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<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
Commission File Number 0-255
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
-------------------
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 incorporation (I.R.S. Employer
or organization) Identification No.)
34 NORTH MERAMEC AVENUE, ST. LOUIS, MO 63105
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
POST OFFICE BOX 7231, ST. LOUIS, MO 63177
- -------------------------------------------------------------------------------
(Mailing Address) (Zip Code)
Registrant's telephone number, including area code: (314) 512 - 9200
----------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
-------- --------
Common Stock Outstanding at July 31, 1998: 5,023,660
------------------
(Number of Shares)
<PAGE> 2
PART I
------
<TABLE>
CONSOLIDATED BALANCE SHEETS
---------------------------
(Dollars Stated in Thousands)
(Except for Share and Per Share Data)
JUNE 30, 1998 DECEMBER 31, 1997
------------- -----------------
<S> <C> <C>
CURRENT ASSETS
Cash $ 48,118 $ 18,523
------------- -----------------
Trade receivables 453,049 402,455
------------- -----------------
Merchandise inventory 410,752 389,314
------------- -----------------
Other current assets 14,905 13,748
------------- -----------------
Total current assets 926,824 824,040
------------- -----------------
PROPERTY
Land 22,888 22,868
------------- -----------------
Buildings and permanent fixtures 292,417 281,508
------------- -----------------
Capital equipment leases 26,683 26,138
------------- -----------------
Less-Accumulated depreciation 136,677 136,485
------------- -----------------
Net property 205,311 194,029
------------- -----------------
DEFERRED FEDERAL INCOME TAXES 9,111 9,639
------------- -----------------
OTHER ASSETS 19,001 24,113
------------- -----------------
$1,160,247 $1,051,821
============= =================
CURRENT LIABILITIES
Notes payable to banks $ 69,044 $ 136,925
------------- -----------------
Current portion of long-term debt 18,215 15,059
------------- -----------------
Trade accounts payable 363,817 326,969
------------- -----------------
Income taxes 6,720 ---
------------- -----------------
Other accrued taxes 10,377 10,663
------------- -----------------
Accrued payroll and benefit costs 25,992 41,924
------------- -----------------
Dividends payable --- 5,246
------------- -----------------
Other payables and accruals 38,114 44,856
------------- -----------------
Total current liabilities 532,279 581,642
------------- -----------------
POSTRETIREMENT BENEFITS LIABILITY 77,504 77,300
------------- -----------------
LONG TERM DEBT 273,858 139,748
------------- -----------------
2
<PAGE> 3
<CAPTION>
CONSOLIDATED BALANCE SHEETS
---------------------------
(Dollars Stated in Thousands)
(Except for Share and Per Share Data)
JUNE 30, 1998 DECEMBER 31, 1997
------------- -----------------
<S> <C> <C> <C> <C>
SHAREHOLDERS' EQUITY
CAPITAL STOCK
Preferred:
---------
Par value $20 per share
Authorized 300,000 shares
<CAPTION>
SHARES
------
1998 1997
---- ----
<S> <C> <C> <C> <C>
Issued to shareholders 6,009 6,009
---------- ----------
In treasury, at cost (623) (58)
---------- ----------
Outstanding 5,386 5,951 108 119
---------- ---------- ------------- -----------------
Common:
------
Stated value $20 per share
Authorized 7,500,000 shares
<CAPTION>
SHARES
------
1998 1997
---- ----
<S> <C> <C> <C> <C>
Issued to voting trustees 4,892,192 4,883,162
---------- ----------
Issued to shareholders 323,707 323,434
---------- ----------
In treasury, at cost (158,373) (19,124)
---------- ----------
Outstanding 5,057,526 5,187,472 101,151 103,749
---------- ---------- ------------- -----------------
<S> <C> <C>
Advance payments on
subscriptions to common
stock 35 37
------------- -----------------
Retained earnings 175,832 149,226
------------- -----------------
Accumulated other comprehensive income (Note 3) (520) ---
------------- -----------------
TOTAL SHAREHOLDERS' EQUITY 276,606 253,131
------------- -----------------
$1,160,247 $1,051,821
============= =================
See accompanying Notes to Consolidated Financial Statements
</TABLE>
3
<PAGE> 4
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
(Dollars Stated in Thousands)
(Except for Share and Per Share Data)
<CAPTION>
QUARTER ENDED
JUNE 30, 1998 JUNE 30, 1997
------------- ---------------
<S> <C> <C>
GROSS SALES, net of returns and allowances $961,706 $849,789
------------- ---------------
Less - Cash discounts 3,035 2,712
------------- ---------------
NET SALES 958,671 847,077
------------- ---------------
COST OF MERCHANDISE SOLD 788,071 695,941
------------- ---------------
Gross margin 170,600 151,136
------------- ---------------
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 133,930 119,568
------------- ---------------
DEPRECIATION AND AMORTIZATION 6,324 5,622
------------- ---------------
Income from operations 30,346 25,946
------------- ---------------
OTHER INCOME, net 1,240 1,440
------------- ---------------
INTEREST EXPENSE 5,853 5,050
------------- ---------------
Income before provision for income taxes 25,733 22,336
------------- ---------------
PROVISION FOR INCOME TAXES
Current 10,305 9,637
------------- ---------------
Deferred 315 (435)
------------- ---------------
Total provision for income taxes 10,620 9,202
------------- ---------------
NET INCOME 15,113 13,134
============= ===============
NET INCOME PER SHARE OF COMMON STOCK $ 2.98 $ 2.48<F*>
============= ===============
DIVIDENDS
Preferred - $.25 per share $ 2 $ 1
------------- ---------------
Common - $.30 per share 1,518 1,444
------------- ---------------
$ 1,520 $ 1,445
============= ===============
<FN>
<F*>Restated for the declaration of a 10% stock dividend in 1997.
