Grainger 2013 Investor Manual

From Motors to Mobile
2013 FACT BOOK
Contents From Motors to Mobile . Fast Facts

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1 2 4 6 8 9 10 12 About the Company
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Creating Shareholder Value Supply Chain
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Investing for Growth eCommerce .
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W.W. Grainger, Inc., with 2012 sales of $9 billion, is North Americas leading broad-line supplier of maintenance, repair and operating (MRO) products, with an expanding global presence. Grainger is a business-to-business distributor of products used to maintain, repair or operate facilities. Millions of businesses and institutions worldwide rely on Grainger for pumps, motors, hand tools, janitorial supplies, fasteners and much more. These customers represent a broad collection of industries including healthcare, manufacturing, government and hospitality. They place orders over the phone, at local branches, online, by fax and using mobile devices. More than 4,000 manufacturers supply Grainger with more than 1 million products that are stocked in Graingers branches and distribution centers or sourced through a network of suppliers. For more information on Grainger, visit www.grainger.com/investor.
United States .
International Overview. Priority Markets: Canada Japan .
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14 16 17 18 19 20 21 22 24 25 26 27 28 30 31 32 32 33
Europe . Mexico Brazil .
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Sustainability
A Great Company to Work For . Community Relations
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Supplier Relationships
Consolidated Statements of Earnings . Consolidated Balance Sheets .
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Consolidated Statements of Cash Flows . Historical Financial Summary.
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Executive and Operating Management . Compensation Practices . Board of Directors .
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Corporate Governance . Company Information .
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Forward-Looking Statements
The 2013 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 deemed to be forward-looking statements under federal securities laws. Grainger cannot guarantee that any forward-looking statement will be realized, although Grainger does believe that its assumptions underlying its forward-looking statements are reasonable. Achievement of future results is subject to risks and uncertainties which could cause Graingers results to differ materially from those which are presented. The forward-looking statements should be read in conjunction with the companys most recent annual report and Form 10-K as well as other reports led with the Securities and Exchange Commission containing a discussion of the companys business and of the various factors that may affect it. Caution should be taken not to place undue reliance on Graingers 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.
From Motors to Mobile When William Grainger started his business in 1927, he created a catalog of available motors to advertise to his customers. Listing 41 products over eight pages, the catalog measured 3.5 x 6 inches and was designed to fit in a jacket pocket.
Over the next 85 years, the company he founded expanded its product offering to more than 500,000 products offered through a 4,000-page catalog. Worldwide, Grainger provides two million customers with more than 1 million products. And with the introduction of the mobile phone application, Grainger returns to its roots by having the product offering fit in ones pocket.
From a catalog to a smartphone, Grainger always maintains a focus on how to improve the experience for its customers, the ones who get it done.
W.W. GRAINGER, INC. AND SUBSIDIARIES
Fast Facts (AS OF 12/31/12)
$9 billion
in sales in 2012
consecutive years of dividend increases
41
MORE THAN
1 MILLION
PRODUCTS AVAILABLE
$1 BILLION
IN SALES IN 2012 FOR ACKLANDSGRAINGER (CANADA)
$561 MILLION
RETURNED TO SHAREHOLDERS IN THE FORM OF DIVIDENDS AND SHARE REPURCHASES IN 2012
MORE THAN
4,700
Awards and Recognitions
Named one of FORTUNE Magazines 100 Best Companies to Work For in 2013 Winner, Canadas 10 Most Admired Cultures Award Ranked No.1, Wholesalers, Diversied, FORTUNE Magazines Most Admired Companies 2012 CIO 100 Award CIO Magazine
2012 Sales by Customer Category (Total Company)
KEY SUPPLIERS
20.4 percent
18% 18% 15% 12% 9% 9% 7% 6% 4% 2% Commercial Heavy Manufacturing Government Contractor Light Manufacturing Other Retail/Wholesale Natural Resources Reseller Transportation
22,400
team members
average annual total shareholder return (2008 2012)
Graingers common stock is listed on the New York and Chicago stock exchanges under the trading symbol
2012 Sales by Product Category (Total Company)
GWW
15th largest
e-retailer in the United States and Canada
LEED-CERTIFIED BUILDINGS
15
Multiple
17% 13% 10% 8% 8% 7% 7% 6% 6% 6% 3% 3% 2% 2% 2%
Safety and Security Material Handling Metalworking Cleaning and Maintenance Pumps, Plumbing and Test Equipment Electrical Hand Tools HVAC Lighting Other Fluid Power Power Tools Motors Power Transmission Specialty Brands
29
DISTRIBUTION CENTERS
$9 million +
sales days in 2012 for U.S. eCommerce
715
branches
2 W.W. GRAINGER, INC. AND SUBSIDIARIES
Grainger operates in 22 countries and serves customers in more than 150 countries through its export business.
(AS OF 12/31/12)
UNITED STATES MRO market size: > $118 billion Market share: 6 percent Branches: 369 Distribution centers: 15 Websites: www.grainger.com www.imperialsupplies.com www.techni-tool.com www.zorotools.com Customers served in 2012: More than 1.4 million
CANADA Doing business as: Acklands Grainger Inc. MRO market size: > $14 billion Market share: 8 percent Branches: 172 Distribution centers: 6 Website: www.acklandsgrainger.com (English and French) Customers served in 2012: Approximately 40,000
JAPAN Doing business as: MonotaRO Co., Ltd. MRO market size: > $57 billion Market share: < 1 percent Branches: 0 Distribution centers: 2 Website: www.monotaro.com Customers served in 2012: More than 400,000
EUROPE (Belgium, Czech Republic, France, Hungary, The Netherlands, Poland, Portugal, Romania, Slovakia, United Kingdom) Doing business as: Fabory Group* MRO market size: > $35 billion Market share: < 1 percent Branches: 142 Distribution centers: 2 Website: www.fabory.com (Multilingual) Customers served in 2012: More than 100,000 *ALTHOUGH FABORY GROUP IS HEADQUARTERED IN EUROPE, IT ALSO HAS LIMITED OPERATIONS IN NORTH AMERICA AND ASIA.
MEXICO MRO market size: > $10 billion Market share: 1 percent Branches: 19 Distribution centers: 1 Website: www.grainger.com.mx Customers served in 2012: More than 35,000
BRAZIL MRO market size: > $21 billion Market share: < 1 percent Branches: 0 Distribution centers: 1 Website: www.grainger.com.br Customers served in 2012: Approximately 1,500
LATIN AMERICA (Colombia, Costa Rica, Dominican Republic, Panama, Puerto Rico**) MRO market size: > $6 billion Market share: < 1 percent Branches: 13 Distribution centers: 1 Website: www.grainger.com Customers served in 2012: More than 13,000 **ALTHOUGH PUERTO RICO IS A U.S.
TERRITORY, THE COMPANY MANAGES THIS BUSINESS AS A PART OF LATIN AMERICA.
ASIA (China, India) Doing business as: Grainger China, Grainger Industrial Supply India Private Limited MRO market size: > $94 billion Market share: < 1 percent Branches: 0 Distribution centers: 1 Regional warehouses: 18 Websites: www.grainger.cn www.graingerindia.com Customers served in 2012: More than 10,000
Creating Shareholder Value

Grainger has proven its ability to gain share, expand margins and generate strong cash flow through the economic cycle. The value creation opportunity for shareholders remains attractive given the highly fragmented market and a business model and strategy that speak to customers needs. Grainger is well positioned to generate attractive returns to shareholders regardless of the economy.
y remaining focused on customer needs, Grainger also delivers for its shareholders. The companys strong track record of creating value for investors has been accomplished by delivering strong sales growth and consistently expanding margins, while prudently managing the capital invested in the business. By delivering on these three key metrics, Grainger has met its goal over the past five Total Shareholder Return Percent (average annual) years of producing top quartile 8 6 20 2 returns for shareholders. For the five years ended 2012, Graingers average total shareholder return topped 20 percent, versus 2 percent for the S&P 500. This performance places Grainger at No. 32 and in the 93rd percentile among companies in the S&P 500.
3 5 YEAR FINANCIAL TARGETS Organic Sales Growth 8 12 percent Annual Operating Margin Expansion 30 60 basis points
Grainger has a blueprint for running a healthy, successful business. The companys leadership team has proven its ability to manage through economic cycles, gain market share, expand margins and generate strong cash flow.
Market Fragmentation North America
Sales Dollars in billions

6.9 6.2 7.2 8.1 9.0
10 Years (19982007)
GWW
5 Years (20082012)
S&P 500
Graingers track record is also impressive when compared to industry peers. The Dow Jones U.S. Industrial Suppliers Total Stock Market Index, an industry-specific benchmark, delivered a five-year cumulative return of 98 percent, versus 153 percent for Grainger.
Comparison of Five-Year Cumulative Total Return Percent
2007 2008 2009 2010 2011 2012
6% 24% 70%
Grainger Other Top 10 Distributors All Other Distributors

2008 2009 2010 2011 2012
200 150 100 50 0 -50 -100
Accelerating Sales Growth Through Share Gain
Despite its leadership position, Grainger has relatively low market share in the global MRO market, which is estimated at $570 billion. In North America alone, Graingers industryleading market share is about 6 percent in a large and fragmented market. In both mature and emerging markets, Grainger has ample opportunity to grow organically and through acquisition as the market consolidates.
W.W. Grainger, Inc. S&P 500 Stock Index Dow Jones U.S. Industrial Suppliers Total Stock Market Index
A HISTORICAL LOOK
W.W. Grainger, Inc., became a publicly traded company on March 29, 1967, with an initial public offering of shares on the Chicago Stock Exchange under the symbol GWW. The first issuance was for 720,000 shares, offered at $19 per share, and all sold within a few hours. At year-end 1967, there were approximately 3,450 registered shareholders. A $1,900 investment (100 shares at $19 per share) was worth $1,473,324 as of Dec. 31, 2012.
Operating Margin Percent

11.4 10.7 12.0 13.0 13.8*
Expanding Margins
12.6
2008
2009
2010
2011
2012
The company has targeted an average of 30 to 60 basis points in operating margin expansion per year for the next three to five years. Grainger has a proven track record of expanding operating margins through better gross margins and improved expense leverage.
Cash Generation/Deployment (2008 2012) Dollars in millions

Cash from Operations
4,000
Cash Flow from Operations Dollars in millions

530 732 596 746 816
Uses of Cash
3,000
63 percent returned to shareholders
2,000
1,000
Share Repurchases Acquisitions
Dividends
2008
2009
2010
2011
2012
Capital Expenditures
GROSS MARGIN EXPANSION Improvements in gross profit margins have primarily been generated by effective product cost management. Grainger leverages its scale position in the channel to ensure competitive product cost. In addition to this favorable price/cost relationship, Grainger has been successful at increasing the mix of private label products. Strong growth of exclusive brands, such as Dayton , Condor and Westward , have contributed to achieving this goal.

Increasing Cash Flow
One of Graingers hallmarks is consistent cash flow generation. Strong working capital management, coupled with a steady track record of growth and margin expansion, has enabled the company to increase its cash flow over the past three years. In 2012, Grainger reported record cash flow from operations of $816 million. Since 2008, Grainger has returned about two-thirds of operating cash flow to shareholders in the form of dividends and share repurchases. In 2012, the company paid $220 million in dividends, which reflected the 21 percent increase in the quarterly dividend announced in April 2012, representing the 41st consecutive year of increased dividends. Grainger is among only three percent of S&P 500 companies that have increased their dividends for more than four decades. Since 2007, Grainger has grown its dividend at a compound annual rate of 18 percent, which exceeds the rate of earnings growth during the same period. In addition, Grainger returned $341 million to shareholders in 2012 in the form of share repurchases. Since 2007, the companys repurchase program has resulted in a 13 percent net reduction in common shares outstanding, from 79 million to 69 million shares.
Shares Outstanding Millions of shares
74.8 72.3 69.4 70.0 69.5
Direct sourcing from low-cost countries provides Grainger with an additional venue for expanding gross profit margins. This program enables Grainger to offer quality products to customers across the globe at a variety of price points. Grainger Global Sourcing works with hundreds of manufacturers worldwide to develop these products. Grainger has promoted its globally sourced exclusive brands through seller education, increased marketing and product line expansion. Since 2007, Grainger has grown its exclusive brand SKU count by more than 200 percent.
EXPENSE LEVERAGE
Grainger has been successful at driving better productivity throughout the company with a robust continuous improvement program. For example, in the distribution business, travel time is waste. Team members have been charged with identifying new ways to re-engineer work through standardized processes that eliminate steps and reduce variability. In 2013 alone, the company is forecasting an incremental $165 million in productivity savings that will be used to fund $135 million in growth investments.
Earnings per Share Diluted Dollars
5.97 5.62 6.93 9.07 10.43*
Dividends Paid Dollars per share

