Profile: Graco Inc. (GGG)

Graco Inc., incorporated in 1926, is engaged in providing fluid handling solutions to organizations involved in manufacturing, processing, construction and maintenance globally. The Company and its subsidiaries sell a range of products in the North and South America, Middle East, Africa, Europe and Asia Pacific. The Company operates in three business segments: industrial, contractor and lubrication. In February 2008, Cohesant Technologies Inc. announced that it completed the sale of its GlasCraft subsidiary effected through the merger of Cohesant Technologies with Graco Indiana Inc., a wholly owned subsidiary of Graco Inc. In August 2008, the Company completed the acquisition of Lubrication Scientifics, Inc. (LubeSci).

Industrial segment

During the fiscal year ended December 26, 2008 (fiscal 2008), the segment represents approximately 57% of the total sales. The segment includes the industrial products and the applied fluid technologies divisions. The divisions market their equipment and services to customers who manufacture, assemble, maintain, repair and refinish products, such as appliances, vehicles, airplanes, electronics, cabinets and furniture and other articles, the divisions focus on different fluids and application methods in these industries.

The industrial products division is engaged on the product development and sales efforts on three product families: equipment to apply paint and other coatings to products such as motor vehicles, appliances, furniture and other industrial and consumer products (Liquid Finishing); equipment to move and dispense chemicals and liquid and semi-solid foods (Process Pumps); and equipment to refinish and repair automobiles (Sharpe by Graco). Finishing equipment for applying paints, varnishes and other coatings includes paint circulating and paint supply pumps, plural component coating proportioners, various accessories to filter, transport, agitate and regulate the fluid, spare parts, such as spray tips, seals and filter screens, and a variety of applicators that use different methods of atomizing and spraying the paint or other coating depending on the viscosity of the fluid, the type of finish desired, and the need to maximize transfer efficiency, minimize overspray and prevent the release of volatile organic compounds (VOCs) into the air. Liquid finishing equipment is used in the automotive, automotive feeder, truck/bus, military and utility vehicle, aerospace, farm and construction, wood and general metals industries.

The Company offers double diaphragm and piston transfer pumps to the chemical, petroleum, general manufacturing and food processing industries, pumps for sanitary applications for use in dairies, diaphragm pumps, transfer pumps and drum and bin unloaders. The process equipment is used in the food and beverage, dairy, pharmaceutical, cosmetic, oil and gas, electronics, waste water, and mining and ceramics applications.

The applied fluid technologies division directs its engineering, sales and marketing efforts toward three broad product families: equipment to apply protective coatings and foam (protective coatings and foam); equipment to apply sealants and adhesives (sealants and adhesives); and equipment to create reaction injection molded polyurethane parts (in-plant polyurethane). The Company offers a range of air-operated airless sprayers and plural component proportioning equipment to apply foam and protective coatings to a range of surfaces. The Xtreme air-operated airless sprayers apply tough protective coatings for use in harsh environmental conditions. These sprayers offer a de-icing feature, reduced noise and easy access to the integrated air controls. A DataTrak control that provides material usage information, system diagnostics and runaway control is available as an option. The XtremeMix plural component sprayers provide on-demand mixing, ratio assurance and job site portability to spray high solid epoxies, urethanes and protective coatings with a short pot life.

The Reactor line of plural component pumps is used to apply foam to insulate walls, water heaters, refrigeration, and hot tubs, create commercial roofing membranes and for packaging, architectural design and cavity filling, as well as to apply polyurea to cover tanks, pipes, roofs, truck beds and foundations with protective coatings and linings where accurate temperatures and pressures are required to achieve optimal results. The Reactor systems are also available installed in mobile spray rigs that provide portability and accessibility to remote job sites. Spray foam is used in insulating buildings. In fiscal 2008, the Company introduced the Fusion CS spray gun for use in the application of foam and polyurea insulation.

The Company offers pumps, applicators and accessories, to supply and precisely dispense sealants and adhesives in automotive assembly, furniture assembly, insulated glass and window manufacturing, bookbinding, wind turbine and solar panel manufacturing and other industrial assembly operations. The Company offers a range of products for the use in the wind energy market.

The Company manufactures from spraying protective foam and other coatings on wind turbine towers to the manufacture of rotor blades, from the automatic lubrication of bearings, gears, and generators to the evacuation and dispensing of oil, grease, anti-freeze and hydraulic fluids, it offers durable, reliable versatile fluid-handling systems for the manufacture and maintenance of wind power components. The GlasCraft Gelcoat system sprays polyester and vinyl ester-based coatings in production and repair operations and the GlasCraft resin transfer molding (RTM) system injects polyester and vinyl-ester resin into blade molds. The automatic lubrication systems dispense precise amounts of lubricant at specific intervals to critical bearings points in the wind turbine towers.

Contractor segment

In fiscal 2008, the contractor segment accounted for approximately 32% of the Company’s total sales. This segment markets a complete line of airless paint and texture sprayers (air, gas, hydraulically- and electrically-powered), accessories such as spray guns, hoses and filters and spare parts such as tips and seals, to professional and semi-professional painters in the construction and maintenance industries. The products are distributed primarily through stores whose main products are paint and other coatings. Contractor products are also sold through general equipment distributors. A limited line of sprayers and accessories are distributed globally through the home center channel.

Contractor equipment encompasses a range of sprayers, including sprayers that apply markings on roads, parking lots, fields and floors; texture to walls and ceilings; viscous coatings to roofs; and paint to walls and structures. Many of these sprayers and their accessories contain one or more technological features, such as micro-processor based controls for consistent spray and protective shut-down, a pump that may be removed and re-installed without tools, an easy clean feature, gas/electric convertibility, and a pump finish.

The The LineDriver and the LineDriver HD Ride-On Systems enable users to double their production by providing a motorized riding module to attach to their LineLazers. This system has a vibration reduction system, a dual foot pedal for forward and reverse motion, a parking brake and a FlexBeam Break-A-Way Light to permit striping in low light conditions. In fiscal 2008, the Company introduced the Nova390 ProStep, a rugged yet lightweight sprayer with a snap on-snap off ProStep that provides the user with an extended reach.

Lubrication segment

The lubrication segment represented approximately 11% of the Company’s sales in fiscal 2008. The lubrication segment is focused on the pumps, applicators and accessories, such as meters and hose reels, for the motor vehicle lubrication markets. The Lubriquip product line consists of the systems for the automatic lubrication of factory machine tools, compressors and pumps used in petrochemical and gas transmissions plants; bearings and gears on equipment in metal, pulp and paper mills; conveyors and material handling equipment; and off-road and over-the-road trucks. LubeSci manufactured and sold automated lubrication systems and components for use in a range of industrial applications and offered an extended line of injectors and metering systems.

During the fiscal year ended December 26, 2007 (fiscal 2007), the Company introduced the Dyna-Star 10:1. In fiscal 2008, the Company introduced the Matrix 3.0 fluid management system, which uses the wireless technology for dispense and monitor bulk tank supply of lubricating oils and anti-freeze at auto dealerships, fleet maintenance facilities, off-road maintenance shops and with industrial in-plant lubrication systems.