W.W. Grainger, Inc 10-Q for FY2024 Q3
W.W. Grainger, Inc. (GWW)
10-Q
2024-10-31
For: 2024-09-30
View Original
Added on
April 08, 2026
About this 10-Q
W.W. Grainger, Inc filed this 10-Q on October 31, 2024, covering the quarter ended September 30, 2024 (FY2024 Q3).
Headline figures
Quarter ended September 30, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $4.39B
- up 4.3% from $4.21B a year earlier
- Net income
- $486M
- up 2.1% from net income of $476M a year earlier
- Diluted EPS
- $9.87
- up 4.7% from $9.43 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
For the quarterly period ended September 30, 2024
OR
For the transition period from ______ to _______
Commission file number 1-5684
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||||||||||||||
| (Address of principal executive offices) | (Zip Code) | |||||||||||||||||||
Registrant’s telephone number, including area code: (847 ) 535-1000
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol | Name of Each Exchange on Which Registered | ||||||
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 ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☒
There were 48,700,165 shares of the Company’s Common Stock outstanding as of October 24, 2024.
1
| TABLE OF CONTENTS | ||||||||
| Page | ||||||||
| PART I - FINANCIAL INFORMATION | ||||||||
| Item 1: | Financial Statements (Unaudited) | |||||||
Condensed Consolidated Statements of Earnings for the Three and Nine Months Ended September 30, 2024 and 2023 | ||||||||
Condensed Consolidated Statements of Comprehensive Earnings for the Three and Nine Months Ended September 30, 2024 and 2023 | ||||||||
Condensed Consolidated Balance Sheets as of September 30, 2024 and December 31, 2023 | ||||||||
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2024 and 2023 | ||||||||
Condensed Consolidated Statements of Shareholders' Equity for the Three and Nine Months Ended September 30, 2024 and 2023 | ||||||||
| Notes to Condensed Consolidated Financial Statements | ||||||||
| Item 2: | Management's Discussion and Analysis of Financial Condition and Results of Operations | |||||||
| Item 3: | Quantitative and Qualitative Disclosures About Market Risk | |||||||
| Item 4: | Controls and Procedures | |||||||
| PART II - OTHER INFORMATION | ||||||||
| Item 1: | Legal Proceedings | |||||||
| Item 1A: | Risk Factors | |||||||
| Item 2: | Unregistered Sales of Equity Securities and Use of Proceeds | |||||||
| Item 5: | Other Information | |||||||
| Item 6: | Exhibits | |||||||
| Signatures | ||||||||
2
PART I – FINANCIAL INFORMATION
Item 1: Financial Statements
W.W. Grainger, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(In millions of dollars and shares, except for per share amounts)
(Unaudited)
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Net sales | $ | $ | $ | $ | |||||||||||||||||||
| Cost of goods sold | |||||||||||||||||||||||
| Gross profit | |||||||||||||||||||||||
| Selling, general and administrative expenses | |||||||||||||||||||||||
| Operating earnings | |||||||||||||||||||||||
| Other expense (income): | |||||||||||||||||||||||
| Interest expense – net | |||||||||||||||||||||||
| Other – net | ( | ( | ( | ( | |||||||||||||||||||
| Total other expense – net | |||||||||||||||||||||||
Earnings before income taxes | |||||||||||||||||||||||
| Income tax provision | |||||||||||||||||||||||
| Net earnings | |||||||||||||||||||||||
| Less net earnings attributable to noncontrolling interest | |||||||||||||||||||||||
| Net earnings attributable to W.W. Grainger, Inc. | $ | $ | $ | $ | |||||||||||||||||||
| Earnings per share: | |||||||||||||||||||||||
| Basic | $ | $ | $ | $ | |||||||||||||||||||
| Diluted | $ | $ | $ | $ | |||||||||||||||||||
| Weighted average number of shares outstanding: | |||||||||||||||||||||||
| Basic | |||||||||||||||||||||||
| Diluted | |||||||||||||||||||||||
The accompanying notes are an integral part of these financial statements.
3
W.W. Grainger, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS
(In millions of dollars)
(Unaudited)
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Net earnings | $ | $ | $ | ||||||||||||||||||||
| Other comprehensive earnings (losses): | |||||||||||||||||||||||
| Foreign currency translation adjustments | ( | ( | ( | ||||||||||||||||||||
Postretirement benefit plan losses and other – net of tax benefit of $ | ( | ( | ( | ( | |||||||||||||||||||
| Total other comprehensive earnings (losses) | ( | ( | ( | ||||||||||||||||||||
| Comprehensive earnings – net of tax | |||||||||||||||||||||||
| Less comprehensive earnings (losses) attributable to noncontrolling interest | |||||||||||||||||||||||
| Net earnings | |||||||||||||||||||||||
| Foreign currency translation adjustments | ( | ( | ( | ||||||||||||||||||||
| Total comprehensive earnings (losses) attributable to noncontrolling interest | |||||||||||||||||||||||
Comprehensive earnings attributable to W.W. Grainger, Inc. | $ | $ | $ | $ | |||||||||||||||||||
The accompanying notes are an integral part of these financial statements.
4
W.W. Grainger, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions of dollars, except for share and per share amounts)
| As of | |||||||||||
| Assets | (Unaudited) September 30, 2024 | December 31, 2023 | |||||||||
| Current assets | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
Accounts receivable (less allowance for credit losses of $ | |||||||||||
| Inventories – net | |||||||||||
| Prepaid expenses and other current assets | |||||||||||
| Total current assets | |||||||||||
| Property, buildings and equipment – net | |||||||||||
| Goodwill | |||||||||||
| Intangibles – net | |||||||||||
| Operating lease right-of-use | |||||||||||
| Other assets | |||||||||||
| Total assets | $ | $ | |||||||||
| Liabilities and shareholders' equity | |||||||||||
| Current liabilities | |||||||||||
| Current maturities | $ | $ | |||||||||
| Trade accounts payable | |||||||||||
| Accrued compensation and benefits | |||||||||||
| Operating lease liability | |||||||||||
| Accrued expenses | |||||||||||
| Income taxes payable | |||||||||||
| Total current liabilities | |||||||||||
| Long-term debt | |||||||||||
| Long-term operating lease liability | |||||||||||
| Deferred income taxes and tax uncertainties | |||||||||||
| Other non-current liabilities | |||||||||||
| Shareholders' equity | |||||||||||
Cumulative preferred stock – $ | |||||||||||
Common Stock – $ | |||||||||||
| Additional contributed capital | |||||||||||
| Retained earnings | |||||||||||
| Accumulated other comprehensive losses | ( | ( | |||||||||
Treasury stock, at cost – shares, respectively | ( | ( | |||||||||
| Total W.W. Grainger, Inc. shareholders’ equity | |||||||||||
| Noncontrolling interest | |||||||||||
| Total shareholders' equity | |||||||||||
| Total liabilities and shareholders' equity | $ | $ | |||||||||
The accompanying notes are an integral part of these financial statements.
5
W.W. Grainger, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions of dollars)
(Unaudited)
| Nine Months Ended | ||||||||||||||
| September 30, | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| Cash flows from operating activities: | ||||||||||||||
| Net earnings | $ | $ | ||||||||||||
| Adjustments to reconcile net earnings to net cash provided by operating activities: | ||||||||||||||
| Provision for credit losses | ||||||||||||||
| Deferred income taxes and tax uncertainties | ||||||||||||||
| Depreciation and amortization | ||||||||||||||
| Non-cash lease expense | ||||||||||||||
| Net (gains) losses from sale of assets | ( | |||||||||||||
| Stock-based compensation | ||||||||||||||
| Change in operating assets and liabilities: | ||||||||||||||
| Accounts receivable | ( | ( | ||||||||||||
| Inventories | ||||||||||||||
| Prepaid expenses and other assets | ( | |||||||||||||
| Trade accounts payable | ||||||||||||||
| Operating lease liabilities | ( | ( | ||||||||||||
| Accrued liabilities | ( | |||||||||||||
| Income taxes – net | ( | ( | ||||||||||||
| Other non-current liabilities | ( | ( | ||||||||||||
| Net cash provided by operating activities | ||||||||||||||
| Cash flows from investing activities: | ||||||||||||||
| Capital expenditures | ( | ( | ||||||||||||
| Proceeds from sale of assets | ||||||||||||||
| Other – net | ||||||||||||||
| Net cash used in investing activities | ( | ( | ||||||||||||
| Cash flows from financing activities: | ||||||||||||||
| Proceeds from debt | ||||||||||||||
| Payments of debt | ( | ( | ||||||||||||
| Proceeds from stock options exercised | ||||||||||||||
| Payments for employee taxes withheld from stock awards | ( | ( | ||||||||||||
| Purchases of treasury stock | ( | ( | ||||||||||||
| Cash dividends paid | ( | ( | ||||||||||||
| Other – net | ( | |||||||||||||
| Net cash used in financing activities | ( | ( | ||||||||||||
| Exchange rate effect on cash and cash equivalents | ( | ( | ||||||||||||
| Net change in cash and cash equivalents | ||||||||||||||
| Cash and cash equivalents at beginning of year | ||||||||||||||
| Cash and cash equivalents at end of period | $ | $ | ||||||||||||
The accompanying notes are an integral part of these financial statements.
6
W.W. Grainger, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In millions of dollars, except for per share amounts)
(Unaudited)
| Common Stock | Additional Contributed Capital | Retained Earnings | Accumulated Other Comprehensive Earnings (Losses) | Treasury Stock | Noncontrolling Interest | Total | |||||||||||||||||
| Balance at January 1, 2023 | $ | $ | $ | $ | ( | $ | ( | $ | $ | ||||||||||||||
| Stock-based compensation | — | — | — | — | |||||||||||||||||||
| Purchases of treasury stock | — | — | — | — | ( | — | ( | ||||||||||||||||
| Net earnings | — | — | — | — | |||||||||||||||||||
| Other comprehensive earnings (losses) | — | — | — | — | ( | ( | |||||||||||||||||
Cash dividends paid ($ | — | — | ( | — | — | — | ( | ||||||||||||||||
| Balance at March 31, 2023 | $ | $ | $ | $ | ( | $ | ( | $ | $ | ||||||||||||||
| Stock-based compensation | — | — | — | ( | |||||||||||||||||||
| Purchases of treasury stock | — | — | — | — | ( | — | ( | ||||||||||||||||
| Net earnings | — | — | — | — | |||||||||||||||||||
| Other comprehensive earnings (losses) | — | — | — | ( | — | ( | ( | ||||||||||||||||
Cash dividends paid ($ | — | — | ( | — | — | ( | ( | ||||||||||||||||
| Balance at June 30, 2023 | $ | $ | $ | $ | ( | $ | ( | $ | $ | ||||||||||||||
| Stock-based compensation | $ | — | $ | $ | — | $ | — | $ | ( | $ | — | $ | |||||||||||
| Purchases of treasury stock | — | — | — | — | ( | ( | ( | ||||||||||||||||
| Net earnings | — | — | — | — | |||||||||||||||||||
| Other comprehensive earnings (losses) | — | — | — | ( | — | ( | ( | ||||||||||||||||
| Capital contribution | — | ( | — | — | — | ||||||||||||||||||
Cash dividends paid ($ | — | — | ( | — | — | ( | ( | ||||||||||||||||
| Balance at September 30, 2023 | $ | $ | $ | $ | ( | $ | ( | $ | $ | ||||||||||||||
The accompanying notes are an integral part of these financial statements.
7
W.W. Grainger, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In millions of dollars, except for per share amounts)
(Unaudited)
| Common Stock | Additional Contributed Capital | Retained Earnings | Accumulated Other Comprehensive Earnings (Losses) | Treasury Stock | Noncontrolling Interest | Total | |||||||||||||||||
| Balance at January 1, 2024 | $ | $ | $ | $ | ( | $ | ( | $ | $ | ||||||||||||||
| Stock-based compensation | — | — | — | — | |||||||||||||||||||
| Purchases of treasury stock | — | — | — | — | ( | — | ( | ||||||||||||||||
| Net earnings | — | — | — | — | |||||||||||||||||||
| Other comprehensive earnings (losses) | — | — | — | ( | — | ( | ( | ||||||||||||||||
Cash dividends paid ($ | — | — | ( | — | — | ( | ( | ||||||||||||||||
| Balance at March 31, 2024 | $ | $ | $ | $ | ( | $ | ( | $ | $ | ||||||||||||||
| Stock-based compensation | — | — | — | ( | ( | ||||||||||||||||||
| Purchases of treasury stock | — | — | — | — | ( | ( | ( | ||||||||||||||||
| Net earnings | — | — | — | — | |||||||||||||||||||
| Other comprehensive earnings (losses) | — | — | — | ( | — | ( | ( | ||||||||||||||||
Cash dividends paid ($ | — | — | ( | — | — | — | ( | ||||||||||||||||
| Balance at June 30, 2024 | $ | $ | $ | $ | ( | $ | ( | $ | $ | ||||||||||||||
| Stock-based compensation | — | — | — | — | |||||||||||||||||||
| Purchases of treasury stock | — | — | — | — | ( | — | ( | ||||||||||||||||
| Net earnings | — | — | — | — | |||||||||||||||||||
| Other comprehensive earnings (losses) | — | — | — | — | |||||||||||||||||||
| Capital contribution | — | ( | — | — | — | ||||||||||||||||||
Cash dividends paid ($ | — | — | ( | — | — | ( | ( | ||||||||||||||||
| Balance at September 30, 2024 | $ | $ | $ | $ | ( | $ | ( | $ | $ | ||||||||||||||
The accompanying notes are an integral part of these financial statements.
8
W.W. Grainger, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
W.W. Grainger, Inc. is a broad line, business-to-business distributor of maintenance, repair and operating (MRO) products and services with operations primarily in North America (N.A.), Japan and the United Kingdom (U.K.). In this report, the words “Grainger” or “Company” mean W.W. Grainger, Inc. and its subsidiaries, except where the context makes it clear that the reference is only to W.W. Grainger, Inc. itself and not its subsidiaries.
