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)
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Large accelerated filer [X] |
Accelerated filer [
]
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Non-accelerated filer [ ] |
Smaller reporting company
[ ]
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Page(s)
|
||||||
PART
I
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||||||
Item
1:
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BUSINESS
|
3
|
||||
THE
COMPANY
|
3
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|||||
UNITED
STATES
|
3-4
|
|||||
CANADA
|
4
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|||||
OTHER
BUSINESSES
|
4-5
|
|||||
SEASONALITY
|
5
|
|||||
COMPETITION
|
5
|
|||||
EMPLOYEES
|
5
|
|||||
WEB SITE
ACCESS TO COMPANY REPORTS
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5
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|||||
Item
1A
:
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RISK
FACTORS
|
5-6
|
||||
Item
1B
:
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UNRESOLVED
STAFF COMMENTS
|
6
|
||||
Item
2:
|
PROPERTIES
|
6-7
|
||||
Item
3:
|
LEGAL
PROCEEDINGS
|
7-8
|
||||
Item
4:
|
SUBMISSION OF
MATTERS TO A VOTE OF SECURITY HOLDERS
|
8
|
||||
Executive
Officers
|
8
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|||||
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
|
||||
Item
7:
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL
|
|
||||
CONDITION AND
RESULTS OF OPERATIONS
|
11-21 | |||||
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
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||||
Item
13:
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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
|
24-25
|
||||
Signatures
|
63
|
|||||
Certifications
|
65-68
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Location
|
Facility and
Use (6)
|
Size in Square
Feet (in 000’s)
|
||
United States
(1)
|
423 United
States branch locations
|
9,371
|
||
United States
(2)
|
14
Distribution Centers
|
5,821
|
||
United States
(3)
|
Other
facilities
|
2,028
|
||
Canada
(4)
|
173 Acklands –
Grainger facilities
|
2,401
|
||
Other
Businesses (5)
|
Other
facilities
|
1,409
|
||
Chicago
Area
|
Headquarters
and General Offices
|
1,327
|
||
Total Square
Feet
|
22,357
|
|||
(1)
|
United States
branches consist of 288 owned and 135 leased properties. Most leases
expire between 2010 and 2018.
|
(2)
|
These
facilities are primarily owned.
|
(3)
|
These
facilities include both owned and leased locations, consisting of storage
facilities, office space, and idle properties including the one million
square foot facility for a new distribution center in
Illinois.
|
(4)
|
Acklands –
Grainger facilities consist of general offices, distribution centers and
branches, of which 58 are owned and 115
leased.
|
(5)
|
These
facilities include owned and leased locations in Japan, Mexico, India,
Puerto Rico, China and Panama.
|
(6)
|
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 (37)
|
President,
Grainger International, a position assumed in 2009, and Senior Vice
President of Grainger, a position assumed in 2007. Previously,
Mr. Carruthers served as President of Acklands – Grainger
Inc., a position assumed in 2006. Prior to assuming the
last-mentioned position, he 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
(63)
|
Senior Vice
President, Communications and Investor Relations, a position assumed in
1999.
|
|
John L. Howard
(52)
|
Senior Vice
President and General Counsel, a position assumed in 2000.
|
|
Gregory S.
Irving (51)
|
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 (49)
|
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.
|
|
Donald G.
Macpherson (42)
|
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 (45)
|
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
(51)
|
Chairman of
the Board, President, and Chief Executive Officer, positions assumed in
2009, 2006, and 2008, respectively. Mr. Ryan became Chief
Operating Officer and was appointed to Grainger’s Board of Directors in
2007. Prior to that, Mr. Ryan served as Group President, a
position assumed in 2004. He has served Grainger in
increasingly responsible roles since 1980, including Executive Vice
President, Marketing, Sales and Service; Vice President, Information
Services; President, grainger.com; and President, Grainger
Parts.
|
Prices
|
|||||||||||||
Quarters
|
High
|
Low
|
Dividends
|
||||||||||
2009
|
First
|
$ | 81.18 | $ | 59.95 | $ | 0.40 | ||||||
Second
|
86.36 | 68.61 | 0.46 | ||||||||||
Third
|
91.55 | 77.67 | 0.46 | ||||||||||
Fourth
|
102.54 | 85.24 | 0.46 | ||||||||||
Year
|
$ | 102.54 | $ | 59.95 | $ | 1.78 | |||||||
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 |
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
|
747,603 | $ | 95.19 | 747,603 | 4,935,977 |
shares
|
|||||||||||
Nov. 1 –
Nov. 30
|
1,085,665 | $ | 95.49 | 1,085,665 | 3,850,312 |
shares
|
|||||||||||
Dec. 1 –
Dec. 31
|
769,840 | $ | 98.04 | 769,840 | 3,080,472 |
shares
|
|||||||||||
Total
|
2,603,108 | $ | 96.58 | 2,603,108 |
(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.
|
(C)
|
Purchases were
made pursuant to a share repurchase program approved by Grainger’s Board
of Directors on April 30, 2008. The 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. Activity is reported on a trade date
basis.
|
December
31,
|
||||||||||||||||||||||||
2004
|
2005
|
2006
|
2007
|
2008
|
2009
|
|||||||||||||||||||
W.W. Grainger,
Inc.
|
$ | 100 | $ | 108 | $ | 108 | $ | 138 | $ | 126 | $ | 159 | ||||||||||||
Dow
Jones US Industrial Suppliers
Total
Stock
Market Index
|
100 | 113 | 117 | 134 | 104 | 131 | ||||||||||||||||||
S&P 500
Stock Index
|
100 | 105 | 121 | 128 | 81 | 102 |
2009
|
2008
|
2007
|
2006
|
2005
|
||||||||||||||||
(In thousands
of dollars, except for per share amounts)
|
||||||||||||||||||||
Net
sales
|
$ | 6,221,991 | $ | 6,850,032 | $ | 6,418,014 | $ | 5,883,654 | $ | 5,526,636 | ||||||||||
Net earnings
attributable to W.W. Grainger, Inc.
|
430,466 | 475,355 | 420,120 | 383,399 | 346,324 | |||||||||||||||
Net earnings
per basic share*
|
5.70 | 6.07 | 5.01 | 4.36 | 3.87 | |||||||||||||||
Net earnings
per diluted share*
|
5.62 | 5.97 | 4.91 | 4.24 | 3.78 | |||||||||||||||
Total
assets
|
3,726,332 | 3,515,417 | 3,094,028 | 3,046,088 | 3,107,921 | |||||||||||||||
Long-term debt
(less current maturities)
|
437,500 | 488,228 | 4,895 | 4,895 | 4,895 | |||||||||||||||
Cash dividends
paid per share
|
$ | 1.780 | $ | 1.550 | $ | 1.340 | $ | 1.110 | $ | 0.920 |
For the Years
Ended December 31,
|
||||||||||||||||||||
As a Percent
of Net Sales
|
Percent
Increase/(Decrease) from Prior Year
|
|||||||||||||||||||
2009
|
2008
|
2007
|
2009
|
2008
|
||||||||||||||||
Net
sales
|
100.0 | % | 100.0 | % | 100.0 | % | (9.2 | )% | 6.7 | % | ||||||||||
Cost of
merchandise sold
|
58.2 | 59.0 | 59.4 | (10.4 | ) | 6.0 | ||||||||||||||
Gross
profit
|
41.8 | 41.0 | 40.6 | (7.5 | ) | 7.9 | ||||||||||||||
Operating
expenses
|
31.1 | 29.6 | 30.1 | (4.6 | ) | 4.8 | ||||||||||||||
Operating
earnings
|
10.7 | 11.4 | 10.5 | (15.0 | ) | 16.7 | ||||||||||||||
Other income
(expense)
|
0.7 | (0.1 | ) | 0.2 | (545.5 | ) | (184.3 | ) | ||||||||||||
Income
taxes
|
4.5 | 4.4 | 4.1 | (7.2 | ) | 13.8 | ||||||||||||||
Noncontrolling
interest
|
0.0 | 0.0 | 0.0 | – | – | |||||||||||||||
Net
earnings attributable to
W.W. Grainger,
Inc.
|
6.9 | % | 6.9 | % | 6.6 | % | (9.4 | )% | 13.1 | % |
For the Years
Ended December 31,
|
||||||||
2009
|
2008
|
|||||||
Other income
and (expense):
|
||||||||
Interest
income (expense) – net
|
$ | (7,408 | ) | $ | (9,416 | ) | ||
Equity in net
income of unconsolidated
entities
|
1,497 | 3,642 | ||||||
Gain
(write-off) of investment in unconsolidated entities
|
47,343 | (6,031 | ) | |||||
Other
non-operating income
|
964 | 2,668 | ||||||
Other
non-operating expense
|
(283 | ) | (317 | ) | ||||
$ | 42,113 | $ | (9,454 | ) |
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 | ) | – | |||||
Other
non-operating income
|
2,668 | 404 | ||||||
Other
non-operating expense
|
(317 | ) | (363 | ) | ||||
$ | (9,454 | ) | $ | 11,208 |
For the Years
Ended December 31,
|
||||||||||||
2009
|
2008
|
2007
|
||||||||||
Land,
buildings, structures and improvements
|
$ | 67,917 | $ | 107,688 | $ | 100,380 | ||||||
Furniture,
fixtures, machinery and equipment
|
63,667 | 76,163 | 87,389 | |||||||||
Subtotal
|
131,584 | 183,851 | 187,769 | |||||||||
Capitalized
software
|
8,367 | 12,297 | 8,556 | |||||||||
Total
|
$ | 139,951 | $ | 196,148 | $ | 196,325 |
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
|
$ | 490,628 | $ | 53,128 | $ | 437,500 | $ | – | $ | – | ||||||||||
Interest on
long-term debt
|
10,214 | 4,668 | 5,453 | 93 | – | |||||||||||||||
Operating
lease obligations
|
216,924 | 42,832 | 69,741 | 52,900 | 51,451 | |||||||||||||||
Purchase
obligations:
|
||||||||||||||||||||
Uncompleted additions
to
property, buildings and
equipment
|
42,025 | 24,215 | 17,810 | – | – | |||||||||||||||
Commitments to purchase
inventory
|
212,700 | 212,694 | 6 | – | – | |||||||||||||||
Other purchase
obligations
|
135,694 | 64,836 | 35,659 | 31,146 | 4,053 | |||||||||||||||
Other
liabilities
|
191,346 | 10,726 | 17,264 | 20,343 | 143,013 | |||||||||||||||
Total
|
$ | 1,299,531 | $ | 413,099 | $ | 583,433 | $ | 104,482 | $ | 198,517 |
For the years
ended December 31,
|
||||||||||||
2009
|
2008
|
2007
|
||||||||||
Risk-free
interest rate
|
2.4 | % | 3.2 | % | 4.6 | % | ||||||
Expected
life
|
6
years
|
6
years
|
6
years
|
|||||||||
Expected
volatility
|
28.8 | % | 25.2 | % | 24.3 | % | ||||||
Expected
dividend yield
|
2.3 | % | 1.8 | % | 1.7 | % |
1 Percentage
Point
|
||||||||
Increase
|
(Decrease)
|
|||||||
Effect on
total of service and interest cost
|
$ | 5,278 | $ | (4,100 | ) | |||
Effect on
accumulated postretirement benefit obligation
|
44,290 | (34,925 | ) |
(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
|
(a)
|
1.
|
Financial
Statements. See Index to Financial Statements and Supplementary
Data.
|
|
|
2.
3.
|
Financial
Statement Schedules. The schedules listed in Reg. 210.5-04 have been
omitted because they are either not applicable or the required information
is shown in the consolidated financial statements or notes
thereto.
