|
Illinois
|
|
36-1150280
|
(State or other jurisdiction of incorporation or organization)
|
|
(I.R.S. Employer Identification No.)
|
|
|
|
100 Grainger Parkway, Lake Forest, Illinois
|
|
60045-5201
|
(Address of principal executive offices)
|
|
(Zip Code)
|
(847) 535-1000
|
||
(Registrant’s telephone number including area code)
|
||
|
||
Not Applicable
|
||
(Former name, former address and former fiscal year; if changed since last report)
|
|
TABLE OF CONTENTS
|
|
|
|
Page No.
|
PART I
|
FINANCIAL INFORMATION
|
|
|
|
|
Item 1.
|
Financial Statements (Unaudited).
|
|
|
|
|
|
Condensed Consolidated Statements of Earnings
for the Three and Six Months Ended June 30, 2016 and 2015 |
|
|
|
|
|
Condensed Consolidated Statements of Comprehensive
Earnings for the Three and Six Months Ended June 30, 2016 and 2015 |
|
|
|
|
|
Condensed Consolidated Balance Sheets
as of June 30, 2016 and December 31, 2015 |
|
|
|
|
|
Condensed Consolidated Statements of Cash Flows
for the Six Months Ended June 30, 2016 and 2015 |
|
|
|
|
|
Notes to Condensed Consolidated Financial Statements
|
|
|
|
|
Item 2.
|
Management's Discussion and Analysis of Financial
Condition and Results of Operations. |
|
|
|
|
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk.
|
|
|
|
|
Item 4.
|
Controls and Procedures.
|
|
|
|
|
PART II
|
OTHER INFORMATION
|
|
|
|
|
Item 1.
|
Legal Proceedings.
|
|
|
|
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds.
|
|
|
|
|
Item 6.
|
Exhibits.
|
|
|
|
|
Signatures
|
|
|
|
|
|
EXHIBITS
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Net sales
|
$
|
2,563,668
|
|
|
$
|
2,522,565
|
|
|
$
|
5,070,206
|
|
|
$
|
4,962,226
|
|
Cost of merchandise sold
|
1,523,609
|
|
|
1,449,133
|
|
|
2,985,094
|
|
|
2,795,052
|
|
||||
Gross profit
|
1,040,059
|
|
|
1,073,432
|
|
|
2,085,112
|
|
|
2,167,174
|
|
||||
Warehousing, marketing and administrative expenses
|
734,470
|
|
|
716,715
|
|
|
1,462,431
|
|
|
1,459,209
|
|
||||
Operating earnings
|
305,589
|
|
|
356,717
|
|
|
622,681
|
|
|
707,965
|
|
||||
Other income and (expense):
|
|
|
|
|
|
|
|
|
|
||||||
Interest income
|
162
|
|
|
277
|
|
|
327
|
|
|
469
|
|
||||
Interest expense
|
(16,806
|
)
|
|
(4,184
|
)
|
|
(30,531
|
)
|
|
(5,819
|
)
|
||||
Loss from equity method investment
|
(5,427
|
)
|
|
(4,302
|
)
|
|
(11,815
|
)
|
|
(4,302
|
)
|
||||
Other non-operating income and (expense)
|
(538
|
)
|
|
178
|
|
|
(98
|
)
|
|
(1,988
|
)
|
||||
Total other expense
|
(22,609
|
)
|
|
(8,031
|
)
|
|
(42,117
|
)
|
|
(11,640
|
)
|
||||
Earnings before income taxes
|
282,980
|
|
|
348,686
|
|
|
580,564
|
|
|
696,325
|
|
||||
Income taxes
|
103,535
|
|
|
123,451
|
|
|
209,475
|
|
|
256,944
|
|
||||
Net earnings
|
179,445
|
|
|
225,235
|
|
|
371,089
|
|
|
439,381
|
|
||||
Less: Net earnings attributable to noncontrolling interest
|
6,769
|
|
|
4,687
|
|
|
11,700
|
|
|
7,818
|
|
||||
Net earnings attributable to W.W. Grainger, Inc.
