10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to _______

Commission file number 1-5684

Grainger W W Inc (chartered name: 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)
Not Applicable
(Former name, former address and former fiscal year; if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
Common Stock	GWW	New York Stock Exchange

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 ☒  No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).  Yes ☒  No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer ☒  Accelerated Filer ☐   Non-accelerated Filer ☐   Smaller Reporting Company ☐

Emerging Growth Company ☐

1

 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 13(a) 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 ☒

There were 54,571,141 shares of the Company’s Common Stock, par value $0.50, outstanding as of June 30, 2019.

2

	TABLE OF CONTENTS
		Page No.
	PART I FINANCIAL INFORMATION
Item 1:	Financial Statements (Unaudited)
	Condensed Consolidated Statements of Earnings      for the Three and Six Months Ended June 30, 2019 and 2018	4
	Condensed Consolidated Statements of Comprehensive     Earnings for the Three and Six Months Ended June 30, 2019 and 2018	5
	Condensed Consolidated Balance Sheets     as of June 30, 2019 and December 31, 2018	6
	Condensed Consolidated Statements of Cash Flows     for the Six Months Ended June 30, 2019 and 2018	7
	Condensed Consolidated Statements of Shareholders' Equity for the Three and Six Months Ended June 30, 2019 and 2018	8
	Notes to Condensed Consolidated Financial Statements	10
Item 2:	Management's Discussion and Analysis of Financial     Condition and Results of Operations	18
Item 3:	Quantitative and Qualitative Disclosures About Market Risk	28
Item 4:	Controls and Procedures	28
	PART II OTHER INFORMATION	28
Item 1:	Legal Proceedings	28
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	28
Item 6:	Exhibits	29
Signatures		30
EXHIBITS

3

PART I – FINANCIAL INFORMATION

Item 1:  Financial Statements

W.W. Grainger, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(In millions of dollars, except for share and per share amounts)

(Unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
Net sales	$	2,893		$	2,861		$	5,692		$	5,627
Cost of goods sold	1,772			1,750			3,476			3,424
Gross profit	1,121			1,111			2,216			2,203
Selling, general and administrative expenses	741			767			1,473			1,524
Operating earnings	380			344			743			679
Other income (expense):
Interest income	1			2			3			2
Interest expense	(22		)	(23		)	(43		)	(48		)
Other, net	7			1			14			(2		)
Total other expense, net	(14		)	(20		)	(26		)	(48		)
Earnings before income taxes	366			324			717			631
Income taxes	94			76			183			142
Net earnings	272			248			534			489
Less: Net earnings attributable to noncontrolling interest	12			11			21			20
Net earnings attributable to W.W. Grainger, Inc.	$	260		$	237		$	513		$	469
Earnings per share:
Basic	$	4.69		$	4.19		$	9.19		$	8.29
Diluted	$	4.67		$	4.16		$	9.14		$	8.23
Weighted average number of shares outstanding:
Basic	55,139,799			56,109,809			55,389,463			56,086,592
Diluted	55,378,936			56,552,644			55,661,005			56,478,645
Cash dividends paid per share	$	1.44		$	1.36		$	2.80		$	2.64

The accompanying notes are an integral part of these financial statements.

4

W.W. Grainger, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS

(In millions of dollars)

(Unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
Net earnings	$	272		$	248		534			489
Other comprehensive earnings (losses):
Foreign currency translation adjustments	19			(49		)	23			(25		)
Postretirement benefit plan reclassification, net of tax benefit of $1, $1, $2 and $2, respectively	(2		)	(3		)	(5		)	(6		)
Total other comprehensive earnings	17			(52		)	18			(31		)
Comprehensive earnings, net of tax	289			196			552			458
Less: Comprehensive earnings (losses) attributable to noncontrolling interest
Net earnings	12			11			21			20
Foreign currency translation adjustments	5			(7		)	3			2
Comprehensive earnings attributable to noncontrolling interest	17			4			24			22
Comprehensive earnings attributable to W.W. Grainger, Inc.	$	272		$	192		$	528		$	436

The accompanying notes are an integral part of these financial statements.

5

W.W. Grainger, Inc. and Subsidiaries

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions of dollars, except for share and per share amounts)

	As of
ASSETS	(Unaudited) June 30, 2019			December 31, 2018
CURRENT ASSETS
Cash and cash equivalents	$	315		$	538
Accounts receivable (less allowances for doubtful
accounts of $25 and $25, respectively)	1,503			1,385
Inventories	1,535			1,541
Prepaid expenses and other assets	92			83
Prepaid income taxes	11			10
Total current assets	3,456			3,557
PROPERTY, BUILDINGS AND EQUIPMENT, NET	1,380			1,352
DEFERRED INCOME TAXES	13			12
GOODWILL	429			424
INTANGIBLES, NET	437			460
OTHER ASSETS	277			68
TOTAL ASSETS	$	5,992		$	5,873
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term debt	$	51		$	49
Current maturities of long-term debt	81			81
Trade accounts payable	780			678
Accrued compensation and benefits	183			262
Accrued contributions to employees' profit sharing plans	46			133
Accrued expenses	288			269
Income taxes payable	23			29
Total current liabilities	1,452			1,501
LONG-TERM DEBT (less current maturities)	2,080			2,090
DEFERRED INCOME TAXES AND TAX UNCERTAINTIES	115			103
OTHER NON-CURRENT LIABILITIES	231			86
SHAREHOLDERS' EQUITY
Cumulative preferred stock – $5 par value – 12,000,000 shares authorized; none issued nor outstanding	—			—
Common stock – $0.50 par value – 300,000,000 shares authorized; 109,659,219 shares issued	55			55
Additional contributed capital	1,152			1,134
Retained earnings	8,226			7,869
Accumulated other comprehensive losses	(156		)	(171		)
Treasury stock, at cost – 55,088,078 and 53,796,859 shares, respectively	(7,354		)	(6,966		)
Total W.W. Grainger, Inc. shareholders’ equity	1,923			1,921
Noncontrolling interest	191			172
Total shareholders' equity	2,114			2,093
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	5,992		$	5,873

The accompanying notes are an integral part of these financial statements.

6

W.W. Grainger, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions of dollars)

(Unaudited)

	Six Months Ended
	June 30,
	2019			2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings	$	534		$	489
Provision for losses on accounts receivable	6			4
Deferred income taxes and tax uncertainties	12			3
Depreciation and amortization	113			128
Net gains from sales of assets, net of write-offs	(5		)	(14		)
Stock-based compensation	23			28
Losses from equity method investment	—			15
Subtotal	149			164
Change in operating assets and liabilities:
Accounts receivable	(118		)	(148		)
Inventories	12			(45		)
Prepaid expenses and other assets	(22		)	(25		)
Trade accounts payable	100			5
Accrued liabilities	(187		)	(60		)
Income taxes payable, net	(7		)	28
Other non-current liabilities	(11		)	(13		)
Subtotal	(233		)	(258		)
Net cash provided by operating activities	450			395
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, buildings and equipment and intangibles	(107		)	(103		)
Proceeds from sales of assets	14			43
Equity method proceeds (investment)	2			(14		)
Net cash used in investing activities	(91		)	(74		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under lines of credit	19			22
Payments against lines of credit	(16		)	(22		)
Payments of long-term debt	(34		)	(36		)
Proceeds from stock options exercised	16			87
Payments for employee taxes withheld from stock awards	(10		)	(29		)
Purchase of treasury stock	(400		)	(201		)
Cash dividends paid	(163		)	(155		)
Other, net	2			3
Net cash used in financing activities	(586		)	(331		)
Exchange rate effect on cash and cash equivalents	4			(4		)
NET CHANGE IN CASH AND CASH EQUIVALENTS	(223		)	(14		)
Cash and cash equivalents at beginning of year	538			327
Cash and cash equivalents at end of period	$	315		$	313

The accompanying notes are an integral part of these financial statements.

7

W.W. Grainger, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(In millions of dollars, except for per share amounts)

(Unaudited)

	Common Stock		Additional Contributed Capital		Retained Earnings			Accumulated Other Comprehensive Earnings (Losses)			Treasury Stock			Noncontrolling Interest			Total
Balance at January 1, 2018	$	55	$	1,041	$	7,405		$	(135	)	$	(6,676	)	$	138		$	1,828
Stock based compensation	—		24		—			—			44			—			68
Purchase of treasury stock	—		—		—			—			(160		)	—			(160		)
Net earnings	—		—		232			—			—			9			241
Other comprehensive earnings	—		—		—			12			—			9			21
Cash dividends paid ($1.28 per share)	—		—		(73		)	—			—			—			(73		)
Balance at March 31, 2018	$	55	$	1,065	$	7,564		$	(123	)	$	(6,792	)	$	156		$	1,925
Stock based compensation	—		14		—			—			23			—			37
Purchase of treasury stock	—		—		—			—			(28		)	—			(28		)
Net earnings	—		—		237			—			—			11			248
Other comprehensive earnings	—		—		—			(45		)	—			(7		)	(52		)
Capital contribution	—		—		—			—			—			2			2
Cash dividends paid ($1.36 per share)	—		—		(76		)	—			—			(6		)	(82		)
Balance at June 30, 2018	$	55	$	1,079	$	7,725		$	(168	)	$	(6,797	)	$	156		$	2,050

8

W.W. Grainger, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(In millions of dollars, except for per share amounts)

(Unaudited)

	Common Stock		Additional Contributed Capital		Retained Earnings			Accumulated Other Comprehensive Earnings (Losses)			Treasury Stock			Noncontrolling Interest			Total
Balance at January 1, 2019	$	55	$	1,134	$	7,869		$	(171	)	$	(6,966	)	$	172		$	2,093
Stock based compensation	—		3		—			—			3			—			6
Purchase of treasury stock	—		—		—			—			(135		)	—			(135		)
Net earnings	—		—		253			—			—			9			262
Other comprehensive (losses) earnings	—		—		—			3			—			(2		)	1
Capital contribution	—		—		—			—			—			2			2
Cash dividends paid ($1.36 per share)	—		—		(77		)	—			—			—			(77		)
Balance at March 31, 2019	$	55	$	1,137	$	8,045		$	(168	)	$	(7,098	)	$	181		$	2,152
Stock based compensation	—		15		—			—			9			—			24
Purchase of treasury stock	—		—		—			—			(265		)	—			(265		)
Net earnings	—		—		260			—			—			12			272
Other comprehensive (losses) earnings	—		—		—			12			—			5			17
Cash dividends paid ($1.44 per share)	—		—		(79		)	—			—			(7		)	(86		)
Balance at June 30, 2019	$	55	$	1,152	$	8,226		$	(156	)	$	(7,354	)	$	191		$	2,114

9

W.W. Grainger, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.    BACKGROUND AND BASIS OF PRESENTATION

W.W. Grainger, Inc. is a broad line, business-to-business distributor of maintenance, repair and operating (MRO) products and services with operations primarily in North America, Europe and Japan. In this report, the words “Company” or “Grainger” 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.

The Condensed Consolidated Financial Statements (Financial Statements) of the Company and the related notes are unaudited and should be read in conjunction with the consolidated financial statements and related notes for the year ended December 31, 2018 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) on February 28, 2019.

The Condensed Consolidated Balance Sheet as of December 31, 2018 has been derived from the audited consolidated financial statements at that date, but does not include all of the disclosures required by accounting principles generally accepted in the U.S. for complete financial statements.

The unaudited financial information reflects all adjustments (primarily consisting of normal recurring adjustments) which, in the opinion of management, are necessary for a fair presentation of the statements contained in this report.

2.    NEW ACCOUNTING STANDARDS

In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments as modified by subsequently issued ASUs 2018-19, 2019-04 and 2019-05. This ASU requires estimating all expected credit losses for certain types of financial instruments, including trade receivables, held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. The effective date of this ASU is for fiscal years and interim periods beginning after December 15, 2019 and the Company plans to adopt this ASU prospectively. The Company is evaluating the impact of this ASU and does not expect a material impact to the Company's Financial Statements.

On January 1, 2019, the Company adopted ASU 2016-02, Leases as modified subsequently by ASUs 2018-01, 2018-10, 2018-11, 2018-20 and 2019-01(Topic 842). The core principle of these ASUs is to improve transparency and comparability related to the accounting and reporting of leasing arrangements, including balance sheet recognition for assets and liabilities associated with rights and obligations created by leases with terms greater than twelve months, among other changes.

The Company utilized the simplified modified retrospective transition method that allowed for a cumulative-effect adjustment in the period of adoption, and did not restate prior periods. Additionally, the Company elected the practical expedients package permitted under the transition guidance. Adoption of the new standard resulted in the recording right of use (ROU) assets and lease liabilities of approximately $208 million and $205 million, respectively as of January 1, 2019 related to operating and finance leases. Adoption of the standard did not materially impact the Company’s Condensed Consolidated Statements of Earnings, Comprehensive Earnings and Statements of Cash Flows. See Note 5 to the Financial Statements.

10

W.W. Grainger, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

3.    REVENUE

Company revenue is primarily comprised of MRO product sales and related activities, such as freight and services. Total service revenue is not material and accounted for approximately 1% of the Company's revenue for the three and six months ended June 30, 2019 and 2018, respectively.

Grainger serves a large number of customers in diverse industries, which are subject to different economic and market specific factors. The Company's presentation of revenue by industry most reasonably depicts how the nature, amount, timing and uncertainty of Company revenue and cash flows are affected by economic and market specific factors. The following table presents the Company's percentage of revenue by reportable segment and by major customer industry:

	Three Months Ended June 30,
	2019						2018
	U.S.		Canada		Total Company (2)		U.S.		Canada		Total Company (2)
Government	19	%	6	%	14	%	19	%	5	%	14	%
Heavy Manufacturing	19	%	20	%	17	%	19	%	21	%	18	%
Light Manufacturing	13	%	6	%	11	%	13	%	6	%	11	%
Transportation	5	%	8	%	5	%	5	%	7	%	5	%
Commercial	17	%	9	%	13	%	16	%	10	%	13	%
Retail/Wholesale	8	%	4	%	7	%	8	%	4	%	7	%
Contractors	10	%	11	%	8	%	10	%	11	%	8	%
Natural Resources	3	%	32	%	4	%	3	%	33	%	4	%
Other (1)	6	%	4	%	21	%	7	%	3	%	20	%
Total net sales to external customers	100	%	100	%	100	%	100	%	100	%	100	%
Percent of Total Company Revenue	72	%	5	%	100	%	72	%	6	%	100	%

	Six Months Ended June 30,
	2019						2018
	U.S.		Canada		Total Company (2)		U.S.		Canada		Total Company (2)
Government	18	%	6	%	13	%	18	%	6	%	14	%
Heavy Manufacturing	19	%	21	%	18	%	20	%	20	%	18	%
Light Manufacturing	13	%	6	%	11	%	13	%	5	%	11	%
Transportation	6	%	8	%	5	%	5	%	8	%	5	%
Commercial	17	%	9	%	13	%	16	%	10	%	13	%
Retail/Wholesale	8	%	4	%	7	%	8	%	4	%	7	%
Contractors	10	%	10	%	8	%	10	%	12	%	8	%
Natural Resources	3	%	32	%	4	%	3	%	32	%	4	%
Other (1)	6	%	4	%	21	%	7	%	3	%	20	%
Total net sales to external customers	100	%	100	%	100	%	100	%	100	%	100	%
Percent of Total Company Revenue	72	%	5	%	100	%	72	%	6	%	100	%

(1) Other category primarily includes revenue from individual customers not aligned to major industry segment, including small businesses and consumers and intersegment net sales.