1.55 1.78 2.08 2.52 3.06
Return on Invested Capital ** Percent

29.8 24.9 29.8 31.9 31.5*
9.52
29.1
2008 2009 2010 2011 2012 2008 2009 2010 2011 2012
2008
2009
2010
2011
2012
2008
2009
2010
2011
2012
* Lower number represents reported figure; upper number represents adjusted figure, which excludes unusual items as reported by the company in its 2012 quarterly earnings releases. ** See footnote on page 29.
Graingers history of consistently increasing dividends pays off in more ways than one. Consider an investor who bought 100 shares at $70 per share in 2009. That $7,000 investment resulted in a $306 dividend in 2012, representing an effective yield of 4.4 percent on the original investment.
Supply Chain
Customers count on Grainger to have the right products, in the right place, at the right time to meet their critical business needs. Serving two million customers with more than 1 million products takes deep expertise and disciplined execution to consistently deliver superior results. Grainger continues to invest in its supply chain capabilities across all of its businesses, developing a powerful global platform for profitable growth.
aving a broad range of products available to meet customer needs is central to Graingers mission. The company is aggressively expanding its product line to capture even more of its customers MRO spend. For example, in the United States the companys product line has more than quadrupled over the past five years, providing customers with easy access to a nearly endless assortment of both in-stock and less frequently purchased drop-ship items. Grainger Mexico has more than doubled the number of products available to its customers by improving the efficiency of its in-country network and leveraging shipping from Graingers U.S. distribution centers. With best-inclass inventory management and deployment practices, Grainger is able to maintain product availability and inventory turns while continually adding new products to meet customer needs.
capabilities closer to its Asian supplier base. At the same time, GGS evaluates its supply network to help minimize risk and ensure access to low-cost products throughout the world.
Purchasing Leverage
Grainger works closely with its suppliers on product cost as well as service enhancements such as cycle time and quality improvements. As Grainger aggregates more of its product purchases across the globe, it is realizing even greater scale advantages. Graingers global businesses continually evaluate purchasing processes on product lines such as hand tools to enhance both cost and service. The company also leverages the specialized fastener expertise of its European business, Fabory Group, to improve the cost and delivery of its overall fastener offering (see Fastener House sidebar on page 13).
Grainger Global Sourcing
OFFERING A NEARLY ENDLESS ASSORTMENT
Availability matters when it comes to MRO products. When a mission-critical part goes down, oftentimes the item is needed immediately. Thats why Graingers supply chain expertise is a competitive advantage. Through effective network design and smart stocking decisions, the company offers customers a nearly endless assortment of products while effectively managing its own inventory costs. Through a combination of products stocked in a Grainger facility, drop-shipped direct from a supplier or sourced specifically for a customer, Grainger is able to serve as a one-stop shop for customers MRO needs. To ensure customer satisfaction, Grainger has a comprehensive supplier drop-ship certification program that clearly identifies order transparency and shipping requirements. Drop-ship is one of the service attributes suppliers are measured against each year. This service helps provide customers with exceptional availability on slower moving items or products that are typically made to order.
Adding more private label products is a key priority for Grainger. These products which include the Dayton , Condor , Westward , LumaPro and Tough Guy brands offer customers high-quality, low-cost options and typically carry higher gross profit margins. The engine behind much of the companys private label offer is Grainger Global Sourcing (GGS), which works with 650 suppliers in 30 countries to Global Sourcing External Sales Percent of total company sales provide Graingers businesses 8.2 8.8 9.4 9.9 10.1 access to high-quality options. In 2012, GGS introduced the Condor brand to Graingers European business and expanded this product offering in Canada. To reduce cycle time and ensure quality, GGS continues to build product 2008 2009 2010 2011 2012 engineering and inspection

Stocked Drop-shipped Sourced
Grainger has continued to expand its offering through a combination of stocked, drop-shipped and sourced items so customers have convenient access to a nearly endless assortment of products.
NORTH AMERICAN DISTRIBUTION NETWORK
Grainger makes substantial investments each year to strengthen its supply chain infrastructure. Highlights in 2012 included:
Edmonton Vancouver Saskatoon Seattle Winnipeg Dartmouth Richmond Hill Minneapolis Janesville San Francisco Denver Chicago Kansas City Greenville Dallas Memphis Jacksonville
(Relocating in 2014)
Robbinsville Cleveland
Los Angeles
AcklandsGrainger relocated its distribution center (DC) in Saskatoon, Saskatchewan, to a new, larger facility that is double the size of the original DC.
AcklandsGrainger completed the purchase of land for a new distribution center outside of Toronto. The existing DC in Richmond Hill will relocate to the new facility, which is designed to house 500,000 products and provide branch replenishment and direct shipping to customers in eastern Canada.
Monterrey
KEY
Super Regional DC Regional DC Market DC
Graingers new central stocking distribution center outside Chicago in Minooka, Ill., began operations in late 2012. The 1 million square-foot facility includes a goods-to-person system that stores up to 500,000 items and delivers product to team members positioned in ergonomic workstations. This process increases team member safety and productivity, while improving order accuracy.
Grainger celebrated the grand opening in May of its 820,000 square-foot distribution center in Patterson, Calif., near San Francisco. With the capacity for 350,000 items, the new DC provides next-day service to customers on much of the West Coast.
A HISTORICAL LOOK GLOBAL BEST PRACTICES
For Grainger, the supply chain thrives on operational excellence. This means having team members who are highly engaged in continuous improvement efforts. In the distribution centers, these efforts pay off with a strong and improving safety record, better inventory and order accuracy, and a variety of cycle time improvements. Best practice sharing across facilities and businesses has contributed to better productivity throughout the global supply chain. In 2012, teams from the Global Supply Chain department supported other Grainger teams around the world. These projects included: the design, construction and inventory transition of the new distribution center in Saskatoon, Saskatchewan; the design and engineering of the upcoming distribution center near Toronto; the expansion of the distribution center in Monterrey, Mexico, which nearly doubled the facilitys capacity for product line expansion; and the establishment of inbound supplier cross docks near Toronto to improve cost and service on inbound freight.
Grainger has been an industry leader in innovation, a tradition that continues with the opening of the state-of-the-art distribution center in Minooka, Ill. In1981, Grainger introduced one of the first large-scale automated storage and retrieval systems (ASRS) in a distribution center. The 84,000 square-foot structure was equivalent to a 250,000 square-foot conventional warehouse and featured a series of cranes that efficiently and safely moved pallets of product through the structure. The company continues to make infrastructure investments that are designed for improved productivity, service and team member safety.
Investing for Growth

Investing in proven growth initiatives allows Grainger to build strength in core competencies and drive share gain. Its part of a commitment to deliver outstanding service to customers and outpace the competition for years to come. By listening to customers and responding to their evolving needs, Grainger invests in the growth drivers noted below, along with eCommerce and international expansion, that best position the company for success in a competitive marketplace.
rainger has established the following growth drivers:

Product Line Expansion
Grainger has grown from 41 products in 1927 to a one-stop shop with more than 1 million products available worldwide. Meeting customer demand with a large and growing MRO assortment is a competitive advantage for Grainger. Product line expansion isnt an event its how Grainger runs and grows the business. The company monitors customer demand for every product to ensure stocking in the proper location. Customers count on Grainger to have the right products in stock to meet critical business needs, so products are stocked according to their popularity (see sidebar on page 6). Establishing a repeatable, predictable delivery performance for direct-shipped items generates confidence from the customer that Grainger will always come through in a time of need. A broad selection gives customers access to the products they need. The 2013 U.S. catalog contains more than 570,000 SKUs.
Product Line Expansion SKUs in U.S. Catalog Thousands
82 115 139 183 233 307 354 413 574
Territory Sales Representatives extend the value proposition to medium-sized businesses that previously didnt have an in-person relationship with Grainger.
Grainger started a Territory Sales Representative (TSR) program in 2009 to strengthen relationships with medium-sized businesses, hiring more than 600 TSRs since then. TSRs are located in more than 30 markets in the United States. With TSRs, Grainger expects to make inroads and extend its value proposition with new and existing customers. Internationally, Grainger added more than 100 sales representatives in the Latin America and Canadian businesses in 2012.
Inventory Management
Graingers 85 years of inventory management experience is an asset when partnering with customers on inventory solutions. Today, customers are looking for more than just a product; they are looking for a holistic solution that includes services. Distributors that can provide customized solutions will differentiate themselves from the competition, and Grainger offers the KeepStock suite of solutions to help customers manage and maintain the right inventory level.
2005
2006
2007
2008
2009
2010
2011
2012
2013
Sales Force Expansion
Distribution is a relationship business. Customers need to know that their partner understands their unique needs, so connecting with customers is a differentiating factor. Calling on customers in person allows Grainger to understand each business and help it meet its productivity needs. Grainger knows that sales representatives work, and the company is adding new sales staff at all levels. This enables Grainger to deepen relationships with larger customers and reach out to medium-sized customers in previously underserved markets. In addition, Grainger is moving to a vertically aligned sales force to address the unique needs of customers in specific industries.
Secure dispensing machines, one of the seven solutions in the KeepStock suite, illustrates Graingers improved capabilities. The lead time required to design, fill and deliver a machine has been cut from 10 weeks to U.S. KeepStock Installations In thousands two weeks. Getting secure 29 40 50 100 machines and other offerings 60 to the customer faster makes Grainger more competitive in the arena of inventory 10 solutions. Grainger also offers 40 40 inventory solutions to businesses outside the United States, including Canada, 2011 2012 2013E FUTURE Europe and Latin America.
eCommerce
Grainger has been a pioneer in business-to-business eCommerce, launching the Grainger.com website in 1995 and becoming one of the first business-to-business companies to conduct sales via the Internet in 1996. Today, eCommerce accounts for more than 30 percent of company sales, or $2.7 billion in 2012.
s more customers leverage technology to enhance productivity, eCommerce has become Graingers fastest growing and eCommerce Revenue most profitable channel. The Percentage of total company sales 15 30 4050 companys eCommerce sales are growing more than twice the rate of the rest of the business, increasing 23 percent in 2012 versus 2011. The company recently opened an eCommerce office in downtown Chicago to help 2005 2012 2015E attract and retain top talent in the web and mobile fields. This team is helping drive significant improvements for eCommerce customers.
Creating the Best User Experience
and can be used by different brands and in different geographies. The company expects that all U.S. customers will be migrated to the new platform by the end of 2013.
Mobile
Grainger launched its mobile website in late 2011 to reach businesses and institutions where maintenance and purchasing professionals are on the go. Research indicates that approximately 60 percent of Graingers customers use smartphones. The mobile site allows customers to access Graingers extensive product offering no matter where they are: on the job site, on the plant floor or in the maintenance shop. Mobile sales grew more than 50 percent quarter-over-quarter for the last three quarters of 2012. Mobile now accounts for 5 percent of Graingers website traffic and more than 20 percent of all online searches. In 2012, the company launched a new mobile application for all smartphone users, which averaged 3,200 downloads per week. Using the mobile app, customers can log into their account, view pricing, confirm local product availability, approve pending orders and check out with the product ready for pickup at their nearest Grainger branch or shipped directly to their office or job site. More than 25 percent of mobile transactions are will-call orders placed for product pickup at the nearest Grainger branch.
Zoro Tools
Over the past two years, Grainger has introduced a number of enhanced capabilities that are improving the online customer experience, which in turn helps boost order conversion rates and increases average order size.
Grainger ranked 15th in the United States and Canada of the Top 100 e-retailers of 2012.
(SOURCE: INTERNET RETAILERS TOP 500 GUIDE)
PRODUCT RATINGS AND REVIEWS allows customers to share
their experiences and learn from other customers who bought similar products.
GUEST CHECKOUT makes it easy for non-registered customers
to quickly place orders for needed supplies.

