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. We will share with you some information regarding Grainger's Third Quarter 2012 Results via this audio webcast. Please also reference our 2012 third quarter earnings release issued today, October 16, 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. Before I discuss the quarter, I'd like to first highlight the $0.66 per share reserve for the expected settlement with the U.S. Department of Justice, which includes the following 2 parts: number one, a $70 million pretax charge for the proposed settlement in principle with the DOJ over the interpretation of contract language signed more than 10 years ago with the General Services Administration and the U.S. Postal Service; and second, a $6 million pretax reserve related to tax, freight and miscellaneous billings for these customers. We are close to having this longstanding dispute behind us. It is important to note that the proposed settlement does not any admission of wrongdoing by the company and avoids costly and lengthy litigation. The GSA contract dates back to 1999 and the government remains one of our larger customer end markets. As a case in point, throughout the multi-year audit, the government continued to buy from Grainger and in fact, increased its purchasing during that time. In 2011 alone, our sales to the GSA and the U.S.…

Thanks, Laura. Since we've already analyzed company operating performance, let's jump right into performance by reporting segment. Again, we have excluded the $0.66 per share charge described at the beginning of this podcast. Operating earnings in the United States increased 7% versus the 2011 third quarter, and the U.S. operating increased 50 basis points to 18.2%. This performance was driven by 4% sales growth and higher gross margins. 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 increased in line with the sales increase and were primarily driven by $19 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 37% versus the prior year, up 38% in local currency. Strong sales growth, coupled with higher gross profit margins, and positive expense leverage, contributed to operating margins increasing 240 basis points to 12.5%. Gross margins increased 140 basis points, with roughly 2/3 of the expansion coming from the timing of supplier rebates and advertising credits. Operating performance for our Other Businesses declined versus a year ago, posting operating earnings of $9 million for the quarter versus $11 million in 2011. Strong performance improvement in Japan and Mexico was partially offset by losses from the acquired businesses in Europe and Brazil, along with losses at some of our startup businesses in developing markets. The operating loss in Europe was primarily driven by lower sales tied to the economy and lower gross margins related to unfavorable customer mix. Contributing to the loss in Europe were adjustments tied to the completion of the purchase price allocation. In Brazil, continued investments in expanding the sales force and product offering contributed to a…