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GWW > SEC Filings for GWW > Form 10-Q on 1-Nov-2012All Recent SEC Filings

Show all filings for GRAINGER W W INC

Form 10-Q for GRAINGER W W INC


Quarterly Report


Item 2.

Grainger is a broad-line distributor of maintenance, repair and operating supplies, and other related products and services used by businesses and institutions. Grainger's operations are primarily in the United States and Canada, with an expanding presence in Europe, Asia and Latin America. Grainger uses a multichannel business model to provide customers with a range of options for finding and purchasing products utilizing sales representatives, catalogs and direct marketing materials and eCommerce. Grainger serves approximately 2.0 million customers worldwide through a network of highly integrated branches, distribution centers, multiple websites and export services.

Business Environment
Several economic factors and industry trends tend to shape Grainger's business environment. The overall economy and leading economic indicators provide insight into anticipated Company performance for the near term and help in forming the development of projections. Historically, Grainger's sales trends have tended to correlate with industrial production and non-farm payrolls. According to the Federal Reserve, overall industrial production increased 2.8% from September 2011 to September 2012. This improvement has positively affected Grainger's sales growth for the nine months of 2012.

In October 2012, Consensus Forecasts-USA projected 2012 Industrial Production growth of 4.0% and GDP growth of 2.1% for the United States. In addition, Consensus Forecasts-USA projected 2012 GDP growth of 2.0% for Canada.

The light and heavy manufacturing customer end-markets have historically correlated with manufacturing employment levels and manufacturing output. According to the Federal Reserve, manufacturing output increased 1.4% from September 2011 to September 2012. The United States Department of Labor reported an increase of 1.5% in manufacturing employment levels. Grainger's heavy and light manufacturing customer end-markets outperformed these indicators as sales to both of these customer end-markets increased in the high single digits in the third quarter of 2012. For the nine months of 2012, sales to heavy and light manufacturing customers increased in the low double digits and high single digits, respectively.

On October 16, 2012, Grainger revised the 2012 sales growth guidance to 11 to 12 percent. Grainger had previously provided guidance of sales growth of 12 to 14 percent. Earnings per share guidance remained unchanged at $10.50 to $10.80, which excludes the $0.66 per share for the $76.0 million pre-tax expense recorded for the expected resolution of government contract issues. See Note 9 to the Condensed Consolidated Financial Statements. Gross profit margins for the last quarter of the year are expected to remain relatively consistent with the 2012 third quarter gross profit margins.

W.W. Grainger, Inc. and Subsidiaries

Matters Affecting Comparability
There were 63 and 64 sales days in the third quarter of 2012 and 2011, respectively. Grainger completed several acquisitions throughout 2011 and 2012, all of which were immaterial individually and in the aggregate. Grainger's operating results have included the results of each business acquired since the respective acquisition dates. Operating expenses included a $76.0 million estimated liability for the expected resolution of government contract issues, as described in Note 9 to the Condensed Consolidated Financial Statements.

Results of Operations - Three Months Ended September 30, 2012 The following table is included as an aid to understanding the changes in Grainger's Condensed Consolidated Statements of Earnings:

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