Grainger Reports Record EPS Of $2.94 For The 2013 First Quarter

       Grainger Reports Record EPS Of $2.94 For The 2013 First Quarter

Raises 2013 Sales and EPS Guidance

Quarterly Highlights

-- Sales of $2.3 billion, up 4 percent, 6 percent daily

-- Operating earnings of $343 million, up 13 percent

-- EPS of $2.94, up 14 percent

-- Operating cash flow of $176 million, up 66 percent

PR Newswire

CHICAGO, April 16, 2013

CHICAGO, April 16, 2013 /PRNewswire/ -- Grainger (NYSE: GWW) today reported
results for the 2013 first quarter ended March 31, 2013. Sales of
$2.3billion increased 4 percent versus $2.2 billion in the first quarter of
2012. There were 63 selling days in the quarter, one less than in 2012. On a
daily basis, sales for the first quarter 2013 increased 6 percent.
Netearnings for the quarter increased 13percent to $212 million versus
$188million in 2012. Earnings per share of $2.94 increased 14percent versus
$2.57 in 2012.

"We are encouraged by the solid start to the year, despite facing difficult
comparisons with 2012," said Chairman, President and Chief Executive Officer
JimRyan. "Our continued strong performance puts us in a position to further
accelerate our growth spending to extend our lead in the MRO industry. Over
the balance of the year, we will invest in eCommerce, our sales force, our
distribution center network and our enterprise systems that will provide value
to our customers and help us gain additional market share longer term," Ryan
added. The company had previously forecasted $135million in incremental
growth-related expenses in 2013, and is now targeting $160 million for the
full year 2013.

Ryan concluded, "We are raising the low end of our 2013 sales and earnings
guidance to reflect our strong performance in the quarter, while increasing
growth investments for the year with the majority of returns occurring after
2013." The company now expects 2013 sales growth of 5 to 9percent and
earnings per share of $11.30 to $12.00. The company's previous 2013 guidance
issued on January 24, 2013, was sales growth of 3 to 9 percent and earnings
per share of $10.85 to $12.00. 


Sales increased 4 percent in the 2013 first quarter reflecting 1less selling
day versus the 2012 first quarter. Sales increased 6 percent on a daily basis
and consisted of 3percentage points from volume, 2percentage points from
price, 1percentage point from acquisitions and 1percentage point from higher
sales of seasonal products, partially offset by a 1percentage point reduction
from foreign exchange. Daily sales increased 8percent in January, 6percent
in February and 3 percent in March. Sales in March 2013 were affected by the
timing of the Easter Holiday, which reduced daily sales growth by 2 percentage
points and also reduced sales growth for the company's reportable business
segments. Inaddition, uncertainty in the United States surrounding
sequestration contributed to a decline in sales to the government end market,
which represented 15 percent of sales for the U.S. segment.

The company's gross profit margin increased 0.8 percentage points to 45.2
percent versus 44.4percent in the 2012 first quarter, primarily driven by the
United States segment. Company operating expenses in the quarter increased 3
percent including an incremental $22million in spending to fund the company's
growth programs.

Company operating earnings of $343 million for the 2013 first quarter
increased 13percent versus the prior year. The increase in operating
earnings was driven by higher sales, improved gross profit margins and
operating expenses, which grew at a slower rate than sales. 

Grainger has two reportable business segments, the United States and Canada,
which represented approximately 89 percent of company sales for the quarter.
The remaining operating units located primarily in Asia, Europe, and Latin
America are included in Other Businesses and are not reportable segments. 

United States

Sales for the United States segment increased 4 percent, 6 percent on a daily
basis in the 2013 first quarter versus the prior year. The 6 percent daily
sales growth was driven by 3percentage points from price, 2percentage points
from volume and 1 percentage point from acquisitions. Daily sales increased
7percent in January, 7 percent in February and 4 percent in March. The sales
increase for the quarter in the United States was led by solid growth in the
light and heavy manufacturing, natural resources, commercial and contractor
end markets.

Operating earnings for the United States segment increased 11 percent in the
quarter driven by the 4 percent sales growth, higher gross profit margins and
positive expense leverage. Gross profit margins for the quarter increased 0.8
percentage points driven by price inflation exceeding product cost inflation
and strong growth of private label products, partially offset by negative
selling mix. 


Sales in the 2013 first quarter at Acklands-Grainger increased 4 percent, 5
percent on a daily basis. The 5percent daily sales growth consisted of 8
percentage points from volume, partially offset by a 2 percentage point
decline from the timing of the Easter Holiday and 1 percentage point decline
from foreign exchange. In local currency, sales increased 5 percent, 6
percent on a daily basis. Daily sales in local currency increased 8 percent
in January, 8percent in February and 3percent in March. The sales increase
for the quarter in Canada was led by strong growth to customers in the
construction, commercial, forestry, oil and gas and light manufacturing end

Operating earnings in Canada increased 11 percent in the 2013 first quarter,
in both U.S. dollars and local currency. The improvement in operating
performance was primarily driven by higher sales and positive expense
leverage. Grossprofit margins were essentially flat versus the prior year.

