UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
or
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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:
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(Exact name of registrant as specified in its charter) | |
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(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
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(Address of principal executive offices) | (Zip Code) |
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(Registrant’s telephone number, including area code) |
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Securities registered pursuant to Section 12(b) of the Act: |
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Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
None | N/A | N/A |
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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 NO |
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Indicate by check mark whether the registrant has submitted electronically 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 such files). |
YES NO |
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. |
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Large accelerated filer |
| Accelerated filer |
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| Emerging growth company |
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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. |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). |
YES NO |
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Common Stock Outstanding at July 31, 2022: |
(Number of Shares) |
Graybar Electric Company, Inc. and Subsidiaries
Quarterly Report on Form 10-Q
For the Period Ended June 30, 2022
(Unaudited)
Table of Contents
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PART I. | FINANCIAL INFORMATION | Page | ||
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| Item 1. | Financial Statements |
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| 6 | |
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| Condensed Consolidated Statements of Changes in Shareholders’ Equity | 7 |
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| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 17 | |
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| Item 3. | 22 | ||
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| Item 4. | 22 | ||
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PART II. | OTHER INFORMATION |
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| Item 2. | 23 | ||
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| Item 6. | 24 | ||
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| 25 |
PART I FINANCIAL INFORMATION
Item 1. Financial Statements.
Graybar Electric Company, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
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| Three Months Ended June 30, |
| Six Months Ended June 30, | ||||||||
(Stated in millions, except per share data) |
| 2022 |
| 2021 |
| 2022 |
| 2021 | ||||
Net Sales |
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Cost of merchandise sold |
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Gross Margin |
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Selling, general and administrative expenses |
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Depreciation and amortization |
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Other income, net |
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Income from Operations |
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Non-operating expenses |
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Income before Provision for Income Taxes |
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Provision for income taxes |
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Net Income |
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Net income attributable to noncontrolling interests |
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Net Income attributable to Graybar Electric Company, Inc. |
| $ | |
| $ | |
| $ | |
| $ | |
Net Income attributable to Graybar Electric Company, Inc. per share of Common Stock |
| $ | |
| $ | |
| $ | |
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Cash Dividends per share of Common Stock |
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| $ | |
| $ | |
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Average Common Shares Outstanding |
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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
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| Three Months Ended June 30, |
| Six Months Ended June 30, | ||||||||
(Stated in millions) |
| 2022 |
| 2021 |
| 2022 |
| 2021 | ||||
Net Income |
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| $ | |
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Other Comprehensive Income |
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Foreign currency translation |
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Pension and postretirement benefits liability adjustments (net of |
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Total Other Comprehensive (Loss) Income |
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Comprehensive Income |
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| $ | |
| $ | |
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Less: Comprehensive income attributable to noncontrolling |
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Comprehensive Income attributable to Graybar Electric Company, Inc. |
| $ | |
| $ | |
| $ | |
| $ | |
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
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| June 30, |
| December 31, | |||
(Stated in millions, except share and per share data) |
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ASSETS |
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Current Assets |
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Cash and cash equivalents |
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Trade receivables (less allowances of $ |
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Merchandise inventory |
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Other current assets |
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Total Current Assets |
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Property, at cost |
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Land |
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Buildings |
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Furniture and fixtures |
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Software |
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Finance leases |
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Total Property, at cost |
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Accumulated depreciation and amortization |
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Net Property |
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Operating Lease Right-of-use Assets |
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Other Non-current Assets |
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Total Assets |
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LIABILITIES |
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Current Liabilities |
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Short-term borrowings |
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Current portion of long-term debt |
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Trade accounts payable |
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Accrued payroll and benefit costs |
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Other accrued taxes |
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Current operating lease liabilities |
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Other current liabilities |
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Total Current Liabilities |
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Postretirement Benefits Liability |
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Pension Liability |
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Long-term Debt |
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Non-current Operating Lease Liabilities |
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Other Non-current Liabilities |
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Total Liabilities |
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SHAREHOLDERS’ EQUITY |
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| Shares at |
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Capital Stock | June 30, 2022 |
| December 31, 2021 |
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Common, stated value $ |
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Authorized | |
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Issued to voting trustees | |
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Issued to shareholders | |
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In treasury, at cost | ( |
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Outstanding Common Stock | |
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Advance Payments on Subscriptions to Common Stock |
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Retained Earnings |
