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This excerpt taken from the GWW 10-Q filed May 2, 2007. Results of Operations – Three Months Ended March 31, 2007 The following table is included as an aid to understanding the changes in Grainger’s Condensed Consolidated Statements of Earnings:
Grainger’s net sales of $1,546.7 million in the first quarter of 2007 increased 9.0% compared with sales of $1,419.1 million for the comparable 2006 quarter. First quarter 2007 sales benefited from the economy and ongoing strategic initiatives such as market expansion and product line expansion. Partially offsetting these improvements was the negative effect of the wind-down of low margin integrated supply contracts. An increase in net sales was realized in all three segments of the business.
The gross profit margin improved 0.7 percentage point to 40.9% for the first three months of 2007 from 40.2% in the comparable period of 2006. The primary driver of the gross profit margin improvement was positive inflation recovery. Operating expenses of $469.5 million in 2007 grew 7.7% over the prior year, driven by payroll and benefits, primarily the result of increased headcount and higher incentive compensation, commission and profit sharing accruals. Operating earnings for the first quarter of 2007 totaled $162.6 million, an increase of 21.0% over the first quarter of 2006 due to the increase in gross profit margin and operating expenses growing at a slower rate than sales.
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