<PAGE>
<PAGE> 1
CONFORMED
---------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
Commission File Number 0-255
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
-------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to _____________
GRAYBAR ELECTRIC COMPANY, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
NEW YORK 13 - 0794380
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
34 NORTH MERAMEC AVENUE, ST. LOUIS, MO 63105
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(Address of principal executive offices) (Zip Code)
POST OFFICE BOX 7231, ST. LOUIS, MO 63177
----------------------------------- ----------
(Mailing Address) (Zip Code)
Registrant's telephone number, including area code: (314) 512 - 9200
----------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
YES X NO
----- -----
Common Stock Outstanding at October 31, 2000: 5,751,135
------------------
(Number of Shares)
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PART I
------
<TABLE>
CONSOLIDATED BALANCE SHEETS
---------------------------
(Dollars Stated in Thousands)
(Except for Share and Per Share Data)
<CAPTION>
SEPTEMBER 30, 2000 DECEMBER 31, 1999
------------------ ------------------
<S> <C> <C>
CURRENT ASSETS
Cash $ 68,924 $ 16,750
------------------ ------------------
Trade receivables 741,527 588,631
------------------ ------------------
Merchandise inventory 965,432 843,061
------------------ ------------------
Other current assets 7,577 6,524
------------------ ------------------
Total current assets 1,783,460 1,454,966
------------------ ------------------
PROPERTY
Land 23,224 21,997
------------------ ------------------
Buildings and permanent fixtures 353,713 321,332
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Capital equipment leases 20,380 31,525
------------------ ------------------
Less-Accumulated depreciation 163,445 161,948
------------------ ------------------
Net property 233,872 212,906
------------------ ------------------
DEFERRED FEDERAL INCOME TAXES 10,816 9,004
------------------ ------------------
OTHER ASSETS 29,356 27,920
------------------ ------------------
$2,057,504 $1,704,796
================== ==================
CURRENT LIABILITIES
Notes payable to banks $441,042 $340,604
------------------ ------------------
Current portion of long-term debt 20,980 20,359
------------------ ------------------
Trade accounts payable 732,793 523,677
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Income taxes 12,635 --
------------------ ------------------
Other accrued taxes 16,086 13,552
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Accrued payroll and benefit costs 46,500 50,107
------------------ ------------------
Dividends payable -- 6,256
------------------ ------------------
Other payables and accruals 61,211 56,973
------------------ ------------------
Total current liabilities 1,331,247 1,011,528
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POSTRETIREMENT BENEFITS LIABILITY 77,708 77,708
------------------ ------------------
LONG TERM DEBT 240,455 255,897
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</TABLE>
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<TABLE>
CONSOLIDATED BALANCE SHEETS
---------------------------
(Dollars Stated in Thousands)
(Except for Share and Per Share Data)
<CAPTION>
SEPTEMBER 30, 2000 DECEMBER 31, 1999
------------------ ------------------
<S> <C> <C>
SHAREHOLDERS' EQUITY
CAPITAL STOCK
Preferred:
---------
Par value $20 per share
Authorized 300,000 shares
<CAPTION>
SHARES
------
2000 1999
---- ----
<S> <C> <C> <C> <C>
Issued to shareholders 3,412 3,412
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In treasury, at cost (422) --
----------- -----------
Outstanding 2,990 3,412 60 68
----------- ----------- ------------------ ------------------
Common:
------
Stated value $20 per share
Authorized 7,500,000 shares
<CAPTION>
SHARES
------
2000 1999
---- ----
<S> <C> <C> <C> <C>
Issued to voting trustees 5,634,261 5,587,485
----------- -----------
Issued to shareholders 338,966 337,757
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In treasury, at cost (210,309) (11,729)
----------- -----------
Outstanding 5,762,918 5,913,513 115,258 118,270
----------- ----------- ------------------ ------------------
Advance payments on
subscriptions to common
stock 49 56
------------------ ------------------
Retained earnings 293,457 241,473
------------------ ------------------
Accumulated other comprehensive income (730) (204)
------------------ ------------------
TOTAL SHAREHOLDERS' EQUITY 408,094 359,663
------------------ ------------------
$2,057,504 $1,704,796
================== ==================
See accompanying Notes to Consolidated Financial Statements
</TABLE>
3
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<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
(Dollars Stated in Thousands)
(Except for Share and Per Share Data)
<CAPTION>
QUARTER ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999
------------------ ------------------
<S> <C> <C>
GROSS SALES, net of returns and allowances $1,343,962 $1,149,118
------------------ ------------------
Less - Cash discounts 3,308 2,418
