Quarterly Report — Form 10-Q Filing Table of Contents
Document/ExhibitDescriptionPagesSize 1: 10-Q Quarterly Report HTML 521K
2: EX-31.1 Certification -- §302 - SOA'02 HTML 21K
3: EX-31.2 Certification -- §302 - SOA'02 HTML 21K
4: EX-32 Certification -- §906 - SOA'02 HTML 18K
11: R1 Cover HTML 68K
12: R2 Condensed Consolidated Statements of Earnings HTML 92K
13: R3 Condensed Consolidated Statements of Comprehensive HTML 60K
Earnings
14: R4 Condensed Consolidated Statements of Comprehensive HTML 19K
Earnings (Parenthetical)
15: R5 Condensed Consolidated Balance Sheets HTML 111K
16: R6 Condensed Consolidated Balance Sheets HTML 36K
(Parenthetical)
17: R7 Condensed Consolidated Statements of Cash Flows HTML 103K
18: R8 Condensed Consolidated Statement of Sharedholders' HTML 53K
Equity Condensed Consolidated Statement of
Sharedholders' Equity
19: R9 Condensed Consolidated Statement of Sharedholders' HTML 19K
Equity Condensed Consolidated Statement of
Sharedholders' Equity (Parenthetical)
20: R10 Background and Basis of Presentation HTML 22K
21: R11 New Accounting Standards HTML 29K
22: R12 Revenue HTML 61K
23: R13 Property, Buildings and Equipment HTML 28K
24: R14 Goodwill and Other Intangible Assets HTML 61K
25: R15 Debt HTML 51K
26: R16 Derivative Instruments HTML 45K
27: R17 Income Taxes HTML 32K
28: R18 Dividend HTML 18K
29: R19 Segment Information HTML 42K
30: R20 Contingencies and Legal Matters HTML 24K
31: R21 New Accounting Standards (Policies) HTML 22K
32: R22 Revenue (Tables) HTML 57K
33: R23 Property, Buildings and Equipment (Tables) HTML 27K
34: R24 Goodwill and Other Intangible Assets (Tables) HTML 61K
35: R25 Debt (Tables) HTML 53K
36: R26 Derivative Instruments (Tables) HTML 45K
37: R27 Income Taxes (Tables) HTML 30K
38: R28 Segment Information (Tables) HTML 38K
39: R29 Background and Basis of Presentation (Details) HTML 18K
40: R30 REVENUE Narrative (Details) HTML 24K
41: R31 Revenue (Details) HTML 67K
42: R32 Property, Buildings and Equipment (Details) HTML 31K
43: R33 GOODWILL AND OTHER INTANGIBLE ASSETS Additional HTML 27K
Information (Details)
44: R34 GOODWILL AND OTHER INTANGIBLE ASSETS Balances and HTML 38K
Changes in Carrying Amounts of Goodwill (Details)
45: R35 GOODWILL AND OTHER INTANGIBLE ASSETS Intangible HTML 43K
assets included in Other assets and intangibles
(Details)
46: R36 DEBT - Narrative (Details) HTML 86K
47: R37 DEBT - Schedule of Long-Term Debt Instruments HTML 62K
(Details)
48: R38 DERIVATIVE INSTRUMENTS - Narrative (Details) HTML 31K
49: R39 DERIVATIVE INSTRUMENTS - Schedule of Derivative HTML 37K
Instruments (Details)
50: R40 Income Taxes (Details) HTML 18K
51: R41 Income Taxes INCOME TAXES - Reconciliation of HTML 31K
Income Tax Expense with Federal Income Taxes at
the Statutory Rate (Details)
52: R42 DIVIDEND - Narrative (Details) HTML 20K
53: R43 SEGMENT INFORMATION - Summary of Segment Results HTML 35K
(Details)
55: XML IDEA XML File -- Filing Summary XML 97K
10: XML XBRL Instance -- gww-20210331_htm XML 1.21M
54: EXCEL IDEA Workbook of Financial Reports XLSX 60K
6: EX-101.CAL XBRL Calculations -- gww-20210331_cal XML 196K
7: EX-101.DEF XBRL Definitions -- gww-20210331_def XML 340K
8: EX-101.LAB XBRL Labels -- gww-20210331_lab XML 947K
9: EX-101.PRE XBRL Presentations -- gww-20210331_pre XML 576K
5: EX-101.SCH XBRL Schema -- gww-20210331 XSD 93K
56: JSON XBRL Instance as JSON Data -- MetaLinks 255± 358K
57: ZIP XBRL Zipped Folder -- 0000277135-21-000014-xbrl Zip 178K
(Exact name of registrant as specified in its charter)
iIllinois
i36-1150280
(State
or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
i100 Grainger Parkway,
iLake
Forest,
iIllinois
i60045-5201
(Address of principal
executive offices)
(Zip Code)
i(847)
i535-1000
(Registrant’s
telephone number including area code)
Not Applicable
(Former name or former address, 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
iCommon
Stock
iGWW
iNew 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. iYes ☒ 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). iYes ☒ 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.
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 i☐ No
☒
There were i52,110,145 shares of the Company’s Common Stock, par value $0.50, outstanding as of March 31, 2021.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - iBACKGROUND
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 (N.A.), Japan and the United Kingdom (U.K.). 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 Company's Condensed Consolidated Financial Statements (Financial Statements) and the related
notes are unaudited and should be read in conjunction with the consolidated financial statements and associated notes for the year ended December 31, 2020 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) on February 24, 2021 (2020 Form 10-K). The Condensed Consolidated Balance Sheet as of December 31, 2020 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 United States of America (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.
