43 Pages Complete QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [x] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the period ended March 31, 2000 or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to Commission file number 1-5684 I.R.S. Employer Identification Number 36-1150280 W.W. Grainger, Inc. (An Illinois Corporation) 100 Grainger Parkway Lake Forest, Illinois 60045-5201 Telephone: (847) 535-1000 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ------ ------ APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date: 93,944,330 shares of the Company's Common Stock were outstanding as of April 28, 2000. The Exhibit Index appears on page 17 in the sequential numbering system. 1
<TABLE> Part I - FINANCIAL INFORMATION W.W. Grainger, Inc., and Subsidiaries CONSOLIDATED STATEMENTS OF EARNINGS (In thousands of dollars except for per share amounts) (Unaudited) <CAPTION> Three Months Ended March 31, ------------------------------ 2000 1999 ------------ ------------ <S> <C> <C> Net sales .................................. $ 1,195,194 $ 1,090,843 Cost of merchandise sold ................... 773,647 687,981 ------------ ------------ Gross profit ............................ 421,547 402,862 Warehousing, marketing, and administrative expenses ................. 346,770 306,596 ------------ ------------ Operating earnings ...................... 74,777 96,266 Other income or (deductions) Interest income ......................... 497 410 Interest expense ........................ (6,102) (1,733) Unclassified-net ........................ 91 (384) ------------ ------------ (5,514) (1,707) ------------ ------------ Earnings before income taxes ............... 69,263 94,559 Income taxes ............................... 28,052 38,296 ------------ ------------ Net earnings ............................ $ 41,211 $ 56,263 ============ ============ Earnings per share: Basic ................................... $ 0.44 $ 0.61 ============ ============ Diluted .................................. $ 0.44 $ 0.60 ============ ============ Weighted average number of shares outstanding: Basic ................................... 92,917,780 92,833,727 ============ ============ Diluted ................................. 94,416,374 94,210,765 ============ ============ Cash dividends paid per share .............. $ 0.16 $ 0.15 ============ ============ <FN> The accompanying notes are an integral part of these financial statements. </FN> </TABLE> 2
<TABLE> W.W. Grainger, Inc., and Subsidiaries CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS (In thousands of dollars) (Unaudited) <CAPTION> Three Months Ended March 31, ---------------------------- 2000 1999 -------- -------- <S> <C> <C> Net Earnings ...................................... $ 41,211 $ 56,263 Other comprehensive earnings (loss): Foreign currency translation adjustments ....... (1,090) 2,537 Unrealized (loss) on investments, net of tax ... (10,381) - -------- -------- Comprehensive earnings ............................ $ 29,740 $ 58,800 ======== ======== <FN> The accompanying notes are an integral part of these financial statements. </FN> </TABLE> 3
<TABLE> W.W. Grainger, Inc., and Subsidiaries CONSOLIDATED BALANCE SHEETS (In thousands of dollars) (Unaudited) <CAPTION> ASSETS March 31, 2000 Dec. 31, 1999 - ----------------------------------------------------------------- -------------- -------------- <S> <C> <C> CURRENT ASSETS Cash and cash equivalents ..................................... $ 64,685 $ 62,683 Accounts receivable, less allowance for doubtful accounts of $19,203 in 2000 and $18,369 in 1999 ............. 600,974 561,786 Inventories ................................................... 773,214 762,495 Prepaid expenses .............................................. 37,235 18,387 Deferred income tax benefits .................................. 67,554 65,794 -------------- -------------- Total current assets ........................................ 1,543,662 1,471,145 PROPERTY, BUILDINGS, AND EQUIPMENT .............................. 1,301,776 1,302,029 Less accumulated depreciation and amortization ................ 613,772 604,278 -------------- -------------- Property, buildings, and equipment-net ........................ 688,004 697,751 OTHER ASSETS .................................................... 380,809 395,930 -------------- -------------- TOTAL ASSETS .................................................... $ 2,612,475 $ 2,564,826 ============== ============== LIABILITIES AND SHAREHOLDERS' EQUITY - ----------------------------------------------------------------- CURRENT LIABILITIES Short-term debt ............................................... $ 283,519 $ 296,836 Current maturities of long-term debt .......................... 27,718 27,721 Trade accounts payable ........................................ 295,153 260,084 Accrued expenses .............................................. 263,479 285,507 Income taxes .................................................. 32,923 386 -------------- -------------- Total current liabilities ................................... 902,792 870,534 LONG-TERM DEBT (less current maturities) ........................ 124,457 124,928 DEFERRED INCOME TAXES ........................................... 