W.W. GRAINGER, INC. (GWW) FY 2024 MD&A
This page reproduces the company's own Item 7 MD&A text from the linked SEC filing. It is filer text, not grepcent analysis, scoring, or investment advice.
Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations
Objective
The following Management’s Discussion and Analysis (MD&A) of Financial Condition and Results of Operations is intended to help the reader understand the results of operations and financial condition of W.W. Grainger, Inc. (Grainger or Company) as it is viewed by the Company. The following discussion should be read in conjunction with the Consolidated Financial Statements and accompanying notes included in Part II, Item 8: Financial Statements and Supplementary Data of this Form 10-K. This section of this Form 10-K generally discusses 2024 and 2023 items and year-to-year comparisons between 2024 and 2023. Discussions of 2022 items and year-to-year comparisons between 2023 and 2022 are not included in this Form 10-K, and can be found in MD&A of Financial Condition and Results of Operations in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023.
Percentage figures included in this section have not been calculated on the basis of such rounded figures but on the basis of such amounts prior to rounding. For this reason, percentage amounts in this section may vary slightly from those obtained by performing the same calculations using the figures in the Company's Consolidated Financial Statements or in the associated text.
Overview
W.W. Grainger, Inc. is a broad line distributor of maintenance, repair and operating (MRO) products and services with operations primarily in North America, Japan and the United Kingdom (U.K.). Grainger uses its high-touch solutions and endless assortment businesses to serve customers worldwide, who rely on Grainger for products and services that enable them to run safe, sustainable and productive operations.
Strategic Priorities
The Company’s continued strategic aspiration for 2025 is to relentlessly expand Grainger’s leadership position 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 growth drivers to drive top-line revenue and MRO market outgrowth. The High-Touch Solutions North America (High-Touch Solutions N.A.) segment is focused on three areas: advantaged MRO solutions, differentiated sales and services, and unparalleled customer service. In the Endless Assortment segment, the business is focused on product assortment expansion and innovative customer acquisition and retention capabilities. Additionally, all Grainger businesses are focused on continuously enhancing our operational processes to improve service and cost through customer experience, technology and supply chain infrastructure which ultimately delivers long-term returns for shareholders.
Recent Events
Macroeconomic Conditions
The global economy continues to experience volatility and uncertainty including to the commodity, labor and transportation markets, arising from a combination of geopolitical conditions and events, and various economic and financial factors. These conditions have affected the Company's operations and may continue to affect the Company's business, financial condition and results of operations.
The Company continues to monitor economic conditions in the U.S. and globally, and the impact of macroeconomic pressures, including repercussions from changes in interest rates, currency exchange fluctuations, changing inflationary environment, and a potential recession on the Company’s business, customers, suppliers and other third parties. The Company has implemented strategies designed to mitigate certain adverse effects from the impact of the changing inflationary environment while remaining market price competitive. Historically, the Company’s broad and diverse customer base and the nondiscretionary nature of the Company’s products to its customers has helped to insulate it from the effects of recessionary periods in the industrial MRO market. The full extent and impact of these conditions are uncertain and cannot be predicted at this time.
For further discussion of the Company's risks and uncertainties, see Part I, Item 1A: Risk Factors of this Form 10-K.
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Results of Operations
In this section, Grainger utilizes non-GAAP (as defined below) measures where it believes it will assist users of its financial statements in understanding its business. Non-GAAP measures exclude certain items affecting comparability that can affect the year-over-year assessment of operating results and other one-time items that do not directly reflect ongoing operating results. For further information regarding the Company's non-GAAP measures including reconciliations to the most directly comparable U.S. generally accepted accounting principles (GAAP) measures, see "Non-GAAP Measures."
