10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One) 

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2015

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 xNO ¨
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 xNO ¨
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 31, 2015: 15,897,937
(Number of Shares)

Graybar Electric Company, Inc. and Subsidiaries

Quarterly Report on Form 10-Q

For the Period Ended September 30, 2015

(Unaudited)

Table of Contents

PART I.	FINANCIAL INFORMATION			Page
	Item 1.	Financial Statements
			Condensed Consolidated Statements of Income	3
			Condensed Consolidated Statements of Comprehensive Income	4
			Condensed Consolidated Balance Sheets	5
			Condensed Consolidated Statements of Cash Flows	6
			Condensed Consolidated Statements of Changes in Shareholders’ Equity	7
			Notes to Condensed Consolidated Financial Statements	8
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		17
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk		22
	Item 4.	Controls and Procedures		22
PART II.	OTHER INFORMATION
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		23
	Item 6.	Exhibits		24
	Signatures			25
	Exhibit Index			26

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)	2015			2014			2015			2014
Gross Sales	$	1,590,576		$	1,576,376		$	4,566,880		$	4,418,354
Cash discounts	(6,690		)	(6,619		)	(19,208		)	(18,422		)
Net Sales	1,583,886			1,569,757			4,547,672			4,399,932
Cost of merchandise sold	(1,280,928		)	(1,275,222		)	(3,692,343		)	(3,573,998		)
Gross Margin	302,958			294,535			855,329			825,934
Selling, general and administrative expenses	(244,672		)	(233,773		)	(717,648		)	(678,647		)
Depreciation and amortization	(10,960		)	(9,786		)	(32,082		)	(29,140		)
Other income, net	1,187			739			6,746			2,897
Income from Operations	48,513			51,715			112,345			121,044
Interest expense, net	(685		)	(364		)	(1,895		)	(1,122		)
Income before Provision for Income Taxes	47,828			51,351			110,450			119,922
Provision for income taxes	(19,431		)	(20,815		)	(44,414		)	(48,929		)
Net Income	28,397			30,536			66,036			70,993
Less:  Net income attributable to noncontrolling interests	(86		)	(72		)	(177		)	(164		)
Net Income attributable to Graybar Electric Company, Inc.	$	28,311		$	30,464		$	65,859		$	70,829
Net Income per share of Common Stock	$	1.77		$	1.93		$	4.12		$	4.47
Cash Dividends per share of Common Stock	$	0.30		$	0.30		$	0.90		$	0.90
Average Common Shares Outstanding	15,942			15,799			15,980			15,861

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)	2015			2014			2015			2014
Net Income	$	28,397		$	30,536		$	66,036		$	70,993
Other Comprehensive Income
Foreign currency translation	(6,082		)	(3,665		)	(10,738		)	(3,366		)
Pension and postretirement benefits liability adjustment (net of tax of $(1,881), $(1,719), $(5,644) and $(5,158), respectively)	2,955			2,701			8,864			8,101
Total Other Comprehensive (Loss) Income	(3,127		)	(964		)	(1,874		)	4,735
Comprehensive Income	$	25,270		$	29,572		$	64,162		$	75,728
Less: Comprehensive (loss) income attributable to        noncontrolling interests, net of tax	(188		)	(64		)	(261		)	12
Comprehensive Income attributable to        Graybar Electric Company, Inc.	$	25,458		$	29,636		$	64,423		$	75,716

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, 2015			December 31, 2014
ASSETS					(Unaudited)
Current Assets
Cash and cash equivalents					$	42,315		$	33,758
Trade receivables (less allowances of $6,453 and $7,073, respectively)					931,563			920,796
Merchandise inventory					520,624			461,139
Other current assets					28,811			44,711
Total Current Assets					1,523,313			1,460,404
Property, at cost
Land					77,530			67,879
Buildings					438,526			429,406
Furniture and fixtures					272,270			253,918
Software					84,878			84,488
Capital leases					31,866			25,135
Total Property, at cost					905,070			860,826
Less – accumulated depreciation and amortization					(468,629		)	(452,163		)
Net Property					436,441			408,663
Other Non-current Assets					75,907			70,046
Total Assets					$	2,035,661		$	1,939,113
LIABILITIES
Current Liabilities
Short-term borrowings					$	140,662		$	66,342
Current portion of long-term debt					7,382			6,241
Trade accounts payable					733,725			726,632
Accrued payroll and benefit costs					96,904			127,191
Other accrued taxes					15,902			18,300
Other current liabilities					78,290			69,148
Total Current Liabilities					1,072,865			1,013,854
Postretirement Benefits Liability					70,117			69,565
Pension Liability					126,330			140,981
Long-term Debt					10,480			11,595
Other Non-current Liabilities					20,881			21,137
Total Liabilities					1,300,673			1,257,132
SHAREHOLDERS’ EQUITY
	Shares at
Capital Stock	September 30, 2015		December 31, 2014
Common, stated value $20.00 per share
Authorized	50,000,000		50,000,000
Issued to voting trustees	13,760,828		13,159,559
Issued to shareholders	2,771,108		2,714,853
In treasury, at cost	(547,260	)	(14,482	)
Outstanding Common Stock	15,984,676		15,859,930		319,694			317,199
Advance Payments on Subscriptions to Common Stock					470			—
Retained Earnings					565,113			513,672
Accumulated Other Comprehensive Loss					(153,629		)	(152,193		)
Total Graybar Electric Company, Inc. Shareholders’ Equity					731,648			678,678
Noncontrolling Interests					3,340			3,303
Total Shareholders’ Equity					734,988			681,981
Total Liabilities and Shareholders’ Equity					$	2,035,661		$	1,939,113

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)	2015			2014
Cash Flows from Operations
Net Income	$	66,036		$	70,993
Adjustments to reconcile net income to cash provided by operations:
Depreciation and amortization	32,082			29,140
Deferred income taxes	(389		)	(146		)
Net gains on disposal of property	(4,946		)	(276		)
Net income attributable to noncontrolling interests	(177		)	(164		)
Changes in assets and liabilities:
Trade receivables	(6,696		)	(80,908		)
Merchandise inventory	(56,416		)	(38,564		)
Other current assets	16,126			(3,692		)
Other non-current assets	3,777			1,965
Trade accounts payable	3,647			90,846
Accrued payroll and benefit costs	(30,948		)	(2,216		)
Other current liabilities	(829		)	4,846
Other non-current liabilities	(169		)	(6,725		)
Total adjustments to net income	(44,938		)	(5,894		)
Net cash provided by operations	21,098			65,099
Cash Flows from Investing Activities
Proceeds from disposal of property	11,170			390
Capital expenditures for property	(62,078		)	(31,775		)
Acquisition of business, net of cash acquired	(18,093		)	—
Net cash used by investing activities	(69,001		)	(31,385		)
Cash Flows from Financing Activities
Net increase (decrease) in short-term borrowings	74,320			(8,760		)
Repayment of long-term debt	(2,736		)	(897		)
Principal payments under capital leases	(3,969		)	(2,503		)
Sale of common stock	13,621			12,503
Purchases of common stock	(10,656		)	(13,212		)
Sales of noncontrolling interests’ common stock	401			—
Purchases of noncontrolling interests’ common stock	(103		)	(288		)
Dividends paid	(14,418		)	(14,302		)
Net cash provided (used) by financing activities	56,460			(27,459		)
Net Increase in Cash	8,557			6,255
Cash, Beginning of Year	33,758			34,665
Cash, End of Period	$	42,315		$	40,920
Non-cash Investing and Financing Activities
Acquisitions of equipment under capital leases	$	6,731		$	3,123
Acquisition of software and maintenance under financing arrangement	—			7,309

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, 2013	$	317,767		$	—	$	489,740		$	(140,363	)	$	3,637		$	670,781
Net income						70,829						164			70,993
Other comprehensive income									4,887			(152		)	4,735
Stock issued	12,067														12,067
Stock purchased	(13,212		)									(288		)	(13,500		)
Advance payments				436											436
Dividends declared						(14,302		)							(14,302		)
September 30, 2014	$	316,622		$	436	$	546,267		$	(135,476	)	$	3,361		$	731,210
	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

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 2015 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, 2014, 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.  Except as discussed in Note 8. Assets Held for Sale, no material subsequent events have occurred since September 30, 2015 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 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 2015 have had or are expected to have a material impact on our consolidated financial statements except those noted below:

In April 2015, Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU” or “Update”) 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 are currently evaluating the impact of adopting this Update on our consolidated financial statements.

