CONFORMED
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
Commission File Number 0-255
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2002
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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GRAYBAR ELECTRIC COMPANY, INC.
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(Exact name of registrant as specified in its charter)
NEW YORK 13 - 0794380
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(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
34 NORTH MERAMEC AVENUE, ST. LOUIS, MO 63105
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(Address of principal executive offices) (Zip Code)
POST OFFICE BOX 7231, ST. LOUIS, MO 63177
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(Mailing Address) (Zip Code)
Registrant's telephone number, including area code: (314) 573 - 9200
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Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by section 13 or 15 (d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days.
YES X NO
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Common Stock Outstanding at April 30, 2002: 6,353,091
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(Number of Shares)
PART I
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CONSOLIDATED BALANCE SHEETS
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(Dollars Stated in Thousands)
(Except for Share and Per Share Data)
MARCH 31, 2002 DECEMBER 31, 2001
========================= =========================
CURRENT ASSETS
Cash $ 10,554 $ 10,079
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Trade receivables 559,382 592,752
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Merchandise inventory 568,215 612,976
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Other current assets 11,973 14,442
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Total current assets 1,150,124 1,230,249
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PROPERTY
Land 25,411 25,402
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Buildings and permanent fixtures 234,806 233,979
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Furniture and fixtures 182,698 170,428
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Capital equipment leases 24,159 24,159
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Less-Accumulated depreciation 193,172 187,492
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Net property 273,902 266,476
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DEFERRED FEDERAL INCOME TAXES 10,558 10,653
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OTHER ASSETS 30,364 28,620
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$ 1,464,948 $ 1,535,998
========================= =========================
CURRENT LIABILITIES
Short-term borrowings $ 53,292 $ 98,737
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Current portion of long-term debt 25,948 25,795
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Trade accounts payable 492,901 495,143
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Other accrued taxes 14,152 11,760
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Accrued payroll and benefit costs 9,434 26,816
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Dividends payable --- 6,299
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Other payables and accruals 41,759 51,753
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Total current liabilities 637,486 716,303
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POSTRETIREMENT BENEFITS LIABILITY 77,431 77,431
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PENSION LIABILITY 19,223 19,223
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LONG TERM DEBT 313,058 315,549
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2
CONSOLIDATED BALANCE SHEETS
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(Dollars Stated in Thousands)
(Except for Share and Per Share Data)
MARCH 31, 2002 DECEMBER 31, 2001
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SHAREHOLDERS' EQUITY
CAPITAL STOCK
Preferred:
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Par value $20 per share
Authorized 300,000 shares
SHARES
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2002 2001
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Issued to shareholders 2,593 2,593
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In treasury, at cost (118) (27)
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Outstanding 2,475 2,566 50 51
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Common:
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Stated value $20 per share
Authorized 7,500,000 shares
SHARES
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2002 2001
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Issued to voting trustees 6,152,293 5,427,152
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Issued to shareholders 316,647 305,754
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In treasury, at cost (90,227) (11,700)
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Outstanding 6,378,713 5,721,206 127,574 114,424
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Advance payments on subscriptions
to common stock 54 ---
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Retained earnings 307,148 310,521
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Accumulated other comprehensive
income (loss) (17,076) (17,504)
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TOTAL SHAREHOLDERS' EQUITY 417,750 407,492
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$ 1,464,948 $ 1,535,998
========================= =========================
See accompanying Notes to Consolidated Financial Statements
3
CONSOLIDATED STATEMENTS OF INCOME
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(Dollars Stated in Thousands)
