CHICAGO, Jan. 26, 2015 /PRNewswire/ -- Grainger
(NYSE: GWW) today reported results for the year ended December 31, 2014. Sales of $10.0 billion increased 6 percent versus
$9.4 billion in 2013. Reported
net earnings of $802 million
increased 1 percent versus $797
million in 2013. Reported earnings per share of
$11.45 increased 3 percent versus
$11.13 in 2013. Unfavorable
foreign exchange represented a $0.07
reduction to earnings per share. The years 2014 and 2013
included the following items:
|
Twelve Months
Ended
December 31,
|
|
|
|
|
|
2014
|
2013
|
% Change
|
|
Diluted Earnings Per
Share as reported:
|
$11.45
|
$11.13
|
3%
|
|
Business
shutdown (Brazil)
|
0.40
|
|
|
|
Pension
change (Fabory)
|
0.15
|
|
|
|
Restructuring (2014: Fabory)
|
0.15
|
0.10
|
|
|
Goodwill
impairment (2014: Colombia)
|
0.11
|
0.29
|
|
|
Subtotal
|
0.81
|
0.39
|
|
|
Diluted Earnings Per
Share as adjusted:
|
$12.26
|
$11.52
|
6%
|
|
|
|
|
|
|
|
Note:
Information regarding the adjustments is detailed in the discussion
of the 2014 fourth quarter.
|
"This was a challenging year, and we were not satisfied with our
overall 2014 performance. As we committed to a year ago, we
addressed several smaller underperforming businesses and believe we
have positioned the company for better results going forward," said
Chairman, President and Chief Executive Officer Jim Ryan. "There were, however, several
bright spots in 2014, including the
United States segment, which continued to perform very well,
gaining share with large customers. We were also pleased with
the single channel online model businesses in Japan, the United
States and Europe, which
continued their rapid growth." Ryan concluded, "Longer term,
we remain optimistic about our opportunities in the large and
fragmented MRO market. We are committed to our strategy to grow and
gain share, and we will continue to invest to create long-term
competitive advantage. In the near term, we remain cautious
given the low inflationary environment in the United States, economic headwinds
internationally and growing pressure from weaker currencies in
Canada and Japan."
The company updated its 2015 guidance and now expects 3 to 7
percent sales growth from 5 to 9 percent and $12.60 to $13.60 earnings per share from
$12.90 to $13.80. The previous
guidance was issued on November 12,
2014. This change reflects the current foreign
currency translation effect on reported financial results due to
the further weakening of the Canadian and Japanese currencies since
the company first issued guidance for 2015, as well as the
deteriorating macroeconomic environment in Canada.
For the full year, the company generated $960 million in operating cash flow versus
$986 million in 2013. Gross capital expenditures for the
year were $387 million versus
$272 million in 2013, driven
primarily by investments to expand the distribution center network
in North America. Grainger bought back approximately 2.1
million shares of stock for $525
million in 2014 and has 8.5 million shares remaining
under the current repurchase authorization. Dividends paid in
2014 totaled $291 million. For the year, Grainger
returned $816 million in cash to
shareholders in the form of dividends and share
repurchases.
2014 Fourth Quarter
Sales for the 2014 fourth quarter of $2.5
billion increased 6 percent versus $2.4 billion in the 2013 fourth quarter.
Reported net earnings of $149 million
declined 5 percent versus $157 million in 2013. Reported
fourth quarter earnings per share of $2.14 decreased 3 percent versus $2.20 in 2013. Unfavorable foreign exchange
represented a $0.02 reduction to
earnings per share. The 2014 and 2013 fourth quarters
included the following items:
|
Three Months
Ended
December
31,
|
|
|
|
|
2014
|
2013
|
% Change
|
|
Diluted Earnings Per
Share as reported:
|
$2.14
|
$ 2.20
|
(3)%
|
|
Business
shutdown (Brazil)
|
0.40
|
|
|
|
Restructuring (2014: Fabory)
|
0.15
|
0.10
|
|
|
Goodwill
impairment (2014: Colombia)
|
0.11
|
0.29
|
|
|
Subtotal
|
0.66
|
0.39
|
|
|
Diluted Earnings Per
Share as adjusted:
|
$2.80
|
$2.59
|
8%
|
During the quarter, the company recorded charges totaling
$0.66 per share, including the items
noted below, resulting in an adjusted EPS of $2.80.
