DOCUMENT AND ENTITY INFORMATION
DOCUMENT AND ENTITY INFORMATION | 9 Months Ended |
Sep. 30, 2016shares | |
Document and Entity Information [Abstract] | |
Entity Registrant Name | GRAINGER W W INC |
Entity Central Index Key | 277,135 |
Current Fiscal Year End Date | --12-31 |
Entity Filer Category | Large Accelerated Filer |
Document Type | 10-Q |
Document Period End Date | Sep. 30, 2016 |
Document Fiscal Year Focus | 2,016 |
Document Fiscal Period Focus | Q3 |
Amendment Flag | false |
Entity Common Stock, Shares Outstanding | 59,569,554 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Income Statement [Abstract] | ||||
Net sales | $ 2,596,288 | $ 2,532,900 | $ 7,666,494 | $ 7,495,126 |
Cost of merchandise sold | 1,556,536 | 1,471,021 | 4,541,629 | 4,266,073 |
Gross profit | 1,039,752 | 1,061,879 | 3,124,865 | 3,229,053 |
Warehousing, marketing and administrative expenses | 717,165 | 721,150 | 2,179,596 | 2,180,359 |
Operating earnings | 322,587 | 340,729 | 945,269 | 1,048,694 |
Other income and (expense): | ||||
Interest income | 147 | 464 | 474 | 934 |
Interest expense | (18,024) | (13,899) | (48,556) | (19,719) |
Loss from equity method investment | (10,333) | (5,972) | (22,147) | (10,273) |
Other non-operating expense | (1,192) | (1,875) | (1,291) | (3,864) |
Total other expense | (29,402) | (21,282) | (71,520) | (32,922) |
Earnings before income taxes | 293,185 | 319,447 | 873,749 | 1,015,772 |
Income taxes | 99,776 | 122,825 | 309,251 | 379,769 |
Net earnings | 193,409 | 196,622 | 564,498 | 636,003 |
Less: Net earnings attributable to noncontrolling interest | 7,536 | 4,421 | 19,236 | 12,239 |
Net earnings attributable to W.W. Grainger, Inc. | $ 185,873 | $ 192,201 | $ 545,262 | $ 623,764 |
Earnings per share: | ||||
Basic (in dollars per share) | $ 3.07 | $ 2.94 | $ 8.88 | $ 9.33 |
Diluted (in dollars per share) | $ 3.05 | $ 2.92 | $ 8.82 | $ 9.24 |
Weighted average number of shares outstanding: | ||||
Basic (in shares) | 60,016,550 | 64,720,037 | 60,854,548 | 66,188,236 |
Diluted (in shares) | 60,416,151 | 65,289,144 | 61,268,119 | 66,849,766 |
Cash dividends paid per share (in dollars per share) | $ 1.22 | $ 1.17 | $ 3.61 | $ 3.42 |
CONDENSED CONSOLIDATED STATEME3
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Statement of Comprehensive Income [Abstract] | ||||
Net earnings | $ 193,409 | $ 196,622 | $ 564,498 | $ 636,003 |
Foreign currency translation adjustments: | ||||
Foreign currency translation gain (loss) | (12,866) | (53,062) | 31,709 | (120,016) |
Defined postretirement benefit plan: | ||||
Reclassification adjustments related to amortization, net of tax benefit of $631, $510, and $1,893, $1,531, respectively | (1,008) | (813) | (3,026) | (2,436) |
Derivative instrument change in fair value of cash flow hedge | 188 | 256 | 844 | 983 |
Comprehensive earnings, net of tax | 179,723 | 143,003 | 594,025 | 514,534 |
Less: Comprehensive earnings attributable to noncontrolling interest | ||||
Net earnings | 7,536 | 4,421 | 19,236 | 12,239 |
Foreign currency translation adjustments | 2,188 | 1,521 | 16,621 | (281) |
Comprehensive earnings attributable to W.W. Grainger, Inc. | $ 169,999 | $ 137,061 | $ 558,168 | $ 502,576 |
CONDENSED CONSOLIDATED STATEME4
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS (PARENTHETICALS) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Statement of Comprehensive Income [Abstract] | ||||
Tax benefit from defined postretirement benefit plan reclassification adjustment | $ 631 | $ 510 | $ 1,893 | $ 1,531 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
CURRENT ASSETS | ||
Cash and cash equivalents | $ 285,981 | $ 290,136 |
Accounts receivable (less allowances for doubtful accounts of $30,204 and $22,288, respectively) | 1,326,359 | 1,209,641 |
Inventories – net | 1,381,468 | 1,414,177 |
Prepaid expenses and other assets | 91,526 | 85,670 |
Prepaid income taxes | 43,858 | 49,018 |
Total current assets | 3,129,192 | 3,048,642 |
PROPERTY, BUILDINGS AND EQUIPMENT | 3,421,322 | 3,370,313 |
Less: Accumulated depreciation and amortization | 1,984,384 | 1,939,072 |
Property, buildings and equipment – net | 1,436,938 | 1,431,241 |
DEFERRED INCOME TAXES | 37,513 | 83,996 |
GOODWILL | 594,511 | 582,336 |
INTANGIBLES - NET | 420,087 | 463,294 |
OTHER ASSETS | 267,268 | 248,246 |
TOTAL ASSETS | 5,885,509 | 5,857,755 |
CURRENT LIABILITIES | ||
Short-term debt | 387,684 | 353,072 |
Current maturities of long-term debt | 16,488 | 247,346 |
Trade accounts payable | 623,745 | 583,474 |
Accrued compensation and benefits | 181,456 | 196,667 |
Accrued contributions to employees’ profit sharing plans | 47,412 | 124,587 |
Accrued expenses | 269,057 | 266,702 |
Income taxes payable | 10,469 | 16,686 |
Total current liabilities | 1,536,311 | 1,788,534 |
LONG-TERM DEBT (less current maturities) | 1,874,132 | 1,388,414 |
DEFERRED INCOME TAXES AND TAX UNCERTAINTIES | 132,761 | 154,352 |
EMPLOYMENT-RELATED AND OTHER NON-CURRENT LIABILITIES | 181,269 | 173,741 |
SHAREHOLDERS' EQUITY | ||
Cumulative Preferred Stock – $5 par value – 12,000,000 shares authorized; none issued nor outstanding | 0 | 0 |
Common Stock – $0.50 par value – 300,000,000 shares authorized; 109,659,219 shares issued | 54,830 | 54,830 |
Additional contributed capital | 1,023,469 | 1,000,476 |
Retained earnings | 7,125,727 | 6,802,130 |
Accumulated other comprehensive losses | (208,126) | (221,091) |
Treasury stock, at cost – 50,089,665 and 47,630,511 shares, respectively | (5,953,187) | (5,369,711) |
Total W.W. Grainger, Inc. shareholders’ equity | 2,042,713 | 2,266,634 |
Noncontrolling interest | 118,323 | 86,080 |
Total shareholders' equity | 2,161,036 | 2,352,714 |
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ 5,885,509 | $ 5,857,755 |
CONDENSED CONSOLIDATED BALANCE6
CONDENSED CONSOLIDATED BALANCE SHEETS (PARENTHETICALS) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts | $ 30,204 | $ 22,288 |
Cumulative preferred stock, par value (in dollars per share) | $ 5 | $ 5 |
Cumulative preferred stock, shares authorized (in shares) | 12,000,000 | 12,000,000 |
Cumulative preferred stock, shares issued (in shares) | 0 | 0 |
Cumulative preferred stock, shares outstanding (in shares) | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.50 | $ 0.50 |
Common stock, shares authorized (in shares) | 300,000,000 | 300,000,000 |
Common stock, shares issued (in shares) | 109,659,219 | 109,659,219 |
Treasury stock, shares at cost (in shares) | 50,089,665 | 47,630,511 |
CONDENSED CONSOLIDATED STATEME7
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net earnings | $ 564,498 | $ 636,003 |
Provision for losses on accounts receivable | 14,753 | 6,416 |
Deferred income taxes and tax uncertainties | 24,259 | (6,906) |
Depreciation and amortization | 177,395 | 164,200 |
Gains from sales of assets, net of asset impairment | (16,928) | (709) |
Stock-based compensation | 27,545 | 35,627 |
Losses from equity method investment | 22,147 | 10,273 |
Change in operating assets and liabilities – net of business acquisitions: | ||
Accounts receivable | (123,922) | (69,784) |
Inventories | 41,938 | 12,627 |
Prepaid income taxes and other expenses | 3,478 | 27,858 |
Trade accounts payable | 36,594 | 19,126 |
Other current liabilities | (86,911) | (102,951) |
Current income taxes payable | (9,714) | 2,451 |
Accrued employment-related benefits cost | 5,591 | 2,401 |
Other – net | (10,340) | (702) |
Net cash provided by operating activities | 670,383 | 735,930 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Additions to property, buildings and equipment | (213,622) | (253,197) |
Proceeds from sales of assets | 48,089 | 12,351 |
Equity method investment | (19,299) | (15,687) |
Net cash paid for business acquisitions | (159) | (463,302) |
Other – net | (405) | (206) |
Net cash used in investing activities | (185,396) | (720,041) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Net increase in commercial paper | 39,887 | 177,000 |
Borrowings under lines of credit | 26,681 | 48,032 |
Payments against lines of credit | (32,515) | (65,764) |
Proceeds from issuance of long-term debt | 516,058 | 1,241,356 |
Payments of long-term debt | (257,109) | (33,938) |
Proceeds from stock options exercised | 29,553 | 53,688 |
