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CONFORMED
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
Commission File Number 0-255
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2001
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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GRAYBAR ELECTRIC COMPANY, INC.
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(Exact name of registrant as specified in its charter)
NEW YORK 13-0794380
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(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
34 NORTH MERAMEC AVENUE, ST. LOUIS, MO 63105
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(Address of principal executive offices) (Zip Code)
POST OFFICE BOX 7231, ST. LOUIS, MO 63177
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(Mailing Address) (Zip Code)
Registrant's telephone number, including area code: (314) 573-9200
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
YES X NO
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Common Stock Outstanding at July 31, 2001: 5,824,634
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(Number of Shares)
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PART I
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CONSOLIDATED BALANCE SHEETS
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(Dollars Stated in Thousands)
(Except for Share and Per Share Data)
JUNE 30, 2001 DECEMBER 31, 2000
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CURRENT ASSETS
Cash $ 18,495 $ 27,614
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Trade receivables 733,263 765,546
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Merchandise inventory 699,746 748,754
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Other current assets 4,516 25,444
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Total current assets 1,456,020 1,567,358
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PROPERTY
Land 24,459 24,178
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Buildings and permanent fixtures 387,466 365,705
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Capital equipment leases 22,726 20,380
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Less-Accumulated depreciation 177,180 166,832
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Net property 257,471 243,431
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DEFERRED FEDERAL INCOME TAXES 1,450 991
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OTHER ASSETS 39,090 31,658
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$1,754,031 $1,843,438
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CURRENT LIABILITIES
Short-term borrowings $ 268,052 $ 406,199
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Current portion of long-term debt 25,344 24,521
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Trade accounts payable 660,469 533,138
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Other accrued taxes 14,918 15,593
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Accrued payroll and benefit costs 20,651 58,196
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Dividends payable -- 6,343
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Other payables and accruals 48,754 74,111
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Total current liabilities 1,038,188 1,118,101
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POSTRETIREMENT BENEFITS LIABILITY 77,311 77,191
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LONG TERM DEBT 222,643 238,349
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CONSOLIDATED BALANCE SHEETS
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(Dollars Stated in Thousands)
(Except for Share and Per Share Data)
JUNE 30, 2001 DECEMBER 31, 2000
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SHAREHOLDERS' EQUITY
CAPITAL STOCK
Preferred:
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Par value $20 per share
Authorized 300,000 shares
SHARES
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2001 2000
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Issued to shareholders 2,990 2,990
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In treasury, at cost (221) (125)
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Outstanding 2,769 2,865 55 57
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Common:
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Stated value $20 per share
Authorized 7,500,000 shares
SHARES
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2001 2000
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Issued to voting trustees 5,698,611 5,685,490
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Issued to shareholders 335,527 335,340
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In treasury, at cost (174,403) (29,440)
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Outstanding 5,859,735 5,991,390 117,195 119,828
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Advance payments on
subscriptions to common
stock 42 49
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Retained earnings 300,285 290,405
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Accumulated other comprehensive income (1,688) (542)
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TOTAL SHAREHOLDERS' EQUITY 415,889 409,797
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$1,754,031 $1,843,438
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See accompanying Notes to Consolidated Financial Statements
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CONSOLIDATED STATEMENTS OF INCOME
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(Dollars Stated in Thousands)
(Except for Share and Per Share Data)
QUARTER ENDED
JUNE 30, 2001 JUNE 30, 2000
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GROSS SALES, net of returns and allowances $1,288,202 $1,295,918
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Less - Cash discounts 3,535 3,524
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NET SALES 1,284,667 1,292,394
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COST OF MERCHANDISE SOLD 1,057,336 1,059,211
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Gross margin 227,331 233,183
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SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 199,169 186,815
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DEPRECIATION AND AMORTIZATION 8,163 7,168
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Income from operations 19,999 39,200
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OTHER INCOME, net 2,312 1,064
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INTEREST EXPENSE 10,032 11,464
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Income before provision for income taxes 12,279 28,800
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PROVISION FOR INCOME TAXES
Current 4,828 12,465
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Deferred 21 (935)
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Total provision for income taxes 4,849 11,530
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NET INCOME $ 7,430 $ 17,270
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NET INCOME PER SHARE OF COMMON STOCK $ 1.26 $ 2.82*
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DIVIDENDS
Preferred - $.25 per share $ 1 $ 1
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Common - $.30 per share 1,761 1,749
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$ 1,762 $ 1,750
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<FN>
* Restated for the declaration of a 5% stock dividend in 2000.
