<PAGE>

                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                    FORM 10-K

(X)   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
      ACT OF 1934

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2006

                                       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 0-255

                         GRAYBAR ELECTRIC COMPANY, INC.
             (Exact name of registrant as specified in its charter)

                 NEW YORK                                 13-0794380
     (State or other jurisdiction of           (IRS Employer Identification No.)
      incorporation or organization)

34 NORTH MERAMEC AVENUE, ST. LOUIS, MISSOURI                63105
  (Address of principal executive offices)                (Zip Code)

      Registrant's telephone number, including area code: (314) 573-9200

      Securities registered pursuant to Section 12(b) of the Act: None

      Securities registered pursuant to Section 12(g) of the Act:

     Common Stock - Par Value $1.00 Per Share with a Stated Value of $20.00

Indicate by check mark whether the registrant is a well-known seasoned issuer,
as defined in Rule 405 of the Securities Act.

                                 Yes ( ) No (X)

Indicate by check mark whether the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act.

                                 Yes ( ) No (X)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                                 Yes (X) No ( )

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Paragraph 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. (X)

Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer.

   Large Accelerated Filer ( ) Accelerated Filer ( ) Non-Accelerated filer (X)

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2) of the Exchange Act.

                                 Yes ( ) No (X)

      The aggregate stated value of the Common Stock beneficially owned with
respect to rights of disposition by persons who are not affiliates (as defined
in Rule 405 under the Securities Act of 1933) of the registrant on June 30,
2006, was approximately $116,177,360. Pursuant to a Voting Trust Agreement,
dated as of April 1, 1997, approximately 95% of the outstanding shares of Common
Stock are held of record by five Voting Trustees who are each directors or
officers of the registrant and who collectively exercise the voting rights with
respect to such shares. The registrant is 100% owned by its active and retired
employees, and there is no public trading market for the registrant's Common
Stock. See Item 5 of this Annual Report on Form 10-K.

      The number of shares of Common Stock outstanding at March 14, 2007 was
6,588,840.

                       DOCUMENTS INCORPORATED BY REFERENCE

      Portions of the documents listed below have been incorporated by reference
into the indicated Part of this Annual Report on Form 10-K:

      Information Statement relating to the 2007 Annual Meeting of Shareholders
- Part III, Items 10-14.

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                   PAGE(S)
<S>           <C>                                                                   <C>
                                     PART I
ITEM 1:       Business                                                               3-5
ITEM 1A:      Risk Factors                                                           5-7
ITEM 1B:      Unresolved Staff Comments                                                7
ITEM 2:       Properties                                                               7
ITEM 3:       Legal Proceedings                                                        7
ITEM 4:       Submission Of Matters To A Vote Of Security Holders                      7

                                     PART II

ITEM 5:       Market For The Registrant's Common Equity, Related Stockholder
                   Matters And Issuer Purchases Of Equity Securities                   8
ITEM 6:       Selected Financial Data                                                  9
ITEM 7:       Management's Discussion And Analysis Of Financial Condition
                   And Results Of Operations                                        9-16
ITEM 7A:      Quantitative And Qualitative Disclosures About Market Risk           16-17
ITEM 8:       Financial Statements And Supplemental Data                           17-33
ITEM 9:       Changes In And Disagreements With Accountants On
                   Accounting And Financial Disclosure                                33
ITEM 9A:      Controls And Procedures                                                 33
ITEM 9B:      Other Information                                                       33
                                    PART III

ITEM 10:      Directors And Executive Officers Of The Registrant                      34
ITEM 11:      Executive Compensation                                                  34
ITEM 12:      Security Ownership Of Certain Beneficial Owners And
                   Management And Related Stockholder Matters                         34
ITEM 13:      Certain Relationships And Related Transactions                          34
ITEM 14:      Principal Accounting Fees And Services                                  34

                                     PART IV

ITEM 15:      Exhibits, Financial Statement Schedules                              35-37
SIGNATURES                                                                            38
CERTIFICATIONS
</TABLE>


                                       2
<PAGE>

                                     PART I

The following discussion should be read in conjunction with our accompanying
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, 2006, included in this Annual Report on Form
10-K. The results shown herein are not necessarily indicative of the results to
be expected in any future periods. This discussion contains forward-looking
statements (as such term is defined in the federal securities laws) and is based
on current expectations, which involve risks and uncertainties. Actual results
and the timing of events could differ materially from the forward-looking
statements as a result of certain factors, a number of which are outlined in
Item 1A, "Risk Factors", of this Annual Report on Form 10-K.

All dollar amounts are stated in thousands ($000s) in the following discussion.

ITEM 1: BUSINESS

THE COMPANY

Graybar Electric Company, Inc. ("Graybar" or the "Company") is engaged in the
distribution of electrical, telecommunications and networking products and the
provision of related supply chain management and logistics services, primarily
to contractors, industrial plants, telephone companies, power utilities,
federal, state and municipal governments and commercial users in North America.
All products sold by the Company are purchased by the Company from others. The
Company's business activity is primarily with customers in the United States.
Graybar also has subsidiary operations with distribution facilities in Canada,
Puerto Rico and Mexico.

The Company was incorporated under the laws of the State of New York on December
11, 1925 to take over the wholesale supply department of Western Electric
Company, Incorporated. Graybar is 100% owned by its active and retired employees
and there is no public trading market for its common stock. The location of the
principal executive offices of the Company is 34 North Meramec Avenue, St.
Louis, Missouri 63105, and its telephone number is (314) 573-9200.

The Company maintains an Internet website at www.graybar.com. Graybar's filings
with the U.S. Securities and Exchange Commission (the "SEC" or "Commission"),
including its annual report on Form 10-K, quarterly reports on Form 10-Q,
current reports on Form 8-K and amendments to those reports, are accessible
free of charge on our website within the "About Us" page under "Graybar SEC
Filings" as soon as reasonably practicable after we file the reports with the
SEC. Additionally, a copy of the Company's SEC filings can be obtained at the
SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549
or by calling the SEC at 1-800-SEC-0330. Also, a copy of our electronically
filed materials can be obtained at www.sec.gov.

SUPPLIERS

Graybar acts as a distributor of over 1,000,000 products (stockkeeping units) of
more than 4,600 manufacturers. The relationship between the Company and its
suppliers is customarily a nonexclusive national or regional distributorship,
terminable upon 30 to 90 days notice by either party. The relationships between
the Company and a number of its principal suppliers go back many years.

During 2006, the Company purchased approximately 52% of the products it
distributes from its top 25 suppliers. However, the Company generally deals with
more than one supplier for any product category and there are alternative
sources of comparable products available for nearly all product categories.

PRODUCTS DISTRIBUTED

The Company stocks more than 120,000 of the products it distributes and,
therefore, is able to supply its customers locally with a wide variety of
electrical, telecommunications and networking products. The products distributed
by the Company consist primarily of wire, cable, conduit, wiring devices,
switchgear, tools, motor controls, transformers, lamps, lighting fixtures and
hardware, power transmission equipment, telephone station apparatus, key
systems, private branch exchanges (PBX), data products for local or wide area
networks, fiber optic products, and cable television (CATV) products. These
products are sold to customers such as contractors (commercial, industrial and
residential), industrial plants, telephone companies, power utilities, federal,
state and municipal governments, and commercial users.

On December 31, 2006 and 2005, the Company had orders on hand that totaled
approximately $563,800 and $445,006, respectively. The increase from 2005 to
2006 reflects the Company's improved competitive performance and positive
economic conditions in the electrical and comm/data markets in which the Company
operates. The market for electrical products has been affected by the general
decrease in new residential construction, offset by increased spending by
commercial and industrial customers and the contractors that serve them. During
the period


                                       3
<PAGE>

from 2003 to 2005, the comm/data industry returned to positive, though moderate,
growth after a period of decline. Growth in the comm/data market accelerated in
2006.

The Company expects that approximately 85% of the orders it had on hand at
December 31, 2006 will be filled within the twelve-month period ending December
31, 2007. Generally, orders placed by customers and accepted by the Company have
resulted in sales. However, customers from time to time request cancellation and
the Company has historically allowed such cancellations.

MARKETING

Graybar sells its products through a network of distribution facilities located
in thirteen geographical districts throughout the United States. The Company
maintains a main distribution facility in each district along with a number of
branch distribution facilities, each of which carries an inventory of products
and operates as a wholesale distributor for the territory in which it is
located. In addition, the Company maintains seven zone warehouses and three
service centers containing inventories of both standard and specialized
products. Both the zone warehouses and service centers replenish the inventories
carried at the main and branch distribution facilities and make shipments
directly to customers. The Company has subsidiary operations with additional
distribution facilities located in Canada, Puerto Rico and Mexico.

The distribution facilities operated by the Company at December 31, 2006 are
shown below:

<TABLE>
<CAPTION>
                                                      Number of Branch
                        Location of Main           Distribution Facilities
      District          Distribution Facility            In District*              Zone Warehouses
      --------          ---------------------            -----------               ---------------
<S>                     <C>                                  <C>                   <C>
      Boston            Boston, MA                           12                    Austell, GA
      California        City of Industry, CA                 20                    Fresno, CA
      Dallas            Dallas, TX                           14                    Joliet, IL
      Chicago           Glendale Heights, IL                 19                    Richmond, VA
      Minneapolis       Minneapolis, MN                      16                    Springfield, MO
      New York          Parsippany, NJ                       12                    Stafford, TX
      Atlanta           Norcross, GA                         20                    Youngstown, OH
      Phoenix           Phoenix, AZ                           9
      Pittsburgh        Pittsburgh, PA                       19
      Richmond          Richmond, VA                         17
      Seattle           Seattle, WA                          11
      St. Louis         St. Louis, MO                        13
      Tampa             Riverview, FL                        20
</TABLE>

      *Includes Service Centers

                                                         Number of
                                                        Distribution
                                                         Facilities
                                                         ----------
      Graybar Electric Canada, Ltd.
       Halifax, Nova Scotia, Canada                          27
      Graybar International, Inc.
       Carolina, Puerto Rico                                  1
      Graybar de Mexico, S.de R.L. de C.V.
       Mexico City, Mexico                                    3

Where the specialized nature or size of a particular shipment warrants, the
Company has products shipped directly from its suppliers to the place of use,
while in other cases orders are filled from the Company's inventory. On a
dollar volume basis, approximately 60% and 59% of the orders were filled from
the Company's inventory in 2006 and 2005, respectively, and the remainder were
shipped directly from the supplier to the place of use. The Company generally
finances its inventory through collections of trade receivables and trade
accounts payable terms with its suppliers. The Company's short-term borrowing
facilities are also used to finance inventory as needed. Currently, the Company
does not use long-term borrowings for inventory financing. No inventory is
pledged as collateral for any borrowings.


                                       4
<PAGE>

The Company distributes its products to more than 160,000 customers, which fall
into three principal classes. The following list shows the estimated percentage
of the Company's total sales attributable to each of these classes for the last
three years:

                                                       Percentage of Sales
      Class of Customers                             Years Ended December 31,
      ------------------                           ----------------------------
                                                   2006        2005        2004
                                                   ----        ----        ----
      Electrical Contractors                       49.8%       45.0%       44.5%
      Commercial & Industrial                      18.9        22.3        21.5
      Voice and Data Communications                19.9        19.4        21.3

At December 31, 2006, the Company employed approximately 3,100 persons in sales
capacities. Approximately 1,300 of these sales personnel were sales
representatives who work in the field making sales to customers at the work
site. The remainder of the sales personnel were sales and marketing managers and
telemarketing, advertising, quotation, counter and clerical personnel.

COMPETITION

The Company believes that it is one of the three largest wholesale distributors
of electrical and comm/data products in the United States. The field is highly
competitive, and the Company estimates that the three largest wholesale
distributors account for only a small portion of the total market. The balance
of the market is made up of several thousand independent distributors operating
on a local, regional or national basis and manufacturers who sell their products
directly to end users.

While price is an important consideration, the Company believes that it is the
service that it is able to offer -- the ability to quickly supply its customers
with a broad range of electrical, telecommunications and networking products
through conveniently located distribution facilities -- that distinguishes it
from most of its competitors, whether they are distributors or manufacturers
selling direct. The Company's pricing structure for the products it sells
reflects the costs associated with the services that it provides and its prices
are generally competitive. However, if a customer is not looking for one
supplier to provide a wide range of products and does not require prompt
delivery or other services, a competitor that does not provide these benefits
may be in a position to offer a lower price.

FOREIGN SALES

Sales by the Company to customers in foreign countries accounted for
approximately five percent (5%) of consolidated revenues in 2006, 2005, and
2004. Subsidiaries of the Company have operations in Canada, Puerto Rico and
Mexico. Limited export activities are handled from Company facilities in Texas,
Arizona and California. Long-lived assets located outside the United States
represented approximately one percent (1%) of the Company's consolidated assets
at the end of each of the last three years. The Company does not have
significant foreign currency exposure and does not believe there are any other
significant risks attendant to its foreign operations.

EMPLOYEES

At December 31, 2006, the Company employed approximately 8,400 persons on a
full-time basis. Approximately 165 of these persons were covered by union
contracts. The Company has not had a material work stoppage and considers its
relations with its employees to be good.

ITEM 1A: RISK FACTORS

Our business, financial condition and results are subject to various risks,
including those discussed below. The risks outlined below are those that we
believe are currently the most significant, although additional risks not
presently known to us or that we currently deem less significant may also impact
our business, financial condition and results.

WE PURCHASE 100% OF THE PRODUCTS WE SELL TO OUR CUSTOMERS FROM OTHER PARTIES. As
a wholesale distributor, our business and financial results are dependent on our
ability to purchase products from manufacturers not controlled by our company
that we, in turn, sell to our customers. Nearly 52% of our purchases are made
from only 25 manufacturers. A sustained disruption in our ability to source
product from one or more of the largest of these vendors might have a material
impact on our ability to fulfill customer orders resulting in lost revenue and,
in rare cases, damages for late or non-delivery.


                                       5
<PAGE>

CONSOLIDATION IN THE ELECTRICAL AND COMM/DATA WHOLESALE DISTRIBUTION INDUSTRIES
COULD NEGATIVELY IMPACT THE FINANCIAL PERFORMANCE OF OUR COMPANY. Our industry
contains several thousand competitors, none with a significant market share.
There has been an increasing amount of consolidation in the market over the past
several years and a few consolidators have greatly increased their scope of
operations in the United States. If a large, well-financed consolidator is able
to unify a large number of our existing competitors into a single entity, it
could impact our market position and, as a result, our financial performance.

OUR BUSINESS FLUCTUATES WITH GENERAL ECONOMIC CONDITIONS, PARTICULARLY IN THE
RESIDENTIAL, COMMERCIAL AND INDUSTRIAL BUILDING CONSTRUCTION INDUSTRIES. Our
operating locations are widely distributed geographically across the United
States and, to a lesser extent, Canada. Customers for both electrical and
comm/data products are similarly diverse -- we have over 160,000 customers and
our largest customer accounts for less than 2% of our total revenue. While our
geographic and customer concentrations are relatively low, our performance is
dependent on favorable conditions in both the general economy and the
construction industry. Conditions in the construction industry are greatly
influenced by the general level of interest rates. Since we derive a substantial
portion of our business from electrical construction contractors, revenue could
be negatively impacted should interest rates rise or other general economic
conditions deteriorate to levels that depress building activity.

INCREASING COSTS OF CERTAIN EMPLOYEE AND RETIREE BENEFITS COULD ADVERSELY AFFECT
OUR RESULTS. Our earnings and cash flow may be impacted by the amount of income
or expense we record and pay for employee benefit plans. This is particularly
true of our defined benefit pension and our postretirement welfare plans. The
cost of the pension plan is dependent on actual plan asset returns and the
factors used to determine the value and current costs of plan benefit
obligations.

