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This Is How We Win

2014 FACT BOOK

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

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W.W. GRAINGER, INC. AND SUBSIDIARIES 33

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

Media Relations ContactJoseph MicucciDirector, Media Relations847.535.0879

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

William D. ChapmanSenior Director, Investor Relations847.535.0881

D. Casey DarbySenior Manager, Investor Relations847.535.0099

Analyst Coverage (As of March 1, 2014)Atlantic Equities — Richard RadbourneBarclays Capital — Scott DavisBB & T Capital Markets — Holden LewisBuckingham Research — Edward WheelerCitibank — Deane DrayCleveland Research Company — Adam UhlmanCredit Suisse — Hamzah MazariDeutsche Bank Securities, Inc. — John InchFBR Capital Markets — Ajay KejriwalGoldman Sachs — Joe RitchieJanney Montgomery Scott LLC — John BaliottiLongbow Research — Eli LustgartenMorningstar — Kwame WebbOppenheimer & Company — Christopher GlynnRaymond James — Sam DarkatshRobert W. Baird — David MantheyStephens, Inc. — Matt DuncanUBS — Winnie ClarkWells Fargo — Allison Poliniak-CusicWilliam Blair & Company, LLC — Ryan MerkelWunderlich Securities, Inc — Brent Rakers

Annual MeetingThe 2014 Annual Meeting of Shareholderswill be held at the company’s headquartersin Lake Forest, Illinois, at 10:00 a.m. CDT onWednesday, April 30, 2014.

Expected Earnings Release DatesFirst Quarter April 16, 2014Second Quarter July17, 2014Third Quarter October 16, 2014Fourth Quarter January 26, 2015

Transfer Agent, Registrar and DividendDisbursing AgentInstructions and inquiries regarding transfers,certificates, changes of title or address, lost ormissing dividend checks, consolidation of accountsand elimination of multiple mailings should bedirected to:Computershare Trust Company, N.A.P.O. Box 43078Providence, RI 02940-3078800.446.2617

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

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

TrademarksACKLANDS–GRAINGER, FOR THE ONESWHO GET IT DONE, GRAINGER, GRAINGER andDesign, GRAINGER FOR THE ONES WHO GETIT DONE and Design, GRAINGER IN CHINESECHARACTERS and Design, GRAINGERShipping Box Design, GRAINGER TOOLS FORTOMORROW, GRAINGER.COM, KEEPSTOCK,LUMAPRO, TOUGH GUY and WESTWARDare the trademarks or service marks ofW.W. Grainger, Inc., which may be registeredin the United States and/or other countries.

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

FABORY is the trademark of Fabory Nederland B.V.,which may be registered in the United States and/orother countries.

MONOTARO, OSAKA SPIRIT and OTOKOMAEare the trademark of MonotaRO Co., Ltd., whichmay be registered in the United States and/orother countries.

SAFETY SOLUTIONS is the trademark of SafetySolutions, Inc., which may be registered in theUnited States and/or other countries.

TECHNI-TOOL is the trademark of Techni-Tool, Inc.,which may be registered in the United States and/orother countries.

ZORO TOOLS and ZORO TOOLS and Designare the trademarks of Zoro Tools, Inc., whichmay be registered in the United States and/orother countries.

All other trademarks and service marks are theproperty of their respective owners.

© 2014 W.W. Grainger, Inc.

Mr. Chapman was named Senior Director,Investor Relations, in April 2012. In this role,he serves as the company’s primary contactwith the investment community. He had servedas Director, Investor Relations since 1999.

Mr. Chapman serves on the advisory board ofthe Chicago Chapter of the National InvestorRelations Institute (NIRI) and is a past presidentand chairman. He is also a member of the NIRINational Senior Roundtable. For the past threeyears, he was recognized by Institutional InvestorMagazine as the top IR professional in the capitalgoods/industrials sector.

Mr. Chapman serves as a director, past presidentand current scholarship chairman of theWisconsin Alumni Association-Chicago Chapterand is a former director of the National WisconsinAlumni Association.

Paper contains 30 percent fiberderived from post-consumer waste.

Recyclable. Please recycle.

The printer and paper utilized for this report have been certified by the ForestStewardship Council (FSC), which promotes environmentally appropriate,socially beneficial and economically viable management of the world’s forests.This report is on paper containing 30 percent post-consumer recycled fiber.

C O M P A N Y I N F O R M A T I O N

Scan this QR code with your smartphone to godirectly to Grainger’s mobile IR website. Get thelatest press releases, presentations, financialsand more information about the company.

FORWARD-LOOKING STATEMENTS

The 2014 Fact Book contains statements that are nothistorical in nature but concern future results and businessplans, strategies and objectives, and other matters that maybe deemed to be “forward-looking statements” under federalsecurities laws. Grainger cannot guarantee that any forward-looking statement will be realized, although Grainger doesbelieve that its assumptions underlying its forward-lookingstatements are reasonable. Achievement of future results issubject to risks and uncertainties which could cause Grainger’sresults to differ materially from those which are presented.

The forward-looking statements should be read inconjunction with the company’s most recent annualreport and Form10-K as well as other reports filed withthe Securities and Exchange Commission containing adiscussion of the company’s business and of the variousfactors that may affect it. Caution should be taken notto place undue reliance on Grainger’s forward-lookingstatements and Grainger undertakes no obligation topublicly update the forward-looking statements, whetheras a result of new information, future events or otherwise.

CONTENTS

This Is How We Win . . . . . . . . . . . . . . . . . . . . . . . . . . . 1Fast Facts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2Strategy: Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4Strategy: Multichannel/Online . . . . . . . . . . . . . . . . . . . . 5Strategy: Shareholder Value . . . . . . . . . . . . . . . . . . . . . 6Growth and Scale: Growth Drivers . . . . . . . . . . . . . . . . . 8Growth and Scale: Scale . . . . . . . . . . . . . . . . . . . . . . . . 10Multichannel: United States . . . . . . . . . . . . . . . . . . . . . . 12Multichannel: Canada . . . . . . . . . . . . . . . . . . . . . . . . . . 14Multichannel: Latin America. . . . . . . . . . . . . . . . . . . . . . 16Multichannel: Europe. . . . . . . . . . . . . . . . . . . . . . . . . . . 17Online: MonotaRO and Zoro Tools . . . . . . . . . . . . . . . . . 18Emerging Markets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20Corporate Social Responsibility: Operating Responsibly . . 21Corporate Social Responsibility: Grainger People . . . . . . 22Corporate Social Responsibility: Community. . . . . . . . . . 23Corporate Social Responsibility: Sustainability . . . . . . . . 24Consolidated Statements of Earnings . . . . . . . . . . . . . . 25Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . 26Consolidated Statements of Cash Flows . . . . . . . . . . . . 27Historical Financial Summary . . . . . . . . . . . . . . . . . . . . . 28Executive and Operating Management . . . . . . . . . . . . . 30Compensation Practices . . . . . . . . . . . . . . . . . . . . . . . . 31Board of Directors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . 32Company Information . . . . . . . . . . . . . . . . . . . . . . . . . . 33

ABOUT THE COMPANY

W.W. Grainger, Inc., with 2013 sales of $9.4 billion, is North America’s

leading broad line supplier of maintenance, repair and operating

products, with operations in Asia, Europe and Latin America.

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 safety gloves, ladders,

cutting tools, 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 and using mobile

devices. More than 4,800 key manufacturers supply Grainger with more

than 1.2 million products that are stocked in Grainger’s branches and

distribution centers or sourced through a network of suppliers.

For more information on Grainger, visit www.grainger.com/investor.


Grainger Wins With:

> CUSTOMERS by providing a broad product offering and value-added services,all built on a foundation of strong relationships and a superior supply chain.

> SUPPLIERS by identifying the products that best meet customers’ current andfuture MRO needs.

> TEAMMEMBERS by attracting, retaining and developing top talent to perform theirbest in a dynamic, inclusive work environment.

> INVESTORS by gaining share, expanding margins and generating strong cash flowthroughout the economic cycle.

> COMMUNITIES through involved, engaged team members who volunteer time inthe places where they live and through company donations of cash and product.

This Is HowWeWin

Grainger team members come to work focused on providing the best service to their customers, the professionalswho maintain and repair facilities. Grainger partners with customers to offer the products and services needed tokeep their buildings running and their people safe. It’s a relationship that plays out every day around the world.With operations in 23 countries, Grainger team members worldwide know what it takes to win.

2 W.W. GRAINGER, INC. AND SUBSIDIARIES

F A S T F A C T S (AS OF 12/31/13)

Product CategoryCustomer Category

18% Heavy Manufacturing15% Commercial*13% Government

12% Contractor11% Light Manufacturing10% Other

6% Natural Resources 6% Retail/Wholesale

5% Transportation*4% Reseller

18% Safety and Security13% Material Handling10% Metalworking9% Cleaning and Maintenance8% Pumps, Plumbing and

Test Equipment7% Hand Tools6% Electrical6% HVAC6% Other5% Lighting4% Power Tools3% Fluid Power2% Motors2% Power Transmission1% Specialty Brands

* Note: Some Transportation salesin the United States were formerlyclassified as Commercial.

2013 Sales (Total Company)

28.7 percentaverage annual total

shareholder return

(2009–2013)

$9.4 billionin sales in 2013

More than

2 millionactive customers

$693 millionin cash returned to

shareholders in the formof dividends and sharerepurchases in 2013

42consecutive years ofdividend increases

1.7 millionshares repurchased

in 2013

Grainger’s commonstock is listed on theNew York and Chicagostock exchanges underthe trading symbol

GWW

More than

1.2 millionproducts available

AWARDS AND RECOGNITIONS

Internet Retailer: Social 500 list (#470)

Internet Retailer: 15th largest e-retailer in the U.S. and Canada

Internet Retailer: Mobile Hot 10

Chicago Tribune 2013 Top Workplaces (#11, Large Companies)


F A S T F A C T S (AS OF 12/31/13)

GRAINGER WORLDWIDE

MRO MARKET MARKET BRANCHES DISTRIBUTION APPROXIMATE NUMBERSIZE SHARE CENTERS OF CUSTOMERS SERVED

IN 2013

United States > $122 billion 6 percent 390 18 1,400,000Includes: Grainger Industrial Supply, E&R Industrial Sales,Imperial Supplies, Safety Solutions, Techni-Tool, Zoro Tools*

Canada (Doing business as: Acklands–Grainger Inc.) > $14 billion 8 percent 171 6 40,000

Latin America > $17 billion 1 percent 33 3 48,000Colombia, Costa Rica, Dominican Republic, Mexico,Panama, Peru, Puerto Rico**

Japan (Doing business as: MonotaRO Co., Ltd.) > $45 billion < 1 percent 0 2 530,000

Europe (Doing business as: Fabory Group) > $39 billion < 1 percent 115 2 100,000Belgium, Czech Republic, France, Hungary, The Netherlands,Poland, Portugal, Romania, Slovakia, United Kingdom

Emerging Markets

Asia (Doing business as: Grainger China, Grainger Industrial > $99 billion < 1 percent 0 1 10,000Supply India Private Limited)China, India

Brazil > $19 billion < 1 percent 0 1 1,500

TOTAL*** > $355 billion 3 percent 709 33 More than 2,000,000

* For segment reporting, Zoro Tools is included in Other Businesses.** Although Puerto Rico is a U.S. territory, the company manages this business as a part of Latin America.*** Total represents MRO market size where Grainger has operations. The worldwide MRO market is estimated to be $585 billion.

23,700team members

Operations in

23 countries

709branches

33distribution centers

16LEED certified buildings

More than

4,800key product suppliers


S T R A T E G Y O V E R V I E W

n the surface, motors, pumps, lights andgenerators may not appear to be very

strategic for a business or an institution, butthey are critical to keeping facilities functioningand efficient. Grainger’s mission is to helpprofessionals keep their operations running andtheir people safe. These hard-working individualsare the backbone of economies around the world,and they trust Grainger to provide them with theright products, services and solutions.