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Accumulated Other Comprehensive Loss |
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Total Graybar Electric Company, Inc. Shareholders’ Equity |
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Noncontrolling Interests |
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Total Shareholders’ Equity |
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Total Liabilities and Shareholders’ Equity |
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| $ | |
| $ | |
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
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| Six Months Ended June 30, | ||||
(Stated in millions) |
| 2022 |
| 2021 | ||
Cash Flows from Operating Activities |
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Net Income |
| $ | |
| $ | |
Adjustments to reconcile net income to cash provided by operating activities: |
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Depreciation and amortization |
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Non-cash operating lease expense |
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Deferred income taxes |
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Net gain on disposal of property |
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Net income attributable to noncontrolling interests |
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Changes in assets and liabilities: |
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Trade receivables |
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Merchandise inventory |
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Other current assets |
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Other non-current assets |
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Trade accounts payable |
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Accrued payroll and benefit costs |
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Other current liabilities |
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Other non-current liabilities |
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Total adjustments to net income |
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Net cash provided by operating activities |
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Cash Flows from Investing Activities |
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Proceeds from disposal of property |
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Capital expenditures for property |
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Acquisition of business, net of cash acquired |
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Net cash used by investing activities |
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Cash Flows from Financing Activities |
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Net decrease in short-term borrowings |
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Principal payments under finance arrangements |
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Sales of common stock |
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Purchases of common stock |
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Purchases of noncontrolling interests’ common stock |
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Dividends paid |
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Net cash used by financing activities |
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Net Increase (Decrease) in Cash |
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Cash, Beginning of Year |
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Cash, End of Period |
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Non-cash Investing and Financing Activities |
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Acquisitions of equipment under finance leases |
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| $ | |
Acquisitions of assets under operating leases |
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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
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| (Unaudited, stated in millions) |
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| Graybar Electric Company, Inc. Shareholders’ Equity |
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| Other |
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| Total | |||
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| Retained |
| Comprehensive |
| Noncontrolling |
| Shareholders’ | ||||||
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| Unissued |
| Earnings |
| Loss |
| Interests |
| Equity | ||||||
December 31, 2021 | $ | |
| $ | — |
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| $ | ( |
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Net income |
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Other comprehensive income |
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Stock issued |
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Stock purchased |
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Advance payments |
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Dividends declared |
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March 31, 2022 | $ | |
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Net income |
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Other comprehensive loss |
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Stock issued |
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Stock purchased |
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Advance payments |
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Dividends declared |
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June 30, 2022 | $ | |
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| Graybar Electric Company, Inc. Shareholders’ Equity |
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| Comprehensive |
| Noncontrolling |
| Shareholders’ | ||||||
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| Unissued |
| Earnings |
| Loss |
| Interests |
| Equity | ||||||
December 31, 2020 | $ | |
| $ | — |
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| $ | ( |
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Net income |
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Other comprehensive income |
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Stock issued |
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Stock purchased |
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Advance payments |
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Dividends declared |
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March 31, 2021 | $ | |
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Net income |
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Other comprehensive income |
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Stock issued |
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Stock purchased |
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Advance payments |
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Dividends declared |
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June 30, 2021 | $ | |
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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 millions, except share and per share data)
(Unaudited)
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, 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"). In our primary role as third-party wholesale distributor, we neither manufacture nor contract to manufacture the products that we sell; however, one of our subsidiaries may contract to manufacture some of its private label lighting fixtures. Our business activity is primarily based in the United States (“U.S.”). We also have subsidiary operations with distribution facilities in Canada and Puerto Rico.
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.
The unaudited condensed consolidated financial statements included herein have been prepared by Graybar pursuant to the rules and regulations of the U.S. Securities and Exchange 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 as of and for the year ended December 31, 2021, included in our latest Annual Report on Form 10-K.
Sales revenue is recognized when performance obligations are satisfied, which is typically upon delivery of the product to the customer. Sometimes product is purchased from the manufacturer and 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 transfers to the 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 control passes to the customer at the time of shipment. We also earn revenue for professional services, general contracting services, and storage services. Such service revenue represented less than
and six months ended June 30, 2022 and 2021. Revenue is reported net of all taxes, primarily sales tax, assessed by governmental authorities as a result of revenue-producing transactions.
Our inventory, comprised entirely of finished goods, is stated at the lower of cost (generally determined using the last-in, first-out (“LIFO”) cost method) or market. Inventories valued using the LIFO method comprised
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.
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.
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, 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. 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.
