<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant /x/
Filed by a Party other than the Registrant / /
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/x/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
W.W. GRAINGER, INC.
-----------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
-----------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
/x/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1),
14a-6(i)(2) or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange
Act Rule 14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction
applies:
-------------------------------------------------------------
2) Aggregate number of securities to which transaction
applies:
--------------------------------------------------------------
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth
the amount on which the filing fee is calculated and
state how it was determined):
-------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------
5) Total fee paid:
------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
1) Amount Previously Paid:
-------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------
4) Date Filed:
------------------------------------------------------------
<PAGE>
[Front Cover]
[LOGO]
5500 W. Howard St., Skokie, IL 60077-2699
(708) 982-9000
March 27, 1995
TO OUR SHAREHOLDERS:
The 1995 annual meeting of shareholders of
W.W. Grainger, Inc., an Illinois corporation, will be held at the
Corporate Offices of the Company, located at 5500 W. Howard St.,
Skokie, Illinois (see map overleaf), on Wednesday, April 26, 1995
at 10:00AM (Central).
We will report at the meeting on our operations and other
matters of current interest. The Board of Directors and
management cordially invite you to attend.
The formal notice of the annual meeting and the proxy
statement follow. Whether or not you plan to attend the meeting,
please sign, date, and return the enclosed proxy promptly to
ensure that your shares will be represented.
<TABLE>
<S> <C>
Office of the Chairman
/s/ D. W. Grainger
Chairman of the Board
/s/ J. D. Fluno /s/ R. L. Keyser
Vice Chairman President
and Chief Executive Operating Officer
</TABLE>
YOUR VOTE IS IMPORTANT.
PLEASE COMPLETE AND RETURN YOUR PROXY PROMPTLY.
<PAGE>
[Inside Front Cover]
[LOGO]
1995 Annual Shareholders' Meeting
Wednesday, April 26, 1995 -
10:00AM (Central)
Location: Corporate Offices
5500 W. Howard St.
Skokie, IL 60077-2699
(Building Entrance:
7650 Frontage Rd.)
[MAP - of Chicago and Niles/Skokie, IL areas showing location of
the Annual Meeting.]
<PAGE>
[LOGO]
5500 W. Howard St., Skokie, IL 60077-2699
(708) 982-9000
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 26, 1995
The annual meeting of shareholders of W.W. Grainger, Inc. will
be held at the Corporate Offices of the Company, located at 5500
W. Howard St., Skokie, Illinois (see map on previous page),
April 26, 1995 at 10:00AM (Central) for the following purposes:
1. To elect ten directors for the ensuing year;
2. To consider and act upon a proposal to ratify the
appointment of Grant Thornton as independent auditors for the
year ending December 31, 1995; and
3. To transact such other business as may properly come
before the meeting and any adjournment thereof.
The Board has fixed the close of business on March 6, 1995
as the record date for the meeting. Shareholders may vote either
in person or by proxy.
By order of the Board of Directors.
J. M. BAISLEY
Secretary
Skokie, Illinois
March 27, 1995
<PAGE>
[LOGO]
5500 W. Howard St., Skokie, IL 60077-2699
(708) 982-9000
March 27, 1995
PROXY STATEMENT
INTRODUCTION
This proxy statement is furnished in connection with the
solicitation on behalf of the Board of Directors of
W.W. Grainger, Inc., an Illinois corporation (the "Company"), of
proxies to be voted at the annual meeting of shareholders of the
Company to be held on April 26, 1995, and at any adjournment
thereof. It is anticipated that this proxy statement and the
accompanying form of proxy will be mailed to shareholders
commencing on or about March 27, 1995.
VOTING AT THE MEETING
The Board has fixed the close of business on March 6, 1995,
as the record date for determining shareholders entitled to
notice of and to vote at the meeting. On that date, there were
outstanding on the books of the Company 50,761,831 shares of
Company common stock. A majority of the shares having voting
power at the meeting will constitute a quorum for the transaction
of business.
In the election of directors, shareholders have the right
to cumulative voting. "Cumulative voting" means that each
shareholder has that number of votes equal to the number of
directors to be elected, times the number of shares owned by such
shareholder. The total number of these votes may be cast
for one nominee or apportioned among two or more nominees, as the
shareholder desires. In any matter other than the election of
directors, each share is entitled to one vote.
Shares of record on the record date and represented by each
properly executed proxy received by the Company in time to permit
its use at the meeting will be voted in accordance with the
instructions indicated in the proxy. If no instructions are
indicated, such shares will be voted as recommended by the Board.
A shareholder who has given a proxy may revoke it by voting in
person at the meeting, or by giving written notice of revocation
or a later-dated proxy to the Secretary of the Company at any
time before the voting.
1
<PAGE>
EXPENSES OF SOLICITATION
The expenses of soliciting proxies will be paid by the
Company. In addition to the use of the mails, proxies may be
solicited personally, or by telephone or other means, by
directors, officers, and regular employees of the Company and its
subsidiaries who, except for normal overtime pay in certain
instances, will not receive additional compensation therefor, and
by representatives of the Company's stock transfer agent.
Arrangements will also be made with brokerage firms and other
custodians, nominees and fiduciaries for the forwarding of proxy
soliciting material to certain beneficial owners of Company
common stock, and the Company will reimburse such brokerage
firms, custodians, nominees, and fiduciaries for reasonable
expenses incurred by them in connection therewith.
