UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended March 31, 2019
OR
 
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from ______ to _______
 
Commission file number 1-5684

W.W. Grainger, Inc.
(Exact name of registrant as specified in its charter)

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)
 
Not Applicable
(Former name, former address and former fiscal year; if changed since last report)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes [X]  No [  ]
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes [X]  No [  ]
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer [X]  Accelerated filer [  ]   Non-accelerated filer [  ]   Smaller reporting company [  ]
Emerging growth company [  ]

  If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]


1


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes [  ]  No [X]
 
There were  55,443,591 shares of the Company’s Common Stock, par value $0.50, outstanding as of March 31, 2019 .

2



 
TABLE OF CONTENTS
 
 
 
Page No.
 
PART I FINANCIAL INFORMATION
 
 
 
 
Item 1:
Financial Statements (Unaudited)
 
 
 
 
 
Condensed Consolidated Statements of Earnings 
    for the Three Months Ended March 31, 2019 and 2018
 
 
 
 
Condensed Consolidated Statements of Comprehensive
    Earnings for the Three Months Ended March 31, 2019 and 2018
 
 
 
 
Condensed Consolidated Balance Sheets
    as of March 31, 2019 and December 31, 2018
 
 
 
 
Condensed Consolidated Statements of Cash Flows
    for the Three Months Ended March 31, 2019 and 2018
 
 
 
 
Condensed Consolidated Statements of Shareholders' Equity for the Three Months Ended March 31, 2019 and 2018
 
 
 
 
Notes to Condensed Consolidated Financial Statements
 
 
 
Item 2:
Management's Discussion and Analysis of Financial
    Condition and Results of Operations
 
 
 
Item 3:
Quantitative and Qualitative Disclosures About Market Risk
 
 
 
Item 4:
Controls and Procedures
 
 
 
 
PART II OTHER INFORMATION
 
 
 
Item 1:
Legal Proceedings
 
 
 
Item 2:
Unregistered Sales of Equity Securities and Use of Proceeds
 
 
 
Item 6:
Exhibits
 
 
 
Signatures
 
 
 
 
EXHIBITS
 
 


3


PART I – FINANCIAL INFORMATION

Item 1:  Financial Statements

W.W. Grainger, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(In millions of dollars, except per share amounts)
(Unaudited)
 
Three Months Ended
 
March 31,
 
2019
 
2018
Net sales
$
2,799

 
$
2,766

Cost of goods sold
1,704

 
1,674

Gross profit
1,095

 
1,092

Selling, general and administrative expenses
732

 
757

Operating earnings
363

 
335

Other income (expense):
 

 
 

Interest income
2

 
—

Interest expense
(21
)
 
(25
)
Losses from equity method investment
—

 
(11
)
Other, net
7

 
8

Total other expense, net
(12
)
 
(28
)
Earnings before income taxes
351

 
307

Income taxes
89

 
66

Net earnings
262

 
241

Less: Net earnings attributable to noncontrolling interest
9

 
9

Net earnings attributable to W.W. Grainger, Inc.
$
253

 
$
232

Earnings per share:
 

 
 

Basic
$
4.50

 
$
4.09

Diluted
$
4.48

 
$
4.07

Weighted average number of shares outstanding:
 

 
 

Basic
55.6

 
56.1

Diluted
55.9

 
56.4

Cash dividends paid per share
$
1.36

 
$
1.28

 
The accompanying notes are an integral part of these financial statements.

4


W.W. Grainger, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS
(In millions of dollars)
(Unaudited)
 
Three Months Ended
 
March 31,
 
2019
 
2018
Net earnings
$
262

 
$
241

Other comprehensive (losses) earnings:
 

 
 

Foreign currency translation adjustments, net of reclassification
4

 
23

Postretirement benefit plan reclassification, net of tax benefit of $1 and $1, respectively
(3
)
 
(2
)
Total other comprehensive earnings
1

 
21

Comprehensive earnings, net of tax
263

 
262

Less: Comprehensive earnings (losses) attributable to noncontrolling interest
 
 
 
Net earnings
9

 
9

Foreign currency translation adjustments
(2
)
 
9

Comprehensive earnings attributable to noncontrolling interest
7

 
18

Comprehensive earnings attributable to W.W. Grainger, Inc.
$
256

 
$
244

 
The accompanying notes are an integral part of these financial statements.

5


W.W. Grainger, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions of dollars, except for share and per share amounts)
 
As of
 
(Unaudited)
 
 
ASSETS
March 31, 2019
 
Dec 31, 2018
CURRENT ASSETS
 
 
 
Cash and cash equivalents
$
392

 
$
538

Accounts receivable (less allowances for doubtful
 

 
 

accounts of $26 and $25, respectively)
1,485

 
1,385

Inventories
1,523

 
1,541

Prepaid expenses and other assets
102

 
83

Prepaid income taxes
6

 
10

Total current assets
3,508

 
3,557

PROPERTY, BUILDINGS AND EQUIPMENT, NET
1,358

 
1,352

DEFERRED INCOME TAXES
14

 
12

GOODWILL
425

 
424

INTANGIBLES, NET
446

 
460

OTHER ASSETS
263

 
68

TOTAL ASSETS
$
6,014

 
$
5,873

LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 
CURRENT LIABILITIES
 
 
 
Short-term debt
$
52

 
$
49

Current maturities of long-term debt
82

 
81

Trade accounts payable
741

 
678

Accrued compensation and benefits
146

 
262

Accrued contributions to employees' profit sharing plans
27

 
133

Accrued expenses
324

 
269

Income taxes payable
90

 
29

Total current liabilities
1,462

 
1,501

LONG-TERM DEBT (less current maturities)
2,077

 
2,090

DEFERRED INCOME TAXES AND TAX UNCERTAINTIES
101

 
103

OTHER NON-CURRENT LIABILITIES
222

 
86

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
55

 
55

Additional contributed capital
1,137

 
1,134

Retained earnings
8,045

 
7,869

Accumulated other comprehensive losses
(168
)
 
(171
)
Treasury stock, at cost – 54,215,628 and 53,796,859 shares, respectively
(7,098
)
 
(6,966
)
Total W.W. Grainger, Inc. shareholders’ equity
1,971

 
1,921

Noncontrolling interest
181

 
172

Total shareholders' equity
2,152

 
2,093

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$
6,014

 
$
5,873

  
The accompanying notes are an integral part of these financial statements.

6


W.W. Grainger, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions of dollars)
(Unaudited)
 
Three Months Ended
 
March 31,
 
2019
 
2018
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
Net earnings
$
262

 
$
241

Provision for losses on accounts receivable
4

 
4

Deferred income taxes and tax uncertainties
(4
)
 
(2
)
Depreciation and amortization
57

 
64

Net gains from sales of assets, net of write-offs
(2
)
 
(6
)
Stock-based compensation
5

 
12

Losses from equity method investment
—

 
11

Change in operating assets and liabilities:
 

 
 

Accounts receivable
(102
)
 
(94
)
Inventories
20

 
3

Prepaid expenses and other assets
(30
)
 
(33
)
Trade accounts payable
64

 
13

Other current liabilities
(207
)
 
(103
)
Income taxes payable, net

64

 
44

Accrued employment-related benefits cost
(4
)
 
(7
)
Net cash provided by operating activities
127

 
147

CASH FLOWS FROM INVESTING ACTIVITIES:
 

 
 

Additions to property, buildings and equipment and intangibles
(60
)
 
(49
)
Proceeds from sales of assets
6

 
26

Equity method investment
2

 
(8
)
Net cash used in investing activities
(52
)
 
(31
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 

 
 

Net increase in commercial paper
—

 
90

Borrowings under lines of credit
10

 
10

Payments against lines of credit
(7
)
 
(20
)
Payments of long-term debt
(14
)
 
(25
)
Proceeds from stock options exercised
3

 
59

Payments for employee taxes withheld from stock awards
(3
)
 
(15
)
Purchase of treasury stock
(135
)
 
(173
)
Cash dividends paid
(76
)
 
(72
)
Other, net
1

 
—

Net cash used in financing activities
(221
)
 
(146
)
Exchange rate effect on cash and cash equivalents
—

 
5

NET CHANGE IN CASH AND CASH EQUIVALENTS
(146
)
 
(25
)
Cash and cash equivalents at beginning of year
538

 
327

Cash and cash equivalents at end of period
$
392

 
$
302

 
The accompanying notes are an integral part of these financial statements.

7


W.W. Grainger, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In millions of dollars, except for per share amounts)
(Unaudited)
 
Common Stock
Additional Contributed Capital
Retained Earnings
Accumulated Other Comprehensive Earnings (Losses)
Treasury Stock
Noncontrolling
Interest
Total
Balance at January 1, 2018
$
55

$
1,041

$
7,405

$
(135
)
$
(6,676
)
$
138

$
1,828

Stock based compensation
—

24

—

—

44

—

68

Purchase of treasury stock
—

—

—

—

(160
)
—

(160
)
Net earnings
—

—

232

—

—

9

241

Other comprehensive earnings
—

—

—

12

—

9

21

Cash dividends paid ($1.28 per share)
—

—

(73
)
—

—

—

(73
)
Balance at March 31, 2018
$
55

$
1,065

$
7,564

$
(123
)
$
(6,792
)
$
156

$
1,925


 
Common Stock
Additional Contributed Capital
Retained Earnings
Accumulated Other Comprehensive Earnings (Losses)
Treasury Stock
Noncontrolling
Interest
Total
Balance at January 1, 2019
$
55

$
1,134

$
7,869

$
(171
)
$
(6,966
)
$
172

$
2,093

Stock based compensation
—

3

—

—

3

—

6

Purchase of treasury stock
—

—

—

—

(135
)
—

(135
)
Net earnings
—

—

253

—

—

9

262

Other comprehensive (losses) earnings
—

—

—

3

—

(2
)
1

Capital contribution
—

—

—

—

—

2

2

Cash dividends paid ($1.36 per share)
—

—

(77
)
—

—

—

(77
)
Balance at March 31, 2019
$
55

$
1,137

$
8,045

$
(168
)
$
(7,098
)
$
181

$
2,152


8



W.W. Grainger, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1.    BACKGROUND AND BASIS OF PRESENTATION
 
W.W. Grainger, Inc. is a broad line, business-to-business distributor of maintenance, repair and operating (MRO) products and services.  W.W. Grainger, Inc.’s operations are primarily in North America, Europe, Japan and Mexico. In this report, the words “Company” or “Grainger” mean W.W. Grainger, Inc. and its subsidiaries, except where the context makes it clear that the reference is only to W.W. Grainger, Inc. itself and not its subsidiaries.
 
The Condensed Consolidated Financial Statements of the Company and the related notes are unaudited and should be read in conjunction with the consolidated financial statements and related notes for the year ended December 31, 2018 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) on February 28, 2019.
 
The Condensed Consolidated Balance Sheet as of December 31, 2018 has been derived from the audited consolidated financial statements at that date, but does not include all of the disclosures required by accounting principles generally accepted in the U.S. for complete financial statements.
 
The unaudited financial information reflects all adjustments (primarily consisting of normal recurring adjustments) which, in the opinion of management, are necessary for a fair presentation of the statements contained in this report.

2.    NEW ACCOUNTING STANDARDS

In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments as modified by subsequently issued ASU 2018-19. This ASU requires estimating all expected credit losses for certain types of financial instruments, including trade receivables, held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. This ASU affects an entity to varying degrees depending on the credit quality of the assets held by the entity, their duration and how the entity applies current GAAP. The effective date of this ASU is for fiscal years and interim periods beginning after December 15, 2019. The Company is evaluating the impact of this ASU.

On January 1, 2019, the Company adopted ASU 2016-02, Leases as modified subsequently by ASUs 2018-01, 2018-10, 2018-11, 2018-20 and 2019-01(Topic 842). The core principle of these ASUs is to improve transparency and comparability related to the accounting and reporting of leasing arrangements, including balance sheet recognition for assets and liabilities associated with rights and obligations created by leases with terms greater than twelve months, among other changes.

The Company utilized the simplified modified retrospective transition method that allowed for a cumulative-effect adjustment in the period of adoption, and did not restate prior periods. Additionally, the Company elected the practical expedients package permitted under the transition guidance. Adoption of the new standard resulted in the recording right of use (ROU) assets and lease liabilities of approximately $208 million and $205 million , respectively as of January 1, 2019 related to operating and finance leases. Adoption of the standard did not materially impact the Company’s Condensed Consolidated Statements of Earnings, Comprehensive Earnings and Statements of Cash Flows. See Note 5 to the Financial Statements.



9
W.W. Grainger, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

3.    REVENUE

Company revenue is primarily comprised of MRO product sales and related activities, such as freight and services. Total service revenue is not material and accounted for approximately 1% of the Company revenue for the three months ended March 31, 2019 and 2018, respectively.

Grainger serves a large number of customers in diverse industries, which are subject to different economic and market specific factors. The Company's presentation of revenue by industry most reasonably depicts how the nature, amount, timing and uncertainty of Company revenue and cash flows are affected by economic and market specific factors. The
following table presents the Company's percentage of revenue by reportable segment and by major customer industry:
 
Three Months Ended March 31,
 
2019
 
2018
 
U.S.
 
Canada
 
Total Company (2)
 
U.S.
 
Canada
 
Total Company (2)
Government
17
%
 
6
%
 
13
%
 
17
%
 
7
%
 
13
%
Heavy Manufacturing
19
%
 
21
%
 
18
%
 
20
%
 
20
%
 
19
%
Light Manufacturing
13
%
 
6
%
 
11
%
 
13
%
 
5
%
 
11
%
Transportation
6
%
 
8
%
 
5
%
 
5
%
 
8
%
 
5
%
Commercial
17
%
 
9
%
 
14
%
 
16
%
 
10
%
 
13
%
Retail/Wholesale
8
%
 
4
%
 
7
%
 
8
%
 
4
%
 
7
%
Contractors
10
%
 
10
%
 
8
%
 
10
%
 
12
%
 
8
%
Natural Resources
3
%
 
32
%
 
4
%
 
3
%
 
31
%
 
4
%
Other (1)
7
%
 
4
%
 
20
%
 
8
%
 
3
%
 
20
%
Total net sales to external customers
100
%
 
100
%
 
100
%
 
100
%
 
100
%
 
100
%
Percent of Total Company Revenue
72
%
 
5
%
 
100
%
 
72
%
 
7
%
 
100
%
(1) Other category primarily includes revenue from individual customers not aligned to major industry segment, including small businesses and consumers and intersegment net sales.
(2) Total Company includes other businesses, which include the Company's endless assortment businesses and operations in Europe, Asia and Latin America and account for approximately 23% and 21% of revenue for the three months ended March 31, 2019 and 2018, respectively.

Total accrued sales returns were approximately $ 27 million and $ 29 million as of March 31, 2019 and December 31, 2018 and are reported as a reduction of Accounts receivable. Total accrued sales incentives were approximately $ 51 million and $ 62 million as of March 31, 2019 and December 31, 2018 and are reported as part of Accrued expenses. The Company did not have any material unsatisfied performance obligations, contract assets or liabilities as of March 31, 2019 and December 31, 2018.

4.    PROPERTY, BUILDINGS AND EQUIPMENT

Property, buildings and equipment consisted of the following (in millions of dollars):
 
As of
 
March 31, 2019
 
December 31, 2018
Land
$
318

 
$
318

Building, structures and improvements
1,343

 
1,338

Furniture, fixtures, machinery and equipment
1,820

 
1,785

Property, buildings and equipment
$
3,481

 
$
3,441

Less: Accumulated depreciation and amortization
2,123

 
2,089

Property, buildings and equipment, net
$
1,358

 
$
1,352



10
W.W. Grainger, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)


5. LEASES

The Company leases certain properties and buildings (including branches, warehouses, distribution centers and office space) and equipment under various arrangements which provide the right to use the underlying asset and require lease payments for the lease term. The Company’s lease portfolio consists mainly of operating leases which expire at various dates through 2036. Finance leases and service contracts with lease arrangements are not material and the following disclosures pertain to the Company’s operating leases.

Many of the property and building lease agreements obligate the Company to pay real estate taxes, insurance and certain maintenance costs (hereinafter referred to as non-lease components). Certain of the Company’s lease arrangements contain renewal provisions from 1 to 30 years , exercisable at the Company's option. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The Company determines if an arrangement is an operating lease at inception. Leases with an initial term of 12 months or less are not recorded on the balance sheet. All other leases are recorded on the balance sheet with ROU assets representing the right to use the underlying asset for the lease term and lease liabilities representing the obligation to make lease payments arising from the lease.

ROU assets and lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term and include options to extend or terminate the lease when they are reasonably certain to be exercised. The present value of lease payments is determined primarily using the incremental borrowing rate based on the information available at lease commencement date. Lease agreements with lease and non-lease components are generally accounted for as a single lease component. The Company’s operating lease expense is recognized on a straight-line basis over the lease term and are recorded in Selling, general and administrative expenses (SG&A).

Information related to operating leases is as follows (in millions of dollars):
 
 
As of March 31, 2019
ROU Assets
 
 
Other assets
 
$
188

 
 
 
Operating lease liabilities
 
 
Accrued expenses
 
56

Other non-current liabilities
 
139

Total operating lease liabilities
 
$
195


 
 
Three Months Ended March 31, 2019
Weighted average remaining lease term
 
6 years

Weighted average incremental borrowing rate
 
2.5
%
Rent expense included in SG&A
 
$
19

Cash paid for operating leases
 
17

ROU assets obtained in exchange for operating lease obligations
 
12




11
W.W. Grainger, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)


Maturities of operating lease liabilities were as follows as of March 31, 2019 (in millions of dollars):
Year
 
Maturity of operating lease liabilities
2019 (excluding three months)
 
49

2020
 
51

2021
 
37

2022
 
27

2023
 
17

Thereafter
 
31

Total lease payments
 
212

Less interest
 
(17
)
Present value of lease liabilities
 
195


As of March 31, 2019, the Company's future operating lease obligations that have not yet commenced are immaterial.

6.    GOODWILL AND INTANGIBLE ASSETS

The balances and changes in the carrying amount of Goodwill by segment are as follows (in millions of dollars):
 
 
United States
 
Canada
 
Other businesses
 
Total
Balance at January 1, 2018
 
$
192

 
$
130

 
$
222

 
$
544

Impairment
 
—

 
—

 
(105
)
 
(105
)
Translation
 
—

 
(10
)
 
(5
)
 
(15
)
Balance at December 31, 2018
 
192

 
120

 
112

 
424

Translation
 
—

 
3

 
(2
)
 
1

Balance at March 31, 2019
 
$
192

 
$
123

 
$
110

 
$
425

The cumulative goodwill impairment charges by segment as of March 31, 2019 are as follows (in millions of dollars):
 
 
United States
 
Canada
 
Other businesses
 
Total
Cumulative goodwill impairment charges
 
$
24

 
$
32

 
$
176

 
$
232



12
W.W. Grainger, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

The balances and changes in Intangible assets, net are as follows (in millions of dollars ):
 
 
 
March 31, 2019
 
December 31, 2018
 
Weighted average life
 
Gross carrying amount
 
Accumulated amortization
 
Net carrying amount
 
Gross carrying amount
 
Accumulated amortization
 
Net carrying amount
Customer lists and relationships
14.3 years
 
$
412

 
$
210

 
$
202

 
$
410

 
$
204

 
$
206

Trademarks, trade names and other
14.5 years
 
23

 
14

 
9

 
24

 
15

 
9

Non-amortized trade names and other
 
 
99

 
—

 
99

 
99

 
—

 
99

Capitalized software
4.1 years
 
661

 
525

 
136

 
657

 
511

 
146

Total intangible assets
8.4 years
 
$
1,195

 
$
749

 
$
446

 
$
1,190

 
$
730

 
$
460


Grainger tests reporting units' goodwill and intangible assets for impairment annually during the fourth quarter and more frequently if impairment indicators exist. Accordingly, Grainger periodically performs qualitative assessments of significant events and circumstances such as reporting units' historical and current results, assumptions regarding future performance, strategic initiatives and overall economic factors to determine the existence of impairment indicators and assess if it is more likely than not that the fair value of reporting units or intangible assets is less than their carrying value and if a quantitative impairment test is necessary.
Granger's qualitative assessment for the three months ended March 31, 2019 did not indicate the presence of any impairment triggering events. Changes in assumptions regarding future performance, as well as the ability to execute on growth initiatives and productivity improvements, may have a significant impact on future cash flows. Likewise, an unfavorable economic environment and changes in market conditions, discount rates or other factors may result in future impairments of goodwill and intangible assets.
7.     RESTRUCTURING

The Company has substantially completed its various restructuring actions initiated during 2017 and 2018 and recorded approximately $ 2 million and $ 8 million of related costs in the three months ended March 31, 2019 and 2018, respectively. The restructuring charges primarily consisted of involuntary employee termination costs in Canada and the U.S., net of gains from the sales of branches and are included in SG&A. The reserve balance as of March 31, 2019 and December 31, 2018 was approximately $ 35 million and $ 47 million, respectively, and is primarily included in Accrued compensation and benefits. The majority of the reserve is expected to be paid during 2019.
  