------------------ ------------------
NET SALES 1,340,654 1,146,700
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COST OF MERCHANDISE SOLD 1,094,509 932,039
------------------ ------------------
Gross margin 246,145 214,661
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SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 195,912 161,892
------------------ ------------------
DEPRECIATION AND AMORTIZATION 7,577 6,550
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Income from operations 42,656 46,219
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OTHER INCOME, net 1,916 1,878
------------------ ------------------
INTEREST EXPENSE 11,942 7,301
------------------ ------------------
Income before provision for income taxes 32,630 40,796
------------------ ------------------
PROVISION FOR INCOME TAXES
Current 13,872 17,205
------------------ ------------------
Deferred (613) (476)
------------------ ------------------
Total provision for income taxes 13,259 16,729
------------------ ------------------
NET INCOME 19,371 24,067
================== ==================
NET INCOME PER SHARE OF COMMON STOCK $ 3.35 $ 4.00<F*>
================== ==================
DIVIDENDS
Preferred - $.25 per share $ -- $ 1
------------------ ------------------
Common - $.30 per share 1,731 1,715
------------------ ------------------
$ 1,731 $ 1,716
================== ==================
<FN>
<F*>Restated for the declaration of a 5% stock dividend in 1999.
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
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<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
(Dollars Stated in Thousands)
(Except for Share and Per Share Data)
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999
------------------ ------------------
<S> <C> <C>
GROSS SALES, net of returns and allowances $3,888,199 $3,179,623
------------------ ------------------
Less - Cash discounts 9,842 7,666
------------------ ------------------
NET SALES 3,878,357 3,171,957
------------------ ------------------
COST OF MERCHANDISE SOLD 3,178,712 2,592,227
------------------ ------------------
Gross margin 699,645 579,730
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SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 553,206 455,101
------------------ ------------------
DEPRECIATION AND AMORTIZATION 21,763 19,103
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Income from operations 124,676 105,526
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OTHER INCOME, net 6,228 8,563
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INTEREST EXPENSE 34,464 19,897
------------------ ------------------
Income before provision for income taxes 96,440 94,192
PROVISION FOR INCOME TAXES
Current 41,026 40,036
------------------ ------------------
Deferred (1,812) (1,263)
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Total provision for income taxes 39,214 38,773
------------------ ------------------
NET INCOME 57,226 55,419
================== ==================
NET INCOME PER SHARE OF COMMON STOCK (NOTE 2) $ 9.81 $ 9.25
================== ==================
DIVIDENDS
Preferred - $.75 per share $ 2 $ 4
------------------ ------------------
Common - $.90 per share 5,240 5,187
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$ 5,242 $ 5,191
================== ==================
See accompanying Notes to Consolidated Financial Statements
</TABLE>
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<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(Dollars Stated in Thousands)
(Except for Share and Per Share Data)
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
2000 1999
------------------ ------------------
<S> <C> <C>
CASH FLOWS FROM OPERATIONS
Net Income $ 57,226 $ 55,419
------------------ ------------------
Adjustments to reconcile net income
to cash provided (used) by operations:
Depreciation and amortization 21,763 19,103
------------------ ------------------
Deferred income taxes (1,812) (1,263)
------------------ ------------------
Gain on sale of property (5) (543)
------------------ ------------------
Changes in assets and liabilities:
Trade receivables (152,896) (109,699)
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Merchandise inventory (122,371) (202,362)
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Other current assets (1,053) 749
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Other assets (1,436) 3,417
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Trade accounts payable 209,116 167,613
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Accrued payroll and benefit costs (3,607) (7,482)
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Other accrued liabilities 18,880 8,439
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(33,421) (122,028)
------------------ ------------------
Net cash provided (used) by operations 23,805 (66,609)
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CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of property 2,495 1,094
------------------ ------------------
Capital expenditures for property (41,465) (20,347)
------------------ ------------------
