CHICAGO, July 19, 2017 /PRNewswire/ -- Grainger
(NYSE: GWW) today reported results for the 2017 second quarter
ended June 30, 2017. Sales of
$2.6 billion increased 2 percent
versus $2.6 billion in the second
quarter of 2016. There were 64 selling days in the 2017
second quarter, the same as the 2016 second quarter. Net
earnings for the quarter of $98
million were down 43 percent versus $173 million in
2016. Earnings per share of $1.67 declined 40 percent versus $2.79 in 2016.
"The second quarter was in line with our expectations, as we saw
continued volume growth from our strategic pricing initiatives in
the United States. We remain on schedule to roll out web
prices on our entire assortment on Aug.
1," said Chief Executive Officer DG Macpherson.
"Outside the United States, we took aggressive action to streamline
our portfolio and focus on profitable businesses, as we announced
the wind-down of the business in Colombia and previously announced the closing
of 59 branches in Canada this
year. Based on our confidence from what we are seeing, we are
reiterating our guidance for the year," Macpherson concluded.
The company reiterated its 2017 sales and earnings per share
guidance of sales growth of 1 to 4 percent and adjusted earnings
per share of $10.00 to $11.30.
The company's previous 2017 guidance was communicated on
April 18, 2017.
Ron Jadin, Senior Vice President
and Chief Financial Officer announced today that he will be
retiring at year-end. Jadin joined Grainger in 1998 and has
served in various financial roles including as CFO since
2008. The company and the Board of Directors thank Jadin for
his many contributions during his tenure. An external search
has been launched to identify his successor.
The second quarter contained the following restructuring
items:
|
Three Months Ended
June 30,
|
|
2017
|
2016
|
%
|
Diluted earnings per
share reported
|
$
1.67
|
$
2.79
|
(40)%
|
Pretax
adjustments:
|
|
|
|
Branch gains (United
States)
|
(0.23)
|
(0.25)
|
|
Restructuring (United
States)
|
0.23
|
0.10
|
|
Restructuring
(Canada)
|
0.35
|
0.13
|
|
Inventory reserve
adjustment (Canada)
|
|
0.16
|
|
Restructuring (Other
Businesses)
|
0.71
|
|
|
Restructuring
(Unallocated expense)
|
|
0.15
|
|
Total pre-tax
adjustments
|
1.06
|
0.29
|
|
Tax effect
(1)
|
0.01
|
(0.08)
|
|
Discrete tax
item
|
|
(0.11)
|
|
Total, net of
tax
|
1.07
|
0.10
|
|
Diluted earnings per
share adjusted
|
$
2.74
|
$
2.89
|
(5)%
|
|
(1) The tax impact of
adjustments is calculated based on the income tax rate in each
applicable jurisdiction, subject to deductibility limitations
and the company's ability to realize the associated text
benefits.
|
In the U.S. segment, gains from the sale of assets were
essentially offset by restructuring costs. The Canadian business
announced plans to close 59 branches in 2017 as part of
restructuring to return to profitable growth. The company
also announced the wind-down of its business in Colombia. In
total, the restructuring items represented $1.07 per share in charges. Excluding
restructuring, net earnings decreased 10 percent and earnings per
share decreased 5 percent.
Company
Sales increased 2 percent in the 2017 second
quarter versus the prior year, driven by an increase of
7 percentage points from volume, partially offset by declines
of 3 percentage points in price, 1 percentage point from foreign
exchange and 1 percentage point from the timing of the Easter
holiday.
Company operating earnings of $232
million for the 2017 second quarter declined 24 percent
versus $306 million in the 2016
quarter. The decline was driven primarily by charges from the
company's restructuring costs. Excluding restructuring in
both years, operating earnings were down 9 percent.
The company has two reportable business segments, the United States and Canada, which represented approximately 80
percent of company sales for the quarter. The remaining
businesses, which include the single channel online businesses, are
included in Other Businesses and are not reportable
segments.