(2) Total Company includes other businesses, which include the Company's endless assortment businesses and operations in Europe, Asia and Latin America and account for approximately 23% of revenue for the three and six months ended June 30, 2019 and 22% of revenue for the three and six months ended June 30 2018.

11

W.W. Grainger, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Total accrued sales returns were approximately $27 million and $29 million as of June 30, 2019 and December 31, 2018, respectively and are reported as a reduction of Accounts receivable. Total accrued sales incentives were approximately $54 million and $62 million as of June 30, 2019 and December 31, 2018, respectively and are reported as part of Accrued expenses. The Company did not have any material unsatisfied performance obligations, contract assets or liabilities as of June 30, 2019 and December 31, 2018.

4.    PROPERTY, BUILDINGS AND EQUIPMENT

Property, buildings and equipment consisted of the following (in millions of dollars):

	As of
	June 30, 2019		December 31, 2018
Land	$	318	$	318
Building, structures and improvements	1,332		1,338
Furniture, fixtures, machinery and equipment	1,774		1,785
Property, buildings and equipment	$	3,424	$	3,441
Less: Accumulated depreciation and amortization	2,044		2,089
Property, buildings and equipment, net	$	1,380	$	1,352

5. LEASES

The Company leases certain properties and buildings (including branches, warehouses, distribution centers and office space) and equipment under various arrangements which provide the right to use the underlying asset and require lease payments for the lease term. The Company’s lease portfolio consists mainly of operating leases which expire at various dates through 2036. Finance leases and service contracts with lease arrangements are not material and the following disclosures pertain to the Company’s operating leases.

Many of the property and building lease agreements obligate the Company to pay real estate taxes, insurance and certain maintenance costs (hereinafter referred to as non-lease components). Certain of the Company’s lease arrangements contain renewal provisions from 1 to 30 years, exercisable at the Company's option. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The Company determines if an arrangement is an operating lease at inception. Leases with an initial term of 12 months or less are not recorded on the balance sheet. All other leases are recorded on the balance sheet with ROU assets representing the right to use the underlying asset for the lease term and lease liabilities representing the obligation to make lease payments arising from the lease.

ROU assets and lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term and include options to extend or terminate the lease when they are reasonably certain to be exercised. The present value of lease payments is determined primarily using the incremental borrowing rate based on the information available at lease commencement date. Lease agreements with lease and non-lease components are generally accounted for as a single lease component. The Company’s operating lease expense is recognized on a straight-line basis over the lease term and is recorded in Selling, general and administrative expenses (SG&A).

12

W.W. Grainger, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Information related to operating leases is as follows (in millions of dollars):

	As of June 30, 2019
ROU Assets
Other assets	$	200
Operating lease liabilities
Accrued expenses	52
Other non-current liabilities	150
Total operating lease liabilities	$	202

	Six Months Ended June 30, 2019
Weighted average remaining lease term	7 years
Weighted average incremental borrowing rate	2.4		%
Cash paid for operating leases	$	32
ROU assets obtained in exchange for operating lease obligations	8

Rent expense included in SG&A for the three and six months ended June 30, 2019, was $16 million and $35 million, respectively.

Maturities of operating lease liabilities were as follows as of June 30, 2019 (in millions of dollars):

Year	Maturity of operating lease liabilities
2019 (excluding six months)	$	30
2020	52
2021	40
2022	31
2023	21
Thereafter	36
Total lease payments	210
Less interest	(8		)
Present value of lease liabilities	$	202

As of June 30, 2019, the Company's future operating lease obligations that have not yet commenced are immaterial.

13

W.W. Grainger, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

6.    GOODWILL AND INTANGIBLE ASSETS

The balances and changes in the carrying amount of Goodwill by segment are as follows (in millions of dollars):

	United States		Canada			Other businesses			Total
Balance at January 1, 2018	$	192	$	130		$	222		$	544
Impairment	—		—			(105		)	(105		)
Translation	—		(10		)	(5		)	(15		)
Balance at December 31, 2018	192		120			112			424
Translation	—		5			—			5
Balance at June 30, 2019	$	192	$	125		$	112		$	429

The cumulative goodwill impairment charges by segment as of June 30, 2019 and December 31, 2018 are as follows (in millions of dollars):

	United States		Canada		Other businesses		Total
Cumulative goodwill impairment charges	$	24	$	32	$	176	$	232

The balances and changes in Intangible assets, net are as follows (in millions of dollars):

		June 30, 2019						December 31, 2018
	Weighted average life	Gross carrying amount		Accumulated amortization		Net carrying amount		Gross carrying amount		Accumulated amortization		Net carrying amount
Customer lists and relationships	14.4 years	$	397	$	209	$	188	$	410	$	204	$	206
Trademarks, trade names and other	13.8 years	37		20		17		24		15		9
Non-amortized trade names and other		99		—		99		99		—		99
Capitalized software	4.3 years	605		472		133		657		511		146
Total intangible assets	8.8 years	$	1,138	$	701	$	437	$	1,190	$	730	$	460

Grainger tests reporting units' goodwill and intangible assets for impairment annually during the fourth quarter and more frequently if impairment indicators exist. Accordingly, Grainger periodically performs qualitative assessments of significant events and circumstances such as reporting units' historical and current results, assumptions regarding future performance, strategic initiatives and overall economic factors to determine the existence of impairment indicators and assess if it is more likely than not that the fair value of reporting units or intangible assets is less than their carrying value and if a quantitative impairment test is necessary.

Grainger's qualitative assessment for the six months ended June 30, 2019 did not indicate the presence of any impairment triggering events. Changes in assumptions regarding future performance, as well as the ability to execute on growth initiatives and productivity improvements, may have a significant impact on future cash flows. Likewise, an unfavorable economic environment and changes in market conditions, discount rates or other factors may result in future impairments of goodwill and intangible assets.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

7.     RESTRUCTURING

The Company has substantially completed its various restructuring actions initiated during 2017 and 2018. During the three and six month ended June 30, 2019, the restructuring activity was not material. In the three and six months ended June 30, 2018, the Company recorded approximately $15 million and $23 million, respectively of restructuring costs. These charges primarily consisted of involuntary employee termination costs in Canada and the U.S., net of gains from the sales of branches and are included in SG&A. The reserve balance as of June 30, 2019 and December 31, 2018 was approximately $24 million and $47 million, respectively, and is primarily included in Accrued compensation and benefits. The majority of the remaining reserve is expected to be paid during 2019.

8.    SHORT-TERM AND LONG-TERM DEBT

Short-term debt consisted of outstanding lines of credit of $51 million and $49 million at June 30, 2019 and December 31, 2018, respectively. Long-term debt consisted of the following (in millions of dollars):

	As of June 30, 2019						As of December 31, 2018
	Carrying Value			Fair Value			Carrying Value			Fair Value
4.60% senior notes due 2045	$	1,000		$	1,112		$	1,000		$	1,026
3.75% senior notes due 2046	400			393			400			357
4.20% senior notes due 2047	400			425			400			383
British pound term loan	167			167			174			174
Euro term loan	125			125			126			126
Canadian dollar revolving credit facility	46			46			44			44
Other	45			45			49			49
Subtotal	2,183			2,313			2,193			2,159
Less current maturities	(81		)	(81		)	(81		)	(81		)
Debt issuance costs and discounts, net of amortization	(22		)	(22		)	(22		)	(22		)
Long-term debt (less current maturities)	$	2,080		$	2,210		$	2,090		$	2,056

The estimated fair value of the Company’s senior notes was based on available external pricing data and current market rates for similar debt instruments, among other factors, which are classified as level 2 inputs within the fair value hierarchy. The carrying value of other long-term debt approximates fair value due to their variable interest rates.

9.    SEGMENT INFORMATION

Grainger's two reportable segments are the U.S. and Canada. The U.S. reportable segment reflects the results of Grainger's U.S. businesses. The Canada reportable segment reflects the results of Acklands-Grainger, Inc. and its subsidiaries. Other businesses include the endless assortment businesses, Zoro Tools, Inc. (Zoro) in the U.S. and MonotaRO Co. (MonotaRO) in Japan, and smaller high-touch solutions businesses in Europe, Asia and Mexico. These businesses individually do not meet the criteria of a reportable segment.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Following is a summary of segment results (in millions of dollars):

	Three Months Ended June 30, 2019
	U.S.			Canada		Total Reportable Segments			Other businesses		Total
Total net sales	$	2,222		$	135	$	2,357		$	663	$	3,020
Intersegment net sales	(127		)	—		(127		)	—		(127		)
Net sales to external customers	$	2,095		$	135	$	2,230		$	663	$	2,893
Segment operating earnings	$	381		$	1	$	382		$	27	$	409

	Three Months Ended June 30, 2018
	U.S.			Canada			Total Reportable Segments			Other businesses		Total
Total net sales	$	2,175		$	177		$	2,352		$	622	$	2,974
Intersegment net sales	(113		)	—			(113		)	—		(113		)
Net sales to external customers	$	2,062		$	177		$	2,239		$	622	$	2,861
Segment operating earnings	$	349		$	(14	)	$	335		$	41	$	376

	Six Months Ended June 30, 2019
	U.S.			Canada			Total Reportable Segments			Other businesses			Total
Total net sales	$	4,371		$	271		$	4,642		$	1,296		$	5,938
Intersegment net sales	(245		)	—			(245		)	(1		)	(246		)
Net sales to external customers	$	4,126		$	271		$	4,397		$	1,295		$	5,692
Segment operating earnings	$	745		$	(4	)	$	741		$	57		$	798

	Six Months Ended June 30, 2018
	U.S.			Canada			Total Reportable Segments			Other businesses			Total
Total net sales	$	4,283		$	359		$	4,642		$	1,210		$	5,852
Intersegment net sales	(223		)	—			(223		)	(2		)	(225		)
Net sales to external customers	$	4,060		$	359		$	4,419		$	1,208		$	5,627
Segment operating earnings	$	706		$	(34	)	$	672		$	77		$	749

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Following are reconciliations of segment information with the consolidated totals per the financial statements (in millions of dollars):

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Operating earnings:
Total operating earnings for reportable segments	$	382		$	335		$	741		$	672
Other businesses	27			41			57			77
Unallocated expenses	(29		)	(32		)	(55		)	(70		)
Total consolidated operating earnings	$	380		$	344		$	743		$	679
	As of
	June 30, 2019			December 31, 2018
Assets:
United States	$	2,625		$	2,496
Canada	172			188
Assets for reportable segments	2,797			2,684
Other current and noncurrent assets	3,087			2,879
Unallocated assets	108			310
Total consolidated assets	$	5,992		$	5,873

The Company is a broad-line distributor of MRO products and services. Products are regularly added and deleted from the Company's inventory. Accordingly, it would be impractical to provide sales information by product category due to the way the business is managed.

Unallocated expenses primarily relate to the Company's headquarters support services and intercompany eliminations, which are not part of any reportable segment. Unallocated expenses include supply chain, product management and procurement, finance, communications, human resources, information systems, legal and compliance, internal audit and real estate.

Assets for reportable segments include net accounts receivable and first-in, first-out inventory which are reported to the Company's Chief Operating Decision Maker. Other current and non-current assets include all other assets of the reportable segments. Unallocated assets are primarily comprised of non-operating cash and cash equivalents, property, buildings and equipment, net, and certain prepaid expenses related to the Company's headquarters support services.

10.    CONTINGENCIES AND LEGAL MATTERS

From time to time the Company is involved in various legal and administrative proceedings that are incidental to its business, including claims related to product liability, general negligence, contract disputes, cybersecurity incidents, privacy matters, environmental issues, wage and hour laws, intellectual property, employment practices, advertising laws, regulatory compliance, and other matters and actions brought by employees, customers, competitors, suppliers and governmental entities. As a government contractor selling to federal, state and local governmental entities, the Company is also subject to governmental and regulatory inquiries, audits and other proceedings, including those related to contract administration and pricing compliance. It is not expected that the ultimate resolution of any of these matters will have, either individually or in the aggregate, a material adverse effect on the Company's consolidated financial position or results of operations.

17

W.W. Grainger, Inc. and Subsidiaries

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations

General

W.W. Grainger, Inc. (Grainger or the Company) is a broad line, business-to-business distributor of maintenance, repair and operating (MRO) products and services with operations primarily in North America, Europe and Japan. More than 3.5 million customers worldwide rely on Grainger for products such as safety, gloves, ladders, motors and janitorial supplies, along with services like inventory management and technical support. These customers represent a broad collection of industries (see Note 3 in the Condensed Consolidated Financial Statements (Financial Statements)). They place orders online, on mobile devices, through sales representatives, over the phone and at local branches. Approximately 5,000 suppliers provide Grainger with approximately 1.7 million products stocked in Grainger's distribution centers (DCs) and branches worldwide.

Grainger's two reportable segments are the U.S. and Canada (Acklands - Grainger Inc. and its subsidiaries). These reportable segments reflect the results of the Company's high-touch solutions businesses in those geographies. Other businesses include the endless assortment businesses, (Zoro in the U.S. and MonotaRO in Japan), and smaller high-touch solutions businesses in Europe, Asia and Mexico.

Business Environment

Given Grainger's large number of customers and the diverse industries it serves, several economic factors and industry trends tend to shape Grainger’s business environment and provide general insight into projecting Grainger's growth. Grainger’s sales in the United States (U.S.) and Canada tend to positively correlate with Business Investment, Business Inventory, Exports, Industrial Production and Gross Domestic Product (GDP). Sales in Canada also tend to positively correlate with oil prices. The table below provides these estimated indicators for 2019:

	U.S.		Canada
	Estimated 2018	Forecasted 2019	Estimated 2018	Forecasted 2019
Business Investment	7.4%	0.9%	1.2%	(0.6)%
Business Inventory	1.6%	3.0%	—	—
Exports	4.0%	2.5%	3.2%	0.8%
Industrial Production	3.9%	1.1%	3.0%	0.7%
GDP	2.9%	2.6%	1.9%	1.4%
Oil Prices	—	—	$65/barrel	$59/barrel
Source: Global Insight U.S. (July 2019), Global Insight Canada (June 2019)

In the U.S., Business Investment and Exports are two major indicators of MRO spending. Per the Global Insight July 2019 forecast, Business Inventory is forecast to improve while Business Investment, Industrial Production, Exports and GDP are forecast to soften, as a result of slowing global growth, trade tensions and associated uncertainty, diminishing support from fiscal stimulus and a decline in the pace of inventory accumulation.