BOARD OF DIRECTORS
ELECTION OF DIRECTORS
Ten directors are to be elected to hold office until the
next annual meeting of shareholders and until their successors
shall have been elected and qualified. When authorized to vote
for any of the directors, as set forth in the proxy, the person
or persons voting the proxy, voting cumulatively, are permitted
to and may apportion the total votes represented by the proxy to
one or more of the nominees as he or they shall determine.
Directors are elected by the votes of a majority of the shares
represented in person or by proxy at the meeting. Broker
non-votes and directions to withhold authority will not count as
votes in the election.
If any nominee named herein should not continue to be
available for election, a circumstance which is not expected,
discretionary authority may be exercised to vote for a
substitute. Shareholder nominations of persons for election as
directors are subject to the notice requirements described under
the caption OTHER MATTERS appearing later in this proxy
statement.
The following pages contain certain information about the
nominees. All of the nominees are presently directors and were
previously elected by the shareholders. Unless otherwise
indicated, each of the nominees has served for at least the past
five years in the principal business position currently or most
recently held. For the nominees' beneficial ownership of shares
of Company common stock, see STOCK OWNERSHIP appearing later in
this proxy statement.
2
<PAGE>
[PHOTO 1] GEORGE R. BAKER, age 65, is a corporate
director/advisor. Until 1985, he was a special
limited partner of Bear, Stearns & Co. Inc.,
investment bankers. Mr. Baker is also a
director of The Midland Company, Reliance Group
Holdings, Inc., Reliance Insurance Company,
and WMS Industries, Inc. He was first elected
a director of the Company in 1976 and
is a member of the Audit Committee and the
Board Affairs and Nominating Committee.
[PHOTO 2] ROBERT E. ELBERSON, age 66, retired in 1989 as
Vice Chairman and a director of Sara Lee
Corporation, a marketer, manufacturer, and
distributor of consumer products and food
services. Until 1986, he served that company
as President and Chief Operating Officer.
Mr. Elberson is also a director of Sonoco
Products Company. He was first elected a
director of the Company in 1982 and is a member
of the Audit Committee and the Board Affairs
and Nominating Committee.
[PHOTO 3] JERE D. FLUNO, age 53, is Vice Chairman of the
Company. Mr. Fluno, who joined the Company
in 1969, is a member of the Office of the
Chairman. He is also a member of the Board of
Governors of the Chicago Stock Exchange,
Incorporated and a director of Midwest Clearing
Corporation and Midwest Securities Trust
Company. Mr. Fluno was first elected a
director of the Company in 1975.
[PHOTO 4] WILBUR H. GANTZ, age 57, is President and Chief
Executive Officer of PathoGenesis Corporation,
a health care company discovering and
developing therapeutics for infectious
diseases. Prior to assuming this position in
1992, he served as President of Baxter
International Inc., a manufacturer and
distributor of health care products and
services. Mr. Gantz is also a director of Bank
of Montreal and its subsidiaries, Harris
Bankcorp, Inc. and Harris Trust and Savings
Bank; The Gillette Company; and PathoGenesis
Corporation. He was first elected a director
of the Company in 1985 and is the chairman of
the Compensation Committee.
3
<PAGE>
[PHOTO 5] DAVID W. GRAINGER, age 67, is Chairman of the
Board and, from 1992 to 1994, was President of
the Company. Mr. Grainger, who joined the
Company in 1952, is a member of the Office of
the Chairman. He is also a director of Baxter
International Inc. Mr. Grainger was first
elected a director of the Company in 1953 and
is a member of the Board Affairs and Nominating
Committee.
[PHOTO 6] RICHARD L. KEYSER, age 52, is the Company's
President, a position assumed in 1994, and
Chief Executive Officer, a position assumed in
1995. Mr. Keyser, who joined the Company in
1986, is a member of the Office of the
Chairman. Other positions in which he served
during the past five years were Chief Operating
Officer of the Company, Executive Vice
President of the Company, President of the
Grainger Division, and Executive Vice President
and General Manager of the Grainger Division.
Mr. Keyser is also a director of Morton
International, Inc. He was first
elected a director of the Company in 1992.
[PHOTO 7] JOHN W. MCCARTER, JR., age 57, is a Senior Vice
President of Booz, Allen & Hamilton Inc., a
management consulting firm. Mr. McCarter is
also a director of A.M. Castle & Co. He was
first elected a director of the Company in 1990
and is a member of the Board Affairs and
Nominating Committee and the Compensation
Committee.
[PHOTO 8] JAMES D. SLAVIK, age 42, is President of Mark
IV Properties, Inc., a real estate investment
and development company. Until 1987, he served
as an investment real estate broker of Coldwell
Banker Commercial Real Estate Services, a real
estate brokerage company. Mr. Slavik is also a
director of Janss Corporation and Mark IV
Properties, Inc. He was first elected a
director of the Company in 1987 and is the
chairman of the Audit Committee.
4
<PAGE>
[PHOTO 9] HAROLD B. SMITH, age 61, is Chairman of
the Executive Committee of Illinois Tool Works
Inc., a manufacturer and marketer of engineered
components and industrial systems and
consumables. He is also a director of Illinois
Tool Works Inc. and Northern Trust Corporation,
and a trustee of Northwestern Mutual Life
Insurance Company. Mr. Smith was first elected
a director of the Company in 1981 and is a
member of the Compensation Committee.
