Good morning, and welcome to the Third 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 263158. The replay will be available through October 26, 2015. Graco has additional information available on a PowerPoint slide presentation which is available as part of the webcast player. At the request of the company we will open the conference up 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 Item 1A of the company's 2014 annual report on Form 10-K, and then 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. I will now turn the conference over to Caroline Chambers, Vice President, Corporate Controller and Information Systems. Please go ahead.

Good morning, everyone. I'm here this morning with Pat McHale and Christian Rothe. Our conference call slides and our third quarter Form 10-Q have been posted on our website. Last evening Graco reported third quarter sales of $319 million, net earnings of $51 million and diluted earnings per share of $0.86. I'll take a moment to identify individual items that impacted our reported figures so that we can get to organic numbers on a constant currency basis. Foreign exchange continues to be a significant headwind again this quarter and the effect of foreign translation rates has reduced sales by $16 million and reduced net income by $6 million or $0.10 per diluted share. As identified in earlier quarters, we believe the full year effect of 2015 average currency translation rates, as compared to last year, will be a headwind on sales of approximately 4% to 5% and 10% to 11% on net earrings as compared to 2014 sales and earnings. Acquisitions completed in the last 12 months increased sales in the third quarter by about $19 million and contributed $2 million to pre-tax operating earnings, or $0.02 per diluted share. A reconciliation of our operating earnings is included on page 10 of our slide deck. Year-to-date the effect of foreign exchange has been largely offset with favorable volume, price and lower factory costs. The effect of acquired businesses reduced operating margins by one percentage point and increases in unallocated corporate expenses and spending for regional and product expansion initiatives have also decreased operating margins by another percentage point. Results for the third quarter also include $2 million from post-closing price adjustments or $0.02 per diluted share related to the sale, in April of this year, of the Liquid Finishing businesses that were held separate. Our year-to-date results include after-tax gain…

Thank you. And we'll go first to Joe Ritchie with Goldman Sachs. Joseph Alfred Ritchie - Goldman Sachs & Co.: Thanks. Good morning, guys. Patrick J. McHale - President, Chief Executive Officer & Director: Good morning. Joseph Alfred Ritchie - Goldman Sachs & Co.: So, the growth in North America, specifically in Industrial North America was really strong, Pat. Especially relative to everything else we're seeing across our coverage. If you could just provide a little bit more color on what you're seeing there and what the trends are on Industrial North America, that'd be helpful. Patrick J. McHale - President, Chief Executive Officer & Director: Yes. You're saying "strong relative" and we don't get that excited about relative performance, but in general we still see opportunities. We're launching our new products across our business segments, the Automotive business has stayed reasonably strong, we're seeing activity in Aerospace. I'd say it's not a great demand environment but it's certainly not terrible and we continue to think that if we do things right, we've got an opportunity to grow here in North America Industrial. Joseph Alfred Ritchie - Goldman Sachs & Co.: And are there any specific end markets right now that are better than others? Are you seeing some strength in auto or what specifically is driving the strength? Patrick J. McHale - President, Chief Executive Officer & Director: Yes. I mentioned auto and aerospace are a couple of markets that have been reasonably good for us. Joseph Alfred Ritchie - Goldman Sachs & Co.: Okay. And I guess, as you head into next quarter, you mentioned the tough Process comp, clearly it's really tough comp versus 4Q of last year. Given organic growth started to turn negative in 3Q and it looks like trends may be getting a little…

And we'll go next to Mike Halloran with Robert Baird. Mike P. Halloran - Robert W. Baird & Co., Inc. (Broker): Morning, guys. So when you think about the core business as it stands today, it sounds like the message you're pushing is tough trends out there but there's some stability within your portfolio. Is that the message as you work into next quarter? Are there any end markets where you're actually seeing core deterioration as you work through the quarter into the fourth quarter or is the environment for you guys tough sledding but pretty stable overall? Patrick J. McHale - President, Chief Executive Officer & Director: Well we've got a little bit of pressure from oil and gas and that hits the new initiative that we've got and of course some of our other business segments have exposure there as well. But we've been pretty consistent all year in terms of our growth outlooks and, although, maybe we're a little bit towards the low end of the range, we're coming in the range and we're expecting that's going here continue through the end of the year. So no real surprises out there, not a great environment but we don't see the wheels falling off the wagon quite yet. Mike P. Halloran - Robert W. Baird & Co., Inc. (Broker): And how has the environment impacted the pipeline from a capital deployment perspective? Any change in the available properties out there or your ability to go after them? Patrick J. McHale - President, Chief Executive Officer & Director: Yes. From an M&A perspective I would say we haven't seen any significant change over what we've seen in the last couple of quarters. We don't see a lot of companies looking to sell during the tough times so it hasn't been a – I'd say a target rich environment for us. Mike P. Halloran - Robert W. Baird & Co., Inc. (Broker): Appreciate it.

