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WW Grainger Inc  (NYSE:GWW)
Q4 2018 Earnings Conference Call
Jan. 24, 2019, 11:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings, and welcome to the W.W. Grainger's Fourth Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Irene Holman, Vice President, Investor Relations. Thank you. You may begin.

Irene Holman -- Vice President, Investor Relations

Good morning. Welcome to Grainger's Q4 earnings call. With me are D.G. Macpherson, Chairman and CEO; and Tom Okray, Senior Vice President and CFO. As a reminder, some of our comments today may be forward-looking based on our current view of future events. Actual results may differ materially as a result of various risks and uncertainties, including those detailed in our SEC filings. Reconciliations of any non-GAAP financial measures mentioned on today's call with their corresponding GAAP measures are at the end of the slide presentation and in our Q4 press release which is available on our IR website.

Looking at reported results for the year, we had adjustments resulting in $186 million impact to operating earnings and a $2.97 impact to EPS. Adjustments included $139 million of non-cash impairment charges related to the Cromwell business and restructuring primarily related to Canada. This morning's call, we'll focus on adjusted results which exclude the items outlined in our press release.

Now I'll turn it over to D.G. to discuss our 2018 performance. D.G., to you.

D.G. Macpherson -- Chairman & Chief Executive Officer

Thanks, Irene. Good morning. Thanks all of you for joining us this morning. 2018 was a strong year for Grainger, both in terms of our performance and in building the path for a long-term success. I am extremely proud of our team members in what they accomplished. Across the business, we remain laser-focused on enhancing our relationships with customers, which has put us in a better position to consistently gain share moving forward.

Let's take a look at what we accomplished in 2018. We drove significant share gains across large and mid-sized customers in the US as our value proposition continued to resonate on more relevant pricing. Our strong sales performance and favorable customer mix helped drive gross margin performance that was better than expected for the year and our diligence in managing costs resulted in significant operating expense leverage. We continued to enhance the customer experience with the Grainger brand in the US to better search capabilities, best-in-class fulfillment and by improving the end-to-end customer experience from order to delivery.

Feedback from customers has been very strong and improving over the last two years. In Canada, the structural reset of the business is complete and we exited the year with a profitable fourth quarter. This has been a tough road for our team members in Canada. I want to acknowledge all the work that they and our team members in the US put in to get Canada to profitability. We still have work ahead of us to stabilize volume performance, which I will talk about in a minute. Our single channel businesses, mainly MonotaRO and Zoro, continue to drive profitable growth. Daily sales grew 23% for our single channel model in 2018.

For our international businesses, the portfolio performed well and contributed to operating margin expansion in the year. Across the business, we drove strong operating expense leverage. We achieved $130 million in cost savings and productivity, net of digital investments which was above our target with $80 million to $120 million. For the year, operating expenses grew at half the rate of sales. Last January, we mentioned our plan to make incremental digital investments to accelerate progress with our offering in the US. Since then we've combined our Gamut and Grainger.com capabilities and made incremental investments in digital marketing. We also invested in our Zoro business to build out our endless assortment model.

At our 2016 Analyst Meeting, we shared 2019 operating margin guidance of 12% to 13%, and we reiterated that target at early 2017 when we announced the acceleration of our pricing actions. We hit that target a year early with operating margin of 12% for the year and we will build off this momentum moving forward. Now I want to remind everyone of the 2018 expectations we set for the US business, when we announced the acceleration of our move to market-based pricing. We said that we expected to achieve 6% to 8% annual volume growth in both 2018 and 2019 with expected market volume growth of 2% to 3% in each year. We expected price deflation of 2% and gross profit margin to decline approximately 120 basis points in 2018. Our results were better than that.

US volume grew 8% at the high end of our guide versus US market volume growth of about 3.5%. Price was flat and contributed to GP margins being down only 20 basis points, after normalizing for the revenue recognition change. Price deflation related to the reset was offset by positive customer mix and market-based price increases. More importantly we're having -- not having to deeply discount infrequently purchased items as customers are more comfortable with our pricing. When I speak with customers and team members I'm hearing that price is no longer the primary part of the conversation, and the focus is squarely on how we can add value and help our customers solve problems.

Our volume performance with both large and midsize customers remain strong throughout 2018. The fourth quarter was our first quarter having fully lapped the pricing changes and this was our strongest quarter results to date on a two-year stack after adjusting for the holiday timing in December, which Tom will address later in this call. US large customer volume grew 6% in the fourth quarter and 14% on a two-year stack. For the year our US large volume grew 12% on a two-year stack. US midsize customer volume grew 16% in the fourth quarter and 42% on a two-year stack. For the year midsize customers grew to 31% on a two-year stack.

We are very happy with our performance in the US in 2018. I want to spend a few minutes reminding everyone of our strategy and performance expectations going forward. Our strategy is to create value for customers through two business models. The first model is the high-touch high service model that serves customers with complex needs. Our Grainger US, Canada and Mexico businesses was Cromwell and Fabory, all fit within this model. The second model is the endless assortment model focused on customers with less complex needs, which we sometimes call the single channel online model.

In our high-touch high service model, we have three priorities for every business to create more value for our customers. Our first is to make sure that we have advantaged MRO solutions. That means understanding more about our products and our customers than anyone in building solutions that create value for our customers. Our second is differentiated sales and services. The battle in our space with complex customers largely occurs at their place of business. Our sellers and our service teams build relationships and provide services that customers value.

And the third is our flawless order to cash process. Creating value for our customers means our order to cash process has to be the absolute best in our space. We are very strong here and we have continued to make good progress. Our fourth priority with our high-touch high service model is to continue the turnaround in Canada. While we have made great progress, we have not yet met our expectations. With the cost structure changes behind us, we are now focused on stabilizing volume and driving profitable growth.

Our team is working on expanding our product assortment and building a demand generation engine through improved website functionality, effective digital marketing and a high performing sales and services team. This is an attractive market, where we are one of the largest players. Our long-term goal remains to achieve double digit operating margin and consistent share gain for this business. In terms of the endless assortment model, we have several priorities. Given the success of our Zoro business coupled with our learnings from MonotaRO, we have made the decision to invest in Zoro to accelerate their product expansion efforts. This means investments in systems and people.

In addition, we are leveraging our knowledge of MonotaRO to improve our marketing and analytics capability in our Zoro US operation. These two changes will require some incremental investment in 2019 that will lower margins in the Zoro business. We are confident that these investments will improve both our growth rate and margins for Zoro in the next several years.