United States
Sales for the U.S. segment were up 1 percent versus the 2016 second
quarter. The increase was driven by a 5 percentage point increase
from volume and 1 percentage point from intercompany sales,
partially offset by a 4 percentage point decline in price and a 1
percentage point decline from the timing of the Easter
holiday. Sales to customers in the Retail and Natural
Resources end markets led the sales performance in the
quarter.
Operating earnings for the U.S. segment declined 11 percent in
the quarter driven by lower gross profit and higher operating
expenses. Gross profit margins for the quarter declined
1.3 percentage points driven by the strategic price
initiatives. In the 2017 second quarter, operating expenses were up
4 percent, which included a $13
million benefit from the gain on sale of branches and
$14 million of restructuring
charges.
Canada
Second quarter 2017 sales for the Canada segment decreased 3 percent in U.S.
dollars and increased 2 percent in local currency. The 2
percent increase consisted of 2 percentage points from volume
and a 2 percentage point benefit from the favorable comparison
related to the Alberta wildfires
in 2016, partially offset by 1 percentage point from lower
price and a 1 percentage point decline from the timing of the
Easter holiday.
The business in Canada posted a
$28 million operating loss in the
2017 second quarter versus a $28
million operating loss in the prior year. Current year
performance was primarily driven by improved gross margin offset by
lower sales and restructuring charges. The gross profit
margin in Canada increased
4.1 percentage points versus the prior year largely due to a
favorable comparison related to an inventory reserve adjustment in
the prior year. Operating expenses increased 8 percent.
The 2017 second quarter contained $20
million of restructuring charges related to facility and
headcount reductions.
Other Businesses
Sales for the Other Businesses increased 11 percent versus the
prior year, consisting of 14 percentage points of growth from
volume and price, partially offset by a 3 percentage point
decline from foreign exchange, primarily attributable to weakness
in the British pound. The performance was driven by 23
percent sales growth for the single channel online businesses.
The Other Businesses posted an operating loss of $14 million in the 2017 second quarter versus
$30 million of operating earnings in the prior year.
This performance included the charges from the wind-down of the
business in Colombia and was
partially offset by strong results from Zoro in the United States and MonotaRO in Japan.
Excluding restructuring, operating earnings for the Other
Businesses were $27
million.
Other
Other income and expense was a net expense of $25 million in the 2017 second quarter versus a
net expense of $23 million in the 2016 second quarter.
This increase was primarily due to interest expense from the
additional debt the company issued in May
2017 and expected losses from the company's investments in
clean energy. For the quarter, the effective tax rate in 2017
was 48.4 percent versus 36.6 percent in 2016. The
increase is primarily due to the wind-down of the business in
Colombia. The company is currently projecting an effective
tax rate of 35.0 to 36.0 percent for the year 2017.
Cash Flow
Operating cash flow was $191 million
in the 2017 second quarter versus $182
million in the 2016 second quarter. The company used
the cash generated during the quarter and proceeds from the debt
offering to invest in the business, pay down short-term debt and
return cash to shareholders through share repurchase and
dividends. Capital expenditures were $52 million in the 2017 second quarter versus
$54 million in the second quarter of
2016. In the 2017 second quarter, Grainger returned
$234 million to shareholders through $80 million in dividends and $154 million to buy back 780,000 shares of
stock.
Year-to-Date
For the six months ended June 30,
2017, sales of $5.2 billion
increased 2 percent versus $5.1 billion in the six months ended
June 30, 2016. There were 128
selling days in the first six months of both years. Net
earnings decreased 24 percent to $273 million versus
$359 million in the first half of
2016. Earnings per share for the six months decreased
20 percent to $4.61 versus
$5.77 in the first half of 2016.
