Illinois
|
36-1150280
|
|
(State or
other jurisdiction of incorporation or organization)
|
(I.R.S.
Employer Identification No.)
|
|
100
Grainger Parkway, Lake Forest, Illinois
|
60045-5201
|
|
(Address of
principal executive offices)
|
(Zip
Code)
|
|
(847)
535-1000
|
||
(Registrant’s
telephone number including area code)
|
||
Title of each
class
|
Name of each exchange on which
registered
|
|
Common Stock
$0.50 par value, and accompanying
|
New York Stock
Exchange
|
|
Preferred
Share Purchase Rights
|
Chicago Stock
Exchange
|
|
Large accelerated filer
T
|
Accelerated filer
£
|
Non-accelerated filer
£
|
Smaller reporting company
£
|
Page(s
)
|
||||||
PART
I
|
||||||
Item 1: | BUSINESS |
3-5
|
||||
THE
COMPANY
|
3
|
|||||
GRAINGER
BRANCH-BASED
|
3-4
|
|||||
INDUSTRIAL
SUPPLY
|
3-4
|
|||||
MEXICO
|
4
|
|||||
CHINA
|
4
|
|||||
ACKLANDS –
GRAINGER BRANCH-BASED
|
4
|
|||||
LAB
SAFETY
|
4
|
|||||
COMPETITION
|
5
|
|||||
EMPLOYEES
|
5
|
|||||
WEB SITE
ACCESS TO COMPANY REPORTS
|
5
|
|||||
Item
1A
:
|
RISK
FACTORS
|
5-6
|
||||
Item
1B
:
|
UNRESOLVED
STAFF COMMENTS
|
6
|
||||
Item
2:
|
PROPERTIES
|
6-7
|
||||
Item
3:
|
LEGAL
PROCEEDINGS
|
7
|
||||
Item
4:
|
SUBMISSION OF
MATTERS TO A VOTE OF SECURITY HOLDERS
|
8
|
||||
Executive
Officers
|
8
|
|||||
PART
II
|
||||||
Item
5:
|
MARKET FOR
REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER
|
|||||
MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
|
9-10
|
|||||
Item
6:
|
SELECTED
FINANCIAL DATA
|
10-11
|
||||
Item
7:
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL
|
|||||
CONDITION AND
RESULTS OF OPERATIONS
|
11-22
|
|||||
Item
7A:
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
22
|
||||
Item
8:
|
FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
|
22
|
||||
Item 9: | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS |
|
||||
ON ACCOUNTING
AND FINANCIAL DISCLOSURE
|
22
|
|||||
Item
9A:
|
CONTROLS AND
PROCEDURES
|
22
|
||||
Item
9B:
|
OTHER
INFORMATION
|
22
|
||||
PART
III
|
||||||
Item
10:
|
DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|
23
|
||||
Item
11:
|
EXECUTIVE
COMPENSATION
|
23
|
||||
Item
12:
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND
RELATED STOCKHOLDER MATTERS
|
23
|
||||
Item
13:
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND
|
|||||
DIRECTOR
INDEPENDENCE
|
23
|
|||||
Item
14:
|
PRINCIPAL
ACCOUNTING FEES AND SERVICES
|
23
|
||||
PART
IV
|
||||||
Item
15:
|
EXHIBITS AND
FINANCIAL STATEMENT SCHEDULES
|
23-24
|
||||
Signatures
|
25
|
|||||
Certifications
|
65-68
|
Location
|
Facility and
Use (7)
|
Size in Square
Feet (in 000’s)
|
||
United States
(1)
|
437 Industrial
Supply branch locations
|
9,466
|
||
United States
(2)
|
Nine
Distribution Centers
|
5,100
|
||
United States
(3)
|
Other
facilities
|
879
|
||
United States
(4)
|
Four Lab
Safety facilities
|
833
|
||
International
(5)
|
Other
facilities
|
806
|
||
Canada
(6)
|
165 Acklands –
Grainger facilities
|
2,303
|
||
Chicago
Area
|
Headquarters
and General Offices
|
1,327
|
||
Total Square
Feet
|
20,714
|
(1)
|
Industrial
Supply branches consist of 290 owned and 147 leased properties. Most
leases expire
between 2009
and 2017.
|
(2)
|
These
facilities are all owned.
|
(3)
|
These
facilities primarily include leased locations, including storage
facilities and idle properties.
|
(4)
|
Lab Safety
facilities consist of general offices, distribution centers, and storage
facilities, of which
one is owned
and three are leased.
|
(5)
|
These
facilities include owned and leased locations for Puerto Rico, Mexico,
China and Panama.
|
(6)
|
Acklands –
Grainger facilities consist of general offices, distribution centers and
branches, of which
56 are owned
and 109 leased.
|
(7)
|
Owned facilities are not subject to any
mortgages.
|
Name
and Age
|
Positions
and Offices Held and Principal
Occupation
and Employment During the Past Five Years
|
|
Court D.
Carruthers (36)
|
Senior Vice
President of Grainger, a position assumed in 2007, and President of
Acklands –
Grainger Inc.,
a position assumed in 2006. Previously, Mr. Carruthers
served as Vice President, National Accounts
and Sales of
Acklands –Grainger Inc., a position assumed in 2002 when he joined
that company.
|
|
Nancy A. Hobor
(62)
|
Senior Vice
President, Communications and Investor Relations, a position assumed in
1999.
|
|
John L. Howard
(51)
|
Senior Vice
President and General Counsel, a position assumed in 2000.
|
|
Gregory S.
Irving (50)
|
Vice President
and Controller, a position assumed in 2008. Previously,
Mr. Irving served as Vice President, Finance, for
Acklands - Grainger Inc. since 2004. After joining Grainger
in 1999 he served in various management positions including Vice
President, Financial Services and Director, Internal Audit.
|
|
Ronald L.
Jadin (48)
|
Senior Vice
President and Chief Financial Officer, a position assumed in 2008.
Previously, Mr. Jadin served as Vice President and Controller, a
position assumed in 2006 after serving as Vice President, Finance. Upon
joining Grainger in 1998, he served as Director, Financial Planning and
Analysis.
|
|
Richard L.
Keyser (66)
|
Chairman of
the Board, a position assumed in 1997. From 1995 through 2008,
Mr. Keyser served as Grainger's Chief Executive Officer. He joined
Grainger in 1986 and became a director in 1992.
|
|
Larry J.
Loizzo (54)
|
Vice
President, Specialty Brands, a position assumed in 2009 and President of
Lab Safety Supply, Inc., a position assumed in 1996. Previously, Mr.
Loizzo was Senior Vice President of Grainger, a position assumed in
2003.
|
|
Donald G.
Macpherson (41)
|
Senior Vice
President, Global Supply Chain, a position assumed in 2008.
Mr. Macpherson joined Grainger in 2008 as Senior Vice President,
Supply Chain. Before joining Grainger, he was Partner and Managing
Director of the Boston Consulting Group, a global management consulting
firm and advisor on business strategy.
|
|
Michael A.
Pulick (44)
|
Senior Vice
President and President, Grainger U.S., a position assumed in 2008 after
serving as Senior Vice President of Customer Service, a position assumed
in 2006. After joining Grainger in 1999, Mr. Pulick has held a number
of increasingly responsible positions in Grainger’s supplier and product
management areas including Vice President, Product Management and Vice
President, Merchandising.
|
|
James T. Ryan
(50)
|
President and
Chief Executive Officer of Grainger, a position assumed in 2008.
Mr. Ryan became a director in 2007. Previously he had been
Grainger’s President and Chief Operating Officer. Before assuming that
position in 2007, Mr. Ryan served as President, a position assumed in
2006, and served as Group President since 2004. Since joining Grainger in
1980, he has served in increasingly responsible roles, including Executive
Vice President, Marketing, Sales and Service; Vice President, Information
Services; President, grainger.com; and President, Grainger
Parts.
|
Prices
|
|||||||||||||
Quarters
|
High
|
Low
|
Dividends
|
||||||||||
2008
|
First
|
$ | 87.92 | $ | 69.00 | $ | 0.35 | ||||||
Second
|
93.12 | 75.94 | 0.40 | ||||||||||
Third
|
93.99 | 79.66 | 0.40 | ||||||||||
Fourth
|
86.90 | 58.86 | 0.40 | ||||||||||
Year
|
$ | 93.99 | $ | 58.86 | $ | 1.55 | |||||||
2007
|
First
|
$ | 80.37 | $ | 68.77 | $ | 0.29 | ||||||
Second
|
94.75 | 76.00 | 0.35 | ||||||||||
Third
|
98.60 | 79.38 | 0.35 | ||||||||||
Fourth
|
96.00 | 84.40 | 0.35 | ||||||||||
Year
|
$ | 98.60 | $ | 68.77 | $ | 1.34 |
Period
|
Total
Number
of Shares
Purchased (A)
|
Average Price
Paid
per Share
(B)
|
Total Number
of Shares Purchased as Part of Publicly Announced Plans or Programs
(C)
|
Maximum Number
of Shares that May Yet Be Purchased Under the Plans or
Programs
|
|||||
Oct. 1 –
Oct. 31
|
-
|
-
|
-
|
8,811,100
|
shares
|
||||
Nov. 1 –
Nov. 30
|
-
|
-
|
-
|
8,811,100
|
shares
|
||||
Dec. 1 –
Dec. 31
|
1,409,274
|
$73.47
|
1,409,274
|
7,401,826
|
shares
|
||||
Total
|
1,409,274
|
$73.47
|
1,409,274
|
(A)
|
There were no
shares withheld to satisfy tax withholding obligations in connection with
the vesting of employee restricted stock
awards.
|
(B)
|
Average price
paid per share includes any commissions paid and includes only those
amounts related to purchases as part of publicly announced plans or
programs. Activity is reported on a trade date
basis.
|
(C)
|
Purchases were
made through a share repurchase program approved by Grainger’s Board of
Directors. On April 30, 2008, Grainger announced that its Board of
Directors granted authority to repurchase up to 10 million shares. The
program has no specified expiration date. No share repurchase plan or
program expired or was terminated during the period covered by this
report.
|
December
31,
|
||||||||||||||||||||||||
2003
|
2004
|
2005
|
2006
|
2007
|
2008
|
|||||||||||||||||||
W.W. Grainger,
Inc.
|
$ | 100 | $ | 143 | $ | 155 | $ | 154 | $ | 196 | $ | 180 | ||||||||||||
S&P 500
Stock Index
|
100 | 111 | 116 | 135 | 142 | 90 | ||||||||||||||||||
Dow Jones
Wilshire 5000
Industrial Supplier Index
|
100 | 135 | 152 | 157 | 180 | 140 |
2008
|
2007
|
2006
|
2005
|
2004
|
||||||||||||||||
(In thousands
of dollars, except for per share amounts)
|
||||||||||||||||||||
Net
sales
|
$ | 6,850,032 | $ | 6,418,014 | $ | 5,883,654 | $ | 5,526,636 | $ | 5,049,785 | ||||||||||
Net
earnings
|
475,355 | 420,120 | 383,399 | 346,324 | 286,923 | |||||||||||||||
Net earnings
per basic share
|
6.21 | 5.10 | 4.36 | 3.87 | 3.18 | |||||||||||||||
Net earnings
per diluted share
|
6.04 | 4.94 | 4.24 | 3.78 | 3.13 | |||||||||||||||
Total
assets
|
3,515,417 | 3,094,028 | 3,046,088 | 3,107,921 | 2,809,573 | |||||||||||||||
Long-term debt
(less current maturities)
|
488,228 | 4,895 | 4,895 | 4,895 | – | |||||||||||||||
Cash dividends
paid per share
|
$ | 1.550 | $ | 1.340 | $ | 1.110 | $ | 0.920 | $ | 0.785 |
·
|
$90 million to
$105 million for supply chain
infrastructure;
|
·
|
$15 million to
$35 million for information
technology.
|
For the Years
Ended December 31,
|
||||||||||||||||||||
As a Percent
of Net Sales
|
Percent
Increase/(Decrease)
from Prior
Year
|
|||||||||||||||||||
2008
|
2007
|
2006
|
2008
|
2007
|
||||||||||||||||
Net
sales
|
100.0 | % | 100.0 | % | 100.0 | % | 6.7 | % | 9.1 | % | ||||||||||
Cost of
merchandise sold
|
59.0 | 59.4 | 60.0 | 6.0 | 8.1 | |||||||||||||||
Gross
profit
|
41.0 | 40.6 | 40.0 | 7.9 | 10.6 | |||||||||||||||
Operating
expenses
|
29.6 | 30.1 | 30.2 | 4.8 | 8.8 | |||||||||||||||
Operating
earnings
|
11.4 | 10.5 | 9.8 | 16.7 | 16.0 | |||||||||||||||
Other income (expense) | (0.1 | ) | 0.2 | 0.4 | (184.3 | ) | (55.1 | ) | ||||||||||||
Income
taxes
|
4.4 | 4.1 | 3.7 | 13.8 | 19.2 | |||||||||||||||
Net
earnings
|
6.9 | % | 6.6 | % | 6.5 | % | 13.1 | % | 9.6 | % |
Daily
Sales
Increase
2008 vs.