Basis of Presentation
The Company's Condensed Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial reporting and the rules and regulations of the U.S. Securities and Exchange Commission (SEC) and therefore do not include all information and disclosures normally included in the annual Consolidated Financial Statements. The preparation of these Condensed Consolidated Financial Statements and accompanying notes in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported. Actual results could differ materially from these estimated amounts. In the opinion of the Company’s management, the Condensed Consolidated Financial Statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation.
The Condensed Consolidated Balance Sheet at December 31, 2023, has been derived from the audited Consolidated Financial Statements at that date but does not include all of the information and footnotes required by GAAP for complete financial statements.
The Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and accompanying notes for the year ended December 31, 2023 included in the Company’s Annual Report on Form 10-K filed with the SEC on February 22, 2024 (2023 Form 10-K).
There were no material changes to the Company’s significant accounting policies from those disclosed in Note 1 of the Notes to Consolidated Financial Statements in Part II, Item 8: Financial Statements and Supplementary Data in the Company's 2023 Form 10-K.
9
W.W. Grainger, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
NOTE 2 - REVENUE
Grainger serves a large number of customers in diverse industries, which are subject to different economic and market-specific factors. The Company's revenue is primarily comprised of MRO product sales and related activities.
The Company's presentation of revenue by reportable segment and customer industry most reasonably depicts how the nature, amount, timing and uncertainty of the Company's revenue and cash flows are affected by economic and market-specific factors. The majority of Company revenue originates from contracts with a single performance obligation to deliver products, whereby performance obligations are satisfied when control of the product is transferred to the customer per the arranged shipping terms.
The following tables present the Company's percentage of revenue by reportable segment and by customer industry:
| Three Months Ended September 30, | |||||||||||||||||||||||||||||||||||
2024 | 2023 | ||||||||||||||||||||||||||||||||||
Customer Industry(1) | High-Touch Solutions N.A. | Endless Assortment | Total Company(2) | High-Touch Solutions N.A. | Endless Assortment | Total Company(2) | |||||||||||||||||||||||||||||
| Manufacturing | % | % | % | % | % | % | |||||||||||||||||||||||||||||
| Government | % | % | % | % | % | % | |||||||||||||||||||||||||||||
| Wholesale | % | % | % | % | % | % | |||||||||||||||||||||||||||||
| Commercial Services | % | % | % | % | % | % | |||||||||||||||||||||||||||||
| Contractors | % | % | % | % | % | % | |||||||||||||||||||||||||||||
| Healthcare | % | % | % | % | % | % | |||||||||||||||||||||||||||||
| Retail | % | % | % | % | % | % | |||||||||||||||||||||||||||||
| Transportation | % | % | % | % | % | % | |||||||||||||||||||||||||||||
| Utilities | % | % | % | % | % | % | |||||||||||||||||||||||||||||
| Warehousing | % | % | % | % | % | % | |||||||||||||||||||||||||||||
Other(3) | % | % | % | % | % | % | |||||||||||||||||||||||||||||
| Total net sales | % | % | % | % | % | % | |||||||||||||||||||||||||||||
| Percent of total company revenue | % | % | % | % | % | % | |||||||||||||||||||||||||||||
(1) Customer industry results for the three months ended September 30, 2024 and 2023 primarily use the North American Industry Classification System (NAICS). As customers' businesses evolve, industry classifications may change. When these changes occur, Grainger does not recast the customer classification for prior periods as the industry used in the prior period was appropriate at the point-in-time. As a result, year-over-year changes may be impacted. | |||||||||||||||||||||||||||||||||||
(2) Total Company includes other businesses, which includes the Cromwell business. Other businesses account for approximately | |||||||||||||||||||||||||||||||||||
(3) Other primarily includes revenue from industries and customers that are not material individually, including hospitality, restaurants, property management and natural resources. | |||||||||||||||||||||||||||||||||||
10
W.W. Grainger, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
| Nine Months Ended September 30, | |||||||||||||||||||||||||||||||||||
2024 | 2023 | ||||||||||||||||||||||||||||||||||
Customer Industry(1) | High-Touch Solutions N.A. | Endless Assortment | Total Company(2) | High-Touch Solutions N.A. | Endless Assortment | Total Company(2) | |||||||||||||||||||||||||||||
| Manufacturing | % | % | % | % | % | % | |||||||||||||||||||||||||||||
| Government | % | % | % | % | % | % | |||||||||||||||||||||||||||||
| Wholesale | % | % | % | % | % | % | |||||||||||||||||||||||||||||
| Commercial Services | % | % | % | % | % | % | |||||||||||||||||||||||||||||
| Contractors | % | % | % | % | % | % | |||||||||||||||||||||||||||||
| Healthcare | % | % | % | % | % | % | |||||||||||||||||||||||||||||
| Retail | % | % | % | % | % | % | |||||||||||||||||||||||||||||
| Transportation | % | % | % | % | % | % | |||||||||||||||||||||||||||||
| Utilities | % | % | % | % | % | % | |||||||||||||||||||||||||||||
| Warehousing | % | % | % | % | % | % | |||||||||||||||||||||||||||||
Other(3) | % | % | % | % | % | % | |||||||||||||||||||||||||||||
| Total net sales | % | % | % | % | % | % | |||||||||||||||||||||||||||||
| Percent of total company revenue | % | % | % | % | % | % | |||||||||||||||||||||||||||||
(1) Customer industry results for the nine months ended September 30, 2024 and 2023 primarily use the North American Industry Classification System (NAICS). As customers' businesses evolve, industry classifications may change. When these changes occur, Grainger does not recast the customer classification for prior periods as the industry used in the prior period was appropriate at the point-in-time. As a result, year-over-year changes may be impacted. | |||||||||||||||||||||||||||||||||||
(2) Total Company includes other businesses, which includes the Cromwell business. Other businesses account for approximately | |||||||||||||||||||||||||||||||||||
(3) Other primarily includes revenue from industries and customers that are not material individually, including hospitality, restaurants, property management and natural resources. | |||||||||||||||||||||||||||||||||||
Total accrued sales incentives are recorded in Accrued expenses and were approximately $111 million and $114 million as of September 30, 2024 and December 31, 2023, respectively.
The Company had no material unsatisfied performance obligations, contract assets or liabilities as of September 30, 2024 and December 31, 2023.
NOTE 3 - PROPERTY, BUILDINGS AND EQUIPMENT
Property, buildings and equipment consisted of the following (in millions of dollars):
| As of | |||||||||||
| September 30, 2024 | December 31, 2023 | ||||||||||
| Land and land improvements | $ | $ | |||||||||
| Building, structures and improvements | |||||||||||
| Furniture, fixtures, machinery and equipment | |||||||||||
| Property, buildings and equipment | $ | $ | |||||||||
| Less accumulated depreciation | |||||||||||
| Property, buildings and equipment – net | $ | $ | |||||||||
11
W.W. Grainger, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
NOTE 4 - GOODWILL AND OTHER INTANGIBLE ASSETS
The Company did not identify any significant events or changes in circumstances that indicated the existence of impairment indicators during the three and nine months ended September 30, 2024. As such, quantitative assessments were not required.
The balances and changes in the carrying amount of goodwill by segment are as follows (in millions of dollars):
| High-Touch Solutions N.A. | Endless Assortment | Total | ||||||||||||||||||||||||
| Balance at January 1, 2023 | $ | $ | $ | |||||||||||||||||||||||
| Translation | ( | ( | ||||||||||||||||||||||||
| Balance at December 31, 2023 | ||||||||||||||||||||||||||
| Translation | ( | ( | ( | |||||||||||||||||||||||
Balance at September 30, 2024 | $ | $ | $ | |||||||||||||||||||||||
The Company's cumulative goodwill impairments as of September 30, 2024 were $137 million. No goodwill impairments were recorded for the three and nine months ended September 30, 2024 and 2023.
The balances and changes in intangible assets – net are as follows (in millions of dollars):
| As of | |||||||||||||||||||||||||||||||||||||||||
| September 30, 2024 | December 31, 2023 | ||||||||||||||||||||||||||||||||||||||||
| Weighted average life | Gross carrying amount | Accumulated amortization | Net carrying amount | Gross carrying amount | Accumulated amortization | Net carrying amount | |||||||||||||||||||||||||||||||||||
| Customer lists and relationships | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||
| Trademarks, trade names and other | |||||||||||||||||||||||||||||||||||||||||
| Non-amortized trade names and other | Indefinite | ||||||||||||||||||||||||||||||||||||||||
| Capitalized software | |||||||||||||||||||||||||||||||||||||||||
| Total intangible assets | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||
12
W.W. Grainger, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
NOTE 5 - DEBT
Total debt, including long-term and current maturities, consisted of the following (in millions of dollars):
| As of | |||||||||||||||||||||||
September 30, 2024 | December 31, 2023 | ||||||||||||||||||||||
| Carrying Value | Fair Value | Carrying Value | Fair Value | ||||||||||||||||||||
| $ | $ | $ | $ | ||||||||||||||||||||
| Debt issuance costs – net of amortization and other | ( | ( | ( | ( | |||||||||||||||||||
| Long-term debt | |||||||||||||||||||||||
| Japanese yen term loan | |||||||||||||||||||||||
| Other | ( | ( | |||||||||||||||||||||
| Current maturities | |||||||||||||||||||||||
| Total debt | $ | $ | $ | $ | |||||||||||||||||||
Senior Notes
Between 2015 and 2020, Grainger issued $2.3
In September 2024, Grainger issued $500 million in unsecured 4.45 % senior notes (4.45 % Notes). Grainger intends to use the net proceeds from this offering to repay the 1.85 % Senior Notes that mature in February 2025 and any remaining net proceeds for general corporate purposes. The 4.45 % Notes mature in September 2034, require no principal payments until maturity, and interest is paid semi-annually in arrears, beginning March 15, 2025.
The Company incurred debt issuance costs related to its Senior Notes, representing underwriting fees and other expenses. These costs were recorded as a contra-liability in Long-term debt and are being amortized over the term of the Senior Notes using the straight-line method to Interest expense – net. As of September 30, 2024 and December 31, 2023, the cumulative unamortized costs were $23 million and $19 million, respectively.
The Company uses interest rate swaps to manage the risks associated with its 1.85 % Senior Notes. These swaps were designated for hedge accounting treatment as fair value hedges. The resulting carrying value adjustments are presented in Other in Current maturities as of September 30, 2024 and Other in Long-term debt as of December 31, 2023 in the table above. For further discussion on the Company's hedge accounting policies, see Note 6.
MonotaRO Term Loan
In August 2020, MonotaRO Co., Ltd (MonotaRO) entered into a ¥9 billion term loan agreement to fund technology investments and the expansion of its distribution center (DC) network. In the third quarter of 2024, the term loan was paid in full.
Fair Value
13
W.W. Grainger, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
NOTE 6 - DERIVATIVE INSTRUMENTS
The Company's earnings and cash flows are subject to fluctuations due to changes in foreign currency exchange and interest rates. Grainger currently enters into certain derivatives or other financial instruments to hedge against these risks.
Fair Value Hedges
The Company uses interest rate swaps to hedge a portion of its fixed-rate debt. These swaps are treated as fair value hedges and consequently the gain or loss on the derivative as well as the offsetting gain or loss on the hedged item, are recognized in the Condensed Consolidated Statements of Earnings in Interest expense – net. The notional amount of the Company’s outstanding fair value hedges as of September 30, 2024 and December 31, 2023 was $450
Due to the high degree of effectiveness between the hedging instruments and the underlying exposures being hedged, no recognition of ineffectiveness was recorded for the three and nine months ended September 30, 2024 and 2023.
The liability hedged by the interest rate swaps is recorded in Current maturities as of September 30, 2024 and Long-term debt as of December 31, 2023 on the Condensed Consolidated Balance Sheets. The carrying amount of the hedged item, including the cumulative amount of fair value hedging adjustments was $444 million as of September 30, 2024 and $432 million as of December 31, 2023.
The interest rate swaps are reported on the Condensed Consolidated Balance Sheets as of September 30, 2024 and December 31, 2023 as shown in the following table (in millions of dollars):
| As of | ||||||||||||||
| September 30, 2024 | December 31, 2023 | |||||||||||||
| Accrued expenses | $ | $ | ||||||||||||
| Other non-current liabilities | $ | $ | ||||||||||||
Fair Value
14
W.W. Grainger, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
NOTE 7 - SEGMENT INFORMATION
Grainger's two reportable segments are High-Touch Solutions N.A. and Endless Assortment. The remaining businesses, which include the Company's Cromwell business, are classified as Other to reconcile to consolidated results. These remaining businesses individually and in the aggregate do not meet the criteria of a reportable segment.
The Company's corporate costs are allocated to each reportable segment based on benefits received. Additionally, intersegment sales transactions, which are sales between Grainger businesses in separate reportable segments, are eliminated within the segment to present only the impact of sales to external customers. Service fees for intersegment sales are included in each reportable segment's Selling, general and administrative expenses (SG&A) and are also eliminated in the Company's Condensed Consolidated Financial Statements.
Following is a summary of segment results (in millions of dollars):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||||||||||||||||||||||||||
| Net sales | Operating earnings (losses) | Net sales | Operating earnings (losses) | Net sales | Operating earnings (losses) | Net sales | Operating earnings (losses) | ||||||||||||||||||||||||||||||||||||||||
| High-Touch Solutions N.A. | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Endless Assortment | |||||||||||||||||||||||||||||||||||||||||||||||
| Other | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Total Company | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
The Company is a broad line distributor of MRO products and services. Products are regularly added and removed from the Company's inventory. Accordingly, it would be impractical to provide sales information by product category due to the way the business is managed and the dynamic nature of the inventory offered, including the evolving list of products stocked and additional products available online but not stocked. Assets for reportable segments are not disclosed as such information is not regularly reviewed by the Company's Chief Operating Decision Maker.