Now executing against these priorities will put us in a position to accomplish the following in 2019 and beyond. We expect the US revenue to grow 300 basis points to 400 basis points faster than the market. We expect Canada volume to stabilize in 2019 and for profitable growth to follow. We expect accelerated growth of the endless assortment model. We expect continued strong operating expense leverage and the Company expects to have operating margin expansion in 2019.

Now I'll turn it over to Tom for detail on our 2018 performance and our 2019 guidance.

Thomas B. Okray -- Senior Vice President & Chief Financial Officer

Thanks, D.G. I'll start with the recap of our 2018 total Company adjusted results, then move to the fourth quarter results by segment. For the full year, revenue was up 8%, 7% on a daily basis driven entirely by volume. Our normalized gross profit rate was down 20 basis points versus the prior year after adjusting for revenue recognition consistent with the US businesses. We continue to realize operating expense leverage on higher volume. For the full year operating expenses normalized for revenue recognition grew 3% on 8% revenue growth. Our strong sales growth, gross margin performance and diligence in driving operating expense leverage resulted in incremental margin of 25%, operating earnings growth of 17 % and an operating margin of 12%, which is 100 basis points higher than the prior year. EPS grew 46% for the year.

We generated operating cash flow of $1.1 billion, representing 110% of net earnings after adjusting for the non-cash impairment for the Cromwell business. This result was flat to the prior year as positive earnings were offset by higher working capital, primarily driven by the timing of trade and other payables, which we do not expect to repeat and the investment in inventory including some opportunistic pre buys. In addition, we returned $741 million in cash to shareholders through dividends and share repurchases.

Looking at the quarter, sales increased 5% including a 1% unfavorable impact from foreign exchange. On a constant currency basis, sales grew 6%, 4% on a daily basis. Sales were comprised of volume growth of 4% and price inflation of 1%, partially offset by a 1% impact for holiday timing. Our normalized gross profit margin was down 20 basis points as margin growth in the US and Canada was more than offset by gross profit declines in our other businesses driven primarily by Cromwell and freight increases in Japan.

Operating expenses normalized for revenue recognition increased 3%, the increase was driven by three factors. First, incremental digital investments including website enhancements and marketing spend for our US business as well as investments in the growth of our Zoro business. Second, incentive compensation versus the prior year, reflecting our strong performance in 2018. And third, expenses which were one-time in nature and are not expected to repeat. Overall, operating earnings were up 10% resulting in operating margin of 11.2%, which is up 50 basis points from the prior year. Earnings per share increased 35% in the quarter versus the prior year due to strong operating performance and a lower tax rate.

Looking at our other segment results. I'll start with our other businesses, which include our single channel online model and our international businesses. Sales were up 11% on a constant currency basis due primarily to volume. Operating earnings increased 28% for the quarter with a 70 basis point improvement in operating margin. In Canada, we finished the quarter profitably, something we haven't been able to say for the past 11 quarters. Sales were down 25% on a daily basis and down 22% daily in constant currency. We've made a lot of changes in a short period of time to improve the business and that has impacted volume more than we expected. The volume decline was offset by 8% price inflation.

Moving to profit, our gross margin was up 160 basis points versus the prior year after normalizing for revenue recognition. Price inflation and lower freight were partially offset by product cost inflation and lapping favorable inventory adjustments in 2017 fourth quarter. Operating earnings increased 134% versus prior year. Operating margin improved 330 basis points, driven by the initiatives from our turnaround plan. In the US, sales grew 6%, 5% on a daily basis and 6% after normalizing for holiday timing.

In 2018, Christmas Eve and New Year's Eve fell on a Monday versus on a Sunday in 2017. We were open for business both days to serve our customers. However, revenue on those days was significantly lower than normal, that lower revenue effectively offset the benefit of the additional sales day. Excluding holiday timing, it was our strongest quarter on a two-year stack since announcing the pricing reset. We feel good about our sales momentum heading into 2019. Gross profit margin was up 20 basis points after normalizing for revenue recognition. As price inflation outpaced cost inflation in the quarter, higher supplier rebates and strong volume performance also contributed to favorable GP rate in the quarter.

Operating expenses in the US were up 8% after normalizing for revenue recognition and one additional payroll day. For the year, after normalizing for revenue recognition, operating expenses grew 5% on 8% revenue growth, providing significant operating leverage. However, there was some lumpiness throughout the year. In the quarter the lumpiness related to three main factors. First, we made planned incremental digital investments in the US. Second, we had higher incentive compensation versus the prior year reflecting strong performance in 2018. And the third piece was related to items that we do not expect to recur. Overall operating earnings grew 5% resulting in a 14.6% operating margin for the US, which was down 20 basis points in the quarter.

Moving to our cost takeout and productivity targets. Everything we do is focused on delivering value to our customers in the most efficient and effective way possible. Our goal was to drive $150 million to $210 million of cost savings and productivity, net of digital investments over a two-year period. In 2018, we achieved cost savings of $130 million and are now more than half way to our two-year target. In the US, we realized $70 million in savings driven by a handful of items including sales productivity from increased revenue per seller and onsite service efficiencies, supply chain productivity as we practice continuous improvement in our DCs and completing Contact Center consolidation.

For Canada, we realized $45 million in savings related to our turnaround efforts. And for our other businesses, we realized $15 million in savings primarily related to closure of unprofitable businesses. Our 2019 cost takeout target is to achieve $65 million to $85 million in savings. Improving our cost structure has been and continues to be an important part of driving profitable growth in the future. We are confident in our ability to achieve our 2019 target. To recap 2018, our performance was strong throughout the year. We gained share profitably, beat our expectations on operating margin and earnings per share, and achieved our 2019 operating margin target a year early.

Now let's take a look at 2019 guidance. As a reminder we changed our guidance philosophy in 2018. We now set guidance in January and plan to update it if we expect to be materially outside the range. In 2019, we expect to deliver the following for the total Company; 4% to 8.5% sales growth driven by continued share gains for the US segment in the single channel businesses. Total Company gross margin is expected to be down 60 basis points to flat versus the prior year. This is due to the timing of our contract pricing negotiations and freight headwinds, partially offset by price increases and customer mix.

Operating margin is expected to improve 20 basis points to 100 basis points, driven by strong sales growth and continued expense leverage, while investing in the areas that matter most to our customers. This includes incremental digital investments in the US segment and investments to accelerate growth with Zoro. Our goal is to drive 2019 incremental margin of 20% to 25%.

Finally, we expect earnings-per-share growth of 2% to 12%. We expect to have a higher tax rate in 2019 versus the prior year due to the wind down of our clean energy investment at the end of 2018. As a result, there will be no EPS benefit due to clean energy in 2019. We have also not assumed any stock-based compensation impact to the tax rate in 2019, which helped the tax rate in 2018.