Changes to Reportable Segments
Effective January 1, 2021, Grainger's itwo reportable segments are High-Touch Solutions (N.A.) and Endless Assortment. On March 8, 2021,
the Company provided investors with segment summary historical financial information and segment historical data that is consistent with its new reportable segment structure and reflective of the intersegment accounting policies described in Note 10 - Segment Information.
The Company's High-Touch Solutions (N.A.) segment provides value-added MRO solutions that are rooted in deep product knowledge and customer expertise. This segment includes the Grainger-branded businesses in the U.S., Canada, Mexico and Puerto Rico. The Company’s Endless Assortment segment provides a simple, transparent and streamlined experience for customers to shop
millions of products online. This segment includes the Company’s Zoro Tools, Inc. (Zoro) businesses in the U.S. and U.K. and MonotaRO Co., Ltd. (MonotaRO), which operates predominately in Japan. The remaining international high-touch solutions businesses, operating primarily in the U.K., are classified as “Other” to reconcile to consolidated results. These businesses individually do not meet the criteria of a reportable segment.
NOTE 2 - iiNEW
ACCOUNTING STANDARDS/
In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This ASU clarifies and simplifies accounting for income taxes by eliminating certain exceptions for intraperiod tax allocation principles, the methodology for calculating income tax rates in an interim period, and recognition of deferred taxes for outside basis differences in an investment, among other updates. The effective date of this ASU was for fiscal years and interim periods beginning after December 15, 2020. The
Company adopted this ASU effective January 1, 2021 and it did not have a material impact on the Financial Statements.
In January 2020, the FASB issued ASU 2020-01, Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815), Clarifying the Interactions between Topic 321, Topic 323 and Topic 815. This ASU simplifies the understanding and application of the codification topics by eliminating inconsistencies and providing clarifications. The effective date of this ASU was for fiscal years and interim periods beginning after December 15, 2020. The Company adopted this ASU
effective January 1, 2021 and it did not have a material impact on the Financial Statements.
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting as modified by subsequently issued ASU 2021-01. This update provides optional expedients and exceptions for applying generally accepted accounting principles to certain contract modifications and hedging relationships that reference London Inter-bank Offered Rate (LIBOR) or another reference rate expected to be discontinued. The guidance is effective upon issuance and generally can be applied through December
31, 2022. The Company is currently evaluating the impact of this standard.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
In October 2020, the FASB issued ASU 2020-10, Codification Improvements. These amendments improve consistency by amending the codification to include all disclosure guidance in the appropriate disclosure sections and clarifies application of various provisions
in the codification by amending and adding new headings, cross referencing to other guidance, and refining or correcting terminology. The effective date of this ASU was for fiscal years and interim periods beginning after December 15, 2020. The Company adopted this ASU effective January 1, 2021 and it did not have a material impact on the Financial Statements.
NOTE 3 - iREVENUE
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 ii1/%
of the Company's revenue for the three months ended March 31, 2021 and 2020, 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 segment and 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. In addition, the segments have unique underlying risks associated with customer purchasing behaviors. In the High-Touch Solutions (N.A.) segment, more than two-thirds of revenue
is derived from customer contracts whereas in the Endless Assortment segment, a majority of revenue is derived from spot buys. iThe following table presents the Company's percentage of revenue by reportable segment and by major customer industry:
(1)
Others primarily includes revenue from industries and customers that are not material individually including agriculture, mining, natural resources and resellers not aligned to a major industry segment.
(2) Total Company includes other businesses, which includes the Cromwell business in the U.K., as well as the Fabory and China businesses in the period prior to their divestitures in the second and third quarter of 2020, respectively. Other businesses account for approximately i2% of revenue for the three
months ended March 31, 2021 and i5% of revenue for the three months ended March 31, 2020, respectively.
Total accrued sales returns were approximately $i37
million and $i31 million as of March 31, 2021 and December 31, 2020, respectively and are reported as a reduction of Accounts receivable, net. Total accrued sales incentives were approximately $i48
million and $i58 million as of March 31, 2021 and December 31, 2020 and are reported as part of Accrued expenses. The Company had no material unsatisfied performance obligations, contract assets or liabilities as of March 31, 2021 and December 31,
2020.
Grainger tests reporting units' goodwill and intangible assets for impairment annually during the fourth quarter and more frequently if impairment indicators exist. Accordingly, Grainger performs quarterly 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, including the current global outbreak of the
Coronavirus (COVID-19 pandemic) and macro-economic developments, to determine the existence of potential indicators of impairment and assess if it is more likely than not that the fair value of reporting units' goodwill or intangible assets is less than their carrying value. If indicators of impairment are identified, a quantitative impairment test is performed. The Company did not identify any significant events or changes in circumstances that indicated the existence of impairment indicators during the three months ended March 31, 2021. As such, quantitative assessments were not required.
i
The
balances and changes in the carrying amount of Goodwill (net of cumulative goodwill impairments) by segment are as follows (in millions of dollars):
The
cumulative goodwill impairments as of March 31, 2021, were $i137 million and consisted of $i32 million within High-Touch Solutions (N.A.) and $i105
million in Other. During the first quarter of 2020, the Company recorded $58 million of impairment charges in Selling, general and administrative expenses (SG&A) in connection with the impairment of Fabory's goodwill. The impairment is presented in Other businesses in the table above. The Company divested Fabory during the second quarter of 2020. Grainger's current business portfolio had iino/
impairments to goodwill for the three months ended March 31, 2021 and 2020.
