-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Fr13cLhRY/OX/TIoZdhTJiVymdIP+TjneswsylLwd6/GcD9t4GOQ2l8mNsAayebR FKzlz1H/IQtOiU6JCstVhw== 0001068800-06-001395.txt : 20061113 0001068800-06-001395.hdr.sgml : 20061110 20061109174105 ACCESSION NUMBER: 0001068800-06-001395 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20060930 FILED AS OF DATE: 20061113 DATE AS OF CHANGE: 20061109 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GRAYBAR ELECTRIC CO INC CENTRAL INDEX KEY: 0000205402 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-ELECTRICAL APPARATUS & EQUIPMENT, WIRING SUPPLIES [5063] IRS NUMBER: 130794380 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-00255 FILM NUMBER: 061203968 BUSINESS ADDRESS: STREET 1: 34 N MERAMEC AVE CITY: ST LOUIS STATE: MO ZIP: 63105 BUSINESS PHONE: 3145129200 MAIL ADDRESS: STREET 1: P O BOX 7231 CITY: ST LOUIS STATE: MO ZIP: 63177 10-Q 1 gray10q.txt GRAYBAR ELECTRIC COMPANY, INC. FORM 10-Q CONFORMED --------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q Commission File Number 0-255 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2006 -------------------------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to --------------- ---------------- GRAYBAR ELECTRIC COMPANY, INC. -------------------------------------------------- (Exact name of registrant as specified in its charter) NEW YORK 13 - 0794380 -------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 34 NORTH MERAMEC AVENUE, ST. LOUIS, MO 63105 -------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) POST OFFICE BOX 7231, ST. LOUIS, MO 63177 -------------------------------------------------------------------------- (Mailing Address) (Zip Code) Registrant's telephone number, including area code: (314) 573 - 9200 -------------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO ----- ----- Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Large Accelerated Filer ( ) Accelerated Filer ( ) Non-Accelerated Filer (X)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) YES NO X ----- ----- Common Stock Outstanding at October 31, 2006: 5,818,955 ---------------------- (Number of Shares) PART I - FINANCIAL INFORMATION Item 1. Financial Statements GRAYBAR ELECTRIC COMPANY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In Thousands except for Share and Per Share Data) (Unaudited)
SEPTEMBER 30, 2006 DECEMBER 31, 2005 -------------------------- ------------------------- ASSETS CURRENT ASSETS Cash and cash equivalents $ 16,384 $ 9,074 Trade receivables 740,334 633,980 Merchandise inventory 452,922 428,127 Other current assets 22,064 15,587 -------------------------- ------------------------- Total Current Assets 1,231,704 1,086,768 PROPERTY Land 40,368 37,958 Buildings 305,730 301,474 Furniture and fixtures 161,911 157,470 Software 76,906 76,906 Capital leases --- 3,741 -------------------------- ------------------------- Total Property, at cost 584,915 577,549 Less - Accumulated depreciation and amortization (267,573) (257,700) -------------------------- ------------------------- Net Property 317,342 319,849 OTHER NON-CURRENT ASSETS 37,034 36,770 -------------------------- ------------------------- TOTAL ASSETS $ 1,586,080 $ 1,443,387 ========================== ========================= LIABILITIES CURRENT LIABILITIES Short-term borrowings $ 92,725 $ 55,910 Current portion of long-term debt 31,910 32,133 Trade accounts payable 535,935 460,548 Accrued payroll and benefit costs 46,469 50,542 Other accrued taxes 14,854 12,715 Dividends payable --- 6,139 Other payables and accruals 90,109 69,892 -------------------------- ------------------------- Total Current Liabilities 812,002 687,879 POSTRETIREMENT BENEFITS LIABILITY 75,174 77,524 PENSION LIABILITY 60,081 60,081 LONG-TERM DEBT 208,948 233,527 OTHER NON-CURRENT LIABILITIES 3,053 2,941 -------------------------- ------------------------- TOTAL LIABILITIES $ 1,159,258 $ 1,061,952 -------------------------- ------------------------- 2 GRAYBAR ELECTRIC COMPANY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS - continued (In thousands except for Share and Per Share Data) (Unaudited) SEPTEMBER 30, 2006 DECEMBER 31, 2005 -------------------------- ------------------------- SHAREHOLDERS' EQUITY CAPITAL STOCK Preferred: Par value, $0.01 per share Authorized, 10,000,000 shares Outstanding: None Common: Stated value, $20 per share Authorized, 15,000,000 shares SHARES ---------------------------------------- September 30, December 31, 2006 2005 ------------------ ------------------ Issued to voting trustees 5,838,702 5,505,983 Issued to shareholders 280,834 309,412 In treasury, at cost (259,783) (22,992) ------------------ ------------------ Outstanding 5,859,753 5,792,403 $ 117,195 $ 115,848 Advance payments on subscriptions to common stock 451 --- RETAINED EARNINGS 350,386 308,935 ACCUMULATED OTHER COMPREHENSIVE LOSS (41,210) (43,348) -------------------------- ------------------------- TOTAL SHAREHOLDERS' EQUITY 426,822 381,435 -------------------------- ------------------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,586,080 $ 1,443,387 ========================== =========================
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of the condensed consolidated financial statements. 3 GRAYBAR ELECTRIC COMPANY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In Thousands except for Per Share Data) (Unaudited)
