Item 1. Financial Statements

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Item 1. Financial Statements

W.W. Grainger, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(In millions of dollars and shares, except for per share amounts)

(Unaudited)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2025		2024		2025		2024
Net sales	$	4,554	$	4,312	$	8,860	$	8,547
Cost of goods sold	2,799		2,618		5,395		5,185
Gross profit	1,755		1,694		3,465		3,362
Selling, general and administrative expenses	1,077		1,045		2,115		2,044
Operating earnings	678		649		1,350		1,318
Other expense (income):
Interest expense – net	20		20		41		41
Other – net	(3)		(7)		(9)		(14)
Total other expense – net	17		13		32		27
Earnings before income taxes	661		636		1,318		1,291
Income tax provision	153		146		310		304
Net earnings	508		490		1,008		987
Less net earnings attributable to noncontrolling interest	26		20		47		39
Net earnings attributable to W.W. Grainger, Inc.	$	482	$	470	$	961	$	948
Earnings per share:
Basic	$	9.99	$	9.54	$	19.87	$	19.20
Diluted	$	9.97	$	9.51	$	19.83	$	19.13
Weighted average number of shares outstanding:
Basic	48.0		49.0		48.1		49.1
Diluted	48.1		49.2		48.2		49.3

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

W.W. Grainger, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS

(In millions of dollars)

(Unaudited)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2025		2024		2025		2024
Net earnings	$	508	$	490	$	1,008	987
Other comprehensive earnings (losses):
Foreign currency translation adjustments	75		(57)		113		(111)


Postretirement benefit plan losses – net of tax expense of $1, $1, $2, and $2, respectively	(4)		(4)		(6)		(7)

Total other comprehensive earnings (losses)	71		(61)		107		(118)
Comprehensive earnings – net of tax	579		429		1,115		869
Less comprehensive earnings (losses) attributable to noncontrolling interest
Net earnings	26		20		47		39
Foreign currency translation adjustments	15		(20)		32		(42)
Total comprehensive earnings (losses) attributable to noncontrolling interest	41		—		79		(3)
Comprehensive earnings attributable to W.W. Grainger, Inc.	$	538	$	429	$	1,036	$	872

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

W.W. Grainger, Inc. and Subsidiaries

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions of dollars, except for share and per share amounts)


	As of
Assets	(Unaudited) June 30, 2025		December 31, 2024
Current assets
Cash and cash equivalents	$	597	$	1,036
Accounts receivable (less allowance for credit losses of $34 and $32, respectively)	2,472		2,232
Inventories – net	2,357		2,306
Prepaid expenses and other current assets	224		163


Total current assets	5,650		5,737
Property, buildings and equipment – net	2,107		1,927

Goodwill	365		355
Intangibles – net	267		243
Operating lease right-of-use	355		371
Other assets	193		196
Total assets	$	8,937	$	8,829

Liabilities and shareholders' equity
Current liabilities

Current maturities	$	2	$	499
Trade accounts payable	1,204		952
Accrued compensation and benefits	260		324

Operating lease liability	81		78
Accrued expenses	414		407
Income taxes payable	41		45
Total current liabilities	2,002		2,305
Long-term debt	2,341		2,279
Long-term operating lease liability	305		327
Deferred income taxes and tax uncertainties	102		101
Other non-current liabilities	104		114
Shareholders' equity
Cumulative preferred stock – $5 par value – 12,000,000 shares authorized; none issued or outstanding	—		—
Common Stock – $0.50 par value – 300,000,000 shares authorized; 109,659,219 shares issued	55		55
Additional contributed capital	1,414		1,399
Retained earnings	14,429		13,677
Accumulated other comprehensive losses	(199)		(274)
Treasury stock, at cost – 61,749,526 and 61,326,349 shares, respectively	(12,025)		(11,499)
Total W.W. Grainger, Inc. shareholders’ equity	3,674		3,358
Noncontrolling interest	409		345
Total shareholders' equity	4,083		3,703
Total liabilities and shareholders' equity	$	8,937	$	8,829

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

W.W. Grainger, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions of dollars)

