Welcome!

News Feed Item

Grainger Reports Record Results For The 2014 First Quarter

Reiterates 2014 Sales and EPS Guidance

CHICAGO, April 16, 2014 /PRNewswire/ -- Grainger (NYSE: GWW) today reported results for the 2014 first quarter ended March 31, 2014.  Sales of $2.4 billion increased 5 percent versus $2.3 billion in the first quarter of 2013.  There were 63 selling days in the 2014 first quarter, the same number as the 2013 first quarter.  Net earnings for the quarter increased 2 percent to $217 million versus $212 million in 2013.  Earnings per share of $3.07 increased 4 percent versus $2.94 in 2013. 

"We are encouraged by the strong finish in March and our solid operating performance in a quarter that was marked by several disruptions from severe winter weather in January and February," said Chairman, President and Chief Executive Officer Jim Ryan.  Ryan added, "We are particularly encouraged by the performance of our U.S. business, which was driven by continued market share gains with large customers.  The performance of our online businesses in Japan and the United States also continues to be strong.  We are facing near-term economic and foreign exchange headwinds in Canada and are unhappy with the current performance.  However, we will continue to invest in the Canadian infrastructure as we are very optimistic about the business over the long term," Ryan concluded. 

The company also reiterated its full year 2014 guidance of 5 to 9 percent sales growth and earnings per share of $12.10 to $12.85.       

Company
Sales increased 5 percent in the 2014 first quarter versus the prior year.  Results for the quarter included 2 percentage points from acquisitions, net of dispositions, and a 2 percentage points reduction from foreign exchange.  Excluding acquisitions and foreign exchange, organic sales increased 5 percent driven by 4 percentage points from volume, 1 percentage point from price and 1 percentage point from higher sales of seasonal products, partially offset by a 1 percentage point decline from business disruptions due to the extreme weather that closed some customer and Grainger facilities across parts of North America during the months of January and February.       

The company's gross profit margin for the quarter decreased 0.1 percentage point versus the prior year to 45.1 percent driven by lower gross margins from the newly acquired businesses.  Company operating earnings of $354 million for the 2014 first quarter increased 3 percent versus the 2013 quarter. This increase was driven by the 5 percent sales growth, partially offset by lower gross profit margins. Operating expenses also increased 5 percent. The increase in operating expenses was driven by $31 million in incremental growth and infrastructure spending as well as incremental expenses from the acquired businesses.  

The company has two reportable business segments, the United States and Canada, which represented approximately 89 percent of company sales for the quarter.  The remaining operating units located primarily in Asia, Europe, and Latin America are included in Other Businesses and are not reportable segments. 

United States
Sales for the United States segment increased 7 percent in the 2014 first quarter versus the prior year.  Results for the quarter included 2 percentage points from acquisitions, net of dispositions.  Excluding acquisitions, organic sales increased 5 percent driven by 4 percentage points from volume, 1 percentage point from price and 1 percentage point from higher sales of seasonal products, partially offset by a 1 percentage point decline due to the extreme weather in January and February.  Strong sales growth to customers in the Heavy and Light Manufacturing, Natural Resources, Retail and Commercial customer end markets contributed to the sales increase in the quarter. 

Operating earnings for the United States segment increased 7 percent in the quarter driven by the 7 percent sales growth and positive expense leverage, partially offset by lower gross profit margins.  Gross profit margins for the quarter decreased 0.3 percentage point driven by lower gross margins from the newly acquired businesses and faster growth with lower margin customers. 

Canada
First quarter 2014 sales for Acklands-Grainger decreased 10 percent in U.S. dollars and were down 2 percent in local currency.  The 2 percent sales decline consisted of a 4 percentage points decline from volume partially offset by a 2 percentage points benefit from the timing of Good Friday, which occurred in March of 2013 but will fall in April this year.  Growth during the quarter to customers in the Utilities, Forestry, Transportation and Reseller end markets was more than offset by declines in the Construction, Light and Heavy Manufacturing, Mining, Retail, Government, and Oil and Gas customer end markets.  Approximately two-thirds of revenue is generated in the western provinces with a concentration in natural resources.  The business in Canada continues to be negatively affected by a weak macroeconomic environment, unfavorable currency exchange, lower commodity prices and a reduction of Canadian exports. 

