43 Pages Complete
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the period ended
March 31, 2000
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
I.R.S. Employer Identification Number 36-1150280
W.W. Grainger, Inc.
(An Illinois Corporation)
100 Grainger Parkway
Lake Forest, Illinois 60045-5201
Telephone: (847) 535-1000
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
------ ------
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuers classes of
common stock, as of the latest practicable date: 93,944,330 shares of the
Company's Common Stock were outstanding as of April 28, 2000.
The Exhibit Index appears on page 17 in the sequential numbering system.
1
<PAGE>
<TABLE>
Part I - FINANCIAL INFORMATION
W.W. Grainger, Inc., and Subsidiaries
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands of dollars except for per share amounts)
(Unaudited)
<CAPTION>
Three Months Ended March 31,
------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Net sales .................................. $ 1,195,194 $ 1,090,843
Cost of merchandise sold ................... 773,647 687,981
------------ ------------
Gross profit ............................ 421,547 402,862
Warehousing, marketing, and
administrative expenses ................. 346,770 306,596
------------ ------------
Operating earnings ...................... 74,777 96,266
Other income or (deductions)
Interest income ......................... 497 410
Interest expense ........................ (6,102) (1,733)
Unclassified-net ........................ 91 (384)
------------ ------------
(5,514) (1,707)
------------ ------------
Earnings before income taxes ............... 69,263 94,559
Income taxes ............................... 28,052 38,296
------------ ------------
Net earnings ............................ $ 41,211 $ 56,263
============ ============
Earnings per share:
Basic ................................... $ 0.44 $ 0.61
============ ============
Diluted .................................. $ 0.44 $ 0.60
============ ============
Weighted average number of shares outstanding:
Basic ................................... 92,917,780 92,833,727
============ ============
Diluted ................................. 94,416,374 94,210,765
============ ============
Cash dividends paid per share .............. $ 0.16 $ 0.15
============ ============
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
2
<PAGE>
<TABLE>
W.W. Grainger, Inc., and Subsidiaries
CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS
(In thousands of dollars)
(Unaudited)
<CAPTION>
Three Months Ended March 31,
----------------------------
2000 1999
-------- --------
<S> <C> <C>
Net Earnings ...................................... $ 41,211 $ 56,263
Other comprehensive earnings (loss):
Foreign currency translation adjustments ....... (1,090) 2,537
Unrealized (loss) on investments, net of tax ... (10,381) -
-------- --------
Comprehensive earnings ............................ $ 29,740 $ 58,800
======== ========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
3
<PAGE>
<TABLE>
W.W. Grainger, Inc., and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(In thousands of dollars)
(Unaudited)
<CAPTION>
ASSETS March 31, 2000 Dec. 31, 1999
- ----------------------------------------------------------------- -------------- --------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents ..................................... $ 64,685 $ 62,683
Accounts receivable, less allowance for doubtful
accounts of $19,203 in 2000 and $18,369 in 1999 ............. 600,974 561,786
Inventories ................................................... 773,214 762,495
Prepaid expenses .............................................. 37,235 18,387
Deferred income tax benefits .................................. 67,554 65,794
-------------- --------------
Total current assets ........................................ 1,543,662 1,471,145
PROPERTY, BUILDINGS, AND EQUIPMENT .............................. 1,301,776 1,302,029
Less accumulated depreciation and amortization ................ 613,772 604,278
-------------- --------------
Property, buildings, and equipment-net ........................ 688,004 697,751
OTHER ASSETS .................................................... 380,809 395,930
-------------- --------------
TOTAL ASSETS .................................................... $ 2,612,475 $ 2,564,826
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
- -----------------------------------------------------------------
CURRENT LIABILITIES
Short-term debt ............................................... $ 283,519 $ 296,836
Current maturities of long-term debt .......................... 27,718 27,721
Trade accounts payable ........................................ 295,153 260,084
Accrued expenses .............................................. 263,479 285,507
Income taxes .................................................. 32,923 386
-------------- --------------
Total current liabilities ................................... 902,792 870,534
LONG-TERM DEBT (less current maturities) ........................ 124,457 124,928
DEFERRED INCOME TAXES ........................................... 41,419 48,117
ACCRUED EMPLOYMENT RELATED BENEFITS COSTS ....................... 41,425 40,718
SHAREHOLDERS' EQUITY
Cumulative Preferred Stock - $5 par value - authorized,
12,000,000 shares, issued and outstanding, none ........... - -
Common Stock - $0.50 par value - authorized, 300,000,000
shares; issued, 107,732,855 shares, 2000 and
107,460,978 shares, 1999 .................................. 53,866 53,730
Additional contributed capital ................................ 264,285 255,569
Retained earnings ............................................. 1,733,514 1,707,258
Unearned restricted stock compensation ........................ (18,019) (16,581)
Accumulated other comprehensive earnings ...................... 57,320 68,791
Treasury stock, at cost - 14,086,892 shares, 2000 and
14,079,292 shares, 1999 .................................... (588,584) (588,238)
-------------- --------------
Total shareholders' equity .................................... 1,502,382 1,480,529
-------------- --------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY .................... $ 2,612,475 $ 2,564,826
============== ==============
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
4
<PAGE>
<TABLE>
W.W. Grainger, Inc., and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of dollars)
(Unaudited)
<CAPTION>
Three Months Ended March 31,
--------------------------------
2000 1999
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings .................................................. $ 41,211 $ 56,263
Provision for losses on accounts receivable ................... 3,553 3,035
Depreciation and amortization:
Property, buildings, and equipment .......................... 21,458 17,908
Intangibles and goodwill .................................... 4,002 3,965
Amortization of capitalized software ........................ 3,492 2,290
Change in operating assets and liabilities:
(Increase) in accounts receivable ........................... (42,741) (47,738)
(Increase) in inventories ................................... (10,719) (19,824)
(Increase) in prepaid expenses .............................. (18,848) (16,650)
(Increase) in deferred income taxes ......................... (1,594) (648)
Increase in trade accounts payable .......................... 35,069 56,470
(Decrease) in other current liabilities ..................... (22,028) (77,095)
Increase in current income taxes payable .................... 32,537 22,651
Increase in accrued employment related
benefits costs ............................................ 707 741
Other - net ................................................... 481 270
-------------- --------------
Net cash provided by operating activities ....................... 46,580 1,638
-------------- --------------
Cash flows from investing activities:
Additions to property, buildings, and
equipment - net of dispositions ............................. (11,711) (37,966)
Expenditures for capitalized software ......................... (9,635) (4,228)
Other - net ................................................... (1,493) (274)
-------------- --------------
Net cash (used in) investing activities ......................... (22,839) (42,468)
-------------- --------------
Cash flows from financing activities:
Net (decrease) increase in short-term debt .................... (13,317) 65,872
Long-term debt payments ....................................... (17) (16)
Stock incentive plan .......................................... 6,896 852
Purchase of treasury stock-net ................................ (346) (13,212)
Cash dividends paid ........................................... (14,955) (14,003)
-------------- --------------
Net cash (used in) provided by financing activities ............. (21,739) 39,493
-------------- --------------
Net increase (decrease) in cash and cash equivalents ............ 2,002 (1,337)
Cash and cash equivalents at beginning of year .................. 62,683 43,171
-------------- --------------
Cash and cash equivalents at end of period ...................... $ 64,685 $ 41,834
============== ==============
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
5
<PAGE>
W.W. Grainger, Inc., and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF STATEMENT PRESENTATION
The financial statements and the related notes are condensed and should be read
in conjunction with the consolidated financial statements and related notes for
the year ended December 31, 1999, included in the Company's Annual Report on
Form 10-K filed with the Securities and Exchange Commission.
The consolidated financial statements include the accounts of the Company and
its subsidiaries. All significant intercompany transactions are eliminated.
Inventories are valued at the lower of cost or market. Cost is determined
primarily by the last-in, first-out (LIFO) method.
The unaudited financial information reflects all adjustments which are, in the
opinion of management, necessary for a fair presentation of the statements
contained herein.
2. DIVIDEND
On April 26, 2000, the Board of Directors declared a quarterly dividend of 17
cents per share, payable June 1, 2000 to shareholders of record on May 8, 2000.
6
<PAGE>
W.W. Grainger, Inc., and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
3. SEGMENT INFORMATION (In thousands of dollars)
The following segment disclosures are condensed and should be read in
conjunction with the consolidated financial statements and related notes for the
year ended December 31, 1999, included in the Company's Annual Report on Form
10-K filed with the Securities and Exchange Commission.
