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 September 30, 2007
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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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Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, or a non-accelerated filer (as defined in
Rule 12b-2 of the Exchange Act).
Large Accelerated Filer ( ) Accelerated Filer ( ) Non-Accelerated Filer (X)
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act)
YES NO X
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Common Stock Outstanding at October 31, 2007: 6,586,888
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(Number of Shares)
GRAYBAR ELECTRIC COMPANY, INC. AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q
SEPTEMBER 30, 2007
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION (UNAUDITED) PAGE(S)
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of Income 4
Condensed Consolidated Statements of Cash Flows 5
Condensed Consolidated Statement of Changes in Shareholders' Equity 6
Notes to the Condensed Consolidated Financial Statements 7-10
ITEM 2. Management's Discussion & Analysis of Financial Condition and
Results of Operations 11-17
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk 18
ITEM 4. Controls and Procedures 18
PART II. OTHER INFORMATION
ITEM 2. Unregistered Sales of Equity Securities and Issuer Purchases of Equity Securities 19
ITEM 6. Exhibits and Reports on Form 8-K 20
SIGNATURES 21
EXHIBIT INDEX 22
Exhibit (31.1) - Section 302 Certification - CEO
Exhibit (31.2) - Section 302 Certification - CFO
Exhibit (32.1) - Section 906 Certification - CEO
Exhibit (32.2) - Section 906 Certification - CFO
2
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
GRAYBAR ELECTRIC COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Stated in thousands except for share data)
(Unaudited)
SEPTEMBER 30, December 31,
ASSETS 2007 2006
- -----------------------------------------------------------------------------------------------------------------------------------
CURRENT ASSETS
Cash and cash equivalents $ 66,320 $ 52,210
Trade receivables 733,663 698,190
Merchandise inventory 407,689 385,479
Other current assets 11,741 19,302
- -----------------------------------------------------------------------------------------------------------------------------------
Total Current Assets 1,219,413 1,155,181
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PROPERTY, AT COST
Land 43,168 44,135
Buildings 311,212 311,148
Furniture and fixtures 166,621 158,757
Software 76,906 76,906
Capital leases 2,413 2,413
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Total Property, at cost 600,320 593,359
Less - accumulated depreciation and amortization (288,268) (267,013)
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Net Property 312,052 326,346
OTHER NON-CURRENT ASSETS 61,516 26,719
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TOTAL ASSETS $ 1,592,981 $ 1,508,246
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LIABILITIES
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CURRENT LIABILITIES
Short-term borrowings $ 41,814 $ 13,667
Current portion of long-term debt 60,051 32,319
Trade accounts payable 577,176 503,408
Accrued payroll and benefit costs 74,217 112,549
Other accrued taxes 17,086 13,010
Dividends payable --- 6,494
Other current liabilities 56,507 58,269
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Total Current Liabilities 826,851 739,716
POSTRETIREMENT BENEFITS LIABILITY 72,197 74,447
PENSION LIABILITY 43,321 43,449
LONG-TERM DEBT 122,409 203,869
OTHER NON-CURRENT LIABILITIES 15,597 4,042
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TOTAL LIABILITIES 1,080,375 1,065,523
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SHAREHOLDERS' EQUITY
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CAPITAL STOCK SHARES AT
-------------------------------
SEPTEMBER 30, December 31,
2007 2006
---- ----
Common, stated value $20.00 per share
Authorized 15,000,000 15,000,000
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Issued to voting trustees 5,409,741 6,158,008
Issued to shareholders 1,447,247 291,703
In treasury, at cost (249,839) (10,722)
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Outstanding Common Stock 6,607,149 6,438,989 132,143 128,780
ADVANCE PAYMENTS ON SUBSCRIPTIONS TO COMMON STOCK 613 ---
RETAINED EARNINGS 402,748 342,878
ACCUMULATED OTHER COMPREHENSIVE LOSS (22,898) (28,935)
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TOTAL SHAREHOLDERS' EQUITY 512,606 442,723
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,592,981 $ 1,508,246
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The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of the Condensed Consolidated Financial Statements.
3
GRAYBAR ELECTRIC COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Stated in thousands except for per share data)
(Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------------------- -------------------------------------
2007 2006 2007 2006
---- ---- ---- ----
GROSS SALES $ 1,370,173 $ 1,333,554 $ 3,942,935 $ 3,780,181
Cash Discounts (5,507) (5,093) (15,253) (14,034)
----------------- ----------------- ---------------- -----------------
NET SALES 1,364,666 1,328,461 3,927,682 3,766,147
Cost of merchandise sold (1,101,715) (1,082,723) (3,162,923) (3,055,118)
----------------- ----------------- ---------------- -----------------
GROSS MARGIN 262,951 245,738 764,759 711,029
Selling, general and administrative
expenses (205,396) (202,294) (615,911) (599,343)
Depreciation and amortization (8,831) (8,655) (26,400) (25,473)
Other (loss) income, net (305) 524 2,387 9,992
----------------- ----------------- ---------------- -----------------
INCOME FROM OPERATIONS 48,419 35,313 124,835 96,205
Interest expense (4,331) (5,758) (13,489) (18,318)
----------------- ----------------- ---------------- -----------------
INCOME BEFORE PROVISION FOR
INCOME TAXES 44,088 29,555 111,346 77,887
Provision for income taxes
Current (5,074) (15,143) (34,755) (39,357)
Deferred (12,458) 3,467 (10,366) 8,218
----------------- ----------------- ---------------- -----------------
Total provision for income taxes (17,532) (11,676) (45,121) (31,139)
----------------- ----------------- ---------------- -----------------
NET INCOME $ 26,556 $ 17,879 $ 66,225 $ 46,748
================= ================= ================ =================
NET INCOME PER SHARE OF COMMON STOCK (A) $ 4.03 $ 2.77 $ 10.08 $ 7.25
----------------- ----------------- ---------------- -----------------
CASH DIVIDENDS PER SHARE OF COMMON
STOCK (B) $ 0.30 $ 0.30 $ 0.90 $ 0.90
----------------- ----------------- ---------------- -----------------
AVERAGE COMMON SHARES OUTSTANDING (A) 6,587 6,447 6,567 6,450
----------------- ----------------- ---------------- -----------------
<FN>
(A) Adjusted for the declaration of a 10% stock dividend in December 2006.