Moving to our segment level projections for 2019. In the US segment, we expect operating margin of 15.5% to 16.1%, driven by expense leverage on strong sales growth, partially offset by gross profit margin headwinds. US revenue growth is expected to be driven by customer acquisition and increasing share of wallet. We continue to expect this business to grow 300 basis points to 400 basis points faster than the market, with expected market growth of approximately 1% to 4%, which includes 1% of price.

Moving to gross profit margin, US GP rate is expected to be down slightly to flat due to a few factors. First, we expect to pass through both general and tariff-related cost inflation. In an inflationary environment, we feel confident in our ability to pass through price. Second, increased freight costs. We have strategic partnerships with freight carriers that significantly mitigated our exposure to increases in 2018. We continue to effectively manage freight cost and expect 2019 freight increases to be materially less than the market.

Finally, we will complete the contract negotiations related to the pricing reset in 2019. We have approximately 10% of large contract revenue to go. In Canada, we expect operating margin of 1% to 5%. Our 2018 volume performance was below expectations and as a result, our operating margin guide for 2019 is slightly lower than our original target. As D.G mentioned, most of the cost structure initiatives are behind us and we're now focused on stabilizing volume and driving profitable growth. Our 2019 actions will include expanding our product assortment including leveraging the US assortment where it makes sense, improving our digital capabilities including website functionality and online marketing and building a high performing sales and service team.

Canada is an attractive market for Grainger and we're committed to getting this business to long-term profitable growth. For other businesses, we expect 6% to 8% operating margin. Single channel businesses operating margin growth is expected to slow due to investments in product expansion and technology to support the growth of our endless assortment model. As we commented earlier, we are confident these investments will improve both our growth rate and margins for Zoro over the next several years.

On Slide 20, we outline our cash flow projection. In 2018, we generated $1.1 billion in operating cash flow. In 2019, we expect operating cash flow to be between $1.1 billion and $1.3 billion driven by strong earnings growth and working capital improvements. We plan to use $300 million to $350 million of our cash to reinvest in the business. This includes investment in the DC to support the growth of MonotaRO. We will also make investments to support the growth of our Zoro business, improve our IT infrastructure and enhance our US distribution center network.

Development of our Louisville DC is progressing as planned and we are on track to start outbound shipping in early 2020. We expect to use $450 million to $600 million for share repurchases, which reflects confidence in our strategy going forward. The remainder will be used for dividends.

Now, I'll turn it back to D.G for closing remarks.

D.G. Macpherson -- Chairman & Chief Executive Officer

Thanks, Tom. We're very pleased with our performance in 2018. More importantly we're excited about the actions we've taken to position us for success moving forward. We look forward to maintaining this momentum in 2019 and beyond. Now, we will open it up for questions.

Questions and Answers:

Operator

Thank you. At this time we'll be conducting a question-and-answer session. (Operator Instructions) Our first question is from Ryan Merkel with William Blair. Please proceed with your question.

Ryan Merkel -- William Blair -- Analyst

Great thanks. So first of all US EBIT margin guidance for 2019 up 10 basis points at the midpoint. I guess, two part question. First, just to clarify you're thinking about flat gross margins and then is this offset by investment, is that why there's not more margin expansion? And then, well, I'll let you answer that and then ask the second part.

D.G. Macpherson -- Chairman & Chief Executive Officer

Thanks, Ryan. This is D.G. So a couple things. One is on on the gross profit line, our expectation is that we will be down 60 basis points, too flat for the year. There's a couple of things going on there. One is, we talked about being roughly flat in 2019 before. What has happened is some of our contracts have not actually been implemented yet, so we got some benefit in 2018 and that benefit will turn into a slight negative in 2019. So at the midpoint we're slightly down. We still expect to get strong operating leverage in the year. We are making some additional investments in digital capability certainly, but we still expect to get stronger operating leverage and slightly down GP at the midpoint, and that's because of that contract timing.

Ryan Merkel -- William Blair -- Analyst

Okay. Got it. All right. And then are we through some of these one-off items, sticking with US EBIT margin in the fourth quarter? I guess what I'm asking is, once we get into first quarter 2019, does year-over-year operating margins in the US start to expand again or is this something that might be more of a second half progression?

Thomas B. Okray -- Senior Vice President & Chief Financial Officer

Yeah. Let let let me take this. This is Tom. As we alluded to in our prepared remarks, there's three main items there. Let me give you a little bit more granularity to help you size that. For the US segment in Q4, SG&A expenses grew 6%. We said 5% that's related to the additional pay day. If you normalize for three buckets, which is variable compensation, the additional payroll day and items that aren't expected to recur, the 6% increase actually goes to flat or 9% associated with revenue recognition goes to a 3% increase. This clearly had a material impact on our Q4 US segment on the operating margin and we don't expect this profile to be representative going forward.

Ryan Merkel -- William Blair -- Analyst

Got it. Okay. That's helpful.

D.G. Macpherson -- Chairman & Chief Executive Officer

Who's next? Not sure if we're having technical difficulty or not.

Operator

Yes we are. Just please be patient. Thank you. Excuse me. (Operator Instructions) Our next question comes from David Manthey with Baird. Please proceed with your question.

David Manthey -- Robert W. Baird & Co. -- Analyst

Thank you. Dramatic pause there. So, hi guys, good morning. First off, as it relates to your outlook, it appears to contemplate something of a soft landing. Could you just talk about the 1% to 4% market growth. What of that do you assume is price versus volume for the market? And then, are you assuming that Grainger is going to be in the same ballpark of maybe a low-single-digit growth rate of price?

D.G. Macpherson -- Chairman & Chief Executive Officer

So yeah. So we have 1% price in there. We have volume of 0% to 3%. We would expect to be somewhere in that ballpark generally. So yeah, that's what we've embedded in there and it is a bit of a soft landing. We don't have any -- we've got the same economic advisors that everybody else does and so we're hearing the same things you are. So that's where we're at right now.

David Manthey -- Robert W. Baird & Co. -- Analyst

Okay. It sounds good, D.G. And then, on these investments in the digital, in the other businesses including Zoro, could you talk about the nature of those investments? What -- broadly what type of investments those are? And then if you could talk about maybe, by how much those investments depressed the EBIT margin forecast that you've given us?

