2011 Fact Book - Grainger

2011 FACT BOOK

Partners in Productivity

HeadquartersW.W. Grainger, Inc.100 Grainger ParkwayLake Forest, IL 60045-5201847.535.1000www.grainger.com

W.W

.Grain

ger,In

c.2011

FactBook

8S4190

W.W. GRAINGER, INC. AND SUBSIDIARIES 33

DESIGN: Anonymous Design, Inc.

HeadquartersW.W. Grainger, Inc.100 Grainger ParkwayLake Forest, IL 60045-5201847.535.1000 Phone847.535.0878 Faxwww.grainger.com

Media Relations ContactsJanis K. TratnikDirector, Corporate Communications847.535.4339

Erin G. PtacekDirector, Corporate Brand and Reputation847.535.1543

Investor Relations ContactsLaura D. BrownSenior Vice President, Communicationsand Investor Relations847.535.0409

William D. ChapmanDirector, Investor Relations847.535.0881

Analyst CoverageBank of America — John InchBarclays Capital — Bob CornellBB&T Capital Markets — Holden LewisBuckingham Research — Edward WheelerCitibank — Deane DrayCleveland Research Company — Adam UhlmanCredit Suisse — Hamzah MazariFBR Capital Markets — Ajay KejriwalGoldman Sachs — Terry DarlingMorgan Keegan & Company — Brent RakersMorgan Stanley — Scott DavisMorningstar — Anil DakaOppenheimer & Company — Christopher GlynnRaymond James — Sam DarkatshRobert W. Baird — David MantheyStephens, Inc. — Matt DuncanUBS — Robert BarryWells Fargo — Allison Poliniak-CusicWilliam Blair & Company, LLC — Ryan Merkel

Annual MeetingThe 2011 Annual Meeting of Shareholders willbe held at the company’s headquarters in LakeForest, Illinois at 10:00 a.m. CDT on Wednesday,April 27, 2011.

Expected Earnings Release DatesFirst Quarter April 18, 2011Second Quarter July 19, 2011Third Quarter October 18, 2011Fourth Quarter January 25, 2012

Transfer Agent, Registrar and DividendDisbursing AgentInstructions and inquiries regarding transfers,certificates, changes of title or address, lost or missingdividend checks, consolidation of accounts andelimination of multiple mailings should be directed to:Computershare Trust Company, N.A.P.O. Box 43078Providence, RI 02940-3078800.446.2617

AuditorsErnst & Young LLP155 North Wacker DriveChicago, IL 60606-1787

Common Stock ListingThe company’s common stock is listed on theNew York and Chicago stock exchanges underthe trading symbol GWW.

TrademarksACKLANDS GRAINGER, ACKLANDS — GRAINGER,FOR THE ONES WHO GET IT DONE, GRAINGER,GRAINGER and Design, GRAINGER Catalog Design,GRAINGER FOR THE ONES WHO GET IT DONEand Design, GRAINGER in Chinese Characters,GRAINGER Shipping Box Design, GRAINGERTOOLS FOR TOMORROW, GRAINGER.COM,GRAINGER.COM.MX, KEEPSTOCK, andWESTWARD are the trademarks or service marksof W.W. Grainger, Inc., which may be registered inthe United states and/or other countries.

DAYTON is the trademark of Dayton ElectricManufacturing Co., which may be registered inthe United States and/or other countries.

AW DIRECT, BEN MEADOWS, BENMEADOWS.COM,CONSTRUCTION BOOK EXPRESS, GEMPLER’S,LAB SAFETY SUPPLY, LSS, LSS.COM, MCFEELY’S,PROFESSIONAL EQUIPMENT, and RAND are thetrademarks or service marks of GHC SpecialtyBrands, LLC, which may be registered in the UnitedStates and/or other countries.

TORHEFE is the trademark of Grainger ColombiaSAS, which may be registered in Colombia and/orother countries.

GRAINGER ONLINE SAFETYMANAGER is theservice mark of Grainger Safety Services, Inc.,which may be registered in the United Statesand/or other countries.

ALLIANCE ENERGY SOLUTIONS is the servicemark of Grainger Service Holding Company, Inc.,which may be registered in the United Statesand/or other countries.

I Design and IMPERIAL are the trademarks or servicemarks of Imperial Supplies LLC, which may beregistered in the United States and/or other countries.

© 2011 W.W.Grainger, Inc.

Company Information

WilliamD. ChapmanDirector, Investor Relations

Mr. Chapman was named Director, InvestorRelations, in October 1999. In this role, he servesas the company’s primary contact with theinvestment community.

Mr. Chapman serves on the board of the ChicagoChapter of the National Investor Relations Institute(NIRI) and is a past president and chairman, as wellas a member of the NIRI National Senior Roundtable.

He also serves as a director, past president andscholarship chairman of the Wisconsin AlumniAssociation-Chicago Chapter and is a former directorof the National Wisconsin Alumni Association.

Forward-Looking StatementsThe 2011 Fact Book contains statements that are not historical in nature but concern future results and business plans, strategies and objectives, and other matters that may be deemedto be “forward-looking statements” under federal securities laws. Grainger cannot guarantee that any forward-looking statement will be realized although Grainger does believe that itsassumptions underlying its forward-looking statements are reasonable. Achievement of future results is subject to risks and uncertainties which could cause Grainger’s results to differmaterially from those which are presented.

The forward-looking statements should be read in conjunction with the company’s most recent annual report and Form 10-K as well as other reports filed with the Securities and ExchangeCommission containing a discussion of the company’s business and of the various factors that may affect it. Caution should be taken not to place undue reliance on Grainger’s forward-looking statements and Grainger undertakes no obligation to publicly update the forward-looking statements, whether as a result of new information, future events or otherwise.


Swissôtel Chicago serves business and leisure

travelers from around the world, combining the

renowned Swiss touch with a fresh, modern

and contemporary design. The award-winning

hotel has been partnering with Grainger to meet

its maintenance, repair and operating (MRO)

product needs for more than 23 years. Facility

Maintenance Engineer Erica Schulz knows that

she can count on Grainger On-site Services

Specialist Dan Hetland to stock her tool crib

with hundreds of fasteners, light bulbs and

other fast moving items through KeepStock,®

Grainger’s inventory management solution.

With the KeepStock®solution, Erica and the

rest of the Swissôtel maintenance crew can

focus more on providing customers with a

superior hotel experience, and spend less

time ordering and managing MRO products.

About the Company

W.W. Grainger, Inc., with 2010 sales of $7.2 billion, is North America’s leading broad-line supplier of maintenance, repair and operating products,

with an expanding presence in Asia and Latin America. For more information on Grainger, visit www.grainger.com/investor.

Contents

Partners in Productivity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Global Fast Facts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Creating Shareholder Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

The Global Maintenance, Repair and Operating Products (MRO) Market . . . . 5

Relentless Focus on the Foundation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Avenues for Accelerating Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Supplier Partner of Choice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Grainger Facts at a Glance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Corporate Social Responsibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

A Great Company to Work For . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Consolidated Statements of Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Consolidated Balance Sheets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Historical Financial Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Executive and Operating Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Compensation Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Company Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33


s the global economy expands and becomes more competitive, businessesand institutions worldwide are looking for new ways to reduce costs andboost productivity. Today’s challenging economic landscape has also forced

companies to do more with less. In doing so, they need partners like Grainger to help themsave time, streamline processes and improve operational efficiency.

Indirect purchasing, specifically MRO (the products needed to maintain, repair and operatefacilities), is getting increasingly more attention. Since the global recession began in 2008,more and more businesses have been slashing their budgets and looking for ways toreduce costs and consolidate suppliers. Once they realize they can do more with less, theywon’t return to the old, inefficient ways of operating. Grainger is uniquely positioned to meetcustomers’ MRO needs in this consolidating environment.

When a building is in need of repair, maintenance professionals need MRO products fast.Their job is to get that facility up and running as quickly as possible. And that’s justone example of when they turn to Grainger. But Grainger is more than just a one-stopshop for emergency MRO products — it is a valued and trusted partner to millions ofbusinesses and institutions worldwide that need cost-effective MRO solutions.

Founded in 1927, Grainger serves more than two million customers in 157 countries. Anindustry leader in North America, Grainger is expanding operations in Asia and LatinAmerica. As customers globalize their operations and look to consolidate their MRO spendacross locations, Grainger is well positioned to meet their product needs while providingtechnical expertise, related services and streamlined ordering processes. With Grainger,customers can do more — with less.

APartners in Productivity

What does Grainger do?

Grainger is a business-to-

business distributor of products

needed to maintain, repair or

operate a facility. Millions of

customers worldwide rely on

Grainger for pumps, motors,

hand tools, janitorial supplies and

much more. These customers

represent industries including

healthcare, manufacturing,

government and hospitality.

They place orders for Grainger

products at local branches,

online, via fax or over the

phone. More than 3,000

manufacturers supply Grainger

with over one million products.

Products are stocked in

Grainger’s distribution centers

and shipped either directly

to customers or to Grainger

branches for local availability.

2 W.W. GRAINGER, INC. AND SUBSIDIARIES

15% Safety and Security12% Material Handling9% Cleaning and

Maintenance8% Metalworking8% Pumps, Plumbing

and Test Equipment7% Electrical7% Hand Tools6% Lighting5% Specialty Brands4% Fluid Power4% HAC/R4% Other4% Ventilation3% Power Tools2% Motors2% Power Transmission

Global Fast Facts (Total Company, as of12/31/10)

2010 Sales by Customer Category(TOTAL COMPANY)

2010 Sales by Product Line(TOTAL COMPANY)

$7.2 billionin sales in 2010

4.6millionshares repurchased in 2010(Approximately 7 percent of shares outstanding)

39CONSECUTIVE YEARSOF DIVIDEND INCREASES(17 PERCENT INCREASE IN 2010)

GWWGrainger’s common stock is listed on theNew York and Chicago stock exchanges

under the trading symbol GWW. $1.8 billionIN E-COMMERCE SALES IN 2010

2.0MILLIONACTIVE CUSTOMERS

IN 157 COUNTRIES

607 branches24 distribution centers18,500 team members

$6.932010 EARNINGS

PER SHARE (DILUTED)

3,000+suppliers

20% Commercial17% Government16% Heavy Manufacturing12% Contractor9% Other9% Light Manufacturing7% Retail/Wholesale6% Agriculture and

Mining4% Reseller

Grainger was named to FortuneMagazine’s 2011 Fortune 100Best Companies to Work For®

1,000,000+PRODUCTS AVAILABLE

uring the past 10 years, two recessions have buffeted the

global economy. Grainger’s performance during the 2001

recession was soft and lagged the economy as it launched

into the recovery phase. Contrast this with Grainger’s performance

during 2008–2010 when the company returned to pre-recession

performance faster than the overall economy.

Grainger’s relentless focus on the customer, coupled with its

financial strength, enabled the company to invest in growth initiatives

such as sales force expansion and global supply chain enhancements

over the last several years. This in turn helped the company gain

market share at a time when competitors worldwide were pulling

back on growth investments, leading to exceptional value creation

for shareholders. In 2010, Grainger delivered a 45 percent total

return to shareholders, versus 15 percent from the S&P 500.

Investing in that very same foundation has led to Grainger’s improved

execution and enhanced financial performance. Over the past three

years, Grainger has demonstrated how it is best positioned to take

share before, during and after a recession.

Creating Shareholder Value

D Emerging Stronger than Ever

1995 1998 2001 2004 2007 2010

Per

cent

,Y-O

-Ych

ange

Coincident 1 year recovery

GWW Organic Sales Growth (Real)

U.S. Industrial Production

1 year lagging recession

3 year lagging recovery

10

5

0

(5)

(10)

(15)

Grainger’s performance improved versus U.S. Industrial Production (IP)in the most recent global recession. SOURCE: FEDERALRESERVEBOARD AND

COMPANY INFORMATION.

• Add locally relevant products tothe already broad offering to drivegrowth in domestic and targetedinternational markets.

• Expand the sales force to improvecustomer coverage.

• Launch new or additional safety,sustainability and inventory managementservices in the Americas and Asia.

• Enhance the eCommerce platform todrive rapid, worldwide growth.

• Expand the capacity of the globallogistics network.

• Continue to extend Grainger’s reachin targeted international markets.

LONG-TERM VIEW

Organic Sales Growth Target7–10 percent

Operating Margin Target14–16 percent

• Strengthen the company’s foundationof having the best product availabilityand broadest offering worldwide.

• Make it even easier for customers todo business with Grainger, anywhereat anytime.

• Continue to build out Grainger’sintegrated systems.

• Continue to foster a culture of continuousimprovement across the business.

