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, 2015 and 2014 | ||
Condensed Consolidated Statements of Comprehensive Earnings for the Three and Six Months Ended June 30, 2015 and 2014 | ||
Condensed Consolidated Balance Sheets as of June 30, 2015 and December 31, 2014 | ||
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2015 and 2014 | ||
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, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Net sales | $ | 2,522,565 | $ | 2,506,104 | $ | 4,962,226 | $ | 4,891,731 | |||||||
Cost of merchandise sold | 1,449,133 | 1,425,418 | 2,795,052 | 2,735,074 | |||||||||||
Gross profit | 1,073,432 | 1,080,686 | 2,167,174 | 2,156,657 | |||||||||||
Warehousing, marketing and administrative expenses | 716,715 | 739,935 | 1,459,209 | 1,461,567 | |||||||||||
Operating earnings | 356,717 | 340,751 | 707,965 | 695,090 | |||||||||||
Other income and (expense): | |||||||||||||||
Interest income | 277 | 413 | 469 | 1,053 | |||||||||||
Interest expense | (4,184 | ) | (2,757 | ) | (5,819 | ) | (5,620 | ) | |||||||
Loss from equity method investment | (4,302 | ) | — | (4,302 | ) | — | |||||||||
Other non-operating income | 484 | 177 | 726 | 345 | |||||||||||
Other non-operating expense | (306 | ) | (159 | ) | (2,714 | ) | (830 | ) | |||||||
Total other expense | (8,031 | ) | (2,326 | ) | (11,640 | ) | (5,052 | ) | |||||||
Earnings before income taxes | 348,686 | 338,425 | 696,325 | 690,038 | |||||||||||
Income taxes | 123,451 | 129,348 | 256,944 | 261,906 | |||||||||||
Net earnings | 225,235 | 209,077 | 439,381 | 428,132 | |||||||||||
Less: Net earnings attributable to noncontrolling interest | 4,687 | 3,162 | 7,818 | 5,564 | |||||||||||
Net earnings attributable to W.W. Grainger, Inc. | $ | 220,548 | $ | 205,915 | $ | 431,563 | $ | 422,568 | |||||||
Earnings per share: | |||||||||||||||
Basic | $ | 3.28 | $ | 2.97 | $ | 6.38 | $ | 6.08 | |||||||
Diluted | $ | 3.25 | $ | 2.94 | $ | 6.32 | $ | 6.00 | |||||||
Weighted average number of shares outstanding: | |||||||||||||||
Basic | 66,652,130 | 68,453,602 | 66,939,110 | 68,576,232 | |||||||||||
Diluted | 67,317,131 | 69,341,885 | 67,647,689 | 69,509,125 | |||||||||||
Cash dividends paid per share | $ | 1.17 | $ | 1.08 | $ | 2.25 | $ | 2.01 |
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Net earnings | $ | 225,235 | $ | 209,077 | $ | 439,381 | $ | 428,132 | |||||||
Other comprehensive earnings (losses): | |||||||||||||||
Foreign currency translation adjustments: | |||||||||||||||
Foreign currency translation adjustments, net of tax benefit of $0, $2,098, $0 and $75, respectively | 9,061 | 23,309 | (66,954 | ) | 8,175 | ||||||||||
Net investment hedge, net of tax (expense) benefit of $0, $(1,987), $0 and $255, respectively | — | 3,185 | — | (409 | ) | ||||||||||
Net foreign currency translation (loss) | 9,061 | 26,494 | (66,954 | ) | 7,766 | ||||||||||
Defined postretirement benefit plan: | |||||||||||||||
Reclassification adjustments related to amortization, net of tax benefit (expense) of $512, $(1,687), $1,021 and $(1,051), respectively | (810 | ) | 6,031 | (1,623 | ) | 5,013 | |||||||||
Derivative instrument change in fair value of cash flow hedge | 245 | (9 | ) | 727 | 23 | ||||||||||
Comprehensive earnings, net of tax | 233,731 | 241,593 | 371,531 | 440,934 | |||||||||||
Less: Comprehensive earnings (losses) attributable to noncontrolling interest | |||||||||||||||
Net earnings | 4,687 | 3,162 | 7,818 | 5,564 | |||||||||||
Foreign currency translation adjustments | (1,509 | ) | 1,551 | (1,802 | ) | 3,030 | |||||||||
Comprehensive earnings attributable to W.W. Grainger, Inc. | $ | 230,553 | $ | 236,880 | $ | 365,515 | $ | 432,340 |
(Unaudited) | |||||||
ASSETS | June 30, 2015 | Dec 31, 2014 | |||||
CURRENT ASSETS | |||||||
Cash and cash equivalents | $ | 819,786 | $ | 226,644 | |||
Accounts receivable (less allowances for doubtful | |||||||
accounts of $20,600 and $22,121, respectively) | 1,197,856 | 1,172,924 | |||||
Inventories – net | 1,302,977 | 1,356,396 | |||||
Prepaid expenses and other assets | 95,008 | 102,669 | |||||
Deferred income taxes | 60,295 | 61,387 | |||||
Prepaid income taxes | 47,824 | 47,529 | |||||
Total current assets | 3,523,746 | 2,967,549 | |||||
PROPERTY, BUILDINGS AND EQUIPMENT | 3,150,247 | 3,115,130 | |||||
Less: Accumulated depreciation and amortization | 1,825,696 | 1,790,784 | |||||
Property, buildings and equipment – net | 1,324,551 | 1,324,346 | |||||
DEFERRED INCOME TAXES | 17,360 | 16,718 | |||||
GOODWILL | 486,612 | 506,905 | |||||
OTHER ASSETS AND INTANGIBLES – NET | 474,640 | 467,531 | |||||
TOTAL ASSETS | $ | 5,826,909 | $ | 5,283,049 |
(Unaudited) | |||||||
LIABILITIES AND SHAREHOLDERS' EQUITY | June 30, 2015 | Dec 31, 2014 | |||||
CURRENT LIABILITIES | |||||||
Short-term debt | $ | 30,495 | $ | 56,896 | |||
Current maturities of long-term debt | 26,275 | 23,404 | |||||
Trade accounts payable | 498,416 | 554,088 | |||||
Accrued compensation and benefits | 155,048 | 191,696 | |||||
Accrued contributions to employees’ profit sharing plans | 70,130 | 178,076 | |||||
Accrued expenses | 255,910 | 245,300 | |||||
Income taxes payable | 10,828 | 12,256 | |||||
Total current liabilities | 1,047,102 | 1,261,716 | |||||
LONG-TERM DEBT (less current maturities) | 1,348,642 | 403,333 | |||||
DEFERRED INCOME TAXES AND TAX UNCERTAINTIES | 95,464 | 95,455 | |||||
EMPLOYMENT-RELATED AND OTHER NON-CURRENT LIABILITIES | 236,263 | 238,444 | |||||
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; issued 109,659,219 shares | 54,830 | 54,830 | |||||
Additional contributed capital | 975,147 | 948,340 | |||||
Retained earnings | 6,615,081 | 6,335,990 | |||||
Accumulated other comprehensive losses | (162,721 | ) | (96,673 | ) | |||
Treasury stock, at cost – 43,684,082 and 42,227,178 shares, respectively | (4,461,822 | ) | (4,032,615 | ) | |||
Total W.W. Grainger, Inc. shareholders’ equity | 3,020,515 | 3,209,872 | |||||
Noncontrolling interest | 78,923 | 74,229 | |||||
Total shareholders' equity | 3,099,438 | 3,284,101 | |||||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 5,826,909 | $ | 5,283,049 |
Six Months Ended | |||||||
June 30, | |||||||
2015 | 2014 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||
Net earnings | $ | 439,381 | $ | 428,132 | |||
Provision for losses on accounts receivable | 4,630 | 4,782 | |||||
Deferred income taxes and tax uncertainties | 1,995 | (9,605 | ) | ||||
Depreciation and amortization | 106,937 | 93,796 | |||||
Stock-based compensation | 27,043 | 28,988 | |||||
(Gains) losses from non-cash charges and sales of assets | (51 | ) | 14,576 | ||||
Losses from equity method investment | 4,302 | — | |||||
Change in operating assets and liabilities – net of business acquisitions and divestitures: | |||||||
Accounts receivable | (50,586 | ) | (98,574 | ) | |||
Inventories | 26,075 | (13,497 | ) | ||||
Prepaid expenses and other current assets | 6,929 | (4,610 | ) | ||||