QUARTER ENDED SEPTEMBER 30, ---------------------------------------------------------- 2006 2005 -------------------------- --------------------------- SALES, NET OF RETURNS AND ALLOWANCES $ 1,333,554 $ 1,134,570 Less - Cash Discounts (5,093) (4,219) -------------------------- -------------------------- Net Sales 1,328,461 1,130,351 COST OF MERCHANDISE SOLD 1,082,723 914,814 -------------------------- -------------------------- Gross Margin 245,738 215,537 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 202,294 186,341 DEPRECIATION AND AMORTIZATION 8,655 9,158 -------------------------- -------------------------- Income from Operations 34,789 20,038 OTHER INCOME, NET 524 1,464 INTEREST EXPENSE 5,758 6,528 -------------------------- -------------------------- Income Before Provision for Income Taxes 29,555 14,974 PROVISION FOR INCOME TAXES Current 15,143 3,099 Deferred (3,467) 3,040 -------------------------- -------------------------- Total Provision for Income Taxes 11,676 6,139 -------------------------- -------------------------- NET INCOME $ 17,879 $ 8,835 ========================== ========================== NET INCOME PER SHARE OF COMMON STOCK (NOTE 3) $ 3.05 $ 1.52 ========================== ========================== COMMON STOCK DIVIDEND - $0.30 per share $ 1,761 $ 1,660 ========================== ========================== AVERAGE COMMON SHARES OUTSTANDING (NOTE 3) 5,861 5,797 ========================== ==========================
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of the condensed consolidated financial statements. 4 GRAYBAR ELECTRIC COMPANY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In Thousands except for Per Share Data) (Unaudited)
NINE MONTHS ENDED SEPTEMBER 30, --------------------------------------------------------- 2006 2005 -------------------------- ------------------------ SALES, NET OF RETURNS AND ALLOWANCES $ 3,780,181 $ 3,179,352 Less - Cash Discounts (14,034) (11,588) -------------------------- ------------------------ Net Sales 3,766,147 3,167,764 COST OF MERCHANDISE SOLD 3,055,118 2,554,400 -------------------------- ------------------------ Gross Margin 711,029 613,364 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 599,343 536,907 DEPRECIATION AND AMORTIZATION 25,473 25,786 -------------------------- ------------------------ Income from Operations 86,213 50,671 OTHER INCOME, NET 9,992 4,225 INTEREST EXPENSE 18,318 20,222 -------------------------- ------------------------ Income Before Provision for Income Taxes and Cumulative Effect of Change in Accounting Principle 77,887 34,674 PROVISION FOR INCOME TAXES Current 39,357 3,099 Deferred (8,218) 11,117 -------------------------- ------------------------ Total Provision for Income Taxes 31,139 14,216 -------------------------- ------------------------ INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 46,748 20,458 Cumulative Effect of Change in Accounting Principle, net of $3,587 Tax Effect (Note 3) --- (5,634) -------------------------- ------------------------ NET INCOME $ 46,748 $ 14,824 ========================== ======================== INCOME PER SHARE OF COMMON STOCK BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE (NOTE 3) $ 7.97 $ 3.51 CHANGE IN ACCOUNTING PRINCIPLE (NOTE 3) --- (0.97) -------------------------- ------------------------ NET INCOME PER SHARE OF COMMON STOCK (NOTE 3) $ 7.97 $ 2.54 ========================== ======================== COMMON STOCK DIVIDEND - $0.90 per share $ 5,297 $ 5,001 ========================== ======================== AVERAGE COMMON SHARES OUTSTANDING (NOTE 3) 5,864 5,825 ========================== ========================
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of the condensed consolidated financial statements. 5 GRAYBAR ELECTRIC COMPANY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands) (Unaudited)
NINE MONTHS ENDED SEPTEMBER 30, --------------------------------------------------------- 2006 2005 -------------------------- -------------------------- CASH FLOWS FROM OPERATIONS Income before cumulative effect of change in accounting principle $ 46,748 $ 20,458 Adjustments to reconcile income before cumulative effect of change in accounting principle to cash provided by operations: Depreciation and amortization 25,473 25,786 Deferred income taxes (8,218) 11,117 Gain on sale of property (9,189) (1,421) Loss on impairment of property 1,336 --- Changes in assets and liabilities: Trade receivables (106,354) (19,656) Merchandise inventory (24,795) 21,574 Other current assets (6,477) 17,316 Other non-current assets (264) 1,530 Trade accounts payable 75,387 (46,836) Other current liabilities 34,220 3,418 Accrued payroll and benefit costs (4,073) (16,549) Other non-current liabilities (2,238) (447) -------------------------- -------------------------- Total adjustments to income before cumulative effect of change in accounting principle (25,192) (4,168) -------------------------- -------------------------- Net cash provided by operations 21,556 16,290 -------------------------- -------------------------- CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of property 11,206 9,845 Capital expenditures for property (27,827) (18,995) -------------------------- -------------------------- Net cash used by investing activities (16,621) (9,150) -------------------------- -------------------------- CASH FLOWS FROM FINANCING ACTIVITIES Net increase in short-term borrowings 36,815 32,069 Repayment of long-term debt (24,802) (27,691) Principal payments under capital leases --- (1,272) Sale of common stock 6,534 4,692 Purchase of treasury stock (4,736) (4,697) Dividends paid (11,436) (11,118) -------------------------- -------------------------- Net cash provided (used) by financing activities 2,375 (8,017) -------------------------- -------------------------- NET INCREASE (DECREASE) IN CASH 7,310 (877) -------------------------- -------------------------- CASH, BEGINNING OF YEAR 9,074 9,961 -------------------------- -------------------------- CASH, END OF THIRD QUARTER $ 16,384 $ 9,084 ========================== ==========================
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of the condensed consolidated financial statements. 6 GRAYBAR ELECTRIC COMPANY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005 (In Thousands) (Unaudited)