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 to 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 includes March 12, 2020. We have evaluated 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 have the option under our Amended Credit Agreement, as defined in Note 5, “Debt”, to continue to use LIBOR until June 30, 2023. As such, this Update does not have a material impact on our contracts and our consolidated financial statements.
The following table summarizes the percentages of our net sales attributable to each of our vertical markets for the three and six months ended June 30, 2022 and 2021:
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| Three Months Ended June 30, |
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Construction |
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CIG |
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Industrial & Utility |
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Total net sales |
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We had
Our total provision for income taxes was $
Revolving Credit Facility
At June 30, 2022, and December 31, 2021, we, along with Graybar Canada Limited, our Canadian operating subsidiary ("Graybar Canada"), had an unsecured, , $
The Amended Credit Agreement contains customary affirmative and negative covenants for credit facilities of this type, including limitations on us and all but certain of our subsidiaries with respect to indebtedness (with specified, limited exceptions), liens, changes in the nature of our business, investments, mergers and acquisitions, issuance of equity securities, dispositions of assets and dissolution of certain subsidiaries, transactions with affiliates, as well as securitizations, factoring transactions, and transactions with sanctioned parties or in violation of certain US or Canadian anti-corruption and anti-money laundering laws. There are also maximum leverage ratio and minimum interest coverage ratio financial covenants to which we will be subject during the term of the Amended Credit Agreement.
We were in compliance with all covenants under the Amended Credit Agreement as of June 30, 2022 and December 31, 2021.
There were $
Short-term borrowings outstanding during the six months ended June 30, 2022 ranged from a minimum of $
At June 30, 2022, we had unused lines of credit under the Amended Credit Agreement amounting to $
Interest expense, net was $
Private Placement Shelf Agreements
We have an uncommitted, unsecured $
(formerly known as MetLife Investment Advisors, LLC), and MetLife Investment Management Limited (collectively, “MetLife”) and each other MetLife affiliate that becomes a party to the agreement. 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 issuance period ending in June 2024.
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.
Each shelf agreement contains representations and warranties of the Company and the applicable lender, 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 June 30, 2022 and December 31, 2021.
Letters of Credit
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
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 no assets held in the postretirement benefits plan at June 30, 2022 and December 31, 2021.
The net periodic benefit cost for the three and six months ended June 30, 2022 and 2021 includes the following components:
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| Pension Benefits |
| Postretirement Benefits | ||||||||
| Three Months Ended |
| Three Months Ended | ||||||||
| June 30, |
| June 30, | ||||||||
Components of Net Periodic Benefit Cost | 2022 |
| 2021 |
| 2022 |
| 2021 | ||||
Selling, general and administrative expenses: |
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Service cost | $ | |
| $ | |
| $ | |
| $ | |
Total selling, general and administrative expenses | $ | |
| $ | |
| $ | |
| $ | |
Non-operating expenses: |
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Interest cost | $ | |
| $ | |
| $ | |
| $ | |
Expected return on plan assets |
| ( |
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Amortization of net actuarial loss |
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Total non-operating expenses | $ | |
| $ | |
| $ | |
| $ | |
Net periodic benefit cost | $ | |
| $ | |
| $ | |
| $ | |
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| Postretirement Benefits | ||||||||
| Six Months Ended |
| Six Months Ended | ||||||||
| June 30, |
| June 30, | ||||||||
Components of Net Periodic Benefit Cost | 2022 |
| 2021 |
| 2022 |
| 2021 | ||||
Selling, general and administrative expenses: |
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Service cost | $ | |
| $ | |
| $ | |
| $ | |
Total selling, general and administrative expenses | $ | |
| $ | |
| $ | |
| $ | |
Non-operating expenses: |
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Interest cost | $ | |
| $ | |
| $ | |
| $ | |
Expected return on plan assets |
| ( |
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Amortization of net actuarial loss |
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Total non-operating expenses | $ | |
| $ | |
| $ | |
| $ | |
Net periodic benefit cost | $ | |
| $ | |
| $ | |
| $ | |
Our common stock is
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. 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 paid were $
We also have authorized
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| Three Months Ended June 30, 2022 |
| Three Months Ended | ||
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| Amortization of Pension |
| Amortization of Pension | ||
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| Actuarial |
| Actuarial | ||
Affected Line in Condensed Consolidated Statement of Income: |
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Non-operating expenses |
