UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 28, 2000
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 No. 001-08772
HUGHES SUPPLY, INC.
-------------------
(Exact name of registrant as specified in its charter)
Florida 59-0559446
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
20 North Orange Avenue, Suite 200, Orlando, Florida 32801
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 407/841-4755
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- -------------------
Common Stock ($1.00 Par Value) New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Common Stock ($1.00 Par Value)
Page 1
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 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. [ ]
State the aggregate market value of the voting stock held by non-affiliates of
the registrant: $347,827,104 as of April 14, 2000.
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date: 23,589,078 shares of Common
Stock ($1.00 par value) as of April 14, 2000.
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents if incorporated by reference and the Part
of the Form 10-K into which the document is incorporated:
Part I - Annual Report to Shareholders for the fiscal year ended
January 28, 2000 (designated portions).
Part II - Annual Report to Shareholders for the fiscal year ended
January 28, 2000 (designated portions).
Part III - Definitive Proxy Statement for the 2000 Annual Meeting of
Shareholders (designated portions).
Part IV - Annual Report to Shareholders for the fiscal year ended
January 28, 2000 (designated portions).
Page 2
TABLE OF CONTENTS
Page
----
PART I
Item 1. Business ......................................................... 4
Item 2. Properties ....................................................... 15
Item 3. Legal Proceedings ................................................ 15
Item 4. Submission of Matters to a Vote of Security Holders............... 15
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters .............................................. 16
Item 6. Selected Financial Data .......................................... 16
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations .............................. 16
Item 7A. Quantitative and Qualitative Disclosures About Market Risk........ 16
Item 8. Financial Statements and Supplementary Data ...................... 17
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure .............................. 17
PART III
Item 10. Directors and Executive Officers of the Registrant................ 18
Item 11. Executive Compensation ........................................... 18
Item 12. Security Ownership of Certain Beneficial Owners and Management ... 18
Item 13. Certain Relationships and Related Transactions ................... 18
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K .. 19
Signatures ....................................................... 23
Index to Consolidated Financial Statements and Schedules ......... 24
Index of Exhibits Filed with this Report ......................... 25
Page 3
PART I
ITEM 1. BUSINESS
GENERAL
Hughes Supply, Inc. (as used throughout this report, "Hughes Supply," the
"Company" or the "Registrant" refers to Hughes Supply, Inc. and its
subsidiaries, except where the context otherwise requires) is one of the largest
diversified wholesale distributors of construction and industrial materials,
equipment and supplies to commercial construction, residential construction,
industrial and public infrastructure markets in North America. Hughes Supply
operates primarily in the southeastern, southwestern and midwestern United
States. The Company, founded in 1928, distributes over 250,000 products,
representing five major product categories, through 488 branches and
distribution centers located in 32 states and Mexico.
The Company focuses on distributing products that leverage its strengths in
inventory management, specialized sales forces by product group, distribution
and logistics, credit management, information technology and mergers and
acquisitions. The Company has increasingly focused on value-added products and
services, including integrated supply arrangements, fabrication, facilities,
management and the development of national accounts.
The Company employs a specialized and experienced sales force for each of
its product groups to best serve its customers. Management believes that no
other company competes against Hughes Supply across all of its product groups.
The Company sells its products to customers in the commercial construction,
residential construction, public infrastructure and industrial markets.
At the commencement of fiscal year 2001, Hughes Supply completed its
planned reorganization into five strategic business units ("SBUs"), each of
which is led by a group president and includes a staff dedicated to the unit. An
SBU is organized around each of the following five broad product categories:
- Electrical and Electric Utility;
- Plumbing/Heating, Ventilation, and Air Conditioning ("HVAC");
- Water and Sewer;
- Industrial Pipe, Valves and Fittings ("Industrial PVF"); and
- Building Materials/Pool and Spa/Maintenance Supplies.
This improved product-driven organizational structure is designed to
enhance the Company's already strong, competitive position in the marketplace by
intensifying the Company's focus on satisfying customer needs, strengthening
vendor relationships and streamlining the decision-making processes at the
Company.
In recent years, the Company has centered its internal growth and growth
through acquisitions around customer groups and products which help it to
diversify geographically and product-wise, capturing more of the total
construction dollar while focusing more on products used in repair, maintenance,
replacement and renovation applications. These products generally offer higher
margins and are less dependent on new construction. Management believes that the
Company's product, market and geographic diversification helps reduce the impact
of economic cycles on its net sales and profitability.
Page 4
INDUSTRY OVERVIEW
Based on estimates available to the Company, industry sales in the United
States of products sold by the Company exceeded $200 billion in 1999, and no
wholesale distributor of these products accounted for more that 5% of the total
market.
Many local and regional distributors are privately-owned,
relationship-based companies. Such distributors often have limited purchasing
power, lack sufficient resources to offer broad product lines and multiple
brands, and lack the sophisticated inventory management and control systems
necessary to operate multiple branches efficiently. As a result, such
distributors target their services to a particular type or size of customer
and/or a particular product group. To counter the limitations experienced by
small distributors, certain wholesale distributors, including the Company, have
grown considerably through acquisitions. This expansion has enabled Hughes
Supply to service various sizes and types of customers and multiple product
groups and diversify its sales across various types of construction and users of
its products.
