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EX-32.1 - EXHIBIT 32.1 - GRAYBAR ELECTRIC CO INCa093016-ex321.htm
EX-32.2 - EXHIBIT 32.2 - GRAYBAR ELECTRIC CO INCa093016-ex322.htm
EX-31.2 - EXHIBIT 31.2 - GRAYBAR ELECTRIC CO INCa093016-ex312.htm
EX-31.1 - EXHIBIT 31.1 - GRAYBAR ELECTRIC CO INCa093016-ex311.htm
EX-10 - EXHIBIT 10 - GRAYBAR ELECTRIC CO INCa093016-ex10.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
graybara04a01a01a02a051a01.gif
FORM 10-Q
(Mark One) 
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended September 30, 2016

or
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 

For the transition period from __________ to __________

Commission File Number: 000-00255

GRAYBAR ELECTRIC COMPANY, INC.
(Exact name of registrant as specified in its charter)
 
 
New York
13-0794380
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
 
 
34 North Meramec Avenue, St. Louis, Missouri
63105
(Address of principal executive offices)
(Zip Code)
 
(314) 573 - 9200
(Registrant’s telephone number, including area code)
 
 
      Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
YES x       NO ¨
 
      Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for shorter period that the registrant was required to submit and post such files).
YES x      NO ¨
 
      Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer¨                                                                        Accelerated filer¨
Non-accelerated filerx (Do not check if a smaller reporting company)      Smaller reporting company¨
                                                                       
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
 YES ¨       NO x
 
Common Stock Outstanding at October 15, 2016: 16,575,625
                                                                        (Number of Shares)




Graybar Electric Company, Inc. and Subsidiaries
Quarterly Report on Form 10-Q
For the Period Ended September 30, 2016
(Unaudited)
 
Table of Contents
 
PART I.
FINANCIAL INFORMATION
Page
 
 
 
 
 
 
Item 1.
Financial Statements
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations                                                                                                                                                                                                       
 
 
 
 
 
 
Item 3.
 
 
 
 
 
 
Item 4.
 
 
 
 
 
PART II.
OTHER INFORMATION
 
 
 
 
 
 
 
Item 2.
 
 
 
 
 
 
Item 6.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

2




PART I  FINANCIAL INFORMATION
 
Item 1.  Financial Statements.
 
Graybar Electric Company, Inc. and Subsidiaries
 
 
 
 
 
 
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
 
 
 
 
(Unaudited)
 
Three Months Ended 
 September 30,
Nine Months Ended 
 September 30,
(Stated in thousands, except per share data)
2016

 
2015

2016

 
2015

Gross Sales
$
1,697,037

 
$
1,590,576

$
4,806,245

 
$
4,566,880

Cash discounts
(7,418
)
 
(6,690
)
(20,625
)
 
(19,208
)
Net Sales
1,689,619

 
1,583,886

4,785,620

 
4,547,672

Cost of merchandise sold
(1,370,861
)
 
(1,280,928
)
(3,881,616
)
 
(3,692,343
)
Gross Margin
318,758

 
302,958

904,004

 
855,329

Selling, general and administrative expenses
(254,969
)
 
(244,672
)
(750,266
)
 
(717,648
)
Depreciation and amortization
(12,283
)
 
(10,960
)
(35,158
)
 
(32,082
)
Other income, net
629

 
1,187

3,438

 
6,746

Income from Operations
52,135

 
48,513

122,018

 
112,345

Interest expense, net
(1,215
)
 
(685
)
(2,635
)
 
(1,895
)
Income before Provision for Income Taxes
50,920

 
47,828

119,383

 
110,450

Provision for income taxes
(20,724
)
 
(19,431
)
(48,396
)
 
(44,414
)
Net Income
30,196

 
28,397

70,987

 
66,036

Less:  Net income attributable to noncontrolling interests
(67
)
 
(86
)
(178
)
 
(177
)
Net Income attributable to Graybar Electric Company, Inc.
$
30,129

 
$
28,311

$
70,809

 
$
65,859

Net Income per share of Common Stock(A)
$
1.82

 
$
1.73

$
4.28

 
$
4.02

Cash Dividends per share of Common Stock
$
0.30

 
$
0.30

$
0.90

 
$
0.90

Average Common Shares Outstanding(A)
16,573

 
16,341

16,558

 
16,379

(A)Adjusted for the declaration of a 2.5% stock dividend in 2015, shares related to which were issued in February 2016.  Prior to the adjustment, the average common shares outstanding were 15,942 and 15,980 for the three and nine months ended September 30, 2015, respectively.

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of the Condensed Consolidated Financial Statements.

3



Graybar Electric Company, Inc. and Subsidiaries
 
 
 
 
 
 
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 
 
 
 
(Unaudited)
 
Three Months Ended 
 September 30,
Nine Months Ended 
 September 30,
(Stated in thousands)
2016

 
2015

2016

 
2015

Net Income
$
30,196

 
$
28,397

$
70,987

 
$
66,036

Other Comprehensive Income
 
 
 
 
 
 
Foreign currency translation
(1,148
)
 
(6,082
)
4,012

 
(10,738
)
Pension and postretirement benefits liability adjustment (net of tax of $(1,762), $(1,881), $(5,286), and $(5,644), respectively)
2,767

 
2,955

8,301

 
8,864

Total Other Comprehensive Income (Loss)
1,619

 
(3,127
)
12,313

 
(1,874
)
Comprehensive Income
$
31,815

 
$
25,270

$
83,300

 
$
64,162

Less: Comprehensive income (loss) attributable to
       noncontrolling interests, net of tax
25

 
(188
)
387

 
(261
)
Comprehensive Income attributable to
       Graybar Electric Company, Inc.
$
31,790

 
$
25,458

$
82,913

 
$
64,423


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 BALANCE SHEETS
 
 
 
 
(Stated in thousands, except share and per share data)
 
September 30,
2016

 
December 31,
2015

ASSETS
 
 
 
 
(Unaudited)

 
 

Current Assets
 
 
 
 
 
 
 

Cash and cash equivalents
 
 
 
 
$
51,111

 
$
37,931

Trade receivables (less allowances of $6,323 and $5,879, respectively)
 
1,019,195

 
928,276

Merchandise inventory
 
 
 
 
616,294

 
518,288

Other current assets
 
 
 
 
25,761

 
31,305

Total Current Assets
 
 
 
 
1,712,361

 
1,515,800

Property, at cost
 
 
 
 
 
 
 
Land
 
 
 
 
78,592

 
75,968

Buildings
 
 
 
 
450,872

 
443,137

Furniture and fixtures
 
 
 
 
284,196

 
271,605

Software
 
 
 
 
87,313

 
85,423

Capital leases
 
 
 
 
33,652

 
32,543

Total Property, at cost
 
 
 
 
934,625

 
908,676

Less – accumulated depreciation and amortization
 
 
 
(503,888
)
 
(474,810
)
Net Property
 
 
 
 
430,737

 
433,866

Other Non-current Assets
 
 
 
 
106,915

 
99,877

Total Assets
 
 
 
 
$
2,250,013

 
$
2,049,543

LIABILITIES
 
 
 
 
 
 
 
Current Liabilities
 
 
 
 
 
 
 
Short-term borrowings
 
 
 
 
$
273,849

 
$
104,978

Current portion of long-term debt
 
 
 
 
4,272

 
6,558

Trade accounts payable
 
 
 
 
794,276

 
766,089

Accrued payroll and benefit costs
 
 
 
 
89,747

 
111,069

Other accrued taxes
 
 
 
 
20,624

 
16,880

Other current liabilities
 
 
 
 
81,633

 
64,783

Total Current Liabilities
 
 
 
 
1,264,401

 
1,070,357

Postretirement Benefits Liability
 
 
 
 
70,091

 
70,303

Pension Liability
 
 
 
 
123,541

 
185,211

Long-term Debt
 
 
 
 
7,735

 
10,272

Other Non-current Liabilities
 
 
 
 
21,718

 
25,254

Total Liabilities
 
 
 
 
1,487,486

 
1,361,397

SHAREHOLDERS’ EQUITY
 
 
 
 
 

 
 

 
Shares at
 
 
 
 
Capital Stock
September 30, 2016

 
December 31, 2015

 
 
 
 
Common, stated value $20.00 per share
 
 
 
 
 
 
 
Authorized
50,000,000

 
50,000,000

 
 

 
 
Issued to voting trustees
14,322,909

 
13,668,055

 
 

 
 
Issued to shareholders
2,778,957

 
2,721,926

 
 

