Attached files
file | filename |
---|---|
EX-31.1 - EXHIBIT 31.1 - GRAYBAR ELECTRIC CO INC | q_093010exhibit311.htm |
EX-32.1 - EXHIBIT 32.1 - GRAYBAR ELECTRIC CO INC | q_093010exhibit321.htm |
EX-31.2 - EXHIBIT 31.2 - GRAYBAR ELECTRIC CO INC | q_093010exhibit312.htm |
EX-32.2 - EXHIBIT 32.2 - GRAYBAR ELECTRIC CO INC | q_093010exhibit322.htm |
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|
|
|
For the quarterly period ended September 30, 2010 |
|
|
|
or |
|
|
¨ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|
|
|
For the transition period from __________ to __________
|
|
|
|
Commission File Number: 000-00255 |
GRAYBAR ELECTRIC COMPANY, INC. | |
(Exact name of registrant as specified in its charter) | |
|
|
New York |
13-0794380 |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
|
|
34 North Meramec Avenue, St. Louis, Missouri |
63105 |
(Address of principal executive offices) |
(Zip Code) |
| |
(314) 573 - 9200 | |
(Registrants telephone number, including area code) | |
| |
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 ¨ | |
| |
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for shorter period that the registrant was required to submit and post such files). | |
YES ¨ NO ¨ | |
| |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. | |
Large accelerated filer ¨ Accelerated filer ¨ | |
Non-accelerated filer x (Do not check if a smaller reporting company) Smaller reporting company ¨ | |
| |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). | |
YES ¨ NO x | |
| |
Common Stock Outstanding at October 31, 2010: 10,537,989 | |
(Number of Shares) |
Graybar Electric Company, Inc. and Subsidiaries
Form 10-Q
For the Quarterly Period Ended September 30, 2010
(Unaudited)
Table of Contents
PART I. |
FINANCIAL INFORMATION |
Page(s) | |
|
|
|
|
|
Item 1. |
Financial Statements |
|
|
|
3 | |
|
|
4 | |
|
|
5 | |
|
|
Condensed Consolidated Statements of Changes in Shareholders Equity |
6 |
|
|
7-11 | |
|
|
|
|
|
Item 2. |
Managements Discussion and Analysis of Financial Condition and Results of Operations |
12-17 |
|
|
|
|
|
Item 3. |
17 | |
|
|
|
|
|
Item 4T. |
17 | |
|
|
|
|
PART II. |
OTHER INFORMATION |
| |
|
|
|
|
|
Item 2. |
18 | |
|
|
|
|
|
Item 6. |
18 | |
|
|
|
|
|
19 | ||
|
|
|
|
|
20 |
2
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
Graybar Electric Company, Inc. and Subsidiaries |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
|
(Unaudited) |
| |||||||||
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
| ||||||
(Stated in thousands except per share data) |
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
Gross Sales |
$ |
1,253,714 |
|
$ |
1,128,912 |
|
$ |
3,394,092 |
|
$ |
3,316,685 |
|
Cash discounts |
|
(4,408 |
) |
|
(4,805 |
) |
|
(12,841 |
) |
|
(13,438 |
) |
Net Sales |
|
1,249,306 |
|
|
1,124,107 |
|
|
3,381,251 |
|
|
3,303,247 |
|
Cost of merchandise sold |
|
(1,015,311 |
) |
|
(908,282 |
) |
|
(2,743,056 |
) |
|
(2,662,267 |
) |
Gross Margin |
|
233,995 |
|
|
215,825 |
|
|
638,195 |
|
|
640,980 |
|
Selling, general and administrative expenses |
|
(189,860 |
) |
|
(188,741 |
) |
|
(549,623 |
) |
|
(570,495 |
) |
Depreciation and amortization |
|
(9,990 |
) |
|
(9,582 |
) |
|
(29,683 |
) |
|
(29,119 |
) |
Other income, net |
|
545 |
|
|
612 |
|
|
2,773 |
|
|
2,216 |
|
Income from Operations |
|
34,690 |
|
|
18,114 |
|
|
61,662 |
|
|
43,582 |
|
Interest expense, net |
|
(1,879 |
) |
|
(2,354 |
) |
|
(6,351 |
) |
|
(7,954 |
) |
Income before Provision for Income Taxes |
|
32,811 |
|
|
15,760 |
|
|
55,311 |
|
|
35,628 |
|
Provision for income taxes |
|
(12,886 |
) |
|
(5,696 |
) |
|
(22,254 |
) |
|
(14,757 |
) |
Net Income |
|
19,925 |
|
|
10,064 |
|
|
33,057 |
|
|
20,871 |
|
Less: Net income attributable to noncontrolling interests |
|
(82 |
) |
|
(45 |
) |
|
(180 |
) |
|
(46 |
) |
Net Income attributable to Graybar Electric Company, Inc. |
$ |
19,843 |
|
$ |
10,019 |
|
$ |
32,877 |
|
$ |
20,825 |
|
Net Income per share of Common Stock (A) |
$ |
1.88 |
|
$ |
0.94 |
|
$ |
3.10 |
|
$ |
1.95 |
|
Cash Dividends per share of Common Stock (B) |
$ |
0.30 |
|
$ |
0.30 |
|
$ |
0.90 |
|
$ |
0.90 |
|
Average Common Shares Outstanding (A) |
|
10,574 |
|
|
10,627 |
|
|
10,601 |
|
|
10,666 |
|
(A) Adjusted for the declaration of a ten percent (10%) stock dividend in 2009, shares related to which were issued in February 2010. Prior to the adjustment, the average common shares outstanding were 9,661 and 9,696 for the three and nine months ended September 30, 2009, respectively.
(B) Cash dividends declared were $3,181 and $2,910 for the three months ended September 30, 2010 and 2009, respectively. Cash dividends declared were $9,550 and $8,750 for the nine months ended September 30, 2010 and 2009, respectively.
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of the Condensed Consolidated Financial Statements.