Debt
issuance costs and discounts, net of amortization
(i24)
(i24)
(i24)
(i24)
Long-term
debt (less current maturities)
$
i2,373
$
i2,663
$
i2,389
$
i2,951
(1)
In the years 2015-2017, Grainger issued $i1.8 billion in long-term debt (Senior Notes) to partially fund the repurchase of $i2.8 billion in shares of the total $i3 billion
announced in April 2015. The remaining share repurchases were funded from internally generated cash. Debt was issued as follows:
•In May 2017, $i400 million payable in i30 years and carries
a i4.20% interest rate, payable semiannually.
•In May 2016, $i400 million payable in i30
years and carries a i3.75% interest rate, payable semiannually.
•In June 2015, $i1 billion payable
in i30 years and carries a i4.60% interest rate, payable semiannually.
The Company
may redeem the Senior Notes in whole at any time or in part from time to time at a “make-whole” redemption price prior to their respective maturity dates. The redemption price is calculated by reference to the then-current yield on a U.S. treasury security with a maturity comparable to the remaining term of the Senior Notes plus i20-i25
basis points, together with accrued and unpaid interest, if any, at the redemption date. Additionally, if the Company experiences specific kinds of changes in control, it will be required to make an offer to purchase the Senior Notes at i101% of their principal amount plus accrued and unpaid interest, if any, at the
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
date of purchase. Within one year of the maturity date, the Company may redeem the Senior Notes in whole at any time or in part at i100% of their principal
amount, together with accrued and unpaid interest, if any, to the redemption date. Costs and discounts of approximately $i24 million associated with the issuance of the Senior Notes, representing underwriting fees and other expenses, have been recorded as a contra-liability within Long-term debt and are being amortized to interest expense over the term of the Senior Notes.
(2) In February 2020, the
Company issued $i500 million of unsecured i1.85% Senior Notes (i1.85%
Notes) and used the proceeds to repay the British pound term loan, Euro term loan and the Canadian dollar revolving credit facility, and to fund general working capital needs. The i1.85% Notes mature in February 2025 and they require no principal payments until the maturity date and interest is payable semi-annually on February 15 and August 15, beginning in August 2020. Prior to January 2025, the Company may redeem the i1.85%
Notes in whole at any time or in part from time to time at a “make-whole” redemption price. This redemption price is calculated by reference to the then-current yield on a U.S. treasury security with a maturity comparable to the remaining term of the i1.85% Notes plus i10
basis points, together with accrued and unpaid interest, if any, at the redemption date. Additionally, if the Company experiences specific kinds of changes in control, it will be required to make an offer to purchase the i1.85% Notes at i101%
of their principal amount plus accrued and unpaid interest, if any, at the date of purchase. On or after January 15, 2025, the Company may redeem the i1.85% Notes in whole at any time or in part from time to time at i100%
of their principal amount, together with accrued and unpaid interest, if any, to the redemption date. Costs and discounts of approximately $i5 million associated with the issuance of the i1.85%
Notes, representing underwriting fees and other expenses, have been recorded as a contra-liability within Long-term debt and are being amortized to interest expense, net over the term of the i1.85% Notes. In connection with the i1.85%
Notes, in February 2020, the Company entered into derivative instrument agreements to manage its risks associated with interest rates on the i1.85% Notes and foreign currency fluctuations related to the financing of international operations. See Note 7 to the Financial Statements for further discussion of these derivative instruments and the Company's hedge accounting policies.
(3)
In August 2020, MonotaRO Co. LTD., the endless assortment business in Japan, entered into a ¥i9 billion term loan agreement to fund technology investments and the expansion of its distribution center network. The Japanese Yen term loan matures in 2024, payable over ifour
equal semi-annual principal installments in 2023 and 2024, and bears average interest at i0.05%.
(4) 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.
NOTE 7 - iDERIVATIVE INSTRUMENTS
The Company maintains various agreements with bank counterparties
that permit the Company to enter into "over-the-counter" derivative instrument agreements to manage its risk associated with interest rates and foreign currency fluctuations. In February 2020, the Company entered into certain derivative instrument agreements to manage its risk associated with interest rates on its i1.85% Notes and foreign currency fluctuations in connection with its foreign currency-denominated
intercompany borrowings. The Company did not enter into these agreements for trading or speculative purposes.
Fair value hedges
The Company uses fair value hedges primarily to hedge a portion of its fixed-rate long-term debt via interest rate swaps. Changes in the fair value of the interest rate swap, along with the gain or loss on the hedged item, is recorded in earnings under the same line item, interest expense, net. The notional amount of the Company’s outstanding fair value hedges as of March 31, 2021 and December 31,
2020 was $ii500/ million.