 
 
In treasury, at cost
(505,514
)
 
(65,890
)
 
 

 
 
Outstanding Common Stock
16,596,352

 
16,324,091

 
331,927

 
326,482

Advance Payments on Subscriptions to Common Stock
 
 
 
954

 

Retained Earnings
 
 
 
 
604,627

 
548,780

Accumulated Other Comprehensive Loss
 
 
 
 
(178,331
)
 
(190,435
)
Total Graybar Electric Company, Inc. Shareholders’ Equity
 
759,177

 
684,827

Noncontrolling Interests
 
 
 
 
3,350

 
3,319

Total Shareholders’ Equity
 
 
 
 
762,527

 
688,146

Total Liabilities and Shareholders’ Equity
 
 
 
$
2,250,013

 
$
2,049,543

 
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
 
 
 
 
(Unaudited)
 
Nine Months Ended September 30,
(Stated in thousands)
2016

 
2015

Cash Flows from Operations
 

 
 

Net Income
$
70,987

 
$
66,036

  Adjustments to reconcile net income to cash provided by operations:
 

 
 

Depreciation and amortization
35,158

 
32,082

Deferred income taxes
2,585

 
(389
)
Net gains on disposal of property
(1,786
)
 
(4,946
)
Net income attributable to noncontrolling interests
(178
)
 
(177
)
Changes in assets and liabilities:
 
 
 
Trade receivables
(73,623
)
 
(6,696
)
Merchandise inventory
(83,059
)
 
(56,416
)
Other current assets
5,632

 
16,126

Other non-current assets
24,369

 
3,777

Trade accounts payable
16,571

 
3,647

Accrued payroll and benefit costs
(21,835
)
 
(30,948
)
Other current liabilities
17,673

 
(783
)
Other non-current liabilities
(51,832
)
 
(215
)
Total adjustments to net income
(130,325
)
 
(44,938
)
Net cash (used) provided by operations
(59,338
)
 
21,098

Cash Flows from Investing Activities
 

 
 
Proceeds from disposal of property
3,301

 
11,170

Capital expenditures for property
(24,820
)
 
(62,078
)
Acquisition of business, net of cash acquired
(59,946
)
 
(18,093
)
Net cash used by investing activities
(81,465
)
 
(69,001
)
Cash Flows from Financing Activities
 

 
 
Net increase in short-term borrowings
168,871

 
74,320

Repayment of long-term debt
(1,853
)
 
(2,736
)
Principal payments under capital leases
(4,116
)
 
(3,969
)
Sale of common stock
15,192

 
13,621

Purchases of common stock
(8,793
)
 
(10,656
)
Sales of noncontrolling interests’ common stock

 
401

Purchases of noncontrolling interests’ common stock
(356
)
 
(103
)
Dividends paid
(14,962
)
 
(14,418
)
Net cash provided by financing activities
153,983

 
56,460

Net Increase in Cash
13,180

 
8,557

Cash, Beginning of Year
37,931

 
33,758

Cash, End of Period
$
51,111

 
$
42,315

 
 
 
 
Non-cash Investing and Financing Activities
 

 
 

Acquisitions of equipment under capital leases
$
314

 
$
6,731

 
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
 
 
 
 
 
 
 
(Unaudited, stated in thousands)
 
 
 
 
 
 
 
 
 
 
 
Graybar Electric Company, Inc. Shareholders’ Equity
 
 
 
 
 
Common
Stock
 
Common
Stock
Subscribed,
Unissued
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Loss
 
Noncontrolling
Interests
 
 
Total
Shareholders’
Equity
December 31, 2014
$
317,199

 
$

 
$
513,672

 
$
(152,193
)
 
$
3,303

 
$
681,981

Net income

 

 
65,859

 


 
177

 
66,036

Other comprehensive loss

 

 


 
(1,436
)
 
(438
)
 
(1,874
)
Stock issued
13,151

 


 


 


 
401

 
13,552

Stock purchased
(10,656
)
 


 


 


 
(103
)
 
(10,759
)
Advance payments


 
470

 


 


 


 
470

Dividends declared


 


 
(14,418
)
 


 


 
(14,418
)
September 30, 2015
$
319,694

 
$
470

 
$
565,113

 
$
(153,629
)
 
$
3,340

 
$
734,988

 
 
 
 
 
 
 
 
 
 
 
 
 
Graybar Electric Company, Inc. Shareholders’ Equity
 
 
 
 
 
Common
Stock
 
Common
Stock
Subscribed,
Unissued
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Loss
 
Noncontrolling
Interests
 
 
Total
Shareholders’
Equity

December 31, 2015
$
326,482

 
$

 
$
548,780

 
$
(190,435
)
 
$
3,319

 
$
688,146

Net income


 


 
70,809

 


 
178

 
70,987

Other comprehensive
income


 


 


 
12,104

 
209

 
12,313

Stock issued
14,238

 


 


 


 


 
14,238

Stock purchased
(8,793
)
 


 


 


 
(356
)
 
(9,149
)
Advance payments


 
954

 


 


 


 
954

Dividends declared


 


 
(14,962
)
 


 


 
(14,962
)
September 30, 2016
$
331,927

 
$
954

 
$
604,627

 
$
(178,331
)
 
$
3,350

 
$
762,527

 
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
(Stated in thousands, except share and per share data)
(Unaudited)
 
1. DESCRIPTION OF THE BUSINESS
 
Graybar Electric Company, Inc. (“Graybar”, “Company”, "we", "our", or "us") is a New York corporation, incorporated in 1925.  We are engaged in the distribution of electrical and communications and data networking products and are a provider of related supply chain management and logistics services.  We primarily serve customers in the construction, and commercial, institutional and government ("CIG"), as well as the industrial and 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"). All products sold by us are purchased by us from others, and we neither manufacture nor contract to manufacture any products that we sell.  Our business activity is primarily with customers in the United States (“U.S.”).  We also have subsidiary operations with distribution facilities in Canada and Puerto Rico.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Our accounting policies conform to generally accepted accounting principles in the U.S. ("GAAP”) and are applied on a consistent basis among all years presented. Significant accounting policies are described below.

Basis of Presentation
 
The unaudited condensed consolidated financial statements included herein have been prepared by Graybar pursuant to the rules and regulations of the United States Securities and Exchange Commission (the “Commission”) applicable to interim financial reporting.  Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations, although we believe that our disclosures are adequate to make the information presented not misleading.  The preparation of financial statements in accordance with GAAP requires the use of estimates and assumptions that affect reported amounts.  Our condensed consolidated financial statements include amounts that are based on management’s best estimates and judgments.  Actual results could differ from those estimates.  Certain reclassifications were made to prior year amounts to conform to the 2016 presentation.  These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations as of and for the year ended December 31, 2015, included in our latest Annual Report on Form 10-K.
 
In the opinion of management, this quarterly report includes all adjustments, consisting of normal recurring accruals and adjustments, necessary for the fair presentation of the financial statements presented.  Results for interim periods are not necessarily indicative of results to be expected for the full year.

Principles of Consolidation
 
The consolidated financial statements include the accounts of Graybar and its subsidiary companies.  All material intercompany balances and transactions have been eliminated.  The ownership interests that are held by owners other than the Company in subsidiaries consolidated by the Company are accounted for and reported as noncontrolling interests.

Estimates
 
The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities.  Actual results could differ from these estimates.

Subsequent Events
 
        We have evaluated subsequent events through the time of the filing of this Quarterly Report on Form 10-Q with the Commission.  No material subsequent events have occurred since September 30, 2016 that require recognition or disclosure in these financial statements.




8



Revenue Recognition
 
Revenue is recognized when evidence of a customer arrangement exists, prices are fixed and determinable, product title, ownership and risk of loss transfers to the customer, and collectability is reasonably assured.  Revenues recognized are primarily for product sales, but also include freight and handling charges.  Our standard shipping terms are FOB shipping point, under which product title passes to the customer at the time of shipment.  We also earn revenue for services provided to customers for supply chain management and logistics services.  Service revenue is recognized when services are rendered and completed.  Revenue is reported net of all taxes assessed by governmental authorities as a result of revenue-producing transactions, primarily sales tax.
 
Outgoing Freight Expenses                                                                                        
 
We record certain outgoing freight expenses as a component of selling, general and administrative expenses. 

Cash and Cash Equivalents
 
We account for cash on hand, deposits in banks, and other short-term, highly liquid investments with an original maturity of three months or less as cash and cash equivalents.
 