- $0.40 per share or $29 million pre-tax of charges related to the
previously announced shutdown of the business in Brazil.
- $0.15 per share or $10 million pre-tax in restructuring charges
related to the previously announced plan to improve the long-term
performance of Fabory in Europe.
- $0.11 per share or $12 million pre-tax in goodwill impairment
charges related to the business in Colombia.
In the 2013 fourth quarter, the company recorded impairment and
restructuring charges totaling $0.39,
resulting in adjusted EPS of $2.59. Excluding items noted above from
both years, company net earnings for the quarter increased
6 percent and earnings per share increased 8 percent
versus the prior year.
Company sales in the 2014 fourth quarter increased 6
percent. There were 64 selling days in both the 2014 and 2013
fourth quarters. The 6 percent sales growth for the quarter
consisted of 7 percentage points from volume,
1 percentage point from price and 1 percentage point from
sales of Ebola related safety products, partially offset by a
2 percentage points decline from unfavorable foreign exchange
and a 1 percentage point negative variance from lapping an extra
month of sales from the E&R Industrial, Inc. acquisition.
E&R Industrial was acquired in the 2013 third quarter;
results for four months of operations were first consolidated in
the fourth quarter of 2013.
Company operating earnings of $267
million for the 2014 fourth quarter increased 4 percent
versus the 2013 quarter. This increase was driven by the
6 percent sales growth and operating expense leverage as
expenses, including $10 million in
incremental growth-related spending, grew at a slower rate than
sales, partially offset by lower gross profit margin. The
company's gross profit margin for the quarter declined 30 basis
points, primarily driven by softer margins in Canada and Fabory. Excluding the items
noted in the table above from both years, company operating
earnings increased 9 percent.
The company has two reportable business segments, the United States and Canada, which represented approximately 88
percent of company sales for the quarter. The remaining
operating units located primarily in Asia, Europe
and Latin America are included in
Other Businesses and are not reportable segments. Results for
the company's single channel online model businesses are included
in Other Businesses.
United States
Sales in the United States segment
increased 6 percent in the 2014 fourth quarter versus the prior
year. The 6 percent sales growth was driven by
6 percentage points from volume, 1 percentage point from
price and 1 percentage point from sales of Ebola related
safety products, partially offset by a 1 percentage point negative
variance from the extra month of E&R sales in the fourth
quarter of 2013 and a 1 percentage point negative variance
from the divestiture of several Specialty Brands on December 31, 2013. Strong sales growth to
customers in the natural resources, commercial and manufacturing
customer end markets contributed to the sales increase in the
quarter.
Operating earnings for the United
States segment increased 16 percent in the quarter driven by
the 6 percent sales growth, positive expense leverage and higher
gross profit margins. Gross profit margins for the quarter
increased 10 basis points driven by price increases exceeding
cost increases, partially offset by faster growth with lower margin
customers. Operating expenses, including $1 million in incremental growth-related
spending, grew more slowly than sales primarily driven by
productivity initiatives.
Canada
Sales in the 2014 fourth quarter at Acklands-Grainger increased 3
percent in U.S. dollars, 11 percent in local currency.
The 11 percent sales increase consisted of 7 percentage points
from the acquisition of WFS Enterprises, Inc. on September 2, 2014, and 4 percentage points
increase from volume. The 4 percent volume growth in
Canada was led by higher sales to
customers in the government and utilities end markets.
Operating earnings in Canada
declined 27 percent in the 2014 fourth quarter and were down
21 percent in local currency. Gross profit margin in
Canada declined 280 basis points
versus the prior year, primarily due to product cost inflation
exceeding price inflation driven by unfavorable foreign exchange,
higher freight costs, and lower supplier rebates as well as
negative mix from the WFS acquisition.
Other Businesses
Sales for the Other Businesses increased 13 percent for the 2014
fourth quarter versus the prior year. This performance
consisted of 21 percentage points of growth from volume and price,
partially offset by an 8 percentage point decline from unfavorable
foreign exchange. Sales growth in the Other Businesses
was driven by MonotaRO in Japan
and Zoro in the United States and
Mexico, partially offset by lower
sales from Fabory in Europe.