[PHOTO 10] FRED L. TURNER, age 62, is Senior Chairman of
the Board and Chairman of the Executive
Committee of McDonald's Corporation, a
restaurant licensor. He joined McDonald's
Corporation in 1956 and assumed his current
position in 1990, after serving that company as
Chairman of the Board and Chief Executive
Officer. Mr. Turner is also a director of Aon
Corporation, Baxter International Inc.,
McDonald's Corporation, and Ronald McDonald
Children's Charities. He was first elected a
director of the Company in 1984 and is the
chairman of the Board Affairs and Nominating
Committee.
MEETINGS AND COMMITTEES OF THE BOARD
Five meetings of the Board were held in 1994. In addition,
the directors acted twice during the year by unanimous consent.
The Board has three standing committees: Audit, Board
Affairs and Nominating, and Compensation. Committee members are
elected by the Board shortly following the annual meeting of
shareholders.
Directors who presently serve on the Audit Committee are
Messrs. Slavik (Chairman), Baker, and Elberson. The Audit
Committee met four times in 1994. Each year, the Audit Committee
reviews the annual audit plan with the independent auditors and
also reviews the results of the annual audit with them. In
addition, the Audit Committee reviews the adequacy of internal
controls with both the independent auditors and the Company's
internal auditors, and has oversight responsibilities for various
aspects of certain employee benefit plans. Although the Audit
Committee, as well as the Board, is apprised of the nature and
costs of the non-audit professional services provided by the
independent auditors, neither the Audit Committee nor the
Board reviews all non-audit services in advance. All services
and fees, however, are subsequently reviewed and approved by the
Audit Committee. The Audit Committee reviews the independence of
the independent auditors, giving consideration to the possible
effect of each audit and non-audit service on such independence.
5
<PAGE>
Directors who presently serve on the Board Affairs and
Nominating Committee are Messrs. Turner (Chairman), Baker,
Elberson, Grainger, and McCarter. The Board Affairs and
Nominating Committee, which met once in 1994, recommends to the
Board the size of the Board, criteria for Board membership,
and prospective nominees. It also recommends to the Board the
make-up of the Board committees (Audit, Board Affairs and
Nominating, and Compensation), makes periodic reviews with
respect to senior management organization and succession, and
makes initial assessments and recommendations to the Board
regarding major issues or proposals. The Board Affairs and
Nominating Committee has not established any policy or procedure
for considering nominees recommended by shareholders.
Directors who presently serve on the Compensation Committee
are Messrs. Gantz (Chairman), McCarter, and Smith. The
Compensation Committee, which met three times in 1994, reviews
compensation policy and objectives as recommended by management
(generally with regard to all employees and specifically with
regard to officers), reviews proposed major compensation program
modifications, and makes appropriate reports and recommendations
to the Board. The Compensation Committee also acts as the
Administration Committee of Company stock incentive plans.
Each director who is not an employee of the Company or any
subsidiary thereof is an alternate member of each Board committee
of which he has not been specifically appointed a member. An
alternate committee member may serve for all purposes at a
committee meeting in place of a specifically appointed committee
member who is absent.
DIRECTORS' FEES AND RELATED INFORMATION
Directors who are not employees of the Company or any
subsidiary thereof receive for their services (i) a retainer fee
at the rate of $25,000 per annum, (ii) an additional retainer fee
for serving as chairman of any Board committee at the rate of
$4,000 per annum, and (iii) a fee of $1,000 for each meeting of
the Board and for each meeting of a committee thereof attended.
The Company reimburses related travel expenses. Directors who
are employees of the Company do not receive any fees for Board or
Board committee service.
Under the Plan for Payment of Directors' Fees, a director
may elect to defer payment of all or any portion of his fees
until after he ceases to be a director. In the case of deferral,
the fees are payable in either a lump sum or periodic
installments. Such deferred fees bear interest at the ten-year
constant maturity Treasury yield, plus one-half of one percent
(0.5%). No director has deferred payment of his 1994 fees,
although one director has elected to defer payment of his fees
earned after 1994.
Under the Post-Service Benefit Plan for Non-Management
Directors, a benefit is provided with respect to any non-employee
director who ceases to be a director (i) after reaching age 70;
(ii) after at least five years of service as a director; or
(iii) by reason of permanent disability or death. The benefit
6
<PAGE>
is 80% of the retainer for serving as a director at the time of
payment, payable for a number of years equal to the lesser of
ten, or the number of years of service as a director. If the
director dies before all payments are made, such payments are
made to his spouse, but cease upon the spouse's death.
In the ordinary course of business during 1994, the Company
and its subsidiaries engaged in various types of business
transactions with, and with affiliates of, organizations with
which directors of the Company are associated in their principal
business occupations or otherwise. The transactions are not
deemed material to any of the directors. Similar transactions
are likely to occur in the future.
STOCK OWNERSHIP
The table below, which is based upon information furnished
to the Company by the individuals involved, sets forth the number
of shares of Company common stock beneficially owned (within the
meaning of Rule 13d-3 under the Securities Exchange Act of 1934,
as amended) on March 6, 1995 by each of the directors, the
nominees and certain executive officers of the Company, and by
all directors and executive officers of the Company as a
group. Unless otherwise indicated in the footnotes following the
table, each of the named persons had beneficial ownership with
respect to the shares shown by sole voting and investment power.