The following table is included as an aid to understanding the changes in Grainger's Consolidated Statements of Earnings for the twelve months ended December 31, 2024 and 2023 (in millions of dollars).
| For the Years Ended December 31, | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| % of Net Sales | ||||||||||||||||
| 2024 | 2023 | % Change | 2024 | 2023 | ||||||||||||
| Net sales(1) | $ | 17,168 | $ | 16,478 | 4.2 | % | 100.0 | % | 100.0 | % | ||||||
| Cost of goods sold | 10,410 | 9,982 | 4.3 | 60.6 | 60.6 | |||||||||||
| Gross profit | 6,758 | 6,496 | 4.0 | 39.4 | 39.4 | |||||||||||
| Selling, general and administrative expenses | 4,121 | 3,931 | 4.8 | 24.0 | 23.8 | |||||||||||
| Operating earnings | 2,637 | 2,565 | 2.8 | 15.4 | 15.6 | |||||||||||
| Other expense – net | 53 | 65 | (18.5) | 0.3 | 0.4 | |||||||||||
| Income tax provision | 595 | 597 | (0.3) | 3.5 | 3.6 | |||||||||||
| Net earnings | 1,989 | 1,903 | 4.5 | 11.6 | 11.6 | |||||||||||
| Less noncontrolling interest | 80 | 74 | (8.1) | 0.5 | 0.5 | |||||||||||
| Net earnings attributable to W.W. Grainger, Inc. | $ | 1,909 | $ | 1,829 | 4.4 | 11.1 | % | 11.1 | % | |||||||
| Diluted earnings per share: | $ | 38.71 | $ | 36.23 | 6.8 | % | ||||||||||
| (1) For further information regarding the Company's disaggregated revenue, see Note 2 of the Notes to the Consolidated Financial Statements in Part II, Item 8: Financial Statements and Supplementary Data of this Form 10-K. |
The following table is included as an aid to understanding the changes of Grainger's total net sales, daily net sales and daily organic constant currency net sales from the prior period for the twelve months ended December 31, 2024 (in millions of dollars):
| For the Years Ended December 31, | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2024 | % Change(1) | 2023 | % Change(1) | ||||||||||
| Net sales | $ | 17,168 | 4.2 | % | $ | 16,478 | 8.2 | % | |||||
| Daily net sales(2) | $ | 66.5 | 3.4 | % | $ | 65.2 | 8.6 | % | |||||
| Daily, organic constant currency net sales(2) | $ | 67.4 | 4.7 | % | $ | 65.8 | 9.5 | % | |||||
| (1) Calculated on the basis of prior year reported net sales for the years ended December 31, 2024 and 2023. | |||||||||||||
| (2) Daily net sales are adjusted for the difference in U.S. selling days relative to the prior year period. Daily, organic constant currency net sales are also adjusted to exclude the impact on net sales due to year-over-year foreign currency exchange rate fluctuations and the prior year period results of E&R divested in the fourth quarter of 2023. There were 256 and 254 sales days in the full year 2024 and 2023, respectively. For further information regarding the Company's non-GAAP measures, including reconciliations to the most directly comparable GAAP measure, see below "Non-GAAP Measures." |
Net sales of $17,168 million for the year ended December 31, 2024 increased $690 million, or 4%, and on a daily, organic constant currency basis, net sales increased 5% compared to the same period in 2023. Both High-Touch Solutions N.A. and the Endless Assortment segments contributed to sales growth in 2024. For further discussion on the Company's net sales, see the Segment Analysis section below.
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Gross profit of $6,758 million for the year ended December 31, 2024 increased $262 million, or 4%, and gross profit margin of 39.4% was flat compared to the same period in 2023. Both segments contributed to gross profit dollar expansion in 2024. For further discussion on the Company's gross profit, see the Segment Analysis section below.
Selling, general, and administrative (SG&A) expenses of $4,121 million for the year ended December 31, 2024 increased $190 million, or 5%. Adjusted SG&A of $4,105 million increased $200 million, or 5%, compared to the same period in 2023 driven by higher marketing and payroll and benefit expenses. SG&A leverage and adjusted SG&A leverage decreased 20 basis points in 2024.
Operating earnings of $2,637 million for the year ended December 31, 2024 increased $72 million, or 3%. Adjusted operating earnings of $2,653 million increased $62 million, or 2%, compared to the same period in 2023 due to higher gross profit dollars, partially offset by increased SG&A expense. Operating margin and adjusted operating margin decreased 20 basis points in 2024.