The Other Businesses posted a $51
million operating loss in the 2014 fourth quarter versus a
$20 million operating loss in the
2013 fourth quarter. During the quarter, the company recorded
the actions noted above related to Fabory and the businesses in
Brazil and Colombia, resulting in a $51 million charge. In the 2013 fourth
quarter, the company recognized restructuring and impairment
charges of $23 million for the Other
Businesses. Excluding these charges from both years, the
Other Businesses would have been breakeven in the 2014 fourth
quarter versus $3 million in earnings in the 2013 period.
The decline in adjusted earnings versus the prior year was
primarily driven by incremental expenses associated with the
start-up of the single channel online model business in
Europe, partially offset by strong
operating performance from Zoro in the United States.
Other
Other income and expense was a net expense of $5 million in the 2014 fourth quarter versus a
net expense of $2 million in the 2013 fourth quarter.
This increase was primarily attributable to higher foreign exchange
transaction
losses.
The reported tax rate in 2014 was 42.3 percent for the quarter
and 39.1 percent for the full year. Excluding the effect of
items separately disclosed and other fourth quarter tax items, the
tax rate was 38.2 percent for the quarter and 2014, compared to
37.3 percent in the 2013 quarter and year. The increase was
primarily due to a higher proportion of earnings in the United States versus geographies with
lower tax rates and losses with no tax benefit. The company
is currently projecting a tax rate of 37.7 to 38.8 percent for
2015.
Cash Flow
Operating cash flow was $297 million
in the 2014 fourth quarter versus $246
million in the 2013 fourth quarter. The company used
the cash generated during the quarter to invest in the business and
return cash to shareholders through share repurchase and
dividends. Gross capital expenditures were $147 million in the 2014 fourth quarter versus
$124 million in the fourth quarter of
2013. In the quarter, Grainger returned $284 million to shareholders through $76 million in dividends and $208 million to buy back 842,000 shares of
stock.
W.W. Grainger, Inc., with 2014
sales of $10.0 billion, is
North America's leading broad line
supplier of maintenance, repair and operating products, with
operations also in Asia,
Europe and Latin America.
Visit www.grainger.com/investor to view
information about the company, including a history of sales by
segment and a podcast regarding 2014 fourth quarter results.
The Grainger website also includes more information
on Grainger's proven growth drivers, including product line
expansion, sales force expansion, eCommerce,
inventory services and international
expansion.
Forward-Looking Statements
This document contains statements that are not historical in nature
but concern future results and business plans, strategies and
objectives and other matters that may be deemed to be
"forward-looking statements" under the federal securities laws.
These forward-looking statements include the Company's expected,
projected or forecasted sales, earnings, tax rate, or earnings per
share, and any associated plans or guidance.
|
CONSOLIDATED
STATEMENTS OF EARNINGS (Unaudited)
|
|
(In thousands, except
for per share amounts)
|
|
|
Three Months
Ended
December 31,
|
|
Twelve Months
Ended
December 31,
|
|
2014
|
|
|
2013
|
|
|
2014
|
|
|
2013
|
|
|
Net sales
|
$
|
2,510,959
|
|
|
$
|
2,377,232
|
|
|
$
|
9,964,953
|
|
|
$
|
9,437,758
|
|
|
Cost of merchandise sold
|
1,456,158
|
|
|
1,370,835
|
|
|
5,650,711
|
|
|
5,301,275
|
|
|
Gross profit
|
1,054,801
|
|
|
1,006,397
|
|
|
4,314,242
|
|
|
4,136,483
|
|
|
Warehousing, marketing and administrative expenses
|
788,287
|
|
|
749,635
|
|
|
2,967,125
|
|
|
2,839,629
|
|
|
Operating earnings
|
266,514
|
|
|
256,762
|
|
|
1,347,117
|
|
|
1,296,854
|
|
|
Other income and (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
384
|
|
|
719
|
|
|
2,068
|
|
|
3,234
|
|
|
Interest expense
|
(2,096)
|
|
|
(3,123)
|
|
|
(10,093)
|
|
|
(13,225)
|
|
|
Other non-operating
income and (expense)
|
(3,089)
|
|
|
(63)
|
|
|
(4,706)
|
|
|
736
|
|
|
Total other
income and (expense)
|
(4,801)
|
|
|
(2,467)
|
|
|
(12,731)
|
|
|
(9,255)
|
|
|
Earnings before income taxes
|
261,713
|
|
|
254,295
|
|
|
1,334,386
|
|
|
1,287,599
|
|
|
Income
taxes
|
110,599
|
|
|
94,902
|
|
|
522,090
|
|
|
479,850
|
|
|
Net earnings
|
151,114
|
|
|
159,393
|
|
|
812,296
|
|
|
807,749
|
|
|
Net earnings
attributable to noncontrolling interest
|
2,275
|
|
|
2,644
|
|
|
10,567
|
|
|
10,713
|
|
|
Net earnings
attributable to W.W. Grainger, Inc.
