COVER
COVER | 9 Months Ended |
Sep. 30, 2020shares | |
Cover [Abstract] | |
Document Type | 10-Q |
Document Quarterly Report | true |
Document Period End Date | Sep. 30, 2020 |
Document Transition Report | false |
Entity File Number | 1-5684 |
Entity Registrant Name | W.W. Grainger, Inc. |
Entity Incorporation, State or Country Code | IL |
Entity Tax Identification Number | 36-1150280 |
Entity Address, Address Line One | 100 Grainger Parkway, |
Entity Address, City or Town | Lake Forest, |
Entity Address, State or Province | IL |
Entity Address, Postal Zip Code | 60045-5201 |
City Area Code | 847 |
Local Phone Number | 535-1000 |
Title of 12(b) Security | Common Stock |
Trading Symbol | GWW |
Security Exchange Name | NYSE |
Entity Current Reporting Status | Yes |
Entity Interactive Data Current | Yes |
Entity Filer Category | Large Accelerated Filer |
Entity Small Business | false |
Entity Emerging Growth Company | false |
Entity Shell Company | false |
Entity Common Stock, Shares Outstanding | 53,668,050 |
Entity Central Index Key | 0000277135 |
Current Fiscal Year End Date | --12-31 |
Document Fiscal Year Focus | 2020 |
Document Fiscal Period Focus | Q3 |
Amendment Flag | false |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS - USD ($) shares in Millions, $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Income Statement [Abstract] | ||||
Net sales | $ 3,018 | $ 2,947 | $ 8,856 | $ 8,639 |
Cost of goods sold | 1,944 | 1,848 | 5,645 | 5,324 |
Gross profit | 1,074 | 1,099 | 3,211 | 3,315 |
Selling, general and administrative expenses | 694 | 761 | 2,467 | 2,234 |
Operating earnings | 380 | 338 | 744 | 1,081 |
Other (income) expense: | ||||
Interest expense, net | 23 | 20 | 72 | 60 |
Other, net | (5) | (4) | (16) | (18) |
Total other expense, net | 18 | 16 | 56 | 42 |
Earnings before income taxes | 362 | 322 | 688 | 1,039 |
Income tax provision | 106 | 78 | 118 | 261 |
Net earnings | 256 | 244 | 570 | 778 |
Less: Net earnings attributable to noncontrolling interest | 16 | 11 | 43 | 32 |
Net earnings attributable to W.W. Grainger, Inc. | $ 240 | $ 233 | $ 527 | $ 746 |
Earnings per share: | ||||
Basic (in dollars per share) | $ 4.43 | $ 4.27 | $ 9.74 | $ 13.46 |
Diluted (in dollars per share) | $ 4.41 | $ 4.25 | $ 9.70 | $ 13.40 |
Weighted average number of shares outstanding: | ||||
Basic (in shares) | 53.6 | 54.1 | 53.6 | 55 |
Diluted (in shares) | 53.9 | 54.4 | 53.8 | 55.2 |
Cash dividends paid per share (in dollars per share) | $ 1.53 | $ 1.44 | $ 4.41 | $ 4.24 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Statement of Comprehensive Income [Abstract] | ||||
Net earnings | $ 256 | $ 244 | $ 570 | $ 778 |
Other comprehensive earnings (losses): | ||||
Foreign currency translation adjustments, net of reclassification | 24 | (17) | 30 | 6 |
Postretirement benefit plan reclassification, net of tax benefit of $1, $1, $3, and $3, respectively | (2) | (2) | (8) | (7) |
Other | 0 | 0 | 4 | 0 |
Total other comprehensive earnings (losses) | 22 | (19) | 26 | (1) |
Comprehensive earnings, net of tax | 278 | 225 | 596 | 777 |
Less: Comprehensive earnings (losses) attributable to noncontrolling interest | ||||
Net earnings | 16 | 11 | 43 | 32 |
Foreign currency translation adjustments | 5 | (1) | 6 | 2 |
Total comprehensive earnings (losses) attributable to noncontrolling interest | 21 | 10 | 49 | 34 |
Comprehensive earnings attributable to W.W. Grainger, Inc. | $ 257 | $ 215 | $ 547 | $ 743 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS (PARENTHETICAL) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Statement of Comprehensive Income [Abstract] | ||||
Postretirement benefit plan reclassification, net of tax benefit | $ 1 | $ 1 | $ 3 | $ 3 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Millions | Sep. 30, 2020 | Dec. 31, 2019 |
CURRENT ASSETS | ||
Cash and cash equivalents | $ 859 | $ 360 |
Accounts receivable (less allowances for doubtful accounts of $26 and $21, respectively) | 1,485 | 1,425 |
Inventories - net | 1,780 | 1,655 |
Prepaid expenses and other current assets | 120 | 104 |
Prepaid income taxes | 29 | 11 |
Total current assets | 4,273 | 3,555 |
PROPERTY, BUILDINGS AND EQUIPMENT - NET | 1,394 | 1,400 |
DEFERRED INCOME TAXES | 11 | 11 |
GOODWILL | 369 | 429 |
INTANGIBLES - NET | 224 | 304 |
OTHER ASSETS | 312 | 306 |
TOTAL ASSETS | 6,583 | 6,005 |
CURRENT LIABILITIES | ||
Short-term debt | 0 | 55 |
Current maturities of long-term debt | 12 | 246 |
Trade accounts payable | 836 | 719 |
Accrued compensation and benefits | 201 | 228 |
Accrued contributions to employees’ profit sharing plans | 48 | 85 |
Accrued expenses | 324 | 318 |
Income taxes payable | 20 | 27 |
Total current liabilities | 1,441 | 1,678 |
LONG-TERM DEBT (less current maturities) | 2,388 | 1,914 |
DEFERRED INCOME TAXES AND TAX UNCERTAINTIES | 112 | 106 |
OTHER NON-CURRENT LIABILITIES | 267 | 247 |
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 | 55 | 55 |
Additional contributed capital | 1,214 | 1,182 |
Retained earnings | 8,694 | 8,405 |
Accumulated other comprehensive losses | (134) | (154) |
Treasury Stock, at cost - 55,991,169 and 55,971,691 shares, respectively | (7,698) | (7,633) |
Total W.W. Grainger, Inc. shareholders’ equity | 2,131 | 1,855 |
Noncontrolling interest | 244 | 205 |
Total shareholders' equity | 2,375 | 2,060 |
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ 6,583 | $ 6,005 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (PARENTHETICAL) - USD ($) $ in Millions | Sep. 30, 2020 | Dec. 31, 2019 |
Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts | $ 26 | $ 21 |
Cumulative preferred stock, par value (in dollars per share) | $ 5 | $ 5 |
Cumulative preferred stock, shares authorized | 12,000,000 | 12,000,000 |
Cumulative preferred stock, shares issued | 0 | 0 |
Cumulative preferred stock, shares outstanding | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.50 | $ 0.50 |
Common stock, shares authorized | 300,000,000 | 300,000,000 |
Common stock, shares issued | 109,659,219 | 109,659,219 |
Treasury stock, shares at cost | 55,991,169 | 55,971,691 |
CONDENSED CONSOLIDATED STATEM_4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Millions | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net earnings | $ 570 | $ 778 |
Provision for credit losses | 18 | 7 |
Deferred income taxes and tax uncertainties | 9 | 19 |
Depreciation and amortization | 137 | 171 |
Net losses (gains) from sales of assets and business divestitures | 104 | (5) |
Impairment of goodwill, intangibles and long-lived assets | 177 | 0 |
Stock-based compensation | 36 | 32 |
Subtotal | 481 | 224 |
Change in operating assets and liabilities: | ||
Accounts receivable | (145) | (119) |
Inventories | (222) | 18 |
Prepaid expenses and other assets | (29) | (15) |
Trade accounts payable | 145 | 50 |
Accrued liabilities | (13) | (137) |
Income taxes - net | (19) | (16) |
Other non-current liabilities | 19 | (13) |
Subtotal | (264) | (232) |
Net cash provided by operating activities | 787 | 770 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Additions to property, buildings, equipment and intangibles | (152) | (163) |
Proceeds from sales of assets and business divestitures | 22 | 16 |
Other | (2) | 2 |
Net cash used in investing activities | (132) | (145) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Borrowings under lines of credit | 12 | 22 |
Payments against lines of credit | (65) | (18) |
Proceeds from Issuance of Long-term Debt | 1,583 | 0 |
Payments of long-term debt | (1,361) | (48) |
Proceeds from stock options exercised | 47 | 19 |
Payments for employee taxes withheld from stock awards | (16) | (10) |
Purchases of treasury stock | (101) | (600) |
Cash dividends paid | (246) | (242) |
Other - net | 0 | 2 |
Net cash used in financing activities | (147) | (875) |
Exchange rate effect on cash and cash equivalents | (9) | (2) |
NET CHANGE IN CASH AND CASH EQUIVALENTS | 499 | (252) |
Cash and cash equivalents at beginning of year | 360 | 538 |
Cash and cash equivalents at end of period | $ 859 | $ 286 |
CONDENSED CONSOLIDATED STATEM_5
CONDENSED CONSOLIDATED STATEMENT OF SHAREDHOLDERS' EQUITY CONDENSED CONSOLIDATED STATEMENT OF SHAREDHOLDERS' EQUITY - USD ($) $ in Millions | Total | Common Stock [Member] | Additional Contributed Capital [Member] | Retained Earnings [Member] | Accumulated Other Comprehensive Earnings (Losses) | Treasury Stock [Member] | Noncontrolling Interest [Member] |
Beginning balance at Dec. 31, 2018 | $ 2,093 | $ 55 | $ 1,134 | $ 7,869 | $ (171) | $ (6,966) | $ 172 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Stock-based compensation | 6 | 3 | 3 | ||||
Purchases of treasury stock | (135) | (135) | |||||
Net earnings | 262 | 253 | 9 | ||||
Other comprehensive (losses) earnings | 1 | 3 | (2) | ||||
Capital contribution | 2 | 2 | |||||
Cash dividends paid | (77) | (77) | |||||
Ending balance at Mar. 31, 2019 | 2,152 | 55 | 1,137 | 8,045 | (168) | (7,098) | 181 |
Beginning balance at Dec. 31, 2018 | 2,093 | 55 | 1,134 | 7,869 | (171) | (6,966) | 172 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Net earnings | 778 | ||||||
Other comprehensive (losses) earnings | (1) | ||||||
Ending balance at Sep. 30, 2019 | 2,072 | 55 | 1,161 | 8,380 | (174) | (7,551) | 201 |
Beginning balance at Mar. 31, 2019 | 2,152 | 55 | 1,137 | 8,045 | (168) | (7,098) | 181 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Stock-based compensation | 24 | 15 | 9 | ||||
Purchases of treasury stock | (265) | (265) | |||||
Net earnings | 272 | 260 | 12 | ||||
Other comprehensive (losses) earnings | 17 | 12 | 5 | ||||
Cash dividends paid | (86) | (79) | (7) | ||||
Ending balance at Jun. 30, 2019 | 2,114 | 55 | 1,152 | 8,226 | (156) | (7,354) | 191 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Stock-based compensation | 12 | 9 | 3 | ||||
Purchases of treasury stock | (200) | (200) | |||||
Net earnings | 244 | 233 | 11 | ||||
Other comprehensive (losses) earnings | (19) | (18) | (1) | ||||
Cash dividends paid | (79) | (79) | |||||
Ending balance at Sep. 30, 2019 | 2,072 | 55 | 1,161 | 8,380 | (174) | (7,551) | 201 |
Beginning balance at Dec. 31, 2019 | 2,060 | 55 | 1,182 | 8,405 | (154) | (7,633) | 205 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Stock-based compensation | 23 | 10 | 13 | ||||
Purchases of treasury stock | (100) | (100) | |||||
Net earnings | 185 | 173 | 12 | ||||
Other comprehensive (losses) earnings | (60) | (63) | 3 | ||||
Cash dividends paid | (78) | (78) | |||||
Ending balance at Mar. 31, 2020 | 2,030 | 55 | 1,192 | 8,500 | (217) | (7,720) | 220 |
Beginning balance at Dec. 31, 2019 | 2,060 | 55 | 1,182 | 8,405 | (154) | (7,633) | 205 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Net earnings | 570 | ||||||
Other comprehensive (losses) earnings | 26 | ||||||
Ending balance at Sep. 30, 2020 | 2,375 | 55 | 1,214 | 8,694 | (134) | (7,698) | 244 |