Exhibits
|
(3)
|
(a)
(b)
|
Restated
Articles of Incorporation, incorporated by reference to Exhibit 3(i) to
Grainger’s Quarterly Report on Form 10-Q for the quarter ended June 30,
1998.
Bylaws, as
amended February 17, 2010.
|
|
(4)
|
Instruments
Defining the Rights of Security Holders, Including
Indentures
|
|
(a)
|
No instruments
which define the rights of holders of Grainger’s Industrial Development
Revenue Bonds are filed herewith, pursuant to the exemption contained in
Regulation S-K, Item 601(b)(4)(iii). Grainger hereby agrees to furnish to
the Securities and Exchange Commission, upon request, a copy of any such
instrument.
|
|
(10)
|
Material
Contracts
|
(a)
|
(i)
(ii)
|
Accelerated share
repurchase agreement, incorporated by reference to Exhibit 10 to
Grainger's Quarterly Report on Form 10-Q for the quarter ended
September 30, 2007.
A Credit
Agreement with Wachovia Bank, National Association, as administrative
agent, and other lenders incorporated by reference to Exhibit 10 to
Grainger's Quarterly Report on Form 10-Q for the quarter ended March 31,
2008.
|
|
(b)
|
Compensatory
Plans or Arrangements
|
|
(i)
|
Director Stock
Plan, as amended, incorporated by reference to Exhibit 10(c) to Grainger’s
Quarterly Report on Form 10-Q for the quarter ended June 30,
2006.
|
|
(ii)
|
1990 Long-Term
Stock Incentive Plan, as amended, incorporated by reference to Exhibit
10(a) to Grainger’s Quarterly Report on Form 10-Q for the quarter ended
June 30, 2006.
|
|
(iii)
|
2001 Long-Term
Stock Incentive Plan, as amended, incorporated by reference to Exhibit
10(b) to Grainger’s Quarterly Report on Form 10-Q for the quarter ended
June 30, 2006.
|
|
(iv)
|
Executive
Death Benefit Plan, as amended, incorporated by reference to Exhibit 10(v)
to Grainger's Annual Report on Form 10-K for the year ended December 31,
2007.
|
|
(1)
|
First
amendment to the Executive Death Benefit Plan, incorporated by reference
to Exhibit 10(b)(v)(1) to Grainger’s Annual Report on Form 10-K for the
year ended December 31, 2008.
|
|
(2)
|
Second
amendment to the Executive Death Benefit
Plan.
|
|
(v)
|
1985 Executive Deferred
Compensation Plan, as amended, incorporated by reference to Exhibit
10(d)(vii) to Grainger’s Annual Report on Form 10-K for the year ended
December 31, 1998.
|
|
(vi)
|
Supplemental
Profit Sharing Plan, as amended, incorporated by reference to Exhibit
10(viii) to Grainger’s Annual Report on Form 10-K for the year ended
December 31, 2003.
|
|
(vii)
|
Supplemental
Profit Sharing Plan II, as amended, incorporated by reference to Exhibit
10(ix) to Grainger's Annual Report on Form 10-K for the year ended
December 31, 2007.
|
|
(viii)
|
Form of Change
in Control Employment Agreement between Grainger and certain of its
executive officers, as amended, incorporated by reference to Exhibit 10(x)
to Grainger's Annual Report on Form 10-K for the year ended December 31,
2007.
|
|
(ix)
|
Form of Change
in Control Employment Agreement between Grainger and certain of its
executive officers.
|
|
(x)
|
Voluntary
Salary and Incentive Deferral Plan, as amended, incorporated by reference
to Exhibit 10(xi) to Grainger's Annual Report on Form 10-K for the year
ended December 31, 2007.
|
|
(xi)
|
Summary
Description of Directors Compensation Program effective April 29, 2009,
incorporated by reference to Exhibit 10(xiii) to Grainger’s Annual Report
on Form10-K for the year ended December 31,
2008.
|
|
(xii)
|
Summary
Description of Directors Compensation Program effective April 28,
2010.
|
|
(xiii)
|
2005 Incentive
Plan, as amended, incorporated by reference to Exhibit 10(d) to Grainger's
Quarterly Report on Form 10-Q for the quarter ended June 30,
2006.
|
|
(xiv)
|
Form of Stock
Option Award Agreement between Grainger and certain of its executive
officers, incorporated by reference to Exhibit 10(xiv) to Grainger's
Annual Report on Form 10-K for the year ended December 31,
2005.
|
|
(xv)
|
Form of Stock
Option and Restricted Stock Unit Agreement between Grainger and certain of
its executive officers, incorporated by reference to Exhibit 10(xv) to
Grainger's Annual Report on Form 10-K for the year ended December 31,
2005.
|
|
(xvi)
(xvii)
|
Form of Stock
Option Award Agreement between Grainger and certain of its executive
officers.
Form of
Stock Option and Restricted Stock Unit Agreement between Grainger and
certain of its international executive
officers.
|
|
(xviii)
|
Form of
Performance Share Award Agreement between Grainger and certain of its
executive officers, incorporated by reference to Exhibit 10(xvi) to
Grainger's Annual Report on Form 10-K for the year ended December 31,
2005.
|
|
(xix)
|
Form of
Performance Share Award Agreement (non-dividend equivalent) between
Grainger and certain of its executive officers, incorporated by reference
to Exhibit 10(xviii) to Grainger's Annual Report on Form 10-K for the year
ended December 31, 2008.
|
|
(xx)
(xxi)
|
Form of
Performance Share Award Agreement (non-dividend equivalent and
recoupment) between Grainger and certain of its executive
officers.
Offer of
Employment Letter to Mr. D.G. Macpherson dated December 14,
2007.
|
|
(xxii)
|
Summary
Description of 2008 Management Incentive Program, incorporated by
reference to Exhibit 10(xviii) to Grainger's Annual Report on Form 10-K
for the year ended December 31,
2007.
|
|
(xxiii)
|
Summary
Description of 2009 Management Incentive Program, incorporated by
reference to Exhibit 10(xxi) to Grainger’s Annual Report on Form 10-K for
the year ended December 31, 2008.
|
|
(xxiv)
|
Summary
Description of 2010 Management Incentive
Program.
|
|
(xxv)
|
Incentive
Program Recoupment Agreement.
|
|
(21)
|
Subsidiaries
of Grainger.
|
|
(23)
|
Consent of
Independent Registered Public Accounting
Firm.
|
|
(31)
|
Rule 13a –
14(a)/15d – 14(a) Certifications
|
|
(a)
|
Chief
Executive Officer certification pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
|
(b)
|
Chief
Financial Officer certification pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
|
(32)
|
Section 1350
Certifications
|
|
(a)
|
Chief
Executive Officer certification pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
|
|
(b)
|
Chief
Financial Officer certification pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
|
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
|
38-62
|
EXHIBIT 23 –
CONSENT OF INDEPENDENT REGISTERED
PUBLIC
ACCOUNTING FIRM
|
64
|
For the Years
Ended December 31,
|
||||||||||||
2009
|
2008
|
2007
|
||||||||||
Net
sales
|
$ | 6,221,991 | $ | 6,850,032 | $ | 6,418,014 | ||||||
Cost of
merchandise sold
|
3,623,465 | 4,041,810 | 3,814,391 | |||||||||
Gross profit
|
2,598,526 | 2,808,222 | 2,603,623 | |||||||||
Warehousing,
marketing and administrative
expenses
|
1,933,302 | 2,025,550 | 1,932,970 | |||||||||
Operating earnings
|
665,224 | 782,672 | 670,653 | |||||||||
Other income
and (expense):
|
||||||||||||
Interest income
|
1,358 | 5,069 | 12,125 | |||||||||
Interest expense
|
(8,766 | ) | (14,485 | ) | (2,974 | ) | ||||||
Equity in net income of unconsolidated
entities
|
1,497 | 3,642 | 2,016 | |||||||||
Gain (write-off) of investment in
unconsolidated entities
|
47,343 | (6,031 | ) | – | ||||||||
Other non-operating income
|
964 | 2,668 | 404 | |||||||||
Other non-operating expense
|
(283 | ) | (317 | ) | (363 | ) | ||||||
Total other income and (expense)
|
42,113 | (9,454 | ) | 11,208 | ||||||||
Earnings before income taxes
|
707,337 | 773,218 | 681,861 | |||||||||
Income
taxes
|
276,565 | 297,863 | 261,741 | |||||||||
Net earnings
|
430,772 | 475,355 | 420,120 | |||||||||
Less: Net earnings attributable to
noncontrolling interest
|
306 | – | – | |||||||||
Net earnings attributable to W.W.
Grainger, Inc.
|
$ | 430,466 | $ | 475,355 | $ | 420,120 | ||||||
Earnings per
share:
|
||||||||||||
Basic
|
$ | 5.70 | $ | 6.07 | $ | 5.01 | ||||||
Diluted
|
$ | 5.62 | $ | 5.97 | $ | 4.91 | ||||||
Weighted
average number of shares outstanding:
|
||||||||||||
Basic
|
73,786,346 | 76,579,856 | 82,403,958 | |||||||||
Diluted
|
74,891,852 | 77,887,620 | 84,173,381 |
For the Years
Ended December 31,
|
||||||||||||
2009
|
2008
|
2007
|
||||||||||
Net
earnings
|
$ | 430,772 | $ | 475,355 | $ | 420,120 | ||||||
Other
comprehensive earnings (losses):
|
||||||||||||
Foreign
currency translation adjustments, net of tax (expense)
benefit of
$(7,813), $11,454 and $(9,279), respectively
|
54,693 | (79,287 | ) | 53,545 | ||||||||
Reclassification
of cumulative currency translation gain
|
(3,145 | ) | – | – | ||||||||
Defined
postretirement benefit plan:
|
||||||||||||
Prior service
(cost) credit arising during period
|
(8,715 | ) | – | 9,433 | ||||||||
Amortization
of prior service credit
|
(1,215 | ) | (1,215 | ) | (437 | ) | ||||||
Amortization
of transition asset
|
(143 | ) | (143 | ) | (143 | ) | ||||||
Net gain
(loss) arising during period
|
3,402 | (49,872 | ) | 11,620 | ||||||||
Amortization
of unrecognized losses
|
4,135 | 1,312 | 2,094 | |||||||||
Income tax
benefit (expense)
|
984 | 19,368 | (8,756 | ) | ||||||||
Net defined
postretirement benefit plan adjustments
|
(1,552 | ) | (30,550 | ) | 13,811 | |||||||
Gain (loss)
on other employment-related benefit plans, net of tax benefit (expense) of
$205, $544 and $(878), respectively
|
(554 | ) | (859 | ) | 1,384 | |||||||
Total other
comprehensive earnings (losses)
|
49,442 | (110,696 | ) | 68,740 | ||||||||
Comprehensive
earnings, net of tax
|
480,214 | 364,659 | 488,860 | |||||||||
Comprehensive
earnings attributable to noncontrolling interest:
|
||||||||||||
Net earnings
|
(306 | ) | – | – | ||||||||
Foreign currency translation
adjustments
|
1,457 | – | – | |||||||||
Comprehensive
earnings attributable to W.W. Grainger, Inc.