Today, Grainger serves more than two millionactive customers of all shapes and sizes, acrossmultiple markets and geographies. Regardless ofwhere they are located or what industry they arein, businesses and institutions are faced withmandates to improve productivity, ensure a safeenvironment for their employees and run theiroperations in a more environmentally friendlyway. They want a product offering that is marketrelevant with fast delivery, reliable customerservice and fair prices.

While these needs are universal, there aresignificant differences in how customers buy.Grainger understands its customers and offerssolutions to best meet their needs.

Large and medium-sized businesses tend to bemore complex and rely on suppliers who canpartner with them to streamline purchasing

O Market FragmentationNorth America

Grainger6%

Other Top 10Distributors24%

All OtherDistributors70%

processes and lower their total cost ofprocurement. They require customized servicesto help them operate across multiple locations.Grainger’s businesses in the United States,Canada, Latin America and Europe have evolvedto successfully address the needs of large andmedium-sized customers.

At the other end of the spectrum are smallcustomers. These organizations use fewer services,mix business and personal purchases and are oftenwilling to spend more time searching for a product.

In general, this customer segmentation by size isconsistent across all of the mature markets whereGrainger operates.

Grainger’s mission is to helpprofessionals keep theiroperations running and theirpeople safe. Safety categoryproducts include hard hatsand reflective vests.

Grainger serves more than twomillion active customers of allshapes and sizes, across multiplemarkets and geographies.

The maintenance, repair and operating (MRO)market is highly fragmented, and Grainger hasa proven strategy to aggressively gain share.


S T R A T E G Y M U L T I C H A N N E L / O N L I N E

rainger has developed two distinct operatingmodels to serve the MRO needs of customers

of all sizes.

Multichannel model

The multichannel model is the cornerstone ofGrainger’s business and accounts for the majorityof its sales. Grainger’s businesses in the UnitedStates, Canada, Latin America and Europe all goto market through the multichannel model. Thismodel primarily serves large and medium-sizedcustomers that have complex operations andpurchasing processes. It is characterized by salescoverage, local branches, eCommerce, catalogand value-added services such as inventorymanagement that help save time and money.Driven by deep relationships, the multichannelmodel enables customers to do business withGrainger as they wish. These customers generallyuse Grainger across multiple channels, dependingon the need of that purchase.

Single channel model

The single channel, or online model, servesprimarily smaller, less complex customers. Thismodel is designed for businesses that still wanta broad product offering, available quickly, butlargely use the web to make purchases. Theydon’t require a dedicated sales representative,local branch support or services like inventorymanagement, safety consulting or deep technicalsupport. This model offers strong online searchcapabilities to help customers quickly find aproduct solution. Through a 12-year relationship

G with MonotaRO in Japan, Grainger has helpedcreate a high-performing business that has alsoserved as the blueprint for Grainger’s online modelin the United States, Zoro Tools (see pages 18–19for more about MonotaRO and Zoro Tools).

Over the past year, Grainger has brought greaterfocus to its strategy, clarifying how and where thecompany will compete and aligning its businessstructure to this strategy to accelerate growth.With two proven and effective operating models,Grainger’s focus is driving market share growthand expanding margins.

Investing in the foundation

To strengthen and increase its competitiveadvantage, Grainger makes substantialinvestments each year in the foundationalelements of systems, supply chain infrastructureand people. As a result, the company’s industry-leading supply chain provides differentiatedcustomer service and broad product availability.In North America, the company serves morethan 95 percent of customers with next-dayshipping (see more on page 11). Technologysystems allow the company the opportunity toshare information across borders. Investmentsin training and development benefit individualteam members and the company overall.

Most foundational investments supportinfrastructure that is common to both businessmodels, allowing Grainger to better serve allcustomers (see more on page 10).

Grainger serves large and medium-sized customers through the multichannel model. Depending on the need or situation, these customersgenerally interact with Grainger using the following channels:

MULTICHANNEL MODEL

Through a 12-year relationshipwith MonotaRO in Japan,Grainger has helped create ahigh-performing business thatserved as the blueprint forGrainger’s online model inthe United States, Zoro Tools.

Sales Force eCommerce/Mobile Contact Centers Inventory Management Branch Support


S T R A T E G Y S H A R E H O L D E R V A L U E

rainger has a distinctive track record ofdelivering strong returns to shareholders.

In the period 2009 to 2013, Grainger’s marketvalue nearly tripled from $6 billion to $17.7 billion.A clear strategy to win with customers, focuson margin expansion and a strong balancesheet all contributed to Grainger’s winningwith investors.

G Margins

Over a cycle, Grainger targets average annualoperating margin expansion of 30 to 60 basis points,driven by high single digit organic sales growthand continued improvements in productivityacross the organization. The company hasestablished five-year operating margin targetsbased on these performance metrics.

The company has increased operating marginsby 300 basis points during the past five years.During that period, most of the improvementhas come from gross margin expansion. Goingforward, Grainger is forecasting a more equalcontribution from gross profit improvement andbetter expense leverage, particularly given thelow inflationary environment.

GROSS PROFIT MARGINS

Grainger has consistently leveraged its scale inpurchasing and supply chain to drive improvementsin gross profit margin. One benefit of purchasingscale is the opportunity to utilize existingproficiency. Grainger has taken advantage ofthe fastener expertise of its European business,Fabory Group, with the creation of a globalfastener purchasing hub. The engineeringknowledge and purchasing process of Faboryallow Grainger to consolidate global purchasingto create buying power. The company expectsto see general improvement in cost of goods soldand plans to leverage the knowledge gained inother product categories.

Global sourcing is another lever, taking advantageof the opportunity scale offers to provide high-quality products at lower price points. Graingerhas been successful at increasing its mix of private

Total Shareholder ReturnPercent (average annual)

8.3 (1.4) 28.7 17.9

10 Years 5 Years(1999–2008) (2009–2013)

GWW

S&P 500

Return on Invested Capital**Percent

24.9 29.8 31.9 29.1 32.6*

2009 2010 2011 2012 2013

31.8

Earnings per Share – DilutedDollars

5.62 6.93 9.07 9.52 11.52*

2009 2010 2011 2012 2013

11.13

Operating MarginPercent

10.7 12.0 13.0 12.6 14.1*

2009 2010 2011 2012 2013

13.7

Comparison of Five-Year Cumulative Total ReturnPercent

Dow Jones U.S. Industrial Suppliers Total Stock Market Index

W.W. Grainger, Inc. S&P 500 Stock Index

2008 2009 2010 2011 2012 2013

300

240

180

120

60

For the five-year period ending2013, Grainger’s cumulativetotal shareholder return was253 percent.

Total shareholder return

Five years ago, Grainger established a goal ofdelivering top quartile returns. The companyhas met and exceeded that goal for each of thepast five years. Most recently, in 2013, Graingergenerated a 28.1 percent total shareholderreturn, and for the five-year period ending2013, the cumulative total shareholder returnwas 253 percent. This performance placesGrainger in the top quartile among companiesin the S&P 500.

* Lower number represents reported figure; upper number represents adjusted figure, which excludes adjustments as reported by the company in its 2013 earnings releases.** See footnote on page 29.


S T R A T E G Y S H A R E H O L D E R V A L U E

label products. Strong growth of exclusive brandssuch as Dayton® and Westward® has contributed toachieving this goal. Most of Grainger’s competitorsdon’t have the capability to offer private labelproducts, creating another opportunity to winwith customers.

OPERATING EXPENSE LEVERAGE

Grainger uses continuous improvement practicesto fuel productivity in the business, which in turnfunds the drivers that grow the business (see pages8–9). Consolidating select back-office operationsin lower-cost geographies is one way Grainger isimproving its cost structure. For example, thecompany has moved some financial processingfunctions to Panama and outsourced some IToperations with the goal of driving efficiencies.

Cash flow

Grainger has a history of strong cash flowgeneration. Through improvements in workingcapital management and margin expansion, thecompany has increased cash flow consistentlyduring the past several years. In 2013, Graingerreported record cash flow from operations of$986 million. Despite substantial productadditions, inventory turns have remained stable,allowing for continued strong cash flow generation.

Grainger has traditionally returned about two-thirds of operating cash flow to shareholdersthrough dividends and share repurchases. Thecompany increased its dividend 16 percent inApril 2013, marking the 42nd consecutive yearof increased dividends. In 2013, the companypaid $255 million in dividends and repurchased$438 million worth of shares, representing70 percent of operating cash flow for the year.Since 2009, the company has achieved a

5 percent reduction in common sharesoutstanding, from 72 million to 69 million. Andsince 1984, when the share repurchase programbegan, Grainger has reduced shares outstandingby 40 percent, from a high of 115 million shares.

Grainger targets the other one-third of operatingcash flow for investment in the business.Although the percentage designated for capitalremains steady on an aggregate basis, the dollarvalue of capital investment has grown over timewith improved cash flow generation. Whileindividual years can increase or decrease basedon specific projects, the long-term average hasapproximated one-third of operating cash flow.

Capital structure

Grainger maintains a debt ratio and liquidityposition that provides flexibility in fundingworking capital needs and long-term cashrequirements. In addition to internally generatedfunds, Grainger has various sources of financingavailable, including bank borrowings under linesof credit. With a long-term rating of AA+ fromStandard & Poor’s, Grainger offers an attractivebalance sheet with low risk.

Operating Margin TargetsPercent

United States 18% – 18% 18% – 19% 19% – 20%

Canada 11% – 12% 11% – 12% 12% – 13%

Other 3% – 4% 4% – 7% 7% – 9%

Company 14% – 15% 15% – 16% 16% – 17%

2014E 2017E 2019E

Grainger manages the businessfor the long term. Infrastructureinvestments in Canada will affectmargins in the medium term,with the expectation of marginexpansion in the long term.

Dividends PaidDollars per share

1.78 2.08 2.52 3.06 3.59

2009 2010 2011 2012 2013

Cash Generation/Deployment(2009–2013) Dollars in millions

Uses ofCash

Cash fromOperations

61 percentreturned to

shareholders

Share Repurchases Dividends

Acquisitions Capital Expenditures

5,000

3,750

2,500

1,250

Shares OutstandingMillions of shares

72.3 69.4 70.0 69.5 68.9

2009 2010 2011 2012 2013

Cash Flow from OperationsDollars in millions

732 596 746 816 986

2009 2010 2011 2012 2013


G R O W T H A N D S C A L E G R O W T H D R I V E R S

rainger’s growth drivers have proven to beeffective. This is particularly apparent when

looking at share gain among large customers.Sales to customers benefiting from eCommerceand KeepStock® solutions, for example, tendto grow faster compared to similar customerswithout the benefit of these offerings. Whenused individually and in tandem, these growthprograms strengthen Grainger’s partnershipswith customers and drive revenue. Product lineexpansion and eCommerce expertise are appliedacross both business models, whereas sales forceexpansion and inventory management areapplicable only to the multichannel model.

G Sales force expansion

Distribution is a relationship business. Customers

need the confidence that their partner understands

their specific challenges. Calling on customers

in person is a differentiating factor that allows

Grainger to understand and help each customer

meet specific productivity needs.

Grainger knows that sales representatives work

within its multichannel model, and the company

is adding more sales representatives in the United

States, Canada and other countries. This enables

Grainger to deepen relationships with larger

customers and reach out to medium-sized

Productivity Versus ProgramsIncremental productivity and expense, dollars in millions

$190

$135

$185

($140)($120)

($132)

Productivity Growth and Infrastructure Programs SAP

* Organic

2014

EIn

crem

enta

lExp

ense

Short Term Medium Term Long Term< 1 year 1-2 years > 2 years

2014 Growth and Infrastructure ProgramsDollars in millions

SalesCoverage

$40

Productivity$10

KeepStock$20

EnterpriseSystemsand SAP

$30

DCs$20

2013* 2014E Low* 2014E High*Total$130

eCommerce$10

Sales force expansion, productline expansion, inventorymanagement and eCommerceare contributing to bettercustomer experiences.

The savings from productivity efforts are used to fund the growth and infrastructure programs and inessence allow Grainger to “grow for free.”