|
$
|
172,676
|
|
|
$
|
220,548
|
|
|
$
|
359,389
|
|
|
$
|
431,563
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
||||||
Basic
|
$
|
2.81
|
|
|
$
|
3.28
|
|
|
$
|
5.81
|
|
|
$
|
6.38
|
|
Diluted
|
$
|
2.79
|
|
|
$
|
3.25
|
|
|
$
|
5.77
|
|
|
$
|
6.32
|
|
Weighted average number of shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic
|
60,891,298
|
|
|
66,652,130
|
|
|
61,278,981
|
|
|
66,939,110
|
|
||||
Diluted
|
61,301,545
|
|
|
67,317,131
|
|
|
61,699,603
|
|
|
67,647,689
|
|
||||
Cash dividends paid per share
|
$
|
1.22
|
|
|
$
|
1.17
|
|
|
$
|
2.39
|
|
|
$
|
2.25
|
|
|
Three Months Ended
|
Six Months Ended
|
||||||||||||
|
June 30,
|
June 30,
|
||||||||||||
|
2016
|
|
2015
|
2016
|
|
2015
|
||||||||
Net earnings
|
$
|
179,445
|
|
|
$
|
225,235
|
|
$
|
371,089
|
|
|
$
|
439,381
|
|
Other comprehensive earnings (losses):
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign currency translation gain (loss)
|
(6,915
|
)
|
|
9,061
|
|
44,575
|
|
|
(66,954
|
)
|
||||
Defined postretirement benefit plan:
|
|
|
|
|
|
|
||||||||
Reclassification adjustments related to amortization, net of tax benefit of $631, $512, and $1,262, $1,021, respectively
|
(1,009
|
)
|
|
(810
|
)
|
(2,018
|
)
|
|
(1,623
|
)
|
||||
Derivative instrument change in fair value of cash flow hedge
|
352
|
|
|
245
|
|
656
|
|
|
727
|
|
||||
Comprehensive earnings, net of tax
|
171,873
|
|
|
233,731
|
|
414,302
|
|
|
371,531
|
|
||||
Less: Comprehensive earnings (losses) attributable to noncontrolling interest
|
|
|
|
|
|
|
||||||||
Net earnings
|
6,769
|
|
|
4,687
|
|
11,700
|
|
|
7,818
|
|
||||
Foreign currency translation adjustments
|
8,729
|
|
|
(1,509
|
)
|
14,433
|
|
|
(1,802
|
)
|
||||
Comprehensive earnings attributable to W.W. Grainger, Inc.
|
$
|
156,375
|
|
|
$
|
230,553
|
|
$
|
388,169
|
|
|
$
|
365,515
|
|
|
(Unaudited)
|
|
|
||||
ASSETS
|
June 30, 2016
|
|
December 31, 2015
|
||||
CURRENT ASSETS
|
|
|
|
||||
Cash and cash equivalents
|
$
|
315,997
|
|
|
$
|
290,136
|
|
Accounts receivable (less allowances for doubtful
|
|
|
|
|
|
||
accounts of $26,403 and $22,288, respectively)
|
1,310,382
|
|
|
1,209,641
|
|
||
Inventories – net
|
1,418,678
|
|
|
1,414,177
|
|
||
Prepaid expenses and other assets
|
103,885
|
|
|
85,670
|
|
||
Prepaid income taxes
|
41,320
|
|
|
49,018
|
|
||
Total current assets
|
3,190,262
|
|
|
3,048,642
|
|
||
PROPERTY, BUILDINGS AND EQUIPMENT
|
3,385,566
|
|
|
3,370,313
|
|
||
Less: Accumulated depreciation and amortization
|
1,966,861
|
|
|
1,939,072
|
|
||
Property, buildings and equipment – net
|
1,418,705
|
|
|
1,431,241
|
|
||
DEFERRED INCOME TAXES
|
62,007
|
|
|
83,996
|
|
||
GOODWILL
|
590,109
|
|
|
582,336
|
|
||
INTANGIBLES - NET
|
437,521
|
|
|
463,294
|
|
||
OTHER ASSETS
|
266,200
|
|
|
248,246
|
|
||
TOTAL ASSETS
|
$
|
5,964,804
|
|
|
$
|
5,857,755
|
|
|
(Unaudited)
|
|
|
||||
LIABILITIES AND SHAREHOLDERS' EQUITY
|
June 30, 2016
|
|
December 31, 2015
