EXHIBIT 99.1
News Release
For Immediate Release | For Further Information Contact: | |||
August 26, 2003 | Arleen Llerandi | |||
Director, Investor Relations | ||||
(407) 254-2989 |
HUGHES SUPPLY, INC.
REPORTS SECOND QUARTER EARNINGS
OF $0.80 PER DILUTED SHARE
Hughes Supply, Inc. (NYSE:HUG) Orlando, Florida
Hughes Supply, Inc., a leading distributor of construction and industrial materials, equipment and supplies, today announced results for its fiscal second quarter 2004 ended August 1, 2003. Net sales for the quarter were $815.1 million, an increase of 5%, compared to $774.7 million in last year’s second quarter. Sales for the 2004 fiscal second quarter, as summarized below, included $55.1 million in revenues from the Utiliserve acquisition which was completed in the fiscal third quarter of 2003.
Second Quarter | First Half | |||||||||||||||
FY 2004 | FY 2003 | FY 2004 | FY 2003 | |||||||||||||
Comparable Branch Sales | $ | 753.2 | $ | 766.6 | $ | 1,478.1 | $ | 1,493.9 | ||||||||
Acquisitions and Newly-Opened Branches | 58.6 | 2.3 | 112.5 | 2.3 | ||||||||||||
Extra Week in First Quarter FY 2003 | — | — | — | 55.1 | ||||||||||||
Closed/Combined Branches | 3.3 | 5.8 | 7.3 | 13.4 | ||||||||||||
Total | $ | 815.1 | $ | 774.7 | $ | 1,597.9 | $ | 1,564.7 | ||||||||
Memo: Comparable Branch “Same-Store” Sales Change | (1.8 | )% | (2.6 | )% | (1.1 | )% | (3.9 | )% |
Net income totaled $18.7 million compared to $18.5 million in the prior year’s second quarter. Earnings per diluted share were $0.80 on approximately 23.3 million shares outstanding, compared to $0.78 per diluted share in the prior year quarter.
Net sales for the six months ended August 1, 2003 were $1.6 billion compared to $1.56 billion last year. For the first six months, net income was $30.5 million versus $30.9 million last year, and earnings per diluted share were $1.31 this year, compared to $1.30 last year.
Revenues
“To deliver higher earnings we had to overcome several revenue challenges this quarter”, said Tom Morgan, President and Chief Executive Officer. “The Industrial PVF segment continues to operate in a very tough environment, important construction markets in Texas and Colorado remain soft, and a large customer was lost to a different alliance in our Electric Utilities business.
“Our Water and Sewer business had to overcome two major setbacks. We took a hit with the record wet weather, particularly in May and June, and could not recover completely, despite a strong July. In addition, PVC and Ductile Pipe pricing was down double digits and resulted in lower sales pricing passed through to customers. The combination of these two factors resulted in negative rather than positive comparable branch sales growth in the quarter.
“Not every quarter is going to be smooth and we must manage through these rough times. The most important issue is that we believe our strategy is right and will deliver future growth in sales, earnings and cash flow,” concluded Morgan.
Earnings and Cash Flow
In terms of earnings and cash flow, David Bearman, Chief Financial Officer commented, “Despite the revenue challenges this quarter, we improved our overall operating expense ratio
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and increased diluted earnings per share over last year’s quarter. I am particularly encouraged by the improvement we made in operating cash flow. Our focus on inventory management, along with other working capital improvements, resulted in $45.9 million of cash flow from operations in the second quarter.”
Segment Revenue
Electrical and Plumbing revenues for the second quarter were $409 million, an increase of $55 million, or 15% over last year’s second quarter. This increase includes $55 million in Utiliserve revenues. Comparable branch sales were flat compared to last year’s second quarter. Year-to-date revenues for the Electrical and Plumbing segment were $802 million, an increase of $73 million over last year, or 10%. Utiliserve contributed $107 million to this year’s sales, and last year’s Electrical and Plumbing sales included $27 million for the extra week in the fiscal first quarter.
Water and Sewer / Building Materials revenues for the second quarter were $339 million, a decrease of $5 million, or 1% compared to last year’s second quarter. Comparable branch sales were also down 1% compared to last year’s second quarter. Year-to-date revenues were $655 million, a decrease of $19 million, or 3% to last year. The extra week in the fiscal first quarter of last year added $21 million to Water and Sewer / Building Materials sales.
Industrial PVF revenues for the second quarter were $67 million, a decrease of $10 million, or 12% as compared to last year’s second quarter. Comparable branch sales were down 13% to last year’s second quarter. Year-to-date revenues were $140 million, a decrease of $21 million, or 13% compared to last year. The extra week in the fiscal first quarter of last year added $7 million to Industrial PVF sales.
