<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
COMMISSION FILE NUMBER 0-255
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1996.
-----------------
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 (IRS Employer
incorporation or organization) Identification No.)
34 North Meramec Avenue, St. Louis, Missouri 63105
--------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Post Office Box 7231, St. Louis, Missouri 63177
--------------------------------------------------------------------------
(Mailing Address) (Zip Code)
Registrant's telephone number, including area code: (314) 512-9200
----------------------
Securities registered pursuant to Section 12(b) of the Act: None
----------
Securities registered pursuant to Section 12(g) of the Act:
Preferred Stock - Par Value $20
Common Stock - Par Value $1 Per Share with a Stated Value of $20
Voting Trust Certificates relating to such Shares of Common Stock of
the Registrant
Common Stock outstanding at March 27, 1997 - 4,864,423 Shares
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, and (2) has been subject to such filing
requirements for the past 90 days.
Yes (X) No ( )
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Paragraph 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K. (X)
The aggregate stated value of the Common Stock outstanding and, with
respect to rights of disposition, beneficially owned by nonaffiliates (as
defined in Rule 405 under the Securities Act of 1933) of the registrant on
March 27, 1997, was approximately $97,288,460. Pursuant to a Voting Trust
Agreement, dated as of April 15, 1987, approximately 95% of the outstanding
shares of Common Stock are held of record by five Voting Trustees who are
each directors of the registrant and who collectively exercise all voting
rights with respect to such shares. The registrant is 100% owned by its
active and retired employees, and there is no public trading market for the
registrant's Common Stock. The registrant has the option to repurchase, at
the price at which it was issued, each outstanding share of Common Stock in
the event of the owner's death, termination of employment other than by
retirement, or desire to dispose of such shares. Historically all shares of
Common Stock have been issued for $20 per share, and the registrant has
always exercised its repurchase option and expects to continue to do so.
The documents listed below have been incorporated by reference into the
indicated Part of this Annual Report on Form 10-K:
(1) Annual Report to Shareholders Part II, Items 5-8 for the fiscal year
ended December 31, 1996.
(2) Information Statement relating Part III, Items 10-13 to the 1997
Annual Meeting of Shareholders.
<PAGE> 2
PART I
------
Item 1. Business
- ------- --------
Graybar Electric Company, Inc. (the "Company") is engaged
internationally in the distribution of electrical and communications
equipment and supplies primarily to contractors, industrial plants, telephone
companies, power utilities, and commercial users. All products sold by the
Company are purchased by the Company from others.
The Company was incorporated under the laws of the State of New York
on December 11, 1925 to take over the wholesale supply department of Western
Electric Company, Incorporated. The location and telephone number of the
principal executive offices of the Company are 34 North Meramec Avenue, St.
Louis, Missouri (314) 512-9200, and the mailing address of the principal
executive offices is P.O. Box 7231, St. Louis, Missouri 63177.
Suppliers
- ---------
The Company acts as a distributor of the products of more than 1,000
manufacturers. The relationship of the Company with a number of its
principal suppliers goes back many years. It is customarily a nonexclusive
national or regional distributorship terminable upon 30 to 90 days notice by
either party.
During 1996, the Company purchased a significant portion of its
products from its three largest suppliers. The termination by any of these
companies, within a short period of time, of a significant number of their
agreements with the Company might have an immediate material adverse effect
on the business of the Company, but the Company believes that within a
reasonable period of time it could find alternate sources of supply adequate
to alleviate such adverse effect.
2
<PAGE> 3
Products Distributed
- --------------------
The Company distributes more than 100,000 different products and,
therefore, is able to supply its customers with a wide variety of electrical
and communications products. The products distributed by the Company consist
primarily of wire, conduit, wiring devices, tools, motor controls,
transformers, lamps, lighting fixtures and hardware, power transmission
equipment, telephone station apparatus, key systems, PBXs, data products for
local area networks or wide area networks, fiber optic products, and CATV
products. These products are sold to customers such as contractors (both
industrial and residential), industrial plants, telephone companies, private
and public utilities, and commercial users.
On December 31, 1996 and 1995, the Company had orders on hand which
totaled approximately $195,002,000 and $192,721,000, respectively. The
Company believes that the increase from 1995 to 1996 reflects the
improvements in the market sectors of the economy in which the Company
operates. The Company expects that approximately 85% of the orders on hand
at December 31, 1996 will be filled within the twelve-month period ending
December 31, 1997. Historically, orders on hand for the Company's products
have been firm, but customers from time to time request cancellation and the
Company has historically allowed such cancellations.
Marketing
- ---------
The Company sells its products through a network of distributing
houses located in 14 geographical districts throughout the United States. In
each district the Company maintains a main distributing house and a number of
branch distributing houses, each of which carries an inventory of supply
materials and operates as a wholesale distributor for the territory in which
it is located. The main distributing house in each district carries a
substantially larger inventory than the branch houses so that the branch
houses can call upon the main distributing house for additional items of
inventory. In addition, the Company maintains two (2) zone warehouses with
special inventories so all locations can call upon them for additional items.
The Company also has subsidiary operations with distribution facilities
located in Puerto Rico, Mexico, Singapore and Canada.
3
<PAGE> 4
The distribution facilities operated by the Company are shown in the
following table:
<TABLE>
<CAPTION>
Location of Main Number of Distributing Number of
Distributing House Houses in District Distributing Houses
- ------------------ ---------------------- -------------------
<S> <C> <C> <C>
Graybar International, Inc.
Boston, MA 9 ---------------------------
Cincinnati, OH 8 Puerto Rico 1
Dallas, TX 27
Glendale Heights, IL 15 Graybar Electric (Ontario) Ltd.
Miami, FL 3 -------------------------------
Minneapolis, MN 18 Canada 5
New York, NY 15
Norcross, GA 18 Graybar Electric Ltd.
Phoenix, AZ 26 ---------------------
Pittsburgh, PA 12 Canada 18
Richmond, VA 17
Seattle, WA 21 Graybar de Mexico, S.A. de CV.
St. Louis, MO 16 ------------------------------
Tampa, FL 23 Mexico City, Mexico 1
Zone Distributing Houses Graybar-P&M International PTE, Ltd.
- ------------------------ -----------------------------------
Bethlehem, PA 1 Singapore 1
Peoria, IL 1
</TABLE>
Where the specialized nature or size of a particular shipment
warrants, the Company has products shipped directly from its suppliers to the
place of use, while in other cases orders are filled from the Company's
inventory. On a dollar volume basis, over sixty percent of the orders are
filled from the Company's inventory and the remainder are shipped directly
from the supplier to the place of use. The Company generally finances its
inventory from internally generated funds and from long and short-term
borrowings.
4
<PAGE> 5
The Company distributes its products to more than 200,000 customers,
which fall into five general classes. The following list shows the estimated
percentage of the Company's total sales for each of the three years ended
December 31, attributable to each of these classes:
<TABLE>
<CAPTION>
CLASS OF CUSTOMERS PERCENTAGE OF SALES
------------------ -------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Electrical contractors 39.1% 39.1% 39.2%
Industrial plants 29.8 30.6 30.9
Telecommunication companies 24.4 22.9 21.7
Private and public power utilities 5.0 5.6 6.3
Miscellaneous 1.7 1.8 1.9
---------- ---------- ----------
100.0% 100.0% 100.0%
========== ========== ==========
</TABLE>
At December 31, 1996, the Company employed approximately 2,500
persons in sales capacities. Approximately 1,100 of these sales personnel
were sales representatives who work in the field making sales to customers at
the work site. The remainder of the sales personnel were sales and marketing
managers, and telemarketing, advertising, quotation, counter and clerical
personnel.
Competition
- -----------
The Company believes that it is the largest distributor of electrical
products not affiliated with a manufacturing company, and one of the three
largest distributors of such products in the United States. The field is
highly competitive, and the Company estimates that the three largest
distributors of electrical products account for only a small portion of the
total market, with the balance of the market being accounted for by
independent distributors and manufacturers operating on a local, state-wide
or regional basis.
The Company believes that its competitive position is primarily a
result of its ability to supply its customers through a network of
conveniently located distribution facilities with a broad range of electrical
and telecommunications materials within a short period of time. Price is
also important, particularly where the Company is asked to submit bids to
contractors in connection with large construction jobs.
5
<PAGE> 6
Employees
- ---------
At December 31, 1996, the Company employed approximately 6,600
persons on a full-time basis. Approximately 160 of these persons were
covered by union contracts. The Company has not had a material work stoppage
and considers its relations with its employees to be good.
Item 2. Properties
- ------- ----------
As of December 31, 1996, the Company operated offices and distribution
facilities in 240 locations. Of these, 131 were owned by the Company, and
the balance were leased. The leases are for varying terms, the majority
having a duration of less than five years.
The Company's distribution facilities consist primarily of warehouse
space. A small portion of the space in each facility is used for offices.
Distribution facilities vary in size from approximately 5,000 square feet to
141,000 square feet, the average being approximately 28,000 square feet.
As of December 31, 1996, approximately $43.5 million in debt of the
Company was secured by mortgages on twenty-eight buildings. Eighteen of
these facilities are subject to a first mortgage securing a 12.25% note, of
which $7.8 million in principal amount remains outstanding. Seven of these
facilities are subject to a first mortgage securing a 9.23% note, of which
$24.6 million in principal amount remains outstanding. A facility in
Houston, Texas is subject to a first mortgage securing a 7.75% note, of which
$3.3 million in principal remains outstanding, and a facility in St. Louis,
Missouri is subject to a first mortgage securing a 7.74% note, of which $6.8
million in principal remains outstanding. A distribution house in Pinellas
County, Florida is subject to a mortgage securing an Industrial Revenue Bond
at an interest rate of 7.00% with one payment for $1.0 million due in 2004.
Item 3. Legal Proceedings
- ------- -----------------
The Company has been named, together with numerous other companies,
as a co-defendant in actions by approximately 3,000 plaintiffs which have
been filed in various federal and state courts in Arkansas, California,
Louisiana, Maryland, Massachusetts, Mississippi, New Hampshire, New Jersey,
New York, Ohio, Pennsylvania and West Virginia. The plaintiffs allege
personal injuries due to exposure to asbestos products and seek substantial
damages. The majority of the complaints do not identify any products
containing asbestos allegedly sold by the Company.
6
<PAGE> 7
However, since all products sold by the Company have been and are purchased
from suppliers, if a plaintiff were to successfully establish an
asbestos-related injury claim with respect to a product sold by the Company,
the Company believes it would normally have a claim against its supplier.
Furthermore, the Company believes it has product liability insurance coverage
available to cover these claims. Accordingly, based on information now known
to the Company, in the opinion of management the ultimate disposition of the
asbestos-related claims against the Company will not have a materially
adverse effect on the Company.
Item 4. Submission of Matters to a Vote of Security Holders
- ------- ---------------------------------------------------
No matter was submitted to a vote of shareholders during the fourth
quarter of the fiscal year covered by this Annual Report on Form 10-K.
PART II
-------
Item 5. Market for the Registrant's Common Stock and Related Shareholder
- ------- ----------------------------------------------------------------
Matters
-------
The Company is wholly owned by its active and retired employees, and
there is no public trading market for its Common Stock, par value $1 per
share with a stated value of $20 per share. No shareholder may sell,
transfer or otherwise dispose of shares of Common Stock without first
offering the Company the option to purchase such shares at the price at which
they were issued. The Company also has the option to purchase the Common
Stock 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 issued by the Company have been issued at $20 per share, and the
Company has always exercised its repurchase option, and expects to continue
to do so.
The information as to number of holders of Common Stock and frequency
and amount of dividends, required to be included pursuant to this Item 5, is
included under the captions "Capital Stock Data" and "Dividend Data" on page
1 of the Company's Annual Report to Shareholders for the year ended December
31, 1996, (the "1996 Annual Report") furnished to the Securities and Exchange
Commission (the "Commission") pursuant to Rule 14c-3 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and such information
is incorporated herein by reference.
7
<PAGE> 8
In May, 1996, the Company entered into a fifteen-year note agreement
that includes various covenants which limit the Company's ability to make
investments, pay dividends, incur debt, dispose of property, and issue equity
securities. The Company is also required to maintain certain financial
ratios as defined in the agreement.
Item 6. Selected Financial Data
- ------- -----------------------
The selected financial data for the Company as of December 31, 1996
and for the five years then ended, which is required to be included pursuant
to this Item 6, is included under the caption "Selected Consolidated
Financial Data" on page 13 of the 1996 Annual Report and is incorporated
herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
- ------- ---------------------------------------------------------------
Results of Operations
---------------------
Management's discussion and analysis required to be included pursuant
to this Item 7 is included under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations" on pages 14 and 15
of the 1996 Annual Report and is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
- ------- -------------------------------------------
The financial statements and Report of Independent Auditors required
by this Item 8 are listed in Item 14(a)(1) of this Annual Report on Form 10-K
under the caption "Index to Financial Statements."
Such financial statements specifically referenced from the 1996
Annual Report in such list are incorporated herein by reference. There is no
supplementary financial information required by this item which is applicable
to the Company.