<TABLE>
<CAPTION>
Three Months Ended March 31, 2000
----------------------------------------------------------------
Branch-based
Distribution Digital Other Totals
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Total net sales ........................ $ 1,078,190 $ 6,280 $ 120,928 $ 1,205,398
Intersegment net sales ................. 2,654 6,080 1,470 10,204
Net sales from external customers ...... 1,075,536 200 119,458 1,195,194
Segment operating earnings ............. 84,508 (10,933) 11,502 85,077
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended March 31, 1999
----------------------------------------------------------------
Branch-based
Distribution Digital Other Totals
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Total net sales ........................ $ 993,354 $ 663 $ 100,573 $ 1,094,590
Intersegment net sales ................. 2,614 388 745 3,747
Net sales from external customers ...... 990,740 275 99,828 1,090,843
Segment operating earnings ............. 103,708 (3,644) 6,195 106,259
</TABLE>
<TABLE>
<CAPTION>
Branch-based
Distribution Digital Other Totals
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Segment Assets
At March 31, 2000 ...................... $ 2,074,321 $ 10,584 $ 183,708 $ 2,268,613
============ ============ ============ ============
At December 31, 1999 ................... $ 2,060,781 $ 3,615 $ 161,865 $ 2,226,261
============ ============ ============ ============
</TABLE>
7
<PAGE>
W.W. Grainger, Inc., and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
3. SEGMENT INFORMATION (In thousands of dollars)
A reconciliation of segment information to consolidated information is as
follows:
<TABLE>
<CAPTION>
Three Months Ended March 31,
------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Total operating earnings for reportable segments ........... $ 85,077 $ 106,259
Unallocated expenses ....................................... (10,300) (9,993)
Elimination of intersegment profits ........................ - -
------------ ------------
Total consolidated operating earnings .................... $ 74,777 $ 96,266
============ ============
</TABLE>
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
------------ ------------
<S> <C> <C>
Assets:
Total assets for reportable segments ....................... $ 2,268,613 $ 2,226,261
Unallocated assets ......................................... 343,862 338,565
------------ ------------
Total consolidated assets ................................ $ 2,612,475 $ 2,564,826
============ ============
</TABLE>
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND THE RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 COMPARED WITH THE THREE MONTHS ENDED MARCH 31,
1999:
Company Net Sales
-----------------
The Company's net sales of $1,195,194,000 in the 2000 first quarter increased
9.6% from net sales of $1,090,843,000 for the comparable 1999 period. This
increase was primarily driven by volume growth in the branch-based businesses,
especially in Canada and Mexico; continued strong growth in Internet
transactions; and strong growth at Grainger Integrated Supply.
There were 65 sales days in the 2000 quarter versus 63 sales days in the 1999
quarter. On a daily basis the Company's net sales increased 6.2%. The year 2000
will have one more sales day than did 1999 (255 vs. 254).
Sales processed through the digital businesses plus the sales that originated
through Grainger.com were $62 million for the first quarter of 2000 as compared
with $10 million in the 1999 first quarter.
Segment Net Sales
The following comments at the segment level include external and intersegment
net sales; those comments at the business unit level include external and inter-
and intrasegment net sales. For segment information see Note 3 of the Notes to
Consolidated Financial Statements included in this report.
Branch-based Distribution Businesses
- ------------------------------------
Net sales of $1,078,190,000 for the first quarter of 2000 increased 8.5% when
compared with net sales of $993,354,000 in the first quarter of 1999. Average
daily net sales increased 5% for the 2000 first quarter compared with the 1999
first quarter.
Sales growth in the United States was tempered by a decline in sales to large
accounts requiring customized services, lower pricing as a result of selected
price decreases, and customer mix variations. Contributing to the 2000 first
quarter growth in the United States were 22 branches opened during 1999 and
increased sales to government accounts.
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND THE RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (Continued)
Acklands-Grainger Inc. experienced strong sales growth across most of Canada.
The growth was driven by an improvement in the oil and gas and forestry sectors
of the economy, gains in large customer account business, and the volume impact
of 8 new branches opened during 1999. In Canadian dollars, average daily sales
increased 14%. The Company is planning to open additional branches in Canada in
2000.
The Mexican operation experienced strong sales growth reflecting the continued
planned development of this business. A key driver was increased sales to
customers located in Mexico's interior, which are served by the Company's
facility in Monterrey. This growth in sales was attributable to market share
expansion and account penetration. In January, the Company opened a storefront
branch in Guadalajara.
Net sales of the Branch-based Distribution Businesses were also favorably
affected by continued momentum associated with the Company's Internet strategy.
Sales orders processed through Grainger.com were $55 million, a 450% increase
over first quarter 1999 sales of $10 million.
Digital Businesses
- ------------------
Net sales for the first quarter of 2000 were $6,280,000, an increase of 847.2%
compared with $663,000 for the same period of 1999. Net sales for these
businesses included product sales and service fee revenues for FindMRO.com and
service fee revenue for Grainger Auction, OrderZone.com, and TotalMRO.com.
FindMRO.com and Grainger Auction were officially launched in November 1999,
whereas TotalMRO.com opened for business on March 31, 2000. TotalMRO.com is a
utility that brings together a variety of distributors and key technology
partners in an easily searchable site containing millions of maintenance,
repair, and operating products and services.
Other Businesses
- ----------------
Net sales for the first quarter of 2000 were $120,928,000, an increase of 20.2%
compared with $100,573,000 for the same period of 1999.
Average daily sales for Grainger Integrated Supply increased 51% for the 2000
first quarter compared with the 1999 first quarter. Sales for this business unit
include product sales and management fees. Growth was driven by new engagements,
contract renewals, and scope expansions.
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND THE RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (Continued)
Average daily sales for Lab Safety Supply, the Company's direct marketing
business, increased for the first quarter 2000 compared with the same period of
1999. The increase at Lab Safety Supply reflects the continued growth of
industrial product sales and expanded market share attained through new customer
accounts.
Company Net Earnings
--------------------
The Company's net earnings of $41,211,000 in the first quarter of 2000 decreased
26.8% when compared to the net earnings of $56,263,000 for the comparable 1999
period.
This decline resulted from a decrease in operating earnings and an increase in
other deductions. Operating earnings declined at the Branch-based Distribution
Businesses and the loss at the Digital Businesses increased. Operating earnings
improved at the Other Businesses.
Segment Operating Earnings
The following comments at the segment level include external and intersegment
operating earnings; those comments at the business unit level include external
and inter- and intrasegment operating earnings. For segment information see Note
3 of the Notes to Consolidated Financial Statements included in this report.
Branch-based Distribution Businesses
- ------------------------------------
Operating earnings of $84,508,000 declined 18.5% for the first quarter 2000 as
compared with $103,708,000 for the 1999 period. The majority of the shortfall
resulted from lower gross profit margins which decreased 1.65 percentage points
from the comparable 1999 quarter. This decline was caused by the following
factors:
1. An unfavorable change in selling price category mix, which was driven by
faster growth in sales to large customers and lower selling prices on
selected products coinciding with the issuance of the Grainger Industrial
Supply Catalog in February 2000.
2. Current recognition of certain product costs not fully recorded in 1999
until the fourth quarter physical inventory due to system installation
issues.
Partially offsetting the above factors was a favorable product mix related to
new products added since the first quarter of 1999.
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND THE RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (Continued)
Also contributing to lower operating earnings were higher operating expenses,
which increased 13% for the 2000 first quarter as compared with the 1999 period.
This increase was a result of the following factors:
o Continued spending to enhance and market Grainger.com. Grainger.com
spending for the 2000 first quarter was $12.6 million compared with $2.5
million for the 1999 period.
o Increased data processing and systems development expenses, as well as
higher costs associated with the operation of the Enterprise Resource
Planning (ERP) System.
o Increased occupancy costs related to 8 new branches in Canada, 22 new
branches in the United States, and the new Lake Forest office facility
opened during 1999.
o Higher freight-out expenses primarily driven by increased per shipment
costs and increased shipments made directly to customers.
Digital Businesses
- ------------------
The Digital Businesses incurred operating losses of $10,933,000 compared with
operating losses of $3,644,000 for the first quarter of 1999. These operating
losses resulted from increased operating expenses incurred to launch, operate,
and market these new digital businesses.
Total Internet related operating expenses, as represented by this segment plus
Grainger.com, (which is included in the Branch-based Distribution Businesses)
were $25 million for the 2000 first quarter as compared with $7 million for the
1999 period. This increase for the quarter ended March 31, 2000 was primarily
the result of incremental operating expenses incurred by the Company to develop,
launch, operate, and market its portfolio of Web sites. The Company estimates
that total Internet spending in the year 2000 will range between $110 and $120
million. Sales processed through the digital businesses plus Grainger.com were
$62 million for the 2000 first quarter as compared with $10 million in the 1999
first quarter.
12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND THE RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (Continued)
Other Businesses
- ----------------
Grainger Integrated Supply experienced an operating loss in the first quarter of
2000 that was 27% less than the operating loss incurred during the first quarter
of 1999. This improvement in operating performance reflects improved
productivity, partially offset by lower gross profit margins. The decrease in
gross profit margins related to product sales, which grew at a faster rate than
related management fee income.
Operating earnings at Lab Safety Supply increased at a faster rate than the
growth in sales, reflecting positive operating leverage from this direct
marketing business.