See accompanying Notes to Consolidated Financial Statements.
4
<PAGE> 5
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
(Dollars Stated in Thousands)
(Except for Share and Per Share Data)
SIX MONTHS ENDED
JUNE 30, 1998 JUNE 30, 1997
------------- --------------
<S> <C> <C>
GROSS SALES, net of returns and allowances $1,833,561 $1,582,588
------------- --------------
Less - Cash discounts 5,559 5,095
------------- --------------
NET SALES 1,828,002 1,577,493
------------- --------------
COST OF MERCHANDISE SOLD 1,498,260 1,290,051
------------- --------------
Gross margin 329,742 287,442
------------- --------------
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 258,296 230,169
------------- --------------
DEPRECIATION AND AMORTIZATION 11,973 10,941
------------- --------------
Income from operations 59,473 46,332
------------- --------------
OTHER INCOME, net 2,993 3,269
------------- --------------
INTEREST EXPENSE 11,996 9,637
------------- --------------
Income before provision for income taxes 50,470 39,964
------------- --------------
PROVISION FOR INCOME TAXES
Current 20,278 16,716
------------- --------------
Deferred 528 (281)
------------- --------------
Total provision for income taxes 20,806 16,435
------------- --------------
NET INCOME 29,664 23,529
============= ==============
NET INCOME PER SHARE OF COMMON STOCK (NOTE 2) $ 5.80 $ 4.41
============= ==============
DIVIDENDS
Preferred - $.50 per share $ 3 $ 3
------------- --------------
Common - $.60 per share 3,055 2,906
------------- --------------
$ 3,058 $ 2,909
============= ==============
See accompanying Notes to Consolidated Financial Statements
</TABLE>
5
<PAGE> 6
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(Dollars Stated in Thousands)
(Except for Share and Per Share Data)
<CAPTION>
SIX MONTHS ENDED JUNE 30,
1998 1997
------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATIONS
Net Income $ 29,664 $ 23,529
------------- ---------------
Adjustments to reconcile net income
to cash provided (used) by operations:
Depreciation and amortization 11,973 10,941
------------- ---------------
Deferred income taxes 528 (281)
------------- ---------------
Gain on sale of property (554) (1,340)
------------- ---------------
Changes in assets and liabilities:
Trade receivables (50,594) (29,106)
------------- ---------------
Merchandise inventory (21,438) (58,269)
------------- ---------------
Other current assets (1,157) 231
------------- ---------------
Other assets 5,112 (3,094)
------------- ---------------
Trade accounts payable 36,848 80,002
------------- ---------------
Accrued payroll and benefit costs (15,932) (11,359)
------------- ---------------
Other accrued liabilities (104) 1,842
------------- ---------------
(35,318) (10,433)
------------- ---------------
Net cash provided (used) by operations (5,654) 13,096
------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of property 1,429 2,870
------------- ---------------
Capital expenditures for property (14,168) (11,261)
------------- ---------------
Net cash used by investing activities (12,739) (8,391)
------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in notes payable to banks (67,881) 54,227
------------- ---------------
Proceeds from long-term debt 140,000 ---
------------- ---------------
Repayment of long-term debt (10,477) (8,451)
------------- ---------------
Principal payments under capital equipment leases (2,219) (1,820)
------------- ---------------
Sale of common stock 185 587
------------- ---------------
Purchase of treasury stock (2,796) (2,733)
------------- ---------------
Dividends paid (8,304) (8,123)
------------- ---------------
Net cash flow provided by financing activities 48,508 33,687
------------- ---------------
EFFECT OF CURRENCY TRANSLATION ADJUSTMENTS
ON CASH (520) ---
------------- ---------------
NET INCREASE IN CASH 29,595 38,392
------------- ---------------
CASH, BEGINNING OF YEAR 18,523 13,820
------------- ---------------
CASH, END OF SECOND QUARTER $ 48,118 $ 52,212
============= ===============
See accompanying Notes to Consolidated Financial Statements
</TABLE>