Income tax provision of $595 million for the year ended December 31, 2024 decreased $2 million, compared to the same period in 2023. Adjusted income taxes of $599 million decreased $2 million compared to the same period in 2023. Grainger's effective tax rates were 23.0% and 23.9% for the years ended December 31, 2024 and 2023, respectively. The adjusted effective tax rates were 23.0% and 23.8%. The Company's effective tax rate was positively impacted from the expiration of a statute of limitation period in 2024.
Diluted earnings per share was $38.71 for the year ended December 31, 2024, an increase of 7% compared to $36.23 for the same period in 2023. Adjusted diluted earnings per share was $38.96 for the year ended December 31, 2024, an increase of 6% compared to $36.67 for the same period in 2023.
Segment Analysis
In this section, Grainger utilizes non-GAAP measures where it believes it will assist users of its financial statements in understanding its business. For further information regarding the Company's non-GAAP measures including reconciliations to the most directly comparable GAAP measures, see "Non-GAAP Measures." For further segment information, see Note 12 of the Notes to Consolidated Financial Statements in Part II, Item 8: Financial Statements and Supplementary Data of this Form 10-K.
High-Touch Solutions N.A.
The following table shows reported segment results (in millions of dollars):
| For the Years Ended December 31, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 2024 | 2023 | % Change | |||||||||
| Net sales | $ | 13,720 | $ | 13,267 | 3.4 | % | |||||
| Gross profit | 5,741 | 5,546 | 3.5 | ||||||||
| Selling, general and administrative expenses | 3,356 | 3,212 | 4.5 | ||||||||
| Operating earnings | $ | 2,385 | $ | 2,334 | 2.2 | % |
Net sales of $13,720 million for the year ended December 31, 2024 increased $453 million, or 3% compared to the same period in 2023. The increase was primarily due to volume.
Gross profit of $5,741 million for the year ended December 31, 2024 increased $195 million, or 4%, and gross profit margin of 41.8% was flat compared to the same period in 2023.
SG&A of $3,356 million for the year ended December 31, 2024 increased $144 million, or 5%, and adjusted SG&A of $3,341 million increased $155 million, or 5% compared to the same period in 2023. The increase was primarily due to higher marketing and payroll and benefit expenses. SG&A leverage decreased 20 basis points and adjusted SG&A leverage decreased 30 basis points compared to the same period in 2023.
Operating earnings of $2,385 million for the year ended December 31, 2024 increased $51 million, or 2%, and adjusted operating earnings of $2,400 million increased $40 million, or 2% compared to the same period in 2023.
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Endless Assortment
The following table shows reported segment results (in millions of dollars):
| For the Years Ended December 31, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 2024 | 2023 | % Change | |||||||||
| Net sales | $ | 3,134 | $ | 2,916 | 7.5 | % | |||||
| Gross profit | 923 | 864 | 6.8 | ||||||||
| Selling, general and administrative expenses | 663 | 631 | 5.1 | ||||||||
| Operating earnings | $ | 260 | $ | 233 | 11.6 | % |
Net sales of $3,134 million for the year ended December 31, 2024 increased $218 million, or 7%, and on a daily constant currency basis, increased 12% compared to the same period in 2023. The increase was due to sales growth of 12%, driven by customer acquisition for the segment and enterprise customer growth at MonotaRO. Sales growth was partially offset by unfavorable currency exchange of 5% due to changes in the exchange rate between U.S. dollar and the Japanese yen.
Gross profit of $923 million for the year ended December 31, 2024 increased $59 million, or 7%, and gross profit margin of 29.5% decreased 10 basis points compared to the same period in 2023.
SG&A of $663 million for the year ended December 31, 2024 increased $32 million, or 5%, compared to the same period in 2023. The increase was primarily due to higher marketing expenses in 2024. SG&A leverage improved 40 basis points compared to the same period in 2023.
Operating earnings of $260 million for the year ended December 31, 2024 increased $27 million, or 12%, compared to the same period in 2023.
