Caroline Chambers – Vice President, Corporate Controller and Information Systems Patrick McHale – President, Chief Executive Officer & Director James Graner – Chief Financial Officer Christian Rothe – Vice President and Treasurer.

Joseph Ritchie – Goldman Sachs and Company. Matthew McConnell – RBC Capital Markets Shane Rourke – Keybanc Capital Markets Kevin Maczka – BB&T Capital Markets Liam Burke – Wunderlich Securities Walter Liptak – Global Hunter Securities.

Please standby. Good morning, and welcome to the Second Quarter 2015 Conference Call for Graco Inc. If you wish to access the replay for this call, you may do so by dialing 1-888-203-1112 within the United States or Canada. The dial-in number for international callers is 719-457-0820. The conference ID number is 7932377.

The replay will be available through July 27, 2015. Graco has additional information available in a PowerPoint slide presentation, which is available as part of the webcast player. At the request of the company, we will open up the conference for questions and answers after the opening remarks from management.

During this call, various remarks may be made by management about their expectations, plans and prospects for the future. These remarks constitute forward-looking statements for the purposes of the Safe Harbor provisions of the Private Securities Litigation Reform Act.

Actual results may differ materially from those indicated as a result of various risk factors, including those identified in Items 1A of the company's 2014 Annual Report, Form 10-K and in the Item 1A of the company's most recent Quarterly Report on Form 10-Q.

These reports are available on the company's website at www.graco.com and the SEC's website at www.sec.gov. Forward-looking statements reflect management's current views and speak only as of the time they are made. The company undertakes no obligation to update these statements in light of new information or future events. This call is being recorded.

I will now turn the conference over to Caroline Chambers, Vice President, Corporate Controller and Information Systems..

Good morning, everyone. I'm here this morning with Pat McHale, Jim Graner, and Christian Rothe. I will provide a brief overview of our quarterly results before turning the call over our quarterly results before turning the call over to Pat for additional discussion.

Our conference call slides and our second quarter Form 10-Q are on our website and provide additional information on our quarter. Last evening, Graco reported second quarter GAAP sales of $335 million, net earnings of $173 million and diluted earnings per share of $2.90.

There is some noise in the second quarter numbers, so I will take a moment to identify the individual items that impacted our reported figures so we can get to organic numbers on a constant currency basis. Starting with foreign exchange, as expected, FX continues to be a significant headwind.

In the second quarter, FX was a $17 million drag on sales and reduced net income by $6 million or $0.10 per diluted share. As identified in the earlier quarters, we believe the full-year effect of current currency translation rates as compared to last year will be a headwind on sales of approximately 5% and 11% on net earnings.

Acquisitions completed in the last 12 months increased sales in the second quarter by about $19 million and contributed $2 million to pre-tax to operating earnings or $0.02 per diluted share. The effective inventory step-up was minimal in the quarter.

The $0.02 per share is after approximately $2 million of intangible amortization expense, but cash earnings per share for acquisitions were $0.04 in the quarter. Pat will further discuss acquisition performance during his comments. In April, we completed the sale of the Liquid Finishing businesses that were held separate.

The conclusion of that transaction resulted in a final dividend income, which is post-tax of $12 million. With the conclusion of the sale, we will no longer receive whole, separate dividends. In addition, after transaction fees, post-closing adjustments and other costs, the $590 million sale generated a taxable gain of $147 million.

After taxes, the total impact of the transaction in the second quarter was $110 million or $1.85 per diluted share. Post transaction adjustments with the buyer should conclude during the third quarter. We don't expect these activities will have a significant impact to what has been reported through the second quarter.

We also had two non-recurring items benefiting the tax rate in the second quarter. First, the tax planning project was completed, resulting in a non-recurring benefit of $2 million. Second, the company has asserted that it will indefinitely reinvest earnings of foreign subsidiaries to support the expansion of our international business.

This assertion is being made with respect to the current and prior period earnings that have not yet been returned to the U.S. This resulted in a non-recurring benefit of approximately $7 million. With the two non-recurring items, we had a favorable tax expense impact of $9 million in the second quarter or $0.15 per diluted share.