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| $ | |
Tax benefit |
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Total reclassifications for the period, net of tax |
| $ | |
| $ | |
The following table represents amounts reclassified from accumulated other comprehensive loss for the six months ended June 30, 2022 and 2021:
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| Six Months Ended June 30, 2022 |
| Six Months Ended June 30, 2021 | ||
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| Amortization of Pension |
| Amortization of Pension | ||
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| Actuarial |
| Actuarial | ||
Affected Line in Condensed Consolidated Statement of Income: |
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Non-operating expenses |
| $ | |
| $ | |
Tax benefit |
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Total reclassifications for the period, net of tax |
| $ | |
| $ | |
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| Three Months Ended June 30, 2022 |
| Three Months Ended June 30, 2021 | ||||||||||||||
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| Pension and Other Postretirement |
| Total |
| Foreign |
| Pension and Other Postretirement |
| Total | ||||||
Beginning balance April 1, |
| $ | ( |
| $ | ( |
| $ | ( |
| $ | ( |
| $ | ( |
| $ | ( |
Other comprehensive (loss) income before reclassifications |
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Amounts reclassified from accumulated other comprehensive income (net of tax $( |
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Net current-period other comprehensive (loss) income |
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Ending balance June 30, |
| $ | ( |
| $ | ( |
| $ | ( |
| $ | ( |
| $ | ( |
| $ | ( |
The following table represents the activity included in accumulated other comprehensive loss for the six months ended June 30, 2022 and 2021:
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| Six Months Ended June 30, 2022 |
| Six Months Ended June 30, 2021 | ||||||||||||||
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| Pension and Other Postretirement |
| Total |
| Foreign |
| Pension and Other Postretirement |
| Total | ||||||
Beginning balance January 1, |
| $ | ( |
| $ | ( |
| $ | ( |
| $ | ( |
| $ | ( |
| $ | ( |
Other comprehensive (loss) income before reclassifications |
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Amounts reclassified from accumulated other comprehensive income (net of tax $( |
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Net current-period other comprehensive (loss) income |
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Ending balance June 30, |
| $ | ( |
| $ | ( |
| $ | ( |
| $ | ( |
| $ | ( |
| $ | ( |
We are subject to various claims, disputes, and administrative and legal matters incidental to our past and current business activities. As a result, contingencies arise resulting from an existing condition, situation, or set of circumstances involving an uncertainty as to the realization of a possible loss.
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, 2021, 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 (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 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; a sustained interruption in the operation of our information systems; the ongoing impact of the coronavirus (COVID-19) pandemic; 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; 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 December 31, 2021.
All dollar amounts, except per share data, are stated in 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, 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"). In our primary role as third-party wholesale distributor, we neither manufacture nor contract to manufacture the products that we sell; however, one of our subsidiaries may contract to manufacture some of its private label lighting fixtures. Our business activity is primarily based 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. 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
We set new quarterly records for net sales and net income in the second quarter of 2022.
Our net sales for the second quarter of 2022 totaled $2,672.6 million, an increase of $440.2 million, or 19.7%, from net sales of $2,232.4 million for the second quarter of 2021. Gross margin for the second quarter of 2022 increased $117.0 million, or 27.7%, to $539.8 million, compared to gross margin of $422.8 million for the same three-month period ended June 30, 2021. Several factors contributed to the increase in net sales and gross margin, including strong demand, price inflation, and a favorable sales mix. As a result, our gross margin rate increased to 20.2% for the second quarter of 2022, compared to 18.9% for the second quarter of 2021.
Selling, general and administrative (“SG&A”) expenses increased $53.4 million, or 18.0%, to $350.7 million for the three months ended June 30, 2022 from $297.3 million for the three months ended June 30, 2021, primarily due to higher compensation and benefit-related expenses and higher outgoing freight expenses. SG&A as a percentage of net sales decreased to 13.1% for the second quarter of 2022, compared to 13.3% for the same three-month period in 2021.
Income from operations increased $62.2 million, or 54.0%, to $177.4 million for the three months ended June 30, 2022, from $115.2 million for the same three-month period last year. Our increase in gross margin, partially offset by the increase in SG&A expenses, contributed to this improvement. As a result, net income attributable to Graybar for the three months ended June 30, 2022 was $127.6 million, an increase of $47.5 million, or 59.3%, compared to $80.1 million for the same three-month period last year.
