Laura Brown, Senior VP, Communications and Investor Relations Bill Chapman, Director, Investor Relations

Hello, this is Laura Brown, senior vice president of communications and investor relations. With me is Bill Chapman, director of investor relations. We are pleased to share with you an update regarding Grainger's second quarter 2011 results via this audio webcast. Please also reference our 2011 second quarter earnings release issued July 19 in addition to other information available on our Investor Relations website to supplement this webcast. Before we begin, please remember that certain statements and projections of future results made in the press release and in this webcast constitute forward-looking information. These statements are based on current market conditions and competitive and regulatory expectations and involve risk and uncertainty. Please see our Form 10-K for a discussion of factors that relate to forward looking statements. Strong sales growth, consistent execution, and impressive gross margin expansion was the story for the quarter. We are very pleased with our continued ability to gain share due to expanding our product line, our sales force, ecommerce capabilities, onsite services, and our international operations. As a result of the strong year-to-date performance, we have raised our full year sales and EPS guidance. We now expect sales to grow 9% to 10% and are forecasting EPS in the range of $8.40 to $8.70 for the full year 2011, excluding unusual items. Please note that our guidance reflects tougher comparisons on the top line, continued strong gross profit margins, and higher growth-related spending in the back half of the year. At the end of this recording, we'll talk in more detail about our revised guidance and our assumptions. We'll start with total company results, then dig deeper into our segments. Company sales increased 12% versus the 2010 second quarter. We had the same number of selling days this quarter as 2010, so reported sales growth…

Thanks Laura. Since we have already covered company opening performance, let's jump right into performance by segment. Reported operating earnings in the United States increased 17% in the 2010 second quarter and operating margins increased 120 basis points to 16.6%. If you exclude the benefit from the PTO change in 2010, operating earnings in the United States increased 22% and operating margins expanded 180 basis points versus the prior year. This performance was driven by 9% sales growth and a higher gross profit margin. Gross profit margins in the United States increased 120 basis points. The gross margin expansion was primarily due to an effective product cost management and the ability to raise prices with the market and ahead of product cost increases. Operating expenses grew in line with sales for the quarter and were up 6% excluding the PTO benefit from the prior year. Let's move on to our business in Canada. At the end of the 2010 fourth quarter, we shared with you the plan for improving performance. We're happy to report that we continued to make substantial progress in the 2011 second quarter as operating earnings increased 130% versus the prior year. Strong sales growth, coupled with higher gross profit margins and tight cost controls contributed to operating margins jumping 530 basis points to 11.4%. The gross margin expansion in Canada was driven by a number of factors, including product cost deflation tied to the tailwind created by the strength of the Canadian dollar. A first quarter price increase, less price discounting and a more favorable customer mix also contributed to the growth in gross profit margins in the second quarter. Having reached the anniversary of actions taken last year to improve gross margins, we are expecting roughly 25 to 50 basis points of year over year…