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Third Quarter Outlook
Tom Morgan stated, “Despite the challenges presented by continued weakness in infrastructure and commercial construction, which is over half of our revenue base, and the Industrial PVF segment, we will again push to achieve positive revenue growth. For the first time in a long time, we are encouraged by what we’re seeing in the Electrical and Plumbing segment, although margins are being pressured.
“The recent Marden Susco acquisition in the Water and Sewer business will be accretive to earnings but probably not in the third quarter. The biggest short-term challenge we have is the sharp decline in the Industrial PVF segment where third quarter earnings are projected to be 50% below the year ago quarter, reducing our diluted earnings per share by $0.10.
“We also expect to record an accounting charge of approximately $0.05 per diluted share for exiting our former headquarters offices because we have been unable to sub-lease the space at this time in the currently weak Orlando commercial real estate market,” concluded Morgan.
Following are projected targeted ranges for the third quarter of fiscal 2004, compared to the year ago quarter:
• | Net Sales: $835 million—$845 million, an increase of 4% to 5% |
• | Net Income: $17 million—$19 million, a decrease of 4% to 14% |
• | Diluted Earnings per Share: $0.70—$0.78, a decrease of 7% to 17% |
Webcast
Hughes Supply will host a webcast conference call at 9 a.m. Eastern time on Wednesday, August 27, 2003 to discuss the Company’s second quarter performance and outlook. This conference call can be accessed athttp://www.hughessupply.com/ and click on the Investors tab, or you can dial 888-425-9158; passcode Hughes; leader Mr. David Bearman.
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A replay of the conference call will be available on the website until September 27, 2003, or you may dial 800-964-5760 and use the passcode Hughes.
About Hughes Supply, Inc.
Hughes Supply, Inc. (www.hughessupply.com) is a distributor of construction and industrial materials, equipment and supplies with over 450 locations in 34 states. Headquartered in Orlando, Florida, Hughes Supply employs approximately 7,200 associates and generates annual revenues of over $3.0 billion. Hughes Supply is a Fortune 500 company and was named by Fortune the #2 Most Admired Company in America in the Wholesalers: Diversified Industry segment.
Except for historical information, all other information discussed in this news release consists of forward-looking statements under the Private Securities Litigation Reform Act of 1995. When used in this report, the words “believe”, “anticipate”, “estimate”, “expect”, “may”, “will”, “should”, “plan”, “intend”, and similar expressions are intended to identify forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be different from any future results, performance, and achievements expressed or implied by these statements. These risks and uncertainties include, but are not limited to, the strength of the construction market, fluctuating commodity prices and unexpected product shortages, competition, Hughes Supply’s reliance on key personnel, general economic conditions, success in integrating acquired business units, Hughes Supply’s dependence on credit sales, and other factors set forth from time to time in filings with the Securities and Exchange Commission. The forward-looking statements included in this news release are made only as of the date of this news release and under section 27A of the Securities Act and section 21E of the Exchange Act. Hughes Supply does not have any obligation to publicly update any forward-looking statements to reflect subsequent events or circumstances.
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Hughes Supply, Inc.
Consolidated Statements of Income
(unaudited)
(in millions, except per share data)
Three Months Ended | ||||||||||||||
August 1, 2003 | Ratio to Sales | August 2, 2002 | Ratio to Sales | |||||||||||
Net Sales | $ | 815.1 | $ | 774.7 | ||||||||||
Cost of Sales | 630.6 | 594.1 | ||||||||||||
Gross Profit | 184.5 | 22.6 | % | 180.6 | 23.3 | % | ||||||||
Operating Expenses: | ||||||||||||||
Selling, general and administrative | 142.8 | 139.0 | ||||||||||||
Depreciation and amortization | 5.0 | 4.8 | ||||||||||||
Total operating expenses | 147.8 | 18.1 | % | 143.8 | 18.6 | % | ||||||||
Operating Income | 36.7 | 4.5 | % | 36.8 | 4.8 | % | ||||||||
Other Income (Expense): | ||||||||||||||
Interest and other income | 1.8 | 2.0 | ||||||||||||
Interest expense | (7.4 | ) | (7.4 | ) | ||||||||||
(5.6 | ) | (5.4 | ) | |||||||||||
Income Before Income Taxes | 31.1 | 31.4 | ||||||||||||
Income Taxes | 12.4 | 12.9 | ||||||||||||
Net Income | $ | 18.7 | 2.3 | % | 18.5 | 2.4 | % | |||||||
Earnings Per Share: | ||||||||||||||
Basic | $ | 0.82 | $ | 0.80 | ||||||||||
Diluted | $ | 0.80 | $ | 0.78 | ||||||||||
Weighted-Average Shares Outstanding: | ||||||||||||||
Basic | 22.8 | 23.3 | ||||||||||||
Diluted | 23.3 | 23.8 | ||||||||||||
Net Sales by Segment: | V | % | ||||||||||||
Electrical/Plumbing | $ | 409.0 | $ | 354.2 | 15.5 | % | ||||||||
Industrial PVF | 67.4 | 77.0 | (12.5 | %) | ||||||||||
Water & Sewer/Building Materials | 338.7 | 343.5 | (1.4 | %) | ||||||||||
$ | 815.1 | $ | 774.7 | 5.2 | % | |||||||||
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Hughes Supply, Inc.