Net sales for the six months ended June 30, 2022 were $5,054.4 million, an increase of $921.5 million, or 22.3%, from net sales of $4,132.9 million for the same six-month period last year. Gross margin for the six months ended June 30, 2022 was $1,019.1 million, an increase of $235.4 million, or 30.0%, compared to gross margin of $783.7 million for the same six-month period last year. Gross margin rate was 20.2% for the six-month period ended June 30, 2022, compared to 19.0% for the six-month period ended June 30, 2021. Net income attributable to Graybar for the six months ended June 30, 2022 was $229.8 million, an increase of $102.5 million, or 80.5%, from net income attributable to Graybar of $127.3 million for the same six-month period last year.
While demand for our products and services remains strong, the markets we serve may continue to be affected by variables such as supply chain constraints, raw material shortages, price inflation, geopolitical tensions, labor issues, and the ongoing spread of COVID-19. As we monitor and adapt to changing economic conditions, we remain focused on providing exceptional service to our customers, minimizing potential risks, and managing our business wisely. We will also continue to invest in profitable organic growth, while we seek out new opportunities that will enhance our long-term performance and strengthen our position as a leader in supply chain innovation.
Consolidated Results of Operations
Three Months Ended June 30, 2022 Compared to Three Months Ended June 30, 2021
The following table sets forth certain information relating to our operations stated in millions of dollars and as a percentage of net sales for the three months ended June 30, 2022 and 2021:
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| Three Months Ended |
| Three Months Ended | ||||||||
| Dollars |
| Percent |
| Dollars |
| Percent | ||||
Net Sales | $ | 2,672.6 |
| 100.0 | % |
| $ | 2,232.4 |
| 100.0 | % |
Cost of merchandise sold |
| (2,132.8) |
| (79.8) |
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| (1,809.6) |
| (81.1) |
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Gross Margin |
| 539.8 |
| 20.2 |
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| 422.8 |
| 18.9 |
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Selling, general and administrative expenses |
| (350.7) |
| (13.1) |
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| (297.3) |
| (13.3) |
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Depreciation and amortization |
| (13.2) |
| (0.5) |
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| (12.2) |
| (0.6) |
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Other income, net |
| 1.5 |
| — |
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| 1.9 |
| 0.1 |
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Income from Operations |
| 177.4 |
| 6.6 |
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| 115.2 |
| 5.1 |
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Non-operating expenses |
| (5.5) |
| (0.2) |
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| (7.3) |
| (0.3) |
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Income before Provision for Income Taxes |
| 171.9 |
| 6.4 |
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| 107.9 |
| 4.8 |
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Provision for income taxes |
| (44.1) |
| (1.6) |
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| (27.6) |
| (1.2) |
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Net Income |
| 127.8 |
| 4.8 |
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| 80.3 |
| 3.6 |
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Net income attributable to noncontrolling interests |
| (0.2) |
| — |
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| (0.2) |
| — |
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Net Income attributable to Graybar Electric Company, Inc. | $ | 127.6 |
| 4.8 | % |
| $ | 80.1 |
| 3.6 | % |
Net sales increased to $2,672.6 million for the quarter ended June 30, 2022, compared to $2,232.4 million for the quarter ended June 30, 2021, an increase of $440.2 million, or 19.7%. For the three months ended June 30, 2022, net sales in our construction, CIG,
and industrial & utility vertical markets increased by 17.1%, 19.2%, and 30.1%, respectively, when compared to the same three-month period of 2021.
Gross margin increased $117.0 million, or 27.7%, to $539.8 million from $422.8 million due to increased net sales for the three months ended June 30, 2022, compared to the same period of 2021. Our gross margin as a percentage of net sales was 20.2% for the three months ended June 30, 2022 compared to 18.9% for the same three-month period in 2021. The increase in gross margin rate was primarily due to a favorable sales mix and gross margin initiatives.
SG&A expenses increased $53.4 million, or 18.0%, to $350.7 million in the second quarter of 2022 from $297.3 million in the second quarter of 2021, due to higher compensation and benefit-related expenses and higher outgoing freight expenses for the three months ended June 30, 2022. SG&A expenses as a percentage of net sales were 13.1% for the three months ended June 30, 2022, down from 13.3% for the three months ended June 30, 2021.
Depreciation and amortization for the three months ended June 30, 2022 increased $1.0 million, or 8.2%, to $13.2 million from $12.2 million, compared to the same period in 2021 due to higher intangibles amortization expense and an increase in property, at cost. Total property, at cost, at June 30, 2022 was $1,079.2 million, an increase of $57.6 million, or 5.6%, when compared to total property, at cost, at June 30, 2021 of $1,021.6 million. Depreciation and amortization as a percentage of net sales decreased to 0.5% for the three months ended June 30, 2022, compared to 0.6% for the three months ended June 30, 2021.
