Grainger Reports Record EPS Of $2.94 For The 2013 First Quarter Raises 2013 Sales and EPS Guidance Quarterly Highlights -- Sales of $2.3 billion, up 4 percent, 6 percent daily -- Operating earnings of $343 million, up 13 percent -- EPS of $2.94, up 14 percent -- Operating cash flow of $176 million, up 66 percent PR Newswire CHICAGO, April 16, 2013 CHICAGO, April 16, 2013 /PRNewswire/ -- Grainger (NYSE: GWW) today reported results for the 2013 first quarter ended March 31, 2013. Sales of $2.3billion increased 4 percent versus $2.2 billion in the first quarter of 2012. There were 63 selling days in the quarter, one less than in 2012. On a daily basis, sales for the first quarter 2013 increased 6 percent. Netearnings for the quarter increased 13percent to $212 million versus $188million in 2012. Earnings per share of $2.94 increased 14percent versus $2.57 in 2012. "We are encouraged by the solid start to the year, despite facing difficult comparisons with 2012," said Chairman, President and Chief Executive Officer JimRyan. "Our continued strong performance puts us in a position to further accelerate our growth spending to extend our lead in the MRO industry. Over the balance of the year, we will invest in eCommerce, our sales force, our distribution center network and our enterprise systems that will provide value to our customers and help us gain additional market share longer term," Ryan added. The company had previously forecasted $135million in incremental growth-related expenses in 2013, and is now targeting $160 million for the full year 2013. Ryan concluded, "We are raising the low end of our 2013 sales and earnings guidance to reflect our strong performance in the quarter, while increasing growth investments for the year with the majority of returns occurring after 2013." The company now expects 2013 sales growth of 5 to 9percent and earnings per share of $11.30 to $12.00. The company's previous 2013 guidance issued on January 24, 2013, was sales growth of 3 to 9 percent and earnings per share of $10.85 to $12.00. Company Sales increased 4 percent in the 2013 first quarter reflecting 1less selling day versus the 2012 first quarter. Sales increased 6 percent on a daily basis and consisted of 3percentage points from volume, 2percentage points from price, 1percentage point from acquisitions and 1percentage point from higher sales of seasonal products, partially offset by a 1percentage point reduction from foreign exchange. Daily sales increased 8percent in January, 6percent in February and 3 percent in March. Sales in March 2013 were affected by the timing of the Easter Holiday, which reduced daily sales growth by 2 percentage points and also reduced sales growth for the company's reportable business segments. Inaddition, uncertainty in the United States surrounding sequestration contributed to a decline in sales to the government end market, which represented 15 percent of sales for the U.S. segment. The company's gross profit margin increased 0.8 percentage points to 45.2 percent versus 44.4percent in the 2012 first quarter, primarily driven by the United States segment. Company operating expenses in the quarter increased 3 percent including an incremental $22million in spending to fund the company's growth programs. Company operating earnings of $343 million for the 2013 first quarter increased 13percent versus the prior year. The increase in operating earnings was driven by higher sales, improved gross profit margins and operating expenses, which grew at a slower rate than sales. Grainger has two reportable business segments, the United States and Canada, which represented approximately 89 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. United States Sales for the United States segment increased 4 percent, 6 percent on a daily basis in the 2013 first quarter versus the prior year. The 6 percent daily sales growth was driven by 3percentage points from price, 2percentage points from volume and 1 percentage point from acquisitions. Daily sales increased 7percent in January, 7 percent in February and 4 percent in March. The sales increase for the quarter in the United States was led by solid growth in the light and heavy manufacturing, natural resources, commercial and contractor end markets. Operating earnings for the United States segment increased 11 percent in the quarter driven by the 4 percent sales growth, higher gross profit margins and positive expense leverage. Gross profit margins for the quarter increased 0.8 percentage points driven by price inflation exceeding product cost inflation and strong growth of private label products, partially offset by negative selling mix. Canada Sales in the 2013 first quarter at Acklands-Grainger increased 4 percent, 5 percent on a daily basis. The 5percent daily sales growth consisted of 8 percentage points from volume, partially offset by a 2 percentage point decline from the timing of the Easter Holiday and 1 percentage point decline from foreign exchange. In local currency, sales increased 5 percent, 6 percent on