Medical and postretirement welfare plan expense levels are dependent on the rate
of increase in medical costs, which have typically grown at a rate exceeding the
general rate of inflation. Continued medical cost inflation in excess of the
general inflation rate increases the risk that we will not be able to mitigate
the rising costs of medical benefits. Increases in the costs of pension and
medical benefits could have an adverse effect on our financial results of
operations.

WE ARE SUBJECT TO LEGAL PROCEEDINGS AND OTHER CLAIMS. We are subject to legal
proceedings and other claims arising out of the conduct of our business,
including proceedings and claims relating to public and private sector
transactions, product liability, contract performance, and employment matters.
On the basis of information currently available to us, we do not believe that
existing proceedings and claims will have a material impact on our financial
position or results. However, litigation is unpredictable, and we could incur
judgments or enter into settlements for current or future claims that could
adversely affect our financial position or our results in a particular period.

More specifically, with respect to asbestos litigation, as of December 31,
2006, approximately 3,109 individual cases and 188 class actions are pending
that allege actual or potential asbestos-related injuries resulting from the
use of or exposure to products sold by us. Additional claims will likely be
filed against us in the future. Our insurance carriers have historically borne
all costs and liability with respect to this litigation and are continuing to
do so. Accordingly, our future liability with respect to pending and unasserted
claims is dependent on the continued solvency of our insurance carriers. Other
factors that could impact this liability are: the number of future claims filed
against us; the defense and settlement costs associated with these claims;
changes in the litigation environment, including changes in federal or state
law governing the compensation of asbestos claimants; adverse jury verdicts in
excess of historic settlement amounts; and bankruptcies of other asbestos
defendants. Because any of these factors may change, our future exposure is
unpredictable and it is possible that we may incur costs that would have a
material adverse impact on our liquidity, financial position or results of
operations in future periods.

OUR FINANCING ARRANGEMENTS AND LOAN AGREEMENTS CONTAIN FINANCIAL COVENANTS AND
CERTAIN OTHER RESTRICTIONS ON OUR ACTIVITIES AND THOSE OF OUR SUBSIDIARIES. Our
senior unsecured notes, revolving credit facility, and asset-backed commercial
paper credit arrangement impose contractual limits on our ability, and the
ability of most of our subsidiaries, to take certain actions. In addition, we
are required to maintain acceptable financial ratios relating to debt leverage,
interest coverage, net worth, asset performance, and certain other customary
covenants. Our failure to comply with these obligations may cause an event of
default triggering an acceleration of the debt owed to our creditors or limit
our ability to obtain additional credit under these facilities. While we expect
to remain in compliance with the terms of our credit agreements, our failure to
do so could have a negative impact on our ability to borrow funds and maintain
acceptable levels of cash flow from financing activities.


                                       6
<PAGE>

THERE IS NO PUBLIC TRADING MARKET FOR OUR COMMON STOCK. The Company's capital
stock is 100% owned by its employees and retirees. Common stock may not be sold
by the holder thereof, except after first offering it to the Company. The
Company has always exercised this purchase option in the past and expects that
it will continue to do so. As a result, no public market for our common stock
exists, nor is one expected to develop. This lack of a public market for the
Company's common stock may limit Graybar's ability to raise large amounts of
equity capital.

ITEM 1B: UNRESOLVED STAFF COMMENTS

Not applicable

ITEM 2: PROPERTIES

As of December 31, 2006, the Company has seven zone warehouses ranging in size
from approximately 160,000 to 300,000 square feet. The lease arrangements used
to finance four of the zone warehouses are discussed in Note 7 to the
Consolidated Financial Statements, located in Item 8, Financial Statement and
Supplemental Data. Of the remaining three zone warehouses, one is owned and two
are leased. The remaining lease terms on these facilities range from
approximately two to five years.

As of December 31, 2006, the Company has three service centers ranging in size
from 143,000 to 210,000 square feet. All three service centers are leased. The
lease arrangements used to finance two of the service centers are discussed in
Note 7 to the Consolidated Financial Statements, located in Item 8, Financial
Statement and Supplemental Data. The remaining lease term on the third service
center is three years.

At December 31, 2006, the Company operated in thirteen geographical districts in
the United States, each of which maintains a main distribution facility (ranging
from approximately 50,000 to 170,000 square feet) that consists primarily of
warehouse space. A small portion of the space in each of the main distribution
facilities is used for offices. The Company owns ten of the main distribution
facilities and leases three. Each district has a number of branch distribution
facilities consisting of warehouse and office space. The number of branches in a
district varies from nine to twenty and totals 199 for all districts. The branch
facilities range in size from approximately 1,000 square feet to 130,000 square
feet, with the average being approximately 30,000 square feet. The Company owns
111 of the branch facilities and leases 88. The leases of the branch facilities
are for varying terms, with the majority having a remaining term of less than
five years.

As of December 31, 2006, the Company has twenty-seven distribution facilities in
Canada, of which nine are owned and eighteen are leased. These range in size
from approximately 5,000 to 60,000 square feet. The Company has a 22,000 square
foot leased facility in Puerto Rico and three leased facilities in Mexico
ranging in size from approximately 1,300 to 13,000 square feet.

The Company's headquarters are located in St. Louis, Missouri in a 93,000 square
foot building owned by the Company. The Company also leases a 200,000 square
foot operations and administration center in St. Louis, Missouri. The Company
has options to purchase this facility in 2011, 2016, and at the expiration of
the lease in 2021.

As of December 31, 2006, the Company had granted mortgages or other security
interests on fifteen buildings securing approximately $60,420 in debt. Ten of
the fifteen facilities are subject to security interests totaling $56,720 under
two lease arrangements with an independent lessor. Another four of the fifteen
facilities are subject to first mortgages securing fixed and variable rate
notes, of which $500 in principal remains outstanding. A facility in Kitchener,
Ontario, Canada is subject to a first mortgage securing a 5.87% note, of which
$3,200 in principal remains outstanding.

ITEM 3: LEGAL PROCEEDINGS

There are presently no pending legal proceedings that are expected to have a
material impact on the Company or its subsidiaries.

ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matter was submitted to a vote of shareholders during the fourth quarter of
the fiscal year covered by this Annual Report on Form 10-K.


                                       7
<PAGE>

                                     PART II

ITEM 5: MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES

The Company is 100% owned by its active and retired employees and there is no
public trading market for its 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
state law, a voting trust may not have a term greater than ten years. At
December 31, 2006, approximately 95% of the Common Stock was held in a Voting
Trust that expires by its terms on March 31, 2007. A new Voting Trust
Agreement will be established effective March 16, 2007 which expires on March
15, 2017. The participation of shareholders in a 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 a newly formed voting trust hold
their Common Stock as the shareholders of record. As of March 12, 2007, 4,061
shareholders owning 4,898,326 shares of Common Stock, or approximately 75% of
the total shares outstanding, have agreed to deposit their shares into the new
Voting Trust Agreement.

No shareholder may sell, transfer or otherwise dispose of shares of Common Stock
(or the Voting Trust Certificates issued with respect thereto) without first
offering the Company the option to purchase such shares (or Voting Trust
Certificates) at the price at which the shares were issued. The Company also has
the option to purchase at the issue price the Common Stock (or Voting Trust
Certificates) of any holder who dies or ceases to be an employee of the Company
for any cause other than retirement on a Company pension. In the past, all
shares issued by the Company have been issued at $20.00 per share. The Company
has always exercised its repurchase option, and expects to continue to do so.

The following table sets forth information regarding purchases of Common Stock
(and Voting Trust Certificates representing shares) by the Company pursuant to
the foregoing provisions:

ISSUER PURCHASES OF EQUITY SECURITIES

<TABLE>
<CAPTION>
                                               TOTAL
                                               NUMBER             AVERAGE            TOTAL NUMBER OF SHARES
                                              OF SHARES        PRICE PAID PER     PURCHASED AS PART OF PUBLICLY
               PERIOD                         PURCHASED            SHARE           ANNOUNCED PLANS OR PROGRAMS
<S>                                            <C>                 <C>                         <C>
October 1 to October 31, 2006                  40,922              $20.00                      N/A
November 1 to November 30, 2006                17,696              $20.00                      N/A
December 1 to December 31, 2006                10,722              $20.00                      N/A
Total                                          69,340              $20.00                      N/A

<CAPTION>
CAPITAL STOCK DATA
FOR THE YEAR ENDED DECEMBER 31, 2006:                            NUMBER OF
TITLE OF CLASS                                                SECURITY HOLDERS           NUMBER OF SHARES
<S>                                                                <C>                      <C>
Common Stock                                                         112                      291,703
Voting Trust Certificates for Common Stock                         5,507                    6,147,286

<CAPTION>
DIVIDEND DATA
PERIOD                                                               2006           2005           2004
<S>                                                                 <C>            <C>            <C>
First Quarter                                                       $0.30          $0.30          $0.30
Second Quarter                                                       0.30           0.30           0.30
Third Quarter                                                        0.30           0.30           0.30
Fourth Quarter                                                       1.10           1.10           1.10
Total                                                               $2.00          $2.00          $2.00
</TABLE>

On December 14, 2006, a ten percent (10%) stock dividend was declared to
shareholders of record on January 3, 2007. Shares representing this dividend
were issued on February 1, 2007.

On December 8, 2005, a five percent (5%) stock dividend was declared to
shareholders of record on January 3, 2006. Shares representing this dividend
were issued on February 1, 2006.


                                       8
<PAGE>

ITEM 6: SELECTED FINANCIAL DATA

             Five Year Selected Consolidated Financial Data Summary
                 (Stated in thousands except for per share data)

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,                     2006           2005           2004           2003           2002
---------------------------------------------------------------------------------------------------------------------
<S>                                           <C>            <C>            <C>            <C>            <C>
Gross sales                                   $ 5,028,827    $ 4,304,187    $ 4,093,462    $ 3,813,272    $ 3,986,954
Cash discounts                                    (19,684)       (16,144)       (13,909)       (10,820)       (12,062)
                                              -----------    -----------    -----------    -----------    -----------
NET SALES                                     $ 5,009,143    $ 4,288,043    $ 4,079,553    $ 3,802,452    $ 3,974,892
GROSS MARGIN (A)                                  961,451        811,034        797,010        762,417        779,465
INCOME BEFORE CUMULATIVE EFFECT OF
  CHANGE IN ACCOUNTING PRINCIPLE                   57,388         22,398         14,018          8,465         11,401
Cumulative effect of change in accounting
  principle, net of $3,587 tax effect (B)              --         (5,634)            --             --             --
NET INCOME                                         57,388         16,764         14,018          8,465         11,401
Net income applicable to common stock (C)          57,388         16,764         14,017          8,463         11,399
Average common shares outstanding (D)               6,442          6,400          6,593          6,922          7,213
Income per share of common stock
  before cumulative effect of change
  in accounting principle (D)                 $      8.91    $      3.50    $      2.13    $      1.22    $      1.58
Cumulative effect of change
  in accounting principle per share (D)                --          (0.88)            --             --             --
NET INCOME PER SHARE OF COMMON STOCK (D)      $      8.91    $      2.62    $      2.13    $      1.22    $      1.58
CASH DIVIDENDS PER COMMON SHARE               $      2.00    $      2.00    $      2.00    $      2.00    $      2.00
Total assets                                  $ 1,508,246    $ 1,443,387    $ 1,451,372    $ 1,422,130    $ 1,400,171
Long-term debt                                $   203,869    $   233,527    $   205,603    $   254,381    $   266,710
---------------------------------------------------------------------------------------------------------------------
</TABLE>

(A)   Reflects reclassification of outgoing freight from cost of merchandise
      sold to selling, general and administrative expenses for all periods prior
      to 2005. Prior to reclassifying outgoing freight, gross margin in 2004,
      2003, and 2002 was $783,781, $734,466, and $745,101, respectively.

(B)   2005 results reflect the adoption of Financial Accounting Standards Board
      (FASB) Interpretation No. 46, "Consolidation of Variable Interest Entities
      - an interpretation of ARB No. 51", (FIN 46) and its subsequent revision
      FIN 46R.

(C)   Income applicable to common stock reflects net income less preferred stock
      dividends.

(D)   All periods adjusted for the declaration of a 10% stock dividend declared
      in December 2006 and a 5% stock dividend declared in December 2005. Prior
      to these adjustments, the average common shares outstanding for 2005,
      2004, 2003, and 2002 were 5,541, 5,709, 5,993, and 6,245, respectively.

This summary should be read in conjunction with the consolidated financial
statements and related notes thereto included elsewhere in this annual report.

ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

Management's Discussion and Analysis provides a narrative on the Company's
financial performance and condition for the three-year period ended December 31,
2006. This discussion should be read in conjunction with the accompanying
financial statements.

BUSINESS OVERVIEW

The Company experienced significant increases in sales, net income, and cash
flow during 2006.

Growth in net sales was strong in both the electrical and comm/data markets in
which the Company operates. This growth was attributable to the combined impact
of the Company's improved competitive performance, the positive economic climate
prevailing in North America, and rising prices for the products it sells.

The improvement in net income was driven by double-digit growth in gross
margin, coupled with the Company's continued attention to controlling expenses.
Productivity gains associated with the upgrade of the Company's information
technology platform were particularly evident in 2006.


                                       9
<PAGE>

Strong cash flow was recorded due to the Company's increased profitability and
better working capital management. The Company funded its capital expenditures
with operational cash flow, while also substantially reducing both short- and
long-term debt and finishing the year with a significant cash balance.

Moderate growth in sales and continued profitability is expected for 2007.

RESULTS OF OPERATIONS

The following table sets forth certain information relating to the operations of
the Company stated in thousands of dollars and as a percentage of sales:

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,              2006                        2005                        2004
------------------------------------------------------------------------------------------------------------------
                                       DOLLARS     PERCENT         Dollars     Percent         Dollars     Percent
                                       -------     -------         -------     -------         -------     -------
<S>                                <C>               <C>       <C>               <C>       <C>               <C>
NET SALES                          $ 5,009,143       100.0%    $ 4,288,043       100.0%    $ 4,079,553       100.0%
Cost of merchandise sold            (4,047,692)      (80.8)     (3,477,009)      (81.1)     (3,282,543)      (80.5)
------------------------------------------------------------------------------------------------------------------
GROSS MARGIN                           961,451        19.2         811,034        18.9         797,010        19.5
 Selling, general and
   administrative expenses            (771,021)      (15.4)       (674,005)      (15.7)       (677,892)      (16.6)
 Taxes, other than income
   taxes                               (43,566)       (0.9)        (41,328)       (1.0)        (40,758)       (1.0)
 Depreciation and
   amortization                        (34,260)       (0.7)        (34,644)       (0.8)        (36,516)       (0.9)
Other income, net                        9,418         0.2           3,732         0.1           5,556         0.1
------------------------------------------------------------------------------------------------------------------
INCOME FROM OPERATIONS                 122,022         2.4          64,789         1.5          47,400         1.1
Interest expense                       (23,019)       (0.5)        (26,470)       (0.6)        (23,453)       (0.6)
------------------------------------------------------------------------------------------------------------------
Income before provision
   for income taxes and
   cumulative effect of
   change in accounting
   principle                            99,003         1.9          38,319         0.9          23,947         0.5
------------------------------------------------------------------------------------------------------------------
Provision for income taxes             (41,615)       (0.8)        (15,921)       (0.4)         (9,929)       (0.2)
------------------------------------------------------------------------------------------------------------------
INCOME BEFORE CUMULATIVE
  EFFECT OF CHANGE IN
  ACCOUNTING PRINCIPLE                  57,388         1.1          22,398         0.5          14,018         0.3
------------------------------------------------------------------------------------------------------------------
Cumulative effect of change
  in accounting principle                   --          --          (5,634)       (0.1)             --          --
------------------------------------------------------------------------------------------------------------------
NET INCOME                         $    57,388         1.1%    $    16,764         0.4%    $    14,018         0.3%
------------------------------------------------------------------------------------------------------------------
</TABLE>

2006 COMPARED TO 2005

Net sales totaled $5,009,143 in 2006, compared to $4,288,043 last year, an
increase of $721,100, or 16.8%. Significant increases in net sales were recorded
in both of the primary market sectors in which the Company operates. Net sales
to the electrical market increased 16.6%, while net sales to the comm/data
market rose 17.0% in 2006 compared to 2005.