And we'll go next to Matt McConnell with RBC Capital Markets.

Thanks. Good morning, guys. Patrick J. McHale - President, Chief Executive Officer & Director: Good morning.

So just a quick follow up on that last comment, people not looking to sell here. Does that mean that buybacks could remain more aggressive over the coming quarters or should we not read into it that way? Christian E. Rothe - Treasurer & Vice President: Yes. This is Christian. I'm not sure I'd read into it that way. As Pat said in his comments and consistent with what we've said frankly for a long time, we're in the optimistic mode. So as the market pulls back from time to time we use those opportunities to buy back shares. There's no specific objective today right now around how much we want to deploy and exactly what timeframe that will be in.

Okay. Thanks. And then following up on the comment about Contractor, sticking with that goal for double-digit growth in the second half of the year, is that based on factors you're seeing in the market for resi or non-resi construction activity? Or is that more specific to Graco? Patrick J. McHale - President, Chief Executive Officer & Director: No, it's a combination of both. We think the current environment is a good environment for us to operate in. It's the kind of environment where our shows are effective, contractors are willing to buy, our new products are interesting and people are willing to invest. So we generally think the end market is favorable and then our own performance of course across the board will drive that kind of a number for us if we do what we say we're going to do.

Okay. Great. And then following up on Joe's question earlier, just that 5% organic growth in Industrial. Certainly stronger than we would have expected based on the tone we've heard through earnings season from a lot of others so far. Any way you can give us a sense of how much of that is coming from market outgrowth or maybe just equipment upgrades to your products that aren't necessarily related to big capacity additions or some of the backlog you carried into the quarter or anything else that's contributing to that pretty strong number? Christian E. Rothe - Treasurer & Vice President: Hey, Matt. It's Christian. As Pat said, and we've called out a number of times, there's project activity that's going to move things around from quarter to quarter. So I wouldn't necessarily read a ton into any individual quarter for us. Look at it again over the longer term.

Okay. Thank you.

And we'll go next to Joe Radigan with KeyBanc.

Good morning, guys. First in Contractor, the growth you saw in the home center channel in the quarter, was there any benefit from stock in there or was that more of a reflection of what you're seeing in terms of sell-through? Patrick J. McHale - President, Chief Executive Officer & Director: No, there's a combination of sell-through and some stocking initiatives. With the end markets being strong, the retailers are looking at making sure they have product on the shelf to serve demand and that's been favorable for us as well.

Okay. And then you typically see some margin compression in Contractor in the fourth quarter. I think it's driven by just ramp costs of new product introductions. Do you expect that to be the case similarly this year? And how does the new product lineup compare year-over-year? Christian E. Rothe - Treasurer & Vice President: Joe, it's Christian. Yeah, absolutely, Q4 is always going to be the low point for the Contractor business on operating margins and we expect that that's going to be the same this Q4 as well. Pat's going to talk about the new products. Patrick J. McHale - President, Chief Executive Officer & Director: Yes, the Contractor division is very active in terms of their new product development launch schedule and we think that we've got a nice healthy launch coming for 2016.

Okay. And then if I could ask one more. Can you, Pat, update the progress at Alco and HiP? Are the new machine tools in place there? And I think the original acquisition accretion estimate was $0.13 to $0.15. How are you tracking, compared to that range? I'm assuming revenues have come in a little lighter, but have you been able to offset that with some additional cost take out? Patrick J. McHale - President, Chief Executive Officer & Director: Yes, revenue has come in lighter, I think we're looking at probably about $0.11 is where we'll end up versus that original estimate that we had. We've approved quite a bit of equipment and some other operational things that we're investing in. Those things haven't really come online yet and started to provide any significant benefits but I would expect that we should start to see that probably coming into the second half of next year.

Okay. Great. Thanks, guys.

And we'll go next to Kevin Maczka with BB&T Capital Markets. Kevin Richard Maczka - BB&T Capital Markets: Thanks. Good morning. Patrick J. McHale - President, Chief Executive Officer & Director: Good morning. Kevin Richard Maczka - BB&T Capital Markets: So Pat, on the new energy exposure you have can you give a little bit of an update there organically how those businesses are doing on the top line? Because those are not in your mid-single-digit organic forecast for this year, but they will next year. Patrick J. McHale - President, Chief Executive Officer & Director: Yes. That's correct. And I think we lap Alco here in the fourth quarter. But we're looking at teens kind of reduction in the top line in those businesses. Kevin Richard Maczka - BB&T Capital Markets: That's what you've seen so far and that looks like the trend that you would expect to continue? Patrick J. McHale - President, Chief Executive Officer & Director: Again, we're going through our first cycle here so I'm not going to pretend I'm an expert. You're probably going to get a lot better information from the people that have been in these businesses for a long time. But that's what we're seeing and that's sort of what I'm expecting going forward. Some of the information coming out from other companies recently has showed some deceleration so I'm not sure if we're going to get wrapped up in that or not. But on the flip side of that, now we've launched our organic products, our first batch of organic products here and we've got some more things coming out. So there's some potential for us, I think, to do better than just what the market's going to give us as we move into 2016. Kevin Richard Maczka - BB&T…

And we'll go next to Liam Burke with Wunderlich.