Beginning balance at Mar. 31, 2020 | 2,030 | 55 | 1,192 | 8,500 | (217) | (7,720) | 220 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Stock-based compensation | 17 | 6 | 11 | ||||
Purchases of treasury stock | (1) | (1) | |||||
Net earnings | 129 | 114 | 15 | ||||
Other comprehensive (losses) earnings | 64 | 66 | (2) | ||||
Cash dividends paid | (87) | (78) | (9) | ||||
Ending balance at Jun. 30, 2020 | 2,152 | 55 | 1,198 | 8,536 | (151) | (7,709) | 223 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Stock-based compensation | 27 | 16 | 11 | ||||
Net earnings | 256 | 240 | 16 | ||||
Other comprehensive (losses) earnings | 22 | 17 | 5 | ||||
Cash dividends paid | (82) | (82) | |||||
Ending balance at Sep. 30, 2020 | $ 2,375 | $ 55 | $ 1,214 | $ 8,694 | $ (134) | $ (7,698) | $ 244 |
CONDENSED CONSOLIDATED STATEM_6
CONDENSED CONSOLIDATED STATEMENT OF SHAREDHOLDERS' EQUITY CONDENSED CONSOLIDATED STATEMENT OF SHAREDHOLDERS' EQUITY (PARENTHETICAL) - $ / shares | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Statement of Stockholders' Equity (Parentheticals) [Abstract] | ||||
Cash dividends paid per share (in dollars per share) | $ 1.53 | $ 1.44 | $ 4.41 | $ 4.24 |
BACKGROUND AND BASIS OF PRESENT
BACKGROUND AND BASIS OF PRESENTATION | 9 Months Ended |
Sep. 30, 2020 | |
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, business-to-business distributor of maintenance, repair and operating (MRO) products and services with operations primarily in North America, Japan and Europe. In this report, the words “Company” or “Grainger” mean W.W. Grainger, Inc. and its subsidiaries, except where the context makes it clear that the reference is only to W.W. Grainger, Inc. itself and not its subsidiaries. Consistent with the Company's strategic focus on broad line MRO distribution in key markets, Grainger divested the Fabory business in Europe (Fabory) on June 30, 2020 and the China business (China) on August 21, 2020. Accordingly, the Company's condensed consolidated statements of earnings, comprehensive earnings and cash flows and related notes include Fabory and China results through the respective dates of divestiture. The proceeds from these divestitures will be used to fund general corporate needs. During the second and third quarters of 2020, Grainger recognized a net loss of approximately $109 million and gain of $5 million (presented within Selling, general and administrative expenses (SG&A)) as a result of the Fabory and China divestitures, respectively, which included net accumulated foreign currency translation losses of $45 million, that were reclassified from Accumulated other comprehensive earnings (losses) (AOCE) to SG&A. The Company's Condensed Consolidated Financial Statements (Financial Statements) and the related notes are unaudited and should be read in conjunction with the consolidated financial statements and associated notes for the year ended December 31, 2019 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) on February 20, 2020 (the 2019 Form 10-K). The Condensed Consolidated Balance Sheet as of December 31, 2019 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 (U.S.) 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 in this report. |
UPDATE TO SIGNIFICANT ACCOUNTIN
UPDATE TO SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended |
Sep. 30, 2020 | |
UPDATE TO SIGNIFICANT ACCOUNTING POLICIES [Abstract] | |
UPDATE TO SIGNIFICANT ACCOUNTING POLICIES | UPDATE TO SIGNIFICANT ACCOUNTING POLICIESOther than the implemented accounting policies related to the allowances for credit losses per the Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) 2016-13 (see Notes 3 and 5 to the Financial Statements), change in depreciation estimates (see Note 6 to the Financial Statements) and accounting for derivative instruments (see Note 9 to the Financial Statements), there have been no material changes to the Company’s significant accounting policies disclosed in the 2019 Form 10-K, Part II, Item 8. |
NEW ACCOUNTING STANDARDS
NEW ACCOUNTING STANDARDS | 9 Months Ended |
Sep. 30, 2020 | |
Accounting Policies [Abstract] | |
NEW ACCOUNTING STANDARDS | NEW ACCOUNTING STANDARDS In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments as modified by subsequently issued ASUs 2018-19, 2019-04, 2019-05, 2019-11 and 2020-02. This ASU requires estimating all expected credit losses for certain types of financial instruments, including trade receivables, held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. The Company adopted this ASU effective January 1, 2020. While the adoption of this ASU did not have a material impact on the Company's Financial Statements, it required changes to the Company’s process of estimating expected credit losses on trade receivables . See Note 5 to the Financial Statements for further information on the Company’s allowance for credit losses. In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This ASU clarifies and simplifies accounting for income taxes by eliminating certain exceptions for intraperiod tax allocation principles, the methodology for calculating income tax rates in an interim period, and recognition of deferred taxes for outside basis differences in an investment, among other updates. The effective date of this ASU is for fiscal years and interim periods beginning after December 15, 2020. The Company is currently evaluating the potential impact of this ASU on the Financial Statements. In January 2020, the FASB issued ASU 2020-01, Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815), Clarifying the Interactions between Topic 321, Topic 323 and Topic 815 . This ASU simplifies the understanding and application of the codification topics by eliminating inconsistencies and providing clarifications. The effective date of this ASU is for fiscal years and interim periods beginning after December 15, 2020. The Company is currently evaluating the potential impact of this ASU on the Financial Statements. In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting . This update provides optional expedients and exceptions for applying generally accepted accounting principles to certain contract modifications and hedging relationships that reference London Inter-bank Offered Rate (LIBOR) or another reference rate expected to be discontinued. The guidance is effective upon issuance and generally can be applied through December 31, 2022. The Company is currently evaluating the potential impact of this ASU on the Financial Statements. |
REVENUE
REVENUE | 9 Months Ended |
Sep. 30, 2020 | |
Revenue from Contract with Customer [Abstract] | |
REVENUE | REVENUE Company revenue is primarily comprised of MRO product sales and related activities, such as freight and services. Total service revenue is not material and accounted for approximately 1% of the Company's revenue for the three and nine months ended September 30, 2020 and 2019, respectively. Grainger serves a large number of customers in diverse industries, which are subject to different economic and market specific factors. The Company's presentation of revenue by industry most reasonably depicts how the nature, amount, timing and uncertainty of Company revenue and cash flows are affected by economic and market specific factors. The following table presents the Company's percentage of revenue by reportable segment and by major customer industry: Three Months Ended September 30, 2020 2019 U.S. Canada Total Company (2) U.S. Canada Total Company (2) Government 23 % 8 % 17 % 20 % 5 % 15 % Heavy Manufacturing 15 % 19 % 15 % 18 % 20 % 17 % Light Manufacturing 12 % 6 % 10 % 12 % 6 % 10 % Transportation 5 % 8 % 4 % 6 % 8 % 5 % Healthcare 9 % — % 7 % 7 % — % 5 % Commercial 8 % 11 % 6 % 10 % 9 % 8 % Retail/Wholesale 10 % 3 % 8 % 9 % 4 % 7 % Contractors 9 % 11 % 7 % 9 % 11 % 8 % Natural Resources 2 % 29 % 3 % 3 % 33 % 4 % Other (1) 7 % 5 % 23 % 6 % 4 % 21 % Total 100 % 100 % 100 % 100 % 100 % 100 % Percent of Total Company Revenue 73 % 4 % 100 % 73 % 4 % 100 % Nine Months Ended September 30, 2020 2019 U.S. Canada Total Company (2) U.S. Canada Total Company (2) Government 22 % 9 % 16 % 19 % 6 % 14 % Heavy Manufacturing 16 % 18 % 15 % 19 % 20 % 17 % Light Manufacturing 13 % 6 % 10 % 13 % 6 % 11 % Transportation 5 % 9 % 5 % 5 % 8 % 5 % Healthcare 10 % — % 7 % 7 % — % 5 % Commercial 8 % 10 % 7 % 10 % 9 % 8 % Retail/Wholesale 10 % 4 % 8 % 8 % 4 % 7 % Contractors 9 % 10 % 7 % 10 % 11 % 8 % Natural Resources 2 % 29 % 3 % 3 % 32 % 4 % Other (1) 5 % 5 % 22 % 6 % 4 % 21 % Total 100 % 100 % 100 % 100 % 100 % 100 % Percent of Total Company Revenue 73 % 4 % 100 % 73 % 5 % 100 % (1) Other category primarily includes revenue from individual customers not aligned to a major industry segment, including small businesses and consumers, and intersegment net sales. (2) Total Company includes other businesses, which include the Company's endless assortment businesses and smaller international high-touch businesses and accounts for approximately 23% of revenue for the three and nine months ended September 30, 2020 and 23% and 22% of revenue for the three and nine months ended September 30, 2019 , respectively. |
ACCOUNTS RECEIVABLE AND ALLOWAN
ACCOUNTS RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES | 9 Months Ended |
Sep. 30, 2020 | |
ACCOUNTS RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES [Abstract] | |
ACCOUNTS RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES | ACCOUNTS RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES The Company’s accounts receivable arise primarily from sales on credit to customers. The Company establishes an allowance for credit losses to present the net amount of accounts receivable expected to be collected. The allowance is determined by using the loss-rate method, which requires an estimation of loss rates based upon historical loss experience adjusted for factors that are relevant to determining the expected collectability of accounts receivable. Some of these factors include macroeconomic conditions that correlate with historical loss experience, delinquency trends, aging behavior of receivables and credit and liquidity quality indicators for industry groups, customer classes or individual customers. |
PROPERTY, BUILDINGS AND EQUIPME
PROPERTY, BUILDINGS AND EQUIPMENT | 9 Months Ended |
Sep. 30, 2020 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY, BUILDINGS AND EQUIPMENT | PROPERTY, BUILDINGS AND EQUIPMENT Property, buildings and equipment consisted of the following (in millions of dollars): As of September 30, 2020 December 31, 2019 Land $ 331 $ 332 Building, structures and improvements 1,321 1,329 Furniture, fixtures, machinery and equipment 1,875 1,832 Property, buildings and equipment $ 3,527 $ 3,493 Less: Accumulated depreciation and amortization and impairment 2,133 2,093 Property, buildings and equipment, net $ 1,394 $ 1,400 Grainger has historically depreciated certain property, building, and equipment using both the declining balance and sum-of-the-years’ digits methods over estimated useful lives of approximately thirty years. In accordance with its policy, the Company periodically reviews information impacting the pattern of consumption for its capital assets and useful lives to ensure that estimates of depreciation expenses are appropriate. The Company’s investment in its supply chain infrastructure and technology triggered the review of these patterns of consumption. Pursuant to the review and effective January 1, 2020, the method of estimating depreciation for these assets was changed to the straight-line method and useful lives to forty $7 million and $22 million to depreciation expense for the three and nine months ended September 30, 2020, respectively. |