<TABLE>
<CAPTION>
SHARES PERCENTAGE
BENEFICIALLY OF COMMON
BENEFICIAL OWNER OWNED (1) STOCK (2)
-----------------------------------------------------------------
<S> <C> <C>
David W. Grainger (3),(4),(5),(6)
5500 W. Howard St.
Skokie, IL 60077 . . . . . . . . . . . 5,905,839 11.63%
James D. Slavik (3),(7),(8),(9),(10)
19000 MacArthur Blvd.
Suite 610
Irvine, CA 92715 . . . . . . . . . . . 4,390,156 8.65%
James M. Baisley (11),(12) . . . . . . . 28,310 *
George R. Baker . . . . . . . . . . . . 800 *
Donald E. Bielinski (11),(13) . . . . . 57,648 *
Robert E. Elberson . . . . . . . . . . . 10,000 *
Jere D. Fluno (11),(14). . . . . . . . . 159,240 *
Wilbur H. Gantz. . . . . . . . . . . . . 4,100 *
Richard L. Keyser (11),(15). . . . . . . 56,400 *
John W. McCarter, Jr. (16) . . . . . . . 2,000 *
Harold B. Smith (17) . . . . . . . . . . 17,000 *
Fred L. Turner . . . . . . . . . . . . . 3,000 *
Directors and Executive Officers
as a group (11),(18),(19) . . . . . . . 10,864,247 21.22%
<FN>
<F1>
(1) In some instances, shares are included as to which
beneficial ownership has been disclaimed in reports filed
with the Securities and Exchange Commission.
</FN>
</TABLE>
7
<PAGE>
<TABLE>
<C> <S>
<FN>
<F2>
(2) An asterisk (*) indicates less than 1%.
<F3>
(3) Messrs. Grainger and Slavik are the only persons known by
the Company to be beneficial owners of more than 5% of the
Company's common stock.
<F4>
(4) Includes 739,498 shares held by The Grainger Foundation
Inc., a charitable foundation, as to which shares
Mr. Grainger has shared voting and investment power.
<F5>
(5) Includes 927,360 shares held by various family trusts, as
to which shares Mr. Grainger has shared voting and
investment power.
<F6>
(6) Includes 356,455 shares held by various family trusts, as
to which shares Mr. Grainger, alone or with his wife, has
voting and investment power.
<F7>
(7) Excludes 344 shares held by Mr. Slavik's wife, as to which
shares Mr. Slavik disclaims voting or investment power.
<F8>
(8) Includes 3,218,680 shares held by certain family-owned
corporations, as to which shares Mr. Slavik has sole voting
power and shared investment power.
<F9>
(9) Includes 707,006 shares held by various family trusts, as
to which shares Mr. Slavik has shared voting and investment
power.
<F10>
(10) Includes 82,810 shares held by various family trusts or as
custodian for family members, as to which shares
Mr. Slavik, alone or with his wife, has voting and
investment power.
<F11>
(11) Includes shares that may be acquired within 60 days after
March 6, 1995 upon exercise of employee stock options as
follows: Mr. Baisley, 28,270 shares; Mr. Bielinski, 52,662
shares; Mr. Fluno, 104,240 shares; Mr. Keyser, 56,150
shares; and all directors and executive officers of the
Company as a group, 445,298 shares. In computing the
percentage of shares owned by each such person and
by the group, such shares were added to the total number of
outstanding shares for the separate calculations.
<F12>
(12) Excludes 100 shares held by Mr. Baisley's son who resides
in the same household, as to which shares Mr. Baisley
disclaims voting or investment power.
<F13>
(13) Includes 4,260 shares as to which Mr. Bielinski has shared
voting and investment power with his wife.
<F14>
(14) Includes 47,612 shares as to which Mr. Fluno has shared
voting and investment power with his wife.
<F15>
(15) Includes 200 shares as to which Mr. Keyser has shared
voting and investment power with his wife.
<F16>
(16) As to such shares, Mr. McCarter has shared voting and
investment power with his wife.
<F17>
(17) Includes 16,000 shares as to which Mr. Smith has shared
voting and investment power.
<F18>
(18) Includes 5,960,205 shares as to which members of the group
have shared voting and/or investment power and 2,000 shares
as to which members of the group have sole voting and no
investment power.
<F19>
(19) Excludes 1,039 shares held by certain family members, as to
which shares members of the group disclaim voting or
investment power.
</FN>
</TABLE>
8
<PAGE>
MANAGEMENT COMPENSATION AND BENEFITS
SUMMARY COMPENSATION INFORMATION
Set forth below is certain summary information concerning
compensation paid to or accrued for those persons who, at
December 31, 1994, were (i) the Company's Chief Executive Officer
and (ii) each of the four other most highly compensated executive
officers of the Company (the "Named Executive Officers")
for services in all capacities to the Company and its
subsidiaries for the fiscal years ended December 31, 1994, 1993,
and 1992:
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
-------------------
AWARDS PAYOUTS ALL OTHER
ANNUAL ------- --------- COMPENSATION(3)
COMPENSATION STOCK LONG-TERM ---------------
NAME AND ------------ OPTIONS INCENTIVE
PRINCIPAL POSITION YEAR SALARY BONUS(1) (SHARES) PAYOUTS(2)
(at 12/31/94)
----------------- ----- ------- -------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
David W. Grainger 1994 $612,000 $352,000 - 0 - $ - 0 - $147,725
Chairman of the 1993 607,000 389,000 - 0 - - 0 - 149,136
Board 1992 578,100 200,000 - 0 - 215,107 143,713
James M. Baisley 1994 $249,600 $192,217 4,740 $ - 0 - $ 60,635
Vice President, 1993 240,000 164,283 4,820 - 0 - 60,607
General Counsel, 1992 224,400 88,580 5,310 56,280 54,024
and Secretary(4)
Donald E. Bielinski 1994 $285,900 $254,708 8,380 $ - 0 - $ 72,608
Senior Vice 1993 268,800 222,267 6,480 - 0 - 75,069
President, 1992 249,300 137,960 7,150 71,300 64,761
Organization and
Planning(4)
Jere D. Fluno 1994 $458,880 $690,000 13,100 $ - 0 - $128,877
Vice Chairman 1993 437,000 490,000 13,160 - 0 - 134,310
1992 416,860 290,000 14,320 155,232 125,662
Richard L. Keyser 1994 $458,880 $690,000 13,100 $ - 0 - $128,877
President and 1993 394,000 490,000 11,830 - 0 - 112,359
Chief Operating 1992 331,850 214,335 9,530 115,231 78,641
Officer(4)
-----------------------
<FN>
<F1>
(1) The amounts shown were paid with respect to performance
during the indicated fiscal year. For the 1994 and 1993
fiscal years, such amounts were paid under the Company's
Management Incentive Program, which combined features of,
and superseded, the annual and long-term cash incentive
plans in effect for the 1992 and earlier fiscal years.