2007
|
||||
Phase 1
(Atlanta, Denver, Seattle)
|
7%
|
|||
Phase 2 (Four
markets in Southern California)
|
5%
|
|||
Phase 3
(Houston, St. Louis, Tampa)
|
10%
|
|||
Phase 4
(Baltimore, Cincinnati, Kansas City,
Miami,
Philadelphia, Washington, D.C.)
|
2%
|
|||
Phase 5
(Dallas, Detroit, New York, Phoenix)
|
3%
|
|||
Phase 6
(Chicago, Minneapolis, Pittsburgh,
San
Francisco)
|
6%
|
For the Years
Ended December 31,
|
||||||||
2008
|
2007
|
|||||||
Other
income and (expense):
|
||||||||
Interest
income (expense) – net
|
$ | (9,416 | ) | $ | 9,151 | |||
Equity in net
income of unconsolidated
entities
|
3,642 | 2,016 | ||||||
Write-off of
investment in unconsolidated entity
|
(6,031 | ) | – | |||||
Unclassified –
net
|
2,351 | 41 | ||||||
$ | (9,454 | ) | $ | 11,208 |
Daily
Sales
Increase
2007 vs.
2006
|
Estimated
Percent
Complete
|
||||
Phase 1
(Atlanta, Denver, Seattle)
|
15%
|
100%
|
|||
Phase 2 (Four
markets in Southern California)
|
6%
|
100%
|
|||
Phase 3
(Houston, St. Louis, Tampa)
|
13%
|
100%
|
|||
Phase 4
(Baltimore, Cincinnati, Kansas City,
Miami,
Philadelphia, Washington, D.C.)
|
10%
|
100%
|
|||
Phase 5
(Dallas, Detroit, New York, Phoenix)
|
9%
|
75%
|
|||
Phase 6
(Chicago, Minneapolis, Pittsburgh,
San
Francisco)
|
9%
|
65%
|
For the Years
Ended December 31,
|
||||||||
2007
|
2006
|
|||||||
Other
income and (expense):
|
||||||||
Interest
income (expense) – net
|
$ | 9,151 | $ | 19,570 | ||||
Equity in net
income of unconsolidated
entities
|
2,016 | 2,960 | ||||||
Gain on sale
of unconsolidated entity
|
– | 2,291 | ||||||
Unclassified –
net
|
41 | 131 | ||||||
$ | 11,208 | $ | 24,952 |
For the Years
Ended December 31,
|
||||||||||||
2008
|
2007
|
2006
|
||||||||||
Land,
buildings, structures and improvements
|
$ | 107,688 | $ | 100,380 | $ | 67,554 | ||||||
Furniture,
fixtures, machinery and equipment
|
76,163 | 87,389 | 62,233 | |||||||||
Subtotal
|
183,851 | 187,769 | 129,787 | |||||||||
Capitalized
software
|
12,297 | 8,556 | 8,950 | |||||||||
Total
|
$ | 196,148 | $ | 196,325 | $ | 138,737 |
Payments Due
by Period
|
||||||||||||||||||||
Total Amounts
Committed
|
Less than 1
Year
|
1 – 3
Years
|
4 – 5
Years
|
More than 5
Years
|
||||||||||||||||
Long-term
debt obligations
|
$ | 509,485 | $ | 21,257 | $ | 100,728 | $ | 387,500 | $ | – | ||||||||||
Interest on
long-term debt
|
18,538 | 6,130 | 10,782 | 1,626 | – | |||||||||||||||
Operating
lease obligations
|
218,375 | 41,150 | 66,471 | 49,917 | 60,837 | |||||||||||||||
Purchase
obligations:
|
||||||||||||||||||||
Uncompleted
additions to
property,
buildings and equipment
|
17,916 | 17,916 | – | – | – | |||||||||||||||
Commitments
to purchase
inventory
|
187,526 | 187,498 | 28 | – | – | |||||||||||||||
Other
purchase obligations
|
80,938 | 68,665 | 11,181 | 1,092 | – | |||||||||||||||
Other
liabilities
|
171,489 | 7,408 | 15,181 | 17,329 | 131,571 | |||||||||||||||
Total
|
$ | 1,204,267 | $ | 350,024 | $ | 204,371 | $ | 457,464 | $ | 192,408 |
For the Years
Ended December 31,
|
||||||||||||
2008
|
2007
|
2006
|
||||||||||
Risk-free
interest rate
|
3.2
|
% | 4.6 | % | 4.9 | % | ||||||
Expected
life
|
6
years
|
6
years
|
6
years
|
|||||||||
Expected
volatility
|
25.2 | % | 24.3 | % | 23.9 | % | ||||||
Expected
dividend yield
|
1.8 | % | 1.7 | % | 1.5 | % |
1 Percentage
Point
|
||||||||
Increase
|
(Decrease)
|
|||||||
Effect on
total of service and interest cost
|
$ | 4,206 | $ | (3,293 | ) | |||
Effect on
accumulated postretirement benefitobligation
|
37,268 | (29,601 | ) |
2008 Quarter
Ended
|
||||||||||||||||||||
Mar.
31
|
June
30
|
Sept.
30
|
Dec.
31
|
Total
|
||||||||||||||||
Earnings Per
Share as previously reported
|
||||||||||||||||||||
Basic
|
$ | 1.47 | $ | 1.48 | $ | 1.84 | $ | 1.42 | $ | 6.21 | ||||||||||
Diluted
|
$ | 1.43 | $ | 1.43 | $ | 1.79 | $ | 1.39 | $ | 6.04 | ||||||||||
Earnings Per
Share Two-class method
|
||||||||||||||||||||
Basic
|
$ | 1.44 | $ | 1.44 | $ | 1.80 | $ | 1.39 | $ | 6.07 | ||||||||||
Diluted
|
$ | 1.41 | $ | 1.42 | $ | 1.77 | $ | 1.37 | $ | 5.97 |
(A)
|
Management’s
Annual Report on Internal Control Over Financial
Reporting
|
(B)
|
Attestation
Report of the Registered Public Accounting
Firm
|
(C)
|
Changes in
Internal Control Over Financial
Reporting
|
W.W.
GRAINGER, INC.
|
|
By:
|
/s/
James T. Ryan
|
James T. Ryan
President and
Chief Executive Officer
|
/s/
James T. Ryan
|
/s/
William K. Hall
|
|
James T.
Ryan
|
William K.
Hall
|
|
President and
Chief Executive Officer
|
Director
|
|
(Principal
Executive Officer and Director)
|
||
/s/
Stuart L. Levenick
|
||
/s/
Ronald L. Jadin
|
Stuart L.
Levenick
|
|
Ronald L.
Jadin
|
Director
|
|
Senior Vice
President
|
||
and Chief
Financial Officer
|
/s/
John W. McCarter, Jr.
|
|
(Principal
Financial Officer)
|
John W.
McCarter, Jr.
|
|
Director
|
||
/s/
Gregory S. Irving
|
||
Gregory S.
Irving
|
/s/
Neil S. Novich
|
|
Vice
President and Controller
|
Neil S.
Novich
|
|
(Principal
Accounting Officer)
|
Director
|
|
/s/
Richard L. Keyser
|
/s/
Michael J. Roberts
|
|
Richard L.
Keyser
|
Michael J.
Roberts
|
|
Chairman of
the Board
|
Director
|
|
/s/
Brian P. Anderson
|
/s/
Gary L. Rogers
|
|
Brian P.
Anderson
|
Gary L.
Rogers
|
|
Director
|
Director
|
|
/s/
Wilbur H. Gantz
|
/s/
James D. Slavik
|
|
Wilbur H.
Gantz
|
James D.
Slavik
|
|
Director
|
Director
|
|
/s/
V. Ann Hailey
|
/s/
Harold B. Smith
|
|
V. Ann
Hailey
|
Harold B.
