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W.W. GRAINGER, INC. — Interim / Quarterly Report 2004
May 7, 2004
30040_10-q_2004-05-07_a507d5e3-a7c9-4b0a-9c63-c8e72bcd2b84.zip
Interim / Quarterly Report
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10-Q 1 form10q1q2004.htm FORM 10Q FOR THE PERIOD ENDED MARCH 31, 2004 MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default"
UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q
MARKER FORMAT-SHEET="Head Major Center Bold 1" FSL="Default"
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2004
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _ TO _
Commission File Number 1-5684 W.W. Grainger, Inc. (Exact name of registrant as specified in its charter)
Illinois (State or other jurisdiction of incorporation or organization) 36-1150280 (I.R.S. Employer Identification No.)
100 Grainger Parkway, Lake Forest, Illinois (Address of principal executive offices) 60045-5201 (Zip Code)
(847) 535-1000 (Registrants telephone number including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ___ X _ No ____ MARKER FORMAT-SHEET="Para Flush" FSL="Default" MARKER FORMAT-SHEET="Para Flush" FSL="Default"
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes ___ X _ No ____ MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default"
MARKER FORMAT-SHEET="Para Flush" FSL="Default"
| APPLICABLE ONLY TO
CORPORATE ISSUERS: |
| --- |
| Indicate the number of shares
outstanding of each of the issuers classes of common stock, as of the latest
practicable date: 90,868,476 shares of the Companys Common Stock were outstanding as
of April 30, 2004. |
1
| TABLE OF CONTENTS | Page No. | |
|---|---|---|
| PART I | FINANCIAL INFORMATION | |
| Item 1. | Financial Statements (Unaudited) | |
| Condensed Consolidated Statements of Earnings for the Three Months Ended March 31, 2004 and March 31, 2003 | 3 | |
| Condensed Consolidated Statements of Comprehensive Earnings for the Three Months Ended March 31, 2004 and March 31, 2003 | 4 | |
| Condensed Consolidated Balance Sheets as of March 31, 2004 and December 31, 2003 | 5 - 6 | |
| Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2004 and March 31, 2003 | 7 - 8 | |
| Notes to Condensed Consolidated Financial Statements | 9 - 14 | |
| Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations | 15 - 20 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 21 |
| Item 4. | Controls and Procedures | 21 |
| PART II | OTHER INFORMATION | |
| Item 2. | Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities | 22 |
| Item 4. | Submission of Matters to a Vote of Security Holders | 23 |
| Item 6. | Exhibits and Reports on Form 8-K | 23 - 24 |
| Signatures | 25 | |
| Exhibit 11 | Computations of Earnings Per Share | |
| Certifications |
2
MARKER FORMAT-SHEET="Head Left-TNR" FSL="Project"
PART I FINANCIAL INFORMATION
MARKER FORMAT-SHEET="Head Left-TNR" FSL="Project"
Item 1. Financial Statements (Unaudited)
MARKER FORMAT-SHEET="Head Minor Center-TNR" FSL="Project"
W.W. Grainger, Inc. and Subsidiaries CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (In thousands of dollars, except for per share amounts) (Unaudited)
| Three Months Ended March 31, — 2004 | 2003 | |||
|---|---|---|---|---|
| Net sales | $ 1,227,799 | $ | 1,139,269 | |
| Cost of merchandise sold | 780,334 | 729,160 | ||
| Gross profit | 447,465 | 410,109 | ||
| Warehousing, marketing and administrative expenses | 346,717 | 318,702 | ||
| Operating earnings | 100,748 | 91,407 | ||
| Other income and (expense) | ||||
| Interest income | 1,232 | 773 | ||
| Interest expense | (1,413 | ) | (1,435 | ) |
| Equity in loss of unconsolidated entities net | (345 | ) | (1,055 | ) |
| Gain on sale of unconsolidated entity | 750 | -- | ||
| Unclassified net | 141 | (1,646 | ) | |
| Net other income and (expense) | 365 | (3,363 | ) | |
| Earnings before income taxes | 101,113 | 88,044 | ||
| Income taxes | 38,554 | 35,640 | ||
| Net earnings | $ 62,559 | $ | 52,404 | |
| Earnings per share: | ||||
| Basic | $ 0.69 | $ | 0.58 | |
| Diluted | $ 0.69 | $ | 0.57 | |
| Weighted average number of shares outstanding: | ||||
| Basic | 90,219,290 | 90,865,346 | ||
| Diluted | 91,273,433 | 92,584,753 | ||
| Cash dividends paid per share | $ 0.185 | $ | 0.180 |
MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Default"
The accompanying notes are an integral part of these financial statements.
3
MARKER FORMAT-SHEET="Head Minor Center-TNR" FSL="Project"
W.W. Grainger, Inc. and Subsidiaries CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS (In thousands of dollars) (Unaudited)
| Three Months Ended March 31, — 2004 | 2003 | |||
|---|---|---|---|---|
| Net earnings | $ 62,559 | $ | 52,404 | |
| Other comprehensive (losses) earnings net of income taxes: | ||||
| Foreign currency translation adjustments, net of tax | ||||
| (expense) benefit related to designated hedge of | ||||
| $(613) and $3,118, respectively | (2,446 | ) | 12,349 | |
| (Losses) on investment securities: | ||||
| Unrealized holding losses, net of tax benefit of $0 | ||||
| and $795, respectively | -- | (1,243 | ) | |
| Reclassifications for net losses included in | ||||
| earnings, net of tax (benefit) of $0 and | ||||
| $(629), respectively | -- | 985 | ||
| (2,446 | ) | 12,091 | ||
| Comprehensive earnings | $ 60,113 | $ | 64,495 |
MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Default"
The accompanying notes are an integral part of these financial statements.