COMMON ACCUMULATED STOCK OTHER COMMON SUBSCRIBED, RETAINED COMPREHENSIVE STOCK UNISSUED EARNINGS LOSS TOTAL ---------------- ---------------- ---------------- ----------------- ------------------- December 31, 2004 $ 110,967 $ --- $ 308,780 $ (27,383) $ 392,364 ------------------- Net income --- --- 14,824 --- 14,824 Currency translation adjustments --- --- --- 1,162 1,162 Unrealized gain from interest rate swap (net of tax of $342) --- --- --- 680 680 ------------------- Comprehensive income 16,666 ------------------- Stock issued 4,351 --- --- --- 4,351 Stock redeemed (4,697) --- --- --- (4,697) Advance payments --- 341 --- --- 341 Dividends declared --- --- (5,001) --- (5,001) ---------------- ---------------- ---------------- ----------------- ------------------ September 30, 2005 $ 110,621 $ 341 $ 318,603 $ (25,541) $ 404,024 ================ ================ ================ ================= ================== COMMON ACCUMULATED STOCK OTHER COMMON SUBSCRIBED, RETAINED COMPREHENSIVE STOCK UNISSUED EARNINGS LOSS TOTAL ---------------- ---------------- ---------------- ----------------- ------------------- December 31, 2005 $ 115,848 $ --- $ 308,935 $ (43,348) $ 381,435 ------------------- Net income --- --- 46,748 --- 46,748 Currency translation adjustments --- --- --- 1,672 1,672 Unrealized gain from interest rate swap (net of tax of $297) --- --- --- 466 466 ------------------- Comprehensive income 48,886 ------------------- Stock issued 6,083 --- --- --- 6,083 Stock redeemed (4,736) --- --- --- (4,736) Advance payments --- 451 --- --- 451 Dividends declared --- --- (5,297) --- (5,297) ---------------- ---------------- ---------------- ----------------- ------------------ September 30, 2006 $ 117,195 $ 451 $ 350,386 $ (41,210) $ 426,822 ================ ================ ================ ================= ==================
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of the condensed consolidated financial statements. 7 GRAYBAR ELECTRIC COMPANY, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (In Thousands except for Share and Per Share Data) (Unaudited) Note 1 - ------ The condensed consolidated financial statements included herein have been prepared by the Company, without audit, 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 generally accepted accounting principles in the United States of America (U.S. GAAP) have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures made herein are adequate to make the information presented not misleading. The preparation of financial statements in accordance with U.S. GAAP requires the use of estimates and assumptions that affect reported amounts. The Company's condensed consolidated financial statements include amounts that are based on management's best estimates and judgments. Actual results could differ from those estimates. Certain reclassifications were made to prior year amounts to conform to the 2006 presentation. It is suggested that these condensed consolidated financial statements be read in conjunction with the financial statements and the notes thereto included in the Company's latest annual report on Form 10-K. In the opinion of the Company, this quarterly report includes all adjustments, consisting of normal recurring accruals and adjustments, necessary for the fair presentation of the financial statements presented. Such interim financial information is subject to year-end adjustments. Results for interim periods are not necessarily indicative of results to be expected for the full year. Note 2 - ------ At September 30, 2006, the Company had a $200,000 accounts receivable securitization program that was to have expired in October 2006. Prior to expiration, the Company amended the program agreement to consist of a $215,000 accounts receivable securitization program that expires in October 2009. The securitization program provides for the sale of certain of the Company's trade receivables on a revolving basis to Graybar Commerce Corporation (GCC), a wholly-owned, bankruptcy-remote, special-purpose subsidiary. GCC sells an undivided interest in the receivables to an unrelated multi-seller commercial paper conduit. The Company accounts for the securitization as an on-balance sheet financing arrangement because the Company has maintained effective control of the accounts receivable through a call option that gives GCC the unilateral right to repurchase the undivided interests. Accordingly, the accounts receivable and related debt are included in the accompanying condensed consolidated balance sheets. GCC has granted a security interest in its trade receivables to the commercial paper conduit. Borrowings outstanding under the securitization program were $60,000 and $20,000 at September 30, 2006 and December 31, 2005, respectively. Note 3 - ------ The Company has two lease arrangements with an independent lessor which provided $58,777 of financing for eight of the Company's distribution facilities as of September 30, 2006. The agreements carry five-year terms expiring July 2008 and December 2009. The Company has the option, with the consent of the lessor's lenders, to renew the leases for an additional five-year term or to purchase the property for a price including the outstanding lease balance. If the Company elects 8 not to renew the lease or purchase the property, or such lenders refuse to consent to a renewal, the Company may elect to remarket the property and arrange for its sale to a third party. The financing structures used in these two lease arrangements qualify as silos of a variable interest entity under Financial Accounting Standards Board (FASB) Interpretation No. 46 (FIN 46), "Consolidation of Variable Interest Entities--an interpretation of ARB No. 51". The Company adopted the provisions of FIN 46 on January 1, 2005, and in accordance therewith, as the primary beneficiary, consolidated these silos in its financial statements as if the interpretations of FIN 46 had been in place from the inception of these leases. The impact of consolidation increased the Company's property by $64,257, the net book value of the distribution facilities then financed under the two leases. Additionally, the Company increased long-term debt by $70,906, and recorded a minority interest in the silos of $2,572 at the date of adoption. The Company also recorded a cumulative effect of change in accounting principle of $(5,634), net of income tax effect of $3,587 during the first quarter of 2005 to affect the consolidation. The Company has treated the adoption of FIN 46 as a non-cash item in its consolidated statements of cash flows.