Because of Hughes Supply's strong competitive position, its size and its
management infrastructure, management believes that the Company is well
positioned to continue to benefit from consolidation trends within the wholesale
distribution business.
Unlike do-it-yourself home center retailers, the Company does not market
its products to retail consumers. Consequently, the Company differentiates
itself with respect to its customer base, breadth of products offered and level
of service provided. Management believes that the Company's customers are
typically professionals who choose their suppliers primarily on the basis of
product availability, price, relationships with sales personnel, and the quality
and scope of services offered by such suppliers. Furthermore, professional
customers generally buy in large volumes, are repeat buyers because of their
involvement in longer-term projects, and require specialized services not
typically provided by do-it-yourself home center retailers. The Company provides
its customers with credit services, design assistance, material specifications,
scheduled job site delivery, job site visits to ensure satisfaction, technical
product services, including blueprint take-off and computerized order quotes,
and assistance with product returns. Accordingly, the Company has been able to
serve customer groups that do-it-yourself home center retailers generally do not
emphasize.
GROWTH STRATEGY
Hughes Supply's growth strategy consists of internal and acquisition-led
growth.
Internal Growth
Hughes Supply has grown internally through increases in same-store sales
and the opening of new branches. Same store sales increases have been
attributable to new product introductions within existing branches, such as fire
protection equipment and concrete fabrication products, fiber-optic products and
the higher value-added services such as integrated supply, national account
business or complete warehouse management contracts. Since January 27, 1995,
Hughes Supply has opened 83 new branches. New branches are generally opened to
fill in existing market areas or to accommodate the split out of multiple
product group branches.
Page 5
Acquisitions
Hughes Supply pursues an active acquisition strategy to capitalize on the
large, growing and highly-fragmented markets in which it competes. Since January
27, 1995, the Company has completed 58 acquisitions representing 228 branches.
Hughes Supply's acquisition strategy focuses on acquiring profitable, private,
wholesale distribution businesses with strong management teams and
well-developed market positions and customer relationships. Hughes Supply
identifies acquisition targets that present growth opportunities and complement
Hughes Supply's existing structure, allowing Hughes Supply to benefit from
synergies resulting from the integration of these targets' operations with its
own. Management believes that significant acquisition opportunities exist in
each of its product categories. Hughes Supply categorizes its acquisitions as
fill-in acquisitions or new market acquisitions:
- Fill-in acquisitions include acquisitions of primarily small companies
that distribute some of the same product groups as the Company in
geographic areas already served by Hughes Supply. Since January 27,
1995, the Company has added 46 branches through 22 fill-in
acquisitions, and the Company's management believes that significant
additional fill-in acquisition opportunities are available.
- New market acquisitions represent the addition of new product groups,
primarily within the Company's existing product categories, or the
entry into new geographic markets, or both. During the last five
fiscal years, the Company has completed 36 new market acquisitions,
adding 182 branches. During such period, the Company's principal
acquisition criteria has been to:
- add products and product groups with higher gross
margins;
- increase sales to the replacement and industrial
markets (that tend to be less cyclical than new
construction markets);
- achieve greater geographical diversification;
- develop additional opportunities for future
fill-in acquisitions and new branch openings; and
- expand its current product offering from leading
suppliers.
Since January 29, 1999, the Company has acquired several wholesale
distributors, including:
(i) W.C. Caye and Company, Inc., significantly increasing
the Company's building materials business in new
geographic markets;
(ii) Reaction Supply Corporation, significantly increasing
the fire protection part of the Company's water and
sewer business in new geographic markets; and
(iii) Western Utilities Supply Co., significantly expanding the
Company's water and sewer business in new geographic
markets.
Page 6
The following table summarizes the fill-in and new-market acquisitions
completed by the Company since January 27, 1995:
Type of Date of Number of Location of Major
Company Acquired Acquisition Acquisition Branches Operation Product Categories
- ------------------------------------------------------------------------------------------------------------------------------------
Olander & Brophy, Inc. New market March 1995 4 OH, PA Building Materials/Pool
& Spa/Maintenance
Supplies
Port City Electrical Supply, Inc. Fill-in March 1995 2 GA, SC Electrical and Electric
Utility
Elec-Tel Supply Company Fill-in April 1995 1 GA Electrical and Electric
Utility
Various branches (1) Fill-in June 1995 - 7 AL, FL, KY, NJ, Electrical and Electric
December 1995 SC, TN, VA Utility; Plumbing/HVAC;
Building Materials/Pool
& Spa/Maintenance
Supplies
Moore Electric Supply, Inc.* New market July 1995 4 NC, SC Electrical and Electric
Utility
Atlantic Pump & Equipment Companies Fill-in September 1995 3 FL Building Materials/Pool
& Spa/Maintenance
Supplies
Florida Pipe & Supply Company* New market December 1995 - FL Industrial PVF
Waldorf Supply, Inc. Fill-in February 1996 1 MD Plumbing/HVAC
West Virginia Water and Waste New market March 1996 2 WV Water and Sewer
Supply Co., Inc.