6
<PAGE> 7
<TABLE>
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
----------------------------------------------------------
FOR THE SIX MONTHS ENDED
------------------------
JUNE 30, 1998 AND 1997
----------------------
(Dollars Stated in Thousands)
(Except for Share and Per Share Data)
<CAPTION>
ACCUMULATED
OTHER
COMPRE-
COMMON PREFERRED RETAINED HENSIVE
STOCK STOCK EARNINGS INCOME TOTAL
------------- ---------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
December 31, 1996 $ 98,373 $ 143 $115,218 $213,734
---------
Net Income and
Total Comprehensive Income 23,529 23,529
Stock Issued 587 587
Stock Redeemed (2,721) (12) (2,733)
Dividends Declared (2,909) (2,909)
------------- ---------- --------- ----------- ---------
June 30, 1997 $ 96,239 $ 131 $135,838 $232,208
============= ========== ========= =========== =========
<CAPTION>
ACCUMULATED
OTHER
COMPRE-
COMMON PREFERRED RETAINED HENSIVE
STOCK STOCK EARNINGS INCOME TOTAL
------------- ---------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
December 31, 1997 $ 103,786 $ 119 $149,226 $253,131
---------
Comprehensive Income: 29,664 29,664
Net Income
Currency Translation Adjustments,
Net of Tax $ (520) (520)
---------
Total Comprehensive Income 29,144
---------
Stock Issued 185 185
Stock Redeemed (2,785) (11) (2,796)
Dividends Declared (3,058) (3,058)
------------- ---------- --------- ----------- ---------
June 30, 1998 $ 101,186 $ 108 $175,832 $ (520) $276,606
============= ========== ========= =========== =========
See accompanying Notes to Consolidated Financial Statements
</TABLE>
7
<PAGE> 8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AND OTHER INFORMATION
-------------------------------
(Dollars Stated in Thousands)
(Except for Share and Per Share Data)
Note 1
- ------
The condensed financial statements included herein have been prepared
by the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although the Company believes that
the disclosures are adequate to make the information presented not
misleading. It is suggested that these condensed financial statements be
read in conjunction with the financial statements and the notes thereto
included in the Company's latest annual report on Form 10-K.
In the opinion of the Company, the quarterly report includes all
adjustments, consisting of normal recurring accruals, necessary for the fair
presentation of the financial statements presented. Such interim financial
information is subject to year-end adjustments and independent audit.
Results for interim periods are not necessarily indicative of results
to be expected for the full year.
Note 2
- -----
<TABLE>
<CAPTION>
SIX MONTHS 1998 SIX MONTHS 1997
--------------- ---------------
<S> <C> <C>
Earnings for Six Months $ 29,664 $ 23,529
--------------- ---------------
Dividends on Preferred Stock 3 3
--------------- ---------------
Available for Common Stock $ 29,661 $ 23,526
--------------- ---------------
Average Common Shares Outstanding 5,112,130 5,335,855<F*>
--------------- ---------------
Earnings Per Share $ 5.80 $ 4.41<F*>
--------------- ---------------
<FN>
<F*> Restated for the declaration of a 10% stock dividend in 1997. Prior to
adjusting for the stock dividend, the average common shares outstanding
were 4,850,777.
</TABLE>
Note 3
- ------
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income".
Comprehensive income is reported in the Consolidated Statements of Changes in
Shareholders' Equity. Comprehensive income for the quarters ended June 30,
1998 and 1997 was $14,689 and $13,134, respectively.
8
<PAGE> 9
MANAGEMENT'S DISCUSSION & ANALYSIS
OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
(Dollars Stated in Thousands)
RESULTS OF OPERATIONS
- ---------------------
Net sales in the first six months of 1998 were 15.9% higher than in the
first six months of 1997. The higher net sales resulted from improvements in
the market sectors of the economy in which the Company operates.
Gross margin in the first six months of 1998 increased $42,300 (14.7%)
compared to the first six months of 1997 primarily due to increased sales in
the electrical and communication markets.