GOODWILL AND OTHER INTANGIBLE A
GOODWILL AND OTHER INTANGIBLE ASSETS | 9 Months Ended |
Sep. 30, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
GOODWILL AND OTHER INTANGIBLE ASSETS | GOODWILL AND INTANGIBLE ASSETS Canada Business Given the slowdowns in global oil markets and the economic repercussions from the COVID-19 pandemic in Canada, qualitative tests performed in the second quarter of 2020 indicated the existence of impairment indicators for the Canada business. As such, quantitative tests were performed to evaluate whether any impairment of goodwill was necessary. Based on the result of the quantitative tests, the Company concluded that there was no impairment of goodwill. The enterprise value of the Canada business at June 30, 2020 exceeded its carrying value by more than 25%, which is a 10 percentage point decrease since the date of the last quantitative test, December 31, 2019. Per the impairment test and respective sensitivity analysis, it was noted that an increase of approximately 3% in the pre-tax discount rate or approximately 1.5% decrease in revenue long-term growth rate projections would cause the Canada business enterprise value to fall to the level of its carrying value and thus trigger an impairment. During the quarter ended September 30, 2020, the Company performed qualitative goodwill and intangible asset assessments. The Company did not identify any significant events or changes in circumstances that indicated the existence of impairment indicators, as such quantitative assessments were not required. The Company will continue to monitor business plans for the Canada business throughout 2020 to determine the need for impairment evaluations. Changes in assumptions regarding future business performance and macroeconomic conditions, particularly the COVID-19 pandemic and global oil prices, may negatively impact demand generation over a long period, future cash flows and enterprise valuations, which could result in future impairments of goodwill and intangible assets for the Canada business. Fabory Business During the first quarter of 2020, the Company recorded impairment charges totaling $58 million attributable to all of Fabory's goodwill and tradenames. Concurrently, consistent with the circumstances leading to the goodwill and tradenames' impairment, the Company performed a recoverability and fair value test of Fabory’s long-lived assets, including property, buildings and equipment and customer lists and relationships and concluded to impair those assets. The impairments of these assets were driven primarily by revenue slowdown in key Fabory markets, gross profit pressures and a flat-to-declining operating margin against a backdrop of industrial sector declines across Europe, which was further amplified by the long-term implications of the COVID-19 pandemic, among other factors. The Company divested Fabory during the second quarter of 2020 (see Note 1 to the Financial Statements). Company The balances and changes in the carrying amount of Goodwill (net of cumulative goodwill impairments) by segment are as follows (in millions of dollars): United States Canada Other businesses Total Balance at January 1, 2019 $ 192 $ 120 $ 112 $ 424 Translation — 6 (1) 5 Balance at December 31, 2019 192 126 111 429 Impairment — — (58) (58) Translation — (3) 1 (2) Balance at September 30, 2020 $ 192 $ 123 $ 54 $ 369 The cumulative goodwill impairments as of September 30, 2020, were $137 million and consisted of $32 million in the Canada business and $105 million in Other businesses. There were no impairments to goodwill for the three and nine months ended September 30, 2020 related to current businesses in Grainger's portfolio. The balances in Intangible assets, net are as follows (in millions of dollars ): September 30, 2020 December 31, 2019 Weighted average life Gross carrying amount Accumulated amortization Net carrying amount Gross carrying amount Accumulated amortization Net carrying amount Customer lists and relationships 11.8 years $ 222 $ 168 $ 54 $ 401 $ 301 $ 100 Trademarks, trade names and other 14.2 years 35 21 14 36 20 16 Non-amortized trade names and other Indefinite 27 — 27 100 38 62 Capitalized software 4.2 years 665 536 129 626 500 126 Total intangible assets 6.7 years $ 949 $ 725 $ 224 $ 1,163 $ 859 $ 304 |
SHORT-TERM AND LONG-TERM DEBT
SHORT-TERM AND LONG-TERM DEBT | 9 Months Ended |
Sep. 30, 2020 | |
Debt Disclosure [Abstract] | |
SHORT-TERM AND LONG-TERM DEBT | SHORT-TERM AND LONG-TERM DEBT During the nine months ended September 30, 2020, the Company entered into several financing transactions: • In February 2020, the Company issued $500 million of unsecured 1.85% Senior Notes (1.85% Notes) and used the proceeds to repay the British pound term loan, Euro term loan and the Canadian dollar revolving credit facility, and to fund general working capital needs. • In connection with the 1.85% Notes, in February 2020, the Company entered into derivative instrument agreements to manage its risks associated with interest rates on the 1.85% Notes and foreign currency fluctuations related to the financing of international operations. See Note 9 to the Financial Statements for further discussion of these derivative instruments and the Company's hedge accounting policies. • In February 2020, the Company entered into a five-year unsecured credit agreement pursuant to which the Company may obtain loans in various currencies on a revolving basis in an aggregate amount not exceeding the U.S. Dollar equivalent of $1.25 billion ($1.25 billion credit facility), which may be increased from time to time up to $1.875 billion at the request of the Company, subject to approval from lenders and other customary conditions. The $1.25 billion credit facility replaced the Company's former $750 million unsecured revolving credit facility, originated in October 2017, which was scheduled to mature in October 2022. • In March 2020, the Company received approximately $1 billion after drawing down on its $1.25 billion credit facility as a proactive measure to increase its cash position and preserve financial flexibility in light of uncertainty resulting from the COVID-19 pandemic. During the third quarter of 2020, the Company repaid its $1 billion draw down on its $1.25 billion credit facility. • In August 2020, MonotaRO Co. LTD., the endless assortment business in Japan, entered into a ¥9 billion term loan agreement to fund technology investments and the expansion of its distribution center network. There was no short-term debt as of September 30, 2020. Short-term debt as of December 31, 2019 consisted of outstanding lines of credit of $55 million. Long-term debt, including current maturities and debt issuance costs and discounts, net, consisted of the following (in millions of dollars): As of September 30, 2020 As of December 31, 2019 Carrying Value Fair Value (3) Carrying Value Fair Value (3) 4.60% senior notes due 2045 $ 1,000 $ 1,287 $ 1,000 $ 1,194 3.75% senior notes due 2046 400 456 400 416 4.20% senior notes due 2047 400 489 400 449 1.85% senior notes due 2025 (1) 500 524 — — British pound term loan — — 170 170 Euro term loan — — 123 123 Japanese Yen term loan (2) 85 85 — — Canadian dollar revolving credit facility — — 46 46 Other 40 40 42 42 Subtotal (4) 2,425 2,881 2,181 2,440 Less: Current maturities (12) (12) (246) (246) Debt issuance costs and discounts, net of amortization (25) (25) (21) (21) Long-term debt (less current maturities) $ 2,388 $ 2,844 $ 1,914 $ 2,173 (1) The 1.85% Notes mature in February 2025 and they require no principal payments until the maturity date and interest is payable semi-annually on February 15 and August 15, beginning in August 2020. Prior to January 2025, the Company may redeem the 1.85% 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 1.85% Notes plus 10 basis points, together with accrued and unpaid interest, if any, at the redemption date. Additionally, if the Company experiences specific kinds of changes in control, it will be required to make an offer to purchase the 1.85% Notes at 101% of their principal amount plus accrued and unpaid interest, if any, at the date of purchase. On or after January 15, 2025, the Company may redeem the 1.85% 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 $5 million associated with the issuance of the 1.85% Notes, representing underwriting fees and other expenses, have been recorded as a contra-liability within Long-term debt and are being amortized to interest expense, net over the term of the 1.85% Notes. (2) The Japanese Yen term loan matures in 2024, payable over four equal semi-annual principal installments in 2023 and 2024, and bears average interest at 0.05%. (3) The estimated fair value of the Company’s senior 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 their variable interest rates. |
DERIVATIVE INSTRUMENTS
DERIVATIVE INSTRUMENTS | 9 Months Ended |
Sep. 30, 2020 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