Company Goalsfor 2011

Strategic Areasof Focus for 2011and Beyond

Long-TermFinancial Targets



Operating MarginPercent

2006 2007 2008 2009 2010

9.810.5

11.410.7

12.0

Creating Shareholder Value (CONTINUED)

Return on Invested CapitalPercent

2006 2007 2008 2009 2010

26.428.5

29.8

24.9

29.8

Earnings per Share – DilutedDollars

2006 2007 2008 2009 2010

4.24

4.91

5.975.62

6.93

SalesDollars in billions

2006 2007 2008 2009 2010

5.96.4

6.9

6.2

7.2

Global Sourcing — External SalesPercent of Total Company Sales

2006 2007 2008 2009 2010

6.77.3

8.28.8

9.4

Long-term, the company’s ability to effectively manage product costs

below the rate of inflation, grow private label brands, optimize

customer mix and leverage operating expenses will enable Grainger

to continue to deliver top quartile shareholder returns.

Grainger’s global sourcing capability is a perfect example of how

the company is improving its financial performance through gross

margin expansion. Approximately 25 percent of sales of products

listed in the U.S. catalog are higher margin private label products.

Roughly half of these sales are sourced through lower cost countries

and carry margins typically 50 percent higher than the company’s

average gross profit margin.

Grainger’s global sourcing capability spans more than 400

manufacturers across more than 30 countries worldwide and is a

significant contributor to gross margin expansion. Customers

continue to look to Grainger for quality products at a variety of price

points. The company is aggressively growing its direct source

business and diversifying its supplier base into new geographies.

Another way Grainger is expanding margins is through operating

expense leverage. The company has harvested the results of many

investments over the last few years, lowering operating expenses as

a percentage of sales. While delivering industry-leading working

capital management, Grainger has also made steady progress

increasing cash flow from operations. The combination of improved

margins and strong inventory and receivables management has

enabled the company to generate significant cash flow. Grainger

shareholders have typically seen two-thirds of the cash returned

to them through share repurchase and dividends, while one-third

has been reinvested in the business for future growth.

Investors have historically viewed Grainger as more of a defensive

play due to the reliable and steady nature of its returns. However,

given the company’s focus on aggressive market share gains and

global expansion, investors are taking a fresh look at Grainger as

a growth opportunity.

Cash Generation/Deployment (2001–2010)Dollars in millions

Dividends

ShareRepurchases

CapitalExpenditures

$6,000

4,000

2,000

Uses of CashCash from Operations

Acquisitions

Working CapitalDollars in billions

2006 2007 2008 2009 2010

1.16

.97

1.381.35 1.37


rainger is the leading global,

broad-line MRO supplier. The

company understands that product

requirements will vary from market to market;

however, the need to have the right product,

in the right place, at the right time, never

wavers. That’s what gives Grainger a

competitive advantage. Whether serving

a customer in Baltimore, Maryland, or

Bogota, Colombia, Grainger’s product

availability, scale and superior customer

service sets it apart from the competition.

The worldwide MRO market is estimated

to be approximately $580 billion. In this

global MRO marketplace, the most obvious

way to achieve strong, sustainable growth is

to be the valued partner to people who keep

workplaces safe, efficient and functioning.

Due to the highly fragmented nature of the

industry, businesses and institutions have an

opportunity to lower costs in virtually every

market where they operate. It is becoming

increasingly important for large MRO

suppliers to think and compete globally in

order to serve multinational customers.

Although product availability is a common

theme for customers worldwide, MRO

purchasing trends are vastly different across

industries and geographies. In emerging

markets, MRO marketplaces are common,

with dozens of vendors specializing in one

product line or category selling wares from

small specialty shops. In a more mature

market like North America, MRO products

are purchased from suppliers who may

carry multiple product lines both in stores

and online.

In emerging markets like China, MRO marketplaces are common, with dozens of vendors specializing in oneproduct line or category selling wares from small specialty shops.

The Global Maintenance, Repair and Operating Products (MRO) Market

North America> $130B

Latin America> $30B

Europe> $200B

Middle Eastand Africa> $50B

Asia Pacific> $170B

MRO Market OpportunityDollars in billions (USD)

Worldwide Market> $580B

Market size estimates based on the Central Intelligence Agency’sWorld Fact Book and company data.

In North America, MRO is primarily purchased in stores and online.

G


rainger’s business model is built on a strong foundationof providing superior customer service in every country

where it operates. Embedded within the foundation are

the following elements:

• Offering the best availability of the broadest product line

• Having the best people in the industry

• Being easy to do business with

• Leveraging scaled and integrated systems

• Fostering a culture of continuous improvement

For Grainger, success means serving its two million customers better

than anyone else. These businesses and institutions are located

across the globe: from the North Slope of Alaska to the ports of

Shanghai and everywhere in between. Customers operate in

industries such as manufacturing, oil and gas, healthcare, government,

transportation, mining and many others. By focusing on customers’

evolving needs and partnering to address industry trends, Grainger

has earned their trust and, ultimately, more of their MRO spend.

MRO is typically one of the smallest budgeted purchasing categories

for most organizations, yet it usually has the highest number of

transactions. This makes purchasing MRO complex, inefficient and

expensive in most corners of the world. Demand is random and

difficult to predict. Businesses and institutions are dealing with this

inefficient process by consolidating suppliers — a significant trend

in this industry.

MRO Demand PatternTypical MRO Purchasing Profile

Once Twice 3–5 6–10 11–15 16+

Uni

que

MR

OP

rodu

cts

Times products are bought per year

1,750

1,500

1,250

1,000

750

500

250

Relentless Focus on the Foundation

PARTNERS IN PRODUCTIVITY

Honeywell, a long-standing Grainger customer and supplier,

invents and manufactures technologies to address global trends

in safety, security, productivity and energy. With approximately

128,000 employees and manufacturing capabilities worldwide,

Honeywell has an unrelenting focus on innovation, quality, delivery

and value in everything they make and do. Their Aerospace,

Automation and Control Solutions, Transportation Systems and

Specialty Materials business units create hundreds of products

ranging from cockpit avionics to building controls to turbochargers

and refining technologies.

With thousands of square feet of space to maintain in multiple

countries, Honeywell partners with Grainger to help streamline its

MRO procurement process. For decades, Grainger has worked

with Honeywell to provide products, services and solutions for

their maintenance, repair and operating needs. Grainger’s global

scale has enabled Honeywell to reduce the number of MRO

suppliers worldwide and earn significant savings.

Grainger also partners with Honeywell to provide a wide selection

of market-leading personal protection equipment to a broad array

of customers. Products such as Howard Leight hearing protection,

Uvex eyewear, Miller fall protection and North respiratory and first

aid help make workplaces safe.

“Honeywell is constantly striving to improve productivity and

increase efficiency across its businesses,” said Michael Dunleavy,

Vice President, Indirect Procurement, Honeywell. “By continuously

improving our processes in all departments, including procurement,

we’re able to bring world-class products and services to market

faster and more cost-effectively for our customers.”

In this environment, companies like Grainger win and gain market

share. Why? Because Grainger has:

• a broad offering of products, services and solutions that gives

customers the confidence to consolidate suppliers;

• an approach to partnering with customers that drives improved

business results;

• an easy-to-do-business-with strategy that allows customers to

focus their energy on their core business.

Grainger’s winning strategy is designed to address the prevailing

trends. By partnering with Grainger, businesses can drive down

costs, improve productivity and reduce inventory. Grainger does this

by providing comprehensive and relevant MRO products, services

and solutions in the global marketplace.

MRO purchasing is often complex, due to random demand.SOURCE: GRAINGERCONSULTING SERVICES.

G


Best Availability of the Broadest Product Line

In 2006, Grainger began a multiyear product line expansion program

to broaden its offering worldwide. At the time, the company didn’t

offer enough products to be a one-stop shop for MRO. So Grainger

embarked on an aggressive program to add new product lines and

extend existing lines both in the United States and internationally.

A broad product line and great availability are competitive advantages

and a high priority for Grainger. Fast moving products are stocked

closest to the customer in local branches, while new or less commonly

used products are stocked in distribution centers (DCs) and shipped

directly to the customer.

Today, more than one million products are available through

Grainger’s multiple catalogs and websites, both of which include

product sourced by Grainger from lower cost countries. The company

plans to add thousands of new SKUs over the next few years.

In addition, the company has been optimizing and expanding its

logistics network to further accommodate product line expansion

and improve customer service. Investments in the global supply

chain help ensure that Grainger’s foundation is stronger than the

Product Line OfferingItems in 2011 catalogs(in thousands)

Grainger Specialty Japan Canada Mexico China Panama Colombia* India*Brand Brands

* Number of catalog items in stock

354

220

174

106

75 60

2213 5

U.S.

competition. Enhancements being made to the distribution centers

in the U.S., Canada, China and Mexico will help drive scale across

the global network.

In the United States, the company is in the process of building out

three super regional distribution centers to deliver faster service and

greater next-day availability to customers coast to coast. The first

super regional DC is located in Greenville, South Carolina, and is

currently operational. Grainger has dramatically improved space

utilization in Greenville without expanding the overall footprint of the

building. The new design and material handling systems get products

into the DC more quickly and help team members pick, pack and

ship customer orders more efficiently. This design includes high-

bay racking, better product placement and more effective

alignment of rack storage. Greenville will serve as a model for

two additional super regional DCs.

The second U.S. super regional distribution center will open in 2011

on the West Coast, with another slated for the Midwest in 2012.

These super regional DCs will average approximately one million

MEETING A NEED

In 2010, Grainger team members noticed

that customers were looking for small

quantities of ceiling tiles for repair purposes.

They were inquiring at branches and had

also searched unsuccessfully for the item

hundreds of times on Grainger.com.® Grainger

explored the opportunity to stock this product.

Local ceiling tile distributors typically sold pallet

quantities for large jobs or new construction;

most Grainger customers needed just one or two

cases of tiles for routine maintenance or repair.

There was unmet demand so Grainger decided

to add ceiling tiles to the product offering.

The most common tiles were stocked in

select distribution centers for same- or next-

day delivery. Quickly, sales volume resulted in

most tiles earning their way into all DCs. The

results: Positive feedback from customers

and $1million in incremental sales within the

first six months. This is just one more example

of how Grainger listens and responds to

customer needs.

KEY

Super Regional DC

Regional DC

Imperial DC** Imperial is one of Grainger’s Specialty Brands. These DCs are included in the U.S. DC network count.

Chicago(New, relocatedfacility openingQ3 2012)

JanesvilleCleveland

Robbinsville

San Francisco(opening Q4 2011)

Los Angeles

Kansas City

Dallas

Memphis

Greenville

Jacksonville

U.S. Distribution Network

Green Bay

Charlotte

D lD

Ch

Reno


square feet and stock nearly the entire Grainger U.S. product

offering. The new facilities are designed to increase product

availability while improving transportation efficiencies.

Grainger’s Canadian subsidiary, Acklands–Grainger, recently made

several supply chain investments, adding new distribution centers in

Vancouver, British Columbia, and Dartmouth, Nova Scotia, to enhance

coverage on both coasts. In addition, existing DCs in Edmonton,

Alberta; Winnipeg, Manitoba; and Richmond Hill, Ontario, were

expanded to handle increased demand. In 2011, a new, 117,000

square foot DC will replace the current facility in Saskatoon,

Relentless Focus on the Foundation (CONTINUED)

Saskatchewan, to meet the needs of the province’s expanding

customer base and product lines. In addition, National Technical

Service Centres provide customers with expert product knowledge

to keep up with new and expanding product lines.

In Canada, more than 90 percent of the shipping volume is served

by the branch network. Acklands–Grainger recently started a

direct-to-customer shipping pilot designed to improve the customer

experience and reduce operating costs. A limited number of DCs

have begun to ship orders directly to customers. These learnings

will be applied to the other Acklands–Grainger DCs in 2011,

with an eventual goal to ship more orders direct-to-customer.

The continued investments in Grainger’s technology platforms

and integrated systems, including the Americas SAP program

(see page11 for more details) will be a key enabler to direct-to-

customer expansion.

As Grainger’s businesses in the Americas evolve, the company

continues to find ways to leverage regional scale and drive

improved supply chain performance. To support this effort,

Grainger is realigning operations for its distribution centers and

logistics system into a single organization across the Americas.

This Americas supply chain will allow for a set of common practices

and processes, while ensuring continued local focus and accountability.

Canadian Distribution Network

Vancouver, BC175,000 square foot DC

Dartmouth, NS35,000 square foot DC

Saskatoon, SK117,000 square foot DCOpening 2011

Grainger’s enhanced distribution center network willfurther allow customers to reduce the amount of inventorythey keep on hand, helping them save time and money.

INTEGRATED NETWORKGrainger serves businesses and institutions through a highlyintegrated network of branches, regional warehouses and distributioncenters in North America, with an expanding presence in Asia andLatin America. (DATAAS OF12/31/10)

Regional DistributionCountry/Territory Branches1 Warehouses2 Centers3

United States 402 — 14Canada 174 — 6Mexico 21 — 1India — 19 —Colombia 5 — 1China 1 1 1Japan — — 1Puerto Rico 3 — —Panama 1 — —

TOTAL 607 20 241 A branch is designed to serve customers directly through walk-inand will-call service.

2 A regional warehouse is designed to ship customer orders and istypically smaller than 20,000 square feet. They do not provide walk-inservice or have showrooms.