D.G. Macpherson -- Chairman & Chief Executive Officer

Sure. So the investments are largely -- if you think about our business in MonotaRO, which has been so successful, they now have 20 million items on their website and we are making investments in Zoro to be able to expand our offering dramatically over the next several years. Those investments are in systems and people to make sure that we can be successful in doing that. We are also investing in analytics capabilities and marketing capabilities and really taking the lessons we've learned from MonotaRO to go ahead and push that. You know, those investments are significant for Zoro. They -- the business will remain profitable through the transition and most of those investments will be done by the end of the year. So we should be in better shape going into 2020 from a margin perspective. But we expect several hundred basis points or more to be to be down relative to where we were this year.

David Manthey -- Robert W. Baird & Co. -- Analyst

Sounds good. Thank you.

D.G. Macpherson -- Chairman & Chief Executive Officer

Thank you.

Operator

Our next question is from Christopher Glynn with Oppenheimer. Please proceed with your question.

Christopher Glynn -- Oppenheimer Holdings -- Analyst

Yeah, thanks. Good morning. Just wanted to ask a little bit about the sequential momentum in the medium strategy. In terms of your path to get back above 5% share long term, obviously good momentum right now. I wonder if there are any market penetration levers that are just getting started there and how that's -- that compounding sensitivity is shaping up? You're introducing new levers at Zoro, sounds interesting. How would you describe how you sustain the compounding at the medium?

D.G. Macpherson -- Chairman & Chief Executive Officer

Sure. So with with mid-sized customers and we've talked about some of this before, we've seen growth both with existing customers. We've reengaged lost (ph) customers and we've acquired new customers. I would say the new customer acquisition has been very solid over the last quarter and we expect that to continue. So most of that is, acquiring new customers digitally and then getting -- building a relationship with those customers. We have a -- still have a fairly small customer file with mid-sized customers relative to the entire universe. So with the Grainger brand mid-sized customer ourselves, we expect consistent, strong growth over the next couple of years at a minimum. And a lot of that's going to be new customer acquisition in addition to some of the existing customer growth.

Christopher Glynn -- Oppenheimer Holdings -- Analyst

Okay great. And I just wanted to get a better understanding of the impact of the contract negotiations on US gross margin outlook is. US large revenue base, about 80% of the segment and you're talking about 10% of those. So you maybe 8% of the US segment. Doesn't seem like that you know approaches the magnitude of mix that would have such a pronounced impact on your gross margin outlook given volume and mix should be good guys.

D.G. Macpherson -- Chairman & Chief Executive Officer

Yeah. So -- so it actually -- it actually does approach the number that we're talking about. If -- that's going to be in the tens of basis points of impact for next year. So if we're down 60 basis points to flat, if that were not the case we'd be sort of centered much closer to zero for next year. So that's the impact and a lot of this is just implementation of contracts that are already signed and in particular one very very large contract that still needs to be implemented fully.

Christopher Glynn -- Oppenheimer Holdings -- Analyst

Okay. Thank you.

Operator

Our next question comes from Stephen Volkmann with Jefferies. Please proceed with your question.

Stephen Volkmann -- Jefferies -- Analyst

Hi. Good morning. I wonder if we could go back to the mid-size sort of large customer breakdown and obviously the mid-size is growing a lot faster, great to see that. I assume that has some positive margin implications and I'm curious if you could ballpark sort of how much tailwind that gives you and then sort of what's offsetting that to leave us with sort of flat to down gross margin?

D.G. Macpherson -- Chairman & Chief Executive Officer

Yeah, I mean you know like we said it's an impact. It's certainly 10 basis points to 20 basis points roughly of an impact in terms of mix that we've seen, if we continue to grow mid-sized customers much faster than large. So it's a small impact, but a real one.

Stephen Volkmann -- Jefferies -- Analyst

Okay. All right. That's helpful, thanks. And then just with respect to -- I think you laid in a little bit extra inventory and I'm curious if that benefits maybe the first half of 2019 on sort of a price cost basis?

D.G. Macpherson -- Chairman & Chief Executive Officer

Yeah, we added inventory as you saw including some opportunistic pre-buys that we made in Q4 and preparing us for what we expect to be strong growth in 2019.

Stephen Volkmann -- Jefferies -- Analyst

Thank you.

Operator

Our next question is from Hamzah Mazari with Macquarie Group. Please proceed with your question.

Mario Cortellacci -- Macquarie Research -- Analyst

Mario Cortellacci filling in for Hamzah. Actually, just kind of hitting on the medium customers again. I mean, could you walk us through what kind of market share you think you guys could get in the medium customers and maybe you could talk about how go-to-market or your sales strategy is different from that of large customers or maybe it's the same?

D.G. Macpherson -- Chairman & Chief Executive Officer

No, it's fairly significantly different. So we have less than 2% market share today. At our peak, we had significantly more than that. Without contemplating a specific number, we know we've got a lot of runway with mid-sized customers. In terms of of how we go-to-market, we acquire customers typically digitally with the mid-sized customer group. We then develop a relationship, in some cases that will stay digital, in some cases that becomes an inside seller relationship, where there will be someone on the phone that talks to them on a consistent basis. We provide significant technical product support to that group, which is a big value to that group and what we find is that those customers really value what Grainger has to offer. The technical product support, the products themselves and the quality the products and the fulfillment all mean a whole lot to that mid-sized customer group. So we're seeing great response as we acquire new customers and build those relationships.

Mario Cortellacci -- Macquarie Research -- Analyst

Great. And just a quick follow up. I mean, could you talk about -- I guess how you guys differ from Amazon industrial supply in your distribution or your products or even your service levels, and maybe where you guys bump up with them head-to-head in just competition wise?

D.G. Macpherson -- Chairman & Chief Executive Officer

So, I'm assuming you're talking about Amazon business, is it...?

Mario Cortellacci -- Macquarie Research -- Analyst

Yes.

D.G. Macpherson -- Chairman & Chief Executive Officer

Yeah, OK. So you know I would. I would say that we are skewed very much more industrial. We develop personal relationships with customers. We provide services with customers, we provide onsite services with customers, we have sellers. Our fulfillment is designed to make sure that we get complete orders to customers next day. So our buildings are a completely different design. I would say on almost every dimension we are different. And so without going into too much detail on the call, we built our machine to be able to really be very attractive to industrial businesses. And that's that's our customer base and that's what we're trying to gain share with.

Mario Cortellacci -- Macquarie Research -- Analyst

Got you. Thank you so much.

D.G. Macpherson -- Chairman & Chief Executive Officer

Thanks.

Operator

Our next question is from Patrick Baumann with J.P. Morgan. Please proceed with your question.