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 do not expect the adoption of this Update to have a material impact on the our results of operations, 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.

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.

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 $1,186 and $1,065 in interest and penalties at September 30, 2015 and December 31, 2014, 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.

11

Our federal income tax returns for the tax years 2012 and forward are available for examination by the United States Internal Revenue Service (“IRS”).  The statute of limitation for the 2012 federal return will expire on September 15, 2016, unless extended by consent. Our state income tax returns for 2010 through 2014 remain subject to examination by various state authorities with the latest period closing on December 31, 2019.  We have not extended the statutes of limitations in any state jurisdictions with respect to years prior to 2010.

Our unrecognized tax benefits of $3,528 and $3,104 at September 30, 2015 and December 31, 2014, 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, 2015, approximately 83% 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 $4,802 and $4,754 for the three months ended September 30, 2015 and 2014, respectively. Cash dividends declared were $14,418 and $14,302 for the nine months ended September 30, 2015 and 2014, respectively.

5. DEBT

Revolving Credit Facility

At September 30, 2015 and December 31, 2014, 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.

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, 2015 and December 31, 2014.

We had total letters of credit of $5,690 and $5,725 outstanding, of which none were issued under the Credit Agreement at September 30, 2015 and December 31, 2014. The letters of credit are used primarily to support certain workers' compensation insurance policies.

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There were $140,662 and $66,342 in short-term borrowings outstanding under the Credit Agreement at September 30, 2015 and December 31, 2014, respectively.

Short-term borrowings outstanding during the nine months ended September 30, 2015 and 2014 ranged from a minimum of $35,981 and $31,089 to a maximum of $184,188 and $111,912, respectively.

At September 30, 2015, we had unused lines of credit under the Credit Agreement amounting to $409,338 available, compared to $483,658 at December 31, 2014.  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 Agreement

At September 30, 2015 and December 31, 2014, we had an uncommitted $100,000 private placement shelf agreement with Prudential Investment Management, Inc. (the "Shelf Agreement"). The 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 Shelf Agreement as of September 30, 2015 and December 31, 2014.

The Shelf Agreement contains various affirmative and negative covenants. We are also required to maintain certain financial ratios as defined in the agreement. We were in compliance with all covenants as of September 30, 2015 and December 31, 2014.

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 under the defined benefit pension plan. Medical benefits are self-insured, and claims are paid 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, 2015 and December 31, 2014.

The net periodic benefit cost for the three and nine months ended September 30, 2015 and 2014 included the following components: 

	Pension Benefits						Postretirement Benefits
	Three Months Ended   September 30,						Three Months Ended   September 30,
Components of Net Periodic Benefit Cost	2015			2014			2015			2014
Service cost	$	6,402		$	5,551		$	626		$	614
Interest cost	6,301			6,704			731			834
Expected return on plan assets	(7,075		)	(6,656		)	—			—
Amortization of:
Net actuarial loss	5,007			4,410			261			317
Prior service cost (gain)	113			238			(545		)	(545		)
Net periodic benefit cost	$	10,748		$	10,247		$	1,073		$	1,220

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	Pension Benefits						Postretirement Benefits
	Nine Months Ended   September 30,						Nine Months Ended   September 30,
Components of Net Periodic Benefit Cost	2015			2014			2015			2014
Service cost	$	19,206		$	16,654		$	1,878		$	1,841
Interest cost	18,902			20,113			2,194			2,502
Expected return on plan assets	(21,223		)	(19,968		)	—			—
Amortization of:
Net actuarial loss	15,021			13,229			783			951
Prior service cost (gain)	339			714			(1,635		)	(1,635		)
Settlement loss	—			789			—			—
Net periodic benefit cost	$	32,245		$	31,531		$	3,220		$	3,659

A settlement loss that resulted from lump sum pension distributions was recorded during the nine months ended September 30, 2014.

We made qualified and nonqualified pension contributions totaling $10,002 during the three-month periods ended September 30, 2015 and 2014, respectively. Contributions made during the nine-month periods ended September 30, 2015 and 2014 totaled $31,536 and $32,864, respectively. Additional contributions totaling $10,002 are expected to be paid during the remainder of 2015.

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, 2015 and 2014:

	Three Months Ended   September 30, 2015									Three Months Ended   September 30, 2014
	Amortization of Pension and Other Postretirement Benefits Items									Amortization of Pension and Other Postretirement Benefits Items
	Actuarial Losses Recognized			Prior Service Costs Recognized			Total			Actuarial Losses Recognized			Prior Service Costs Recognized			Total
Affected Line in Condensed Consolidated Statement of Income:
Selling, general and administrative expenses	$	5,268		$	(432	)	$	4,836		$	4,727		$	(307	)	$	4,420
Tax (benefit) expense	(2,049		)	168			(1,881		)	(1,839		)	120			(1,719		)
Total reclassifications for the period, net of tax	$	3,219		$	(264	)	$	2,955		$	2,888		$	(187	)	$	2,701

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The following table represents amounts reclassified from accumulated other comprehensive income (loss) for the nine months ended September 30, 2015 and 2014:

	Nine Months Ended   September 30, 2015									Nine Months Ended   September 30, 2014
	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	$	15,804		$	(1,296	)	$	14,508		$	14,180		$	(921	)	$	13,259
Tax (benefit) expense	(6,148		)	504			(5,644		)	(5,517		)	359			(5,158		)
Total reclassifications for the period, net of tax	$	9,656		$	(792	)	$	8,864		$	8,663		$	(562	)	$	8,101

The following table represents the activity included in accumulated other comprehensive income (loss) for the three months ended September 30, 2015 and 2014:

	Three Months Ended   September 30, 2015									Three Months Ended   September 30, 2014
	Foreign Currency			Pension and Other Postretirement Benefits			Total			Foreign Currency			Pension and Other Postretirement Benefits			Total
Beginning balance July 1,	$	(4,208	)	$	(146,568	)	$	(150,776	)	$	6,968		$	(141,616	)	$	(134,648	)
Other comprehensive (loss) income before reclassifications	(5,808		)	—			(5,808		)	(3,529		)	—			(3,529		)
Amounts reclassified from accumulated other comprehensive income (net of tax $(1,881) and $(1,719))	—			2,955			2,955			—			2,701			2,701
Net current-period other comprehensive (loss) income	(5,808		)	2,955			(2,853		)	(3,529		)	2,701			(828		)
Ending balance September 30,	$	(10,016	)	$	(143,613	)	$	(153,629	)	$	3,439		$	(138,915	)	$	(135,476	)

The following table represents the activity included in accumulated other comprehensive income (loss) for the nine months ended September 30, 2015 and 2014:

	Nine Months Ended   September 30, 2015									Nine Months Ended   September 30, 2014
	Foreign Currency			Pension and Other Postretirement Benefits			Total			Foreign Currency			Pension and Other Postretirement Benefits			Total
Beginning balance January 1,	$	284		$	(152,477	)	$	(152,193	)	$	6,653		$	(147,016	)	$	(140,363	)
Other comprehensive (loss) income before reclassifications	(10,300		)	—			(10,300		)	(3,214		)	—			(3,214		)
Amounts reclassified from accumulated other comprehensive income (net of tax $(5,644) and $(5,158))	—			8,864			8,864			—			8,101			8,101
Net current-period other comprehensive (loss) income	(10,300		)	8,864			(1,436		)	(3,214		)	8,101			4,887
Ending balance September 30,	$	(10,016	)	$	(143,613	)	$	(153,629	)	$	3,439		$	(138,915	)	$	(135,476	)

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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 $7,669 at December 31, 2014. During the three months ended September 30, 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, 2015, we sold assets classified as held for sale with net book values of $4,669, and recorded 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, 2015 is $3,058 and is recorded in net property in the condensed consolidated balance sheets.

Subsequent to September 30, 2015, but prior to issuance of this report, we sold one of the locations included as an asset held for sale. The location had net book value of $3,000 and yielded a net gain of $496.