Operating earnings in Canada decreased 35 percent in the 2014 first quarter and were down 29 percent in local currency.  The 35 percent decline was primarily driven by the 10 percent sales decline, a lower gross profit margin and negative expense leverage.  The gross profit margin in Canada declined 0.2 percentage point versus the prior year primarily due to higher freight costs and the effect of unfavorable foreign exchange from products sourced from the United States.  The increase in operating expenses was primarily driven by higher payroll, benefits and severance costs along with incremental IT spending. 

Other Businesses
Sales for the Other Businesses, which includes operations primarily in Asia, Europe and Latin America, increased 11 percent for the 2014 first quarter versus the prior year.  This performance consisted of 18 percentage points of growth from volume and price, partially offset by a 7 percentage points decline from unfavorable foreign exchange.  Sales growth in the Other Businesses was driven by Zoro Tools and the businesses in Mexico and Japan.  Strong sales growth in Japan was partially offset by the weakness in the Japanese yen versus the U.S. dollar.

Operating earnings for the Other Businesses were $8 million in the 2014 first quarter, flat versus the prior year.  This performance included strong results from Zoro Tools, partially offset by lower performance from the businesses in Latin America and costs associated with evaluating the new online business outside of the United States. 

Other
Other income and expense was a net expense of $2.7 million in the 2014 first quarter versus $1.4 million in the 2013 first quarter.  For the quarter, the effective tax rate in 2014 was 37.7 percent versus 37.3 percent in 2013.  The increase was primarily due to more earnings in the United States versus other jurisdictions with lower tax rates.  The company is currently projecting an effective tax rate of 37.4 to 37.8 percent for the year 2014.

Cash Flow
Operating cash flow was $168 million in the 2014 first quarter versus $176 million in the 2013 first quarter.  The company used the cash generated during the quarter and cash on hand to invest in the business and return cash to shareholders through share repurchase and dividends.  Capital expenditures were $66 million in the 2014 first quarter versus $43 million in the first quarter of 2013.  In the 2014 first quarter, Grainger returned $215 million to shareholders through $65 million in dividends and $150 million to buy back 615,000 shares of stock. 

W.W. Grainger, Inc., with 2013 sales of $9.4 billion, is North America's leading broad line supplier of maintenance, repair and operating products, with operations in Asia, Europe and Latin America.

Visit www.grainger.com/investor to view information about the company, including a history of sales by segment and a podcast regarding 2014 first quarter results. The Grainger website also includes more information on Grainger's proven growth drivers, including product line expansion, sales force expansion, eCommerce and inventory services.

Forward-Looking Statements
This document contains forward-looking statements under the federal securities law.  Forward-looking statements relate to the company's expected future financial results and business plans, strategies and objectives and are not historical facts.  They are generally identified by qualifiers such as "plan", "earnings per share guidance", "sales guidance", "currently projecting", "working on extending", "to better position" or similar expressions.  There are risks and uncertainties, the outcome of which could cause the company's results to differ materially from what is projected.  The forward-looking statements should be read in conjunction with the company's most recent annual report, as well as the company's Form 10-K, Form 10-Q and other reports filed with the Securities & Exchange Commission, containing a discussion of the company's business and various factors that may affect it.

 


CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited)

(In thousands, except for per share amounts)



Three Months Ended March 31,


2014


2013

Net sales

$

2,385,627



$

2,280,435


Cost of merchandise sold

1,309,656



1,248,699


Gross profit

1,075,971



1,031,736


Warehousing, marketing and administrative expense

721,632



688,431


Operating earnings

354,339



343,305


Other income and (expense)




Interest income

640



898


Interest expense

(2,863)



(3,166)


Other non-operating income

(503)



887


Total other expense

(2,726)



(1,381)


Earnings before income taxes

351,613



341,924


Income taxes

132,558



127,397


Net earnings

219,055



214,527


Net earnings attributable to noncontrolling interest

2,402



2,689


Net earnings attributable to W.W. Grainger, Inc.

