UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 20172019
OR
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to _______
Commission file number 1-5684
W.W. Grainger, Inc.
(Exact name of registrant as specified in its charter)
| Illinois | 36-1150280 | ||||
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||
| 100 Grainger Parkway, | Lake Forest, | Illinois | 60045-5201 | ||
| (Address of principal executive offices) | (Zip Code) | ||||
| 847 | 535-1000 | ||||
| (Registrant’s telephone number including area code) | |||||
Securities registered pursuant to Section 12(b) of the Act:
| Title of | Trading Symbol | Name of |
| Common Stock | GWW | New York Stock Exchange |
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [X]☒ No [ ]☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] ☐No [X]☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X]☒ No [ ]☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes [X]☒ No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” andfiler,” “smaller reporting company”company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer☒ Accelerated Filer ☐ Non-accelerated Filer ☐ Smaller Reporting Company ☐
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 139) 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 [X]☒
The aggregate market value of the voting common equity held by nonaffiliates of the registrant was $9,747,864,843$13,765,366,450 as of the close of trading as reported on the New York Stock Exchange on June 30, 20172019. The Company does not have nonvoting common equity.
The registrant had 56,105,41153,656,306 shares of the Company’s Common Stock outstanding as of January 31, 2018.2020.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive proxy statement to be filed in connection with the annual meeting of shareholders to be held on April 25, 2018,29, 2020, are incorporated by reference into Part III hereof of this Form 10-K where indicated theindicated. The registrant's definitive 20182019 proxy statement will be filed on or about March 15, 2018.19, 2020.
| TABLE OF CONTENTS | ||||||
| PART I | ||||||
| Item 1: | BUSINESS | |||||
| Item 1A: | RISK FACTORS | |||||
| Item 1B: | UNRESOLVED STAFF COMMENTS | |||||
| Item 2: | PROPERTIES | |||||
| Item 3: | LEGAL PROCEEDINGS | |||||
| Item 4: | MINE SAFETY DISCLOSURES | |||||
| PART II | ||||||
| Item 5: | MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED SHAREHOLDER | |||||
| MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES | ||||||
| Item 6: | SELECTED FINANCIAL DATA | |||||
| Item 7: | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL | |||||
| CONDITION AND RESULTS OF OPERATIONS | ||||||
| Item 7A: | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | |||||
| Item 8: | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA | |||||
| Item 9: | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS | |||||
| ON ACCOUNTING AND FINANCIAL DISCLOSURE | ||||||
| Item 9A: | CONTROLS AND PROCEDURES | |||||
| Item 9B: | OTHER INFORMATION | |||||
| PART III | ||||||
| Item 10: | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE | |||||
| Item 11: | EXECUTIVE COMPENSATION | |||||
| Item 12: | ||||||
| Item 13: | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE | |||||
| Item 14: | PRINCIPAL ACCOUNTANT FEES AND SERVICES | |||||
| PART IV | ||||||
| Item 15: | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES | |||||
| Item 16: | FORM 10-K SUMMARY | |||||
| Signatures | ||||||
PART I
Item 1: Business
The Company
W.W. Grainger, Inc., incorporated in the State of Illinois in 1928, is a broad line, business-to-business distributor of maintenance, repair and operating (MRO) supplies and other related products and services. W.W. Grainger, Inc.'sservices with operations are primarily in the United States (U.S.)North America, Japan and Canada, with a presence in Europe, Asia and Latin America.Europe. 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.
Strategy
In the large and fragmented MRO industry, Grainger’s strategy is to relentlessly expand its leadership position (i.e., supply chain infrastructure, broad in-stock product offering and deep customer relationships) by being the go-to partner for customers who build and run safe, sustainable, and productive operations. To execute this strategy, the Company competes with two business models: high-touch solutions and endless assortment. Grainger’s high-touch solutions businesses serve customers with complex needs primarily in North America and Europe. The endless assortment businesses are focused on customers with less-complex needs and includes Zoro Tools, Inc. (Zoro) in the United States (U.S.) and MonotaRO Co., Ltd. (MonotaRO) in Japan. Competing with these two models allows Grainger usesto leverage its scale and advantaged supply chain to meet the changing needs of its customers. The following provides a combinationhigh-level view of multichanneleach model:
MRO Industry
The estimated market where Grainger has operations is large with an estimated size of more than $290 billion and single channel online business modelsis concentrated in North America, Japan and Europe. These large core markets have high gross domestic product per capita, advanced infrastructures and competition is highly fragmented. Grainger estimates to have 4% share within these markets with opportunity and a track record for growth.
Grainger’s two reportable segments are the U.S. and Canada, and are further described below. Other businesses include the endless assortment businesses, Zoro and MonotaRO, and smaller international businesses primarily in Europe and Mexico. For further segment and financial information, see “Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 14 to the Consolidated Financial Statements (Financial Statements).
The table below shows Grainger's estimated share of the MRO market and the summary of its operations by reporting segments and other businesses as of December 31, 2019:
| Approximate Market Share | Distribution Centers (DCs)1 | Branches1 | Approximate Number of Customers Served (thousands)2 | ||||
| United States | 7% | 17 | 282 | 1,000 | |||
| Canada | 4% | 5 | 53 | 50 | |||
| Other businesses | |||||||
| Endless assortment businesses | 2% | 4 | — | 2,600 | |||
| International high-touch solutions businesses | 1% | 6 | 119 | 150 | |||
| TOTAL | 4% | 32 | 454 | 3,800 | |||
1 See Item 2, "Properties" for more information.
2 Customers served in the U.S. may include overlap with Zoro within the endless assortment businesses.
Customers and Products
Approximately 5,000 suppliers provide customers, primarilyGrainger businesses with a range of options for findingabout 1.6 million products stocked in DCs and purchasing MRObranches. Additionally, Grainger’s endless assortment businesses offer millions more products utilizing sales representatives, contact centers, catalogs, inventory management solutions and eCommerce technology. Grainger servesthrough its expanding drop-ship assortment. No single supplier comprised more than 3 million customers worldwide through a network5% of highly integrated distribution centers, websites, branchestotal purchases and inventory management solutions.no significant barriers exist with respect to sources of supply.
Grainger’s MRO product offering is grouped under several broad categories, including material-handling equipment, safety and security supplies, lighting and electrical products, power and hand tools, pumps and plumbing supplies, cleaning and maintenance supplies and metalworking tools. Products are regularly added to and removed from Grainger's product lines on the basis of customer demand, market research, suppliers' recommendations, sales volumes and other factors. No single product category comprises more than 17% of global sales.
United States
The U.S. business offers a broad selection of MRO supplies and other related products and services through its eCommerce platforms, catalogs, branches and sales representatives, catalogs, eCommerce and local branches.service representatives. A combination of product breadth, local availability, speed of delivery, detailed product information and competitively priced products and services is provided by this business. Products offered include material handling equipment, safety
Sales in 2019 were made to approximately 1 million customers and security supplies, lightingno single end customer accounted for more than 2% of total sales. U.S. business customers range from mid-sized businesses to large corporations, government entities and electricalother institutions within many industries. Macro trends and technology drive the way U.S. business customers behave. Customers desire highly tailored solutions with real-time access to information and efficient delivery of products power and hand tools, pumpsservices. These trends are reflected in how customers do business as demonstrated in the following tables for the 2019 line mix:
| Order Origination | Order Fulfillment | |||||
| Digital channels: | Direct-to-customer: | |||||
| Website | 30 | % | Ship to Customer | 70 | % | |
| EDI/ePro | 25 | % | KeepStock® | 17 | % | |
| KeepStock® | 16 | % | Subtotal | 87 | % | |
| Subtotal | 71 | % | Branch Pick-up | 13 | % | |
| Non-digital channels: | Total | 100 | % | |||
| Branch | 10 | % | ||||
| Phone | 19 | % | ||||
| Subtotal | 29 | % | ||||
| Total | 100 | % | ||||
Customers have access to more than 4 million products through Grainger.com and plumbing supplies, cleaningother branded websites. Grainger.com provides real-time price and maintenance suppliesproduct availability, detailed product information and metalworking tools. Services offered primarily relatefeatures such as product search and compare capabilities. For customers with sophisticated electronic purchasing platforms, the U.S. business utilizes technology that allows these systems to inventory management solutions.
communicate directly with Grainger.com. The majority of products sold by the U.S. business are nationally brandedthird-party owned products. In addition, 22%approximately 21% of 20172019 U.S. business sales were private label MRO items bearing Grainger’s registered trademarks, including DAYTON®, SPEEDAIRE®, AIR HANDLER®, TOUGH GUY®, WESTWARD®, CONDOR® and LUMAPRO®. Grainger has taken steps to protect these trademarks against infringement and believes that they will remain available for future use in its business. The U.S. business purchases products for sale from more than 2,600 suppliers, most of which are manufacturers. Through a global sourcing operation, the business procures competitively priced, high-quality products produced outside the U.S. from approximately 400 suppliers. No single supplier comprised more than 5% of total purchases and no significant barriers thus far exist with respect to sources of supply.
