Exchange Commission, including our Form 10-K, Form 10-Qs and Form 8-Ks, and other disclosures, including our 2025 Overview report, press releases, earnings releases, analyst briefings, conference calls and other written documents or oral statements released by our Company, may contain forward-looking statements. Forward-looking statements generally use words such as “expect,” “foresee,” “anticipate,” “believe,” “project,” “should,” “estimate,” “will,” and similar expressions, and reflect our Company’s expectations concerning the future. All forecasts and projections are forward-looking statements. Forward-looking statements are based upon currently available information, but various risks and uncertainties may cause our Company’s actual results to differ materially from those expressed in these statements. The Company undertakes no obligation to update these statements in light of new information or future events. 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, risks relating to the demand for our products and the level of commercial, industrial and construction activity worldwide; changes in currency translation rates; international and domestic instability; interest rate fluctuations and changes in credit markets; global sourcing of materials; inflationary cost pressures and our ability to raise prices without decreasing demand for our products; interruptions of or intrusions into our information systems; intellectual property rights; the use of generative artificial intelligence and other emerging technologies; 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 or tariff rates or the adoption of new tax or tariff legislation; and costs associated with legal proceedings. Please refer to Item 1A of our 2025 Annual Report on Form 10-K and Item 1A of this Form 10-Q for a more comprehensive discussion of these and other risk factors. These reports are available on the Company’s website at www.graco.com and the Securities and Exchange Commission’s website at www.sec.gov. Shareholders, potential investors and other readers are urged to consider these factors in evaluating forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. Investors should realize that factors other than those identified above and in Item 1A might prove important to the Company’s future results. It is not possible for management to identify each and every factor that may have an impact on the Company’s operations in the future as new factors can develop from time to time.