W.W. Grainger (GWW)

I.  EARNINGS REVIEW

Sales in the first quarter benefited from the economy, market share gains, ongoing strategic initiatives and a favorable Canadian exchange rate. Partially offsetting these positive effects was the negative impact from the timing of the Easter holiday, which fell into the first quarter of 2005 versus the second quarter of 2004.

Sales were up 9% driven by an increase in both segments. The increase in the Branch-based Distribution segment was primarily driven by strengthening manufacturing and commercial sectors and a favorable Canadian exchange rate. Lab Safety benefited from the acquisition of AW Direct, Inc. Overall, March sales were negatively impacted by the timing of the Easter holiday.

W.W. Grainger, Inc. Supplemental Financial Information for the First Quarter Ended March 31, 2005

—2—

I.  EARNINGS REVIEW

Sales in the fourth quarter benefited from the economy, market share gains, ongoing strategic initiatives and a favorable Canadian exchange rate.

Daily sales were up 11% driven by an increase in the Branch-based Distribution segment and Lab Safety, partially offset by a decrease at Integrated Supply. The increase in the Branch-based Distribution segment was primarily driven by strengthening manufacturing and commercial sectors and a favorable Canadian exchange rate. Lab Safety’s increase was driven by growth in the sales of labware, material handling products, and signs and labels. The decrease at Integrated Supply was due to the disengagement of two large customers in late 2003 and the slowdown at two large existing customers, partially offset by incremental sales at sites added during 2004.

W.W. Grainger, Inc. Supplemental Financial Information for the Fourth Quarter Ended December 31, 2004

—2—