|
||||
CURRENT LIABILITIES
|
|
|
|
||||
Short-term debt
|
$
|
372,854
|
|
|
$
|
353,072
|
|
Current maturities of long-term debt
|
132,620
|
|
|
247,346
|
|
||
Trade accounts payable
|
628,659
|
|
|
583,474
|
|
||
Accrued compensation and benefits
|
203,401
|
|
|
196,667
|
|
||
Accrued contributions to employees’ profit sharing plans
|
35,950
|
|
|
124,587
|
|
||
Accrued expenses
|
250,573
|
|
|
266,702
|
|
||
Income taxes payable
|
17,287
|
|
|
16,686
|
|
||
Total current liabilities
|
1,641,344
|
|
|
1,788,534
|
|
||
LONG-TERM DEBT (less current maturities)
|
1,765,809
|
|
|
1,388,414
|
|
||
DEFERRED INCOME TAXES AND TAX UNCERTAINTIES
|
135,950
|
|
|
154,352
|
|
||
EMPLOYMENT-RELATED AND OTHER NON-CURRENT LIABILITIES
|
179,127
|
|
|
173,741
|
|
||
SHAREHOLDERS' EQUITY
|
|
|
|
|
|
||
Cumulative Preferred Stock – $5 par value – 12,000,000 shares authorized; none issued nor outstanding
|
—
|
|
|
—
|
|
||
Common Stock – $0.50 par value – 300,000,000 shares authorized;
109,659,219 shares issued
|
54,830
|
|
|
54,830
|
|
||
Additional contributed capital
|
1,016,044
|
|
|
1,000,476
|
|
||
Retained earnings
|
7,013,688
|
|
|
6,802,130
|
|
||
Accumulated other comprehensive losses
|
(192,310
|
)
|
|
(221,091
|
)
|
||
Treasury stock, at cost – 49,236,663 and 47,630,511 shares, respectively
|
(5,758,349
|
)
|
|
(5,369,711
|
)
|
||
Total W.W. Grainger, Inc. shareholders’ equity
|
2,133,903
|
|
|
2,266,634
|
|
||
Noncontrolling interest
|
108,671
|
|
|
86,080
|
|
||
Total shareholders' equity
|
2,242,574
|
|
|
2,352,714
|
|
||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
|
$
|
5,964,804
|
|
|
$
|
5,857,755
|
|
|
Six Months Ended
|
||||||
|
June 30,
|
||||||
|
2016
|
|
2015
|
||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
||||
Net earnings
|
$
|
371,089
|
|
|
$
|
439,381
|
|
Provision for losses on accounts receivable
|
8,282
|
|
|
4,630
|
|
||
Deferred income taxes and tax uncertainties
|
4,565
|
|
|
1,995
|
|
||
Depreciation and amortization
|
113,496
|
|
|
106,937
|
|
||
(Gains) from sales of assets, net of asset impairment
|
(15,564
|
)
|
|
(51
|
)
|
||
Stock-based compensation
|
21,135
|
|
|
27,043
|
|
||
Losses from equity method investment
|
11,815
|
|
|
4,302
|
|
||
Change in operating assets and liabilities – net of business
acquisitions:
|
|
|
|
|
|
||
Accounts receivable
|
(98,394
|
)
|
|
(50,586
|
)
|
||
Inventories
|
8,733
|
|
|
26,075
|
|
||
Prepaid expenses and other assets
|
(6,143
|
)
|
|
6,929
|
|
||
Trade accounts payable
|
43,338
|
|
|
(29,144
|
)
|
||
Other current liabilities
|
(128,960
|
)
|
|
(169,123
|
)
|
||
Current income taxes payable
|
(1,368
|
)
|
|
(847
|
)
|
||
Accrued employment-related benefits cost
|
3,877
|
|
|
4,231
|
|
||
Other – net
|
(9,512
|
)
|
|
(2,267
|
)
|
||
Net cash provided by operating activities
|
326,389
|
|
|
369,505
|
|
||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
||
Additions to property, buildings and equipment