<F2>
(2) For the 1992 fiscal year, the amounts shown were paid with
respect to the three-year performance cycle then ended
under the Company's superseded long-term cash incentive
plan. See footnote (1) above.
<F3>
(3) The amounts shown were accrued under the Company's
non-contributory profit sharing plan, in which most Company
employees participate, and the related supplemental profit
sharing plan.
<F4>
(4) As of the date of this proxy statement, Mr. Baisley's title
is Senior Vice President, General Counsel, and Secretary;
Mr. Bielinski's title is Senior Vice President, Marketing
and Sales; and Mr. Keyser's title is President and Chief
Executive Officer.
</FN>
</TABLE>
9
<PAGE>
STOCK OPTION GRANTS
Set forth below is further information concerning Company
grants of stock options during the fiscal year ended December 31,
1994 to the Named Executive Officers other than Mr. Grainger, to
whom no stock options were granted during the year. No stock
appreciation rights were granted during the year.
<TABLE>
<CAPTION>
PERCENTAGE OF
TOTAL OPTIONS
OPTIONS GRANTED TO EXERCISE OR EARLIEST GRANT DATE
GRANTED EMPLOYEES IN BASE PRICE EXERCISE EXPIRATION PRESENT
NAME (SHARES) FISCAL 1994 (PER SHARE)(1) DATE(2) DATE VALUE (3)
----------- --------- ------------ ------------ --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
James M. Baisley. . 4,740 2.37% $61.50 4/27/97 4/26/04 $120,845
Donald E. Bielinski 8,380 4.18% 61.50 4/27/97 4/26/04 213,646
Jere D. Fluno . . .13,100 6.54% 61.50 4/27/97 4/26/04 333,981
Richard L. Keyser .13,100 6.54% 61.50 4/27/97 4/26/04 333,981
------------------------
<FN>
<F1>
(1) The per-share option exercise price equals the per-share
closing price of Company common stock reported in the
Composite Tape for New York Stock Exchange-listed stocks on
the business day preceding the date of grant. Stock
optionees presently may make payment of the exercise price
of stock options by delivering already owned shares of
Company common stock (based on the fair market value of the
shares at the time). Stock optionees presently may also
direct that shares of Company common stock otherwise
deliverable upon exercise (based on the fair market value
of the shares at the time) be withheld in satisfaction of
withholding tax obligations arising from exercise.
<F2>
(2) All options granted to the Named Executive Officers were
granted on April 27, 1994, and become exercisable three
years following the date of grant.
<F3>
(3) The amounts shown are based on the Black-Scholes option
pricing model. Material assumptions incorporated into this
model in estimating the value of the options include the
following:
</FN>
</TABLE>
<TABLE>
<S> <C>
a. Exercise price of $61.50.
b. Term of ten years.
c. Interest rate of 6.86%, representing the ten-year constant maturity
Treasury yield at April 26, 1994.
d. Volatility of 20.99%, an annualized number using weekly prices of
Company common stock for the six-month period prior to April 27,
1994.
e. Dividend yield of 1.30%, calculated by dividing the annualized
dividend payout by the closing price of Company common stock on the
business day preceding the date of grant.
The actual value, if any, an executive may realize will depend on the
excess of the stock price over the exercise price on the date
the option is exercised. There is no assurance the value realized by an
executive will be at or near the value estimated by the Black-Scholes model.
</TABLE>
STOCK OPTION EXERCISES AND HOLDINGS
Set forth below is information relating to stock options
exercised by the Named Executive Officers during the 1994 fiscal
year and the number of shares of Company common stock covered by,
10
<PAGE>
and the value of, outstanding stock options held by them at
December 31, 1994. At no time during the year did the Company
have any outstanding stock appreciation rights. Mr. Grainger is
excluded from the table as he did not hold any stock options
during the year.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT 12/31/94 OPTIONS AT 12/31/94(3)
ACQUIRED ON VALUE ------------------- -----------------------
NAME EXERCISE(1) REALIZED(2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXER.
------- ------------- ---------- ----------- ------------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
James M. Baisley 4,460 $162,306 29,270 9,560 $ 580,314 - 0 -
Donald E. Bielinski- 0 - - 0 - 52,662 14,860 1,198,031 - 0 -
Jere D. Fluno - 0 - - 0 - 104,240 26,260 2,220,484 - 0 -
Richard L. Keyser - 0 - - 0 - 56,150 24,930 1,242,409 - 0 -
-----------------------
<FN>
<F1>
(1) The figures shown are the numbers of shares covered by the exercised
stock options.