DCs are the primary order fulfillment channel with approximately 9,000 installations. As70% of December 31, 2017, there were approximately 65,000 total installations.
same-day availability.availability to customers. The U.S. business DC network fulfillsis also a large portionprimary component of customer orders, especially as customers migrateGrainger’s North American distribution network and it supplies inventory, product management, supply chain and related support services to websiteall Grainger subsidiaries in the North American region, including the Canada business, Mexico business and electronic purchasing.Zoro, which are part of other businesses. Approximately 18%, 62%, and 99% of inventory purchases in 2019 for the Canadian business, Mexican business and Zoro, respectively, were sourced from the U.S. business.
Branches in the U.S. business serve the immediate needs of customers in their local markets by allowing them to directly pick up items. In addition, branches supportitems and leverage branch staff for their technical product expertise and search-and-select support. Branches also fulfill local KeepStock® operations. operations in their local markets.
The branch network has approximately 1,700 employees who primarily fulfill counter and will-call product purchases and provide customer service. Branch network sales volume has continued to grow throughout 2017.
Canada
The U.S. business has a sales force of approximately 3,500 professionals who help customers select the right products to find immediate solutions to their needs and reduce costs by utilizing Grainger as a consistent source of supply. In 2017, the U.S. business continued to focus its outside sales force on facilitating growth with large customers who typically have more complex purchasing requirements than small and mid-sized customers. The U.S. business primarily utilizes a network of inside sellers and digital channels to meet the needs of small and mid-sized customers.
Canada
The Canada business primarily serves Canadian customers through branches,its integrated DC and branch network as well as sales and service representatives and DCs across Canada. As of December 31, 2017, the Canada business had 91 branches and 6 DCs. Approximately 13,000 sales transactions are completed daily. Customers have access to more than 131,000 stocked products through a comprehensive catalog. In addition, customers can purchase products through various fully bilingual websites. Grainger estimates the 2017 Canada market for MRO products was approximately $11 billion, of which the Canada business share is approximately 7%.representatives.
Other businesses
Other businesses includeis comprised of the endless assortment businesses, Zoro in the U.S.,and MonotaRO, in Japan and operationssmaller international high-touch solutions businesses primarily in Europe Asia and Latin America. The businesses in this group with revenues of more than $100 million in 2017 are described below.Mexico.
Zoro
Zoro is an online MRO distributor, primarily serving U.S. customers through its website, Zoro.com. With sales of more than $625 million in 2019, Zoro offers a broad selection of more than 13.5 million products.products to its customers. Zoro has no branches or sales force,representatives, and customer orders are primarily fulfilled through the U.S. business supply chain.chain and third parties.
MonotaRO
Grainger operates in Japan and other Asian countries primarily through its majority interest in MonotaRO. MonotaRO had more than $1 billion in revenue in 2019 and provides customers with access to approximately 20 million MRO products primarily through its catalogswebsites and websites.catalogs. A majority of orders are conducted through Monotaro.com, through which customers have access to approximately 13 million products.MonotaRO.com and fulfilled from its DCs and third parties. MonotaRO fulfills the majority of orders from three DCs. Grainger estimates the Japanese market for MRO products was approximately $42 billion in 2017, of which MonotaRO’s share is approximately 2%.
Seasonality
Grainger sells products that typically sell more oftenmay have seasonal fluctuations during the winter or summer seasons. In any given month, unusual weather patterns, that is, unusually hotseasons or cold weather, could positively or negatively impact the sales volumesduring periods of these products.natural disasters. However, historical seasonality impacts have not been material to Grainger’s operating results.
Competition
In the large and fragmented MRO industry, Grainger faces competition in each market from a variety of competitors, including manufacturers (including some of its own suppliers) that sell directly to certain segments of the market, to wholesale distributors, catalog houses, retail enterprisesretailers and Internet-basedinternet-based businesses. Also, competitors vary by size, from large broad-line distributors to small local and regional competitors. Grainger differentiates itself by providing local product availability, a broad product line, sales and service representatives, competitive pricing, catalogs (which include product descriptions and, in certain cases, extensive technical and application data) and advanced electronic and eCommerce technology. Grainger also offers other services, such as inventory management. Grainger has several large competitorsmanagement and continues to be highly competitive against the predominant number of small local and regional competitors.technical support.
Employees
As of December 31, 2017,2019, Grainger had approximately 25,70025,300 employees, of whom approximately 24,40023,800 were full-time and 1,3001,500 were part-time or temporary. Grainger has never had a major work stoppage and considers employee relations to be good.
Website Access to Company Reports
Grainger makes available free of charge, through its website, www.Grainger.com/investor,www.invest.grainger.com, its Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and amendments to those reports if any, as soon as reasonably practicable after these materials are electronically filed with, or furnished to, the U.S. Securities and Exchange Commission (SEC).
Information about our Executive Officers
Following is information about the executive officers of Grainger including age as of January 31, 2020. Executive officers of Grainger generally serve until the next annual appointment of officers, or until earlier resignation or removal.
| Name and Age | Positions and Offices Held and Principal Occupation and Employment During the Past Five Years |
| Kathleen S. Carroll (51) | Senior Vice President and Chief Human Resources Officer, a position assumed in December 2018. Previously, Ms. Carroll served as Executive Vice President, Chief Human Resources Officer of First Midwest Bancorp, Inc., a diversified financial services company, from 2017 to 2018. Prior to that role, Ms. Carroll was employed at Aon Corporation, a global insurance brokerage and consulting company, between 2006 and 2017, in various human resources roles, culminating in her position as Vice President, Global Head of Talent Acquisition. |
| John L. Howard (62) | Senior Vice President and General Counsel, a position assumed in January 2000. Previously, Mr. Howard served in several roles of increasing responsibility at Tenneco, Inc., a global conglomerate. Prior to those roles, Mr. Howard held a variety of legal positions in the federal government, including Associate Deputy Attorney General in the U.S. Department of Justice and in The White House as Counsel to the Vice President. |
| D.G. Macpherson (52) | Chairman of the Board, a position assumed in October 2017, and Chief Executive Officer, a position assumed in October 2016 at which time he was also appointed to the Board of Directors. Previously, Mr. Macpherson served as Chief Operating Officer, a position assumed in 2015, Senior Vice President and Group President, Global Supply Chain and International, a position assumed in 2013, Senior Vice President and President, Global Supply Chain and Corporate Strategy, a position assumed in 2012, and Senior Vice President, Global Supply Chain, a position assumed in 2008. |
| Deidra C. Merriwether (51) | Senior Vice President and President, North American Sales & Service, a position assumed in November 2019. Previously, Ms. Merriwether served as Senior Vice President, U.S. Direct Sales and Strategic Initiatives, a position assumed in September 2017, Vice President, Pricing and Indirect Procurement, a position assumed in 2016, and as a Vice President in Finance from 2013 to 2016. Prior to joining Grainger in September 2013, Ms. Merriwether held various positions as a Vice President, including positions of increasing responsibility at Sears Holdings Corporation, a broadline retailer, PriceWaterhouseCoopers, a global professional services firm, and Eli Lilly & Company, a global pharmaceutical company, across Finance, Procurement and Operations, lastly serving as Chief Operating Officer, Retail Formats, at Sears Holdings Corporation. |
| Thomas B. Okray (57) | Senior Vice President and Chief Financial Officer, a position assumed in May 2018. Prior to joining Grainger, Mr. Okray served as Executive Vice President, Chief Financial Officer of Advance Auto Parts, Inc., a leading automotive aftermarket parts provider in North America, a position assumed in 2016. Previously, Mr. Okray served as Vice President, Finance, Global Customer Fulfillment, of Amazon.com, Inc., an online retailer, from January 2016 to October 2016, as Vice President, Finance, North American Operations of Amazon, from June 2015 to January 2016, and was employed by General Motors Company, a global automotive company, from July 1989 to June 2015, in a variety of finance and supply chain related roles, culminating in his position as CFO, Global Product Development, Purchasing & Supply Chain, from January 2010 to June 2015. |
| Paige K. Robbins (51) | Senior Vice President, Grainger Technology, Merchandising, Marketing, and Strategy, a position assumed in November 2019. Previously, Ms. Robbins served as Senior Vice President and Chief Merchandising, Marketing, Digital, Strategy Officer, a position assumed in May 2019, as Senior Vice President and Chief Digital Officer, a position assumed in September 2017, and as Senior Vice President, Global Supply Chain, Branch Network, Contact Centers and Corporate Strategy, a position assumed in 2016. Since joining Grainger in September 2010, Ms. Robbins has held various positions as a Vice President, including in the areas of Global Supply Chain and Logistics. |
Eric R. Tapia (43) | Vice President and Controller, a position assumed in October 2016. Mr. Tapia served as Vice President, Internal Audit, from 2010 to 2016. Mr. Tapia is a Certified Public Accountant (CPA) and before joining Grainger in 2010 was an audit partner with KPMG. |
Item 1A: Risk Factors
The following is a discussion of significant risk factors relevant to Grainger’sGrainger's business that could adversely affect its financial condition, results of operations and cash flows. The risk factors discussed in this section should be considered together with information included elsewhere in this Annual Report on Form 10-K and should not be considered the only risks to which the Company is exposed.
Weakness in the economy, market trends and other conditions affecting the profitability and financial stability of Grainger’sGrainger's customers could negatively impact Grainger’sGrainger's sales growth and results of operations.