QUARTER ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30, ----------------------------------------- ------------------------------------------- 2006 2005 2006 2005 ------------------ ------------------- -------------------- ------------------- Income Before Cumulative Effect of Change in Accounting Principle $ 17,879 $ 8,835 $ 46,748 $ 20,458 Cumulative Effect of Change in Accounting Principle, Net --- --- --- (5,634) ------------------ ------------------- -------------------- ------------------ Net Earnings $ 17,879 $ 8,835 $ 46,748 $ 14,824 ================== =================== ==================== ================== Available for Common Stock $ 17,879 $ 8,835 $ 46,748 $ 14,824 ================== =================== ==================== ================== Average Common Shares Outstanding 5,861,601 5,796,653* 5,863,705 5,824,897* ================== =================== ==================== ================== Earnings Per Share Before Cumulative Effect of Change in Accounting Principle $ 3.05 $ 1.52* $ 7.97 $ 3.51* Cumulative Effect of Change in Accounting Principle, Net --- --- --- (0.97)* ------------------ ------------------- -------------------- ------------------ Earnings Per Share $ 3.05 $ 1.52* $ 7.97 $ 2.54* ================== =================== ==================== ================== *Adjusted for the declaration of a 5% stock dividend in 2005. Prior to adjusting for the stock dividend, the average common shares outstanding were 5,520,622 and 5,547,521 for the quarter and nine months ended September 30, 2005, respectively.
Following the disposition and substitution of properties subject to the lease arrangements in 2005, the consolidated silos included in the Company's financial statements have a net property balance of $42,540, long-term debt of $56,720, and a minority interest of $2,057 at September 30, 2006 and a net property balance of $43,446, long-term debt of $56,720 and minority interest of $2,057 at December 31, 2005. Under the terms of the lease arrangements, the Company's maximum exposure to loss at September 30, 2006 and December 31, 2005, in respect of the properties subject to the two lease agreements, is $49,961, the amount guaranteed by the Company as the residual fair value of the property. 9 Note 4 - ------ The Company entered into an agreement during the first quarter of 2006, whereby the Company expected to sell certain real property at a sale price of $1,950. The book value of the property on the date the sale agreement was executed was approximately $3,100. The Company estimates that it will incur additional costs of approximately $185 to sell the property. The transfer of real estate had been expected to take place by the end of the second quarter 2006, but the contract to sell the property was cancelled as was allowed under the terms of the sale agreement. The Company expects the real estate to be sold by the second quarter of 2007. The Company determined that the expected sale of this real property met the criteria for recognition of an impairment loss on an asset classified as held for sale as outlined in FASB Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", and, in accordance therewith, recorded an impairment loss of $(1,336) to account for the expected loss on the sale in the first quarter of 2006. The impairment loss is included in other income, net in the Consolidated Statements of Income for the nine months ended September 30, 2006. Gains on the sale of real property totaling $0 and $754 are included in other income, net in the three-month periods ended September 30, 2006 and 2005, respectively. Gains on the sale of real property totaling $9,189 and $1,421 are included in other income, net in the nine month periods ended September 30, 2006 and 2005, respectively. Note 5 - ------ The Company made contributions to its defined benefit pension plan totaling $7,500 and $22,500 during the three and nine month periods ended September 30, 2006 and 2005, respectively. Additional contributions totaling $7,500 are expected to be paid during the remainder of 2006. Note 6 - ------ Comprehensive income is reported in the Consolidated Statements of Changes in Shareholders' Equity. Comprehensive income for the quarters ended September 30, 2006 and 2005 was $17,628 and $11,234, respectively. Note 7 - ------ The FASB issued Interpretation No. 48 (FIN 48), "Accounting for Uncertainty in Income Taxes, an Interpretation of SFAS No. 109" in June 2006. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements in accordance with FASB Statement No. 109, "Accounting for Income Taxes". FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. It also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company continues to evaluate the impact that FIN 48 will have on its financial statements. Note 8 - ------ The FASB issued Statement of Financial Accounting Standards No. 158 (SFAS 158), "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106, and 132(R)", in September 2006. Among other items, SFAS 158 requires recognition of the over- or under-funded status of an entity's defined benefit postretirement plan(s) as an asset or liability in its financial statements, requires the measurement of 10 defined benefit postretirement plan assets and obligations as of the end of the employer's fiscal year, and requires recognition of the funded status of defined benefit postretirement plans in other comprehensive income. SFAS 158 is effective for fiscal years ending after December 15, 2007 for employers, such as the Company, that do not issue publicly-traded equity securities. The Company has not yet evaluated the impact SFAS 158 will have on its statement of financial position. Note 9 - ------ The Company had an unsecured Credit Agreement with a group of banks at an interest rate based on the London Interbank Offered Rate (LIBOR) that had previously consisted of a $100,000, 364-day facility that was to have expired in July 2006. Prior to expiration, the Company amended the Credit Agreement to consist of a $150,000, 364-day facility that expires in July 2007. There were no amounts outstanding under the Credit Agreement at September 30, 2006 and December 31, 2005. 