Item 9. Changes in and Disagreements with Accountants on Accounting and
- ------- ---------------------------------------------------------------
Financial Disclosure
--------------------
None.
8
<PAGE> 9
PART III
--------
Item 10. Directors and Executive Officers of the Registrant
- -------- --------------------------------------------------
The information with respect to the directors and executive officers
of the Company required to be included pursuant to this Item 10 will be
included under the caption "Directors and Executive Officers -- Nominees for
Election as Directors" in the Company's Information Statement relating to the
1997 Annual Meeting (the "Information Statement"), to be filed with the
Commission pursuant to Rule 14c-5 under the Exchange Act, and is incorporated
herein by reference.
Item 11. Executive Compensation
- -------- ----------------------
The information with respect to executive compensation required to be
included pursuant to this Item 11 will be included under the captions
"Executive Compensation" and "Pension Plan" in the Information Statement and
is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
- -------- --------------------------------------------------------------
The information with respect to the security ownership of beneficial
owners of more than 5% of the Common Stock, the directors of the Company and
all directors and officers of the Company, which is required to be included
pursuant to this Item 12, will be included in the introductory language and
under the caption "Directors and Executive Officers -- Nominees for Election
as Directors" in the Information Statement and is incorporated herein by
reference.
Item 13. Certain Relationships and Related Transactions
- -------- ----------------------------------------------
The information with respect to any reportable transactions, business
relationships and indebtedness between the Company and the beneficial owners
of more than 5% of the Common Stock, the directors or nominees for director
of the Company, the executive officers of the Company or the members of the
immediate families of such individuals, required to be included pursuant to
this Item 13, will be included under the caption "Directors and Executive
Officers" in the Information Statement and is incorporated herein by
reference.
9
<PAGE> 10
PART IV
-------
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
- -------- ----------------------------------------------------------------
(a) Documents filed as part of this report:
--------------------------------------
The following financial statements and Report of
Independent Auditors are included on the indicated pages in the
1996 Annual Report and are incorporated by reference in this
Annual Report on Form 10-K:
1. Index to Financial Statements
-----------------------------
(i) Consolidated Statements of Income and Retained
Earnings for each of the three years ended December
31, 1996 (page 16).
(ii) Consolidated Balance Sheets, as of December 31, 1996
and December 31, 1995 (page 17).
(iii) Consolidated Statements of Cash Flows for each of the
three years ended December 31, 1996 (page 18).
(iv) Notes to Consolidated Financial Statements (pages 19
to 22).
(v) Report of Independent Auditors (page 23).
2. Index to Financial Schedule
---------------------------
The following schedule for each of the three years ended December
31, 1996, to the Financial Statements is included on the indicated page in this
Annual Report on Form 10-K:
(i) Schedule II. Valuation and Qualifying Accounts (page
14).
All schedules other than those indicated above are omitted
because of the absence of the conditions under which they are required or
because the required information is set forth in the financial statements and
the accompanying notes thereto.
10
<PAGE> 11
3. Exhibits
--------
The following exhibits required to be filed as part of this
Annual Report on Form 10-K have been included:
(3) Articles of incorporation and by-laws
(i) Restated Certificate of Incorporation dated March 9,
1984 filed as exhibit 3(i) to the Company's Annual
Report on Form 10-K for the year ended December 31,
1984 (Commission File No. 0-255) and incorporated
herein by reference.
(ii) By-laws as amended through August 1, 1991 filed as
exhibit 6(a)(19) to the Company's Quarterly Report
on Form 10-Q for the quarter ended September 30,
1991 (Commission File No. 0-255) and incorporated
herein by reference.
(4)and(9) Instruments defining the rights of security holders,
including indentures and voting trust agreements.
Voting Trust Agreement dated as of April 15,
1987, attached as Annex A to the Prospectus, dated
January 20, 1987, constituting a part of the
Registration Statement on Form S-13 (Registration
No. 2-57861) and incorporated herein by reference.
The Company hereby agrees to furnish to the
Commission upon request a copy of each instrument
omitted pursuant to Item 601(b)(4)(iii)(A) of
Regulation S-K.
(10) Material contracts.
(i) Management Incentive Plan, filed as Exhibit 4(a)(1)
to the Annual Report on Form 10-K for the year ended
December 31, 1972 (Commission File No. 0-255), as
amended by the Amendment effective January 1,
1974, filed as Exhibit 13-c to the Registration
Statement on Form S-1 (Registration No. 2-51832),
the Amendment effective January 1, 1977, filed as
Exhibit 13(d) to the Registration Statement on Form
S-1 (Registration No. 2-59744), and the Amendment
effective January 1, 1980, filed as Exhibit 5(f) to
the Registration Statement on Form S-7
(Registration No. 2-68938) and incorporated herein
by reference.
(13) Annual Report to Shareholders for 1996 (except for
those portions which are expressly incorporated by
reference in this Annual Report on Form 10-K, this
exhibit is furnished for the information of the
Commission and is not deemed to be filed as part of
this Annual Report on Form 10-K).
(21) List of subsidiaries of the Company.
(23) Independent Auditors' Consent of Ernst and Young LLP.
(23A) Independent Accountants' Consent of Price Waterhouse
LLP.
(27) Financial Data Schedule (submitted in EDGAR format
only).
(b) Reports on Form 8-K:
-------------------
No reports on Form 8-K were filed during the last quarter of the
Company's fiscal year ended December 31, 1996.
11
<PAGE> 12
SIGNATURES
----------
Pursuant to the requirements of Section 13 of the Securities Exchange
Act of 1934, the Company has duly caused this Annual Report on Form 10-K to
be signed on its behalf by the undersigned, thereunto duly authorized, as of
the 27th day of March, 1997.
GRAYBAR ELECTRIC COMPANY, INC.
By /S/ C. L. HALL
-----------------------------
(C. L. Hall, President)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Annual Report on Form 10-K has been signed below by the following
persons on behalf of the Company, in the capacities indicated, on March 27,
1997.
/S/ C. L. HALL Director and President
- ---------------------------------------- (Principal Executive Officer
(C. L. Hall) and Principal Financial
Officer)
/S/ J. R. SEATON Director, Vice President
- ---------------------------------------- and Comptroller (Principal
(J. R. Seaton) Accounting Officer)
/S/ A. A. BRZOSKI, JR Director
- ----------------------------------------
(A. A. Brzoski, Jr.)
/S/ T. S. GURGANOUS Director
- ----------------------------------------
(T. S. Gurganous)
/S/ R. H. HANEY Director
(R. H. Haney)
- ----------------------------------------
/S/ G. W. HARPER Director
- ----------------------------------------
(G. W. Harper)
/S/ G. J. McCREA Director
- ----------------------------------------
(G. J. McCrea)
/S/ R. L. MYGRANT Director
- ----------------------------------------
(R. L. Mygrant)
12
<PAGE> 13
/S/ R. D. OFFENBACHER Director
- ----------------------------------------
(R. D. Offenbacher)
/S/ I. ORLOFF Director
- ----------------------------------------
(I. Orloff)
/S/ R. A. REYNOLDS Director
- ----------------------------------------
(R. A. Reynolds)
/S/ G. S. TULLOCH, JR. Director
- ----------------------------------------
(G. S. Tulloch, Jr.)
/S/ C. R. UDELL Director
- ----------------------------------------
(C. R. Udell)
/S/ J. F. VAN PELT Director
- ----------------------------------------
(J. F. Van Pelt)
/S/ J. W. WOLF Director
- ----------------------------------------
(J. W. Wolf)
13
<PAGE> 14
GRAYBAR ELECTRIC COMPANY, INC. AND SUBSIDIARIES
-----------------------------------------------
SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS
---------------------------------------------
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
-------- -------- -------- -------- --------
Balance at Additions Balance
Beginning Charged to at End
of Period Income Deductions of Period
Description --------- ---------- ---------- ---------
-----------
<S> <C> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31, 1996:
Reserve deducted from assets to
which it applies-
Allowance for doubtful accounts $ 4,113,000 $ 2,004,000 $ 2,216,000<F1> $ 3,901,000
Allowance for cash discounts 476,000 9,743,000 9,637,000<F2> 582,000
----------- ----------- ----------- -----------
Total $ 4,589,000 $11,747,000 $11,853,000 $ 4,483,000
=========== =========== =========== ===========
FOR THE YEAR ENDED DECEMBER 31, 1995:
Reserve deducted from assets to
which it applies-
Allowance for doubtful accounts $ 3,801,000 $ 3,403,000 $ 3,091,000<F1> $ 4,113,000
Allowance for cash discounts 495,000 9,559,000 9,578,000<F2> 476,000
----------- ----------- ----------- -----------
Total $ 4,296,000 $12,962,000 $12,669,000 $ 4,589,000
=========== =========== =========== ===========
FOR THE YEAR ENDED DECEMBER 31, 1994:
Reserve deducted from assets to
which it applies-
Allowance for doubtful accounts $ 3,497,000 $ 2,287,000 $ 1,983,000<F1> $ 3,801,000
Allowance for cash discounts 448,000 8,886,000 8,839,000<F2> 495,000
----------- ----------- ----------- -----------
Total $ 3,945,000 $11,173,000 $10,822,000 $ 4,296,000
=========== =========== =========== ===========
<FN>
<F1> Amount of trade receivables written off against the reserve provided.
<F2> Discounts allowed to customers.
</TABLE>
14
<PAGE> 15
INDEX TO EXHIBITS
<PAGE> 16
<TABLE>
INDEX TO EXHIBITS
-----------------
Exhibits
--------
<C> <S>
(3) Articles of incorporation and by-laws.
(i) Restated Certificate of Incorporation dated March 9, 1984...................<F*>
(ii) By-laws as amended through August 1, 1991...................................<F*>
(4)and(9) Instruments defining the rights of security holders, including indentures
and voting trust agreements.
Voting Trust Agreement dated as of April 15, l987, attached as
Annex A to the Prospectus, dated January 20, 1987, constituting a part of
the Registration Statement on Form S-13 (Registration No. 2-57861)................<F*>
(10) Material contracts.
(i) Management Incentive Plan, filed as Exhibit 4(a)(1) to the Annual
Report on Form 10-K for the year ended December 31, 1972 (Commission File
No. 0-255), as amended by the Amendment effective January 1, 1974, filed
as Exhibit 13-c to the Registration Statement on Form S-1 (Registration
No. 2-51832), the Amendment effective January 1, 1977, filed as Exhibit
13(d) to the Registration Statement on Form S-1 (Registration No. 2-59744),
and the Amendment effective January 1, 1980, filed as Exhibit 5(f) to the
Registration Statement on Form S-7 (Registration No. 2-68938).....................<F*>
(13) Annual Report to Shareholders for 1996 (except for those portions which
are expressly incorporated by reference in this Annual Report on Form 10-K,
this exhibit is furnished for the information of the Commission and is not
deemed to be filed as part of this Annual Report on Form 10-K)
(21) List of subsidiaries of the Company.
(23) Independent Auditors' Consent of Ernst and Young LLP.
(23A) Independent Accountants' Consent of Price Waterhouse LLP.
(27) Financial Data Schedule (submitted in EDGAR format only).
<FN>
--------------
<F*>Incorporated by reference in this Annual Report on Form 10-K.
</TABLE>
15
<PAGE> 1
EXHIBIT 13
ANNUAL REPORT TO SHAREHOLDERS
FOR 1996
<PAGE> 2
GraybaR [LOGO]
1996
ANNUAL REPORT
<PAGE> 3
[PHOTO]
Graybar's Directors are shown in the warehouse of the new St. Louis District
Headquarters facility in Bel Ridge, Missouri.
Front row, from left to right:
George S. Tulloch
Vice President, Secretary, and General Counsel
John W. Wolf
Vice President and Treasurer
Robert A. Reynolds, Jr.
Senior Vice President, Comm/Data Business
Carl L. Hall
President and Chief Executive Officer
Richard H. Haney
Senior Vice President, Electrical Business
Thomas S. Gurganous
District Vice President--Richmond District
Golden W. Harper
Vice President--Operations
Second row, from left to right:
Jack F. Van Pelt
Vice President--Human Resources
Gerard J. McCrea
District Vice President--Northeastern Comm/Data District
Robert L. Mygrant
District Vice President--Tampa District
Anthony A. Brzoski
Vice President--Comm/Data Marketing
Charles R. Udell
Vice President--Electrical Marketing
John R. Seaton
Vice President and Comptroller
Irving Orloff
District Vice President--St. Louis District
Richard D. Offenbacher
District Vice President--Southeastern Comm/Data District
<PAGE> 4
Company's Business
Graybar Electric Company, Inc. is engaged internationally in the distribution
of electrical and communications equipment and supplies primarily to
contractors, industrial plants, telephone companies, power utilities, and
commercial users. All products sold by the Company are purchased by the
Company from others.