Patrick Baumann -- J.P. Morgan Chase & Co. -- Analyst

Hey guys, thanks for taking my call. I just had a couple of questions here. First one is just an SG&A growth, the profile for 2019 sounds pretty similar to what you did in 2018. Just curious as you look beyond 2019, what this might look like on more of a normalized basis after you are through with all your cost savings plans?

D.G. Macpherson -- Chairman & Chief Executive Officer

So I would just say that we have -- we think built a muscle and a process to make sure that we are very disciplined with SG&A going forward. Our expectation is that we will continue to get SG&A leverage to 2020 and beyond. So without talking about specific numbers, our expectation is that the process we've built, the way we look at our expenses, the way we drive improvement throughout the business, efficiency and effectiveness, we'll continue to do -- to perform well going forward.

Patrick Baumann -- J.P. Morgan Chase & Co. -- Analyst

Okay. On Zoro, what did the business grow in the quarter and for the year? And just curious if you could provide some context on what -- what's driving the change in kind of the assortment strategy there? Is the growth kind of slowing down a little bit or you guys just --

D.G. Macpherson -- Chairman & Chief Executive Officer

Now. The Zoro -- yeah, the Zoro business continue to grow very very strongly throughout the year. If you look at the history of our our business in Japan, about this time in the history, they really stepped on the accelerator with the assortment strategy and we're at the point now where creating some real differentiation with the Zoro business in the marketplace we think is important and we think we've got an opportunity to do that based on what we've learned and so we're investing for the future. It doesn't mean that we have seen slower growth at Zoro at this point.

Patrick Baumann -- J.P. Morgan Chase & Co. -- Analyst

Got it. And the last one, just really quick. Restructuring expense for 2019, do you guys expect any restructuring, I didn't see anything in the slides or press release?

Thomas B. Okray -- Senior Vice President & Chief Financial Officer

Yeah, we expect our restructuring expense obviously to go down with most of the heavy lifting in US and in Canada behind us. So it'll be significantly less than we've seen in the past couple of years.

Patrick Baumann -- J.P. Morgan Chase & Co. -- Analyst

Okay. Thanks. Good luck guys.

D.G. Macpherson -- Chairman & Chief Executive Officer

Thanks.

Thomas B. Okray -- Senior Vice President & Chief Financial Officer

Thank you.

Operator

Our next question is from Robert Barry with Buckingham Research Group. Please proceed with your question.

Robert Barry -- Buckingham Research Group -- Analyst

Hey guys. Good morning.

D.G. Macpherson -- Chairman & Chief Executive Officer

Good morning.

Thomas B. Okray -- Senior Vice President & Chief Financial Officer

Good morning.

Robert Barry -- Buckingham Research Group -- Analyst

I apologize, I was dropped from the call for the first couple questions. So if you touched on this already we can skip it but, did you talk about what you've assumed in the guide vis-a-vis the tariffs versus what you outlined at 3Q, any change there?

Thomas B. Okray -- Senior Vice President & Chief Financial Officer

No change at all. And just to clarify, our contemplation in the guide assume the 10% tariff being at 25%. So that's already included in the guide.

Robert Barry -- Buckingham Research Group -- Analyst

Got it. So if it stays at 10% then there would be some upside there I guess?

Thomas B. Okray -- Senior Vice President & Chief Financial Officer

Correct.

D.G. Macpherson -- Chairman & Chief Executive Officer

Yes.

Robert Barry -- Buckingham Research Group -- Analyst

Got it. And then just, I wanted to follow up on the question about -- I think there was the question about the US operating margin. I think it's implied about flattish, is that right? And I'm just curious what's driving that, especially because it sounds like you'll be lapping some headwinds in 3Q and 4Q that seem to be non-recurring?

Thomas B. Okray -- Senior Vice President & Chief Financial Officer

You're referring to the guide for '19 for the US segment?

Robert Barry -- Buckingham Research Group -- Analyst

Yeah. The 15.5% to 16.1%. I think it came in what at 15.7%, yeah for the year.

Thomas B. Okray -- Senior Vice President & Chief Financial Officer

Yeah sure. No, as D.G. mentioned earlier, maybe you were dropped off the call, on GP, we expect to be flat to minus 60 basis points down. And with the big impact there being freight as well as the contracts which still have to be closed for this year or implemented for this year. So, yeah, we've got opportunity on the high end to grow 100 bps in terms of operating margin, but we're being prudent on the low end given the uncertainty we see in terms of the freight issues as well as the overall economic environment.

Robert Barry -- Buckingham Research Group -- Analyst

Got it, got it. Just finally, what is the messaging on the end market demand in your momentum. I mean the 4% adjusted in December looks like a deceleration. I think the 4Q overall is a deceleration versus recent quarters. Just any color on what you're seeing out there in the demand -- from the demand perspective? Thanks.

D.G. Macpherson -- Chairman & Chief Executive Officer

I'd point to a couple things. One is certainly the market growth was still reasonably strong in the fourth quarter, a little less than it was in Q2 and Q3 it appears. That said, we think our performance was very similar on a comparison basis to the market in the fourth quarter. We talked a little bit about the last week of the year being very slow, but fortunately people showed a back up to work to start the year. And so our expectation is that there's going to be very modest growth at this point that's our expectation and we'll continue to gain share at a similar pace to what we've done.

Robert Barry -- Buckingham Research Group -- Analyst

Got it. Thank you.

D.G. Macpherson -- Chairman & Chief Executive Officer

Thanks.

Operator

Our next question is from Nigel Coe with Wolfe Research. Please proceed with your question.

Nigel Coe -- Wolfe Research -- Analyst

Thanks, good morning. D.G., could you maybe just kind of go back to your comments on tariffs, because you expressed confidence in your ability to price through both inflation and tariffs. So if we end up with a 10% or zero on (inaudible) compared to 25% in your plan, should we assume that's awash with pricing a little less than you would otherwise have gone with?

D.G. Macpherson -- Chairman & Chief Executive Officer

So I think you're -- Nigel, I think your question is what happens if the tariffs stay at -- go back to 10%. Is that your question?

Nigel Coe -- Wolfe Research -- Analyst

Yeah. And then therefore pricing, would pricing not be as great as it would have -- otherwise have been?

D.G. Macpherson -- Chairman & Chief Executive Officer

Over time that would be the case. I mean, typically -- if that were to happen there would be some lag so there might be some benefit during that lag period. It's what we typically have seen historically, but generally our philosophy is we want to make sure we're pricing to market and getting the best cost we can. And so presumably the market price would adjust at some point in the future as well.