Non-operating expenses for the three months ended June 30, 2022 decreased $1.8 million, or 24.7%, to $5.5 million from $7.3 million for the three months ended June 30, 2021. This was primarily due to decreases in non-service cost components of pension net periodic benefit costs of $2.4 million, partially offset by an increase in interest expense, net of $0.5 million for the three months ended June 30, 2022, compared to the same three-month period in 2021. The increase in interest expense, net was due to higher levels of average outstanding short-term borrowings for the three months ended June 30, 2022, compared to the same three-month period in 2021.
Income before provision for income taxes totaled $171.9 million for the three months ended June 30, 2022, an increase of $64.0 million, or 59.3%, from $107.9 million for the three months ended June 30, 2021. The increase was primarily due to our increase in gross margin partially offset by increases in SG&A expenses.
Our total provision for income taxes increased $16.5 million, or 59.8%, to $44.1 million for the three months ended June 30, 2022, compared to $27.6 million for the same period of 2021. This increase in our provision for income taxes was due to increased pretax income. Our effective tax rate was 25.6% for both the three months ended June 30, 2022 and the same period of 2021. The effective tax rate for the three months ended June 30, 2022 was higher than the 21.0% U.S. federal statutory rate primarily due to state, local and foreign income taxes.
Net income attributable to Graybar Electric Company, Inc. for the three months ended June 30, 2022 increased $47.5 million, or 59.3%, to $127.6 million from $80.1 million for the three months ended June 30, 2021.
Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021
The following table sets forth certain information relating to our operations stated in millions of dollars and as a percentage of net sales for the six months ended June 30, 2022 and 2021:
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| Six Months Ended |
| Six Months Ended | ||||||||
| Dollars |
| Percent |
| Dollars |
| Percent | ||||
Net Sales | $ | 5,054.4 |
| 100.0 | % |
| $ | 4,132.9 |
| 100.0 | % |
Cost of merchandise sold |
| (4,035.3) |
| (79.8) |
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| (3,349.2) |
| (81.0) |
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Gross Margin |
| 1,019.1 |
| 20.2 |
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|
| 783.7 |
| 19.0 |
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Selling, general and administrative expenses |
| (674.7) |
| (13.4) |
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|
| (575.2) |
| (13.9) |
|
Depreciation and amortization |
| (26.2) |
| (0.5) |
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|
| (24.4) |
| (0.6) |
|
Other income, net |
| 2.4 |
| — |
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|
| 2.4 |
| — |
|
Income from Operations |
| 320.6 |
| 6.3 |
|
|
| 186.5 |
| 4.5 |
|
Non-operating expenses |
| (11.0) |
| (0.2) |
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|
| (15.1) |
| (0.4) |
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Income before Provision for Income Taxes |
| 309.6 |
| 6.1 |
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| 171.4 |
| 4.1 |
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Provision for income taxes |
| (79.4) |
| (1.6) |
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|
| (43.8) |
| (1.0) |
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Net Income |
| 230.2 |
| 4.5 |
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| 127.6 |
| 3.1 |
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Net income attributable to noncontrolling interests |
| (0.4) |
| — |
|
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| (0.3) |
| — |
|
Net Income attributable to Graybar Electric Company, Inc. | $ | 229.8 |
| 4.5 | % |
| $ | 127.3 |
| 3.1 | % |
Net sales increased to $5,054.4 million for the six months ended June 30, 2022, compared to $4,132.9 million for the six months ended June 30, 2021, an increase of $921.5 million, or 22.3%. Net sales in our construction, CIG, and industrial & utility vertical markets increased by 20.1%, 20.7%, and 33.1%, respectively, for the six months ended June 30, 2022, compared to the same six-month period of 2021.
Gross margin increased $235.4 million, or 30.0%, to $1,019.1 million from $783.7 million due to increased net sales for the six months ended June 30, 2022, compared to the same period of 2021. Our gross margin as a percentage of net sales was 20.2% for the six months ended June 30, 2022 compared to 19.0% for the same six-month period in 2021. The increase in gross margin rate was primarily due to a favorable sales mix and gross margin initiatives.