Cash
flow hedges
The Company uses cash flow hedges primarily to hedge the exposure to variability in forecasted cash flows from foreign currency-denominated intercompany borrowings via cross-currency swaps. Gains or losses on the cross-currency swaps are reported as a component of Accumulated other comprehensive earnings (losses) (AOCE) and reclassified into earnings in the same period during which the hedged transaction affects earnings. The notional amount of the Company’s outstanding cash flow hedges as of March 31, 2021 and December 31, 2020 was approximately $ii34/
million.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
i
The effect of the Company's
fair value and cash flow hedges on the Company's Condensed Consolidated Statement of Earnings for the three months ended March 31, 2021 and 2020 is as follows (in millions of dollars):
Interest
rate swap designated as hedging instrument
$
(i10)
$
i—
$
i18
$
i—
Cash
flow hedge:
Hedged item
$
i—
$
i—
$
i—
$
(i2)
Cross-currency
swap designated as hedging instrument
$
i—
$
i—
$
i—
$
i2
/
The
effect of the Company’s fair value and cash flow hedges on AOCE for the three months ended March 31, 2021 and 2020was not material.
i
The fair value and carrying amounts of outstanding derivative instruments in the
Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020 were as follows (in millions of dollars):
The
carrying amount of the liability hedged by the interest rate swap (long-term debt), including the cumulative amount of fair value hedging adjustments, as of March 31, 2021 and December 31, 2020 amounted to $i510 million and $i521 million,
respectively.
The estimated fair values of the Company's derivative instruments were based on quoted market forward rates, which are classified as Level 2 within the fair value hierarchy, and reflect the present value of the amount that the Company would pay for contracts involving the same notional amounts and maturity dates. No adjustments were required during the current period to reflect the counterparty’s’ credit risk and/or the Company’s own nonperformance risk.
NOTE
8 - iINCOME TAXES
i
The reconciliations of income tax expense with federal income taxes at the statutory rate are as follows (in millions
of dollars):
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The changes to the Company's effective tax rate for the three months ended March 31, 2021 was primarily driven by the absence of tax losses in the Company's investment in Fabory due to the impairment and internal reorganization of the Company's holdings of Fabory in the first quarter of 2020. The
Company divested Fabory during the second quarter of 2020.
The
Company is a broad line distributor of MRO products and services. Products are regularly added and removed 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, and the dynamic nature of the inventory offered, including the evolving list of products stocked and additional products available online but not stocked.
Intersegment sales transactions, which are sales between Grainger businesses in separate reportable segments, are eliminated within the segment to present only the impact of third-party sales. Service fees for intersegment sales from the High-Touch Solutions (N.A.) segment to the Endless Assortment segment are included in SG&A.
Corporate
costs are substantially allocated to each reportable segment based on benefits received. Assets for reportable segments are not disclosed as such information is not regularly reviewed by the Company's Chief Operating Decision Maker.
NOTE 11 - iCONTINGENCIES AND LEGAL MATTERS
From
time to time the Company is involved in various legal and administrative proceedings, including claims related to product liability, safety or compliance, privacy and cybersecurity matters, negligence, contract disputes, environmental issues, unclaimed property, wage and hour laws, intellectual property, advertising, consumer protection, pricing (including disaster or emergency declaration pricing statutes), employment practices, regulatory compliance, anti-bribery and corruption or other matters and actions brought by employees, consumers, competitors, suppliers, customers, governmental entities and other third parties.
As previously disclosed, beginning in the fourth quarter of 2019, Grainger, KMCO, LLC (KMCO)
and other defendants have been named in several product liability-related lawsuits in the Harris County, Texas District Court relating to an explosion at a KMCO chemical refinery located in Crosby, Harris County, Texas on April 2, 2019. The complaints, which to date encompass 15 lawsuits and approximately 145 plaintiffs, seek recovery of compensatory and other damages and relief in relation to one death and various alleged injuries. On May 8, 2020, KMCO filed a voluntary petition in the United States Bankruptcy Court for the Southern District of Texas for relief under Chapter 7 of Title 11 of the United States Bankruptcy Court in the case KMCO, LLC, No. 20-60028. As a result of the Chapter
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
7 proceedings, the claims against KMCO in the Harris County lawsuits were stayed. Effective January 1, 2021, the Bankruptcy Court lifted the stay with respect to KMCO.
On December 16, 2020, KMCO, the trustee of its estate and ORG Chemical Holdings, LLC, KMCO’s parent company (“ORG”), filed a product liability-related lawsuit relating to the KMCO chemical refinery incident against Grainger and another defendant in the Harris County, Texas District Court, which
seeks unspecified damages (the “KMCO Case”). On April 1, 2021, twenty-four individual plaintiffs filed a petition in intervention seeking to be added as plaintiffs in the KMCO Case and seeking unspecified damages. On March 24, 2021, Indian Harbor Insurance Company together with other insurance companies and underwriters, as subrogees of KMCO and ORG, filed a lawsuit relating to the KMCO chemical refinery incident against Grainger and another defendant in the Harris County, Texas District Court, seeking reimbursement of insurance payments made by the plaintiffs on behalf of the insured parties and other damages.
Grainger is investigating each of the various claims relating to the KMCO chemical refinery incident, which are at an early stage, and intends to contest these matters vigorously.
Also, as a government contractor selling to federal, state and local governmental entities, the Company may be subject to governmental or regulatory inquiries or audits or other proceedings, including those related to contract administration or to pricing compliance.
While the Company is unable to predict the outcome of any of these matters, 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 condition or results of operations.