Prior to the adjustment, the average common shares outstanding were 5,861
and 5,864 for the three and nine month periods ended September 30, 2006.
(B) Cash dividends were $1,983 and $1,760 for the three months ended
September 30, 2007 and 2006 respectively. Cash dividends were $5,949 and
$5,297 for the nine months ended September 30, 2007 and 2006,
respectively.
The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of the Condensed Consolidated Financial Statements.
4
GRAYBAR ELECTRIC COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Stated in thousands)
(Unaudited)
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FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2007 2006
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CASH FLOWS FROM OPERATIONS
Net Income $66,225 $ 46,748
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Adjustments to reconcile net income to cash provided by operations:
Depreciation and amortization 26,400 25,473
Deferred income taxes 10,366 (8,218)
Net gain on disposal of property (1,025) (9,189)
Loss on impairment of property 1,727 1,336
Changes in assets and liabilities:
Trade receivables (35,473) (106,354)
Merchandise inventory (22,210) (24,795)
Other current assets 7,561 (6,477)
Other non-current assets (34,797) (264)
Trade accounts payable 73,768 75,387
Accrued payroll and benefit costs (38,332) 6,870
Other current liabilities (2,843) 23,277
Other non-current liabilities 8,517 (2,238)
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Total adjustments to net income (6,341) (25,192)
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Net cash flow provided by operations 59,884 21,556
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CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from disposal of property 7,869 11,206
Capital expenditures for property (18,974) (27,827)
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Net cash flow used by investing activities (11,105) (16,621)
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CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in short-term borrowings 28,147 36,815
Repayment of long-term debt (54,035) (24,802)
Principal payments under capital leases (314) ---
Sale of common stock 8,759 6,534
Purchases of treasury stock (4,783) (4,736)
Dividends paid (12,443) (11,436)
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Net cash flow (used) provided by financing activities (34,669) 2,375
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NET INCREASE IN CASH 14,110 7,310
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CASH, BEGINNING OF YEAR 52,210 9,074
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CASH, END OF PERIOD $66,320 $16,384
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The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of the Condensed Consolidated Financial Statements.
5
GRAYBAR ELECTRIC COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006
(Stated in thousands)
(Unaudited)
COMMON ACCUMULATED
STOCK OTHER
COMMON SUBSCRIBED, RETAINED COMPREHENSIVE
STOCK UNISSUED EARNINGS LOSS TOTAL
---------------- ----------------- ----------------- ------------------ -------------------
DECEMBER 31, 2005 $ 115,848 $ --- $ 308,935 $ (43,348) $ 381,435
-------------------
Net income --- --- 46,748 --- 46,748
Currency translation adjustments --- --- --- 1,672 1,672
Unrealized gain from
interest rate swap (net of tax
of $297) --- --- --- 466 466
-------------------
Comprehensive income 48,886
-------------------
Stock issued 6,083 --- --- --- 6,083
Stock redeemed (4,736) --- --- --- (4,736)
Advance payments --- 451 --- --- 451
Dividends declared --- --- (5,297) --- (5,297)
---------------- ----------------- ----------------- ------------------ -------------------
SEPTEMBER 30, 2006 $ 117,195 $ 451 $ 350,386 $ (41,210) $ 426,822
================ ================= ================= ================== ===================
COMMON ACCUMULATED
STOCK OTHER
COMMON SUBSCRIBED, RETAINED COMPREHENSIVE
STOCK UNISSUED EARNINGS LOSS TOTAL
---------------- ----------------- ----------------- ------------------ -------------------
DECEMBER 31, 2006 $ 128,780 $ --- $ 342,878 $ (28,935) $ 442,723
-------------------
Cumulative impact of change in
accounting for uncertainties in income
taxes (Note 7) --- --- (406) --- (406)
---------------- ----------------- ----------------- ------------------ -------------------
January 1, 2007, as adjusted 128,780 --- 342,472 (28,935) 442,317
---------------- ----------------- ----------------- ------------------ -------------------
Net income --- --- 66,225 --- 66,225
Currency translation adjustments --- --- --- 6,031 6,031
Unrealized gain from
interest rate swap (net of tax
of $4) --- --- --- 6 6
-------------------
Comprehensive income 72,262
-------------------
Stock issued 8,146 --- --- --- 8,146
Stock redeemed (4,783) --- --- --- (4,783)
Advance payments --- 613 --- --- 613
Dividends declared --- --- (5,949) --- (5,949)
---------------- ----------------- ----------------- ------------------ -------------------
SEPTEMBER 30, 2007 $ 132,143 $ 613 $ 402,748 $ (22,898) $ 512,606
================ ================= ================= ================== ===================
The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of the Condensed Consolidated Financial Statements.
6
GRAYBAR ELECTRIC COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands except for Share and Per Share Data)
(Unaudited)
Note 1
- ------
The condensed consolidated financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and regulations
of the U.S. Securities and Exchange Commission applicable to interim financial
reporting. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with accounting principles
generally accepted in the United States of America (U.S. GAAP) 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. The preparation of financial statements in
accordance with U.S. GAAP requires the use of estimates and assumptions that
affect reported amounts. The Company's condensed consolidated financial
statements include amounts that are based on management's best estimates and
judgments. Actual results could differ from those estimates. Certain
reclassifications were made to prior year amounts to conform to the 2007
presentation. It is suggested that these condensed consolidated 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, this quarterly report includes all
adjustments, consisting of normal recurring accruals and adjustments,
necessary for the fair presentation of the financial statements presented.