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 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, 2015 and 2014.

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. ACQUISITION

In April 2015, we acquired 100% of the outstanding capital stock of Advantage Industrial Automation, Inc. (“AIA”), 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.

Since the date of acquisition, the AIA results are reflected in our Condensed Consolidated Financial Statements. Pro forma results of this acquisition were not material; therefore, they are not presented.

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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, 2014, 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; cyber-attacks; volatility in the prices of industrial commodities; disruptions in our sources of supply; a sustained interruption in the operation of our information systems; increased funding requirements and expenses related to our pension plan; 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 or to borrow under our existing credit facilities or any replacements thereof.  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, 2014.

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.

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Business Overview

We achieved our twelfth consecutive year-over-year quarterly net sales record. Our third quarter 2015 net sales of $1,583,886 exceeded third quarter 2014 net sales by 0.9%, or $14,129. The third quarter 2015 was also an all-time quarterly net sales record, surpassing the fourth quarter 2014 net sales by 0.3%, or $4,957. Year-to-date September 30, 2015 net sales were $4,547,672, a 3.4% increase, or $147,740, over prior year net sales of $4,399,932. Our orders on hand also continued to increase during the third quarter.

The gross margin rate for the third quarter of 2015 was 19.1%, which brought our year-to-date 2015 gross margin rate of 18.8% in line with 2014. Our enhanced gross margin rate for the quarter is the result of our organic gross margin improvement and diversification initiatives and our second quarter 2015 acquisition. Gross margin increased $29,395, or 3.6%, to $855,329 for the nine months ended September 30, 2015, when compared to gross margin of $825,934 for the same nine-month period last year.

As we expanded our workforce, infrastructure, and online presence to support our growing sales, we experienced an increase of $39,001, or 5.7%, to $717,648 in our selling, general, and administrative expenses for the nine months ended September 30, 2015.

While we are aware of a generalized slowdown across our industry and expect that our sales will grow slowly through the end of 2015 and into 2016, we believe that our investments in developing our sales force, expanding our number of locations, and enhancing our e-commerce offering have positioned us well for long-term growth.

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, 2015 and 2014:

	Three Months Ended					Three Months Ended
	September 30, 2015					September 30, 2014
	Dollars			Percent		Dollars			Percent
Net Sales	$	1,583,886		100.0	%	$	1,569,757		100.0	%
Cost of merchandise sold	(1,280,928		)	(80.9	)	(1,275,222		)	(81.2	)
Gross Margin	302,958			19.1		294,535			18.8
Selling, general and administrative expenses	(244,672		)	(15.4	)	(233,773		)	(14.9	)
Depreciation and amortization	(10,960		)	(0.7	)	(9,786		)	(0.6	)
Other income, net	1,187			—		739			—
Income from Operations	48,513			3.0		51,715			3.3
Interest expense, net	(685		)	—		(364		)	—
Income before Provision for Income Taxes	47,828			3.0		51,351			3.3
Provision for income taxes	(19,431		)	(1.2	)	(20,815		)	(1.4	)
Net Income	28,397			1.8		30,536			1.9
Less:  Net income attributable to noncontrolling interests	(86		)	—		(72		)	—
Net Income attributable to Graybar Electric Company, Inc.	$	28,311		1.8	%	$	30,464		1.9	%

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	Nine Months Ended					Nine Months Ended
	September 30, 2015					September 30, 2014
	Dollars			Percent		Dollars			Percent
Net Sales	$	4,547,672		100.0	%	$	4,399,932		100.0	%
Cost of merchandise sold	(3,692,343		)	(81.2	)	(3,573,998		)	(81.2	)
Gross Margin	855,329			18.8		825,934			18.8
Selling, general and administrative expenses	(717,648		)	(15.8	)	(678,647		)	(15.4	)
Depreciation and amortization	(32,082		)	(0.7	)	(29,140		)	(0.7	)
Other income, net	6,746			0.1		2,897			—
Income from Operations	112,345			2.4		121,044			2.7
Interest expense, net	(1,895		)	—		(1,122		)	—
Income before Provision for Income Taxes	110,450			2.4		119,922			2.7
Provision for income taxes	(44,414		)	(1.0	)	(48,929		)	(1.1	)
Net Income	66,036			1.4		70,993			1.6
Less:  Net income attributable to noncontrolling interests	(177		)	—		(164		)	—
Net Income attributable to Graybar Electric Company, Inc.	$	65,859		1.4	%	$	70,829		1.6	%

Three Months Ended September 30, 2015 Compared to Three Months Ended September 30, 2014

Net sales totaled $1,583,886 for the quarter ended September 30, 2015, compared to $1,569,757 for the quarter ended September 30, 2014, an increase of $14,129, or 0.9%.  Net sales in our construction and CIG vertical markets increased for the three months ended September 30, 2015 compared to the same three-month period of 2014 by 3.1% and 1.0%, respectively, while net sales in our industrial and utility vertical market declined by 4.6%.

Gross margin increased$8,423, or 2.9%, to $302,958 from $294,535 primarily due to our focus on gross margin rate improvement initiatives as well as increased net sales in the third quarter of 2015, compared to the same period of 2014. Our gross margin as a percent of net sales totaled 19.1% for the three months ended September 30, 2015, up from 18.8% for the three months ended September 30, 2014.

Selling, general and administrative expenses increased$10,899, or 4.7%, to $244,672 in the third quarter of 2015 from $233,773 in the third quarter of 2014, due primarily to higher compensation-related expenses associated with our sales force expansion initiative and normal compensation increases for our existing workforce for the three months ended September 30, 2015.  Selling, general and administrative expenses as a percentage of net sales totaled 15.4% for the three months ended September 30, 2015, up from 14.9% for the three months ended September 30, 2014.

Depreciation and amortization expenses for the three months ended September 30, 2015increased$1,174, or 12.0%, to $10,960 from $9,786 in the third quarter of 2014, due to an increase in property, at cost. Total property, at cost, at September 30, 2015 was $905,070, an increase of $66,846, or 8.0%, when compared to total property, at cost, at September 30, 2014 of $838,224. As a result, depreciation and amortization expenses as a percentage of net sales totaled 0.7% for the three months ended September 30, 2015, up from 0.6% for the same period of 2014.

Other income, net totaled $1,187 for the three-month period ended September 30, 2015, compared to $739 for the three months ended September 30, 2014.  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 increase in other income, net for the three months ended September 30, 2015 compared to the same three-month period in 2014 was primarily due to increases in net gains on the disposal of personal property of $543.

Income before provision for income taxes totaled $47,828 for the three months ended September 30, 2015, a decrease of $3,523, or 6.9%, from $51,351 for the three months ended September 30, 2014. The decrease was primarily due to increases in selling, general, and administrative expenses and depreciation and amortization expenses, partially offset by an increase in gross margin.

Our total provision for income taxes decreased$1,384, or 6.6%, to $19,431 for the three months ended September 30, 2015, compared to $20,815 for the same period of 2014.  Our effective tax rate was 40.6% for the three months ended September 30, 2015, compared to 40.5% for the same period of 2014. The increase in the effective tax rate was attributable to

19

changes in anticipated pretax income. The effective tax rate for the three months ended September 30, 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, 2015decreased$2,153, or 7.1%, to $28,311 from $30,464 for the three months ended September 30, 2014.

Nine Months EndedSeptember 30, 2015 Compared to Nine Months EndedSeptember 30, 2014

Net sales totaled $4,547,672 for the nine-month period ended September 30, 2015, compared to $4,399,932 for the nine-month period ended September 30, 2014, an increase of $147,740, or 3.4%.  Net sales in our construction and CIG vertical markets increased for the nine months ended September 30, 2015 compared to the same nine-month period of 2014 by 3.9% and 5.8%, respectively, while net sales in our industrial and utility vertical market declined by 0.6%.

Gross margin increased$29,395, or 3.6%, to $855,329 from $825,934 primarily due to increased net sales in the first nine months of 2015, compared to the same period of 2014.  Our gross margin as a percent of net sales remained at 18.8% for the nine months ended September 30, 2015 and 2014.

