New glossary details supply chain vocabulary
Grainger records flat sales, lower earnings in third quarter
Danaher sees earnings, sales increase in Q3 2003
Barnes Distribution posts increases in third quarter
Motion Industries sees sales, profit decline in third quarter
Industrial production rises after decrease in August
Sales, income surge for ITW
Sales and earnings falter for Textron in third quarter
Danaher to acquire stationary scanner manufacturer
Precision Industries' Keith Davis to retire
Parker Hannifin records flat sales, lower income in Q1 2004
August machine tool consumption increases over July
AIT posts income growth on lower sales in Q1 2004
Eaton posts increased sales, income during third quarter
Precision Twist Drill names new president
SKF's profits slip in third quarter
3M forms new business group to address packaging
Fastenal posts increased third quarter financials
Baldor sees sales, earnings increase in third quarter
Norcross Safety Products acquires KCL
Grainger sets growth course by expanding market presence

New glossary details supply chain vocabulary
Industrial Data & Information Inc. published the first edition of a new resource for professionals in the supply chain field, the Glossary of Supply Chain Terminology For Logistics, Manufacturing, Warehousing & Technology.

This glossary is for experienced professionals in supply chain software, operations, logistics or warehousing. There are thousands of acronyms that exist today; this handbook takes the mystery out of those and explains what they mean.

The glossary will greatly help new logistics professionals learn faster. New and experienced professionals are challenged to know the many industry terms used in warehousing, transportation, computers, EDI, government, manufacturing, standards, business and with various organizations.

"Most glossaries are intended for a single industry, but a supply chain expert must have robust knowledge in multiple industries," said Industrial Data & Information president Philip Obal. "This glossary is a multi-industry glossary and helps the system integrators, IT staff, consultants, executives, new users and expert users as it targets supply chain professionals as the primary audience."

Reviews of the glossary, table of contents, book cover image and author's picture and biography are available on IDII's Web site. 

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Grainger records flat sales, lower earnings in third quarter
Grainger reported flat sales and a 3 percent decline in diluted earnings per share for its third quarter ended Sept. 30. Sales were $1.2 billion in both the 2003 and 2002 third quarters. Net earnings of $56.8 million decreased 5 percent and diluted earnings per share were 62 cents vs. 64 cents for the 2002 third quarter.

Sales for the nine months ended Sept. 30 were $3.5 billion, flat compared to the 2002 period. Net earnings increased 11 percent to $165 million and diluted earnings per share were $1.79 vs. $1.57 in the 2002 period. Net earnings for 2002 included a 4 cents per share gain on sale of securities and a 25 cents per share goodwill impairment charge.

"We are committed to returning the company to sustained revenue growth. The completion of our logistics network in early 2004 will provide a solid foundation to improve service to our customers," said Grainger chairman and CEO Richard L. Keyser. "We recently announced a multi-year program to expand our presence in the United States by enhancing our branch network and increasing sales coverage in 25 major metropolitan markets and selected secondary markets. I expect to see accelerated sales growth in the future as this program unfolds."

He added: "We now expect sales for the full year to be essentially flat since revenues are not developing as expected. Additionally, we are reducing our 2003 earnings per share range to $2.43 to $2.51 due to lower revenues and implementation expenses related to our branch expansion and ongoing cost control programs."

Sales in the branch-based distribution segment were flat vs. the prior year third quarter. The sluggish economy and weak sales of seasonal products contributed to a sales decline of 1 percent in the United States. Overall performance in this segment benefited from incremental spending by government accounts and approximately $2.5 million of sales related to Hurricane Isabel. Sales processed through Grainger.com increased 13 percent to $125 million from $110 million in the 2002 third quarter.

Sales in Canada were up 9 percent for the quarter due to the effect of a favorable Canadian exchange rate. In local currency, this business experienced a 4 percent sales decrease. Operating earnings for this segment declined 1 percent vs. the 2002 third quarter. Increased operating expenses related to the logistics network project and higher health care costs contributed to the decline in earnings.