Excess tax benefits from stock-based compensation | 11,873 | 24,415 |
Purchase of treasury stock | (613,198) | (1,177,241) |
Cash dividends paid | (221,131) | (230,948) |
Net cash (used in) provided by financing activities | (499,901) | 36,600 |
Exchange rate effect on cash and cash equivalents | 10,759 | (20,982) |
NET CHANGE IN CASH AND CASH EQUIVALENTS | (4,155) | 31,507 |
Cash and cash equivalents at beginning of year | 290,136 | 226,644 |
Cash and cash equivalents at end of period | $ 285,981 | $ 258,151 |
BACKGROUND AND BASIS OF PRESENT
BACKGROUND AND BASIS OF PRESENTATION | 9 Months Ended |
Sep. 30, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
BACKGROUND AND BASIS OF PRESENTATION | BACKGROUND AND BASIS OF PRESENTATION W.W. Grainger, Inc. is a broad-line distributor of maintenance, repair and operating (MRO) supplies, and other related products and services used by businesses and institutions. W.W. Grainger, Inc.’s operations are primarily in the United States and Canada, with a presence in Europe, Asia and Latin America. In this report, the words “Company” or “Grainger” mean W.W. Grainger, Inc. and its subsidiaries. The Condensed Consolidated Financial Statements of the Company and the related notes are unaudited and should be read in conjunction with the consolidated financial statements and related notes for the year ended December 31, 2015 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC). The Condensed Consolidated Balance Sheet as of December 31, 2015 has been derived from the audited consolidated financial statements at that date, but does not include all of the disclosures required by accounting principles generally accepted in the United States of America for complete financial statements. The unaudited financial information reflects all adjustments (primarily consisting of normal recurring adjustments) which, in the opinion of management, are necessary for a fair presentation of the statements contained herein. |
NEW ACCOUNTING STANDARDS
NEW ACCOUNTING STANDARDS | 9 Months Ended |
Sep. 30, 2016 | |
Accounting Policies [Abstract] | |
NEW ACCOUNTING STANDARDS | NEW ACCOUNTING STANDARDS In July 2015, the Financial Accounting Standards Board (FASB) announced a one-year delay in the effective date of Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers. The standard will now be effective for interim and annual periods beginning after December 15, 2017. The standard also permits adoption as early as the original effective date, which was for interim and annual periods beginning after December 15, 2016. In March 2016, the FASB issued ASU 2016-08, Revenue from Contract with Customers: Principal versus Agent Considerations (Reporting Revenue Gross versus Net) . The amendment is meant to reduce the potential for diversity in practice arising from inconsistent application of the principal versus agent guidance as well as reduce the cost and complexity during the transition and on an ongoing basis. In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing . The amendment is meant to clarify the identification of performance obligations and the licensing implementation guidelines, while retaining the related principles of those areas. The effective dates of ASU 2016-08 and ASU 2016-10 are consistent with ASU 2014-09. The Company has elected not to early adopt these ASUs and is evaluating their impact to the consolidated financial statements. In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory, which simplifies the subsequent measurement of inventory by replacing the lower of cost or market test with a lower of cost or net realizable value (NRV) test. NRV is calculated as the estimated selling price less reasonably predictable costs of completion, disposal and transportation. This pronouncement is effective for fiscal years and for interim periods within those fiscal years beginning after December 15, 2016, and prospective adoption is required. The Company is evaluating the impact of this ASU. In January 2016, the FASB issued ASU 2016-01, Financial Instruments: Recognition and Measurement of Financial Assets and Financial Liabilities . This change to the financial instrument model primarily affects the accounting for equity investments, financial liabilities under fair value options and the presentation and disclosure requirements for financial instruments. The effective date for the standard is for fiscal years and interim periods within those years beginning after December 15, 2017. Certain provisions for the new guidance can be adopted early. The Company is evaluating the impact of this ASU. In February 2016, the FASB issued ASU 2016-02, Leases. The purpose of the standard is to improve transparency and comparability related to the accounting and reporting of leasing arrangements. The guidance will require balance sheet recognition for assets and liabilities associated with rights and obligations created by leases with terms greater than twelve months. The effective date for the standard is for fiscal years and interim periods within those years beginning after December 15, 2018. Early adoption is permitted. The Company is evaluating the impact of this ASU. In March 2016, the FASB issued ASU 2016-07, Investments - Equity Method and Joint Ventures; Simplifying the Transition to the Equity Method of Accounting . This update eliminates the requirement to retroactively adjust the investment, results of operations and retained earnings when an investment qualifies for use of the equity method as a result of an increase in the level of ownership interest or degree of influence. The amendment requires that the investor add the cost of acquiring the additional interest to the current basis of the investor's previously held interest and adopt the equity method of accounting as of the date the investment becomes qualified for equity method accounting. The effective date for the standard is for fiscal years and interim periods within those years beginning after December 15, 2016. The amendment should be applied prospectively and early application is permitted. This ASU is not expected to have a material impact on the Company's consolidated financial statements. In March 2016, the FASB issued ASU 2016-09, Stock Based Compensation: Improvements to Employee Share-Based Payment Accounting . The standard simplifies several aspects of the accounting for employee share-based payment transactions, including accounting for income taxes, forfeitures and statutory tax withholdings requirements, as well as classification in the statement of cash flows. The effective date for the standard is for fiscal years and interim periods within those years beginning after December 15, 2016. Early adoption is permitted. If early adoption is elected, all amendments in the ASU that apply must be adopted in the same period. The Company has elected not to early adopt this ASU. The Company expects the new guidance to impact its tax expense and dilutive shares outstanding calculation, with a potentially dilutive impact on future earnings per share and increased period to period variability of net earnings. In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments. The amendments in this update affect an entity to varying degrees depending on the credit quality of the assets held by the entity, their duration, and how the entity applies current GAAP. The effective date of the amendment to the standard is for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company is evaluating the impact of this ASU. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payments. The amendments in this update address eight specific cash flow issues with the objective of reducing the existing diversity in practice. The effective date of the amendment to the standard is for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company is evaluating the impact of this ASU. |
DIVIDEND
DIVIDEND | 9 Months Ended |
Sep. 30, 2016 | |
Dividends [Abstract] | |
DIVIDEND | DIVIDEND On October 26, 2016 , the Company’s Board of Directors declared a quarterly dividend of $1.22 per share, payable on December 1, 2016 , to shareholders of record on November 14, 2016 . |
ACQUISITION
ACQUISITION | 9 Months Ended |
Sep. 30, 2016 | |