Such interim financial information is subject to year-end adjustments. Results
for interim periods are not necessarily indicative of results to be expected
for the full year.
Note 2
- ------
At September 30, 2007 and December 31, 2006, the Company had a $215,000
trade receivable securitization program that expires in October 2009.
The trade receivable securitization program provides for the sale of
certain of the Company's trade receivables on a revolving basis to Graybar
Commerce Corporation (GCC), a wholly-owned, bankruptcy-remote, special-purpose
subsidiary. GCC sells an undivided interest in the trade receivables to an
unrelated multi-seller commercial paper conduit. The Company accounts for the
securitization as an on-balance sheet financing arrangement because the
Company has maintained effective control of the trade receivables through a
call option that gives GCC the unilateral right to repurchase the undivided
interests. Accordingly, the trade receivables and related debt are included in
the accompanying condensed consolidated balance sheets. GCC has granted a
security interest in its trade receivables to the commercial paper conduit.
There were $20,000 in borrowings outstanding under the trade receivable
securitization program at September 30, 2007. There were no borrowings
outstanding under the trade receivable securitization program at December 31,
2006.
Note 3
- ------
Prior to September 28, 2007, the Company had two lease arrangements with
an independent lessor which provided $58,777 of financing for eight of the
Company's distribution facilities. The agreements carried five-year terms
expiring July 2008 and December 2009.
7
The financing structures used in these two lease arrangements qualify as
silos of a variable interest entity and therefore are accounted for under
Financial Accounting Standards Board (FASB) Interpretation No. 46,
"Consolidation of Variable Interest Entities--an interpretation of ARB No.
51".
The Company has the option, with the consent of the lenders to the
lessor, to renew the leases for an additional five-year term or to purchase
the property for a price including the outstanding lease balance. If the
Company elects not to renew the lease or purchase the property, or such
lenders refuse to consent to a renewal, the Company may elect to remarket the
property and arrange for its sale to a third party.
The Company terminated the lease arrangement expiring in December 2009 on
September 28, 2007 by exercising its purchase option. The independent lessor
conveyed clear title to three of the Company's distribution facilities to the
Company in exchange for a cash payment $30,479, which included the outstanding
principal owed on the three properties totaling $30,057, unpaid interest, and
other closing costs.
Under the terms of the remaining lease arrangement, the Company's maximum
exposure to loss at September 30, 2007, in respect of the properties subject
to the remaining lease agreement, is $24,412, the amount guaranteed by the
Company as the residual fair value of the property. The amount guaranteed by
the Company as the residual fair value of the property subject to the two
lease arrangements was $49,961 at December 31, 2006.
Note 4
- ------
The Company made contributions to its qualified defined benefit pension
plan totaling $38,000 and $55,500 during the three and nine month periods
ended September 30, 2007, respectively. Contributions made during the three
and nine month periods ended September 30, 2006 totaled $7,500 and $22,500,
respectively. Additional contributions totaling $10,000 are expected to be
paid during the remainder of 2007.
Note 5
- ------
The 1997 Voting Trust Agreement expired on March 31, 2007 and was
succeeded by the 2007 Voting Trust Agreement, which expires on March 15, 2017.
Approximately 79.1% of the Company's issued and outstanding shares of Common
Stock had been deposited with the Voting Trustees to be held under the 2007
Voting Trust Agreement by their beneficial owners as of September 30, 2007.
Note 6
- ------
Comprehensive income for the quarters ended September 30, 2007 and 2006
was $27,801 and $17,628, respectively. Comprehensive income for the nine
months ended September 30, 2007 and 2006 was $72,262 and $48,886,
respectively, and is reported in the Condensed Consolidated Statements of
Changes in Shareholders' Equity for the Nine Months Ended September 30, 2007
and 2006. Comprehensive income is comprised of net income, currency
translation adjustments related to the Company's operations in Canada and
Mexico, and changes in the value of the Company's interest rate swap
agreement.
Note 7
- ------
The Company adopted the provisions of FASB Interpretation No. 48,
"Accounting for Uncertainty in Income Taxes - an interpretation of FASB
Statement No. 109" (FIN 48), on
8
January 1, 2007. Under FIN 48, the Company had $6,980 of unrecognized tax
benefits recorded in its statement of financial position as of January 1,
2007. Of this amount, $406 was recorded as a reduction to the January 1, 2007
balance of retained earnings. The Company's unrecognized tax benefits of
$6,995 as of September 30, 2007 are uncertain tax positions that would impact
the Company's effective tax rate if recognized. The Company does not expect
any significant increases or decreases in its unrecognized tax benefits within
one year of this reporting date.
The Company classifies interest expense and penalties as part of its
provision for income taxes based upon applicable federal and state
interest/underpayment percentages. The Company has accrued $2,577 in interest
and penalties in its statement of financial position at September 30, 2007.
Interest was computed on the difference between the provision for income taxes
recognized in accordance with FIN 48 and the amount of benefit previously
taken or expected to be taken in the Company's federal, state and local income
tax returns.
The Company's federal income tax returns for the tax years 2004 and
forward are available for examination by the United States Internal Revenue
Service. The Company has not agreed to extend its federal statute of
limitations for the 2004 tax year as of September 30, 2007. The federal
statute of limitations for the 2004 tax year will expire on September 15,
2008. The Company's state income tax returns for 2002 through 2006 remain
subject to examination by various state authorities with the latest closing
period on October 15, 2011. The Company has not extended the statutes of
limitations for any state jurisdictions with respect to years prior to 2002.
Such statutes of limitations will expire on or before October 15, 2007 unless
extended.