Smith
|
|
Director
|
Director
|
|
Page(s)
|
|
MANAGEMENT’S
ANNUAL REPORT ON INTERNAL CONTROL OVER
FINANCIAL
REPORTING
|
27
|
REPORTS OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|
28-29
|
FINANCIAL
STATEMENTS
|
|
CONSOLIDATED
STATEMENTS OF EARNINGS
|
30
|
CONSOLIDATED
STATEMENTS OF COMPREHENSIVE EARNINGS
|
31
|
CONSOLIDATED
BALANCE SHEETS
|
32-33
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
34-35
|
CONSOLIDATED
STATEMENTS OF SHAREHOLDERS’ EQUITY
|
36-37
|
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
|
38-63
|
EXHIBIT 23 –
CONSENT OF INDEPENDENT REGISTERED
PUBLIC
ACCOUNTING FIRM
|
64
|
For the Years
Ended December 31,
|
||||||||||||
2008
|
2007
|
2006
|
||||||||||
Net
sales
|
$ | 6,850,032 | $ | 6,418,014 | $ | 5,883,654 | ||||||
Cost of
merchandise sold
|
4,041,810 | 3,814,391 | 3,529,504 | |||||||||
Gross
profit
|
2,808,222 | 2,603,623 | 2,354,150 | |||||||||
Warehousing,
marketing and
administrative expenses
|
2,025,550 | 1,932,970 | 1,776,079 | |||||||||
Operating
earnings
|
782,672 | 670,653 | 578,071 | |||||||||
Other income
and (expense)
|
||||||||||||
Interest income
|
5,069 | 12,125 | 21,496 | |||||||||
Interest expense
|
(14,485 | ) | (2,974 | ) | (1,926 | ) | ||||||
Equity in net income of unconsolidated
entities
|
3,642 | 2,016 | 2,960 | |||||||||
Write-off of investment in
unconsolidated entity
|
(6,031 | ) | – | – | ||||||||
Gain on sale of unconsolidated
entity
|
– | – | 2,291 | |||||||||
Unclassified – net
|
2,351 | 41 | 131 | |||||||||
Total other income and
(expense)
|
(9,454 | ) | 11,208 | 24,952 | ||||||||
Earnings before income
taxes
|
773,218 | 681,861 | 603,023 | |||||||||
Income
taxes
|
297,863 | 261,741 | 219,624 | |||||||||
Net earnings
|
$ | 475,355 | $ | 420,120 | $ | 383,399 | ||||||
Earnings per
share:
|
||||||||||||
Basic
|
$ | 6.21 | $ | 5.10 | $ | 4.36 | ||||||
Diluted
|
$ | 6.04 | $ | 4.94 | $ | 4.24 | ||||||
Weighted
average number of shares outstanding:
|
||||||||||||
Basic
|
76,579,856 | 82,403,958 | 87,838,723 | |||||||||
Diluted
|
78,750,328 | 85,044,963 | 90,523,774 |
For the Years
Ended December 31,
|
||||||||||||
2008
|
2008
|
2006
|
||||||||||
Net
earnings
|
$ | 475,355 | $ | 420,120 | $ | 383,399 | ||||||
Other
comprehensive earnings (losses):
|
||||||||||||
Foreign
currency translation adjustments, net of
tax benefit
(expense) of $11,454, $(9,279) and $147, respectively
|
(79,287 | ) | 53,545 | (1,181 | ) | |||||||
Defined
postretirement benefit plan:
|
||||||||||||
Prior service
credit arising during period
|
– | 9,433 | – | |||||||||
Amortization
of prior service credit
|
(1,215 | ) | (437 | ) | – | |||||||
Amortization
of transition asset
|
(143 | ) | (143 | ) | – | |||||||
Net gain
(loss) arising during period
|
(49,872 | ) | 11,620 | – | ||||||||
Amortization
of net loss
|
1,312 | 2,094 | – | |||||||||
Income tax
benefit (expense)
|
19,368 | (8,756 | ) | – | ||||||||
(30,550 | ) | 13,811 | – | |||||||||
Gain (loss)
on other employment-related benefit plans, net of tax benefit (expense) of
$544, $(878) and $(21), respectively
|
(859 | ) | 1,384 | 33 | ||||||||
(110,696 | ) | 68,740 | (1,148 | ) | ||||||||
Comprehensive
earnings, net of tax
|
$ | 364,659 | $ | 488,860 | $ | 382,251 | ||||||
As of
December 31,
|
||||||||||||
2008
|
2007
|
2006
|
||||||||||
LIABILITIES
AND SHAREHOLDERS’ EQUITY
|
||||||||||||
CURRENT
LIABILITIES
|
||||||||||||
Short-term
debt
|
$ | 19,960 | $ | 102,060 | $ | – | ||||||
Current
maturities of long-term debt
|
21,257 | 4,590 | 4,590 | |||||||||
Trade
accounts payable
|
290,802 | 297,929 | 334,820 | |||||||||
Accrued
compensation and benefits
|
162,380 | 182,275 | 140,141 | |||||||||
Accrued
contributions to employees’ profit sharing plans
|
146,922 | 126,483 | 113,014 | |||||||||
Accrued
expenses
|
118,633 | 102,607 | 106,681 | |||||||||
Income
taxes payable
|
1,780 | 10,459 | 7,077 | |||||||||
Total current liabilities
|
761,734 | 826,403 | 706,323 | |||||||||
LONG-TERM
DEBT
(less
current maturities)
|
488,228 | 4,895 | 4,895 | |||||||||
DEFERRED
INCOME TAXES AND TAX
UNCERTAINTIES
|
33,219 | 20,727 | 6,235 | |||||||||
ACCRUED
EMPLOYMENT-RELATED
BENEFITS
COSTS
|
198,431 | 143,895 | 151,020 | |||||||||
SHAREHOLDERS’
EQUITY
|
||||||||||||
Cumulative
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;
issued,
109,659,219, 109,659,219 and
109,657,938
shares, respectively
|
54,830 | 54,830 | 54,829 | |||||||||
Additional
contributed capital
|
564,728 | 475,350 | 478,454 | |||||||||
Retained
earnings
|
3,670,726 | 3,316,875 | 3,007,606 | |||||||||
Accumulated
other comprehensive earnings
|
(38,525 | ) | 72,171 | 3,431 | ||||||||
Treasury
stock, at cost –
34,878,190,
30,199,804 and
25,590,311
shares, respectively
|
(2,217,954 | ) | (1,821,118 | ) | (1,366,705 | ) | ||||||
Total
shareholders’ equity
|
2,033,805 | 2,098,108 | 2,177,615 | |||||||||
TOTAL
LIABILITIES AND SHAREHOLDERS’
EQUITY
|
$ | 3,515,417 | $ | 3,094,028 | $ | 3,046,088 |
For the Years
Ended December 31,
|
||||||||||||
2008
|
2007
|
2006
|
||||||||||
CASH FLOWS
FROM OPERATING ACTIVITIES:
|
||||||||||||
Net earnings
|
$ | 475,355 | $ | 420,120 | $ | 383,399 | ||||||
Provision for losses on accounts
receivable
|
12,924 | 15,436 | 6,057 | |||||||||
Deferred income taxes and tax
uncertainties
|
5,182 | (18,632 | ) | 9,858 | ||||||||
Depreciation and
amortization:
|
||||||||||||
Property, buildings and
equipment
|
112,443 | 106,839 | 100,975 | |||||||||
Capitalized software and other
intangibles
|
27,127 | 25,160 | 17,593 | |||||||||
Stock-based compensation | 45,945 | 35,551 | 33,741 | |||||||||
Tax benefit of stock incentive
plans
|
1,925 | 3,193 | 1,563 | |||||||||
Net gains on sales of property,
buildings and equipment
|
(9,232 | ) | (7,254 | ) | (11,035 | ) | ||||||
Income from unconsolidated
entities
|
(3,642 | ) | (2,016 | ) | (2,960 | ) | ||||||
Gain on sale of unconsolidated
entity
|
– | – | (2,291 | ) | ||||||||
Write-off of unconsolidated
entity
|
6,031 | – | – | |||||||||
Change in operating assets and
liabilities –
net of business acquisitions:
|
||||||||||||
(Increase) in accounts
receivable
|
(5,592 | ) | (41,814 | ) | (53,056 | ) | ||||||
(Increase) in
inventories
|
(92,518 | ) | (97,234 | ) | (33,839 | ) | ||||||
(Increase) in prepaid
income taxes
|
(22,556 | ) | – | – | ||||||||
(Increase) in prepaid
expenses
|
(11,073 | ) | (2,342 | ) | (3,918 | ) | ||||||
Increase (decrease) in
trade accounts payable
|
(6,960 | ) | (39,436 | ) | 10,888 | |||||||
Increase (decrease) in
other current liabilities
|
199 | 54,457 | (2,558 | ) | ||||||||
Increase (decrease) in
current income
taxes payable
|
(7,784 | ) | 2,304 | (17,395 | ) | |||||||
Increase in accrued employment-related
benefits costs
|
3,216 | 17,705 | 2,634 | |||||||||
Other – net
|
(924 | ) | (3,162 | ) | (2,903 | ) | ||||||
Net cash
provided by operating activities
|
530,066 | 468,875 | 436,753 | |||||||||
CASH FLOWS
FROM INVESTING ACTIVITIES:
|
||||||||||||
Additions to property, buildings and
equipment
|
(182,678 | ) | (188,867 | ) | (127,814 | ) | ||||||
Proceeds from sales of property,
buildings and equipment
|
13,620 | 12,084 | 17,314 | |||||||||
Additions to capitalized
software
|
(12,297 | ) | (8,556 | ) | (8,950 | ) | ||||||
Proceeds from sale of marketable
securities
|
19,848 | 12,765 | – | |||||||||
Purchase of marketable
securities
|
– | (17,079 | ) | (13,187 | ) | |||||||
Proceeds from sale of unconsolidated
entity
|
– | – | 27,843 | |||||||||
Net cash paid for business
acquisitions
|
(34,290 | ) | (4,698 | ) | (34,390 | ) | ||||||
Investments in unconsolidated
entities
|
(6,487 | ) | (2,138 | ) | (3,988 | ) | ||||||
Other – net
|
(351 | ) | (468 | ) | 3,426 | |||||||
Net cash used
in investing activities
|
(202,635 | ) | (196,957 | ) | (139,746 | ) |
For the Years
Ended December 31,
|
||||||||||||
2008
|
2007
|
2006
|
||||||||||
CASH FLOWS
FROM FINANCING ACTIVITIES:
|
||||||||||||
Net
increase (decrease) in commercial paper
|
$ | (95,947 | ) | $ | 95,947 | $ | – | |||||
Borrowings
under line of credit
|
29,959 | 14,107 | – | |||||||||
Payments
against line of credit
|
(15,437 | ) | (7,751 | ) | – | |||||||
Proceeds
from issuance of long-term debt
|
500,000 | – | – | |||||||||
Proceeds
from stock options exercised
|
46,833 | 113,500 | 64,437 | |||||||||
Excess tax
benefits from stock-based compensation
|
13,533 | 30,696 | 13,373 | |||||||||
Purchase
of treasury stock
|
(394,247 | ) | (647,293 | ) | (472,787 | ) | ||||||
Cash
dividends paid
|
(121,504 | ) | (113,093 | ) | (97,896 | ) | ||||||
Net cash used
in financing activities
|
(36,810 | ) | (513,887 | ) | (492,873 | ) | ||||||
Exchange rate
effect on cash and cash equivalents
|
(7,768 | ) | 6,935 | (557 | ) | |||||||
NET INCREASE
(DECREASE) IN CASH AND CASH
EQUIVALENTS
|
282,853 | (235,034 | ) | (196,423 | ) | |||||||
Cash and cash
equivalents at beginning of year
|
113,437 | 348,471 | 544,894 | |||||||||
Cash and cash
equivalents at end of year
|
$ | 396,290 | $ | 113,437 | $ | 348,471 | ||||||
Supplemental
cash flow information:
|
||||||||||||
Cash
payments for interest (net of amounts capitalized)
|
$ | 14,508 | $ | 4,409 | $ | 1,413 | ||||||
Cash
payments for income taxes
|
306,960 | 244,541 | 212,350 | |||||||||
Noncash
investing activities:
|
||||||||||||
Fair
value of noncash assets acquired in business acquisitions
|
$ | 41,068 | $ | 5,039 | $ | 38,430 | ||||||
Liabilities
assumed in business acquisitions
|
(6,778 | ) | (341 | ) | (4,040 | ) | ||||||
Common
Stock
|
Additional
Contributed Capital
|
Retained
Earnings
|
Unearned
Restricted Stock Compensation
|
Accumulated
Other Comprehensive Earnings (Losses)
|
Treasury
Stock
|
|||||||||||||||||||
Balance at
January 1, 2006
|
$ | 54,834 | $ | 451,578 | $ | 2,722,103 | $ | (17,280 | ) | $ | 27,082 | $ | (949,341 | ) | ||||||||||
Exercise of
stock options
|
– | (3,984 | ) | – | – | – | 68,421 | |||||||||||||||||
Tax benefits
on stock-based
compensation
awards
|
– | 14,936 | – | – | – | – | ||||||||||||||||||
Stock option
expense
|
– | 19,904 | – | – | – | – | ||||||||||||||||||
Cancellation
of other stock-
based
compensation awards
|
(5 | ) | 5 | – | – | – | – | |||||||||||||||||
Amortization
of other stock-
based
compensation awards
|
– | 13,845 | – | – | – | – | ||||||||||||||||||
Vesting of
restricted stock
|
– | – | – | – | – | (4,263 | ) | |||||||||||||||||
Settlement of
other stock- based compensation awards
|
– | (1,003 | ) | – | – | – | 592 | |||||||||||||||||
Purchase of
treasury stock
|
– | – | – | – | – | (482,114 | ) | |||||||||||||||||
Other
comprehensive earnings
|
– | – | – | – | (1,148 | ) | – | |||||||||||||||||
Adjustment to
initially apply
SFAS No.