The investment of reinvestment assertion under our current foreign earnings composition will have a benefit going forward of approximately 1 percentage point on our effective tax rate.

We will be able to fund our domestic operations and have uses for foreign cash to grow our international businesses through investments in our legacy operations and new acquisitions.

In addition, we'll also experience a somewhat higher level of variability in our tax rate from quarter-to-quarter, depending on foreign earnings sources which is why our second half guidance on our tax rate is a two-point range of 31% to 33%. The midpoint of that range, 32%, reflects the 1 percentage point improvement on our effective tax rate.

A few other items to note before I turn the call over to Pat for his comment. Cash provided by operating activities is $97 million year-to-date. The increases in inventory and accounts receivable reflect organic growth as well as the effective acquired operations.

Net debt was $270 million at the end of the second quarter, significantly below the balance of $790 million at the end of Q1. The primary driver of the decrease was of course the sale of held separate businesses.

We continue to do our share repurchases during the second quarter including a small accelerated repurchase program of $60 million with a term not to exceed three months. The program wrapped up earlier in July with about 840,000 shares repurchased. Pat will discuss further capital allocation priorities in his comments.

Incremental spending in regional and product growth initiatives was $1 million in the second quarter and $3 million year-to-date. Capital expenditures year-to-date have been $20 million and our current forecast is for approximately $4 million in CapEx for the full year.

Unallocated corporate expenses are $3 million above last year to the first half; and for the full year, we expect unallocated corporate expenses to be approximately $6 million to $8 million above last year primarily due to increased pension, stock compensation and incremental cost related to the new central warehouse.

Starting in the first quarter of this year, we created a new reporting segment that include our Process, Oil and Natural Gas and Lubrication divisions. The new segment reflects our increased focus on growth in the Process area as well as recent acquisition.

Further information about our segment is included on page 19 of the conference call slides and historical financial information for the segments is also posted on our website. I'll turn the call over to Pat now for further segment and regional discussion..

Thanks, Caroline. Good morning, everyone. My top line comment this morning will be at constant currency and without acquisitions. As noted in the press release, we achieved 3% organic sales growth and grew in every reportable segment and region in the second quarter.

While somewhat below in our own expectations for the quarter, we feel we're still on track for our expectation of mid-single-digit growth for the full year. Our Contractor segment ended up five quarters straight of double-digit growth from the Americas, growing mid-single digits in the quarter.

This was a difficult top to last year where we had strong home center sales particularly related to entry level equipment. The home center side of our business was flat in the second quarter against this difficult comp, while the paint store channel in the Americas grew at the higher end of the mid-single-digit range.

Out-the-door sales in both the home center and paint store were good during the quarter. In Contractor EMEA, we achieved double digit year-over-year growth in Western Europe in Q2. The emerging markets of EMEA were down double digits, particularly Russia and resulted in the mid-single digit regional number for contractor.

We continue to experience difficulties in Asia Pacific in the Contractor business, with the region down high-single digits in Q2. This is driven by ongoing underperformance in China. We recently made some leadership changes in the region to try to get to back on track. We believe that the remainder of 2015 will continue to be challenging.

With regard to our Industrial and Process segments, growth rates by region were relatively unchanged in the second quarter compared to the first quarter. The exception is our Industrial segment in Asia Pacific which grew at a double-digit pace. At this point, we don't feel this is a resurgence but rather a reversion to the mean.

Industrial Asia Pacific outperformed in Q2 but had underperformed in Q1. Growth in production levels throughout the region remained relatively disappointing. We are seeing some decent project activity, but it's based on general industrial automation and efficiency gains, rather than macro driven growth.

Looking at the overall EMEA regions, similar to last quarter, sales from the developed markets of EMEA were strong with low-double-digit growth. We also achieved growth in Central Eastern Europe and Africa this quarter.

