WW GRAINGER INC

Previous wording

The global economy continues to experience volatile disruptions including to the commodity, labor and transportation markets, arising from a combination of geopolitical events and various economic and financial factors. These disruptions have affected the Company's operations and may continue to affect the Company's business, financial condition and results of operations.

Current wording

The global economy continues to experience volatility and uncertainty including to the commodity, labor and transportation markets, arising from a combination of geopolitical conditions and events, and various economic and financial factors. These conditions have affected the Company's operations and may continue to affect the Company's business, financial condition and results of operations.

Previous wording

The Company continues to monitor economic conditions in the U.S. and globally, and the impact of macroeconomic pressures, including repercussions from changes in interest rates, currency exchange fluctuations, inflation and a potential recession on the Company’s business, customers, suppliers and other third parties. As a result of continued inflation, the Company has implemented strategies designed to mitigate certain adverse effects of higher costs while also remaining market price competitive. Historically, the Company’s broad and diverse customer base and the nondiscretionary nature of the Company’s products to its customers has helped to insulate it from the effects of recessionary periods in the industrial MRO market. The full extent and impact of these conditions are uncertain and cannot be predicted at this time.

Current wording

The Company continues to monitor economic conditions in the U.S. and globally, and the impact of macroeconomic pressures, including repercussions from changes in interest rates, currency exchange fluctuations, changing inflationary environment, and a potential recession on the Company’s business, customers, suppliers and other third parties. The Company has implemented strategies designed to mitigate certain adverse effects from the impact of the changing inflationary environment while remaining market price competitive. Historically, the Company’s broad and diverse customer base and the nondiscretionary nature of the Company’s products to its customers has helped to insulate it from the effects of recessionary periods in the industrial MRO market. The full extent and impact of these conditions are uncertain and cannot be predicted at this time.

Previous wording

Net sales of $4,235 million for the three months ended March 31, 2024 increased $144 million, or 4%, and on a daily, organic constant currency basis, net sales increased 5% compared to the same period in 2023. Both High-Touch Solutions N.A. and the Endless Assortment segments contributed to sales growth in the first quarter of 2024. For further discussion on the Company's net sales, see the Segment Analysis section below.

Current wording

Net sales of $4,312 million for the three months ended June 30, 2024 increased $130 million, or 3%, and on a daily, organic constant currency basis net sales increased 5% compared to the same period in 2023. Both High-Touch Solutions N.A. and the Endless Assortment segments contributed to sales growth in the second quarter of 2024. For further discussion on the Company's net sales, see the Segment Analysis section below.

Previous wording

Selling, general and administrative (SG&A) expenses of $999 million for the three months ended March 31, 2024 increased $45 million, or 5%, compared to the same period in 2023 driven by higher marketing and payroll and benefit expenses. SG&A leverage decreased 30 basis points compared to the same period in 2023.

Current wording

Selling, general and administrative (SG&A) expenses of $1,045 million for the three months ended June 30, 2024 increased $62 million, or 6%, compared to the same period in 2023. Adjusted SG&A of $1,029 million increased $46 million, or 5% driven by higher marketing and payroll and benefit expenses in the second quarter of 2024. Adjusted SG&A leverage decreased 40 basis points compared to the same period in 2023.

Previous wording

Operating earnings of $669 million for the three months ended March 31, 2024 decreased $11 million, or 2%, compared to the same period in 2023 as higher gross profit dollars were more than offset by increased SG&A.

Current wording

Operating earnings of $649 million for the three months ended June 30, 2024 decreased $12 million, or 2%, compared to the same period in 2023. Adjusted operating earnings of $665 million increased $4 million, or 1%, due to higher gross profit dollars, partially offset by increased SG&A expenses in the second quarter of 2024.

Previous wording

Income tax expense of $158 million and $154 million represents effective tax rates of 24.2% and 23.3% for the three months ended March 31, 2024 and 2023, respectively. The increase in the effective tax rate was primarily due to reduced tax benefits from stock compensation compared to the same period in 2023.