CLICK TO CALL/CHAT offers the same great service on Grainger.com
that customers have come to expect over the phone and at the companys branches. Through this capability, Grainger provides real-time technical product support and service that helps customers get the products they need. With usage increasing 200 percent in one year, Grainger added 30 Click to Chat agents in 2012 and expects to offer a mobile chat function in early 2013.
AUTO-REORDER allows customers to choose a desired frequency for
Leveraging the eCommerce expertise of both Grainger.com and MonotaRO, the company launched Zoro Tools in 2011 to meet the low-touch, low-cost needs of smaller customers. With impressive year-over-year growth, this single channel model offers new opportunities to gain share, while leveraging Graingers existing distribution network.
LEVERAGING EMARKETING TO DRIVE WEBSITE TRAFFIC
In two years, Grainger has increased its investment in keywords from 10,000 to more than 5.6 million today.
repeat purchases and have orders automatically generated, saving them time, money and effort.
Next Generation eCommerce Platform
Digital advertising produces a better than 6:1 return for every advertising dollar spent.
Grainger is in the process of converting to a new eCommerce platform that provides more flexibility, making it easier to make real-time enhancements to the site. The new platform is scalable,
Banner ads generate over 50 million impressions per month, yielding a 10:1 return on every advertising dollar spent.
United States
For 85 years, Grainger has been helping businesses and institutions in the United States improve the way they purchase and manage the supplies needed to keep their facilities running efficiently and their employees safe. Graingers multichannel business model and world-class distribution network provide customers nationwide with easy access to more than 1 million products, helping them consolidate their MRO purchases and take cost out of their business.
rainger has more than 14,000 U.S. team members who are passionate about helping customers get the products they need to get their jobs done. The company provides products across more than 30 categories including safety, security, material handling, pumps, plumbing, test equipment, cleaning, maintenance, HVAC and much more.
Multichannel Model
Graingers strength is in its multichannel business model, which allows customers to get the products they want, when they want them, how they want them. This model includes:
KNOWLEDGEABLE SALES REPRESENTATIVES
Grainger has more than 2,600 sales representatives who are skilled at identifying ways to help large and medium-sized businesses save time and money by better managing their MRO inventory. The companys sales team works with a variety of customers in industries including manufacturing, government, healthcare, hospitality, transportation and natural resources. Grainger uses several different sales coverage models including: Corporate and Major Account representatives who work primarily with large customers looking to standardize purchasing across multiple facilities. Account Managers who use a consultative approach to helping businesses and government institutions reduce total purchasing costs. Territory Sales Representatives who primarily call on mediumsized customers who value Graingers multichannel model, broad product offering and service capabilities.
Secure dispensing machines, one of the KeepStock suite of inventory management solutions, reduce consumption by up to 40 percent through controlled inventory access, saving customers time and money.
unique needs. The company ended 2012 with approximately 40,000 KeepStock installations in the United States, a 30 percent increase versus 2011. An additional 10,000 installations are projected for 2013.
EXTENSIVE BRANCH NETWORK Graingers branch network plays a critical role in providing customers immediate access to needed supplies. The company has more than 360 U.S. locations stocked with inventory tailored to meet the just-in-time and emergency needs of local businesses. The branches are backed up by a network of distribution centers that carry more than 500,000 products.
eCommerce is the glue that holds the multichannel model together. In addition to the Grainger.com website, customers also utilize Graingers online Order Management System, which automates the purchasing and approval process, making it easier for customers to manage their departments MRO spend. Graingers eProcurement solutions help larger customers with buyers across multiple locations connect electronically with Grainger, resulting in end-to-end integration that enhances efficiency and lowers purchasing costs.
ECOMMERCE
Graingers off-site customer service centers provide 24/7 telephone support, including technical product support, as well as online support through the companys Click to Call/Chat capabilities on Grainger.com.
SERVICE CENTERS
Strategic Acquisitions
Grainger provides a suite of inventory management solutions under its KeepStock offering. From customer-managed inventory solutions like labeling, scanning and mobile capabilities to vendor-managed inventory solutions like on-site support, vending machines and on-site branches, Graingers KeepStock program meets customers
INVENTORY MANAGEMENT SOLUTIONS
Grainger remains largely driven by organic growth but sees the opportunity to augment this growth, and the capabilities to serve customers, through acquisitions. In December 2012, Grainger acquired Techni-Tool, Inc. and its affiliate Wassco Inc., leading specialist distributors serving manufacturing customers. This acquisition helps Grainger provide more of the products, services and technical support needed by manufacturers in the electronics, aerospace, telecommunications and medical industries. The company expects to continue to make strategic acquisitions that extend its capabilities and help customers consolidate more of their MRO purchases with Grainger.
2012 Sales by Customer Category United States

21% 17% 17% 12% 10% 7% 7% 5% 3% 1% Commercial Government Heavy Manufacturing Contractor Light Manufacturing Other Retail Reseller Natural Resources Transportation
2012 Sales by Product Category United States

15% Safety and Security 13% Material Handling 10% Cleaning and Maintenance 10% Pumps, Plumbing and Test Equipment 8% Electrical 8% HVAC 8% Metalworking 7% Lighting 6% Hand Tools 4% Fluid Power 3% Power Tools 3% Power Transmission 3% Specialty Brands 2% Motors
KEY Branch Distribution Center (As of 12/31/12)
RESPONDING TO HURRICANE SANDY
Grainger has a long and proven history of helping customers prepare for, respond to and recover from disasters. The company once again answered the call when Hurricane Sandy devastated communities in coastal New York and New Jersey. Graingers national emergency response team kicked into high gear in the days leading up to the storm, working with suppliers to get shipments of needed products to the affected areas and coordinating efforts between the companys sales, customer service and supply chain teams. Many of the companys local team members overcame damage to their homes and personal property to stand with customers, helping them get critical supplies in their time of greatest need. Graingers support before, during and after Hurricane Sandy helped position the company to play a lead role in rebuilding efforts in the months following the storm. The company supplied customers with a variety of critical supplies throughout the ordeal, including Court Carruthers, Senior Vice President and generators used to help healthcare customers President, Grainger U.S., talks with Account maintain operations during the power outage in Manager Stephen Sacco at Graingers temporary New York City, and air moving equipment used store in lower Manhattan. Grainger opened the store to provide immediate supplies to customers to dry out the north tube of the Holland Tunnel. after Hurricane Sandy. In addition, Grainger provided thousands of recovery-related products to customers at a critical time, including chain saws, gas cans, extension cords, wet vacs, water and trash pumps, flashlights, batteries, space heaters and sanitizing supplies. To help customers and contractors in the Financial District, Grainger opened a temporary store in lower Manhattan to better position core cleanup products. Grainger also reinforced its commitment to the community by donating $100,000 to the American Red Cross to assist in relief efforts. Individual team members made a difference by utilizing the companys Matching Charitable Gifts Program, which provides a three-to-one match for contributions to qualified nonprofit organizations, and by volunteering time through the American Red Cross Ready When the Time Comes program (see more on page 22). Once again, Grainger demonstrated its commitment to being a trusted partner that customers and communities can rely on in good times and bad.
HELPING HOSPITALS SUCCEED
Hospitals and healthcare facilities are focused on improving patient satisfaction while keeping overall costs low, and Grainger is there to help. Just ask the team at The University of Pittsburgh Medical Center (UPMC) that leveraged KeepStock on-site to implement a more streamlined purchasing process and realize efficiency gains. Previously, the maintenance staff placed orders daily, often resulting in duplicate orders. Other inefficiencies included repetitive purchasing of items that couldnt be located quickly and decentralized storage practices. The benefits of KeepStock implementation were clear: Within the first year, UPMC saw a 25 percent reduction in supply costs, the near-elimination of emergency parts runs by staff and improved clarity in the invoicing process. Repairs and replacements have also become more predictable and efficient as parts are in the right place. In addition, the program significantly decreased the time spent on supply-related activities, allowing more time for maintenance tasks, leading to greater internal customer and patient satisfaction. UPMCs success is just one example of how Grainger helps hospitals stay productive and improve the bottom line.
11
International Overview
Grainger made its first international acquisition in 1996 with the purchase of Acklands Limited in Canada. Since that time, the company has significantly grown its international presence and now has operations in 22 countries and serves customers in more than 150 countries through its export operation. Having robust global capabilities is essential to best meet the needs of customers and capture share in a $570 billion global MRO market.
ith such a significant growth opportunity in the core U.S.-based business, why focus on global expansion? The company sees four primary reasons.
CUSTOMER PULL
In an era of increasing globalization, existing Grainger customers regularly ask for support in helping them maintain safe, productive workplaces around the world. Customers know how challenging this work can be, particularly in markets where the distribution of MRO products is less mature and where the services theyre accustomed to are not yet established. Having a trusted partner like Grainger matters.
HIGHER GROWTH MARKETS
SHARING TALENT ACROSS BORDERS
As Grainger expands globally, the company is finding new ways to share expertise in different countries. At the highest levels of the company, leaders have rotated roles between the United States and international businesses, to become well versed in all aspects of the business and develop a global mindset. In the Latin America region, several leaders whose careers began in Mexico are now leading teams in other countries, providing great leverage and expertise sharing at the region level. In addition, the company is increasingly using short-term international assignments as a means to develop high-potential talent and foster collaboration across borders. Short-term assignments and best practice sharing in the supply chain, finance, sales and other teams have proven highly effective in developing talent and sharing expertise at the local level.
Global operations allow Grainger to diversify economic risk across a broad set of geographic regions. It also gives the company access to markets with significantly higher growth rates than the United States.
PURCHASING LEVERAGE
In this industry, purchasing scale matters. Global expansion gives Grainger stronger leverage for all of its businesses, ultimately resulting in a more cost-effective product offering.
ACCESS TO IDEAS AND TALENT
Operating globally gives Grainger access to diverse talent and expertise that otherwise would be difficult, if not impossible, to leverage. This knowledge comes in the form of market intelligence, customer relationships, buying expertise and product knowledge. With operations in North America, Asia, Europe and Latin America, Grainger believes its important to have a framework to determine whether and where further expansion is warranted. The following four dimensions are used to evaluate and prioritize investment among existing markets: The first is materiality. To have a significant presence in a given market requires there be significant latent MRO potential. For example, the overall continent of Europe, which includes countries where Grainger does not currently operate, has an estimated MRO market potential of $155 billion, greater than that of the United States.
Relevance is the second filter and speaks to how relevant
market. Grainger has learned that the structure and maturity of a market as measured by GDP per capita is a good indicator of where its offering will be compelling. Mid-developed economies ($5,000$25,000 of GDP per capita) and developed economies (greater than $25,000 of GDP per capita) are best suited for Graingers traditional value proposition. The third element is advantage. This relates to where Grainger can achieve an advantaged position relative to competition, which requires both scale through high local share and some local tailoring of the product offering. The fourth dimension is risk versus reward. With a proud history of operating with the highest levels of ethics and integrity, maintaining and building upon the companys reputation is paramount. Consideration is given to political, security and economic risk, which is arguably the most important filter used to evaluate expansion opportunities.
Graingers core capabilities of helping customers save time and money in finding and managing MRO products are in a given
INTERNATIONAL PRIORITY MARKETS
CANADA
JAPAN
EUROPE
MEXICO
BRAZIL
Priority Markets
Additional Markets
Using the criteria noted, Grainger believes it is in the right markets at this time. In addition, five of the markets have emerged as priorities for the company, offering the greatest potential for long-term market leadership. These priority markets are Canada, Japan, Europe, Mexico and Brazil. These markets offer exceptional growth potential as the company currently has single-digit share in each of these markets. Graingers businesses in Canada, Japan* and Mexico have proven successful, and the company intends to increase support to accelerate the continued growth of those operations. Brazil offers a very attractive opportunity, and with its recent entrance into the market through the acquisition of AnFreixo S.A., now known as Grainger Brazil, the company has set its sights on becoming the countrys leading industrial distributor. Europe remains attractive to Grainger through its Fabory operations, offering a stable presence in the Netherlands, Belgium and France and access to the high-growth economies of Central and Eastern Europe.
Along with the five priority global markets, Grainger intends to continue to nurture and grow its existing locations. In Latin America, for example, Grainger has focused on building its physical presence throughout the region to provide businesses with service above and beyond what had been available previously. In addition to its focus on Mexico and Brazil, the company now has operations in Colombia, Costa Rica, Dominican Republic, Panama and Puerto Rico and will be opening in Peru in early 2013. In these countries, Grainger is focused on ensuring it has a competitively advantaged broad product offering with local availability while leveraging the companys global scale. Grainger has also taken a closer look at its business operations in India and China. These growing economies offer growth potential on a long-term time horizon, and Grainger has managed accordingly. In 2012, the company announced changes to the businesses in India and China to improve long-term performance. In India, for example, Grainger has fine-tuned its business model to directly serve end-user customers and increase profitability. In both India and China, Grainger intends to continue providing outstanding service to local and multinational customers. The key to global success is a tireless focus on winning more customers to create a commanding lead in market share, while choosing wisely where to invest. Grainger is convinced that this approach will maximize returns, mitigate risk and create a worldwide collaborative culture to leverage best practices.
FASTENER HOUSE
Graingers acquisition of Fabory is a great example of how the company seeks to leverage the expertise and talent of the companies it acquires to benefit the overall organization. With more than 50,000 unique fasteners in its offering, Fabory possesses specialization in fasteners that Grainger did not previously have. Fabory gives Grainger a competitive position against other fastener distributors through strategic sourcing capabilities and an expanded fastener offering. The company has already realized significant cost savings on a limited assortment of fasteners in the United States and Canada and is in the process of establishing Fabory as the sourcing center for all nonbranded fasteners for the company. This move should bring Grainger a more comprehensive and competitive offering at a lower cost across key fastener categories.
* Grainger operates in Japan through a 52 percent ownership stake in MonotaRO.
13
Priority Markets Canada