As a result of a required accounting reclassification, gross profit and operating expenses increased by the same amount; therefore, there was no effect on operating earnings.

Sales for direct marketer Lab Safety Supply increased 6 percent. Excluding revenues from the Gempler's business acquired April 14, sales were down 3 percent. These results reflect ongoing weakness in the manufacturing sector, which represents approximately half of Lab Safety's sales. Operating earnings of $11 million for this segment were down 19 percent, due primarily to increases in catalog media expense and integration costs associated with the Gempler's acquisition.

Sales for Grainger Integrated Supply were down 12 percent during the quarter due to fewer customer locations and lower sales to existing customers. Operating earnings for this segment were $700,000 vs. $1.7 million in the 2002 third quarter, due to lower fee revenue and higher operating expenses primarily related to a systems upgrade.

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Danaher sees earnings, sales increase in Q3 2003
Danaher Corp. reported third quarter net sales of $1.3 billion, 14 percent higher than the $1.2 billion reported during the third quarter a year ago. Third quarter net earnings reached $138.6 million, or 87 cents per share, up from corresponding 2002 period earnings of $116 million, or 74 cents per share.

For the first three quarters of 2003, Danaher generated net sales of $3.8 billion, up 15 percent from $3.3 billion during the prior-year period. Net earnings for the period were $366.9 million, or $2.31 per share, up from $302.4 million, or $1.95 per share, the year before.

"We are again pleased to report record third quarter results. Although we continue to operate in a challenging economic environment, we achieved an 18 percent increase in earnings per share for the quarter,” said Danaher president and CEO H. Lawrence Culp Jr. “Sales for the quarter grew 14 percent compared to last year’s third quarter, driven primarily by revenues from recent acquisitions. Operating cash flow was a record $619 million for the 2003 nine month period and 10 percent higher than in 2002. Organic growth remains a priority. We have recently seen some encouraging developments in our businesses, but we will continue to drive cost reductions to fund our targeted growth opportunities.”

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Barnes Distribution posts increases in third quarter
Barnes Distribution reported third quarter sales of $103.8 million, up $31.8 million, or 44 percent, from $72 million in the same quarter a year ago.

Kar Products, which Barnes Group purchased in February 2003, contributed $30.8 million of sales in the most recent quarter. 

Barnes Distribution generated operating profit of $7.4 million in the third quarter, up sharply from operating profit of $2.4 million in the third quarter of 2002.

"This was a solid quarter for Barnes Distribution; beyond tripling operating profit, the integration of Kar is running ahead of our original schedule, and our new sales growth initiatives are performing very well," said Barnes Group president and CEO Edmund M. Carpenter. "Our national and regional customer development efforts, e-commerce platforms and new Tier 2 relationships together contributed $5.9 million in sales to the most recent quarter, up from $1.8 million last year. We added more than 50 new national and regional customers, bringing to 249 the total new customers gained since January 2002."

He added: "During the quarter, we continued to integrate Kar Products into Barnes Distribution, achieving a number of milestones. As a result of the progress we have made to date, we believe that Kar will be substantially integrated in the United States by the end of the year, and the integration in Canada, which includes the construction of a new distribution center, will be completed in the first half of 2004."

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Motion Industries sees sales, profit decline in third quarter
Motion Industries reported third quarter net sales of $557 million, down from net sales of $571 million during the third quarter last year. The subsidiary of Genuine Parts Co. posted operating profit of $34.2 million, down from $39 million the year before.

For the first nine months of the year, Motion Industries saw sales edge down to $1.7 billion, a decrease of less than 1 percent. Operating profit declined to $110.6 million from $126 million during the first nine months of 2002.

"Motion Industries, our industrial group, was down 3 percent for the quarter and down slightly for the nine months reflecting the contracting manufacturing economy and declining capacity utilization," said Genuine Parts chairman Larry Prince.