|
$
|
148,839
|
|
|
$
|
156,749
|
|
|
$
|
801,729
|
|
|
$
|
797,036
|
|
|
Earnings per share
-Basic
|
$
|
2.17
|
|
|
$
|
2.24
|
|
|
$
|
11.59
|
|
|
$
|
11.31
|
|
|
-Diluted
|
$
|
2.14
|
|
|
$
|
2.20
|
|
|
$
|
11.45
|
|
|
$
|
11.13
|
|
|
Average number of shares outstanding
-Basic
|
67,899
|
|
|
69,140
|
|
|
68,334
|
|
|
69,456
|
|
|
-Diluted
|
68,705
|
|
|
70,191
|
|
|
69,206
|
|
|
70,576
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings Per
Share
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings as
reported
|
$
|
148,839
|
|
|
$
|
156,749
|
|
|
$
|
801,729
|
|
|
$
|
797,036
|
|
|
Earnings allocated to
participating securities
|
(1,638)
|
|
|
(1,985)
|
|
|
(9,444)
|
|
|
(11,521)
|
|
|
Net earnings
available to common shareholders
|
$
|
147,201
|
|
|
$
|
154,764
|
|
|
$
|
792,285
|
|
|
$
|
785,515
|
|
|
Weighted average
shares adjusted for dilutive securities
|
68,705
|
|
|
70,191
|
|
|
69,206
|
|
|
70,576
|
|
|
Diluted earnings per
share
|
$
|
2.14
|
|
|
$
|
2.20
|
|
|
$
|
11.45
|
|
|
$
|
11.13
|
|
|
SEGMENT RESULTS
(Unaudited)
|
|
(In thousands of
dollars)
|
|
|
Three Months
Ended
December 31,
|
|
Twelve Months
Ended
December 31,
|
|
2014
|
|
|
2013
|
|
|
2014
|
|
|
2013
|
|
|
Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
United
States
|
$
|
1,990,733
|
|
|
$
|
1,871,510
|
|
|
$
|
7,926,075
|
|
|
$
|
7,413,712
|
|
|
Canada
|
279,140
|
|
|
271,839
|
|
|
1,075,754
|
|
|
1,114,285
|
|
|
Other
Businesses
|
307,594
|
|
|
272,876
|
|
|
1,182,186
|
|
|
1,040,473
|
|
|
Intersegment sales
|
(66,508)
|
|
|
(38,993)
|
|
|
(219,062)
|
|
|
(130,712)
|
|
|
Net sales to external customers
|
$
|
2,510,959
|
|
|
$
|
2,377,232
|
|
|
$
|
9,964,953
|
|
|
$
|
9,437,758
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
United
States
|
$
|
339,003
|
|
|
$
|
291,984
|
|
|
$
|
1,444,288
|
|
|
$
|
1,304,175
|
|
|
Canada
|
19,609
|
|
|
26,815
|
|
|
87,583
|
|
|
128,768
|
|
|
Other
Businesses
|
(50,986)
|
|
|
(19,634)
|
|
|
(37,806)
|
|
|
7,599
|
|
|
Unallocated expense
|
(41,112)
|
|
|
(42,403)
|
|
|
(146,948)
|
|
|
(143,688)
|
|
|
Operating earnings
|
$
|
266,514
|
|
|
$
|
256,762
|
|
|
$
|
1,347,117
|
|
|
$
|
1,296,854
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
operating margin
|
10.6
|
%
|
|
10.8
|
%
|
|
13.5
|
%
|
|
13.7
|
%
|
|
ROIC* for Company
|
|
|
|
|
|
|
31.2
|
%
|
|
31.8
|
%
|
|
ROIC* for United States
|
|
|
|
|
|
|
50.5
|
%
|
|
49.2
|
%
|
|
ROIC* for Canada
|
|
|
|
|
|
|
13.6
|
%
|
|