Electric Laboratories and Sales New market April 1996 3 IL, OH Electrical and Electric
Corporation* Utility
PVF Holdings, Inc. New market May 1996 16 GA, IL, LA, MO, NC, Industrial PVF
NJ, TN, TX, UT, WA
Gayle Supply Company, Inc.* Fill-in May 1996 3 AL Plumbing/HVAC
R & G Plumbing Supply, Inc. Fill-in May 1996 2 AL Plumbing/HVAC
JuNo Industries, Inc. and J.I. Services New market September 1996 4 FL, GA Plumbing/HVAC
Corporation*
Palm Pool Products, Inc.* New market September 1996 2 MI, OH Building Materials/Pool
& Spa/Maintenance
Supplies
Coastal Wholesale, Inc. Fill-in November 1996 1 FL Building Materials/Pool
& Spa/Maintenance
Supplies
J & J, Inc. New market November 1996 2 GA, TX Industrial PVF
Wholesale Electric Supply Corporation New market November 1996 2 NC, NY Electrical and Electric
Utility
Panhandle Pipe & Supply Co., Inc.* Fill-in December 1996 1 WV Water and Sewer
Sunbelt Supply Company* New market December 1996 8 LA, TX, VA Industrial PVF
Metals, Incorporated, Stainless New market January 1997 3 AL, MO, OK Industrial PVF
Tubular Products, Inc., and
Metals, Inc. - Gulf Coast Division*
Dixie Forming & Building New market February 1997 5 NC, SC, VA Building Materials/Pool
Specialities Incorporated & Spa/Maintenance
Supplies
Gulf Pool Equipment Company New market February 1997 3 GA, OK, TX Building Materials/Pool
& Spa/Maintenance
Supplies
Dominion Pipe and Supply Company New market May 1997 1 VA Water and Sewer
and Dominion Pipe Fabricators, Inc.*
Page 7
Type of Date of Number of Location of Major
Company Acquired Acquisition Acquisition Branches Operation Product Categories
- ------------------------------------------------------------------------------------------------------------------------------------
Gilleland Concrete Products, Inc. New market June 1997 1 GA Water and Sewer
Shrader Holding Co., Inc.* New market August 1997 3 AR, TX Water and Sewer
Workman Developments, Inc. New market August 1997 1 WV Plumbing/HVAC
Supply One Fill-in September 1997 1 OH Plumbing/HVAC
Allied Metals, Inc. New market October 1997 1 TX Industrial PVF
Virginia Water & Waste Supply Fill-in November 1997 1 VA Water and Sewer
Company, Inc.*
Superior Concrete Products Fill-in December 1997 - FL Building Materials/Pool
& Spa/Maintenance
Supplies
APPCO Process Equipment New market December 1997 - NC Water and Sewer
Company
Mountain Country Supply, Inc. New market January 1998 10 AZ Plumbing/HVAC
International Supply Company, Inc. New market January 1998 33 TX Plumbing/HVAC; Water and
Sewer
and affilitated operations
Merex Corporation New market January 1998 2 TX, MX Plumbing/HVAC
Chad Supply, Inc.* New market January 1998 18 AL, FL, GA, KY, LA, Building Materials/Pool
NC, OH, SC, TN & Spa/Maintenance
Supplies
San Antonio Plumbing Fill-in March 1998 14 TX Plumbing/HVAC
Distributors, Inc.*
United Supply Agencies New market March 1998 1 TX Building Materials/Pool
& Spa/Maintenance
Supplies
Winn-Lange Electric, Inc.* New market June 1998 3 TX Electrical and Electric
Utility
Windward Supply, Inc. New market August 1998 1 TX Building Materials/Pool
& Spa/Maintenance
Supplies
US Fusion, Inc.* New market September 1998 1 LA Plumbing/HVAC
Douglas Leonhardt and New market October 1998 3 GA, NC, TN Water and Sewer
Associates, Inc.
Municipal and Contractor Sales, Inc. New market November 1998 4 MD Water and Sewer
Rainbow Sales Co., Inc. New market December 1998 3 NC, VA Building Materials/Pool
& Spa/Maintenance
Supplies
Florida Electric Supply, Inc. Fill-in December 1998 1 FL Electrical and Electric
Utility
Kamen Supply Company, Inc. New market January 1999 10 CO, KS Plumbing/HVAC
American Industrial Precast New market January 1999 2 TX Water and Sewer
Products, Inc.
Page 8
Type of Date of Number of Location of Major
Company Acquired Acquisition Acquisition Branches Operation Product Categories
- ------------------------------------------------------------------------------------------------------------------------------------
Stewart Supply Company, Inc. Fill-in February 1999 - TX Building Materials/Pool
& Spa/Maintenance
Supplies
State Wholesale Supply, Inc. Fill-in March 1999 1 NC Plumbing/HVAC
W.C. Caye and Company, Inc. New market March 1999 11 AL, FL, GA, SC Building Materials/Pool
& Spa/Maintenance
Supplies
Turf Irrigation & Water Works Fill-in May 1999 4 AZ Water and Sewer
Water Works Supply Fill-in May 1999 2 VA Water and Sewer
Reaction Supply Corporation New market September 1999 8 AZ, CA, NV Water and Sewer
Plumbing & Mechanical Supply Fill-in October 1999 1 FL Plumbing/HVAC
Company, Inc.
Western Utilities Supply Co., Inc. New market February 2000 7 AK, MT, WA Water and Sewer
---
TOTAL 228
===
* Accounted for as pooling of interests.
(1) Facilities acquired in purchases of assets from four entities.