G R O W T H A N D S C A L E G R O W T H D R I V E R S

customers previously underserved. In addition,

Grainger is moving to a vertically aligned sales

force in major markets to address the needs of

customers in specific industries including

government, healthcare and manufacturing.

Inventory management

The company has distinguished its valueproposition by adding services that helpcustomers manage their inventory. This leadsto satisfied customers who return to Graingerfor its products, solutions and services.

With a diverse base of customer types and sizes,Grainger knows that many businesses need atailored inventory solution. Smaller operationsmay be comfortable with bin labeling andscanning devices, whereas a multisite facilitymay require vendor-managed offerings. Withthe KeepStock® suite of inventory managementsolutions, customers get the tools they needto improve inventory availability and reduceworking capital.

Product line expansion

Meeting customer demand with a large andmarket-relevant MRO assortment is a competitiveadvantage for Grainger. Product line expansionisn’t an event – it’s how Grainger runs and growsthe business. As companies consolidate suppliers,a broad product offering makes Grainger moreattractive to customers.

The ability to drop ship products to customers,with reliable delivery timing, has been a wayfor Grainger to extend its product line.Additionally, the company leverages combinedinventory between contiguous businesses. Forexample, inventory warehoused in the UnitedStates is available to customers in Canada andMexico. This practice enables the company toextend its product line into new geographies.

eCommerce

Most companies today are challenged to reducecosts and find more productive ways of doingbusiness. Grainger’s eCommerce offering,including websites and mobile solutions withinthe multichannel model, allows customers toplace and manage orders quickly using the latesttechnology. In 2013, eCommerce represented$3 billion in sales and 33 percent of overall salesfor the company (see more about the onlinemodel on pages 18–19).

The eProcurement (ePro) tool is one wayGrainger works with larger customers withinthe multichannel model. The customizedconnection allows multiple purchasers withina single company to order from Grainger.com,®

adding value and allowing Grainger to be amore integral partner to that customer. ePro isone of many ways Grainger wins with customers.

The end users of Grainger products are often found in a basement, on a roof, in a truck or at a worksite. Thesecustomers need solutions to help them find what they need when they are away from a desk. Mobility tools likethe iPad® application and LiveChat with Photo, available in the United States, help customers get the productsthey need when on the go.

In November 2013, Grainger released its application for the iPad. The app allows customers to visuallybrowse through thousands of products with improved search filters and view information including technicalspecifications and product accessories.

Other key features include:• detailed product pages;• real-time product availability at the nearest branch or date the product is expected to arrive, if shipped;• streamlined, single page checkout and• order history that helps a customer track recently placed orders or search within past orders.

LiveChat with Photo, released in October 2013, is a feature of the Grainger.com mobile app for the iPhone.Customers can send or attach a photo of a product to a Grainger Customer Service Representative during alive chat, with a chat history also available.

MOBILITY

eCommerce RevenuePercentage of total company sales

15 30 33 40–50

2009 2012 2013 FUTURE

U.S. KeepStock InstallationsIn thousands

29 40 55 100

2011 2012 2013 FUTURE

®

45

55


G R O W T H A N D S C A L E S C A L E

cale matters. Grainger’s powerfulcombination of scale advantage and

disciplined execution allows the companyto provide the best customer service at a lowtotal cost. Grainger continues to invest in itssupply chain capabilities, developing a strongglobal platform for profitable growth andcompetitive advantage.

S With best-in-class inventory managementpractices, Grainger is able to maintain productavailability and inventory turns while continuallyadding new products to meet customer needs.Businesses are consolidating the number ofsuppliers they use as a way to lower their owncosts and increase productivity. This trendfavors the broad line distributor that can offerthe best product assortment and services tothese businesses.

As Grainger aggregates more of its productpurchases across the globe, the company isrealizing even greater scale advantages. Forexample, the company is leveraging thespecialized fastener buying expertise of itsEuropean business, Fabory Group, to centralizeand combine fastener spend across all ofGrainger’s operations to improve its offeringand drive more competitive costs. The companyis identifying additional product categories touse in a similar approach.

Supplier relationships

Grainger has strong relationships with itssuppliers to maintain high levels of service atcompetitive prices. The company works closelywith its supplier partners to negotiate favorablecontract terms and conducts line reviews to helpensure the best possible purchasing advantage.The partnerships with more than 4,800 keyproduct suppliers play a critical role in helpingGrainger win. Dedicated product managementteam members identify the right supplierpartners and work with them to ensure theirproducts meet the needs of customers todayand in the future.

Grainger hosts multiple supplier events inNorth America each year to share the company’sstrategy and demonstrate opportunities forpartnership. At the annual Partners inPerformance event in the United States,suppliers are recognized for their achievementsin several categories, including on-time shipping,responsiveness, cost effectiveness and productquality. Being recognized is a significant honor,as less than 1 percent of Grainger’s suppliersreceive this award.

Product Line Expansion — SKUs in U.S. CatalogThousands

307 354 413 574 593

2010 2011 2012 2013 2014

Adding more exclusive brandproducts is a key priority forGrainger. Brands like Westward®

offer customers high-qualityoptions at lower price points.

Winning with customers is about providing theright products, in the right place, at the right time.With more than 1.2 million products availablecompany-wide, Grainger continues to aggressivelyexpand its product line to capture even moreMRO spend. In the last five years, product linesin the United States and Canada have more thanquadrupled. In Mexico, the product line has morethan doubled during the same time period.


G R O W T H A N D S C A L E S C A L E

Grainger’s supply chain infrastructure is the backbone of the company’s abilityto deliver products where and when customers need them. The company makessubstantial investments to strengthen its supply chain and provide differentiatedservice. In North America, the company serves more than 95 percent of customersnext-day.

The company’s largest distribution centers (DCs) – the Illinois DC, San Francisco DCand Greenville DC – fulfill half of customer volume and replenish the internationaland export operations as well as Zoro Tools (see Zoro Tools overview on page19).

ILLINOIS DC

Located outside of Chicago in Minooka, Ill., this 1million square-foot facility isthe company’s central stocking DC. Designed to store 500,000 items, it enablesGrainger to deliver products to customers nationwide. The building houses astate-of-the-art automated goods-to-person system. This technology deliversproducts to team members positioned in ergonomic workstations, promotingincreased team member safety and productivity while improving order accuracy.The automation in the Illinois DC provides an excellent solution for a buildingwith high throughput and large storage requirements. The Illinois DC is also theworld’s largest Leadership in Energy and Environmental Design (LEED) certifiedPlatinum-rated facility for Commercial Interiors.

TORONTO DC

In 2013, Acklands–Grainger broke ground on a 500,000 square-foot distributioncenter outside of Toronto in Caledon, Ontario. This relocation of the existing facilityis expected to be fully operational in early 2015 with a storage capacity of 400,000products. It will support growth by providing same-day or next-day delivery to thegreater Toronto area, next-day delivery to eastern Canada and replenishment andnext-day backfill to branches in Ontario and Quebec.

Investments in Canada’s distribution center network will ultimately allow shipmentsto go directly to customers, as opposed to the current model whereby product isshipped from DC to branch and from branch to customer. Shipping orders fromcentralized DCs offers productivity savings for the company and better service levelsfor the customer.

Grainger Global Sourcing

Adding exclusive brand products is a key priorityfor Grainger. These products – which include theDayton,® Westward,® LumaPro® and Tough Guy®

brands – offer customers high-quality options atlower price points.

The engine behind much of the company’sexclusive brands offering is Grainger GlobalSourcing (GGS), which works with 700 suppliersin 30 countries to provide Grainger’s businesseswith access to 72,000 high-quality products.GGS is a powerful lever to improve gross profit,contributing 15 to 20 basis points annually over thepast five years. In 2013, sales of product procuredby the GGS operation exceeded $1 billion.

To reduce cycle time and ensure quality, GGScontinues to build technical and inspectioncapabilities in its China operations. At the sametime, GGS continually evaluates its supply networkto help minimize risk and ensure access to low-costproducts throughout the world.

Scale at work

Scale isn’t limited to managing product cost andinventory. Grainger works to take advantage ofits size to improve efficiency and productivityacross the organization.

Grainger leverages scale through developingand sharing best practices. Learnings in areas ofeCommerce, supply chain, technology and salescan be shared and transferred to other parts of thecompany. Scale also allows Grainger to servicelarge customers across borders. Multinationalbusinesses can simplify their MRO purchasewith a single distributor, instead of using multiplecountry-specific distributors.

Chicago

Cleveland

NortheastSan Francisco

Los Angeles

Kansas City

Dallas

Memphis Greenville

Jacksonville

DartmouthWinnipeg

Saskatoon

Edmonton

Vancouver

Monterrey

Mexico City

North American Distribution Network

Toronto

Seattle

Minneapolis

Denver

500,000 products

350,000 products

100,000 products

Existing location

Future expansionin existing location

Note: Map excludes thedistribution centers ofU.S. acquisitions.

NORTH AMERICAN DISTRIBUTION NETWORKSales Procured Through Global SourcingPercent of total company sales

8.8 9.4 9.9 10.1 10.6

2009 2010 2011 2012 2013


M U L T I C H A N N E L U N I T E D S T A T E S

ith more than 85 years of history, Graingerhas grown to become the market leader

in the United States. With 6 percent share of anestimated $122 billion market, Grainger still hasan attractive runway for growth.

Grainger’s core business in the United Statesfocuses on helping large and medium-sizedcustomers save time and money in purchasing andmanaging products needed to keep their facilities

W

Key

BRANCH

DISTRIBUTION CENTER

(ASOF 12/31/13)

2013 Sales by Product Category – United States

16% Safety and Security14% Material Handling10% Cleaning and

Maintenance10% Pumps, Plumbing

and Test Equipment8% HVAC8% Metalworking7% Electrical7% Lighting7% Hand Tools4% Fluid Power3% Power Tools2% Motors2% Power Transmission2% Specialty Brands

running efficiently and their people safe.Grainger’s world-class distribution networkprovides customers with easy access to morethan a million products, helping them consolidatetheir MRO purchases and take cost out of theirbusiness. Grainger’s U.S. business has more than15,000 team members who are passionate aboutassisting customers with the products and servicesneeded to get their jobs done.

Inventory services coordinatorsand sales representatives are apart of the formula that helpsGrainger win with U.S. customers.

2013 Sales by Customer Category –United States

19% Heavy Manufacturing16% Commercial*16% Government13% Light Manufacturing12% Contractor

6% Retail 5% Other

5% Reseller5% Transportation*3% Natural Resources

* Note: Some Transportation saleswere formerly classified as Commercial.

Map excludes facilities operatedby acquired businesses.


M U L T I C H A N N E L U N I T E D S T A T E S

Multichannel model

One of Grainger’s competitive advantages inthe United States is its multichannel businessmodel, which allows customers to do businessin the manner most convenient for them. Thismodel includes:

KNOWLEDGEABLE SALES REPRESENTATIVES

Grainger has more than 3,000 salesrepresentatives focused on identifying ways tohelp large and medium-sized businesses bettermanage their MRO inventory and reduce theirtotal cost of procurement.

INDUSTRY-LEADING eCOMMERCE CAPABILITIES

Grainger’s eCommerce offering helps customersenhance productivity and lower purchasing costs.The U.S. business’ main website, Grainger.com,®

is the 15th largest eCommerce site in the UnitedStates and Canada, according to Internet Retailer.Customers also benefit from Grainger’s OrderManagement System, a feature of Grainger.comthat automates the purchasing and approvalprocess, and eProcurement solutions, whichhelp larger customers with buyers acrossmultiple locations connect electronically withGrainger. In 2013, Grainger rolled out a new

web platform to customers in the United States,featuring advanced functionality and improveduser experience.

INVENTORY MANAGEMENT SOLUTIONS

Grainger provides a suite of customer-managedand vendor-managed inventory solutions to meetcustomers’ specific needs as part of its KeepStock®

offering. The company ended 2013 with morethan 55,000 KeepStock installations in the UnitedStates and plans to add another 10,000 in 2014.