He added: "We are pleased with the initiatives in each segment and we are committed to the execution of these plans. Our priorities will be continued gradual sales improvement with close attention to operating costs and margin improvement."

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Industrial production rises after decrease in August
Industrial production increased 0.4 percent in September after declining 0.1 percent in August, according to the Federal Reserve. For the third quarter, total industrial production increased at an annual rate of 3.3 percent.

Manufacturing output, led by an increase in motor vehicle production, climbed 0.7 percent in September and rose at an annual rate of 2.9 percent in the third quarter. The output at utilities fell back 2.2 percent in September, and the output at mines was unchanged.

At 110.6 percent of its 1997 average, industrial production was 0.6 percent lower in September than its year-earlier level. Capacity utilization for total industry increased to 74.7 percent but was still 1.3 percentage points below the rate in September 2002 and 6.6 percentage points below its 1972-2002 average.

The 0.7 percent rise in manufacturing output in September reflected increases of 1.3 percent in the production of durables and 0.1 percent in nondurables. The factory operating rate moved up 0.4 percentage point in September, to 73.1 percent, but remained 1 percentage point below its year-earlier level.

The output of durables rose at an annual rate of 7.7 percent in the third quarter, but the output of nondurables declined 1.3 percent. 

Among durables, a 6.6 percent rise in the output of motor vehicles and parts in September more than reversed the production decline in August. The continued weakness in steel production contributed to a September decline of 0.3 percent in the index for primary metal products, which rose at an annual rate of only 1.9 percent in the third quarter. The output for computers and electronic products posted a 1.4 percent gain last month and was 10.9 percent above its year-earlier level.

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Sales, income surge for ITW
Illinois Tools Works (ITW) generated third quarter operating revenues of $2.5 billion, up from $2.4 billion during the third quarter last year. Net income reached $268.9 million for the quarter, or 87 cents per share, vs. net income of $245.5 million, or 80 cents per share, a year ago.

For the first nine months of the year, ITW reported operating revenues of $7.4 billion, up from operating revenues of $7 billion last year. Net income reached $740 million, or $2.40 per share, compared to net income of $489.6 million, or $1.59 per share, during the prior-year period.

"While we welcome the fact that our North American September revenue and income results were stronger than we originally anticipated, we remain cautious about a sustainable end market rebound in the fourth quarter of this year," said ITW chairman and CEO W. James Farrell.

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Sales and earnings falter for Textron in third quarter
Textron Inc. reported third quarter revenues of $2.2 billion, down from revenues of $2.5 billion last year. Net income reached $47 million, or 34 cents per share, vs. net income of $71 million, or 51 cents per share, in the prior-year period.

For the first nine months of the year, Textron recorded revenues of $7.1 billion vs. revenues of $7.6 billion a year ago. The company generated net income of $176 million, or $1.29 per share, during the first three quarters, up from a net loss of $255 million, or $1.81 per share, last year.

Textron's Fastening Systems business posted third quarter revenues of $404 million vs. revenues of $411 million during the same period last year. The segment generated profits of $10 million during the quarter, down from $21 million the year before.

For the first three quarters, Fastening Systems had revenues of $1.3 billion, up from $1.2 billion the year before. The unit reported profits of $49 million compared to profits of $52 million a year ago.

Textron's Industrial unit recorded third quarter revenues of $654 million, up from revenues of $647 million the year before. Profits fell to $23 million in Q3 from $36 million the year before.

During the first three quarters of the year, the Industrial unit saw revenues climb to $2.1 billion from $2 billion a year ago. Profits fell to $97 million from $108 million.

"Overall, we performed slightly above our range of expectations for the quarter, in spite of weaker than expected demand in our Fastening Systems, E-Z-GO and Jacobsen end markets," said Textron chairman, president and CEO Lewis B. Campbell. "Our extensive cost reduction initiatives, including restructuring, Textron Six Sigma and supply chain management, contributed significantly to our performance."