NOTE 8 - CONTINGENCIES AND LEGAL MATTERS
From time to time the Company is involved in various legal and administrative proceedings, including claims related to: product liability, safety or compliance; privacy and cybersecurity matters; negligence; contract disputes; environmental issues; unclaimed property; wage and hour laws; intellectual property; advertising and marketing; consumer protection; pricing (including disaster or emergency declaration pricing statutes); employment practices; regulatory compliance, including trade and export matters; anti-bribery and corruption; and other matters and actions brought by team members, consumers, competitors, suppliers, customers, governmental entities and other third parties.
The Company remains in litigation involving KMCO, LLC (KMCO) as previously disclosed. The Company continues to contest the remaining KMCO-related lawsuits and cannot predict the timing, outcome or any estimate of possible loss or range of losses on the remaining KMCO lawsuits.
NOTE 9 - SUBSEQUENT EVENTS
On October 30, 2024, the Company’s Board of Directors declared a quarterly dividend of $2.05 per share, payable December 1, 2024, to shareholders of record on November 11, 2024.
15
W.W. Grainger, Inc. and Subsidiaries
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations
The following Management’s Discussion and Analysis (MD&A) of Financial Condition and Results of Operations is intended to help the reader understand the results of operations and financial condition of W.W. Grainger, Inc. (Grainger or Company) as it is viewed by management of the Company. The following discussion should be read in conjunction with the Consolidated Financial Statements and accompanying notes for the year ended December 31, 2023 included in the Company's 2023 Form 10-K and the Condensed Consolidated Financial Statements and accompanying notes included in Part I, Item 1: Financial Statements of this Form 10-Q.
Percentage figures included in this section have not been calculated on the basis of such rounded figures but on the basis of such amounts prior to rounding. For this reason, percentage amounts in this section may vary slightly from those obtained by performing the same calculations using the figures in the Company's Condensed Consolidated Financial Statements or in the associated text.
Overview
Grainger is a broad line, business-to-business distributor of maintenance, repair and operating (MRO) products and services with operations primarily in North America, Japan and the U.K. Grainger uses a combination of its high-touch solutions and endless assortment businesses to serve its customers worldwide, which rely on Grainger for products and services that enable them to run safe, sustainable and productive operations.
Strategic Priorities
For a discussion of the Company’s strategic priorities for 2024, see Part 1, Item 1: Business and Part II, Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Company’s 2023 Form 10-K.
Recent Events
Macroeconomic Conditions
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.
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.
For further discussion of the Company's risks and uncertainties, see Part I, Item 1A: Risk Factors in the Company’s 2023 Form 10-K.
16
W.W. Grainger, Inc. and Subsidiaries
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations –Three Months Ended September 30, 2024
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 below "Non-GAAP Measures."
The following table is included as an aid to understanding the changes in Grainger’s Condensed Consolidated Statements of Earnings for three months ended September 30, 2024 and 2023 (in millions of dollars except per share amounts):
Three Months Ended September 30, | |||||||||||||||||||||||||||||
| % Change | % of Net Sales | ||||||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||||||||
Net sales(1) | $ | 4,388 | $ | 4,208 | 4.3 | % | 100.0 | % | 100.0 | % | |||||||||||||||||||
| Cost of goods sold | 2,668 | 2,553 | 4.5 | 60.8 | 60.7 | ||||||||||||||||||||||||
| Gross profit | 1,720 | 1,655 | 3.9 | 39.2 | 39.3 | ||||||||||||||||||||||||
| Selling, general and administrative expenses | 1,034 | 988 | 4.7 | 23.6 | 23.4 | ||||||||||||||||||||||||
| Operating earnings | 686 | 667 | 2.8 | 15.6 | 15.9 | ||||||||||||||||||||||||
| Other expense – net | 15 | 15 | — | 0.3 | 0.4 | ||||||||||||||||||||||||
| Income tax provision | 166 | 159 | 4.4 | 3.8 | 3.8 | ||||||||||||||||||||||||
| Net earnings | 505 | 493 | 2.4 | 11.5 | 11.7 | ||||||||||||||||||||||||
| Noncontrolling interest | 19 | 17 | 11.8 | 0.4 | 0.4 | ||||||||||||||||||||||||
| Net earnings attributable to W.W. Grainger, Inc. | $ | 486 | $ | 476 | 2.1 | 11.1 | % | 11.3 | % | ||||||||||||||||||||
| Diluted earnings per share | $ | 9.87 | $ | 9.43 | 4.7 | % | |||||||||||||||||||||||
(1) For further information regarding the Company's disaggregated revenue, see Note 2 of the Notes to Condensed Consolidated Financial Statements in Part 1, Item 1: Financial Statements of this Form 10-Q. | |||||||||||||||||||||||||||||
The following table is included as an aid to understanding the changes of Grainger's total net sales, daily net sales and daily, organic constant currency net sales from the prior period for the three months ended September 30, 2024 and 2023 (in millions of dollars):
Three Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 2024 | % Change(1) | 2023 | % Change(1) | |||||||||||||||||||||||||||||||||||||||||||||||
| Net sales | $ | 4,388 | 4.3 | % | $ | 4,208 | 6.7 | % | ||||||||||||||||||||||||||||||||||||||||||
Daily net sales(2) | $ | 67.5 | 2.6 | % | $ | 67.9 | 8.4 | % | ||||||||||||||||||||||||||||||||||||||||||
Daily, organic constant currency net sales(2) | $ | 68.5 | 4.0 | % | $ | 68.1 | 8.7 | % | ||||||||||||||||||||||||||||||||||||||||||
(1) Calculated on the basis of prior year net sales for the three months ended September 30, 2024 and 2023. | ||||||||||||||||||||||||||||||||||||||||||||||||||
(2) Daily net sales are adjusted for the difference in U.S. selling days relative to the prior year period. Daily, organic constant currency net sales are also adjusted to exclude the impact on net sales due to year-over-year foreign currency exchange rate fluctuations and the prior year period results of E & R Industrial Sales, Inc. (E&R) divested in the fourth quarter of 2023. There were 64 and 63 sales days in the three months ended September 30, 2024 and 2023, respectively. For further information regarding the Company's non-GAAP measures, including reconciliations to the most directly comparable GAAP measure, see below "Non-GAAP Measures." | ||||||||||||||||||||||||||||||||||||||||||||||||||
Net sales of $4,388 million for the three months ended September 30, 2024 increased $180 million, or 4% on a reported and daily, organic constant currency basis, compared to the same period in 2023. Both High-Touch Solutions N.A. and the Endless Assortment segments contributed to sales growth in the third quarter of 2024. For further discussion on the Company's net sales, see the Segment Analysis section below.
17
W.W. Grainger, Inc. and Subsidiaries
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Gross profit of $1,720 million for the three months ended September 30, 2024 increased $65 million, or 4%, and gross profit margin of 39.2% decreased 10 basis points compared to the same period in 2023. For further discussion on the Company's gross profit, see the Segment Analysis section below.
Selling, general and administrative (SG&A) expenses of $1,034 million for the three months ended September 30, 2024 increased $46 million, or 5%, compared to the same period in 2023. The increase was primarily due to higher marketing and payroll and benefit expenses in the third quarter of 2024. SG&A leverage decreased 20 basis points compared to the same period in 2023.
Operating earnings of $686 million for the three months ended September 30, 2024 increased $19 million, or 3%, compared to the same period in 2023. The increase was due to higher gross profit dollars, partially offset by increased SG&A expenses in the third quarter of 2024.
Income tax expense of $166 million and $159 million represents effective tax rates of 24.8% and 24.4% for the three months ended September 30, 2024 and 2023, respectively.
Diluted earnings per share was $9.87 for the three months ended September 30, 2024, an increase of 5% compared to $9.43 for the same period in 2023.
Segment Analysis
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 below "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.
High-Touch Solutions N.A.
The following table shows reported segment results (in millions of dollars):
| Three Months Ended September 30, | |||||||||||||||||
| 2024 | 2023 | % Change | |||||||||||||||
| Net sales | $ | 3,515 | $ | 3,403 | 3.3 | % | |||||||||||
| Gross profit | $ | 1,462 | $ | 1,418 | 3.1 | % | |||||||||||
| Selling, general and administrative expenses | $ | 845 | $ | 806 | 4.8 | % | |||||||||||
| Operating earnings | $ | 617 | $ | 612 | 0.8 | % | |||||||||||
Net sales of $3,515 million for the three months ended September 30, 2024 increased $112 million, or 3% on a reported and daily, organic constant currency basis, compared to the same period in 2023. The increase was primarily due to volume.
Gross profit of $1,462 million for the three months ended September 30, 2024 increased $44 million, or 3%. Gross profit margin of 41.6% decreased 10 basis points compared to the same period in 2023.
SG&A of $845 million for the three months ended September 30, 2024 increased $39 million, or 5%, compared to the same period in 2023. The increase was primarily due to higher marketing and payroll and benefit expenses. SG&A leverage decreased 30 basis points.
Operating earnings of $617 million for the three months ended September 30, 2024 increased $5 million, or 1%, compared to the same period in 2023.
18
W.W. Grainger, Inc. and Subsidiaries
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Endless Assortment
The following table shows reported segment results (in millions of dollars):
| Three Months Ended September 30, | |||||||||||||||||
| 2024 | 2023 | % Change | |||||||||||||||
| Net sales | $ | 791 | $ | 732 | 8.1 | % | |||||||||||
| Gross profit | $ | 233 | $ | 216 | 7.9 | % | |||||||||||
| Selling, general and administrative expenses | $ | 163 | $ | 161 | 1.2 | % | |||||||||||
| Operating earnings | $ | 70 | $ | 55 | 27.3 | % | |||||||||||
Net sales of $791 million for the three months ended September 30, 2024 increased $59 million, or 8%, and on a daily constant currency basis increased 12% compared to the same period in 2023. The increase was due to sales growth of 13%, driven by customer acquisition for the segment and enterprise growth at MonotaRO. Sales growth was partially offset by unfavorable currency exchange of 5% due to changes in the exchange rate between the U.S. dollar and the Japanese yen.
Gross profit of $233 million for the three months ended September 30, 2024 increased $17 million, or 8%, and gross profit margin of 29.5% decreased 10 basis points compared to the same period in 2023.
SG&A of $163 million for the three months ended September 30, 2024 increased $2 million, or 1%, compared to the same period in 2023. SG&A leverage improved 140 basis points as sales growth outpaced SG&A expenses driven by occupancy efficiencies compared to the same period in 2023.
Operating earnings of $70 million for the three months ended September 30, 2024 increased $15 million, or 27%, compared to the same period in 2023.
19
W.W. Grainger, Inc. and Subsidiaries
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations – Nine Months Ended September 30, 2024
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 below "Non-GAAP Measures."
The following table is included as an aid to understanding the changes in Grainger's Condensed Consolidated Statements of Earnings (in millions of dollars except per share amounts):
Nine Months Ended September 30, | |||||||||||||||||||||||||||||
Percent Increase/(Decrease) from Prior Year | As a Percent of Net Sales | ||||||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||||||||
Net sales(1) | $ | 12,935 | $ | 12,481 | 3.6 | % | 100.0 | % | 100.0 | % | |||||||||||||||||||
| Cost of goods sold | 7,853 | 7,548 | 4.0 | 60.7 | 60.5 | ||||||||||||||||||||||||
| Gross profit | 5,082 | 4,933 | 3.0 | 39.3 | 39.5 | ||||||||||||||||||||||||
| Selling, general and administrative expenses | 3,078 | 2,925 | 5.2 | 23.8 | 23.4 | ||||||||||||||||||||||||
| Operating earnings | 2,004 | 2,008 | (0.2) | 15.5 | 16.1 | ||||||||||||||||||||||||
| Other expense – net | 42 | 49 | (14.3) | 0.4 | 0.4 | ||||||||||||||||||||||||
| Income tax provision | 470 | 468 | 0.4 | 3.6 | 3.7 | ||||||||||||||||||||||||
| Net earnings | 1,492 | 1,491 | 0.1 | 11.5 | 12.0 | ||||||||||||||||||||||||
| Noncontrolling interest | 58 | 57 | 1.8 | 0.4 | 0.5 | ||||||||||||||||||||||||
| Net earnings attributable to W.W. Grainger, Inc. | $ | 1,434 | $ | 1,434 | — | 11.1 | % | 11.5 | % | ||||||||||||||||||||
| Diluted earnings per share | $ | 29.00 | $ | 28.32 | 2.4 | % | |||||||||||||||||||||||
(1) For further information regarding the Company's disaggregated revenue, see Note 2 of the Notes to Condensed Consolidated Financial Statements in Part 1, Item 1: Financial Statements of this Form 10-Q. | |||||||||||||||||||||||||||||
The following table is included as an aid to understanding the changes of Grainger's total net sales, daily net sales and daily, organic constant currency net sales compared from the prior period for the nine months ended September 30, 2024 and 2023 (in millions of dollars):
| Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 2024 | % Change(1) | 2023 | % Change(1) | |||||||||||||||||||||||||||||||||||||||||||||||
| Net sales | $ | 12,935 | 3.6 | % | $ | 12,481 | 9.2 | % | ||||||||||||||||||||||||||||||||||||||||||
Daily net sales(2) | $ | 67.0 | 3.1 | % | $ | 65.7 | 9.8 | % | ||||||||||||||||||||||||||||||||||||||||||
Daily, organic constant currency net sales(2) | $ | 68.1 | 4.8 | % | $ | 66.4 | 11.1 | % | ||||||||||||||||||||||||||||||||||||||||||
(1) Calculated on the basis of prior year net sales for the nine months ended September 30, 2024 and 2023. | ||||||||||||||||||||||||||||||||||||||||||||||||||
(2) Daily net sales are adjusted for the difference in U.S. selling days relative to the prior year period. Daily, organic constant currency net sales are also adjusted to exclude the impact on net sales due to year-over-year foreign currency exchange rate fluctuations and the prior year period results of E&R divested in the fourth quarter of 2023. There were 192 and 191 sales days in the nine months ended September 30, 2024 and 2023, respectively. For further information regarding the Company's non-GAAP measures, including reconciliations to the most directly comparable GAAP measure, see below "Non-GAAP Measures." | ||||||||||||||||||||||||||||||||||||||||||||||||||
Net sales of $12,935 million for the nine months ended September 30, 2024 increased $454 million, or 4%, and on a daily, organic constant currency basis increased 5% compared to the same period in 2023. Both High-Touch
20
W.W. Grainger, Inc. and Subsidiaries
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Solutions N.A. and the Endless Assortment segments contributed to sales growth in the nine months ended September 30, 2024. For further discussion on the Company's net sales, see the Segment Analysis section below.