Business Combinations [Abstract] | |
ACQUISITION | ACQUISITION On September 1, 2015 , the Company acquired all of the issued share capital of Cromwell Group (Holdings) Limited (Cromwell). With sales of approximately £ 285 million ($ 437 million ) for fiscal year ending August 31, 2015, prior to the acquisition, Cromwell was the largest independent MRO distributor in the United Kingdom, serving more than 35,000 industrial and manufacturing customers worldwide. The Company paid £ 310 million ($ 464 million ), subject to customary adjustments, for the Cromwell acquisition. The acquisition was partially funded with newly issued debt in the United Kingdom. Goodwill and intangibles recorded totaled approximately $ 355 million . The goodwill is not deductible for tax purposes. The purchase price allocation has been finalized and the impact to the consolidated financial statements was not material. Disclosure of pro forma results are not required. |
GOODWILL
GOODWILL | 9 Months Ended |
Sep. 30, 2016 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
GOODWILL | GOODWILL At September 30, 2016, Grainger had approximately $1 billion of Goodwill and Intangible assets, or 17% of total assets. Grainger annually reviews goodwill and intangible assets with indefinite lives for impairment in the fourth quarter and when events or changes in circumstances indicate the carrying value of these assets might exceed their current fair values. Grainger tests for goodwill impairment at the reporting unit level and performs a qualitative assessment of factors such as a reporting unit's current performance and overall economic factors to determine if it is more likely than not that the goodwill might be impaired and whether it is necessary to perform the two-step quantitative goodwill impairment test. In the two-step test, Grainger first compares the carrying value of assets of the reporting unit to its calculated fair value. If the carrying value of assets of the reporting unit exceeds its calculated fair value, the second step is performed, where the implied fair value of goodwill is compared to the carrying value of that goodwill, to determine the amount of impairment. The fair value of reporting units is calculated primarily using the discounted cash flow (DCF) method and incorporating value indicators from a market approach to evaluate the reasonableness of the resulting fair values. The DCF method incorporates various assumptions including the amount and timing of future expected cash flows, including revenues, gross margins, operating expenses, capital expenditures and working capital based on operational budgets, long range strategic plans and other estimates. The terminal value growth rate is used to calculate the value of cash flows beyond the last projected period and reflects management’s best estimates for perpetual growth for the reporting units. Estimates of market participant risk-adjusted weighted average cost of capital are used as a basis for determining the discount rates to apply to the reporting units’ future expected cash flows and terminal value. As previously reported, Grainger completed the annual impairment testing during the fourth quarter of 2015, including the quantitative test for Fabory, with $106 million of goodwill at December 31, 2015. The fair value of the Fabory reporting unit's goodwill exceeded the carrying value by 15% , and the step two calculation was not required. For the Company's remaining reporting units, the estimated fair values substantially exceeded the carrying values. Grainger monitors the operating performance of Fabory and the quarterly assessment did not indicate the presence of any goodwill impairment triggering events as of September 30, 2016. If Fabory's future earnings and cash flows projections are not achieved or economic conditions in Europe deteriorate, future impairment of Fabory's intangible assets, including goodwill, could result. |
RESTRUCTURING RESERVES
RESTRUCTURING RESERVES | 9 Months Ended |
Sep. 30, 2016 | |
Restructuring and Related Activities [Abstract] | |
RESTRUCTURING RESERVES | RESTRUCTURING RESERVES The Company recorded employee termination benefits with the majority expected to be paid through 2017 related to the reorganization of the business. Severance costs of approximately $7 million and $32 million were recorded in the three and nine months ended September 30, 2016 , respectively, and are included in Warehousing, marketing and administrative expenses. The severance reserve balance as of September 30, 2016 and December 31, 2015 was approximately $29 million and $24 million , respectively, and is included in Accrued compensation and benefits. |
SHORT-TERM AND LONG-TERM DEBT
SHORT-TERM AND LONG-TERM DEBT | 9 Months Ended |
Sep. 30, 2016 | |
Debt Disclosure [Abstract] | |
SHORT-TERM AND LONG-TERM DEBT | SHORT-TERM AND LONG-TERM DEBT The following summarizes information concerning short-term debt (in thousands of dollars): September 30, 2016 December 31, 2015 Outstanding lines of credit $ 17,797 $ 23,072 Outstanding commercial paper 369,887 330,000 $ 387,684 $ 353,072 Long-term debt consisted of the following (in thousands of dollars): September 30, 2016 December 31, 2015 4.60% senior notes due 2045 $ 1,000,000 $ 1,000,000 3.75% senior notes due 2046 400,000 — U.S. dollar term loan — 114,614 British pound term loan 197,220 235,808 Euro term loan 123,618 114,030 Japanese yen term loans 59,212 49,875 Canadian dollar revolving credit facility 106,650 108,389 Other 23,367 25,991 Debt issuance costs and discounts (19,447 ) (12,947 ) Less current maturities (16,488 ) (247,346 ) $ 1,874,132 $ 1,388,414 On August 31, 2016, the Company entered into an agreement for a five year term loan of €110 million and a revolving credit facility of up to €20 million . The proceeds from the term loan were used to pay €102.5M of a term loan that matured in August 2016, which was entered into to partially fund the acquisition of Fabory in 2011. Under the agreement, no principal amount of the loan will be required to be paid until the loan becomes due on August 31, 2021 at which time the loan will be required to be paid in full. The Company, at its option, may prepay this term loan in whole or in part at the end of any interest period without penalty. The loan will bear interest at the Euro Interbank Offered Rate (EURIBOR) plus a margin of 45 basis points . If EURIBOR is less than zero, then EURIBOR will be deemed to be zero. The interest rate at September 30, 2016 was 0.45% . Costs of approximately €0.5 million associated with the issuance of the term loan, representing arrangement fees and other expenses, have been recorded as a contra-liability within Long-term debt and will be amortized to interest expense over the life of the term loan. The revolving credit facility must generally be paid at the conclusion of each interest period as defined in the facility agreement. This facility will bear interest at EURIBOR plus a margin of 35 basis points . The carrying value of the term loan approximates fair value due to the variable interest rates. On May 16, 2016 , the Company issued $400 million of unsecured 3.75% Senior Notes ( 3.75% Notes) that mature on May 15, 2046 . The 3.75% Notes require no principal payments until the maturity date and interest is payable semi-annually on May 15 and November 15, beginning on November 15, 2016. Prior to November 15, 2045, the Company may redeem the 3.75% Notes in whole at any time or in part from time to time at a “make-whole” redemption price. This redemption price is calculated by reference to the then-current yield on a U.S. treasury security with a maturity comparable to the remaining term of the 3.75% Notes plus 20 basis points, together with accrued and unpaid interest, if any, to the redemption date. On or after November 15, 2045, the Company may redeem the 3.75% Notes in whole at any time or in part from time to time at 100% of their principal amount, together with accrued and unpaid interest, if any, to the redemption date. Costs and discounts of approximately $7 million associated with the issuance of the 3.75% Notes, representing underwriting fees and other expenses, have been recorded as a contra-liability within