13
W.W. Grainger, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

8.    SHORT-TERM AND LONG-TERM DEBT
 
Short-term debt consisted of outstanding lines of credit of $ 52 million and $49 million at March 31, 2019 and December 31, 2018 respectively. Long-term debt consisted of the following (in millions of dollars):
 
As of March 31, 2019
 
As of December 31, 2018
 
Carrying Value
 
Fair Value
 
Carrying Value
 
Fair Value
4.60% senior notes due 2045
$
1,000

 
$
1,075

 
$
1,000

 
$
1,026

3.75% senior notes due 2046
400

 
374

 
400

 
357

4.20% senior notes due 2047
400

 
401

 
400

 
383

British pound term loan
172

 
172

 
174

 
174

Euro term loan
123

 
123

 
126

 
126

Canadian dollar revolving credit facility
45

 
45

 
44

 
44

Other
41

 
41

 
49

 
49

Subtotal
2,181

 
2,231

 
2,193

 
2,159

Less current maturities
(82
)
 
(82
)
 
(81
)
 
(81
)
Debt issuance costs and discounts, net of amortization
(22
)
 
(22
)
 
(22
)
 
(22
)
Long-term debt (less current maturities)
$
2,077

 
$
2,127

 
$
2,090

 
$
2,056


The estimated fair value of the Company’s senior notes was based on available external pricing data and current market rates for similar debt instruments, among other factors, which are classified as level 2 inputs within the fair value hierarchy. The carrying value of other long-term debt approximates fair value due to their variable interest rates.



14
W.W. Grainger, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

9.    EARNINGS PER SHARE
 
The following table sets forth the computation of basic and diluted earnings per share under the two-class method (in millions of dollars, except for share and per share amounts):
 
Three Months Ended
 
March 31,
 
2019
 
2018
Net earnings attributable to W.W. Grainger, Inc. as reported
253

 
$
232

Distributed earnings available to participating securities
(1
)
 
(1
)
Undistributed earnings available to participating securities
(2
)
 
(1
)
Numerator for basic earnings per share – Undistributed and distributed earnings available to common shareholders
250

 
230

Undistributed earnings allocated to participating securities
2

 
1

Undistributed earnings reallocated to participating securities
(2
)
 
(1
)
Numerator for diluted earnings per share – Undistributed and distributed earnings available to common shareholders
$
250

 
$
230

Denominator for basic earnings per share – weighted average shares
55,643,199

 
56,062,607

Effect of dilutive securities
304,429

 
340,639

Denominator for diluted earnings per share – weighted average shares adjusted for dilutive securities
55,947,628

 
56,403,246

Earnings per share two-class method
 

 
 

Basic
$
4.50

 
$
4.09

Diluted
$
4.48

 
$
4.07


10.    SEGMENT INFORMATION

Grainger's two reportable segments are the U.S. and Canada. The U.S. reportable segment reflects the results of Grainger's U.S. businesses. The Canada reportable segment reflects the results for Acklands-Grainger, Inc. and its subsidiaries. Other businesses include the endless assortment businesses, Zoro Tools, Inc. (Zoro) in the U.S. and MonotaRO Co. (MonotaRO) in Japan, and smaller high-touch solutions businesses in Europe, Asia and Mexico. These businesses individually do not meet the criteria of a reportable segment.

Following is a summary of segment results (in millions of dollars):
 
Three Months Ended March 31, 2019
 
U.S.
 
Canada
 
Total Reportable Segments
 
Other businesses
 
Total
Total net sales
$
2,149

 
$
136

 
$
2,285

 
$
633

 
$
2,918

Intersegment net sales
(118
)
 
—

 
(118
)
 
(1
)
 
(119
)
Net sales to external customers
$
2,031

 
$
136

 
$
2,167

 
$
632

 
$
2,799

Segment operating earnings
$
364

 
$
(5
)
 
$
359

 
$
30

 
$
389


15
W.W. Grainger, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

 
Three Months Ended March 31, 2018
 
U.S.
 
Canada
 
Total Reportable Segments
 
Other businesses
 
Total
Total net sales
$
2,108

 
$
182

 
$
2,290

 
$
588

 
$
2,878

Intersegment net sales
(111
)
 
—

 
(111
)
 
(1
)
 
(112
)
Net sales to external customers
$
1,997

 
$
182

 
$
2,179

 
$
587

 
$
2,766

Segment operating earnings
$
357

 
$
(20
)
 
$
337

 
$
36

 
$
373


Following are reconciliations of segment information with the total consolidated totals per the financial statements (in millions of dollars):
 
Three Months Ended March 31,
 
2019
 
2018
Operating earnings:
 
Total operating earnings for reportable segments
$
359

 
$
337

Other businesses
30

 
36

Unallocated expenses
(26
)
 
(38
)
Total consolidated operating earnings
$
363

 
$
335

 
 
 
 
 
As of
 
March 31, 2019
 
December 31, 2018
Assets:
 
 
 
United States
$
2,575

 
$
2,496

Canada
184

 
188

Assets for reportable segments
2,759

 
2,684

Other current and noncurrent assets
3,051

 
2,879

Unallocated assets
204

 
310

Total consolidated assets
$
6,014

 
$
5,873

 
 
 
 

The Company is a broad-line distributor of MRO products and services. Products are regularly added and deleted from the Company's inventory. Accordingly, it would be impractical to provide sales information by product category due to the way the business is managed.

Unallocated expenses primarily relate to the Company's headquarters support services and intercompany eliminations, which are not part of any reportable segment. Unallocated expenses include supply chain, product management and procurement, finance, communications, human resources, information systems, legal and compliance, internal audit and real estate.

Assets for reportable segments include net accounts receivable and first-in, first-out inventory which are reported to the Company's Chief Operating Decision Maker. Other current and non-current assets include all other assets of the reportable segments. Unallocated assets are primarily comprised of non-operating cash and cash equivalents, property, buildings and equipment, net, and certain prepaid expenses related to the Company's headquarters support services.



16
W.W. Grainger, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)



11.    CONTINGENCIES AND LEGAL MATTERS

From time to time the Company is involved in various legal and administrative proceedings that are incidental to its business, including claims related to product liability, general negligence, contract disputes, cybersecurity incidents, privacy matters, environmental issues, wage and hour laws, intellectual property, employment practices, advertising laws, regulatory compliance, and other matters and actions brought by employees, customers, competitors, suppliers and governmental entities. As a government contractor selling to federal, state and local governmental entities, the Company is also subject to governmental and regulatory inquiries, audits and other proceedings, including those related to contract administration and pricing compliance. It is not expected that the ultimate resolution of any of these matters will have, either individually or in the aggregate, a material adverse effect on the Company's consolidated financial position or results of operations.




17
W.W. Grainger, Inc. and Subsidiaries
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations

General
W.W. Grainger, Inc. (Grainger or the Company) is a broad line, business-to-business distributor of maintenance, repair and operating (MRO) products and services with operations primarily in North America, Europe and Japan. More than 3.5 million customers worldwide rely on Grainger for products such as safety, gloves, ladders, motors and janitorial supplies, along with services like inventory management and technical support. These customers represent a broad collection of industries (see Note 3 in the Condensed Consolidated Financial Statements (Financial Statements)). They place orders online, on mobile devices, through sales representatives, over the phone and at local branches. Approximately 5,000 suppliers provide Grainger with approximately 1.7 million products stocked in Grainger's distribution centers (DCs) and branches worldwide.

Grainger's two reportable segments are the U.S. and Canada (Acklands - Grainger Inc. and its subsidiaries). These reportable segments reflect the results of the Company's high-touch solutions businesses in those geographies. Other businesses include the endless assortment businesses, (Zoro in the U.S. and MonotaRO in Japan), and smaller high-touch solutions businesses in Europe, Asia and Mexico.

Business Environment
Given Grainger's large number of customers and the diverse industries it serves, several economic factors and indusry trends tend to shape Grainger’s business environment and provide general insight into projecting Grainger's growth. Grainger’s sales in the United States (U.S.) and Canada tend to positively correlate with Business Investment, Business Inventory, Exports, Industrial Production and Gross Domestic Product (GDP). Sales in Canada also tend to positively correlate with oil prices. The table below provides these estimated indicators for 2019:
 
U.S.
 
Canada
 
Estimated 2018
Forecasted 2019
 
Estimated 2018
Forecasted 2019
Business Investment
7.4%
3.0%
 
0.8%
(2.3)%
Business Inventory
1.6%
3.3%
 
—
—
Exports
4.0%
2.8%
 
3.3%
2.7%
Industrial Production
3.9%
2.1%
 
2.6%
0.7%
GDP
2.9%
2.3%
 
1.8%
1.4%
Oil Prices
—
—
 
$65/barrel
$63/barrel
Source: Global Insight U.S. (April 2019), Global Insight Canada (March 2019)

In the U.S., Business Investment and Exports are two major indicators of MRO spending. Per the Global Insight April 2019 forecast, Business Inventory is forecast to improve while Business Investment, Industrial Production, Exports and GDP are forecast to slow, yet still remain stable during 2019 despite slowing global growth and trade concerns, financial market volatility and fading fiscal stimulus.
Per the Global Insight March 2019 forecast, Canada's Business Investment, Exports, Industrial Production and GDP are expected to slow due to a reduction in spending, delayed investments and weakness in oil prices and limited output.   
Outlook
Each business in Grainger’s portfolio has a specific set of strategic imperatives focused on creating unique value for customers.

In the U.S. business, Grainger is focused on growing market share through the three pillars of its strategy: (i) building advantaged MRO solutions, which means being able to get customers the exact product they need to solve a problem quickly; (ii) offering differentiated sales and services; Grainger has an advantage in serving complex businesses at their place of business through its direct customer relationships and onsite services and (iii) delivering unparalleled customer service; Grainger is committed to providing the absolute best customer experience in the industry through its effort to deliver flawlessly on every customer transaction.
 

18
W.W. Grainger, Inc. and Subsidiaries
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Matters Affecting Comparability
There were 63 sales days in the three months ended March 31, 2019 and 64 sales days in the three months ended March 31, 2018.

Results of Operations – Three Months Ended March 31, 2019
The following table is included as an aid to understand the changes in Grainger’s Condensed Consolidated Statements of Earnings (in millions of dollars):
 
Three Months Ended March 31,
 
 
 
 
Percent Increase/(Decrease)
 
As a Percent of Net Sales
 
2019
 
2018
 
2019
 
2018
Net sales
$
2,799

 
$
2,766

1
 %
 
100.0
%
 
100.0
%
Cost of goods sold
1,704

 
1,674

2
 %
 
60.9

 
60.5

Gross profit
1,095

 
1,092

—
 %
 
39.1

 
39.5

Selling, general and administrative expenses
732

 
757

(3
)%
 
26.2

 
27.4

Operating earnings
363

 
335

8
 %
 
13.0

 
12.1

Other expense, net
12

 
28

(57
)%
 
0.4

 
1.0

Income taxes
89

 
66

35
 %
 
3.2

 
2.4

Net earnings
262

 
241

 
 
 
 
 
Noncontrolling interest
9

 
9

—
 %
 
0.3

 
0.3

Net earnings attributable to W.W. Grainger, Inc.
$
253

 
$
232

9
 %
 
9.0
%
 
8.4
%

Grainger’s net sales of $ 2,799 million for the first quarter of 2019 increased $33 million, or 1% compared to the same period in 2018. On a daily basis sales, net sales increased 3.0% and consisted of the following:
 
Percent Increase/(Decrease)
Volume
3.0%
Price
1.5
Foreign exchange
(1.0)
Cash to accrual transition (U.S.)
(0.5)
Total
3.0%

The increase in net sales was primarily driven by volume increases in the U.S. business and the endless assortment businesses, partially offset by lower sales in the Canada business, foreign exchange and the impact of a prior year change in accounting estimate. More specifically, a small group of U.S. customers were transitioned from cash to accrual basis of accounting as a result of their improved credit profile. See the Segment Analysis below for further details related to segment revenue.

Gross profit of $ 1,095 million for the first quarter of 2019 increased $3 million compared to the same quarter in 2018. The gross profit margin of 39.1% during the first quarter of 2019 decreased 0.35 percentage point when compared to the same quarter in 2018. The decline in gross profit margin generation was primarily driven by the other businesses and also includes a 0.15 percentage point decline from the timing of the Company's North American sales meeting that took place in March 2019 versus February in the prior year.

The table below reconciles reported Selling, general and administrative expenses (SG&A), operating earnings and net earnings attributable to W.W. Grainger, Inc. determined in accordance with U.S. generally accepted accounting principles (GAAP) to adjusted SG&A, operating earnings and net earnings attributable to W.W. Grainger, Inc., which are all considered non-GAAP measures. The Company believes that these non-GAAP measures provide meaningful

19
W.W. Grainger, Inc. and Subsidiaries
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

information to assist shareholders in understanding financial results and assessing prospects for future performance as they provide a better baseline for analyzing the ongoing performance of its businesses by excluding items that may not be indicative of core operating results. Because non-GAAP financial measures are not standardized, it may not be possible to compare these measures with other companies' non-GAAP measures having the same or similar names. All tables below are in millions of dollars:
 
Three Months Ended
 
 
 
March 31,
 
 
 
2019
 
2018
 
%
Selling, general and administrative expenses reported
$
732

 
$
757

 
(3
)%
Restructuring (U.S.)
—

 
3

 
 
Branch gains (U.S.)
—

 
(7
)
 
 
Restructuring (Canada)
1

 
11

 
 
Restructuring (Other businesses)
—

 
1

 
 
          Subtotal
1

 
8

 
 
Selling, general and administrative expenses adjusted
$
731

 
$
749

 
(2
)%
 
2019
 
2018
 
%
Operating earnings reported
$
363

 
$
335

 
8
%
Total restructuring, net of branch gains
2

 
8

 
 
Operating earnings adjusted
$
365

 
$
343

 
6
%
 
2019
 
2018
 
%
Net earnings attributable to W.W. Grainger, Inc. reported
$
253

 
$
232

 
9
%
Total restructuring, net of branch gains
2

 
8

 
 
Tax effect (1)
—

 
(2
)
 
 
Total restructuring, net of branch gains and tax
2

 
6

 
 
Net earnings attributable to W.W. Grainger, Inc. adjusted
$
255

 
$
238

 
7
%
(1) The tax impact of adjustments is calculated based on the income tax rate in each applicable jurisdiction, subject to deductibility limitations and the Company's ability to realize the associated tax benefits.

SG&A of $ 732 million for the first quarter of 2019 decreased $25 million , or 3 % compared to the first quarter of 2018 . Excluding restructuring, net of branch gains in both periods as noted in the table above, SG&A decreased $18 million, or 2% primarily due to 2018 cost take-out actions in Canada.

Operating earnings of $363 million for the first quarter of 2019 increased $28 million , or 8% compared to the first quarter of 2018 . Excluding restructuring, net of branch gains in both periods as noted in the table above, operating earnings increased $22 million or 6%, driven primarily by SG&A leverage and cost take-out actions.

Other expense, net was $12 million for the first quarter of 2019 , a decrease of $16 million, or 57% compared to the first quarter of 2018 . The decrease was primarily due to lower losses from the conclusion of the Company's clean energy investments in the second half of 2018.

Income taxes of $ 89 million for the first quarter of 2019 increased $23 million, or 35% compared to the first quarter of 2018 . Grainger's effective tax rates were 25.4% and 21.6% for the three months ended March 31, 2019 and 2018, respectively. The increase was primarily driven by lower tax benefit from stock-based compensation and the absence of the Company's clean energy tax benefits in 2019 as the Company concluded its investments in 2018.

Net earnings attributable to W.W. Grainger, Inc. of $ 253 million for the first quarter of 2019 increased $21 million or 9% compared to the first quarter of 2018 . Excluding restructuring, net of branch gains from both periods in the table above, net earnings increased $17 million, or 7%. The increase in net earnings primarily resulted from lower SG&A and lower other expense, net.

20
W.W. Grainger, Inc. and Subsidiaries
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Diluted earnings per share of $4.48 in the first quarter of 2019 was up 10% versus the $4.07 for the first quarter of 2018 , primarily due to higher net earnings and lower average shares outstanding. Excluding restructuring, net of branch gains from both periods in the table above, diluted earnings per share of $4.51 in the first quarter of 2019 increased 8% from $4.18 for the first quarter of 2018 .

Segment Analysis
The following results at the U.S. and Canada segments and Other businesses level include external and intersegment net sales and operating earnings. See Note 10 to the Financial Statements.

United States
Net sales were $ 2,149 million for the first quarter of 2019 , an increase of $41 million , or 2% compared to the same period in 2018. On a daily basis, net sales increased 3.5% and consisted of the following:
 
Percent Increase/(Decrease)
Volume
2.5%
Price
1.5
Intercompany sales to Zoro (included in other businesses)
0.5
Cash to accrual transition
(1.0)
Total
3.5%

Sales to customers in the commercial end markets increased high single digits. Heavy manufacturing, government, retail, natural resources and contractors increased mid-single digits and light manufacturing end markets increased low-single digits. See Note 3 to the Financial Statements for information related to disaggregated revenue. Overall, revenue increases were primarily driven by market share gains and improved demand in all industries, partially offset by the cash to accrual transition for a small group of U.S. customers in the prior year.

The gross profit margin for the first quarter of 2019 increased 0.15 percentage point compared to the same period in 2018. Excluding the 0.2 percentage point decline due to the timing of the Company's North American sales meeting, gross profit margin increased 0.35 percentage points due to freight favorability and product and customer mix.

SG&A increased 2% in the first quarter of 2019 compared to the first quarter of 2018 . The increase was primarily driven by digital marketing, partially offset by variable compensation.

Operating earnings of $ 364 million for the first quarter of 2019 increased $7 million , or 2% from $ 357 million for the first quarter of 2018 . This increase was driven primarily by higher gross profit from higher sales.

Canada
Net sales were $ 136 million for the first quarter of 2019 , a decrease of $46 million , or 25% compared to the same period in 2018. On a daily basis, net sales decreased 24.0% and consisted of the following:
 
Percent (Decrease)/Increase
Volume
(24.0)%
Foreign exchange
(4.0)
Price
4.0
Total
(24.0)%

For the first quarter of 2019 , volume was down 24.0 percentage points compared to the same period in 2018 due to actions taken to reduce the branch footprint and sales coverage optimization activities, partially offset by price increases.

The gross profit margin decreased 2.0 percentage points in the first quarter of 2019 versus the first quarter of 2018 , primarily due to unfavorable inventory reserve adjustments due to lower sales volume.


21
W.W. Grainger, Inc. and Subsidiaries
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

SG&A decreased 41% in the first quarter of 2019 compared to the first quarter of 2018 . Excluding restructuring costs in both periods (as noted in the table above and Note 7 to the Financial Statements), SG&A would have decreased 33%. This decrease was primarily due to 2018 cost reduction actions and lower variable expense due to lower sales volume.

Operating losses were $5 million for the first quarter of 2019 compared to $20 million in the first quarter of 2018 . Excluding restructuring costs in both periods (as noted in the table above and Note 7 to the Financial Statements), operating losses would have been $3 million compared to $9 million in the prior period due to lower SG&A and lower sales volume.

Other businesses
Net sales were $ 633 million for the first quarter of 2019 , an increase of $45 million , or 8% when compared to the same period in 2018. On a daily basis, net sales increased 9.5% and consisted of the following:
 
Percent Increase/(Decrease)
Price/volume
12.0%
Foreign exchange
(2.5)
Total
9.5%

The net sales increase was primarily due to strong revenue growth from the endless assortment businesses.