3
Graybar Electric Company, Inc. and Subsidiaries |
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
| ||||||||
|
|
|
|
|
|
September 30, |
|
|
December 31, |
| |||
(Stated in thousands except share and per share data) |
|
|
|
|
2010 |
|
|
2009 |
| ||||
ASSETS |
|
|
|
|
|
(Unaudited) |
|
|
|
| |||
Current Assets |
|
|
|
|
|
|
|
|
|
| |||
Cash and cash equivalents |
|
|
|
|
$ |
80,971 |
|
$ |
163,864 |
| |||
Trade receivables (less allowances of $6,541 and $6,217, respectively) |
689,105 |
|
|
577,400 |
| ||||||||
Merchandise inventory |
|
|
|
|
|
395,606 |
|
|
309,622 |
| |||
Other current assets |
|
|
|
|
|
22,985 |
|
|
27,353 |
| |||
Total Current Assets |
|
|
|
|
|
1,188,667 |
|
|
1,078,239 |
| |||
Property, at cost |
|
|
|
|
|
|
|
|
|
| |||
Land |
|
|
|
|
|
47,663 |
|
|
47,743 |
| |||
Buildings |
|
|
|
|
|
343,280 |
|
|
337,781 |
| |||
Furniture and fixtures |
|
|
|
|
|
175,367 |
|
|
172,753 |
| |||
Software |
|
|
|
|
|
76,906 |
|
|
76,906 |
| |||
Capital leases |
|
|
|
|
|
8,753 |
|
|
5,205 |
| |||
Total Property, at cost |
|
|
|
|
|
651,969 |
|
|
640,388 |
| |||
Less accumulated depreciation and amortization |
|
|
(356,081 |
) |
|
(336,686 |
) | ||||||
Net Property |
|
|
|
|
|
295,888 |
|
|
303,702 |
| |||
Other Non-current Assets |
|
|
|
|
|
36,558 |
|
|
50,012 |
| |||
Total Assets |
|
|
|
|
$ |
1,521,113 |
|
$ |
1,431,953 |
| |||
LIABILITIES |
|
|
|
|
|
|
|
|
|
| |||
Current Liabilities |
|
|
|
|
|
|
|
|
|
| |||
Short-term borrowings |
|
|
|
|
$ |
18,888 |
|
$ |
15,232 |
| |||
Current portion of long-term debt |
|
|
|
|
|
34,268 |
|
|
36,068 |
| |||
Trade accounts payable |
|
|
|
|
|
558,476 |
|
|
451,279 |
| |||
Accrued payroll and benefit costs |
|
|
|
|
|
72,925 |
|
|
66,939 |
| |||
Other accrued taxes |
|
|
|
|
|
14,371 |
|
|
15,378 |
| |||
Dividends payable |
|
|
|
|
|
-- |
|
|
10,660 |
| |||
Other current liabilities |
|
|
|
|
|
38,528 |
|
|
57,690 |
| |||
Total Current Liabilities |
|
|
|
|
|
737,456 |
|
|
653,246 |
| |||
Postretirement Benefits Liability |
|
|
|
|
|
65,148 |
|
|
66,336 |
| |||
Pension Liability |
|
|
|
|
|
77,665 |
|
|
77,699 |
| |||
Long-term Debt |
|
|
|
|
|
59,957 |
|
|
80,959 |
| |||
Other Non-current Liabilities |
|
|
|
|
|
11,555 |
|
|
15,544 |
| |||
Total Liabilities |
|
|
|
|
|
951,781 |
|
|
893,784 |
| |||
SHAREHOLDERS EQUITY |
|
|
|
|
|
|
|
|
|
| |||
|
Shares at |
|
|
|
|
|
|
| |||||
Capital Stock |
September 30, |
|
December 31, 2009 |
|
|
|
|
|
|
| |||
Common, stated value $20.00 per share |
|
|
|
|
|
|
|
|
|
| |||
Authorized |
20,000,000 |
|
15,000,000 |
|
|
|
|
|
|
| |||
Issued to voting trustees |
8,990,524 |
|
8,638,604 |
|
|
|
|
|
|
| |||
Issued to shareholders |
2,029,401 |
|
1,984,686 |
|
|
|
|
|
|
| |||
In treasury, at cost |
(428,244 |
) |
(24,808 |
) |
|
|
|
|
|
| |||
Outstanding Common Stock |
10,591,681 |
|
10,598,482 |
|
|
211,834 |
|
|
211,970 |
| |||
Advance Payments on Subscriptions to Common Stock |
|
644 |
|
|
-- |
| |||||||
Retained Earnings |
|
447,247 |
|
|
423,920 |
| |||||||
Accumulated Other Comprehensive Loss |
|
(95,384 |
) |
|
(102,599 |
) | |||||||
Total Graybar Electric Company, Inc. Shareholders Equity |
564,341 |
|
|
533,291 |
| ||||||||
Noncontrolling Interests |
|
4,991 |
|
|
4,878 |
| |||||||
Total Shareholders Equity |
|
569,332 |
|
|
538,169 |
| |||||||
Total Liabilities and Shareholders Equity |
$ |
1,521,113 |
|
$ |
1,431,953 |
| |||||||
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of the Condensed Consolidated Financial Statements.
4
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of the Condensed Consolidated Financial Statements.
5
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of the Condensed Consolidated Financial Statements.
6
Graybar Electric Company, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Stated in thousands except share and per share data)
(Unaudited)
Note 1
The condensed consolidated financial statements included herein have been prepared by Graybar Electric Company, Inc. (Graybar or the Company), without audit, pursuant to the rules and regulations of the United States (US) Securities and Exchange Commission (the Commission) applicable to interim financial reporting. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the US (US GAAP) have been condensed or omitted pursuant to such rules and regulations, although the Company believes that its disclosures are adequate to make the information presented not misleading. The preparation of financial statements in accordance with US GAAP requires the use of estimates and assumptions that affect reported amounts. The Companys condensed consolidated financial statements include amounts that are based on managements best estimates and judgments. Actual results could differ from those estimates. Certain reclassifications were made to prior year amounts to conform to the 2010 presentation. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto and Managements Discussion and Analysis of Financial Condition and Results of Operations as of and for the year ended December 31, 2009 included in the Companys latest Annual Report on Form 10-K.
In the opinion of management, this quarterly report includes all adjustments, consisting of normal recurring accruals and adjustments, necessary for the fair presentation of the financial statements presented. Such interim financial information is subject to year-end adjustments. Results for interim periods are not necessarily indicative of results to be expected for the full year.
Note 2
In June 2009, the Financial Accounting Standards Board (FASB) issued guidance establishing two levels of US GAAP authoritative and non-authoritative and making the FASB Accounting Standards Codification the source of authoritative US GAAP to be applied by non-governmental entities, except for rules and interpretative releases of the Commission. This guidance was effective for financial statements issued for interim and annual periods ending after September 15, 2009. The adoption changed certain disclosure references to US GAAP, but did not have any other impact on the Companys condensed consolidated financial statements.