EXTENSIVE BRANCH NETWORK

Grainger’s branch network plays a critical rolein providing customers immediate access toneeded supplies. The company has nearly 400U.S. locations stocked with inventory tailored tomeet the just-in-time and emergency needs oflocal businesses.

CONTACT CENTERS

Grainger’s contact centers provide customers24/7 support over the phone, in addition totechnical product support and online supportthrough the company’s Click to Call/Chatcapabilities on Grainger.com.

The 2014 U.S. catalog containsmore than 51,000 new items.

STRATEGIC ACQUISITIONS

Grainger’s acquisition strategy is targeted at accelerating the rate of organic growth by adding companies with deep expertise in key endmarkets such as manufacturing. The company has recently made acquisitions that enhance its product and service capabilities, enabling thecompany to meet more customer needs. The company expects to make additional strategic acquisitions that extend its product and serviceoffering and technical expertise to help customers consolidate more of their MRO purchases with Grainger.

COMPANY

Techni-Tool

E&R IndustrialSales

Safety Solutions

DATE ACQUIRED

December 2012

August 2013

December 2013

INDUSTRY SPECIALTY

Distributor of products and related servicesto manufacturers in the electronics,aerospace, telecommunications andmedical industries

Distributor of metalworking products(cutting tools and abrasives) and MROsupplies to manufacturers in the aerospace,automotive and general industrial segments

Distributor of safety footwear, suppliesand services with a strong focus onthe manufacturing sector, servinglarge businesses in the Midwest

PRODUCT OFFERING

Nearly 25,000 products

More than 100,000 products

More than 40,000 products

2013 REVENUES

Approximately $80 million

Approximately $190 million(full year)

Approximately $65 million(full year)


M U L T I C H A N N E L C A N A D A

n 1996, Grainger made its first internationalacquisition when it purchased Acklands

Limited. The company became known asAcklands–Grainger Inc. and celebrates its125th anniversary in 2014. Acklands–Graingeris Canada’s largest MRO distributor with8 percent market share and has the highestshare of any Grainger business.

Canada has an MRO market size of $14 billionand has attributes that distinguish it from theU.S. market. The vast geography, lower populationdensity and reliance on the natural resourcessector create challenges and opportunitiesspecific to Acklands–Grainger.

Through its multichannel business model,including 171 branches, six distributioncenters and more than 2,700 team members,Acklands–Grainger serves customers primarilyin the natural resource, heavy construction,transportation and government sectors. As aresult, the majority of the business is concentratedin western Canada. In addition, the companycontinues to enhance its presence and servicecapabilities to better meet the needs of customersin the manufacturing and commercial sectors.

I Investments for growth

Acklands–Grainger has made a number ofinvestments over the years to enhance overallservice to customers, including:

PRODUCT LINE EXPANSION

In 2013, Acklands–Grainger announced thelargest product expansion in its company history,adding more than 200,000 new products toits online offering. This expansion more thandoubled the number of products available tocustomers online, enhancing the company’sability to serve as a single source for MROproducts. Many of the new products are shippeddirectly from Grainger’s U.S. distribution centernetwork, taking advantage of the company’sNorth American scale.

INVENTORY MANAGEMENT

Acklands–Grainger provides customers with asuite of inventory management solutions as partof its KeepStockSM offering, ranging from vendingmachines to onsite branches. These solutions helpcustomers increase efficiency and lower overallcosts by ensuring they have the right inventorywhere they need it and by providing controlledaccess to high volume supplies.

Acklands–Grainger servescustomers primarily in thenatural resource, heavyconstruction, transportationand government sectors.


TECHNICAL SERVICES

In addition, Acklands–Grainger provides anumber of technical services to help customerscomply with government and industry standards,reduce the risk of injury and minimize costlydowntime related to equipment failures.These include:• calibration and repair of gas detectioninstruments;

• preventive maintenance and productrepair programs;

• self-contained breathing apparatusequipment services and

• programs to track and managesafety initiatives.

eCOMMERCE CAPABILITIES

The company’s eCommerce channel providescustomers with three solutions. First is core websitefunctionality through acklandsgrainger.com,which provides customers access to more than300,000 products. Second is enhanced websitecapabilities, such as the Order ManagementSolution, which offers a suite of tools that providegreater purchasing control and order visibility.Finally, integrated eCommerce capabilities connectcustomers electronically with Acklands–Graingerand automate invoice processing, which savestime and helps improve accuracy.

M U L T I C H A N N E L C A N A D A

2013 Sales by Customer Category – Canada

25% Agricultureand Mining

21% Contractor16% Heavy Manufacturing12% Commercial

9% Transportation8% Retail/Wholesale5% Government3% Light Manufacturing1% Other

2013 Sales by Product Category – Canada

38% Safety and Security20% Metalworking14% Material Handling11% Hand Tools

7% Cleaning andMaintenance

5% Power Tools3% Electrical1% Fluid Power1% HVAC

Strengthening the foundation

Acklands–Grainger is in the midst of a multiyearprogram to boost supply chain capacity and buildan information system infrastructure to enablegrowth and improve productivity. The Canadianbusiness today is in a similar position to where theU.S. business was 15 years ago, shipping mostlyfrom branches instead of DCs. Investments in ITand supply chain to consolidate outbound shippingwas a critical inflection point in the performanceof the U.S. business, and it is anticipated that thesame will be true for Acklands–Grainger.

In preparation for this transformation,Acklands–Grainger has taken steps to increasecapacity. The expansion includes addingdistribution centers to enhance coverage onboth coasts and expanding existing distributioncenters to handle higher demand.

Examples include:• relocation of the distribution center inRichmond Hill, Ontario, to a new 500,000square-foot facility in nearby Caledon. The newDCis more than three times larger than the existingfacility and will be fully operational in early 2015.

• installing a new Warehouse ManagementSystem that will introduce automation that helpsimprove product availability, order accuracy,operational efficiency and cycle times.

The Acklands–Grainger catalog,printed in English and FrenchCanadian, celebrates 125 years ofserving Canadian businesses.

Key

BRANCH

DISTRIBUTION CENTER

(ASOF 12/31/13)


M U L T I C H A N N E L L A T I N A M E R I C A

rainger’s business in Latin Americacovers operations in Colombia, Costa Rica,

Dominican Republic, Mexico, Panama, Peru andPuerto Rico, with a combined MRO market sizeof approximately $17 billion.

The largest of these businesses, Grainger Mexico,serves the needs of customers primarily in themanufacturing, automotive, food and beverage,oil and gas, mining, and hospitality segmentsthrough its multichannel model. GraingerMexico reaches 95 percent of MRO customersnext day through its network of 16 branches,three master branches and distribution centersin Monterrey and Mexico City.

Similar to the company’s other multichannelbusinesses, Grainger Mexico has madeinvestments in several key areas to enhanceoverall service to customers, including:

EXPANDING THE PRODUCT LINE

Grainger Mexico has more than doubledits product offering over the past five years.The company continues to add new productsin areas like material handling, electrical,lighting, cleaning, metalworking and fasteners.

G

In addition, the company is collaborating acrossborders by leveraging Grainger’s productassortment and delivery capabilities in theUnited States to offer customers access toapproximately 119,000 products.

VALUE-ADDED SERVICES

Grainger Mexico has been leveraging best practicesfrom the company’s business in the United Statesto enhance its eCommerce capabilities. In 2013,eCommerce accounted for 22 percent of total salesin Mexico. Grainger Mexico also offers customersa suite of inventory management solutions, whichare used primarily by large customers looking tobetter manage their MRO spend.

EXPANDING SALES COVERAGE

Grainger Mexico has been adding salesrepresentatives to help customers in fast growingsegments like mining and automotive save timeand money in getting the supplies they need to keeptheir businesses running and their people safe.

ENHANCING DISTRIBUTION CENTER

CAPACITY AND INFORMATION SYSTEMS

Grainger Mexico recently reconfigured itsdistribution center in Monterrey to allow spacefor future expansion of its product line andadded distribution center capacity in Mexico City.The business is also investing in IT infrastructureto support continued growth.

The operations in the Latin America countriesoutside of Mexico serve customers primarily in themanufacturing, mining, oil and gas, and hospitalitysectors. The company operates through itsmultichannel model, providing quick and reliableaccess to needed products at competitive prices.

The Grainger Mexico productoffering has more than doubledin the past five years.

MEXICO

PANAMA

PUERTORICO*

COLOMBIA

DOMINICANREPUBLIC

COSTARICA

PERU

Key

BRANCH

DISTRIBUTION CENTER

(ASOF 12/31/13)

* Although Puerto Rico is a U.S. territory,the company manages its business thereas a part of Latin America.


M U L T I C H A N N E L E U R O P E

abory Group, a leading distributor of fastenersand related products, serves businesses of all

sizes, including MRO professionals, originalequipment manufacturers (OEMs) and technicalwholesalers. It operates in 10 countries in Europe,with limited operations in Asia.

Fabory is focused on capturing market share inboth the mature Western European market andthe higher-growth Central and Eastern Europeanmarkets. More than 65 percent of Fabory salesare from higher margin fasteners, producinggross profit margins in excess of 50 percent.Fabory has a fastener market share in the 20 to25 percent range in the Benelux countries(Belgium, the Netherlands and Luxembourg).With an MRO market size of $39 billion acrossthe markets where it operates, Fabory is wellpoised for long-term growth.

Fabory uses the multichannel model to servemore than 100,000 customers with 280 salesrepresentatives, 115 shops and fabory.com, itswebsite available in 10 languages. Customershave access to more than 50,000 standard andspecialized fasteners, 30,000 tools, 10,000industrial supplies and 10,000 safety and otherproducts through these channels. This productrange is being selectively expanded to achievestronger alignment to local customer needs.Focus areas include national and private labelsafety products and tools targeted at customerswhere there are already strong relationships builtthrough the fastener offering.

Fabory offers a high level of technical expertise andinnovative services, and its quality system meets therequirements of the most stringent and demanding

F

FRANCE

NETHERLANDS

BELGIUM

UNITEDKINGDOM

HUNGARY

CZECHREPUBLIC

POLAND

SLOVAKIA

ROMANIA

PORTUGAL

OEM customers. With distribution centers inEastern and Western Europe and its networkof shops, Fabory offers industry leading servicelevels across its expanding product assortment.

Fabory has been a pioneer in the developmentof inventory management solutions. Since itsdevelopment of a vendor-managed inventoryprogram more than 20 years ago, Fabory hascontinued to deliver innovative logisticalsolutions, such as the optical bin and two-binsystems, helping customers drive down cost,realize efficiencies and ensure operationalcontinuity. A new Fabory-developed solution,incorporating radio frequency identification(RFID) technology, is currently being piloted.

Fabory continues to adapt its multichannelmodel to better serve customers, includingimprovements to the fabory.com website.

Key

BRANCH

DISTRIBUTION CENTER

(ASOF 12/31/13)

Fabory uses the multichannelmodel to serve more than100,000 customers with 280 salesrepresentatives, 115 shops andfabory.com.


O N L I N E M O N O T A R O A N D Z O R O T O O L S

n Japan, Grainger is a 51 percent stakeholderin MonotaRO Co. Ltd., a leading publicly

traded eCommerce direct marketer. With morethan $45 billion in MRO potential in Japan,MonotaRO is focused on aggressively growingits presence in the market through a singlechannel business model. At the same time,MonotaRO is leveraging its expertise andcapabilities to serve customers in surroundingmarkets, like China, Singapore and South Korea.MonotaRO serves more than 530,000 small andmedium-sized customers across a full range ofindustries, with more than 80 percent of itstransactions conducted online.

I Growth drivers

MonotaRO started as a direct marketer in2002 and has enjoyed rapid, sustained growthsince then. The company is continuing itsprofitable growth journey by focusing onthree key growth drivers:

CUSTOMER ACQUISITION

MonotaRO uses a blend of eCommerce andtraditional marketing including paid search,search engine optimization, flyers and faxesto attract new customers. Even after morethan a decade in operation, the company grewcustomers and revenue in 2013 by approximately20 percent. Every month, new customers aredrawn to MonotaRO’s broad product offering,attractive prices and delivery capabilities.The company also focuses on acquiring largercustomers with tools such as workflow routingand reporting capabilities.