Per the Global Insight June 2019 forecast, Canada's Business Investment, Exports, Industrial Production and GDP are expected to slow due to a reduction in spending, delayed investments, weakness in oil prices and slowing global oil demand.   

Outlook

Each business in Grainger’s portfolio has a specific set of strategic imperatives focused on creating unique value for customers.

In the U.S. business, Grainger is focused on growing market share through the three pillars of its strategy: (i) building advantaged MRO solutions, which means being able to get customers the exact product they need to solve a problem quickly; (ii) offering differentiated sales and services; Grainger has an advantage in serving complex businesses at their place of business through its direct customer relationships and onsite services and (iii) delivering unparalleled customer service; Grainger is committed to providing the absolute best customer experience in the industry through its effort to deliver flawlessly on every customer transaction.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Matters Affecting Comparability

There were 64 sales days in the three months ended June 30, 2019 and 2018.

Results of Operations – Three Months Ended June 30, 2019

The following table is included as an aid to understand the changes in Grainger’s Condensed Consolidated Statements of Earnings (in millions of dollars):

	Three Months Ended June 30,
					Percent Increase/(Decrease)		As a Percent of Net Sales
	2019		2018				2019		2018
Net sales	$	2,893	$	2,861	1	%	100.0	%	100.0	%
Cost of goods sold	1,772		1,750		1		61.3		61.2
Gross profit	1,121		1,111		1		38.7		38.8
Selling, general and administrative expenses	741		767		(3	)	25.6		26.8
Operating earnings	380		344		11		13.1		12.0
Other expense, net	14		20		(30	)	0.5		0.7
Income taxes	94		76		24		3.2		2.6
Net earnings	272		248
Noncontrolling interest	12		11		9		0.4		0.4
Net earnings attributable to W.W. Grainger, Inc.	$	260	$	237	10	%	9.0	%	8.3	%

Grainger’s net sales of $2,893 million for the second quarter of 2019 increased $32 million, or 1% compared to the same period in 2018. On a daily basis, net sales increased 1.0% and consisted of the following:

	Percent Increase/(Decrease)
Volume	1.5%
Price	0.5
Foreign exchange	(1.0)
Total	1.0%

The increase in net sales was primarily driven by volume increases in the U.S. business and the endless assortment businesses, partially offset by lower sales in the Canada business and foreign exchange. See the Segment Analysis below for further details related to segment revenue.

Gross profit of $1,121 million for the second quarter of 2019 increased $10 million compared to the same quarter in 2018. The gross profit margin of 38.7% during the second quarter of 2019 decreased 0.1 percentage point when compared to the same quarter in 2018.

The table below reconciles reported Selling, general and administrative expenses (SG&A), operating earnings and net earnings attributable to W.W. Grainger, Inc. determined in accordance with U.S. generally accepted accounting principles (GAAP) to adjusted SG&A, operating earnings and net earnings attributable to W.W. Grainger, Inc., 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 better baseline for analyzing the ongoing performance of its 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 these measures with other companies' non-GAAP measures having the same or similar names. All tables below are in millions of dollars:

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

	Three Months Ended
	June 30,
	2019			2018			%
SG&A reported	$	741		$	767		(3	)%
Restructuring, net of branch gains (U.S.)	2			6
Restructuring (Canada)	(4		)	12
Restructuring (Other businesses)	—			1
Restructuring (Unallocated expense)	(1		)	(5		)
Total restructuring, net	(3		)	14
SG&A adjusted	$	744		$	753		(1	)%

	2019			2018		%
Operating earnings reported	$	380		$	344	11	%
Total restructuring, net	(3		)	15
Operating earnings adjusted	$	377		$	359	5	%

	2019			2018			%
Net earnings attributable to W.W. Grainger, Inc. reported	$	260		$	237		10	%
Total restructuring, net	(3		)	15
Tax effect (1)	1			(3		)
Total restructuring, net and tax	(2		)	12
Net earnings attributable to W.W. Grainger, Inc. adjusted	$	258		$	249		4	%

(1) The tax impact of adjustments is calculated based on the income tax rate in each applicable jurisdiction, subject to deductibility limitations and the Company's ability to realize the associated tax benefits.

SG&A of $741 million for the second quarter of 2019 decreased $26 million, or 3% compared to the second quarter of 2018. Excluding restructuring, net in both periods as noted in the table above, SG&A decreased $9 million, or 1% primarily due to 2018 cost take-out actions in Canada and lower variable compensation in the U.S. business and at the corporate level.

Operating earnings of $380 million for the second quarter of 2019 increased $36 million, or 11% compared to the second quarter of 2018. Excluding restructuring, net in both periods as noted in the table above, operating earnings increased $18 million or 5%, driven primarily by cost take-out initiatives in the Canadian business and higher gross profit and lower variable compensation in the U.S. business and at the corporate level.

Other expense, net was $14 million for the second quarter of 2019, a decrease of $6 million, or 30% compared to the second quarter of 2018. The decrease was primarily due to lower losses from the Company's clean energy investments which were concluded in the second half of 2018.

Income taxes of $94 million for the second quarter of 2019 increased $18 million, or 24% compared to the second quarter of 2018. Grainger's effective tax rates were 25.6% and 23.4% for the three months ended June 30, 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. of $260 million for the second quarter of 2019 increased $23 million or 10% compared to the second quarter of 2018. Excluding restructuring, net from both periods in the table above, net earnings increased $9 million, or 4%. The increase in net earnings primarily resulted from lower SG&A and lower other expense, net.

Diluted earnings per share of $4.67 in the second quarter of 2019 was up 12% versus the $4.16 for the second quarter of 2018, primarily due to higher net earnings and lower average shares outstanding. Excluding restructuring, net from

20

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

both periods in the table above, diluted earnings per share of $4.64 in the second quarter of 2019 increased 6% from $4.37 for the second quarter of 2018.

Segment Analysis

The following results at the U.S. and Canada segments and Other businesses level include external and intersegment net sales and operating earnings. See Note 9 to the Financial Statements.

United States

Net sales were $2,222 million for the second quarter of 2019, an increase of $47 million, or 2% compared to the same period in 2018 and consisted of the following:

	Percent Increase/(Decrease)
Volume	1.5%
Price	0.5
Intercompany sales to Zoro (included in other businesses)	0.5
Other	(0.5)
Total	2.0%

Sales to customers in the retail end markets increased high single digits. Government and commercial increased mid-single digits and contractors and light manufacturing end markets increased low-single digits. Heavy manufacturing was down low single digits and natural resources was down mid-single digits when compared to the prior year. See Note 3 to the Financial Statements for information related to disaggregated revenue. Overall, revenue increases were primarily driven by market share gains.

The gross profit margin for the second quarter of 2019 increased 0.35 percentage point compared to the same period in 2018, as a result of stable price cost spread.

SG&A decreased 1% in the second quarter of 2019 compared to the second quarter of 2018. The decrease was primarily driven by lower variable compensation versus the prior year.

Operating earnings of $381 million for the second quarter of 2019 increased $32 million, or 9% from $349 million for the second quarter of 2018. This increase was driven primarily by higher gross profit from higher sales.

Canada

Net sales were $135 million for the second quarter of 2019, a decrease of $42 million, or 23% compared to the same period in 2018 and consisted of the following:

	Percent (Decrease)/Increase
Volume	(23.0)%
Foreign exchange	(3.0)
Price	3.0
Total	(23.0)%

For the second quarter of 2019, volume was down 23.0 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 sales coverage optimization activities.

The gross profit margin decreased 1.4 percentage points in the second quarter of 2019 versus the second quarter of 2018, primarily due to negative price-cost spread as a result of a more competitive pricing dynamic in the region.

SG&A decreased 42% in the second quarter of 2019 compared to the second quarter of 2018. Excluding restructuring costs in both periods (as noted in the table above and Note 7 to the Financial Statements), SG&A would have decreased

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

26%. This decrease was primarily due to 2018 cost take-out actions and lower variable expense due to lower sales volume.

Operating earnings were $1 million for the second quarter of 2019 compared to operating losses of $14 million in the second quarter of 2018. Excluding restructuring, net in both periods as noted in the table above, operating losses would have been $3 million compared to $2 million in the prior period primarily due to lower sales volume.

Other businesses

Net sales were $663 million for the second quarter of 2019, an increase of $41 million, or 6.5% when compared to the same period in 2018 and consisted of the following:

	Percent Increase/(Decrease)
Price/volume	9.5%
Foreign exchange	(3.0)
Total	6.5%

The increase in net sales was primarily due to customer acquisition growth from the endless assortment businesses, partially offset by foreign exchange headwinds from the yen, euro and pound sterling.

Operating earnings of $27 million for the second quarter of 2019 were down $14 million compared to operating earnings of $41 million the second quarter of 2018. This decrease is primarily due to the endless assortment businesses' investments to drive long-term growth and performance in the high-touch solutions businesses.

Matters Affecting Comparability

There were 127 sales days in the six months ended June 30, 2019 and 128 sales days in the six months ended June 30, 2018.

Results of Operations – Six Months Ended June 30, 2019

The following table is included as an aid to understanding the changes in Grainger’s Condensed Consolidated Statements of Earnings (in millions of dollars):

	Six Months Ended June 30,
					Percent Increase/(Decrease)		As a Percent of Net Sales
	2019		2018				2019		2018
Net sales	$	5,692	$	5,627	1	%	100.0	%	100.0	%
Cost of goods sold	3,476		3,424		2		61.1		60.9
Gross profit	2,216		2,203		1		38.9		39.1
Selling, general and administrative expenses	1,473		1,524		(3	)	25.9		27.1
Operating earnings	743		679		9		13.1		12.1
Other expense, net	26		48		(46	)	0.5		0.9
Income taxes	183		142		29		3.2		2.5
Net earnings	534		489
Noncontrolling interest	21		20		5		0.4		0.4
Net earnings attributable to W.W. Grainger, Inc.	$	513	$	469	10	%	9.0	%	8.3	%

22

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Grainger’s net sales of $5,692 million for the six months ended June 30, 2019 increased $65 million, or 1% compared to the same period in 2018. On a daily basis, net sales increased 2.0% and consisted of the following:

	Percent Increase/(Decrease)
Volume	2.0%
Price	1.0
Foreign exchange	(1.0)
Total	2.0%

The increase in net sales was primarily driven by volume increases in the U.S. business due to market share gain and an improved demand environment and continued double digit growth in the endless assortments businesses, offset by lower sales in the Canada business and other businesses. See the Segment Analysis below for further details related to segment revenue.

Gross profit of $2,216 million for the six months ended June 30, 2019 increased $13 million, or 1% compared to the same period in 2018. The gross profit margin of 38.9% decreased 0.2 percentage point when compared to the same period in 2018.

The table below reconciles reported SG&A, operating earnings and net earnings attributable to W.W. Grainger, Inc. determined in accordance with U.S. GAAP to adjusted SG&A, operating earnings and net earnings attributable to W.W. Grainger, Inc., 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 better baseline for analyzing the ongoing performance of its 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 these measures with other companies' non-GAAP measures having the same or similar names. All tables below are in millions of dollars:

	Six Months Ended
	June 30,
	2019			2018			%
SG&A reported	$	1,473		$	1,524		(3	)%
Restructuring, net of branch gains (U.S.)	2			1
Restructuring (Canada)	(3		)	23
Restructuring (Other businesses)	—			3
Restructuring (Unallocated expense)	(1		)	(5		)
Total restructuring, net	(2		)	22
SG&A adjusted	$	1,475		$	1,502		(2	)%

	2019			2018		%
Operating earnings reported	$	743		$	679	9	%
Total restructuring, net	(1		)	23
Operating earnings adjusted	$	742		$	702	6	%

	2019			2018			%
Net earnings attributable to W.W. Grainger, Inc. reported	$	513		$	469		9	%
Total restructuring, net	(1		)	23
Tax effect (1)	1			(5		)
Total restructuring, net and tax	—			18
Net earnings attributable to W.W. Grainger, Inc. adjusted	$	513		$	487		5	%

(1) The tax impact of adjustments is calculated based on the income tax rate in each applicable jurisdiction, subject to deductibility limitations and the Company's ability to realize the associated tax benefits.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

SG&A of $1,473 million for the six months ended June 30, 2019 decreased $51 million, or 3% from $1,524 million for the six months ended June 30, 2018. Excluding restructuring, net in both periods as noted in the table above, SG&A decreased $27 million, or 2% primarily due to 2018 cost take-out actions in Canada and lower variable compensation in the U.S. business and at the corporate level.

Operating earnings for the six months ended June 30, 2019 were $743 million, an increase of $64 million, or 9% compared to the same period in 2018. Excluding restructuring, net in both periods as noted in the table above, operating earnings increased $40 million or 6%, driven primarily by cost take-out actions in the Canadian business and higher gross profit and lower variable compensation in the U.S. business and at a corporate level.

Other expense, net was $26 million for the six months ended June 30, 2019, a decrease of $22 million, or 46% compared to the six months ended June 30, 2018. The decrease was primarily due to lower losses from the Company's clean energy investments which were concluded in the second half of 2018.

Income taxes of $183 million for the six months ended June 30, 2019 increased $41 million, or 29% compared with $142 million for the comparable 2018 period. Grainger's effective tax rates were 25.5% and 22.5% for the six months ended June 30, 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 the six months ended June 30, 2019 increased $44 million or 10% to $513 million from $469 million for the six months ended June 30, 2018. Excluding restructuring, net from both periods in the table above, net earnings increased $26 million, or 5%. The increase in net earnings primarily resulted from lower SG&A and lower other expense, net.

Diluted earnings per share of $9.14 in the six months ended June 30, 2019 was up 11% versus the $8.23 for the same period in 2018, due to higher earnings and lower average shares outstanding. Excluding restructuring, net from both periods in the table above, diluted earnings per share would have been $9.14 compared to $8.55 in 2018, an increase of 7%.

Segment Analysis

The following comments at the segment and other businesses level include external and intersegment net sales and operating earnings. See Note 9 to the Financial Statements.

United States

Net sales were $4,371 million for the six months ended June 30, 2019, an increase of $88 million, or 2%, compared to the same period in 2018. On a daily basis, net sales increased 3.0% and consisted of the following:

	Percent Increase/(Decrease)
Volume	2.0%
Price	1.0
Intercompany sales to Zoro (included in other businesses)	0.5
Other	(0.5)
Total	3.0%

Sales to customers in the commercial, retail and government end markets increased mid-single digits and contractors, light manufacturing and heavy manufacturing end markets increased low-single digits. See Note 3 to the Financial Statements for information related to disaggregated revenue. Overall, revenue increases were primarily driven by market share gains and pricing.

