UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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 | |
(Registrant’s telephone number, including area code) | |
Securities registered pursuant to Section 12(b) of the Act: |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
None | N/A | N/A |
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 |
Indicate by check mark whether the registrant has submitted electronically | |
YES | |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, | |
Large accelerated filer | Accelerated filer | |
Non-accelerated filer | Smaller reporting company | |
Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. | |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). | |
YES | |
Common Stock Outstanding at | |
(Number of Shares) | |
Graybar Electric Company, Inc. and Subsidiaries
Quarterly Report on Form 10-Q
For the Period Ended
(Unaudited)
Table of Contents
PART I. | FINANCIAL INFORMATION | Page | ||||
Item 1. | Financial Statements | |||||
Item 2. | 16 | |||||
Item 3. | 19 | |||||
Item 4. | 19 | |||||
PART II. | OTHER INFORMATION | |||||
Item 2. | 20 | |||||
Item 6. | 21 | |||||
22 | ||||||
PART I FINANCIAL INFORMATION
Item 1. Financial Statements.
| Graybar Electric Company, Inc. and Subsidiaries | ||||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF INCOME | ||||||||||||||
| (Unaudited) | ||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||
| (Stated in thousands, except per share data) | 2017 | 2016 | 2017 | 2016 | ||||||||||
| Gross Sales | $ | 1,708,638 | $ | 1,697,037 | $ | 4,967,349 | $ | 4,806,245 | ||||||
| Cash discounts | (7,795 | ) | (7,418 | ) | (23,055 | ) | (20,625 | ) | ||||||
| Net Sales | 1,700,843 | 1,689,619 | 4,944,294 | 4,785,620 | ||||||||||
| Cost of merchandise sold | (1,378,859 | ) | (1,370,861 | ) | (3,999,588 | ) | (3,881,616 | ) | ||||||
| Gross Margin | 321,984 | 318,758 | 944,706 | 904,004 | ||||||||||
| Selling, general and administrative expenses | (260,752 | ) | (254,969 | ) | (776,135 | ) | (750,266 | ) | ||||||
| Depreciation and amortization | (12,211 | ) | (12,283 | ) | (36,231 | ) | (35,158 | ) | ||||||
| Other income, net | 1,511 | 629 | 5,640 | 3,438 | ||||||||||
| Income from Operations | 50,532 | 52,135 | 137,980 | 122,018 | ||||||||||
| Interest expense, net | (1,217 | ) | (1,215 | ) | (3,082 | ) | (2,635 | ) | ||||||
| Income before Provision for Income Taxes | 49,315 | 50,920 | 134,898 | 119,383 | ||||||||||
| Provision for income taxes | (19,761 | ) | (20,724 | ) | (54,220 | ) | (48,396 | ) | ||||||
| Net Income | 29,554 | 30,196 | 80,678 | 70,987 | ||||||||||
| Less: Net income attributable to noncontrolling interests | (120 | ) | (67 | ) | (229 | ) | (178 | ) | ||||||
| Net Income attributable to Graybar Electric Company, Inc. | $ | 29,434 | $ | 30,129 | $ | 80,449 | $ | 70,809 | ||||||
Net Income per share of Common Stock(A) | $ | 1.68 | $ | 1.73 | $ | 4.57 | $ | 4.07 | ||||||
| Cash Dividends per share of Common Stock | $ | 0.30 | $ | 0.30 | $ | 0.90 | $ | 0.90 | ||||||
Average Common Shares Outstanding(A) | 17,611 | 17,402 | 17,618 | 17,386 | ||||||||||
Graybar Electric Company, Inc. and 16,558 for the three and nine months ended September 30, 2016, respectively.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited) | ||||||
Three Months Ended | ||||||
(Stated in millions, except per share data) | 2021 | 2020 | ||||
Net Sales | $ | 1,900.5 | $ | 1,773.2 | ||
Cost of merchandise sold | (1,539.6) | (1,432.8) | ||||
Gross Margin | 360.9 | 340.4 | ||||
Selling, general and administrative expenses | (277.9) | (290.1) | ||||
Depreciation and amortization | (12.2) | (13.2) | ||||
Other income, net | 0.5 | 0.6 | ||||
Income from Operations | 71.3 | 37.7 | ||||
Non-operating expenses | (7.8) | (7.5) | ||||
Income before Provision for Income Taxes | 63.5 | 30.2 | ||||
Provision for income taxes | (16.2) | (8.7) | ||||
Net Income | 47.3 | 21.5 | ||||
Net income attributable to noncontrolling interests | (0.1) | (0.1) | ||||
Net Income attributable to Graybar Electric Company, Inc. | $ | 47.2 | $ | 21.4 | ||
Net Income attributable to Graybar Electric Company, Inc. per share of Common Stock | $ | 2.07 | $ | 0.94 | ||
Cash Dividends per share of Common Stock | $ | 0.30 | $ | 0.30 | ||
Average Common Shares Outstanding | 22.8 | 22.7 | ||||
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of the Condensed Consolidated Financial Statements.
| Graybar Electric Company, Inc. and Subsidiaries | ||||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ||||||||||||||
| (Unaudited) | ||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||
| (Stated in thousands) | 2017 | 2016 | 2017 | 2016 | ||||||||||
| Net Income | $ | 29,554 | $ | 30,196 | $ | 80,678 | $ | 70,987 | ||||||
| Other Comprehensive Income | ||||||||||||||
| Foreign currency translation | 3,616 | (1,148 | ) | 6,550 | 4,012 | |||||||||
| Pension and postretirement benefits liability adjustment (net of tax of $(1,997), $(1,762), $(5,990), and $(5,286), respectively) | 3,136 | 2,767 | 9,408 | 8,301 | ||||||||||
| Total Other Comprehensive Income | 6,752 | 1,619 | 15,958 | 12,313 | ||||||||||
| Comprehensive Income | $ | 36,306 | $ | 31,815 | $ | 96,636 | $ | 83,300 | ||||||
Less: Comprehensive income attributable to noncontrolling interests, net of tax | 209 | 25 | 457 | 387 | ||||||||||
Comprehensive Income attributable to Graybar Electric Company, Inc. | $ | 36,097 | $ | 31,790 | $ | 96,179 | $ | 82,913 | ||||||
Graybar Electric Company, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited) | ||||||
Three Months Ended | ||||||
(Stated in millions) | 2021 | 2020 | ||||
Net Income | $ | 47.3 | $ | 21.5 | ||
Other Comprehensive Income | ||||||
Foreign currency translation | 1.5 | (9.2) | ||||
Pension and postretirement benefits liability adjustments (net of | 6.6 | 5.5 | ||||
Total Other Comprehensive Income (Loss) | 8.1 | (3.7) | ||||
Comprehensive Income | $ | 55.4 | $ | 17.8 | ||
Less: Comprehensive income (loss) attributable to noncontrolling | 0.2 | (0.2) | ||||
Comprehensive Income attributable to Graybar Electric Company, Inc. | $ | 55.2 | $ | 18.0 | ||
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of the Condensed Consolidated Financial Statements.