Operating earnings of $ 30 million for the first quarter of 2019 were down $6 million compared to operating earnings of $36 million the first quarter of 2018 . This decrease is primarily due to the endless assortment businesses' investments to drive long-term growth.

Financial Condition

Cash Flow
Net cash provided by operating activities was $ 127 million and $ 147 million for the three months ended March 31, 2019 and 2018, respectively. The decrease in cash provided by operating activities is primarily the result of higher net payments related to employee variable compensation and benefits paid under annual incentive plans, partially offset by higher operating cash earnings.

Net cash used in investing activities was $ 52 million and $ 31 million for the three months ended March 31, 2019 and 2018, respectively. This increase in net cash used in investing activities was primarily driven by higher additions to property, buildings and equipment and lower proceeds from the sales of assets when compared to the prior year.

Net cash used in financing activities was $ 221 million and $ 146 million in the three months ended March 31, 2019 and 2018, respectively. The increase in net cash used in financing activities was primarily driven by lower proceeds from commercial paper and lower proceeds from stock options exercised, partially offset by lower stock repurchases in 2019 compared to 2018.

Working Capital
Internally generated funds are the primary source of working capital and funds used for growth initiatives and capital expenditures. Grainger's working capital is not impacted by significant seasonality trends throughout the year.

Working capital consists of current assets (less non-operating cash) and current liabilities (less short-term debt, current maturities of long-term debt and lease liabilities). Working capital at March 31, 2019 , was $ 2,086 million , an increase of $ 188 million when compared to $ 1,898 million at December 31, 2018. The increase was primarily driven by an increase in accounts receivable and a decrease in accrued contributions to employees profit-sharing plans due to the annual cash contribution to the profit sharing plans. At these dates, the ratio of current assets to current liabilities was 2.6 and 2.4 , respectively.



22
W.W. Grainger, Inc. and Subsidiaries
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS


Debt
Grainger maintains a debt ratio and liquidity position that provides flexibility in funding working capital needs and long-term cash requirements. In addition to internally generated funds, Grainger has various sources of financing available, including bank borrowings under lines of credit. Total debt, which is defined as total interest-bearing debt (short-term, current maturities and long-term) and lease liabilities as a percent of total capitalization was 52.8% at March 31, 2019 , and 51.5% at December 31, 2018 .

Critical Accounting Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make judgments, estimates and assumptions about future events that affect the amounts reported in the financial statements and accompanying notes.

Accounting estimates are considered critical when they require management to make subjective and complex judgments, estimates and assumptions about matters that have a material impact on the presentation of Grainger’s financial statements and accompanying notes. For a description of Grainger’s critical accounting estimates, see Grainger's Annual Report on Form 10-K for the fiscal year ended December 31, 2018 .

Management has discussed the development and selection of these critical accounting estimates with the Audit Committee of the Board of Directors and with the Company's independent registered public accounting firm.

Forward-Looking Statements
From time to time, in this Quarterly Report on Form 10-Q, as well as in other written reports, communications and verbal statements, Grainger makes forward-looking statements that are not historical in nature but concern forecasts of future results, business plans, analyses, prospects, strategies, objectives and other matters that may be deemed to be “forward-looking statements” under the federal securities laws. Forward-looking statements can generally be identified by their use of terms such as “anticipate,” “estimate,” “believe,” “expect,” “could,” “forecast,” “may,” “intend,” “plan,” “predict,” “project” “will” or “would” and similar terms and phrases, including references to assumptions.
Grainger cannot guarantee that any forward-looking statement will be realized and achievement of future results is subject to risks and uncertainties, many of which are beyond the Company’s control, which could cause Grainger’s results to differ materially from those that are presented.
Important factors that could cause actual results to differ materially from those presented or implied in the forward-looking statements include, without limitation: higher product costs or other expenses; a major loss of customers; loss or disruption of sources of supply; increased competitive pricing pressures; failure to develop or implement new technology initiatives or business strategies; failure to adequately protect intellectual property or successfully defend against infringement claims; the implementation, timing and results of the Company’s strategic pricing initiatives and other responses to market pressures; the outcome of pending and future litigation or governmental or regulatory proceedings, including with respect to wage and hour, anti-bribery and corruption, environmental, advertising, privacy and cybersecurity matters; investigations, inquiries, audits and changes in laws and regulations; disruption of information technology or data security systems; general industry, economic, market or political conditions; general global economic conditions; currency exchange rate fluctuations; market volatility, including volatility or price declines of the Company’s common stock; commodity price volatility; labor shortages; facilities disruptions or shutdowns; higher fuel costs or disruptions in transportation services; natural and other catastrophes; unanticipated and/or extreme weather conditions; loss of key members of management; the Company’s ability to operate, integrate and leverage acquired businesses; changes in effective tax rates and other factors identified under Item 1A: Risk Factors in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, as updated in the Company’s Quarterly Reports on Form 10-Q.
Caution should be taken not to place undue reliance on Grainger’s forward-looking statements and Grainger undertakes no obligation to update or revise any of its forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

23

W.W. Grainger, Inc. and Subsidiaries


Item 3.
Quantitative and Qualitative Disclosures About Market Risk
 
For quantitative and qualitative disclosures about market risk, see “Item 7A: Quantitative and Qualitative Disclosures About Market Risk” in Grainger's Annual Report on Form 10-K for the fiscal year ended December 31, 2018 .

Item 4.
Controls and Procedures
 
Disclosure Controls and Procedures
Grainger carried out an evaluation, under the supervision and with the participation of its management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of Grainger's disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)) as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that Grainger’s disclosure controls and procedures were effective as of the end of the period covered by this report in (i) ensuring that information required to be disclosed by Grainger in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and (ii) ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
 
Changes in Internal Control Over Financial Reporting
There have been no changes in Grainger's internal control over financial reporting for the quarter ended March 31, 2019, that have materially affected, or are reasonably likely to materially affect, Grainger’s internal control over financial reporting.

PART II – OTHER INFORMATION
 
Item 1.
Legal Proceedings

For a description of the Company’s legal proceedings, see Note 11 - Contingencies and Legal Matters - to the Condensed Consolidated Financial Statements included under Item 1 - Financial Statements, of Part I of this report.

Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
 
Issuer Purchases of Equity Securities – First Quarter
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
Jan 1 – Jan 31
194,643
$285.58
194,643
1,184,102
Feb 1 – Feb 28
100,731
$307.61
100,731
1,083,371
Mar 1 – Mar 31
162,513
$297.36
162,513
920,858
Total
457,887

457,887
 
 
(A)
There were no shares withheld to satisfy tax withholding obligations.
(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 6, 2015, up to 15 million shares with no expiration date. Activity is reported on a trade date basis.







24

W.W. Grainger, Inc. and Subsidiaries


Item 6.        Exhibits

A list of exhibits filed with this report on Form 10-Q is provided in the Exhibit Index on page 27 of this report.


25



SIGNATURES


 
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
 
 
W.W. GRAINGER, INC.
Date:
April 22, 2019
 
 
 
By:
 
 
 
/s/ Thomas B. Okray
 
 
 
Thomas B. Okray, Senior Vice President
and Chief Financial Officer
 
 
 
(Principal Financial Officer)
Date:
April 22, 2019
 
 
 
By:
 
 
 
/s/ Eric R. Tapia
 
 
 
Eric R. Tapia, Vice President
and Controller
 
 
 
(Principal Accounting Officer)



26



EXHIBIT INDEX

EXHIBIT NO.
 
DESCRIPTION
 
Form of 2019 W.W. Grainger, Inc. 2015 Incentive Plan Stock Option Agreement between W.W. Grainger, Inc. and certain of its executive officers. *

 
Form of 2019 W.W. Grainger, Inc. 2015 Incentive Plan Restricted Stock Unit Agreement between W.W. Grainger, Inc. and certain of its executive officers. *
 
Form of 2019 W.W. Grainger, Inc. 2015 Incentive Plan Performance Restricted Stock Unit Agreement between W.W. Grainger, Inc. and certain of its executive officers. *
 
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS
 
XBRL Instance Document.
101.SCH
 
XBRL Taxonomy Extension Schema Document.
101.CAL
 
XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF
 
XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB
 
XBRL Taxonomy Extension Label Linkbase Document.
101.PRE
 
XBRL Taxonomy Extension Presentation Linkbase Document.

(*) Management contract of compensatory plan arrangement

27

Exhibit 10.1

W.W. GRAINGER, INC.
2015 Incentive Plan
Stock Option Agreement
This Stock Option Agreement (this "Agreement"), dated as of April 1, 2019 (the "Grant Date"), is entered into between W.W. Grainger, Inc., an Illinois corporation (the "Company"), and you as the executive (the "Executive"), who is employed by the Company or a Subsidiary of the Company (the "Employer").
In consideration of the Executive's agreement to enter into an Unfair Competition Agreement with the Company concurrently with this Agreement on the Grant Date (the "Unfair Competition Agreement"), the Company desires to grant the Executive the right and option ("Option") to purchase shares of the Company's common stock ("Shares") pursuant to the W.W. Grainger, Inc. 2015 Incentive Plan (as may be amended from time to time, the "Plan") and the Executive agrees to enter into the Unfair Competition Agreement and accept such Option on the terms and conditions set forth in this Agreement, the Plan and the Unfair Competition Agreement. Capitalized terms used but not defined in this Agreement have the meanings specified in the Plan.
In consideration of the mutual provisions set forth in this Agreement and in the Unfair Competition Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
Grants
1.01 Grants . 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) and effective on the Grant Date, the Company hereby grants to the Executive the Option to purchase all or a portion of the number of Shares specified in the April 1, 2019 award grant at the price per Share as specified in the grant notice posted to the Executive's electronic investment account maintained with Morgan Stanley Smith Barney LLC, the brokerage firm/third party service provider engaged by the Company in connection with the administration of the Plan (the "Stock Plan Administrator").
1.02 Term of Option . The Option shall expire ten (10) years from the Grant Date, subject to the terms and conditions set forth in this Agreement, the Plan and the Unfair Competition Agreement.


ARTICLE II
Provisions Relating to Option
2.01 Vesting of Option . If the Executive remains continuously employed by the Employer (or any other Subsidiary or Affiliate) until the vesting date(s) specified in the grant notice ("Option Vesting Date"), the Option shall become vested and exercisable on such date. The Option shall not vest before the Option Vesting Date unless otherwise provided or permitted by the Plan or this Agreement, and any portion of the Option that does not vest shall be forfeited in full and the Executive shall have no further rights with respect to such Option.
2.02 Effect of Termination of Employment . Except as otherwise stated in the Plan, if the Executive's employment or service is terminated prior to the Option Vesting Date for any reason whatsoever other than the Executive's death or Disability (defined below), the Executive’s unvested Options as of the Executive's Termination Date (defined below) shall be forfeited in there entirety. However, the Executive shall have three (3) months from the Termination Date to exercise vested Options. If the Executive is a resident of, or employed in, the United States, "Termination Date" shall mean the effective date of termination of the Executive's employment. If the Executive is a resident of, or employed outside of, the United States, "Termination Date" shall mean the earliest of (i) the date on which notice of termination is provided to the Executive, (ii) the last day of the Executive's active service with the Employer or (iii) the last day on which the Executive is an employee of the Employer, as determined in each case without including any required advanced notice period and irrespective of the status of the termination under local labor or employment laws.
2.03 Effect of Death or Disability of the Executive . If the Executive's employment or service is terminated prior to the Option Vesting Date due to the Executive's death or Disability, the Option immediately shall fully vest, become exercisable and will expire on the earlier of (i) six (6) years from the Termination Date or (ii) the original expiration date of the Option. For purposes of this Agreement, "Disability" shall have the same meaning as defined in the Plan, subject to modification as may be required to conform to the laws, rules and regulations (“Laws”) of the Executive's country of residence (and country of employment, if different).
2.04 Exercise of Option . The Executive may exercise the vested portion of the Option in accordance with such policies and procedures as shall be established by the Company and/or the Stock Plan Administrator from time to time.
2.05 Payment of Option Price . The Executive shall at the time of exercise of the Option (except in the case of a cashless exercise, which) tender to the Company the full Option Price. At the discretion of the Committee, and subject to such policies and procedures as it may adopt from time to time, the Option Price may be paid (i) in cash, (ii) in Shares already owned by the Executive for at least six (6) months and having a Fair Market Value on the date of exercise equal to the Option Price, (iii) through a combination of cash and Shares, or (iv) through a cashless exercise through a broker-dealer approved for this purpose by the Company. Notwithstanding anything to the contrary in this Agreement, if the Executive resides in a country where the local foreign exchange Laws either preclude the remittance of currency out of the country for purposes of paying the Option Price, or require the Company, the Employer and/or the Executive to secure any legal or regulatory approvals, complete any legal or regulatory filings, or undertake any additional steps


for remitting currency out of the country, the Company may restrict the method of exercise to a form of cashless exercise or such other form(s) of exercise as it determines in its sole discretion.
ARTICLE III
Recoupment
3.01      Recoupment in Event of Misconduct . If the Company determines that the Executive has committed or engaged in misconduct against the Company or has engaged in any criminal conduct, including embezzlement, fraud or theft, that involves or is related to the Company, or any other conduct that violates Company policy, causes or is discovered to have caused, any loss, damage, injury or other endangerment to the Company's property or reputation, and such Executive has received or is entitled to receive performance stock units, performance restricted stock units, stock options, restricted stock units or cash incentive compensation (collectively, "Incentive Compensation"), then the Company shall have the right to cancel the Incentive Compensation, require the return of Shares acquired under the Plan, recapture any gain realized upon the sale of Shares acquired under the Plan or take any other action it deems appropriate under the circumstances with respect to recouping the Incentive Compensation. The Company shall have sole discretion in determining whether the Executive's conduct was in compliance with applicable 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. If the Executive engages in misconduct or is believed to have engaged in misconduct, including but not limited to any violation of any of Executive's obligations under the Unfair Competition Agreement, the Company shall be entitled to take the actions outlined above for recouping the Incentive Compensation, as the Company deems appropriate under the circumstances.
3.02      Recoupment in Event of Materially Inaccurate Financial Results . If the Company has publicly filed materially inaccurate financial results (the "Subject Financials"), whether or not they result in a restatement, the Company has the discretion to recover any Incentive Compensation that was paid or settled to the Executive during the period covered by the Subject Financials as set forth herein. If the payment or settlement of Incentive Compensation would have been lower had the achievement of applicable financial performance goals been calculated based on restated financial results with respect to the Subject Financials, the Company may, if it determines it appropriate in its sole discretion, recover the portion of the paid or settled Incentive Compensation in excess of the payment or settlement that would have been made based on restated financial results. The Company will not seek to recover Incentive Compensation received or settled more than three (3) years after the date of the initial filing that contained the Subject Financials.
3.03 Recoupment in Event of Error . If the Executive receives any amount in excess of what the Executive should have received under the terms of this Agreement for any reason (including, without limitation, by reason of a mistake in calculations or administrative error), all as determined by the Committee, then the Company shall have the right to cancel the Incentive Compensation, require the return of Shares acquired under the Plan, recapture any gain realized upon the sale of Shares acquired under the Plan or take any other action it deems appropriate under the circumstances with respect to recouping the Incentive Compensation.


3.04      Implementation . For purposes of this Article III , the Executive expressly authorizes the Company to issue instructions, on behalf of the Executive, to the Stock Plan Administrator (and/or any other brokerage firm/third party service provider engaged by the Company to hold Shares and other amounts acquired under the Plan) to re-convey, transfer or otherwise return to the Company any Incentive Compensation subject to recoupment hereunder. Executive acknowledges and agrees that the Company's rights hereunder shall not be affected in any way by any subsequent change in the Executive’s status, including retirement or termination of employment (including due to death or Disability). The Executive expressly agrees to indemnify and hold the Company and the Employer harmless from any loss, cost, damage, or expense (including attorneys' fees) that the Company or the Employer may incur as a result of the Executive’s actions or in the Company and the Employer’s efforts to recover such previously made payments or value pursuant to Article III .
3.05      Forfeiture . To the extent any of the events set forth in this Article III occur before the Executive receives any Incentive Compensation due hereunder, any such Incentive Compensation shall be forfeited as determined by the Company in its sole discretion.
3.06    Executive Consent .  For purposes of the Company’s enforcement of this Article III , the Executive expressly and explicitly authorizes the Company to issue instructions, on the Executive’s behalf, to any brokerage firm and/or third party administrator engaged by the Company to hold any cash payments, Shares or other amounts acquired by the Executive under the Plan to re-convey, transfer or otherwise return such cash payments, Shares or other amounts to the Company.

ARTICLE IV
Tax
4.01 Tax-Related Items . Regardless of any action the Company or the Employer takes with respect to any or all income tax (including U.S. federal, state and local taxes or non-U.S. taxes), social insurance, payroll tax, payment on account or other tax-related withholding ("Tax-Related Items"), the Executive acknowledges and agrees that the ultimate liability for all Tax-Related Items legally due by the Executive is and remains the Executive's responsibility and that the Company and the Employer (i) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the Option, including the grant of the Option, the vesting of the Option, the exercise of the Option, the subsequent sale of any Shares acquired pursuant to the Option and the receipt of any dividends and (ii) do not commit to structure the terms of the grant or any aspect of the Option to reduce or eliminate the Executive's liability for Tax-Related Items.
4.02      Tax Withholding Obligations . Prior to the delivery of Shares (or cash) upon the exercise of the Option, if the Executive's country of residence (and country of employment, if different) requires withholding of Tax-Related Items, the Company shall withhold a sufficient number of whole Shares otherwise issuable upon exercise of the Option that have an aggregate Fair Market Value sufficient to pay the Tax-Related Items required to be withheld with respect to the Shares or the cash equivalent. Depending on the withholding method specified in the Plan, the Company may withhold or account for Tax-Related Items by considering applicable statutory withholding rates or other applicable withholding rates, including maximum applicable rates, in which case the Company shall make a cash payment to the Executive equal to the over-withheld amount, if applicable, as soon as administratively practicable. The cash equivalent of the Shares withheld will be used to settle the


obligation to withhold the Tax-Related Items. In the event that the withholding of Shares is prohibited under applicable Law or otherwise may trigger adverse consequences to the Company or the Employer, the Company and the Employer may withhold the Tax-Related Items required to be withheld with respect to the Shares in cash from the Executive's regular salary and/or wages or any other amounts payable to the Executive, or may require the Executive to personally make payment of the Tax-Related Items required to be withheld. In the event the withholding requirements are not satisfied through the withholding of Shares by the Company or through the withholding of cash from the Executive's regular salary and/or wages or other amounts payable to the Executive, no Shares will be issued to the Executive (or the Executive's estate) upon the exercise of the Option unless and until satisfactory arrangements (as determined by the Committee) have been made by the Executive with respect to the payment of any Tax-Related Items that the Company or the Employer determines, in its sole discretion, must be withheld or collected with respect to such Option. If the obligation for the Executive's Tax-Related Items is satisfied by withholding a number of Shares as described herein, the Executive shall be deemed to have been issued the full number of Shares issuable upon exercise, notwithstanding that a number of the Shares is held back solely for the purpose of paying the Tax-Related Items due as a result of the exercise or any other aspect of the Award.
     The Executive will pay to the Company or the Employer any amount of Tax-Related Items that the Company or the Employer may be required to withhold as a result of the Executive's participation in the Plan or the Executive's acquisition of Shares that cannot be satisfied by the means described in this Article IV . The Company may refuse to deliver any Shares due upon exercise of the Option if the Executive fails to comply with his or her obligations in connection with the Tax-Related Items as described herein. If the Executive is subject to taxation in more than one jurisdiction, the Executive acknowledges that the Company, the Employer or one or more of their respective Subsidiaries may be required to withhold or account for Tax-Related Items in more than one jurisdiction. The Executive hereby consents to any action reasonably taken by the Company and the Employer to meet his or her obligation for Tax-Related Items. By accepting this grant of Option, the Executive expressly consents to the withholding of Shares and/or withholding from the Executive's regular salary and/or wages or other amounts payable to the Executive as provided for hereunder. All other Tax-Related Items related to the Option and any Shares delivered in payment thereof are the Executive's sole responsibility.
ARTICLE V
International Arrangements
5.01 Exchange Controls . As a condition to this grant of Options, the Executive agrees to comply with any applicable foreign exchange Laws and hereby consents to any necessary, appropriate or advisable actions taken by the Company, the Employer or any of their respective Subsidiaries as may be required to comply with any applicable Laws of the Executive's country of residence (and country of employment, if different).
5.02      Foreign Asset and Account Reporting Requirements . The Executive acknowledges that there may be certain foreign asset and/or account reporting requirements, which may affect the Executive's ability to acquire or hold Shares acquired under the Plan or cash received from participating in the