The increase in net sales was largely attributable to the Company's improved
competitive performance and positive general economic conditions in North
America during 2006. Significant inflation in the price of copper-based
products, mainly wire and cable, also positively impacted net sales. Electrical
market net sales were particularly strong in the construction sector. Growth in
the overall comm/data market accelerated in 2006 and, coupled with the Company's
improved penetration of this market, resulted in higher net sales to comm/data
customers.

Gross margin increased $150,417, or 18.5%, due to the higher net sales volume in
2006 compared to 2005. The Company's gross margin rate on net sales increased to
19.2% during 2006, up from 18.9% in 2005.

Selling, general and administrative expenses as a percentage of sales were 15.4%
in 2006, compared to 15.7% in 2005. Selling, general and administrative expenses
increased $97,016, or 14.4%, to $771,021 in 2006 from $674,005 in 2005. The
increase was mainly due to increased employee compensation and benefit expenses,
including incentive compensation, totaling approximately $92,000.


                                       10
<PAGE>

Taxes, other than income taxes, increased $2,238, or 5.4%, from $41,328 in 2005
to $43,566 in 2006. This increase was due to increases in local property and
payroll tax expenses.

Depreciation and amortization expenses in 2006 decreased slightly to $34,260
from $34,644 in 2005, mainly due to lower amortization on capital leases.

Other income, net of $9,418 in 2006 included net gains on the disposal of
property of $8,820 combined with property impairment losses of $(2,575).
Accounts receivable interest charges to customers and other interest income
accounted for the remaining $3,173 of other income, net in 2006. Other income,
net in 2005 included net gains on the disposal of property of $1,818 and
accounts receivable interest charges to customers of $1,124.

The net book value of two real estate properties that the Company listed for
sale in 2006 was greater than the listed selling price less expected selling
costs. The Company determined that the expected sale of these properties met the
criteria for recognition of an impairment loss on an asset classified as held
for sale as outlined in FASB Statement of Financial Accounting Standards (SFAS)
No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets". In
accordance therewith, the Company recorded impairment losses totaling $(2,575)
to account for the expected losses on the sale of these two properties. The
impairment losses are included in other income, net in the Consolidated
Statements of Income for the year ended December 31, 2006. The properties are
expected to be sold within the year. Therefore, the properties, with a book
value of $8,116, are considered to be held for sale at December 31, 2006 and
accordingly, shall not be depreciated while so classified.

Income from operations totaled $122,022 in 2006, an increase of $57,233, or
88.3%, from $64,789 in 2005. The increase was due to higher gross margin and
other income, net, and lower depreciation and amortization expenses, partially
offset by higher selling, general and administrative expenses.

Interest expense declined $3,451, or 13.0%, to $23,019 in 2006 from $26,470 in
2005. This reduction was mainly due to lower levels of outstanding short- and
long-term debt.

The combination of increased gross margin, other income, net, and selling,
general and administrative expenses, coupled with lower depreciation and
amortization expenses and lower interest expenses, resulted in pre-tax earnings
of $99,003 for the year ended December 31, 2006, an increase of $60,684, or
158.4%, compared to the year ended December 31, 2005.

The Company's total provision for income taxes increased $25,694 to $41,615 for
the year ended December 31, 2006 as a result of higher pre-tax earnings. The
Company's effective tax rate increased to 42.0% for the year ended December 31,
2006, up from 41.5% in 2005. The 2006 and 2005 effective tax rates were higher
than the 35.0% U.S. federal statutory rate primarily due to state and local
income taxes.

Net income for 2006 increased $40,624, or 242.3%, to $57,388 in 2006 from
$16,764 in 2005. A portion of the increase was attributable to the cumulative
effect of change in accounting principle of $(5,634), net of income tax effect
of $3,587, recorded by the Company in 2005 as a consequence of the adoption of
FIN 46, and its subsequent revision, FIN 46R.

2005 COMPARED TO 2004

Net sales increased $208,490, or 5.1%, in 2005 compared to 2004. Higher net
sales resulted from the combined impact of continued, strong economic growth in
the electrical market, particularly the construction and industrial sectors, and
by modest, though improving, growth in sales to customers in the comm/data
market. The impact of inflation on sales and cost of merchandise sold was
evident in 2005, particularly during the fourth quarter. For the year,
electrical market sales rose 6.4%, while sales to the comm/data market increased
1.3%.

Gross margin increased $14,024, or 1.8%, due to the higher sales volume
generated by the Company in 2005.

Selling, general and administrative expenses decreased $3,887, or 0.6%, in 2005
compared to 2004. This decline was due primarily to decreases in computer,
networking and other technology expenses of approximately $8,100 as a result of
the completion of the Company's Enterprise Resource Planning (ERP) system
rollout. The decrease in these technology-related expenses was partially offset
by an increase in employee salaries and incentive compensation of approximately
$5,000 and an increase in employee benefit expenses of nearly $1,675.

Taxes, other than income taxes increased $570 due to the combined impact of
payroll taxes on increased employee compensation and higher local property
taxes.


                                       11
<PAGE>

Depreciation and amortization expenses declined $1,872 in 2005, mainly due to
reduced amortization charges on capital leases.

Other income, net includes net gains on the disposal of property of $1,818 and
$1,882 in 2005 and 2004, respectively. Accounts receivable interest charges to
customers totaled $1,124 in 2005, compared to $1,205 in 2004.

Interest expense increased $3,017 in 2005 compared to 2004, due to the adoption
of FIN 46, as discussed below. Upon consolidation of certain lease arrangements
previously treated as operating leases on January 1, 2005, subsequent payments
under these arrangements of $4,200 are characterized as interest expense rather
than as rent expense. Increased interest expense on short-term debt was caused
by higher interest rates. The average amount of short-term borrowings
outstanding during 2005 and 2004 totaled $135,000 and $146,000 at
weighted-average interest rates of 3.51% and 1.69%, respectively. Lower
interest expense on long-term debt and interest rate swaps more than offset the
increase in interest expense on short-term borrowings.

The combined effect of increased gross margin, lower selling, general and
administrative expenses and depreciation and amortization expenses, coupled
with a limited increase in interest expense and lower, though positive other
income, net resulted in improved pre-tax earnings of $38,319 in 2005. This
represents a $14,372, or 60%, increase over 2004 results.

As of January 1, 2005, the Company adopted the provisions of FIN 46, and its
subsequent revision, FIN 46R, which apply to the financing structures used in
two lease arrangements between the Company and an independent lessor. The
financing structures used in these two lease arrangements qualify as variable
interest entities under FIN 46, and the Company's interests in the variable
interest entities were required to be consolidated in the Company's financial
statements beginning with the first quarter of 2005. The Company recorded a
cumulative effect of change in accounting principle of $(5,634), net of income
tax effect of $3,587, in its consolidated financial statements during the first
quarter of 2005 as a result of the adoption of FIN 46.

Provision for income taxes was $15,921 in 2005 compared to $9,929 in 2004. The
effective tax rate in 2005 was 41.5%, unchanged from 2004.

Net income increased 19.6% to $16,764 in 2005, compared to $14,018 in 2004.

FINANCIAL CONDITION AND LIQUIDITY

<TABLE>
<CAPTION>
Cash Flow Information
(stated in thousands)                                               2006          2005          2004
                                                                    ----          ----          ----
<S>                                                             <C>           <C>           <C>
      Net cash flow provided (used) by operations               $160,319      $ 77,049      $(16,417)
      Capital expenditures                                       (45,494)      (30,233)      (24,100)
      Net cash flow used by investing activities                 (32,897)       (4,308)      (19,741)
      Net cash flow (used) provided by financing activities      (84,286)      (73,628)       26,958
</TABLE>

The Company has funded its capital requirements from cash flow provided by
operations, stock issuances to its employees and long-term debt.

      OPERATING ACTIVITIES

      Cash provided by operations was $160,319 in 2006 compared to $77,049 in
      2005 and cash used of $(16,417) in 2004. The increase in cash flow from
      2005 to 2006 was a result of increased income before the cumulative
      effect of change in accounting principle of $34,990, a $42,648 decrease
      in merchandise inventory, an increase in trade accounts payable of
      $42,860, partially offset by an increase in trade receivables of $64,210.
      The increase in trade receivables resulted primarily from the increase in
      sales experienced by the Company. The average number of days of sales in
      trade receivables at December 31, 2006 decreased moderately from the
      average number of days at December 31, 2005. Merchandise inventory levels
      were lower at December 31, 2006 when compared to December 31, 2005.
      Average inventory turnover improved significantly when comparing December
      31, 2006 to December 31, 2005. This improvement in working capital
      management resulted in current assets exceeding current liabilities by
      $415,465 at December 31, 2006, up $16,576 from December 31, 2005.

      INVESTING ACTIVITIES

      Capital expenditures for property were $45,494, $30,233, and $24,100, and
      proceeds from the disposal of property were $11,887, $25,036, and $3,565,
      for the years ended December 31, 2006, 2005, and 2004, respectively. The
      proceeds received resulted primarily from the sale of real property.


                                       12
<PAGE>

      FINANCING ACTIVITIES

      The excess of cash provided by operations over investing activities
      enabled the Company to reduce short-term debt by $42,243 and long-term
      debt by $31,885 in 2006. Reductions in short- and long-term debt during
      2005 were $11,847 and $48,803, respectively.

      Cash provided by the sale of common stock amounted to $7,401, $5,215, and
      $361, and purchases of treasury stock were $6,123, $5,803, and $6,909 for
      the years ended December 31, 2006, 2005, and 2004, respectively. Dividends
      paid were $11,436, $11,118, and $11,620 for the years ended December 31,
      2006, 2005, and 2004, respectively.

Liquidity

The Company has an unsecured Credit Agreement with a group of banks at an
interest rate based on the London Interbank Offered Rate (LIBOR) that had
previously consisted of a $100,000, 364-day facility that was to have expired in
July 2006. Prior to expiration, the Company amended the Credit Agreement to
consist of a $150,000, 364-day facility that expires in July 2007. There were no
amounts outstanding under the Credit Agreement at December 31, 2006 and 2005.

At December 31, 2006, the Company had a $215,000 accounts receivable
securitization program that expires in October 2009. The securitization program
provides for the sale of certain of the Company's trade receivables on a
revolving basis to Graybar Commerce Corporation (GCC), a wholly-owned,
bankruptcy-remote, special-purpose subsidiary. GCC sells an undivided interest
in the receivables to an unrelated multi-seller commercial paper conduit. The
Company accounts for the securitization as an on-balance sheet financing
arrangement because the Company has maintained effective control of the trade
receivables through a call option that gives GCC the unilateral right to
repurchase the undivided interests. Accordingly, the trade receivables and
related debt are included in the accompanying consolidated balance sheets. GCC
has granted a security interest in its trade receivables to the commercial
paper conduit. There were no borrowings outstanding under the securitization
program at December 31, 2006, compared to $20,000 at December 31, 2005.

At December 31, 2006, the Company had available to it unused lines of credit
amounting to $377,076 compared to $288,831 at December 31, 2005. These lines are
available to meet the short-term cash requirements of the Company. Short-term
borrowings outstanding during 2006 and 2005 ranged from a minimum of $13,667 and
$25,983 to a maximum of $140,924 and $205,804, respectively. The Company also
reduced its outstanding long-term debt by $31,885 from a balance (including
current portion) of $265,660 at December 31, 2005 to $236,188 at December 31,
2006.

The Credit Agreement, the accounts receivable securitization program, and
certain other note agreements have various covenants that limit the Company's
ability to make investments, pay dividends, incur debt, dispose of property, and
issue equity securities. The Company is also required to maintain certain
financial ratios as defined in the agreements. The Company is in compliance with
all covenants as of December 31, 2006.

The Company has two lease arrangements with an independent lessor which provide
$58,777 of financing for eight of the Company's distribution facilities as of
December 31, 2006. Each of the agreements carries a five-year term. The Company
has the option, with the consent of the lessor's lenders, to renew the leases
for an additional five-year term or to purchase the property for a price
including the outstanding lease balance. If the Company elects not to renew the
lease or purchase the property, or such lenders refuse to consent to a renewal,
the Company may elect to remarket the property and arrange for its sale to a
third party.

The financing structures used in these two lease arrangements qualify as silos
of a variable interest entity under FIN 46. On January 1, 2005, the Company
adopted the provisions of FIN 46, which was subsequently amended by FIN 46R, and
in accordance therewith, as the primary beneficiary, consolidated these silos in
its financial statements as if the interpretations of FIN 46 had been in place
from the inception of these leases. The impact of consolidation increased the
Company's property by $64,257, the net book value of the nine distribution
facilities then financed under the two leases. Additionally, the Company
increased long-term debt by $70,906 and recorded a minority interest in the
silos of $2,572 at the date of adoption. The Company recorded a cumulative
effect of change in accounting principle of $(5,634), net of income tax effect
of $3,587, during the first quarter of 2005 to affect the consolidation. The
Company has treated the adoption of FIN 46 as a non-cash item in its
consolidated statements of cash flows.


                                       13
<PAGE>

Three of the nine distribution facilities financed by the two lease arrangements
were sold during 2005. In accordance with the terms of the lease financing
agreements, the Company substituted two properties under one of the leases and
also granted mortgages on two other properties in a replacement transaction. As
of December 31, 2006, the consolidated silos included in the Company's financial
statements have a net property balance of $42,536, long-term debt of $56,720,
and a minority interest of $2,057. At December 31, 2005, the consolidated silos
included in the Company's financial statements had a net property balance of
$43,446, long-term debt of $56,720, and a minority interest of $2,057. Under the
terms of the lease arrangements, the Company's maximum exposure to loss at
December 31, 2006, in respect of the properties subject to the two lease
arrangements, is $49,961, the amount guaranteed by the Company as the residual
fair value of the property.

CONTRACTUAL OBLIGATIONS AND COMMITMENTS

The Company has the following contractual obligations as of December 31, 2006:

<TABLE>
<CAPTION>
                                                            2008         2010         2012
                                                            and          and          and
(stated in thousands)             Total        2007         2009         2011        Beyond
---------------------           --------     --------     --------     --------     --------
<S>                             <C>          <C>          <C>          <C>          <C>
Long-term debt obligations      $246,556     $ 46,134     $110,092     $ 70,583     $ 19,747
Capital lease obligations          2,816          564        1,126        1,126           --
Operating lease obligations       99,916       24,821       36,140       15,355       23,600
Purchase obligations             566,019      566,019           --           --           --
                                --------     --------     --------     --------     --------
       Total                    $915,307     $637,538     $147,358     $ 87,064     $ 43,347
</TABLE>

Long-term debt and capital lease obligations consist of principal and interest
payments.

Purchase obligations consist primarily of open inventory purchase orders made in
the normal course of business. Many of these obligations may be cancelled with
limited or no financial penalties.

The table above does not include $43,449 of accrued, unfunded pension cost and
$81,714 of accrued, unfunded employment-related benefit obligations, of which
$74,447 is related to the Company's postretirement benefits plan, because it is
not certain when the obligations will be paid. The Company also expects to make
contributions totaling approximately $40,000 to its defined benefit pension plan
during 2007 that are not included in the table.