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Accu-Sort, a Telford, Pa., company with approximately $90 million in revenues, makes and markets stationary scanners used most commonly in manufacturing, distribution and sorting applications. First-year EPS accretion is expected to be minimal.

“Accu-Sort broadens Danaher’s footprint in the product identification space from marking and coding to include scanning, inspection and reading,” said Danaher president and CEO H. Lawrence Culp Jr. “The pending acquisition of Accu-Sort, less than a year after our Willett acquisition, and less than two years after our Videojet acquisition, demonstrates our commitment to the product identification market and positions us to grow one of our key strategic platforms. It also enables us to expand our served market and provides us with attractive new segments and opportunities.”

The acquisition remains subject to regulatory approval and other customary closing conditions.

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Precision Industries' Keith Davis to retire
Precision Industries branch division senior vice president Keith Davis retired Oct. 3 after 36 years with the company.

“We want to thank Keith for the many years of service and the many ways he has helped this company grow and prosper over the last three decades," said Precision Industries president and CEO Dennis Circo.

Davis began his career at Precision in 1967 as branch manager of Precision’s Des Moines, Iowa, location. Davis was promoted to vice president for corporate accounts and then served as vice president for Precision’s product groups. Before his retirement, Davis oversaw the day-to-day operations of Precision’s national network of branches as senior vice president, branch division.

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Parker Hannifin records flat sales, lower income in Q1 2004
Parker Hannifin Corp. reported fiscal first quarter 2004 net sales of $1.6 billion, even with net sales recorded during the prior-year period. First quarter net income reached $56.7 million, or 48 cents per share, compared to net income of $61 million, or 52 cents per share, during the company's fiscal 2003 first quarter.

With no recovery in industrial, mobile and aerospace demand, few of the company's operating units recorded year-over-year growth, yet all marked sequential improvements in operating margin.

"Our hard work is steadily paying off," said Parker CEO Don Washkewicz. "We have yet to see a sustained positive trend in order rates. We're implementing the Win Strategy throughout the company to build long-term earning power and enhanced cash flows from operations. Division by division, it is working."

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August machine tool consumptions increases over July
U.S. machine tool consumption totaled $151 million in August, up 16.6 percent from July but down 3.2 percent from the $155.9 million reported for August 2002, according to The Association for Manufacturing Technology (AMT) and the American Machine Tool Distributors' Association (AMTDA). 

With a year-to-date total of $1.2 billion, 2003 is down 16.1 percent compared to the same period in 2002.

"August orders and increased output among many of our customers appear to be signaling and end to the decline in the manufacturing technology investments," said AMT president John B. Byrd III. "While a capital spending recovery has not yet begun, better times certainly seem to be on the horizon."

U.S. machine tool consumption is also reported on a regional basis for five geographic break-downs of the United States.

Northeast region machine tool consumption in August rose to $23.2 million, 18.1 percent ahead of July's $19.7 million and 36.6 percent ahead of the total for August 2002. At $158.5 million, year-to-date consumption was off 21.2 percent compared to 2002 at the same time.

August machine tool consumption in the Southern region stood at $20 million, down 17.9 percent from July's $24.4 million, but up 6.8 percent compared to August a year ago. The year-to-date total of $269.4 million was up 8.8 percent from the comparable figure a year ago.

Totaling $65 million, August machine tool consumption in the Midwest was up 38.8 percent compared to July's $46.8 million, but down 9.6 percent from August 2002. With a year-to-date total of $478.3 million, 2003 was off 17.3 percent from 2002 at the same time.

At $26.7 million, August machine tool consumption in the Central region was slightly higher than July's $25.9 million, but off 18.6 percent compared to August a year ago. The year-to-date total of $200.2 million was off 24.3 percent compared to the same period in 2002.