Plan (including from any dividends or dividend equivalent payments) in a brokerage or bank account outside the Executive's country of residence (and country of employment, if different). The Executive may be required to report such accounts, assets or transactions to the tax or other authorities in the Executive's country of residence (and country of employment, if different). The Executive acknowledges and agrees that it is his or her personal responsibility to be compliant with such Laws.
5.03      Country Specific Addendum . Notwithstanding any provisions of this Agreement to the contrary, the Option shall be subject to any special terms and conditions for the Executive's country of residence (and country of employment, if different) set forth in the addendum to this Agreement ("Addendum"). If the Executive transfers residence and/or employment to another country reflected in an Addendum at the time of transfer, the special terms and conditions for such country will apply to the Executive to the extent the Company determines, in its sole discretion, that the application of such special terms and conditions is necessary or advisable in order to comply with local Laws or to facilitate the operation and administration of the Option and the Plan (or the Company may establish alternative terms and conditions as may be necessary or advisable to accommodate the Executive's transfer). In all circumstances, any applicable Addendum shall constitute part of this Agreement.
5.04      Controlling Language . The Executive acknowledges and agrees that it is the Executive's express intent that this Agreement, the Plan, the Unfair Competition Agreement and all other documents, notices and legal proceedings entered into, given or instituted pursuant to the Option be drawn up in English. If the Executive has received this Agreement, the Plan, the Unfair Competition Agreement or any other documents related to the Option translated into a language other than English and the meaning of any translated version is different than the English version, the English version will control.
ARTICLE VI
Miscellaneous
6.01 Restriction on Transferability . Except to the extent expressly provided in the Plan or this Agreement, the Option may not be sold, transferred, pledged, assigned, or otherwise alienated at any time other than by will or by the laws of descent and distribution. Any attempt to do so contrary to the provisions hereof shall be null and void.
6.02 Rights as Shareholder . The Executive shall not have voting or any other rights as a shareholder of the Company with respect to the Shares issuable upon exercise of the Option until the date of issuance of such Shares. Upon exercise of the Option the Executive will obtain, with respect to the Shares received in such exercise, full voting and other rights as a shareholder of the Company.
6.03 Administration . The Committee shall have the power to interpret the Plan and this Agreement and to adopt such rules for the administration, interpretation, and application of the Plan as are consistent therewith and to interpret or revoke any such rules. All actions taken and all interpretations and determinations made by the Committee shall be final and binding upon the Executive, the


Company, and all other Persons. No member of the Committee shall be personally liable for any action, determination, or interpretation made in good faith with respect to the Plan or this Agreement.
6.04 No Employment Rights . This Agreement and the Executive's participation in the Plan are not and shall not be interpreted to: (i) form an employment contract or relationship with the Company, the Employer or any of their respective Subsidiaries; (ii) confer upon the Executive any right to continue in the employ of the Company, the Employer or any of their respective Subsidiaries; or (iii) interfere with the ability of the Company, the Employer or any of their respective Subsidiaries to terminate the Executive's employment at any time.
6.05      Nature of Grant . In accepting the grant hereunder, the Executive acknowledges and agrees that: (i) the Plan is established voluntarily by the Company, it is discretionary in nature and it may be modified, amended, suspended or terminated by the Company at any time; (ii) the Executive has read the Plan and any Options granted under it shall be subject to all of the terms and conditions of the Plan, including but not limited to the power of the Committee to interpret and determine the terms and provisions of the Plan and this Agreement 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; (iii) the Option does not create any contractual or other right to receive future grants of Options, benefits in lieu of Options, or any other Plan benefits in the future; (iv) nothing contained in this Agreement is intended to create or enlarge any other contractual obligations between the Company or the Employer and the Executive; (v) any grant under the Plan, including any grant of Options, is not part of normal or expected compensation for purposes of calculating any severance, resignation, redundancy, end of service payments, bonuses, long service option, pension, or retirement benefits or similar payments; (vi) the Executive is voluntarily participating in the Plan; (vii) the future value of the Shares underlying the Option granted hereunder is unknown and cannot be predicted with certainty; and (viii) neither the Company, the Employer nor any of their respective Subsidiaries shall be liable for any change in value of the Option, the amount realized upon settlement of the Option or the amount realized upon a subsequent sale of any Shares acquired upon exercise of the Option, resulting from any fluctuation of the United States Dollar/local currency foreign exchange rate. Without limiting the generality of the foregoing, the Committee shall have the discretion to adjust the terms and conditions of any Option to correct for any windfalls or shortfalls in such Option which, in the Committee's determination, arise from factors beyond the Executive's control; provided, however, that the Committee's authority with respect to any Option to a "covered employee," as defined in Section 162(m)(3) of the Code, shall be limited to decreasing, and not increasing, such Option.
6.06 Compliance with Law . The Company shall not be required to issue or deliver any Shares pursuant to this Agreement pending compliance with all applicable Laws (including any registration requirements or tax withholding requirements) and compliance with the Laws and practices of any stock exchange or quotation system upon which the Shares are listed or quoted. If the Executive resides or is employed outside of the United States, the Executive agrees, as a condition of the grant of the Option, to repatriate all payments attributable to the Shares and/or cash acquired under the Plan (including, but not limited to, dividends and any proceeds derived from the sale of Shares acquired pursuant to the Option) if required by and in accordance with local Laws in the Executive’s country of residence (and country of employment, if different). In addition, the Executive also


agrees to take any and all actions, and consent to any and all actions taken by the Company, its Subsidiaries and the Employer, as may be required to allow the Company, its Subsidiaries and the Employer to comply with local Laws in the Executive’s country of residence (and country of employment, if different). Finally, the Executive agrees to take any and all actions as may be required to comply with the Executive’s personal legal and tax obligations under local Laws in the Executive’s country of residence (and country of employment, if different).
6.07      Amendment . This Agreement may be amended by a writing which specifically states that it is amending this Agreement executed by (i) the Company and the Executive, (ii) the Company (at the discretion of the Committee), so long as a copy of such amendment is delivered to the Executive, and provided that no such amendment having a material adverse affect on the rights of the Executive hereunder may be made without the Executive's written consent or (iii) the Company (at the discretion of the Committee) in any way it may deem necessary or advisable to carry out the purpose of the grant as a result of any change in applicable Laws or any future Laws or judicial decisions.
6.08 Notices . Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of its Corporate Secretary. Any notice to be given to the Executive shall be addressed to the Executive at the address listed in the Employer's records or to the Executive's electronic investment account held at the Stock Plan Administrator. By a notice given pursuant to this Section 6.08 , either party may designate a different address for notices. Any notice shall have been deemed given when actually delivered.
6.09 Severability . If all or any part of this Agreement or the Plan is declared by any court or governmental authority to be unlawful or invalid, such unlawfulness or invalidity shall not invalidate any portion of this Agreement or the Plan not declared to be unlawful or invalid. Any provision of this Agreement (or part of such provision) so declared to be unlawful or invalid shall, if possible, be construed in a manner which will give effect to the terms of such provision (or part of such provision) to the fullest extent possible while remaining lawful and valid.
6.10 Construction . The Option is being issued pursuant to Article 6 (Stock Option) of the Plan. The Option is subject to the terms of the Plan. The Executive acknowledges receipt of the Plan booklet which contains the entire Plan, and the Executive represents and warrants that the Executive has read the Plan. Additional copies of the Plan are available upon request during normal business hours at the principal executive offices of the Company. To the extent that any provision of this Agreement violates or is inconsistent with an express provision of the Plan, the Plan provision shall govern and any inconsistent provision in this Agreement shall be of no force or effect. The words "including," "includes," or "include" are to be read as listing non-exclusive examples of the matters referred to, whether or not words such as "without limitation" or "but not limited to" are used in each instance.
6.11 Waiver of Right to Jury Trial . EACH OF THE PARTIES KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THE OPTION, THE PLAN OR THIS AGREEMENT.


6.12 Waiver; No Third Party Beneficiaries . A waiver by the Company of a breach of any provision of this Agreement by the Executive shall not operate or be construed as a waiver of any other provision of this Agreement, or of any subsequent breach by the Executive. This Agreement shall not be construed to create any third party beneficiary rights.
6.13 Data Privacy . The Company is located at 100 Grainger Parkway, Lake Forest, Illinois 60045, United States of America, and grants Options under the Plan to employees of the Company and its Subsidiaries in its sole discretion. In conjunction with the Company's grant of the Options under the Plan and its ongoing administration of such awards, the Company is providing the following information about its data collection, processing and transfer practices. In accepting the grant of the Option, the Executive expressly and explicitly consents to the personal data activities as described herein.
i. Data Collection, Processing and Usage . The Company and the Employer will collect, process and use certain personal information about the Executive, specifically, the Executive’s name, home address, email address and telephone number, date of birth, social security or insurance number, passport number or other identification number, salary, nationality, job title, any Shares or directorships held in the Company, details of all Options or any other entitlement to Shares awarded, canceled, exercised, vested, unvested or outstanding in the Executive’s favor (“Data”), for the purpose of implementing, administering and managing the Plan. The Company's legal basis for the collection, processing and use of the Executive's Data is the Executive's consent. The Executive's Data also may be disclosed to certain securities or other regulatory authorities where the Company’s securities are listed or traded or regulatory filings are made. The Company's legal basis for such disclosure of the Executive's Data is to comply with applicable laws, rules and regulations.
ii. Stock Plan Administration Service Providers . The Company and the Employer transfer the Executive's Data to the Stock Plan Administrator based in the United States of America, which assists the Company with the implementation, administration and management of the Plan. In the future, the Company may select a different Stock Plan Administrator and share the Executive's Data with another company that serves in a similar manner. The Stock Plan Administrator will open an account for the Executive to receive and trade Shares acquired under the Plan. The Executive will be asked to agree to separate terms and data processing practices with the Stock Plan Administrator, which is a condition of the Executive's ability to participate in the Plan.
iii. International Data Transfers . The Company and the Stock Plan Administrator are based in the United States of America. The Executive should note that the Executive's country of residence may have enacted data privacy laws that are different from the United States of America. The Company's legal basis for the transfer of the Executive's Data to the United States of America is the Executive consent.
iv. Voluntariness and Consequences of Consent, Denial or Withdrawal . The Executive's participation in the Plan and the Executive's grant of consent hereunder is purely voluntary. The Executive may deny or withdraw his or her consent at any time. If the Executive does not consent, or if the Executive later withdraws his or her consent, the Executive may be unable to participate in the Plan. This would not affect the Executive's existing employment or salary; instead, the Executive merely may forfeit the opportunities associated with participation in the Plan.
v. Data Retention . The Executive understands that the Executive's Data will be held only as long as is necessary to implement, administer and manage the Executive's Option and


participation in the Plan. When the Company no longer needs the Data, the Company will remove it from its systems.
vi. Data Subject Rights . The Executive understands that the Executive may have the right under applicable law to (i) access or copy the Executive's Data that the Company possesses, (ii) rectify incorrect Data concerning the Executive, (iii) delete the Executive's Data, (iv) restrict processing of the Executive's Data, (vi) lodge complaints with the competent supervisory authorities in the Executive’s country of residence. To receive clarification regarding these rights or to exercise these rights, the Executive understands that the Executive can contact his or her local human resources representative.
6.14      Private Placement . The grant of the Option is not intended to be a public offering of securities in the Executive's country of residence (and country of employment, if different). The Company has not submitted any registration statement, prospectus or other filing with the local securities authorities (unless otherwise required under local Laws).
6.15      No Advice Regarding Grant . The Company and the Employer are not providing any tax, legal or financial advice, nor is the Company or the Employer making any recommendations regarding the Option, the Executive's participation in the Plan or the Executive's acquisition or sale of the underlying Shares. The Executive is hereby advised to consult with the Executive's own personal tax, legal and financial advisors regarding participation in the Plan before taking any action related to the Plan or the Agreement.
6.16      Securities Law Restrictions . The Executive acknowledges that, depending on the Executive's country of residence (and country of employment, if different) or where the Company Shares are listed, the Executive shall be subject to insider trading restrictions and/or market abuse Laws, which may affect the Executive's ability to acquire, sell or otherwise dispose of Shares, rights to Shares (e.g., the Option) under the Plan or rights linked to the value of Shares during such times as the Executive is considered to have "inside information" regarding the Company or its business (as defined by the local Laws in the Executive's country of residence and/or employment). Local insider trading laws and regulations may prohibit the cancellation or amendment of orders the Executive placed before the Executive possessed inside information. Furthermore, the Executive could be prohibited from (i) disclosing the inside information to any third party (other than on a "need to know" basis) and (ii) "tipping" third parties (including other employees of the Company and its Subsidiaries) or causing them otherwise to buy or sell securities. Any restrictions under these Laws are separate from and in addition to any restrictions that may be imposed under any applicable Company insider trading or other policy. The Executive solely is responsible for ensuring compliance with any applicable restrictions and should consult with his or her personal legal advisor on this matter.
6.17      Stock Ownership and Retention Guidelines . The exercise of any Options may be subject to the Company's Stock Ownership and Retention Guidelines, as in effect from time to time, in all respects.
6.18      EU Age Discrimination Rules . If the Executive is a local national of, and employed in, a country that is a member of the European Union, the grant of the Option and the terms and conditions governing the Option are intended to comply with the age discrimination provisions of the EU Equal


Treatment Framework Directive, as implemented into local law (the "Age Discrimination Rules"). To the extent that a court or tribunal of competent jurisdiction determines that any provision of this Agreement is invalid or unenforceable, in whole or in part, under the Age Discrimination Rules, the Company, in its sole discretion, shall have the power and authority to revise or strike such provision to the minimum extent necessary to make it valid and enforceable to the full extent permitted under local Laws.
6.19      Electronic Delivery . The Company may, in its sole discretion, deliver any documents related to the Option or other Awards granted to the Executive under the Plan by electronic means. The Executive hereby expressly consents to receive such documents by electronic delivery and agrees to participate in the Plan through an online or electronic system established and maintained by the Company or a third party designated by the Company.
6.20      Governing Law; Jurisdiction . This Agreement shall be exclusively governed by, and construed in accordance with, the Laws of the State of Illinois without giving effect to any choice of law or conflict of law rules or provisions (whether of the State of Illinois or of any other jurisdiction) that would cause the application of the laws of a jurisdiction other than the State of Illinois. All disputes and controversies arising between the parties are to be submitted for determination exclusively to the federal or state courts of the State of Illinois and by accepting the grant of the Option, the Executive expressly consents to the jurisdiction of such courts. Notwithstanding the foregoing, the Company may at its option seek interim and permanent injunctive relief before any competent court, tribunal or judicial forum, which in the absence of the foregoing provision, would have jurisdiction to grant the relief sought.
6.21      Entire Agreement . The Plan, this Agreement (including any applicable addendum) and the Unfair Competition Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede, in their entirety, all prior undertakings and agreements of the Company and the Executive with respect to the subject matter hereof.
[ Signature Page Follows ]
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by a duly authorized officer and the Executive acknowledges and agrees that by clicking on the box next to this Agreement in the section "Read and Acknowledge Award Documents" on the screen titled "Award Acceptance," the Executive expressly agrees to be bound by the terms and conditions of the Options, including Executive's electronic signature constituting the sole and exclusive means of executing this Agreement.


 
W.W. GRAINGER, INC.
 
 
 
By:
 
Name: DG Macpherson
 
Title: Chairman & Chief Executive Officer
 
 
 
By:
 
Executive signature
 
 
 
Date: April 1, 2019

W.W. GRAINGER, INC.
2015 Incentive Plan
Addendum to Stock Option Agreement

In addition to the terms of the W.W. Grainger, Inc. 2015 Incentive Plan (as may be amended from time to time, the "Plan") and the Stock Option Agreement (the "Agreement"), the Option is subject to the following additional terms and conditions as set forth in this addendum (this "Addendum") to the extent the Executive resides or is employed in one of the countries addressed herein. All capitalized terms contained in this Addendum shall have the same meaning as set forth in the Plan and the Agreement unless otherwise defined. If the Executive transfers residence or employment to a country identified in this Addendum, the additional terms and conditions for such country as reflected in this Addendum will apply to the Executive to the extent the Company determines, in its sole discretion, that the application of such terms and conditions is necessary or advisable in order to comply with local laws, rules and regulations, or to facilitate the operation and administration of the Option and the Plan (or the Company may establish alternative terms and conditions as may be necessary or advisable to accommodate the Executive’s transfer).

European Union ("EU") / European Economic Area ("EEA")
The following provision replaces Section 6.13 to the extent the Executive is employed in the EU or EEA:
6.13      Data Privacy . The Company is located at 100 Grainger Parkway, Lake Forest, Illinois 60045, United States of America, and grants Options under the Plan to employees of the Company and its Subsidiaries in its sole discretion. In conjunction with the Company's grant of the Options under the Plan and its ongoing administration of such awards, the Company is providing the following information about its data collection, processing and transfer practices, which the Executive should carefully review.
i.      Data Collection, Processing and Usage . The Company and the Employer will collect, process and use certain personal information about the Executive, specifically, the Executive’s name, home address, email address and telephone number, date of birth, social security or insurance number, passport number or other identification number, salary, nationality, job title, any Shares or directorships held in the Company, details of all Options or any other entitlement to Shares awarded, canceled, exercised, vested, unvested or outstanding in the Executive’s favor (“Data”), for the purpose of implementing, administering and managing the Plan. The Company collects, process


and uses the Executive's Data pursuant to the Company's legitimate interest of administering the Executive's Options and generally managing the Plan, and to satisfy its contractual obligations under the Agreement. The Executive's Data also may be disclosed to certain securities or other regulatory authorities where the Company’s securities are listed or traded or regulatory filings are made. The Company's legal basis for such disclosure of the Executive's Data is to comply with applicable laws, rules and regulations.
ii.      Stock Plan Administration Service Providers . The Company and the Employer transfer the Executive's Data to the Stock Plan Administrator based in the United States of America, which assists the Company with the implementation, administration and management of the Plan. In the future, the Company may select a different Stock Plan Administrator and share the Executive's Data with another company that serves in a similar manner. The Stock Plan Administrator will open an account for the Executive to receive and trade Shares acquired under the Plan. The Executive will be asked to agree to separate terms and data processing practices with the Stock Plan Administrator, which is a condition of the Executive's ability to participate in the Plan.
iii.      International Data Transfers . The Company and the Stock Plan Administrator are based in the United States of America. The Executive should note that the Executive's country of residence may have enacted data privacy laws that are different from the United States of America. The Company's legal basis for the transfer of the Executive's Data to the United States of America is to satisfy its contractual obligations under this Agreement.
iv.      Data Retention . The Executive understands that the Executive's Data will be held only as long as is necessary to implement, administer and manage the Executive's Option and participation in the Plan. When the Company no longer needs the Data, the Company will remove it from its systems. If the Company retains the Executive's Data longer, it would be to satisfy the Company's legal or regulatory obligations and the Company's legal basis would be for compliance with applicable laws, rules and regulations.
v.      Data Subject Rights . The Executive understands that the Executive may have the right under applicable law to (i) access or copy the Executive's Data that the Company possesses, (ii) rectify incorrect Data concerning the Executive, (iii) delete the Executive's Data, (iv) restrict processing of the Executive's Data, (vi) lodge complaints with the competent supervisory authorities in the Executive’s country of residence. To receive clarification regarding these rights or to exercise these rights, the Executive understands that the Executive can contact his or her local human resources representative.
Belgium
Name: ________________________ Number of Shares: _____________________
Grant Date: ____________________ Option Price: _______________________
Acceptance of Option


In order for the Option to be subject to taxation at the time of grant, the Executive must affirmatively accept the Option in writing within 60 days of the Grant Date specified above by signing below and returning this original executed Addendum to:
Attn: Treasury Department
100 Grainger Parkway, Lake Forest, IL 60045, USA
patrick.axley@grainger.com
The Executive hereby accepts the Option granted by the Company on the Grant Date. The Executive acknowledges that the Executive has been advised to discuss the acceptance of the Option and the applicable tax treatment with a financial and/or tax advisor, and that the Executive’s decision to accept the Option is made in full knowledge.
Executive Signature:          _______________________________
Executive Printed Name:          _______________________________
Date of Acceptance:          _______________________________
If the Executive fails to affirmatively accept the Option in writing within 60 days of the Grant Date, the Option will not be subject to taxation at the time of grant but instead will be subject to taxation on the date the Executive exercises the Option (or such other treatment as may apply under Belgian tax law at the time of exercise).
Undertaking for Qualifying Option
If the Executive is accepting the Option in writing within 60 days of the Grant Date and wishes to have the Option subject to a lower valuation for Belgium tax purposes pursuant to article 43, §6 of the Belgian law of 26 March 1999, the Executive may agree and undertake to (a) not exercise the Option before December 31 of the third (3 rd ) calendar year following the calendar year in which the Grant Date falls, and (b) not transfer the Option under any circumstances (except upon rights the Executive’s heir might have in the Option upon the Executive’s death). If the Executive wishes to make this undertaking, the Executive must sign below and return this executed Addendum to the address listed above.
Executive Signature:          _______________________________
Executive Printed Name:          _______________________________
Payment of Exercise Price Limited to Cash Payment
Notwithstanding anything to the contrary in the Agreement or the Plan, the Executive shall be permitted to pay the Option Price only by means of a cash payment.