3 A distribution center is designed to replenish the branch network andship orders directly to customers. These facilities are typically hundreds ofthousands of square feet and receive inventory directly from suppliers.

KEY

DISTRIBUTION CENTER

NATIONAL TECHNICAL SERVICE CENTRE

(AS OF 12/31/10)


Common practices and processes are also shared throughout

the DCs via continuous improvement (CI) initiatives. These efforts

have also engaged the workforce to help identify waste and

improve core processes in the supply chain. These ongoing CI

efforts drive better performance while lowering Grainger’s cost

to serve. For example, in the Greenville DC, team members

participate in the “Bright Ideas” program, posting potential CI

projects and ideas in a common area that are evaluated and

responded to by DC management. Of the many “Bright Ideas”

received, the team has implemented projects in the sorting,

packing, conveyance, bin storage and racking areas. Results

included improved inbound cycle time, as well as additional bin

storage and packing space at the Greenville DC.

Best People in the Industry

From Toronto to Tokyo, Grainger’s people make the difference.

More than18,500 team members go above and beyond for

customers every day, whether it’s serving customers across the

counter, picking the right product at the distribution center, providing

technical assistance over the phone or supporting an internal

business partner. That dedication to service is ingrained in the

company’s culture from the top down and the bottom up.

Grainger’s team members are empowered to form strong and

lasting partnerships with customers. In doing so, team members

are matched with key customer industries such as government,

healthcare, manufacturing and hospitality, allowing them to truly

understand the unique needs of those customers.

Grainger’s sales force model also allows for interaction with many

customer types through multiple channels. Various team members

in the United States, Canada, Mexico, Panama, India, China, Japan

and Colombia assist customers with their MRO needs in person,

over the phone and online.

Part of great service means being there for customers where and

when they need help. Grainger’s talented customer service team,

located within branches and call centers, connects with customers

through multiple channels – face-to-face, telephone, e-mail, facsimile

and Internet – in order to provide quick and easy service. The

company’s 24-hour customer service call center and evening and

weekend emergency service ensure a solution for every problem,

at any time.

A WALK IN MY SHOES

A construction worker walked into Grainger’s Lawrence,Massachusetts, branch desperate to buy steel-toed boots in orderto gain access to an active construction site. Without the boots hewould lose a day’s wages for not having safe and appropriatefootwear. Unfortunately, the location did not have his size in stock.

Although Grainger could supply the boots the following day, thatwasn’t going to solve the construction worker’s problem. Just then,Grainger team member Rick Whitcomb, Sales Team Lead, realizedhe was the same shoe size and offered up an extra pair of bootsfrom his locker.

“It may sound corny, but I really try to put myself in the customer’sshoes and understand their needs,” said Rick. “Whatdo they want? What are they feeling? What dothey see when they walk through the door? Howdoes a customer view the staff? Are we readyto assist? How can I make a customer for life?At the end of the day, I measure my results byhow many handshakes I receive. If I get ahandshake, I feel like I did a great job.”

Grainger has a distinct competitive advantagein its people who are empowered to say yes tocustomers more often. It’s this type of powerfulcustomer service that keeps businesses comingback for more.

More than 18,500 team members go above and beyond forcustomers every day, whether it’s serving customers acrossthe counter, picking the right product at the distributioncenter, providing technical assistance over the phone orsupporting an internal business partner.

Easy to Do Business With

Grainger customers want:

• A best-in-class online experience

• Easy online search

• Access to Grainger through their existing systems

• Consistent experience across channels

• Personalization and customization

eCommerce is a powerful element of Grainger’s global, multichannel

strategy, growing at twice the rate of other channels. It is the most

profitable arm of the business, creating a huge opportunity for sales

and earnings growth.

Grainger has been a pioneer

in business-to-business

eCommerce, launching the

Grainger.com® website in

1995. Today, a quarter of the

company’s annual revenue is

generated through electronic

channels, representing almost

$1.8 billion in sales in 2010.

Based on Internet sales

revenue, Grainger ranked 19th in the Top100 e-retailers of 2010.

(SOURCE: INTERNETRETAILER’S TOP 500 GUIDE®)

In 2011 and 2012, Grainger’s U.S. websites will be enhanced to

provide a fresh, new customer experience. A new search engine will

improve search results and quickly guide customers to the right

solution. Customers can expect new capabilities on Grainger.com®

Relentless Focus on the Foundation (CONTINUED)

that will offer more targeted search functionality and a more

personalized online experience.

Grainger’s investment in technology is not limited to just the Internet.

To make ordering and billing easy for larger customers, Grainger also

offers integrated purchasing systems such as EDI, a fully embedded

electronic data interchange, and ePro, a system compatible with

ARIBA, Oracle, SAP and 40 other customer platforms.

In addition, technologies such as Voice over Internet Protocol (VoIP)

and Simplified Order Entry (SOE) make it easy for customers to do

business with Grainger. VoIP provides phone service and caller ID

to more than 400 locations across Grainger’s U.S. Branch and

Service Center network. These phone systems are networked

together to offer bilingual and 24x7 support from a live representative.

Grainger is one of the best in the industry: approximately 95

percent of inbound calls are answered within 20 seconds.

VoIP then interfaces with SOE so Grainger can recognize customers

and their order history when they call. By understanding a customer’s

problem right away, the company can offer a consistent and

customized experience across the U.S. phone and branch channels.


DOING MORE WITH LESS

“We love being able to serve our customers using Grainger.com®!

“We use the website to track order history and provide proof ofdelivery to busy warehouse managers. It helps us comply withmore customer contracts, decreasing the amount of follow-upwe have to do with procurement and accounting after a deliveryhas been made.

“We are a lot more efficientin our ordering due toGrainger.com®, resultingin increased profitabilityfor the business.”

DAWN HALL, OPERATIONS

MANAGER, ALL BUSINESS

MACHINES, INC.

As customers worldwide continue to understand theopportunity to improve productivity through online purchasing,Grainger expects to see eCommerce adoption increase.

eCommerce RevenueDollars in billions

2006 2007 2008 2009 2010

1.0

1.3

1.5 1.5

1.8


Scaled and Integrated Systems

Grainger’s foundation is built on supply chain and IT scale. By

leveraging this scale as a competitive advantage, Grainger is able

to improve service and leverage costs.

Grainger is often one of its suppliers’ biggest distribution customers.

The company works closely with its more than 3,000 suppliers on

product costs as well as service enhancements such as shortened

lead times. As Grainger begins aggregating more of its product

purchases across its businesses, it is realizing even greater purchasing

scale advantage. For example, in 2010 the company completed

16 product line reviews ($125 million in COGS), which evaluated

product assortment and costs for items like gloves and striking

tools across all Grainger business units. The effort resulted in

$12 million in product cost savings, as well as expanded private label

opportunities. The company plans similar line review efforts in 2011.

As demand for Grainger’s globally sourced products continues to

grow, the company has more opportunities to leverage its global

scale. In 2009, the company began consolidating shipments of

private label products from Asia to reduce product costs, decrease

cycle times and improve service to all of Grainger’s businesses.

Continuing to build out its global sourcing capabilities provides

Grainger a unique competitive advantage, including in-country

expertise and access to more complex products, like motors, not

typically sourced from Asia.

Grainger’s IT platform underpins the company’s strong foundation,

providing essential information and tools for all of its businesses. In

late 2010, Grainger unveiled plans to launch the Americas SAP

platform to optimize data systems across the region. This platform

will expand the existing footprint in the United States to the rest of

the Americas and replace outdated systems in Colombia, Canada

and Mexico. It will also serve as the IT platform for any new

businesses in Latin America.

Moving in the Right Direction

2007 2010

Order defectsOutbound cycletime (minutes)

Packaging costs($ per line) Productivity

2007 2010 2007 2010 2007 2010

By applying CI principles, the U.S. distribution centers have seen adramatic decrease in waste and a positive increase in productivity.

With the Americas SAP platform, Grainger anticipates improved

customer service, better inventory utilization and enhanced

productivity due to process automation. Scheduled to be completed

by 2013, the Americas SAP platform will leverage the company’s

sizable investment in technology and enable sharing of best practices

across business units. The integrated platform will also allow for

multiple languages, currencies and regulatory requirements as

Grainger continues to expand to other countries in the Americas.

Culture of Continuous Improvement (CI)

As demonstrated by the supply chain, continuous improvement is

a part of Grainger’s corporate culture. Continuous improvement

techniques such as Lean, Six Sigma and Kaizen help reduce

waste and create efficiencies across all business units. Grainger

encourages CI initiatives throughout all its facilities and teams,

from the distribution centers to the corporate office. In fact, team

members are expected to offer ideas that make processes easier

and more efficient. In 2010, Grainger’s branch team members

submitted more than100 ideas via the “Take Work Out” project to

remove non-value add, non-customer facing work out of their daily

flow. As a result,13 process improvements were implemented for

a total productivity savings of more than $3 million.

Grainger encourages continuous improvementinitiatives throughout all its facilities and teams, fromthe distribution centers to the corporate office.


roduct line expansion has been key to Grainger’s core

organic growth over the last several years, contributing an

average of two percentage points annually to the top line.

Growing the company’s portfolio of available products, to more than

one million items, has helped Grainger reach new customers and

further penetrate existing ones.

Complementing product line expansion is sales force expansion and

the launch of the Territory Sales Representative (TSR) program.

While many competitors cut back on customer-facing resources

during the recession, Grainger continued to add sales representatives,

hiring more than 240 TSRs

in 2009 and 2010. The TSR

program is designed to prospect

for new accounts and sell to

small to medium-sized existing

customers in 22 markets across

the United States including

Macon, Georgia; Dallas, Texas;

and Washington, D.C. Beyond

the United States, Grainger

added more than 130 sales

representatives in Canada, Latin America and Asia in 2010.

In addition to proven growth strategies like product line expansion,

sales force expansion, eCommerce and best-in-class customer

service, Grainger is exploring new ways to profitably grow market

share worldwide.

Services

During the recession, businesses and institutions were forced to do

more with less. They cut expenses, including headcount, and reduced

inventory. The shortage of resources caused them to outsource

certain processes and look to vendors to provide the skills and

resources their staff once provided. For example, customers have

asked Grainger to provide related services to accompany product,

such as lighting audits and retrofits when they purchase lighting,

or safety training when they purchase hard hats and glasses.

Avenues for Accelerating Growth

Grainger Sales Force(In thousands)

2006 2007 2008 2009 2010

1.8

2.4 2.4

2.72.8

Grainger has been providing MRO-related services to Canadian

customers for years and the U.S. business has begun to adopt

a similar approach. The company has applied best practices from

Acklands–Grainger to begin designing additional services that support

customers’ key issues, such as safety and sustainability. Grainger is

also evaluating service opportunities in Latin America and Asia.

Services are viewed as an exciting, new avenue to create additional

product pull through in a relevant, scalable and profitable way.

Inventory Solutions/KeepStock®

Grainger has 84 years of inventory management experience and is now

making this service available to customers. The KeepStock® service,

as it is known and branded, allows customers to manage their own

MRO inventory or have Grainger manage it for them. Grainger team

members working at nearby branches fill customer bins, provide on-

site customer service or run on-site branches at customer locations.

By utilizing the KeepStock® service, customers can free up working

capital and manpower to address core business needs.

To date, Grainger has more than 12,500 KeepStock® implementations,

including the United States, Canada, Mexico, China, Puerto Rico and

Panama, and expects the number to grow at a rate of more than

20 percent annually. Product sales to customers with inventory

management agreements grow an average of17 percentage points

faster because Grainger is embedded into the customer’s daily

operations. These customers look to Grainger first for their MROneeds.

TSRs call on customers in Grainger-branded vehicles.

VALUE-ADDED SOLUTIONS

“The Grainger KeepStock® program has helped me get a betterhandle on my true demand, which allows me to buy less andreduce the amount of inventory I keep on hand. KeepStock®

allows me to keep my employees focused on operating thebuilding, instead of buying and managing inventory.”

CLIFFORD HILL, CHIEF ENGINEER, SWISSÔTEL CHICAGO

P


Sustainability

Grainger is truly a one-stop partner for customers when it comes to

sustainability services. The company’s 2009 acquisition of Alliance

Energy Solutions (AES) allows Grainger to provide a turnkey solution

for customers’ energy needs. By partnering with AES, Grainger

helps customers design, source and install energy efficient lighting,

while securing rebates. To date, AES is actively engaged with

customers in 33 states across the country, and in 2010 installed

more than 400 lighting projects. As a result, businesses that partner

with Grainger and AES have saved an average of $15,750 on their

annual lighting and energy bills.

In addition, Grainger offers customers a green catalog, stocked with

thousands of items to help businesses and institutions worldwide

reduce costs and achieve their sustainability goals. These products

span four categories:

• Products that conserve energy and reduce costs and emissionsassociated with the burning of fossil fuels.

• Products that improve indoor air quality and contain fewer toxins,helping to provide employees, customers and janitorial staff with a

safer environment to work and do business.