Note 3
The consolidated financial statements include the accounts of Graybar Electric Company, Inc. and its subsidiaries. All material intercompany balances and transactions have been eliminated. The ownership interests that are held by owners other than the Company in subsidiaries consolidated by the Company are accounted for and reported as noncontrolling interests.
Note 4
The Companys inventory is stated at the lower of cost (determined using the last-in, first-out (LIFO) cost method) or market. LIFO accounting is a method of accounting that, compared with other inventory accounting methods, generally provides better matching of current costs with current revenues. An actual valuation of inventory under the LIFO method can be made only at year-end based on the inventory levels and costs at that time. Accordingly, interim LIFO calculations are based on managements estimates of expected year-end inventory levels and costs and are subject to the final year-end LIFO inventory valuation.
Note 5
The Company is party to an interest rate swap agreement that effectively converts its variable rate interest payments to a fixed rate on amounts due under a certain lease arrangement. The Companys interest rate swap agreement is designated as a cash flow hedge and is required to be measured at fair value on a recurring basis.
The Company endeavors to utilize the best available information in measuring fair value. The interest rate swap is valued based on quoted data from the counterparty, corroborated with indirectly observable market data, which, combined, are deemed to be a Level 2 input in the fair value hierarchy established by FASB. At September 30, 2010 and December 31, 2009, the Company recorded a liability of $5,308 and $4,969, respectively, in other current liabilities on the consolidated balance sheet for the fair value of the swap. The effective portion of the related gains or losses on the swap are deferred in accumulated other comprehensive loss. No ineffectiveness was recorded in the condensed consolidated statements of income during the three and nine months ended September 30, 2010 and 2009. The loss, net of tax, reclassified from accumulated other comprehensive loss to interest expense related to the effective portion of the interest rate swap was $(207) and $(632) during the three and nine month periods ended September 30, 2010, respectively. The loss, net of tax, reclassified from accumulated other comprehensive loss to interest expense related to the effective portion of the interest rate swap was $(213) and $(568) during the three and nine month periods ended September 30, 2009, respectively.
7
Unrealized losses, net of tax, of $(40) and $(207) related to the swap were recorded in accumulated other comprehensive loss during the three and nine months ended September 30, 2010. Unrealized (losses) gains, net of tax, of $(117) and $606 related to the swap were recorded in accumulated other comprehensive loss during the three and nine months ended September 30, 2009, respectively.
These deferred gains and losses are recognized in income in the period in which the related interest payments being hedged are recognized in expense. The Company has recorded $(3,244) and $(3,037), net of tax, in accumulated other comprehensive loss related to the effective portion of the interest rate swap at September 30, 2010 and December 31, 2009, respectively. The amount of loss expected to be reclassified from accumulated other comprehensive loss to interest expense over the next twelve months is $(1,153).
Note 6
The Company determines its deferred tax assets and liabilities based upon the difference between the financial statement and tax bases of its assets and liabilities calculated using enacted applicable tax rates. The Company then assesses the likelihood that its deferred tax assets will be recovered from future taxable income and, to the extent it believes that recovery is not likely, a valuation allowance is established. Changes in the valuation allowance, when recorded, are included in the provision for income taxes in the consolidated financial statements.
The Companys unrecognized tax benefits of $4,358 and $3,754 at September 30, 2010 and December 31, 2009, respectively, are uncertain tax positions that would impact the Companys effective tax rate if recognized. The Company does not anticipate a material change in its unrecognized tax benefits during the next twelve months.
There were no tax positions for which the ultimate deductibility was highly uncertain included in the consolidated balance sheet at September 30, 2010 and December 31, 2009. Because of the impact of deferred tax accounting, other than interest and penalties, any disallowance of the shorter deductibility period would not affect the annual effective tax rate, but would accelerate the payment of cash to the taxing authority to an earlier period.
The Company classifies interest expense and penalties as part of its provision for income taxes based upon applicable federal and state interest and underpayment penalty rates. The Company has accrued $1,315 and $1,103 in interest and penalties on its balance sheet at September 30, 2010 and December 31, 2009, respectively. Interest was computed on the difference between the provision for income taxes recognized in accordance with US GAAP and the amount of benefit previously taken or expected to be taken in the Companys federal, state, and local income tax returns.
The Companys federal income tax returns for the tax years 2007 and forward are available for examination by the US Internal Revenue Service (IRS). The Company closed an examination conducted by the IRS of its 2007 federal income tax return during the fourth quarter of 2009. The results of this examination were included in the 2009 provision for income taxes. This examination outcome did not have a material effect on the Companys financial results or its effective tax rate for the year ended December 31, 2009.
The Company has not agreed to extend its federal statute of limitations for the 2007 tax year as of September 30, 2010. The federal statute of limitations for the 2007 tax year will expire on September 15, 2011. The Companys state income tax returns for 2005 through 2009 remain subject to examination by various state authorities, with the latest period closing on December 31, 2014. The Company has extended the statutes of limitations for two state jurisdictions with respect to years prior to 2005. Such statutes of limitations will expire on or before November 15, 2010 unless further extended.
8
Note 7
The Companys capital stock is one hundred percent (100%) owned by its active and retired employees, and there is no public trading market for its stock. No shareholder may sell, transfer, or otherwise dispose of shares of common stock or the voting trust interests issued with respect thereto (common stock, common shares, or shares) without first offering the Company the option to purchase such shares at the price at which the shares were issued. The Company also has the option to purchase at the issue price the common stock of any holder who ceases to be an employee of the Company for any cause other than retirement on a Company pension. All outstanding shares of the Company have been issued at $20.00 per share. The Company has always exercised its purchase option and expects to continue to do so.
Approximately eighty-two percent (82%) and eighty-one percent (81%) of the Companys issued and outstanding shares of common stock was deposited with voting trustees and held under the 2007 Voting Trust Agreement by their beneficial owners as of September 30, 2010 and December 31, 2009, respectively.
At the Companys annual meeting of shareholders on June 10, 2010, the shareholders approved an amendment to the Companys Restated Certificate of Incorporation to increase the number of authorized shares of common stock from 15,000,000 to 20,000,000 shares. The amendment was effective August 2010.