The first six months contained the following restructuring
items:
|
Six Months Ended
June 30,
|
|
2017
|
2016
|
%
|
Diluted earnings per
share reported
|
$
4.61
|
$
5.77
|
(20)%
|
Pretax
adjustments:
|
|
|
|
Branch gains (United
States)
|
(0.39)
|
(0.25)
|
|
Restructuring (United
States)
|
0.28
|
0.36
|
|
Restructuring
(Canada)
|
0.37
|
0.18
|
|
Inventory reserve
adjustment (Canada)
|
|
0.16
|
|
Restructuring (Other
Businesses)
|
0.70
|
|
|
Restructuring
(Unallocated expense)
|
|
0.15
|
|
Total pre-tax
adjustments
|
0.96
|
0.60
|
|
Tax effect
(1)
|
0.05
|
(0.19)
|
|
Discrete tax
item
|
|
(0.11)
|
|
Total, net of
tax
|
1.01
|
0.30
|
|
Diluted earnings per
share adjusted
|
$
5.62
|
$
6.07
|
(7)%
|
|
(1) The tax impact of
adjustments is calculated based on the income tax rate in each
applicable jurisdiction, subject to deductibility limitations and
the company's ability to realize the associated text
benefits.
|
Excluding the items noted in the table, net earnings declined 12
percent and earnings per share declined 7 percent.
Webcast
Grainger will conduct a live conference call and webcast at
11:00 a.m. Eastern Daylight Time on
July 19, 2017, to discuss the second
quarter. The webcast will be hosted by DG Macpherson and
Ron Jadin and can be accessed at
www.grainger.com/investor. For those unable to participate in
the live event, a webcast replay will be available for 90 days at
www.grainger.com/investor.
W.W. Grainger, Inc., with 2016
sales of $10.1 billion, is
North America's leading broad line
supplier of maintenance, repair and operating products, with
operations also in Europe,
Asia and Latin America.
Visit www.grainger.com/investor to view
information about the company, including a supplement regarding
2017 second quarter results. The Grainger website
also includes more information through our Fact Book
and Corporate Social Responsibility
report.
Safe Harbor Statement
All statements in this communication, other than those relating
to historical facts, are "forward-looking statements." These
forward-looking statements are not guarantees of future performance
and are subject to a number of assumptions, risks and
uncertainties, many of which are beyond our control, which could
cause actual results to differ materially from such statements.
These statements include, but are not limited to, statements about
future strategic plans and future financial and operating results.
Important factors that could cause actual results to differ
materially from our expectations include, among others: higher
product costs or other expenses; a major loss of customers; loss or
disruption of source of supply; increased competitive pricing
pressures; failure to develop or implement new technologies; the
implementation, timing and success of our strategic pricing
initiatives; the outcome of pending and future litigation or
governmental or regulatory proceedings, including with respect to
wage and hour, anti-bribery and corruption, environmental,
advertising, privacy and cybersecurity matters; investigations,
inquiries, audits and changes in laws and regulations; disruption
of information technology or data security systems; general
industry or market conditions; general global economic conditions;
currency exchange rate fluctuations; market volatility; commodity
price volatility; labor shortages; facilities disruptions or
shutdowns; higher fuel costs or disruptions in transportation
services; natural and other catastrophes; unanticipated weather
conditions; loss of key members of management; our ability to
operate, integrate and leverage acquired businesses; changes in
credit ratings; changes in effective tax rates and other factors
which can be found in our filings with the Securities and Exchange
Commission, including our most recent periodic reports filed on
Form 10-K and Form 10-Q, which are available on our Investor
Relations website. Forward-looking statements are given only as of
the date of this communication and we disclaim any obligation to
update or revise any forward-looking statement, whether as a result
of new information, future events or otherwise, except as required
by law.
