W.W. Grainger, Inc. (NYSE:GWW) Q4 2014 Earnings Conference Call - Final Transcript
Jan 26, 2015 • 07:30 am ET
per share were $12.26 for the year, representing a 6% increase versus $11.52 in 2013. Adjusted EPS grew faster than net earnings due to fewer shares outstanding as a result of our stock repurchases.
Now let's turn to the 2014 fourth quarter. Overall, results were within the expectations issued at our Analyst Meeting on November 12th. Company sales in the fourth quarter increased 6%. Excluding the charges from 2014 and 2013, operating earnings increased 9%, while net earnings increased 6%. Adjusted earnings per share were $2.80 for the quarter, representing an increase of 8% versus the 2013 fourth quarter.
Let's now walk down the operating section of the income statement. Adjusted gross profit margins were 42.5%, flat with the 2013 fourth quarter due to improvement in the United States, offset by gross profit declines in Canada and Fabory in Europe.
On an adjusted basis, Company operating earnings for the quarter increased 9%. The earnings growth was driven by the 6% sales increase and operating expenses growing at a slower rate than sales. Adjusted operating expenses grew 4% including $10 million in incremental growth-related spending. Throughout the year, we continued to invest in growth and infrastructure designed to accelerate our share gains and increase our size and scale. Incremental growth spending for the full year 2014 was $78 million versus 2013. A schedule summarizing incremental growth spending for 2011 through 2015 can be found in Exhibit 3 of this podcast. Adjusted company operating margins increased 40 basis points to 12.7% for the quarter from12.3% a year ago.
Let's now focus on performance drivers during the quarter. In doing so, we'll cover the following topics: First, sales by segment in the quarter, the month of December and January sales so far. Second, operating performance by segment. Third, cash generation and capital deployment. And finally, we'll wrap up with a discussion of our 2015 guidance and other key items.
As mentioned earlier, Company sales for the quarter increased 6%. We had 64 selling days in the quarter, the same as the previous year. The 6% sales growth for the quarter consisted of 7 percentage points from volume, 1 percentage point from price and 1 percentage point from sales of Ebola related safety products, partially offset by a 2 percentage point decline from unfavorable foreign exchange and a 1 percentage point negative variance from lapping an extra month of sales in the fourth quarter of 2013 from E&R Industrial, Inc.
Let's move on to sales by segment. We report two segments, the United States and Canada. Our remaining operations, located primarily in Asia, Europe and Latin America, are reported under a grouping titled Other Businesses and also include results for the single channel online model businesses in Japan, the United States and Europe.
Sales in the United States, which accounted for 77% of total company revenue in the quarter, increased 6%. The 6% sales growth for the quarter was driven by 6 percentage points from volume, 1 percentage point from price and 1 percentage