1 EXHIBIT 13 ANNUAL REPORT TO SHAREHOLDERS FOR 1995 2 Graybar [PHOTO] [PHOTO] [PHOTO] A N N U A L R E P O R T 1 * 9 * 9 * 5 3 [PHOTO] Graybar's Directors held their March 1996 quarterly Board Meeting in Richmond, Virginia. This photograph was taken at Richmond's historic Jefferson Hotel. 1. Richard H. Haney Senior Vice President, Electrical Business 2. Carl L. Hall President and Chief Executive Officer 3. Robert A. Reynolds, Jr. Senior Vice President, Comm/Data Business 4. George S. Tulloch Vice President, Secretary and General Counsel 5. Jack F. Van Pelt Vice President-Human Resources 6. Robert L. Mygrant District Vice President, Tampa District 7. Richard D. Offenbacher District Vice President, Southeastern Comm/Data District 8. Irving Orloff District Vice President, St. Louis District 9. Gerard J. McCrea District Vice President, Northeastern Comm/Data District 10. John W. Wolf Vice President and Treasurer 11. Thomas S. Gurganous District Vice President, Richmond District 12. John R. Seaton Vice President and Comptroller 13. Golden W. Harper Vice President--Operations 4 Company's Business Graybar Electric Company, Inc. is engaged internationally in the distribution of electrical and communications equipment and supplies primarily to contractors, industrial plants, telephone companies, power utilities, and commercial users. All products sold by the Company are purchased by the Company from others. Markets Served Electrical Contractor Commercial & Industrial Voice & Data Communications Power Utility International Capital Stock Data Number of Equity Security Holders as of December 31, 1995: - - ------------------------------------------------------------------------------------ Title of Class Number of Security Holders - - ------------------------------------------------------------------------------------ Preferred Stock 116 Common Stock 112 Voting Trust Certificates for Common Stock 3,855 - - ------------------------------------------------------------------------------------ Dividend Data Common Stock, par value $1; stated value $20. Dividends declared for year: 1995 1994 1993 - - ------------------------------------------------------------------------------------ First Quarter $ .30 $ .30 $ .30 Second Quarter .30 .30 .30 Third Quarter .30 .30 .30 Fourth Quarter $1.10 $1.10 $1.10 - - ------------------------------------------------------------------------------------ On The Cover Graybar employees served as models in several photographs that were taken in 1995 for advertising literature. In the top picture are Information Systems Department employees John Krolikiewicz (foreground), Programmer Analyst; Karen Rauch, User Support Analyst; Nick Carter, Documentation Clerk; and Brenda Green, Senior User Support Analyst. In the center picture, Pam French, Senior Programmer Analyst, checks a high-density disk storage unit. Shown at the Flagship Counter in Graybar Phoenix are Reggie Villanueva (right), Supervisor, Counter Sales; Jeff Dykes (left, facing away from the camera), Manager, Area Counters; and Chuck Connors, Counter Sales Representative. Contents Graybar Officers and Directors Inside Front Cover President's Letter 2 Market Review 4 Operations Review 10 Financial Review 15 Selected Consolidated Financial Data 15 Management's Discussion & Analysis of Financial Condition and Results of Operations 16 Consolidated Financial Statements 18 Report of Independent Accountants 25 District Management 26 Locations 28 ONE 5 LETTER TO SHAREHOLDERS With a 17.4% sales increase over the previous year, Graybar's growth in 1995 outpaced the industry. Net profits nearly doubled, enabling the Company to retain sufficient earnings to finance continued expansion and investments in new facilities and technology. Projected capital expenditures for 1996 are budgeted to be in excess of $40 million. A significant portion of these expenditures relates to investments in technology. We are installing additional personal computers and local area networks in all districts across the country. With those networks in place, we will be able to manage information more efficiently with a subsequent improvement in service to our customers in virtually every market. Also in 1996, the Company will implement a new software system to help manage merchandise investment and warehousing. We continue to expand the markets served by our Distribution Centers in Los Angeles and Houston and, in 1996, will begin to implement a new warehouse management system in those locations. This new system incorporates scanners, bar coding, and wireless technology that brings us closer to a true "paperless" warehouse. This technology reduces errors, saves time, helps us improve service levels, and increases productivity. In the meantime, with our expanded inventories we have improved our fill rate in those areas serviced by the Distribution Centers. This improves our level of service to the customer and at the same time reduces the expense associated with multiple shipments. We began to implement bar coding at all of our city counters in late 1994, and anticipate completion of that project early in 1996. The productivity gains and improved service as a result of bar coding are truly extraordinary. Our customers are serviced in less than half the time as before, and pricing errors and inventory differences are virtually eliminated. In addition, the expanded self-service "Flagship" Counters encourage more impulse buying. This leads to larger, more profitable transactions. And, most important, the expanded counters provide superior service to our customers with a wide selection of product and speedier processing of their orders. In January of 1995 we began to specialize our business with sales and marketing personnel devoted exclusively to either electrical or communications and data. The West Coast was our pilot for all of 1995 and the benefits of specialization were immediately apparent. Specialization resulted in a sharper focus on both sides of our business which contributed to the extraordinary sales growth in the West. The final steps toward specialization of our business were completed in 1995 with the formation of three new Comm/Data Districts in the Northeast, Midwest, and Southeast. Jerry McCrea, Al Eddings and Dick Offenbacher, respectively, were appointed as Vice Presidents of those districts. Simultaneously, the Philadelphia and Pittsburgh Districts were merged. The combined district is now headquartered in Pittsburgh. Three of the branches in the former Philadelphia District were reassigned to the Richmond District. During 1995 we had significant changes in senior management with the retirement of Tommy Thompson, Senior Vice President-Sales & Marketing; Jim Hade, Senior Vice President-Distribution, and, of course, Ed McGrath, President & CEO. Among his many other accomplishments, Tommy Thompson, during his tenure, devised the Flagship Counter concept and led that initiative. He also developed a new pricing policy and procedures that eventually led to significantly improved gross margins. And for a number of years, Tommy headed our Company's sales and marketing efforts, which no doubt contributed to the record sales and profits we're seeing today. TWO 6 Jim Hade, in addition to providing leadership and direction to the field, was instrumental in the implementation of the Quality Process for Graybar. Largely because of his efforts, the Company achieved notable improvements to many of our processes while achieving ISO certification in a number of locations. In time, we expect to implement these ISO-certified processes in every Graybar location. Ed McGrath provided the vision and direction that led the Company to its prominent leadership position today, particularly in new technology. Ed was the first to recognize the need to be the leader in technology and, as President, he had the courage and foresight to make that happen. He was a visionary in the truest sense of the word. Tommy, Jim and Ed all left indelible marks on the Company -- they will be missed. Other significant personnel changes were the appointments of two new Directors in 1995, Tommy Gurganous, Vice President, Richmond District, and Jerry McCrea, Vice President, Philadelphia District. Also in 1995, Richard Haney was appointed Senior Vice President for the Electrical Business and Bob Reynolds was appointed Senior Vice President for the Comm/Data Business. In addition, Dick Offenbacher, Bob Mygrant, and Richard Haney were elected Voting Trustees in 1995, replacing Ed McGrath, Tommy Thompson, and Jim Hade. In 1995, with the appointment of John Teipen as Director of Training, training became an integral and permanent part of the organization. In anticipation of continued growth, this increased emphasis and focus on training will enable us to develop and improve our employees' skills more quickly. In an effort to increase productivity while simultaneously improving customer service, we appointed Jim Ford as Director of Process Improvement. Jim works closely with senior management and with Dennis Grousosky, our Director of Quality and Service, to identify areas in need of improvement, examine and evaluate all the processes associated with those areas, and coordinate the improvement effort through process improvement teams. We believe our investments in the future and the continued dedication and hard work of our employees are the principal reasons for our steadily increasing market share. It took almost twenty years -- from 1974 to 1993 - - -- for Graybar to grow from $1 billion in annual sales to $2 billion. In 1995, we exceeded $2.7 billion. For 1996 we are budgeting for more than $3 billion in sales. Increasing market share will continue to be our highest priority -- we have momentum on our side and, with continued focus on the customer, we believe the fundamentals are in place for Graybar to continue its leadership in the Electrical and Comm/Data Markets. /s/ C. L. Hall St. Louis, Missouri Carl L. Hall March 1996 President THREE 7 MARKET REVIEW Construction Market Graybar's Construction Market customers consist of a broad range of installers, from one-employee residential contractors to multi-billion- dollar engineering constructors. Over the years, the Company has developed unique service capabilities to serve the specific needs of each class of contractor. As a result, this remains our largest market. During 1995 the Company established nine "project service teams" to support contractors working on major projects. These team members are project experts who will help us develop the tools we need to expand our share of this business. Already the Company is benefiting from these efforts in individual markets. In 1996 we expect to create project teams across the Company. Graybar's ON SITE service became a reality in 1995 and was used in several new major projects. Working with large engineering constructors, the Company provided both material and manpower at the project sites. Materials were bar coded, delivered to the job site storeroom, checked out with hand-held scanners and automatically replenished. Although residential construction was slow, Graybar made strong gains with commercial and industrial contractors, energy management contractors, and engineering constructors. This made construction one of our fastest- growing domestic markets. Lighting application and selling skills are especially important to Graybar Sales Representatives who call on contractors. Accordingly, in 1995 the Company continued its commitment to specialized lighting training. Graybar held four lamp and lighting conferences at the General Electric Nela Park Lighting Institute. Approximately 160 employees representing all Graybar districts participated. In addition, the Company conducted advanced lighting schools and supplier-specific seminars in Atlanta, Chicago, Las Vegas and Charlotte. Participants at each seminar learned how to take advantage of opportunities in the retrofit market using Graybar Financial Services and the Environmental Protection Agency's Green Lights(R) energy conservation program. In support of all