Allowance for Doubtful Accounts
 
We perform ongoing credit evaluations of our customers, and a significant portion of our trade receivables is secured by mechanic’s lien or payment bond rights.  We maintain allowances to reflect the expected uncollectability of trade receivables based on past collection history and specific risks identified in the receivables portfolio.  Although actual credit losses have historically been within management’s expectations, additional allowances may be required if the financial condition of our customers were to deteriorate.
 
Merchandise Inventory
 
Our inventory is stated at the lower of cost (determined using the last-in, first-out (“LIFO”) cost method) or market.  LIFO accounting is a method of accounting that, compared with other inventory accounting methods, generally provides better matching of current costs with current sales. 
 
We make provisions for obsolete or excess inventories as necessary to reflect reductions in inventory value. 
 
Vendor Allowances
 
Our agreements with many of our suppliers provide for us to earn volume incentives based on purchases during the agreement period.  Based on the provisions of our vendor agreements, we develop vendor accrual rates by estimating the point at which we will have completed our performance under the agreement and the deferred amounts will be earned. We perform analyses and review historical trends to ensure the deferred amounts earned are appropriately recorded. Certain vendor agreements contain purchase volume incentives that provide for increased funding when graduated purchase volumes are met. Amounts accrued throughout the year are based on estimates of future activity levels, and could be materially impacted if actual purchase volumes differ. Changes in the estimated amount of incentives are treated as changes in estimate and are recognized in earnings in the period in which the change in estimate occurs.  In the event that the operating performance of our suppliers were to decline, however, there can be no assurance that amounts earned would be paid or that the volume incentives would continue to be included in future agreements.

Property and Depreciation
 
Property, plant and equipment are recorded at cost. Depreciation is expensed on a straight-line basis over the estimated useful lives of the related assets. Interest costs incurred to finance expenditures for major long-term construction projects are capitalized as part of the asset's historical cost and included in property, plant and equipment, then depreciated over the useful life of the asset. Leasehold improvements are amortized over the term of the lease or the estimated useful life of the improvement, whichever is shorter. Expenditures for maintenance and repairs are charged to expense when incurred, while the costs of significant improvements, which extend the useful life of the underlying asset, are capitalized.


9



Credit Risk
 
Financial instruments that potentially expose us to concentrations of credit risk consist primarily of trade receivables.  We perform ongoing credit evaluations of our customers, and a significant portion of our trade receivables may be protected by mechanic’s lien or payment bond rights.  We maintain allowances for potential credit losses, and such losses historically have been within management’s expectations.
 
Fair Value
 
We endeavor to utilize the best available information in measuring fair value.  GAAP has established a fair value hierarchy, which prioritizes the inputs used in measuring fair value.  The tiers in the hierarchy include:  Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own data inputs and assumptions.  We have used fair value measurements to value our pension plan assets.
 
Foreign Currency Exchange Rate
 
The functional currency for our Canadian subsidiary is the Canadian dollar.  Accordingly, its balance sheet amounts are translated at the exchange rates in effect at the end of each reporting period and its statements of income amounts are translated at the average rates of exchange prevailing during the current period.  Currency translation adjustments are included in accumulated other comprehensive loss.
 
Goodwill
 
Our goodwill is not amortized, but rather tested annually for impairment.  Goodwill is reviewed annually in the fourth quarter and/or when circumstances or other events might indicate that impairment may have occurred.  We first perform a qualitative assessment of goodwill impairment. The qualitative assessment considers several factors including the excess fair value over carrying value as of the last quantitative impairment test, the length of time since the last fair value measurement, the current carrying value, market conditions, actual performance compared to forecasted performance, and the current business outlook. If the qualitative assessment indicates that it is more likely than not that goodwill is impaired, the reporting unit is then quantitatively tested for impairment. If a quantitative assessment is required, the fair value is determined using a variety of assumptions including estimated future cash flows of the reporting unit and applicable discount rates. 

Definite Lived Intangible Assets
 
The cost of intangible assets with determinable useful lives is amortized to reflect the pattern of economic benefits consumed, either on a straight-line or accelerated basis over the estimated periods benefited. Customer relationships, trade names and other non-contractual intangible assets with determinable lives are amortized over periods generally ranging from 5 to 20 years. Intangible assets are tested for impairment if events or circumstances occur indicating that the respective asset might be impaired.
 
Income Taxes
 
We recognize deferred tax assets and liabilities to reflect the future tax consequences of events that have been recognized in the financial statements or tax returns.  Uncertainty exists regarding tax positions taken in previously filed tax returns still subject to examination and positions expected to be taken in future returns.  A deferred tax asset or liability results from the temporary difference between an item’s carrying value as reflected in the financial statements and its tax basis, and is calculated using enacted applicable tax rates.  We assess the likelihood that our deferred tax assets will be recovered from future taxable income and, to the extent we believe that recovery is not likely, a valuation allowance is established.  Changes in the valuation allowance, when recorded, are included in the provision for income taxes in the consolidated financial statements.  We classify interest expense and penalties as part of our provision for income taxes based upon applicable federal and state interest/underpayment percentages.
 
Other Postretirement Benefits
 
We account for postretirement benefits other than pensions by accruing the costs of benefits to be provided over the employees’ periods of active service.  These costs are determined on an actuarial basis.  Our consolidated balance sheets reflect the funded status of postretirement benefits.

10



 
Pension Plan
 
We sponsor a noncontributory defined benefit pension plan accounted for by accruing the cost to provide the benefits over the employees’ periods of active service.  These costs are determined on an actuarial basis.  Our consolidated balance sheets reflect the funded status of the defined benefit pension plan.
 
New Accounting Standards
 
No new accounting standards that were issued or became effective during 2016 have had or are expected to have a material impact on our consolidated financial statements except those noted below:

In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU” or “Update”) 2016-02, “Leases (Topic 842)”. The core principle of Topic 842 requires that a lessee should recognize the assets and liabilities on the balance sheet and disclose key information about leasing arrangements. The amendments in ASU 2016-02 are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The guidance is required to be adopted at the earliest period presented using a modified retrospective approach. We are currently evaluating the impact the provisions will have on our consolidated financial statements and whether we will adopt the guidance early.

In April 2015, FASB issued ASU 2015-05, "Intangibles-Goodwill and Other-Internal-use Software: Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement". This Update provides guidance about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract and expensed as services are received. The Update is effective for fiscal years beginning after December 15, 2015 and interim periods. We adopted this Update on January 1, 2016. The adoption of this standard did not have a material impact on our results of operation, financial position, or cash flows.

In February 2015, FASB issued ASU 2015-02, "Consolidation". The amendments in this Update affect reporting entities that are required to evaluate whether they should consolidate certain legal entities. All legal entities are subject to reevaluation under the revised consolidation model. This ASU is effective for public business entities for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. We adopted this Update on January 1, 2016. The adoption of this standard did not have a material impact on our results of operation, financial position, or cash flows.

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers”, which provides guidance on a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes current revenue recognition guidance, including industry-specific guidance. In July 2015, the FASB deferred the effective date of the Update for one year. The Update will now be effective for public business entities for annual reporting periods, including interim reporting periods, beginning after December 15, 2017.

The new standard provides for two alternative implementation methods.  The first is to apply the new standard retrospectively to each prior reporting period presented.  This method allows the use of certain practical expedients. The second method is to apply the new standard retrospectively in the year of initial adoption and record a cumulative effect adjustment for the impact of adjusting contracts open at the date of adoption.  Under this transition method, we would apply this guidance retrospectively only to contracts that are not completed contracts at the date of initial application, which for us will be January 1, 2018.  We would then recognize the cumulative effect of initially applying the standard as an adjustment to the opening balance of retained earnings. This method also requires us to disclose comparative information for the year of adoption.

In March 2016, FASB issued ASU 2016-08 "Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)". The amendments in this Update do not change the core principle of the guidance stated in ASU 2014-09. Instead, the amendments in this ASU are intended to further clarify the implementation guidance on principal versus agent considerations. ASU 2016-08 will have the same effective date and transition requirements as the new revenue standard issued in ASU 2014-09.

We continue to determine which method we will use to implement the new standard and to assess the impact the new standard is expected to have on the consolidated financial statements or on other matters or aspects of our business.


11



3. INCOME TAXES
 
We determine our deferred tax assets and liabilities based upon the difference between the financial statement and tax bases of our assets and liabilities, calculated using enacted applicable tax rates.  We then assess the likelihood that our deferred tax assets will be recovered from future taxable income and, to the extent we believe that recovery is not likely, we establish a valuation allowance.  Changes in the valuation allowance, when recorded, are included in the provision for income taxes in the condensed consolidated financial statements.
 