158 to
postretirement benefit plans,
net
of tax
benefit of $14,280
|
– | – | – | – | (22,503 | ) | – | |||||||||||||||||
Reclassification
of unearned restricted stock compensation
|
– | (17,280 | ) | – | 17,280 | – | – | |||||||||||||||||
Change in
interest – joint
venture
|
– | 453 | – | – | – | – | ||||||||||||||||||
Net
earnings
|
– | – | 383,399 | – | – | – | ||||||||||||||||||
Cash dividends
paid ($1.11
per
share)
|
– | – | (97,896 | ) | – | – | – | |||||||||||||||||
Balance at
December 31, 2006
|
$ | 54,829 | $ | 478,454 | $ | 3,007,606 | $ | – | $ | 3,431 | $ | (1,366,705 | ) |
Adoption of
FIN 48
|
– | – | 870 | – | – | – | ||||||||||||||||||
Reinstatement
of equity method
|
– | – | 1,372 | – | – | – | ||||||||||||||||||
Exercise of
stock options
|
– | (19,991 | ) | – | – | – | 133,491 | |||||||||||||||||
Tax benefits
on stock-based
compensation
awards
|
– | 33,889 | – | – | – | – | ||||||||||||||||||
Stock option
expense
|
– | 16,888 | – | – | – | – | ||||||||||||||||||
Amortization
of other stock-
based
compensation awards
|
– | 18,667 | – | – | – | – | ||||||||||||||||||
Vesting of
restricted stock
|
– | – | – | – | – | (1,126 | ) | |||||||||||||||||
Settlement of
other stock-based compensation awards
|
1 | (2,557 | ) | – | – | – | 1,189 | |||||||||||||||||
Purchase of
treasury stock
|
– | (50,000 | ) | – | – | – | (587,967 | ) | ||||||||||||||||
Other
comprehensive earnings
|
– | – | – | – | 68,740 | – | ||||||||||||||||||
Net
earnings
|
– | – | 420,120 | – | – | – | ||||||||||||||||||
Cash dividends
paid ($1.34
per
share)
|
– | – | (113,093 | ) | – | – | – | |||||||||||||||||
Balance at
December 31, 2007
|
$ | 54,830 | $ | 475,350 | $ | 3,316,875 | $ | – | $ | 72,171 | $ | (1,821,118 | ) |
Common
Stock
|
Additional
Contributed Capital
|
Retained
Earnings
|
Unearned
Restricted Stock Compensation
|
Accumulated
Other Comprehensive Earnings (Losses)
|
Treasury
Stock
|
|||||||||||||||||||
Balance at
December 31, 2007
|
$ | 54,830 | $ | 475,350 | $ | 3,316,875 | $ | – | $ | 72,171 | $ | (1,821,118 | ) | |||||||||||
Exercise of
stock options
|
– | (12,663 | ) | – | – | – | 59,460 | |||||||||||||||||
Tax benefits
on stock-based
compensation
awards
|
– | 15,458 | – | – | – | – | ||||||||||||||||||
Stock option
expense
|
– | 19,868 | – | – | – | – | ||||||||||||||||||
Amortization
of other stock-
based
compensation awards
|
– | 26,077 | – | – | – | – | ||||||||||||||||||
Vesting of
restricted stock
|
– | – | – | – | – | (417 | ) | |||||||||||||||||
Settlement of
other stock-based compensation awards
|
– | (9,362 | ) | – | – | – | 5,209 | |||||||||||||||||
Purchase of
treasury stock
|
– | 50,000 | – | – | – | (461,088 | ) | |||||||||||||||||
Other
comprehensive earnings
|
– | – | – | – | (110,696 | ) | – | |||||||||||||||||
Net
earnings
|
– | – | 475,355 | – | – | – | ||||||||||||||||||
Cash dividends
paid ($1.55
per
share)
|
– | – | (121,504 | ) | – | – | – | |||||||||||||||||
Balance at
December 31, 2008
|
$ | 54,830 | $ | 564,728 | $ | 3,670,726 | $ | – | $ | (38,525 | ) | $ | (2,217,954 | ) |
Buildings,
structures and improvements
|
10 to 45
years
|
Furniture,
fixtures, machinery and equipment
|
3 to 10
years
|
As of December
31,
|
||||||||||||
2008
|
2007
|
2006
|
||||||||||
Beginning
balance
|
$ | 3,442 | $ | 4,651 | $ | 3,763 | ||||||
Returns
|
(12,917 | ) | (12,781 | ) | (9,579 | ) | ||||||
Provisions
|
12,693 | 11,572 | 10,467 | |||||||||
Ending
balance
|
$ | 3,218 | $ | 3,442 | $ | 4,651 |
2008 Quarter
Ended
|
||||||||||||||||||||
Mar.
31
|
June
30
|
Sept.
30
|
Dec.
31
|
Total
|
||||||||||||||||
Earnings Per
Share as previously reported
|
||||||||||||||||||||
Basic
|
$ | 1.47 | $ | 1.48 | $ | 1.84 | $ | 1.42 | $ | 6.21 | ||||||||||
Diluted
|
$ | 1.43 | $ | 1.43 | $ | 1.79 | $ | 1.39 | $ | 6.04 | ||||||||||
Earnings Per
Share Two-class method
|
||||||||||||||||||||
Basic
|
$ | 1.44 | $ | 1.44 | $ | 1.80 | $ | 1.39 | $ | 6.07 | ||||||||||
Diluted
|
$ | 1.41 | $ | 1.42 | $ | 1.77 | $ | 1.37 | $ | 5.97 |
For the Years
Ended December 31,
|
||||||||||||
2008
|
2007
|
2006
|
||||||||||
Balance at
beginning of period
|
$ | 25,830 | $ | 18,801 | $ | 18,401 | ||||||
Provision for
uncollectible accounts
|
12,924 | 15,436 | 6,057 | |||||||||
Write-off of
uncollectible accounts, less
recoveries
|
(11,501 | ) | (8,755 | ) | (5,660 | ) | ||||||
Foreign
currency or translation impact
|
(772 | ) | 348 | 3 | ||||||||
Balance at end
of period
|
$ | 26,481 | $ | 25,830 | $ | 18,801 |
Asia
Pacific
|
||||||||||||||||||||
MonotaRO
|
MRO
Korea
|
Brands
|
USI-AGI
|
|||||||||||||||||
Co.,
Ltd.
|
Co.,
Ltd.
|
India
Ltd.
|
Prairies
Inc.
|
Total
|
||||||||||||||||
Balance at
January 1, 2006
|
$ | 2,434 | $ | – | $ | – | $ | 22,721 | $ | 25,155 | ||||||||||
Cash
investments
|
3,988 | – | – | – | 3,988 | |||||||||||||||
Equity
earnings
|
1,826 | – | – | 1,134 | 2,960 | |||||||||||||||
Divestiture
|
– | – | – | (24,967 | ) | (24,967 | ) | |||||||||||||
Change in
interest due to
issuance of stock by
joint
venture
|
453 | – | – | – | 453 | |||||||||||||||
Foreign
currency gain (loss)
|
(209 | ) | – | – | 1,112 | 903 | ||||||||||||||
Balance at
December 31, 2006
|
8,492 | – | – | – | 8,492 | |||||||||||||||
Cash
investments
|
– | 2,138 | – | – | 2,138 | |||||||||||||||
Equity
earnings
|
1,401 | 615 | – | – | 2,016 | |||||||||||||||
Reinstatement
to equity
method of accounting
|
– | 1,372 | – | – | 1,372 | |||||||||||||||
Foreign
currency gain
|
620 | 121 | – | – | 741 | |||||||||||||||
Balance at
December 31, 2007
|
$ | 10,513 | $ | 4,246 | – | $ | – | $ | 14,759 | |||||||||||
Cash
investments
|
– | – | 6,487 | – | 6,487 | |||||||||||||||
Equity
earnings (losses)
|
4,303 | (205 | ) | (456 | ) | – | 3,642 | |||||||||||||
Write-off
|
– | – | (6,031 | ) | – | (6,031 | ) | |||||||||||||
Foreign
currency gain (loss)
|
3,008 | (1,035 | ) | – | – | 1,973 | ||||||||||||||
Balance at
December 31, 2008
|
$ | 17,824 | $ | 3,006 | – | $ | – | $ | 20,830 | |||||||||||
Ownership
interest at December 31, 2008
|
38.3 | % | 49.0 | % | 49.9 | % | 0.0 | % |
As of December
31,
|
||||||||||||
2008
|
2007
|
2006
|
||||||||||
Line
of Credit
|
||||||||||||
Outstanding at
December 31
|
$ | 19,960 | $ | 6,113 | $ | – | ||||||
Maximum
month-end balance during the year
|
$ | 19,960 | $ | 11,234 | $ | – | ||||||
Average amount
outstanding during the year
|
$ | 13,022 | $ | 7,756 | $ | – | ||||||
Weighted
average interest rate during the year
|
6.23 | % | 6.48 | % | – | % | ||||||
Weighted
average interest rate at December 31
|
4.86 | % | 6.57 | % | – | % | ||||||
Commercial
Paper
|
||||||||||||
Outstanding at
December 31
|
$ | – | $ | 95,947 | $ | – | ||||||
Maximum
month-end balance during the year
|
$ | 319,860 | $ | 139,104 | $ | – | ||||||
Average amount
outstanding during the year
|
$ | 54,589 | $ | 28,030 | $ | – | ||||||
Weighted
average interest rate during the year
|
3.08 | % | 5.38 | % | – | % | ||||||
Weighted
average interest rate at December 31
|
– | 4.30 | % | – | % |
As of December
31,
|
||||||||||||
2008
|
2007
|
2006
|
||||||||||
Bank term
loan
|
$ | 500,000 | $ | – | $ | – | ||||||
Industrial
development revenue and private
activity
bonds
|
9,485 | 9,485 | 9,485 | |||||||||
Less current
maturities
|
(21,257 | ) | (4,590 | ) | (4,590 | ) | ||||||
$ | 488,228 | $ | 4,895 | $ | 4,895 |
Year
|
Payment
Amount
|
|||||
2009
|
$ | 18,900 | ||||
2010
|
$ | 50,700 | ||||
2011
|
$ | 50,900 | ||||
2012
|
$ | 387,500 | ||||
2013 and after
|
$ | 1,500 |
For the Years
Ended December 31,
|
||||||||||||
2008
|
2007
|
2006
|
||||||||||
Service
cost
|
$ | 9,699 | $ | 10,856 | $ | 9,737 | ||||||
Interest
cost
|
9,490 | 8,973 | 7,599 | |||||||||
Expected
return on assets
|
(4,466 | ) | (4,049 | ) | (2,790 | ) | ||||||
Amortization
of prior service credit
|
(1,215 | ) | (437 | ) | (858 | ) | ||||||
Amortization
of transition asset
|
(143 | ) | (143 | ) | (143 | ) | ||||||
Amortization
of unrecognized losses
|
1,312 | 2,094 | 2,903 | |||||||||
Net periodic
benefits costs
|
$ | 14,677 | $ | 17,294 | $ | 16,448 |
2008
|
2007
|
2006
|
||||||||||
Benefit
obligation at beginning of year
|
$ | 150,910 | $ | 155,353 | $ | 127,598 | ||||||
Service
cost
|
9,699 | 10,856 | 9,737 | |||||||||
Interest
cost
|
9,490 | 8,973 | 7,599 | |||||||||
Plan
participants’ contributions
|
1,751 | 1,575 | 1,670 | |||||||||
Amendments
|
– | (9,433 | ) | 5,559 | ||||||||
Actuarial
(gain) loss
|
21,443 | (12,754 | ) | 7,359 | ||||||||
Benefits
paid
|
(4,924 | ) | (3,929 | ) | (4,277 | ) | ||||||
Medicare Part
D Subsidy received
|
270 | 269 | 108 | |||||||||
Benefit
obligation at end of year
|
188,639 | 150,910 | 155,353 | |||||||||
Fair value of
plan assets at beginning of year
|
74,432 | 67,486 | 46,503 | |||||||||
Actual
returns on plan assets
|
(23,963 | ) | 2,915 | 6,192 | ||||||||
Employer
contributions
|
9,407 | 6,385 | 17,398 | |||||||||
Plan
participants’ contributions
|
1,751 | 1,575 | 1,670 | |||||||||
Benefits
paid
|
(4,924 | ) | (3,929 | ) | (4,277 | ) | ||||||
Fair value of
plan assets at end of year
|
56,703 | 74,432 | 67,486 | |||||||||
Accrued
postretirement benefit costs
|
$ | 131,936 | $ | 76,478 | $ | 87,867 |
As of December
31,
|
||||||||||||
2008
|
2007
|
2006
|
||||||||||
Prior service
credit
|
$ | 9,377 | $ | 10,592 | $ | 1,596 | ||||||