OPERATING STRATEGY
The Company's operating strategy is based on decentralizing, at the branch
level, customer-related functions such as sales and local inventory management,
and centralizing, at the corporate level, the administrative responsibility for
certain functions such as credit, human resources, finance and accounting, legal
and information technology.
At the commencement of fiscal 2001, Hughes Supply completed its planned
reorganization centered solely around the Company's main product categories by
creating five SBUs, each of which is led by a group president. Under the
reorganized structure, the Company's branches are grouped into territories,
territories into districts, and districts into SBUs. Territory managers
generally have oversight responsibility for branches within a territory as well
as direct responsibility for a specific branch within the territory. District
managers have two or more territory managers who report to them and regional
managers have two or more district managers who report to them. Before the
reorganization, the Company was organized into regions which were mixtures of
geographic and product group categories. The Company's prior organizational
structure also differed in that district and territory managers reported to the
Company's Regional Vice Presidents who, in turn, reported to the Company's
President. Management believes that this reorganization will provide improved
support for the Company's expected future growth through acquisitions, create
increased customer focus and vendor recognition by product category and improve
and accelerate decision making while increasing the overall administrative
efficiency.
Page 9
Key elements of the Company's operating strategy include:
Local Market Focus. Hughes Supply has organized its branches as
autonomous, decentralized branches capable of meeting local market needs
and offering competitive prices. Each branch handles one or more of the
Company's product groups and operates as a separate profit center with its
own experienced sales force which is specialized by product group. Each
branch manager has the authority and responsibility to set pricing, tailor
the inventory offering and mix, as well as the nature of services offered,
to meet the local market demand. In addition, each branch manager is
responsible for purchasing, maintaining adequate inventory levels, cost
controls and customer relations. A substantial portion of a branch
manager's compensation is dependent on his branch's financial performance.
The Company has been able to tailor its branch size and product offerings
to meet perceived market demand. As a result, the Company successfully
operates branches in secondary cities where management believes it has
achieved significant market share and in larger metropolitan areas where it
has established a sound market presence.
Superior Customer Service. Substantially all of Hughes Supply's sales
are to professional customers with whom the Company has developed long-term
relationships. These relationships are based on the Company's history of
providing superior service, which creates trust. Customer services provided
by the Company include credit, design assistance, material specifications,
scheduled job site delivery, job site visits to ensure satisfaction,
technical product services (including blueprint take-off and computerized
order quotes) and assistance with product returns.
Comprehensive and Diversified Product Groups. As part of its emphasis
on superior customer service, the Company offers more that 250,000 products
in its product categories at competitive prices. Distribution of a wide
variety of products within each product category helps the Company's
customers manage their inventory, arrange for consolidated delivery
requirements and provide a greater portion of total job specifications. The
depth and breadth of the Company's product categories generally permits it
to make add-on sales of higher margin, non-commodity items. The Company is
diversified across multiple product categories, geographic regions and
various sectors of the construction industry (such as commercial,
residential, public infrastructure and industrial), which lessens its
dependence upon market conditions applicable to any of its product
categories or any single sector of the construction industry. Such product
diversification provides opportunities for the Company to participate in
multiple phases of construction projects, capturing more of the total
construction spending dollar and spanning the entire construction cycle.
Well-Trained and Experienced Workforce. The Company has implemented
extensive employee recruiting and training programs to ensure that its
employees have the skill levels necessary to compete effectively in today's
marketplace. The Company utilizes in-depth training seminars covering basic
and advanced product knowledge, as well as multiple levels of selling,
purchasing, negotiating and management skills workshops. The Company has
also developed a recruiting and training program to increase the number of
qualified applicants introduced into its management and sales ranks. The
Company generally has experienced a low rate of turnover within its
management and sales force ranks. As a result, the Company's corporate
management group, branch managers, outside sales representatives and inside
sales account executives have considerable experience with the Company.
Page 10
Centralized Administrative Functions. The Company has centralized
certain administrative functions such as credit, human resources, finance
and accounting, legal and management information systems. Centralization of
human resources, finance and accounting functions ensure conformity in
policy and lower overall cost of administration. The Company's credit
function is essential to its success. All credit decisions are researched,
analyzed and approved by a group of regional credit managers to ensure
conformity and quality of credit decisions across the Company's operations.
Management believes that its credit function has enabled it to be
recognized as an industry leader due to its consistently low level of bad
debt expense.
Volume Purchasing Power. The Company established its Preferred Vendor
Program in 1991 to more effectively leverage its purchasing power. This
program has reduced the number of vendors and has resulted in stronger,
more strategic relationships with a more concentrated group of vendors. The
concentration of vendors has also improved the Company's ability to assure
more timely delivery, reduce errors, and to obtain better terms and greater
financial incentives. Other programs currently being employed with vendors
include vendor-managed inventory systems, bar coding, and electronic
exchange of purchase orders and invoices.
PRODUCTS
The Company distributes products in the following five main product
categories:
- Electrical/Electric Utility: Electrical supplies; residential,
commercial, and industrial electrical fixtures and other specialty
fixtures; and electric utility supplies and related hardware;
- Plumbing/HVAC: Plumbing fixtures and related fittings; plumbing
accessories and supplies; residential, commercial and industrial water
heaters; HVAC equipment; and refrigeration equipment, supplies and
service parts;
- Water and Sewer: Waterworks and industrial supplies; pre-cast concrete
tested utility and fire line vaults; and fire protection fabrication
and supplies and related hardware and accessories;
- Industrial PVF: Mechanical and welded pipe, valves and fittings; high
performance valves; specialty pipe; and stainless steel and other high
alloy pipe, plate, valves and fittings; and
- Building Materials/Pool and Spa/ Maintenance Supplies:
Concrete-forming products, tools, forms and accessories; road and
bridge products; above-ground and in-ground pool packages; cleaning
equipment and water treatment supplies; and multi-family housing
maintenance supplies.