PRODUCT LINE EXPANSION

Key to MonotaRO’s value proposition is accessto a broad assortment of national and privatelabel brands. The company continues to addto its product offering, including pneumaticparts and cutting tools, while expanding itsprivate label brands, MonotaRO,® Osaka Spirit®

and Otokomae.®

MonotaRO offers several differentcatalogs to supplement its online-based business model.

MonotaRO serves more than530,000 small and medium-sizedcustomers across a full rangeof industries, with more than80 percent of its transactionsconducted online.


O N L I N E M O N O T A R O A N D Z O R O T O O L S

Private brand sales now comprise more than25 percent of total sales in Japan, with thepotential to increase the percentage of totalsales in the future. The company offers abroad product assortment on its website with120,000 items stocked in inventory. MonotaROis opening a new distribution center in early2014 with 450,000 square feet available toaccommodate 100,000 additional productsavailable to customers within two days.

DATABASE MARKETING

MonotaRO has become known for itsexpertise in using sophisticated data analyticsto understand customer buying behaviors.After a customer has identified a product forpurchase, data analytics can introduce a privatelabel or lower priced option. Eventually, repeatcustomers are offered complementary productsbased on aggregated purchase behaviors. Thiswill continue to be a core component thathelps drive MonotaRO’s growth.

Zoro Tools

To better serve smaller and less complexcustomers in the United States, Graingerlaunched Zoro Tools as a stand-alone, singlechannel online model in 2011. Zoro Toolsleverages the eCommerce expertise of

Grainger.com® and MonotaRO to meet the low-touch, low-cost needs of smaller customers. It alsobenefits from the vast product offering and supplychain infrastructure of the U.S. multichannelbusiness. The business features a broad productoffering, limited services and technical support,lower list prices and no discounts.

Since its launch, Zoro Tools has been growingrapidly and delivered more than $80 million inrevenue in 2013, more than double the resultsof the prior year. Zoro Tools had consistentmonth-over-month growth and positiveoperating earnings every month in 2013.

Similar to MonotaRO, Zoro Tools benefits from avariety of data analytics to allow for sophisticatedmarketing techniques. And like MonotaRO, ZoroTools is accelerating customer acquisition throughonline marketing techniques including productlisting ads and comparison shopping engines.

As it continues to grow, Zoro Tools is acceleratingchannel performance through partnershipswith leading technology companies andoptimizing paid search activities. This modelis allowing Grainger to serve and win withsmaller customers who today represent about4 percent of Grainger’s sales in the United States.

To better serve smaller andless complex customers in theUnited States, Grainger launchedZoro Tools as a stand-alone, singlechannel online model in 2011.


n addition to the large, mature economies ofNorth America and Europe, Grainger operates

in several smaller emerging markets. Thecompany sees potential to apply its supply chainknowledge and infrastructure to offer customersproducts to meet specific, local MRO needs. Thecompany determines how to create competitiveadvantage and profitability in each specific market.

Brazil represents $19 billion in MRO potentialand has market characteristics that make itappealing to Grainger. These include ongoinginfrastructure investments and a strong naturalresource base. Many Grainger customers fromNorth America operate in Brazil and understandthe value of partnering with Grainger. Sinceentering the market in 2012, Grainger hasfocused on growing its customer base andbuilding the capabilities, infrastructure and scalerequired for success long-term. In 2013, Graingerrecorded an impairment to goodwill related tothe business in Brazil, as a result of loweredperformance expectations.

In China, Grainger is refocusing operations tomeet the local needs for efficiency and qualityproducts at reasonable prices. The company isaggressively testing different models to servecustomers, including a small outside sales forceaimed at serving large multinational companiesfamiliar with Grainger, an inside sales forceserving medium-sized and large customersand an online model focused on small andmedium-sized customers. In all three approaches,the business is leveraging the expertise ofGrainger’s operations globally.

I

In China, Grainger utilizesdifferent business models toserve customers.

E M E R G I N G M A R K E T S

EXPORT

Exporting allows Grainger to serve customerswith needs in parts of the world where thecompany does not have a physical presence.Today, Grainger ships to 166 countriesglobally, leveraging resellers to provide localservice and support.

Grainger is deepening its export capabilitiesin regions of the world where naturalresources make up a material portion ofthat country’s GDP, where the majority ofMRO products are imported and wherethere is a demand for available and reliableproducts. Priority markets include SaudiArabia, Indonesia and Chile.

CORPORATE SOCIAL RESPONSIBIL ITY


C O R P O R A T E S O C I A L R E S P O N S I B I L I T Y O P E R A T I N G R E S P O N S I B L Y

perating with the highest levels of ethics andintegrity is the foundation of how Grainger

does business. Through regular review of itsgovernance practices and ongoing dialogue withteam members, suppliers and stakeholders, thecompany works to help ensure high operatingstandards across the business.

Grainger’s corporate governance and operatingprinciples are evaluated on a regular basis bythe Board of Directors. In addition, all Graingerteam members must certify their personalcommitment to the company’s BusinessConduct Guidelines each year.

Ethical sourcing

Grainger distributes products from thousandsof suppliers around the world. To ensure theseproducts are manufactured and delivered withhigh ethical standards, the company recentlyestablished a Supplier Code of Ethics focusedon four areas of ethical sourcing – human rights,labor, the environment and anti-corruption.Starting in 2014, all U.S. and Grainger GlobalSourcing suppliers will be expected to complywith the Supplier Code of Ethics.

As a responsible company, Grainger supportsthe goal of preventing armed groups in theDemocratic Republic of the Congo (DRC) andadjoining countries from benefiting from thesourcing of conflict minerals. Grainger reservesthe right to cease sourcing from a supplier if thecompany determines the product is not DRC-conflict free and the supplier fails to implementreasonable steps to transition to DRC-conflictfree sources.

O

Grainger’s Corporate Social Responsibility (CSR) Report highlights the company’sCSR commitments and progress. To learn more, visit www.graingercsr.com.

Grainger’s commitment to diversity extends toits supply chain partners. In the United States,Grainger works with more than 130 minority-,women- and veteran-owned suppliers. Thecompany is also a founding member of theDiverse Manufacturing Supply Chain Allianceand is an active member of the Women’s BusinessEnterprise National Council, the National MinoritySupplier Development Council and the CanadianCouncil for Aboriginal Business.

SUPPLIER DIVERSITY

More than20,000 products

More than$100 million inannual sales

130 businesses ownedby minorities, women

and veterans

Environmentally preferable products

Grainger offers customers thousands ofenvironmentally preferable products tohelp decrease energy use, conserve water,reduce waste and improve air quality.A special icon makes it easy for customersto find more than 30,000 of these productsto support the maintenance and operationof sustainable facilities in the United Statesand Canada.

The company discloses its sustainablepractices through participation in theCarbon Disclosure Project and throughits Corporate Social Responsibility report,available at graingercsr.com.


C O R P O R A T E S O C I A L R E S P O N S I B I L I T Y G R A I N G E R P E O P L E

hen people see themselves as part ofsomething bigger than their job alone,

they are inspired and motivated to do their best.Grainger’s team members know they make adifference every day as they help customers keeptheir facilities up and running. In turn, Graingerwants to make sure team members thrive in arewarding and inclusive workplace.

A focus on team members is at the root ofGrainger’s success. The company offerscompetitive pay, benefits and growthopportunities coupled with an environment ofteamwork, fairness and respect. As the companygrows, team members have informal and formalavenues to develop their talents, including:

BUSINESS RESOURCE GROUPS

More than 3,000 team members in the UnitedStates participate in Business Resource Groups(BRGs). These are grass-roots organizations withthe mission of supporting team member andbusiness growth. In 2013, Grainger introducedtwo new groups: the Equality Alliance BRG andthe Veterans & Military Supporters BRG.

TALENT ATTRACTION AND DEVELOPMENT

Grainger is committed to hiring people who havea passion for service, collaboration and integrity.The company’s Talent Magnet program rewardsteam members for referring talented people whowould be a good fit, and nearly one quarter of allnew hires in the United States were internal

WGrainger teams have been involvedin dragon boat racing since 2007,and the support of Grainger’s AsianPacific Islander BRG has created aculture of collaboration betweenteams in Canada, California, Illinoisand South Carolina.

referrals. In 2013, Grainger also started threedevelopment programs: Grainger EmergingLeader, Inclusive Leader and the FinanceLeadership Development Program, joining theFirst Time Manager Program.

Safety

Focusing on team members means puttingsafety first, and Grainger takes a comprehensiveapproach to maintaining a safe workingenvironment. This is particularly importantat its branches and distribution centers, whereequipment and team members are constantlyin motion. From daily stretching exercises andinspection of protective gear to specialized jobtraining, team members are actively engaged inensuring safety.

In 2013, Grainger launched the SafetyAround the World initiative to increase thecompany’s ability to consistently communicateand manage environmental, health and safetyprinciples. This effort includes the launch of aweb-enabled management system that willunify global implementation of the InternationalOrganization for Standardization 14001 andOccupational Health and Safety AssessmentSeries 18001 requirements. In early 2014,Grainger branches and distribution centersachieved 100 percent adoption of the system inthe United States, and the company will continueto deploy the system in additional geographies.

Grainger sponsorseight Business ResourceGroups (BRGs):

• Administrative BusinessPartner

• African American

• Asian Pacific Islander

• Equality Alliance

• Generational

• Latino

• Veterans & MilitarySupporters

• Women’s


C O R P O R A T E S O C I A L R E S P O N S I B I L I T Y C O M M U N I T Y

rainger’s commitment to service extendsfrom its operations and facilities into the

local communities where Grainger teammemberslive and work. In 2013, Grainger donated morethan $22 million in cash and product to charitableorganizations around the world.

Disaster preparedness and response

Grainger’s supply chain expertise and strongculture of service make it a natural leader indisaster preparedness and response. From thefloods in Alberta, Canada, to Typhoon Haiyan inthe Philippines, Grainger businesses and teammembers donated time and resources to preparefor and respond to disasters in 2013.

Grainger has donated more than $14 million incash and product to the American Red Cross since2001. In 2013, Grainger sponsored the launchof Volunteer Connection, an online volunteermanagement system used by the Red Cross torecruit and engage its 500,000 volunteers.

Skilled trades

Grainger is investing in the skilled tradesworkforce through the Grainger Tools forTomorrow® scholarship program. Started in2006, the program has grown to offer 200scholarships annually to community collegestudents across the United States, half of whichare earmarked for military veterans. Graingeralso partnered with the Aspen Institute in2013 to develop the Skilled Trades Playbook,a how-to guide for building workforcepartnerships between schools and employers.

Matching gifts

Grainger teammembers in the United Statesextend the culture of caring into the localcommunity through participation in the

G Grainger team members makea difference in times of disaster.The Canadian Red Cross namedAcklands–Grainger the recipient ofits 2013 Partners in Humanity Awardfor its leadership of the Ready Whenthe Time Comes® volunteer program.

GLOBAL REACH: LOCAL GIVING

CANADA Acklands–Graingerraised more than $400,000 for theUnited Way in 2013. In addition,Acklands–Grainger also supportsChildren’s Wish Foundation ofCanada, Easter Seals andWIN House.

MEXICO Team members fromGrainger Mexico raised money forthe annual Centro de RehabilitaciónInfantil Teletón campaign to supportchildren with cancer and autism.

EUROPE Fabory team membersmade a €5,000 donation to theRonald McDonald House Charities.The business also teaches fastenertechnology at Delft University in theNetherlands and expanded its fastenereducation program to the University ofCoimbra in Portugal in 2013.

company’s Charitable Matching Gifts Program,where the company matches team membercontributions up to three-to-one. In 2013,Grainger donated $2.9 million in matchinggifts to nearly 2,000 charitable organizations.In Canada, team members participate inthe United Way’s annual Days of Caring.Acklands–Grainger matched $167,000 of teammember donations to the United Way in 2013.

