16 Pages Complete
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] Quarterly Report Pursuant to Section 13
or 15(d) of the Securities Exchange Act
of 1934
For the period ended September 30, 1997
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
I.R.S. Employer Identification Number 36-1150280
W.W. Grainger, Inc.
(An Illinois Corporation)
455 Knightsbridge Parkway
Lincolnshire, Illinois 60069-3620
Telephone: (847)793-9030
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
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: 49,649,927 shares of the
Company's Common Stock were outstanding as of October 31, 1997.
(1)
<PAGE>
Part I - FINANCIAL INFORMATION
W.W. Grainger, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands of dollars except for per share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- ----------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
Net sales ...................... $1,066,927 $ 901,858 $3,103,689 $2,633,129
Cost of merchandise sold ....... 693,775 582,324 2,006,228 1,703,490
---------- ---------- ---------- ----------
Gross profit ................. 373,152 319,534 1,097,461 929,639
Warehousing, marketing, and
administrative expenses ...... 277,338 233,737 811,687 677,388
---------- ---------- ---------- ----------
Operating earnings ........... 95,814 85,797 285,774 252,251
Other income or (deductions)
Interest income .............. 314 1,780 2,216 2,780
Interest expense ............. (1,436) (88) (4,012) (662)
Unclassified-net ............. 233 (78) (536) (284)
---------- ---------- ---------- ----------
(889) 1,614 (2,332) 1,834
---------- ---------- ---------- ----------
Earnings before income taxes ... 94,925 87,411 283,442 254,085
Income taxes ................... 38,445 35,139 114,794 102,142
---------- ---------- ---------- ----------
Net earnings ................... $ 56,480 $ 52,272 $ 168,648 $ 151,943
========== ========== ========== ==========
Net earnings per common and
common equivalent share ...... $ 1.12 $ 1.02 $ 3.28 $ 2.96
========== ========== ========== ==========
Average number of common
and common equivalent
shares outstanding ........... 50,334,582 51,454,355 51,472,222 51,417,826
========== ========== ========== ==========
Cash dividends paid per share .. $ 0.27 $ 0.25 $ 0.79 $ 0.73
========== ========== ========== ==========
The accompanying notes are an integral part of these financial statements.
(2)
<PAGE>
W.W. Grainger, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(In thousands of dollars)
(Unaudited)
Sept. 30, Dec. 31,
ASSETS 1997 1996
- -------------------------------------------------------- ---------- ----------
CURRENT ASSETS
Cash and cash equivalents ............................ $ 57,502 $ 126,935
Accounts receivable, less allowance for doubtful
accounts of $17,869 in 1997 and $15,302 in 1996 .... 493,560 433,575
Inventories .......................................... 576,481 686,925
Prepaid expenses ..................................... 15,331 11,971
Deferred income tax benefits ......................... 59,943 60,837
---------- ----------
Total current assets ............................... 1,202,817 1,320,243
PROPERTY, BUILDINGS, AND EQUIPMENT ..................... 1,053,855 985,712
Less accumulated depreciation and amortization ....... 479,566 434,728
---------- ----------
Property, buildings, and equipment-net ............... 574,289 550,984
OTHER ASSETS ........................................... 231,496 247,794
---------- ----------
TOTAL ASSETS ........................................... $2,008,602 $2,119,021
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
- --------------------------------------------------------
CURRENT LIABILITIES
Short-term debt ...................................... $ 132,941 $ 135,275
Current maturities of long-term debt ................. 24,324 24,753
Trade accounts payable ............................... 269,069 240,779
Accrued expenses ..................................... 186,575 187,457
Income taxes ......................................... 29,526 27,804
---------- ----------
Total current liabilities .......................... 642,435 616,068
LONG-TERM DEBT (less current maturities) ............... 5,096 6,152
DEFERRED INCOME TAXES .................................. 3,669 2,207
ACCRUED EMPLOYMENT RELATED BENEFITS COSTS .............. 35,288 31,932
SHAREHOLDERS' EQUITY
Cumulative Preferred Stock - $5 par value - authorized,
6,000,000 shares, issued and outstanding, none ....... -- --
Common Stock - $0.50 par value - authorized,
150,000,000 shares; issued, 53,476,419 shares, 1997,
and 53,338,026 shares, 1996. ......................... 26,738 26,669
Additional contributed capital ........................ 264,972 262,318
Treasury stock, at cost - 3,790,186 shares, 1997, and
409,600 shares, 1996 ................................ (302,455) (32,090)
Unearned restricted stock compensation ................ (16,996) (17,597)
Cumulative translation adjustments .................... (3,830) (2,262)
Retained earnings ..................................... 1,353,685 1,225,624
---------- ----------
Total shareholders' equity ......................... 1,322,114 1,462,662
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ........... $2,008,602 $2,119,021
========== ==========
The accompanying notes are an integral part of these financial statements.