|
$ | 481,365 | $ | 364,659 | $ | 488,860 |
As of
December 31,
|
||||||||||||
2009
|
2008
|
2007
|
||||||||||
LIABILITIES
AND SHAREHOLDERS’ EQUITY
|
||||||||||||
CURRENT
LIABILITIES
|
||||||||||||
Short-term
debt
|
$ | 34,780 | $ | 19,960 | $ | 102,060 | ||||||
Current
maturities of long-term debt
|
53,128 | 21,257 | 4,590 | |||||||||
Trade
accounts payable
|
300,791 | 290,802 | 297,929 | |||||||||
Accrued
compensation and benefits
|
135,323 | 162,380 | 182,275 | |||||||||
Accrued
contributions to employees’ profit sharing plans
|
121,895 | 146,922 | 126,483 | |||||||||
Accrued
expenses
|
124,150 | 118,633 | 102,607 | |||||||||
Income
taxes payable
|
6,732 | 1,780 | 10,459 | |||||||||
Total
current liabilities
|
776,799 | 761,734 | 826,403 | |||||||||
LONG-TERM
DEBT
(less
current maturities)
|
437,500 | 488,228 | 4,895 | |||||||||
DEFERRED
INCOME TAXES AND TAX
UNCERTAINTIES
|
62,215 | 33,219 | 20,727 | |||||||||
ACCRUED
EMPLOYMENT-RELATED
BENEFITS
COSTS
|
222,619 | 198,431 | 143,895 | |||||||||
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;
109,659,219
shares issued
|
54,830 | 54,830 | 54,830 | |||||||||
Additional
contributed capital
|
596,358 | 564,728 | 475,350 | |||||||||
Retained
earnings
|
3,966,508 | 3,670,726 | 3,316,875 | |||||||||
Accumulated
other comprehensive earnings (losses)
|
12,374 | (38,525 | ) | 72,171 | ||||||||
Treasury
stock, at cost –
37,382,703,
34,878,190 and
30,199,804
shares, respectively
|
(2,466,350 | ) | (2,217,954 | ) | (1,821,118 | ) | ||||||
Total W.W. Grainger, Inc. shareholders’ equity
|
2,163,720 | 2,033,805 | 2,098,108 | |||||||||
Noncontrolling
interest
|
63,479 | – | – | |||||||||
Total
shareholders’ equity
|
2,227,199 | 2,033,805 | 2,098,108 | |||||||||
TOTAL
LIABILITIES AND SHAREHOLDERS’
EQUITY
|
$ | 3,726,332 | $ | 3,515,417 | $ | 3,094,028 |
For the Years
Ended December 31,
|
||||||||||||
2009
|
2008
|
2007
|
||||||||||
CASH FLOWS
FROM OPERATING ACTIVITIES:
|
||||||||||||
Net earnings
|
$ | 430,772 | $ | 475,355 | $ | 420,120 | ||||||
Provision for losses on accounts
receivable
|
10,748 | 12,924 | 15,436 | |||||||||
Deferred income taxes and tax
uncertainties
|
21,683 | 5,182 | (18,632 | ) | ||||||||
Depreciation and
amortization
|
147,531 | 139,570 | 131,999 | |||||||||
Stock-based compensation
|
40,407 | 45,945 | 35,551 | |||||||||
Tax benefit of stock incentive
plans
|
2,894 | 1,925 | 3,193 | |||||||||
Net losses (gains) on property, buildings
and equipment
|
8,642 | (9,232 | ) | (7,254 | ) | |||||||
Income from unconsolidated entities –
net
|
(1,497 | ) | (3,642 | ) | (2,016 | ) | ||||||
(Gain) write-off of unconsolidated
entities
|
(47,343 | ) | 6,031 | – | ||||||||
Change in operating assets and liabilities
– net of business acquisitions
|
||||||||||||
(Increase) decrease in accounts
receivable
|
2,794 | (5,592 | ) | (41,814 | ) | |||||||
(Increase) decrease in
inventories
|
175,286 | (92,518 | ) | (97,234 | ) | |||||||
(Increase) decrease in prepaid
expenses
|
(11,180 | ) | (33,629 | ) | (2,342 | ) | ||||||
Increase (decrease) in trade accounts
payable
|
(16,736 | ) | (6,960 | ) | (39,436 | ) | ||||||
Increase (decrease) in other current
liabilities
|
(52,944 | ) | 199 | 54,457 | ||||||||
Increase (decrease) in current income
taxes payable
|
2,472 | (7,784 | ) | 2,304 | ||||||||
Increase (decrease) in accrued
employment-related benefits costs
|
22,080 | 3,216 | 17,705 | |||||||||
Other – net
|
(3,213 | ) | (924 | ) | (3,162 | ) | ||||||
Net cash provided by operating
activities
|
732,396 | 530,066 | 468,875 | |||||||||
CASH FLOWS
FROM INVESTING ACTIVITIES:
|
||||||||||||
Additions to property, buildings and
equipment
|
(142,414 | ) | (194,975 | ) | (197,423 | ) | ||||||
Proceeds from sales of property, buildings and equipment
|
1,684 | 13,620 | 12,084 | |||||||||
Cash paid for business acquisitions, net
of cash acquired, and other investments
|
(121,833 | ) | (14,793 | ) | (9,480 | ) | ||||||
Investments in unconsolidated
entities
|
– | (6,487 | ) | (2,138 | ) | |||||||
Net cash used in investing
activities
|
$ | (262,563 | ) | $ | (202,635 | ) | $ | (196,957 | ) |
For the Years
Ended December 31,
|
||||||||||||
2009
|
2008
|
2007
|
||||||||||
CASH FLOWS
FROM FINANCING ACTIVITIES:
|
||||||||||||
Net
(decrease) increase in commercial paper
|
$ | – | $ | (95,947 | ) | $ | 95,947 | |||||
Borrowings
under line of credit
|
46,125 | 29,959 | 14,107 | |||||||||
Payments
against line of credit
|
(43,583 | ) | (15,437 | ) | (7,751 | ) | ||||||
Proceeds
from issuance of long-term debt
|
– | 500,000 | – | |||||||||
Payments
of long-term debt
|
(18,856 | ) | – | – | ||||||||
Proceeds
from stock options exercised
|
91,165 | 46,833 | 113,500 | |||||||||
Excess tax
benefits from stock-based compensation
|
19,030 | 13,533 | 30,696 | |||||||||
Purchase
of treasury stock
|
(372,727 | ) | (394,247 | ) | (647,293 | ) | ||||||
Cash
dividends paid
|
(134,684 | ) | (121,504 | ) | (113,093 | ) | ||||||
Net cash used
in financing activities
|
(413,530 | ) | (36,810 | ) | (513,887 | ) | ||||||
Exchange rate
effect on cash and cash equivalents
|
7,278 | (7,768 | ) | 6,935 | ||||||||
NET INCREASE
(DECREASE) IN CASH AND CASH
EQUIVALENTS
|
63,581 | 282,853 | (235,034 | ) | ||||||||
Cash and cash
equivalents at beginning of year
|
396,290 | 113,437 | 348,471 | |||||||||
Cash and cash
equivalents at end of year
|
$ | 459,871 | $ | 396,290 | $ | 113,437 | ||||||
Supplemental
cash flow information:
|
||||||||||||
Cash
payments for interest (net of amounts capitalized)
|
$ | 8,766 | $ | 14,508 | $ | 4,409 | ||||||
Cash
payments for income taxes
|
235,043 | 306,960 | 244,541 | |||||||||
|
||||||||||||
Noncash
investing activities:
|
||||||||||||
Fair
value of noncash assets acquired in business acquisitions
|
$ | 324,913 | $ | 41,068 | $ | 5,039 | ||||||
Liabilities
assumed in business acquisitions
|
(75,530 | ) | (6,778 | ) | (341 | ) |
W.W. Grainger,
Inc. Shareholders’ Equity
|
||||||||||||||||||||||||
Common
Stock
|
Additional
Contributed Capital
|
Retained
Earnings
|
Accumulated
Other Comprehensive Earnings (Losses)
|
Treasury
Stock
|
Noncontrolling
Interest
|
|||||||||||||||||||
Balance at
January 1, 2007
|
$ | 54,829 | $ | 478,454 | $ | 3,007,606 | $ | 3,431 | $ | (1,366,705 | ) | $ | – | |||||||||||
Cumulative
effect of a change in
accounting principle
|
– | – | 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 | ) | – | ||||||||||||||||
Net
earnings
|
– | – | 420,120 | – | – | – | ||||||||||||||||||
Other
comprehensive earnings
|
– | – | – | 68,740 | – | – | ||||||||||||||||||
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 | ) | $ | – |
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 | ) | – | |||||||||||||||||
Net
earnings
|
– | – | 475,355 | – | – | – | ||||||||||||||||||
Other
comprehensive earnings
|
– | – | – | (110,696 | ) | – | – | |||||||||||||||||
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 | ) | $ | – |
W.W. Grainger,
Inc. Shareholders’ Equity
|
||||||||||||||||||||||||
Common
Stock
|
Additional
Contributed Capital
|
Retained
Earnings
|
Accumulated
Other Comprehensive Earnings (Losses)
|
Treasury
Stock
|
Noncontrolling
Interest
|
|||||||||||||||||||
Balance at
December 31, 2008
|
$ | 54,830 | $ | 564,728 | $ | 3,670,726 | $ | (38,525 | ) | $ | (2,217,954 | ) | $ | – | ||||||||||
Exercise of
stock options
|
– | (15,614 | ) | – | – | 106,255 | 96 | |||||||||||||||||
Tax benefits
on stock-based
compensation
awards
|
– | 21,924 | – | – | – | – | ||||||||||||||||||
Stock option
expense
|
– | 16,100 | – | – | – | 98 | ||||||||||||||||||
Amortization
of other stock-
based
compensation awards
|
– | 24,307 | – | – | – | – | ||||||||||||||||||
Vesting of
restricted stock
|
– | – | – | – | (926 | ) | – | |||||||||||||||||
Settlement of
other stock-based
compensation awards
|
– | (15,087 | ) | – | – | 8,525 | – | |||||||||||||||||
Purchase of
treasury stock
|
– | – | – | – | (362,250 | ) | – | |||||||||||||||||
Net
earnings
|
– | – | 430,466 | – | – | 306 | ||||||||||||||||||
Other
comprehensive earnings
|
– | – | – | 50,899 | – | (1,457 | ) | |||||||||||||||||
Cash dividends
paid ($1.78
per share)
|
– | – | (134,684 | ) | – | – | – | |||||||||||||||||
Change in
subsidiary ownership
|
– | – | – | – | – | 64,436 | ||||||||||||||||||
Balance at
December 31, 2009
|
$ | 54,830 | $ | 596,358 | $ | 3,966,508 | $ | 12,374 | $ | (2,466,350 | ) | $ | 63,479 |
Buildings,
structures and improvements
|
10 to 30
years
|
Furniture,
fixtures, machinery and equipment
|
3
to 10 years
|
For the Years
Ended December 31,
|
||||||||||||
2009
|
2008
|
2007
|
||||||||||
Beginning
balance
|
$ | 3,218 | $ | 3,442 | $ | 4,651 | ||||||
Returns
|
(11,727 | ) | (12,917 | ) | (12,781 | ) | ||||||
Provisions
|
11,747 | 12,693 | 11,572 | |||||||||
Ending
balance
|
$ | 3,238 | $ | 3,218 | $ | 3,442 |
For the Years
Ended December 31,
|
||||||||||||
2009
|
2008
|
2007
|
||||||||||
Balance at
beginning of period
|
$ | 26,481 | $ | 25,830 | $ | 18,801 | ||||||
Provision for
uncollectible accounts
|
10,748 | 12,924 | 15,436 | |||||||||
Write-off of
uncollectible accounts, net of
recoveries
|
(12,254 | ) | (11,501 | ) | (8,755 | ) | ||||||
Foreign
currency translation impact
|
875 | (772 | ) | 348 | ||||||||
Balance at end
of period
|
$ | 25,850 | $ | 26,481 | $ | 25,830 |
Grainger
|
||||||||||||||||
Industrial
|
||||||||||||||||
Supply
|
||||||||||||||||
MonotaRO
|
MRO
Korea
|
India
|
||||||||||||||
Co.,
Ltd.
|
Co.,
Ltd.
|
Private
Ltd.
