michael pulick vice president, product...
TRANSCRIPT
Michael PulickVice President, Product Management
May 2006
Forward-Looking StatementsThis presentation contains statements that are forward-looking; i.e., not historical facts. The forward-looking statements are based on the company’s current expectations, and some of them are subject to risks and uncertainties the outcome of which could result in actual future performance being materially different from the performance indicated. They should be considered in conjunction with the company’s most recent annual report, as well as the company’s Form 10-K and other reports filed with the United States Securities and Exchange Commission containing a discussion of the company’s business and of various factors that may affect it.
Agenda
Company Overview Growth DriversMargin Drivers
Company Overview
Who We Are
Founded in 1927
$5.5 billion in sales
16,700 employees
1.7 million customers
1,100 suppliers
Access to 800,000 products
Efficient Logistics Network
North America’s leading distributor of facilities maintenance supplies
Grainger’s Served Market
$5.5 B Grainger
> 95% Competitors
$140 billion opportunityin North America
Other competitors include: McMaster Carr at $2.5 B; Fastenal at $1.6 B; MSC at $1.2 B
Government17%
Heavy Mfg16%
Light Mfg10%
Retail8%
Commercial19%
Resellers8%
Transportation4%
Other4%
Contractors14%
Large, Diverse Customer Base
2005 U.S. sales by customer segment
Growth Drivers
Market Expansion Program
Market Expansion Sales Projection
$0
$200
$400
$600
$800
$1,000
$1,200
2004 2006 2008 2010 2012
$ in
mill
ions
2004A 2005A 2006E 2007E 2008E 2013ESales $41 $150 $245 - $275 $415 - $440 $550+ $1,100
*Program sales beyond normal economic growth in these markets, cumulative.
Program sales*
Market Expansion Operating Earnings Projection
-$50
$0
$50
$100
$150
$200
$250
2004 2006 2008 2010 2012
2004A 2005A 2006E 2007E 2008E 2013E
Operating earnings (loss) $(22) $(16) $(15) - $(25) $5 - $15 $50 - $60 $200+
$ in
mill
ions
Program operating earnings
Product Line Expansion
Motors4%
Power Transmission
3%
Lighting7%
Power Tools4%
Metal Working5%
HACR5%
Fluid Power5%
Hand Tools6%
Electrical7%
Ventilation7%
Cleaning9%
Matl Handling15%
Safety14%
Pumps/Plumbing9%
2005 U.S. sales by product line
Product Line Expansion
Product Line Expansion- 40 percent increase in 2006
- Fastener offering increased to 31,000 products
- $5 - $10M capital investment in 2006
- Expected to contribute 1% to sales growth in 2006
- Inventory investment $40 - $50M
2005 Catalog = 82,400 products2006 Catalog = 115,000 products
Margin Drivers
Product Line Reviews
Economic EarningsSupplier Scorecard– Delivery– Cost– Quality– Product Portfolio & Information
Product Expansion
Private Label and Global Sourcing
$0
$50
$100
$150
$200
$250
$300
$350
$ in
mill
ions
2000
2001
2002
2003
2004
2005
Globally Sourced Product SalesPlan to increase
private label portion of sales from 24 percent to 30 percent
Grainger sources five percent of its products outside the United States; primarily from Asia
Gross Margin
25%27%29%31%33%35%37%39%41%
2000 2001 2002 2003 2004 2005 20061Q
Appendix
2005 Guidance and Results
Guidance ResultsSales growth 8 - 11% 9.4%EPS $3.20 - $3.45 $3.78CapEx $150 - $175 MM $157 MMCash flow $325 - $375 MM $433 MM
2006 Company Guidance
Sales growth 8 - 11%Operating margin 10 - 10.5%EPS $4.00 - $4.15CapEx $140 - $165 MMCash flow $425 - $475 MM
Long Term Goals
2006-20102000-2005Sales growth
Operating margin
ROIC
7-10% 7-10%
10-12%9-10%
> 20% > 20%
Priorities for Cash
Fund growth initiativesDividends
Increased dividends by 21% in 200635 consecutive years of increasing dividends
Share repurchase2.4 million shares in 2005; 500K in 1Q 2006$150 to $200 million share repurchase expected 2006
Grainger Investor RelationsNancy A. Hobor
Senior Vice President, Communications and Investor Relations
(847) [email protected]
William D. ChapmanDirector, Investor Relations
(847) [email protected]