Trade accounts payable | (29,144 | ) | 2,852 | ||||
Accrued liabilities | (169,123 | ) | (127,930 | ) | |||
Current income taxes payable | (847 | ) | 1,601 | ||||
Employment-related and other non-current liabilities | 4,231 | 6,712 | |||||
Other – net | (2,267 | ) | 1,243 | ||||
Net cash provided by operating activities | 369,505 | 328,466 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||
Additions to property, buildings and equipment | (170,873 | ) | (156,210 | ) | |||
Proceeds from sales of property, buildings and equipment | 10,119 | 5,416 | |||||
Equity method investment | (10,190 | ) | — | ||||
Net cash received for business divestitures | 1,114 | 19,199 | |||||
Other – net | (567 | ) | — | ||||
Net cash used in investing activities | (170,397 | ) | (131,595 | ) | |||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||
Borrowings under lines of credit | 26,842 | 44,686 | |||||
Payments against lines of credit | (46,649 | ) | (64,634 | ) | |||
Proceeds from issuance of long-term debt and commercial paper borrowings | 995,880 | 54,997 | |||||
Payments of long-term debt and commercial paper | (30,597 | ) | (9,538 | ) | |||
Proceeds from stock options exercised | 35,549 | 31,816 | |||||
Excess tax benefits from stock-based compensation | 17,106 | 22,177 | |||||
Purchase of treasury stock | (442,595 | ) | (235,847 | ) | |||
Cash dividends paid | (153,906 | ) | (140,885 | ) | |||
Net cash provided by (used in) financing activities | 401,630 | (297,228 | ) | ||||
Exchange rate effect on cash and cash equivalents | (7,596 | ) | 1,420 | ||||
NET CHANGE IN CASH AND CASH EQUIVALENTS | 593,142 | (98,937 | ) | ||||
Cash and cash equivalents at beginning of year | 226,644 | 430,644 | |||||
Cash and cash equivalents at end of period | $ | 819,786 | $ | 331,707 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Service cost | $ | 2,532 | $ | 2,252 | $ | 5,064 | $ | 4,503 | |||||||
Interest cost | 2,412 | 2,637 | 4,824 | 5,274 | |||||||||||
Expected return on assets | (2,594 | ) | (2,060 | ) | (5,188 | ) | (4,119 | ) | |||||||
Amortization of transition asset | — | (35 | ) | — | (71 | ) | |||||||||
Amortization of unrecognized losses | 378 | 195 | 756 | 390 | |||||||||||
Amortization of prior service credits | (1,700 | ) | (1,814 | ) | (3,400 | ) | (3,627 | ) | |||||||
Net periodic benefit costs | $ | 1,028 | $ | 1,175 | $ | 2,056 | $ | 2,350 |
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 |
Three Months Ended June 30, 2014 | |||||||||||||||
United States | Canada | Other Businesses | Total | ||||||||||||
Total net sales | $ | 1,992,955 | $ | 264,046 | $ | 298,926 | $ | 2,555,927 | |||||||
Intersegment net sales | (49,358 | ) | (42 | ) | (423 | ) | (49,823 | ) | |||||||
Net sales to external customers | $ | 1,943,597 | $ | 264,004 | $ | 298,503 | $ | 2,506,104 | |||||||
Segment operating earnings | $ | 365,099 | $ | 19,212 | $ | (456 | ) | $ | 383,855 |
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 |
Six Months Ended June 30, 2014 | |||||||||||||||
United States | Canada | Other Businesses | Total | ||||||||||||
Total net sales | $ | 3,890,265 | $ | 518,342 | $ | 573,832 | $ | 4,982,439 | |||||||
Intersegment net sales | (90,225 | ) | (88 | ) | (395 | ) | (90,708 | ) | |||||||
Net sales to external customers | $ | 3,800,040 | $ | 518,254 | $ | 573,437 | $ | 4,891,731 | |||||||
Segment operating earnings | $ | 718,786 | $ | 40,508 | $ | 8,019 | $ | 767,313 |
United States | Canada | Other Businesses | Total | ||||||||||||
Segment assets: | |||||||||||||||
June 30, 2015 | $ | 2,188,815 | $ | 348,508 | $ | 356,992 | $ | 2,894,315 | |||||||
December 31, 2014 | $ | 2,181,521 | $ | 394,342 | $ | 345,987 | $ | 2,921,850 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Operating earnings: | |||||||||||||||
Total operating earnings for operating segments | $ | 394,190 | $ | 383,855 | $ | 779,192 | $ | 767,313 | |||||||
Unallocated expenses and eliminations | (37,473 | ) | (43,104 | ) | (71,227 | ) | (72,223 | ) | |||||||
Total consolidated operating earnings | $ | 356,717 | $ | 340,751 | $ | 707,965 | $ | 695,090 |
June 30, 2015 | Dec 31, 2014 | ||||||
Assets: | |||||||
Total assets for operating segments | $ | 2,894,315 | $ | 2,921,850 | |||
Other current and non-current assets | 2,069,484 | 2,113,900 | |||||
Unallocated assets | 863,110 | 247,299 | |||||
Total consolidated assets | $ | 5,826,909 | $ | 5,283,049 |
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Net earnings attributable to W.W. Grainger, Inc. as reported | $ | 220,548 | $ | 205,915 | $ | 431,563 | $ | 422,568 | |||||||
Distributed earnings available to participating securities | (742 | ) | (727 | ) | (1,510 | ) | (1,562 | ) | |||||||
Undistributed earnings available to participating securities | (1,418 | ) | (1,666 | ) | (2,879 | ) | (3,765 | ) | |||||||
Numerator for basic earnings per share – Undistributed and distributed earnings available to common shareholders | 218,388 | 203,522 | 427,174 | 417,241 | |||||||||||
Undistributed earnings allocated to participating securities | 1,418 | 1,666 | 2,879 | 3,765 | |||||||||||
Undistributed earnings reallocated to participating securities | (1,404 | ) | (1,645 | ) | (2,850 | ) | (3,716 | ) | |||||||
Numerator for diluted earnings per share – Undistributed and distributed earnings available to common shareholders | $ | 218,402 | $ | 203,543 | $ | 427,203 | $ | 417,290 | |||||||
Denominator for basic earnings per share – weighted average shares | 66,652,130 | 68,453,602 | 66,939,110 | 68,576,232 | |||||||||||
Effect of dilutive securities | 665,001 | 888,283 | 708,579 | 932,893 | |||||||||||
Denominator for diluted earnings per share – weighted average shares adjusted for dilutive securities | 67,317,131 | 69,341,885 | 67,647,689 | 69,509,125 | |||||||||||
Earnings per share two-class method | |||||||||||||||
Basic | $ | 3.28 | $ | 2.97 | $ | 6.38 | $ | 6.08 | |||||||
Diluted | $ | 3.25 | $ | 2.94 | $ | 6.32 | $ | 6.00 |
United States | Canada | ||||
2015 Forecast (April) | 2015 Forecast (July) | 2015 Forecast (April) | 2015 Forecast (July) | ||
GDP | 2.8% | 2.2% | 1.9% | 1.5% | |
Industrial Production | 1.9% | 1.5% | 1.3% | (1.8)% | |
Exports | 2.2% | 2.2% | 3.9% | 2.9% | |
Business Investment | 7.9% | 5.3% | (1.2)% | (2.1)% | |
Business Inventory | 3.1% | 2.7% | — | — | |
Oil Prices | $48/barrel | $55/barrel | $48/barrel | $55/barrel | |
Source: Global Insight |
Three Months Ended June 30, | ||||||||
As a Percent of Net Sales | Percent Increase/(Decrease) | |||||||
2015 | 2014 | |||||||
Net sales | 100.0 | % | 100.0 | % | 0.7 | % | ||
Cost of merchandise sold | 57.4 | 56.9 | 1.7 | |||||
Gross profit | 42.6 | 43.1 | (0.7 | ) | ||||
Operating expenses | 28.5 | 29.5 | (3.1 | ) | ||||
Operating earnings | 14.1 | 13.6 | 4.7 | |||||
Other income (expense) | (0.3 | ) | (0.1 | ) | 245.3 | |||
Income taxes | 4.9 | 5.2 | (4.6 | ) | ||||