Nigel Coe -- Wolfe Research -- Analyst

Okay. And then I hate to ask you this question, but can you maybe just touch on your government fails. Obviously, still very strong through 4Q, but with the shutdown, how is that tracking? Maybe just remind us in terms of your exposure to state versus federal and proportion of that?

D.G. Macpherson -- Chairman & Chief Executive Officer

Yeah great. So we're about 70% state local, about 30% federal. The federal business for us tends to skew industrial and by that we mean things like the military, some of those are funded. So far I would say the impact on us has been -- certainly it's calculable, but not big. It's a small impact for us right now. I would say, we get la ittle more concerned if the shutdown goes longer, because it has knock on effects to other things. But for us the shutdown in its current form, we don't have huge volume with customers that are shutdown right now. So it's a pretty small impact on us so far. That said, obviously if it goes longer we get concerned about some other things.

Nigel Coe -- Wolfe Research -- Analyst

And in total, government is about 14% of your sales or so?

D.G. Macpherson -- Chairman & Chief Executive Officer

Yes, that's about right.

Nigel Coe -- Wolfe Research -- Analyst

Great. Thank you.

D.G. Macpherson -- Chairman & Chief Executive Officer

Thank you.

Operator

Our next question is from Chris Dankert with Longbow Research. Please proceed with your question.

Christopher Dankert -- Longbow Research -- Analyst

Good morning guys. Thanks for taking my question here. I guess, just take another slice at media, I mean, Tom, what gives you confidence in maintaining it looks like media -- mid-teens growth in that business. I mean, anything you can share with us whether it's your number of new customer acquisitions, new user size of it, any other metrics we can see as far as giving you confidence in maintaining that growth rate?

Thomas B. Okray -- Senior Vice President & Chief Financial Officer

Yeah, and we haven't shared this specifics. I would say that the new customer acquisition rate gives us confidence. I would say that the lapsed customer return rate continues to be strong. We continue to get customers who have been customers before. And just our numbers through the fourth quarter give us confidence that there's still a lot of momentum to go as we've lapped the pricing -- price decreases.

Christopher Dankert -- Longbow Research -- Analyst

Got it, got it. And then, thinking about productivity and cost savings beyond 2019 here, obviously you already commented on Zorro and the single channel kind of getting a little bit improvement from lower investment. I guess, any other way to think about normalized incremental margins for the US with the other businesses here?

Thomas B. Okray -- Senior Vice President & Chief Financial Officer

I'm sorry, could -- you're talking about, in 2019 or beyond 2019?

Christopher Dankert -- Longbow Research -- Analyst

Beyond, once we kind of get the cost cuts fully --

Thomas B. Okray -- Senior Vice President & Chief Financial Officer

So our our expectation has been that we will grow expenses at about half the rate we grow sales and that's been kind of our expectation. We don't see anything that would change that at this point going forward. We still feel like we've got a lot of opportunity to improve our cost structure going forward.

Christopher Dankert -- Longbow Research -- Analyst

Understood. Thanks guys.

D.G. Macpherson -- Chairman & Chief Executive Officer

Thank you.

Operator

Our next question is from Evelyn Chow with Goldman Sachs. Please proceed with your question.

Evelyn Chow -- Goldman Sachs -- Analyst

Good morning guys. I want to just touch on Canada for a moment. I know, Tom when we met back in November, you had said cited potential green shoots in the volume inflection in that business. Could you just give us an update on what you're seeing on the ground and how the market is progressing and any line of sight you had into your own inflection?

Thomas B. Okray -- Senior Vice President & Chief Financial Officer

Yeah. So just to clarify we had a really hard reset of that business. I think when you look at the cost takeout numbers, they're bigger than we had talked about taking and as we got into it we felt like we needed to reset pretty much everything, everything in the business. That has had a fairly significant impact on volume in the business. We are now doing some things to improve the customer experience that we think are going to help us grow going forward -- adding products to the assortment. Again, we're training our sellers and really working on getting a high performing sales and services team in that business. Our fulfillment performance is actually pretty good. We're hearing from customers that is pretty good. We're starting to see few wins for the first time in a long time. There I think we're starting to get some volume. Now, it's going to take a while. The reality is, this was a very hard reset and that's why we're backing off of the margin targets for 2019 because it's going to take a little bit longer than we had hoped. It's been a very complicated and challenging process. I would say we're still confident in the underlying market. The market has been performing reasonably well. We have a business that -- that's sort of separate out there that we know has been performing reasonably well, so the market has been growing and most of this has been us resetting that business.

Evelyn Chow -- Goldman Sachs -- Analyst

That makes sense. And then thanks for framing the gross margin guidance with your comments on contract negotiations and tariffs. It sounds like freight is the other big piece of that. So any sense of the magnitude that's baked into the guide currently?

Thomas B. Okray -- Senior Vice President & Chief Financial Officer

Well, you know, obviously freight market has been tight. I think a lot of the uncertainty on where we land probably is freight going into the year, whether or not that market stays as tight or gets tighter or it gets looser. It builds some of the uncertainty. We feel like we are effectively managing freight. We feel like we've got a really good process to improve both our operational freight costs and our overall freight cost. So, I would say it's modest impact, but it is an impact.

Evelyn Chow -- Goldman Sachs -- Analyst

Thank you guys.

D.G. Macpherson -- Chairman & Chief Executive Officer

Thanks. Thanks Evelyn.

Operator

Our next question is from Ryan Cieslak with Northcoast Research. Please proceed with your question.

Ryan Cieslak -- Northcoast Research -- Analyst

Hey, good morning guys. My first question I think you'd mentioned that supplier rebates had a positive impact on your gross margins within the US business in '18. Is there any way you can maybe quantify that or provide some directional color of how much of an impact that was? And then what is the 2019 guidance for your gross margins in the US segment assumed for the supplier rebate dynamic certainly relative to what you guys saw in 2018?

D.G. Macpherson -- Chairman & Chief Executive Officer

So, our supply rebates are largerly based on volume. We don't disclose how much of -- what the magnitude of those are. And I would say that our supplier rebates for 2019 bake in an assumption around our volume, which you see in there, so they're linked to the revenue expectation for the business.

Ryan Cieslak -- Northcoast Research -- Analyst

Is it fair to say D.G though that the supplier rebate benefit is smaller than what you saw in '18?

D.G. Macpherson -- Chairman & Chief Executive Officer

To the extent that our volume is slightly smaller, that would be fair to say.