From time to time, the Company has also been named, along with numerous other nonaffiliated companies, as a defendant in litigation in various states involving asbestos and/or silica. These lawsuits typically assert claims of personal injury arising from alleged exposure to asbestos and/or silica as a consequence of products manufactured by third parties purportedly distributed by the Company. While several lawsuits have been dismissed in the past based on the lack of product identification, if a specific product distributed by the Company is identified in any pending
or future lawsuits, the Company will seek to exercise indemnification remedies against the product manufacturer to the extent available. In addition, the Company believes that a substantial number of these claims are covered by insurance. The Company has entered into agreements with its major insurance carriers relating to the scope, coverage and the costs of defense, of lawsuits involving claims of exposure to asbestos. The Company believes it has strong legal and factual defenses and intends to continue defending itself vigorously in these lawsuits. While the
Company is unable to predict the outcome of these proceedings, it believes that the ultimate resolution will not have, either individually or in the aggregate, a material adverse effect on the Company’s consolidated financial condition or results of operations.
Item
2: Management's Discussion and Analysis of Financial Condition and Results of Operations
General
W.W. Grainger, Inc. (Grainger or Company) is a broad line, business-to-business distributor of maintenance, repair and operating (MRO) products and services with operations primarily in North America (N.A.), Japan and the United Kingdom (U.K.). Grainger uses a combination of its high-touch solutions and endless assortment businesses to serve its more than 5 million customers worldwide, which rely on Grainger for MRO products and services that enable them to run safe, sustainable and productive operations.
Effective January 1, 2021, Grainger's two reportable segments are High-Touch Solutions (N.A.) and Endless Assortment. These reportable segments align
with Grainger's go-to-market strategies and bifurcated business models (high-touch solutions and endless assortment). The High-Touch Solutions (N.A.) segment includes the Grainger-branded businesses in the United States of America (U.S.), Canada, Mexico and Puerto Rico. The Endless Assortment segment includes the Company’s Zoro Tools, Inc. (Zoro) and MonotaRO Co., Ltd. (MonotaRO) online channels which operate predominately in the U.S., U.K. and Japan.
Strategic Priorities Amidst the COVID-19 Pandemic
The Company’s strategic priorities for 2021 have not changed from those stated in Part II, Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations
included in the Company’s Annual Report for the year ended December 31, 2020 on Form 10-K (2020 Form 10-K), which are to "Keep the World Working" and relentlessly expand Grainger’s leadership position in the MRO space by being the go-to-partner for people who build and run safe, sustainable and productive operations. However, the respective business plans to achieve these strategic priorities continue to be affected by the global outbreak of Coronavirus in 2019 (COVID-19 pandemic).
The COVID-19 pandemic has caused significant disruptions in the U.S. and global markets, and economists expect the economic impact will continue to be significant. Grainger is an essential business and its major facilities have been allowed to remain operational during
the pandemic as customers have depended on Grainger's products and services to keep their businesses up and running. As the COVID-19 pandemic continues to impact global markets and the needs of customers, employees, suppliers and communities continue to change, the Company’s efforts and business plans have evolved accordingly. Grainger is currently focused on serving customers and communities well in addressing the pandemic and preparing for an ongoing recovery, supporting the needs and safety of employees and ensuring the Company continues to operate with a strong financial position.
Impact of the COVID-19 Pandemic to Grainger Businesses
The COVID-19
pandemic has impacted and is likely to continue impacting Grainger’s businesses and operations as well as the operations of its customers and suppliers.
From a customer perspective, business re-openings, production and related activity throughout the quarter varied based on geography, industry and COVID-19 pandemic conditions. For example, the U.S. geography began to see signs of economic recovery while other international geographies faced slower reopenings. In the high-touch solutions and endless assortment businesses, sales to essential businesses remained strong while sales to non-essential and disrupted industries are beginning to return to pre-COVID-19 pandemic levels. From an inventory and supply chain perspective, demand for pandemic-related inventory has started to decrease with excess supply in the marketplace, resulting in inventory adjustments during the quarter.
The
Company's major operational facilities and infrastructure (i.e., Distribution Centers, branches, e-commerce sites, and logistic partners) are remaining operational with limited disruptions, while adhering to strict safety and social-distancing protocols. In addition, the Company has prioritized maintaining all facilities safe for customers and employees to work and interact. To date, the Company has been able to absorb the pandemic impact with minimal workforce reductions or furloughs, which positions the Company for accelerated growth post-pandemic.
Matters
Affecting Comparability
There were 63 sales days in the three months ended March 31, 2021 and 64 sales days in the three months ended March 31, 2020.
Consistent with the Company's strategic
focus on broad line MRO distribution in key markets, in June 2020 Grainger divested the Fabory high-touch solutions business, in August 2020 divested the China high-touch solutions business (China) and in November 2020 commenced the liquidation of Zoro Tools Europe (ZTE) in Germany. Accordingly, the Company’s operating results include Fabory, China and ZTE results through the respective dates of divestiture or liquidation.
In addition, beginning in mid-February 2020, the Company experienced elevated levels of COVID-19 pandemic-related product sales (e.g., personal protective equipment (PPE) and safety products) due to higher customer demand in response to the COVID-19 pandemic, while non-pandemic sales decreased. Conversely, as
the COVID-19 pandemic progressed throughout 2020 and into 2021, the Company has seen levels of pandemic-related sales soften toward pre-pandemic levels and non-pandemic sales turning positive. This will have an impact on gross margin as pandemic-related product sales are generally lower-margin.