$

216,653



$

211,838


Earnings per share

  -Basic

$

3.11



$

2.99


  -Diluted

$

3.07



$

2.94


Average number of shares outstanding

  -Basic

68,700



69,562


  -Diluted

69,677



70,775






Diluted Earnings Per Share




Net earnings as reported

$

216,653



$

211,838


Earnings allocated to participating securities

(2,919)



(3,595)


Net earnings available to common shareholders

$

213,734



$

208,243


Weighted average shares adjusted for dilutive securities

69,677



70,775


Diluted earnings per share

$

3.07



$

2.94



 


SEGMENT RESULTS (Unaudited)

(In thousands of dollars)



Three Months Ended March 31,


2014


2013

Sales




United States

$

1,897,311



$

1,774,538


Canada

254,297



283,140


Other Businesses

274,906



247,874


Intersegment sales

(40,887)



(25,117)


Net sales to external customers

$

2,385,627



$

2,280,435






Operating earnings




United States

$

353,687



$

330,888


Canada

21,296



32,856


Other Businesses

8,475



8,251


Unallocated expense

(29,119)



(28,690)


Operating earnings

$

354,339



$

343,305






Company operating margin

14.9

%


15.1

%

ROIC* for Company

33.8

%


34.6

%

ROIC* for United States

51.0

%


51.5

%

ROIC* for Canada

14.2

%


22.2

%





*The GAAP financial statements are the source for all amounts used in the Return on Invested Capital (ROIC) calculation.  ROIC is calculated using operating earnings divided by net working assets (a 2-point average for the year-to-date).  Net working assets are working assets minus working liabilities defined as follows: working assets equal total assets less cash equivalents (2-point average of $274.5 million), deferred taxes, and investments in unconsolidated entities, plus the LIFO reserve (2-point average of $388.9 million).  Working liabilities are the sum of trade payables, accrued compensation and benefits, accrued contributions to employees' profit sharing plans, and accrued expenses.

 


CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

Preliminary

(In thousands of dollars)


Assets

March 31, 2014


December 31, 2013

Cash and cash equivalents

$

375,564



$

430,644


Accounts receivable – net

1,159,556



1,101,656


Inventories - net

1,266,460



1,305,520


Prepaid expenses and other assets

129,525



130,646


Deferred income taxes

64,559



75,819


Total current assets

2,995,664



3,044,285


Property, buildings and equipment – net

1,210,778



1,208,562


Deferred income taxes

31,543



16,209


Goodwill

522,063



525,467


Other assets and intangibles – net

474,181



471,805


Total assets

$

5,234,229



$

5,266,328


Liabilities and Shareholders' Equity




Short-term debt

$

104,167



$

66,857


Current maturities of long-term debt

32,465



30,429


Trade accounts payable

493,915



510,634


Accrued compensation and benefits

167,409



185,905


Accrued contributions to employees' profit sharing plans (1)

48,557



176,800


Accrued expenses

220,692



218,835


Income taxes payable (2)

98,932



6,330


Total current liabilities

1,166,137



1,195,790


Long-term debt

438,068



445,513


Deferred income taxes and tax uncertainties

114,812



113,585


Employment-related and other non-current liabilities

186,621



184,604


Shareholders' equity (3)

3,328,591



3,326,836


Total liabilities and shareholders' equity

$

5,234,229



$

5,266,328


 

(1)


Accrued contributions to employees' profit sharing plans decreased $128 million primarily due to the annual cash contributions to the profit sharing plan.

(2)


Income taxes payable increased $93 million primarily due to the timing of income tax payments.