Foreign Asset Reporting Information
The Executive is required to report any security or bank account (including a brokerage account) opened and maintained outside Belgium on the Executive’s annual tax return. In a separate report, the Executive is required to provide the National Bank of Belgium with the account details of any such foreign accounts (including the account number, bank name and country in which any such account was opened). This report, as well as additional information on how to complete it, can be found on the website of the National Bank of Belgium, www.nbb.be, under the Kredietcentrales / Centrales des crédits caption.
Canada
Accelerated Vesting upon Retirement
Notwithstanding anything in the Agreement or the Plan to the contrary, if the Executive’s employment or service is terminated by reason of retirement, the Option immediately shall fully vest, become exercisable and will expire on the earlier of (i) six (6) years from the Termination Date or (ii) the original expiration date of the Option. For purposes of the foregoing, "retirement" shall have the definition prescribed by local Laws.
No Exercise Using Previously Owned Shares
Notwithstanding any provision in the Agreement or the Plan to the contrary, the Executive may not pay the Option Price by tendering Shares already owned by the Executive.
Securities Law Information
The Executive is permitted to sell Shares acquired through the Plan through the designated broker appointed under the Plan, if any, provided that the resale of such Shares takes place outside of Canada through the facilities of a stock exchange on which the Shares are listed (i.e., the New York Stock Exchange).
Foreign Asset Reporting Information
Any foreign property (including Shares and Options acquired under the Plan) must be reported to the Canada Revenue Agency on form T1135 (Foreign Income Verification Statement) if the total cost of your foreign property exceeds C$100,000 at any time in the year. The Options must be reported - generally at a nil cost - if the C$100,000 cost threshold is exceeded because of other foreign property held.  If Shares are acquired, their cost generally is the adjusted cost base ("ACB") of the Shares. The ACB would normally equal the fair market value of the Shares at time of exercise, but if the Executive owns other Shares, this ACB may have to be averaged with the ACB of the other Shares. The form must be filed by April 30 of the following year. The Executive should consult with his or her personal tax advisor to determine the Executive’s reporting requirements.
The following provisions will apply if the Executive is a resident of Quebec :
Data Privacy Notice and Consent
This provision supplements Section 6.13 of the Agreement:
The Executive hereby authorizes the Company, its Subsidiaries and the Employer to discuss with and obtain all relevant information pertaining to the Executive from all personnel involved in the administration and operation of the Plan.  The Executive further authorizes the Company, its Subsidiaries and the Employer to


disclose and discuss the Executive's participation in the Plan with their advisors.  The Executive further authorizes the Company, its Subsidiaries and the Employer to record any information pertaining to the Executive’s participation in the Plan and to keep such information in his or her employee file.
Use of English Language
If the Executive is a resident of Quebec, by accepting the Option, the Executive acknowledges and agrees that it is the Executive’s wish that the Agreement, this Addendum, the Plan, as well as all other documents, notices and legal proceedings entered into, given or instituted pursuant to the Option, either directly or indirectly, be drawn up in English.
Utilisation de l’anglais
Si l’exécutif est un résident du Québec, en acceptant le Option, l l’exécutif reconnaît et accepte que ce est le souhait du l’exécutif que l’Accord , le présent Addenda, ainsi que tous autres documents, avis et procédures judiciaires, exécutés, donnés ou intentés en vertu de le Option, liés directement ou indirectement, soient rédigés en anglais.

Mexico
Accelerated Vesting upon Retirement
Notwithstanding anything in the Agreement or the Plan to the contrary, if the Executive’s employment or service is terminated by reason of retirement, the Option immediately shall fully vest, become exercisable and will expire on the earlier of (i) six (6) years from the Termination Date or (ii) the original expiration date of the Option. For purposes of the foregoing, "retirement" shall have the definition prescribed by local Laws.
Commercial Relationship
The Executive expressly recognizes that participation in the Plan and the Company’s grant of the Option does not constitute an employment relationship between the Executive and the Company. The Executive has been granted the Option as a consequence of the commercial relationship between the Company and the Employer, and the Employer is the Executive’s sole employer. Based on the foregoing, (a) the Executive expressly recognizes that the Plan and the benefits derived from participation in the Plan do not establish any rights between the Executive and the Company or the Employer, (b) the Plan and the benefits derived from participation in the Plan are not part of the employment conditions and/or benefits provided by the Company or the Employer, and (c) any modifications or amendments to the Plan by the Company, or a termination of the Plan by the Company, shall not constitute a change or impairment of the terms and conditions of the Executive’s employment with the Employer.
Extraordinary Item of Compensation
The Executive expressly acknowledges and agrees that participation in the Plan is a result of the discretionary and unilateral decision of the Company, as well as the Executive’s free and voluntary decision to participate in the Plan in accord with the terms and conditions of the Plan, the Agreement, the Unfair Competition Agreement and this Addendum. As such, the Executive acknowledges and agrees that the Company may, in its sole discretion, amend and/or discontinue the Executive’s participation in the Plan at any time and without any liability. The value of the Option is an extraordinary item of compensation outside the scope of the employment contract, if any. The Option is not a part of the Executive’s regular or expected compensation for purposes of calculating any severance, resignation, redundancy, end of service payments, bonuses, long-


service awards, pension or retirement benefits, or any similar payments, which are the exclusive obligations of the Employer.

Netherlands
Waiver of Termination Rights
The Executive waives any and all rights to compensation or damages as a result of any termination of employment for any reason whatsoever, insofar as those rights result or may result from (a) the loss or diminution in value of such rights or entitlements under the Plan or (b) the Executive ceasing to have rights under, or ceasing to be entitled to any Awards under the Plan as a result of such termination.
Dutch Subsidiary Director Notice
The Executive acknowledges and agree that the Option granted to the Executive in connection with the Executive’s participation in the Plan are not granted as consideration for, or otherwise in connection with the service the Executive may provide as a director ("statutair bestuurder") of a Subsidiary established under the laws of Netherlands or operating within the Netherlands.

Portugal
Termination of Service
The following provision shall supplement Section 2.02 of the Agreement:
In case of termination of service of the Executive triggering the payment of severance costs under applicable law, the Option shall not be taken into account in the calculation of such severance costs, to the extent permitted by applicable law.
Use of English Language
The Executive hereby expressly declares that the Executive has full knowledge of the English language and has read, understood and fully accepted and agreed with the terms and conditions established in the Plan, the Agreement, the Unfair Competition Agreement and this Addendum.
Uso da Língua Inglesa
Por meio do presente, o Executivo declara que Executivo possui pleno conhecimento da língua inglesa e que leu, compreendeu, e livremente aceita e concorda com os termos e condiçoes estabelecidas no Plano, o Acordo, o Acordo de Concorrência Desleal e este Adendo.

United Kingdom
Income Tax and Social Insurance Contribution Withholding
The following provision shall replace Article IV of the Agreement:


Without limitation to Article IV of the Agreement, the Executive agrees that the Executive is liable for all Tax-Related Items and hereby covenants to pay all such Tax-Related Items as and when requested by the Company or the Employer or by Her Majesty’s Revenue and Customs ("HMRC") (or any other tax authority or any other relevant authority). The Executive also agrees to indemnify and hold harmless the Company and the Employer against any taxes that they are required to pay or withhold or have paid or will pay to HMRC (or any other tax authority or any other relevant authority) on the Executive’s behalf.
Exclusion of Claim
The Executive acknowledges and agrees that the Executive will have no entitlement to compensation or damages, insofar as such entitlement arises or may arise from the Executive’s ceasing to have rights under or to be entitled to exercise the Option as a result of such termination (whether the termination is in breach of contract or otherwise), or from the loss or diminution in value of the Option. Upon the grant of the Option, the Executive shall be deemed to have irrevocably waived any such entitlement.

United States
Accelerated Vesting upon Retirement
Notwithstanding anything in the Agreement or the Plan to the contrary, if the Executive’s employment or service is terminated prior to the Option Vesting Date due to the Executive’s retirement, the Option immediately shall fully vest, become exercisable and will expire on the earlier of (i) six (6) years from the Termination Date or (ii) the original expiration date of the Option. For purposes of the foregoing, "retirement" shall mean the Executive’s termination of service with (i) 25 years of service, (ii) 20 years of service and attainment of age 55, or (iii) attainment of age 60.







Exhibit 10.2

W.W. GRAINGER, INC.
2015 Incentive Plan
Restricted Stock Unit Agreement
This Restricted Stock Unit Agreement (this "Agreement"), dated as of April 2, 2018 (the "Grant Date"), is entered into between W.W. Grainger, Inc., an Illinois corporation (the "Company"), and you as the executive (the "Executive"), who is employed by the Company or a Subsidiary of the Company (the "Employer").
In consideration of the Executive's agreement to enter into an Unfair Competition Agreement with the Company concurrently with this Agreement on the Grant Date (the "Unfair Competition Agreement"), the Company desires to grant the Executive an award of restricted stock units (the "RSUs"), providing for the issuance of shares of the Company's common stock ("Shares") pursuant to the W.W. Grainger, Inc. 2015 Incentive Plan (as may be amended from time to time, the "Plan") and the Executive agrees to enter into the Unfair Competition Agreement and accept such RSUs on the terms and conditions set forth in this Agreement, the Plan and the Unfair Competition Agreement.
Capitalized terms used but not defined in this Agreement have the meanings specified in the Plan.
In consideration of the mutual provisions set forth in this Agreement and in the Unfair Competition Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
Grants
1.01 Grant . 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) and effective on the Grant Date, the Company hereby grants to the Executive the number of RSUs as specified in the April 1, 2019 award grant notice posted to the Executive's electronic investment account maintained with Morgan Stanley Smith Barney, the brokerage firm/third party service provider engaged by the Company in connection with the administration of the Plan (the "Stock Plan Administrator"). Each RSU represents a contractual right to receive one (1) Share upon the satisfaction of the terms and conditions of this Agreement.
ARTICLE II
Provisions Relating to RSUs
2.01 Vesting of RSUs . If the Executive remains continuously employed by the Employer (or any other Subsidiary or Affiliate) until the vesting date(s) specified in the grant notice ("RSU Vesting Date"), the RSUs shall become vested on such date and the Executive shall be entitled to receive the underlying Shares as provided herein. The RSUs shall not vest before the RSU Vesting Date unless otherwise provided or permitted by the Plan or this Agreement, and any RSUs that do not vest shall be forfeited in full and the Executive shall have no further rights with respect to such RSUs. Each RSU that becomes vested as provided herein shall be settled in accordance with Section 2.04 .
2.02      Effect of Termination of Employment . Except as otherwise stated in the Plan, if the Executive's employment or service is terminated prior to the RSU Vesting Date for any reason whatsoever other than the Executive's death or Disability (defined below), the Executive shall cease vesting in the RSUs as of the




Executive's Termination Date (defined below) and the RSUs shall be forfeited in their entirety. If the Executive is a resident of, or employed in, the United States, "Termination Date" shall mean the effective date of termination of the Executive's employment. If the Executive is a resident of, or employed outside of, the United States, "Termination Date" shall mean the earliest of (i) the date on which notice of termination is provided to the Executive, (ii) the last day of the Executive's active service with the Employer or (iii) the last day on which the Executive is an employee of the Employer, as determined in each case without including any required advanced notice period and irrespective of the status of the termination under local labor or employment laws.
2.03 Effect of Death or Disability of the Executive . If the Executive's employment or service is terminated prior to the RSU Vesting Date due to the Executive's death or Disability, the RSUs immediately shall fully vest. For purposes of this Agreement, "Disability" shall have the same meaning as defined in the Plan, subject to modification as may be required to conform to the laws, rules and regulations (“Laws”) of the Executive's country of residence (and country of employment, if different). For the sake of clarity, the date of the Executive’s death or Disability shall be a RSU Vesting Date. The RSUs that becomes vested as provided herein shall be settled in accordance with Section 2.04 .
2.04 Settlement . Upon the RSU Vesting Date, the Company shall, as soon as practicable (but in no event later than 60 days following the applicable RSU Vesting Date), settle the RSUs by registering Shares in the Executive's name and delivering such Shares to the Executive's electronic stock plan account maintained by the Stock Plan Administrator. At the discretion of the Committee, and subject to such policies and procedures as it may adopt from time to time, the Executive's RSUs may be settled in the form of: (i) cash, to the extent settlement in Shares (a) is prohibited under applicable Laws, (b) would require the Executive, the Company or the Employer to obtain the approval of any governmental and/or regulatory body in the Executive's country of residence (and country of employment, if different), or (c) is administratively burdensome or (ii) Shares, but the Company may require the Executive to immediately sell such Shares if necessary to comply with applicable Laws (in which case, the Executive hereby expressly authorizes the Company to issue sales instructions in relation to such Shares on the Executive's behalf).
2.05 Dividend Equivalents . Prior to the RSU Vesting Date, the Executive shall be entitled to receive cash dividend payments equal to any cash dividends and other distributions paid with respect to a number of Shares underlying the RSUs held by the Executive. If the Company declares any dividends payable in Shares (rather than in cash), the Executive shall be entitled to additional RSUs equal to the Fair Market Value of such Share dividends; provided, such additional RSUs shall be subject to the same vesting, forfeiture and transferability requirements and restrictions that apply to the original RSUs with respect to which they relate.
ARTICLE III
Recoupment
3.01      Recoupment in Event of Misconduct . If the Company determines that the Executive has committed or engaged in misconduct against the Company or has engaged in any criminal conduct, including embezzlement, fraud or theft, that involves or is related to the Company, or any other conduct that violates Company policy, causes or is discovered to have caused, any loss, damage, injury or other endangerment to the Company's property or reputation, and such Executive has received or is entitled to receive performance stock units, performance restricted stock units, stock options, restricted stock units or cash incentive compensation (collectively, "Incentive Compensation"), then the Company shall have the right to cancel the Incentive Compensation, require the return of Shares acquired under the Plan, recapture any gain realized upon the sale of Shares acquired under the Plan or take any other action it deems appropriate under the circumstances with respect to recouping the Incentive Compensation. The Company shall have sole discretion in determining whether the Executive's conduct was in compliance with applicable 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. If the Executive engages in misconduct or is believed to have engaged in misconduct, including but not limited to any violation of any of Executive's obligations under the Unfair Competition Agreement, the Company shall be entitled to take the actions outlined above for recouping the Incentive Compensation, as the Company deems appropriate under the circumstances.
3.02      Recoupment in Event of Materially Inaccurate Financial Results . If the Company has publicly filed materially inaccurate financial results (the "Subject Financials"), whether or not they result in a restatement, the Company has the discretion to recover any Incentive Compensation that was paid or settled to the Executive during the period covered by the Subject Financials as set forth herein. If the payment or settlement of Incentive Compensation would have been lower had the achievement of applicable financial performance goals been calculated based on restated financial results with respect to the Subject Financials, the Company may, if it determines it appropriate in its sole discretion, recover the portion of the paid or settled Incentive Compensation in excess of the payment or settlement that would have been made based on restated financial results. The Company will not seek to recover Incentive Compensation received or settled more than three (3) years after the date of the initial filing that contained the Subject Financials.
3.03      Recoupment in Event of Error . If the Executive receives any amount in excess of what the Executive should have received under the terms of this Agreement for any reason (including, without limitation, by reason of a mistake in calculations or administrative error), all as determined by the Committee, then the Company shall have the right to cancel the Incentive Compensation, require the return of Shares acquired under the Plan, recapture any gain realized upon the sale of Shares acquired under the Plan or take any other action it deems appropriate under the circumstances with respect to recouping the Incentive Compensation.
3.04      Implementation . For purposes of this Article III , the Executive expressly authorizes the Company to issue instructions, on behalf of the Executive, to the Stock Plan Administrator (and/or any other brokerage firm/third party service provider engaged by the Company to hold Shares and other amounts acquired under the Plan) to re-convey, transfer or otherwise return to the Company any Incentive Compensation subject to recoupment hereunder. Executive acknowledges and agrees that the Company's rights hereunder shall not be affected in any way by any subsequent change in the Executive’s status, including retirement or termination of employment (including due to death or Disability). The Executive expressly agrees to indemnify and hold the Company and the Employer harmless from any loss, cost, damage, or expense (including attorneys' fees) that the Company or the Employer may incur as a result of the Executive’s actions or in the Company and the Employer’s efforts to recover such previously made payments or value pursuant to Article III .
3.05      Forfeiture . To the extent any of the events set forth in this Article III occur before the Executive receives any Incentive Compensation due hereunder, any such Incentive Compensation shall be forfeited as determined by the Company in its sole discretion.
3.06      Executive Consent .  For purposes of the Company’s enforcement of this Article III , the Executive expressly and explicitly authorizes the Company to issue instructions, on the Executive’s behalf, to any brokerage firm and/or third party administrator engaged by the Company to hold any cash payments, Shares or other amounts acquired by the Executive under the Plan to re-convey, transfer or otherwise return such cash payments, Shares or other amounts to the Company.

ARTICLE IV
Tax




4.01 Tax-Related Items . Regardless of any action the Company or the Employer takes with respect to any or all income tax (including U.S. federal, state and local taxes or non-U.S. taxes), social insurance, payroll tax, payment on account or other tax-related withholding ("Tax-Related Items"), the Executive acknowledges and agrees that the ultimate liability for all Tax-Related Items legally due by the Executive is and remains the Executive's responsibility and that the Company and the Employer (i) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the RSUs, including the grant of the RSUs, the vesting of the RSUs, the subsequent sale of any Shares acquired pursuant to the RSUs and the receipt of any dividends or dividend equivalents and (ii) do not commit to structure the terms of the grant or any aspect of the RSUs to reduce or eliminate the Executive's liability for Tax-Related Items.
4.02      Tax Withholding Obligations . Prior to the delivery of Shares (or cash) upon the vesting of the RSUs, if the Executive's country of residence (and country of employment, if different) requires withholding of Tax-Related Items, the Company shall withhold a sufficient number of whole Shares otherwise issuable upon the vesting of the RSUs that have an aggregate Fair Market Value sufficient to pay the Tax-Related Items required to be withheld with respect to the Shares or the cash equivalent. Depending on the withholding method specified in the Plan, the Company may withhold or account for Tax-Related Items by considering applicable statutory withholding rates or other applicable withholding rates, including maximum applicable rates, in which case the Company shall make a cash payment to the Executive equal to the over-withheld amount, if applicable, as soon as administratively practicable. The cash equivalent of the Shares withheld will be used to settle the obligation to withhold the Tax-Related Items. In the event that the withholding of Shares is prohibited under applicable Law or otherwise may trigger adverse consequences to the Company or the Employer, the Company and the Employer may withhold the Tax-Related Items required to be withheld with respect to the Shares in cash from the Executive's regular salary and/or wages or any other amounts payable to the Executive, or may require the Executive to personally make payment of the Tax-Related Items required to be withheld. In the event the withholding requirements are not satisfied through the withholding of Shares by the Company or through the withholding of cash from the Executive's regular salary and/or wages or other amounts payable to the Executive, no Shares will be issued to the Executive (or the Executive's estate) upon vesting of the RSUs unless and until satisfactory arrangements (as determined by the Committee) have been made by the Executive with respect to the payment of any Tax-Related Items that the Company or the Employer determines, in its sole discretion, must be withheld or collected with respect to such RSUs. If the obligation for the Executive's Tax-Related Items is satisfied by withholding a number of Shares as described herein, the Executive shall be deemed to have been issued the full number of Shares issuable upon vesting, notwithstanding that a number of the Shares is held back solely for the purpose of paying the Tax-Related Items due as a result of the vesting or any other aspect of the RSU.
     The Executive will pay to the Company or the Employer any amount of Tax-Related Items that the Company or the Employer may be required to withhold as a result of the Executive's participation in the Plan or the Executive's acquisition of Shares that cannot be satisfied by the means described in this Article IV . The Company may refuse to deliver any Shares due upon vesting of the RSUs if the Executive fails to comply with his or her obligations in connection with the Tax-Related Items as described herein. If the Executive is subject to taxation in more than one jurisdiction, the Executive acknowledges that the Company, the Employer or one or more of their respective Subsidiaries may be required to withhold or account for Tax-Related Items in more than one jurisdiction. The Executive hereby consents to any action reasonably taken by the Company and the Employer to meet his or her obligation for Tax-Related Items. By accepting this grant of RSUs, the Executive expressly consents to the withholding of Shares and/or withholding from the Executive's regular salary and/or wages or other amounts payable to the Executive as provided for hereunder. All other Tax-Related Items related to the RSUs and any Shares delivered in payment thereof are the Executive's sole responsibility.