Gross profit of $5,082 million for the nine months ended September 30, 2024 increased $149 million, or 3%, and gross profit margin of 39.3% decreased 20 basis points compared to the same period in 2023. For further discussion on the Company's gross profit, see the Segment Analysis section below.
SG&A of $3,078 million for the nine months ended September 30, 2024 increased $153 million, or 5%, compared to the same period in 2023. Adjusted SG&A of $3,062 million increased $137 million, or 5%, driven by higher marketing and payroll and benefit expenses in 2024. SG&A leverage decreased 40 basis points and adjusted SG&A leverage decreased 30 basis points compared to the same period in 2023.
Operating earnings of $2,004 million for the nine months ended September 30, 2024 decreased $4 million, compared to the same period in 2023. Adjusted operating earnings of $2,020 million increased $12 million, or 1%.
Income taxes of $470 million for the nine months ended September 30, 2024 increased $2 million, compared to the same period in 2023. Adjusted income taxes of $474 million increased $6 million compared to the same period in 2023. Grainger's effective tax rates were 24.0% and 23.9% for the nine months ended September 30, 2024 and 2023, respectively. The adjusted effective tax rate for the nine months ended September 30, 2024 was 24.0%.
Diluted earnings per share was $29.00 and adjusted diluted earnings per share was $29.25 for the nine months ended September 30, 2024. On an adjusted basis, this was an increase of 3% compared to $28.32 for the same period in 2023.
Segment Analysis
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.
High-Touch Solutions N.A.
The following table shows reported segment results (in millions of dollars):
| Nine Months Ended September 30, | |||||||||||||||||
| 2024 | 2023 | % Change | |||||||||||||||
| Net sales | $ | $ | 10,052 | 3.2 | % | ||||||||||||
| Gross profit | $ | 4,328 | $ | 4,213 | 2.7 | % | |||||||||||
| Selling, general and administrative expenses | $ | 2,510 | $ | 2,380 | 5.5 | % | |||||||||||
| Operating earnings | $ | $ | 1,833 | (0.8) | % | ||||||||||||
Net sales of $10,378 million for the nine months ended September 30, 2024 increased $326 million, or 3% on a reported and daily, organic constant currency basis, compared to the same period in 2023. The increase was primarily due to volume.
Gross profit of $4,328 million for the nine months ended September 30, 2024 increased $115 million, or 3%, and gross profit margin of 41.7% decreased 20 basis points compared to the same period in 2023.
SG&A of $2,510 million for the nine months ended September 30, 2024 increased $130 million, or 6%, compared to the same period in 2023. Adjusted SG&A of $2,495 million increased $115 million, or 5%. The increase was primarily due to higher marketing and payroll and benefit expenses in 2024. SG&A leverage decreased 50 basis points and adjusted SG&A leverage decreased 30 basis points compared to the same period in 2023.
21
W.W. Grainger, Inc. and Subsidiaries
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Operating earnings of $1,818 million for the nine months ended September 30, 2024 decreased $15 million, or 1%, compared to the same period in 2023. Adjusted operating earnings of $1,833 million was the same as the prior year period.
Endless Assortment
The following table shows reported segment results (in millions of dollars):
| Nine Months Ended September 30, | |||||||||||||||||
| 2024 | 2023 | % Change | |||||||||||||||
| Net sales | $ | $ | 5.0 | % | |||||||||||||
| Gross profit | $ | 682 | $ | 654 | 4.3 | % | |||||||||||
| Selling, general and administrative expenses | $ | 492 | $ | 476 | 3.4 | % | |||||||||||
| Operating earnings | $ | $ | 178 | 6.7 | % | ||||||||||||
Net sales of $2,318 million for the nine months ended September 30, 2024 increased $111 million, or 5% and on a daily constant currency basis increased 11% 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. Sales growth was partially offset by unfavorable currency exchange of 7% due to changes in the exchange rate between the U.S. dollar and the Japanese yen.
Gross profit of $682 million for the nine months ended September 30, 2024 increased $28 million, or 4%, and gross profit margin of 29.4% decreased 20 basis points compared to the same period in 2023. The decrease was driven by unfavorable product mix.
SG&A of $492 million for the nine months ended September 30, 2024 increased $16 million, or 3%, compared to the same period in 2023. The increase was primarily due to higher marketing expenses in 2024. SG&A leverage increased 40 basis points compared to the same period in 2023.
Operating earnings of $190 million for the nine months ended September 30, 2024 increased $12 million, or 7% compared to the same period in 2023.
Non-GAAP Measures
Grainger utilizes non-GAAP measures where it believes it will assist users of its financial statements in understanding its business. Non-GAAP measures exclude certain items affecting comparability that can affect the year-over-year assessment of operating results and other one-time items that do not directly reflect ongoing operating results. The Company adjusts its reported net sales when there are differences in the number of U.S. selling days relative to the prior year period and also excludes the impact on reported net sales due to changes in foreign currency exchange rate fluctuations and results of certain divested businesses. This includes the net sales results of E&R divested in the fourth quarter of 2023 previously reported in the High-Touch Solutions N.A. segment. Adjusted results including adjusted SG&A, adjusted operating earnings, adjusted net earnings and adjusted diluted EPS exclude certain non-recurring items, including restructuring charges, asset impairments, gains and losses associated with business divestitures and other non-recurring, infrequent or unusual gains and losses from the Company’s most directly comparable reported U.S. generally accepted accounting principles (GAAP) results. The Company believes its non-GAAP measures provide meaningful information to assist investors in understanding financial results and assessing prospects for future performance as they provide a better baseline for analyzing the ongoing performance of its businesses by excluding items that may not be indicative of core operating results. Grainger’s non-GAAP financial measures should be considered in addition to, and not as a replacement for or as a superior measure to its most directly comparable GAAP measures and may not be comparable to similarly titled measures reported by other companies.
22
W.W. Grainger, Inc. and Subsidiaries
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
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 sales for the three months ended September 30, 2024 and 2023 (in millions of dollars):
| Three Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||
| High-Touch Solutions N.A. | Endless Assortment | Total Company(1) | ||||||||||||||||||||||||||||||||||||||||||
| 2024 | % Change(2) | 2024 | % Change(2) | 2024 | % Change(2) | |||||||||||||||||||||||||||||||||||||||
| Reported net sales | $ | 3,515 | 3.3 | % | $ | 791 | 8.1 | % | $ | 4,388 | 4.3 | % | ||||||||||||||||||||||||||||||||
Daily impact(3) | (0.9) | (1.6) | (0.2) | (1.7) | (1.1) | (1.7) | ||||||||||||||||||||||||||||||||||||||
| Daily net sales | 54.1 | 1.7 | 12.2 | 6.4 | 67.5 | 2.6 | ||||||||||||||||||||||||||||||||||||||
Foreign currency exchange(4) | 0.1 | 0.3 | 0.6 | 5.1 | 0.7 | 1.0 | ||||||||||||||||||||||||||||||||||||||
Business divestiture(5) | 0.3 | 0.5 | — | — | 0.3 | 0.4 | ||||||||||||||||||||||||||||||||||||||
| Daily, organic constant currency net sales | $ | 54.5 | 2.5 | % | $ | 12.8 | 11.5 | % | $ | 68.5 | 4.0 | % | ||||||||||||||||||||||||||||||||
| 2023 | % Change(2) | 2023 | % Change(2) | 2023 | % Change(2) | |||||||||||||||||||||||||||||||||||||||
| Reported net sales | $ | 3,403 | 7.0 | % | $ | 732 | 4.3 | % | $ | 4,208 | 6.7 | % | ||||||||||||||||||||||||||||||||
Daily impact(3) | 0.9 | 1.7 | 0.2 | 1.7 | 1.1 | 1.7 | ||||||||||||||||||||||||||||||||||||||
| Daily net sales | 54.9 | 8.7 | 11.8 | 6.0 | 67.9 | 8.4 | ||||||||||||||||||||||||||||||||||||||
Foreign currency exchange(4) | (0.1) | (0.2) | 0.3 | 3.2 | 0.2 | 0.3 | ||||||||||||||||||||||||||||||||||||||
| Daily, organic constant currency net sales | $ | 54.8 | 8.5 | % | $ | 12.1 | 9.2 | % | 68.1 | 8.7 | % | |||||||||||||||||||||||||||||||||
(1) Total Company includes Other. Grainger's businesses reported in Other do not meet the criteria of a reportable segment. | ||||||||||||||||||||||||||||||||||||||||||||
(2) Compared to net sales in the prior year period. | ||||||||||||||||||||||||||||||||||||||||||||
(3) Excludes the impact on net sales due to the difference in U.S. selling days relative to the prior year period on a daily basis. There were 64 and 63 sales days in the three months ended September 30, 2024 and 2023, respectively. | ||||||||||||||||||||||||||||||||||||||||||||
(4) Excludes the impact on net sales due to year-over-year foreign currency exchange rate fluctuations on a daily basis. | ||||||||||||||||||||||||||||||||||||||||||||
(5) Excludes the net sales results of the divested E&R business in the prior year period on a daily basis. | ||||||||||||||||||||||||||||||||||||||||||||
23
W.W. Grainger, Inc. and Subsidiaries
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
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 sales for the nine months ended September 30, 2024 and 2023 (in millions of dollars):
| Nine months ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||
| High-Touch Solutions N.A. | Endless Assortment | Total Company(1) | ||||||||||||||||||||||||||||||||||||||||||
| 2024 | % Change(2) | 2024 | % Change(2) | 2024 | % Change(2) | |||||||||||||||||||||||||||||||||||||||
| Reported net sales | $ | 10,378 | 3.2 | % | $ | 2,318 | 5.0 | % | $ | 12,935 | 3.6 | % | ||||||||||||||||||||||||||||||||
Daily impact(3) | (0.3) | (0.5) | (0.1) | (0.5) | (0.4) | (0.5) | ||||||||||||||||||||||||||||||||||||||
| Daily net sales | 53.8 | 2.7 | 12.0 | 4.5 | 67.0 | 3.1 | ||||||||||||||||||||||||||||||||||||||
Foreign currency exchange(4) | — | — | 0.8 | 6.6 | 0.8 | 1.2 | ||||||||||||||||||||||||||||||||||||||
Business divestiture(5) | 0.3 | 0.6 | — | — | 0.3 | 0.5 | ||||||||||||||||||||||||||||||||||||||
| Daily, organic constant currency net sales | $ | 54.1 | 3.3 | % | $ | 12.8 | 11.1 | % | $ | 68.1 | 4.8 | % | ||||||||||||||||||||||||||||||||
| 2023 | % Change(2) | 2023 | % Change(2) | 2023 | % Change(2) | |||||||||||||||||||||||||||||||||||||||
| Reported net sales | $ | 10,052 | 10.3 | % | $ | 2,207 | 4.2 | % | $ | 12,481 | 9.2 | % | ||||||||||||||||||||||||||||||||
Daily impact(3) | 0.3 | 0.6 | 0.1 | 0.6 | 0.4 | 0.6 | ||||||||||||||||||||||||||||||||||||||
| Daily net sales | 52.9 | 10.9 | 11.7 | 4.8 | 65.7 | 9.8 | ||||||||||||||||||||||||||||||||||||||
Foreign currency exchange(4) | — | — | 0.7 | 6.3 | 0.7 | 1.3 | ||||||||||||||||||||||||||||||||||||||
| Daily, organic constant currency net sales | $ | 52.9 | 10.9 | % | $ | 12.4 | 11.1 | % | 66.4 | 11.1 | % | |||||||||||||||||||||||||||||||||
(1) Total Company includes Other. Grainger's businesses reported in Other do not meet the criteria of a reportable segment. | ||||||||||||||||||||||||||||||||||||||||||||
(2) Compared to net sales in the prior year period. | ||||||||||||||||||||||||||||||||||||||||||||
(3) Excludes the impact on net sales due to the difference in U.S. selling days relative to the prior year period on a daily basis. There were 192 and 191 sales days in the nine months ended September 30, 2024 and 2023, respectively. | ||||||||||||||||||||||||||||||||||||||||||||
(4) Excludes the impact on net sales due to year-over-year foreign currency exchange rate fluctuations on a daily basis. | ||||||||||||||||||||||||||||||||||||||||||||
(5) Excludes the net sales results of the divested E&R business in the prior year period on a daily basis. | ||||||||||||||||||||||||||||||||||||||||||||
The following tables provide reconciliations of reported SG&A expenses, operating earnings, net earnings attributable to W.W. Grainger, Inc. and diluted earnings per share determined in accordance with GAAP to the Company's non-GAAP measures adjusted SG&A, adjusted operating earnings, adjusted net earnings attributable to W.W. Grainger, Inc. and adjusted diluted earnings per share for the three and nine months ended September 30, 2024 and 2023 (in millions of dollars):
24
W.W. Grainger, Inc. and Subsidiaries
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
| Three months ended September 30, 2024 | Reported | Adjustment(1) | Adjusted | % Change | ||||||||||||||||||||||
| Selling, general and administrative expenses | ||||||||||||||||||||||||||
| High-Touch Solutions N.A. | $ | 845 | $ | — | $ | 845 | ||||||||||||||||||||
| Endless Assortment | 163 | — | 163 | |||||||||||||||||||||||
Other(2) | 26 | — | 26 | |||||||||||||||||||||||
| Selling, general and administrative expenses | $ | 1,034 | $ | — | $ | 1,034 | 4.7% | |||||||||||||||||||
| Earnings | ||||||||||||||||||||||||||
| High-Touch Solutions N.A. | $ | 617 | $ | — | $ | 617 | ||||||||||||||||||||
| Endless Assortment | 70 | — | 70 | |||||||||||||||||||||||
Other(2) | (1) | — | (1) | |||||||||||||||||||||||
| Operating earnings | $ | 686 | $ | — | $ | 686 | 2.8% | |||||||||||||||||||
| Total other expense – net | (15) | — | (15) | |||||||||||||||||||||||
Income tax provision | (166) | — | (166) | |||||||||||||||||||||||
| Net earnings | $ | 505 | $ | — | $ | 505 | ||||||||||||||||||||
| Noncontrolling interest | (19) | — | (19) | |||||||||||||||||||||||
| Net earnings attributable to W.W. Grainger, Inc. | $ | 486 | $ | — | $ | 486 | 2.1% | |||||||||||||||||||
| Diluted earnings per share | $ | 9.87 | $ | — | $ | 9.87 | 4.7% | |||||||||||||||||||
| Three months ended September 30, 2023 | Reported | Adjustment(1) | Adjusted | % Change | ||||||||||||||||||||||
| Selling, general and administrative expenses | ||||||||||||||||||||||||||
| High-Touch Solutions N.A. | $ | 806 | $ | — | $ | 806 | ||||||||||||||||||||
| Endless Assortment | 161 | — | 161 | |||||||||||||||||||||||
Other(2) | 21 | — | 21 | |||||||||||||||||||||||