11 Item 2. MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Dollars Stated in Thousands) 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, 2005, included in our Annual Report on Form 10-K for such period as filed with the U.S. Securities and Exchange Commission. The results shown herein are not necessarily indicative of the results to be expected in any future periods. This discussion contains forward-looking statements (as such term is defined in the federal securities laws) and is based on current expectations, which involve risks and uncertainties. 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, 2005. OVERVIEW - -------- Graybar Electric Company, Inc. (the "Company") is engaged internationally in the distribution of electrical, telecommunications and networking products, and the provision of related supply chain management and logistics services, primarily to contractors, industrial plants, telephone companies, power utilities, federal and state governments and commercial users. The Company is 100% owned by its active and retired employees, and there is no public trading market for its common stock. The Company experienced significant growth in both sales and gross margin in the first nine months of 2006, compared to the first nine months of 2005, which more than offset an increase in total expense. As a result, income from operations rose 70.1% in the first nine months of 2006, compared to the first nine months of 2005. The combination of higher income from operations and increases in other income, net resulted in an increase in income before cumulative effect of change in accounting principle of 128.5% for the nine months ended September 30, 2006, when compared to the nine months ended September 30, 2005. With the combined effects of favorable economic conditions and the enhanced capabilities resulting from the upgrade of its computer systems to an Enterprise Resource Planning (ERP) system, the Company believes it is positioned to grow profitably and expand its business opportunities. Continued profitable sales growth is expected for the balance of 2006. 12 CONSOLIDATED RESULTS OF OPERATIONS - ---------------------------------- The following table sets forth certain information relating to the operations of the Company expressed as a percentage of net sales for the three and nine month periods ended September 30, 2006 and 2005:
QUARTER ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ---------------------------- --------------------------- 2006 2005 2006 2005 ------------- ----------- ----------- ----------- Net Sales 100.0% 100.0% 100.0% 100.0% Cost of Merchandise Sold (81.5) (80.9) (81.1) (80.6) ------------- ----------- ----------- ----------- Gross Margin 18.5 19.1 18.9 19.4 Selling, General and Administrative Expenses (15.2) (16.5) (16.0) (17.0) Depreciation and Amortization (0.7) (0.8) (0.7) (0.8) ------------- ----------- ----------- ----------- Income from Operations 2.6 1.8 2.2 1.6 Other Income, net --- 0.1 0.3 0.1 Interest Expense (0.4) (0.6) (0.5) (0.6) ------------- ----------- ----------- ----------- Income Before Provision for Income Taxes and Cumulative Effect of Change in Accounting Principle 2.2 1.3 2.0 1.1 Provision for Income Taxes (0.9) (0.5) (0.8) (0.4) ------------- ----------- ----------- ----------- Income Before Cumulative Effect of Change in Accounting Principle 1.3 0.8 1.2 0.7 Cumulative Effect of Change in Accounting Principle --- --- --- (0.2) ------------- ----------- ----------- ----------- Net Income 1.3% 0.8% 1.2% 0.5% ============= =========== =========== ===========
The Company continued to benefit from positive general economic conditions in North America during the three and nine month periods ended September 30, 2006. Electrical market net sales were particularly strong in the construction sector. Higher net sales to the comm/data market resulted from the Company's improved competitive performance in this market, coupled with modest growth in the overall comm/data market. THREE MONTHS ENDED SEPTEMBER 30, 2006 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 2005 Net sales totaled $1,328,461 in the third quarter of 2006, an increase of $198,110, or 17.5%, when compared to net sales of $1,130,351 for the third quarter of 2005. Significant increases in net sales were recorded in both of the primary market sectors in which the Company operates. Net sales to the electrical market increased 18.1%, while net sales to the comm/data market rose 14.9% during the third quarter of 2006, when compared to the same period of 2005. Gross margin increased $30,201, or 14.0%, due to the higher sales volume recorded in the third quarter of 2006 compared to the same period of 2005. The Company's gross margin rate on net sales decreased to 18.5% during the third quarter of 2006, down from 19.1% for the same period of 2005, largely due to the increased cost of copper-based products, primarily wire and cable. Selling, general and administrative expenses increased $15,953, or 8.6%, in the third quarter of 2006, compared to the third quarter of 2005, mainly due to employee compensation and benefit expenses which were approximately $14,690, or 12.1%, higher than the same period of 2005. 