Transition
asset
|
857 | 1,000 | 1,143 | |||||||||
Unrecognized
losses
|
(73,966 | ) | (25,405 | ) | (39,119 | ) | ||||||
Deferred tax
asset
|
24,800 | 5,432 | 14,188 | |||||||||
Net
losses
|
$ | (38,932 | ) | $ | (8,381 | ) | $ | (22,192 | ) |
2009
|
||||
Amortization
of prior service credit
|
$ | (1,215 | ) | |
Amortization
of transition asset
|
(143 | ) | ||
Amortization of
unrecognized
losses
|
4,377 | |||
Estimated
amount to be amortized from AOCE into
net periodic
postretirement benefit costs
|
$ | 3,019 |
For the Years
Ended December 31,
|
||||||||||||
2008
|
2007
|
2006
|
||||||||||
Discount
rate
|
6.50 | % | 5.90 | % | 5.50 | % | ||||||
Expected
long-term rate of return on plan assets,
net of tax
at 40%
|
6.00 | % | 6.00 | % | 6.00 | % | ||||||
Initial
healthcare cost trend rate
|
10.00 | % | 10.00 | % | 10.00 | % | ||||||
Ultimate
healthcare cost trend rate
|
5.00 | % | 5.00 | % | 5.00 | % | ||||||
Year ultimate
healthcare cost trend rate reached
|
2018
|
2017
|
2016
|
2008
|
2007
|
2006
|
||||||||||
Discount
rate
|
5.90 | % | 6.50 | % | 5.90 | % | ||||||
Expected
long-term rate of return on plan assets,
net of tax
at 40%
|
6.00 | % | 6.00 | % | 6.00 | % | ||||||
Initial
healthcare cost trend rate
|
10.00 | % | 10.00 | % | 10.00 | % | ||||||
Ultimate
healthcare cost trend rate
|
5.00 | % | 5.00 | % | 5.00 | % | ||||||
Year ultimate
healthcare cost trend rate reached
|
2019
|
2018
|
2017
|
1 Percentage
Point
|
||||||||
Increase
|
(Decrease)
|
|||||||
Effect on
total service and interest cost
|
$ | 4,206 | $ | (3,293 | ) | |||
Effect on
accumulated postretirement benefit obligation
|
37,268 | (29,601 | ) |
Estimated gross
benefit payments
|
Estimated
Medicare subsidy receipts
|
|||||||
2009
|
$ | 3,852 | $ | (414 | ) | |||
2010
|
4,436 | (497 | ) | |||||
2011
|
5,173 | (587 | ) | |||||
2012
|
5,989 | (694 | ) | |||||
2013
|
7,017 | (809 | ) | |||||
2014 –
2018
|
56,046 | (6,507 | ) |
For the Years
Ended December 31,
|
||||||||||||
2008
|
2007
|
2006
|
||||||||||
Service
cost
|
$ | 247 | $ | 298 | $ | 361 | ||||||
Interest
cost
|
880 | 883 | 850 | |||||||||
Amortization
of unrecognized (gains) losses
|
(153 | ) | 127 | 154 | ||||||||
Net periodic
benefits costs
|
$ | 974 | $ | 1,308 | $ | 1,365 |
2008
|
2007
|
2006
|
||||||||||
Benefit
obligation at beginning of year
|
$ | 14,115 | $ | 14,906 | $ | 15,222 | ||||||
Service
cost
|
247 | 298 | 361 | |||||||||
Interest
cost
|
880 | 883 | 850 | |||||||||
Actuarial
(gains) losses
|
1,425 | (1,972 | ) | (1,095 | ) | |||||||
Benefits
paid
|
(579 | ) | – | (432 | ) | |||||||
Benefit
obligation at end of year
|
$ | 16,088 | $ | 14,115 | $ | 14,906 |
As of December
31,
|
||||||||||||
2008
|
2007
|
2006
|
||||||||||
Current
liabilities
|
$ | 552 | $ | 739 | $ | 454 | ||||||
Noncurrent
liabilities
|
15,536 | 13,376 | 14,452 | |||||||||
Net amounts
recognized
|
$ | 16,088 | $ | 14,115 | $ | 14,906 |
2008
|
2007
|
2006
|
||||||||||
Discount rate
used to determine net periodic benefit cost
(January 1 valuation)
|
6.40 | % | 5.90 | % | 5.50 | % | ||||||
Discount rate
used to determine benefit obligation
(
December 31
valuation)
|
6.10 | % | 6.40 | % | 5.90 | % | ||||||
Compensation
increase used to determine obligation
and
cost
|
4.00 | % | 4.00 | % | 4.00 | % |
Benefit
Payments
|
||||
2009
|
$ | 553 | ||
2010
|
608 | |||
2011
|
665 | |||
2012
|
729 | |||
2013
|
803 | |||
2014 –
2018
|
5,269 |
For the Years
Ended December 31,
|
||||||||||||
2008
|
2007
|
2006
|
||||||||||
Interest
cost
|
$ | 543 | $ | 568 | $ | 573 | ||||||
Amortization
of unrecognized losses
|
40 | 59 | 184 | |||||||||
Net periodic
benefits costs
|
$ | 583 | $ | 627 | $ | 757 |
2008
|
2007
|
2006
|
||||||||||
Benefit
obligation at beginning of year
|
$ | 10,151 | $ | 10,945 | $ | 11,419 | ||||||
Interest
cost
|
543 | 568 | 573 | |||||||||
Actuarial
(gains) losses
|
(135 | ) | (104 | ) | 129 | |||||||
Benefits
paid
|
(1,226 | ) | (1,258 | ) | (1,176 | ) | ||||||
Benefit
obligation at end of year
|
$ | 9,333 | $ | 10,151 | $ | 10,945 |
As of December
31,
|
||||||||||||
2008
|
2007
|
2006
|
||||||||||
Current
liabilities
|
$ | 1,226 | $ | 1,226 | $ | 1,229 | ||||||
Noncurrent
liabilities
|
8,107 | 8,925 | 9,716 | |||||||||
Net amounts
recognized
|
$ | 9,333 | $ | 10,151 | $ | 10,945 |
2008
|
2007
|
2006
|
||||||||||
Discount rate
used to determine net periodic benefit cost
(January 1
valuation)
|
5.70% | 5.50% | 5.25% | |||||||||
Discount rate
used to determine benefit obligation
(December 31
valuation)
|
6.00% | 5.70% | 5.50% |
Benefit
Payments
|
||||
2009
|
$ | 1,226 | ||
2010
|
1,196 | |||
2011
|
1,162 | |||
2012
|
1,154 | |||
2013
|
1,155 | |||
2014 –
2018
|
4,858 |
Future Minimum
Lease Payments
|
||||
2009
|
$ | 41,150 | ||
2010
|
35,718 | |||
2011
|
30,753 | |||
2012
|
26,658 | |||
2013
|
23,259 | |||
Thereafter
|
60,837 | |||
Total minimum
payments required
|
$ | 218,375 | ||
Less amounts
representing sublease income
|
(227 | ) | ||
$ | 218,148 |
Shares Subject
to Option
|
Weighted
Average Price Per Share
|
Options
Exercisable
|
||||||||||
Outstanding at
January 1, 2006
|
8,691,840 | $ | 48.37 | 4,572,250 | ||||||||
Granted
|
1,422,300 | $ | 75.87 | |||||||||
Exercised
|
(1,390,461 | ) | $ | 46.35 | ||||||||
Canceled or
expired
|
(268,810 | ) | $ | 57.88 | ||||||||
Outstanding at
December 31, 2006
|
8,454,869 | $ | 53.00 | 4,627,249 | ||||||||
Granted
|
740,220 | $ | 82.21 | |||||||||
Exercised
|
(2,430,523 | ) | $ | 47.74 | ||||||||
Canceled or
expired
|
(236,580 | ) | $ | 67.29 | ||||||||
Outstanding at
December 31, 2007
|
6,527,986 | $ | 58.19 | 3,447,856 | ||||||||
Granted
|
883,000 | $ | 84.58 | |||||||||
Exercised
|
(953,199 | ) | $ | 50.07 | ||||||||
Canceled or
expired
|
(103,920 | ) | $ | 73.14 | ||||||||
Outstanding at
December 31, 2008
|
6,353,867 | $ | 62.95 | 3,633,612 |
For the years
ended December 31,
|
||||||||||||
2008
|
2007
|
2006
|
||||||||||
Fair value of
options exercised
|
$ | 12,752 | $ | 31,736 | $ | 18,152 | ||||||
Total
intrinsic value of options exercised
|
$ | 35,095 | $ | 88,921 | $ | 38,906 | ||||||
Fair value of
options vested
|
$ | 15,510 | $ | 15,996 | $ | 15,295 | ||||||
Settlements of
options exercised
|
$ | 47,016 | $ | 113,752 | $ | 64,437 |
Options
Outstanding
|
Options
Exercisable
|
|||||||||||||||||||||||||||
Weighted
Average
|
Weighted
Average
|
|||||||||||||||||||||||||||
Range
of
Exercise
Prices
|
Number
|
Remaining
Contractual
Life
|
Exercise
Price
|
Intrinsic
Value
(000’s)
|
Number
|
Remaining
Contractual
Life
|
Exercise
Price
|
Intrinsic
Value
(000’s)
|
||||||||||||||||||||
$ | 37.50 - $44.05 | 742,155 |
2.0
Years
|
$ | 40.55 | $ | 28,419 | 742,155 |
2.0
Years
|
$ | 40.55 | $ | 28,419 | |||||||||||||||
$ | 45.50 - $54.85 | 2,707,052 |
4.6
Years
|
$ | 51.49 | 74,051 | 2,705,992 |
4.6
Years
|
$ | 51.49 | 74,019 | |||||||||||||||||
$ | 56.03 - $70.67 | 139,815 |
6.1
Years
|
$ | 62.08 | 2,343 | 138,815 |
6.1
Years
|
$ | 62.02 | 2,335 | |||||||||||||||||
$ | 71.21 - $93.05 | 2,764,845 |
8.2
Years
|
$ | 80.24 | (3,875 | ) | 46,650 |
7.7
Years
|
$ | 77.69 | 54 | ||||||||||||||||
6,353,867 |
5.9
Years
|
$ | 62.95 | $ | 100,938 | 3,633,612 |
4.2
Years
|
$ | 49.99 | $ | 104,827 |
For the Years
Ended December 31,
|
||||||||||||
2008
|
2007
|
2006
|
||||||||||
Risk-free
interest rate
|
3.2 | % | 4.6 | % | 4.9 | % | ||||||
Expected
life
|
6
years
|
6
years
|
6
years
|
|||||||||
Expected
volatility
|
25.2 | % | 24.3 | % | 23.9 | % | ||||||
Expected
dividend yield
|
1.8 | % | 1.7 | % | 1.5 | % |
2008
|
2007
|
2006
|
||||||||||||||||||||||
Shares
|
Weighted
Average
|
Shares
|
Weighted
Average
|
Shares
|
Weighted
Average
|
|||||||||||||||||||
Beginning nonvested
shares outstanding
|
116,796 | $ | 69.49 | 37,812 | $ | 71.23 | – | $ | – | |||||||||||||||
Issuances
|
38,360 | $ | 86.00 | 83,089 | $ | 68.64 | 37,812 | $ | 71.23 | |||||||||||||||
Cancellations
|
– | $ | – | (4,105 | ) | $ | 69.00 | – | $ | – | ||||||||||||||
Vestings
|
(37,260 | ) | $ | 71.23 | – | $ | – | – | $ | – | ||||||||||||||
Ending nonvested
shares
outstanding
|
117,896 | $ | 75.13 | 116,796 | $ | 69.49 | 37,812 | $ | 71.23 |
2008
|
2007
|
2006
|
||||||||||||||||||||||
Shares
|
Weighted
Average
|
Shares
|
Weighted
Average
|
Shares
|
Weighted
Average
|
|||||||||||||||||||
Beginning nonvested
shares outstanding
|
65,000 | $ | 52.37 | 105,000 | $ | 51.05 | 270,000 | $ | 44.75 | |||||||||||||||
Cancellations
|
– | $ | – | – | $ | – | (10,000 | ) | $ | 57.07 | ||||||||||||||
Vesting
|
(15,000 | ) | $ | 48.15 | (40,000 | ) | $ | 48.73 | (155,000 | ) | $ | 37.91 | ||||||||||||
Ending nonvested
shares outstanding
|
50,000 | $ | 53.50 | 65,000 | $ | 52.37 | 105,000 | $ | 51.05 | |||||||||||||||
Fair value of
shares
vested
|
$1.3 million
|
$3.0
million
|
$11.1
million
|
|||||||||||||||||||||
2008
|
2007
|
2006
|
||||||||||||||||||||||
Shares
|
Weighted
Average
|
Shares
|
Weighted
Average
|
Shares
|
Weighted
Average
|
|||||||||||||||||||
Beginning nonvested
units
|
982,568 | $ | 72.91 | 740,200 | $ | 65.24 | 517,000 | $ | 49.74 | |||||||||||||||
Issuances
|
460,423 | $ | 84.35 | 421,003 | $ | 83.53 | 408,300 | $ | 75.54 | |||||||||||||||
Cancellations
|
(33,490 | ) | $ | 78.72 | (74,030 | ) | $ | 71.99 | (26,750 | ) | $ | 66.84 | ||||||||||||