Page 11
SALES AND MARKETING
The Company employs approximately 950 outside sales representatives who
call on and work with professional buyers such as architects, engineers,
manufacturers' representatives, purchasing agents, plant superintendents,
foremen and job specifiers for contractors and subcontractors. The Company's
outside sales representatives provide product specifications and usage data,
design alternatives, and job quotes to professional buyers in an effort to
assist them in fulfilling their material needs. This sales force also assists
with custom design projects for customers providing assistance through
brainstorming, story boarding, graphic design and photography.
Approximately 680 inside account executives expedite orders, deliveries,
quotations, requests for pricing and the release of products for delivery. Most
orders and shipment releases are delivered by the Company's trucks to the
customers' offices, job sites or plants.
DISTRIBUTION AND LOGISTICS
The Company's distribution network consists of branches and distribution
centers in the United States (483) and Mexico (5). The efficient operation of
the Company's distribution network is critical in providing quality service to
its specialized customer base. The Company's distribution centers and the
branches connected to a distribution center, use technology in warehouse
management to optimize receiving, inventory control, picking, packing and
shipping functions. The Company's purchasing agents in its branches use a
computerized inventory system to monitor stock levels, while central
distribution centers in Florida, Georgia and Arizona provide purchasing
assistance as well as a broad stock of inventory which supplements the inventory
of the branches. In addition, the Company uses several of its larger branches in
other parts of the country as distribution points for certain product lines.
CUSTOMERS AND SUPPLIERS
The Company currently serves over 125,000 customers, and no single customer
accounts for more than 1% of total annual sales. Orders for larger construction
projects normally require long-term delivery schedules throughout the period of
construction, which in some cases may continue for several years. The
substantial majority of customer orders are shipped from inventory at the
Company's branches. The Company also accommodates special orders from its
customers and facilitates the shipment of certain large volume orders directly
from the manufacturer to the customer.
The Company regularly purchases from over 11,000 manufacturers and
suppliers of which approximately 750 are currently part of the Company's
Preferred Vendor Program. The Company instituted this Preferred Vendor Program
to leverage its existing relationships with a number of suppliers and to
increase sales of their products in local markets through various initiatives,
including sales promotions, cooperative marketing efforts, dedicated sales force
and product exclusivity. In return, many of these key suppliers offer lower
prices and rebate programs to the Company. The Company actively solicits
volume-purchasing discounts and rebates from its preferred vendors and is
constantly working to expand its Preferred Vendor Program. No single supplier
accounted for more than 5% of the Company's total purchases during fiscal 2000.
Page 12
INFORMATION TECHNOLOGY
The Company's Information Technology systems are capable of supporting
numerous operational functions including purchasing, receiving, order
processing, shipping, inventory management, sales analysis and accounting. The
Company's customers and sales representatives rely on these systems for
real-time information on product pricing, inventory availability and order
status. The systems also provide management with information relating to sales,
inventory levels and customer payments, and with other data that is essential
for the Company to operate efficiently and provide a high level of service to
its customers. The Company believes that its continued investment in upgrading
and consolidating its Information Technology systems is necessary to provide a
platform to implement its e-commerce initiatives and to allow it to continue its
strategic growth initiatives.
Over the last three fiscal years, the Company has consolidated the number
of operating systems from 35 to 15 and plans to reduce such number to seven by
the end of fiscal year 2001. The Company believes that this consolidation allows
for increased operational efficiencies, particularly in the area of working
capital management, provides a means for decreasing transaction costs and
provides the Company with the infrastructure necessary to realize administrative
synergies associated with past and future acquisitions.
Hughes Supply's multi-pronged approach to e-commerce strategy focuses upon:
(i) expanding net sales through greater customer reach, extended hours (i.e.,
24/7/365) and broader product offerings; and (ii) lowering costs through
streamlined selling, general and administrative costs, improved inventory
management and lower product procurement costs. In addition, e-commerce
solutions in the wholesale distribution business are ideally suited to national
account programs and integrated supply chain management, important growth areas
of the Company.
The key elements of the Company's e-commerce initiatives are:
- hughessupply.com: This web site, when fully operational, will enable
the Company's customers to order products directly via electronic
commerce, as well as allow the Company to place direct electronic
orders with vendors for the majority of its products. Fulfillment will
be done from the existing branch network. The overall reduction in
paper flow is expected to reduce procurement costs. This site is
currently being developed internally by the IT group.
- supplyFORCE.com: The Company has committed to participate in a new
advanced internet system organized by Affiliated Distributors, a
cooperative of supply houses in which Hughes Supply is one of the
largest members. This system will be an e-commerce site focused on
national accounts and integrated supply targeted toward industrial
customers and is expected to be operational during fiscal year 2001.