Note 8
The Company has a revolving credit agreement with a group of thirteen banks at an interest rate based on the London Interbank Offered Rate (LIBOR) that consists of an unsecured $200,000 five-year facility expiring in May 2012. There were no amounts outstanding under the credit agreement at September 30, 2010 and December 31, 2009.
Note 9
At September 30, 2010 and December 31, 2009, the Company had a $100,000 trade receivable securitization program that was scheduled to expire in October 2010. Prior to expiration, the Company amended the trade receivable securitization program agreement, effective as of October 8, 2010, to extend the program to October 2011. The trade receivable securitization program provides for the sale of certain of the Companys trade receivables on a revolving basis to Graybar Commerce Corporation (GCC), a wholly-owned, bankruptcy-remote, special-purpose subsidiary. GCC sells an undivided interest in the trade receivables to an unrelated multi-seller commercial paper conduit. In the event that a dislocation in the market for the conduits receivables-backed commercial paper develops and the conduit is unable to purchase the undivided interest offered by GCC, the agent bank for the trade receivable securitization program is obligated to purchase the undivided interest in the trade receivables from GCC under the terms of the program.
The Company accounts for the securitization as an on-balance sheet financing arrangement because the Company has maintained effective control of the trade receivables through a call option that gives GCC the unilateral right to repurchase the undivided interests. Accordingly, the trade receivables and related debt are included in the accompanying consolidated balance sheets. GCC has granted a security interest in its trade receivables to the commercial paper conduit. There were no borrowings outstanding under the trade receivable securitization program at September 30, 2010 and December 31, 2009.
Note 10
Effective January 1, 2010, the Company adopted new accounting guidance that modified the consolidation model in previous guidance and expanded the disclosures related to variable interest entities (VIE). The adoption of this new accounting guidance had no impact on the Companys financial statements.
An entity is considered to be a VIE if its total equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support or if its equity investors, as a group, lack the characteristics of having a controlling financial interest. A reporting company is required to consolidate a VIE as its primary beneficiary when it has both the power to direct the activities of the VIE that most significantly impact the VIE's economic performance and the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE.
The Company has a lease agreement with an independent lessor that is considered to be a VIE. The agreement provides $28,720 of financing for five of the Companys distribution facilities and carries a five-year term expiring July 2013. The financing structure used with this lease qualifies as a silo of a VIE. Graybar, as lessee, retains the power to direct the operational activities that most significantly impact the economic performance of the VIE and has an obligation to absorb losses and the right to receive benefits from the sale of the real property held by the VIE lessor. Therefore, the Company is the primary beneficiary of this VIE, and in accordance with US GAAP, consolidates the silo in its financial statements.
9
As of September 30, 2010, the consolidated silo included in the Companys consolidated financial statements had a net property balance of $15,913, long-term debt of $27,715, and a noncontrolling interest of $1,005. At December 31, 2009, the consolidated silo included in the Companys consolidated financial statements had a net property balance of $16,299, long-term debt of $27,715, and a noncontrolling interest of $1,005.
Under the terms of the lease agreement, the amount guaranteed by the Company as the residual fair value of the property subject to the lease arrangement was $28,720 at September 30, 2010 and December 31, 2009.
Note 11
The Company has a noncontributory defined benefit pension plan covering substantially all full-time employees. The plan provides retirement benefits based on an employees final average earnings and years of service. Employees become one hundred percent (100%) vested after three years of service regardless of age. The Companys plan funding policy is to make contributions, provided that the total annual contributions will not be less than the Employee Retirement Income Security Act (ERISA) and the Pension Protection Act of 2006 minimums or greater than the maximum tax-deductible amount, to review contribution and funding strategy on a regular basis, and to allow discretionary contributions to be made by the Company from time to time. The assets of the defined benefit pension plan are invested primarily in fixed income and equity securities, money market funds, and other investments.
The Company made contributions to its defined benefit pension plan totaling $10,000 and $30,000 during the three and nine month periods ended September 30, 2010, respectively. Contributions made during the three and nine month periods ended September 30, 2009 totaled $8,500 and $24,500, respectively. The Company expects to make additional contributions totaling $10,600 during the remainder of 2010.
Note 12
The Company and its subsidiaries are subject to various claims, disputes, and administrative and legal matters incidental to the Companys past and current business activities. As a result, contingencies may arise resulting from an existing condition, situation, or set of circumstances involving an uncertainty as to the realization of a possible loss.
The Company accounts for loss contingencies in accordance with US GAAP. Estimated loss contingencies are accrued only if the loss is probable and the amount of the loss can be reasonably estimated. With respect to a particular loss contingency, it may be probable that a loss has occurred, but the estimate of the loss is a wide range. If the Company deems some amount within the range to be a better estimate than any other amount within the range, that amount will be accrued. However, if no amount within the range is a better estimate than any other amount, the minimum amount in the range is accrued. While the Company believes that none of these claims, disputes, and administrative and legal matters will have a material adverse effect on its financial position, these matters are uncertain and the Company cannot at this time determine whether the financial impact, if any, of these matters will be material to its results of operations or financial condition in the period in which such matters are resolved or a better estimate becomes available.
Note 13
Comprehensive income for the three months ended September 30, 2010 and 2009 was $22,863 and $14,521, respectively. Comprehensive income for the nine months ended September 30, 2010 and 2009 was $40,315 and $31,835, respectively. Comprehensive income is comprised of net income, foreign currency translation adjustments related to the Companys operations outside of the US, changes in the fair value of the Companys interest rate swap agreement, and the amortization of gains and losses related to the Companys pension and postretirement liabilities.
10
Note 14
The Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (collectively the "Acts") were enacted by the US Congress in March 2010. The Acts have both short- and long-term implications for benefit plan standards. Implementation of this legislation is planned to occur in phases, with some plan standard changes taking effect beginning in 2010 and other changes becoming effective through 2018.
In the short term, the Companys healthcare costs are expected to increase due to the Acts raising of the maximum eligible age for covered dependents to receive benefits, the elimination of the lifetime dollar limits per covered individual, and restrictions on annual dollar limits on essential benefits per covered individual, among other standard requirements. In the long term, the Companys healthcare costs may increase due to the enactment of the excise tax on high cost healthcare plans.
The Company continues to evaluate the impact, if any, the Acts will have on its financial statements as new regulations under the Acts are issued. The Company expects the general trend in healthcare costs to continue to rise and the effects of the Acts, and any future legislation, could materially impact the cost of providing healthcare benefits for many employers, including the Company.