(3)


Common stock outstanding as of March 31, 2014 was 68,430,856 shares as compared with 68,853,938 shares at December 31, 2013.

 


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

Preliminary

(In thousands of dollars)



Three Months Ended March 31,


2014


2013

Cash flows from operating activities:




Net earnings

$

219,055



$

214,527


Provision for losses on accounts receivable

2,413



1,496


Deferred income taxes and tax uncertainties

(2,671)



(1,000)


Depreciation and amortization

45,776



38,945


Stock-based compensation

11,262



11,547


Change in operating assets and liabilities – net of business

acquisitions and divestitures:




Accounts receivable

(78,676)



(101,803)


Inventories

30,608



60,122


Prepaid expenses and other assets

6,564



28,090


Trade accounts payable

(13,497)



8,672


Other current liabilities

(146,616)



(137,186)


Current income taxes payable

92,410



52,085


Employment-related and other non-current liabilities

1,177



5,620


Other – net

(287)



(4,698)


Net cash provided by operating activities

167,518



176,417


Cash flows from investing activities:




Additions to property, buildings and equipment

(65,664)



(42,962)


Proceeds from sale of property, buildings and equipment

462



1,573


Other – net

13,023



(89)


Net cash used in investing activities

(52,179)



(41,478)


Cash flows from financing activities:




Net increase (decrease) in short-term debt

38,508



(3,832)


Net (decrease) in long-term debt

(5,807)



(3,750)


Proceeds from stock options exercised

10,170



23,461


Excess tax benefits from stock-based compensation

6,807



12,650


Purchase of treasury stock

(150,553)



(69,797)


Cash dividends paid

(64,682)



(56,546)


Net cash used in financing activities

(165,557)



(97,814)


Exchange rate effect on cash and cash equivalents

(4,862)



(3,672)


Net change in cash and cash equivalents

(55,080)



33,453


Cash and cash equivalents at beginning of year

430,644



452,063


Cash and cash equivalents at end of period

$

375,564



$

485,516


 

SOURCE W.W. Grainger, Inc.

More Stories By PR Newswire

Copyright © 2007 PR Newswire. All rights reserved. Republication or redistribution of PRNewswire content is expressly prohibited without the prior written consent of PRNewswire. PRNewswire shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.

