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GWW · W.W. Grainger

28 filings

10-K

GWW 10-K Annual Reports

W.W. Grainger - 28 annual reports

Filing record · 2016–202610-K1110-Q328-K92

2025
W.W. Grainger Annual Report, Year Ended Dec 31, 2025
W.W. Grainger, Inc. reported net sales of $17.94 billion for the fiscal year ended December 31, 2025, representing a 4.5% increase over the prior year. This growth was driven by both the High-Touch Solutions North America segment, which saw a 2% increase in net sales, and the Endless Assortment segment, which experienced a significant 16% surge in net sales. Despite increased revenue, operating earnings saw a 5.4% decrease to $2.50 billion, impacted by higher selling, general, and administrative (SG&A) expenses, which rose by 9.5% driven by increased payroll, benefits, and marketing costs. Notably, the company divested its U.K. business (Cromwell and Zoro U.K.) during the year, incurring associated losses. Financially, Grainger maintained a strong liquidity position with $1.8 billion in available liquidity at year-end 2025. The company continued its commitment to returning capital to shareholders through dividends and share repurchases, totaling $467 million and $1.05 billion respectively in 2025. Investments in capital expenditures, primarily for supply chain capacity expansion and technology enhancements, increased to $684 million in 2025. The company faces ongoing risks related to inflation, supply chain disruptions, and geopolitical instability, but believes its diversified business model and customer base provide resilience.
Feb 19, 2026
2024
W.W. Grainger Annual Report, Year Ended Dec 31, 2024
W.W. Grainger, Inc. (GWW) reported solid financial results for the fiscal year ended December 31, 2024. The company's net sales increased by 4.2% to $17.17 billion, driven by growth in both its High-Touch Solutions North America and Endless Assortment segments. Diluted earnings per share (EPS) saw a healthy increase of 6.8% to $38.71. Grainger continues to execute its "The Grainger Edge" strategy, focusing on providing value-added MRO solutions and an extensive online product offering. The company demonstrated strong operational efficiency, maintaining its gross profit margin at 39.4%, while managing selling, general, and administrative (SG&A) expenses effectively. Despite broader economic uncertainties, Grainger's diversified customer base and the non-discretionary nature of its MRO products provided resilience. The company also returned significant capital to shareholders through share repurchases and dividends, underscoring its commitment to shareholder value.
Feb 20, 2025
2023
W.W. Grainger Annual Report, Year Ended Dec 31, 2023
W.W. Grainger, Inc. (GWW) demonstrated robust financial performance in its 2023 fiscal year, with net sales increasing by 8.2% to $16.5 billion and net earnings growing by an impressive 18.0% to $1.9 billion. This growth was primarily driven by strong performance in the High-Touch Solutions North America segment, which saw an 8.9% increase in net sales, complemented by a 4.7% rise in the Endless Assortment segment. The company effectively managed costs, leading to an expansion in gross profit margin by 100 basis points and an improvement in operating earnings by 15.8%. Grainger also returned significant capital to shareholders through dividends and share repurchases, highlighting a commitment to shareholder value. The company's strategic priorities for 2024 focus on expanding its leadership position in the MRO market by offering advantaged solutions, differentiated services, and exceptional customer experiences across both its high-touch and endless assortment models. Grainger continues to invest in its supply chain and technology infrastructure to enhance operational efficiency and customer service. Despite facing macroeconomic headwinds such as inflation and supply chain disruptions, Grainger's diversified customer base and the essential nature of its products provide a degree of resilience. The company ended the year with a strong liquidity position, ensuring continued investment in growth and shareholder returns.
Feb 22, 2024
2022
W.W. Grainger Annual Report, Year Ended Dec 31, 2022
W.W. Grainger, Inc. (GWW) demonstrated robust financial performance in its 2022 fiscal year, marked by significant net sales growth and increased operating earnings. The company's dual business model, combining 'High-Touch Solutions N.A.' and 'Endless Assortment,' proved effective in serving its diverse customer base, which spans from small businesses to large corporations across various industries. Despite facing inflationary pressures and macroeconomic uncertainties, Grainger managed its costs and pricing strategies to maintain competitive positioning and drive profitability. Key financial indicators show a substantial increase in net sales, driven by both price realization and volume growth, particularly within the High-Touch Solutions N.A. segment. The company's operational efficiency and strategic investments in technology and supply chain infrastructure contributed to improved gross profit margins and operating leverage. Grainger also continued its commitment to returning capital to shareholders through dividends and share repurchases, while maintaining a strong liquidity position and investment-grade credit ratings.
Feb 21, 2023
2021
W.W. Grainger Annual Report, Year Ended Dec 31, 2021
W.W. Grainger, Inc. (GWW) reported strong performance in its 2021 fiscal year, demonstrating resilience and growth following the disruptions of the COVID-19 pandemic. The company's strategic focus on its two core segments, High-Touch Solutions N.A. and Endless Assortment, has proven effective. Net sales increased by 10.4% to $13.02 billion, driven by a recovery in core non-pandemic product sales and positive volume growth. Operating earnings saw a significant 51.8% increase, reflecting improved gross profit and disciplined expense management. Grainger's financial position remains robust, supported by strong cash flows from operations and available liquidity. The company continues to invest in its distribution network and technology enhancements, signaling a commitment to long-term growth and shareholder returns. Despite ongoing macroeconomic challenges like inflation and supply chain disruptions, Grainger's diversified business model and strategic initiatives position it well to navigate the evolving market landscape and maintain its leadership in the MRO distribution sector.