|
Total
|
|||||||||||||
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 | ||||||||||||
Cash
investments
|
4,013 | – | 1,194 | 5,207 | ||||||||||||
Equity
earnings
|
1,249 | 248 | – | 1,497 | ||||||||||||
Dividends
|
(878 | ) | – | – | (878 | ) | ||||||||||
Foreign currency (loss)
gain
|
(468 | ) | 254 | – | (214 | ) | ||||||||||
Gain (loss) on previously held
equity interest
|
44,275 | – | (77 | ) | 44,198 | |||||||||||
Investment eliminated in
consolidation
|
(66,015 | ) | – | (1,117 | ) | (67,132 | ) | |||||||||
Balance at
December 31, 2009
|
$ | – | $ | 3,508 | $ | – | $ | 3,508 | ||||||||
Ownership
interest at December 31, 200
9
|
52.9 | % | 49.0 | % | 100.0 | % |
As of December
31,
|
||||||||||||
2009
|
2008
|
2007
|
||||||||||
Line of
Credit
|
||||||||||||
Outstanding at
December 31
|
$ | 34,780 | $ | 19,960 | $ | 6,113 | ||||||
Maximum
month-end balance during the year
|
$ | 35,371 | $ | 19,960 | $ | 11,234 | ||||||
Average amount
outstanding during the year
|
$ | 33,554 | $ | 13,022 | $ | 7,756 | ||||||
Weighted
average interest rate during the year
|
5.22 | % | 6.23 | % | 6.48 | % | ||||||
Weighted
average interest rate at December 31
|
5.06 | % | 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,
|
||||||||||||
2009
|
2008
|
2007
|
||||||||||
Bank term
loan
|
$ | 483,333 | $ | 500,000 | $ | – | ||||||
Industrial
development revenue and private
activity
bonds
|
7,295 | 9,485 | 9,485 | |||||||||
Less current
maturities
|
(53,128 | ) | (21,257 | ) | (4,590 | ) | ||||||
$ | 437,500 | $ | 488,228 | $ | 4,895 |
Year
|
Payment
Amount
|
|||
2010
|
$ | 50,728 | ||
2011
|
50,900 | |||
2012
|
387,500 | |||
2013
|
- | |||
2014 and after
|
1,500 |
For the Years
Ended December 31,
|
||||||||||||
2009
|
2008
|
2007
|
||||||||||
Service
cost
|
$ | 12,305 | $ | 9,699 | $ | 10,856 | ||||||
Interest
cost
|
10,730 | 9,490 | 8,973 | |||||||||
Expected
return on assets
|
(3,402 | ) | (4,466 | ) | (4,049 | ) | ||||||
Amortization
of prior service credit
|
(1,215 | ) | (1,215 | ) | (437 | ) | ||||||
Amortization
of transition asset
|
(143 | ) | (143 | ) | (143 | ) | ||||||
Amortization
of unrecognized losses
|
4,135 | 1,312 | 2,094 | |||||||||
Net periodic benefits
costs
|
$ | 22,410 | $ | 14,677 | $ | 17,294 |
2009
|
2008
|
2007
|
||||||||||
Benefit
obligation at beginning of year
|
$ | 188,639 | $ | 150,910 | $ | 155,353 | ||||||
Service
cost
|
12,305 | 9,699 | 10,856 | |||||||||
Interest
cost
|
10,730 | 9,490 | 8,973 | |||||||||
Plan participants’
contributions
|
1,797 | 1,751 | 1,575 | |||||||||
Amendments
|
8,715 | – | (9,433 | ) | ||||||||
Actuarial loss
(gain)
|
4,892 | 21,443 | (12,754 | ) | ||||||||
Benefits
paid
|
(5,277 | ) | (4,924 | ) | (3,929 | ) | ||||||
Medicare Part D Subsidy
received
|
316 | 270 | 269 | |||||||||
Benefit
obligation at end of year
|
222,117 | 188,639 | 150,910 | |||||||||
Fair value of
plan assets at beginning of year
|
56,703 | 74,432 | 67,486 | |||||||||
Actual returns (losses) on plan
assets
|
11,695 | (23,963 | ) | 2,915 | ||||||||
Employers’
contributions
|
9,001 | 9,407 | 6,385 | |||||||||
Plan participants’
contributions
|
1,797 | 1,751 | 1,575 | |||||||||
Benefits
paid
|
(5,277 | ) | (4,924 | ) | (3,929 | ) | ||||||
Fair value of
plan assets at end of year
|
73,919 | 56,703 | 74,432 | |||||||||
Noncurrent
postretirement benefit obligation
|
$ | 148,198 | $ | 131,936 | $ | 76,478 |
As of December
31,
|
||||||||||||
2009
|
2008
|
2007
|
||||||||||
Prior service
credit (cost)
|
$ | (552 | ) | $ | 9,377 | $ | 10,592 | |||||
Transition
asset
|
714 | 857 | 1,000 | |||||||||
Unrecognized
losses
|
(66,430 | ) | (73,966 | ) | (25,405 | ) | ||||||
Deferred tax
asset
|
25,784 | 24,800 | 5,432 | |||||||||
Net
losses
|
$ | (40,484 | ) | $ | (38,932 | ) | $ | (8,381 | ) |
2010
|
||||
Amortization
of prior service credit
|
$ | (494 | ) | |
Amortization
of transition asset
|
(143 | ) | ||
Amortization
of unrecognized losses
|
3,954 | |||
Estimated amount to be
amortized from AOCE into
net periodic
postretirement benefit costs
|
$ | 3,317 |
For the Years
Ended December 31,
|
||||||||||||
2009
|
2008
|
2007
|
||||||||||
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 |
2009
|
2008
|
2007
|
||||||||||
Discount
rate
|
6.00 | % | 5.90 | % | 6.50 | % | ||||||
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
|
9.50 | % | 10.00 | % | 10.00 | % | ||||||
Ultimate
healthcare cost trend rate
|
5.00 | % | 5.00 | % | 5.00 | % | ||||||
Year ultimate
healthcare cost trend rate reached
|
2019 | 2019 | 2018 |
1 Percentage
Point
|
||||||||
Increase
|
(Decrease)
|
|||||||
Effect on
total service and interest cost
|
$ | 5,278 | $ | (4,100 | ) | |||
Effect on
accumulated postretirement benefit obligations
|
44,290 | (34,925 | ) |
Level
1
|
Level
2
|
Level
3
|
Total
|
|||||||||||||
Fair value of
invested assets
|
||||||||||||||||
Registered
investment companies
|
||||||||||||||||
Fidelity
Spartan U.S. Equity Index Fund
|
$ | 37,624 | $ | – | $ | – | $ | 37,624 | ||||||||
Vanguard
500 Index Fund
|
37,691 | – | – | 37,691 | ||||||||||||
Total
Assets
|
$ | 75,315 | $ | – | $ | – | $ | 75,315 |
Estimated gross
benefit payments
|
Estimated
Medicare
subsidy
receipts
|
|||||||
2010
|
$ | 4,182 | $ | (338 | ) | |||
2011
|
4,928 | (402 | ) | |||||
2012
|
5,749 | (480 | ) | |||||
2013
|
6,798 | (565 | ) | |||||
2014
|
8,012 | (666 | ) | |||||
2015 – 2019
|
63,983 | (5,596 | ) |
For the Years
Ended December 31,
|
||||||||||||
2009
|
2008
|
2007
|
||||||||||
Service
cost
|
$ | 234 | $ | 247 | $ | 298 | ||||||
Interest
cost
|
965 | 880 | 883 | |||||||||
Amortization
of unrecognized (gains) losses
|
(24 | ) | (153 | ) | 127 | |||||||
Net periodic
benefits costs
|
$ | 1,175 | $ | 974 | $ | 1,308 |
2009
|
2008
|
2007
|
||||||||||
Benefit
obligation at beginning of year
|
$ | 16,088 | $ | 14,115 | $ | 14,906 | ||||||
Service
cost
|
234 | 247 | 298 | |||||||||
Interest
cost
|
965 | 880 | 883 | |||||||||
Actuarial (gains)
losses
|
(102 | ) | 1,425 | (1,972 | ) | |||||||
Benefits
paid
|
– | (579 | ) | – | ||||||||
Benefit
obligation at end of year
|
$ | 17,185 | $ | 16,088 | $ | 14,115 |
As of December
31,
|
||||||||||||
2009
|
2008
|
2007
|
||||||||||
Current
liabilities
|
$ | 3,081 | $ | 552 | $ | 739 | ||||||
Noncurrent
liabilities
|
14,104 | 15,536 | 13,376 | |||||||||
Net amounts
recognized
|
$ | 17,185 | $ | 16,088 | $ | 14,115 |
2009
|
2008
|
2007
|
||||||||||
Discount rate
used to determine net periodic benefit cost
(January 1 valuation)
|
6.10 | % | 6.40 | % | 5.90 | % | ||||||
Discount rate
used to determine benefit obligation
(December 31
valuation)
|
5.70 | % | 6.10 | % | 6.40 | % | ||||||
Compensation
increase used to determine obligation
and cost
|
4.00 | % | 4.00 | % | 4.00 | % |
Benefit
Payments
|
||||
2010
|
$ | 3,081 | ||
2011
|
648 | |||
2012
|
855 | |||
2013
|
1,204 | |||
2014
|
1,068 | |||
2015 – 2019
|
5,254 |
For the Years
Ended December 31,
|
||||||||||||
2009
|
2008
|
2007
|
||||||||||
Interest
cost
|
$ | 524 | $ | 543 | $ | 568 | ||||||
Amortization
of unrecognized losses
|
23 | 40 | 59 | |||||||||
Net periodic benefits
costs
|
$ | 547 | $ | 583 | $ | 627 |
2009
|
2008
|
2007
|
||||||||||
Benefit
obligation at beginning of year
|
$ | 9,333 | $ | 10,151 | $ | 10,945 | ||||||
Interest
cost
|
524 | 543 | 568 | |||||||||
Actuarial losses
(gains)
|
628 | (135 | ) | (104 | ) | |||||||
Benefits
paid
|
(1,226 | ) | (1,226 | ) | (1,258 | ) | ||||||
Benefit
obligation at end of year
|
$ | 9,259 | $ | 9,333 | $ | 10,151 |
As of December
31,
|
||||||||||||
2009
|
2008
|
2007
|
||||||||||
Current
liabilities
|
$ | 1,196 | $ | 1,226 | $ | 1,226 | ||||||
Noncurrent
liabilities
|