AcklandsGrainger reached an important milestone in 2012. For the first time in its 123-year history, the business crossed the $1 billion mark in annual sales. This milestone is a reflection of the teams dedication to customers, team members and communities. This continued strong performance has allowed the company to invest in building new distribution centers and upgrading information systems while expanding eCommerce, customer coverage, services and products.
cklandsGrainger sees great opportunity in the $14 billion MRO market of Canada. With 8 percent market share, AcklandsGrainger has the highest share of any Grainger business. The business is strong in customer markets including oil and gas, construction, utilities and the natural resources market in western Canada, but significant potential remains, particularly in eastern Canada. As AcklandsGrainger sets its sights on its next chapter, it is intent on achieving $2 billion in annual sales far faster than its first billion dollar year. Through a combination of organic and acquired growth, the team is focused on the following initiatives:
The expansion will cross all product categories, including additions in new product segments such as plumbing, lab supplies and electrical. The team expects to leverage the North American offering available through the U.S. network to provide customers with even more solutions. A significant portion of this increase will come through private brands, providing high-quality products with attractive margins.
Services
Distribution Center (DC) and IT Investments
The AcklandsGrainger team is also expanding its services offering. The technical services offering helps maximize workforce productivity, helps reduce the risk of injury and minimizes costly downtime by offering a one-stop solution. For more than 20 years, the Canadian team has provided customers with a suite of inventory management solutions, ranging from on-site branches to vending machines. This is particularly relevant to customers across Canada, including natural resource customers who leverage automated dispensing solutions in mining operations located below the earths surface, saving time and improving workforce safety and productivity. AcklandsGraingers KeepStock offering allows customers to better manage their MRO spend, have the right inventory in the places they need it and limit use of controlled items to authorized team members.
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AcklandsGrainger is in the midst of a multiyear program to boost the supply chain infrastructure. The effort began a few years ago with the DC improvements in British Columbia and has continued with the new facility in Saskatchewan (see map on page 7). The team is investing in the infrastructure needed to support a much larger organization, improving productivity, enhancing customer service and investing in proven growth drivers to accelerate profitable growth. Included are plans to build up the IT infrastructure and invest in the distribution center network to improve capacity and availability. In 2012, the company purchased land in the Toronto area to begin construction of a new distribution center that is expected to be more operationally efficient and provide additional capacity to serve customers in eastern Canada.
Product Line Expansion
eCommerce
With more room to grow, the business is able to more aggressively expand its product line, particularly in products used in the facilities maintenance arena, a category less penetrated in Canada than elsewhere. Nearly 120,000 products will be featured in the 2013 catalog, an increase of 15 percent versus 2012. Plans are under way to more than double the web offering in 2013 to broaden relevance and reach new and existing customers as well as help customers consolidate their purchases with AcklandsGrainger.
eCommerce is a key productivity tool for customers, providing convenience, control and improved purchasing and invoice processes. The team offers three solutions: core website functionality, enhanced website capabilities (including customer order workflow management) and integrated eCommerce. In 2013, the business intends to refine and enhance the eCommerce customer experience by leveraging functionality that exists elsewhere in Grainger.
Accelerating Profitability and Productivity
While growing the top line, the team is also focused on actions to further enhance profitability, including accelerating the private label brand offering, improving the cost structure and strategically pricing the offering. To fund ongoing growth over the next several years, the AcklandsGrainger team is committed to leveraging continuous improvement principles to take cost out of the business through more stable, simple processes that can be standardized across the network for an even better customer experience.
2012 Sales by Customer Category Canada

31% Agriculture and Mining 17% Contractor 9% Transportation 9% Retail/Wholesale 8% Heavy Manufacturing 8% Commercial 7% Government 7% Other 4% Light Manufacturing
2012 Sales by Product Category Canada

37% 16% 15% 15% 7% 5% 3% 1% 1% Safety and Security Metalworking Hand Tools Material Handling Cleaning and Maintenance Power Tools Electrical Fluid Power HVAC
A HISTORICAL LOOK
What is today Acklands Grainger traces its roots back to 1889 and a woodworker from Lanark County, Ontario, named Dudley Ackland. Attracted by the promise of the New West, Ackland left his position as manager of a successful carriage factory in Port Elgin, Ontario, to set up a farm implement and wagon repair business with his son in Winnipeg, Manitoba. In 1905 the company was legally incorporated as D. Ackland & Son Limited. It was the only firm on the prairies of Canada producing parts for carriages and buckboards. It also manufactured farm machinery and a variety of other goods and equipment to meet the needs of settlers flooding into the West. In 1919, with the advent of the automobile and mechanized farm equipment, the company began to serve this new market by adding replacement parts and accessories to its product offering. The company also expanded into welding equipment and industrial products, keeping pace with the economic expansion of the prairie provinces. In the 1960s and 1970s, Acklands Limited (as it was known at the time) launched its first private brand, Westward, and set its sights on aggressive expansion in Ontario and Quebec to balance its traditional strength in the West. In 1996 Acklands Limited was purchased by W.W. Grainger, Inc. and became Acklands Grainger Inc. This was Graingers first international purchase, and since then, Acklands Grainger has grown steadily, both organically and through acquisitions.
CONTINUOUS IMPROVEMENT
A significant shift is under way at Acklands Grainger to build a culture of continuous improvement (CI) across all levels. The team in Canada has fully embraced CI to deliver on its growth and productivity goals. Theyve also found that CI is a powerful driver for delivering value to customers and engaging team members. In 2012, the Acklands Grainger team completed several Kaizen and Value Stream events to teach team members how to use basic CI tools. Highlights included improvements in the outbound shipping process from distribution centers that helped reduce errors by more than 30 percent. Process enhancements achieved during the year also contributed to reducing cycle time for delivering KeepStock Secure vending machines to customers by more than 50 percent. By using CI to develop all team members, the company expects to deliver incremental value to customers and a more efficient and safer workplace for team members.
15
Priority Markets Japan

Grainger is a 52 percent stakeholder in MonotaRO Co. Ltd., a leading eCommerce direct marketer. With more than $57 billion in MRO potential in Japan, Grainger is focused on aggressively growing its presence through the single channel business model it operates. The company serves more than 400,000 mostly small and medium-sized customers across a full range of industries, with more than 80 percent of its transactions conducted online.
onotaRO started as a direct marketer in 2002 and has enjoyed rapid, sustained growth since then. With about 1 percent market share of a fragmented market, MonotaRO is continuing its profitable growth journey by focusing on three key growth drivers:
CUSTOMER ACQUISITION
MonotaRO uses a blend of eCommerce and traditional marketing including paid search, search engine optimization, flyers and faxes to attract new customers. The company adds thousands of new customers monthly who are drawn to MonotaROs broad product offering, attractive prices and delivery capabilities. The company also focuses on acquiring larger customers with tools such as workflow routing and reporting capabilities.
MonotaRO, Osaka Spirit, and Otokomae. Private brand sales now comprise nearly 30 percent of total sales in Japan and are expected to become an even larger contributor to sales moving forward. To support the continued expansion of its product offering, MonotaRO plans to open a new distribution center in 2013 with 450,000 square feet available to accommodate 100,000 additional products available to customers within two days. MonotaRO has become known for its expertise in using sophisticated data analytics to understand customer buying behaviors and respond with a full line of products offered at the same price for all customers. Leveraging advanced techniques will continue to be a core component that helps drive MonotaROs growth.
DATABASE MARKETING
based on previous buying behavior of like customers. The company is also leveraging data to explore purchasing trends that help the company evaluate additional products for cross-product promotions and private label opportunities.
2011 GDP Growth Sales Growth -0.7% +25%
2012 +2.3% +25%
Operating Margin Percent

3.1 5.2 8.4 9.4
Data analytics techniques include predictive analytics that anticipate customer demand
2009
2010
2011
2012
PRODUCT LINE EXPANSION
Key to MonotaROs value proposition is the access to a broad assortment of national and private label brands. The company continues to add to its product offering, including fasteners and factory automation product lines, while expanding the companys private label brands,
JAPAN
KEY Distribution Center (As of 12/31/12)
Priority Markets Europe

Grainger acquired Fabory Group, a Europe-based fastener distributor, in August 2011. This business is enabling Grainger to pursue growth in both mature (Western Europe) and emerging (Central and Eastern Europe) markets, while gaining more scale and relevance in fastener purchasing and distribution. With an MRO market size of $35 billion in the countries where Fabory operates, there is great potential in the Eurozone.
hroughout Europe, Fabory Group is known as the Masters in Fasteners. Founded in 1947, Fabory Group serves small businesses, MRO professionals, original equipment manufacturers (OEM) and technical wholesalers across Europe. Over the last several decades, Fabory Group has expanded its geographic reach to include small operations in North America and Asia and now operates more than 140 locations in 14 countries. Fabory Groups products and services range from standard and specialized fasteners to tools and industrial supplies.
Robotic arms at the Tilburg, Netherlands, distribution center retrieve fasteners and other products with speed and precision.
More than 65 percent of sales are from higher margin fasteners, producing gross profit margins in excess of 50 percent. Customers have access to more than 80,000 products in Fabory Groups offering through a variety of channels, including shops, sales representatives and a multilingual website. Fabory will likely expand its shop presence in Central and Eastern Europe over the next several years.
Its also investing in its eCommerce platform to provide customers new and convenient ways to conduct business. Similar to other Grainger business units, Fabory is focused on product line expansion in both mature and emerging markets as an additional driver of growth. In Faborys case, the emphasis is on selling name brand and private label safety products and tools to customers where it already has strong relationships built through its fastener offering. Over time, Fabory plans to broaden its product offering across a growing range of industrial supplies, becoming a trusted source for businesses to get the fasteners and industrial supplies needed for both MRO and OEM applications. Another avenue of growth for Fabory has been its vendor-managed inventory (VMI) program. Since it was developed more than 20 years ago, Fabory Groups VMI systems have helped thousands of customers concentrate on their core business while removing inefficiencies and cost. Today, more than 2,500 customers are on the Fabory VMI platform. Given the weak economy in Europe, Grainger took action in late 2012 to lower the cost structure of the business, closing six shops while continuing to invest in the growth areas of Central and Eastern Europe.
POLAND
UNITED KINGDOM NETHERLANDS
BELGIUM
CZECH REPUBLIC HUNGARY
SLOVAKIA ROMANIA
FRANCE
PORTUGAL
17
Priority Markets Mexico

Starting with a team of just 12 people in a storefront location outside of Monterrey, Grainger Mexico began operations in 1996 by leveraging the U.S. product offering and focusing on local manufacturing customers. Since its humble beginnings, the team has built a national presence and is now Mexicos leading MRO distributor. Grainger Mexico is expanding its leadership by making strategic investments to support continued growth.
exico offers strong growth potential, a highly fragmented MRO market, proximity to the U.S. supply chain infrastructure, a similar product offering to the United States and strong recognition of the Grainger brand. Additionally, MRO-intensive industries such as manufacturing and hospitality align closely with Graingers product offering and expertise. Customers in Mexico value working with a partner that offers a wide variety of products at an attractive price, with proximity to their business and services that help them take cost out of their operations. To meet these needs, Grainger Mexico is focused on three areas to expand its presence and differentiate its offering:
launched a new catalog comprised Grainger Mexico was of 29,000 non-stocked products Product expansion remains named to the Sper available for two-day delivery an important growth driver, Empresas list in 2012 by Expansin Magazine. from the U.S. distribution center positioning Grainger Mexico in Dallas, Texas. as a single source to meet the MRO needs of customers. The Grainger SERVICES Inventory management solutions Mexico team is aggressively adding new are a fast-growing service offering in Mexico products to better serve specific customer and an area of continued focus for the segments. The addition of private label business. Grainger Mexico continues to products, such as the Contender hand tool take advantage of partnerships with the line, offers businesses high-quality products U.S. business to build and strengthen these service competencies. at attractive price points. In 2012, the team
PRODUCT LINE EXPANSION
Today, Grainger Mexico reaches 90 percent of MRO customers next day through
16 branches 3 master branches 1 distribution center (LEED Gold Certied building in Monterrey) Call center professionals An eCommerce channel that comprises 22 percent of total sales
With a robust branch network, Grainger Mexico is expanding its sales force to meet the evolving needs of its customers, including adding sales representatives with specific industry expertise, such as automotive, food and beverage, mining, oil and gas, and hospitality. Grainger Mexico is leveraging the Territory Sales Representative model, focused on serving small and medium-sized businesses, and adding more corporate account managers to serve large customers.
SALES FORCE EXPANSION
MEXICO MEXICO
Team members celebrated a successful year at Grainger Mexicos annual customer show in Mexico City.
Priority Markets Brazil