Net cash used by investing activities (38,970) (19,253)
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CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in notes payable to banks 100,438 147,146
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Proceeds from long-term debt -- --
------------------ ------------------
Repayment of long-term debt (16,131) (10,739)
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Principal payments under capital
equipment leases (2,443) (3,754)
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Sale of common stock 953 14,211
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Purchase of treasury stock (3,980) (3,615)
------------------ ------------------
Dividends paid (11,498) (10,670)
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Net cash flow provided by financing activities 67,339 132,579
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NET INCREASE IN CASH 52,174 46,717
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CASH, BEGINNING OF YEAR 16,750 20,252
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CASH, END OF THIRD QUARTER $ 68,924 $ 66,969
================== ==================
See accompanying Notes to Consolidated Financial Statements
</TABLE>
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<TABLE>
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
----------------------------------------------------------
FOR THE NINE MONTHS ENDED
-------------------------
SEPTEMBER 30, 2000 AND 1999
---------------------------
(Dollars Stated in Thousands)
<CAPTION>
ACCUMULATED
COMMON OTHER
STOCK COMPRE-
COMMON PREFERRED SUBSCRIBED, RETAINED HENSIVE
STOCK STOCK UNISSUED EARNINGS INCOME TOTAL
-------- --------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
December 31, 1998 $103,690 $ 108 $ 0 $193,838 $ (836) $296,800
--------
Net Income 55,419 55,419
Currency Translation
Adjustments 467 467
--------
Comprehensive Income 55,886
--------
Stock Issued 14,152 14,152
Stock Redeemed (3,610) (5) (3,615)
Advance Payments 59 59
Dividends Declared (5,191) (5,191)
-------- ------- ------- -------- -------- --------
September 30, 1999 $114,232 $ 103 $ 59 $244,066 $ (369) $358,091
======== ======= ======= ======== ======== ========
<CAPTION>
ACCUMULATED
COMMON OTHER
STOCK COMPRE-
COMMON PREFERRED SUBSCRIBED, RETAINED HENSIVE
STOCK STOCK UNISSUED EARNINGS INCOME TOTAL
-------- --------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
December 31, 1999 $118,270 $ 68 $ 56 $241,473 $ (204) $359,663
--------
Net Income 57,226 57,226
Currency Translation
Adjustments (526) (526)
--------
Comprehensive Income 56,700
--------
Stock Issued 960 960
Stock Redeemed (3,972) (8) (3,980)
Advance Payments (7) (7)
Dividends Declared (5,242) (5,242)
-------- ------- ------- -------- -------- --------
September 30, 2000 $115,258 $ 60 $ 49 $293,457 $ (730) $408,094
======== ======= ======= ======== ======== ========
See accompanying Notes to Consolidated Financial Statements
</TABLE>
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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
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<TABLE>
<CAPTION>
NINE MONTHS 2000 NINE MONTHS 1999
---------------- ----------------
<S> <C> <C>
Earnings for Nine Months $ 57,226 $ 55,419
---------------- ----------------
Dividends on Preferred Stock 2 4
---------------- ----------------
Available for Common Stock $ 57,224 $ 55,415
---------------- ----------------
Average Common Shares Outstanding 5,834,768 5,991,691<F*>
---------------- ----------------
Earnings Per Share $ 9.81 $ 9.25<F*>
---------------- ----------------
<FN>
<F*> Restated for the declaration of a 5% stock dividend in 1999.
Prior to adjusting for the stock dividend, the average common
shares outstanding were 5,706,372.
</TABLE>
Note 3
------
Comprehensive income is reported in the Consolidated Statements of
Changes in Shareholders' Equity. Comprehensive income for the quarters ended
September 30, 2000 and 1999 was $19,211 and $24,141, respectively.
8
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Note 4
------
The Company entered into an accounts receivable securitization program in
June 2000 which provides for the sale of the Company's trade accounts
receivables to a wholly owned, bankruptcy remote, special purpose subsidiary,
Graybar Commerce Corporation. The trade accounts receivable purchases are
financed through the issuance of commercial paper under a revolving liquidity
facility. Under the securitization program, Graybar Commerce Corporation has
granted a security interest in its trade accounts receivable. Borrowings
outstanding under the securitization program at September 30, 2000 were
$200 million, the maximum available under the program.
9
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MANAGEMENT'S DISCUSSION & ANALYSIS
OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
(Dollars Stated in Thousands)
RESULTS OF OPERATIONS
---------------------
Net sales in the first nine months of 2000 were 22.3% higher than in the
first nine months of 1999. The higher net sales resulted from improvements
in the market sectors of the economy in which the Company operates.