Long-term debt and will be amortized to interest expense over the term of the 3.75% Notes. The carrying value of the 3.75% Notes approximates the fair value as of September 30, 2016. In January 2016, the Company exercised its option to prepay the U.S. dollar term loan and paid off the remaining balance of the loan. On June 11, 2015 , the Company issued $1 billion of unsecured 4.60% Senior Notes ( 4.60% Notes) that mature on June 15, 2045 . The 4.60% Notes require no principal payments until the maturity date and interest is payable semi-annually on June 15 and December 15, beginning on December 31, 2015. Prior to December 15, 2044, the Company may redeem the 4.60% Notes in whole at any time or in part from time to time at a “make-whole” redemption price. This redemption price is calculated by reference to the then-current yield on a U.S. treasury security with a maturity comparable to the remaining term of the 4.60% Notes plus 25 basis points, together with accrued and unpaid interest, if any, to the redemption date. On or after December 15, 2044, the Company may redeem the 4.60% Notes in whole at any time or in part from time to time at 100% of their principal amount, together with accrued and unpaid interest, if any, to the redemption date. Costs and discounts of approximately $11 million associated with the issuance of the 4.60% Notes, representing underwriting fees and other expenses, have been recorded as a contra-liability within Long-term debt and will be amortized to interest expense over the term of the 4.60% Notes. The fair value of the 4.60% Notes was approximately $1.2 billion and $1 billion as of September 30, 2016 and December 31, 2015, respectively. The estimated fair value of the Company’s 3.75% Notes and 4.60% Notes was based on available external pricing data and current market rates for similar debt instruments, among other factors, which are classified as level 2 inputs within the fair value hierarchy. The carrying value of other long-term debt approximates fair value due to the variable interest rates. |
EQUITY METHOD INVESTMENT
EQUITY METHOD INVESTMENT | 9 Months Ended |
Sep. 30, 2016 | |
Equity Method Investments and Joint Ventures [Abstract] | |
EQUITY METHOD INVESTMENT | EQUITY METHOD INVESTMENT In addition to the investment made in 2015, in January 2016, the Company invested in a second limited liability company established to produce refined coal, which is then sold to a utility to produce electricity. The production and sale of refined coal is eligible for renewable energy tax credits under Section 45 of the Internal Revenue Code. Under the terms of the investment, effective control lies with a co-investor who manages the day-to-day operations of the entity, and as such the investments are accounted for under the equity method of accounting. As of September 30, 2016 and December 31, 2015, the balance of the combined clean energy investments was $6 million and $9 million , respectively, and is included on the balance sheet under Other assets. During the three and nine months ended September 30, 2016 , the Company recorded $10 million and $22 million , respectively, in equity losses. The total tax benefit year-to-date of $26 million including energy tax credits, is reflected in the Company’s effective tax rate for the nine months ended September 30, 2016. The investments contributed $4 million to net earnings for the nine months ended September 30, 2016 . |
EMPLOYEE BENEFITS - POSTRETIREM
EMPLOYEE BENEFITS - POSTRETIREMENT | 9 Months Ended |
Sep. 30, 2016 | |
Defined Benefit Plans and Other Postretirement Benefit Plans Disclosures [Abstract] | |
EMPLOYEE BENEFITS - POSTRETIREMENT | EMPLOYEE BENEFITS - POSTRETIREMENT The Company has a postretirement healthcare benefits plan that provides coverage for a majority of its United States employees hired prior to January 1, 2013 and their dependents, should they elect to maintain such coverage upon retirement. Covered employees become eligible for participation when they qualify for retirement while working for the Company. Participation in the plan is voluntary and requires participants to make contributions toward the cost of the plan, as determined by the Company. The net periodic benefit costs charged to operating expenses, which are valued at the measurement date of January 1 and recognized evenly throughout the year, consisted of the following components (in thousands of dollars): Three Months Ended September 30, Nine Months Ended September 30, 2016 2015 2016 2015 Service cost $ 2,059 $ 2,532 $ 6,178 $ 7,596 Interest cost 2,464 2,412 7,391 7,236 Expected return on assets (2,528 ) (2,594 ) (7,584 ) (7,782 ) Amortization of unrecognized losses 32 378 96 1,134 Amortization of prior service credits (1,672 ) (1,700 ) (5,016 ) (5,100 ) Net periodic benefit costs $ 355 $ 1,028 $ 1,065 $ 3,084 The Company has established a Group Benefit Trust to fund the plan and process benefit payments. The funding of the trust is an estimated amount which is intended to allow the maximum deductible contribution under the Internal Revenue Code of 1986 as amended (IRC). There are no minimum funding requirements and the Company intends to follow its practice of funding the maximum deductible contribution under the IRC. The Company did not make a contribution to the trust during the three and nine months ended September 30, 2016 . |
SEGMENT INFORMATION
SEGMENT INFORMATION | 9 Months Ended |
Sep. 30, 2016 | |
Segment Reporting [Abstract] | |
SEGMENT INFORMATION | SEGMENT INFORMATION The Company has two reportable segments: the United States and Canada. The United States operating segment reflects the results of the Company's U.S. business. The Canada operating segment reflects the results for Acklands – Grainger Inc. (Acklands-Grainger), the Company’s Canadian business. Other businesses include single channel online businesses such as MonotaRO in Japan and Zoro in the United States and business units in Europe, Asia and Latin America. Other businesses do not meet the definition of a reportable segment. Operating segments generate revenue almost exclusively through the distribution of maintenance, repair and operating supplies, as service revenues account for less than 1% of total revenues for each operating segment. The Company is a broad-line distributor of maintenance, repair and operating (MRO) supplies, and other related products. Products are regularly added or deleted from the Company's inventory. Accordingly, it would be impractical to provide information by product category due to the way the business is managed. Following is a summary of segment results (in thousands of dollars): Three Months Ended September 30, 2016 United States Canada Other Businesses Total Total net sales $ 2,028,235 $ 179,281 $ 481,929 $ 2,689,445 Intersegment net sales (92,160 ) (23 ) (974 ) (93,157 ) Net sales to external customers $ 1,936,075 $ 179,258 $ 480,955 $ 2,596,288 Segment operating earnings $ 342,524 $ (15,118 ) $ 24,835 $ 352,241 Three Months Ended September 30, 2015 United States Canada Other Businesses Total Total net sales $ 2,039,488 $ 213,132 $ 354,692 $ 2,607,312 Intersegment net sales (73,393 ) (21 ) (998 ) (74,412 ) Net sales to external customers $ 1,966,095 $ 213,111 $ 353,694 $ 2,532,900 Segment operating earnings $ 359,414 $ 3,587 $ 14,260 $ 377,261 Nine Months Ended September 30, 2016 United States Canada Other Businesses Total Total net sales $ 5,973,044 $ 552,470 $ 1,401,429 $ 7,926,943 Intersegment net sales (257,101 ) (109 ) (3,239 ) (260,449 ) Net sales to external customers $ 5,715,943 $ 552,361 $ 1,398,190 $ 7,666,494 Segment operating earnings $ 1,023,318 $ (55,207 ) $ 76,343 $ 1,044,454 Nine Months Ended September 30, 2015 United States Canada Other Businesses Total Total net sales $ 6,041,576 $ 687,128 $ 971,389 $ 7,700,093 Intersegment net sales (201,978 ) (74 ) (2,915 ) (204,967 ) Net sales to external customers $ 5,839,598 $ 687,054 $ 968,474 $ 7,495,126 Segment operating earnings $ 1,095,036 $ 22,474 $ 38,943 $ 1,156,453 United States Canada Other Businesses Total Segment assets: September 30, 2016 $ 2,272,869 $ 304,080 $ 522,879 $ 3,099,828 December 31, 2015 $ 2,191,045 $ 317,504 $ 507,116 $ 3,015,665 Following are reconciliations