SG&A expenses increased $99.5 million, or 17.3%, to $674.7 million, for the six months ended June 30, 2022, compared to $575.2 million for the six months ended June 30, 2021, mainly due to higher compensation and benefit-related expenses and higher outgoing freight expenses for the six months ended June 30, 2022. SG&A expenses as a percentage of net sales were 13.4% for the six months ended June 30, 2022, down from 13.9% for the six months ended June 30, 2021.
Depreciation and amortization for the six months ended June 30, 2022 increased $1.8 million, or 7.4%, to $26.2 million from $24.4 million for the same six-month period in 2021, due to higher intangibles amortization expense and an increase in property, at cost. Total property, at cost, at June 30, 2022 was $1,079.2 million, an increase of $57.6 million, or 5.6%, when compared to total property, at cost, at June 30, 2021 of $1,021.6 million. Depreciation and amortization as a percentage of net sales totaled 0.5% for the six months ended June 30, 2022, down from 0.6% for the six months ended June 30, 2021.
Non-operating expenses decreased $4.1 million to $11.0 million for the six months ended June 30, 2022, compared to $15.1 million for the same period of 2021. This was due to decreases in non-service cost components of pension net periodic benefit costs of $5.2 million, partially offset by an increase in interest expense, net of $1.1 for the six months ended June 30, 2022, compared to the same six-month period in 2021. The increase in interest expense, net was due to higher levels of average outstanding short-term borrowings and higher interest rates for the six months ended June 30, 2022, compared to the same six-month period in 2021.
Income before provision for income taxes totaled $309.6 million for the six months ended June 30, 2022, an increase of $138.2 million, or 80.6%, from $171.4 million for the six months ended June 30, 2021. The increase was primarily due to our increase in gross margin partially offset by increases in SG&A expenses.
Our total provision for income taxes increased $35.6 million, or 81.3%, to $79.4 million for the six months ended June 30, 2022, compared to $43.8 million for the same period in 2021. The increase in our provision for income taxes year over year resulted from increased pretax income. Our year-to-date effective tax rate was 25.6% for both the six months ended June 30, 2022 and 2021. The
effective tax rate for the six months ended June 30, 2022 was higher than the 21.0% U.S. federal statutory rate primarily due to state, local, and foreign income taxes.
Net income attributable to Graybar Electric Company, Inc. for the six-month period ended June 30, 2022 increased $102.5 million, or 80.5%, to $229.8 million from $127.3 million for the six months ended June 30, 2021.
Financial Condition and Liquidity
We manage our liquidity and capital levels so that we have the capability 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 invest in strategic long-term growth plans.
We have historically funded our working capital requirements using cash flows generated from the collection of trade receivables and trade accounts payable terms with our suppliers, supplemented by short-term bank lines of credit, if necessary. Capital expenditures have been financed primarily with cash from working capital management and short-term bank lines of credit.
Our cash and cash equivalents at June 30, 2022 were $79.0 million, compared to $48.5 million at December 31, 2021, an increase of $30.5 million, or 62.9%. Cash on hand at June 30, 2022 is reflective of strong cash flows from operating activities as a result of increased net income and effective working capital management. As a result, short-term borrowings decreased by $42.0 million, or 33.8%, to $82.2 million at June 30, 2022, from $124.2 million at December 31, 2021. Current assets exceeded current liabilities by $949.4 million at June 30, 2022, an increase of $219.1 million, or 30.0%, from $730.3 million at December 31, 2021.
Operating Activities
Cash flows provided by operating activities for the six months ended June 30, 2022 was $104.1 million, compared to cash provided by operating activities of $61.2 million for the six months ended June 30, 2021, an increase of $42.9 million, or 70.1%. Cash provided by operating activities for the six months ended June 30, 2022 was primarily attributable to net income of $230.2 million adjusted for non-cash depreciation and amortization expenses of $26.2 million, and an increase in trade accounts payable of $250.5 million during the six months ended June 30, 2022, partially offset by an increase in trade receivables of $184.7 million, an increase in merchandise inventory levels of $141.0 million and a decrease in accrued payroll and benefit costs of $59.8 million from December 31, 2021 to June 30, 2022.
The average number of days of sales in trade receivables for the six-month period ended June 30, 2022 increased moderately compared to the same six-month period ended June 30, 2021. The days in inventory increased significantly for the six months ended June 30, 2022, compared to the six months ended June 30, 2021.
Investing Activities
Net cash used by investing activities totaled $22.5 million for the six months ended June 30, 2022, compared to net cash used by investing activities of $23.5 million for the same six-month period in 2021, a decrease of $1.0 million. The decrease was due to no business acquisitions in 2022, partially offset by higher capital expenditures in the six months ended June 30, 2022, compared to the same six-month period ended June 30, 2021.