41,419 48,117 ACCRUED EMPLOYMENT RELATED BENEFITS COSTS ....................... 41,425 40,718 SHAREHOLDERS' EQUITY Cumulative Preferred Stock - $5 par value - authorized, 12,000,000 shares, issued and outstanding, none ........... - - Common Stock - $0.50 par value - authorized, 300,000,000 shares; issued, 107,732,855 shares, 2000 and 107,460,978 shares, 1999 .................................. 53,866 53,730 Additional contributed capital ................................ 264,285 255,569 Retained earnings ............................................. 1,733,514 1,707,258 Unearned restricted stock compensation ........................ (18,019) (16,581) Accumulated other comprehensive earnings ...................... 57,320 68,791 Treasury stock, at cost - 14,086,892 shares, 2000 and 14,079,292 shares, 1999 .................................... (588,584) (588,238) -------------- -------------- Total shareholders' equity .................................... 1,502,382 1,480,529 -------------- -------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY .................... $ 2,612,475 $ 2,564,826 ============== ============== <FN> The accompanying notes are an integral part of these financial statements. </FN> </TABLE> 4
<TABLE> W.W. Grainger, Inc., and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands of dollars) (Unaudited) <CAPTION> Three Months Ended March 31, -------------------------------- 2000 1999 -------------- -------------- <S> <C> <C> Cash flows from operating activities: Net earnings .................................................. $ 41,211 $ 56,263 Provision for losses on accounts receivable ................... 3,553 3,035 Depreciation and amortization: Property, buildings, and equipment .......................... 21,458 17,908 Intangibles and goodwill .................................... 4,002 3,965 Amortization of capitalized software ........................ 3,492 2,290 Change in operating assets and liabilities: (Increase) in accounts receivable ........................... (42,741) (47,738) (Increase) in inventories ................................... (10,719) (19,824) (Increase) in prepaid expenses .............................. (18,848) (16,650) (Increase) in deferred income taxes ......................... (1,594) (648) Increase in trade accounts payable .......................... 35,069 56,470 (Decrease) in other current liabilities ..................... (22,028) (77,095) Increase in current income taxes payable .................... 32,537 22,651 Increase in accrued employment related benefits costs ............................................ 707 741 Other - net ................................................... 481 270 -------------- -------------- Net cash provided by operating activities ....................... 46,580 1,638 -------------- -------------- Cash flows from investing activities: Additions to property, buildings, and equipment - net of dispositions ............................. (11,711) (37,966) Expenditures for capitalized software ......................... (9,635) (4,228) Other - net ................................................... (1,493) (274) -------------- -------------- Net cash (used in) investing activities ......................... (22,839) (42,468) -------------- -------------- Cash flows from financing activities: Net (decrease) increase in short-term debt .................... (13,317) 65,872 Long-term debt payments ....................................... (17) (16) Stock incentive plan .......................................... 6,896 852 Purchase of treasury stock-net ................................ (346) (13,212) Cash dividends paid ........................................... (14,955) (14,003) -------------- -------------- Net cash (used in) provided by financing activities ............. (21,739) 39,493 -------------- -------------- Net increase (decrease) in cash and cash equivalents ............ 2,002 (1,337) Cash and cash equivalents at beginning of year .................. 62,683 43,171 -------------- -------------- Cash and cash equivalents at end of period ...................... $ 64,685 $ 41,834 ============== ============== <FN> The accompanying notes are an integral part of these financial statements. </FN> </TABLE> 5
W.W. Grainger, Inc., and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. BASIS OF STATEMENT PRESENTATION The financial statements and the related notes are condensed and should be read in conjunction with the consolidated financial statements and related notes for the year ended December 31, 1999, included in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission. The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany transactions are eliminated. Inventories are valued at the lower of cost or market. Cost is determined primarily by the last-in, first-out (LIFO) method. The unaudited financial information reflects all adjustments which are, in the opinion of management, necessary for a fair presentation of the statements contained herein. 2. DIVIDEND On April 26, 2000, the Board of Directors declared a quarterly dividend of 17 cents per share, payable June 1, 2000 to shareholders of record on May 8, 2000. 6