- bestroute.com: The Company made a significant minority investment in
bestroute.com, a new internet supply house that targets slower-moving,
hard-to-find inventory items to industrial concerns and contractors on
a national basis. bestroute.com's site became operational on March 31,
2000 and is currently serving as a source of industry information. The
commerce part of this site is expected to become operational June 1,
2000.
Page 13
COMPETITION
Management believes that the Company is one of the largest wholesale
distributors of its range of products in the United States and that no other
company competes against it across all of its product groups. However, there is
strong competition in each product group distributed by the Company. The main
sources of competition are other wholesalers, manufacturers who sell certain
lines directly to contractors and, to a limited extent, retailers in the markets
for plumbing, electrical fixtures and supplies, building materials, pool and spa
supplies, and contractors' tools. The principal competitive factors in the
Company's business are product availability, pricing, technical knowledge as to
application and usage, and advisory and other service capabilities which develop
the trust factor needed in successful customer relationships.
INVENTORIES
The Company is a wholesale distributor of construction and industrial
materials and maintains significant inventories to meet rapid delivery
requirements and to ensure a continuous allotment of goods from suppliers. As of
January 28, 2000, inventories constituted approximately 36% of the Company's
total assets.
EMPLOYEES
As of January 28, 2000, the Company had approximately 7,800 employees
consisting of approximately 15 executives, 1,840 managers, 1,630 sales personnel
and 4,315 other employees, including truck drivers, warehouse personnel, office
and clerical workers. Over the last year, the Company's work force has increased
approximately 8% compared to the prior year as a result of business
acquisitions, increased sales volume and personnel required for its
administrative functions. The Company considers its relationship with its
employees to be good.
FORWARD-LOOKING STATEMENTS
Certain statements set forth in this Report constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and
are subject to the safe harbor created by such sections. When used in this
Report, the words "believe," "anticipate," `estimate," "expect," "may," "will,"
"should," "plan," "intend," "potential," "predict," "forecast," and similar
expressions are intended to identify forward-looking statements. Although the
Company believes that the expectations reflected in such forward-looking
statements are reasonable, it can give no assurance that such expectations will
prove to be correct. The Company's actual results may differ significantly from
the results discussed in such forward-looking statements. When appropriate,
certain factors that could cause results to differ materially from those
projected in the forward-looking statements are enumerated. The foregoing should
be read in conjunction with the Company's consolidated financial statements and
the notes thereto contained herein.
Page 14
ITEM 2. PROPERTIES
The Company leases approximately 52,000 square feet of an office building
in Orlando, Florida for its headquarters. In addition, the Company owns or
leases 488 facilities in 32 states and Mexico. The typical sales branch consists
of a combined office and warehouse facility ranging in size from 3,000 to 50,000
square feet, with paved parking and storage areas. The Company also operates a
computer center, three central distribution warehouses and a garage and trucking
terminal.
Additional information regarding owned and leased properties of the Company
is set forth as Exhibit 99.1 to this Report.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in various legal proceedings arising in the normal
course of its business. Management believes that none of these proceedings will
have a material adverse impact on its financial condition, results of operations
or cash flows.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of the Company's security holders during
the fourth quarter of the fiscal year ended January 28, 2000.
Page 15
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Information with respect to the principal market for the Company's common
stock, stock prices and dividend information is set forth under the caption
"Corporate and Shareholder Information" and in Note 11 of the Notes to
Consolidated Financial Statements of the Company's Annual Report to Shareholders
for the fiscal year ended January 28, 2000, a copy of which is filed as an
exhibit to this Report and the cited portion of which is incorporated herein by
reference.
ITEM 6. SELECTED FINANCIAL DATA
Information with respect to selected financial data of the Company is set
forth under the caption "Selected Financial Data" of the Company's Annual Report
to Shareholders for the fiscal year ended January 28, 2000, a copy of which is
filed as an exhibit to this Report and the cited portion of which is
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Information with respect to the Company's financial condition, changes in
financial condition and results of operations is set forth under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" of the Company's Annual Report to Shareholders for the fiscal year
ended January 28, 2000, a copy of which is filed as an exhibit to this Report
and the cited portion of which is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information with respect to the Company's market risk is set forth under
the section "Inflation and Changing Prices" under the caption "Management's
Discussion and Analysis of Financial Condition and Results of Operations" of the
Company's Annual Report to Shareholders for the fiscal year ended January 28,
2000, a copy of which is filed as an exhibit to this Report and the cited
portion of which is incorporated herein by reference.
Page 16
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
(a) Financial Statements
The financial statements filed with this report are set forth in the "Index
to Consolidated Financial Statements and Schedules" following Part IV hereof.
(b) Selected Quarterly Financial Data
Information with respect to selected quarterly financial data of the
Company is set forth in Note 11 of the Notes to Consolidated Financial
Statements of the Company's Annual Report to Shareholders for the fiscal year
ended January 28, 2000, a copy of which is filed as an exhibit to this Report
and the cited portion of which is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
The Company has not had any change in, or disagreement with, its
accountants or reportable event which is required to be reported in response to
this item.
Page 17
PART III
All information required by Part III (Items 10, 11, 12 and 13) is
incorporated by reference to the Company's Definitive Proxy Statement for the
2000 Annual Meeting of Shareholders.
Page 18
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Financial Statements and Financial Statement Schedules
Financial statements and financial statement schedules required to be filed
by Item 8 of this Report are listed in a separately designated section submitted
below. Exhibits are listed in subparagraph (c) below.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter ended January
28, 2000.