Gross margin in the first nine months of 2000 increased 20.7% compared to
the first nine months of 1999 primarily due to increased sales in the
electrical and communication markets.
The increase in selling, general and administrative expenses in the first
nine months of 2000 compared to the first nine months of 1999 occurred
largely because of growth in personnel complement and increases in
compensation and related expenses. In addition, continued implementation of
a company-wide customer service and logistics project throughout 1999 and
2000 resulted in higher selling, general and administrative expenses in the
first nine months of 2000 compared to the first nine months of 1999 due to
increases in the Company's number of facilities and related staffing and
start-up expenses. The increased expenses were anticipated by management and
are expected to provide future benefits to the Company's results of
operations.
Interest expense increased in the first nine months of 2000 compared to
the first nine months of 1999 primarily due to increased levels of borrowing
incurred to finance higher aggregate levels of inventory and receivables.
Interest rates on 2000 short-term borrowings have been higher than for the
same period in 1999.
Other income includes service charges for special services provided to
one customer of $3,388 and $2,911 in the first nine months of 2000 and 1999,
respectively.
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 $2,248 in the first nine months of 2000
compared to the same period in 1999.
10
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<PAGE> 11
MANAGEMENT'S DISCUSSION & ANALYSIS
OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
(Dollars Stated in Thousands)
FINANCIAL CONDITION AND LIQUIDITY
---------------------------------
The financial condition of the Company continues to be strong. At
September 30, 2000, current assets exceeded current liabilities by $452,213,
up $8,775 from December 31, 1999. The current assets at September 30, 2000
were sufficient to meet the cash needs required to pay current liabilities.
The substantial increase in accounts receivable resulted primarily from the
growth in sales experienced by the Company. The average number of days of
sales in accounts receivable has increased slightly during 1999 and 2000.
Merchandise inventory levels were higher at September 30, 2000 when compared
to December 31, 1999 and June 30, 2000 inventory levels primarily due to the
growth in sales and increases in specific inventory carried to support
customer contract agreements. This increase in inventory is largely offset
by a corresponding increase in trade accounts payable. Inventory turnover
has decreased during 1999 and 2000, due largely to a company-wide customer
service and logistics project to redeploy inventory into a system of national
zones, regional zones and branch locations. Although the project objective
is to provide better customer service and reduce overall costs, management
expected some temporary inventory increase, unrelated to sales volume, during
the transition to the new system. This transition to the new customer
service and logistics system is planned to be complete by early 2002. The
Company does not have any other plans or commitments which would require
significant amounts of additional working capital.
At September 30, 2000, the Company had available to it unused lines of
credit amounting to $254,661. These lines are available to meet short-term
cash requirements of the Company. Bank borrowings outstanding during 2000
through September 30 ranged from a minimum of $304,000 to a maximum of
$441,042.
The Company has funded its capital requirements from operations, stock
issuances to its employees and long-term debt. During the first nine months
of 2000, cash provided by operations amounted to $23,805 compared to $66,609
cash used by operations in the first nine months of 1999. Cash provided from
the sale of common stock and proceeds received on stock subscriptions
amounted to $953 in the first nine months of 2000.
Capital expenditures for property for the nine-month periods ended
September 30, 2000 and 1999 were $41,465 and $20,347, respectively.
Purchases of treasury stock for the nine-month periods ended September 30,
2000 and 1999 were $3,980 and $3,615, respectively. Dividends paid for the
nine-month periods ended September 30, 2000 and 1999 were $11,498 and
$10,670, respectively.
11
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PART II: OTHER INFORMATION
---------------------------
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits furnished in accordance with provisions of
Item 601 of Regulation S-K.
(3)(ii) By-laws as amended through July 25, 2000.
(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.
12
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<PAGE> 13
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
November 13, 2000 GRAYBAR ELECTRIC COMPANY, INC.
---------------------
(Date)
/S/ R. A. REYNOLDS, JR.
------------------------------
R. A. REYNOLDS, JR.
PRESIDENT
/S/ J. H. HINSHAW
------------------------------
J. H. HINSHAW
SENIOR VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
/S/ J. H. KIPPER
------------------------------
J. H. KIPPER
VICE PRESIDENT
AND COMPTROLLER
13