| Graybar Electric Company, Inc. and Subsidiaries | |||||||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||||||||
| (Stated in thousands, except share and per share data) | September 30, 2017 | December 31, 2016 | |||||||||||
| ASSETS | (Unaudited) | ||||||||||||
| Current Assets | |||||||||||||
| Cash and cash equivalents | $ | 51,806 | $ | 43,339 | |||||||||
| Trade receivables (less allowances of $5,695 and $5,025, respectively) | 1,050,613 | 964,180 | |||||||||||
| Merchandise inventory | 610,873 | 516,732 | |||||||||||
| Other current assets | 22,659 | 24,148 | |||||||||||
| Total Current Assets | 1,735,951 | 1,548,399 | |||||||||||
| Property, at cost | |||||||||||||
| Land | 78,681 | 78,440 | |||||||||||
| Buildings | 464,829 | 454,587 | |||||||||||
| Furniture and fixtures | 295,498 | 286,615 | |||||||||||
| Software | 87,313 | 87,313 | |||||||||||
| Capital leases | 35,423 | 33,652 | |||||||||||
| Total Property, at cost | 961,744 | 940,607 | |||||||||||
| Less – accumulated depreciation and amortization | (539,639 | ) | (512,535 | ) | |||||||||
| Net Property | 422,105 | 428,072 | |||||||||||
| Other Non-current Assets | 124,132 | 122,761 | |||||||||||
| Total Assets | $ | 2,282,188 | $ | 2,099,232 | |||||||||
| LIABILITIES | |||||||||||||
| Current Liabilities | |||||||||||||
| Short-term borrowings | $ | 216,604 | $ | 140,465 | |||||||||
| Current portion of long-term debt | 2,157 | 4,155 | |||||||||||
| Trade accounts payable | 835,939 | 752,171 | |||||||||||
| Accrued payroll and benefit costs | 85,402 | 121,421 | |||||||||||
| Other accrued taxes | 20,022 | 16,926 | |||||||||||
| Other current liabilities | 86,155 | 73,028 | |||||||||||
| Total Current Liabilities | 1,246,279 | 1,108,166 | |||||||||||
| Postretirement Benefits Liability | 70,769 | 70,628 | |||||||||||
| Pension Liability | 117,064 | 160,950 | |||||||||||
| Long-term Debt | 7,063 | 7,271 | |||||||||||
| Other Non-current Liabilities | 25,029 | 21,328 | |||||||||||
| Total Liabilities | 1,466,204 | 1,368,343 | |||||||||||
| SHAREHOLDERS’ EQUITY | |||||||||||||
| Shares at | |||||||||||||
| Capital Stock | September 30, 2017 | December 31, 2016 | |||||||||||
| Common, stated value $20.00 per share | |||||||||||||
| Authorized | 50,000,000 | 50,000,000 | |||||||||||
| Issued to voting trustees | 14,717,825 | 14,606,830 | |||||||||||
| Issued to shareholders | 3,469,173 | 2,850,551 | |||||||||||
| In treasury, at cost | (590,066 | ) | (18,854 | ) | |||||||||
| Outstanding Common Stock | 17,596,932 | 17,438,527 | 351,939 | 348,771 | |||||||||
| Advance Payments on Subscriptions to Common Stock | 966 | — | |||||||||||
| Retained Earnings | 639,919 | 575,380 | |||||||||||
| Accumulated Other Comprehensive Loss | (180,870 | ) | (196,600 | ) | |||||||||
| Total Graybar Electric Company, Inc. Shareholders’ Equity | 811,954 | 727,551 | |||||||||||
| Noncontrolling Interests | 4,030 | 3,338 | |||||||||||
| Total Shareholders’ Equity | 815,984 | 730,889 | |||||||||||
| Total Liabilities and Shareholders’ Equity | $ | 2,282,188 | $ | 2,099,232 | |||||||||
Graybar Electric Company, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, | December 31, | |||||||||
(Stated in millions, except share and per share data) | 2021 | 2020 | ||||||||
ASSETS | (Unaudited) | |||||||||
Current Assets | ||||||||||
Cash and cash equivalents | $ | 138.8 | $ | 131.2 | ||||||
Trade receivables (less allowances of $7.0 and $6.9, respectively) | 1,138.4 | 1,109.0 | ||||||||
Merchandise inventory | 625.1 | 588.5 | ||||||||
Other current assets | 57.5 | 56.6 | ||||||||
Total Current Assets | 1,959.8 | 1,885.3 | ||||||||
Property, at cost | ||||||||||
Land | 80.0 | 78.9 | ||||||||
Buildings | 508.3 | 504.5 | ||||||||
Furniture and fixtures | 256.1 | 255.7 | ||||||||
Software | 154.6 | 153.5 | ||||||||
Finance leases | 14.3 | 14.6 | ||||||||
Total Property, at cost | 1,013.3 | 1,007.2 | ||||||||
Accumulated depreciation and amortization | (607.0) | (600.6) | ||||||||
Net Property | 406.3 | 406.6 | ||||||||
Operating Lease Right-of-use Assets | 120.6 | 118.8 | ||||||||
Other Non-current Assets | 141.5 | 140.5 | ||||||||
Total Assets | $ | 2,628.2 | $ | 2,551.2 | ||||||
LIABILITIES | ||||||||||
Current Liabilities | ||||||||||
Short-term borrowings | $ | — | $ | 50.0 | ||||||
Current portion of long-term debt | 2.2 | 2.3 | ||||||||
Trade accounts payable | 979.6 | 884.1 | ||||||||
Accrued payroll and benefit costs | 99.7 | 121.7 | ||||||||
Other accrued taxes | 44.8 | 44.2 | ||||||||
Current operating lease liabilities | 31.6 | 31.2 | ||||||||
Other current liabilities | 107.1 | 104.4 | ||||||||
Total Current Liabilities | 1,265.0 | 1,237.9 | ||||||||
Postretirement Benefits Liability | 74.0 | 74.1 | ||||||||
Pension Liability | 192.2 | 197.9 | ||||||||
Long-term Debt | 5.3 | 5.7 | ||||||||
Non-current Operating Lease Liabilities | 97.2 | 95.9 | ||||||||
Other Non-current Liabilities | 4.7 | 4.7 | ||||||||
Total Liabilities | 1,638.4 | 1,616.2 | ||||||||
SHAREHOLDERS’ EQUITY | ||||||||||
Shares at | ||||||||||
Capital Stock | March 31, 2021 | December 31, 2020 | ||||||||
Common, stated value $20.00 per share | ||||||||||
Authorized | 50,000,000 | 50,000,000 | ||||||||
Issued to voting trustees | 19,182,922 | 18,755,472 | ||||||||
Issued to shareholders | 3,979,373 | 3,905,994 | ||||||||
In treasury, at cost | (274,887) | (57,047) | ||||||||
Outstanding Common Stock | 22,887,408 | 22,604,419 | 457.8 | 452.1 | ||||||
Advance Payments on Subscriptions to Common Stock | 1.1 | — | ||||||||
Retained Earnings | 765.4 | 725.1 | ||||||||
Accumulated Other Comprehensive Loss | (238.7) | (246.7) | ||||||||
Total Graybar Electric Company, Inc. Shareholders’ Equity | 985.6 | 930.5 | ||||||||
Noncontrolling Interests | 4.2 | 4.5 | ||||||||
Total Shareholders’ Equity | 989.8 | 935.0 | ||||||||
Total Liabilities and Shareholders’ Equity | $ | 2,628.2 | $ | 2,551.2 | ||||||
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of the Condensed Consolidated Financial Statements.
| Graybar Electric Company, Inc. and Subsidiaries | |||||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||
| (Unaudited) | |||||||
| Nine Months Ended September 30, | |||||||
| (Stated in thousands) | 2017 | 2016 | |||||
| Cash Flows from Operations | |||||||
| Net Income | $ | 80,678 | $ | 70,987 | |||
| Adjustments to reconcile net income to cash provided by operations: | |||||||
| Depreciation and amortization | 36,231 | 35,158 | |||||
| Deferred income taxes | (6,659 | ) | 2,585 | ||||
| Net gains on disposal of property | (270 | ) | (1,786 | ) | |||
| Net income attributable to noncontrolling interests | (229 | ) | (178 | ) | |||
| Changes in assets and liabilities: | |||||||
| Trade receivables | (86,433 | ) | (73,623 | ) | |||
| Merchandise inventory | (94,141 | ) | (83,059 | ) | |||
| Other current assets | 1,489 | 5,632 | |||||
| Other non-current assets | (2,503 | ) | 24,369 | ||||
| Trade accounts payable | 83,768 | 16,571 | |||||
| Accrued payroll and benefit costs | (36,019 | ) | (21,835 | ) | |||
| Other current liabilities | 20,875 | 17,673 | |||||
| Other non-current liabilities | (24,646 | ) | (51,832 | ) | |||
| Total adjustments to net income | (108,537 | ) | (130,325 | ) | |||
| Net cash used by operations | (27,859 | ) | (59,338 | ) | |||
| Cash Flows from Investing Activities | |||||||
| Proceeds from disposal of property | 2,015 | 3,301 | |||||
| Capital expenditures for property | (26,674 | ) | (24,820 | ) | |||
| Acquisition of business, net of cash acquired | — | (59,946 | ) | ||||
| Net cash used by investing activities | (24,659 | ) | (81,465 | ) | |||
| Cash Flows from Financing Activities | |||||||
| Net increase in short-term borrowings | 76,139 | 168,871 | |||||
| Repayment of long-term debt | — | (1,853 | ) | ||||
| Principal payments under capital leases | (3,613 | ) | (4,116 | ) | |||
| Sale of common stock | 15,558 | 15,192 | |||||
| Purchases of common stock | (11,424 | ) | (8,793 | ) | |||
| Sales of noncontrolling interests’ common stock | 627 | — | |||||
| Purchases of noncontrolling interests’ common stock | (392 | ) | (356 | ) | |||
| Dividends paid | (15,910 | ) | (14,962 | ) | |||
| Net cash provided by financing activities | 60,985 | 153,983 | |||||
| Net Increase in Cash | 8,467 | 13,180 | |||||
| Cash, Beginning of Year | 43,339 | 37,931 | |||||
| Cash, End of Period | $ | 51,806 | $ | 51,111 | |||
| Non-cash Investing and Financing Activities | |||||||
| Acquisitions of equipment under capital leases | $ | 1,407 | $ | 314 | |||
Graybar Electric Company, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) | ||||||
Three Months Ended March 31, | ||||||
(Stated in millions) | 2021 | 2020 | ||||
Cash Flows from Operating Activities | ||||||
Net Income | $ | 47.3 | $ | 21.5 | ||
Adjustments to reconcile net income to cash provided by operating activities: | ||||||
Depreciation and amortization | 12.2 | 13.2 | ||||
Non-cash operating lease expense | 8.5 | 8.2 | ||||
Deferred income taxes | (4.4) | (1.1) | ||||
Net income attributable to noncontrolling interests | (0.1) | (0.1) | ||||
Changes in assets and liabilities: | ||||||
Trade receivables | (29.4) | (41.3) | ||||
Merchandise inventory | (36.6) | 7.6 | ||||
Other current assets | (0.9) | (4.5) | ||||
Other non-current assets | (0.6) | (1.1) | ||||
Trade accounts payable | 95.5 | 68.4 | ||||
Accrued payroll and benefit costs | (22.0) | (49.0) | ||||
Other current liabilities | 4.7 | (27.6) | ||||
Other non-current liabilities | (5.5) | (6.6) | ||||
Total adjustments to net income | 21.4 | (33.9) | ||||
Net cash provided (used) by operating activities | 68.7 | (12.4) | ||||
Cash Flows from Investing Activities | ||||||
Proceeds from disposal of property | 0.3 | — | ||||
Capital expenditures for property | (10.0) | (8.1) | ||||
Acquisition of business, net of cash acquired | (0.1) | — | ||||
Net cash used by investing activities | (9.8) | (8.1) | ||||
Cash Flows from Financing Activities | ||||||
Net (decrease) increase in short-term borrowings | (50.0) | 132.0 | ||||
Principal payments under finance arrangements | (0.7) | (2.2) | ||||
Sales of common stock | 11.1 | 10.5 | ||||
Purchases of common stock | (4.3) | (4.2) | ||||
Purchases of noncontrolling interests’ common stock | (0.5) | (0.1) | ||||
Dividends paid | (6.9) | (6.9) | ||||
Net cash (used) provided by financing activities | (51.3) | 129.1 | ||||
Net Increase in Cash | 7.6 | 108.6 | ||||
Cash, Beginning of Year | 131.2 | 60.8 | ||||
Cash, End of Period | $ | 138.8 | $ | 169.4 | ||
Non-cash Investing and Financing Activities | ||||||
Acquisitions of equipment under finance leases | $ | 0.2 | $ | 0.2 | ||
Acquisitions of assets under operating leases | $ | 10.2 | $ | 16.0 | ||
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of the Condensed Consolidated Financial Statements.
