10-KPeriod: FY2012

W.W. GRAINGER, INC. Annual Report, Year Ended Dec 31, 2012

Filed February 28, 2013For Securities:GWW

Summary

W.W. Grainger, Inc. (GWW) reported solid performance for the fiscal year ended December 30, 2012, with net sales increasing by 10.8% to $8.95 billion. This growth was driven by a 6% increase in volume, 3% from business acquisitions, and 3% from pricing strategies, with a slight negative impact from foreign exchange. The company demonstrated a robust market position, particularly in the United States, with a significant 7% increase in net sales for its primary segment. Grainger's strategic acquisitions, including Techni-Tool, Inc. and AnFreixo S.A., are contributing to its expansion and market reach. While facing economic uncertainties and competitive pressures, Grainger highlighted its strong operational capabilities, including a well-established distribution network and a growing eCommerce presence, which resulted in a 5% increase in net earnings to $690 million. The company also continued to return value to shareholders through share repurchases and increased dividends.

Financial Highlights

53 data points
Beta

Revenue

$8.95B

43.8% Gross Margin

Net Income

$689.88M

7.7% Net Margin

EPS (Diluted)

$9.52

Total Assets

$5.01B

Cash & Equivalents

$452.06M

Free Cash Flow

$566.34M

Financial Statements
Beta
Revenue$8.95B
Cost of Revenue$5.03B
Gross Profit$3.92B
SG&A Expenses$2.79B
Operating Income$1.13B
Interest Expense$16.08M
Net Income$689.88M
EPS (Basic)$9.71
EPS (Diluted)$9.52
Shares Outstanding (Basic)69.81M
Shares Outstanding (Diluted)71.18M

Key Highlights

  • 1Net sales grew by 10.8% to $8.95 billion in 2012, reflecting strong customer demand and strategic pricing.
  • 2Acquisitions, including Techni-Tool in the US and AnFreixo in Brazil, contributed 3% to sales growth, indicating an active expansion strategy.
  • 3eCommerce revenues saw a substantial 17% increase, reaching $2.2 billion, underscoring the growing importance of digital channels.
  • 4Gross profit margin improved to 43.8%, up from 43.5% in 2011, driven by price increases outpacing product cost increases.
  • 5Operating expenses increased by 13%, partly due to significant one-time charges including a $76 million settlement for GSA/USPS contracts and restructuring costs.
  • 6Net earnings increased by 4.8% to $690 million, or $9.52 per diluted share, demonstrating resilience despite increased operating expenses.
  • 7The company returned significant capital to shareholders, with cash dividends paid per share increasing to $3.06 from $2.52 in 2011, and share repurchases totaling $341 million.

Frequently Asked Questions

W.W. Grainger's revenue growth in 2012 was primarily driven by increased sales volume (6%), strategic business acquisitions (3%), and price increases (3%). The company also benefited from a robust performance in its core United States market and a significant 17% growth in its eCommerce channel.

While net sales increased, operating expenses also rose by 13%. This increase was significantly impacted by one-time charges, including a $76 million settlement related to GSA and USPS contracts and $24 million in restructuring and impairment charges. Excluding these items, operating expenses grew at a more moderate rate (10%), driven by investments in sales force expansion, eCommerce, and advertising, as well as costs associated with acquisitions.

Grainger projected a sales growth range of 3% to 9% for 2013 and raised its EPS guidance to $10.85-$12.00. The company plans to continue investing in key growth areas including its sales force, product line expansion, eCommerce capabilities, inventory management services, and international expansion.

Grainger actively pursues strategic acquisitions to expand its market reach and product offerings. In 2012, acquisitions like Techni-Tool in the US and AnFreixo in Brazil contributed to sales growth. While these acquisitions enhance future growth prospects, they also add integration costs and can impact short-term profitability due to restructuring charges or initial operating losses, as seen in the 'Other Businesses' segment.