DERIVATIVE INSTRUMENTS | DERIVATIVE INSTRUMENTS The Company maintains various agreements with bank counterparties that permit the Company to enter into "over-the-counter" derivative instrument agreements to manage its risk associated with interest rates and foreign currency fluctuations. In February 2020, the Company entered into certain derivative instrument agreements to manage its risk associated with interest rates on its 1.85% Notes and foreign currency fluctuations in connection with its foreign currency-denominated intercompany borrowings. The Company did not enter into these agreements for trading or speculative purposes. Accounting for derivative instruments The Company recognizes all derivative instruments as assets or liabilities in the Condensed Consolidated Balance Sheets at fair value. The accounting for changes in the fair value of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and, further, on the type of hedging relationship. To qualify for hedge accounting, a derivative must be highly effective at reducing the risk associated with the exposure being hedged. In addition, for a derivative to be designated as a hedge, the risk management objective and strategy must be documented. Hedge documentation must identify the derivative hedging instrument, the asset or liability or forecasted transaction, type of risk to be hedged, and how the effectiveness of the derivative is assessed prospectively and retrospectively. To assess effectiveness, the Company uses statistical methods and qualitative comparisons of critical terms. The extent to which a derivative has been and is expected to continue to be, highly effective at offsetting changes in the fair value or cash flows of the hedged item is assessed and documented periodically. If it is determined that a derivative is not highly effective at hedging the designated exposure, hedge accounting is discontinued. For those derivative instruments that are designated and qualify as hedging instruments, the Company classifies them as fair value hedges or cash flow hedges. Fair value hedges The Company uses fair value hedges primarily to hedge a portion of its fixed-rate long-term debt via interest rate swaps. Changes in the fair value of the interest rate swap, along with the gain or loss on the hedged item, is recorded in earnings under the same line item, interest expense, net. The notional amount of the Company’s outstanding fair value hedges as of September 30, 2020 was $500 million. Cash flow hedges The Company uses cash flow hedges primarily to hedge the exposure to variability in forecasted cash flows from foreign currency-denominated intercompany borrowings via cross-currency swaps. Gains or losses on the cross-currency swaps are reported as a component of AOCE and reclassified into earnings in the same period during which the hedged transaction affects earnings. The notional amount of the Company’s outstanding cash flow hedges as of September 30, 2020 was approximately $34 million. The effect of the Company's fair value and cash flow hedges on the Company's Condensed Consolidated Statement of Earnings for the nine months ended September 30, 2020 is as follows (in millions of dollars): Nine Months Ended September 30, 2020 Interest expense, net Other, net Gain or (loss) recognized in earnings Fair value hedge: Hedged item $ (22) $ — Interest rate swap designated as hedging instrument $ 22 $ — Cash flow hedge: Hedged item $ — $ — Cross-currency swap designated as hedging instrument $ — $ — The effect of the Company’s fair value and cash flow hedges on earnings for the three months ended September 30, 2020 and AOCE for the three and nine months ended September 30, 2020 was not material. The fair value and carrying amounts of outstanding derivative instruments in the Condensed Consolidated Balance Sheets as of September 30, 2020 was as follows (in millions of dollars): Balance Sheet Classification Fair Value and Carrying Amounts Cross-currency swap Other noncurrent liabilities $ — Interest rate swap Other assets $ 22 The carrying amount of the liability hedged by the interest rate swap (long-term debt), including the cumulative amount of fair value hedging adjustments, as of September 30, 2020 amounted to $522 million. |
INCOME TAXES
INCOME TAXES | 9 Months Ended |
Sep. 30, 2020 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | INCOME TAXES The reconciliations of income tax expense with federal income taxes at the statutory rate are as follows (in millions of dollars): Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Federal income tax $ 76 $ 67 $ 145 $ 218 States income taxes, net of federal benefit 12 9 23 28 Foreign rate difference 12 4 18 14 Foreign subsidiaries tax impacts, non operating 5 — (71) — Change in valuation allowance 4 2 8 5 Other, net (3) (4) (5) (4) Income tax expense $ 106 $ 78 $ 118 $ 261 Effective tax rate 29.3 % 24.2 % 17.3 % 25.1 % The changes to the Company's effective tax rate for the nine months ended September 30, 2020 was primarily driven by tax losses in the Company's investment in Fabory per the impairment and internal reorganization of the Company's holdings of Fabory in the first quarter of 2020. The Company divested Fabory during the second quarter of 2020 (see Note 1 to the Financial Statements). On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (CARES) Act was enacted and signed into U.S. law to provide economic relief to individuals and businesses facing economic hardship as a result of the COVID-19 pandemic. The CARES Act did not have a material impact on the Company's consolidated financial condition or results of operations as of and for the nine months ended September 30, 2020. |
SEGMENT INFORMATION
SEGMENT INFORMATION | 9 Months Ended |
Sep. 30, 2020 | |
Segment Reporting [Abstract] | |
SEGMENT INFORMATION | SEGMENT INFORMATION Grainger's two reportable segments are the U.S. and Canada. These reportable segments reflect the results of the Company's high-touch businesses in those geographies. Other businesses include the endless assortment businesses, Zoro Tools, Inc. (Zoro) and MonotaRO Co., LTD (MonotaRO), and smaller international high-touch businesses. These businesses individually do not meet the criteria of a reportable segment. Operating segments generate revenue almost exclusively through the distribution of MRO supplies, as service revenues account for approximately 1% of total revenues for each operating segment. Following is a summary of segment results (in millions of dollars): Three Months Ended September 30, 2020 U.S. Canada Total Reportable Segments Other businesses Total Total net sales $ 2,347 $ 116 $ 2,463 $ 687 $ 3,150 Intersegment net sales (131) — (131) (1) (132) Net sales to external customers $ 2,216 $ 116 $ 2,332 $ 686 $ 3,018 Segment operating earnings $ 354 $ 2 $ 356 $ 44 $ 400 Three Months Ended September 30, 2019 U.S. Canada Total Reportable Segments Other businesses Total Total net sales $ 2,277 $ 129 $ 2,406 $ 673 $ 3,079 Intersegment net sales (131) — (131) (1) (132) Net sales to external customers $ 2,146 $ 129 $ 2,275 $ 672 $ 2,947 Segment operating earnings $ 343 $ — $ 343 $ 30 $ 373 Nine Months Ended September 30, 2020 U.S. Canada Total Reportable Segments Other businesses Total Total net sales $ 6,823 $ 352 $ 7,175 $ 2,065 $ 9,240 Intersegment net sales (382) — (382) (2) (384) Net sales to external customers $ 6,441 $ 352 6,793 $ 2,063 $ 8,856 Segment operating earnings $ 1,012 $ (4) $ 1,008 $ (56) $ 952 Nine Months Ended September 30, 2019 U.S. Canada Total Reportable Segments Other businesses Total Total net sales $ 6,648 $ 400 $ 7,048 $ 1,969 $ 9,017 Intersegment net sales (376) — (376) (2) (378) Net sales to external customers $ 6,272 $ 400 $ 6,672 $ 1,967 $ 8,639 Segment operating earnings $ 1,088 $ (4) $ 1,084 $ 87 $ 1,171 Following are reconciliations of segment information with the consolidated totals per the Financial Statements (in millions of dollars): Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Operating earnings: Total operating earnings for reportable segments $ 356 $ 343 $ 1,008 $ 1,084 Other businesses 44 30 (56) 87 Unallocated expenses (20) (35) (208) (90) Total consolidated operating earnings $ 380 $ 338 $ 744 $ 1,081 As of September 30, 2020 December 31, 2019 Assets: United States $ 3,044 $ 2,668 Canada 166 173 Assets for reportable segments 3,210 2,841 Other current and noncurrent assets 2,676 3,003 Unallocated assets 697 161 Total consolidated assets $ 6,583 $ 6,005 The Company is a broad line distributor of MRO products and services. Products are regularly added and removed from the Company's inventory. Accordingly, it would be impractical to provide sales information by product category due to the way the business is managed, and the dynamic nature of the inventory offered, including the evolving list of products stocked and additional products available online but not stocked. Unallocated amounts include corporate-level support and administrative expenses, corporate-level assets consisting primarily of cash, property, buildings and equipment, intersegment eliminations and other adjustments. Unallocated expenses and assets are not included in any reportable segment. |
CONTINGENCIES AND LEGAL MATTERS
CONTINGENCIES AND LEGAL MATTERS | 9 Months Ended |
Sep. 30, 2020 | |
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, safety or compliance, privacy and cybersecurity matters, general negligence, contract disputes, environmental issues, unclaimed property, wage and hour laws, intellectual property, advertising, consumer protection, pricing (including disaster or emergency declaration pricing statutes), employment practices, regulatory compliance, anti-bribery and corruption or other matters and actions brought by employees, consumers, competitors, suppliers, customers, governmental entities and other third parties. For example, as disclosed in the Company's 2019 Form 10-K, beginning in the fourth quarter of 2019, Grainger, KMCO, LLC (KMCO) and other defendants have been named in several product liability-related lawsuits in the Harris County, Texas District Court relating to an explosion at a KMCO chemical refinery located in Crosby, Harris County, Texas on April 2, 2019. The complaints seek recovery of compensatory and other damages and relief. On May 8, 2020, KMCO filed a voluntary petition in the United States Bankruptcy Court for the Southern District of Texas for relief under Chapter 7 of Title 11 of the United States Bankruptcy Court in the case KMCO, LLC, No. 20-60028. As a result of the Chapter 7 proceedings, the claims against KMCO in the Harris County lawsuits are currently stayed. Grainger is investigating the claims, which are at an early stage, and intends to contest these matters vigorously. Also, as a government contractor selling to federal, state and local governmental entities, the Company may be subject to governmental or regulatory inquiries or audits or other proceedings, including those related to contract administration or to pricing compliance. While the Company is unable to predict the outcome of any of these matters, 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 condition or results of operations. From time to time, the Company has also been named, along with numerous other nonaffiliated companies, as a defendant in litigation in various states involving asbestos and/or silica. These lawsuits typically assert claims of personal injury arising from alleged exposure to asbestos and/or silica as a consequence of products manufactured by third parties purportedly distributed by the Company. While several lawsuits have been dismissed in the past based on the lack of product identification, if a specific product distributed by the Company is identified in any pending or future lawsuits, the Company will seek to exercise indemnification remedies against the product manufacturer to the extent available. In addition, the Company believes that a substantial number of these claims are covered by insurance. The Company has entered into agreements with its major insurance carriers relating to the scope, coverage and the costs of defense, of lawsuits involving claims of exposure to asbestos. The Company believes it has strong legal and factual defenses and intends to continue defending itself vigorously in these lawsuits. While the Company is unable to predict the outcome of these proceedings, it believes that the ultimate resolution will not have, either individually or in the aggregate, a material adverse effect on the Company’s consolidated financial condition or results of operations. |