Western region machine tool consumption in August rose to $16.6 million, up 30.1 percent from July's $12.8 million and up 2.5 percent compared to August a year ago. At $119.2 million, year-to-date 2003 was 29.7 percent lower than the comparable figure for 2002.

These numbers and all data in this report are based on the totals of actual data reported by companies participating in the United States Machine Tool Consumption (USMTC) report, jointly compiled by the two trade associations representing the production and distribution of manufacturing technology. The report provides regional and national U.S. consumption data of domestic and imported machine tools and related equipment.

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AIT posts income growth on lower sales in Q1 2004
Applied Industrial Technologies reported first quarter 2004 net sales of $361.4 million, compared to net sales of $368 million during the same period a year ago.

The company generated first quarter net income of $4.8 million, or 25 cents per share, vs. net income of $3.9 million, or 20 cents per share, during the prior-year period.

"While the economic outlook remains troubling, we continue to make progress on profit levels by focusing on margin management," said Applied chairman and CEO David L. Pugh.

He added: "Looking ahead, our sales guidance for our second quarter is $340 million to $350 million, with earnings per share between 20 cents and 25 cents. We are maintaining full year fiscal 2004 guidance for earnings between $1.10 and $1.20 per share with sales ranging from $1.4 billion to $1.5 billion."

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Eaton posts increased sales, income during third quarter
Eaton Corp. generated third quarter net sales of $2 billion, up from net sales of $1.8 billion during the third quarter last year. The company reported net income of $107 million, or $1.39 per share, compared to net income of $93 million, or $1.30 per share, during Q3 2002.

For the first nine months of the year, Eaton posted net sales of $6 billion, compared to net sales of $5.4 billion during the prior-year period. Net income reached $272 million, or $3.67 per share, vs. net income of $214 million, or $2.98 per share, last year.

"While our end markets remained depressed in the third quarter, we anticipate modest growth in the fourth quarter compared to last year, driven principally by a stronger heavy-duty truck market in North America," said Eaton chairman and CEO Alexander M. Cutler.

"We now anticipate full-year net income per share of $4.80 to $4.90 and fourth quarter net income per share of $1.15 to $1.25," he said.

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Precision Twist Drill names new president
Precision Twist Drill Co. of Crystal Lake, Ill., appointed Alan Godfrey as its new president. Formerly vice president of sales for Sandvik Coromant USA, Godfrey also served in various senior-level sales and marketing positions with Sandvik Coromant over the past 30 years. 

Precision Twist Drill manufactures three brands: Precision Twist Drill, Union Butterfield and Triumph Twist Drill.

“I look forward to leading our team in a positive direction in sales, marketing and product development to ensure that our distributor partners have the tools needed for success," Godfrey wrote in a letter to distributors

Tony Elfström, former president for Precision Twist Drill, will now join Sandvik Tooling NAFTA as vice president of business synergies.

In other news, the supply and manufacturing activities of Precision Twist Drill Co. will become part of Sandvik Tooling Production NAFTA effective Nov. 1. The Crystal Lake manufacturing facility will continue as prime supplier for the Precision Twist Drill.

This transition is in line with Sandvik Tooling’s brand strategy and business model in which the supply process generates synergies through the efficient management and utilization of resources across the entire Sandvik Tooling business area.

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SKF's profits slip in third quarter
SKF reported third quarter net sales of 10.1 billion kronor ($1.3 billion), up less than 1 percent from the same quarter a year ago. Net profit reached 503 million kronor ($65.5 million), down 13.6 percent from net profit the year before.

For the first nine months of 2003, SKF generated net sales of 31.1 billion kronor ($4 billion), down 2 percent from net sales generated for the first three quarters of 2002. Net profit for the first nine months was 1.6 billion kronor ($210 million), down 6.4 percent from the prior year period.