However, sales in Russia were half of what they were a year ago, and the Middle East was down high-single digits, offsetting much of the strong performance in the West. Before moving on to our outlook for the second half, I want to discuss profitability for the second quarter and update you on our oil and natural gas initiatives.

On the operating earnings line, foreign currency was a $9 million drag this quarter, and we had incremental spending on regional and product growth initiatives of $1 million. But we benefited from $2 million in operating earnings from acquired operations.

The end result is an adjusted improvement in operating earnings on an organic constant currency basis of $6 million. Off a very low organic growth rate, we were able to achieve better than 50% incremental margins. This is in contrast to our experience in the first quarter where we had incremental margins well below our historic rate.

The key difference was that the first quarter had a significant portion of its growth from the Contractor segment. Much of that was from growth in the home center channel where we have lower gross margins. We were also missing growth in the regions outside of the U.S. where we get higher margins.

In the second quarter, home center sales were flat, and we saw a higher level of growth on Asia Pacific. These two items drove our improved incremental margins in the second quarter. To underscore the earnings per share on an apples-to-apples basis for Q2, I want to repeat a couple of numbers that Caroline shared with you a few minutes ago.

We reported adjusted earnings per share in the quarter of $1.05 which can be found in a table on the fourth page of our press release in slide 5 of the deck. It removes the impact of the liquid finishing business. In addition to that, you need to remove $0.15 that we received as a benefit from the one-time tax items and $0.02 from acquisitions.

Going the other direction, unfavorable currency with a $0.10 drag in the quarter and we had $0.01 of incremental expense for regional and product growth initiatives. If you net those items, earnings would have been $0.99 per diluted share. This compares with adjusted earnings per share of $0.89 for the same period at 2014.

Moving on to Oil and Natural Gas, less than 5% of our sales worldwide come directly from the Oil and Natural Gas end market and a majority of those sales are via the acquisition of Alco and High Pressure Equipment late last year and early this year. These businesses are feeling the impact of the cyclical downturn.

When comparing performance of the businesses against their first half of 2014 before we own them, shipments are off in the high-single-digit to low-double-digit range. On the top line, this performance is macro-driven and we believe not a long-term trend.

We bought these businesses for three primary reasons, all of which are for the long term, the products, end market and opportunities to improve profitability. The piece is intact and we're believers that Oil and Natural Gas will be strong over the next couple of decades. We're in a cycle and the market will move up again.

Regarding profitability, we continue to be very positive about the long-term improvement potential. Both Alco and High Pressure are strong businesses that we're running to constrained capital environment, outsourcing was common and their manufacturing technology at least a couple of generations behind.

We have approved the number of new technology investments for these businesses and we will begin to bring this online late this year and into next year helping cost, quality and delivery. Further, we're looking to consolidate the Alco footprint into a single location which we hope to accomplish in 2016.

In short, we continue to find synergies and are optimistic that we're in a position to attain our line and our shareholders' capital. We're pushing forward with the spending on improvement plans despite the weak top line, to be positioned to capture more profitability by the time the market turns.

Our organic oil and natural gas initiative is also moving ahead with our first internally developed product line, chemical injection pumps, being released for sale this summer. We believe that our new product is differentiated and is in a good position to gain acceptance. Like any organic growth initiative, it will take time to get a foothold.

We've already invested in a commercial team which is in place and ready to start selling. Moving on to the outlook. Our thesis for the year remains intact, mid-single-digit organic sales growth on a constant currency basis for the full-year 2015, with growth from all reportable segments and regions.

Our Contractor business should achieve double-digit growth for the year. The Process and Industrial Americas businesses are looking at mid-single-digit growth. The Industrial business in the U.S. is running slightly behind that pace today, so there is some downside risk.

In the Contractor business, while there's enough buffer in the year-to-date numbers that we're confident in the full-year double-digit outlook, the team is optimistic that they can also achieve double-digit growth within the second half.

The reported financial results and outlook of some of our big paint store partners last week would indicate there's some risk to the second half view, though. Paint volumes appear to be growing at a low- to mid-single-digit pace. Our team believes Contractor can outgrow the market as they have for several years.