(c) Exhibits Filed
A substantial number of the exhibits referred to below are indicated as
having been previously filed as exhibits to other reports under the Securities
Exchange Act of 1934, as amended, or as exhibits to registration statements
under the Securities Act of 1933, as amended. Such previously filed exhibits are
incorporated by reference in this Form 10-K. Exhibits not incorporated by
reference herein are filed with this report.
(2) Plan of acquisition, reorganization, arrangement, liquidation or
succession. Not applicable.
(3) Articles of incorporation and by-laws.
3.1 Restated Articles of Incorporation, as amended, incorporated by
reference to Exhibit 3.1 to Form 10-Q for the quarter ended April
30, 1997 (Commission File No. 001-08772).
3.2 Composite By-Laws, as amended, incorporated by reference to
Exhibit 3.2 to Form 10-Q for the quarter ended October 31, 1999
(Commission File No. 001-08772).
3.3 Form of Articles of Amendment to Restated Articles of
Incorporation of the Company, incorporated by reference to
Exhibit 99.2 to Form 8-A dated May 22, 1998 (Commission File No.
001-08772).
(4) Instruments defining the rights of security holders, including
indentures.
4.1 Form of Common Stock Certificate representing shares of the
Registrant's common stock, $1.00 par value, incorporated by
reference to Exhibit 4.1 to Form 10-Q for the quarter ended July
31, 1997 (Commission File No. 001-08772).
4.2 Rights Agreement dated as of May 20, 1998 between Hughes Supply,
Inc. and American Stock Transfer & Trust Company, incorporated by
reference to Exhibit 99.2 to Form 8-A dated May 22, 1998
(Commission File No. 001-08772).
Page 19
(9) Voting trust agreement. Not applicable.
(10) Material contracts.
10.1 Lease Agreements with Hughes, Inc.
(a) Orlando Trucking, Garage and Maintenance Operations dated
December 1, 1971, incorporated by reference to Exhibit 13(n)
to Registration No. 2-43900 (Commission File No. 0-5235).
Letter dated April 15, 1992 extending lease from month to
month, filed as Exhibit 10.1(a) to Form 10-K for the fiscal
year ended January 31, 1992 (Commission File No. 0-5235).
(b) Leases effective March 31, 1988, incorporated by reference
to Exhibit 10.1(c) to Form 10-K for the fiscal year ended
January 27, 1989 (Commission File No. 0-5235).
Sub-Item Property
-------- --------
(1) Clearwater
(2) Daytona Beach
(3) Fort Pierce
(4) Lakeland
(6) Leesburg
(7) Orlando Electrical Operation
(8) Orlando Plumbing Operation
(9) Orlando Utility Warehouse
(11) Sarasota
(12) Venice
(13) Winter Haven
(c) Lease Amendment Letter between Hughes, Inc. and the
Registrant, dated December 1, 1986, amending Orlando Truck
Operations Center and Maintenance Garage lease, incorporated
by reference to Exhibit 10.1(i) to Form 10-K for the fiscal
year ended January 30, 1987 (Commission File No. 0-5235).
(d) Lease Agreement dated June 1, 1987, between Hughes, Inc. and
the Registrant, for additional Sarasota property,
incorporated by reference to Exhibit 10.1(j) to Form 10-K
for the fiscal year ended January 29, 1988 (Commission File
No. 0-5235).
(e) Lease dated March 11, 1992, incorporated by reference to
Exhibit 10.1(e) to Form 10-K for the fiscal year ended
January 31, 1992 (Commission File No. 0-5235).
Sub-Item Property
-------- --------
(2) Gainesville Electrical Operation
Page 20
(f) Amendments to leases between Hughes, Inc. and the
Registrant, dated April 1, 1998, amending the leases for the
thirteen properties listed in Exhibit 10.1(b), (d) and (e),
incorporated by reference to Exhibit 10.1 to Form 10-K for
the fiscal year ended January 30, 1998 (Commission File No.
001-08772).
10.2 Hughes Supply, Inc. 1988 Stock Option Plan as amended March 12,
1996 incorporated by reference to Exhibit 10.2 to Form 10-K for
the fiscal year ended January 26, 1996 (Commission File No.
001-08772).
10.3 Form of Supplemental Executive Retirement Plan Agreement entered
into between the Registrant and eight of its executive officers,
incorporated by reference to Exhibit 10.6 to Form 10-K for the
fiscal year ended January 30, 1987 (Commission File No. 0-5235).
10.4 Directors' Stock Option Plan, as amended, incorporated by
reference to Exhibit 10.4 to Form 10-Q for the quarter ended
October 31, 1999 (Commission File No. 001-08772).
10.5 Hughes Supply, Inc. Amended Senior Executives' Long-Term
Incentive Bonus Plan, adopted January 25, 1996, incorporated by
reference to Exhibit 10.9 to Form 10-K for the fiscal year ended
January 26, 1996 (Commission File No. 001-08772).
10.6 Note Purchase Agreement, dated as of August 28, 1997, by and
among the Company and certain purchasers identified in Schedule A
of the Note Purchase Agreement, incorporated by reference to
Exhibit 10.15 to Form 10-Q for the quarter ended July 31, 1997
(Commission File No. 001-08772).