of segment information with the consolidated totals per the financial statements (in thousands of dollars): Three Months Ended September 30, Nine Months Ended September 30, 2016 2015 2016 2015 Operating earnings: Total operating earnings for operating segments $ 352,241 $ 377,261 1,044,454 $ 1,156,453 Unallocated expenses and eliminations (29,654 ) (36,532 ) (99,185 ) (107,759 ) Total consolidated operating earnings $ 322,587 $ 340,729 945,269 $ 1,048,694 September 30, 2016 December 31, 2015 Assets: Total assets for operating segments $ 3,099,828 $ 3,015,665 Other current and non-current assets 2,652,146 2,624,966 Unallocated assets 133,535 217,124 Total consolidated assets $ 5,885,509 $ 5,857,755 Assets for operating segments include net accounts receivable and first-in, first-out inventory which are reported to the Company's Chief Operating Decision Maker. Other current and non-current assets include all other asset balances for the operating segments. Unallocated expenses and unallocated assets primarily relate to the Company headquarter's support services, which are not part of any business segment, as well as intercompany eliminations. Unallocated expenses include payroll and benefits, depreciation and other costs associated with headquarters-related support services. Unallocated assets include non-operating cash and cash equivalents, certain prepaid expenses and property, buildings and equipment-net. Intersegment net sales for the U.S. segment increased by $19 million and $55 million for the three and nine months ended September 30, 2016, respectively, compared to the prior year, driven by increased sales from the U.S. business to Zoro. The U.S. business' supply chain network is Zoro's primary source of inventory. |
EARNINGS PER SHARE
EARNINGS PER SHARE | 9 Months Ended |
Sep. 30, 2016 | |
Earnings Per Share [Abstract] | |
EARNINGS PER SHARE | EARNINGS PER SHARE The following table sets forth the computation of basic and diluted earnings per share under the two-class method (in thousands of dollars, except for share and per share amounts): Three Months Ended Nine Months Ended September 30, September 30, 2016 2015 2016 2015 Net earnings attributable to W.W. Grainger, Inc. as reported $ 185,873 $ 192,201 $ 545,262 $ 623,764 Distributed earnings available to participating securities (547 ) (676 ) (1,749 ) (2,187 ) Undistributed earnings available to participating securities (1,085 ) (1,138 ) (3,179 ) (4,012 ) Numerator for basic earnings per share – Undistributed and distributed earnings available to common shareholders 184,241 190,387 540,334 617,565 Undistributed earnings allocated to participating securities 1,085 1,138 3,179 4,012 Undistributed earnings reallocated to participating securities (1,078 ) (1,129 ) (3,157 ) (3,972 ) Numerator for diluted earnings per share – Undistributed and distributed earnings available to common shareholders $ 184,248 $ 190,396 $ 540,356 $ 617,605 Denominator for basic earnings per share – weighted average shares 60,016,550 64,720,037 60,854,548 66,188,236 Effect of dilutive securities 399,601 569,107 413,571 661,530 Denominator for diluted earnings per share – weighted average shares adjusted for dilutive securities 60,416,151 65,289,144 61,268,119 66,849,766 Earnings per share two-class method Basic $ 3.07 $ 2.94 $ 8.88 $ 9.33 Diluted $ 3.05 $ 2.92 $ 8.82 $ 9.24 |
CONTINGENCIES AND LEGAL MATTERS
CONTINGENCIES AND LEGAL MATTERS | 9 Months Ended |
Sep. 30, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
CONTINGENCIES AND LEGAL MATTERS | CONTINGENCIES AND LEGAL MATTERS From time to time the Company is involved in various legal and administrative proceedings that are incidental to its business, including claims related to product liability, general negligence, contract disputes, environmental issues, wage and hour laws, intellectual property, employment practices, regulatory compliance or other matters and actions brought by employees, consumers, competitors, suppliers or governmental entities. As a government contractor selling to federal, state and local governmental entities, the Company is also subject to governmental or regulatory inquiries or audits or other proceedings, including those related to pricing compliance. It is not expected that the ultimate resolution of any of these matters will have, either individually or in the aggregate, a material adverse effect on the Company's consolidated financial position or results of operations. TCPA Matter As previously disclosed, on April 5, 2013 David Davies filed a putative class action lawsuit in the Circuit Court of Cook County, Illinois on behalf of all those who received faxes in connection with a 2009 marketing campaign. The complaint alleges, among other things, that the Company violated the Telephone Consumer Protection Act of 1991, as amended by the Junk Fax Prevention Act of 2005 (the “TCPA”), by sending fax advertisements that either were unsolicited and/or did not contain a valid opt-out notice. The TCPA provides for penalties of $500 to $1,500 for each non-compliant individual fax. On May 13, 2013, the Company removed the case to the Federal District Court for the Northern District of Illinois (the “District Court”). On June 27, 2014, the District Court found that Davies was not an adequate class representative. The United States Court of Appeals for the Seventh Circuit denied Davies’ petition for immediate review of the ruling. Davies subsequently moved the District Court for reconsideration of its ruling and his motion was denied on September 28, 2016. The parties filed cross-motions for summary judgment, which are pending. The Company believes it has strong legal and factual defenses and intends to continue defending itself vigorously in the pending lawsuit. While the Company is unable to predict the outcome of this proceeding, the Company believes that the ultimate outcome of this matter will not have a material adverse effect on the Company’s consolidated financial position or results of operations. |
NEW ACCOUNTING STANDARDS (Polic
NEW ACCOUNTING STANDARDS (Policies) | 9 Months Ended |
Sep. 30, 2016 | |
Accounting Policies [Abstract] | |
New Accounting Standards | In July 2015, the Financial Accounting Standards Board (FASB) announced a one-year delay in the effective date of Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers. The standard will now be effective for interim and annual periods beginning after December 15, 2017. The standard also permits adoption as early as the original effective date, which was for interim and annual periods beginning after December 15, 2016. In March 2016, the FASB issued ASU 2016-08, Revenue from Contract with Customers: Principal versus Agent Considerations (Reporting Revenue Gross versus Net) . The amendment is meant to reduce the potential for diversity in practice arising from inconsistent application of the principal versus agent guidance as well as reduce the cost and complexity during the transition and on an ongoing basis. In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing . The amendment is meant to clarify the identification of performance obligations and the licensing implementation guidelines, while retaining the related principles of those areas. The effective dates of ASU 2016-08 and ASU 2016-10 are consistent with ASU 2014-09. The Company has elected not to early adopt these ASUs and is evaluating their impact to the consolidated financial statements. In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory, which simplifies the subsequent measurement of inventory by replacing the lower of cost or market test with a lower of cost or net realizable value (NRV) test. NRV is calculated as the estimated selling price less reasonably predictable costs of completion, disposal and transportation. This pronouncement is effective for fiscal years and for interim periods within those fiscal years beginning after December 15, 2016, and prospective adoption is required. The Company is evaluating the impact of this ASU. In January 2016, the FASB issued ASU 2016-01, Financial Instruments: Recognition and Measurement of Financial Assets and Financial Liabilities . This change to the financial instrument model primarily affects