<F2>
(2) The amounts shown are the differences between the per-share stock option
exercise prices and fair market values of Company common stock on the
dates of exercise, multiplied by the number of shares covered by the
exercised stock options.
<F3>
(3) The amounts shown are the differences between the per-share stock option
exercise prices and the closing price of Company common stock on
December 30, 1994 of $57.75 per share, as reported in the Composite Tape
for New York Stock Exchange-listed stocks, multiplied by the number of
shares covered by the unexercised stock options.
</FN>
</TABLE>
OTHER BENEFITS
The Executive Deferred Compensation Plan, an unfunded plan
administered by a committee of management, permitted participants
selected by the committee and the committee to agree on a salary
reduction of between 5% and 15% (or more with special agreement)
for up to four years. The Company allocated to participants'
accounts an additional 15% of the salary reduction to reflect
reduced profit sharing plan contributions. Under the related
Plan Agreement, a participant is entitled to 180 monthly
payments, commencing at age 65, in an annual amount that is based
upon the amount of the salary reduction, the additional amount
allocated by the Company, and the number of years to normal
retirement age. Reduced or increased payments are provided in
the event that the participant begins receiving payments before
or after age 65. If a participant terminates his service with
the Company prior to qualifying for early benefits pursuant to
the terms of the Plan, or if the Company reduces benefits or
terminates the Plan, or if there is a "change of control" of the
Company, the Plan provides for various benefits to the
participant, ranging from a return of the amount of salary
deferral, plus interest, to a lump-sum benefit equal to the
present value of a projected payment stream. If a
participant dies before retirement or before having received the
full amount of his benefits, the balance will be paid to his
designated beneficiary. Although the initiation of salary
payment deferrals has not been permitted for several years and
there were no such deferrals for 1994, all of the Named Executive
Officers and certain other members of management have
11
<PAGE>
deferred salary payments under the Plan for prior years. Payments
under the Plan have commenced with respect to Mr. Grainger, who
is receiving $12,280 per month in this regard. If Messrs.
Baisley, Bielinski, Fluno, and Keyser remain employees of the
Company until age 65 and then commence receiving payments
under the Plan, the monthly payments would amount to $5,545,
$3,664, $26,207,and $10,509, respectively.
Participation of employees in the Executive Death Benefit
Plan, which is unfunded, is determined by a committee of
management. The beneficiary of a participant who dies while
employed by the Company is entitled to monthly payments equal to
50% of the participant's monthly compensation for the longer of
120 months or until the participant would have attained age 65.
A lump-sum benefit in an amount which, after taxes, approximates
one year's compensation, is payable to a participant's designated
beneficiary upon death after retirement, as defined in the Plan.
All of the Named Executive Officers and certain other members of
management participate in the Plan.
The Company has minimized its exposure relating to the
Executive Deferred Compensation Plan and the Executive Death
Benefit Plan by purchasing life insurance contracts, which are
owned by the Company.
The Management Incentive Program (MIP), which is unfunded,
is administered by a committee of management. MIP accounts have
been established in the names of participants. Initial MIP
account balances of participants who were participants in the
superseded long-term incentive plan reflect amounts accrued but
not paid under that plan. MIP account balances are
adjusted periodically as a result of MIP bonuses earned, MIP
bonuses paid, and merit salary adjustment guidelines applicable
to salaried employees generally.
MIP account balances are generally paid out upon death,
retirement, or long term disability, but are subject to
forfeiture in the event of voluntary resignation or termination
for misconduct. Messrs. Grainger, Baisley, Bielinski, Fluno, and
Keyser currently have MIP account balances of $279,805, $74,001,
$94,565, $203,342, and $177,751, respectively.
The Company provides a separation benefit to certain
full-time employees upon termination of employment (other than
for cause) at age 55 or later with at least 15 years service.
This benefit, which is unfunded, is equal to one week's regular
pay for each two full years of continuous employment accrued
prior to December 31, 1984, with a maximum of 13 weeks pay.
Mr. Keyser joined the Company after December 31, 1984 and,
accordingly, will not receive the separation benefit. Had they
been eligible and terminated their employment as of the date of
this proxy statement, Messrs. Grainger, Baisley, Bielinski, and
Fluno would have received a separation benefit of $153,000,
$5,040, $34,962, and $63,646, respectively.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD
This report of the Compensation Committee of the Board (the
"Committee") discusses the Company's compensation policies for
the executive officers, including members of the Office of the
Chairman who consist of Messrs. Grainger, Fluno, and Keyser,
respectively the Chairman, Vice Chairman, and President and Chief
Executive Officer.
12
<PAGE>
The Committee administers the Company's executive
compensation program. All members of the Committee are
non-employee directors. The Committee recommends to the Board
the compensation of all executive officers. In this connection,
the Committee considers information and data supplied by
management and by an independent compensation and benefits
consultant.
EXECUTIVE COMPENSATION POLICIES
The purpose of the executive compensation program is to
enable the Company to attract and retain qualified executives and
to provide appropriate incentives, including equity incentives,
to support the achievement of the Company's business goals. The
overall program includes variable pay components which link total
executive compensation to the creation of shareholder value over
the long term.
When Company performance is at target, the Company's
objective is to pay total compensation at least at the
size-adjusted median of a peer group of companies approved by the
Committee. All elements of compensation are valued to determine
the Company's posture relative to the comparator group. For
1994, the Company met its total compensation objective. Based on
the Company's superior performance, total compensation paid in
1994 was above the peer group median.