(3)
<PAGE>
W.W. Grainger, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of dollars)
(Unaudited)
Nine Months Ended
September 30,
----------------------
1997 1996
--------- ----------
Cash flows from operating activities:
Net earnings ..................................... $ 168,648 $ 151,943
Provision for losses on accounts receivable ...... 9,290 7,986
Depreciation and amortization:
Property, buildings, and equipment ............. 48,078 45,870
Intangibles and goodwill ....................... 12,339 9,427
Change in operating assets and liabilities:
(Increase) in accounts receivable .............. (69,275) (57,401)
Decrease in inventories ........................ 110,444 36,766
(Increase) in prepaid expenses ................. (3,360) (655)
Decrease (increase) in deferred income taxes ... 2,356 (594)
Increase in trade accounts payable ............. 28,290 28,968
(Decrease) in other accrued expenses ........... (882) (16,905)
Increase in current income taxes payable ....... 1,722 1,137
Increase in accrued employment related
benefits costs ............................... 3,356 2,880
Other - net ...................................... 1,277 2,304
---------- ----------
Net cash provided by operating activities .......... 312,283 211,726
---------- ----------
Cash flows from investing activities:
Additions to property, buildings, and
equipment - net of dispositions ................ (70,871) (34,325)
Other - net ...................................... 2,006 (1,235)
---------- ----------
Net cash (used in) investing activities ............ (68,865) (35,560)
---------- ----------
Cash flows from financing activities:
Net (decrease) in short-term debt ................ (2,334) (20,512)
Proceeds from long-term debt ..................... -- 1,500
Long-term debt payments .......................... (1,485) (2,058)
Stock options exercised .......................... 1,934 2,215
(Purchase)/issuance of treasury stock - net ...... (270,379) --
Cash dividends paid .............................. (40,587) (37,218)
---------- ----------
Net cash (used in) financing activities ............ (312,851) (56,073)
---------- ----------
Net (decrease) increase in cash and cash equivalents (69,433) 120,093
Cash and cash equivalents at beginning of year ..... 126,935 11,460
---------- ----------
Cash and cash equivalents at end of period ......... $ 57,502 $ 131,553
========== ==========
The accompanying notes are an integral part of these financial statements.
(4)
<PAGE>
W.W. Grainger, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF STATEMENT PRESENTATION
The financial statements and the related notes are condensed and should be read
in conjunction with the consolidated financial statements and related notes for
the year ended December 31, 1996, included in the Company's Annual Report on
Form 10-K filed with the Securities and Exchange Commission.
The consolidated financial statements include the accounts of the Company and
its subsidiaries. All significant intercompany transactions are eliminated.
Inventories are valued at the lower of cost or market. Cost is determined
primarily by the last-in, first-out (LIFO) method.
The unaudited financial information reflects all adjustments which are, in the
opinion of management, necessary for a fair presentation of the statements
contained herein.
Checks outstanding of $32,831,709 and $35,366,000 were included in trade
accounts payable at September 30, 1997 and December 31, 1996, respectively.
2. DIVIDEND
On October 29, 1997, the Board of Directors declared a quarterly dividend of 27
cents per share, payable December 1, 1997 to shareholders of record on November
11, 1997.
3. SHARE REPURCHASE AUTHORIZATION
On April 30, 1997, the Company's Board of Directors restored an existing share
repurchase authorization to its original level of five million shares. The
authorization continues to be adjustable to reflect stock splits and stock
dividends.
Repurchases are expected to be made from time to time in open market and
privately negotiated transactions. The repurchased shares will be retained in
the Company's treasury and be available for general corporate purposes (see the
Liquidity and Capital Resources section).