13 Depreciation and amortization expenses decreased $503, or 5.5%, in the third quarter of 2006 compared to the third quarter of 2005, mainly due to lower amortization expense on capital leases. Income from operations totaled $34,789 in the third quarter of 2006, an increase of $14,751, or 73.6%, over the same period of 2005. This was due to higher sales and gross margin and lower depreciation and amortization expenses, partially offset by higher selling, general and administrative expenses. Other income, net in the third quarter of 2006 totaled $524, compared to $1,464 in the third quarter of 2005. Accounts receivable interest charges to customers and other interest income of $524 accounted for all of the other income, net recorded during the quarter ended September 30, 2006. Other income, net for the third quarter of 2005 included gains on the sale of real property of $754 and accounts receivable interest charges to customers and other interest income of approximately $710. Interest expense declined $770, or 11.8%, in the third quarter of 2006 to $5,758, down from $6,528 in the third quarter of 2005. This reduction was mainly due to lower levels of outstanding short- and long-term debt. The combination of increased gross margin and higher selling, general and administrative expenses, coupled with lower depreciation and amortization expenses, lower other income, net, and lower interest expenses, resulted in pre-tax earnings of $29,555 in the third quarter of 2006, an increase of $14,581, or 97.4%, compared to pre-tax earnings of $14,974 in the third quarter of 2005. As a result of higher pre-tax earnings, the Company's total provision for income taxes increased $5,537 to $11,676 for the quarter ended September 30, 2006. The Company's effective tax rate decreased to 39.5% in the third quarter of 2006, down from 41.0% in the third quarter of 2005. The effective tax rate for the quarters ended September 30, 2006 and 2005 was higher than the 35% U.S. federal statutory rate primarily due to state and local income taxes. Net income totaled $17,879 in the third quarter of 2006, an increase of $9,044, or 102.4%, over the same period of 2005. NINE MONTHS ENDED SEPTEMBER 30, 2006 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 2005 Net sales totaled $3,766,147 for the nine months ended September 30, 2006, an increase of $598,383 or 18.9%, when compared to the same nine month period ended September 30, 2005. Significant increases in net sales were recorded in both of the primary market sectors in which the Company operates. Net sales to the electrical market increased 18.9%, while net sales to the comm/data market rose 18.9% in the nine months ended September 30, 2006, compared to the same period of 2005. 14 Gross margin increased $97,665, or 15.9%, due to the higher net sales volume recorded for the nine months ended September 30, 2006 compared to the same period of 2005. The Company's gross margin rate on net sales decreased to 18.9% during the first nine months of 2006, down from 19.4% during the same period of 2005, mainly due to the increased cost of copper-based products, primarily wire and cable. Selling, general and administrative expenses increased $62,436, or 11.6%, for the nine months ended September 30, 2006, compared to the nine months ended September 30, 2005, mainly due to increased employee compensation and benefit expenses totaling approximately $56,373. Depreciation and amortization expenses decreased slightly to $25,473 from $25,786 mainly due to lower levels of property and equipment depreciation and lower amortization on capital leases, when comparing the nine months ended September 30, 2006 to the nine month period ended September 30, 2005. Income from operations totaled $86,213 for the nine months ended September 30, 2006, an increase of $35,542, or 70.1%, over the same nine month period of 2005. This was due to higher sales and gross margin and lower depreciation and amortization expenses, partially offset by higher selling, general and administrative expenses. Other income, net for the nine months ended September 30, 2006 totaled $9,992, compared to $4,225 for the nine months ended September 30, 2005. Gains on the sale of real property of $9,189 combined with a property impairment loss of $(1,336) accounted for the largest part of other income, net for the nine months ended September 30, 2006. Accounts receivable interest charges to customers and other interest income, accounted for the remaining $2,139 of other income, net. Other income, net for the nine months ended September 30, 2005 included gains on sale of property of $1,421 and accounts receivable interest charges to customers and other interest income of $2,804. Interest expense declined $1,904, or 9.4%, for the nine months ended September 30, 2006 to $18,318 from $20,222 for the same nine month period in 2005. This reduction was mainly due to lower levels of outstanding short- and long-term debt. The combination of increased gross margin, other income, net, and selling, general and administrative expenses, coupled with lower depreciation and amortization and lower interest expenses, resulted in pre-tax earnings of $77,887 for the nine months ended September 30, 2006, an increase of $43,213, or 124.6%, compared to the nine months ended September 30, 2005. As a result of higher pre-tax earnings, the Company's total provision for income taxes increased $16,923 to $31,139 for the nine months ended September 30, 2006. The Company's effective tax rate decreased to 40.0% for the nine months ended September 30, 2006, down from 41.0% for the nine months ended September 30, 2005. The effective tax rates for the nine months ended September 30, 2006 and 2005 were higher than the 35% U.S. federal statutory rate primarily due to state and local income taxes. 