With more than half of the total MRO potential in Latin America, Brazil is a key market for Grainger. The country enjoys robust growth through infrastructure investments and a strong natural resource base. Many Grainger customers from North America operate in Brazil and understand the value of partnering with the company. Grainger has set the goal of being the leading MRO distributor in the market, through strong organic growth and potential acquisitions.
rainger formally entered the Brazil market in April 2012 through the acquisition of AnFreixo S.A., now known as Grainger Brazil. AnFreixo has served Brazil since 1943 and is a leading broad-line distributor of MRO supplies. Grainger Brazil operates from its distribution center in So Paulo and is building a team of sales professionals with a strong eCommerce platform. Customers are mostly large and medium-sized businesses from the mining, metallurgy, agribusiness, infrastructure, and oil and gas segments. To accelerate growth and capture the significant opportunity ahead, Grainger Brazil is focused on building its strategic advantage by offering a broad product line and having same- or next-day availability. The team is aggressively building its sales force and product offering while
Grainger Brazil team members are focused on serving the local So Paulo market with a broad product line.
leveraging company scale. On the sales force side, the company plans to add field and inside sales representatives in the So Paulo area with an emphasis on
serving large corporate accounts. This process began in 2012 with the addition of about 30 new sales representatives, and further hiring is planned for 2013. A broad product line is key to ensuring Grainger Brazil has a compelling offer that helps businesses keep their operations running safely and Brazil is the seventhproductively. The largest economy in company added the world, with 2012 3,500 products GDP of $2.25 trillion to its offering in (in U.S. dollars). 2012, and 10,000 more SKUs are expected in 2013 in categories such as health and safety and material maintenance. Product line expansion is also intended to introduce a greater assortment of private brands. From a geographic standpoint, So Paulo and the surrounding metropolitan area remain the focus, as the company grows its presence in that specific market. This will require a reliable logistics network to provide same- and next-day service.
BRAZIL
SALES VOLUME BY REGION 2012 69% Southeast region 13% Midwest region 9% Northeast region 7% North region 2% South region
So Paulo
19
Sustainability
Sustainability at Grainger means doing business the right way. It means an everyday commitment to valuing the planet and performance for the bottom line. Grainger is committed to operating the business in a way that helps preserve the environment. The company partners with customers by offering products and services that help them achieve their own sustainable operations goals and encourages team members to embrace sustainability.
n 2012, Grainger publicly disclosed for the first time its carbon footprint, a measure of greenhouse gas emissions. Grainger is among 3,000 organizations in 60 countries that disclose their greenhouse gas emissions and climate change strategies to the Carbon Disclosure Project (CDP). The reporting by the CDP provides transparency into an organizations sustainability practices and identifies risks that affect employees, customers, investors and ultimately, business performance. Reporting carbon emissions is a growing trend for companies and an indicator of a commitment to sustainability. Grainger received a score of 73 on a 100-point scale, which exceeds the average score of 70 for S&P 500 companies that participated in the project. Grainger is the first MRO distributor to publicly disclose its carbon footprint via the CDP, another demonstration of its commitment to leadership in the industry. The majority of Graingers carbon footprint is comprised of energy consumed in distribution centers, branches and corporate offices. Grainger invests in energy-efficient facilities, which then have a direct effect on the carbon footprint.
to increase efficiency in operations and result in a healthier future for the organization and the planet. Its important to Grainger that team members connect to the issue of sustainability. Grainger launched a program aimed at educating team members about what sustainability means to the business and encouraged them to interact and share their ideas. Graingers Right Idea initiative provided team members with the opportunity to share best practices with others across the network.
Grainger published a Corporate Social Responsibility report and website in March 2013, highlighting the companys commitment to sustainability.
Grainger offers more than 18,000 green products on Grainger.com.
Grainger sold more than 380,000 LED lamps and fixtures in 2012.
Graingers LEED-certified headquarters features a sunlit atrium.
Grainger Lighting Services , which provides lighting and lighting controls retrofit services, has saved customers 209 million kilowatt hours and $22 million on electric bills since 2010. Thats enough energy to power more than 17,500 homes for a year.*
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For example, AcklandsGrainger has initiated a lighting efficiency program, updating more than 100 facilities in the last four years. The U.S. operation conducts a similar program that resulted in a 15 percent decrease in energy consumption at 50 upgraded facilities during the same time period. For 2013, Grainger will set carbon emissions reduction targets that balance the growth of the organization with investments that aim
In 2012, Grainger distribution centers in the United States recycled 303 tons of cardboard and 22 tons of plastic wrap per facility for a total recycling rate of 72 percent.
* Source: EPA Clean Energy Calculations and References Guide. The calculations
and information are estimates based on certain assumptions and do not constitute a guarantee of future savings. All calculations based on estimated 15-year life from the installation of energy efcient measures identied for a given project.
CONTINUING TO LEED
Grainger is committed to building LEED-certied facilities and opened three such facilities in 2012:
FACILITY SIZE
(SQUARE FEET)
LOCATION
CERTIFICATION
NOTES
Distribution Center Distribution Center Branch
820,000 1,000,000 42,000
Patterson, Calif. Minooka, Ill. St. Laurent, Quebec
NC Gold CI Platinum NC Silver
Opened in May 2012 Largest LEED CI Platinum facility in the world Graingers rst LEED-certied property in Canada
NC = New Construction, CI = Commercial Interiors
A Great Company to Work For

Grainger has known for 85 years that to be the first choice of customers, it has to be the workplace of choice for industry-leading talent. Today, Grainger builds upon that proud heritage as it welcomes new hires around the world and continuously develops team members to create a unified team wired on service to customers, communities and each other. Grainger has been ranked a great workplace in the United States, Canada and Mexico based on team member feedback.
yna Smith (below) reflects the excitement Graingers 22,000 team members feel as they see the company innovate and invest to serve more customers with excellence. Grainger has put in place a host of well-defined programs and processes that help accelerate talent excellence. It starts with attracting, developing and retaining the right talent for the right roles. From the on-boarding process on Day One, to career development and reward and recognition programs, Grainger pays close attention to ensuring outstanding execution on everything that shapes and maintains a great team member experience. An inclusive work environment, well-defined behaviors that drive performance, a relentless focus on ethics and integrity, and clearly defined business goals guide and inspire team members and help them deliver their best every day and in emergencies. As the company expands internationally, tools such as a common performance management system, best practice sharing and stretch assignments create a team that shares a common vision and learns from diverse cultures and colleagues. Performance is rewarded through competitive compensation and benefits tailored to specific markets. In the United States, the company continues its Profit Sharing Trust (PST) for eligible team members. Established in 1941 by the companys founder as a way to share with those who generate the profit, the PST helps team members plan their financial future while requiring no individual contributions. Today, only a handful of U.S. companies have a comparable retirement savings vehicle. Team members also have ample opportunities to grow professionally and personally through mentor relationships and by taking leadership roles in Graingers community programs and Business
Resource Groups (BRGs). Graingers current BRGs include Women, African American, Latino, Asian Pacific Islander, Administrative Professional and Generational groups, and more than 3,000 team members participate. The company has recently expanded the horizon with the addition of Pride and Veterans BRGs. Inclusion and Diversity is a business imperative Grainger has been recognized by several organizations as a at Grainger, and the BRGs are a top workplace. key to helping grow, attract and retain diverse talent to better serve a changing customer base. At its core, a workplace is defined by more than policies and programs. It delivers results when team members have a shared passion and commitment for what they do every day, and are inspired to go that extra mile to bring the best solution to the customer. It becomes a great place to work when team members have each others backs and are eager to collaborate and offer support when needed. Whether it is a friendly smile and knowledgeable help when meeting a customer; expertise in packaging the right products, solutions or support; lending a team member a hand; or going above and beyond when a disaster like Hurricane Sandy strikes, Graingers people are committed to making a difference. It is no wonder that team member engagement survey results are so impressive, outpacing other high-performing companies in several dimensions.
Ive been with Grainger for six years. What gets me jazzed is to see the culture change before my eyes. I see the organization making leaps in its effort to attract and retain diverse talent. Im witnessing us make the critical shifts related to acquisitions and global growth. I am watching the implementation of transformational leadership, as Graingers commitment to customer satisfaction extends itself to team member satisfaction. All of this is happening while we maintain impressive growth and increase market share! Yeah, Im pretty jazzed to be a part of the family!
LYNA SMITH, INTERNATIONAL ACCOUNTS RELATIONSHIP MANAGER, NILES, ILL.
I recently celebrated 39 years with AcklandsGrainger. I have had a variety of roles here and have grown tremendously thanks to many mentors and the volunteer work I have been able to do in the community. I want to continue to learn and share my experiences with others in the company. I am proud that I have become a coach to a number of others and want to ensure that I spend time helping them excel and achieve their career aspirations. Great teammates, supportive leaders, a culture of ethics and integrity, good benefits and the opportunity to develop has made AcklandsGrainger the only workplace for me for four solid decades!
PETER BAKER, SAFETY SPECIALIST, ACKLANDS GRAINGER, KELOWNA, BRITISH COLUMBIA
21
Community Relations
Grainger has a proud history of leading the way in corporate citizenship by improving the local communities where customers and team members live and work. Grainger champions innovative programs and forms strategic partnerships to address disaster preparedness, technical education and volunteer involvement. These initiatives, in addition to the company's three-to-one Matching Charitable Gifts Program, are the hallmark of the companys pledge to exemplify good corporate citizenship.
ervice and reliability are at the core of Graingers business and at the heart of the companys commitment to disaster preparedness and response across the globe. Grainger has core strengths in emergency response and proudly fills a niche that is vital to keeping businesses and communities up and running.
Ready When the Time Comes
2012 CORPORATE SOCIAL RESPONSIBILITY SNAPSHOT
Donated more than $5.8 million to cultural, education, health and human service organizations. Conducted a record-breaking United Way campaign in Canada, with more than $400,000 raised from 400 team members. Supported 138 students pursuing degrees in the industrial trades with scholarships and Westward toolkits. Donated nearly $16.4 million in products to charities including educational and humanitarian relief organizations. Provided $3 million in matching gifts to more than 2,000 charitable organizations to increase the contributions of 1,887 U.S. team members.
The American Red Cross has learned from years of national disaster experience that no organization, no matter how strong, can go it alone. Grainger is the national founding sponsor of the award-winning American Red Cross Ready When the Time Comes (RWTC) volunteer program in the United States and Canada, and more than 1,400 employees, their families and friends have become trained Red Cross disaster response volunteers. In 2012, the RWTC program completed a successful multiyear launch with more than 14,000 volunteers from 450 companies in 60 markets in the United States, Puerto Rico and Canada. Grainger team members, volunteering through the RWTC program, provided assistance in response to the Colorado and Oklahoma wildfires and Hurricane Sandy. Grainger also contributed more than $175,000 in cash and products to the American Red Cross to assist the victims of the hurricane.
Volunteer Connection
more than 30,000 people applied to help the American Red Cross through Volunteer Connection, even prior to its formal launch in March 2013. The system was put to the test during Hurricane Sandy to organize, train and deploy new volunteers, with more than 11,000 new applications in the first month after the storm.
Technical Education
Grainger has made a $3 million commitment as the national launch sponsor of American Red Cross Volunteer Connection, a next-generation volunteer management system that will improve recruitment, management and deployment processes for the 500,000 Red Cross volunteers across the country. Overall,
Just as Grainger is experiencing growth and innovation, opportunities in the skilled trades are growing and changing faster than people realize. The jobs of today and tomorrow offer exciting, long-term career opportunities that require advanced problemsolving skills, along with science, technology and math knowledge. Graingers vision is to create an environment that elevates awareness about the need and importance of these jobs.
Following Hurricane Sandy, I was assigned to an emergency response detail because I have a New York State food handlers certificate. It was really sad. Many of the people I met were still shell-shocked by everything. They were very happy to meet me because they had not met many local volunteers. A local face made them open up. Being able to talk about local sports helped bring some life back to the people. The greatest part was seeing everyone pull together.
JACQUELINE GUDMAND, SALES ASSOCIATE AND RWTC VOLUNTEER, ELMSFORD, N.Y.
HURRICANE SANDY VOLUNTEER RESPONSE
QUEENS, N.Y. Distributed meals through a special

vehicle that goes into disaster areas for individuals who do not go to shelters or when a shelter hasnt been set up.
JERSEY CITY, N.J. Created 10,000 care bags consisting

of basic emergency supplies.
NORFOLK, VA. Conducted disaster assessments in

neighborhoods damaged by the storm.
BOSTON, MASS. Created, assembled and distributed

care packages consisting of food staples.
CHICAGO, ILL. Answered telephones during the