The gross profit margin increased 0.2 percentage point compared to the same period in 2018.

SG&A for the six months ended June 30, 2019 increased $7 million, or 1% compared to the same period in 2018. The increase was primarily driven by digital marketing, partially offset by lower variable compensation versus the prior year.

24

W.W. Grainger, Inc. and Subsidiaries

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Operating earnings of $745 million for the six months ended June 30, 2019 increased $39 million, or 5% from $706 million for the six months ended June 30, 2018. This increase was driven primarily by higher sales, higher gross profit dollars and improved SG&A leverage.

Canada

Net sales were $271 million for the six months ended June 30, 2019, a decrease of $88 million, or 24% compared to the same period in 2018. On a daily basis, net sales decreased 24.0% and consisting of the following:

	Percent (Decrease)/Increase
Volume	(24.0)%
Foreign exchange	(3.5)
Price	3.5
Total	(24.0)%

For the six months ended June 30, 2019, volume was down 24.0 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 sales coverage optimization activities.

The gross profit margin decreased 1.7 percentage points in the six months ended June 30, 2019 compared to the six months ended June 30, 2018, primarily due to negative price-cost spread as a result of a more competitive pricing dynamic in the region.

SG&A decreased $64 million, or 42% in the six months ended June 30, 2019 compared to the six months ended June 30, 2018. Excluding restructuring, net in both periods (as noted in the table above and Note 7 to the Financial Statements), SG&A would have decreased $38 million, or 29% compared to the prior period. This decrease was primarily due to cost reduction actions and lower sales volume.

Operating losses were $4 million for the six months ended June 30, 2019 compared to losses of $34 million in the six months ended June 30, 2018. Excluding restructuring, net in both periods (as noted in the table above and Note 7 to the Financial Statements), operating losses would have been $6 million compared to $11 million in the prior period primarily due to lower sales volume, partially offset by lower SG&A.

Other businesses

Net sales for other businesses were $1,296 million for the six months ended June 30, 2019 an increase of $86 million, or 7% compared to the same period in 2018. On a daily basis, net sales increased 8.0% and consisted of the following:

	Percent Increase/(Decrease)
Price/volume	10.5%
Foreign exchange	(2.5)
Total	8.0%

The net sales increase was primarily due to customer acquisition growth from the endless assortment businesses, partially offset by foreign exchange headwinds from the yen, euro and pound sterling.

Operating earnings of $57 million for the six months ended June 30, 2019 decreased $20 million from operating earnings of $77 million in the comparable period from the prior year. This decrease is primarily due to the endless assortment businesses' investments to drive long-term growth and performance in the high-touch solutions businesses.

Financial Condition

Cash Flow

Net cash provided by operating activities was $450 million and $395 million for the six months ended June 30, 2019 and 2018, respectively. The increase in cash provided by operating activities is primarily the result of higher net earnings

25

W.W. Grainger, Inc. and Subsidiaries

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

and favorable changes in working capital, partially offset by higher income tax payments and higher net payments related to employee variable compensation and benefits paid under annual incentive plans.

Net cash used in investing activities was $91 million and $74 million for the six months ended June 30, 2019 and 2018, respectively. This increase in net cash used in investing activities was primarily driven by higher additions to property, buildings and equipment and lower proceeds from the sales of assets when compared to the prior year.

Net cash used in financing activities was $586 million and $331 million in the six months ended June 30, 2019 and 2018, respectively. The increase in net cash used in financing activities was primarily driven by higher stock repurchases in 2019 compared to 2018.

Working Capital

Internally generated funds are the primary source of working capital and funds used for growth initiatives and 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, current maturities of long-term debt and lease liabilities). Working capital at June 30, 2019, was $2,109 million, an increase of $211 million when compared to $1,898 million at December 31, 2018. The increase was primarily driven by an increase in accounts receivable and a decrease in accrued contributions to employees profit-sharing plans due to the annual cash contribution. At these dates, the ratio of current assets to current liabilities was 2.7 and 2.4, respectively.

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 maturities and long-term) and lease liabilities as a percent of total capitalization was 53.3% at June 30, 2019, and 51.5% at December 31, 2018.

Critical Accounting Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make judgments, estimates and assumptions about future events that affect the amounts reported in the financial statements and accompanying notes.

Accounting estimates are considered critical when they require management to make subjective and complex judgments, estimates and assumptions about matters that have a material impact on the presentation of Grainger’s financial statements and accompanying notes. For a description of Grainger’s critical accounting estimates, see Grainger's Annual Report on Form 10-K for the fiscal year ended December 31, 2018.

Management has discussed the development and selection of these critical accounting estimates with the Audit Committee of the Board of Directors and with the Company's independent registered public accounting firm.

Forward-Looking Statements

From time to time, in this Quarterly Report on Form 10-Q, as well as in other written reports, communications and verbal statements, Grainger makes forward-looking statements that are not historical in nature but concern forecasts of future results, business plans, analyses, prospects, strategies, objectives and other matters that may be deemed to be “forward-looking statements” under the federal securities laws. Forward-looking statements can generally be identified by their use of terms such as “anticipate,” “estimate,” “believe,” “expect,” “could,” “forecast,” “may,” “intend,” “plan,” “predict,” “project” “will” or “would” and similar terms and phrases, including references to assumptions.

Grainger cannot guarantee that any forward-looking statement will be realized and achievement of future results is subject to risks and uncertainties, many of which are beyond the Company’s control, which could cause Grainger’s results to differ materially from those that are presented.

Important factors that could cause actual results to differ materially from those presented or implied in the forward-looking statements include, without limitation: higher product costs or other expenses; a major loss of customers; loss or disruption of sources of supply; increased competitive pricing pressures; failure to develop or implement new technology initiatives or business strategies; failure to adequately protect intellectual property or successfully defend

26

W.W. Grainger, Inc. and Subsidiaries

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

against infringement claims; the implementation, timing and results of the Company’s strategic pricing initiatives and other responses to market pressures; the outcome of pending and future litigation or governmental or regulatory proceedings, including with respect to wage and hour, anti-bribery and corruption, environmental, advertising, privacy and cybersecurity matters; investigations, inquiries, audits and changes in laws and regulations; disruption of information technology or data security systems; general industry, economic, market or political conditions; general global economic conditions; currency exchange rate fluctuations; market volatility, including volatility or price declines of the Company’s common stock; commodity price volatility; labor shortages; facilities disruptions or shutdowns; higher fuel costs or disruptions in transportation services; natural and other catastrophes; unanticipated and/or extreme weather conditions; loss of key members of management; the Company’s ability to operate, integrate and leverage acquired businesses; changes in effective tax rates and other factors identified under Item 1A: Risk Factors in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, as updated in the Company’s Quarterly Reports on Form 10-Q.

Caution should be taken not to place undue reliance on Grainger’s forward-looking statements and Grainger undertakes no obligation to update or revise any of its forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

27

W.W. Grainger, Inc. and Subsidiaries

Item 3. Quantitative and Qualitative Disclosures About Market Risk

For quantitative and qualitative disclosures about market risk, see “Item 7A: Quantitative and Qualitative Disclosures About Market Risk” in Grainger's Annual Report on Form 10-K for the fiscal year ended December 31, 2018.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

Grainger carried out an evaluation, under the supervision and with the participation of its management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of Grainger's disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)) as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that Grainger’s disclosure controls and procedures were effective as of the end of the period covered by this report in (i) ensuring that information required to be disclosed by Grainger in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and (ii) ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There have been no changes in Grainger's internal control over financial reporting for the quarter ended June 30, 2019, that have materially affected, or are reasonably likely to materially affect, Grainger’s internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

For a description of the Company’s legal proceedings, see Note 10 - Contingencies and Legal Matters - to the Condensed Consolidated Financial Statements included under Item 1 - Financial Statements, of Part I of this report.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities – Second 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
Apr. 1 – Apr. 30	144,280	$299.48	144,280	4,948,299
May 1 – May 31	431,814	$266.63	431,814	4,516,485
June 1 – June 30	392,950	$271.64	392,950	4,123,535
Total	969,044		969,044

(A) There were no shares withheld to satisfy tax withholding obligations.

(B) Average price paid per share includes any commissions paid and includes only those amounts related to purchases as part of publicly announced plans or programs.

(C) Purchases were made pursuant to a share repurchase program approved by Grainger’s Board of Directors on April 6, 2015 and announced by the Company on April 16, 2015, whereby the Company was authorized to repurchase up to 15 million shares with no expiration date (the "2015 Program"). In addition, purchases were made pursuant to a share repurchase program approved by Grainger’s Board of Directors and announced by the Company on April 24, 2019 (the "2019 Program"), which replaced the 2015 Program. The 2019 Program authorizes the repurchase of up to 5 million shares with no expiration date.

28

W.W. Grainger, Inc. and Subsidiaries

Item 6.        Exhibits

A list of exhibits filed with this report on Form 10-Q is provided in the Exhibit Index on page 31 of this report.

29

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

			W.W. GRAINGER, INC.
Date:	July 24, 2019	By:	/s/ Thomas B. Okray
			Thomas B. Okray, Senior Vice President and Chief Financial Officer
			(Principal Financial Officer)
Date:	July 24, 2019	By:	/s/ Eric R. Tapia
			Eric R. Tapia, Vice President and Controller
			(Principal Accounting Officer)

30

EXHIBIT INDEX

EXHIBIT NO.	DESCRIPTION
31.1	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32	Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH	XBRL Taxonomy Extension Schema Document.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.

31

EX-31.1

CERTIFICATION

Exhibit 31.1

I, D.G. Macpherson, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of W.W. Grainger, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: July 24, 2019

By:	/s/ D.G. Macpherson
Name:	D.G. Macpherson
Title:	Chairman and Chief Executive Officer

EX-31.2

CERTIFICATION

Exhibit 31.2

I, Thomas B. Okray, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of W.W. Grainger, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: July 24, 2019

By:	/s/ Thomas B. Okray
Name:	Thomas B. Okray
Title:	Senior Vice President and Chief Financial Officer

EX-32

Exhibit 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of W.W. Grainger, Inc. (“Grainger”) for the quarterly period ended June 30, 2019, (the “Report”), D.G. Macpherson, as Chairman and Chief Executive Officer of Grainger, and Thomas B. Okray, as Senior Vice President and Chief Financial Officer of Grainger, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Grainger.

/s/ D.G. Macpherson

D.G. Macpherson

Chairman and Chief Executive Officer

July 24, 2019

/s/ Thomas B. Okray

Thomas B. Okray

Senior Vice President and Chief Financial Officer

July 24, 2019

XML

COVER	6 Months Ended
	Jun. 30, 2019 shares
Cover page.
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Jun. 30, 2019
Document Transition Report	false
Entity File Number	1-5684
Entity Registrant Name	Grainger W W Inc
Entity Incorporation, State or Country Code	IL
Entity Tax Identification Number	36-1150280
Entity Address, Address Line One	100 Grainger Parkway,
Entity Address, City or Town	Lake Forest,
Entity Address, State or Province	IL
Entity Address, Postal Zip Code	60045-5201
City Area Code	847
Local Phone Number	535-1000
Title of 12(b) Security	Common Stock
Trading Symbol	GWW
Security Exchange Name	NYSE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding	54,571,141
Entity Central Index Key	0000277135
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q2
Amendment Flag	false

XML

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Income Statement [Abstract]
Net sales	$ 2,893	$ 2,861	$ 5,692	$ 5,627
Cost of goods sold	1,772	1,750	3,476	3,424
Gross profit	1,121	1,111	2,216	2,203
Selling, general and administrative expenses	741	767	1,473	1,524
Operating earnings	380	344	743	679
Other income (expense):
Interest income	1	2	3	2
Interest expense	(22)	(23)	(43)	(48)
Other, net	7	1	14	(2)
Total other expense, net	(14)	(20)	(26)	(48)
Earnings before income taxes	366	324	717	631
Income taxes	94	76	183	142
Net earnings	272	248	534	489
Less: Net earnings attributable to noncontrolling interest	12	11	21	20
Net earnings attributable to W.W. Grainger, Inc.	$ 260	$ 237	$ 513	$ 469
Earnings per share:
Basic (in dollars per share)	$ 4.69	$ 4.19	$ 9.19	$ 8.29
Diluted (in dollars per share)	$ 4.67	$ 4.16	$ 9.14	$ 8.23
Weighted average number of shares outstanding:
Basic (in shares)	55,139,799	56,109,809	55,389,463	56,086,592
Diluted (in shares)	55,378,936	56,552,644	55,661,005	56,478,645
Cash dividends paid per share (in dollars per share)	$ 1.44	$ 1.36	$ 2.80	$ 2.64

XML

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Statement of Comprehensive Income [Abstract]
Net earnings	$ 272	$ 248	$ 534	$ 489
Other comprehensive earnings (losses):
Foreign currency translation adjustments	19	(49)	23	(25)
Postretirement benefit plan reclassification, net of tax benefit of $1, $1, $2 and $2, respectively	(2)	(3)	(5)	(6)
Total other comprehensive earnings	17	(52)	18	(31)
Comprehensive earnings, net of tax	289	196	552	458
Less: Comprehensive earnings (losses) attributable to noncontrolling interest
Net earnings	12	11	21	20
Foreign currency translation adjustments	5	(7)	3	2
Comprehensive earnings attributable to noncontrolling interest	17	4	24	22
Comprehensive earnings attributable to W.W. Grainger, Inc.	$ 272	$ 192	$ 528	$ 436

XML

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS (PARENTHETICAL) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Statement of Comprehensive Income [Abstract]
Postretirement benefit plan reclassification, tax benefit	$ 1	$ 1	$ 2	$ 2

XML

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Millions	Jun. 30, 2019	Dec. 31, 2018
CURRENT ASSETS
Cash and cash equivalents	$ 315	$ 538
Accounts receivable (less allowances for doubtful accounts of $26 and $25, respectively)	1,503	1,385
Inventories	1,535	1,541
Prepaid expenses and other assets	92	83
Prepaid income taxes	11	10
Total current assets	3,456	3,557
PROPERTY, BUILDINGS AND EQUIPMENT, NET	1,380	1,352
DEFERRED INCOME TAXES	13	12
GOODWILL	429	424
INTANGIBLES, NET	437	460
OTHER ASSETS	277	68
TOTAL ASSETS	5,992	5,873
CURRENT LIABILITIES
Short-term debt	51	49
Current maturities of long-term debt	81	81
Trade accounts payable	780	678
Accrued compensation and benefits	183	262
Accrued contributions to employees’ profit sharing plans	46	133
Accrued expenses	288	269
Income taxes payable	23	29
Total current liabilities	1,452	1,501
LONG-TERM DEBT (less current maturities)	2,080	2,090
DEFERRED INCOME TAXES AND TAX UNCERTAINTIES	115	103
OTHER NON-CURRENT LIABILITIES	231	86
SHAREHOLDERS' EQUITY
Cumulative Preferred Stock – $5 par value – 12,000,000 shares authorized; none issued nor outstanding	0	0
Common Stock – $0.50 par value – 300,000,000 shares authorized; 109,659,219 shares issued	55	55
Additional contributed capital	1,152	1,134
Retained earnings	8,226	7,869
Accumulated other comprehensive losses	(156)	(171)
Treasury stock, at cost – 55,088,078 and 53,796,859 shares, respectively	(7,354)	(6,966)
Total W.W. Grainger, Inc. shareholders’ equity	1,923	1,921
Noncontrolling interest	191	172
Total shareholders' equity	2,114	2,093
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$ 5,992	$ 5,873