Other Businesses

Sales for the Other Businesses, which includes operations primarily in Asia,
Europe and Latin America, increased 4 percent, 5 percent on a daily basis, for
the 2013 first quarter versus the prior year. The daily sales growth
consisted of 6 percentage points from volume and price and 4percentage points
from acquisitions, partially offset by a 5 percentage point decline from
unfavorable foreign exchange. The sales increase was primarily due to strong
revenue growth in Japan and incremental sales from the business in Brazil
acquired in April 2012. 

Operating earnings for the Other Businesses were $8 million in the 2013 first
quarter versus $11million in the 2012 first quarter. The decline in earnings
performance for the quarter versus the prior year was driven by operating
losses in Brazil, coupled with lower earnings in some of the smaller
businesses in Asia and Latin America. The earnings decline was partially
offset by strong earnings growth in Japan and operating earnings growth in
Europe related to lower expenses from restructuring actions taken in the 2012
fourth quarter.


Interest expense, net of interest income, was $2.3 million in the 2013 first
quarter versus $2.5million in the 2012 first quarter. The effective tax rate
in the quarter was 37.3percent versus 37.4percent in the 2012 quarter.The
company is currently projecting an effective tax rate of 37.3 to 37.7 percent
for the year 2013.

Cash Flow

Operating cash flow was $176 million in the 2013 first quarter versus $106
million in the 2012 first quarter. Cash flow in the 2013 quarter benefited
from higher earnings, lower inventory purchases and a lower management
incentive payout versus the prior year. The company used cash from operations
to fund capital expenditures of $43million in the quarter versus $41 million
in the first quarter of 2012. In the 2013 first quarter, Grainger returned
$127 million to shareholders through $57 million in dividends and $70 million
to buy back 315,000 shares of stock. As of March 31, 2013, the company had
5.0 million shares remaining on its share repurchase authorization.

W.W. Grainger, Inc., with 2012 sales of $9 billion, is North America's leading
broad line supplier of maintenance, repair and operating products, with
expanding global operations.

Visit to view information about the company,
including a history of daily sales by segment and a podcast regarding 2013
first quarter results. The Grainger Industrial Supply  website also includes
more information on Grainger's proven growth drivers, including product line
expansion, sales force expansion, eCommerce, inventory services and
international expansion.

Forward-Looking Statements

This document contains forward-looking statements under the federal securities
law. Forward-looking statements relate to the company's expected future
financial results and business plans, strategies and objectives and are not
historical facts. They are generally identified by qualifiers such as "will
invest", "will provide value", "help us gain additional market share",
"forecasted", "targeting", "sales and earnings guidance", "majority of returns
start after 2013", "expects" or similar expressions. There are risks and
uncertainties, the outcome of which could cause the company's results to
differ materially from what is projected. The forward-looking statements
should be read in conjunction with the company's most recent annual report, as
well as the company's Form 10-K, Form 10-Q and other reports filed with the
Securities & Exchange Commission, containing a discussion of the company's
business and various factors that may affect it.

(In thousands, except for per share amounts)
                                                  Three Months Ended March 31,
                                                  2013            2012
Net sales                                         $  2,280,435    $ 2,193,445
Costofmerchandisesold                          1,248,699       1,219,113
Grossprofit                                      1,031,736       974,332
Warehousing, marketing and administrative expense 688,431         669,971
Operatingearnings                                343,305         304,361
Interestincome                                   898             595
Interestexpense                                  (3,166)         (3,057)
Other non-operating income                        887             614
Totalother expense                               (1,381)         (1,848)
Earningsbeforeincometaxes                      341,924         302,513
Income taxes                                      127,397         113,055
Netearnings                                      214,527         189,458
Net earnings attributable to noncontrolling       2,689           1,942
Netearnings attributable to W.W. Grainger, Inc.  $  211,838      $ 187,516
                                                  $  2.99         $ 2.63
-Diluted                                        $  2.94         $ 2.57
                                                  69,562          70,133
-Diluted                                        70,775          71,656
Diluted Earnings Per Share
Net earnings as reported                          $  211,838      $ 187,516
Earnings allocated to participating securities    (3,595)         (3,296)
Net earnings available to common shareholders     $  208,243      $ 184,220
Weighted average shares adjusted for dilutive     70,775          71,656
Diluted earnings per share                        $  2.94         $ 2.57

(In thousands of dollars)
                                Three Months Ended March 31,
                                2013            2012
United States                   $  1,774,538    $ 1,700,709
Canada                          283,140         272,883
Other Businesses                247,874         238,956
Intersegmentsales              (25,117)        (19,103)
Netsalestoexternalcustomers $  2,280,435    $ 2,193,445
United States                   $  330,888      $ 298,964
Canada                          32,856          29,700
Other Businesses                8,251           10,715
Unallocatedexpense             (28,690)        (35,018)
Operatingearnings              $  343,305      $ 304,361
Company operatingmargin        15.1%           13.9%
ROIC*forCompany               34.6%           31.8%
ROIC*forUnited States         51.5%           49.2%
ROIC*forCanada                22.2%           21.8%