American Red Cross and CBS Chicago Cares Sandy Relief Telethon, which raised more than $550,000.
I am an Army Veteran of Operation Iraqi Freedom and an enthusiastic student. After my active duty, I came home and began working in smelting operations. While working on the smelting pots, things would break or stop working. This is when I discovered my love of being able to fix things to make them work. Once I graduate, I plan to go to work for one of the many industrial employers we are fortunate to have in this fine community. In the long term, I would like to move my family into the kind of house they deserve.
CHARLES MAITLEN, 2012 RECIPIENT OF THE GRAINGER TOOLS FOR TOMORROW SCHOLARSHIP, PELLISSIPPI STATE COMMUNITY COLLEGE, KNOXVILLE, TENN.
GLOBAL VALUES. LOCAL PARTNERS.
Graingers culture of engaging the local community is important in all parts of the world. Team members and businesses support a multitude of programs and partners making a difference.
Grainger works closely with the American Association for Community Colleges (AACC) and the Aspen Institutes Skills for Americas Future to build greater awareness of the need for and value of technical education, to provide visibility to the importance and opportunities in the industrial-trade professions, and to highlight the training and education community colleges offer.
Grainger Tools for Tomorrow Scholarship Program
AcklandsGrainger has trained more than 160 Ready When the Time Comes volunteers in ve markets in Canada. Team members in Edmonton (pictured here) and Richmond Hill received training in 2012.
UNITED WAY In 2012, AcklandsGrainger in Canada
In 2006, Grainger partnered with AACC and introduced the Grainger Tools for Tomorrow scholarship to support individuals entering the skilled trades workforce. This scholarship program continued to grow in 2012, offering $2,000 scholarships to each of two qualified students SKILLED TRADES entering their final year of AWARENESS MONTH technical education at 100 Grainger designated October select community colleges. 2012 as Skilled Trades One-half of the scholarships Awareness Month to increase are earmarked for veterans the visibility of those who work of the U.S. armed forces.
in the skilled trades and to celebrate the innovative accomplishments and the significant opportunities that exist within these fields. The Grainger Industry Innovators contest was designed to educate the public on the value and opportunity in the skilled trades, salute customers and support Grainger Tools for Tomorrow scholarship program recipients and all those interested in pursuing careers in the trades.
raised more than $400,000 for the United Way. This is AcklandsGraingers 13th year of supporting the United Way, and to date contributions totaling nearly $1.4 million have been raised through team member donations, company matches and fundraising efforts.
EASTER SEALS AcklandsGrainger has been involved with
Easter Seals for several years, providing both financial and volunteerism support. The team participated in the Vancouver 24-Hour Relay to send more than 950 children with disabilities to one-week camps around the province. AcklandsGrainger was the top fundraising team for 2012 with more than $25,000 raised.
CENTRE OF HOPE To help individuals struggling with
Grainger Matching Charitable Gifts Program
homelessness, AcklandsGrainger team members donated more than 460 items of winter clothing to the Centre of Hopes Below Zero campaign.
RONALD MCDONALD CHARITY Instead of receiving Christmas gifts, Fabory team members made a donation to the Ronald McDonald Charity, including gifts for families staying at a Ronald McDonald House during the holidays. CARITAS Grainger Mexico assisted Caritas in 2012, an
The three-to-one Grainger Matching Charitable Gifts Program was introduced to U.S. team members in 1981 and remains one of the companys cornerstone community giving initiatives. Grainger is proud to be part of the less than 1 percent of U.S. companies that match contributions at this three-to-one rate.
organization focused on the poor and marginalized population, with excess product donations of more than $800,000.
TELETN Team members from Grainger Mexico supported
the annual Centro de Rehabilitacin Infantil Teletn campaign to support children with cancer and autism. Grainger Mexico contributed nearly $200,000, which included product donations and cash contributions.
23
Supplier Relationships
At Grainger, supplier relationships are true partnerships. With more than one million products available through its worldwide operations, Grainger relies on its supplier partners for the products to meet customers current MRO needs and anticipate future ones. By partnering with Grainger, suppliers have access to two million businesses and institutions.
oing business around the world requires supplier partners that excel at delivering quality products in the right place, at the right time. Team members in Graingers world-class supply chain not only identify the right suppliers, but work with them to ensure their practices meet the needs of customers today and in the future. Each year Grainger hosts multiple supplier events in North America to share the companys strategy and demonstrate opportunities for partnership in specific countries and around the world. In the United States and Mexico, suppliers are recognized for their achievements in on-time shipping, responsiveness, cost effectiveness and product quality at the annual Partners in Performance event. Being recognized as a Partner in Performance is a significant honor, as less than 1 percent of Graingers 4,700 suppliers receive this award.
A HISTORICAL LOOK
Grainger is committed to building long-standing relationships with suppliers. In fact, Graingers tie with Broan-NuTone LLC, manufacturer of exhaust fans and heating equipment, Henry Broan (right), who developed dates back to 1932. That Broans original kitchen ventilation fan, the Motordor , meets with colleagues. was the year Henry Broan formed what was then known as Midwest Manufacturing Company, in Milwaukee, Wis. By chance, Broan attended a meeting of a trade association of electrical distributors, where William Grainger spoke about the companys mission and products. After the meeting the two men discussed some new concepts Broan was developing. One of the ideas was a kitchen wall exhaust fan with a second motor that opened the door to the outside when the fans electric switch was engaged. The only existing fan model had a manually operated door. Grainger liked the idea, and Broan made him a prototype. The result: a fan that would become Motordor fan model 11C. Grainger purchased 6,000 units, a sizeable order for Broans company. Broan did not have the cash to purchase the motors required, so Grainger arranged to have another company supply the motors on credit. Graingers word was enough to convince the motor company to wait for payment until after the fans were sold.
Cotterman Co., a manufacturer of industrial and commercial ladders, received the top supplier of the year award for 2012, marking its second win in a row. Cotterman provides Grainger with more than 900 items with a two-day lead time, all made to order and shipped 99 percent on time.
Broan-NuTone LLC still produces the successor to that original fan, and that product, stock number 4C707, appears to this day in the Grainger catalog.
PARTNERS IN PERFORMANCE AWARDS United States

Outstanding Recognition Winners Supplier of the Year Cotterman Co. Carrier Grane Transportation New Supplier Plastic Supply of PA Green/Sustainability General Electric Lighting International Milwaukee Electric Tool Corporation General Award Winners Air Conditioning Products Co. Cotterman Co. CRC Industries EXAIR Corporation Georgia Pacific Consumer Products, L.P. GOJO Industries, Inc. Hi Temp Products of Canada Inc. Oz Lifting Products, LLC Philips Lighting Electronics NA Port-A-Cool, LLC Riptron Inc. Shop-Vac Corporation Southwire Company Stenner Pump Company, Inc. Superior Manufacturing Group The Marcom Group, Ltd.
Mexico
Outstanding Recognition Winners Supplier of the Year MSA Mxico Best New Supplier GEBESA Demand and Supply Chain Urrea Herramientas Profesionales Sales and Marketing Efforts Milwaukee (Techtronic Industries Mxico) Achievement and Contribution Walter de Mxico Supplier Development 3M de Mxico Commitment CARSSA On Time Delivery FedEx Efficiency in Transportation Garov
General Award Winners W.H. Brady MAPA Spontex Calzado Industrial Duramax Rubbermaid Commercial Products
Consolidated Statements of Earnings
For the Years Ended December 31, (In thousands of dollars, except per share amounts) 2012 2011 2010
Net sales Cost of merchandise sold Gross prot Warehousing, marketing and administrative expenses Operating earnings Other income and (expense): Interest income Interest expense Equity in net income (loss) of unconsolidated entities Gain on sale of investment in unconsolidated entity Other non-operating income Other non-operating expense Total other income and (expense) Earnings before income taxes Income taxes Net earnings Less: Net earnings attributable to noncontrolling interest Net earnings attributable to W.W. Grainger, Inc. Earnings per share: Basic Diluted Weighted average number of shares outstanding: Basic Diluted
$8,950,045 5,033,885 3,916,160 2,785,035 1,131,125 2,660 (16,078) 1,866 (1,784) (13,336) 1,117,789 418,940 698,849 8,968 $ 689,881 $ $ 9.71 9.52
$8,078,185 4,567,393 3,510,792 2,458,363 1,052,429 2,068 (9,091) 314 7,639 709 (2,541) (902) 1,051,527 385,115 666,412 7,989 $ 658,423 $ $ 9.26 9.07
$7,182,158 4,176,474 3,005,684 2,145,209 860,475 1,215 (8,187) (182) 1,608 (1,151) (6,697) 853,778 340,196 513,582 2,717 $ 510,865 $ $ 7.05 6.93
69,811,881 71,181,733
69,690,854 71,176,158
70,836,945 72,138,858
Diluted Earnings Per Share: Net earnings as reported Earnings allocated to participating securities Net earnings available to common shareholders Weighted average shares adjusted for dilutive securities Diluted earnings per share
$ 689,881 (12,181) $ 677,700 71,181,733 $ 9.52
$ 658,423 (12,654) $ 645,769 71,176,158 $ 9.07
$ 510,865 (11,294) $ 499,571 72,138,858 $ 6.93
Segment Information
(In thousands of dollars) 2012 2011 2010
Sales United States Canada Other Businesses Intersegment sales Net sales to external customers Operating earnings United States Canada Other Businesses Unallocated expenses Operating earnings
$6,925,842 1,105,782 1,006,762 (88,341) $8,950,045
$6,501,343 992,823 647,666 (63,647) $8,078,185
$6,020,069 820,941 389,621 (48,473) $7,182,158
$1,132,722 127,412 20,289 (149,298) $1,131,125
$1,066,324 107,582 30,984 (152,461) $1,052,429
$ 920,222 46,836 11,661 (118,244) $ 860,475
25
Consolidated Balance Sheets
As of December 31, (In thousands of dollars) 2012 2011
Assets Current Assets Cash and cash equivalents Accounts receivable (less allowances for doubtful accounts of $19,449 and $18,801, respectively) Inventories net Prepaid expenses and other assets Deferred income taxes Prepaid income taxes Total current assets Property, Buildings and Equipment Land Buildings, structures and improvements Furniture, xtures, machinery and equipment Less: Accumulated depreciation and amortization Property, buildings and equipment net Deferred income taxes Goodwill Other assets and intangibles net Total Assets Liabilities and Shareholders Equity Current Liabilities Short-term debt Current maturities of long-term debt Trade accounts payable Accrued compensation and benets Accrued contributions to employees prot sharing plans Accrued expenses Income taxes payable Total current liabilities Long-term debt (less current maturities) Deferred income taxes and tax uncertainties Employment-related and other noncurrent liabilities Shareholders equity Cumulative preferred stock $5 par value 12,000,000 shares authorized; none issued or outstanding Common stock $0.50 par value 300,000,000 shares authorized; 109,659,219 shares issued Additional contributed capital Retained earnings Accumulated other comprehensive earnings (losses) Treasury stock, at cost 40,180,724 and 39,696,367 shares, respectively Total W.W. Grainger, Inc. shareholders equity Noncontrolling interest Total shareholders equity Total Liabilities and Shareholders Equity
$ 452,063 940,020 1,301,935 110,414 55,967 40,241 2,900,640 265,224 1,224,044 1,271,166 2,760,434 1,615,861 1,144,573 51,536 543,670 374,179 $5,014,598
$ 335,491 888,697 1,268,647 100,081 47,410 54,574 2,694,900 252,161 1,186,002 1,127,159 2,565,322 1,505,027 1,060,295 100,830 509,183 350,854 $4,716,062
79,071 18,525 428,782 165,450 170,434 204,800 12,941 1,080,003 467,048 119,280 230,901
$ 119,970 221,539 477,648 207,010 159,950 178,652 23,156 1,387,925 175,055 100,218 328,585 54,830 700,826 4,806,110 (28,738) (2,904,243)) 2,628,785 95,494 2,724,279 $4,716,062
54,830 812,573 5,278,577 53,578 (3,175,646) 3,023,912 93,454 3,117,366 $5,014,598
Consolidated Statements of Cash Flows
For the Years Ended December 31, (In thousands of dollars) 2012 2011 2010
Cash ows from operating activities: Net earnings Provision for losses on accounts receivable Deferred income taxes and tax uncertainties Depreciation and amortization Stock-based compensation Gain on investment in unconsolidated entities Change in operating assets and liabilities net of business acquisitions: Accounts receivable Inventories Prepaid expenses and other assets Trade accounts payable Other current liabilities Current income taxes payable Accrued employment-related benets costs Other net Net cash provided by operating activities Cash ows from investing activities: Additions to property, buildings and equipment Proceeds from sale of property, buildings and equipment Cash paid for business acquisitions, net of cash acquired Other net Net cash used in investing activities Cash ows from nancing activities: Borrowings under lines of credit Payments against lines of credit Proceeds from issuance of long-term debt Payments of long-term debt and commercial paper Proceeds from stock options exercised Excess tax benets from stock-based compensation Purchase of treasury stock Cash dividends paid Net cash used in nancing activities Exchange rate effect on cash and cash equivalents Net change in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year Supplemental cash ow information: Cash payments for interest (net of amounts capitalized) Cash payments for income taxes
$ 698,849 9,504 12,343 159,049 55,500 (45,953) (14,872) 8,346 (54,314) (58,673) (9,349) 45,795 9,970 816,195
$ 666,412 4,761 1,666 149,200 54,020 (7,639) (85,083) (219,680) (24,228) 86,395 50,718 16,827 45,680 7,059 746,108
$ 513,582 6,718 (5,553) 149,678 49,796 (127,790) (80,545) (8,806) 36,219 49,576 (1,503) 18,128 (3,055) 596,445
(249,860) 8,530 (64,808) 482 (305,656)
(196,942) 7,278 (359,296) 13,892 (535,068)
(127,124) 6,508 (62,072) 13,529 (169,159)
161,160 (205,006) 300,000 (219,950) 72,084 57,885 (340,532) (220,077) (394,436) 469 116,572 335,491 $ 452,063
218,885 (194,325) 172,464 (179,296) 84,337 52,098 (151,082) (180,527) (177,446) (11,557) 22,037 313,454 $ 335,491
35,297 (29,799) 200,000 (239,122) 86,528 25,650 (504,803) (152,338) (578,587) 4,884 (146,417) 459,871 $ 313,454
16,028 383,698
8,996 312,616
8,188 319,754
27
Historical Financial Summary
2012
2011 $8,078,185 1,051,527 385,115 658,423 658,423 1,438,375 196,942 137,211 2,694,900 4,716,062 2,724,279 180,527 175,055 9.26 9.07 2.52 38.94 187.19 26.3 22.2 13.0 8.1 27.4 15.9 57.1 1.9 3.0 4.0 69,690,854 71,176,158 21,446 4,029 711 354,000
2010 $7,182,158 853,778 340,196 510,865 510,865 1,162,318 127,124 137,793 2,238,071 3,904,377 2,287,670 152,338 420,446 7.05 6.93 2.08 32.97 138.11 22.6 18.7 11.9 7.1 29.8 17.8 57.3 2.6 3.1 4.4 70,836,945 72,138,858 18,596 3,079 607 307,000
Financial Summary ($000)
Net sales Earnings before income taxes and cumulative effect of accounting change Income taxes Earnings before cumulative effect of accounting change Cumulative effect of accounting change Net earnings attributable to W.W. Grainger, Inc. Working capital Additions to property, buildings and equipment and capitalized software Depreciation and amortization Current assets Total assets Shareholders equity Cash dividends paid Long-term debt (less current maturities) Earnings basic Earnings diluted Cash dividends paid Book value Year-end stock price Percent of return on average shareholders equity Percent of return on average total capitalization Earnings before income taxes and cumulative effect of accounting change as a percent of net sales Earnings before cumulative effect of accounting change as a percent of net sales Cash dividends paid as a percent of net earnings Total debt as a percent of total capitalization Current assets as a percent of total assets Current assets to current liabilities Average inventory turnover FIFO Average inventory turnover LIFO Average number of shares outstanding basic Average number of shares outstanding diluted Number of employees Number of outside sales representatives Number of branches Number of products in the Grainger catalog issued February 1
$8,950,045 1,117,789 418,940 689,881 689,881 1,603,748 249,860 145,612 2,900,640 5,014,598 3,117,366 220,077 467,048 9.71 9.52 3.06 44.87 202.37 23.6 20.5 12.5 7.7 31.9 15.3 57.8 2.7 2.8 3.9 69,811,881 71,181,733 22,413 4,157 715 410,000
Per Share ($)
Ratios
Other Data
Note: See the companys current and prior years Form 10-K for changes in accounting and unusual items.
2009 $6,221,991 707,337 276,565 430,466 430,466 1,026,690 142,414 140,974 2,131,515 3,726,332 2,227,199 134,684 437,500 5.70 5.62 1.78 30.81 96.83 20.2 16.4 11.4 6.9 31.3 19.1 57.2 2.7 2.7 3.8 73,786,346 74,891,852 18,006 2,845 612 233,000
2008 $6,850,032 773,218 297,863 475,355 475,355 1,064,094 194,975 135,137 2,144,109 3,515,417 2,033,805 121,504 488,228 6.07 5.97 1.55 27.20 78.84 23.0 20.3 11.3 6.9 25.6 20.7 61.0 2.8 2.9 4.1 76,579,856 77,887,620 18,334 2,433 617 183,000
2007 $6,418,014 681,861 261,741 420,120 420,120 1,021,663 197,423 127,882 1,800,817 3,094,028 2,098,108 113,093 4,895 5.01 4.91 1.34 26.40 87.52 19.7 19.2 10.6 6.6 26.9 5.0 58.2 2.2 3.1 4.3 82,403,958 84,173,381 18,036 2,386 610 139,000
2006 $5,883,654 603,023 219,624 383,399 383,399 852,472 136,764 114,884 1,862,086 3,046,088 2,177,615 97,896 4,895 4.36 4.24 1.11 25.90 69.94 17.2 17.2 10.2 6.5 25.5 0.4 61.1 2.6 3.1 4.4 87,838,723 90,523,774 17,074 1,805 593 115,000
2005 $5,526,636 532,674 186,350 346,324 346,324 1,290,188 157,247 105,671 1,985,539 3,107,921 2,288,976 82,663 4,895 3.87 3.78 0.92 25.51 71.10 15.9 15.9 9.6 6.3 23.9 0.4 63.9 2.9 3.2 4.5 89,568,746 91,588,295 16,732 2,507 589 82,400
2004 $5,049,785 445,139 158,216 286,923 286,923 1,108,384 160,758 96,305 1,744,416 2,809,573 2,067,970 71,243 3.18 3.13 0.79 22.83 66.62 14.7 14.2 8.8 5.7 24.8 0.5 62.1 2.7 3.3 4.6 90,206,773 91,673,375 15,523 2,154 582 82,300
2003
2002
$4,667,014
381,090 154,119 226,971 226,971 926,773 80,486 88,629 1,633,413 2,624,678 1,845,135 67,281 4,895 2.50 2.46 0.74 20.27 47.39 12.9 12.3 8.2 4.9 29.6 7.5 62.2 2.3 2.9 4.4 90,731,013 92,394,085 14,701 1,741 575 88,400
$4,643,898
397,837 162,349 235,488 (23,921) 211,567 898,681 144,052 92,811 1,484,947 2,437,448 1,667,698 66,467 119,693 2.30 2.24 0.72 18.21 51.55 12.9 13.6 8.6 5.1 31.4 7.2 60.9 2.5 3.2 4.5 91,982,430 94,303,497 15,236 1,650 576 98,700
NOTE ON ROIC Prior to January 2011, ROIC was calculated using annual operating earnings divided by a 13-point (monthly) average for net working assets. Moving forward, ROIC will be calculated using a 5-point (quarterly) average for net working assets to provide greater transparency. Net working assets are working assets minus working liabilities dened as follows: working assets equal total assets less cash equivalents (non-operating cash), deferred taxes and investments in unconsolidated entities, plus the LIFO reserve. Working liabilities are the sum of trade payables, accrued compensation and benets, accrued contributions to employees prot sharing plans and accrued expenses.
29
Executive and Operating Management