Markets Served
Electrical Contractor
Commercial & Industrial
Voice & Data Communications
Power Utility
International
Capital Stock Data
Number of Equity Security Holders as of
December 31, 1996:
<TABLE>
<CAPTION>
- -----------------------------------------------------
Title of Class Number of Security Holders
- -----------------------------------------------------
<S> <C>
Preferred Stock 109
Common Stock 108
Voting Trust Certificates for Common Stock 4,817
- -----------------------------------------------------
</TABLE>
Dividend Data
Common Stock, par value $1; stated value $20.
<TABLE>
<CAPTION>
Dividends declared for year: 1996 1995 1994
- ------------------------------------------------------------------
<S> <C> <C> <C>
First Quarter $ .30 $ .30 $ .30
Second Quarter .30 .30 .30
Third Quarter .30 .30 .30
Fourth Quarter $1.10 $1.10 $1.10
- ------------------------------------------------------------------
</TABLE>
On September 12, 1996 a five percent stock dividend was declared to
shareholders of record on January 15, 1997. Shares representing this
dividend were issued on February 3, 1997.
On the Cover
Graybar employees based in the new Bel Ridge Center in St. Louis served as
models in photographs that were taken for advertising literature and for a
new "Career Opportunities" brochure. In the top photo is David Parentin,
Truck Driver.
In the middle photo are Beth Fluesmeier, Lease Administrator; Melvin Owens,
Sales Representative; and Paul Perry, Data Communications Technical
Specialist.
In the third photo is Steve Boschert, Sales Representative.
Contents
Graybar Officers and Directors Inside Front Cover
President's Letter 2
Market Review 4
Operations Review 10
Financial Review 13
Selected Consolidated Financial Data 13
Management's Discussion & Analysis
of Financial Condition and Results of Operations 14
Consolidated Financial Statements 16
Report of Independent Auditors 23
District Management 24
Locations 26
1
<PAGE> 5
LETTER TO SHAREHOLDERS
A healthy economy, along with increasing penetration of our markets,
led Graybar to another year of solid growth in 1996. Sales increased by 8%
while net profits grew by more than 20%, providing record returns on sales
and investment. In addition, Graybar achieved unprecedented productivity
gains in 1996 with gross profit production per employee at an all-time high.
To support our strategy of accelerated growth, the Company made investments
in personnel, facilities, and technology. Six new branches opened, ten
others moved to new, larger locations, and eight were renovated.
While we have made significant new expenditures in personnel and
facilities, our largest capital expenditures in recent years consistently
have been in technology.
Noteworthy advances in 1996 include:
* Completion of local area networks.
* Expansion of "Hot Key," which gives us on-line access to a steadily
increasing base of key suppliers.
* Bar coding, which was completed at all of our counter locations in 1996.
Bar coding enables us to improve service to our customers while
virtually eliminating pricing errors and inventory differences.
* Expanded network capabilities, including the installation of personal
computers at all of our Customer Service Representative, Telemarketing,
and Quotation assignments.
Because we view technology as strategic to our success, in December we
appointed Kendal J. Klindworth to the new position of Vice President and
Chief Information Officer. As such, he is responsible for providing the
strategic direction for information services. Ken, as former General Manager
of Information Systems, brings with him a wealth of knowledge and will be an
immeasurable help in charting our course for the future.
Other significant personnel changes in 1996 included the election of
two new Directors: Anthony A. Brzoski and Charles R. Udell, Vice Presidents of
Comm/Data and Electrical Markets, respectively. With their wide experience,
both Tony and Chuck are sure to make positive contributions to the Board.
In 1996 Karen L. Burkart joined corporate headquarters as Manager,
Minority and Women Business Enterprise Development. Prior to joining
Graybar, Karen had extensive experience as an industry consultant on Minority
and Women in Business issues. We look forward to pursuing the many
opportunities for Graybar in this market area.
Graybar's unprecedented growth in recent years precipitated many
personnel changes in addition to a record number of new employees. The
dramatic increase in personnel heightened the need for increased focus on
employee training. In response, we are implementing a structure to
coordinate, deliver, and track the training appropriate for each employee. A
Training Guide has been developed by our Director of Training, in
consultation with our National Training Group, that defines the skills
required for each job assignment.
We are committed to identifying and delivering comprehensive training
to meet the need for specialized skills in all of our growing markets.
Efforts in continuous improvement are implemented through our Director
of Quality. The following initiatives, among others, were completed in 1996:
* Fifteen additional Graybar branches earned ISO 9002 Certification in 1996.
2
<PAGE> 6
* The Company achieved a notable reduction in billing adjustments as a
percentage of total transactions -- representing a major productivity gain
along with improved customer service.
* The "DocuNet" intranet, Graybar's private communications network, was made
available company-wide. "Docunet" provides immediate on-line access to
procedural information such as Operating Manuals, General Instructions,
and ISO documentation.
The increasing demands of our customers and competitive pressures
dictate that we continually strive toward more efficient warehousing and
delivery services. Our goal is to complete a customer's order in one shipment
- -- with no errors. To that end, we are currently conducting an intensive
analysis of warehouse logistics.
To ensure that we understand the service needs of both our customers
and suppliers, we began with customer and supplier interviews, followed by a
critical appraisal of our distribution center pilot facilities in Houston and
Los Angeles.
As a result, we identified methods to improve material flow, and have
more clearly defined our service strategy. We expect to see significant
benefits from this study in 1997 as we implement new warehouse procedures.
These will make our Graybar distribution network even more valuable to our
customers and suppliers alike.
Our international presence is concentrated in North America and the
Caribbean with locations in Canada, Mexico and Puerto Rico. We serve
additional customers throughout the world through Graybar International and
our subsidiary in Singapore.
The Company's locations in Canada continued to produce positive results
with satisfactory growth. In early 1997, we will become majority
shareholders in Harris & Roome of Nova Scotia. Our pleasure in this
noteworthy event is diminished, however, by the death of H. C. "Kip" Roberts,
former President of Harris & Roome. Kip was a widely respected leader in the
electrical industry and a valued friend.
Graybar continued with satisfactory growth in 1996 in both Electrical
and Comm/Data Markets. We have momentum on our side and plan to build on
that momentum in the coming years.
/s/ Carl L. Hall
St. Louis, Missouri Carl L. Hall
March 1997 President
3
<PAGE> 7
MARKET REVIEW
Construction Market
The Construction (Contractor) Market continues as the Company's largest
market, representing approximately 40% of our total sales. Graybar's 1996
sales growth outpaced the industry.
Stock sales contributed significantly to this growth, in spite of a
decline in copper wire pricing. We attribute this growth to our commitment
to supplier selectivity -- providing our customers preferred brand-name
products -- and a continuing commitment for improved service.
All counters have been equipped with bar code scanners to provide
faster and more efficient service for our customers. Our "Hot Key"
capabilities provide on-line computer assistance for special customer
requirements. This direct electronic linkage allows our Customer Service
Representatives (CSRs) to access key suppliers' data bases to locate needed
products from their regional warehouses. Graybar's ON-SITE material
management services, developed for the Engineering Constructor Market during
the early 1990s, continued to gain market recognition as a value-added
construction service during 1996. Through the use of electronic commerce and
the latest in bar code technology, Graybar project teams provided specialized
material management services for major constructor projects. In 1996, these
projects ranged from a fast-track computer chip manufacturing facility, to a
petrochemical plant, to a commercial building. ON-SITE has helped increase
sales to engineering constructors, who represent a large potential in the
Contractor Market.
To enhance our overall service capabilities, we continued our commitment
to sales specialization and training. Twenty-eight corporate-sponsored training
schools were conducted with nine key suppliers. More than 600 employees attended
these classes. A total of 160 employees participated in four lamp and lighting
conferences at General Electric's Nela Park Training Institute. Square D
classes were held regionally. Graybar-specific lighting schools were conducted
at Lithonia, Cooper, and Hubbell Lighting Training Centers.
The Company exhibited at two major contractor conventions in 1996. The
National Electrical Contractors Association Exposition in Boston featured a
3,000 square foot "Flagship" counter demonstration. The theme at the
Independent Electrical Contractors Exposition in Portland, Oregon, was "Net
Profits," which focused on ways to increase profitability through computer
technology. We exhibited GraybarNet(R), the Company's on-line ordering
system.
After nearly a century of conducting business together, Graybar and
Square D announced a new national agreement that expanded the range of Square
D products available from all Graybar branches in the United States. Graybar
now represents Square D as its only line of electrical distribution and
control equipment. This new commitment will enhance both companies' ability
to anticipate, meet, and exceed customer needs.
[PHOTOS]
Square D sponsors this NASCAR racing car, which has been displayed at Graybar
locations around the country. In the driver's seat is Charlie Vingara,
Manager,Counter Sales at Hamilton, New Jersey. The car was featured at the
grand opening of the Company's new Hamilton location in July.
4
<PAGE> 8
Graybar capabilities and products were promoted throughout the year in
trade publication advertisements and in our new Electrical Products Catalog.
Commercial & Industrial Markets
In 1996, Graybar's growth in the Commercial and Industrial (C&I)
Markets increased significantly compared to prior years. Investments in
technological tools have helped us offer value-added services to our C&I
customers.
Our National Account Managers promoted Graybar's extensive
capabilities in areas that affect the customers' bottom lines. Graybar can
assist with cost containment, product standardization, inventory reduction,
process improvement, documented cost savings, and commodity management. We
offer these customers significant cost-saving alternatives to their
current procurement processes.
We are committed to building Graybar's presence in the C&I Markets, and
we continue to dedicate resources to these markets. The Company plans to
position additional National Account Managers in our branches. These
Managers will be responsible for specific accounts, and will help position
Graybar as the total low-cost provider of goods and services to these key
customers.
Integrated Supply
Integrated Supply continues to be a subject of great interest to many
of our major industrial accounts. In 1995, Graybar helped form the Solutions
Providers Alliance to address our customers' Integrated Supply issues. The
members of the Alliance, in addition to Graybar, are Vallen Corporation, a
supplier of safety supplies; and Kaman Industrial Technologies, a supplier of
bearings and power transmission products.
The primary mission of the Alliance is to provide our industrial
customers with one contact for their maintenance, repair, and operations
materials. Integrated Supply continues to be of interest to several of our
industrial customers. The Company has entered into integrated supply
agreements with several companies, and we continue to pursue other
opportunities.
Minority and Women Business Enterprise
In 1996, the Company established the new position of Manager, Minority
and Women Business Enterprise Development. Graybar is committed to seeking
opportunities to form mutually profitable relationships with qualified
minority- and women-owned businesses. These relationships will be made
available to our C&I customers.
"ON-SITE" Services
Many of our national industrial customers have benefited from Graybar's
ON-SITE capabilities. Graybar ON-SITE was initially developed for the
Engineering Constructor Market, and offered a means of reducing acquisition
cost and managing bulk electrical materials on capital projects. The key to
ON-SITE is the set-up and maintenance of a temporary stocking location by
Graybar at a job site. This program gained momentum throughout 1996.
National industrial accounts as well as engineering constructors
recognize Graybar ON-SITE as a significant value-added service. In 1996,
ON-SITE provided benefits to key multiple-location national accounts by using
nationally negotiated agreements and promoting product standardization for
their capital projects.
[PHOTO]
In 1996, Graybar celebrated 100 years of nationwide distribution of
incandescent lamps. Stan Davis (left), Vice President-Sales and Marketing,
GE Lamps, presents a Centennial anniversary plaque to Carl Hall, President
and CEO.
Site inventory management is a value-added Graybar service for construction
customers. BE&K, a major construction firm based in Birmingham, Alabama,
depended on Graybar during the construction of this paper board manufacturing
plant in Stevenson, Alabama.
5
<PAGE> 9
MARKET REVIEW
We continue to promote this unique service to both our engineering
constructors and industrial customers.
Comm/Data Markets
In 1996, Graybar completed the transition to a specialized sales and
marketing organization. This followed the successful pilot of the Western
Comm/Data District in 1995. Three additional districts were established in
1996 -- the Northeastern, Southeastern, and Central Comm/Data Districts.
During the past year, the four Comm/Data Districts supported 36
managers. Thirty-one managers led sales and customer service teams to grow
the business with "private network" customers -- commercial, industrial, and
contractor accounts; and five managers focused on "public network" accounts
- -- the Bell operating companies, independent telephone companies, and the
cable television industry.
Specialization of the sales/service teams contributed to record sales
in an economic environment that was depressed by severe pressure on cable
pricing. The cable shortages in 1995 led to overcapacity in 1996.
Comm/Data Products
Emerging technology continued to fuel the demand for comm/data products
as customers addressed their needs for more information processing. Typical
of this demand was the usage of the Internet and the resulting need to expand
telephone networks to handle the traffic.
Increased need for higher processing speeds and capacity also was
driven by new applications of existing technology, such as video systems,
voice messaging, and teleconferencing. From the educational institutions to
the health care industry, more information is being requested for
decision-making.
The Company continues to develop the sales and technical expertise that
enables us to understand the customers' applications and assist them with
product solutions. In 1996, Graybar had 52 representatives who held the
Registered Communications Distribution Design (RCDD) certification from
Building Industries Consulting Services International. The RCDD designation
is an important credential for communications professionals who design data
cabling systems. Graybar also has on staff 16 network system specialists
with expertise in electronic network components, and five technical support
specialists who design and prepare schematics on complete systems.