Other Deductions
Other deductions of $5,514,000 in the first quarter of 2000 increased 223%
compared with $1,707,000 in the prior year's first quarter. Other deductions
were higher principally due to an increase in interest expense. This increase
resulted from higher average borrowings, higher average interest rates paid on
all outstanding debt, and lower capitalized interest.
Income Taxes
The Company's effective tax rate was 40.5% for the first quarter of both 2000
and 1999.
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND THE RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (Continued)
Year 2000
---------
The Year 2000 issue is the result of computer programs using two digits rather
than four to define the applicable year. Computer programs that have date
sensitive software may recognize a date using "00" as the year 1900 versus the
year 2000. This could result in systems failure or in miscalculation causing
disruptions to operations.
The Company's efforts in response to the Year 2000 issue included the review of
information technology and non-information technology products and systems, the
remediation or replacement, and testing, of affected information technology
systems and facilities, the surveying of key suppliers of goods and services,
and the creation of reasonable contingency plans to address potentially serious
Year 2000 problems. Expenses associated with the Year 2000 project included both
a reallocation of existing internal resources and the use of outside services.
Year 2000 expenses from the inception of the project through 1999 year end are
estimated to be $62,000,000. Year 2000 expenses after 1999 are expected to be
minimal.
The Company did not experience any material systems, product supply, or customer
service disruptions as a result of Year 2000 problems. There can be no
assurance, however, that such disruptions will not occur by reason of Year 2000
or other date-related problems yet to become manifest.
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND THE RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
For the three months ended March 31, 2000, working capital increased by
$40,259,000. The ratio of current assets to current liabilities was 1.7 at both
March 31, 2000 and December 31, 1999. The Consolidated Statements of Cash Flows,
included in this report, detail the sources and uses of cash and cash
equivalents.
The Company maintains a debt ratio and liquidity position that provides
reasonable flexibility in funding working capital needs and long-term cash
requirements. In addition to internally generated funds, the Company has various
sources of financing available, including commercial paper sales and bank
borrowings under lines of credit and otherwise. Total debt as a percent of
Shareholders' Equity was 29% at March 31, 2000 and 30% at December 31, 1999. For
the first three months of 2000, $12,186,000 was expended for property,
buildings, and equipment, and $9,635,000 was expended for capitalized software,
for a total of $21,821,000.
FORWARD-LOOKING STATEMENTS
Throughout this Form 10-Q are forward-looking statements about the Company's
expected future financial results and business plans, strategies, and
objectives. These forward-looking statements are often identified by qualifiers
such as: "expects," "plans," " anticipates," "intends," or similar expressions.
There are risks and uncertainties the outcome of which could cause the Company's
results to differ materially from what is projected.
Factors that may affect the forward-looking statements include the following:
higher product costs or other expenses; a major loss of customers; increased
competitive pricing pressure on the Company's businesses; failure to develop,
implement, or commercialize successfully new Internet technologies or other
business strategies; the outcome of pending and future litigation and
governmental proceedings; changes in laws and regulations; facilities
disruptions or shutdowns due to accidents, natural acts or governmental action;
unanticipated weather conditions; and other difficulties in improving margins or
financial performance.
Trends and projections could also be affected by general industry and market
conditions and growth rates, general economic conditions, including currency
rate fluctuations and other factors.
15
<PAGE>
W.W. Grainger, Inc., and Subsidiaries
PART II - OTHER INFORMATION
Items 1, 2, 3, and 5 not applicable.
Item 4 Submission of Matters to a Vote of Security Holders.
An annual meeting of shareholders of the Company was held on April 26,
2000. At that meeting:
a) Management's nominees listed in the proxy statement pertaining to
the meeting were elected directors for the ensuing year. Of the
83,327,034 shares present in person or represented by proxy at
the meeting, the number of shares voted for and the number of
shares as to which authority to vote in the election was
withheld, were as follows with respect to each of the nominees:
<TABLE>
<CAPTION>
Shares as to Which Voting
Name Shares Voted for Election Authority Withheld
--------------------- --------------------------- -----------------------------
<S> <C> <C>
B. P. Anderson 82,501,667 825,367
J. D. Fluno 82,482,271 844,763
W. H. Gantz 82,506,916 820,118
D. W. Grainger 82,498,556 828,478
R. L. Keyser 82,489,180 837,854
J. W. McCarter, Jr. 82,506,837 820,197
N. S. Novich 82,504,676 822,358
J. D. Slavik 82,501,669 825,365
H. B. Smith 82,503,937 823,097
F. L. Turner 82,503,060 823,974
J. S. Webb 74,143,981 9,183,053
</TABLE>
b) A proposal to ratify the appointment of Grant Thornton, LLP as
independent auditors of the Company for the year ended December
31, 2000 was approved. Of the 83,327,034 shares present or
represented by proxy at the meeting, 82,988,724 shares were voted
for the proposal, 102,592 shares were voted against the proposal,
and 235,718 shares abstained from voting with respect to the
proposal.
16
<PAGE>
W.W. Grainger, Inc., and Subsidiaries
PART II - OTHER INFORMATION
<TABLE>
<CAPTION>
EXHIBIT INDEX
-------------
<S> <C>
Item 6 Exhibits (numbered in accordance with Item 601 of regulation S-K).
a) Exhibits
(3)(ii) By-laws, as amended 20-35
(10) Material Contracts
(a) Supplemental Profit Sharing Plan, as amended 36-43
(11) Computation of Earnings per Common and Common
Equivalent Share 19
(27) Financial Data Schedule
b) Reports on Form 8-K - None
</TABLE>
17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
W.W. Grainger, Inc.
--------------------------------------------
(Registrant)
Date: May 11, 2000 By: /s/ P.O. Loux
--------------------------------------------
P.O. Loux, Senior Vice President, Finance
and Chief Financial Officer
Date: May 11, 2000 By: /s/ R.D. Pappano
--------------------------------------------
R.D. Pappano, Vice President,
Financial Reporting
18
<PAGE>
<TABLE>
Exhibit 11
W.W. Grainger, Inc., and Subsidiaries
COMPUTATIONS OF EARNINGS PER SHARE
<CAPTION>
Three Months Ended March 31,
-----------------------------------
2000 1999
--------------- ---------------
BASIC:
<S> <C> <C>
Weighted average number of shares outstanding
during the year ................................................... 92,917,780 92,833,727
=============== ===============
Net earnings ......................................................... $ 41,211,000 $ 56,263,000
=============== ===============
Earnings per share ................................................... $ 0.44 $ 0.61
=============== ===============
DILUTED:
Weighted average number of shares outstanding
during the year (basic) ........................................... 92,917,780 92,833,727
Potential Shares:
Shares issuable under outstanding options ..................... 2,541,850 2,840,880
Shares which could have been purchased based
on the average market value for the period .................. 1,737,022 2,044,197
--------------- ---------------
804,828 796,683
Dilutive effect of exercised options prior to being
exercised ................................................... 77,266 37,855
--------------- ---------------
Shares for the portion of the period that the options
were outstanding ............................................ 882,094 834,538
Contingently issuable shares .................................. 616,500 542,500
--------------- ---------------
1,498,594 1,377,038
--------------- ---------------
Adjusted weighted average number of shares outstanding
during the year .................................................... 94,416,374 94,210,765
=============== ===============
Net earnings ......................................................... $ 41,211,000 $ 56,263,000
=============== ===============
Earnings per share ................................................... $ 0.44 $ 0.60
=============== ===============
</TABLE>
19
<PAGE>
Exhibit 3(ii) to the quarterly report
on Form 10-Q of W.W. Grainger, Inc.
for the quarter ended March 31, 2000
As Amended April 26, 2000
BY-LAWS
OF
W.W. GRAINGER, INC.
ARTICLE I
---------
OFFICES
-------
The principal office of the corporation shall be located in the State
of Illinois. The corporation may have such other offices, either within or
without the State of Illinois, as the business of the corporation may require
from time to time.
The registered office of the corporation required by the Illinois
Business Corporation Act to be maintained in the State of Illinois may be, but
need not be, identical with the principal office in the State of Illinois, and
the address of the registered office may be changed from time to time by the
board of directors.
ARTICLE II
----------
SHAREHOLDERS
------------
SECTION 1. ANNUAL MEETING. (a) The annual meeting of the shareholders
shall be held on the last Wednesday of April, in each year, or at such time as
may be determined by the board of directors, for the purpose of electing
directors and for the transaction of such other business as may properly come
before the meeting. If the day fixed for the annual meeting shall be a legal
holiday, such meeting shall be held on the next succeeding business day. If the
election of the directors shall not be held on the day designated herein for any
annual meeting or adjournment thereof, the board of directors shall cause the
election to be held at a meeting of the shareholders as soon thereafter as
conveniently may be.