Selling, general and administrative expenses increased$39,001, or 5.7%, to $717,648, for the nine-month period ended September 30, 2015, compared to $678,647 for the nine-month period ended September 30, 2014, due primarily to higher compensation-related expenses associated with our salesforce expansion initiative and normal compensation increases for our existing workforce for the nine months ended September 30, 2015.  Selling, general and administrative expenses as a percentage of net sales totaled 15.8% for the nine months ended September 30, 2015, up from 15.4% for the same period of 2014.

Depreciation and amortization expenses for the nine months ended September 30, 2015increased$2,942, or 10.1%, to $32,082 from $29,140 for the same nine-month period in 2014, due to an increase in property, at cost. Total property, at cost, at September 30, 2015 was $905,070, an increase of $66,846, or 8.0%, when compared to total property, at cost, at September 30, 2014 of $838,224. As a result, depreciation and amortization expenses as a percentage of net sales remained constant at 0.7% for the nine months ended September 30, 2015 and 2014.

Other income, net totaled $6,746 for the nine-month period ended September 30, 2015, compared to $2,897 for the nine months ended September 30, 2014.  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 increase in other income, net for the nine months ended September 30, 2015 compared to the same nine-month period in 2014 was primarily due to increases in net gains on the disposal of real and personal property of $4,670, partially offset by a decrease in miscellaneous income items of $735.

Income before provision for income taxes totaled $110,450 for the nine months ended September 30, 2015, a decrease of $9,472, or 7.9%, from $119,922 for the nine months ended September 30, 2014. The decrease was primarily due to increases in selling, general and administrative expenses and depreciation and amortization expenses, partially offset by increases in gross margin and other income, net.

Our total provision for income taxes decreased$4,515, or 9.2%, to $44,414 for the nine months ended September 30, 2015, compared to $48,929 for the same period in 2014.  Our year-to-date effective tax rate was 40.2% for the nine months ended September 30, 2015, compared to 40.8% for the same period in 2014.  The decrease in the effective tax rate was attributable to U.S. Internal Revenue Service ("IRS") audit-related adjustments that were recorded during the nine months ended September 30, 2014 that did not repeat during the nine months ended September 30, 2015. The effective tax rate for the nine months ended September 30, 2015 was higher than the 35.0% U.S. federal statutory rate primarily due to state and local income taxes, while the effective tax rate for nine months ended September 30, 2014 was higher due to the IRS audit and state and local income taxes.

Net income attributable to Graybar Electric Company, Inc. for the nine-month period ended September 30, 2015decreased$4,970, or 7.0%, to $65,859 from $70,829 for the nine months ended September 30, 2014.

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, make benefit payments, fund acquisitions, make dividend payments, finance information technology needs, and finance other miscellaneous cash outlays. We believe that maintaining a

20

strong 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.

Cash and cash equivalents were $42,315 at September 30, 2015, compared to $33,758 at December 31, 2014, an increase of $8,557, or 25.3%. Our short term borrowings increased significantly during the nine-month period to $140,662 at September 30, 2015 from $66,342 at December 31, 2014, in part, because we have strategically invested in expanding our service offering by adding new locations, expanding our sales force, and through an acquisition. Short-term borrowings at September 30, 2015 were down $43,526, or 23.6%, when compared to June 30, 2015. In addition, current assets exceeded current liabilities by $450,448 at September 30, 2015, an increase of $3,898, or 0.9%, from $446,550 at December 31, 2014.

Operating Activities

Cash provided by operations for the nine months ended September 30, 2015 was $21,098, compared to $65,099 for the nine months ended September 30, 2014, a decline of $44,001, or 67.6%. Cash flows provided by operations for September 30, 2015 was a result of increased inventory levels during the nine months ended September 30, 2015 to support our expected growth of sales during 2015, as well as an increase in trade receivables and a decrease in accrued payroll benefits, partially offset by an increase in trade accounts payable.

Merchandise inventory turnover decreased modestly for the nine months ended September 30, 2015, compared to the nine months ended September 30, 2014, as a result of increased merchandise inventory levels partially offset by higher sales volume at September 30, 2015 compared to September 30, 2014. The average number of days of sales in trade receivables for the nine-month period ended September 30, 2015 remains unchanged compared to the same nine-month period ended September 30, 2014.

Investing Activities

Net cash used by investing activities totaled $69,001 for the nine months ended September 30, 2015, compared to $31,385 for the same nine-month period in 2014, an increase of $37,616, or 119.9%. In the first quarter of 2015, we purchased a new regional distribution center in southern California for $23,392, while disposing of a regional distribution center in northern California that had been classified as an asset held for sale and provided proceeds of $8,214. During the second quarter of 2015, we acquired Advantage Industrial Automation, Inc. for $18,093, net of cash acquired. For further discussion of the acquisition, refer to Note 10, "Acquisition", of the notes to the condensed consolidated financial statements.

Financing Activities

Net cash provided by financing activities for the nine months ended September 30, 2015 totaled $56,460, compared to net cash used by financing activities of $27,459 for the nine months ended September 30, 2014, an increase of $83,919, or 305.6%. The increase was primarily due to the increase in our short term borrowings for the nine months ended September 30, 2015 to fund our operating and investing activities.

Liquidity

We had a $550,000 revolving credit facility with $409,338 in available capacity at September 30, 2015, compared to $483,658 at December 31, 2014. At September 30, 2015 and December 31, 2014, 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. No notes had been issued under the shelf agreement as of September 30, 2015 and December 31, 2014. For further discussion related to our revolving credit facility and our private placement shelf agreement, 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 $5,690 and $5,725 outstanding, of which none were issued under the $550,000 revolving credit facility at September 30, 2015 and December 31, 2014. The letters of credit are used primarily to support certain workers' compensation insurance policies.

21

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, 2014.

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, 2015, 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.

22

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, 2015, approximately 83% 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 to July 31, 2015	35,807	$20.00	N/A
August 1 to August 31, 2015	55,218	$20.00	N/A
September 1 to September 30, 2015	43,056	$20.00	N/A
Total	134,081	$20.00	N/A

23

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.
	(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

24

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 4, 2015	/s/ KATHLEEN M. MAZZARELLA
Date	Kathleen M. Mazzarella
	President and Chief Executive Officer (Principal Executive Officer)
November 4, 2015	/s/ RANDALL R. HARWOOD
Date	Randall R. Harwood
	Senior Vice President and Chief Financial Officer (Principal Financial Officer)

25

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.
(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

26

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Kathleen M. Mazzarella, 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) 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

d) 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 (the registrant's fourth fiscal quarter in the case of an annual report) 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.

November 4, 2015	/s/ KATHLEEN M. MAZZARELLA
Date	Kathleen M. Mazzarella
	President and Chief Executive Officer (Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Randall R. Harwood, 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) 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

d) 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 (the registrant's fourth fiscal quarter in the case of an annual report) 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.

November 4, 2015	/s/ RANDALL R. HARWOOD
Date	Randall R. Harwood
	Senior Vice President and Chief Financial Officer (Principal Financial Officer)

EX-32.1

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, Kathleen M. Mazzarella, President and Chief 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, 2015 (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.

November 4, 2015	/s/ KATHLEEN M. MAZZARELLA
Date	Kathleen M. Mazzarella
	President and Chief Executive Officer (Principal Executive Officer)

EX-32.2

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, Randall R. Harwood, Senior Vice President and Chief 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, 2015 (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.

November 4, 2015	/s/ RANDALL R. HARWOOD
Date	Randall R. Harwood
	Senior Vice President and Chief Financial Officer (Principal Financial Officer)

XML

Debt - Short-Term Borrowings (Details) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014	Sep. 30, 2014
Line of Credit Facility [Line Items]
Short-term borrowings	$ 140,662	$ 66,342
Revolving Credit Facility
Line of Credit Facility [Line Items]
Short-term borrowings	140,662	$ 66,342
Minimum
Line of Credit Facility [Line Items]
Short-term borrowings	35,981		$ 31,089
Maximum
Line of Credit Facility [Line Items]
Short-term borrowings	$ 184,188		$ 111,912

XML

Description of the Business

9 Months Ended

Sep. 30, 2015

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Description of the Business

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.