10.7 Hughes Supply, Inc. 1997 Executive Stock Plan.
10.8 Note Purchase Agreement, dated as of May 29, 1996, by and among
the Company and certain purchasers identified in Schedule A of
the Note Purchase Agreement, incorporated by reference to Exhibit
10.13 to Form 10-K for the fiscal year ended January 30, 1998
(Commission File No. 001-08772).
10.9 Note Purchase Agreement, dated as of May 5, 1998, by and among
the Company and certain purchasers identified in Schedule A of
the Note Purchase Agreement, incorporated by reference to Exhibit
10.11 to Form 10-Q for the quarter ended April 30, 1998
(Commission File No. 001-08772).
10.10 Revolving Credit Agreement, dated as of January 26, 1999 and
amended on September 29, 1999, by and among the Company and a
group of banks, incorporated by reference to Exhibit 10.11 to
Form 10-Q for the quarter ended October 31, 1999 (Commission File
No. 001-08772). The Revolving Credit Agreement contains a table
of contents identifying the contents of Schedules and Exhibits,
all of which have been omitted. The Company agrees to furnish a
supplemental copy of any omitted Schedule or Exhibit to the
Commission upon request.
Page 21
10.11 Line of Credit Agreement, dated as of January 26, 1999 and
amended on September 29, 1999, by and among the Company and a
group of banks, incorporated by reference to Exhibit 10.12 to
Form 10-Q for the quarter ended October 31, 1999 (Commission File
No. 001-08772). The Line of Credit Agreement contains a table of
contents identifying the contents of Schedules and Exhibits, all
of which have been omitted. The Company agrees to furnish a
supplemental copy of any omitted Schedule or Exhibit to the
Commission upon request.
10.12 Bridge Revolving Credit Agreement, dated as of November 30,
1999, by and between the Company and SunTrust Bank, Central
Florida, N.A.
(11) Statement re computation of per share earnings. Not applicable.
(12) Statements re computation of ratios. Not applicable.
(13) Annual report to security holders, Form 10-Q or quarterly report to
security holders.
13.1 Information incorporated by reference into Form 10-K from the
Annual Report to Shareholders for the fiscal year ended January
28, 2000.
(16) Letter re change in certifying accountant. Not applicable.
(18) Letter re change in accounting principles. Not applicable.
(21) Subsidiaries of the Registrant.
21.1 Subsidiaries of the Registrant.
(22) Published report regarding matters submitted to vote of security
holders. Not applicable.
(23) Consents of experts and counsel.
23.1 Consent of PricewaterhouseCoopers LLP.
(24) Power of attorney. Not applicable.
(27) Financial Data Schedule.
27.1 Financial Data Schedule (filed electronically only).
(99) Additional exhibits.
99.1 Location of Facilities.
Page 22
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
HUGHES SUPPLY, INC.
By: /s/ David H. Hughes
----------------------------------
David H. Hughes, Chairman of
the Board and Chief Executive
Officer
/s/ J. Stephen Zepf
----------------------------------
J. Stephen Zepf, Treasurer,
Chief Financial Officer and
Chief Accounting Officer
Date: April 24, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
/s/ David H. Hughes /s/ A. Stewart Hall, Jr.
- ---------------------------- ------------------------
David H. Hughes A. Stewart Hall, Jr.
April 24, 2000 April 24, 2000
(Director) (Director)
/s/ John D. Baker II /s/ Vincent S. Hughes
- ---------------------------- ----------------------
John D. Baker II Vincent S. Hughes
April 24, 2000 April 24, 2000
(Director) (Director)
/s/ Robert N. Blackford /s/ William P. Kennedy
- ---------------------------- ----------------------
Robert N. Blackford William P. Kennedy
April 24, 2000 April 24, 2000
(Director) (Director)
/s/ H. Corbin Day
- ----------------------------
H. Corbin Day
April 24, 2000
(Director)
Page 23
HUGHES SUPPLY, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
The following consolidated financial statements of the Registrant and its
subsidiaries included in the Registrant's Annual Report to Shareholders for the
fiscal year ended January 28, 2000, are incorporated by reference:
Annual
Report
Page
----
Consolidated Statements of Income
for the years ended January 28, 2000,
January 29, 1999 and January 30, 1998 17
Consolidated Balance Sheets as of
January 28, 2000 and January 29, 1999 18
Consolidated Statements of Shareholders'
Equity for the years ended January 28, 2000,
January 29, 1999 and January 30, 1998 19
Consolidated Statements of Cash Flows for
the years ended January 28, 2000,
January 29, 1999 and January 30, 1998 20
Notes to Consolidated Financial Statements 21
Report of Independent Certified
Public Accountants 30
All other schedules have been omitted as they are either not applicable, not
required or the information is given in the financial statements or related
notes thereto.
Page 24
INDEX OF EXHIBITS FILED WITH THIS REPORT
10.7 Hughes Supply, Inc. 1997 Executive Stock Plan.
10.12 Bridge Revolving Credit Agreement, dated as of November 30, 1999, by
and between the Company and SunTrust Bank, Central Florida, N.A.
13.1 Information incorporated by reference into Form 10-K from the Annual
Report to Shareholders for the fiscal year ended January 28, 2000.
21.1 Subsidiaries of the Registrant.
23.1 Consent of PricewaterhouseCoopers LLP.
27.1 Financial Data Schedule (filed electronically only).
99.1 Location of Facilities.
Page 25