We classify interest expense and penalties as part of our provision for income taxes based upon applicable federal and state interest/underpayment percentages.  We have accrued $963 and $907 in interest and penalties at September 30, 2016 and December 31, 2015, respectively.  Interest was computed on the difference between the provision for income taxes recognized in accordance with GAAP and the amount of benefit previously taken or expected to be taken in our federal, state, and local income tax returns.
 
Our federal income tax returns for the tax years 2013 and forward are available for examination by the United States Internal Revenue Service (“IRS”).  The statute of limitations for the 2013 federal return will expire on September 15, 2017, unless extended by consent. Our state income tax returns for 2011 through 2015 remain subject to examination by various state authorities with the latest period closing on December 31, 2020.  We have not extended the statutes of limitations in any state jurisdictions with respect to years prior to 2011.
 
Our unrecognized tax benefits of $2,387 and $2,247 at September 30, 2016 and December 31, 2015, respectively, are uncertain tax positions that would impact our effective tax rate if recognized.  We are periodically engaged in tax return examinations, reviews of statute of limitations periods, and settlements surrounding income taxes. We do not anticipate a material change in unrecognized tax benefits during the next twelve months.

4. CAPITAL STOCK
 
Our common stock is 100% owned by active and retired employees, and there is no public trading market for our common stock.  Since 1928, substantially all of the issued and outstanding shares of common stock have been held of record by voting trustees under successive voting trust agreements. Under applicable New York law, a voting trust may not have a term greater than ten years. At September 30, 2016, approximately 84% of the common stock was held in a voting trust that expires by its terms on March 15, 2017. The participation of shareholders in the voting trust is voluntary at the time the voting trust is created, but is irrevocable during its term. Shareholders who elect not to participate in the voting trust hold their common stock as shareholders of record.

No holder of our common stock or voting trust interests representing our common stock ("common stock", "common shares", or "shares") may sell, transfer or otherwise dispose of any shares without first offering us the option to purchase those shares at the price at which they were issued.  Additionally, a shareholder is entitled to any cash dividends, if any, accrued for the quarter in which the purchase offer is made, adjusted pro rata for the number of days such shares were held prior to the dividend record date. 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 on a pension (except a deferred pension), 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.

Cash dividends declared were $4,985 and $4,802 for the three months ended September 30, 2016 and 2015, respectively. Cash dividends declared were $14,962 and $14,418 for the nine months ended September 30, 2016 and 2015, respectively.
  
5. DEBT
 
Revolving Credit Facility

At September 30, 2016 and December 31, 2015, we along with Graybar Canada Limited, our Canadian operating subsidiary (“Graybar Canada”), had an unsecured, five-year, $550,000 revolving credit agreement maturing in June 2019 with Bank of America, N.A. and the other lenders named therein (the "Credit Agreement"), which includes a combined letter of credit sub-facility of up to $50,000, a U.S. swing line loan facility of up to $50,000, and a Canadian swing line loan facility of up to $20,000. The Credit Agreement includes a $100,000 sublimit (in U.S. or Canadian dollars) for borrowings by Graybar Canada and contains an accordion feature, which allows us to request increases to the aggregate borrowing commitments of up to $300,000.

12




The Credit Agreement contains customary affirmative and negative covenants for credit facilities of this type, including limitations on us and our subsidiaries with respect to indebtedness, 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, restricted payments (subject to incurrence tests, with certain exceptions), as well as securitizations, factoring transactions, and transactions with sanctioned parties or in violation of certain U.S. or Canadian anti-corruption laws. There are also maximum leverage ratio and minimum interest coverage ratio financial covenants that we are subject to during the term of the Credit Agreement. We were in compliance with all these covenants as of September 30, 2016 and December 31, 2015.

We had total letters of credit of $5,460 and $4,994 outstanding, of which none were issued under the Credit Agreement at September 30, 2016 and December 31, 2015. The letters of credit are issued primarily to support certain workers' compensation insurance policies.
   
There were $273,849 and $104,978 in short-term borrowings outstanding under the Credit Agreement at September 30, 2016 and December 31, 2015, respectively.

Short-term borrowings outstanding during the nine months ended September 30, 2016 and 2015 ranged from a minimum of $105,014 and $35,981 to a maximum of $311,506 and $184,188, respectively.

At September 30, 2016, we had unused lines of credit under the Credit Agreement amounting to $276,151 available, compared to $445,022 at December 31, 2015.  These lines are available to meet our short-term cash requirements and are subject to annual fees of up to 40 basis points (0.40%).
 
Private Placement Shelf Agreements

At September 30, 2016 and December 31, 2015, we had an uncommitted $100,000 private placement Shelf Agreement with Prudential Investment Management, Inc. (the "Prudential Shelf Agreement"). The Prudential Shelf Agreement allows us to issue senior promissory notes to affiliates of Prudential at fixed rate terms to be agreed upon at the time of any issuance during a three year issuance period ending in September 2017. No notes had been issued under the Prudential Shelf Agreement as of September 30, 2016 and December 31, 2015.
 
On September 22, 2016, we entered into an uncommitted $100,000 private placement shelf agreement (the “MetLife Shelf Agreement”) with Metropolitan Life Insurance Company and MetLife Investment Advisors, LLC and each other affiliate of MetLife that becomes a party to the agreement (collectively, “MetLife”).  Subject to the terms and conditions set forth below, the MetLife Shelf Agreement is expected to allow the Company to issue senior promissory notes to MetLife 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 September 2019. Floating rate note interest rates will be based on London Interbank Offered Rate ("LIBOR") plus a spread. No notes have been issued under the MetLife Shelf Agreement, which ranks equally with the Company’s Credit Agreement and Prudential Shelf Agreement. 

Each shelf agreement contains customary representations and warranties of the Company and the investor. Each shelf agreement also contains customary events of default, including: a failure to pay principal, interest or fees when due; a failure to comply with covenants; the fact that any representation or warranty made by any of the credit parties is incorrect when given; the occurrence of an event of default under certain other indebtedness of Graybar and its subsidiaries; the commencement of certain insolvency or receivership events affecting any of the credit parties; certain actions under ERISA; and the occurrence of a change in control of Graybar (subject to certain permitted transactions as described in our Credit Agreement and in the applicable shelf agreement). Upon the occurrence of an event of default, all outstanding obligations of Graybar under any or all of these agreements may be declared immediately due and payable.

Each shelf agreement contains customary affirmative and negative covenants for facilities of this type, including limitations on Graybar and its subsidiaries with respect to indebtedness, liens, changes in the nature of its business, investments, mergers and acquisitions, issuance of equity securities, dispositions of assets and dissolution of certain subsidiaries, transactions with affiliates, restricted payments (subject to incurrence tests, with certain exceptions), as well as securitizations, factoring transactions, and transactions with sanctioned parties or in violation of certain U.S. or Canadian anti-terrorism laws. There are also maximum leverage ratio and minimum interest coverage ratio financial covenants to which we are subject during the term of the shelf agreement. These covenants are substantially similar to those contained in the Credit Agreement, subject to a number of important exceptions and qualifications set forth in the applicable shelf agreement. We were in compliance with all covenants as of September 30, 2016 and December 31, 2015.

13




In addition, we have agreed to a most favored lender clause which is designed to ensure that any notes issued in the future under the Prudential Shelf Agreement and MetLife Shelf Agreement will continue to be of equal ranking with our indebtedness under the Credit Agreement.

6. PENSION AND OTHER POSTRETIREMENT BENEFITS
 
We have a noncontributory defined benefit pension plan covering substantially all employees first hired prior to July 1, 2015 after the completion of one year of service and 1,000 hours of service.  The plan provides retirement benefits based on an employee’s average earnings and years of service.  These employees become 100% vested after three years of service, regardless of age.  A supplemental benefit plan provides nonqualified benefits for compensation in excess of the IRS compensation limits applicable to the plan.

Our plan funding policy is to make contributions, provided that the total annual contributions will not be less than 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 defined benefit 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 health care 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 service pension (except a deferred pension) under the defined benefit pension plan. Medical benefits are self-insured and claims are administered through an insurance company. 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 September 30, 2016 and December 31, 2015.