*The GAAP financial statements are the source for all amounts used in the
Return on Invested Capital (ROIC) calculation. ROIC is calculated using
operating earnings divided by net working assets (a 2-point average for the
year-to-date). Net working assets are working assets minus working
liabilities defined as follows: working assets equal total assets less cash
equivalents (2-point average of $342.0 million), deferred taxes, and
investments in unconsolidated entities, plus the LIFO reserve (2-point average
of $378.5 million). Working liabilities are the sum of trade payables,
accrued compensation and benefits, accrued contributions to employees' profit
sharing plans, and accrued expenses.

(In thousands of dollars)
Assets                                       March31, 2013  December 31, 2012
Cash and cash equivalents                    $  485,516      $   452,063
Accounts receivable – net                    1,031,920       940,020
Inventories – net                            1,230,614       1,301,935
Prepaid expenses and other assets            122,031         150,655
Deferred income taxes                        53,347          55,967
Total current assets                         2,923,428       2,900,640
Property, buildings and equipment – net      1,133,406       1,144,573
Deferred income taxes                        56,220          51,536
Goodwill                                     521,579         543,670
Other assets and intangibles – net           379,095         374,179
Total assets                                 $  5,013,728    $   5,014,598
Liabilities and Shareholders' Equity
Short-term debt                              $  73,602       $   79,071
Current maturities of long-term debt         21,757          18,525
Trade accounts payable                       431,848         428,782
Accrued compensation and benefits            154,255         165,450
Accrued contributions to employees' profit   46,933          170,434
sharing plans (1)
Accrued expenses                             196,557         204,800
Income taxes payable (2)                     64,470          12,941
Total current liabilities                    989,422         1,080,003
Long-term debt                               454,527         467,048
Deferred income taxes and tax uncertainties  118,995         119,280
Employment-related and other non-current     232,594         230,901
Shareholders' equity (3)                     3,218,190       3,117,366
Total liabilities and shareholders' equity   $  5,013,728    $   5,014,598

    Accrued contributions to employees' profit sharing plans decreased $124
(1) million primarily due to the annual cash contributions to the profit
    sharing plan.
(2) Income taxes payable increased $52 million primarily due to the timing of
    income tax payments.
(3) Common stock outstanding as of March 31, 2013 was 69,544,054 shares as
    compared with 69,478,495 shares at December 31, 2012.

(In thousands of dollars)
                                                  Three Months Ended March 31,
                                                  2013            2012
Cash flows from operating activities:
Net earnings                                      $  214,527      $  189,458
Provision for losses on accounts receivable       1,496           2,631
Deferred income taxes and tax uncertainties       (1,000)         (2,178)
Depreciation and amortization                     38,945          36,679
Stock-based compensation                          11,547          11,443
Change in operating assets and liabilities – net
of business

Accounts receivable                               (101,803)       (86,639)
Inventories                                       60,122          36,845
Prepaid expenses and other assets                 28,090          52,994
Trade accounts payable                            8,672           (28,549)
Other current liabilities                         (137,186)       (185,591)
Current income taxes payable                      52,085          58,325
Employment-related and other non-current          5,620           22,246
Other – net                                       (4,698)         (1,426)
Net cash provided by operating activities         176,417         106,238
Cash flows from investing activities:
Additions to property, buildings and equipment    (42,962)        (40,636)
Proceeds from sale of property, buildings and     1,573           602
Other – net                                       (89)            666
Net cash used in investing activities             (41,478)        (39,368)
Cash flows from financing activities:
Net (decrease) increase in short-term debt        (3,832)         1,651
Net (decrease) increase in long-term debt         (3,750)         3,252
Proceeds from stock options exercised             23,461          30,241
Excess tax benefits from stock-based compensation 12,650          18,185
Purchase of treasury stock                        (69,797)        (61,757)
Cash dividends paid                               (56,546)        (47,017)
Net cash used in financing activities             (97,814)        (55,445)
Exchange rate effect on cash and cash equivalents (3,672)         (8,161)
Net change in cash and cash equivalents           33,453          3,264
Cash and cash equivalents at beginning of year    452,063         335,491
Cash and cash equivalents at end of period        $  485,516      $  338,755

SOURCE W.W. Grainger, Inc.

Contact: Media - Joseph Micucci, Director, Media Relations, 847-535-0879
(office), 847-830-5328 (mobile); Grainger Media Relations Hotline,
847-535-5678; Investors - Laura Brown, SVP, Communications & Investor
Relations, 847-535-0409 (office), 847-804-1383 (mobile); William Chapman, Sr.
Director, Investor Relations, 847-535-0881 (office), 847-456-8647 (mobile)
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