• Products that reduce waste and help preserve natural resources.This category includes items that help promote recycling and those

that are made from renewable resources.

• Products that conserve water and help reduce water and sewercosts, as well as preserve one of nature’s most precious resources.

Grainger has also taken a leadership role in helping customers make

smarter green purchasing decisions. In 2011, Grainger added additional

information on Grainger.com® to help customers understand why a

product has been designated as an environmentally preferable item.

This practice is unique in the industry and provides Grainger customers

with relevant information needed to make purchasing decisions.

(For more on Grainger’s internal sustainability efforts, see page 22.)

Safety

Grainger continues to be the number one distributor of commercial

and industrial safety products in North America. As the company

expands its vast safety offering, it will also add safety services to

insure that customers view Grainger as the primary partner for all

of their safety needs. The services offering will begin with product-

related safety and training services.

In October 2010, Grainger announced the acquisition of SafetyCertified,

an online safety and risk management company. Now known as the

Grainger Online SafetyManagerSM program, this application will help

customers develop and maintain safety programs while providing

online training on more than100 safety topics.

SAFETY FIRST!

“As a Safety Manager for a drilling company, the most important part

of my job is making sure our employees and our workplaces are

completely safe. This means complying with OSHA standards and

having the right training programs for employees.

“After a routine inspection last summer, we were given limited time to

address several issues. That’s when I reached out to Grainger and they

partnered with me to understand our safety needs. We utilized the

Grainger Online SafetyManagerSM program to help increase our

compliance rate. By implementing a few changes, I was able to

improve our OSHA-required programs to be inspection-ready,

resulting in 98 percent compliance. In turn, this new compliance

allowed us to satisfy the safety program audits of one of our major

customers and was instrumental in helping secure contracts with

another major customer.

“Passing these types of audits has afforded us opportunities to

broaden our customer base, but more importantly, it means our

employees are protected. By working with Grainger, I know I have

a partner to help address my company’s safety needs and I’m

confident that our facility is a safe place to work.”

CODY ASHLEY, HSE DIRECTOR, LATSHAW DRILLING CO.

At the same time, Acklands–Grainger announced the acquisition of

Solus Sécurité Inc. to broaden its already extensive safety services

offering. Solus Sécurité is a leading fire protection and safety distributor

in Quebec offering safety product repair and technical support.

Grainger Online SafetyManagerSM program.


Avenues for Accelerating Growth (CONTINUED)

International Growth Strategies

The global MRO marketplace holds approximately $580 billion

in opportunity. Many of Grainger’s multinational customers have

asked Grainger to be where they are. For these customers, finding

reliable MRO products in far-off regions of the world can be difficult

and expensive. This customer demand, combined with fast growth

in emerging markets and increasing opportunity from small and

medium-sized local customers, has served as a catalyst for

Grainger’s international strategy. Over time, the company has

become a valued partner to many businesses worldwide.

As Grainger expands globally, it is focusing on two primary regions:

Latin America and Asia. Opportunities outside these regions will be

pursued if they present a strong, strategic fit. These high-growth

markets provide the right combination of size, competitive landscape,

business and political risk and supply chain leverage. Grainger can

also provide a locally relevant product offering.

For example, Grainger China targets customers with product lines

tailored to the manufacturing sector (items such as safety, tools and

material handling), as opposed to a broader offering. China’s market

expansion strategy focuses on establishing regional warehouses for

direct ship to customers, instead of the traditional branch-based

model. These efforts paid off in 2010, resulting in a 70 percent

increase in sales and operating losses cut in half. Grainger will

continue to employ a variety of market entry approaches, insuring

the investment is appropriately scaled to the size of the market.

EXPORT

Grainger’s export business started in 1984 and today servescustomers worldwide through a local, dedicated sales force and itsreseller program, including authorized resellers in countries such asGuam, Singapore and Qatar. The export business serves a range ofcustomers from the U.S. military to large multinational companies tolocal businesses. These businesses of varying nationalities, size andscope rely on Grainger for high quality products, transparency intransactional information and ease of doing business.

TRADING DESK

The trading desk is a new, small-market concept where Grainger handlesthe product needs of local customers, including duties and freight, inlocal currency. Grainger opened its first trading desk in Trinidad in 2010to serve the oil and gas, manufacturing and tourism segments.

START-UP: SMALL BRANCH

In markets with midsize MRO potential, Grainger’s strategy includesestablishing a local presence through a smaller branch, carryingspecific product categories most relevant to the local market, such astools and safety. With this size of facility, Grainger can enter marketsat a lower cost and grow revenue over time. Grainger’s 2008 entryinto Panama is an example of this approach.

JOINT VENTURE/ACQUISITION

Acquisitions help Grainger enhance growth in markets where it hasan existing presence and enable the company to accelerate entryand gain local market knowledge when entering new markets.

In countries where it already has a presence, Grainger is focusedon acquisition targets that help build out a product line or service,capture a niche customer segment or extend its geographic reach.In countries where it doesn’t already have a presence, Grainger istargeting acquisitions or joint ventures to enter markets that arecomplex but highly attractive.

For example, in Canada, Acklands–Grainger has been building out itslocal presence and targeted product lines through acquisitions. In2010, the company acquired the Atlantic Canada division of WolseleyIndustrial Products (Amalgamated) Inc. to further penetrate the NovaScotia and New Brunswick markets. Ranson Industrial and SafetySupplies Inc. and Solus Sécurité Inc. were also acquired in 2010,helping expand Acklands–Grainger’s safety product portfolio. Theseacquisitions, along with K&D Pratt Industrial Division (acquired in2009), contributed three percent to Acklands–Grainger’s top-linegrowth in 2010.

In Asia, the company owns 53 percent of MonotaRO Co., Ltd.in Japan. Here the model focuses on small to medium-sizedmanufacturing customers via a direct mail catalog and website.2010 sales for Japan were up more than 25 percent, totaling$196 million. In Korea, Grainger partners with SK Networks, wherecustomers order through speedmall.com to meet their MRO needs.

In Latin America, the company’s joint venture with Torhefe S.A.created an entrée into South America. Grainger Colombia is a leadingMRO supplier in that country, with an emphasis on fasteners. Thebusiness’ annualized revenue totaled more than $30 million in 2010.Grainger Colombia has five locations in the country, includingBarranquilla, Bogota, Cali, Cartagena and Medellin.

International Market Entry Strategy

Investment scaled to market based on attractiveness

Mar

keta

ttra

ctiv

enes

s

Export Local Grainger BusinessExport

Level of Investment

Start-up: Small Branch

Joint Venture Acquisition

Trading Desk

Authorized Reseller

Local Seller


Specialty Brands

Grainger’s Specialty Brands enable the company to reach niche

customer end markets not traditionally targeted by Grainger. In 2010,

Grainger successfully completed the integration of the Specialty

Brands portfolio into the U.S. business. The integration delivered

$88 million in incremental revenue and $40 million in cost savings

over an 18-month time period. As part of the integration, the company

is refocusing the Lab Safety Supply brand on the $15 billion lab

supplies market and is establishing a field sales team. By targeting

core laboratory products, Grainger can gain deeper relevance with

this niche customer.

As part of an ongoing review of the Specialty Brands portfolio, the

company also assessed the strategic fit of each of the brands. To

better position the growth potential and profitability of the entire

portfolio, Grainger divested the Highsmith brand (serving library

professionals) in December 2010. In addition, Grainger continues

to evaluate opportunities to divest four smaller Specialty Brands

in 2011: Professional Equipment, Construction Book Express,

McFeely’s and Rand. Highsmith and these four brands represented

approximately one percent of total company revenue in 2010.

INNOVATION

In 2009, Grainger started designing and building a

framework for innovation within the organization. The

innovation process creates a partnership between individual

team members and the business to help find solutions for

customers’ business issues.

In this environment new ideas are prototyped quickly and

at low cost, then tested with customers before moving on

to more significant development. Grainger uses the new

innovation process to harness the collective ideas of team

members, evolve its offer, improve the customer experience,

and consistently deliver on its commitment to help businesses

manage and reduce operating expenses.

Since its inception, Grainger team members have submitted

a variety of ideas for consideration ranging from mobile

solutions for customers on the go, to serving the inventory

needs of customers in remote locations.

Grainger’s Innovation Pipeline

DetermineCUSTOMER

value

What docustomers need?

DetermineSHAREHOLDER

value

Does it work?

Do customersaccept it?

Can weoperationalize?

Can wedeliver attractive

returns?

IDEA

HYPOTHESIS

EXPERIMENT

PILOT

LAUNCH

© W.W. Grainger, Inc. 2010

Grainger will continue to invest in the remaining Specialty Brands,

including Lab Safety Supply, Imperial Supplies (serving fleet

maintenance needs), Gempler’s (serving horticulture and agriculture

professionals), Ben Meadows (serving forestry professionals) and

AW Direct (serving the tow truck industry), while looking for strategic

acquisitions to grow the portfolio.

As part of the super regional distribution center project in the

United States, Grainger built a common distribution platform (CDP)

to serve both Grainger and Specialty Brands. Upon completion, the

three super regional DCs will have the ability to ship multiple

brands. Within the industry, this capability is unique to Grainger

and will allow for greater customer fulfillment and delivery, with

all brands leveraging shared customer and product information.

For instance, if a Ben Meadows customer on the East Coast

needed a tree caliper, the order might take 2–3 days to deliver

since it was coming from Janesville, Wisconsin. With the new

CDP in Greenville, South Carolina, inventory availability improves

and the product arrives the next day.


rainger has deep relationships with more than 3,000

product suppliers who are critical to the company’s

continued success. With more than one million SKUs

available worldwide, Grainger relies on its supplier partners to

help meet customers’ MRO needs.

By partnering with Grainger, suppliers have access to more than

two million businesses and institutions, ranging from small companies

to national corporations, and every possible enterprise in between.

Suppliers also benefit from the visibility provided by Grainger’s various

marketing vehicles, including its catalogs, direct mail, e-marketing

and websites.

Every year, Grainger recognizes suppliers who meet or exceed

rigorous performance metrics at the company’s annual Partners

in Performance event. Grainger’s Partners in Performance Award

recognizes suppliers who achieve excellence in several categories,

including on-time shipping, responsiveness, cost effectiveness and

product quality. Suppliers are rated throughout the year, and judged

on their overall performance and improvement. In addition, the

company invites suppliers to participate in an annual customer

trade show, where thousands of customers and Grainger sales

representatives view and interact with suppliers’ product lines.

A WIN-WIN PARTNERSHIP

Grainger is committed to partnering with diverse suppliers

throughout the world. Mikisew Industrial Supply is a manufacturer of

round slings, web slings and tie downs, as well as a tester of load-

bearing products. These products are used by the transportation

industry to secure large loads. Founded in 2002 by the Mikisew

Cree First Nation (an aboriginal nation from Northeastern Alberta)

with assistance from Suncor Energy, Inc. and Acklands–Grainger,

Mikisew Industrial Supply’s 2010 sales were almost $2 million.

More than 100 Acklands–Grainger branches in every province sold

Mikisew Industrial Supply’s product in 2010 and12 full-time jobs

were created in Edmonton — eight of them for aboriginal employees.

Acklands–Grainger plans to aggressively develop this relationship

over the next few years. Some of the key 2011 focus areas

include expansion of Mikisew Industrial Supply’s marketing

program to reach new customers and exploring federal

government aboriginal programs for tax incentives and credits.

This relationship has created opportunity for all parties involved

and demonstrates Grainger’s commitment to diversity and the

local communities in which it operates.

GSupplier Partner of Choice

2010 PARTNERS IN PERFORMANCE WINNERS

Accuform Lyle SignsBand-It Mi-T-M CorporationCotterman OZ LiftingCRC Industries Phillips Lighting ElectronicsDynaquip Port-A-CoolFranklin Electric Water Reelcraft IndustriesGeorgia Pacific Steco CorporationKen Forging Structural PlasticsKlein Tools Superior Manufacturing GroupLockwood Products Tennsco

Those who received special recognition included:

Supplier of the Year Best New SupplierAir Conditioning Products Sandvik

Special Achievement/ Sustainability SupplierContribution Award of the YearInternational Enviroguard Georgia Pacific

Carrier of the YearDynamex

AIR CONDITIONING PRODUCTS

In 2010, the Partners in Performance award for Supplier of the

Year went to Air Conditioning Products (ACP). ACP specializes

in the manufacturing of shutters, louvers and dampers for the

HVAC industry. For over 50 years this company has provided

quality products for Grainger’s highly reputable Dayton® brand.

ACP’s family-owned company has attributed its success to

remaining focused on providing superior products with short

delivery times. Through its state-of-the-art manufacturing facility

near Detroit, Michigan, this valued supplier works tirelessly to

quickly deliver products that meet and exceed quality and

reliability requirements within most air control applications.

Less than one percent of Grainger’s 3,000 suppliers receive the

Partners in Performance award. ACP is just one example of

many suppliers whose unwavering commitment to performance,

innovation and partnership help make Grainger the customer’s

first choice in MRO.

