Industrial distributor provides training, networking opportunities at customer event
Susan Avery -- Purchasing, 1/21/2010 11:12:15 AM
"Tough doesn't begin to describe the challenges you're facing" Jim Ryan, chairman, president and CEO at Grainger, said in his opening remarks to the MRO buyers attending the industrial distributor's Total MRO Solutions National Customer event this week in Orlando. The next two days, he said, "are about learning and networking with people who can help you get your business up and running" as the economy comes out of recession.
More than 2,000 of the distributor's commercial customers attended the event Jan. 17-19, which also consists of a trade show with more than 400 of its manufacturer suppliers. Grainger is repeating the event again on Jan. 20-22 for a second set of customers.
Attendees, many of whom are purchasing professionals who source MRO goods and services, heard about the economic recovery from Nigel Gault, chief U.S. economist at IHS Global Insight, and the state of the distribution industry from David Manthey, senior analyst with Robert W. Baird. The two each gave an address following Ryan's opening remarks.
Gault said that the economic recovery, which started in the fourth quarter of 2009, won't be "gangbusters" because the current business cycle is not normal. While the economy got a boost from businesses restocking inventory and fiscal and monetary policy, high unemployment and lingering effects of the financial crisis will be a drag on growth in 2010, he said.
Along that same theme, Manthey said that the recovery would be "subdued" for companies in the distribution industry. Results of a survey of industrial distributors he conducted last year show revenues starting to pick up in the fourth quarter of 2009 and climbing just 2.4% in 2010. Beyond that, he said, the industry will continue to see consolidation.
The event began on Sunday, with a Solutions Under the Sun networking session that provided opportunities for attendees to meet with industry experts, Grainger executives and their peers in an informal setting. Grainger execs were positioned in tents set up for the event that focused on some of the company's key markets: contractors and facility maintenance; manufacturing-facility and plant maintenance; transportation, warehousing and distribution; healthcare and hospitality and retail. A reception and dinner followed the networking.
Eric Sandford, director of supply management, at OmniSource Southeast, took part in the networking session, sharing experiences of his team with his peers. Sandford is expanding the structured MRO sourcing program he set up, using his company's relationship with Grainger as a benchmark. Sandford and his team keep an eye on MRO inventory using the distributor's KeepStock (or vendor managed) inventory program.
Of the growth in the event compared with last year, Mike Pulick, president, Grainger U.S., told Purchasing.com, "We take continuous improvement seriously." There were more manufacturer suppliers at the trade show, more networking opportunities and more customers attending at the 2010 event. In fact, the industrial distributor held the gathering twice during the week for two separate groups of customers. In total, more than 4,000 purchasing and maintenance professionals took part.
Speaking to the current business climate, Pulick said, "Our customers are starting to increase production, but are doing it with the same resources. So, they have to be more productive. We see this as an opportunity to show our customers how to be more efficient at purchasing MRO items."
To that end, the distributor offered at its event educational training session on topics that concern its customers. These are: inventory management, safety, sustainability and business continuity.
At the training session on inventory management, Kevin Heath, vice president of strategic sourcing at Georgia Pacific, told attendees that he views MRO as opportunity for continuous improvement. Georgia Pacific spends $80 million annually on general mill supplies. The category is the first that Heath and his team selected in an effort to consolidate the company's purchasing and supply base.
For Georgia Pacific, consolidating the category has helped to lower inventory levels by 20%, increase productivity and improve equipment reliability, he said.
On the trade show floor, Sam Kim, vice president, e-commerce, provided customers with an overview of Grainger's online buying activities. In the past year, the company refined the search capability (by product attributes) of its website and added a merchandizing feature that suggests related products. It also introduced functionality embedded within grainger.com that allows users to customize some products such as hard hats, safety signs and mats.
Tom Blue, vice president of sales at Milwaukee Tools in Milwaukee, one of Grainger's manufacturer suppliers with a booth on the show floor, uses the event to demonstrate new products to Grainger customers, including new test and measurement tools. He told Purchasing.com that his company continued to introduce new products in 2009 viewing the economic downturn as an opportunity for the company to grow its business and take market share from competitors.