</FN>
See accompanying Notes to Consolidated Financial Statements
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CONSOLIDATED STATEMENTS OF INCOME
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(Dollars Stated in Thousands)
(Except for Share and Per Share Data)
SIX MONTHS ENDED
JUNE 30, 2001 JUNE 30, 2000
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GROSS SALES, net of returns and allowances $2,554,638 $2,544,237
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Less - Cash discounts 6,903 6,534
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NET SALES 2,547,735 2,537,703
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COST OF MERCHANDISE SOLD 2,091,104 2,084,203
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Gross margin 456,631 453,500
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SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 403,783 357,294
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DEPRECIATION AND AMORTIZATION 16,017 14,186
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Income from operations 36,831 82,020
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OTHER INCOME, net 6,942 4,312
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INTEREST EXPENSE 21,596 22,522
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Income before provision for income taxes 22,177 63,810
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PROVISION FOR INCOME TAXES
Current 8,471 27,154
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Deferred 288 (1,199)
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Total provision for income taxes 8,759 25,955
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NET INCOME $ 13,418 $ 37,855
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NET INCOME PER SHARE OF COMMON STOCK (NOTE 2) $ 2.27 $ 6.15
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DIVIDENDS
Preferred - $.50 per share $ 1 $ 2
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Common - $.60 per share 3,537 3,509
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$ 3,538 $ 3,511
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See accompanying Notes to Consolidated Financial Statements
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CONSOLIDATED STATEMENTS OF CASH FLOWS
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(Dollars Stated in Thousands)
(Except for Share and Per Share Data)
SIX MONTHS ENDED JUNE 30,
2001 2000
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CASH FLOWS FROM OPERATIONS
Net Income $ 13,418 $ 37,855
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Adjustments to reconcile net income
to cash provided by operations:
Depreciation and amortization 16,017 14,186
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Deferred income taxes 288 (1,199)
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Gain on sale of property (2,549) --
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Changes in assets and liabilities:
Trade receivables 32,283 (112,991)
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Merchandise inventory 49,008 128,709
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Other current assets 20,928 2,154
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Other assets (7,432) (1,582)
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Trade accounts payable 127,331 (13,285)
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Accrued payroll and benefit costs (37,545) (14,765)
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Other accrued liabilities (27,803) (206)
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170,526 1,021
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Net cash provided by operations 183,944 38,876
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CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of property 2,746 110
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Capital expenditures for property (27,911) (20,199)
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Net cash used by investing activities (25,165) (20,089)
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CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in short-term borrowings (138,147) 62,706
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Proceeds from long-term debt -- --
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Repayment of long-term debt (15,503) (14,945)
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Principal payments under capital equipment leases (1,725) (1,773)
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Sale of common stock 259 823
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Purchase of treasury stock (2,901) (2,787)
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Dividends paid (9,881) (9,767)
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Net cash (used) provided by financing activities (167,898) 34,257
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NET INCREASE (DECREASE) IN CASH (9,119) 53,044
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CASH, BEGINNING OF YEAR 27,614 16,750
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CASH, END OF SECOND QUARTER $ 18,495 $ 69,794
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See accompanying Notes to Consolidated Financial Statements
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CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
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FOR THE SIX MONTHS ENDED
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JUNE 30, 2001 AND 2000
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(Dollars Stated in Thousands)
(Except for Share and Per Share Data)
ACCUMULATED
COMMON OTHER
STOCK COMPRE-
COMMON PREFERRED SUBSCRIBED, RETAINED HENSIVE
STOCK STOCK UNISSUED EARNINGS INCOME TOTAL
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December 31, 1999 $118,270 $ 68 $ 56 $241,473 $ (204) $359,663
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Net Income 37,855 37,855
Currency Translation Adjustments (366) (366)
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Comprehensive Income 37,489
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Stock Issued 831 831
Stock Redeemed (2,780) (7) (2,787)
Advance Payments (8) (8)
Dividends Declared (3,511) (3,511)
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June 30, 2000 $116,321 $ 61 $ 48 $275,817 $ (570) $391,677
======== ======== ======== ======== ======== ========
ACCUMULATED
COMMON OTHER
STOCK COMPRE-
COMMON PREFERRED SUBSCRIBED, RETAINED HENSIVE
STOCK STOCK UNISSUED EARNINGS INCOME TOTAL
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December 31, 2000 $119,828 $ 57 $ 49 $290,405 $ (542) $409,797
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Net Income 13,418 13,418
Currency Translation Adjustments (8) (8)
Unrealized Gain/(Loss) from
Interest Rate Swap (1,138) (1,138)
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Comprehensive Income 12,272
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Stock Issued 266 266
Stock Redeemed (2,899) (2) (2,901)
Advance Payments (7) (7)
Dividends Declared (3,538) (3,538)
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June 30, 2001 $117,195 $ 55 $ 42 $300,285 $ (1,688) $415,889
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See accompanying Notes to Consolidated Financial Statements
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AND OTHER INFORMATION
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(Dollars Stated in Thousands)
(Except for Share and Per Share Data)
Note 1
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The condensed financial statements included herein have been prepared by
the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although the Company believes that
the disclosures are adequate to make the information presented not
misleading. It is suggested that these condensed financial statements be
read in conjunction with the financial statements and the notes thereto
included in the Company's latest annual report on Form 10-K.