(5)
<PAGE>
W.W. Grainger, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
4. EARNINGS PER SHARE (SFAS No. 128)
The Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per
Share," is effective for 1997 year end financial statements, and replaces
Accounting Principles Board Opinion No. 15, "Earnings per Share," for
calculating earnings per share. SFAS No. 128 eliminates the presentation of
primary and fully diluted earnings per share and requires the dual presentation
of earnings per share and earnings per share - assuming dilution. The
calculation of earnings per share excludes any contingently returnable and any
potential common shares (options, warrants, convertible securities, and
contingent stock agreements). The calculation of earnings per share - assuming
dilution includes common shares outstanding and the dilutive effect of potential
common shares.
The effect on the Company's earnings per share of adopting SFAS No. 128 is not
expected to be material.
5. REPORTING COMPREHENSIVE INCOME (SFAS No. 130)
SFAS No. 130, "Reporting Comprehensive Income," is effective for fiscal years
beginning after December 15, 1997. The Company plans to adopt SFAS No. 130 in
1998.
SFAS No. 130 requires disclosure of the components of and total comprehensive
income in the period in which they are recognized in the financial statements.
Comprehensive income is defined as the change in equity (net assets) of a
business enterprise arising from transactions and other events and circumstances
from nonowner sources. It includes all changes in equity during the reporting
period except those resulting from investments by owners and distributions to
owners.
Adoption of SFAS No. 130 will require additional disclosures in the Company's
financial statements.
6. DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION (SFAS No.
131)
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," is effective for fiscal years beginning after December 15, 1997.
The Company plans to adopt SFAS No. 131 in 1998.
SFAS No. 131 requires disclosure of certain information about operating segments
in complete sets of financial statements of the enterprise and in condensed
financial statements of interim periods issued to shareholders. It also requires
disclosure of certain information about products and services, the geographic
areas in which the enterprise operates, and major customers.
The Company has not yet determined the effect that adoption of SFAS No. 131 will
have on its financial reporting requirements.
(6)
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND THE RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED WITH THE THREE MONTHS ENDED
SEPTEMBER 30, 1996:
Net Sales
Net sales of $1,066,927,000 in the 1997 third quarter increased 18.3% from net
sales of $901,858,000 for the comparable 1996 period. There were 64 sales days
both in the 1997 and 1996 third quarters. The year 1997 will have one less sales
day than did the year 1996 (255 versus 256).
The sales increase of 18.3% for the 1997 third quarter, as compared with the
1996 third quarter, was principally volume related. Excluding the incremental
sales of Acklands - Grainger, Inc. (AGI), the Canadian industrial distribution
business acquired on December 2, 1996, sales increased 8.5%. This 8.5% increase
primarily represented the effects of the Company's marketing initiatives, which
included new product additions, the expansion of branch facilities, and the
National Accounts, Integrated Supply, and Direct Marketing programs.
Sales in the 1997 third quarter were negatively affected by the United Parcel
Service's (UPS) work stoppage which began on August 4, 1997 and lasted more than
two weeks. The Company estimates that sales were approximately $14 million lower
as a result of the UPS work stoppage. In addition, sales of seasonal products
for the Company, excluding AGI, were flat in the 1997 third quarter as compared
with the same 1996 period. Sales of non-seasonal products for the Company,
excluding AGI, increased approximately 10% in the 1997 third quarter as compared
with the same 1996 period.
The Company's Grainger branch-based business experienced selling price increases
of about 0.9% when comparing the third quarters of 1997 and 1996. Daily sales to
National Account customers within the branch-based business increased an
estimated 12%, on a comparable basis, over the 1996 third quarter.
(7)
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND THE RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net Earnings
Net earnings of $56,480,000 in the 1997 third quarter increased 8.1% when
compared to net earnings of $52,272,000 for the comparable 1996 period. The net
earnings increase was lower than the net sales increase primarily due to lower
gross profit margins, operating expenses increasing at a faster rate than net
sales, higher interest expense, lower interest income, and a higher effective
income tax rate.
