Laura D. Brown - Senior Vice President of Communications & Investor Relations William D. Chapman - Director of Investor Relations

Hello, this is Laura Brown, Senior Vice President of Communications and Investor Relations. With me is Bill Chapman, Senior Director of Investor Relations. The purpose of this podcast is to provide you with additional information regarding Grainger's fourth quarter 2012 results. Please also reference our 2012 fourth quarter earnings release issued today, January 24, 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. Today, we reported record results for the year 2012 and reiterated our earnings per share guidance for 2013. We'll discuss 2012 in more detail, as well as comment on January's strong sales start. At the very end of December, we experienced a dramatic slowdown in sales, contributing to quarterly performance that was below our guidance. In addition, there were 3 items included in our quarterly results that were not part of our November 14, 2012, earnings guidance: at $0.18 per share charge, primarily related to streamlining operations in Europe, India and China to improve the long-term performance of these businesses; a $0.03 per share charge related to the closure of branches in the United States; and a $0.04 per share impairment charge related to our Alliance Energy Solutions business acquired in 2009. The impairment was caused by lower-than-expected operating performance. A schedule detailing these items can be found in the earnings release. These 3 items combined represented a $0.25 reduction to earnings per share, resulting in adjusted fourth quarter earnings per share of…

Thanks, Laura. Since we've already analyzed company operating performance, let's jump right into performance by reporting segment. Operating earnings in the United States increased 17% versus the 2011 fourth quarter, and the U.S. operating margin increased 160 basis points to 16.2%. Excluding $10 million and $18 million in charges during the 2012 and 2011 quarters, operating earnings increased 12%,, and the U.S. operating margin increased 110 basis points to 16.8%. This performance was driven by the 5% sales growth, higher gross profit margins and positive expense leverage. Gross profit margins for the quarter increased 50 basis points, driven by price increases exceeding cost inflation, partially offset by unfavorable customer mix. Operating expenses grew at a slower rate than sales and included $1 million in incremental growth-related spending on areas such as new sales representatives, e-commerce and advertising. Let's move on to our business in Canada. Operating earnings increased 2% versus the prior year, down 2% in local currency. The increase in operating earnings was driven by favorable foreign exchange and modest expense leverage, partially offset by lower gross profit margins. Gross margins in Canada decreased 150 basis points versus the prior year. The decline was primarily due to unfavorable customer and product sales mix. Lower gross margins and higher operating expenses contributed to a 130 basis point decline in operating margins to 10.7%. Operating performance for our Other Businesses declined versus a year ago posting a loss of $10.4 million for the quarter versus operating earnings of $5 million in 2011. During the quarter, we decided to implement the following structural changes to the businesses in Europe, India and China to improve long-term performance, resulting in $13.7 million in restructuring charges. In Europe, we closed 6 underperforming shops and reduced headcount to better align the business with the weak economy…