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Beyond the Box 2012 FACT BOOK

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Facts and Financials about W.W. Grainger

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Page 1: Grainger Fact Book

Beyond the Box

2012 FACT BOOK

Page 2: Grainger Fact Book

Forward-Looking Statements

The 2012 Fact Book contains statements that are not historical in nature but concern future results and business plans, strategies and objectives, andother matters that may be deemed to be “forward-looking statements” under federal securities laws. Grainger cannot guarantee that any forward-lookingstatement will be realized, although Grainger does believe that its assumptions underlying its forward-looking statements are reasonable. Achievement offuture results is subject to risks and uncertainties which could cause Grainger’s results to differ materially from those which are presented.

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

About the Company

W.W. Grainger, Inc., with 2011sales of $8.1 billion, is North America’s leading broad-line supplier ofmaintenance, repair and operating (MRO) products, with an expanding global presence.

Grainger is a business-to-business distributor of products used to maintain, repair or operate a facility.Millions of customers worldwide rely on Grainger for pumps, motors, hand tools, janitorial supplies and muchmore. These customers represent a broad collection of industries including healthcare, manufacturing,government and hospitality. They place orders for Grainger products at local branches, online, via fax or overthe phone. More than 3,500 manufacturers supply Grainger with approximately one million products thatare either stocked in Grainger’s distribution centers, available online or available through sourcing. Theseindustrial products are shipped either directly to customers or to Grainger branches for local availability.

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

Contents

Beyond the Box . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Fast Facts: Beyond the Numbers . . . . . . . . . . . . . . . . . . . 2

Delivering Shareholder Value Beyond Expectations . . . . 4

Leveraging Scale with the Foundation . . . . . . . . . . . . . . . 6

Investing for Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Gaining Share in the United States . . . . . . . . . . . . . . . . . . 10

Gaining Share in Canada . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Gaining Share in Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Accelerating Growth in Asia . . . . . . . . . . . . . . . . . . . . . . . . 16

Accelerating Growth in Latin America . . . . . . . . . . . . . . . . 18

Going Above and Beyond for Communities . . . . . . . . . . . 20

A Great Company to Work For . . . . . . . . . . . . . . . . . . . . . 23

Building Strong Supplier Relationships . . . . . . . . . . . . . . . 24

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

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

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

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

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

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

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

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

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

Page 3: Grainger Fact Book

W.W. GRAINGER, INC. AND SUBSIDIARIES 1

hen Bill Grainger delivered a motor to his first customer 85 years ago, he knew there was more inside thatbox than just a product; it was a promise. It was his family’s name, reputation and everything they stood for:service, reliability and expertise.

Today, Grainger continues to deliver on that promise, but the world looks considerably different than it did in 1927. Many forces,including globalization, technology and increased competition, are forcing businesses and institutions to think and act differentlyand ultimately, do more with less. In response, Grainger is playing a vital role in helping customers drive out unnecessary cost,reduce inventory and be more sustainable in order to compete in a dynamic world. At the same time, companies like Grainger arebeing held accountable not only for industry-leading customer service, but also for positively influencing local communities andcommitting to high standards of ethics and governance. To compete globally and continue to meet customers’ evolving needs,Grainger has to do more than just ship products; it has to go beyond the box.

But going beyond the box involves more than customers. Grainger’s stewardship extends to a series of key stakeholders by providing:

Beyond the Box

CUSTOMERS WITH:

• The broadest product selection inthe industry

• Multiple channels that make it easierfor them to cost-effectively managetheir maintenance, repair and operating(MRO) supply needs

• Exceptional service in person, overthe phone or online

• A variety of product-related services

• Sustainable solutions, products andservices for their MRO supply needs

W

SUPPLIERS WITH:

• Access to a world-class supply chainand distribution network

• Access to approximately two million activebusinesses and institutions worldwide

TEAM MEMBERS WITH:

• An award-winning culture

• Opportunities to learn and grow

• Exceptional benefits

SHAREHOLDERS WITH:

• Strong, steady financial performance

• Consistent, top-quartile returns

• 40 consecutive years of dividend growth

COMMUNITIES WITH:

• Millions of dollars to local charitablecauses through team member contributionsand a matching gifts program

• More than 1,400 trained volunteersfor disaster relief and emergencypreparedness and response

• Hundreds of scholarships to trade schoolstudents and veterans pursuing careersin the skilled labor force

From Hawaii (pictured here) to Hong Kong,millions of customers rely on Graingerfor their MRO needs.

Page 4: Grainger Fact Book

20% Commercial16% Heavy Manufacturing

15% Government12% Contractor10% Other

9% Light Manufacturing 7% Retail/Wholesale

6% Natural Resources5% Reseller

16% Safety and Security11% Material Handling10% Metalworking9% Cleaning and Maintenance8% Pumps, Plumbing and

Test Equipment8% Hand Tools7% HVAC7% Electrical6% Lighting4% Specialty Brands4% Other3% Power Tools3% Fluid Power2% Motors2% Power Transmission

2011 Salesby Product Line(TOTAL COMPANY)

2 W.W. GRAINGER, INC. AND SUBSIDIARIES

of consecutivedividend increases

shares repurchasedin 2011 (approximately

1 percent of sharesoutstanding)

40 years

1million

Fast Facts:Beyond theNumbers(TOTAL COMPANY, AS OF12/31/11)

2011 Salesby CustomerCategory(TOTAL COMPANY)

branches

teammembers

711

21,446

1,000,000+PRODUCTS AVAILABLE

e-retailer in theU.S. and Canada

15th largest

2011 Awards

• No.1, America’s Most Admired Company, Diversified

Wholesalers — Fortune

• No.100 on the Fortune 100 Best Companies toWork For® list

• No. 2 among large companies on theChicago Tribune’sTop Workplaces list

• Named one of the Best Places to Work in Information

Technology — ComputerWorld

• Platinum Level – Canada’s10 Most Admired Corporate

CulturesTM Award

• Ranked No. 8 in HR Executive Magazine’s Most Admiredfor HR list

distributioncenters

2011 earnings pershare (diluted)

$9.07

in sales in 2011

$8.1billion

total shareholderreturn in 2011

38%

28

Grainger’s performance goes beyond the numbers. It’s anextension of the company’s global brand that is focusedon service and stewardship – to shareholders, customers,team members, communities and suppliers. Take a look.

®

In 2011, Grainger

outperformed the

S&P 500 by

36%and the Dow JonesIndustrial Average

(DJIA) by

30%

Grainger’s common stock

is listed on the New York

and Chicago stock

exchanges under the

trading symbol

GWWGrainger’s Minooka, Ill.,

distribution center is home

to the largest LEED

Commercial Interiors

Platinum facility in the world.

Page 5: Grainger Fact Book

W.W. GRAINGER, INC. AND SUBSIDIARIES 3

Canada

MRO*market size: > $13 billion

Market share: < 8 percent

Next-day delivery:95 percent of customers

Branches: 172

Distribution centers: 6

Website:www.acklandsgrainger.com(English and French)

Customers served in 2011:More than 41,000 businessesand institutions, which primarilyrepresent the mining, oil and gas,forestry, construction, manufacturingand other commercial industries.

United States

MRO*market size: > $114 billion

Market share: < 6 percent

Next-day delivery:98 percent of customers

Branches: 368

Distribution centers: 15

Websites:www.grainger.comwww.imperialinc.comwww.supplylink.comwww.experiencedone.com

Customers served in 2011:Approximately 1.6 million customers,who primarily represent industrial,commercial and governmentmaintenance departments.

Global Trend:GLOBALIZATION

From Tokyo to Toronto, when afactory’s main assembly line shutsdown due to a faulty part, time is ofthe essence. Grainger customerswant fast, effective service regardlessof where they operate. In response,Grainger has invested in LatinAmerica, Asia and now Europe,finding ways to leverage thecompany’s existing supply chain andpurchasing power for the benefit oflocal and multinational customers.Using multiple channels, Grainger’scustomers are able to solve theirunique issues quickly and in thelanguage that is most suitablefor their workforce.

Latin America(Colombia, Costa Rica, DominicanRepublic, Mexico, Panama, PuertoRico,** Trinidad)

MRO*market size: > $35 billion

Market share: < 1 percent

Branches: 33

Distribution centers: 2

Websites:www.grainger.com.cowww.grainger.com.mxwww.grainger.com

Customers served in 2011:More than 45,000 customers,primarily in the hospitality,manufacturing, and oil andgas industries.

**ALTHOUGH PUERTO RICO IS A U.S. TERRITORY,THE COMPANY MANAGES ITS BUSINESS THEREAS A PART OF LATIN AMERICA.

Europe(Belgium, Czech Republic, France,Hungary, The Netherlands, Poland,Portugal, Romania, Slovakia,United Kingdom)

As known as: Fabory Group†

MRO*market size: > $175 billion

Market share: < 1 percent

Branches: 137

Distribution centers: 2

Website:www.fabory.com (Multilingual)

Customers served in 2011:More than 100,000 in themachine building, automotive andmetalworking industries.† ALTHOUGH FABORY GROUP ISHEADQUARTERED IN EUROPE, IT ALSO HASLIMITED OPERATIONS IN NORTH AMERICAAND ASIA.

Asia(China, India, Japan)

Doing business as: Grainger China,Grainger Industrial Supply IndiaPrivate Limited, MonotaRO Co., Ltd.

MRO*market size: > $200 billion

Market share: < 1 percent

Branches: 1

Distribution centers: 3

Regional warehouses: 18

Websites:www.grainger.com.cnwww.graingerindia.comwww.monotaro.com

Customers served in 2011:More than 350,000 customers,primarily in the manufacturing,contractor and automotiveaftermarket industries, themajority in Japan.

*Maintenance, repair and operating supplies

2 MILLIONACTIVE CUSTOMERS

IN 157 COUNTRIES

Global Trend:SUPPLIER CONSOLIDATION

Over the last several years,businesses worldwide have beenforced to cut budgets, reduceoverhead and increase productivity.In order to do more with less, they’verelied on suppliers to help identifyopportunities to take cost out whilegaining efficiency. Grainger’s valueproposition has never been morerelevant. By helping businessesacross the globe examine theirMRO spend, Grainger has assistedmany customers in dramaticallyconsolidating their MRO suppliers,saving them both time and money.

Page 6: Grainger Fact Book

4 W.W. GRAINGER, INC. AND SUBSIDIARIES

Dividends

ShareRepurchases

Capital Expenditures

$6,000

4,000

2,000

Uses of Cash Cash from Operations

Acquisitions

Cash Generation/Deployment (2007–2011)Dollars in millions

67 percentreturned to

shareholders

or Grainger shareholders, growth was a key theme in2011. Not only did shares of GWW reach new all-timehighs several times over the course of twelve months,

the stock outperformed the S&P 500 by 36 percent and theDJIA by 30 percent.

So what is the key to Grainger’s success? Grainger’s relentlessfocus on the customer, coupled with its financial strength, hasenabled the company to invest in growth initiatives such asproduct line expansion, sales force expansion, global supplychain enhancements, eCommerce, MRO-related services andinternational expansion over the last several years. This in turnhelped the company gain market share at a time when the majorityof competitors worldwide were pulling back on growth investments.

LONG-TERM VIEW

Company Initiatives for 2012 and Beyond

• Help customers manage MRO inventory.

• Make it even easier for customers to do business withGrainger, anywhere at any time.

• Add locally relevant products to drive growth.

• Improve customer coverage.

• Improve eCommerce capability to drive rapid growth.

• Expand the capacity of the global logistics network globally.

• Continue to extend Grainger’s reach in targetedinternational markets.

• Leverage Grainger’s systems and scale to better servecustomers and improve cost.

• Continue to foster a culture of continuous improvementacross the business.

Financial Targets (2014–2016)

Organic Sales Growth7–11 percent

Operating Margin15–17 percent

Delivering ShareholderValue Beyond Expectations

Grainger is focused on delivering shareholder value thatgoes above and beyond other industrial distributors.

Per

cent

,Y-O

-Ych

ange

Coincident 1-year recovery

GWW U.S. Organic Sales Growth (Real) U.S. Industrial Production

1 year lagging recession

3 years lagging recovery

Emerging Stronger Than Ever

1995 1999 2003 2007 2011

12

8

4

0

(4)

(8)

(12)

(15)

Grainger’s U.S. performance improved versus U.S. Industrial Production (IP) in themost recent global recession. SOURCE: FEDERALRESERVEBOARD ANDCOMPANY INFORMATION.