(Except for Share and Per Share Data)
QUARTER ENDED
MARCH 31, 2002 MARCH 31, 2001
========================== ==========================
GROSS SALES, net of returns and allowances $ 970,814 $ 1,266,436
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Less - Cash discounts 2,904 3,368
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NET SALES 967,910 1,263,068
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COST OF MERCHANDISE SOLD 786,168 1,033,768
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Gross margin 181,742 229,300
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SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 170,369 204,614
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DEPRECIATION AND AMORTIZATION 8,529 7,854
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Income from operations 2,844 16,832
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OTHER INCOME, net 2,121 4,630
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INTEREST EXPENSE 7,333 11,564
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Income (loss) before provision for income taxes (2,368) 9,898
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PROVISION FOR (BENEFIT FROM) INCOME TAXES
Current (816) 3,643
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Deferred (96) 267
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Total provision for (benefit from) income taxes (912) 3,910
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NET INCOME (LOSS) $ (1,456) $ 5,988
========================== ==========================
NET INCOME (LOSS) PER SHARE OF COMMON STOCK (NOTE 2) $ (.23) $ 1.01
========================== ==========================
DIVIDENDS
Preferred - $.25 per share $ 1 $ 1
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Common - $.30 per share 1,916 1,775
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$ 1,917 $ 1,776
========================== ==========================
See accompanying Notes to Consolidated Financial Statements
4
CONSOLIDATED STATEMENTS OF CASH FLOWS
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(Dollars Stated in Thousands)
(Except for Share and Per Share Data)
THREE MONTHS ENDED MARCH 31,
2002 2001
========================== ==========================
CASH FLOWS FROM OPERATIONS
Net Income (Loss) $ (1,456) $ 5,988
-------------------------- --------------------------
Adjustments to reconcile net income (loss)
to cash provided by operations:
Depreciation and amortization 8,529 7,854
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Deferred income taxes (96) 267
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Gain on sale of property --- (2,549)
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Changes in assets and liabilities:
Trade receivables 33,370 39,306
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Merchandise inventory 44,761 (41,404)
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Other current assets 2,469 18,534
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Other assets (1,744) (1,324)
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Trade accounts payable (2,242) 176,632
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Accrued payroll and benefit costs (17,382) (42,300)
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Other accrued liabilities (6,983) 8,763
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60,682 163,779
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Net cash provided by operations 59,226 169,767
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CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of property 766 2,665
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Capital expenditures for property (16,721) (11,948)
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Net cash used by investing activities (15,955) (9,283)
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CASH FLOWS FROM FINANCING ACTIVITIES
Net decrease in short-term borrowings (45,445) (112,322)
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Proceeds from long-term debt --- --
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Repayment of long-term debt (1,251) (1,611)
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Principal payments under capital equipment leases (1,087) (766)
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Sale of common stock 14,775 148
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Purchase of treasury stock (1,572) (1,571)
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Dividends paid (8,216) (8,119)
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Net cash used by financing activities (42,796) (124,241)
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NET INCREASE IN CASH 475 36,243
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CASH, BEGINNING OF YEAR 10,079 27,614
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CASH, END OF FIRST QUARTER $ 10,554 $ 63,857
========================== ==========================
See accompanying Notes to Consolidated Financial Statements
5
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
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FOR THE QUARTERS ENDED
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MARCH 31, 2002 AND 2001
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(Dollars Stated in Thousands)
(Except for Share and Per Share Data)
COMMON ACCUMULATED
STOCK OTHER
COMMON PREFERRED SUBSCRIBED, RETAINED COMPREHENSIVE
STOCK STOCK UNISSUED EARNINGS INCOME (LOSS) TOTAL
----------- ------------ ------------ --------------- --------------------- ---------------
December 31, 2000 $119,828 $ 57 $ 49 $ 290,405 $ (542) $ 409,797
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Net Income 5,988 5,988
Currency Translation Adjustments (475) (475)
Cumulative Impact of Adoption of
