W.W. Grainger, Inc., (NYSE: GWW) reported sales for the 2012 third quarter ended September 30, 2012 of $2.3 billion—an increase of 8% versus $2.1 billion during the same period in 2011. The company’s sales on a daily basis increased 10% during the third quarter compared to the third quarter of 2011.
During the third quarter, the Chicago-based distributor recorded a $70 million pre-tax reserve for a settlement in principle to resolve pricing disclosure issues relating to government contracts with General Services Administration (GSA) and United States Postal Service (USPS). The proposed settlement, which covers 12 years of sales to the GSA and 10 years of sales to the USPS, remains subject to the approval of the U.S. Department of Justice (DOJ).
In addition, the company established a $6 million pre-tax reserve for resolving tax, freight and miscellaneous billing issues with these government customers. Excluding the reserve, Grainger’s net earnings increased 11% and earnings per share of $2.81 increased 12%. Including the reserve, reported net earnings for the third quarter decreased 15% to $155 million versus $182 million in 2011 and earnings per share of $2.15 decreased 14% versus $2.51 in 2011.
“We delivered a solid quarter, with stronger organic sales growth in September than in August and continued to gain market share, expand margins and generate nearly $100 million in operating cash flow over the prior year,” said Jim Ryan, Grainger’s president, chairman and CEO. “We are also resolving an ongoing dispute with the GSA and USPS and are pleased to be near final settlement with the DOJ.”
Broken down by month, Grainger’s third quarter sales increased 8%, 10% on a daily basis, with 11% daily sales growth in July, 10% in August and 9% in September. The 10% increase in daily sales during the quarter included three percentage points from acquisitions and a one percentage point decline attributable to unfavorable foreign exchange.
Grainger has two reportable business segments, the United States and Canada, which represented approximately 89% of company sales for the quarter. Sales for the United States segment increased 4%, 5% on a daily basis, during the 2012 third quarter versus the prior year.
For the third quarter, Canadian-based Acklands-Grainger’s sales increased 10%, or 12% on a daily basis. In local currency, the distributor’s sales increased 11%, 13% on a daily basis. The company attributed the sales increase for the quarter in Canada to strong growth to customers in the commercial services, oil and gas, forestry, contractor and utilities end markets.
Sales for Grainger’s other businesses—including operations in Asia, Europe and Latin America—increased 54% for the 2012 third quarter versus the prior year. This increase was primarily due to the incremental sales from the business in Europe (Fabory) acquired in August 2011, and the business in Brazil (AnFreixo) acquired in April 2012. Excluding acquisitions, Grainger’s sales for the other businesses increased 20%, primarily the result of strong revenue growth in Japan and Mexico.
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