The market demand for SKF's products and services is expected to improve slightly during the fourth quarter, with demand in Europe unchanged, higher in North America and significantly higher in Asia, the company said in a press release. Manufacturing will be increased in line with market demand to maintain a high service level.

SKF said it will close the factories in Jamestown and Altoona in the U.S. The production in Jamestown, N.Y., and Altoona, Pa., will be transferred to other SKF facilities in North America. SKF also said it would cut 1,400 jobs as it restructures its Ovako Steel business.

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3M forms new business group to address packaging
3M introduced a suite of tools and services to help customers manage packaging-related issues more cost effectively. Its new Global Packaging Services group was formed in response to a fast-growing global market demand for more efficient packaging management solutions.

"Packaging is one of the last remaining frontiers in operational excellence," said 3M Industrial Services and Solutions Division vice president John Pohl. "Most companies focus on R&D and manufacturing, but have not considered packaging to be a strategic tool or a cost center. This missed opportunity is costing companies millions of dollars."

Using Six Sigma methodology, 3M evaluated its complex manufacturing processes and determined that it could reduce packaging-related expenses by $50 million over a five-year period, if it could streamline and centralize the global packaging process.

3M Global Packaging Services will help customers reduce packaging costs per unit produced. One of the key solutions includes the Integrated Packaging Tool from 3M, a Web-based system that integrates structural, textual and graphical packaging information.

The Integrated Packaging Tool also enables customers to integrate disparate databases; artwork; internal and external business rules; and equipment such as scanners, printers and other input/output devices. Additional services include optimization of customers' processes, packaging design, packaging line engineering and packaging automation.

"We start by evaluating each client's unique packaging needs by working through a rigorous assessment process. Then, we develop a solution that best meets those needs," said 3M Professional Services business manager Mike Haldane. "The solution may include 3M products and services and/or complementary services from 3M's partners."

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Fastenal posts increased third quarter financials
The Fastenal Company's net sales for the third quarter totaled $258.3 million, an increase of 8.5 percent over net sales of $238.1 million in the third quarter of 2002.

Net earnings increased from $19.1 million in the third quarter of 2002 to $23.3 million in the third quarter of 2003, an increase of 21.7 percent. Earnings per share increased from 25 cents to 31 cents for the comparable periods.

Net sales for the nine-month period ended Sept. 30, 2003, totaled $743.3 million, an increase of 8.3 percent over net sales of $686.2 million in the first nine months of 2002.

Net earnings increased from $58.7 million in the first nine months of 2002 to $64.2 million in the first nine months of 2003, an increase of 9.5 percent. Earnings per share increased from 77 cents to 85 cents for the comparable periods.

Fastenal management added the following to its earnings press release: "While Fastenal continues to feel the impacts of the weakened industrial economy, we noted the following during the first nine months of 2003: (1) the inventory increases experienced in 2002, and again in the first quarter of 2003, stopped, and decreased beginning in June 2003, (2) cash provided by operating activities strengthened over the prior year, primarily due to the reduction in inventory growth, and (3) the store conversion project (the Customer Service Project, or CSP) that began in 2002 surpassed the 50 percent completion point in August 2003."

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Baldor sees sales, earnings increase in third quarter
Baldor Electric Co. reported third quarter net sales of $139 million, up 3 percent from $135 million during the third quarter of 2002. The company generated net earnings of $6.1 million, or 18 cents per share, compared to net earnings of $5.2 million, or 15 cents per share, last year.

For the first three quarters of the year, Baldor posted net sales of $414.9 million, compared to net sales of $413.6 million in 2003. Net earnings reached $18.2 million, or 54 cents per share, in 2003, compared to $17.8 million, or 51 cents per share, through the first three quarters of 2002.

"For many years, we have focused on doing the right things for our customers, employees and shareholders, regardless of the pace of the economy," said Baldor chairman R.S. Boreham Jr. "We believe that our continued strategy of introducing new products, increasing our customer base, maintaining our workforce and strengthening our balance sheet positions us well for future growth."