SFAS 133 (net of tax of $877) (1,342) (1,342)
Unrealized Gain/(Loss) from
Interest Rate Swap (net of tax
of $246) (378) (378)
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Comprehensive Income 3,793
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Stock Issued 153 153
Stock Redeemed (1,571) (1,571)
Advance Payments (5) (5)
Dividends Declared (1,776) (1,776)
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March 31, 2001 $118,410 $ 57 $ 44 $ 294,617 $ (2,737) $ 410,391
=========== ============ ============ =============== ===================== ===============
COMMON ACCUMULATED
STOCK OTHER
COMMON PREFERRED SUBSCRIBED, RETAINED COMPREHENSIVE
STOCK STOCK UNISSUED EARNINGS INCOME (LOSS) TOTAL
----------- ------------ ------------ --------------- --------------------- ---------------
December 31, 2001 $114,424 $ 51 $ 0 $ 310,521 $ (17,504) $ 407,492
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Net Income (Loss) (1,456) (1,456)
Currency Translation Adjustments 28 28
Unrealized Gain/(Loss) from
Interest Rate Swap (net of tax
of $247) 400 400
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Comprehensive Income (Loss) (1,028)
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Stock Issued 14,721 14,721
Stock Redeemed (1,571) (1) (1,572)
Advance Payments 54 54
Dividends Declared (1,917) (1,917)
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March 31, 2002 $127,574 $ 50 $ 54 $ 307,148 $ (17,076) $ 417,750
=========== ============ ============ =============== ===================== ===============
See accompanying Notes to Consolidated Financial Statements
6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AND OTHER INFORMATION
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(Dollars Stated in Thousands)
(Except for Share and Per Share Data)
Note 1
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The condensed financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information
and footnote disclosures normally included in financial statements prepared
in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although the
Company believes that the disclosures are adequate to make the information
presented not misleading. It is suggested that these condensed financial
statements be read in conjunction with the financial statements and the
notes thereto included in the Company's latest annual report on Form 10-K.
In the opinion of the Company, the quarterly report includes all
adjustments, consisting of normal recurring accruals, necessary for the fair
presentation of the financial statements presented. Such interim financial
information is subject to year-end adjustments and independent audit.
Results for interim periods are not necessarily indicative of
results to be expected for the full year.
Note 2
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THREE MONTHS 2002 THREE MONTHS 2001
========================== =========================
Earnings (Loss) for Three Months $ (1,456) $ 5,988
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Dividends on Preferred Stock 1 1
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Available for Common Stock $ (1,457) $ 5,987
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Average Common Shares Outstanding 6,203,143 5,948,916
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Earnings (Loss) Per Share $ (.23) $ 1.01
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7
Note 3
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The Company entered into an accounts receivable securitization
program in June 2000 which provides for the sale of the Company's trade
accounts receivables to a wholly owned, bankruptcy remote, special purpose
subsidiary, Graybar Commerce Corporation. The trade accounts receivable
purchases are financed through the issuance of commercial paper under a
revolving liquidity facility. Under the securitization program, Graybar
Commerce Corporation has granted a security interest in its trade accounts
receivable. The trade accounts receivable sold to Graybar Commerce
Corporation under the program are fully consolidated in trade receivables in
the Company's consolidated balance sheets. Borrowings outstanding under the
securitization program at March 31, 2002 were $25 million and are included
in short-term borrowings in the Company's consolidated balance sheets. The
Company has $250 million available for additional borrowing under the
program at March 31, 2002. The program expires in June 2003.
Note 4
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On January 1, 2002 the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible Assets."
Under SFAS 142, goodwill and indefinite-lived intangible assets will no
longer be amortized but rather will be tested annually for impairment. As of
March 31, 2002 the Company has not completed its initial impairment test.
The Company will complete the impairment test prior to June 30, 2002.
Management does not anticipate that the results of the initial impairment
test will have a significant impact on earnings or the financial position of
the Company.
8
MANAGEMENT'S DISCUSSION & ANALYSIS
OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
(Dollars Stated in Thousands)
RESULTS OF OPERATIONS
- ---------------------
Net sales in the first three months of 2002 were 23.4% lower than
in the first three months of 2001. The lower net sales resulted from a
generally depressed economy in the market sectors in which the Company
operates. The decrease in communications market sales when comparing the
first three months of 2002 to the first three months of 2001 was
significantly more than the decrease in sales in the electrical market.
Gross margin in the first three months of 2002 decreased 20.7%
compared to the first three months of 2001 primarily due to decreased sales
in the electrical and communications markets.