XML

Accumulated Other Comprehensive Income (Loss) - Reclassifications Out of Accumulated Other Comprehensive Income (Loss) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Selling, general and administrative expenses	$ 244,672	$ 233,773	$ 717,648	$ 678,647
Tax (benefit) expense	19,431	20,815	44,414	48,929
Total reclassifications for the period, net of tax	(28,397)	(30,536)	(66,036)	(70,993)
Reclassification out of Accumulated Other Comprehensive Income
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Selling, general and administrative expenses	4,836	4,420	14,508	13,259
Tax (benefit) expense	(1,881)	(1,719)	(5,644)	(5,158)
Total reclassifications for the period, net of tax	2,955	2,701	8,864	8,101
Actuarial Losses Recognized | Reclassification out of Accumulated Other Comprehensive Income
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Selling, general and administrative expenses	5,268	4,727	15,804	14,180
Tax (benefit) expense	(2,049)	(1,839)	(6,148)	(5,517)
Total reclassifications for the period, net of tax	3,219	2,888	9,656	8,663
Prior Service Costs Recognized | Reclassification out of Accumulated Other Comprehensive Income
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Selling, general and administrative expenses	(432)	(307)	(1,296)	(921)
Tax (benefit) expense	168	120	504	359
Total reclassifications for the period, net of tax	$ (264)	$ (187)	$ (792)	$ (562)

XML

Pension and Other Postretirement Benefits - Net Periodic Benefit Cost (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Pension Plans, Defined Benefit
Defined Benefit Plans and Other Postretirement Benefit Plans [Line Items]
Service cost	$ 6,402	$ 5,551	$ 19,206	$ 16,654
Interest cost	6,301	6,704	18,902	20,113
Expected return on plan assets	(7,075)	(6,656)	(21,223)	(19,968)
Amortization of: Net actuarial loss	5,007	4,410	15,021	13,229
Amortization of: Prior service cost (gain)	113	238	339	714
Settlement loss			0	789
Net periodic benefit cost	10,748	10,247	32,245	31,531
Other Postretirement Benefit Plans, Defined Benefit
Defined Benefit Plans and Other Postretirement Benefit Plans [Line Items]
Service cost	626	614	1,878	1,841
Interest cost	731	834	2,194	2,502
Expected return on plan assets	0	0	0	0
Amortization of: Net actuarial loss	261	317	783	951
Amortization of: Prior service cost (gain)	(545)	(545)	(1,635)	(1,635)
Settlement loss			0	0
Net periodic benefit cost	$ 1,073	$ 1,220	$ 3,220	$ 3,659

XML

Accumulated Other Comprehensive Income (Loss) - Changes in Accumulated Other Comprehensive Income (Loss) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward]
Beginning balance	$ (150,776)	$ (134,648)	$ (152,193)	$ (140,363)
Other comprehensive (loss) income before reclassifications	(5,808)	(3,529)	(10,300)	(3,214)
Amounts reclassified from accumulated other comprehensive income (net of tax)	2,955	2,701	8,864	8,101
Net current-period other comprehensive (loss) income	(2,853)	(828)	(1,436)	4,887
Ending balance	(153,629)	(135,476)	(153,629)	(135,476)
Other Comprehensive (Income) Loss, Reclassification Adjustment from AOCI, Pension and Other Postretirement Benefit Plans, Tax	(1,881)	(1,719)	(5,644)	(5,158)
Foreign Currency
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward]
Beginning balance	(4,208)	6,968	284	6,653
Other comprehensive (loss) income before reclassifications	(5,808)	(3,529)	(10,300)	(3,214)
Amounts reclassified from accumulated other comprehensive income (net of tax)	0	0	0	0
Net current-period other comprehensive (loss) income	(5,808)	(3,529)	(10,300)	(3,214)
Ending balance	(10,016)	3,439	(10,016)	3,439
Pension and Other Postretirement Benefits
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward]
Beginning balance	(146,568)	(141,616)	(152,477)	(147,016)
Other comprehensive (loss) income before reclassifications	0	0	0	0
Amounts reclassified from accumulated other comprehensive income (net of tax)	2,955	2,701	8,864	8,101
Net current-period other comprehensive (loss) income	2,955	2,701	8,864	8,101
Ending balance	$ (143,613)	$ (138,915)	$ (143,613)	$ (138,915)

XML

Assets Held For Sale - Assets Held for Sale (Details) - USD ($) $ in Thousands	1 Months Ended	3 Months Ended		9 Months Ended
	Oct. 31, 2015	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014	Dec. 31, 2014
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Loss on impairment of property		$ 0	$ 0	$ 0	$ 0
Disposal Group, Held-for-sale or Disposed of by Sale, Not Discontinued Operations
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Long lived assets held for sale		3,058		3,058		$ 7,669
Net book value of assets for sale		0		4,669
Net gain on sale of assets		$ 0		$ 4,195
Subsequent Event [Member] | Disposal Group, Held-for-sale or Disposed of by Sale, Not Discontinued Operations
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Net book value of assets for sale	$ 3,000
Net gain on sale of assets	$ 496

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Condensed Consolidated Statements of Changes in Shareholders’ Equity - USD ($) $ in Thousands	Total	Common Stock	Common Stock Subscribed, Unissued	Retained Earnings	Accumulated Other Comprehensive Loss	Noncontrolling Interests
Balance at Dec. 31, 2013	$ 670,781	$ 317,767	$ 0	$ 489,740	$ (140,363)	$ 3,637
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	70,993			70,829		164
Other comprehensive income (loss)	4,735				4,887	$ (152)
Stock issued	12,067	12,067
Stock purchased	(13,500)	(13,212)				$ (288)
Advance payments	436		436
Dividends declared	(14,302)			(14,302)
Balance at Sep. 30, 2014	731,210	316,622	436	546,267	(135,476)	3,361
Balance at Dec. 31, 2014	681,981	317,199	0	513,672	(152,193)	3,303
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	66,036			65,859		177
Other comprehensive income (loss)	(1,874)				(1,436)	(438)
Stock issued	13,552	13,151				401
Stock purchased	(10,759)	(10,656)				(103)
Advance payments	470		470
Dividends declared	(14,418)			(14,418)
Balance at Sep. 30, 2015	$ 734,988	$ 319,694	$ 470	$ 565,113	$ (153,629)	$ 3,340

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- Acquisition (Details) - USD ($) $ in Thousands		9 Months Ended
	Apr. 01, 2015	Sep. 30, 2015	Sep. 30, 2014
Business Acquisition [Line Items]
Acquisition of business, net of cash acquired		$ (18,093)	$ 0
Advantage Industrial Automation
Business Acquisition [Line Items]
Percentage of voting interest acquired	100.00%
Acquisition of business, net of cash acquired	$ (18,093)
Goodwill	7,057
Other Intangible Assets	$ 8,283

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Condensed Consolidated Statements of Income - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Income Statement [Abstract]
Gross Sales	$ 1,590,576	$ 1,576,376	$ 4,566,880	$ 4,418,354
Cash discounts	(6,690)	(6,619)	(19,208)	(18,422)
Net Sales	1,583,886	1,569,757	4,547,672	4,399,932
Cost of merchandise sold	(1,280,928)	(1,275,222)	(3,692,343)	(3,573,998)
Gross Margin	302,958	294,535	855,329	825,934
Selling, general and administrative expenses	(244,672)	(233,773)	(717,648)	(678,647)
Depreciation and amortization	(10,960)	(9,786)	(32,082)	(29,140)
Other income, net	1,187	739	6,746	2,897
Income from Operations	48,513	51,715	112,345	121,044
Interest expense, net	(685)	(364)	(1,895)	(1,122)
Income before Provision for Income Taxes	47,828	51,351	110,450	119,922
Provision for income taxes	(19,431)	(20,815)	(44,414)	(48,929)
Net Income	28,397	30,536	66,036	70,993
Less: Net income attributable to noncontrolling interests	(86)	(72)	(177)	(164)
Net Income attributable to Graybar Electric Company, Inc.	$ 28,311	$ 30,464	$ 65,859	$ 70,829
Net Income per share of Common Stock (in dollars per share)	$ 1.77	$ 1.93	$ 4.12	$ 4.47
Cash Dividends per share of Common Stock (in dollars per share)	$ 0.30	$ 0.30	$ 0.90	$ 0.90
Average Common Shares Outstanding (Shares)	15,942	15,799	15,980	15,861