CONSOLIDATED
STATEMENTS OF EARNINGS (Unaudited)
|
(In thousands, except
for per share amounts)
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Net sales
|
$
|
2,615,269
|
|
|
$
|
2,563,668
|
|
|
$
|
5,156,398
|
|
|
$
|
5,070,206
|
|
Cost of
merchandise sold
|
1,575,313
|
|
|
1,523,609
|
|
|
3,097,250
|
|
|
2,985,094
|
|
Gross profit
|
1,039,956
|
|
|
1,040,059
|
|
|
2,059,148
|
|
|
2,085,112
|
|
Warehousing,
marketing and administrative expenses
|
807,891
|
|
|
734,470
|
|
|
1,531,595
|
|
|
1,462,431
|
|
Operating
earnings
|
232,065
|
|
|
305,589
|
|
|
527,553
|
|
|
622,681
|
|
Other income
(expense):
|
|
|
|
|
|
|
|
Interest
income
|
465
|
|
|
162
|
|
|
658
|
|
|
327
|
|
Interest
expense
|
(19,905)
|
|
|
(16,806)
|
|
|
(36,884)
|
|
|
(30,531)
|
|
Loss from equity
method investment
|
(6,121)
|
|
|
(5,427)
|
|
|
(14,495)
|
|
|
(11,815)
|
|
Other non-operating
income and (expense)
|
692
|
|
|
(538)
|
|
|
1,037
|
|
|
(98)
|
|
Total other
income (expense)
|
(24,869)
|
|
|
(22,609)
|
|
|
(49,684)
|
|
|
(42,117)
|
|
Earnings before
income taxes
|
207,196
|
|
|
282,980
|
|
|
477,869
|
|
|
580,564
|
|
Income
taxes
|
100,237
|
|
|
103,535
|
|
|
188,057
|
|
|
209,475
|
|
Net earnings
|
106,959
|
|
|
179,445
|
|
|
289,812
|
|
|
371,089
|
|
Net earnings
attributable to noncontrolling interest
|
9,038
|
|
|
6,769
|
|
|
17,147
|
|
|
11,700
|
|
Net earnings
attributable to W.W. Grainger, Inc.
|
$
|
97,921
|
|
|
$
|
172,676
|
|
|
$
|
272,665
|
|
|
$
|
359,389
|
|
Earnings per share
-Basic
|
$
|
1.68
|
|
|
$
|
2.81
|
|
|
$
|
4.64
|
|
|
$
|
5.81
|
|
-Diluted
|
$
|
1.67
|
|
|
$
|
2.79
|
|
|
$
|
4.61
|
|
|
$
|
5.77
|
|
Average number of
shares outstanding
-Basic
|
58,013
|
|
|
60,891
|
|
|
58,363
|
|
|
61,279
|
|
-Diluted
|
58,287
|
|
|
61,302
|
|
|
58,741
|
|
|
61,700
|
|
|
|
|
|
|
|
|
|
Diluted Earnings Per
Share
|
|
|
|
|
|
|
|
Net earnings as
reported
|
$
|
97,921
|
|
|
$
|
172,676
|
|
|
$
|
272,665
|
|
|
$
|
359,389
|
|
Earnings allocated to
participating securities
|
(643)
|
|
|
(1,539)
|
|
|
(2,125)
|
|
|
(3,280)
|
|
Net earnings
available to common shareholders
|
$
|
97,278
|
|
|
$
|
171,137
|
|
|
$
|
270,540
|
|
|
$
|
356,109
|
|
Weighted average
shares adjusted for dilutive securities
|
58,287
|
|
|
61,302
|
|
|
58,741
|
|
|
61,700
|
|
Diluted earnings per
share
|
$
|
1.67
|
|
|
$
|
2.79
|
|
|
$
|
4.61
|
|
|
$
|
5.77
|
|
SEGMENT RESULTS
(Unaudited)
|
(In thousands of
dollars)
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Sales
|
|
|
|
|
|
|
|
United
States
|
$
|
1,999,153
|
|
|
$
|
1,978,542
|
|
|
$
|
3,952,597
|
|
|
$
|
3,944,809
|
|
Canada
|
189,113
|
|
|
194,418
|
|
|
375,254
|
|
|
373,189
|
|
Other
Businesses
|
526,560
|
|
|
474,166
|
|
|
1,023,967
|
|
|
919,500
|
|
Intersegment
sales
|
(99,557)
|
|
|
(83,458)
|
|
|
(195,420)
|
|
|
(167,292)
|
|
Net sales to external
customers
|
$
|
2,615,269
|
|
|
$
|
2,563,668
|
|
|
$
|
5,156,398
|
|
|
$
|
5,070,206
|
|
|
|
|
|
|
|
|
|
Operating
earnings
|
|
|
|
|
|
|
|
United
States
|
$
|
312,289
|
|
|
$
|
348,938
|
|
|
$
|
624,759
|
|
|
$
|
680,795
|
|
Canada
|
(27,727)
|
|
|
(27,741)
|
|
|
(44,456)
|
|
|
(40,088)
|
|
Other
