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|Grainger Reports EPS of 51 cents for the Third Quarter of 2000|
CHICAGO, IL, October 16, 2000 - Grainger today reported that sales grew in the third quarter ended September 30, 2000, by 6 percent to $1.2 billion while net earnings increased by 5 percent to $48.1 million and earnings per diluted share rose from $0.49 to $0.51. Included in the quarter's results was a $3.2 million pretax gain on the sale of securities, adding $0.02 to earnings per diluted share.
Sales for the nine months were $3.7 billion compared to $3.4 billion for the first nine months of 1999. Net earnings of $145.0 million for the nine months ended September 30, 2000, were below net earnings of $152.6 million for the same period of last year. Earnings per diluted share of $1.54 for the first nine months of 2000 were down 5 percent.
Grainger's Chairman and Chief Executive Officer, Richard L. Keyser said, "Most of Grainger's businesses improved in the third quarter, and I am pleased with their progress, although I am not satisfied with where we are. Daily sales grew by 7 percent and our gross margins improved. Even though our spending on the Internet continued, we were able to hold overall operating expenses by tighter cost control."
Grainger's branch-based businesses grew 6 percent on a daily sales basis versus the 1999 third quarter despite a 20 percent decline in sales of summer seasonal products due to mild weather in the more heavily populated areas of the United States. Gross margins for this segment improved 44 basis points, while operating margins were up 100 basis points versus the 1999 third quarter. Among the initiatives contributing to the improved performance were sales growth from large customers, a series of promotional pricing actions as well as increasing prices on selected items, and improved productivity.
Sales processed through the Company's Internet businesses were $100 million for the quarter, up 233% from the 1999 third quarter. These results include $75 million in sales at Grainger.com, some of which came from more than 20 customers now ordering over the Internet through a variety of Enterprise Software Vendor (ESV) portals. As of the end of the quarter, the annualized run rate for the Internet businesses is $385 million. The Company now estimates that total sales processed through all of its Internet businesses in 2000 should reach between $350 and $400 million.
On August 1, 2000, Grainger completed a transaction that combined Grainger's OrderZone.com with Works.com. In addition to contributing the OrderZone.com business and assets, Grainger.com will offer the Works.com purchasing service and e-marketplace. For its contributions, Grainger received a 40 percent equity stake in Works.com. Losses from equity interests in unconsolidated entities, primarily related to Works.com, were $4.6 million after tax, or $0.05 per share. For the quarter, the Company estimates that the OrderZone.com / Works.com merger reduced earnings by $0.02 per share versus the run rate experienced prior to the merger. At this rate, the Company anticipates that the incremental effect from the equity stake will lower EPS by $0.03 to $0.04 per share in the 2000 fourth quarter.
Keyser said, "Looking forward, we expect our Internet businesses to process sales of between $500 and $600 million in 2001. This includes Grainger.com, our successful Internet access into Grainger Industrial Supply. We continue to believe that the Internet will allow Grainger to increase its market share. Based on recent analysis, customers who transitioned some or all of their purchasing to Grainger.com have demonstrated incremental sales growth of 9 percent above their expected growth trends."
W.W. Grainger, Inc. (NYSE: GWW), with 1999 sales of $4.5 billion, is the leading North American provider of maintenance, repair, and operating (MRO) supplies and related information to businesses and institutions. Grainger shares are traded on the New York and Chicago stock exchanges. For more information, visit Grainger online at www.grainger.com.
This document may contain statements that are not historical facts and are forward-looking. The forward-looking statements (generally identified by words or phrases indicating a projection or future expectation such as "annualized run rate," "anticipates," "believe," "expects," or "estimates") 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 on next page)
CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited)
(In thousands of dollars except for per share amounts)
Three Months ended Sept 30 Nine Months ended Sept 30
2000 1999 2000 1999
Net sales $ 1,241,730 $ 1,175,393 $ 3,678,946 $ 3,412,411
Cost of merchandise sold 794,115 752,657 2,375,321 2,170,798
Gross profit 447,615 422,736 1,303,625 1,241,613
Warehousing, marketing, and
administrative expenses 356,037 342,354 1,064,369 977,494
Operating earnings 91,578 80,382 239,256 264,119
Other income or (deductions)
Interest income 442 391 1,379 1,120
Interest expense (6,398) (5,276) (19,085) (9,952)
Equity in loss of
unconsolidated entities (4,602) - (4,602) -
Unclassified-net 2,963 1,405 29,847 1,138
(7,595) (3,480) 7,539 (7,694)
income taxes 83,983 76,902 246,795 256,425
Income taxes 35,876 31,145 101,815 103,852
Net earnings $ 48,107 $ 45,757 $ 144,980 $ 152,573
Net earnings per share
- Basic $0.52 $0.49 $1.56 $1.64
- Diluted $0.51 $0.49 $1.54 $1.62
Average number of shares
- Basic 93,097,895 92,840,777 93,023,258 92,831,640
- Diluted 94,074,751 94,352,612 94,313,030 94,358,453
(Supplemental financial information concerning the Quarter and Nine Months ended September 30, 2000 is available upon request. Contact Dileep Gangolli, Investor Relations Manager at firstname.lastname@example.org or 847-535-0879.)