contractors, the Company participated in two major contractor expositions and conventions in 1995--the National Electrical Contractors Association (NECA) Show and the Independent Electrical Contractors (IEC) Convention. Graybar's exhibit was the highlight of the NECA Show with the highly popular theme "Tooling Up for New Opportunities Starts at Graybar." Graybar's booth again set NECA attendance records. At IEC, Graybar and General Electric (GE) Lighting co-hosted a reception and dinner for more than 300 delegates. The Company's strong presence at both events strengthened our contractor customers' interest in Graybar's value-added services. These efforts, along with improved stocks, advertising, and merchandising at our counters, resulted in outstanding sales growth. [PHOTO] FOUR 8 Commercial & Industrial Markets Graybar is strongly committed to expanding our share of the Commercial and Industrial (C & I) Markets. We continue to benefit from the investments the Company has made in recent years to serve these important customers. In 1995 Graybar's C & I Market growth increased significantly compared to the prior year. In the Industrial Market we have gained share through substantial growth in sales to national accounts, multi-location regional accounts, and Original Equipment Manufacturers (OEM). Industrial integrated supply sales nearly doubled in 1995. Sales through stock to industrial customers were up dramatically, led by double-digit increases in almost all major product categories. Commercial Market sales also improved significantly during 1995, led by dramatic increases in sales of data products. Graybar representatives contacted many commercial customers during our participation in the national exhibitions of the American Society of Hospital Engineers (ASHE) and the Building Owners Managers Association (BOMA). The Company promoted products and distribution services that are geared specifically to these industries. Increasingly, national accounts are key to our industrial marketing efforts. In nearly every industrial sector, Graybar plays a leading role in the national account arena by providing technological leadership and comprehensive distribution services. Our national account group at corporate headquarters helps customers lower their cost of doing business by offering outsourcing, technical and service support and assistance with supplier consolidation. By streamlining our customers' procurement processes, and by managing their inventories and storerooms, our customers can spend more time on their core business. In 1995 Graybar helped form the Solutions Providers Alliance, an integrated supply alliance, to address customers' integrated supply requirements. Members of the alliance, in addition to Graybar, are Kaman Industrial Technologies, VWR Scientific Products, and Vallen Corporation. Each of these companies is a leader within its respective industry. The mission of the Alliance is to provide true "one-stop shopping" and technology leadership to Maintenance and Repair Operations (MRO) customers. Graybar is committed to providing superior sales and service to our C & I customers. During 1995 the Company conducted a variety of marketing and product training seminars for sales and customer service representatives. Two C & I sales seminars were held to provide training on current issues, trends and programs specific to these markets. Product specific training was conducted by Square D Industrial Control Products and Intermediate Distributor Training Schools, GE Lighting, and Hoffman Engineering. Three lighting design seminars were held with Graybar participants learning how to help C & I customers with lighting design and layout. Industry awareness of Graybar capabilities increased during the year as a result of trade magazine advertising. Graybar capabilities and product advertisements were featured throughout the year in Purchasing Magazine, Electrical Contractor & Maintenance, and CEE News. Comm/Data Markets Graybar's position in the Comm/Data Markets grew significantly stronger in 1995. Contributing to this success was the Company's new marketing and sales organization, which specializes the sales and customer service functions into dedicated electrical and comm/data teams. The new specialized organization was piloted on the West Coast in 1995. The Western Comm/Data District, under the leadership of District Vice President Kenneth B. Sparks, was formed during the first quarter. Three additional Comm/Data Districts will be in place effective January 1, 1996. Graybar and supplier representatives promoted "Tooling Up for New Opportunities" at the 1995 NECA Show. FIVE 9 MARKET REVIEW Area Managers Comm/Data Sales, who report to the District Vice President, were appointed to manage the sales and customer service functions. These Area Managers are specialized into two complementary groups. The private network group focuses on the specific needs of commercial accounts, industrials, and contractors. The public network group serves the regulated comm/data industries, such as the former Regional Bell Operating Companies, independent telephone companies, and the cable television industry. Customers, suppliers, and comm/data employees have reacted positively to Graybar's specialized structure. Comm/Data personnel work in existing Graybar offices, and they share warehousing, delivery systems, and business processes with their counterparts in the electrical business. With the specialization of markets, Graybar sales and customer service people are free to focus on the markets they serve best. Sales and market share were at record levels as the Company attained an increased share in this expanding business arena. Comm/Data Products Sales of comm/data products grew significantly in 1995 as our customers added to their networks and upgraded systems to higher speeds. Structured cabling systems are evolving as the industry standard for communications wiring, and Graybar is a leading distributor of these products. Record demand for cable resulted in an industry-wide shortage of some types of copper and fiber cable, which added stability to pricing. Our customers require ever faster technology to handle their growing levels of data transmission. This translates into great opportunities for Graybar, since the Company has the technical expertise to deal with emerging technologies. To respond to our customers' needs, Graybar piloted a field technical support team in the Western Comm/Data District. These Network System Specialists thoroughly understand electronic network components. They provide pre-sales support for Graybar sales and customer service personnel so that our field personnel can better serve their customers. The results were very positive, and teams of Network System Specialists are scheduled to be added to the other Comm/Data Districts in 1996. In 1995 the Company also started to centralize the purchasing of comm/data products at corporate headquarters. This transition continues. Private Networks Market The Company increased sales to interconnect contractors by promoting products with advanced features. The demand for more traditional products was flat. Many interconnects are beginning to serve customers in the emerging "work at home" market. These interconnects need to know how to merge computer and telephone functions into one system. Suppliers are also developing products, both hardware and software, for these needs. In response to this emerging market, Graybar added a Product Manager to oversee the Computer Telephone Integration (CTI) product line. The Company also distributed 110,000 copies of the Graybar Digest featuring CTI products. Graybar participated in the 1995 Communications Networks (ComNet) Show, which attracted a record 40,000 delegates. [PHOTO] SIX 10 Data contractor sales exceeded budget in 1995, with many customers becoming active in electronic products and recognizing Graybar as a qualified source. The Company added several new suppliers of electronic data networking products. Sales specialization has been especially helpful with commercial and industrial users. These accounts generally have well-trained comm/data specialists who do the specifying and buying. They prefer dealing with Sales Representatives who are knowledgeable enough to recommend technical solutions. To help satisfy this customer need, 40 Graybar representatives have completed a rigorous training program offered by Building Industries Consulting Services International (BICSI), a respected trade association. These individuals have earned BICSI's designation as a Registered Communications Distribution Designer. Those holding the "RCDD" title are recognized as being experts in structured cabling system design, and their expertise is sought by users. Value-added services such as this have contributed to the Company's sales growth and helped to build market share. Public Network Market Sales were strong with the former Regional Bell Operating Companies, the independent telephone companies, and the many specialized contractors who do work for them. Specialization in this market has led to a better understanding of the customer's product needs and service expectations. The similarity in wide-area network product needs for telephone companies and power utilities also enabled the Company to achieve over-budget sales to the Power Utility Market. Cable television products were featured in a special issue of the Graybar Digest distributed to cable companies and telephone companies. As these customers expand their markets, Graybar is ready to supply their needs. POWER UTILITY MARKET The nation's power utilities face enormous change. The trends of decentralization, re-engineering, and cost-cutting -- trends that have dominated the airline, telecommunications, and banking industries in the past -- now affect the utility industry. As the industry evolves, power utilities will become similar to traditional national account customers, with comparable needs for distribution services and increased opportunities for Graybar. Utilities recognize that a value-added distributor can help them more efficiently manage their overall merchandise investment. Graybar is well positioned to participate in this evolving market. By using local sales and management coverage in concert with the national account sales staff, we are delivering the message that Graybar has the technology, business systems, and professional capabilities to best serve the needs of the utility customer. The evolving utility industry presents attractive new opportunities for Graybar. Our sales to this market have been on the increase, and they can continue to grow as we promote the Company's unique service capabilities. SEVEN 11 MARKET REVIEW INTERNATIONAL MARKETS International sales were up significantly in 1995. Graybar International focused on expanding sales to domestic accounts that have international facilities, as well as to engineering contractors that have international projects. Graybar International serves both the Electrical and Comm/Data Markets. North America Graybar Ontario and Harris & Roome, which is based in Nova Scotia, had record-breaking years in a Canadian electrical market that saw very little growth in 1995. R.E.D. Technologies, based in Toronto, has restructured to be in a better position to compete in the comm/data marketplace. The devaluation of the Mexican currency in December of 1994 negatively affected the Mexican market throughout 1995. Graybar de Mexico achieved better than expected sales results in spite of the adverse economy and is building an organization to take advantage of the anticipated improvement of market conditions in 1996. Latin America/Caribbean Miami International was able to improve its penetration in strategic markets in South America. A sales office was opened in late 1995 in Lima, Peru. Graybar Puerto Rico completed restructuring in 1995 and the Flagship Counter was completed. Penetration of the Industrial and Comm/Data Markets continues to be a major priority. Asia/Pacific The Pacific Rim remains one of the fastest-growing