Economic, political, and industry trends affect Grainger’sGrainger's business environments. Grainger serves several industries and markets in which the demand for its products and services is sensitive to the production activity, capital spending and demand for products and services of Grainger’sGrainger's customers. Many of these customers operate in markets that are subject to cyclical fluctuations resulting from market uncertainty, trade and tariff policies, costs of goods sold, currency exchange rates, central bank interest rate changes, foreign competition, offshoring of production, oil and natural gas prices, geopolitical developments, labor shortages, inflation, deflation, and a variety of other factors beyond Grainger’sGrainger's control. Any of these factors could cause customers to idle or close facilities, delay purchases, reduce production levels, or experience reductions in the demand for their own products or services.
Any of these events could impair the ability of Grainger’s customers to make full and timely payments oralso reduce the volume of products and services these customers purchase from Grainger or impair the ability of Grainger's customers to make full and timely payments, and could cause increased pressure on Grainger’sGrainger's selling prices and terms of sale. Accordingly, a significant or prolonged slowdown in economic activity in the U.S., Canada or any other major world economy, or a segment of any such economy, could negatively impact Grainger’sGrainger's sales growth and results of operations.
The facilities maintenance industry is highly competitive, and changes in competition could result in decreased demand for Grainger’sGrainger's products and services.
Grainger competes in a variety of ways, including product assortment and availability, services offered to customers, pricing, purchasing convenience, and the overall experience Grainger offers. This includes the ease of use of Grainger's high-touch high-service operations (branches and digital platforms) and delivery of products.
There are several large competitors in the industry, although most of the market is served by small local and regional competitors. Grainger faces competition in all markets it serves from manufacturers (including some of its own suppliers) that sell directly to certain segments of the market, wholesale distributors, catalog houses, retail enterprises and online businesses that compete with price transparency.
To remain competitive, the Company must be willing and able to respond to market pressures, including pricing, whether widely available or negotiated under a contract, delivery and services. These pressures, andpressures. Downward pressure on sales prices, changes in the implementation, timing and resultsvolume of our strategic pricingorders, and other responses,an inability to pass higher product costs on to customers could cause our gross profit percentage to fluctuate or decline. We may not be able to pass rising product costs to customers if those customers have ready product or supplier alternatives in the marketplace. These pressures could have a material effect on Grainger'sGrainger’s sales and profitability. If the Company is unable to grow sales or reduce costs, among other actions, to wholly or partially offset the effect on profitability of our pricing actions, the Company'sCompany’s results of operations and financial condition may be adversely affected.
Volatility in commodity prices may adversely affect gross margins.
Some of Grainger’sGrainger's products contain significant amounts of commodity-priced materials, such as steel, copper, petroleum derivatives, or rare earth minerals, and are subject to price changes based uponon fluctuations in the commodities market. Fluctuations in the price of fuel could affect transportation costs. Grainger’sGrainger's ability to pass on such increases in costs in a timely manner depends on market conditions. The inability to pass along cost increases could result in lower gross margins. In addition, higher prices could impactreduce demand for these products, resulting in lower sales volumes.
Unexpected product shortages, tariffs, and risks associated with Grainger's suppliers could negatively impact customer relationships resultingor result in an adverse impact on results of operations.
Historically, no significant difficulty has been encountered with respect to sources of supply; however, disruptions could occur due to factors beyond Grainger’sGrainger's control, including economic downturns, geopolitical unrest, port slowdowns,tariffs, new tariffs or tariff increases, trade issues and policies, labor problems experienced by Grainger's suppliers, transportation availability and cost, shortage of raw materials, inflation and other factors, any of which could adversely affect a supplier’ssupplier's ability to manufacture or deliver products. Asproducts or could result in an increase in Grainger's product costs.
Further, Grainger continues to source lower costsources products from Asia and other areas of the world,world. This increases the risk for disruptions has increasedof supply disruption due to the additional lead time required and distances involved.
If Grainger was to experience difficulty in obtaining products, there could be a short-term adverse effect on results of operations and a longer-term adverse effect on customer relationships and Grainger’sGrainger's reputation. In addition, Grainger has strategic relationships with a number of vendors. In the event Grainger was unable to maintain those relations, there might be a loss of competitive pricing advantages which could, in turn, adversely affect results of operations.
Changes in customer base or product mix could cause thechanges in Grainger's gross margin percentage to decline. or affect Grainger's competitive position.
From time to time, Grainger experiences changes in customer base and product mix that affect gross margin. Changes in customer base and product mix result primarily from business acquisitions, changes in customer demand, customer acquisitions, selling and marketing activities, competition and competition. If rapid growth with larger, lower margin customers continues,the increased use of eCommerce by Grainger will face pressure to maintain current gross margins, as these customers receive more discounted pricing due to their higher sales volume.and its competitors. There can be no assurance that Grainger will be able to maintain historical gross margins in the future.
Additionally, as customer base and product mix change over time, Grainger must identify new products, product lines and services that respond to industry trends and customer needs. The inability to introduce new products and effectively integrate them into Grainger's existing product mix could have a negative impact on future sales growth and Grainger's competitive position.
Disruptions in Grainger’sGrainger's supply chain could result in an adverse impact on results of operations.
Interruptions in the proper functioning of information systems could disrupt operations and cause unanticipated increases in costs and/or decreases in revenues.
The proper functioning of Grainger’sGrainger's information systems is critical to the successful operation of its business. Grainger continues to invest in software, hardware and network infrastructures in order to effectively manage its information systems. Although Grainger’sGrainger's information systems are protected with robust backup and security systems, including physical and software safeguards and remote processing capabilities, information systems are still vulnerable to damage or interruption from natural disasters, power losses, computer viruses, telecommunication failures, user error, third party actions
such as malicious computer programs, denial-of-service attacks and cybersecurity breaches, and other problems. In addition, from time to time Grainger relies on the IT systems of third parties to assist in conducting its business.
If Grainger's systems or those of third parties on which Grainger depends are damaged, breached or cease to function properly Grainger may have to make a significant investment to repair or replace them and may suffer interruptions in its business operations in the interim. If critical information systems fail or otherwise become unavailable, among other things, Grainger’sGrainger's ability to operate its eCommerce platforms, process orders, maintain proper levels of inventories, collect accounts receivable, and disburse funds, manage its supply chain, monitor results of operations, and process and store employee or customer data, among other functions, could be adversely affected. Any such interruption of Grainger’sGrainger's information systems could also subject Grainger to additional costs.have a material adverse effect on its business or results of operations.
Through Grainger’sGrainger's sales and eCommerce channels, Grainger collects and stores personally identifiable, confidential, proprietary and other information from customers so that they may, among other things, purchase products or services, enroll in promotional programs, register on Grainger’sGrainger's websites or otherwise communicate or interact with the Company. Moreover, Grainger’sGrainger's operations routinely involve receiving, storing, processing and transmitting sensitive information pertaining to its business, customers, suppliers and employees, and other sensitive matters.
Moreover, from time to time, Grainger may share information with vendors and other third parties that assist with certain aspects of the business. While Grainger requires assurances that these vendors and other parties will protect confidential information, there is a risk that the confidentiality of data held or accessed by them may be compromised. If successful, those attempting to penetrate Grainger’sGrainger's or its vendors’vendors' information systems may misappropriate intellectual property or personally identifiable, credit card, confidential, proprietary or other sensitive customer, supplier, employee or business information.information, or cause systems disruption.
In addition, a Grainger employee, contractor or other third party with whom Grainger does business may attempt to circumvent security measures in order to obtain such information or inadvertently cause a breach involving such information. Further, Grainger’sGrainger's systems are integrated with customer systems in certain cases, and a breach of the Company’sCompany's information systems could be used to gain illicit access to customer systems and information.
While Grainger has instituted safeguards for the protection of such information, because techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until they are launched against a target, Grainger may be unable to anticipate these techniques or implement adequate preventative measures. Any breach of Grainger's security measures or any breach, error or malfeasance of those of its third party service providers could cause Grainger to incur significant costs to protect any customers, suppliers, employees, and other parties whose personal data is compromised and to make changes to its information systems and administrative processes to address security issues.
Loss of customer, supplier, employee or intellectual property or other business information or failure to comply with data privacy and security laws could disrupt operations, damage Grainger’sGrainger's reputation and expose Grainger to claims from customers, suppliers, financial institutions, regulators, payment card associations, employees and others, any of which could have a material adverse effect on Grainger, its financial condition and results of operations. In the past, Grainger has experienced certain cybersecurity incidents. In each instance, Grainger provided notifications and adopted remedial measures. While these incidents have not been deemed to be material to Grainger, there can be no assurance that a future breach or incident would not be material to Grainger's operations and financial condition.
Grainger's ability to adequately protect its intellectual property or successfully defend against infringement claims by others may have an adverse impact on operations.
Grainger's business relies on the use, validity and continued protection of certain proprietary information and intellectual property, which includes current and future patents, trade secrets, trademarks, service marks, copyrights and confidentiality agreements as well as license and sublicense agreements to use intellectual property owned by affiliated entities or third parties. Unauthorized use of Grainger's intellectual property by others could result in harm to various
aspects of the business and may result in costly and protracted litigation in order to protect Grainger’s rights. In addition, Grainger may be subject to claims that it has infringed on the intellectual property rights of others, which could subject Grainger to liability, require Grainger to obtain licenses to use those rights at significant cost or otherwise cause Grainger to modify its operations.