James T. Ryan Chairman, President and Chief Executive Ofcer Laura D. Brown Senior Vice President, Communications and Investor Relations Court D. Carruthers Senior Vice President; President, Grainger U.S.
Mr. Ryan was named Chairman in April 2009, and President and Chief Executive Ofcer in June 2008. He has been President of Grainger since 2006 and was named Chief Operating Ofcer and appointed to the Board of Directors in February 2007. Mr. Ryan has held a number of other key roles since joining Grainger in 1980. They include Group President; Executive Vice President, Marketing, Sales and Service; President, Grainger.com; Vice President, Information Services; and President, Grainger Parts. Mr. Ryan serves on the Board of Trustees of the Chicago Museum of Science and Industry and DePaul University, and is a Business Advisory Council member for the Farmer School of Business at Miami University, Oxford, Ohio. He is also a member of the Civic Committee of the Commercial Club of Chicago, the Economic Club of Chicago and the Business Roundtable.
Ms. Brown was named Senior Vice President, Communications and Investor Relations in July 2010. She is responsible for Graingers internal and external communications, community relations and investor relations. Ms. Brown most recently served as Vice President, Global Business Communications. Since joining the company in 2000, she has held roles of increasing responsibility in the nance, marketing, and investor relations organizations. Prior to joining Grainger, Ms. Brown was a vice president at Baxter International and Alliant Food Service. Ms. Brown is a 2012 Fellow of the Leadership Greater Chicago program. Ms. Brown currently serves on the Illinois Board of Make-A-Wish, and is a member of the nance committee.
Mr. Carruthers was named Senior Vice President and President, Grainger U.S. in January 2012. He is responsible for the companys U.S. operations. Previously, Mr. Carruthers served as Senior Vice President and President, Grainger International, overseeing the companys operations in Canada, Europe, Asia and Latin America. Mr. Carruthers joined the company in 2002, serving in sales and branch leadership roles in Canada before being promoted to President, AcklandsGrainger Inc. in 2006. Prior to joining Grainger, Mr. Carruthers held a number of sales leadership and business development roles in the transportation industry. Mr. Carruthers is a member of the University of Alberta Business Advisory Council and previously served as Director of Kids Help Phone and Markham Stouffville Hospital Foundation, as well as Past Chair of the United Way of York Region Campaign.
Timothy M. Ferrarell Senior Vice President and Chief Information Ofcer
Joseph C. High Senior Vice President and Chief People Ofcer
John L. Howard Senior Vice President and General Counsel
Mr. Ferrarell was named Senior Vice President and Chief Information Ofcer in June 2007. He is responsible for enhancing customers experiences through the companys process improvement and business system integration efforts. Prior to this role, Mr. Ferrarell had served as Senior Vice President, Enterprise Systems, since June 2001, and took on responsibility for Enterprise Processes in 2006. He joined the company in 1983, and has served in a variety of senior leadership capacities within marketing, product line development, product management, and quality and business planning. Mr. Ferrarell serves on the Board of Trustees for Lewis University.
Mr. High joined Grainger as Senior Vice President and Chief People Ofcer in June 2011. He is responsible for aligning business strategies with people initiatives to build high-performing leaders and teams that meet the needs of diverse customers with excellence, while driving company success and shareholder value. Before joining Grainger, Mr. High was the Senior Vice President of Human Resources at Owens Corning in Toledo, Ohio. Prior to that role, he was head of Human Resources for ConocoPhillips in Houston. Mr. High also served as an Ofcer at Rockwell Automation and Cummins Engine Company. Mr. High has served on the Board at Outward Bound, a premier provider of experience-based outdoor leadership programs for teens, adults and professionals, and was a Trustee of the University of Toledo. He is currently a member of the Executive Leadership Council, a premier leadership organization comprised of senior African-American corporate executives from Fortune 500 companies dedicated to inclusion and development of young leaders.
Mr. Howard joined Grainger and was named Senior Vice President and General Counsel in January 2000. His responsibilities include supporting all of the companys legal functions, business development and administrative services. Before joining Grainger, Mr. Howard served as Vice President and General Counsel for Tenneco Automotive, a subsidiary of Tenneco, Inc. Prior assignments included Vice President, Law at Tenneco. From 1990 to 1993, Mr. Howard served in The White House as counsel to the Vice President of the United States. From 1984 to 1990, he held a variety of legal positions within the federal government, including Associate Deputy Attorney General in the U.S. Department of Justice. Mr. Howard served a ve-year term as Chairman, Special Panel on Appeals. He also served a two-year term on the Federal Reserve Bank of Chicagos Seventh District Advisory Council. He currently serves on the board of directors of the Chicago Botanic Garden as a Vice Chairman.
Ronald L. Jadin Senior Vice President and Chief Financial Ofcer
D G Macpherson Senior Vice President; President, Global Supply Chain and Corporate Strategy
Michael A. Pulick Senior Vice President; President, Grainger International
Mr. Jadin was named Senior Vice President and Chief Financial Ofcer for Grainger in March 2008. His responsibilities include nancial planning and analysis, nancial reporting, internal audit, treasury operations and nancial services. Mr. Jadin also served as Vice President and Controller since November 2006. Prior to that, he was Vice President, Finance, for Grainger Industrial Supply, as well as Director of Financial Planning and Analysis for the company. Prior to joining Grainger in 1998, he spent 15 years serving in nancial analysis and management capacities within General Electric. Mr. Jadin volunteers at Habitat for Humanity and his church.
Mr. Macpherson was named Senior Vice President and President, Global Supply Chain and Corporate Strategy in December 2011. He is responsible for the companys overall business strategy as well as the performance of the Global Supply Chain organization. Mr. Macpherson oversees the performance of Graingers U.S. product management, inventory, distribution, and sourcing capabilities as well as global sourcing, purchasing, and transportation efforts. His team also provides specialized supply chain expertise to each of Graingers international businesses. In addition, Mr. Macpherson is leading an initiative to improve the IT systems for the companys businesses in Canada and Latin America. Mr. Macpherson joined Grainger in 2008 from Boston Consulting Group (BCG) where he was Partner and Managing Director since 2002. Mr. Macpherson is a member of the board of directors for the American Red Cross of Greater Chicago.
Mr. Pulick was named Senior Vice President and President, Grainger International in January 2012. In this role, he is responsible for overseeing Graingers operations outside the U.S., which include approximately 7,000 team members in more than 25 countries. Prior to this role he served as Senior Vice President and President, Grainger U.S. and was responsible for all aspects of the companys U.S. operations. Since joining Grainger in 1999, Mr. Pulick has held a number of roles with increased responsibility. Prior to joining Grainger, Mr. Pulick held management positions within General Electrics Industrial Systems business and its Motors, Appliances and Industrial Controls business. Mr. Pulick serves as a member of the Illinois Institute of Technologys Executive Board and Board of Trustees and is also a former Junior Achievement of Chicago board member.
Compensation Practices
Executive Compensation
The Company does not have employment agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes Executive compensation is tied to performance; numeric criteria are disclosed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes The Company has the ability to claw back incentive compensation. . . . . . . . . . . . . . . . . . . . . Yes CEO salary is no more than 2 times salary of next highest paid named executive ofcer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes Annual Cash Incentives Annual cash incentives are linked to achieving predetermined Company objectives. Stock options are granted based on individual performance and linked to stock price performance for ten years. Performance shares are granted based on achieving specic, predetermined Company objectives over the three-year performance period. Benets The prot sharing plan encourages nancial performance that drives increased shareholder value. Ofcers are subject to ownership guidelines: CEO at least 6X salary Other senior ofcers at least 3X salary The Companys incentive programs incorporate a balance of risk mitigation components.
Pay for Performance Compensation Element