| Graybar Electric Company, Inc. and Subsidiaries | |||||||||||||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY | |||||||||||||||||||||||
| (Unaudited, stated in thousands) | |||||||||||||||||||||||
| Graybar Electric Company, Inc. Shareholders’ Equity | |||||||||||||||||||||||
Common Stock | Common Stock Subscribed, Unissued | Retained Earnings | Accumulated Other Comprehensive Loss | Noncontrolling Interests | Total Shareholders’ Equity | ||||||||||||||||||
| December 31, 2015 | $ | 326,482 | $ | — | $ | 548,780 | $ | (190,435 | ) | $ | 3,319 | $ | 688,146 | ||||||||||
| Net income | 70,809 | 178 | 70,987 | ||||||||||||||||||||
| Other comprehensive income | 12,104 | 209 | 12,313 | ||||||||||||||||||||
| Stock issued | 14,238 | 14,238 | |||||||||||||||||||||
| Stock purchased | (8,793 | ) | (356 | ) | (9,149 | ) | |||||||||||||||||
| Advance payments | 954 | 954 | |||||||||||||||||||||
| Dividends declared | (14,962 | ) | (14,962 | ) | |||||||||||||||||||
| September 30, 2016 | $ | 331,927 | $ | 954 | $ | 604,627 | $ | (178,331 | ) | $ | 3,350 | $ | 762,527 | ||||||||||
| Graybar Electric Company, Inc. Shareholders’ Equity | |||||||||||||||||||||||
Common Stock | Common Stock Subscribed, Unissued | Retained Earnings | Accumulated Other Comprehensive Loss | Noncontrolling Interests | Total Shareholders’ Equity | ||||||||||||||||||
| December 31, 2016 | $ | 348,771 | $ | — | $ | 575,380 | $ | (196,600 | ) | $ | 3,338 | $ | 730,889 | ||||||||||
| Net income | 80,449 | 229 | 80,678 | ||||||||||||||||||||
| Other comprehensive income | 15,730 | 228 | 15,958 | ||||||||||||||||||||
| Stock issued | 14,592 | 627 | 15,219 | ||||||||||||||||||||
| Stock purchased | (11,424 | ) | (392 | ) | (11,816 | ) | |||||||||||||||||
| Advance payments | 966 | 966 | |||||||||||||||||||||
| Dividends declared | (15,910 | ) | (15,910 | ) | |||||||||||||||||||
| September 30, 2017 | $ | 351,939 | $ | 966 | $ | 639,919 | $ | (180,870 | ) | $ | 4,030 | $ | 815,984 | ||||||||||
Graybar Electric Company, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited, stated in millions) | |||||||||||||||||
Graybar Electric Company, Inc. Shareholders’ Equity | |||||||||||||||||
Common | Accumulated | ||||||||||||||||
Stock | Other | Total | |||||||||||||||
Common | Subscribed, | Retained | Comprehensive | Noncontrolling | Shareholders’ | ||||||||||||
Stock | Unissued | Earnings | Loss | Interests | Equity | ||||||||||||
December 31, 2020 | $ | 452.1 | $ | — | $ | 725.1 | $ | (246.7) | $ | 4.5 | $ | 935.0 | |||||
Net income | 47.2 | 0.1 | 47.3 | ||||||||||||||
Other comprehensive income | 8.0 | 0.1 | 8.1 | ||||||||||||||
Stock issued | 10.0 | 10.0 | |||||||||||||||
Stock purchased | (4.3) | (0.5) | (4.8) | ||||||||||||||
Advance payments | 1.1 | 1.1 | |||||||||||||||
Dividends declared | (6.9) | (6.9) | |||||||||||||||
March 31, 2021 | $ | 457.8 | $ | 1.1 | $ | 765.4 | $ | (238.7) | $ | 4.2 | $ | 989.8 | |||||
Graybar Electric Company, Inc. Shareholders’ Equity | |||||||||||||||||
Common | Accumulated | ||||||||||||||||
Stock | Other | Total | |||||||||||||||
Common | Subscribed, | Retained | Comprehensive | Noncontrolling | Shareholders’ | ||||||||||||
Stock | Unissued | Earnings | Loss | Interests | Equity | ||||||||||||
December 31, 2019 | $ | 449.5 | $ | — | $ | 694.0 | $ | (250.6) | $ | 4.9 | $ | 897.8 | |||||
Net income | 21.4 | 0.1 | 21.5 | ||||||||||||||
Other comprehensive loss | (3.4) | (0.3) | (3.7) | ||||||||||||||
Stock issued | 9.4 | 9.4 | |||||||||||||||
Stock purchased | (4.2) | (0.1) | (4.3) | ||||||||||||||
Advance payments | 1.1 | 1.1 | |||||||||||||||
Dividends declared | (6.9) | (6.9) | |||||||||||||||
March 31, 2020 | $ | 454.7 | $ | 1.1 | $ | 708.5 | $ | (254.0) | $ | 4.6 | $ | 914.9 | |||||
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of the Condensed Consolidated Financial Statements.
Graybar Electric Company, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Stated in thousands,millions, except share and per share data)
(Unaudited)
1. DESCRIPTION OF THE BUSINESS
Graybar Electric Company, Inc. (“Graybar”, “Company”, "we", "our", or "us") is a New York corporation, incorporated in 1925. We are engaged in the distribution of electrical and communications and data networking products and are a provider of related supply chain management and logistics services. We primarily serve customers in the construction, industrial & utility, and commercial, institutional and government ("CIG"), and industrial & utility vertical markets, with products and services that support new construction, infrastructure updates, building renovation, facility maintenance, repair and operations ("MRO"), and original equipment manufacturers ("OEM"). AllWe purchase all of the products sold by us are purchased by uswe sell from others, and we neither manufacture nor contract to manufacture any products that we sell. Our business activity is primarily with customersbased in the United States (“U.S.”). We also have subsidiary operations with distribution facilities in Canada and Puerto Rico.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Our accounting policies conform to generally accepted accounting principles in the U.S. ("GAAP”) and are applied on a consistent basis among all years presented. Significant accounting policies are described below.
Basis of Presentation
The unaudited condensed consolidated financial statements included herein have been prepared by Graybar pursuant to the rules and regulations of the United StatesU.S. 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 GAAP have been condensed or omitted pursuant to such rules and regulations, although we believe that our disclosures are adequate to make the information presented not misleading. The preparation of financial statements in accordance with GAAP requires the use of estimates and assumptions that affect reported amounts. Our condensed consolidated financial statements include amounts that are based on management’s best estimates and judgments. Actual results could differ from those estimates. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations as of and for the year ended
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 condensed consolidated financial statements presented. Results for interim periods are not necessarily indicative of results to be expected for the full year.
Principles of Consolidation
The condensed consolidated financial statements include the accounts of Graybar and its subsidiary companies. All material intercompany balances and transactions have been eliminated. The ownership interests that are held by owners other than the Company are in subsidiaries consolidatedowned by the Company and are accounted for and reported as noncontrolling interests.
Estimates
The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. Actual results could differ from these estimates.
Revenue Recognition
Sales revenue is recognized when evidenceperformance obligations are satisfied, which is typically upon delivery of a customer arrangement exists, prices are fixedthe product to the customer. Sometimes product is purchased from the manufacturer and determinable,drop-shipped to the customer. We generally take control of the goods when shipped by the manufacturer and then recognize revenue when control of the product title, ownership and risk of loss transfers to the customer, and collectability is reasonably assured.customer. Revenues recognized are primarily for product sales, but may also include freight and handling charges. Our standard warehouse shipping terms are FOB shipping point, under which product titlecontrol passes to the customer at the time of shipment. We also earn revenue for professional services, provided to customersgeneral contracting services, and storage services. Such service revenue represented less than 1% of net sales for supply chain managementthe three months ended March 31, 2021 and logistics services. Service revenue is recognized when services are rendered and completed.2020. Revenue is reported net of all taxes, primarily sales tax, assessed by governmental authorities as a result of revenue-producing transactions, primarily sales tax.transactions.
Outgoing Freight Expenses
We record certain95% of outgoing freight expenses as a component of selling, general and administrative expenses.