Investing in the foundation of the business has led to Grainger’simproved execution and enhanced financial performance. Overthe past four years, Grainger has demonstrated how it is bestpositioned to gain share before, during and after a recession. Incontrast, Grainger’s growth during the 2001 recession was softand lagged the economy as it launched into the recovery phase.However, Grainger’s execution during the 2008–2009 downturnand 2010–2011 recovery enabled the company to return topre-recession performance faster than the overall economy.

F

Grainger’s ability to gain market share, coupled with effectiveproduct cost management below the rate of inflation, growingprivate label brands and leveraging operating expenses, will enableGrainger to continue to deliver top-quartile shareholder returns.

Grainger shareholders have historically seen approximatelytwo-thirds of cash from operations returned to them throughshare repurchase and dividends, while one-third has beenreinvested in the business for future growth. In 2011, thecompany’s management team reiterated their intent to growthe dividend at a faster rate than earnings growth over thenext three to five years.

PERIOD GWW S&P 500 DJIA

1 year 36 percent 0 6 percent

5 years 168 percent -11 percent -2 percent

10 years 290 percent 10 percent 22 percent

GWW performance versus S&P 500 and DJIA

Page 7: Grainger Fact Book

W.W. GRAINGER, INC. AND SUBSIDIARIES 5

Operating MarginPercent

2007 2008 2009 2010 2011

10.5 11.4 10.7 12.0 13.0

Return on Invested CapitalPercent

2007 2008 2009 2010 2011

28.5 29.8 24.9 29.8 31.9

Earnings per Share – DilutedDollars

2007 2008 2009 2010 2011

4.91 5.97 5.62 6.93 9.07

SalesDollars in billions

2007 2008 2009 2010 2011

6.4 6.9 6.2 7.2 8.1

Global Sourcing — External SalesPercent of Total Company Sales

2007 2008 2009 2010 2011

7.3 8.2 8.8 9.4 9.9

Working CapitalDollars in billions

2007 2008 2009 2010 2011

.97 1.38 1.35 1.37 1.31

North America> $140B

Latin America> $35B

Europe> $175B

Middle Eastand Africa> $25B

North Asia> $160B

Worldwide Market> $575B

South Asia> $40B

MRO Market OpportunityDollars in billions (USD)

Generating cash isn’t the only way the company is creatingvalue. Grainger’s global sourcing capability is a perfectexample of how the company is improving its financialperformance through gross margin expansion. Approximately25 percent of sales of products listed in the U.S. catalog arehigher margin private label products. Roughly half of thesesales involve products sourced by Grainger from lower costcountries and carry margins typically 50 percent higher thanthe company’s average gross profit margin.

Grainger’s Global Sourcing (GGS) arm spans approximately300 manufacturers in 24 countries worldwide and is asignificant contributor to gross margin expansion. Customerscontinue to look to Grainger for quality products at a variety ofprice points. The company is aggressively growing its directsourcing business and diversifying its supplier base into newgeographies in Latin America and Asia, as well as partners inthe U.S. (See page 7 for more detail on GGS.)

Another way Grainger is expanding margins is through operatingexpense leverage. The company has harvested the results ofinvestments over the last few years, lowering operating expensesas a percentage of sales (with the exception of 2011, whenGrainger made multiple investments in the company’s fivegrowth drivers – see pages 8–9). While delivering some ofthe best working capital management in the industry, Graingerhas also made steady progress increasing cash flow fromoperations. The combination of improved margins and stronginventory and receivables management has enabled thecompany to generate significant cash flow.

In 2012, the company will continue to invest aggressivelyin sales force expansion, eCommerce and supply chainenhancements to continue to drive growth. Grainger addedmore than1,300 new jobs in 2011 in the sales force,distribution centers and support function areas.

Investors have historically viewed Grainger as a strong, steadyand reliable investment, due to the dependable nature of itsreturns. However, given the company’s focus on aggressivemarket share gains and global expansion, investors are takinga fresh look at Grainger as a growth opportunity.

Grainger’s relentless focus on the customer, coupled with its financial strength, hasenabled the company to invest in growth initiatives including global supply chainenhancements, like the new 850,000 square-foot distribution center pictured here,in Patterson, Calif.

Page 8: Grainger Fact Book

6 W.W. GRAINGER, INC. AND SUBSIDIARIES

rainger’s foundation allows it to provide the rightproducts, at the right time, from the right place, forall of its customers. Below is a look at some of the

company’s foundational advantages.

Product Breadth and Availability – Having the right productsavailable to meet customer needs is central to Grainger’sfoundation. The company continues to aggressively expandits product line to capture even more of its customers’ MROspend. For example, in the United States the company’s productline has more than quadrupled over the past five years and inMexico it has doubled. By leveraging its efficient inventorymanagement and deployment practices, Grainger is able tomaintain product availability and inventory turns whilecontinually adding new products.

Distribution Center Network – Grainger is makinginvestments in its logistics network to put more productscloser to its customers than the competition. This includesthe recent reconfiguration of the Distribution Centers (DCs)in Greenville, S.C., and Monterrey, Mexico, to improve bothservice and efficiency. The company is also investing in morecapacity to meet future growth needs.

• In late 2011, the companybegan shipping from itsnew DC southeast of SanFrancisco. This 820,000square-foot facility will stockup to 350,000 items andprovide improved next-dayservice to customers on theWest Coast of the UnitedStates. The new DC will also lower transportation costsand improve service by serving as a regional hub for globallysourced products.

Leveraging Scalewith the Foundation

Grainger’s success is built on a foundation of scaleadvantage and superior supply chain execution. Thesecomponents enable the company to do more than justdeliver product – these foundational elements allowGrainger to go beyond the box to provide the best possiblecustomer service at the lowest total cost. The company iscontinuing to take actions to make sure its foundationprovides a powerful platform for profitable growth and acompetitive advantage that others cannot easily replicate.

G• The company is preparing to relocate its central stocking DCin the Chicago area to a new facility in Minooka, Ill. The movewill increase storage capacity and allow Grainger to deliver moreproducts next-day to customers in the Midwest.

• In January 2012, the company relocated its DC in Saskatoon,Saskatchewan, to a new, larger facility that will house nearly50,000 products to meet the needs of this province’s expandingcustomer base.

Purchasing Leverage – Grainger works closely with itssuppliers on product costs as well as service enhancementssuch as shorter lead times and cycle time improvements. AsGrainger aggregates more of its product purchases acrossthe globe, it is realizing even greater scale advantages. Theacquisition of Fabory Group in Europe is a perfect example;Grainger is leveraging Fabory Group’s fastener purchasingexpertise to create synergies that benefit the entire company. In2011, the company conducted more than 20 global line reviewsto drive improved cost and service for all of its businesses.

Information Technology – Grainger’s IT platform underpinsthe company’s foundation, providing real-time information andtools for all of the company’s businesses. Grainger plans tomigrate all of its businesses in the Americas to a single SAPplatform based on the company’s current U.S. installation. Thesechanges will be phased in over the next several years and willallow the company to further leverage its scale while improvingoperating efficiency for its growing international businesses.

Page 9: Grainger Fact Book

W.W. GRAINGER, INC. AND SUBSIDIARIES 7

Continuous Improvement (CI) CultureFor Grainger, execution matters. A hallmark ofGrainger’s operationsis its focus on engaging team members closest to the work incontinuous improvement efforts. In the Distribution Centers, thisapproach has resulted in substantially improved inbound andoutbound cycle times and dramatically improved space utilizationwithin existing buildings. The company’s continuous improvementapproach also emphasizes cross-functional participation anddeveloping standard work processes to drive results.

Continuous improvement learnings and best practices areconsistently shared across all of Grainger’s businesses, resultingin service and productivity improvements. For example, byleveraging a small team of network and space planning experts,the company is able to ensure all of its businesses have accessto the best thinking in areas such as product management,inventory planning, transportation, and DC operations.

Grainger Global SourcingAs Grainger continues to drive profitable growth, adding moreprivate label products is a key priority. These products –which include the Dayton,® Condor,® Westward,® LumaPro®

and Tough Guy® brands – offer customers high-quality, low-cost products and typically carry higher gross profit margins.

The engine behind much of the company’s private labeloffer is Grainger Global Sourcing (GGS), which workswith 300 suppliers in 24 countries to provide Grainger’sbusinesses access to high-quality products. To reducecycle time and ensure quality, GGS continues to buildproduct engineering and inspection capabilities closer toits Asian supplier base. At the same time, GGS continuallyevaluates its supply network to minimize risk and ensureaccess to low-cost products throughout the world.

In 2011, GGS introduced a low-cost tool line for Mexicounder a new brand, Contender,® and provided a new entrylevel Dayton® motor program for India. Both illustrate howthe company consistently identifies new opportunities toleverage GGS purchasing scale and capabilities to providelocally relevant products.

Number of squarefeet of distribution

space Graingerhas worldwide

8.5 millionNumber of U.S.

leaders trained inCI problem solving

in 2011

250+Number of Grainger

Global Sourcingproducts offered

~61,000

KEY

Super Regional DCRegional DC

Chicago(Relocating in 2012)

JanesvilleCleveland Robbinsville

San Francisco

Los AngelesKansas City

Dallas Memphis

Greenville

Jacksonville

Richmond Hill

DartmouthWinnipeg

Saskatoon

Edmonton

Vancouver

Monterrey

Mexico City

ond

mooutp

katooouve

North American Distribution Network

2007 2011

Outbound cycle time

(minutes)

2007 2011 2007 2011 2007 2011

Order defects

(defect rate)

Productivity

($ per team member)

Packaging costs

($ per line)Moving in the Right Direction

Grainger’s foundation allows it to provide the right products, at the right time, fromthe right place, for all of its customers.

Page 10: Grainger Fact Book

[1] Product Line ExpansionIn 2006, Grainger began a multiyear product line expansion(PLE) program to broaden its offering worldwide. Prior to this,the company didn’t have the extensive breadth of productsthat customers were looking for. So Grainger embarked onan aggressive program to add new product lines and extendexisting lines both in the United States and internationally.

A broad product line andgreater availability arecompetitive advantages and ahigh priority for Grainger. Fastmoving products are stockedclosest to the customer inlocal branches, while new orless commonly used products are stocked in distribution centers(DCs) and shipped directly to the customer.

Today, Grainger offers more than one million products throughmultiple channels. Both the website and the catalogs includeproduct sourced by Grainger from lower-cost countries. Thecompany plans to add thousands of new SKUs over the next fewyears as PLE has been key to driving share growth worldwide.On average, product line expansion has delivered 200–300basis points in incremental sales each year.

Investing for Growth

8 W.W. GRAINGER, INC. AND SUBSIDIARIES

[2] eCommerceTechnology continues to change the way customers wantto purchase and manage their MRO supplies. Graingercustomers want:• A best-in-class online experience• Easy online search and real-time availability• Access to Grainger through their existing desktop andmobile systems• Consistent experience across channels• Personalization and customization

eCommerce is a powerfulelement of Grainger’smultichannel strategy,growing at twice the rate ofother U.S. channels. It is themost profitable arm of thebusiness, creating a hugeopportunity for sales andearnings growth. Grainger hasbeen a pioneer in business-to-business eCommerce,launching the Grainger.com® website in 1995. Today, more than27 percent of the company’s annual revenue is generatedthrough electronic channels, representing $2.2 billion in salesin 2011. Based on Internet sales revenue, Grainger ranked15thin the U.S. and Canada on the Top100 e-retailers of 2011.(SOURCE: INTERNET RETAILER’S TOP 500 GUIDE®)

In 2012, Grainger’s U.S. websites will continue to be enhanced toprovide a fresh, new customer experience. An improved searchengine will improve search results and quickly guide customersto the right solution. Customers can expect new capabilities onGrainger.com® that will offer more targeted search functionalityand a more personalized online experience. These enhancementswill continue to expand the gap between Grainger and thecompetition, both traditional and web-based distributors.