The Company's gross profit margin decreased by 0.46 percentage point when
comparing the third quarters of 1997 and 1996. This decrease was partially the
result of the incremental effect of Acklands - Grainger Inc. (AGI) which has
lower average gross profit margins as compared with the average of all other
business units. Excluding AGI, the Company's gross profit margin decreased 0.17
percentage point when comparing the third quarters of 1997 and 1996. Of note
were the following factors affecting the gross profit margin for the Company,
excluding AGI:
1. The change in selling price category mix was unfavorable primarily as a
result of the growth in sales to the Company's larger volume customers.
2. Freight-in costs increased, partially as a result of special handling
due to the UPS work stoppage.
Partially offsetting the above factors was a favorable change in product mix as
sales of seasonal products (generally lower than average profit margins) were
flat.
Operating expenses (warehousing, marketing, and administrative) for the Company
increased 18.7% for the 1997 third quarter as compared with the same 1996
period. This rate of increase was greater than the rate of increase in net
sales. Factors contributing to this rate of increase were the following:
1. Payroll and other operating expenses were higher as a result of the
following initiatives:
a) Continued expansion of the Company's integrated supply business;
b) Continued development of the Company's full service capabilities
on the Internet;
c) Continued refocus and realignment of the Direct Sales force;
d) Increased advertising expenses supporting the Company's marketing
initiatives;
e) Expansion of the Company's telesales capability;
f) Continued enhancement of the Company's information systems,
including Year 2000 compliance; and
g) Continuation of business process improvement efforts.
2. The operating expenses of AGI, acquired in December 1996, were
incremental and contributed to the increase.
(8)
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND THE RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Interest income decreased $1,466,000 for the 1997 third quarter as
compared with the same period in 1996. This decrease resulted from lower average
daily invested balances. During the 1997 third quarter, average daily invested
balances were lower primarily due to the purchase of over 3,300,000 shares of
the Company's common stock since the beginning of the year, which was partially
funded by the liquidation of marketable securities. The decrease in interest
income was partially offset by higher average interest rates earned.
Interest expense increased $1,348,000 for the third quarter of 1997 as compared
with the same period in 1996. This increase resulted from higher average
borrowings and lower capitalized interest, partially offset by lower average
interest rates paid on all outstanding debt. Much of the increase in interest
expense was related to approximately $135,000,000 in short-term debt added to
finance the acquisition of Acklands - Grainger Inc. (AGI) in December 1996, and
to the short-term debt added to partially fund the repurchase of shares of the
Company's common stock.
The Company's effective income tax rate for the third quarter of 1997 was 40.5%
versus 40.2% for the comparable 1996 period. The increase in the effective
income tax rate is attributable to proportionally higher income generated in
Canada (AGI) which is taxed at a higher rate than domestic income.
Net earnings for the third quarter of 1997 were negatively affected by the UPS
work stoppage which occurred in August 1997. The gross profit margin lost on the
estimated $14 million in lost sales, along with the incremental operating
expenses incurred to serve customers during this period, resulted in an
estimated negative effect on net earnings of about $0.06 per share.
(9)
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND THE RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED WITH THE NINE MONTHS ENDED
SEPTEMBER 30, 1996:
Net Sales:
Net sales of $3,103,689,000 in the first nine months of 1997 increased 17.9%
from net sales of $2,633,129,000 for the comparable 1996 period. There were 191
sales days in the 1997 nine month period and 192 sales days in the comparable
1996 period. The year 1997 will have one less sales day than did the year 1996
(255 versus 256).
The sales increase of 17.9% for the first nine months of 1997 as compared with
the same 1996 period was principally volume related. Excluding the incremental
sales of Acklands - Grainger Inc. (AGI), sales increased 7.7%. This 7.7%
increase can be explained primarily by the same factors discussed for the third
quarter of 1997. (See the Third Quarter Net Sales discussion.)
Sales of seasonal products for the Company, excluding AGI, declined
approximately 4% in the first nine months of 1997 as compared with the same 1996
period. Many regions of the United States experienced milder weather during the
first nine months of 1997 versus the comparable 1996 period. Sales of
non-seasonal products for the Company, excluding AGI, increased approximately
10% in the first nine months of 1997 as compared with the same 1996 period.