FANS SHUTTERS DAMPERS LOUVERS

United States• U.S. MRO market size: > $106 billion• Grainger’s U.S. market share: approximately 5 percent

Grainger operates in the United States through a highly

integrated network of 402 branches,14 distribution

centers and multiple websites (see list at lower right).

In 2010, Grainger’s U.S. business served more than

1.7 million customers, who primarily represent industrial,

commercial and government maintenance departments.


21% Commercial19% Government16% Heavy Manufacturing12% Contractor10% Light Manufacturing7% Other7% Retail4% Agriculture

and Mining4% Reseller

13% Safety and Security12% Material Handling10% Cleaning and

Maintenance10% Pumps, Plumbing and

Test Equipment8% Electrical7% Lighting7% Metalworking6% Hand Tools6% Specialty Brands5% Ventilation4% Fluid Power4% HAC/R3% Motors3% Power Tools2% Power Transmission

2010 Sales by Product Line —United States

Grainger Facts at a Glance

2010 Sales by Customer Category —United States

Competitors• Airgas Safety• Fastenal• HD Supply• K+K America• McMaster-Carr• MSC Industrial Direct• Vallen• Regional and local suppliers

KEY

BRANCH

DISTRIBUTION CENTER

(AS OF 12/31/10)

Grainger provides 98 percent of U.S. customers with next-day delivery.

Websitesawdirect.combenmeadows.comgemplers.comgrainger.comimperialinc.comLSS.comsupplylink.com


Canada• Canadian MRO market size: > $13 billion• Acklands–Grainger’s market share: approximately 7 percent

Acklands–Grainger is Canada’s largest distributor of industrial,

safety and fastener products. The company serves customers via

174 branches, 6 distribution centers and its bilingual website.

Canada’s vast natural resources make agriculture, mining, oil

and gas several of the company’s largest customer segments.

In 2010, tens of thousands of businesses and institutions

purchased MRO products from Acklands–Grainger.

2010 Sales by Product Line —Canada

33% Safety and Security17% Metalworking

and Supplies16% Material Handling

and Storage15% Hand Tools

8% Cleaning andMaintenance

5% Power Tools3% Electrical2% Other1% Fluid Power

25% Agricultureand Mining

17% Contractor15% Heavy Manufacturing10% Commercial9% Transportation8% Retail7% Government6% Other3% Light Manufacturing

2010 Sales by Customer Category —Canada

Websiteacklandsgrainger.com

KEY

BRANCH

DISTRIBUTION CENTER

(AS OF 12/31/10)

Grainger Facts at a Glance (CONTINUED)

Acklands – Grainger provides 95 percent of Canadian customers with next-day delivery.

Competitors• Century Vallen• Fastenal• Gregg Distributors• HD Supply• Tenaquip• Weber Supply• Regional and local suppliers


Competitors• Fastenal• Hidroca• Rexel• Sonepar• Wurth• Regional and local suppliers

Major Customer Categories

ColombiaHeavy ManufacturingLight ManufacturingCommercial

MexicoCommercialHeavy ManufacturingOil and Gas

PanamaOil and GasPanama Canal

Puerto RicoManufacturingGovernmentConstruction

Latin America – Colombia, Mexico, Panama and Puerto Rico• Latin American MRO market size: > $30 billion• Grainger’s Latin American market share: < 1 percent

Grainger entered the Latin American

market in1993, tapping into the growing

Puerto Rican economy. Since that time,

Central and South America became even

more of an attractive market and an ideal

way to leverage the company’s supply

chain across the Americas. Today,

Grainger operates 21branches and one

DC in Mexico, serving multiple industries,

as well as a 30,000 square foot branch in

Panama. In June 2010, Grainger entered into a

joint venture with Torhefe S.A., now Grainger

Colombia, a leading distributor of MRO supplies with an

emphasis on fasteners. Grainger also operates three branches

on the island of Puerto Rico.*

COLOMBIA

PANAMA

MEXICO

PUERTORICO*

Major Product Lines

ColombiaFastenersHand ToolsPower Tools

MexicoHand ToolsMaterial Handling and StorageSafety and Security

PanamaSafetyHand ToolsMaterial Handling

Puerto RicoMaterial HandlingSafety and SecurityPumps, Plumbing and Test Equipment

KEY

BRANCH

DISTRIBUTION CENTER

BRANCH/DISTRIBUTION CENTER

(AS OF 12/31/10)

Grainger provides 90 percent of Mexican customers with next-day delivery.

* ALTHOUGH PUERTO RICO IS A U.S. TERRITORY, THE COMPANY MANAGES ITS BUSINESS THERE AS A PARTOF LATIN AMERICA.

Websitesgrainger.comgrainger.com.mx

Asia – China, India, Japan and Korea• Asian MRO market size: > $170 billion• Grainger’s Asian market share: < 1 percent

With its rapid industrial and commercial growth, large network of

MRO manufacturers and close proximity to global transportation

hubs, Asia is an attractive market for Grainger. It also provides

vast opportunity for Grainger to develop its supply chain scale

and leverage its Grainger Global Sourcing arm. The company has

implemented several different operating models on this continent.

In Japan, Grainger operates through a 53 percent interest

in MonotaRO Co., Ltd., which provides small and mid-sized

businesses with access to more than one million

MRO products through a catalog and web-based

direct marketing. In China, Grainger currently operates

a 128,000 square foot branch and distribution center

in Shanghai, along with a smaller, regional distribution

warehouse in South China. In 2011, Grainger China

plans to expand its reach through a new regional

warehouse in Tianjin. Grainger markets to Chinese

customers through a Chinese-language catalog

and website.

In India, Grainger owns a master distributor with more than 2,000 dealer relationships and

licenses, known as Grainger Industrial Supply India Private Limited (formerly Asia Pacific

Brands India, Ltd.). MRO Korea is a joint venture in South Korea between Grainger

(49 percent ownership) and SK Networks (51 percent ownership). The company operates

an online distribution business there, www.speedmall.kr.

Major Customer CategoriesChinaManufacturingCommercialContractor

IndiaReseller

JapanManufacturingContractorAutomotive Aftermarket

Competitors• Regional and local suppliers

CHINA

INDIA

JAPAN

SOUTHKOREA

Major Product LinesChinaSafety and SecurityMaterial Handling and Storage

IndiaElectricalMotors and FansCompressors

JapanMaterial HandlingToolsSafety and Security

KEY

DISTRIBUTION CENTER

BRANCH/DISTRIBUTION CENTER

REGIONAL WAREHOUSE

(AS OF 12/31/10)

Grainger Facts at a Glance (CONTINUED)


Websitesgrainger.com.cnmonotaro.comspeedmall.krgraingerindia.com


rainger is committed to supporting,

serving and partnering with community

organizations — especially where

its customers and team members live and

work. This philosophy goes beyond helping

businesses maintain their facilities and

encompasses the investments that keep

communities viable.

In 2010, Grainger donated more than

$14 million to not-for-profit organizations

across the globe through cash, products and

employee matching gifts. Internationally,

team members made a difference in their

neighborhoods by donating time and money

to meet local needs. For example, Canadian

team members supported the United Way

and the Children’s Wish Foundation, while

team members in Mexico aided communities

during the aftermath of Hurricane Alex.

Emergency preparedness and technical

education have long been the two main

philanthropic focus areas for the company.

Through two signature programs — the

American Red Cross’ Ready When theTime

ComesTM volunteer disaster preparedness

program and the Grainger Tools for

Tomorrow® scholarship program for

individuals in a skilled trades technical

education curriculum — Grainger makes a

significant impact by using its resources

and expertise to deepen and inspire

relationships with communities, customers

and public partners.

Grainger Tools for Tomorrow®

scholarship program

Even in today’s economy, businesses

and institutions are struggling to fill

positions in the skilled trades. As the

U.S. infrastructure continues to age and

more senior trades people leave the labor

force, the demand for skilled workers in

areas such as manufacturing, construction

and facilities maintenance are expected

to grow. Since 2006, Grainger and the

American Association of Community

Colleges (AACC) have partnered to provide

more than 300 students access to skilled

trades jobs and technical education.

In 2010, the Grainger Tools for Tomorrow®

scholarship program grew to 150 annual

scholarships, with one-third of those awards

targeted for veterans in recognition of their

service to the country. In 2011, the program

grew again; 100 community colleges across

the United States will offer two $2,000

scholarships to students enrolled in industrial

trades programs such as heating, ventilation

and air conditioning, welding, plumbing and

automotive. In addition, upon graduation,

scholarship recipients receive a Westward®

toolkit outfitted for their industrial trade skill.

Corporate Social Responsibility

G

“I want my daughterto learn that onesmall act of kindnesscan heal years ofpain. While I hopewe are spared fromdisasters in Miamithis hurricane season, I know that we areprepared to make a difference in our localcommunity when and if help is needed.”

CHRISTINE KIRBY, GRAINGER SALES ASSOCIATE, MIAMI,

FLORIDA, AND HER DAUGHTER KAITLYN, READY WHEN

THE TIME COMESTM VOLUNTEERS

Disaster Preparedness and Relief

As National Founding Sponsor of the

American Red Cross’ Ready When the Time

ComesTM program, more than 1,100 Grainger

team members across the United States are

trained and ready to provide assistance to

those affected by disaster — before it strikes.

This unique program connects the expertise

of the American Red Cross with the resources

of the business community to help ensure

local communities are prepared to respond

in times of need.

Since 2006, the Ready When the Time

ComesTM program has enabled more than

450 businesses and organizations to train

more than11,000 volunteers in 42 cities

across the United States. In addition, the

company extended the Ready When the

Time ComesTM program for the first time

beyond U.S. borders when it became

National Founding Sponsor in Canada

in October 2010.

In 2011, the ReadyWhen the Time ComesTM

program will be introduced in10 new cities

including Anchorage, Alaska; Farmington,

Connecticut; Honolulu, Hawaii; Little Rock,

Arkansas; Oklahoma City, Oklahoma;

Orlando, Florida; Pittsburgh, Pennsylvania;

Sacramento, California; San Juan, Puerto

Rico; and Seattle, Washington.

“I am studying WindEnergy TurbineTechnology to helpfuture generationslessen theirdependency on oldenergy technologyand foreign oil, and to reduce emissions.The Grainger Tools for Tomorrow®

scholarship program is a sigh of relief.It means I don’t have to hold down a40-hour job and can concentrate onstaying on the Dean’s list.”

GREG FRATES, IOWA LAKES COMMUNITY COLLEGE,

ESTHERVILLE, IOWA

WIND ENERGY TURBINE TECHNOLOGY


The Grainger Tools for Tomorrow®

scholarship program prepares technical

education students to quickly enter the

workforce in their chosen profession. At the

same time, Grainger’s leadership in technical

education helps bring a broader awareness

to the need for a well-trained, skilled labor

workforce and builds valuable relationships

with schools and students in our local

communities. Grainger is also the sponsor

of the American Association of Community

Colleges’ Trades in Focus awarenesscampaign designed to attract more students

to the industrial skilled trades.

Sustainability

Grainger is determined to be a leader in

setting the MRO standard for sustainable,

environmentally friendly operations. This

commitment is focused on partnerships

inside and outside the organization, including

those with customers, suppliers and local

community organizations. Grainger strives to

manage its own operations, in addition to

helping customers manage theirs, with cost-

effective, sustainable practices and solutions.

Grainger, the first industrial supplier to have

a Leadership in Energy and Environmental

Design (LEED) facility, today operates12

LEED certified facilities, including its DC

in Mexico, and has committed to build all

new construction projects to meet LEED

standards. On average, LEED facilities

typically use 24–50 percent less energy

and 40 percent less water while creating

70 percent less waste and at least 33 percent

fewer carbon emissions. (SOURCE: U.S. GREEN

BUILDING COUNCIL)

In Canada, Acklands – Grainger has

partnered with Bullfrog Power to secure

green electricity for three facilities in Ontario

and Alberta. As a result, Bullfrog’s generators

inject renewable electricity onto the grid to

match the amount of power these facilities

use. Bullfrog’s electricity comes exclusively

from wind and hydro facilities that have been

certified as low impact by Environment

Canada under its EcoLogo program.

In 2010, the Illinois Sustainable Technology

Center, in cooperation with the Illinois

Governor’s office, recognized Grainger for

its commitment to sustainable operations

in Illinois.

In August 2010, Grainger completed its

first solar panel installation on the roof of

its Distribution Center in Robbinsville,

New Jersey. The solar panels generate

40 percent of the facility’s electrical load,

which is the equivalent to removing the

annual greenhouse gas emissions from

164 passenger vehicles.

Grainger values the people and partnerships

that enable its corporate social responsibility

efforts to thrive and help build a stronger

society. The company’s programs reflect

the commitment of Grainger’s team members

who expand the meaning of “getting the

job done” beyond providing facilities

maintenance products and services, to

addressing community needs. Grainger’s

consistent focus on disaster preparedness

and technical education over the last

decade has helped enhance resiliency

in local communities.

Robbinsville, New Jersey, DC solar panel.