W.W. Grainger, Inc., and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) 3. SEGMENT INFORMATION (In thousands of dollars) The following segment disclosures are condensed and should be read in conjunction with the consolidated financial statements and related notes for the year ended December 31, 1999, included in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission. <TABLE> <CAPTION> Three Months Ended March 31, 2000 ---------------------------------------------------------------- Branch-based Distribution Digital Other Totals ------------ ------------ ------------ ------------ <S> <C> <C> <C> <C> Total net sales ........................ $ 1,078,190 $ 6,280 $ 120,928 $ 1,205,398 Intersegment net sales ................. 2,654 6,080 1,470 10,204 Net sales from external customers ...... 1,075,536 200 119,458 1,195,194 Segment operating earnings ............. 84,508 (10,933) 11,502 85,077 </TABLE> <TABLE> <CAPTION> Three Months Ended March 31, 1999 ---------------------------------------------------------------- Branch-based Distribution Digital Other Totals ------------ ------------ ------------ ------------ <S> <C> <C> <C> <C> Total net sales ........................ $ 993,354 $ 663 $ 100,573 $ 1,094,590 Intersegment net sales ................. 2,614 388 745 3,747 Net sales from external customers ...... 990,740 275 99,828 1,090,843 Segment operating earnings ............. 103,708 (3,644) 6,195 106,259 </TABLE> <TABLE> <CAPTION> Branch-based Distribution Digital Other Totals ------------ ------------ ------------ ------------ <S> <C> <C> <C> <C> Segment Assets At March 31, 2000 ...................... $ 2,074,321 $ 10,584 $ 183,708 $ 2,268,613 ============ ============ ============ ============ At December 31, 1999 ................... $ 2,060,781 $ 3,615 $ 161,865 $ 2,226,261 ============ ============ ============ ============ </TABLE> 7
W.W. Grainger, Inc., and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) 3. SEGMENT INFORMATION (In thousands of dollars) A reconciliation of segment information to consolidated information is as follows: <TABLE> <CAPTION> Three Months Ended March 31, ------------------------------ 2000 1999 ------------ ------------ <S> <C> <C> Total operating earnings for reportable segments ........... $ 85,077 $ 106,259 Unallocated expenses ....................................... (10,300) (9,993) Elimination of intersegment profits ........................ - - ------------ ------------ Total consolidated operating earnings .................... $ 74,777 $ 96,266 ============ ============ </TABLE> <TABLE> <CAPTION> March 31, December 31, 2000 1999 ------------ ------------ <S> <C> <C> Assets: Total assets for reportable segments ....................... $ 2,268,613 $ 2,226,261 Unallocated assets ......................................... 343,862 338,565 ------------ ------------ Total consolidated assets ................................ $ 2,612,475 $ 2,564,826 ============ ============ </TABLE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND THE RESULTS OF OPERATIONS RESULTS OF OPERATIONS THREE MONTHS ENDED MARCH 31, 2000 COMPARED WITH THE THREE MONTHS ENDED MARCH 31, 1999: Company Net Sales ----------------- The Company's net sales of $1,195,194,000 in the 2000 first quarter increased 9.6% from net sales of $1,090,843,000 for the comparable 1999 period. This increase was primarily driven by volume growth in the branch-based businesses, especially in Canada and Mexico; continued strong growth in Internet transactions; and strong growth at Grainger Integrated Supply. There were 65 sales days in the 2000 quarter versus 63 sales days in the 1999 quarter. On a daily basis the Company's net sales increased 6.2%. The year 2000 will have one more sales day than did 1999 (255 vs. 254). Sales processed through the digital businesses plus the sales that originated through Grainger.com were $62 million for the first quarter of 2000 as compared with $10 million in the 1999 first quarter. Segment Net Sales The following comments at the segment level include external and intersegment net sales; those comments at the business unit level include external and inter- and intrasegment net sales. For segment information see Note 3 of the Notes to Consolidated Financial Statements included in this report. Branch-based Distribution Businesses - ------------------------------------ Net sales of $1,078,190,000 for the first quarter of 2000 increased 8.5% when compared with net sales of $993,354,000 in the first quarter of 1999. Average daily net sales increased 5% for the 2000 first quarter compared with the 1999 first quarter. Sales growth in the United States was tempered by a decline in sales to large accounts requiring customized services, lower pricing as a result of selected price decreases, and customer mix variations. Contributing to the 2000 first quarter growth in the United States were 22 branches opened during 1999 and increased sales to government accounts. 