Fluctuations in foreign currency could have an effect on reported results of operations.operations.
In order to compete, Grainger must attract, retain and motivate key employees, and the failure to do so could have an adverse effect on results of operations.
In order to compete and have continued growth, Grainger must attract, retain and motivate executives and other key employees, including those in managerial, technical, sales, marketing and support positions. Grainger competes to hire employees and then must train them and develop their skills and competencies. Grainger’sGrainger's results of operations could be adversely affected by increased costs due to increased competition for employees, higher employee turnover or increased employee benefit costs.
Grainger’s continued success is substantially dependent on positive perceptions of Grainger’s reputation.
One of the reasons why customers choose to do business with Grainger and why employees choose Grainger as a place of employment is the reputation that Grainger has built over many years. To be successful in the future, Grainger must continue to preserve, grow and leverage the value of Grainger’sGrainger's brand. Reputational value is based in large part on perceptions of subjective qualities. Even an isolated incident, or the aggregate effect of individually insignificant incidents, can erode trust and confidence, particularly if they result in adverse publicity, governmental investigations or litigation, and as a result, could tarnish Grainger’sGrainger's brand and lead to adverse effects on Grainger’sGrainger's business.
Grainger is subject to various domestic and foreign laws, regulations and standards. Failure to comply or unforeseen developments in related contingencies such as litigation could adversely affect Grainger’sGrainger's financial condition, results of operations and cash flows.
The wide array of laws, regulations and standards in everyeach domestic and foreign jurisdiction where itGrainger operates, includinginclude, but are not limited to: advertising and marketing regulations, anti-bribery and corruption laws, anti-competition regulations, data protection (including, payment card industry data security standards)because Grainger accepts credit cards, the Payment Card Industry Data Security Standard), data privacy (including in the U.S., the California Consumer Privacy Act, and in the European Union, which has traditionally imposed strict obligations under data privacy lawsthe General Data Protection Regulation 2016, with interpretations varying from state to state and regulations that vary from country to country) and cybersecurity requirements (including protection of information and incident responses), environmental protection laws, foreign exchange controls and cash repatriation restrictions, government business regulations applicable to Grainger as a government contractor selling to federal, state and local government entities, health and safety laws, import and export requirements, intellectual property laws, labor laws (including federal and state wage and hour laws), product compliance or safety laws, supplier regulations regarding the sources of supplies or products, tax laws (including as to U.S. taxes on foreign subsidiaries), unclaimed property laws and laws, regulations and standards applicable to other commercial matters. Moreover, Grainger is also subject to audits and inquiries in the normal course of business.
Failure to comply with any of these laws, regulations and standards could result in civil, criminal, monetary and non-monetary fines, penalties and/or, remediation costs as well as potential damage to the Company’sCompany's reputation. Changes in these laws, regulations and standards, or in their interpretation, could increase the cost of doing business, including, among other factors, as a result of increased investments in technology and the development of new operational processes. Furthermore, while Grainger has implemented policies and procedures designed to facilitate compliance with these laws, regulations and standards, there can be no assurance that employees, contractors, suppliers, vendors, or agentsother third parties will not violate such laws, regulations and standards or Grainger’sGrainger's policies. Any such failure to comply or violation could individually or in the aggregate materially adversely affect Grainger’sGrainger's financial condition, results of operations and cash flows.
In addition, Grainger's business and results of operations in the UK may be negatively affected by changes in trade policies, or changes in labor, immigration, tax or other laws, resulting from the UK's anticipated exit from the European Union.
Grainger alsois subject to a number of rules and regulations related to its government contracts, which may result in increased compliance costs and potential liabilities.
Grainger's contracts with U.S. federal, state and local government entities are subject to various regulations related to procurement, formation and performance. In addition, the Company's government contracts may provide for termination, reduction or modification by the government at any time, with or without cause. From time to time, Grainger is subject to governmental or regulatory investigations or audits related to its compliance with these rules and regulations. Violations of these regulations could result in fines, criminal sanctions, the inability to participate in existing or future government contracting and other administrative sanctions. Any such penalties could result in damage to the Company's reputation, increased costs of compliance and/or remediation and could adversely affect the Company's financial condition and results of operations.
In conducting its business Grainger may become subject to legal proceedings or governmental investigations, including in connection with product liability or product compliance claims if people, property or the environment are harmed by Grainger’s products or services.
Grainger is, and from time to time may become, party to a number of legal proceedings or governmental investigations for alleged violations of laws, rules or regulations. Grainger also may be subject to disputes and proceedings incidental to Grainger’sits business, involving alleged damagesincluding product-related claims for personal injury or injuries arising out ofillness, death, or environmental or property damage, including the use of Grainger’sproceedings discussed in Part I, Item 3. Legal Proceedings. Grainger also may be requested or required to recall products and services or violations of these laws, regulations or standards.take other actions. The defense of these proceedings may require significant expenses and divert management’smanagement's time and attention, and Grainger may be required to pay damages that could individually or in the aggregate materially adversely affect its financial condition, results of operations and cash flows. The Company’s
reputation could also be adversely affected by any resulting negative publicity. In addition, any insurance or indemnification rights that Grainger may have with respect to such matters may be insufficient or unavailable to protect the Company against potential loss exposures.
Tax changes could affect Grainger’sGrainger's effective tax rate and future profitability.
In December 2017, the U.S. government enacted comprehensive tax legislation that included significant changes to the taxation of business entities. The Company's accounting for the tax effects of such legislation may be subject to change due to subsequent clarification or amendment of the tax law which could adversely affect the Company's operating results or financial condition.
Grainger's common stock may be subject to volatility or price declines.
The trading price of Grainger's common stock is subject to broad and unpredictable fluctuation due to changes in economic, political and market conditions, the operating results of Grainger and its competitors, changes in expectations as to Grainger's future financial or operating performance, including estimates by securities analysts and investors, the Company’s failure to meet the financial performance guidance or other forward-looking statements provided to the public, changes in capital structure, share repurchase programs or dividend policies, and a number of other factors, including those discussed in this Item 1A. These factors, many which are outside of Grainger's control, could cause stock price volatility or Grainger's stock price to decline.
Changes in Grainger’s credit ratings and outlook may reduce access to capital and increase borrowing costs.
Grainger’s credit ratings are based on a number of factors, including the Company’s financial strength and factors outside of Grainger’s control, such as conditions affecting Grainger’s industry generally or the introduction of new rating practices and methodologies. Grainger cannot provide assurances that its current credit ratings will remain in effect or that the ratings will not be lowered, suspended or withdrawn entirely by the rating agencies. If rating agencies lower, suspend or withdraw the ratings, the market price or marketability of Grainger’s securities may be adversely affected. In addition, any change in ratings could make it more difficult for the Company to raise capital on favorable terms, impact the Company’s ability to obtain adequate financing, and result in higher interest costs for the Company’s existing credit facilities or on future financings.
Grainger has incurred substantial indebtedness and may incur substantial additional indebtedness, which could adversely affect cash flow, decrease business flexibility, or prevent Grainger from fulfilling its obligations.
As of December 31, 2019, Grainger’s consolidated indebtedness was approximately $2.4 billion. The Company’s indebtedness could, among other things, limit Grainger’s ability to respond to rapidly changing business and economic conditions, require the Company to dedicate a substantial portion of its cash flows to the payment of principal and interest on its indebtedness, reducing the funds available for other business purposes, and make it more difficult to satisfy the Company’s financial obligations as they come due during periods of adverse economic and industry conditions.
The agreements governing Grainger’s debt agreements and instruments contain representations, warranties, affirmative, negative and financial covenants, and default provisions. Grainger’s failure to comply with these restrictions and obligations could result in a default under such agreements, which may allow Grainger’s creditors to accelerate the related indebtedness. Any such acceleration could have a material adverse effect on Grainger’s business, financial condition, results of operations, cash flows, and its ability to obtain financing on favorable terms in the future.
In addition, Grainger may in the future seek to raise additional financing for working capital, capital expenditures, refinancing of indebtedness, share repurchases or other general corporate purposes. Grainger’s ability to obtain additional financing will be dependent on, among other things, the Company’s financial condition, prevailing market conditions and numerous other factors beyond the Company’s control. Such additional financing may not be available
on commercially reasonable terms or at all. Any inability to obtain financing when needed could materially adversely affect the Company’s business, financial condition or results of operations.
Item 1B: Unresolved Staff Comments
None.
Item 2: Properties
As of December 31, 20172019, Grainger’s owned and leased facilities totaled approximately 28.2 million square feet. The U.S. and Canada businesses accounted for the majority of the total square footage. Grainger believes that its properties are generally in excellent condition, well maintained and suitable for the conduct of business.
