|
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)
|
Title of Each Class
|
Trading Symbol
|
Name of Each Exchange on Which Registered
|
Common Stock
|
GWW
|
New York Stock Exchange
|
|
TABLE OF CONTENTS
|
|
|
|
Page No.
|
|
PART I FINANCIAL INFORMATION
|
|
|
|
|
Item 1:
|
Financial Statements (Unaudited)
|
|
|
|
|
|
Condensed Consolidated Statements of Earnings
for the Three Months Ended March 31, 2020 and 2019 |
|
|
|
|
|
Condensed Consolidated Statements of Comprehensive
Earnings for the Three Months Ended March 31, 2020 and 2019 |
|
|
|
|
|
Condensed Consolidated Balance Sheets
as of March 31, 2020 and December 31, 2019 |
|
|
|
|
|
Condensed Consolidated Statements of Cash Flows
for the Three Months Ended March 31, 2020 and 2019 |
|
|
|
|
|
Condensed Consolidated Statements of Shareholders' Equity for the Three Months Ended March 31, 2020 and 2019
|
|
|
|
|
|
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 1A:
|
Risk Factors
|
|
|
|
|
Item 2:
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
|
|
|
|
Item 6:
|
Exhibits
|
|
|
|
|
Signatures
|
|
|
|
|
|
EXHIBITS
|
|
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2020
|
|
2019
|
||||
Net sales
|
$
|
3,001
|
|
|
$
|
2,799
|
|
Cost of goods sold
|
1,880
|
|
|
1,704
|
|
||
Gross profit
|
1,121
|
|
|
1,095
|
|
||
Selling, general and administrative expenses
|
962
|
|
|
732
|
|
||
Operating earnings
|
159
|
|
|
363
|
|
||
Other (income) expense:
|
|
|
|
|
|
||
Interest expense, net
|
21
|
|
|
19
|
|
||
Other, net
|
(4
|
)
|
|
(7
|
)
|
||
Total other expense, net
|
17
|
|
|
12
|
|
||
Earnings before income taxes
|
142
|
|
|
351
|
|
||
Income tax (benefit) provision
|
(43
|
)
|
|
89
|
|
||
Net earnings
|
185
|
|
|
262
|
|
||
Less: Net earnings attributable to noncontrolling interest
|
12
|
|
|
9
|
|
||
Net earnings attributable to W.W. Grainger, Inc.
|
$
|
173
|
|
|
$
|
253
|
|
Earnings per share:
|
|
|
|
|
|
||
Basic
|
$
|
3.20
|
|
|
$
|
4.50
|
|
Diluted
|
$
|
3.19
|
|
|
$
|
4.48
|
|
Weighted average number of shares outstanding:
|
|
|
|
|
|
||
Basic
|
53.6
|
|
|
55.6
|
|
||
Diluted
|
53.8
|
|
|
55.9
|
|
||
Cash dividends paid per share
|
$
|
1.44
|
|
|
$
|
1.36
|
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2020
|
|
2019
|
||||
Net earnings
|
$
|
185
|
|
|
$
|
262
|
|
Other comprehensive earnings (losses):
|
|
|
|
|
|
||
Foreign currency translation adjustments, net of reclassification
|
(58
|
)
|
|
4
|
|
||
Postretirement benefit plan reclassification, net of tax benefit of $1 million and $1 million, respectively
|
(3
|
)
|
|
(3
|
)
|
||
Other
|
1
|
|
|
—
|
|
||
Total other comprehensive earnings (losses)
|
(60
|
)
|
|
1
|
|
||
Comprehensive earnings, net of tax
|
125
|
|
|
263
|
|
||
Less: Comprehensive earnings (losses) attributable to noncontrolling interest
|
|
|
|
||||
Net earnings
|
12
|
|
|
9
|
|
||
Foreign currency translation adjustments
|
3
|
|
|
(2
|
)
|
||
Total comprehensive earnings (losses) attributable to noncontrolling interest
|
15
|
|
|
7
|
|
||
Comprehensive earnings attributable to W.W. Grainger, Inc.