21.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*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 5-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 (5-point average of $182.7 million),
deferred taxes, and investments in unconsolidated entities, plus
the LIFO reserve (5-point average of $312.7 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)
|
|
|
At December
31,
|
|
Assets
|
2014
|
|
|
2013
|
|
|
Cash and cash
equivalents (1)
|
$
|
226,644
|
|
|
$
|
430,644
|
|
|
Accounts receivable –
net
|
1,173,624
|
|
|
1,101,656
|
|
|
Inventories
|
1,365,500
|
|
|
1,305,520
|
|
|
Prepaid expenses and
other assets
|
157,598
|
|
|
130,646
|
|
|
Deferred income
taxes
|
61,387
|
|
|
75,819
|
|
|
Total current
assets
|
2,984,753
|
|
|
3,044,285
|
|
|
Property, buildings
and equipment – net (2)
|
1,324,346
|
|
|
1,208,562
|
|
|
Deferred income
taxes
|
16,718
|
|
|
16,209
|
|
|
Goodwill
|
506,205
|
|
|
525,467
|
|
|
Other assets and
intangibles – net
|
468,733
|
|
|
471,805
|
|
|
Total
assets
|
$
|
5,300,755
|
|
|
$
|
5,266,328
|
|
|
Liabilities and
Shareholders' Equity
|
|
|
|
|
|
|
Short-term
debt
|
$
|
56,896
|
|
|
$
|
66,857
|
|
|
Current maturities of
long-term debt
|
23,404
|
|
|
30,429
|
|
|
Trade accounts
payable
|
570,591
|
|
|
510,634
|
|
|
Accrued compensation
and benefits
|
191,696
|
|
|
185,905
|
|
|
Accrued contributions
to employees' profit sharing plans
|
178,076
|
|
|
176,800
|
|
|
Accrued
expenses
|
245,300
|
|
|
218,835
|
|
|
Income taxes
payable
|
12,256
|
|
|
6,330
|
|
|
Total current
liabilities
|
1,278,219
|
|
|
1,195,790
|
|
|
Long-term
debt
|
404,536
|
|
|
445,513
|
|
|
Deferred income taxes
and tax uncertainties
|
95,455
|
|
|
113,585
|
|
|
Employment-related
and other non-current liabilities (3)
|
238,444
|
|
|
184,604
|
|
|
Shareholders' equity
(4)
|
3,284,101
|
|
|
3,326,836
|
|
|
Total liabilities and
shareholders' equity
|
$
|
5,300,755
|
|
|
$
|
5,266,328
|
|
|
|
|
(1)
|
Cash and cash
equivalents decreased $204 million, or 47%, primarily due to share
repurchases, dividends and investments in property, buildings and
equipment.
|
|
(2)
|
Property, buildings
and equipment - net increased $116 million, or 10%, primarily due
to investments in supply chain, technology infrastructure and the
WFS acquisition.
|
|
(3)
|
Employment-related
and other non-current liabilities increased $54 million, or 29%,
primarily due to a decrease in the discount rate used to calculate
employee benefit obligations.
|
|
(4)
|
Common stock
outstanding as of December 31, 2014 was 67,432,041 shares as
compared with 68,853,938 shares at December 31, 2013.