Corporate Social Responsibility (CONTINUED)

SUPPORTING VETERANS

In recognition of their service tothe United States, in 2010 Graingerawarded 50 Grainger Tools forTomorrow® scholarships to U.S. Army,Air Force, Coast Guard, Marines andNavy veterans studying in communitycolleges across the country.

“I’m one of those red, white and bluekids.. . I grew up in a proud military family.I chose naval aviation because I feltthat it would be the most challenging —instead of landing a plane on five milesof concrete, we had to land it on 300feet of a pitching aircraft carrier deck.

“Today, I work at an engine shop thatbuilds vintage engines for Warbirds. Thepeople I work with are the last of theirgeneration and almost no one my ageworks on these aircraft. I do this sofuture generations can appreciate thesemachines in flight. Twenty years fromnow I want to be a leader in aviationmaintenance and preservation. Whatbetter way to help preserve them.

“I can’t tell you how honored andgrateful I am for the scholarship; itcontinues to open more opportunitiesfor me. I hope I can honor Graingerand all veterans through my hardwork and future contributions.”

JEFF JOSSELYN,

RANCHO CUCAMONGA, CALIFORNIA

2010 GRAINGER TOOLS FOR TOMORROW®

SCHOLARSHIP RECIPIENT

CHAFFEY COMMUNITY COLLEGE

AVIATION MAINTENANCE


KEY

Community College receiving GraingerTools for Tomorrow scholarships (75)

Ready When the Time ComesTM program (42)

®

Matching GiftsFISCAL YEAR NUMBER OF DONORS

2010 2,0792009 1,9532008 1,9132007 1,794

Grainger matches eligible U.S. team members’

charitable gifts 3-to-1, capping an individual’s

annual contribution at $2,500. Less than one

percent of corporations offer this benefit. As a

result, Grainger team members are empowered

to be more than employees; they are company

ambassadors to their local communities. In

2010, despite economic pressures, the number

of Grainger team members contributing to their

communities reached a record high.

• 1,100+ = Grainger team members trainedas Ready When the Time ComesTM volunteers.

• 300+ = Number of Acklands–Graingerteam members who support Canada’sUnited Way 2010 national campaign. TheUnited Way recognized Acklands– Graingerwith its Giving Spirit Award.

• 1= The percentage of global companiesthat provide 3-to-1 matching gifts.

• 16 = The percentage of customers(269,263) that bought green productsfrom Grainger in 2010.

• 7,833 = The number of green productsavailable on Grainger.com® in January 2011.

• 1.9 million = Pounds of carbon dioxideoffset each year by the solar panel installationat Grainger’s New Jersey distribution center.

• 90 = The number of therapy sessions grantedto children with disabilities through support ofTeletón by Grainger Mexico team members.

$14.5 million

69% Product19% Matching Gifts12% Cash Donations

2010 Charitable Contributions

Grainger’s Community Relations Program Coverage: 2010

In 2010, Grainger donated more than

$14.5 millionto not-for-profit organizations acrossthe globe through cash, productsand employee matching gifts.

200Number of scholarships available

in 2011 through the Grainger Toolsfor Tomorrow® scholarship program

$100,000amount of tuition dollars made available toveterans through the Grainger Tools forTomorrow® scholarship program in 2010.

1,700 tonsIn 2010, Grainger recycled more than1,700 tons of paper and plastics fromits DCs – the equivalent of keepingalmost 3 football fields (6,332 cubic

yards) of waste from landfills.

Fast Facts – Corporate Social Responsibility (As of12/31/10)

“Ready When the Time ComesTM is a program that turns compassion intoaction. We are grateful that Grainger and many other businesses aresupporting the training and that so many of their employees have steppedforward to help provide comfort and care to their neighbors in need.”GAIL MCGOVERN, PRESIDENT AND CEO OF THE AMERICAN RED CROSS


umber one on Fortune’s Most Admired Companies inthe World list for diversified wholesalers; Number 100 onFortune’s 2011 Best Companies to Work For® list; winner

of Canada’s10 Most Admired Corporate Cultures; the awards thecompany has garnered are a testament to Grainger’s reputationas an outstanding employer and great company to work for.

Grainger’s18,500 team members worldwide agree. A recentinternal survey showed employees are highly engaged with thecompany and its direction. They are proud to work for Grainger,are willing to put in extra effort to help the company succeedand would recommend it to others.

Team members know that if they drive company performance,they will share in the success. In addition to competitive pay,strong health and wellness benefits and tuition reimbursement,the company has an attractive retirement program. In 2010, thecompany not only created value for shareholders – it createdvalue for team members, resulting in a $151million companycontribution to fund team member retirement in 2011.

Grainger team members have a true partner to further theirprofessional growth and development. The company is committedto helping team members grow and succeed through cross-functional projects, on-the-job training, international assignments,job sharing, volunteerism and leadership roles within thecompany’s business resource groups (BRGs).

More than 2,700 team members volunteer their time on theAfrican-American, Asian Pacific Islander, Generational, Latino,and Women’s BRGs and that number is expected to grow withthe addition of the Administrative and Sustainability BRGs in2011. These groups are open to all team members and focus on

A Great Company to Work For

2010 AWARDS

No.1, America’s Most Admired Company,Diversified Wholesalers — Fortune (March 2010)

Ranked No.13 on the Most Admired Companiesfor HR — Human Resource Executive Magazine

Ranked No. 6 among large companies on theChicago Tribune’s Top Workplaces 2010 list.

Named one of the Best Places to Work inInformation Technology — ComputerWorld (2010)

Awarded the Platinum Level by Canada’s 10 MostAdmired Corporate CulturesTM program

GETTING IT DONE

Branch Manager Jonathan Wachtel has

been serving Grainger customers since he

graduated Florida State University in 2003.

During the last seven years, he’s worked

in sales, customer service, eCommerce

and supply chain. Jonathan has seen the

business evolve and change, but one thing

has remained the same. “Grainger is truly

invested in its people,” said Jonathan. “As

a manager, I get to help my team grow and

succeed. Each employee has different

ambitions and aspirations, and trying to figure

out how to develop them while achieving

those goals is extremely rewarding.”

business issues specific to that BRG – for instance, forming awork-from-home policy for working moms, or recruitment andretention of African-American managers. The BRGs are acompetitive advantage in the global marketplace. They enhanceGrainger’s organizational capabilities by sponsoring professionaland cultural events, help develop team members in new waysand provide targeted market intelligence.

Working at Grainger means more than receiving a paycheck andbenefits – it’s about getting it done – for customers, communitiesand team members. Grainger, true to its family-founded roots,emphasizes service, teamwork, personal development and makinga difference in local communities.

Getting it done has helped Grainger succeed for more than80 years and will guide the company to new heights in theyears ahead.

N

Jonathan knows firsthand Grainger’s

commitment to its team members as well

as the local community. In 2004, while

working in Atlanta, Jonathan was a part of

the Hurricane Response team. He was

deployed to Alabama to help assist

another branch after Category 3

Hurricane Ivan. “Being able

to help both customers

and residents in need was

an extremely gratifying

feeling,” remembers

Jonathan. “Although

many customers had

damaged homes or destroyed businesses,

they were thankful for the service

we gave and supplies we were

able to provide them with.”

To learn more about making a

difference at Grainger, visit

www.experiencedone.com

to explore career

opportunities.


For the Years Ended December 31,

(In thousands of dollars, except per share amounts) 2010 2009 2008

Net sales $7,182,158 $6,221,991 $6,850,032

Cost of merchandise sold 4,176,474 3,623,465 4,041,810

Gross profit 3,005,684 2,598,526 2,808,222

Warehousing, marketing and administrative expenses 2,145,209 1,933,302 2,025,550

Operating earnings 860,475 665,224 782,672

Other income and (expense):Interest income 1,215 1,358 5,069

Interest expense (8,187) (8,766) (14,485)

Equity in net (loss) income of unconsolidated entities (182) 1,497 3,642

Gain (write-off) of investment in unconsolidated entities – net — 47,343 (6,031)

Other non-operating income 1,608 964 2,668

Other non-operating expense (1,151) (283) (317)

Total other income and (expense) (6,697) 42,113 (9,454)

Earnings before income taxes 853,778 707,337 773,218

Income taxes 340,196 276,565 297,863

Net earnings 513,582 430,772 475,355

Less: Net earnings attributable to noncontrolling interest 2,717 306 —

Net earnings attributable to W.W. Grainger, Inc. $ 510,865 $ 430,466 $ 475,355

Earnings per share:Basic $ 7.05 $ 5.70 $ 6.07

Diluted $ 6.93 $ 5.62 $ 5.97

Weighted average number of shares outstanding:Basic 70,836,945 73,786,346 76,579,856

Diluted 72,138,858 74,891,852 77,887,620

Segment Information

(In thousands of dollars) 2010 2009 2008

SalesUnited States $6,020,069 $5,445,390 $6,057,828

Canada 820,941 651,166 727,989

Other Businesses 389,621 165,051 111,732

Intersegment sales (48,473) (39,616) (47,517)

Net sales to external customers $7,182,158 $6,221,991 $6,850,032

Operating earningsUnited States $ 920,222 $ 735,586 $ 840,408

Canada 46,836 43,742 54,263

Other Businesses 11,661 (11,634) (11,827)

Unallocated expenses (118,244) (102,470) (100,172)

Operating earnings $ 860,475 $ 665,224 $ 782,672

Consolidated Statements of Earnings


As of December 31,


AssetsCurrent Assets

Cash and cash equivalents $ 313,454 $ 459,871 $ 396,290

Accounts receivable (less allowances for doubtful accounts of$24,552, $25,850 and $26,481, respectively) 762,895 624,910 589,416

Inventories 991,577 889,679 1,009,932

Prepaid expenses and other assets 87,125 88,364 73,359

Deferred income taxes 44,627 42,023 52,556

Prepaid income taxes 38,393 26,668 22,556

Total current assets 2,238,071 2,131,515 2,144,109

Property, Buildings and EquipmentLand 249,119 237,867 192,916

Buildings, structures and improvements 1,133,392 1,078,439 1,048,440

Furniture, fixtures, machinery and equipment 995,249 950,187 890,507

2,377,760 2,266,493 2,131,863

Less accumulated depreciation and amortization 1,414,088 1,313,222 1,201,552

Property, buildings and equipment – net 963,672 953,271 930,311

Deferred income taxes 87,244 79,472 97,442

Investments in unconsolidated entities 3,461 3,508 20,830

Goodwill 387,232 351,182 213,159

Other assets and intangibles – net 224,697 207,384 109,566

Total Assets $3,904,377 $3,726,332 $3,515,417

Liabilities and Shareholders’ EquityCurrent Liabilities

Short-term debt $ 42,769 $ 34,780 $ 19,960

Current maturities of long-term debt 31,059 53,128 21,257

Trade accounts payable 344,295 300,791 290,802

Accrued compensation and benefits 169,343 135,323 162,380

Accrued contributions to employees’ profit sharing plans 145,119 121,895 146,922

Accrued expenses 130,836 124,150 118,633

Income taxes payable 5,882 6,732 1,780

Total current liabilities 869,303 776,799 761,734

Long-term debt (less current maturities) 420,446 437,500 488,228

Deferred income taxes, tax uncertainties and derivative instruments 82,502 62,215 33,219

Accrued employment-related benefits costs 244,456 222,619 198,431

Shareholders’ equityCumulative 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 54,830 54,830 54,830

Additional contributed capital 637,686 596,358 564,728

Retained earnings 4,326,761 3,966,508 3,670,726

Accumulated other comprehensive earnings (losses) 42,951 12,374 (38,525)

Treasury stock, at cost – 40,281,417, 37,382,703 and34,878,190 shares, respectively (2,857,012) (2,466,350) (2,217,954)

Total W.W. Grainger, Inc. shareholders’ equity 2,205,216 2,163,720 2,033,805

Noncontrolling interest 82,454 63,479 —

Total shareholders’ equity 2,287,670 2,227,199 2,033,805

Total Liabilities and Shareholders’ Equity $3,904,377 $3,726,332 $3,515,417

Consolidated Balance Sheets


For the Years Ended December 31,


Cash flows from operating activities:Net earnings $ 513,582 $ 430,772 $ 475,355

Provision for losses on accounts receivable 6,718 10,748 12,924

Deferred income taxes and tax uncertainties (5,553) 21,683 5,182

Depreciation and amortization (149,678) 147,531 139,570

Stock-based compensation 49,796 43,301 47,870

(Gain) write-off of unconsolidated entities — (47,343) 6,031

Change in operating assets and liabilities – net of business acquisitions:Accounts receivable (127,790) 2,794 (5,592)

Inventories (80,545) 175,286 (92,518)

Prepaid expenses (8,806) (11,180) (33,629)

Trade accounts payable 36,219 (16,736) (6,960)

Other current liabilities 49,576 (52,944) 199

Current income taxes payable (1,503) 2,472 (7,784)

Accrued employment-related benefits costs 18,128 22,080 3,216

Other – net (3,055) 3,932 (13,798)

