Grainger annual sales down 4%

W.W. Grainger, Chicago, IL, reported sales for the year ended Dec. 31, 2001 decreased 4 percent to $4.8 billion versus $5.0 billion in 2000. Net earnings for the year were down 9.5 percent to $174.5 million. Sales in the 2001 fourth quarter were down 8 percent compared to the prior year fourth quarter. Net earnings of $61.5 million were up 28 percent over the same quarter in 2000.

The full year results include non-recurring, after-tax charges of $36.6 million. Based on current projections, the company reduced its non-recurring charges, originally recognized in the second quarter of 2001, by $1.4 million after-tax. Excluding this adjustment, net earnings for the quarter were $60.1 million versus $47.9 million in the 2000 fourth quarter, a 25 percent increase.

Included in 2000 earnings was an after-tax gain of $17.9 million related to sales of investment securities. Excluding unusual items in both 2001 and 2000, net earnings were $211.2 million in 2001 versus $175.0 million in 2000, an increase of 21 percent, and earnings per share were $2.23 versus $1.86, a 20 percent increase.

'Although the recession in North America caused a decline in sales, we benefited from the actions taken throughout 2001 to create a more focused and cost effective organization,' said Grainger's Chairman and CEO, Richard L. Keyser. 'Cash flow was particularly strong in 2001, allowing us to continue investing in the business and buy back 1.8 million shares of stock.

Segment performance

In the company's branch-based distribution businesses, daily sales in the U.S. declined 11 percent for the fourth quarter, and 5 percent for the full year. Sales to government accounts increased 14%, while other customer categories declined.

Daily sales in Canada decreased 8 percent during the quarter including the effect of an unfavorable Canadian exchange rate. In local currency, this business had a decrease of 5 percent due to the weakness in the Canadian economy, partially offset by improved sales to the oil and gas industry.

The Mexican operation experienced a 23 percent decline in daily sales. The company attributed the decrease to continued weakness in the automotive and electronics manufacturing industries, deterioration in the Mexican economy, and the U.S. recession.
For the full year, the branch-based operations had sales of $4.25 billion, down 5 percent from $4.48 billion in 2000. For the fourth quarter, sales were $986.5 million, down 9 percent from $1.09 billion in the same period last year.

Keyser said, 'I'm pleased that despite the weak economic environment our digital channels continued to show an increase in sales. For example, Grainger.com processed sales of $86 million, a 19 percent increase versus the 2000 fourth quarter, and $333 million for the full year, an increase of 25 percent.'

The weaker sales environment for the branch-based businesses segment was the primary cause for the 7 percent decline in segment operating earnings in the quarter. 'Nevertheless, improved gross profit margins helped boost operating margins to 9.1 percent for 2001, 23 basis points better than last year,' said Keyser.

Lab Safety Supply reported sales of $324.8 million for the full year, down 2 percent from $330.1 million in 2000. Fourth quarter sales were $74.6 million, down 2 percent from $76.5 million in the fourth quarter of 2000. Lab Safety Supply's sales results included Ben Meadows, an acquisition made in the 2001 first quarter. Lab Safety Supply's 15-percent decline in operating earnings primarily resulted from weak sales in the nation's industrial sector and higher operating expenses from the expanded use of specialty catalogs.

Sales for the Other Businesses segment, which is primarily its integrated supply unit, were $190.8 million, up 5 percent from $180.9 million in 2000. Fourth quarter sales in this unit were $52.5 million for the year, up 11 percent from $47.4 million in 2000. Business unit sales include product sales and management fees. The Other Businesses segment was profitable in the quarter and for the full year versus a loss in the 2000 periods as the company trimmed headcount and eliminated marginal contracts.