Company Quick10K Filing
Grainger WW
Price291.11 EPS18
Shares55 P/E16
MCap16,075 P/FCF21
Net Debt1,872 EBIT1,312
TEV17,947 TEV/EBIT14
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-06-30 Filed 2020-07-23
10-Q 2020-03-31 Filed 2020-04-23
10-K 2019-12-31 Filed 2020-02-20
10-Q 2019-09-30 Filed 2019-10-23
10-Q 2019-06-30 Filed 2019-07-24
10-Q 2019-03-31 Filed 2019-04-22
10-K 2018-12-31 Filed 2019-02-28
10-Q 2018-09-30 Filed 2018-11-01
10-Q 2018-06-30 Filed 2018-07-26
10-Q 2018-03-31 Filed 2018-04-27
10-K 2017-12-31 Filed 2018-02-26
10-Q 2017-09-30 Filed 2017-10-26
10-Q 2017-06-30 Filed 2017-07-27
10-Q 2017-03-31 Filed 2017-04-27
10-K 2016-12-31 Filed 2017-02-28
10-Q 2016-09-30 Filed 2016-10-28
10-Q 2016-06-30 Filed 2016-07-28
10-Q 2016-03-31 Filed 2016-04-28
10-K 2015-12-31 Filed 2016-02-29
10-Q 2015-09-30 Filed 2015-10-29
10-Q 2015-06-30 Filed 2015-07-30
10-Q 2015-03-31 Filed 2015-04-30
10-K 2014-12-31 Filed 2015-02-27
10-Q 2014-09-30 Filed 2014-10-30
10-Q 2014-06-30 Filed 2014-07-31
10-Q 2014-03-31 Filed 2014-05-01
10-K 2013-12-31 Filed 2014-02-27
10-Q 2013-09-30 Filed 2013-10-31
10-Q 2013-06-30 Filed 2013-08-01
10-Q 2013-03-31 Filed 2013-04-25
10-K 2012-12-31 Filed 2013-02-28
10-Q 2012-09-30 Filed 2012-11-01
10-Q 2012-06-30 Filed 2012-07-26
10-Q 2012-03-31 Filed 2012-04-26
10-K 2011-12-31 Filed 2012-02-28
10-Q 2011-09-30 Filed 2011-10-27
10-Q 2011-06-30 Filed 2011-07-28
10-Q 2011-03-31 Filed 2011-04-28
10-K 2010-12-31 Filed 2011-02-28
10-Q 2010-09-30 Filed 2010-10-28
10-Q 2010-06-30 Filed 2010-07-29
10-Q 2010-03-31 Filed 2010-04-29
10-K 2009-12-31 Filed 2010-02-25
8-K 2020-07-23 Earnings, Exhibits
8-K 2020-05-01
8-K 2020-04-23
8-K 2020-04-09
8-K 2020-03-26
8-K 2020-02-28
8-K 2020-02-21
8-K 2020-02-19
8-K 2020-02-14
8-K 2020-01-30
8-K 2019-10-23
8-K 2019-07-24
8-K 2019-04-25
8-K 2019-04-22
8-K 2019-01-24
8-K 2018-10-16
8-K 2018-07-18
8-K 2018-04-26
8-K 2018-04-19
8-K 2018-04-02
8-K 2018-01-24

GWW 10Q Quarterly Report

Part I - Financial Information
Item 1: 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
EX-31.1 gww-2020063020xex311.htm
EX-31.2 gww-2020063020xex312.htm
EX-32 gww-2020063020xex32.htm

Grainger WW Earnings 2020-06-30

Balance SheetIncome StatementCash Flow
10.08.06.04.02.00.02012201420172020
Assets, Equity
3.02.41.81.20.60.02012201420172020
Rev, G Profit, Net Income
0.50.30.1-0.2-0.4-0.62012201420172020
Ops, Inv, Fin

gww-20200630
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended June 30, 2020
OR
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from ______ to _______
 
Commission file number 1-5684

W.W. Grainger, Inc.
(Exact name of registrant as specified in its charter)
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 or former address, if changed since last report)
 
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading SymbolName of Each Exchange on Which Registered
Common StockGWWNew York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes   No
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes   No
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
 
Large Accelerated Filer   Accelerated Filer    Non-accelerated Filer    Smaller Reporting Company
Emerging Growth Company

1


 If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes   No
 
There were 53,571,736 shares of the Company’s Common Stock, par value $0.50, outstanding as of June 30, 2020.
2