a daily basis. Daily sales in local currency increased 8 percent in January, 8percent in February and 3percent in March. The sales increase for the quarter in Canada was led by strong growth to customers in the construction, commercial, forestry, oil and gas and light manufacturing end markets. Operating earnings in Canada increased 11 percent in the 2013 first quarter, in both U.S. dollars and local currency. The improvement in operating performance was primarily driven by higher sales and positive expense leverage. Grossprofit margins were essentially flat versus the prior year. Other Businesses Sales for the Other Businesses, which includes operations primarily in Asia, Europe and Latin America, increased 4 percent, 5 percent on a daily basis, for the 2013 first quarter versus the prior year. The daily sales growth consisted of 6 percentage points from volume and price and 4percentage points from acquisitions, partially offset by a 5 percentage point decline from unfavorable foreign exchange. The sales increase was primarily due to strong revenue growth in Japan and incremental sales from the business in Brazil acquired in April 2012. Operating earnings for the Other Businesses were $8 million in the 2013 first quarter versus $11million in the 2012 first quarter. The decline in earnings performance for the quarter versus the prior year was driven by operating losses in Brazil, coupled with lower earnings in some of the smaller businesses in Asia and Latin America. The earnings decline was partially offset by strong earnings growth in Japan and operating earnings growth in Europe related to lower expenses from restructuring actions taken in the 2012 fourth quarter. Other Interest expense, net of interest income, was $2.3 million in the 2013 first quarter versus $2.5million in the 2012 first quarter. The effective tax rate in the quarter was 37.3percent versus 37.4percent in the 2012 quarter.The company is currently projecting an effective tax rate of 37.3 to 37.7 percent for the year 2013. Cash Flow Operating cash flow was $176 million in the 2013 first quarter versus $106 million in the 2012 first quarter. Cash flow in the 2013 quarter benefited from higher earnings, lower inventory purchases and a lower management incentive payout versus the prior year. The company used cash from operations to fund capital expenditures of $43million in the quarter versus $41 million in the first quarter of 2012. In the 2013 first quarter, Grainger returned $127 million to shareholders through $57 million in dividends and $70 million to buy back 315,000 shares of stock. As of March 31, 2013, the company had 5.0 million shares remaining on its share repurchase authorization. W.W. Grainger, Inc., with 2012 sales of $9 billion, is North America's leading broad line supplier of maintenance, repair and operating products, with expanding global operations. Visit www.grainger.com/investor to view information about the company, including a history of daily sales by segment and a podcast regarding 2013 first quarter results. The Grainger Industrial Supply 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 forward-looking statements under the federal securities law. Forward-looking statements relate to the company's expected future financial results and business plans, strategies and objectives and are not historical facts. They are generally identified by qualifiers such as "will invest", "will provide value", "help us gain additional market share", "forecasted", "targeting", "sales and earnings guidance", "majority of returns start after 2013", "expects" or similar expressions. There are risks and uncertainties, the outcome of which could cause the company's results to differ materially from what is projected. The forward-looking statements should be read in conjunction with the company's most recent annual report, as well as the company's Form 10-K, Form 10-Q and other reports filed with the Securities & Exchange Commission, containing a discussion of the company's business and various factors that may affect it. CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) (In thousands, except for per share amounts) Three Months Ended March 31, 2013 2012 Net sales $ 2,280,435 $ 2,193,445 Costofmerchandisesold 1,248,699 1,219,113 Grossprofit 1,031,736 974,332 Warehousing, marketing and administrative expense 688,431 669,971 Operatingearnings 343,305 304,361 Otherincomeand(expense) Interestincome 898 595 Interestexpense (3,166) (3,057) Other non-operating income 887 614 Totalother expense (1,381) (1,848) Earningsbeforeincometaxes 341,924 302,513 Income taxes 127,397 113,055 Netearnings 214,527 189,458 Net earnings attributable to noncontrolling 2,689 1,942 interest Netearnings attributable to W.W. Grainger, Inc. $ 211,838 $ 187,516 Earningspershare $ 2.99 $ 2.63 -Basic -Diluted $ 2.94 $ 2.57 Averagenumberofsharesoutstanding 69,562 70,133 -Basic -Diluted 70,775 71,656 Diluted Earnings Per Share Net earnings as reported $ 211,838 $ 187,516 Earnings allocated to participating securities (3,595) (3,296) Net earnings available to common shareholders $ 208,243 $ 184,220 Weighted average shares adjusted for dilutive 70,775 71,656 securities Diluted earnings per share $ 2.94 $ 2.57 SEGMENT RESULTS (Unaudited) (In thousands of dollars) Three Months Ended March 31, 2013 2012 Sales United States $ 1,774,538 $ 1,700,709 Canada 283,140 272,883 Other Businesses 247,874 238,956 Intersegmentsales (25,117) (19,103) Netsalestoexternalcustomers $ 2,280,435 $ 2,193,445 Operatingearnings United States $ 330,888 $ 298,964 Canada 32,856 29,700 Other Businesses 8,251 10,715 Unallocatedexpense (28,690) (35,018) Operatingearnings $ 343,305 $ 304,361 Company operatingmargin 15.1% 13.9% ROIC*forCompany 34.6% 31.8% ROIC*forUnited States 51.5% 49.2% ROIC*forCanada 22.2% 21.8% *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 2-point average for the year-to-date). Net working assets are working assets minus working liabilities defined as follows: working assets equal total assets less cash equivalents (2-point average of $342.0 million), deferred taxes, and investments in unconsolidated entities, plus the LIFO reserve (2-point average of $378.5 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 March31, 2013 December 31, 2012 Cash and cash equivalents $ 485,516 $ 452,063 Accounts receivable – net 1,031,920 940,020 Inventories – net 1,230,614 1,301,935 Prepaid expenses and other assets 122,031 150,655 Deferred income taxes 53,347 55,967 Total current assets 2,923,428 2,900,640 Property, buildings and equipment – net 1,133,406 1,144,573 Deferred income taxes 56,220 51,536 Goodwill 521,579 543,670 Other assets and intangibles – net 379,095 374,179 Total assets $ 5,013,728 $ 5,014,598 Liabilities and Shareholders' Equity Short-term debt $ 73,602 $ 79,071 Current maturities of long-term debt 21,757 18,525 Trade accounts payable 431,848 428,782 Accrued compensation and benefits 154,255 165,450 Accrued contributions to employees' profit 46,933 170,434 sharing plans (1) Accrued expenses 196,557 204,800 Income taxes payable (2) 64,470 12,941 Total current liabilities 989,422 1,080,003 Long-term debt 454,527 467,048 Deferred income taxes and tax uncertainties 118,995 119,280 Employment-related and other non-current 232,594 230,901 liabilities Shareholders' equity (3) 3,218,190 3,117,366 Total liabilities and shareholders' equity $ 5,013,728 $ 5,014,598 Accrued contributions to employees' profit sharing plans decreased $124 (1) million primarily due to the annual cash contributions to the profit sharing plan. (2) Income taxes payable increased $52 million primarily due to the timing of income tax payments. (3) Common stock outstanding as of March 31, 2013 was 69,544,054 shares as compared with 69,478,495 shares at December 31, 2012. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Preliminary (In thousands of dollars) Three Months Ended March 31, 2013 2012 Cash flows from operating activities: Net earnings $ 214,527 $ 189,458 Provision for losses on accounts receivable 1,496 2,631 Deferred income taxes and tax uncertainties (1,000) (2,178) Depreciation and amortization 38,945 36,679 Stock-based compensation 11,547 11,443 Change in operating assets and liabilities – net of business acquisitions Accounts receivable (101,803) (86,639) Inventories 60,122 36,845 Prepaid expenses and other assets 28,090 52,994 Trade accounts payable 8,672 (28,549) Other current liabilities (137,186) (185,591) Current income taxes payable 52,085 58,325 Employment-related and other non-current 5,620 22,246 liabilities Other – net (4,698) (1,426) Net cash provided by operating activities 176,417 106,238 Cash flows from investing activities: Additions to property, buildings and equipment (42,962) (40,636) Proceeds from sale of property, buildings and 1,573 602 equipment Other – net (89) 666 Net cash used in investing activities (41,478) (39,368) Cash flows from financing activities: Net (decrease) increase in short-term debt (3,832) 1,651 Net (decrease) increase in long-term debt (3,750) 3,252 Proceeds from stock options exercised 23,461 30,241 Excess tax benefits from stock-based compensation 12,650 18,185 Purchase of treasury stock (69,797) (61,757) Cash dividends paid (56,546) (47,017) Net cash used in financing activities (97,814) (55,445) Exchange rate effect on cash and cash equivalents (3,672) (8,161) Net change in cash and cash equivalents 33,453 3,264 Cash and cash equivalents at beginning of year 452,063 335,491 Cash and cash equivalents at end of period $ 485,516 $ 338,755 SOURCE W.W. Grainger, Inc. Website: http://www.grainger.com Contact: Media - Joseph Micucci, Director, Media Relations, 847-535-0879 (office), 847-830-5328 (mobile); Grainger Media Relations Hotline, 847-535-5678; Investors - Laura Brown, SVP, Communications & Investor Relations, 847-535-0409 (office), 847-804-1383 (mobile); William Chapman, Sr. Director, Investor Relations, 847-535-0881 (office), 847-456-8647 (mobile)
Grainger Reports Record EPS Of $2.94 For The 2013 First Quarter
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