A brief description of significant facilities follows:
| Location | Facility and Use | Size in Square Feet (in | |||
| U.S. (1) | |||||
| U.S. (2) | |||||
| U.S. (3) | Other facilities | ||||
| Canada (4) | |||||
| 5 DCs | 968 | ||||
| Canada | Other facilities | ||||
| Other businesses (6) | Other facilities | 5,034 | |||
| Chicago area (2) | Headquarters and general offices | ||||
| Total Square Feet | |||||
| (1) | Consists of |
| (2) | These facilities are primarily owned and range in size from approximately 45,000 |
| (3) | These facilities include both owned and leased locations and primarily |
| (4) | Consists of |
| (5) | These facilities are primarily owned and range in size from approximately 40,000 to 540,000 square feet. |
| (6) | These facilities include owned and leased locations in |
| Owned facilities are not subject to any mortgages. | |
Item 3: Legal Proceedings
For a description of legal proceedings, see the disclosure contained in Note 1715 to the Consolidated Financial Statements included in "Part II, Item 8: Financial Statements and Supplementary Data" of this report, which is incorporated herein by reference.
Item 4: Mine Safety Disclosures
Not applicable.
PART II
Item 5: Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities
Market Information and Dividends
Grainger's common stock is listed and traded on the New York Stock Exchange, under the symbol GWW. The high and low sales prices for the common stock and the dividends declared and paid per share for each calendar quarter during 2017 and 2016 are shown below.
| Market Price Per Share | ||||||||||||
| Quarters | High | Low | Dividends | |||||||||
| 2017 | First | $ | 262.72 | $ | 229.05 | $ | 1.22 | |||||
| Second | 234.66 | 168.58 | 1.28 | |||||||||
| Third | 185.82 | 155.00 | 1.28 | |||||||||
| Fourth | 240.49 | 166.46 | 1.28 | |||||||||
| Year | $ | 262.72 | $ | 155.00 | $ | 5.06 | ||||||
| 2016 | First | $ | 234.77 | $ | 176.85 | $ | 1.17 | |||||
| Second | 239.95 | 212.64 | 1.22 | |||||||||
| Third | 235.53 | 212.54 | 1.22 | |||||||||
| Fourth | 240.74 | 201.94 | 1.22 | |||||||||
| Year | $ | 240.74 | $ | 176.85 | $ | 4.83 | ||||||
Grainger expects that its practice of paying quarterly dividends on its common stock will continue, although the payment of future dividends is at the discretion of Grainger’s Board of Directors and will depend upon Grainger’s earnings, capital requirements, financial condition and other factors.
Holders
The approximate number of shareholders of record of Grainger’s common stock as of February 7, 2018,January 31, 2020, was 688604 with approximately 150,934206,588 additional shareholders holding stock through nominees.
Issuer Purchases of Equity Securities - Fourth Quarter
| 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 | 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 | ||||
| Oct. 1 – Oct. 31 | 206,586 | $185.37 | 206,586 | 3,506,481 | shares | 112,700 | $301.83 | 112,700 | 3,284,920 | shares | ||
| Nov. 1 – Nov. 30 | 237,397 | $199.91 | 237,397 | 3,269,084 | shares | 126,183 | $320.04 | 126,183 | 3,158,737 | shares | ||
| Dec. 1 – Dec. 31 | 410,679 | $227.94 | 410,679 | 2,858,405 | shares | 81,184 | $319.32 | 80,144 | 3,078,593 | shares | ||
| Total | 854,662 | $209.86 | 854,662 | 320,067 (D) | 319,027 | |||||||
| (A) |
| (B) | Average price paid per share includes any commissions |
| (C) | Purchases were made pursuant to a share repurchase program approved by Grainger's Board of |
| (D) | The difference of 1,040 shares between the Total Number of Shares Purchased and the Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs represents shares purchased by the administrator and record keeper of the W.W. Grainger, Inc. Employees Profit Sharing Plan for the benefit of the employees who participate in the plan. |
Company Performance
The following stock price performance graph compares the cumulative total return on an investment in Grainger common stock with the cumulative total return of an investment in each of the Dow Jones US Industrial Suppliers Total Stock Market Index and the S&P 500 Stock Index. It covers the period commencing December 31, 20122014, and ending December 31, 20172019. The graph assumes that the value for the investment in Grainger common stock and in each index was $100 on December 31, 20122014, and that all dividends were reinvested.
| December 31, | December 31, | |||||||||||||||||||||||||||||||||||
| 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | |||||||||||||||||||||||||
| W.W. Grainger, Inc. | $ | 100 | $ | 128 | $ | 130 | $ | 105 | $ | 124 | $ | 129 | $ | 100 | $ | 81 | $ | 95 | $ | 99 | $ | 121 | $ | 148 | ||||||||||||
| Dow Jones US Industrial Suppliers Total Stock Market Index | 100 | 119 | 117 | 95 | 119 | 133 | 100 | 81 | 102 | 114 | 105 | 139 | ||||||||||||||||||||||||
| S&P 500 Stock Index | 100 | 132 | 151 | 153 | 171 | 208 | 100 | 101 | 114 | 138 | 132 | 174 | ||||||||||||||||||||||||
Item 6: Selected Financial Data
| 2017 | 2016 | 2015 | 2014 | 2013 | 2019 | 2018 | 2017 | 2016 | 2015 | |||||||||||||||||||||||||||||
| (In thousands of dollars, except for per share amounts) | (In millions of dollars, except for per share amounts) | |||||||||||||||||||||||||||||||||||||
| Net sales | $ | 10,424,858 | $ | 10,137,204 | $ | 9,973,384 | $ | 9,964,953 | $ | 9,437,758 | $ | 11,486 | $ | 11,221 | $ | 10,425 | $ | 10,137 | $ | 9,973 | ||||||||||||||||||
| Gross profit | 4,397 | 4,348 | 4,098 | 4,115 | 4,231 | |||||||||||||||||||||||||||||||||
| Operating earnings | 1,262 | 1,158 | 1,035 | 1,113 | 1,294 | |||||||||||||||||||||||||||||||||
| Net earnings attributable to W.W. Grainger, Inc. (herein referred to as Net earnings) | 585,730 | 605,928 | 768,996 | 801,729 | 797,036 | 849 | 782 | 586 | 606 | 769 | ||||||||||||||||||||||||||||
| Net earnings per basic share | 10.07 | 9.94 | 11.69 | 11.59 | 11.31 | 15.39 | 13.82 | 10.07 | 9.94 | 11.69 | ||||||||||||||||||||||||||||
| Net earnings per diluted share | 10.02 | 9.87 | 11.58 | 11.45 | 11.13 | 15.32 | 13.73 | 10.02 | 9.87 | 11.58 | ||||||||||||||||||||||||||||
| Total assets | 5,804,254 | 5,694,307 | 5,857,755 | 5,283,049 | 5,266,328 | |||||||||||||||||||||||||||||||||
| Long-term debt (less current maturities) and other long-term liabilities | 2,469,860 | 2,159,602 | 1,716,507 | 737,232 | 743,702 | |||||||||||||||||||||||||||||||||
| Total current assets | 3,555 | 3,557 | 3,206 | 3,020 | 3,049 | |||||||||||||||||||||||||||||||||
| Property, building and equipment, net | 1,400 | 1,352 | 1,392 | 1,421 | 1,431 | |||||||||||||||||||||||||||||||||
| Long-term debt (less current maturities) | 1,914 | 2,090 | 2,248 | 1,841 | 1,388 | |||||||||||||||||||||||||||||||||
| Total shareholders' equity | $ | 1,827,733 | $ | 1,905,768 | $ | 2,352,714 | $ | 3,284,101 | $ | 3,326,836 | 2,060 | 2,093 | 1,828 | 1,906 | 2,353 | |||||||||||||||||||||||
| Operating cash flow | 1,042 | 1,057 | 1,057 | 1,024 | 1,036 | |||||||||||||||||||||||||||||||||
| Cash dividends paid per share | $ | 5.06 | $ | 4.83 | $ | 4.59 | $ | 4.17 | $ | 3.59 | $ | 5.68 | $ | 5.36 | $ | 5.06 | $ | 4.83 | $ | 4.59 | ||||||||||||||||||
The items discussed below are considered to materially affect the comparability of the information reflected in the selected financial data. For further information see“Part II, Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operations” of this report, which is incorporated herein by reference.
Net earnings for 2019 included a net expense of $109 million primarily consisting of a $104 million net non-cash charge related to intangible assets impairment at the Cromwell business in the U.K., which is part of other businesses and a net charge of $5 million related to restructuring primarily in the U.S business.
Net earnings for 2018 included a net expense of $170 million primarily consisting of a $133 million net non-cash charge related to goodwill and intangible asset impairment at Cromwell, which is part of other businesses and a net charge of $37 million related to restructuring primarily consisting of asset impairment charges in Canada and other related charges, net of gains from the sale of real estate in the U.S., Canada and corporate offices.
Net earnings for 2017 included a net expense of $84 million primarily consisting of a net charge of $102 million related to restructuring and other charges primarily consisting of branch closures in the U.S. and Canada businesses, net of gains on sale of branch real estate in the U.S., the consolidation of the contact center network in the U.S. and the wind-down of operations in Colombia, which iswas part of other businesses. This was partially offset by the net benefit of $15 million related to U.S. tax legislation and other discrete tax items and a net benefit of $3 million related to General Services Administrative (GSA) and unclaimed property reserves.items.