Vestings
|
(172,255 | ) | $ | 64.37 | (104,605 | ) | $ | 75.85 | (158,350 | ) | $ | 58.68 | ||||||||||||
Ending nonvested
units
|
1,237,246 | $ | 77.88 | 982,568 | $ | 72.91 | 740,200 | $ | 65.24 | |||||||||||||||
Fair value
of
shares vested
|
$11.1 million
|
$7.5
million
|
$8.4
million
|
|||||||||||||||||||||
2008
|
2007
|
2006
|
||||||||||||||||||||||
Units
|
Dollars
|
Units
|
Dollars
|
Units
|
Dollars
|
|||||||||||||||||||
Beginning balance
|
74,522 | $ | 6,522 | 61,242 | $ | 4,283 | 51,977 | $ | 3,696 | |||||||||||||||
Dividends
|
1,692 | 137 | 1,099 | 95 | 902 | 64 | ||||||||||||||||||
Deferred fees
|
17,007 | 1,460 | 12,181 | 1,012 | 14,844 | 1,128 | ||||||||||||||||||
Retirement
distributions
|
– | – | – | – | (6,481 | ) | (461 | ) | ||||||||||||||||
Unit
appreciation
(depreciation)
|
– | (769 | ) | – | 1,132 | – | (144 | ) | ||||||||||||||||
Ending balance
|
93,221 | $ | 7,350 | 74,522 | $ | 6,522 | 61,242 | $ | 4,283 |
2008
|
2007
|
2006
|
||||||||||||||||||||||
Outstanding
Common Stock
|
Treasury
Stock
|
Outstanding
Common Stock
|
Treasury
Stock
|
Outstanding
Common Stock
|
Treasury
Stock
|
|||||||||||||||||||
Balance at
beginning of period
|
79,459,415 | 30,199,804 | 84,067,627 | 25,590,311 | 89,715,641 | 19,952,297 | ||||||||||||||||||
Exercise of
stock options, net of 2,725, 3,318 and 0 shares swapped in stock-for-stock
exchange
|
950,474 | (950,474 | ) | 2,427,205 | (2,427,205 | ) | 1,390,461 | (1,390,461 | ) | |||||||||||||||
Cancellation
of shares related to tax withholdings on restricted stock
vesting
|
(4,874 | ) | 4,874 | (14,867 | ) | 14,867 | (59,297 | ) | 59,297 | |||||||||||||||
Settlement of
restricted stock units, net of 48,488, 16,739 and 6,228 shares retained,
respectively
|
101,962 | (101,962 | ) | 31,057 | (29,776 | ) | 13,822 | (13,822 | ) | |||||||||||||||
Cancellation
of restricted shares
|
– | – | – | – | (10,000 | ) | – | |||||||||||||||||
Purchase of
treasury shares
|
(5,725,948 | ) | 5,725,948 | (7,051,607 | ) | 7,051,607 | (6,983,000 | ) | 6,983,000 | |||||||||||||||
Balance at end
of period
|
74,781,029 | 34,878,190 | 79,459,415 | 30,199,804 | 84,067,627 | 25,590,311 |
As of December
31,
|
||||||||||||
2008
|
2007
|
2006
|
||||||||||
Foreign
currency translation adjustments
|
$ | 3,943 | $ | 94,683 | $ | 31,859 | ||||||
Effect of
adopting SFAS No. 158 related to postretirement benefit plans and
other employment-related benefit plans
|
– | – | (36,783 | ) | ||||||||
Postretirement
benefit plan
|
||||||||||||
Prior
service credit
|
9,377 | 10,592 | – | |||||||||
Transition
asset
|
857 | 1,000 | – | |||||||||
Unrecognized
(losses)
|
(73,966 | ) | (25,405 | ) | – | |||||||
Unrecognized
gains (losses) on other employment-related benefit
plans
|
(68 | ) | 1,335 | (524 | ) | |||||||
Deferred tax
asset (liability)
|
21,332 | (10,034 | ) | 8,879 | ||||||||
Total
accumulated other comprehensive earnings (losses)
|
$ | (38,525 | ) | $ | 72,171 | $ | 3,431 |
For the Years
Ended December 31,
|
||||||||||||
2008
|
2007
|
2006
|
||||||||||
Current
provision:
|
||||||||||||
Federal
|
$ | 246,731 | $ | 238,220 | $ | 172,961 | ||||||
State
|
39,673 | 42,401 | 31,725 | |||||||||
Foreign
|
18,044 | 15,329 | 5,080 | |||||||||
Total
current
|
304,448 | 295,950 | 209,766 | |||||||||
Deferred tax
provision (benefit):
|
||||||||||||
Federal
|
(5,968 | ) | (28,520 | ) | 8,996 | |||||||
State
|
(1,049 | ) | (5,013 | ) | 1,636 | |||||||
Foreign
|
432 | (676 | ) | (774 | ) | |||||||
Total
deferred
|
(6,585 | ) | (34,209 | ) | 9,858 | |||||||
Total
provision
|
$ | 297,863 | $ | 261,741 | $ | 219,624 |
For the Years
Ended December 31,
|
||||||||||||
2008
|
2007
|
2006
|
||||||||||
United
States
|
$ | 731,315 | $ | 646,762 | $ | 588,322 | ||||||
Foreign
|
41,903 | 35,099 | 14,701 | |||||||||
$ | 773,218 | $ | 681,861 | $ | 603,023 |
As of December
31,
|
||||||||||||
2008
|
2007
|
2006
|
||||||||||
Deferred tax
assets:
|
||||||||||||
Inventory
|
$ | 22,674 | $ | 19,577 | $ | 13,809 | ||||||
Accrued
expenses
|
29,966 | 30,295 | 28,606 | |||||||||
Accrued
employment-related benefits
|
144,125 | 111,147 | 99,006 | |||||||||
Foreign
operating loss carryforwards
|
10,833 | 10,239 | 9,530 | |||||||||
Property,
buildings and equipment
|
921 | 3,189 | – | |||||||||
Other
|
11,352 | 8,064 | 8,582 | |||||||||
Deferred
tax assets
|
219,871 | 182,511 | 159,533 | |||||||||
Less
valuation allowance
|
(15,977 | ) | (13,551 | ) | (13,461 | ) | ||||||
Deferred
tax assets, net of valuation allowance
|
$ | 203,894 | $ | 168,960 | $ | 146,072 | ||||||
Deferred tax
liabilities:
|
||||||||||||
Purchased tax
benefits
|
$ | (5,812 | ) | $ | (6,779 | ) | $ | (7,715 | ) | |||
Property,
buildings and equipment
|
- | – | (4,303 | ) | ||||||||
Intangibles
|
(17,083 | ) | (16,884 | ) | (14,182 | ) | ||||||
Software
|
(12,774 | ) | (9,710 | ) | (10,627 | ) | ||||||
Prepaids
|
(21,893 | ) | (16,625 | ) | (14,111 | ) | ||||||
Foreign
currency gain
|
(2,206 | ) | (13,661 | ) | (4,453 | ) | ||||||
Deferred
tax liabilities
|
(59,768 | ) | (63,659 | ) | (55,391 | ) | ||||||
Net deferred
tax asset
|
$ | 144,126 | $ | 105,301 | $ | 90,681 | ||||||
The net
deferred tax asset is classified as follows:
|
||||||||||||
Current
assets
|
$ | 52,556 | $ | 56,663 | $ | 48,123 | ||||||
Noncurrent
assets
|
97,442 | 54,658 | 48,793 | |||||||||
Noncurrent
liabilities (foreign)
|
(5,872 | ) | (6,020 | ) | (6,235 | ) | ||||||
Net deferred
tax asset
|
$ | 144,126 | $ | 105,301 | $ | 90,681 |
For the Years
Ended December 31,
|
||||||||||||
2008
|
2007
|
2006
|
||||||||||
Beginning
balance
|
$ | 13,551 | $ | 13,461 | $ | 10,872 | ||||||
Increase
(decrease) related to foreign net operating loss
carryforwards
|
86 | 1,329 | (70 | ) | ||||||||
Increase
(decrease) related to capital losses and other
|
2,340 | (1,239 | ) | 2,659 | ||||||||
Ending
balance
|
$ | 15,977 | $ | 13,551 | $ | 13,461 |
For the Years
Ended December 31,
|
||||||||||||
2008
|
2007
|
2006
|
||||||||||
Federal income
tax at the 35% statutory rate
|
$ | 270,626 | $ | 238,651 | $ | 211,058 | ||||||
State income
taxes, net of federal income
tax
benefit
|
25,105 | 24,302 | 22,795 | |||||||||
Resolution of
prior year tax contingencies
|
– | – | (12,200 | ) | ||||||||
Other –
net
|
2,132 | (1,212 | ) | (2,029 | ) | |||||||
Income tax
expense
|
$ | 297,863 | $ | 261,741 | $ | 219,624 | ||||||
Effective
tax rate
|
38.5 | % | 38.4 | % | 36.4 | % |
2008
|
2007
|
|||||||
Balance at
beginning of year
|
$ | 13,568 | $ | 15,274 | ||||
Additions
based on tax positions related to the current year
|
13,016 | 3,060 | ||||||
Additions for
tax positions of prior years
|
735 | – | ||||||
Reductions for
tax positions of prior years
|
(2,900 | ) | (4,729 | ) | ||||
Settlements
(audit payments) refunds – net
|
(55 | ) | (37 | ) | ||||
Balance at end
of year
|
$ | 24,364 | $ | 13,568 |
For the Years
Ended December 31,
|
||||||||||||
2008
|
2007
|
2006
|
||||||||||
Net
earnings
|
$ | 475,355 | $ | 420,120 | $ | 383,399 | ||||||
Denominator
for basic earnings per share – weighted average shares
|
76,580 | 82,404 | 87,839 | |||||||||
Effect of
dilutive securities – stock-based compensation
|
2,170 | 2,641 | 2,685 | |||||||||
Denominator
for diluted earnings per share – weighted average shares
adjusted for dilutive
securities
|
78,750 | 85,045 | 90,524 | |||||||||
Basic earnings
per common share
|
$ | 6.21 | $ | 5.10 | $ | 4.36 | ||||||
Diluted
earnings per common share
|
$ | 6.04 | $ | 4.94 | $ | 4.24 |
2008
|
||||||||||||||||
Grainger
Branch-based
|
Acklands – Grainger
Branch-based
|
Lab
Safety
|
Total
|
|||||||||||||
Total net
sales
|
$ | 5,678,823 | $ | 727,989 | $ | 450,725 | $ | 6,857,537 | ||||||||
Intersegment
net sales
|
(3,556 | ) | (127 | ) | (3,822 | ) | (7,505 | ) | ||||||||
Net sales to
external customers
|
5,675,267 | 727,862 | 446,903 | 6,850,032 | ||||||||||||
Segment
operating earnings
|
782,747 | 54,263 | 45,386 | 882,396 | ||||||||||||
Segment
assets
|
2,216,282 | 448,660 | 225,494 | 2,890,436 | ||||||||||||
Depreciation
and amortization
|
107,367 | 10,506 | 9,333 | 127,206 | ||||||||||||
Additions to
long-lived assets
|
$ | 166,807 | $ | 24,337 | $ | 15,337 | $ | 206,481 |
2007
|
||||||||||||||||
Grainger
Branch-based
|
Acklands –
Grainger
Branch-based
|
Lab
Safety
|
Total
|
|||||||||||||
Total net
sales
|
$ | 5,352,520 | $ | 636,524 | $ | 434,663 | $ | 6,423,707 | ||||||||
Intersegment
net sales
|
(1,997 | ) | – | (3,696 | ) | (5,693 | ) | |||||||||
Net sales to
external customers
|
5,350,523 | 636,524 | 430,967 | 6,418,014 | ||||||||||||
Segment
operating earnings
|
669,441 | 44,218 | 54,287 | 767,946 | ||||||||||||
Segment
assets
|
2,107,408 | 502,414 | 212,627 | 2,822,449 | ||||||||||||
Depreciation
and amortization
|
100,082 | 10,786 | 9,126 | 119,994 | ||||||||||||
Additions to
long-lived assets
|
$ | 155,936 | $ | 10,794 | $ | 7,844 | $ | 174,574 |
2006
|
||||||||||||||||
Grainger
Branch-based
|
Acklands – Grainger
Branch-based
|
Lab
Safety
|
Total
|
|||||||||||||
Total net
sales
|
$ | 4,910,836 | $ | 565,098 | $ | 411,511 | $ | 5,887,445 | ||||||||
Intersegment
net sales
|
(1,214 | ) | – | (2,577 | ) | (3,791 | ) | |||||||||
Net sales to
external customers
|
4,909,622 | 565,098 | 408,934 | 5,883,654 | ||||||||||||
Segment
operating earnings
|