(Unaudited)


	Six Months Ended
	June 30,
	2025		2024
Cash flows from operating activities:
Net earnings	$	1,008	$	987
Adjustments to reconcile net earnings to net cash provided by operating activities:
Provision for credit losses	13		12
Deferred income taxes and tax uncertainties	1		15
Depreciation and amortization	125		116
Non-cash lease expense	41		41


Stock-based compensation	35		34


Change in operating assets and liabilities:
Accounts receivable	(212)		(205)
Inventories	(19)		71
Prepaid expenses and other assets	(33)		(42)
Trade accounts payable	231		184
Operating lease liabilities	(53)		(47)
Accrued liabilities	(60)		(18)
Income taxes – net	(37)		(62)
Other non-current liabilities	(17)		(14)

Net cash provided by operating activities	1,023		1,072
Cash flows from investing activities:
Capital expenditures	(300)		(195)
Proceeds from sale of assets	4		1
Other – net	13		17


Net cash used in investing activities	(283)		(177)
Cash flows from financing activities:



Proceeds from debt	63		3
Payments of debt	(503)		(17)
Proceeds from stock options exercised	2		10
Payments for employee taxes withheld from stock awards	(30)		(40)
Purchases of treasury stock	(507)		(512)
Cash dividends paid	(225)		(206)
Other – net	(1)		(1)
Net cash used in financing activities	(1,201)		(763)
Exchange rate effect on cash and cash equivalents	22		(23)
Net change in cash and cash equivalents	(439)		109
Cash and cash equivalents at beginning of year	1,036		660
Cash and cash equivalents at end of period	$	597	$	769

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

W.W. Grainger, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(In millions of dollars, except for per share amounts)

(Unaudited)


	Common Stock		Additional Contributed Capital		Retained Earnings		Accumulated Other Comprehensive Earnings (Losses)		Treasury Stock		Noncontrolling Interest		Total
Balance at January 1, 2024	$	55	$	1,355	$	12,162	$	(172)	$	(10,285)	$	326	$	3,441
Stock-based compensation	—		8		—		—		2		—		10
Purchases of treasury stock	—		—		—		—		(277)		—		(277)
Net earnings	—		—		478		—		—		19		497
Other comprehensive earnings (losses)	—		—		—		(35)		—		(22)		(57)


Cash dividends paid ($1.86 per share)	—		—		(92)		—		—		(13)		(105)
Balance at March 31, 2024	$	55	$	1,363	$	12,548	$	(207)	$	(10,560)	$	310	$	3,509
Stock-based compensation	—		8		—		—		(15)		1		(6)
Purchases of treasury stock	—		—		—		—		(243)		(1)		(244)
Net earnings	—		—		470		—		—		20		490
Other comprehensive earnings (losses)	—		—		—		(41)		—		(20)		(61)

Cash dividends paid ($2.05 per share)	—		—		(101)		—		—		—		(101)
Balance at June 30, 2024	$	55	$	1,371	$	12,917	$	(248)	$	(10,818)	$	310	$	3,587

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

W.W. Grainger, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(In millions of dollars, except for per share amounts)

(Unaudited)


	Common Stock		Additional Contributed Capital		Retained Earnings		Accumulated Other Comprehensive Earnings (Losses)		Treasury Stock		Noncontrolling Interest		Total
Balance at January 1, 2025	$	55	$	1,399	$	13,677	$	(274)	$	(11,499)	$	345	$	3,703
Stock-based compensation	—		10		—		—		1		—		11
Purchases of treasury stock	—		—		—		—		(288)		—		(288)
Net earnings	—		—		479		—		—		21		500
Other comprehensive earnings (losses)	—		—		—		19		—		17		36


Cash dividends paid ($2.05 per share)	—		—		(99)		—		—		(16)		(115)
Balance at March 31, 2025	$	55	$	1,409	$	14,057	$	(255)	$	(11,786)	$	367	$	3,847
Stock-based compensation	—		6		—		—		(11)		1		(4)
Purchases of treasury stock	—		—		—		—		(228)		—		(228)
Net earnings	—		—		482		—		—		26		508
Other comprehensive earnings (losses)	—		—		—		56		—		15		71
Capital contribution	—		(1)		—		—		—		—		(1)
Cash dividends paid ($2.26 per share)	—		—		(110)		—		—		—		(110)
Balance at June 30, 2025	$	55	$	1,414	$	14,429	$	(199)	$	(12,025)	$	409	$	4,083