NEW ACCOUNTING STANDARDS (Polic
NEW ACCOUNTING STANDARDS (Policies) | 9 Months Ended |
Sep. 30, 2020 | |
Accounting Policies [Abstract] | |
Update to Significant Accounting Policies and New Accounting Standards | UPDATE TO SIGNIFICANT ACCOUNTING POLICIESOther than the implemented accounting policies related to the allowances for credit losses per the Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) 2016-13 (see Notes 3 and 5 to the Financial Statements), change in depreciation estimates (see Note 6 to the Financial Statements) and accounting for derivative instruments (see Note 9 to the Financial Statements), there have been no material changes to the Company’s significant accounting policies disclosed in the 2019 Form 10-K, Part II, Item 8.NEW ACCOUNTING STANDARDS In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments as modified by subsequently issued ASUs 2018-19, 2019-04, 2019-05, 2019-11 and 2020-02. This ASU requires estimating all expected credit losses for certain types of financial instruments, including trade receivables, held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. The Company adopted this ASU effective January 1, 2020. While the adoption of this ASU did not have a material impact on the Company's Financial Statements, it required changes to the Company’s process of estimating expected credit losses on trade receivables . See Note 5 to the Financial Statements for further information on the Company’s allowance for credit losses. In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This ASU clarifies and simplifies accounting for income taxes by eliminating certain exceptions for intraperiod tax allocation principles, the methodology for calculating income tax rates in an interim period, and recognition of deferred taxes for outside basis differences in an investment, among other updates. The effective date of this ASU is for fiscal years and interim periods beginning after December 15, 2020. The Company is currently evaluating the potential impact of this ASU on the Financial Statements. In January 2020, the FASB issued ASU 2020-01, Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815), Clarifying the Interactions between Topic 321, Topic 323 and Topic 815 . This ASU simplifies the understanding and application of the codification topics by eliminating inconsistencies and providing clarifications. The effective date of this ASU is for fiscal years and interim periods beginning after December 15, 2020. The Company is currently evaluating the potential impact of this ASU on the Financial Statements. In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting . This update provides optional expedients and exceptions for applying generally accepted accounting principles to certain contract modifications and hedging relationships that reference London Inter-bank Offered Rate (LIBOR) or another reference rate expected to be discontinued. The guidance is effective upon issuance and generally can be applied through December 31, 2022. The Company is currently evaluating the potential impact of this ASU on the Financial Statements. |
Accounts Receivable and Allowance for Credit Losses, Policy | ACCOUNTS RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES The Company’s accounts receivable arise primarily from sales on credit to customers. The Company establishes an allowance for credit losses to present the net amount of accounts receivable expected to be collected. The allowance is determined by using the loss-rate method, which requires an estimation of loss rates based upon historical loss experience adjusted for factors that are relevant to determining the expected collectability of accounts receivable. Some of these factors include macroeconomic conditions that correlate with historical loss experience, delinquency trends, aging behavior of receivables and credit and liquidity quality indicators for industry groups, customer classes or individual customers. |
REVENUE (Tables)
REVENUE (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Revenue from Contract with Customer [Abstract] | |
Disaggregation of Revenues | The following table presents the Company's percentage of revenue by reportable segment and by major customer industry: Three Months Ended September 30, 2020 2019 U.S. Canada Total Company (2) U.S. Canada Total Company (2) Government 23 % 8 % 17 % 20 % 5 % 15 % Heavy Manufacturing 15 % 19 % 15 % 18 % 20 % 17 % Light Manufacturing 12 % 6 % 10 % 12 % 6 % 10 % Transportation 5 % 8 % 4 % 6 % 8 % 5 % Healthcare 9 % — % 7 % 7 % — % 5 % Commercial 8 % 11 % 6 % 10 % 9 % 8 % Retail/Wholesale 10 % 3 % 8 % 9 % 4 % 7 % Contractors 9 % 11 % 7 % 9 % 11 % 8 % Natural Resources 2 % 29 % 3 % 3 % 33 % 4 % Other (1) 7 % 5 % 23 % 6 % 4 % 21 % Total 100 % 100 % 100 % 100 % 100 % 100 % Percent of Total Company Revenue 73 % 4 % 100 % 73 % 4 % 100 % Nine Months Ended September 30, 2020 2019 U.S. Canada Total Company (2) U.S. Canada Total Company (2) Government 22 % 9 % 16 % 19 % 6 % 14 % Heavy Manufacturing 16 % 18 % 15 % 19 % 20 % 17 % Light Manufacturing 13 % 6 % 10 % 13 % 6 % 11 % Transportation 5 % 9 % 5 % 5 % 8 % 5 % Healthcare 10 % — % 7 % 7 % — % 5 % Commercial 8 % 10 % 7 % 10 % 9 % 8 % Retail/Wholesale 10 % 4 % 8 % 8 % 4 % 7 % Contractors 9 % 10 % 7 % 10 % 11 % 8 % Natural Resources 2 % 29 % 3 % 3 % 32 % 4 % Other (1) 5 % 5 % 22 % 6 % 4 % 21 % Total 100 % 100 % 100 % 100 % 100 % 100 % Percent of Total Company Revenue 73 % 4 % 100 % 73 % 5 % 100 % (1) Other category primarily includes revenue from individual customers not aligned to a major industry segment, including small businesses and consumers, and intersegment net sales. (2) Total Company includes other businesses, which include the Company's endless assortment businesses and smaller international high-touch businesses and accounts for approximately 23% of revenue for the three and nine months ended September 30, 2020 and 23% and 22% of revenue for the three and nine months ended September 30, 2019 , respectively. |
PROPERTY, BUILDINGS AND EQUIP_2
PROPERTY, BUILDINGS AND EQUIPMENT (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY, BUILDINGS AND EQUIPMENT | Property, buildings and equipment consisted of the following (in millions of dollars): As of September 30, 2020 December 31, 2019 Land $ 331 $ 332 Building, structures and improvements 1,321 1,329 Furniture, fixtures, machinery and equipment 1,875 1,832 Property, buildings and equipment $ 3,527 $ 3,493 Less: Accumulated depreciation and amortization and impairment 2,133 2,093 Property, buildings and equipment, net $ 1,394 $ 1,400 |
GOODWILL AND OTHER INTANGIBLE_2
GOODWILL AND OTHER INTANGIBLE ASSETS (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Goodwill | The balances and changes in the carrying amount of Goodwill (net of cumulative goodwill impairments) by segment are as follows (in millions of dollars): United States Canada Other businesses Total Balance at January 1, 2019 $ 192 $ 120 $ 112 $ 424 Translation — 6 (1) 5 Balance at December 31, 2019 192 126 111 429 Impairment — — (58) (58) Translation — (3) 1 (2) Balance at September 30, 2020 $ 192 $ 123 $ 54 $ 369 |
Schedule of Finite-Lived Intangible Assets By Major Class | The balances in Intangible assets, net are as follows (in millions of dollars ): September 30, 2020 December 31, 2019 Weighted average life Gross carrying amount Accumulated amortization Net carrying amount Gross carrying amount Accumulated amortization Net carrying amount Customer lists and relationships 11.8 years $ 222 $ 168 $ 54 $ 401 $ 301 $ 100 Trademarks, trade names and other 14.2 years 35 21 14 36 20 16 Non-amortized trade names and other Indefinite 27 — 27 100 38 62 Capitalized software 4.2 years 665 536 129 626 500 126 Total intangible assets 6.7 years $ 949 $ 725 $ 224 $ 1,163 $ 859 $ 304 |
SHORT-TERM AND LONG-TERM DEBT (
SHORT-TERM AND LONG-TERM DEBT (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Debt Disclosure [Abstract] | |
Schedule of Long-Term Debt Instruments | Long-term debt, including current maturities and debt issuance costs and discounts, net, consisted of the following (in millions of dollars): As of September 30, 2020 As of December 31, 2019 Carrying Value Fair Value (3) Carrying Value Fair Value (3) 4.60% senior notes due 2045 $ 1,000 $ 1,287 $ 1,000 $ 1,194 3.75% senior notes due 2046 400 456 400 416 4.20% senior notes due 2047 400 489 400 449 1.85% senior notes due 2025 (1) 500 524 — — British pound term loan — — 170 170 Euro term loan — — 123 123 Japanese Yen term loan (2) 85 85 — — Canadian dollar revolving credit facility — — 46 46 Other 40 40 42 42 Subtotal (4) 2,425 2,881 2,181 2,440 Less: Current maturities (12) (12) (246) (246) Debt issuance costs and discounts, net of amortization (25) (25) (21) (21) Long-term debt (less current maturities) $ 2,388 $ 2,844 $ 1,914 $ 2,173 (1) The 1.85% Notes mature in February 2025 and they require no principal payments until the maturity date and interest is payable semi-annually on February 15 and August 15, beginning in August 2020. Prior to January 2025, the Company may redeem the 1.85% 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 1.85% Notes plus 10 basis points, together with accrued and unpaid interest, if any, at the redemption date. Additionally, if the Company experiences specific kinds of changes in control, it will be required to make an offer to purchase the 1.85% Notes at 101% of their principal amount plus accrued and unpaid interest, if any, at the date of purchase. On or after January 15, 2025, the Company may redeem the 1.85% 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 $5 million associated with the issuance of the 1.85% Notes, representing underwriting fees and other expenses, have been recorded as a contra-liability within Long-term debt and are being amortized to interest expense, net over the term of the 1.85% Notes. (2) The Japanese Yen term loan matures in 2024, payable over four equal semi-annual principal installments in 2023 and 2024, and bears average interest at 0.05%. (3) The estimated fair value of the Company’s senior 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 their variable interest rates. |
DERIVATIVE INSTRUMENTS (Tables)
DERIVATIVE INSTRUMENTS (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Schedule of Derivative Instruments | The effect of the Company's fair value and cash flow hedges on the Company's Condensed Consolidated Statement of Earnings for the nine months ended September 30, 2020 is as follows (in millions of dollars): Nine Months Ended September 30, 2020 Interest expense, net Other, net Gain or (loss) recognized in earnings Fair value hedge: Hedged item $ (22) $ — Interest rate swap designated as hedging instrument $ 22 $ — Cash flow hedge: Hedged item $ — $ — Cross-currency swap designated as hedging instrument $ — $ — |