Noncontrolling interest | 0.2 | 0.1 | 48.2 | |||||
Net earnings attributable to W.W. Grainger, Inc. | 8.7 | % | 8.2 | % | 7.1 | % |
Percent Increase/(Decrease) | |
Volume | 4 |
Business acquisition | 1 |
Foreign exchange | (3) |
Price | (1) |
Total | 1% |
Three Months Ended | |||||
June 30, | |||||
2015 | 2014 | % | |||
Diluted earnings per share reported | $3.25 | $2.94 | 11 | % | |
Restructuring costs in Brazil and Europe | 0.02 | — | |||
Retirement plan transition | — | 0.15 | |||
Diluted earnings per share adjusted | $3.27 | $3.09 | 6 | % |
Percent Increase/(Decrease) | |
Volume | 2 |
Intercompany sales to Zoro | 1 |
Price | (1) |
Total | 2% |
Percent Increase/(Decrease) | |
Foreign exchange | (11) |
Volume | (10) |
Business acquisition | 8 |
Price | 4 |
Total | (9)% |
Percent Increase/(Decrease) | |
Volume/Price | 21 |
Foreign exchange | (14) |
Total | 7% |
Six Months Ended June 30, | ||||||||
As a Percent of Net Sales | Percent Increase/(Decrease) | |||||||
2015 | 2014 | |||||||
Net sales | 100.0 | % | 100.0 | % | 1.4 | % | ||
Cost of merchandise sold | 56.3 | 55.9 | 2.2 | |||||
Gross profit | 43.7 | 44.1 | 0.5 | |||||
Operating expenses | 29.4 | 29.9 | (0.2 | ) | ||||
Operating earnings | 14.3 | 14.2 | 1.9 | |||||
Other income (expense) | (0.2 | ) | (0.1 | ) | 130.4 | |||
Income taxes | 5.2 | 5.4 | (1.9 | ) | ||||
Noncontrolling interest | 0.2 | 0.1 | 40.5 | |||||
Net earnings attributable to W.W. Grainger, Inc. | 8.7 | % | 8.6 | % | 2.1 | % |
Percent Increase/(Decrease) | |
Volume | 3 |
Business acquisition | 1 |
Foreign exchange | (3) |
Total | 1% |
Six Months Ended | |||||
June 30, | |||||
2015 | 2014 | % | |||
Diluted earnings per share reported | $6.32 | $6.00 | 5 | % | |
Restructuring costs in Brazil and Europe | 0.05 | — | |||
Retirement plan transition | — | 0.15 | |||
Diluted earnings per share adjusted | $6.37 | $6.15 | 4 | % |
Percent Increase/(Decrease) | |
Volume | 3 |
Intercompany sales to Zoro | 1 |
Price | (1) |
Total | 3% |
Percent Increase/(Decrease) | |
Foreign Exchange | (11) |
Volume | (8) |
Business acquisition | 7 |
Price | 3 |
Total | (9)% |
Percent Increase/(Decrease) | |
Volume/Price | 21 |
Foreign exchange | (14) |
Total | 7% |
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 | 213,303 | $246.00 | 213,303 | 14,786,697 | |
May 1 – May 31 | 495,602 | $246.56 | 495,602 | 14,291,095 | |
June 1 – June 30 | 580,613 | $240.05 | 580,613 | 13,710,482 | |
Total | 1,289,518 | $243.54 | 1,289,518 |
(A) | There were no shares withheld to satisfy tax withholding obligations in connection with the vesting of employee restricted stock awards. |
(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. Activity is reported on a trade date basis. |
Item 6. | Exhibits |
(a) | Exhibits (numbered in accordance with Item 601 of Regulation S-K) | ||
(3) | (ii) Bylaws, as amended | ||
(10) | Material Contracts | ||
(b)(i) Separation Agreement and General Release by and between Grainger and Court Carruthers dated July 22, 2015. | |||
(31) | Rule 13a – 14(a)/15d – 14(a) Certifications | ||
(a) Chief Executive Officer certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |||
(b) Chief Financial Officer certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |||
(32) | Section 1350 Certifications | ||
Certifications 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. |
W.W. Grainger, Inc. | |||
(Registrant) | |||
Date: | July 30, 2015 | By: | /s/ R. L. Jadin |
R. L. Jadin, Senior Vice President and Chief Financial Officer | |||
Date: | July 30, 2015 | By: | /s/ W. Lomax |
W. Lomax, Vice President and Controller |
1. | Resignation. Carruthers will resign from the office of Senior Vice President effective July 31, 2015 (the “Resignation Date”) and agrees to execute such documents as may be required to effect his resignation as an officer or director of the Company, its parent or any of its affiliates. Until December 31, 2015 (the “Separation Date”) Carruthers will receive his regular salary and benefit coverage, and in so doing will assist the Company with the transition of his responsibilities, as required. His employment status with the Company will terminate for all purposes on the earlier of December 31, 2017 or the date on which Separation Payments cease (the “Termination Date”). |
2. | Separation Payments. Subject to continued compliance by Carruthers with his obligations under section 16 hereunder, commencing on the first pay date following the Separation Date, the Company shall pay the equivalent of eighteen (18) months of salary to Carruthers, calculated at his current base rate of pay (the “Separation Payments”), less required deductions with no other allowances except as called out below. Payments shall be made on the Company’s regular pay dates and pursuant to the Company’s normal payroll processes on a pro-rated basis over a period of eighteen (18) months, or pro-rated over 24 months ending December 31, 2017, at Carruthers’ election. In the event of the death of Carruthers prior to the Termination Date, the balance of any Separation Payments to which he is entitled at that time shall be paid to the duly appointed personal representative of his estate. The Separation Payments are inclusive of any statutory entitlements. |
3. | Management Incentive Program (“MIP”). Carruthers’ current and future participation in the MIP shall be governed by way of this Section as well as the provisions of the Plan then in effect. In or about March 2016, Carruthers will receive a payment under the MIP in respect of the full year 2015, based upon his current base salary subject to the applicable percentage multiple and the actual performance of the Company, and pursuant to the terms of the Plan then in effect as would be applicable to Senior Officers of the Company. No other MIP payments will be made to Carruthers beyond those outlined above. |
4. | Vacation Pay/PTO. Carruthers will be paid all vacation pay/PTO outstanding and accrued as of the Separation Date on the date of the first Separation Payment in accordance with the Company’s practice and subject to applicable United States and Canadian provisions. No additional vacation or PTO will be earned after this date. |
5. | Group Health Benefits. Carruthers’ current group health benefit coverage for health care, dental, life insurance and vision care benefits will continue, to the extent permitted by the carriers, until the earlier of the Termination Date or the date on which Carruthers becomes eligible for benefit coverage through a subsequent employer, subject to any revisions to the plans that are made generally in respect of benefits for executives of the Company. Eligibility for Grainger’s Executive Physical Examination Program shall remain available to Carruthers for the years 2015 and 2016. All other benefit coverage and Carruthers’ eligibility to participate in any other Company employee programs end on the Separation Date. |