The companies used for compensation comparator purposes are
not the same companies used to compare total shareholder return
in the Performance Graph. The companies in the Performance Graph
are those comprising the Dow Jones Electrical Components Index.
However, the Company's "market" for executive talent is broader
than that index. The compensation comparator group used is
representative of a cross section of major companies with whom
the Company historically competes for its executive talent.
Total compensation consists of base salary, cash incentive
compensation, stock options, and benefits. Policies relative to
each of these elements are discussed herein.
BASE SALARIES
The Committee reviews base salaries annually. Adjustments
to base salaries are determined based on an evaluation of the
competitive market, individual performance, position in salary
range (where applicable), experience of the executive, and
internal equity issues. After evaluating the competitive market,
a merit increase guideline program for all exempt employees was
approved by the Committee in 1994. Salary increases to the
executive officers in 1994 were consistent with this program.
In determining the salary compensation of the members of
the Office of the Chairman, the Committee considers the financial
and non-financial performance of the Company, as well as an
analysis of their salaries in relation to those for comparable
positions in the comparator group of companies approved by the
Committee. The Committee recommended salary increases for all
three incumbents. Mr. Grainger elected not to accept an
increase.
13
<PAGE>
CASH INCENTIVES
For executive officers and officers in all business units,
the Management Incentive Program (MIP) rewards participants for
improvements in economic earnings. The concept of economic
earnings recognizes the fact that capital providers have a
required rate of return on their investment. Economic
earnings occur only after the Company's earnings exceed this
required return. The MIP emphasizes the need to continually
improve economic earnings. The basic concept underlying the MIP
is that improved economic earnings result from:
- Increasing the return on existing investments,
- Making new investments that have returns exceeding
the Company's cost of capital, and
- Reducing or eliminating investments that have returns
which fail to meet the Company's cost of capital.
The MIP is structured to provide an appropriate balance
between short-term and long-term results. The program emphasizes
the common interests of management and shareholders with
long-term improvements in economic earnings expected to
correspond to long-term improvement in shareholder value.
The MIP is based on quantitative measures, but also
provides for utilization of a qualitative component. The
quantitative component is built around target bonuses which are
stated as a percentage of base salary. These target bonuses were
established based on a review of competitive market
practice and are similar to the targets in prior programs.
Target bonuses range from 25 percent to 75 percent of base
salary. The qualitative component consists of a discretionary
factor under which, if used, total bonuses can be adjusted up or
down as much as 10 percent of participants' base salaries to
account for economic or other conditions outside the
participants' control. Annually, actual results are compared to
targets to determine the amount of the bonus earned.
Company economic earnings for 1994 exceeded target and,
during the same period, significant milestones were achieved in
moving toward the Company's strategic objectives which include
integration of other business units into the core business unit.
Bonuses were calculated under the MIP formula based on
Company-wide performance for all eligible officers with the
exception of two business unit presidents whose bonuses were
based on their individual unit programs. No discretionary
adjustment was made in this year's bonuses. The
Committee did reallocate the bonus amount generated for the
Office of the Chairman among the three members of that office, as
reflected in the summary compensation table, based on
Mr. Grainger's recommendation that the other members of the
office receive a larger portion of the pool in recognition of
their contributions to 1994's positive results.
14
<PAGE>
STOCK OPTION PROGRAM
Stock options are granted at an option price not less than
the fair market value of the underlying Company common stock on
the date of grant. The stock option program is considered an
important means of aligning the financial interests of executive
officers and other key employees to the longer term financial
interests of the shareholders. The number of shares
granted at each level in the organization is designed to provide
an economic value that is competitive with grants made by other
companies for comparable jobs. It is the current expectation of
the Committee to ensure that gains realized upon exercise of
stock options are not subject to any limits on deductibility by
the Company for federal income tax purposes under Section
162(m) of the Internal Revenue Code of 1986, as amended.
Stock option grants made in prior years as well as the
total number of options to be granted relative to the total
number of Company shares outstanding also were factors considered
in determining an appropriate grant for 1994.
Mr. Grainger, as in prior years, elected not to accept
stock option grants.
BENEFITS
With the exception of the Executive Death Benefit Plan,
which is discussed in an earlier section, the profit sharing and
welfare benefits provided to executives are comparable to those
provided to most Company employees, both salaried and hourly.
Wilbur H. Gantz, Chairman
John W. McCarter, Jr.
Harold B. Smith
Members of the Compensation
Committee of the Board of
Directors
15
<PAGE>
STOCK PRICE PERFORMANCE
The following stock price performance graph compares the
cumulative total return on an investment in Company common stock
against the cumulative total return of an investment in each of
the S&P 500 Stock Index and the Dow Jones Electrical Components
Index for the period commencing December 31, 1989 and ending
December 31, 1994. The graph assumes that the value for the
investment in Company common stock and in each index was $100 on
December 31, 1989 and that all dividends were reinvested.
[Performance graph filed with Branch Chief.]
<TABLE>
<CAPTION>
W.W. GRAINGER, INC. S&P 500 STOCK INDEX DOW JONES ELECTRICAL
COMPONENTS INDEX
DECEMBER 31,
<S> <C> <C> <C>
1989 100 100 100
1990 105 97 92
1991 174 126 115
1992 195 136 115
1993 189 150 125
1994 192 152 131
</TABLE>
PROPOSAL TO RATIFY THE APPOINTMENT OF INDEPENDENT AUDITORS
Upon the recommendation of its Audit Committee, the Board
has appointed Grant Thornton as independent auditors of the
Company for the fiscal year ending December 31, 1995 which
appointment will be submitted for ratification at the meeting.