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

W.W. Grainger, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

W.W. Grainger, Inc. is a broad line, business-to-business distributor of maintenance, repair and operating (MRO) products and services with operations primarily in North America (N.A.), Japan and the United Kingdom (U.K.). In this report, the words “Grainger” or “Company” mean W.W. Grainger, Inc. and its subsidiaries, except where the context makes it clear that the reference is only to W.W. Grainger, Inc. itself and not its subsidiaries.

Basis of Presentation

The Company's Condensed Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial reporting and the rules and regulations of the U.S. Securities and Exchange Commission (SEC) and therefore do not include all information and disclosures normally included in the annual Consolidated Financial Statements. The preparation of these Condensed Consolidated Financial Statements and accompanying notes in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported. Actual results could differ materially from these estimated amounts. In the opinion of the Company’s management, the Condensed Consolidated Financial Statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation.

The Condensed Consolidated Balance Sheet at December 31, 2024, has been derived from the audited Consolidated Financial Statements at that date but does not include all of the information and footnotes required by GAAP for complete financial statements.

The Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and accompanying notes for the year ended December 31, 2024 included in the Company’s Annual Report on Form 10-K filed with the SEC on February 20, 2025 (2024 Form 10-K).

There were no material changes to the Company’s significant accounting policies from those disclosed in Note 1 of the Notes to Consolidated Financial Statements in Part II, Item 8: Financial Statements and Supplementary Data in the Company's 2024 Form 10-K.

W.W. Grainger, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

NOTE 2 - REVENUE

Grainger serves a large number of customers in diverse industries, which are subject to different economic and market-specific factors. The Company's revenue is primarily comprised of MRO product sales and related activities.

The Company's presentation of revenue by reportable segment and customer industry most reasonably depicts how the nature, amount, timing and uncertainty of the Company's revenue and cash flows are affected by economic and market-specific factors. The majority of Company revenue originates from contracts with a single performance obligation to deliver products, whereby performance obligations are satisfied when control of the product is transferred to the customer per the arranged shipping terms.

The following tables present the Company's percentage of revenue by reportable segment and by customer industry:


	Three Months Ended June 30,
	2025						2024
Customer Industry(1)	High-Touch Solutions N.A.		Endless Assortment		Total Company(2)		High-Touch Solutions N.A.		Endless Assortment		Total Company(2)
Manufacturing	30	%	30	%	30	%	31	%	30	%	31	%
Government	19	%	3	%	16	%	19	%	3	%	16	%
Wholesale	7	%	18	%	9	%	7	%	18	%	9	%
Commercial Services	7	%	12	%	8	%	7	%	12	%	8	%
Contractors	6	%	12	%	7	%	5	%	12	%	6	%
Healthcare	7	%	1	%	6	%	7	%	2	%	6	%
Retail	4	%	4	%	4	%	4	%	4	%	4	%
Transportation	4	%	2	%	4	%	4	%	2	%	4	%
Utilities	3	%	2	%	3	%	3	%	2	%	3	%
Warehousing	3	%	—	%	2	%	3	%	—	%	2	%
Other(3)	10	%	16	%	11	%	10	%	15	%	11	%
Total net sales	100	%	100	%	100	%	100	%	100	%	100	%
Percent of total company revenue	78	%	20	%	100	%	80	%	18	%	100	%


(1)Customer industry results for the three months ended June 30, 2025 and 2024 primarily use the North American Industry Classification System (NAICS). As customers' businesses evolve, industry classifications may change. When these changes occur, Grainger does not recast the customer classification for prior periods as the industry used in the prior period was appropriate at the point-in-time. As a result, year-over-year changes may be impacted.
(2)Total Company includes other businesses, which includes the Cromwell business. Other businesses account for approximately 2% of Total Company revenue for both the three months ended June 30, 2025 and 2024.
(3)Other primarily includes revenue from industries and customers that are not material individually, including hospitality, restaurants, property management and natural resources.