Feb 23, 2022
2020
W.W. Grainger Annual Report, Year Ended Dec 31, 2020
W.W. Grainger's 2020 10-K shows a year shaped by the COVID-19 pandemic and portfolio pruning. Net sales rose 2.7% to $11.797 billion, driven by strong pandemic-related volume (PPE and safety products) from government and healthcare customers, partly offset by declines in non-pandemic MRO demand and weakness in Canada and international high-touch businesses. However, the mix shifted toward lower-margin pandemic products and the faster-growing endless assortment businesses (Zoro and MonotaRO), so gross margin fell 2.4 points to 35.9%. Reported operating earnings dropped 19% to $1.019 billion and diluted EPS fell to $12.82 from $15.32. Much of the decline reflects non-recurring items, including a $109 million loss on the Fabory divestiture, $177 million in impairments, and restructuring charges. Excluding these items, adjusted operating earnings fell about 4% and adjusted diluted EPS fell about 6% to $16.18. The balance sheet and cash generation remained solid. Operating cash flow was $1.123 billion, cash rose to $585 million, and available liquidity was about $1.8 billion. Total debt rose to roughly $2.4 billion after a $500 million 1.85% note issuance in February 2020, and the debt-to-capitalization ratio increased to 55.6%. Grainger continued returning capital, paying $338 million in dividends and repurchasing $601 million of stock. Management also announced a re-segmentation effective January 1, 2021, into High Touch – North America and Endless Assortment, which better reflects its two business models and will make future segment results more comparable. For investors, the key questions are how quickly non-pandemic demand recovers, whether the endless assortment businesses can keep growing margins, and whether the pandemic-driven gross margin pressure reverses as expected. Management says it expects pandemic-related margin headwinds to subside as the economy recovers, but the filing also notes that these outcomes remain highly uncertain.
Feb 24, 2021
2019
W.W. Grainger Annual Report, Year Ended Dec 31, 2019
W.W. Grainger's FY2019 10-K shows a company that grew sales modestly while absorbing a sizable non-cash impairment at its UK Cromwell business. Net sales rose 2.5% to $11.486 billion, driven primarily by volume gains in the U.S. business from market share and double-digit growth in the lower-margin endless assortment businesses (Zoro and MonotaRO). Gross margin slipped 0.5 points to 38.3%, reflecting that mix shift. Reported operating earnings rose 9% to $1.262 billion, but this comparison is flattered by lower 2019 restructuring and impairment charges. Excluding those items, adjusted operating earnings grew 3% to $1.388 billion, and adjusted diluted EPS rose 4% to $17.29 versus $16.70. Reported diluted EPS was $15.32, up 12%. The balance sheet and cash generation remain solid but are being used heavily for shareholder returns. Operating cash flow was $1.042 billion, roughly flat, while the company repurchased $700 million of stock and paid $328 million in dividends, which pushed financing outflows to $1.023 billion and reduced cash to $360 million. Total debt was about $2.4 billion, and the debt-to-capitalization ratio rose to 54.3% from 51.5%. Both rating agencies keep Grainger at investment grade (A3/A+). Management also signaled a February 2020 refinancing into a $1.25 billion revolving credit facility. For investors, the key tension is between a U.S. core that is taking share but growing slowly and a Canada business in turnaround with a sharp sales decline. Growth is increasingly reliant on the endless assortment model, which is dilutive to margins, and the Cromwell write-down raises questions about the returns on past acquisitions. Shareholders should watch whether adjusted earnings growth can keep pace with the buyback-supported EPS gains, and whether the company can hold gross margin as its mix shifts.
Feb 20, 2020
2018
W.W. Grainger Annual Report, Year Ended Dec 31, 2018
W.W. Grainger's 2018 10-K shows a year of strong top-line growth and a sharp rebound in profitability. Net sales rose 8% to $11,221 million, driven by U.S. volume gains from market share growth and improved demand, plus double-digit growth in the endless assortment businesses (Zoro and MonotaRO), partly offset by a 13% decline in Canada. Reported operating earnings rose 12% to $1,158 million and diluted EPS rose 37% to $13.73. Excluding restructuring and impairment charges, which include a $139 million non-cash impairment at the Cromwell business in the U.K., adjusted operating earnings grew 17% and adjusted diluted EPS rose 46% to $16.70, per management's non-GAAP reconciliation. Quality of earnings warrants some scrutiny. Gross margin fell 0.6 points to 38.7%, with about 0.5 points attributable to the new FASB revenue recognition standard, which reclassified KeepStock costs from SG&A into COGS. Operating cash flow was flat at $1,057 million, weighed by inventory investment and payables timing. Free cash flow after $239 million of capex was roughly $818 million, and the company returned capital through $316 million of dividends and $425 million of buybacks, while total debt as a percentage of capitalization fell to 51.5% from 56.2%. Looking ahead, management expects U.S. business investment and industrial production to slow in 2019 while remaining stable, Canada to stabilize volumes after its cost reset, and 2019 capex of $300 million to $350 million. The company also adopted the new lease standard on January 1, 2019, recording right-of-use assets and lease liabilities of roughly $210 million to $230 million, with no material expected impact on earnings or cash flows. Key risks include the cyclical exposure of industrial customers, commodity and tariff-driven cost pressure, supply chain and cybersecurity disruption, and the UK's exit from the EU.