Current wording

Income tax expense of $146 million and $155 million represents effective tax rates of 22.9% and 24.0% for the three months ended June 30, 2024 and 2023, respectively. Adjusted income tax expense of $150 million represents an adjusted effective tax rate of 22.9%. The decrease in the effective tax rate was primarily due to increased benefits from tax credits compared to the same period in 2023.

Previous wording

Diluted earnings per share was $9.62 for the three months ended March 31, 2024 compared to $9.61 for the same period in 2023.

Current wording

Diluted earnings per share was $9.51 and adjusted diluted earnings per share was $9.76 for the three months ended June 30, 2024. On an adjusted basis, this was an increase of 5.2% compared to $9.28 for the same period in 2023.

Previous wording

Net sales of $3,405 million for the three months ended March 31, 2024 increased $111 million, or 3%, and on adaily, organic constant currency basis, increased 4% compared to the same period in 2023. The increase was primarily due to volume.

Current wording

Net sales of $3,458 million for the three months ended June 30, 2024 increased $103 million, or 3%, and on a daily, organic constant currency basis increased 4% compared to the same period in 2023. The increase was primarily due to volume.

Previous wording

SG&A of $813 million for the three months ended March 31, 2024 increased $38 million, or 5%, compared to the same period in 2023. The increase was primarily due to higher marketing and payroll expenses. SG&A leverage decreased 40 basis points compared to the same period in 2023.

Current wording

SG&A of $852 million for the three months ended June 30, 2024 increased $54 million, or 7%, compared to the same period in 2023. Adjusted SG&A of $837 million increased $39 million, or 5%, primarily due to higher marketing and occupancy expenses in the second quarter of 2024. Adjusted SG&A leverage decreased 40 basis points compared to the same period in 2023.

Previous wording

Net sales of $751 million for the three months ended March 31, 2024 increased $27 million, or 4%, and on a daily constant currency basis, increased 10% compared to the same period in 2023. The increase was due to sales growth of 10%, driven by customer acquisition for the segment and enterprise growth at MonotaRO, partially offset by declining non-core, consumer-like customers at Zoro. Sales growth was offset by unfavorable currency exchange of 6% due to changes in the exchange rate between the U.S. dollar and the Japanese yen.

Current wording

Net sales of $776 million for the three months ended June 30, 2024 increased $25 million, or 3%, and on a daily constant currency basis increased 12% compared to the same period in 2023. The increase was due to sales growth of 12%, driven by customer acquisition for the segment and enterprise growth at MonotaRO, partially offset by declining non-core, consumer-like customers at Zoro. Sales growth was offset by unfavorable currency exchange of 9% due to changes in the exchange rate between the U.S. dollar and the Japanese yen.

Previous wording

SG&A of $161 million for the three months ended March 31, 2024 increased $5 million, or 3%, compared to the same period in 2023. The increase was due to higher marketing expense in the first quarter of 2024. SG&A leverage improved 10 basis points compared to the same period in 2023.

Current wording

SG&A of $168 million for the three months ended June 30, 2024 increased $9 million, or 6%, compared to the same period in 2023. The increase was due to higher marketing expenses in the second quarter of 2024. SG&A leverage decreased 50 basis points compared to the same period in 2023.

Previous wording

Gross profit of $1,668 million for the three months ended March 31, 2024 increased $34 million, or 2%, and gross profit margin of 39.4% decreased 50 basis points compared to the same period in 2023. For further discussion on the Company's gross profit, see the Segment Analysis section below.

Current wording

Gross profit of $3,362 million for the six months ended June 30, 2024 increased $84 million, or 3%, and gross profit margin of 39.3% decreased 30 basis points compared to the same period in 2023. For further discussion on the Company's gross profit, see the Segment Analysis section below.

Previous wording

In this section, Grainger utilizes non-GAAP measures where it believes it will assist users of its financial statements in understanding its business. For further information regarding the Company's non-GAAP measures including a reconciliation to the most directly comparable GAAP measure, see above "Non-GAAP Measures." For further segment information, see Note 7 of the Notes to Condensed Consolidated Financial Statements in Part I, Item 1: Financial Statements of this Form 10-Q.