Net earnings for 2016 included a net expense of $105 million primarily consisting of the following:
Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations
General
W.W. Grainger, Inc. (Grainger)(Grainger or Company) is a broad line, business-to-business distributor of maintenance, repair and operating (MRO) supplies and other related products and services with operations primarily in the U.S.North America, Japan and Canada, with a presence in Europe, Asia and Latin America.Europe. More than 33.5 million customers worldwide rely on Grainger for products such as safety, gloves, ladders, motors and janitorial supplies, along with services likesuch as inventory management and technical support. These customers represent a broad collection of industries including commercial, government, healthcare and manufacturing.(see Note 2 to the Consolidated Financial Statements (Financial Statements)). They place orders online, on mobile devices, through sales representatives,digital channels, over the phone and at local branches. Approximately 5,2005,000 suppliers provide Grainger with approximately 1.7about 1.6 million products stocked in Grainger's distribution centers (DCs) and branches worldwide.
Grainger’s two reportable segments are the U.S. and Canada. The U.S. operating segment reflects the results of Grainger’s U.S. businesses. The Canada operating segment reflects the results for Acklands –(Acklands - Grainger, Inc. and its subsidiaries.subsidiaries). These reportable segments reflect the results of the Company's high-touch solutions businesses in those geographies. Other businesses include the single channel onlineendless assortment businesses, (Zoro in the U.S. and MonotaRO in Japan), and operationssmaller international high-touch solutions businesses in Europe Asia and Latin America.Mexico.
The Company’s strategic priority for 2020 is clear: relentlessly expand Grainger’s leadership position in the MRO space by being the go-to-partner for people who build and run safe, sustainable and productive operations. To achieve this, each Grainger business has a set of strategic objectives focused on top line growth through market share gain. The U.S. business is focused on growing through differentiated sales and services (e.g., direct customer relationships and onsite services), advantaged MRO solutions (e.g., get customers the exact products and services they need to solve a problem quickly) and unparalleled customer service (e.g., deliver flawlessly on every customer transaction). The Canada business is focused on growing volume and gaining market share after substantially completing a multi-year turnaround. The other businesses are primarily focused on profitably growing the international high-touch businesses in Europe and Mexico and the diverse industries it serves, several economic factorsendless assortment businesses through product assortment expansion and industry trends tend to shape Grainger’s business environment. The overall economy and leading economic indicators provide general insight into projecting Grainger's growth. Grainger’s sales in the U.S. and Canada tend to positively correlate with Business Investment, Business Inventory, Exports and Industrial Production. In the U.S., sales tend to positively correlate with Gross Domestic Product (GDP). In Canada, sales tend to positively correlate with oil prices. The table below provides these estimated indicators for 2017 and 2018:
| U.S. | Canada | ||||||||||
| Estimated 2017 | Forecasted 2018 | Estimated 2017 | Forecasted 2018 | ||||||||
| Business Investment | 5.1 | % | 7.9 | % | 2.3 | % | 3.5 | % | |||
| Business Inventory | 0.8 | % | 2.1 | % | — | — | |||||
| Exports | 3.4 | % | 5.3 | % | 1.1 | % | 1.8 | % | |||
| Industrial Production | 1.9 | % | 3.3 | % | 5.2 | % | 0.1 | % | |||
| GDP | 2.2 | % | 2.7 | % | 3.0 | % | 2.4 | % | |||
| Oil Prices | — | — | $51/barrel | $54/barrel | |||||||
| Source: Global Insight (January 2018) | |||||||||||
Results of Operations
The following table is included as an aid to understanding changes in Grainger's Consolidated Statements of Earnings (in millions of dollars):
| For the Years Ended December 31, | For the Years Ended December 31, | ||||||||||||||||||||||||||||||||
| Percent Increase/(Decrease) from Prior Year | As a Percent of Net Sales | Percent Increase/(Decrease) from Prior Year | As a Percent of Net Sales | ||||||||||||||||||||||||||||||
| 2017 (A) | 2016 (A) | 2017 | 2017 | 2016 | 2019 | 2018 | 2019 | 2019 | 2018 | ||||||||||||||||||||||||
| Net sales | $ | 10,425 | $ | 10,137 | 3 | % | 100.0 | % | 100.0 | % | $ | 11,486 | $ | 11,221 | 2 | % | 100.0 | % | 100.0 | % | |||||||||||||
| Cost of merchandise sold | 6,327 | 6,023 | 5 | % | 60.7 | 59.4 | |||||||||||||||||||||||||||
| Cost of goods sold | 7,089 | 6,873 | 3 | % | 61.7 | % | 61.3 | % | |||||||||||||||||||||||||
| Gross profit | 4,098 | 4,115 | — | % | 39.3 | 40.6 | 4,397 | 4,348 | 1 | % | 38.3 | % | 38.7 | % | |||||||||||||||||||
| Warehousing, marketing and administrative expenses | 3,049 | 2,995 | 2 | % | 29.3 | 29.6 | |||||||||||||||||||||||||||
| Selling, general and administrative expenses | 3,135 | 3,190 | (2 | )% | 27.3 | % | 28.4 | % | |||||||||||||||||||||||||
| Operating earnings | 1,049 | 1,119 | (6 | )% | 10.1 | 11.0 | 1,262 | 1,158 | 9 | % | 11.0 | % | 10.3 | % | |||||||||||||||||||
| Other expense, net | 113 | 100 | 13 | % | 1.1 | 1.0 | 53 | 77 | (31 | )% | 0.5 | % | 0.7 | % | |||||||||||||||||||
| Income taxes | 313 | 386 | (19 | )% | 3.0 | 3.8 | 314 | 258 | 22 | % | 2.7 | % | 2.3 | % | |||||||||||||||||||
| Net earnings | 622 | 633 | (2 | )% | 6.0 | 6.2 | 895 | 823 | 9 | % | 7.8 | % | 7.3 | % | |||||||||||||||||||
| Noncontrolling interest | 37 | 27 | 36 | % | 0.4 | 0.3 | 46 | 41 | 12 | % | 0.4 | % | 0.4 | % | |||||||||||||||||||
| Net earnings attributable to W.W. Grainger, Inc. | $ | 586 | $ | 606 | (3 | )% | 5.6 | % | 6.0 | % | $ | 849 | $ | 782 | 8 | % | 7.4 | % | 7.0 | % | |||||||||||||
2019 Compared to 20162018
Grainger's net sales were $10,425 million for 2017, an increase of 3%, when compared with net sales of $10,137$11,486 million for the comparable 2016 period. On a daily basis,year ended 2019 increased $265 million, or 2.5%, compared to the 3% increase for the year consisted of the following:
same period in 2018. The increase in net sales was primarily driven by the single channel online businesses in the U.S. and Japan, as well as volume increases in the U.S. business as a result of the pricing actions. The U.S. business pricing actions were primarily implementedfrom market share gain and continued double-digit growth in the firstendless assortments businesses, partially offset by lower sales in the Canada business and third quarters of 2017 and included adjusting list price and introducing new lower web prices on the entire business assortment, which drove faster growth in 2017 through share gains with existing customers and acquisition of new customers. Referother businesses. See Note 14 to the Financial Statements and refer to the Segment Analysis below for further details.
Gross profit of $4,098 million for 2017 was down $17 million compared with $4,115 million for 2016. The gross profit margin for 2017 was 39.3%, down 1.3 percentage points versus 2016, driven primarily by the pricing actions in the U.S. business.