Non-GAAP Measures
Grainger utilizes non-GAAP measures where it believes it will assist users of its financial statements in understanding its business. Non-GAAP measures exclude certain items affecting comparability that can affect the year-over-year assessment of operating results and other one-time items that do not directly reflect ongoing operating results. The Company adjusts its reported net sales when there are differences in the number of U.S. selling days relative to the prior year period and also excludes the impact on reported net sales due to changes in foreign currency exchange rate fluctuations and results of certain divested businesses. Adjusted results including adjusted SG&A, adjusted operating earnings, adjusted net earnings and adjusted diluted EPS exclude certain non-recurring items, including restructuring charges, asset impairments, gains and losses associated with business divestitures and other non-recurring, infrequent or unusual gains and losses from the Company’s most directly comparable reported U.S. generally accepted accounting principles (GAAP) results. The Company believes its non-GAAP measures provide meaningful information to assist investors in understanding financial results and assessing prospects for future performance as they provide a better baseline for analyzing the ongoing performance of its businesses by excluding items that may not be indicative of core operating results. Grainger’s non-GAAP financial measures should be considered in addition to, and not as a replacement for or as a superior measure to its most directly comparable GAAP measures and may not be comparable to similarly titled measures reported by other companies.
Restructuring Actions
In the second quarter of 2024, the Company recorded restructuring charges in SG&A of $15 million in the High-Touch Solutions N.A. segment and $1 million in Grainger's Other businesses. The charges consisted primarily of team member severance and benefit costs. The Company does not expect these actions to have a material effect on its future results of operations.
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Business Divestitures
In the fourth quarter of 2023, Grainger divested E & R Industrial Sales, Inc. (E&R) and recorded a one-time pre-tax loss on the divestiture of $26 million in SG&A. The Company does not expect this business exit to have a material effect on its future results of operations.
The following table provides a reconciliation of reported net sales growth from the prior year period in accordance with GAAP to the Company's non-GAAP measures daily net sales and daily, organic constant currency net sales for the twelve months ended December 31, 2024 (in millions of dollars):
| For the Years Ended December 31, | |||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| High-Touch Solutions N.A. | Endless Assortment | Total Company(1) | |||||||||||||||||||
| 2024 | % Change(2) | 2024 | % Change(2) | 2024 | % Change(2) | ||||||||||||||||
| Reported net sales | $ | 13,720 | 3.4 | % | $ | 3,134 | 7.5 | % | $ | 17,168 | 4.2 | % | |||||||||
| Daily impact(3) | (0.4) | (0.8) | (0.1) | (0.9) | (0.5) | (0.8) | |||||||||||||||
| Daily net sales | 53.2 | 2.6 | 12.1 | 6.6 | 66.5 | 3.4 | |||||||||||||||
| Foreign currency exchange(4) | 0.1 | 0.1 | 0.6 | 5.0 | 0.6 | 0.9 | |||||||||||||||
| Business divestiture(5) | 0.3 | 0.5 | — | — | 0.3 | 0.4 | |||||||||||||||
| Daily, organic constant currency net sales | $ | 53.6 | 3.2 | % | $ | 12.7 | 11.6 | % | $ | 67.4 | 4.7 | % | |||||||||
| 2023 | % Change(2) | 2023 | % Change(2) | 2023 | % Change(2) | ||||||||||||||||
| Reported net sales | $ | 13,267 | 8.9 | % | $ | 2,916 | 4.7 | % | $ | 16,478 | 8.2 | % | |||||||||
| Daily impact(3) | 0.2 | 0.4 | — | 0.4 | 0.3 | 0.4 | |||||||||||||||
| Daily net sales | 52.4 | 9.3 | 11.5 | 5.1 | 65.2 | 8.6 | |||||||||||||||
| Foreign currency exchange(4) | — | — | 0.6 | 5.3 | 0.6 | 0.9 | |||||||||||||||
| Business divestiture(5) | — | 0.1 | — | — | — | — | |||||||||||||||
| Daily, organic constant currency net sales | $ | 52.4 | 9.4 | % | $ | 12.1 | 10.4 | % | 65.8 | 9.5 | % | ||||||||||
| (1) Total Company includes Other. Grainger's businesses reported in Other do not meet the criteria of a reportable segment. | |||||||||||||||||||||
| (2) Compared to net sales in the prior year period. | |||||||||||||||||||||
| (3) Excludes the impact on net sales due to the difference in U.S. selling days relative to the prior year period on a daily basis. There were 256 and 254 sales days in the full year 2024 and 2023, respectively. | |||||||||||||||||||||