Grainger Community Grant Program

To help address local needs in the United States, thecompany proudly assists The Grainger Foundationthrough the Grainger Community Grant Program.The Grainger Foundation is an independent,private foundation established in 1949 by thecompany’s founder, William Wallace Grainger.

Under the Grainger Community Grant Program,Grainger market managers identify charitableorganizations in their local communities andmake recommendations for gifts rangingfrom $1,000 to $10,000. As a result of theserecommendations, The Grainger Foundationmade 900 grants totaling $6.1 million to avariety of health and human services, civicand educational organizations in 2013.

Volunteer Connection is usedby the Red Cross to recruit andengage its 500,000 volunteers.


C O R P O R A T E S O C I A L R E S P O N S I B I L I T Y S U S T A I N A B I L I T Y

rainger applies a continuous improvementmindset to its sustainability efforts –

consistently identifying and implementingopportunities across the business to reduceenergy use, minimize waste and increaserecycling. In 2013, the company continuedto focus efforts on its largest facilities whilefinding innovative ways to use resources.

LEED buildings

In 2008, Grainger became the first industrialdistributor to have Leadership in Energy andEnvironmental Design (LEED) certified facilities.Today, the company operates 16 LEED certifiedbuildings in the United States, Canada andMexico. In 2013, as Grainger began work on itsnew data center in Lake Forest, Ill., the companypartnered with the U.S. Green Building Councilto develop a new LEED certification specificallyfor data centers. The building’s innovative newcooling system is expected to use 50 percent lessenergy than similar data centers.

GGrainger installed a one-megawattsolar panel system at its SanFrancisco Distribution Center in2013 and now has four megawattsof solar capacity.

LEED Certified Square Footage in North AmericaPercent of company total

7 8 12 15 16

2009 2010 2011 2012 2013

Emissions disclosures

Grainger was the first industrial distributor topublicly disclose its greenhouse gas emissionsthrough the Carbon Disclosure Project (CDP)in 2012. In 2013, Grainger expanded the scope ofits disclosure to include its operations in Canadaand Mexico, in addition to the United States. In2013, Grainger’s CDP disclosure score improvedfrom 73 to 93, and the company’s performancescore improved from C to B.

Energy usage

Energy use is a key component of Grainger’ssustainability strategy. In 2013, Grainger continuedto invest in energy-saving projects, such as lightingretrofits, and supported renewable energy use byadding a one-megawatt solar panel system at theSan Francisco Distribution Center. The companyalso equipped additional distribution centerswith state-of-the-art building managementsystems to reduce energy consumption in eachfacility by 10 to 15 percent and plans moreretrofit projects.

Waste reduction

Grainger’s distribution centers prioritize wastereduction initiatives. The company also workedto standardize processes in order to improverecycling rates across distribution centers inthe United States, resulting in a 5.1 percentimprovement versus the prior year. In 2013,more than 6,200 tons of cardboard, plasticwrap and metal were recycled by the company’sU.S. distribution centers.


For the Years Ended December 31,

(In thousands of dollars, except per share amounts) 2013 2012 2011

Net sales $9,437,758 $8,950,045 $8,078,185

Cost of merchandise sold 5,301,275 5,033,885 4,567,393

Gross profit 4,136,483 3,916,160 3,510,792

Warehousing, marketing and administrative expenses 2,839,629 2,785,035 2,458,363

Operating earnings 1,296,854 1,131,125 1,052,429

Other income and (expense):Interest income 3,234 2,660 2,068

Interest expense (13,225) (16,078) (9,091)

Equity in net income of unconsolidated entity — — 314

Gain on sale of investment in unconsolidated entity — — 7,639

Other non-operating income 2,732 1,866 709

Other non-operating expense (1,996) (1,784) (2,541)

Total other income and (expense) (9,255) (13,336) (902)

Earnings before income taxes 1,287,599 1,117,789 1,051,527

Income taxes 479,850 418,940 385,115

Net earnings 807,749 698,849 666,412

Less: Net earnings attributable to noncontrolling interest 10,713 8,968 7,989

Net earnings attributable to W.W. Grainger, Inc. $ 797,036 $ 689,881 $ 658,423

Earnings per share:Basic $ 11.31 $ 9.71 $ 9.26

Diluted $ 11.13 $ 9.52 $ 9.07

Weighted average number of shares outstanding:Basic 69,455,507 69,811,881 69,690,854

Diluted 70,576,432 71,181,733 71,176,158

Diluted Earnings Per Share:Net earnings as reported $ 797,036 $ 689,881 $ 658,423

Earnings allocated to participating securities (11,522) (12,181) (12,654)

Net earnings available to common shareholders $ 785,514 $ 677,700 $ 645,769

Weighted average shares adjusted for dilutive securities 70,576,432 71,181,733 71,176,158

Diluted earnings per share $ 11.13 $ 9.52 $ 9.07

Segment Information

(In thousands of dollars) 2013 2012 2011

SalesUnited States $7,413,712 $6,925,842 $6,501,343

Canada 1,114,285 1,105,782 992,823

Other Businesses 1,040,473 1,006,762 647,666

Intersegment sales (130,712) (88,341) (63,647)

Net sales to external customers $9,437,758 $8,950,045 $8,078,185

Operating earningsUnited States $1,304,175 $1,132,722 $1,066,324

Canada 128,768 127,412 107,582

Other Businesses 7,599 20,289 30,984

Unallocated expenses (143,688) (149,298) (152,461)

Operating earnings $1,296,854 $1,131,125 $1,052,429

C O N S O L I D A T E D S T A T E M E N T S O F E A R N I N G S


C O N S O L I D A T E D B A L A N C E S H E E T S

As of December 31,

(In thousands of dollars) 2013 2012

AssetsCurrent AssetsCash and cash equivalents $ 430,644 $ 452,063

Accounts receivable (less allowances for doubtful accounts of$20,096 and $19,449, respectively) 1,101,656 940,020

Inventories — net 1,305,520 1,301,935

Prepaid expenses and other assets 115,331 110,414

Deferred income taxes 75,819 55,967

Prepaid income taxes 15,315 40,241

Total current assets 3,044,285 2,900,640

Property, Buildings and EquipmentLand 277,256 265,224

Buildings, structures and improvements 1,259,237 1,224,044

Furniture, fixtures, machinery and equipment 1,404,597 1,271,166

2,941,090 2,760,434

Less: Accumulated depreciation and amortization 1,732,528 1,615,861

Property, buildings and equipment – net 1,208,562 1,144,573

Deferred income taxes 16,209 51,536

Goodwill 525,467 543,670

Other assets and intangibles – net 471,805 374,179

Total Assets $5,266,328 $5,014,598

Liabilities and Shareholders’ EquityCurrent LiabilitiesShort-term debt $ 66,857 $ 79,071

Current maturities of long-term debt 30,429 18,525

Trade accounts payable 510,634 428,782

Accrued compensation and benefits 185,905 165,450

Accrued contributions to employees’ profit sharing plans 176,800 170,434

Accrued expenses 218,835 204,800

Income taxes payable 6,330 12,941

Total current liabilities 1,195,790 1,080,003

Long-term debt (less current maturities) 445,513 467,048

Deferred income taxes and tax uncertainties 113,585 119,280

Employment-related and other noncurrent liabilities 184,604 230,901

Shareholders’ equityCumulative 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 54,830 54,830

Additional contributed capital 893,055 812,573

Retained earnings 5,822,612 5,278,577

Accumulated other comprehensive earnings 28,914 53,578

Treasury stock, at cost – 40,805,281 and 40,180,724 shares, respectively (3,548,973) (3,175,646)

Total W.W. Grainger, Inc. shareholders’ equity 3,250,438 3,023,912

Noncontrolling interest 76,398 93,454

Total shareholders’ equity 3,326,836 3,117,366

Total Liabilities and Shareholders’ Equity $5,266,328 $5,014,598


C O N S O L I D A T E D S T A T E M E N T S O F C A S H F L O W S

For the Years Ended December 31,

(In thousands of dollars) 2013 2012 2011

Cash flows from operating activities:Net earnings $ 807,749 $ 698,849 $ 666,412

Provision for losses on accounts receivable 8,855 9,504 4,761

Deferred income taxes and tax uncertainties (9,319) 12,343 1,666

Depreciation and amortization 180,613 159,049 149,200

Impairment of goodwill and other intangible assets 26,284 4,945 —

(Gains) losses from sales of assets (22,155) 2,609 8,069

Stock-based compensation 55,590 55,500 54,020

Gain on sale of investment in unconsolidated entity — — (7,639)

Change in operating assets and liabilities – net of business acquisitionsand divestitures:Accounts receivable (126,465) (45,953) (85,083)

Inventories (23,636) (14,872) (219,680)

Prepaid expenses and other assets 16,873 8,346 (24,228)

Trade accounts payable 71,118 (54,314) 86,395

Other current liabilities (707) (58,673) 50,718

Current income taxes payable (4,813) (9,349) 16,827

Accrued employment-related benefits costs 9,872 45,795 45,680

Other – net (3,361) 2,416 (1,010)

Net cash provided by operating activities 986,498 816,195 746,108

Cash flows from investing activities:Additions to property, buildings and equipment (272,145) (249,860) (196,942)

Proceeds from sales of property, buildings and equipment 26,701 8,530 7,278

Cash paid for business acquisitions, net of cash acquired (153,915) (64,808) (359,296)

Other – net (68) 482 13,892

Net cash used in investing activities (399,427) (305,656) (535,068)

Cash flows from financing activities:Borrowings under lines of credit 144,805 161,160 218,885

Payments against lines of credit (154,450) (205,006) (194,325)

Proceeds from issuance of long-term debt — 300,000 172,464

Payments of long-term debt and commercial paper (16,681) (219,950) (179,296)

Proceeds from stock options exercised 69,412 72,084 84,337

Excess tax benefits from stock-based compensation 59,984 57,885 52,098

Purchase of treasury stock (438,473) (340,532) (151,082)

Cash dividends paid (255,466) (220,077) (180,527)

Net cash used in financing activities (590,869) (394,436) (177,446)

Exchange rate effect on cash and cash equivalents (17,621) 469 (11,557)

Net change in cash and cash equivalents (21,419) 116,572 22,037

Cash and cash equivalents at beginning of year 452,063 335,491 313,454

Cash and cash equivalents at end of year $ 430,644 $ 452,063 $ 335,491

Supplemental cash flow information:Cash payments for interest (net of amounts capitalized) $ 12,954 $ 16,028 $ 8,996

Cash payments for income taxes 414,363 383,698 312,616


H I S T O R I C A L F I N A N C I A L S U M M A R Y

2013 2012 2011

Financial Net sales $9,437,758 $8,950,045 $8,078,185

Summary ($000) Earnings before income taxes 1,287,599 1,117,789 1,051,527

Income taxes 479,850 418,940 385,115

Net earnings attributable to W.W. Grainger, Inc. 797,036 689,881 658,423

Working capital 1,621,103 1,603,748 1,438,375

Additions to property, buildings and equipment andcapitalized software 272,145 249,860 196,942

Depreciation and amortization 164,902 145,612 137,211

Current assets 3,044,285 2,900,640 2,694,900

Total assets 5,266,328 5,014,598 4,716,062

Shareholders’ equity 3,326,836 3,117,366 2,724,279

Cash dividends paid 255,466 220,077 180,527

Long-term debt (less current maturities) 445,513 467,048 175,055

Per Share ($) Earnings – basic 11.31 9.71 9.26

Earnings – diluted 11.13 9.52 9.07

Cash dividends paid 3.59 3.06 2.52

Book value 48.32 44.87 38.94

Year-end stock price 255.42 202.37 187.19

Ratios Percent of return on average shareholders’ equity 24.7 23.6 26.3

Percent of return on average total capitalization 21.4 20.5 22.2

Earnings before income taxes as a percent of net sales 13.6 12.5 13.0

Earnings as a percent of net sales 8.4 7.7 8.1

Cash dividends paid as a percent of net earnings 32.1 31.9 27.4

Total debt as a percent of total capitalization 14.0 15.3 15.9

Current assets as a percent of total assets 57.8 57.8 57.1

Current assets to current liabilities 2.5 2.7 1.9

Average inventory turnover – FIFO 3.0 2.8 3.0

Average inventory turnover – LIFO 4.1 3.9 4.0

Other Data Average number of shares outstanding – basic 69,455,507 69,811,881 69,690,854

Average number of shares outstanding – diluted 70,576,432 71,181,733 71,176,158

Number of employees 23,741 22,413 21,446

Number of outside sales representatives 4,479 4,157 4,029

Number of branches 709 715 711

Number of products in the Grainger® catalog issued February 1 570,000 410,000 354,000

Note: See the company’s current and prior years’ Form 10-K for changes in accounting and other adjustments.