4
MARKER FORMAT-SHEET="Head Minor Center-TNR" FSL="Project"
W.W. Grainger, Inc. and Subsidiaries CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands of dollars, except for per share amounts)
| ASSETS | (Unaudited) March 31, 2004 | Dec. 31, 2003 |
|---|---|---|
| CURRENT ASSETS | ||
| Cash and cash equivalents | $ 434,732 | $ 402,824 |
| Accounts receivable (less allowances for doubtful | ||
| accounts of $26,896 and $24,736, respectively) | 472,971 | 431,896 |
| Inventories | 654,107 | 661,247 |
| Prepaid expenses and other assets | 52,451 | 37,947 |
| Deferred income taxes | 101,434 | 99,499 |
| Total current assets | 1,715,695 | 1,633,413 |
| PROPERTY, BUILDINGS AND EQUIPMENT | 1,550,552 | 1,545,150 |
| Less accumulated depreciation and amortization | 831,652 | 813,158 |
| Property, buildings and equipmentnet | 718,900 | 731,992 |
| DEFERRED INCOME TAXES | 15,885 | 20,296 |
| INVESTMENTS IN UNCONSOLIDATED ENTITIES | 22,253 | 22,822 |
| GOODWILL, NET | 155,045 | 156,268 |
| OTHER ASSETS AND INTANGIBLES, NET | 57,800 | 59,887 |
| TOTAL ASSETS | $ 2,685,578 | $ 2,624,678 |
5
MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Default"
W.W. Grainger, Inc. and Subsidiaries CONDENSED CONSOLIDATED BALANCE SHEETS (Continued) (In thousands of dollars, except for per share amounts)
| LIABILITIES AND SHAREHOLDERS EQUITY | (Unaudited) March 31, 2004 | |||
|---|---|---|---|---|
| CURRENT LIABILITIES | ||||
| Current maturities of long-term debt | $ 142,562 | $ | 144,135 | |
| Trade accounts payable | 312,321 | 257,806 | ||
| Accrued expenses | 223,148 | 261,009 | ||
| Income taxes | 72,982 | 43,690 | ||
| Total current liabilities | 751,013 | 706,640 | ||
| LONG-TERM DEBT (less current maturities) | 4,895 | 4,895 | ||
| ACCRUED EMPLOYMENT-RELATED BENEFITS COSTS | 71,556 | 68,008 | ||
| SHAREHOLDERS EQUITY | ||||
| Cumulative Preferred Stock $5 par value | ||||
| 12,000,000 shares authorized; | ||||
| none issued nor outstanding | -- | -- | ||
| Common Stock $0.50 par value | ||||
| 300,000,000 shares authorized; | ||||
| issued, 109,481,299 and | ||||
| 109,377,216 shares, respectively | 54,741 | 54,689 | ||
| Additional contributed capital | 398,945 | 394,409 | ||
| Retained earnings | 2,288,457 | 2,242,762 | ||
| Unearned restricted stock compensation | (9,812 | ) | (11,471 | ) |
| Accumulated other comprehensive earnings | 148 | 2,594 | ||
| Treasury stock, at cost | ||||
| 19,139,357 and 18,356,227 shares, respectively | (874,365 | ) | (837,848 | ) |
| Total shareholders equity | 1,858,114 | 1,845,135 | ||
| TOTAL LIABILITIES AND SHAREHOLDERS EQUITY | $ 2,685,578 | $ | 2,624,678 |
MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Default"
The accompanying notes are an integral part of these financial statements.
6
MARKER FORMAT-SHEET="Head Minor Center-TNR" FSL="Project"
W.W. Grainger, Inc. and Subsidiaries CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands of dollars) (Unaudited)
| Three Months Ended March 31, — 2004 | 2003 | |||
|---|---|---|---|---|
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||
| Net earnings | $ 62,559 | $ 52,404 | ||
| Provision for losses on accounts receivable | 4,196 | 3,901 | ||
| Deferred income taxes | 1,863 | (2,490 | ) | |
| Depreciation and amortization: | ||||
| Property, buildings and equipment | 22,471 | 19,823 | ||
| Other intangibles | 488 | 161 | ||
| Capitalized software | 3,394 | 4,912 | ||
| Tax benefit of stock incentive plans | 546 | 257 | ||
| Net losses (gains) on sales of property, buildings and | ||||
| equipment | 48 | (137 | ) | |
| Gain on sale of unconsolidated entity | (750 | ) | -- | |
| Write-downs of investments | -- | 1,614 | ||
| Losses on unconsolidated entities | 345 | 1,055 | ||
| Change in operating assets and liabilities: | ||||
| (Increase) in accounts receivable | (45,805 | ) | (32,318 | ) |
| Decrease in inventories | 6,010 | 21,693 | ||
| (Increase) in prepaid expenses | (14,496 | ) | (16,089 | ) |
| Increase in trade accounts payable | 54,856 | 9,110 | ||
| (Decrease) in other current liabilities | (37,664 | ) | (44,638 | ) |
| Increase in current income taxes payable | 29,330 | 25,508 | ||
| Increase in accrued employment-related benefit costs | 3,548 | 3,760 | ||
| Othernet | 1,828 | 1,128 | ||
| Net cash provided by operating activities | $ 92,767 | $ 49,654 | ||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||
| Additions to property, buildings and | ||||
| equipmentnet of dispositions | $ (9,792 | ) | $ (19,709 | ) |
| Additions to capitalized software | (1,433 | ) | (2,004 | ) |
| Investments in unconsolidated entities | -- | (3,564 | ) | |
| Othernet | 975 | 179 | ||
| Net cash used in investing activities | $ (10,250 | ) | $ (25,098 | ) |
MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Default"
The accompanying notes are an integral part of these financial statements.