Ryan Cieslak -- Northcoast Research -- Analyst

And then when you think about the ability to maintain the medium size customer growth, I know this question was asked a couple of different ways, but is there anything specific that you guys are going to do differently this year as it relates to digital actions or some sort of investments that you're making that would potentially be a catalyst or recapitalize sort of where the level is or are you saying basically you're just -- you're seeing good momentum and you expect that momentum to continue here into 2019?

D.G. Macpherson -- Chairman & Chief Executive Officer

I think it's both. We're seeing good momentum and we're actually increasing our digital investments to acquire more customers. So we are doing both, that's part of the digital investment that Tom talked about earlier.

Ryan Cieslak -- Northcoast Research -- Analyst

Okay. Appreciate it guys.

D.G. Macpherson -- Chairman & Chief Executive Officer

Thanks.

Operator

The next question is from Deane Dray with RBC Capital Markets. Please proceed with your question.

Deane Dray -- RBC Capital Markets -- Analyst

Thank you. Good morning everyone.

D.G. Macpherson -- Chairman & Chief Executive Officer

Good morning.

Deane Dray -- RBC Capital Markets -- Analyst

I just want to make sure I understand how you could get to the higher end of your 2019 sales guidance just from what I see you coming out of the fourth quarter, exit rate is a bit softer. You're baking in some soft landing assumptions here. Maybe, we'll see how long the government shutdown pinches you, at least for the first quarter, but based upon that where do you get an acceleration of growth and might you have to go and consider further price cuts?

D.G. Macpherson -- Chairman & Chief Executive Officer

Well first of all I mean, let me address the price cut issue first. Our prices are competitive from a market based perspective so that, no is the answer to that question. Our perspective is, we don't actually see a shift in the share gain we have. So, the way I think about it is if the market growth rate is at the top end of what we're saying, then we feel like we will be at the top end of that revenue perspective. And so if -- there's all kinds of opinions out there about what happens with market activity. Some of them actually have a little bit of a slowdown now and an acceleration later I don't know whether any of that's true, but certainly there are projections out there that are at the top end of our range. If that comes true then we will be at the top end of our sales range.

Deane Dray -- RBC Capital Markets -- Analyst

Got it. And then for Tom, just some color around the tax for the fourth quarter, a lot lower. We've heard some companies discussed further clarity on tax reform. Was there any dynamic there? And then what was it -- drove the decision to exit your clean energy tax program?

Thomas B. Okray -- Senior Vice President & Chief Financial Officer

Yeah. I mean first of all on the tax rate if you put in the stock based compensation, then that puts us squarely at the low end of our our guide. So that's the story on that. In terms of exiting the clean energy, it was it was a nice $0.09 pickup for this year and just made the decision that we're going to conclude it.

Deane Dray -- RBC Capital Markets -- Analyst

So that was at your discretion, it's not that the program went away.

Thomas B. Okray -- Senior Vice President & Chief Financial Officer

That's correct.

Deane Dray -- RBC Capital Markets -- Analyst

Got it. Thank you.

Operator

Our next question is from Justin Bergner with Gabelli & Company. Please proceed with your question.

Justin Bergner -- Gabelli & Company -- Analyst

Good morning D.G. Good morning Tom.

D.G. Macpherson -- Chairman & Chief Executive Officer

Good morning.

Justin Bergner -- Gabelli & Company -- Analyst

As you look at sort of your outgrowth going forward and I realize you're only guiding to 2019 today, but just generally speaking. Is it going to shift more toward medium customers driving your outgrowth. I know that large customers have also been a strong contributor, but as medium customers become a larger base is that going to become a larger contributor to your outgrowth or is it going to stay large contribution as well?

D.G. Macpherson -- Chairman & Chief Executive Officer

Well over the next several years, we expect mid-sized customers to grow faster than large, but we expect the dollar impact of large customer growth to be much higher given the base of a large customer revenue. So we don't feel like we are close to maxed out with any customer segment. We feel like we have strong opportunity really with our customer groups. But we would expect the percentage growth of mid-sized customers to be higher this year, next year, probably for the next three years at a minimum.

Justin Bergner -- Gabelli & Company -- Analyst

Okay. Thank you. And then I'm surprised that prices only modeled or expected to be 100 basis points. Just I mean -- help me understand why all sort of the inflationary and tariff headwinds don't require greater than 1% price to sort of keep up with cost pressures?

Thomas B. Okray -- Senior Vice President & Chief Financial Officer

Yeah. Just to clarify in the 1% to 4% market growth, we've got 1% assumed in that. So, it would be 0% to 3% in terms of volume. With respect to our own range and our guide, we've got 1% to 2%.

Justin Bergner -- Gabelli & Company -- Analyst

Okay. That makes sense. Thank you.

Operator

Next question is from Scott Graham with BMO Capital Markets. Please proceed with your question.

Scott Graham -- BMO Capital Markets -- Analyst

Yeah, hey, good morning. Similar to -- I think it was the question to top about the 2019 guidance range for the US. I guess I was expecting to hear a tinge of conservatism and I don't think I'm hearing that from you all. And if I'm wrong on that please let me know and you know by extension that does mean that the other businesses -- that goal of 6% to 8% with the midpoint of 7%, that's roughly 100 basis points on a 6% margin from '18 is a pretty big needle move on a business whose margins have really not moved, even though we've kind of targeted the higher. So it does seem that if in fact this US margin range is kind of going to be what it's going to be that there's are a lot of reliance in area where we haven't seen a lot of success in reaching to a higher level of margin. Can you maybe give us what the drivers are behind that business to give us some comfort on that?

D.G. Macpherson -- Chairman & Chief Executive Officer

Sure. So just to be clear, we have seen pretty significant margin expansion in our other category over the last couple of years. So -- and what gives us more confidence is we've actually closed some unprofitable businesses. That portfolio is now much more squarely attuned to the online model and the margins there are much higher than that 6% in aggregate. So, as we go forward, we would expect to have continued margin expansion even with the investments in Zoro that we're going to make, largely just the math of having a much stronger portfolio at this point. So we expect data. I would also say we do expect slight margin expansion in the US, although it's modest at least for the guide.

Scott Graham -- BMO Capital Markets -- Analyst

Okay. We are talking the as reported 6% right, not the you know sort of stripped down version, right?

D.G. Macpherson -- Chairman & Chief Executive Officer

I'm not sure. Scott, I'm not sure.

Scott Graham -- BMO Capital Markets -- Analyst

In other words the businesses, I think you're referring there through your other -- you are into segment. You run some things that could potentially change the dynamics of the other businesses margin. We are talking about the other businesses margin as reported right?

D.G. Macpherson -- Chairman & Chief Executive Officer

Sure, yeah. Absolutely. Absolutely we are. Yes.