Private Networks Market
Sales to interconnect contractors in 1996 increased in a flat market.
The integration of computer and telephone technology has progressed at a pace
below industry expectations.
Sales to data contractors were brisk, followed closely by sales to
commercial and industrial users. The addition of electronic data networking
components also added to the Company's sales growth.
New product offerings announced in the fourth quarter are expected to
add significantly to market growth in 1997.
Public Networks Market
The announcements of the proposed consolidations of Bell Atlantic with
NYNEX, and Pacific Bell with Southwestern Bell, came as the Bell operating
companies were entering new market opportunities created by legislation
changes in 1996. The same legislation allowed other service providers to
compete against the Bell operating companies for local telephone service
revenues. Many service providers, including AT&T and several large cable
companies, already have announced plans to offer local telephone service.
Development of Graybar's focused public network sales/service teams
positioned the Company to take full advantage of the opportunities created by
the emergence of new business ventures within the public network.
To further Graybar's interests with the public network companies, the
position of Director of
6
<PAGE> 10
Public Network Sales was created to coordinate all our sales efforts in this
market. Kathy M. Mazzarella, who was formerly a National Product Manager,
was named to that position.
Similar changes took place with the utility, CATV, and long-distance
companies, enabling Graybar to attain record sales in the Public Networks
Market.
National Comm/Data Accounts
Graybar's sales to companies with multiple locations across the country
increased substantially in 1996. Our service processes, which provide
consistently excellent customer service levels and pricing standards, were
cost-savers for these accounts. In the coming years, additional National
Account Managers will continue to coordinate our efforts with these very
important customers.
Power Utility Market
The Power Utility Market continues to change due to the evolution
brought about by deregulation. Deregulation of this industry has triggered
an explosion of competition and new opportunities -- both for energy
providers and for those channels that serve the industry. We are seeing the
effects of deregulation, with utilities merging, placing more emphasis on
long-term agreements with suppliers, and looking for ways to reduce costs.
These changes have created new market opportunities for Graybar to help
utilities reduce their operating costs and increase their profits.
Power Utility Market opportunities for Graybar are present in both the
generating side of the business as well as in the revenue/marketing side.
New opportunities for Graybar in the generating side are with the Energy
Service Companies (ESCOs). These ESCOs will offer retro-fit lighting,
alarms, motor controls, and communications equipment services. They will
offer these products and services to their existing customer base and to new
customers outside utilities' traditional service areas. On the revenue and
marketing side, Graybar continues to pursue value-added service agreements
and those products and service opportunities that help utilities reduce their
costs.
As utilities continue to grow through mergers and acquisitions, their
geographic customer base also grows. Graybar is well-positioned to serve
these needs, both regionally and nationally.
International Markets
Graybar International continued to focus its efforts on supporting our
national account initiatives, paying particular attention to accounts with
international facilities and engineering contractors with international
projects.
North America
Although the Canadian economy exhibited little overall growth, Graybar
Ontario and Harris & Roome, the Company's Canadian operations, continued to
profitably gain market share.
Graybar de Mexico in Mexico City was reorganized in 1996 to become
better positioned to operate within the framework of current economic
conditions in Mexico. Results of the reorganization have been favorable and
the Company anticipates improved performance in a slowly improving Mexican
economy in 1997.
[PHOTO]
Graybar branches honor their customers and suppliers with open houses and
trade shows. Shown here are Denver employees Barb Kershenstein, Supervisor
Office Services, and Barb Guidi, Senior Customer Service Representative,
helping with their branch's 10th Annual Octoberfest.
7
<PAGE> 11
MARKET REVIEW
Latin America/Caribbean
Miami International continued its solid performance in South American
markets throughout 1996. Our focus on national accounts resulted in
successful project business in Ecuador, Argentina, and Chile.
Graybar Puerto Rico experienced the best year in its history in 1996.
The Company maintained a strong position in the Contractor Market, while
improving its national account business and Comm/Data Market results.
Asia/Pacific
Business throughout the Pacific Rim remained strong in 1996, and San
Francisco International ended the year with record-breaking sales results.
Sales to Japanese contractors continued to grow, while sales to United States
contractors increased dramatically.
Graybar-P&M (Singapore) increased sales in 1996 while supporting San
Francisco International in the electrical markets, and showed dramatic
improvement in sales of comm/data products to national account customers.
Middle East/Africa
Houston International produced favorable results in 1996 despite the
presence of an overall weak economy throughout the Middle East.
Maintenance and repair operations business with national account
customers was a significant factor in the continued growth of this operation.
Marketing Support
Advertising and Sales Promotion
The Marketing Services Group continues its support of the Company's
marketing objectives with catalogs, direct mail, trade advertising,
promotions, Graybar Digest product publications, customized supplier
catalogs, and brochures.
Integrated marketing communications became the focus in 1996. This
ensured that advertising and sales promotion initiatives carried the
consistent theme that Graybar is the source for "real solutions."
A highlight of the year was the introduction of the new 1,184-page
Electrical Products Catalog No. 40. It features 40,000 products from 140
brand preference suppliers. The latest publication techniques, such as
digitized imaging and electronic file storage, were used to create the new
catalog. As a result, future updating will be easier and faster. New
features include a supplier index, section indexes, and supplier prefixes on
each page.
The popular Comm/Data Graybar Digest continued in 1996 with issues on
broadband/fiber optic products, voice products/ computer telephony
integration, LAN/WAN products, and premises wiring. Customer requests for
the Digest are on the increase with our average mailing at 66,000 copies per
issue.
[PHOTO]
The Company promoted its products and services with advertising created
by Graybar's own advertising professionals. Each of the ads shown here
earned Electrical Construction and Maintenance magazine's "Unforgettable
Award," which recognized the ads' level of recall among readers, overall
effectiveness, and design.
8
<PAGE> 12
A Wiring Systems Catalog was produced in early 1996 to update the
sectionalized Comm/Data Catalog.
Successful national sales promotions included industry leaders such as
AMP, GE Lamp, Greenlee, Hubbell, Klein Tools, Lutron, 3M, Ortronics, Panduit,
Square D, Thomas & Betts, and Wiremold.
The redesigned Graybar wall calendar was distributed to approximately
85,000 customers.
In 1996, more than 40,000 requests for literature were handled by our
national toll-free inquiry service line.
To reinforce Graybar's service and product capabilities, ads were
placed in Electrical Contractor, EC&M, CEE News, Purchasing, Cabling
Installation and Maintenance, Cabling Business, Lightwave, Communications
Week, and Outside Plant.
Graybar advertising received eight industry awards for outstanding
advertising, including recognition for three ads that earned EC&M magazine's
"10 Most Unforgettable Ads for the Year" award.
Counter Business
Graybar counter sales continued their strong performance in 1996,
exceeding all previous sales records. New "Flagship" counters and
self-serve locations contributed to this growth with the addition of 15 new
or remodeled counter facilities.
Merchandising and supplier selectivity played key roles in counter
sales growth by promoting upgraded products, Graybar capabilities, and
strategic suppliers.
Graybar Financial Services (GFS)
Graybar's equipment leasing and financing group enjoyed a record year.
Pre-tax profit grew significantly in an environment of stable interest rates,
acceptable collections, and a growing lease portfolio.
GFS continued to expand its customer service and sales organization to
better service its accounts. GFS employees are processing more than 3,500
inquiries monthly. In 1996, more than 5,000 end-user customers had GFS
leases while hundreds of contractors and interconnects regularly used GFS.
Suppliers such as GE Lighting and Lucent Technologies participated in
joint marketing programs, including training and development of specialized
literature addressing the advantages to customers of leasing or financing
entire system upgrades.
World Series of Golf
The Company continued its sponsorship of the World Series of Golf at
Firestone Country Club, Akron, Ohio. Our Electrical and Comm/Data Markets
were represented. A large contingent of key customers, suppliers, and
Graybar hosts participated in this annual event.
[PHOTO]
Graybar's total counter business in 1996 exceeded $590 million, the highest
ever. Contributing to that success were Ralph Vega, Assistant Counter
Supervisor, and John Staack, Manager, Counter Sales, shown in the new
Flagship Counter at Anaheim.
9
<PAGE> 13
OPERATIONS REVIEW
Corporate Purchasing Group
During 1996, the Company completed the centralization of replenishment
planning for all of Graybar's Comm/Data merchandise. All comm/data products
for all locations are now purchased by Corporate Purchasing in St. Louis.
This Corporate Purchasing Group also purchases electrical products
inventories for the Dallas and St. Louis Districts, and for the Zone Service
Centers.
New Purchasing Software
In June 1996, buyers in the Corporate Purchasing Group began converting
lines from the old purchasing system to the new E3TRIM(R) system. E3TRIM(R)
is an inventory management software application designed to help us improve
customer service while reducing excessive inventory. By December 1996, all
comm/data supplier lines were being purchased through this new system.
The electrical product lines in the Dallas and St. Louis Districts, as
well as the Zone Service Centers, also are planned on E3TRIM(R). Buyers and
supervisors were trained on the new planning system, which is an exciting
approach to inventory management. It will help improve both Graybar's
profitability and customer service capabilities.
Supplier-Assisted Inventory Management
Graybar's Supplier-Assisted Inventory Management program (SAIM) enjoyed
substantial growth during 1996. SAIM is the automated process whereby
Graybar electronically advises suppliers what has been sold - by item, by
location - on a daily basis. The supplier reviews the merchandise demand and
plans stock replenishment to maintain an agreed-upon service level. This
partnership approach benefits Graybar, our suppliers, and our customers.
Five of Graybar's largest suppliers are now involved in company-wide planning
and replenishment of our inventory. Additional strategic suppliers are now
in pilot or testing phases, in preparation for SAIM in 1997.
Warehouse Management
The design and development of the Warehouse Management System (WMS)
continued throughout 1996. The heart of WMS is a comprehensive software
package that uses technology to control the flow of material and information
within the warehouse.
A complete review of all warehouse operational processes and functions
is underway. This will result in improved processing for all warehouses and
assist in the integration of WMS software. The net result will be a more
efficient operating system, reduced costs, and improved customer service. A
pilot installation is scheduled for 1997.
Safety
In 1996 David W. Hughes joined the corporate staff as National Safety
Manager. This new position, which reports to the Vice President-Operations,
is responsible for developing and implementing company-wide safety
procedures. These procedures are designed to reduce the Company's exposure
to work-related injuries and accidents, and ensure compliance to regulations
established by safety agencies such as the Occupational Safety and Health
Administration,
[PHOTO]
Mike Smith, Material Handler at the St.Louis Main House, checks inventory
using a bar code scanner.
10
<PAGE> 14
Department of Transportation, and Environmental Protection Agency.
During 1996 Graybar developed new safety programs for Department of
Transportation compliance, warehouse safety, and defensive driving, among
others. Corporate headquarters and each district established local safety
councils.
In addition to reducing personal pain and suffering resulting from
injuries, our Graybar safety program will help us eliminate unnecessary
operating costs associated with medical bills, lost productivity, and
potential regulatory fines.
Corporate Price/Cost Services
In 1996, a new inquiry mode (CPI) was implemented for use by Branch
Managers and sales personnel. This valuable new tool makes review and
maintenance of Customer Price Authorizations (CPAs) an easier task by
providing all catalog item information with CPA information on one screen.
With the CPI mode, customer exception reports have decreased and more
consistent customer pricing has been attained.
Also in 1996, work continued on a new price/cost maintenance system
that will allow Graybar to take information from Trade Service and outside
suppliers and electronically update our national database. This new system
is scheduled for completion in 1997.
New Locations Opened in 1996:
Chicago, Illinois (Downtown)
Gainesville, Florida
Hamilton, New Jersey
Jericho, New York
Hayward, California
Neenah, Wisconsin
[PHOTO]
Among the Company's new buildings in 1996 was the Bel Ridge Center in
suburban St. Louis. This structure is the home of St. Louis District
Headquarters, the Corporate Purchasing Department, Marketing Technical
Services Group, Graybar Financial Services, Price/Cost Services Group, and
Graybar International.
11
<PAGE> 15
OPERATIONS REVIEW
Information Systems
Our computer infrastructure saw many changes during 1996.
The conversion to frame relay is providing improved response time with
the ability to utilize faster transmission speeds to support a distributed
system.
LAN (local area network) servers are in place in all locations having
10 or more personal computer workstations. All other locations will have
servers installed during 1997. A total of 3,500 workstations are linked via
Novell LANs.
We have upgraded our back-up system in Kansas City, providing greatly
improved application testing ability.
During 1997 we will be installing Groupwise(R), a new E-mail system, to
improve our company-wide communication and simplify both remote access and
Internet access.
Graybar is currently managing inventories at more than 40 customer
locations and job sites. To facilitate customers' interactions with our
computer and the use of these inventories for maintenance, manufacturing or
construction needs, IS designed and is supporting a number of processes, such
as bar code scanning, automatic replenishment and electronic data interchange
(EDI).