Cash and Cash Equivalents
We account for cash on hand, deposits in banks, and other short-term, highly liquid investments with an original maturity of three months or less as cash and cash equivalents.
Allowance for Doubtful Accounts
We perform ongoing credit evaluations of our customers, and a significant portion of our trade receivables is secured by mechanic’s lien or payment bond rights. We maintain allowances to reflect the expected uncollectability of trade receivables based on past collection history andpooled on the aging of the receivables, specific risks identified in the receivables portfolio.portfolio based on current conditions, and expected future economic conditions when necessary. Although actual credit losses have historically been within management’s expectations, additional allowances may be required if the financial condition of our customers were to deteriorate.
Merchandise Inventory
Our inventory, comprised entirely of finished goods, is stated at the lower of cost (determined(generally determined using the last-in, first-out (“LIFO”) cost method) or market. Inventories valued using the LIFO method comprised 89% of the total inventories at March 31, 2021 and 91% at March 31, 2020. LIFO accounting is a method of accounting that, compared with other inventory accounting methods, generally provides better matching of current costs with current sales.
We make provisions for obsolete or excess inventories as necessary to reflect reductions in inventory value.
Vendor Allowances
Our agreements with many of our suppliers provide for us to earn volume incentives based on purchases during the agreement period. Based on the provisions of our vendor agreements, we develop vendor accrual rates by estimating the point at which we will have completed our performance under the agreementagreements and the deferred amounts that will be earned. We perform analyses and review historical trends to ensure the deferred amounts earned are appropriately recorded. Certain vendor agreements contain purchase volume incentives that provide for increased funding when graduated purchase volumes are met. Amounts accrued throughout the year are based on estimates of future activity levels, and could be materially impacted if actual purchase volumes differ. Changes in the estimated amount of incentives are treated as changes in estimate and are recognized in earnings in the period in which the change in estimate occurs. In the event that the operating performance of our suppliers were to decline, however, there can be no assurance that amounts earned would be paid or that the volume incentives would continue to be included in future agreements.
Property and Depreciation
Property, plant and equipment are recorded at cost. Depreciation is expensed on a straight-line basis over the estimated useful lives of the related assets. Interest costs incurred to finance expenditures for major long-term construction projects are capitalized as part of the asset's historical cost and included in property, plant and equipment, then depreciated over the useful life of the asset. Leasehold improvements are amortized over the term of the lease or the estimated useful life of the improvement, whichever is shorter. Expenditures for maintenance and repairs are charged to expense when incurred, while the costs of significant improvements, which extend the useful life of the underlying asset, are capitalized.
Fair Value
We endeavor to utilize the best available information in measuring fair value. GAAP has established a fair value hierarchy, which prioritizes the inputs used in measuring fair value. The tiers in the hierarchy include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own data inputs and assumptions. We have used fair value measurements to value our pension plan assets.
Foreign Currency Exchange Rate
The functional currency for our Canadian subsidiary is the Canadian dollar. Accordingly, its balance sheet amounts are translated at the exchange rates in effect at the end of each reporting period and its statements of income amounts are translated at the average
rates of exchange prevailing during the current period. Currency translation adjustments are included in accumulated other comprehensive loss.
Goodwill
Our goodwill is not amortized, but rather tested annually for impairment. Goodwill is reviewed annually in the fourth quarter and/orand when circumstances or other events might indicate that impairment may have occurred. We first perform a qualitative assessment of goodwill impairment. The qualitative assessment considers several factors including the excess fair value over carrying value as of the last quantitative impairment test, the length of time since the last fair value measurement, the current carrying value, market conditions, actual performance compared to forecasted performance, and the current business outlook. If the qualitative assessment indicates that it is more likely than not that goodwill is impaired, the reporting unit iswould then be quantitatively tested for impairment. If a quantitative assessment iswould be required, the fair value iswould be determined using a variety of assumptions including estimated future cash flows of the reporting unit and applicable discount rates.
Definite Lived Intangible Assets
The cost of intangible assets with determinable useful lives is amortized to reflect the pattern of economic benefits consumed, either on a straight-line or accelerated basis over the estimated periods benefited. Customer relationships, trade names and other non-contractual intangible assets with determinable lives are amortized over periods generally ranging from 53 to 20 years. Intangible assets are tested for impairment if events or circumstances occur indicating that the respective asset might be impaired.
Income Taxes
Our income tax provision is recorded in accordance with a full-year forecasted rate methodology, including discrete items in the periods in which they occur. We recognize deferred tax assets and liabilities to reflect the future tax consequences of events that have been recognized in the financial statements or tax returns. Uncertainty exists regarding tax positions taken in previously filed tax returns still subject to examination and positions expected to be taken in future returns. A deferred tax asset or liability results from the temporary difference between an item’s carrying value as reflected in the financial statements and its tax basis and is calculated using enacted applicable tax rates. We assess the likelihood that our deferred tax assets will be recovered from future taxable income and, to the extent we believe 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 condensed consolidated financial statements. We classify interest expense and penalties as part of our provision for income taxes based upon applicable federal and state interest/underpayment percentages.
Other Postretirement Benefits
We account for postretirement benefits other than pensions by accruing the costs of benefits to be provided over the eligible employees’ periods of active service. These costs are determined on an actuarial basis. Our condensed consolidated balance sheets reflect the funded status of postretirement benefits.
Pension Plan
We sponsor a noncontributory defined benefit pension plan accounted for by accruing the cost to provide the benefits over the eligible employees’ periods of active service. These costs are determined on an actuarial basis. Our condensed consolidated balance sheets reflect the funded status of the defined benefit pension plan.
Leases
We determine if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, current operating lease liabilities, and non-current operating lease liabilities on our condensed consolidated balance sheets. Amounts related to finance leases are included in property and equipment, current portion of long-term debt, and long-term debt on our condensed consolidated balance sheets. ROU assets and lease liabilities are recognized and measured on the date the underlying asset is made available to us.
Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. We use our incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Our lease terms may include options to extend or terminate the lease when it is
reasonably certain that we will exercise that option. Operating lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.
For certain leases, such as real estate and information technology (“IT”) equipment, we account for the lease and non-lease components as a single lease component. For all other leases, we account for the lease and non-lease components separately. We have elected as an accounting policy not to apply the recognition requirements for short-term leases. Therefore, leases with a term of twelve months or less are not recorded on the condensed consolidated balance sheets. Lease expenses associated with short-term leases are immaterial and are recorded in the condensed consolidated statements of income in selling, general and administrative expenses. Additionally, for certain vehicle leases, we apply a portfolio approach to account for the operating lease ROU assets and liabilities.
Non-operating Expenses
Non-operating expenses are comprised of interest expense, net and non-service cost components of the net periodic benefit cost for the pension and other postretirement benefit plans. The non-service cost components include interest cost, expected return on plan assets, amortization of net actuarial gains/losses, amortization of prior service costs/gains, and charges due to settlement of certain plan liabilities.
New Accounting Standards
In March 2020, the FASB issued Accounting Standard Update (“ASU” or “Update”) 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting” that provides temporary relief to the GAAP guidance on contract modifications and hedge accounting standardsto ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to alternative rates. This Update is effective for all entities as of March 12, 2020 through December 31, 2022. The guidance on contract modifications, which is applicable to Graybar, can be applied prospectively from any date beginning March 12, 2020 and may also be applied to modifications of existing contracts made earlier in the interim period that were issued or became effective during 2017includes March 12, 2020. We have had or are expectedevaluated the impact of the adoption of the Update on our contracts and our consolidated financial statements. We do not engage in hedging transactions and we anticipate that our few impacted contracts will continue to use LIBOR until at least December 31, 2021. As such, we currently believe this Update will not have a material impact on our condensed consolidated financial statements except those noted below:
3. REVENUE
The following table summarizes the FASB issued ASU 2016-02, “Leases (Topic 842)” ("ASU 2016-02"). The core principlepercentages of Topic 842 requires that a lessee should recognizeour net sales attributable to each of our vertical markets for the three months ended March 31, 2021 and 2020:
Three Months Ended March 31, | ||||||
2021 | 2020 | |||||
Construction | 58.5 | % | 57.8 | % | ||
CIG | 25.7 | 26.6 | ||||
Industrial & Utility | 15.8 | 15.6 | ||||
Total net sales | 100.0 | % | 100.0 | % | ||
Certain reclassifications have been made to the vertical market assigned to customers in the prior year’s information to conform to the March 31, 2021 presentation.
We had 0 material contract assets, andcontract liabilities, or deferred contract costs recorded on the condensed consolidated balance sheet as of March 31, 2021 and disclose key information about leasing arrangements. The amendmentsDecember 31, 2020. In addition, for the three months ended March 31, 2021 and 2020, revenue recognized in ASU 2016-02 are effective for fiscal yearsthe reporting period that was included in the contract liability balance at the beginning after December 15, 2018, including interim periods within those fiscal years. The guidanceof the period is requirednot material.
Revenue expected to be adopted at the earliest period presented using a modified retrospective approach. We are currently evaluating the impact the provisions will have on our condensed consolidated financial statements.
4. INCOME TAXES
Our total provision for income taxes was $16.2 million for the three months ended March 31, 2021. We record our income tax provision using a full-year forecasted methodology, including discrete items in the condensed consolidated financial statements.