(b) At any annual meeting or adjournment thereof only such business
shall be conducted as shall have been brought before the meeting (i) by or at
the direction of the board of directors or (ii) by any shareholder (x) who is
entitled to vote at the time of giving notice provided for in this Section 1(b)
and remains such until the meeting and (y) who complies with the procedures set
forth in this Section 1(b). For business to be properly brought before an annual
meeting or adjournment thereof by a shareholder, the shareholder must have given
timely notice thereof in proper written form to the
20
<PAGE>
secretary. To be timely, a shareholder's notice must be delivered to or mailed
and received at the principal office of the corporation no less than thirty days
nor more than sixty days prior to the meeting; provided, however, that in the
event that less than forty days' notice or prior public disclosure of the date
of the meeting is given or made to shareholders, notice by the shareholder to be
timely must be received not later than the close of business on the tenth day
following the day on which such notice of the date of the annual meeting was
mailed or such public disclosure was made. To be in proper written form, a
shareholder's notice to the secretary shall set forth in writing as to each
matter the shareholder proposes to bring before the meeting (i) a brief
description of the business desired to be brought before the meeting and the
reasons for conducting such business at the meeting, (ii) the name and address,
as they appear on the corporation's books, of the shareholder proposing such
business, (iii) the class and number of shares of the corporation which are
beneficially owned by the shareholder and (iv) any material interest of the
shareholder in such business. Notwithstanding anything in these by-laws to the
contrary, no business shall be conducted at any annual meeting or adjournment
thereof except in accordance with the procedures set forth in this Section 1(b).
The officer or other person presiding shall, if the facts warrant, determine and
declare to the meeting that business was not properly brought before the meeting
in accordance with the procedures set forth in this Section 1(b), and if he
should so determine, he shall so declare to the meeting and any such business
not properly brought before the meeting shall not be transacted.
SECTION 2. SPECIAL MEETINGS. Special meetings of the shareholders may
be called by the chairman of the board, the board of directors or by the holders
of not less than one-fifth of all the outstanding shares of the corporation, for
the purpose or purposes for which the meeting is called. Unless otherwise stated
in the notice of special meeting, no other business may be transacted at any
such meeting.
SECTION 3. PLACE OF MEETING. The board of directors may designate any
place, either within or without the State of Illinois, as the place of meeting
for any annual meeting or for any special meeting called by the board of
directors. If no designation is made, or if a special meeting be otherwise
called, the place of meeting shall be the principal office of the corporation in
the State of Illinois.
SECTION 4. NOTICE OF MEETINGS. Written notice stating the place, day
and hour of the meeting and, in case of a special meeting, the purpose or
purposes for which the meeting is called, shall be delivered not less than ten
nor more than sixty days before the date of the meeting, or in the case of a
merger, consolidation, share exchange, dissolution or sale, lease or exchange of
assets, not less than twenty days nor more than sixty days before the date of
the meeting, either personally or by mail, by or at the direction of the
chairman of the board or the secretary, or the officer or persons calling the
meeting, to each shareholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the United
States mail, addressed to the shareholder at his address as it appears on the
records of the corporation, with postage thereon prepaid.
SECTION 5. FIXING OF RECORD DATE. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders, or
shareholders entitled to receive payment of any dividend, or in order to make a
21
<PAGE>
determination of shareholders for any other proper purpose, the board of
directors of the corporation may fix in advance a date as the record date for
any such determination of shareholders, such date in any case to be not more
than sixty days and, in case of a meeting of shareholders, not less than ten
days, or in the case of a merger, consolidation, share exchange, dissolution or
sale, lease or exchange of assets, not less than twenty days, prior to the date
on which the particular action, requiring such determination of shareholders, is
to be taken. If no record date is fixed for the determination of shareholders
entitled to notice of or entitled to vote at a meeting of shareholders, or
entitled to receive payment of a dividend, the date on which notice of the
meeting is mailed or the date on which the resolution of the board of directors
declaring such dividend is adopted, as the case may be, shall be the record date
for such determination of shareholders. When a determination of shareholders
entitled to vote at any meeting of shareholders has been made as provided above,
such determination shall apply to any adjournment thereof.
SECTION 6. VOTING LISTS. The officer or agent having charge of the
transfer books for shares of the corporation shall make within twenty days after
the record date for a meeting of shareholders, or ten days before such meeting
of shareholders, whichever is earlier, a complete list of the shareholders
entitled to vote at such meeting, arranged in alphabetical order, with the
address of and the number of shares held by each, which list, for a period of
ten days prior to such meeting, shall be kept on file at the principal office of
the corporation in the State of Illinois and shall be subject to inspection by
any shareholder at any time during usual business hours and to copying at the
shareholder's expense. Such list shall also be produced and kept open at the
time and place of the meeting and shall be subject to the inspection of any
shareholder during the whole time of the meeting. The original share ledger or
transfer book, or a duplicate thereof kept in the State, shall be prima facie
evidence as to who are the shareholders entitled to examine such list or share
ledger, or transfer book or to vote at any meeting of shareholders.
SECTION 7. QUORUM. A majority of the outstanding shares of the
corporation, entitled to vote on a matter, represented in person or by proxy,
shall constitute a quorum at any meeting of shareholders; provided, that if less
than a majority of the outstanding shares are represented at said meeting, a
majority of the shares so represented may adjourn the meeting from time to time
without further notice.
SECTION 8. PROXIES. A shareholder may appoint a proxy to vote or
otherwise act for the shareholder by delivering a valid appointment to the
person so appointed or such person's agent; provided that no shareholder may
name more than three persons as proxies to attend and to vote the shareholder's
shares at any meeting of shareholders. Such appointment may be by any means,
including means of electronic transmission, permitted by law. No proxy shall be
valid after the expiration of eleven months from the date thereof unless
otherwise provided in the proxy.
SECTION 9. VOTING OF SHARES. Subject to the provisions of Section 11 of
this Article, each outstanding share, regardless of class, shall be entitled to
one vote upon each matter submitted to vote at a meeting of shareholders.
22
<PAGE>
SECTION 10. VOTING OF SHARES BY CERTAIN HOLDERS. Shares standing in the
name of another corporation, domestic or foreign, may be voted by such officer,
agent, or proxy as the by-laws of such corporation may prescribe, or, in the
absence of such provision, as the board of directors of such corporation may
determine.
Shares standing in the name of a deceased person may be voted by his
administrator or executor, either in person or by proxy. Shares standing in the
name of a guardian, conservator, or trustee may be voted by such fiduciary,
either in person or by proxy, but no guardian, conservator, or trustee shall be
entitled, as such fiduciary, to vote shares held by him without a transfer of
such shares into his name.
Shares standing in the name of a receiver may be voted by such
receiver, and shares held by or under the control of a receiver may be voted by
such receiver without the transfer thereof into his name if authority to do so
be contained in an appropriate order of the court by which such receiver was
appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Shares of its own stock belonging to this corporation shall not be
voted, directly or indirectly, at any meeting and shall not be counted in
determining the total number of outstanding shares at any given time, but shares
of its own stock held by it in a fiduciary capacity may be voted and shall be
counted in determining the total number of outstanding shares at any given time.
SECTION 11. CUMULATIVE VOTING. In all elections for directors, every
shareholder shall have the right to vote, in person or by proxy, the number of
shares owned by him, for as many persons as there are directors to be elected,
or to cumulate said shares, and give one candidate as many votes as the number
of directors multiplied by the number of his shares shall equal, or to
distribute them on the same principle among as many candidates as he shall see
fit.
SECTION 12. VOTING BY BALLOT. Voting on any question or in any election
may be by voice, unless the officer or other person presiding over the meeting
shall order or any shareholder shall demand that voting be by ballot.
ARTICLE III
-----------
DIRECTORS
---------
SECTION 1. GENERAL POWERS. The business and affairs of the corporation
shall be managed under the direction of its board of directors.
SECTION 2. NUMBER, TENURE AND QUALIFICATIONS. The number of directors
of the corporation shall be not less than seven nor more than twelve. The number
of directors may be fixed or changed from time to time, within the minimum and
maximum, by the directors or the shareholders without amending these by-laws.
Each
23
<PAGE>
director shall hold office until the next annual meeting of shareholders or
until his successor shall have been elected and qualified. Directors need not be
residents of Illinois or shareholders of the corporation.
SECTION 3. REGULAR MEETINGS. A regular meeting of the board of
directors shall be held without other notice than this by-law, immediately after
the annual meeting of shareholders. The board of directors may provide by
resolution, the time and place, either within or without the State of Illinois,
for the holding of additional regular meetings without other notice than such
resolution.
SECTION 4. SPECIAL MEETINGS. Special meetings of the board of directors
may be called by or at the request of the chairman of the board or any two
directors. The person or persons authorized to call special meetings of the
board of directors may fix any place, either within or without the State of
Illinois, as the place for holding any special meeting of the board of directors
called by them.