|
(105,717
|
)
|
|
(170,873
|
)
|
||
Proceeds from sales of assets
|
43,119
|
|
|
10,119
|
|
||
Equity method investment
|
(10,340
|
)
|
|
(10,190
|
)
|
||
Net cash received for business divestiture
|
—
|
|
|
1,114
|
|
||
Other – net
|
(597
|
)
|
|
(567
|
)
|
||
Net cash used in investing activities
|
(73,535
|
)
|
|
(170,397
|
)
|
||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
||
Net increase in commercial paper
|
19,888
|
|
|
(4,967
|
)
|
||
Borrowings under lines of credit
|
18,501
|
|
|
26,842
|
|
||
Payments against lines of credit
|
(19,306
|
)
|
|
(46,649
|
)
|
||
Proceeds from issuance of long-term debt
|
393,284
|
|
|
995,880
|
|
||
Payments of long-term debt
|
(129,981
|
)
|
|
(25,630
|
)
|
||
Proceeds from stock options exercised
|
26,191
|
|
|
35,549
|
|
||
Excess tax benefits from stock-based compensation
|
9,770
|
|
|
17,106
|
|
||
Purchase of treasury stock
|
(412,647
|
)
|
|
(442,595
|
)
|
||
Cash dividends paid
|
(147,480
|
)
|
|
(153,906
|
)
|
||
Net cash (used in) provided by financing activities
|
(241,780
|
)
|
|
401,630
|
|
||
Exchange rate effect on cash and cash equivalents
|
14,787
|
|
|
(7,596
|
)
|
||
NET CHANGE IN CASH AND CASH EQUIVALENTS
|
25,861
|
|
|
593,142
|
|
||
Cash and cash equivalents at beginning of year
|
290,136
|
|
|
226,644
|
|
||
Cash and cash equivalents at end of period
|
$
|
315,997
|
|
|
$
|
819,786
|
|
|
June 30, 2016
|
|
December 31, 2015
|
||||
Outstanding lines of credit
|
$
|
22,966
|
|
|
$
|
23,072
|
|
Outstanding commercial paper
|
349,888
|
|
|
330,000
|
|
||
|
$
|
372,854
|
|
|
$
|
353,072
|
|
|
June 30, 2016
|
|
December 31, 2015
|
||||
4.60% senior notes
|
$
|
1,000,000
|
|
|
$
|
1,000,000
|
|
3.75% senior notes
|
400,000
|
|
|
—
|
|
||
U.S. dollar term loan
|
—
|
|
|
114,614
|
|
||
British pound denominated term loan
|
207,574
|
|
|
235,808
|
|
||
Euro denominated term loan
|
113,816
|
|
|
114,030
|
|
||
Japanese yen denominated term loans
|
56,907
|
|
|
49,875
|
|
||
Canadian dollar revolving credit facility
|
112,203
|
|
|
108,389
|
|
||
Other
|
27,194
|
|
|
25,991
|
|
||
Debt issuance costs and discounts
|
(19,265
|
)
|
|
(12,947
|
)
|
||
Less current maturities
|
(132,620
|
)
|
|
(247,346
|
)
|
||
|
$
|
1,765,809
|
|
|
$
|
1,388,414
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Service cost
|
$
|
2,060
|
|
|
$
|
2,532
|
|
|
$
|
4,119
|
|
|
$
|
5,064
|
|
Interest cost
|
2,463
|
|
|
2,412
|
|
|
4,927
|
|
|
4,824
|
|
||||
Expected return on assets
|
(2,528
|
)
|
|
(2,594
|
)
|
|
(5,056
|
)
|
|
(5,188
|
)
|
||||
Amortization of unrecognized losses
|
32
|
|
|
378
|
|
|
64
|
|
|
756
|
|
||||
Amortization of prior service credits
|
(1,672
|
)
|
|
(1,700
|
)
|
|
(3,344
|
)
|
|
(3,400
|
)
|
||||
Net periodic benefit costs
|
$
|
355
|
|
|
$
|
1,028
|
|
|
$
|
710
|
|
|
$
|
2,056
|
|
|
Three Months Ended June 30, 2016
|
||||||||||||||
|
United States
|
|
Canada
|
|
Other Businesses
|
|
Total
|
||||||||