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
|
|
Preliminary
|
|
(In thousands of
dollars)
|
|
|
Twelve Months
Ended
December 31,
|
|
2014
|
|
|
2013
|
|
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
Net
earnings
|
$
|
812,296
|
|
|
$
|
807,749
|
|
|
Provision for losses
on accounts receivable
|
12,945
|
|
|
8,855
|
|
|
Deferred income taxes
and tax uncertainties
|
(13,732)
|
|
|
(9,319)
|
|
|
Depreciation and
amortization
|
208,326
|
|
|
180,613
|
|
|
Impairment of
goodwill and other intangible assets
|
16,652
|
|
|
26,284
|
|
|
Losses (gains) from
non-cash charges and sales of assets
|
41,037
|
|
|
(22,155)
|
|
|
Stock-based
compensation
|
49,032
|
|
|
55,590
|
|
|
Change in operating
assets and liabilities – net of business acquisitions and
divestitures:
|
|
|
|
|
|
|
Accounts
receivable
|
(122,580)
|
|
|
(126,465)
|
|
|
Inventories
|
(101,547)
|
|
|
(23,636)
|
|
|
Prepaid expenses and
other assets
|
(31,950)
|
|
|
16,873
|
|
|
Trade accounts
payable
|
48,523
|
|
|
71,118
|
|
|
Other current
liabilities
|
8,693
|
|
|
(707)
|
|
|
Current income taxes
payable
|
(1,487)
|
|
|
(4,813)
|
|
|
Accrued
employment-related benefits cost
|
35,027
|
|
|
9,872
|
|
|
Other –
net
|
(1,421)
|
|
|
(3,361)
|
|
|
Net cash provided by
operating activities
|
959,814
|
|
|
986,498
|
|
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
Additions to
property, buildings and equipment
|
(387,390)
|
|
|
(272,145)
|
|
|
Proceeds from sales
of assets
|
26,755
|
|
|
26,701
|
|
|
Cash paid for
business acquisitions
|
(30,713)
|
|
|
(153,915)
|
|
|
Other –
net
|
7,290
|
|
|
(68)
|
|
|
Net cash used in
investing activities
|
(384,058)
|
|
|
(399,427)
|
|
|
Cash flows from
financing activities:
|
|
|
|
|
|
|
Borrowings under
lines of credit
|
113,721
|
|
|
144,805
|
|
|
Payments against
lines of credit
|
(117,277)
|
|
|
(154,450)
|
|
|
Proceeds from
issuance of long-term debt
|
150,504
|
|
|
—
|
|
|
Payments of long-term
debt and commercial paper
|
(170,907)
|
|
|
(16,681)
|
|
|
Proceeds from stock
options exercised
|
48,579
|
|
|
69,412
|
|
|
Excess tax benefits
from stock-based compensation
|
33,772
|
|
|
59,984
|
|
|
Purchase of treasury
stock
|
(525,120)
|
|
|
(438,473)
|
|
|
Cash dividends
paid
|
(291,395)
|
|
|
(255,466)
|
|
|
Net cash used in
financing activities
|
(758,123)
|
|
|
(590,869)
|
|
|
Exchange rate effect
on cash and cash equivalents
|
(21,633)
|
|
|
(17,621)
|
|
|
Net change in cash
and cash equivalents
|
(204,000)
|
|
|
(21,419)
|
|
|
Cash and cash
equivalents at beginning of year
|
430,644
|
|
|
452,063
|
|
|
Cash and cash
equivalents at end of period
|
$
|
226,644
|
|
|
$
|
430,644
|
|
|
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
December 31,
|
|
|
|
Twelve Months
Ended
December 31,
|
|
|
|
2014
|
|
|
2013
|
|
%
|
|
2014
|
|
|
2013
|
|
%
|
|
Operating earnings
reported
|
$
|
266,514
|
|
|
$
|
256,762
|
|
4
|
%
|
|
$
|
1,347,117
|
|
|
$
|
1,296,854
|
|
4
|
%
|
|
Business shutdown
(Brazil)
|
29,140
|
|
|
—
|
|
|
|
|
29,140
|
|
|
—
|
|
|
|
|
Pension change
(Fabory)
|
—
|
|
|
—
|
|
|
|
|
13,639
|
|
|
—
|
|
|
|
|
Restructuring (2014:
Fabory)
|
10,460
|
|
|
9,815
|
|
|
|
|
10,460
|
|
|
9,815
|
|
|
|
|
Goodwill impairment
