Ron Jadin Senior Vice President & Chief Financial Officer
Financial Update
1 ANNUAL ANALYST MEETING: November 13, 2013
2013 Guidance
Strong operating margin expansion and EPS growth for full year 2013
LOW HIGH
Sales $B 9.4$ 9.5$
EPS 11.45$ 11.65$
Sales growth 5% 6%
EPS growth 10% 12%
Op Margin % 14.2% 14.4%
Op Margin expansion 40 bps 60 bps
Note: excludes unusual items as reported by the company in its quarterly earnings releases
2 ANNUAL ANALYST MEETING: November 13, 2013
4Q 2013 Guidance
Strong sales growth, with margin dilution from acquisitions
LOW HIGH
Sales $B 2.4$ 2.4$
EPS 2.53$ 2.73$
Sales growth 6% 8%
EPS growth 5% 13%
Op Margin % 12.5% 13.2%
Op Margin expansion (20) bps 50 bps
Note: excludes unusual items as reported by the company in its quarterly earnings releases
3 ANNUAL ANALYST MEETING: November 13, 2013
2014 Guidance
4 ANNUAL ANALYST MEETING: November 13, 2013
Economic Assumptions
2014 economic projections show improvement over 2013
Real 2014 2013
U.S. MRO Market
U.S. Business Investment
U.S. Exports
U.S. Industrial Production 1.8% to 4.7% (3.0% avg)
CANADA GDP 2.3%
EUROZONE GDP 0.9%
MEXICO GDP 3.6%
JAPAN GDP 1.7%
Sources: "Consensus Forecasts - U.S.A." publication October 2013.
U.S. MRO Market: internal Grainger economic forecast as of October 2013, based on
data points provided by Global Insights.
1.6%
1.9%
2.3%
1.7%
-0.3%
0.5%
2.0%
0.9%
0.3% to 5.3% (2.9% avg)
1.1% to 10.3% (5.7% avg)
0.8% to 6.9% (4.0% avg)
5 ANNUAL ANALYST MEETING: November 13, 2013
Sales Growth Drivers
Low end organic comparable to 2013, high end assumes stronger economy & share gains
Economy/Share Gain 4% - 8% 4%
Price 1%
Organic Sales 5% - 9% 5%
F/X -1%
Acquisitions 2%
Company Sales 6% - 10% 6%
Note: 2013E reflects midpoint of guidance range
0%
1%
1%
2014E 2013E
6 ANNUAL ANALYST MEETING: November 13, 2013
2014 Guidance by Segment
Strong margin growth in the U.S., investment increases in Canada & Other Businesses
LOW HIGH LOW HIGH LOW HIGH
Sales growth 4% 8% 2% 6% 14% 19%
Op Margin % 18.1% 18.4% 11.2% 11.5% 3.2% 3.5%
Op Margin % vs PY 15 45 bps (50) (20) bps 0 35 bps
* Organic - excludes E&R acquisition
U.S. * CANADA OTHER BUS
7 ANNUAL ANALYST MEETING: November 13, 2013
2014 Guidance
Margin expansion consistent with long term goal of 30-60 bps per year, before programs
LOW HIGH
Sales $B $9.9 $10.3
EPS $12.23 $12.98
Sales growth 5% 9%
EPS growth 6% 13%
Op Margin % 14.5% 14.8%
Op Margin % vs PY 15 bps 45 bps
* excludes E&R acquisition
ORGANIC *
8 ANNUAL ANALYST MEETING: November 13, 2013
Double digit sales and EPS growth at high end of range
2014 Guidance
9
LOW HIGH LOW HIGH
Sales $B $9.9 $10.3 10.1$ 10.4$
EPS $12.23 $12.98 12.25$ 13.00$
Sales growth 5% 9% 6% 10%
EPS growth 6% 13% 6% 13%
Op Margin % 14.5% 14.8% 14.3% 14.6%
Op Margin % vs PY 15 bps 45 bps 0 bps 30 bps
* excludes E&R acquisition
TOTAL COMPANYORGANIC *
ANNUAL ANALYST MEETING: November 13, 2013