7
MARKER FORMAT-SHEET="Head Minor Center-TNR" FSL="Project"
W.W. Grainger, Inc. and Subsidiaries CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) (In thousands of dollars) (Unaudited)
| Three Months Ended March 31, — 2004 | 2003 | |||
|---|---|---|---|---|
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||
| Net decrease in short-term debt | $ -- | $ (174 | ) | |
| Long-term debt payments | (4 | ) | (123 | ) |
| Stock options exercised | 3,391 | 1,574 | ||
| Purchase of treasury stocknet | (36,633 | ) | (502 | ) |
| Cash dividends paid | (16,864 | ) | (16,504 | ) |
| Net cash used in financing activities | $ (50,110 | ) | $ (15,729 | ) |
| Exchange rate effect on cash and cash equivalents | (499 | ) | 1,230 | |
| NET INCREASE IN CASH AND CASH EQUIVALENTS | 31,908 | 10,057 | ||
| Cash and cash equivalents at beginning of year | 402,824 | 208,528 | ||
| Cash and cash equivalents at end of period | $ 434,732 | $ 218,585 |
MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Default"
The accompanying notes are an integral part of these financial statements.
8
MARKER FORMAT-SHEET="Head Minor Center-TNR" FSL="Project"
W.W. Grainger, Inc. and Subsidiaries NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
MARKER FORMAT-SHEET="Para (List) Flush Lv 0- TNR" FSL="Project"
1. BACKGROUND AND BASIS OF STATEMENT PRESENTATION
MARKER FORMAT-SHEET="Para (List) Flush Lv 0- TNR" FSL="Project"
W.W. Grainger, Inc. is engaged in the distribution of facilities maintenance products, services and related information used by businesses and institutions in North America. The words Company or Grainger mean W.W. Grainger, Inc. and its subsidiaries in this report.
MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project"
The Condensed Consolidated Financial Statements of the Company and the related notes are unaudited and should be read in conjunction with the consolidated financial statements and related notes for the year ended December 31, 2003, included in the Companys Annual Report on Form 10-K filed with the Securities and Exchange Commission.
MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project"
The Condensed Consolidated Balance Sheet as of December 31, 2003, has been derived from the audited financial statements at that date, but does not include all of the disclosures required by accounting principles generally accepted in the United States of America for complete financial statements.
MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project"
The unaudited financial information reflects all adjustments, which in the opinion of management, are necessary for a fair presentation of the statements contained herein. Certain prior period amounts have been reclassified to conform to the current years presentation.
MARKER FORMAT-SHEET="Para (List) Flush Lv 0- TNR" FSL="Project"
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
MARKER FORMAT-SHEET="Head Left-TNR" FSL="Project"
STOCK INCENTIVE PLANS
MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Default"
The Company maintains various stock incentive plans. The Company accounts for these plans under the recognition and measurement principles of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. The Company recognizes compensation cost for restricted shares and restricted stock units granted to employees. No compensation cost is recognized for stock option grants. All options granted under the Companys plans had an exercise price equal to the market value of the underlying common stock on the date of grant. The following table illustrates the effect on net earnings and earnings per share if the Company had applied the fair value recognition provisions of Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation, to stock-based compensation. The following table also provides the amount of stock-based compensation cost included in net earnings as reported.
9
MARKER FORMAT-SHEET="Head Minor Center-TNR" FSL="Default"
W.W. Grainger, Inc. and Subsidiaries NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited)
| Three Months Ended March 31, — 2004 | 2003 | |||
|---|---|---|---|---|
| (In thousands of dollars, except for per share amounts) | ||||
| Net earnings, as reported | $ 62,559 | $ | 52,404 | |
| Deduct: Total stock-based employee compensation | ||||
| expense determined under the fair value based | ||||
| method for all awards, net of related tax | (4,857 | ) | (4,517 | ) |
| Add: Stock-based employee compensation cost, net | ||||
| of related tax, included in net earnings, as | ||||
| reported | 1,717 | 1,075 | ||
| Net earnings, pro forma | $ 59,419 | $ | 48,962 | |
| Earnings per share: | ||||
| Basicas reported | $ 0.69 | $ | 0.58 | |
| Basicpro forma | $ 0.66 | $ | 0.54 | |
| Dilutedas reported | $ 0.69 | $ | 0.57 | |
| Dilutedpro forma | $ 0.65 | $ | 0.53 |
MARKER FORMAT-SHEET="Head Left-TNR" FSL="Project"
VENDOR CONSIDERATION
MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Default"
The Emerging Issues Task Force (EITF) issued Accounting by a Customer (Including a Reseller) for Certain Consideration Received from a Vendor, (Issue 02-16) in November 2002 with transition provisions subsequently issued in January 2003. The January 2003 transition rules stated that Issue 02-16 would apply to all agreements entered into or significantly modified after December 31, 2002. The Companys accounting treatment for vendor provided funds was consistent with Issue 02-16, with the exception of vendor funded advertising allowances. The Company had previously accounted for these allowances as an offset to operating (advertising) expenses. Under Issue 02-16, this method is allowable if the allowances are for specific, identifiable and incremental costs incurred by the Company in marketing its vendors products. The Company provides numerous advertising programs to promote its vendors products, including catalogs and other printed media, Internet and other marketing programs. Most of these programs relate to multiple vendors, which makes supporting the specific, identifiable and incremental criteria difficult, and would require numerous assumptions and judgments. Based on the inexact nature of trying to track reimbursements to the exact advertising expenditure for each vendor, the Company treats most vendor advertising allowances as a reduction of cost of merchandise sold rather than a reduction of operating (advertising) expenses. This change does not have any effect on net earnings.