8,063 | 8,107 | 8,925 | |||||||||
Net amounts
recognized
|
$ | 9,259 | $ | 9,333 | $ | 10,151 |
2009
|
2008
|
2007
|
||||||||||
Discount rate
used to determine net periodic benefit
cost
(January 1 valuation)
|
6.00 | % | 5.70 | % | 5.50 | % | ||||||
Discount rate
used to determine benefit obligation
(December 31
valuation)
|
4.50 | % | 6.00 | % | 5.70 | % |
Benefit
Payments
|
||||
2010
|
$ | 1,196 | ||
2011
|
1,161 | |||
2012
|
1,154 | |||
2013
|
1,154 | |||
2014
|
1,075 | |||
2015 – 2019
|
4,444 |
Future Minimum
Lease Payments
|
||||
2010
|
$ | 42,832 | ||
2011
|
37,187 | |||
2012
|
32,554 | |||
2013
|
28,640 | |||
2014
|
24,260 | |||
Thereafter
|
51,451 | |||
Total minimum
payments required
|
216,924 | |||
Less amounts
representing sublease income
|
(568 | ) | ||
$ | 216,356 |
Shares Subject
to Option
|
Weighted
Average Price Per Share
|
Options
Exercisable
|
||||||||||
Outstanding at
January 1, 2007
|
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 | ||||||||
Granted
|
944,470 | $ | 79.69 | |||||||||
Exercised
|
(1,689,581 | ) | $ | 57.18 | ||||||||
Canceled or
expired
|
(134,160 | ) | $ | 78.98 | ||||||||
Outstanding at
December 31, 2009
|
5,474,596 | $ | 68.07 | 3,141,996 |
For the years
ended December 31,
|
||||||||||||
2009
|
2008
|
2007
|
||||||||||
Fair value of
options exercised
|
$ | 24,442 | $ | 12,752 | $ | 31,736 | ||||||
Total
intrinsic value of options exercised
|
57,702 | 35,095 | 88,921 | |||||||||
Fair value of
options vested
|
23,303 | 15,510 | 15,996 | |||||||||
Settlements of
options exercised
|
92,213 | 47,016 | 113,752 |
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 | 361,165 |
1.14
Years
|
$ | 40.25 | $ | 20,434 | 361,165 |
1.14
Years
|
$ | 40.25 | $ | 20,434 | ||||||||||||||||
$45.50 - $54.85 | 1,763,239 |
3.91
Years
|
$ | 51.05 | 80,720 | 1,762,179 |
3.91
Years
|
$ | 51.05 | 80,669 | ||||||||||||||||||
$56.03 - $70.67 | 88,422 |
5.11
Years
|
$ | 61.77 | 3,101 | 88,422 |
5.11
Years
|
$ | 61.77 | 3,101 | ||||||||||||||||||
$71.21 - $93.05 | 3,261,770 |
7.85
Years
|
$ | 80.52 | 53,199 | 930,230 |
6.48
Years
|
$ | 76.56 | 18,656 | ||||||||||||||||||
5,474,596 |
6.09
Years
|
$ | 68.07 | $ | 157,454 | 3,141,996 |
4.39
Years
|
$ | 57.66 | $ | 122,860 |
For the years
ended December 31,
|
||||||||||||
2009
|
2008
|
2007
|
||||||||||
Risk-free
interest rate
|
2.4 | % | 3.2 | % | 4.6 | % | ||||||
Expected
life
|
6
years
|
6
years
|
6
years
|
|||||||||
Expected
volatility
|
28.8 | % | 25.2 | % | 24.3 | % | ||||||
Expected
dividend yield
|
2.3 | % | 1.8 | % | 1.7 | % |
2009
|
2008
|
2007
|
||||||||||||||||||||||
Shares
|
Weighted
Average Price Per Share
|
Shares
|
Weighted
Average Price Per Share
|
Shares
|
Weighted
Average Price Per Share
|
|||||||||||||||||||
Beginning nonvested
shares outstanding
|
117,896 | $ | 75.13 | 116,796 | $ | 69.49 | 37,812 | $ | 71.23 | |||||||||||||||
Issuances
|
36,720 | $ | 73.17 | 38,360 | $ | 86.00 | 83,089 | $ | 68.64 | |||||||||||||||
Cancellations
|
(3,319 | ) | $ | 83.40 | – | $ | – | (4,105 | ) | $ | 69.00 | |||||||||||||
Vestings
|
(78,935 | ) | $ | 68.64 | (37,260 | ) | $ | 71.23 | – | $ | – | |||||||||||||
Ending nonvested
shares
outstanding
|
72,362 | $ | 80.01 | 117,896 | $ | 75.13 | 116,796 | $ | 69.49 |
2009
|
2008
|
2007
|
||||||||||||||||||||||
Shares
|
Weighted
Average Price Per Share
|
Shares
|
Weighted
Average Price Per Share
|
Shares
|
Weighted
Average Price Per Share
|
|||||||||||||||||||
Beginning nonvested
shares outstanding
|
50,000 | $ | 53.50 | 65,000 | $ | 52.37 | 105,000 | $ | 51.05 | |||||||||||||||
Vesting
|
(40,000 | ) | $ | 54.12 | (15,000 | ) | $ | 48.15 | (40,000 | ) | $ | 48.73 | ||||||||||||
Ending nonvested
shares outstanding
|
10,000 | $ | 47.81 | 50,000 | $ | 53.50 | 65,000 | $ | 52.37 | |||||||||||||||
Fair value of
shares
vested
|
$2.9
million
|
$1.3
million
|
$3.0
million
|
2009
|
2008
|
2007
|
||||||||||||||||||||||
Shares
|
Weighted
Average Price
Per Share
|
Shares
|
Weighted
Average Price
Per Share
|
Shares
|
Weighted
Average Price
Per Share
|
|||||||||||||||||||
Beginning nonvested
units
|
1,237,246 | $ | 77.88 | 982,568 | $ | 72.91 | 740,200 | $ | 65.24 | |||||||||||||||
Issuances
|
284,825 | $ | 83.10 | 460,423 | $ | 84.35 | 421,003 | $ | 83.53 | |||||||||||||||
Cancellations
|
(81,572 | ) | $ | 78.47 | (33,490 | ) | $ | 78.72 | (74,030 | ) | $ | 71.99 | ||||||||||||
Vestings
|
(199,135 | ) | $ | 63.57 | (172,255 | ) | $ | 64.37 | (104,605 | ) | $ | 75.85 | ||||||||||||
Ending nonvested
units
|
1,241,364 | $ | 80.96 | 1,237,246 | $ | 77.88 | 982,568 | $ | 72.91 | |||||||||||||||
Fair value of
shares vested
|
$12.4
million
|
$11.1 million
|
$7.5
million
|
2009
|
2008
|
2007
|
||||||||||||||||||||||
Units
|
Dollars
|
Units
|
Dollars
|
Units
|
Dollars
|
|||||||||||||||||||
Beginning balance
|
93,221 | $ | 7,350 | 74,522 | $ | 6,522 | 61,242 | $ | 4,283 | |||||||||||||||
Dividends
|
2,338 | 192 | 1,692 | 137 | 1,099 | 95 | ||||||||||||||||||
Deferred fees
|
17,950 | 1,463 | 17,007 | 1,460 | 12,181 | 1,012 | ||||||||||||||||||
Unit
appreciation
(depreciation)
|
– | 1,986 | – | (769 | ) | – | 1,132 | |||||||||||||||||
Ending balance
|
113,509 | $ | 10,991 | 93,221 | $ | 7,350 | 74,522 | $ | 6,522 |
2009
|
2008
|
2007
|
||||||||||||||||||||||
Outstanding
Common
Stock
|
Treasury
Stock
|
Outstanding
Common Stock
|
Treasury
Stock
|
Outstanding
Common
Stock
|
Treasury
Stock
|
|||||||||||||||||||
Balance at
beginning of period
|
74,781,029 | 34,878,190 | 79,459,415 | 30,199,804 | 84,067,627 | 25,590,311 | ||||||||||||||||||
Exercise of
stock options, net of 17,050, 2,725 and 3,318 shares swapped in
stock-for-stock exchange, respectively
|
1,672,531 | (1,672,531 | ) | 950,474 | (950,474 | ) | 2,427,205 | (2,427,205 | ) | |||||||||||||||
Cancellation
of shares related to tax withholdings on restricted stock
vesting
|
(12,531 | ) | 12,531 | (4,874 | ) | 4,874 | (14,867 | ) | 14,867 | |||||||||||||||
Settlement of
restricted stock units, net of 67,382, 48,488 and 16,739 shares retained,
respectively
|
131,753 | (131,753 | ) | 101,962 | (101,962 | ) | 31,057 | (29,776 | ) | |||||||||||||||
Settlement of
performance share units, net of 12,172 shares retained
|
25,088 | (25,088 | ) | – | – | – | – | |||||||||||||||||
Purchase of
treasury shares
|
(4,321,354 | ) | 4,321,354 | (5,725,948 | ) | 5,725,948 | (7,051,607 | ) | 7,051,607 | |||||||||||||||
Balance at end
of period
|
72,276,516 | 37,382,703 | 74,781,029 | 34,878,190 | 79,459,415 | 30,199,804 |
As of December
31,
|
||||||||||||
2009
|
2008
|
2007
|
||||||||||
Foreign
currency translation adjustments
|
$ | 63,304 | $ | 3,943 | $ | 94,683 | ||||||
Postretirement
benefit plan
|
||||||||||||
Prior
service (cost) credit
|
(552 | ) | 9,377 | 10,592 | ||||||||
Transition
asset
|
714 | 857 | 1,000 | |||||||||
Unrecognized
losses
|
(66,430 | ) | (73,966 | ) | (25,405 | ) | ||||||
Unrecognized
(losses) gains on other employment-related benefit
plans
|
(827 | ) | (68 | ) | 1,335 | |||||||
Deferred tax
asset (liability)
|
14,708 | 21,332 | (10,034 | ) | ||||||||
Total
accumulated other comprehensive earnings (losses)
|
10,917 | (38,525 | ) | 72,171 | ||||||||
Less: Foreign
currency translation adjustments attributable to noncontrolling
interest
|
(1,457 | ) | – | – | ||||||||
Total
accumulated other comprehensive earnings (losses) attributable to
W.W. Grainger, Inc.
|
$ | 12,374 | $ | (38,525 | ) | $ | 72,171 |
For the Years
Ended December 31,
|
||||||||||||
2009
|
2008
|
2007
|
||||||||||
Net earnings attributable to
W.W. Grainger, Inc.
|
$ | 430,466 | $ | 475,355 | $ | 420,120 | ||||||
Transfers from the
noncontrolling interest:
|
||||||||||||
Increase in W.W. Grainger, Inc.