Results of Operations – Three Months Ended March 31, 2021
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 March 31,
Percent Increase/(Decrease)
As a Percent of Net Sales
2021
2020
2021
2020
Net sales
$
3,084
$
3,001
2.8
%
100.0
%
100.0
%
Cost
of goods sold
1,991
1,880
5.9
%
64.5
%
62.6
%
Gross profit
1,093
1,121
(2.5)
%
35.5
%
37.4
%
Selling,
general and administrative expenses (SG&A)
735
962
(23.6)
%
23.9
%
32.1
%
Operating earnings
358
159
125.5
%
11.6
%
5.3
%
Other
expense, net
15
17
(10.8)
%
0.5
%
0.6
%
Income tax provision (benefit)
88
(43)
(304.6)
%
2.9
%
(1.4)
%
Net
earnings
255
185
37.5
%
8.3
%
6.2
%
Noncontrolling interest
17
12
36.6
%
0.6
%
0.4
%
Net
earnings attributable to W.W. Grainger, Inc.
$
238
$
173
37.5
%
7.7
%
5.8
%
Grainger’s net sales of $3,084 million for the first quarter of 2021 increased $83 million, or 2.8%, compared to the same quarter in 2020. On a daily basis net sales increased 4.4%. The increase in net sales
was primarily driven by volume increases in the high-touch solutions and endless assortment businesses. Also, non-pandemic related product sales continue to improve while demand for pandemic-related product sales remain higher than their pre-pandemic level. See Note 3 to the Financial Statements for information related to disaggregated revenue. See the Segment Analysis below for further details related to segment revenue.
Gross profit of $1,093 million for the first quarter of 2021 decreased $28 million, or 2%, compared to the same quarter in 2020. The gross profit margin of 35.5% during the first quarter of 2021 decreased 1.9 percentage points when compared to the same quarter in 2020. This decrease was primarily driven by non-core pandemic-related inventory adjustments in the U.S. business (part of High-Touch Solutions (N.A.)). See Segment
Analysis below for further details related to segment gross profit.
SG&A of $735 million for the first quarter of 2021 decreased $227 million, or 24%, compared to the first quarter of 2020. This decrease is primarily a result of higher net restructuring charges in the U.S. and Canada businesses (part of High-Touch Solutions (N.A.)) and impairment charges for the divested Fabory business (part of Other) in the first quarter of 2020.
The following tables (in millions of dollars, except percentages) reconcile reported 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 non-GAAP measures including SG&A adjusted, operating earnings adjusted and net earnings
attributable to W.W. Grainger, Inc. adjusted. The Company believes that these non-GAAP measures provide meaningful information to assist investors in understanding financial results and assessing prospects for future performance as they provide a better baseline for analyzing the ongoing performance of its businesses by excluding items that may not be indicative of core operating
results. 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.
Net
earnings attributable to W.W. Grainger, Inc. reported
$
238
$
173
38
%
Total
restructuring, net, impairment charges and tax¹
—
57
Net earnings attributable to W.W. Grainger, Inc. adjusted
$
238
$
230
3
%
¹ The tax impact of adjustments and non-cash impairments are calculated based on the income tax rate in each
applicable jurisdiction, subject to deductibility and the Company's ability to realize the associated tax benefits.
Excluding restructuring, net and impairment charges in both periods as noted in the table above, SG&A decreased $43 million, or 6%. This decrease is primarily due to cost control actions across the high-touch solutions businesses. SG&A leverage improved 2.1 percentage points when compared to the first quarter of 2020.
Operating earnings of $358 million for the first quarter of 2021 increased $199 million, or 126%, compared to the first quarter of 2020. Excluding restructuring, net and impairment charges in both periods as noted in the table above, operating earnings increased $15 million, or 4%,
driven primarily by lower SG&A expenses partially offset by lower gross profit dollars.
Other expense, net was $15 million for the first quarter of 2021, a decrease of $2 million, or 11%, compared to the first quarter of 2020.
The Company recorded an income tax expense of $88 million for the first quarter of 2021, which increased $131 million, or 305%, compared to an income tax benefit of $43 million in the first quarter of 2020. This change is primarily related to a tax benefit related to the Fabory business recorded in the first quarter of 2020. Grainger's effective tax rates were 25.8% and negative 30.4% for the three months ended March 31, 2021 and 2020,
respectively. Excluding this tax benefit, as well as the restructuring, net and impairment charges in both periods as noted in the table above, the effective tax rates were 25.8% and 25.6% for the three months ended March 31, 2021 and 2020, respectively. The reconciliation of the effective tax rate is as follows:
Net earnings attributable to W.W. Grainger, Inc. of $238 million for the first quarter of 2021 increased $65 million, or 38%, compared to the first quarter of 2020. Excluding restructuring, net, impairment charges and tax from both periods per the table above, net earnings increased $8 million or 3%.
Segment Analysis
See Note 10 to the Financial Statements for further detail on segment information.
High-Touch Solutions
(N.A.)
Net sales were $2,397 million for the first quarter of 2021, an increase of $42 million, or 1.8% compared to the same period in 2020. On a daily basis, net sales increased 3.4% and consisted of the following:
Percent Increase
Price and customer mix
2.0%
Volume (including product mix)
1.1
Foreign exchange
0.3
Total
3.4%
Overall, revenue increases for the high-touch solutions businesses were primarily driven by price and customer mix. During the first quarter of 2021, the U.S. business experienced some continuation of elevated sales volume of pandemic-related products from the government and other essential businesses with sales to non-essential and disrupted industries beginning to return to their pre-pandemic levels. See Note 3 to the Financial Statements for information related to disaggregated revenue. From a product perspective, the high-touch solutions business experienced continued demand for COVID-19 pandemic-related products, as well as increasing demand for non-pandemic products as the economy improves.