| Selling, general and administrative expenses | $ | 988 | $ | — | $ | 988 | 7.9% | |||||||||||||||||||
| Earnings | ||||||||||||||||||||||||||
| High-Touch Solutions N.A. | $ | 612 | $ | — | $ | 612 | ||||||||||||||||||||
| Endless Assortment | 55 | — | 55 | |||||||||||||||||||||||
Other(2) | — | — | — | |||||||||||||||||||||||
| Operating earnings | $ | 667 | $ | — | $ | 667 | 10.7% | |||||||||||||||||||
| Total other expense – net | (15) | — | (15) | |||||||||||||||||||||||
| Income tax provision | (159) | — | (159) | |||||||||||||||||||||||
| Net earnings | $ | 493 | $ | — | $ | 493 | ||||||||||||||||||||
| Noncontrolling interest | (17) | — | (17) | |||||||||||||||||||||||
| Net earnings attributable to W.W. Grainger, Inc. | $ | 476 | $ | — | $ | 476 | 11.9% | |||||||||||||||||||
| Diluted earnings per share | $ | 9.43 | $ | — | $ | 9.43 | 14.1% | |||||||||||||||||||
(1) There were no non-GAAP adjustments for the three months ended September 30, 2024 and 2023. | ||||||||||||||||||||||||||
(2) Grainger's businesses reported in Other do not meet the criteria of a reportable segment. | ||||||||||||||||||||||||||
25
W.W. Grainger, Inc. and Subsidiaries
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
| Nine Months Ended September 30, 2024 | Reported | Adjustment(1) | Adjusted | % Change Reported(2) | % Change Adjusted(2) | ||||||||||||||||||||||||
| Selling, general and administrative expenses | |||||||||||||||||||||||||||||
| High-Touch Solutions N.A. | $ | 2,510 | $ | (15) | $ | 2,495 | |||||||||||||||||||||||
| Endless Assortment | 492 | — | 492 | ||||||||||||||||||||||||||
Other(3) | 76 | (1) | 75 | ||||||||||||||||||||||||||
| Selling, general and administrative expenses | $ | 3,078 | $ | (16) | $ | 3,062 | 5.2% | 4.7% | |||||||||||||||||||||
| Earnings | |||||||||||||||||||||||||||||
| High-Touch Solutions N.A. | $ | 1,818 | $ | 15 | $ | 1,833 | |||||||||||||||||||||||
| Endless Assortment | 190 | — | 190 | ||||||||||||||||||||||||||
Other(3) | (4) | 1 | (3) | ||||||||||||||||||||||||||
| Operating earnings | $ | 2,004 | $ | 16 | $ | 2,020 | (0.2)% | 0.6% | |||||||||||||||||||||
| Total other expense – net | (42) | — | (42) | ||||||||||||||||||||||||||
Income tax provision(4) | (470) | (4) | (474) | ||||||||||||||||||||||||||
| Net earnings | $ | 1,492 | $ | 12 | $ | 1,504 | |||||||||||||||||||||||
| Noncontrolling interest | (58) | — | (58) | ||||||||||||||||||||||||||
| Net earnings attributable to W.W. Grainger, Inc. | $ | 1,434 | $ | 12 | $ | 1,446 | —% | 0.8% | |||||||||||||||||||||
| Diluted earnings per share | $ | 29.00 | $ | 0.25 | $ | 29.25 | 2.4% | 3.3% | |||||||||||||||||||||
| Nine Months Ended September 30, 2023 | Reported | Adjustment(1) | Adjusted | % Change Reported(2) | % Change Adjusted(2) | ||||||||||||||||||||||||
| Selling, general and administrative expenses | |||||||||||||||||||||||||||||
| High-Touch Solutions N.A. | $ | 2,380 | $ | — | $ | 2,380 | |||||||||||||||||||||||
| Endless Assortment | 476 | — | 476 | ||||||||||||||||||||||||||
Other(3) | 69 | — | 69 | ||||||||||||||||||||||||||
| Selling, general and administrative expenses | $ | 2,925 | $ | — | $ | 2,925 | 9.5% | 9.5% | |||||||||||||||||||||
| Earnings | |||||||||||||||||||||||||||||
| High-Touch Solutions N.A. | $ | 1,833 | $ | — | $ | 1,833 | |||||||||||||||||||||||
| Endless Assortment | 178 | — | 178 | ||||||||||||||||||||||||||
Other(3) | (3) | — | (3) | ||||||||||||||||||||||||||
| Operating earnings | $ | 2,008 | $ | — | $ | 2,008 | 20.2% | 20.2% | |||||||||||||||||||||
| Total other expense – net | (49) | — | (49) | ||||||||||||||||||||||||||
| Income tax provision | (468) | — | (468) | ||||||||||||||||||||||||||
| Net earnings | $ | 1,491 | $ | — | $ | 1,491 | |||||||||||||||||||||||
| Noncontrolling interest | (57) | — | (57) | ||||||||||||||||||||||||||
| Net earnings attributable to W.W. Grainger, Inc. | $ | 1,434 | $ | — | $ | 1,434 | 23.3% | 23.3% | |||||||||||||||||||||
| Diluted earnings per share | $ | 28.32 | $ | — | $ | 28.32 | 25.7% | 25.7% | |||||||||||||||||||||
(1) Reflects restructuring costs incurred in the second quarter of 2024. There were no non-GAAP adjustments for the nine months ended September 30, 2023. | |||||||||||||||||||||||||||||
(2) Compared to the reported and adjusted results of the prior year period. | |||||||||||||||||||||||||||||
(3) Grainger's businesses reported in Other do not meet the criteria of a reportable segment. | |||||||||||||||||||||||||||||
(4) Reflects a tax benefit related to the restructuring costs incurred in the second quarter of 2024. Grainger's reported and adjusted effective tax rates were 24.0% for the nine months ended September 30, 2024. | |||||||||||||||||||||||||||||
26
W.W. Grainger, Inc. and Subsidiaries
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
Grainger believes its current balances of cash and cash equivalents, marketable securities and availability under its revolving credit facility will be sufficient to meet its liquidity needs for the next twelve months. The Company expects to continue to invest in its business and return excess cash to shareholders through cash dividends and share repurchases, which it plans to fund through cash flows generated from operations. Grainger also maintains access to capital markets and may issue debt or equity securities from time to time, which may provide an additional source of liquidity.
Cash and Cash Equivalents
As of September 30, 2024 and December 31, 2023, Grainger had cash and cash equivalents of $1,448 million and $660 million, respectively. The Company had approximately $2.7 billion in available liquidity as of September 30, 2024.
Cash Flows
The following table shows the Company's cash flow activity for the periods presented (in millions of dollars):
| Nine Months Ended September 30, | |||||||||||
| 2024 | 2023 | ||||||||||
| Total cash provided by (used in): | |||||||||||
| Operating activities | $ | 1,683 | $ | 1,427 | |||||||
| Investing activities | (262) | (307) | |||||||||
| Financing activities | (615) | (839) | |||||||||
| Effect of exchange rate changes on cash and cash equivalents | (18) | (5) | |||||||||
| Increase in cash and cash equivalents | $ | 788 | $ | 276 | |||||||
Net cash provided by operating activities was $1,683 million and $1,427 million for the nine months ended September 30, 2024 and 2023, respectively. The increase was driven by favorable changes in working capital primarily due to decreased accounts receivable driven by value added services compared to the prior year period.
Net cash used in investing activities was $262 million and $307 million for the nine months ended September 30, 2024 and 2023, respectively. The decrease was due to timing of capital expenditures driven by U.S. supply chain investments in the third quarter of 2024.
Net cash used in financing activities was $615 million and $839 million for the nine months ended September 30, 2024 and 2023, respectively. The decrease in cash used in financing activities was primarily due to the issuance of long-term debt, which includes $500 million in unsecured senior notes partially offset by higher treasury stock repurchases in the third quarter of 2024.
Working Capital
Working capital as of September 30, 2024 was $3,112 million, an increase of $34 million compared to $3,078 million as of December 31, 2023. As of September 30, 2024 and December 31, 2023, the ratio of current assets to current liabilities was 2.7 and 2.8, respectively.
Debt
Grainger maintains a debt ratio and liquidity position that provides flexibility in funding working capital needs and long-term cash requirements. Grainger has various sources of financing available.
Total debt as a percent of total capitalization was 41.9% and 40.1% as of September 30, 2024 and December 31, 2023, respectively.
27
W.W. Grainger, Inc. and Subsidiaries
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Grainger receives ratings from two independent credit rating agencies: Moody's Investor Service (Moody's) and Standard & Poor's (S&P). Both credit rating agencies currently rate the Company's corporate credit at investment grade.
The following table summarizes the Company's credit ratings as of September 30, 2024:
| Corporate | Senior Unsecured | Short-term | |||||||||||||||
| Moody's | A2 | A2 | P1 | ||||||||||||||
| S&P | A+ | A+ | A1 | ||||||||||||||
Commitments and Other Contractual Obligations
There were no material changes to the Company’s commitments and other contractual obligations from those disclosed in Part II, Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Company’s 2023 Form 10-K.
Critical Accounting Estimates
The preparation of Grainger’s Condensed Consolidated Financial Statements and accompanying notes are in conformity with GAAP and the Company’s discussion and analysis of its financial condition and operating results require the Company’s management to make assumptions and estimates that affect the reported amounts. The Company considers an accounting policy to be a critical estimate if: (1) it involves assumptions that are uncertain when judgment was applied, and (2) changes in the estimate assumptions, or selection of a different estimate methodology, could have a significant impact on Grainger’s consolidated financial position and results. While the Company believes the assumptions and estimates used are reasonable, the Company’s management bases its estimates on historical experience and on various other assumptions it believes to be reasonable under the circumstances.
Note 1 of the Notes to Consolidated Financial Statements in Part II, Item 8: Financial Statements of the Company's 2023 Form 10-K describe the significant accounting policies and methods used in the preparation of the Company’s Condensed Consolidated Financial Statements.
There were no material changes to the Company's critical accounting estimates from those disclosed in Part II, Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operations in the Company's 2023 Form 10-K.
28
W.W. Grainger, Inc. and Subsidiaries
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
From time to time in this Quarterly Report on Form 10-Q as well as in other written reports, communications and verbal statements, Grainger makes forward-looking statements that are not historical in nature but concern forecasts of future results, business plans, analyses, prospects, strategies, objectives and other matters that may be deemed to be “forward-looking statements” under the federal securities laws. Forward-looking statements can generally be identified by their use of terms such as “estimate,” “believe,” “expect,” “could,” “may,” "continue," “plan,” “predict,” “will,” or “would,” and similar terms and phrases, including references to assumptions.
Grainger cannot guarantee that any forward-looking statement will be realized and achievement of future results is subject to risks and uncertainties, many of which are beyond Grainger’s control, which could cause Grainger’s results to differ materially from those that are presented.
Important factors that could cause actual results to differ materially from those presented or implied in the forward-looking statements include, without limitation: inflation, higher product costs or other expenses, including operational and administrative expenses; the impact of macroeconomic pressures and geopolitical trends, changes and events; a major loss of customers; loss or disruption of sources of supply; changes in customer or product mix; increased competitive pricing pressures; changes in third party practices regarding digital advertising; failure to enter into or sustain contractual arrangements on a satisfactory basis with group purchasing organizations; failure to develop, manage or implement new technology initiatives or business strategies, including with respect to Grainger’s eCommerce platforms; failure to adequately protect intellectual property or successfully defend against infringement claims; fluctuations or declines in Grainger's gross profit margin; Grainger’s responses to market pressures; the outcome of pending and future litigation or governmental or regulatory proceedings, including with respect to wage and hour, anti-bribery and corruption, environmental, regulations related to advertising, marketing and the Internet, consumer protection, pricing (including disaster or emergency declaration pricing statutes), product liability, compliance or safety, trade and export compliance, general commercial disputes, or privacy and cybersecurity matters; investigations, inquiries, audits and changes in laws and regulations; failure to comply with laws, regulations and standards, including new or stricter environmental laws or regulations; government contract matters; the impact of any government shutdown; disruption or breaches of information technology or data security systems involving Grainger or third parties on which Grainger depends; general industry, economic, market or political conditions; general global economic conditions including tariffs and trade issues and policies; currency exchange rate fluctuations; market volatility, including price and trading volume volatility or price declines of Grainger’s common stock; commodity price volatility; facilities disruptions or shutdowns; higher fuel costs or disruptions in transportation services; outbreaks of pandemic disease or viral contagions; natural or human induced disasters, extreme weather and other catastrophes or conditions; effects of climate change; failure to execute on our efforts and programs related to environmental, social and governance matters; competition for, or failure to attract, retain, train, motivate and develop executives and key team members; loss of key members of management or key team members; loss of operational flexibility and potential for work stoppages or slowdowns if team members unionize or join a collective bargaining arrangement; changes in effective tax rates; changes in credit ratings or outlook; Grainger’s incurrence of indebtedness or failure to comply with restrictions and obligations under its debt agreements and instruments; and other factors identified under Part I, Item 1A: Risk Factors and elsewhere in Grainger's latest Form 10-K, as updated from time to time in Grainger's Quarterly Form 10-Q.