markets in the world. San Francisco International, which serves the Pacific Rim, ended the year with record-breaking results. Graybar's relationships with Japanese engineering contractors are strong and continue to strengthen. Graybar-P&M (Singapore) completed restructuring to reduce cost and improve service. We closed Graybar Guam and refocused our efforts in Southeast Asia. Middle East/Africa Houston International exceeded all expectations in its first year of operation. Despite over-all weak markets throughout the Middle East, Houston International achieved its success by focusing on strategic industrial, engineering contractor and comm/data accounts. MARKETING SUPPORT Counters Graybar counters generated record sales and profits in 1995. Much of this success can be attributed to the Company's emphasis on new Flagship and remodeled counters. The new Flagship concept increases counter traffic and improves customer service through effective merchandising. This merchandising strategy makes products highly visible and provides a consistent product mix at every location. Eleven Flagship Counters were completed during 1995. Standards for today's Graybar counters include specific floor tile, wall color, lighting levels, power entrance doors, customer amenities, and size. The new counters start at 4,000 square feet in size; self-service counter locations begin at 10,000 square feet. This allows the customer the room to view more product, which stimulates impulse sales. Supplier selectivity and data base marketing play an important role in the development of product merchandising. Counter customers appreciate our recognized brands and quality products. These are presented using consistent merchandising designs, convenient layouts, and signage. Graybar Financial Services Our finance subsidiary, Graybar Financial Services (GFS), enjoyed a record year of growth and earnings in 1995. More than 3,900 leases and loans were processed for tools, test equipment, comm/data and electrical upgrades, and other projects. In 1995 GFS expanded its customer service and sales organization to better support the Company's customers who regularly use financing to improve their businesses. A special unit of EIGHT 12 The "March Madness" counter promotion was one of 14 national sales promotion activities that increased counter sales for 1995. [PHOTO] This promotion featured products from Hubbell Wiring Device-Kellems and comm/data products from Hubbell Premise Wiring, Inc. Graybar employees is dedicated to servicing more than 3,000 customer inquiries every month. New customer database and lease tracking software was implemented in 1995. This software provides detailed customer information and paperless lease tracking, further enhancing service. Advertising & Sales Promotion Advertising and Sales Promotion provided needed support to attain corporate sales and market share objectives. Our major suppliers continue to acknowledge Graybar's positive presence in the marketplace. Graybar placed over 100 full pages of color advertising in publications addressing all of our major markets. Many of these ads continued our "Contractor John/Real Solutions" theme. Company advertisements won awards for superior effectiveness in advertising recall and readership. In addition to national trade ads, additional ads were placed in local trade event publications to support unique sales opportunities. Use of Graybar's advertised toll-free telephone number and literature request cards increased dramatically. Sales promotion contributed to increased counter sales for featured suppliers. Fourteen suppliers participated and supported monthly national promotion activities in 1995. Support for the Flagship and self-service counters was provided through ad-mats and counter mailers, product merchandising, counter promotion displays, header cards, product packaging, and banners. The Company, working closely with key suppliers, also introduced suppliers' catalogs and brochures with custom covers that promote Graybar. Advertising and Sales Promotion helped Graybar once again maintain high visibility at the NECA Convention & Trade Show with the theme, "Tooling Up for New Opportunities Starts at Graybar." NINE 13 OPERATIONS REVIEW OPERATIONS Customer Service Training Two thousand front-line Graybar employees, including Customer Service Representatives, Counter Sales Representatives and Supervisors, Financial personnel, Quotations personnel, and Truck Drivers completed two day training sessions on "Excellence in Customer Service." This training develops the service skills of focusing on customers' needs and exceeding their expectations. In conjunction with this training, the Managers, Customer Service have participated in coaching skills training to help them reinforce key concepts of customer service with their front-line employees. "Excellence in Customer Service, Part 2" will be offered during 1996. This training course will build on the foundation skills taught in the first course, concentrating on ways to build relationships with customers. Graybar Quality Process and "DocuNet" In 1995 the Company re-focused its Quality Process organization. Each Quality Manager is now responsible for two or more Graybar districts and reports directly to the Director of Quality and Service at corporate headquarters. The Quality Managers' mission is to help local management improve processes and raise service standards. During 1996 Quality Managers will focus on two important customer- oriented goals: reducing billing errors across the Company by fifty percent, and formulating service standards for counter and warehouse operations. Achieving these goals will involve local problem-solving teams, training, and employee cooperation at every level of the Company. During 1995 the Company continued its commitment to the ISO 9000 standard by certifying four additional locations. ISO certification is an internationally recognized standard of high commitment to the Quality Process. Twelve additional locations are scheduled for certification during 1996. To assist branches in their certification efforts, Graybar developed an electronic "web" server for document storage and access. This system, known as Graybar DocuNet, is a private document server that is available company-wide on Graybar's wide-area network. DocuNet contains all ISO 9000 procedural instructions, as well as related General Instructions, Operating Manuals, and other training manuals. The balance of General Instructions and Operating Manuals will be added to the web server during 1996. DocuNet links all documents together, providing employees with powerful searching capabilities. They can search for a certain subject and then review the specific instructions related to that subject. DocuNet will become the storage site for many other Company documents as Graybar moves toward electronic document storage. Jeff Dykes, Manager, Area Counters [PHOTO] at Phoenix, checks a counter display. TEN 14 Corporate Purchasing Group In January of 1995 a corporate purchasing group was established to plan replenishment of comm/data stock material for approximately 50 Company locations. By the end of 1995, the corporate purchasing group was responsible for planning replenishment of comm/data stock for more than 130 locations. The implementation of this process change will continue in 1996, with the goal of having all replenishment of comm/data material planned by corporate purchasing. The Distribution Centers and Zone Service Centers continued to be valuable assets to Graybar and our customers during 1995. The Company added many product lines to these central-stock facilities to provide rapid availability of new or hard-to-find items. Additionally, the Company placed strategic stocks of items with limited availability in selected sites to provide better customer service. Supplier-Assisted Inventory Management GE Lighting became the third key supplier to participate nationwide in Graybar's Supplier-Assisted Inventory Management program (SAIM). This is an automated process where our supplier partner participates in the planning and replenishment of our inventory. SAIM reduces inventory replenishment and carrying costs by automating many of the activities previously performed by buyers and buyer assistants. SAIM also reduces investment without sacrificing service by shortening the order cycle time and lead time required to receive product. During the last quarter of 1995, ten suppliers were involved in various stages of the SAIM process. By the end of 1996 we estimate that at least one-quarter of our total stock purchases will be planned through this program. Inventory Planning and Replenishment Software In 1995 Graybar purchased a sophisticated inventory planning software application. The heart of the package is a forecasting module that provides accurate, statistical forecasts for most inventory items. These forecasts help us precisely match our stock purchases with what customers are actually buying. We expect this software tool to significantly increase the level of customer service we can provide on shipments from stock. At the same time we expect to maintain or reduce the Company's overall merchandise investment. Implementation of the software package will begin in the first quarter of 1996. General Operations and Cost Containment During the first quarter of 1995 Graybar implemented an automated purchase order fax system which reduces the cost of faxing a purchase order by more than eighty percent. On average, each day the Company sends nearly 2,000 purchase orders to suppliers. During 1996 the Company expects to add other business documents to the automated fax system in order to further reduce our cost of handling paper. In the last quarter of 1995 Graybar piloted an automated process for updating local pricing. This process uses electronic data interchange technology to obtain data directly from the supplier's pricing database, thus eliminating the need for manual entry of local cost changes. This process will save us many hours of labor currently spent manually entering cost changes and will eliminate suppliers' pricing discrepancies for stock items on invoices. During 1995 more than two million packages were consolidated and shipped by a single shipping service, resulting in significant volume discounts and cost reductions on a major portion of our shipping expense. In 1995 the Company developed a computer-based application for tracking individual reels (or "containers") of wire. The Container Management System (CMS) allows Graybar to better manage wire inventories. With CMS, Customer Service Representatives and the purchasing department know what lengths of wire are in the warehouse. This gives CSRs valuable information when they are talking to wire customers, and it lets the purchasing ELEVEN 15 OPERATIONS REVIEW department know when it's time to replenish stocks. The information from CMS is available on local area networks, and can be queried at any time to see what lengths of wire are currently available. The Company created the new position of National Safety Manager in 1995. This position oversees all regulatory compliance with federal and state programs, fleet safety programs, safety-related training, accident prevention programs and loss prevention programs. The National Safety Manager will develop a comprehensive safety program designed to eliminate accidents. Distribution Centers In 1995 the Distribution Centers expanded their service areas and delivery capabilities. The Company uses bar code technology, radio frequency scanners, and the latest in warehouse equipment in these large facilities. This enables the Distribution Centers to efficiently service customers by providing overnight delivery to a large geographical area. Warehouse Management In the last quarter of 1995 Graybar purchased a warehouse management software package which uses technology to control the flow of material and information within a warehouse in a fast and accurate manner. The Company is now integrating the third-party software with our own computer