CRITICAL ACCOUNTING POLICIES

The consolidated financial statements are prepared in accordance with accounting
principles generally accepted in the United States, which require the Company to
make estimates and assumptions (see Note 1 to the consolidated financial
statements). The Company believes the following accounting policies have the
potential to have a more significant impact on the financial statements either
because of the significance of the financial statement item to which they relate
or because they involve a higher degree of judgment and complexity.

Revenue Recognition

Revenues are recognized when evidence of a customer arrangement exists, prices
are fixed and determinable, and product title, ownership and risk of loss
transfers to the customer. Revenues recognized are primarily for product sales,
but also include freight and handling charges. The Company's standard shipping
terms are FOB shipping point, under which, product title passes to the customer
at the time of shipment. The Company does, however, fulfill some customer orders
based on shipping terms of FOB destination, whereby title passes to the customer
at the time of delivery.

Allowance for Doubtful Accounts

The Company performs ongoing credit evaluations of its customers and a
significant portion of its trade receivables is secured by mechanic's lien or
payment bond rights. The Company maintains allowances to reflect the expected
uncollectibility of trade receivables based on past collection history, the
economic environment 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 the Company's customers were to deteriorate.


                                       14
<PAGE>

Income Taxes

Deferred tax assets and liabilities are recorded based on the Company's
assessment of future taxes to be paid in the jurisdictions in which the Company
operates. These assessments involve temporary differences resulting from
differing treatment of items for tax and accounting purposes, as well as
estimates of the Company's current tax exposures. Based on the Company's
evaluation of the tax positions it takes on the various tax returns it files,
the Company believes it was adequately reserved for these issues at December 31,
2006.

Merchandise Inventory

The Company values its inventories at the lower of cost (determined using the
last-in, first-out (LIFO) cost method) or market. In assessing the ultimate
realization of inventories, the Company makes judgments as to its return rights
to suppliers and future demand requirements. If actual future demand, market
conditions or supplier return provisions are less favorable than those projected
by management, additional inventory write-downs may be required.

Pension Plan

The Company's pension plan expense and obligations are determined based on the
selection of certain assumptions, the most significant of which are the expected
long-term rate of return on plan assets and the discount rate used to discount
plan liabilities. While management believes that the assumptions selected by the
Company are appropriate, differences in actual experience or changes in
assumptions may affect the Company's pension plan obligation and future pension
expense. In 2006, the Company's expected long-term rate of return on plan assets
was 8.00%, down from 8.25% in 2005. The discount rate used to discount plan
liabilities was changed to 5.75% at December 31, 2006, up from 5.50% at December
31, 2005. The Company has elected to continue to use an expected long-term rate
of return on plan assets of 8.00% for 2007. The change in assumptions and return
on assets experienced by the plan are expected to result in 2007 pension expense
of approximately $32,500.

Supplier Volume Incentives

The Company's agreements with many of its suppliers provide for the Company to
earn incentives based on purchases during the agreement period. These agreements
typically provide for the incentives to be paid in arrears and the Company
estimates amounts to be received from suppliers at the end of each reporting
period based on the earnout level that the Company believes is probable of being
achieved. Amounts received have historically been within management's estimates.
In the event that the operating performance of the Company's suppliers were to
decline, however, there can be no assurance that amounts earned would be paid or
that the incentives would continue to be included in future agreements.

NEW ACCOUNTING STANDARDS

The FASB issued Interpretation No. 48, "Accounting for Uncertainty in Income
Taxes, an Interpretation of SFAS No. 109" (FIN 48), in June 2006. FIN 48
clarifies the accounting for uncertainty in income taxes recognized in an
enterprise's financial statements in accordance with SFAS No. 109, "Accounting
for Income Taxes". FIN 48 prescribes a recognition threshold and measurement
attribute for the financial statement recognition and measurement of a tax
position taken or expected to be taken in a tax return. It also provides
guidance on derecognition, classification, interest and penalties, accounting in
interim periods, disclosure, and transition. FIN 48 is effective for fiscal
years beginning after December 15, 2006 (first quarter of 2007 for calendar year
companies). The Company continues to evaluate the impact that FIN 48 will have
on its financial statements.

In September 2006, the FASB issued SFAS No. 157, "Fair Value Instruments" (SFAS
157). SFAS 157 defines fair value, establishes a framework for measuring fair
value in generally accepted accounting principles and expands disclosures about
fair value measurements. This Statement applies under other accounting
pronouncements that require or permit fair value measurements, the FASB having
previously concluded in those accounting pronouncements that fair value is the
relevant measurement attribute. Accordingly, this Statement does not require any
new fair value measurements. This Statement is effective for financial
statements issued for fiscal years beginning after November 15, 2007 and interim
periods within those fiscal years. The Company has not yet evaluated the impact
SFAS 157 will have on its financial statements.


                                       15
<PAGE>

The FASB issued SFAS No. 158, "Employers' Accounting for Defined Benefit Pension
and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106,
and 132(R)" (SFAS 158), in September 2006. Among other items, SFAS 158 requires
recognition of the over- or under-funded status of an entity's defined benefit
postretirement plan(s) as an asset or liability in its financial statements,
requires the measurement of defined benefit postretirement plan assets and
obligations as of the end of the employer's fiscal year, and requires
recognition of the funded status of defined benefit postretirement plans in
other comprehensive income. SFAS 158 is effective for fiscal years ending after
December 15, 2007 for employers, such as the Company, that do not issue
publicly-traded equity securities.

The Company believes that the adoption of SFAS 158 will have a material impact
on its statement of financial position, as the unfunded portion of the Company's
pension plan at December 31, 2006 was $102,533. The unfunded portion related to
other postretirement benefit obligations was $91,061 at December 31, 2006. The
amounts recognized in the consolidated balance sheet for the Company's pension
plan and postretirement benefit obligations are $43,449 and $74,447,
respectively, as of December 31, 2006.

ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company's interest expense is sensitive to changes in the general level of
interest rates. Changes in interest rates have different impacts on the
fixed-rate and variable-rate portions of the Company's debt portfolio. A change
in interest rates on the fixed-rate portion of the debt portfolio impacts the
fair value of the financial instrument but has no impact on interest incurred or
cash flows. A change in interest rates on the variable-rate portion of the debt
portfolio impacts the interest incurred and cash flows but does not impact the
fair value of the financial instrument. To mitigate the cash flow impact of
interest rate fluctuations, the Company generally maintains a significant
portion of its debt as fixed rate in nature by borrowing on a long-term basis.

Based on the amount ($70,689) of variable rate debt outstanding at December 31,
2006, a one-percent (1%) increase in interest rates would increase the Company's
interest expense by $707 per annum.

The following table provides information about financial instruments that are
sensitive to changes in interest rates. The table presents principal cash flows
and related weighted-average interest rates by expected maturity dates.

<TABLE>
<CAPTION>
                                                                                                                  Fair
                                                                                                                 Market
                                                                                         There-                  Value
(stated in thousands)              2007       2008       2009       2010       2011      After        Total     12/31/06
---------------------              ----       ----       ----       ----       ----      ------       -----     --------
<S>                              <C>         <C>        <C>        <C>        <C>        <C>        <C>         <C>
Long-term debt principal
payments by expected
maturity dates, including
current portion
  Fixed-rate debt                $32,213     32,249     32,255     34,863     29,063     18,523     $179,166    $176,431
  Average interest rate             7.14%      7.14%      7.14%      7.04%      7.12%     6.61%

  Variable-rate debt             $   106     27,767     29,058         52         39         --     $ 57,022    $ 57,022
  Average interest rate             6.98%      6.93%      6.92%      6.75%      6.75%        --

  Short-term variable-
    rate borrowings              $13,667                                                            $ 13,667    $ 13,667
  Average interest rate             6.00%
</TABLE>

The fair value of long-term debt is estimated by discounting cash flows using
current borrowing rates available for debt of similar maturities.

In September 2000, the Company entered into a swap agreement to manage interest
rates on amounts due under a leveraged lease arrangement. The agreement, which
expires in July 2013, is based on a notional amount of $28,720. The agreement
calls for an exchange of interest payments, with the Company being paid a London
Interbank Offered Rate (LIBOR) floating rate and paying a fixed rate of 6.92%.
There is no exchange of the notional amount upon which the payments are based.
The fair value of the agreement at December 31, 2006 was approximately $(3,160).
The negative value of this agreement reflects the low level of interest rates
generally.


                                       16
<PAGE>

FOREIGN EXCHANGE RATE RISK

The Company conducts business in Canada and Mexico. Exposure to foreign currency
exchange rate fluctuations is not material.

CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS:

Management's Discussion and Analysis of Financial Condition and Results of
Operations as of and for the year ended December 31, 2006, included in our
Annual Report on Form 10-K for such period as filed with the U.S. Securities and
Exchange Commission, should be read in conjunction with our accompanying audited
consolidated financial statements and the notes thereto.

This document contains forward-looking statements (as such term is defined in
the federal securities laws) and is based on current expectations, which involve
risks and uncertainties. The results herein are not necessarily indicative of
the results to be expected in any future periods. 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 the Annual Report on Form 10-K.

ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


                                       17
<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

                           [ERNST & YOUNG letterhead]

The Board of Directors and Shareholders
Graybar Electric Company, Inc.

We have audited the accompanying consolidated balance sheets of Graybar Electric
Company, Inc. as of December 31, 2006 and 2005, and the related consolidated
statements of income, changes in shareholders' equity, and cash flows for each
of the three years in the period ended December 31, 2006. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. We were not engaged to perform an
audit of the Company's internal control over financial reporting. Our audits
included consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
Company's internal control over financial reporting. Accordingly, we express no
such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Graybar Electric
Company, Inc. at December 31, 2006 and 2005, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 2006, in conformity with U.S. generally accepted accounting
principles.

                                                /s/ Ernst & Young LLP

St. Louis, Missouri
February 23, 2007


                                       18
<PAGE>

                 GRAYBAR ELECTRIC COMPANY, INC. AND SUBSIDIARIES

                        CONSOLIDATED STATEMENTS OF INCOME

                 (Stated in thousands except for per share data)

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,                                                     2006           2005           2004
-----------------------------------------------------------------------------------------------------------------------
<S>                                                                           <C>            <C>            <C>
NET SALES                                                                     $ 5,009,143    $ 4,288,043    $ 4,079,553
Cost of merchandise sold                                                       (4,047,692)    (3,477,009)    (3,282,543)
-----------------------------------------------------------------------------------------------------------------------
     GROSS MARGIN                                                                 961,451        811,034        797,010
Selling, general and administrative expenses                                     (771,021)      (674,005)      (677,892)
Taxes, other than income taxes                                                    (43,566)       (41,328)       (40,758)
Depreciation and amortization                                                     (34,260)       (34,644)       (36,516)
Other income, net                                                                   9,418          3,732          5,556
-----------------------------------------------------------------------------------------------------------------------
     INCOME FROM OPERATIONS                                                       122,022         64,789         47,400
Interest expense                                                                  (23,019)       (26,470)       (23,453)
-----------------------------------------------------------------------------------------------------------------------
Income before provision for income taxes and cumulative effect
  of change in accounting principle                                                99,003         38,319         23,947
-----------------------------------------------------------------------------------------------------------------------
Provision for income taxes
  Current                                                                         (47,563)        (3,885)       (12,772)
  Deferred                                                                          5,948        (12,036)         2,843
-----------------------------------------------------------------------------------------------------------------------
     Total provision for income taxes                                             (41,615)       (15,921)        (9,929)
-----------------------------------------------------------------------------------------------------------------------
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
  PRINCIPLE                                                                        57,388         22,398         14,018
-----------------------------------------------------------------------------------------------------------------------
Cumulative effect of change in accounting principle, net of
  $3,587 tax effect                                                                    --         (5,634)            --
-----------------------------------------------------------------------------------------------------------------------
     NET INCOME                                                               $    57,388    $    16,764    $    14,018
-----------------------------------------------------------------------------------------------------------------------
Income per share of common stock before cumulative effect
  of change in accounting principle (A)                                       $      8.91    $      3.50    $      2.13
-----------------------------------------------------------------------------------------------------------------------
Cumulative effect of change in accounting principle per share (A)                      --          (0.88)            --
-----------------------------------------------------------------------------------------------------------------------
NET INCOME PER SHARE OF COMMON STOCK (A)                                      $      8.91    $      2.62    $      2.13
-----------------------------------------------------------------------------------------------------------------------
</TABLE>

(A)   Adjusted for the declaration of a 10% stock dividend in 2006.

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


                                       19
<PAGE>

                 GRAYBAR ELECTRIC COMPANY, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

            (Stated in thousands except for share and per share data)

<TABLE>
<CAPTION>
AS OF DECEMBER 31,                                                                                        2006           2005
-----------------------------------------------------------------------------------------------------------------------------
<S>                                                                                                <C>            <C>
ASSETS
-----------------------------------------------------------------------------------------------------------------------------
   CURRENT ASSETS
     Cash and cash equivalents                                                                     $    52,210    $     9,074
     Trade receivables (less allowances of $8,522 and $7,526,
       respectively)                                                                                   698,190        633,980
     Merchandise inventory                                                                             385,479        428,127
     Other current assets                                                                               19,302         15,587
-----------------------------------------------------------------------------------------------------------------------------
         Total Current Assets                                                                        1,155,181      1,086,768
-----------------------------------------------------------------------------------------------------------------------------
   PROPERTY, AT COST
     Land                                                                                               44,135         37,958
     Buildings                                                                                         311,148        301,474
     Furniture and fixtures                                                                            158,757        157,470
     Software                                                                                           76,906         76,906
     Capital leases                                                                                      2,413          3,741
-----------------------------------------------------------------------------------------------------------------------------
         Total Property, at cost                                                                       593,359        577,549
         Less - accumulated depreciation and amortization                                             (267,013)      (257,700)
-----------------------------------------------------------------------------------------------------------------------------
         Net Property                                                                                  326,346        319,849
-----------------------------------------------------------------------------------------------------------------------------
   OTHER NON-CURRENT ASSETS                                                                             26,719         36,770
-----------------------------------------------------------------------------------------------------------------------------
         TOTAL ASSETS                                                                              $ 1,508,246    $ 1,443,387
-----------------------------------------------------------------------------------------------------------------------------
LIABILITIES
-----------------------------------------------------------------------------------------------------------------------------
   CURRENT LIABILITIES
     Short-term borrowings                                                                         $    13,667    $    55,910
     Current portion of long-term debt                                                                  32,319         32,133
     Trade accounts payable                                                                            503,408        460,548
     Accrued payroll and benefit costs                                                                 112,549         66,711
     Other accrued taxes                                                                                13,010         12,715
     Dividends payable                                                                                   6,494          6,139
     Other current liabilities                                                                          58,269         53,723
-----------------------------------------------------------------------------------------------------------------------------
         Total Current Liabilities                                                                     739,716        687,879
-----------------------------------------------------------------------------------------------------------------------------
   POSTRETIREMENT BENEFITS LIABILITY                                                                    74,447         77,524
-----------------------------------------------------------------------------------------------------------------------------
   PENSION LIABILITY                                                                                    43,449         60,081
-----------------------------------------------------------------------------------------------------------------------------
   LONG-TERM DEBT                                                                                      203,869        233,527
-----------------------------------------------------------------------------------------------------------------------------
   OTHER NON-CURRENT LIABILITIES                                                                         4,042          2,941
-----------------------------------------------------------------------------------------------------------------------------
         TOTAL LIABILITIES                                                                           1,065,523      1,061,952
-----------------------------------------------------------------------------------------------------------------------------
                                                                          Shares at December 31,
                                                                           2006           2005
-----------------------------------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
-----------------------------------------------------------------------------------------------------------------------------
   CAPITAL STOCK
       Common, stated value $20.00 per share,
         Authorized                                                  15,000,000     15,000,000
         Issued to voting trustees                                    6,158,008      5,505,983
         Issued to shareholders                                         291,703        309,412
         In treasury, at cost                                           (10,722)       (22,992)
-----------------------------------------------------------------------------------------------------------------------------
         Outstanding Common Stock                                     6,438,989      5,792,403         128,780        115,848
-----------------------------------------------------------------------------------------------------------------------------
       Common shares subscribed                                         506,662        378,538          10,133          7,571
         Less - subscriptions receivable                               (506,662)      (378,538)        (10,133)        (7,571)
-----------------------------------------------------------------------------------------------------------------------------
   RETAINED EARNINGS                                                                                   342,878        308,935
   ACCUMULATED OTHER COMPREHENSIVE LOSS                                                                (28,935)       (43,348)
-----------------------------------------------------------------------------------------------------------------------------
         TOTAL SHAREHOLDERS' EQUITY                                                                    442,723        381,435
-----------------------------------------------------------------------------------------------------------------------------
         TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                                $ 1,508,246    $ 1,443,387
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>