10
MARKER FORMAT-SHEET="Head Minor Center-TNR" FSL="Project"
W.W. Grainger, Inc. and Subsidiaries NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited)
MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project"
For 2004, as new vendor contracts become effective, most vendor allowances will be classified in cost of merchandise sold rather than in operating (advertising) expenses. The Company has made reclassifications to the prior period to maintain comparability. As a result, cost of merchandise sold was reduced and operating (advertising) expenses were increased by $16.3 million in the first quarter of 2003.
MARKER FORMAT-SHEET="Head Left-TNR" FSL="Project"
NEW ACCOUNTING PRONOUNCEMENTS
MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project"
In January 2003, the FASB initially issued Interpretation No. 46 (FIN 46), Consolidation of Variable Interest Entities. FIN 46 was revised in December 2003, when the FASB issued FASB Interpretation No. 46 (revised December 2003) (FIN 46R), Consolidation of Variable Interest Entities. FIN 46R is an interpretation of Accounting Research Bulletin No. 51, Consolidated Financial Statements, that replaces FIN 46 and revises the requirements for consolidation by business enterprises of variable interest entities with specific characteristics. The new consolidation requirements related to variable interest entities are required to be adopted no later than the first reporting period that ends after March 15, 2004 (as of March 31, 2004, for the Company). The Company adopted the provisions of FIN 46R as of January 1, 2004, and adoption did not have an effect on its results of operations or financial position.
MARKER FORMAT-SHEET="Para (List) Flush Lv 0- TNR" FSL="Project"
3. SPECIAL CHARGES
MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project"
In 2001, the Company shut down the operations of Material Logic, with the exception of FindMRO, and wrote down its investment in other digital activities. In connection with this shut down, the Company took a pretax charge against operating earnings of $39.1 million (after-tax $23.2 million) in 2001. The Company provided a comprehensive separation package, including outplacement services, to 166 employees whose jobs were eliminated. Severance payments began in July 2001 and will continue until June 2004, when the last severance package expires. Other shut down costs include lease obligations which, if not settled earlier, will continue through June 2004.
MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Default"
The following table shows the activity and balance of the Material Logic restructuring reserve for the first quarter 2004:
| Balance Dec. 31, 2003 | Deductions | Balance Mar. 31, 2004 | ||
|---|---|---|---|---|
| (In thousands of dollars) | ||||
| Restructuring Reserve (operating expenses) | ||||
| Workforce reductions | $ 422 | $ (163 | ) | $ 259 |
| Other shutdown costs | 206 | (75 | ) | 131 |
| $ 628 | $ (238 | ) | $ 390 |
MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Default"
Deductions reflect cash payments.
11
MARKER FORMAT-SHEET="Head Minor Center-TNR" FSL="Project"
W.W. Grainger, Inc. and Subsidiaries NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited)
MARKER FORMAT-SHEET="Head Left-TNR" FSL="Project"
4. DIVIDEND
MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project"
On April 28, 2004, the Board of Directors declared a quarterly dividend of 20 cents per share, payable June 1, 2004 to shareholders of record on May 10, 2004. This represents an 8.1% increase from the prior quarterly rate of 18½ cents per share.
MARKER FORMAT-SHEET="Head Left-TNR" FSL="Project"
5. GUARANTEES
MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project"
The Company has an outstanding guarantee related to an industrial development revenue bond assumed by the buyer of one of the Companys formerly owned facilities. The maximum exposure under this guarantee is $8.5 million. The Company has not recorded any liability relating to this guarantee and believes it is unlikely that material payments will be required.
MARKER FORMAT-SHEET="Head Left-TNR" FSL="Project"
WARRANTY RESERVES
MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Default"
The Company generally warrants the products it sells against defects for one year. For a significant portion of warranty claims, the manufacturer is responsible for the expenses associated with this warranty program. For those warranty expenses not covered by the manufacturer, the Company provides a reserve for future costs based on historical experience. The reserve activity was as follows:
| Three Months Ended March 31, — 2004 | 2003 | |||
|---|---|---|---|---|
| (In thousands of dollars) | ||||
| Beginning balance | $ 2,863 | $ | 3,000 | |
| Returns | (2,760 | ) | (2,239 | ) |
| Provision | 2,709 | 2,203 | ||
| Ending balance | $ 2,812 | $ | 2,964 |
MARKER FORMAT-SHEET="Para (List) Flush Lv 0- TNR" FSL="Project"
6. EMPLOYEE BENEFITS
MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Default"
The Company has a postretirement healthcare benefits plan that provides coverage for a majority of its retired employees and their dependents should they elect to maintain such coverage. Covered employees become eligible for participation when they qualify for retirement while working for the Company. Participation in the plan is voluntary and requires participants to make contributions toward the cost of the plan, as determined by the Company. The Company uses a December 31 measurement date for its postretirement healthcare benefits plan.
12
MARKER FORMAT-SHEET="Head Minor Center-TNR" FSL="Project"
W.W. Grainger, Inc. and Subsidiaries NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited)
MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Default"
The net periodic benefits costs charged to operating expenses included the following components:
| Three Months Ended March 31, — 2004 | 2003 | |||
|---|---|---|---|---|
| (In thousands of dollars) | ||||
| Service cost | $ 1,893 | $ | 1,616 | |
| Interest cost | 1,628 | 1,415 | ||
| Expected return on assets | (516 | ) | (270 | ) |
| Amortization of transition asset | (36 | ) | (36 | ) |
| Amortization of prior service cost | (215 | ) | (160 | ) |
| Amortization of unrecognized losses | 634 | 500 | ||
| Net periodic benefits costs | $ 3,388 | $ | 3,065 |
MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Project"
The Company has established a group benefit trust to fund the plan and process benefit payments. During the quarter, the Company contributed $2.9 million to the trust. The funding of the trust is an estimated amount, which is intended to allow the maximum deductible contribution under the Internal Revenue Code of 1986 (IRC), as amended. There are no minimum funding requirements and the Company intends to follow its practice of funding the maximum deductible contribution under the IRC.