The net periodic benefit cost for the three and nine months ended September 30, 2016 and 2015 included the following components: 

Pension Benefits
 
Postretirement Benefits
 
Three Months Ended 
 September 30,
 
Three Months Ended 
 September 30,
 
Components of Net Periodic Benefit Cost
2016

2015

 
2016

2015

Service cost
$
6,342

$
6,402

 
$
572

$
626

Interest cost
7,066

6,301

 
757

731

Expected return on plan assets
(6,754
)
(7,075
)
 


Amortization of:


 


Net actuarial loss
4,791

5,007

 
177

261

Prior service cost (gain)
106

113

 
(545
)
(545
)
Net periodic benefit cost
$
11,551

$
10,748

 
$
961

$
1,073

 
 
Pension Benefits
 
Postretirement Benefits
 
Nine Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
Components of Net Periodic Benefit Cost
2016

2015

 
2016

2015

Service cost
$
19,026

$
19,206

 
$
1,716

$
1,878

Interest cost
21,197

18,902

 
2,272

2,194

Expected return on plan assets
(20,262
)
(21,223
)
 


Amortization of:
 
 
 
 
 
Net actuarial loss
14,373

15,021

 
531

783

Prior service cost (gain)
318

339

 
(1,635
)
(1,635
)
Net periodic benefit cost
$
34,652

$
32,245

 
$
2,884

$
3,220

We made qualified and nonqualified pension contributions totaling $44,002 and $10,002 during the three-month periods ended September 30, 2016 and 2015, respectively. Contributions made during the nine-month periods ending September 30,

14



2016 and 2015 totaled $81,633 and $31,536, respectively. Additional contributions totaling $2 are expected to be paid during the remainder of 2016.

7. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following table represents amounts reclassified from accumulated other comprehensive income (loss) for the three months ended September 30, 2016 and 2015:
 
 
Three Months Ended 
 September 30, 2016
 
Three Months Ended 
 September 30, 2015
 
 
Amortization of Pension and Other Postretirement Benefits Items
 
Amortization of Pension and Other Postretirement Benefits Items
 
 
Actuarial Losses Recognized
 
Prior Service Costs Recognized
 
Total
 
Actuarial Losses Recognized
 
Prior Service Costs Recognized
 
Total
Affected Line in Condensed Consolidated Statement of Income:
 
 
 
 
 
 
 
 
 
 
 
 
Selling, general and administrative
expenses
 
$
4,968

 
$
(439
)
 
$
4,529

 
$
5,268

 
$
(432
)
 
$
4,836

Tax (benefit) expense
 
(1,933
)
 
171

 
(1,762
)
 
(2,049
)
 
168

 
(1,881
)
Total reclassifications for the period, net of tax
 
$
3,035

 
$
(268
)
 
$
2,767

 
$
3,219

 
$
(264
)
 
$
2,955


The following table represents amounts reclassified from accumulated other comprehensive income (loss) for the nine months ended September 30, 2016 and 2015:
 
 
Nine Months Ended 
 September 30, 2016
 
Nine Months Ended 
 September 30, 2015
 
 
Amortization of Pension and Other Postretirement Benefits Items
 
Amortization of Pension and Other Postretirement Benefits Items
 
 
Actuarial Losses Recognized
 
Prior Service Costs Recognized
 
Total
 
Actuarial Losses Recognized
 
Prior Service Costs Recognized
 
Total
Affected Line in Condensed Consolidated Statement of Income:
 
 
 
 
 
 
 
 
 
 
 
 
Selling, general and administrative expenses
 
$
14,904

 
$
(1,317
)
 
$
13,587

 
$
15,804

 
$
(1,296
)
 
$
14,508

Tax (benefit) expense
 
(5,798
)
 
512

 
(5,286
)
 
(6,148
)
 
504

 
(5,644
)
Total reclassifications for the period, net of tax
 
$
9,106

 
$
(805
)
 
$
8,301

 
$
9,656

 
$
(792
)
 
$
8,864



15



The following table represents the activity included in accumulated other comprehensive income (loss) for the three months ended September 30, 2016 and 2015:
 
 
Three Months Ended 
 September 30, 2016
 
Three Months Ended 
 September 30, 2015
 
 
Foreign Currency
 
Pension and Other Postretirement Benefits
 
Total
 
Foreign Currency
 
Pension and Other Postretirement Benefits
 
Total
Beginning balance July 1,
 
$
(7,507
)
 
$
(172,485
)
 
$
(179,992
)
 
$
(4,208
)
 
$
(146,568
)
 
$
(150,776
)
Other comprehensive income (loss) before reclassifications
 
(1,106
)
 

 
(1,106
)
 
(5,808
)
 

 
(5,808
)
Amounts reclassified from accumulated other comprehensive income (net of tax $(1,762) and $(1,881))
 

 
2,767

 
2,767

 

 
2,955

 
2,955

Net current-period other comprehensive income (loss)
 
(1,106
)
 
2,767

 
1,661

 
(5,808
)
 
2,955

 
(2,853
)
Ending balance September 30,
 
$
(8,613
)
 
$
(169,718
)
 
$
(178,331
)
 
$
(10,016
)
 
$
(143,613
)
 
$
(153,629
)

The following table represents the activity included in accumulated other comprehensive income (loss) for the nine months ended September 30, 2016 and 2015:
 
 
Nine Months Ended 
 September 30, 2016
 
Nine Months Ended 
 September 30, 2015
 
 
Foreign Currency
 
Pension and Other Postretirement Benefits
 
Total
 
Foreign Currency
 
Pension and Other Postretirement Benefits
 
Total
Beginning balance January 1,
 
$
(12,416
)
 
$
(178,019
)
 
$
(190,435
)
 
$
284

 
$
(152,477
)
 
$
(152,193
)
Other comprehensive income (loss) before reclassifications
 
3,803

 

 
3,803

 
(10,300
)
 

 
(10,300
)
Amounts reclassified from accumulated other comprehensive income (net of tax $(5,286) and $(5,644))
 

 
8,301

 
8,301

 

 
8,864

 
8,864

Net current-period other comprehensive income (loss)
 
3,803

 
8,301

 
12,104

 
(10,300
)
 
8,864

 
(1,436
)
Ending balance September 30,
 
$
(8,613
)
 
$
(169,718
)
 
$
(178,331
)
 
$
(10,016
)
 
$
(143,613
)
 
$
(153,629
)

8. ASSETS HELD FOR SALE

We consider properties to be assets held for sale when all of the following criteria are met: (i) a formal commitment to a plan to sell a property has been made and exercised; (ii) the property is available for sale in its present condition; (iii) actions required to complete the sale of the property have been initiated; (iv) sale of the property is probable and we expect the sale will occur within one year; and (v) the property is being actively marketed for sale at a price that is reasonable given its current market value.
 
Upon designation as an asset held for sale, we record the carrying value of each property at the lower of its carrying value or its estimated fair value, less estimated costs to sell, and depreciation of the property ceases. The net book value of assets held for sale was $58 at December 31, 2015. During the three months ended September 30, 2016 and 2015, we sold no assets classified as held for sale and recorded no net gains on the assets held for sale. During the nine months ended September 30, 2016, we sold an asset classified as held for sale with a net book value of $58 and recorded a net gain on the asset held for sale of $1,627 in other income, net. During the nine months ended September 30, 2015, we sold assets classified as held for sale with a net book values of $4,669 and recorded a net gains on the assets held for sale of $4,195 in other income, net. The remaining net book value of assets still held for sale at September 30, 2016 is $553 and is recorded in net property in the condensed consolidated balance sheets.

We review long-lived assets held and used for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. For assets classified as held and used, impairment may occur if projected

16



undiscounted cash flows are not adequate to cover the carrying value of the assets. In such cases, additional analysis is conducted to determine the amount of the loss to be recognized. The impairment loss is calculated as the difference between the carrying amount of the asset and its estimated fair value. The analysis requires estimates of the amount and timing of projected cash flows and, where applicable, selection of an appropriate discount rate. Such estimates are critical in determining whether any impairment charge should be recorded and the amount of such charge if an impairment loss is deemed necessary.

For assets held for sale, impairment occurs whenever the net book value of the property listed for sale exceeds the expected selling price less estimated selling expenses. There were no impairment charges recorded during the three and nine month periods ended September 30, 2016 and 2015.

9. COMMITMENTS AND CONTINGENCIES
 
Graybar and our subsidiaries are subject to various claims, disputes, and administrative and legal matters incidental to our past and current business activities.  As a result, contingencies may arise resulting from an existing condition, situation, or set of circumstances involving an uncertainty as to the realization of a possible loss.
 