|
$
|
110
|
|
|
$
|
256
|
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2020
|
|
2019
|
||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
||||
Net earnings
|
$
|
185
|
|
|
$
|
262
|
|
|
|
|
|
||||
Provision for credit losses
|
6
|
|
|
4
|
|
||
Deferred income taxes and tax uncertainties
|
(7
|
)
|
|
(4
|
)
|
||
Depreciation and amortization
|
45
|
|
|
57
|
|
||
Net losses (gains) from sales of assets and business divestitures
|
3
|
|
|
(2
|
)
|
||
Impairment of goodwill, intangibles and long-lived assets
|
177
|
|
|
—
|
|
||
Stock-based compensation
|
9
|
|
|
5
|
|
||
Subtotal
|
233
|
|
|
60
|
|
||
Change in operating assets and liabilities:
|
|
|
|
|
|
||
Accounts receivable
|
(217
|
)
|
|
(102
|
)
|
||
Inventories
|
19
|
|
|
20
|
|
||
Prepaid expenses and other assets
|
(26
|
)
|
|
(30
|
)
|
||
Trade accounts payable
|
155
|
|
|
64
|
|
||
Accrued liabilities
|
(36
|
)
|
|
(207
|
)
|
||
Income taxes - net
|
(62
|
)
|
|
64
|
|
||
Other non-current liabilities
|
(7
|
)
|
|
(4
|
)
|
||
Subtotal
|
(174
|
)
|
|
(195
|
)
|
||
Net cash provided by operating activities
|
244
|
|
|
127
|
|
||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
||
Additions to property, buildings, equipment and intangibles
|
(50
|
)
|
|
(60
|
)
|
||
Proceeds from sales of assets
|
—
|
|
|
6
|
|
||
Other
|
(2
|
)
|
|
2
|
|
||
Net cash used in investing activities
|
(52
|
)
|
|
(52
|
)
|
||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
||
Borrowings under lines of credit
|
9
|
|
|
10
|
|
||
Payments against lines of credit
|
(45
|
)
|
|
(7
|
)
|
||
Proceeds from long-term debt
|
1,500
|
|
|
—
|
|
||
Payments of long-term debt
|
(345
|
)
|
|
(14
|
)
|
||
Proceeds from stock options exercised
|
19
|
|
|
3
|
|
||
Payments for employee taxes withheld from stock awards
|
(5
|
)
|
|
(3
|
)
|
||
Purchases of treasury stock
|
(100
|
)
|
|
(135
|
)
|
||
Cash dividends paid
|
(78
|
)
|
|
(76
|
)
|
||
Other - net
|
—
|
|
|
1
|
|
||
Net cash provided by (used in) financing activities
|
955
|
|
|
(221
|
)
|
||
Exchange rate effect on cash and cash equivalents
|
(15
|
)
|
|
—
|
|
||
NET CHANGE IN CASH AND CASH EQUIVALENTS
|
1,132
|
|
|
(146
|
)
|
||
Cash and cash equivalents at beginning of year
|
360
|
|
|
538
|
|
||
Cash and cash equivalents at end of period
|
$
|
1,492
|
|
|
$
|
392
|
|
|
Common Stock
|
Additional Contributed Capital
|
Retained Earnings
|
Accumulated Other Comprehensive Earnings (Losses)
|
Treasury Stock
|
Noncontrolling
Interest
|
Total
|
||||||||||||||
Balance at January 1, 2019
|
$
|
55
|
|
$
|
1,134
|
|
$
|
7,869
|
|
$
|
(171
|
)
|
$
|
(6,966
|
)
|
$
|
172
|
|
$
|
2,093
|
|
Stock based compensation
|
—
|
|
3
|
|
—
|
|
—
|
|
3
|
|
—
|
|
6
|
|
|||||||
Purchases of treasury stock
|
—
|
|
—
|
|
—
|
|
—
|
|
(135
|
)
|
—
|
|
(135
|
)
|
|||||||
Net earnings
|
—
|
|
—
|
|
253
|
|
—
|
|
—
|
|
9
|
|
262
|
|
|||||||
Other comprehensive earnings (losses)
|
—
|
|
—
|
|
—
|
|
3
|
|
—
|
|
(2
|
)
|
1
|
|
|||||||
Capital contribution
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
2
|
|
2
|
|
|||||||
Cash dividends paid ($1.36 per share)
|
—
|
|
—
|
|
(77
|
)
|
—
|
|
—
|
|
—
|
|
(77
|
)
|
|||||||
Balance at March 31, 2019
|
$
|
55
|
|
$
|
1,137
|
|
$
|
8,045
|
|
$
|
(168
|
)
|
$
|
(7,098
|
)
|
$
|
181
|
|
$
|
2,152
|
|
|
Common Stock
|
Additional Contributed Capital
|
Retained Earnings
|
Accumulated Other Comprehensive Earnings (Losses)
|
Treasury Stock
|
Noncontrolling
Interest
|
Total
|
||||||||||||||
Balance at January 1, 2020
|
$
|
55
|
|
$
|
1,182
|
|
$
|
8,405
|
|
$
|
(154
|
)
|
$
|
(7,633
|
)
|
$
|
205
|
|
$
|
2,060
|
|
Stock based compensation
|
—
|
|
10
|
|
—
|
|
—
|
|
13
|
|
—
|
|
23
|
|
|||||||
Purchases of treasury stock
|
—
|
|
—
|
|
—
|
|
—
|
|
(100
|
)
|
—
|
|
(100
|
)
|
|||||||
Net earnings
|
—
|
|
—
|
|
173
|
|
—
|
|
—
|
|
12
|
|
185
|
|
|||||||
Other comprehensive earnings (losses)
|
—
|
|
—
|
|
—
|
|
(63
|
)
|
—
|
|
3
|
|
(60
|
)
|
|||||||
Cash dividends paid ($1.44 per share)
|
—
|
|
—
|
|
(78
|
)
|
—
|
|
—
|
|
—
|
|
(78
|
)
|
|||||||
Balance at March 31, 2020
|
$
|
55
|
|
$
|
1,192
|
|
$
|
8,500
|
|
$
|
(217
|
)
|
$
|
(7,720
|
)
|
$
|
220
|
|
$
|
2,030
|
|
|
Three Months Ended March 31,
|
||||||||||||||||
|
2020
|
|
2019
|
||||||||||||||
|
U.S.