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (PARENTHETICAL) - USD ($) $ in Millions	Jun. 30, 2019	Dec. 31, 2018
Statement of Financial Position [Abstract]
Allowance for doubtful accounts	$ 25	$ 25
Cumulative preferred stock, par value (in dollars per share)	$ 5	$ 5
Cumulative preferred stock, shares authorized	12,000,000	12,000,000
Cumulative preferred stock, shares issued	0	0
Cumulative preferred stock, shares outstanding	0	0
Common stock, par value (in dollars per share)	$ 0.5	$ 0.5
Common stock, shares authorized	300,000,000	300,000,000
Common stock, shares issued	109,659,219	109,659,219
Treasury stock, shares at cost	55,088,078	53,796,859

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Millions	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings	$ 534	$ 489
Provision for losses on accounts receivable	6	4
Deferred income taxes and tax uncertainties	12	3
Depreciation and amortization	113	128
Net gains from sales of assets, net of write-offs	(5)	(14)
Stock-based compensation	23	28
Losses from equity method investment	0	15
Subtotal	149	164
Change in operating assets and liabilities:
Accounts receivable	(118)	(148)
Inventories	12	(45)
Prepaid expenses and other assets	(22)	(25)
Trade accounts payable	100	5
Accrued liabilities	(187)	(60)
Income taxes payable, net	(7)	28
Other non-current liabilities	(11)	(13)
Subtotal	(233)	(258)
Net cash provided by operating activities	450	395
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, buildings and equipment and intangibles	(107)	(103)
Proceeds from sales of assets	14	43
Equity method proceeds (investment)	2	(14)
Net cash used in investing activities	(91)	(74)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under lines of credit	19	22
Payments against lines of credit	(16)	(22)
Payments of long-term debt	(34)	(36)
Proceeds from stock options exercised	16	87
Payments for employee taxes withheld from stock awards	(10)	(29)
Purchase of treasury stock	(400)	(201)
Cash dividends paid	(163)	(155)
Other, net	2	3
Net cash used in financing activities	(586)	(331)
Exchange rate effect on cash and cash equivalents	4	(4)
NET CHANGE IN CASH AND CASH EQUIVALENTS	(223)	(14)
Cash and cash equivalents at beginning of year	538	327
Cash and cash equivalents at end of period	$ 315	$ 313

XML

CONDENSED CONSOLIDATED STATEMENT OF SHAREDHOLDERS' EQUITY CONDENSED CONSOLIDATED STATEMENT OF SHAREDHOLDERS' EQUITY - USD ($) $ in Millions	Total	Common Stock [Member]	Additional Contributed Capital [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Earnings (Losses)	Treasury Stock [Member]	Noncontrolling Interest [Member]
Beginning balance at Dec. 31, 2017	$ 1,828	$ 55	$ 1,041	$ 7,405	$ (135)	$ (6,676)	$ 138
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock based compensation	68		24			44
Purchase of treasury stock	(160)					(160)
Net earnings	241			232			9
Other comprehensive (losses) earnings	21				12		9
Cash dividends paid	(73)			(73)
Ending balance at Mar. 31, 2018	1,925	55	1,065	7,564	(123)	(6,792)	156
Beginning balance at Dec. 31, 2017	1,828	55	1,041	7,405	(135)	(6,676)	138
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net earnings	489
Other comprehensive (losses) earnings	(31)
Ending balance at Jun. 30, 2018	2,050	55	1,079	7,725	(168)	(6,797)	156
Beginning balance at Mar. 31, 2018	1,925	55	1,065	7,564	(123)	(6,792)	156
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock based compensation	37		14			23
Purchase of treasury stock	(28)					(28)
Net earnings	248			237			11
Other comprehensive (losses) earnings	(52)				(45)		(7)
Capital contribution	2						2
Cash dividends paid	(82)			(76)			(6)
Ending balance at Jun. 30, 2018	2,050	55	1,079	7,725	(168)	(6,797)	156
Beginning balance at Dec. 31, 2018	2,093	55	1,134	7,869	(171)	(6,966)	172
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock based compensation	6		3			3
Purchase of treasury stock	(135)					(135)
Net earnings	262			253			9
Other comprehensive (losses) earnings	1				3		(2)
Capital contribution	2						2
Cash dividends paid	(77)			(77)
Ending balance at Mar. 31, 2019	2,152	55	1,137	8,045	(168)	(7,098)	181
Beginning balance at Dec. 31, 2018	2,093	55	1,134	7,869	(171)	(6,966)	172
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net earnings	534
Other comprehensive (losses) earnings	18
Ending balance at Jun. 30, 2019	2,114	55	1,152	8,226	(156)	(7,354)	191
Beginning balance at Mar. 31, 2019	2,152	55	1,137	8,045	(168)	(7,098)	181
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock based compensation	24		15			9
Purchase of treasury stock	(265)					(265)
Net earnings	272			260			12
Other comprehensive (losses) earnings	17				12		5
Cash dividends paid	(86)			(79)			(7)
Ending balance at Jun. 30, 2019	$ 2,114	$ 55	$ 1,152	$ 8,226	$ (156)	$ (7,354)	$ 191

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CONDENSED CONSOLIDATED STATEMENT OF SHAREDHOLDERS' EQUITY CONDENSED CONSOLIDATED STATEMENT OF SHAREDHOLDERS' EQUITY (PARENTHETICAL) - $ / shares	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Statement of Stockholders' Equity (Parentheticals) [Abstract]
Cash dividends paid per share (in dollars per share)	$ 1.44	$ 1.36	$ 2.80	$ 2.64

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BACKGROUND AND BASIS OF PRESENTATION

6 Months Ended

Jun. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

BACKGROUND AND BASIS OF PRESENTATION

BACKGROUND AND BASIS OF PRESENTATION

W.W. Grainger, Inc. is a broad line, business-to-business distributor of maintenance, repair and operating (MRO) products and services with operations primarily in North America, Europe and Japan. In this report, the words “Company” or “Grainger” 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.

The Condensed Consolidated Financial Statements (Financial Statements) of the Company and the related notes are unaudited and should be read in conjunction with the consolidated financial statements and related notes for the year ended December 31, 2018 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) on February 28, 2019.

The Condensed Consolidated Balance Sheet as of December 31, 2018 has been derived from the audited consolidated financial statements at that date, but does not include all of the disclosures required by accounting principles generally accepted in the U.S. for complete financial statements.

The unaudited financial information reflects all adjustments (primarily consisting of normal recurring adjustments) which, in the opinion of management, are necessary for a fair presentation of the statements contained in this report.

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NEW ACCOUNTING STANDARDS

6 Months Ended

Jun. 30, 2019

Accounting Policies [Abstract]

NEW ACCOUNTING STANDARDS

NEW ACCOUNTING STANDARDS

In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments as modified by subsequently issued ASUs 2018-19, 2019-04 and 2019-05. This ASU requires estimating all expected credit losses for certain types of financial instruments, including trade receivables, held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. The effective date of this ASU is for fiscal years and interim periods beginning after December 15, 2019 and the Company plans to adopt this ASU prospectively. The Company is evaluating the impact of this ASU and does not expect a material impact to the Company's Financial Statements.

On January 1, 2019, the Company adopted ASU 2016-02, Leases as modified subsequently by ASUs 2018-01, 2018-10, 2018-11, 2018-20 and 2019-01(Topic 842). The core principle of these ASUs is to improve transparency and comparability related to the accounting and reporting of leasing arrangements, including balance sheet recognition for assets and liabilities associated with rights and obligations created by leases with terms greater than twelve months, among other changes.

The Company utilized the simplified modified retrospective transition method that allowed for a cumulative-effect adjustment in the period of adoption, and did not restate prior periods. Additionally, the Company elected the practical expedients package permitted under the transition guidance. Adoption of the new standard resulted in the recording right of use (ROU) assets and lease liabilities of approximately $208 million and $205 million, respectively as of January 1, 2019 related to operating and finance leases. Adoption of the standard did not materially impact the Company’s Condensed Consolidated Statements of Earnings, Comprehensive Earnings and Statements of Cash Flows. See Note 5 to the Financial Statements.

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REVENUE

6 Months Ended

Jun. 30, 2019

Revenue from Contract with Customer [Abstract]

REVENUE

REVENUE

Company revenue is primarily comprised of MRO product sales and related activities, such as freight and services. Total service revenue is not material and accounted for approximately 1% of the Company's revenue for the three and six months ended June 30, 2019 and 2018, respectively.

Grainger serves a large number of customers in diverse industries, which are subject to different economic and market specific factors. The Company's presentation of revenue by industry most reasonably depicts how the nature, amount, timing and uncertainty of Company revenue and cash flows are affected by economic and market specific factors. The following table presents the Company's percentage of revenue by reportable segment and by major customer industry:

	Three Months Ended June 30,
	2019						2018
	U.S.		Canada		Total Company (2)		U.S.		Canada		Total Company (2)
Government	19	%	6	%	14	%	19	%	5	%	14	%
Heavy Manufacturing	19	%	20	%	17	%	19	%	21	%	18	%
Light Manufacturing	13	%	6	%	11	%	13	%	6	%	11	%
Transportation	5	%	8	%	5	%	5	%	7	%	5	%
Commercial	17	%	9	%	13	%	16	%	10	%	13	%
Retail/Wholesale	8	%	4	%	7	%	8	%	4	%	7	%
Contractors	10	%	11	%	8	%	10	%	11	%	8	%
Natural Resources	3	%	32	%	4	%	3	%	33	%	4	%
Other (1)	6	%	4	%	21	%	7	%	3	%	20	%
Total net sales to external customers	100	%	100	%	100	%	100	%	100	%	100	%
Percent of Total Company Revenue	72	%	5	%	100	%	72	%	6	%	100	%

	Six Months Ended June 30,
	2019						2018
	U.S.		Canada		Total Company (2)		U.S.		Canada		Total Company (2)
Government	18	%	6	%	13	%	18	%	6	%	14	%
Heavy Manufacturing	19	%	21	%	18	%	20	%	20	%	18	%
Light Manufacturing	13	%	6	%	11	%	13	%	5	%	11	%
Transportation	6	%	8	%	5	%	5	%	8	%	5	%
Commercial	17	%	9	%	13	%	16	%	10	%	13	%
Retail/Wholesale	8	%	4	%	7	%	8	%	4	%	7	%
Contractors	10	%	10	%	8	%	10	%	12	%	8	%
Natural Resources	3	%	32	%	4	%	3	%	32	%	4	%
Other (1)	6	%	4	%	21	%	7	%	3	%	20	%
Total net sales to external customers	100	%	100	%	100	%	100	%	100	%	100	%
Percent of Total Company Revenue	72	%	5	%	100	%	72	%	6	%	100	%

(1) Other category primarily includes revenue from individual customers not aligned to major industry segment, including small businesses and consumers and intersegment net sales.

(2) Total Company includes other businesses, which include the Company's endless assortment businesses and operations in Europe, Asia and Latin America and account for approximately 23% of revenue for the three and six months ended June 30, 2019 and 22% of revenue for the three and six months ended June 30 2018.

Total accrued sales returns were approximately $27 million and $29 million as of June 30, 2019 and December 31, 2018, respectively and are reported as a reduction of Accounts receivable. Total accrued sales incentives were approximately $54 million and $62 million as of June 30, 2019 and December 31, 2018, respectively and are reported as part of Accrued expenses. The Company did not have any material unsatisfied performance obligations, contract assets or liabilities as of June 30, 2019 and December 31, 2018.

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PROPERTY, BUILDINGS AND EQUIPMENT

6 Months Ended

Jun. 30, 2019

Property, Plant and Equipment [Abstract]

PROPERTY, BUILDINGS AND EQUIPMENT

PROPERTY, BUILDINGS AND EQUIPMENT

Property, buildings and equipment consisted of the following (in millions of dollars):

	As of
	June 30, 2019		December 31, 2018
Land	$	318	$	318
Building, structures and improvements	1,332		1,338
Furniture, fixtures, machinery and equipment	1,774		1,785
Property, buildings and equipment	$	3,424	$	3,441
Less: Accumulated depreciation and amortization	2,044		2,089
Property, buildings and equipment, net	$	1,380	$	1,352

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LEASES

6 Months Ended

Jun. 30, 2019

Leases [Abstract]

LEASES

LEASES

The Company leases certain properties and buildings (including branches, warehouses, distribution centers and office space) and equipment under various arrangements which provide the right to use the underlying asset and require lease payments for the lease term. The Company’s lease portfolio consists mainly of operating leases which expire at various dates through 2036. Finance leases and service contracts with lease arrangements are not material and the following disclosures pertain to the Company’s operating leases.

Many of the property and building lease agreements obligate the Company to pay real estate taxes, insurance and certain maintenance costs (hereinafter referred to as non-lease components). Certain of the Company’s lease arrangements contain renewal provisions from 1 to 30 years, exercisable at the Company's option. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The Company determines if an arrangement is an operating lease at inception. Leases with an initial term of 12 months or less are not recorded on the balance sheet. All other leases are recorded on the balance sheet with ROU assets representing the right to use the underlying asset for the lease term and lease liabilities representing the obligation to make lease payments arising from the lease.

ROU assets and lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term and include options to extend or terminate the lease when they are reasonably certain to be exercised. The present value of lease payments is determined primarily using the incremental borrowing rate based on the information available at lease commencement date. Lease agreements with lease and non-lease components are generally accounted for as a single lease component. The Company’s operating lease expense is recognized on a straight-line basis over the lease term and is recorded in Selling, general and administrative expenses (SG&A).

Information related to operating leases is as follows (in millions of dollars):

	As of June 30, 2019
ROU Assets
Other assets	$	200
Operating lease liabilities
Accrued expenses	52
Other non-current liabilities	150
Total operating lease liabilities	$	202

	Six Months Ended June 30, 2019
Weighted average remaining lease term	7 years
Weighted average incremental borrowing rate	2.4		%
Cash paid for operating leases	$	32
ROU assets obtained in exchange for operating lease obligations	8

Rent expense included in SG&A for the three and six months ended June 30, 2019, was $16 million and $35 million, respectively.