6. | Pension Plan. The Company will, consistent with its past practice and subject to Carruthers continuing his contributions, continue its contributions to the defined contribution pension plan to the earlier of the Termination Date or the date on which Carruthers becomes eligible for membership in a pension plan through a subsequent employer. Carruthers will be contacted by the plan administrator after his participation ends regarding his options under the pension plan. |
7. | Notional Account Plan. To the extent permissible, the Company will continue to make notional contributions based on the eligible portion of the Separation Payments for the period ending on the Termination Date in accordance with the provisions of the Acklands-Grainger Inc. Notional Account Plan for Designated Executives and Senior Managers. Receipt of any Notional Account balance shall occur pursuant to the provisions of the Notional Plan. So as to insure compliance with U.S. Section 409-a, Carruthers will receive payment of all funds contained within his Notional Account 6 months after his Termination Date. |
8. | Expatriation - Long Term International Assignment. The terms of the repatriation engagement letter dated December 22, 2011, with the exception of the tax equalization provisions, shall continue to apply up to the Separation Date. Tax equalization provisions will apply to all payments pursuant to the terms of this Agreement. Should Carruthers elect to be repatriated to Canada prior to the Separation Date, the repatriation provisions of the repatriation engagement letter will be honoured. Should Carruthers return to Canada after his Separation Date but prior to September 30, 2016, Grainger will provide Carruthers with a sum, up to $25,000 against invoices for purposes of the movement of household goods between the United States and Canada. |
9. | Stock Options and Performance Share Units. Carruthers will be eligible to exercise all vested stock options pursuant to the terms of the W.W. Grainger, Inc. 2010 Incentive Plan and companion agreements. Applicable Options and Performance Share Units (i.e. awarded in 2012, 2013 and 2014) will continue to vest through the Termination Date, with any remaining unvested options or units forfeiting as of the Termination Date. Thereafter, all then vested options must be exercised on or before the expiration date of each option or within three (3) months of the Termination Date, whichever should occur first. The Special January 1, 2014 PRSU Grant shall vest by operation of this Agreement as of January 1, 2017. Performance Shares issued in 2013, 2014 and 2015 will vest by operation of this Agreement. Carruthers further understands and agrees that the non-competition provisions of performance share, restricted stock unit and/or stock option agreements to which Carruthers is a party, which provisions are incorporated herein by reference, including without limitation the W.W. Grainger, Inc. Unfair Competition Agreement dated January 1, 2015, and the W.W. Grainger, Inc. Stock Option Agreement dated April 30, 2014 (collectively, the "noncompetition provisions"), will remain in full force and effect, and are in addition to and not superseded by any other obligation set forth in this Agreement. Carruthers acknowledges and agrees that, for purposes of such agreements, his employment with the Company shall be considered terminated on the Termination Date hereunder, and the term "Date of Termination" as used in the Unfair Competition Agreement dated January 1, 2015, shall mean the Termination Date hereunder. Carruthers understands that he will not be eligible for any further grants of Stock Options or Performance Shares beyond those he has already received. |
10. | Outplacement Services. Carruthers shall be provided with executive level outplacement services through one of the outplacement service providers identified by the Company. Carruthers shall have the opportunity to both interview and thereafter elect which service provider he chooses to work with from those being made available to him. Engagement of this service shall remain available to Carruthers so long as he actively begins utilization of services on or before December 31, 2016. |
11. | Executive Advanced Management Program - University of Chicago. Provided that existing Executive Advanced Management Program requirements continue to be met, the Company will pay the base cost of the current program through its previously established end date. |
12. | Executive Coaching. If Carruthers so requests, the Company will continue to make Executive Coaching services available to Carruthers, consistent with his current engagement schedule, through his Separation Date. |
13. | Tax Preparation. The Company will continue to provide tax preparation services to Carruthers for services incurred in the preparation of his tax returns through to the year following the last scheduled year in which Carruthers is receiving payments pursuant to the terms of this Agreement. |
14. | Waiver and Release of All Claims. In consideration for the promises and undertakings contained in this Agreement, and for other good and valuable consideration, the receipt of which is hereby acknowledged, Carruthers and his marital community, descendants, dependents, heirs, representatives, agents, attorneys, successors and assigns, hereby waive, release, and discharge the Company, W.W. Grainger, Inc., their affiliates and subsidiaries (collectively “Grainger”) from any and all complaints, claims, charges, claims for relief, demands, suits, actions, and causes of action, whether in law or in equity, whether administrative, judicial, or other, which they have asserted or could assert against Grainger at common law or under any statute, ordinance, rule, regulation, order, policy, or law, whether federal, state, provincial or local, on any grounds whatsoever, known or unknown, including any and all claims arising under the Employment Standards Act, 2000, the Human Rights Code (Ontario), Illinois’ fair employment statutes, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Civil Rights Acts of 1866 and 1871, the Immigration Reform and Control Act, the Fair Labor Standards Act, the Employee Retirement and Income Security Act, the federal Family and Medical Leave Act, the Americans with Disabilities Act, the Equal Pay Act, the Age Discrimination in Employment Act, the Older Workers’ Benefit Protection Act, and any and all actions for breach of contract, express or implied, breach of the covenant of good faith and fair dealing, express or implied, wrongful termination in violation of public policy, all other claims for wrongful termination and constructive discharge, and all other tort claims, including assault, battery, intentional or negligent infliction of emotional distress, invasion of privacy, negligence, negligent investigation, negligent hiring or retention, defamation, libel or slander, intentional or negligent misrepresentation, fraud, whistleblowing, and any and all other laws and regulations relating to employment termination, employment discrimination, harassment or retaliation, wages, hours, benefits, compensation, bonuses, incentives, and any and all claims for attorneys’ fees and costs. This waiver and release of claims includes all other claims, disputes, and causes of action arising out of Carruthers’ employment with Grainger and the end of that employment up to the date of execution of this Agreement. |