11
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with our accompanying unaudited condensed consolidated financial statements and notes thereto, and our audited consolidated financial statements, notes thereto and Managements Discussion and Analysis of Financial Condition and Results of Operations as of and for the year ended December 31, 2009, included in our Annual Report on Form 10-K for such period as filed with the United States Securities and Exchange Commission (the Commission). The results shown herein are not necessarily indicative of the results to be expected in any future periods.
Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (PSLRA), Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the Exchange Act). These forward-looking statements generally are identified by the words believes, projects, expects, anticipates, estimates, intends, strategy, plan, may, will, would, will be, will continue, will likely result, and similar expressions. The Company intends such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the PSLRA. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties that may cause actual results to differ materially from the forward-looking statements. The Companys ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse impact on the Companys operations and future prospects on a consolidated basis include, but are not limited to: general economic conditions, particularly in the residential, commercial, and industrial building construction industries, volatility in the prices of industrial metal commodities, disruptions in the Companys sources of supply, a sustained interruption in the operation of the Companys information systems, adverse legal proceedings or other claims, and the inability, or limitations on the Companys ability, to raise debt or equity capital. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. The Company undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, unless otherwise required by applicable securities laws. Further information concerning our business, including additional factors that could materially impact our financial results, is included herein and in our other filings with the Commission. Actual results and the timing of events could differ materially from the forward-looking statements as a result of certain factors, a number of which are outlined in Item 1A., Risk Factors, of the Companys Annual Report on Form 10-K for the year ended December 31, 2009.
All dollar amounts are stated in thousands ($000s) in the following discussion and accompanying tables.
Background
Graybar Electric Company, Inc. (Graybar or the Company) is a New York corporation, incorporated in 1925. The Company is engaged in the distribution of electrical, communications and data networking (comm/data) products, and the provision of related supply chain management and logistics services, primarily to electrical and comm/data contractors, industrial plants, telephone companies, federal, state, and local governments, commercial users, and power utilities in North America. All products sold by the Company are purchased by the Company from others. The Companys business activity is primarily with customers in the US. Graybar also has subsidiary operations with distribution facilities in Canada and Puerto Rico.
The Companys capital stock is one hundred percent (100%) owned by its active and retired employees, and there is no public trading market for its stock. No shareholder may sell, transfer or otherwise dispose of shares of common stock or the voting trust interests issued with respect thereto (common stock, common shares, or shares) without first offering the Company the option to purchase such shares at the price at which shares were issued. The Company also has the option to purchase at the issue price the common stock of any holder who ceases to be an employee of the Company for any cause other than retirement on a Company pension. The Company has always exercised its purchase option and expects to continue to do so. All outstanding shares of the Company have been issued at $20.00 per share.
Business Overview
General economic conditions in the Companys North American trading area continued to improve during the nine month period ended September 30, 2010. Capital expenditures on business equipment continue to be positive. Spending on building construction, however, remains constrained by tight credit availability and muted demand for new facilities. As a result, the Companys net sales increased a modest 2.4% during the nine months ended September 30, 2010, while gross margin declined 0.4% during the same period.
12
The Company expects moderate growth in net sales through the end of the year and into 2011. Price competition and rising product costs are expected to continue to depress gross margin as a percent of net sales.
Consolidated Results of Operations
The following table sets forth certain information relating to the operations of the Company stated in thousands of dollars and as a percentage of net sales for the three and nine months ended September 30, 2010 and 2009.
|
|
|
Three Months Ended |
|
|
|
Three Months Ended |
| ||||||
|
|
|
September 30, 2010 |
|
|
|
September 30, 2009 |
| ||||||
|
|
|
Dollars |
|
|
Percent |
|
|
|
Dollars |
|
|
Percent |
|
Net Sales |
|
$ |
1,249,306 |
|
|
100.0 |
% |
|
$ |
1,124,107 |
|
|
100.0 |
% |
Cost of merchandise sold |
|
|
(1,015,311 |
) |
|
(81.3 |
) |
|
|
(908,282 |
) |
|
(80.8 |
) |
Gross Margin |
|
|
233,995 |
|
|
18.7 |
|
|
|
215,825 |
|
|
19.2 |
|
Selling, general and administrative expenses |
|
|
(189,860 |
) |
|
(15.2 |
) |
|
|
(188,741 |
) |
|
(16.8 |
) |
Depreciation and amortization |
|
|
(9,990 |
) |
|
(0.8 |
) |
|
|
(9,582 |
) |
|
(0.9 |
) |
Other income, net |
|
|
545 |
|
|
0.1 |
|
|
|
612 |
|
|
0.1 |
|
Income from Operations |
|
|
34,690 |
|
|
2.8 |
|
|
|
18,114 |
|
|
1.6 |
|
Interest expense, net |
|
|
(1,879 |
) |
|
(0.2 |
) |
|
|
(2,354 |
) |
|
(0.2 |
) |
Income before Provision for Income Taxes |
|
|
32,811 |
|
|
2.6 |
|
|
|
15,760 |
|
|
1.4 |
|
Provision for income taxes |
|
|
(12,886 |
) |
|
(1.0 |
) |
|
|
(5,696 |
) |
|
(0.5 |
) |
Net Income |
|
|
19,925 |
|
|
1.6 |
|
|
|
10,064 |
|
|
0.9 |
|
Less: Net income attributable tononcontrolling interests |
|
|
(82 |
) |
|
-- |
|
|
|
(45 |
) |
|
-- |
|
Net Income attributable toGraybar Electric Company, Inc. |
|
$ |
19,843 |
|
|
1.6 |
% |
|
$ |
10,019 |
|
|
0.9 |
% |
|
|
|
Nine Months Ended |
|
|
|
Nine Months Ended |
| ||||||
|
|
|
September 30, 2010 |
|
|
|
September 30, 2009 |
| ||||||
|
|
|
Dollars |
|
|
Percent |
|
|
|
Dollars |
|
|
Percent |
|
Net Sales |
|
$ |
3,381,251 |
|
|
100.0 |
% |
|
$ |
3,303,247 |
|
|
100.0 |
% |
Cost of merchandise sold |
|
|
(2,743,056 |