Maturities of operating lease liabilities were as follows as of June 30, 2019 (in millions of dollars):

Year	Maturity of operating lease liabilities
2019 (excluding six months)	$	30
2020	52
2021	40
2022	31
2023	21
Thereafter	36
Total lease payments	210
Less interest	(8		)
Present value of lease liabilities	$	202

As of June 30, 2019, the Company's future operating lease obligations that have not yet commenced are immaterial.

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GOODWILL AND OTHER INTANGIBLE ASSETS

6 Months Ended

Jun. 30, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL AND OTHER INTANGIBLE ASSETS

GOODWILL AND INTANGIBLE ASSETS

The balances and changes in the carrying amount of Goodwill by segment are as follows (in millions of dollars):

	United States		Canada			Other businesses			Total
Balance at January 1, 2018	$	192	$	130		$	222		$	544
Impairment	—		—			(105		)	(105		)
Translation	—		(10		)	(5		)	(15		)
Balance at December 31, 2018	192		120			112			424
Translation	—		5			—			5
Balance at June 30, 2019	$	192	$	125		$	112		$	429

The cumulative goodwill impairment charges by segment as of June 30, 2019 and December 31, 2018 are as follows (in millions of dollars):

	United States		Canada		Other businesses		Total
Cumulative goodwill impairment charges	$	24	$	32	$	176	$	232

The balances and changes in Intangible assets, net are as follows (in millions of dollars):

		June 30, 2019						December 31, 2018
	Weighted average life	Gross carrying amount		Accumulated amortization		Net carrying amount		Gross carrying amount		Accumulated amortization		Net carrying amount
Customer lists and relationships	14.4 years	$	397	$	209	$	188	$	410	$	204	$	206
Trademarks, trade names and other	13.8 years	37		20		17		24		15		9
Non-amortized trade names and other		99		—		99		99		—		99
Capitalized software	4.3 years	605		472		133		657		511		146
Total intangible assets	8.8 years	$	1,138	$	701	$	437	$	1,190	$	730	$	460

Grainger tests reporting units' goodwill and intangible assets for impairment annually during the fourth quarter and more frequently if impairment indicators exist. Accordingly, Grainger periodically performs qualitative assessments of significant events and circumstances such as reporting units' historical and current results, assumptions regarding future performance, strategic initiatives and overall economic factors to determine the existence of impairment indicators and assess if it is more likely than not that the fair value of reporting units or intangible assets is less than their carrying value and if a quantitative impairment test is necessary.

Grainger's qualitative assessment for the six months ended June 30, 2019 did not indicate the presence of any impairment triggering events. Changes in assumptions regarding future performance, as well as the ability to execute on growth initiatives and productivity improvements, may have a significant impact on future cash flows. Likewise, an unfavorable economic environment and changes in market conditions, discount rates or other factors may result in future impairments of goodwill and intangible assets.

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RESTRUCTURING

6 Months Ended

Jun. 30, 2019

Restructuring and Related Activities [Abstract]

RESTRUCTURING RESERVES

RESTRUCTURING

The Company has substantially completed its various restructuring actions initiated during 2017 and 2018. During the three and six month ended June 30, 2019, the restructuring activity was not material. In the three and six months ended June 30, 2018, the Company recorded approximately $15 million and $23 million, respectively of restructuring costs. These charges primarily consisted of involuntary employee termination costs in Canada and the U.S., net of gains from the sales of branches and are included in SG&A. The reserve balance as of June 30, 2019 and December 31, 2018 was approximately $24 million and $47 million, respectively, and is primarily included in Accrued compensation and benefits. The majority of the remaining reserve is expected to be paid during 2019.

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SHORT-TERM AND LONG-TERM DEBT

6 Months Ended

Jun. 30, 2019

Debt Disclosure [Abstract]

SHORT-TERM AND LONG-TERM DEBT

SHORT-TERM AND LONG-TERM DEBT

Short-term debt consisted of outstanding lines of credit of $51 million and $49 million at June 30, 2019 and December 31, 2018, respectively. Long-term debt consisted of the following (in millions of dollars):

	As of June 30, 2019						As of December 31, 2018
	Carrying Value			Fair Value			Carrying Value			Fair Value
4.60% senior notes due 2045	$	1,000		$	1,112		$	1,000		$	1,026
3.75% senior notes due 2046	400			393			400			357
4.20% senior notes due 2047	400			425			400			383
British pound term loan	167			167			174			174
Euro term loan	125			125			126			126
Canadian dollar revolving credit facility	46			46			44			44
Other	45			45			49			49
Subtotal	2,183			2,313			2,193			2,159
Less current maturities	(81		)	(81		)	(81		)	(81		)
Debt issuance costs and discounts, net of amortization	(22		)	(22		)	(22		)	(22		)
Long-term debt (less current maturities)	$	2,080		$	2,210		$	2,090		$	2,056

The estimated fair value of the Company’s senior notes was based on available external pricing data and current market rates for similar debt instruments, among other factors, which are classified as level 2 inputs within the fair value hierarchy. The carrying value of other long-term debt approximates fair value due to their variable interest rates.

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SEGMENT INFORMATION

6 Months Ended

Jun. 30, 2019

Segment Reporting [Abstract]

SEGMENT INFORMATION

    SEGMENT INFORMATION

Grainger's two reportable segments are the U.S. and Canada. The U.S. reportable segment reflects the results of Grainger's U.S. businesses. The Canada reportable segment reflects the results of Acklands-Grainger, Inc. and its subsidiaries. Other businesses include the endless assortment businesses, Zoro Tools, Inc. (Zoro) in the U.S. and MonotaRO Co. (MonotaRO) in Japan, and smaller high-touch solutions businesses in Europe, Asia and Mexico. These businesses individually do not meet the criteria of a reportable segment.

Following is a summary of segment results (in millions of dollars):

	Three Months Ended June 30, 2019
	U.S.			Canada		Total Reportable Segments			Other businesses		Total
Total net sales	$	2,222		$	135	$	2,357		$	663	$	3,020
Intersegment net sales	(127		)	—		(127		)	—		(127		)
Net sales to external customers	$	2,095		$	135	$	2,230		$	663	$	2,893
Segment operating earnings	$	381		$	1	$	382		$	27	$	409

	Three Months Ended June 30, 2018
	U.S.			Canada			Total Reportable Segments			Other businesses		Total
Total net sales	$	2,175		$	177		$	2,352		$	622	$	2,974
Intersegment net sales	(113		)	—			(113		)	—		(113		)
Net sales to external customers	$	2,062		$	177		$	2,239		$	622	$	2,861
Segment operating earnings	$	349		$	(14	)	$	335		$	41	$	376

	Six Months Ended June 30, 2019
	U.S.			Canada			Total Reportable Segments			Other businesses			Total
Total net sales	$	4,371		$	271		$	4,642		$	1,296		$	5,938
Intersegment net sales	(245		)	—			(245		)	(1		)	(246		)
Net sales to external customers	$	4,126		$	271		$	4,397		$	1,295		$	5,692
Segment operating earnings	$	745		$	(4	)	$	741		$	57		$	798

	Six Months Ended June 30, 2018
	U.S.			Canada			Total Reportable Segments			Other businesses			Total
Total net sales	$	4,283		$	359		$	4,642		$	1,210		$	5,852
Intersegment net sales	(223		)	—			(223		)	(2		)	(225		)
Net sales to external customers	$	4,060		$	359		$	4,419		$	1,208		$	5,627
Segment operating earnings	$	706		$	(34	)	$	672		$	77		$	749

Following are reconciliations of segment information with the consolidated totals per the financial statements (in millions of dollars):

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Operating earnings:
Total operating earnings for reportable segments	$	382		$	335		$	741		$	672
Other businesses	27			41			57			77
Unallocated expenses	(29		)	(32		)	(55		)	(70		)
Total consolidated operating earnings	$	380		$	344		$	743		$	679
	As of
	June 30, 2019			December 31, 2018
Assets:
United States	$	2,625		$	2,496
Canada	172			188
Assets for reportable segments	2,797			2,684
Other current and noncurrent assets	3,087			2,879
Unallocated assets	108			310
Total consolidated assets	$	5,992		$	5,873

The Company is a broad-line distributor of MRO products and services. Products are regularly added and deleted from the Company's inventory. Accordingly, it would be impractical to provide sales information by product category due to the way the business is managed.

Unallocated expenses primarily relate to the Company's headquarters support services and intercompany eliminations, which are not part of any reportable segment. Unallocated expenses include supply chain, product management and procurement, finance, communications, human resources, information systems, legal and compliance, internal audit and real estate.

Assets for reportable segments include net accounts receivable and first-in, first-out inventory which are reported to the Company's Chief Operating Decision Maker. Other current and non-current assets include all other assets of the reportable segments. Unallocated assets are primarily comprised of non-operating cash and cash equivalents, property, buildings and equipment, net, and certain prepaid expenses related to the Company's headquarters support services.

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CONTINGENCIES AND LEGAL MATTERS

6 Months Ended

Jun. 30, 2019

Commitments and Contingencies Disclosure [Abstract]

CONTINGENCIES AND LEGAL MATTERS

CONTINGENCIES AND LEGAL MATTERS

From time to time the Company is involved in various legal and administrative proceedings that are incidental to its business, including claims related to product liability, general negligence, contract disputes, cybersecurity incidents, privacy matters, environmental issues, wage and hour laws, intellectual property, employment practices, advertising laws, regulatory compliance, and other matters and actions brought by employees, customers, competitors, suppliers and governmental entities. As a government contractor selling to federal, state and local governmental entities, the Company is also subject to governmental and regulatory inquiries, audits and other proceedings, including those related to contract administration and pricing compliance. It is not expected that the ultimate resolution of any of these matters will have, either individually or in the aggregate, a material adverse effect on the Company's consolidated financial position or results of operations.

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NEW ACCOUNTING STANDARDS (Policies)

6 Months Ended

Jun. 30, 2019

Accounting Policies [Abstract]

New Accounting Standards

NEW ACCOUNTING STANDARDS

In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments as modified by subsequently issued ASUs 2018-19, 2019-04 and 2019-05. This ASU requires estimating all expected credit losses for certain types of financial instruments, including trade receivables, held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. The effective date of this ASU is for fiscal years and interim periods beginning after December 15, 2019 and the Company plans to adopt this ASU prospectively. The Company is evaluating the impact of this ASU and does not expect a material impact to the Company's Financial Statements.

On January 1, 2019, the Company adopted ASU 2016-02, Leases as modified subsequently by ASUs 2018-01, 2018-10, 2018-11, 2018-20 and 2019-01(Topic 842). The core principle of these ASUs is to improve transparency and comparability related to the accounting and reporting of leasing arrangements, including balance sheet recognition for assets and liabilities associated with rights and obligations created by leases with terms greater than twelve months, among other changes.

The Company utilized the simplified modified retrospective transition method that allowed for a cumulative-effect adjustment in the period of adoption, and did not restate prior periods. Additionally, the Company elected the practical expedients package permitted under the transition guidance. Adoption of the new standard resulted in the recording right of use (ROU) assets and lease liabilities of approximately $208 million and $205 million, respectively as of January 1, 2019 related to operating and finance leases. Adoption of the standard did not materially impact the Company’s Condensed Consolidated Statements of Earnings, Comprehensive Earnings and Statements of Cash Flows. See Note 5 to the Financial Statements.

Leases

LEASES

The Company leases certain properties and buildings (including branches, warehouses, distribution centers and office space) and equipment under various arrangements which provide the right to use the underlying asset and require lease payments for the lease term. The Company’s lease portfolio consists mainly of operating leases which expire at various dates through 2036. Finance leases and service contracts with lease arrangements are not material and the following disclosures pertain to the Company’s operating leases.

Many of the property and building lease agreements obligate the Company to pay real estate taxes, insurance and certain maintenance costs (hereinafter referred to as non-lease components). Certain of the Company’s lease arrangements contain renewal provisions from 1 to 30 years, exercisable at the Company's option. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The Company determines if an arrangement is an operating lease at inception. Leases with an initial term of 12 months or less are not recorded on the balance sheet. All other leases are recorded on the balance sheet with ROU assets representing the right to use the underlying asset for the lease term and lease liabilities representing the obligation to make lease payments arising from the lease.

ROU assets and lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term and include options to extend or terminate the lease when they are reasonably certain to be exercised. The present value of lease payments is determined primarily using the incremental borrowing rate based on the information available at lease commencement date. Lease agreements with lease and non-lease components are generally accounted for as a single lease component. The Company’s operating lease expense is recognized on a straight-line basis over the lease term and is recorded in Selling, general and administrative expenses (SG&A).

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GOODWILL AND OTHER INTANGIBLE ASSETS (Policies)	6 Months Ended
	Jun. 30, 2019
Goodwill and Intangible Assets Disclosure [Abstract]
Goodwill and Intangible Assets, Goodwill, Policy	Grainger tests reporting units' goodwill and intangible assets for impairment annually during the fourth quarter and more frequently if impairment indicators exist. Accordingly, Grainger periodically performs qualitative assessments of significant events and circumstances such as reporting units' historical and current results, assumptions regarding future performance, strategic initiatives and overall economic factors to determine the existence of impairment indicators and assess if it is more likely than not that the fair value of reporting units or intangible assets is less than their carrying value and if a quantitative impairment test is necessary.

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REVENUE (Tables)

6 Months Ended

Jun. 30, 2019

Revenue from Contract with Customer [Abstract]

Disaggregation of Revenues

The following table presents the Company's percentage of revenue by reportable segment and by major customer industry:

	Three Months Ended June 30,
	2019						2018
	U.S.		Canada		Total Company (2)		U.S.		Canada		Total Company (2)
Government	19	%	6	%	14	%	19	%	5	%	14	%
Heavy Manufacturing	19	%	20	%	17	%	19	%	21	%	18	%
Light Manufacturing	13	%	6	%	11	%	13	%	6	%	11	%
Transportation	5	%	8	%	5	%	5	%	7	%	5	%
Commercial	17	%	9	%	13	%	16	%	10	%	13	%
Retail/Wholesale	8	%	4	%	7	%	8	%	4	%	7	%
Contractors	10	%	11	%	8	%	10	%	11	%	8	%
Natural Resources	3	%	32	%	4	%	3	%	33	%	4	%
Other (1)	6	%	4	%	21	%	7	%	3	%	20	%
Total net sales to external customers	100	%	100	%	100	%	100	%	100	%	100	%
Percent of Total Company Revenue	72	%	5	%	100	%	72	%	6	%	100	%

	Six Months Ended June 30,
	2019						2018
	U.S.		Canada		Total Company (2)		U.S.		Canada		Total Company (2)
Government	18	%	6	%	13	%	18	%	6	%	14	%
Heavy Manufacturing	19	%	21	%	18	%	20	%	20	%	18	%
Light Manufacturing	13	%	6	%	11	%	13	%	5	%	11	%
Transportation	6	%	8	%	5	%	5	%	8	%	5	%
Commercial	17	%	9	%	13	%	16	%	10	%	13	%
Retail/Wholesale	8	%	4	%	7	%	8	%	4	%	7	%
Contractors	10	%	10	%	8	%	10	%	12	%	8	%
Natural Resources	3	%	32	%	4	%	3	%	32	%	4	%
Other (1)	6	%	4	%	21	%	7	%	3	%	20	%
Total net sales to external customers	100	%	100	%	100	%	100	%	100	%	100	%
Percent of Total Company Revenue	72	%	5	%	100	%	72	%	6	%	100	%

(1) Other category primarily includes revenue from individual customers not aligned to major industry segment, including small businesses and consumers and intersegment net sales.