Operating Margin % and Drivers
Both GP% expansion and expense productivity drive continued op margin expansion
8%
10%
12%
14%
16%
0
25
50
75
100
2012 2013E 2014E
OP
MA
RG
IN %
YR
/ Y
R C
HA
NG
E (
bp
s)
GP % CHANGE EXPENSE % CHANGE OP MARGIN %
+50bps
+30bps
+55bps
Note: 2013 and 2014 are organic and are midpoints of guidance ranges
10 ANNUAL ANALYST MEETING: November 13, 2013
Productivity continues to fund programs * organic
INCREMENTAL YEAR-OVER-YEAR PRODUCTIVITY & PROGRAM EXPENSE
$190
$135
$185
($135) ($120) ($140) ($200)
($100)
$0
$100
$200
$300
$ M
ILLIO
NS
PRODUCTIVITY GROWTH & INFRASTRUCTURE PROGRAMS
2014E LOW* Sales +5%
OM +15bps
2014E HIGH* Sales +9%
OM +45bps
2013E*
SAP SAP
Productivity vs. Programs
11 ANNUAL ANALYST MEETING: November 13, 2013
Growth & Infrastructure Programs
Portfolio balanced between short, medium, and long term
Enterprise
Systems & SAP $30M
DCs
$20M
eCommerce
$10MSales Coverage
$40M
LONG TERM
MEDIUM TERM
SHORT TERMProductivity
$10M
Keep Stock
$20M
$50M
$130M
$30M
$50M
2014E INCREMENTAL EXPENSEEARNINGS POSITIVE
< 1 year
> 2 years
1-2 years
12 ANNUAL ANALYST MEETING: November 13, 2013
Long Term Operating Margins
Company op margin expansion 30-60 bps per year, on high single digit organic sales growth
U.S. 18% - 18% 18% - 19% 19% - 20%
Canada 11% - 12% 11% - 12% 12% - 13%
Other 3% - 4% 4% - 7% 7% - 9%
Company 14% - 15% 15% - 16% 16% - 17%
2014E 2017E 2019E
13 ANNUAL ANALYST MEETING: November 13, 2013
Cash Flow & Balance Sheet
14 ANNUAL ANALYST MEETING: November 13, 2013
Cash Flow from Operations
Strong cash flow continues
$0.0
$0.2
$0.4
$0.6
$0.8
$1.0
$1.2
2009 2010 2011 2012 2013E 2014E
$B
ILL
ION
S
15 ANNUAL ANALYST MEETING: November 13, 2013
Cash Flow Guidance
Strong cash returns to shareholders, even with step-up in 2014 capital spending
Millions of Dollars 2014E 2013E
Cash Flow from Operations $950 - $1050 $975 - $1025
Capital Expenditures (gross) 375 - 425 250 - 300
% of Cash Flow (midpoint) ~40% ~28%
Share Repurchase 350 - 400 350 - 400
Dividends $270 - $290 $250
Depreciation & amortization: 2014 $185-$205; 2013 $180-$190
16 ANNUAL ANALYST MEETING: November 13, 2013
Capital Spending Trend
Capital spending averages near one-third of operating cash flow
40%36%
31%
42%
37%
19%21%
26%
31%28%
40%
0%
10%
20%
30%
40%
50%
$0
$100
$200
$300
$400
$500
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013E 2014E
CAPEX $M CAPEX % of OP CASH FLOW
Note: 2013 and 2014 are midpoints of guidance ranges
17 ANNUAL ANALYST MEETING: November 13, 2013
Working Capital Turns
Working capital turns remain on trend
35
40
45
50
55
60
65
70
0
1
2
3
4
5
6
7
2009 2010 2011 2012 2013E 2014E
DS
O
TU
RN
S
WORKING CAPITAL TURNS INVENTORY TURNS DSO
18 ANNUAL ANALYST MEETING: November 13, 2013
ROIC
Continued strong ROIC, even with capital and program investment increases
0%
10%
20%
30%
40%
2007 2008 2009 2010 2011 2012 2013E 2014E