Businesses
|
(14,222)
|
|
|
29,724
|
|
|
17,285
|
|
|
51,508
|
|
Unallocated
expense
|
(38,275)
|
|
|
(45,332)
|
|
|
(70,035)
|
|
|
(69,534)
|
|
Operating
earnings
|
$
|
232,065
|
|
|
$
|
305,589
|
|
|
$
|
527,553
|
|
|
$
|
622,681
|
|
|
|
|
|
|
|
|
|
Company operating
margin
|
8.9
|
%
|
|
11.9
|
%
|
|
10.2
|
%
|
|
12.3
|
%
|
ROIC* for
Company
|
|
|
|
|
21.9
|
%
|
|
25.0
|
%
|
ROIC* for United
States
|
|
|
|
|
40.0
|
%
|
|
43.2
|
%
|
ROIC* for
Canada
|
|
|
|
|
(16.4)
|
%
|
|
(13.5)
|
%
|
|
|
|
|
|
|
|
|
|
*The GAAP financial
statements are the source for all amounts used in the Return on
Invested Capital (ROIC) calculation. ROIC is calculated using
operating earnings divided by net working assets (a 3-point average
for the year). Net working assets are working assets minus
working liabilities defined as follows: working assets equal total
assets less cash equivalents (3-point average of $66.9 million),
deferred taxes, and investments in unconsolidated entities, plus
the LIFO reserve (3-point average of $381.7 million). Working
liabilities are the sum of trade payables, accrued compensation and
benefits, accrued contributions to employees' profit sharing plans,
and accrued expenses.
|
CONDENSED
CONSOLIDATED BALANCE SHEETS (Unaudited)
|
Preliminary
|
(In thousands of
dollars)
|
|
Assets
|
June 30,
2017
|
|
December 31, 2016
|
Cash and cash
equivalents
|
$
|
275,065
|
|
|
$
|
274,146
|
|
Accounts receivable –
net
|
1,369,626
|
|
|
1,223,096
|
|
Inventories
|
1,397,804
|
|
|
1,406,470
|
|
Prepaid expenses and
other assets
|
143,852
|
|
|
116,517
|
|
Total current
assets
|
3,186,347
|
|
|
3,020,229
|
|
Property, buildings
and equipment – net
|
1,392,196
|
|
|
1,420,891
|
|
Deferred income
taxes
|
79,264
|
|
|
64,775
|
|
Goodwill
|
536,580
|
|
|
527,150
|
|
Intangibles –
net
|
592,473
|
|
|
586,126
|
|
Other
assets
|
75,021
|
|
|
75,136
|
|
Total
assets
|
$
|
5,861,881
|
|
|
$
|
5,694,307
|
|
Liabilities and
Shareholders' Equity
|
|
|
|
Short-term debt
(1)
|
$
|
129,066
|
|
|
$
|
386,140
|
|
Current maturities of
long-term debt
|
29,232
|
|
|
19,966
|
|
Trade accounts
payable
|
692,689
|
|
|
650,092
|
|
Accrued compensation
and benefits
|
197,073
|
|
|
212,525
|
|
Accrued contributions
to employees' profit sharing plans
|
48,905
|
|
|
54,948
|
|
Accrued
expenses
|
291,225
|
|
|
290,207
|
|
Income taxes
payable
|
22,387
|
|
|
15,059
|
|
Total current
liabilities
|
1,410,577
|
|
|
1,628,937
|
|
Long-term debt
(1)
|
2,267,872
|
|
|
1,840,946
|
|
Deferred income taxes
and tax uncertainties
|
135,270
|
|
|
126,101
|
|
Employment-related
and other non-current liabilities
|
199,965
|
|
|
192,555
|
|
Shareholders' equity
(2)
|
1,848,197
|
|
|
1,905,768
|
|
Total liabilities and
shareholders' equity
|
$
|
5,861,881
|
|
|
$
|
5,694,307
|
|
|
|
(1)
|
Long-term debt
increased $427 million primarily due to the issuance of $400
million of Senior Notes in May 2017, with proceeds used primarily
to repay short-term debt and repurchase stock.
|
(2)
|
Common stock
outstanding as of June 30, 2017 was 57,690,673 compared with
58,804,314 shares at December 31, 2016, primarily due to share
repurchases.
