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 2020-09-30 Filed 2020-10-22
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 2020-10-27
8-K 2020-10-22
8-K 2020-07-23
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-2020093020xex311.htm
EX-31.2 gww-2020093020xex312.htm
EX-32 gww-2020093020xex32.htm

Grainger WW Earnings 2020-09-30

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-20200930
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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 September 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 53,668,050 shares of the Company’s Common Stock, par value $0.50, outstanding as of September 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 Nine Months Ended September 30, 2020 and 2019
   
 Condensed Consolidated Statements of Comprehensive Earnings for the Three and Nine Months Ended September 30, 2020 and 2019
   
 Condensed Consolidated Balance Sheets
    as of September 30, 2020 and December 31, 2019
   
 Condensed Consolidated Statements of Cash Flows
    for the Nine Months Ended September 30, 2020 and 2019
Condensed Consolidated Statements of Shareholders' Equity  for the Three and Nine Months Ended September 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 and shares, except for per share amounts)
(Unaudited)
Three Months EndedNine Months Ended
 September 30,September 30,
 2020201920202019
Net sales$3,018 $2,947 $8,856 $8,639 
Cost of goods sold1,944 1,848 5,645 5,324 
Gross profit1,074 1,099 3,211 3,315 
Selling, general and administrative expenses694 761 2,467 2,234 
Operating earnings380 338 744 1,081 
Other (income) expense:  
Interest expense, net23 20 72 60 
Other, net(5)(4)(16)(18)
Total other expense, net18 16 56 42 
Earnings before income taxes
362 322 688 1,039 
Income tax provision106 78 118 261 
Net earnings256 244 570 778 
Less: Net earnings attributable to noncontrolling interest16 11 43 32 
Net earnings attributable to W.W. Grainger, Inc.$240 $233 $527 $746 
Earnings per share:  
Basic$4.43 $4.27 $9.74 $13.46 
Diluted$4.41 $4.25 $9.70 $13.40 
Weighted average number of shares outstanding:    
Basic53.6 54.1 53.6 55.0 
Diluted53.9 54.4 53.8 55.2 
Cash dividends paid per share$1.53 $1.44 $4.41 $4.24 
 
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 EndedNine Months Ended
September 30,September 30,
 2020201920202019
Net earnings$256 $244 $570 $778 
Other comprehensive earnings (losses):    
Foreign currency translation adjustments, net of reclassification24 (17)30 6 
Postretirement benefit plan reclassification, net of tax benefit of $1, $1, $3, and $3, respectively
(2)(2)(8)(7)
Other  4  
Total other comprehensive earnings (losses)22 (19)26 (1)
Comprehensive earnings, net of tax278 225 596 777 
Less: Comprehensive earnings (losses) attributable to noncontrolling interest
Net earnings
16 11 43 32 
Foreign currency translation adjustments
5 (1)6 2 
Total comprehensive earnings (losses) attributable to noncontrolling interest21 10 49 34 
Comprehensive earnings attributable to W.W. Grainger, Inc.
$257 $215 $547 $743 