| (4) Excludes the impact on net sales due to year-over-year foreign currency exchange rate fluctuations on a daily basis. | |||||||||||||||||||||
| (5) Excludes the net sales results of the divested E&R business in the prior year period on a daily basis. |
The following tables provide a reconciliation of reported SG&A expenses, operating earnings, net earnings attributable to W.W. Grainger, Inc. and diluted earnings per share determined in accordance with GAAP to the Company's non-GAAP measures adjusted SG&A, adjusted operating earnings, adjusted net earnings attributable to W.W. Grainger, Inc. and adjusted diluted earnings per share for the twelve months ended December 31, 2024 and 2023 (in millions of dollars):
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| Twelve Months Ended December 31, 2024 | Reported | Adjustment(1) | Adjusted | % Change Reported(2) | % Change Adjusted(2) | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selling, general and administrative expenses | |||||||||||||||
| High-Touch Solutions N.A. | $ | 3,356 | $ | (15) | $ | 3,341 | |||||||||
| Endless Assortment | 663 | — | 663 | ||||||||||||
| Other(3) | 102 | (1) | 101 | ||||||||||||
| Selling, general and administrative expenses | $ | 4,121 | $ | (16) | $ | 4,105 | 4.8% | 5.1% | |||||||
| Earnings | |||||||||||||||
| High-Touch Solutions N.A. | $ | 2,385 | $ | 15 | $ | 2,400 | |||||||||
| Endless Assortment | 260 | — | 260 | ||||||||||||
| Other(3) | (8) | 1 | (7) | ||||||||||||
| Operating earnings | $ | 2,637 | $ | 16 | $ | 2,653 | 2.8% | 2.4% | |||||||
| Total other expense – net | (53) | — | (53) | ||||||||||||
| Income tax provision(4) | (595) | (4) | (599) | ||||||||||||
| Net earnings | $ | 1,989 | $ | 12 | $ | 2,001 | |||||||||
| Noncontrolling interest | (80) | — | (80) | ||||||||||||
| Net earnings attributable to W.W. Grainger, Inc. | $ | 1,909 | $ | 12 | $ | 1,921 | 4.4% | 3.8% | |||||||
| Diluted earnings per share | $ | 38.71 | $ | 0.25 | $ | 38.96 | 6.8% | 6.2% | |||||||
| Twelve Months Ended December 31, 2023 | Reported | Adjustment(1) | Adjusted | % Change Reported(2) | % Change Adjusted(2) | ||||||||||
| Selling, general and administrative expenses | |||||||||||||||
| High-Touch Solutions N.A. | $ | 3,212 | $ | (26) | $ | 3,186 | |||||||||
| Endless Assortment | 631 | — | 631 | ||||||||||||
| Other(3) | 88 | — | 88 | ||||||||||||
| Selling, general and administrative expenses | $ | 3,931 | $ | (26) | $ | 3,905 | 8.2% | 6.8% | |||||||
| Earnings | |||||||||||||||
| High-Touch Solutions N.A. | $ | 2,334 | $ | 26 | $ | 2,360 | |||||||||
| Endless Assortment | 233 | — | 233 | ||||||||||||
| Other(3) | (2) | — | (2) | ||||||||||||
| Operating earnings | $ | 2,565 | $ | 26 | $ | 2,591 | 15.8% | 18.1% | |||||||
| Total other expense – net | (65) | — | (65) | ||||||||||||
| Income tax provision(5) | (597) | (4) | (601) | ||||||||||||
| Net earnings | $ | 1,903 | $ | 22 | $ | 1,925 | |||||||||
| Noncontrolling interest | (74) | — | (74) | ||||||||||||
| Net earnings attributable to W.W. Grainger, Inc. | $ | 1,829 | $ | 22 | $ | 1,851 | 18.2% | 21.2% | |||||||
| Diluted earnings per share | $ | 36.23 | $ | 0.44 | $ | 36.67 | 20.5% | 23.6% | |||||||
| (1) Reflects restructuring costs incurred in the second quarter of 2024 and the loss on divestiture of E&R in the fourth quarter of 2023. | |||||||||||||||
| (2) Compared to the reported and adjusted results of the prior year period. | |||||||||||||||
| (3) Grainger's businesses reported in Other do not meet the criteria of a reportable segment. | |||||||||||||||
| (4) Reflects a tax benefit related to the restructuring costs incurred in the second quarter of 2024. Grainger's reported and adjusted effective tax rates were 23.0% for the year ended December 31, 2024. | |||||||||||||||
| (5) Reflects a one-time tax benefit recognized upon the divestiture of E&R in the fourth quarter of 2023. Grainger's reported and adjusted effective tax rates were 23.9% and 23.8%, respectively, for the year ended December 31, 2023. |
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Liquidity and Capital Resources
Grainger believes its current balances of cash and cash equivalents, marketable securities and availability under its revolving credit facility will be sufficient to meet its liquidity needs for the next twelve months. The Company expects to continue to invest in its business and return excess cash to shareholders through cash dividends and share repurchases, which it plans to fund through cash flows generated from operations. Grainger also maintains access to capital markets and may issue debt or equity securities from time to time, which may provide an additional source of liquidity.