In the opinion of the Company, the quarterly report includes all
adjustments, consisting of normal recurring accruals, necessary for the fair
presentation of the financial statements presented. Such interim financial
information is subject to year-end adjustments and independent audit.
Results for interim periods are not necessarily indicative of results to
be expected for the full year.
Note 2
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SIX MONTHS 2001 SIX MONTHS 2000
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Earnings for Six Months $ 13,418 $ 37,855
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Dividends on Preferred Stock 1 2
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Available for Common Stock $ 13,417 $ 37,853
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Average Common Shares Outstanding 5,915,971 6,150,876*
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Earnings Per Share $ 2.27 $ 6.15*
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<FN>
* Restated for the declaration of a 5% stock dividend in 2000. Prior to
adjusting for the stock dividend, the average common shares outstanding
were 5,857,977.
</FN>
Note 3
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On January 1, 2001 the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 133, as amended by SFAS No. 138, "Accounting for
Derivative Instruments and Hedging Activities". The statement requires the
Company to recognize all derivative instruments on the balance sheet at fair
value. The adoption of SFAS No. 133 impacts the accounting for the Company's
interest rate swap agreement. The Company manages interest rates on amounts
due under certain operating leases through its swap agreement. The Company's
interest rate swap agreement is designated as a cash flow hedge.
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Upon adoption of SFAS No. 133, the Company recorded a liability for the
fair value of the interest rate swap of $2,219 in its consolidated balance
sheet. On an ongoing basis, the Company will reflect the current fair value
of the interest rate swap on its balance sheet. The related gains or losses
on the swap are deferred in shareholders' equity as a component of
comprehensive income. At January 1, 2001 the Company included unrealized net
losses of $1,342 (net of tax) in accumulated other comprehensive income to
record the cumulative transition adjustment as a result of adopting SFAS
No. 133. During the three and six-month periods ended June 30, 2001,
unrealized net gains of $582 (net of tax) and $204 (net of tax), respectively,
related to the swap were recorded in accumulated other comprehensive income.
These deferred gains and losses are recognized in income in the period
in which the related interest rates being hedged have been recognized
in expense.
Note 4
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Comprehensive income is reported in the Consolidated Statements of
Changes in Shareholders' Equity. Comprehensive income for the quarters ended
June 30, 2001 and 2000 was $8,479 and $16,907, respectively.
Note 5
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The Company entered into an accounts receivable securitization program
in June 2000 which provides for the sale of the Company's trade accounts
receivable to a wholly owned, bankruptcy remote, special purpose subsidiary,
Graybar Commerce Corporation. The trade accounts receivable purchases are
financed through the issuance of commercial paper under a revolving liquidity
facility. Under the securitization program, Graybar Commerce Corporation has
granted a security interest in its trade accounts receivable. Borrowings
outstanding under the securitization program at June 30, 2001 were
$200 million, the maximum available under the program. The program expires
in June 2003.
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MANAGEMENT'S DISCUSSION & ANALYSIS
OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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(Dollars Stated in Thousands)
RESULTS OF OPERATIONS
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Net sales in the first six months of 2001 were .4% higher than in the
first six months of 2000. The relatively small increase in net sales
resulted from a generally flat economy in the market sectors in which the
Company operates.
Gross margin in the first six months of 2001 increased .7% compared to
the first six months of 2000 primarily due to a generally higher gross margin
rate on sales.