The tabletables below reconcilesreconcile reported Selling, general and administrative expenses (SG&A), operating earnings, net earnings attributable to W.W. Grainger, Inc. and diluted earnings per share, determined in accordance with U.S. generally accepted accounting principlesGenerally Accepted Accounting Principles (GAAP) in the United States of America to adjusted SG&A, operating earnings, net earnings attributable to W.W. Grainger, Inc. and diluted earnings per share, which are all considered non-GAAP measures. The Company believes that these non-GAAP measures provide meaningful information to assist shareholders in understanding financial results and assessing prospects for future performance as they provide a non-GAAP measure. Management believes adjusted net earnings is an important indicatorbetter baseline for analyzing the ongoing performance of operations because it excludesits businesses by excluding items that may not be indicative of core operating results. Because non-GAAP financial measures are not standardized, it may not be possible to compare this financial measurethese measures with other companies' non-GAAP financial measures having the same or similar names. (In thousandsThese non-GAAP measures should not be considered in isolation or as a substitute for reported results. These non-GAAP measures reflect an additional way of dollars):viewing aspects of operations that, when viewed with GAAP results, provide a more complete understanding of the business. All tables below are in millions of dollars:
| Twelve Months Ended | |||||||||
| December 31, | |||||||||
| 2019 | 2018 | % | |||||||
| SG&A reported | $ | 3,135 | $ | 3,190 | (2 | )% | |||
| Restructuring, net of branch gains (U.S.) | 5 | 9 | |||||||
| Restructuring, net of branch gains (Canada) | — | 35 | |||||||
| Restructuring (Other businesses) | 2 | 5 | |||||||
| Impairment charges (Other businesses) | 120 | 139 | |||||||
| Restructuring (Unallocated expense) | (1 | ) | (2 | ) | |||||
| Subtotal | 126 | 186 | |||||||
| SG&A adjusted | $ | 3,009 | $ | 3,004 | — | % | |||
| 2019 | 2018 | % | |||||||
| Operating earnings reported | $ | 1,262 | $ | 1,158 | 9 | % | |||
| Total restructuring, net and impairment charges | 126 | 186 | |||||||
| Operating earnings adjusted | $ | 1,388 | $ | 1,344 | 3 | % | |||
| 2019 | 2018 | % | |||||||
| Net earnings attributable to W.W. Grainger, Inc. reported | $ | 849 | $ | 782 | 8 | % | |||
| Total restructuring, net and impairment charges | 126 | 186 | |||||||
| Tax effect (1) | (17 | ) | (16 | ) | |||||
| Total restructuring and impairment charges, net of branch gains and tax | 109 | 170 | |||||||
| Net earnings attributable to W.W. Grainger, Inc. adjusted | $ | 958 | $ | 952 | 1 | % | |||
| (1) The tax impact of adjustments and non-cash impairments are calculated based on the income tax rate in each applicable jurisdiction, subject to deductibility and the Company's ability to realize the associated tax benefits. | |||||||||
| Twelve Months Ended | |||||||||
| December 31, | |||||||||
| 2017 | 2016 | % | |||||||
| Net earnings reported | $ | 585,730 | $ | 605,928 | (3 | )% | |||
| Restructuring (U.S.) | 30,352 | 21,234 | |||||||
| Branch gains (U.S.) | (20,620 | ) | (11,421 | ) | |||||
| Other (gains) charges (U.S.) | (2,830 | ) | 28,531 | ||||||
| Restructuring (Canada) | 30,390 | 11,085 | |||||||
| Inventory reserve adjustment (Canada) | — | 7,278 | |||||||
| Restructuring (Other businesses) | 55,324 | — | |||||||
| Other charges (Other businesses) | — | 52,318 | |||||||
| Restructuring (Unallocated expense) | 6,647 | 5,603 | |||||||
| U.S. tax legislation | (3,250 | ) | — | ||||||
| Discrete tax items | (12,123 | ) | (9,378 | ) | |||||
| Subtotal | 83,890 | 105,250 | |||||||
| Net earnings adjusted | $ | 669,620 | $ | 711,178 | (6 | )% | |||
Operating earnings of $1,262 million in 2019 increased $104 million, or 9% compared to $1,158 million in the same period in 2018. Excluding restructuring, net and impairment charges in both periods as noted in the table above, operating earnings increased $44 million, or 3%, driven primarily by cost take-out actions in the Canadian business and improved SG&A leverage in the U.S. business.
Other expense, net of $53 million for the year ended 2019, decreased $24 million, or 31% compared to the same period in 2018. The decrease in expense was primarily due to lower losses from the conclusion of the Company's clean energy investments during the second half of 2018.
Income taxes of $314 million for the year ended 2019 increased $56 million, or 22% compared to $258 million for the same period in 2018. Grainger's effective tax rates were 26.0% and 23.9% in 2019 and 2018, respectively. The increase was primarily driven by lower tax benefit from stock-based compensation and the absence of the Company's clean energy tax benefits in 2019 as the Company concluded its investments in 2018.
Net earnings attributable to W.W. Grainger, Inc. for 2017 decreased by 3%the year ended 2019 increased $67 million, or 8% to $586$849 million from $606$782 million in 2016the same period in 2018. Excluding restructuring, net and impairment charges and income taxes from both periods as noted in the table above, net earnings increased $6 million, or 1%. The decreaseincrease in net earnings primarily resulted from lower operating earnings, partially offset by lower income taxes. Excluding the net charges from both years mentioned aboveSG&A and discrete tax items, net earnings decreased 6%.other expense, net.
Diluted earnings per share of $10.02was $15.32 for the year ended 2019 and increased 12% compared to $13.73 for the same period in 2017 were 2%2018, due to higher than $9.87 for 2016, due tonet earnings and lower average shares outstanding partially offset by lower earnings.outstanding. Excluding restructuring, net and impairment charges and income taxes from both periods as noted in the charges mentionedtable above, diluted earnings per share would have been $11.46$17.29 compared to $11.58$16.70 in 2016, a decrease of 1%.
| For the Years Ended December 31, | |||||||||||||||||
| Percent Increase/(Decrease) from Prior Year | As a Percent of Net Sales | ||||||||||||||||
| 2016 (A) | 2015 (A) | 2016 | 2016 | 2015 | |||||||||||||
| Net sales | $ | 10,137 | $ | 9,973 | 2 | % | 100.0 | % | 100.0 | % | |||||||
| Cost of merchandise sold | 6,023 | 5,742 | 5 | % | 59.4 | 57.6 | |||||||||||
| Gross profit | 4,115 | 4,231 | (3 | )% | 40.6 | 42.4 | |||||||||||
| Warehousing, marketing and administrative expenses | 2,995 | 2,931 | 2 | % | 29.6 | 29.4 | |||||||||||
| Operating earnings | 1,119 | 1,300 | (14 | )% | 11.0 | 13.0 | |||||||||||
| Other expense, net | 100 | 50 | 102 | % | 1.0 | 0.5 | |||||||||||
| Income taxes | 386 | 466 | (17 | )% | 3.8 | 4.7 | |||||||||||
| Net earnings | 633 | 785 | (19 | )% | 6.2 | 7.9 | |||||||||||
| Noncontrolling interest | 27 | 16 | 66 | % | 0.3 | 0.2 | |||||||||||
| Net earnings attributable to W.W. Grainger, Inc. | $ | 606 | $ | 769 | (21 | )% | 6.0 | % | 7.7 | % | |||||||
2018 Compared to 2017
For the full year 2017 to 2018 comparative discussion, see Item 7: Management’s Discussion and Analysis of $9,973 millionFinancial Condition and Results of Operations - Results of Operations in Grainger’s Annual Report on Form 10-K for the comparable 2015 period. The 2% increase for the year consisted of the following:
| For the Years Ended December 31, | |||||||
| 2016 | 2015 | ||||||
| Interest income (expense) - net | $ | (65,615 | ) | $ | (32,405 | ) | |
| Loss from equity method investment | (31,193 | ) | (11,740 | ) | |||
| Other non-operating income | 1,300 | 1,102 | |||||
| Other non-operating expense | (4,931 | ) | (6,572 | ) | |||
| Total | $ | (100,439 | ) | $ | (49,615 | ) | |
| Twelve Months Ended | |||||||||
| December 31, | |||||||||
| 2016 | 2015 | % | |||||||
| Net earnings reported | $ | 605,928 | $ | 768,996 | (21 | )% | |||
| Restructuring (U.S.) | 21,234 | 22,231 | |||||||
| Branch gains (U.S.) | (11,421 | ) | — | ||||||
| Other charges (U.S.) | 28,531 | — | |||||||
| Restructuring (Canada) | 11,085 | 3,090 | |||||||
| Inventory reserve adjustment (Canada) | 7,278 | — | |||||||
| Restructuring (Other businesses) | — | 4,814 | |||||||
| Other charges (Other businesses) | 52,318 | — | |||||||
| Restructuring (Unallocated expense) | 5,603 | (24 | ) | ||||||
| Discrete tax items | (9,378 | ) | (5,984 | ) | |||||
| Subtotal | 105,250 | 24,127 | |||||||
| Net earnings adjusted | $ | 711,178 | $ | 793,123 | (10 | )% | |||
Segment Analysis - 20172019 Compared to 20162018
The following comments at the reportable segment and other business unit level include external and intersegment net sales and operating earnings. See Note 1614 to the Consolidated Financial Statements.
United States
Net sales were $7,960$8,815 million for 2017the year ended 2019, an increase of $90$227 million,, or 1% when2.5% compared with net sales of $7,870$8,588 million for 2016. On a daily basis, the 2% increase2018 and consisted of the following:
| Percent Increase (Decrease) | |
| Volume | 2.0% |
| Price | 0.5 |
| Intersegment sales to Zoro (included in other businesses) | 0.5 |
| Other | (0.5) |
| Total | 2.5% |
Overall, revenue increases were primarily driven by market share gains. See Note 2 to the Financial Statements for information related to disaggregated revenue.
Gross profit margin decreased 0.4 percentage points compared to the same period in 2018 reflecting the impact of contract renegotiations and customer mix.
SG&A for the year ended 2019 was flat compared to the same period in 2018 due to strong expense management.
Operating earnings of $1,391 million increased $53 million, or 4% from $1,338 million in the same period of 2018. This increase was driven primarily by higher sales, higher gross profit dollars and improved SG&A leverage.
Canada
Net sales were $529 million for the year ended 2019, a decrease of $124 million, or 19% when compared with $653 million for 2018 and consisted of the following:
| Percent (Decrease)/Increase | |
| Volume | (19.0)% |
| Price | 2.0 |
| Foreign Exchange | (2.0) |
| Total | (19.0)% |
For the year ended 2019, volume decreased by 19 percentage points compared to the same period in 2018 due to customer disruption as a result of actions taken to reduce the branch footprint and optimize sales coverage.
Gross profit margin increased 0.7 percentage points in 2019 compared to the same period in 2018 primarily due to inventory and supply chain efficiencies.
SG&A decreased $89 million, or 34% in 2019 compared to the same period in 2018. Excluding restructuring, net in both periods as noted in the table above, SG&A would have decreased $54 million, or 24% compared to the prior period. This decrease was primarily due to cost reduction actions and lower variable expense as a result of lower sales volume.