We have expanded to the entire Company a process improving automated
cost recovery with suppliers. The Pittsburgh District was instrumental in
developing this process, which completely automates maintenance of Customer
Price Authorizations and provides accurate recovery amounts as orders are
entered. It verifies the amount of recovery received from a supplier with
the amount expected on each customer order. A task force has established a
pilot program with several key suppliers. We plan to expand this process to
additional supplier partners.
The ability to check order status is now a part of Hot Key, our on-line
communication tool with our suppliers. When CSRs need to check the status of
an order for material being shipped from a supplier, they can check by
directly accessing the supplier's computer records. The order status
information from the supplier is displayed to the CSR in our system.
We enhanced customer EDI capabilities with the addition of EDI quote
processing in the Customer Order Entry mode. This allows us to process
requests for quotations on-line and send electronic responses to our
customers.
We initiated our first step toward computer/telephone integration (CTI)
with a personal computer application piloted in Nashville. Customers are
identified by their telephone number or other unique identifiers.
About 65 server site locations have access to the Electronic Catalog.
These servers connect more than 700 workstations with access to the catalog.
The balance of locations will have access to the catalog during 1997.
The implementation of counter bar code check-out scanning is now
complete in all locations.
In 1997, dedicated access to the Internet will be available, allowing
authorized users access from their workstations. The components to protect
Graybar's internal network and data are now in place. We expect to make
Internet access available early in 1997, following testing and a pilot
program.
12
<PAGE> 16
FINANCIAL REVIEW
<TABLE>
Selected Consolidated Financial Data
(Stated in thousands except for per share data)
<CAPTION>
1996 1995 1994 1993 1992
===================================================================================================================
<S> <C> <C> <C> <C> <C>
Sales $ 3,001,049 $ 2,774,368 $ 2,364,461 $ 2,041,473 $ 1,902,354
Less--Cash discounts (9,637) (9,578) (8,839) (8,306) (8,243)
- -------------------------------------------------------------------------------------------------------------------
Net Sales 2,991,412 2,764,790 2,355,622 2,033,167 1,894,111
- -------------------------------------------------------------------------------------------------------------------
Cost of Merchandise Sold (2,453,962) (2,267,186) (1,934,925) (1,668,007) (1,564,929)
- -------------------------------------------------------------------------------------------------------------------
Interest Expense (16,687) (16,577) (12,003) (9,810) (10,054)
- -------------------------------------------------------------------------------------------------------------------
Provision for Income Taxes
Current (28,599) (23,426) (15,225) (10,016) (6,601)
Deferred (1,722) (2,408) 1,251 763 (493)
- -------------------------------------------------------------------------------------------------------------------
Total provision for income taxes (30,321) (25,834) (13,974) (9,253) (7,094)
- -------------------------------------------------------------------------------------------------------------------
Income before Cumulative
Effect of Accounting Change 44,533 36,718 18,702 14,745 10,232
- -------------------------------------------------------------------------------------------------------------------
Cumulative effect on prior years
of change in accounting for
postretirement benefits -- -- -- (45,000) --
- -------------------------------------------------------------------------------------------------------------------
Net Income (Loss) 44,533 36,718 18,702 (30,255) 10,232
- -------------------------------------------------------------------------------------------------------------------
Income (Loss) Applicable to
Common Stock 44,526 36,710 18,694 (30,265) 10,222
- -------------------------------------------------------------------------------------------------------------------
Average Common Shares
Outstanding <FA> 4,948 4,750 4,873 5,018 4,870
- -------------------------------------------------------------------------------------------------------------------
Income (Loss) per Share of
Common Stock <FA> 9.00 7.73 3.84 (6.03) 2.10
- -------------------------------------------------------------------------------------------------------------------
Cash dividends per share 2.00 2.00 2.00 2.00 2.00
- -------------------------------------------------------------------------------------------------------------------
Retained Earnings
Balance, beginning of year 84,801 57,081 52,486 91,733 93,837
Add--Net income (loss) 44,533 36,718 18,702 (30,255) 10,232
- -------------------------------------------------------------------------------------------------------------------
129,334 93,799 71,188 61,478 104,069
- -------------------------------------------------------------------------------------------------------------------
Less dividends
Preferred ($1.00 per share) (7) (8) (8) (10) (10)
Common (in cash) (9,480) (8,990) (8,729) (8,982) (8,282)
Common (in stock) (4,629) -- (5,370) -- (4,044)
- -------------------------------------------------------------------------------------------------------------------
(14,116) (8,998) (14,107) (8,992) (12,336)
- -------------------------------------------------------------------------------------------------------------------
Balance, end of year 115,218 84,801 57,081 52,486 91,733
Proceeds on stock subscriptions,
shares unissued 52 -- 39 51 --
Stock Outstanding
Preferred 143 150 164 183 197
Common 98,321 89,206 91,859 89,098 85,719
- -------------------------------------------------------------------------------------------------------------------
Total Shareholders' Equity 213,734 174,157 149,143 141,818 177,649
- -------------------------------------------------------------------------------------------------------------------
Total Assets 881,636 823,280 719,786 610,512 557,036
Long-term Debt $ 151,659 $ 91,257 $ 90,212 $ 63,621 $ 64,655
- -------------------------------------------------------------------------------------------------------------------
<FN>
<FA> Adjusted for the declaration of 5% stock dividends in 1996 and 1992 and a
6.25% stock dividend in 1994. Prior to adjusting for the stock dividends, the
average common shares outstanding for 1995, 1994, 1993 and 1992 were 4,524,
4,368, 4,498 and 4,157, respectively.
This summary should be read in conjunction with the consolidated financial
statements and related notes thereto included elsewhere in this annual
report.
===================================================================================================================
</TABLE>
13
<PAGE> 17
FINANCIAL REVIEW
Management's Discussion and Analysis of Financial Condition and Results of
Operations
(Stated in thousands except for share and per share data)
RESULTS OF OPERATIONS
1996 Compared to 1995
Net sales in 1996 were 8.2% higher than in 1995. The higher net sales
resulted from improvements in the market sectors of the economy in which the
Company operates. The impact of inflation on sales and cost of sales
was not significant in 1996.
Gross margin in 1996 increased $39,846 (8.0%) compared to 1995
primarily due to the increased sales in the electrical and communications
markets.
The increase in selling, general and administrative expenses in 1996
compared to 1995 occurred largely because of adjustments in personnel
complement and adjustments in compensation and related expenses.
Interest charges increased slightly in 1996 compared to 1995 primarily
due to increased levels of borrowing incurred to finance higher aggregate
levels of inventory and receivables. Interest rates on 1996 short-term
borrowings were generally lower than for the same period in 1995.
Other income includes gains on sale of property of $7,313 and $2,055 in
1996 and 1995, respectively.
The combined effect of the increases in gross margin and other income,
together with the increases in selling, general and administrative expenses,
interest expense and depreciation and amortization, resulted in an increase
in income before provision for income taxes of $12,302 in 1996 compared to
1995.
1995 Compared to 1994
Net sales in 1995 were 17.4% higher than in 1994.
The higher net sales resulted from improvements in the market sectors of the
economy in which the Company operates. The impact of inflation on sales and
cost of sales was not significant in 1995.
Gross margin in 1995 increased $76,907 (18.3%) compared to 1994
primarily due to the increased sales in the electrical and communications
markets.
The increase in selling, general and administrative expenses in 1995
compared to 1994 occurred largely because of adjustments in personnel
complement and adjustments in compensation and related expenses.
Interest charges increased in 1995 compared to 1994 primarily due to
increased levels of borrowing incurred to finance higher levels of inventory
and receivables. Interest rates on 1995 short-term borrowings were generally
higher than for the same period in 1994.
Other income includes gains on sale of property of $2,055 in 1995.
The combined effect of the increases in gross margin and other income,
together with the increases in selling, general and administrative expenses,
interest charges and depreciation and amortization, resulted in an increase
in income before provision for income taxes and cumulative effect of the
accounting change of $29,876 in 1995 compared to 1994.
14
<PAGE> 18
Management's Discussion and Analysis of Financial Condition and Results of
Operations
(Stated in thousands except for share and per share data)
1994 Compared to 1993
Net sales in 1994 were 15.9% higher than in 1993.
The higher net sales resulted from improvements in the market sectors of the
economy in which the Company operates. The impact of inflation on sales and
cost of sales was not significant in 1994.
Gross margin in 1994 increased $55,537 (15.2%) compared to 1993
primarily due to the increased sales in the electrical and communications
markets.
The increase in selling, general and administrative expenses in 1994
compared to 1993 occurred largely because of adjustments in personnel
complement and adjustments in compensation and related expenses.
Interest charges increased in 1994 compared to 1993 primarily due to
increased levels of borrowing incurred to finance higher levels of inventory
and receivables. Interest rates on 1994 short-term borrowing were generally
higher than for the same period in 1993.
The combined effect of the increase in gross margin and the decrease in
other income, together with the increases in selling, general and
administrative expenses, interest charges and depreciation and amortization,
resulted in an increase in income before provision for income taxes and
cumulative effect of the accounting change of $8,678 in 1994 compared to
1993.
The Company adopted Statement of Financial Accounting Standards (SFAS)
No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions," on January 1, 1993 on the immediate recognition basis. The
after-tax impact of the accounting change decreased 1993 earnings $45,000, or
$9.42 per share.
FINANCIAL CONDITION AND LIQUIDITY
The financial condition of the Company continues to
be strong. At December 31, 1996, current assets exceeded current liabilities
by $231,984, up $76,103 from December 31, 1995. The current assets at
December 31, 1996 were sufficient to meet the cash needs required to pay
current liabilities. The Company does not have any plans or commitments
which would require significant amounts of additional working capital.
At December 31, 1996, the Company had available to it unused lines of
credit amounting to $266,000. These lines are available to meet short-term
cash requirements of the Company. Bank borrowings outstanding during 1996 and
1995 varied from a minimum of $38,000 and $77,000 to a maximum of $168,000
and $158,000, respectively.
The Company has a $125,000 Revolving Credit Loan Agreement with a group
of banks at an interest rate based on the London Interbank Offered Rate. The
credit agreement, which expires in May, 2001, has various covenants which
limit the Company's ability to make investments, incur debt, dispose of
property, and issue equity securities. The Company is also required to
maintain certain financial ratios as defined in the agreement. The Company
intends to utilize this credit line primarily as a secondary source of
borrowing for short-term financing requirements. In April, 1996, the
agreement was amended to increase the commitment to $125,000 from the $80,000
commitment in 1995. There have been no borrowings against this credit line
through December 31, 1996.
The Company has funded its capital requirements from operations, stock
issuances to its employees and long-term debt. In May, 1996, the Company
received the proceeds from a fifteen-year note for $65,000 at a fixed
interest rate of 7.36% with principal payable in semiannual installments
beginning in May, 2001. The note agreement has various covenants which limit
the Company's ability to make investments, pay dividends, incur debt, dispose
of property, and issue equity securities. The Company is also required to
maintain certain financial ratios as defined in the agreement. In July,
1996, the Company received the proceeds from a ten-year note for $7,000 at a
fixed interest rate of 7.74% with principal payable in quarterly installments
beginning in November, 1996.
Cash provided by operations during 1996 amounted to $36,586 compared
to $13,265 cash used by operations in 1995. Cash provided from the sale of
common stock and proceeds received on stock subscriptions amounted to $8,002
and $328 in 1996 and 1995, respectively. Additional cash of approximately
$549 will be provided in 1997 as a result of payments to be made for stock
subscribed to by employees under the 1995 Common Stock Purchase Plan.