) |
|
(81.1 |
) |
|
|
(2,662,267 |
) |
|
(80.6 |
) |
Gross Margin |
|
|
638,195 |
|
|
18.9 |
|
|
|
640,980 |
|
|
19.4 |
|
Selling, general and administrative expenses |
|
|
(549,623 |
) |
|
(16.3 |
) |
|
|
(570,495 |
) |
|
(17.3 |
) |
Depreciation and amortization |
|
|
(29,683 |
) |
|
(0.9 |
) |
|
|
(29,119 |
) |
|
(0.9 |
) |
Other income, net |
|
|
2,773 |
|
|
0.1 |
|
|
|
2,216 |
|
|
0.1 |
|
Income from Operations |
|
|
61,662 |
|
|
1.8 |
|
|
|
43,582 |
|
|
1.3 |
|
Interest expense, net |
|
|
(6,351 |
) |
|
(0.2 |
) |
|
|
(7,954 |
) |
|
(0.2 |
) |
Income before Provision for Income Taxes |
|
|
55,311 |
|
|
1.6 |
|
|
|
35,628 |
|
|
1.1 |
|
Provision for income taxes |
|
|
(22,254 |
) |
|
(0.6 |
) |
|
|
(14,757 |
) |
|
(0.5 |
) |
Net Income |
|
|
33,057 |
|
|
1.0 |
|
|
|
20,871 |
|
|
0.6 |
|
Less: Net income attributable tononcontrolling interests |
|
|
(180 |
) |
|
-- |
|
|
|
(46 |
) |
|
-- |
|
Net Income attributable toGraybar Electric Company, Inc. |
|
$ |
32,877 |
|
|
1.0 |
% |
|
$ |
20,825 |
|
|
0.6 |
% |
Three Months Ended September 30, 2010 Compared to Three Months Ended September 30, 2009
Net sales totaled $1,249,306 for the quarter ended September 30, 2010, compared to $1,124,107 for the quarter ended September 30, 2009, an increase of $125,199, or 11.1%. Net sales to the electrical and comm/data market sectors for the three months ended September 30, 2010 increased 7.9% and 17.6%, respectively, compared to the same three month period of 2009.
Gross margin increased $18,170, or 8.4%, to $233,995 from $215,825, due mainly to higher net sales volume during the three months ended September 30, 2010, compared to the same period of 2009. The Companys gross margin rate on net sales decreased to 18.7% for the three months ended September 30, 2010 from 19.2% for the same period of 2009.
Selling, general and administrative expenses increased $1,119, or 0.6%, to $189,860, in the third quarter of 2010 from $188,741 in the third quarter of 2009, mainly due to higher employee compensation costs. Selling, general and administrative expenses as a percentage of net sales were 15.2% in the third quarter of 2010, down from 16.8% of net sales in the third quarter of 2009.
13
Depreciation and amortization expenses for the three months ended September 30, 2010 increased $408, or 4.3%, to $9,990 from $9,582 in the third quarter of 2009. This increase was due to higher average levels of property, at cost recorded during the quarter ended September 30, 2010, compared to the same period of 2009, primarily equipment acquired under capital leases. Depreciation and amortization expenses as a percentage of net sales decreased to 0.8% for the three months ended September 30, 2010, compared to 0.9% of net sales for the same three month period of 2009.
Other income, net totaled $545 for the three months ended September 30, 2010, compared to $612 for the three months ended September 30, 2009. Other income, net consists primarily of gains (losses) on the disposal of property, trade receivable interest charges to customers, and other miscellaneous income items related to the Companys business activities. The decrease in other income, net was mainly due to higher net losses on the disposal of property for the three months ended September 30, 2010, compared to the three months ended September 30, 2009. Losses on the disposal of property were $(111) for the three months ended September 30, 2010 compared to $(64) for the three months ended September 30, 2009.
Income from operations totaled $34,690 for the three months ended September 30, 2010, an increase of $16,576, or 91.5%, from $18,114 for the three months ended September 30, 2009. The increase was due to higher gross margin, which more than offset higher selling, general and administrative expenses, higher depreciation and amortization expenses, and lower other income, net.
Interest expense, net declined $475, or 20.2%, to $1,879 for the three months ended September 30, 2010 from $2,354 for the three months ended September 30, 2009. This reduction was mainly due to a lower level of outstanding long-term debt in the third quarter of 2010, compared to the same period of 2009. Long-term debt outstanding, including the current portion, was $94,225 at September 30, 2010, compared to $121,863 at September 30, 2009.
The increase in income from operations and reduction in interest expense, net resulted in income before provision for income taxes of $32,811 for the three months ended September 30, 2010, an increase of $17,051, or 108.2%, compared to $15,760 for the three months ended September 30, 2009.
The Companys total provision for income taxes increased $7,190, or 126.2%, to $12,886 for the three months ended September 30, 2010, compared to $5,696 for the same period of 2009. The Companys effective tax rate increased to 39.3% for the three months ended September 30, 2010, up from 36.1% for the same period of 2009. This increase in the effective tax rate was mainly due to changes in unrecognized tax benefits, interest and penalties for the three months ended September 30, 2010, compared to the three months ended September 30, 2009.
Net income attributable to Graybar Electric Company, Inc. for the three months ended September 30, 2010 increased $9,824, or 98.1%, to $19,843 from $10,019 for the three months ended September 30, 2009.
Nine months ended September 30, 2010 Compared to Nine months ended September 30, 2009
Net sales totaled $3,381,251 for the nine month period ended September 30, 2010, compared to $3,303,247 for the nine month period ended September 30, 2009, an increase of $78,004, or 2.4%. Net sales to the electrical market during the nine month period ended September 30, 2010 decreased 0.3%, while net sales to the comm/data market increased 7.9%, for the nine month period ended September 30, 2010, compared to the same nine month period of 2009.
Gross margin decreased $2,785, or 0.4%, to $638,195 from $640,980, due mainly to increased price competition during the first nine months of 2010, coupled with lower net sales during the first half of 2010, compared to the same period of 2009. The Companys gross margin rate on net sales decreased to 18.9% for the nine months ended September 30, 2010 from 19.4% for the same nine month period of 2009.
Selling, general and administrative expenses decreased $20,872, or 3.7%, to $549,623, for the nine month period ended September 30, 2010, compared to $570,495 for the nine month period ended September 30, 2009, mainly due to lower employee compensation costs. Selling, general and administrative expenses as a percentage of net sales for the nine month period ended September 30, 2010 were 16.3%, an improvement from 17.3% for the same nine month period of 2009.