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


                                       20
<PAGE>

                 GRAYBAR ELECTRIC COMPANY, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                              (Stated in thousands)

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,                                               2006          2005          2004
---------------------------------------------------------------------------------------------------------------
<S>                                                                        <C>           <C>           <C>
CASH FLOWS FROM OPERATIONS
    Income before cumulative effect of change in accounting principle      $ 57,388      $ 22,398      $ 14,018
---------------------------------------------------------------------------------------------------------------
    Adjustments to reconcile income before cumulative effect of change
     in accounting principle to cash provided (used) by operations -
       Depreciation and amortization                                         34,260        34,644        36,516
       Deferred income taxes                                                 (5,948)       12,036        (2,843)
       Net gain on disposal of property                                      (8,820)       (1,818)       (1,882)
       Loss on impairment of property                                         2,575            --            --
       Changes in assets and liabilities:
         Trade receivables                                                  (64,210)       (9,252)      (67,761)
         Merchandise inventory                                               42,648        45,085        10,121
         Other current assets                                                (3,715)       10,792        (8,564)
         Other non-current assets                                             9,341        (8,484)       12,869
         Trade accounts payable                                              42,860       (29,635)      (45,996)
         Accrued payroll and benefit costs                                   45,838         2,036        12,214
         Other current liabilities                                           12,513        (7,494)       22,843
         Other non-current liabilities                                       (4,411)        6,741         2,048
---------------------------------------------------------------------------------------------------------------
       Total adjustments to income before cumulative effect of
        change in accounting principle                                      102,931        54,651       (30,435)
---------------------------------------------------------------------------------------------------------------
    Net cash flow provided (used) by operations                             160,319        77,049       (16,417)
---------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
       Proceeds from disposal of property                                    11,887        25,036         3,565
       Capital expenditures for property                                    (45,494)      (30,233)      (24,100)
       Investment in joint venture                                              710           889           794
---------------------------------------------------------------------------------------------------------------
    Net cash flow used by investing activities                              (32,897)       (4,308)      (19,741)
---------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
       Net (decrease) increase in short-term borrowings                     (42,243)      (11,847)       67,757
       Repayment of long-term debt                                          (31,885)      (48,803)      (20,176)
       Principal payments under capital leases                                   --        (1,272)       (2,455)
       Sale of common stock                                                   7,401         5,215           361
       Purchases of treasury stock                                           (6,123)       (5,803)       (6,909)
       Dividends paid                                                       (11,436)      (11,118)      (11,620)
---------------------------------------------------------------------------------------------------------------
    Net cash flow (used) provided by financing activities                   (84,286)      (73,628)       26,958
---------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH                                              43,136          (887)       (9,200)
---------------------------------------------------------------------------------------------------------------
CASH, BEGINNING OF YEAR                                                       9,074         9,961        19,161
---------------------------------------------------------------------------------------------------------------
CASH, END OF YEAR                                                          $ 52,210      $  9,074      $  9,961
SUPPLEMENTAL CASH FLOW INFORMATION:
       CASH PAID FOR INTEREST                                              $ 23,644      $ 26,669      $ 23,548
       CASH PAID (REFUNDED) FOR INCOME TAXES                               $ 40,114      $ 13,767      $ (4,057)
---------------------------------------------------------------------------------------------------------------
</TABLE>

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


                                       21
<PAGE>

                 GRAYBAR ELECTRIC COMPANY, INC. AND SUBSIDIARIES

           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
              FOR THE YEARS ENDED DECEMBER 31, 2006, 2005, AND 2004

                              (Stated in thousands)

<TABLE>
<CAPTION>
                                                                    COMMON                   ACCUMULATED
                                                                    STOCK                       OTHER
                                        COMMON       PREFERRED    SUBSCRIBED,    RETAINED   COMPREHENSIVE
                                        STOCK          STOCK       UNISSUED      EARNINGS   INCOME (LOSS)      TOTAL
                                       --------      ---------    -----------    --------   -------------     --------
<S>                                    <C>           <C>           <C>           <C>           <C>            <C>
DECEMBER 31, 2003                      $117,427      $     43      $     45      $306,030      $(35,962)      $387,583
                                       ========      ========      ========      ========      ========       ========
Net income                                                                         14,018                       14,018
Currency translation adjustments                                                                  2,510          2,510
Unrealized gain from interest                                                                       233            233
   rate swap (net of tax of $149)
Minimum pension liability (net of
   tax of $3,700)                                                                                 5,836          5,836
                                                                                                              --------
Comprehensive income                                                                                            22,597
                                                                                                              --------
Stock issued                                406                                                                    406
Stock redeemed                           (6,866)          (43)                                                  (6,909)
Advance payments                                                        (45)                                       (45)
Dividends declared                                                                (11,268)                     (11,268)
                                       --------      --------      --------      --------      --------       --------
DECEMBER 31, 2004                      $110,967      $      0      $      0      $308,780      $(27,383)      $392,364
                                       ========      ========      ========      ========      ========       ========
Net income                                                                         16,764                       16,764
Currency translation adjustments                                                                  1,191          1,191
Unrealized gain from interest
   rate swap (net of tax of $587)                                                                   935            935
Minimum pension liability (net of
   tax of $11,518)                                                                              (18,091)       (18,091)
                                                                                                              --------
Comprehensive income                                                                                               799
                                                                                                              --------
Stock issued                              5,215                                                                  5,215
Stock redeemed                           (5,803)                                                                (5,803)
Dividends declared                        5,469                                   (16,609)                     (11,140)
                                       --------      --------      --------      --------      --------       --------
DECEMBER 31, 2005                      $115,848      $      0      $      0      $308,935      $(43,348)      $381,435
                                       ========      ========      ========      ========      ========       ========
Net income                                                                         57,388                       57,388
Currency translation adjustments                                                                   (317)          (317)
Unrealized gain from interest
   rate swap (net of tax of $338)                                                                   533            533
Minimum pension liability (net of
   tax of $9,348)                                                                                14,197         14,197
                                                                                                              --------
Comprehensive income                                                                                            71,801
                                                                                                              --------
Stock issued                              7,401                                                                  7,401
Stock redeemed                           (6,123)                                                                (6,123)
Dividends declared                       11,654                                   (23,445)                     (11,791)
                                       --------      --------      --------      --------      --------       --------
DECEMBER 31, 2006                      $128,780      $      0      $      0      $342,878      $(28,935)      $442,723
                                       ========      ========      ========      ========      ========       ========
</TABLE>

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


                                       22
<PAGE>

                 GRAYBAR ELECTRIC COMPANY, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2006, 2005, AND 2004

            (Stated in thousands except for share and per share data)

1/SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS

Graybar Electric Company, Inc. (the "Company") is a New York Corporation,
incorporated in 1925. The Company is engaged in the distribution of electrical,
telecommunications and networking products and the provision of related supply
chain management and logistics services, primarily to contractors, industrial
plants, telephone companies, power utilities, federal, state and municipal
governments, and commercial users in North America. All products sold by the
Company are purchased by the Company from others. The Company's business
activity is primarily with customers in the United States. The Company also has
subsidiary operations with distribution facilities in Canada, Puerto Rico and
Mexico.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of Graybar Electric
Company, Inc. and its subsidiary companies. All significant intercompany
balances and transactions have been eliminated. Certain reclassifications of
prior year amounts have been made to conform to the 2006 presentation.

REVENUE RECOGNITION

Revenues are recognized when evidence of a customer arrangement exists, prices
are fixed and determinable, and product title, ownership and risk of loss
transfers to the customer. Revenues recognized are primarily for product sales,
but also include freight and handling charges. The Company's standard shipping
terms are FOB shipping point, under which, product title passes to the customer
at the time of shipment. The Company does, however, fulfill some customer orders
based on shipping terms of FOB destination, whereby title passes to the customer
at the time of delivery.

OUTGOING FREIGHT EXPENSES

The Company records certain outgoing freight expenses as a component of selling,
general and administrative expenses. These costs totaled $46,942, $43,799, and
$50,020 for the years ended 2006, 2005, and 2004, respectively.

ESTIMATES

The preparation of financial statements in conformity with generally accepted
accounting principles 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 those estimates.

CASH AND CASH EQUIVALENTS

The Company accounts 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

The Company performs ongoing credit evaluations of its customers and a
significant portion of its trade receivables is secured by mechanic's lien or
payment bond rights. The Company maintains allowances to reflect the expected
uncollectibility of trade receivables based on past collection history, the
economic environment 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 the Company's customers were to deteriorate.


                                       23
<PAGE>

The following table shows a rollforward of the activity in the allowances for
doubtful accounts and cash discounts:

<TABLE>
<CAPTION>
                                            BALANCE
                                              AT         PROVISION
                                           BEGINNING    (CHARGED TO     WRITE-OFFS       BALANCE AT
                                           OF PERIOD      INCOME)      (DEDUCTIONS)    END OF PERIOD
                                           ---------    -----------    ------------    -------------
<S>                                        <C>            <C>            <C>             <C>
FOR THE YEAR ENDED DECEMBER 31, 2006:
Allowance for cash discounts               $   1,024      $  19,965      $ (19,684)      $   1,305
Allowance for doubtful accounts                6,502          8,759         (8,044)          7,217
                                           ---------      ---------      ---------       ---------
   Total                                   $   7,526      $  28,724      $ (27,728)      $   8,522
                                                                                         =========

FOR THE YEAR ENDED DECEMBER 31, 2005:
Allowance for cash discounts               $     981      $  16,187      $ (16,144)      $   1,024
Allowance for doubtful accounts                7,323          5,956         (6,777)          6,502
                                           ---------      ---------      ---------       ---------
   Total                                   $   8,304      $  22,143      $ (22,921)      $   7,526
                                                                                         =========

FOR THE YEAR ENDED DECEMBER 31, 2004:
Allowance for cash discounts               $     734      $  14,156      $ (13,909)      $     981
Allowance for doubtful accounts                6,465          6,240         (5,382)          7,323
                                           ---------      ---------      ---------       ---------
   Total                                   $   7,199      $  20,396      $ (19,291)      $   8,304
                                                                                         =========
</TABLE>

MERCHANDISE INVENTORY

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 revenues. Had the
first-in, first-out (FIFO) method been used, inventory would have been
approximately $109,773 and $64,345 greater than reported under the LIFO method
at December 31, 2006 and 2005, respectively. The Company liquidated portions of
previously created LIFO layers in 2006, 2005, and 2004 resulting in decreases in
cost of goods sold of $(10,176), $(5,015), and $(473), respectively. The Company
makes provisions for obsolete or slow-moving inventories as necessary to reflect
reduction in inventory value. Reserves for excess and obsolete inventories were
$6,560 and $3,660 at December 31, 2006 and 2005, respectively. The total net
reserve expense related to excess and obsolete inventories, included in cost of
goods sold, was $2,900, $2,060, and $(500) for 2006, 2005, and 2004,
respectively.

SUPPLIER VOLUME INCENTIVES

The Company's agreements with many of its suppliers provide for the Company to
earn incentives based on purchases during the agreement period. The Company
estimates the amount to be received from suppliers at the end of each reporting
period based on the earnout level that the Company believes is probable of being
achieved. The Company records the incentive ratably over the year as a reduction
of cost of merchandise sold as the related inventory is sold. Changes in the
estimated amount of incentives are treated as changes in estimate and are
recognized using a cumulative catch-up adjustment.

PROPERTY AND DEPRECIATION

The Company provides for depreciation and amortization using the straight-line
method over the following estimated useful lives of the assets:

<TABLE>
      ----------------------------------------------------------------------------------------------------------
<S>                                                     <C>
      Buildings                                         42 years
      ----------------------------------------------------------------------------------------------------------
      Permanent fixtures -- leased property             Over the shorter of the asset's life or the lease term
      ----------------------------------------------------------------------------------------------------------
      Furniture, fixtures, equipment and software       4 to 14 years
      ----------------------------------------------------------------------------------------------------------
      Capital leases                                    Over the shorter of the asset's life or the lease term
      ----------------------------------------------------------------------------------------------------------
</TABLE>

Depreciation expense was $23,088, $21,977, and $23,746 in 2006, 2005, and 2004,
respectively.

At the time property is retired, or otherwise disposed of, the asset and related
accumulated depreciation are removed from the accounts, and any resulting gain
or loss is credited or charged to other income, net.

Property under capital leases, consisting primarily of computer equipment, is
recorded in property with the corresponding obligations carried in long-term
debt. The amount capitalized is the present value at the beginning of the lease
term of the


                                       24
<PAGE>

aggregate future minimum lease payments.

Maintenance and repairs are expensed as incurred. Major renewals and betterments
that extend the life of property are capitalized.

The Company capitalizes interest expense on major construction and development
projects while in progress. Interest capitalized in 2006, 2005, and 2004 was
$144, $47, and $69, respectively.

The Company capitalizes qualifying internal and external costs incurred to
develop or obtain software for internal use during the application development
stage. Costs incurred during the pre-application development and
post-implementation stages are expensed as incurred. The Company capitalized
$799 and $0 in 2006 and 2005, respectively.

Unamortized software totaled $42,305 and $52,265 at December 31, 2006 and 2005,
respectively. The estimated useful life of capitalized software is eight years.

The net book value of two real estate properties that the Company listed for
sale in 2006 was greater than the listed selling price less expected selling
costs. The Company determined that the expected sale of these properties met the
criteria for recognition of an impairment loss on an asset classified as held
for sale as outlined in Financial Accounting Standards Board (FASB) Statement of
Financial Accounting Standards (SFAS) No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets". In accordance therewith, the Company recorded
impairment losses totaling $(2,575) to account for the expected losses on the
sale of these two properties. The impairment losses are included in other
income, net in the consolidated statements of income for the year ended December
31, 2006. The properties are expected to be sold within the year. Therefore, the
properties, with a book value of $8,116, are considered to be held for sale at
December 31, 2006 and accordingly, shall not be depreciated while so classified.

CREDIT RISK

Financial instruments that potentially expose the Company to concentrations of
credit risk consist primarily of trade receivables. The Company performs ongoing
credit evaluations of its customers and a significant portion of its trade
receivables is secured by mechanic's lien or payment bond rights. The Company
maintains allowances for potential credit losses and such losses historically
have been within management's expectations.

DERIVATIVE FINANCIAL INSTRUMENTS

SFAS No. 133, as amended by SFAS No. 138 and SFAS No. 149, "Accounting for
Derivative Instruments and Hedging Activities", requires the Company to
recognize all derivative instruments on the balance sheet at fair value. The
Company has entered into an interest rate swap agreement that effectively
converts its floating rate payments to a fixed-rate basis. The Company manages
interest rates on amounts due under certain lease arrangements through its swap
agreement. The Company's interest rate swap agreement is designated as a cash
flow hedge.