Feb 28, 2019
2017
W.W. Grainger Annual Report, Year Ended Dec 31, 2017
W.W. Grainger's fiscal 2017 was a year of top-line growth paired with margin compression and lower earnings. Net sales rose 3% to $10.42 billion, driven by volume gains in the U.S. business and strong growth at single channel online businesses such as Zoro and MonotaRO, while price deflation from the U.S. pricing actions (roughly 4% company-wide) absorbed much of the benefit. Gross margin fell 1.3 points to 39.3%, operating earnings declined 6% to $1.05 billion, and net earnings attributable to Grainger fell 3% to $586 million, or $10.02 diluted EPS. Excluding restructuring, gains, and other charges, adjusted EPS was $11.46 versus $11.58 in 2016, a 1% decline. eCommerce reached 51% of total sales, up from 47%, which is the central strategic signal in the filing. The balance sheet and capital allocation shifted meaningfully. Grainger issued $400 million of 4.20% notes in May 2017, and long-term debt rose to about $2.25 billion, with total debt to capitalization at 56.2% versus 54.1% a year earlier. Share repurchases totaled roughly $605 million, and the company continued to pay its dividend ($5.06 per share, up from $4.83). Operating cash flow was steady at $1.06 billion. Management is restructuring the business: 113 Canadian branches are slated for closure, the U.S. contact center network is consolidating into three national centers, and the Canada business is undergoing a broader reset. The 2018 outlook calls for 3% to 7% sales growth and EPS of $12.95 to $14.15 after guidance was raised for the lower U.S. corporate tax rate, though the company also flagged incremental digital investment and a 23% to 26% effective tax rate. Key risks for investors include continued price deflation from the pricing strategy, the margin pressure from a shift toward larger, lower-margin customers, the Canada turnaround (its goodwill headroom was only about 31%), and the Cromwell UK unit (about 15% headroom). Execution on the digital and restructuring agenda will determine whether revenue growth converts into earnings growth.
Feb 26, 2018
2016
W.W. Grainger Annual Report, Year Ended Dec 31, 2016
W.W. Grainger's fiscal 2016 was a year of margin pressure and restructuring rather than growth. Net sales rose 2% to $10.14 billion, but gross margin fell 1.8 points to 40.6% on price deflation exceeding cost deflation and unfavorable customer mix. Operating earnings fell 14% to $1.12 billion, and diluted EPS dropped 15% to $9.87. Excluding roughly $1.71 per share of charges (restructuring, a $52 million goodwill and intangible impairment at Other Businesses, an unclaimed property adjustment, and a GSA contingency), adjusted diluted EPS was $11.58, down 3% from $11.94. The non-GAAP figures are management's, not audited measures. The growth engine is digital. U.S. eCommerce sales reached $3.7 billion, up 12% and 46% of U.S. revenue, and consolidated eCommerce was 47% of total sales. Cromwell (U.K.) added about 3 points of growth. Offsetting this, the Canadian business shrank 18% on the Alberta oil slowdown and an ERP transition, and the U.S. business declined 1% as it closed 55 branches in 2016 and 49 in 2015. Management has guided to 2-6% sales growth and $11.30-$12.40 EPS for 2017, and expects Canada to reach break-even by the end of 2017. Balance sheet and capital allocation shifted noticeably. Total debt rose to 54.1% of total capitalization from 45.8%, and Debt/EBITDA reached 1.7x, above the 1.0-1.5x target. In response, Grainger plans to cut 2017 share repurchases to $600 million from the $800 million originally planned and to pay down short-term debt. Operating cash flow was steady at about $1.0 billion, and the dividend rose to $4.83 per share, though cash dividends paid still consumed roughly 30% of operating cash flow.
Feb 28, 2017
2015
W.W. Grainger Annual Report, Year Ended Dec 31, 2015
W.W. Grainger's 2015 results were essentially flat on the top line, with net sales of $9.97 billion versus $9.96 billion in 2014, while profitability weakened. Gross margin fell 0.9 percentage points to 42.4%, operating earnings declined 3% to $1.30 billion, and diluted EPS rose 1% to $11.58 only because of a 5.8% reduction in average diluted shares. Excluding restructuring charges and discrete tax items, adjusted diluted EPS fell 3% to $11.94. Foreign currency was a 3-point drag on sales, and eCommerce grew 16% to $4.1 billion, representing 41% of sales. The results reflect a weak industrial backdrop, particularly in oil-and-gas-exposed natural resources customers and Canada, where Canadian sales fell 17% and operating earnings fell 69%. Capital allocation and balance sheet changes were significant. Grainger repurchased $1.4 billion of stock in 2015, issued a $1 billion 4.60% senior note due 2045, and acquired Cromwell, a U.K. MRO distributor, for $464 million. Total debt as a percent of total capitalization rose to 45.8% from 12.9%, and long-term debt increased to $1.39 billion from $403 million. Management plans to keep debt-to-EBITDA in a 1.0–1.5x range. Operating cash flow was steady at $990 million, and the dividend was raised to $4.59 per share from $4.17. Looking ahead, management reiterated 2016 guidance of EPS of $10.80–$13.00 and sales of -1% to +7%. The company is pursuing restructuring, including closing 49 U.S. branches in 2015 and announcing 55 more closures for 2016, and it is investing in its supply chain and eCommerce platforms. Investors should weigh the strong cash generation and eCommerce momentum against thinning margins, a leveraged balance sheet, and continued softness in energy-linked and Canadian end markets.
Feb 29, 2016
2014
W.W. Grainger Annual Report, Year Ended Dec 31, 2014
W.W. Grainger's 2014 10-K shows a company that grew sales 6% to $9.96 billion, with diluted EPS up 3% to $11.45 on a reported basis. Adjusted for $0.81 per share of charges (Brazil shutdown, European pension transition and restructuring, and a Colombia goodwill impairment), diluted EPS was $12.26, up 6%. Growth was led by the United States business, where sales rose 7% to $7.9 billion and segment operating earnings rose 11% to $1.44 billion. Volume growth of 5% was the main driver, with acquisitions and price each contributing about 1-2 points. Gross margin slipped 0.5 point to 43.3% because of lower-margin acquired businesses and mix shift toward large customers, while operating expenses grew 4% as management kept investing in eCommerce, sales reps, supply chain and inventory management. The Canadian business was the clear weak spot. Sales fell 3% in reported dollars, though they rose 4% in local currency. Segment operating earnings dropped 32% to $88 million, pressured by a weak Canadian dollar, resource-sector softness and the WFS acquisition. Management cut 2015 guidance on January 26, 2015, lowering EPS guidance to $12.60-$13.60 from $12.90-$13.80 and sales growth to 3-7% from 5-9%, citing foreign exchange and the Canadian economy. Other businesses (Zoro, Japan, Mexico, Europe) grew sales 14%, but posted an operating loss of $38 million after one-time charges and start-up costs. Brazil is being closed during 2015. Cash generation remained solid. Operating cash flow was $960 million, capital expenditures rose to $387 million, and the company returned $816 million to shareholders through dividends ($4.17 per share, up 16%) and buybacks ($525 million). Net debt is modest, with total debt at 12.9% of capitalization. The filing also shows a large new DC build-out in New Jersey and Toronto, and a 2015 capex plan of $375-425 million. The main investor questions are whether the Canadian slump persists, whether Zoro and eCommerce growth can keep margins stable, and how much of the 2014 margin pressure is structural.