W.W. Grainger, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)


	Six Months Ended June 30,
	2025						2024
Customer Industry(1)	High-Touch Solutions N.A.		Endless Assortment		Total Company(2)		High-Touch Solutions N.A.		Endless Assortment		Total Company(2)
Manufacturing	30	%	30	%	30	%	31	%	29	%	31	%
Government	19	%	3	%	15	%	19	%	3	%	16	%
Wholesale	7	%	18	%	9	%	7	%	18	%	9	%
Commercial Services	7	%	12	%	8	%	7	%	12	%	8	%
Contractors	5	%	12	%	7	%	5	%	11	%	6	%
Healthcare	8	%	1	%	6	%	7	%	1	%	6	%
Retail	4	%	4	%	4	%	4	%	4	%	4	%
Transportation	4	%	2	%	4	%	4	%	2	%	4	%
Utilities	3	%	2	%	3	%	3	%	2	%	3	%
Warehousing	3	%	1	%	2	%	3	%	1	%	2	%
Other(3)	10	%	15	%	12	%	10	%	17	%	11	%
Total net sales	100	%	100	%	100	%	100	%	100	%	100	%
Percent of total company revenue	78	%	20	%	100	%	80	%	18	%	100	%


(1)Customer industry results for the six months ended June 30, 2025 and 2024 primarily use the North American Industry Classification System (NAICS). As customers' businesses evolve, industry classifications may change. When these changes occur, Grainger does not recast the customer classification for prior periods as the industry used in the prior period was appropriate at the point-in-time. As a result, year-over-year changes may be impacted.
(2)Total Company includes other businesses, which includes the Cromwell business. Other businesses account for approximately 2% of Total Company revenue for both the six months ended June 30, 2025 and 2024.
(3)Other primarily includes revenue from industries and customers that are not material individually, including hospitality, restaurants, property management and natural resources.

Total accrued sales incentives are recorded in Accrued expenses and were approximately $114 million and $109 million as of June 30, 2025 and December 31, 2024, respectively.

The Company had no material unsatisfied performance obligations, contract assets or liabilities as of June 30, 2025 and December 31, 2024.

NOTE 3 - PROPERTY, BUILDINGS AND EQUIPMENT

Property, buildings and equipment consisted of the following (in millions of dollars):


	As of
	June 30, 2025		December 31, 2024
Land and land improvements	$	435	$	415
Building, structures and improvements	1,866		1,723
Furniture, fixtures, machinery and equipment	2,050		1,945
Property, buildings and equipment	$	4,351	$	4,083
Less accumulated depreciation	2,244		2,156
Property, buildings and equipment – net	$	2,107	$	1,927

W.W. Grainger, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

NOTE 4 - GOODWILL AND OTHER INTANGIBLE ASSETS

The Company did not identify any significant events or changes in circumstances that indicated the existence of impairment indicators during the three and six months ended June 30, 2025. As such, quantitative assessments were not required.

The balances and changes in the carrying amount of goodwill by segment are as follows (in millions of dollars):


	High-Touch Solutions N.A.		Endless Assortment		Total
Balance at January 1, 2024	$	315	$	55	$	370


Translation	(9)		(6)		(15)
Balance at December 31, 2024	306		49		355


Translation	6		4		10
Balance at June 30, 2025	$	312	$	53	$	365

The Company's cumulative goodwill impairments as of June 30, 2025 were $137 million. No goodwill impairments were recorded for the three and six months ended June 30, 2025 and 2024.