593,455 | 15,242 | 52,283 | 660,980 | ||||||||||||
Segment
assets
|
1,938,270 | 394,707 | 215,515 | 2,548,492 | ||||||||||||
Depreciation
and amortization
|
88,753 | 9,505 | 8,099 | 106,357 | ||||||||||||
Additions to
long-lived assets
|
$ | 112,414 | $ | 8,238 | $ | 37,733 | $ | 158,385 |
2008
|
2007
|
2006
|
||||||||||
Operating
earnings:
|
||||||||||||
Total
operating earnings for reportable
segments
|
$ | 882,396 | $ | 767,946 | $ | 660,980 | ||||||
Unallocated
expenses
|
(99,724 | ) | (97,293 | ) | (82,909 | ) | ||||||
Total
consolidated operating earnings
|
$ | 782,672 | $ | 670,653 | $ | 578,071 | ||||||
Assets:
|
||||||||||||
Total assets
for reportable segments
|
$ | 2,890,436 | $ | 2,822,449 | $ | 2,548,492 | ||||||
Unallocated
assets
|
624,981 | 271,579 | 497,596 | |||||||||
Total
consolidated assets
|
$ | 3,515,417 | $ | 3,094,028 | $ | 3,046,088 |
2008
|
||||||||||||
Segment
Totals
|
Unallocated
|
Consolidated
Total
|
||||||||||
Other
significant items:
|
||||||||||||
Depreciation
and amortization
|
$ | 127,206 | $ | 12,364 | $ | 139,570 | ||||||
Additions to
long-lived assets
|
$ | 206,481 | $ | 7,508 | $ | 213,989 | ||||||
Revenues
|
Long-lived
Assets
|
|||||||||||
Geographic
information:
|
||||||||||||
United
States
|
$ | 5,953,205 | $ | 998,529 | ||||||||
Canada
|
731,131 | 176,174 | ||||||||||
Other foreign
countries
|
165,696 | 41,217 | ||||||||||
$ | 6,850,032 | $ | 1,215,920 |
2007
|
||||||||||||
Segment
Totals
|
Unallocated
|
Consolidated
Total
|
||||||||||
Other
significant items:
|
||||||||||||
Depreciation
and amortization
|
$ | 119,994 | $ | 12,005 | $ | 131,999 | ||||||
Additions to
long-lived assets
|
$ | 174,574 | $ | 25,558 | $ | 200,132 | ||||||
Revenues
|
Long-lived
Assets
|
|||||||||||
Geographic
information:
|
||||||||||||
United
States
|
$ | 5,643,500 | $ | 961,624 | ||||||||
Canada
|
640,121 | 206,133 | ||||||||||
Other foreign
countries
|
134,393 | 20,135 | ||||||||||
$ | 6,418,014 | $ | 1,187,892 |
2006
|
||||||||||||
Segment
Totals
|
Unallocated
|
Consolidated
Total
|
||||||||||
Other
significant items:
|
||||||||||||
Depreciation
and amortization
|
$ | 106,357 | $ | 12,211 | $ | 118,568 | ||||||
Additions to
long-lived assets
|
$ | 158,385 | $ | 14,268 | $ | 172,653 | ||||||
Revenues
|
Long-Lived
Assets
|
|||||||||||
Geographic
information:
|
||||||||||||
United
States
|
$ | 5,197,240 | $ | 909,188 | ||||||||
Canada
|
567,626 | 176,097 | ||||||||||
Other foreign
countries
|
118,788 | 8,784 | ||||||||||
$ | 5,883,654 | $ | 1,094,069 |
Acklands – Grainger
Branch-based
|
Lab
Safety
|
Total
|
||||||||||
Balance at
January 1, 2006
|
$ | 120,779 | $ | 61,947 | $ | 182,726 | ||||||
Acquisitions
|
– | 28,276 | 28,276 | |||||||||
Translation
|
(331 | ) | – | (331 | ) | |||||||
Balance at
December 31, 2006
|
120,448 | 90,223 | 210,671 | |||||||||
Acquisition
|
– | 1,473 | 1,473 | |||||||||
Translation
|
20,884 | – | 20,884 | |||||||||
Balance at
December 31, 2007
|
141,332 | 91,696 | 233,028 | |||||||||
Acquisitions
|
4,381 | 2,372 | 6,753 | |||||||||
Translation
|
(26,622 | ) | – | (26,622 | ) | |||||||
Balance at
December 31, 2008
|
$ | 119,091 | $ | 94,068 | $ | 213,159 |
2008 Quarter
Ended
|
||||||||||||||||||||
March
31
|
June
30
|
September
30
|
December
31
|
Total
|
||||||||||||||||
Net sales
|
$ | 1,661,046 | $ | 1,756,856 | $ | 1,839,475 | $ | 1,592,655 | $ | 6,850,032 | ||||||||||
Cost of merchandise sold
|
981,112 | 1,050,979 | 1,097,127 | 912,592 | 4,041,810 | |||||||||||||||
Gross profit
|
679,934 | 705,877 | 742,348 | 680,063 | 2,808,222 | |||||||||||||||
Warehousing, marketing and
administrative expenses
|
494,111 | 521,042 | 510,891 | 499,506 | 2,025,550 | |||||||||||||||
Operating earnings
|
185,823 | 184,835 | 231,457 | 180,557 | 782,672 | |||||||||||||||
Net earnings
|
114,238 | 113,179 | 140,023 | 107,915 | 475,355 | |||||||||||||||
Earnings per share - basic
|
1.47 | 1.48 | 1.84 | 1.42 | 6.21 | |||||||||||||||
Earnings per share - diluted
|
$ | 1.43 | $ | 1.43 | $ | 1.79 | $ | 1.39 | $ | 6.04 |
2007 Quarter
Ended
|
||||||||||||||||||||
March
31
|
June
30
|
September
30
|
December
31
|
Total
|
||||||||||||||||
Net sales
|
$ | 1,546,658 | $ | 1,601,011 | $ | 1,658,592 | $ | 1,611,753 | $ | 6,418,014 | ||||||||||
Cost of merchandise sold
|
914,570 | 960,546 | 999,003 | 940,272 | 3,814,391 | |||||||||||||||
Gross profit
|
632,088 | 640,465 | 659,589 | 671,481 | 2,603,623 | |||||||||||||||
Warehousing, marketing and
administrative expenses
|
469,503 | 473,890 | 485,257 | 504,320 | 1,932,970 | |||||||||||||||
Operating earnings
|
162,585 | 166,575 | 174,332 | 167,161 | 670,653 | |||||||||||||||
Net earnings
|
101,787 | 104,791 | 109,150 | 104,392 | 420,120 | |||||||||||||||
Earnings per share - basic
|
1.21 | 1.25 | 1.33 | 1.32 | 5.10 | |||||||||||||||
Earnings per share - diluted
|
$ | 1.17 | $ | 1.21 | $ | 1.29 | $ | 1.28 | $ | 4.94 |
For the Years
Ended December 31,
|
||||||||||||
2008
|
2007
|
2006
|
||||||||||
Foreign
currency gains – net
|
$ | 2,404 | $ | 54 | $ | 31 | ||||||
Income
items
|
242 | 350 | 328 | |||||||||
Expense
items
|
(295 | ) | (363 | ) | (228 | ) | ||||||
Unclassified –
net
|
$ | 2,351 | $ | 41 | $ | 131 |
1.
|
Section 4.3
of the Plan is amended to add the following sentence at the end thereof to
read as follows:
|
Notwithstanding
anything in the Plan to the contrary, for an Employee who becomes a
Participant in the Plan on or after October 29, 2008, this Section 4.3
shall not apply and no death benefit will be payable under this Plan for
such a Participant who dies after incurring a Separation from
Service.
|
|
2.
|
Section 4.4
of the Plan is amended to add the following sentence at the end thereof to
read as follows:
|
Notwithstanding
anything in the Plan to the contrary, for an Employee who becomes a
Participant in the Plan on or after October 29, 2008, this Section 4.4
shall not apply and no cashout of the death benefit shall be available
under this Plan for such a Participant upon retirement.
|
|
3.
|
Section 4.6
of the Plan is amended to add the following sentence at the end thereof to
read as follows:
|
Notwithstanding
anything in the Plan to the contrary, for an Employee who becomes a
Participant in the Plan on or after October 29, 2008, no benefit shall be
payable under this Section
4.6.
|
1.
|
General.
This
award is governed by and subject to the terms and conditions of this
Agreement, the
Plan and the
Unfair Competition Agreement (the terms of which are hereby incorporated
herein by reference). In general, the Executive will be
entitled to receive a number of Performance Shares determined by the
Company’s performance against its sales growth target (as described in
Section 2 below), with the vesting of those Performance Shares being
subject to the Company’s achievement of its return on invested capital
target (as described in Section 3
below).
|
2.
|
Grant of Performance Shares;
[Next Fiscal Year] Sales Target.
The Company hereby
awards to the Executive a total of _______ Performance Shares (the “Target
Number”), such number being subject to possible adjustment as
follows. The actual number of Performance Shares which the
Executive will receive will depend on the Company’s total net sales during
its [next fiscal year]. Such number will be calculated in
accordance with the following
table:
|
If,
the Company’s [Next Fiscal Year]
sales
are at:
|
Then
the number of Performance
Shares
will be:
|
|
Less
than
|
$_________
|
Zero
(0)
|
$_________
|
Fifty percent
(50%) of the Target Number
|
|
$_________
$_________ or
more
|
One hundred
percent (100%) of the
Target
Number
Two hundred
percent (200%) of the Target
Number
|
|
Amounts
between the foregoing numbers will be interpolated as
necessary. For example, if [next fiscal year] net sales are
$_____, then the Executive would receive ______________ percent (__%) of
the Target Number of Performance
Shares.
|
3.
|
Vesting; ROIC
Target.
The vesting of the Performance Shares will
depend upon the Company’s average return on invested capital (“ROIC”)
during the period of three fiscal years beginning with the [current]
fiscal year, i.e., the Company’s [current], [next], [2 years out] fiscal
years (the “Measuring Period”). For this purpose, ROIC means
the Company’s operating earnings divided by its net working
assets. Vesting will be determined in accordance with the
following table:
|
If
the Company’s average ROIC
during
the Measuring Period is:
|
Then
the following percentage of
Performance
Shares will vest:
|
Less than ___
percent (__%)
|
Zero
(0)
|
____ percent
(__%) or more
|
One hundred
percent (100%)
|
|
Amounts
between the foregoing numbers will
not
be
interpolated. In other words, the Performance Shares will
either vest at one hundred percent (100%) or they will not vest at
all. If the Performance Shares vest, then in settlement of the
Performance Shares, the Executive will receive a number of shares of
Common Stock equal to the number of Performance Shares determined under
Section 2 above, subject, however, to the withholding provisions
below. If the Performance Shares do not vest, then they will be
forfeited in full and the Executive shall have no further rights with
respect to the award hereunder.
|
4.
|
Receipt by the Executive of the
Plan.