|
|
Canada
|
|
Total Company (2)
|
|
U.S.
|
|
Canada
|
|
Total Company (2)
|
||||||
Government
|
18
|
%
|
|
9
|
%
|
|
14
|
%
|
|
17
|
%
|
|
6
|
%
|
|
13
|
%
|
Heavy Manufacturing
|
18
|
%
|
|
19
|
%
|
|
17
|
%
|
|
19
|
%
|
|
21
|
%
|
|
18
|
%
|
Light Manufacturing
|
13
|
%
|
|
6
|
%
|
|
11
|
%
|
|
13
|
%
|
|
6
|
%
|
|
11
|
%
|
Transportation
|
5
|
%
|
|
9
|
%
|
|
5
|
%
|
|
6
|
%
|
|
8
|
%
|
|
5
|
%
|
Healthcare
|
9
|
%
|
|
—
|
%
|
|
6
|
%
|
|
7
|
%
|
|
—
|
%
|
|
6
|
%
|
Commercial
|
9
|
%
|
|
9
|
%
|
|
8
|
%
|
|
10
|
%
|
|
9
|
%
|
|
8
|
%
|
Retail/Wholesale
|
9
|
%
|
|
4
|
%
|
|
7
|
%
|
|
8
|
%
|
|
4
|
%
|
|
7
|
%
|
Contractors
|
10
|
%
|
|
10
|
%
|
|
8
|
%
|
|
10
|
%
|
|
10
|
%
|
|
8
|
%
|
Natural Resources
|
3
|
%
|
|
29
|
%
|
|
3
|
%
|
|
3
|
%
|
|
32
|
%
|
|
4
|
%
|
Other (1)
|
6
|
%
|
|
5
|
%
|
|
21
|
%
|
|
7
|
%
|
|
4
|
%
|
|
20
|
%
|
Total
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
Percent of Total Company Revenue
|
73
|
%
|
|
4
|
%
|
|
100
|
%
|
|
72
|
%
|
|
5
|
%
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
||||||
|
March 31, 2020
|
|
December 31, 2019
|
||||
Land
|
$
|
329
|
|
|
$
|
332
|
|
Building, structures and improvements
|
1,316
|
|
|
1,329
|
|
||
Furniture, fixtures, machinery and equipment
|
1,833
|
|
|
1,832
|
|
||
Property, buildings and equipment
|
$
|
3,478
|
|
|
$
|
3,493
|
|
Less: Accumulated depreciation and amortization and impairment
|
2,121
|
|
|
2,093
|
|
||
Property, buildings and equipment, net
|
$
|
1,357
|
|
|
$
|
1,400
|
|
|
|
United States
|
|
Canada
|
|
Other businesses
|
|
Total
|
||||||||
Balance at January 1, 2019
|
|
$
|
192
|
|
|
$
|
120
|
|
|
$
|
112
|
|
|
$
|
424
|
|
Translation
|
|
—
|
|
|
6
|
|
|
(1
|
)
|
|
5
|
|
||||
Balance at December 31, 2019
|
|
192
|
|
|
126
|
|
|
111
|
|
|
429
|
|
||||
Impairment
|
|
—
|
|
|
—
|
|
|
(58
|
)
|
|
(58
|
)
|
||||
Translation
|
|
—
|
|
|
(10
|
)
|
|
—
|
|
|
(10
|
)
|
||||
Balance at March 31, 2020
|
|
$
|
192
|
|
|
$
|
116
|
|
|
$
|
53
|
|
|
$
|
361
|
|
|
|
United States
|
|
Canada
|
|
Other businesses
|
|
Total
|
||||||||
Cumulative goodwill impairment charges, December 31, 2019
|
|
$
|
—
|
|
|
$
|
32
|
|
|
$
|
152
|
|
|
$
|
184
|
|
Impairment
|
|
—
|
|
|
—
|
|
|
58
|
|
|
58
|
|
||||
Cumulative goodwill impairment charges, March 31, 2020
|
|
$
|
—
|
|
|
$
|
32
|
|
|
$
|
210
|
|
|
$
|
242
|
|
|
|
|
March 31, 2020
|
|
December 31, 2019
|
||||||||||||||||||||
|