The balances and changes in intangible assets – net are as follows (in millions of dollars):


		As of
		June 30, 2025						December 31, 2024
	Weighted average life	Gross carrying amount		Accumulated amortization		Net carrying amount		Gross carrying amount		Accumulated amortization		Net carrying amount
Customer lists and relationships	10.7 years	$	166	$	158	$	8	$	164	$	155	$	9
Trademarks, trade names and other	14.9 years	32		26		6		31		24		7
Non-amortized trade names and other	Indefinite	19		—		19		18		—		18
Capitalized software	4.5 years	785		551		234		714		505		209
Total intangible assets	5.9 years	$	1,002	$	735	$	267	$	927	$	684	$	243

W.W. Grainger, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

NOTE 5 - DEBT

Total debt, including long-term and current maturities, consisted of the following (in millions of dollars):


	As of
	June 30, 2025				December 31, 2024
	Carrying Value		Fair Value		Carrying Value		Fair Value
4.60% senior notes due 2045	$	1,000	$	884	$	1,000	$	894
4.45% senior notes due 2034	500		489		500		477
3.75% senior notes due 2046	400		329		400		332
4.20% senior notes due 2047	400		311		400		312
Japanese Yen term loans	62		62		—		—
Debt issuance costs – net of amortization and other	(21)		(21)		(21)		(21)
Long-term debt	2,341		2,054		2,279		1,994


1.85% senior notes due 2025(1)	—		—		500		498
Other	2		2		(1)		(1)
Current maturities	2		2		499		497
Total debt	$	2,343	$	2,056	$	2,778	$	2,491

(1)On February 18, 2025, Grainger repaid in full the principal amount of $500 million for the 1.85% Senior Notes that matured in February 2025. The related interest rate swaps with a notional value of $450 million that hedged a portion of the interest rate risk related to this debt expired on February 15, 2025.

Senior Notes

Between 2015 and 2024, Grainger issued $2.8 billion in unsecured debt (Senior Notes) primarily to provide flexibility in funding general working capital needs, share repurchases and long-term cash requirements. The Senior Notes require no principal payments until maturity and interest is paid semi-annually.

The Company incurred debt issuance costs related to its Senior Notes, representing underwriting fees and other expenses. These costs were recorded as a contra-liability in Long-term debt and are being amortized over the term of the Senior Notes using the straight-line method to Interest expense – net. As of June 30, 2025 and December 31, 2024, the cumulative unamortized costs were $21 million and $22 million, respectively.

Japanese Yen Term Loans

In June 2025, MonotaRO entered into ¥9 billion term loan agreements to fund the expansion of its distribution center (DC) network. The Japanese Yen term loans mature in 2035, payable in equal monthly principal installments from September 2028 through June 2035, and bear a weighted average interest rate of 1.24%.

Fair Value

The estimated fair value of the Company’s Senior Notes was based on available external pricing data and current market rates for similar debt instruments, among other factors, which are classified as Level 2 inputs within the fair value hierarchy.

NOTE 6 - SEGMENT INFORMATION

Grainger's two reportable segments are High-Touch Solutions N.A. (HTSNA) and Endless Assortment (EA). These reportable segments align with Grainger's go-to-market strategies and bifurcated business models of high-touch solutions and endless assortment that generate sales primarily through the distribution of MRO products. The remaining businesses are classified as Other to reconcile to consolidated results. These businesses individually and in the aggregate do not meet the criteria of a reportable segment.

W.W. Grainger, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The operating and reportable segments reflect the way the chief operating decision maker (CODM) evaluates the business. All expenses directly attributable to each reportable segment are included in the operating results for each segment. The CODM is not regularly provided and does not evaluate the segments using total asset or capital expenditure information and it is therefore not disclosed. For further discussion on the CODM, see Note 12 of the Notes to Consolidated Financial Statements in Part II, Item 8: Financial Statements and Supplementary Data in the Company’s 2024 Form 10-K.