Consolidated Statements of Income
(unaudited)
(in millions, except per share data)
Six Months Ended | ||||||||||||||
August 1, 2003 | Ratio to Sales | August 2, 2002 | Ratio to Sales | |||||||||||
Net Sales | $ | 1,597.9 | $ | 1,564.7 | ||||||||||
Cost of Sales | 1,238.0 | 1,203.0 | ||||||||||||
Gross Profit | 359.9 | 22.5 | % | 361.7 | 23.1 | % | ||||||||
Operating Expenses: | ||||||||||||||
Selling, general and administrative | 287.3 | 287.8 | ||||||||||||
Depreciation and amortization | 10.1 | 9.8 | ||||||||||||
Total operating expenses | 297.4 | 18.6 | % | 297.6 | 19.0 | % | ||||||||
Operating Income | 62.5 | 3.9 | % | 64.1 | 4.1 | % | ||||||||
Other Income (Expense): | ||||||||||||||
Interest and other income | 3.4 | 3.7 | ||||||||||||
Interest expense | (15.1 | ) | (15.4 | ) | ||||||||||
(11.7 | ) | (11.7 | ) | |||||||||||
Income Before Income Taxes | 50.8 | 52.4 | ||||||||||||
Income Taxes | 20.3 | 21.5 | ||||||||||||
Net Income | $ | 30.5 | 1.9 | % | $ | 30.9 | 2.0 | % | ||||||
Earnings Per Share: | ||||||||||||||
Basic | $ | 1.33 | $ | 1.33 | ||||||||||
Diluted | $ | 1.31 | $ | 1.30 | ||||||||||
Weighted-Average Shares Outstanding: | ||||||||||||||
Basic | 22.8 | 23.2 | ||||||||||||
Diluted | 23.2 | 23.7 | ||||||||||||
Net Sales by Segment: | V | % | ||||||||||||
Electrical/Plumbing | $ | 802.3 | $ | 729.6 | 10.0 | % | ||||||||
Industrial PVF | 140.5 | 161.3 | (12.9 | %) | ||||||||||
Water & Sewer/Building Materials | 655.1 | 673.8 | (2.8 | %) | ||||||||||
$ | 1,597.9 | $ | 1,564.7 | 2.1 | % | |||||||||
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Hughes Supply, Inc.
Consolidated Balance Sheets
(unaudited)
(in millions)
August 1, | January 31, | August 2, | ||||||||||
2003 | 2003 | 2002 | ||||||||||
Assets | ||||||||||||
Current Assets: | ||||||||||||
Cash and cash equivalents | $ | 3.8 | $ | 1.7 | $ | 3.3 | ||||||
Accounts receivable, net | 469.0 | 423.1 | 456.4 | |||||||||
Inventories | 436.9 | 438.5 | 417.7 | |||||||||
Deferred income taxes | 17.9 | 19.7 | 15.1 | |||||||||
Other current assets | 52.6 | 48.5 | 32.7 | |||||||||
Total current assets | 980.2 | 931.5 | 925.2 | |||||||||
Property and Equipment | 170.4 | 157.8 | 144.8 | |||||||||
Goodwill | 320.1 | 320.1 | 263.8 | |||||||||
Other Assets | 29.6 | 26.9 | 20.3 | |||||||||
$ | 1,500.3 | $ | 1,436.3 | $ | 1,354.1 | |||||||
Liabilities and Shareholders’ Equity | ||||||||||||
Current Liabilities: | ||||||||||||
Current portion of long-term debt | $ | 63.7 | $ | 63.8 | $ | 21.3 | ||||||
Accounts payable | 279.6 | 230.0 | 248.6 | |||||||||
Accrued compensation and benefits | 33.1 | 43.3 | 33.7 | |||||||||
Other current liabilities | 36.8 | 35.6 | 40.7 | |||||||||
Total current liabilities | 413.2 | 372.7 | 344.3 | |||||||||
Long-Term Debt | 366.4 | 378.1 | 356.6 | |||||||||
Deferred Income Taxes | 46.5 | 34.0 | 19.3 | |||||||||
Other Noncurrent Liabilities | 7.3 | 6.7 | 6.2 | |||||||||
Total liabilities | 833.4 | 791.5 | 726.4 | |||||||||
Shareholders’ Equity: | ||||||||||||
Common stock | 23.9 | 23.9 | 23.9 | |||||||||
Capital in excess of par value | 222.3 | 222.4 | 222.4 | |||||||||
Retained earnings | 442.4 | 416.7 | 394.0 | |||||||||
Treasury stock and other | (21.7 | ) | (18.2 | ) | (12.6 | ) | ||||||
Total shareholders’ equity | 666.9 | 644.8 | 627.7 | |||||||||
$ | 1,500.3 | $ | 1,436.3 | $ | 1,354.1 | |||||||
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Hughes Supply, Inc.