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Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Statement of Financial Position [Abstract]
Allowance for doubtful accounts	$ 6,453	$ 7,073
Common, stated value per share	$ 20	$ 20
Authorized	50,000,000	50,000,000
Issued to voting trustees	13,760,828	13,159,559
Issued to shareholders	2,771,108	2,714,853
In treasury, at cost	(547,260)	(14,482)
Outstanding common stock	15,984,676	15,859,930

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Income Taxes (Narrative) (Details) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Income Tax Disclosure [Abstract]
Accrued interest and penalties	$ 1,186	$ 1,065
Unrecognized tax benefits	$ 3,528	$ 3,104

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Debt - Credit Agreement (Details) - USD ($)		9 Months Ended
	Jun. 06, 2014	Sep. 30, 2015	Dec. 31, 2014
Line of Credit Facility [Line Items]
Line of Credit Facility, Remaining Borrowing Capacity		$ 409,338,000	$ 483,658,000
Commitment fee percentage		0.40%
Line of Credit | Credit Agreement | Revolving Credit Facility
Line of Credit Facility [Line Items]
Debt Instrument, Term	5 years
Maximum borrowing capacity	$ 550,000,000
Accordion feature, higher borrowing capacity option	300,000,000
Line of Credit | Credit Agreement | Letter of Credit Sub-Facility
Line of Credit Facility [Line Items]
Maximum borrowing capacity	50,000,000
Line of Credit | Credit Agreement | Bridge Loan | Graybar Canada
Line of Credit Facility [Line Items]
Maximum borrowing capacity	100,000,000
Line of Credit | Credit Agreement | Bridge Loan | UNITED STATES
Line of Credit Facility [Line Items]
Maximum borrowing capacity	50,000,000
Line of Credit | Credit Agreement | Bridge Loan | CANADA
Line of Credit Facility [Line Items]
Maximum borrowing capacity	$ 20,000,000
Letter of Credit
Line of Credit Facility [Line Items]
Letters of credit outstanding, amount		$ 5,690,000	5,725,000
Letter of Credit | Revolving Credit Facility
Line of Credit Facility [Line Items]
Letters of credit outstanding, amount		$ 0	$ 0

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Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Cash Flows from Operations
Net Income	$ 66,036	$ 70,993
Adjustments to reconcile net income to cash provided by operations:
Depreciation and amortization	32,082	29,140
Deferred income taxes	(389)	(146)
Net gains on disposal of property	(4,946)	(276)
Net income attributable to noncontrolling interests	(177)	(164)
Changes in assets and liabilities:
Trade receivables	(6,696)	(80,908)
Merchandise inventory	(56,416)	(38,564)
Other current assets	16,126	(3,692)
Other non-current assets	3,777	1,965
Trade accounts payable	3,647	90,846
Accrued payroll and benefit costs	(30,948)	(2,216)
Other current liabilities	(829)	4,846
Other non-current liabilities	(169)	(6,725)
Total adjustments to net income	(44,938)	(5,894)
Net cash provided by operations	21,098	65,099
Cash Flows from Investing Activities
Proceeds from disposal of property	11,170	390
Capital expenditures for property	(62,078)	(31,775)
Acquisition of business, net of cash acquired	(18,093)	0
Net cash used by investing activities	(69,001)	(31,385)
Cash Flows from Financing Activities
Net increase (decrease) in short-term borrowings	74,320	(8,760)
Repayment of long-term debt	(2,736)	(897)
Principal payments under capital leases	(3,969)	(2,503)
Sale of common stock	13,621	12,503
Purchases of common stock	(10,656)	(13,212)
Sales of noncontrolling interests’ common stock	401	0
Purchases of noncontrolling interests’ common stock	(103)	(288)
Dividends paid	(14,418)	(14,302)
Net cash provided (used) by financing activities	56,460	(27,459)
Net Increase in Cash	8,557	6,255
Cash, Beginning of Year	33,758	34,665
Cash, End of Period	42,315	40,920
Non-cash Investing and Financing Activities
Acquisitions of equipment under capital leases	6,731	3,123
Acquisition of software and maintenance under financing arrangement	$ 0	$ 7,309

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Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Statement of Comprehensive Income [Abstract]
Net Income	$ 28,397	$ 30,536	$ 66,036	$ 70,993
Other Comprehensive Income
Foreign currency translation	(6,082)	(3,665)	(10,738)	(3,366)
Pension and postretirement benefits liability adjustment (net of tax of $(1,881), $(1,719), $(5,644) and $(5,158), respectively)	2,955	2,701	8,864	8,101
Total Other Comprehensive (Loss) Income	(3,127)	(964)	(1,874)	4,735
Comprehensive Income	25,270	29,572	64,162	75,728
Less: Comprehensive (loss) income attributable to noncontrolling interests, net of tax	(188)	(64)	(261)	12
Comprehensive Income attributable to Graybar Electric Company, Inc.	$ 25,458	$ 29,636	$ 64,423	$ 75,716

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2015

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

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.

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Document and Entity Information Document - shares	9 Months Ended
	Sep. 30, 2015	Oct. 31, 2015
Document and Entity Information [Abstract]
Entity Registrant Name	GRAYBAR ELECTRIC CO INC
Entity Central Index Key	0000205402
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Document Type	10-Q
Document Period End Date	Sep. 30, 2015
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q3
Amendment Flag	false
Entity Common Stock, Shares Outstanding		15,897,937

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Acquisition

9 Months Ended

Sep. 30, 2015

Business Combinations [Abstract]

Acquisition

ACQUISITION

In April 2015, we acquired 100% of the outstanding capital stock of Advantage Industrial Automation, Inc. (“AIA”), 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.

Since the date of acquisition, the AIA results are reflected in our Condensed Consolidated Financial Statements. Pro forma results of this acquisition were not material; therefore, they are not presented.

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Condensed Consolidated Statements of Comprehensive Income Condensed Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Statement of Comprehensive Income [Abstract]
Pension and postretirement benefits liabilities adjustment, tax	$ (1,881)	$ (1,719)	$ (5,644)	$ (5,158)

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Capital Stock

9 Months Ended

Sep. 30, 2015

Equity [Abstract]

Capital Stock

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, 2015, approximately 83% 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 $4,802 and $4,754 for the three months ended September 30, 2015 and 2014, respectively. Cash dividends declared were $14,418 and $14,302 for the nine months ended September 30, 2015 and 2014, respectively.

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Income Taxes

9 Months Ended

Sep. 30, 2015

Income Tax Disclosure [Abstract]

Income Taxes

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 $1,186 and $1,065 in interest and penalties at September 30, 2015 and December 31, 2014, 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 2012 and forward are available for examination by the United States Internal Revenue Service (“IRS”).  The statute of limitation for the 2012 federal return will expire on September 15, 2016, unless extended by consent. Our state income tax returns for 2010 through 2014 remain subject to examination by various state authorities with the latest period closing on December 31, 2019.  We have not extended the statutes of limitations in any state jurisdictions with respect to years prior to 2010.

Our unrecognized tax benefits of $3,528 and $3,104 at September 30, 2015 and December 31, 2014, 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.

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Capital Stock - Captial Stock (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014	Dec. 31, 2014
Equity [Abstract]
Percent of entity owned by current and retired employees			100.00%
Percent of entity held in voting trust	83.00%		83.00%
Common, stated value (in dollars per share)	$ 20		$ 20		$ 20
Dividends, Common Stock, Cash	$ 4,802	$ 4,754	$ 14,418	$ 14,302

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2015

Accounting Policies [Abstract]

Basis of Presentation

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 2015 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, 2014, 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

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

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

Subsequent Events

We have evaluated subsequent events through the time of the filing of this Quarterly Report on Form 10-Q with the Commission.  Except as discussed in Note 8. Assets Held for Sale, no material subsequent events have occurred since September 30, 2015 that require recognition or disclosure in these financial statements.

Revenue Recognition

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

Outgoing Freight Expenses                                                                                        

We record certain outgoing freight expenses as a component of selling, general and administrative expenses. 

Cash and Cash Equivalents

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

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

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. 

Supplier Volume Incentives

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 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.