MARKER FORMAT-SHEET="Para (List) Flush Lv 0- TNR" FSL="Default"
7. SEGMENT INFORMATION
| Three Months Ended March 31, 2004 — Branch-based Distribution | Lab Safety | Integrated Supply | Total | ||||
|---|---|---|---|---|---|---|---|
| (In thousands of dollars) | |||||||
| Total net sales | $ 1,088,172 | $ | 85,779 | $ | 58,913 | $ 1,232,864 | |
| Intersegment net sales | (4,639 | ) | (426 | ) | -- | (5,065 | ) |
| Net sales to external customers | $ 1,083,533 | $ | 85,353 | $ | 58,913 | $ 1,227,799 | |
| Segment operating earnings | $ 106,093 | $ | 11,814 | $ | 1,053 | $ 118,960 |
| Three Months Ended March 31, 2003 — Branch-based Distribution | Lab Safety | Integrated Supply | Total | ||||
|---|---|---|---|---|---|---|---|
| (In thousands of dollars) | |||||||
| Total net sales | $ 1,014,872 | $ | 71,489 | $ | 57,272 | $ 1,143,633 | |
| Intersegment net sales | (3,929 | ) | (435 | ) | -- | (4,364 | ) |
| Net sales to external customers | $ 1,010,943 | $ | 71,054 | $ | 57,272 | $ 1,139,269 | |
| Segment operating earnings | $ 91,025 | $ | 10,853 | $ | 1,134 | $ 103,012 |
13
MARKER FORMAT-SHEET="Head Minor Center-TNR" FSL="Default"
W.W. Grainger, Inc. and Subsidiaries NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited)
| Segment assets: | Branch-based Distribution | Lab Safety | Integrated Supply | Total |
|---|---|---|---|---|
| (In thousands of dollars) | ||||
| At March 31, 2004 | $ 1,874,422 | $ 146,504 | $ 38,184 | $ 2,059,110 |
| At December 31, 2003 | $ 1,851,640 | $ 142,466 | $ 40,094 | $ 2,034,200 |
MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Default"
Following is a reconciliation of segment information with the consolidated totals per the financial statements:
| Three Months Ended March 31, — 2004 | 2003 | |||
|---|---|---|---|---|
| (In thousands of dollars) | ||||
| Total operating earnings for reportable segments | $ 118,960 | $ | 103,012 | |
| Unallocated expenses | (18,211 | ) | (11,605 | ) |
| Elimination of intersegment profits | (1 | ) | -- | |
| Total consolidated operating earnings | $ 100,748 | $ | 91,407 |
| March 31, 2004 | December 31, 2003 | |
|---|---|---|
| (In thousands of dollars) | ||
| Assets | ||
| Total assets for reportable segments | $ 2,059,110 | $ 2,034,200 |
| Unallocated assets | 626,468 | 590,478 |
| Total consolidated assets | $ 2,685,578 | $ 2,624,678 |
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Unallocated expenses and unallocated assets primarily relate to the Companys support services, which are not part of any business segment. Unallocated expenses include payroll and benefits, depreciation and other costs associated with headquarters-related support services. Unallocated assets include non-operating cash and cash equivalents, and certain prepaid expenses and property, buildings and equipmentnet. Unallocated expenses increased $6.6 million in the first quarter of 2004 primarily due to the recognition of $5.9 million in severance and benefits related to organizational changes.
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Item 2.
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W.W. Grainger, Inc. and Subsidiaries MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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Overview General Grainger is the leading broad-line supplier of facilities maintenance products in North America. Grainger reports its operating results in three segments: Branch-based Distribution, Lab Safety and Integrated Supply. Grainger distributes a wide range of products used by businesses and institutions to keep their facilities and equipment up and running. Grainger uses a multichannel business model to provide customers with a range of options for finding and purchasing products through a network of branches, field sales forces, direct marketing including catalogs and a variety of electronic and Internet channels. Grainger serves customers through a network of 573 branches, 17 distribution centers and multiple Web sites.
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Business Environment Several economic factors and industry trends shape Graingers business. In the first quarter of 2004, economic indicators showed improvement with industrial production growth and increases in employment. Expectations are for continued expansion in the manufacturing sector. Graingers sales to manufacturers tend to correlate more with employment levels than with manufacturing output, so job creation, in addition to manufacturing production, is an indicator of potential sales growth.
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Additionally, Grainger continues to focus on government and commercial customers, including healthcare institutions. Sales to both government and national accounts increased in the first quarter of 2004 when compared with the first quarter of 2003. Graingers market expansion program is expected to reach more customer groups by increasing the size and number of branches, expanding local availability of products and adding local sales professionals in high potential markets.
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For the full year 2004, Grainger now anticipates capital expenditures of no more than $200 million, in part because a higher number of branches in the market expansion program may be leased rather than purchased. In the first quarter of 2004, approximately $10 million of capital expenditures related to its branch network and information technology initiatives were incurred. Expenditures for these initiatives are expected to increase significantly in subsequent quarters.
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Matters Affecting Comparability Graingers operating results for the first quarter of 2004 include the operating results of Gemplers. Gemplers was acquired and included in the Lab Safety segment from the acquisition date of April 14, 2003.