Mark Lindstrom, vice president of sales at Ergodyne in St. Paul, Minn., another supplier exhibitor, said that he likes having access to both Grainger sellers and end users. "This is one of the more productive distributor shows we attend," he said
Thursday, January 28, 2010
Grainger Reports Year End Results
Grainger Reports Sales of $6.2 Billion and Earnings Per Share of $5.62 for the Year Ended December 31, 2009
--Highlights --
4Q09 sales of $1.6 billion, up 3 percent
4Q09 EPS of $1.27, down 7 percent, including the following items:
$0.07 in asset impairment charges
$0.05 in severance charges
$732 million in operating cash flow for the year
$507 million returned to shareholders in dividends & share repurchases in 2009
Pretax ROIC* of 24.9 percent versus 29.8 percent in 2008
Visit www.grainger.com/investor to access a podcast describing Grainger's performance in more detail.
CHICAGO, Jan 26, 2010 /PRNewswire via COMTEX/ -- Grainger (NYSE: GWW) today reported sales, earnings and earnings per share for the year ended December 31, 2009. Sales of $6.2 billion were down 9 percent versus 2008. Net earnings of $430 million decreased 9 percent versus $475 million in 2008. Earnings per share of $5.62 decreased 6 percent versus $5.97** in 2008.
"I am very proud of our employees and how they have successfully navigated this company through one of the most difficult economic times in our history," said Chairman, President and Chief Executive Officer Jim Ryan. "The actions we took in 2009 to keep service levels and customer relationships strong are paying off. I am excited about the opportunity we have going forward to gain additional market share and create value for our shareholders by serving as the indispensable MRO partner to businesses and institutions."
*The GAAP financial statements are the source for all amounts used in the Return on Invested Capital (ROIC) calculation. ROIC is calculated using annualized operating earnings based on year-to-date operating earnings divided by a 13 point average for net working assets. Net working assets are working assets minus working liabilities defined as follows: working assets equal total assets less cash equivalents (non operating cash), deferred taxes, and investments in unconsolidated entities, plus the LIFO reserve. Working liabilities are the sum of trade payables, accrued compensation and benefits, accrued contributions to employees' profit sharing plans, and accrued expenses.
** Reported 2008 EPS were $6.04, which was restated after adopting FSP 03-6-1 on January 1, 2009, resulting in a 7 cent reduction in EPS in 2008 and 6 cents in 2009. (See page K-41 of the company's 2008 10-K for additional information).
Ryan added, "We are seeing some initial signs of improvement in the overall economy, although job growth is expected to lag the recovery. Stronger sales growth in December and January give us greater confidence to raise our 2010 sales growth guidance to a range of 6 to 10 percent and our earnings per share guidance to the new range of $5.40 to $5.90. We remain cautiously optimistic about the economy and are executing on the things we can control like our customer service and high product availability. As a result, we are well positioned for continued share gain, particularly as many competitors have been forced to reduce inventories." The company had previously issued 2010 guidance of 4 to 9 percent sales growth and earnings per share of $5.30 to $5.80.
For the 2009 fourth quarter, sales of $1.6 billion increased 3 percent versus the fourth quarter of 2008. There were 64 sales days in both the 2009 and 2008 fourth quarters. Daily sales decreased 3 percent in October, increased 2 percent in November and increased 11 percent in December. The 3 percent increase for the quarter included a 4 percentage point contribution from acquisitions, a 2 percentage point benefit from foreign exchange and a 2 percentage point lift from price increases, partially offset by a 5 percentage point decline in volume. Net earnings of $97 million decreased 10 percent versus $108 million in 2008. Earnings per share of $1.27 decreased 7 percent versus $1.37 in 2008. The effect of adopting FSP 03-6-1 was a 1 cent per share reduction in the fourth quarter of 2009 and 2 cents in the 2008 quarter.
During the quarter, the company continued to lower its cost structure by closing branches and reducing headcount. In total, 12 branches, including 6 Will Call Express locations, were closed. These closures, along with other asset write-downs, resulted in asset impairment charges of $9 million or 7 cents per share. In addition, the company reduced headcount by another 200 positions in the 2009 fourth quarter, incurring $7.5 million or 5 cents per share in severance cost. For the full year 2009, the company eliminated approximately 600positions and incurred $18 million in severance or 11 cents per share.