SECTION 5. NOTICE. Notice of any special meeting shall be given at
least two days previously thereto by written notice delivered personally, sent
by United States mail, sent by a third party entity that provides delivery
services in the ordinary course of business and guarantees delivery in the
particular case no later than the following day, or sent by electronic
transmission. If mailed, such notice shall be deemed to be delivered 24 hours
after deposited in the United States mail, next-day delivery guaranteed,
addressed to the director at the director's business address, with postage
thereon prepaid. If sent by delivery service, notice shall be deemed to be
delivered 24 hours after delivery to the third party delivery service. If notice
is sent by electronic transmission, such notice shall be deemed to be delivered
upon transmission. For this purpose, "electronic transmission" may include, but
shall not be limited to, a telex, wire or wireless equipment that transmits a
facsimile of the notice and provides the transmitter with an electronically
generated receipt, or other electronic means. Any director may waive notice of
any meeting. The attendance of a director at any meeting shall constitute a
waiver of notice of such meeting, except where a director attends a meeting for
the express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the board
of directors need be specified in the notice or waiver of notice of such
meeting.
SECTION 6. QUORUM. A majority of the board of directors shall
constitute a quorum for transaction of business at any meeting of the board of
directors, provided, that if less than a majority of the directors are present
at said meeting, a majority of the directors present may adjourn the meeting
from time to time without further notice.
SECTION 7. MANNER OF ACTING. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the board
of directors.
SECTION 8. VACANCIES. Any vacancy occurring in the board of directors
and any directorship to be filled by reason of an increase in the number of
directors may be filled by election at an annual meeting or at a special meeting
of shareholders called for that purpose; provided, however, vacancies arising
between meetings of shareholders
24
<PAGE>
by reason of an increase in the number of directors or otherwise may be filled
by a majority of the board of directors then remaining. A director elected by
the shareholders to fill a vacancy shall hold office for the balance of the term
for which elected. A director appointed by the directors to fill a vacancy shall
serve until the next meeting of shareholders at which directors are to be
elected.
SECTION 9. COMPENSATION. By resolution of the board of directors, the
directors may be paid their expenses, if any, for attendance at each meeting of
the board or of a committee thereof, and may be paid a fixed sum for attendance
at meetings and/or a stated retainer as directors. No such payment shall
preclude any director from serving the corporation in any other capacity and
receiving compensation therefor.
SECTION 10. PRESUMPTION OF ASSENT. A director of the corporation who is
present at a meeting of the board of directors at which action on any corporate
matter is taken shall be conclusively presumed to have assented to the action
taken unless his dissent shall be entered in the minutes of the meeting or
unless he shall file his written dissent to such action with the person acting
as the secretary of the meeting before the adjournment thereof or shall forward
such dissent by registered mail to the secretary of the corporation immediately
after the adjournment of the meeting. Such right to dissent shall not apply to a
director who voted in favor of such action.
SECTION 11. COMMITTEES. Committees of the board of directors shall
consist of an audit committee, a compensation committee, a board affairs and
nominating committee, and such other committees as the board of directors by
resolution may create. Each committee shall have such number of members and
shall exercise such authority and carry out such duties as are set forth in
resolutions of the board of directors. Committee members shall be elected
annually but shall serve at the discretion of the board of directors and may be
removed by the board of directors. The board of directors may increase or
decrease the number of members of any committee at any time and may designate
one or more directors as alternate members of any committee, who may replace any
absent or disqualified member or members at any meeting of the committee. A
majority of members of a committee shall constitute a quorum and, unless
otherwise set forth in resolutions of the board of directors, a majority of
those members present at a meeting and not disqualified from voting shall
constitute the acts of the committee.
SECTION 12. INFORMAL ACTION BY DIRECTORS. (a) Any action required to be
taken at a meeting of the board of directors of the corporation, or any other
action which may be taken at a meeting of the board of directors or a committee
thereof, may be taken without a meeting if a consent in writing, setting forth
the action so taken, shall be signed by all of the directors entitled to vote
with respect to the subject matter thereof, or by all of the members of such
committee, as the case may be.
(b) The consent shall be evidenced by one or more written approvals,
each of which sets forth the action taken and bears the signature of one or more
directors. All the approvals evidencing the consent shall be delivered to the
secretary to be filed in the corporate records. The action taken shall be
effective when all the directors have approved the consent unless the consent
specifies a different effective date.
25
<PAGE>
(c) Any such consent signed by all the directors or all the members of
a committee shall have the same effect as a unanimous vote, and may be stated as
such in any document filed with the Secretary of State.
SECTION 13. TELEPHONE ATTENDANCE. (a) Members of the board of directors
or of any committee of the board of directors may participate in and act at any
meeting of such board or committee through the use of a conference telephone or
other communications equipment by means of which all persons participating in
the meeting can hear each other. Participation in such meeting shall constitute
attendance and presence in person at the meeting of the person or persons so
participating.
(b) The board of directors or any committee may, at its option, provide
for a tape recording of any such conference telephone portion of a meeting but
the lack thereof shall not affect the validity of any actions taken at such
meeting.
SECTION 14. REMOVAL OF DIRECTORS. One or more of the directors may be
removed, with or without cause, at a meeting of shareholders by the affirmative
vote of the holders of a majority of the outstanding shares then entitled to
vote at an election of directors, except that:
(1) No director shall be removed at a meeting of shareholders unless
the notice of such meeting shall state that a purpose of the meeting is to vote
upon the removal of one or more directors named in the notice. Only the named
director or directors may be removed at such meeting;
(2) If less than the entire board is to be removed, no director may be
removed, with or without cause, if the votes cast against his removal would be
sufficient to elect him, if then cumulatively voted at an election of the entire
board of directors; and
(3) If a director is elected by a class or series of shares, he may be
removed only by the shareholders of that class or series.
SECTION 15. DIRECTOR CONFLICT OF INTEREST. If a transaction is fair to
the corporation at the time it is authorized, approved or ratified, the fact
that a director of the corporation is directly or indirectly a party to the
transaction shall not be grounds for invalidating the transaction.
SECTION 16. NOMINATIONS OF DIRECTORS. (a) Except for directors elected
to fill vacancies pursuant to these by-laws, nominations for election for the
board of directors may be made by the board of directors, or by the nominating
committee of the board of directors and approved by the board of directors. Such
nominations shall be submitted to a vote of the shareholders at the next annual
meeting of shareholders or at a special meeting of shareholders called for such
purpose.
(b) Nominations for election to the board of directors may be made by
any shareholder of any outstanding class of stock of the corporation entitled to
vote for the election of directors provided that; (i) any such shareholder
nominating a director shall, not later than the date with respect to submission
of shareholders' proposals for the next
26
<PAGE>
annual meeting as set forth in the corporation's proxy statement for the
preceding annual meeting of shareholders, notify the chairman of the board of
the corporation in writing of the intent to so nominate one or more persons and
shall further set forth in such notice the names of all such nominees together
with, with respect to each such nominee, his principal occupation, age, holdings
of equity securities of the corporation and such other information as would be
required under applicable laws, including the various securities laws, to be set
forth by the corporation in its proxy statement and related materials if such
person were a nominee of the board of directors; (ii) such shareholder so
proposing to nominate a person remains a shareholder of the corporation through
the date of the annual meeting at which such shareholder, or such shareholder's
proxy, nominates such person for election as a director; and (iii) such
shareholder delivers the consent of each such nominee to serve as director, or
states in the notice that each such nominee, if elected, has consented to serve
as director.
ARTICLE IV
----------
OFFICERS
--------
SECTION 1. NUMBER. The officers of the corporation shall be a chairman
of the board, a senior chairman of the board, one or more presidents, one or
more vice presidents, a treasurer, a secretary, and such other officers and such
assistant or administrative officers as may be elected or appointed as
hereinafter provided. Any two or more offices may be held by the same person.
SECTION 2. ELECTION, APPOINTMENT AND TERM OF OFFICE. Officers of the
corporation shall be elected or appointed annually by the board of directors,
although vacancies may be filled or new offices created and filled at any
meeting of the board of directors. Each officer elected or appointed by the
board of directors shall hold office until the next annual election or
appointment of officers by the board of directors, or until his earlier death,
resignation or removal. Officers and assistant or administrative officers of the
corporation may also be appointed from time to time by the chairman of the
board, to serve as such at his pleasure.
SECTION 3. REMOVAL. Any officer or assistant or administrative officer
of the corporation elected or appointed by the board of directors may be removed
by the board of directors whenever in its judgment the best interests of the
corporation would be served thereby. Any officer or assistant or administrative
officer of the corporation appointed by the chairman of the board may be removed
by the chairman of the board whenever in his judgment the best interests of the
corporation would be served thereby. Any removal provided for in this Section 3
shall be without prejudice to the contract rights, if any, of the person so
removed. Election or appointment of an officer or assistant or administrative
officer of the corporation shall not itself create contract rights.
SECTION 4. CHAIRMAN OF THE BOARD. The chairman of the board shall be
the chief executive officer. He shall preside at all meetings of the
shareholders and the board of directors. He shall be primarily responsible for
carrying out the policies established by and the directions of the board of
directors and shall perform such other duties as may be prescribed from time to
time by the board of directors. He may from
27
<PAGE>
time to time, to the extent not delegated by the board of directors, delegate
and re-delegate any part of any of the responsibilities and authority set forth
herein to the senior chairman of the board, to any other member of the board of
directors and/or to a president. The chairman of the board must be a director of
the corporation.