Note 8
- ------
The FASB issued Statement of Financial Accounting Standards (SFAS) No.
157, "Fair Value Instruments" (SFAS 157), in September 2006. SFAS 157 defines
fair value, establishes a framework for measuring fair value under generally
accepted accounting principles and expands disclosures about fair value
measurements. This Statement applies to other accounting pronouncements that
require or permit fair value measurements, the FASB having previously
concluded in those accounting pronouncements that fair value is the relevant
measurement attribute. Accordingly, this Statement does not require any new
fair value measurements. This Statement is effective for financial statements
issued for fiscal years beginning after November 15, 2007, and interim periods
within those fiscal years. The Company does not expect that its adoption of
SFAS 157 will have a material impact on its financial statements.
The FASB issued SFAS No. 158, "Employers' Accounting for Defined Benefit
Pension and Other Postretirement Plans, an amendment of FASB Statements No.
87, 88, 106, and 132(R)" (SFAS 158), in September 2006. Among other items,
SFAS 158 requires recognition of the over- or under-funded status of an
entity's defined benefit postretirement plan(s) as an asset or liability in
its financial statements, requires the measurement of defined benefit
postretirement plan assets and obligations as of the end of the employer's
fiscal year, and requires recognition of the funded status of defined benefit
postretirement plans in other comprehensive income. SFAS 158 is effective for
fiscal years ending after June 15, 2007 for employers, such as the Company,
that do not issue publicly-traded equity securities.
The Company believes that the adoption of SFAS 158 will have a material
impact on its statement of financial position, as the unfunded portion of the
Company's pension plan at December 31, 2006 was approximately $102,533. The
unfunded portion related to other
9
postretirement benefit obligations was $91,061 at December 31, 2006. The
liabilities recognized in the consolidated balance sheet for the Company's
pension plan and postretirement benefit obligations are $43,321 and $72,197,
respectively, as of September 30, 2007, compared to $43,449 and $74,447,
respectively, at December 31, 2006.
The FASB issued SFAS No.159, "The Fair Value Option for Financial Assets
and Financial Liabilities" (SFAS 159), in February 2007. SFAS 159 permits the
Company to choose to measure many financial instruments and certain other
items at fair value. The fair value option established by SFAS 159 permits the
Company to choose to measure eligible items at fair value at specified
election dates and report unrealized gains and losses on items for which the
fair value option has been elected in earnings at each subsequent reporting
date. The fair value option may be applied instrument by instrument, with a
few exceptions, such as investments otherwise accounted for by the equity
method or interest in a variable interest entity that the entity is required
to consolidate. The application is irrevocable unless a new election date
occurs and is applied only to entire instruments and not to portions of
instruments. This Statement is effective as of the beginning of the Company's
first fiscal year that begins after November 15, 2007. Early adoption is
permitted as of the beginning of a fiscal year that begins on or before
November 15, 2007, provided the Company also elects to apply the provisions of
SFAS 157. The Company is not permitted to apply SFAS 159 retrospectively to
fiscal years preceding the effective date unless it chooses early adoption.
The Company does not expect the provisions of SFAS 159 to have a material
impact on its financial statements.
Note 9
- ------
The Company and its subsidiaries are subject to various claims, disputes,
administrative, and legal matters incidental to the Company's past and current
business activities. As a result, contingencies arise resulting from an
existing condition, situation, or set of circumstances involving an
uncertainty as to the realization of a possible loss.
The Company accounts for loss contingencies in accordance with the
provisions of SFAS No. 5, "Accounting for Contingencies". Estimated loss
contingencies are accrued only if the loss is probable and the amount of the
loss can be reasonably estimated. With respect to a particular loss
contingency, it may be probable that a loss has occurred but the estimate of
the loss is a wide range. If the Company deems some amount within the range to
be a better estimate than any other amount within the range, that amount would
be accrued. However, if no amount within the range is a better estimate than
any other amount, the minimum amount in the range is accrued. While the
Company believes that none of these claims, disputes, administrative, and
legal matters will have a material adverse effect on its financial position,
these matters are uncertain and the Company cannot at this time determine
whether the financial impact, if any, of these matters will be material to its
results of operations in the period in which such matters are resolved or a
better estimate becomes available.
Note 10
- -------
The Company had an unsecured Credit Agreement with a group of banks at an
interest rate based on the London Interbank Offered Rate (LIBOR) that
consisted of a $150,000, 364-day facility that was to expire in July 2007.
On May 8, 2007, the Company executed a new unsecured, LIBOR-based Credit
Agreement with a group of banks that consists of a $200,000, five-year
facility that expires in May 2012 and canceled the $150,000, 364-day facility
previously in place.
10
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (Dollars Stated in Thousands)
The following discussion should be read in conjunction with our
accompanying unaudited condensed consolidated financial statements and notes
thereto, and our audited consolidated financial statements, notes thereto and
Management's Discussion and Analysis of Financial Condition and Results of
Operations as of and for the year ended December 31, 2006, included in our
Annual Report on Form 10-K for such period as filed with the U.S. Securities
and Exchange Commission. The results shown herein are not necessarily
indicative of the results to be expected in any future periods. This
discussion contains forward-looking statements (as such term is defined in the
federal securities laws) and is based on current expectations, which involve
risks and uncertainties. Actual results and the timing of events could differ
materially from the forward-looking statements as a result of certain factors,
a number of which are outlined in Item 1A., "Risk Factors", of our Annual
Report on Form 10-K for the year ended December 31, 2006.
OVERVIEW
- --------
Graybar Electric Company, Inc. (the "Company") is engaged in the
distribution of electrical, telecommunications and networking products and the
provision of related supply chain management and logistics services, primarily
to contractors, industrial plants, telephone companies, power utilities,
federal, state and municipal governments, and commercial users in North
America. All products sold by the Company are purchased by the Company from
others. The Company's business activity is primarily with customers in the
United States. The Company also has subsidiary operations with distribution
facilities in Canada, Puerto Rico and Mexico. The Company is 100% owned by its
active and retired employees, and there is no public trading market for its
common stock.