(2) Total Company includes other businesses, which include the Company's endless assortment businesses and operations in Europe, Asia and Latin America and account for approximately 23% of revenue for the three and six months ended June 30, 2019 and 22% of revenue for the three and six months ended June 30 2018.

XML

PROPERTY, BUILDINGS AND EQUIPMENT (Tables)

6 Months Ended

Jun. 30, 2019

Property, Plant and Equipment [Line Items]

PROPERTY, BUILDINGS AND EQUIPMENT

Property, buildings and equipment consisted of the following (in millions of dollars):

	As of
	June 30, 2019		December 31, 2018
Land	$	318	$	318
Building, structures and improvements	1,332		1,338
Furniture, fixtures, machinery and equipment	1,774		1,785
Property, buildings and equipment	$	3,424	$	3,441
Less: Accumulated depreciation and amortization	2,044		2,089
Property, buildings and equipment, net	$	1,380	$	1,352

XML

LEASES (Tables)

6 Months Ended

Jun. 30, 2019

Leases [Abstract]

Schedule of Assets and Liabilities

Information related to operating leases is as follows (in millions of dollars):

	As of June 30, 2019
ROU Assets
Other assets	$	200
Operating lease liabilities
Accrued expenses	52
Other non-current liabilities	150
Total operating lease liabilities	$	202

Schedule of Operating Lease Information

	Six Months Ended June 30, 2019
Weighted average remaining lease term	7 years
Weighted average incremental borrowing rate	2.4		%
Cash paid for operating leases	$	32
ROU assets obtained in exchange for operating lease obligations	8

Schedule of Maturities of Operating Lease Liabilities

Maturities of operating lease liabilities were as follows as of June 30, 2019 (in millions of dollars):

Year	Maturity of operating lease liabilities
2019 (excluding six months)	$	30
2020	52
2021	40
2022	31
2023	21
Thereafter	36
Total lease payments	210
Less interest	(8		)
Present value of lease liabilities	$	202

XML

GOODWILL AND OTHER INTANGIBLE ASSETS (Tables)

6 Months Ended

Jun. 30, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Goodwill

The balances and changes in the carrying amount of Goodwill by segment are as follows (in millions of dollars):

	United States		Canada			Other businesses			Total
Balance at January 1, 2018	$	192	$	130		$	222		$	544
Impairment	—		—			(105		)	(105		)
Translation	—		(10		)	(5		)	(15		)
Balance at December 31, 2018	192		120			112			424
Translation	—		5			—			5
Balance at June 30, 2019	$	192	$	125		$	112		$	429

The cumulative goodwill impairment charges by segment as of June 30, 2019 and December 31, 2018 are as follows (in millions of dollars):

	United States		Canada		Other businesses		Total
Cumulative goodwill impairment charges	$	24	$	32	$	176	$	232

Schedule of Finite-Lived Intangible Assets By Major Class

The balances and changes in Intangible assets, net are as follows (in millions of dollars):

		June 30, 2019						December 31, 2018
	Weighted average life	Gross carrying amount		Accumulated amortization		Net carrying amount		Gross carrying amount		Accumulated amortization		Net carrying amount
Customer lists and relationships	14.4 years	$	397	$	209	$	188	$	410	$	204	$	206
Trademarks, trade names and other	13.8 years	37		20		17		24		15		9
Non-amortized trade names and other		99		—		99		99		—		99
Capitalized software	4.3 years	605		472		133		657		511		146
Total intangible assets	8.8 years	$	1,138	$	701	$	437	$	1,190	$	730	$	460

XML

SHORT-TERM AND LONG-TERM DEBT (Tables)

6 Months Ended

Jun. 30, 2019

Debt Disclosure [Abstract]

Schedule of Long-Term Debt Instruments

Long-term debt consisted of the following (in millions of dollars):

	As of June 30, 2019						As of December 31, 2018
	Carrying Value			Fair Value			Carrying Value			Fair Value
4.60% senior notes due 2045	$	1,000		$	1,112		$	1,000		$	1,026
3.75% senior notes due 2046	400			393			400			357
4.20% senior notes due 2047	400			425			400			383
British pound term loan	167			167			174			174
Euro term loan	125			125			126			126
Canadian dollar revolving credit facility	46			46			44			44
Other	45			45			49			49
Subtotal	2,183			2,313			2,193			2,159
Less current maturities	(81		)	(81		)	(81		)	(81		)
Debt issuance costs and discounts, net of amortization	(22		)	(22		)	(22		)	(22		)
Long-term debt (less current maturities)	$	2,080		$	2,210		$	2,090		$	2,056

XML

SEGMENT INFORMATION (Tables)

6 Months Ended

Jun. 30, 2019

Segment Reporting [Abstract]

Summary of Segment Results

Following is a summary of segment results (in millions of dollars):

	Three Months Ended June 30, 2019
	U.S.			Canada		Total Reportable Segments			Other businesses		Total
Total net sales	$	2,222		$	135	$	2,357		$	663	$	3,020
Intersegment net sales	(127		)	—		(127		)	—		(127		)
Net sales to external customers	$	2,095		$	135	$	2,230		$	663	$	2,893
Segment operating earnings	$	381		$	1	$	382		$	27	$	409

	Three Months Ended June 30, 2018
	U.S.			Canada			Total Reportable Segments			Other businesses		Total
Total net sales	$	2,175		$	177		$	2,352		$	622	$	2,974
Intersegment net sales	(113		)	—			(113		)	—		(113		)
Net sales to external customers	$	2,062		$	177		$	2,239		$	622	$	2,861
Segment operating earnings	$	349		$	(14	)	$	335		$	41	$	376

	Six Months Ended June 30, 2019
	U.S.			Canada			Total Reportable Segments			Other businesses			Total
Total net sales	$	4,371		$	271		$	4,642		$	1,296		$	5,938
Intersegment net sales	(245		)	—			(245		)	(1		)	(246		)
Net sales to external customers	$	4,126		$	271		$	4,397		$	1,295		$	5,692
Segment operating earnings	$	745		$	(4	)	$	741		$	57		$	798

	Six Months Ended June 30, 2018
	U.S.			Canada			Total Reportable Segments			Other businesses			Total
Total net sales	$	4,283		$	359		$	4,642		$	1,210		$	5,852
Intersegment net sales	(223		)	—			(223		)	(2		)	(225		)
Net sales to external customers	$	4,060		$	359		$	4,419		$	1,208		$	5,627
Segment operating earnings	$	706		$	(34	)	$	672		$	77		$	749

Schedule of Reconciliation of Operating Earnings from Segment to Consolidated

Following are reconciliations of segment information with the consolidated totals per the financial statements (in millions of dollars):

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Operating earnings:
Total operating earnings for reportable segments	$	382		$	335		$	741		$	672
Other businesses	27			41			57			77
Unallocated expenses	(29		)	(32		)	(55		)	(70		)
Total consolidated operating earnings	$	380		$	344		$	743		$	679
	As of
	June 30, 2019			December 31, 2018
Assets:
United States	$	2,625		$	2,496
Canada	172			188
Assets for reportable segments	2,797			2,684
Other current and noncurrent assets	3,087			2,879
Unallocated assets	108			310
Total consolidated assets	$	5,992		$	5,873

Schedule of Reconciliation of Assets from Segment to Consolidated

Following are reconciliations of segment information with the consolidated totals per the financial statements (in millions of dollars):

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Operating earnings:
Total operating earnings for reportable segments	$	382		$	335		$	741		$	672
Other businesses	27			41			57			77
Unallocated expenses	(29		)	(32		)	(55		)	(70		)
Total consolidated operating earnings	$	380		$	344		$	743		$	679
	As of
	June 30, 2019			December 31, 2018
Assets:
United States	$	2,625		$	2,496
Canada	172			188
Assets for reportable segments	2,797			2,684
Other current and noncurrent assets	3,087			2,879
Unallocated assets	108			310
Total consolidated assets	$	5,992		$	5,873

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NEW ACCOUNTING STANDARDS (Details) - USD ($) $ in Millions	Jun. 30, 2019	Jan. 01, 2019
Accounting Policies [Abstract]
Operating lease, right-of-use asset	$ 200	$ 208
Operating lease, liability	$ 202	205
Finance lease, right-of-use asset		208
Finance lease, liability		$ 205

XML

REVENUE Narrative (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Disaggregation of Revenue [Line Items]
Accrued sales returns	$ 27		$ 27		$ 29
Accrued sales incentives	$ 54		$ 54		$ 62
Service Revenue [Member]
Disaggregation of Revenue [Line Items]
Percent of Total Company Revenue	1.00%	1.00%	1.00%	1.00%

XML

REVENUE (Details)	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Disaggregation of Revenue [Line Items]
Revenue From Contract With Customer, Excluding Assessed Tax, Percentage	100.00%	100.00%	100.00%	100.00%
Revenue From Contract With Customer, Excluding Assessed Tax, Percentage Of Company-Wide Revenue	100.00%	100.00%	100.00%	100.00%
Government [Member]
Disaggregation of Revenue [Line Items]
Revenue From Contract With Customer, Excluding Assessed Tax, Percentage	14.00%	14.00%	13.00%	14.00%
Heavy Manufacturing [Member]
Disaggregation of Revenue [Line Items]
Revenue From Contract With Customer, Excluding Assessed Tax, Percentage	17.00%	18.00%	18.00%	18.00%
Light Manufacturing [Member]
Disaggregation of Revenue [Line Items]
Revenue From Contract With Customer, Excluding Assessed Tax, Percentage	11.00%	11.00%	11.00%	11.00%
Transportation [Member]
Disaggregation of Revenue [Line Items]
Revenue From Contract With Customer, Excluding Assessed Tax, Percentage	5.00%	5.00%	5.00%	5.00%
Commercial [Member]
Disaggregation of Revenue [Line Items]
Revenue From Contract With Customer, Excluding Assessed Tax, Percentage	13.00%	13.00%	13.00%	13.00%
Retail/Wholesale [Member]
Disaggregation of Revenue [Line Items]
Revenue From Contract With Customer, Excluding Assessed Tax, Percentage	7.00%	7.00%	7.00%	7.00%
Contractors [Member]
Disaggregation of Revenue [Line Items]
Revenue From Contract With Customer, Excluding Assessed Tax, Percentage	8.00%	8.00%	8.00%	8.00%
Natural Resources [Member]
Disaggregation of Revenue [Line Items]
Revenue From Contract With Customer, Excluding Assessed Tax, Percentage	4.00%	4.00%	4.00%	4.00%
Other [Member]
Disaggregation of Revenue [Line Items]
Revenue From Contract With Customer, Excluding Assessed Tax, Percentage	21.00%	20.00%	21.00%	20.00%
Other Segments [Member]
Disaggregation of Revenue [Line Items]
Percent of Total Company Revenue	23.00%	23.00%	22.00%	22.00%
United States [Member]
Disaggregation of Revenue [Line Items]
Revenue From Contract With Customer, Excluding Assessed Tax, Percentage	100.00%	100.00%	100.00%	100.00%
Revenue From Contract With Customer, Excluding Assessed Tax, Percentage Of Company-Wide Revenue	72.00%	72.00%	72.00%	72.00%
United States [Member] | Government [Member]
Disaggregation of Revenue [Line Items]
Revenue From Contract With Customer, Excluding Assessed Tax, Percentage	19.00%	19.00%	18.00%	18.00%
United States [Member] | Heavy Manufacturing [Member]
Disaggregation of Revenue [Line Items]
Revenue From Contract With Customer, Excluding Assessed Tax, Percentage	19.00%	19.00%	19.00%	20.00%
United States [Member] | Light Manufacturing [Member]
Disaggregation of Revenue [Line Items]
Revenue From Contract With Customer, Excluding Assessed Tax, Percentage	13.00%	13.00%	13.00%	13.00%
United States [Member] | Transportation [Member]
Disaggregation of Revenue [Line Items]
Revenue From Contract With Customer, Excluding Assessed Tax, Percentage	5.00%	5.00%	6.00%	5.00%
United States [Member] | Commercial [Member]
Disaggregation of Revenue [Line Items]
Revenue From Contract With Customer, Excluding Assessed Tax, Percentage	17.00%	16.00%	17.00%	16.00%
United States [Member] | Retail/Wholesale [Member]
Disaggregation of Revenue [Line Items]
Revenue From Contract With Customer, Excluding Assessed Tax, Percentage	8.00%	8.00%	8.00%	8.00%
United States [Member] | Contractors [Member]
Disaggregation of Revenue [Line Items]
Revenue From Contract With Customer, Excluding Assessed Tax, Percentage	10.00%	10.00%	10.00%	10.00%
United States [Member] | Natural Resources [Member]
Disaggregation of Revenue [Line Items]
Revenue From Contract With Customer, Excluding Assessed Tax, Percentage	3.00%	3.00%	3.00%	3.00%
United States [Member] | Other [Member]
Disaggregation of Revenue [Line Items]
Revenue From Contract With Customer, Excluding Assessed Tax, Percentage	6.00%	7.00%	6.00%	7.00%
Canada [Member]
Disaggregation of Revenue [Line Items]
Revenue From Contract With Customer, Excluding Assessed Tax, Percentage	100.00%	100.00%	100.00%	100.00%
Revenue From Contract With Customer, Excluding Assessed Tax, Percentage Of Company-Wide Revenue	5.00%	6.00%	5.00%	6.00%
Canada [Member] | Government [Member]
Disaggregation of Revenue [Line Items]
Revenue From Contract With Customer, Excluding Assessed Tax, Percentage	6.00%	5.00%	6.00%	6.00%
Canada [Member] | Heavy Manufacturing [Member]
Disaggregation of Revenue [Line Items]
Revenue From Contract With Customer, Excluding Assessed Tax, Percentage	20.00%	21.00%	21.00%	20.00%
Canada [Member] | Light Manufacturing [Member]
Disaggregation of Revenue [Line Items]
Revenue From Contract With Customer, Excluding Assessed Tax, Percentage	6.00%	6.00%	6.00%	5.00%
Canada [Member] | Transportation [Member]
Disaggregation of Revenue [Line Items]
Revenue From Contract With Customer, Excluding Assessed Tax, Percentage	8.00%	7.00%	8.00%	8.00%
Canada [Member] | Commercial [Member]
Disaggregation of Revenue [Line Items]
Revenue From Contract With Customer, Excluding Assessed Tax, Percentage	9.00%	10.00%	9.00%	10.00%
Canada [Member] | Retail/Wholesale [Member]
Disaggregation of Revenue [Line Items]
Revenue From Contract With Customer, Excluding Assessed Tax, Percentage	4.00%	4.00%	4.00%	4.00%
Canada [Member] | Contractors [Member]
Disaggregation of Revenue [Line Items]
Revenue From Contract With Customer, Excluding Assessed Tax, Percentage	11.00%	11.00%	10.00%	12.00%
Canada [Member] | Natural Resources [Member]
Disaggregation of Revenue [Line Items]
Revenue From Contract With Customer, Excluding Assessed Tax, Percentage	32.00%	33.00%	32.00%	32.00%
Canada [Member] | Other [Member]
Disaggregation of Revenue [Line Items]
Revenue From Contract With Customer, Excluding Assessed Tax, Percentage	4.00%	3.00%	4.00%	3.00%

