What were the main drivers of the net sales decrease in the second quarter?

The net sales decrease of 2% in the second quarter of 2003 was primarily due to the continuing general weakness in the U.S. economy and lower seasonal sales resulting from unseasonably cool weather. These factors were partially offset by increased sales at Lab Safety due to the Gempler's acquisition.

How did the Gempler's acquisition impact the company's financial results?

The acquisition of Gempler's on April 14, 2003, contributed positively to the Lab Safety segment's net sales, increasing them by 7% in the second quarter. However, excluding this acquisition, Lab Safety's sales would have decreased by 2% due to weakness in the manufacturing sector.

What caused the significant increase in year-to-date net earnings for the first six months of 2003 compared to 2002?

The substantial year-over-year increase in net earnings for the first six months of 2003 was largely due to the fact that the prior year's comparable period (six months ended June 30, 2002) included a significant non-cash charge of $23.9 million after-tax related to the write-down of goodwill under SFAS 142. Excluding these prior-year items, net earnings for the first six months of 2003 were comparable to 2002.

What is the company's outlook regarding economic conditions and future performance?

Management noted the continuing general weakness in the U.S. economy and softness in Mexico's economy. The company's financial reports include forward-looking statements that discuss potential risks and uncertainties, such as general economic conditions, interest rate and currency fluctuations, and competitive pressures, which could affect future results.

GWW 10-Q Quarterly Report Q2 FY2003 — Revenue, Net Income, EPS

Summary

W.W. Grainger, Inc. (GWW) reported its second quarter and year-to-date results for 2003, demonstrating resilience amidst a challenging economic environment. For the three months ended June 30, 2003, net sales slightly decreased by 2% to $1.17 billion compared to the prior year, impacted by general economic weakness and unfavorable weather. However, net earnings saw a modest increase of 3% to $56.0 million, driven by improved other income and a lower effective tax rate, despite a 2% dip in operating earnings. On a year-to-date basis for the six months ended June 30, 2003, net sales were largely flat at $2.31 billion. Net earnings significantly increased by 22% to $108.4 million, although this was influenced by the prior year's accounting charge for goodwill impairment. Excluding this charge and other prior-year items, year-over-year net earnings were comparable. The company completed the acquisition of Gempler's for $36.7 million, which contributed positively to Lab Safety's sales, and continued to invest in its distribution centers.

Key Highlights

1Net sales for the second quarter of 2003 were $1,172.7 million, a 2% decrease compared to $1,194.8 million in Q2 2002, attributed to economic weakness and cool weather.
2Net earnings for the second quarter increased by 3% to $56.0 million ($0.61 per diluted share) from $54.5 million ($0.57 per diluted share) in Q2 2002.
3Year-to-date net sales for the first six months of 2003 were $2,311.9 million, essentially flat compared to $2,320.1 million in the prior year.
4Year-to-date net earnings significantly increased by 22% to $108.4 million ($1.17 per diluted share) compared to $89.0 million ($0.93 per diluted share) in the prior year, though the prior year included a significant accounting charge.
5The company acquired Gempler's on April 14, 2003, for $36.7 million, adding to the Lab Safety segment's revenue.
6Gross profit margin for the Branch-based Distribution segment improved by 1.0 percentage point in Q2 2003 due to pricing actions, favorable product mix, and one-time benefits.
7The company's liquidity remains strong, with a current ratio of 2.7:1 as of June 30, 2003, and a low debt-to-capitalization ratio of 7.7%.

W.W. GRAINGER, INC. Quarterly Report for Q2 Ended Jun 30, 2003

Summary

Key Highlights

Frequently Asked Questions