10-KPeriod: FY2014

W.W. GRAINGER, INC. Annual Report, Year Ended Dec 31, 2014

Filed February 27, 2015For Securities:GWW

Summary

W.W. Grainger, Inc. (GWW) presents its 2014 annual report, highlighting a modest 5.6% increase in net sales to $9.96 billion, a slight rise from $9.44 billion in 2013. Net earnings saw a marginal increase of 0.6% to $801.7 million, translating to $11.45 per diluted share. The company continues its strategic investments in eCommerce, supply chain, and sales force expansion, aiming to accelerate market share growth. However, the report also notes challenges, including a slight dip in gross profit margin due to acquisitions and lower-margin customer growth, alongside specific charges for business closures and restructurings in international operations, which impacted overall profitability. Grainger's core U.S. segment remains robust, showing a 7% sales increase driven by volume and strategic acquisitions. Conversely, the Canadian segment experienced a 3% sales decline due to unfavorable foreign exchange rates and a slowdown in key natural resource sectors. The company is actively managing these challenges while continuing to invest in its multichannel distribution model, which is crucial for future growth and competitiveness in the MRO supply market. Investors should monitor the impact of these strategic investments and the recovery in the Canadian market.

Financial Highlights

54 data points
Beta

Revenue

$9.96B

43.3% Gross Margin

Net Income

$801.73M

8.0% Net Margin

EPS (Diluted)

$11.45

Total Assets

$5.28B

Cash & Equivalents

$226.64M

Free Cash Flow

$572.42M

Financial Statements
Beta
Revenue$9.96B
Cost of Revenue$5.65B
Gross Profit$4.31B
SG&A Expenses$2.97B
Operating Income$1.35B
Interest Expense$10.09M
Net Income$801.73M
EPS (Basic)$11.59
EPS (Diluted)$11.45
Shares Outstanding (Basic)68.33M
Shares Outstanding (Diluted)69.21M

Key Highlights

  • 1Net sales increased by 5.6% to $9.96 billion in 2014, up from $9.44 billion in 2013.
  • 2Net earnings attributable to W.W. Grainger, Inc. increased slightly by 0.6% to $801.7 million in 2014.
  • 3Diluted earnings per share were $11.45 in 2014, a 3% increase from $11.13 in 2013.
  • 4The U.S. segment showed strong sales growth of 7%, driven by volume and acquisitions.
  • 5The Canadian segment experienced a sales decline of 3%, impacted by foreign exchange and market conditions.
  • 6Significant investments were made in eCommerce, supply chain, and sales force expansion.
  • 7Gross profit margin decreased by 0.5 percentage points in 2014 due to acquisition impacts and customer mix.

Frequently Asked Questions

Net sales grew by 5.6% in 2014, primarily driven by a 5% increase in sales volume and a 1% contribution from business acquisitions, partially offset by a slight decrease due to foreign exchange impacts. Growth was particularly strong in the U.S. segment, supported by sales to heavy and light manufacturing customers, as well as diversified commercial services.

Profitability was affected by several factors. The gross profit margin declined due to lower margins from newly acquired businesses, faster growth with lower-margin customers, and charges related to closing the business in Brazil and restructuring in Europe. Operating expenses also increased due to growth-related spending and these same charges. Specific charges included a $0.40 per share expense for the Brazil closure, and other costs related to European operations and goodwill impairment.

International operations presented a mixed picture. The Canadian segment saw a 3% decrease in net sales, despite a 4% increase in local currency, due to a significant negative impact from foreign exchange. Grainger also incurred charges related to closing its business in Brazil and restructuring operations in Europe. Other international businesses, such as Zoro, Japan, and Mexico, contributed to sales growth in the 'Other Businesses' segment.

For 2015, Grainger revised its earnings per share guidance downwards, citing unfavorable foreign exchange and a weak Canadian economy. The company plans to continue investing in its supply chain, information systems, eCommerce, sales force, and inventory management services, aiming to accelerate market share growth. Projected capital expenditures for 2015 are expected to range from $375 million to $425 million, funded by operating cash.