Weighted average life
|
|
Gross carrying amount
|
|
Accumulated amortization/impairment
|
|
Net carrying amount
|
|
Gross carrying amount
|
|
Accumulated amortization/impairment
|
|
Net carrying amount
|
||||||||||||
Customer lists and relationships
|
14.1 years
|
|
$
|
287
|
|
|
$
|
229
|
|
|
$
|
58
|
|
|
$
|
401
|
|
|
$
|
301
|
|
|
$
|
100
|
|
Trademarks, trade names and other
|
14.2 years
|
|
34
|
|
|
20
|
|
|
14
|
|
|
36
|
|
|
20
|
|
|
16
|
|
||||||
Non-amortized trade names and other
|
Indefinite
|
|
61
|
|
|
34
|
|
|
27
|
|
|
100
|
|
|
38
|
|
|
62
|
|
||||||
Capitalized software
|
4.2 years
|
|
637
|
|
|
510
|
|
|
127
|
|
|
626
|
|
|
500
|
|
|
126
|
|
||||||
Total intangible assets
|
7.8 years
|
|
$
|
1,019
|
|
|
$
|
793
|
|
|
$
|
226
|
|
|
$
|
1,163
|
|
|
$
|
859
|
|
|
$
|
304
|
|
•
|
In February 2020, the Company issued $500 million of unsecured 1.85% Senior Notes (1.85% Notes) and used the proceeds to repay the British pound term loan, Euro term loan and the Canadian dollar revolving credit facility, and to fund general working capital needs.
|
•
|
In connection with the 1.85% Notes, in February 2020, the Company entered into derivative instrument agreements to manage its risks associated with interest rates of the 1.85% Notes and foreign currency fluctuations related to the financing of international operations. See Note 10 for further discussion of these derivative instruments and the Company's hedge accounting policies.
|
•
|
In February 2020, the Company entered into a five-year unsecured credit agreement pursuant to which the Company may obtain loans in various currencies on a revolving basis in an aggregate amount not exceeding the U.S. Dollar equivalent of $1.25 billion ($1.25 billion credit facility), which may be increased from time to time up to $1.875 billion at the request of the Company, subject to obtaining additional commitments and other customary conditions. The $1.25 billion credit facility replaced the Company's former $750 million unsecured revolving credit facility, originated in October 2017, which was scheduled to mature in October 2022.
|
•
|
In March 2020, the Company received approximately $1 billion after drawing down on its $1.25 billion credit facility as a proactive measure to increase its cash position and preserve financial flexibility in light of current uncertainty in the global markets resulting from the COVID-19 pandemic.