Schedule of Derivative Instruments in Statement of Financial Position, Fair Value | The fair value and carrying amounts of outstanding derivative instruments in the Condensed Consolidated Balance Sheets as of September 30, 2020 was as follows (in millions of dollars): Balance Sheet Classification Fair Value and Carrying Amounts Cross-currency swap Other noncurrent liabilities $ — Interest rate swap Other assets $ 22 |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Income Tax Disclosure [Abstract] | |
Schedule of Effective Income Tax Rate Reconciliation | The reconciliations of income tax expense with federal income taxes at the statutory rate are as follows (in millions of dollars): Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Federal income tax $ 76 $ 67 $ 145 $ 218 States income taxes, net of federal benefit 12 9 23 28 Foreign rate difference 12 4 18 14 Foreign subsidiaries tax impacts, non operating 5 — (71) — Change in valuation allowance 4 2 8 5 Other, net (3) (4) (5) (4) Income tax expense $ 106 $ 78 $ 118 $ 261 Effective tax rate 29.3 % 24.2 % 17.3 % 25.1 % |
SEGMENT INFORMATION (Tables)
SEGMENT INFORMATION (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Segment Reporting [Abstract] | |
Summary of Segment Results | Following is a summary of segment results (in millions of dollars): Three Months Ended September 30, 2020 U.S. Canada Total Reportable Segments Other businesses Total Total net sales $ 2,347 $ 116 $ 2,463 $ 687 $ 3,150 Intersegment net sales (131) — (131) (1) (132) Net sales to external customers $ 2,216 $ 116 $ 2,332 $ 686 $ 3,018 Segment operating earnings $ 354 $ 2 $ 356 $ 44 $ 400 Three Months Ended September 30, 2019 U.S. Canada Total Reportable Segments Other businesses Total Total net sales $ 2,277 $ 129 $ 2,406 $ 673 $ 3,079 Intersegment net sales (131) — (131) (1) (132) Net sales to external customers $ 2,146 $ 129 $ 2,275 $ 672 $ 2,947 Segment operating earnings $ 343 $ — $ 343 $ 30 $ 373 Nine Months Ended September 30, 2020 U.S. Canada Total Reportable Segments Other businesses Total Total net sales $ 6,823 $ 352 $ 7,175 $ 2,065 $ 9,240 Intersegment net sales (382) — (382) (2) (384) Net sales to external customers $ 6,441 $ 352 6,793 $ 2,063 $ 8,856 Segment operating earnings $ 1,012 $ (4) $ 1,008 $ (56) $ 952 Nine Months Ended September 30, 2019 U.S. Canada Total Reportable Segments Other businesses Total Total net sales $ 6,648 $ 400 $ 7,048 $ 1,969 $ 9,017 Intersegment net sales (376) — (376) (2) (378) Net sales to external customers $ 6,272 $ 400 $ 6,672 $ 1,967 $ 8,639 Segment operating earnings $ 1,088 $ (4) $ 1,084 $ 87 $ 1,171 |
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 millions of dollars): Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Operating earnings: Total operating earnings for reportable segments $ 356 $ 343 $ 1,008 $ 1,084 Other businesses 44 30 (56) 87 Unallocated expenses (20) (35) (208) (90) Total consolidated operating earnings $ 380 $ 338 $ 744 $ 1,081 As of September 30, 2020 December 31, 2019 Assets: United States $ 3,044 $ 2,668 Canada 166 173 Assets for reportable segments 3,210 2,841 Other current and noncurrent assets 2,676 3,003 Unallocated assets 697 161 Total consolidated assets $ 6,583 $ 6,005 |
Schedule of Reconciliation of Assets from Segment to Consolidated | Following are reconciliations of segment information with the consolidated totals per the Financial Statements (in millions of dollars): Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Operating earnings: Total operating earnings for reportable segments $ 356 $ 343 $ 1,008 $ 1,084 Other businesses 44 30 (56) 87 Unallocated expenses (20) (35) (208) (90) Total consolidated operating earnings $ 380 $ 338 $ 744 $ 1,081 As of September 30, 2020 December 31, 2019 Assets: United States $ 3,044 $ 2,668 Canada 166 173 Assets for reportable segments 3,210 2,841 Other current and noncurrent assets 2,676 3,003 Unallocated assets 697 161 Total consolidated assets $ 6,583 $ 6,005 |
BACKGROUND AND BASIS OF PRESE_2
BACKGROUND AND BASIS OF PRESENTATION (Details) - Discontinued Operations [Member] - USD ($) $ in Millions | 3 Months Ended | |
Sep. 30, 2020 | Jun. 30, 2020 | |
Fabory Business [Member] | ||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||
Net gain (loss) on divestiture | $ (109) | |
Accumulated foreign currency translation losses | $ 45 | |
China Business [Member] | ||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||
Net gain (loss) on divestiture | $ 5 |
REVENUE Narrative (Details)
REVENUE Narrative (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2020 | Dec. 31, 2019 | |
Disaggregation of Revenue [Line Items] | |||
Accrued sales returns | $ 30 | $ 30 | $ 25 |
Accrued sales incentives | $ 55 | $ 55 | $ 57 |
Service Revenue [Member] | |||
Disaggregation of Revenue [Line Items] | |||
Percent of Total Company Revenue | 1.00% | 1.00% |
REVENUE (Details)
REVENUE (Details) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Disaggregation of Revenue [Line Items] | ||||
Revenue From Contract With Customer, Excluding Assessed Tax, Percentage | 100.00% | 100.00% | 100.00% | 100.00% |
Revenue From Contract With Customer, Excluding Assessed Tax, Percentage Of Company-Wide Revenue | 100.00% | 100.00% | 100.00% | 100.00% |
Service Revenue [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Percent of Total Company Revenue | 1.00% | 1.00% | ||
Government Customer [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue From Contract With Customer, Excluding Assessed Tax, Percentage | 17.00% | 15.00% | 16.00% | 14.00% |
Heavy Manufacturing [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue From Contract With Customer, Excluding Assessed Tax, Percentage | 15.00% | 17.00% | 15.00% | 17.00% |
Light Manufacturing [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue From Contract With Customer, Excluding Assessed Tax, Percentage | 10.00% | 10.00% | 10.00% | 11.00% |
Transportation [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue From Contract With Customer, Excluding Assessed Tax, Percentage | 4.00% | 5.00% | 5.00% | 5.00% |
Healthcare Customer [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue From Contract With Customer, Excluding Assessed Tax, Percentage | 7.00% | 5.00% | 7.00% | 5.00% |
Commercial [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue From Contract With Customer, Excluding Assessed Tax, Percentage | 6.00% | 8.00% | 7.00% | 8.00% |
Retail/Wholesale [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue From Contract With Customer, Excluding Assessed Tax, Percentage | 8.00% | 7.00% | 8.00% | 7.00% |
Contractors [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue From Contract With Customer, Excluding Assessed Tax, Percentage | 7.00% | 8.00% | 7.00% | 8.00% |
Natural Resources [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue From Contract With Customer, Excluding Assessed Tax, Percentage | 3.00% | 4.00% | 3.00% | 4.00% |
Other [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue From Contract With Customer, Excluding Assessed Tax, Percentage | 23.00% | 21.00% | 22.00% | 21.00% |
Other Segments [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Percent of Total Company Revenue | 23.00% | 23.00% | 23.00% | 22.00% |
United States [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue From Contract With Customer, Excluding Assessed Tax, Percentage | 100.00% | 100.00% | 100.00% | 100.00% |
Revenue From Contract With Customer, Excluding Assessed Tax, Percentage Of Company-Wide Revenue | 73.00% | 73.00% | 73.00% | 73.00% |
United States [Member] | Government Customer [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue From Contract With Customer, Excluding Assessed Tax, Percentage | 23.00% | 20.00% | 22.00% | 19.00% |
United States [Member] | Heavy Manufacturing [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue From Contract With Customer, Excluding Assessed Tax, Percentage | 15.00% | 18.00% | 16.00% | 19.00% |
United States [Member] | Light Manufacturing [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue From Contract With Customer, Excluding Assessed Tax, Percentage | 12.00% | 12.00% | 13.00% | 13.00% |
United States [Member] | Transportation [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue From Contract With Customer, Excluding Assessed Tax, Percentage | 5.00% | 6.00% | 5.00% | 5.00% |
United States [Member] | Healthcare Customer [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue From Contract With Customer, Excluding Assessed Tax, Percentage | 9.00% | 7.00% | 10.00% | 7.00% |
United States [Member] | Commercial [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue From Contract With Customer, Excluding Assessed Tax, Percentage | 8.00% | 10.00% | 8.00% | 10.00% |
United States [Member] | Retail/Wholesale [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue From Contract With Customer, Excluding Assessed Tax, Percentage | 10.00% | 9.00% | 10.00% | 8.00% |
United States [Member] | Contractors [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue From Contract With Customer, Excluding Assessed Tax, Percentage | 9.00% | 9.00% | 9.00% | 10.00% |
United States [Member] | Natural Resources [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue From Contract With Customer, Excluding Assessed Tax, Percentage | 2.00% | 3.00% | 2.00% | 3.00% |
United States [Member] | Other [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue From Contract With Customer, Excluding Assessed Tax, Percentage | 7.00% | 6.00% | 5.00% | 6.00% |
Canada [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue From Contract With Customer, Excluding Assessed Tax, Percentage | 100.00% | 100.00% | 100.00% | 100.00% |
Revenue From Contract With Customer, Excluding Assessed Tax, Percentage Of Company-Wide Revenue | 4.00% | 4.00% | 4.00% | 5.00% |
Canada [Member] | Government Customer [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue From Contract With Customer, Excluding Assessed Tax, Percentage | 8.00% | 5.00% | 9.00% | 6.00% |
Canada [Member] | Heavy Manufacturing [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue From Contract With Customer, Excluding Assessed Tax, Percentage | 19.00% | 20.00% | 18.00% | 20.00% |
Canada [Member] | Light Manufacturing [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue From Contract With Customer, Excluding Assessed Tax, Percentage | 6.00% | 6.00% | 6.00% | 6.00% |
Canada [Member] | Transportation [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue From Contract With Customer, Excluding Assessed Tax, Percentage | 8.00% | 8.00% | 9.00% | 8.00% |