Gross profit margin for the first quarter of 2021 decreased 2.3 percentage points compared to the same period in 2020. The decrease was primarily
the result of U.S. business inventory adjustments on non-core pandemic-related products in the first quarter of 2021.
SG&A of $589 million for the first quarter of 2021 decreased $31 million, or 5%, when compared to the first quarter of 2020, which is primarily driven by reduced travel and general operating efficiencies.
Operating earnings of $306 million for the first quarter of 2021 decreased $8 million, or 3%, from $314 million for the first quarter of 2020. This decrease was driven by lower gross profit dollars partially offset by lower SG&A expenses.
Endless Assortment
Net sales were $622 million for the first quarter of 2021, an increase of $126 million, or 25.4%,
compared to the same period in 2020. On a daily basis, net sales increased 27.4% and consisted of the following:
Percent Increase
Volume/price/mix
23.3%
Foreign exchange
4.1
Total
27.4%
The
increase in net sales was driven by continued strong customer acquisition in the endless assortment businesses.
Gross profit margin increased 0.3 percentage points in the first quarter of 2021 compared to the first quarter of 2020. The increase was driven by Zoro's improved discounting strategies.
SG&A leverage decreased 1.5 percentage points compared with the same period in 2020 due to sales revenue outpacing SG&A expenses related to increased sales volume.
Operating earnings of $55 million for the first quarter of 2021 increased $20 million, or 58% from $35 million for the first quarter of 2020. The increase was driven primarily by higher sales primarily due to continued customer acquisitions.
Other
Net sales were $65 million for the first quarter of 2021, an decrease of $85 million, or 56.5%, when compared to the same quarter in 2020. On a daily basis, net sales decreased 55.8% and consisted of the following:
Percent
(Decrease)/ Increase
Business divestitures
(43.3)%
Volume/price/mix
(15.8)
Foreign exchange
3.3
Total
(55.8)%
The decrease in net sales was driven by revenue declines in the Cromwell business as a result of pandemic-related slowdowns and the net impact of the Fabory and China business divestitures.
Gross profit margin increased 2.8
percentage points in the first quarter of 2021 compared to the first quarter of 2020 primarily due to business unit mix.
SG&A decreased 89% in the first quarter of 2021 compared to the first quarter of 2020 primarily due to the impairment charges for the divested Fabory business in the first quarter of 2020.
Operating losses of $3 million for the first quarter of 2021 decreased $187 million compared to operating losses of $190 million for the first quarter of 2020. This improvement is primarily due to the impairment charges for the divested Fabory business in the first quarter of 2020.
Grainger believes that, assuming its operations are not significantly impacted by the COVID-19 pandemic for a prolonged period, its current level of cash and cash equivalents, marketable securities and availability under its revolving credit facilities will be sufficient to meet its liquidity needs for the next twelve months. Grainger expects to continue to invest in its business and return excess cash to shareholders through cash dividends and share repurchases, which it plans to fund through total available liquidity and cash flows generated from operations.
Grainger also maintains access to capital markets and may issue debt or equity securities from time to time, which may provide an additional source of liquidity.
Cash, Cash Equivalents and Liquidity
As of March 31, 2021 and December 31, 2020, Grainger had cash and cash equivalents of $562 million and $585 million, respectively. This decrease in cash is primarily due to resuming capital investments and the share repurchase program, which were paused in 2020 due to the COVID-19 pandemic. As of March 31, 2021, the Company had approximately $1.8 billion in available liquidity.
Cash
Flows
Net cash provided by operating activities was $294 million and $244 million for the three months ended March 31, 2021 and 2020, respectively. The increase in cash provided by operating activities is primarily the result of higher net earnings and favorable working capital, including strong accounts receivable collections, partially offset by the net impacts from the now divested Fabory business.
Net cash used in investing activities was $58 million and $52 million for the three months ended March 31, 2021 and 2020, respectively. This increase in net cash used in investing activities was primarily driven by higher additions to the
Company's supply chain infrastructure slightly offset by sales and redemption of assets.
Net cash used in financing activities was $250 million in the three months ended March 31, 2021 compared to net cash provided by $955 million in the three months ended March 31, 2020. The change in net cash (used in) provided by financing activities was primarily driven by prior year borrowings of long-term debt partially offset by higher treasury stock repurchases in the current year.
Working Capital
Internally generated funds are the primary source of working capital and funds used for growth initiatives and capital expenditures.
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 as of March 31, 2021, was $2,080 million, a decrease of $140 million when compared to $2,220 million as of December 31, 2020. The decrease was primarily driven by a decrease in inventory and an increase in trade accounts payable. At these dates, the ratio of current assets to current liabilities was 2.4 and 2.6 for March 31, 2021 and December 31, 2020, 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 revolving credit facilities. 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 55.5% at March 31, 2021, and 55.6% at December 31, 2020.