Our unrecognized tax benefits of $2,066 and $1,755$1.7 million at September 30, 2017both March 31, 2021 and December 31, 2016, respectively,2020, are uncertain tax positions that would impact our effective tax rate if recognized. We are periodically engaged in tax return examinations, reviewsthe review of statute of limitationslimitation periods, and settlements surrounding income taxes. We do not anticipate a material change in unrecognized tax benefits during the next twelve months.
We classify interest expense and penalties as part of our provision for income taxes based upon applicable federal and state interest/interest and underpayment percentages. We have accrued
In response to the COVID-19 pandemic, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed into law on March 27, 2020. The CARES Act, among other things, includes tax provisions relating to refundable payroll tax credits, deferment of employer social security payments, net operating loss utilization and carryback periods, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property (“QIP”). On December 27, 2020, the Taxpayer Certainty and Disaster Tax Relief Act of 2020 was enacted as part of the Consolidated Appropriations Act, 2021, followed by the American Rescue Plan Act on March 1, 2021. These recent laws, among many other provisions, expand and extend the refundable employee retention tax credits previously made available under the CARES Act and allow a full deduction for business meals for the 2021 and 2022 tax years. At this point we do not believe that these changes will have a material impact on our income tax provision for 2021. We will continue to evaluate the impact of new legislation on our financial position, results of operations, and cash flows.
Our federal income tax returns for the tax years 20142017 and forward are available for examination by the United StatesU.S. Internal Revenue Service (“IRS”). The statute of limitations for the 20142017 federal return will expire on SeptemberOctober 15, 2018, unless extended by consent.2021. Our state income tax returns for 20122016 through 20162020 remain subject to examination by various state authorities with the latest period closing on December 31, 2021.2025. We have not extended the statutes of limitations in any state jurisdictions with respect to years prior to 2012.2016.
5. DEBT
Revolving Credit Facility
At March 31, 2021 and December 31, 2020, we, along with Graybar Canada Limited, our Canadian operating subsidiary ("Graybar Canada"), had an unsecured, five-year, $750.0 million committed revolving credit agreement maturing in August 2023 with Bank of America, N.A. and the other lenders named therein (the "Amended Credit Agreement"), which includes a combined letter of credit sub-facility of up to $25.0 million, a U.S. swing-line loan facility of up to $75.0 million, and a Canadian swing-line loan facility of up to $20.0 million. The Amended Credit Agreement includes a $100.0 million sublimit (in U.S. or Canadian dollars) for borrowings by Graybar Canada. The Amended Credit Agreement contains an accordion feature, which allows us to request increases in the aggregate borrowing commitments of up to $375.0 million.
We were in compliance with all covenants under the Amended Credit Agreement as of March 31, 2021 and December 31, 2020.
There were 0 short-term borrowings under the Amended Credit Agreement at March 31, 2021, compared to $50.0 million of short-term borrowings at December 31, 2020.
Short-term borrowings outstanding during the three months ended March 31, 2021 ranged from a minimum of $0.0 million to a maximum of $50.0 million. Short-term borrowings outstanding during the three months ended March 31, 2020 ranged from a minimum of $55.0 million to a maximum of $270.0 million.
At March 31, 2021, we had unused lines of credit under the Amended Credit Agreement amounting to $749.6 million available, compared to $699.6 million at December 31, 2020. These lines are available to meet our short-term cash requirements and are subject to annual fees of up to 40 basis points (0.40%).
Interest expense, net was $0.2 million and $0.9 million for the three months ended March 31, 2021 and 2020, respectively.
Private Placement Shelf Agreements
We have an uncommitted, unsecured $100.0 million private placement shelf agreement (the “Prudential Shelf Agreement”) with PGIM, Inc., which is expected to allow us to issue senior promissory notes to affiliates of PGIM, Inc. at fixed rate terms to be agreed upon at the time of any issuance during a three-year issuance period ending in August 2023. We also have an uncommitted, unsecured $100.0 million private placement shelf agreement (the "MetLife Shelf Agreement") with Metropolitan Life Insurance Company and MetLife Investment Advisors, LLC and each other affiliate of MetLife that becomes a party to the agreement (collectively, "MetLife"). The MetLife Shelf Agreement is expected to allow us to issue senior promissory notes to MetLife at fixed or floating rate economic terms to be agreed upon at the time of issuance during a three-year period ending in August 2021.
We remain obligated under a most favored lender clause which is designed to ensure that any notes in the future under the Prudential Shelf Agreement and MetLife Shelf Agreement will continue to be of equal ranking with indebtedness under our Amended Credit Agreement.
NaN notes have been issued under either the Prudential Shelf Agreement or the MetLife Shelf Agreement as of March 31, 2021 and December 31, 2020.
Each shelf agreement contains representations and warranties of the Company and the applicable lender, customary events of default and affirmative and negative covenants, customary for agreements of this type. These covenants are substantially similar to those contained in the Amended Credit Agreement, subject to a number of exceptions and qualifications set forth in the applicable shelf agreement. All outstanding obligations of Graybar under one or both of these agreements may be declared immediately due and payable upon the occurrence of an event of default.
We were in compliance with all covenants under the Prudential Shelf Agreement and the MetLife Shelf Agreement as of March 31, 2021 and December 31, 2020.
Letters of Credit
We had total letters of credit of $6.3 million outstanding at both March 31, 2021 and December 31, 2020, of which $0.4 million were issued under the Amended Credit Agreement. The letters of credit are issued primarily to support certain workers' compensation insurance policies.
6. PENSION AND OTHER POSTRETIREMENT BENEFITS
We have a noncontributory defined benefit pension plan (the "Pension Plan") covering substantially all employees first hired prior to July 1, 2015 after the completion of one year of service and 1,000 hours of service. The Pension Plan provides retirement benefits based on an employee’s final average earnings and years of service. These employees become 100% vested after three years of service, regardless of age. A supplemental benefit plan provides nonqualified pension benefits for compensation in excess of the IRS compensation limits applicable to the Pension Plan and eligible compensation deferred by a participant.
Our funding policy is to make contributions to the Pension Plan, provided that the total annual contributions will not be less than the Employee Retirement Income Security Act of 1974 (“ERISA”) and the Pension Protection Act of 2006 minimums or greater than the maximum tax-deductible amount, to review the contribution and funding strategy on a regular basis, and to allow discretionary contributions to be made by us from time to time. The assets of the Pension Plan are invested primarily in fixed income investments and equity securities. We pay nonqualified pension benefits when they are due according to the terms of the supplemental benefit plan.
We provide certain postretirement healthcare and life insurance benefits to retired employees. Substantially all of our employees hired or rehired prior to 2014 may become eligible for postretirement medical benefits if they reach the age and service requirements of the retiree medical plan and retire on a pension (except a deferred pension) under the Pension Plan. Medical benefits are self-insured and claims are administered through a third party administrator. The cost of coverage is determined based on the annual projected plan costs. The participant's premium or cost is determined based on Company guidelines. Postretirement life insurance benefits are insured through an insurance company. We fund postretirement benefits as incurred, and accordingly, there were 0 assets held in the postretirement benefits plan at March 31, 2021 and December 31, 2020.
The net periodic benefit cost for the three months ended March 31, 2021 and 2020 includes the following components:
Pension Benefits | Postretirement Benefits | ||||||||||
Three Months Ended | Three Months Ended | ||||||||||
March 31, | March 31, | ||||||||||
Components of Net Periodic Benefit Cost | 2021 | 2020 | 2021 | 2020 | |||||||
Selling, general and administrative expenses: | |||||||||||
Service cost | $ | 7.6 | $ | 7.2 | $ | 0.6 | $ | 0.5 | |||
Total selling, general and administrative expenses | $ | 7.6 | $ | 7.2 | $ | 0.6 | $ | 0.5 | |||
Non-operating expenses: | |||||||||||
Interest cost | $ | 6.1 | $ | 7.0 | $ | 0.4 | $ | 0.6 | |||
Expected return on plan assets | (7.8) | (8.4) | — | — | |||||||
Amortization of: | |||||||||||
Net actuarial loss | 8.6 | 7.2 | 0.3 | 0.2 | |||||||
Total non-operating expenses | $ | 6.9 | $ | 5.8 | $ | 0.7 | $ | 0.8 | |||
Net periodic benefit cost | $ | 14.5 | $ | 13.0 | $ | 1.3 | $ | 1.3 | |||
We made qualified and nonqualified pension contributions totaling $11.6 million during the three-month period ended March 31, 2021 and contributions totaling $11.8 million during the three-month period ended March 31, 2020. Additional contributions of $30.0 million are expected to be paid during the remainder of 2021, but may change at our discretion.