system. The warehouse information system features hand-held scanners that are connected to a central computer via radio. The warehouse itself is laid out to make the most efficient use of people, equipment and warehouse space. Stock is bar coded, and the accuracy rate of receiving, selecting, and shipping material is close to 100 percent. Orders are tracked by computer in "real time" from start to finish. This technology will provide a broad base to reduce costs and improve service. New Locations: Houston, Texas (Bingle Road) Orem, Utah Jackson, Tennessee Wanamassa, New Jersey Houston, Texas (Tellepsen) Springfield, Missouri LaMarque, Texas Information Systems In late 1994 a pilot project was established in Tampa to analyze the impact of the utilization of bar codes at our city counters. The results demonstrated a marked improvement in both customer checkout time and accuracy. Customer perception of our system capabilities improved dramatically. Subsequently, 38 counters were converted to bar codes by year end 1995 with the intent to add the remaining counters in early 1996. Electronic Data Interchange capabilities were significantly improved and expanded during 1995. Demonstrating a hand-held scanner at the Graybar Counter [PHOTO] is Stephanie Atkins, Branch Administrator at Phoenix. TWELVE 16 New equipment and software automated many manual routines. We can now add new customers as trading partners in a matter of hours. Our in-house staff provides the technological expertness to rapidly accommodate special customer processing requirements as well. The Decision Support System was completed and installed at every district. Following training in August all districts can now generate special reports locally. This has significantly improved our ability to manage our business and be responsive to customer requirements. Our ability to communicate on line with the various suppliers (Hot Key) was expanded to 13 suppliers with several more ready. On-line CSR access now approaches 15,000 transactions per month. The ability to check order status with Hot Key suppliers is currently in testing and will be added in 1996. A new Billing Adjustment Mode was introduced in 1995. This mode was designed to permit the individual with the first customer contact concerning a problem or claim to easily resolve the issue on line with the customer. A significant reduction in paperwork and improved customer service is expected. An internal web server was developed to support the central control and distribution of ISO 9000 documentation. This is similar technology to the Internet, but unlike the Internet, our DOCUNET Web Server can only be accessed via the Graybar data network. In the future this same technology will be used to provide other documentation to Graybar locations. In 1995 we began a project to completely redesign Graybar's data network. The new network will use contemporary components such as Frame Relay, routers, and hubs versus the older X.25 pads and switches. The first phase, which encompassed corporate and the district offices, has been completed. The second phase will begin in early 1996 and will involve all remaining Graybar U.S. based locations. Along with the new network, some 1,280 PC workstations will be installed, bringing the total number of workstations to 3,500. Brenda Schopp and Howard Fry, Senior Network Control Technicians at the IS Department, check the performance of Graybar's private network. [PHOTO] Human Resources In 1995, the Board of Directors elected Carl L. Hall to the position of President and Chief Executive Officer. Mr. Hall succeeded Edward A. McGrath, who retired. At the time of his election, Mr. Hall was Executive Vice President. Prior to that he served as District Manager at Chicago. He has served as a Director since 1989. In March, the Board changed the position of "District Manager" to "District Vice President." The Board elected two new Directors: Thomas S. Gurganous, Vice President, Richmond District; and Gerard J. McCrea, who at the time was Vice President, Philadelphia District. Mr. McCrea was appointed Vice President, Northeastern Comm/Data District effective January 1, 1996. The Company appointed two new District Vice Presidents in 1995: H. Bennett Wall, Atlanta; and Kenneth B. Sparks, Western Comm/Data. The branches in the former Los Angeles District were merged with the Phoenix District effective January 1, 1995. Also effective January 1, 1995, the branches in the former San Francisco District were merged with the Seattle District. THIRTEEN 17 OPERATIONS REVIEW The Company also appointed four District Operating Managers and four District Financial Managers in 1995. The Company continued the specialization of market functions in 1995. Richard H. Haney was appointed Senior Vice President-Electrical Business, and Robert A. Reynolds, Jr., was appointed Senior Vice President-Comm/Data Business. Mr. Haney was formerly District Manager, Atlanta District, and Mr. Reynolds was formerly Vice President-Marketing Services. Charles R. Udell was appointed Vice President- Electrical Marketing, and Anthony A. Brzoski was appointed Vice President-Comm/Data Marketing. Also appointed at corporate headquarters were Dennis J. Grousosky, Director, Quality and Service; John A. Teipen, Director of Training; Gerard J. Kollar, National Product Manager; Garry M. Acker, National Market Manager; David J. Moeller, National Account Manager; Robert D. Grassel, National Manager, Utility Market; and Carl R. Lagerquist, National Manager, Advertising and Sales Promotion. The Company is using new technologies to help train employees. One example is the Graybar Electronic Encyclopedia, a personal-computer based glossary of electrical and comm/data technical terms. Traditional classroom training continues to be a valuable method of delivering information. In 1995 we developed the Essential Management Skills (EMS) class, which formally introduces managers to the skills needed in today's vibrant working environment. In addition, updates were made to Targeted Selection, Excellence in Customer Service, High-Performance Selling and Performance Management Programs. Our suppliers play an increasing role in our training efforts. Suppliers added more than 20 new modules on Pathfinder, the Company's distance learning network. Several suppliers, such as AT&T (now Lucent Technologies), Square D, Lithonia, GE, Cooper Lighting, and others, also helped develop classroom training programs. The National Comm/Data Sales Training Conferences continue to be very valuable opportunities for suppliers to meet and train Graybar employees. The conference structure promotes hands-on review of products and features. Our customers are requesting assistance in the training of their personnel. This provides an excellent opportunity for Graybar to offer additional value-added services to customers using the training methods already developed for our internal training. [PHOTO] Many Graybar retirees maintain a strong interest in the Company. Shown here at a Tampa District retiree luncheon are Bob Latimer and his wife, retiree Alice Latimer; Rick Edwards, Pompano Beach Branch Manager; Walt Smelt; and Mike Spencer. FOURTEEN 18 FINANCIAL REVIEW Selected Consolidated Financial Data (Stated in thousands except for per share data) 1995 1994 1993 1992 1991 - - ------------------------------------------------------------------------------------------------- Sales $2,774,368 $2,364,461 $2,041,473 $1,902,354 $1,743,544 Less--Cash discounts (9,578) (8,839) (8,306) (8,243) (8,170) - - ------------------------------------------------------------------------------------------------- Net Sales 2,764,790 2,355,622 2,033,167 1,894,111 1,735,374 - - ------------------------------------------------------------------------------------------------- Cost of Merchandise Sold (2,267,186) (1,934,925) (1,668,007) (1,564,929) (1,431,255) - - ------------------------------------------------------------------------------------------------- Interest Expense (16,577) (12,003) (9,810) (10,054) (13,092) - - ------------------------------------------------------------------------------------------------- Provision for Income Taxes Current (23,426) (15,225) (10,016) (6,601) (6,356) Deferred (2,408) 1,251 763 (493) (534) - - ------------------------------------------------------------------------------------------------- Total provision for income taxes (25,834) (13,974) (9,253) (7,094) (6,890) - - ------------------------------------------------------------------------------------------------- Income Before Cumulative Effect of Accounting Change 36,718 18,702 14,745 10,232 9,515 - - ------------------------------------------------------------------------------------------------- Cumulative effect on prior years of change in accounting for postretirement benefits -- -- (45,000) -- -- - - ------------------------------------------------------------------------------------------------- Net Income (Loss) 36,718 18,702 (30,255) 10,232 9,515 - - ------------------------------------------------------------------------------------------------- Income (Loss) Applicable to Common Stock 36,710 18,694 (30,265) 10,222 9,504 - - ------------------------------------------------------------------------------------------------- Average Common Shares Outstanding <FA> 4,524 4,641 4,779 4,638 4,814 - - ------------------------------------------------------------------------------------------------- Income (Loss) per Share of Common Stock <FA> 8.11 4.03 (6.33) 2.20 1.97 - - ------------------------------------------------------------------------------------------------- Cash dividends per share 2.00 2.00 2.00 2.00 2.00 - - ------------------------------------------------------------------------------------------------- Retained Earnings Balance, beginning of year 57,081 52,486 91,733 93,837 92,910 Add--Net income (loss) 36,718 18,702 (30,255) 10,232 9,515 - - ------------------------------------------------------------------------------------------------- 93,799 71,188 61,478 104,069 102,425 - - ------------------------------------------------------------------------------------------------- Less dividends Preferred ($1.00 per share) (8) (8) (10) (10) (11) Common (in cash) (8,990) (8,729) (8,982) (8,282) (8,577) Common (in stock) -- (5,370) -- (4,044) -- - - ------------------------------------------------------------------------------------------------- (8,998) (14,107) (8,992) (12,336) (8,588) - - ------------------------------------------------------------------------------------------------- Balance, end of year 84,801 57,081 52,486 91,733 93,837 Proceeds on stock subscriptions, shares unissued -- 39 51 -- 67 Stock Outstanding Preferred 150 164 183 197 219 Common 89,206 91,859 89,098 85,719 85,132 - - ------------------------------------------------------------------------------------------------- Total Shareholders' Equity 174,157 149,143 141,818 177,649 179,255 - - ------------------------------------------------------------------------------------------------- Total Assets 823,280 719,786 610,512 557,036 518,480 Long-term Debt $ 91,257 $ 90,212 $ 63,621 $ 64,655 $ 70,338 - - ------------------------------------------------------------------------------------------------- <FN> <FA> Adjusted for the declaration of 6.25% and 5% stock dividends in 1994 and 1992, respectively. Prior to adjusting for the stock dividends, the average common shares outstanding for 1993, 1992 and 1991 were 4,498, 4,157 and 4,315, respectively. This summary should be read in conjunction with the consolidated financial statements and related notes thereto included elsewhere in this annual report. FIFTEEN 19 FINANCIAL REVIEW Management's Discussion and Analysis of Financial Condition and Results of Operations (Stated in thousands except for share and per share data) RESULTS OF OPERATIONS 1995 Compared to 1994 Net sales in 1995 were 17.4% higher than in 1994. The higher net sales resulted from improvements in the market sectors of the economy in which the Company operates. The impact of inflation on sales and cost of sales was not significant in 1995. Gross margin in 1995 increased $76,907 (18.3%) compared to 1994 primarily due to the increased sales in the electrical and communications markets. The increase in selling, general and administrative expenses in 1995 compared to 1994 occurred largely because of adjustments in personnel complement and adjustments in compensation and related expenses. Interest charges increased in 1995 compared to 1994 primarily due to increased levels of borrowing incurred to finance higher levels of inventory and receivables. Interest rates on 1995 short-term borrowings were generally higher than for the same period in 1994. The combined effect of the increases in gross margin and other income, together with the increases in selling, general and administrative expenses, interest charges and depreciation and amortization, resulted in an increase in income before provision for income taxes and cumulative effect of the accounting change of $29,876 in 1995 compared to 1994. 