Base Salary
Link to Performance
Base salary increases are linked to individual performance.
Equity Compensation
All stock-based incentive plans have been approved by shareholders . . . . . . . . . . . . . . . . . Yes The Companys 2010 Incentive Plan does not allow reloads, repricing, stock options issued at a discount to fair market value, or stock options to be transferred by a participant for consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes Stock options are always awarded at an exercise price equal to the closing price of the Companys common stock reported for the business day before the grant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes The Company has not misdated or backdated stock options resulting in a restatement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes The Company discloses performance criteria in its stock-based compensation plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes Dividends are not available on performance shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes The Company, in coordination with a proxy advisory rm, commits to an appropriate burn rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes
Long-Term Incentives
Ownership Guidelines
Risk Mitigation
31
Board of Directors
Brian P. Anderson Former Executive Vice President and Chief Financial Ofcer, OfceMax Incorporated, Itasca, Ill. (1, 2,* ) V. Ann Hailey President, Chief Executive Ofcer and Chief Financial Ofcer, Famous Yard Sale, Inc., New Albany, Ohio (1,* 2) William K. Hall Founding Partner, Procyon Advisors LLP, Skokie, Ill. (1, 2) John W. McCarter, Jr. President Emeritus of the Field Museum of Natural History, Chicago, Ill. (2, 3) James T. Ryan Chairman, President and Chief Executive Ofcer
Neil S. Novich Former Chairman, President and Chief Executive Ofcer, Ryerson Inc., Chicago, Ill. (2, 3) Michael J. Roberts Former Global President and COO of McDonalds Corporation, CEO of LYFE Kitchen, Chicago, Ill. (2, 3) Gary L. Rogers Former Vice Chairman, General Electric Company, Faireld, Conn. (1, 2)
E. Scott Santi President and Chief Executive Ofcer, Illinois Tool Works Inc., Glenview, Ill. (1, 2)
James D. Slavik Chairman, Mark IV Capital, Inc., Newport Beach, Calif. (2, 3)
Stuart L. Levenick Group President, Caterpillar Inc., Peoria, Ill. (2, 3*)
(1) Member of Audit Committee (2) Member of Board Affairs and Nominating Committee (3) Member of Compensation Committee
* Committee Chair
Lead Director
Corporate Governance
Board 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 by the 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 and Nominating Committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes Disclosure Committee function for nancial reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes Independent Audit Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes Audit Committee has a nancial expert. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes Auditors elected at most recent annual meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes Independent Compensation Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes Board Compensation Committee has independent compensation consultant. . . . . . . Yes
Independent Director Compensation

The 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 form of Company equity for the entire duration of the Directors service . . . . . . . . . . . . . . . . . . . . . Yes The Companys Director Stock Ownership Guidelines require Directors to own Company equity worth at least 5X the annual retainer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes The Director pay package is regularly benchmarked to market and reviewed by an Independent Compensation Consultant. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes The Company does not use stock options as part of the Director pay 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 Director and for attending continuing education programs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes A Director who is an employee of the Company does not receive any compensation for services as a Director . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes
Shareholder Rights
Company has a shareholder rights plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . No Shareholders 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 posts its articles of incorporation and bylaws on website . . . . . . . . . . . . . . Yes
Company Information
Headquarters W.W. Grainger, Inc. 100 Grainger Parkway Lake Forest, IL 60045-5201 847.535.1000 Phone 847.535.0878 Fax www.grainger.com Media Relations Contact Joseph Micucci Director, Media Relations 847.535.0879 Investor Relations Contacts Laura D. Brown Senior Vice President, Communications and Investor Relations 847.535.0409 William D. Chapman Senior Director, Investor Relations 847.535.0881 Analyst Coverage (As of March 1, 2013) Barclays Capital Scott Davis BB & T Capital Markets Holden Lewis Buckingham Research Edward Wheeler Citibank Deane Dray Cleveland Research Company Adam Uhlman Credit Suisse Hamzah Mazari FBR Capital Markets Ajay Kejriwal Janney Montgomery Scott LLC John Baliotti Longbow Research Derek Jose Morningstar Basili Alukos Oppenheimer & Company Christopher Glynn Raymond James Sam Darkatsh Robert W. Baird David Manthey S&P Capital IQ Stewart Scharf Stephens, Inc. Matt Duncan UBS Robert Barry Wells Fargo Allison Poliniak-Cusic William Blair & Company, LLC Ryan Merkel Wunderlich Securities, Inc. Brent Rakers Annual Meeting The 2013 Annual Meeting of Shareholders will be held at the companys headquarters in Lake Forest, Illinois, at 10:00 a.m. CDT on Wednesday, April 24, 2013. Expected Earnings Release Dates First Quarter April 16, 2013 Second Quarter July 17, 2013 Third Quarter October 16, 2013 Fourth Quarter January 24, 2014 Mr. Chapman was named Senior Director, Investor Relations, in April 2012. In this role, he serves as the companys primary contact with the investment community. He had served as Director, Investor Relations since 1999. Mr. Chapman serves on the advisory board of the Chicago Chapter of the National Investor Relations Institute (NIRI) and is a past president and chairman. He is also a member of the NIRI National Senior Roundtable. In 2013, he was recognized by Institutional Investor Magazine as the top IR professional in the capital goods/ industrials sector, as voted by the sell-side. Mr. Chapman serves as a director, past president and current scholarship chairman of the Wisconsin Alumni Association-Chicago Chapter and is a former director of the National Wisconsin Alumni Association. Transfer Agent, Registrar and Dividend Disbursing Agent Instructions and inquiries regarding transfers, certicates, changes of title or address, lost or missing dividend checks, consolidation of accounts and elimination of multiple mailings should be directed to: Computershare Trust Company, N.A. P.O. Box 43078 Providence, RI 02940-3078 800.446.2617 Auditors Ernst & Young LLP 155 North Wacker Drive Chicago, IL 60606-1787 Common Stock Listing The companys common stock is listed on the New York and Chicago stock exchanges under the trading symbol GWW. Trademarks ACKLANDS GRAINGER, CONDOR, CONTENDER, FOR THE ONES WHO GET IT DONE, GRAINGER, GRAINGER and Design, GRAINGER FOR THE ONES WHO GET IT DONE and Design, GRAINGER IN CHINESE CHARACTERS and Design, GRAINGER LIGHTING SERVICES, GRAINGER Shipping Box Design, GRAINGER TOOLS FOR TOMORROW, GRAINGER.COM, GRAINGER.COM.MX, KEEPSTOCK, LUMAPRO, TOUGH GUY and WESTWARD are the trademarks or service marks of W.W. Grainger, Inc., which may be registered in the United States and/or other countries. DAYTON is the trademark of Dayton Electric Manufacturing Co., which may be registered in the United States and/or other countries. FABORY, FABORY MASTERS IN FASTENERS and Design and MASTERS IN FASTENERS are the trademarks of Fabory Nederland B.V., which may be registered in the United States and/or other countries. MONOTARO, OSAKA SPIRIT and OTOKOMAE are the trademarks of MonotaRO Co., Ltd., which may be registered in the United States and/or other countries. TECHNI-TOOL is the trademark of Techni-Tool, Inc., which may be registered in the United States and/or other countries. ZORO TOOLS and ZORO TOOLS and Design are the trademarks of Zoro Tools, Inc., which may be registered in the United States and/or other countries. All other trademarks and service marks are the property of their respective owners.
The printer and paper utilized for this report have been certified by the Forest Stewardship Council (FSC), which promotes environmentally appropriate, socially beneficial and economically viable management of the worlds forests. This report is on paper containing 30 percent post-consumer recycled fiber.
Paper contains 30 percent fiber derived from post-consumer waste.
Recyclable. Please recycle.
Grainger was recognized in 2013 by Institutional Investor Magazine as having the top IR team in the capital goods/industrials sector, as voted by the sell-side.
DESIGN: Anonymous Design, Inc. 2013 W.W. Grainger, Inc.
33
Headquarters W.W. Grainger, Inc. 100 Grainger Parkway Lake Forest, IL 60045-5201 847.535.1000 www.grainger.com
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From Motors to Mobile

2013 FACT BOOK

Contents From Motors to Mobile . Fast Facts

1 2 4 6 8 9 10 12 About the Company

Creating Shareholder Value Supply Chain

Investing for Growth eCommerce .

International Overview. Priority Markets: Canada Japan .

Europe . Mexico Brazil .

A Great Company to Work For . Community Relations

Consolidated Statements of Earnings . Consolidated Balance Sheets .

Consolidated Statements of Cash Flows . Historical Financial Summary.

Executive and Operating Management . Compensation Practices . Board of Directors .

Corporate Governance . Company Information .

W.W. GRAINGER, INC. AND SUBSIDIARIES

Fast Facts (AS OF 12/31/12)

consecutive years of dividend increases

2012 Sales by Customer Category (Total Company)

average annual total shareholder return (2008 2012)

2012 Sales by Product Category (Total Company)

17% 13% 10% 8% 8% 7% 7% 6% 6% 6% 3% 3% 2% 2% 2%

2 W.W. GRAINGER, INC. AND SUBSIDIARIES

W.W. GRAINGER, INC. AND SUBSIDIARIES

Creating Shareholder Value

Sales Dollars in billions

Grainger Other Top 10 Distributors All Other Distributors

200 150 100 50 0 -50 -100

Accelerating Sales Growth Through Share Gain

4 W.W. GRAINGER, INC. AND SUBSIDIARIES

Operating Margin Percent

Cash Generation/Deployment (2008 2012) Dollars in millions

Cash Flow from Operations Dollars in millions

63 percent returned to shareholders

Share Repurchases Acquisitions

Increasing Cash Flow

Dividends Paid Dollars per share

Return on Invested Capital ** Percent

W.W. GRAINGER, INC. AND SUBSIDIARIES

OFFERING A NEARLY ENDLESS ASSORTMENT

Stocked Drop-shipped Sourced

6 W.W. GRAINGER, INC. AND SUBSIDIARIES

NORTH AMERICAN DISTRIBUTION NETWORK

Super Regional DC Regional DC Market DC

A HISTORICAL LOOK GLOBAL BEST PRACTICES

W.W. GRAINGER, INC. AND SUBSIDIARIES

Investing for Growth

rainger has established the following growth drivers:

Sales Force Expansion

8 W.W. GRAINGER, INC. AND SUBSIDIARIES

PRODUCT RATINGS AND REVIEWS allows customers to share

to quickly place orders for needed supplies.

W.W. GRAINGER, INC. AND SUBSIDIARIES

2012 Sales by Customer Category United States

2012 Sales by Product Category United States

KEY Branch Distribution Center (As of 12/31/12)

RESPONDING TO HURRICANE SANDY

HELPING HOSPITALS SUCCEED

W.W. GRAINGER, INC. AND SUBSIDIARIES

SHARING TALENT ACROSS BORDERS

12 W.W. GRAINGER, INC. AND SUBSIDIARIES

INTERNATIONAL PRIORITY MARKETS

* Grainger operates in Japan through a 52 percent ownership stake in MonotaRO.

W.W. GRAINGER, INC. AND SUBSIDIARIES

Priority Markets Canada

Distribution Center (DC) and IT Investments