The preceding list is not intended to be an exhaustive list of all of the factors that could impact Grainger's forward-looking statements. Given these risks and uncertainties, you are cautioned not to place undue reliance on Grainger’s forward-looking statements and Grainger undertakes no obligation to update or revise any of its forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
29
W.W. Grainger, Inc. and Subsidiaries
Item 3: Quantitative and Qualitative Disclosures About Market Risk
Grainger’s primary market risk exposures include changes in foreign currency exchange and interest rates.
There were no material changes to the Company’s market risk from those described in Part II, Item 7A: Quantitative and Qualitative Disclosures About Market Risk in the Company's 2023 Form 10-K.
Item 4: Controls and Procedures
Disclosure Controls and Procedures
The Company, under the supervision and with the participation of its management, including the Chief Executive Officer and the Chief Financial Officer, evaluated the effectiveness of Grainger's disclosure controls and procedures (as defined in Rule 13a-15(e)) under the Securities Exchange Act of 1934, as amended (the Exchange Act) as of the end of the period covered by this quarterly report. Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that Grainger’s disclosure controls and procedures were effective as of the end of the period covered by this report in (i) ensuring that information required to be disclosed by Grainger in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and (ii) ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.
Changes in Internal Control Over Financial Reporting
There were no changes in Grainger's internal control over financial reporting for the quarter ended September 30, 2024, that have materially affected, or are reasonably likely to materially affect, Grainger’s internal control over financial reporting.
30
PART II – OTHER INFORMATION
Item 1: Legal Proceedings
For an update to the description of the Company’s legal proceedings, see Note 8 of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1: Financial Information of this Form 10-Q.
Item 1A: Risk Factors
There have been no material changes from the risk factors previously disclosed in Part 1, Item 1A: Risk Factors in the Company's 2023 Form 10-K.
Item 2: Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities – Third Quarter 2024
| Period | Total Number of Shares Purchased (A) | Average Price Paid per Share (B) | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (C) | Maximum Number of Shares That May Yet be Purchased Under the Plans or Programs | |||||||||||||
| Jul. 1 – Jul. 31 | 69,119 | $934.96 | 69,119 | 4,746,710 | |||||||||||||
| Aug. 1 – Aug. 31 | 106,780 | $961.49 | 106,780 | 4,639,930 | |||||||||||||
| Sep. 1 – Sep. 30 | 57,710 | $970.53 | 57,710 | 4,582,220 | |||||||||||||
| Total | 233,609 | 233,609 | |||||||||||||||
A.There were no shares withheld to satisfy tax withholding obligations.
B.Average price paid per share excludes excise tax and commissions of $0.02 per share paid.
C.Prior to April 28, 2024, purchases were made pursuant to a share repurchase program approved by Grainger's Board of Directors and announced on April 28, 2021 (2021 Program). On April 24, 2024, Grainger's Board of Directors authorized a program for the Company to repurchase an aggregate amount of up to five million shares in the open market, through privately negotiated transactions and block transactions, pursuant to a trading plan or otherwise (2024 Program) with no expiration date. In authorizing the 2024 Program, the Board of Directors terminated the 2021 Program.
Item 5: Other Information
None of the Company's directors or officers adopted , modified, or terminated
31
W.W. Grainger, Inc. and Subsidiaries
Item 6: Exhibits
| EXHIBIT NO. | DESCRIPTION | |||||||
| Fifth Supplemental Indenture, dated as of September 12, 2024, by and between the Company and U.S. Bank Trust Company, National Association, as Trustee (including Form of Note). | ||||||||
| Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||||||||
| Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||||||||
| Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | ||||||||
| 101.INS | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | |||||||
| 101.SCH | XBRL Taxonomy Extension Schema Document. | |||||||
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document. | |||||||
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase Document. | |||||||
| 101.LAB | XBRL Taxonomy Extension Label Linkbase Document. | |||||||
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document. | |||||||
| 104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). | |||||||
32
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| W.W. GRAINGER, INC. | |||||||||||
| Date: | October 31, 2024 | By: | /s/ Deidra C. Merriwether | ||||||||
| Deidra C. Merriwether | |||||||||||
| Senior Vice President | |||||||||||
| and Chief Financial Officer | |||||||||||
| (Principal Financial Officer) | |||||||||||
| Date: | October 31, 2024 | By: | /s/ Laurie R. Thomson | ||||||||
| Laurie R. Thomson | |||||||||||
| Vice President and Controller | |||||||||||
| (Principal Accounting Officer) | |||||||||||
33
Exhibit 4.1
W.W. GRAINGER, INC.
AND
U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION, TRUSTEE
_______________
4.450% Senior Notes due 2034
_______________
FIFTH SUPPLEMENTAL INDENTURE
_______________
Dated as of September 12, 2024
to
Indenture Dated as of June 11, 2015
Debt Securities
FIFTH SUPPLEMENTAL INDENTURE, dated as of September 12, 2024, (this “Supplemental Indenture”), between W.W. Grainger, Inc., an Illinois corporation (the “Company”), and U.S. Bank Trust Company, National Association, as successor in interest to U.S. Bank National Association, a national banking association (the “Trustee”).
Recitals of the Company
WHEREAS, the Company has heretofore executed and delivered to the Trustee an Indenture (the “Base Indenture”), dated as of June 11, 2015 (as supplemented by this Supplemental Indenture, the “Indenture”), providing for the issuance from time to time of one or more series of Securities;
WHEREAS, Section 9.1(e) of the Base Indenture provides that the Company and the Trustee may, without the consent of any Holders of Securities, enter into an indenture supplemental to the Base Indenture to establish the form or terms of Securities of any series as permitted by Sections 2.1 and 3.1 of the Base Indenture;
WHEREAS, the Company has duly authorized the execution and delivery of this Supplemental Indenture to provide for the issuance of $500,000,000 principal amount of its 4.450% Senior Notes due 2034 (the “Notes”); and
WHEREAS, the Company has requested that the Trustee execute and deliver this Supplemental Indenture; all the conditions and requirements necessary to make this Supplemental Indenture, when duly executed and delivered, a valid and binding agreement in accordance with its terms and for the purposes herein expressed, have been performed and fulfilled; and the execution and delivery of this Supplemental Indenture have been duly authorized in all respects.
NOW THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH: For and in consideration of the premises and the issuance of the series of Securities provided for herein, the Company and the Trustee mutually covenant and agree as follows:
ARTICLE 1
RELATION TO THE BASE INDENTURE; DEFINITIONS; RULES OF CONSTRUCTION
Section 1.1 Relation to the Base Indenture. This Supplemental Indenture constitutes an integral part of the Base Indenture.
Section 1.2 Definitions. For all purposes of this Supplemental Indenture, the following terms shall have the respective meanings set forth in this Section 1.2.
“Applicable Procedures” has the meaning set forth in Section 2.3(h).
“Base Indenture” has the meaning set forth in the recitals hereto.
“Business Day” means any day other than a Saturday or Sunday and other than a day on which banking institutions in New York, New York, are authorized or obligated by law or executive order to close.
“Certificated Security” means a Security registered in the name of the Holder thereof and issued in accordance with Section 2.4 hereof, substantially in the form of the Security attached hereto as Exhibit A and that does not bear the Global Security Legend.
“Change of Control” means the occurrence of any of the following: (1) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any “person” (as that term is used in Section 13(d)(3) of the Exchange Act), other than the Company or one of its Subsidiaries becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of more than 50% of the Company’s Voting Stock or other Voting Stock into which the Company’s Voting Stock is reclassified, consolidated, exchanged or changed, measured by voting power rather than number of shares; (2) the direct or indirect sale, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the Company’s assets and the assets of its subsidiaries, taken as a whole, to one or more Persons, other than the Company or one of its Subsidiaries; or (3) the first day on which a majority of the members of the Company’s Board of Directors are not Continuing Directors. Notwithstanding the foregoing, a transaction shall not be deemed to be a Change of Control if (1) the Company becomes a direct or indirect wholly-owned subsidiary of a holding company and (2)(A) the direct or indirect holders of the Voting Stock of such holding company immediately following that transaction are substantially the same as the holders of the Company’s Voting Stock immediately prior to that transaction or (B) immediately following that transaction no “person” (as that term is used in Section 13(d)(3) of the Exchange Act) (other than a holding company satisfying the requirements of this sentence) is the beneficial owner, directly or indirectly, of more than 50% of the Voting Stock of such holding company.
“Change of Control Offer” has the meaning set forth in Section 2.5(a).
“Change of Control Payment” has the meaning set forth in Section 2.5(a).
“Change of Control Payment Date” has the meaning set forth in Section 2.5(a).
“Change of Control Triggering Event” means the occurrence of both a Change of Control and a Rating Event.
“Company” has the meaning set forth in the introductory paragraph hereof.
“Continuing Director” means, as of any date of determination, any member of the Company’s Board of Directors who (1) was a member of such Board of Directors on the date the Notes were issued or (2) was nominated for election, elected or appointed to such Board of Directors with the approval of a majority of the Continuing Directors who were members of such Board of Directors at the time of such nomination, election or appointment (either by a specific vote or by approval of the Company’s proxy statement in which such member was named as a nominee for election as a director).
“DTC” means The Depository Trust Company.
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Global Security” has the meaning set forth in Section 2.4(a).
“Global Security Legend” means the legend set forth in Section 2.4(c), which is to be placed on all Global Securities issued under the Indenture.
“H.15” has the meaning set forth in the definition of “Treasury Rate” in this Section 1.2.
“H.15 TCM” has the meaning set forth in the definition of “Treasury Rate” in this Section 1.2.
“Indenture” has the meaning set forth in the recitals hereto.
“Investment Grade Rating” means a rating equal to or higher than Baa3 (or the equivalent) by Moody’s and BBB- (or the equivalent) by S&P, and the equivalent investment grade credit rating from any replacement rating agency or rating agencies.
“Moody’s” means Moody’s Investors Service, Inc. and any successor to its ratings agency business.
“Notes” has the meaning set forth in the recitals hereto, and means any Notes authenticated and delivered pursuant to the Indenture.
“Par Call Date” means June 15, 2034 (the date that is three months prior to the stated Maturity of the Notes).
“Participant” means a member of, or a participant in, the Depositary.
“Paying Agent” means any Person (including the Company) authorized by the Company to pay the principal of, premium, if any, or interest on, any Securities on behalf of the Company.
“Rating Agencies” means (1) each of Moody’s and S&P, and (2) if either Moody’s or S&P ceases to rate the Notes or fails to make a rating of the Notes publicly available for reasons outside of the Company’s control, a “nationally recognized statistical rating organization” within the meaning of Section 3(a)(62) of the Exchange Act selected by the Company (as certified by a Board Resolution) as a replacement agency for Moody’s or S&P, or both of them, as the case may be.
“Rating Event” means the rating on the Notes is lowered by each of the Rating Agencies and the Notes are rated below an Investment Grade Rating by each of the Rating Agencies on any day within the 60-day period (which 60-day period will be extended so long as the rating of the Notes is under publicly announced consideration for a possible downgrade by any of the Rating Agencies) after the earlier of (1) the occurrence of a Change of Control and (2) public notice of the occurrence of a Change of Control or the Company’s intention to effect a Change of Control; provided, however, that a Rating Event otherwise arising by virtue of a particular reduction in rating will not be deemed to have occurred in respect of a particular Change of Control (and thus will not be deemed a Rating Event for purposes of the definition of Change of Control Triggering Event) if the Rating Agencies making the reduction in rating to which this definition would otherwise apply do not announce or publicly confirm or inform the Trustee in writing at the Company’s request that the reduction was the result, in whole or in part, of any event or circumstance comprised of or arising as a result of, or in respect of, the applicable Change of Control (whether or not the applicable Change of Control has occurred at the time of the Rating Event).
“Remaining Life” has the meaning set forth in the definition of “Treasury Rate” in this Section 1.2.
“S&P” means S&P Global Ratings, a division of S&P Global Inc. and any successor to its ratings agency business.
“Supplemental Indenture” has the meaning set forth in the introductory paragraph hereof.
“Treasury Rate” means, with respect to any Redemption Date, the yield determined by the Company in accordance with the following two paragraphs.
The Treasury Rate shall be determined by the Company after 4:15 p.m., New York City time (or after such time as yields on U.S. government securities are posted daily by the Board of Governors of the Federal Reserve System), on the third Business Day preceding the Redemption Date based upon the yield or yields for the most recent day that appear after such time on such day in the most recent statistical release published by the Board of Governors of the Federal Reserve System designated as “Selected Interest Rates (Daily) - H.15” (or any successor designation or publication) (“H.15”) under the caption “U.S. government securities–Treasury constant maturities–Nominal” (or any successor caption or heading) (“H.15 TCM”). In determining the Treasury Rate, the Company shall select, as applicable: (1) the yield for the Treasury constant maturity on H.15 exactly equal to the period from the Redemption Date to the Par Call Date (the “Remaining Life”); or (2) if there is no such Treasury constant maturity on H.15 exactly equal to the Remaining Life, the two yields – one yield corresponding to the Treasury constant maturity on H.15 immediately shorter than and one yield corresponding to the Treasury constant maturity on H.15 immediately longer than the Remaining Life – and shall interpolate to the Par Call Date on a straight-line basis (using the actual number of days) using such yields and rounding the result to three decimal places; or (3) if there is no such Treasury constant maturity on H.15 shorter than or longer than the Remaining Life, the yield for the single Treasury constant maturity on H.15 closest to the Remaining Life. For purposes of this paragraph, the applicable Treasury constant maturity or maturities on H.15 shall be deemed to have a maturity date equal to the relevant number of months or years, as applicable, of such Treasury constant maturity from the Redemption Date.