The Company experienced moderate growth in both sales and gross margin
during the first nine months of 2007, compared to the first nine months of
2006, which more than offset an increase in total expense and lower other
income, net. As a result, income from operations for the three and nine months
ended September 30, 2007, increased 37.1% and 29.8%, respectively, when
compared to the three and nine months ended September 30, 2006. The
combination of higher income from operations and lower interest expense
resulted in an increase in net income for the three and nine months ended
September 30, 2007 of 48.5% and 41.7%, respectively, when compared to the
three and nine months ended September 30, 2006. Continued profitable sales
growth is expected for the balance of 2007.
11
CONSOLIDATED RESULTS OF OPERATIONS
- ----------------------------------
The following tables set forth certain information relating to the
operations of the Company stated in thousands of dollars and as a percentage
of net sales for the three and nine month periods ended September 30, 2007 and
2006:
THREE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, 2007 SEPTEMBER 30, 2006
----------------------------------- --------------------------------
(Dollars stated in thousands) DOLLARS PERCENT DOLLARS PERCENT
------------------ ------------- ---------------- -----------
Net sales $ 1,364,666 100.0% $ 1,328,461 100.0%
Cost of merchandise sold (1,101,715) (80.7) (1,082,723) (81.5)
------------------ ------------- ---------------- -----------
Gross margin 262,951 19.3 245,738 18.5
Selling, general and administrative expenses (205,396) (15.1) (202,294) (15.2)
Depreciation and amortization (8,831) (0.6) (8,655) (0.7)
Other (loss) income, net (305) (0.1) 524 ---
------------------ ------------- ---------------- -----------
Income from operations 48,419 3.5 35,313 2.6
Interest expense (4,331) (0.3) (5,758) (0.4)
------------------ ------------- ---------------- -----------
Income before provision for income taxes 44,088 3.2 29,555 2.2
Provision for income taxes (17,532) (1.3) (11,676) (0.9)
------------------ ------------- ---------------- -----------
Net income $ 26,556 1.9% $ 17,879 1.3%
================== ============= ================ ===========
NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 2007 SEPTEMBER 30, 2006
----------------------------------- --------------------------------
(Dollars stated in thousands) DOLLARS PERCENT DOLLARS PERCENT
------------------ ------------- ---------------- -----------
Net sales $ 3,927,682 100.0% $ 3,766,147 100.0%
Cost of merchandise sold (3,162,923) (80.5) (3,055,118) (81.1)
------------------ ------------- ---------------- -----------
Gross margin 764,759 19.5 711,029 18.9
Selling, general and administrative expenses (615,911) (15.7) (599,343) (16.0)
Depreciation and amortization (26,400) (0.7) (25,473) (0.7)
Other income, net 2,387 0.1 9,992 0.3
------------------ ------------- ---------------- -----------
Income from operations 124,835 3.2 96,205 2.5
Interest expense (13,489) (0.4) (18,318) (0.5)
------------------ ------------- ---------------- -----------
Income before provision for income taxes 111,346 2.8 77,887 2.0
Provision for income taxes (45,121) (1.1) (31,139) (0.8)
------------------ ------------- ---------------- -----------
Net income $ 66,225 1.7% $ 46,748 1.2%
================== ============= ================ ===========
The Company continued to benefit from positive, though slowing, general
economic conditions in North America during the nine month period ended
September 30, 2007. Growth in electrical market sales was moderate, though
negatively impacted by the continued decline in residential construction
throughout much of North America. Higher sales to the comm/data market
resulted from the Company's improved competitive performance in this market,
coupled with moderate growth in the overall comm/data market.
THREE MONTHS ENDED SEPTEMBER 30, 2007 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 2006
Net sales totaled $1,364,666 for the three months ended September 30,
2007, an increase of $36,205, or 2.7%, when compared to net sales of
$1,328,461 for the three months ended September 30, 2006. Increases in net
sales were recorded in both of the primary market sectors in which the Company
operates.
Net sales to the electrical market for the three months ended September
30, 2006 increased 0.2%, when compared to the three months ended September 30,
2006, while net sales to the comm/data market rose 9.0% during the same
period.
12
Gross margin increased $17,213, or 7.0%, to $262,951 from $245,738,
partly due to higher net sales volume in the third quarter of 2007 compared to
the same period in 2006. In addition, the Company's gross margin rate on net
sales increased to 19.3% during the three months ended September 30, 2007, up
from 18.5% for the same three month period in 2006, primarily due to a return
to a more stable product cost environment compared to the three months ended
September 30, 2006 and the Company's ongoing gross margin rate improvement
initiatives.
Selling, general and administrative expenses increased $3,102, or 1.5%,
in the third quarter of 2007 to $205,396 from $202,294 in the third quarter of
2006, mainly due to increased compensation costs resulting from a modest
increase in the number of employees, partially offset by reduced employee
benefit, legal, and professional expenses. Selling, general and administrative
expenses as a percentage of net sales decreased to 15.1% in the third quarter
of 2007, from 15.2% in the third quarter of 2006.
Depreciation and amortization expenses in the third quarter of 2007
increased $176, or 2.0%, to $8,831 from $8,655 in the third quarter of 2006,
due to higher average balances of property, at cost, for the three months
ended September 30, 2007 compared to the same period in 2006.
Other income (loss), net of $(305) in the third quarter of 2007 included
net gains on the disposal of property of $289 and a property impairment loss
of $(1,305). Trade receivables interest charges to customers and other
interest income together accounted for $711 of other income, net in the third
quarter of 2007. Other income, net of $524 in the third quarter of 2006 was
comprised of trade receivable interest charges to customers and other interest
income.