15
<PAGE> 19
CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
Consolidated Statements of Income and Retained Earnings
(Stated in thousands except for share and per share data)
<CAPTION>
For the Years Ended December 31, 1996 1995 1994
===========================================================================================
<S> <C> <C> <C>
Sales, net of returns and allowances $ 3,001,049 $ 2,774,368 $ 2,364,461
Less--Cash discounts (9,637) (9,578) (8,839)
- -------------------------------------------------------------------------------------------
Net Sales 2,991,412 2,764,790 2,355,622
- -------------------------------------------------------------------------------------------
Cost of Merchandise Sold (2,453,962) (2,267,186) (1,934,925)
- -------------------------------------------------------------------------------------------
Gross Margin 537,450 497,604 420,697
Selling, General and Administrative expenses (409,259) (380,425) (339,557)
Taxes, other than income taxes (26,922) (24,727) (21,952)
Depreciation and amortization (19,862) (17,744) (15,999)
- -------------------------------------------------------------------------------------------
Income from operations 81,407 74,708 43,189
Other Income, net 10,134 4,421 1,490
Interest Expense (16,687) (16,577) (12,003)
- -------------------------------------------------------------------------------------------
Income Before Provision for Income Taxes 74,854 62,552 32,676
- -------------------------------------------------------------------------------------------
Provision for Income Taxes
Current (28,599) (23,426) (15,225)
Deferred (1,722) (2,408) 1,251
- -------------------------------------------------------------------------------------------
Total provision for income taxes (30,321) (25,834) (13,974)
- -------------------------------------------------------------------------------------------
Net Income 44,533 36,718 18,702
- -------------------------------------------------------------------------------------------
Retained Earnings, beginning of year 84,801 57,081 52,486
Cash dividends-
Preferred, $1.00 per share each year (7) (8) (8)
Common, $2.00 per share each year (9,480) (8,990) (8,729)
Common Stock dividend (4,629) -- (5,370)
- -------------------------------------------------------------------------------------------
Retained Earnings, end of year $ 115,218 $ 84,801 $ 57,081
- -------------------------------------------------------------------------------------------
Net Income per share of Common Stock $ 9.00 $ 7.73 $ 3.84
- -------------------------------------------------------------------------------------------
See accompanying Notes to Consolidated Financial Statements
</TABLE>
16
<PAGE> 20
<TABLE>
<CAPTION>
Consolidated Balance Sheets December 31,
(Stated in thousands except for share and per share data) 1996 1995
=========================================================================================================
<S> <C> <C>
ASSETS
=========================================================================================================
Current Assets
Cash $ 13,820 $ 21,033
Trade receivables (less allowances of $4,483 and $4,589, respectively) 342,323 344,232
Merchandise inventory 301,835 259,782
Other current assets 13,245 12,800
- ---------------------------------------------------------------------------------------------------------
Total current assets 671,223 637,847
- ---------------------------------------------------------------------------------------------------------
Property, at cost
Land 21,894 19,921
Buildings 153,454 137,982
Furniture and fixtures 107,410 90,341
Capital equipment leases 26,138 22,732
- ---------------------------------------------------------------------------------------------------------
308,896 270,976
Less--Accumulated depreciation and amortization 122,444 110,843
- ---------------------------------------------------------------------------------------------------------
186,452 160,133
- ---------------------------------------------------------------------------------------------------------
Deferred Income Taxes 11,793 14,354
- ---------------------------------------------------------------------------------------------------------
Other Assets 12,168 10,946
- ---------------------------------------------------------------------------------------------------------
$881,636 $823,280
- ---------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
- ---------------------------------------------------------------------------------------------------------
Current Liabilities
Notes payable to banks $ 68,282 $130,554
Current portion of long-term debt 15,075 13,479
Trade accounts payable 273,878 277,729
Accrued payroll and benefit costs 35,923 37,350
Other accrued taxes 9,164 8,957
Dividends payable 5,214 4,915
Other payables and accruals 31,703 8,982
- ---------------------------------------------------------------------------------------------------------
Total current liabilities 439,239 481,966
- ---------------------------------------------------------------------------------------------------------
Postretirement Benefits Liability 77,004 75,900
- ---------------------------------------------------------------------------------------------------------
Long-term Debt 151,659 91,257
- ---------------------------------------------------------------------------------------------------------
<CAPTION>
Shares at December 31,
1996 1995
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shareholders' Equity
Capital stock-
Preferred, par value $20 per share,
authorized 300,000 shares--
Issued to shareholders 7,141 7,504
In treasury, at cost -- --
- ---------------------------------------------------------------------------------------------------------
Outstanding 7,141 7,504 143 150
- ---------------------------------------------------------------------------------------------------------
Common, stated value $20 per share,
Authorized 7,500,000 7,500,000
Issued to voting trustees 4,684,709 4,228,414
Issued to shareholders 251,375 244,315
In treasury, at cost (20,035) (12,431)
- ---------------------------------------------------------------------------------------------------------
Outstanding 4,916,049 4,460,298 98,321 89,206
- ---------------------------------------------------------------------------------------------------------
Common shares subscribed 1,110 9,008
Retained earnings 115,218 84,801
- ---------------------------------------------------------------------------------------------------------
214,792 183,165
Less--Subscriptions receivable 1,058 9,008
- ---------------------------------------------------------------------------------------------------------
Total Shareholders' Equity 213,734 174,157
- ---------------------------------------------------------------------------------------------------------
$881,636 $823,280
- ---------------------------------------------------------------------------------------------------------
See accompanying Notes to Consolidated Financial Statements
</TABLE>
17
<PAGE> 21
CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
Consolidated Statements of Cash Flows
(Stated in thousands)
<CAPTION>
For the Years Ended December 31, 1996 1995 1994
==========================================================================================================
<S> <C> <C> <C>
Cash Flows from Operations
Net Income $ 44,533 $ 36,718 $ 18,702
==========================================================================================================
Adjustments to reconcile net income
to cash provided (used) by operations -
Depreciation and amortization 19,862 17,744 15,999
Deferred income taxes 1,722 2,408 (1,251)
Gain on sale of property (7,313) (2,055) --
Changes in assets and liabilities:
Trade receivables 1,909 (42,707) (44,891)
Merchandise inventory (42,053) (48,300) (43,555)
Other current assets (445) (527) (2,174)
Other assets (1,222) (2,251) (1,556)
Trade accounts payable (3,851) 19,073 64,813
Accrued payroll and benefit costs (1,427) 2,275 7,432
Other accrued liabilities 24,871 4,357 2,934
==========================================================================================================
(7,947) (49,983) (2,249)
==========================================================================================================
Net cash flow provided (used) by operations 36,586 (13,265) 16,453
==========================================================================================================
Cash Flows From Investing Activities
Proceeds from sale of property 10,497 4,136 415
Capital expenditures for property (44,865) (25,621) (26,963)
==========================================================================================================
Net cash flow used by investing activities (34,368) (21,485) (26,548)
==========================================================================================================
Cash Flows From Financing Activities
Net increase (decrease) in notes payable to banks (62,272) 50,066 (1,706)
Proceeds from long-term debt 72,000 14,000 35,000
Repayment of long-term debt (10,387) (10,862) (7,892)
Principal payments under capital equipment leases (4,115) (2,975) (4,009)
Sale of common stock 8,002 328 578
Purchases of treasury stock (3,471) (3,034) (3,218)
Dividends paid (9,188) (8,884) (8,846)
==========================================================================================================
Net cash flow provided (used) by financing activities (9,431) 38,639 9,907
==========================================================================================================
Net Increase (Decrease) in Cash (7,213) 3,889 (188)
==========================================================================================================
Cash, Beginning of Year 21,033 17,144 17,332
- ----------------------------------------------------------------------------------------------------------
Cash, End of Year $ 13,820 $ 21,033 $ 17,144
- ----------------------------------------------------------------------------------------------------------
See accompanying Notes to Consolidated Financial Statements
</TABLE>
18
<PAGE> 22
Notes to Consolidated Financial Statements
for the Years Ended December 31, 1996, 1995 and 1994
(Stated in thousands except for share and per share data)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of Graybar
Electric Company, Inc. and its subsidiary companies. All significant
intercompany balances and transactions have been eliminated.
Revenue Recognition
Revenue from the sale of the Company's products is recognized upon
shipment to the customer. Costs of the products are recorded as cost of
merchandise sold when the related revenue is recognized.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues
and expenses and the disclosure of contingent assets and liabilities. Actual
results could differ from those estimates.
Merchandise Inventory
Inventory is stated at the lower of cost (determined using the last-in,
first-out (LIFO) cost method) or market. LIFO accounting is generally a
conservative method of accounting that, compared with other inventory
accounting methods, provides better matching of current costs with current
revenues. Had the first-in, first-out (FIFO) method been used, inventory
would have been approximately $30,644 and $32,583 greater than reported under
the LIFO method at December 31, 1996 and 1995, respectively.
Property and Depreciation
The Company provides for depreciation and amortization using the
straight-line method over the following estimated useful lives of the assets:
- ------------------------------------------------------------
Buildings 42 years
- ------------------------------------------------------------
Permanent fixtures-- Over the lives of the
leased property respective leases
- ------------------------------------------------------------
Furniture, fixtures and equipment 4 to 14 years
- ------------------------------------------------------------
Capital equipment Over the lives of the
leases respective leases
- ------------------------------------------------------------
At the time property is retired, or otherwise disposed of, the asset
and related accumulated depreciation are removed from the accounts, and any
resulting gain or loss is credited or charged to other income.
Equipment under capital leases is recorded in property with the
corresponding obligations carried in long-term debt. The amount capitalized
is the present value at the beginning of the lease term of the aggregate
future minimum lease payments.
Maintenance and repairs are expensed as incurred. Major renewals and
betterments that extend the life of the property are capitalized.
The Company capitalizes interest expense on major construction and
development projects while in progress.
Description of Business and Credit Risk
Graybar Electric Company, Inc. is engaged internationally in the
distribution of electrical and communications equipment and supplies
primarily to contractors, industrial plants, telephone companies, power
utilities, and commercial users. All products sold by the Company are
purchased by the Company from others.
Financial instruments which potentially expose the Company to
concentrations of credit risk consist primarily of trade accounts receivable.
The Company's business activity is primarily with customers in the United
States; however, the Company has limited sales activity in several
international locations. The Company performs ongoing credit evaluations of
its customers, and a significant portion of trade receivables is secured by
lien or bond rights. In addition, export sales are usually guaranteed by
letter of credit or advance payment arrangements. The Company maintains
allowances for potential credit losses, and such losses historically have
been within management's expectations.
2. INCOME TAXES
The provision for income taxes recorded in the Consolidated Statements
of Income and Retained Earnings is as follows:
<TABLE>
<CAPTION>
Years Ended December 31: 1996 1995 1994
- -------------------------------------------------------------------
<S> <C> <C> <C>
Federal income tax
Current $25,057 $20,304 $13,335
Deferred 1,543 2,123 (951)
State income tax
Current 3,542 3,122 1,890
Deferred 179 285 (300)
- -------------------------------------------------------------------
Financial statement
income tax provision $30,321 $25,834 $13,974
- -------------------------------------------------------------------
</TABLE>
19
<PAGE> 23
CONSOLIDATED FINANCIAL STATEMENTS
Deferred income taxes are provided based upon differences between the
financial statement and tax bases of assets and liabilities. The following
deferred tax assets (liabilities) are recorded at December 31:
<TABLE>
<CAPTION>
Assets/(Liabilities) 1996 1995
- -------------------------------------------------------
<S> <C> <C>
Postretirement benefits $ 30,455 $ 30,018
Payroll accruals 5,792 5,074
Bad debt reserves 2,574 1,745
Inventory 1,973 1,692
Other deferred tax assets 7,232 4,664
Prepaid pension (4,086) (3,493)
Fixed asset depreciation (12,639) (13,384)
Fixed asset gains (5,362) (1,372)
Other deferred tax liabilities (11,689) (8,972)
- -------------------------------------------------------
$ 14,250 $ 15,972
- -------------------------------------------------------
</TABLE>
Deferred tax assets included in Other Current Assets were $2,457 and
$1,618 in 1996 and 1995, respectively.
A reconciliation between the "statutory" federal income tax rate and
the effective tax rate in the Consolidated Statements of Income and Retained
Earnings is as follows:
<TABLE>
<CAPTION>
Years Ended December 31: 1996 1995 1994
- -------------------------------------------------------------------
<S> <C> <C> <C>
"Statutory" tax rate 35.0% 35.0% 35.0%
State and local income taxes,
net of federal benefit 3.3 3.3 3.4
Other, net 2.2 3.0 4.4
- -------------------------------------------------------------------
Effective tax rate 40.5% 41.3% 42.8%
- -------------------------------------------------------------------
</TABLE>
3. CAPITAL STOCK
The Company's capital stock is owned by its employees and retirees.
Neither common nor preferred stock may be sold by the holder thereof, except
by first offering it to the Company. The Company may buy any common shares
so offered at the price at which they were issued ($20) with appropriate
adjustments for current dividends or may call all or part of the preferred
stock at par plus accrued dividends.
During 1995, the Company offered to eligible employees the right to
subscribe to 575,000 shares of common stock at $20 per share in accordance
with the provisions of the Company's Common Stock Purchase Plan dated October
9, 1995. This resulted in the subscription of 450,402 shares ($9,008).
Subscribers under the Plan elected to make payments under one of the
following options: (i) all shares subscribed for prior to January 19, 1996;
(ii) a portion of such shares prior to January 19, 1996, and the balance in
monthly installments through payroll deductions (or in certain cases where a
subscriber is no longer on the Company's payroll, through pension deductions
or direct monthly payments) over a 34-month period; or (iii) all shares
pursuant to the installment method. Shares were issued and Voting Trust
Certificates were delivered to subscribers as of January 19, 1996, in the
case of shares paid for prior to January 19, 1996. Shares will be issued and
Voting Trust Certificates will be delivered to subscribers on a quarterly
basis, as of the tenth day of March, June, September and December to the
extent full payments of shares are made in the case of subscriptions under
the installment method.