Latest Stories
DXWorldEXPO LLC announced today that ICC-USA, a computer systems integrator and server manufacturing company focused on developing products and product appliances, will exhibit at the 22nd International CloudEXPO | DXWorldEXPO. DXWordEXPO New York 2018, colocated with CloudEXPO New York 2018 will be held November 11-13, 2018, in New York City. ICC is a computer systems integrator and server manufacturing company focused on developing products and product appliances to meet a wide range of ...
Coca-Cola’s Google powered digital signage system lays the groundwork for a more valuable connection between Coke and its customers. Digital signs pair software with high-resolution displays so that a message can be changed instantly based on what the operator wants to communicate or sell. In their Day 3 Keynote at 21st Cloud Expo, Greg Chambers, Global Group Director, Digital Innovation, Coca-Cola, and Vidya Nagarajan, a Senior Product Manager at Google, discussed how from store operations and ...
Sanjeev Sharma Joins November 11-13, 2018 @DevOpsSummit at @CloudEXPO New York Faculty. Sanjeev Sharma is an internationally known DevOps and Cloud Transformation thought leader, technology executive, and author. Sanjeev's industry experience includes tenures as CTO, Technical Sales leader, and Cloud Architect leader. As an IBM Distinguished Engineer, Sanjeev is recognized at the highest levels of IBM's core of technical leaders.
We are seeing a major migration of enterprises applications to the cloud. As cloud and business use of real time applications accelerate, legacy networks are no longer able to architecturally support cloud adoption and deliver the performance and security required by highly distributed enterprises. These outdated solutions have become more costly and complicated to implement, install, manage, and maintain.SD-WAN offers unlimited capabilities for accessing the benefits of the cloud and Internet. ...
As Cybric's Chief Technology Officer, Mike D. Kail is responsible for the strategic vision and technical direction of the platform. Prior to founding Cybric, Mike was Yahoo's CIO and SVP of Infrastructure, where he led the IT and Data Center functions for the company. He has more than 24 years of IT Operations experience with a focus on highly-scalable architectures.
Without lifecycle traceability and visibility across the tool chain, stakeholders from Planning-to-Ops have limited insight and answers to who, what, when, why and how across the DevOps lifecycle. This impacts the ability to deliver high quality software at the needed velocity to drive positive business outcomes. In his general session at @DevOpsSummit at 19th Cloud Expo, Eric Robertson, General Manager at CollabNet, will discuss how customers are able to achieve a level of transparency that e...
Headquartered in Plainsboro, NJ, Synametrics Technologies has provided IT professionals and computer systems developers since 1997. Based on the success of their initial product offerings (WinSQL and DeltaCopy), the company continues to create and hone innovative products that help its customers get more from their computer applications, databases and infrastructure. To date, over one million users around the world have chosen Synametrics solutions to help power their accelerated business or per...
Dion Hinchcliffe is an internationally recognized digital expert, bestselling book author, frequent keynote speaker, analyst, futurist, and transformation expert based in Washington, DC. He is currently Chief Strategy Officer at the industry-leading digital strategy and online community solutions firm, 7Summits.
In an era of historic innovation fueled by unprecedented access to data and technology, the low cost and risk of entering new markets has leveled the playing field for business. Today, any ambitious innovator can easily introduce a new application or product that can reinvent business models and transform the client experience. In their Day 2 Keynote at 19th Cloud Expo, Mercer Rowe, IBM Vice President of Strategic Alliances, and Raejeanne Skillern, Intel Vice President of Data Center Group and ...
Founded in 2000, Chetu Inc. is a global provider of customized software development solutions and IT staff augmentation services for software technology providers. By providing clients with unparalleled niche technology expertise and industry experience, Chetu has become the premiere long-term, back-end software development partner for start-ups, SMBs, and Fortune 500 companies. Chetu is headquartered in Plantation, Florida, with thirteen offices throughout the U.S. and abroad.
Bill Schmarzo, author of "Big Data: Understanding How Data Powers Big Business" and "Big Data MBA: Driving Business Strategies with Data Science," is responsible for setting the strategy and defining the Big Data service offerings and capabilities for EMC Global Services Big Data Practice. As the CTO for the Big Data Practice, he is responsible for working with organizations to help them identify where and how to start their big data journeys. He's written several white papers, is an avid blogge...
More and more brands have jumped on the IoT bandwagon. We have an excess of wearables – activity trackers, smartwatches, smart glasses and sneakers, and more that track seemingly endless datapoints. However, most consumers have no idea what “IoT” means. Creating more wearables that track data shouldn't be the aim of brands; delivering meaningful, tangible relevance to their users should be. We're in a period in which the IoT pendulum is still swinging. Initially, it swung toward "smart for smart...
DXWorldEXPO LLC announced today that Dez Blanchfield joined the faculty of CloudEXPO's "10-Year Anniversary Event" which will take place on November 11-13, 2018 in New York City. Dez is a strategic leader in business and digital transformation with 25 years of experience in the IT and telecommunications industries developing strategies and implementing business initiatives. He has a breadth of expertise spanning technologies such as cloud computing, big data and analytics, cognitive computing, m...
"DivvyCloud as a company set out to help customers automate solutions to the most common cloud problems," noted Jeremy Snyder, VP of Business Development at DivvyCloud, in this SYS-CON.tv interview at 20th Cloud Expo, held June 6-8, 2017, at the Javits Center in New York City, NY.
"Venafi has a platform that allows you to manage, centralize and automate the complete life cycle of keys and certificates within the organization," explained Gina Osmond, Sr. Field Marketing Manager at Venafi, in this SYS-CON.tv interview at DevOps at 19th Cloud Expo, held November 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA.