CHICAGO, July 19, 2016 /PRNewswire/ -- Grainger (NYSE: GWW) today reported results for the 2016 second quarter ended June 30, 2016. Sales of $2.6 billion increased 2 percent versus $2.5 billion in the second quarter of 2015. There were 64 selling days in the 2016 second quarter, the same as the 2015 second quarter. Net earnings for the quarter of $173 million were down 22 percent versus $221 million in 2015. Earnings per share of $2.79 declined 14 percent versus $3.25 in 2015.

Second quarter results contained the following special items that the company believes are not indicative of ongoing operations and have been removed to provide better comparability with prior periods. Excluding the special items in both years noted below, net earnings decreased 20 percent and earnings per share decreased 12 percent.



                                             Three Months Ended

                                                  June 30,
                                                  --------


                                               2016               2015 % Change
                                               ----               ---- --------

    Diluted Earnings Per Share as reported:   $2.79              $3.25          (14)%

       Restructuring (United States)         (0.09)

       Inventory reserve adjustment (Canada)   0.12

       Restructuring (Canada)                  0.09

       Restructuring (Unallocated expense)     0.09

       Discrete tax item                     (0.11)

       Restructuring (Other Businesses)                     0.02

             Subtotal                          0.10               0.02
                                               ----               ----

    Diluted Earnings Per Share as adjusted:   $2.89              $3.27          (12)%
                                              =====              =====

"Grainger and our industry remain challenged by the difficult industrial environment. The U.S. business performed slightly below our expectations due to lower sales volume that was partially offset by better than expected gross profit margins. We managed expenses tightly in the quarter given the lower sales volume. Our Canadian business continued to be affected by low oil prices, the fires in Fort McMurray and unfavorable foreign exchange. While these headwinds will likely remain in the near term, we have confidence in our Canadian leadership team and the steps we are taking to return to long-term profitability. A bright spot for the quarter was the continued strong performance of our single channel online businesses, which posted topline growth of 34 percent," said Chairman, President and Chief Executive Officer Jim Ryan. Ryan concluded, "Despite the significant shortfall in Canada, which contributed to quarterly performance below our expectations, I have great confidence that we have positioned Grainger to capitalize on the attractive growth opportunity in the large and fragmented MRO market."

The company also revised its 2016 sales and earnings per share guidance and now expects sales growth of 1 to 4 percent and earnings per share of $11.20 to $12.20 for the year. The company's previous 2016 guidance, communicated on April 18, 2016, included sales growth of 0 to 6 percent and earnings per share of $11.00 to $12.80.

Company
Sales increased 2 percent in the 2016 second quarter versus the prior year. The sales performance included a 4 percentage point contribution from Cromwell Group (Holdings) Limited, acquired on September 1, 2015. Excluding this acquisition, organic sales declined 2 percent driven by a 1 percentage point decrease in volume and a 1 percentage point reduction in price.

Company operating earnings of $306 million for the 2016 second quarter declined 14 percent versus $357 million in the 2015 quarter. The decline was driven by lower sales, lower gross profit margins and higher operating expenses. Excluding the items detailed in the table above in both years, operating earnings declined 10 percent in the quarter.

The company has two reportable business segments, the United States and Canada, which represented approximately 82 percent of company sales for the quarter. The remaining operating businesses are located in Europe, Asia and Latin America. The single channel online businesses are included in Other Businesses and are not reportable segments.

United States
Sales for the U.S. segment declined 3 percent versus the 2015 second quarter. The 3 percent decline was driven by a 2 percentage point decrease in volume and a 2 percentage point decline in price, partially offset by a 1 percentage point contribution from increased sales to Zoro, the single channel online business in the United States. Retail and Government customers posted the strongest sales growth in the quarter.

Operating earnings for the U.S. segment declined 6 percent in the quarter driven by lower sales and lower gross profit margins, partially offset by lower operating expenses. Gross profit margins for the quarter declined 0.9 percentage points driven by unfavorable customer mix and price deflation outpacing cost deflation. Operating expenses for the segment were down 4 percent in the quarter versus the 2015 second quarter.

The quarter included $6 million of restructuring costs for the U.S. segment driven by previously announced branch closures and the offshoring of some IT support functions. These charges were more than offset by $15 million in gains on the sale of branch real estate for a net restructuring benefit of $9 million, or $0.09 per share. Excluding restructuring, operating expenses were down 2 percent and operating earnings were down 8 percent.

Canada
Second quarter 2016 sales for Acklands-Grainger declined 19 percent in U.S. dollars and 16 percent in local currency. The 16 percent decline consisted of 14 percentage points from lower volume and 2 percentage points from the wildfires in Alberta. The business in Canada continued to be affected by a weak economic environment, resulting in lower sales to most customer end markets. Daily sales in the province of Alberta, which represents about a third of the company's business in Canada, were down 28 percent versus the prior year, while daily sales for all other provinces were down 11 percent.

The business in Canada posted a $28 million operating loss in the 2016 second quarter versus operating earnings of $9 million in the prior year, driven by the sales decline, a lower gross profit margin and negative expense leverage. The gross profit margin in Canada declined 12 percentage points versus the prior year, primarily due to a large inventory adjustment along with cost of goods inflation exceeding price inflation due to unfavorable foreign exchange. Operating expenses declined 3 percent in the quarter due to lower SAP project costs and lower advertising costs, partially offset by restructuring costs.

During the quarter, the Canadian business recognized a negative adjustment to inventory of $10 million, or $0.12 per share. This adjustment was based on additional visibility of inventory performance provided by the recent conversion to the U.S. SAP system. Restructuring costs for the Canadian business in the quarter were $8 million, or $0.09 per share, primarily related to severance. Excluding these items, operating expenses were down 12% and the business posted an operating loss of $10 million.

Other Businesses
Sales for the Other Businesses increased 49 percent for the 2016 second quarter versus the prior year, consisting of 31 percentage points from Cromwell, 17 percentage points from volume and price and a 1 percentage point benefit from foreign exchange. Strong organic performance for the Other Businesses was driven by 34 percent daily sales growth for the single channel online businesses, partially offset by lower sales in Latin America.

Operating earnings for the Other Businesses of $30 million in the 2016 second quarter were up 96 percent versus $15 million the prior year. This performance was driven by strong operating results from Zoro in the United States and MonotaRO in Japan. Cromwell's business also contributed to the earnings growth in the quarter.

Unallocated Expenses
Unallocated expenses of $45 million increased 22 percent in the 2016 second quarter versus $37 million in the prior year quarter. The increase was driven primarily by a $9 million, or $0.09 per share, write-down of a corporate aircraft that the company plans to sell in connection with the outsourcing of the aviation department.

Other Income and Expense
Other income and expense was a net expense of $23 million in the 2016 second quarter versus a net expense of $8 million in the 2015 second quarter. This increase was primarily due to interest expense from the $1 billion of debt issued in 2015 and the $400 million of debt issued in May 2016, along with the planned losses from the company's investments in clean energy.

Income Tax
For the quarter, the effective tax rate in 2016 was 36.6 percent versus 35.4 percent in 2015. The 2016 second quarter included a $0.11 per share benefit from the effective settlement of certain federal income tax issues under audit for the years 2009 through 2012. Excluding this discrete benefit, the company's effective tax rate was 39.1 percent. The effective tax rate for the 2015 second quarter, excluding a year-to-date adjustment for the benefit from the company's first clean energy investment, was 36.9 percent. The year-over-year increase in the tax rate, excluding the settlement benefit, was primarily due to a larger proportion of earnings from higher tax rate jurisdictions and lower benefit from the clean energy investments in the quarter. The company currently projects an effective tax rate, excluding discrete items, of 36.8 to 37.8 percent for the full year 2016 versus 35.2 to 36.2 percent provided on April 19, 2016. This increase is driven by the expectation of continued earnings concentration in higher tax rate jurisdictions and lower benefit from the clean energy investments.

Cash Flow
Operating cash flow was $173 million in the 2016 second quarter versus $213 million in the 2015 second quarter. The company used the cash generated during the quarter along with short term borrowings and proceeds from the 2016 debt offering to invest in the business and return cash to shareholders through share repurchase and dividends. Capital expenditures were $54 million in the 2016 second quarter versus $71 million in the second quarter of 2015. In the 2016 second quarter, Grainger returned $315 million to shareholders through $75 million in dividends and $241 million to buy back 1,033,000 shares of stock.

Year-to-Date
For the six months ended June 30, 2016, sales of $5.1 billion increased 2 percent versus $5.0 billion in the six months ended June 30, 2015. There were 128 selling days in the first six months of 2016, one more than in 2015. Net earnings decreased 17 percent to $359 million versus $432 million in the first half of 2015. Earnings per share for the six months decreased 9 percent to $5.77 versus $6.32 in the first half of 2015.

Year-to-date results contained special items that the company believes are not indicative of ongoing operations and have been removed to provide better comparability with prior periods. Excluding the special items in both six-month periods noted below, net earnings decreased 13 percent and earnings per share decreased 5 percent.



                                              Six Months Ended

                                                  June 30,
                                                  --------


                                               2016               2015 % Change
                                               ----               ---- --------

    Diluted Earnings Per Share as reported:   $5.77              $6.32          (9)%

       Restructuring (United States)           0.07

       Inventory reserve adjustment (Canada)   0.12

       Restructuring (Canada)                  0.13

       Restructuring (Unallocated expense)     0.09

       Discrete tax item                     (0.11)

       Restructuring (Other Businesses)                     0.05

             Subtotal                          0.30               0.05
                                               ----               ----

    Diluted Earnings Per Share as adjusted:   $6.07              $6.37          (5)%
                                              =====              =====

W.W. Grainger, Inc., with 2015 sales of $10 billion, is North America's leading broad line supplier of maintenance, repair and operating products (MRO), with operations also in Europe, Asia and Latin America.

Visit www.grainger.com/investor to view information about the company, including a history of sales by segment and a podcast regarding 2016 second quarter results. The Grainger website also includes more information through our Fact Book and Corporate Social Responsibility report.

Safe Harbor Statement
All statements in this communication, other than those relating to historical facts, are "forward-looking statements" based on our current view of the competitive market and the overall environment. Factors that could cause our actual results to differ materially from those statements include, among other risks and uncertainties, a major loss of customers or suppliers, competitive pressures, legal proceedings, changes in laws and regulations, general economic, industry or market conditions, technological or operational disruptions, natural and other catastrophes and other factors that can be found in our filings with the Securities and Exchange Commission, including our most recent Forms 10-K and 10-Q, which are available on our Investor Relations website. We disclaim any obligation to update or revise any forward-looking statement, except as required by law.




                                                             CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited)

                                                              (In thousands, except for per share amounts)


                                                                                  Three Months Ended                        Six Months Ended
                                                                                       June 30,                                 June 30,
                                                                                       --------                                 --------

                                                                         2016                                 2015        2016               2015
                                                                         ----                                 ----        ----               ----

    Net sales                                                                    $2,563,668                          $2,522,565                   $5,070,206  $4,962,226

    Cost of merchandise sold                                        1,523,609                              1,449,133               2,985,094        2,795,052
                                                                    ---------                              ---------               ---------        ---------

    Gross profit                                                    1,040,059                              1,073,432               2,085,112        2,167,174

    Warehousing, marketing and administrative expenses                734,470                                716,715               1,462,431        1,459,209
                                                                      -------                                -------               ---------        ---------

    Operating earnings                                                305,589                                356,717                 622,681          707,965

    Other income and (expense)

    Interest income                                                       162                                    277                     327              469

    Interest expense                                                 (16,806)                               (4,184)               (30,531)         (5,819)

    Loss from equity method investment                                (5,427)                               (4,302)               (11,815)         (4,302)

    Other non-operating income and (expense)                            (538)                                   178                    (98)         (1,988)
                                                                         ----                                    ---                     ---           ------

    Total other income and (expense)                                 (22,609)                               (8,031)               (42,117)        (11,640)
                                                                      -------                                 ------                 -------          -------

    Earnings before income taxes                                      282,980                                348,686                 580,564          696,325

    Income taxes                                                      103,535                                123,451                 209,475          256,944
                                                                      -------                                -------                 -------          -------

    Net earnings                                                      179,445                                225,235                 371,089          439,381
                                                                      -------                                -------                 -------          -------

    Net earnings attributable to noncontrolling interest                6,769                                  4,687                  11,700            7,818
                                                                        -----                                  -----                  ------            -----

    Net earnings attributable to W.W. Grainger, Inc.                               $172,676                            $220,548                     $359,389    $431,563
                                                                                   ========                            ========                     ========    ========

    Earnings per share                                                                $2.81                               $3.28                        $5.81       $6.38

      -Basic
                                                                                                                                                                  ===

      -Diluted                                                                        $2.79                               $3.25                        $5.77       $6.32
                                                                                      =====                               =====                        =====       =====

    Average number of shares outstanding                               60,891                                 66,652                  61,279           66,939

      -Basic
                                                                                                                                                       ===

      -Diluted                                                         61,302                                 67,317                  61,700           67,648
                                                                       ======                                 ======                  ======           ======


    Diluted Earnings Per Share
    --------------------------

    Net earnings as reported                                                       $172,676                            $220,548                     $359,389    $431,563

    Earnings allocated to participating securities                    (1,539)                               (2,146)                (3,280)         (4,360)
                                                                       ------                                 ------                  ------           ------

    Net earnings available to common shareholders                                  $171,137                            $218,402                     $356,109    $427,203
                                                                                   ========                            ========                     ========    ========

    Weighted average shares adjusted for dilutive securities           61,302                                 67,317                  61,700           67,648


                                                                                                                                                       ===

    Diluted earnings per share                                                        $2.79                               $3.25                        $5.77       $6.32
                                                                                      =====                               =====                        =====       =====



                                    SEGMENT RESULTS (Unaudited)

                                     (In thousands of dollars)


                                                                Three Months Ended June 30,            Six Months Ended June 30,
                                                                ---------------------------            -------------------------

                                                                                       2016                                  2015           2016                   2015
                                                                                       ----                                  ----           ----                   ----

    Sales

    United States                                                                           $1,978,542                                           $2,030,633             $3,944,809  $4,002,088

    Canada                                                                          194,418                                         239,466                    373,189      473,996

    Other Businesses                                                                474,166                                         318,898                    919,500      616,697

    Intersegment sales                                                             (83,458)                                       (66,432)                  (167,292)    (130,555)
                                                                                    -------                                         -------                   --------     --------

    Net sales to external customers                                                         $2,563,668                                           $2,522,565             $5,070,206  $4,962,226
                                                                                            ----------                                           ----------             ----------  ----------


    Operating earnings

    United States                                                                             $348,938                                             $369,533               $680,795    $735,622

    Canada                                                                         (27,741)                                          9,499                   (40,088)      18,886

    Other Businesses                                                                 29,724                                          15,158                     51,508       24,684

    Unallocated expense                                                            (45,332)                                       (37,473)                   (69,534)    (71,227)
                                                                                    -------                                         -------                    -------      -------

    Operating earnings                                                                        $305,589                                             $356,717               $622,681    $707,965
                                                                                              --------                                             --------               --------    --------


    Company operating margin                                                          11.9%                                          14.1%                     12.3%       14.3%

    ROIC* for Company                                                                                                                25.0%                     32.4%

    ROIC* for United States                                                                                                          43.2%                     48.7%

    ROIC* for Canada                                                                                                               (13.5)%                      5.8%


*The GAAP financial statements are the source for all amounts used in the Return on Invested Capital (ROIC) calculation. ROIC is calculated using operating earnings divided by net working assets (a 3-point average for the year). Net working assets are working assets minus working liabilities defined as follows: working assets equal total assets less cash equivalents (3-point average of $95.4 million, deferred taxes, and investments in unconsolidated entities, plus the LIFO reserve (3-point average of $388.0 million). Working liabilities are the sum of trade payables, accrued compensation and benefits, accrued contributions to employees' profit sharing plans, and accrued expenses.




                                     CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

                                                        Preliminary

                                                 (In thousands of dollars)


    Assets                                           June 30, 2016                December 31, 2015
    ------                                           -------------                -----------------

    Cash and cash equivalents                                          $315,997                          $290,136

    Accounts receivable - net                            1,310,382                           1,209,641

    Inventories                                          1,418,678                           1,414,177

    Prepaid expenses and other
     assets (1)                                            179,727                             134,688
                                                           -------                             -------

    Total current assets                                 3,224,784                           3,048,642

    Property, buildings and
     equipment - net                                     1,418,705                           1,431,241

    Deferred income taxes                                   27,485                              83,996

    Goodwill                                               590,109                             582,336

    Intangibles - net                                      437,521                             463,294

    Other assets                                           266,200                             248,246
                                                           -------                             -------

    Total assets                                                     $5,964,804                        $5,857,755
                                                                     ----------                        ----------

    Liabilities and Shareholders' Equity
    ------------------------------------

    Short-term debt                                                    $372,854                          $353,072

    Current maturities of long-
     term debt                                             132,620                             247,346

    Trade accounts payable                                 628,659                             583,474

    Accrued compensation and
     benefits                                              203,401                             196,667

    Accrued contributions to
     employees' profit sharing
     plans                                                  35,950                             124,587

    Accrued expenses                                       250,573                             266,702

    Income taxes payable                                    17,287                              16,686
                                                            ------                              ------

    Total current liabilities                            1,641,344                           1,788,534

    Long-term debt (2)                                   1,765,809                           1,388,414

    Deferred income taxes and tax
     uncertainties                                         135,950                             154,352

    Employment-related and other
     non-current liabilities                               179,127                             173,741

    Shareholders' equity                                 2,242,574                           2,352,714
                                                         ---------                           ---------

    Total liabilities and
     shareholders' equity                                            $5,964,804                        $5,857,755
                                                                     ==========                        ==========


    (1)              Prepaid expenses and other
                     assets increased $45 million
                     primarily due to increases in
                     prepaid income tax and software
                     maintenance contracts.

    (2)              Long-term debt increased $377
                     million primarily due to the
                     issuance of $400 million of
                     senior notes in May 2016.



                                               CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

                                                                       Preliminary

                                                                (In thousands of dollars)


                                                                                      Six Months Ended
                                                                                          June 30,
                                                                                          --------

                                                                                                              2016 2015
                                                                                                              ---- ----

    Cash flows from operating activities:

    Net earnings                                                                                          $371,089                 $439,381

    Provision for losses on accounts
     receivable                                                                                              8,282           4,630

    Deferred income taxes and tax
     uncertainties                                                                                          39,087           1,995

    Depreciation and amortization                                                                          113,496         106,937

    Gains from sales of assets, net of asset
     impairment                                                                                           (15,564)           (51)

    Stock-based compensation                                                                                21,135          27,043

    Losses from equity method investment                                                                    11,815           4,302

    Change in operating assets and liabilities - net of business
     acquisitions and divestitures:

    Accounts receivable                                                                                   (98,394)       (50,586)

    Inventories                                                                                              8,733          26,075

    Prepaid expenses and other assets                                                                     (40,665)          6,929

    Trade accounts payable                                                                                  43,338        (29,144)

    Other current liabilities                                                                            (128,960)      (169,123)

    Current income taxes payable                                                                           (1,368)          (847)

    Accrued employment-related benefits cost                                                                 3,877           4,231

       Other - net                                                                                         (9,512)        (2,267)
                                                                                                            ------          ------

    Net cash provided by operating activities                                                              326,389         369,505
                                                                                                           -------         -------

    Cash flows from investing activities:

    Additions to property, buildings and
     equipment                                                                                           (105,717)      (170,873)

    Proceeds from sales of assets                                                                           43,119          10,119

    Equity method investment                                                                              (10,340)       (10,190)

    Net cash received for business divestiture                                                                   -          1,114

    Other - net                                                                                              (597)          (567)
                                                                                                              ----            ----

    Net cash used in investing activities                                                                 (73,535)      (170,397)
                                                                                                           -------        --------

    Cash flows from financing activities:

    Net increase (decrease) in short-term debt                                                              19,083        (24,774)

    Net increase (decrease) in long-term debt                                                              261,476         970,250

    Proceeds from stock options exercised                                                                   26,191          35,549

    Excess tax benefits from stock-based
     compensation                                                                                            9,770          17,106

    Purchase of treasury stock                                                                           (412,647)      (442,595)

    Cash dividends paid                                                                                  (147,480)      (153,906)
                                                                                                          --------        --------

    Net cash (used in) provided by financing
     activities                                                                                          (243,607)        401,630
                                                                                                          --------         -------

    Exchange rate effect on cash and cash
     equivalents                                                                                            16,614         (7,596)
                                                                                                            ------          ------

    Net change in cash and cash equivalents                                                                 25,861         593,142

    Cash and cash equivalents at beginning of
     year                                                                                                  290,136         226,644
                                                                                                           -------         -------

    Cash and cash equivalents at end of period                                                            $315,997                 $819,786
                                                                                                          ========                 ========

SUPPLEMENTAL INFORMATION - CONSOLIDATED STATEMENTS OF EARNINGS
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (Unaudited)
(In thousands of dollars)

The company supplemented the reporting of financial information determined under U.S. generally accepted accounting principles (GAAP) with certain non-GAAP financial measures, which the company refers to as "adjusted" measures, including adjusted operating earnings, adjusted segment operating earnings, adjusted net earnings and adjusted diluted earnings per share. Adjusted measures exclude items that may not be indicative of core operating results. The company believes that these non-GAAP measures provide meaningful information to assist shareholders in understanding financial results and assessing prospects for future performance. Management believes adjusted operating earnings, adjusted net earnings and adjusted diluted earnings per share are important indicators of operations because they exclude items that may not be indicative of our core operating results, and provide a better baseline for analyzing trends in our underlying businesses. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names. These adjusted financial measures should not be considered in isolation or as a substitute for reported results. These non-GAAP financial measures reflect an additional way of viewing aspects of operations that, when viewed with GAAP results, provide a more complete understanding of the business. The company strongly encourages investors and shareholders to review company financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure.

The reconciliations provided below reconcile the non-GAAP financial measures adjusted net earnings, adjusted diluted earnings per share, adjusted operating earnings and adjusted segment operating earnings with GAAP financial measures:




                                   Three Months Ended June 30,                Six Months Ended June 30,
                                   ---------------------------                -------------------------

                                     2016                      2015%            2016                    2015%
                                     ----                       ----             ----                     ----

    Operating earnings reported               $305,589                      $356,717      (14%)                    $622,681             $707,965 (12%)

    Restructuring (United States) (9,352)                                -                            7,055                   -

    Inventory reserve adjustment
     (Canada)                       9,847                                 -                            9,847                   -

    Restructuring (Canada)          8,055                                 -                           11,132                   -

    Restructuring (Unallocated
     expense)                       8,947                                 -                            8,947                   -

    Restructuring (Other
     Businesses)                        -                            2,066                                       -                4,086
                                      ---                            -----                                     ---                -----

    Subtotal                       17,497                             2,066                            36,981               4,086
                                   ------                             -----                            ------               -----

    Operating earnings adjusted               $323,086                      $358,783      (10%)                    $659,662             $712,051  (7%)
                                              ========                      ========                               ========             ========



                                         SUPPLEMENTAL INFORMATION - CONSOLIDATED STATEMENTS OF EARNINGS

                                        RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (Unaudited)

                                                            (In thousands of dollars)


                                                                                                          Three Months Ended                    Six Months Ended
                                                                                                               June 30,                             June 30,
                                                                                                               --------                             --------

                                                                                                                        2016              2015%                               2016           2015%
                                                                                                                        ----               ----                                ----            ----

    Segment operating earnings adjusted

    United States                                                                                                    339,586            369,533                             687,850         735,622

    Canada                                                                                                           (9,839)             9,499                            (19,109)          18,886

    Other Businesses                                                                                                  29,724             17,224                              51,508          28,770

    Unallocated expense                                                                                             (36,385)          (37,473)                            (60,587)        (71,227)
                                                                                                                     -------            -------                             -------         -------

    Segment operating earnings adjusted                                                                                      $323,086                            $358,783     (10%)                 $659,662 $712,051 (7%)
                                                                                                                             ========                            ========                           ======== ========


    Company operating margin adjusted                                                                                  12.6%             14.2%                              13.0%          14.3%

    ROIC* for Company                                                                                                                                              26.5%            32.5%

    ROIC* for United States                                                                                                                                        43.6%            48.7%

    ROIC* for Canada                                                                                                                                              (6.3%)             5.8%



    *Adjusted ROIC is
     calculated as defined on
     page 8, excluding the
     items adjusting operating
     earnings as noted above.



                                  Three Months Ended                                    Six Months Ended
                                       June 30,                                             June 30,
                                       --------                                             --------

                               2016                    2015     %                                2016          2015           %
                               ----                    ----    ---                               ----          ----          ---

    Net earnings reported               $172,676            $220,548              (22%)                             $359,389     $431,563 (17%)

    Restructuring (United
     States)                (5,852)                                           4,415

    Inventory reserve
     adjustment (Canada)      7,240                                     7,240

    Restructuring (Canada)    5,922                                     8,184

    Restructuring
     (Unallocated expense)    5,599                                     5,599

    Discrete tax item       (7,075)                                  (7,075)

       Restructuring (Other
        Businesses)                                  1,676                                     3,504
                                                     -----                                     -----

       Subtotal               5,834                   1,676                      18,363                  3,504

    Net earnings adjusted               $178,510            $222,224              (20%)                             $377,752     $435,067 (13%)
                                        ========            ========                                                ========     ========


    Diluted earnings per
     share reported                        $2.79               $3.25              (14%)                                $5.77        $6.32  (9%)

    Restructuring (United
     States)                 (0.09)                                     0.07

    Inventory reserve
     adjustment (Canada)       0.12                                      0.12

    Restructuring (Canada)     0.09                                      0.13

    Restructuring
     (Unallocated expense)     0.09                                      0.09

    Discrete tax item        (0.11)                                   (0.11)

    Restructuring (Other
     Businesses)                                      0.02                                      0.05
                                                      ----                                      ----

    Subtotal                   0.10                    0.02                        0.30                   0.05
                               ----                    ----                        ----                   ----

    Diluted earnings per
     share adjusted                        $2.89               $3.27              (12%)                                $6.07        $6.37  (5%)
                                           =====               =====                                                   =====        =====


To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/grainger-reports-results-for-the-2016-second-quarter-300300329.html

SOURCE W.W. Grainger, Inc.