Income from operations totaled $48,419 in the third quarter of 2007, an
increase of $13,106, or 37.1%, from $35,313 for the same period in 2006. The
increase was due to higher gross margin, partially offset by higher selling,
general, and administrative expenses, higher depreciation and amortization
expenses, and lower other income, net.
Interest expense declined $1,427, or 24.8%, to $4,331 in the third
quarter of 2007 from $5,758 in the third quarter of 2006. This reduction was
due to lower levels of outstanding short- and long-term debt in the third
quarter of 2007, compared to the same period in 2006.
The combination of higher gross margin, increased selling, general and
administrative expenses and higher depreciation and amortization expenses, and
lower interest expenses, resulted in pre-tax earnings of $44,088 for the three
months ended September 30, 2007, an increase of $14,533, or 49.2%, over
pre-tax earnings of $29,555 for the three months ended September 30, 2006.
As a result of higher pre-tax earnings, the Company's total provision for
income taxes increased $5,856, or 50.2%, to $17,532 for the three months ended
September 30, 2007 from $11,676 for the three months ended September 30, 2006.
The Company's effective tax rate increased to 39.8% for the three months ended
September 30, 2007, up from 39.5% in the same three month period in 2006. The
2007 and 2006 effective tax rates were higher than the 35.0% U.S. federal
statutory rate primarily due to state and local income taxes.
Net income for the three months ended September 30, 2007 increased
$8,677, or 48.5%, to $26,556 from $17,879 for the three months ended September
30, 2006.
13
NINE MONTHS ENDED SEPTEMBER 30, 2007 COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 2006
Net sales totaled $3,927,682 for the nine months ended September 30,
2007, an increase of $161,535, or 4.3%, when compared to net sales of
$3,766,147 for the nine months ended September 30, 2006. Increases in net
sales were recorded in both of the primary market sectors in which the Company
operates. Net sales to the electrical market for the nine months ended
September 30, 2007 increased 3.2%, when compared to the nine months ended
September 30, 2006, while net sales to the comm/data market rose 7.1% during
the period.
Gross margin increased $53,730, or 7.6%, to $764,759 from $711,029,
partly due to higher net sales volume recorded for the nine months ended
September 30, 2007 compared to the same period in 2006. In addition, the
Company's gross margin rate on net sales increased to 19.5% during the nine
months ended September 30, 2007, up from 18.9% for the same nine month period
in 2006, primarily due to a return to a more stable product cost environment
compared to the nine months ended September 30, 2006 and the Company's ongoing
gross margin rate improvement initiatives.
Selling, general and administrative expenses increased $16,568, or 2.8%,
for the nine months ended September 30, 2007 to $615,911 from $599,343,
compared to the nine months ended September 30, 2006, mainly due to increased
compensation costs resulting from a modest increase in the number of
employees, partially offset by reduced employee benefit, bad debt, legal, and
professional expenses. Selling, general and administrative expenses as a
percentage of net sales decreased to 15.7% for the nine months ended September
30, 2007 from 16.0% in the same period of 2006.
Depreciation and amortization expenses increased $927, or 3.6%, to
$26,400 from $25,473 for the nine months ended September 30, 2007 compared to
the same nine months in 2006. The increase is due to higher average balances
of property, at cost, and higher amortization on capital leases.
Other income, net totaled $2,387 for the nine months ended September 30,
2007, compared to $9,992 for the nine months ended September 30, 2006. Other
income, net for the nine months ended September 30, 2007 included net gains on
the disposal of property of $1,025, property impairment losses of $(1,727) and
interest income and trade receivable interest charges to customers of $3,089.
Other income, net for the nine months ended September 30, 2006, included net
gains on disposal of property of $9,189 and a property impairment loss of
$(1,336). Trade receivable interest charges to customers and other interest
income accounted for the remaining $2,139 of other income, net for the nine
months ended September 30, 2006.
Income from operations totaled $124,835 for the nine months ended
September 30, 2007, an increase of $28,630, or 29.8%, from $96,205 for the
same period in 2006. The increase was due to higher gross margin, partially
offset by higher selling, general, and administrative expenses, higher
depreciation and amortization expenses, and lower other income, net.
Interest expense declined $4,829, or 26.4%, to $13,489 for the nine
months ended September 30, 2007 from $18,318 for the same nine month period in
2006. This reduction was due to lower levels of outstanding short- and
long-term debt in 2007, compared to 2006.
The combination of higher gross margin, increased selling, general and
administrative expenses, and higher depreciation and amortization expenses,
and lower interest expense,
14
resulted in pre-tax earnings of $111,346 for the nine months ended September
30, 2007, an increase of $33,459, or 43.0%, compared to pre-tax earnings of
$77,887 for the nine months ended September 30, 2006.
As a result of higher pre-tax earnings, the Company's total provision for
income taxes increased $13,982, or 44.9%, to $45,121 for the nine months ended
September 30, 2007 from $31,139 for the nine months ended September 30, 2006.
The Company's effective tax rate increased to 40.5% for the nine months ended
September 30, 2007, up from 40.0% in the same nine month period in 2006. The
2007 and 2006 effective tax rates were higher than the 35.0% U.S. federal
statutory rate primarily due to state and local income taxes.
Net income for the nine months ended September 30, 2007 increased
$19,477, or 41.7%, to $66,225 from $46,748 for the nine months ended September
30, 2006.
FINANCIAL CONDITION AND LIQUIDITY
- ---------------------------------
The Company has historically funded its capital requirements using cash
flow provided by operations, stock issuances to its employees, and long-term
debt.