1994 Compared to 1993 Net sales in 1994 were 15.9% higher than in 1993. The higher net sales resulted from improvements in the market sectors of the economy in which the Company operates. The impact of inflation on sales and cost of sales was not significant in 1994. Gross margin in 1994 increased $55,537 (15.2%) compared to 1993 primarily due to the increased sales in the electrical and communications markets. The increase in selling, general and administrative expenses in 1994 compared to 1993 occurred largely because of adjustments in personnel complement and adjustments in compensation and related expenses. Interest charges increased in 1994 compared to 1993 primarily due to increased levels of borrowing incurred to finance higher levels of inventory and receivables. Interest rates on 1994 short-term borrowings have been generally higher than for the same period in 1993. The combined effect of the increase in gross margin and the decrease in other income, together with the increases in selling, general and administrative expenses, interest charges and depreciation and amortization, resulted in an increase in income before provision for income taxes and cumulative effect of the accounting change of $8,678 in 1994 compared to 1993. The Company adopted Statement of Financial Accounting Standards (SFAS) No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," on January 1, 1993 on the immediate recognition basis. The after-tax impact of the accounting change decreased 1993 earnings $45,000, or $9.42 per share. SIXTEEN 20 Management's Discussion and Analysis of Financial Condition and Results of Operations (Stated in thousands except for share and per share data) 1993 Compared to 1992 Net sales in 1993 were 7.3% higher than in 1992. The higher net sales resulted from improvements in the market sectors of the economy in which the Company operates. The impact of inflation on sales and cost of sales was not significant in 1993. Gross margin in 1993 increased $35,978 (10.9%) compared to 1992 primarily due to the increased sales in the electrical and communications markets together with a generally higher gross margin rate in those markets. The increase in selling, general and administrative expenses in 1993 compared to 1992 occurred largely because of adjustments in personnel complement and adjustments in compensation and related expenses. Interest charges decreased in 1993 compared to 1992 primarily due to lower interest rates on short-term borrowings. The combined effect of the increases in gross margin and other income and the decrease in interest charges, together with the increases in selling, general and administrative expenses and depreciation and amortization, resulted in an increase in income before provision for income taxes and cumulative effect of the accounting change of $6,672 in 1993 compared to 1992. The Company adopted Statement of Financial Accounting Standards (SFAS) No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," on January 1, 1993. SFAS No. 106 requires current recognition of postretirement benefit costs as opposed to recognizing these costs on a cash basis. SFAS No. 106 was adopted by the Company on the immediate recognition basis. The after- tax impact of the accounting change decreased 1993 earnings $45,000, or $9.42 per share. While adoption of SFAS No. 106 had an adverse effect on the 1993 reported results of operations and shareholders' equity, cash flows were not affected. FINANCIAL CONDITION AND LIQUIDITY The financial condition of the Company continues to be strong. At December 31, 1995, current assets exceeded current liabilities by $155,881, up $19,747 from December 31, 1994. The current assets at December 31, 1995 were sufficient to meet the cash needs required to pay current liabilities. The Company does not have any plans or commitments which would require significant amounts of additional working capital. At December 31, 1995, the Company had available to it unused lines of credit amounting to $148,000. These lines are available to meet short-term cash requirements of the Company. Bank borrowings outstanding during 1995 and 1994 varied from a minimum of $77,000 and $54,000 to a maximum of $158,000 and $132,000, respectively. The Company has an $80,000 Revolving Credit Loan Agreement with a group of banks at an interest rate based on the London Interbank Offered Rate (LIBOR). The credit agreement has various covenants which limit the Company's ability to make investments, incur debt, dispose of property, and issue equity securities. The Company is also required to maintain certain financial ratios as defined in the agreement. The Company intends to utilize this credit line primarily as a secondary source of borrowing for short-term financing requirements. In May, 1995, the agreement was amended to increase the commitment to $80,000 from the $50,000 commitment in 1994. There have been no borrowings against this credit line through December 31, 1995. The Company has funded its capital requirements from operations, stock issuances to its employees and long-term debt. In May, 1994, the Company received the proceeds from a ten-year note for $35,000 at a fixed interest rate of 6.25% with principal payable in five equal annual installments in each of the years 2000 through 2004. The note agreement has various covenants 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 agreement. In February, 1995, the Company received the proceeds from a ten-year note for $4,000 at a fixed interest rate of 8.53% with principal payable in quarterly installments beginning in June, 1995. In April, 1995, the Company received the proceeds from a five-year note for $10,000 at a fixed interest rate of 7.67% with principal payable in five equal annual installments beginning in April, 1996. Cash used by operations during 1995 amounted to $13,265 compared to $16,453 cash provided by operations in 1994. Cash provided from the sale of common stock and proceeds received on stock subscriptions amounted to $328 and $578 in 1995 and 1994, respectively. Additional cash of approximately $7,901 will be provided in 1996 as a result of payments to be made for stock subscribed to by employees under the 1995 Common Stock Purchase Plan. SEVENTEEN 21 CONSOLIDATED FINANCIAL STATEMENTS Consolidated Statements of Income and Retained Earnings (Stated in thousands except for share and per share data) For the Years Ended December 31, 1995 1994 1993 ============================================================================================================= Sales, net of returns and allowances $2,774,368 $2,364,461 $2,041,473 Less--Cash discounts (9,578) (8,839) (8,306) - - ------------------------------------------------------------------------------------------------------------- Net Sales 2,764,790 2,355,622 2,033,167 - - ------------------------------------------------------------------------------------------------------------- Cost of Merchandise Sold (2,267,186) (1,934,925) (1,668,007) - - ------------------------------------------------------------------------------------------------------------- Gross Margin 497,604 420,697 365,160 Selling, General and Administrative expenses (380,425) (339,557) (299,910) Taxes, other than income taxes (24,727) (21,952) (19,915) Depreciation and amortization (17,744) (15,999) (14,379) - - ------------------------------------------------------------------------------------------------------------- Income from operations 74,708 43,189 30,956 Other Income, net 4,421 1,490 2,852 Interest Expense (16,577) (12,003) (9,810) - - ------------------------------------------------------------------------------------------------------------- Income Before Provision for Income Taxes and Cumulative Effect of Accounting Change 62,552 32,676 23,998 - - ------------------------------------------------------------------------------------------------------------- Provision for Income Taxes Current (23,426) (15,225) (10,016) Deferred (2,408) 1,251 763 - - ------------------------------------------------------------------------------------------------------------- Total provision for income taxes (25,834) (13,974) (9,253) - - ------------------------------------------------------------------------------------------------------------- Income before cumulative effect of accounting change 36,718 18,702 14,745 - - ------------------------------------------------------------------------------------------------------------- Cumulative effect on prior years of change in accounting for postretirement benefits, net of $28,000 tax benefit -- -- (45,000) - - ------------------------------------------------------------------------------------------------------------- Net Income (Loss) 36,718 18,702 (30,255) - - ------------------------------------------------------------------------------------------------------------- Retained Earnings, beginning of year 57,081 52,486 91,733 Cash dividends- Preferred, $1.00 per share each year (8) (8) (10) Common, $2.00 per share each year (8,990) (8,729) (8,982) Common Stock dividend -- (5,370) -- - - ------------------------------------------------------------------------------------------------------------- Retained Earnings, end of year $ 84,801 $ 57,081 $ 52,486 - - ------------------------------------------------------------------------------------------------------------- Income per Share of Common Stock Before Cumulative Effect of Accounting Change $ 8.11 $ 4.03 $ 3.09 - - ------------------------------------------------------------------------------------------------------------- Net Income (Loss) per share of Common Stock $ 8.11 $ 4.03 $ (6.33) - - ------------------------------------------------------------------------------------------------------------- See accompanying Notes to Consolidated Financial Statements EIGHTEEN 22 Consolidated Balance Sheets December 31, (Stated in thousands except for share and per share data) 1995 1994 ============================================================================================================ ASSETS ============================================================================================================ Current Assets Cash $ 21,033 $ 17,144 Trade receivables (less allowances of $4,589 and $4,296, respectively) 344,232 301,525 Merchandise inventory 259,782 211,482 Other current assets 12,800 12,273 - - ------------------------------------------------------------------------------------------------------------ Total current assets 637,847 542,424 - - ------------------------------------------------------------------------------------------------------------ Property, at cost Land 19,921 19,297 Buildings 137,982 131,081 Furniture and fixtures 90,341 79,542 Capital equipment leases 22,732 32,235 - - ------------------------------------------------------------------------------------------------------------ 270,976 262,155 Less--Accumulated depreciation 110,843 108,722 - - ------------------------------------------------------------------------------------------------------------ 160,133 153,433 - - ------------------------------------------------------------------------------------------------------------ Deferred Income Taxes 14,354 15,234 - - ------------------------------------------------------------------------------------------------------------ Other Assets 10,946 8,695 - - ------------------------------------------------------------------------------------------------------------ $823,280 $719,786 - - ------------------------------------------------------------------------------------------------------------ LIABILITIES AND SHAREHOLDERS' EQUITY - - ------------------------------------------------------------------------------------------------------------- Current Liabilities Notes payable to banks $130,554 $ 80,488 Current portion of long-term debt 13,479 13,457 Trade accounts payable 277,729 258,656 Accrued payroll and benefit costs 37,350 35,075 Other accrued taxes 8,957 7,475 Dividends payable 4,915 4,801 Other payables and accruals 8,982 6,338 - - ------------------------------------------------------------------------------------------------------------ Total current liabilities 481,966 406,290 - - ------------------------------------------------------------------------------------------------------------ Postretirement Benefits Liability 75,900 74,141 - - ------------------------------------------------------------------------------------------------------------ Long-term Debt 91,257 90,212 - - ------------------------------------------------------------------------------------------------------------ Shares at December 31, 1995 1994 - - ------------------------------------------------------------------------------------------------------------ Shareholders' Equity Capital stock- Preferred, par value $20 per share, authorized 300,000 shares-- Issued to shareholders 7,504 8,248 In treasury, at cost -- (60) - - ------------------------------------------------------------------------------------------------------------ Outstanding 7,504 8,188 150 164 - - ------------------------------------------------------------------------------------------------------------ Common, stated value $20 per share, Authorized 7,500,000 5,000,000 Issued to voting trustees 4,228,414 4,347,757 Issued to shareholders 244,315 250,893 In treasury, at cost (12,431) (5,708) - - ------------------------------------------------------------------------------------------------------------ Outstanding 4,460,298 4,592,942 89,206 91,859 - - ------------------------------------------------------------------------------------------------------------ Common shares subscribed 9,008 486 Retained earnings 84,801 57,081 - - ------------------------------------------------------------------------------------------------------------ 183,165 149,590 Less--Subscriptions receivable 9,008 447 - - ------------------------------------------------------------------------------------------------------------ Total Shareholders' Equity 174,157 149,143 - - ------------------------------------------------------------------------------------------------------------ $823,280 $719,786 - - ------------------------------------------------------------------------------------------------------------ See accompanying Notes to Consolidated Financial Statements NINETEEN 23 CONSOLIDATED FINANCIAL STATEMENTS Consolidated Statements of Cash Flows (Stated in thousands) For the Years Ended December 31, 1995 1994 1993 ====================================================================================================== Cash Flows from Operations Income before cumulative effect of accounting change $36,718 $18,702 $14,745 ====================================================================================================== Adjustments to reconcile income before cumulative effect of accounting change to cash (used) provided by operations- Depreciation and amortization 17,744 15,999 14,379 Deferred income taxes 2,408 (1,251) (763) Gain on sale of property (2,055) -- -- Changes in assets and liabilities: Trade receivables (42,707) (44,891) (19,226) Merchandise inventory (48,300) (43,555) (5,524) Other current assets (527) (2,174) (1,556) Other assets (2,251) (1,556) 448 Trade accounts payable 19,073 64,813 1,609 Accrued payroll and benefit costs 2,275 7,432 1,948 Other accrued liabilities 4,357 2,934 240 ====================================================================================================== (49,983) (2,249) (8,445) ====================================================================================================== Net cash flow (used) provided by operations (13,265) 16,453 6,300 ====================================================================================================== Cash Flows From Investing Activities Proceeds from sale of property 4,136 415 277 Capital expenditures for property (25,621) (26,963) (13,264) ====================================================================================================== Net cash flow used by investing activities (21,485) (26,548) (12,987) ====================================================================================================== Cash Flows From Financing Activities Net increase (decrease) in notes payable to banks 50,066 (1,706) 12,196 Proceeds from long-term debt 14,000 35,000 10,000 Repayment of long-term debt (10,862) (7,892) (5,699) Principal payments under capital equipment leases (2,975) (4,009) (3,812) Sale of common stock 328 578 6,288 Purchase of treasury stock (3,034) (3,218) (2,872) Dividends paid (8,884) (8,846) (8,620) ====================================================================================================== Net cash flow provided by financing activities 38,639 9,907 7,481 ====================================================================================================== Net Increase (Decrease) in Cash 3,889 (188) 794 ====================================================================================================== Cash, Beginning of Year 17,144 17,332 16,538 - - ------------------------------------------------------------------------------------------------------ Cash, End of Year $21,033 $17,144 $17,332 - - ------------------------------------------------------------------------------------------------------ See accompanying Notes to Consolidated Financial Statements TWENTY 24 Notes to Consolidated Financial Statements for the Years Ended December 31, 1995, 1994 and 1993 (Stated in thousands except for share and per share data) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The consolidated financial statements include the accounts of Graybar Electric Company, Inc. and its subsidiary companies. All significant intercompany balances and transactions have been eliminated. Revenue Recognition Revenue from the sale of the Company's products is recognized upon shipment to the customer. Costs of the products are recorded as cost of merchandise sold when the related revenue is recognized. Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities. Actual results could differ from those estimates. Merchandise Inventory Inventory is stated at the lower of cost (determined using the last-in, first-out (LIFO) cost method) or market. LIFO accounting is generally a conservative method of accounting that, compared with other inventory accounting methods, provides better matching of current costs with current revenues. Had the first-in, first-out (FIFO) method been used, inventory would have been approximately $32,583 and $25,360 greater than reported under the LIFO method at December 31, 1995 and 1994, respectively. Property and Depreciation The Company provides for depreciation using the straight-line method over the following estimated useful lives of the assets: - - ------------------------------------------------------------- Buildings 42 years - - ------------------------------------------------------------- Permanent fixtures-- Over the lives of the leased property respective leases - - ------------------------------------------------------------- Furniture, fixtures and equipment 4 to 14 years - - ------------------------------------------------------------- Capital equipment Over the lives of the leases respective leases - - ------------------------------------------------------------- At the time property is retired, or otherwise disposed of, the asset and related accumulated depreciation are removed from the accounts and any resulting gain or loss is credited or charged to other income. Equipment under capital leases is recorded in property with the corresponding obligations carried in long-term debt. The amount capitalized is the present value at the beginning of the lease term of the aggregate minimum lease payments. Maintenance and repairs are expensed as incurred. Renewals and betterments that extend the life of the property are capitalized. The Company capitalizes interest expense on major construction and development projects while in progress. Credit Risk Financial instruments which potentially expose the Company to concen- trations of credit risk consist primarily of trade accounts receivable. The Company distributes its products to a large number of customers in the electrical contractor, industrial plant and communications markets. Most of the Company's business activity is with customers in the United States; however, the Company has limited sales activity in several international locations. The Company performs ongoing credit evaluations of its customers, and a significant portion of trade receivables is secured by lien or bond rights. In addition, export sales are usually guaranteed by letter of credit or advance payment arrangements. The Company maintains allowances for potential credit losses and such losses historically have been within management's expectations. 2. INCOME TAXES The provision for income taxes recorded in the Consolidated Statements of Income and Retained Earnings is as follows: Years Ended December 31: 1995 1994 1993 - - ---------------------------------------------------------------------------------------------------------- Federal income tax Current $20,304 $13,335 $9,067 Deferred 2,123 (951) (629) State income tax Current 3,122 1,890 949 Deferred 285 (300) (134) - - ----------------------------------------------------------------------------------------------------------- Financial statement income tax provision $25,834 $13,974 $9,253 - - ----------------------------------------------------------------------------------------------------------- TWENTY-ONE 25 CONSOLIDATED FINANCIAL STATEMENTS Deferred income taxes are provided based upon differences between the financial statement and tax bases of assets and liabilities. The following deferred taxes are recorded at December 31: Assets/(Liabilities) 1995 1994 - - ------------------------------------------------------------------------------------------------------------- Postretirement benefits $ 30,018 $ 29,323 Payroll accruals 5,074 4,320 Bad debt reserves 1,745 1,673 Inventory 1,692 1,463 Other deferred tax assets 4,664 3,431 Prepaid pension (3,493) (2,717) Fixed asset depreciation (13,384) (13,513) Fixed asset gains (1,372) (624) Other deferred tax liabilities (8,972) (4,976) - - ------------------------------------------------------------------------------------------------------------- $ 15,972 $ 18,380 - - ------------------------------------------------------------------------------------------------------------- Deferred tax assets included in Other Current Assets were $1,618 and $3,146 in 1995 and 1994, respectively. A reconciliation between the "statutory" federal income tax rate and the effective tax rate in the Consolidated Statements of Income and Retained Earnings is as follows: Years Ended December 31: 1995 1994 1993 - - ------------------------------------------------------------------------------------------------------------- "Statutory" tax rate 35.0% 35.0% 35.0% State and local income taxes, net of federal benefit 3.3 3.4 2.9 Other, net 3.0 4.4 .7 - - ------------------------------------------------------------------------------------------------------------- Effective