Scott Graham -- BMO Capital Markets -- Analyst

Okay. Secondly, you know -- I know it was some time ago that you set forth your 2019 margin goals. Any reason why now we're -- that we're in '19, we don't maybe take a look at a couple of years and you know kind of go to higher aspirations?

D.G. Macpherson -- Chairman & Chief Executive Officer

Well, I mean I would assume that we have higher aspirations. We have not -- right now we're just talking about 2019. If we -- if we decide to put out margin guidance going forward, we would do that separately. But, yeah, I mean obviously we don't -- we're not saying that we're going to start.

Scott Graham -- BMO Capital Markets -- Analyst

No, for sure I would definitely hear-in that message. Last question Is this. The slowdown that we -- maybe saw in the fourth quarter, could you maybe give us a little bit of a feel for the tone of business in January so far?

D.G. Macpherson -- Chairman & Chief Executive Officer

Well, like I said I mean it was we're happy to see that people came back to work in January and you know we feel good about our ability to gain share in any market. Yeah, there's obviously a lot of uncertainty. Most of that is uncertainty, around things that we don't control and I don't think we know where to land. I would say that the fourth quarter, up until sort of the last week of December, things were very, very, very good and so the slowdown was a very very short period of time. And so we were looking to see if people came back to work and they did, which is good.

Scott Graham -- BMO Capital Markets -- Analyst

Understood. Hey thanks.

D.G. Macpherson -- Chairman & Chief Executive Officer

Thanks.

Operator

Our next question is from John Inch with Gordon Haskett. Please proceed with your question.

John Inch -- Gordon Haskett Research Advisors -- Analyst

D.G., I want to ask you just about the national accounts. If you go back prior to your pricing initiatives, they would traditionally drag gross margins and I'm curious if we were to normalize for these contract sort of implementation the 10%, are they still relatively dragging year-over-year on the trend or are they flat, like what's going on there?

D.G. Macpherson -- Chairman & Chief Executive Officer

So are you -- are you asking about -- I think you're asking the question on national accounts, are the GP flat year-over-year or are you talking about their impact on the companies?

John Inch -- Gordon Haskett Research Advisors -- Analyst

Yeah, no are they flat year-over-year and just -- you got, I guess --

D.G. Macpherson -- Chairman & Chief Executive Officer

With the exception of the contract reset that we've talked about the answer is, yeah, they're pretty stable.

John Inch -- Gordon Haskett Research Advisors -- Analyst

They are pretty stable. Okay. And that's a change right from what you know --

D.G. Macpherson -- Chairman & Chief Executive Officer

Yeah, it is. It is actually post reset. What we've seen with -- with all of our large customers is a bit of an opportunity to simplify pricing. They're more willing to buy (inaudible) at the prices that see because they're competitive and so that -- that's simplified things as well.

John Inch -- Gordon Haskett Research Advisors -- Analyst

The other question I had is -- it goes back to tariffs. If the tariffs are rolled back or we actually achieve a trade deal. I mean what actually happens to pricing? Does pricing have to get reversed and how do you -- look, how do you guys think about this dynamic over the next few months?

D.G. Macpherson -- Chairman & Chief Executive Officer

Well, so you know for us, we actually separate price cost in terms of how we think about it. We're pricing to the market. We try to get the best cost we can. I think I mentioned this before, typically when there's been things like that -- that have happened, price will change, but there may be some lag. So there might be some period where you have some short-term benefit. Ultimately you would expect if tariffs were rolled back that prices would eventually sort of moderate. But you know typically we get some period of benefit then.

John Inch -- Gordon Haskett Research Advisors -- Analyst

Meaning great -- you, meaning Grainger prices moderate. So you would actually have to take your list prices down is that or your contract pricing down or whatever?

D.G. Macpherson -- Chairman & Chief Executive Officer

So over time the market price will change and we will -- we will be aligned to the market price.

John Inch -- Gordon Haskett Research Advisors -- Analyst

Understood. Just lastly your Zoro investments. I think you said you were expanding your SKU's, what are the SKU's now and how much do they expand and I'm curious are there -- is there an impact if Zoro gets bigger with respect to potentially cannibalizing medium accounts or do you really think they can sort of stick to discrete tracks?

D.G. Macpherson -- Chairman & Chief Executive Officer

Yeah. You know they're -- they're pretty discrete today. There's very little cannibalization. Actually, you know, today there are several million SKUs that Zoro has. We will go to double digit million SKUs eventually. Doing that actually to create a little bit more differentiation between a Grainger model, which is very industrial, very MRO focused versus what -- what Zoro has. And we saw that that'll actually mitigate cannibalization to some degree as well, but obviously there's some, but it's very -- it's very minimal today.

John Inch -- Gordon Haskett Research Advisors -- Analyst

Got it. Okay. Appreciate it. Thank you.

D.G. Macpherson -- Chairman & Chief Executive Officer

Thank you.

Operator

Ladies and gentlemen we've reached out to the question answer session. I'd now like to turn the call back to D.G. Macpherson for closing comments.

D.G. Macpherson -- Chairman & Chief Executive Officer

All right. Thanks -- thanks everyone again for joining us. I would just reiterate a couple of points. One is, we're very happy with the performance that we had in 2018. I think we've focused on the right things, our results were strong and we've got a lot of momentum heading into the future. So we really appreciate all your time and I hope you are off to a great New Year. Thank you.

Operator

This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.

Duration: 67 minutes

Call participants:

Irene Holman -- Vice President, Investor Relations

D.G. Macpherson -- Chairman & Chief Executive Officer

Thomas B. Okray -- Senior Vice President & Chief Financial Officer

Ryan Merkel -- William Blair -- Analyst

David Manthey -- Robert W. Baird & Co. -- Analyst

Christopher Glynn -- Oppenheimer Holdings -- Analyst

Stephen Volkmann -- Jefferies -- Analyst

Mario Cortellacci -- Macquarie Research -- Analyst

Patrick Baumann -- J.P. Morgan Chase & Co. -- Analyst

Robert Barry -- Buckingham Research Group -- Analyst

Nigel Coe -- Wolfe Research -- Analyst

Christopher Dankert -- Longbow Research -- Analyst

Evelyn Chow -- Goldman Sachs -- Analyst

Ryan Cieslak -- Northcoast Research -- Analyst

Deane Dray -- RBC Capital Markets -- Analyst

Justin Bergner -- Gabelli & Company -- Analyst

Scott Graham -- BMO Capital Markets -- Analyst

John Inch -- Gordon Haskett Research Advisors -- Analyst

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