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Norcross Safety Products acquires KCL
Norcross Safety Products president Robert Peterson recently announced that KCL, Kachele-Cama Latex GmbH, is the latest member of the growing Norcross family of companies.

KCL manufactures and markets hand protection products in Germany, Hungary and the Czech Republic. KCL will continue to market as a stand-alone company. Norcross Safety Products is the parent company of North Safety Products.

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Grainger sets growth course by expanding market presence
Grainger announced an extensive, multi-year branch expansion program to increase its market presence in the United States.

The program will begin with larger branches and additional sales personnel in three metropolitan markets: Atlanta, Denver and Seattle. Over the next three to five years, the company will assess and reinforce local availability of products and sales coverage to increase service to customers in 25 major metropolitan markets as well as in selected secondary markets.

Grainger expects to fund the first phase of the program by ongoing productivity improvements that reduce the company's overall cost structure.

Grainger anticipates that the initial stage of this program will accelerate sales growth and contribute to reaching its long-term goal of 7 percent to 10 percent.

"Grainger's value to its customers lies in getting products to them quickly and easily so they can maintain and repair their facilities," said Grainger chairman and CEO Richard L. Keyser. "This program enables us to have a greater breadth of products close to our customers, saving them both time and money. We are adding new branches and sales professionals in high potential markets. We are also expanding branches to add more warehousing and merchandising space, relocating branches to put them closer to our customers and closing some branches.

"Based on the results of recent pilots, which tested elements of this program, we expect that this strategy should drive annual sales growth in the initial markets by 10 percent to 15 percent per year through our planning horizon."

Product availability is key to helping customers reduce their inventory and save money. Grainger's branches provide immediate local availability across a broad product offering, and as a result of the three-year $200 million investment in its supply chain, the company will be positioned to provide next-day branch replenishment. The distribution centers also will provide most of the next-day customer shipping, so that employees at branches can focus on meeting customers' same-day needs.

Changing demographics and the need for comprehensive coverage require the company to look at expanding, relocating or adding branches. Actions to change Grainger's presence in three metropolitan markets are already underway with plans to add three new branches, relocate or expand seven branches and close two branches.

The company also plans to add or expand branches in 12 secondary markets. Due to the anticipated sales growth for these targeted markets, the return on this project is expected to exceed the company's cost of capital and improve its return on invested capital (ROIC).

In the first phase, Grainger expects to add more than 300,000 additional square feet, or approximately 50 percent more showroom and warehouse capacity. The additional inventory in these new or expanded branches should total more than $20 million; the company expects to hire approximately 100 additional sales professionals and branch associates to focus on customers' needs.

Plans call for capital expenditures of $25 million to $30 million for the branch projects in 2004. The company expects to offset the incremental expenses of this initial phase of the program with its ongoing productivity improvement programs; without these actions, the program would negatively impact operating earnings in 2004.

"Grainger's multi-channel model is what distinguishes us from our competition," said Keyser. "No other company has as broad a product line with tens of thousands of items immediately available all across the country."

He added, "It is our plan to focus on the major metropolitan areas while selectively acting on market opportunities in secondary markets as we have over the years. We will augment our branch expansion with an aggressive sales and marketing effort targeted to capture additional market share."

While the company already is seeing growth in sales to large, national accounts and government customers, the branch expansion should stimulate additional growth from these customers through all channels, including the Internet. Adding, relocating and expanding branches will also help Grainger's local customers, who rely more heavily on branches. Local customers are intense users of the branch system and they should react positively to greater inventory availability complemented by focused sales and marketing efforts.

This branch expansion program represents a systematic look at the company's network on a market-by-market basis. Since 1998, the company focused on upgrading its logistics network and improving customer service. For the past two years, economic factors have negatively affected sales. Sales growth from the first markets in the branch expansion program is expected to add an incremental $20 million to $30 million to annual sales in 2004.

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