tax rate 41.3% 42.8% 38.6% - - ------------------------------------------------------------------------------------------------------------- 3. CAPITAL STOCK The Company's capital stock is owned by its employees and retirees. Neither common nor preferred stock may be sold by the holder thereof, except by first offering it to the Company. The Company may buy any common shares so offered at the price at which they were issued ($20) with appropriate adjustments for current dividends, or may call all or part of the preferred stock at par plus accrued dividends. During 1995, the Company offered to eligible employees the right to subscribe to 575,000 shares of common stock at $20 per share in accordance with the provisions of the Company's Common Stock Purchase Plan dated October 9, 1995. This resulted in the subscription of 450,402 shares ($9,008). Subscribers under the Plan elected to make payments under one of the following options: (i) all shares subscribed for prior to January 19, 1996; (ii) a portion of such shares prior to January 19, 1996, and the balance in monthly installments through payroll deductions (or in certain cases where a subscriber is no longer on the Company's payroll, through pension deductions or direct monthly payments) over a 34-month period; or (iii) all shares pursuant to the installment method. Shares were issued and Voting Trust Certificates were delivered to subscribers as of January 19, 1996, in the case of shares paid for prior to January 19, 1996. Shares will be issued and Voting Trust Certificates will be delivered to subscribers on a quarterly basis, as of the tenth day of March, June, September and December to the extent full payments of shares are made in the case of subscriptions under the installment method. Shown below is a summary of shares reacquired and retired by the Company in the three years ended December 31: Preferred Common Reacquired Retired Reacquired Retired - - ------------------------------------------------------------------------------- 1995 684 744 151,009 144,286 1994 967 1,285 159,938 179,737 1993 717 514 142,889 128,633 - - ------------------------------------------------------------------------------- 4. LONG-TERM DEBT December 31, Long-term debt was composed of: 1995 1994 - - ------------------------------------------------------------------------------------ 6.25% note, unsecured, maturing June, 2004, installments of $7,000 due annually in each of the years 2000 through 2004 $35,000 $35,000 9.23% note secured by a first mortgage on various properties, maturing June, 2005, installments of $2,725 due annually in each of the years 1995 through 2004 with final payment of $2,750 due in 2005 24,550 27,275 7.67% note, unsecured, maturing April, 2000, installments of $2,000 due annually in each of the years 1996 through 2000 8,000 -- 12.25% note secured by a first mortgage on various properties, due in monthly installments through June, 1999 7,824 10,343 5.68% to 9.23% capital equipment leases, various maturities 7,583 10,027 5.68% note, unsecured, maturing June, 1998, installments of $2,000 due annually in each of the years 1994 through 1998 4,000 6,000 8.53% note, secured by facility, due in quarterly installments through March, 2005 3,300 -- Variable rate, Industrial Revenue Bonds, secured by facilities, various maturities 1,000 1,567 - - ------------------------------------------------------------------------------------ $91,257 $90,212 - - ------------------------------------------------------------------------------------ TWENTY-TWO 26 Long-term debt matures as follows: - - ------------------------------------------------------------ 1997 $13,463 1998 12,392 1999 8,842 2000 12,210 2001-2005 44,350 - - ------------------------------------------------------------ $91,257 - - ------------------------------------------------------------ The present value of future minimum lease payments under capital leases as of December 31, 1995 was $10,850 of which $7,583 is included in long-term debt. Bank borrowings varied from a minimum of $77,000 and $54,000 to a maximum of $158,000 and $132,000 in 1995 and 1994, respectively. The average amount of bank borrowings outstanding during 1995 and 1994 amounted to approximately $122,000 and $88,000 at average interest rates of 6.10% and 4.40%, respectively. The averages are based on the daily amounts outstanding during each year. The Company had unused lines of credit of approximately $148,000 as of December 31, 1995. Certain lines require maintenance of compensating balances of up to 5% of the available lines of credit. In May, 1994, the Company received the proceeds from a ten-year note for $35,000 at a fixed interest rate of 6.25%. The note agreement has various covenants 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 agreement. The Company has an $80,000 Revolving Credit Loan Agreement with a group of banks at an interest rate based on the London Interbank Offered Rate (LIBOR). The credit agreement has various covenants which limit the Company's ability to make investments, incur debt, dispose of property, and issue equity securities. The Company is also required to maintain certain financial ratios as defined in the agreement. In May, 1995, the agreement was amended to increase the commitment to $80,000 from the $50,000 commitment in 1994. There have been no borrowings against this credit line through December 31, 1995. 5. PENSION PLAN Pension and related expense was $4,757, $4,635 and $3,556 for each of the three years ended December 31, 1995, 1994 and 1993, respectively. The Company has a noncontributory defined benefit pension plan covering substantially all full-time employees. The plan provides retirement benefits based on an employee's final average earnings and years of service. Employees become 100% vested after 5 years of service, regardless of age. The Company's funding policy is to contribute the net periodic pension cost accrued each year, provided that the contribution will not be less than the ERISA minimum nor greater than the maximum tax deductible amount. The actuarially computed components of the defined benefit pension plan expense for the three years ended December 31, are as follows: 1995 1994 1993 -------------------------------------------------------- Service cost - benefits earned during the year $ 4,190 $ 4,249 $ 3,383 Interest cost on projected benefit obligation 7,762 7,357 6,923 Actual return on plan assets (16,200) 642 (9,472) Net amortization of return on plan assets and unrecognized net asset 8,222 (8,660) 1,958 ------- ------- ------- Total defined benefit plan expense $ 3,974 $ 3,588 $ 2,792 ======= ======= ======= The following table sets forth the plan's funded status for the two years ended December 31: 1995 1994 ------------------------------- Actuarial present value of benefit obligation: Vested benefits $70,700 $52,883 Nonvested benefits 14,000 11,329 ------- ------- Accumulated benefit obligation 84,700 64,212 ------- ------- Projected benefit obligation for service rendered to date 114,000 92,514 ------- ------- Plan assets at fair value, primarily common stocks and bonds 92,274 80,738 ------- ------- Projected benefit obligation in excess of plan assets (21,726) (11,776) ------- ------- Unrecognized prior service cost 5,370 (12) Unrecognized net loss 33,116 28,412 Unrecognized net asset at January 1, 1987 (10,426) (11,584) ------- ------- Net pension asset recognized in the consolidated balance sheet $ 6,334 $ 5,040 ======= ======= The discount rate and rate of increase in future compensation levels used in determining the actuarial present value of the projected benefit obligation were 7.25% and 4.25%, and 8.50% and 5.50% in 1995 and 1994, respectively. The long-term rate of return on assets used in determining defined benefit plan expense was 9.25%, 9.75% and 9.00% in 1995, 1994 and 1993, respectively. The average remaining service lives of plan participants used to calculate the amortization of the unrecognized net asset at January 1, 1987 was 18 years. TWENTY-THREE 27 CONSOLIDATED FINANCIAL STATEMENTS The Company also provides a defined contribution profit sharing and savings plan covering substantially all of its full-time employees. Annual contributions by the Company to the plan are at the discretion of management and are generally determined based on the profitability of the Company. Employees may also contribute to the plan subject to limitations imposed by federal tax law and ERISA. 6. POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE Effective January 1, 1993, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions." The Company and its subsidiaries provide certain health care and life insurance benefits for retired employees through the Retiree Welfare Plan (the Plan). Substantially all of the Company's employees may become eligible to participate in the Plan if they reach normal retirement age while working for the Company. Benefits are provided through insurance coverage with premiums based on the benefits paid during the year. The Company funds the Plan on a pay-as-you-go basis and, accordingly, the Plan has no assets at December 31, 1995 or 1994. The Company elected to immediately recognize the cumulative effect of adoption of SFAS No. 106 pertaining to years prior to 1993 through a one-time adjustment which decreased 1993 net income by $45,000, net of a $28,000 income tax effect. Periodic postretirement benefit expense for the three years ended December 31, is as follows: 1995 1994 1993 ------------------------------------------------------ Service cost - benefits earned during the year $ 443 $ 536 $ 401 Interest cost on accumulated postretirement benefit obligation 6,398 6,149 6,111 Amortization of net loss from prior years -- 122 -- ------ ------- ------ Net periodic postretirement benefit expense $6,841 $6,807 $6,512 ====== ====== ====== The following table sets forth the accumulated postretirement benefit obligation for the Company's postretirement benefit plans for the two years ended December 31: 1995 1994 --------------------------------------- Retirees $66,000 $60,743 Fully eligible active plan participants 14,300 11,135 Other active plan participants 8,300 6,034 ------- ------- Accumulated postretirement benefit obligation 88,600 77,912 Unrecognized net loss (12,700) (3,771) ------- ------- Accrued postretirement benefit cost $75,900 $74,141 ======= ======= The discount rate used in determining net periodic postretirement benefit expense was 8.50%, 7.50% and 8.75% for 1995, 1994 and 1993, respectively. The discount rate used to determine the accumulated postretirement benefit obligation was 7.25% and 8.50% at December 31, 1995 and 1994, respectively. The health care cost trend rate used in determining net periodic postretirement benefit expense for all years was 6.75% for 1995 and 1994 and 8.00% for 1993. The health care cost trend rate used to determine the accumulated postretirement benefit obligation for all years was 6.50% and 6.75% at December 31, 1995 and 1994, respectively. A one percentage point increase in the health care cost trend rate would not have a material impact on the net periodic postretirement benefit expense or the accumulated postretirement benefit obligation. 7. NET INCOME PER SHARE OF COMMON STOCK The computation of net income per share of common stock is based on the weighted average number of common shares outstanding during each year. The average numbers of shares used in computing net income per share of common stock were 4,524,304 , 4,640,998 and 4,778,747 in 1995, 1994 and 1993, respectively, adjusted for the declaration of a 6.25% stock dividend in 1994. 