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) September 30, 2020December 31, 2019
CURRENT ASSETS  
Cash and cash equivalents$859 $360 
Accounts receivable (less allowances for credit losses of $26 and $21, respectively)
1,485 1,425 
Inventories - net1,780 1,655 
Prepaid expenses and other current assets120 104 
Prepaid income taxes29 11 
Total current assets4,273 3,555 
PROPERTY, BUILDINGS AND EQUIPMENT - NET1,394 1,400 
DEFERRED INCOME TAXES11 11 
GOODWILL369 429 
INTANGIBLES - NET224 304 
OTHER ASSETS312 306 
TOTAL ASSETS$6,583 $6,005 
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES  
Short-term debt$ $55 
Current maturities of long-term debt12 246 
Trade accounts payable836 719 
Accrued compensation and benefits201 228 
Accrued contributions to employees' profit sharing plans48 85 
Accrued expenses324 318 
Income taxes payable20 27 
Total current liabilities1,441 1,678 
LONG-TERM DEBT (less current maturities)2,388 1,914 
DEFERRED INCOME TAXES AND TAX UNCERTAINTIES112 106 
OTHER NON-CURRENT LIABILITIES267 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; issued 109,659,219 shares
55 55 
Additional contributed capital1,214 1,182 
Retained earnings8,694 8,405 
Accumulated other comprehensive earnings (losses)(134)(154)
Treasury stock, at cost - 55,991,169 and 55,971,691 shares, respectively
(7,698)(7,633)
Total W.W. Grainger, Inc. shareholders’ equity2,131 1,855 
Noncontrolling interest
244 205 
Total shareholders' equity2,375 2,060 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$6,583 $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)
Nine Months Ended
 September 30,
 20202019
CASH FLOWS FROM OPERATING ACTIVITIES:  
Net earnings$570 $778 
Provision for credit losses18 7 
Deferred income taxes and tax uncertainties9 19 
Depreciation and amortization137 171 
Net losses (gains) from sales of assets and business divestitures104 (5)
Impairment of goodwill, intangibles and long-lived assets177  
Stock-based compensation36 32 
Subtotal481 224 
Change in operating assets and liabilities:  
Accounts receivable(145)(119)
Inventories(222)18 
Prepaid expenses and other assets(29)(15)
Trade accounts payable145 50 
Accrued liabilities(13)(137)
Income taxes - net(19)(16)
Other non-current liabilities19 (13)
Subtotal(264)(232)
Net cash provided by operating activities787 770 
CASH FLOWS FROM INVESTING ACTIVITIES:  
Additions to property, buildings, equipment and intangibles(152)(163)
Proceeds from sales of assets and business divestitures22 16 
Other(2)2 
Net cash used in investing activities(132)(145)
CASH FLOWS FROM FINANCING ACTIVITIES:  
Borrowings under lines of credit12 22 
Payments against lines of credit(65)(18)
Proceeds from long-term debt1,583  
Payments of long-term debt(1,361)(48)
Proceeds from stock options exercised47 19 
Payments for employee taxes withheld from stock awards(16)(10)
Purchases of treasury stock(101)(600)
Cash dividends paid(246)(242)
Other - net 2 
Net cash used in financing activities(147)(875)
Exchange rate effect on cash and cash equivalents(9)(2)
NET CHANGE IN CASH AND CASH EQUIVALENTS499 (252)
Cash and cash equivalents at beginning of year360 538 
Cash and cash equivalents at end of period$859 $286 
 
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 
Stock-based compensation— 9 — — 3 — 12 
Purchases of treasury stock— — — — (200)— (200)
Net earnings— — 233 — — 11 244 
Other comprehensive earnings (losses)
— — — (18)— (1)(19)
Cash dividends paid ($1.44 per share)
— — (79)— — — (79)
Balance at September 30, 2019
$55 $1,161 $8,380 $(174)$(7,551)$201 $2,072 


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 
Stock-based compensation— 16 — — 11 — 27 
Net earnings— — 240 — — 16 256 
Other comprehensive earnings (losses)
— — — 17 — 5 22 
Cash dividends paid ($1.53 per share)— — (82)— — — (82)
Balance at September 30, 2020
$55 $1,214 $8,694 $(134)$(7,698)$244 $2,375 


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, Grainger divested the Fabory business in Europe (Fabory) on June 30, 2020 and the China business (China) on August 21, 2020. Accordingly, the Company's condensed consolidated statements of earnings, comprehensive earnings and cash flows and related notes include Fabory and China results through the respective dates of divestiture. The proceeds from these divestitures will be used to fund general corporate needs. During the second and third quarters of 2020, Grainger recognized a net loss of approximately $109 million and gain of $5 million (presented within Selling, general and administrative expenses (SG&A)) as a result of the Fabory and China divestitures, respectively, which included net accumulated foreign currency translation losses of $45 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 9 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 to the Financial Statements 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
10

W.W. Grainger, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
between Topic 321, Topic 323 and Topic 815. This ASU simplifies the understanding and application of the 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 2020-04, 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 nine months ended September 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 September 30,
20202019
U.S.CanadaTotal Company (2)U.S.CanadaTotal Company (2)
Government23 %8 %17 %20 %5 %15 %
Heavy Manufacturing15 %19 %