The Executive acknowledges receipt of the Plan
booklet which contains the entire Plan. The Executive represents and
warrants that he has read the Plan and that he agrees that all Performance
Shares awarded under it shall be subject to all of the terms and
conditions of the Plan, including but not limited to the exclusive right
of the Committee to interpret and determine the terms and provisions of
the Performance Share Award Agreements and the Plan and to make all
determinations necessary or advisable for the administration of the Plan,
all of which interpretations and determinations shall be final and
binding. Without limiting the generality of the foregoing, the
Committee shall have the discretion to adjust the terms and conditions of
awards of Performance Shares to correct for any windfalls or shortfalls in
such awards which, in the Committee’s determination, arise from factors
beyond the awardees’ control, provided, however, that the Committee’s
authority with respect to any award to a “covered employee,” as defined in
Section 162(m)(3) of the Code, shall be limited to decreasing, and not
increasing, such award.
|
5.
|
Tax
Deposit.
If the Performance Shares shall vest, the
Executive shall deposit with the Company an amount of cash equal to the
amount determined by the Company to be withheld upon such vesting for any
withholding taxes, FICA contributions, or the like under any federal or
state statute, rule, or regulation. The Company may withhold,
and the Committee may in its discretion permit the Executive to elect
(subject to such conditions as the Committee shall require) to have the
Company withhold, a number of shares of Common Stock having a fair market
value on the date that the amount of tax to be withheld is determined
equal to the required statutory minimum withholding. The
Company shall not issue and deliver any of its Common Stock upon the
vesting and settlement of the Performance Shares until and unless the
Executive has made the deposit required herein or proper provision for
withholding has been made.
|
6.
|
Agreement to
Serve
. Except in the case of an event causing
acceleration of vesting in accordance with the Plan, the Executive agrees
to remain in the employ of the Company or its subsidiaries for a period of
at least one (1) year from the award date of the Performance Shares,
subject to the right of the Company to terminate such
employment.
|
7.
|
Other Terms and Conditions Applicable to the Performance Shares. |
|
a. Rights of
Shareholder.
The Executive shall not have any voting
rights with respect to the Performance Shares. The Executive
shall have no right to receive dividend equivalent payments with respect
to the Performance Shares.
|
|
b. Termination of
Employment.
If the Executive’s employment terminates
during the Measuring Period for any reason other than retirement,
disability or death, then the Performance Shares will be forfeited in full
and the Executive shall have no further rights with respect to the award
hereunder.
|
|
c.
Retirement.
If the Executive’s employment with the
Company terminates during the Measuring Period by reason of retirement,
then the Executive will be entitled to receive in settlement of the
Performance Shares a number of shares of Common Stock equal to the product
of (x) the number of Performance Shares, if any, which subsequently vest
under Section 3 above,
multiplied by
(y) a fraction, the numerator of which is the number of months during the
Measuring Period that the Executive was employed by the Company and the
denominator of which is the total number of months in the Measuring
Period, i.e., 36 months. For purposes of the foregoing calculation, the
Executive will be deemed to have been employed by the Company during the
month that his employment terminates if, and only if, such termination
occurs on or after the fifteenth (
15
th
)
calendar day of that
month.
|
|
d. Disability or
Death.
If the Executive’s employment with the Company
terminates during the Measuring Period by reason of disability (defined
below) or death, then the Executive or the Executive’s estate, as the case
may be, will be entitled to receive in settlement of the Performance
Shares a number of shares of Common Stock calculated in the same manner as
under Subsection c immediately above, provided, however, that if such
termination of employment occurs during the first fiscal year of the
Measuring Period, then for purposes of such calculation the number of
Performance Shares referred to in clause (x) of such calculation shall be
determined as though the Company had met, but not exceeded, its sales
growth target and 100 percent of such Performance Shares had
vested. For purposes of the foregoing, the term “disability”
means the Executive’s inability to engage in any substantial gainful
activity by reason of any medically determinable physical or mental
impairment that can be expected to result in death or that has lasted for
a continuous period of not less than twelve (12)
months.
|
8.
|
Severability.
The
provisions of the Agreement shall be severable, and in the event that any
provision of it is found to be unenforceable, all other provisions shall
be binding and enforceable on the parties as drafted. In the
event that any provision is found to be unenforceable, the parties consent
to the Court’s modification of that provision in order to make the
provision enforceable, subject to the limitations of the Court’s powers
under the law.
|
9.
|
Venue.
The
Executive acknowledges that, in the event that a determination of the
enforceability of this Agreement is sought, or any other judicial
proceedings are brought pertaining to this Agreement, the Company has the
choice of venue and the preferred venue for such proceedings is Lake
County, Illinois.
|
10.
|
Governing
Law.
This Agreement shall be governed by and construed
in accordance with the laws of the State of Illinois, excluding any
conflicts or choice of law rules or principles
thereof.
|
W.W.
GRAINGER, INC.
|
|
By:
|
|
James T.
Ryan
|
|
President and
Chief Executive Officer
|
|
Executive
(Signature)
|
|
Executive
(Print Name)
|
|
|
Date
|
I.
|
Introduction
|
The 2009
Company Management Incentive Program (MIP) was designed to focus on two
key factors that drive improvements in shareholder value: return on
invested capital (ROIC) and sales
growth.
|
II.
|
Objectives
|
The MIP is
designed to:
|
|
Encourage
decision-making focused on producing a favorable rate of ROIC and on
growing the business rapidly, thus leading to improvements in shareholder
value.
|
|
Influence
participants to make decisions consistent with shareholders’
interests.
|
|
Align
management with Company objectives.
|
|
Attract and
retain the talent required to achieve the Company’s
objectives.
|
III.
|
Eligibility
|
Positions
that participate in this program are those that have significant impact on
the Company. Eligibility for participation in this program is based on the
determination of management. Criteria for inclusion are market practice,
impact of the role on overall Company results, and internal practice.
Participation in this program is subject to the Terms and
Conditions.
|
|
|
IV.
|
Performance
Measures
Shareholder
value will improve most dramatically if the Company can achieve two goals
simultaneously:
|
|
|
1.
|
Produce a
constantly improving rate of ROIC,
and
|
2.
|
Grow the
business rapidly.
|
The 2009 MIP
will be based on ROIC and sales growth. The payout earned is the sum of
the ROIC and sales growth results. This can be represented algebraically
as follows:
|
Total Payout
= ROIC Payout + Sales Growth Multiplier
|
|
ROIC
is defined as
operating earnings divided by net working
assets:
|
ROIC
|
=
|
Operating
Earnings
Net Working
Assets
|
The ROIC
component will range from 0% to 50% of a participant’s total Target
Incentive.
|
Sales growth
is defined
as year-over-year performance:
|
Sales
growth
|
=
|
Total Company Sales,
Current Year
Total
Company Sales, Prior
Year
|
-1
|
|
|
The sales
growth component will range from 0% to 150% of a participant’s total
Target Incentive.
|
|
Management
would be allowed to recommend discretionary adjustments to the ROIC and
sales growth portions of the payout, to correct for any windfalls or
shortfalls beyond the control of participants.
|
|
V.
|
Target Award
Opportunity
|
Target awards
for each position are based on competitive market practice and internal
considerations and are stated as a percentage of the employee’s base
salary.
|
IV.
|
Determination Of
Payment Amounts
|
The following
process is used to determine the payment amount for each
participant.
|
|
Step 1:
Determine the
performance results for ROIC and the resultant performance to goal.
Compute the appropriate percentage of Target Incentive
earned.
|
|
Step 2:
Determine the
performance results for sales growth and the resultant performance to
goal. Compute the appropriate percentage of Target Incentive
earned. Add these results to the results from Step 1 to
determine the Total % Payout.
|
|
Step 3
: Calculate each
participant’s incentive amount earned as follows:
|
|
Incentive
Amount Earned =
Total %
Payout x (Annualized Base Salary (as of 12/31) x
Target Incentive %)
|
|
Those
employees who are eligible to participate for only part of the year will
have their incentive amount adjusted accordingly, based on the eligibility
provisions of the Terms and Conditions.
|
|
Step 4
: The Compensation
Committee of Management and the Compensation Committee of the Board must
approve final incentive amounts.
|
|
Step 5:
Once approved,
final incentive amounts are forwarded to the Employee Systems manager for
payment.
|
1.
|
I have
reviewed this Annual Report on Form 10-K of W.W. Grainger,
Inc.;
|
|
2.
|
Based on my
knowledge, this report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made,
not misleading with respect to the period covered by this
report;
|
|
3.
|
Based on my
knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
|
|
4.
|
The
registrant’s other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
a)
|
Designed such
disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being
prepared;
|
|
b)
|
Designed such
internal control over financial reporting, or caused such internal control
over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in
accordance with generally accepted accounting
principles;
|
|
c)
|
Evaluated the
effectiveness of the registrant’s disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
|
|
d)
|
Disclosed in
this report any change in the registrant’s internal control over financial
reporting that occurred during the registrant’s most recent fiscal quarter
(the registrant’s fourth fiscal quarter in the case of an annual report)
that has materially affected, or is reasonably likely to materially
affect, the registrant’s internal control over financial reporting;
and
|
|
5.
|
The
registrant’s other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting,
to the registrant’s auditors and the audit committee of the registrant’s
board of directors (or persons performing the equivalent
functions):
|
|
a)
|
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information;
and
|
|
b)
|
Any fraud,
whether or not material, that involves management or other employees who
have a significant role in the registrant’s internal control over
financial reporting.
|
By:
|
/s/ J. T.
Ryan
|
Name:
|
J. T.
Ryan
|
Title:
|
President and
Chief Executive Officer
|
1.
|
I have
reviewed this Annual Report on Form 10-K of W.W. Grainger,
Inc.;
|
|
2.
|
Based on my
knowledge, this report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made,
not misleading with respect to the period covered by this
report;
|
|
3.
|
Based on my
knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
|
|
4.
|
The
registrant’s other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
a)
|
Designed such
disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being
prepared;
|
|
b)
|
Designed such
internal control over financial reporting, or caused such internal control
over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in
accordance with generally accepted accounting
principles;
|
|
c)
|
Evaluated the
effectiveness of the registrant’s disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
|
|
d)
|
Disclosed in
this report any change in the registrant’s internal control over financial
reporting that occurred during the registrant’s most recent fiscal quarter
(the registrant’s fourth fiscal quarter in the case of an annual report)
that has materially affected, or is reasonably likely to materially
affect, the registrant’s internal control over financial reporting;
and
|
|
5.
|
The
registrant’s other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting,
to the registrant’s auditors and the audit committee of the registrant’s
board of directors (or persons performing the equivalent
functions):
|
|
a)
|
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information;
and
|
|
b)
|
Any fraud,
whether or not material, that involves management or other employees who
have a significant role in the registrant’s internal control over
financial reporting.
|
By:
|
/s/ R. L.
Jadin
|
Name:
|
R. L.
Jadin
|
Title:
|
Senior Vice
President and Chief Financial
Officer
|
1.
|
The Annual
Report on Form 10-K of Grainger for the annual period ended
December 31,
2008, (the “Report”) fully complies with the requirements of Section 13(a)
or 15(d) of the Securities Exchange Act of 1934;
and
|
2.
|
The
information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of
Grainger.
|
/s/ J. T.
Ryan
|
|
J. T.
Ryan
|
|
President
and
Chief
Executive Oficer
|
|
February 26,
2009
|
1.
|
The Annual
Report on Form 10-K of Grainger for the annual period ended
December 31,
2008, (the “Report”) fully complies with the requirements of Section 13(a)
or 15(d) of the Securities Exchange Act of 1934;
and
|
2.
|
The
information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of
Grainger.
|
/s/ R. L.
Jadin
|
|
R. L.
Jadin
|
|
Senior Vice
President
and Chief
Financial Officer
|
|
February 26,
2009
|