On an ongoing basis, the Company reflects the current fair value of the
interest rate swap on its balance sheet. At December 31, 2006, the Company has
recorded a liability of $3,160 in other current liabilities on the consolidated
balance sheet for the fair value of the swap. The effective portion of the
related gains or losses on the swap are deferred in accumulated other
comprehensive loss. No ineffectiveness was recorded in the consolidated
statements of income during 2006, 2005, and 2004. Unrealized gains (net of tax)
of $533, $935, and $233 related to the swap were recorded in accumulated other
comprehensive loss during the years ended December 31, 2006, 2005, and 2004,
respectively. At December 31, 2006 an unrealized net loss of $1,932 (net of
tax) is recorded in accumulated other comprehensive loss. These deferred gains
and losses are recognized in income in the period in which the related interest
payments being hedged are recognized in expense.

GOODWILL

The Company follows SFAS No. 142, "Goodwill and Other Intangible Assets", under
which goodwill and indefinite-lived intangible assets are not amortized but
rather tested annually for impairment. As of December 31, 2006, the Company has
completed its annual impairment test and concluded that there is no impairment
of the Company's goodwill. At December 31, 2006 and 2005, the Company had $6,680
of goodwill included in other non-current assets on the consolidated balance
sheet.


                                       25
<PAGE>

NEW ACCOUNTING STANDARDS

The FASB issued Interpretation No. 48, "Accounting for Uncertainty in Income
Taxes, an Interpretation of SFAS No. 109" (FIN 48), in June 2006. FIN 48
clarifies the accounting for uncertainty in income taxes recognized in an
enterprise's financial statements in accordance with SFAS No. 109, "Accounting
for Income Taxes". FIN 48 prescribes a recognition threshold and measurement
attribute for the financial statement recognition and measurement of a tax
position taken or expected to be taken in a tax return. It also provides
guidance on derecognition, classification, interest and penalties, accounting in
interim periods, disclosure, and transition. FIN 48 is effective for fiscal
years beginning after December 15, 2006 (first quarter 2007 for calendar year
companies). The Company continues to evaluate the impact that FIN 48 will have
on its financial statements.

In September 2006, the FASB issued SFAS No. 157, "Fair Value Instruments" (SFAS
157). SFAS 157 defines fair value, establishes a framework for measuring fair
value in generally accepted accounting principles and expands disclosures about
fair value measurements. This Statement applies under other accounting
pronouncements that require or permit fair value measurements, the FASB having
previously concluded in those accounting pronouncements that fair value is the
relevant measurement attribute. Accordingly, this Statement does not require any
new fair value measurements. This Statement is effective for financial
statements issued for fiscal years beginning after November 15, 2007 and interim
periods within those fiscal years. The Company has not yet evaluated the impact
SFAS 157 will have on its financial statements.

The FASB issued SFAS No. 158, "Employers' Accounting for Defined Benefit Pension
and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106,
and 132(R)" (SFAS 158), in September 2006. Among other items, SFAS 158 requires
recognition of the over- or under-funded status of an entity's defined benefit
postretirement plan(s) as an asset or liability in its financial statements,
requires the measurement of defined benefit postretirement plan assets and
obligations as of the end of the employer's fiscal year, and requires
recognition of the funded status of defined benefit postretirement plans in
other comprehensive income. SFAS 158 is effective for fiscal years ending after
December 15, 2007 for employers, such as the Company, that do not issue
publicly-traded equity securities.

The Company believes that the adoption of SFAS 158 will have a material impact
on its statement of financial position since the unfunded portion of the
Company's pension plan at December 31, 2006 was $102,533. The unfunded portion
related to other postretirement benefit obligations was $91,061 at December 31,
2006. The amounts recognized in the consolidated balance sheet for the Company's
pension plan and postretirement benefit obligations are $43,449 and $74,447,
respectively, as of December 31, 2006.

2/INCOME TAXES

The provisions for income taxes recorded in the consolidated statements of
income are as follows:

      FOR THE YEARS ENDED DECEMBER 31,            2006         2005        2004
      -------------------------------------------------------------------------
      Federal income tax
         Current                              $ 43,514     $  2,082    $ 11,815
         Deferred                               (5,030)      10,672      (2,598)

      State income tax
         Current                                 4,049        1,803         957
         Deferred                                 (918)       1,364        (245)
      -------------------------------------------------------------------------
      Provision for income taxes              $ 41,615     $ 15,921    $  9,929


                                       26
<PAGE>

Deferred income taxes are provided based upon differences between the financial
statement and tax bases of assets and liabilities. The following deferred tax
assets (liabilities) are recorded at December 31:

      Assets/(Liabilities)                                   2006          2005
      -------------------------------------------------------------------------
      Postretirement benefits                            $ 29,385      $ 30,298
      Payroll accruals                                      2,307         2,729
      Bad debt reserves                                     3,029         2,594
      Other deferred tax assets                            11,647         9,892
      Prepaid pension                                      10,148        18,993
      Inventory                                             2,100            --
      -------------------------------------------------------------------------
          Gross deferred tax assets                        58,616        64,506
      -------------------------------------------------------------------------
      Inventory                                                --        (3,796)
      Fixed assets                                        (19,666)      (19,234)
      Computer software                                   (16,415)      (18,650)
      Other deferred tax liabilities                       (7,873)       (4,822)
      -------------------------------------------------------------------------
          Gross deferred tax liabilities                  (43,954)      (46,502)
      -------------------------------------------------------------------------
      Net deferred tax assets                            $ 14,662      $ 18,004
      -------------------------------------------------------------------------

Deferred tax assets included in other current assets were $10,442 and $4,869 in
2006 and 2005, respectively. Deferred tax assets included in other non-current
assets were $4,220 and $13,135 in 2006 and 2005, respectively. The Company's
deferred tax assets include state net operating loss carryforwards of $4,422 and
$5,996 as of December 31, 2006 and 2005, respectively, that expire from 2006 to
2025. Valuation allowances of $0 and $1,485 have been established for a portion
of these deferred tax assets as of December 31, 2006 and 2005, respectively.

A reconciliation between the "statutory" federal income tax rate and the
effective tax rate in the consolidated statements of income is as follows:

      For the Years Ended December 31,               2006       2005       2004
      -------------------------------------------------------------------------
      "Statutory" federal tax rate                   35.0%      35.0%      35.0%
      State and local income taxes,
        net of federal benefit                        4.9        3.2        2.1
      Other, net                                      2.1        3.3        4.4
      -------------------------------------------------------------------------
      Effective tax rate                             42.0%      41.5%      41.5%
      -------------------------------------------------------------------------

3/CAPITAL STOCK

The Company's capital stock is 100% owned by its employees and retirees. Common
stock may not be sold by the holder thereof, except after first offering it to
the Company. The Company may buy any common shares so offered at the price at
which they were issued ($20.00 per share) with appropriate adjustments for
current dividends.

During 2006, the Company offered to eligible employees and qualified retirees
the right to subscribe to 850,000 shares of common stock at $20.00 per share in
accordance with the provisions of the Company's Three-year Common Stock Purchase
Plan dated June 10, 2004. This resulted in the subscription of 506,662 shares
($10,133). Subscribers under the Plan elected to make payments under one of the
following options: (i) all shares subscribed for on or before January 11, 2007;
or (ii) all shares subscribed for in installments paid through payroll
deductions (or in certain cases where a subscriber is no longer on the Company's
payroll, through direct monthly payments) over an 11-month period.

Shares were issued and Voting Trust Certificates were delivered to subscribers
as of January 11, 2007, in the case of shares paid for prior to January 11,
2007. Shares will be issued and Voting Trust Certificates will be delivered to
subscribers on a quarterly basis, as of the tenth day of March, June and
September and the fifteenth day of December to the extent full payments of
shares are made in the case of subscriptions under the installment method.

The 2007 Voting Trust Agreement, which replaces the expiring 1997 Voting Trust
Agreement, allows Voting Trust Certificate holders to elect that their voting
trust interest be uncertificated, that is, represented by a book entry system,
rather than by physical delivery of the Voting Trust Certificates. Voting Trust
Certificate holders making this election will, therefore, not receive
certificates in the manner described above.


                                       27
<PAGE>

Shown below is a summary of shares reacquired and retired by the Company in the
three years ended December 31:

                       PREFERRED SHARES                   COMMON SHARES
                    REACQUIRED     RETIRED           REACQUIRED      RETIRED
                    ----------     -------           ----------      -------
      2006                  --          --              306,131      318,401
      2005                  --          --              290,194      294,180
      2004               2,121       2,173              343,281      344,646
      ----------------------------------------------------------------------

The Company amended its Certificate of Incorporation to authorize a new class of
10,000,000 shares of Delegated Authority Preferred Stock ("preferred stock"),
par value one cent ($0.01), on June 10, 2004. The preferred stock may be issued
in one or more series, with the designations, relative rights, preferences and
limitations of shares of each such series being fixed by a resolution of the
Board of Directors of the Company. There were no shares of preferred stock
outstanding at December 31, 2006 and 2005.

On December 14, 2006, the Company declared a 10% common stock dividend. Each
shareholder was entitled to one share of common stock for every ten shares held
as of January 3, 2007. The stock was issued February 1, 2007. On December 8,
2005, the Company declared a 5% common stock dividend. Each shareholder was
entitled to one share of common stock for every twenty shares held as of January
3, 2006. The stock was issued February 1, 2006. The per share computations for
periods presented have been adjusted to reflect the new number of shares as
required by SFAS No. 128, "Earnings Per Share".

4/LONG-TERM DEBT AND BORROWINGS UNDER SHORT-TERM CREDIT AGREEMENTS

<TABLE>
<CAPTION>
                                                                                                         DECEMBER 31,
LONG-TERM DEBT WAS COMPRISED OF:                                                                      2006         2005
-----------------------------------------------------------------------------------------------------------------------
<S>                                                                                               <C>          <C>
7.49% senior note, unsecured, due in annual installments of $14,286 beginning in July 2005
   through July 2011                                                                              $ 71,429     $ 85,714
Variable rate lease arrangements (two), secured by facilities, due July 2008
   and December 2009                                                                                56,720       56,720
6.59% senior note, unsecured, due in semiannual installments of $3,750 beginning in
   October 2003 through April 2013                                                                  48,750       56,250
7.36% senior note, unsecured, due in semiannual installments of $3,095 beginning in May
   2001 through November 2010 with final payment of $3,094 due in May 2011                          27,856       34,047
6.65% senior note, unsecured, due in annual installments of $3,636 beginning in June 2003
   through June 2013                                                                                25,455       29,091
5.87% note secured by facility, due in monthly installments of $27 through June 2010,
   with final payment of $2,666 due in July 2010                                                     3,196        3,332
6.48% capital lease, due in monthly installments of $47 beginning in January 2007
   through December 2011                                                                             2,413           --
Fixed and variable rate mortgages, secured by facilities, various maturities                           369          506
-----------------------------------------------------------------------------------------------------------------------
                                                                                                   236,188      265,660
   Less current portion                                                                             32,319       32,133
-----------------------------------------------------------------------------------------------------------------------
LONG-TERM DEBT                                                                                    $203,869     $233,527
-----------------------------------------------------------------------------------------------------------------------
</TABLE>

LONG-TERM DEBT MATURES AS FOLLOWS:
-----------------------------------------------------------
2007                                               $ 32,319
2008                                                 60,016
2009                                                 61,313
2010                                                 34,915
2011                                                 29,102
2012-2013                                            18,523
-----------------------------------------------------------
                                                   $236,188
-----------------------------------------------------------

The net book value of property securing various long-term debt instruments was
$51,105 at December 31, 2006.

The Company's borrowings under short-term credit agreements consist of issuances
of commercial paper and borrowings under revolving credit agreements and bank
lines of credit.


                                       28
<PAGE>

The Company has an unsecured Credit Agreement with a group of banks at an
interest rate based on the London Interbank Offered Rate (LIBOR) that had
previously consisted of a $100,000, 364-day facility that was to have expired in
July 2006. Prior to expiration, the Company amended the Credit Agreement to
consist of a $150,000, 364-day facility that expires in July 2007. There were no
amounts outstanding under the Credit Agreement at December 31, 2006 and 2005.

At December 31, 2006, the Company had a $215,000 accounts receivable
securitization program that expires in October 2009 that had previously
consisted of a $200,000 accounts receivable securitization program that was due
to expire in October 2006. The securitization program provides for the sale of
certain of the Company's trade receivables on a revolving basis to Graybar
Commerce Corporation (GCC), a wholly-owned, bankruptcy-remote, special-purpose
subsidiary. GCC sells an undivided interest in the receivables to an unrelated
multi-seller commercial paper conduit. The Company accounts for the
securitization as an on-balance sheet financing arrangement because the Company
has maintained effective control of the trade receivables through a call option
that gives GCC the unilateral right to repurchase the undivided interests.
Accordingly, the trade receivables and related debt are included in the
accompanying consolidated balance sheets. GCC has granted a security interest in
its trade receivables to the commercial paper conduit. Borrowings outstanding
under the securitization program were $0 and $20,000 at December 31, 2006 and
2005, respectively.

As discussed further in Note 7, effective January 1, 2005, the Company adopted
the provisions of FIN 46 resulting in the recording of variable lease
arrangements totaling $56,720 as long-term debt at December 31, 2006.

Borrowings under short-term credit agreements varied from a minimum of $13,667
and $25,983 to a maximum of $140,924 and $205,804 in 2006 and 2005,
respectively. The average daily amount of borrowings outstanding under
short-term credit agreements during 2006 and 2005 amounted to approximately
$82,000 and $135,000 at weighted average interest rates of 5.31% and 3.51%,
respectively. The weighted average interest rate for amounts outstanding at
December 31, 2006 was 6.00%.

The Company had unused lines of credit of $377,076 as of December 31, 2006.
Certain committed lines of credit have annual fees of up to 50 basis points of
the committed lines of credit.

The Credit Agreement, accounts receivable securitization program, and certain
other note agreements have various covenants that limit the Company's ability to
make investments, pay dividends, incur debt, dispose of property, and issue
equity securities. The Company is also required to maintain certain financial
ratios as defined in the agreements. The Company was in compliance with all
covenants as of December 31, 2006 and 2005, respectively.

The carrying amount of the Company's outstanding long-term, fixed-rate debt
exceeds its fair value by $2,735 at December 31, 2006. The fair value of the
Company's variable-rate long- and short-term debt approximates its carrying
value at December 31, 2006.

5/PENSION AND OTHER POSTRETIREMENT BENEFITS

The Company has a noncontributory defined benefit pension plan covering
substantially all full-time employees. The plan provides retirement benefits
based on an employee's final average earnings and years of service. Employees
become 100% vested after five years of service regardless of age. The Company's
funding policy is to contribute the net periodic pension cost accrued each year,
provided that the contribution will not be less than the ERISA minimum or
greater than the maximum tax-deductible amount. The assets of the defined
benefit pension plan are invested primarily in equity and fixed income
securities, money market funds, and other investments.

The investment objective of the Company's defined benefit pension plan is to
ensure that there are sufficient assets to fund regular pension benefits payable
to employees over the long-term life of the plan. The Company's pension plan
seeks to earn the highest possible long-term, total rate of return on assets
consistent with prudent standards for preservation of capital, tolerance of
investment risk and maintenance of liquidity.