[3] Inventory ManagementGrainger has 85 years of inventory management experienceand is now making this expertise available to customers.In addition to consultingwith facility managers andpurchasing departmentson how to take cost out oftheir business, Grainger alsooffers a suite of inventorymanagement services.

This suite of solutions, calledthe KeepStock® service, allowscustomers to manage theirown MRO inventory or have Grainger manage it for them.Grainger team members can fill customer bins or vendingmachines, provide on-site customer service or run on-sitebranches at customer locations. Customer managed options,

Product Line Expansion — SKUs in U.S. catalogThousands

82 115 139 183 233 307 354 413 500

2005 2006 2007 2008 2009 2010 2011 2012 2015E

eCommerce RevenuePercentage of total company sales

15 27 40–50

2005 2011 2015E

Grainger’s strategy goes beyond execution. It employs vision,creativity and a willingness to invest in future growth so thecompany can deliver service that surpasses customers’expectations, while outpacing traditional and nontraditionalcompetitors. In order to allocate the right resources toinitiatives that drive the greatest return, Grainger continuallylistens to customers’ needs while scanning the competitivelandscape. The result: aggressive investments in the fivecore growth drivers listed below that have yielded impressivereturns over the last several years.

KeepStock Accounts – U.S.

14,000 45,000

®

2011 2015E

Page 11: Grainger Fact Book

W.W. GRAINGER, INC. AND SUBSIDIARIES 9

such as vending, labeling and scanning, are also provided throughthe KeepStock® service. By utilizing the KeepStock® service,customers can free up working capital and manpower to addresscore business needs.

Grainger now accounts for KeepStock® services based on thenumber of customer locations, versus number of customers, asmany customers have multiple sites with multiple installations.Today, a KeepStock® service is present at more than 34,100Grainger customer locations in the United States, Canada,Mexico, China, Puerto Rico and Panama, and the companyexpects the number to grow at a rate of more than 20 percentannually. Product sales to customers using inventory managementsolutions grow an average of two to three times faster becauseGrainger is embedded into the customer’s daily operations.

[4] International ExpansionThe global MRO marketplace holds approximately $575 billionin opportunity. There is plenty of room for Grainger to leverageits purchasing scale and expand in these emerging markets.For multinational customers, finding reliable MRO products infar-off regions of the world can be difficult and expensive.Customer demand, combined with fast growth in emergingmarkets and increasing opportunity from small and medium-sized local customers, has served as a catalyst for Grainger’sinternational strategy.

As Grainger expands globally, it is focused on Latin Americaand Asia. Opportunities outside these regions will be pursuedif they present a strong, strategic fit, as was the case with theFabory Group acquisition in Europe in August 2011. Theemerging market opportunities in Central and Eastern Europe,combined with the opportunity for purchasing synergies, madeFabory Group an ideal candidate for acquisition (see page14for more on Fabory Group). High-growth markets like Asia,Latin America, and Central and Eastern Europe provide the rightcombination of size, competitive landscape, business andpolitical risk and supply chain leverage.

EXPORT

Grainger’s export business started in 1984 and today servescustomers worldwide through a combination of a local, dedicatedsales force and its reseller program, including authorizedresellers in countries such as Guam, Singapore and Qatar.The export business serves a range of customers from the U.S.military to large multinational companies to local businesses.

TRADING DESK

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

START-UP: SMALL BRANCH

In markets with midsize MRO potential, Grainger’s strategy includesestablishing a local presence through a smaller branch and carrying

specific product categories most relevant to the local market, such astools and safety. With this size of facility, Grainger can enter marketsat a lower cost and grow revenue over time. Grainger’s 2011entryinto the Dominican Republic is an example of this approach.

JOINT VENTURE/ACQUISITION

Acquisitions help Grainger enhance growth in new and existingmarkets and enable the company to accelerate entry and gainlocal market knowledge when entering new markets. In countrieswhere it already has a presence, Grainger is focused on acquisitiontargets that help build out a product line or service, capture a nichecustomer segment or extend its geographic reach.

In countries where it doesn’t already have a presence, Graingeris targeting acquisitions or joint ventures to enter markets thatare complex but highly attractive. For example, in Europe,Grainger acquired Fabory Group to further penetrate the Centraland Eastern European markets and leverage the company’sfastener expertise.

Total company salesfrom eCommerce

27%

[5] Sales Force ExpansionComplementing product line expansion is sales force expansionand the launch of the Territory Sales Representative (TSR)program. While many competitors cut back on customer-facingresources during the recession, Grainger continued to addsales representatives, hiring more than 500 TSRs in the UnitedStates since 2009. The TSR program is designed to prospectfor new customers and grow existing small to medium-sizedcustomers. TSRs are located in more than 30 markets includingLos Angeles, Calif.; Dallas, Texas; and Washington, D.C. Beyondthe United States, Grainger added approximately 200 salesrepresentatives in Canada, Latin America, Asia and Europein 2011. Increasingly, Grainger’s sales representatives arebecoming subject matter experts in areas such as manufacturingand healthcare to gain greater customer intimacy and providethe best solution possible. This vertical segment approach isbuilt off of Grainger’s past success deploying a dedicatedgovernment sales force.

Countries where Graingerhas brick and mortar operations

21

Investment scaled to market based on attractiveness

Market Entry Continuum

Mar

keta

ttra

ctiv

enes

s

Level of Investment

Start-up: Small Branch

Joint Venture Acquisition

Trading Desk

Authorized Reseller

Local Seller

Page 12: Grainger Fact Book

10 W.W. GRAINGER, INC. AND SUBSIDIARIES

Gaining Share in theUnited States

Grainger is the leading distributor of MRO products inNorth America and the largest MRO supplier in the UnitedStates. For 85 years, the company has delivered products,services and solutions that drive cost savings, efficiency andproductivity above and beyond customers’ expectations. Inthe United States, this ranges from inventory managementsolutions and safety products to eCommerce and a varietyof options in between.

To optimize its footprint and reallocate resources to highergrowth opportunities, Grainger closed 35 branches in theUnited States in 2011. The company has also invested more inGrainger.com® and inventory management services, hired moresales representatives, and retrained team members for newroles in customer service, KeepStock® services and eCommerce.During this change, both customer satisfaction levels and teammember engagement survey results increased.

Despite this shift, Grainger branches will remain a crucial partof Grainger’s go-to-market strategy as customers continue todemand same-day service for their just-in-time and emergencyMRO needs.

Commerce is just one way Grainger is gainingshare in the United States. As customers migrateto purchasing even more online, their consumer

website experiences and expectations transfer to the B2Barena. Grainger is improving its best-in-class website and hasmade significant enhancements to the user experience,both online and mobile, to make it faster, easier and morepersonal, including:

• Customer-Focused Design – 2011 put the customer infocus on Grainger.com.® Comprehensive product information,detailed photos and easy-to-access account managementtools on every page are just a few of the enhancements thatmake the site more intuitive for customers. It’s easier than everto buy on Grainger.com.®

• Click to Call/Chat – The new “Click to Call/Chat” featurelayers the great service provided to customers on the phoneand in the branches into Grainger.com.® If a customer has aquestion when shopping on the site – about products, technicalspecifications, or account information – a knowledgeablerepresentative is just a click away. Customers can chatinstantly online or enter a phone number for immediate dialback for a live conversation.

e • Real-Time Product Availability (RTA) – RTA answerscommonly asked customer questions, such as: Do you have it?How do I know? When can I get it? Where can I get it? Customersnow have visibility into real-time shipping information and localbranch product pickup availability so that they can make aninformed purchase. Imagine a contractor in need of a part –quickly! They log on and know exactly which branch to visitfor the product.

• New Platform – Grainger’s new platform provides a fresh lookand improved functionality to Grainger.com.® In 2011, Graingerbegan a staged migration of itsU.S. customers to the new site.The new platform makes it easier to implement enhancements tothe site. Grainger can execute changes in minutes, which makesit easy for the company to respond quickly to customer needs.

• Grainger.com®Mobile –Grainger’s new mobile website,launched in December 2011, isaccessible from ANY smartphone.Customers now have access toan optimized Grainger.com® nomatter the location: job site,truck, plant floor, garage ormaintenance shop. Using thenew mobile website, customerscan log into their accounts, viewpricing, confirm local product availability, approve pending orders,and check out – with the product ready for pickup at a Graingerbranch or shipped directly to their office or job site.

Time and technology, combined with a need for more efficiencyand productivity, have shifted the ways in which customers want todo business with Grainger. Customers want to spend more time intheir facilities and less time out of the office. They want suppliersto bring the products to them. So they are ordering online,installing an inventory management solution, or having productsdelivered directly to their site. As a result, Grainger’s local footprintis evolving to become more relevant to customers’ needs whileensuring the greatest return on investment for the company.

Order Fulfillment MigrationAs a percent of total U.S. sales

1985 2000 2010

100%

75

50

25

Picked up Shipped

Page 13: Grainger Fact Book

W.W. GRAINGER, INC. AND SUBSIDIARIES 11

KEY

Branch

Distribution Center

(As of 12/31/11)

22% Commercial 17% Government17% Heavy Manufacturing12% Contractor 10% Light Manufacturing 7% Other 7% Retail 5% Reseller 3% Natural Resources

13% Safety and Security13% Material Handling10% Pumps, Plumbing and

Test Equipment9% Cleaning and

Maintenance9% HVAC8% Electrical7% Lighting7% Metalworking7% Hand Tools5% Specialty Brands4% Fluid Power3% Motors3% Power Tools2% Power Transmission

2011 Sales by Product Line —United States

2011 Sales by Customer Category —United States

Sales Force ExpansionMRO is a relationship business and Grainger has continued tostrengthen and deepen its customer ties through the addition ofsales representatives such as account managers and territory salesrepresentatives (TSRs). Grainger’s territory sales representativeprogram is one example of how an idea successfully movedthrough the innovation pipeline. The program looked very differentin pilot stage and has morphed to include a new hiring profileand new geographic territories, among other changes. Theserefinements have helped decrease the payback period, makingTSRs cash flow positive in approximately 20 months.

Today, more than 500 TSRs are serving small and medium-sizedcustomers in more than 30 markets across the U.S., and they arehaving great success. Take Sumter Coatings, for instance, a mid-sizebusiness in Sumter, S.C., focused on providing its customers withpremium industrial coatings for steel, iron, propane, sinks, tubs andmore. Maintenance Director Marc Molyneau had been working withanother supplier when TSRWill Eckhardt came calling on his facility.

“Marc told me he was unhappy with the level of customer servicefrom his current MRO supplier. They were never available whenhe needed them. Marc was looking for a supplier that would comeon-site and be available when called upon. I proceeded to explainmy role as a TSR. After a month of showing him how Grainger cantake time and money out of his procurement process, he was soldon Grainger. He now looks to me not only for day-to-day needsbut as his first resourceto help solve problems.”Will has had tremendoussuccess, growing therelationship with SumterCoatings 94 percent inone year.

InnovationInnovation continues to play a key role in Grainger’s success. Dozens of ideas, ranging from customer-facing mobile applications toshowroom design to customer inventory management solutions, have moved through the company’s innovation pipeline over the lastseveral years. The innovation team takes ideas from hypothesis to launch in a four-step development process that first prototypes theidea with customers and then rigorously tests the idea’s operational and financial validity.

Here’s a recent example: A large property management firm wanted to apply the same inventory management approach used in its toolcribs to the vans its technicians drive every day. Thus, the idea of KeepStock Mobile®was born. Working with the customer, the Graingerteam developed a mobile application that allows a maintenance technician to simply scan shelf labels inside their van with their smartphone.A replenishment order is then automatically sent to Grainger. The idea has since been scaled across all major mobile device platformsand adopted by many customers as a fast and easy method for reordering frequently used items.

TSRs serve small and medium-sized customers in more than30 markets across the U.S.

Page 14: Grainger Fact Book

hile eCommerce and sales force expansionare also at play in this established market,Acklands—Grainger has gained a strong foothold

and customer following through its KeepStockSM inventorymanagement service. For more than 20 years, the Canadianteam has been providing customers with a suite of inventorymanagement solutions, ranging from on-site branches to vendingmachines. In fact, Canada’s best-in-class inventory managementprogram provided the foundation for the KeepStock® service inthe United States.