The Company's Grainger branch-based business experienced selling price increases
of about 1.0% when comparing the first nine months of 1997 and 1996. Daily sales
to National Account customers increased approximately 16%, on a comparable
basis, over the same 1996 period.
(10)
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND THE RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net Earnings
Net earnings of $168,648,000 in the first nine months of 1997 increased 11.0%
when compared to net earnings of $151,943,000 for the comparable 1996 period.
The net earnings increase was lower than the sales increase primarily due to
operating expenses increasing at a faster rate than net sales, higher interest
expense, lower interest income, and higher effective tax rates, partially offset
by higher gross profit margins.
The Company's gross profit margin increased by 0.05 percentage point when
comparing the first nine months of 1997 and 1996. Excluding Acklands - Grainger
Inc. (AGI), the Company's gross profit margin increased 0.41 percentage point
when comparing the first nine months of 1997 and 1996. Of note were the
following factors affecting the gross profit margin for the Company, excluding
AGI:
1. The change in product mix was favorable as sales of seasonal products
(generally lower than average gross profit margins) declined, and Lab
Safety Supply sales (generally higher than average gross profit margins)
increased as a percent of total sales.
2. Selling price increases exceeded the level of cost increases.
Partially offsetting the above factors was an unfavorable change in selling
price category mix, which primarily resulted from the growth in sales to the
Company's larger volume customers.
Operating expenses for the Company increased 19.8% for the first nine months of
1997 as compared with the same 1996 period. This rate of increase was higher
than the rate of increase in net sales and was primarily related to the same
factors discussed for the third quarter of 1997. (See the Third Quarter Net
Earnings discussion.)
Interest income decreased $564,000 for the first nine months of 1997 as compared
with the same period in 1996. This decrease resulted from lower average daily
invested balances, partially offset by higher average interest rates earned.
During 1997, interest income was affected by the purchase of over 3,300,000
share of the Company's common stock, which was partially funded by the
liquidation of marketable securities.
Interest expense increased $3,350,000 for the first nine months of 1997 as
compared with the same period in 1996. This increase resulted from higher
average borrowings (see the Third Quarter Net Earnings discussion), partially
offset by lower average interest rates paid on all outstanding debt and higher
capitalized interest.
(11)
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND THE RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company's effective income tax rate for the first nine months of 1997 was
40.5% versus 40.2% for the comparable 1996 period. The increase in the effective
income tax rate is attributable to the same factor discussed for the third
quarter 1997. (See the Third Quarter Net Earnings discussion.)
Net earnings for the first nine months of 1997 were also negatively affected by
the UPS work stoppage as discussed for the third quarter of 1997. (See the Third
Quarter Net Earnings discussion.)
OTHER DEVELOPMENTS
Year 2000
The Company uses various software and technology which is affected by the Year
2000 issue. The Year 2000 issue is the inability of certain computer hardware
and software to correctly process year information after December 31, 1999.
The Company has put in place a project team dedicated to implementing a Year
2000 solution. In addition to internal systems, this team is addressing Year
2000 operational issues with suppliers, customers, and others with whom the
Company does business.
The Company is actively working to achieve the objective of properly functioning
internal systems beyond the year 1999. This includes modifying certain existing
systems as well as evaluating replacement of hardware and software for other
systems, sooner than would otherwise be the case. Although total cost estimates
have yet to be determined, the Company has incurred costs this year and expects
to incur costs over the next two years to address the Year 2000 issue.
Management believes that failure to address the Year 2000 issue on a timely
basis could have a materially adverse effect on the Company and is committed to
devoting the appropriate resources to ensure a Year 2000 solution.
LIQUIDITY AND CAPITAL RESOURCES
For the nine months ended September 30, 1997, working capital decreased by
$143,793,000. The ratio of current assets to current liabilities was 1.9 at
September 30, 1997 and 2.1 at December 31, 1996. The Consolidated Statements of
Cash Flows, included in this report, detail the sources and uses of cash and
cash equivalents.
(12)
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND THE RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Company continues to maintain a low debt ratio and strong liquidity
position, which provides flexibility in funding working capital needs and
long-term cash requirements. In addition to internally generated funds, the
Company has various sources of financing available, including commercial paper
sales and bank borrowings under lines of credit and otherwise. Total debt as a
percent of Shareholders' Equity was 12.3% at September 30, 1997 and 11.4% at
December 31, 1996. For the first nine months of 1997, $49,739,000 as expended
for land, buildings, and facilities improvements, including the ongoing
construction of a new office facility in Lake Forest, Illinois, and $20,561,000
for data processing, office, and other equipment, for a total of $70,300,000.