The decrease in selling, general and administrative expenses in the
first three months of 2002 compared to the first three months of 2001
occurred largely because of adjustments in personnel complement and
adjustments in compensation and related expenses.
Interest expense decreased in the first three months of 2002
compared to the first three months of 2001 primarily due to lower interest
rates on short-term borrowings and decreased levels of short-term borrowings
required to finance lower levels of inventory and receivables.
Other income includes service charges for special services provided
to one customer of $797 and $1,048 and gains on sale of property of $0 and
$2,549 in the first three months of 2002 and 2001, respectively.
The combined effect of the decreases in gross margin and other
income, together with the increase in depreciation and amortization and
decreases in selling, general and administrative expenses and interest
expense, resulted in a decrease in pretax earnings of $12,266 in the first
three months of 2002 compared to the same period in 2001.
9
MANAGEMENT'S DISCUSSION & ANALYSIS
OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
(Dollars Stated in Thousands)
FINANCIAL CONDITION AND LIQUIDITY
- ---------------------------------
At March 31, 2002, current assets exceeded current liabilities by
$512,638, down $1,308 from December 31, 2001. The current assets at March
31, 2002 were sufficient to meet the cash needs required to pay current
liabilities. The reduction in accounts receivable from December 31, 2001 to
March 31, 2002 resulted primarily from the decrease in sales experienced by
the Company. The average number of days of sales in accounts receivable has
remained relatively stable during the first quarter of 2002. Merchandise
inventory levels were lower at March 31, 2002 when compared to December 31,
2001 inventory levels due largely to continuing reductions in specific
inventory carried to support customer contract agreements. The Company does
not have any other plans or commitments that would require significant
amounts of additional working capital.
The Company is going to convert its existing computer systems to an
Enterprise Resource Planning (ERP) system over the course of the next
several years. Although the initial stages of the project are currently
under way, scheduled implementation dates have not been finalized. The total
project costs are expected to be approximately $90,000. The Company expects
that conversion to the ERP system will provide future benefits to its
results of operations.
At March 31, 2002, the Company had available to it unused lines of
credit amounting to $625,097. These lines are available to meet short-term
cash requirements of the Company. Short-term borrowings outstanding during
2002 through March 31 ranged from a minimum of $53,292 to a maximum of
$216,779.
The Company has funded its capital requirements from operations,
stock issuances to its employees and long term debt. During the first three
months of 2002, cash provided by operations amounted to $59,226 compared to
$169,767 cash provided by operations in the first three months of 2001. Cash
provided from the sale of common stock and proceeds received on stock
subscriptions amounted to $14,775 in the first three months of 2002.
Additional cash of approximately $423 will be provided in the remainder of
2002 as a result of payments to be made for stock subscribed to by employees
under the 2001 Common Stock Purchase Plan.
Capital expenditures for property for the three-month periods ended
March 31, 2002 and 2001 were $16,721 and $11,948, respectively. Purchases of
treasury stock for the three-month periods ended March 31, 2002 and 2001
were $1,572 and $1,571, respectively. Dividends paid for the three-month
periods ended March 31, 2002 and 2001 were $8,216 and $8,119, respectively.
10
PART II: OTHER INFORMATION
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Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits furnished in accordance with provisions of Item 601
of Regulation S-K.
None.
(b) Reports on Form 8-K.
No reports on Form 8-K have been filed during the quarter for
which this report is filed.
11
SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
May 14, 2002 GRAYBAR ELECTRIC COMPANY, INC.
----------------------
(Date)
/S/ R. A. REYNOLDS, JR.
-----------------------------------
R. A. REYNOLDS, JR.
PRESIDENT AND
PRINCIPAL EXECUTIVE OFFICER
/S/ J. H. HINSHAW
-----------------------------------
J. H. HINSHAW
SENIOR VICE PRESIDENT AND
PRINCIPAL FINANCIAL OFFICER
/S/ J. H. KIPPER
-----------------------------------
J. H. KIPPER
VICE PRESIDENT
AND COMPTROLLER
12