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, 2020 and 2019
   
 Condensed Consolidated Statements of Comprehensive Earnings for the Three and Six Months Ended June 30, 2020 and 2019
   
 Condensed Consolidated Balance Sheets
    as of June 30, 2020 and December 31, 2019
   
 Condensed Consolidated Statements of Cash Flows
    for the Six Months Ended June 30, 2020 and 2019
Condensed Consolidated Statements of Shareholders' Equity  for the Three and Six Months Ended June 30, 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  

3


PART I – FINANCIAL INFORMATION

Item 1:  Financial Statements

W.W. Grainger, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(In millions of dollars, except for share and per share amounts)
(Unaudited)
Three Months EndedSix Months Ended
 June 30,June 30,
 2020201920202019
Net sales$2,837  $2,893  $5,838  $5,692  
Cost of goods sold1,821  1,772  3,701  3,476  
Gross profit1,016  1,121  2,137  2,216  
Selling, general and administrative expenses811  741  1,773  1,473  
Operating earnings205  380  364  743  
Other (income) expense:  
Interest expense, net28  21  49  40  
Other, net(7) (7) (11) (14) 
Total other expense, net21  14  38  26  
Earnings before income taxes
184  366  326  717  
Income tax provision55  94  12  183  
Net earnings129  272  314  534  
Less: Net earnings attributable to noncontrolling interest15  12  27  21  
Net earnings attributable to W.W. Grainger, Inc.$114  $260  $287  $513  
Earnings per share:  
Basic$2.11  $4.69  $5.31  $9.19  
Diluted$2.10  $4.67  $5.29  $9.14  
Weighted average number of shares outstanding:    
Basic53.5  55.1  53.6  55.4  
Diluted53.7  55.4  53.8  55.7  
Cash dividends paid per share$1.44  $1.44  $2.88  $2.80  
 
The accompanying notes are an integral part of these financial statements.
4


W.W. Grainger, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS
(In millions of dollars)
(Unaudited)
 Three Months EndedSix Months Ended
June 30,June 30,
 2020201920202019
Net earnings$129  $272  $314  $534  
Other comprehensive earnings (losses):    
Foreign currency translation adjustments, net of reclassification64  19  6  23  
Postretirement benefit plan reclassification, net of tax benefit of $1, $1, $2, and $2 million, respectively(3) (2) (6) (5) 
Other3    4    
Total other comprehensive earnings (losses)64  17  4  18  
Comprehensive earnings, net of tax193  289  318  552  
Less: Comprehensive earnings (losses) attributable to noncontrolling interest
Net earnings
15  12  27  21  
Foreign currency translation adjustments
(2) 5  1  3  
Total comprehensive earnings (losses) attributable to noncontrolling interest13  17  28  24  
Comprehensive earnings attributable to W.W. Grainger, Inc.
$180  $272  $290  $528  


The accompanying notes are an integral part of these financial statements.
5


W.W. Grainger, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions of dollars, except for share and per share amounts)
As of
ASSETS      (Unaudited) June 30, 2020December 31, 2019
CURRENT ASSETS  
Cash and cash equivalents$1,603  $360  
Accounts receivable (less allowances for credit losses of $25 million and $21 million, respectively)1,460  1,425  
Inventories - net1,695  1,655  
Prepaid expenses and other current assets127  104  
Prepaid income taxes33  11  
Total current assets4,918  3,555  
PROPERTY, BUILDINGS AND EQUIPMENT - NET1,365  1,400  
DEFERRED INCOME TAXES10  11  
GOODWILL365  429  
INTANGIBLES - NET223  304  
OTHER ASSETS313  306  
TOTAL ASSETS$7,194  $6,005  
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES  
Short-term debt$15  $55  
Current maturities of long-term debt21  246  
Trade accounts payable770  719  
Accrued compensation and benefits212  228  
Accrued contributions to employees' profit sharing plans33  85  
Accrued expenses312  318  
Income taxes payable25  27  
Total current liabilities1,388  1,678  
LONG-TERM DEBT (less current maturities)3,301  1,914  
DEFERRED INCOME TAXES AND TAX UNCERTAINTIES103  106  
OTHER NON-CURRENT LIABILITIES250  247  
SHAREHOLDERS' EQUITY  
Cumulative preferred stock – $5 par value – 12,000,000 shares authorized; none issued nor outstanding
    