We account for loss contingencies in accordance with GAAP.  Estimated loss contingencies are accrued only if the loss is probable and the amount of the loss can be reasonably estimated.  With respect to a particular loss contingency, it may be probable that a loss has occurred but the estimate of the loss is a wide range.  If we deem an amount within the range to be a better estimate than any other amount within the range, that amount will be accrued.  However, if no amount within the range is a better estimate than any other amount, the minimum amount of the range is accrued.  While we believe that none of these claims, disputes, administrative, and legal matters will have a material adverse effect on our financial position, these matters are uncertain and we cannot at this time determine whether the financial impact, if any, of these matters will be material to our results of operations in the period during which such matters are resolved or a better estimate becomes available.

10. ACQUISITIONS

In April 2015, we acquired 100% of the outstanding capital stock of Advantage Industrial Automation, Inc. (“Advantage”), which provides control and automation solutions to industrial users, OEMs and system integrators, for $18,093 in cash, net of cash acquired. The purchase price allocation resulted in approximately $7,057 and $8,283 of tax deductible goodwill and other intangible assets, respectively.

On July 1, 2016, we purchased Cape Electrical Supply ("Cape Electric"), a regional distributor serving electrical contractors and large engineering construction firms, as well as industrial, institutional and utility customers, for approximately $59,946 in cash, net of cash acquired. The purchase price allocation is preliminary pending finalization of the valuation of the long lived assets including acquired intangible assets, which is expected to be completed in the fourth quarter of 2016. The preliminary purchase price allocation resulted in approximately $16,544 and $23,586 of tax deductible goodwill and other intangible assets, respectively.

Since the date of acquisition, Advantage and Cape Electric results are reflected in our Condensed Consolidated Financial Statements. Pro forma results of these acquisitions are not material; therefore, they are not presented.
  



17



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, 2015, 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; volatility in the prices of industrial commodities; cyber-attacks; a sustained interruption in the operation of our information systems; increased funding requirements and expenses related to our pension plan; the inability, or limitations on our ability to borrow under our existing credit facilities or any replacements thereof; disruptions in our sources of supply; compliance with increasing governmental regulations; adverse legal proceedings or other claims; 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, 2015.

All dollar amounts, except per share data, are stated in thousands ($000s) 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, and commercial, institutional and government ("CIG"), as well as the industrial and utility vertical markets, with products and services that support new construction, infrastructure updates, building renovation, facility maintenance, repair and operations ("MRO"), and original equipment manufacturers ("OEMs"). All products sold by us are purchased by us from others, and we neither manufacture nor contract to manufacture any products we sell.  Our business activity is primarily with customers in the United States ("U.S.").  We also have subsidiary operations with distribution facilities in Canada and Puerto Rico.
 
Our common stock is 100% owned by active and retired employees, and there is no public trading market for our common stock.  No holder of our common stock or voting trust interests representing our common stock (“common stock”, “common shares”, or “shares”) may sell, transfer, or otherwise dispose of any shares without first offering us the option to purchase those shares at the price at which they were issued.  Additionally, a shareholder is entitled to any cash dividends, if any, accrued for the quarter in which the purchase offer is made, adjusted pro rata for the number of days such shares were held prior to the dividend record date. 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 on a pension (except a deferred pension), 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.

18



Business Overview

Net sales for the three months ended September 30, 2016 were $1,689,619, a record quarter for net sales for the second consecutive quarter. This was $105,733, or 6.7% higher than the three months ended September 30, 2015. Year-to-date September 30, 2016 net sales totaled $4,785,620, an increase of $237,948, or 5.2%, over year-to-date September 30, 2015 net sales of $4,547,672. Quarter-to-date net sales in our construction and CIG vertical markets increased 11.3% and 2.7%, respectively, while our industrial and utility vertical market net sales decreased 1.6%. Year-to-date net sales in our construction vertical market increased 9.8%, while our industrial and utility vertical market net sales decreased 1.2% and our CIG vertical market net sales decreased 0.1%.

The gross margin rate for the three months ended September 30, 2016 and 2015, was 18.9% and 19.1%, resepctively. Gross margin increased $15,800, or 5.2%, to $318,758 for the three months ended September 30, 2016, when compared to gross margin of $302,958 for the same period last year. Year-to-date September 30, 2016 and 2015 gross margin rate was 18.9% and 18.8%, respectively. Year-to-date September 30, 2016 gross margin increased $48,675, or 5.7%, to $904,004, compared to gross margin of $855,329 for the same nine-month period last year. Our year-to-date improved gross margin rate continues to be the result of our organic gross margin improvement and product diversification initiatives.

Net income attributable to the Company for the three months ended September 30, 2016 increased $1,818, or 6.4%, to $30,129 from $28,311 for the three months ended September 30, 2015, while net income attributable to the Company for the nine months ended September 30, 2016 increased $4,950, or 7.5%, to $70,809 from $65,859 for the nine months ended September 30, 2015.

Our performance for the three and nine months ended September 30, 2016 was the result, in part, of our sustained focus on achieving profitable growth and strengthening our position in the supply chain. Over the last several years, we have invested in new and expanded facilities, training and developing our people, and enhancing our technology and service capabilities.

While we will continue to remain focused on organic growth, we will pursue new opportunities to drive our long-term success and expand our reach by looking at new locations and exploring potential acquisitions.

Consolidated Results of Operations

The following tables set forth certain information relating to our operations stated in thousands of dollars and as a percentage of net sales for the three and nine months ended September 30, 2016 and 2015:

 
Three Months Ended
 
Three Months Ended
 
September 30, 2016
 
September 30, 2015
 
Dollars

 
Percent

 
Dollars

 
Percent

Net Sales
$
1,689,619

 
100.0
 %
 
$
1,583,886

 
100.0
 %
Cost of merchandise sold
(1,370,861
)
 
(81.1
)
 
(1,280,928
)
 
(80.9
)
Gross Margin
318,758

 
18.9

 
302,958

 
19.1

Selling, general and administrative expenses
(254,969
)
 
(15.1
)
 
(244,672
)
 
(15.4
)
Depreciation and amortization
(12,283
)
 
(0.7
)
 
(10,960
)
 
(0.7
)
Other income, net
629

 

 
1,187

 

Income from Operations
52,135

 
3.1

 
48,513

 
3.0

Interest expense, net
(1,215
)
 
(0.1
)
 
(685
)
 

Income before Provision for Income Taxes
50,920

 
3.0

 
47,828

 
3.0

Provision for income taxes
(20,724
)
 
(1.2
)
 
(19,431
)
 
(1.2
)
Net Income
30,196

 
1.8

 
28,397

 
1.8

Less:  Net income attributable to noncontrolling interests
(67
)
 

 
(86
)
 

Net Income attributable to
Graybar Electric Company, Inc.
$
30,129

 
1.8
 %
 
$
28,311

 
1.8
 %


19




Nine Months Ended
 
Nine Months Ended
 
September 30, 2016
 
September 30, 2015
 
Dollars

 
Percent

 
Dollars

 
Percent

Net Sales
$
4,785,620

 
100.0
 %
 
$
4,547,672

 
100.0
 %
Cost of merchandise sold
(3,881,616
)
 
(81.1
)
 
(3,692,343
)
 
(81.2
)
Gross Margin
904,004

 
18.9

 
855,329

 
18.8

Selling, general and administrative expenses
(750,266
)
 
(15.7
)
 
(717,648
)
 
(15.8
)
Depreciation and amortization
(35,158
)
 
(0.7
)
 
(32,082
)
 
(0.7
)
Other income, net
3,438

 

 
6,746

 
0.1

Income from Operations
122,018

 
2.5

 
112,345

 
2.4

Interest expense, net
(2,635
)
 

 
(1,895
)
 

Income before Provision for Income Taxes
119,383

 
2.5

 
110,450

 
2.4

Provision for income taxes
(48,396
)
 
(1.0
)
 
(44,414
)
 
(1.0
)
Net Income
70,987

 
1.5

 
66,036

 
1.4

Less:  Net income attributable to noncontrolling interests
(178
)
 

 
(177
)
 

Net Income attributable to
Graybar Electric Company, Inc.
$
70,809

 
1.5
 %
 
$
65,859

 
1.4
 %

Three Months Ended September 30, 2016 Compared to Three Months Ended September 30, 2015
 
Net sales totaled $1,689,619 for the quarter ended September 30, 2016, compared to $1,583,886 for the quarter ended September 30, 2015, an increase of $105,733, or 6.7%.  Net sales in our construction and CIG vertical markets increased for the three months ended September 30, 2016 compared to the same three-month period of 2015 by 11.3% and 2.7%, respectively, while net sales in our industrial and utility vertical market declined by 1.6%.
 