Canada [Member] | Healthcare Customer [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue From Contract With Customer, Excluding Assessed Tax, Percentage | 0.00% | 0.00% | 0.00% | 0.00% |
Canada [Member] | Commercial [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue From Contract With Customer, Excluding Assessed Tax, Percentage | 11.00% | 9.00% | 10.00% | 9.00% |
Canada [Member] | Retail/Wholesale [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue From Contract With Customer, Excluding Assessed Tax, Percentage | 3.00% | 4.00% | 4.00% | 4.00% |
Canada [Member] | Contractors [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue From Contract With Customer, Excluding Assessed Tax, Percentage | 11.00% | 11.00% | 10.00% | 11.00% |
Canada [Member] | Natural Resources [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue From Contract With Customer, Excluding Assessed Tax, Percentage | 29.00% | 33.00% | 29.00% | 32.00% |
Canada [Member] | Other [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue From Contract With Customer, Excluding Assessed Tax, Percentage | 5.00% | 4.00% | 5.00% | 4.00% |
PROPERTY, BUILDINGS AND EQUIP_3
PROPERTY, BUILDINGS AND EQUIPMENT (Details) - USD ($) $ in Millions | Jan. 01, 2020 | Sep. 30, 2020 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 |
Property, Plant and Equipment [Line Items] | |||||
Property, buildings and equipment | $ 3,527 | $ 3,527 | $ 3,493 | ||
Less: Accumulated depreciation and amortization and impairment | 2,133 | 2,133 | 2,093 | ||
PROPERTY, BUILDINGS AND EQUIPMENT - NET | 1,394 | 1,394 | 1,400 | ||
Impairment charge | 44 | ||||
Land [Member] | |||||
Property, Plant and Equipment [Line Items] | |||||
Property, buildings and equipment | 331 | 331 | 332 | ||
Building, Structures and Improvements [Member] | |||||
Property, Plant and Equipment [Line Items] | |||||
Property, buildings and equipment | 1,321 | 1,321 | $ 1,329 | ||
Estimated useful lives | 30 years | ||||
Furniture, Fixtures, Machinery and Equipment [Member] | |||||
Property, Plant and Equipment [Line Items] | |||||
Property, buildings and equipment | 1,875 | 1,875 | $ 1,832 | ||
Estimated useful lives | 30 years | ||||
Furniture, Fixtures, Machinery and Equipment [Member] | Minimum [Member] | |||||
Property, Plant and Equipment [Line Items] | |||||
Estimated useful lives | 40 years | ||||
Furniture, Fixtures, Machinery and Equipment [Member] | Maximum [Member] | |||||
Property, Plant and Equipment [Line Items] | |||||
Estimated useful lives | 50 years | ||||
Property, Buildings and Equipment [Member] | |||||
Property, Plant and Equipment [Line Items] | |||||
Impairment charge | 24 | ||||
Right-Of-Use Assets [Member] | |||||
Property, Plant and Equipment [Line Items] | |||||
Impairment charge | 20 | ||||
Change in Accounting Method Accounted for as Change in Estimate [Member] | |||||
Property, Plant and Equipment [Line Items] | |||||
Depreciation | $ 7 | $ 22 |
GOODWILL AND OTHER INTANGIBLE_3
GOODWILL AND OTHER INTANGIBLE ASSETS Additional Information (Details) $ in Millions | 3 Months Ended | 9 Months Ended |
Sep. 30, 2020USD ($) | Sep. 30, 2020USD ($) | |
Segment Reporting Information [Line Items] | ||
Impairment | $ 58 | |
Percentage of fair value in excess of carrying amount | 25.00% | 25.00% |
Change in percentage of fair value in excess of carrying amount | 0.10 | |
Goodwill and Intangible Asset Impairment | $ 137 | |
Goodwill, Impairment Loss, Excluding Divested Businesses | $ 0 | 0 |
Canada [Member] | ||
Segment Reporting Information [Line Items] | ||
Impairment | $ 0 | |
Pro Forma [Member] | ||
Segment Reporting Information [Line Items] | ||
Impairment trigger, pre-tax discount rate | 0.03 | |
Impairment trigger, decrease in revenue long-term growth rate | 0.015 | |
Canada [Member] | ||
Segment Reporting Information [Line Items] | ||
Goodwill and Intangible Asset Impairment | $ 32 | |
Other Businesses [Member] | ||
Segment Reporting Information [Line Items] | ||
Goodwill and Intangible Asset Impairment | $ 105 |
GOODWILL AND OTHER INTANGIBLE_4
GOODWILL AND OTHER INTANGIBLE ASSETS Balances and Changes in Carrying Amounts of Goodwill (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2020 | Mar. 31, 2020 | Sep. 30, 2020 | Dec. 31, 2019 | |
Goodwill [Roll Forward] | ||||
Goodwill, beginning balance | $ 429 | $ 429 | $ 424 | |
Impairment | (58) | |||
Translation | (2) | 5 | ||
Goodwill, ending balance | $ 369 | 369 | 429 | |
Goodwill, Impairment Loss, Excluding Divested Businesses | 0 | 0 | ||
United States [Member] | ||||
Goodwill [Roll Forward] | ||||
Goodwill, beginning balance | 192 | 192 | 192 | |
Impairment | 0 | |||
Translation | 0 | 0 | ||
Goodwill, ending balance | 192 | 192 | 192 | |
Canada [Member] | ||||
Goodwill [Roll Forward] | ||||
Goodwill, beginning balance | 126 | 126 | 120 | |
Impairment | 0 | |||
Translation | (3) | 6 | ||
Goodwill, ending balance | 123 | 123 | 126 | |
Other Businesses [Member] | ||||
Goodwill [Roll Forward] | ||||
Goodwill, beginning balance | 111 | 111 | 112 | |
Impairment | $ (58) | (58) | ||
Translation | 1 | (1) | ||
Goodwill, ending balance | $ 54 | $ 54 | $ 111 |
GOODWILL AND OTHER INTANGIBLE_5
GOODWILL AND OTHER INTANGIBLE ASSETS Intangible assets included in Other assets and intangibles (Details) - USD ($) $ in Millions | 9 Months Ended | |
Sep. 30, 2020 | Dec. 31, 2019 | |
Total intangible assets, gross | $ 949 | $ 1,163 |
Total intangible assets, net | 224 | 304 |
Finite-lived intangible assets, accumulated amortization | 725 | 859 |
Goodwill and Intangible Asset Impairment | 137 | |
Customer lists and relationships [Member] | ||
Finite-lived intangible assets, gross | 222 | 401 |
Finite-lived intangible assets, accumulated amortization | 168 | 301 |
Finite-lived intangible assets, net | 54 | 100 |
Trademarks, trade names and other [Member] | ||
Finite-lived intangible assets, gross | 35 | 36 |
Finite-lived intangible assets, accumulated amortization | 21 | 20 |
Finite-lived intangible assets, net | 14 | 16 |
Non-amortized trade names and other [Member] | ||
Finite-lived intangible assets, gross | 27 | 100 |
Finite-lived intangible assets, accumulated amortization | 0 | 38 |
Indefinite-lived intangible assets, carrying amount | 27 | 62 |
Capitalized software [Member] | ||
Finite-lived intangible assets, gross | 665 | 626 |
Finite-lived intangible assets, accumulated amortization | 536 | 500 |
Finite-lived intangible assets, net | $ 129 | $ 126 |
Weighted average [Member] | ||
Finite-lived intangible assets, useful life | 6 years 8 months 12 days | |
Weighted average [Member] | Customer lists and relationships [Member] | ||
Finite-lived intangible assets, useful life | 11 years 9 months 18 days | |
Weighted average [Member] | Trademarks, trade names and other [Member] | ||
Finite-lived intangible assets, useful life | 14 years 2 months 12 days | |
Weighted average [Member] | Capitalized software [Member] | ||
Finite-lived intangible assets, useful life | 4 years 2 months 12 days |
SHORT-TERM AND LONG-TERM DEBT -
SHORT-TERM AND LONG-TERM DEBT - Narrative (Details) $ in Millions | 1 Months Ended | 9 Months Ended | |||||
Aug. 31, 2020JPY (¥)numberOfPayments | Mar. 31, 2020USD ($) | Feb. 29, 2020USD ($) | Sep. 30, 2020USD ($) | Sep. 30, 2019USD ($) | Dec. 31, 2019USD ($) | Oct. 31, 2017USD ($) | |
Debt Instrument [Line Items] | |||||||
Debt issuance costs and discounts, net of amortization | $ (25) | $ (21) | |||||
Borrowings under lines of credit | 12 | $ 22 | |||||
Line of Credit [Member] | |||||||
Debt Instrument [Line Items] | |||||||
Outstanding lines of credit | 0 | $ 55 | |||||
Revolving Credit Facility [Member] | Line of Credit [Member] | |||||||
Debt Instrument [Line Items] | |||||||
Line of credit facility, option to increase maximum borrowing capacity | $ 1,875 | ||||||
Maximum availability of revolving credit facility | $ 1,250 | ||||||
Borrowings under lines of credit | $ 1,000 | ||||||
Senior Notes, 1.85% due 2025 [Member] | Senior Notes [Member] | |||||||
Debt Instrument [Line Items] | |||||||
Debt principal amount | $ 500 | ||||||
Interest rate | 1.85% | ||||||
Basis points | 0.10% | ||||||
Redemption price, percentage upon change of control | 101.00% | ||||||
Redemption price | 100.00% | ||||||
Debt issuance costs and discounts, net of amortization | $ 5 | ||||||
5-Year Unsecured Revolving Line Of Credit [Member] | Domestic Line of Credit [Member] | |||||||
Debt Instrument [Line Items] | |||||||
Maximum availability of revolving credit facility | $ 750 | ||||||
Term Loan Agreement, 0.05% [Member] | Term Loans [Member] | |||||||
Debt Instrument [Line Items] | |||||||
Debt principal amount | ¥ | ¥ 9,000,000,000 | ||||||
Number of semi-annual principal payments | numberOfPayments | 4 | ||||||
Average interest rate | 0.05% |
SHORT-TERM AND LONG-TERM DEBT_2
SHORT-TERM AND LONG-TERM DEBT - Schedule of Long-Term Debt Instruments (Details) - USD ($) $ in Millions | Sep. 30, 2020 | Feb. 29, 2020 | Dec. 31, 2019 |
Debt Instrument [Line Items] | |||
Other | $ 40 | $ 42 | |
Other, fair value | 40 | 42 | |
Long-term debt, gross | 2,425 | 2,181 | |
Long-term debt, gross, fair value | 2,881 | 2,440 | |
Less: Current maturities | (12) | (246) | |
Less current maturities, fair value | (12) | (246) | |
Debt issuance costs and discounts, net of amortization | (25) | (21) | |
Debt issuance costs and discounts, fair value | (25) | (21) | |
Long-term debt (less current maturities) | 2,388 | 1,914 | |
Long-term debt, excluding current maturities, , fair value | 2,844 | 2,173 | |
British pound denominated term loan and revolving credit facility [Member] | |||
Debt Instrument [Line Items] | |||
Long-term debt | 0 | 170 | |
Long-term debt, fair value | 0 | 170 | |
Euro denominated term loan and revolving credit facility [Member] | |||
Debt Instrument [Line Items] | |||
Long-term debt | 0 | 123 | |
Long-term debt, fair value | 0 | 123 | |
Canadian dollar revolving credit facility [Member] | |||
Debt Instrument [Line Items] | |||
Long-term debt | 0 | 46 | |
Long-term debt, fair value | 0 | 46 | |
Japanese Yen Denominated Term Loan | |||
Debt Instrument [Line Items] | |||
Long-term debt | 85 | 0 | |
Long-term debt, fair value | 85 | 0 | |
Senior Notes, 4.60% due 2045 [Member] | Senior notes [Member] | |||
Debt Instrument [Line Items] | |||
Long-term debt | 1,000 | 1,000 | |
Long-term debt, fair value | 1,287 | 1,194 | |
Senior Notes, 3.75% due 2046 [Member] | Senior notes [Member] | |||
Debt Instrument [Line Items] | |||
Long-term debt | 400 | 400 | |
Long-term debt, fair value | 456 | 416 | |
Senior Notes, 4.20% due 2047 [Member] | Senior notes [Member] | |||
Debt Instrument [Line Items] | |||
Long-term debt | 400 | 400 | |
Long-term debt, fair value | 489 | 449 | |
Senior Notes, 1.85% due 2025 [Member] | Senior notes [Member] | |||
Debt Instrument [Line Items] | |||
Long-term debt | 500 | 0 | |
Long-term debt, fair value | $ 524 | $ 0 | |
Debt issuance costs and discounts, net of amortization | $ 5 |
DERIVATIVE INSTRUMENTS - Narrat