the accounting for equity investments, financial liabilities under fair value options and the presentation and disclosure requirements for financial instruments. The effective date for the standard is for fiscal years and interim periods within those years beginning after December 15, 2017. Certain provisions for the new guidance can be adopted early. The Company is evaluating the impact of this ASU. In February 2016, the FASB issued ASU 2016-02, Leases. The purpose of the standard is to improve transparency and comparability related to the accounting and reporting of leasing arrangements. The guidance will require balance sheet recognition for assets and liabilities associated with rights and obligations created by leases with terms greater than twelve months. The effective date for the standard is for fiscal years and interim periods within those years beginning after December 15, 2018. Early adoption is permitted. The Company is evaluating the impact of this ASU. In March 2016, the FASB issued ASU 2016-07, Investments - Equity Method and Joint Ventures; Simplifying the Transition to the Equity Method of Accounting . This update eliminates the requirement to retroactively adjust the investment, results of operations and retained earnings when an investment qualifies for use of the equity method as a result of an increase in the level of ownership interest or degree of influence. The amendment requires that the investor add the cost of acquiring the additional interest to the current basis of the investor's previously held interest and adopt the equity method of accounting as of the date the investment becomes qualified for equity method accounting. The effective date for the standard is for fiscal years and interim periods within those years beginning after December 15, 2016. The amendment should be applied prospectively and early application is permitted. This ASU is not expected to have a material impact on the Company's consolidated financial statements. In March 2016, the FASB issued ASU 2016-09, Stock Based Compensation: Improvements to Employee Share-Based Payment Accounting . The standard simplifies several aspects of the accounting for employee share-based payment transactions, including accounting for income taxes, forfeitures and statutory tax withholdings requirements, as well as classification in the statement of cash flows. The effective date for the standard is for fiscal years and interim periods within those years beginning after December 15, 2016. Early adoption is permitted. If early adoption is elected, all amendments in the ASU that apply must be adopted in the same period. The Company has elected not to early adopt this ASU. The Company expects the new guidance to impact its tax expense and dilutive shares outstanding calculation, with a potentially dilutive impact on future earnings per share and increased period to period variability of net earnings. In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments. The amendments in this update affect an entity to varying degrees depending on the credit quality of the assets held by the entity, their duration, and how the entity applies current GAAP. The effective date of the amendment to the standard is for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company is evaluating the impact of this ASU. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payments. The amendments in this update address eight specific cash flow issues with the objective of reducing the existing diversity in practice. The effective date of the amendment to the standard is for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company is evaluating the impact of this ASU. |
Goodwill | Grainger annually reviews goodwill and intangible assets with indefinite lives for impairment in the fourth quarter and when events or changes in circumstances indicate the carrying value of these assets might exceed their current fair values. Grainger tests for goodwill impairment at the reporting unit level and performs a qualitative assessment of factors such as a reporting unit's current performance and overall economic factors to determine if it is more likely than not that the goodwill might be impaired and whether it is necessary to perform the two-step quantitative goodwill impairment test. In the two-step test, Grainger first compares the carrying value of assets of the reporting unit to its calculated fair value. If the carrying value of assets of the reporting unit exceeds its calculated fair value, the second step is performed, where the implied fair value of goodwill is compared to the carrying value of that goodwill, to determine the amount of impairment. The fair value of reporting units is calculated primarily using the discounted cash flow (DCF) method and incorporating value indicators from a market approach to evaluate the reasonableness of the resulting fair values. The DCF method incorporates various assumptions including the amount and timing of future expected cash flows, including revenues, gross margins, operating expenses, capital expenditures and working capital based on operational budgets, long range strategic plans and other estimates. The terminal value growth rate is used to calculate the value of cash flows beyond the last projected period and reflects management’s best estimates for perpetual growth for the reporting units. Estimates of market participant risk-adjusted weighted average cost of capital are used as a basis for determining the discount rates to apply to the reporting units’ future expected cash flows and terminal value. |
SHORT-TERM AND LONG-TERM DEBT (
SHORT-TERM AND LONG-TERM DEBT (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Debt Disclosure [Abstract] | |
Schedule of Short-Term Debt Instruments | The following summarizes information concerning short-term debt (in thousands of dollars): September 30, 2016 December 31, 2015 Outstanding lines of credit $ 17,797 $ 23,072 Outstanding commercial paper 369,887 330,000 $ 387,684 $ 353,072 |
Schedule of Long-Term Debt Instruments | Long-term debt consisted of the following (in thousands of dollars): September 30, 2016 December 31, 2015 4.60% senior notes due 2045 $ 1,000,000 $ 1,000,000 3.75% senior notes due 2046 400,000 — U.S. dollar term loan — 114,614 British pound term loan 197,220 235,808 Euro term loan 123,618 114,030 Japanese yen term loans 59,212 49,875 Canadian dollar revolving credit facility 106,650 108,389 Other 23,367 25,991 Debt issuance costs and discounts (19,447 ) (12,947 ) Less current maturities (16,488 ) (247,346 ) $ 1,874,132 $ 1,388,414 |
EMPLOYEE BENEFITS - POSTRETIR22
EMPLOYEE BENEFITS - POSTRETIREMENT (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Defined Benefit Plans and Other Postretirement Benefit Plans Disclosures [Abstract] | |
Schedule of Net Periodic Benefit Costs Charged to Operating Expenses | The net periodic benefit costs charged to operating expenses, which are valued at the measurement date of January 1 and recognized evenly throughout the year, consisted of the following components (in thousands of dollars): Three Months Ended September 30, Nine Months Ended September 30, 2016 2015 2016 2015 Service cost $ 2,059 $ 2,532 $ 6,178 $ 7,596 Interest cost 2,464 2,412 7,391 7,236 Expected return on assets (2,528 ) (2,594 ) (7,584 ) (7,782 ) Amortization of unrecognized losses 32 378 96 1,134 Amortization of prior service credits (1,672 ) (1,700 ) (5,016 ) (5,100 ) Net periodic benefit costs $ 355 $ 1,028 $ 1,065 $ 3,084 |
SEGMENT INFORMATION (Tables)
SEGMENT INFORMATION (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Segment Reporting [Abstract] | |