Common stock – $0.50 par value – 300,000,000 shares authorized;
109,659,219 shares issued
55  55  
Additional contributed capital1,198  1,182  
Retained earnings8,536  8,405  
Accumulated other comprehensive earnings (losses)(151) (154) 
Treasury stock, at cost – 56,087,483 and 55,971,691 shares, respectively(7,709) (7,633) 
Total W.W. Grainger, Inc. shareholders’ equity1,929  1,855  
Noncontrolling interest
223  205  
Total shareholders' equity2,152  2,060  
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$7,194  $6,005  
  
The accompanying notes are an integral part of these financial statements.
6


W.W. Grainger, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions of dollars)
(Unaudited)
Six Months Ended
 June 30,
 20202019
CASH FLOWS FROM OPERATING ACTIVITIES:  
Net earnings$314  $534  
Provision for credit losses14  6  
Deferred income taxes and tax uncertainties  12  
Depreciation and amortization95  113  
Net losses (gains) from sales of assets and business divestitures110  (5) 
Impairment of goodwill, intangibles and long-lived assets177    
Stock-based compensation26  23  
Subtotal422  149  
Change in operating assets and liabilities:  
Accounts receivable(113) (118) 
Inventories(144) 12  
Prepaid expenses and other assets(37) (22) 
Trade accounts payable79  100  
Accrued liabilities(32) (187) 
Income taxes - net(18) (7) 
Other non-current liabilities5  (11) 
Subtotal(260) (233) 
Net cash provided by operating activities476  450  
CASH FLOWS FROM INVESTING ACTIVITIES:  
Additions to property, buildings, equipment and intangibles(93) (107) 
Proceeds from sales of assets and business divestitures13  14  
Other(2) 2  
Net cash used in investing activities(82) (91) 
CASH FLOWS FROM FINANCING ACTIVITIES:  
Borrowings under lines of credit12  19  
Payments against lines of credit(50) (16) 
Proceeds from long-term debt1,500    
Payments of long-term debt(347) (34) 
Proceeds from stock options exercised28  16  
Payments for employee taxes withheld from stock awards(14) (10) 
Purchases of treasury stock(101) (400) 
Cash dividends paid(164) (163) 
Other - net  2  
Net cash provided by (used in) financing activities864  (586) 
Exchange rate effect on cash and cash equivalents(15) 4  
NET CHANGE IN CASH AND CASH EQUIVALENTS1,243  (223) 
Cash and cash equivalents at beginning of year360  538  
Cash and cash equivalents at end of period$1,603  $315  
 
The accompanying notes are an integral part of these financial statements.
7


W.W. Grainger, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In millions of dollars, except for per share amounts)
(Unaudited)
Common StockAdditional Contributed CapitalRetained EarningsAccumulated Other Comprehensive Earnings (Losses)Treasury StockNoncontrolling
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  
Stock based compensation—  15  —  —  9  —  24  
Purchases of treasury stock—  —  —  —  (265) —  (265) 
Net earnings—  —  260  —  —  12  272  
Other comprehensive earnings (losses)
—  —  —  12  —  5  17  
Cash dividends paid ($1.44 per share)
—  —  (79) —  —  (7) (86) 
Balance at June 30, 2019
$55  $1,152  $8,226  $(156) $(7,354) $191  $2,114  


The accompanying notes are an integral part of these financial statements.


















8



W.W. Grainger, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In millions of dollars, except for per share amounts)
(Unaudited)
Common StockAdditional Contributed CapitalRetained EarningsAccumulated Other Comprehensive Earnings (Losses)Treasury StockNoncontrolling
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  
Stock based compensation—  6  —  —  11  —  17  
Purchases of treasury stock—  —  —  —  —  (1) (1) 
Net earnings—  —  114  —  —  15  129  
Other comprehensive earnings (losses)
—  —  —  66  —  (2) 64  
Cash dividends paid ($1.44 per share)
—  —  (78) —  —  (9) (87) 
Balance at June 30, 2020
$55  $1,198  $8,536  $(151) $(7,709) $223  $2,152  


The accompanying notes are an integral part of these financial statements.
9

W.W. Grainger, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. BACKGROUND AND BASIS OF PRESENTATION
 
W.W. Grainger, Inc. is a broad line, business-to-business distributor of maintenance, repair and operating (MRO) products and services with operations primarily in North America, Japan and Europe. In this report, the words “Company” or “Grainger” mean W.W. Grainger, Inc. and its subsidiaries, except where the context makes it clear that the reference is only to W.W. Grainger, Inc. itself and not its subsidiaries.
 