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND THE RESULTS OF OPERATIONS RESULTS OF OPERATIONS (Continued) Acklands-Grainger Inc. experienced strong sales growth across most of Canada. The growth was driven by an improvement in the oil and gas and forestry sectors of the economy, gains in large customer account business, and the volume impact of 8 new branches opened during 1999. In Canadian dollars, average daily sales increased 14%. The Company is planning to open additional branches in Canada in 2000. The Mexican operation experienced strong sales growth reflecting the continued planned development of this business. A key driver was increased sales to customers located in Mexico's interior, which are served by the Company's facility in Monterrey. This growth in sales was attributable to market share expansion and account penetration. In January, the Company opened a storefront branch in Guadalajara. Net sales of the Branch-based Distribution Businesses were also favorably affected by continued momentum associated with the Company's Internet strategy. Sales orders processed through Grainger.com were $55 million, a 450% increase over first quarter 1999 sales of $10 million. Digital Businesses - ------------------ Net sales for the first quarter of 2000 were $6,280,000, an increase of 847.2% compared with $663,000 for the same period of 1999. Net sales for these businesses included product sales and service fee revenues for FindMRO.com and service fee revenue for Grainger Auction, OrderZone.com, and TotalMRO.com. FindMRO.com and Grainger Auction were officially launched in November 1999, whereas TotalMRO.com opened for business on March 31, 2000. TotalMRO.com is a utility that brings together a variety of distributors and key technology partners in an easily searchable site containing millions of maintenance, repair, and operating products and services. Other Businesses - ---------------- Net sales for the first quarter of 2000 were $120,928,000, an increase of 20.2% compared with $100,573,000 for the same period of 1999. Average daily sales for Grainger Integrated Supply increased 51% for the 2000 first quarter compared with the 1999 first quarter. Sales for this business unit include product sales and management fees. Growth was driven by new engagements, contract renewals, and scope expansions. 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND THE RESULTS OF OPERATIONS RESULTS OF OPERATIONS (Continued) Average daily sales for Lab Safety Supply, the Company's direct marketing business, increased for the first quarter 2000 compared with the same period of 1999. The increase at Lab Safety Supply reflects the continued growth of industrial product sales and expanded market share attained through new customer accounts. Company Net Earnings -------------------- The Company's net earnings of $41,211,000 in the first quarter of 2000 decreased 26.8% when compared to the net earnings of $56,263,000 for the comparable 1999 period. This decline resulted from a decrease in operating earnings and an increase in other deductions. Operating earnings declined at the Branch-based Distribution Businesses and the loss at the Digital Businesses increased. Operating earnings improved at the Other Businesses. Segment Operating Earnings The following comments at the segment level include external and intersegment operating earnings; those comments at the business unit level include external and inter- and intrasegment operating earnings. For segment information see Note 3 of the Notes to Consolidated Financial Statements included in this report. Branch-based Distribution Businesses - ------------------------------------ Operating earnings of $84,508,000 declined 18.5% for the first quarter 2000 as compared with $103,708,000 for the 1999 period. The majority of the shortfall resulted from lower gross profit margins which decreased 1.65 percentage points from the comparable 1999 quarter. This decline was caused by the following factors: 1. An unfavorable change in selling price category mix, which was driven by faster growth in sales to large customers and lower selling prices on selected products coinciding with the issuance of the Grainger Industrial Supply Catalog in February 2000. 2. Current recognition of certain product costs not fully recorded in 1999 until the fourth quarter physical inventory due to system installation issues. Partially offsetting the above factors was a favorable product mix related to new products added since the first quarter of 1999. 11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND THE RESULTS OF OPERATIONS RESULTS OF OPERATIONS (Continued) Also contributing to lower operating earnings were higher operating expenses, which increased 13% for the 2000 first quarter as compared with the 1999 period. This increase was a result of the following factors: o Continued spending to enhance and market Grainger.com. Grainger.com spending for the 2000 first quarter was $12.6 million compared with $2.5 million for the 1999 period. o Increased data processing and systems development expenses, as well as higher costs associated with the operation of the Enterprise Resource Planning (ERP) System. o Increased occupancy costs related to 8 new branches in Canada, 22 new branches in the United States, and the new Lake Forest office facility opened during 1999. o Higher freight-out expenses primarily driven by increased per shipment costs and increased shipments made directly to customers. Digital Businesses - ------------------ The Digital Businesses incurred operating losses of $10,933,000 compared with operating losses of $3,644,000 for the first quarter of 1999. These operating losses resulted from increased operating expenses incurred to launch, operate, and market these new digital businesses. Total Internet related operating expenses, as represented by this segment plus Grainger.com, (which is included in the Branch-based Distribution Businesses) were $25 million for the 2000 first quarter as compared with $7 million for the 1999 period. This increase for the quarter ended March 31, 2000 was primarily the result of incremental operating expenses incurred by the Company to develop, launch, operate, and market its portfolio of Web sites. The Company estimates that total Internet spending in the year 2000 will range between $110 and $120 million. Sales processed through the digital businesses plus Grainger.com were $62 million for the 2000 first quarter as compared with $10 million in the 1999 first quarter. 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND THE RESULTS OF OPERATIONS RESULTS OF OPERATIONS (Continued) Other Businesses - ---------------- Grainger Integrated Supply experienced an operating loss in the first quarter of 2000 that was 27% less than the operating loss incurred during the first quarter of 1999. This improvement in operating performance reflects improved productivity, partially offset by lower gross profit margins. The decrease in gross profit margins related to product sales, which grew at a faster rate than related management fee income. Operating earnings at Lab Safety Supply increased at a faster rate than the growth in sales, reflecting positive operating leverage from this direct marketing business. Other Deductions Other deductions of $5,514,000 in the first quarter of 2000 increased 223% compared with $1,707,000 in the prior year's first quarter. Other deductions were higher principally due to an increase in interest expense. This increase resulted from higher average borrowings, higher average interest rates paid on all outstanding debt, and lower capitalized interest. Income Taxes The Company's effective tax rate was 40.5% for the first quarter of both 2000 and 1999. 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND THE RESULTS OF OPERATIONS RESULTS OF OPERATIONS (Continued) Year 2000 --------- The Year 2000 issue is the result of computer programs using two digits rather than four to define the applicable year. Computer programs that have date sensitive software may recognize a date using "00" as the year 1900 versus the year 2000. This could result in systems failure or in miscalculation causing disruptions to operations. The Company's efforts in response to the Year 2000 issue included the review of information technology and non-information technology products and systems, the remediation or replacement, and testing, of affected information technology systems and facilities, the surveying of key suppliers of goods and services, and the creation of reasonable contingency plans to address potentially serious Year 2000 problems. Expenses associated with the Year 2000 project included both a reallocation of existing internal resources and the use of outside services. Year 2000 expenses from the inception of the project through 1999 year end are estimated to be $62,000,000. Year 2000 expenses after 1999 are expected to be minimal. The Company did not experience any material systems, product supply, or customer service disruptions as a result of Year 2000 problems. There can be no assurance, however, that such disruptions will not occur by reason of Year 2000 or other date-related problems yet to become manifest. 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND THE RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES For the three months ended March 31, 2000, working capital increased by $40,259,000. The ratio of current assets to current liabilities was 1.7 at both March 31, 2000 and December 31, 1999. The Consolidated Statements of Cash Flows, included in this report, detail the sources and uses of cash and cash equivalents. The Company maintains a debt ratio and liquidity position that provides reasonable flexibility in funding working capital needs and long-term cash requirements. In addition to internally generated funds, the Company has various sources of financing available, including commercial paper sales and bank borrowings under lines of credit and otherwise. Total debt as a percent of Shareholders' Equity was 29% at March 31, 2000 and 30% at December 31, 1999. For the first three months of 2000, $12,186,000 was expended for property, buildings, and equipment, and $9,635,000 was expended for capitalized software, for a total of $21,821,000. FORWARD-LOOKING STATEMENTS Throughout this Form 10-Q are forward-looking statements about the Company's expected future financial results and business plans, strategies, and objectives. These forward-looking statements are often identified by qualifiers such as: "expects," "plans," " anticipates," "intends," or similar expressions. There are risks and uncertainties the outcome of which could cause the Company's results to differ materially from what is projected. Factors