Summary of Segment Results | Following is a summary of segment results (in thousands of dollars): Three Months Ended September 30, 2016 United States Canada Other Businesses Total Total net sales $ 2,028,235 $ 179,281 $ 481,929 $ 2,689,445 Intersegment net sales (92,160 ) (23 ) (974 ) (93,157 ) Net sales to external customers $ 1,936,075 $ 179,258 $ 480,955 $ 2,596,288 Segment operating earnings $ 342,524 $ (15,118 ) $ 24,835 $ 352,241 Three Months Ended September 30, 2015 United States Canada Other Businesses Total Total net sales $ 2,039,488 $ 213,132 $ 354,692 $ 2,607,312 Intersegment net sales (73,393 ) (21 ) (998 ) (74,412 ) Net sales to external customers $ 1,966,095 $ 213,111 $ 353,694 $ 2,532,900 Segment operating earnings $ 359,414 $ 3,587 $ 14,260 $ 377,261 Nine Months Ended September 30, 2016 United States Canada Other Businesses Total Total net sales $ 5,973,044 $ 552,470 $ 1,401,429 $ 7,926,943 Intersegment net sales (257,101 ) (109 ) (3,239 ) (260,449 ) Net sales to external customers $ 5,715,943 $ 552,361 $ 1,398,190 $ 7,666,494 Segment operating earnings $ 1,023,318 $ (55,207 ) $ 76,343 $ 1,044,454 Nine Months Ended September 30, 2015 United States Canada Other Businesses Total Total net sales $ 6,041,576 $ 687,128 $ 971,389 $ 7,700,093 Intersegment net sales (201,978 ) (74 ) (2,915 ) (204,967 ) Net sales to external customers $ 5,839,598 $ 687,054 $ 968,474 $ 7,495,126 Segment operating earnings $ 1,095,036 $ 22,474 $ 38,943 $ 1,156,453 United States Canada Other Businesses Total Segment assets: September 30, 2016 $ 2,272,869 $ 304,080 $ 522,879 $ 3,099,828 December 31, 2015 $ 2,191,045 $ 317,504 $ 507,116 $ 3,015,665 |
Schedule of Reconciliation of Operating Earnings from Segment to Consolidated | Following are reconciliations of segment information with the consolidated totals per the financial statements (in thousands of dollars): Three Months Ended September 30, Nine Months Ended September 30, 2016 2015 2016 2015 Operating earnings: Total operating earnings for operating segments $ 352,241 $ 377,261 1,044,454 $ 1,156,453 Unallocated expenses and eliminations (29,654 ) (36,532 ) (99,185 ) (107,759 ) Total consolidated operating earnings $ 322,587 $ 340,729 945,269 $ 1,048,694 |
Schedule of Reconciliation of Assets from Segment to Consolidated | September 30, 2016 December 31, 2015 Assets: Total assets for operating segments $ 3,099,828 $ 3,015,665 Other current and non-current assets 2,652,146 2,624,966 Unallocated assets 133,535 217,124 Total consolidated assets $ 5,885,509 $ 5,857,755 |
EARNINGS PER SHARE (Tables)
EARNINGS PER SHARE (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Earnings Per Share [Abstract] | |
Schedule of Computation of Basic and Diluted Earnings per Share under Two-Class Method | The following table sets forth the computation of basic and diluted earnings per share under the two-class method (in thousands of dollars, except for share and per share amounts): Three Months Ended Nine Months Ended September 30, September 30, 2016 2015 2016 2015 Net earnings attributable to W.W. Grainger, Inc. as reported $ 185,873 $ 192,201 $ 545,262 $ 623,764 Distributed earnings available to participating securities (547 ) (676 ) (1,749 ) (2,187 ) Undistributed earnings available to participating securities (1,085 ) (1,138 ) (3,179 ) (4,012 ) Numerator for basic earnings per share – Undistributed and distributed earnings available to common shareholders 184,241 190,387 540,334 617,565 Undistributed earnings allocated to participating securities 1,085 1,138 3,179 4,012 Undistributed earnings reallocated to participating securities (1,078 ) (1,129 ) (3,157 ) (3,972 ) Numerator for diluted earnings per share – Undistributed and distributed earnings available to common shareholders $ 184,248 $ 190,396 $ 540,356 $ 617,605 Denominator for basic earnings per share – weighted average shares 60,016,550 64,720,037 60,854,548 66,188,236 Effect of dilutive securities 399,601 569,107 413,571 661,530 Denominator for diluted earnings per share – weighted average shares adjusted for dilutive securities 60,416,151 65,289,144 61,268,119 66,849,766 Earnings per share two-class method Basic $ 3.07 $ 2.94 $ 8.88 $ 9.33 Diluted $ 3.05 $ 2.92 $ 8.82 $ 9.24 |
DIVIDEND - Narrative (Details)
DIVIDEND - Narrative (Details) | Oct. 26, 2016$ / shares |
Subsequent Event [Member] | |
Subsequent Event [Line Items] | |
Dividend declared (in dollars per share) | $ 1.22 |
ACQUISITION - Narrative (Detail
ACQUISITION - Narrative (Details) - Cromwell [Member] £ in Millions, $ in Millions | Sep. 01, 2015GBP (£) | Sep. 01, 2015USD ($) | Aug. 31, 2015GBP (£) | Aug. 31, 2015USD ($) |
Business Acquisition [Line Items] | ||||
Sales reported by acquired entity for last fiscal year | £ 285 | $ 437 | ||
Acquisition price | £ 310 | $ 464 | ||
Goodwill and intangibles recorded | $ 355 |
GOODWILL - Narrative (Details)
GOODWILL - Narrative (Details) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Segment Reporting Information [Line Items] | ||
Goodwill and Intangible assets | $ 1,000,000 | |
Goodwill and Intangible assets, percent of total assets | 17.00% | |
Goodwill | $ 594,511 | $ 582,336 |
Fabory [Member] | ||
Segment Reporting Information [Line Items] | ||
Goodwill | $ 106,000 | |
Percentage of fair value in excess of carrying amount | 15.00% |
RESTRUCTURING RESERVES - Narrat
RESTRUCTURING RESERVES - Narrative (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2016 | Dec. 31, 2015 | |
Accrued compensation and benefits [Member] | |||
Restructuring Cost and Reserve [Line Items] | |||
Restructuring reserve | $ 29 | $ 29 | $ 24 |
Warehousing, marketing and administrative expense [Member] | |||
Restructuring Cost and Reserve [Line Items] | |||
Severance costs | $ 7 | $ 32 |
SHORT-TERM AND LONG-TERM DEBT -
SHORT-TERM AND LONG-TERM DEBT - Schedule of Short-Term Debt Instruments (Details) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Short-term Debt [Line Items] | ||
Outstanding short-term debt | $ 387,684 | $ 353,072 |
Line of Credit [Member] | ||
Short-term Debt [Line Items] | ||
Outstanding short-term debt | 17,797 | 23,072 |
Commercial Paper [Member] | ||
Short-term Debt [Line Items] | ||
Outstanding short-term debt | $ 369,887 | $ 330,000 |
SHORT-TERM AND LONG-TERM DEBT30
SHORT-TERM AND LONG-TERM DEBT - Schedule of Long-Term Debt Instruments (Details) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Debt Instrument [Line Items] | ||
Other | $ 23,367 | $ 25,991 |
Debt issuance costs and discounts | (19,447) | (12,947) |
Less current maturities | (16,488) | (247,346) |
Long-term debt, excluding current maturities | 1,874,132 | 1,388,414 |
U.S. dollar term loan [Member] | ||
Debt Instrument [Line Items] | ||
Long-term debt | 0 | 114,614 |
British pound term loan [Member] | ||
Debt Instrument [Line Items] | ||
Long-term debt | 197,220 | 235,808 |
Euro term loan [Member] | ||
Debt Instrument [Line Items] | ||
Long-term debt | 123,618 | 114,030 |
Yen term loans [Member] | ||
Debt Instrument [Line Items] | ||
Long-term debt | 59,212 | 49,875 |
Canadian dollar revolving credit facility [Member] | ||
Debt Instrument [Line Items] | ||
Long-term debt | 106,650 | 108,389 |
Unsecured Senior Notes, 4.60% due 2045 [Member] | Senior notes [Member] | ||
Debt Instrument [Line Items] | ||
Long-term debt | 1,000,000 | 1,000,000 |
Unsecured Senior Notes, 3.75% due 2046 [Member] | Senior notes [Member] | ||
Debt Instrument [Line Items] | ||
Long-term debt | $ 400,000 | $ 0 |
SHORT-TERM AND LONG-TERM DEBT31
SHORT-TERM AND LONG-TERM DEBT - Narrative (Details) | Aug. 31, 2016EUR (€) | May 16, 2016USD ($) | Jun. 11, 2015USD ($) | Sep. 30, 2016USD ($) | Sep. 30, 2015USD ($) | Dec. 31, 2015USD ($) |
Debt Instrument [Line Items] | ||||||
Repayments of long-term debt | $ 257,109,000 | $ 33,938,000 | ||||
Euro term loan [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Repayments of long-term debt | € | € 102,500,000 | |||||
August 2016 Credit Agreement [Member] | Term Loan [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Debt instrument, term | 5 years | |||||
Face amount of debt | € | € 110,000,000 | |||||
Effective interest rate | 0.45% | |||||
Debt issuance cost | € | € 500,000 | |||||
August 2016 Credit Agreement [Member] | Term Loan [Member] | Euro Interbank Offered Rate (EURIBOR) [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Basis points | 0.45% | |||||
August 2016 Credit Agreement [Member] | Revolving Credit Facility [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Maximum borrowing capacity | € | € 20,000,000 | |||||
August 2016 Credit Agreement [Member] | Revolving Credit Facility [Member] | Euro Interbank Offered Rate (EURIBOR) [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Basis points | 0.35% | |||||