Additional Contributed Capital for MonotaRO stock option
exercises
|
34 | – | – | |||||||||
Change from net earnings
attributable to W.W. Grainger, Inc. and transfer from noncontrolling
interest
|
$ | 430,500 | $ | 475,355 | $ | 420,120 |
For the Years
Ended December 31,
|
||||||||||||
2009
|
2008
|
2007
|
||||||||||
Current
provision:
|
||||||||||||
Federal
|
$ | 203,375 | $ | 246,731 | $ | 238,220 | ||||||
State
|
36,078 | 39,673 | 42,401 | |||||||||
Foreign
|
15,860 | 18,044 | 15,329 | |||||||||
Total
current
|
255,313 | 304,448 | 295,950 | |||||||||
Deferred tax
provision (benefit):
|
||||||||||||
Federal
|
16,446 | (5,968 | ) | (28,520 | ) | |||||||
State
|
2,894 | (1,049 | ) | (5,013 | ) | |||||||
Foreign
|
1,912 | 432 | (676 | ) | ||||||||
Total
deferred
|
21,252 | (6,585 | ) | (34,209 | ) | |||||||
Total
provision
|
$ | 276,565 | $ | 297,863 | $ | 261,741 |
For the Years
Ended December 31,
|
||||||||||||
2009
|
2008
|
2007
|
||||||||||
United
States
|
$ | 679,648 | $ | 731,315 | $ | 646,762 | ||||||
Foreign
|
27,689 | 41,903 | 35,099 | |||||||||
$ | 707,337 | $ | 773,218 | $ | 681,861 |
As of December
31,
|
||||||||||||
2009
|
2008
|
2007
|
||||||||||
Deferred tax
assets:
|
||||||||||||
Inventory
|
$ | 11,554 | $ | 22,674 | $ | 19,577 | ||||||
Accrued
expenses
|
29,262 | 29,966 | 30,295 | |||||||||
Accrued employment-related
benefits
|
163,333 | 144,125 | 111,147 | |||||||||
Foreign operating loss
carryforwards
|
12,547 | 10,833 | 10,239 | |||||||||
Property, buildings and
equipment
|
– | 921 | 3,189 | |||||||||
Other
|
13,947 | 11,352 | 8,064 | |||||||||
Deferred tax
assets
|
230,643 | 219,871 | 182,511 | |||||||||
Less valuation
allowance
|
(20,810 | ) | (15,977 | ) | (13,551 | ) | ||||||
Deferred tax assets, net of
valuation allowance
|
$ | 209,833 | $ | 203,894 | $ | 168,960 | ||||||
Deferred tax
liabilities:
|
||||||||||||
Purchased tax
benefits
|
$ | (5,178 | ) | $ | (5,812 | ) | $ | (6,779 | ) | |||
Property, buildings and
equipment
|
(7,318 | ) | – | – | ||||||||
Intangibles
|
(67,821 | ) | (17,083 | ) | (16,884 | ) | ||||||
Software
|
(8,835 | ) | (12,774 | ) | (9,710 | ) | ||||||
Prepaids
|
(22,889 | ) | (21,893 | ) | (16,625 | ) | ||||||
Foreign currency
gain
|
(10,020 | ) | (2,206 | ) | (13,661 | ) | ||||||
Deferred tax
liabilities
|
(122,061 | ) | (59,768 | ) | (63,659 | ) | ||||||
Net deferred
tax asset
|
$ | 87,772 | $ | 144,126 | $ | 105,301 | ||||||
The net
deferred tax asset is classified as follows:
|
||||||||||||
Current
assets
|
$ | 42,023 | $ | 52,556 | $ | 56,663 | ||||||
Noncurrent
assets
|
79,472 | 97,442 | 54,658 | |||||||||
Noncurrent liabilities
(foreign)
|
(33,723 | ) | (5,872 | ) | (6,020 | ) | ||||||
Net deferred
tax asset
|
$ | 87,772 | $ | 144,126 | $ | 105,301 |
For the Years
Ended December 31,
|
||||||||||||
2009
|
2008
|
2007
|
||||||||||
Beginning
balance
|
$ | 15,977 | $ | 13,551 | $ | 13,461 | ||||||
Increase
related to foreign net operating loss carryforwards
|
4,833 | 86 | 1,329 | |||||||||
Increase
(decrease) related to capital losses and other
|
– | 2,340 | (1,239 | ) | ||||||||
Ending
balance
|
$ | 20,810 | $ | 15,977 | $ | 13,551 |
For the Years
Ended December 31,
|
||||||||||||
2009
|
2008
|
2007
|
||||||||||
Federal income
tax at the 35% statutory rate
|
$ | 247,568 | $ | 270,626 | $ | 238,651 | ||||||
State income
taxes, net of federal income
tax
benefit
|
25,332 | 25,105 | 24,302 | |||||||||
Other –
net
|
3,665 | 2,132 | (1,212 | ) | ||||||||
Income tax
expense
|
$ | 276,565 | $ | 297,863 | $ | 261,741 | ||||||
Effective tax
rate
|
39.1 | % | 38.5 | % | 38.4 | % |
2009
|
2008
|
2007
|
||||||||||
Balance at
beginning of year
|
$ | 24,364 | $ | 13,568 | $ | 15,274 | ||||||
Additions
based on tax positions related to the current year
|
6,743 | 13,016 | 3,060 | |||||||||
Additions for
tax positions of prior years
|
362 | 735 | – | |||||||||
Reductions for
tax positions of prior years
|
(2,856 | ) | (2,900 | ) | (4,729 | ) | ||||||
Reductions due
to statute lapse
|
(1,961 | ) | – | – | ||||||||
Settlements
(audit payments) refunds – net
|
(112 | ) | (55 | ) | (37 | ) | ||||||
Balance at end
of year
|
$ | 26,540 | $ | 24,364 | $ | 13,568 |
For the Years
Ended December 31,
|
||||||||||||
2009
|
2008
|
2007
|
||||||||||
Net earnings
attributable to W.W. Grainger, Inc. as reported
|
$ | 430,466 | $ | 475,355 | $ | 420,120 | ||||||
Less:
Distributed earnings available to participating securities
|
(2,990 | ) | (2,560 | ) | (1,707 | ) | ||||||
Less:
Undistributed earnings available to participating
securities
|
(7,059 | ) | (7,935 | ) | (5,428 | ) | ||||||
Numerator for
basic earnings per share –
Undistributed
and distributed earnings available to common shareholders
|
420,417 | 464,860 | 412,985 | |||||||||
Add:
Undistributed earnings allocated to participating
securities
|
7,059 | 7,935 | 5,428 | |||||||||
Less:
Undistributed earnings reallocated to participating
securities
|
(6,957 | ) | (7,804 | ) | (5,316 | ) | ||||||
Numerator for
diluted earnings per share –
Undistributed
and distributed earnings available to common shareholders
|
$ | 420,519 | $ | 464,991 | $ | 413,097 | ||||||
Denominator
for basic earnings per share – weighted average shares
|
73,786,346 | 76,579,856 | 82,403,958 | |||||||||
Effect of
dilutive securities
|
1,105,506 | 1,307,764 | 1,769,423 | |||||||||
Denominator
for diluted earnings per share – weighted average shares adjusted for
dilutive securities
|
74,891,852 | 77,887,620 | 84,173,381 | |||||||||
Earnings per
share Two-class method
|
||||||||||||
Basic
|
$ | 5.70 | $ | 6.07 | $ | 5.01 | ||||||
Diluted
|
$ | 5.62 | $ | 5.97 | $ | 4.91 |
2009
|
||||||||||||||||
United
States
|
Canada
|
Other
Businesses
|
Total
|
|||||||||||||
Total net
sales
|
$ | 5,445,390 | $ | 651,166 | $ | 165,051 | $ | 6,261,607 | ||||||||
Intersegment
net sales
|
(39,057 | ) | (154 | ) | (405 | ) | (39,616 | ) | ||||||||
Net sales to
external customers
|
5,406,333 | 651,012 | 164,646 | 6,221,991 | ||||||||||||
Segment
operating earnings (losses)
|
735,586 | 43,742 | (11,634 | ) | 767,694 | |||||||||||
Segment
assets
|
2,281,731 | 545,866 | 333,955 | 3,161,552 | ||||||||||||
Depreciation
and amortization
|
117,821 | 10,769 | 6,593 | 135,183 | ||||||||||||
Additions to
long-lived assets
|
$ | 219,393 | $ | 15,680 | $ | 134,650 | $ | 369,723 |
2008
|
||||||||||||||||
United
States
|
Canada
|
Other
Businesses
|
Total
|
|||||||||||||
Total net
sales
|
$ | 6,057,828 | $ | 727,989 | $ | 111,732 | $ | 6,897,549 | ||||||||
Intersegment
net sales
|
(46,992 | ) | (127 | ) | (398 | ) | (47,517 | ) | ||||||||
Net sales to
external customers
|
6,010,836 | 727,862 | 111,334 | 6,850,032 | ||||||||||||
Segment
operating earnings (losses)
|
840,408 | 54,263 | (11,827 | ) | 882,844 | |||||||||||
Segment
assets
|
2,310,484 | 448,660 | 133,111 | 2,892,255 | ||||||||||||
Depreciation
and amortization
|
112,126 | 10,506 | 4,574 | 127,206 | ||||||||||||
Additions to
long-lived assets
|
$ | 149,675 | $ | 24,337 | $ | 32,469 | $ | 206,481 |
2007
|
||||||||||||||||
United
States
|
Canada
|
Other
Businesses
|
Total
|
|||||||||||||
Total net
sales
|
$ | 5,729,327 | $ | 636,524 | $ | 93,516 | $ | 6,459,367 | ||||||||
Intersegment
net sales
|
(41,160 | ) | – | (193 | ) | (41,353 | ) | |||||||||
Net sales to
external customers
|
5,688,167 | 636,524 | 93,323 | 6,418,014 | ||||||||||||
Segment
operating earnings (losses)
|
731,553 | 44,218 | (7,495 | ) | 768,276 | |||||||||||
Segment
assets
|
2,250,266 | 502,414 | 71,139 | 2,823,819 | ||||||||||||
Depreciation
and amortization
|
106,744 | 10,786 | 2,464 | 119,994 | ||||||||||||
Additions to
long-lived assets
|
$ | 149,009 | $ | 10,794 | $ | 14,771 | $ | 174,574 |
2009
|
2008
|
2007
|
||||||||||
Operating
earnings:
|
||||||||||||
Total
operating earnings for reportable
segments
|
$ | 767,694 | $ | 882,844 | $ | 768,276 | ||||||
Unallocated
expenses
|
(102,470 | ) | (100,172 | ) | (97,623 | ) | ||||||
Total consolidated operating
earnings
|
$ | 665,224 | $ | 782,672 | $ | 670,653 | ||||||
Assets:
|
||||||||||||
Total assets
for reportable segments
|
$ | 3,161,552 | $ | 2,892,255 | $ | 2,823,819 | ||||||
Unallocated
assets
|
564,780 | 623,162 | 270,209 | |||||||||
Total consolidated
assets
|
$ | 3,726,332 | $ | 3,515,417 | $ | 3,094,028 |
2009
|
||||||||||||
Segment
Totals
|
Unallocated
|
Consolidated
Total
|
||||||||||
Other
significant items:
|
||||||||||||
Depreciation
and amortization
|
$ | 135,183 | $ | 12,348 | $ | 147,531 | ||||||
Additions to
long-lived assets
|
$ | 369,723 | $ | 2,618 | $ | 372,341 | ||||||
Revenues
|
Long-lived
Assets
|
|||||||||||
Geographic
information:
|
||||||||||||
United
States
|
$ | 5,362,729 | $ | 1,080,053 | ||||||||
Canada
|
653,984 | 213,962 | ||||||||||
Other foreign
countries
|
205,278 | 177,503 | ||||||||||
$ | 6,221,991 | $ | 1,471,518 |
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 |
United
States
|
Canada
|
Other
Businesses
|
Total
|
|||||||||||||
Balance at
January 1, 2007
|
$ | 90,223 | $ | 120,448 | $ | – | $ | 210,671 | ||||||||
Acquisition
|
1,473 | – | – | 1,473 | ||||||||||||
Translation
|
– | 20,884 | – | 20,884 | ||||||||||||
Balance at
December 31, 2007
|
91,696 | 141,332 | – | 233,028 | ||||||||||||
Acquisitions
|
2,372 | 4,381 | – | 6,753 | ||||||||||||
Translation
|
– | (26,622 | ) | – | (26,622 | ) | ||||||||||
Balance at
December 31, 2008
|
94,068 | 119,091 | – | 213,159 | ||||||||||||
Acquisitions
|
62,361 | 67 | 58,191 | 120,619 | ||||||||||||
Translation
|
– | 18,748 | (1,344 | ) | 17,404 | |||||||||||
Balance at
December 31, 2009
|
$ | 156,429 | $ | 137,906 | $ | 56,847 | $ | 351,182 |
2009 Quarter
Ended
|
||||||||||||||||||||
March
31
|
June
30
|
September
30
|
December
31
|
Total
|
||||||||||||||||
Net sales
|
$ | 1,465,248 | $ | 1,533,263 | $ | 1,589,665 | $ | 1,633,815 | $ | 6,221,991 | ||||||||||
Cost of merchandise sold
|
835,833 | 908,295 | 929,720 | 949,617 | 3,623,465 | |||||||||||||||
Gross profit
|
629,415 | 624,968 | 659,945 | 684,198 | 2,598,526 | |||||||||||||||
Warehousing, marketing and
administrative expenses
|
470,201 | 471,039 | 473,225 | 518,837 | 1,933,302 | |||||||||||||||
Operating earnings
|
159,214 | 153,929 | 186,720 | 165,361 | 665,224 | |||||||||||||||
Net earnings
attributable to W.W. Grainger, Inc.
|
96,378 | 92,466 | 144,564 | 97,058 | 430,466 | |||||||||||||||
Earnings per share - basic
|
1.27 | 1.23 | 1.91 | 1.29 | 5.70 | |||||||||||||||
Earnings per share - diluted
|
$ | 1.25 | $ | 1.21 | $ | 1.88 | $ | 1.27 | $ | 5.62 |
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
attributable to W.W. Grainger, Inc.
|
114,238 | 113,179 | 140,023 | 107,915 | 475,355 | |||||||||||||||
Earnings per share - basic
|
1.44 | 1.44 | 1.80 | 1.39 | 6.07 | |||||||||||||||
Earnings per share - diluted
|
$ | 1.41 | $ | 1.42 | $ | 1.77 | $ | 1.37 | $ | 5.97 |
W.W. GRAINGER,
INC.
|
|
By:
|
/s/
James T. Ryan
|
James T. Ryan
Chairman,
President and
Chief Executive Officer
|
/s/
James T. Ryan
|
/s/
William K. Hall
|
|
James T.