ARTICLE V
International Arrangements
5.01 Exchange Controls . As a condition to this RSU award, the Executive agrees to comply with any applicable foreign exchange Laws and hereby consents to any necessary, appropriate or advisable actions taken by the Company, the Employer or any of their respective Subsidiaries as may be required to comply with any applicable Laws of the Executive's country of residence (and country of employment, if different).
5.02      Foreign Asset and Account Reporting Requirements . The Executive acknowledges that there may be certain foreign asset and/or account reporting requirements, which may affect the Executive's ability to acquire or hold Shares acquired under the Plan or cash received from participating in the Plan (including from any dividends or dividend equivalent payments) in a brokerage or bank account outside the Executive's country of residence (and country of employment, if different). The Executive may be required to report such accounts, assets or transactions to the tax or other authorities in the Executive's country of residence (and country of employment, if different). The Executive acknowledges and agrees that it is his or her personal responsibility to be compliant with such Laws.
5.03      Country Specific Addendum . Notwithstanding any provisions of this Agreement to the contrary, the RSUs shall be subject to any special terms and conditions for the Executive's country of residence (and country of employment, if different) set forth in the addendum to this Agreement ("Addendum"). If the Executive transfers residence and/or employment to another country reflected in an Addendum at the time of transfer, the special terms and conditions for such country will apply to the Executive to the extent the Company determines, in its sole discretion, that the application of such special terms and conditions is necessary or advisable in order to comply with local Laws or to facilitate the operation and administration of the RSUs and the Plan (or the Company may establish alternative terms and conditions as may be necessary or advisable to accommodate the Executive's transfer). In all circumstances, any applicable Addendum shall constitute part of this Agreement.
5.04      Controlling Language . The Executive acknowledges and agrees that it is the Executive's express intent that this Agreement, the Plan, the Unfair Competition Agreement and all other documents, notices and legal proceedings entered into, given or instituted pursuant to the RSUs be drawn up in English. If the Executive has received this Agreement, the Plan, the Unfair Competition Agreement or any other documents related to the RSUs translated into a language other than English and the meaning of any translated version is different than the English version, the English version will control.
ARTICLE VI
Miscellaneous
6.01 Restriction on Transferability . Except to the extent expressly provided in the Plan or this Agreement, the RSUs may not be sold, transferred, pledged, assigned, or otherwise alienated at any time other than by will or by the laws of descent and distribution. Any attempt to do so contrary to the provisions hereof shall be null and void.
6.02 Rights as Shareholder . The Executive shall not have voting or any other rights as a shareholder of the Company with respect to the Shares issuable upon the vesting of RSUs until the date of issuance of such Shares. Upon settlement of the RSUs, the Executive will obtain, with respect to the Shares received in such settlement, full voting and other rights as a shareholder of the Company.
6.03 Administration . The Committee shall have the power to interpret the Plan and this Agreement and to adopt such rules for the administration, interpretation, and application of the Plan as are consistent therewith




and to interpret or revoke any such rules. All actions taken and all interpretations and determinations made by the Committee shall be final and binding upon the Executive, the Company, and all other Persons. No member of the Committee shall be personally liable for any action, determination, or interpretation made in good faith with respect to the Plan or this Agreement.
6.04 No Employment Rights . This Agreement and the Executive's participation in the Plan are not and shall not be interpreted to: (i) form an employment contract or relationship with the Company, the Employer or any of their respective Subsidiaries; (ii) confer upon the Executive any right to continue in the employ of the Company, the Employer or any of their respective Subsidiaries; or (iii) interfere with the ability of the Company, the Employer or any of their respective Subsidiaries to terminate the Executive's employment at any time.
6.05      Nature of Grant . In accepting the grant hereunder, the Executive acknowledges and agrees that: (i) the Plan is established voluntarily by the Company, it is discretionary in nature and it may be modified, amended, suspended or terminated by the Company at any time; (ii) the Executive has read the Plan and any RSUs granted under it shall be subject to all of the terms and conditions of the Plan, including but not limited to the power of the Committee to interpret and determine the terms and provisions of the Plan and this Agreement 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; (iii) the RSU does not create any contractual or other right to receive future grants of RSUs, benefits in lieu of RSUs, or any other Plan benefits in the future; (iv) nothing contained in this Agreement is intended to create or enlarge any other contractual obligations between the Company or the Employer and the Executive; (v) any grant under the Plan, including any grant of RSUs, is not part of normal or expected compensation for purposes of calculating any severance, resignation, redundancy, end of service payments, bonuses, long service option, pension, or retirement benefits or similar payments; (vi) the Executive is voluntarily participating in the Plan; (vii) the future value of the Shares underlying the RSUs granted hereunder is unknown and cannot be predicted with certainty; and (viii) neither the Company, the Employer nor any of their respective Subsidiaries shall be liable for any change in value of the RSUs, the amount realized upon settlement of the RSUs or the amount realized upon a subsequent sale of any Shares acquired upon settlement of the RSUs, resulting from any fluctuation of the United States Dollar/local currency foreign exchange rate. Without limiting the generality of the foregoing, the Committee shall have the discretion to adjust the terms and conditions of any award of RSUs to correct for any windfalls or shortfalls in such RSUs which, in the Committee's determination, arise from factors beyond the Executive's 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 RSU.
6.06 Compliance with Law . The Company shall not be required to issue or deliver any Shares pursuant to this Agreement pending compliance with all applicable Laws (including any registration requirements or tax withholding requirements) and compliance with the Laws and practices of any stock exchange or quotation system upon which the Shares are listed or quoted. If the Executive resides or is employed outside of the United States, the Executive agrees, as a condition of the grant of the RSUs, to repatriate all payments attributable to the Shares and/or cash acquired under the Plan (including, but not limited to, dividends and any proceeds derived from the sale of Shares acquired pursuant to the RSUs) if required by and in accordance with local Laws in the Executive’s country of residence (and country of employment, if different). In addition, the Executive also agrees to take any and all actions, and consent to any and all actions taken by the Company, its Subsidiaries and the Employer, as may be required to allow the Company, its Subsidiaries and the Employer to comply with local Laws in the Executive’s country of residence (and country of employment, if different). Finally, the Executive agrees to take any and all actions as may be required to comply with the Executive’s




personal legal and tax obligations under local Laws in the Executive’s country of residence (and country of employment, if different).
6.07 Amendment . This Agreement may be amended by a writing which specifically states that it is amending this Agreement executed by (i) the Company and the Executive, (ii) the Company (at the discretion of the Committee), so long as a copy of such amendment is delivered to the Executive, and provided that no such amendment having a material adverse affect on the rights of the Executive hereunder may be made without the Executive's written consent or (iii) the Company (at the discretion of the Committee) in any way it may deem necessary or advisable to carry out the purpose of the grant as a result of any change in applicable Laws or any future Laws or judicial decisions.
6.08 Notices . Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of its Corporate Secretary. Any notice to be given to the Executive shall be addressed to the Executive at the address listed in the Employer's records or to the Executive's electronic investment account held at the Stock Plan Administrator. By a notice given pursuant to this Section 6.08 , either party may designate a different address for notices. Any notice shall have been deemed given when actually delivered.
6.09 Severability . If all or any part of this Agreement or the Plan is declared by any court or governmental authority to be unlawful or invalid, such unlawfulness or invalidity shall not invalidate any portion of this Agreement or the Plan not declared to be unlawful or invalid. Any provision of this Agreement (or part of such provision) so declared to be unlawful or invalid shall, if possible, be construed in a manner which will give effect to the terms of such provision (or part of such provision) to the fullest extent possible while remaining lawful and valid.
6.10 Construction . The RSUs are being issued pursuant to Article 8 (Restricted Stock and Restricted Stock Units) of the Plan. The RSUs are subject to the terms of the Plan. The Executive acknowledges receipt of the Plan booklet which contains the entire Plan, and the Executive represents and warrants that the Executive has read the Plan. Additional copies of the Plan are available upon request during normal business hours at the principal executive offices of the Company. To the extent that any provision of this Agreement violates or is inconsistent with an express provision of the Plan, the Plan provision shall govern and any inconsistent provision in this Agreement shall be of no force or effect. The words "including," "includes," or "include" are to be read as listing non-exclusive examples of the matters referred to, whether or not words such as "without limitation" or "but not limited to" are used in each instance.
6.11 Waiver of Right to Jury Trial . EACH OF THE PARTIES KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THE RSUS, THE PLAN OR THIS AGREEMENT.
6.12 Waiver; No Third Party Beneficiaries . A waiver by the Company of a breach of any provision of this Agreement by the Executive shall not operate or be construed as a waiver of any other provision of this Agreement, or of any subsequent breach by the Executive. This Agreement shall not be construed to create any third party beneficiary rights.
6.13 Data Privacy . The Company is located at 100 Grainger Parkway, Lake Forest, Illinois 60045, United States of America, and grants RSUs under the Plan to employees of the Company and its Subsidiaries in its sole discretion. In conjunction with the Company's grant of the RSUs under the Plan and its ongoing administration of such awards, the Company is providing the following information about its data collection,




processing and transfer practices. In accepting the grant of the RSU, the Executive expressly and explicitly consents to the personal data activities as described herein.
i. Data Collection, Processing and Usage . The Company and the Employer will collect, process and use certain personal information about the Executive, specifically, the Executive’s name, home address, email address and telephone number, date of birth, social security or insurance number, passport number or other identification number, salary, nationality, job title, any Shares or directorships held in the Company, details of all RSUs or any other entitlement to Shares awarded, canceled, exercised, vested, unvested or outstanding in the Executive’s favor (“Data”), for the purpose of implementing, administering and managing the Plan. The Company's legal basis for the collection, processing and use of the Executive's Data is the Executive's consent. The Executive's Data also may be disclosed to certain securities or other regulatory authorities where the Company’s securities are listed or traded or regulatory filings are made. The Company's legal basis for such disclosure of the Executive's Data is to comply with applicable laws, rules and regulations.
ii. Stock Plan Administration Service Providers . The Company and the Employer transfer the Executive's Data to the Stock Plan Administrator based in the United States of America, which assists the Company with the implementation, administration and management of the Plan. In the future, the Company may select a different Stock Plan Administrator and share the Executive's Data with another company that serves in a similar manner. The Stock Plan Administrator will open an account for the Executive to receive and trade Shares acquired under the Plan. The Executive will be asked to agree to separate terms and data processing practices with the Stock Plan Administrator, which is a condition of the Executive's ability to participate in the Plan.
iii. International Data Transfers . The Company and the Stock Plan Administrator are based in the United States of America. The Executive should note that the Executive's country of residence may have enacted data privacy laws that are different from the United States of America. The Company's legal basis for the transfer of the Executive's Data to the United States of America is the Executive consent.
iv. Voluntariness and Consequences of Consent, Denial or Withdrawal . The Executive's participation in the Plan and the Executive's grant of consent hereunder is purely voluntary. The Executive may deny or withdraw his or her consent at any time. If the Executive does not consent, or if the Executive later withdraws his or her consent, the Executive may be unable to participate in the Plan. This would not affect the Executive's existing employment or salary; instead, the Executive merely may forfeit the opportunities associated with participation in the Plan.
v. Data Retention . The Executive understands that the Executive's Data will be held only as long as is necessary to implement, administer and manage the Executive's RSU and participation in the Plan. When the Company no longer needs the Data, the Company will remove it from its systems. If the Company retains the Executive's Data longer, it would be to satisfy the Company's legal or regulatory obligations and the Company's legal basis would be for compliance with applicable laws, rules and regulations.
vi. Data Subject Rights . The Executive understands that the Executive may have the right under applicable law to (i) access or copy the Executive's Data that the Company possesses, (ii) rectify incorrect Data concerning the Executive, (iii) delete the Executive's Data, (iv) restrict processing of the Executive's Data, (vi) lodge complaints with the competent supervisory authorities in the Executive’s country of residence. To receive clarification regarding these rights or to exercise these rights, the Executive understands that the Executive can contact his or her local human resources representative.
6.14      Private Placement . The grant of the RSUs is not intended to be a public offering of securities in the Executive's country of residence (and country of employment, if different). The Company has not submitted any registration statement, prospectus or other filing with the local securities authorities (unless otherwise required under local Laws).




6.15      No Advice Regarding Grant . The Company and the Employer are not providing any tax, legal or financial advice, nor is the Company or the Employer making any recommendations regarding the RSUs, the Executive's participation in the Plan or the Executive's acquisition or sale of the underlying Shares. The Executive is hereby advised to consult with the Executive's own personal tax, legal and financial advisors regarding participation in the Plan before taking any action related to the Plan or the Agreement.     
6.16      Securities Law Restrictions . The Executive acknowledges that, depending on the Executive's country of residence (and country of employment, if different) or where the Company Shares are listed, the Executive shall be subject to insider trading restrictions and/or market abuse Laws, which may affect the Executive's ability to acquire, sell or otherwise dispose of Shares, rights to Shares (e.g., RSUs) or rights linked to the value of Shares during such times as the Executive is considered to have "inside information" regarding the Company or its business (as defined by the local Laws in the Executive's country of residence and/or employment). Local insider trading laws and regulations may prohibit the cancellation or amendment of orders the Executive placed before the Executive possessed inside information. Furthermore, the Executive could be prohibited from (i) disclosing the inside information to any third party (other than on a "need to know" basis) and (ii) "tipping" third parties (including other employees of the Company and its Subsidiaries) or causing them otherwise to buy or sell securities. Any restrictions under these Laws are separate from and in addition to any restrictions that may be imposed under any applicable Company insider trading or other policy. The Executive solely is responsible for ensuring compliance with any applicable restrictions and should consult with his or her personal legal advisor on this matter.
6.17      EU Age Discrimination Rules . If the Executive is a local national of and employed in the United Kingdom or a country that is a member of the European Union, the grant of the RSUs and the terms and conditions governing the RSUs are intended to comply with the age discrimination provisions of the EU Equal Treatment Framework Directive, as implemented into local law (the "Age Discrimination Rules"). To the extent that a court or tribunal of competent jurisdiction determines that any provision of this Agreement is invalid or unenforceable, in whole or in part, under the Age Discrimination Rules, the Company, in its sole discretion, shall have the power and authority to revise or strike such provision to the minimum extent necessary to make it valid and enforceable to the full extent permitted under local Laws.
6.18      Electronic Delivery . The Company may, in its sole discretion, deliver any documents related to the RSUs granted to the Executive under the Plan by electronic means. The Executive hereby expressly consents to receive such documents by electronic delivery and agrees to participate in the Plan through an online or electronic system established and maintained by the Company or a third party designated by the Company.
6.19      Governing Law; Jurisdiction . This Agreement shall be exclusively governed by, and construed in accordance with, the Laws of the State of Illinois without giving effect to any choice of law or conflict of law rules or provisions (whether of the State of Illinois or of any other jurisdiction) that would cause the application of the laws of a jurisdiction other than the State of Illinois. All disputes and controversies arising between the parties are to be submitted for determination exclusively to the federal or state courts of the State of Illinois and by accepting the grant of RSUs, the Executive expressly consents to the jurisdiction of such courts. Notwithstanding the foregoing, the Company may at its option seek interim and permanent injunctive relief before any competent court, tribunal or judicial forum, which in the absence of the foregoing provision, would have jurisdiction to grant the relief sought.
6.20      Entire Agreement . The Plan, this Agreement (including any applicable addendum) and the Unfair Competition Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede, in their entirety, all prior undertakings and agreements of the Company and the Executive with respect to the subject matter hereof.




[ Signature Page Follows ]
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by a duly authorized officer and the Executive acknowledges and agrees that by clicking on the box next to this Agreement in the section "Read and Acknowledge RSU Documents" on the screen titled "RSU Acceptance, " the Executive expressly agrees to be bound by the terms and conditions of the RSU, including Executive's electronic signature constituting the sole and exclusive means of executing this Agreement.
 
W.W. GRAINGER, INC.
 
 
 
By:
 
Name: DG Macpherson
 
Title: Chairman & Chief Executive Officer
 
 
 
By:
 
Name:
 
Title:
 
 
 
Date: April 1, 2019
W.W. GRAINGER, INC.
2015 Incentive Plan
Addendum to Restricted Stock Unit Agreement
In addition to the terms of the W.W. Grainger, Inc. 2015 Incentive Plan (as may be amended from time to time, the "Plan") and the Restricted Stock Unit Agreement (the "Agreement"), the RSUs are subject to the following additional terms and conditions as set forth in this addendum (this "Addendum") to the extent the Executive resides or is employed in one of the countries addressed herein. All capitalized terms contained in this Addendum shall have the same meaning as set forth in the Plan and the Agreement unless otherwise defined. If the Executive transfers residence or employment to a country identified in this Addendum, the additional terms and conditions for such country as reflected in this Addendum will apply to the Executive to the extent the Company determines, in its sole discretion, that the application of such terms and conditions is necessary or advisable in order to comply with local laws, rules and regulations, or to facilitate the operation and administration of the RSUs and the Plan (or the Company may establish alternative terms and conditions as may be necessary or advisable to accommodate the Executive’s transfer).
European Union ("EU") / European Economic Area ("EEA")

The following provision replaces Section 6.13 to the extent the Executive is employed in the EU or EEA:
6.13      Data Privacy . The Company is located at 100 Grainger Parkway, Lake Forest, Illinois 60045, United States of America, and grants RSUs under the Plan to employees of the Company and its Subsidiaries in its sole discretion. In conjunction with the Company's grant of the RSUs under the Plan and its ongoing administration of such awards, the Company is providing the following information about its data collection, processing and transfer practices, which the Executive should carefully review.
i.      Data Collection, Processing and Usage . The Company and the Employer will collect, process and use certain personal information about the Executive, specifically, the Executive’s name, home address,




email address and telephone number, date of birth, social security or insurance number, passport number or other identification number, salary, nationality, job title, any Shares or directorships held in the Company, details of all RSUs or any other entitlement to Shares awarded, canceled, exercised, vested, unvested or outstanding in the Executive’s favor (“Data”), for the purpose of implementing, administering and managing the Plan. The Company collects, process and uses the Executive's Data pursuant to the Company's legitimate interest of administering the Executive's RSUs and generally managing the Plan, and to satisfy its contractual obligations under the Agreement. The Executive's Data also may be disclosed to certain securities or other regulatory authorities where the Company’s securities are listed or traded or regulatory filings are made. The Company's legal basis for such disclosure of the Executive's Data is to comply with applicable laws, rules and regulations.
ii.      Stock Plan Administration Service Providers . The Company and the Employer transfer the Executive's Data to the Stock Plan Administrator based in the United States of America, which assists the Company with the implementation, administration and management of the Plan. In the future, the Company may select a different Stock Plan Administrator and share the Executive's Data with another company that serves in a similar manner. The Stock Plan Administrator will open an account for the Executive to receive and trade Shares acquired under the Plan. The Executive will be asked to agree to separate terms and data processing practices with the Stock Plan Administrator, which is a condition of the Executive's ability to participate in the Plan.
iii.      International Data Transfers . The Company and the Stock Plan Administrator are based in the United States of America. The Executive should note that the Executive's country of residence may have enacted data privacy laws that are different from the United States of America. The Company's legal basis for the transfer of the Executive's Data to the United States of America is to satisfy its contractual obligations under this Agreement.
iv.      Data Retention . The Executive understands that the Executive's Data will be held only as long as is necessary to implement, administer and manage the Executive's RSU and participation in the Plan. When the Company no longer needs the Data, the Company will remove it from its systems. If the Company retains the Executive's Data longer, it would be to satisfy the Company's legal or regulatory obligations and the Company's legal basis would be for compliance with applicable laws, rules and regulations.
v.      Data Subject Rights . The Executive understands that the Executive may have the right under applicable law to (i) access or copy the Executive's Data that the Company possesses, (ii) rectify incorrect Data concerning the Executive, (iii) delete the Executive's Data, (iv) restrict processing of the Executive's Data, (vi) lodge complaints with the competent supervisory authorities in the Executive’s country of residence. To receive clarification regarding these rights or to exercise these rights, the Executive understands that the Executive can contact his or her local human resources representative.
Belgium

Foreign Asset Reporting Information

The Executive is required to report any security or bank account (including a brokerage account) opened and maintained outside Belgium on the Executive’s annual tax return. In a separate report, the Executive is required to provide the National Bank of Belgium with the account details of any such foreign accounts (including the account number, bank name and country in which any such account was opened). This report, as well as additional information on how to complete it, can be found on the website of the National Bank of Belgium, www.nbb.be, under the Kredietcentrales / Centrales des crédits caption.







