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<PAGE> 1
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, 1997
--------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
------------------ -----------------
GRAYBAR ELECTRIC COMPANY, INC
------------------------------------------------------
(Exact name of registrant as specified in its charter)
NEW YORK 13 - 0794380
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
34 NORTH MERAMEC AVENUE, ST. LOUIS, MO 63105
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
POST OFFICE BOX 7231, ST. LOUIS, MO 63177
- --------------------------------------------------------------------------------
(Mailing Address) (Zip Code)
Registrant's telephone number, including area code: (314) 512-9200
------------------
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
------- -------
Common Stock Outstanding at October 31, 1997: 4,736,833
---------------------
(Number of Shares)
<PAGE> 2
PART I
------
<TABLE>
CONSOLIDATED BALANCE SHEETS
---------------------------
(Dollars Stated in Thousands)
(Except for Share and Per Share Data)
<CAPTION>
SEPTEMBER 30, 1997 DECEMBER 31, 1996
------------------ -----------------
<S> <C> <C>
CURRENT ASSETS
Cash $ 45,927 $ 13,820
------------------ -----------------
Trade receivables 418,439 342,323
------------------ -----------------
Merchandise inventory 372,129 301,835
------------------ -----------------
Other current assets 14,899 13,245
------------------ -----------------
Total current assets 851,394 671,223
------------------ -----------------
PROPERTY
Land 22,619 21,894
------------------ -----------------
Buildings and permanent fixtures 276,118 260,864
------------------ -----------------
Capital equipment leases 26,138 26,138
------------------ -----------------
Less-Accumulated depreciation 133,577 122,444
------------------ -----------------
Net property 191,298 186,452
------------------ -----------------
DEFERRED FEDERAL INCOME TAXES 12,708 11,793
------------------ -----------------
OTHER ASSETS 25,509 12,168
------------------ -----------------
$1,080,909 $881,636
================== =================
CURRENT LIABILITIES
Notes payable to banks $ 144,833 $ 68,282
------------------ -----------------
Current portion of long-term debt 14,388 15,075
------------------ -----------------
Trade accounts payable 367,143 273,878
------------------ -----------------
Income taxes 8,511 --
------------------ -----------------
Other accrued taxes 10,602 9,164
------------------ -----------------
Accrued payroll and benefit costs 31,254 35,923
------------------ -----------------
Dividends payable -- 5,214
------------------ -----------------
Other payables and accruals 38,226 31,703
------------------ -----------------
Total current liabilities 614,957 439,239
------------------ -----------------
POSTRETIREMENT BENEFITS LIABILITY 77,751 77,004
------------------ -----------------
LONG TERM DEBT 143,489 151,659
------------------ -----------------
</TABLE>
2
<PAGE> 3
<TABLE>
CONSOLIDATED BALANCE SHEETS
---------------------------
(Dollars Stated in Thousands)
(Except for Share and Per Share Data)
<CAPTION>
SEPTEMBER 30, 1997 DECEMBER 31, 1996
------------------ -----------------
<S> <C> <C>
SHAREHOLDERS' EQUITY
CAPITAL STOCK
Preferred:
---------
Par value $20 per share
Authorized 300,000 shares
<CAPTION>
SHARES
------
1997 1996
---- ----
<S> <C> <C> <C> <C>
Issued to shareholders 7,141 7,141
------------- -------------
In treasury, at cost (1,132) --
------------- -------------
Outstanding 6,009 7,141 120 143
------------- ------------- ------------------ -----------------
Common:
------
Stated value $20 per share
Authorized 7,500,000 shares
<CAPTION>
SHARES
------
1997 1996
---- ----
<S> <C> <C> <C> <C>
Issued to voting trustees 4,719,126 4,684,709
------------- -------------
Issued to shareholders 252,330 251,375
------------- -------------
In treasury, at cost (221,674) (20,035)
------------- -------------
Outstanding 4,749,782 4,916,049 94,996 98,321
------------- ------------- ------------------ -----------------
Common shares subscribed 683 1,110
------------------ -----------------
Retained earnings 149,552 115,218
------------------ -----------------
Less-Subscriptions receivable 639 1,058
------------------ -----------------
TOTAL SHAREHOLDERS' EQUITY 244,712 213,734
------------------ -----------------
$1,080,909 $881,636
================== =================
See accompanying Notes to Consolidated Financial Statements
</TABLE>
3
<PAGE> 4
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
(Dollars Stated in Thousands)
(Except for Share and Per Share Data)
<CAPTION>
QUARTER ENDED
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996
------------------ ------------------
<S> <C> <C>
GROSS SALES, net of returns and allowances $893,577 $787,009
------------------ ------------------
Less - Cash discounts 2,862 2,044
------------------ ------------------
NET SALES 890,715 784,965
------------------ ------------------
COST OF MERCHANDISE SOLD 733,590 648,864
------------------ ------------------
Gross margin 157,125 136,101
------------------ ------------------
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 121,402 109,085
------------------ ------------------
DEPRECIATION AND AMORTIZATION 5,724 5,134
------------------ ------------------
Income from operations 29,999 21,882
------------------ ------------------
OTHER INCOME, net 736 3,516
------------------ ------------------
INTEREST EXPENSE 4,997 4,031
------------------ ------------------
Income before provision for income taxes 25,738 21,367
------------------ ------------------
PROVISION FOR INCOME TAXES
Current 11,230 9,046