7. CAPITAL STOCK
Our common stock is 100% owned by active and retired employees, and there is no public trading market for our 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 New York law, a voting trust may not have a term greater than ten years. Accordingly, aA new Voting Trust Agreement was established effective March 3, 2017, which expires by its terms on March 1, 2027.2027 because under applicable New York law, a voting trust may not have a term greater than ten years. At
No holder of our common stock or voting trust interests representing our common stock ("common stock", "common shares", or "shares") may sell, transfer or otherwise dispose of any shares without first offering us the option to purchase those shares at the price at which they were issued. Additionally, a shareholder was entitled to any cash dividends, if any, accrued for the quarter in which the purchase offer is made, adjusted pro rata for the number of days such shares were held prior to the dividend record date. On June 8, 2017, the shareholders voted to remove this adjustment for accruing dividends on the common stock. We also have the option to purchase at the issue price the common shares of any shareholder who ceases to be an employee for any reason other than death or "retirement" (as defined in our amended restated certificate of incorporation), and on the first anniversary of any holder's death. In the past, we have always exercised these purchase options, and we expect to continue to do so in the foreseeable future. However, we can make no assurance that we will continue to exercise our purchase option in the future. All outstanding shares have been issued at
Cash dividends declaredpaid were $5,286 and $4,985$6.9 million for the
We also have authorized 10,000,000 shares of Delegated Authority Preferred Stock (“preferred stock”), par value one cent ($0.01). The preferred stock may be issued in one or more series, with the designations, relative rights, preferences, and limitations of shares of each such series being fixed by a resolution of our Board of Directors. There were no0 shares of preferred stock outstanding at September 30, 2017March 31, 2021 and December 31, 2016.
| Pension Benefits | Postretirement Benefits | ||||||||||||
| Three Months Ended September 30, | Three Months Ended September 30, | ||||||||||||
| Components of Net Periodic Benefit Cost | 2017 | 2016 | 2017 | 2016 | |||||||||
| Service cost | $ | 6,604 | $ | 6,342 | $ | 582 | $ | 572 | |||||
| Interest cost | 6,954 | 7,066 | 711 | 757 | |||||||||
| Expected return on plan assets | (7,658 | ) | (6,754 | ) | — | — | |||||||
| Amortization of: | |||||||||||||
| Net actuarial loss | 5,376 | 4,791 | 197 | 177 | |||||||||
| Prior service cost (gain) | 105 | 106 | (545 | ) | (545 | ) | |||||||
| Net periodic benefit cost | $ | 11,381 | $ | 11,551 | $ | 945 | $ | 961 | |||||
| Pension Benefits | Postretirement Benefits | ||||||||||||
| Nine Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||
| Components of Net Periodic Benefit Cost | 2017 | 2016 | 2017 | 2016 | |||||||||
| Service cost | $ | 19,812 | $ | 19,026 | $ | 1,745 | $ | 1,716 | |||||
| Interest cost | 20,863 | 21,197 | 2,133 | 2,272 | |||||||||
| Expected return on plan assets | (22,973 | ) | (20,262 | ) | — | — | |||||||
| Amortization of: | |||||||||||||
| Net actuarial loss | 16,127 | 14,373 | 591 | 531 | |||||||||
| Prior service cost (gain) | 315 | 318 | (1,635 | ) | (1,635 | ) | |||||||
| Net periodic benefit cost | $ | 34,144 | $ | 34,652 | $ | 2,834 | $ | 2,884 | |||||
8. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The following table represents amounts reclassified from accumulated other comprehensive income (loss)loss for the
Three Months Ended | Three Months Ended | |||||
Amortization of Pension | Amortization of Pension | |||||
Actuarial | Actuarial | |||||
Affected Line in Condensed Consolidated Statement of Income: | ||||||
Non-operating expenses | $ | 8.9 | $ | 7.4 | ||
Tax benefit | (2.3) | (1.9) | ||||
Total reclassifications for the period, net of tax | $ | 6.6 | $ | 5.5 | ||
| Three Months Ended September 30, 2017 | Three Months Ended September 30, 2016 | |||||||||||||||||||||||
| Amortization of Pension and Other Postretirement Benefits Items | Amortization of Pension and Other Postretirement Benefits Items | |||||||||||||||||||||||
| Actuarial Losses Recognized | Prior Service Costs Recognized | Total | Actuarial Losses Recognized | Prior Service Costs Recognized | Total | |||||||||||||||||||
| Affected Line in Condensed Consolidated Statement of Income: | ||||||||||||||||||||||||
Selling, general and administrative expenses | $ | 5,573 | $ | (440 | ) | $ | 5,133 | $ | 4,968 | $ | (439 | ) | $ | 4,529 | ||||||||||
| Tax (benefit) expense | (2,168 | ) | 171 | (1,997 | ) | (1,933 | ) | 171 | (1,762 | ) | ||||||||||||||
| Total reclassifications for the period, net of tax | $ | 3,405 | $ | (269 | ) | $ | 3,136 | $ | 3,035 | $ | (268 | ) | $ | 2,767 | ||||||||||
| Nine Months Ended September 30, 2017 | Nine Months Ended September 30, 2016 | |||||||||||||||||||||||
| Amortization of Pension and Other Postretirement Benefits Items | Amortization of Pension and Other Postretirement Benefits Items | |||||||||||||||||||||||
| Actuarial Losses Recognized | Prior Service Costs Recognized | Total | Actuarial Losses Recognized | Prior Service Costs Recognized | Total | |||||||||||||||||||
| Affected Line in Condensed Consolidated Statement of Income: | ||||||||||||||||||||||||
| Selling, general and administrative expenses | $ | 16,718 | $ | (1,320 | ) | $ | 15,398 | $ | 14,904 | $ | (1,317 | ) | $ | 13,587 | ||||||||||
| Tax (benefit) expense | (6,503 | ) | 513 | (5,990 | ) | (5,798 | ) | 512 | (5,286 | ) | ||||||||||||||
| Total reclassifications for the period, net of tax | $ | 10,215 | $ | (807 | ) | $ | 9,408 | $ | 9,106 | $ | (805 | ) | $ | 8,301 | ||||||||||
The following table represents the activity included in accumulated other comprehensive income (loss)loss for the
| Three Months Ended September 30, 2017 | Three Months Ended September 30, 2016 | |||||||||||||||||||||||
| Foreign Currency | Pension and Other Postretirement Benefits | Total | Foreign Currency | Pension and Other Postretirement Benefits | Total | |||||||||||||||||||
| Beginning balance July 1, | $ | (7,548 | ) | $ | (179,985 | ) | $ | (187,533 | ) | $ | (7,507 | ) | $ | (172,485 | ) | $ | (179,992 | ) | ||||||
| Other comprehensive income (loss) before reclassifications | 3,527 | — | 3,527 | (1,106 | ) | — | (1,106 | ) | ||||||||||||||||
| Amounts reclassified from accumulated other comprehensive income (net of tax $(1,997) and $(1,762)) | — | 3,136 | 3,136 | — | 2,767 | 2,767 | ||||||||||||||||||
| Net current-period other comprehensive income (loss) | 3,527 | 3,136 | 6,663 | (1,106 | ) | 2,767 | 1,661 | |||||||||||||||||
| Ending balance September 30, | $ | (4,021 | ) | $ | (176,849 | ) | $ | (180,870 | ) | $ | (8,613 | ) | $ | (169,718 | ) | $ | (178,331 | ) | ||||||
| Nine Months Ended September 30, 2017 | Nine Months Ended September 30, 2016 | |||||||||||||||||||||||
| Foreign Currency | Pension and Other Postretirement Benefits | Total | Foreign Currency | Pension and Other Postretirement Benefits | Total | |||||||||||||||||||
| Beginning balance January 1, | $ | (10,343 | ) | $ | (186,257 | ) | $ | (196,600 | ) | $ | (12,416 | ) | $ | (178,019 | ) | $ | (190,435 | ) | ||||||
| Other comprehensive income (loss) before reclassifications | 6,322 | — | 6,322 | 3,803 | — | 3,803 | ||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive income (net of tax $(5,990) and $(5,286)) | — | 9,408 | 9,408 | — | 8,301 | 8,301 | ||||||||||||||||||
| Net current-period other comprehensive income (loss) | 6,322 | 9,408 | 15,730 | 3,803 | 8,301 | 12,104 | ||||||||||||||||||
| Ending balance September 30, | $ | (4,021 | ) | $ | (176,849 | ) | $ | (180,870 | ) | $ | (8,613 | ) | $ | (169,718 | ) | $ | (178,331 | ) | ||||||
Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | |||||||||||||||||
Foreign | Pension and Other Postretirement | Total | Foreign | Pension and Other Postretirement | Total | |||||||||||||
Beginning balance January 1, | $ | (5.1) | $ | (241.6) | $ | (246.7) | $ | (7.7) | $ | (242.9) | $ | (250.6) | ||||||
Other comprehensive income (loss) before reclassifications | 1.4 | — | 1.4 | (8.9) | — | (8.9) | ||||||||||||
Amounts reclassified from accumulated other comprehensive income (net of tax $(2.3) and $(1.9)) | — | 6.6 | 6.6 | — | 5.5 | 5.5 | ||||||||||||
Net current-period other comprehensive income (loss) | 1.4 | 6.6 | 8.0 | (8.9) | 5.5 | (3.4) | ||||||||||||
Ending balance March 31, | $ | (3.7) | $ | (235.0) | $ | (238.7) | $ | (16.6) | $ | (237.4) | $ | (254.0) | ||||||
9. COMMITMENTS AND CONTINGENCIES
We are subject to various claims, disputes, and administrative and legal matters incidental to our 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.
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 we deem an 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 of the range is accrued. While we believe that none of these claims, disputes, administrative, and legal matters will have a material adverse effect on our financial position, these matters are uncertain and we cannot at this time determine whether the financial impact, if any, of these matters will be material to our results of operations in the period duringin which such matters are resolved or a better estimate becomes available.