|
|
As of March 31, 2020
|
|
As of December 31, 2019
|
||||||||||||
|
Carrying Value
|
|
Fair Value (3)
|
|
Carrying Value
|
|
Fair Value (3)
|
||||||||
4.60% senior notes due 2045
|
$
|
1,000
|
|
|
$
|
1,167
|
|
|
$
|
1,000
|
|
|
$
|
1,194
|
|
3.75% senior notes due 2046
|
400
|
|
|
381
|
|
|
400
|
|
|
416
|
|
||||
4.20% senior notes due 2047
|
400
|
|
|
433
|
|
|
400
|
|
|
449
|
|
||||
1.85% senior notes due 2025 (1)
|
500
|
|
|
500
|
|
|
—
|
|
|
—
|
|
||||
$1.25 billion credit facility (2)
|
1,000
|
|
|
1,000
|
|
|
—
|
|
|
—
|
|
||||
British pound term loan
|
—
|
|
|
—
|
|
|
170
|
|
|
170
|
|
||||
Euro term loan
|
—
|
|
|
—
|
|
|
123
|
|
|
123
|
|
||||
Canadian dollar revolving credit facility
|
—
|
|
|
—
|
|
|
46
|
|
|
46
|
|
||||
Other
|
51
|
|
|
51
|
|
|
42
|
|
|
42
|
|
||||
Subtotal (4)
|
3,351
|
|
|
3,532
|
|
|
2,181
|
|
|
2,440
|
|
||||
Less current maturities
|
(21
|
)
|
|
(21
|
)
|
|
(246
|
)
|
|
(246
|
)
|
||||
Debt issuance costs and discounts, net of amortization
|
(27
|
)
|
|
(27
|
)
|
|
(21
|
)
|
|
(21
|
)
|
||||
Long-term debt (less current maturities)
|
$
|
3,303
|
|
|
$
|
3,484
|
|
|
$
|
1,914
|
|
|
$
|
2,173
|
|
|
Interest expense, net
|
|
Other, net
|
||||
Gain or (loss) recognized in earnings
|
|
|
|
|
|
||
Fair value hedge:
|
|
|
|
||||
Hedged item
|
$
|
(18
|
)
|
|
$
|
—
|
|
Interest rate swap designated as hedging instrument
|
$
|
18
|
|
|
$
|
—
|
|
|
|
|
|
||||
Cash flow hedge:
|
|
|
|
||||
Hedged item
|
$
|
—
|
|
|
$
|
(2
|
)
|
Cross-currency swap designated as hedging instrument
|
$
|
—
|
|
|
$
|
2
|
|
|
Balance Sheet Classification
|
|
Fair Value and Carrying Amounts
|
||
Cross-currency swap
|
Prepaid expenses and other current assets
|
|
$
|
2
|
|
Interest rate swap
|
Other assets
|
|
$
|
18
|
|
|
Three Months Ended March 31,
|
||||||
|
2020
|
|
2019
|
||||
Federal income tax
|
$
|
30
|
|
|
$
|
74
|
|
States income taxes, net of federal benefit
|
(2
|
)
|
|
10
|
|
||
Foreign rate difference
|
2
|
|
|
5
|
|
||
Goodwill impairment
|
2
|
|
|
—
|
|
||
Tax benefit related to the Fabory business
|
(82
|
)
|
|
—
|
|
||
Change in tax contingencies
|
3
|
|
|
—
|
|
||
Change in valuation allowance
|
3
|
|
|
1
|
|
||
Investment in foreign subsidiary
|
3
|
|
|
—
|
|
||
Other, net
|
(2
|
)
|
|
(1
|
)
|
||
Income tax (benefit) expense
|
$
|
(43
|
)
|
|
$
|
89
|
|
Effective tax rate
|
(30.4
|
)%
|
|
25.4
|
%
|
|
Three Months Ended March 31, 2020
|
||||||||||||||||||
|
U.S.
|
|
Canada
|
|
Total Reportable Segments
|
|
Other businesses
|
|
Total
|
||||||||||
Total net sales
|
$
|
2,307
|
|
|
$
|
129
|
|
|
$
|
2,436
|
|
|
$
|
698
|
|
|
$
|
3,134
|
|
Intersegment net sales
|
(133
|
)
|
|
—
|
|
|
(133
|
)
|
|
—
|
|
|
(133
|
)
|
|||||
Net sales to external customers
|
$
|
2,174
|
|
|
$
|
129
|
|
|
$
|
2,303
|
|
|
$
|
698
|
|
|
$
|
3,001
|
|
Segment operating earnings
|
$
|
340
|
|
|
$
|
(3
|
)
|
|
$
|
337
|
|
|
$
|
(138
|
)
|
|
$
|
199
|
|
|
Three Months Ended March 31, 2019
|
||||||||||||||||||
|
U.S.