14
Depreciation and amortization expenses for the nine months ended September 30, 2010 increased $564, or 1.9%, to $29,683 from $29,119 for the same nine month period in 2009. This increase was due primarily to an increase in buildings and furniture and fixture assets, partially offset by the disposal of property. Depreciation and amortization expenses as a percentage of net sales remained flat at 0.9% for the nine months ended September 30, 2010, compared to the same nine month period of 2009.
Other income, net totaled $2,773 for the nine month period ended September 30, 2010, compared to $2,216 for the nine month period ended September 30, 2009. Other income, net consists primarily of gains (losses) on the disposal of property, trade receivable interest charges to customers, and other miscellaneous income items related to the Companys business activities. The increase in other income, net was mainly due to net gains on the disposal of property, which were $672 for the nine months ended September 30, 2010, compared to $335 for the nine months ended September 30, 2009.
Income from operations totaled $61,662 for the nine month period ended September 30, 2010, an increase of $18,080, or 41.5%, from $43,582 for the nine month period ended September 30, 2009. The increase was largely due to lower selling, general and administrative expenses and higher other income, net, which more than offset lower gross margin and higher depreciation and amortization expenses.
Interest expense, net declined $1,603, or 20.2%, to $6,351 for the nine month period ended September 30, 2010 from $7,954 for the nine month period ended September 30, 2009. This reduction was mainly due to a lower level of outstanding long-term debt in 2010, compared to 2009. Long-term debt outstanding, including the current portion, was $94,225 at September 30, 2010, compared to $121,863 at September 30, 2009.
The increase in income from operations and reduction in interest expense, net resulted in income before provision for income taxes of $55,311 for the nine month period ended September 30, 2010, an increase of $19,683, or 55.2%, compared to $35,628 for the nine month period ended September 30, 2009.
The Companys total provision for income taxes increased $7,497, or 50.8%, to $22,254 for the nine month period ended September 30, 2010, compared to $14,757 for the same nine month period of 2009, due to an increase in income before provision for income taxes. As a result, the Companys effective tax rate decreased to 40.2% for the nine month period ended September 30, 2010, down from 41.4% for the same nine month period of 2009.
Net income attributable to Graybar Electric Company, Inc. for the nine month period ended September 30, 2010 increased $12,052, or 57.9%, to $32,877 from $20,825 for the nine month period ended September 30, 2009.
Financial Condition and Liquidity
The Company has historically funded its working capital requirements using cash flows generated by the collection of trade receivables and trade accounts payable terms with its suppliers, supplemented by short-term bank lines of credit. Capital assets are financed primarily by the sale of common stock to the Companys employees and long-term debt.
Operating Activities
Net cash used by operations was $22,847 for the nine month period ended September 30, 2010, compared to net cash provided by operations of $48,346 for the same nine month period of 2009. Negative cash flows from operations for the nine months ended September 30, 2010 were primarily attributable to increases in trade receivables of $111,705 and merchandise inventory of $85,984. These negative cash flows were partially offset by net income of $33,057 and an increase in trade accounts payable of $107,197.
Trade receivables increased primarily due to an 11.1% rise in net sales during the quarter ended September 30, 2010, compared to the same period of 2009, but also due to a modest increase in average days of sales outstanding at September 30, 2010. Merchandise inventory balances increased significantly to support rising net sales, particularly during the quarter ended September 30, 2010, while inventory turnover improved modestly for the same period, compared to the three months ended September 30, 2009.
Current assets exceeded current liabilities by $451,211 at September 30, 2010, an increase of $26,218, or 6.2%, from $424,993 at December 31, 2009.
15
Investing Activities
Net cash used by investing activities totaled $17,299 for the nine month period ended September 30, 2010, compared to $20,127 for the same period of 2009. Capital expenditures for property were $18,415 and $21,095, and proceeds from the disposal of property were $1,116 and $968, for the nine month periods ended September 30, 2010 and 2009, respectively. The proceeds received resulted primarily from the sale of real property during the nine month periods ended September 30, 2010 and 2009.
Financing Activities
Net cash used by financing activities totaled $42,747 for the nine month period ended September 30, 2010, compared to $46,222 for the nine month period ended September 30, 2009.
Cash provided by short-term borrowings was $3,656 for the nine month period ended September 30, 2010, compared to cash used for short-term borrowings of $4,168 for the nine month period ended September 30, 2009. The Company made payments on long-term debt, including current portion, of $25,173 and capital lease obligations of $1,418 for the nine month period ended September 30, 2010. During the nine month period ended September 30, 2009, the Company made payments on long-term debt, including current portion, of $25,148 and capital lease obligations of $510.
Cash provided by the sale of common stock amounted to $8,577 and $10,034, and purchases of stock to be held in treasury were $8,069 and $9,158, for the nine month periods ended September 30, 2010 and 2009, respectively. Cash paid for noncontrolling interest common stock was $110 and $61 for the nine month periods ended September 30, 2010 and 2009, respectively. Cash dividends paid were $20,210 and $17,675 for the nine month periods ended September 30, 2010 and 2009, respectively.
Cash and cash equivalents were $80,971 at September 30, 2010, compared to $163,864 at December 31, 2009, a decrease of $82,893, or 50.6%.
Liquidity
The Company has a revolving credit agreement with a group of thirteen banks at an interest rate based on the London Interbank Offered Rate (LIBOR) that consists of an unsecured $200,000 five-year facility expiring in May 2012. There were no amounts outstanding under this credit agreement at September 30, 2010 and December 31, 2009.
At September 30, 2010 and December 31, 2009, the Company had a $100,000 trade receivable securitization program that was scheduled to expire in October 2010. Prior to expiration, the Company amended the trade receivable securitization program agreement, effective as of October 8, 2010, to extend the program to October 2011. The trade receivable securitization program provides for the sale of certain of the Companys trade receivables on a revolving basis to Graybar Commerce Corporation (GCC), a wholly-owned, bankruptcy-remote, special-purpose subsidiary. GCC sells an undivided interest in the trade receivables to an unrelated multi-seller commercial paper conduit. In the event that a dislocation in the market for the conduits receivables-backed commercial paper develops and the conduit is unable to purchase the undivided interest offered by GCC, the agent bank for the trade receivable securitization program is obligated to purchase the undivided interest in the trade receivables from GCC under the terms of the program.