15. | Officer Indemnification. The current officer indemnification coverage shall remain in full force and effect pursuant to the terms and conditions of the Individual Indemnification Agreement with Carruthers, as well as continued coverage under the Company’s Directors & Officers indemnity program subject to the terms and conditions of the program. |
16. | Covenants of Carruthers. It is a condition of this Agreement that Carruthers agree to the following cooperation, non-disclosure, non-competition, non-solicitation and non-disparagement covenants. Continued payments under this Agreement are contingent upon continued compliance with these obligations. In the event of a violation of any of these covenants by Carruthers, all Separation Payments, benefits and other compensation under this Agreement will cease forthwith and the Company will have no further obligations whatsoever to Carruthers subject to any statutory entitlements. |
a. | Co-operation and Assistance. Carruthers agrees that he will make himself available, as requested and at reasonable times, to provide assistance relative to Company-related matters as well as to assist on any litigation or other or legal matter of which Carruthers has knowledge or in which he was previously involved through his Termination Date. Carruthers will be reimbursed for all approved expenses he may incur in furtherance of these efforts. |
b. | Non-Competition. Carruthers understands and agrees that the non-competition, non disclosure, non-solicitation and non-disparagement provisions of the 2015 Unfair Competition Agreement, 2014 and 2015 Stock Option Award / Performance Share / PRSU Agreements to which he is a party, and which provisions are incorporated herein by reference, will remain in full force and effect, and are in addition to and not superseded by any other obligation set forth in this Agreement. Carruthers acknowledges and agrees that, for purposes of the Unfair Competition Agreement: (i) his employment with the Company shall be considered terminated on the Termination Date hereunder; (ii) the term "Date of Termination" in the Unfair Competition Agreement dated January 1, 2015, shall mean the Termination Date hereunder; and (iii) the term "Restricted Period" in such agreement shall mean the period ending December 31, 2019. At the request of Carruthers, the Company shall consider and respond to any specific requests for a waiver of any restriction against competition in respect of a specific competitor of the Company, its parent and affiliates. |
17. | Change in Control. The outstanding Change of Control Agreement dated October 27, 2010 is null and void and of no effect as of the Separation Date. |
18. | References and Communications. At Carruthers' request, the Company will provide positive and mutually agreed-upon references through Jim Ryan, Chairman and C.E.O of W.W. Grainger, Inc. to prospective employers. Carruthers shall have an opportunity to review and comment on any Company press release or announcement concerning his departure. In an effort to insure that no conflict exists, Carruthers shall prior to any public disclosure relating to his future employment plans or future employer, notify Grainger of said potential engagement. |
19. | Governing Law; Severability. This Agreement is governed by the laws of the Province of Ontario. In the event any provision of this Agreement is determined to be unlawful or unenforceable by a duly authorized court of competent jurisdiction, the remainder of this Agreement shall not be affected thereby and each provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law. |
20. | Entire Agreement. This Agreement sets forth the full terms of the arrangements between the Company and Carruthers and supersedes any prior oral or written understanding with respect to any entitlements on termination of employment, except in so far as other agreements are incorporated by reference in this Agreement. Carruthers specifically acknowledges and agrees that, apart from the terms of this Agreement, he has no further rights to or entitlements to any additional compensation, benefits, perquisites, notice, pay in lieu of notice, severance pay, stock options or restricted stock units of any nature or kind. |
21. | Confidentiality. Both parties agree that the terms associated with the development and execution of this Agreement are strictly confidential and shall not be disclosed to any other person, except as required by law, to the parties' tax or legal advisors, or by Carruthers to his spouse, who shall be informed of the obligation of confidentiality. |
22. | Independent Legal Advice. Carruthers hereby accepts and agrees to the terms and conditions of this Agreement and acknowledges having had an opportunity to obtain independent legal advice prior to execution hereof. |
23. | Currency. All payments and amounts referred to in this Agreement are in Canadian funds, unless otherwise specified. |
24. | Successors. This Agreement shall be binding upon any successors of the Company. |
25. | Effective Date. This Agreement is conditional on the approval of the Company’s Board of Directors and shall become effective, once approved, immediately after it is signed by both parties. |
ACKLANDS-GRAINGER INC. | ||
/s/ Court Carruthers | /s/ Joseph C. High | |
Court Carruthers | By: Joseph C. High | |
Date: July 22, 2015 | Date: July 22, 2015 | |
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/ 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 30, 2015 |
/s/ R. L. Jadin |
R. L. Jadin |
Senior Vice President and Chief Financial Officer |
July 30, 2015 |
EQUITY METHOD INVESTMENT (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2015 |
Jun. 30, 2014 |
Jun. 30, 2015 |
Jun. 30, 2014 |
|
Equity Method Investments and Joint Ventures [Abstract] | ||||
Equity Method Investments | $ 6,000 | $ 6,000 | ||
Loss from equity method investment | $ (4,302) | $ 0 | $ (4,302) | $ 0 |
NEW ACCOUNTING STANDARDS |
6 Months Ended |
---|---|
Jun. 30, 2015 | |
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
