may not realize projected efficiencies and cost-savings from the businesses we acquire. We cannot predict how customers, competitors, suppliers and employees will react to the acquisitions that
we make. If acquired businesses do not meet performance expectations, assets acquired could be subject to impairment. We make significant investments in developing products that have innovative features and differentiated technology in their
industries and in niche markets. We are adding to the geographies in which we do business with third party distributors. We cannot predict whether and when we will be able to realize the expected financial results and accretive effect of the
acquisitions that we make, the new products that we develop and the channel expansions that we make.
Divestiture - Our acquisition of the finishing
businesses of ITW includes a requirement that we divest the acquired Liquid Finishing businesses, which has not been completed and remains subject to FTC approval.
In April 2012, we completed our purchase of the finishing businesses of ITW. The acquisition included Powder Finishing and Liquid Finishing equipment
operations, technologies and brands. Results of the Powder Finishing businesses have been included in the Industrial segment since the date of acquisition. Pursuant to a March 2012 order, the Liquid Finishing businesses were to be held separate from
the rest of Gracos businesses while the FTC considered a settlement with Graco and determined which portions of the Liquid Finishing business Graco must divest. The FTC approved a final decision and order on October 6, 2014, which became
effective on October 9, 2014. Pursuant to the final order, Graco must sell the Liquid Finishing business assets within 180 days of the effective date. On October 8, 2014, the Company announced it had signed a definitive agreement to sell
the Liquid Finishing business assets for $590 million cash, subject to regulatory approval and other customary closing conditions. The sale transaction is expected to close in the first half of 2015. Nonetheless, we cannot be certain to what extent
or when the required regulatory approval of a buyer and terms of the sale will be obtained, or whether the Company will be able to complete a divestiture in a time frame that is satisfactory to the FTC. Graco will continue to hold the Liquid
Finishing businesses separate and maintain them as viable and competitive until the sale process is complete.
Economic Environment Demand for
our products depends on the level of commercial and industrial activity worldwide.
An economic downturn or financial market turmoil may depress
demand for our equipment in all major geographies and markets. If our distributors and original equipment manufacturers are unable to purchase our products because of unavailable credit or unfavorable credit terms or are simply unwilling to purchase
our products, our net sales and earnings will be adversely affected. An economic downturn may 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 and earnings.
Changes in exchange rates will impact our reported sales and earnings. A majority of our manufacturing and cost structure is based in the United States. In
addition, decreased value of local currency may make it difficult for some of our distributors to purchase products.
Changes in Laws and Regulations
Changes may impact how we can do business and the cost of doing business around the world.
The speed and frequency of implementation and the
complexity of new or revised laws and regulations globally appear to be increasing. In addition, as our business grows and/or geographically expands, we may become subject to laws and regulations previously inapplicable to our business. These laws
and regulations increase our costs of doing business, may affect the manner in which our products will be produced or delivered and may impact our long-term ability to provide returns to our shareholders.
Anti-Corruption 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.
Bribery, corruption and trade laws and regulations, and enforcement thereof, is increasing in frequency, complexity
and severity on a global basis. If our internal controls and compliance program do not adequately prevent or deter our employees, agents, distributors, suppliers and other third parties with whom we do business from violating anti-corruption laws,
we may incur defense costs, fines, penalties and reputational damage.
Intellectual Property Demand for our products may be affected by new
entrants who copy our products and/or infringe on our intellectual property.
From time to time, we have been faced with instances where competitors
have infringed or improperly used our intellectual property and/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 becoming more prevalent in Asia. If we are unable to effectively meet these challenges, they could adversely affect our revenues and profits and hamper our ability to grow.