(2014: Colombia)
|
11,795
|
|
|
25,758
|
|
|
|
|
11,795
|
|
|
25,758
|
|
|
|
|
Subtotal
|
51,395
|
|
|
35,573
|
|
|
|
|
65,034
|
|
|
35,573
|
|
|
|
|
Operating earnings
adjusted
|
$
|
317,909
|
|
|
$
|
292,335
|
|
9
|
%
|
|
$
|
1,412,151
|
|
|
$
|
1,332,427
|
|
6
|
%
|
|
SUPPLEMENTAL
INFORMATION - CONSOLIDATED STATEMENTS OF EARNINGS
|
|
RECONCILIATION OF
GAAP TO NON-GAAP FINANCIAL MEASURES (Unaudited)
|
|
(In thousands of
dollars)
|
|
|
Three Months
Ended
December 31,
|
|
|
|
Twelve Months
Ended
December 31,
|
|
|
|
|
2014
|
|
2013
|
%
|
|
2014
|
|
2013
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating
earnings adjusted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United
States
|
339,003
|
|
|
304,845
|
|
|
|
|
1,444,288
|
|
|
1,317,036
|
|
|
|
|
Canada
|
19,609
|
|
|
26,815
|
|
|
|
|
87,583
|
|
|
128,768
|
|
|
|
|
Other
Businesses
|
409
|
|
|
3,079
|
|
|
|
|
27,228
|
|
|
30,312
|
|
|
|
|
Unallocated expense
|
(41,112)
|
|
|
(42,404)
|
|
|
|
|
(146,948)
|
|
|
(143,689)
|
|
|
|
|
Segment operating
earnings adjusted
|
$
|
317,909
|
|
|
$
|
292,335
|
|
9
|
%
|
|
$
|
1,412,151
|
|
|
$
|
1,332,427
|
|
6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
operating margin adjusted
|
12.7
|
%
|
|
12.3
|
%
|
|
|
|
14.2
|
%
|
|
14.1
|
%
|
|
|
|
ROIC* for Company
|
|
|
|
|
|
|
|
|
32.7
|
%
|
|
32.6
|
%
|
|
|
|
ROIC* for United States
|
|
|
|
|
|
|
|
|
50.5
|
%
|
|
49.6
|
%
|
|
|
|
ROIC* for Canada
|
|
|
|
|
|
|
|
|
13.6
|
%
|
|
21.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*Adjusted ROIC is
calculated as defined on page 8, excluding the items adjusting
operating earnings as noted above.
|
|
Three Months
Ended
December 31,
|
|
|
|
Twelve Months
Ended
December 31,
|
|
|
|
2014
|
|
|
2013
|
|
%
|
|
2014
|
|
|
2013
|
|
%
|
|
Net earnings
reported
|
$
|
148,839
|
|
|
$
|
156,749
|
|
(5)
|
%
|
|
$
|
801,729
|
|
|
$
|
797,036
|
|
1
|
%
|
|
Business shutdown
(Brazil)
|
27,779
|
|
|
—
|
|
|
|
|
27,779
|
|
|
—
|
|
|
|
|
Pension change
(Fabory)
|
—
|
|
|
—
|
|
|
|
|
10,229
|
|
|
—
|
|
|
|
|
Restructuring (2014:
Fabory)
|
10,460
|
|
|
7,326
|
|
|
|
|
10,460
|
|
|
7,326
|
|
|
|
|
Goodwill impairment
(2014: Colombia)
|
7,785
|
|
|
20,421
|
|
|
|
|
7,785
|
|
|
20,421
|
|
|
|
|
Subtotal
|
46,024
|
|
|
27,747
|
|
|
|
|
56,253
|
|
|
27,747
|
|
|
|
|
Net earnings
adjusted
|
$
|
194,863
|
|
|
$
|
184,496
|
|
6
|
%
|
|
$
|
857,982
|
|
|
$
|
824,783
|
|
4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per
share reported
|
$
|
2.14
|
|
|
$
|
2.20
|
|
(3)
|
%
|
|
$
|
11.45
|
|
|
$
|
11.13
|
|
3
|
%
|
|
Business shutdown
(Brazil)
|
0.40
|
|
|
—
|
|
|
|
|
0.40
|
|
|
—
|
|
|
|
|
Pension change
(Fabory)
|
—
|
|
|
—
|
|
|
|
|
0.15
|
|
|
—
|
|
|
|
|
Restructuring (2014:
Fabory)
|
0.15
|
|
|
0.10
|
|
|
|
|
0.15
|
|
|
0.10
|
|
|
|
|
Goodwill impairment
(2014: Colombia)
|
0.11
|
|
|
0.29
|
|
|
|
|
0.11
|
|
|
0.29
|
|
|
|
|
Subtotal
|
0.66
|
|
|
0.39
|
|
|
|
|
0.81
|
|
|
0.39
|
|
|
|
|
Diluted earnings per
share adjusted
|
$
|
2.80
|
|
|
$
|
2.59
|
|
8
|
%
|
|
$
|
12.26
|
|
|
$
|
11.52
|
|
6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/grainger-reports-results-for-year-ended-december-31-2014-300025091.html
SOURCE W.W. Grainger, Inc.