Ryan
|
William K.
Hall
|
|
Chairman,
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
Emeritus
|
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
|
|
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:
|
Chairman,
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,
2009, (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
|
|
Chairman,
President and
Chief
Executive Oficer
|
|
February 25,
2010
|
1.
|
The Annual
Report on Form 10-K of Grainger for the annual period ended
December 31,
2009, (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 25,
2010
|
|
(i) any
merger, reorganization or consolidation of the Company or any Subsidiary
with or into any corporation or other Person if Persons who were the
beneficial owners (as such term is used in Rule 13d-3 under the Act) of
the Company’s Common Stock and securities of the Company entitled to vote
generally in the election of directors (“
Voting
Securities
”) immediately before such merger, reorganization or
consolidation are not, immediately thereafter, the beneficially owners,
directly or indirectly, of at least 60% of the then-outstanding common
shares and the combined voting power of the then-outstanding Voting
Securities (“
Voting Power
”)
of the corporation or other Person surviving or resulting from such
merger, reorganization or consolidation (or the parent corporation
thereof) in substantially the same respective proportions as their
beneficial ownership, immediately before the consummation of such merger,
reorganization or consolidation, of the then-outstanding Common Stock and
Voting Power of the Company; or
|
|
(ii) the
sale or other disposition of all or substantially all of the consolidated
assets of the Company, other than a sale or other disposition by the
Company of all or substantially all of its consolidated assets to an
entity of which at least 60% of the common shares and the Voting Power
outstanding
|
|
(i) no
such person, entity or group shall be deemed to own beneficially any
securities held by the Company or a Subsidiary or any employee benefit
plan (or any related trust) of the Company or a
Subsidiary;
|
|
(ii) no
Change in Control shall be deemed to have occurred solely by reason of any
such acquisition if both (x) after giving effect to acquisition, such
person, entity or group has beneficial ownership of less than 30% of the
then-outstanding Common Stock and Voting Power of the Company and (y)
prior to such acquisition, at least two-thirds of the directors described
in paragraph (c) of this definition vote to adopt a resolution of the
Board to the specific effect that such acquisition shall not be deemed a
Change in Control; and
|
|
(iii) no
Change in Control shall be deemed to have occurred solely by reason any
such acquisition or holding in connection with any merger, reorganization
or consolidation of the Company or any Subsidiary which is not a Change in
Control within the meaning of paragraph (a)(i) of this
definition.
|
|
(i) During
the Employment Period, (A) Executive's position (including status,
offices, titles and reporting requirements), authority, duties and
responsibilities shall be at least commensurate in all material respects
with the most significant of those held, exercised and assigned at any
time during the 90-day period immediately preceding the Effective Date and
(B) Executive's services shall be performed at the location where
Executive was employed immediately preceding the Effective Date or any
office or location less than 50 miles from such
location.
|
|
(ii) During
the Employment Period, and excluding any periods of vacation, sick leave
and disability to which Executive is entitled, Executive shall devote
reasonable attention and time during normal business hours to the business
and affairs of the Company and, to the extent necessary to discharge the
responsibilities assigned to Executive thereunder, use Executive's
reasonable best efforts to perform faithfully and efficiently
such
|
|
(b)
Compensation
.
|
|
(i)
Base
Salary
. During the Employment Period, Executive shall
receive an annual base salary in cash (“
Annual Base
Salary
”), which shall be paid in a manner consistent with the
Company's payroll practices immediately preceding the Effective Date at a
rate at least equal to 12 times the highest monthly base salary (unreduced
by any salary reductions or deferrals pursuant to a plan maintained under
Section 401(k) of the Code or any similar plan) paid or payable to
Executive by the Company in respect of the 12-month period immediately
preceding the month in which the Effective Date occurs. During
the Employment Period, the Company shall review the Annual Base Salary at
least annually and may increase Annual Base Salary at any time and from
time to time based on the performance of the Executive and the
Company. Any increase in Annual Base Salary shall not serve to
limit or reduce any other obligation to Executive under this
Agreement. Annual Base Salary shall not be reduced after any
such increase and the term “Annual Base Salary” shall refer to Annual Base
Salary as so increased.
|
|
(ii)
Annual
Bonus
. In addition to Annual Base Salary, during the
Employment Period Executive shall be entitled to participate in the
Management Incentive Program or other annual bonus program maintained by
the Company for peer executives, and the Executive's target bonus
thereunder shall be not be less than the Target Bonus. Any
annual bonus due to Executive under such program (the "
Annual Bonus
")
shall be paid in cash no later than 90 days after the end of the fiscal
year for which the Annual Bonus is awarded, unless Executive shall elect
to defer the receipt of such Annual
Bonus.
|
|
(iii)
Incentive, Savings and
Retirement Plans
. In addition to Annual Base Salary and
Annual Bonus payable as hereinabove provided, Executive shall be entitled
to participate during the Employment Period in all incentive, savings and
retirement plans and Policies applicable to
peer
|
|
(iv)
Welfare Benefit
Plans
. During the Employment Period, Executive and/or
Executive's family, as the case may be, shall be eligible to participate
in and shall receive all benefits under welfare benefit plans and Policies
provided by the Company (including medical, prescription, dental,
disability, salary continuance, employee life, group life, accidental
death and travel accident insurance plans and programs) and applicable to
peer executives of the Company, but in no event shall such plans and
Policies provide benefits which are less favorable, in the aggregate, than
the most favorable of such plans and Policies in effect at any time during
the 90-day period immediately preceding the Effective
Date.
|
|
(v)
Expenses
. During
the Employment Period, Executive shall be entitled to prompt reimbursement
for all reasonable expenses incurred by Executive in accordance with the
most favorable Policies of the Company in effect at any time during the
90-day period immediately preceding the Effective Date or, if more
favorable to Executive, as in effect at any time thereafter with respect
to peer executives of the
Company.
|
|
(vi)
Fringe
Benefits
. During the Employment Period, Executive shall
be entitled to fringe benefits in accordance with the most favorable plans
and Policies of the Company in effect at any time during the 90-day period
immediately preceding the Effective Date or, if more favorable to
Executive, as in effect at any time thereafter with respect to peer
executives of the Company.
|
|
(vii)
Office; Support
Staff
. During the Employment Period, Executive shall be
entitled to an office or offices of a size and with furnishings and other
appointments, and to personal secretarial and other assistance, at least
equal to the most favorable of the foregoing provided to Executive by the
Company at any time during the 90-day period immediately preceding the
Effective Date or, if more favorable to Executive, as provided at any time
thereafter with respect to peer executives of the
Company.
|
|
(viii)
Vacation
. During
the Employment Period, Executive shall be entitled to paid vacation in
accordance with the most favorable plans and Policies of the Company as in
effect at any time during the 90-day period immediately preceding the
Effective Date or, if more favorable to Executive, as in effect at any
time thereafter with respect to peer executives of the
Company.
|
|
(ix)
Subsidiaries
. To
the extent that, immediately prior to the Effective Date, Executive has
been on the payroll of, and participated in the bonus, incentive or
employee benefit plans of, a Subsidiary, the references to the Company
contained in Sections 2(b)(i) through 2(b)(viii) and elsewhere in this
Agreement referring to benefits to which Executive may be entitled shall
also refer to such Subsidiary.
|
|
(i) embezzlement,
fraud or theft with respect to the property of the Company or a conviction
for any felony involving moral turpitude or causing material harm,
financial or otherwise, to the
Company;
|
|
(ii) habitual
neglect in the performance of Executive's significant duties (other than
on account of incapacity due to physical or mental illness or Disability);
or
|
|
(iii) a
demonstrably deliberate act or failure to act, including a violation of
the rules or policies of the Company, which causes a material financial or
other loss, damage or injury to the property, reputation or employees of
the Company; provided, however, that, unless such an act or a failure to
act was done by Executive in bad faith or without a reasonable belief that
Executive's act or failure to act, as the case may be, was in the best
interest of the Company or was required by applicable law, such act or
failure to act shall not constitute Cause if, within 20 days after the
Board or the Chief Executive Officer of the Company gives Executive
written notice of such act or failure to act that specifically refers to
this Section, Executive cures such act or failure to act to the fullest
extent that it is curable.
|
|
(v) The
Company provides Executive a written notice (a “
Notice of Intent to
Terminate
”) not less than 30 days prior to the Date of Termination
setting forth the Company's intention to consider terminating Executive’s
employment. Such Notice shall include a statement of the
intended Date of Termination and a detailed description of the specific
facts that the Company believes to constitute
Cause.
|
|
(w) No
act or omission of Executive shall constitute Cause if such act or
omission occurred more than 12 months before the earliest date on which
any member of the Board who is not a party to the act or
omission
|
|
(x) Executive
is offered an opportunity to respond to such Notice of Intent to Terminate
by appearing in person, together with Executive's legal counsel, before
the Board on a date specified in the Notice of Intent to Terminate, which
date shall be at least 25 days after Executive’s receipt of the Notice of
Intent to Terminate and, in any event, at least five days prior to the
Date of Termination proposed in such
Notice.
|
|
(y) By
a vote of the Board that includes the affirmative vote of at least 75% of
the Non-Employee Directors, the Board determines that the actions of
Executive specified in the Notice of Intent to Terminate constitute Cause
and that Executive's employment should accordingly be terminated for
Cause.
|
|
(z) The
Company provides Executive a copy of the Board's written determination
setting forth in detail (I) the specific basis for such termination for
Cause and (II) if the Date of Termination is other than the date of
Executive’s receipt of such determination, the Date of Termination (which
date shall be not more than 15 days after the giving of such
notice).
|
|
(i) the
assignment to Executive of any duties inconsistent in any material respect
with Executive's position (including status, offices, titles and reporting
requirements), authority, duties or responsibilities as contemplated by
Section 2(a), or any other action by the Company which results in a
material adverse change in such position, authority, duties or
responsibilities, excluding an isolated, insubstantial and inadvertent
action not taken in bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by Executive (it
being understood that, without limiting the generality of the foregoing,
if a substantial portion of Executive's duties prior to the Change in
Control related to the Company's status as a public company and such
activities no longer constitute a substantial portion of Executive's
duties during the Employment Period, then Executive shall be deemed to
have "Good Reason");
|
|
(ii) any
reduction by the Company in the base salary, annual bonus opportunity or
long-term incentive opportunity provided to the Executive under Section
2(b), or any material reduction by the Company in the aggregate benefits
(other than base salary, annual bonus opportunity or long-term incentive
opportunity) provided to the Executive under such
section;
|
|
(iii) any
requirement that Executive be based at any office or location other than
the location specified in Section
2(a)(i)(B);
|
|
(iv) any
purported termination by the Company of Executive's employment otherwise
than as expressly permitted by this Agreement (it being understood that
any such purported termination shall not be effective for any other
purpose of this Agreement); or
|
|
(v) any
failure by the Company to comply with Section
10(c).