Consistent with the Company's strategic focus on broad-line MRO distribution in key markets, on June 30, 2020, Grainger divested the Fabory business in Europe (Fabory). Accordingly, the Company's condensed consolidated statements of earnings, comprehensive earnings and cash flows include Fabory results through the date of divestiture. The proceeds from the divestiture will be used to fund general corporate needs and capital investments. During the second quarter of 2020, Grainger recognized a net loss of approximately $109 million (presented within Selling, general and administrative expenses (SG&A)) as a result of this divestiture, which included accumulated foreign currency translation losses of $48 million, that were reclassified from Accumulated other comprehensive earnings (losses) (AOCE) to SG&A.

The Company's Condensed Consolidated Financial Statements (Financial Statements) and the related notes are unaudited and should be read in conjunction with the consolidated financial statements and associated notes for the year ended December 31, 2019 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) on February 20, 2020 (the 2019 Form 10-K). The Condensed Consolidated Balance Sheet as of December 31, 2019 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 (U.S.) 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 in this report.

2. UPDATE TO SIGNIFICANT ACCOUNTING POLICIES

Other than the implemented accounting policies related to the allowances for credit losses per the Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) 2016-13 (see Notes 3 and 5 to the Financial Statements), change in depreciation estimates (see Note 6 to the Financial Statements) and accounting for derivative instruments (see Note 10 to the Financial Statements), there have been no material changes to the Company’s significant accounting policies disclosed in the 2019 Form 10-K, Part II, Item 8.

3. NEW ACCOUNTING STANDARDS

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments as modified by subsequently issued ASUs 2018-19, 2019-04, 2019-05, 2019-11 and 2020-02. This ASU requires estimating all expected credit losses for certain types of financial instruments, including trade receivables, held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. The Company adopted this ASU effective January 1, 2020. While the adoption of this ASU did not have a material impact on the Company's Financial Statements, it required changes to the Company’s process of estimating expected credit losses on trade receivables. See Note 5 for further information on the Company’s allowance for credit losses.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This ASU clarifies and simplifies accounting for income taxes by eliminating certain exceptions for intraperiod tax allocation principles, the methodology for calculating income tax rates in an interim period, and recognition of deferred taxes for outside basis differences in an investment, among other updates. The effective date of this ASU is for fiscal years and interim periods beginning after December 15, 2020. The Company is currently evaluating the potential impact of this ASU on the Financial Statements.

In January 2020, the FASB issued ASU 2020-01, Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815), Clarifying the Interactions between Topic 321, Topic 323 and Topic 815. This ASU simplifies the understanding and application of the
10

W.W. Grainger, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
codification topics by eliminating inconsistencies and providing clarifications. The effective date of this ASU is for fiscal years and interim periods beginning after December 15, 2020. The Company is currently evaluating the potential impact of this ASU on the Financial Statements.

In March 2020, the FASB issued ASU 2020-03, Codification Improvements to Financial Instruments. The amendments in this update represent changes to clarify or improve the codification and correct unintended application. This ASU was effective immediately upon issuance and its adoption did not have a material impact on the Company's Financial Statements.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This update provides optional expedients and exceptions for applying generally accepted accounting principles to certain contract modifications and hedging relationships that reference London Inter-bank Offered Rate (LIBOR) or another reference rate expected to be discontinued. The guidance is effective upon issuance and generally can be applied through December 31, 2022. The Company is currently evaluating the potential impact of this ASU on the Financial Statements.

4. REVENUE

Company revenue is primarily comprised of MRO product sales and related activities, such as freight and services. Total service revenue is not material and accounted for approximately 1% of the Company's revenue for the three and six months ended June 30, 2020 and 2019, respectively.

Grainger serves a large number of customers in diverse industries, which are subject to different economic and market specific factors. The Company's presentation of revenue by industry most reasonably depicts how the nature, amount, timing and uncertainty of Company revenue and cash flows are affected by economic and market specific factors. The following table presents the Company's percentage of revenue by reportable segment and by major customer industry:
Three Months Ended June 30,
20202019
U.S.CanadaTotal Company (2)U.S.CanadaTotal Company (2)
Government24 %10 %17 %19 %6 %14 %
Heavy Manufacturing15 %16 %15 %19 %20 %17 %
Light Manufacturing13