Canada
RSUs Payable in Shares Only
Notwithstanding any provision in the Agreement or the Plan to the contrary, vested RSUs shall be payable in Shares only (and shall not be settled in cash).
Accelerated Vesting upon Retirement
Notwithstanding anything in the Agreement or the Plan to the contrary, if the Executive’s employment or service is terminated by reason of retirement, the RSUs immediately shall fully vest. For purposes of the foregoing, "retirement" shall have the definition prescribed by local Laws.
Securities Law Information
The Executive is permitted to sell Shares acquired through the Plan through the designated broker appointed under the Plan, if any, provided that the resale of such Shares takes place outside of Canada through the facilities of a stock exchange on which the Shares are listed (i.e., the New York Stock Exchange).
Foreign Asset Reporting Information
Any foreign property (including Shares and RSUs acquired under the Plan) must be reported to the Canada Revenue Agency on form T1135 (Foreign Income Verification Statement) if the total cost of your foreign property exceeds C$100,000 at any time in the year. The RSUs must be reported - generally at a nil cost - if the C$100,000 cost threshold is exceeded because of other foreign property held.  If Shares are acquired, their cost generally is the adjusted cost base ("ACB") of the Shares. The ACB would normally equal the fair market value of the Shares at time of vesting, but if the Executive owns other Shares, this ACB may have to be averaged with the ACB of the other Shares. The form must be filed by April 30 of the following year. The Executive should consult with his or her personal tax advisor to determine the Executive’s reporting requirements.
The following provisions will apply if the Executive is a resident of Quebec :
Data Privacy Notice and Consent
This provision supplements Section 6.13 of the Agreement:
The Executive hereby authorizes the Company, its Subsidiaries and the Employer to discuss with and obtain all relevant information pertaining to the Executive from all personnel involved in the administration and operation of the Plan.  The Executive further authorizes the Company, its Subsidiaries and the Employer to disclose and discuss the Executive's participation in the Plan with their advisors.  The Executive further authorizes the Company, its Subsidiaries and the Employer to record any information pertaining to the Executive’s participation in the Plan and to keep such information in his or her employee file.
Use of English Language
If the Executive is a resident of Quebec, by accepting the RSUs, the Executive acknowledges and agrees that it is the Executive’s wish that the Agreement, this Addendum, the Plan, as well as all other documents, notices




and legal proceedings entered into, given or instituted pursuant to the RSUs, either directly or indirectly, be drawn up in English.
Utilisation de l’anglais
Si l’exécutif est un résident du Québec, en acceptant le RSUs, l l’exécutif reconnaît et accepte que ce est le souhait du l’exécutif que l’Accord , le présent Addenda, ainsi que tous autres documents, avis et procédures judiciaires, exécutés, donnés ou intentés en vertu de le RSUs, liés directement ou indirectement, soient rédigés en anglais.
Mexico
Accelerated Vesting upon Retirement
Notwithstanding anything in the Agreement or the Plan to the contrary, if the Executive’s employment or service is terminated by reason of retirement, the RSUs immediately shall fully vest. For purposes of the foregoing, "retirement" shall have the definition prescribed by local Laws.
Commercial Relationship
The Executive expressly recognizes that participation in the Plan and the Company’s grant of the RSUs does not constitute an employment relationship between the Executive and the Company. The Executive has been granted RSUs as a consequence of the commercial relationship between the Company and the Employer, and the Employer is the Executive’s sole employer. Based on the foregoing, (a) the Executive expressly recognizes that the Plan and the benefits derived from participation in the Plan do not establish any rights between the Executive and the Company or the Employer, (b) the Plan and the benefits derived from participation in the Plan are not part of the employment conditions and/or benefits provided by the Company or the Employer, and (c) any modifications or amendments to the Plan by the Company, or a termination of the Plan by the Company, shall not constitute a change or impairment of the terms and conditions of the Executive’s employment with the Employer.
Extraordinary Item of Compensation
The Executive expressly acknowledges and agrees that participation in the Plan is a result of the discretionary and unilateral decision of the Company, as well as the Executive’s free and voluntary decision to participate in the Plan in accord with the terms and conditions of the Plan, the Agreement, the Unfair Competition Agreement and this Addendum. As such, the Executive acknowledges and agrees that the Company may, in its sole discretion, amend and/or discontinue the Executive’s participation in the Plan at any time and without any liability. The value of the RSUs is an extraordinary item of compensation outside the scope of the employment contract, if any. The RSUs are not a part of the Executive’s regular or expected compensation for purposes of calculating any severance, resignation, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits, or any similar payments, which are the exclusive obligations of the Employer.
Netherlands
Waiver of Termination Rights
The Executive waives any and all rights to compensation or damages as a result of any termination of employment for any reason whatsoever, insofar as those rights result or may result from (a) the loss or




diminution in value of such rights or entitlements under the Plan or (b) the Executive ceasing to have rights under, or ceasing to be entitled to any Awards under the Plan as a result of such termination.
Dutch Subsidiary Director Notice
The Executive acknowledges and agree that the RSUs granted to the Executive in connection with the Executive’s participation in the Plan are not granted as consideration for, or otherwise in connection with the service the Executive may provide as a director ("statutair bestuurder") of a Subsidiary established under the laws of Netherlands or operating within the Netherlands.
Portugal
Exchange Control Information
If the Executive receives Shares upon vesting and settlement of the RSUs, the acquisition of the Shares should be reported to the Banco de Portugal for statistical purposes. If the Shares are deposited with a commercial bank or financial intermediary in Portugal, such bank or financial intermediary will submit the report on the Executive’s behalf. If the Shares are not deposited with a commercial bank or financial intermediary in Portugal, the Executive is responsible for submitting the report to the Banco de Portugal.
Termination of Service
The following provision shall supplement Section 2.02 of the Agreement:
In case of termination of service of the Executive triggering the payment of severance costs under applicable law, the RSUs shall not be taken into account in the calculation of such severance costs, to the extent permitted by applicable law.
Use of English Language
The Executive hereby expressly declares that the Executive has full knowledge of the English language and has read, understood and fully accepted and agreed with the terms and conditions established in the Plan, the Agreement, the Unfair Competition Agreement and this Addendum.
Uso da Língua Inglesa
Por meio do presente, o Executivo declara que Executivo possui pleno conhecimento da língua inglesa e que leu, compreendeu, e livremente aceita e concorda com os termos e condiçoes estabelecidas no Plano, o Acordo, o Acordo de Concorrência Desleal e este Adendo.

United Kingdom
RSUs Payable in Shares Only
Notwithstanding any provision in the Agreement or the Plan to the contrary, vested RSUs shall be payable in Shares only (and shall not be settled in cash).
Income Tax and Social Insurance Contribution Withholding
The following provision shall replace Article IV of the Agreement:




Without limitation to Article IV of the Agreement, the Executive agrees that the Executive is liable for all Tax-Related Items and hereby covenants to pay all such Tax-Related Items as and when requested by the Company or the Employer or by Her Majesty’s Revenue and Customs ("HMRC") (or any other tax authority or any other relevant authority). The Executive also agrees to indemnify and hold harmless the Company and the Employer against any taxes that each is required to pay or withhold or have paid or will pay to HMRC (or any other tax authority or any other relevant authority) on the Executive’s behalf.
Exclusion of Claim
The Executive acknowledges and agrees that the Executive will have no entitlement to compensation or damages, insofar as such entitlement arises or may arise from the Executive’s ceasing to have rights under or to be entitled to vest in the RSUs as a result of such termination (whether the termination is in breach of contract or otherwise), or from the loss or diminution in value of the RSUs. Upon the grant of the RSUs, the Executive shall be deemed to have irrevocably waived any such entitlement.





Exhibit 10.3

W.W. GRAINGER, INC.
2015 Incentive Plan
Performance Restricted Stock Unit Agreement

This Performance Restricted Stock Unit Agreement (this "Agreement"), dated as of April 1, 2019 (the "Grant Date"), is entered into between W.W. Grainger, Inc., an Illinois corporation (the "Company"), and you as the executive (the "Executive"), who is employed by the Company or a Subsidiary of the Company (the "Employer").

In consideration of the Executive's agreement to enter into an Unfair Competition Agreement with the Company concurrently with this Agreement on the Grant Date (the "Unfair Competition Agreement"), the Company desires to grant the Executive an award of performance restricted stock units (the "PRSUs"), providing for the issuance of shares of the Company's common stock ("Shares") pursuant to the W.W. Grainger, Inc. 2015 Incentive Plan (as may be amended from time to time, the "Plan") subject to the Company's attainment of certain long-term performance goals and the Executive agrees to enter into the Unfair Competition Agreement and accept such PRSUs on the terms and conditions set forth in this Agreement, the Plan and the Unfair Competition Agreement. Capitalized terms used but not defined in this Agreement have the meanings specified in the Plan.

In consideration of the mutual provisions set forth in this Agreement and in the Unfair Competition Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE I
Grants
1.01      Grant . 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) and effective on the Grant Date, the Company hereby grants to the Executive the number of PRSUs (the "Target PRSUs") as specified in the April 1, 2019 award grant notice posted to the Executive's electronic investment account maintained with Morgan Stanley Smith Barney LLC, the brokerage firm/third party service provider engaged by the Company in connection with the administration of the Plan (the "Administrator"). Each PRSU represents a contractual right to receive one (1) Share upon the satisfaction of the terms and conditions of this Agreement. The actual number of PRSUs that may become vested and settled pursuant to this Agreement will depend on the Company’s average return on invested capital ("ROIC") during the period of January 1, 2019 through December 31, 2021 (the "Measurement Period"). For this purpose, ROIC means the Company’s operating earnings divided by its net working assets, as determined by the Committee in its sole discretion. The actual number of vested PRSUs will be determined in accordance with Section 2 below.
ARTICLE II
Provisions Relating to PRSUs

2.01      ROIC Target . The actual number of PRSUs subject to this Agreement shall be determined based upon the Company's achievement of the ROIC Target as follows (“Actual PRSUs”):





If the Company ' s average ROIC
during the Measurement Period is:
Actual PRSUs:
Less than 18%
0% of the Target PRSUs
18% or more
100% of the Target PRSUs

For purposes of the foregoing, the level of achievement of the ROIC Target shall be determined by the Committee in its sole discretion by calculating the Company's return on invested capital for each applicable fiscal year by dividing (i) the Company's operating earnings for the applicable fiscal year, by (ii) the Company's net working assets for the applicable fiscal year. Further, the actual number of PRSUs subject to this Agreement based upon the Company's achievement of the ROIC Target shall be determined by applying straight-line interpolation rounded down to the nearest whole number of PRSUs. If the PRSUs vest, then in settlement of the PRSUs, the Executive will receive a number of shares of Common Stock equal to the number of PRSUs determined under this Section 2.01 , subject, however, to the withholding provisions below. If the PRSUs do not vest, then they will be forfeited in full and the Executive shall have no further rights with respect to the award hereunder.

2.02      Vesting of PSUs . If the Executive remains continuously employed by the Employer (or any other Subsidiary or Affiliate) through the third anniversary of the Grant Date (the "PRSUS Vesting Date"), the actual number of PRSUs as determined pursuant to Section 2.01 shall become fully vested on such date and the Executive shall be entitled to receive the underlying Shares as provided herein. The PRSUs shall not vest before the PRSU Vesting Date unless otherwise provided or permitted by the Plan or this Agreement, and any PRSUs that do not vest shall be forfeited in full and the Executive shall have no further rights with respect to such PRSUs. Each PRSU that becomes vested as provided herein shall be settled in accordance with Section 2.06 . No dividend equivalents will be paid on the shares of Common Stock underlying the PRSUs.

2.03      Effect of Termination of Employment . Except as otherwise stated in the Plan, if the Executive's employment or service is terminated prior to the PRSU Vesting Date for any reason whatsoever other than the Executive's death, Disability (defined below) or retirement, the PRSU shall be forfeited in their entirety. If the Executive is a resident of, or employed in, the United States, "Termination Date" shall mean the effective date of termination of the Executive's employment. If the Executive is a resident of, or employed outside of, the United States, "Termination Date" shall mean the earliest of (i) the date on which notice of termination is provided to the Executive, (ii) the last day of the Executive's active service with the Employer or (iii) the last day on which the Executive is an employee of the Employer, as determined in each case without including any required advanced notice period and irrespective of the status of the termination under local labor or employment laws.

2.04      Effect of Death, Disability or Retirement of the Executive . If the Executive’s employment or service is terminated prior to the PRSU Vesting Date due to death or Disability, the Executive will immediately become vested in the number of Actual PRSUs equal to 100% of the Target PRSUs. For purposes of this Agreement, "Disability" shall have the same meaning as defined in the Plan, subject to modification as may be required to conform to the laws, rules and regulations ("Laws") of the Executive's country of residence (and country of employment, if different). For the sake of clarity, the date of the Executive’s death or Disability shall be a PRSU Vesting Date. Each Actual PRSU that becomes vested as provided herein shall be settled in accordance with Section 2.06 .

2.05 Effect of Retirement of the Executive . If the Executive’s employment or service is terminated prior to the PRSU Vesting Date due to the retirement of the Executive, the Executive will continue vesting in accordance with Section 2.02 as if the Executive had not been terminated. Each Actual PRSU that becomes vested as provided herein shall be settled in accordance with Section 2.06 . For purposes of this Agreement,




"retirement" shall mean the Executive’s termination of service with (i) 25 years of service, (ii) 20 years of service and attainment of age 55, or (iii) attainment of age 60.

2.06 Settlement . Upon the PRSU Vesting Date, the Company shall, as soon as practicable (but in no event later than 60 days following the applicable PRSU Vesting Date), settle the PRSU by registering Shares in the Executive's name and delivering such Shares to the Executive's electronic stock plan account maintained by the Stock Plan Administrator. At the discretion of the Committee, and subject to such policies and procedures as it may adopt from time to time, the Executive's PRSU may be settled in the form of: (i) cash, to the extent settlement in Shares (a) is prohibited under applicable Laws, (b) would require the Executive, the Company or the Employer to obtain the approval of any governmental and/or regulatory body in the Executive's country of residence (and country of employment, if different), or (c) is administratively burdensome or (ii) Shares, but the Company may require the Executive to immediately sell such Shares if necessary to comply with applicable Laws (in which case, the Executive hereby expressly authorizes the Company to issue sales instructions in relation to such Shares on the Executive's behalf).

ARTICLE III
Recoupment
3.01      Recoupment in Event of Misconduct . If the Company determines that the Executive has committed or engaged in misconduct against the Company or has engaged in any criminal conduct, including embezzlement, fraud or theft, that involves or is related to the Company, or any other conduct that violates Company policy, causes or is discovered to have caused, any loss, damage, injury or other endangerment to the Company's property or reputation, and such Executive has received or is entitled to receive performance stock units, performance restricted stock units, stock options, restricted stock units or cash incentive compensation (collectively, "Incentive Compensation"), then the Company shall have the right to cancel the Incentive Compensation, require the return of Shares acquired under the Plan, recapture any gain realized upon the sale of Shares acquired under the Plan or take any other action it deems appropriate under the circumstances with respect to recouping the Incentive Compensation. The Company shall have sole discretion in determining whether the Executive's conduct was in compliance with applicable 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. If the Executive engages in misconduct or is believed to have engaged in misconduct, including but not limited to any violation of any of Executive's obligations under the Unfair Competition Agreement, the Company shall be entitled to take the actions outlined above for recouping the Incentive Compensation, as the Company deems appropriate under the circumstances.
3.02      Recoupment in Event of Materially Inaccurate Financial Results . If the Company has publicly filed materially inaccurate financial results (the "Subject Financials"), whether or not they result in a restatement, the Company has the discretion to recover any Incentive Compensation that was paid or settled to the Executive during the period covered by the Subject Financials as set forth herein. If the payment or settlement of Incentive Compensation would have been lower had the achievement of applicable financial performance goals been calculated based on restated financial results with respect to the Subject Financials, the Company may, if it determines it appropriate in its sole discretion, recover the portion of the paid or settled Incentive Compensation in excess of the payment or settlement that would have been made based on restated financial results. The Company will not seek to recover Incentive Compensation received or settled more than three (3) years after the date of the initial filing that contained the Subject Financials.
3.03      Recoupment in Event of Error . If the Executive receives any amount in excess of what the Executive should have received under the terms of this Agreement for any reason (including, without limitation, by reason of a mistake in calculations or administrative error), all as determined by the Committee, then the Company shall have the right to cancel the Incentive Compensation, require the return of Shares acquired




under the Plan, recapture any gain realized upon the sale of Shares acquired under the Plan or take any other action it deems appropriate under the circumstances with respect to recouping the Incentive Compensation.
3.04      Implementation . For purposes of this Article III , the Executive expressly authorizes the Company to issue instructions, on behalf of the Executive, to the Stock Plan Administrator (and/or any other brokerage firm/third party service provider engaged by the Company to hold Shares and other amounts acquired under the Plan) to re-convey, transfer or otherwise return to the Company any Incentive Compensation subject to recoupment hereunder. Executive acknowledges and agrees that the Company's rights hereunder shall not be affected in any way by any subsequent change in the Executive’s status, including retirement or termination of employment (including due to death or Disability). The Executive expressly agrees to indemnify and hold the Company and the Employer harmless from any loss, cost, damage, or expense (including attorneys' fees) that the Company or the Employer may incur as a result of the Executive’s actions or in the Company and the Employer’s efforts to recover such previously made payments or value pursuant to Article III .
3.05      Forfeiture . To the extent any of the events set forth in this Article III occur before the Executive receives any Incentive Compensation due hereunder, any such Incentive Compensation shall be forfeited as determined by the Company in its sole discretion.
3.06      Executive Consent .  For purposes of the Company’s enforcement of this Article III , the Executive expressly and explicitly authorizes the Company to issue instructions, on the Executive’s behalf, to any brokerage firm and/or third party administrator engaged by the Company to hold any cash payments, Shares or other amounts acquired by the Executive under the Plan to re-convey, transfer or otherwise return such cash payments, Shares or other amounts to the Company.