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
|
Preliminary
|
(In thousands of
dollars)
|
|
|
Six Months
Ended
June
30,
|
|
2017
|
|
2016
|
Cash flows from
operating activities:
|
|
|
|
Net
earnings
|
$
|
289,812
|
|
|
$
|
371,089
|
|
Provision for losses
on accounts receivable
|
12,769
|
|
|
8,282
|
|
Deferred income taxes
and tax uncertainties
|
(7,339)
|
|
|
4,565
|
|
Depreciation and
amortization
|
128,195
|
|
|
113,496
|
|
Net losses (gains)
from sales of assets and non-cash charges
|
12,537
|
|
|
(15,564)
|
|
Stock-based
compensation
|
20,030
|
|
|
21,135
|
|
Losses from equity
method investment
|
14,495
|
|
|
11,815
|
|
Change in operating
assets and liabilities – net of business acquisitions:
|
|
|
|
Accounts
receivable
|
(136,844)
|
|
|
(98,394)
|
|
Inventories
|
29,936
|
|
|
8,733
|
|
Prepaid expenses and
other assets
|
(24,232)
|
|
|
(6,143)
|
|
Trade accounts
payable
|
36,817
|
|
|
43,338
|
|
Other current
liabilities
|
(18,989)
|
|
|
(112,256)
|
|
Current income taxes
payable
|
6,360
|
|
|
(1,368)
|
|
Accrued
employment-related benefits cost
|
3,655
|
|
|
3,877
|
|
Other –
net
|
4,976
|
|
|
(9,512)
|
|
Net cash provided by
operating activities
|
372,178
|
|
|
343,093
|
|
Cash flows from
investing activities:
|
|
|
|
Additions to
property, buildings and equipment
|
(131,147)
|
|
|
(105,717)
|
|
Proceeds from sales
of assets
|
69,758
|
|
|
43,119
|
|
Equity method
investment
|
(13,300)
|
|
|
(10,340)
|
|
Other –
net
|
(146)
|
|
|
(597)
|
|
Net cash used in
investing activities
|
(74,835)
|
|
|
(73,535)
|
|
Cash flows from
financing activities:
|
|
|
|
Net (decrease)
increase in commercial paper
|
(269,841)
|
|
|
19,888
|
|
Borrowings under
lines of credit
|
30,374
|
|
|
18,501
|
|
Payments against
lines of credit
|
(18,036)
|
|
|
(19,306)
|
|
Net increase of
long-term debt
|
407,873
|
|
|
263,303
|
|
Proceeds from stock
options exercised
|
27,064
|
|
|
26,191
|
|
Excess tax benefits
from stock-based compensation
|
—
|
|
|
9,770
|
|
Payments for employee
taxes withheld from stock awards
|
(16,719)
|
|
|
(16,704)
|
|
Purchase of treasury
stock
|
(313,562)
|
|
|
(412,647)
|
|
Cash dividends
paid
|
(151,637)
|
|
|
(147,480)
|
|
Net cash used in
financing activities
|
(304,484)
|
|
|
(258,484)
|
|
Exchange rate effect
on cash and cash equivalents
|
8,060
|
|
|
14,787
|
|
Net change in cash
and cash equivalents
|
919
|
|
|
25,861
|
|
Cash and cash
equivalents at beginning of year
|
274,146
|
|
|
290,136
|
|
Cash and cash
equivalents at end of period
|
$
|
275,065
|
|
|
$
|
315,997
|
|
SUPPLEMENTAL INFORMATION - CONSOLIDATED
STATEMENTS OF EARNINGS
RECONCILIATION OF GAAP TO NON-GAAP
FINANCIAL MEASURES (Unaudited)
(In thousands of dollars)
The company supplemented the reporting of financial information
determined under U.S. generally accepted accounting principles
(GAAP) with certain non-GAAP financial measures, which the company
refers to as "adjusted" measures, including adjusted operating
earnings, adjusted segment operating earnings, adjusted net
earnings and adjusted diluted earnings per share. Adjusted
measures exclude items that may not be indicative of core operating
results. The company believes that these non-GAAP measures
provide meaningful information to assist shareholders in
understanding financial results and assessing prospects for future
performance. Management believes adjusted operating earnings,
adjusted net earnings and adjusted diluted earnings per share are
important indicators of operations because they exclude items that
may not be indicative of our core operating results, and provide a
better baseline for analyzing trends in our underlying
businesses. Because non-GAAP financial measures are not
standardized, it may not be possible to compare these financial
measures with other companies' non-GAAP financial measures having
the same or similar names. These adjusted financial measures
should not be considered in isolation or as a substitute for
reported results. These non-GAAP financial measures reflect
an additional way of viewing aspects of operations that, when
viewed with GAAP results, provide a more complete understanding of
the business. The company strongly encourages investors and
shareholders to review company financial statements and
publicly-filed reports in their entirety and not to rely on any
single financial measure.