                                       29
<PAGE>

Asset allocation information for pension plan assets at December 31, 2006 and
2005 is as follows:

<TABLE>
<CAPTION>
                                                     2006         2005          Target
                                                    ACTUAL       Actual       Allocation
                                                  ALLOCATION    Allocation       Range
                                                  ----------    ----------       -----
<S>                                                  <C>           <C>           <C>
      Equity securities-U.S.                          25%           38%          15-50%
      Equity securities-International                 24            17           10-30%
      Fixed income investments-U.S.                   31            34           10-50%
      Fixed income investments-International           5            --            0-15%
      Other                                           15            11            0-25%
                                                     ---           ---
                                                     100%          100%
                                                     ===           ===
</TABLE>

The Company and its subsidiaries provide certain health care and life insurance
benefits for retired employees through the Retiree Welfare Plan (the Plan).
Substantially all of the Company's employees may become eligible to participate
in the Plan if they reach normal retirement age while working for the Company.
Benefits are provided through insurance coverage with premiums based on the
benefits paid during the year. The Company funds the Plan on a pay-as-you-go
basis, and accordingly, the Plan has no assets at December 31, 2006 or 2005.

The following table sets forth information regarding the Company's pension and
other postretirement benefits as of December 31, 2006 and 2005 using a December
31 measurement date:

<TABLE>
<CAPTION>
                                                                           POSTRETIREMENT
                                              PENSION BENEFITS                BENEFITS
                                          -----------------------     -----------------------
                                               2006          2005          2006          2005
                                          -----------------------     -----------------------
<S>                                       <C>           <C>           <C>           <C>
      Accumulated benefit obligation      $ 236,496     $ 225,291     $  91,061     $ 100,524
                                          ---------     ---------     ---------     ---------
      Projected benefit obligation          295,580       288,331            --            --
      Fair value of plan assets             193,047       165,210            --            --
                                          ---------     ---------     ---------     ---------
      Funded status                       $(102,533)    $(123,121)    $ (91,061)    $(100,524)
                                          ---------     ---------     ---------     ---------
</TABLE>

Amounts recognized in the consolidated balance sheet for the years ended
December 31 consist of the following:

<TABLE>
<CAPTION>
                                                                           POSTRETIREMENT
                                              PENSION BENEFITS                BENEFITS
                                          -----------------------     -----------------------
                                               2006          2005          2006          2005
                                          -----------------------     -----------------------
<S>                                       <C>           <C>           <C>           <C>
      Accrued benefit cost                $ (43,449)    $ (60,081)    $ (74,447)    $ (77,524)
      Intangible asset                        8,669         9,829            --            --
      Accumulated other comprehensive
         loss                                31,722        45,919            --            --
                                          ---------     ---------     ---------     ---------
      Net amount recognized               $  (3,058)    $  (4,333)    $ (74,447)    $ (77,524)
                                          ---------     ---------     ---------     ---------
</TABLE>

Weighted average assumptions for the years ended December 31 are:

<TABLE>
<CAPTION>
                                                                           POSTRETIREMENT
                                              PENSION BENEFITS                BENEFITS
                                          -----------------------     -----------------------
                                               2006          2005          2006          2005
                                          -----------------------     -----------------------
<S>                                            <C>           <C>         <C>           <C>
      Discount rate                            5.75%         5.50%         5.75%         5.50%
      Expected return on plan assets           8.00%         8.25%           --            --
      Rate of compensation increase            4.00%         4.00%           --            --
      Health care cost trend on covered
         charges                                 --            --        10%/5%        11%/5%
</TABLE>

The expected return on plan assets assumption for the defined benefit pension
plan is a long-term assumption and was determined after evaluating input from
the plan's actuary and pension fund investment advisor, and also considering
actual plan experience and historical and anticipated rates of return on the
various classes of assets in which the plan invests. The Company anticipates
that its investment managers will continue to generate long-term returns
consistent with its assumed rate, despite temporary downturns in market
performance.


                                       30
<PAGE>

The following presents information regarding the plans for the years ended
December 31:

<TABLE>
<CAPTION>
                                                                           POSTRETIREMENT
                                              PENSION BENEFITS                BENEFITS
                                          -----------------------     -----------------------
                                               2006          2005          2006          2005
                                          -----------------------     -----------------------
<S>                                       <C>           <C>           <C>           <C>
      Employer contributions              $  30,882     $  30,000     $  12,194     $  10,553
      Participant contributions                  --            --         1,095           977
      Benefits paid                       $ (22,604)    $ (26,017)    $ (13,289)    $ (11,530)
</TABLE>

The Company expects to make contributions totaling $40,000 to its defined
benefit pension plan during 2007.

Estimated future defined benefit pension plan benefit payments are as follows:

                 2007                  $  24,000
                 2008                     25,000
                 2009                     26,000
                 2010                     28,000
                 2011                     30,000
                 2012-2016             $ 188,000

The net periodic cost recognized for the defined benefit pension plan was
$31,939, $24,266, and $35,610 for each of the three years ended December 31,
2006, 2005, and 2004, respectively. Included in the Company's 2004 pension
expense was approximately $15,100 due to the settlement of a portion of its
defined benefit plan obligations as a result of increased election of lump sum
payouts by retirees under the standard terms of the plan.

The net periodic cost recognized for the postretirement benefit plan was $7,317,
$10,606, and $11,594 for each of the three years ended December 31, 2006, 2005,
and 2004, respectively.

For measurement of the net periodic postretirement benefit obligation, a 10.00%
annual rate of increase in per capita cost of covered health care benefits was
assumed for 2006. The rate was assumed to decrease 1.00% per year to 5.00% at
January 1, 2012 and to remain at that level thereafter.

The Company also provides a defined contribution profit sharing and savings plan
covering substantially all of its full-time employees. Annual contributions by
the Company to the plan are at the discretion of management and are generally
determined based on the profitability of the Company. Employees may also
contribute to the plan subject to limitations imposed by federal tax law and
ERISA.

6/NET INCOME PER SHARE OF COMMON STOCK

The computation of net income per share of common stock is based on the weighted
average number of common shares outstanding during each year, adjusted in all
periods presented for the declaration of a 10% stock dividend in 2006 and a 5%
stock dividend in 2005. The average numbers of shares used in computing net
income per share of common stock as of December 31, 2006 were 6,441,869,
6,399,308, and 6,593,858 in 2006, 2005, and 2004, respectively.

7/COMMITMENTS AND CONTINGENCIES

The Company has two lease arrangements with an independent lessor which provide
$58,777 of financing for eight of the Company's distribution facilities as of
December 31, 2006. Each of the agreements carries a five-year term. The Company
has the option, with the consent of the lessor's lenders, to renew the leases
for an additional five-year term or to purchase the property for a price
including the outstanding lease balance. If the Company elects not to renew the
lease or purchase the property, or such lenders refuse to consent to a renewal,
the Company may elect to remarket the property and arrange for its sale to a
third party.

The financing structures used in these two lease arrangements qualify as silos
of a variable interest entity under FIN 46. On January 1, 2005, the Company
adopted the provisions of FIN 46, which was subsequently amended by FIN 46R, and
in accordance therewith, as the primary beneficiary, consolidated these silos in
its financial statements as if the interpretations of FIN 46 had been in place
from the inception of these leases. The impact of consolidation increased the
Company's property by $64,257, the net book value of the nine distribution
facilities then financed under the two leases. Additionally, the Company
increased long-term debt by $70,906, and recorded a minority interest in the
silos of $2,572 at the date of adoption. The Company recorded a cumulative
effect of change in accounting principle of $(5,634), net of income tax effect
of $3,587, during the first quarter of 2005 to affect the consolidation. The
Company


                                       31
<PAGE>

has treated the adoption of FIN 46 as a non-cash item in its consolidated
statements of cash flows.

Three of the nine distribution facilities financed by the two lease arrangements
were sold during 2005. In accordance with the terms of the lease financing
agreements, the Company substituted two properties under one of the leases and
also granted mortgages on two other properties in a replacement transaction. As
of December 31, 2006, the consolidated silos included in the Company's financial
statements have a net property balance of $42,536, long-term debt of $56,720 and
a minority interest of $2,057.

Under the terms of the lease arrangements, the Company's maximum exposure to
loss at December 31, 2006, in respect of the properties subject to the two lease
arrangements, is $49,961, the amount guaranteed by the Company as the residual
fair value of the property.

Had the provisions of FIN 46 been applied retrospectively, rather than as the
cumulative effect of a change in accounting principle, net income and net income
per share on a pro forma basis, adjusted for the 10% stock dividend declared in
2006 and the 5% stock dividend declared in 2005, would be as follows:

      Actual                                      2006         2005         2004
      ------                                      ----         ----         ----
      Net income                              $ 57,388     $ 16,764     $ 14,018
      Net income per share of common stock    $   8.91     $   2.62     $   2.13

      Pro Forma                                   2006         2005         2004
      ---------                                   ----         ----         ----
      Net income                              $     --     $ 22,398     $ 12,746
      Net income per share of common stock    $     --     $   3.50     $   1.94

Rental expense was $27,730, $31,404, and $40,916 in 2006, 2005, and 2004,
respectively.

Future minimum rental payments required under operating leases that have either
initial or remaining noncancellable lease terms in excess of one year as of
December 31, 2006 are as follows:

      FOR THE YEARS ENDING DECEMBER 31,
      -----------------------------------------------------
      2007                                         $ 24,821
      2008                                           21,204
      2009                                           14,936
      2010                                            9,075
      2011                                            6,280
      Subsequent to 2011                             23,600
      -----------------------------------------------------

In September 2000, the Company entered into a swap agreement to manage interest
rates on amounts due under one of the lease arrangements discussed above. The
agreement, which expires in July 2013, is based on a notional amount of $28,720.
The agreement calls for an exchange of interest payments with the Company
receiving payments based on the LIBOR floating rate and making payments based on
a fixed rate of 6.92%. There is no exchange of the notional amount upon which
the payments are based. As discussed in Note 1, the swap is designated as a
completely effective cash flow hedge of the variable interest payments due under
the lease. The fair value of the swap was $(3,160) at December 31, 2006 and is
recorded in other current liabilities in the consolidated balance sheet.

The Company and its subsidiaries are subject to various claims, disputes,
administrative, legal and tax matters incidental to the Company's past and
current business activities. As a result, contingencies arise resulting from an
existing condition, situation, or set of circumstances involving an uncertainty
as to the realization of a possible loss.

The Company accounts for loss contingencies in accordance with the provisions
of SFAS No. 5, "Accounting for Contingencies". 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 the Company deems some amount within the range to be a better estimate than
any other amount within the range, that amount shall be accrued. However, if no
amount within the range is a better estimate than any other amount, the minimum
amount in the range is accrued. While the Company believes that none of these
claims, disputes, administrative, legal and tax matters will have a material
adverse effect on its financial position, these matters are uncertain and the
Company cannot at this time determine whether the financial impact, if any, of
these matters will be material to its results of operations in the period in
which such matters are resolved or a better estimate becomes available.


                                       32
<PAGE>

8/ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The components of accumulated other comprehensive loss as of December 31, 2006
and 2005 are as follows:

                                                      2006          2005
      ------------------------------------------------------------------
      Currency translation adjustments            $  4,719      $  5,036
      Unrealized loss from interest rate swap       (1,932)       (2,465)
      Minimum pension liability                    (31,722)      (45,919)
      ------------------------------------------------------------------
                                                  $(28,935)     $(43,348)
      ------------------------------------------------------------------

9/QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

Quarterly financial data for 2006 and 2005, adjusted for the declaration of
stock dividends of 10% and 5% in 2006 and 2005, respectively, is as follows:

<TABLE>
<CAPTION>
                                                                                  FOR THE QUARTERS ENDED,
2006                                                                  3/31            6/30           9/30          12/31
------------------------------------------------------------------------------------------------------------------------
<S>                                                            <C>             <C>            <C>            <C>
Net sales                                                      $ 1,121,211     $ 1,316,475    $ 1,328,461    $ 1,242,996
Gross margin                                                       222,764         242,527        245,738        250,422
Net income                                                          10,388          18,481         17,879         10,640
Net income per share of common stock (A)                       $      1.61     $      2.86    $      2.77    $      1.67
------------------------------------------------------------------------------------------------------------------------
</TABLE>

(A)   All periods adjusted for a 10% stock dividend declared in December 2006.
      Prior to these adjustments, the average common shares outstanding for the
      first, second and third quarters of 2006 were 5,866,130, 5,871,458 and
      5,860,601, respectively.

<TABLE>
<CAPTION>
                                                                                  FOR THE QUARTERS ENDED,
2005                                                                  3/31            6/30           9/30          12/31
------------------------------------------------------------------------------------------------------------------------
<S>                                                            <C>             <C>            <C>            <C>
Net sales                                                      $   963,939     $ 1,073,474    $ 1,130,351    $ 1,120,279
Gross margin                                                       190,989         206,838        215,537        197,670
Income before cumulative effect of change in accounting
    principle                                                        3,661           7,962          8,835          1,940
Cumulative effect of change in accounting principle, net of
    $3,587 tax effect                                               (5,634)             --             --             --
Net income (loss)                                                   (1,973)          7,962          8,835          1,940
Income per share of common stock before cumulative effect
    of change in accounting principle (B)                      $      0.57     $      1.24    $      1.38    $      0.31
Cumulative effect of change in accounting principle per
    share (B)                                                        (0.88)             --             --             --
Net income (loss) per share of common stock (B)                $     (0.31)    $      1.24    $      1.38    $      0.31
------------------------------------------------------------------------------------------------------------------------
</TABLE>

(B)   All periods adjusted for a 10% stock dividend declared in December 2006
      and a 5% stock dividend declared in December 2005. Prior to these
      adjustments, the average common shares outstanding for the first, second,
      third and fourth quarters of 2005 were 5,579,321, 5,550,797, 5,520,622 and
      5,518,791, respectively.

ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

ITEM 9A: CONTROLS AND PROCEDURES

An evaluation was performed under the supervision and with the participation of
the Company's management of the effectiveness of the design and operation of the
Company's disclosure controls and procedures as of December 31, 2006. Based on
that evaluation, the Company's management, including the Chief Executive Officer
and Chief Financial Officer, concluded that the Company's disclosure controls
and procedures were effective to ensure that information required to be
disclosed in the reports filed or submitted by the Company 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.

ITEM 9B: OTHER INFORMATION

Not applicable.


                                       33
<PAGE>

                                    PART III

ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information with respect to the directors of the Company required to be
included pursuant to this Item 10 will be included under the caption "Directors
-- Nominees for Election as Directors" and "Directors -- Committees" in the
Company's Information Statement relating to the 2007 Annual Meeting (the
"Information Statement"), to be filed with the SEC pursuant to Rule 14c-5 under
the Exchange Act, and is incorporated herein by reference.

The following directors are also executive officers of the Company: D. B.
D'Alessandro, D. E. DeSousa, T. F. Dowd, L. R. Giglio, K. M. Mazzarella, R. D.
Offenbacher and R. A. Reynolds, Jr. Information regarding the other executive
officers appears below.

Name             Age    Business experience last five years
----             ---    -----------------------------------
M. J. Beagen     50     Employed by Company in 1980; Assistant Treasurer 2000 to
                        2005; Vice President and Controller 2005 to present.

J. N. Reed       50     Employed by Company in 1980, Vice President and
                        Treasurer 2000 to present.

The information with respect to audit committee financial experts required to be
included pursuant to this Item 10 will be included under the caption "Directors
-- Committees" in the Company's Information Statement and is incorporated herein
by reference.

The Company has adopted a code of ethics that applies specifically to the
principal executive officer, principal financial officer and principal
accounting officer ("Covered Officers"). This code of ethics is appended to the
Company's business conduct guidelines for all employees. The business conduct
guidelines and specific code for Covered Officers may be accessed at the "About
Us" page under "Code of Ethics" at the Company's website at www.graybar.com and
is also available in print without charge upon written request addressed to the
Secretary of the Company at its principal executive offices.