Consolidated Statements of Cash Flows
(unaudited)
(in millions)
Three Months Ended | Six Months Ended | |||||||||||||||
August 1, 2003 | August 2, 2002 | August 1, 2003 | August 2, 2002 | |||||||||||||
Cash Flows from Operating Activities: | ||||||||||||||||
Net income | $ | 18.7 | $ | 18.5 | $ | 30.5 | $ | 30.9 | ||||||||
Adjustments to reconcile net income to cash provided by operating activities: | ||||||||||||||||
Depreciation and amortization | 5.0 | 4.8 | 10.1 | 9.8 | ||||||||||||
Deferred income taxes | 6.9 | 4.8 | 14.3 | 5.7 | ||||||||||||
Other | 1.9 | 3.0 | 4.7 | 7.8 | ||||||||||||
Changes in assets and liabilities, net of businesses acquired: | ||||||||||||||||
Accounts receivable | (10.2 | ) | (26.3 | ) | (48.9 | ) | (74.2 | ) | ||||||||
Inventories | 29.6 | (14.4 | ) | 1.6 | (21.3 | ) | ||||||||||
Other current assets | (11.5 | ) | (4.8 | ) | (4.1 | ) | 23.9 | |||||||||
Other assets | (0.5 | ) | 0.3 | (1.7 | ) | 0.1 | ||||||||||
Accounts payable | (0.3 | ) | 4.9 | 44.2 | 60.7 | |||||||||||
Accrued compensation and benefits | 9.5 | 10.5 | (10.2 | ) | 0.9 | |||||||||||
Other current liabilities | (2.8 | ) | (4.6 | ) | 1.2 | 6.1 | ||||||||||
Other noncurrent liabilities | (0.4 | ) | 0.1 | 0.6 | 0.2 | |||||||||||
Net cash provided by (used in) operating activities | 45.9 | (3.2 | ) | 42.3 | 50.6 | |||||||||||
Cash Flows from Investing Activities: | ||||||||||||||||
Capital expenditures | (2.7 | ) | (6.0 | ) | (8.0 | ) | (8.4 | ) | ||||||||
Proceeds from sale of property and equipment | 0.3 | 2.2 | 0.4 | 3.5 | ||||||||||||
Net cash used in investing activities | (2.4 | ) | (3.8 | ) | (7.6 | ) | (4.9 | ) | ||||||||
Cash Flows from Financing Activities: | ||||||||||||||||
Net (payments) borrowings under short-term debt arrangements | (38.3 | ) | 11.1 | (17.5 | ) | (41.7 | ) | |||||||||
Principal payments on other debt | (6.7 | ) | (6.7 | ) | (9.3 | ) | (6.7 | ) | ||||||||
Purchase of treasury shares | – | – | (6.0 | ) | – | |||||||||||
Dividends paid | (2.3 | ) | (2.0 | ) | (4.7 | ) | (4.0 | ) | ||||||||
Other | 5.6 | 4.9 | 4.9 | 3.2 | ||||||||||||
Net cash (used in) provided by financing activities | (41.7 | ) | 7.3 | (32.6 | ) | (49.2 | ) | |||||||||
Net Increase (Decrease) in Cash and Cash Equivalents | 1.8 | 0.3 | 2.1 | (3.5 | ) | |||||||||||
Cash and Cash Equivalents, Beginning of Period | 2.0 | 3.0 | 1.7 | 6.8 | ||||||||||||
Cash and Cash Equivalents, End of Period | $ | 3.8 | $ | 3.3 | $ | 3.8 | $ | 3.3 | ||||||||
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