Operating earnings were $3 million for the year ended 2019 compared to losses of $49 million in the same period in 2018. Excluding restructuring, net in both periods (as noted in the table above and Note 5 to the Financial Statements), operating earnings would have been $3 million compared to operating losses of $14 million in the prior period primarily due to lower SG&A and lower sales volume.
Other businesses
Net sales for other businesses were $2,651 million for the year ended 2019, an increase of $210 million, or 8.5%, when compared to the same period in 2018. The net sales increase was primarily due to incremental sales at the endless assortment businesses and consisted of the following:
| Percent Increase/(Decrease) | |
| Volume | |
| Total | |
partially offset by foreign exchange headwinds from the euro and MonotaRO. On a daily basis, the 13% increase consisted of the following:pound sterling.
Operating earningslosses for other businesses were $56 million for 2017 compared to $41 million for 2016. Excluding restructuring charges in 2017 and the goodwill and intangible impairment charges of $52 million in the Fabory and Colombia businesses in the prior year, operating earnings increased $18 million or 19%, due to strong performance from the single channel online businesses.
Segment Analysis - 2018 Compared to 2017
For the full year 2017 to 2018 comparative discussion, see Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations - Segment Analysis - 2018 Compared to 2017 in Grainger’s Annual Report on Form 10-K for other businesses were $41 million for 2016 compared to $48 million for 2015. Excluding goodwill and intangible impairment charges of $52 million in the Fabory and Colombia businesses and other restructuring charges in the priorfiscal year operating earnings for other business increased by $39 million driven by strong performance from MonotaRO, Zoro and the earnings contribution from Cromwell.ended December 31, 2018.
Financial Condition
For the full year 2017 discussion, see Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations - Financial Condition in Grainger’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018.
Grainger believes that its current level of cash and cash equivalents, marketable securities and availability under its revolving credit facilities will be sufficient to meet its liquidity needs. Grainger expects to continue to invest in its strong working capital position,business and return excess cash to shareholders through cash dividends and share repurchases, which it plans to fund through total available liquidity and cash flows generated from operationsoperations. Grainger also maintains access to capital markets and borrowing capacitymay issue debt or equity securities from time to continue, allowing it to fund its operations, growth initiatives and capital expenditures as well as pay cash dividends, repurchase shares and repay its long-term debt obligations while maintainingtime, which may provide an adequate credit rating.additional source of liquidity.
Cash and Cash Equivalents
At December 31, 2017, 20162019 and 2015,2018, Grainger had cash and cash equivalents of $327 million, $274$360 million and $290$538 million, respectively. Approximately 64%, 72%69% and 76%49% were outside the U.S. business as of December 31, 2017, 20162019 and 2015,2018, respectively. Grainger has no material limits or restrictions on its ability to use or access these foreign liquid assets.
Cash FlowFlows
Net cash provided by operating activities was $1,057$1,042 million and $1,024$1,057 million for the twelve monthsyears ended December 31, 20172019 and 2016,2018, respectively. The increasedecrease in cash provided by operating activities iswas primarily the result of lower payments related to employee benefits,variable compensation payments, partially offset by lower earningsfavorable net income and higherchanges in working capital.
Net cash used in investing activities was $146$202 million and $262$166 million for the twelve monthsyears ended December 31, 20172019 and 2016,2018, respectively. The decreaseThis increase in net cash used in investing activities was primarily driven by lower additions to property, buildings and equipment compared to the prior year and higher proceeds primarily from the sales of branch real estate assets in the U.S. and a U.S. business divestiture when compared to the prior year.
Net cash used in financing activities was $867$1,023 million and $776$670 million in the twelve monthsyears ended December 31, 20172019 and 2016,2018, respectively. The increase in net cash used in financing activities was primarily driven by lower proceeds of long-term debt and higher net payments of commercial paper, offset by lowertreasury stock repurchases in 20172019 compared to 20162018 and lower payments of long-term debt.
Working Capital
Internally generated funds are the primary source of working capital and funds used for growth initiatives andincluding capital expenditures. Grainger's working capital is not impacted by significant seasonality trends throughout the year.
Working capital consists of current assets (less non-operating cash) and current liabilities (less short-term debt, and current maturities of long-term debt)debt and lease liabilities). Working capital was $1,669$2,092 million at December 31, 2017,2019, compared with $1,722$1,898 million at December 31, 2016,2018, primarily due to an increase in accounts receivable and inventory and decreases in accrued compensation and benefits partially offset by increases in current liabilities.accounts payable. At these dates, the ratio of current assets to current liabilities was 2.22.6 and 2.4, respectively.
Capital Expenditures
In each of the past threetwo years, a portion of the Company's net cash flows has been used for additions to property, buildings, equipment and capitalized software (presented in Intangibles - net on the Consolidated Balance Sheet) as summarized in the following table (in thousandsmillions of dollars):
| For the Years Ended December 31, | For the Years Ended December 31, | |||||||||||||||||
| 2017 | 2016 | 2015 | 2019 | 2018 | ||||||||||||||
| Land, buildings, structures and improvements | $ | 108,753 | $ | 70,942 | $ | 86,082 | $ | 47 | $ | 69 | ||||||||
| Furniture, fixtures, machinery and equipment | 65,996 | 139,474 | 202,137 | 131 | 137 | |||||||||||||
| Subtotal | 174,749 | 210,416 | 288,219 | 178 | 206 | |||||||||||||
| Capitalized software | 62,534 | 73,833 | 85,649 | 43 | 33 | |||||||||||||
| Total | $ | 237,283 | $ | 284,249 | $ | 373,868 | $ | 221 | $ | 239 | ||||||||
In 2017,2019, the Company continued to invest in its worldwideNorth American and Japanese distribution networks (e.g. new DCs and branches as well as machinery and equipment to further automate the distribution process). In addition, the Company invested in the development of inventory management and software solutions.
In 2018, the Company continued to invest in its North American distribution network (e.g. new or expanding existing facilities and technology), digital platforms (e.g. eCommerce websites. Other investments include the consolidation of facility and inventory management solutions), capital maintenanceoffice locations and development of its existing branch networks across the enterprise and other supporting information technology assets.software solutions.
Debt
Grainger maintains a debt ratio and liquidity position that provides flexibility in funding working capital needs and long-term cash requirements. In addition to internally generated funds, Grainger has various sources of financing available, including bank borrowings under lines of credit. Total debt, which is defined as total interest-bearing debt (short-term current and long-term) and lease liabilities as a percent of total capitalization, was 56.2%54.3% and 54.1%51.5%, as of December 31, 20172019 and 2016,2018, respectively.
Grainger receives ratings from two independent credit ratings agencies: Moody's Investor Service (Moody's) and Standard & Poor's (S&P). Both credit rating agencies currently rate our corporate credit at investment grade. The following table summarizes the Company's credit ratings at December 31, 2019:
| Corporate | Senior Unsecured | Short-term | |||
| Moody's | A3 | A3 | P2 | ||
| S&P | A+ | A+ | A1 | ||
Commitments and Other Contractual Obligations
At December 31, 2017,2019 Grainger's contractual obligations, including estimated payments due by period, are as follows (in thousandsmillions of dollars):
| Payments Due by Period | Payments Due by Period | |||||||||||||||||||||||||||||||||||||
| Total Amounts Committed | Less than 1 Year | 1 - 3 Years | 4 - 5 Years | More than 5 Years | Total Amounts Committed | Less than 1 Year | 1 - 3 Years | 3 - 5 Years | More than 5 Years | |||||||||||||||||||||||||||||
| Debt obligations | $ | 2,365,795 | $ | 94,312 | $ | 334,930 | $ | 136,553 | $ | 1,800,000 | $ | 2,181 | $ | 246 | $ | 129 | $ | 6 | $ | 1,800 | ||||||||||||||||||
| Interest on debt | 2,197,909 | 83,002 | 161,853 | 156,604 | 1,796,450 | 2,035 | 81 | 157 | 156 | 1,641 | ||||||||||||||||||||||||||||
| Operating lease obligations | 196,544 | 63,625 | 82,594 | 34,446 | 15,879 | 239 | 63 | 100 | 46 | 30 | ||||||||||||||||||||||||||||
| Purchase obligations: | ||||||||||||||||||||||||||||||||||||||
Uncompleted additions to property, buildings and equipment | 68,806 | 68,287 | 346 | 173 | — | 88 | 88 | — | — | — | ||||||||||||||||||||||||||||
Commitments to purchase inventory | 541,834 | 541,834 | — | — | — | 498 | 498 | — | — | — | ||||||||||||||||||||||||||||
| Other goods and services | 141,883 | 98,843 | 36,481 | 6,474 | 85 | 317 | 177 | 112 | 28 | — | ||||||||||||||||||||||||||||
| Other liabilities | 130,256 | 91,879 | 9,703 | 6,569 | 22,105 | 103 | 81 | 5 | 4 | 13 | ||||||||||||||||||||||||||||
| Total | $ | 5,643,027 | $ | 1,041,782 | $ | 625,907 | $ | 340,819 | $ | 3,634,519 | $ | 5,461 | $ | 1,234 | $ | 503 | $ | 240 | $ | 3,484 | ||||||||||||||||||