------------------ ------------------
Deferred (634) (268)
------------------ ------------------
Total provision for income taxes 10,596 8,778
------------------ ------------------
NET INCOME 15,142 12,589
================== ==================
NET INCOME PER SHARE OF COMMON STOCK $ 3.17 $ 2.54
================== ==================
DIVIDENDS
Preferred - $.25 per share $ 2 $ 1
------------------ ------------------
Common - $.30 per share 1,426 1,413
------------------ ------------------
$ 1,428 $ 1,414
================== ==================
See accompanying Notes to Consolidated Financial Statements
</TABLE>
4
<PAGE> 5
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
(Dollars Stated in Thousands)
(Except for Share and Per Share Data)
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996
------------------ ------------------
<S> <C> <C>
GROSS SALES, net of returns and allowances $2,476,165 $2,237,973
------------------ ------------------
Less - Cash discounts 7,957 6,634
------------------ ------------------
NET SALES 2,468,208 2,231,339
------------------ ------------------
COST OF MERCHANDISE SOLD 2,023,641 1,840,721
------------------ ------------------
Gross margin 444,567 390,618
------------------ ------------------
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 351,571 317,087
------------------ ------------------
DEPRECIATION AND AMORTIZATION 16,665 14,605
------------------ ------------------
Income from operations 76,331 58,926
------------------ ------------------
OTHER INCOME, net 4,005 9,093
------------------ ------------------
INTEREST EXPENSE 14,634 12,422
------------------ ------------------
Income before provision for income taxes 65,702 55,597
------------------ ------------------
PROVISION FOR INCOME TAXES
Current 27,946 23,642
------------------ ------------------
Deferred (915) (795)
------------------ ------------------
Total provision for income taxes 27,031 22,847
------------------ ------------------
NET INCOME 38,671 32,750
================== ==================
NET INCOME PER SHARE OF COMMON STOCK (NOTE 2) $ 8.01 $ 6.61
================== ==================
DIVIDENDS
Preferred - $.75 per share $ 5 $ 5
------------------ ------------------
Common - $.90 per share 4,332 4,268
------------------ ------------------
$ 4,337 $ 4,273
================== ==================
See accompanying Notes to Consolidated Financial Statements
</TABLE>
5
<PAGE> 6
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(Dollars Stated in Thousands)
(Except for Share and Per Share Data)
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
1997 1996
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATIONS
NET INCOME $ 38,671 $ 32,750
-------------- --------------
Adjustments to reconcile net income
to cash provided by operations:
Depreciation and amortization 16,665 14,605
-------------- --------------
Deferred income taxes (915) (795)
-------------- --------------
Gain on sale of property (1,340) (6,512)
-------------- --------------
Changes in assets and liabilities:
Trade receivables (66,101) (7,008)
-------------- --------------
Merchandise inventory (63,001) (33,403)
-------------- --------------
Other current assets (1,307) 579
-------------- --------------
Other assets (18,657) (1,071)
-------------- --------------
Trade accounts payable 89,006 38,483
-------------- --------------
Accrued payroll and benefit costs (4,669) (9,567)
-------------- --------------
Other accrued liabilities 14,436 26,206
-------------- --------------
(35,883) 21,517
-------------- --------------
Net cash provided by operations 2,788 54,267
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of property 3,033 8,773
-------------- --------------
Capital expenditures for property (17,600) (35,752)
-------------- --------------
Net cash used by investing activities (14,567) (26,979)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in notes payable to banks 69,874 (55,504)
-------------- --------------
Proceeds from long-term debt -- 72,000
-------------- --------------
Repayment of long-term debt (9,527) (9,453)
-------------- --------------
Principal payments under capital equipment leases (3,554) (3,638)
-------------- --------------
Sale of common stock 699 7,799
-------------- --------------
Purchase of treasury stock (4,055) (2,810)
-------------- --------------
Dividends paid (9,551) (9,188)
-------------- --------------
Net cash flow provided (used) by financing activities 43,886 (794)
-------------- --------------
NET INCREASE IN CASH 32,107 26,494
-------------- --------------
CASH, BEGINNING OF YEAR 13,820 21,033
-------------- --------------
CASH, END OF THIRD QUARTER $ 45,927 $ 47,527
============== ==============
See accompanying Notes to Consolidated Financial Statements
</TABLE>
6
<PAGE> 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AND OTHER INFORMATION
---------------------------------
(Dollars Stated in Thousands)
(Except for Share and Per Share Data)
Note 1
- ------
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
- ------
<TABLE>
<CAPTION>
NINE MONTHS 1997 NINE MONTHS 1996
---------------- ----------------
<S> <C> <C>
Earnings for Nine months $ 38,671 $ 32,750
---------------- ----------------
Dividends on Preferred Stock 5 5
---------------- ----------------
Available for Common Stock $ 38,666 $ 32,745
---------------- ----------------
Average Common Shares Outstanding 4,827,608 4,952,647<F*>
---------------- ----------------
Earnings Per Share $ 8.01 $ 6.61<F*>
---------------- ----------------
<FN>
<F*> Restated for the declaration of a 5% stock dividend in 1996. Prior to
adjusting for the stock dividend, the average common shares outstanding
were 4,716,807.