Current wording

In this section, Grainger utilizes non-GAAP measures where it believes it will assist users of its financial statements in understanding its business. For further information regarding the Company's non-GAAP measures including reconciliations to the most directly comparable GAAP measure, see "Non-GAAP Measures." For further segment information, see Note 7 of the Notes to Condensed Consolidated Financial Statements in Part I, Item 1: Financial Statements of this Form 10-Q.

Previous wording

Gross profit of $1,423 million for the three months ended March 31, 2024 increased $26 million, or 2%, and gross profit margin of 41.8% decreased 60 basis points compared to the same period in 2023. The decrease was primarily driven by negative price cost spread.

Current wording

Gross profit of $2,866 million for the six months ended June 30, 2024 increased $71 million, or 3%, and gross profit margin of 41.8% decreased 20 basis points compared to the same period in 2023. The decrease was primarily driven by negative price cost spread due to timing.

Previous wording

Gross profit of $220 million for the three months ended March 31, 2024 increased $6 million, or 2.8%, and gross profit margin of 29.3% decreased 30 basis points compared to the same period in 2023. The decrease was driven by unfavorable product mix at Zoro partially offset by freight efficiencies at MonotaRO.

Current wording

Gross profit of $449 million for the six months ended June 30, 2024 increased $11 million, or 3%, and gross profit margin of 29.4% decreased 30 basis points compared to the same period in 2023. The decrease was driven by unfavorable product mix, partially offset by freight efficiencies.

Previous wording

The following table provides a reconciliation of reported net sales growth from the prior year period in accordance with GAAP to the Company's non-GAAP measures daily net sales and daily, organic constant currency net salesfor thethree months ended March 31, 2024 and 2023 (in millions of dollars):

Current wording

The following tables provide reconciliations of reported net sales growth from the prior year period in accordance with GAAP to the Company's non-GAAP measures daily net sales and daily, organic constant currency net salesfor the three months ended June 30, 2024 and 2023 (in millions of dollars):

Previous wording

As of March 31, 2024 and December 31, 2023, Grainger had cash and cash equivalents of $804 million and $660 million, respectively. The Company had approximately $2.1 billion in available liquidity as of March 31, 2024.

Current wording

As of June 30, 2024 and December 31, 2023, Grainger had cash and cash equivalents of $769 million and $660 million, respectively. The Company had approximately $2.0 billion in available liquidity as of June 30, 2024.

Previous wording

Net cash provided by operating activities was $661 million and $454 million for the three months ended March 31, 2024 and 2023, respe ctively. The increase was driven by favorable working capital primarily due to timing of cash payments and inventory management compared to the prior year period.

Current wording

Net cash provided by operating activities was $1,072 million and $904 million for the six months ended June 30, 2024 and 2023, respectively. The increase was driven by favorable changes in working capital and inventory management combined with supply chain efficiencies compared to the prior year period.

Previous wording

Net cash used in financing activities was $391 million and $224 million for the three months ended March 31, 2024 and 2023, respectively. The increase was primarily due to higher treasury stock purchases compared to the prior year period.

Current wording

Net cash used in financing activities was $763 million and $521 million for the six months ended June 30, 2024 and 2023, respectively. The increase was primarily due to higher treasury stock purchases compared to the prior year period.

Previous wording

Working capital as of March 31, 2024 was $2,953 million, a decrease of $125 million compared to $3,078 million as of December 31, 2023. The decrease was driven by timing of disbursements and accrued expenses, partially offset by higher cash and lower inventory compared to the prior year period. As of March 31, 2024 and December 31, 2023, the ratio of current assets to current liabilities was 2.5 and 2.8, respectively.

Current wording

Working capital as of June 30, 2024 was $3,153 million, an increase of $75 million compared to $3,078 million as of December 31, 2023. The increase was driven by higher operating cash and increased accounts receivable. As of June 30, 2024 and December 31, 2023, the ratio of current assets to current liabilities was 2.7 and 2.8, respectively.

Previous wording

Total debt as a percent of total capitalization was 39.4% and 40.1% as of March 31, 2024 and December 31, 2023, respectively.

Current wording

Total debt as a percent of total capitalization was 38.9% and 40.1% as of June 30, 2024 and December 31, 2023, respectively.