What is the company's outlook for the remainder of 2012?

W.W. Grainger reiterated its 2012 sales growth guidance of 12% to 14% and raised its full-year earnings per share guidance to a range of $10.50 to $10.80. Sales for the second half of 2012 are expected to grow between 10% and 13%, with gross profit margins anticipated to remain consistent with Q2 2012 levels.

How did acquisitions impact the company's financial performance?

Acquisitions, particularly Fabory and the Brazilian business (AnFreixo), contributed significantly to the growth in the 'Other Businesses' segment, with sales up 84% in the second quarter. These acquisitions also contributed to increased operating expenses, but the overall impact on revenue and earnings was positive.

Are there any significant legal or contingent matters that investors should be aware of?

The company is involved in ongoing discussions and non-binding mediation with the Department of Justice (DOJ) and the United States Postal Service (USPS) regarding pricing provisions and disclosure obligations under government contracts. While the company believes it has complied with contracts and does not expect a material adverse effect on its financial position, an unfavorable resolution could result in significant payments. An internal investigation into alleged expense reimbursement falsification and potential improper customer incentives in Grainger China also concluded without substantiating initial concerns of significant improper use of gift cards, with voluntary disclosure made to the DOJ and SEC.

What drove the increase in operating expenses?

Operating expenses increased primarily due to expenses related to the Fabory and AnFreixo acquisitions, as well as incremental spending on new sales representatives, e-commerce initiatives, and advertising to support growth.

GWW 10-Q Quarterly Report Q2 FY2012 — Revenue, Net Income, EPS

Summary

W.W. Grainger, Inc. (GWW) reported solid financial results for the second quarter and first half of 2012, demonstrating continued growth driven by increased sales volume and strategic acquisitions. Net sales for the quarter rose by 12.3% year-over-year to $2.25 billion, with a 15.4% increase in net earnings attributable to W.W. Grainger, Inc. to $190.7 million, translating to a diluted EPS of $2.63, up 12% from the prior year. The company successfully navigated a growing economic environment, with industrial production increasing and favorable trends in key customer end-markets like heavy and light manufacturing. Key drivers for this performance included a robust increase in sales volume, contributing significantly to revenue growth, alongside benefits from acquisitions in Europe and Latin America. The company also saw an improvement in gross profit margin, primarily due to pricing strategies outpacing product cost increases. Despite some increased operating expenses related to growth initiatives and acquisitions, overall operating earnings showed a healthy increase of 18.4% for the quarter. Grainger reiterated its positive outlook, raising its full-year EPS guidance, reflecting management's confidence in sustained performance.

Financial Highlights

51 data points

Beta

Revenue

$2.25B

0.4% Gross Margin

Net Income

$190.70M

0.1% Net Margin

EPS (Diluted)

$2.63

Total Assets

$4.76B

Cash & Equivalents

$249.75M

Free Cash Flow

$76.24M

Financial Statements

Beta

Revenue	$2.25B
Cost of Revenue	$1.27B
Gross Profit	$978.34M
SG&A Expenses	$664.34M
Operating Income	$314.00M
Interest Expense	$2.91M
Net Income	$190.70M
EPS (Basic)	$2.68
EPS (Diluted)	$2.63
Shares Outstanding (Basic)	69.94M
Shares Outstanding (Diluted)	71.31M

Key Highlights

1Net sales increased by 12.3% to $2.25 billion for the three months ended June 30, 2012, compared to $2.00 billion in the prior year.
2Net earnings attributable to W.W. Grainger, Inc. rose by 12.3% to $190.7 million ($2.63 diluted EPS) for the quarter, compared to $169.9 million ($2.34 diluted EPS) in the prior year.
3Gross profit margin improved by 0.4 percentage points to 43.5% in Q2 2012, driven by price increases outpacing product cost increases.
4Operating earnings grew by 18.4% to $314.0 million for the quarter, indicating strong operational leverage.
5The company reiterated its 2012 sales growth guidance of 12-14% and raised its full-year EPS guidance to $10.50-$10.80.
6International operations, particularly the 'Other Businesses' segment (including Fabory and AnFreixo), showed substantial growth, with sales up 84% in the quarter due to acquisitions and strong performance in Japan.
7The company repurchased 758,319 shares of common stock during the second quarter under its share repurchase program.

W.W. GRAINGER, INC. Quarterly Report for Q2 Ended Jun 30, 2012

Summary

Financial Highlights

Key Highlights

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