Total net sales
|
$
|
1,978,542
|
|
|
$
|
194,418
|
|
|
$
|
474,166
|
|
|
$
|
2,647,126
|
|
Intersegment net sales
|
(82,442
|
)
|
|
(50
|
)
|
|
(966
|
)
|
|
(83,458
|
)
|
||||
Net sales to external customers
|
$
|
1,896,100
|
|
|
$
|
194,368
|
|
|
$
|
473,200
|
|
|
$
|
2,563,668
|
|
Segment operating earnings
|
$
|
348,938
|
|
|
$
|
(27,741
|
)
|
|
$
|
29,724
|
|
|
$
|
350,921
|
|
|
Three Months Ended June 30, 2015
|
||||||||||||||
|
United States
|
|
Canada
|
|
Other Businesses
|
|
Total
|
||||||||
Total net sales
|
$
|
2,030,633
|
|
|
$
|
239,466
|
|
|
$
|
318,898
|
|
|
$
|
2,588,997
|
|
Intersegment net sales
|
(65,394
|
)
|
|
(17
|
)
|
|
(1,021
|
)
|
|
(66,432
|
)
|
||||
Net sales to external customers
|
$
|
1,965,239
|
|
|
$
|
239,449
|
|
|
$
|
317,877
|
|
|
$
|
2,522,565
|
|
Segment operating earnings
|
$
|
369,533
|
|
|
$
|
9,499
|
|
|
$
|
15,158
|
|
|
$
|
394,190
|
|
|
Six Months Ended June 30, 2016
|
||||||||||||||
|
United States
|
|
Canada
|
|
Other Businesses
|
|
Total
|
||||||||
Total net sales
|
$
|
3,944,809
|
|
|
$
|
373,189
|
|
|
$
|
919,500
|
|
|
$
|
5,237,498
|
|
Intersegment net sales
|
(164,941
|
)
|
|
(86
|
)
|
|
(2,265
|
)
|
|
(167,292
|
)
|
||||
Net sales to external customers
|
$
|
3,779,868
|
|
|
$
|
373,103
|
|
|
$
|
917,235
|
|
|
$
|
5,070,206
|
|
Segment operating earnings
|
$
|
680,795
|
|
|
$
|
(40,088
|
)
|
|
$
|
51,508
|
|
|
$
|
692,215
|
|
|
Six Months Ended June 30, 2015
|
||||||||||||||
|
United States
|
|
Canada
|
|
Other Businesses
|
|
Total
|
||||||||
Total net sales
|
$
|
4,002,088
|
|
|
$
|
473,996
|
|
|
$
|
616,697
|
|
|
$
|
5,092,781
|
|
Intersegment net sales
|
(128,585
|
)
|
|
(53
|
)
|
|
(1,917
|
)
|
|
(130,555
|
)
|
||||
Net sales to external customers
|
$
|
3,873,503
|
|
|
$
|
473,943
|
|
|
$
|
614,780
|
|
|
$
|
4,962,226
|
|
Segment operating earnings
|
$
|
735,622
|
|
|
$
|
18,886
|
|
|
$
|
24,684
|
|
|
$
|
779,192
|
|
|
United States
|
|
Canada
|
|
Other Businesses
|
|
Total
|
||||||||
Segment assets:
|
|
|
|
|
|
|
|
||||||||
June 30, 2016
|
$
|
2,280,207
|
|
|
$
|
315,742
|
|
|
$
|
525,142
|
|
|
$
|
3,121,091
|
|
December 31, 2015
|
$
|
2,191,045
|
|
|
$
|
317,504
|
|
|
$
|
507,116
|
|
|
$
|
3,015,665
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Operating earnings:
|
|
|
|
||||||||||||
Total operating earnings for operating segments
|
$
|
350,921
|
|
|
$
|
394,190
|
|
|
$
|
692,215
|
|
|
$
|
779,192
|
|
Unallocated expenses and eliminations
|
(45,332
|
)
|
|
(37,473
|
)
|
|
(69,534
|
)
|
|
(71,227
|
)
|
||||
Total consolidated operating earnings
|
$
|
305,589
|
|
|
$
|
356,717
|
|
|
$
|
622,681
|
|
|
$
|
707,965
|
|
|
June 30, 2016
|
|
December 31, 2015
|
||||
Assets:
|
|
||||||
Total assets for operating segments
|
$
|
3,121,091
|
|
|
$
|
3,015,665
|
|
Other current and non-current assets
|
2,690,398
|
|
|
2,624,966
|
|
||
Unallocated assets
|
153,315
|
|
|
217,124
|
|
||
Total consolidated assets
|
$
|
5,964,804
|