8. COMMITMENTS Rental expense was $8,819 , $8,420 and $6,941 in 1995, 1994 and 1993, respectively. Future minimum rental payments required under operating leases that have either initial or remaining noncancellable lease terms in excess of one year as of December 31, 1995 are as follows: Years ending December 31: - - ------------------------------ 1996 $8,802 1997 6,405 1998 5,013 1999 3,730 2000 2,293 Subsequent to 2000 2,970 - - ------------------------------ 9. STATEMENTS OF CASH FLOWS During 1995, 1994 and 1993 income taxes paid totaled $22,943, $16,783 and $10,621; interest paid totaled $16,222, $11,987 and $10,158 and liabilities assumed in connection with capitalized leases totaled $904, $5,949 and $0, respectively. TWENTY-FOUR 28 REPORT OF INDEPENDENT ACCOUNTANTS One Boatmen's Plaza Telephone 314 425 0500 St. Louis, MO 63101 Price Waterhouse LLP [LOGO] REPORT OF INDEPENDENT ACCOUNTANTS February 16, 1996 To the Shareholders and Board of Directors of Graybar Electric Company, Inc. In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income and retained earnings and of cash flows present fairly, in all material respects, the financial position of Graybar Electric Company, Inc. and its subsidiaries (the Company) at December 31, 1995 and 1994, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. As discussed in Note 6 to the financial statements, the Company changed its method of accounting for postretirement benefits other than pensions effective January 1, 1993. /s/ Price Waterhouse LLP Price Waterhouse LLP TWENTY-FIVE 29 DISTRICT MANAGEMENT AS OF JANUARY 1, 1996 - - ------------------------------------------------- New York District - - ------------------------------------------------- Frank Mossa Vice President [PHOTO] Keith E. Davis Operating Manager James (Chip) Bateman Financial Manager - - ------------------------------------------------- Boston District - - ------------------------------------------------- William L. King Vice President [PHOTO] Donald M. Block Sales Manager Gerald G. Pollick Operating Manager Joseph P. Peduto Financial Manager - - ------------------------------------------------- Pittsburgh District - - ------------------------------------------------- Steven M. Schooley Vice President [PHOTO] Wade V. Leidecker Sales Manager C. Robert Smith Operating Manager Peter M. Wingrove Financial Manager - - ------------------------------------------------- Cincinnati District - - ------------------------------------------------- Kenneth L. Netherton Vice President [PHOTO] James D. Hooper Sales Manager David L. Mitchell Operating Manager Stephen C. Beckmann Financial Manager - - ------------------------------------------------- Atlanta District - - ------------------------------------------------- H. Bennett Wall Vice President [PHOTO] D. Steven Smith Sales Manager Nancy C. Porter Operating Manager Darrel D. Schilling Financial Manager - - ------------------------------------------------- Richmond District - - ------------------------------------------------- Thomas S. Gurganous Vice President [PHOTO] J. Wayne Andrews Sales Manager Wallace H. Hancock Sales Manager Ernest L. Chappell, Jr. Operating Manager David E. Metz Financial Manager - - ------------------------------------------------- Tampa District - - ------------------------------------------------- Robert L. Mygrant Vice President [PHOTO] Bruce E. Neilson Sales Manager Robert C. Lyons Sales Manager Robert D. Wombacher Operating Manager Richard C. Hird Financial Manager - - ------------------------------------------------- Chicago District - - ------------------------------------------------- Richard A. Cole Vice President [PHOTO] Thomas E. Walsh Sales Manager John C. Fischer Operating Manager Martin J. Beagen Financial Manager - - ------------------------------------------------- Minneapolis District - - ------------------------------------------------- Robert L. Nowak Vice President [PHOTO] Terrence J. Innes Sales Manager Christopher O. Olsen Operating Manager Thomas E. Kinate Financial Manager TWENTY-SIX 30 - - ------------------------------------------------- St. Louis District - - ------------------------------------------------- Irving Orloff Vice President [PHOTO] John P. Mills Operating Manager James V. Glass Financial Manager - - ------------------------------------------------- Dallas District - - ------------------------------------------------- Lawrence R. Giglio Vice President [PHOTO] Peter J. Roettinger Sales Manager Francis B. Roderick Sales Manager Thomas T. Townsend Operating Manager George D. Zackey Financial Manager - - ------------------------------------------------- Seattle District - - ------------------------------------------------- John C. Loff Vice President Larry T. Christensen Sales Manager T. Peter Girard, Jr. Operating Manager Randall R. Harwood Financial Manager - - ------------------------------------------------- Phoenix District - - ------------------------------------------------- Gary D. Hodges Vice President [PHOTO] Richard A. Mitchell Sales Manager Jerry D. Nichols Operating Manager Ronald J. Grabar Financial Manager - - ------------------------------------------------- Northeastern Comm/Data District - - ------------------------------------------------- Gerard J. McCrea Vice President [PHOTO] - - ------------------------------------------------- Southeastern Comm/Data District - - ------------------------------------------------- Richard D. Offenbacher Vice President [PHOTO] - - ------------------------------------------------- Central Comm/Data District - - ------------------------------------------------- Alan L. Eddings Vice President [PHOTO] - - ------------------------------------------------- Western Comm/Data District - - ------------------------------------------------- Kenneth B. Sparks Vice President [PHOTO] TWENTY-SEVEN 31 LOCATIONS AS OF JANUARY 1, 1996 CORPORATE OFFICE 34 North Meramec Avenue St. Louis, Missouri 63105 314 512-9200 INFORMATION SYSTEMS 11828 Lackland Road St. Louis, Missouri 63146 314 569-0006 MID-ATLANTIC ZONE SERVICE CENTER 2124 Avenue C Bethlehem, Pennsylvania 18017 610 266-0200 MIDWEST ZONE SERVICE CENTER 2424 A North Main Street East Peoria, Illinois 61611 309 694-2341 - - --------------------------------------- New York District - - --------------------------------------- 21-15 Queens Plaza North Long Island City, New York 11101 718 392-2000 BRANCHES New York: Manhattan, Rochester, Albany, Syracuse, Hauppauge, Buffalo New Jersey: Newark, North Brunswick, Teterboro Telcom, Hackettstown, Parsippany, Wanamassa - - --------------------------------------- Pittsburgh District - - --------------------------------------- 900 Ridge Avenue Pittsburgh, Pennsylvania 15212 412 323-5200 BRANCHES Ohio: Youngstown, Cleveland, Akron, Canton, Mansfield Pennsylvania: Greensburg West Virginia: Wheeling, Harrisburg, Allentown, Philadelphia Delaware: New Castle - - --------------------------------------- Atlanta District - - --------------------------------------- 2050 Nancy Hanks Drive Norcross, Georgia 30071 770 441-5580 BRANCHES Georgia: Atlanta Midtown, Marietta, Riverdale, Savannah, Cartersville Alabama: Birmingham, Huntsville, Mobile South Carolina: Columbia, Greenville, Spartanburg, Hilton Head, Beaufort Tennessee: Knoxville, Chattanooga Florida: Pensacola Mississippi: Jackson - - --------------------------------------- Tampa District - - --------------------------------------- 801 North Rome Avenue Tampa, Florida 33606 813 253-8881 BRANCHES Florida: Sarasota, Lakeland, Orlando, Largo, Melbourne, North Tampa, Jacksonville, South Jacksonville, Tallahassee, Daytona Beach, Perrine, Miami, West Palm Beach, Tampa Utility, Florida City, Fort Myers, Fort Pierce, Miami Telcom, Naples, Pompano Beach, Georgia: Kingsland - - --------------------------------------- Boston District - - --------------------------------------- 345 Harrison Avenue Boston, Massachusetts 02118 617 482-9320 BRANCHES Rhode Island: Cranston Massachusetts: Worcester, West Springfield, Somerville Maine: Portland New Hampshire: Manchester Vermont: Rutland Connecticut: Hamden - - --------------------------------------- Cincinnati District - - --------------------------------------- 1022 West Eighth Street Cincinnati, Ohio 45203 513 621-0600 BRANCHES West Virginia: Charleston Ohio: Columbus, Dayton, Lima Kentucky: Lexington, Louisville Tennessee: Nashville - - --------------------------------------- Richmond District - - --------------------------------------- 1510 Tomlynn Street Richmond, Virginia 23230 804 354-1300 BRANCHES Virginia: Norfolk, Roanoke, Hampton, Chantilly North Carolina: Asheville, Raleigh, Winston-Salem, Charlotte, Greensboro, Wilmington South Carolina: Rock Hill Tennessee: Bristol, Johnson City Maryland: Baltimore, Lanham - - --------------------------------------- Chicago District - - --------------------------------------- 900 Regency Drive Glendale Heights, Illinois 60139 708 893-3600 BRANCHES Illinois: Naperville Indiana: Fort Wayne, South Bend, Hammond, Indianapolis Michigan: Flint, Lansing, Grand Rapids, Kalamazoo, Auburn Hills, Kentwood, Livonia Ohio: Toledo TWENTY-EIGHT 32 Northeastern Comm/Data District 1550 South Warfield Street Philadelphia, Pennsylvania 19146 215 336-2211 Southeastern Comm/Data District 2050 Nancy Hanks Drive Norcross, Georgia 30071 770 441-5580 Central Comm/Data District 600 South Taylor St. Louis, Missouri 63110 314 531-4700 Western Comm/Data District 1600 132nd Avenue, Northeast Bellevue, Washington 98005 206 453-1574 - - --------------------------------------- Minneapolis District - - --------------------------------------- 2300 East 25th Street Minneapolis, Minnesota 55406 612 721-3545 BRANCHES Minnesota: St. Paul, Duluth, Brooklyn Park, Burnsville, Plymouth, Rochester, Mankato Montana: Billings North Dakota: Fargo South Dakota: Sioux Falls, Brookings Wisconsin: Green Bay, Milwaukee, Marinette, Manitowoc, Madison - - --------------------------------------- Dallas District - - --------------------------------------- 717 South Good Latimer Expressway Dallas, Texas 75226 214 939-0844 BRANCHES Texas: San Antonio, Fort Worth, Amarillo, Austin, Abilene, Dallas, Royal Lane, Cypress, Beaumont, Corpus Christi, Houston, Houston Telcom, North Dallas, Sherman, Lubbock, Longview, Kilgore, LaMarque, Texas Instruments, Houston Distribution Center, Tellepsen Counter, Bingle Counter, Cullen Counter Oklahoma: Oklahoma City, Tulsa Arkansas: Little Rock, Conway Louisiana: Shreveport, Baton Rouge, Lake Charles, Harahan - - --------------------------------------- Phoenix District - - --------------------------------------- 3350 West Earll Drive Phoenix, Arizona 85017 602 269-2131 BRANCHES Arizona: Mesa, Tucson Colorado: Colorado Springs, Denver, Englewood New Mexico: Albuquerque Texas: El Paso Nevada: Las Vegas, Henderson Utah: Salt Lake City, Orem California: Los Angeles, Anaheim, Costa Mesa, Long Beach, San Bernardino, San Diego, Santa Barbara, Van Nuys, Bakersfield, San Marcos, Santa Maria, Los Angeles Distribution Center - - --------------------------------------- St. Louis District - - --------------------------------------- 600 South Taylor Avenue St. Louis, Missouri 63110 314 531-4700 BRANCHES Iowa: Davenport, Des Moines, Cedar Rapids Illinois: East Peoria, Springfield Missouri: Jefferson City, Kansas City, Springfield Indiana: Evansville Kansas: Olathe, Wichita Nebraska: Omaha Tennessee: Memphis, Jackson - - --------------------------------------- Seattle District - - --------------------------------------- 1919 Sixth Avenue South Seattle, Washington 98134 206 292-4848 BRANCHES Washington: Spokane, Tacoma, Everett, Bellevue Oregon: Portland, Beaverton Idaho: Boise Alaska: Anchorage California: Oakland, Fresno, Modesto, Sacramento, San Jose, Martinez, San Francisco Downtown, Visalia Nevada: Reno Hawaii: Aiea - - --------------------------------------- International - - --------------------------------------- 34 North Meramec Avenue St. Louis, Missouri 63105 314 512-9200 Miami International 10500 Southwest 186th Street Perrine, Florida 38157 305 252-0400 San Francisco International 251 Lawrence Avenue So. San Francisco, California 94080 415 871-7000 Houston International 6161 Bingle Road Houston, Texas 77092 713 507-9200 LOCATIONS Halifax, Nova Scotia Toronto, Canada Guaynabo, Puerto Rico Singapore Juarez and Mexico City, Mexico Kitchener, Ontario Niagara Falls, Ontario Hamilton, Ontario Guelph, Ontario Windsor, Ontario TWENTY-NINE 33 Graybar Electric Company, Inc. 34 North Meramec Avenue St. Louis, Missouri 63105