The partner performance does indicate that the risk profile has grown in recent months. Our EMEA region is flat year-to-date, with strong growth in the West being wiped out by significant declines in Russia and modest declines in the Middle East.

As we look at the comps in Russia through the rest of the year, as well as recent bookings trends, the third quarter appears to be another quarter where Russia's sales will be down nearly half. Comps begin to moderate as we exit the year, although we expect a double-digit sales decline in Russia in the fourth quarter as well.

As such, we're keeping our outlook for low-single-digit growth in the region for 2015. In Asia Pacific, demand continues to be spotty and heavily reliant on project activity. While the second quarter was a strong mid-single-digit performance, our year-to-date sales are still down slightly.

We expect to end the third quarter in positive territory and showing full year low-single-digit growth for the region. In summary, the underlying business fundamentals remain sound. Pricing is holding and our factories are performing. We're staying in the course with our strategies and investments.

Couple of final comments, first, regarding capital allocation. Caroline noted that during the first quarter we entered into a short-dated accelerated share repurchase program. Don't view this as a significant change in our capital allocation strategy. We're still focused on growing via acquisition and continue to work our pipeline.

A couple of small deals closed in the quarter, but we continue to look for larger transaction opportunities. As has been noted by most peers in our space, multiples are high. We're maintaining our discipline and we'll pull the trigger on the right opportunities at the right valuation.

Regarding share repurchases, we anticipate continuing to reduce our share count. Our priority though is to continue to drive the top and bottom line via organic growth and acquisitions. We've deployed nearly $190 million year-to-date and $370 million in the last 18 months on acquisitions.

During that same period, we've repurchased about 270 million in Graco shares, net of shares issued. Before turning it over for questions, I can't let this call end today without recognizing the man sitting across the table for EMEA, our CFO, Jim Graner. I've been the beneficiary of his counsel everyday during the eight years that I've been CEO.

Jim is an outstanding business person with a quick mind and his leadership skills are outstanding. Jim always puts the shareholder interest first and has been a tireless champion of ROI and fact-based decision making. Everyone in the Graco organization has a deep respect for the value Jim has brought to the company.

While not so young in years, Jim remains young in mind and body. And on behalf of the shareholders, board of directors, and all the employees at Graco, I thank Jim for his service and wish him well in his what I know will be a very active and robust retirement. With that, operator, we're ready for questions..

Thank you. The question-and-answer session will begin at this time. [Operator Instructions] And our first question comes from Joe Ritchie with Goldman Sachs & Co..

Thank you. Good morning, everyone..

Good morning..

Hey, Joe..

Jim, congratulations. It's been a pleasure and I also want to say congratulations to Christian..

Thank you..

Thank you..

I guess my first quick question, maybe going back to some of your comments, Pat. You talked about paint volume growing, the trends decelerating a little bit here and then growing at the low to mid-single digit at least the market rate growing at that pace.

Can you talk us through a little bit what's happening there? Is the end market just starting to slow down a little bit? Is there any excess inventory in the channel? What can you tell us about that dynamic?.

So from a natural paint dynamic, you're probably better off listening to the commentary from the people that are selling paint. They did make some comments about projects being behind due to some weather and some other things. But from our view point, we got a good product line-up. We got good programs for the second half.

Housing market in our view is still in the middle of a nice recovery. Some of the data points you're seeing out there on home sales and pricing is very positive. And hopefully, they'll work hard to get jobs finished in the second half of the year, and they'll need equipment to do that.

But our team thinks that we're going to continue to perform well and is optimistic that we can have second half that has double-digit growth in Contractor North America..

Okay..

Our channel partners on point-of-sale information that we've got continue to show robust out-the-door sales, double-digit kind of category, and there are no concerns over inventory levels in the channel..

Okay. That's good to know. And I saw – it was interesting to hear. Pat, you mentioned that Western Europe was up double digits. I would imagine it's been a while since that's occurred. But I'm curious to hear some thoughts there, what you're seeing in that end market specifically..