Item 2. Management’s 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 Management’s Discussion and Analysis of Financial Condition and Results of Operations as of and for the year ended
December 31,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 (the “PSLRA”), Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words “believes”, “projects”, “expects”, “anticipates”, “estimates”, “intends”, “strategy”, “plan”, “may”, “will”, “would”, “will
“will be”, “will continue”, “will likely result”, and other similar expressions. We intend 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. Our 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 our 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 pricesongoing impact of industrial commodities; cyber-attacks;the coronavirus (COVID-19) pandemic; a sustained interruption in the operation of our information systems; volatility in the prices of industrial commodities; cyber-attacks; increased funding requirements and expenses related to our pension plan; disruptions in our sources of supply; the inability, or limitations on our ability to borrow under our existing credit facilities or any replacements thereof; disruptions in our sources of supply; compliance with increasing governmental regulations; adverse legal proceedings or other claims; compliance with changing governmental regulations; and the inability, or limitations on our 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. We undertake 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 law. 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 our Annual Report on Form 10-K for the year ended
All dollar amounts, except per share data, are stated in thousands ($000s)millions in the following discussion and accompanying tables.
Background
Graybar Electric Company, Inc. (“Graybar”, “Company”, "we", "our", or "us") is a New York corporation, incorporated in 1925. We are engaged in the distribution of electrical and communications and data networking products and are a provider of related supply chain management and logistics services. We primarily serve customers in the construction, industrial & utility and commercial, institutional and government ("CIG"), and industrial & utility vertical markets, with products and services that support new construction, infrastructure updates, building renovation, facility maintenance, repair and operations ("MRO"), and original equipment manufacturers ("OEMs"OEM"). AllWe purchase all of the products sold by us are purchased by uswe sell from others, and we neither manufacture nor contract to manufacture any products we sell. Our business activity is primarily with customersbased in the United States ("U.S."). We also have subsidiary operations with distribution facilities in Canada and Puerto Rico.
Our common stock is 100% owned by active and retired employees, and there is no public trading market for our common stock. No holder of our common stock or voting trust interests representing our common stock (“common stock”, “common shares”, or “shares”) may sell, transfer, or otherwise dispose of any shares without first offering us the option to purchase those shares at the price at which they were issued. Additionally, a shareholder was entitled to any cash dividends, if any, accrued for the quarter in which the purchase offer is made, adjusted pro rata for the number of days such shares were held prior to the dividend record date. On June 8, 2017, the shareholders voted to remove this adjustment for accruing dividends on the common stock. We also have the option to purchase at the issue price the common shares of any shareholder who ceases to be an employee for any reason other than death or "retirement" (as defined in our amended restated certificate of incorporation), and on the first anniversary of any holder's death. In the past, we have always exercised these purchase options, and we expect to continue to do so in the foreseeable future. However, we can make no assurance that we will continue to exercise our purchase option in the future. All outstanding shares have been issued at $20.00 per share.
Business Overview
Following several quarters of 2017, our net sales totaled $1,700,843, an increase of $11,224, or 0.7%, comparedvolatility and instability due to the same period last year. SalesCOVID-19 pandemic (the “pandemic”), economic conditions showed signs of improvement in our industrial & utility and construction vertical markets increased 9.9% and 0.5%, respectively, while our CIG vertical marketearly 2021. Graybar’s performance in the first quarter reflected this positive trend. Net sales decreased 7.8% for the quarter. Although gross margin rate remained constant at 18.9% for the three months ended September 30, 2017 and 2016, respectively, grossMarch 31, 2021 were $1,900.5 million, an increase of $127.3 million, or 7.2%, compared to $1,773.2 million for
the three months ended March 31, 2020. Gross margin increased $3,226,$20.5 million, or 1.0%6.0%, to $321,984$360.9 million for the three months ended September 30, 2017, from $318,758March 31, 2021, compared to gross margin of $340.4 million for the same three-month period of 2016 as a result oflast year.
Income from operations increased $33.6 million, or 89.1%, to $71.3 million for the three months ended March 31, 2021, compared to $37.7 million for the three months ended March 31, 2020. Net sales growth, along with our pricing and product diversification initiatives andsustained focus on managing our acquisition in the prior year.
While the overall economy appears to be recovering from the same period last year. Year-to-date net sales inpandemic, the markets we serve may continue to be affected by variables such as supply chain constraints, raw material shortages, labor issues, and the ongoing spread of COVID-19 and its variants. Graybar remains focused on providing exceptional service to our industrial & utilitycustomers, minimizing potential risks, and construction vertical markets increased 10.7% and 3.9%, respectively, while our CIG vertical market net sales decreased 5.7%. Gross marginsustaining a strong financial position for the nine months ended September 30, 2017 was $944,706, an increase of $40,702, or 4.5%, compared to gross margin of $904,004 for the same nine-month period last year. Gross margin rate was 19.1% for the nine-month period ended September 30, 2017 compared to 18.9% for the nine-month period ended September 30, 2016. Net income attributable to the Company for the nine months ended September 30, 2017 increased $9,640, or 13.6%, to $80,449.
Consolidated Results of Operations
Three Months Ended March 31, 2021 Compared to Three Months Ended March 31, 2020
The following table sets forth certain information relating to our operations stated in thousandsmillions of dollars and as a percentage of net sales for the three and nine months ended
Three Months Ended | Three Months Ended | ||||||||||
Dollars | Percent | Dollars | Percent | ||||||||
Net Sales | $ | 1,900.5 | 100.0 | % | $ | 1,773.2 | 100.0 | % | |||
Cost of merchandise sold | (1,539.6) | (81.0) | (1,432.8) | (80.8) | |||||||
Gross Margin | 360.9 | 19.0 | 340.4 | 19.2 | |||||||
Selling, general and administrative expenses | (277.9) | (14.6) | (290.1) | (16.4) | |||||||
Depreciation and amortization | (12.2) | (0.6) | (13.2) | (0.7) | |||||||
Other income, net | 0.5 | — | 0.6 | — | |||||||
Income from Operations | 71.3 | 3.8 | 37.7 | 2.1 | |||||||
Non-operating expenses | (7.8) | (0.4) | (7.5) | (0.4) | |||||||
Income before Provision for Income Taxes | 63.5 | 3.4 | 30.2 | 1.7 | |||||||
Provision for income taxes | (16.2) | (0.9) | (8.7) | (0.5) | |||||||
Net Income | 47.3 | 2.5 | 21.5 | 1.2 | |||||||
Net income attributable to noncontrolling interests | (0.1) | — | (0.1) | — | |||||||
Net Income attributable to Graybar Electric Company, Inc. | $ | 47.2 | 2.5 | % | $ | 21.4 | 1.2 | % | |||
| Three Months Ended | Three Months Ended | ||||||||||||
| September 30, 2017 | September 30, 2016 | ||||||||||||
| Dollars | Percent | Dollars | Percent | ||||||||||
| Net Sales | $ | 1,700,843 | 100.0 | % | $ | 1,689,619 | 100.0 | % | |||||
| Cost of merchandise sold | (1,378,859 | ) | (81.1 | ) | (1,370,861 | ) | (81.1 | ) | |||||
| Gross Margin | 321,984 | 18.9 | 318,758 | 18.9 | |||||||||
| Selling, general and administrative expenses | (260,752 | ) | (15.3 | ) | (254,969 | ) | (15.1 | ) | |||||
| Depreciation and amortization | (12,211 | ) | (0.7 | ) | (12,283 | ) | (0.7 | ) | |||||
| Other income, net | 1,511 | 0.1 | 629 | — | |||||||||
| Income from Operations | 50,532 | 3.0 | 52,135 | 3.1 | |||||||||
| Interest expense, net | (1,217 | ) | (0.1 | ) | (1,215 | ) | (0.1 | ) | |||||
| Income before Provision for Income Taxes | 49,315 | 2.9 | 50,920 | 3.0 | |||||||||
| Provision for income taxes | (19,761 | ) | (1.2 | ) | (20,724 | ) | �� | (1.2 | ) | ||||
| Net Income | 29,554 | 1.7 | 30,196 | 1.8 | |||||||||
| Less: Net income attributable to noncontrolling interests | (120 | ) | — | (67 | ) | — | |||||||
Net Income attributable to Graybar Electric Company, Inc. | $ | 29,434 | 1.7 | % | $ | 30,129 | 1.8 | % | |||||
| Nine Months Ended | Nine Months Ended | ||||||||||||
| September 30, 2017 | September 30, 2016 | ||||||||||||
| Dollars | Percent | Dollars | Percent | ||||||||||
| Net Sales | $ | 4,944,294 | 100.0 | % | $ | 4,785,620 | 100.0 | % | |||||
| Cost of merchandise sold | (3,999,588 | ) | (80.9 | ) | (3,881,616 | ) | (81.1 | ) | |||||
| Gross Margin | 944,706 | 19.1 | 904,004 | 18.9 | |||||||||
| Selling, general and administrative expenses | (776,135 | ) | (15.7 | ) | (750,266 | ) | (15.7 | ) | |||||
| Depreciation and amortization | (36,231 | ) | (0.7 | ) | (35,158 | ) | (0.7 | ) | |||||
| Other income, net | 5,640 | 0.1 | 3,438 | — | |||||||||
| Income from Operations | 137,980 | 2.8 | 122,018 | 2.5 | |||||||||
| Interest expense, net | (3,082 | ) | (0.1 | ) | (2,635 | ) | — | ||||||
| Income before Provision for Income Taxes | 134,898 | 2.7 | 119,383 | 2.5 | |||||||||
| Provision for income taxes | (54,220 | ) | (1.1 | ) | (48,396 | ) | (1.0 | ) | |||||
| Net Income | 80,678 | 1.6 | 70,987 | 1.5 | |||||||||
| Less: Net income attributable to noncontrolling interests | (229 | ) | — | (178 | ) | — | |||||||
Net Income attributable to Graybar Electric Company, Inc. | $ | 80,449 | 1.6 | % | $ | 70,809 | 1.5 | % | |||||
Net sales increased to
Gross margin increased $3,226,$20.5 million, or 1.0%6.0%, to $321,984$360.9 million from $340.4 million primarily due to increased net sales for the three months ended September 30, 2017, from $318,758 forMarch 31, 2021, compared to the same period of 2016. The increase in gross margin was primarily due to pricing and product diversification initiatives and recent acquisitions, as well as increased net sales in the third quarter of 2017.2020. Our gross margin as a percentpercentage of net sales was 18.9%totaled 19.0% for the
SG&A expenses ("SG&A")
Depreciation and amortization expenses for the
Non-operating expenses increased $0.3 million to $7.8 million for the three months ended March 31, 2021, compared to $629$7.5 million for the three months ended September 30, 2016. Other income, net consists primarilysame period of gains on the disposal of property, trade receivable interest charges to customers, and other miscellaneous income items related to our business activities.2020. The increase in other income, net was primarily due to favorable settlementsan increase in non-service cost components of prior claimspension net periodic benefit costs of $1.1 million offset by a decrease in interest expense, net of $0.7 million for the three months ended September 30, 2017March 31, 2021, compared to the same three-monththree-month period in 2016.