Net cash provided by operating activities 596,445 732,396 530,066

Cash flows from investing activities:Additions to property, buildings and equipment – net of dispositions (120,616) (140,730) (181,355)

Cash paid for business acquisitions, net of cash acquired, (62,072) (123,093) (34,290)

Other – net 13,529 1,260 13,010

Net cash used in investing activities $(169,159) $(262,563) $(202,635)

Cash flows from financing activities:Net increase (decrease) in commercial paper $200,000 $ — $ (95,947)

Borrowings under lines of credit 35,297 46,125 29,959

Payments against lines of credit (29,799) (43,583) (15,437)

Proceeds from issuance of long-term debt — — 500,000

Payments of long-term debt (239,122) (18,856) —

Proceeds from stock options exercised 86,528 91,165 46,833

Excess tax benefits from stock-based compensation 25,650 19,030 13,533

Purchase of treasury stock (504,803) (372,727) (394,247)

Cash dividends paid (152,338) (134,684) (121,504)

Net cash used in financing activities (578,587) (413,530) (36,810)

Exchange rate effect on cash and cash equivalents 4,884 7,278 (7,768)

Net (decrease) increase in cash and cash equivalents (146,417) 63,581 282,853

Cash and cash equivalents at beginning of year 459,871 396,290 113,437

Cash and cash equivalents at end of year $ 313,454 $ 459,871 $ 396,290

Supplemental cash flow information:Cash payments for interest (net of amounts capitalized) $ 8,188 $ 8,766 $ 14,508

Cash payments for income taxes 319,754 235,043 306,960

Consolidated Statements of Cash Flows


Historical Financial Summary

2010 2009 2008

Financial Net sales $7,182,158 $6,221,991 $6,850,032

Summary ($000) Earnings before income taxes andcumulative effect of accounting change 853,778 707,337 773,218

Income taxes 340,196 276,565 297,863

Earnings before cumulative effect of accounting change 510,865 430,466 475,355

Cumulative effect of accounting change — — —

Net earnings attributable to W.W. Grainger, Inc. 510,865 430,466 475,355

Working capital 1,368,768 1,354,716 1,382,375

Additions to property, buildings and equipment andcapitalized software 131,540 139,951 196,148

Depreciation and amortization 137,793 140,974 135,137

Current assets 2,238,071 2,131,515 2,144,109

Total assets 3,904,377 3,726,332 3,515,417

Shareholders’ equity 2,287,670 2,227,199 2,033,805

Cash dividends paid 152,338 134,684 121,504

Long-term debt (less current maturities) 420,446 437,500 488,228

Per Share ($) Earnings – basic 7.05 5.70 6.07

Earnings – diluted 6.93 5.62 5.97

Cash dividends paid 2.08 1.78 1.55

Book value 32.97 30.81 27.20

Year-end stock price 138.11 96.83 78.84

Ratios Percent of return on average shareholders’ equity 22.6 20.2 23.0

Percent of return on average total capitalization 18.7 16.4 20.3

Earnings before income taxes and cumulative effectof accounting change as a percent of net sales 11.9 11.4 11.3

Earnings before cumulative effect of accountingchange as a percent of net sales 7.1 6.9 6.9

Cash dividends paid as a percent of net earnings 29.8 31.3 25.6

Total debt as a percent of total capitalization 17.8 19.1 20.7

Current assets as a percent of total assets 57.3 57.2 61.0

Current assets to current liabilities 2.6 2.7 2.8

Average inventory turnover – FIFO 3.1 2.7 2.9

Average inventory turnover – LIFO 4.4 3.8 4.1

Other Data Average number of shares outstanding – basic 70,836,945 73,786,346 76,579,856

Average number of shares outstanding – diluted 72,138,858 74,891,852 77,887,620

Number of employees 18,596 18,006 18,334

Number of outside sales representatives 3,079 2,845 2,433

Number of branches 607 612 617

Number of products in the Grainger® catalog 307,000 233,000 183,000

Notes: 2010 EPS included a $0.28 benefit from a change to a paid time-off policy and a $0.15 tax expense related to thehealthcare legislation.

Full year 2009 EPS includes a $0.37 gain from acquiring majority ownership in MonotaRO Co., Ltd.

In the first quarter of 2009, Grainger adopted authoritative guidance on “Determining Whether Instruments Granted inShare-Based Payment Transactions Are Participating Securities,” and as a result earnings per share was calculated underthe new guidance for 2009 and restated using the new guidance for 2007 and 2008. Earnings per share for 2006 — 2000was calculated using the treasury stock method and was not restated due to limited information.

2010 — 2006 number of outside sales representatives restated due to redefinition of certain positions.


2007 2006 2005 2004 2003 2002 2001 2000

$6,418,014 $5,883,654 $5,526,636 $5,049,785 $4,667,014 $4,643,898 $4,754,317 $4,977,044

681,861 603,023 532,674 445,139 381,090 397,837 297,280 331,595

261,741 219,624 186,350 158,216 154,119 162,349 122,750 138,692

420,120 383,399 346,324 286,923 226,971 235,488 174,530 192,903

— — — — — (23,921) — —

420,120 383,399 346,324 286,923 226,971 211,567 174,530 192,903

974,414 1,155,763 1,290,188 1,108,384 926,773 898,681 838,800 735,678

196,325 138,737 157,247 160,758 80,486 144,052 107,168 94,913

127,882 114,884 105,671 96,305 88,629 92,811 97,220 98,147

1,800,817 1,862,086 1,985,539 1,744,416 1,633,413 1,484,947 1,392,611 1,483,002

3,094,028 3,046,088 3,107,921 2,809,573 2,624,678 2,437,448 2,331,246 2,459,601

2,098,108 2,177,615 2,288,976 2,067,970 1,845,135 1,667,698 1,603,189 1,537,386

113,093 97,896 82,663 71,243 67,281 66,467 65,445 62,863

4,895 4,895 4,895 — 4,895 119,693 118,219 125,258

5.01 4.36 3.87 3.18 2.50 2.30 1.87 2.07

4.91 4.24 3.78 3.13 2.46 2.24 1.84 2.05

1.34 1.11 0.92 0.79 0.74 0.72 0.70 0.67

26.40 25.90 25.51 22.83 20.27 18.21 17.17 16.37

87.52 69.94 71.10 66.62 47.39 51.55 48.00 36.50

19.7 17.2 15.9 14.7 12.9 12.9 11.1 12.8

19.2 17.2 15.9 14.2 12.3 13.6 10.2 11.2

10.6 10.2 9.6 8.8 8.2 8.6 6.3 6.7

6.6 6.5 6.3 5.7 4.9 5.1 3.7 3.9

26.9 25.5 23.9 24.8 29.6 31.4 37.5 32.6

5.0 0.4 0.4 0.5 7.5 7.2 7.8 17.3

58.2 61.1 63.9 62.1 62.2 60.9 59.7 60.3

2.2 2.6 2.9 2.7 2.3 2.5 2.5 2.0

3.1 3.1 3.2 3.3 2.9 3.2 3.3 3.2

4.3 4.4 4.5 4.6 4.4 4.5 4.7 4.6

82,403,958 87,838,723 89,568,746 90,206,773 90,731,013 91,982,430 93,189,132 93,003,813

84,173,381 90,523,774 91,588,295 91,673,375 92,394,085 94,303,497 94,727,868 94,223,815

18,036 17,074 16,732 15,523 14,701 15,236 15,385 16,192

2,386 1,805 2,507 2,154 1,741 1,650 1,641 1,708

610 593 589 582 575 576 579 572

139,000 115,000 82,400 82,300 88,400 98,700 99,900 85,200

Notes: 2002 net earnings include a charge for the cumulative effect of accounting change of $23,921,000, or $0.26 per share, and special credits of $4,458,000,or $0.05 per share, for gains on sales of investment securities and $1,183,000, or $0.01 per diluted share, for the reduction of the reserves established in 2001.

2001 net earnings include a special charge of $36,650,000, or $0.39 per share, to establish a reserve related to the shutdown of Material Logic.

2000 net earnings include gains on the sales of investment securities of $17,860,000, or $0.19 per share.


James T. RyanChairman, President and Chief ExecutiveOfficer

Mr. Ryan was named Grainger’s Chairman in April2009, and President and Chief Executive Officerin June 2008. He has been President since April2006 and was named Chief Operating Officerand to the Board of Directors in February 2007.

Mr. Ryan has held a number of other key postssince joining Grainger in 1980. They include GroupPresident; Executive Vice President, Marketing,Sales and Service; President, Grainger.com; VicePresident, Information Services; and President,Grainger Parts.

Mr. Ryan is a trustee of the Museum of Science andIndustry and DePaul University. He also serves as amember of the Civic Committee of the CommercialClub of Chicago, the Economic Club of Chicago andthe Business Roundtable.

Laura D. BrownSenior Vice President,Communications and Investor Relations

Laura D. Brown was named Senior Vice President,Communications and Investor Relations in July2010. She is responsible for Grainger’s internal andexternal communications, community relations andinvestor relations.

Ms. Brown most recently served as Vice President,Global Business Communications. Since joiningGrainger in 2000, she held roles of increasingresponsibility in the finance, marketing, andinvestor relations organizations. Prior to Grainger,Ms. Brown was a vice president at BaxterInternational and Alliant Food Service.

She currently serves as President of the Friends ofLake Forest Parks and Recreation Foundation.

Ronald L. JadinSenior Vice President and Chief Financial Officer

Mr. Jadin was promoted to his current role inMarch 2008. He had been Vice President andController since November 2006. His dutiesinclude financial planning and analysis, financialprocess planning and control, financial reporting,internal audit and treasury operations.

He also has served as Vice President, Finance,Grainger Industrial Supply, and Director ofFinancial Planning and Analysis. Before joiningGrainger in 1998, Mr. Jadin spent 15 years infinancial analysis and management positions atGeneral Electric.

Court D. CarruthersSenior Vice President; President,Grainger International

Mr. Carruthers was promoted to the new position ofPresident, Grainger International, in March 2009.In this role, he is responsible for the company’soperations outside the United States.

Previously, he served as President ofAcklands–Grainger, a position held since October2006, where he was responsible for the Canadianbusiness in its entirety. He joined the company in2002 and held a number of increasingly responsibleleadership roles in sales and branch operations.

He is a Director of Kids Help Phone and theMarkham Stouffville Hospital Foundation, a memberof the University of Alberta Business AdvisoryCouncil and is Past Chair of the United Way ofYork Region Campaign Cabinet.

TimothyM. FerrarellSenior Vice President and Chief Information Officer

Mr. Ferrarell was named Senior Vice President,Chief Information Officer, in June 2007. He isresponsible for enhancing customers’ experiencesthrough the company’s process improvement andbusiness system integration efforts.

Prior to this role, Mr. Ferrarell had served asSenior Vice President, Enterprise Systems,since June 2001, and took on responsibilityfor Enterprise Processes in 2006.

He is a trustee of Lewis University.

John L. HowardSenior Vice President and General Counsel

Mr. Howard joined Grainger and was electedSenior Vice President and General Counsel inJanuary 2000. His responsibilities includesupporting all of the company’s legal functionsand administrative services.

He serves on the Federal Reserve Bank ofChicago’s Seventh District Advisory Council.Mr. Howard also is on the board of the ChicagoBotanic Garden. Mr. Howard is an adjunct facultymember at Northwestern’s Medill School.

Executive and Operating Management


Lawrence J. PilonSenior Vice President, Human Resources

Mr. Pilon was named Senior Vice Presidentof Human Resources in February 2005. Heis responsible for providing strategic directionfor Grainger’s global human capital and leadershipinitiatives.

Before joining Grainger, Mr. Pilon served asExecutive Vice President, Human Resources, forthe Kellogg Company, where he led worldwidehuman resources. He serves on the board of theMake-A-Wish Foundation of Illinois.

DG MacphersonSenior Vice President, Global Supply Chain

Mr. Macpherson, who joined Grainger in February2008, heads Grainger’s Global Supply Chainoperations. He is responsible for providing globalplanning, coordination and specialized expertise tothe supply chain organization in all of Grainger’sbusiness units. Mr. Macpherson was promoted tohis current post in October 2008.

He previously worked for the Boston ConsultingGroup (BCG), where he was Partner and Directorsince 2002. There, he was a strategic consultantto Grainger, leading BCG’s relationship with thecompany since 2001. Earlier, he was an operationsmanager for Rain Bird Sprinkler ManufacturingCompany and a test engineer with the U.S. Air Force.

Michael A. PulickSenior Vice President; President, Grainger U.S.

Mr. Pulick was named President of Grainger’s U.S.Business in November 2008. He is responsiblefor all aspects of the company’s U.S. operations,including the core business and Specialty Brands.He previously served as Senior Vice President ofCustomer Service. Since joining Grainger in 1999,Mr. Pulick has assumed increasingly responsibleroles in supplier and product management.

Before joining Grainger, he held managementpositions within General Electric.