The reconciliations provided below reconcile the non-GAAP
financial measures adjusted net earnings, adjusted diluted earnings
per share, adjusted operating earnings and adjusted segment
operating earnings with GAAP financial measures:
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
|
2017
|
|
2016
|
%
|
|
2017
|
|
2016
|
%
|
Operating earnings
reported
|
$
|
232,065
|
|
|
$
|
305,589
|
|
(24)%
|
|
$
|
527,553
|
|
|
$
|
622,681
|
|
(15)%
|
Branch gains (United
States)
|
(13,438)
|
|
|
(15,376)
|
|
|
|
(22,826)
|
|
|
(15,380)
|
|
|
Restructuring (United
States)
|
13,541
|
|
|
6,024
|
|
|
|
16,607
|
|
|
22,435
|
|
|
Restructuring
(Canada)
|
20,485
|
|
|
8,055
|
|
|
|
21,572
|
|
|
11,132
|
|
|
Inventory reserve
adjustment (Canada)
|
|
|
|
9,847
|
|
|
|
|
|
|
9,847
|
|
|
Restructuring (Other
Businesses)
|
41,510
|
|
|
|
|
|
|
41,510
|
|
|
|
|
|
Restructuring
(Unallocated expense)
|
|
|
|
8,947
|
|
|
|
|
|
|
8,947
|
|
|
Subtotal
|
62,098
|
|
|
17,497
|
|
|
|
56,863
|
|
|
36,981
|
|
|
Operating earnings
adjusted
|
$
|
294,163
|
|
|
$
|
323,086
|
|
(9)%
|
|
$
|
584,416
|
|
|
$
|
659,662
|
|
(11)%
|
SUPPLEMENTAL
INFORMATION - CONSOLIDATED STATEMENTS OF EARNINGS
|
RECONCILIATION OF
GAAP TO NON-GAAP FINANCIAL MEASURES (Unaudited)
|
(In thousands of
dollars)
|
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
|
2017
|
|
2016
|
%
|
|
2017
|
|
2016
|
%
|
Segment operating
earnings adjusted
|
|
|
|
|
|
|
|
|
|
United
States
|
312,392
|
|
|
339,586
|
|
|
|
618,540
|
|
|
687,850
|
|
|
Canada
|
(7,242)
|
|
|
(9,839)
|
|
|
|
(22,884)
|
|
|
(19,109)
|
|
|
Other
Businesses
|
27,288
|
|
|
29,724
|
|
|
|
58,795
|
|
|
51,508
|
|
|
Unallocated
expense
|
(38,275)
|
|
|
(36,385)
|
|
|
|
(70,035)
|
|
|
(60,587)
|
|
|
Segment operating
earnings adjusted
|
$
|
294,163
|
|
|
$
|
323,086
|
|
(9)%
|
|
$
|
584,416
|
|
|
$
|
659,662
|
|
(11)%
|
|
|
|
|
|
|
|
|
|
|
Company
operating margin adjusted
|
11.2
|
%
|
|
12.6
|
%
|
|
|
11.3
|
%
|
|
13.0
|
%
|
|
ROIC* for Company
|
|
|
|
|
|
24.3
|
%
|
|
26.5
|
%
|
|
ROIC* for United States
|
|
|
|
|
|
39.6
|
%
|
|
43.6
|
%
|
|
ROIC* for Canada
|
|
|
|
|
|
(8.4)
|
%
|
|
(6.3)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
|
2017
|
|
2016
|
%
|
|
2017
|
|
2016
|
%
|