Thank you. Pat, the dollar continues to be strong vis-a-vis overseas currencies. Are you seeing any stepped up local competition in any of your overseas markets with the stronger dollar? Patrick J. McHale - President, Chief Executive Officer & Director: No. It hasn't really been a significant issue for us. We were concerned obviously coming into this year that that would be the case in some of the markets but I would say in general we haven't spent a lot of time talking about that or dealing with that around the world.

Okay. And you talked about new product introductions in the Contractor segment. What does the new product pipeline look like outside of Contractor? Patrick J. McHale - President, Chief Executive Officer & Director: It looks really healthy across the board. Of course where we're trying to build a good new product pipeline is in the acquired businesses. And so we're taking that regular Graco new product development process and the five year product plan and we're starting to implement those in the acquisitions. So I'm very pleased with where we're at and where we'll be next year in terms of the new technologies and new products that we're bringing to the market.

Great. Thank you, Pat.

And we'll go next to Charley Brady with SunTrust Robinson Humphrey.

Good morning, guys. How are you? Patrick J. McHale - President, Chief Executive Officer & Director: How are you?

Good. Thanks. Pat, just quickly on Contractor. Can you talk about the mix, sort of the low, medium, high mix, has that started yet to start skewing towards the higher margin product? Are we still kind of where we've been for the past basically 12 months, 15 months or so? Patrick J. McHale - President, Chief Executive Officer & Director: So as Christian tried to communicate, apparently ineffectively, now he's giving me a bad look. Anyway what you're seeing in Contractor is a masking of the sales of the larger units within the pro paint side, so the pro paint business on the non-res side really started to get better for us a while ago and the mix within the pro paint channel has been looking better for us, but the home center growth has been really strong and so the home center margins, when you take a look at the segment in total, the home center margins are skewing that down. We've also had some new product launches over the course of the last 12 months to 24 months on the small end of product line on the pro side that have also been pretty successful so it's hard for you to look at the overall number and see it, but yes the large units have been increasing nicely as new resis come back.

Thanks. That's helpful. And just in terms, I guess, a follow up on the new products, are there more of a higher-margin products coming out from the new product pipeline and Contractor or lower-end still? Christian E. Rothe - Treasurer & Vice President: The new products that are coming out in the Contractor business in the last, let's call it 24 months, it's actually been across a range. They've developed a marketing program that's kind of a "good, better, best" and it's really focused on trying to get people into that better and best category. And it actually looks like it's being quite effective so I'm pretty happy with that performance thus far. So it's not really on low-end or high-end, it's actually across the board.

Okay. And then just looking back to Industrial again, and I know you've talked about the end markets, but specifically on Europe, if you back up the currency, it's a plus 8% which aside from the fact that everyone's talking down Industrials, Europe in and of itself has kind of softened. Can you focus just on Europe and where you're seeing the strength in there? Patrick J. McHale - President, Chief Executive Officer & Director: Yes. First of all, are you talking geographically or by the product mix?

Well, I guess I'm looking at 8% growth in Industrials in Europe which is surprisingly strong. I'm just trying to understand, wrap my head around where you're seeing that, how that's happening? Christian E. Rothe - Treasurer & Vice President: Yes. Charlie, it's Christian again. Similar to what we were talking about what the – in general, when you're looking at individual quarters there are projects that can move from quarter to quarter and right now year-to-date in the year we're 2% up organically in the Industrial segment. So although this is an 8%, that number is outside of what we've had for a trend thus far this year. Again we're happy with the 8%, there's no doubt about it, but, as you look at the year-to-date number, that's probably a better indicator.

Okay. Great. Thanks.

And we'll take our next question from Matt Summerville with Alembic Global Advisors.