that may affect the forward-looking statements include the following: higher product costs or other expenses; a major loss of customers; increased competitive pricing pressure on the Company's businesses; failure to develop, implement, or commercialize successfully new Internet technologies or other business strategies; the outcome of pending and future litigation and governmental proceedings; changes in laws and regulations; facilities disruptions or shutdowns due to accidents, natural acts or governmental action; unanticipated weather conditions; and other difficulties in improving margins or financial performance. Trends and projections could also be affected by general industry and market conditions and growth rates, general economic conditions, including currency rate fluctuations and other factors. 15
W.W. Grainger, Inc., and Subsidiaries PART II - OTHER INFORMATION Items 1, 2, 3, and 5 not applicable. Item 4 Submission of Matters to a Vote of Security Holders. An annual meeting of shareholders of the Company was held on April 26, 2000. At that meeting: a) Management's nominees listed in the proxy statement pertaining to the meeting were elected directors for the ensuing year. Of the 83,327,034 shares present in person or represented by proxy at the meeting, the number of shares voted for and the number of shares as to which authority to vote in the election was withheld, were as follows with respect to each of the nominees: <TABLE> <CAPTION> Shares as to Which Voting Name Shares Voted for Election Authority Withheld --------------------- --------------------------- ----------------------------- <S> <C> <C> B. P. Anderson 82,501,667 825,367 J. D. Fluno 82,482,271 844,763 W. H. Gantz 82,506,916 820,118 D. W. Grainger 82,498,556 828,478 R. L. Keyser 82,489,180 837,854 J. W. McCarter, Jr. 82,506,837 820,197 N. S. Novich 82,504,676 822,358 J. D. Slavik 82,501,669 825,365 H. B. Smith 82,503,937 823,097 F. L. Turner 82,503,060 823,974 J. S. Webb 74,143,981 9,183,053 </TABLE> b) A proposal to ratify the appointment of Grant Thornton, LLP as independent auditors of the Company for the year ended December 31, 2000 was approved. Of the 83,327,034 shares present or represented by proxy at the meeting, 82,988,724 shares were voted for the proposal, 102,592 shares were voted against the proposal, and 235,718 shares abstained from voting with respect to the proposal. 16
W.W. Grainger, Inc., and Subsidiaries PART II - OTHER INFORMATION <TABLE> <CAPTION> EXHIBIT INDEX ------------- <S> <C> Item 6 Exhibits (numbered in accordance with Item 601 of regulation S-K). a) Exhibits (3)(ii) By-laws, as amended 20-35 (10) Material Contracts (a) Supplemental Profit Sharing Plan, as amended 36-43 (11) Computation of Earnings per Common and Common Equivalent Share 19 (27) Financial Data Schedule b) Reports on Form 8-K - None </TABLE> 17
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. W.W. Grainger, Inc. -------------------------------------------- (Registrant) Date: May 11, 2000 By: /s/ P.O. Loux -------------------------------------------- P.O. Loux, Senior Vice President, Finance and Chief Financial Officer Date: May 11, 2000 By: /s/ R.D. Pappano -------------------------------------------- R.D. Pappano, Vice President, Financial Reporting 18
<TABLE> Exhibit 11 W.W. Grainger, Inc., and Subsidiaries COMPUTATIONS OF EARNINGS PER SHARE <CAPTION> Three Months Ended March 31, ----------------------------------- 2000 1999 --------------- --------------- BASIC: <S> <C> <C> Weighted average number of shares outstanding during the year ................................................... 92,917,780 92,833,727 =============== =============== Net earnings ......................................................... $ 41,211,000 $ 56,263,000 =============== =============== Earnings per share ................................................... $ 0.44 $ 0.61 =============== =============== DILUTED: Weighted average number of shares outstanding during the year (basic) ........................................... 92,917,780 92,833,727 Potential Shares: Shares issuable under outstanding options ..................... 2,541,850 2,840,880 Shares which could have been purchased based on the average market value for the period .................. 1,737,022 2,044,197 --------------- --------------- 804,828 796,683 Dilutive effect of exercised options prior to being exercised ................................................... 77,266 37,855 --------------- --------------- Shares for the portion of the period that the options were outstanding ............................................ 882,094 834,538 Contingently issuable shares .................................. 616,500 542,500 --------------- --------------- 1,498,594 1,377,038 --------------- --------------- Adjusted weighted average number of shares outstanding during the year .................................................... 94,416,374 94,210,765 =============== =============== Net earnings ......................................................... $ 41,211,000 $ 56,263,000 =============== =============== Earnings per share ................................................... $ 0.44 $ 0.60 =============== =============== </TABLE> 19