It's interesting. If you take a look across our business units, Western Europe has been performing really well. I'm certainly going to give some credit to the team, and I'm sure there's some impact on some of the new products that we've launched, but it's been surprisingly strong.

Unfortunately, it's just being wiped out by what's happening in Russia and the Middle East. I don't have any particular color for you there other than Western European market seems to be performing better than what you would expect looking at GDP and construction growth rates. I don't really know why..

Okay. All right. That's fair enough. Maybe one last question. I guess going back to incremental margins, and we know going into the year, we expect that something significantly less just given the incremental investments that you're making in oil and gas and other areas.

I guess as we think through the second half of the year, is it still your expectation that there's going to be incremental investment of roughly, I think, $7 million for all of 2015, and how do you think about the incremental margins across the business in the second half?.

Joe, this is Christian. We're taking another look at that incremental investment. And you're right. We did say $7 million last quarter. It looks like it's going to be $5 million to $6 million right now for the full year. So, it is pulling back just a touch. It's frankly a rounding error when we're talking about that magnitude of money.

So, it's not a reflection of us pulling back at all on the spending side. On the incremental portion of it, as you know, there's a big headwind on the FX side. Pat talked about the fact that there's a favorable mix in the second quarter compared to what we had in the first quarter.

I think we're probably going to see that moderate as we get in the second half, so the incremental certainly are probably going to pull back somewhat from where we were in the second quarter..

Okay. That's helpful, guys. Congratulations again. And I'll get back in queue..

All right. Thanks..

And our next question comes from Matthew McConnell with RBC Capital Markets..

Thank you. Good morning and congrats on a good quarter..

Thanks..

Congrats also – I want to echo the comments. Jim and Christian, congrats to both of you guys..

Thanks, Matt..

So, just to follow-up real quick on the incremental – very strong organic incremental this quarter, and I think you mentioned mix was going to maybe normalize a bit in the back half.

Does that mean APAC slows down? Or what else would be affecting the organic incremental in the back half of the year?.

Yeah. So, we take a look at it and our expectation is for Contractor to be better in the back half of the year. And Contractor has got slightly less margins than our Industrial business. So, that's likely to be part of the story..

Okay. Great. Thanks. And I know you've gotten a bunch of questions especially last quarter about price.

And it seems like everything is on track there, but are you still getting your usual point or two of price, or is currency having any impact on your ability to get price realization?.

Yeah. No, pricing has been fine. It's held up well really around the world and across product lines. Again, some of the movement that you see in terms of flow-through margin from quarter-to-quarter really is mix-dependent.

But the underlying fundamentals of the business from both price and even our factory performance have been really sound, I'd say, here this year..

Okay. Great..

When we measure price, we measure it in the currency of sale..

Yeah..

But we are getting the prices in euro and British pound and those other currencies that are under some relative pressure versus the U.S. dollar..

Okay. Great. And maybe one last one on cash conversion. I know it's been a bit slow and there's some seasonality to that.

But anything you're seeing on inventory or receivable levels, why those might be up a little bit?.

Basically, we think that reflects just normal seasonal growth, as well as some improvements in service levels..

Okay. Thank you very much..

And our next question comes from Joseph Radigan with KeyBanc Capital Markets..

Good morning. This is Shane Rourke on for Joe. Thanks for taking the call. I was wondering if you could give some color on the order trends you saw in the quarter, how the tempo went sort of exiting June and maybe what you're seeing so far in July..

So, this is Jim. Relative to looking at the short term for the third quarter, we did end the quarter with about $23 million in more backlog than we had at the quarter end period in 2014. About half of that is from acquired businesses, and the other half is from our Industrial segment which we feel good about.

Those orders should ship mostly in the third quarter. Also looking at our order rate in first three weeks of July. The percentage increase versus 2014 is the same as it was for the second quarter of the year. So, again we feel good about the near term revenue outlook..

Okay. That's helpful. And maybe just one more in the Contractor segment, I think you mentioned sales of the new home center product is about flat.