One such example isAcklands–Grainger’sKeepStockSM service forone of the largest mining andmetal companies in the world.Acklands–Grainger hasbeen working with this largecustomer to provide their safety,industrial and material handlingproducts for many years. Thecustomer mines for alloys,coal, copper, nickel and zincthousands of meters below theearth’s surface, and finding a way to stay on top of their just-in-time MRO needs has been critical to the business’ success.To meet the customer’s unique needs, Acklands–Grainger hasimplemented the following inventory management solutions:

• Dedicated, branded vehicles that deliver original equipmentmanufacturer (OEM) materials from surface level to underground• A fully staffed mobile maintenance warehouse 7,500 feetunderground• Automated dispensing machines installed at the surface, 4,600-foot level, and 7,500-foot level to provide real-time access to highvolume safety supplies, hand tools and other industrial equipment

Through the use of automated dispensing solutions andprojects such as the off-site Personal Protection Equipment(PPE) Program (where miners pick up their safety supplies at

Wa local branch), the customer has realized cost savings andreduced consumption.

Over the last five years, the Acklands–Grainger catalogoffering has more than doubled, from 41,000 to110,000 SKUs.Sales of private label brands, which represent a lower-cost,higher-margin product offering, continue to grow from C$51millionin 2007 to C$95 million in 2011 with plenty of room for growth.These products provide additional price points for the cost-conscious customer and have been very successful in theCanadian market. The growth of the Condor® safety line is onesuch example. Acklands—Grainger grew Condor® revenuesmore than 60 percent to more than C$10 million in 2011 andwill continue to leverage the brand through collaboration withGrainger Global Sourcing.

The business in Canada has also taken an aggressive stanceon acquisitions to grow and gain share. Over the last two years,Grainger has acquired five companies in Canada, including:

• K&D Pratt, Industrial Division, to expand in Atlantic Canada;

• Ranson Industrial and Safety Supplies, Inc., to expand thesafety offering;

• Solus Sécurité, Inc., to expand the safety product andservices offering;

• Woseley Industrial Products (Amalgamated) Inc., to furtherpenetrate the Nova Scotia and New Brunswick markets;

• Fercomat, to further serve Quebec’s natural resourcecustomer base.

In 2011, the successful integration of these acquisitions contributed3 percentage points to the top line. The Acklands–Grainger teamis also continuously reviewing an active pipeline of new targetsthat could help the company expand its geographic coverage,customer segments and product and services offering.

12 W.W. GRAINGER, INC. AND SUBSIDIARIES

Gaining Share in Canada

Going beyond the box extends across borders as well.Acklands—Grainger has been serving the MRO needs ofCanadian customers for more than 120 years and is thelargest industrial and safety distributor in the country. Thecompany is focused on gaining share and acceleratingprofitable growth.

Page 15: Grainger Fact Book

W.W. GRAINGER, INC. AND SUBSIDIARIES 13

31% Agricultureand Mining

17% Contractor9% Transportation9% Retail/Wholesale8% Heavy Manufacturing8% Commercial7% Government7% Other4% Light Manufacturing

35% Safety and Security17% Metalworking15% Material Handling15% Hand Tools

8% Cleaning andMaintenance

5% Power Tools3% Electrical1% Fluid Power1% HVAC

2011 Sales by ProductLine — Canada

2011 Sales by CustomerCategory — Canada

Key

Branch

Distribution Center

(As of 12/31/11)

Local Presence

The Canadian team is focused on opening small branches in select markets to take

advantage of growth opportunities and expand its local presence, as well as serve

the natural resource market. For example, in 2011 the company opened locations in

Petawawa, ON, to support the local Canadian Forces base there and Smithers, BC, to

serve the mining and forestry sectors. Acklands–Grainger plans to open 4–5 small-

format branches annually in order to meet these customers’ growing MRO needs.

Over the last five years,the Acklands–Grainger catalogoffering has more than doubled,

from 41,000 to

110,000 SKUs

Acklands–Grainger has more than 170 branches across Canada.

Acklands–Grainger’smarket share in

the Canadian MROspace, making this

business the leadingMRO distributor in

the country

8%Number of years

Acklands–Graingerhas been servingcustomers with

inventory managementservices

20+

Acklands—Grainger grew Condor®

revenues more than 60 percent

to more than C$10 million in 2011

Page 16: Grainger Fact Book

14 W.W. GRAINGER, INC. AND SUBSIDIARIES

n August 2011, Grainger announced its acquisition ofFabory Group, a Europe-based fastener distributor. Thisbusiness is enabling Grainger to accelerate its growth

in both mature (Western Europe) and emerging (Central andEastern Europe) markets, while gaining more scale andrelevance in fastener purchasing and distribution.

With an MRO market size of $175 billion and a fastener marketsize of $1.9 billion, there is much potential in this area of theworld. Central and Eastern Europe in particular pose anattractive growth opportunity.

Throughout Europe, Fabory Group is known as theMasters inFasteners.® Since1947, Fabory Group has been serving smallbusinesses, MRO professionals, original equipment manufacturersand technical wholesalers across Europe. Over the last severaldecades, Fabory Group has expanded its geographic reachthrough limited operations in North America and Asia andnow operates more than130 locations in15 countries, withheadquarters in the Netherlands.

Fabory Group’s products and services range from standardand specialized fasteners to tools and industrial supplies. Thecompany’s product mix is weighted differently than Grainger’s,with more than 65 percent of sales from higher margin fasteners,producing gross profit margins in excess of 50 percent.

Fabory Group’s highly trained workforce and A2LA (AmericanAssociation for Laboratory Accreditation) accredited laboratoriesprovide technical support, logistics solutions, inventorymanagement and much more. Customers have access tomore than 80,000 products in Fabory Group’s offering througha variety of channels, including its 130+ shops, more than250 sales representatives, and a multilingual website.

Fabory Group is expanding its shop presence over the nextseveral years, focusing on high-growth emerging markets suchas Romania, Hungary and Poland in Central and Eastern Europe.The combination of services, high-quality products and know-how make it easy and convenient for customers to get whatthey need, when they need it.

Similar to other Grainger markets across the globe, FaboryGroup is focused on product line expansion as an additionaldriver of growth. In 2011, Fabory group added several newproduct categories: woodscrews, hole saws, anchoring products,hose clamps (from private label brand MaxxFast®), and additional

Gaining Share in Europe

I

stainless steel fasteners. European legislation regarding steelconstruction has also been a catalyst for the addition of structuralbolting products in 2012. With the global footprint and scale ofGrainger, Fabory Group is also planning to add private labelbrands such as Condor.® In fact, prior to the acquisition, FaboryGroup was a reseller of Grainger’s private label brand Westward.®

As a part of Grainger, Fabory Group has seen increasedpurchasing leverage with suppliers and is able to buy moreeffectively than ever before. Another reason Fabory Group hasbeen so successful is its vendor managed inventory (VMI)program. Since it was developed more than 20 years ago,Fabory Group’s VMI systems have helped thousands ofcustomers manage their inventory. Today, more than 2,500customers use Fabory Group’s VMI systems, and 75 percentof Fabory Group’s 250 OEM customers are on VMI.

Value added services like VMI make Fabory Group a partner,giving the company the added advantage of close andcontinuous interaction with its customers. In return, customersare able to benefit from the ongoing developments by FaboryGroup’s supply chain specialists, like the recent introductionof its Optical Bin service.

Fabory Group’s Optical Bin system makes use of specialshelving racks that contain sensors for each bin location. Eachsensor monitors whether a space on the shelf is filled or notand determines if the stock level is sufficient or requiresattention. This information is sent to a customer-specific OpticalBin website, showing the real-time status of each individuallocation in each rack and on each shelf.

Now Grainger is delivering service and results beyond itstraditional geographies.

Page 17: Grainger Fact Book

FRANCE

NETHERLANDS

BELGIUM

UNITEDKINGDOM

HUNGARY

CZECHREPUBLIC

POLAND

SLOVAKIA

ROMANIA

PORTUGAL

W.W. GRAINGER, INC. AND SUBSIDIARIES 15

Stork Technical Services relies on Fabory Group

Stork Technical Services (STS) is a worldwide knowledge-based organization which

ensures that companies in the chemical, oil and gas, and energy industries as well as other

production sectors can operate successfully without interruption. STS services vary from

installation, maintenance, consultancy and technical management to highly specialized

activities such as the production of turbo components or the overhaul of gearboxes.

High Quality Standards

“Our focus is serving the chemical, oil and gas, and energy sectors. If a customer’s installation

stops, the effects are enormous,” says Christel Rosbag, Advisor, Marketing & Communication

for STS. “Therefore, our people must be able to use the best possible materials. We need a

fastener supplier that can meet our high quality standards – a supplier who can deliver our

orders promptly, regardless of the location where we are working.”

Perfect Logistical Performance

“I view Fabory Group more as a partner than as a supplier,” states Rob Hogeveen, Senior

Contract Manager at STS. “Their logistical performance is perfect. We can even call them

on the weekend if we need some stud bolts urgently. Fabory Group suits us perfectly.

They are reliable, they think along with us and deliver quality.”

Attention to Detail

Rien van IJzendoorn, responsible for

purchasing at STS, is happy to order with

Fabory. “Fabory Group has an eye for detail,”

he explains. “We use a lot of metal end studs.

Many suppliers deliver them full of the razor

sharp metal chips that result from the

production process. Fabory Group washes

these metal end studs first. This may seem

trivial, but for the people who work with

them this is extremely important.”

Fabory Group’s Optical Bin system makes use of specialshelving racks that contain sensors for each bin location.

35% Heavy Manufacturing22% Other18% Light Manufacturing 13% Retail12% Contractor

2011 Sales by Customer Category —Europe

84% Metalworking6% Other5% Hand Tools5% Power Tools

2011 Sales by Product Category —Europe

Number of productsin stock at

Fabory Group

Number of FaboryGroup customers who

utilize the VendorManaged Inventory

program (VMI)

89,000 3.10.47

2,500

KEY

Branch

Distribution Center

(As of 12/31/11)

Rien van IJzendoorn, Rob Hogeveen and ChristelRosbag of STS.

branches and

2distribution centers

137

Date J.M. Borstlapand his sons wentinto business asBorstlap & Sons,

selling fasteners andMRO products

Page 18: Grainger Fact Book

16 W.W. GRAINGER, INC. AND SUBSIDIARIES

Accelerating Growth in Asia

Grainger is committed to increasing its presence in emergingmarkets and continued expansion in Asia remains a highpriority. Asia offers fast-growing industrial and commercialmarkets where Grainger can offer customers service aboveand beyond that of the current MRO players. Unlike LatinAmerica, which offers great opportunity to build pan-regionalscale, China, Japan and India (the world’s second, third andfourth largest economies) offer great potential for developingscale at the country level. And there remains potential forfurther expansion within Asia.

oday, Grainger has three distinct business models inAsia. In Japan, Grainger is a 53 percent stakeholder inMonotaRO Co. Ltd., a leading eCommerce direct marketer.

MonotaRO is focused on accelerating its profitable growth through:• Enhancing its industry-leading technology platform• Broadening its customer base from small and medium-sizedbusinesses to include large industrial customers such asmanufacturing, automotive and contractor customers• Expanding its private label product offering

2011 marked the fifth anniversary of the Grainger China business.Large multinational companies familiar with Grainger continue torepresent the majority of Grainger China’s business. To positionitself to meet the evolving needs of the market, Grainger Chinahas pursued several growth initiatives, including:• Product line expansion to include more relevant, lower costproducts, particularly in areas such as tools, safety andmaterial handling• Regional warehouses in Guangzhou and Tianjin strategicallypositioned to increase service levels to customers• A comprehensive eCommerce platform with a more robustsearch engine and more complete online transaction capabilities,such as EZQuote online quotation tools and EZApprov, aweb-based procurement productivity tool• A growing sales force to build relationships with current andprospective customers

TWhile having a showroom for customers to visit is an importantpart of the buying decision in many markets around the world,Grainger China’s multinational customer base often prefersshipped products, eCommerce options and inventory managementsolutions. As such, the local team is adding inventory to the localmarket through low-cost warehouses while building out itseCommerce and inventory management offering to make iteasier for customers to get what they need. As with othermarkets, acquisitions that provide an entrée into new regionsof the country while increasing scale will also be considered.