|
|
(i) The
Company shall pay to Executive the following amounts in a lump sum in cash
within 10 days after Executive's Date of
Termination:
|
|
(A) an
amount equal to the sum of Executive's Accrued Base Salary, Accrued Annual
Bonus and accrued but unpaid vacation pay (collectively, the “
Accrued
Obligations
”),
|
|
(B) the
Prorated Annual Bonus,
|
|
(C) the
product of three (3.0) (such number, the “
Severance
Multiple
”) times the sum of Executive's (I) Annual Base
Salary, (II) Target Bonus and (III) Average Profit Sharing Plan
Contribution; and
|
|
(D) an
amount equal to the value of the unvested portion of Executive's accounts
under the Profit Sharing Plans as of the Date of
Termination.
|
|
(ii)
|
(A) During
the period commencing on the Date of Termination and continuing thereafter
for a number of years equal to the Severance Multiple, or such longer
period as any plan or Policy in which Executive is a participant as of the
Date of Termination (such eligibility to be determined based on the terms
of such plan or Policy as in effect on the Effective Date or, if more
favorable to Executive, the terms of such plan or Policy as in effect on
the Date of Termination), the Company shall continue to provide medical
(including post-retirement medical benefits to the extent that Executive
is or becomes eligible for such benefits as of the Date of Termination
after giving effect to paragraph (C) of this Section 4(a)(ii)),
prescription, dental and similar health care benefits (or, if such
benefits are not available, the after-tax economic value thereof
determined pursuant to paragraph (D) of this Section 4(a)(ii)) to
Executive and his family.
|
|
(B) The
terms of such benefits shall be at least as favorable to Executive as the
terms of the most favorable plans or Policies of the Company applicable to
peer executives at Executive's Date of Termination, but in no event less
favorable to Executive than the most favorable plans or Policies of the
Company applicable to peer
|
|
(C) Such
benefits shall be provided at no cost to Executive and his family, except
that Executive shall be responsible for the payment of premiums,
co-payments, deductibles and similar charges based on the terms of the
most favorable plans or Policies of the Company applicable to peer
executives at Executive's Date of Termination, but in no event less
favorable to Executive than the most favorable plans or Policies of the
Company applicable to peer executives during the 90-day period immediately
preceding the Effective Date.
|
|
(D) For
purposes of determining whether, and on what terms and conditions,
Executive is eligible to receive the post-retirement medical benefits
specified in paragraph (A) above, Executive shall on the Date of
Termination be credited with three (3.0) additional years for purposes of
attained age and years of service.
|
|
(E) The
after-tax economic value of any benefit to be provided pursuant to
paragraph (A) above shall be deemed to be the present value of the
premiums expected to be paid for all such benefits that are to be provided
on an insured basis. The after-tax economic value of all other
benefits shall be deemed to be the present value of the expected net cost
to the Company of providing such
benefits.
|
|
(iii) The
Company shall cause Executive to receive, at the Company's expense,
standard outplacement services from a nationally-recognized firm selected
by Executive; provided that the cost of such services to the Company shall
not exceed 15% of Executive's Annual Base Salary in effect on the Date of
Termination.
|
|
(iv) If
on the Date of Termination the Executive is a “specified employee” of the
Company (as defined in Treasury Regulation Section 1.409A-1(i)), and if
amounts payable under this Section 4(a) (other than Accrued Obligations)
are not on account of an “involuntary separation from service” (as defined
in Treasury Regulation Section 1.409A – 1(n)), amounts that would
otherwise have been paid during the 6-month period immediately following
the Date of Termination shall be paid on the first regular payroll date
immediately following the 6-month anniversary of the Date of
Termination.
|
If
to the Company, to:
|
W.W.
Grainger, Inc.
|
100 Grainger
Parkway
|
|
Lake Forest,
Illinois 60045
|
|
Attention: General
Counsel
|
|
W.W.
GRAINGER, INC.
|
|
|
By:________________________________________________ |
James T.
Ryan
Chairman,
President and Chief Executive Officer
|
|
EXECUTIVE:
|
|
___________________________________________________ | |
INSERT
NAME
|
|
(a) then a
portion of the Option shall become immediately exercisable equal to the
product of (x) the number of shares
subject to the Option, multiplied by (y) a fraction, the numerator of
which is the number of months during the calendar
year
in which the Effective Date occurs that the Executive was employed by the
Company and the denominator of
which is 12; and
|
|
(b) the
balance of the Option not immediately exercisable pursuant to subsection
(a) above, will be forfeited in full and the
Executive shall have no further rights with respect to the Option
hereunder.
|
EXECUTIVE:
|
W.W.
GRAINGER, INC.
|
|
___________________________________
|
By:_______________________________________________ | |
James T.
Ryan
Chairman,
President and Chief Executive Officer
|
||
|
||
Date:______________________________ | Date:______________________________________________ | |
|
|
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; 2011 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 2011 fiscal year. Such number will be calculated in
accordance with the following
table:
|
If,
the Company’s 2011 sales are at:
|
Then
the number of
Performance
Shares will be:
|
Less than $XX
Billion
|
Zero
(0)
|
$XX
Billion
|
Fifty percent
(50%) of the Target Number
|
$XX
Billion
|
One hundred
percent (100%) of the
Target
Number
|
$XX Billion
or more
|
Two hundred
percent (200%) of the
Target
Number
|
|
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 2010 fiscal
year, i.e., the Company’s 2010, 2011 and 2012 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
eighteen percent (18%)
|
Zero
(0)
|
Eighteen
percent (18%) or more
|
One hundred
percent (100%)
|
|
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 Withholding
Obligations.
If the Performance Shares shall vest, the
Executive shall be responsible for any required withholding
including, but without limitation, taxes, FICA contributions, or the like
under any federal, state or applicable statute, rule, or
regulation. Upon such vesting, the Company may
withhold a number of shares of Common Stock having a fair market value on
the date that the amount is to be withheld equal to the amount determined
by the Company to be the required statutory minimum withholding; this
amount may or may not satisfy the Executive’s calendar year withholding
obligation. The Company shall not issue and shall not deliver
any of its Common Stock upon the vesting and settlement of the Performance
Shares until and unless the proper provision for minimum required
withholding has been made.
|
|
6. Recoupment
of Incentive-based Compensation.
|
|
a.
|
If the Board
of Directors determines that the Executive has committed fraud against the
Company or has been engaged in any criminal conduct that involves or is
related to the Company and such Executive is entitled to receive
performance shares, stock options, restricted stock units or cash
incentive compensation (“Incentive Compensation”) then the Company shall
recover from the Executive such Incentive Compensation, in whole or in
part, for any period of time, as it deems appropriate under the
circumstances. The Board shall have sole discretion in
determining whether the Executive’s conduct was in compliance with the law
or Company policy and the extent to which the Company will seek recovery
of the Incentive Compensation notwithstanding any other remedies available
to the Company.
|
|
b.
|
In the event
of a restatement of materially inaccurate financial results, the Board has
the discretion to recover cash incentive payments or the settlement of
performance shares (“Incentive Payments”) that were paid or settled to the
Executive during the period covered by the restatement as set forth
herein. If the payment or settlement of Incentive Payments
would have been lower had the achievement of applicable financial
performance goals been calculated based on such restated financial
results, the Board may, if it determines appropriate in its sole
discretion, recover the portion of the paid or settled Incentive Payments
in excess of the payment or settlement that would have been made based on
the restated financial results. The Company will not seek to
recover Incentive Payments received or settled more than three years after
the date of the initial filing that contained the incorrect financial
results.
|
|
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/Death.
If
the Executive’s employment with the Company terminates during the
Measuring Period by reason of retirement or death, then the Executive or
the Executive’s estate 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.
If
the Executive’s employment with the Company terminates during the
Measuring Period by reason of disability (defined below), then the
Executive 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
|
|
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 Cook
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.
|
a.
|
20,000 shares
will fully vest seven years from the grant
date.
|
W.W.
GRAINGER, INC. - 100 GRAINGER
PARKWAY - LAKE FOREST,
IL 60045-5201
|
847/535-2037 - FAX
847/535-1387- http://www.grainger.com
|
b.
|
As an
officer, you will be required to hold shares in W.W. Grainger, Inc.
Common Stock
equal to
three times
your
annual base
salary. The restricted stock units, along with restricted stock
units you may receive as
part of your
annual
awards, will apply to this stock ownership guideline. You will
have three years from the
date of
employment
to meet this
guideline.
|
a.
|
A
pre-retirement monthly survivor income benefit upon your death (equal to
50% of your base salary plus 50% of
your MIP
Target) payable to your named beneficiary for a period of 10
years.
|
b.
|
A
post-retirement benefit payable upon your death that is (equal to) 100% of
annual cash compensation
(including
any incentive payments under MIP) in your final full year of
service.
|
c.
|
The Executive
Death Benefit Plan describes and governs the provisions of the
Plan. A copy of the Plan will be
provided to
you.
|
W.W.
GRAINGER, INC. - 100 GRAINGER
PARKWAY - LAKE FOREST,
IL 60045-5201
|
847/535-2037 - FAX
847/535-1387- http://www.grainger.com
|
W.W.
GRAINGER, INC. - 100 GRAINGER
PARKWAY - LAKE FOREST,
IL 60045-5201
|
847/535-2037 - FAX
847/535-1387- http://www.grainger.com
|
I.
|
Introduction
|
The 2010
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 2010 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 Payout
|
|
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 60% 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.
|
|
The overall incentive amount earned is capped at 200% 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.
|
General.
The
Covered Programs are based on the Company’s achievement of certain
established targets as set forth in the Summary Description or the Annual
Incentive Award Section. Any payout made pursuant to the
Covered Programs are subject to terms and conditions as set forth on an
annual basis. Participation in the Covered Programs do not
guarantee a payout to the
Executive.
|
2.
|
Recoupment
of Incentive-based Compensation.
|
a.
|
If the Board
of Directors determines that the Executive has committed fraud against the
Company or has been engaged in any criminal conduct that involves or is
related to the Company and such Executive is entitled to receive
performance shares, stock options, restricted stock units or cash
incentive compensation (“Incentive Compensation”) then the Company shall
recover from the Executive such Incentive Compensation, in whole or in
part, for any period of time, as it deems appropriate under the
circumstances. The Board shall have sole discretion in
determining whether the Executive’s conduct was in compliance with the law
or Company policy and the extent to which the Company will seek recovery
of the Incentive Compensation notwithstanding any other remedies available
to the Company.
|
b.
|
In the event
of a restatement of materially inaccurate financial results, the Board has
the discretion to recover cash incentive payments or the settlement of
performance shares (“Incentive Payments”) that were paid or settled to the
Executive during the period covered by the restatement as set forth
herein. If the payment or settlement of Incentive Payments
would have been lower had the achievement of applicable financial
performance goals been calculated based on such restated financial
results, the Board may, if it determines appropriate in its sole
discretion, recover the portion of the paid or settled Incentive Payments
in excess of the payment or settlement that would have been made based on
the restated financial results. The Company will not seek to
recover Incentive Payments received or settled more than three years after
the date of the initial filing that contained the incorrect financial
results.
|
3.
|
Governing Law;
Jurisdiction.
This Agreement shall be governed by and
construed in accordance with the laws of the State of Illinois. Any action
arising under or relating to this Agreement may be taken in a court of
appropriate jurisdiction, either state or federal, situated in Cook
County, Illinois. Each party hereby consents to the
jurisdiction of any court before which the action has been brought in
accordance with this Section and will accept service of process by any
method permitted by the rules of, or applicable to, such court, whether or
not such party then resides within such court’s
jurisdiction.
|