2010 2009 2008 2007 2006 2005 2004 2003

$7,182,158 $6,221,991 $6,850,032 $6,418,014 $5,883,654 $5,526,636 $5,049,785 $4,667,014

853,778 707,337 773,218 681,861 603,023 532,674 445,139 381,090

340,196 276,565 297,863 261,741 219,624 186,350 158,216 154,119

510,865 430,466 475,355 420,120 383,399 346,324 286,923 226,971

1,162,318 1,026,690 1,064,094 1,021,663 852,472 1,290,188 1,108,384 926,773

127,124 142,414 194,975 197,423 136,764 157,247 160,758 80,486

137,793 140,974 135,137 127,882 114,884 105,671 96,305 88,629

2,238,071 2,131,515 2,144,109 1,800,817 1,862,086 1,985,539 1,744,416 1,633,413

3,904,377 3,726,332 3,515,417 3,094,028 3,046,088 3,107,921 2,809,573 2,624,678

2,287,670 2,227,199 2,033,805 2,098,108 2,177,615 2,288,976 2,067,970 1,845,135

152,338 134,684 121,504 113,093 97,896 82,663 71,243 67,281

420,446 437,500 488,228 4,895 4,895 4,895 — 4,895

7.05 5.70 6.07 5.01 4.36 3.87 3.18 2.50

6.93 5.62 5.97 4.91 4.24 3.78 3.13 2.46

2.08 1.78 1.55 1.34 1.11 0.92 0.79 0.74

32.97 30.81 27.20 26.40 25.90 25.51 22.83 20.27

138.11 96.83 78.84 87.52 69.94 71.10 66.62 47.39

22.6 20.2 23.0 19.7 17.2 15.9 14.7 12.9

18.7 16.4 20.3 19.2 17.2 15.9 14.2 12.3

11.9 11.4 11.3 10.6 10.2 9.6 8.8 8.2

7.1 6.9 6.9 6.6 6.5 6.3 5.7 4.9

29.8 31.3 25.6 26.9 25.5 23.9 24.8 29.6

17.8 19.1 20.7 5.0 0.4 0.4 0.5 7.5

57.3 57.2 61.0 58.2 61.1 63.9 62.1 62.2

2.6 2.7 2.8 2.2 2.6 2.9 2.7 2.3

3.1 2.7 2.9 3.1 3.1 3.2 3.3 2.9

4.4 3.8 4.1 4.3 4.4 4.5 4.6 4.4

70,836,945 73,786,346 76,579,856 82,403,958 87,838,723 89,568,746 90,206,773 90,731,013

72,138,858 74,891,852 77,887,620 84,173,381 90,523,774 91,588,295 91,673,375 92,394,085

18,596 18,006 18,334 18,036 17,074 16,732 15,523 14,701

3,079 2,845 2,433 2,386 1,805 2,507 2,154 1,741

607 612 617 610 593 589 582 575

307,000 233,000 183,000 139,000 115,000 82,400 82,300 88,400

NOTE ON ROICPrior to January 2011, ROIC was calculated using annual operating earnings divided by a 13-point (monthly) average for net working assets. Since 2011,ROIC has been calculated using a 5-point (quarterly) average for net working assets to provide greater transparency. Net working assets are working assetsminus working liabilities defined as follows: working assets equal total assets less cash equivalents (non-operating cash), deferred taxes and investments inunconsolidated entities, plus the LIFO reserve. Working liabilities are the sum of trade payables, accrued compensation and benefits, accrued contributions toemployees’ profit sharing plans and accrued expenses.

H I S T O R I C A L F I N A N C I A L S U M M A R Y


E X E C U T I V E A N D O P E R A T I N G M A N A G E M E N T

James T. RyanChairman, President and Chief ExecutiveOfficer

Mr. Ryan was named Chairman in April 2009, and President andChief Executive Officer in June 2008. He has been President ofGrainger since 2006 and was named Chief Operating Officerand appointed to the Board of Directors in February 2007.

Mr. Ryan has held a number of other key roles since joiningGrainger 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 andIndustry and DePaul University, and is a Business Advisory Council member for theFarmer School of Business at Miami University, Oxford, Ohio. He is also a member ofthe Civic Committee of the Commercial Club of Chicago, the Economic Club of Chicagoand the Business Roundtable.

Michael S. AliSenior Vice President and Chief Information Officer

Dr. Ali joined Grainger in July 2013 as Senior Vice President andChief Information Officer. He is responsible for the IT systemsthat enable Grainger’s long-term profitable growth.

Prior to Grainger, Dr. Ali was Senior Vice President ApplicationServices and PMO at U.S. Foods. Previous to that he was CIO atHarman, and before that the CIO at U.K.-based Jaguar Land

Rover. He has also held engineering and management roles in Ford Motor Company,GE, Rensselaer, NASA, and the National Institute of Standards and Technology.

Laura D. BrownSenior Vice President, Communications and Investor Relations

Ms. Brown was named Senior Vice President, Communicationsand Investor Relations in July 2010. She is responsible forGrainger’s internal and external communications, public affairsand investor relations.

Ms. Brown most recently served as Vice President, GlobalBusiness Communications. Since joining the company in 2000,

she has held roles of increasing responsibility in the finance, marketing, and investorrelations organizations. Prior to joining Grainger, Ms. Brown was a vice president atBaxter International and Alliant Food Service.

Ms. Brown is a 2012 Fellow of the Leadership Greater Chicago program. Ms. Browncurrently serves on the Illinois Board of Make-A-Wish, and is chair of the finance committee.

Court D. CarruthersSenior Vice President; Group President, Americas

Mr. Carruthers was named Senior Vice President and GroupPresident, Americas, in August 2013. He is primarily responsiblefor the company’s business operations in Canada, the U.S.,Mexico and Latin America. Previously, Mr. Carruthers held seniorleadership positions as Senior Vice President and President,Grainger U.S., overseeing the company’s business operationsacross the United States, and Senior Vice President and

President, Grainger International, overseeing the company’s operations in Canada,Europe, Asia and Latin America.

Mr. Carruthers joined the company in 2002, serving in sales and branch leadership rolesin Canada before being promoted to President, Acklands–Grainger Inc. in 2006. Priorto joining Grainger, Mr. Carruthers held a number of sales leadership and businessdevelopment roles in the transportation industry.

Mr. Carruthers currently serves as a Director of the Northern Illinois Food Bank and amember of the University of Alberta Business Advisory Council.

Joseph C. HighSenior Vice President and Chief People Officer

Mr. High joined Grainger as Senior Vice President and ChiefPeople Officer in June 2011. He is responsible for aligningbusiness strategies with people initiatives to build high-performing leaders and teams to drive company success.

Before joining Grainger, Mr. High was the Senior Vice Presidentof Human Resources at Owens Corning in Toledo, Ohio. Prior to

that role, he was head of Human Resources for ConocoPhillips in Houston. Mr. High alsoserved as an Officer 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, and was a Trustee of the University of Toledo. He iscurrently a member of the Board of Visitors for the UNC Kenan-Flager School of Businessand the Executive Leadership Council, a premier leadership organization comprised ofsenior African-American corporate executives from Fortune 500 companies dedicated toinclusion and development of young leaders.

John L. HowardSenior Vice President and General Counsel

Mr. Howard joined Grainger and was named Senior Vice Presidentand General Counsel in January 2000. His responsibilities includesupporting all of the company’s legal functions, businessdevelopment and administrative services.

Before joining Grainger, Mr. Howard served as Vice Presidentand General Counsel for Tenneco Automotive, a subsidiary of

Tenneco, Inc. Prior assignments included Vice President, Law at Tenneco. From 1990 to1993, Mr. Howard served in TheWhite House as counsel to the Vice President of theUnited States. From 1984 to 1990, he held a variety of legal positions within the federalgovernment, including Associate Deputy Attorney General in the U.S. Department of Justice.

Mr. Howard served a five-year term asChairman, Special Panel on Appeals. He also served atwo-year term on the Federal ReserveBank of Chicago’s SeventhDistrict Advisory Council.He currently serves on the board of directors of theChicagoBotanic Garden and as a trusteeof the RushUniversityMedical Center.

Ronald L. JadinSenior Vice President and Chief Financial Officer

Mr. Jadin was named Senior Vice President and Chief FinancialOfficer for Grainger in March 2008. His responsibilities includefinancial planning and analysis, financial reporting, internal audit,treasury operations and financial services.

Mr. Jadin had served as Vice President and Controller sinceNovember 2006. Prior to that, he was Vice President, Finance,

for Grainger Industrial Supply, as well as Director of Financial Planning and Analysis forthe company.

Prior to joining Grainger in 1998, he spent 15 years serving in financial analysis andmanagement capacities within General Electric.

Mr. Jadin volunteers at Habitat for Humanity and his church.

DG MacphersonSenior Vice President and Group President, Global Supply Chainand International

Mr. Macpherson was named Senior Vice President and GroupPresident, Global Supply Chain and International, in September2013. He is responsible for corporate strategy and continuousimprovement, the global supply chain organization, the company’ssingle channel online businessmodel and international operations

in Asia, Europe and Brazil.

Prior to this roleMr. Macpherson was Senior Vice President and President, Global SupplyChain and Corporate Strategy.

Mr. Macpherson joined Grainger in 2008 from the Boston Consulting Group (BCG), where hewas Partner andManaging Director since 2002.

Mr. Macpherson is amember of the board of directors for the American Red Cross ofGreater Chicago.


EXECUTIVE COMPENSATION

The Company does not have employment agreements. . . . . . . . . . . . . . . . . . . . . Yes

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

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

CEO salary is no more than 2½ times salary of next highest paidnamed executive officer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes

EQUITY COMPENSATION

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

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

Stock options are always awarded at an exercise price equal to theclosing price of the Company’s common stock reported for thebusiness day before the grant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes

The Company has not misdated or backdated stock optionsresulting in a restatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes

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

Dividends are not available on performance shares . . . . . . . . . . . . . . . . . . . . . . . . . Yes

The Company, in coordination with a proxy advisory firm, commitsto an appropriate burn rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes

PAY FOR PERFORMANCE

Compensation Element Link to Performance

Base Salary Base salary increases are linked toindividual performance.

Annual Cash Incentives Annual cash incentives are linked toachieving predetermined Company objectives.

Long-Term Incentives • Stock options are granted based onindividual performance and linked to stockprice performance for ten years.

• Performance shares are granted basedon achieving specific, predeterminedCompany objectives over the three-yearperformance period.

Benefits The profit sharing plan encouragesfinancial performance that drives increasedshareholder value.

Ownership Guidelines Officers are subject to ownership guidelines:• CEO at least 6X salary• Other senior officers at least 3X salary

Risk Mitigation The Company’s incentive programs incorporatea balance of risk mitigation components.

Compensation Practices

E X E C U T I V E A N D O P E R A T I N G M A N A G E M E N T

Paul C. MillerVice President, Global eCommerce Customer Informationand Innovation

Mr. Miller joined Grainger in November 2010 as Vice President,eCommerce, with responsibility for ensuring a superior onlineand mobile experience for Grainger’s U.S. customers. Given thedigital opportunity worldwide, Mr. Miller recently assumed globaloversight of the company’s multichannel digital solutions, aswell as corporate innovation. In 2012, leadership of customer

information strategy and execution, including the quality, maintenance and analytics ofcustomer data, was added to his responsibilities.