The following is a summary of segment results (in millions of dollars):


	Three Months Ended June 30,
	2025						2024
	High-Touch Solutions N.A.		Endless Assortment		Total		High-Touch Solutions N.A.		Endless Assortment		Total
Net sales(1)	$	3,544	$	929	$	4,473	$	3,458	$	776	$	4,234
Reconciliation of net sales
Other net sales					81						78
Total company net sales					$	4,554					$	4,312
Less:
Cost of goods sold	2,090		652				2,015		547
Other segment items(2)	865		185				852		168
Segment operating earnings	$	589	$	92	$	681	$	591	$	61	$	652
Reconciliation of operating earnings
Other operating earnings					(3)						(3)
Total company operating earnings					$	678					$	649


	Six Months Ended June 30,
	2025						2024
	High-Touch Solutions N.A		Endless Assortment		Total		High-Touch Solutions N.A		Endless Assortment		Total
Net sales(1)	$	6,941	$	1,757	$	8,698	$	6,863	$	1,527	$	8,390
Reconciliation of net sales
Other net sales					162						157
Total company net sales					$	8,860					$	8,547
Less:
Cost of goods sold	4,048		1,235				3,997		1,078
Other segment items(2)	1,704		358				1,665		329
Segment operating earnings	$	1,189	$	164	$	1,353	$	1,201	$	120	$	1,321
Reconciliation of operating earnings
Other operating earnings (losses)					(3)						(3)
Total company operating earnings					$	1,350					$	1,318

(1)Intersegment sales are recorded at values based on market prices, which creates intercompany profit sales that are eliminated within each segment to present only the impact of net sales to external customers.
(2)Other segment items for HTSNA and EA consist of selling, general and administrative expenses primarily comprised of payroll and benefits, marketing expense, depreciation, amortization and non-cash lease expense, corporate overhead expenses allocated to each segment based upon benefits received, occupancy and other miscellaneous expenses. Intersegment expenses including fees and certain incurred costs for shared services are also included within the amounts shown above.

W.W. Grainger, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Depreciation, amortization and non-cash lease expense presented below is related to long-lived assets, capitalized software and right-of-use assets. Long-lived assets consist of property, buildings and equipment.


	Three Months Ended June 30,				Six Months Ended June 30,
	2025		2024		2025		2024
Depreciation, amortization and non-cash lease expense:
High-Touch Solutions N.A.	$	61	$	59	$	119	$	113
Endless Assortment	20		17		39		35
Other	3		2		5		4
Total	$	84	$	78	$	163	$	152

Following is revenue by geographic location (in millions of dollars):


	Three Months Ended June 30,				Six Months Ended June 30,
	2025		2024		2025		2024
Revenue by geographic location(1):
United States	$	3,652	$	3,502	$	7,156	$	6,948
Japan	562		469		1,042		920
Canada	175		170		337		338
Other foreign countries	165		171		325		341
	$	4,554	$	4,312	$	8,860	$	8,547

(1)Revenue presented above is attributed to the destination country where the customer is located.

The Company is a broad line distributor of MRO products. Products are regularly added and removed from the Company's inventory. Accordingly, it would be impractical to provide sales information by product category due to the way the business is managed and the dynamic nature of the inventory offered, including the evolving list of products stocked and additional products available online but not stocked. For further information regarding the Company's sales by segment and customer industry, see Note 2.

NOTE 7 - CONTINGENCIES AND LEGAL MATTERS

From time to time the Company is involved in various legal and administrative proceedings, including claims related to: product liability, safety or compliance; privacy and cybersecurity matters; negligence; contract disputes; environmental issues; unclaimed property; wage and hour laws; intellectual property; advertising and marketing; consumer protection; pricing (including disaster or emergency declaration pricing statutes); employment practices; regulatory compliance, including trade and export matters; anti-bribery and corruption; and other matters and actions brought by team members, consumers, competitors, suppliers, customers, governmental entities and other third parties.

The Company remains in litigation involving KMCO, LLC (KMCO) as previously disclosed. The Company continues to contest the remaining KMCO-related lawsuits and cannot reasonably predict the timing, outcome or any estimate of possible loss or range of losses on the remaining KMCO lawsuits.

NOTE 8 - SUBSEQUENT EVENTS

On July 4, 2025, the President of the United States enacted a comprehensive spending and policy bill that includes provisions related to corporate income tax reform. The Company is currently evaluating the financial statement impact of this legislation.

On July 30, 2025, the Company’s Board of Directors declared a quarterly dividend of $2.26 per share, payable September 1, 2025, to shareholders of record on August 11, 2025.

W.W. Grainger, Inc. and Subsidiaries

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

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