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The first quarter of 2004 had one additional selling day than the prior year with 64 sales days in 2004 compared with 63 sales days in 2003.
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W.W. Grainger, Inc. and Subsidiaries MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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Results of Operations The following table is included as an aid to understanding the changes in Graingers Condensed Consolidated Statements of Earnings.
| Items in Condensed Consolidated | ||||
| Statements of Earnings as a | ||||
| Percent of Net Sales | ||||
| 2004 | 2003 | Percent Increase/ (Decrease) | ||
| Net sales | 100.0 % | 100.0 | % | 7.8 % |
| Cost of merchandise sold | 63.6 | 64.0 | 7.0 | |
| Operating expenses | 28.2 | 28.0 | 8.8 | |
| Operating earnings | 8.2 | 8.0 | 10.2 | |
| Other income (expense) | -- | (0.3 | ) | 110.9 |
| Income taxes | 3.1 | 3.1 | 8.2 | |
| Net earnings | 5.1 | 4.6 | 19.4 |
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Graingers net sales of $1,227.8 million in the first quarter of 2004 increased 7.8% compared with sales of $1,139.3 million for the comparable 2003 quarter, resulting from a strengthening in the economy, as well as from one additional sales day. On a daily basis, sales grew 6.1% over the 2003 quarter. Net sales increased across all three segments of the business.
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Gross profit margin in the quarter improved to 36.4% from 36.0% principally due to improved product costs, the positive effect of favorable product mix and selected price increases, partially offset by an unfavorable change in selling price category mix. Operating earnings for the first three months of 2004 totaled $100.7 million, an increase of 10.2% over the first three months of 2003. Increases were realized in the Branch-based Distribution and Lab Safety segments, partially offset by lower operating earnings in the Integrated Supply segment and the recognition of $5.9 million in severance and benefits related to organizational changes.
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Net earnings for the first quarter of 2004 increased by 19.4% to $62.6 million from $52.4 million in 2003. Diluted earnings per share of $0.69 in the first quarter 2004 was 21.1% higher than $0.57 for the first quarter of 2003. The growth in the quarter resulted from a strengthening in the economy, as well as a reduced tax rate for the Company.
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Segment Analysis The following comments at the segment level refer to external and intersegment net sales. Comments at the business unit level include external and inter- and intrasegment net sales. See Note 7 to the Condensed Consolidated Financial Statements.
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W.W. Grainger, Inc. and Subsidiaries MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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Branch-based Distribution Net sales in the Branch-based Distribution segment of $1,088.2 million increased by 7.2% in the first quarter of 2004 compared to net sales of $1,014.9 million in the first quarter of 2003. Sales in the United States were up 6.3% due to the strengthening of the economy and an additional sales day. Increases were also realized in government and national accounts, up 9% and 7%, respectively, in the first quarter. All other customer accounts combined were up 5%.
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Sales processed through the grainger.com Web site were $143.4 million for the first quarter of 2004, an increase of 24.7% over first quarter of 2003 sales of $115.0 million.
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Net sales in Canada in the first three months of 2004 were 15.0% higher than the comparable three months of 2003 due to a favorable exchange rate. On a daily basis, sales were up 13.2%, however, in local currency, this business experienced a 1.0% decline. Sales in Mexico increased 13.1% in the first quarter of 2004, 11.4% on a daily basis, driven by increased Internet sales, telesales and the effect of two branch expansions that occurred late in the first quarter of 2003.
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The gross profit margin increased 0.5 percentage points in the 2004 first quarter over the comparable quarter of 2003. Improved product costs, the positive effect of product mix and selected price increases, partially offset by an unfavorable change in selling price category mix, contributed to the increased gross profit margin in the quarter.
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Operating expenses were up 6.2% in the quarter, however, this rate of increase was lower than the rate of sales growth. Lower spending on advertising and data processing was partially offset by higher payroll and benefits, which increased at a faster rate than sales due to higher accruals for profit sharing and bonuses, as well as to increases for contract services due to the acceleration of the SAP installation.
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Operating earnings of $106.1 million for the first quarter of 2004 increased 16.6% compared with $91.0 million for the comparable quarter of 2003. The earnings improvement resulted from higher sales and improved gross margin, combined with overall operating expenses that grew at a lower rate than sales.
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Lab Safety Net sales for Lab Safety were $85.8 million for the first quarter of 2004, an increase of $14.3 million, or 20.0%, when compared with $71.5 million for the same period in 2003. The sales growth was primarily attributable to incremental sales from Gemplers, acquired on April 14, 2003. Daily sales for the quarter were up 18.1% over 2003, excluding the acquisition, daily sales were up 0.7%.
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Sales of Gemplers products, which include the effects of a customer loyalty program that concluded this quarter, generally have lower gross margins than the rest of Lab Safetys products. This contributed to lower Lab Safety gross profit margins in the first quarter of 2004 compared with the first quarter of 2003.
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W.W. Grainger, Inc. and Subsidiaries MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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Operating expenses at Lab Safety were $3.8 million higher in the quarter due to incremental costs associated with the addition of Gemplers and increased investment in catalog media to continue strengthening its customer file.
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Operating earnings of $11.8 million in the first quarter of 2004, up 8.9% over 2003, grew at a lower rate than sales reflecting the lower gross profit margins associated with Gemplers.
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Integrated Supply Integrated Supply net sales of $58.9 million for the first three months of 2004 were up 2.9% when compared with the same period of 2003. Daily sales were up 1.3% over the prior period. Incremental sales at eight customer locations added since the first quarter of 2003 were partially offset by two site disengagements and lower volumes from existing customers. Sales included both product sales, which are passed through to the customer at cost, and management fees.