Grant Thornton and its predecessors have served as independent
auditors of the Company for approximately 60 years. It is
expected that representatives of Grant Thornton will be present
at the meeting to respond to appropriate questions of
shareholders and to make any desired statements.
THE BOARD RECOMMENDS A VOTE FOR THE PROPOSAL TO RATIFY THE
APPOINTMENT OF INDEPENDENT AUDITORS.
16
<PAGE>
Approval of the proposal requires the affirmative votes of
a majority of the shares of Company common stock represented in
person or by proxy at the meeting. Broker non-votes and
abstentions will have the same effect as votes against the
proposal. In the event the proposal is not approved, the Board
will consider the negative vote as a mandate to appoint other
independent auditors of the Company for the next fiscal year.
OTHER MATTERS
NOTICE REQUIREMENTS
Any shareholder who desires to have a proposal included in
the Company's proxy soliciting material relating to the Company's
1996 annual meeting of shareholders (in accordance with Rule
14a-8 of Regulation 14A under the Securities Exchange Act of
1934, as amended) should send to the Secretary of the Company at
its corporate offices a signed notice of intent to submit the
proposal at the meeting. The notice, including the text of the
proposal, must be received at such offices no later than November
27, 1995 in order for the proposal to be considered for inclusion
in such proxy soliciting material.
The Company's By-Laws require that there be furnished to
the Chairman of the Board of the Company written notice with
respect to the nomination of a person for election as a director
(other than a person nominated at the direction of the Board) at
a meeting of shareholders. In order for any such nomination to
be proper, the notice must contain certain information concerning
the nominating shareholder and the nominee and be furnished no
later than the date corresponding with the date relating to the
submission of notice of intent to submit a shareholder proposal.
(See the preceding paragraph in this regard.) A copy of the
applicable By-Law provisions may be obtained without charge upon
written request to the Secretary of the Company at its corporate
offices.
DISCRETIONARY AUTHORITY
The Board does not know of any matters other than those
described in this proxy statement that will be presented for
consideration at the meeting. If any matter not described in
this proxy statement should properly be so presented, it is
intended that the proxies will be voted on the matter in
accordance with the judgment of the person or persons voting
them.
YOUR VOTE IS IMPORTANT. PLEASE COMPLETE AND SIGN
THE ENCLOSED FORM OF PROXY AND RETURN IT PROMPTLY IN THE
ACCOMPANYING POSTPAID ENVELOPE.
17
<PAGE>
[LOGO]
--------------
NOTICE
of annual
meeting of
shareholders
and PROXY
STATEMENT
April 26, 1995
M Printed on recycled paper.
<PAGE>
COMMON PROXY W.W. GRAINGER, INC. COMMON PROXY
5500 W. Howard St., Skokie, IL 60077
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Proxy for Annual Shareholders' Meeting April 26, 1995
The undersigned hereby appoints James M. Baisley,
Jere D. Fluno, and David W. Grainger, and each of them, proxies
of the undersigned with full power of substitution to represent
the undersigned and to vote all of the shares of the Common Stock
of the Company which the undersigned is entitled to vote at the
Annual Meeting of Shareholders of W.W. Grainger, Inc. to be held
April 26, 1995 and at any and all adjournments thereof, with all
the powers the undersigned would possess if personally present
and voting thereat.
A majority of said proxies or substitutes who shall be
present at the meeting may exercise all powers hereunder. All
proxies will be voted as specified. IF NO SPECIFICATION IS MADE,
THE PROXY WILL BE VOTED FOR ITEMS 1 AND 2. IF AUTHORITY IS GIVEN
TO VOTE FOR THE ELECTION OF DIRECTORS, THIS PROXY MAY BE VOTED
CUMULATIVELY FOR DIRECTORS AS SET FORTH IN THE PROXY STATEMENT.
CONTINUED, AND TO BE SIGNED AND DATED, ON REVERSE SIDE
<PAGE>
/X/ PLEASE MARK VOTES
AS IN THIS EXAMPLE
MANAGEMENT RECOMMENDS A VOTE FOR ITEMS 1 AND 2.
1. Election of Directors.
NOMINEES: George R. Baker, Robert E. Elberson, Jere D. Fluno,
Wilbur H. Gantz, David W. Grainger, Richard L. Keyser, John W.
McCarter,Jr., James D. Slavik, Harold B. Smith, Fred L. Turner
FOR WITHHELD
ALL FROM ALL
NOMINEES NOMINEES
/ / / /
__________________________________________________
FOR, except vote withheld from nominees named above
2. Proposal to ratify appointment of Grant Thornton as
independent auditors for the year ending December 31, 1995.
FOR AGAINST ABSTAIN
/ / / / / /
3. In their discretion upon such other matters as may properly
come before the meeting.
CHECK HERE CHECK HERE
FOR ADDRESS / / IF YOU PLAN / /
CHANGE AND TO ATTEND
NOTE CHANGE BELOW THE MEETING
Please sign exactly as your name or names appear hereon. Joint
owners should each sign personally. If signing in a fiduciary or
representative capacity, give full title as such.
SIGNATURE: __________________ DATE____________________________
SIGNATURE:___________________ DATE____________________________
<PAGE>
APPENDIX
1. On Inside Front Cover - a map representing location of the
Annual Meeting.
2. On pages 7 through 9 - 10 photos of the Board of Directors
nominees.
3. On page 20 - Stock Price Performance graph filed with Branch
Chief.