The chairman of the board may sign deeds, mortgages, bonds, contracts
or other instruments which the board of directors has authorized to be executed,
except in cases where the signing and execution thereof shall be expressly
delegated by the board of directors or by these by-laws to some other officer or
agent of the corporation, or shall be required by law to be otherwise signed or
executed. The chairman of the board may delegate signing authority to other
persons within the corporation as shall be deemed necessary.
SECTION 5. SENIOR CHAIRMAN OF THE BOARD. The senior chairman of the
board shall, in the absence of the chairman of the board, or another director to
whom the responsibilities have been delegated, preside at all meetings of the
shareholders and the board of directors. He shall advise the chairman of the
board on matters of long- and short-term strategic planning and policy and other
significant matters affecting the corporation, and shall perform such other
duties as may from time to time be prescribed by the board of directors, or
delegated to him by the chairman of the board. The senior chairman of the board
must be a director of the corporation.
SECTION 6. PRESIDENTS. The president or, if there be more than one, the
presidents shall oversee and direct such operations, shall be responsible for
such day-to-day activities, and shall do and perform such other duties as from
time to time may be assigned by the board of directors or the chairman of the
board. If there be more than one president, the board of directors may designate
one or more of them as group president or use a similar descriptive designation.
SECTION 7. VICE PRESIDENTS. Each of the vice presidents shall be
responsible for those activities and shall perform those duties as from time to
time may be assigned by the board of directors, the chairman of the board, or a
president. The board of directors may designate one or more of the vice
presidents as executive, group or senior vice presidents or use a similar
descriptive designation.
SECTION 8. TREASURER. If required by the board of directors, the
treasurer shall give a bond for the faithful discharge of his duties in such sum
and with such surety or sureties as the board of directors shall determine. He
shall (a) have charge and custody of and be responsible for all funds and
securities of the corporation, (b) receive and give receipts for moneys due and
payable to the corporation from any source whatsoever, and deposit all such
moneys in the name of the corporation in such banks, trust companies or other
depositories as shall be selected in accordance with the provisions of Article V
of these by-laws and (c) in general perform all the duties incident to the
office of treasurer and such other duties as from time to time may be assigned
to him by the board of directors, the chairman of the board, or the chief
financial officer.
SECTION 9. SECRETARY. The secretary shall (a) keep the minutes of the
shareholders' and of the board of directors' meetings in one or more books
provided for that purpose, (b) see that all notices are duly given in accordance
with the provisions of
28
<PAGE>
these by-laws or as required by law, (c) be custodian of the corporate records
and of the seal of the corporation and see that the seal of the corporation is
affixed to all certificates for shares prior to the issue thereof and to all
documents, the execution of which on behalf of the corporation under its seal is
duly authorized in accordance with the provisions of these by-laws, (d) keep, or
cause the transfer agent to keep, a register of the post office address of each
shareholder which shall be furnished to the secretary by such shareholder, (e)
sign with the chairman of the board certificates for shares of the corporation,
the issue of which shall have been authorized by resolution of the board of
directors, (f) have general charge of the stock transfer books of the
corporation and (g) in general perform all duties incident to the office of
secretary and such other duties as from time to time may be assigned to him by
the board of directors or the chairman of the board.
SECTION 10. SALARIES. The salaries of the officers elected or appointed
by the board of directors shall be fixed from time to time by the board of
directors and no such officer shall be prevented from receiving such salary by
reason of the fact that he is also a director of the corporation.
ARTICLE V
---------
CONTRACTS, LOANS, CHECKS AND DEPOSITS
-------------------------------------
SECTION 1. CONTRACTS. The board of directors may authorize any officer
or officers, agent or agents, to enter into any contract or execute and deliver
any instrument in the name of and on behalf of the corporation, and such
authority may be general or confined to specific instances.
SECTION 2. LOANS. No loans shall be contracted on behalf of the
corporation and no evidences of indebtedness shall be issued in its name unless
authorized by a resolution of the board of directors. Such authority may be
general or confined to specific instances.
SECTION 3. CHECKS, DRAFTS, ETC. All checks, drafts or other orders for
the payment of money, notes, or other evidences of indebtedness issued in the
name of the corporation, shall be signed by such officer or officers, agent or
agents of the corporation and in such manner as shall from time to time be
determined by resolution of the board of directors.
SECTION 4. DEPOSITS. All funds of the corporation not otherwise
employed shall be deposited from time to time to the credit of the corporation
in such banks, trust companies, or other depositaries as the board of directors
may select.
29
<PAGE>
ARTICLE VI
----------
CERTIFICATES FOR SHARES
AND THEIR TRANSFER
----------------------
SECTION 1. CERTIFICATES FOR SHARES. The issued shares of the
corporation shall be represented by certificates, except as and to the extent
determined by, or pursuant to, resolution adopted by the board of directors.
Certificates representing shares of the corporation shall be in such form as may
be determined by the board of directors. Such certificates shall be signed by
the chairman of the board and by the secretary or an assistant secretary, and
shall be sealed with the seal of corporation. All certificates for shares shall
be consecutively numbered or otherwise identified. The name of the person to
whom the shares represented thereby are issued, with the number of shares and
date of issue, shall be entered in the books of the corporation, as shall
similar information with respect to shares that are uncertificated. All
certificates surrendered to the corporation for transfer shall be canceled. No
new certificate shall be issued until the former certificate for a like number
of shares, unless the shares are uncertificated, shall have been surrendered and
canceled except that in the case of a lost, destroyed or mutilated certificate a
new one may be issued therefor upon such terms and indemnity to the corporation
as the board of directors may prescribe.
SECTION 2. TRANSFERS OF SHARES. Transfers of shares of the corporation
shall be made either on the books of the corporation or on the books of the duly
authorized and appointed agent or agents of the corporation by the holder of
record thereof or by his legal representative, who shall furnish proper evidence
of authority to transfer, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the secretary of the corporation or proper
officer of the transfer agent and, unless such shares are uncertificated, on
surrender for cancellation of the certificate for such shares. The person in
whose name shares stand on the books of the corporation or its duly authorized
and appointed transfer agent or agents shall be deemed the owner thereof for all
purposes as regards the corporation.
ARTICLE VII
-----------
FISCAL YEAR
-----------
The fiscal year of the corporation shall begin on the first day of
January in each year and end on the last day of December in each year.
30
<PAGE>
ARTICLE VIII
------------
DIVIDENDS
---------
The board of directors may from time to time, declare, and the
corporation may pay, dividends on its outstanding shares in the manner and upon
the terms and conditions provided by law and its articles of incorporation.
ARTICLE IX
----------
SEAL
----
The board of directors shall provide a corporate seal which shall be in
the form of a circle and shall have inscribed thereon the name of the
corporation and the words, "Corporate Seal, Illinois".
ARTICLE X
---------
WAIVER OF NOTICE
----------------
Whenever any notice whatever is required to be given under the
provisions of these by-laws or under the provisions of the articles of
incorporation or under the provisions of the Illinois Business Corporation Act,
a waiver thereof in writing, signed by the person or persons entitled to such
notice, whether before or after the time stated therein shall be deemed
equivalent to the giving of such notice.
ARTICLE XI
----------
AMENDMENTS
----------
These by-laws may be altered, amended or repealed and new by-laws may
be adopted at any meeting of the board of directors of the corporation by a
majority vote of the directors present at the meeting.
ARTICLE XII
-----------
INDEMNIFICATION OF DIRECTORS AND OFFICERS
-----------------------------------------
SECTION 1. The corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director or officer of the corporation,
or is or was serving at the request of the corporation as a director or officer
of another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines
31
<PAGE>
and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding, if he acted in good faith and
in a manner he reasonably believed to be in, or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
SECTION 2. The corporation shall indemnify any person who was or is a
party, or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that he is or was a
director or officer of the corporation, or is or was serving at the request of
the corporation as a director or officer of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection with the defense or
settlement of such action, suit or proceeding, if he acted in good faith and in
a manner he reasonably believed to be in, or not opposed to the best interests
of the corporation, and except that no indemnification shall be made with
respect to any claim, issue or matter as to which such person has been finally
adjudged to have been liable to the corporation, unless, and only to the extent
that the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability, but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses as the court shall deem proper.
SECTION 3. Any indemnification under Sections 1 or 2 (unless ordered by
a court) shall be made only as authorized in the specific case, upon a
determination that indemnification of the director or officer is proper in the
circumstances because he has met the applicable standard of conduct set forth in
Sections 1 or 2. Such determination shall be made (1) by the board of directors
by a majority vote of a quorum consisting of directors who were not parties to
such action, suit or proceeding, or (2) if such a quorum is not obtainable (or,
even if obtainable, a quorum of disinterested directors so directs) by
independent legal counsel in a written opinion, or (3) by the shareholders. In
any event, to the extent that a director or officer of the corporation has been
successful, on the merits or otherwise, in the defense of any action, suit or
proceeding referred to in Sections 1 or 2 or in defense of any claim, issue or
matter therein, he shall be indemnified against expenses (including reasonable
attorneys' fees) actually and reasonably incurred by him in connection
therewith.
SECTION 4. (a) Reasonable expenses incurred in defending a civil or
criminal action, suit or proceeding shall be paid by the corporation in advance
of the final disposition of such action, suit or proceeding, upon receipt of (i)
a statement signed by such director or officer to the effect that such director
or officer acted in good faith and in a manner which he believed to be in, or
not opposed to the best interests of the corporation and (ii) an undertaking by
or on behalf of the director or officer to repay such amount, if it shall
ultimately be determined that he is not entitled to be indemnified by the
corporation as authorized in this Article.
32
<PAGE>
(b) The board of directors may, by separate resolution adopted under
and referring to this Article of the by-laws, provide for securing the payment
of authorized advances by the creation of escrow accounts, the establishment of
letters of credit or such other means as the board deems appropriate and with
such restrictions, limitations and qualifications with respect thereto as the
board deems appropriate in the circumstances.
SECTION 5. (a) The indemnification and advancement of expenses provided
by or granted under other subsections of this Article shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any by-law, agreement, vote of
shareholders or disinterested directors, or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director or
officer and shall inure to the benefit of the heirs, executors and
administrators of such a person.
(b) The provisions of this ARTICLE XII shall be deemed to be a contract
between the corporation and each director and officer who serves in such
capacity at anytime while this ARTICLE XII is in effect and any indemnification
provided under this ARTICLE XII to a person shall continue after such person
ceases to be an officer, director, agent or employee of the corporation as to
all facts, circumstances and events occurring while such person was such
officer, director, agent or employee, and shall not be decreased or diminished
in scope without such person's consent, regardless of the repeal or modification
of this Article or any repeal or modification of the Illinois Business
Corporation Act or any other applicable law. If the scope of indemnity provided
by this ARTICLE XII or any replacement article, or pursuant to the Illinois
Business Corporation Act or any modification or replacement thereof is
increased, then such person shall be entitled to such increased indemnification
as is in existence at the time indemnity is provided to such person, it being
the intent, subject to Section 10 of this ARTICLE XII, to indemnify persons
under this ARTICLE XII to the fullest extent permitted by law.
SECTION 6. The corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under the provisions of this Article.
SECTION 7. Subject to Section 10 of this Article, if a claim under this
Article is not promptly paid in full by the corporation after a written claim
has been received by the corporation or if expenses pursuant to Section 4 of
this Article have not been promptly advanced after a written request for such
advancement accompanied by the statement and undertaking required by Section 4
of this Article has been received by the corporation, the director or officer
may at any time thereafter bring suit against the corporation to recover the
unpaid amount of the claim or the advancement of expenses. If successful, in
whole or in part, in such suit, such director or officer shall also be entitled
to be paid the reasonable expense thereof, including attorneys' fees. It shall
be
33
<PAGE>
a defense to any such action (other than an action brought to enforce a claim
for expenses incurred in defending any proceeding in advance of its final
disposition where the required undertaking has been tendered to the corporation)
that the director or officer has not met the standards of conduct which make it
permissible under the Illinois Business Corporation Act for the corporation to
indemnify the director or officer for the amount claimed, but the burden of
proving such defense shall be on the corporation. Neither the failure of the
corporation (including its board of directors, independent legal counsel, or its
shareholders) to have made a determination, if required, prior to the
commencement of such action that indemnification of the director or officer is
proper in the circumstances because he or she has met the applicable standard of
conduct required under the Illinois Business Corporation Act, nor an actual
determination by the corporation (including its board of directors, independent
legal counsel, or its shareholders) that the director or officer had not met
such applicable standard of conduct, shall be a defense to the action or create
a presumption that the director or officer had not met the applicable standard
of conduct.
SECTION 8. For purposes of this Article, references to "the
corporation" shall include, in addition to the surviving corporation, any
merging corporation (including any corporation having merged with a merging
corporation) absorbed in a merger which, if its separate existence had
continued, would have had the power and authority to indemnify its directors,
officers and employees or agents, so that any person who was a director or
officer of such merging corporation, or was serving at the request of such
merging corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under the provisions of this Article with respect to the surviving
corporation as such person would have with respect to such merging corporation
if its separate existence had continued.
SECTION 9. For purposes of this Article, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on a person with respect to an employee
benefit plan; references to "serving at the request of the corporation" shall
include any service as a director, officer, employee or agent of the corporation
which imposes duties on, or involves services by such director, officer,
employee, or agent with respect to an employee benefit plan, its participants,
or beneficiaries; and references to "officers" shall include elected and
appointed officers. A person who acted in good faith and in a manner he
reasonably believed to be in the best interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interest of the corporation" as referred to in
this Article.
SECTION 10. Anything herein to the contrary notwithstanding, if the
corporation purchases insurance in accordance with Section 6 of this ARTICLE
XII, the corporation shall not be required to, but may (if the board of
directors so determines in accordance with this ARTICLE XII) reimburse any party
instituting any action, suit or proceeding if a result of the institution
thereof is the denial of or limitation of payment of losses under such insurance
when such losses would have been paid thereunder if a non-insured third party
had instituted such action, suit or proceedings.
34
<PAGE>
ARTICLE XIII
------------
INDEMNIFICATION OF EMPLOYEES AND AGENTS
---------------------------------------
The corporation may indemnify any agent or employee of the corporation
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding (including, but not limited to
any such proceeding by or in the right of the corporation) whether civil,
criminal, administrative or investigative, by reason of the fact that he is or
was serving the corporation at its request and in the course and scope of his
duties and acting in good faith and in a manner he reasonably believed to be in,
or not opposed to, the best interests of the corporation, against expenses
(including reasonable attorney's fees) actually and reasonably incurred by him
in connection with the defense or settlement of such action, suit or proceeding.
The standards of conduct, the provisions for payment and advances, and the terms
and conditions contained in Article XII, Sections 1, 2, 3, 4, 5(a), 6, 8, 9 and
10 shall apply to any indemnification hereunder.
35
<PAGE>
Exhibit 10(a) to the quarterly report
on Form 10-Q of W.W. Grainger, Inc.
for the quarter ended March 31, 2000
W. W. Grainger, Inc.
SUPPLEMENTAL PROFIT SHARING PLAN
--------------------------------
(As Amended and Restated Effective January 1, 1992)
(Conformed Copy as of April 26, 2000, Including First through Fifth Amendments)
ARTICLE ONE. PURPOSE AND EFFECTIVE DATE
---------------------------------------
1.1 Purpose of Plan. The purpose of this W.W. Grainger, Inc. Supplemental
Profit Sharing Plan is to provide key executives with profit sharing and
retirement benefits commensurate with their current compensation unaffected by
limitations imposed by the Internal Revenue Code on qualified retirement plans.
The Plan is intended to constitute an excess benefit plan, as defined in Section
3(36) of ERISA, and a "top hat" plan, as defined in Section 201(2) of ERISA.
1.2 Effective Date. This Plan was originally established effective as of
January 1, 1983. It was subsequently amended and restated by action of the Board
of Directors on April 29, 1992. The effective date of the Plan as amended and
restated herein is January 1, 1992.
ARTICLE TWO. DEFINITIONS
------------------------
2.1 Definitions. Whenever used herein, the following terms shall have the
respective meanings set forth below and, when intended, such terms shall be
capitalized.
(a) "Retirement" shall have the same meaning as defined in Section
1.36 of the Profit Sharing Plan.
36
<PAGE>
(b) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
(c) "Committee" shall mean the Profit Sharing Trust Committee.
(d) "Company" shall mean W.W. Grainger, Inc., a corporation
organized under the laws of the State of Illinois, and
subsidiaries thereof.
(e) "Disability" shall have the same meaning as defined in Section
1.14 of the Profit Sharing Plan.
(f) "Employee" shall mean any person who is employed by the
Company.
(g) "ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time.
(h) "Participant" shall mean any Employee selected by the
Committee to participate in this Plan pursuant to Article Four.
(I) "Plan" shall mean this W.W. Granger, Inc. Supplemental Profit
Sharing Plan.
(j) "Profit Sharing Plan" shall mean the W.W. Grainger, Inc.
Employees Profit Sharing Plan as amended form time to time.
2.2 Gender and Number. Except when otherwise indicated by the context,
any masculine term used in this plan also shall include the feminine; the plural
shall include the singular and the singular shall include the plural.
37
<PAGE>
ARTICLE THREE. ADMINISTRATION
-----------------------------
3.1 Administration by Committee. The Plan shall be administered by the
Committee, which is appointed by the Board of Directors of the Company to
administer this Plan and the Profit Sharing Plan.