NEW ACCOUNTING STANDARDS | NEW ACCOUNTING STANDARDS In February 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis. This ASU which is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2015, changes the consolidation analysis required under U.S. GAAP for limited partnerships and other variable interest entities. Early adoption is permitted and the ASU allows for either retrospective or modified retrospective application. This ASU is not expected to have a material impact on the Company's consolidated financial statements. In July 2015, the FASB announced a one-year delay in the effective date of ASU 2014-09, Revenue from Contracts with Customers. The standard will now be effective for interim and annual periods beginning after December 15, 2017. The standard also permits adoption as early as the original effective date, which was for interim and annual periods beginning after December 15, 2016. This ASU is not expected to have a material impact on the Company's consolidated financial statements. In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs. This ASU which is effective for fiscal years and interim periods beginning after December 15, 2015, changes the presentation of debt issuance costs in financial statements as a direct deduction from the related debt liability rather than as an asset. Early adoption is permitted and retrospective application is required. Effective June 30, 2015, the Company has adopted ASU 2015-03 and the Condensed Consolidated Balance Sheet was retroactively restated under the new presentation. The adoption of ASU 2015-03 did not have a material impact to the Company's consolidated financial statements, as existing debt issuance costs were immaterial. In April 2015, the FASB issued ASU 2015-05, Customer's Accounting for Fees Paid in a Cloud Computing Arrangement. This ASU which is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2015, provides guidance to customers about whether a cloud computing arrangement includes a software license. Early adoption is permitted and the ASU allows for either retrospective or prospective application. This ASU is not expected to have a material impact on the Company's consolidated financial statements. |
SUBSEQUENT EVENTS (Details) - 1 months ended Jul. 30, 2015 - Subsequent Event [Member] - GBP (£) £ in Millions |
Total |
---|---|
Subsequent Event [Line Items] | |
Business Acquisition, Name of Entity to be Acquired | Cromwell Group (Holdings) Limited |
Business Acquisition, Description of Entity to be Acquired | a distributor of MRO products headquartered in Leicester, England |
Value of Business to be Acquired | £ 310 |
BACKGROUND AND BASIS OF PRESENTATION |
6 Months Ended |
---|---|
Jun. 30, 2015 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
BACKGROUND AND BASIS OF PRESENTATION | BACKGROUND AND BASIS OF PRESENTATION W.W. Grainger, Inc. is a broad-line distributor of maintenance, repair and operating supplies, and other related products and services used by businesses and institutions. W.W. Grainger, Inc.’s operations are primarily in the United States and Canada, with a presence in Europe, Asia and Latin America. In this report, the words “Company” or “Grainger” mean W.W. Grainger, Inc. and its subsidiaries. The Condensed Consolidated Financial Statements of the Company and the related notes are unaudited and should be read in conjunction with the consolidated financial statements and related notes for the year ended December 31, 2014 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC). The Condensed Consolidated Balance Sheet as of December 31, 2014 has been derived from the audited consolidated financial statements at that date, but does not include all of the disclosures required by accounting principles generally accepted in the United States of America for complete financial statements. The unaudited financial information reflects all adjustments (primarily consisting of normal recurring adjustments) which, in the opinion of management, are necessary for a fair presentation of the statements contained herein. |
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2015 |
Jun. 30, 2014 |
Jun. 30, 2015 |
Jun. 30, 2014 |
|
Net sales | $ 2,522,565 | $ 2,506,104 | $ 4,962,226 | $ 4,891,731 |
Cost of merchandise sold | 1,449,133 | 1,425,418 | 2,795,052 | 2,735,074 |
Gross profit | 1,073,432 | 1,080,686 | 2,167,174 | 2,156,657 |
Warehousing, marketing and administrative expenses | 716,715 | 739,935 | 1,459,209 | 1,461,567 |
Operating earnings | 356,717 | 340,751 | 707,965 | 695,090 |
Other income and (expense): | ||||
Interest income | 277 | 413 | 469 | 1,053 |
Interest expense | (4,184) | (2,757) | (5,819) | (5,620) |
Loss from equity method investment | (4,302) | 0 | (4,302) | 0 |
Other non-operating income | 484 | 177 | 726 | 345 |
Other non-operating expense | (306) | (159) | (2,714) | (830) |
Total other expense | (8,031) | (2,326) | (11,640) | (5,052) |
Earnings before income taxes | 348,686 | 338,425 | 696,325 | 690,038 |
Income taxes | 123,451 | 129,348 | 256,944 | 261,906 |
Net earnings | 225,235 | 209,077 | 439,381 | 428,132 |
Less: Net earnings attributable to noncontrolling interest | 4,687 | 3,162 | 7,818 | 5,564 |
Net earnings attributable to W.W. Grainger, Inc. | $ 220,548 | $ 205,915 | $ 431,563 | $ 422,568 |
Earnings per share: | ||||
Basic (in dollars per share) | $ 3.28 | $ 2.97 | $ 6.38 | $ 6.08 |
Diluted (in dollars per share) | $ 3.25 | $ 2.94 | $ 6.32 | $ 6.00 |
Weighted average number of shares outstanding: | ||||
Basic (in shares) | 66,652,130 | 68,453,602 | 66,939,110 | 68,576,232 |
Diluted (in shares) | 67,317,131 | 69,341,885 | 67,647,689 | 69,509,125 |
Cash dividends paid per share (in dollars per share) | $ 1.17 | $ 1.08 | $ 2.25 | $ 2.01 |
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (PARENTHETICALS) - USD ($) |
Jun. 30, 2015 |
Dec. 31, 2014 |
---|---|---|
Allowance for doubtful accounts | $ 20,600,000 | $ 22,121,000 |
Cumulative preferred stock, par value | $ 5 | $ 5 |
Cumulative preferred stock, shares authorized | 12,000,000 | 12,000,000 |
Cumulative preferred stock, shares issued | 0 | 0 |
Cumulative preferred stock, shares outstanding | 0 | 0 |
Common stock, par value | $ 0.5 | $ 0.5 |
Common stock, shares authorized | 300,000,000 | 300,000,000 |
Common stock, shares issued | 109,659,219 | 109,659,219 |
Treasury stock, shares at cost | 43,684,082 | 42,227,178 |
DIVIDEND (Details) - 1 months ended Jul. 29, 2015 - Subsequent Event [Member] - $ / shares |
Total |
---|---|
Dividends Payable [Line Items] | |
Dividends Payable, Amount Per Share | $ 1.17 |
Dividend payable date to be paid | Sep. 01, 2015 |
Dividends payable record date | Aug. 10, 2015 |
DERIVATIVE INSTRUMENTS (Details) - Interest Rate Swap [Member] - USD ($) $ in Millions |
1 Months Ended | ||
---|---|---|---|
Oct. 31, 2011 |
Jun. 30, 2015 |
Dec. 31, 2014 |
|
Derivative [Line Items] | |||
Derivative instruments, Liabilities | $ 1 | $ 2 | |
Derivative, Maturity Date | Aug. 31, 2016 |
CONTINGENCIES AND LEGAL MATTERS |
6 Months Ended |
---|---|
Jun. 30, 2015 | |
Commitments and Contingencies Disclosure [Abstract] | |