For the first nine months of 1997, the Company repurchased approximately 3.3
million shares of its common stock. The Company used internally generated funds
and short-term debt to fund 1997 share repurchases. As of September 30, 1997,
approximately 2.9 million shares of common stock remain available under the
repurchase authorization. (See Note 3 of the Notes to Consolidated Financial
Statements.)
W.W. Grainger, Inc. and Subsidiaries
PART II - OTHER INFORMATION
Items 1, 2, 3, 4, and 5 not applicable.
Item 6 Exhibits (numbered in accordance with Item 601 of regulation
S-K) and Reports on Form 8-K.
EXHIBIT INDEX
----------------------
a) Exhibits
(11) Computation of Earnings per Common and
Common Equivalent Share 15
(27) Financial Data Schedule 16
b) Reports on Form 8-K - None.
(13)
<PAGE>
SIGNATURES
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.
W.W. Grainger, Inc.
-----------------------------------------
(Registrant)
Date: November 11, 1997 By: /s/ J.D. Fluno
- ------------------------- -----------------------------------------
J.D. Fluno, Vice Chairman
Date: November 11, 1997 By: /s/ P.O. Loux
- ------------------------- -----------------------------------------
P.O. Loux, Senior Vice President, Finance
and Chief Financial Officer
Date: November 11, 1997 By: /s/ R.D. Pappano
- ------------------------- -----------------------------------------
R.D. Pappano, Vice President, Financial
Reporting and Investor Relations
(14)
<PAGE>
Exhibit 11
W.W. Grainger, Inc. and Subsidiaries
COMPUTATION OF EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
Nine Months Ended
September 30,
--------------------------
1997 1996
------------ ------------
Average number of shares outstanding during
the period ...................................... 50,954,485 50,980,853
Common equivalent shares:
Shares issuable under outstanding options
which are dilutive ............................ 1,617,433 1,533,317
Shares which could have been purchased based
upon the average market value for the period .. 1,110,695 1,112,806
------------ ------------
506,738 420,511
Dilutive effect of exercised options prior to being
exercised ....................................... 10,999 16,462
------------ ------------
517,737 436,973
------------ ------------
Weighted average number of common and
common equivalent shares outstanding ............ 51,472,222 51,417,826
============ ============
Net earnings ...................................... $168,648,000 $151,943,000
============ ============
Net earnings per common and common
equivalent share ................................ $ 3.28 $ 2.96
============ ============
Three months ended September 30:
Nine months ended September 30, from above ........ $ 3.28 $ 2.96
Six months ended June 30, as previously
reported .......................................... 2.16 1.94
------------ ------------
Net earnings per common and common equivalent
share for the three months ended September 30 ..... $ 1.12 $ 1.02
============ ============
Note: The computation of earnings per share assuming full dilution is the same
as set forth above.
(15)
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 57,502
<SECURITIES> 0
<RECEIVABLES> 511,429
<ALLOWANCES> 17,869
<INVENTORY> 576,481
<CURRENT-ASSETS> 1,202,817
<PP&E> 1,053,855
<DEPRECIATION> 479,566
<TOTAL-ASSETS> 2,008,602
<CURRENT-LIABILITIES> 642,435
<BONDS> 27,697
0
0
<COMMON> 26,738
<OTHER-SE> 1,295,376
<TOTAL-LIABILITY-AND-EQUITY> 2,008,602
<SALES> 3,103,689
<TOTAL-REVENUES> 3,103,689
<CGS> 2,006,228
<TOTAL-COSTS> 2,006,228
<OTHER-EXPENSES> 800,717
<LOSS-PROVISION> 9,290
<INTEREST-EXPENSE> 4,012
<INCOME-PRETAX> 283,442
<INCOME-TAX> 114,794
<INCOME-CONTINUING> 168,648
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 168,648
<EPS-PRIMARY> 3.28
<EPS-DILUTED> 0
</TABLE>