3.2 Authority of Committee. The Committee shall have the authority to
interpret the Plan, to establish and revise rules and regulations relating to
the Plan, to designate Participants, and to make all determinations that it
deems necessary or advisable for the administration of the Plan.
ARTICLE FOUR. ELIGIBILITY
-------------------------
4.1 Participants. The Committee shall select the Employee or Employees
who shall participate in this Plan, subject to the limitations set forth in
Section 4.2. Once an Employee is designated a Participant, he shall remain a
Participant for the purposes specified in Section 5.1 and/or Section 5.2 until
the earlier of his death, retirement, disability, or termination of employment.
4.2 Limitations on Eligibility. The Committee may select as Participants
in this Plan only those Employees who are "Eligible Employees" in the Profit
Sharing Plan (as defined therein) and whose share of contribution are
forfeitures under the Profit Sharing Plan are limited by:
(a) Section 415 of the Code; or
(b) Any other provision of the Code or ERISA, provided that the
Employee is among "a select group of management or highly
compensated Employees" of the Company, within the meaning
of Sections 201, 301, and 401 of ERISA, such that the Plan
with respect to benefits attributable to this subsection
(b) qualifies for a "top hat" exemption from
38
<PAGE>
most of the substantive requirements of Title I of ERISA.
ARTICLE FIVE. BENEFITS AND ACCOUNTS
-----------------------------------
5.1 Accounts. An account shall be established for each Participant. Each
year there shall be credited to each Participant's account the difference
between (a) the aggregate amount of Company contributions and forfeitures which
would have been allocated to the account of the Participant in the Profit
Sharing Plan without regard to the contribution limitations described in Section
4.2 hereof; and (b) the amount of Company contribution and forfeitures actually
allocated to the account of the Participant in the Profit Sharing Plan.
5.2 Earnings Factor. In addition to the credit under Section 5.1, if any,
an earnings factor shall be credited to each Participant's account at the end of
each calendar quarter. Such earnings factor shall be equal to the rate of return
that the Participant's account earned under the Profit Sharing Plan for that
calendar quarter; provided that the rate of return for a Participant who no
longer has a Profit Sharing Plan account shall be based upon the Participant's
Profit Sharing Plan investment allocation immediately prior to final
distribution of his Profit Sharing Plan account. Notwithstanding the foregoing,
a Participant may elect to receive after termination of employment an earnings
factor equal to the rate of return in any one of the investment funds (exclusive
of the Grainger Stock Fund) available under the Profit Sharing Plan. Such
election shall be made on a form approved by the Committee, shall not be given
effect unless it is submitted to the Committee or its designee at least 12
months prior to the Participant's termination of employment, and shall remain in
effect until the Participant's vested account balance under this Plan has been
distributed.
5.3 Distribution Upon Termination of Employment. In the event of a
Participant's termination of employment for any reason other than death, the
Participant's vested account balance under this Plan shall become payable to the
Participant in the form of five annual installments, provided that a vested
account balance less than $100,000 shall be paid in a lump sum within ninety
(90) days after the end of the calendar quarter in which termination occurs.
39
<PAGE>
Notwithstanding, a Participant whose vested account balance is $100,000
or greater may elect, on a form approved by the Committee, to receive
distribution of his or her vested account balance in the form of a lump sum
payment or in the form of annual installments paid over a period not to exceed
the lesser of 15 years or the Participant's remaining life expectancy. Such
election shall not be given effect unless it is submitted to the Committee or
its designee at least 12 months prior to the Participant's termination of
employment. Life expectancy shall be calculated as of the end of the calendar
year during which the Participant's employment is terminated, and shall not
thereafter be recalculated.
The first annual installment, or a lump sum payment, if properly
elected, shall be paid to the Participant within ninety (90) days after the end
of the calendar quarter in which termination of employment occurs. The remaining
installments shall be paid in the first calendar quarter of each subsequent
year.
The amount of each annual installment shall be equal to the quotient
obtained by dividing the value of the Participant's vested account balance on
the effective date of the related employment termination (and on the date of
each subsequent installment, as appropriate) by the number of years remaining in
the distribution period including that installment. The Participant's vested
account balance shall continue to accrue earnings, as specified in Section 5.2,
until the entire vested account balance has been paid.
5.4 Death Benefit. In the event of a Participant's death, the
Participant's entire remaining account balance shall be paid in a lump sum,
within ninety (90) days after the end of the calendar quarter in which such
death occurs, to the Participant's beneficiary, as such beneficiary was
designated by the Participant in accordance with the Company's beneficiary
designation procedures.
In the event a Participant dies without having designated a beneficiary,
or with no surviving beneficiary, the Participant's account balance shall be
paid in a lump sum to the Participant's estate within ninety (90) days after the
end of the calendar quarter in which death occurs.
40
<PAGE>
5.5 Alternative Payment Form. Notwithstanding the terms and conditions
of Section 5.3, a Participant may at any time on or after his termination of
employment petition the Committee to request that payment of his remaining
vested account balance be made in a lump sum due to circumstances of compelling
personal hardship. The Committee, at its sole discretion, shall make a binding
determination as to whether such alternative form of payment will be allowed.
ARTICLE SIX. VESTING
--------------------
Vesting. Subject to Section 8.1, each Participant shall become vested in
his account balance under this Plan at the same rate and at the same time as he
becomes vested in his account balance in the Profit Sharing Plan.
ARTICLE SEVEN. AMENDMENT AND TERMINATION
----------------------------------------
7.1 Amendment. The Company shall have the power at any time and from time
to time to amend this Plan by resolution of its Board of Directors, provided
that no amendment shall be adopted the effect of which would be to deprive any
Participant of his vested interest in his account under this Plan.
7.2 Termination. The Company reserves the right to terminate this Plan at
any time by resolution of its Board of Directors. Subject to Section 8.1, upon
termination of this Plan, each Participant shall become fully vested in his
account balance and such account balance shall become payable at the same time
and in the same manner as provided in Article Five.
41
<PAGE>
ARTICLE EIGHT. MISCELLANEOUS
----------------------------
8.1 Funding. This Plan shall be unfunded. No contributions shall be made
to any separate funding vehicle. The Company may set up reserves on its books of
account evidencing the liability under this Plan. To the extent that any person
acquires an account balance hereunder or a right to receive payments from the
Company, such right shall be no greater than the right of a general unsecured
creditor.
8.2 Limitation of Rights. Nothing in the Plan shall be construed to:
(a) Give any Employee any right to participate in the Plan
except in accordance with the provisions of the Plan;
(b) Limit in any way the right of the Company to terminate an
Employee's employment; or
(c) Evidence any agreement or understanding, express or
implied, that the Company will employ an Employee in any
particular position or at any particular rate of
remuneration.
8.3 Nonalienation. No benefits under this Plan shall be pledged,
assigned, transferred, sold or in any manner whatsoever
anticipated, charged, or encumbered by an Employee, former
Employee, or their beneficiaries, or in any manner be liable for
the debts, contracts, obligations, or engagements of any person
having a possible interest in the Plan, voluntary or involuntary,
or for any claims, legal or equitable, against any such person,
including claims for alimony or the support of any spouse.
8.4 Controlling Law. This Plan shall be construed in accordance with
the laws of the State of Illinois in every respect, including
without limitation, validity, interpretation, and performance.
42
<PAGE>
8.5 Text Controls. Article headings are included in the Plan for
convenience of reference only, and the Plan is to be construed without any
reference to such headings. If there is any conflict between such headings and
the text of the Plan, the text shall control.
IN WITNESS WHEREOF, the Company has caused this Plan, as amended and
restated herein, to be signed and attested by its duly qualified officers and
caused its corporate seal to be hereunto affixed on this 29th day of April,
1992.
W.W. Grainger, Inc.
By: [D.W. Grainger ]
----------------
Chairman
Attest:
[J.M. Baisley]
- --------------
Secretary
43
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 64,685
<SECURITIES> 0
<RECEIVABLES> 620,177
<ALLOWANCES> 19,203
<INVENTORY> 773,214
<CURRENT-ASSETS> 1,543,662
<PP&E> 1,301,776
<DEPRECIATION> 613,772
<TOTAL-ASSETS> 2,612,475
<CURRENT-LIABILITIES> 902,792
<BONDS> 124,457
0
0
<COMMON> 53,866
<OTHER-SE> 1,448,516
<TOTAL-LIABILITY-AND-EQUITY> 2,612,475
<SALES> 1,195,194
<TOTAL-REVENUES> 1,195,194
<CGS> 773,647
<TOTAL-COSTS> 773,647
<OTHER-EXPENSES> 346,770
<LOSS-PROVISION> 3,553
<INTEREST-EXPENSE> 6,102
<INCOME-PRETAX> 69,263
<INCOME-TAX> 28,052
<INCOME-CONTINUING> 41,211
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 41,211
<EPS-BASIC> 0.44
<EPS-DILUTED> 0.44
</TABLE>