Operating Activities
- --------------------
Cash provided by operations was $59,884 for the nine months ended
September 30, 2007, compared to $21,556 for the nine months ended September
30, 2006. Positive cash flow from operations for the nine months ended
September 30, 2007 was primarily due to net income of $66,225, an increase in
trade accounts payable of $73,768, and increases in other current- and
non-current liabilities totaling $5,674, partially offset by an increase in
trade receivables of $35,473, an increase in merchandise inventory of $22,210,
increases in other current and non-current assets totaling $27,236, and a
$38,332 decrease in accrued payroll and benefit costs.
The average number of days of sales in trade receivables at September 30,
2007 decreased moderately from the average number of days at September 30,
2006. Merchandise inventory levels were higher at September 30, 2007 when
compared to December 31, 2006 to support the growth in net sales. Average
inventory turnover improved moderately, when comparing the nine months ended
September 30, 2007 and 2006, respectively.
Current assets exceeded current liabilities by $392,562 at September 30,
2007, a decrease of $22,903, or 5.5%, from $415,465 at December 31, 2006.
Investing Activities
- --------------------
Capital expenditures for property were $18,974 and $27,827, and proceeds
from the disposal of property were $7,869, and $11,206, for the nine months
ended September 30, 2007 and 2006, respectively. The proceeds received
resulted primarily from the sale of real property.
Financing Activities
- --------------------
The excess of cash provided by operations over investing activities, as
well as an increase in short-term borrowings for the nine months ended
September 30, 2007 of $28,147, was used by the Company to reduce long-term
debt by $54,035 and capital lease obligations by $314 for the nine months
ended September 30, 2007. During the nine months ended September 30, 2006, the
Company's cash flow provided by financing activities resulted from
15
an increase in short-term borrowings of $36,815, partially offset by a
decrease in long-term debt of $24,802.
Cash provided by the sale of common stock amounted to $8,759 and $6,534,
and purchases of treasury stock were $4,783 and $4,736 for the nine months
ended September 30, 2007 and 2006, respectively. Dividends paid were $12,443
and $11,436 for the nine months ended September 30, 2007 and 2006,
respectively.
Liquidity
- ---------
On May 8, 2007, the Company executed a new unsecured, LIBOR-based Credit
Agreement with a group of banks that consists of a $200,000, five-year
facility that expires in May 2012 and cancelled the $150,000, 364-day facility
previously in place. There were no borrowings outstanding under this facility
at September 30, 2007.
At September 30, 2007 and December 31, 2006, the Company had a $215,000
trade receivable securitization program that expires in October 2009. There
were $20,000 in borrowings outstanding under the trade receivable
securitization program at September 30, 2007. There were no borrowings
outstanding under the trade receivable securitization program at December 31,
2006.
At September 30, 2007, the Company had available to it unused lines of
credit amounting to $413,510 compared to $377,076 at December 31, 2006. These
lines are available to meet the short-term cash requirements of the Company.
Short-term borrowings outstanding during the nine months ended September 30,
2007 and 2006 ranged from a minimum of $13,871 and $28,630 to a maximum of
$49,355 and $140,924, respectively. The Company also reduced its outstanding
long-term debt (including current portion and capital lease obligations) to
$182,460 at September 30, 2007 from $236,188 at December 31, 2006, compared to
a reduction of $24,802 in long-term debt (including current portion) to
$240,858 at September 30, 2006 from $265,660 at December 31, 2005.
NEW ACCOUNTING PRONOUNCEMENTS
- -----------------------------
The Company adopted the provisions of FASB Interpretation No. 48,
"Accounting for Uncertainty in Income Taxes - an interpretation of FASB
Statement No. 109" (FIN 48), on January 1, 2007. Under FIN 48, the Company had
$6,980 of unrecognized tax benefits recorded in its statement of financial
position as of January 1, 2007. Of this amount, $406 was recorded as a
reduction to the January 1, 2007 balance of retained earnings. The Company's
unrecognized tax benefits of $6,995 as of September 30, 2007 are uncertain tax
positions that would impact the Company's effective tax rate if recognized.
The Company does not expect any significant increases or decreases in its
unrecognized tax benefits within one year of this reporting date.
The Company classifies interest expense and penalties as part of its
provision for income taxes based upon applicable federal and state
interest/underpayment percentages. The Company has accrued $2,577 in interest
and penalties in its statement of financial position at September 30, 2007.
Interest was computed on the difference between the provision for income taxes
recognized in accordance with FIN 48 and the amount of benefit previously
taken or expected to be taken in the Company's federal, state and local income
tax returns.
The Company's federal income tax returns for the tax years 2004 and
forward are available for examination by the United States Internal Revenue
Service. The Company has not agreed to extend its federal statute of
limitations for the 2004 tax year as of September 30, 2007. The federal
statute of limitations for the 2004 tax year will expire on September 15,
16
2008. The Company's state income tax returns for 2002 through 2006 remain
subject to examination by various state authorities with the latest closing
period on October 15, 2011. The Company has not extended the statutes of
limitations for any state jurisdictions with respect to years prior to 2002.
Such statutes of limitations will expire on or before October 15, 2007 unless
extended.
The FASB issued Statement of Financial Accounting Standards (SFAS) No.
157, "Fair Value Instruments" (SFAS 157), in September 2006. SFAS 157 defines
fair value, establishes a framework for measuring fair value under generally
accepted accounting principles and expands disclosures about fair value
measurements. This Statement applies to other accounting pronouncements that
require or permit fair value measurements, the FASB having previously
concluded in those accounting pronouncements that fair value is the relevant
measurement attribute. Accordingly, this Statement does not require any new
fair value measurements. This Statement is effective for financial statements
issued for fiscal years beginning after November 15, 2007, and interim periods
within those fiscal years. The Company does not expect that its adoption of
SFAS 157 will have a material impact on its financial statements.
The FASB issued SFAS No. 158, "Employers' Accounting for Defined Benefit
Pension and Other Postretirement Plans, an amendment of FASB Statements No.