Feb 27, 2015
2013
W.W. Grainger Annual Report, Year Ended Dec 31, 2013
W.W. Grainger's fiscal 2013 was a year of solid top-line and earnings growth, with net sales rising 5% to $9.44 billion and net earnings attributable to the company up 16% to $797 million. Diluted EPS reached $11.13, up 17% year over year. Excluding a $0.29 goodwill impairment charge and a $0.10 restructuring charge, adjusted diluted EPS was $11.52, up 10% from $10.43 on a comparably adjusted basis. Growth was driven by volume (3 points), acquisitions (2 points) and price (1 point), partly offset by a 1-point currency headwind. Gross margin held flat at 43.8%, and operating margin improved to 13.7% from 12.6%, reflecting operating expenses growing more slowly than sales. The U.S. business, which accounts for roughly 79% of sales, grew 7% and drove most of the improvement, while Canada was nearly flat in U.S. dollars (up 1%, or 4% in local currency). The company continued to invest heavily in growth initiatives, including sales representatives, eCommerce (now $2.5 billion, up 16%) and inventory management services, as well as in a new 1 million square-foot Chicago-area distribution center. Cash flow from operations rose to $986 million, and Grainger returned substantial capital to shareholders through $438 million of buybacks and $255 million of dividends. Looking ahead, management lowered its 2014 guidance on January 24, 2014, to EPS of $12.10 to $12.85 (from $12.25 to $13.00) and sales growth of 5% to 9% (from 6% to 10%), citing unfavorable foreign exchange and the divestiture of four direct marketing brands. Balance sheet strength is solid, with total debt at 14.0% of capitalization and no financial covenants restricting the business, though investors should monitor goodwill exposure at Fabory and Grainger Colombia, where fair value cushions are relatively thin, and the performance of international operations, including Latin America and Brazil.
Feb 27, 2014
2012
W.W. Grainger Annual Report, Year Ended Dec 31, 2012
W.W. Grainger's 2012 10-K shows a year of strong top-line growth and solid profit expansion despite a one-time legal charge. Net sales rose 11% to $8.95 billion, driven by 6% volume growth, 3% from acquisitions, and 3% from price, with sales growth slowing in each quarter and a sharp drop in late December. Gross margin improved 0.3 points to 43.8%, reflecting price increases outpacing cost inflation. Reported diluted EPS rose 5% to $9.52, but this included $0.91 per share of net charges, primarily a $0.66 per share expense for settling GSA and USPS contract disputes. On an adjusted basis, diluted EPS was $10.43, up 15%, indicating underlying earnings momentum that investors should weigh against the reported figure. The balance sheet and cash generation remain healthy. Operating cash flow was $816 million, capital expenditures were $250 million, and dividends paid rose to $3.06 per share from $2.52. Total debt as a percent of capitalization fell to 15.3% from 15.9%. Management guided 2013 EPS to $10.85 to $12.00 and raised sales growth guidance to 3% to 9%, though it noted softer macro indicators. Key forward-looking items include a new Illinois distribution center becoming fully operational in 2013, expected 2013 capital spending of $280 to $350 million, and continued investment in sales force, eCommerce, and international expansion. Risks to monitor include the sensitivity of pricing and margins to commodity costs, dependence on supply chain and information system continuity, ongoing asbestos and silica litigation involving about 1,925 plaintiffs, and the cost of regulatory compliance as a government contractor. Working capital improved to $1.6 billion with a current ratio of 2.6, and the company reported no material weaknesses in internal controls.
Feb 28, 2013
2011
W.W. Grainger Annual Report, Year Ended Dec 31, 2011
W.W. Grainger's 2011 results show strong top-line and earnings growth. Net sales rose 12.5% to $8.08 billion, with daily sales up 12.0%. Volume contributed roughly 8 points, acquisitions about 2 points (including the August 2011 Fabory Group purchase), price about 2 points and foreign exchange about 1 point. Gross margin expanded 1.7 points to 43.5%, driven by price increases exceeding cost inflation and a shift away from low-margin sourced products. Operating earnings grew 22.3% to $1.05 billion, and diluted EPS rose 30.9% to $9.07. Those figures include a net $0.03 per-share benefit from several one-time items: a $0.16 charge for U.S. branch closures, a $0.12 tax-settlement benefit and a $0.07 gain on the sale of the MRO Korea joint venture. The U.S. segment, roughly 80% of sales, grew 8.0% with operating earnings up 15.9%. Canada grew 20.9% (15.7% in local currency), and operating earnings more than doubled to $107.6 million. The newer international businesses grew 66.2%, led by Fabory in Europe. Cash generation stayed solid: operating cash flow was $746 million, capital spending was about $197 million, and cash returned to shareholders included $180 million in dividends and $151 million in buybacks. Total debt fell to 15.9% of capitalization from 17.8%. Management guided 2012 sales growth of 10% to 14% and diluted EPS of $9.90 to $10.65. Risks flagged in the filing include a pending DOJ/USPS pricing review under government contracts, a China-related internal investigation with possible FCPA implications opened in January 2012, asbestos and silica litigation involving about 1,800 plaintiffs, and exposure to commodity prices and foreign currency.