Unsecured Senior Notes, 3.75% due 2046 [Member] | Senior Notes [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Face amount of debt | $ 400,000,000 | |||||
Basis points | 0.20% | |||||
Debt issuance cost | $ 7,000,000 | |||||
Stated interest rate | 3.75% | |||||
Debt redemption percent | 100.00% | |||||
Unsecured Senior Notes, 4.60% due 2045 [Member] | Senior Notes [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Face amount of debt | $ 1,000,000,000 | |||||
Basis points | 0.25% | |||||
Debt issuance cost | $ 11,000,000 | |||||
Stated interest rate | 4.60% | |||||
Debt redemption percent | 100.00% | |||||
Debt, fair value | $ 1,200,000,000 | $ 1,000,000,000 |
EQUITY METHOD INVESTMENT - Narr
EQUITY METHOD INVESTMENT - Narrative (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | |
Equity Method Investments and Joint Ventures [Abstract] | |||||
Investment balance | $ 6,000 | $ 6,000 | $ 9,000 | ||
Pre-tax loss from equity method investment | $ 10,333 | $ 5,972 | 22,147 | $ 10,273 | |
Income tax benefit | 26,000 | ||||
After-tax income from equity method investment | $ 4,000 |
EMPLOYEE BENEFITS - POSTRETIR33
EMPLOYEE BENEFITS - POSTRETIREMENT - Schedule of Net Periodic Benefit Costs Charged to Operating Expenses (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Defined Benefit Plans and Other Postretirement Benefit Plans Disclosures [Abstract] | ||||
Service cost | $ 2,059 | $ 2,532 | $ 6,178 | $ 7,596 |
Interest cost | 2,464 | 2,412 | 7,391 | 7,236 |
Expected return on assets | (2,528) | (2,594) | (7,584) | (7,782) |
Amortization of unrecognized losses | 32 | 378 | 96 | 1,134 |
Amortization of prior service credits | (1,672) | (1,700) | (5,016) | (5,100) |
Net periodic benefit costs | $ 355 | $ 1,028 | $ 1,065 | $ 3,084 |
SEGMENT INFORMATION - Narrative
SEGMENT INFORMATION - Narrative (Details) $ in Millions | 3 Months Ended | 9 Months Ended |
Sep. 30, 2016USD ($) | Sep. 30, 2016USD ($)segment | |
Segment Reporting Information [Line Items] | ||
Number of reportable segments | segment | 2 | |
Service revenues, percent of total revenues | 1.00% | |
United States [Member] | ||
Segment Reporting Information [Line Items] | ||
Intersegment sales increase | $ | $ 19 | $ 55 |
SEGMENT INFORMATION - Summary o
SEGMENT INFORMATION - Summary of Segment Results (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | |
Summarized Information | |||||
Net sales to external customers | $ 2,596,288 | $ 2,532,900 | $ 7,666,494 | $ 7,495,126 | |
Total consolidated operating earnings | 322,587 | 340,729 | 945,269 | 1,048,694 | |
Total assets | 5,885,509 | 5,885,509 | $ 5,857,755 | ||
United States [Member] | |||||
Summarized Information | |||||
Net sales to external customers | 1,936,075 | 1,966,095 | 5,715,943 | 5,839,598 | |
Total assets | 2,272,869 | 2,272,869 | 2,191,045 | ||
Canada [Member] | |||||
Summarized Information | |||||
Net sales to external customers | 179,258 | 213,111 | 552,361 | 687,054 | |
Total assets | 304,080 | 304,080 | 317,504 | ||
Other Businesses [Member] | |||||
Summarized Information | |||||
Net sales to external customers | 480,955 | 353,694 | 1,398,190 | 968,474 | |
Total assets | 522,879 | 522,879 | 507,116 | ||
Segment Balances Before Intersegment Eliminations and Consolidation Reconciling Items [Member] | |||||
Summarized Information | |||||
Net sales to external customers | 2,689,445 | 2,607,312 | 7,926,943 | 7,700,093 | |
Total consolidated operating earnings | 352,241 | 377,261 | 1,044,454 | 1,156,453 | |
Total assets | 3,099,828 | 3,099,828 | $ 3,015,665 | ||
Segment Balances Before Intersegment Eliminations and Consolidation Reconciling Items [Member] | United States [Member] | |||||
Summarized Information | |||||
Net sales to external customers | 2,028,235 | 2,039,488 | 5,973,044 | 6,041,576 | |
Total consolidated operating earnings | 342,524 | 359,414 | 1,023,318 | 1,095,036 | |
Segment Balances Before Intersegment Eliminations and Consolidation Reconciling Items [Member] | Canada [Member] | |||||
Summarized Information | |||||
Net sales to external customers | 179,281 | 213,132 | 552,470 | 687,128 | |
Total consolidated operating earnings | (15,118) | 3,587 | (55,207) | 22,474 | |
Segment Balances Before Intersegment Eliminations and Consolidation Reconciling Items [Member] | Other Businesses [Member] | |||||
Summarized Information | |||||
Net sales to external customers | 481,929 | 354,692 | 1,401,429 | 971,389 | |
Total consolidated operating earnings | 24,835 | 14,260 | 76,343 | 38,943 | |
Intersegment Eliminations [Member] | |||||
Summarized Information | |||||
Net sales to external customers | (93,157) | (74,412) | (260,449) | (204,967) | |
Intersegment Eliminations [Member] | United States [Member] | |||||
Summarized Information | |||||
Net sales to external customers | (92,160) | (73,393) | (257,101) | (201,978) | |
Intersegment Eliminations [Member] | Canada [Member] | |||||
Summarized Information | |||||
Net sales to external customers | (23) | (21) | (109) | (74) | |
Intersegment Eliminations [Member] | Other Businesses [Member] | |||||
Summarized Information | |||||
Net sales to external customers | $ (974) | $ (998) | $ (3,239) | $ (2,915) |
SEGMENT INFORMATION - Schedule
SEGMENT INFORMATION - Schedule of Reconciliation of Operating Earnings from Segment to Consolidated (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Segment Reporting Information [Line Items] | ||||
Total consolidated operating earnings | $ 322,587 | $ 340,729 | $ 945,269 | $ 1,048,694 |
Segment Balances Before Intersegment Eliminations and Consolidation Reconciling Items [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Total consolidated operating earnings | 352,241 | 377,261 | 1,044,454 | 1,156,453 |
Eliminations and Unallocated in Consolidation [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Total consolidated operating earnings | $ (29,654) | $ (36,532) | $ (99,185) | $ (107,759) |
SEGMENT INFORMATION - Schedul37
SEGMENT INFORMATION - Schedule of Reconciliation of Assets from Segment to Consolidated (Details) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Segment Reporting Information [Line Items] | ||
Total consolidated assets | $ 5,885,509 | $ 5,857,755 |
Segment Balances Before Intersegment Eliminations and Consolidation Reconciling Items [Member] | ||
Segment Reporting Information [Line Items] | ||
Total consolidated assets | 3,099,828 | 3,015,665 |
Segment Reconciling Items [Member] | ||
Segment Reporting Information [Line Items] | ||
Total consolidated assets | 2,652,146 | 2,624,966 |
Eliminations and Unallocated in Consolidation [Member] | ||
Segment Reporting Information [Line Items] | ||
Total consolidated assets | $ 133,535 | $ 217,124 |
EARNINGS PER SHARE - Schedule o
EARNINGS PER SHARE - Schedule of Computation of Basic and Diluted Earnings per Share under Two-Class Method (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Earnings Per Share [Abstract] | ||||
Net earnings attributable to W.W. Grainger, Inc. as reported | $ 185,873 | $ 192,201 | $ 545,262 | $ 623,764 |
Distributed earnings available to participating securities | (547) | (676) | (1,749) | (2,187) |
Undistributed earnings available to participating securities | (1,085) | (1,138) | (3,179) | (4,012) |
Numerator for basic earnings per share – Undistributed and distributed earnings available to common shareholders | 184,241 | 190,387 | 540,334 | 617,565 |
Undistributed earnings allocated to participating securities | 1,085 | 1,138 | 3,179 | 4,012 |
Undistributed earnings reallocated to participating securities | (1,078) | (1,129) | (3,157) | (3,972) |
Numerator for diluted earnings per share – Undistributed and distributed earnings available to common shareholders | $ 184,248 | $ 190,396 | $ 540,356 | $ 617,605 |
Denominator for basic earnings per share - weighted average shares (in shares) | 60,016,550 | 64,720,037 | 60,854,548 | 66,188,236 |
Effect of dilutive securities (in shares) | 399,601 | 569,107 | 413,571 | 661,530 |
Denominator for diluted earnings per share - weighted average shares adjusted for dilutive securities (in shares) | 60,416,151 | 65,289,144 | 61,268,119 | 66,849,766 |
Basic (in dollars per share) | $ 3.07 | $ 2.94 | $ 8.88 | $ 9.33 |
Diluted (in dollars per share) | $ 3.05 | $ 2.92 | $ 8.82 | $ 9.24 |