15 Income before cumulative effect of accounting change for the nine months ended September 30, 2006 increased $26,290, or 128.5%, when compared to the same nine month period of 2005. Results for the nine months ended September 30, 2005 reflect the Company's January 1, 2005 adoption of FASB Interpretation No. 46 (FIN 46), which applies to the financing structures used in two lease arrangements between the Company and an independent lessor. The financing structures used in these two lease arrangements qualify as variable interest entities under FIN 46 and the Company's interests in the variable interest entities were required to be consolidated in the Company's financial statements beginning January 1, 2005. The Company recorded a cumulative effect of change in accounting principle of $(5,634), net of income tax effect of $3,587, in its consolidated financial statements during the nine months ended September 30, 2005 as a consequence of the adoption of FIN 46. Net income for the nine months ended September 30, 2006 totaled $46,748, a $31,924, or 215.4%, increase over the same nine month period of 2005. FINANCIAL CONDITION AND LIQUIDITY - --------------------------------- The Company has funded its capital requirements from operations, long-term debt and stock issuances to its employees. Cash provided by operations for the nine months ended September 30, 2006 totaled $21,556, compared to $16,290 for the same period of 2005. This $5,266 increase in cash flow from operations is mainly attributable to higher income before cumulative effect of accounting change of $26,290 and increased trade accounts payables and other current liabilities, partially offset by increases in trade receivables and merchandise inventory due to higher net sales volume. Current assets exceeded current liabilities by $419,702 at September 30, 2006, up $20,813 from December 31, 2005. Accounts receivable increased $106,354 due to the combined effect of higher average daily sales for the nine months ended September 30, 2006 compared to 2005 for the same period, offset by a moderate improvement in collections, as measured by average days of sales outstanding. Merchandise inventory increased $24,795 from December 31, 2005, reflecting the higher levels of inventory needed to support the growth in sales, partially offset by a moderate improvement in average inventory turnover during the nine months ended September 30, 2006, compared to the same period of 2005. Capital expenditures for property and equipment were $27,827 in the nine month period ended September 30, 2006 compared to $18,995 for the same period in 2005. Proceeds from the sale of property were $11,206 and $9,845, in the nine months ended September 30, 2006 and 2005, respectively, primarily due to the sale of real property. The Company had available to it unused lines of credit totaling $294,212 at September 30, 2006, compared to $288,831 at December 31, 2005. These lines are available to meet the short-term cash requirements of the Company. Short-term borrowings outstanding for the nine months ended September 30, 2006 ranged from a minimum of $28,630 to a maximum of $140,924, compared to a minimum of $25,983 and a maximum of $205,804 for the nine months ended September 30, 2005. 16 Cash provided by the sale of common stock and proceeds received on common stock subscriptions totaled $6,534 in the nine months ended September 30, 2006, compared to $4,692 for the nine months ended September 30, 2005. Purchases of treasury stock in the nine months ended September 30, 2006 and 2005 were $4,736 and $4,697 respectively. Dividends paid in the nine months ended September 30, 2006 and 2005 were $11,436 and $11,118, respectively. NEW ACCOUNTING PRONOUNCEMENTS - ----------------------------- The FASB issued Interpretation No. 48 (FIN 48), "Accounting for Uncertainty in Income Taxes, an Interpretation of SFAS No. 109", in June 2006. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements in accordance with FASB Statement No. 109, "Accounting for Income Taxes". FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. It also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company continues to evaluate the impact that FIN 48 will have on its financial statements. The FASB issued Statement of Financial Accounting Standards No. 158 (SFAS 158), "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106, and 132(R)", in September 2006. Among other items, SFAS 158 requires recognition of the over- or under-funded status of an entity's defined benefit postretirement plan(s) as an asset or liability in its financial statements, requires the measurement of defined benefit postretirement plan assets and obligations as of the end of the employer's fiscal year, and requires recognition of the funded status of defined benefit postretirement plans in other comprehensive income. SFAS 158 is effective for fiscal years ending after December 15, 2007 for employers, such as the Company, that do not issue publicly-traded equity securities. The Company has not yet evaluated the impact SFAS 158 will have on its statement of financial position. SUBSEQUENT EVENT - ---------------- At September 30, 2006, the Company had a $200,000 accounts receivable securitization program that was to have expired in October 2006. Prior to expiration, the Company amended the program agreement to consist of a $215,000 accounts receivable securitization program that expires in October 2009. 17 Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ----------------------------- There have been no material changes in the policies, procedures, controls or risk profile from that provided in Item 7A, "Quantitative and Qualitative Disclosures About Market Risk", of the Company's Annual Report on Form 10-K for the year ended December 31, 2005. Item 4. CONTROLS AND PROCEDURES ----------------------- An evaluation was performed under the supervision and with the participation of the Company's management of the effectiveness of the design and operation of the Company's disclosure controls and procedures as of September 30, 2006. Based on that evaluation, the Company's management, including the Chief Executive Officer and Chief Financial Officer, concluded that the Company's disclosure controls and procedures were effective. 