Feb 28, 2012
2010
W.W. Grainger Annual Report, Year Ended Dec 31, 2010
W.W. Grainger's FY2010 10-K shows a strong rebound year. Net sales rose 15.4% to $7.18 billion, with volume growth of about 10 points, acquisitions adding 4 points, and FX adding 2 points. Operating earnings grew 29.4% to $860.5 million, and the operating margin expanded from 10.7% to 11.9%. Diluted EPS was $6.93, up 23.3% from $5.62. Management notes that 2010 included two non-cash items: a $0.28 per share benefit from a paid time off policy change and a $0.15 per share tax expense from healthcare legislation, for a net $0.13 benefit. Excluding these items and the 2009 MonotaRO gain, EPS grew about 29.5%. The balance sheet and cash flow profile remain conservative. Total assets were $3.90 billion, and total debt as a percent of capitalization fell to 17.8% from 19.1%. Operating cash flow declined to $596.4 million from $732.4 million, mainly because of working capital investment in receivables and inventory to support higher sales. Grainger returned substantial capital in 2010, with $504.8 million of share repurchases and $152.3 million of dividends. Management guides to 2011 sales growth of 5% to 9% and EPS of $7.15 to $7.90, with sales growth expected to slow from 2010 because of tougher comparisons and the non-recurring oil spill cleanup demand. Key risks include a Department of Justice inquiry into GSA contract pricing and disclosure compliance, and USPS Office of Inspector General investigations into the MRO and Custodial contracts. Each could lead to False Claims Act treble damages, though management believes none will have a material adverse effect. Asbestos and silica litigation involves roughly 1,900 plaintiffs. International expansion in Japan, Canada, and Colombia is a growing share of the business, and the company also faces commodity price exposure and competitive pressure from manufacturers and online competitors.
Feb 28, 2011
2009
W.W. Grainger Annual Report, Year Ended Dec 31, 2009
W.W. Grainger's 2009 results reflected a sharp cyclical downturn in its core U.S. industrial business, with net sales falling 9.2% to $6.22 billion from $6.85 billion. Volume declined roughly 14 percentage points, partly offset by about 5 points of price increases, and the heavy manufacturing customer sector fell in the mid-20% range. Operating earnings dropped 15.0% to $665.2 million, and operating margin contracted to 10.7% from 11.4%. Net earnings attributable to Grainger fell 9.4% to $430.5 million, and diluted EPS declined to $5.62 from $5.97. Net earnings were cushioned by a one-time, non-cash $47.4 million pre-tax gain from remeasuring the prior 48% stake in MonotaRO after Grainger became majority owner (53%). Gross margin improved 0.8 points to 41.8%, driven by price increases exceeding product cost inflation, which helped offset the volume decline. Balance sheet and cash flow remained strong. Operating cash flow rose to $732.4 million from $530.1 million, aided by a $175 million inventory reduction, and Grainger repurchased 4.5 million shares for $372.7 million while paying $134.7 million in dividends. Total debt was 19.1% of total capitalization, and the company carried $437.5 million of long-term debt, mainly a $483 million bank term loan maturing in 2012. Management guided to 2010 sales growth of 6% to 10%, supported by 2009 acquisitions, favorable foreign exchange, and organic growth from the multiyear product line expansion, while expecting operating expenses to rise and the effective tax rate to reach roughly 39.3%. Key risks for investors include the pace of economic and manufacturing recovery, commodity-driven margin pressure, and government contracting exposure. Grainger disclosed open DOJ and USPS inquiries into GSA and USPS contract pricing compliance, with potential treble damages under the False Claims Act, though management does not expect a material adverse effect. Asbestos and silica lawsuits involving about 1,900 plaintiffs also remain pending, which management believes are largely insured and immaterial.
Feb 25, 2010
2008
W.W. Grainger Annual Report, Year Ended Dec 31, 2008
W.W. Grainger's 2008 10-K shows a company that grew sales and earnings through a difficult year, but with a sharply weaker outlook heading into 2009. Net sales rose 6.7% to $6.85 billion, operating earnings climbed 16.7% to $782.7 million, and diluted EPS increased 22.3% to $6.04, helped by a 0.4-point gross margin improvement to 41.0% and share repurchases that reduced the share count. Management, however, said that sales turned negative in late 2008 as the economic downturn hit, that the fourth quarter showed a steep decline in the company's markets, and that it is difficult to project future results. In response, Grainger froze executive and salaried pay, tied 2009 management bonuses to aggressive sales targets, and announced 300 to 400 job eliminations with $25 million to $35 million in annualized savings and roughly $15 million to $20 million in one-time severance charges. The balance sheet changed meaningfully during 2008. Grainger took on a $500 million four-year unsecured bank term loan, pushing long-term debt to $488 million and total debt to 20.7% of total capitalization, up from 5.0% a year earlier. Cash rose to $396 million, working capital increased to $1.38 billion, and the current ratio improved to 2.8. Operating cash flow was $530 million, but a $143 million working capital build, mainly inventory tied to the product line expansion, held back free cash flow, which was roughly $335 million after capital expenditures of $195 million. Treasury stock purchases totaled $394 million for 5.5 million shares, and about 7.4 million shares remained under the repurchase authorization. Investors should weigh the strong 2008 earnings record against several risks: a likely sales decline in 2009 given macro indicators (the filing projects a 2.1% U.S. GDP decline and a 7.2% drop in industrial production), a rising effective tax rate projected at 38.9%, an unresolved General Services Administration contract matter that could lead to a False Claims Act action with treble damages, and asbestos and silica litigation covering about 2,200 plaintiffs. Management said none of these legal matters is expected to have a material adverse effect, but the GSA issue carries the most uncertainty.