ITEM 11: EXECUTIVE COMPENSATION

The information with respect to executive compensation required to be included
pursuant to this Item 11 will be included under the caption "Executive
Compensation Discussion and Analysis" in the Information Statement and is
incorporated herein by reference.

ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

The information with respect to the security ownership of beneficial owners of
more than 5% of the Common Stock and of directors and executive officers of the
Company required to be included pursuant to this Item 12, will be included under
the captions "Beneficial Ownership of More Than 5% of the Outstanding Common
Stock" and "Beneficial Ownership of Management" in the Information Statement and
is incorporated herein by reference.

ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

At the date of this report, other than as described under the caption "Directors
- Certain Transactions" in the Information Statement, there are no reportable
transactions, business relationships or indebtedness of the type required to be
included pursuant to this Item 13 between the Company and the beneficial owners
of more than 5% of the Common Stock, the directors or nominees for director of
the Company, the executive officers of the Company or the members of the
immediate families of such individuals. If there is any change in that regard
prior to the filing of the Information Statement, such information will be
included under such caption in the Information Statement and shall be
incorporated herein by reference.

ITEM 14: PRINCIPAL ACCOUNTING FEES AND SERVICES

The information with respect to principal accounting fees and services required
to be included pursuant to this Item 14 will be included under the caption
"Relationship with Independent Registered Public Accounting Firm" in the
Company's Information Statement and is incorporated herein by reference.


                                       34
<PAGE>

                                     PART IV

ITEM 15: EXHIBITS, FINANCIAL STATEMENT SCHEDULES

      (a)   DOCUMENTS FILED AS PART OF THIS REPORT:

            The following financial statements and Report of Independent
      Registered Public Accounting Firm are included on the indicated pages in
      this 2006 Annual Report on Form 10-K.

            1.    INDEX TO FINANCIAL STATEMENTS

                  (i)   Consolidated Statements of Income for each of the three
                        years ended December 31, 2006 (page 19).

                  (ii)  Consolidated Balance Sheets, as of December 31, 2006 and
                        2005 (page 20).

                  (iii) Consolidated Statements of Cash Flows for each of the
                        three years ended December 31, 2006 (page 21).

                  (iv)  Consolidated Statements of Changes in Shareholders'
                        Equity for each of the three years ended December 31,
                        2006 (page 22).

                  (v)   Notes to Consolidated Financial Statements (pages 23 to
                        33).

                  (vi)  Report of Independent Registered Public Accounting Firm
                        (page 18).

            2.    INDEX TO FINANCIAL SCHEDULE

                  All schedules are omitted because of the absence of the
                  conditions under which they are required or because the
                  required information is set forth in the financial statements
                  and the accompanying notes thereto.

            3.    EXHIBITS

            The following exhibits required to be filed as part of this Annual
      Report on Form 10-K have been included:

            (3)   Articles of incorporation and by-laws

                  (i)   Restated Certificate of Incorporation, as amended, filed
                        as Exhibit 4(i) to the Company's Registration Statement
                        on Form S-1 (Registration No. 333-15761) and
                        incorporated herein by reference.

                  (ii)  By-laws as amended through July 25, 2000 filed as
                        Exhibit 3(ii) to the Company's Quarterly Report on Form
                        10-Q for the period ended September 30, 2000 (Commission
                        File No. 0-255) and incorporated herein by reference.

                  (iii) Certificate of Amendment of Certificate of
                        Incorporation, filed as Exhibit 4(ii) of the Company's
                        Registration Statement on Form S-2 (Registration No.
                        333-118575) and incorporated herein by reference.

      (4) and (9)       Voting Trust Agreements

                              Voting Trust Agreement dated as of April 1, 1997,
                        attached as Annex A to the Prospectus, dated January 21,
                        1997, constituting a part of the Company's Registration
                        Statement on Form S-1 (Registration No. 333-15761) and
                        incorporated herein by reference.

                              Voting Trust Agreement dated as of March 16, 2007,
                        attached as Annex A to the Prospectus, effective January
                        18, 2007, constituting a part of the Company's
                        Registration Statement on Form S-1 (Registration No.
                        333-139992) and incorporated herein by reference.


                                       35
<PAGE>

                              The Company hereby agrees to furnish to the
                        Commission upon request a copy of each instrument
                        omitted pursuant to Item 601(b)(4)(iii)(A) of Regulation
                        S-K.

            (10)  Material contracts.

                  (i)   Management Incentive Plan, filed as Exhibit 4(a)(1) to
                        the Annual Report on Form 10-K for the year ended
                        December 31, 1972 (Commission File No. 0-255), as
                        amended by the Amendment effective January 1, 1974,
                        filed as Exhibit 13-c to the Registration Statement on
                        Form S-1 (Registration No. 2-51832), the Amendment
                        effective January 1, 1977, filed as Exhibit 13(d) to the
                        Registration Statement on Form S-1 (Registration No.
                        2-59744), and the Amendment effective January 1, 1980,
                        filed as Exhibit 5(f) to the Registration Statement on
                        Form S-7 (Registration No. 2-68938) and incorporated
                        herein by reference.*

                  (ii)  Form of Deferral Agreement entered into between the
                        Company and certain employees, filed as Exhibit 10(ii)
                        to the Company's Annual Report on Form 10-K for the year
                        ended December 31, 2002 and incorporated herein by
                        reference.*

                  (iii) Form of Supplemental Benefit Plan covering certain
                        employees, filed as Exhibit 10(iii) to the Company's
                        Annual Report on Form 10-K for the year ended December
                        31, 2002 and incorporated herein by reference.*

                  (iv)  Receivables Sale Agreement, dated June 30, 2000, between
                        Graybar Electric Company, Inc. and Graybar Commerce
                        Corporation filed as Exhibit 10.1 to the Company's
                        Quarterly Report on Form 10-Q for the period ended June
                        30, 2003 (Commission File No. 0-255) and incorporated
                        herein by reference; Amendment to Receivables Sale
                        Agreement, dated August 15, 2006, filed as Exhibit 10(x)
                        to the Company's Registration Statement on Form S-1
                        (Registration No. 333-137249) and incorporated herein by
                        reference.

                  (v)   Receivables Purchase Agreement, dated June 30, 2000,
                        among Graybar Commerce Corporation, as Seller, Graybar
                        Electric Company, Inc., as Servicer, Falcon Asset
                        Securitization Corporation and Bank One, NA, as Agent,
                        and other financial institutions named therein;
                        Amendments to Receivables Purchase Agreement dated
                        January 1, 2001, June 22, 2001, August 29, 2001, October
                        26, 2001, December 31, 2001, October 23, 2002, and
                        December 23, 2002, filed as Exhibit 10.2 to the
                        Company's Quarterly Report on Form 10-Q for the period
                        ended June 30, 2003 (Commission File No. 0-255) and
                        incorporated herein by reference; Amendment to
                        Receivables Purchase Agreement dated October 22, 2003,
                        filed as Exhibit 10(v) of the Company's Registration
                        Statement on Form S-2 (Registration No. 333-118575) and
                        incorporated herein by reference; Amendment to
                        Receivables Purchase Agreement, dated September 26,
                        2005, filed as Exhibit 10(v) to the Company's Annual
                        Report on Form 10-K for the year ended December 31,
                        2005; Amendment to Receivables Purchase Agreement dated
                        August 15, 2006, filed as Exhibit 10(ix) to the
                        Company's Registration Statement on Form S-1
                        (Registration No. 333-137249) and incorporated herein by
                        reference.

                  (vi)  364-Day Credit Agreement, dated July 22, 2004, among
                        Graybar Electric Company, Inc., Wachovia Bank, National
                        Association, as Agent, and other banks named therein;
                        filed as Exhibit 10(vi) of the Company's Registration
                        Statement on Form S-2 (Registration No. 333-118575) and
                        incorporated herein by reference; First Amendment, dated
                        July 21, 2005, to Credit Agreement, dated July 22, 2004,
                        filed as Exhibit 10(vii) of the Company's Registration
                        Statement on Form S-2 (Registration No. 333-127929) and
                        incorporated herein by reference; Second Amendment,
                        dated July 20, 2006, to Credit Agreement, dated July 22,
                        2004, filed as Exhibit 10.1 to the Company's Quarterly
                        Report on Form 10-Q for the period ended June 30, 2006
                        (Commission File No. 0-255) and incorporated herein by
                        reference.

*     Compensation arrangement


                                       36
<PAGE>

            (21)        List of subsidiaries of the Company.

            (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.


                                       37
<PAGE>

SIGNATURES

      Pursuant to the requirements of Section 13 of the Securities Exchange Act
of 1934, the Company has duly caused this Annual Report on Form 10-K to be
signed on its behalf by the undersigned, thereunto duly authorized, as of the
14th day of March, 2007.

                                  GRAYBAR ELECTRIC COMPANY, INC.


                                  By          /S/ R. A. REYNOLDS, JR.
                                    -------------------------------------------
                                    (R. A. Reynolds, Jr., Chairman of the Board
                                                  and President)

      Pursuant to the requirements of the Securities Exchange Act of 1934, this
Annual Report on Form 10-K has been signed below by the following persons on
behalf of the Company, in the capacities indicated, on March 14, 2007.


/S/ R. A. REYNOLDS, JR.                         Director, Chairman of
--------------------------------                the Board and President
(R. A. Reynolds, Jr.)                           (Principal Executive Officer)



/S/ D. B. D'ALESSANDRO                          Director
--------------------------------                (Principal Financial Officer)
(D. B. D'Alessandro)


/S/ R. A. COLE                                  Director
--------------------------------
(R. A. Cole)


/S/ D. E, DeSOUSA                               Director
--------------------------------
(D. E. DeSousa)


/S/ T. F. DOWD                                  Director
--------------------------------
(T. F. Dowd)


/S/ L. R. GIGLIO                                Director
--------------------------------
(L. R. Giglio)


/S/ T. S. GURGANOUS                             Director
--------------------------------
(T. S. Gurganous)


/S/ F. H. HUGHES                                Director
--------------------------------
(F. H. Hughes)


/S/ R. C. LYONS                                 Director
--------------------------------
(R. C. Lyons)


/S/ R. L. NOWAK                                 Director
--------------------------------
(R. L. Nowak)


                                       38
<PAGE>


/S/ K. M. MAZZARELLA                            Director
--------------------------------
(K. M. Mazzarella)


/S/ R. D. OFFENBACHER                           Director
--------------------------------
(R. D. Offenbacher)


/S/ K. B. SPARKS                                Director
--------------------------------
(K. B. Sparks)


/S/ M. J. BEAGEN                                Vice President and Controller
--------------------------------                (Principal Accounting Officer)
(M. J. Beagen)


                                       39
<PAGE>

INDEX TO EXHIBITS

EXHIBITS

(3)   Articles of incorporation and by-laws.

      (i) Restated Certificate of Incorporation, as amended, filed as Exhibit
      4(i) to the Company's Registration Statement on Form S-1 (Registration No.
      333-15761) and incorporated herein by reference.

      (ii) By-laws as amended through July 25, 2000 filed as Exhibit 3(ii) to
      the Company's Quarterly Report on Form 10-Q for the period ended September
      30, 2000 (Commission File No. 0-255) and incorporated herein by reference.

      (iii) Certificate of Amendment of Certificate of Incorporation, filed as
      Exhibit 4(ii) to the Company's Registration Statement on Form S-2
      (Registration No. 333-118575) and incorporated herein by reference.

(4) and (9) Voting Trust Agreements

                  Voting Trust Agreement dated as of April 1, 1997, attached as
            Annex A to the Prospectus, dated January 21, 1997, constituting a
            part of the Company's Registration Statement on Form S-1
            (Registration No. 333-15761) and incorporated herein by reference.

                  Voting Trust Agreement dated as of March 16, 2007, attached as
            Annex A to the Prospectus, effective January 18, 2007, constituting
            a part of the Company's Registration Statement on Form S-1
            (Registration No. 333-139992) and incorporated herein by reference.

(10)  Material contracts.

            (i) Management Incentive Plan, filed as Exhibit 4(a)(1) to the
            Annual Report on Form 10-K for the year ended December 31, 1972
            (Commission File No. 0-255), as amended by the Amendment effective
            January 1, 1974, filed as Exhibit 13-c to the Registration Statement
            on Form S-1 (Registration No. 2-51832), the Amendment effective
            January 1, 1977, filed as Exhibit 13(d) to the Registration
            Statement on Form S-1 (Registration No. 2-59744), and the Amendment
            effective January 1, 1980, filed as Exhibit 5(f) to the Registration
            Statement on Form S-7 (Registration No. 2-68938) and incorporated
            herein by reference.*

            (ii) Form of Deferral Agreement entered into between the Company and
            certain employees, filed as Exhibit 10(ii) to the Company's Annual
            Report on Form 10-K for the year ended December 31, 2002 and
            incorporated herein by reference.*

            (iii) Form of Supplemental Benefit Plan covering certain employees,
            filed as Exhibit 10(iii) to the Company's Annual Report on Form 10-K
            for the year ended December 31, 2002 and incorporated herein by
            reference.*

            (iv) Receivables Sale Agreement, dated June 30, 2000, between
            Graybar Electric Company, Inc. and Graybar Commerce Corporation
            filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q
            for the period ended June 30, 2003 (Commission File No. 0-255) and
            incorporated herein by reference; Amendment to Receivables Sale
            Agreement, dated August 15, 2006, filed as Exhibit 10(x) to the
            Company's Registration Statement on Form S-1 (Registration No.
            333-137249) and incorporated herein by reference.

            (v) Receivables Purchase Agreement, dated June 30, 2000, among
            Graybar Commerce Corporation, as Seller, Graybar Electric Company,
            Inc., as Servicer, Falcon Asset Securitization Corporation and Bank
            One, NA, as Agent, and other financial institutions named therein;
            Amendments to Receivables Purchase Agreement dated January 1, 2001,
            June 22, 2001, August 29, 2001, October 26, 2001, December 31, 2001,
            October 23, 2002, and December 23, 2002, filed as Exhibit 10.2 to
            the Company's Quarterly Report on Form 10-Q for the period ended
            June 30, 2003 (Commission File No. 0-255) and incorporated herein by
            reference; Amendment to Receivables Purchase Agreement dated October
            22, 2003, filed as Exhibit 10(v) to the Company's Registration
            Statement on Form S-2 (Registration No. 333-118575) and incorporated
            herein by reference; Amendment to Receivables Purchase Agreement,
            dated September 26, 2005, filed as Exhibit 10(v) to the Company's
            Annual Report on Form 10-K for the year ended December 31, 2005 and
            incorporated herein by reference; Amendment to Receivables Purchase
            Agreement dated August 15, 2006, filed as Exhibit


                                       40
<PAGE>

            10(ix) to the Company's Registration Statement on Form S-1
            (Registration No. 333-137249) and incorporated herein by reference.

            (vi) 364-Day, Credit Agreement, dated July 22, 2004, among Graybar
            Electric Company, Inc., Wachovia Bank, National Association, as
            Agent, and other banks named therein; filed as Exhibit 10(vi) to the
            Company's Registration Statement on Form S-2 (Registration No.
            333-118575) and incorporated herein by reference; First Amendment,
            dated July 21, 2005, to Credit Agreement, dated July 22, 2004, filed
            as Exhibit 10(vii) of the Company's Registration Statement on Form
            S-2 (Registration No. 333-127929) and incorporated herein by
            reference; Second Amendment, dated July 20, 2006, to Credit
            Agreement, dated July 22, 2004, filed as Exhibit 10.1 to the
            Company's Quarterly Report on Form 10-Q for the period ended June
            30, 2006 (Commission File No. 0-255) and incorporated herein by
            reference.

*     Compensation arrangement

(21)        List of subsidiaries of the Company.

(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.


                                       41