</TABLE>
Note 3
- ------
In May, 1997, the Company purchased additional shares of Harris & Roome
Supply Limited (H&R) at a purchase price of $2,261 to bring its ownership
percentage to 78% of the outstanding shares of H&R. The effective date of
this transaction was February 1, 1997. The sales, income and total assets of
H&R are not material to the Company.
7
<PAGE> 8
MANAGEMENT'S DISCUSSION & ANALYSIS
OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
(Dollars Stated in Thousands)
RESULTS OF OPERATIONS
- ---------------------
Net sales in the first nine months of 1997 were 10.6% higher than in
the first nine months of 1996. The higher net sales resulted from improvements
in the market sectors of the economy in which the Company operates.
Gross margin in the first nine months of 1997 increased $53,949 (13.8%)
compared to the first nine months of 1996 primarily due to increased sales in
the electrical and communication markets.
The increase in selling, general and administrative expenses in the
first nine months of 1997 compared to the first nine months of 1996 occurred
largely because of adjustments in personnel complement and adjustments in
compensation and related expenses.
Interest expense increased in the first nine months of 1997 compared to
the first nine months of 1996 primarily due to increased levels of borrowing
incurred to finance higher aggregate levels of inventory and receivables.
Other income in the first nine months of 1997 included gains on sale of
property of $1,340.
The combined effect of the increase in gross margin and the decrease in
other income, together with increases in selling, general and administrative
expenses, interest expense and depreciation and amortization, resulted in an
increase in pretax earnings of $10,105 in the first nine months of 1997
compared to the same period in 1996.
8
<PAGE> 9
MANAGEMENT'S DISCUSSION & ANALYSIS
OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
(Dollars Stated in Thousands)
FINANCIAL CONDITION AND LIQUIDITY
- ---------------------------------
The financial condition of the Company continues to be strong. At
September 30, 1997, current assets exceeded current liabilities by $236,437,
up $4,453 from December 31, 1996. The current assets at September 30, 1997
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 September 30, 1997, the Company had available to it unused lines of
credit amounting to $210,000. These lines are available to meet short-term
cash requirements of the Company. Bank borrowings outstanding during 1997
through September 30 ranged from a minimum of $65,000 to a maximum of
$163,000.
The Company has funded its capital requirements from operations, stock
issuances to its employees and long term debt. During the first nine months
of 1997, cash provided by operations amounted to $2,788 compared to $54,267
cash provided by operations in the first nine months of 1996. Cash provided
from the sale of common stock and proceeds received on stock subscriptions
amounted to $699 in the first nine months of 1997. Additional cash of
approximately $138 will be provided in the remainder of 1997 as a result of
payments to be made for stock subscribed to by employees under the 1995
Common Stock Purchase Plan.
9
<PAGE> 10
PART II: OTHER INFORMATION
----------------------------
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits furnished in accordance with provisions of Item
601 of Regulation S-K.
(27) Financial Data Schedule (submitted in EDGAR format
only).
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the quarter
for which this report is filed.
10
<PAGE> 11
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 12, 1997 GRAYBAR ELECTRIC COMPANY, INC.
-----------------
(Date)
/S/ C. L. HALL
-----------------------------
C. L. HALL
PRESIDENT
/S/ J. R. SEATON
-----------------------------
J. R. SEATON
VICE PRESIDENT
AND COMPTROLLER
11
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 45,927
<SECURITIES> 0
<RECEIVABLES> 418,439
<ALLOWANCES> 0
<INVENTORY> 372,129
<CURRENT-ASSETS> 851,394
<PP&E> 324,875
<DEPRECIATION> 133,577
<TOTAL-ASSETS> 1,080,909
<CURRENT-LIABILITIES> 614,957
<BONDS> 143,489
<COMMON> 94,996
0
120
<OTHER-SE> 149,596
<TOTAL-LIABILITY-AND-EQUITY> 1,080,909
<SALES> 2,468,208
<TOTAL-REVENUES> 2,468,208
<CGS> 2,023,641
<TOTAL-COSTS> 2,023,641
<OTHER-EXPENSES> 368,236
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,634
<INCOME-PRETAX> 65,702
<INCOME-TAX> 27,031
<INCOME-CONTINUING> 38,671
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 38,671
<EPS-PRIMARY> 8.01
<EPS-DILUTED> 8.01
</TABLE>
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