Feb 27, 2009
2007
W.W. Grainger Annual Report, Year Ended Dec 31, 2007
W.W. Grainger's fiscal 2007 results show a company growing sales and earnings while returning significant capital to shareholders. Net sales rose 9.1% to $6.42 billion, and operating earnings grew 16.0% to $670.7 million, as gross margin expanded 0.6 points to 40.6%. Net earnings increased 9.6% to $420.1 million, and diluted EPS reached $4.94, up 16.5%, helped by a share count reduction from buybacks. Growth was driven by the multiyear U.S. market expansion program, the product line expansion (roughly 90,000 new products added over two years), and strength in government and commercial customer sectors, partly offset by the wind-down of low-margin integrated supply contracts. Capital deployment was aggressive. Grainger repurchased 7.05 million shares for about $647 million in cash during 2007, including a $500 million accelerated share repurchase agreement executed in August 2007 that was completed in January 2008. Dividends rose to $1.34 per share from $1.11. These actions were funded partly with commercial paper and short-term borrowings, pushing total debt to 5.0% of total capitalization from 0.4% a year earlier and reducing working capital and cash to $113 million. Operating cash flow of $468.9 million remained solid, and the company retains an AA+ S&P long-term debt rating. Investors should weigh the strong operating momentum against a meaningful risk: the U.S. Justice Department intervened in a qui tam lawsuit in January 2008 alleging Grainger violated pricing and Trade Agreement Act provisions under its GSA government contract, seeking treble damages. Management says it has complied with the contract in all material respects and cannot predict the outcome. Separately, the company faces asbestos/silica lawsuits involving about 2,800 plaintiffs, which management believes are largely insured and not materially adverse.
Feb 27, 2008
2006
W.W. Grainger Annual Report, Year Ended Dec 31, 2006
W.W. Grainger's fiscal 2006 10-K shows a company performing well on the top and bottom line. Net sales rose 6.5% to $5.88 billion, with daily sales up 6.9%, driven by strong demand from commercial, government and manufacturing customers and by the U.S. market expansion program. Gross margin improved 0.9 points to 40.0%, largely from mix shifts away from low-margin integrated supply and automotive contracts and from global sourcing. Operating earnings grew 11.4% to $578.1 million, and diluted EPS rose 12.2% to $4.24, even after roughly $0.14 of dilution from the adoption of SFAS 123R stock-based compensation expensing. Net earnings were $383.4 million, and the 36.4% reported tax rate included one-time benefits worth about $0.15 per share. Balance sheet and capital allocation were central themes. Management repurchased about 6.95 million shares for roughly $473 million, versus 2.4 million shares in 2005, and paid $97.9 million in dividends, with the quarterly dividend raised to $0.29 from $0.24 during the year. Cash fell to $348 million from $545 million as buybacks and capital spending (about $137 million, with 2007 guidance of $150 to $175 million) absorbed cash flow from operations of $437 million. Total debt was minimal at roughly 0.4% of capitalization, and the company holds an S&P AA+ long-term rating. Working capital was $1.16 billion and the current ratio was 2.6. The main watch items are the cadence of the multiyear market expansion and product line programs, which management expects to drive 2007 growth, the wind-down of low-margin integrated supply contracts, a higher expected 2007 effective tax rate of 38.5%, and the ongoing asbestos and silica litigation involving about 3,100 plaintiffs, which management does not expect to be material. The filing reflects a company that is growing faster than its market, expanding margins and returning substantial capital to shareholders.
Feb 27, 2007
2005
W.W. Grainger Annual Report, Year Ended Dec 31, 2005
W.W. Grainger's fiscal 2005 10-K shows a company operating in a strengthening North American economy, with broad-based growth across its customer segments. Net sales rose 9.4% to $5.53 billion, and operating earnings grew 17.6% to $519.0 million, reflecting a 1.3-point expansion in gross margin to 39.1%. Net earnings increased 20.7% to $346.3 million, and diluted EPS reached $3.78 versus $3.13 in 2004. Growth was led by commercial, government, manufacturing and natural resource customers, with the multiyear market expansion program contributing about 1 percentage point of Branch-based Distribution sales growth. Margin gains came mainly from a shift away from low-margin integrated supply and automotive contracts, along with global sourcing. Part of the margin improvement was helped by one-time items, including roughly $18.6 million of favorable Q4 physical inventory adjustments and $9.5 million of LIFO adjustments, and a 2005 tax rate benefit worth $0.10 per diluted share. The balance sheet remains conservative. Debt was negligible at roughly $9.5 million, against $545 million of cash, and total debt was 0.4% of total capitalization. Operating cash flow was $432.5 million, and free cash flow after $157.2 million of capital expenditures was about $275 million, which funded $137.5 million of share repurchases and $82.7 million of dividends. The dividend was raised to $0.92 per share from $0.785. Management guided 2006 capital expenditures to $140–175 million and a projected effective tax rate of 38.9%, which is higher than 2005 and a headwind to earnings. It also flagged about $0.15 per diluted share of stock-compensation expense from adopting SFAS 123R. Ongoing risks include asbestos and silica litigation involving roughly 3,400 plaintiffs, which management does not expect to be material, and the wind-down of integrated supply contracts. For investors, the central question is how much of the 2005 earnings strength is durable. Sales momentum, the expansion program, and the cash-generative balance sheet are supportive. Non-recurring inventory and LIFO gains and the lower tax rate are less likely to repeat, and the guided tax increase and expensing of stock compensation will pressure 2006 earnings.