Effective with the first quarter of 2009, the company has two reportable business segments, the United States and Canada, which represent approximately 98 percent of full year company sales. This reporting structure reflects the integration of Lab Safety Supply with Grainger's U.S. branch-based business. The remaining operating units (Japan, Mexico, India, Puerto Rico, China and Panama) are included in other businesses and are not considered a segment. The company acquired Asia Pacific Brands India Private Limited in June 2009 resulting in the inclusion of the India operations in other businesses in the third quarter. The company also acquired a majority ownership of MonotaRO in September 2009, consolidated this Japanese entity in its balance sheet as of the end of the third quarter and began consolidating its income statement in the fourth quarter.
United States
Sales for the United States segment decreased 2 percent in the 2009 fourth quarter, with daily sales down 7 percent in October, down 3 percent in November and up 5 percent in December. Acquisitions and the timing of the Christmas holiday accounted for 3 percentage points of the sales growth in December.
Grainger serves a diverse set of customer end-markets in the United States. During the quarter, sales to government and commercial customers increased versus the 2008 fourth quarter, while sales to resellers, contractors, manufacturing and retail customers declined.
Throughout 2009, Grainger added products to its already broad offering that will result in having approximately 307,000 in-stock products in the 2010 catalog. Product line expansion contributed $260 million in sales for the fourth quarter versus $185 million in the 2008 fourth quarter. Products added over the last four years resulted in $934 million in sales in 2009.
Also contributing to segment performance in the quarter was ongoing work to integrate Lab Safety Supply with Grainger Industrial Supply. The company still expects this combination to deliver $70-$100 million in incremental revenue and $20-$30 million in cost savings by mid-2010. Through the end of 2009, the integration has generated $44 million of the additional revenue and $22 million of the cost savings.
Operating earnings for the quarter were down 6 percent in the United States, the result of operating expenses declining at a slower rate than sales. The decline in operating expenses was primarily the result of lower payroll-related expenses, reduced commissions and no bonus accruals, partially offset by higher severance and asset impairment charges particularly related to the branch closings. Gross profit margins for the quarter were flat with the prior year.
Canada
Sales for the Acklands-Grainger business in the quarter were up 11 percent versus the 2008 fourth quarter in U.S. dollars. In local currency, sales were down 3 percent for the quarter and on a daily basis were down 7 percent in October, down 8 percent in November and up 7 percent in December. Sales performance in December benefited from some large customer orders and the incremental sales from an acquisition. From a customer sector standpoint, the 3 percent sales decline for the quarter was attributable to continued weakness among heavy manufacturing, contractor and forestry, partially offset by growth among utilities, government and agriculture and mining.
Operating earnings in Canada increased 59 percent in the 2009 fourth quarter and were up 38 percent in local currency. This improvement resulted from the sales increase, a 0.9 percentage point improvement in gross profit margins, and operating expenses which increased at a slower rate than sales. The improvement in gross margins was driven by a year-end inventory pick up primarily attributable to lower than forecasted transportation and product costs. Product costs were lower than expected due in part to favorable foreign exchange. The 2008 fourth quarter included a charge for the bankruptcy of a provider of freight payment services. Excluding these items, operating earnings were up 6 percent in U.S. dollars, and down 7 percent in local currency, versus 2008.
--Highlights --
4Q09 sales of $1.6 billion, up 3 percent
4Q09 EPS of $1.27, down 7 percent, including the following items:
$0.07 in asset impairment charges
$0.05 in severance charges
$732 million in operating cash flow for the year
$507 million returned to shareholders in dividends & share repurchases in 2009
Pretax ROIC* of 24.9 percent versus 29.8 percent in 2008
Visit www.grainger.com/investor to access a podcast describing Grainger's performance in more detail.
CHICAGO, Jan 26, 2010 /PRNewswire via COMTEX/ -- Grainger (NYSE: GWW) today reported sales, earnings and earnings per share for the year ended December 31, 2009. Sales of $6.2 billion were down 9 percent versus 2008. Net earnings of $430 million decreased 9 percent versus $475 million in 2008. Earnings per share of $5.62 decreased 6 percent versus $5.97** in 2008.
"I am very proud of our employees and how they have successfully navigated this company through one of the most difficult economic times in our history," said Chairman, President and Chief Executive Officer Jim Ryan. "The actions we took in 2009 to keep service levels and customer relationships strong are paying off. I am excited about the opportunity we have going forward to gain additional market share and create value for our shareholders by serving as the indispensable MRO partner to businesses and institutions."