Gross margin increased $15,800, or 5.2%, to $318,758 for the three months ended September 30, 2016, from $302,958 for the same period of 2015 primarily due to increased net sales in the third quarter of 2016, compared to the same period of 2015. Our gross margin as a percent of net sales totaled 18.9% for the three months ended September 30, 2016 compared to 19.1% for the three months ended September 30, 2015. The decrease in gross margin rate was primarily due to a change in sales mix for the three months ended September 30, 2016 compared to the same three month period in 2015.
 
Selling, general and administrative expenses ("SG&A") increased $10,297, or 4.2%, to $254,969 in the third quarter of 2016 from $244,672 in the third quarter of 2015, due primarily to an increase in employee benefit costs, normal compensation increases and increases in management and sales incentive accruals for the three months ended September 30, 2016.  Selling, general and administrative expenses as a percentage of net sales totaled 15.1% for the three months ended September 30, 2016 compared to 15.4% for the three months ended September 30, 2015.

Depreciation and amortization expenses for the three months ended September 30, 2016 increased $1,323, or 12.1%, to $12,283 from $10,960 in the third quarter of 2015, due to an increase in property, at cost. Total property, at cost, at September 30, 2016 was $934,625, an increase of $29,555, or 3.3%, when compared to total property, at cost, at September 30, 2015 of $905,070. Depreciation and amortization expenses as a percentage of net sales totaled 0.7% for the three months ended September 30, 2016 and 2015.

Other income, net totaled $629 for the three-month period ended September 30, 2016, compared to $1,187 for the three months ended September 30, 2015.  Other income, net consists primarily of gains on the disposal of property, trade receivable interest charges to customers, and other miscellaneous income items related to our business activities.  The decrease in other income, net was primarily due to lower net gains on the disposal of personal property for the three months ended September 30, 2016 compared to the same three-month period in 2015.

Interest expense, net increased $530, or 77.4%, to $1,215 for the three months ended September 30, 2016 compared to $685 for the same period of 2015. The increase was primarily due to higher levels of average outstanding short-term borrowings.

Income before provision for income taxes totaled $50,920 for the three months ended September 30, 2016, an increase of $3,092, or 6.5%, from $47,828 for the three months ended September 30, 2015. The increase was primarily due to our growth in gross margin partially offset by increases in SG&A and depreciation and amortization expenses.


20



Our total provision for income taxes increased $1,293, or 6.7%, to $20,724 for the three months ended September 30, 2016, compared to $19,431 for the same period of 2015.  Our effective tax rate was 40.7% for the three months ended September 30, 2016, compared to 40.6% for the same period of 2015. The increase in the effective tax rate was largely attributable to an increase in state and foreign taxes. The effective tax rate for the three months ended September 30, 2016 and 2015 was higher than the 35.0% U.S. federal statutory rate primarily due to state and local income taxes.
 
Net income attributable to Graybar Electric Company, Inc. for the three months ended September 30, 2016 increased $1,818, or 6.4%, to $30,129 from $28,311 for the three months ended September 30, 2015.

Nine Months Ended September 30, 2016 Compared to Nine Months Ended September 30, 2015
 
Net sales totaled $4,785,620 for the nine-month period ended September 30, 2016, compared to $4,547,672 for the nine-month period ended September 30, 2015, an increase of $237,948, or 5.2%.  Net sales in our construction vertical market increased by 9.8% for the nine months ended September 30, 2016 compared to the same nine-month period of 2015, while net sales in our industrial and utility and CIG vertical markets declined by 1.2% and 0.1%, respectively.
 
Gross margin increased $48,675, or 5.7%, to $904,004 from $855,329 primarily due to our focus on gross margin rate improvement initiatives, as well as increased net sales in the first nine months of 2016, compared to the same period of 2015.  Our gross margin as a percent of net sales totaled 18.9% for the nine months ended September 30, 2016, up from 18.8% for the nine months ended September 30, 2015.
 
Selling, general and administrative expenses increased $32,618, or 4.5%, to $750,266, for the nine-month period ended September 30, 2016, compared to $717,648 for the nine-month period ended September 30, 2015, due primarily to an increase in employee benefit costs, normal compensation increases and increases in management and sales incentive accruals for the nine months ended September 30, 2016.  Selling, general and administrative expenses as a percentage of net sales decreased to 15.7% for the nine months ended September 30, 2016 compared to 15.8% for the nine months ended September 30, 2015.

Depreciation and amortization expenses for the nine months ended September 30, 2016 increased $3,076, or 9.6%, to $35,158 from $32,082 for the same nine-month period in 2015, due to an increase in property, at cost. Total property, at cost, at September 30, 2016 was $934,625, an increase of $29,555, or 3.3%, when compared to total property, at cost, at September 30, 2015 of $905,070. Depreciation and amortization expenses as a percentage of net sales remained constant at 0.7% for the nine months ended September 30, 2016 and 2015.
 
Other income, net totaled $3,438 for the nine-month period ended September 30, 2016, compared to $6,746 for the nine months ended September 30, 2015.  Other income, net consists primarily of gains on the disposal of property, trade receivable interest charges to customers, and other miscellaneous income items related to our business activities.  The decrease in other income, net was primarily due to reduced net gains on the disposal of real and personal property for the nine months ended September 30, 2016 compared to the same nine-month period in 2015.
 
Interest expense, net increased $740, or 39.1%, to $2,635 for the nine months ended September 30, 2016 compared to $1,895 for the same period of 2015. The increase was primarily due to higher levels of average outstanding short-term borrowings.

Income before provision for income taxes totaled $119,383 for the nine months ended September 30, 2016, an increase of $8,933, or 8.1%, from $110,450 for the nine months ended September 30, 2015. The increase was primarily due to our growth in gross margin and partially offset by increases in SG&A and depreciation and amortization expenses.
 
Our total provision for income taxes increased $3,982, or 9.0%, to $48,396 for the nine months ended September 30, 2016, compared to $44,414 for the same period in 2015.  Our year-to-date effective tax rate was 40.5% for the nine months ended September 30, 2016, compared to 40.2% for the same period in 2015.  The increase in the effective tax rate was attributable to discrete events and an increase in state and foreign taxes as compared to the prior year. The effective tax rate for the nine months ended September 30, 2016 was higher than the 35.0% U.S. federal statutory rate primarily due to state and local income taxes.
 
Net income attributable to Graybar Electric Company, Inc. for the nine-month period ended September 30, 2016 increased $4,950, or 7.5%, to $70,809 from $65,859 for the nine months ended September 30, 2015.


21



Financial Condition and Liquidity
 
We manage our liquidity and capital levels so that we have the capacity to invest in the growth of our business, meet debt service obligations, finance anticipated capital expenditures, pay dividends, make benefit payments, finance information technology needs, fund acquisitions and finance other miscellaneous cash outlays. We believe that maintaining a strong company financial condition enables us to competitively access multiple financing channels, maintain an optimal cost of capital and enable our company to invest in strategic long-term growth plans.

We have historically funded our working capital requirements using cash flows generated by the collection of trade receivables and trade accounts payable terms with our suppliers, supplemented by short-term bank lines of credit.  Capital expenditures have been financed primarily by cash from working capital management, short-term bank lines of credit and long-term debt.

Our cash and cash equivalents at September 30, 2016 were $51,111, compared to $37,931 at December 31, 2015, an increase of $13,180, or 34.7%. Our short-term borrowings increased significantly, $168,871, or 160.9% during the nine-month period to $273,849 at September 30, 2016 from $104,978 at December 31, 2015, primarily due to the financing of strategic investments in merchandise inventory to support the growth of sales and our acquisition of Cape Electric in the third quarter, all funded via short-term lines of credit. In addition, cash collections, as measured by days sales outstanding, declined modestly for the quarter ended September 30, 2016. Finally, current assets exceeded current liabilities by $447,960 at September 30, 2016, an increase of $2,517, or 0.6%, from $445,443 at December 31, 2015.
 
Operating Activities
 
Cash used by operations for the nine months ended September 30, 2016 was $59,338, compared to cash provided by operations of $21,098 for the nine months ended September 30, 2015. Cash flows used by operations for September 30, 2016 was attributable to increased inventory levels during the nine months ended September 30, 2016 of $83,059 to support our continued growth of sales during 2016, as well as an increase in trade receivables of $73,623 as a result of increased sales and a modest increase in days sales outstanding for the three months ended September 30, 2016, and a decrease in accrued payroll benefits of $21,835 and a decrease of $51,832 in other non-current liabilities as a result of additional voluntary pension contributions made during the second and third quarters of 2016. These uses were partially offset by net income of $70,987 and an increase in trade accounts payable of $16,571.