Mar 6, 2006
2004
W.W. Grainger Annual Report, Year Ended Dec 31, 2004
W.W. Grainger's fiscal 2004 10-K shows a strong rebound in profitability driven by a recovering U.S. economy and company-specific initiatives. Net sales rose 8.2% to $5,049.8 million, led by the Branch-based Distribution segment (up 8.5%) and Lab Safety (up 10.2%), while Integrated Supply was essentially flat. Gross margin expanded 1.6 percentage points to 37.8%, reflecting product cost reductions, global sourcing, selected price increases and favorable mix. Operating earnings grew 13.5% to $439.5 million, and net earnings rose 26.4% to $286.9 million, or $3.13 per diluted share. Part of the earnings jump came from a lower effective tax rate (35.6% excluding equity-method items versus 40.0% in 2003), which added roughly $0.21 per diluted share, so investors should separate that one-time benefit from core operating growth. The balance sheet is conservative. Debt was effectively eliminated after the $140.8 million cross-currency swap and related commercial paper matured in September 2004, leaving only $9.5 million of industrial revenue bonds, and total debt fell to 0.5% of capitalization. Operating cash flow was $406.5 million, capital expenditures were about $161 million, and the company repurchased 2.0 million shares while paying $71.2 million in dividends. Management guided 2005 capital spending to $150 to $180 million and expects the market expansion program and SAP investments to drive growth. Key risks include the planned exit from on-site Integrated Supply services, ongoing asbestos/silica litigation involving about 3,700 plaintiffs, and the rising cost of the SAP and branch-network transition.
Feb 28, 2005
2003
W.W. Grainger Annual Report, Year Ended Dec 31, 2003
W.W. Grainger's fiscal 2003 10-K shows a company with flat top-line performance but improving gross margins and a fortress balance sheet. Net sales were $4,667.0 million, essentially flat versus $4,643.9 million in 2002, as weak U.S. manufacturing employment weighed on demand, partly offset by government account growth (up to 17% of sales from 13% in 2001) and Canadian currency tailwinds. Gross margin rose to 35.1% from 34.4% on favorable product mix and selected price increases, but operating earnings fell 1.5% to $387.3 million because operating expenses rose to 26.8% of sales, driven by higher severance and healthcare costs. Diluted EPS increased to $2.46 from $2.24, though the prior-year comparison was depressed by a $23.9 million goodwill write-down; excluding that, earnings growth was more modest. The company ended 2003 with $402.8 million in cash, long-term debt of only $4.9 million (with $144.1 million reclassified to current due to a cross-currency swap maturing in 2004), and shareholders' equity of $1.85 billion. Operating cash flow improved to $394.1 million, aided by inventory reduction from the redesigned logistics network. Management plans to more than double capital expenditures to $200 to $225 million in 2004, targeting branch expansion, IT upgrades, and completion of the distribution network, which is a meaningful step-up that will pressure free cash flow in the near term. Key watch items for investors include the continued dependence on U.S. manufacturing employment, the rising operating expense base, the 2004 capex ramp, and the accounting change requiring vendor allowances to be reclassified from operating expenses to cost of merchandise sold (a $55.2 million reclassification in 2003 terms, with no net earnings effect). The company's AA+ credit rating and low leverage give it significant flexibility to fund these initiatives.
Mar 10, 2004
2002
W.W. Grainger Annual Report, Year Ended Dec 31, 2002
W.W. Grainger's fiscal 2002 10-K shows a company that grew earnings despite a soft top line. Net sales fell 2.3% to $4.64 billion, driven by weak North American industrial demand, the Canadian automotive aftermarket joint venture with Uni-Select, and the wind-down of the Digital segment. Operating earnings rose 16.1% to $393.2 million, and the operating margin widened to 8.5% from 7.1%. Excluding the Material Logic restructuring items and the 2002 cumulative accounting charge, earnings improved on a like-for-like basis, reflecting gross margin gains from pricing actions and mix, lower cost of merchandise sold, and tighter expense control. Diluted EPS was $2.24, including a $0.26 goodwill impairment charge at Acklands, and would have been $2.44 excluding these items. The balance sheet remains conservative. Total assets were $2.44 billion, shareholders' equity was $1.67 billion, and total debt was only 7.2% of total capitalization. The company holds an AA+ S&P rating, and its committed credit lines were largely unused. Operating cash flow fell to $303.5 million from $509.2 million, mainly because of a $97 million inventory build intended to improve service levels and capture share in an anticipated economic recovery. The company also repurchased 2.2 million shares for about $100 million and paid $66.5 million in dividends. Key risks include continued weakness in the North American economy, exposure to Canadian and Mexican currency and economic conditions, and a legal overhang from roughly 600 asbestos-related lawsuits, which management believes are largely insured and not material. Management also disclosed a pending $35 million acquisition of Gempler's by Lab Safety, expected to close in the second quarter of 2003.
Mar 20, 2003
1998
W.W. Grainger Annual Report, Year Ended Dec 31, 1998
W.W. Grainger, Inc. (GWW) closed 1998 with net sales of $4.34 billion, up 4.9% from $4.14 billion in 1997, and net earnings of $238.5 million, up 2.9%. Diluted EPS rose to $2.44 from $2.27, aided by a 2-for-1 stock split in May 1998 and about 4.5 million shares repurchased during the year. Growth was primarily volume-driven, supported by National Accounts, Integrated Supply, and direct marketing programs. Canadian subsidiary Acklands-Grainger (AGI) was a drag on reported sales because of currency translation and weak resource-sector demand, and excluding AGI, sales grew 6.1%. Profitability was pressured by investment spending. Net earnings grew more slowly than sales because of pre-tax losses at Grainger Integrated Supply ($17.7 million) and the Mexico business ($3.4 million), rising operating expenses, Year 2000 and new enterprise system costs, and higher interest and foreign currency losses. Gross margin improved 0.67 percentage points to 36.8%, reflecting cost reduction programs, a 0.7% price increase, and favorable mix. Operating expenses rose to 27.4% of sales from 26.6%. The balance sheet remains conservative, with working capital of $542 million, a current ratio of 1.8, and operating cash flow of $335 million. Total debt rose to 18% of equity from 12%, mainly because of $193 million of share repurchases and short-term borrowings. Management describes the Year 2000 and business enterprise system projects as a total cost of roughly $34 to $39 million remaining, with completion targeted for Q3 1999. Management also flagged that Year 2000 failures at other companies could have a material adverse effect.