|
|
$
|
5,857,755
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Net earnings attributable to W.W. Grainger, Inc. as reported
|
$
|
172,676
|
|
|
$
|
220,548
|
|
|
$
|
359,389
|
|
|
$
|
431,563
|
|
Distributed earnings available to participating securities
|
(576
|
)
|
|
(742
|
)
|
|
(1,202
|
)
|
|
(1,510
|
)
|
||||
Undistributed earnings available to participating securities
|
(970
|
)
|
|
(1,418
|
)
|
|
(2,092
|
)
|
|
(2,879
|
)
|
||||
Numerator for basic earnings per share – Undistributed and distributed earnings available to common shareholders
|
171,130
|
|
|
218,388
|
|
|
356,095
|
|
|
427,174
|
|
||||
Undistributed earnings allocated to participating securities
|
970
|
|
|
1,418
|
|
|
2,092
|
|
|
2,879
|
|
||||
Undistributed earnings reallocated to participating securities
|
(964
|
)
|
|
(1,404
|
)
|
|
(2,078
|
)
|
|
(2,850
|
)
|
||||
Numerator for diluted earnings per share – Undistributed and distributed earnings available to common shareholders
|
$
|
171,136
|
|
|
$
|
218,402
|
|
|
$
|
356,109
|
|
|
$
|
427,203
|
|
Denominator for basic earnings per share – weighted average shares
|
60,891,298
|
|
|
66,652,130
|
|
|
61,278,981
|
|
|
66,939,110
|
|
||||
Effect of dilutive securities
|
410,247
|
|
|
665,001
|
|
|
420,622
|
|
|
708,579
|
|
||||
Denominator for diluted earnings per share – weighted average shares adjusted for dilutive securities
|
61,301,545
|
|
|
67,317,131
|
|
|
61,699,603
|
|
|
67,647,689
|
|
||||
Earnings per share two-class method
|
|
|
|
|
|
|
|
|
|
||||||
Basic
|
$
|
2.81
|
|
|
$
|
3.28
|
|
|
$
|
5.81
|
|
|
$
|
6.38
|
|
Diluted
|
$
|
2.79
|
|
|
$
|
3.25
|
|
|
$
|
5.77
|
|
|
$
|
6.32
|
|
|
United States
|
Canada
|
||
|
2016 Forecast (April)
|
2016 Forecast (July)
|
2016 Forecast (April)
|
2016 Forecast (July)
|
Business Investment
|
1.8%
|
—%
|
(3.3)%
|
(3.9)%
|
Business Inventory
|
1.8%
|
1.3%
|
—%
|
—%
|
Exports
|
1.4%
|
0.9%
|
2.2%
|
2.4%
|
Industrial Production
|
(0.8)%
|
(1.6)%
|
(1.1)%
|
(2.0)%
|
GDP
|
2.1%
|
1.9%
|
1.3%
|
1.3%
|
Oil Prices
|
—
|
—
|
$40/barrel
|
$44/barrel
|
Source: Global Insight (April & July 2016)
|
|
|
|
|
|
Three Months Ended June 30,
|
||||||||||||||
|
|
|
|
Percent Increase/(Decrease)
|
|
As a Percent of Net Sales
|
|||||||||
|
2016 (A)
|
|
2015 (A)
|
|
2016
|
|
2015
|
||||||||
Net sales
|
$
|
2,564
|
|
|
$
|
2,523
|
|
2
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
Cost of merchandise sold
|
1,524
|
|
|
1,449
|
|
5
|
%
|
|
59.4
|
|
|
57.4
|
|
||
Gross profit
|
1,040
|
|
|
1,073
|
|
(3
|
)%
|
|
40.6
|
|
|
42.6
|
|
||
Operating expenses
|
734
|
|
|
717
|
|
2
|
%
|
|
28.7
|
|
|
28.5
|
|
||
Operating earnings
|
306
|
|
|
357
|
|
(14
|
)%
|
|
11.9
|
|
|
14.1
|
|
||
Other expense
|
23
|
|
|
8
|
|
NM
|
|
|
0.9
|
|
|
0.3
|
|
||
Income taxes
|
104
|
|
|
123
|
|
(16
|
)%
|
|
4.0
|
|
|
4.9
|
|
||
Noncontrolling interest
|
7
|
|
|
5
|
|
44
|
%
|
|
0.3
|
|
|
0.2
|
|
||
Net earnings attributable to W.W. Grainger, Inc.