Merchandise inventory turnover declined moderately for the nine months ended September 30, 2016, compared to the nine months ended September 30, 2015, as a result of increased merchandise inventory levels, partially offset by higher sales volume at September 30, 2016 compared to September 30, 2015. The average number of days of sales in trade receivables for the nine-month period ended September 30, 2016 increased moderately compared to the same nine-month period ended September 30, 2015.

Investing Activities
 
Net cash used by investing activities totaled $81,465 for the nine months ended September 30, 2016, compared to $69,001 for the same nine-month period in 2015, an increase of $12,464, or 18.1%. The increase was primarily due to the acquisition of Cape Electric, net of cash, for $59,946, partially offset by lower capital expenditures in the nine months ended September 30, 2016 compared to the nine months ended September 30, 2015. In the first quarter of 2015, we purchased a new regional distribution center in southern California for $23,392. In the second quarter of 2016, we acquired two properties for a total of $3,279. Proceeds on the disposal of property decreased during the nine months ended September 30, 2016 compared to 2015. In the first quarter of 2016 we disposed of a local distribution facility that provided proceeds of $1,686, compared to first quarter of 2015 when we disposed of a regional distribution center in northern California that provided proceeds of $8,214. Both facilities had been classified as an asset held for sale.

Financing Activities
 
Net cash provided by financing activities for the nine months ended September 30, 2016 totaled $153,983, compared to $56,460 for the nine months ended September 30, 2015, an increase of $97,523, or 172.7%. The increase was primarily due to the increase in our short term borrowings for the nine months ended September 30, 2016 when compared to the nine months ended September 30, 2015, to fund our operating and investing activities.


22



Liquidity

We had a $550,000 revolving credit facility with $276,151 in available capacity at September 30, 2016, compared to $445,022 at December 31, 2015. At September 30, 2016 and December 31, 2015, we also had an uncommitted $100,000 private placement shelf agreement that allows us to issue senior promissory notes to affiliates of Prudential at fixed rate terms to be agreed upon at the time of any issuance during a three year issuance period ending in September 2017. At September 30, 2016, we also had an uncommitted $100,000 private placement shelf agreement that allows us to issue senior promissory notes to affiliates of MetLife at fixed rate terms to be agreed upon at the time of any issuance during a three year issuance period ending in September 2019. We have not issued any notes under the shelf agreements as of September 30, 2016 and December 31, 2015. For further discussion related to our revolving credit facility and our private placement shelf agreements, refer to Note 5, "Debt", of the notes to the condensed consolidated financial statements located in Item 1.

We had total letters of credit of $5,460 and $4,994 outstanding, of which none were issued under the $550,000 revolving credit facility at September 30, 2016 and December 31, 2015. The letters of credit are issued primarily to support certain workers' compensation insurance policies.

New Accounting Standards Updates
 
Our adoption of new accounting standards are 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, 2015.

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 September 30, 2016, 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.


23



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.  Under applicable New York law, a voting trust may not have a term greater than ten years.  The 2007 Voting Trust Agreement expires by its terms on March 15, 2017. At September 30, 2016, approximately 84% of the common stock was held in this 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.
 
No holder of our common stock or voting trust interests representing our common stock ("common stock", "common shares", or "shares") may sell, transfer, or otherwise dispose of any shares without first offering us the option to purchase those shares at the price at which they were issued.  Additionally, a shareholder is entitled to any cash dividends, if any, accrued for the quarter in which the purchase offer is made, adjusted pro rata for the number of days such shares were held prior to the dividend record date. 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 on a pension (except a deferred pension), and on the first anniversary of any holder's death.  In the past, we have always exercised these purchase options, and we expect to continue to do so in the foreseeable future.  However, we can make no assurance that we will continue to exercise our purchase option in the future. All outstanding shares have been issued at $20.00 per share.
 
The following table sets forth information regarding purchases of common stock by the Company, all of which were made pursuant to the foregoing provisions:
 
Issuer Purchases of Equity Securities
Period
 
Total Number of
Shares Purchased
 
Average
Price Paid
per Share
 
Total Number of Shares
Purchased as Part of Publicly
Announced Plans or Programs
July 1 - July 31, 2016
 
61,642

 
 
$20.00
 
N/A
August 1 - August 31, 2016
 
48,160

 
 
$20.00
 
N/A
September 1 - September 30, 2016
 
54,693

 
 
$20.00
 
N/A
Total
 
164,495

 
 
$20.00
 
N/A
 


24



Item 6.  Exhibits.
 
(a)
Exhibits furnished in accordance with provisions of Item 601 of Regulation S-K.
 
 
 
 
 
 
 
 
 
(3)
 
(i)
 
Articles of Incorporation
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(a)
Restated Certificate of Incorporation, as amended, filed as Exhibit 3.1 to the Company's Current Report on Form 8-K dated June 13, 2013 (Commission File No. 000-00255) and incorporated herein by reference.
 
 
 
 
 
 
 
 
 
 
 
 
(ii)
 
Bylaws
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(a)
By-laws as amended through March 12, 2015, filed as Exhibit 3(ii) to the Company's Current Report on Form 8-K dated March 12, 2015 (Commission File No. 000-00255) and incorporated herein by reference.
 
 
 
 
 
 
 
 
 
 
(10)
 
Material Contract
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Private Shelf Agreement, dated September 22, 2016, between the Company and Metropolitan Life Insurance Company, MetLife Investment Advisors, LLC and other MetLife affiliates.
 
 
 
 
 
 
 
 
 
 
(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.
 
 
 
 
 
 
 
 
 
 
101.INS
 
XBRL Instance Document
 
 
 
 
 
 
 
 
 
 
101.SCH
 
XBRL Taxonomy Extension Schema Document
 
 
 
 
 
 
 
 
 
 
101.CAL
 
XBRL Taxonomy Extension Calculation Linkbase Document
 
 
 
 
 
 
 
 
 
 
101.DEF
 
XBRL Taxonomy Extension Definition Linkbase Document
 
 
 
 
 
 
 
 
 
 
101.LAB
 
XBRL Taxonomy Extension Label Linkbase Document
 
 
 
 
 
 
 
 
 
 
101.PRE
 
XBRL Taxonomy Extension Presentation Linkbase Document
 
 
 
 
 
 
 
 
 
 


25



SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
 
 
GRAYBAR ELECTRIC COMPANY, INC.
 
 
 
 
 
 
 
 
 
November 1, 2016
 
/s/ KATHLEEN M. MAZZARELLA
 
Date
 
Kathleen M. Mazzarella
 
 
 
President and Chief Executive Officer
(Principal Executive Officer)
 
 
 
 
 
November 1, 2016
 
/s/ RANDALL R. HARWOOD
 
Date
 
Randall R. Harwood
 
 
 
Senior Vice President and Chief Financial Officer
(Principal Financial Officer)


26



EXHIBIT INDEX
 
Exhibits

(3(i))

 
Articles of Incorporation
 
 
 
 
 
 
(a)
Restated Certificate of Incorporation, as amended, filed as Exhibit 3.1 to the Company's Current Report on Form 8-K dated June 13, 2013 (Commission File No. 000-00255) and incorporated herein by reference.
 
 
 
 
(3(ii))

 
Bylaws
 
 
 
 
 
 
(a)
By-laws as amended through March 12, 2015, filed as Exhibit 3(ii) to the Company's Current Report on Form 8-K dated March 12, 2015 (Commission File No. 000-00255) and incorporated herein by reference.
 
 
 
 
(10
)
 
Material Contract
 
 
 
 
 
 
 
Private Shelf Agreement, dated September 22, 2016, between the Company and Metropolitan Life Insurance Company, MetLife Investment Advisors, LLC and other MetLife affiliates.
 
 
 
 
(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.
 
 
 
 
101.INS

 
XBRL Instance Document
 
 
 
101.SCH

 
XBRL Taxonomy Extension Schema Document
 
 
 
 
101.CAL

 
XBRL Taxonomy Extension Calculation Linkbase Document
 
 
 
 
101.DEF

 
XBRL Taxonomy Extension Definition Linkbase Document
 
 
 
 
101.LAB

 
XBRL Taxonomy Extension Label Linkbase Document
 
 
 
 
101.PRE

 
XBRL Taxonomy Extension Presentation Linkbase Document
 
 
 
 
 
 
 
 

27