The Company accounts for the securitization as an on-balance sheet financing arrangement because the Company has maintained effective control of the trade receivables through a call option that gives GCC the unilateral right to repurchase the undivided interests. Accordingly, the trade receivables and related debt are included in the accompanying consolidated balance sheets. GCC has granted a security interest in its trade receivables to the commercial paper conduit. There were no borrowings outstanding under the trade receivable securitization program at September 30, 2010 and December 31, 2009.
At September 30, 2010, the Company had unused lines of credit amounting to $307,354 available, compared to $310,504 at December 31, 2009. Certain committed lines of credit had annual fees of up to 92 basis points (0.92%) of the committed lines of credit. These lines are available to meet the short-term cash requirements of the Company.
Short-term borrowings outstanding during the nine month periods ended September 30, 2010 and 2009 ranged from a minimum of $10,786 and $11,189 to a maximum of $20,962 and $65,858, respectively.
16
The revolving credit agreement, the trade receivable securitization program, and certain other note agreements contain various covenants that limit the Companys 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. The Company was in compliance with all covenants under these agreements as of September 30, 2010 and December 31, 2009.
The Company has a lease agreement with an independent lessor that is considered to be a VIE. The agreement provides $28,720 of financing for five of the Companys distribution facilities and carries a five-year term expiring July 2013. The financing structure used with this lease qualifies as a silo of a VIE. Graybar, as lessee, retains the power to direct the operational activities that most significantly impact the economic performance of the VIE and has an obligation to absorb losses and the right to receive benefits from the sale of the real property held by the VIE lessor. Therefore, the Company is the primary beneficiary of this VIE, and in accordance with US GAAP, consolidates the silo in its financial statements.
As of September 30, 2010, the consolidated silo included in the Companys consolidated financial statements had a net property balance of $15,913, long-term debt of $27,715, and a noncontrolling interest of $1,005. At December 31, 2009, the consolidated silo included in the Companys consolidated financial statements had a net property balance of $16,299, long-term debt of $27,715, and a noncontrolling interest of $1,005.
Under the terms of the lease agreement, the amount guaranteed by the Company as the residual fair value of the property subject to the lease arrangement was $28,720 at September 30, 2010 and December 31, 2009.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes in the policies, procedures, controls or risk profile from those provided in Item 7A., Quantitative and Qualitative Disclosures About Market Risk, of the Companys Annual Report on Form 10-K for the year ended December 31, 2009.
Item 4T. Controls and Procedures
(a) Evaluation of disclosure controls and procedures
An evaluation of the effectiveness of the design and operation of the Companys disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of September 30, 2010, was performed under the supervision and with the participation of the Companys management. Based on that evaluation, the Companys management, including the Principal Executive Officer and Principal Financial Officer, concluded that the Companys disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the reports filed or submitted by the Company under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commissions rules and forms.
(b) Changes in internal control over financial reporting
There were no changes in the Companys internal control over financial reporting that occurred during the period covered by this report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, the Companys internal control over financial reporting.
17
PART II. OTHER INFORMATION
Item 2. Unregistered Sales of Equity Securities And Use Of Proceeds
(c) The Company is one hundred percent (100%) owned by its active and retired employees, and there is no public trading market for its common stock. Since 1928, substantially all of the issued and outstanding shares of common stock have been held of record by voting trustees under successive voting trust agreements. Under applicable state law, a voting trust may not have a term greater than ten years. At September 30, 2010, approximately eighty-two percent (82%) of the common stock was held in a voting trust that expires by its terms on March 15, 2017. The participation of shareholders in the voting trust is voluntary at the time the voting trust is created, but is irrevocable during its term. Shareholders who elect not to participate in the voting trust hold their common stock as shareholders of record.
No shareholder may sell, transfer, or otherwise dispose of shares of common stock or the voting trust interests issued with respect thereto (common stock, common shares, or shares) without first offering the Company the option to purchase such shares at the price at which the shares were issued. The Company also has the option to purchase at the issue price the common stock of any holder who dies or ceases to be an employee of the Company for any cause other than retirement on a Company pension. The Company has always exercised its purchase option and expects to continue to do so. All outstanding shares of the Company have been issued at $20.00 per share.
The following table sets forth information regarding purchases of common stock by the Company pursuant to the foregoing provisions:
Issuer Purchases of Equity Securities
Period |
Total Number ofShares Purchased |
Average Price Paid per Share |
Total Number of Shares Purchased as Part of
Publicly |
July 1 to July 31, 2010 |
44,831 |
$20.00 |
N/A |
August 1 to August 31, 2010 |
34,307 |
$20.00 |
N/A |
September 1 to September 30, 2010 |
31,784 |
$20.00 |
N/A |
Total |
110,922 |
$20.00 |
N/A |
18
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.
|
|
GRAYBAR ELECTRIC COMPANY, INC. |
|
|
|
|
|
|
November 8, 2010 |
|
/s/ ROBERT A. REYNOLDS, JR. |
Date |
|
Robert A. Reynolds, Jr. |
|
|
Chairman, President and Chief Executive Officer (Principal Executive Officer) |
|
|
|
November 8, 2010 |
|
/s/ D. BEATTY DALESSANDRO |
Date |
|
D. Beatty DAlessandro |
|
|
Senior Vice President and Chief Financial Officer (Principal Financial Officer) |
|
|
|
November 8, 2010 |
|
/s/ MARTIN J. BEAGEN |
Date |
|
Martin J. Beagen |
|
|
Vice President and Controller (Principal Accounting Officer) |
19
EXHIBIT INDEX
Exhibits
3.1 Restated Certificate of Incorporation as amended, filed as Exhibit 3.1 to the Companys Quarterly Report on Form 10-Q for the Quarter ended June 30, 2010, as filed with the Commission on August 9, 2010 (Commission File No. 000-00255) and incorporated herein by reference.
3.2 By-laws as amended through December 10, 2009, filed as Exhibit 3(ii) to the Companys Current Report on Form 8-K dated December 16, 2009 (Commission File No. 000-00255) and incorporated herein by reference.
10.1 Amendment No. 16 to the Receivables Purchase Agreement, dated as of October 8, 2010, filed as Exhibit 10.1 to the Companys Current Report on Form 8-K dated October 8, 2010, as filed with the Commission on October 8, 2010 (Commission File No. 000-00255) and incorporated herein by reference.
31.1 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 Principal Executive Officer.
31.2 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 Principal Financial Officer.
32.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Principal Executive Officer.
32.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Principal Financial Officer.
20