Is there any commentary you can add on sell-through and sort of what you're seeing in demand kind in that channel?.

Yeah. Sell-through on the home center during the quarter was the sale out-the-door at the home center was fine. It was our total sales into the home center that were flat but again reflective of some pretty big numbers in the second quarter or last year as we have launched some of our new entry level product.

So we don't think there's anything to miss there and should expect to see some growth as we move forward to the second half again..

Okay. Thanks a lot..

Our next question comes from Kevin Maczka with BB&T Capital Markets..

Thanks. Good morning..

Good morning..

Good morning, Kevin..

Can I just ask the margin question on Industrial. I don't know if sequential is the right way to look at this or not, but you added about $10 million of sales there and about $8 million of EBIT.

Can you just talk about that, was there some unique mix that was unfavorable in Q1 and more favorable in Q2? What drove that strong sequential incremental?.

Yeah. It is a mix shift that's happening. As we talked about, we weren't getting a lot of regional growth in Q1. We got better growth out of Asia Pacific in Q2. We called out in Q1 the fact that regional mix was having an impact on the business.

And that going back a little bit more to your – what we would consider normalized set number, we saw a bounce back in Q2..

Okay. Shifting gears, if you look at the regional commentary, it seems like there's a view that Asia is getting – or excuse me, EMEA maybe is getting a little bit better, Asia maybe softening a bit. It looks like your Process business kind of jives with that, with EMEA up, Asia down, but Industrial was the opposite.

Can you just talk a little bit about what are some of the drivers there that would drive EMEA down in Industrial, but up in Process and up in Asia and down in Process?.

So my view is, is that – so, first of all, cutting it that fine gets difficult. You know all the different end markets our Industrial and Process businesses are in. That would be a pretty complicated analysis to try to figure that out. My view is that Asia and Europe are both pretty much performing in aggregate as we expected.

We really haven't changed our outlook on either of those regions as we've moved through the year here, and we're not choosing to move it going into the second half. So, you can see things going up and down.

But again, I think from an end market perspective between Process and Industrial, trying to make any real observations out of that difference in rate I think is probably not meaningful at this point..

Kevin, I think if you take a look at our order rates, they are more consistent than our billings.

We had some shipments deferred, I will say, in Asia Pacific from the first quarter into the second quarter due to the dock strike and our creation of our warehouse over there, so Pat's comments earlier about the second quarter Asia Pacific getting us to a more normalized year-to-date number..

Yes. Okay. Got it. And then just finally, Pat, you've kept that same top line outlook all year. I think you made mention of maybe some areas of risk to that forecast. I'm wondering if you can just quickly revisit that. I think you mentioned Contractor perhaps not double-digit in the second half would be one area of potential.

What were the others?.

Yeah. The other was our Industrial business is running slight – in the Americas is running slightly behind our – the mid-single digits that we expected to achieve. So, there could be a little bit or risk there. But generally, we feel pretty good about where our outlooks at and didn't feel the need to do anything with it..

Well, your outlook for mid-single digit certainly seems better than most industrials right now, so that's good to know. Okay. That's all I had. Thank you..

Our next question comes from Liam Burke with Wunderlich Securities..

Thank you. Pat, you mentioned in your comments that you had developed in-house your own oil and gas product.

In terms of new product development, is there any area that you're concentrating on this year, or is it your standard across the board?.

Yeah. It's our standard across the board. The way we're organized by business unit, each one of our business units – not the reporting segments, but even the business units within them have their own engineering teams.

And so, we're launching and we have five-year product plans in each one of those business units, and we're launching products on a regular basis. So, the oil and gas was a new investment for us, and we started adding engineers and ramping up that team hear a year and a half ago or whatever it was.

But beyond that, our tempo should be pretty consistent in the rest of the businesses..

Okay. Thank you. And, Christian, I know this is semantics, but in Caroline's prepared comments, she mentioned $270 million in net debt.

Is that net debt, or is that a gross number?.

That's a net number. So, there's a cash of $40 million, and there was long-term debt of $310 million..