Income before provision for income taxes totaled
Our total provision for income taxes decreased $963,increased $7.5 million, or 4.6%86.2%, to $19,761$16.2 million for the three months ended September 30, 2017,March 31, 2021, compared to $20,724$8.7 million for the same period of 2016.in 2020. The decreaseincrease in our provision for income taxes is due to loweryear over year resulted from increased pretax incomeincome. Our year-to-date effective tax rate was 25.5% for the three months ended September 30, 2017 asMarch 31, 2021, compared to the same period28.8% for 2020, primarily driven by reductions in 2016. Our effective2021 permanent adjustment limitations, state expense, and discrete tax rate was 40.1% for the three months ended September 30, 2017, compared to 40.7% for the same period of 2016.charges. The effective tax rate for the three months ended September 30, 2017 and 2016March 31, 2021 was higher than the 35.0%21.0% U.S. federal statutory rate primarily due to state, local, and localforeign income taxes.
Net income attributable to Graybar Electric Company, Inc. for the
three-month period ended March 31, 2021 increased $25.8 million, or 120.6%, to $47.2 million from $21.4 million for the three months endedFinancial Condition and Liquidity
We manage our liquidity and capital levels so that we have the capacitycapability to invest in the growth of our business, meet debt service obligations, finance anticipated capital expenditures, pay dividends, make benefit payments, finance information technology needs, fund acquisitions and finance other miscellaneous cash outlays. We believe that maintaining a strong company financial condition enables us to competitively access multiple financing channels, maintain an optimal cost of capital and enable our company to invest in strategic long-term growth plans.
We have historically funded our working capital requirements using cash flows generated byfrom the collection of trade receivables and trade accounts payable terms with our suppliers, supplemented by short-term bank lines of credit.credit, if necessary. Capital expenditures have been financed primarily bywith cash from working capital management and short-term bank lines of credit and long-term debt.
Our cash and cash equivalents at September 30, 2017March 31, 2021 were $51,806,$138.8 million, compared to $43,339$131.2 million at December 31, 2016,2020, an increase of $8,467,$7.6 million, or 19.5%5.8%. OurCash on hand at March 31, 2021 is reflective of improved cash flows from operations as a result of effective working capital management. As a result, we had no short-term borrowings increased significantly, $76,139, or 54.2% during the nine-month periodat March 31, 2021, compared to $216,604 at September 30, 2017 from $140,465$50.0 million at December 31, 2016, primarily due to higher working capital investment required to support operating activities due to the growth in sales, funding of employee benefits, and additional voluntary pension contributions, all funded via short-term lines of credit.2020. Current assets exceeded current liabilities by $489,672$694.8 million at September 30, 2017,March 31, 2021, an increase of $49,439,$47.4 million, or 11.2%7.3%, from $440,233$647.4 million at December 31, 2016.
Operating Activities
Cash usedflows provided by operationsoperating activities for the ninethree months ended
The average number of days of sales in trade receivables for the nine-monththree-month period ended September 30, 2017 decreased modestlyMarch 31, 2021 improved significantly compared to the same nine-monththree-month period ended September 30, 2016. MerchandiseMarch 31, 2020. The days in inventory turnover improved modestlymoderately for the ninethree months ended September 30, 2017,March 31, 2021, compared to the ninethree months ended September 30, 2016.
Investing Activities
Net cash used by investing activities totaled $24,659$9.8 million for the ninethree months ended September 30, 2017,March 31, 2021, compared to $81,465net cash used by investing activities of $8.1 million for the same nine-monththree-month period in 2016, a decrease2020, an increase of $56,806, or 69.7%.$1.7 million. The decreaseincrease was primarily due to the purchase of Cape Electric for $59,946 during the nine months ended September 30, 2016, partially offset by slightly higher capital expenditures in the ninethree months ended September 30, 2017,March 31, 2021, compared to the ninethree months ended September 30, 2016. Proceeds onMarch 31, 2020.
Financing Activities
Net cash used by financing activities for the disposal of property decreased during the ninethree months ended September 30, 2017,March 31, 2021 totaled $51.3 million, compared to 2016 primarily as a result of disposing of a local distribution facility that provided proceeds of $1,686 in the first quarter of 2016.
Liquidity
Our cash and cash equivalents at March 31, 2021 were $138.8 million, compared to $131.2 million at December 31, 2020. We also had a $550,000$750.0 million amended committed revolving credit facility (“Amended Credit Agreement”) with $333,396$749.6 million in available capacity at
We have not issued any notes under the shelf agreementsShelf Agreements as of
We had total letters of credit of $
New Accounting Standards Updates
Our adoption of new accounting standards areis discussed in Note 2, "Summary of Significant Accounting Policies", of the notes to the condensed consolidated financial statements located in Item 1., "Financial Statements", of this Quarterly Report on Form 10-Q.
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 our Annual Report on Form 10-K for the year ended
December 31,Item 4. Controls and Procedures.
(a) Evaluation of disclosure controls and procedures
An evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of
(b) Changes in internal control over financial reporting
There were no changes in our internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are likely to materially affect, our internal control over financial reporting.
PART II -– OTHER INFORMATION
Item 2. Unregistered Sales of Equity Securities and Use Ofof Proceeds.
Our common stock is 100% owned by active and retired employees, and there is no public trading market for our 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 New York law, a voting trust may not have a term greater than ten years. Accordingly, aA new Voting Trust Agreement was established effective March 3, 2017, which expires by its terms on March 1, 2027.2027 because under applicable New York law, a voting trust may not have a term greater than ten years. At
No holder of our common stock or voting trust interests representing our common stock ("common stock", "common shares", or "shares") may sell, transfer, or otherwise dispose of any shares without first offering us the option to purchase those shares at the price at which they were issued. Additionally, a shareholder was entitled to any cash dividends, if any, accrued for the quarter in which the purchase offer is made, adjusted pro rata for the number of days such shares were held prior to the dividend record date. On June 8, 2017, the shareholders voted to remove this adjustment for accruing dividends on the common stock. We also have the option to purchase at the issue price the common shares of any shareholder who ceases to be an employee for any cause other than death or "retirement" (as defined in our amended restated certificate of incorporation), and on the first anniversary of any holder's death. In the past, we have always exercised these purchase options, and we expect to continue to do so in the foreseeable future. However, we can make no assurance that we will continue to exercise our purchase option in the future. All outstanding shares have been issued at $20.00 per share.
The following table sets forth information regarding purchases of common stock by the Company, all of which were made pursuant to the foregoing provisions:
Issuer Purchases of Equity Securities
Period | Total Number of | Average | Total Number of Shares |
January 1 - January 31, 2021 | 62,652 | $20.00 | N/A |
February 1 - February 28, 2021 | 48,475 | $20.00 | N/A |
March 1 - March 31, 2021 | 106,713 | $20.00 | N/A |
Total | 217,840 | $20.00 | N/A |
| Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | |||||
| July 1 - July 31, 2017 | 100,701 | $20.00 | N/A | |||||
| August 1 - August 31, 2017 | 97,188 | $20.00 | N/A | |||||
| September 1 - September 30, 2017 | 42,697 | $20.00 | N/A | |||||
| Total | 240,586 | $20.00 | N/A | |||||
Item 6. Exhibits.
3.1 | ||
3.2 | ||
4 | ||
9 | Voting Trust Agreement dated as of March 3, 2017, included at Exhibit | |
10.1 | ||
10.2 | ||
31.1 | ||
31.2 | ||
32.1 | ||
32.2 | ||
101.INS | XBRL Instance Document – the instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document. | |
101.SCH | XBRL Taxonomy Extension Schema Document | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | |
104 | Cover Page Interactive Data File (formatted in Inline XBRL contained in Exhibit 101) | |
* Compensation arrangement |
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. | |||
April 26, 2021 | /s/ | ||
| Kathleen M. Mazzarella | |||
Date | Kathleen M. Mazzarella | ||
President and Chief Executive Officer (Principal Executive Officer) | |||
April 26, 2021 | /s/ | ||
Date | Scott S. Clifford | ||
Senior Vice President and Chief Financial Officer (Principal Financial Officer) |