|
$
|
173
|
|
|
$
|
221
|
|
(22
|
)%
|
|
6.7
|
%
|
|
8.7
|
%
|
|
Three Months Ended
|
|
|||
|
June 30,
|
|
|||
|
2016
|
|
2015
|
%
|
|
Diluted earnings per share reported
|
$2.79
|
|
$3.25
|
(14
|
)%
|
Restructuring (United States)
|
(0.09)
|
|
—
|
|
|
Inventory reserve adjustment (Canada)
|
0.12
|
|
—
|
|
|
Restructuring (Canada)
|
0.09
|
|
—
|
|
|
Restructuring (Unallocated expense)
|
0.09
|
|
—
|
|
|
Discrete tax item
|
(0.11)
|
|
—
|
|
|
Restructuring (Other Businesses)
|
—
|
|
0.02
|
|
|
Subtotal
|
$0.10
|
|
0.02
|
|
|
Diluted earnings per share adjusted
|
$2.89
|
|
$3.27
|
(12
|
)%
|
|
Percent Increase/(Decrease)
|
Intercompany sales to Zoro
|
1
|
Price
|
(2)
|
Volume
|
(2)
|
Total
|
(3)%
|
|
Percent Increase/(Decrease)
|
Wildfire impact
|
(2)
|
Foreign exchange
|
(3)
|
Volume
|
(14)
|
Total
|
(19)%
|
|
Percent Increase/(Decrease)
|
Business acquisition
|
31
|
Price/volume
|
17
|
Foreign exchange
|
1
|
Total
|
49%
|
|
Six Months Ended June 30,
|
||||||||||||||
|
|
|
|
Percent Increase/(Decrease)
|
|
As a Percent of Net Sales
|
|||||||||
|
2016 (A)
|
|
2015 (A)
|
|
2016
|
|
2015
|
||||||||
Net sales
|
$
|
5,070
|
|
|
$
|
4,962
|
|
2
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
Cost of merchandise sold
|
2,985
|
|
|
2,795
|
|
7
|
%
|
|
58.9
|
|
|
56.3
|
|
||
Gross profit
|
2,085
|
|
|
2,167
|
|
(4
|
)%
|
|
41.1
|
|
|
43.7
|
|
||
Operating expenses
|
1,462
|
|
|
1,459
|
|
—
|
%
|
|
28.8
|
|
|
29.4
|
|
||
Operating earnings
|
623
|
|
|
708
|
|
(12
|
)%
|
|
12.3
|
|
|
14.3
|
|
||
Other expense
|
42
|
|
|
12
|
|
NM
|
|
|
0.8
|
|
|
0.2
|
|
||
Income taxes
|
209
|
|
|
257
|
|
(18
|
)%
|
|
4.1
|
|
|
5.2
|
|
||
Noncontrolling interest
|
12
|
|
|
8
|
|
50
|
%
|
|
0.2
|
|
|
0.2
|
|
||
Net earnings attributable to W.W. Grainger, Inc.
|
$
|
359
|
|
|
$
|
432
|
|
(17
|
)%
|
|
7.1
|
%
|
|
8.7
|
%
|
|
Six Months Ended
|
|
|||
|
June 30,
|
|
|||
|
2016
|
|
2015
|
%
|
|
Diluted Earnings Per Share reported
|
$5.77
|
|
$6.32
|
(9
|
)%
|
Restructuring (United States)
|
0.07
|
|
—
|
|
|
Inventory reserve adjustment (Canada)
|
0.12
|
|
—
|
|
|
Restructuring (Canada)
|
0.13
|
|
—
|
|
|
Restructuring (Unallocated expense)
|
0.09
|
|
—
|
|
|
Discrete tax items
|
(0.11)
|
|
—
|
|
|
Restructuring (Other Businesses)
|
—
|
|
0.05
|
|
|
Subtotal
|
0.30
|
|
0.05
|
|
|
Diluted earnings per share adjusted
|
$6.07
|
|
$6.37
|
(5
|
)%
|
|
Percent Increase/(Decrease)
|
Intercompany sales to Zoro
|
1
|
Seasonal sales
|
(1)
|
Price
|
(2)
|
Total
|
(2)%
|
|
Percent Increase/(Decrease)
|
Volume
|
(13)
|
Foreign exchange
|
(6)
|
SAP implementation
|
(3)
|
Wildfire impact
|
(1)
|
Price
|
1
|
Total
|
(22)%
|
|
Percent Increase/(Decrease)
|
Business acquisition
|
32
|
Volume
|
17
|
Foreign exchange
|
(1)
|
Total
|
48%
|
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk.
