CHICAGO, July 15 /PRNewswire/ -- W.W. Grainger, Inc. (NYSE: GWW), the
leading provider of maintenance, repair, and operating (MRO) supplies in North
America, today reported results for the second quarter and six months ended
June 30, 1999. Sales increased 2.4 percent to $1,146.2 million for the
second quarter of 1999 versus $1,119.0 million for the second quarter of 1998.
Net earnings for the second quarter of 1999 were down 14.7 percent to
$50.6 million, compared to $59.3 million for the prior year quarter. Earnings
per fully diluted share were $0.53 versus $0.60 in the comparable quarter in
1998, an 11.7 percent decline.
For the 1999 first half, sales increased 2.8 percent to $2,237.0 million,
up from $2,176.1 million for the 1998 first half. Net earnings were
$106.8 million, compared to $116.4 million for the first half of 1998.
Earnings per fully diluted share were $1.13 per share versus $1.18 for the
1998 first half, a 4.2 percent decline.
"We were disappointed that, despite reaching record sales, our earnings
fell short. Higher costs and service interruptions related to our new systems
installation, were largely responsible for the decline, reducing earnings by
$0.07 per share," said Grainger Chairman and CEO Richard L. Keyser. "As the
Company expanded the number of sites on its new business enterprise system,
costs such as premium freight, installation-related expenditures, and
additional headcount for service grew, particularly late in June."
Keyser added, "While addressing these challenges, we also made progress on
our strategic restructuring to customer-focused business units, and we are on
track in our Internet strategy."
The Company's industry-leading, business-to-business Internet initiative
gained significant momentum during the quarter, with sales through
Grainger.com reaching $19.0 million, an 88 percent increase over Internet
sales of $10.1 million in the first quarter of 1999, and a 526 percent
increase over the second quarter of 1998. Based on the accelerated volume of
Internet business, the Company now estimates its annualized Internet sales run
rate at $90 million, up from $70 million announced at the end of April 1999.
In addition to Grainger.com, on May 15, 1999, the Company launched
OrderZone.com, the first multi-supplier Internet marketplace, which provides a
complementary mix of industrial products to customers. Also during the
quarter, the Company entered into several alliances with technology partners
including Ariba, Inc., Commerce One, Inc., PSDI, and SAP AG, in support of its
strategy to provide specialized Internet solutions to large businesses.
"We are also pleased to report progress in other newer business units such
as Grainger Integrated Supply, our outsourcing unit, which experienced 37
percent growth in average daily sales during the second quarter," added
Keyser. "Our transition to customer-focused business units, while slower than
desired, is clearly moving in the right direction."
Earnings for the quarter reflected continuing investments in the Company's
newer businesses including the Internet initiatives. In addition, service
interruptions from the installation of the Company's new business enterprise
system accounted for a $10 million loss in sales, while related costs added
$7.5 million to expenses in the quarter. The Company continues to work toward
full implementation of the new system, which will provide for system
integration across the Company.
W.W. Grainger, Inc. (GWW), with 1998 sales of $4.3 billion, is the leading
North American provider of maintenance, repair, and operating (MRO) supplies,
services, and related information to businesses and institutions. GWW shares
are traded on the New York and Chicago stock exchanges. For more information,
visit Grainger on-line at http://www.grainger.com .
This document contains statements that are not historical facts and are
forward-looking. The forward-looking statements are based on the Company's
current expectations and some of them are subject to risks and uncertainties
the outcome of which could result in actual future performance being
materially different from the performance indicated. They should be read in
conjunction with the Company's most recent annual report, as well as the
Company's Form 10-K and other reports filed with the Securities and Exchange
Commission, containing a discussion of the Company's business and of various
factors that may affect it.
CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited)
(In thousands of dollars except for per share amounts)
Three Months ended June 30 Six Months ended June 30
1999 1998 1999 1998
Net sales $1,146,175 $1,118,970 $2,237,018 $2,176,077
Cost of merchandise sold 730,160 717,011 1,418,141 1,388,963
Gross profit 416,015 401,959 818,877 787,114
Warehousing, marketing,
and administrative
expenses 328,544 301,193 635,140 588,757
Operating earnings 87,471 100,766 183,737 198,357
Other income or (deductions)
Interest income 319 142 729 480
Interest expense (2,943) (1,614) (4,676) (3,297)
Unclassified -- net 117 286 (267) 127
(2,507) (1,186) (4,214) (2,690)
Earnings before
income taxes 84,964 99,580 179,523 195,667
Income taxes 34,411 40,330 72,707 79,245
Net earnings $50,553 $59,250 $106,816 $116,422
Net earnings per share
-- Basic $0.54 $0.61 $1.15 $1.20
-- Diluted $0.53 $0.60 $1.13 $1.18
Average number of shares
outstanding
-- Basic 92,820,417 97,246,552 92,827,072 97,235,431
-- Diluted 94,511,981 99,061,632 94,361,373 99,021,684
Earnings per share and the average number of shares outstanding reflect
the 2-for-1 stock split effective at the close of business on May 11, 1998.
(Supplemental financial information concerning the Quarter and First Half
ended June 30, 1999 is available upon request. Contact Bill Chapman, Investor
Relations Manager, 847-535-0881.)
SOURCE W.W. Grainger, Inc.
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http://www.grainger.com
Company News On-Call:
http://www.prnewswire.com/comp/953850.html or fax,
800-758-5804, ext. 953850
CONTACT:
William D. Chapman of W.W. Grainger, Inc.,
847-535-0881
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