If on the third Business Day preceding the Redemption Date H.15 TCM is no longer published, the Company shall calculate the Treasury Rate based on the rate per annum equal to the semi-annual equivalent yield to maturity at 11:00 a.m., New York City time, on the second Business Day preceding such Redemption Date of the United States Treasury security maturing on, or with a maturity that is closest to, the Par Call Date, as applicable. If there is no United States Treasury security maturing on the Par Call Date but there are two or more United States Treasury securities with a maturity date equally distant from the Par Call Date, one with a maturity date preceding the Par Call Date and one with a maturity date following the Par Call Date, the Company shall select the United States Treasury security with a maturity date preceding the Par Call Date. If there are two or more United States Treasury securities maturing on the Par Call Date or two or more United States Treasury securities meeting the criteria of the preceding sentence, the Company shall select from among these two or more United States Treasury securities the United States Treasury security that is trading closest to par based upon the average of the bid and asked prices for such United States Treasury securities at 11:00 a.m., New York City time. In determining the Treasury Rate in accordance with the terms of this paragraph, the semi-annual yield to maturity of the applicable United States Treasury security shall be based upon the average of the bid and asked prices (expressed
as a percentage of principal amount) at 11:00 a.m., New York City time, of such United States Treasury security, and rounded to three decimal places.
“Trustee” has the meaning set forth in the introductory paragraph hereof until a successor replaces it in accordance with the applicable provisions of the Indenture and thereafter means the successor serving thereunder.
“Voting Stock” means, with respect to any specified “person” (as that term is used in Section 13(d)(3) of the Exchange Act), as of any date, the capital stock of such person that is at the time entitled to vote generally in the election of the board of directors of such person.
Section 1.3 Rules of Construction. For all purposes of this Supplemental Indenture, except as expressly provided or unless the context otherwise requires:
a.capitalized terms used herein without definition shall have the meanings specified in the Base Indenture;
b.all references herein to Articles and Sections, unless otherwise specified, refer to the corresponding Articles and Sections of this Supplemental Indenture;
c.the words “herein,” “hereof” and “hereunder” and other words of similar import refer to this Supplemental Indenture as a whole and not to any particular Article, Section or other subdivision; and
d.in the event of a conflict with the definition of terms in the Base Indenture, the definitions in this Supplemental Indenture shall control.
ARTICLE 2
THE NOTES
Section 2.1 Title of the Notes. There are hereby established by this Supplemental Indenture a separate series of Securities under the Indenture, designated as the “4.450% Senior Notes due 2034.”
Section 2.2 Limitation on Aggregate Principal Amount.
a.The Notes are initially limited in aggregate principal amount to $500,000,000, except for such Notes authorized and delivered upon registration of transfer of, or in exchange for, or in lieu of other notes, pursuant to Sections 3.4, 3.5, 3.6, 9.6 or 11.7 of the Base Indenture. The Company may, from time to time, without notice to or the consent of any Holders of the Securities of any series,
issue Securities under the Indenture in addition, and with identical terms, to the $500,000,000 aggregate principal amount of Notes (other than issue date, public offering price and the amount of the first payment of interest). Any such additional Securities and the Notes will be treated as a single series for purposes of the Indenture; provided that if the additional Securities are not fungible with the Notes for United States federal income tax purposes, the additional Securities will have a separate CUSIP number. Any such increase in the authorized aggregate principal amount of the Notes shall be evidenced by an Officers’ Certificate delivered to the Trustee, without further action by the Company.
Section 2.3 Terms of the Notes.
a.DTC is hereby designated as the Depositary for the Notes, which shall be issued in the form of Global Securities as further provided in Section 2.4.
b.The principal of the Notes is payable on September 15, 2034.
c.The Notes shall bear interest at an annual rate of 4.450%, from September 15, 2024, or from the most recent date on which interest has been paid or provided for, payable semi-annually in arrears on March 15 and September 15 of each year commencing March 15, 2025, until the principal of such Notes is paid or made available for payment. The interest so payable will be paid to the person in whose name the Notes are registered at the close of business on the preceding March 1 or September 1, respectively. If the date on which interest is payable is not a Business Day, the interest will be paid on the next following Business Day and no interest shall accrue for the intervening period.
d.Payment of the principal of (and premium, if any, on) and any such interest on the Notes will be made at the office or agency of the Company maintained for that purpose in New York, New York, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts; provided, however, that at the option of the Company payment of interest may be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register. U.S. Bank Trust Company, National Association is appointed as the Trustee and Paying Agent for the Notes to perform the functions set forth in the Indenture to be performed by such offices.
e.At any time prior to the Par Call Date the Notes are redeemable at the option of the Company, in whole or in part, at any time and from time to time, at a Redemption Price equal to the greater of:
•(a) the sum of the present values of the remaining scheduled payments of principal and interest thereon discounted to the Redemption Date (assuming the Notes matured on the Par Call
Date) on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate plus 15 basis points less (b) interest accrued to the Redemption Date, and
•100% of the principal amount of the Notes to be redeemed,
plus, in either case, accrued and unpaid interest thereon to, but excluding, the Redemption Date.
On or after the Par Call Date, the Notes are redeemable at the option of the Company, in whole or in part, at any time and from time to time, at a Redemption Price equal to 100% of the principal amount of the Notes being redeemed plus accrued and unpaid interest thereon to, but excluding, the Redemption Date.
f.The Company’s actions and determinations in determining the Redemption Price shall be conclusive and binding for all purposes, absent manifest error, and the Trustee is entitled to rely conclusively on the accuracy of the Company’s calculation of the Redemption Price without independent verification.
g.Notice of any redemption will be mailed or electronically delivered (or otherwise transmitted in accordance with the Depositary’s procedures) at least 10 days but not more than 60 days before the Redemption Date to each Holder of Notes to be redeemed.
h.In the case of a partial redemption, selection of the Notes for redemption will be made pro rata, by lot or by such other method as the Trustee deems appropriate and fair in accordance with the rules and procedures of the Depositary of such Notes at the time of such partial redemption that apply to such partial redemption (the “Applicable Procedures”). No Notes of a principal amount of $2,000 or less will be redeemed in part. If any Note is to be redeemed in part only, the notice of redemption that relates to the Note will state the portion of the principal amount of the Note to be redeemed. A new Note in a principal amount equal to the unredeemed portion of the Note will be issued in the name of the Holder of the Note upon surrender for cancellation of the original Note. For so long as the Notes are held by DTC (or another Depositary), the redemption of the Notes shall be done in accordance with the Applicable Procedures.
i.Unless the Company defaults in payment of the Redemption Price, on and after the Redemption Date, interest will cease to accrue on the Notes or portions thereof called for redemption.
j.The Notes are not entitled to any mandatory redemption or sinking fund payments.
k.The Notes shall be issued in registered form in minimum denominations of $2,000 and integral multiples of $1,000 in excess thereof.
l.The entire principal amount of the Notes shall be payable upon the acceleration of the Maturity thereof pursuant to Section 5.2 of the Indenture.
m.Additional Amounts will not be payable to the Holders of the Notes.
n.The Notes shall have such other terms and provisions as are provided in the form thereof set forth in Exhibit A hereto, which terms and provisions are hereby expressly made a part of the Indenture and, to the extent applicable, the Company and the Trustee, by their execution and delivery of this Supplemental Indenture expressly agree to such terms and provisions and to be bound thereby. Except as otherwise expressly permitted by the Indenture, all Notes shall be identical in all respects. Notwithstanding any differences among them, all Notes issued under the Indenture, including any Notes issued after the date hereof pursuant to and in accordance with the terms hereof, shall vote and consent together on all matters as one class.
o.The Company shall be required to offer to purchase the Notes, in accordance with Section 2.5 hereof, upon the occurrence of a Change of Control Triggering Event.
Section 2.4 Book Entry Provisions; Transfer and Exchange.
a.The Notes shall be issued initially in the form of one or more permanent global notes (“Global Securities”). Each Global Security initially shall (i) be registered in the name of the Depositary for such Global Security or the nominee of such Depositary, (ii) be deposited with, or on behalf of, the Depositary or with the Trustee as custodian for such Depositary, (iii) bear the Global Security Legend and (iv) be dated the date of its authentication. Except as provided in Section 2.4(b), owners of beneficial interests in Global Securities will not be entitled to receive physical delivery of certificated Notes.
Participants shall have no rights under the Indenture with respect to any Global Security held on their behalf by the Depositary, or the Trustee as its custodian, or under such Global Security, and the Depositary may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner of such Global Security for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or shall impair, as between the Depositary and its Participants, the operation of customary practices governing the exercise of the rights of a Holder of any Security.
b.Notwithstanding any other provision in the Indenture, no Global Security may be exchanged in whole or in part for Securities registered, and no transfer of a Global Security in whole or in part may be registered, in the name of any Person other than the Depositary for such Global Security or a nominee thereof unless (i) such Depositary (A) has notified the Company that it is unwilling or unable to continue as Depositary for such Global Security or (B) has ceased to be a clearing agency registered as such under the Exchange Act, and in either case of (A) or (B) the Company fails to appoint a successor Depositary within 90 calendar days, (ii) the Company, at its option, executes and delivers to the Trustee a Company Order stating that it elects to cause the issuance of the Securities in certificated form and that all Global Securities shall be exchanged in whole for Securities that are not Global Securities (in which case, such exchange shall be effected by the Trustee) or (iii) there shall have occurred and be continuing an Event of Default with respect to the Notes. In all cases, Certificated Securities delivered in exchange for any Global Security or beneficial interests in Global Securities will be registered in the names, and issued in any approved denominations, requested by or on behalf of the Depositary (in accordance with its customary procedures). Global Securities also may be exchanged or replaced, in whole or in part, as provided in Sections 3.4 and 3.6 of the Base Indenture. Every Security authenticated and delivered in exchange for, or in lieu of, a Global Security or any portion thereof, pursuant to this Section 2.4 or Sections 3.4 and 3.6 of the Base Indenture, shall be authenticated and delivered in the form of, and shall be, a Global Security. A Global Security may not be exchanged for another Note other than as provided in this Section 2.4(b).
c.Legend. The following legend shall appear on the face of all Global Securities.
“THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE OF A DEPOSITARY OR A SUCCESSOR DEPOSITARY. TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR’S NOMINEE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT AND ANY SUCH CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR
TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.”
Section 2.5 Change of Control.
a.If a Change of Control Triggering Event occurs with respect to the Notes, unless the Company has exercised its option to redeem the Notes (as described in Section 2.3(e)), the Company will be required to make an offer (the “Change of Control Offer”) to each Holder of the Notes to repurchase all or any part (equal to $2,000 or an integral multiple of $1,000 in excess thereof) of such Holder’s Notes on the terms set forth below. In the Change of Control Offer, the Company will be required to offer payment in cash equal to 101% of the aggregate principal amount of Notes repurchased, plus accrued and unpaid interest, if any, on the Notes repurchased to, but excluding, the date of repurchase (the “Change of Control Payment”). Within 30 days following any Change of Control Triggering Event or, at the option of the Company, prior to any Change of Control, but after public announcement of the transaction that constitutes or may constitute the Change of Control, the Company will deliver a notice to Holders of the Notes, with a copy to the Trustee, describing the transaction that constitutes or may constitute the Change of Control Triggering Event and offering to repurchase the Notes on the date specified in the notice, which date will be no earlier than 30 days and no later than 60 days from the date such notice is delivered (the “Change of Control Payment Date”). The notice will, if delivered prior to the date of consummation of the Change of Control, state that the offer to purchase is conditioned on the Change of Control Triggering Event occurring on or prior to the Change of Control Payment Date. The Trustee (in each of its capacities) shall not be responsible for or liable for determining, monitoring or confirming whether any Change of Control Triggering Event has occurred. The Trustee shall not be responsible for monitoring the Company’s rating status, whether a Rating Event has occurred or making any request upon any Rating Agency.
b.On the Change of Control Payment Date, the Company will, to the extent lawful:
i.accept for payment all Notes or portions of Notes properly tendered pursuant to the Change of Control Offer;
ii.deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes or portions of Notes properly tendered; and
iii.deliver or cause to be delivered to the Trustee the Notes properly accepted together with an Officers’ Certificate stating the aggregate principal amount of Notes or portions of Notes being repurchased.
c.The Company will not be required to make a Change of Control Offer upon the occurrence of a Change of Control Triggering Event if a third party makes such an offer in the manner, at the times and otherwise in compliance with the requirements for an offer made by the Company and the third party repurchases all Notes properly tendered and not withdrawn under its offer.
d.The Company will comply with the requirements of Rule 14e-1 under the Exchange Act, and any other securities laws and regulations thereunder to the extent those laws and regulations are applicable in connection with the repurchase of the Notes as a result of a Change of Control Triggering Event. To the extent that the provisions of any such securities laws or regulations conflict with the provisions of this Section 2.5, the Company will comply with those securities laws and regulations and will not be deemed to have breached its obligations under this Section 2.5 by virtue of any such conflict.
Section 2.6 Events of Default. In addition to the Events of Default specified in Section 5.1 of the Base Indenture, the following shall constitute an “Event of Default” with respect to the Notes: any default in the payment of any Change of Control Payment in respect of the Notes as when the same becomes due and payable in accordance with Section 2.5 hereof. Such additional Event of Default is expressly included in this Supplemental Indenture for the benefit of, and shall be solely applicable to, the series of Securities established as the Notes by this Supplemental Indenture.
ARTICLE 3
MISCELLANEOUS PROVISIONS
Section 3.1 Ratification. The Base Indenture, as supplemented by this Supplemental Indenture, is in all respects hereby adopted, ratified and confirmed.