In India, Grainger operates as a master distributor with regionalwarehouses that serve more than 2,000 dealer relationships inall states of the country. Over time, Grainger intends to transitionits business model in India from a two-tier, indirect model to adirect end-user model. To facilitate this evolution, the team isdeveloping its product offering in three ways:• Introducing product categories that complement existingdealer offerings• Launching private label products such as the new Dayton®

motor offering designed specifically for India• Exploring acquisition opportunities to quickly establish anend-user customer base and provide local market expertise

5 yearsIn 2011, the GraingerChina business markedits fifth anniversary

Page 19: Grainger Fact Book

CHINA

INDIA

JAPAN

Key

Distribution Center

Branch/Distribution Center

Regional Warehouse

(As of 12/31/11)

W.W. GRAINGER, INC. AND SUBSIDIARIES 17

Innovation fuels growth in JapanWith more than 80 percent of its sales generated online, MonotaRO understandshow to use technology to serve customers. The company has sophisticated analyticaltools that suggest specific products from its assortment of 1.5 million SKUs basedon buying behavior and predictive analyses. This spirit of innovation was evidentfollowing the devastating earthquake and tsunami of 2011 when MonotaRO quicklymobilized to create a completely new website with specialized products available forcustomers in the hardest-hit areas. The Japanese team was also able to leverageGrainger’s global supply chain to bring in much-needed product from China andNorth America.

* GRAINGER HAS A 53 PERCENT MAJORITY IN MONOTARO.

Number of productsavailable to the Chinabusiness customer

of MonotaROsales are

conducted online

59,000 80%

80% Other5% Electrical3% Pumps, Plumbing and

Test Equipment2% Safety and Security2% Material Handling2% Lighting2% Motors1% Metalworking1% Hand Tools1% Power Tools1% Power Transmission

2011 Sales by Product Line —Asia

Building talent for the futureIn recent years, Grainger has significantly broadened its international presence, offeringdynamic new opportunities for the professional development of its team. As it continues toexpand around the world, Grainger is committed to developing talent that is adept at operatingin an increasingly complex global marketplace. To foster this growth, Grainger is more activelysharing talent across borders and creating rich learning experiences for leaders at all levelsthrough global projects, short-term global assignments and international relocations. Recentexamples include:• Two team members in Florida moving to their native Dominican Republic to helplaunch Grainger locally• Several U.S. supply chain leaders taking on global supply chain responsibility• Finance team members relocating from the U.S. to Europe and Colombia to helpwith integration efforts• Accounts receivable and accounts payable team members relocating to the newservice center in Panama

MonotaRO uses this yuruchara,

an anime-style cartoon mascot,

on a variety of materials, including

its website and catalogs, to promote

its business to customers.

Page 20: Grainger Fact Book

18 W.W. GRAINGER, INC. AND SUBSIDIARIES

Accelerating Growth inLatin America

Grainger first established a presence in Latin America in1994 with the launch of Grainger Caribe in Puerto Rico.Today, the company serves more than 45,000 customersin six countries with plans to continue its aggressiveexpansion throughout the region, providing Latin Americancustomers with service above and beyond what they havepreviously experienced.

atin America remains a key expansion area forGrainger, offering exceptional growth potential, ahighly fragmented MRO market, proximity to the

company’s U.S. supply chain infrastructure, a similar productoffering to North America and strong recognition of theGrainger brand. Additionally, the region’s MRO-intensiveindustries such as manufacturing, mining, hospitality andpharmaceuticals align closely with Grainger’s productoffering and expertise.

The company is solidifying its leadership in the region bymaking strategic investments to support ongoing growth.Focus areas include:

• Small Branch Expansion – Grainger is investing in smallbranches of approximately 10,000 square feet that offer acompetitively advantaged assortment of locally tailored inventoryin markets where it already has a presence, and establishinggreenfield operations in markets with midsize MRO potential.Examples include the recent addition of new branches in Ponceand Caguas, Puerto Rico, and Hermosillo, Mexico; and theestablishment of Grainger Dominican Republic, located in SantoDomingo, which offers local businesses a wide array of productsand quick access to the entire Grainger U.S. product assortment.

• Joint Venture/Acquisition – In complex but highly attractivemarkets, Grainger often looks to establish a presence through a

Ljoint venture or acquisition, allowing the company to leveragethe local market expertise of its partner to quickly accelerateprofitable growth. Grainger’s experience in Colombia, describedon the following page, serves as a relevant example.

• Product Line Expansion – Product expansion remains animportant growth driver, which positions Grainger as a singlesource to meet the MRO needs of local customers. In Mexicoand Colombia, the local Grainger team is aggressively addingnew products to better serve specific customer segments, suchas hospitality and oil and gas. The addition of private labelproducts, such as the Contender® hand tool line, offers localbusinesses high-quality products at attractive price points.

• KeepStock®– Inventory management solutions are a fast-growing service offering in the region, growing by morethan 40 percent in 2011. Grainger plans to begin offeringKeepStock® solutions in newer markets like the DominicanRepublic, while continuing to accelerate growth in moreestablished markets like Mexico and Panama.

Leveraging best practices to serve Latin American industryLocal teams regularly leverage the expertise of Grainger partners around the world. Forexample, Acklands–Grainger has a long history of offering innovative solutions for the miningsector in Canada, such as KeepStock® dispensing units located in underground mines thathelp enhance productivity while helping keep employees safe on the job. This expertise isbeing shared in Latin America, where mining is a strong and growing industry. Another exampleis the hospitality sector, where Latin American teams benefit from the expertise that theGrainger U.S. team provides, including industry-specific services and solutions that helpimprove guest satisfaction while increasing the bottom line. With tourism expected tocontribute US$5 billion to the economy of the Dominican Republic in 2012, this expertiseoffers great growth potential for Grainger.

Page 21: Grainger Fact Book

W.W. GRAINGER, INC. AND SUBSIDIARIES 19

MEXICO

PANAMA

PUERTORICO**

COLOMBIA

DOMINICANREPUBLIC

COSTARICA*

TRINIDAD

Key

Branch

Distribution Center

(As of 12/31/11)

* Branch to open Spring 2012

** Although Puerto Rico is a U.S. territory, the companymanages its business there as a part of Latin America.

Costa RicaIn spring of 2012, Grainger will open its first location inCosta Rica to serve the hospitality, tourism, agricultureand electronics export markets. This 11,000 square-footfacility will initially offer more than 7,000 SKUs to localcustomers to meet their growing MRO needs.

26% Heavy Manufacturing 22% Commercial13% Other 12% Reseller 8% Retail 5% Government 5% Contractor 5% Light Manufacturing 4% Agriculture and Mining

19% Safety and Security15% Material Handling15% Metalworking14% Hand Tools

7% Pumps, Plumbing andTest Equipment

6% Electrical5% Cleaning and

Maintenance5% HVAC4% Fluid Power4% Power Tools3% Lighting1% Motors1% Power Transmission1% Other

2011 Sales by Product Line —Latin America

2011 Sales by Customer Category —Latin America

Beyond the Box: Serving LatAm CustomersWhen a large manufacturer and exporter of plastic syringes inMexico began its relationship with Grainger, there was ampleopportunity for efficiency and standardization. The customerneeded better inventory planning methods, as the lack ofcontrols was causing expenses to rise due to excess inventory.By partnering with Grainger, the right solution was identified:an on-site KeepStock® branch.

With Grainger’s KeepStock® solution installed on-site, thecustomer improved its process, reduced its cycle order timesand lowered overall maintenance costs by 30 percent. Afterseeing results, the customer called on Grainger to helpconsolidate all of their MRO spend.

Dominican RepublicGrainger opened its newest Latin American branchin Santo Domingo in 2011 to serve the mining andmanufacturing segments.

A look inside Grainger ColombiaGrainger’s experience in Colombia provides a good example of how the companycontemplates expansion in the larger and more complex economies of Latin America.Grainger established physical operations in Colombia in 2010 through its partnershipwith Torhefe, S.A., now Grainger Colombia. Torhefe was an established localdistributor with five locations in the country’s largest cities and an emphasis andexpertise in fasteners. The Torhefe business offered Grainger strong customerrelationships, expertise in the Colombian business environment and the opportunityfor significant profitable growth. The business is quickly expanding its productoffering as a broad-line MRO distributor, exploring opportunities in other markets ofthe country, like Bucaramanga, where it will open a branch in 2012 and begin aKeepStock® program. At the same time, the Grainger businesses worldwide arebenefitting from the expertise in fastener purchasing that the Colombian team offers.

Page 22: Grainger Fact Book

20 W.W. GRAINGER, INC. AND SUBSIDIARIES

Going Above and Beyondfor Communities

hy is Grainger growing as a leader in corporatesocial responsibility? The answer lies in thecompany’s deep commitment to service, whether

it is going above and beyond to get critical supplies to disaster-stricken communities, educating the skilled labor force of thefuture or building more environmentally sustainable workplaces.

Grainger is committed to strengthening the communities wherecustomers and team members live and work. In 2011, Graingerdonated more than $24 million in cash and products to morethan 2,000 not-for-profit organizations in North America. In theU.S. alone, Grainger team members directed $2.9 million to arange of community organizations through the company’sthree-to-one employee Matching Charitable Gifts Program.

Grainger supports innovative programs in philanthropy andsustainability that benefit local communities. Emergencypreparedness, technical education and sustainable work placesare focus areas that highlight the company’s commitment tobeing a good corporate citizen.

Disaster Preparedness and ResponseService and reliability are the core of Grainger’s business andat the heart of the company’s commitment to disaster preparednessand response. In March 2011, Grainger sprang into action tosupport those affected by the Japanese earthquake and tsunami.Grainger donated more than $100,000 to the American Red CrossInternational Disaster Relief fund, while Grainger’s MonotaRObusiness in Japan contributed 1,000,000 Yen (US$12,000) to theJapanese Red Cross. Japanese team members also created adedicated website to quickly distribute cleanup supplies. Graingerteam members across the globe supported the tsunami reliefefforts through fund-raising and matching gift programs.

The tragedy in Japan wasn’t the only example of how Graingerresponded in 2011:

• The passion to serve was also evident during widespreadstorms and floods in the United States and Canada. Grainger

W

volunteers from Manitoba, Canada, to Oklahoma City, Okla.,and Memphis, Tenn., led the way to help the American Red Crossas Ready When the Time ComesTM disaster volunteers.

• In response to Hurricane Irene, volunteers from Boston, Mass.;Raleigh, N.C.; Norfolk, Va.; and Puerto Rico were activated toassist their local Red Cross chapters deploy critical relief services.

• Acklands—Grainger team members in Alberta and Saskatchewanpulled together to involve the local community, as well as suppliersand customers, to support victims of the Slave Lake wildfires.

The unique partnership between Grainger and the AmericanRed Cross was honored in 2011 with the prestigious CorporateCitizenship Award for Best Partnership by the U.S. Chamberof Commerce Business Civic Leadership Center (BCLC).As national founding sponsor of the Ready When the TimeComesTM program, Grainger has helped build disaster responsecapacity to include more than14,000 volunteers — from 460companies in 55 communities across the U.S., Canada, andPuerto Rico. Of Grainger’s 1,400 trained volunteers, many haveserved the Red Cross in more than 60 deployments since theprogram’s national launch in 2006.

Grainger recently increased its support to disaster preparednessthrough a $3 million multiyear commitment to the American RedCross for the design and implementation of a nationwide volunteerdatabase, The Volunteer Connection. The new online system willenable the Red Cross to recruit, train, link and deploy more volunteersand will enhance the volunteer experience with social media tools.

Grainger and the American Red Cross Win Best Partnership Award“The work of Grainger and the American Red Cross is the definition of a successfulcorporate/nonprofit partnership,” said Stephen Jordan, U.S. Chamber BCLC Founderand Executive Director. “Their support of the Ready When the Time ComesTM programhas made communities throughout the United States safer and more secure in theevent of a disaster.” Grainger CEO Jim Ryan (photo left) and American Red Cross Chiefof Humanitarian Services Jerry DeFrancisco (photo right) accept the “Best Partnership”award at the BCLC Corporate Citizenship Awards ceremony and reception at theNewseum in Washington, D.C. Photo by Ian Wagreich – © U.S. Chamber of Commerce.