Financing Activities
Net cash used by financing activities for the six months ended June 30, 2022 totaled $51.1 million, compared to net cash used by financing activities of $60.6 million for the six months ended June 30, 2021, a decrease of $9.5 million. The decrease was primarily due to net payments on short-term borrowings of $42.0 million during the six months ended June 30, 2022, compared to net payments on short-term borrowings of $50.0 million in the same six-month period in 2021.
Liquidity
Our cash and cash equivalents at June 30, 2022 were $79.0 million, compared to $48.5 million at December 31, 2021. We also had a $750.0 million amended unsecured, committed revolving credit facility (“Amended Credit Agreement”) with $668.1 million in available capacity at June 30, 2022, compared to available capacity of $625.4 million at December 31, 2021. At June 30, 2022 and December 31, 2021, we also had two uncommitted, unsecured private placement shelf agreements ("Shelf Agreements"). One of the Shelf Agreements is expected to allow us to issue senior promissory notes up to $100.0 million to 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. Our other Shelf Agreement is expected to allow us to issue senior promissory notes up to $150.0 million to MetLife Investment Management, LLC (formerly known as MetLife Investment Advisors, LLC), and MetLife Investment Management Limited (collectively, “MetLife”) and each other MetLife affiliate that becomes party to the agreement at fixed or floating rate economic terms to be agreed upon at the time of any issuance during a three-year issuance period ending in June 2024.
We have not issued any notes under the Shelf Agreements as of June 30, 2022 and December 31, 2021. For further discussion related to our Amended Credit Agreement and our Shelf Agreements, refer to Note 5, "Debt", of the notes to the condensed consolidated financial statements located in Item 1., “Financial Statements”, of this Quarterly Report on Form 10-Q.
We had total letters of credit of $7.6 million outstanding at June 30, 2022, of which $1.9 million were issued under the Amended Credit Agreement. We had total letters of credit of $6.1 million outstanding at December 31, 2021, of which $0.4 million was issued under the Amended Credit Agreement. The letters of credit are issued primarily to support certain workers' compensation insurance policies and support performance under certain customer contracts.
New Accounting Standards Updates
Our adoption of new accounting standards is 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, 2021.
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 June 30, 2022, was performed under the supervision and with the participation of management. Based on that evaluation, our management, including the Principal Executive Officer and Principal Financial Officer, concluded that our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the reports filed or submitted by us under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.
(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 of 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. A new Voting Trust Agreement was established effective March 3, 2017, which expires by its terms on March 1, 2027, because under applicable New York law, a voting trust may not have a term greater than ten years. At June 30, 2022, approximately 83% of our outstanding common stock was held in the voting trust. 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. Shareholders may elect to participate in the voting trust at any time during the term of the voting trust.
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. 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
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Period | Total Number of | Average | Total Number of Shares |
April 1 - April 30, 2022 | 56,346 | $20.00 | N/A |
May 1 - May 31, 2022 | 95,206 | $20.00 | N/A |
June 1 - June 30, 2022 | 60,410 | $20.00 | N/A |
Total | 211,962 | $20.00 | N/A |
Item 6. Exhibits.
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3.1 |
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3.2 |
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4 |
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9 |
| Voting Trust Agreement dated as of March 3, 2017, included at Exhibit 4 above. |
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31.1 |
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31.2 |
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32.1 |
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32.2 |
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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. |
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101.SCH |
| XBRL Taxonomy Extension Schema Document |
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101.CAL |
| XBRL Taxonomy Extension Calculation Linkbase Document |
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101.DEF |
| XBRL Taxonomy Extension Definition Linkbase Document |
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101.LAB |
| XBRL Taxonomy Extension Label Linkbase Document |
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101.PRE |
| XBRL Taxonomy Extension Presentation Linkbase Document |
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104 |
| Cover Page Interactive Data File (formatted in Inline XBRL contained in Exhibit 101) |
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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.
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| GRAYBAR ELECTRIC COMPANY, INC. |
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| August 5, 2022 |
| /s/ Kathleen M. Mazzarella |
| Date |
| Kathleen M. Mazzarella |
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| President and Chief Executive Officer (Principal Executive Officer) |
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| August 5, 2022 |
| /s/ David M. Meyer |
| Date |
| David M. Meyer |
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| Senior Vice President and Chief Financial Officer (Principal Financial Officer) |