|
|
Canada
|
|
Total Reportable Segments
|
|
Other businesses
|
|
Total
|
||||||||||
Total net sales
|
$
|
2,149
|
|
|
$
|
136
|
|
|
$
|
2,285
|
|
|
$
|
633
|
|
|
$
|
2,918
|
|
Intersegment net sales
|
(118
|
)
|
|
—
|
|
|
(118
|
)
|
|
(1
|
)
|
|
(119
|
)
|
|||||
Net sales to external customers
|
$
|
2,031
|
|
|
$
|
136
|
|
|
$
|
2,167
|
|
|
$
|
632
|
|
|
$
|
2,799
|
|
Segment operating earnings
|
$
|
364
|
|
|
$
|
(5
|
)
|
|
$
|
359
|
|
|
$
|
30
|
|
|
$
|
389
|
|
|
Three Months Ended March 31,
|
||||||
|
2020
|
|
2019
|
||||
Operating earnings:
|
|
||||||
Total operating earnings for reportable segments
|
$
|
337
|
|
|
$
|
359
|
|
Other businesses
|
(138
|
)
|
|
30
|
|
||
Unallocated expenses
|
(40
|
)
|
|
(26
|
)
|
||
Total consolidated operating earnings
|
$
|
159
|
|
|
$
|
363
|
|
|
|
|
|
||||
|
As of
|
||||||
|
March 31, 2020
|
|
December 31, 2019
|
||||
Assets:
|
|
|
|
||||
United States
|
$
|
2,845
|
|
|
$
|
2,668
|
|
Canada
|
167
|
|
|
173
|
|
||
Assets for reportable segments
|
3,012
|
|
|
2,841
|
|
||
Other current and noncurrent assets
|
2,767
|
|
|
3,003
|
|
||
Unallocated assets
|
1,398
|
|
|
161
|
|
||
Total consolidated assets
|
$
|
7,177
|
|
|
$
|
6,005
|
|
|
|
|
|
•
|
Serving as an essential business under virtually every state order, to continue supporting hospitals, governments, first responders, critical manufacturers, and the many other customers that are assisting in the pandemic response;
|
•
|
Supporting Company employees by providing a safe environment and jobs;
|
•
|
Serving customers and communities by providing safe, high-quality services;
|
•
|
Closely partnering with supplier and logistics partners to locate the products needed to replenish inventories, provide much needed products to customers and meet changing customer, community and supplier needs;
|
•
|
Continuing to be a trusted partner to customers and suppliers now and after the expected economic slowdown; and
|
•
|
Preserving a strong financial and liquidity position to execute business plans and remain positioned to succeed beyond this pandemic.
|
•
|
Drew down $1.0 billion from the Company's $1.25 billion unsecured revolving credit facility.
|
•
|
Paused the Company’s share repurchase program.
|
•
|
Implemented several initiatives to conserve cash and optimize profitability, including limiting discretionary spending, temporarily furloughing employees or reducing work hours, reducing short term executive pay, delaying salary increases, scaling back advertising spend, eliminating non-essential travel, delaying or reducing hiring activities and deferring certain discretionary capital expenditures.
|
|
Three Months Ended March 31,
|
||||||||||||||
|
|
|
|
Percent Increase/(Decrease)
|
|
As a Percent of Net Sales
|
|||||||||
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
Net sales
|
$
|
3,001
|
|
|
$
|
2,799
|
|
7.2
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
Cost of goods sold
|
1,880
|
|
|
1,704
|
|
10.3
|
%
|
|
62.6
|
%
|
|
60.9
|
%
|
||
Gross profit
|
1,121
|
|
|
1,095
|
|
2.4
|
%
|
|
37.4
|
%
|
|
39.1
|
%
|
||
Selling, general and administrative expenses
|
962
|
|
|
732
|
|
31.4
|
%
|
|
32.1
|
%
|
|
26.2
|
%
|
||
Operating earnings
|
159
|
|
|
363
|
|
(56.3
|
)%
|
|
5.3
|
%
|
|
13.0
|
%
|
||
Other expense, net
|
17
|
|
|
12
|
|
35.6
|
%
|
|
0.6
|
%
|
|
0.4
|
%
|
||
Income taxes
|
(43
|
)
|
|
89
|
|
(148.4
|
)%
|
|
(1.4
|
)%
|
|
3.2
|
%
|
||
Net earnings
|
185
|
|
|
262
|
|
|
|
6.2
|
%
|
|
9.4
|
%
|
|||
Noncontrolling interest
|
12
|
|
|
9
|
|
34.7
|
%
|
|
0.4
|
%
|
|
0.3
|
%
|
||
Net earnings attributable to W.W. Grainger, Inc.
|
$
|
173
|
|
|
$
|
253
|
|
(31.5
|
)%
|
|
5.8
|
%
|
|
9.0
|
%
|
|
Three Months Ended
|
|
|
|||||||
|
March 31, 2020
|
|
|
|||||||
|
2020
|
|
2019
|
|
%
|
|||||
SG&A reported
|
$
|
962
|
|
|
$
|
732
|
|
|
(31
|
)%
|
Restructuring, net of branch gains (U.S.)