$310 million..

Yes..

Thank you..

[Operator Instructions] And we'll take our next question from Walter Liptak with Global Hunter Securities..

Thanks. Good morning, guys, and congratulations, Jim and Christian. I wanted to ask kind of a follow-on to the way that you phrased it with that risk with the low single-digit in Industrial. I think your comments were kind of that risk because of China that maybe that's not macro-driven and in the USA.

And I wonder in both of those regions what the trends were during the quarter, and are you seeing any projects, especially in the U.S.

getting pushed out to the right just because of, I guess, general slowing or slowing in oil and gas markets?.

So let's go back to my risk commentary. Maybe I didn't do a good job communicating. I really only pointed out two things. I pointed out that our Industrial business in the U.S. is running slightly below the pace that we need to hit what we think our expectation is.

So just the fact that it's running a little bit behind of where we're going to end up, we thought we'd point out that there's a little bit of risk there. And then on the Contractor side, it was just some commentary from the American paint store partners regarding the paint and then what our team thinks they're going to do in the second half.

Other than that, in terms of the regions and Industrial and Europe and Asia and everywhere else, we're sticking with the same outlook that we've given since the beginning of the year, and we feel pretty good that we're going to achieve it..

Okay. Fair enough. It sounds that like the Industrial, which was strong in China, that in the third quarter, you wouldn't expect that growth rate sustainable, that it might have been one project or a couple of projects.

Is that right?.

No. Really, what we're saying is the first quarter was weaker than we thought it should have been, and the second quarter was maybe stronger. Jim referred to some shipment issues. For the year, they're more around that flat kind of a number. We do expect to end up by the end of the year, but it's going to be noisy.

If you're looking for real consistency coming out of Asia Pacific quarter-to-quarter, I don't think you're going to see that. I think you're going to see some jumping around. But again, we don't have a negative outlook for the second half. I'd say we're slightly positive compared to the first half..

Okay. Fair enough.

And then when they ask about the management change in China contractor, what was behind that? I think we've talked on conference calls before about your China strategy in that you want to grow despite the macro trends, but was there a change now, the strategy along with management, and maybe a little color on this?.

It's a big market and we think that there's a lot more opportunity than we're capturing over there. And of course, one of the key strategies for Graco is to build our channel and to drive end-user conversion. And we really need a team in China that can do that.

So last year, we changed out – China, the leader for our contractor business in the country of China. And now more recently, we just added the director for Asia Pacific who will be the boss of that person, plus lead the other areas of contractor in Asia. And of course – and I can't believe he just started a week or so ago.

And so he's going to have to have some time to get his feet on the ground to decide from a strategic perspective what change we want to make. So we indicated that probably it would remain challenging through the end of the year.

I expect to give him some time to figure out what he wants to do, and then going to the next year, we'll probably be able to provide some clarity. But ultimately, we need to drive channel and we need to drive end-user conversion and that's what we intend to do..

Okay. Yeah.

Understanding that, any comments on the macro trends there?.

Well, they're not great, but when you go over there and you look, there's stuff being built everywhere. So, if you just sit back and you wait for orders to come in, it's going to be tough right now.

But we look at it as all the untapped potentials, if people were painting with equipment even in a down market, there's lots of pieces of equipment that can be sold. So, again, that's our challenge. We don't focus so much on what's happening with the construction market in the CED and the emerging markets.

We really have to focus on our own execution and what we can do to drive people to use equipment..

Okay. Understood. All right. Thank you..

If there are no further questions, I will now turn the conference over to Pat McHale..

All right. It looks like I have a surprise comment here from Mr. Jim Graner across the table. Jim, go ahead..

Well, I'd just like to thank Pat for the positive comments and a great ride for me, hopefully a great ride for the shareholders, and I'd like to be invited back the next time EPS, there's $2.90 per quarter..

All right. Very good. Well, thank you all for joining us, and have a good day..

This concludes our conference for today. Thank you all for participating and have a nice day. All parties may now disconnect..