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Gross profit declined in the quarter due to lower management fees. Operating expenses increased 4.0% in the first quarter of 2004 versus the comparable quarter of 2003 due to higher payroll and benefit expenses, driven primarily by severance resulting from the site disengagements.
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Operating earnings of $1.1 million for Integrated Supply declined 7.1% in the quarter, the result of lower management fees combined with increased operating expenses for severance.
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Other Income and Expense Other income and expense was $0.4 million of income in the first quarter of 2004 compared with $3.4 million of expense in the first quarter of 2003. The following table summarizes the components of other income and expense:
| Three Months Ended March 31, — 2004 | 2003 | |||
|---|---|---|---|---|
| Other income and (expense) | ||||
| Interest (expense), net of interest income | $ (181 | ) | $ (662 | ) |
| Equity in losses of unconsolidated entities, net | (345 | ) | (1,055 | ) |
| Gain on sale of unconsolidated entity | 750 | -- | ||
| Unclassified net: | ||||
| (Losses) gains on sales of fixed assets, net | (48 | ) | 137 | |
| Write-down of investments | -- | (1,614 | ) | |
| Other | 189 | (169 | ) | |
| Net other income and (expense) | $ 365 | $ (3,363 | ) |
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The first quarter of 2003 included $1.6 million in expense for the write-down of investment securities. The remaining improvement in 2004 over the comparable quarter was primarily attributable to the gain on sale of an unconsolidated entity, lower equity losses of unconsolidated entities and higher interest income.
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W.W. Grainger, Inc. and Subsidiaries MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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Income Taxes Graingers effective tax rate was 38.1% for the first quarter of 2004 and 40.5% for the comparable period of 2003. Excluding the effect of equity losses in unconsolidated entities, which are recorded net of tax, the effective income tax rate was 38.0% and 40.0% for the first quarter of 2004 and 2003, respectively. The change in the effective tax rate was primarily driven by a lower tax rate in Canada and the realization of tax loss carryforwards related to operations in Mexico and to capital losses.
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Financial Condition For the three months ended March 31, 2004, working capital of $964.7 million increased by $37.9 million when compared to the $926.8 million at December 31, 2003. The ratio of current assets to current liabilities was 2.3 at March 31, 2004, unchanged from year-end December 31, 2003.
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Net cash flows provided by operating activities of $92.8 million and $49.7 million in the first quarter of 2004 and 2003, respectively, continued to serve as the primary source of funding operations including growth initiatives, capital expenditures and payment of cash dividends. Net cash provided by operations in the first quarter of 2004 increased $43.1 million over the comparable period of 2003. Net earnings of $62.6 million, up $10.2 million over the first quarter of 2003, and continued improvement in working capital management were the primary drivers of the increase in cash flow from operations in the first quarter of 2004 versus the first quarter of 2003. Changes in operating assets and liabilities resulted in a net use of cash of $4.2 million for the 2004 quarter. Trade accounts payable increased due to higher inventory purchases in March. Accounts receivable increased due to higher sales, partially offset by lower days sales outstanding and process improvements. Other current liabilities declined primarily due to the annual profit sharing contribution.
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Net cash used in investing activities was $10.3 million in the first quarter of 2004 and $25.1 million in the first quarter of 2003. For the first three months of 2004, $13.2 million was expended for property, buildings and equipment, and $1.4 million was expended for capitalized software, for a total of $14.6 million. In the first three months of 2003, $21.7 million was expended for property, buildings, equipment and capitalized software. Grainger also made $3.6 million of investments in unconsolidated entities in 2003.
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Net cash used in financing activities was $50.1 million in the first quarter of 2004 and $15.7 million in the first quarter of 2003. Graingers purchases of treasury stock were $36.1 million higher in the 2004 quarter as Grainger repurchased 785,300 shares compared with 12,000 shares in 2003. As of March 31, 2004, approximately 8.3 million shares of common stock remained available under Graingers repurchase authorization. Dividends paid to shareholders were $16.9 million and $16.5 million for the first quarter of 2004 and 2003, respectively.
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Grainger maintains a debt ratio and liquidity position that provides flexibility in funding working capital needs and long-term cash requirements. In addition to internally generated funds, Grainger has various sources of financing available, including commercial paper sales and bank borrowings under lines of credit. Total debt as a percent of total capitalization was 7.4% and 7.5% at March 31, 2004 and December 31, 2003, respectively.
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W.W. Grainger, Inc. and Subsidiaries MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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Critical Accounting Policies and Estimates The preparation of financial statements, in conformity with accounting principles generally accepted in the United States of America, requires management to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses in the financial statements. Management bases its estimates on historical experience and other assumptions, which it believes are reasonable. If actual amounts are ultimately different from these estimates, the revisions are included in Graingers results of operations for the period in which the actual amounts become known.
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Accounting policies are considered critical when they require management to make assumptions about matters that are highly uncertain at the time the estimate is made and when different estimates than those management reasonably could have made have a material impact on the presentation of Graingers financial condition, changes in financial condition or results of operations. For a description of Graingers critical accounting policies see the Companys Annual Report on Form 10-K for the year ended December 31, 2003.
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Forward-Looking Statements This document may contain forward-looking statements under the federal securities laws. The forward-looking statements relate to Graingers expected future financial results and business plans, strategies and objectives and are not historical facts. They are often identified by qualifiers such as will, continue, believes, intends, expectations, expected, anticipate or similar expressions. There are risks and uncertainties the outcome of which could cause Graingers results to differ materially from what is projected.
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Factors that may affect forward-looking statements include the following: higher product costs or other expenses; a major loss of customers; increased competitive pricing pressure on Graingers businesses; failure to develop or implement new technologies or other business strategies; the outcome of pending and future litigation and governmental proceedings; changes in laws and regulations; facilities disruptions or shutdowns; disruptions in transportation services; natural and other catastrophes; unanticipated weather conditions; and other difficulties in achieving or improving margins or financial performance.