XML

PROPERTY, BUILDINGS AND EQUIPMENT (Details) - USD ($) $ in Millions	Jun. 30, 2019	Dec. 31, 2018
Property, Plant and Equipment [Line Items]
PROPERTY, BUILDINGS AND EQUIPMENT	$ 3,424	$ 3,441
Less: Accumulated depreciation and amortization	2,044	2,089
PROPERTY, BUILDINGS AND EQUIPMENT, NET	1,380	1,352
Land [Member]
Property, Plant and Equipment [Line Items]
PROPERTY, BUILDINGS AND EQUIPMENT	318	318
Building, Structures and Improvements [Member]
Property, Plant and Equipment [Line Items]
PROPERTY, BUILDINGS AND EQUIPMENT	1,332	1,338
Furniture, Fixtures, Machinery and Equipment [Member]
Property, Plant and Equipment [Line Items]
PROPERTY, BUILDINGS AND EQUIPMENT	$ 1,774	$ 1,785

XML

LEASES - Narrative (Details)	Jun. 30, 2019
Minimum [Member]
Lessee, Lease, Description [Line Items]
Lease renewal term	1 year
Maximum [Member]
Lessee, Lease, Description [Line Items]
Lease renewal term	30 years

XML

LEASES - Schedule of Operating Lease Information (Details) - USD ($) $ in Millions	3 Months Ended	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2019	Jan. 01, 2019
Leases [Abstract]
Other assets	$ 200	$ 200	$ 208
Accrued expenses	52	52
Other non-current liabilities	150	150
Total operating lease liabilities	$ 202	$ 202	$ 205
Weighted average remaining lease term	7 years	7 years
Weighted average incremental borrowing rate	2.40%	2.40%
Rent expense included in SG&A for the three months ended June 30, 2019	$ 16	$ 35
Cash paid for operating leases for the three months ended June 30, 2019		32
ROU assets obtained in exchange for operating lease obligations		$ 8

XML

LEASES - Schedule of Maturities of Operating Leases (Details) - USD ($) $ in Millions	Jun. 30, 2019	Jan. 01, 2019
Leases [Abstract]
2019 (excluding six months)	$ 30
2020	52
2021	40
2022	31
2023	21
Thereafter	36
Total lease payments	210
Less interest	(8)
Present value of lease liabilities	$ 202	$ 205

XML

GOODWILL AND OTHER INTANGIBLE ASSETS Balances and Changes in Carrying Amounts of Goodwill (Details) - USD ($) $ in Millions	6 Months Ended	12 Months Ended
	Jun. 30, 2019	Dec. 31, 2018
Goodwill [Roll Forward]
Goodwill, beginning balance	$ 424	$ 544
Impairment		(105)
Translation	5	(15)
Goodwill, ending balance	429	424
Goodwill, Impaired, Accumulated Impairment Loss [Abstract]
Cumulative goodwill impairment charges, beginning balance	232
Cumulative goodwill impairment charges, ending balance	232	232
United States [Member]
Goodwill [Roll Forward]
Goodwill, beginning balance	192	192
Impairment		0
Translation	0	0
Goodwill, ending balance	192	192
Goodwill, Impaired, Accumulated Impairment Loss [Abstract]
Cumulative goodwill impairment charges, beginning balance	24
Cumulative goodwill impairment charges, ending balance	24	24
Canada [Member]
Goodwill [Roll Forward]
Goodwill, beginning balance	120	130
Impairment		0
Translation	5	(10)
Goodwill, ending balance	125	120
Goodwill, Impaired, Accumulated Impairment Loss [Abstract]
Cumulative goodwill impairment charges, beginning balance	32
Cumulative goodwill impairment charges, ending balance	32	32
Other Businesses [Member]
Goodwill [Roll Forward]
Goodwill, beginning balance	112	222
Impairment		(105)
Translation	0	(5)
Goodwill, ending balance	112	112
Goodwill, Impaired, Accumulated Impairment Loss [Abstract]
Cumulative goodwill impairment charges, beginning balance	176
Cumulative goodwill impairment charges, ending balance	$ 176	$ 176

XML

GOODWILL AND OTHER INTANGIBLE ASSETS Intangible assets included in Other assets and intangibles (Details) - USD ($) $ in Millions	6 Months Ended
	Jun. 30, 2019	Dec. 31, 2018
Total intangible assets, gross	$ 1,138	$ 1,190
Total intangible assets, net	437	460
Finite-lived intangible assets, accumulated amortization	701	730
Customer lists and relationships [Member]
Finite-lived intangible assets, gross	397	410
Finite-lived intangible assets, accumulated amortization	209	204
Finite-lived intangible assets, net	188	206
Trademarks, trade names and other [Member]
Finite-lived intangible assets, gross	37	24
Finite-lived intangible assets, accumulated amortization	20	15
Finite-lived intangible assets, net	17	9
Non-amortized trade names and other [Member]
Indefinite-lived intangible assets, carrying amount	99	99
Capitalized software [Member]
Finite-lived intangible assets, gross	605	657
Finite-lived intangible assets, accumulated amortization	472	511
Finite-lived intangible assets, net	$ 133	$ 146
Weighted average [Member]
Finite-lived intangible assets, useful life	8 years 9 months 18 days
Weighted average [Member] | Customer lists and relationships [Member]
Finite-lived intangible assets, useful life	14 years 4 months 24 days
Weighted average [Member] | Trademarks, trade names and other [Member]
Finite-lived intangible assets, useful life	13 years 9 months 18 days
Weighted average [Member] | Capitalized software [Member]
Finite-lived intangible assets, useful life	4 years 3 months 18 days

XML

RESTRUCTURING (Details) - USD ($) $ in Millions	3 Months Ended	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2018	Jun. 30, 2019	Dec. 31, 2018
Selling, General and Administrative Expenses [Member]
Restructuring Cost and Reserve [Line Items]
Restructuring related costs	$ 15	$ 23
Employee Related Liabilities, Current [Member]
Restructuring Cost and Reserve [Line Items]
Restructuring reserve balance			$ 24	$ 47

XML

SHORT-TERM AND LONG-TERM DEBT - Narrative (Details) - USD ($) $ in Millions	Jun. 30, 2019	Dec. 31, 2018
Line of Credit [Member]
Debt Instrument [Line Items]
Outstanding lines of credit	$ 51	$ 49

XML

SHORT-TERM AND LONG-TERM DEBT - Schedule of Long-Term Debt Instruments (Details) - USD ($) $ in Millions	Jun. 30, 2019	Dec. 31, 2018
Debt Instrument [Line Items]
Other	$ 45	$ 49
Other, fair value	45	49
Long-term debt, gross	2,183	2,193
Long-term debt, gross, fair value	2,313	2,159
Less current maturities	(81)	(81)
Less current maturities, fair value	(81)	(81)
Debt issuance costs and discounts, net of amortization	(22)	(22)
Debt issuance costs and discounts, fair value	(22)	(22)
Long-term debt (less current maturities)	2,080	2,090
Long-term debt, excluding current maturities, , fair value	2,210	2,056
British pound denominated term loan and revolving credit facility [Member]
Debt Instrument [Line Items]
Long-term debt	167	174
Long-term debt, fair value	167	174
Euro denominated term loan and revolving credit facility [Member]
Debt Instrument [Line Items]
Long-term debt	125	126
Long-term debt, fair value	125	126
Canadian dollar revolving credit facility [Member]
Debt Instrument [Line Items]
Long-term debt	46	44
Long-term debt, fair value	46	44
Senior Notes, 4.60% due 2045 [Member] | Senior notes [Member]
Debt Instrument [Line Items]
Long-term debt	1,000	1,000
Long-term debt, fair value	1,112	1,026
Senior Notes, 3.75% due 2046 [Member] | Senior notes [Member]
Debt Instrument [Line Items]
Long-term debt	400	400
Long-term debt, fair value	393	357
Senior Notes, 4.20% due 2047 [Member] | Senior notes [Member]
Debt Instrument [Line Items]
Long-term debt	400	400
Long-term debt, fair value	$ 425	$ 383

XML

SEGMENT INFORMATION - Narrative (Details)	6 Months Ended
	Jun. 30, 2019 segment
Segment Reporting Information [Line Items]
Number of reportable segments	2

XML

SEGMENT INFORMATION - Summary of Segment Results (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Segment Reporting Information [Line Items]
TOTAL ASSETS	$ 5,992		$ 5,992		$ 5,873
Summarized Information
Net sales to external customers	2,893	$ 2,861	5,692	$ 5,627
Total consolidated operating earnings	380	344	743	679
United States [Member]
Summarized Information
Net sales to external customers	2,095	2,062	4,126	4,060
Canada [Member]
Summarized Information
Net sales to external customers	135	177	271	359
United States And Canada Segments [Member]
Summarized Information
Net sales to external customers	2,230	2,239	4,397	4,419
Total consolidated operating earnings	382	335	741	672
Other Businesses [Member]
Summarized Information
Net sales to external customers	663	622	1,295	1,208
Segment Balances Before Intersegment Eliminations and Consolidation Reconciling Items [Member]
Segment Reporting Information [Line Items]
TOTAL ASSETS	2,797		2,797		2,684
Summarized Information
Net sales to external customers	3,020	2,974	5,938	5,852
Total consolidated operating earnings	409	376	798	749
Segment Balances Before Intersegment Eliminations and Consolidation Reconciling Items [Member] | United States [Member]
Segment Reporting Information [Line Items]
TOTAL ASSETS	2,625		2,625		2,496
Summarized Information
Net sales to external customers	2,222	2,175	4,371	4,283
Total consolidated operating earnings	381	349	745	706
Segment Balances Before Intersegment Eliminations and Consolidation Reconciling Items [Member] | Canada [Member]
Segment Reporting Information [Line Items]
TOTAL ASSETS	172		172		$ 188
Summarized Information
Net sales to external customers	135	177	271	359
Total consolidated operating earnings	1	(14)	(4)	(34)
Segment Balances Before Intersegment Eliminations and Consolidation Reconciling Items [Member] | United States And Canada Segments [Member]
Summarized Information
Net sales to external customers	2,357	2,352	4,642	4,642
Total consolidated operating earnings	382	335	741	672
Segment Balances Before Intersegment Eliminations and Consolidation Reconciling Items [Member] | Other Businesses [Member]
Summarized Information
Net sales to external customers	663	622	1,296	1,210
Total consolidated operating earnings	27	41	57	77
Intersegment Eliminations [Member]
Summarized Information
Net sales to external customers	(127)	(113)	(246)	(225)
Intersegment Eliminations [Member] | United States [Member]
Summarized Information
Net sales to external customers	(127)	(113)	(245)	(223)
Intersegment Eliminations [Member] | Canada [Member]
Summarized Information
Net sales to external customers	0	0	0	0
Intersegment Eliminations [Member] | United States And Canada Segments [Member]
Summarized Information
Net sales to external customers	(127)	(113)	(245)	(223)
Intersegment Eliminations [Member] | Other Businesses [Member]
Summarized Information
Net sales to external customers	$ 0	$ 0	$ (1)	$ (2)

XML

SEGMENT INFORMATION - Schedule of Reconciliation of Operating Earnings from Segment to Consolidated (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Segment Reporting Information [Line Items]
Total consolidated operating earnings	$ 380	$ 344	$ 743	$ 679
Assets	5,992		5,992		$ 5,873
Segment Balances Before Intersegment Eliminations and Consolidation Reconciling Items [Member]
Segment Reporting Information [Line Items]
Total consolidated operating earnings	409	376	798	749
Assets	2,797		2,797		2,684
Eliminations and Unallocated in Consolidation [Member]
Segment Reporting Information [Line Items]
Total consolidated operating earnings	(29)	(32)	(55)	(70)
Assets	108		108		310
Segment Reconciling Items [Member]
Segment Reporting Information [Line Items]
Assets	3,087		3,087		2,879
United States And Canada Segments [Member]
Segment Reporting Information [Line Items]
Total consolidated operating earnings	382	335	741	672
United States And Canada Segments [Member] | Segment Balances Before Intersegment Eliminations and Consolidation Reconciling Items [Member]
Segment Reporting Information [Line Items]
Total consolidated operating earnings	382	335	741	672
Other Businesses [Member] | Segment Balances Before Intersegment Eliminations and Consolidation Reconciling Items [Member]
Segment Reporting Information [Line Items]
Total consolidated operating earnings	27	41	57	77
United States [Member] | Segment Balances Before Intersegment Eliminations and Consolidation Reconciling Items [Member]
Segment Reporting Information [Line Items]
Total consolidated operating earnings	381	349	745	706
Assets	2,625		2,625		2,496
Canada [Member] | Segment Balances Before Intersegment Eliminations and Consolidation Reconciling Items [Member]
Segment Reporting Information [Line Items]
Total consolidated operating earnings	1	$ (14)	(4)	$ (34)
Assets	$ 172		$ 172		$ 188

XML

SEGMENT INFORMATION - Schedule of Reconciliation of Assets from Segment to Consolidated (Details) - USD ($) $ in Millions	Jun. 30, 2019	Dec. 31, 2018
Segment Reporting Information [Line Items]
TOTAL ASSETS	$ 5,992	$ 5,873
Segment Balances Before Intersegment Eliminations and Consolidation Reconciling Items [Member]
Segment Reporting Information [Line Items]
TOTAL ASSETS	2,797	2,684
Segment Reconciling Items [Member]
Segment Reporting Information [Line Items]
TOTAL ASSETS	3,087	2,879
Eliminations and Unallocated in Consolidation [Member]
Segment Reporting Information [Line Items]
TOTAL ASSETS	108	310
United States [Member] | Segment Balances Before Intersegment Eliminations and Consolidation Reconciling Items [Member]
Segment Reporting Information [Line Items]
TOTAL ASSETS	2,625	2,496
Canada [Member] | Segment Balances Before Intersegment Eliminations and Consolidation Reconciling Items [Member]
Segment Reporting Information [Line Items]
TOTAL ASSETS	$ 172	$ 188