*The GAAP financial statements are the source for all amounts used in the Return on Invested Capital (ROIC) calculation. ROIC is calculated using annualized operating earnings based on year-to-date operating earnings divided by a 13 point average for net working assets. Net working assets are working assets minus working liabilities defined as follows: working assets equal total assets less cash equivalents (non operating cash), deferred taxes, and investments in unconsolidated entities, plus the LIFO reserve. Working liabilities are the sum of trade payables, accrued compensation and benefits, accrued contributions to employees' profit sharing plans, and accrued expenses.
** Reported 2008 EPS were $6.04, which was restated after adopting FSP 03-6-1 on January 1, 2009, resulting in a 7 cent reduction in EPS in 2008 and 6 cents in 2009. (See page K-41 of the company's 2008 10-K for additional information).
Ryan added, "We are seeing some initial signs of improvement in the overall economy, although job growth is expected to lag the recovery. Stronger sales growth in December and January give us greater confidence to raise our 2010 sales growth guidance to a range of 6 to 10 percent and our earnings per share guidance to the new range of $5.40 to $5.90. We remain cautiously optimistic about the economy and are executing on the things we can control like our customer service and high product availability. As a result, we are well positioned for continued share gain, particularly as many competitors have been forced to reduce inventories." The company had previously issued 2010 guidance of 4 to 9 percent sales growth and earnings per share of $5.30 to $5.80.
For the 2009 fourth quarter, sales of $1.6 billion increased 3 percent versus the fourth quarter of 2008. There were 64 sales days in both the 2009 and 2008 fourth quarters. Daily sales decreased 3 percent in October, increased 2 percent in November and increased 11 percent in December. The 3 percent increase for the quarter included a 4 percentage point contribution from acquisitions, a 2 percentage point benefit from foreign exchange and a 2 percentage point lift from price increases, partially offset by a 5 percentage point decline in volume. Net earnings of $97 million decreased 10 percent versus $108 million in 2008. Earnings per share of $1.27 decreased 7 percent versus $1.37 in 2008. The effect of adopting FSP 03-6-1 was a 1 cent per share reduction in the fourth quarter of 2009 and 2 cents in the 2008 quarter.
During the quarter, the company continued to lower its cost structure by closing branches and reducing headcount. In total, 12 branches, including 6 Will Call Express locations, were closed. These closures, along with other asset write-downs, resulted in asset impairment charges of $9 million or 7 cents per share. In addition, the company reduced headcount by another 200 positions in the 2009 fourth quarter, incurring $7.5 million or 5 cents per share in severance cost. For the full year 2009, the company eliminated approximately 600positions and incurred $18 million in severance or 11 cents per share.
Effective with the first quarter of 2009, the company has two reportable business segments, the United States and Canada, which represent approximately 98 percent of full year company sales. This reporting structure reflects the integration of Lab Safety Supply with Grainger's U.S. branch-based business. The remaining operating units (Japan, Mexico, India, Puerto Rico, China and Panama) are included in other businesses and are not considered a segment. The company acquired Asia Pacific Brands India Private Limited in June 2009 resulting in the inclusion of the India operations in other businesses in the third quarter. The company also acquired a majority ownership of MonotaRO in September 2009, consolidated this Japanese entity in its balance sheet as of the end of the third quarter and began consolidating its income statement in the fourth quarter.
United States
Sales for the United States segment decreased 2 percent in the 2009 fourth quarter, with daily sales down 7 percent in October, down 3 percent in November and up 5 percent in December. Acquisitions and the timing of the Christmas holiday accounted for 3 percentage points of the sales growth in December.
Grainger serves a diverse set of customer end-markets in the United States. During the quarter, sales to government and commercial customers increased versus the 2008 fourth quarter, while sales to resellers, contractors, manufacturing and retail customers declined.
Throughout 2009, Grainger added products to its already broad offering that will result in having approximately 307,000 in-stock products in the 2010 catalog. Product line expansion contributed $260 million in sales for the fourth quarter versus $185 million in the 2008 fourth quarter. Products added over the last four years resulted in $934 million in sales in 2009.