Page 23: Grainger Fact Book

W.W. GRAINGER, INC. AND SUBSIDIARIES 21

• Donated nearly $13 million to the American Red Crosssince 2001.

• Trained 1,400+ Grainger team members as Ready Whenthe Time ComesTM volunteers since 2001.

• Raised more than $400,000 for a record United Waycampaign in Canada.

• Awarded scholarships to 200 students at 100 communitycolleges across the United States pursuing degrees inindustrial trades in 2011.

• Directed $2.9 million to charitable organizations through1,888 team member gifts in 2011.

• Donated nearly $10,000 to Teleton, a 24-hour TV andradio broadcast to benefit children’s rehabilitation centers,from Grainger Mexico team members.

Technical EducationAs North America’s leading distributor of maintenance, repairand operating supplies, Grainger is committed to helpingstem the growing shortage of skilled workers by supportingtechnical education and promoting workforce development inlocal communities.

Grainger has partnered with the American Association ofCommunity Colleges since 2005 to raise awareness of this

emerging issue. Overthe past five years,Grainger has donatedmore than $1.5 millionthrough scholarshipsfor students to preparefor jobs in the industrialtrades such as welding,electrical, HVAC,plumbing and facilities

maintenance. In 2011, 100 community colleges recommended bythe American Association of Community Colleges were offered$400,000 of Grainger Tools for Tomorrow® scholarships. Half ofthe scholarships were earmarked for veterans of the U.S. ArmedForces. Grainger Tools for Tomorrow® scholarship recipients arealso awarded a customized Westward® tool kit upon graduationto begin their careers.

In Canada, where the economy is also challenged by a shrinkingskilled workforce, Acklands—Grainger donated $160,000 ofproduct to Women Building Futures for its Suncor Energy TrainingCentre in Edmonton, Alberta. This first-of-its-kind operation openedin 2011, providing women students with skills training and theworkplace culture awareness needed to be successful in theconstruction sector.

In Patterson, Calif., the site of the company’s newest distributioncenter, Grainger selected a local high school to fund and developa new logistics curriculum. The program trains high schoolstudents interested in supply chain careers, while helping to builda strong local workforce for companies located in this WestCoast transportation hub.

“My hands-on experience in

the Navy helped shape my

view of the engineering

spectrum and will help me as

I plan to build a better future.

The Grainger Tools for

Tomorrow® scholarship

provides me the opportunity

to achieve my degree in

electrical engineering.”

“After receiving a Grainger

Tools for Tomorrow®scholarship,

I began my technical education

at Elgin Community College,

where I studied to become a

tool and die maker. If it were

not for Grainger’s scholarship,

I wouldn’t have had the

opportunity to explore careers

in the industrial trades.”

Dane Burkett, 2011 Grainger Tools for Tomorrow® scholarship program recipient —Queensborough Community College, Bayside, N.Y., Electrical Engineering Technology

Grady Knight, Grainger Tools for Tomorrow® scholarship recipient and featuredPlant Engineering 2011 Leader Under 40

Jacob Chandler, Branch Manager in Madison, Wisc., honors Dale Townsend,Blackhawk Technical College, with his Westward® tool kit.

The Future is Bright in Technical EducationGrainger has donated nearly $2 million in support oftechnical education since 2005.

2011 CharitableContributions

$24 million

Product 79%

Matching Gifts 12%

Cash Donations 9%

A Caring CultureAt the 23rd Annual Red CrossCancer Institute Golf Classic,Acklands–Grainger RegionalDirector Lylle Kephart’s namewas drawn to win a raffle prize of$10,000. Instead of acceptingthe prize, Lylle donated the moneyback to the Alberta CancerFoundation. When Acklands—Grainger learned about the teammember’s generosity, it matchedthe $10,000 donation.

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22 W.W. GRAINGER, INC. AND SUBSIDIARIES

Waste — Going, going, goneIn 2011, Grainger distribution centers recycled an average of 236 tons of cardboardand 16 tons of plastic wrap per facility, for a total recycling rate of 72 percent. Graingeralso partners with Redemtech, a sustainable computing company, to responsiblydispose of 100 percent of the organization’s electronic waste.

One metric used in the company’s distribution center operations is the carton-to-orderratio, which measures packaging efficiency. Through continuous improvementinitiatives, Grainger has reduced the carton-to-order ratio by more than 20 percentsince 2004, resulting in a more sustainable and cost effective operation.

Grainger also conducted tests in its facilities using Georgia-Pacific’s enMotion,® amotion sensor paper towel dispenser, instead of traditional folded towels. As a result, itscorporate headquarters switched to enMotion,® saving 30 to 70 percent annually onproduct costs, waste, emissions and labor.

Going Above and Beyond for Communities(continued)

Environmental SustainabilityAs businesses and institutions build more sustainable practices,Grainger is incorporating environmentally responsible processeswithin its operations while bringing customers more innovativeproducts and solutions for green facility management.

With more than 3.5 million square feet of Leadership in Energyand Environmental Design (LEED) certified space at fourteenfacilities across the United States and Mexico, Grainger iscommitted to setting a strong example for other industrialdistributors when it comes to LEED building certifications,energy and resource efficiency, and recycling. In 2011, Graingeradded two new LEED certified facilities to its network.

• In Patterson, Calif., Grainger constructed an 820,000 square-foot LEED-New Construction (NC) Gold distribution center.

• In Minooka, Ill., Grainger achieved LEED for CommercialInteriors (CI) Platinum status on a 1,000,000 square-footdistribution center scheduled to open in late 2012.

The Minooka facility is the largest LEED CI Platinum facility inthe world and features sustainable technologies, including a solarwall panel. The 2,700 square-foot solar wall uses innovative airand solar capabilities to cut down on energy consumption.

As one of the largest distributors of lighting in North America,Grainger understands the importance of promoting energyefficiency. Grainger is in the process of retrofitting its brancheswith new energy-efficient lighting. To date, more than fiftyGrainger branches across the United States have been completed.Grainger has reduced the total electricity consumption of eachretrofitted branch by about 15 percent.

Grainger has also worked closely with customers to help themrealize savings by switching to more energy-efficient lighting. Inanticipation of the 2012 lighting legislation changes (a result ofthe 2005 Energy Policy Act and 2007 Energy IndependenceSecurity Act), many customers have turned to Grainger to helpthem conserve energy and upgrade to products that meet thenew energy-efficient standards. The company now offers energy-efficient services to help customers reduce consumption throughlighting retrofits conducted by its subsidiary, Alliance EnergySolutions (AES). In 2011, Grainger and AES saved customers79 million kilowatt hours and $9.8 million on electric bills.

Amount of LEEDcertified square footage

in Grainger’s NorthAmerican facilities

Number ofgreen products

offered onGrainger.com®

or 79 million kilowatthours, the amount

Grainger and AES helpedcustomers save on

their 2011 electric bills

3.5 million 14,500

$9.8 millionAmount of recyclingbins and carts sold tocustomers in 2011 tohelp facilitate theirrecycling programs

100,000+

The Patterson, Calif., distribution center is one of Grainger’s 14 LEED certifiedfacilities across North America.

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W.W. GRAINGER, INC. AND SUBSIDIARIES 23

o matter where they are around the globe, Grainger’s21,000 team members are going beyond the box toexceed the expectations of customers, communities

and each other. In turn, Grainger remains as dedicated to itsteam as it is to customers, constantly seeking to unlock the fullpotential of every team member.

Thanks to this mutual commitment, Grainger continues to build itsreputation as a great business partner and a great place to work.Team members know that if they drive performance, they willshare in the company’s success. In addition to competitive pay,strong health and wellness benefits, adoption assistance andtuition reimbursement, eligible team members in the United Stateshave a stake in company profits through Grainger’s Profit SharingTrust (PST). In 2011, the company contributed $143 million to thePST. This defined contribution program helps eligible teammembers in planning their long-term financial goals. Unlike atraditional 401(k) plan, it is not based on a company match ofteam member contributions. In a recent study that comparedGrainger’s PST to pension and retirement plans offered by 250of the Fortune 500 companies, Grainger’s program ranked inthe top10. The international businesses and some subsidiarybusinesses have benefit programs tailored for their markets.

Grainger also partners with its team members to furtherprofessional growth. The company is committed to attracting,developing and retaining top talent, while gaining from theirdiverse perspectives. Team members grow through stretchassignments and varied roles, including international, and aregroomed for future career development and leadershipopportunities. Mentoring programs and volunteer opportunities

A Great Company toWork For

Nhelp team members find complementary avenues to build theirleadership skills.

Nearly 3,000 team members participate in Business ResourceGroups (BRGs). These groups promote greater diversity byaddressing a wide range of business topics and are open to allteam members. Examples of focus areas include recruitment andretention of African-American managers, the development ofwomen, Asian Pacific Islander and Latino team members, andreverse mentoring (where the younger generation orients themore tenured workforce to technology and popular culture)through the Generational BRG.

As the team grows globally, Grainger uses traditional communicationchannels as well as social media tools to generate dialog and garnerideas and input from across the business. The company hasembraced a set of Performance Drivers globally, and thesecommon behaviors guide the team in doing what is right forcustomers, the business and each other.

It is no wonder that team member engagement at Graingerremains strong. An internal survey in 2011 showed that teammembers continue to have strong confidence in leaders and thestrategic vision of the company, and they clearly understand theircustomers’ needs. This deep engagement has helped Graingergrow and will help the company succeed long into the future.

Hernan Vigliarolo, Regional HumanResources Director, Latin America“Grainger was a great surprise to me,” says Hernanof the company he joined in May 2011. “Duringmy interview I realized that Grainger is a people-

oriented company with deep values, great people and leaders whomake things happen. You can have open communication at everylevel of the organization and offer new ideas. That is the type ofcompany I want to work for!”

“The team’s focus on serving customers and collaborating witheach other inspires me and confirms that I am in the right place.I feel like I have been a part of this company for years. Everyday I choose Grainger.”

Tana Zambarelli, Customer LifecycleManager, Grainger U.S.Grainger was only a four billion dollar corporationwhen Tana joined the team in 1990 and sheremembers feeling overwhelmed. “But right away

I was greeted with kindness, understanding and generosity. I havealways felt valued and that has inspired me to give my best toGrainger,” she says. “Grainger has evolved into a global companywith a very diverse workforce. Everything is moving much fasterthan when I started. One thing, however, has not changed.Grainger team members share the same traits – warm-hearted,hard-working, and very caring.”

TO LEARN MORE ABOUT MAKING A DIFFERENCE AT GRAINGER, VISIT

WWW.EXPERIENCEDONE.COM, GRAINGER’S CAREER SITE.

Getting it Done Grainger team members share an uncommon passion for service no matter where they are on the globe.

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24 W.W. GRAINGER, INC. AND SUBSIDIARIES

rainger has deep relationships with more than 3,500product suppliers who go beyond just delivering product,and actually play a critical role in the company’s continued

success. With more than one million products available throughthe company’s worldwide operations, Grainger relies on its supplierpartners to help meet customers’ MRO needs and expectations.

By partnering with Grainger, suppliers have access to morethan two million businesses and institutions, ranging from smallcompanies to multinational corporations, and every possible

Building Strong SupplierRelationships

G

Partners in Performance Outstanding Recognition Awards

Supplier of the Year — Cotterman Co.Carrier — Action Expediting, Inc.Special Achievement — Brady WorldwideNew Supplier — LabChem, Inc.Green/Sustainability — Georgia Pacific Consumer Products, L.P.International – Stanley Black & Decker

Partners in Performance General Award WinnersAir Conditioning Products Co.Cotterman Co.CRC IndustriesDart Controls Inc.EXAIR CorporationFiltration GroupGeorgia Pacific Consumer Products, L.P.GOJO Industries, Inc.Hubbell Wiring Device – KellemsKen Forging, Inc.The Marcom Group, Ltd.Mi-T-M CorporationPolar Plastics Inc.Southwire CompanySuperior Manufacturing GroupWolf Peak International, Inc.

Business units outsidethe U.S. that host

supplier recognitionevents (Canada,

Mexico and Europe)

General Electric,Grainger’s largest

supplier

Total numberof Grainger

suppliers worldwide

3 3,500

enterprise in between. Suppliers also benefit from the visibilityprovided by Grainger’s various marketing channels, includingits catalogs, direct mail, e-marketing, branch merchandisingand websites.