ARTICLE IV
Tax
4.01 Tax-Related Items . Regardless of any action the Company or the Employer takes with respect to any or all income tax (including U.S. federal, state and local taxes or non-U.S. taxes), social insurance, payroll tax, payment on account or other tax-related withholding ("Tax-Related Items"), the Executive acknowledges and agrees that the ultimate liability for all Tax-Related Items legally due by the Executive is and remains the Executive's responsibility and that the Company and the Employer (i) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the PRSU, including the grant of the PRSU, the vesting of the PRSU, the subsequent sale of any Shares acquired pursuant to the PRSU and the receipt of any dividends and (ii) do not commit to structure the terms of the grant or any aspect of the PRSU to reduce or eliminate the Executive's liability for Tax-Related Items.
4.02      Tax Withholding Obligations . Prior to the delivery of Shares (or cash) upon the vesting of the PRSU, if the Executive's country of residence (and country of employment, if different) requires withholding of Tax-Related Items, the Company shall withhold a sufficient number of whole Shares otherwise issuable upon the vesting of the PRSU that have an aggregate Fair Market Value sufficient to pay the Tax-Related Items required to be withheld with respect to the Shares or the cash equivalent. Depending on the withholding method specified in the Plan, the Company may withhold or account for Tax-Related Items by considering applicable statutory withholding rates or other applicable withholding rates, including maximum applicable rates, in which case the Company shall make a cash payment to the Executive equal to the over-withheld amount, if applicable, as soon as administratively practicable. The cash equivalent of the Shares withheld will be used to settle the obligation to withhold the Tax-Related Items. In the event that the withholding of Shares is prohibited under applicable Law or otherwise may trigger adverse consequences to the Company or the Employer, the Company and the Employer may withhold the Tax-Related Items required to be withheld with respect to the Shares in cash from the Executive's regular salary and/or wages or any other amounts




payable to the Executive, or may require the Executive to personally make payment of the Tax-Related Items required to be withheld. In the event the withholding requirements are not satisfied through the withholding of Shares by the Company or through the withholding of cash from the Executive's regular salary and/or wages or other amounts payable to the Executive, no Shares will be issued to the Executive (or the Executive's estate) upon vesting of the PRSU unless and until satisfactory arrangements (as determined by the Committee) have been made by the Executive with respect to the payment of any Tax-Related Items that the Company or the Employer determines, in its sole discretion, must be withheld or collected with respect to such PRSUs. If the obligation for the Executive's Tax-Related Items is satisfied by withholding a number of Shares as described herein, the Executive shall be deemed to have been issued the full number of Shares issuable upon vesting, notwithstanding that a number of the Shares is held back solely for the purpose of paying the Tax-Related Items due as a result of the vesting or any other aspect of the PRSU.
The Executive will pay to the Company or the Employer any amount of Tax-Related Items that the Company or the Employer may be required to withhold as a result of the Executive's participation in the Plan or the Executive's acquisition of Shares that cannot be satisfied by the means described in this Article IV . The Company may refuse to deliver any Shares due upon vesting of the PRSU if the Executive fails to comply with his or her obligations in connection with the Tax-Related Items as described herein. If the Executive is subject to taxation in more than one jurisdiction, the Executive acknowledges that the Company, the Employer or one or more of their respective Subsidiaries may be required to withhold or account for Tax-Related Items in more than one jurisdiction. The Executive hereby consents to any action reasonably taken by the Company and the Employer to meet his or her obligation for Tax-Related Items. By accepting this grant of the PRSU, the Executive expressly consents to the withholding of Shares and/or withholding from the Executive's regular salary and/or wages or other amounts payable to the Executive as provided for hereunder. All other Tax-Related Items related to the PRSU and any Shares delivered in payment thereof are the Executive's sole responsibility.

ARTICLE V
International Arrangements
5.01 Exchange Controls . As a condition to this PRSU award, the Executive agrees to comply with any applicable foreign exchange Laws and hereby consents to any necessary, appropriate or advisable actions taken by the Company, the Employer or any of their respective Subsidiaries as may be required to comply with any applicable Laws of the Executive's country of residence (and country of employment, if different).
5.02      Foreign Asset and Account Reporting Requirements . The Executive acknowledges that there may be certain foreign asset and/or account reporting requirements, which may affect the Executive's ability to acquire or hold Shares acquired under the Plan or cash received from participating in the Plan (including from any dividends or dividend equivalent payments) in a brokerage or bank account outside the Executive's country of residence (and country of employment, if different). The Executive may be required to report such accounts, assets or transactions to the tax or other authorities in the Executive's country of residence (and country of employment, if different). The Executive acknowledges and agrees that it is his or her personal responsibility to be compliant with such Laws.
5.03      Country Specific Addendum . Notwithstanding any provisions of this Agreement to the contrary, the PRSU shall be subject to any special terms and conditions for the Executive's country of residence (and country of employment, if different) set forth in the addendum to this Agreement ("Addendum"). If the Executive transfers residence and/or employment to another country reflected in an Addendum at the time of transfer, the special terms and conditions for such country will apply to the Executive to the extent the Company determines, in its sole discretion, that the application of such special terms and conditions is necessary or advisable in order to comply with local Laws or to facilitate the operation and administration




of the PRSU and the Plan (or the Company may establish alternative terms and conditions as may be necessary or advisable to accommodate the Executive's transfer). In all circumstances, any applicable Addendum shall constitute part of this Agreement.
5.04      Controlling Language . The Executive acknowledges and agrees that it is the Executive's express intent that this Agreement, the Plan, the Unfair Competition Agreement and all other documents, notices and legal proceedings entered into, given or instituted pursuant to the PRSU be drawn up in English. If the Executive has received this Agreement, the Plan, the Unfair Competition Agreement or any other documents related to the PRSU translated into a language other than English and the meaning of any translated version is different than the English version, the English version will control.
ARTICLE VI
Miscellaneous
6.01 Restriction on Transferability . Except to the extent expressly provided in the Plan or this Agreement, the PRSUs may not be sold, transferred, pledged, assigned, or otherwise alienated at any time other than by will or by the laws of descent and distribution. Any attempt to do so contrary to the provisions hereof shall be null and void.
6.02 Rights as Shareholder . The Executive shall not have voting or any other rights as a shareholder of the Company with respect to the Shares issuable upon the vesting of PRSUs until the date of issuance of such Shares. Upon settlement of the PRSU, the Executive will obtain, with respect to the Shares received in such settlement, full voting and other rights as a shareholder of the Company.
6.03 Administration . The Committee shall have the power to interpret the Plan and this Agreement and to adopt such rules for the administration, interpretation, and application of the Plan as are consistent therewith and to interpret or revoke any such rules. All actions taken and all interpretations and determinations made by the Committee shall be final and binding upon the Executive, the Company, and all other Persons. No member of the Committee shall be personally liable for any action, determination, or interpretation made in good faith with respect to the Plan or this Agreement.
6.04 No Employment Rights . This Agreement and the Executive's participation in the Plan are not and shall not be interpreted to: (i) form an employment contract or relationship with the Company, the Employer or any of their respective Subsidiaries; (ii) confer upon the Executive any right to continue in the employ of the Company, the Employer or any of their respective Subsidiaries; or (iii) interfere with the ability of the Company, the Employer or any of their respective Subsidiaries to terminate the Executive's employment at any time.
6.05      Nature of Grant . In accepting the grant hereunder, the Executive acknowledges and agrees that: (i) the Plan is established voluntarily by the Company, it is discretionary in nature and it may be modified, amended, suspended or terminated by the Company at any time; (ii) the Executive has read the Plan and any PRSUs granted under it shall be subject to all of the terms and conditions of the Plan, including but not limited to the power of the Committee to interpret and determine the terms and provisions of the Plan and this Agreement 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; (iii) the PRSU does not create any contractual or other right to receive future grants of PRSUs, benefits in lieu of PRSUs, or any other Plan benefits in the future; (iv) nothing contained in this Agreement is intended to create or enlarge any other contractual obligations between the Company or the Employer and the Executive; (v) any grant under the Plan, including any grant of PRSUs, is not part of normal or expected compensation for purposes of calculating any severance, resignation, redundancy, end of service payments, bonuses, long service option, pension, or




retirement benefits or similar payments; (vi) the Executive is voluntarily participating in the Plan; (vii) the future value of the Shares underlying the PRSU granted hereunder is unknown and cannot be predicted with certainty; and (viii) neither the Company, the Employer nor any of their respective Subsidiaries shall be liable for any change in value of the PRSU, the amount realized upon settlement of the PRSU or the amount realized upon a subsequent sale of any Shares acquired upon settlement of the PRSU, resulting from any fluctuation of the United States Dollar/local currency foreign exchange rate. Without limiting the generality of the foregoing, the Committee shall have the discretion to adjust the terms and conditions of any award of PRSUs to correct for any windfalls or shortfalls in such PRSU which, in the Committee's determination, arise from factors beyond the Executive's control; provided, however, that the Committee's authority with respect to any PRSU to a "covered employee," as defined in Section 162(m)(3) of the Code, shall be limited to decreasing, and not increasing, such PRSU.
6.06 Compliance with Law . The Company shall not be required to issue or deliver any Shares pursuant to this Agreement pending compliance with all applicable Laws (including any registration requirements or tax withholding requirements) and compliance with the Laws and practices of any stock exchange or quotation system upon which the Shares are listed or quoted. If the Executive resides or is employed outside of the United States, the Executive agrees, as a condition of the grant of the PRSUs, to repatriate all payments attributable to the Shares and/or cash acquired under the Plan (including, but not limited to, dividends and any proceeds derived from the sale of Shares acquired pursuant to the PRSUs) if required by and in accordance with local Laws in the Executive’s country of residence (and country of employment, if different). In addition, the Executive also agrees to take any and all actions, and consent to any and all actions taken by the Company, its Subsidiaries and the Employer, as may be required to allow the Company, its Subsidiaries and the Employer to comply with local Laws in the Executive’s country of residence (and country of employment, if different). Finally, the Executive agrees to take any and all actions as may be required to comply with the Executive’s personal legal and tax obligations under local Laws in the Executive’s country of residence (and country of employment, if different).
6.07 Amendment . This Agreement may be amended by a writing which specifically states that it is amending this Agreement executed by (i) the Company and the Executive, (ii) the Company (at the discretion of the Committee), so long as a copy of such amendment is delivered to the Executive, and provided that no such amendment having a material adverse affect on the rights of the Executive hereunder may be made without the Executive's written consent or (iii) the Company (at the discretion of the Committee) in any way it may deem necessary or advisable to carry out the purpose of the grant as a result of any change in applicable Laws or any future Laws or judicial decisions.
6.08 Notices . Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of its Corporate Secretary. Any notice to be given to the Executive shall be addressed to the Executive at the address listed in the Employer's records or to the Executive's electronic investment account held at the Stock Plan Administrator. By a notice given pursuant to this Section 6.08 , either party may designate a different address for notices. Any notice shall have been deemed given when actually delivered.
6.09 Severability . If all or any part of this Agreement or the Plan is declared by any court or governmental authority to be unlawful or invalid, such unlawfulness or invalidity shall not invalidate any portion of this Agreement or the Plan not declared to be unlawful or invalid. Any provision of this Agreement (or part of such provision) so declared to be unlawful or invalid shall, if possible, be construed in a manner which will give effect to the terms of such provision (or part of such provision) to the fullest extent possible while remaining lawful and valid.




6.10 Construction . The PRSUs are being issued pursuant to Article 9 (Performance Shares/Performance Units) of the Plan. PRSUs are subject to the terms of the Plan. The Executive acknowledges receipt of the Plan booklet which contains the entire Plan, and the Executive represents and warrants that the Executive has read the Plan. Additional copies of the Plan are available upon request during normal business hours at the principal executive offices of the Company. To the extent that any provision of this Agreement violates or is inconsistent with an express provision of the Plan, the Plan provision shall govern and any inconsistent provision in this Agreement shall be of no force or effect. The words "including," "includes," or "include" are to be read as listing non-exclusive examples of the matters referred to, whether or not words such as "without limitation" or "but not limited to" are used in each instance.
6.11 Waiver of Right to Jury Trial . EACH OF THE PARTIES KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THE PRSUs, THE PLAN OR THIS AGREEMENT.
6.12 Waiver; No Third Party Beneficiaries . A waiver by the Company of a breach of any provision of this Agreement by the Executive shall not operate or be construed as a waiver of any other provision of this Agreement, or of any subsequent breach by the Executive. This Agreement shall not be construed to create any third party beneficiary rights.
6.13 Data Privacy . The Company is located at 100 Grainger Parkway, Lake Forest, Illinois 60045, United States of America, and grants PRSUs under the Plan to employees of the Company and its Subsidiaries in its sole discretion. In conjunction with the Company's grant of the PRSUs under the Plan and its ongoing administration of such awards, the Company is providing the following information about its data collection, processing and transfer practices. In accepting the grant of the PRSU, the Executive expressly and explicitly consents to the personal data activities as described herein.
i. Data Collection, Processing and Usage . The Company and the Employer will collect, process and use certain personal information about the Executive, specifically, the Executive’s name, home address, email address and telephone number, date of birth, social security or insurance number, passport number or other identification number, salary, nationality, job title, any Shares or directorships held in the Company, details of all PRSUs or any other entitlement to Shares awarded, canceled, exercised, vested, unvested or outstanding in the Executive’s favor (“Data”), for the purpose of implementing, administering and managing the Plan. The Company's legal basis for the collection, processing and use of the Executive's Data is the Executive's consent. The Executive's Data also may be disclosed to certain securities or other regulatory authorities where the Company’s securities are listed or traded or regulatory filings are made. The Company's legal basis for such disclosure of the Executive's Data is to comply with applicable laws, rules and regulations.
ii. Stock Plan Administration Service Providers . The Company and the Employer transfer the Executive's Data to the Stock Plan Administrator based in the United States of America, which assists the Company with the implementation, administration and management of the Plan. In the future, the Company may select a different Stock Plan Administrator and share the Executive's Data with another company that serves in a similar manner. The Stock Plan Administrator will open an account for the Executive to receive and trade Shares acquired under the Plan. The Executive will be asked to agree to separate terms and data processing practices with the Stock Plan Administrator, which is a condition of the Executive's ability to participate in the Plan.
iii. International Data Transfers . The Company and the Stock Plan Administrator are based in the United States of America. The Executive should note that the Executive's country of residence may have enacted data privacy laws that are different from the United States of America. The Company's legal basis for the transfer of the Executive's Data to the United States of America is the Executive consent.
iv. Voluntariness and Consequences of Consent, Denial or Withdrawal . The Executive's




participation in the Plan and the Executive's grant of consent hereunder is purely voluntary. The Executive may deny or withdraw his or her consent at any time. If the Executive does not consent, or if the Executive later withdraws his or her consent, the Executive may be unable to participate in the Plan. This would not affect the Executive's existing employment or salary; instead, the Executive merely may forfeit the opportunities associated with participation in the Plan.
v. Data Retention . The Executive understands that the Executive's Data will be held only as long as is necessary to implement, administer and manage the Executive's PRSU and participation in the Plan. When the Company no longer needs the Data, the Company will remove it from its systems.
vi. Data Subject Rights . The Executive understands that the Executive may have the right under applicable law to (i) access or copy the Executive's Data that the Company possesses, (ii) rectify incorrect Data concerning the Executive, (iii) delete the Executive's Data, (iv) restrict processing of the Executive's Data, (vi) lodge complaints with the competent supervisory authorities in the Executive’s country of residence. To receive clarification regarding these rights or to exercise these rights, the Executive understands that the Executive can contact his or her local human resources representative.
6.14      Private Placement . The grant of the PRSUs is not intended to be a public offering of securities in the Executive's country of residence (and country of employment, if different). The Company has not submitted any registration statement, prospectus or other filing with the local securities authorities (unless otherwise required under local Laws).
6.15      No Advice Regarding Grant . The Company and the Employer are not providing any tax, legal or financial advice, nor is the Company or the Employer making any recommendations regarding the PRSU, the Executive's participation in the Plan or the Executive's acquisition or sale of the underlying Shares. The Executive is hereby advised to consult with the Executive's own personal tax, legal and financial advisors regarding participation in the Plan before taking any action related to the Plan or the Agreement.     
6.16      Securities Law Restrictions . The Executive acknowledges that, depending on the Executive's country of residence (and country of employment, if different) or where the Company Shares are listed, the Executive shall be subject to insider trading restrictions and/or market abuse Laws, which may affect the Executive's ability to acquire, sell or otherwise dispose of Shares, rights to Shares (e.g., PRSUs) or rights linked to the value of Shares during such times as the Executive is considered to have "inside information" regarding the Company or its business (as defined by the local Laws in the Executive's country of residence and/or employment). Local insider trading laws and regulations may prohibit the cancellation or amendment of orders the Executive placed before the Executive possessed inside information. Furthermore, the Executive could be prohibited from (i) disclosing the inside information to any third party (other than on a "need to know" basis) and (ii) "tipping" third parties (including other employees of the Company and its Subsidiaries) or causing them otherwise to buy or sell securities. Any restrictions under these Laws are separate from and in addition to any restrictions that may be imposed under any applicable Company insider trading or other policy. The Executive solely is responsible for ensuring compliance with any applicable restrictions and should consult with his or her personal legal advisor on this matter.
6.17      EU Age Discrimination Rules . If the Executive is a local national of and employed in the United Kingdom or a country that is a member of the European Union, the grant of the PRSUs and the terms and conditions governing the PRSUs are intended to comply with the age discrimination provisions of the EU Equal Treatment Framework Directive, as implemented into local law (the "Age Discrimination Rules"). To the extent that a court or tribunal of competent jurisdiction determines that any provision of this Agreement is invalid or unenforceable, in whole or in part, under the Age Discrimination Rules, the Company, in its sole discretion, shall have the power and authority to revise or strike such provision to the minimum extent necessary to make it valid and enforceable to the full extent permitted under local Laws.




6.18      Electronic Delivery . The Company may, in its sole discretion, deliver any documents related to the PRSUs granted to the Executive under the Plan by electronic means. The Executive hereby expressly consents to receive such documents by electronic delivery and agrees to participate in the Plan through an online or electronic system established and maintained by the Company or a third party designated by the Company.
6.19      Governing Law; Jurisdiction . This Agreement shall be exclusively governed by, and construed in accordance with, the Laws of the State of Illinois without giving effect to any choice of law or conflict of law rules or provisions (whether of the State of Illinois or of any other jurisdiction) that would cause the application of the laws of a jurisdiction other than the State of Illinois. All disputes and controversies arising between the parties are to be submitted for determination exclusively to the federal or state courts of the State of Illinois and by accepting the grant of PRSUs, the Executive expressly consents to the jurisdiction of such courts. Notwithstanding the foregoing, the Company may at its option seek interim and permanent injunctive relief before any competent court, tribunal or judicial forum, which in the absence of the foregoing provision, would have jurisdiction to grant the relief sought.
6.20      Entire Agreement . The Plan, this Agreement (including any applicable addendum) and the Unfair Competition Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede, in their entirety, all prior undertakings and agreements of the Company and the Executive with respect to the subject matter hereof.
[ Signature Page Follows ]

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by a duly authorized officer and the Executive acknowledges and agrees that by clicking on the box next to this Agreement in the section "Read and Acknowledge PRSU Documents" on the screen titled "PRSU Acceptance, " the Executive expressly agrees to be bound by the terms and conditions of the PRSU, including Executive's electronic signature constituting the sole and exclusive means of executing this Agreement.
 
W.W. GRAINGER, INC.
 
 
 
By:
 
Name: DG Macpherson
 
Title: Chairman & Chief Executive Officer
 
 
 
By:
 
Executive signature
 
 
 
Date: April 1, 2019







CERTIFICATION
Exhibit 31.1
I, D.G. Macpherson, certify that:
 
1.
I have reviewed this Quarterly Report on Form 10-Q 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.

Date: April 22, 2019
 
By:
/ s/ D.G. Macpherson                                                         
Name:
D.G. Macpherson
Title:
Chairman and Chief Executive Officer





CERTIFICATION
Exhibit 31.2
I, Thomas B. Okray, certify that:
 
1.
I have reviewed this Quarterly Report on Form 10-Q 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.

Date: April 22, 2019
 
By:
/ s/ Thomas B. Okray                                                        
Name:
Thomas B. Okray
Title:
Senior Vice President and Chief Financial Officer





Exhibit 32
 
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
 
 
In connection with the Quarterly Report on Form 10-Q of W.W. Grainger, Inc. (“Grainger”) for the quarterly period ended March 31, 2019 , (the “Report”), D.G. Macpherson, as Chairman and Chief Executive Officer of Grainger, and Thomas B. Okray, as Senior Vice President and Chief Financial Officer of Grainger, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
 
1.
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/ D.G. Macpherson
D.G. Macpherson
Chairman and Chief Executive Officer
April 22, 2019
 
 
 
/s/ Thomas B. Okray
Thomas B. Okray
Senior Vice President and Chief Financial Officer
April 22, 2019