Mar 26, 1999
1995
W.W. Grainger Annual Report, Year Ended Dec 31, 1995
W.W. Grainger's 1995 10-K shows a company that grew sales and earnings strongly while keeping a conservative balance sheet. Net sales rose 8.4% to $3.28 billion (about 8.8% on a daily basis, since 1995 had one fewer sales day), driven mainly by volume from new product additions, branch expansion, Zone Distribution Centers, and the National Accounts program, where daily sales rose about 22%. Selling price increases were modest at roughly 1.5%. Net earnings climbed 46.0% to $186.7 million, or $3.64 per share, but that comparison flatters 1995 because 1994 absorbed a $49.8 million after-tax restructuring charge. Excluding that charge, earnings grew 5.1%, which trailed sales growth because operating expenses rose faster than sales. The balance sheet and cash flow profile is strong. Working capital was $618.5 million with a current ratio of 2.4, and total debt was only 5% of shareholders' equity. Operating cash flow fell to $126.3 million from $191.4 million, largely due to higher inventory and receivables, and capital spending was $111.9 million. Dividends rose to $0.89 per share, and the company bought back no stock in 1995 or 1994, retaining about 3.6 million shares of repurchase authorization. Management describes the company as a service business and points to the integration of Allied Safety and Bossert Industrial Supply, expected to finish in 1996, as the next step in its strategy. The filing also shows some risks to monitor. Inventory grew faster than sales, rising to $602.6 million, and operating cash flow weakened materially. Operating expenses are rising from investment in infrastructure, freight, and benefits. Gross margin gains were slight, and mix shifted toward lower-margin National Accounts business. The company reported no material pending legal proceedings, and its auditor, Grant Thornton, issued a clean opinion.
Mar 25, 1996
1994
W.W. Grainger Annual Report, Year Ended Dec 31, 1994
W.W. Grainger's 1994 results show a company growing sales rapidly while absorbing a large one-time restructuring charge. Net sales rose 15.0% to $3.02 billion, driven mainly by volume, with the core Grainger branch business actually seeing 0.6% selling-price deflation. Reported net earnings fell 13.9% to $127.9 million ($2.50 per share), but that figure includes a $69.4 million pretax restructuring charge ($49.8 million after tax, or $0.97 per share) tied to integrating Allied Safety, Bossert Industrial Supply, and the sanitary supply business. Excluding the charge, net earnings rose 19.3%, and the adjusted net margin was 5.9% versus 5.7% in 1993. Operating expenses grew more slowly than sales, though gross margin, excluding the charge, compressed about 1.1 percentage points on product mix and cost inflation running ahead of price increases. The balance sheet remains conservative. Total assets reached $1.53 billion, shareholders' equity was $1.03 billion, and total debt was only about 4% of equity. Operating cash flow was $191 million, against capital expenditures of $120 million that went largely to the branch optimization program, Zone Distribution Centers, and computer system upgrades. No shares were repurchased in 1994, though about 3.6 million remain authorized, and the dividend was raised to $0.78 per share from $0.705. Management also changed: Richard L. Keyser became President in 1994 and CEO effective March 1, 1995, and the company describes itself as a service business with a single industry segment. For investors, the key questions are whether the restructuring delivers the promised operating savings, whether gross margin pressure from National Accounts growth and contractor repricing persists, and whether the company can sustain its high-teens earnings growth on an underlying basis. The filing's own description of the core business and its scale, with 337 branches, 1.2 million customers, and roughly 20 million transactions a year, supports the view of a dominant MRO distributor with a strong balance sheet.
Mar 27, 1995
1993
W.W. Grainger Annual Report, Year Ended Dec 31, 1993
W.W. Grainger's 1993 Form 10-K shows a company growing steadily through its core Grainger Division and a growing portfolio of smaller distribution businesses. Consolidated net sales rose 11.2% to $2.63 billion, and net earnings grew 8.2% to $148.4 million, or $2.86 per share. Operating margin was roughly 9.6% of sales, while net earnings as a share of sales slipped to 5.6% from 5.8%, as operating expenses (warehousing, marketing and administrative costs) rose faster than sales. The Grainger Division, which accounts for most revenue, grew sales 9.3%, driven by a 7.4% volume increase and a 1.8% price increase, and National Accounts sales rose 25%. The balance sheet is conservative. Total assets were $1.38 billion and shareholders' equity was $942 million. Debt is minimal, with long-term debt of only $6.2 million, and total debt was 7% of equity. Operating cash flow was $162.5 million, which covered $98.4 million of capital spending, mainly for branch expansion, and $36.3 million of dividends. The company also repurchased 1.78 million shares for about $105 million. Working capital declined year over year, and the current ratio fell to 2.2 from 2.5 as short-term borrowings were used. The main investor considerations are margin pressure from higher operating costs and the cost of building out the newer acquired businesses, including Lab Safety, Allied, Bossert and PCA. Acquisition-related amortization reduced earnings, and the effective tax rate rose to 40.3% partly because of the 1993 federal tax rate increase. Management frames the company as a service business and highlights its branch network, distribution centers and catalog-led model as its competitive advantages.
Mar 28, 1994