Every year in the U.S., Grainger recognizes suppliers who meetor exceed rigorous performance metrics at the company’sannual Partners in Performance event. The Partners inPerformance Award recognizes suppliers who achieveexcellence in several categories, including on-time shipping,responsiveness, cost effectiveness and product quality.Suppliers are rated throughout the year, and judged on theiroverall performance and improvement. In addition, the companyinvites suppliers to participate in an annual customer tradeshow, where thousands of customers and Grainger salesand branch representatives view and interact with suppliers’product lines.

Cotterman Co.Supplier of the Year Cotterman Co., a manufacturer of industrialand commercial ladders, has a long-standing history and traditionof service to MRO professionals. In fact, like Grainger, they werefounded as a family business and have been serving customers formore than 85 years. Cotterman’s commitment to manufacturingexcellence, just-in-time construction and custom building arefoundational. The team prides themselves on 99.9 percent oforders delivered in 48 hours or less. So it’s no surprise thatCotterman has been a top-performing supplier for Grainger overthe last several years.

Cotterman was first featured in the Grainger catalog in 2001andthe partnership has progressed ever since. Over time, volume hasincreased and now exceeds 100 Grainger transactions a day.Cotterman was also one of the first Grainger suppliers to be certifiedfor the drop ship program, shipping orders directly to customers.

“We are doing things today that we weren’t capable of doing tenyears ago,” said Vice President Nick Valore. “Grainger has setlevels of excellence that have made us improve as a company.As Grainger began to refine its supplier scorecard measurements,we made sure Cotterman would rank at the top of the list.”

“This recognition is great for Cotterman – it puts us alongside thebigger suppliers and national name brands. But it’s also great forour team, especially those who work late nights or weekends toget product out on time. It doesn’t matter how big you are – if youdo the right thing for your customers, you can get recognized.”

Cotterman Co. receives Grainger’s annual Supplier of the Year award.

Page 27: Grainger Fact Book

W.W. GRAINGER, INC. AND SUBSIDIARIES 25

For the Years Ended December 31,

(In thousands of dollars, except per share amounts) 2011 2010 2009

Net sales $8,078,185 $7,182,158 $6,221,991

Cost of merchandise sold 4,567,393 4,176,474 3,623,465

Gross profit 3,510,792 3,005,684 2,598,526

Warehousing, marketing and administrative expenses 2,458,363 2,145,209 1,933,302

Operating earnings 1,052,429 860,475 665,224

Other income and (expense):Interest income 2,068 1,215 1,358

Interest expense (9,091) (8,187) (8,766)

Equity in net income (loss) of unconsolidated entities 314 (182) 1,497

Gain on investment in unconsolidated entities 7,639 — 47,343

Other non-operating income 709 1,608 964

Other non-operating expense (2,541) (1,151) (283)

Total other income and (expense) (902) (6,697) 42,113

Earnings before income taxes 1,051,527 853,778 707,337

Income taxes 385,115 340,196 276,565

Net earnings 666,412 513,582 430,772

Less: Net earnings attributable to noncontrolling interest 7,989 2,717 306

Net earnings attributable to W.W. Grainger, Inc. $ 658,423 $ 510,865 $ 430,466

Earnings per share:Basic $ 9.26 $ 7.05 $ 5.70

Diluted $ 9.07 $ 6.93 $ 5.62

Weighted average number of shares outstanding:Basic 69,690,854 70,836,945 73,786,346

Diluted 71,176,158 72,138,858 74,891,852

Diluted Earnings Per Share:Net earnings as reported $ 658,423 $ 510,865 $ 430,466

Earnings allocated to participating securities (12,654) (11,294) (9,947)

Net earnings available to common shareholders $ 645,769 $ 499,571 $ 420,519

Weighted average shares adjusted for dilutive securities 71,176,158 72,138,858 74,891,852

Diluted earnings per share $ 9.07 $ 6.93 $ 5.62

Segment Information

Consolidated Statements of Earnings

(In thousands of dollars) 2011 2010 2009

SalesUnited States $6,501,343 $6,020,069 $5,445,390

Canada 992,823 820,941 651,166

Other Businesses 647,666 389,621 165,051

Intersegment sales (63,647) (48,473) (39,616)

Net sales to external customers $8,078,185 $7,182,158 $6,221,991

Operating earningsUnited States $1,066,324 $ 920,222 $ 735,586

Canada 107,582 46,836 43,742

Other Businesses 30,984 11,661 (11,634)

Unallocated expenses (152,461) (118,244) (102,470)

Operating earnings $1,052,429 $ 860,475 $ 665,224

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26 W.W. GRAINGER, INC. AND SUBSIDIARIES

As of December 31,

(In thousands of dollars) 2011 2010

AssetsCurrent AssetsCash and cash equivalents $ 335,491 $ 313,454

Accounts receivable (less allowances for doubtful accounts of$18,801 and $24,552, respectively) 888,697 762,895

Inventories — net 1,268,647 991,577

Prepaid expenses and other assets 100,081 87,125

Deferred income taxes 47,410 44,627

Prepaid income taxes 54,574 38,393

Total current assets 2,694,900 2,238,071

Property, Buildings and EquipmentLand 252,161 249,119

Buildings, structures and improvements 1,186,002 1,133,392

Furniture, fixtures, machinery and equipment 1,127,159 995,249

2,565,322 2,377,760

Less: Accumulated depreciation and amortization 1,505,027 1,414,088

Property, buildings and equipment – net 1,060,295 963,672

Deferred income taxes 100,830 87,244

Goodwill 509,183 387,232

Other assets and intangibles – net 350,854 228,158

Total Assets $4,716,062 $3,904,377

Liabilities and Shareholders’ EquityCurrent LiabilitiesShort-term debt $ 119,970 $ 42,769

Current maturities of long-term debt 221,539 31,059

Trade accounts payable 477,648 344,295

Accrued compensation and benefits 207,010 169,343

Accrued contributions to employees’ profit sharing plans 159,950 145,119

Accrued expenses 178,652 130,836

Income taxes payable 23,156 5,882

Total current liabilities 1,387,925 869,303

Long-term debt (less current maturities) 175,055 420,446

Deferred income taxes, tax uncertainties and derivative instruments 106,573 82,502

Accrued employment-related benefits costs 322,230 244,456

Shareholders’ equityCumulative preferred stock – $5 par value – 12,000,000 shares authorized; none issued nor outstanding — —

Common stock – $0.50 par value – 300,000,000 shares authorized; 109,659,219 shares issued 54,830 54,830

Additional contributed capital 700,826 637,686

Retained earnings 4,806,110 4,326,761

Accumulated other comprehensive (losses) earnings (28,738) 42,951

Treasury stock, at cost – 39,696,367 and 40,281,417 shares, respectively (2,904,243) (2,857,012)

Total W.W. Grainger, Inc. shareholders’ equity 2,628,785 2,205,216

Noncontrolling interest 95,494 82,454

Total shareholders’ equity 2,724,279 2,287,670

Total Liabilities and Shareholders’ Equity $4,716,062 $3,904,377

Consolidated Balance Sheets

Page 29: Grainger Fact Book

W.W. GRAINGER, INC. AND SUBSIDIARIES 27

For the Years Ended December 31,

(In thousands of dollars) 2011 2010 2009

Cash flows from operating activities:Net earnings $ 666,412 $ 513,582 $ 430,772

Provision for losses on accounts receivable 4,761 6,718 10,748

Deferred income taxes and tax uncertainties 1,666 (5,553) 21,683

Depreciation and amortization 149,200 149,678 147,531

Stock-based compensation 54,020 49,796 43,301

Gain on investment in unconsolidated entities (7,639) — (47,343)

Change in operating assets and liabilities – net of business acquisitions:Accounts receivable (85,083) (127,790) 2,794

Inventories (219,680) (80,545) 175,286

Prepaid expenses and other assets (24,228) (8,806) (11,180)

Trade accounts payable 86,395 36,219 (16,736)

Other current liabilities 50,718 49,576 (52,944)

Current income taxes payable 16,827 (1,503) 2,472

Accrued employment-related benefits costs 45,680 18,128 22,080

Other – net 7,059 (3,055) 3,932

Net cash provided by operating activities 746,108 596,445 732,396

Cash flows from investing activities:Additions to property, buildings and equipment (196,942) (127,124) (142,414)

Proceeds from sale of property, buildings and equipment 7,278 6,508 1,684

Cash paid for business acquisitions, net of cash acquired (359,296) (62,072) (123,093)

Other – net 13,892 13,529 1,260

Net cash used in investing activities $ (535,068) $(169,159) $(262,563)

Cash flows from financing activities:Borrowings under lines of credit $ 218,885 $ 35,297 $ 46,125

Payments against lines of credit (194,325) (29,799) (43,583)

Proceeds from issuance of long-term debt 172,464 200,000 —

Payments of long-term debt and commercial paper (179,296) (239,122) (18,856)

Proceeds from stock options exercised 84,337 86,528 91,165

Excess tax benefits from stock-based compensation 52,098 25,650 19,030

Purchase of treasury stock (151,082) (504,803) (372,727)

Cash dividends paid (180,527) (152,338) (134,684)

Net cash used in financing activities (177,446) (578,587) (413,530)

Exchange rate effect on cash and cash equivalents (11,557) 4,884 7,278

Net change in cash and cash equivalents 22,037 (146,417) 63,581

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

Cash and cash equivalents at end of year $ 335,491 $ 313,454 $ 459,871

Supplemental cash flow information:Cash payments for interest (net of amounts capitalized) $ 8,996 $ 8,188 $ 8,766

Cash payments for income taxes 312,616 319,754 235,043

Consolidated Statements of Cash Flows

Page 30: Grainger Fact Book

28 W.W. GRAINGER, INC. AND SUBSIDIARIES

Historical Financial Summary

2011 2010 2009

Financial Net sales $8,078,185 $7,182,158 $6,221,991

Summary ($000) Earnings before income taxes andcumulative effect of accounting change 1,051,527 853,778 707,337

Income taxes 385,115 340,196 276,565

Earnings before cumulative effect of accounting change 658,423 510,865 430,466

Cumulative effect of accounting change — — —

Net earnings attributable to W.W. Grainger, Inc. 658,423 510,865 430,466

Working capital 1,306,975 1,368,768 1,354,716

Additions to property, buildings and equipment andcapitalized software 196,942 127,124 142,414

Depreciation and amortization 137,211 137,793 140,974

Current assets 2,694,900 2,238,071 2,131,515

Total assets 4,716,062 3,904,377 3,726,332

Shareholders’ equity 2,724,279 2,287,670 2,227,199

Cash dividends paid 180,527 152,338 134,684

Long-term debt (less current maturities) 175,055 420,446 437,500

Per Share ($) Earnings – basic 9.26 7.05 5.70

Earnings – diluted 9.07 6.93 5.62

Cash dividends paid 2.52 2.08 1.78

Book value 38.94 32.97 30.81

Year-end stock price 187.19 138.11 96.83

Ratios Percent of return on average shareholders’ equity 26.3 22.6 20.2

Percent of return on average total capitalization 22.2 18.7 16.4

Earnings before income taxes and cumulative effectof accounting change as a percent of net sales 13.0 11.9 11.4

Earnings before cumulative effect of accountingchange as a percent of net sales 8.1 7.1 6.9

Cash dividends paid as a percent of net earnings 27.4 29.8 31.3

Total debt as a percent of total capitalization 15.9 17.8 19.1

Current assets as a percent of total assets 57.1 57.3 57.2

Current assets to current liabilities 1.9 2.6 2.7

Average inventory turnover – FIFO 3.0 3.1 2.7

Average inventory turnover – LIFO 4.0 4.4 3.8

Other Data Average number of shares outstanding – basic 69,690,854 70,836,945 73,786,346

Average number of shares outstanding – diluted 71,176,158 72,138,858 74,891,852

Number of employees 21,446 18,596 18,006

Number of outside sales representatives 4,029 3,079 2,845

Number of branches 711 607 612

Number of products in the Grainger® catalog 354,000 307,000 233,000

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

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

Page 31: Grainger Fact Book

W.W. GRAINGER, INC. AND SUBSIDIARIES 29

2008 2007 2006 2005 2004 2003 2002 2001

$6,850,032 $6,418,014 $5,883,654 $5,526,636 $5,049,785 $4,667,014 $4,643,898 $4,754,317