Sources of Liquidity
Cash and Cash Equivalents
As of December 31, 2024 and 2023, Grainger had cash and cash equivalents of $1,036 million and $660 million, respectively. The increase in cash was primarily due to cash flows from operations and issuance of new long-term debt, partially offset by continued capital expenditure spend and higher volume of share repurchases. The Company had approximately $2.3 billion in available liquidity as of December 31, 2024.
Cash Flows
The following table shows the Company's cash flow activity for the periods presented (in millions of dollars):
| For the Years Ended December 31, | ||||||
|---|---|---|---|---|---|---|
| 2024 | 2023 | |||||
| Total cash provided by (used in): | ||||||
| Operating activities | $ | 2,111 | $ | 2,031 | ||
| Investing activities | (520) | (422) | ||||
| Financing activities | (1,180) | (1,278) | ||||
| Effect of exchange rate changes on cash and cash equivalents | (35) | 4 | ||||
| Increase in cash and cash equivalents | $ | 376 | $ | 335 |
Net cash provided by operating activities was $2,111 million and $2,031 million for the year ended December 31, 2024 and 2023, respectively. The increase was primarily driven by continued growth in net earnings.
Net cash used in investing activities was $520 million and $422 million for the year ended December 31, 2024 and 2023, respectively. The increase reflects the continued investment in U.S. supply chain capacity expansion throughout 2024.
Net cash used in financing activities was $1,180 million and $1,278 million for the year ended December 31, 2024 and 2023, respectively. The decrease in cash used in financing activities was due to the issuance of long-term debt, which includes $500 million in unsecured senior notes partially offset by higher treasury stock repurchases in 2024.
Debt
Grainger maintains a debt ratio and liquidity position that provides flexibility in funding working capital needs and long-term cash requirements. Grainger has various sources of financing available. For further information regarding the Company's debt instruments and available financing sources, see Note 5 of the Notes to the Consolidated Financial Statements in Part II, Item 8: Financial Statements and Supplementary Data of this Form 10-K.
Total debt as a percent of total capitalization was 42.9% and 40.1%, as of December 31, 2024 and 2023, respectively.
Credit Ratings
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 the Company's corporate credit at investment grade.
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The following table summarizes the Company's credit ratings as of December 31, 2024:
| Corporate | Senior Unsecured | Short-term | |||
|---|---|---|---|---|---|
| Moody's | A2 | A2 | P1 | ||
| S&P | A+ | A+ | A1 |
Uses of Liquidity
Internally generated cash flows are the primary source of Grainger's working capital and growth initiatives, including capital expenditures. The Company expects to continue to return excess capital to shareholders through share repurchases and dividends.
Working Capital
Working capital as of December 31, 2024 was $3,282 million, an increase of $204 million compared to $3,078 million as of December 31, 2023. The increase was primarily due to sustained sales growth. As of December 31, 2024 and 2023, the ratio of current assets to current liabilities was 2.9 and 2.8, respectively.
Capital Expenditures
In fiscal 2024, the Company's capital expenditures were $541 million and $445 million for the years ended December 31, 2024 and 2023, respectively. Capital project spending for 2025 is expected to be in the range of $450 and $550 million. This includes continued supply chain capacity expansion and technology enhancements across the Company.