|
6
|
|
|
—
|
|
|
|
|||
Restructuring (Canada)
|
1
|
|
|
1
|
|
|
|
|||
Fabory impairment charges (Other businesses)
|
177
|
|
|
—
|
|
|
|
|||
Total restructuring, net and impairment charges
|
184
|
|
|
1
|
|
|
|
|||
SG&A adjusted
|
$
|
778
|
|
|
$
|
731
|
|
|
(7
|
)%
|
|
2020
|
|
2019
|
|
%
|
|||||
Operating earnings reported
|
$
|
159
|
|
|
$
|
363
|
|
|
(56
|
)%
|
Total restructuring, net, and impairment charges
|
184
|
|
|
2
|
|
|
|
|||
Operating earnings adjusted
|
$
|
343
|
|
|
$
|
365
|
|
|
(6
|
)%
|
|
2020
|
|
2019
|
|
%
|
|||||
Net earnings attributable to W.W. Grainger, Inc. reported
|
$
|
173
|
|
|
$
|
253
|
|
|
(32
|
)%
|
Total restructuring, net, and impairment charges, net of tax
|
57
|
|
|
2
|
|
|
|
|||
Net earnings attributable to W.W. Grainger, Inc. adjusted
|
$
|
230
|
|
|
$
|
255
|
|
|
(9
|
)%
|
|
Three Months Ended March 31,
|
||||
|
2020
|
|
2019
|
||
Effective tax rate reported
|
(30.4
|
)%
|
|
25.4
|
%
|
Tax benefit related to the Fabory business
|
61.2
|
|
|
—
|
|
Tax impact of restructuring, net and impairment charges
|
(5.2
|
)
|
|
—
|
|
Effective tax rate adjusted
|
25.6
|
%
|
|
25.4
|
%
|
|
Percent Increase/(Decrease)
|
Volume
|
7.8%
|
Intersegment sales
|
0.3
|
Price and mix
|
(2.4)
|
Total
|
5.7%
|
|
Percent Decrease
|
Volume
|
(4.4)%
|
Foreign exchange
|
(1.1)
|
Price
|
(0.6)
|
Total
|
(6.1)%
|
|
Corporate
|
|
Senior Unsecured
|
|
Short-term
|
Moody's
|
A3
|
|
A3
|
|
P2
|
S&P
|
A+
|
|
A+
|
|
A1
|
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
|
|
January 1 - January 31
|
110,294
|
$331.91
|
110,294
|
2,968,299
|
|
February 1 - February 29
|
77,022
|
$282.92
|
77,022
|
2,891,277
|
|
March 1 - March 31
|
150,522
|
$279.10
|
148,722
|
2,742,555
|
|
Total
|
337,838 (D)
|
|
336,038
|
|
(A)
|
There were no shares withheld to satisfy tax withholding obligations.
|
(B)
|
Average price paid per share includes any commissions paid.
|
(C)
|
Purchases were made pursuant to a share repurchase program approved by Grainger’s Board of Directors and announced April 24, 2019 (2019 Program). The 2019 Program authorizes the repurchase of up to 5 million shares with no expiration date.
|
(D)
|
The difference of 1,800 shares between the Total Number of Shares Purchased and the Total Number of
|
|
|
|
W.W. GRAINGER, INC.
|
Date:
|
April 23, 2020
|
By:
|
/s/ Thomas B. Okray
|
|
|
|
Thomas B. Okray, Senior Vice President
and Chief Financial Officer
|
|
|
|
(Principal Financial Officer)
|
Date:
|
April 23, 2020
|
By:
|
/s/ Eric R. Tapia
|
|
|
|
Eric R. Tapia, Vice President
and Controller
|
|
|
|
(Principal Accounting Officer)
|
EXHIBIT NO.
|
|
DESCRIPTION
|
|
Fourth Supplemental Indenture, dated as of February 26, 2020, between W.W. Grainger, Inc., and U.S. Bank National Association, as trustee incorporated by reference to Exhibit 4.1 to W.W. Grainger, Inc.'s Current Report on Form 8-K dated February 21, 2020.
|
|
|
Form of 1.85% Senior Notes due 2025 (included in Exhibit 4.1), incorporated by reference to Exhibit 4.2 to W.W. Grainger, Inc.'s Current Report on Form 8-K dated February 21, 2020.
|
|
|
Form of 2020 W.W. Grainger, Inc. 2015 Incentive Plan Restricted Stock Unit Agreement between W.W. Grainger, Inc. and certain of its executive officers.*
|
|
|
Form of 2020 W.W. Grainger, Inc. 2015 Incentive Plan Performance Stock Unit Agreement between W.W. Grainger, Inc. and certain of its executive officers.*
|
|
|
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
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 - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL 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.
|
104
|
|
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101),
|
|
W.W. GRAINGER, INC.