Grainger receives ratings from two independent credit rating agencies: Moody's Investor Service (Moody's) and Standard & Poor's (S&P). Both credit rating agencies currently rate the Company's
corporate credit at investment grade. The following table summarizes the Company's credit ratings at March 31, 2021:
There were no material changes to the Company’s commitments and other contractual obligations from those disclosed in Part II, Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Company’s 2020 Form 10-K.
Critical
Accounting Estimates
The methods, assumptions, and estimates used in applying the Company’s accounting policies may require the application of judgments regarding matters that are inherently uncertain. The Company considers an accounting policy to be a critical estimate if: (1) it involves assumptions that are uncertain when judgment was applied, and (2) changes in the estimate assumptions, or selection of a different estimate methodology could have a significant impact on Grainger’s consolidated financial position and results. While the Company believes that estimates, assumptions, and judgments used are reasonable, they are based on information available when the estimate
was made.
A description of the Company’s critical accounting estimates is described in Part II, Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Company’s 2020 Form 10-K.
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: the unknown duration and health, economic, operational and financial impacts of the global outbreak of the coronavirus disease 2019 (COVID-19) as well as the duration, extent and impact of the actions taken or contemplated by governmental authorities or others in connection with the COVID-19 pandemic on the Company’s businesses, its employees, customers and suppliers, including disruption to Grainger's operations resulting from employee illnesses, the development and availability of effective treatment or vaccines, any mandated facility closures of non-essential businesses, stay in shelter health orders or other similar restrictions for customers and suppliers, changes in customers' product needs, suppliers' inability to meet unprecedented
demand for COVID-19 related products, inventory shortages, the potential for government action to allocate or direct products to certain customers which may cause disruption in relationships with other customers, disruption caused by business responses to the COVID-19 pandemic, including working remote arrangements, which may create increased vulnerability to cybersecurity incidents, including breaches of information systems security, adaptions to the Company's controls and procedures required by working remote arrangements, including financial reporting processes, which could impact the design or operating effectiveness of such controls or procedures, and global or regional economic downturns or recessions, which could result in a decline in demand for the Company's products or limit the
Company's ability to access capital markets on terms that are attractive or at all; higher product costs or other expenses; a major loss of customers; loss or disruption of sources of supply; changes in customer or product mix; increased competitive pricing pressures; failure to develop or implement new technology initiatives or business strategies; failure to adequately protect intellectual property or successfully defend against infringement claims; fluctuations or declines in the Company's gross profit percentage; the Company's 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, consumer protection, pricing (including disaster or emergency
declaration pricing statutes), product liability, general commercial disputes, safety or compliance, or privacy and cybersecurity matters; investigations, inquiries, audits and changes in laws and regulations; failure to comply with laws, regulations and standards; government contract matters; disruption of information technology or data security systems involving the Company or third parties on which the Company
depends; general industry, economic, market or political conditions; general global economic conditions including tariffs and trade issues and policies; currency exchange rate fluctuations; market volatility, including price and trading volume 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; other pandemic diseases or viral contagions; natural or human induced disasters, extreme weather and other catastrophes or conditions; failure to attract, retain, train, motivate, develop and transition key employees; loss of key members of management or key employees; changes in
effective tax rates; changes in credit ratings or outlook; the Company's incurrence of indebtedness and other factors identified under Part II, Item 1A: “Risk Factors” in the Company’s 2020 Form 10-K, as updated from time to time 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.
Item 3.Quantitative and Qualitative Disclosures About Market Risk
As disclosed in Part II, Item 7A: Quantitative and Qualitative Disclosures About Market Risk in the Company's 2020 Form 10-K, Grainger’s primary market risk exposures include changes in foreign currency exchange and interest rates.
For a discussion of current market conditions resulting from the COVID-19 pandemic, refer to Part I, Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations.
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 March 31, 2021, that
have materially affected, or are reasonably likely to materially affect, Grainger’s internal control over financial reporting.
24
PART II – OTHER INFORMATION
Item 1: Legal Proceedings
For a description of the Company’s legal proceedings, see Note 11 - Contingencies and Legal Matters - to the
Condensed Consolidated Financial Statements included under Part 1, Item 1: Financial Statements.
Item 2: Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities – First Quarter
Period
Total Number
of Shares Purchased (A) (D)
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
January 1 - January 31
155,980
$388.26
154,980
1,338,763
February 1 - February 28
146,924
$374.55
146,924
1,191,839
March
1 - March 31
150,566
$394.53
150,016
1,041,823
Total
453,470
451,920
(A)There were no shares withheld to satisfy tax withholding obligations.
(B)Average price paid per share excludes commissions of $0.01 per share paid.
(C)Purchases were made pursuant to a share repurchase program approved
by Grainger’s Board of Directors and announced April 24, 2019 (2019 Program). The 2019 Program authorizes the repurchase of up to 5 million shares with no expiration date. On April 28, 2021, Grainger's Board of Directors authorized and the Company announced a new program authorizing the repurchase of up to 5 million shares with no expiration date, replacing the 2019 Program.
(D)The difference of 1,550 shares between the Total Number of Shares Purchased and the Total Number of
Shares Purchased as Part of Publicly Announced Plans or Programs represents shares purchased by the
administrator and record keeper of the W.W. Grainger, Inc.
Retirement Savings Plan for the benefit
of the employees who participate in the plan.
Item 6: Exhibits
A list of exhibits filed with this report on Form 10-Q is provided in the Exhibit Index on page 27 of this report.
25
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.
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.