Share Repurchases
For the years ended December 31, 2024 and 2023, Grainger repurchased shares of its common stock in the open market for $1,201 million and $850 million, respectively. Share repurchases are executed at prices the Company determines appropriate subject to various factors, including market conditions and the Company's financial performance and may be affected through accelerated share repurchase programs, open market purchases or privately negotiated transactions, including through Rule 10b5-1 plans. Share repurchases for 2025 are expected to be in the range of $1,150 and $1,250 million.
Dividends
For the years ended December 31, 2024 and 2023, Grainger declared and paid $421 million and $392 million, respectively, in dividends to holders of the Company's common stock.
Commitments and Other Contractual Obligations
The Company's material cash requirements include the following commitments and other contractual obligations.
Debt
As of December 31, 2024, the Company had outstanding debt obligations with varying maturities for an aggregate principal amount of $2,803 million, with $502 million payable within 12 months. Total future interest payments associated with the Company's outstanding debt obligations was $1,855 million, with $101 million payable within 12 months.
Purchase Obligations
Grainger had purchase obligations of approximately $1,687 million as of December 31, 2024, which includes approximately $1,021 million payable within 12 months. Grainger's purchase obligations primarily include commitments to purchase inventory, uncompleted additions to property, buildings and equipment and other goods and services. Purchase obligations are made in the normal course of business to meet operating needs and are primarily noncancelable.
Leases
The Company has lease arrangements for certain properties, buildings and equipment (including branches, warehouses, DCs and office space). As of December 31, 2024, the Company had fixed operating lease payment obligations of $437 million, with $91 million payable within 12 months.
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Critical Accounting Estimates
The preparation of Grainger’s Consolidated Financial Statements and accompanying notes are in conformity with GAAP and the Company’s discussion and analysis of its financial condition and operating results require the Company’s management to make assumptions and estimates that affect the reported amounts. The Company considers an accounting policy to be a critical estimate if: (1) it involves assumptions that are uncertain when judgment was applied, and (2) changes in the estimate assumptions, or selection of a different estimate methodology, could have a significant impact on Grainger’s consolidated financial position and results. While the Company believes the assumptions and estimates used are reasonable, the Company’s management bases its estimates on historical experience and on various other assumptions it believes to be reasonable under the circumstances. Note 1 of the Notes to Consolidated Financial Statements in Part II, Item 8: Financial Statements and Supplementary Data of this Form 10-K describes the significant accounting policies and methods used in the preparation of the Company’s Consolidated Financial Statements.
Inventories
Company inventories primarily consist of merchandise purchased for resale and are valued at the lower of cost or market value. The majority of the Company’s inventory is accounted for using the last-in, first-out (LIFO) method. Market value is based on an analysis of inventory trends including, but not limited to, reviews of inventory levels, sales and cost information and on-hand quantities relative to the sales history for the product and shelf-life. The Company's methodology for estimating whether adjustments are necessary is continually evaluated for factors including significant changes in product demand, liquidation or disposition history values and market conditions such as inflation and other acquisition costs, including freight and duties. If business or economic conditions change, estimates and assumptions may be adjusted as deemed appropriate.
Goodwill
The Company evaluates goodwill for impairment annually during the fourth quarter and more frequently if impairment indicators exist. The fair value of reporting units is calculated primarily using the discounted cash flow method and utilizing value indicators from a market approach to evaluate the reasonableness of the resulting fair values.
The estimates used to calculate the fair values of reporting units involve the use of significant assumptions, estimates and judgments and changes from year to year based on operating results, market conditions, macroeconomic developments and other factors. Changes in these estimates and assumptions could materially affect the determination of fair value and impairment for each reporting unit. For further information on the Company's goodwill, see Note 4 of the Notes to Consolidated Financial Statements in Part II, Item 8: Financial Statements and Supplementary Data of this Form 10-K.
Contingencies and Legal Matters
The Company is subject to various claims and legal proceedings that arise in the ordinary course of business, the outcomes of which are inherently uncertain. The Company accrues for costs relating to litigation claims and other contingent matters when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated. For further information on the Company's contingencies and legal matters, see Note 13 of the Notes to Consolidated Financial Statements in Part II, Item 8: Financial Statements and Supplementary Data of this Form 10-K.
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