Shown below is a summary of shares reacquired and retired by the
Company in the three years ended December 31:
<TABLE>
<CAPTION>
Preferred Common
Reacquired Retired Reacquired Retired
- ------------------------------------------------------------
<S> <C> <C> <C> <C>
1996 363 363 173,173 165,569
1995 684 744 151,009 144,286
1994 967 1,285 159,938 179,737
- ------------------------------------------------------------
</TABLE>
4. LONG-TERM DEBT
<TABLE>
<CAPTION>
December 31,
Long-term debt was composed of: 1996 1995
- ------------------------------------------------------------------------
<S> <C> <C>
7.36% note, unsecured, maturing
May, 2011, installments of $3,095
due semiannually in each of the years
2001 through 2010 with final payment
of $3,100 due in 2011 $ 65,000 $ -
6.25% note, unsecured, maturing
June, 2004, installments of $7,000
due annually in each of the years
2000 through 2004 35,000 35,000
9.23% note secured by a first
mortgage on various properties,
maturing May, 2005, installments
of $2,725 due annually in each
of the years 1995 through 2004
with final payment of $2,750 due
in 2005 21,825 24,550
4.78% to 8.75% capital equipment
leases, various maturities 6,832 7,583
7.74% note, secured by facility,
due in quarterly installments
through August, 2006 6,125 -
7.67% note, unsecured, maturing
April, 2000, installments of
$2,000 due annually in each of
the years 1996 through 2000 6,000 8,000
12.25% note secured by a first
mortgage on various properties,
due in monthly installments
through June, 1999 4,977 7,824
7.75% note, secured by facility,
due in quarterly installments
through March, 2005 2,900 3,300
5.68% note, unsecured, maturing
June, 1998, installments of $2,000
due annually in each of the years
1994 through 1998 2,000 4,000
7.00% Industrial Revenue
Bond, secured by facility,
maturing August, 2004, one
installment due in 2004 1,000 1,000
- -----------------------------------------------------------------------
$151,659 $91,257
- -----------------------------------------------------------------------
</TABLE>
20
<PAGE> 24
Long-term debt matures as follows:
<TABLE>
<CAPTION>
- ----------------------------------
<S> <C>
1998 $ 14,183
1999 10,684
2000 13,417
2001 17,016
2002-2011 96,359
- ----------------------------------
$151,659
- ----------------------------------
</TABLE>
The present value of future minimum lease payments under capital leases
as of December 31, 1996 was $11,236, of which $6,832 is included in long-term
debt. The net book value of property securing various long-term debt
instruments was $52,676 at December 31, 1996.
Bank borrowings varied from a minimum of $38,000 and $77,000 to a
maximum of $168,000 and $158,000 in 1996 and 1995, respectively. The average
amount of bank borrowings outstanding during 1996 and 1995 amounted to
approximately $98,000 and $122,000 at weighted average interest rates of
5.60% and 6.10%, respectively. The averages are based on the daily amounts
outstanding during each year.
In May, 1996, the Company received the proceeds from a fifteen-year
note for $65,000 at a fixed interest rate of 7.36% with principal payable in
semiannual installments beginning in May, 2001. The note agreement has
various covenants which limit the Company's ability to make investments,
pay dividends, incur debt, dispose of property, and issue equity securities.
The Company is also required to maintain certain financial ratios as defined
in the agreement. In July, 1996, the Company received the proceeds from a
ten-year note for $7,000 at a fixed interest rate of 7.74% with principal
payable in quarterly installments beginning in November, 1996.
The Company had unused lines of credit of approximately $266,000 as of
December 31, 1996. Certain lines require maintenance of compensating
balances of up to 5% of the available lines of credit. Included in these
unused lines of credit is a $125,000 Revolving Credit Loan Agreement with a
group of banks at an interest rate based on the London Interbank Offered
Rate. The credit agreement, which expires in May, 2001, has various
covenants which limit the Company's ability to make investments, incur debt,
dispose of property, and issue equity securities. The Company is also
required to maintain certain financial ratios as defined in the agreement.
In April, 1996, the agreement was amended to increase the commitment to
$125,000 from the $80,000 commitment in 1995. There have been no borrowings
against this credit line through December 31, 1996.
The carrying amounts of the Company's outstanding long-term debt and
notes payable to banks approximate their fair values at December 31, 1996.
5. PENSION PLAN
Pension and related expense was $6,940, $4,757 and $4,635 for each of
the three years ended December 31, 1996, 1995 and 1994, respectively.
The Company has a noncontributory defined benefit pension plan covering
substantially all full-time employees. The plan provides retirement benefits
based on an employee's final average earnings and years of service.
Employees become 100% vested after five years of service, regardless of age.
The Company's funding policy is to contribute the net periodic pension
cost accrued each year, provided that the contribution will not be less than
the ERISA minimum or greater than the maximum tax deductible amount. The
actuarially computed components of the defined benefit pension plan expense
for the three years ended December 31, are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------------------------------
<S> <C> <C> <C>
Service cost - benefits
earned during the year $ 5,263 $ 4,190 $ 4,249
Interest cost on projected
benefit obligation 8,383 7,762 7,357
Actual return on plan
assets (8,013) (16,200) 642
Net amortization of return
on plan assets and
unrecognized net asset 348 8,222 (8,660)
------- ------- -------
Total defined benefit plan
expense $ 5,981 $ 3,974 $ 3,588
======= ======= =======
</TABLE>
The following table sets forth the plan's funded status for the two
years ended December 31:
<TABLE>
<CAPTION>
1996 1995
--------------------
<S> <C> <C>
Actuarial present value of benefit
obligation:
Vested benefits $ 74,800 $ 70,700
Nonvested benefits 15,300 14,000
-------- --------
Accumulated benefit obligation 90,100 84,700
-------- --------
Projected benefit obligation for
service rendered to date 119,800 114,000
-------- --------
Plan assets at fair value, primarily
common stocks and bonds 97,257 92,274
-------- --------
Projected benefit obligation
in excess of plan assets (22,543) (21,726)
-------- --------
Unrecognized prior service cost 4,375 5,370
Unrecognized net loss 34,689 33,116
Unrecognized net asset at
January 1, 1987 (9,267) (10,426)
-------- --------
Net pension asset recognized in
the consolidated balance sheets $ 7,254 $ 6,334
======== ========
</TABLE>
The discount rate and rate of increase in future compensation levels
used in determining the actuarial present value of the projected benefit
obligation were 7.50% and 4.50%, and 7.25% and 4.25% in 1996 and 1995,
respectively. The long-term rate of return on assets used in determining
defined benefit plan expense was 9.50%, 9.25% and 9.75% in 1996,
21
<PAGE> 25
1995 and 1994, respectively. The average remaining service lives of plan
participants used to calculate the amortization of the unrecognized net asset at
January 1, 1987 was 18 years.
The Company also provides a defined contribution profit sharing and
savings plan covering substantially all of its full-time employees. Annual
contributions by the Company to the plan are at the discretion of management
and are generally determined based on the profitability of the Company.
Employees may also contribute to the plan subject to limitations imposed by
federal tax law and ERISA.
6. POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions." The Company and its subsidiaries provide
certain health care and life insurance benefits for retired employees through
the Retiree Welfare Plan (the Plan). Substantially all of the Company's
employees may become eligible to participate in the Plan if they reach normal
retirement age while working for the Company. Benefits are provided through
insurance coverage with premiums based on the benefits paid during the year.
The Company funds the Plan on a pay-as-you-go basis, and accordingly, the Plan
has no assets at December 31, 1996 or 1995.
Periodic postretirement benefit expense for the three years ended
December 31 is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------------------------
<S> <C> <C> <C>
Service cost - benefits earned
during the year $ 554 $ 443 $ 536
Interest cost on accumulated
postretirement benefit obligation 6,105 6,398 6,149
Amortization of net loss
from prior years 104 -- 122
------ ------ ------
Net periodic postretirement
benefit expense $6,763 $6,841 $6,807
====== ====== ======
</TABLE>
The following table sets forth the accumulated postretirement benefit
obligation for the Company's postretirement benefit plans for the two years
ended December 31:
<TABLE>
<CAPTION>
1996 1995
-------------------
<S> <C> <C>
Retirees $64,700 $ 66,000
Fully eligible active plan participants 12,200 14,300
Other active plan participants 7,700 8,300
------- --------
Accumulated postretirement benefit
obligation 84,600 88,600
Unrecognized net loss (7,596) (12,700)
------- --------
Accrued postretirement benefit cost $77,004 $ 75,900
</TABLE>
The discount rate used in determining net periodic postretirement
benefit expense was 7.25%, 8.50% and 7.50% for 1996, 1995 and 1994,
respectively. The discount rate used to determine the accumulated
postretirement benefit obligation was 7.50% and 7.25% at December 31, 1996
and 1995, respectively. The health care cost trend rate used in determining
net periodic postretirement benefit expense for all years was 6.50% for 1996
and 6.75% for 1995 and 1994. The health care cost trend rate used to
determine the accumulated postretirement benefit obligation for all years was
6.75% and 6.50% at December 31, 1996 and 1995, respectively. A one
percentage point increase in the health care cost trend rate would not have a
material impact on the net periodic postretirement benefit expense or the
accumulated postretirement benefit obligation.
7. NET INCOME PER SHARE OF COMMON STOCK
The computation of net income per share of common stock is based on the
weighted average number of common shares outstanding during each year. The
average numbers of shares used in computing net income per share of common
stock were 4,947,583, 4,750,519 and 4,873,048 in 1996, 1995 and 1994,
respectively, adjusted for the declaration of a 5% stock dividend in 1996 and
a 6.25% stock dividend in 1994.
8. COMMITMENTS
Rental expense was $10,119, $8,819 and $8,420 in 1996, 1995 and 1994,
respectively.
Future minimum rental payments required under operating leases that
have either initial or remaining noncancellable lease terms in excess of one
year as of December 31, 1996 are as follows:
<TABLE>
Years ending December 31:
- ------------------------------------------
<S> <C>
1997 $9,748
1998 8,466
1999 6,129
2000 3,883
2001 2,333
Subsequent to 2001 2,670
- ------------------------------------------
</TABLE>
9. STATEMENTS OF CASH FLOWS
During 1996, 1995 and 1994 income taxes paid totaled $31,468, $22,943
and $16,783; interest paid totaled $16,252, $16,222 and $11,987; and
liabilities assumed in connection with capitalized leases totaled $4,500,
$904 and $5,949, respectively.
22
<PAGE> 26
REPORT OF INDEPENDENT AUDITORS
ERNST & YOUNG LLP / / Gateway One / / Phone: 314 259 1000
[LOGO] Suite 1400
701 Market Street
St. Louis, Missouri 63101
Report of Independent Auditors
To the Shareholders and
the Board of Directors
Graybar Electric Company, Inc.
We have audited the accompanying consolidated balance sheet of Graybar Electric
Company, Inc. as of December 31, 1996, and the related statements of income and
retained earnings and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit. The consolidated financial statements of the Company, as of December
31, 1995, and for each of the two years in the period then ended were audited by
other auditors whose report dated February 16, 1996, expressed an unqualifed
opinion on those statements.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the 1996 financial statements referred to above present fairly,
in all material respects, the financial position of the Company at December 31,
1996, and the results of its operations and its cash flows for the year then
ended in conformity with generally accepted accounting principles.
February 18, 1997
/s/ Ernst & Young LLP
23
<PAGE> 27
DISTRICT MANAGEMENT AS OF JANUARY 1, 1997
==============================================
New York District
==============================================
Frank Mossa Keith E. Davis
Vice President Operating Manager
[PHOTO] James (Chip) Bateman
Financial Manager
==============================================
Boston District
==============================================
William L. King Donald M. Block
Vice President Sales Manager
[PHOTO] Gerald G. Pollick
Operating Manager
Joseph P. Peduto
Financial Manager
==============================================
Pittsburgh District
==============================================
Steven M. Schooley Wade V. Leidecker
Vice President Sales Manager
[PHOTO] C. Robert Smith
Operating Manager
Peter M. Wingrove
Financial Manager
==============================================
Cincinnati District
==============================================
Kenneth L. Netherton James D. Hooper
Vice President Sales Manager
[PHOTO] David L. Mitchell
Operating Manager
Stephen C. Beckmann
Financial Manager
==============================================
Atlanta District
==============================================
H. Bennett Wall D. Steven Smith
Vice President Sales Manager
[PHOTO] Danny R. Battles
Operating Manager
Darrel D. Schilling
Financial Manager
==============================================
Richmond District
==============================================
Thomas S. Gurganous J. Wayne Andrews
Vice President Sales Manager
[PHOTO] Wallace H. Hancock
Sales Manager
Ernest L. Chappell, Jr.