Section 3.2 Counterparts. This Supplemental Indenture may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. The exchange of copies of this Supplemental Indenture and of signature pages of the parties hereto transmitted by Facsimile or PDF may be used in lieu of the originals and shall constitute effective execution and delivery and shall be deemed to be their original signatures for all purposes.
Section 3.3 Governing Law and Waiver of Jury Trial. THIS SUPPLEMENTAL INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CHOICE OF LAW PRINCIPLES THEREOF. EACH OF THE COMPANY AND THE TRUSTEE HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS SUPPLEMENTAL INDENTURE, THE SECURITIES OR THE TRANSACTION CONTEMPLATED HEREBY.
Section 3.4 Trustee. The Trustee makes no representations as to, and shall not be responsible for, the validity or sufficiency of this Supplemental Indenture or the Notes. The recitals herein are deemed to be those of the Company and not of the Trustee. The Trustee shall not be accountable for the use or application by the Company of the Notes or the proceeds thereof. Neither the Trustee nor any Paying Agent shall be responsible for monitoring the Company’s ratings or determining whether a Rating Event has occurred. All of the provisions contained in the Base Indenture in respect of the rights, privileges, immunities, protections, indemnities, powers and duties of the Trustee shall be applicable in respect of this Supplemental Indenture as fully and with like force and effect as though fully set forth in full therein.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed as of the day and year first above written.
W.W. GRAINGER, INC.
By:
Name: Deidra C. Merriwether
Title: Senior Vice President and Chief Financial Officer
U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION, as Trustee
By
Name: Linda Garcia
Title: Vice President
[Signature page to Fifth Supplemental Indenture]
EXHIBIT A
Form of Notes
W.W. GRAINGER, INC.
4.450% SENIOR NOTE DUE 2034
[Insert the Global Security Legend, if applicable, pursuant to the provisions of the Fifth Supplemental Indenture]
No. ______ $__________________
CUSIP ________________
ISIN ________________
W.W. Grainger, Inc., an Illinois corporation (herein called the “Company,” which term includes any successor corporation under the Indenture referred to on the reverse hereof), for value received, hereby promises to pay to ______________, the principal sum of _______________________ Dollars ($____________) or such other principal amount as set forth on Schedule I hereto on September 15, 2034, and to pay interest thereon from September 12, 2024 or from the most recent Interest Payment Date to which interest has been paid or duly provided for semi-annually in arrears on March 15 and September 15 in each year commencing March 15, 2025, at the rate of 4.450% per annum until the principal hereof is paid or made available for payment.
The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Indenture referred to on the reverse hereof, be paid to the Person in whose name this Security is registered at the close of business on the March 1 or the September 1 (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date; provided, however, that, if such Interest Payment Date would fall on a day that is not a Business Day, such Interest Payment Date shall be the following day that is a Business Day and no interest shall accrue for the intervening period.
Payment of the principal of (and premium, if any, on) and any such interest on this Security will be made at the office or agency of the Company maintained for that purpose in New York, New York, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts; provided, however, that at the option of the Company payment of interest may be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register.
Reference is hereby made to the further provisions of this Security set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been manually executed by or on behalf of the Trustee under the Indenture referred to on the reverse hereof, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose.
* * * * *
IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed by the manual or facsimile signature of one of its authorized officers.
W.W. Grainger, Inc.
By:________________________
Name:
Title:
Trustee’s Certificate of Authentication
This is one of the Securities of the series designated therein referred to in the within mentioned Indenture.
U.S. Bank Trust Company, National
Association, as Trustee
By:___________________________ Authorized Signatory
Dated:___________________________
W.W. GRAINGER, INC.
This Security is one of a duly authorized issue of securities of the Company (herein called the “Securities”), issued and to be issued in one or more series under an Indenture, dated as of June 11, 2015, between the Company and U.S. Bank National Association as trustee, as supplemented by a Fifth Supplemental Indenture, dated as of September 12, 2024, between the Company and the U.S. Bank Trust Company, National Association, as successor in interest to U.S. Bank National Association, a national banking association (herein called the “Trustee,” which term includes any successor trustee under the Indenture) (collectively, the “Indenture”), to which Indenture reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Securities and of the terms upon which the Securities are, and are to be, authenticated and delivered. This Security is one of the series designated on the face hereof, initially limited in aggregate principal amount to $500,000,000.
At any time prior to June 15, 2034 (the date that is three months prior to the stated maturity of the Securities) (the “Par Call Date”), the Securities are redeemable at the option of the Company, in whole or in part, at any time and from time to time, at a Redemption Price equal to the greater of:
•(a) the sum of the present values of the remaining scheduled payments of principal and interest thereon discounted to the Redemption Date (assuming the Securities matured on the Par Call Date) on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate plus 15 basis points less (b) interest accrued to the Redemption Date, and
•100% of the principal amount of the Securities to be redeemed,
plus, in either case, accrued and unpaid interest thereon to, but excluding, the Redemption
Date.
On or after the Par Call Date, the Securities are redeemable at the option of the Company, in whole or in part, at any time and from time to time, at a Redemption Price equal to 100% of the principal amount of the Securities being redeemed plus accrued and unpaid interest thereon to, but excluding, the Redemption Date.
“Business Day” means any day other than a Saturday or Sunday and other than a day on which banking institutions in New York, New York, are authorized or obligated by law or executive order to close.
“Treasury Rate” means, with respect to any Redemption Date, the yield determined by the Company in accordance with the following two paragraphs.
The Treasury Rate shall be determined by the Company after 4:15 p.m., New York City time (or after such time as yields on U.S. government securities are posted daily by the Board of
Governors of the Federal Reserve System), on the third Business Day preceding the Redemption Date based upon the yield or yields for the most recent day that appear after such time on such day in the most recent statistical release published by the Board of Governors of the Federal Reserve System designated as “Selected Interest Rates (Daily) - H.15” (or any successor designation or publication) (“H.15”) under the caption “U.S. government securities–Treasury constant maturities–Nominal” (or any successor caption or heading) (“H.15 TCM”). In determining the Treasury Rate, the Company shall select, as applicable: (1) the yield for the Treasury constant maturity on H.15 exactly equal to the period from the Redemption Date to the Par Call Date (the “Remaining Life”); or (2) if there is no such Treasury constant maturity on H.15 exactly equal to the Remaining Life, the two yields – one yield corresponding to the Treasury constant maturity on H.15 immediately shorter than and one yield corresponding to the Treasury constant maturity on H.15 immediately longer than the Remaining Life – and shall interpolate to the Par Call Date on a straight-line basis (using the actual number of days) using such yields and rounding the result to three decimal places; or (3) if there is no such Treasury constant maturity on H.15 shorter than or longer than the Remaining Life, the yield for the single Treasury constant maturity on H.15 closest to the Remaining Life. For purposes of this paragraph, the applicable Treasury constant maturity or maturities on H.15 shall be deemed to have a maturity date equal to the relevant number of months or years, as applicable, of such Treasury constant maturity from the Redemption Date.
If on the third Business Day preceding the Redemption Date H.15 TCM is no longer published, the Company shall calculate the Treasury Rate based on the rate per annum equal to the semi-annual equivalent yield to maturity at 11:00 a.m., New York City time, on the second Business Day preceding such Redemption Date of the United States Treasury security maturing on, or with a maturity that is closest to, the Par Call Date, as applicable. If there is no United States Treasury security maturing on the Par Call Date but there are two or more United States Treasury securities with a maturity date equally distant from the Par Call Date, one with a maturity date preceding the Par Call Date and one with a maturity date following the Par Call Date, the Company shall select the United States Treasury security with a maturity date preceding the Par Call Date. If there are two or more United States Treasury securities maturing on the Par Call Date or two or more United States Treasury securities meeting the criteria of the preceding sentence, the Company shall select from among these two or more United States Treasury securities the United States Treasury security that is trading closest to par based upon the average of the bid and asked prices for such United States Treasury securities at 11:00 a.m., New York City time. In determining the Treasury Rate in accordance with the terms of this paragraph, the semi-annual yield to maturity of the applicable United States Treasury security shall be based upon the average of the bid and asked prices (expressed as a percentage of principal amount) at 11:00 a.m., New York City time, of such United States Treasury security, and rounded to three decimal places.
If an Event of Default with respect to Securities of this series shall occur and be continuing, the principal of the Securities of this series may be declared due and payable in the manner and with the effect provided in the Indenture.
The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Securities of each series under the Indenture to be affected at any time by the Company and the Trustee with the consent of the Holders of not less than a majority in aggregate principal amount of the Securities at the time Outstanding of each series to be affected. The Indenture also contains provisions permitting the Holders of specified percentages in aggregate principal amount of the Securities of each series at the time Outstanding, on behalf of all the Holders of all Securities of such series, to waive certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security.
The Indenture does not limit the incurrence of additional debt by the Company or any of its Subsidiaries; however, it does limit the creation of certain Liens and the entry into certain sale and leaseback transactions by the Company or any of its Restricted Subsidiaries. The limitations are subject to a number of qualifications and exceptions.
No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of (and premium, if any, on) and interest on this Security at the times, place and rate, and in the coin or currency, as prescribed herein and in the Indenture.
“Global Security” and “Global Securities” means a Security or Securities evidencing all or part of a series of Securities, issued to the Depositary (as hereinafter defined) for such series or its nominee, registered in the name of such Depositary or its nominee, bearing the Global Securities Legend and dated the date of its authentication. “Depositary” means, with respect to the Securities of any series issuable or issued in whole or in part in the form of one or more Global Securities, the person designated as the Depositary by the Company.
No holder of any beneficial interest in this Security held on its behalf by a Depositary or a nominee of such Depositary shall have any rights under the Indenture with respect to such Global Security, and such Depositary or nominee may be treated by the Company, the Trustee, and any agent of the Company or the Trustee as the owner of such Global Security for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall impair, as between a Depositary and such holders of beneficial interests, the operation of customary practices governing the exercise of the rights of the Depositary as Holder of any Security.
This Security is exchangeable, in whole but not in part, for Securities registered in the names of Persons other than the Depositary or its nominee or in the name of a successor to the Depositary or a nominee of such successor depositary only if (i) the Depositary (a) notifies the Company that it is unwilling or unable to continue as depositary for the Global Securities and the Company fails to appoint a successor depositary within 90 calendar days or (b) has ceased to be a clearing agency registered under the Exchange Act and the Company fails to appoint a successor depositary within 90 calendar days, (ii) at any time the Company in its sole discretion determines
to issue Certificated Securities or (iii) there shall have occurred and be continuing an Event of Default with respect to the Securities. If this Security is exchangeable pursuant to the preceding sentence, it shall be exchangeable for Securities issuable in minimum denominations of $2,000 and in integral multiples of $1,000 in excess thereof and registered in such names as the Depositary holding this Security shall direct. Subject to the foregoing, this Security is not exchangeable, except for a Security or Securities of the same aggregate denominations to be registered in the name of such Depositary or its nominee or in the name of a successor to the Depositary or a nominee of such successor depositary.
No recourse shall be had for the payment of the principal of (and premium, if any, on) or interest on this Security, or for any claim based hereon, or otherwise in respect hereof, or based on or in respect of the Indenture or any indenture supplemental thereto, against any incorporator, stockholder, officer or director, as such, past, present or future, of the Company or any successor corporation, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance hereof and as part of the consideration for the issue hereof, expressly waived and released.
All capitalized terms used in this Security and not otherwise defined herein shall have the meanings assigned to them in the Indenture.
This Security, including without limitation the obligation of the Company contained herein to pay the principal of (and premium, if any, on) and interest on this Security in accordance with the terms hereof and of the Indenture, shall be construed in accordance with and governed by the laws of the State of New York.
ASSIGNMENT FORM
To assign this Security, fill in the form below:
(I) or (we) assign and transfer this Security to
| (Insert assignee’s social security or tax I.D. no.) | ||
(Print or type assignee’s name, address and zip code)
and irrevocably appoint ____________________________________ agent to transfer this Security on the books of the Company. The agent may substitute another to act for him.
Your Signature: ____________________________________________
(Sign exactly as your name appears on the other side of this Security)
Date: ________________________________
Medallion Signature Guarantee: _____________________________________
Schedule I
SCHEDULE OF TRANSFERS AND EXCHANGES
The following increases or decreases in Principal Amount of this Global Security have been made:
Date of Exchange | Amount of Decrease in Principal Amount of this Global Security | Amount of Increase in Principal Amount of this Global Security | Principal Amount of this Global Security following such Decrease or Increase | Signature of Authorized Signatory of trustee or Custodian | ||||||||||||||||||||||
CERTIFICATION
Exhibit 31.1
I, D.G. Macpherson, certify that:
1.I have reviewed this Quarterly Report on Form 10-Q of W.W. Grainger, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: October 31, 2024
| By: | /s/ D.G. Macpherson | ||||
| Name: | D.G. Macpherson | ||||
| Title: | Chairman and Chief Executive Officer | ||||
CERTIFICATION
Exhibit 31.2
I, Deidra C. Merriwether, certify that:
1.I have reviewed this Quarterly Report on Form 10-Q of W.W. Grainger, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: October 31, 2024
| By: | /s/ Deidra C. Merriwether | ||||
| Name: | Deidra C. Merriwether | ||||
| Title: | Senior Vice President and Chief Financial Officer | ||||
Exhibit 32
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of W.W. Grainger, Inc. (“Grainger”) for the quarterly period ended September 30, 2024, (the “Report”), D.G. Macpherson, as Chairman and Chief Executive Officer of Grainger, and Deidra C. Merriwether, as Senior Vice President and Chief Financial Officer of Grainger, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Grainger.
| /s/ D.G. Macpherson | ||
| D.G. Macpherson | ||
| Chairman and Chief Executive Officer | ||
| October 31, 2024 | ||
| /s/ Deidra C. Merriwether | ||
| Deidra C. Merriwether | ||
| Senior Vice President and Chief Financial Officer | ||
| October 31, 2024 | ||