|
Item 4.
|
Controls and Procedures.
|
Item 1.
|
Legal Proceedings.
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds.
|
Period
|
Total Number of Shares Purchased (A)
|
Average Price Paid per Share (B)
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (C)
|
Maximum Number of
Shares That May Yet be Purchased Under the
Plans or Programs
|
|
Apr. 1 – Apr. 30
|
367,604
|
$231.54
|
367,604
|
8,227,680
|
|
May 1 – May 31
|
337,104
|
$227.19
|
337,104
|
7,890,576
|
|
June 1 – June 30
|
328,898
|
$221.92
|
328,898
|
7,561,678
|
|
Total
|
1,033,606
|
$227.06
|
1,033,606
|
|
(A)
|
There were no shares withheld to satisfy tax withholding obligations.
|
(B)
|
Average price paid per share includes any commissions paid and includes only those amounts related to purchases as part of publicly announced plans or programs.
|
(C)
|
Purchases were made pursuant to a share repurchase program approved by Grainger’s Board of Directors on April 6, 2015. The program has no specified expiration date. Activity is reported on a trade date basis.
|
|
|
|
W.W. Grainger, Inc.
|
|
|
|
(Registrant)
|
Date:
|
July 28, 2016
|
By:
|
/s/ R. L. Jadin
|
|
|
|
R. L. Jadin, Senior Vice President
and Chief Financial Officer
|
Date:
|
July 28, 2016
|
By:
|
/s/ W. Lomax
|
|
|
|
W. Lomax, Vice President
and Controller
|
EXHIBIT NO.
|
|
DESCRIPTION
|
10.1
|
|
Form of Stock Option Award Agreement between W.W. Grainger, Inc. and certain of its executive officers.*
|
10.2
|
|
Form of Restricted Stock Unit Award Agreement between W.W. Grainger, Inc. and certain of its executive officers.*
|
10.3
|
|
Form of 2016 Performance Share Award Agreement between W.W. Grainger, Inc. and certain of its executive officers.*
|
31.1
|
|
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
31.2
|
|
Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
32
|
|
Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
101.INS
|
|
XBRL Instance Document.
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document.
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document.
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document.
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document.
|
Belgium
|
Canada
|
Mexico
|
Netherlands
|
Portugal
|
United Kingdom
|
United States
|
Belgium
|
Canada
|
Mexico
|
Netherlands
|
Portugal
|
United Kingdom
|
If the Company’s Net Sales
for fiscal year 2018 are: |
Actual Number of
Performance Shares: |
< $11.2 Billion
|
0% of the Target Number
|
$11.7 Billion
|
50% of the Target Number
|
$
>
12.2 Billion
|
100% of the Target Number
|
If the Company’s average ROIC
during the Measuring Period is:
|
Actual Number of
Performance Shares: |
<21.6%
|
0% of the Target Number
|
23.8 %
|
50% of the Target Number
|
>
26.0%
|
100% of the Target Number
|
Canada
|
United Kingdom
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of W.W. Grainger, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
By:
|
/
s/ J. T. Ryan
|
Name:
|
J. T. Ryan
|
Title:
|
Chairman, President and Chief Executive Officer
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of W.W. Grainger, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
By:
|
/
s/ R. L. Jadin
|
Name:
|
R. L. Jadin
|
Title:
|
Senior Vice President and Chief Financial Officer
|
1.
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Grainger.
|
/s/ J. T. Ryan
|
J. T. Ryan
|
Chairman, President and Chief Executive Officer
|
July 28, 2016
|
|
|
|
/s/ R. L. Jadin
|
R. L. Jadin
|
Senior Vice President and Chief Financial Officer
|
July 28, 2016
|