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
SYS-CON Events announced today that Juniper Networks (NYSE: JNPR), an industry leader in automated, scalable and secure networks, will exhibit at SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. Juniper Networks challenges the status quo with products, solutions and services that transform the economics of networking. The company co-innovates with customers and partners to deliver automated, scalable and secure network...
With major technology companies and startups seriously embracing Cloud strategies, now is the perfect time to attend @CloudExpo | @ThingsExpo, June 6-8, 2017, at the Javits Center in New York City, NY and October 31 - November 2, 2017, Santa Clara Convention Center, CA. Learn what is going on, contribute to the discussions, and ensure that your enterprise is on the right path to Digital Transformation.
SYS-CON Events announced today that Hitachi, the leading provider the Internet of Things and Digital Transformation, will exhibit at SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. Hitachi Data Systems, a wholly owned subsidiary of Hitachi, Ltd., offers an integrated portfolio of services and solutions that enable digital transformation through enhanced data management, governance, mobility and analytics. We help globa...
The 20th International Cloud Expo has announced that its Call for Papers is open. Cloud Expo, to be held June 6-8, 2017, at the Javits Center in New York City, brings together Cloud Computing, Big Data, Internet of Things, DevOps, Containers, Microservices and WebRTC to one location. With cloud computing driving a higher percentage of enterprise IT budgets every year, it becomes increasingly important to plant your flag in this fast-expanding business opportunity. Submit your speaking proposal ...
@GonzalezCarmen has been ranked the Number One Influencer and @ThingsExpo has been named the Number One Brand in the “M2M 2016: Top 100 Influencers and Brands” by Analytic. Onalytica analyzed tweets over the last 6 months mentioning the keywords M2M OR “Machine to Machine.” They then identified the top 100 most influential brands and individuals leading the discussion on Twitter.
Blockchain is a shared, secure record of exchange that establishes trust, accountability and transparency across supply chain networks. Supported by the Linux Foundation's open source, open-standards based Hyperledger Project, Blockchain has the potential to improve regulatory compliance, reduce cost and time for product recall as well as advance trade. Are you curious about Blockchain and how it can provide you with new opportunities for innovation and growth? In her session at 20th Cloud Exp...
The goal of Continuous Testing is to shift testing left to find defects earlier and release software faster. This can be achieved by integrating a set of open source functional and performance testing tools in the early stages of your software delivery lifecycle. There is one process that binds all application delivery stages together into one well-orchestrated machine: Continuous Testing. Continuous Testing is the conveyor belt between the Software Factory and production stages. Artifacts are ...
The buzz continues for cloud, data analytics and the Internet of Things (IoT) and their collective impact across all industries. But a new conversation is emerging - how do companies use industry disruption and technology enablers to lead in markets undergoing change, uncertainty and ambiguity? Organizations of all sizes need to evolve and transform, often under massive pressure, as industry lines blur and merge and traditional business models are assaulted and turned upside down. In this new da...
Back in February of 2017, Andrew Clay Schafer of Pivotal tweeted the following: “seriously tho, the whole software industry is stuck on deployment when we desperately need architecture and telemetry.” Intrigue in a 140 characters. For me, I hear Andrew saying, “we’re jumping to step 5 before we’ve successfully completed steps 1-4.”
SYS-CON Events announced today that T-Mobile will exhibit at SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. As America's Un-carrier, T-Mobile US, Inc., is redefining the way consumers and businesses buy wireless services through leading product and service innovation. The Company's advanced nationwide 4G LTE network delivers outstanding wireless experiences to 67.4 million customers who are unwilling to compromise on ...
SYS-CON Events announced today that Hitachi, the leading provider the Internet of Things and Digital Transformation, will exhibit at SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. Hitachi Data Systems, a wholly owned subsidiary of Hitachi, Ltd., offers an integrated portfolio of services and solutions that enable digital transformation through enhanced data management, governance, mobility and analytics. We help globa...
“DevOps is really about the business. The business is under pressure today, competitively in the marketplace to respond to the expectations of the customer. The business is driving IT and the problem is that IT isn't responding fast enough," explained Mark Levy, Senior Product Marketing Manager at Serena Software, in this SYS-CON.tv interview at DevOps Summit, held Nov 4–6, 2014, at the Santa Clara Convention Center in Santa Clara, CA.
20th Cloud Expo, taking place June 6-8, 2017, at the Javits Center in New York City, NY, will feature technical sessions from a rock star conference faculty and the leading industry players in the world. Cloud computing is now being embraced by a majority of enterprises of all sizes. Yesterday's debate about public vs. private has transformed into the reality of hybrid cloud: a recent survey shows that 74% of enterprises have a hybrid cloud strategy.
SYS-CON Events announced today that Grape Up will exhibit at SYS-CON's 21st International Cloud Expo®, which will take place on Oct. 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA. Grape Up is a software company specializing in cloud native application development and professional services related to Cloud Foundry PaaS. With five expert teams that operate in various sectors of the market across the U.S. and Europe, Grape Up works with a variety of customers from emergi...
SYS-CON Events announced today that Super Micro Computer, Inc., a global leader in compute, storage and networking technologies, will exhibit at SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. Supermicro (NASDAQ: SMCI), the leading innovator in high-performance, high-efficiency server technology, is a premier provider of advanced server Building Block Solutions® for Data Center, Cloud Computing, Enterprise IT, Hadoop/...