CONTINGENCIES AND LEGAL MATTERS | CONTINGENCIES AND LEGAL MATTERS From time to time the Company is involved in various legal and administrative proceedings that are incidental to its business, including claims related to product liability, general negligence, contract disputes, environmental issues, wage and hour laws, intellectual property, employment practices, regulatory compliance or other matters and actions brought by employees, consumers, competitors, suppliers or governmental entities. As a government contractor selling to federal, state and local governmental entities, the Company is also subject to governmental or regulatory inquiries or audits or other proceedings, including those related to pricing compliance. It is not expected that the ultimate resolution of any of these matters will have, either individually or in the aggregate, a material adverse effect on the Company's consolidated financial position or results of operations. |
DOCUMENT AND ENTITY INFORMATION - Jun. 30, 2015 - USD ($) |
Total |
---|---|
Document Information [Line Items] | |
Entity Registrant Name | GRAINGER W W INC |
Entity Central Index Key | 0000277135 |
Current Fiscal Year End Date | --12-31 |
Entity Filer Category | Large Accelerated Filer |
Document Type | 10-Q |
Document Period End Date | Jun. 30, 2015 |
Document Fiscal Year Focus | 2015 |
Document Fiscal Period Focus | Q2 |
Amendment Flag | false |
Entity Common Stock, Shares Outstanding | 65,975,137 |
Entity Well-known Seasoned Issuer | Yes |
Entity Voluntary Filers | No |
Entity Current Reporting Status | Yes |
Entity Public Float | $ 14,934,345,621 |
SUBSEQUENT EVENTS |
6 Months Ended |
---|---|
Jun. 30, 2015 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | SUBSEQUENT EVENTS On July 30, 2015, the Company announced an agreement to acquire Cromwell Group (Holdings) Limited, together with its subsidiaries, a distributor of MRO products headquartered in Leicester, England, for £310 million GBP, subject to customary adjustments. The transaction is expected to be completed in early September 2015. The acquisition will be funded with debt, both in the United Kingdom and United States. |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS (UNAUDITED) (PARENTHETICALS) - USD ($) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2015 |
Jun. 30, 2014 |
Jun. 30, 2015 |
Jun. 30, 2014 |
|
Foreign currency translation adjustments, tax benefit | $ 0 | $ 2,098,000 | $ 0 | $ 75,000 |
Net investment hedge tax (expense) benefit | 0 | (1,987,000) | 0 | 255,000 |
Tax benefit (expense) from defined postretirement benefit plan reclassification adjustment | $ 512,000 | $ (1,687,000) | $ 1,021,000 | $ (1,051,000) |
DERIVATIVE INSTRUMENTS |
6 Months Ended |
---|---|
Jun. 30, 2015 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
DERIVATIVE INSTRUMENTS | DERIVATIVE INSTRUMENTS The Company uses derivative instruments to manage a portion of exposures to fluctuations in interest rates and foreign currency exchange rates. The Company does not enter into derivative financial instruments for trading or speculative purposes. The fair values of these instruments are determined by using quoted market forward rates (level 2 inputs) and reflect the present value of the amount that the Company would pay for contracts involving the same notional amounts and maturity dates. These instruments qualify for hedge accounting and the changes in fair value are reported as a component of other comprehensive earnings (losses) net of tax effects. As of June 30, 2015 and December 31, 2014, the fair value of the Company's interest rate swap included on the balance sheet as a liability under Employment-related and other noncurrent liabilities was $1 million and $2 million, respectively. The purpose of the interest rate swap is to partially hedge the future interest expense of the euro-denominated term loan entered into to fund a portion of the Fabory acquisition in 2011. The swap matures in August 2016. All remaining derivative instruments were immaterial individually and in the aggregate as of June 30, 2015 and December 31, 2014. |
LONG-TERM DEBT |
6 Months Ended |
---|---|
Jun. 30, 2015 | |
Debt Disclosure [Abstract] | |
LONG-TERM DEBT | LONG-TERM DEBT On June 11, 2015, the Company issued $1 billion of unsecured 4.60% Senior Notes (the "Notes") that mature on June 15, 2045. The Notes require no principal payments until the maturity date and interest is payable semi-annually on June 15 and December 15, beginning on December 15, 2015. Prior to December 15, 2044, the Company may redeem the Notes in whole at any time or in part from time to time at a “make-whole” redemption price. This redemption price is calculated by reference to the then current yield on a US treasury security with a maturity comparable to the remaining term of the Notes plus 25 basis points, together with accrued and unpaid interest, if any, to the redemption date. On or after December 15, 2044, the Company may redeem the Notes in whole at any time or in part from time to time at 100% of their principal amount, together with accrued and unpaid interest, if any, to the redemption date. Costs of approximately $10 million associated with the issuance of the Notes, representing underwriting fees and other expenses, have been recorded as a contra-liability within Long-term debt and will be amortized to interest expense over the term of the Notes. The approximate fair value of the Company's Notes is $1 billion as of June 30, 2015, and approximates the carrying amount. The estimated fair value of the Company’s Notes was based on available external pricing data and current market rates for similar debt instruments, among other factors, and are classified as level 2 inputs within the fair value hierarchy. |
LONG-TERM DEBT (Details) - Jun. 30, 2015 - Senior Notes [Member] - USD ($) $ in Millions |
Total |
---|---|
Debt Instrument [Line Items] | |
Debt Instrument, Issuance Date | Jun. 11, 2015 |
Senior Notes | $ 1,000 |
Debt Instrument, Interest Rate, Stated Percentage | 4.60% |
Debt Instrument, Maturity Date | Jun. 15, 2045 |
Debt Instrument, Redemption, Description | Prior to December 15, 2044, the Company may redeem the Notes in whole at any time or in part from time to time at a “make-whole” redemption price. This redemption price is calculated by reference to the then current yield on a US treasury security with a maturity comparable to the remaining term of the Notes plus 25 basis points, together with accrued and unpaid interest, if any, to the redemption date. On or after December 15, 2044, the Company may redeem the Notes in whole at any time or in part from time to time at 100% of their principal amount, together with accrued and unpaid interest, if any, to the redemption date. |
Debt Issuance Cost | $ 10 |
Long-term Debt, Fair Value | $ 1,000 |
EMPLOYEE BENEFITS (Tables) |