18 PART II: OTHER INFORMATION Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No holder of Common Stock (or Voting Trust Certificates representing shares) may sell, transfer or otherwise dispose of any shares (or the Voting Trust Certificates) without first offering the Company the option to purchase them within 30 days for $20.00 per share, with appropriate adjustment for regular dividends, if any, declared and paid at the end of the quarter in which the offer is made. The Company also has the option to purchase for $20.00 per share, adjusted for dividends, the Common Stock (or Voting Trust Certificates representing shares) of any shareholder who ceases to be an employee for any reason other than death or retirement on a pension (except a deferred pension) at any time after termination of employment until 30 days after the holder makes an offer to sell the Common Stock to the Company. In the event of death, such option becomes exercisable by the Company one year from the date of death. In the past the Company has always exercised these options and it expects to continue to do so. The following table sets forth information regarding purchases of Common Stock (and Voting Trust Certificates representing shares) by the Company pursuant to the foregoing provisions: ISSUER PURCHASES OF EQUITY SECURITIES - ----------------------------------------------------------------------------------------------------------------------------
TOTAL AVERAGE TOTAL NUMBER OF SHARES NUMBER PRICE PURCHASED AS PART OF OF PAID PUBLICLY ANNOUNCED PLANS OR PERIOD SHARES PURCHASED PER SHARE PROGRAMS - ---------------------------------------------------------------------------------------------------------------------------- July 1 to July 31, 2006 21,486 $20.00 N/A - ---------------------------------------------------------------------------------------------------------------------------- August 1 to August 31, 31,372 $20.00 N/A 2006 - ---------------------------------------------------------------------------------------------------------------------------- September 1 to September 39,902 $20.00 N/A 30, 2006 - ---------------------------------------------------------------------------------------------------------------------------- Total 92,760 $20.00 N/A - ----------------------------------------------------------------------------------------------------------------------------
19 Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits furnished in accordance with provisions of Item 601 of Regulation S-K. (31) Rule 13a-14(a)/15d-14(a) Certifications 31.1 - Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 - Principal Executive Officer. 31.2 - Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 - Principal Financial Officer. (32) Section 1350 Certifications 32.1 - Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 - Principal Executive Officer. 32.2 - Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 - Principal Financial Officer (b) Reports on Form 8-K. Form 8-K was filed with the Commission on September 14, 2006, reporting a change in the Company's Board of Directors. Form 8-K was filed with the Commission on October 13, 2006, reporting the Company's entry into Material Definitive Agreements. 20 SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. November 10, 2006 GRAYBAR ELECTRIC COMPANY, INC. --------------------------- (Date) /S/ R. A. REYNOLDS, JR. --------------------------------- R. A. REYNOLDS, JR. PRESIDENT AND PRINCIPAL EXECUTIVE OFFICER /S/ D. B. D'ALESSANDRO --------------------------------- D. B. D'ALESSANDRO SENIOR VICE PRESIDENT AND PRINCIPAL FINANCIAL OFFICER /S/ MARTIN J. BEAGEN --------------------------------- MARTIN J. BEAGEN VICE PRESIDENT AND CONTROLLER AND PRINCIPAL ACCOUNTING OFFICER 21 EXHIBIT INDEX ------------- 31.1 - Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 - Principal Executive Officer. 31.2 - Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 - Principal Financial Officer. 32.1 - Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 - Principal Executive Officer. 32.2 - Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 - Principal Financial Officer 22 EX-31.1 2 ex31p1.txt CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER Exhibit 31.1 CERTIFICATION ------------- I, Robert A. Reynolds, Jr., certify that: 1. I have reviewed this quarterly report on Form 10-Q of Graybar Electric Company, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected or is reasonably likely to materially affect the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 10, 2006 /s/ ROBERT A. REYNOLDS, JR. ------------------------------------------- Robert A. Reynolds, Jr. President and Principal Executive Officer EX-31.2 3 ex31p2.txt CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER Exhibit 31.2 CERTIFICATION ------------- I, D. Beatty D'Alessandro, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Graybar Electric Company, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected or is reasonably likely to materially affect the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 10, 2006 /s/ D. BEATTY D' ALESSANDRO ----------------------------------------------- D. Beatty D'Alessandro Senior Vice President and Principal Financial Officer EX-32.1 4 ex32p1.txt CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER Exhibit 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 I, Robert A. Reynolds, Jr., President and Principal Executive Officer of Graybar Electric Company, Inc. ("the Company"), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that: (1) The Quarterly Report on Form 10-Q of the Company for the period ended September 30, 2006 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Robert A. Reynolds, Jr. - --------------------------- Robert A. Reynolds, Jr. President and Principal Executive Officer November 10, 2006 EX-32.2 5 ex32p2.txt CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER Exhibit 32.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 I, D. Beatty D'Alessandro, Senior Vice President and Principal Financial Officer of Graybar Electric Company, Inc. ("the Company"), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that: (1) The Quarterly Report on Form 10-Q of the Company for the period ended September 30, 2006 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ D. Beatty D'Alessandro - -------------------------- D. Beatty D'Alessandro Senior Vice President and Principal Financial Officer November 10, 2006 -----END PRIVACY-ENHANCED MESSAGE-----