87, 88, 106, and 132(R)" (SFAS 158), in September 2006. Among other items,
SFAS 158 requires recognition of the over- or under-funded status of an
entity's defined benefit postretirement plan(s) as an asset or liability in
its financial statements, requires the measurement of defined benefit
postretirement plan assets and obligations as of the end of the employer's
fiscal year, and requires recognition of the funded status of defined benefit
postretirement plans in other comprehensive income. SFAS 158 is effective for
fiscal years ending after June 15, 2007 for employers, such as the Company,
that do not issue publicly-traded equity securities.
The Company believes that the adoption of SFAS 158 will have a material
impact on its statement of financial position, as the unfunded portion of the
Company's pension plan at December 31, 2006 was approximately $102,533. The
unfunded portion related to other postretirement benefit obligations was
$91,061 at December 31, 2006. The liabilities recognized in the consolidated
balance sheet for the Company's pension plan and postretirement benefit
obligations are $43,321 and $72,197, respectively, as of September 30, 2007,
compared to $43,449 and $74,447, respectively, at December 31, 2006.
The FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets
and Financial Liabilities" (SFAS 159), in February 2007. SFAS 159 permits the
Company to choose to measure many financial instruments and certain other
items at fair value. The fair value option established by SFAS 159 permits the
Company to choose to measure eligible items at fair value at specified
election dates and report unrealized gains and losses on items for which the
fair value option has been elected in earnings at each subsequent reporting
date. The fair value option may be applied instrument by instrument, with a
few exceptions, such as investments otherwise accounted for by the equity
method or interest in a variable interest entity that the entity is required
to consolidate. The application is irrevocable unless a new election date
occurs and is applied only to entire instruments and not to portions of
instruments. This Statement is effective as of the beginning of the Company's
first fiscal year that begins after November 15, 2007. Early adoption is
permitted as of the beginning of a fiscal year that begins on or before
November 15, 2007, provided the Company also elects to apply the provisions of
SFAS 157. The Company is not permitted to apply SFAS 159 retrospectively to
fiscal years preceding the effective date unless the Company chooses early
adoption. The Company does not expect the provisions of SFAS 159 to have a
material impact on its financial statements.
17
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes in the policies, procedures, controls
or risk profile from that provided in Item 7A., "Quantitative and Qualitative
Disclosures About Market Risk", of the Company's Annual Report on Form 10-K
for the year ended December 31, 2006.
Item 4. Controls and Procedures
An evaluation of the effectiveness of the design and operation of the
Company's disclosure controls and procedures was performed under the
supervision and with the participation of the Company's management as of
September 30, 2007. Based on that evaluation, the Company's management,
including the Chief Executive Officer and Chief Financial Officer, concluded
that the Company's disclosure controls and procedures were effective.
18
PART II: OTHER INFORMATION
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
No shareholder may sell, transfer or otherwise dispose of shares of
Common Stock (or the Voting Trust Interests issued with respect thereto)
without first offering the Company the option to purchase such shares (or
Voting Trust Interests issued with respect thereto) at the price at which the
shares were issued. The Company also has the option to purchase at the issue
price, the Common Stock (or Voting Trust Interests issued with respect
thereto) of any shareholder who dies or ceases to be an employee of the
Company for any cause other than retirement on a Company pension. In the past,
all shares have been issued at $20.00 per share. The Company has always
exercised its repurchase option and expects to continue to do so.
The following table sets forth information regarding purchases of Common
Stock (and Voting Trust Interests issued with respect thereto) by the Company
pursuant to the foregoing provisions:
ISSUER PURCHASES OF EQUITY SECURITIES
- --------------------------------------------------------------------------------------------------------------------------------
Total Total Number of Shares
Number Average Purchased as Part of
of Shares Price Paid Publicly Announced
Period Purchased per Share Plans or Programs
- --------------------------------------------------------------------------------------------------------------------------------
July 1 to July 31, 2007 40,301 $20.00 N/A
- --------------------------------------------------------------------------------------------------------------------------------
August 1 to August 31, 2007 50,821 $20.00 N/A
- --------------------------------------------------------------------------------------------------------------------------------
September 1 to September 30, 2007 15,523 $20.00 N/A
- --------------------------------------------------------------------------------------------------------------------------------
Total 106,645 $20.00 N/A
- --------------------------------------------------------------------------------------------------------------------------------
19
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits furnished in accordance with provisions of Item 601 of Regulation
S-K.
(31) Rule 13a-14(a)/15d-14(a) Certifications
31.1 - Certification Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 - Principal Executive Officer
31.2 - Certification Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 - Principal Financial Officer
(32) Section 1350 Certifications
32.1 - Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 - Principal Executive Officer
32.2 - Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 - Principal Financial Officer
(b) Reports on Form 8-K.
No reports on Form 8-K have been filed with the Commission during the
quarter for which this report is filed.
20
SIGNATURES
----------
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.
November 9, 2007 GRAYBAR ELECTRIC COMPANY, INC.
----------------------
(Date)
/s/ R. A. Reynolds, Jr.
----------------------------------------
R. A. REYNOLDS, JR.
PRESIDENT AND
PRINCIPAL EXECUTIVE OFFICER
/s/ D. B. D'Alessandro
----------------------------------------
D. B. D'ALESSANDRO
SENIOR VICE PRESIDENT AND
PRINCIPAL FINANCIAL OFFICER
/s/ Martin J. Beagen
----------------------------------------
MARTIN J. BEAGEN
VICE PRESIDENT AND CONTROLLER
AND PRINCIPAL ACCOUNTING OFFICER
21
EXHIBIT INDEX
-------------
31.1 - Certification Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 - Principal Executive Officer
31.2 - Certification Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 - Principal Financial Officer
32.1 - Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002 - Principal Executive
Officer
32.2 - Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002 - Principal Financial
Officer
22