Laura Brown - Senior Vice President, Communications and Investor Relations Bill Chapman - Senior Director, Investor Relations.

heavy manufacturing, natural resources and retail were up in the low double-digits; light manufacturing and commercial were up in the high single-digits; government was up in the mid single-digits; reseller was up in the low single-digits; and contractor was down in the low single-digits.

Sales in Canada for March were down 7%, but were up 1% in local currency. The 1% sales increase consisted of 5 percentage points benefit from the timing of Good Friday partially offset by 4 percentage points decline in volume.

The volume decline was driven by lower sales to the construction, light manufacturing, mining, retail, government and reseller customer end-markets partially offset by growth to customers in the utilities, forestry, heavy manufacturing, and oil and gas customer end-markets.

Sales for our Other Businesses increased 16% in March, consisting of 19 percentage points from volume and price, 1 percentage point benefit from the timing of Good Friday, partially offset by 4 percentage points from unfavorable foreign exchange. Sales growth in the Other Businesses was driven by Zoro Tools and the businesses in Mexico and Japan.

In local currency, sales for the business in Japan grew more than 30%, but were partially offset by a weaker Japanese yen versus the U.S. dollar. Looking ahead to April, daily sales growth to date in April is running in line with the sales growth we reported for March.

Keep in mind however that we will face some headwinds from the Easter holiday in the back half of the month. Now, I would like to turn the discussion over to Bill Chapman..

Thanks, Laura. Since we have already analyzed company operating performance, let’s jump right into results by reportable segment. Operating earnings in the United States increased 7% versus the 2013 first quarter, while operating margins were flat at 18.7%.

Gross profit margins for the quarter decreased 30 basis points driven by lower gross margins from the newly acquired businesses and faster growth with lower margin customers.

Operating expenses grew at a slower rate than sales, which included incremental expenses from the acquired businesses and $26 million in incremental growth and infrastructure-related spending on areas such as new sales representatives, e-commerce and advertising. For the U.S.

business on an organic basis, excluding acquisitions, gross profit margins increased 40 basis points to 46.9% versus 46.5% in 2013 driven by price inflation exceeding cost inflation. Operating margin increased 30 basis points to 19.2% versus 18.9% in 2013 reflecting higher gross margins, partially offset by negative expense leverage.

Let’s move on to our business in Canada. Operating earnings decreased 35% versus the prior year. The decrease was driven by the 10% sales decline, lower gross profit margins and negative expense leverage.

Gross margins in Canada decreased 20 basis points versus the prior year, primarily due to higher freight costs, along with the effect of unfavorable foreign exchange from products sourced from the United States.

Also contributing to the lower operating performance was increased payroll, benefits and severance, and approximately $2 million in incremental spending related to IT system investments.

We continue to invest in the business in Canada through this tougher macroeconomic environment to strengthen our operations and better position the business for the long-term. The Other Businesses generated $8 million in operating earnings in the 2014 and 2013 first quarters.

This performance included strong results from Zoro Tools partially offset by lower performance from the businesses in Latin America and costs to evaluate the new online business in other markets.

Below the operating line, other income and expense was a net expense of $2.7 million in the 2014 first quarter versus $1.4 million in the 2013 first quarter. For the quarter, the effective tax rate in 2014 was 37.7% versus 37.3% in 2013.

The increase was primarily due to more earnings in the United States relative to other jurisdictions with lower tax rates. We are still projecting an effective tax rate of 37.4% to 37.8% for the full year 2014. Lastly, let’s take a look at cash flow for the quarter. Operating cash flow was $168 million versus $176 million in 2013.

The lower cash flow was driven primarily by lower trade accounts payable balances related to the timing of inventory purchases. We used the cash flow and cash flow on hand to invest in the business and return cash to shareholders through share repurchase and dividends. Capital expenditures for the quarter were $66 million versus $43 million in 2013.

We paid dividends of $65 million, reflecting the 16% increase in the quarterly dividend announced in April of 2013. In addition, we bought back 615,000 shares of stock for $150 million and ended the quarter with 3 million shares remaining on our share repurchase authorization. In total, we returned $215 million to shareholders in the quarter.

As reported in our 2014 first quarter earnings release, we reiterated our 2014 sales and earnings per share guidance. The sales guidance range remains at 5% to 9% growth. It’s important to note that we slightly revised the composition. The low end reflects more volume contribution and less price realization.

Let’s look more closely at the underlying elements of our expectations. Let’s start with gross profit margins. For the full year, on an organic basis, we continue to expect gross margin expansion to reach 30 basis points at the high-end driven primarily by the United States.

On a reported basis, we are forecasting minimal gross margin expansion versus 2013 due to lower gross margins from the acquired businesses.

For the 2014 second quarter, we expect organic gross profit margins to be down approximately 15 basis points due primarily to one-time inventory transition costs in Canada in preparation for the relocation to the new distribution center in Toronto.

On a reported basis, we are expecting gross profit margins to decrease by about 60 basis points due to the acquired businesses. Please keep in mind that as you model margins for the second quarter and the remainder of the year, our first quarter included supplier support provided for our annual customer tradeshows.

As a result, both gross profit and operating expenses as a percent of sales are inflated by about 100 basis points. Let’s take a closer look at company operating margin expectations. In 2014, we anticipate operating margin contraction in the first half followed by operating margin expansion in the second half.

This is due to the carryover effect of the 2013 second half growth and infrastructure spending and the acquisition of the lower margin businesses. For the full year, on an organic basis, we continue to expect 15 to 45 basis points of operating margin expansion.

On a reported basis, we are forecasting full year operating margin expansion of 10 to 40 basis points, reflecting negative mix from the acquisitions.

For the 2014 second quarter, on an organic basis, operating margins are forecasted to decline 40 to 80 basis points due to the incremental growth and infrastructure spending anticipated in the second quarter. Please see Exhibit 4 for more information.

For the 2014 second quarter, on a reported basis, operating margins could decline 50 to 100 basis points. Please mark your calendar for the following upcoming events. On April 30, we will host our Annual Meeting of Shareholders. The script from the presentation will be available on our website following the event.

On May 6, DG Macpherson, Senior Vice President and Group President, Global Supply Chain and International, will present at the Robert W. Baird Growth Stock Conference in Chicago. The event will be webcast. And finally, we will release April sales on Tuesday, May 13. Overall, we are pleased with our start to 2014.

We continue to invest in the business to gain share and deliver solid returns to shareholders. And we appreciate your support and thank you for your interest in Grainger. If you have any questions, please contact Laura Brown at 847-535-0409, Casey Darby at 847-535-0099 or me at 847-535-0881. Thank you..