Operating Manager
David E. Metz
Financial Manager
==============================================
Tampa District
==============================================
Robert L. Mygrant Bruce E. Neilson
Vice President Sales Manager
[PHOTO] Robert C. Lyons
Sales Manager
Robert D. Wombacher
Operating Manager
Richard C. Hird
Financial Manager
==============================================
Chicago District
==============================================
Richard A. Cole Thomas E. Walsh
Vice President Sales Manager
[PHOTO] John C. Fischer
Operating Manager
Martin J. Beagen
Financial Manager
==============================================
Minneapolis District
==============================================
Robert L. Nowak Terrence J. Innes
Vice President Sales Manager
[PHOTO] Christopher O. Olsen
Operating Manager
Thomas E. Kinate
Financial Manager
24
<PAGE> 28
==============================================
St. Louis District
==============================================
Irving Orloff Michael W. Fowler
Vice President Sales Manager
[PHOTO] John P. Mills
Operating Manager
D. Beatty D `Alessandro
Financial Manager
==============================================
Dallas District
==============================================
Lawrence R. Giglio Peter J. Roettinger
Vice President Sales Manager
[PHOTO] Francis B. Roderick
Sales Manager
Thomas T. Townsend
Operating Manager
George D. Zackey
Financial Manager
==============================================
Seattle District
==============================================
John C. Loff Larry T. Christensen
Vice President Sales Manager
[PHOTO] T. Peter Girard, Jr.
Operating Manager
Randall R. Harwood
Financial Manager
==============================================
Phoenix District
==============================================
Gary D. Hodges Richard A. Mitchell
Vice President Sales Manager
[PHOTO] Jerry D. Nichols
Operating Manager
Ronald J. Grabar
Financial Manager
==============================================
Northeastern Comm/Data District
==============================================
Gerard J. McCrea
Vice President
[PHOTO]
==============================================
Southeastern Comm/Data District
==============================================
Richard D. Offenbacher
Vice President
[PHOTO]
==============================================
Central Comm/Data District
==============================================
Alan L. Eddings
Vice President
[PHOTO]
==============================================
Western Comm/Data District
==============================================
Kenneth B. Sparks
Vice President
[PHOTO]
25
<PAGE> 29
LOCATIONS AS OF JANUARY 1, 1997
CORPORATE OFFICE
34 North Meramec Avenue
St. Louis, Missouri 63105
314 512-9200
==============================
New York District
==============================
21-15 Queens Plaza North
Long Island City,
New York 11101
718 392-2000
BRANCHES
New York: Manhattan,
Rochester, Albany, Syracuse,
Hauppauge, Buffalo, Jericho
New Jersey: Newark,
North Brunswick, Teterboro,
Hackettstown, Parsippany,
Wanamassa, Hamilton
INFORMATION SYSTEMS
11828 Lackland Road
St. Louis, Missouri 63146
314 569-0006
==============================
Pittsburgh District
==============================
900 Ridge Avenue
Pittsburgh, Pennsylvania
15212
412 323-5200
BRANCHES
Ohio: Youngstown, Cleveland,
Akron, Canton, Mansfield
Pennsylvania: Greensburg
Harrisburg, Allentown,
Philadelphia
West Virginia: Wheeling,
Delaware: New Castle
MID-ATLANTIC ZONE SERVICE CENTER
2124 Avenue C
Bethlehem, Pennsylvania 18017
610 266-0220
==============================
Atlanta District
==============================
2050 Nancy Hanks Drive
Norcross, Georgia 30071
770 441-5580
BRANCHES
Georgia: Atlanta
Midtown, Marietta,
Riverdale, Savannah,
Cartersville
Alabama: Birmingham,
Huntsville, Mobile
South Carolina: Columbia,
Greenville, Spartanburg,
Hilton Head, Beaufort
Tennessee: Knoxville,
Chattanooga
Florida: Pensacola
Mississippi: Jackson
MIDWEST ZONE
SERVICE CENTER
2424 A North Main Street
East Peoria, Illinois 61611
309 694-2341
==============================
Tampa District
==============================
801 North Rome Avenue
Tampa, Florida 33606
813 253-8881
BRANCHES
Florida: Sarasota, Lakeland,
Orlando, Largo, Melbourne,
North Tampa, Jacksonville,
South Jacksonville,
Tallahassee, Daytona Beach,
Perrine, Miami,
West Palm Beach,
Tampa Utility, Florida City,
Fort Myers, Fort Pierce,
Naples, Pompano Beach,
Gainesville
Georgia: Kingsland
==============================
Boston District
==============================
345 Harrison Avenue
Boston, Massachusetts 02118
617 482-9320
BRANCHES
Rhode Island: Cranston
Massachusetts: Worcester,
Springfield, Somerville
Maine: Portland
New Hampshire: Manchester
Vermont: Rutland
Connecticut: Hamden
==============================
Cincinnati District
==============================
1022 West Eighth Street
Cincinnati, Ohio 45203
513 621-0600
BRANCHES
West Virginia: Charleston
Ohio: Columbus, Dayton,
Lima
Kentucky: Lexington,
Louisville
Tennessee: Nashville
==============================
Richmond District
==============================
1510 Tomlynn Street
Richmond, Virginia 23230
804 354-1300
BRANCHES
Virginia: Norfolk, Roanoke,
Hampton, Chantilly
North Carolina: Asheville,
Raleigh, Winston-Salem,
Charlotte, Greensboro,
Wilmington
South Carolina: Rock Hill
Tennessee: Bristol, Johnson City
Maryland: Baltimore, Lanham
==============================
Chicago District
==============================
900 Regency Drive
Glendale Heights, Illinois
60139
630 893-3600
BRANCHES
Illinois: Naperville, Chicago
Downtown
Indiana: Fort Wayne,
South Bend, Hammond, Indianapolis
Michigan: Flint, Lansing,
Grand Rapids, Kalamazoo, Auburn Hills,
Kentwood, Livonia
Ohio: Toledo
26
<PAGE> 30
Northeastern
Comm/Data District
1550 South Warfield Street
Philadelphia, Pennsylvania 19146
215 336-2211
==============================
Minneapolis District
==============================
2300 East 25th Street
Minneapolis, Minnesota 55406
612 721-3545
BRANCHES
Minnesota: St. Paul, Duluth,
Brooklyn Park, Burnsville,
Plymouth, Rochester, Mankato
Montana: Billings
North Dakota: Fargo
South Dakota: Sioux Falls,
Brookings
Wisconsin: Green Bay,
Milwaukee, Marinette,
Manitowoc, Madison, Neenah
Southeastern
Comm/Data District
2050 Nancy Hanks Drive
Norcross, Georgia 30071
770 441-5580
==============================
Dallas District
==============================
4601 Cambridge Road
Ft. Worth, Texas 76155
817 213-1200
BRANCHES
Texas: San Antonio,
Fort Worth Counter, Amarillo,
Austin, Abilene, Cypress,
Beaumont, Corpus Christi,
Houston, Houston (Counter)
North Dallas, Sherman,
Lubbock, Kilgore, LaMarque,
Dallas (Royal Lane),
Texas Instruments,
Houston Distribution Center,
Tellepsen Counter,
Oklahoma: Oklahoma City, Tulsa
Arkansas: Little Rock, Conway
Louisiana: Shreveport,
Baton Rouge, Lake Charles, Harahan
Central
Comm/Data District
8170 Lackland Road
Bel Ridge, Missouri 63114
314 512-0100
==============================
Phoenix District
==============================
3350 West Earll Drive
Phoenix, Arizona 85017
602 269-2131
BRANCHES
Arizona: Mesa, Tucson, Scottsdale
Colorado: Colorado Springs,
Denver, Englewood
New Mexico: Albuquerque
Texas: El Paso
Nevada: Las Vegas, Henderson
Utah: Salt Lake City, Orem
California: Los Angeles,
Anaheim, Costa Mesa,
Long Beach, San Bernardino,
San Diego, Santa Barbara,
Van Nuys, Bakersfield,
San Marcos, Santa Maria,
San Diego (Downtown)
Los Angeles Distribution Center
Western
Comm/Data District
1919 Sixth Avenue South
Seattle, Washington 98124
206 292-4848
==============================
St. Louis District
==============================
8170 Lackland Road
Bel Ridge, Missouri 63114
314 512-0100
BRANCHES
Iowa: Davenport, Des Moines,
Cedar Rapids
Illinois: East Peoria,
Springfield
Missouri: Jefferson City,
Kansas City, Springfield,
St. Louis Counter
Indiana: Evansville
Kansas: Olathe, Wichita
Nebraska: Omaha
Tennessee: Memphis, Jackson
==============================
Seattle District
==============================
1919 Sixth Avenue South
Seattle, Washington 98134
206 292-4848
BRANCHES
Washington: Spokane,
Tacoma, Everett, Bellevue
Oregon: Portland, Beaverton
Idaho: Boise
Alaska: Anchorage
California: Oakland Counter,
Fresno, Modesto, Sacramento,
San Jose, Martinez, Hayward,
San Francisco Downtown,
Visalia, San Carlos (Counter)
Nevada: Reno
Hawaii: Aiea
==============================
International
==============================
8170 Lackland Road
Bel Ridge, Missouri 63114
314 512-0100
Miami International
10500 Southwest 186th Street
Perrine, Florida 33157
305 252-0400
San Francisco International
2368 Lincoln Avenue
Hayward, California 94545
510 259-0122
Houston International
6161 Bingle Road
Houston, Texas 77293
713 507-9200
LOCATIONS
Halifax, Nova Scotia
Toronto, Canada
San Juan, Puerto Rico
Singapore
Mexico City, Mexico
Kitchener, Ontario
Hamilton, Ontario
Guelph, Ontario
Windsor, Ontario
27
<PAGE> 31
QUALITY
*GraybaR [LOGO]
SERVICE
<PAGE> 32
Graybar Electric Company, Inc.
34 North Meramec Avenue
St. Louis, Missouri 63105
<PAGE> 1
LIST OF SUBSIDIARIES
<PAGE> 2
EXHIBIT 21
----------
GRAYBAR ELECTRIC COMPANY, INC.
LIST OF SUBSIDIARIES
--------------------
Graybar Foreign Sales Corporation, a Barbados corporation.
Graybar International, Inc., a Missouri corporation doing
business in the territory of Puerto Rico.
Graybar Financial Services, Inc., a Missouri corporation.
Graybar Electric de Mexico, S.A. de C.V., a Mexican corporation.
Graybar Electric Limited, a Canadian corporation.
Graybar Foundation, Inc., a Missouri corporation.
Graybar Services, Inc., an Illinois corporation.
Cognitive Training Corporation, a Missouri corporation.
Distribution Associates, Inc., a Missouri corporation.
Graybar Electric (Ontario) Limited, a Canadian corporation
Graybar Holdings Limited, a Canadian corporation.
Graybar-P&M International PTE LTD, a Singapore corporation.
Duran Industries, Inc., a Texas corporation.
<PAGE> 1
EXHIBIT 23
INDEPENDENT AUDITORS'
CONSENT OF ERNST AND YOUNG LLP
<PAGE> 2
Consent of Independent Auditors
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Graybar Electric Company, Inc. of our report dated February 18, 1997,
included in the 1996 Annual Report to Shareholders of Graybar Electric
Company, Inc.
Our audit also included the financial statements schedule of Graybar Electric
Company, Inc. listed in Item 14(a) for the year ended December 31, 1996. This
schedule is the responsibility of the Company's management. Our responsibility
is to express an opinion based on our audit. In our opinion, the financial
statement schedule referred to above, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.
/s/ Ernst & Young LLP
St. Louis, Missouri
February 18, 1997
<PAGE> 1
EXHIBIT 23(A)
INDEPENDENT ACCOUNTANTS'
CONSENT OF PRICE WATERHOUSE LLP
<PAGE> 2
800 Market Street Telephone 314 206 8500
St. Louis, MO 63101
Price Waterhouse LLP [LOGO]
February 16, 1996
To the Board of Directors
Graybar Electric Company, Inc.
In our opinion, the consolidated balance sheet and the related consolidated
statements of income and retained earnings and cash flows as of and for each
of the two years in the period ended December 31, 1995 (appearing on pages
16 through 18 of the Graybar Electric Company, Inc. 1996 Annual Report to
Shareholders which has been incorporated by reference in this Form 10-K Annual
Report) present fairly, in all material respects, the financial position,
results of operations and cash flows of Graybar Electric Company, Inc. and its
subsidiaries as of and for each of the two years in the period ended December
31, 1995, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above. We have not audited the consolidated financial statements of Graybar
Electric Company, Inc. for any period subsequent to December 31, 1995.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
St. Louis, Missouri
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 13,820
<SECURITIES> 0
<RECEIVABLES> 342,323
<ALLOWANCES> 3,901
<INVENTORY> 301,835
<CURRENT-ASSETS> 671,223
<PP&E> 308,896
<DEPRECIATION> 122,444
<TOTAL-ASSETS> 881,636
<CURRENT-LIABILITIES> 439,239
<BONDS> 151,659
<COMMON> 98,321
0
143
<OTHER-SE> 115,270
<TOTAL-LIABILITY-AND-EQUITY> 881,636
<SALES> 2,991,412
<TOTAL-REVENUES> 2,991,412
<CGS> 2,453,962
<TOTAL-COSTS> 2,453,962
<OTHER-EXPENSES> 456,043
<LOSS-PROVISION> (212)
<INTEREST-EXPENSE> 16,687
<INCOME-PRETAX> 74,854
<INCOME-TAX> 30,321
<INCOME-CONTINUING> 44,533
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 44,533
<EPS-PRIMARY> 9.00
<EPS-DILUTED> 9.00
</TABLE>