By:
Name: DG Macpherson
Title: Chairman & Chief Executive Officer
|
European Union ("EU") / European Economic Area ("EEA") / United Kingdom
|
Belgium
|
Canada
|
France
|
Mexico
|
Netherlands
|
Portugal
|
United Kingdom
|
|
W.W. GRAINGER, INC.
By:
Name: DG Macpherson
Title: Chairman & Chief Executive Officer
|
Performance Metric
|
Share Gain
|
Manner of Calculation
|
“Share Gain” shall be determined by the Committee in its sole discretion for each calendar year in the Measurement Period by calculating the Company’s
U.S. reportable segment’s sales growth attributable to the Company’s high touch solutions model for the particular calendar year over the U.S. maintenance, repair, and operations (“MRO”) market growth for the particular calendar year.
The MRO market growth for the particular calendar year shall be based on the average of the monthly numbers for (i) the Manufacturing sub-component of the Industrial Production Index under the North American Industry Classification System of the Office of Management and Budget and (ii) the Final Demand - Private Capital sub-component of the Producer Price Index according to the U.S. Bureau of Labor Statistics.
The Share Gain for each calendar year shall then be averaged based upon the total number of calendar years in the Measurement Period to determine the final achievement of the Performance Metric, which may be adjusted by the Committee in its sole discretion.
The payout percentage for the Performance Metric will be determined based on a straight-line interpolation of the targets reflected below, rounded down to the nearest whole percentage point.
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Targets for Performance Metric
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|
Target
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Share Gain Payout Percentage
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0 basis points or less
|
0%
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1 basis points to 149 basis points
|
1% to 79%
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150 basis points to 249 basis points
|
80% to 99%
|
250 basis points to 350 basis points
|
100%
|
351 basis points to 449 basis points
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101% to 120%
|
450 basis points to 799 basis points
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121% to 199%
|
800 basis points or greater
|
200% (maximum)
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Performance Metric
|
Endless Assortment Business Revenue Growth
|
Manner of Calculation
|
“Endless Assortment Business Revenue Growth” shall be determined by the Committee in its sole discretion for each calendar year in the Measurement Period by calculating year-over-year sales growth for Zoro Tools, Inc. and MonotaRO Co., Ltd., which are part of the endless assortment businesses.
The Endless Assortment Business Revenue Growth for each calendar year shall then be averaged based upon the total number of calendar years in the Measurement Period to determine the final achievement of the Performance Metric.
The payout percentage for the Performance Metric will be determined based on a straight-line interpolation of the targets reflected below, rounded down to the nearest whole percentage point.
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Targets for Performance Metric
|
|
Target
|
Endless Assortment Business Revenue Growth
Payout Percentage
|
0% or less
|
0%
|
1% to 9%
|
1% to 79%
|
10% to 14%
|
80% to 99%
|
15% to 20%
|
100%
|
21% to 25%
|
101% to 120%
|
26% to 39%
|
121% to 199%
|
40% or greater
|
200% (maximum)
|
Performance Metric
|
Operating Margin
|
Manner of Calculation
|
“Operating Margin” shall be determined by the Committee in its sole discretion for each calendar year in the Measurement Period by calculating the Company’s operating earnings over net sales on a consolidated basis for the particular calendar year.
The Operating Margin for each calendar year shall then be averaged based upon the total number of calendar years in the Measurement Period to determine the final achievement of the Performance Metric.
The payout percentage for the Performance Metric will be determined based on a straight-line interpolation of the targets reflected below, rounded down to the nearest whole percentage point.
|
Targets for Performance Metric
|
|
Target
|
Operating Margin Payout Percentage
|
-200 basis points or less
|
0%
|
-199 basis points to -61 basis points
|
1% to 79%
|
-60 basis points to -21 basis points
|
80% to 99%
|
-20 basis points to 20 basis points
|
100%
|
21 basis points to 60 basis points
|
101% to 120%
|
61 basis points to 199 basis points
|
121% to 199%
|
200 basis points or greater
|
200% (maximum)
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European Union ("EU") / European Economic Area ("EEA") / United Kingdom
|
Belgium
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Canada
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France
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Mexico
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Netherlands
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Portugal
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United Kingdom
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1.
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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
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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:
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/s/ D.G. Macpherson
|
Name:
|
D.G. Macpherson
|
Title:
|
Chairman 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/ Thomas B. Okray
|
Name:
|
Thomas B. Okray
|
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/ D.G. Macpherson
|
D.G. Macpherson
|
Chairman and Chief Executive Officer
|
April 23, 2020
|
|
|
|
/s/ Thomas B. Okray
|
Thomas B. Okray
|
Senior Vice President and Chief Financial Officer
|
April 23, 2020
|