Mr. Miller has an extensive leadership background in eCommerce and Direct Marketing.Prior to joining Grainger, he led a start-up division of a venture-backed company that servicesproperty insurance carriers. Previously, Mr. Miller was Senior Vice President, Direct Commercefor Sears Holding Corporation and Vice President of eCommerce for Williams-Sonoma Inc.,leading Internet and catalog activities. Additionally, he has held leadership positions withinKraft and Clorox in Canada.

Debra S. OlerVice President and General Manager, Grainger Brand

Ms. Oler assumed the role of Vice President and General Manager,Grainger Brand in May 2011. She is responsible for acceleratinggrowth through the development, deployment and execution of thecompany’s go-to-market strategies in the United States. Thisincludes determining Grainger’s customer segmentation model,pricing strategies, and customer coverage plan, as well as designingGrainger’s service and solutions portfolio.

Ms. Oler has held several roles with increasing responsibility over the years, includingVice President, Grainger Industrial Supply Brand; Vice President, Sales, for GraingerIndustrial Supply; and Vice President, Sales Effectiveness, where she was chargedwith improving sales force productivity and effectiveness. She joined Grainger inMay 2002 as Regional Sales Vice President.

Prior to joining Grainger, Ms. Oler held positions of increasing responsibility at Kraft andAlliant Foodservice, with a focus on leading sales teams and fostering sales development.A member of the Marketing Executive Council and the Sales Executive Council, she alsois a member of the Sales Executive Council Guru team. In addition, she serves on theBoard of the UMass Pancreatic Cancer Foundation.

Paige RobbinsVice President, Americas Supply Chain

Ms. Robbins is Grainger’s Vice President, Americas Supply Chain.She has responsibility for managing the company’s distributioncenter operations, inventory, suppliers’ performance andtransportation as well as the overall design of the supply chainnetwork for the Americas. Ms. Robbins joined Grainger inNovember 2010 as Vice President of Logistics Management.

Prior to this role, Ms. Robbins served as Partner and Managing Director at the BostonConsulting Group, where she specialized in developing supply chain strategies for industrialclients as well as growth, profit improvement and merger and acquisition strategies.

Kinya SetoSenior Vice President, Online Business

Mr. Seto was named Senior Vice President, Online Business inSeptember 2013. He is responsible for developing Grainger’ssingle channel online business model globally.

Mr. Seto joined the company in April 2012 and served asRegional Vice President, Asia Pacific and Executive Chairman,MonotaRO. In this role, he was responsible for Grainger’s

operations in Oceania and Asia including MonotaRO in Japan, in which Grainger has amajority ownership.

Prior to joining Grainger, Mr. Seto was President and Chief Executive Officer of MonotaROin Amagasaki, Japan. Previous to this role he served in leadership roles at SumitomoCorporation in Tokyo, Japan, and Detroit, Mich.; was President of Iron Dynamics ProcessInternational in Chicago, Ill.; and was Sales Vice President of Precision Bar Services, Inc.


B O A R D O F D I R E C T O R S

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

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

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

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

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

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

All Directors elected annually. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Board Compensation Committee has independent compensation consultant . . Yes

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

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

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

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

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

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

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

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

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

Shareholder RightsCompany does not have a shareholder rights plan . . . . . . . . . . . . . . . . . . . . Yes

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

Brian P. AndersonFormer Executive Vice President andChief Financial Officer, OfficeMaxIncorporated, Itasca, Ill.(1, 2, †)

V. Ann HaileyFormer President, Chief Executive Officerand Chief Financial Officer,Famous Yard Sale, Inc., New Albany, Ohio(1, 2)

William K. HallFounding Partner, Procyon Advisors LLP,Skokie, Ill.(1, 2)

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

Note: Effective April 30, 2014.

Neil S. NovichFormer Chairman, President andChief Executive Officer, Ryerson Inc.,Chicago, Ill.(2, 3)

Michael J. RobertsFormer Global President and COO ofMcDonalds Corporation,CEO of LYFE Kitchen, Chicago, Ill.(2, 3)

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

James T. RyanChairman, President andChief Executive Officer

E. Scott SantiPresident and Chief Executive Officer,Illinois Tool Works Inc., Glenview, Ill.(1, 2)

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

(1) Member of Audit Committee

(2) Member of Board Affairs and

Nominating Committee

(3) Member of Compensation Committee

† Lead Director


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

Media Relations ContactJoseph MicucciDirector, Media Relations847.535.0879

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

William D. ChapmanSenior Director, Investor Relations847.535.0881

D. Casey DarbySenior Manager, Investor Relations847.535.0099

Analyst Coverage (As of March 1, 2014)Atlantic Equities — Richard RadbourneBarclays Capital — Scott DavisBB & T Capital Markets — Holden LewisBuckingham Research — Edward WheelerCitibank — Deane DrayCleveland Research Company — Adam UhlmanCredit Suisse — Hamzah MazariDeutsche Bank Securities, Inc. — John InchFBR Capital Markets — Ajay KejriwalGoldman Sachs — Joe RitchieJanney Montgomery Scott LLC — John BaliottiLongbow Research — Eli LustgartenMorningstar — Kwame WebbOppenheimer & Company — Christopher GlynnRaymond James — Sam DarkatshRobert W. Baird — David MantheyStephens, Inc. — Matt DuncanUBS — Winnie ClarkWells Fargo — Allison Poliniak-CusicWilliam Blair & Company, LLC — Ryan MerkelWunderlich Securities, Inc — Brent Rakers

Annual MeetingThe 2014 Annual Meeting of Shareholderswill be held at the company’s headquartersin Lake Forest, Illinois, at 10:00 a.m. CDT onWednesday, April 30, 2014.

Expected Earnings Release DatesFirst Quarter April 16, 2014Second Quarter July17, 2014Third Quarter October 16, 2014Fourth Quarter January 26, 2015

Transfer Agent, Registrar and DividendDisbursing AgentInstructions and inquiries regarding transfers,certificates, changes of title or address, lost ormissing dividend checks, consolidation of accountsand elimination of multiple mailings should bedirected to:Computershare Trust Company, N.A.P.O. Box 43078Providence, RI 02940-3078800.446.2617

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

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

TrademarksACKLANDS–GRAINGER, FOR THE ONESWHO GET IT DONE, GRAINGER, GRAINGER andDesign, GRAINGER FOR THE ONES WHO GETIT DONE and Design, GRAINGER IN CHINESECHARACTERS and Design, GRAINGERShipping Box Design, GRAINGER TOOLS FORTOMORROW, GRAINGER.COM, KEEPSTOCK,LUMAPRO, TOUGH GUY and WESTWARDare the trademarks or service marks ofW.W. Grainger, Inc., which may be registeredin the United States and/or other countries.

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

FABORY is the trademark of Fabory Nederland B.V.,which may be registered in the United States and/orother countries.

MONOTARO, OSAKA SPIRIT and OTOKOMAEare the trademark of MonotaRO Co., Ltd., whichmay be registered in the United States and/orother countries.

SAFETY SOLUTIONS is the trademark of SafetySolutions, Inc., which may be registered in theUnited States and/or other countries.

TECHNI-TOOL is the trademark of Techni-Tool, Inc.,which may be registered in the United States and/orother countries.

ZORO TOOLS and ZORO TOOLS and Designare the trademarks of Zoro Tools, Inc., whichmay be registered in the United States and/orother countries.

All other trademarks and service marks are theproperty of their respective owners.

© 2014 W.W. Grainger, Inc.

Mr. Chapman was named Senior Director,Investor Relations, in April 2012. In this role,he serves as the company’s primary contactwith the investment community. He had servedas Director, Investor Relations since 1999.

Mr. Chapman serves on the advisory board ofthe Chicago Chapter of the National InvestorRelations Institute (NIRI) and is a past presidentand chairman. He is also a member of the NIRINational Senior Roundtable. For the past threeyears, he was recognized by Institutional InvestorMagazine as the top IR professional in the capitalgoods/industrials sector.

Mr. Chapman serves as a director, past presidentand current scholarship chairman of theWisconsin Alumni Association-Chicago Chapterand is a former director of the National WisconsinAlumni Association.

Paper contains 30 percent fiberderived from post-consumer waste.

Recyclable. Please recycle.

The printer and paper utilized for this report have been certified by the ForestStewardship Council (FSC), which promotes environmentally appropriate,socially beneficial and economically viable management of the world’s forests.This report is on paper containing 30 percent post-consumer recycled fiber.

C O M P A N Y I N F O R M A T I O N

Scan this QR code with your smartphone to godirectly to Grainger’s mobile IR website. Get thelatest press releases, presentations, financialsand more information about the company.

FORWARD-LOOKING STATEMENTS

The 2014 Fact Book contains statements that are nothistorical in nature but concern future results and businessplans, strategies and objectives, and other matters that maybe deemed to be “forward-looking statements” under federalsecurities laws. Grainger cannot guarantee that any forward-looking statement will be realized, although Grainger doesbelieve that its assumptions underlying its forward-lookingstatements are reasonable. Achievement of future results issubject to risks and uncertainties which could cause Grainger’sresults to differ materially from those which are presented.

The forward-looking statements should be read inconjunction with the company’s most recent annualreport and Form10-K as well as other reports filed withthe Securities and Exchange Commission containing adiscussion of the company’s business and of the variousfactors that may affect it. Caution should be taken notto place undue reliance on Grainger’s forward-lookingstatements and Grainger undertakes no obligation topublicly update the forward-looking statements, whetheras a result of new information, future events or otherwise.

CONTENTS

This Is How We Win . . . . . . . . . . . . . . . . . . . . . . . . . . . 1Fast Facts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2Strategy: Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4Strategy: Multichannel/Online . . . . . . . . . . . . . . . . . . . . 5Strategy: Shareholder Value . . . . . . . . . . . . . . . . . . . . . 6Growth and Scale: Growth Drivers . . . . . . . . . . . . . . . . . 8Growth and Scale: Scale . . . . . . . . . . . . . . . . . . . . . . . . 10Multichannel: United States . . . . . . . . . . . . . . . . . . . . . . 12Multichannel: Canada . . . . . . . . . . . . . . . . . . . . . . . . . . 14Multichannel: Latin America. . . . . . . . . . . . . . . . . . . . . . 16Multichannel: Europe. . . . . . . . . . . . . . . . . . . . . . . . . . . 17Online: MonotaRO and Zoro Tools . . . . . . . . . . . . . . . . . 18Emerging Markets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20Corporate Social Responsibility: Operating Responsibly . . 21Corporate Social Responsibility: Grainger People . . . . . . 22Corporate Social Responsibility: Community. . . . . . . . . . 23Corporate Social Responsibility: Sustainability . . . . . . . . 24Consolidated Statements of Earnings . . . . . . . . . . . . . . 25Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . 26Consolidated Statements of Cash Flows . . . . . . . . . . . . 27Historical Financial Summary . . . . . . . . . . . . . . . . . . . . . 28Executive and Operating Management . . . . . . . . . . . . . 30Compensation Practices . . . . . . . . . . . . . . . . . . . . . . . . 31Board of Directors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . 32Company Information . . . . . . . . . . . . . . . . . . . . . . . . . . 33

ABOUT THE COMPANY

W.W. Grainger, Inc., with 2013 sales of $9.4 billion, is North America’s

leading broad line supplier of maintenance, repair and operating

products, with operations in Asia, Europe and Latin America.

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 safety gloves, ladders,

cutting tools, 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 and using mobile

devices. More than 4,800 key manufacturers supply Grainger with more

than 1.2 million products that are stocked in Grainger’s branches and

distribution centers or sourced through a network of suppliers.

For more information on Grainger, visit www.grainger.com/investor.

This Is How We Win

2014 FACT BOOK

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

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FactBook

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