Also contributing to segment performance in the quarter was ongoing work to integrate Lab Safety Supply with Grainger Industrial Supply. The company still expects this combination to deliver $70-$100 million in incremental revenue and $20-$30 million in cost savings by mid-2010. Through the end of 2009, the integration has generated $44 million of the additional revenue and $22 million of the cost savings.
Operating earnings for the quarter were down 6 percent in the United States, the result of operating expenses declining at a slower rate than sales. The decline in operating expenses was primarily the result of lower payroll-related expenses, reduced commissions and no bonus accruals, partially offset by higher severance and asset impairment charges particularly related to the branch closings. Gross profit margins for the quarter were flat with the prior year.
Canada
Sales for the Acklands-Grainger business in the quarter were up 11 percent versus the 2008 fourth quarter in U.S. dollars. In local currency, sales were down 3 percent for the quarter and on a daily basis were down 7 percent in October, down 8 percent in November and up 7 percent in December. Sales performance in December benefited from some large customer orders and the incremental sales from an acquisition. From a customer sector standpoint, the 3 percent sales decline for the quarter was attributable to continued weakness among heavy manufacturing, contractor and forestry, partially offset by growth among utilities, government and agriculture and mining.
Operating earnings in Canada increased 59 percent in the 2009 fourth quarter and were up 38 percent in local currency. This improvement resulted from the sales increase, a 0.9 percentage point improvement in gross profit margins, and operating expenses which increased at a slower rate than sales. The improvement in gross margins was driven by a year-end inventory pick up primarily attributable to lower than forecasted transportation and product costs. Product costs were lower than expected due in part to favorable foreign exchange. The 2008 fourth quarter included a charge for the bankruptcy of a provider of freight payment services. Excluding these items, operating earnings were up 6 percent in U.S. dollars, and down 7 percent in local currency, versus 2008.
Monday, January 11, 2010
MSC's sales down 11%
Distributor points to strong cash generation, sequential sales growth as evidence of solid performance in first quarter
Victoria Fraza Kickham -- Industrial Distribution, 1/8/2010 1:33:04 PM
Industrial MRO products distributor MSC called its first-quarter results "solid" despite the ongoing difficult business climate. The Melville, N.Y.-based company reported lower sales and earnings compared to the first quarter of 2009, but pointed to strong cash generation performance and sequential average daily sales growth as positive achievements in a challenging market.
MSC's sales fell 11 percent for the quarter to $384.8 million, compared with $433 million a year ago. The distributor's operating income for the quarter was $51 million, compared with $74.4 million a year ago, while net income was $31.4 million compared with $45.1 million in the prior-year period. Earnings per share fell 31 percent to 50 cents, compared to 72 cents a share in the first quarter of 2009.
"The fiscal first quarter produced solid results for MSC," president and CEO David Sandler said in a statement announcing the results. "Despite operating in a business environment that remained difficult, we generated results in line with our expectations and continued to take market share. ..."
MSC posted sequential average daily sales growth of 12 percent from fiscal fourth-quarter levels, and generated $41.7 million in free cash during the period. Looking ahead, MSC said it expects second-quarter earnings per share to be between 43 cents and 47 cents on net sales of between $384 million and $396 million.
Victoria Fraza Kickham -- Industrial Distribution, 1/8/2010 1:33:04 PM
Industrial MRO products distributor MSC called its first-quarter results "solid" despite the ongoing difficult business climate. The Melville, N.Y.-based company reported lower sales and earnings compared to the first quarter of 2009, but pointed to strong cash generation performance and sequential average daily sales growth as positive achievements in a challenging market.
MSC's sales fell 11 percent for the quarter to $384.8 million, compared with $433 million a year ago. The distributor's operating income for the quarter was $51 million, compared with $74.4 million a year ago, while net income was $31.4 million compared with $45.1 million in the prior-year period. Earnings per share fell 31 percent to 50 cents, compared to 72 cents a share in the first quarter of 2009.
"The fiscal first quarter produced solid results for MSC," president and CEO David Sandler said in a statement announcing the results. "Despite operating in a business environment that remained difficult, we generated results in line with our expectations and continued to take market share. ..."
MSC posted sequential average daily sales growth of 12 percent from fiscal fourth-quarter levels, and generated $41.7 million in free cash during the period. Looking ahead, MSC said it expects second-quarter earnings per share to be between 43 cents and 47 cents on net sales of between $384 million and $396 million.
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