Credit Risk

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

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

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

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 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

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

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

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.

Pension Plan

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

New Accounting Standards

No new accounting standards that were issued or became effective during 2015 have had or are expected to have a material impact on our consolidated financial statements except those noted below:

In April 2015, Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU” or “Update”) 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 are currently evaluating the impact of adopting this Update on our consolidated financial statements.

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 do not expect the adoption of this Update to have a material impact on the our results of operations, 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.

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.

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Accumulated Other Comprehensive Income (Loss)

9 Months Ended

Sep. 30, 2015

Equity [Abstract]

Accumulated Other Comprehensive Income (Loss)

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following table represents amounts reclassified from accumulated other comprehensive income (loss) for the three months ended September 30, 2015 and 2014:

	Three Months Ended   September 30, 2015									Three Months Ended   September 30, 2014
	Amortization of Pension and Other Postretirement Benefits Items									Amortization of Pension and Other Postretirement Benefits Items
	Actuarial Losses Recognized			Prior Service Costs Recognized			Total			Actuarial Losses Recognized			Prior Service Costs Recognized			Total
Affected Line in Condensed Consolidated Statement of Income:
Selling, general and administrative expenses	$	5,268		$	(432	)	$	4,836		$	4,727		$	(307	)	$	4,420
Tax (benefit) expense	(2,049		)	168			(1,881		)	(1,839		)	120			(1,719		)
Total reclassifications for the period, net of tax	$	3,219		$	(264	)	$	2,955		$	2,888		$	(187	)	$	2,701

The following table represents amounts reclassified from accumulated other comprehensive income (loss) for the nine months ended September 30, 2015 and 2014:

	Nine Months Ended   September 30, 2015									Nine Months Ended   September 30, 2014
	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	$	15,804		$	(1,296	)	$	14,508		$	14,180		$	(921	)	$	13,259
Tax (benefit) expense	(6,148		)	504			(5,644		)	(5,517		)	359			(5,158		)
Total reclassifications for the period, net of tax	$	9,656		$	(792	)	$	8,864		$	8,663		$	(562	)	$	8,101

The following table represents the activity included in accumulated other comprehensive income (loss) for the three months ended September 30, 2015 and 2014:

	Three Months Ended   September 30, 2015									Three Months Ended   September 30, 2014
	Foreign Currency			Pension and Other Postretirement Benefits			Total			Foreign Currency			Pension and Other Postretirement Benefits			Total
Beginning balance July 1,	$	(4,208	)	$	(146,568	)	$	(150,776	)	$	6,968		$	(141,616	)	$	(134,648	)
Other comprehensive (loss) income before reclassifications	(5,808		)	—			(5,808		)	(3,529		)	—			(3,529		)
Amounts reclassified from accumulated other comprehensive income (net of tax $(1,881) and $(1,719))	—			2,955			2,955			—			2,701			2,701
Net current-period other comprehensive (loss) income	(5,808		)	2,955			(2,853		)	(3,529		)	2,701			(828		)
Ending balance September 30,	$	(10,016	)	$	(143,613	)	$	(153,629	)	$	3,439		$	(138,915	)	$	(135,476	)

The following table represents the activity included in accumulated other comprehensive income (loss) for the nine months ended September 30, 2015 and 2014:

	Nine Months Ended   September 30, 2015									Nine Months Ended   September 30, 2014
	Foreign Currency			Pension and Other Postretirement Benefits			Total			Foreign Currency			Pension and Other Postretirement Benefits			Total
Beginning balance January 1,	$	284		$	(152,477	)	$	(152,193	)	$	6,653		$	(147,016	)	$	(140,363	)
Other comprehensive (loss) income before reclassifications	(10,300		)	—			(10,300		)	(3,214		)	—			(3,214		)
Amounts reclassified from accumulated other comprehensive income (net of tax $(5,644) and $(5,158))	—			8,864			8,864			—			8,101			8,101
Net current-period other comprehensive (loss) income	(10,300		)	8,864			(1,436		)	(3,214		)	8,101			4,887
Ending balance September 30,	$	(10,016	)	$	(143,613	)	$	(153,629	)	$	3,439		$	(138,915	)	$	(135,476	)

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Debt

9 Months Ended

Sep. 30, 2015

Debt Disclosure [Abstract]

Debt

DEBT

Revolving Credit Facility

At September 30, 2015 and December 31, 2014, 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.

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, 2015 and December 31, 2014.

We had total letters of credit of $5,690 and $5,725 outstanding, of which none were issued under the Credit Agreement at September 30, 2015 and December 31, 2014. The letters of credit are used primarily to support certain workers' compensation insurance policies.

There were $140,662 and $66,342 in short-term borrowings outstanding under the Credit Agreement at September 30, 2015 and December 31, 2014, respectively.

Short-term borrowings outstanding during the nine months ended September 30, 2015 and 2014 ranged from a minimum of $35,981 and $31,089 to a maximum of $184,188 and $111,912, respectively.

At September 30, 2015, we had unused lines of credit under the Credit Agreement amounting to $409,338 available, compared to $483,658 at December 31, 2014.  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 Agreement

At September 30, 2015 and December 31, 2014, we had an uncommitted $100,000 private placement shelf agreement with Prudential Investment Management, Inc. (the "Shelf Agreement"). The 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 Shelf Agreement as of September 30, 2015 and December 31, 2014.

The Shelf Agreement contains various affirmative and negative covenants. We are also required to maintain certain financial ratios as defined in the agreement. We were in compliance with all covenants as of September 30, 2015 and December 31, 2014.

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Pension and Other Postretirement Benefits

9 Months Ended

Sep. 30, 2015

Defined Benefit Plans and Other Postretirement Benefit Plans Disclosures [Abstract]

Pension and Other Postretirement Benefits

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 under the defined benefit pension plan. Medical benefits are self-insured, and claims are paid 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, 2015 and December 31, 2014.

The net periodic benefit cost for the three and nine months ended September 30, 2015 and 2014 included the following components: 

	Pension Benefits						Postretirement Benefits
	Three Months Ended   September 30,						Three Months Ended   September 30,
Components of Net Periodic Benefit Cost	2015			2014			2015			2014
Service cost	$	6,402		$	5,551		$	626		$	614
Interest cost	6,301			6,704			731			834
Expected return on plan assets	(7,075		)	(6,656		)	—			—
Amortization of:
Net actuarial loss	5,007			4,410			261			317
Prior service cost (gain)	113			238			(545		)	(545		)
Net periodic benefit cost	$	10,748		$	10,247		$	1,073		$	1,220

	Pension Benefits						Postretirement Benefits
	Nine Months Ended   September 30,						Nine Months Ended   September 30,
Components of Net Periodic Benefit Cost	2015			2014			2015			2014
Service cost	$	19,206		$	16,654		$	1,878		$	1,841
Interest cost	18,902			20,113			2,194			2,502
Expected return on plan assets	(21,223		)	(19,968		)	—			—
Amortization of:
Net actuarial loss	15,021			13,229			783			951
Prior service cost (gain)	339			714			(1,635		)	(1,635		)
Settlement loss	—			789			—			—
Net periodic benefit cost	$	32,245		$	31,531		$	3,220		$	3,659

A settlement loss that resulted from lump sum pension distributions was recorded during the nine months ended September 30, 2014.

We made qualified and nonqualified pension contributions totaling $10,002 during the three-month periods ended September 30, 2015 and 2014, respectively. Contributions made during the nine-month periods ended September 30, 2015 and 2014 totaled $31,536 and $32,864, respectively. Additional contributions totaling $10,002 are expected to be paid during the remainder of 2015.

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Assets Held For Sale

9 Months Ended

Sep. 30, 2015

Discontinued Operations and Disposal Groups [Abstract]

Assets Held For Sale

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 $7,669 at December 31, 2014. During the three months ended September 30, 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, 2015, we sold assets classified as held for sale with net book values of $4,669, and recorded 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, 2015 is $3,058 and is recorded in net property in the condensed consolidated balance sheets.

Subsequent to September 30, 2015, but prior to issuance of this report, we sold one of the locations included as an asset held for sale. The location had net book value of $3,000 and yielded a net gain of $496.

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 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, 2015 and 2014.