Net earnings
reported
|
$
|
97,921
|
|
|
$
|
172,676
|
|
(43)%
|
|
$
|
272,665
|
|
|
$
|
359,389
|
|
(24)%
|
Branch gains (United
States)
|
(8,419)
|
|
|
(9,622)
|
|
|
|
(14,300)
|
|
|
(9,625)
|
|
|
Restructuring (United
States)
|
11,161
|
|
|
3,770
|
|
|
|
13,081
|
|
|
14,040
|
|
|
Restructuring
(Canada)
|
16,498
|
|
|
5,922
|
|
|
|
17,301
|
|
|
8,184
|
|
|
Inventory reserve
adjustment (Canada)
|
|
|
|
7,240
|
|
|
|
|
|
|
7,240
|
|
|
Restructuring (Other
Businesses)
|
43,969
|
|
|
|
|
|
|
43,969
|
|
|
|
|
|
Restructuring
(Unallocated expense)
|
|
|
|
5,599
|
|
|
|
|
|
|
5,599
|
|
|
Discrete tax
item
|
|
|
|
(7,075)
|
|
|
|
|
|
|
(7,075)
|
|
|
Subtotal
|
63,209
|
|
|
5,834
|
|
|
|
60,051
|
|
|
18,363
|
|
|
Net earnings
adjusted
|
$
|
161,130
|
|
|
$
|
178,510
|
|
(10)%
|
|
$
|
332,716
|
|
|
$
|
377,752
|
|
(12)%
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per
share reported
|
$
|
1.67
|
|
|
$
|
2.79
|
|
(40)%
|
|
$
|
4.61
|
|
|
$
|
5.77
|
|
(20)%
|
Pretax
adjustments:
|
|
|
|
|
|
|
|
|
|
Branch gains (United
States)
|
(0.23)
|
|
|
(0.25)
|
|
|
|
(0.39)
|
|
|
(0.25)
|
|
|
Restructuring (United
States)
|
0.23
|
|
|
0.10
|
|
|
|
0.28
|
|
|
0.36
|
|
|
Restructuring
(Canada)
|
0.35
|
|
|
0.13
|
|
|
|
0.37
|
|
|
0.18
|
|
|
Inventory reserve
adjustment (Canada)
|
|
|
|
0.16
|
|
|
|
|
|
|
0.16
|
|
|
Restructuring (Other
Businesses)
|
0.71
|
|
|
|
|
|
|
0.70
|
|
|
|
|
|
Restructuring
(Unallocated expense)
|
|
|
|
0.15
|
|
|
|
|
|
|
0.15
|
|
|
Total pretax
adjustments
|
1.06
|
|
|
0.29
|
|
|
|
0.96
|
|
|
0.60
|
|
|
Tax effect
(1)
|
0.01
|
|
|
(0.08)
|
|
|
|
0.05
|
|
|
(0.19)
|
|
|
Discrete tax
item
|
|
|
|
(0.11)
|
|
|
|
|
|
|
(0.11)
|
|
|
Total, net of
tax
|
1.07
|
|
|
0.10
|
|
|
|
1.01
|
|
|
0.30
|
|
|
Diluted earnings per
share adjusted
|
$
|
2.74
|
|
|
$
|
2.89
|
|
(5)%
|
|
$
|
5.62
|
|
|
$
|
6.07
|
|
(7)%
|
|
|
|
|
|
|
|
|
|
|
(1) The tax impact of
adjustments is calculated based on the income tax rate in each
applicable jurisdiction, subject to deductibility limitations and
the company's ability to realize the associated text
benefits.
|
View original
content:http://www.prnewswire.com/news-releases/grainger-reports-results-for-the-2017-second-quarter-300490673.html
SOURCE W.W. Grainger, Inc.