DERIVATIVE INSTRUMENTS - Narrative (Details) - USD ($) $ in Millions | Sep. 30, 2020 | Feb. 29, 2020 |
Derivative [Line Items] | ||
Derivative instruments and hedges, liabilities | $ 522 | |
Senior Notes, 1.85% due 2025 [Member] | Senior notes [Member] | ||
Derivative [Line Items] | ||
Interest rate | 1.85% | |
Designated as Hedging Instrument [Member] | Fair Value Hedging [Member] | ||
Derivative [Line Items] | ||
Derivative, notional amount | 500 | |
Designated as Hedging Instrument [Member] | Cash Flow Hedging [Member] | ||
Derivative [Line Items] | ||
Derivative, notional amount | $ 34 |
DERIVATIVE INSTRUMENTS - Schedu
DERIVATIVE INSTRUMENTS - Schedule of Derivative Instruments (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Derivative [Line Items] | ||||
Interest expense, net | $ (23) | $ (20) | $ (72) | $ (60) |
Other, net | 5 | $ 4 | 16 | $ 18 |
Designated as Hedging Instrument [Member] | Fair Value Hedging [Member] | Other Contract [Member] | ||||
Derivative [Line Items] | ||||
Interest expense, net | (22) | |||
Other, net | 0 | |||
Designated as Hedging Instrument [Member] | Fair Value Hedging [Member] | Interest Rate Swap [Member] | ||||
Derivative [Line Items] | ||||
Fair Value and Carrying Amounts | 22 | 22 | ||
Interest expense, net | 22 | |||
Other, net | 0 | |||
Designated as Hedging Instrument [Member] | Cash Flow Hedging [Member] | Other Contract [Member] | ||||
Derivative [Line Items] | ||||
Interest expense, net | 0 | |||
Other, net | 0 | |||
Designated as Hedging Instrument [Member] | Cash Flow Hedging [Member] | Cross Currency Interest Rate Contract [Member] | ||||
Derivative [Line Items] | ||||
Fair Value and Carrying Amounts | $ 0 | 0 | ||
Interest expense, net | 0 | |||
Other, net | $ 0 |
INCOME TAXES (Details)
INCOME TAXES (Details) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Income Tax Disclosure [Abstract] | ||||
Effective tax rate | 29.30% | 24.20% | 17.30% | 25.10% |
INCOME TAXES INCOME TAXES - Rec
INCOME TAXES INCOME TAXES - Reconciliation of Income Tax Expense with Federal Income Taxes at the Statutory Rate (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Income Tax Disclosure [Abstract] | ||||
Federal income tax | $ 76 | $ 67 | $ 145 | $ 218 |
State income taxes, net of federal income tax benefit | 12 | 9 | 23 | 28 |
Foreign rate difference | 12 | 4 | 18 | 14 |
Foreign subsidiaries tax impacts, non operating | 5 | 0 | (71) | 0 |
Change in valuation allowance | 4 | 2 | 8 | 5 |
Other, net | (3) | (4) | (5) | (4) |
Income tax expense | $ 106 | $ 78 | $ 118 | $ 261 |
Effective tax rate | 29.30% | 24.20% | 17.30% | 25.10% |
SEGMENT INFORMATION - Narrative
SEGMENT INFORMATION - Narrative (Details) | 9 Months Ended |
Sep. 30, 2020segment | |
Segment Reporting Information [Line Items] | |
Number of reportable segments | 2 |
SEGMENT INFORMATION - Summary o
SEGMENT INFORMATION - Summary of Segment Results (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
Segment Reporting Information [Line Items] | |||||
TOTAL ASSETS | $ 6,583 | $ 6,583 | $ 6,005 | ||
Summarized Information | |||||
Net sales to external customers | 3,018 | $ 2,947 | 8,856 | $ 8,639 | |
Total consolidated operating earnings | 380 | 338 | 744 | 1,081 | |
United States [Member] | |||||
Summarized Information | |||||
Net sales to external customers | 2,216 | 2,146 | 6,441 | 6,272 | |
Canada [Member] | |||||
Summarized Information | |||||
Net sales to external customers | 116 | 129 | 352 | 400 | |
United States And Canada Segments [Member] | |||||
Summarized Information | |||||
Net sales to external customers | 2,332 | 2,275 | 6,793 | 6,672 | |
Other Businesses [Member] | |||||
Summarized Information | |||||
Net sales to external customers | 686 | 672 | 2,063 | 1,967 | |
Segment Balances Before Intersegment Eliminations and Consolidation Reconciling Items [Member] | |||||
Segment Reporting Information [Line Items] | |||||
TOTAL ASSETS | 3,210 | 3,210 | 2,841 | ||
Summarized Information | |||||
Net sales to external customers | 3,150 | 3,079 | 9,240 | 9,017 | |
Total consolidated operating earnings | 400 | 373 | 952 | 1,171 | |
Segment Balances Before Intersegment Eliminations and Consolidation Reconciling Items [Member] | United States [Member] | |||||
Segment Reporting Information [Line Items] | |||||
TOTAL ASSETS | 3,044 | 3,044 | 2,668 | ||
Summarized Information | |||||
Net sales to external customers | 2,347 | 2,277 | 6,823 | 6,648 | |
Total consolidated operating earnings | 354 | 343 | 1,012 | 1,088 | |
Segment Balances Before Intersegment Eliminations and Consolidation Reconciling Items [Member] | Canada [Member] | |||||
Segment Reporting Information [Line Items] | |||||
TOTAL ASSETS | 166 | 166 | $ 173 | ||
Summarized Information | |||||
Net sales to external customers | 116 | 129 | 352 | 400 | |
Total consolidated operating earnings | 2 | 0 | (4) | (4) | |
Segment Balances Before Intersegment Eliminations and Consolidation Reconciling Items [Member] | United States And Canada Segments [Member] | |||||
Summarized Information | |||||
Net sales to external customers | 2,463 | 2,406 | 7,175 | 7,048 | |
Total consolidated operating earnings | 356 | 343 | 1,008 | 1,084 | |
Segment Balances Before Intersegment Eliminations and Consolidation Reconciling Items [Member] | Other Businesses [Member] | |||||
Summarized Information | |||||
Net sales to external customers | 687 | 673 | 2,065 | 1,969 | |
Total consolidated operating earnings | 44 | 30 | (56) | 87 | |
Intersegment Eliminations [Member] | |||||
Summarized Information | |||||
Net sales to external customers | (132) | (132) | (384) | (378) | |
Intersegment Eliminations [Member] | United States [Member] | |||||
Summarized Information | |||||
Net sales to external customers | (131) | (131) | (382) | (376) | |
Intersegment Eliminations [Member] | Canada [Member] | |||||
Summarized Information | |||||
Net sales to external customers | 0 | 0 | 0 | 0 | |
Intersegment Eliminations [Member] | United States And Canada Segments [Member] | |||||
Summarized Information | |||||
Net sales to external customers | (131) | (131) | (382) | (376) | |
Intersegment Eliminations [Member] | Other Businesses [Member] | |||||
Summarized Information | |||||
Net sales to external customers | $ (1) | $ (1) | $ (2) | $ (2) |
SEGMENT INFORMATION - Schedule
SEGMENT INFORMATION - Schedule of Reconciliation of Operating Earnings from Segment to Consolidated (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
Segment Reporting Information [Line Items] | |||||
Total consolidated operating earnings | $ 380 | $ 338 | $ 744 | $ 1,081 | |
Assets | 6,583 | 6,583 | $ 6,005 | ||
Net sales | 3,018 | 2,947 | 8,856 | 8,639 | |
Segment Balances Before Intersegment Eliminations and Consolidation Reconciling Items [Member] | |||||
Segment Reporting Information [Line Items] | |||||
Total consolidated operating earnings | 400 | 373 | 952 | 1,171 | |
Assets | 3,210 | 3,210 | 2,841 | ||
Net sales | 3,150 | 3,079 | 9,240 | 9,017 | |
Eliminations and Unallocated in Consolidation [Member] | |||||
Segment Reporting Information [Line Items] | |||||
Total consolidated operating earnings | (20) | (35) | (208) | (90) | |
Assets | 697 | 697 | 161 | ||
Segment Reconciling Items [Member] | |||||
Segment Reporting Information [Line Items] | |||||
Assets | 2,676 | 2,676 | 3,003 | ||
Intersegment Eliminations [Member] | |||||
Segment Reporting Information [Line Items] | |||||
Net sales | (132) | (132) | (384) | (378) | |
United States And Canada Segments [Member] | |||||
Segment Reporting Information [Line Items] | |||||
Net sales | 2,332 | 2,275 | 6,793 | 6,672 | |
United States And Canada Segments [Member] | Segment Balances Before Intersegment Eliminations and Consolidation Reconciling Items [Member] | |||||
Segment Reporting Information [Line Items] | |||||
Total consolidated operating earnings | 356 | 343 | 1,008 | 1,084 | |
Net sales | 2,463 | 2,406 | 7,175 | 7,048 | |
United States And Canada Segments [Member] | Intersegment Eliminations [Member] | |||||
Segment Reporting Information [Line Items] | |||||
Net sales | (131) | (131) | (382) | (376) | |
Other Businesses [Member] | |||||
Segment Reporting Information [Line Items] | |||||
Net sales | 686 | 672 | 2,063 | 1,967 | |
Other Businesses [Member] | Segment Balances Before Intersegment Eliminations and Consolidation Reconciling Items [Member] | |||||
Segment Reporting Information [Line Items] | |||||
Total consolidated operating earnings | 44 | 30 | (56) | 87 | |
Net sales | 687 | 673 | 2,065 | 1,969 | |
Other Businesses [Member] | Intersegment Eliminations [Member] | |||||
Segment Reporting Information [Line Items] | |||||
Net sales | (1) | (1) | (2) | (2) | |
United States [Member] | |||||
Segment Reporting Information [Line Items] | |||||
Net sales | 2,216 | 2,146 | 6,441 | 6,272 | |
United States [Member] | Segment Balances Before Intersegment Eliminations and Consolidation Reconciling Items [Member] | |||||
Segment Reporting Information [Line Items] | |||||
Total consolidated operating earnings | 354 | 343 | 1,012 | 1,088 | |
Assets | 3,044 | 3,044 | 2,668 | ||
Net sales | 2,347 | 2,277 | 6,823 | 6,648 | |
United States [Member] | Intersegment Eliminations [Member] | |||||
Segment Reporting Information [Line Items] | |||||
Net sales | (131) | (131) | (382) | (376) | |
Canada [Member] | |||||
Segment Reporting Information [Line Items] | |||||
Net sales | 116 | 129 | 352 | 400 | |
Canada [Member] | Segment Balances Before Intersegment Eliminations and Consolidation Reconciling Items [Member] | |||||
Segment Reporting Information [Line Items] | |||||
Total consolidated operating earnings | 2 | 0 | (4) | (4) | |
Assets | 166 | 166 | $ 173 | ||
Net sales | 116 | 129 | 352 | 400 | |
Canada [Member] | Intersegment Eliminations [Member] | |||||
Segment Reporting Information [Line Items] | |||||
Net sales | $ 0 | $ 0 | $ 0 | $ 0 |
SEGMENT INFORMATION - Schedul_2
SEGMENT INFORMATION - Schedule of Reconciliation of Assets from Segment to Consolidated (Details) - USD ($) $ in Millions | Sep. 30, 2020 | Dec. 31, 2019 |
Segment Reporting Information [Line Items] | ||
TOTAL ASSETS | $ 6,583 | $ 6,005 |
Segment Balances Before Intersegment Eliminations and Consolidation Reconciling Items [Member] | ||
Segment Reporting Information [Line Items] | ||
TOTAL ASSETS | 3,210 | 2,841 |
Segment Reconciling Items [Member] | ||
Segment Reporting Information [Line Items] | ||
TOTAL ASSETS | 2,676 | 3,003 |
Eliminations and Unallocated in Consolidation [Member] | ||
Segment Reporting Information [Line Items] | ||
TOTAL ASSETS | 697 | 161 |
United States [Member] | Segment Balances Before Intersegment Eliminations and Consolidation Reconciling Items [Member] | ||
Segment Reporting Information [Line Items] | ||
TOTAL ASSETS | 3,044 | 2,668 |
Canada [Member] | Segment Balances Before Intersegment Eliminations and Consolidation Reconciling Items [Member] | ||
Segment Reporting Information [Line Items] | ||
TOTAL ASSETS | $ 166 | $ 173 |