A certified purchasingmanager, Mr. Pulick is an adjunctprofessor at the Lake Forest Graduate School ofManagement and is a member of the Illinois Instituteof Technology’s Board of Trustees. He is also a formerJunior Achievement of Chicago board member.

Executive CompensationThe Company does not have employment agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes

Executive compensation is tied to performance; numeric criteriaare disclosed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes

The Company has the ability to claw back incentive compensation. . . . . . . . . . . . . . . . . . . . . Yes

CEO salary is no more than 2½ times salary of next highest paid namedexecutive officer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes

Equity CompensationAll stock-based incentive plans have been approved by shareholders . . . . . . . . . . . . . . . . . Yes

The Company’s 2010 Incentive Plan does not allow reloads, repricing,stock options issued at a discount to fair market value; or stock optionsto be transferred by a participant for consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes

Stock options are always awarded at an exercise price equal to the closingprice of the Company’s common stock reported for the business daybefore the grant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes

The Company has not misdated or backdated stock options resulting ina restatement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes

The Company discloses performance criteria in its stock-basedcompensation plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes

Dividends are not available on unearned performance shares or onperformance shares granted in 2009 and beyond . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes

The Company, in coordination with a proxy advisory firm, commits to anappropriate burn rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes

Payments on Death and DisabilityAs of January 1, 2010, all employees receive the same benefits upon death;existing executives continue to receive benefits under executive deathbenefit plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes

Compensation PracticesPay for PerformanceCompensation Element Link to Performance

Base Salary Base salary increases are linked toindividual performance.

Annual Cash Incentives Annual cash incentives are linked to achievingpredetermined Company objectives.

Long-Term Incentives • Stock options are granted based on individualperformance and linked to stock price performancefor ten years.

• Restricted stock units are granted based onindividual performance and the value realizedis linked to stock price performance for thefour-year vesting schedule.

• Performance shares are granted based on achievingspecific predetermined Company objectives over thethree-year performance period.

Benefits The profit sharing plan encourages financialperformance that drives increased shareholder value.

Ownership Guidelines The Directors and Officers are subject toownership guidelines.


Corporate GovernanceBoard is elected by majority vote . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes

Majority of Directors independent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes

Separate Chairman and CEO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . No

Independent Lead Director . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes

Independent Board Affairs and Nominating Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes

Number of Board meetings held or scheduled. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

All directors elected annually . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes

Corporate governance guidelines (Operating Principles) approved bythe Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes

Board plays active role in risk oversight. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes

Independent Directors hold meetings without management present. . . . . . . . . . . . . . . . . . Yes

Board-approved succession plan in place. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes

The performance of the Board is reviewed regularly. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes

The performance of each Committee is reviewed regularly. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes

Board members conduct periodic individual self-evaluations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes

Board orientation/education program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes

Directors must tender resignation upon a substantive change in career(Criteria for Membership). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes

All Directors are expected to attend annual shareholders meeting . . . . . . . . . . . . . . . . . . . . . Yes

All Directors attended at least 75 percent of Board and Committee meetings . . . . . . . . Yes

Charters for Audit, Compensation, and Board Affairs andNominating Committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes

Disclosure Committee function for financial reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes

Independent Audit Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes

Audit Committee has a financial expert . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes

Auditors elected at most recent annual meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes

Independent Compensation Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes

Board Compensation Committee has independent compensation consultant. . . . . . . Yes

Independent Director CompensationThe majority of the director pay package is in the form of Company equity. . . . . . . . . . Yes

The majority of the pay package is required to be held in the formof Company equity for the entire duration of the director’s service . . . . . . . . . . . . . . . . . . . . . Yes

The Company’s Director Stock Ownership Guidelines require directors toown Company equity worth at least 5X the annual retainer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes

The director pay package is regularly benchmarked to market andreviewed by an Independent Compensation Consultant. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes

The Company does not use stock options as part of the directorpay package. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes

The Company does not have a director retirement program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes

The Company does not offer perquisites to directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes

The Company only reimburses for expenses relating to service as a directorand for attending continuing education programs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes

A director who is an employee of the Company does not receiveany compensation for services as a director . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes

Shareholder RightsShareholders have cumulative voting rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes

Shareholders may call special meetings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes

Employees may vote their shares in company-sponsored plans. . . . . . . . . . . . . . . . . . Yes

All stock-based incentive plans have been approved by shareholders . . . . . . . . . . . . Yes

An independent tabulator tabulates shareholder votes. . . . . . . . . . . . . . . . . . . . . . . . . . . Yes

Company has a shareholder rights plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . No

Company posts its articles of incorporation and bylaws on website . . . . . . . . . . . . . . Yes

Board of Directors

(1) Member of Audit Committee

(2) Member of Board Affairs and Nominating

Committee

(3) Member of Compensation Committee

* Committee Chair

† Lead Director

Brian P. AndersonFormer Executive Vice President and Chief FinancialOfficer, OfficeMax Incorporated, Itasca, Illinois(1*, 2)

Wilbur H. GantzPresident and Chief Executive Officer,PathoCapital LLC, Northbrook, Illinois(1, 2*, †)

V. Ann HaileyFormer Chief Financial Officer, Gilt Groupe,New York City, New York(1, 2)

William K. HallFounding Partner, Procyon Advisors LLP,Downers Grove, Illinois(1, 2)

Stuart L. LevenickGroup President, Caterpillar Inc., Peoria, Illinois(2, 3)

John W. McCarter, Jr.President and Chief Executive Officer,The Field Museum of Natural History,Chicago, Illinois(2, 3)

Neil S. NovichFormer Chairman, President and Chief ExecutiveOfficer, Ryerson Inc., Chicago, Illinois(2, 3*)

Michael J. RobertsChief Executive Officer and Founder, WestsideHoldings, LLC, Chicago, Illinois(2, 3)

Gary L. RogersFormer Vice Chairman, General Electric Company,Fairfield, Connecticut(1, 2)

James T. RyanChairman, President and Chief Executive Officer

E. Scott SantiVice Chairman, Illinois Tool Works Inc.,Glenview, Illinois(1, 2)

James D. SlavikChairman, Mark IV Capital, Inc., Newport Beach,California(2, 3)


DESIGN: Anonymous Design, Inc.

HeadquartersW.W. Grainger, Inc.100 Grainger ParkwayLake Forest, IL 60045-5201847.535.1000 Phone847.535.0878 Faxwww.grainger.com

Media Relations ContactsJanis K. TratnikDirector, Corporate Communications847.535.4339

Erin G. PtacekDirector, Corporate Brand and Reputation847.535.1543

Investor Relations ContactsLaura D. BrownSenior Vice President, Communicationsand Investor Relations847.535.0409

William D. ChapmanDirector, Investor Relations847.535.0881

Analyst CoverageBank of America — John InchBarclays Capital — Bob CornellBB&T Capital Markets — Holden LewisBuckingham Research — Edward WheelerCitibank — Deane DrayCleveland Research Company — Adam UhlmanCredit Suisse — Hamzah MazariFBR Capital Markets — Ajay KejriwalGoldman Sachs — Terry DarlingMorgan Keegan & Company — Brent RakersMorgan Stanley — Scott DavisMorningstar — Anil DakaOppenheimer & Company — Christopher GlynnRaymond James — Sam DarkatshRobert W. Baird — David MantheyStephens, Inc. — Matt DuncanUBS — Robert BarryWells Fargo — Allison Poliniak-CusicWilliam Blair & Company, LLC — Ryan Merkel

Annual MeetingThe 2011 Annual Meeting of Shareholders willbe held at the company’s headquarters in LakeForest, Illinois at 10:00 a.m. CDT on Wednesday,April 27, 2011.

Expected Earnings Release DatesFirst Quarter April 18, 2011Second Quarter July 19, 2011Third Quarter October 18, 2011Fourth Quarter January 25, 2012

Transfer Agent, Registrar and DividendDisbursing AgentInstructions and inquiries regarding transfers,certificates, changes of title or address, lost or missingdividend checks, consolidation of accounts andelimination of multiple mailings should be directed to:Computershare Trust Company, N.A.P.O. Box 43078Providence, RI 02940-3078800.446.2617

AuditorsErnst & Young LLP155 North Wacker DriveChicago, IL 60606-1787

Common Stock ListingThe company’s common stock is listed on theNew York and Chicago stock exchanges underthe trading symbol GWW.

TrademarksACKLANDS GRAINGER, ACKLANDS — GRAINGER,FOR THE ONES WHO GET IT DONE, GRAINGER,GRAINGER and Design, GRAINGER Catalog Design,GRAINGER FOR THE ONES WHO GET IT DONEand Design, GRAINGER in Chinese Characters,GRAINGER Shipping Box Design, GRAINGERTOOLS FOR TOMORROW, GRAINGER.COM,GRAINGER.COM.MX, KEEPSTOCK, andWESTWARD are the trademarks or service marksof W.W. Grainger, Inc., which may be registered inthe United states and/or other countries.

DAYTON is the trademark of Dayton ElectricManufacturing Co., which may be registered inthe United States and/or other countries.

AW DIRECT, BEN MEADOWS, BENMEADOWS.COM,CONSTRUCTION BOOK EXPRESS, GEMPLER’S,LAB SAFETY SUPPLY, LSS, LSS.COM, MCFEELY’S,PROFESSIONAL EQUIPMENT, and RAND are thetrademarks or service marks of GHC SpecialtyBrands, LLC, which may be registered in the UnitedStates and/or other countries.

TORHEFE is the trademark of Grainger ColombiaSAS, which may be registered in Colombia and/orother countries.

GRAINGER ONLINE SAFETYMANAGER is theservice mark of Grainger Safety Services, Inc.,which may be registered in the United Statesand/or other countries.

ALLIANCE ENERGY SOLUTIONS is the servicemark of Grainger Service Holding Company, Inc.,which may be registered in the United Statesand/or other countries.

I Design and IMPERIAL are the trademarks or servicemarks of Imperial Supplies LLC, which may beregistered in the United States and/or other countries.

© 2011 W.W.Grainger, Inc.

Company Information

WilliamD. ChapmanDirector, Investor Relations

Mr. Chapman was named Director, InvestorRelations, in October 1999. In this role, he servesas the company’s primary contact with theinvestment community.

Mr. Chapman serves on the board of the ChicagoChapter of the National Investor Relations Institute(NIRI) and is a past president and chairman, as wellas a member of the NIRI National Senior Roundtable.

He also serves as a director, past president andscholarship chairman of the Wisconsin AlumniAssociation-Chicago Chapter and is a former directorof the National Wisconsin Alumni Association.

Forward-Looking StatementsThe 2011 Fact Book contains statements that are not historical in nature but concern future results and business plans, strategies and objectives, and other matters that may be deemedto be “forward-looking statements” under federal securities laws. Grainger cannot guarantee that any forward-looking statement will be realized although Grainger does believe that itsassumptions underlying its forward-looking statements are reasonable. Achievement of future results is subject to risks and uncertainties which could cause Grainger’s results to differmaterially from those which are presented.

The forward-looking statements should be read in conjunction with the company’s most recent annual report and Form 10-K as well as other reports filed with the Securities and ExchangeCommission containing a discussion of the company’s business and of the various factors that may affect it. Caution should be taken not to place undue reliance on Grainger’s forward-looking statements and Grainger undertakes no obligation to publicly update the forward-looking statements, whether as a result of new information, future events or otherwise.


Swissôtel Chicago serves business and leisure

travelers from around the world, combining the

renowned Swiss touch with a fresh, modern

and contemporary design. The award-winning

hotel has been partnering with Grainger to meet

its maintenance, repair and operating (MRO)

product needs for more than 23 years. Facility

Maintenance Engineer Erica Schulz knows that

she can count on Grainger On-site Services

Specialist Dan Hetland to stock her tool crib

with hundreds of fasteners, light bulbs and

other fast moving items through KeepStock,®

Grainger’s inventory management solution.

With the KeepStock®solution, Erica and the

rest of the Swissôtel maintenance crew can

focus more on providing customers with a

superior hotel experience, and spend less

time ordering and managing MRO products.

About the Company

W.W. Grainger, Inc., with 2010 sales of $7.2 billion, is North America’s leading broad-line supplier of maintenance, repair and operating products,

with an expanding presence in Asia and Latin America. For more information on Grainger, visit www.grainger.com/investor.

Contents

Partners in Productivity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Global Fast Facts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Creating Shareholder Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

The Global Maintenance, Repair and Operating Products (MRO) Market . . . . 5

Relentless Focus on the Foundation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Avenues for Accelerating Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Supplier Partner of Choice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Grainger Facts at a Glance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Corporate Social Responsibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

A Great Company to Work For . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Consolidated Statements of Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Consolidated Balance Sheets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Historical Financial Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Executive and Operating Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Compensation Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Company Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

2011 FACT BOOK


HeadquartersW.W. Grainger, Inc.100 Grainger ParkwayLake Forest, IL 60045-5201847.535.1000www.grainger.com

W.W

.Grain

ger,In

c.2011

FactBook

8S4190

2011 Fact Book - Grainger

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