The increase in selling, general and administrative expenses in the
first six months of 1998 compared to the first six months of 1997 occurred
largely because of adjustments in personnel complement and adjustments in
compensation and related expenses.
Interest expense increased in the first six months of 1998 compared to
the first six months of 1997 primarily due to increased levels of borrowing
incurred to finance higher aggregate levels of inventory and receivables.
Interest rates on 1998 short-term borrowings have been slightly higher than
for the same period in 1997.
Other income in the first six months of 1998 included gains on sale of
property of $554.
The combined effect of the increase in gross margin and the decrease in
other income, together with increases in selling, general and administrative
expenses, interest expense and depreciation and amortization, resulted in an
increase in pretax earnings of $10,506 in the first six months of 1998
compared to the same period in 1997.
9
<PAGE> 10
MANAGEMENT'S DISCUSSION & ANALYSIS
OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
(Dollars Stated in Thousands)
FINANCIAL CONDITION AND LIQUIDITY
- ---------------------------------
The financial condition of the Company continues to be strong. At June
30, 1998, current assets exceeded current liabilities by $394,545, up
$152,147 from December 31, 1997. The current assets at June 30, 1998 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 June 30, 1998, the Company had available to it unused lines of
credit amounting to $255,000. These lines are available to meet short-term
cash requirements of the Company. Bank borrowings outstanding during 1998
through June 30 ranged from a minimum of $38,000 to a maximum of $211,655.
The Company has funded its capital requirements from operations, stock
issuances to its employees and long term debt. In January, 1998, the Company
received the proceeds from a seven-year note for $25,000 at a fixed interest
rate of 6.44% with principal payable in quarterly installments beginning in
April, 1998. In April, 1998, the Company received the proceeds from a
fifteen-year note for $75,000 at a fixed interest rate of 6.59% with
principal payable in semiannual installments beginning in October, 2003. In
June, 1998, the Company received the proceeds from a fifteen-year note for
$40,000 at a fixed interest rate of 6.65% with principal payable in annual
installments beginning in June, 2003. All three note agreements have 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 agreements. During the first six months of 1998, cash used by operations
amounted to $5,654 compared to $13,096 cash provided by operations in the
first six months of 1997.
10
<PAGE> 11
PART II: OTHER INFORMATION
----------------------------
Item 4. Submission of Matters to a Vote of Security Holders.
The annual meeting of shareholders occurred on June 11, 1998.
All of the nominees named in the Information Statement filed with
the Commission and mailed to shareholders in accordance with the
provisions of Regulation 14-C were elected. The names of the
nominees elected follow; all received 4,784,128 votes, no negative
votes were cast.
1. A. A. Brzoski
2. T. F. Dowd
3. T. S. Gurganous
4. C. L. Hall
5. R. H. Haney
6. G. W. Harper
7. W. L. King
8. G. J. McCrea
9. R. D. Offenbacher
10. I. Orloff
11. R. A. Reynolds, Jr.
12. J. R. Seaton
13. C. R. Udell
14. J. F. Van Pelt
15. J. W. Wolf
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits furnished in accordance with provisions of Item
601 of Regulation S-K.
(27) Financial Data Schedule (submitted in EDGAR format
only).
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the quarter
for which this report is filed.
11
<PAGE> 12
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
August 13, 1998 GRAYBAR ELECTRIC COMPANY, INC.
- -------------------------
(Date)
/S/ C. L. HALL
-------------------------------------------
C. L. HALL
PRESIDENT
/S/ J. R. SEATON
-------------------------------------------
J. R. SEATON
VICE PRESIDENT
AND COMPTROLLER
12
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 48,118
<SECURITIES> 0
<RECEIVABLES> 453,049
<ALLOWANCES> 0
<INVENTORY> 410,752
<CURRENT-ASSETS> 926,824
<PP&E> 341,988
<DEPRECIATION> 136,677
<TOTAL-ASSETS> 1,160,247
<CURRENT-LIABILITIES> 532,279
<BONDS> 273,858
<COMMON> 101,151
0
108
<OTHER-SE> 175,347
<TOTAL-LIABILITY-AND-EQUITY> 1,160,247
<SALES> 1,828,002
<TOTAL-REVENUES> 1,828,002
<CGS> 1,498,260
<TOTAL-COSTS> 1,498,260
<OTHER-EXPENSES> 270,269
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,996
<INCOME-PRETAX> 50,470
<INCOME-TAX> 20,806
<INCOME-CONTINUING> 29,664
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 29,664
<EPS-PRIMARY> 5.80
<EPS-DILUTED> 5.80
</TABLE>
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