The increase in selling, general and administrative expenses in the first
six months of 2001 compared to the first six months of 2000 occurred largely
because of growth in personnel complement and increases in compensation and
related expenses. In addition, continued implementation of a company-wide
customer service and logistics project throughout 2000 and 2001 resulted in
higher selling, general and administrative expenses in the first six months
of 2001 compared to the first six months of 2000 due to increases in the
Company's number of facilities and related staffing and start-up expenses.
The increased expenses were anticipated by management and are expected to
provide future benefits to the Company's results of operations.
Interest expense decreased in the first six months of 2001 compared to
the first six months of 2000 primarily due to lower interest rates on
short-term borrowings.
Other income includes service charges for special services provided to
one customer of $2,179 and $2,380 and gains on sale of property of $2,549 and
$0 in the first six months of 2001 and 2000, respectively.
The combined effect of the increases in gross margin and other income and
the decrease in interest expense, together with increases in selling, general
and administrative expenses and depreciation and amortization, resulted in a
decrease in pretax earnings of $41,633 in the first six months of 2001
compared to the same period in 2000.
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MANAGEMENT'S DISCUSSION & ANALYSIS
OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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(Dollars Stated in Thousands)
FINANCIAL CONDITION AND LIQUIDITY
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The financial condition of the Company continues to be strong.
At June 30, 2001, current assets exceeded current liabilities by $417,832,
down $31,425 from December 31, 2000. The current assets at June 30, 2001
were sufficient to meet the cash needs required to pay current liabilities.
Merchandise inventory levels were lower at June 30, 2001 when compared to
December 31, 2000 inventory levels due largely to improved inventory turnover
and reductions in specific inventory carried to support customer contract
agreements. The substantial increase in trade accounts payable and the
reduction in short-term borrowings resulted primarily from additional dating
taken on supplier payments. The Company does not have any other plans or
commitments which would require significant amounts of additional working
capital.
At June 30, 2001, the Company had available to it unused lines of credit
amounting to $394,946. These lines are available to meet short-term cash
requirements of the Company. Short-term borrowings outstanding during 2001
through June 30 ranged from a minimum of $268,052 to a maximum of $479,000.
The Company has funded its capital requirements from operations, stock
issuances to its employees and long term debt. In July 2001 the Company
received the proceeds from a ten-year note for $100,000 at a fixed interest
rate of 7.49% with principal payable in annual installments beginning in July
2005. The note agreement has various convenants which limit the Company's
ability to make investments, pay dividends, incur debt, dispose of property,
and issue equity securities. The Company is also required to maintain
certain financial ratios as defined in the agreements. Net proceeds from
the note were used to pay down outstanding debt. During the first six months
of 2001, cash provided by operations amounted to $183,944 compared to $38,876
cash provided by operations in the first six months of 2000. Cash provided
from the sale of common stock and proceeds received on stock subscriptions
amounted to $259 in the first six months of 2001.
Capital expenditures for property for the six-month periods ended June
30, 2001 and 2000 were $27,911 and $20,199, respectively. Purchases of
treasury stock for the six-month periods ended June 30, 2001 and 2000 were
$2,901 and $2,787, respectively. Dividends paid for the six-month periods
ended June 30, 2001 and 2000 were $9,881 and $9,767, respectively.
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PART II: OTHER INFORMATION
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Item 4. Submission of Matters to a Vote of Security Holders.
The annual meeting of shareholders occurred on June 14, 2001.
All of the nominees named in the Information Statement filed with
the Commission and mailed to shareholders in accordance with the
provisions of Regulation 14-C were elected. The names of the
nominees elected follow; all received 5,563,691 votes, no negative
votes were cast.
1. R. A. Cole
2. D. E. DeSousa
3. T. F. Dowd
4. T. S. Gurganous
5. G. W. Harper
6. J. H. Hinshaw
7. G. D. Hodges
8. J. C. Loff
9. G. J. McCrea
10. R. D. Offenbacher
11. R. A. Reynolds, Jr.
12. C. R. Udell
13. J. F. Van Pelt
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits furnished in accordance with provisions of Item 601
of Regulation S-K.
None.
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the quarter for
which this report is filed.
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SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
August 10, 2001 GRAYBAR ELECTRIC COMPANY, INC.
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(Date)
/S/ R. A. REYNOLDS, JR.
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R. A. REYNOLDS, JR.
PRESIDENT
/S/ J. H. HINSHAW
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J. H. HINSHAW
SENIOR VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
/S/ J. H. KIPPER
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J. H. KIPPER
VICE PRESIDENT
AND COMPTROLLER
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