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Trends and projections could also be affected by general industry and market conditions, gross domestic product growth rates, general economic conditions, including interest rate and currency rate fluctuations, global and other conflicts, job creation and employment levels, and other factors.
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W.W. Grainger, Inc. and Subsidiaries
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PART I FINANCIAL INFORMATION
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ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
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For a description of additional market risks of Grainger, see Item 7A: Quantitative and Qualitative Disclosures About Market Risk in the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2003.
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ITEM 4. Controls and Procedures
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(a) Evaluation of disclosure controls and procedures
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Grainger carried out an evaluation, under the supervision and with the participation of its management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of Graingers disclosure controls and procedures pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that Graingers disclosure controls and procedures were effective as of the end of the period covered by this report.
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(b) Internal control over financial reporting
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There were no changes in Graingers internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, Graingers internal control over financial reporting.
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PART II OTHER INFORMATION
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Items 1, 3 and 5 not applicable.
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Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities.
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Issuer Purchases of Equity Securities
| Period — Jan. 1 Jan. 31 | -- | Average Price Paid
per Share (A) — $ -- | -- | 9,081,700 shares |
| --- | --- | --- | --- | --- |
| Feb. 1 Feb. 29 | 141,700 | $ 47.7480 | 141,700 | 8,940,000 shares |
| Mar. 1 Mar. 31 | 643,600 | $ 46.3787 | 643,600 | 8,296,400 shares |
| Total | 785,300 | $ 46.6257 | 785,300 | 8,296,400 shares |
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(A) Average price paid per share includes any commissions paid. Activity is reported on a settlement date basis.
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All purchases were made pursuant to a share repurchase program approved by Graingers Board of Directors. As reported in Graingers Form 10-Q for the quarter ended September 30, 2002, which was filed on November 11, 2002, authority under the program was restored to 10 million shares on October 30, 2002. The program has no specified expiration date. No share repurchase plan or program expired or was terminated during the period covered by this report.
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W.W. Grainger, Inc. and Subsidiaries
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ITEM 4. Submission of Matters to a Vote of Security Holders.
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An annual meeting of shareholders of Grainger was held on April 28, 2004. At that meeting:
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Managements nominees were elected directors for the ensuing year. Of the 78,915,301 shares present in person or represented by proxy at the meeting, the number of shares voted for, and the number of shares as to which authority to vote in the election was withheld, were as follows with respect to each of the nominees:
| Name | Shares Voted for Election | Shares as to Which Voting
Authority Withheld |
| --- | --- | --- |
| B. P. Anderson W. H. Gantz D. W. Grainger R. L. Keyser F. A. Krehbiel J. W. McCarter, Jr. N. S. Novich J. D. Slavik H. B. Smith J. S. Webb | 77,527,475 77,359,804 77,941,289 77,791,984 77,165,478 77,888,974 78,153,951 76,356,753 78,028,901 77,587,585 | 1,387,826 1,555,497 974,012 1,123,317 1,749,823 1,026,327 761,350 2,558,548 886,400 1,327,716 |
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A proposal to ratify the appointment of Grant Thornton LLP as independent auditors of Grainger for the year ending December 31, 2004 was approved. Of the 78,915,301 shares present or represented by proxy at the meeting, 77,399,063 shares were voted for the proposal, 1,057,539 shares were voted against the proposal and 458,699 shares abstained from voting with respect to the proposal.
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ITEM 6. Exhibits and Reports on Form 8-K.
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(a) Exhibits (numbered in accordance with Item 601 of Regulation S-K)
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(3) (ii) By-Laws, as amended.
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(10) (a) 1990 Long Term Stock Incentive Plan, as amended.
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(b) 2001 Long Term Stock Incentive Plan, as amended.
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(c) Separation Agreement and General Release dated March 31, 2004, by and among Grainger, John W. Slayton, Jr. (who previously served as Senior Vice President, Supply Chain Management of Grainger) and Elizabeth Slayton.
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(d) Separation Agreement and General Release dated May 5, 2004, by and among, Grainger, Wesley M. Clark (who previously served as President and Chief Operating Officer of Grainger) and Deborah Clark.
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W.W. Grainger, Inc. and Subsidiaries
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(11) Computations of Earnings per Share.
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(31) Rule 13a 14(a)/15d 14(a) Certifications
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(a) Chief Executive Officer certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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(b) Chief Financial Officer certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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(32) Section 1350 Certifications
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(a) Chief Executive Officer certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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(b) Chief Financial Officer certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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(b) Reports on Form 8-K
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Grainger filed a report on Form 8-K, dated April 6, 2004, reporting under Item 5 thereof the issuance of a press release announcing a new operational structure and the plans of Wesley M. Clark, President and Chief Operating Officer, to leave Grainger. The report further announced that Mr. Clark is resigning as a director and will not stand for reelection as a director at Graingers 2004 annual meeting of shareholders.
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Grainger filed a report on Form 8-K, dated April 16, 2004, reporting under Item 12 thereof information included as exhibits to the report, consisting of a press release announcing financial results for the quarter ended March 31, 2004, and supplemental financial information for the quarter ended March 31, 2004.
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SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Date: May 6, 2004 | By: | W.W. Grainger, Inc. (Registrant) — /s/ P. O. Loux P. O. Loux, Senior Vice President, Finance and Chief Financial Officer |
|---|---|---|
| Date: May 6, 2004 | By: | /s/ J. E. Andringa J. E. Andringa, Vice President and Controller |
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