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Defined Benefit Plans and Other Postretirement Benefit Plans Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Periodic Benefit Costs Charged to Operating Expenses | The net periodic benefit costs charged to operating expenses, which are valued at the measurement date of January 1 and recognized evenly throughout the year, consisted of the following components (in thousands of dollars):
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SEGMENT INFORMATION |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SEGMENT INFORMATION | SEGMENT INFORMATION The Company has two reportable segments: the United States and Canada. The United States operating segment reflects the results of the Company's U.S. business. The Canada operating segment reflects the results for Acklands – Grainger Inc., the Company’s Canadian business. Other businesses include Zoro, the single channel business in the United States, and operations in Europe, Asia and Latin America. These other businesses individually do not meet the definition of a reportable segment. Operating segments generate revenue almost exclusively through the distribution of maintenance, repair and operating supplies, as service revenues account for less than 1% of total revenues for each operating segment. Following is a summary of segment results (in thousands of dollars):
Following are reconciliations of segment information with the consolidated totals per the financial statements (in thousands of dollars):
Assets for operating segments include net accounts receivable and first-in, first-out inventory which are reported to the Company's Chief Operating Decision Maker. Other current and non-current assets include all other asset balances for the operating segments. Unallocated expenses and unallocated assets primarily relate to the Company headquarter's support services, which are not part of any business segment, as well as intercompany eliminations. Unallocated expenses include payroll and benefits, depreciation and other costs associated with headquarters-related support services. Unallocated assets include non-operating cash and cash equivalents, certain prepaid expenses and property, buildings and equipment-net. Unallocated assets increased by $616 million at June 30, 2015 compared to December 31, 2014, primarily due to increased cash balances from the issuance of $1 billion in long-term debt. Intersegment net sales for the U.S. segment increased by $38 million for the six months of 2015 compared to the prior year, driven by increased sales from the U.S. business to Zoro. The U.S. business' supply chain network is Zoro's primary source of inventory. Other current and non-current assets decreased by $44 million at June 30, 2015 compared to December 31, 2014, primarily due to lower goodwill and intangible balances, as a result of foreign currency translation. |
EQUITY METHOD INVESTMENT |
6 Months Ended |
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Jun. 30, 2015 | |
Equity Method Investments and Joint Ventures [Abstract] | |
EQUITY METHOD INVESTMENT | EQUITY METHOD INVESTMENT In May 2015, the Company invested in a limited liability company (“LLC”) established to produce refined coal, which is then sold to a utility to produce electricity. The production and sale of refined coal is eligible for renewable energy tax credits under Section 45 of the Internal Revenue Code. Under the terms of the investment, effective control lies with a co-investor who manages the day-to-day operations of the entity. The Company will fund its share of operating expenses of the entity through January 2019 and receive tax credits in proportion to its equity investment. The investment will be accounted for under the equity method of accounting. As of June 30, 2015, the investment balance was $6 million and is included on the balance sheet under Other assets and intangibles-net. During the period, the Company recorded $4 million in equity losses and the tax benefit of energy tax credits is reflected in the Company’s effective tax rate. |
EMPLOYEE BENEFITS |
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Defined Benefit Plans and Other Postretirement Benefit Plans Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
EMPLOYEE BENEFITS - POSTRETIREMENT | EMPLOYEE BENEFITS - POSTRETIREMENT The Company has a postretirement healthcare benefits plan that provides coverage for a majority of its United States employees hired prior to January 1, 2013, and their dependents should they elect to maintain such coverage upon retirement. Covered employees become eligible for participation when they qualify for retirement while working for the Company. Participation in the plan is voluntary and requires participants to make contributions toward the cost of the plan, as determined by the Company. The net periodic benefit costs charged to operating expenses, which are valued at the measurement date of January 1 and recognized evenly throughout the year, consisted of the following components (in thousands of dollars):
The Company has established a Group Benefit Trust to fund the plan and process benefit payments. The funding of the trust is an estimated amount which is intended to allow the maximum deductible contribution under the Internal Revenue Code of 1986 (IRC), as amended. There are no minimum funding requirements and the Company intends to follow its practice of funding the maximum deductible contribution under the IRC. During the three and six months ended June 30, 2015, the Company contributed $1.7 million and $2.1 million, respectively, to the trust. |
EARNINGS PER SHARE |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
EARNINGS PER SHARE | EARNINGS PER SHARE The following table sets forth the computation of basic and diluted earnings per share under the two-class method (in thousands of dollars, except for share and per share amounts):
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EARNINGS PER SHARE (Tables) |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Computation of Basic and Diluted Earnings per Share under two-class method | The following table sets forth the computation of basic and diluted earnings per share under the two-class method (in thousands of dollars, except for share and per share amounts):
|
EMPLOYEE BENEFITS (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2015 |
Jun. 30, 2014 |
Jun. 30, 2015 |
Jun. 30, 2014 |
|
Defined Benefit Plans and Other Postretirement Benefit Plans Disclosures [Abstract] | ||||
Defined Benefit Plan, Contributions by Employer | $ 1,700 | $ 2,100 | ||
Service cost | 2,532 | $ 2,252 | 5,064 | $ 4,503 |
Interest cost | 2,412 | 2,637 | 4,824 | 5,274 |
Expected return on assets | (2,594) | (2,060) | (5,188) | (4,119) |
Amortization of transition asset | 0 | (35) | 0 | (71) |
Amortization of unrecognized losses | 378 | 195 | 756 | 390 |
Amortization of prior service credits | (1,700) | (1,814) | (3,400) | (3,627) |
Net periodic benefit costs | $ 1,028 | $ 1,175 | $ 2,056 | $ 2,350 |
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