773,218 681,861 603,023 532,674 445,139 381,090 397,837 297,280

297,863 261,741 219,624 186,350 158,216 154,119 162,349 122,750

475,355 420,120 383,399 346,324 286,923 226,971 235,488 174,530

— — — — — — (23,921) —

475,355 420,120 383,399 346,324 286,923 226,971 211,567 174,530

1,382,375 974,414 1,155,763 1,290,188 1,108,384 926,773 898,681 838,800

194,975 197,423 136,764 157,247 160,758 80,486 144,052 107,168

135,137 127,882 114,884 105,671 96,305 88,629 92,811 97,220

2,144,109 1,800,817 1,862,086 1,985,539 1,744,416 1,633,413 1,484,947 1,392,611

3,515,417 3,094,028 3,046,088 3,107,921 2,809,573 2,624,678 2,437,448 2,331,246

2,033,805 2,098,108 2,177,615 2,288,976 2,067,970 1,845,135 1,667,698 1,603,189

121,504 113,093 97,896 82,663 71,243 67,281 66,467 65,445

488,228 4,895 4,895 4,895 — 4,895 119,693 118,219

6.07 5.01 4.36 3.87 3.18 2.50 2.30 1.87

5.97 4.91 4.24 3.78 3.13 2.46 2.24 1.84

1.55 1.34 1.11 0.92 0.79 0.74 0.72 0.70

27.20 26.40 25.90 25.51 22.83 20.27 18.21 17.17

78.84 87.52 69.94 71.10 66.62 47.39 51.55 48.00

23.0 19.7 17.2 15.9 14.7 12.9 12.9 11.1

20.3 19.2 17.2 15.9 14.2 12.3 13.6 10.2

11.3 10.6 10.2 9.6 8.8 8.2 8.6 6.3

6.9 6.6 6.5 6.3 5.7 4.9 5.1 3.7

25.6 26.9 25.5 23.9 24.8 29.6 31.4 37.5

20.7 5.0 0.4 0.4 0.5 7.5 7.2 7.8

61.0 58.2 61.1 63.9 62.1 62.2 60.9 59.7

2.8 2.2 2.6 2.9 2.7 2.3 2.5 2.5

2.9 3.1 3.1 3.2 3.3 2.9 3.2 3.3

4.1 4.3 4.4 4.5 4.6 4.4 4.5 4.7

76,579,856 82,403,958 87,838,723 89,568,746 90,206,773 90,731,013 91,982,430 93,189,132

77,887,620 84,173,381 90,523,774 91,588,295 91,673,375 92,394,085 94,303,497 94,727,868

18,334 18,036 17,074 16,732 15,523 14,701 15,236 15,385

2,433 2,386 1,805 2,507 2,154 1,741 1,650 1,641

617 610 593 589 582 575 576 579

183,000 139,000 115,000 82,400 82,300 88,400 98,700 99,900

Page 32: Grainger Fact Book

30 W.W. GRAINGER, INC. AND SUBSIDIARIES

James T. RyanChairman, Presidentand Chief ExecutiveOfficer

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

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

Mr. Ryan is a trustee of the Museum of Science andIndustry and DePaul University and is a businessAdvisory Council Member for the Farmer School ofBusiness at Miami University, Oxford, Ohio. He also isa member of the Civic Committee of the CommercialClub of Chicago, the Economic Club of Chicago andthe Business Roundtable.

Laura D. BrownSenior Vice President,Communications andInvestor Relations

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

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

John L. HowardSenior Vice Presidentand General Counsel

Mr. Howard joined Grainger and was electedSenior Vice President and General Counselin January 2000. His responsibilities includesupporting all of the company’s legal functions,business development and administrative services.

He served a two-year term on Federal ReserveBank of Chicago’s Seventh District AdvisoryCouncil. Mr. Howard currently serves as ViceChairman and Secretary on the board of theChicago Botanic Garden.

Court D. CarruthersSenior Vice President;President, Grainger U.S.

Mr. Carruthers was named Senior Vice Presidentand President, Grainger U.S. in January 2012. Inthis role, he is responsible for the company’s U.S.operations. Previously, Mr. Carruthers served asSenior Vice President and President, GraingerInternational, overseeing the company’s operationsin Canada, Europe, Asia and Latin America.

Mr. Carruthers joined Grainger in 2002, holdingleadership positions in sales, branch operations, andglobal sourcing in Grainger’s Canadian subsidiary,Acklands–Grainger, Inc., before being promoted toPresident, Acklands–Grainger in 2006. Prior to joiningthe company, he held a number of sales leadershipand business development roles in the logistics sector.

Mr. Carruthers serves as a member of the Universityof Alberta Business Advisory Council, is a PastDirector of Kids Help Phone and the MarkhamStouffville Hospital Foundation, and Past Chair ofthe United Way York Region Campaign.

TimothyM. FerrarellSenior Vice Presidentand Chief InformationOfficer

Mr. Ferrarell was named Senior Vice President, ChiefInformation Officer, in June 2007. He is responsiblefor enhancing customers’ experiences through thecompany’s process improvement and businesssystem integration efforts.

Prior to this role, Mr. Ferrarell had served as SeniorVice President, Enterprise Systems, since June2001, and took on responsibility for EnterpriseProcesses in 2006.

He serves on the Board of Trustees forLewis University.

Joseph C. HighSenior Vice President,Human Resources

Mr. High joined Grainger as Senior Vice President,Human Resources in June 2011. He is responsiblefor ensuring that Grainger’s human capital strategiesand plans strongly support the company’s globalgrowth initiatives.

Prior to joining Grainger, Mr. High was the SeniorVice President of Human Resources at OwensCorning in Toledo, Ohio. Previous to that role, he washead of Human Resources for ConocoPhillips inHouston. Mr. High also served as an Officer atRockwell Automation andCummins EngineCompany.

Mr. High also serves on the Board at OutwardBound, a premier provider of experience-basedoutdoor leadership programs for teens, adultsand professionals, and is chairman of the HumanResources Committee. He is also a past Trusteeof the University of Toledo.

Executive and Operating Management

Page 33: Grainger Fact Book

DG MacphersonSenior Vice President;President, Global SupplyChain and CorporateStrategy

Mr. Macpherson, who joined Grainger in 2008, leadsGrainger’s Global Supply Chain operations includingthe company’s distribution centers, its product offeringand availability. Mr. Macpherson also provides globalplanning, coordination and specialized expertise tothe supply chain organizations in all of Grainger’sbusiness units, including global supply chainarchitecture and procurement.

In January 2012, Mr. Macpherson added responsibilityto extend a common SAP platform to the company’sbusinesses in Canada and Latin America. He alsodirects the corporation’s overall business strategy.

Mr. Macpherson joined Grainger in 2008 from theBoston Consulting Group (BCG), where he wasPartner andManaging Director since 2002.

Mr. Macpherson is amember of the board of directorsfor the American Red Cross of Greater Chicago.

W.W. GRAINGER, INC. AND SUBSIDIARIES 31

Ronald L. JadinSenior Vice Presidentand Chief FinancialOfficer

Mr. Jadin was promoted to his current rolein March 2008. He had been Vice Presidentand Controller since November 2006. Hisduties include financial planning and analysis,financial process planning and control, financialreporting, internal audit, treasury operations andfinancial services.

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

Michael A. PulickSenior Vice President;President, GraingerInternational

Mr. Pulick was named Senior Vice President andPresident, Grainger International in January 2012.In this role, he is responsible for overseeingGrainger’s operations outside the United States,which include approximately 6,000 team membersin more than 30 countries.

Prior to this role he served as Senior Vice Presidentand President, Grainger U.S. and was responsiblefor all aspects of the company’s U.S. operations.Since joining Grainger in 1999, Mr. Pulick has helda number of roles with increased responsibility. Priorto joining Grainger, Mr. Pulick held managementpositions within General Electric’s Industrial Systemsbusiness and its Motors, Appliances and IndustrialControls business.

He serves as a member of the Illinois Institute ofTechnology’s Board of Trustees and is also a formerJunior Achievement of Chicago board member.

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

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

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

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

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

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

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

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

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

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

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

Compensation PracticesPay for PerformanceCompensation Element Link to Performance

Base Salary Base salary increases are linked toindividual performance.

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

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

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

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

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

Ownership Guidelines 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 incorporate abalance of risk mitigation components.

Page 34: Grainger Fact Book

32 W.W. GRAINGER, INC. AND SUBSIDIARIES

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Shareholder RightsCompany has a shareholder rights plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . No

Shareholders have cumulative voting rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes

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

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

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

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

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

Board of Directors

(1) Member of Audit Committee

(2) Member of Board Affairs and Nominating

Committee

(3) Member of Compensation Committee

* Committee Chair

† Lead Director

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

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

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

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

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

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

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

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

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

James T. RyanChairman, President and Chief Executive Officer

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

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

Page 35: Grainger Fact Book

W.W. GRAINGER, INC. AND SUBSIDIARIES 33

DESIGN: Anonymous Design, Inc.

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

Media Relations ContactsRobb KristopherDirector, Media Relations847.535.0879

Kellie HarrisManager, Media Relations847.535.1542

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

William D. ChapmanSenior Director, Investor Relations847.535.0881

Analyst Coverage (As of March 1, 2012)Bank of America — John InchBarclays Capital — Scott DavisBB&T Capital Markets — Holden LewisBuckingham Research — Edward WheelerCitibank — Deane DrayCleveland Research Company — Adam UhlmanCredit Suisse — Hamzah MazariFBR Capital Markets — Ajay KejriwalGoldman Sachs — Terry DarlingMorningstar — Basili AlukosOppenheimer & Company — Christopher GlynnRaymond James — Sam DarkatshRobert W. Baird — David MantheyS+P — Stewart ScharfStephens, Inc. — Matt DuncanUBS — Robert BarryWells Fargo — Allison Poliniak-CusicWilliam Blair & Company, LLC — Ryan Merkel

Annual MeetingThe 2012 Annual Meeting of Shareholders willbe held at the company’s headquarters in LakeForest, Illinois, at 10:00 a.m. CDT on Wednesday,April 25, 2012.

Expected Earnings Release DatesFirst Quarter April 17, 2012Second Quarter July 18, 2012Third Quarter October 16, 2012Fourth Quarter January 24, 2013

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, ACKLANDS—GRAINGER,ACKLANDS GRAINGER INDUSTRIAL SAFETYFASTENERS and Design, CONDOR, CONDORand Design, CONTENDER, FOR THE ONES WHOGET IT DONE, GRAINGER, GRAINGER andDesign, GRAINGER FOR THE ONES WHO GETIT DONE and Design, GRAINGER IN CHINESECHARACTERS and Design, GRAINGER ShippingBox Design, GRAINGER TOOLS FOR TOMORROW,GRAINGER.COM, GRAINGER.COM.MX, KEEPSTOCK,KEEPSTOCK MOBILE, LUMAPRO, TOUGH GUYand WESTWARD are the trademarks or service marksof W.W. Grainger, Inc., which may be registered in theUnited States and/or other countries.

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

FABORY; FABORY MASTERS IN FASTENERS andDesign, MASTERS IN FASTENERS and MAXXFASTare the trademarks of Fabory Nederland B.V., whichmay be registered in the United States and/or othercountries.

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

ALLIANCE ENERGY SOLUTIONS is the servicemark of Grainger Service Holding Company, Inc.,which may be registered in the United States and/orother countries.

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

© 2012 W.W.Grainger, Inc.

Company Information

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. Since 1999,he had served as Director, Investor Relations.

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. In 2012, he wasrecognized by Institutional InvestorMagazineas the top IR professional in the capital goods/industrials sector, as voted by the buy-side.

Mr. Chapman also serves as a director, pastpresident and current scholarship chairmanof the Wisconsin Alumni Association-ChicagoChapter and is a former director of the NationalWisconsin Alumni Association.

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The printer and paper utilized for thisreport have been certified by theForest Stewardship Council (FSC),which promotes environmentallyappropriate, socially beneficial andeconomically viable managementof the world’s forests. This report ison paper containing 30 percentpost-consumer recycled fiber.

Page 36: Grainger Fact Book

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

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