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Accumulated Other Comprehensive Income (Loss) (Tables)

9 Months Ended

Sep. 30, 2015

Equity [Abstract]

Reclassification out of Accumulated Other Comprehensive Income

The following table represents amounts reclassified from accumulated other comprehensive income (loss) for the three months ended September 30, 2015 and 2014:

	Three Months Ended   September 30, 2015									Three Months Ended   September 30, 2014
	Amortization of Pension and Other Postretirement Benefits Items									Amortization of Pension and Other Postretirement Benefits Items
	Actuarial Losses Recognized			Prior Service Costs Recognized			Total			Actuarial Losses Recognized			Prior Service Costs Recognized			Total
Affected Line in Condensed Consolidated Statement of Income:
Selling, general and administrative expenses	$	5,268		$	(432	)	$	4,836		$	4,727		$	(307	)	$	4,420
Tax (benefit) expense	(2,049		)	168			(1,881		)	(1,839		)	120			(1,719		)
Total reclassifications for the period, net of tax	$	3,219		$	(264	)	$	2,955		$	2,888		$	(187	)	$	2,701

The following table represents amounts reclassified from accumulated other comprehensive income (loss) for the nine months ended September 30, 2015 and 2014:

	Nine Months Ended   September 30, 2015									Nine Months Ended   September 30, 2014
	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	$	15,804		$	(1,296	)	$	14,508		$	14,180		$	(921	)	$	13,259
Tax (benefit) expense	(6,148		)	504			(5,644		)	(5,517		)	359			(5,158		)
Total reclassifications for the period, net of tax	$	9,656		$	(792	)	$	8,864		$	8,663		$	(562	)	$	8,101

Schedule of Accumulated Other Comprehensive Income (Loss)

The following table represents the activity included in accumulated other comprehensive income (loss) for the three months ended September 30, 2015 and 2014:

	Three Months Ended   September 30, 2015									Three Months Ended   September 30, 2014
	Foreign Currency			Pension and Other Postretirement Benefits			Total			Foreign Currency			Pension and Other Postretirement Benefits			Total
Beginning balance July 1,	$	(4,208	)	$	(146,568	)	$	(150,776	)	$	6,968		$	(141,616	)	$	(134,648	)
Other comprehensive (loss) income before reclassifications	(5,808		)	—			(5,808		)	(3,529		)	—			(3,529		)
Amounts reclassified from accumulated other comprehensive income (net of tax $(1,881) and $(1,719))	—			2,955			2,955			—			2,701			2,701
Net current-period other comprehensive (loss) income	(5,808		)	2,955			(2,853		)	(3,529		)	2,701			(828		)
Ending balance September 30,	$	(10,016	)	$	(143,613	)	$	(153,629	)	$	3,439		$	(138,915	)	$	(135,476	)

The following table represents the activity included in accumulated other comprehensive income (loss) for the nine months ended September 30, 2015 and 2014:

	Nine Months Ended   September 30, 2015									Nine Months Ended   September 30, 2014
	Foreign Currency			Pension and Other Postretirement Benefits			Total			Foreign Currency			Pension and Other Postretirement Benefits			Total
Beginning balance January 1,	$	284		$	(152,477	)	$	(152,193	)	$	6,653		$	(147,016	)	$	(140,363	)
Other comprehensive (loss) income before reclassifications	(10,300		)	—			(10,300		)	(3,214		)	—			(3,214		)
Amounts reclassified from accumulated other comprehensive income (net of tax $(5,644) and $(5,158))	—			8,864			8,864			—			8,101			8,101
Net current-period other comprehensive (loss) income	(10,300		)	8,864			(1,436		)	(3,214		)	8,101			4,887
Ending balance September 30,	$	(10,016	)	$	(143,613	)	$	(153,629	)	$	3,439		$	(138,915	)	$	(135,476	)

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Debt - Private Placement Shelf Agreement (Details) $ in Thousands	Sep. 22, 2014 USD ($)
Maximum | Senior Notes | Private Placement Shelf Agreement
Debt Instrument [Line Items]
Agreement face amount	$ 100,000

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Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Current Assets
Cash and cash equivalents	$ 42,315	$ 33,758
Trade receivables (less allowances of $6,453 and $7,073, respectively)	931,563	920,796
Merchandise inventory	520,624	461,139
Other current assets	28,811	44,711
Total Current Assets	1,523,313	1,460,404
Property, at cost
Land	77,530	67,879
Buildings	438,526	429,406
Furniture and fixtures	272,270	253,918
Software	84,878	84,488
Capital leases	31,866	25,135
Total Property, at cost	905,070	860,826
Less – accumulated depreciation and amortization	(468,629)	(452,163)
Net Property	436,441	408,663
Other Non-current Assets	75,907	70,046
Total Assets	2,035,661	1,939,113
Current Liabilities
Short-term borrowings	140,662	66,342
Current portion of long-term debt	7,382	6,241
Trade accounts payable	733,725	726,632
Accrued payroll and benefit costs	96,904	127,191
Other accrued taxes	15,902	18,300
Other current liabilities	78,290	69,148
Total Current Liabilities	1,072,865	1,013,854
Postretirement Benefits Liability	70,117	69,565
Pension Liability	126,330	140,981
Long-term Debt	10,480	11,595
Other Non-current Liabilities	20,881	21,137
Total Liabilities	1,300,673	1,257,132
SHAREHOLDERS’ EQUITY
Outstanding Common Stock	319,694	317,199
Advance Payments on Subscriptions to Common Stock	470	0
Retained Earnings	565,113	513,672
Accumulated Other Comprehensive Loss	(153,629)	(152,193)
Total Graybar Electric Company, Inc. Shareholders’ Equity	731,648	678,678
Noncontrolling Interests	3,340	3,303
Total Shareholders’ Equity	734,988	681,981
Total Liabilities and Shareholders’ Equity	$ 2,035,661	$ 1,939,113

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Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2015

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

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 2015 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, 2014, 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.  Except as discussed in Note 8. Assets Held for Sale, no material subsequent events have occurred since September 30, 2015 that require recognition or disclosure in these financial statements.

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.

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 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.

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 2015 have had or are expected to have a material impact on our consolidated financial statements except those noted below:

In April 2015, Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU” or “Update”) 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 are currently evaluating the impact of adopting this Update on our consolidated financial statements.

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 do not expect the adoption of this Update to have a material impact on the our results of operations, 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.

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.

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Pension and Other Postretirement Benefits - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Defined Benefit Plans and Other Postretirement Benefit Plans Disclosures [Abstract]
Requisite service period			3 years
Contributions by employer	$ 10,002	$ 10,002	$ 31,536	$ 32,864
Estimated future contributions in remainder of 2015			$ 10,002

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Pension and Other Postretirement Benefits (Tables)

9 Months Ended

Sep. 30, 2015

Defined Benefit Plans and Other Postretirement Benefit Plans Disclosures [Abstract]

Schedule of Net Benefit Costs

The net periodic benefit cost for the three and nine months ended September 30, 2015 and 2014 included the following components: 

	Pension Benefits						Postretirement Benefits
	Three Months Ended   September 30,						Three Months Ended   September 30,
Components of Net Periodic Benefit Cost	2015			2014			2015			2014
Service cost	$	6,402		$	5,551		$	626		$	614
Interest cost	6,301			6,704			731			834
Expected return on plan assets	(7,075		)	(6,656		)	—			—
Amortization of:
Net actuarial loss	5,007			4,410			261			317
Prior service cost (gain)	113			238			(545		)	(545		)
Net periodic benefit cost	$	10,748		$	10,247		$	1,073		$	1,220

	Pension Benefits						Postretirement Benefits
	Nine Months Ended   September 30,						Nine Months Ended   September 30,
Components of Net Periodic Benefit Cost	2015			2014			2015			2014
Service cost	$	19,206		$	16,654		$	1,878		$	1,841
Interest cost	18,902			20,113			2,194			2,502
Expected return on plan assets	(21,223		)	(19,968		)	—			—
Amortization of:
Net actuarial loss	15,021			13,229			783			951
Prior service cost (gain)	339			714			(1,635		)	(1,635		)
Settlement loss	—			789			—			—
Net periodic benefit cost	$	32,245		$	31,531		$	3,220		$	3,659