Note: excludes unusual items as reported by the company in its quarterly press releases
19 ANNUAL ANALYST MEETING: November 13, 2013
Cash & Capital Strategy
Cash
Maintain $300M cash balance +/- $100M
Increase dividend > earnings growth
Reinvest one-third of cash flow in CAPEX
Remaining cash for share repurchase and acquisitions
Capital
Fund smaller acquisitions (< 5% assets or < $300M) with cash
Fund larger acquisitions with long term debt
Maintain tier 1 CP rating, strong “A” the floor, $1.5B - $2.0B debt
capacity
20 ANNUAL ANALYST MEETING: November 13, 2013
Summary: Near Term
2013
Strong performance, despite a weak economy
2014
Double digit sales and EPS growth at high end of guidance range,
solid leverage at midpoint
Productivity continues to fund significant growth and infrastructure
increases
Strong working capital management and ROIC
21 ANNUAL ANALYST MEETING: November 13, 2013
Summary: Long Term
TARGETING:
High single digit organic sales growth
30-60 bps average annual operating margin expansion
Top quartile shareholder returns
Two-thirds of operating cash flow returned to shareholders
Grainger uniquely positioned for strong long term growth, operating leverage and ROIC
22 ANNUAL ANALYST MEETING: November 13, 2013
Appendix
23 ANNUAL ANALYST MEETING: November 13, 2013
Operating Margin % Drivers
Productivity more than offsets increased program investments and selling price mix
2014E 2013EMidpoint Midpoint
Selling Price Mix (50) bps (53) bps
Acquisitions (23) (30)
Private Label 21 21
International Businesses 7 27
Price/Cost Leverage 32 50
Gross Profit (13) 15
OPEX Productivity 151 145
Acquisitions 7 25
Growth Spending (130) (135)
Expense 28 35
Operating Margin 15 bps 50 bps
24 ANNUAL ANALYST MEETING: November 13, 2013
Total Shareholder Return (TSR)
2014E
Sales 8%
Op Margin 1%
Op Earnings 9%
Tax Rate & Shares 0%
EPS 9%
Dividend Yield 2%
TSR 11%
Op Margin expansion 15 bps
Note: data shown is midpoint of guidance
Continued double digit TSR, driven by sales, op margin and dividend yield
25 ANNUAL ANALYST MEETING: November 13, 2013
Dividends & Shares Outstanding
2013 is the 42nd consecutive year of increased dividends; GWW is among an elite 3% of S&P 500
companies that have increased its dividend each year for more than four decades
$0.00
$1.00
$2.00
$3.00
$4.00
DIVIDENDS PER SHARE
2008
$1.55
$3.59
18% CAGR
2013E
0
20
40
60
80
100
2008 2013E
75
69
7%
reduction
SHARES OUTSTANDING(Millions)
26 ANNUAL ANALYST MEETING: November 13, 2013
Sales Days & Sales Growth Rate
FULL
Sales Days Q1 Q2 Q3 Q4 YEAR
2014 Sales Days 63 64 64 64 255
2013 Sales Days 63 64 64 64 255
2014 vs 2013 - - - - -
2012 Sales Days 64 64 63 64 255
2013 vs 2012 (1) - 1 - -
2013E Sales (reported) Q1A Q2A Q3A FY-E
Variance % to Prior Year 4% 6% 5% 6% - 8% 5 - 6%
Effective Tax Rate
2014 estimate: 37.5% to 37.9%
Q4E
27 ANNUAL ANALYST MEETING: November 13, 2013