Hey. Morning. A couple questions, you've been talking a quarter or two or three about the challenges you've had in conversion, specifically speaking about the Contractor segment, away from brush and roller to spray. What was sort of the genesis of that? And I know you've made some management changes; what are your expectations that will come out of the changes you've made? And when will we be able to see some tangible evidence that you've made the right changes? Patrick J. McHale - President, Chief Executive Officer & Director: So let's talk a little bit about conversion in general. Conversion in general really is a positive dynamic for us when labor rates are increasing. So that's one positive for us. So we talked about conversion, we talk about emerging markets. Where labor rates get to be $5 and $6 an hour it becomes pretty easy math to go to spray equipment. Our challenge of course is always where the labor markets are much lower than that with painters maybe making $1 or $2 an hour. The second thing that will drive in those kinds of situations is when they have a good book of business. So when the economy's strong and they're trying to get jobs done, and it could be driven by the construction markets or could be event driven in terms of World Cups or things like that, but when they've got to get jobs done in a hurry even when labor rates are low, that provides a good example, a good opportunity for us on the conversion front. So the challenge we've had of course, Southern Europe's starting to come back now, but that's been very soft from a construction perspective and has made the conversion work by our team over there more difficult. You may be referring more specifically to some of the problems that we've seen in China. China's had a booming construction market. And although the labor rates are low for painters there, we feel like there's a better opportunity to convert than we've been doing. And that's really where we've had our leadership challenge and we've made a leadership change. I'm going to say give them 12 months. This time next year hopefully we're seeing that some of the changes that the new leader put in place are starting to actually show up in our results. I'd really hate to say that it's going to be sooner than that, just based upon my experience and how long it takes to get tactics implemented at the field level.

Got it. And then just a couple more, can you comment on – over the last even three months to six months, even going back into the second quarter, if you've seen any difference and maybe you can even just describe the linearity or lack thereof you've seen in weekly order rates in both your Industrial and Process reportable segments? Patrick J. McHale - President, Chief Executive Officer & Director: So we typically don't break out the order rates by segments. I'll tell you though, specific to your linearity comment, it's probably been a nine-month period where we've had spottiness in orders from week to week, but the months always seem to turn out fine. The general trends are okay, but any individual week is probably not a great indicator for us. And that's just the environment we're in.

And then lastly just with respect to pricing year to date and what you expect to realize for the full year 2015 in terms of pricing? And if any expectation should be reset otherwise for 2016 across the company? Patrick J. McHale - President, Chief Executive Officer & Director: I think our pricing model is still well intact. We're getting pricing this year in that kind of 1.5% to 2% range, next year – that's a realized pricing number – and next year we're looking at the same type of number.

Great. Thanks, Pat. Thanks, Christian.

We'll take our next question from Walter Liptak with Seaport Global.

Thanks. Good morning, guys. Wanted to ask about Process in some of those new businesses realizing it's on a tough comp. But some of those end markets I think of as being end markets that are growing, autos still going pretty strong, service garages, waste water, et cetera. I wonder if you could give us a little bit more color on what's happening there? My understanding is that oil and gas is still pretty small for you, as well as mining. Is there some dynamic going on? What should be strong, like auto related? Patrick J. McHale - President, Chief Executive Officer & Director: No. We are seeing opportunities within Process. Sanitary has been a nice opportunity for us, as well and that's in our Process segment. But on the Process side we're also going to have in addition to our oil and gas exposure with the acquired businesses, which is yes, frankly small. We have oil and gas exposure in our core product lines as well, of course. And then mining is a significant drag on the Process segment as well, and has been for some time. So they've got a couple end markets that aren't so good. They've got some end market opportunities that are pretty good, and it's rolling up to what it's rolling up to right now.

Okay. My understanding is in O&G you've got some new products that you're commercializing and made some investments. I wonder how that commercialization process is going with this really tough kind of upstream spending environment? Patrick J. McHale - President, Chief Executive Officer & Director: So, we have been able to get distributors signed up for our new product line, which is a positive. We had a target for distribution to get set up here this year on our organic effort, on oil and gas, and we're going to hit that target. It's probably too early to say whether the revenue targets are going to get met or not, but there's nothing here in the first couple of months after launch that would indicate to us that we're not going to have an opportunity to be successful.

Okay. Great. Then if I can ask a follow-up just on expenses, the two expenses I think about that were incremental this year were the centralized distribution center and the new products, just stepping things up there. I wonder if – are we tailing off on costs? Or are they still going to be higher in the fourth quarter? Is the DC complete now?

No. There's still some activity going on with the new central warehouse and basically what we're seeing for the full year will be $7 million to $8 million above last year's expense. Again, a part of that is driven by our pension and stock comp as well. The project initiatives, some of them are starting to lap and not be incremental but we might see another million or so next quarter.

Okay. Great. And then are you seeing benefits yet that you can quantify from the new products? Patrick J. McHale - President, Chief Executive Officer & Director: Well, so if you're calling out the incremental spend on new products most of those are coming out of our new initiatives. And I'd say that it's too early to say that we're seeing a benefit, but we still expect that we will. If you're talking about our standard $50 million spend on new products, we track it very carefully with each division every six months and we're very happy with the performance in general of our $50 million spend on new product development.

Okay. Fair enough. Thank you.

And there are no further questions at this time. I would now like to turn the conference back over to Pat McHale. Patrick J. McHale - President, Chief Executive Officer & Director: All right. Well thank you for joining us this morning and have a good rest of your day.

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